Molina Healthcare, Inc. (NYSE: MOH):
- Fourth quarter 2016 net loss per
diluted share decreases $0.79, to $0.85
- Net income per diluted share for full
year 2016 increases $0.78, to $0.92
- 2017 guidance of $1.72 net income per
diluted share and $2.09 adjusted net income per diluted share
remains unchanged
Molina Healthcare, Inc. (NYSE: MOH) today announced that, due to
an oversight, its unaudited financial results for the fourth
quarter and full year of 2016, as reported on February 15, 2017,
did not include the impact of a retroactive contract amendment
received in the fourth quarter of 2016 that changed the minimum
medical loss ratio calculation under California’s Medicaid
Expansion program.
The pre-tax impact of that retroactive contract amendment was
$68 million favorable for both the fourth quarter and the full year
of 2016. On a per diluted share basis, the contract amendment was
favorable to fourth quarter 2016 results by $0.79 and favorable to
full year 2016 results by $0.78. The California Medicaid Expansion
minimum medical loss ratio requirement terminated effective June
30, 2016, so this amendment is entirely retrospective in nature.
Accordingly, this development has no impact on the Company’s
previously published outlook for 2017.
Income before income tax expense for the full year of 2016 after
the adjustment will be $205 million, compared to $137 million
previously reported on February 15, 2017. Similarly, net loss per
diluted share for the three months ended December 31, 2016 will be
$0.85, compared to the net loss per diluted share previously
reported of $1.64. Net income per diluted share for the year ended
December 31, 2016 will be $0.92, compared to the previously
reported net income per diluted share of $0.14. These adjustments
will be reflected in the Company's Annual Report on Form 10-K for
the year ended December 31, 2016.
“We want our stockholders to know that providing confidence and
transparency in our financial statements has always been a top
priority for Molina Healthcare,” said J. Mario Molina, Chief
Executive Officer, Molina Healthcare, Inc. “We remain committed to
strengthening and improving the performance of our core business in
order to drive our profitability.”
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 12 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.
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995: This earnings release contains
“forward-looking statements” regarding our expected 2017 financial
performance. 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;
- the numerous political and market-based
uncertainties associated with the Affordable Care Act (the “ACA”)
or “Obamacare,” including any potential repeal and replacement of
the law, amendment of the law, or move to state block grants for
Medicaid;
- the market dynamics surrounding the ACA
Marketplaces, including but not limited to uncertainties associated
with risk transfer requirements, the potential for disproportionate
enrollment of higher acuity members, the withdrawal of cost sharing
subsidies and/or premium tax credits, the adequacy of agreed rates,
and potential disruption associated with market withdrawal;
- subsequent adjustments to reported
premium revenue based upon subsequent developments or new
information, including changes to estimated amounts payable or
receivable related to Marketplace risk adjustment/risk transfer,
risk corridors, and reinsurance;
- 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;
- 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 success of our efforts to retain
existing government contracts, including those in Illinois,
Washington, Florida, Texas, and New Mexico, and to obtain new
government contracts in connection with state requests for
proposals (RFPs) in both existing and new states;
- 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;
- our ability to consummate and realize
benefits from acquisitions, and to integrate acquisitions;
- 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;
- our estimates of amounts owed for such
cost expenditure floors, administrative cost and profit ceilings,
premium stabilization programs, profit-sharing arrangements, and
risk adjustment provisions;
- the Medicaid expansion cost corridors
in New Mexico and Washington, and any other retroactive adjustment
to revenue where methodologies and procedures are subject to
interpretation or dependent upon information about the health
status of participants other than Molina members;
- the interpretation and implementation
of at-risk premium rules and state contract performance
requirements regarding the achievement of certain quality measures,
and our ability to recognize revenue amounts 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 PROMESA law, and our efforts to better manage the
health care costs of our Puerto Rico health plan;
- the success and renewal of our duals
demonstration programs in California, Illinois, Michigan, Ohio,
South Carolina, and Texas;
- the accurate estimation of incurred but
not reported or paid medical costs across our health plans;
- efforts by states to recoup previously
paid and recognized premium amounts;
- 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, or
potential investigations, and any fine, sanction, enrollment
freeze, monitoring program, or premium recovery 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 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;
- our failure to comply with the
financial or other covenants in our credit agreement or the
indentures governing our outstanding notes;
- the sufficiency of our funds on hand to
pay the amounts due upon conversion of our outstanding notes;
- 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, public catastrophes or terrorist attacks, and associated
public alarm;
- 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 March 1, 2017, and we disclaim any obligation to update any
forward-looking statements to conform the statement to actual
results or changes in our expectations.
MOLINA HEALTHCARE, INC. UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS Three Months
Ended December 31, 2016 Year Ended December 31, 2016
As
Previously
Reported
Adjustments As Revised
As
Previously
Reported
Adjustments As Revised (Dollar
amounts in millions, except per-share amounts) Revenue:
Premium revenue $ 4,109 $ 68 $ 4,177 $ 16,324 $ 68 $ 16,392
Service revenue 131 — 131 539 — 539 Premium tax revenue 120 3 123
465 3 468 Health insurer fee revenue 94 — 94 345 — 345 Investment
income and other revenue 9 — 9 38
— 38 Total revenue 4,463 71
4,534 17,711 71 17,782
Operating expenses: Medical care costs 3,844 — 3,844 14,774
— 14,774 Cost of service revenue 123 — 123 485 — 485 General and
administrative expenses 359 — 359 1,393 — 1,393 Premium tax
expenses 120 3 123 465 3 468 Health insurer fee expenses 54 — 54
217 — 217 Depreciation and amortization 37 —
37 139 — 139 Total operating
expenses 4,537 3 4,540 17,473 3
17,476 Operating (loss) income (74 ) 68 (6 )
238 68 306 Interest expense 25 — 25 101
— 101 (Loss) income before income tax
expense (99 ) 68 (31 ) 137 68 205 Income tax (benefit) expense (8 )
24 16 129 24 153
Net (loss) income $ (91 ) $ 44 $ (47 ) $ 8 $
44 $ 52 Diluted net (loss) income per
share $ (1.64 ) $ 0.79 $ (0.85 ) $ 0.14 $ 0.78
$ 0.92 Diluted weighted average shares
outstanding 55.6 — 55.6 56.3 —
56.3
Operating Statistics:
Medical care ratio (1) 93.6 % 92.0 % 90.5 % 90.1 % General and
administrative expense ratio (2) 8.0 % 7.9 % 7.9 % 7.8 % Premium
tax ratio (1) 2.8 % 2.9 % 2.8 % 2.8 % Effective tax rate 79.0 %
(54.5 )% 94.1 % 74.8 % Net profit margin (2) (2.0 )% (1.0 )% — %
0.3 %
____________
(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)
General and administrative expense ratio
represents general and administrative expenses as a percentage of
total revenue. Net profit margin represents net (loss) income as a
percentage of total revenue.
MOLINA HEALTHCARE, INC. UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS As of December 31,
2016
As Previously
Reported
Adjustments As Revised (In
millions,except per-share data) ASSETS Current
assets: Cash and cash equivalents $ 2,819 $ — $ 2,819
Investments 1,758 — 1,758 Receivables 974 — 974 Income taxes
refundable 63 (24 ) 39 Prepaid expenses and other current assets
131 — 131 Derivative asset 267 — 267
Total current assets 6,012 (24 ) 5,988 Property, equipment, and
capitalized software, net 454 — 454 Deferred contract costs 86 — 86
Intangible assets, net 140 — 140 Goodwill 620 — 620 Restricted
investments 110 — 110 Deferred income taxes 10 — 10 Other assets 41
— 41 $ 7,473 $ (24 ) $
7,449
LIABILITIES AND STOCKHOLDERS’ EQUITY Current
liabilities: Medical claims and benefits payable $ 1,929 $ — $
1,929 Amounts due government agencies 1,273 (71 ) 1,202 Accounts
payable and accrued liabilities 382 3 385 Deferred revenue 315 —
315 Current portion of long-term debt 472 — 472 Derivative
liability 267 — 267 Total current
liabilities 4,638 (68 ) 4,570 Senior notes 975 — 975 Lease
financing obligations 198 — 198 Deferred income taxes 15 — 15 Other
long-term liabilities 42 — 42 Total
liabilities 5,868 (68 ) 5,800 Stockholders’
equity: Common stock, $0.001 par value; 150 shares authorized;
outstanding: 57 shares at December 31, 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 841 — 841 Accumulated other
comprehensive loss (2 ) — (2 ) Retained earnings 766 44
810 Total stockholders’ equity 1,605 44
1,649 $ 7,473 $ (24 ) $ 7,449
MOLINA HEALTHCARE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended December 31, 2016 Year Ended
December 31, 2016
As
Previously
Reported
Adjustments As Revised
As
Previously
Reported
Adjustments As Revised (In
millions) Operating activities: Net (loss) income
$ (91 ) $ 44 $ (47 ) $ 8 $ 44 $ 52 Adjustments to reconcile net
(loss) income to net cash provided by operating activities:
Depreciation and amortization 47 — 47 182 — 182 Deferred income
taxes 2 — 2 22 — 22 Share-based compensation 2 — 2 26 — 26
Amortization of convertible senior notes and lease financing
obligations 8 — 8 31 — 31 Other, net 2 — 2 16 — 16 Changes in
operating assets and liabilities: Receivables 79 — 79 (348 ) — (348
) Prepaid expenses and other assets 47 — 47 (69 ) — (69 ) Medical
claims and benefits payable 58 — 58 226 — 226 Amounts due
government agencies 41 (71 ) (30 ) 544 (71 ) 473 Accounts payable
and accrued liabilities (8 ) 3 (5 ) (7 ) 3 (4 ) Deferred revenue
(65 ) — (65 ) 92 — 92 Income taxes (82 ) 24 (58 ) (50
) 24 (26 ) Net cash provided by operating activities
40 — 40 673 — 673
Investing activities: Purchases of investments (485 ) — (485
) (1,929 ) — (1,929 ) Proceeds from sales and maturities of
investments 454 — 454 1,966 — 1,966 Purchases of property,
equipment, and capitalized software (33 ) — (33 ) (176 ) — (176 )
Change in restricted investments — — — 4 — 4 Net cash paid in
business combinations — — — (48 ) — (48 ) Other, net (7 ) —
(7 ) (19 ) — (19 ) Net cash used in investing
activities (71 ) — (71 ) (202 ) — (202
) Financing activities: Proceeds from employee stock plans 8 — 8 18
— 18 Other, net — — — 1 —
1 Net cash provided by financing activities 8
— 8 19 — 19 Net
(decrease) increase in cash and cash equivalents (23 ) — (23 ) 490
— 490 Cash and cash equivalents at beginning of period 2,842
— 2,842 2,329 — 2,329
Cash and cash equivalents at end of period $ 2,819 $
— $ 2,819 $ 2,819 $ — $
2,819
MOLINA HEALTHCARE, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES — 2017 OUTLOOK
Amount Per share (2)
(In millions, except per-share
amounts)
Net income - 2017 Outlook $ 100 $ 1.72 Adjustments: Amortization of
intangible assets 34 0.59 Income tax effect (1) (12 ) (0.22 )
Amortization of intangible assets, net of tax effect 22 0.37
Adjusted net income - 2017 Outlook $ 122 $ 2.09
____________
(1)
Income tax effect calculated at the
statutory tax rate of 37%.
(2)
Computation assumes 58.2 million diluted
weighted average shares outstanding.
The following are descriptions of the
adjustments made to GAAP measures used to calculate the non-GAAP
measures used in this news release:
Adjusted net income: Net income
(GAAP) less amortization of intangible assets, net of income tax
effect calculated at the statutory tax rate of 37%. We believe that
adjusted net income is very helpful in assessing our financial
performance exclusive of the non-cash impact of the amortization of
purchased intangibles.
Adjusted net income per diluted
share: Adjusted net income divided by weighted average common
shares outstanding on a fully diluted basis.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170301006407/en/
Molina Healthcare, Inc.Juan José Orellana, 562-435-3666, ext.
111143Investor Relations
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