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Form 8-K MOLINA HEALTHCARE INC For: Jul 27

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July 27, 2016 4:20 PM EDT


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): July 27, 2016
______________
MOLINA HEALTHCARE, INC.
(Exact name of registrant as specified in its charter)
Delaware
1-31719
13-4204626
(State of incorporation)
(Commission File Number)
(I.R.S. Employer Identification Number)
______________
200 Oceangate, Suite 100, Long Beach, California 90802
(Address of principal executive offices)
Registrant’s telephone number, including area code: (562) 435-3666

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))




Item 2.02.    Results of Operations and Financial Condition.
On July 27, 2016, Molina Healthcare, Inc. issued a press release announcing its financial results for the second quarter and the six months ended June 30, 2016. 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, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as expressly set forth by specific reference in such a filing.
Item 9.01.    Financial Statements and Exhibits.
(d)     Exhibits:
Exhibit
No.               Description
99.1              Press release of Molina Healthcare, Inc. issued July 27, 2016, as to financial results for the second quarter and the six months ended June 30, 2016.




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:
July 27, 2016
By:
/s/ Jeff D. Barlow
 
 
Jeff D. Barlow
 
 
Chief Legal Officer and Secretary




EXHIBIT INDEX
Exhibit
 
No.
Description
 
 
99.1
Press release of Molina Healthcare, Inc. issued July 27, 2016, as to financial results for the second quarter and six months ended June 30, 2016.





News Release

Contact:
Juan José Orellana
Investor Relations
562-435-3666, ext. 111143


MOLINA HEALTHCARE REPORTS
SECOND QUARTER 2016 RESULTS

•
Net income per diluted share for the quarter of $0.58.
•
Adjusted net income per diluted share for the quarter of $0.67.
•
Net income per diluted share for the quarter up 35% over first quarter 2016.
•
Adjusted net income per diluted share for the quarter up 31% over first quarter 2016.
•
Total revenue for the quarter of $4.4 billion, up 24% over second quarter 2015.
•
Aggregate membership up 26% over second quarter 2015.

Long Beach, California (July 27, 2016) – Molina Healthcare, Inc. (NYSE: MOH) today reported its financial results for the second quarter of 2016.
“The results we have reported today reflect meaningful progress from the first quarter of 2016,” said J. Mario Molina, M.D., chief executive officer of Molina Healthcare, Inc. “Last quarter, we identified specific improvements that we needed to make to our operations. Today’s announcement demonstrates that we are making good headway with this work. The issues we identified in Ohio and Texas in the first quarter are substantially resolved, and work in Puerto Rico is well under way.”
Update on Financial Performance
Second Quarter 2016 Compared With First Quarter 2016
Second quarter 2016 financial performance improved significantly when compared with the first quarter of 2016. Earnings per diluted share increased to $0.58 in the second quarter of 2016 from $0.43 in the first quarter. Adjusted earnings per diluted share increased to $0.67 in the second quarter of 2016 from $0.51 in the first quarter.
Higher profitability in the second quarter was primarily the result of improvements at the Ohio and Texas health plans. The medical care ratio of the Ohio health plan decreased to 89.7% in the second quarter of 2016 from 92.0% in the first quarter. The medical care ratio of the Texas health plan decreased to 78.5% in the second quarter of 2016 from 92.8% in the first quarter. Even without the benefit of out-of-period quality revenue adjustments discussed below, the medical care ratio of the Texas health plan would have been approximately 85.3% in the second quarter, still well under the 92.8% medical care ratio reported in the first quarter.
In total, out-of-period adjustments related to 2015 dates of service were not significant to second quarter performance. Out-of-period adjustments were significant, however, on a geographic and program basis. Out-

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MOH Reports Second Quarter 2016 Results
Page 2
July 27, 2016

of-period adjustments were the result of changes in accounting estimates made as new information became available to the Company. The table below will help the reader to understand the discussion that follows.
Summary of Significant Out-of-Period Adjustments Affecting 2016 Financial Results
 
Three Months Ended
 
Six Months Ended
 
June 30, 2016
 
June 30, 2016
 
(In millions, except per diluted share amounts)
 
Amount
 
Per Diluted Share
 
Amount
 
Per Diluted Share
Marketplace adjustments for 2015 dates of service
$
(37
)
 
$
(0.42
)
 
$
(68
)
 
$
(0.76
)
Texas quality revenue adjustment for 2014/2015 dates of service
44

 
0.50

 
44

 
0.49

Texas quality revenue adjustment for 1Q 2016 dates of service
7

 
0.08

 
N/A

 
N/A

Puerto Rico premium revenue adjustment for 2015 dates of service
(11
)
 
(0.12
)
 
(11
)
 
(0.12
)
Florida premium revenue adjustment for 2014/2015 dates of service
—

 
—

 
18

 
0.20

Total out-of-period adjustments, net
$
3

 
$
0.04

 
$
(17
)
 
$
(0.19
)
Out-of-period adjustments increased pretax income by approximately $3 million (or approximately $0.04 per diluted share) in the second quarter of 2016. Specifically:
•
Adjustments related to 2015 dates of service reduced Marketplace pretax income by approximately $37 million (or approximately $0.42 per diluted share) in the second quarter. On June 30, 2016, the Centers for Medicare and Medicaid Services released the final update on risk adjustment and reinsurance payments for the 2015 benefit year, and we adjusted our accruals accordingly.
•
During the second quarter, we were informed by the Texas Department of Health and Human Services that it will not recoup any quality revenue for calendar years 2014, 2015, and 2016. Therefore, we recognized previously deferred quality revenue amounting to approximately $51 million (or approximately $0.58 per diluted share) in the second quarter of 2016. Of the $51 million adjustment, $44 million related to 2015 and 2014 dates of service, and $7 million related to the first quarter of 2016.
•
Reductions to revenue previously recorded for 2015 dates of service in Puerto Rico decreased pretax income by approximately $11 million (or approximately $0.12 per diluted share) in the second quarter.
Understanding the First Half of 2016
We reported pretax income of $144 million for the first half of 2016. These results were affected by several out-of-period adjustments related to dates of service in 2015 and 2014. In total, these adjustments reduced pretax income in the first half of 2016 by approximately $17 million (or approximately $0.19 per diluted share). Specifically:
•
Adjustments related to 2015 dates of service reduced Marketplace pretax income by approximately $68 million (or approximately $0.76 per diluted share) in the first half of 2016. We now estimate that the medical care ratio for our Marketplace program for all of 2015 was approximately 80%. Through June 30, 2016, the medical care ratio of our Marketplace program for months of service in the first half of 2016 alone (exclusive of out-of-period adjustments) was approximately 78%.
•
As described above, the recognition of Texas quality revenue associated with calendar years 2014 and 2015 increased pretax income in the first half of 2016 by approximately $44 million (or approximately $0.49 per diluted share).
•
Also as noted above, reductions to 2015 premium revenue in Puerto Rico reduced pretax income by approximately $11 million (or approximately $0.12 per diluted share) in the first half of 2016.
•
Retroactive adjustments to premium revenue in Florida for dates of service in 2014 and 2015 increased pretax income by approximately $18 million (or approximately $0.20 per diluted share) in the first half

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MOH Reports Second Quarter 2016 Results
Page 3
July 27, 2016

of 2016. Prior to reporting first quarter 2016 results, we were informed by the Florida Agency for Health Care Administration that we were due a retroactive increase to Medicaid premium revenue relating to dates of service prior to 2016. We reported this development in our first quarter 2016 results.
Net Income per Share Guidance
Our net income per share guidance for fiscal year 2016 remains unchanged. We expect the following factors, among others, to affect our financial performance in the second half of 2016:
•
The ultimate savings to be realized from various cost savings initiatives and the speed at which such savings will be realized.
•
Medicaid rate increases (excluding Medicaid Expansion) of approximately 3.0% in California (effective July 1, 2016); approximately 2.5% in Puerto Rico (effective July 1, 2016); and approximately 3.0% in Texas (effective September 1, 2016). All rate changes are consistent with our previous expectations.
•
Medicaid Expansion rate decreases of approximately 11.0% in California (effective July 1, 2016) and approximately 2.0% in Ohio (effective July 1, 2016). All rate changes are consistent with our previous expectations.
•
The implementation of a medical care ratio floor of 86.0% for the South Carolina Medicaid program effective July 1, 2016.
•
Declining margins for our Marketplace business during the second half of 2016 due to normal membership attrition; the addition of higher cost members through the special enrollment process; higher costs as members reach the limits of the cost-sharing provisions of their insurance coverage; and increasing utilization as members become more engaged with our care networks. This is consistent with our previous expectations.
Conference Call
Management will host a conference call and webcast to discuss Molina Healthcare's second quarter results at 5:00 p.m. Eastern time on Wednesday, July 27, 2016. The number to call for the interactive teleconference is (212) 271-4651. A telephonic replay of the conference call will be available from 7:00 p.m. Eastern time on Wednesday, July 27, 2016, through 6:00 p.m. Eastern Time on Thursday, July 28, 2016, by dialing (800) 633-8284 and entering confirmation number 21812476. A live audio broadcast of Molina Healthcare’s conference call will be available on our website, molinahealthcare.com. A 30-day online replay will be available approximately an hour following the conclusion of the live broadcast.
About Molina Healthcare
Molina Healthcare, Inc., a FORTUNE 500 company, provides managed health care services under the Medicaid and Medicare programs and through the state insurance marketplaces. Through our locally operated health plans in 11 states across the nation and in the Commonwealth of Puerto Rico, Molina currently serves approximately 4.2 million members. Dr. C. David Molina founded our company in 1980 as a provider organization serving low-income families in Southern California. Today, we continue his mission of providing high quality and cost-effective health care to those who need it most. For more information about Molina Healthcare, please visit our website at molinahealthcare.com.

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MOH Reports Second Quarter 2016 Results
Page 4
July 27, 2016

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This earnings release contains “forward-looking statements” regarding our plans, expectations, and anticipated future events. Actual results could differ materially due to numerous known and unknown risks and uncertainties. Those known risks and uncertainties include, but are not limited to, the following:
•
the success of our profit improvement and cost-cutting initiatives;
•
uncertainties and evolving market and provider economics associated with the implementation of the Affordable Care Act (the “ACA”), the Medicaid expansion, the insurance marketplaces, the effect of various implementing regulations, and uncertainties regarding the Medicare-Medicaid dual eligible demonstration programs in California, Illinois, Michigan, Ohio, South Carolina, and Texas;
•
management of our medical costs, including our ability to reduce over time the high medical costs commonly associated with new patient populations;
•
our ability to predict with a reasonable degree of accuracy utilization rates, including utilization rates in new plans, geographies, and programs where we have less experience with patient and provider populations, and also including utilization rates associated with seasonal flu patterns or other newly emergent diseases;
•
our ability to manage growth, including maintaining and creating adequate internal systems and controls relating to authorizations, approvals, provider payments, and the overall success of our care management initiatives designed to control costs;
•
our receipt of adequate premium rates to support increasing pharmacy costs, including costs associated with specialty drugs and costs resulting from formulary changes that allow the option of higher-priced non-generic drugs;
•
our ability to operate profitably in an environment where the trend in premium rate increases lags behind the trend in increasing medical costs;
•
the interpretation and implementation of federal or state medical cost expenditure floors, administrative cost and profit ceilings, premium stabilization programs, profit sharing arrangements, and risk adjustment provisions;
•
the interpretation and implementation of at-risk premium rules regarding the achievement of certain quality measures, and our ability to recognize revenue amounts associated therewith;
•
the interpretation and implementation of state contract performance requirements regarding the achievement of certain quality measures, and our ability to avoid liquidated damages associated therewith;
•
cyber-attacks or other privacy or data security incidents resulting in an inadvertent unauthorized disclosure of protected health information;
•
the success of our health plan in Puerto Rico, including the resolution of the Puerto Rico debt crisis, payment of all amounts due under our Medicaid contract, the effect of the newly enacted PROMESA law, and our efforts to better manage the health care costs of our Puerto Rico health plan;
•
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, including the resolution of the Illinois budget impasse and continued payment of all amounts due to our Illinois health plan;
•
the accurate estimation of incurred but not reported or paid medical costs across our health plans;
•
subsequent adjustments to reported premium revenue based upon subsequent developments or new information, including changes to estimated amounts due to or receivable from CMS under the ACA's “three R’s” marketplace premium stabilization programs;
•
efforts by states to recoup previously paid amounts, including our dispute with the state of New Mexico related to reimbursement for retroactively enrolled members in 2014;
•
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;
•
the continuation and renewal of the government contracts of our health plans, Molina Medicaid Solutions, and Pathways, and the terms under which such contracts are renewed;
•
complications, member confusion, or enrollment backlogs related to the annual renewal of Medicaid coverage;
•
government audits and reviews, and any fine, enrollment freeze, or monitoring program that may result therefrom;
•
changes with respect to our provider contracts and the loss of providers;
•
approval by state regulators of dividends and distributions by our health plan subsidiaries;
•
changes in funding under our contracts as a result of regulatory changes, programmatic adjustments, or other reforms;
•
high dollar claims related to catastrophic illness;
•
the favorable resolution of litigation, arbitration, or administrative proceedings;
•
the relatively small number of states in which we operate health plans;
•
the effect on our Los Angeles County subcontract of Centene Corporation’s acquisition of Health Net Inc.;
•
the availability of adequate financing on acceptable terms to fund and capitalize our expansion and growth, repay our outstanding indebtedness at maturity and meet our liquidity needs, including the interest expense and other costs associated with such financing;
•
the failure of a state in which we operate to renew its federal Medicaid waiver;
•
changes generally affecting the managed care or Medicaid management information systems industries;
•
increases in government surcharges, taxes, and assessments, including but not limited to the deductibility of certain compensation costs;
•
newly emergent viruses or widespread epidemics, including the Zika virus, public catastrophes or terrorist attacks, and associated public alarm;

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MOH Reports Second Quarter 2016 Results
Page 5
July 27, 2016

•
changes in general economic conditions, including unemployment rates;
•
the sufficiency of our funds on hand to pay the amounts due upon conversion of our outstanding notes;
•
increasing competition and consolidation in the Medicaid industry;
and numerous other risk factors, including those discussed in our periodic reports and filings with the Securities and Exchange Commission. These reports can be accessed under the investor relations tab of our website or on the SEC’s website at sec.gov. Given these risks and uncertainties, we can give no assurances that our forward-looking statements will prove to be accurate, or that any other results or events projected or contemplated by our forward-looking statements will in fact occur, and we caution investors not to place undue reliance on these statements. All forward-looking statements in this release represent our judgment as of July 27, 2016, and we disclaim any obligation to update any forward-looking statements to conform the statement to actual results or changes in our expectations.



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MOH Reports Second Quarter 2016 Results
Page 6
July 27, 2016

MOLINA HEALTHCARE, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
 
(Dollar amounts in millions, except net income per share)
Revenue:
 
 
 
 
 
 
 
Premium revenue
$
4,029

 
$
3,304

 
$
8,024

 
$
6,275

Service revenue
135

 
47

 
275

 
99

Premium tax revenue
109

 
95

 
218

 
190

Health insurer fee revenue
76

 
74

 
166

 
122

Investment income
8

 
4

 
16

 
7

Other revenue
2

 
1

 
3

 
3

Total revenue
4,359

 
3,525

 
8,702

 
6,696

Operating expenses:
 
 
 
 
 
 
 
Medical care costs
3,594

 
2,929

 
7,182

 
5,565

Cost of service revenue
116

 
33

 
243

 
69

General and administrative expenses
351

 
287

 
691

 
543

Premium tax expenses
109

 
95

 
218

 
190

Health insurer fee expenses
50

 
40

 
108

 
81

Depreciation and amortization
34

 
25

 
66

 
50

Total operating expenses
4,254

 
3,409

 
8,508

 
6,498

Operating income
105

 
116

 
194

 
198

Interest expense
25

 
15

 
50

 
30

Income before income tax expense
80

 
101

 
144

 
168

Income tax expense
47

 
62

 
87

 
101

Net income
$
33

 
$
39

 
$
57

 
$
67

 
 
 
 
 
 
 
 
Diluted net income per share
$
0.58

 
$
0.72

 
$
1.01

 
$
1.29

 
 
 
 
 
 
 
 
Diluted weighted average shares outstanding
55.5

 
53.9

 
56.3

 
52.0

 
 
 
 
 
 
 
 
Operating Statistics:
 
 
 
 
 
 
 
Medical care ratio (1)
89.2
%
 
88.7
%
 
89.5
%
 
88.7
%
General and administrative expense ratio (2)
8.1
%
 
8.1
%
 
7.9
%
 
8.1
%
Premium tax ratio (1)
2.6
%
 
2.8
%
 
2.6
%
 
2.9
%
Effective tax rate
59.8
%
 
61.3
%
 
60.7
%
 
60.1
%
Net profit margin (2)
0.7
%
 
1.1
%
 
0.7
%
 
1.0
%
____________
(1)
Medical care ratio represents medical care costs as a percentage of premium revenue; premium tax ratio represents premium tax expenses as a percentage of premium revenue plus premium tax revenue.
(2)
Computed as a percentage of total revenue.

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MOH Reports Second Quarter 2016 Results
Page 7
July 27, 2016

MOLINA HEALTHCARE, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
 
June 30,
 
December 31,
 
2016
 
2015
 
(Unaudited)
 
 
 
(Amounts in millions,
except per-share data)
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
2,345

 
$
2,329

Investments
1,968

 
1,801

Receivables
1,012

 
597

Income taxes refundable
23

 
13

Prepaid expenses and other current assets
197

 
192

Derivative asset
—

 
374

Total current assets
5,545

 
5,306

Property, equipment, and capitalized software, net
448

 
393

Deferred contract costs
80

 
81

Intangible assets, net
146

 
122

Goodwill
611

 
519

Restricted investments
107

 
109

Deferred income taxes
—

 
18

Derivative asset
226

 
—

Other assets
39

 
28

 
$
7,202

 
$
6,576

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
 
 
 
Medical claims and benefits payable
$
1,766

 
$
1,685

Amounts due government agencies
1,238

 
729

Accounts payable and accrued liabilities
537

 
362

Deferred revenue
104

 
223

Current portion of long-term debt
1

 
449

Derivative liability
—

 
374

Total current liabilities
3,646

 
3,822

Senior notes
1,428

 
962

Lease financing obligations
198

 
198

Deferred income taxes
25

 
—

Derivative liability
226

 
—

Other long-term liabilities
38

 
37

Total liabilities
5,561

 
5,019

Stockholders’ equity:
 
 
 
Common stock, $0.001 par value; 150 shares authorized; outstanding: 57 shares at June 30, 2016 and 56 shares at December 31, 2015
—

 
—

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

 
—

Additional paid-in capital
822

 
803

Accumulated other comprehensive gain (loss)
4

 
(4
)
Retained earnings
815

 
758

Total stockholders’ equity
1,641

 
1,557

 
$
7,202

 
$
6,576



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MOH Reports Second Quarter 2016 Results
Page 8
July 27, 2016

MOLINA HEALTHCARE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
 
(Amounts in millions)
Operating activities:
 
 
 
 
 
 
 
Net income
$
33

 
$
39

 
$
57

 
$
67

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
45

 
29

 
89

 
62

Deferred income taxes
9

 
6

 
39

 
7

Share-based compensation
9

 
3

 
16

 
9

Amortization of convertible senior notes and lease financing obligations
7

 
8

 
15

 
15

Other, net
5

 
6

 
11

 
9

Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Receivables
(149
)
 
(140
)
 
(415
)
 
(35
)
Prepaid expenses and other assets
59

 
40

 
(143
)
 
(97
)
Medical claims and benefits payable
(173
)
 
44

 
82

 
292

Amounts due government agencies
328

 
203

 
509

 
298

Accounts payable and accrued liabilities
(58
)
 
(31
)
 
147

 
158

Deferred revenue
10

 
(112
)
 
(119
)
 
(138
)
Income taxes
14

 
(1
)
 
(10
)
 
1

Net cash provided by operating activities
139

 
94

 
278

 
648

 
 
 
 
 
 
 
 
Investing activities:
 
 
 
 
 
 
 
Purchases of investments
(363
)
 
(555
)
 
(974
)
 
(993
)
Proceeds from sales and maturities of investments
464

 
286

 
812

 
541

Purchases of property, equipment, and capitalized software
(56
)
 
(41
)
 
(102
)
 
(66
)
Change in restricted investments
9

 
(9
)
 
5

 
(14
)
Net cash paid in business combinations
(6
)
 
—

 
(8
)
 
(8
)
Other, net
(7
)
 
(10
)
 
(6
)
 
(17
)
Net cash provided by (used in) investing activities
41

 
(329
)
 
(273
)
 
(557
)
 
 
 
 
 
 
 
 
Financing activities:
 
 
 
 
 
 
 
Proceeds from common stock offering, net of issuance costs
—

 
373

 
—

 
373

Proceeds from employee stock plans
10

 
7

 
10

 
8

Other, net
(1
)
 
(1
)
 
1

 
3

Net cash provided by financing activities
9

 
379

 
11

 
384

Net increase in cash and cash equivalents
189

 
144

 
16

 
475

Cash and cash equivalents at beginning of period
2,156

 
1,870

 
2,329

 
1,539

Cash and cash equivalents at end of period
$
2,345

 
$
2,014

 
$
2,345

 
$
2,014


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MOH Reports Second Quarter 2016 Results
Page 9
July 27, 2016

MOLINA HEALTHCARE, INC.
UNAUDITED NON-GAAP FINANCIAL MEASURES
We use two non-GAAP financial measures as supplemental metrics in evaluating our financial performance, making financing and business decisions, and forecasting and planning for future periods. For these reasons, management believes such measures are useful supplemental measures to investors in comparing our performance to the performance of other public companies in the health care industry. These non-GAAP financial measures should be considered as supplements to, and not as substitutes for or superior to, GAAP measures.
The first of these non-GAAP measures is earnings before interest, taxes, depreciation and amortization (EBITDA). We believe that EBITDA is particularly helpful in assessing our ability to meet the cash demands of our operating units. The following table reconciles net income, which we believe to be the most comparable GAAP measure, to EBITDA.
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
 
(Amounts in millions)
Net income
$
33

 
$
39

 
$
57

 
$
67

Adjustments:
 
 
 
 
 
 
 
Depreciation, and amortization of intangible assets and capitalized software
39

 
29

 
76

 
58

Interest expense
25

 
15

 
50

 
30

Income tax expense
47

 
62

 
87

 
101

EBITDA
$
144

 
$
145

 
$
270

 
$
256

The second of these non-GAAP measures is adjusted net income (including adjusted net income per diluted share). We believe that adjusted net income per diluted share is very helpful in assessing our financial performance exclusive of the non-cash impact of the amortization of purchased intangibles. The following table reconciles net income, which we believe to be the most comparable GAAP measure, to adjusted net income.
 
Three Months Ended June 30,
 
Six Months Ended June 30,
2016
 
2015
 
2016
 
2015
 
(In millions, except per diluted share amounts)
 
Amount
 
Per share
 
Amount
 
Per share
 
Amount
 
Per share
 
Amount
 
Per share
Net income
$
33

 
$
0.58

 
$
39

 
$
0.72

 
$
57

 
$
1.01

 
$
67

 
$
1.29

Adjustment, net of tax:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of intangible assets
5

 
0.09

 
3

 
0.05

 
10

 
0.17

 
6

 
0.10

Adjusted net income
$
38

 
$
0.67

 
$
42

 
$
0.77

 
$
67

 
$
1.18

 
$
73

 
$
1.39




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MOH Reports Second Quarter 2016 Results
Page 10
July 27, 2016

MOLINA HEALTHCARE, INC.
UNAUDITED HEALTH PLANS SEGMENT MEMBERSHIP
 
June 30,
 
March 31,
 
December 31,
 
June 30,
 
2016
 
2016
 
2015
 
2015
Ending Membership by Health Plan:
 
 
 
 
 
 
 
California
680,000

 
676,000

 
620,000

 
593,000

Florida
565,000

 
576,000

 
440,000

 
348,000

Illinois
201,000

 
206,000

 
98,000

 
101,000

Michigan
393,000

 
399,000

 
328,000

 
260,000

New Mexico
251,000

 
246,000

 
231,000

 
225,000

Ohio
341,000

 
336,000

 
327,000

 
332,000

Puerto Rico
336,000

 
339,000

 
348,000

 
361,000

South Carolina
105,000

 
102,000

 
99,000

 
114,000

Texas
367,000

 
380,000

 
260,000

 
266,000

Utah
151,000

 
151,000

 
102,000

 
92,000

Washington
709,000

 
672,000

 
582,000

 
553,000

Wisconsin
134,000

 
137,000

 
98,000

 
107,000

 
4,233,000

 
4,220,000

 
3,533,000

 
3,352,000

Ending Membership by Program:
 
 
 
 
 
 
 
Temporary Assistance for Needy Families (TANF), CHIP(1)
2,500,000

 
2,485,000

 
2,312,000

 
2,180,000

Medicaid Expansion
654,000

 
632,000

 
557,000

 
475,000

Marketplace
597,000

 
630,000

 
205,000

 
261,000

Aged, Blind or Disabled (ABD)
387,000

 
380,000

 
366,000

 
353,000

Medicare-Medicaid Plan (MMP) - Integrated
51,000

 
50,000

 
51,000

 
39,000

Medicare Special Needs Plans
44,000

 
43,000

 
42,000

 
44,000

 
4,233,000

 
4,220,000

 
3,533,000

 
3,352,000

_______________________
(1)
CHIP stands for Children’s Health Insurance Program.




-MORE-

MOH Reports Second Quarter 2016 Results
Page 11
July 27, 2016


MOLINA HEALTHCARE, INC.
UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA
(In millions, except percentages and per-member per-month amounts)
 
Three Months Ended June 30, 2016
 
Member
Months(1)
 
Premium Revenue
 
Medical Care Costs
 
MCR(2)
 
Medical Margin
 
 
Total
 
PMPM
 
Total
 
PMPM
 
 
California
2.0

 
$
554

 
$
268.95

 
$
493

 
$
239.63

 
89.1
%
 
$
61

Florida
1.8

 
464

 
273.90

 
426

 
251.69

 
91.9

 
38

Illinois
0.6

 
154

 
256.17

 
137

 
227.71

 
88.9

 
17

Michigan
1.2

 
369

 
312.18

 
334

 
282.86

 
90.6

 
35

New Mexico
0.8

 
342

 
451.72

 
305

 
403.52

 
89.3

 
37

Ohio
1.0

 
483

 
473.91

 
433

 
424.87

 
89.7

 
50

Puerto Rico
1.0

 
170

 
169.04

 
175

 
173.49

 
102.6

 
(5
)
South Carolina
0.3

 
87

 
277.22

 
71

 
226.27

 
81.6

 
16

Texas
1.1

 
635

 
571.14

 
499

 
448.23

 
78.5

 
136

Utah
0.5

 
110

 
240.26

 
106

 
233.12

 
97.0

 
4

Washington
2.1

 
559

 
264.40

 
500

 
236.32

 
89.4

 
59

Wisconsin
0.4

 
99

 
244.88

 
96

 
235.88

 
96.3

 
3

Other(3)
—

 
3

 
—

 
19

 
—

 
—

 
(16
)
 
12.8

 
$
4,029

 
$
316.72

 
$
3,594

 
$
282.54

 
89.2
%
 
$
435

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2015
 
Member
Months(1)
 
Premium Revenue
 
Medical Care Costs
 
MCR(2)
 
Medical Margin
 
Total
 
PMPM
 
Total
 
PMPM
 
 
California
1.7

 
$
503

 
$
285.14

 
$
459

 
$
259.85

 
91.1
%
 
$
44

Florida
1.1

 
257

 
244.35

 
217

 
205.97

 
84.3

 
40

Illinois
0.3

 
102

 
337.55

 
98

 
325.91

 
96.6

 
4

Michigan
0.8

 
237

 
307.27

 
200

 
258.67

 
84.2

 
37

New Mexico
0.7

 
322

 
466.46

 
276

 
400.27

 
85.8

 
46

Ohio
1.1

 
509

 
510.30

 
432

 
433.75

 
85.0

 
77

Puerto Rico
1.1

 
194

 
179.33

 
184

 
170.32

 
95.0

 
10

South Carolina
0.4

 
93

 
276.36

 
67

 
196.92

 
71.3

 
26

Texas
0.8

 
512

 
635.74

 
468

 
581.42

 
91.5

 
44

Utah
0.2

 
80

 
288.60

 
72

 
258.88

 
89.7

 
8

Washington
1.6

 
410

 
249.39

 
371

 
225.46

 
90.4

 
39

Wisconsin
0.3

 
75

 
233.15

 
56

 
175.62

 
75.3

 
19

Other(3)
—

 
10

 
—

 
29

 
—

 
—

 
(19
)
 
10.1

 
$
3,304

 
$
328.96

 
$
2,929

 
$
291.65

 
88.7
%
 
$
375

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






-MORE-

MOH Reports Second Quarter 2016 Results
Page 12
July 27, 2016


MOLINA HEALTHCARE, INC.
UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA
(In millions, except percentages and per-member per-month amounts)
 
Six Months Ended June 30, 2016
 
Member
Months(1)
 
Premium Revenue
 
Medical Care Costs
 
MCR(2)
 
Medical Margin
 
 
Total
 
PMPM
 
Total
 
PMPM
 
 
California
4.0

 
$
1,095

 
$
271.14

 
$
962

 
$
238.30

 
87.9
%
 
$
133

Florida
3.4

 
953

 
284.53

 
839

 
250.58

 
88.1

 
114

Illinois
1.2

 
303

 
261.43

 
269

 
232.06

 
88.8

 
34

Michigan
2.4

 
756

 
316.18

 
681

 
285.13

 
90.2

 
75

New Mexico
1.5

 
678

 
450.62

 
601

 
399.17

 
88.6

 
77

Ohio
2.0

 
971

 
481.44

 
882

 
437.35

 
90.8

 
89

Puerto Rico
2.0

 
351

 
172.98

 
349

 
171.95

 
99.4

 
2

South Carolina
0.6

 
171

 
276.61

 
138

 
223.58

 
80.8

 
33

Texas
2.2

 
1,255

 
575.87

 
1,074

 
492.65

 
85.5

 
181

Utah
0.9

 
224

 
252.08

 
208

 
234.46

 
93.0

 
16

Washington
4.1

 
1,065

 
260.05

 
958

 
233.84

 
89.9

 
107

Wisconsin
0.8

 
196

 
247.57

 
188

 
236.92

 
95.7

 
8

Other(3)
—

 
6

 
—

 
33

 
—

 
—

 
(27
)
 
25.1

 
$
8,024

 
$
320.17

 
$
7,182

 
$
286.57

 
89.5
%
 
$
842

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2015
 
Member
Months(1)
 
Premium Revenue
 
Medical Care Costs
 
MCR(2)
 
Medical Margin
 
Total
 
PMPM
 
Total
 
PMPM
 
 
California
3.4

 
$
1,014

 
$
294.85

 
$
911

 
$
264.97

 
89.9
%
 
$
103

Florida
2.0

 
568

 
291.33

 
498

 
255.45

 
87.7

 
70

Illinois
0.6

 
206

 
339.72

 
188

 
309.66

 
91.2

 
18

Michigan
1.5

 
457

 
298.87

 
385

 
251.57

 
84.2

 
72

New Mexico
1.4

 
636

 
462.62

 
568

 
413.48

 
89.4

 
68

Ohio
2.1

 
1,024

 
498.96

 
845

 
412.05

 
82.6

 
179

Puerto Rico
1.1

 
194

 
179.33

 
184

 
170.32

 
95.0

 
10

South Carolina
0.7

 
184

 
271.35

 
141

 
206.88

 
76.2

 
43

Texas
1.6

 
894

 
565.45

 
820

 
518.60

 
91.7

 
74

Utah
0.5

 
157

 
289.42

 
146

 
268.72

 
92.8

 
11

Washington
3.2

 
786

 
245.22

 
723

 
225.47

 
91.9

 
63

Wisconsin
0.6

 
135

 
216.85

 
105

 
168.58

 
77.7

 
30

Other(3)
—

 
20

 
—

 
51

 
—

 
—

 
(31
)
 
18.7

 
$
6,275

 
$
336.21

 
$
5,565

 
$
298.18

 
88.7
%
 
$
710

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





-MORE-

MOH Reports Second Quarter 2016 Results
Page 13
July 27, 2016

MOLINA HEALTHCARE, INC.
UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA
(In millions, except percentages and per-member per-month amounts)
 
Three Months Ended June 30, 2016
 
Member
Months(1)
 
Premium Revenue
 
Medical Care Costs
 
MCR(2)
 
Medical Margin
 
 
Total
 
PMPM
 
Total
 
PMPM
 
 
TANF and CHIP
7.5

 
$
1,302

 
$
173.57

 
$
1,202

 
$
160.26

 
92.3
%
 
$
100

Medicaid Expansion
1.9

 
742

 
378.19

 
634

 
323.56

 
85.6

 
108

Marketplace
1.8

 
373

 
206.88

 
323

 
178.79

 
86.4

 
50

ABD
1.2

 
1,168

 
991.38

 
1,038

 
881.80

 
88.9

 
130

MMP
0.2

 
315

 
2,093.29

 
270

 
1,792.78

 
85.6

 
45

Medicare
0.2

 
129

 
997.44

 
127

 
974.30

 
97.7

 
2

 
12.8

 
$
4,029

 
$
316.72

 
$
3,594

 
$
282.54

 
89.2
%
 
$
435

 
Three Months Ended June 30, 2015
 
Member
Months(1)
 
Premium Revenue
 
Medical Care Costs
 
MCR(2)
 
Medical Margin
 
 
Total
 
PMPM
 
Total
 
PMPM
 
 
TANF and CHIP
6.5

 
$
1,169

 
$
178.38

 
$
1,063

 
$
162.24

 
91.0
%
 
$
106

Medicaid Expansion
1.4

 
582

 
419.67

 
474

 
341.67

 
81.4

 
108

Marketplace
0.8

 
161

 
204.22

 
90

 
113.21

 
55.4

 
71

ABD
1.1

 
1,053

 
984.99

 
947

 
885.84

 
89.9

 
106

MMP
0.1

 
198

 
1,784.30

 
214

 
1,934.40

 
108.4

 
(16
)
Medicare
0.2

 
141

 
1,059.90

 
141

 
1,062.71

 
100.3

 
—

 
10.1

 
$
3,304

 
$
328.96

 
$
2,929

 
$
291.65

 
88.7
%
 
$
375

 
Six Months Ended June 30, 2016
 
Member
Months(1)
 
Premium Revenue
 
Medical Care Costs
 
MCR(2)
 
Medical Margin
 
 
Total
 
PMPM
 
Total
 
PMPM
 
 
TANF and CHIP
14.9

 
$
2,626

 
$
176.00

 
$
2,400

 
$
160.85

 
91.4
%
 
$
226

Medicaid Expansion
3.8

 
1,421

 
371.82

 
1,208

 
316.13

 
85.0

 
213

Marketplace
3.4

 
782

 
228.19

 
657

 
191.62

 
84.0

 
125

ABD
2.4

 
2,280

 
976.58

 
2,079

 
890.71

 
91.2

 
201

MMP
0.3

 
655

 
2,157.55

 
587

 
1,932.73

 
89.6

 
68

Medicare
0.3

 
260

 
1,013.04

 
251

 
977.35

 
96.5

 
9

 
25.1

 
$
8,024

 
$
320.17

 
$
7,182

 
$
286.57

 
89.5
%
 
$
842

 
Six Months Ended June 30, 2015
 
Member
Months(1)
 
Premium Revenue
 
Medical Care Costs
 
MCR(2)
 
Medical Margin
 
 
Total
 
PMPM
 
Total
 
PMPM
 
 
TANF and CHIP
12.0

 
$
2,141

 
$
177.93

 
$
1,960

 
$
162.89

 
91.6
%
 
$
181

Medicaid Expansion
2.7

 
1,089

 
409.29

 
867

 
325.84

 
79.6

 
222

Marketplace
1.4

 
355

 
258.66

 
246

 
179.15

 
69.3

 
109

ABD
2.1

 
1,993

 
940.23

 
1,810

 
853.56

 
90.8

 
183

MMP
0.2

 
423

 
1,986.04

 
413

 
1,942.20

 
97.8

 
10

Medicare
0.3

 
274

 
1,036.95

 
269

 
1,020.01

 
98.4

 
5

 
18.7

 
$
6,275

 
$
336.21

 
$
5,565

 
$
298.18

 
88.7
%
 
$
710

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

-MORE-

MOH Reports Second Quarter 2016 Results
Page 14
July 27, 2016


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

The following tables provide the details of our medical care costs for the periods indicated:
 
Three Months Ended June 30,
 
2016
 
2015
 
Amount
 
PMPM
 
% of
Total
 
Amount
 
PMPM
 
% of
Total
Fee for service
$
2,620

 
$
206.01

 
72.9
%
 
$
2,103

 
$
209.34

 
71.8
%
Pharmacy
529

 
41.59

 
14.7

 
392

 
39.01

 
13.3

Capitation
304

 
23.87

 
8.5

 
248

 
24.72

 
8.5

Direct delivery
18

 
1.39

 
0.5

 
27

 
2.78

 
1.0

Other
123

 
9.68

 
3.4

 
159

 
15.80

 
5.4

 
$
3,594

 
$
282.54

 
100.0
%
 
$
2,929

 
$
291.65

 
100.0
%
 
Six Months Ended June 30,
 
2016
 
2015
 
Amount
 
PMPM
 
% of
Total
 
Amount
 
PMPM
 
% of
Total
Fee for service
$
5,357

 
$
213.77

 
74.6
%
 
$
4,051

 
$
217.05

 
72.8
%
Pharmacy
1,054

 
42.05

 
14.7

 
743

 
39.81

 
13.4

Capitation
599

 
23.87

 
8.3

 
465

 
24.90

 
8.3

Direct delivery
34

 
1.36

 
0.5

 
54

 
2.93

 
1.0

Other
138

 
5.52

 
1.9

 
252

 
13.49

 
4.5

 
$
7,182

 
$
286.57

 
100.0
%
 
$
5,565

 
$
298.18

 
100.0
%

The following table provides the details of our medical claims and benefits payable as of the dates indicated:
 
June 30,
 
December 31,
 
2016
 
2015
Fee-for-service claims incurred but not paid (IBNP)
$
1,292

 
$
1,191

Pharmacy payable
103

 
88

Capitation payable
37

 
140

Other (1)
334

 
266

 
$
1,766

 
$
1,685

______________________
(1)
“Other” medical claims and benefits payable include amounts payable to certain providers for which we act as an intermediary on behalf of various state agencies without assuming financial risk. Such receipts and payments do not impact our consolidated statements of income. As of June 30, 2016 and December 31, 2015, we had recorded non-risk provider payables of approximately $191 million and $167 million, respectively.

-MORE-

MOH Reports Second Quarter 2016 Results
Page 15
July 27, 2016

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

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

 
 
 
Year Ended
 
Six Months Ended June 30,
 
December 31,
 
2016
 
2015
 
2015
 
 
 
 
 
 
Medical claims and benefits payable, beginning balance
$
1,685

 
$
1,201

 
$
1,201

Components of medical care costs related to:
 
 
 
 
 
Current period
7,371

 
5,703

 
11,935

Prior period
(189
)
 
(138
)
 
(141
)
Total medical care costs
7,182

 
5,565

 
11,794

 
 
 
 
 
 
Change in non-risk provider payables
24

 
14

 
48

Payments for medical care costs related to:
 
 
 
 
 
Current period
5,885

 
4,449

 
10,448

Prior period
1,240

 
839

 
910

Total paid
7,125

 
5,288

 
11,358

Medical claims and benefits payable, ending balance
$
1,766

 
$
1,492

 
$
1,685

 
 
 
 
 
 
Benefit from prior period as a percentage of:
 
 
 
 
 
Balance at beginning of period
11.3
%
 
11.5
%
 
11.8
%
Premium revenue, trailing twelve months
1.3
%
 
1.2
%
 
1.1
%
Medical care costs, trailing twelve months
1.4
%
 
1.4
%
 
1.2
%
 
 
 
 
 
 
Fee-For-Service Claims Data:
 
 
 
 
 
Days in claims payable, fee for service
48

 
49

 
48

Number of members at end of period
4,233,000

 
3,352,000

 
3,533,000

Number of claims in inventory at end of period
530,900

 
463,200

 
380,800

Billed charges of claims in inventory at end of period
$
1,279

 
$
905

 
$
816

Claims in inventory per member at end of period
0.13

 
0.14

 
0.11

Billed charges of claims in inventory per member at end of period
$
302.06

 
$
269.93

 
$
230.91

Number of claims received during the period
26,279,000

 
18,679,000

 
40,173,300

Billed charges of claims received during the period
$
31,649

 
$
21,505

 
$
46,211




-END-

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