Molina Healthcare, Inc 10-Q for FY2020 Q2

Molina Healthcare, Inc. (MOH)

10-Q 2020-07-31 For: 2020-06-30

Added on April 10, 2026

About this 10-Q

Molina Healthcare, Inc filed this 10-Q on July 31, 2020, covering the quarter ended June 30, 2020 (FY2020 Q2).

Headline figures

Quarter ended June 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $4.62B; up 10.1% from $4.19B a year earlier
Net income: $276M; up 40.8% from net income of $196M a year earlier
Diluted EPS: $4.65; up 52.0% from $3.06 a year earlier

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Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 Par Value	MOH	New York Stock Exchange


ITEM NUMBER			Page

PART I

1.	Financial Statements	3

2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

3.	Quantitative and Qualitative Disclosures About Market Risk	40

4.	Controls and Procedures	41

PART II

1.	Legal Proceedings	41

1A.	Risk Factors	41

2.	Unregistered Sales of Equity Securities and Use of Proceeds	42

3.	Defaults Upon Senior Securities	Not Applicable.

4.	Mine Safety Disclosures	Not Applicable.

5.	Other Information	Not Applicable.

6.	Exhibits	43

	Signatures	44


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019

	(In millions, except per-share amounts) (Unaudited)
Revenue:
Premium revenue	$	4,372	$	4,049	$	8,676	$	8,001
Premium tax revenue	157		110		307		248
Health insurer fees reimbursed	71		—		137		—
Investment income and other revenue	18		34		47		63
Total revenue	4,618		4,193		9,167		8,312
Operating expenses:
Medical care costs	3,598		3,466		7,314		6,837
General and administrative expenses	345		328		662		630
Premium tax expenses	157		110		307		248
Health insurer fees	71		—		139		—
Depreciation and amortization	21		22		41		47
Other	2		2		6		5
Total operating expenses	4,194		3,928		8,469		7,767
Operating income	424		265		698		545
Other expenses, net:
Interest expense	24		22		45		45
Other expense (income), net	5		(14)		5		(17)
Total other expenses, net	29		8		50		28
Income before income tax expense	395		257		648		517
Income tax expense	119		61		194		123
Net income	$	276	$	196	$	454	$	394

Net income per share - Basic	$	4.72	$	3.15	$	7.65	$	6.34
Net income per share - Diluted	$	4.65	$	3.06	$	7.54	$	6.04


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019

	(In millions) (Unaudited)
Net income	$	276	$	196	$	454	$	394
Other comprehensive income:
Unrealized investment income	62		10		37		17
Less: effect of income taxes	15		2		9		4
Other comprehensive income, net of tax	47		8		28		13
Comprehensive income	$	323	$	204	$	482	$	407


	June 30, 2020		December 31, 2019

	(Dollars in millions, except per-share amounts)
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	3,303	$	2,452
Investments	1,906		1,946
Receivables	1,580		1,406
Prepaid expenses and other current assets	273		163
Total current assets	7,062		5,967
Property, equipment, and capitalized software, net	399		385
Goodwill and intangible assets, net	164		172
Restricted investments	87		79
Deferred income taxes	65		79
Other assets	99		105
Total assets	$	7,876	$	6,787

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Medical claims and benefits payable	$	1,960	$	1,854
Amounts due government agencies	865		664
Accounts payable, accrued liabilities and other	876		502
Deferred revenue	54		249
Total current liabilities	3,755		3,269
Long-term debt	1,812		1,237
Finance lease liabilities	229		231
Other long-term liabilities	84		90
Total liabilities	5,880		4,827
Stockholders’ equity:
Common stock, $0.001 par value, 150 million shares authorized; outstanding: 59 million shares at June 30, 2020, and 62 million shares at December 31, 2019	—		—
Preferred stock, $0.001 par value; 20 million shares authorized, no shares issued and outstanding	—		—
Additional paid-in capital	166		175
Accumulated other comprehensive income	32		4
Retained earnings	1,798		1,781
Total stockholders’ equity	1,996		1,960
Total liabilities and stockholders’ equity	$	7,876	$	6,787


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Common Stock					Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total
	Outstanding	Amount

	(In millions)
	(Unaudited)
Balance at December 31, 2019	62	$	—	$	175	$	4	$	1,781	$	1,960
Net income	—	—		—		—		178		178
Common stock purchases	(3)	—		(9)		—		(437)		(446)
Termination of warrants	—	—		(30)		—		—		(30)
Other comprehensive loss, net	—	—		—		(19)		—		(19)
Share-based compensation	—	—		4		—		—		4
Balance at March 31, 2020	59	—		140		(15)		1,522		1,647
Net income	—	—		—		—		276		276
Other comprehensive income, net	—	—		—		47		—		47
Share-based compensation	—	—		26		—		—		26
Balance at June 30, 2020	59	$	—	$	166	$	32	$	1,798	$	1,996


	June 30,
	2020		2019

	(In millions)
Cash and cash equivalents	$	3,303	$	2,253
Restricted cash and cash equivalents	63		74
Total cash, cash equivalents, and restricted cash and cash equivalents presented in the consolidated statements of cash flows	$	3,366	$	2,327


			Observable Inputs		Directly or Indirectly Observable Inputs		Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)

	(In millions)
Corporate debt securities	$	1,139	$	—	$	1,139	$	—
Mortgage-backed securities	439		—		439		—
Municipal securities	176		—		176		—
Asset-backed securities	139		—		139		—
Certificates of deposit	7		—		7		—
U.S. Treasury notes	4		—		4		—
Government-sponsored enterprise securities (“GSEs”)	2		—		2		—

Total	$	1,906	$	—	$	1,906	$	—


	Balance Sheet Location	June 30, 2020		December 31, 2019

		(In millions)
Derivative asset:
Call option	Current assets: Prepaid expenses and other current assets	$	—	$	29
Derivative liability:
Conversion option	Current liabilities: Accounts payable, accrued liabilities and other	$	—	$	29


	June 30, 2020						December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value

	(In millions)
4.375% Notes	$	789	$	802	$	—	$	—
5.375% Notes	696		723		696		745
4.875% Notes	327		333		327		340
Term loan facility ⁽¹⁾	—		—		220		220
1.125% Convertible Notes ⁽¹⁾	—		—		12		42
Total	$	1,812	$	1,858	$	1,255	$	1,347


	June 30, 2020
	Amortized Cost		Gross Unrealized								Estimated Fair Value
					Gains			Losses

	(In millions)
Corporate debt securities	$	1,108	$	33		$	2		$	1,139
Mortgage-backed securities	433		9			3			439
Municipal securities	174		2			—			176
Asset-backed securities	136		3			—			139
Certificates of deposit	7		—			—			7
U.S. Treasury notes	4		—			—			4
GSEs	2		—			—			2

Total	$	1,864	$	47		$	5		$	1,906


	Amortized Cost		Estimated Fair Value

	(In millions)
Due in one year or less	$	263	$	265
Due after one year through five years	979		1,009
Due after five years through ten years	172		176
Due after ten years	450		456
Total	$	1,864	$	1,906


	In a Continuous Loss Position for Less than 12 Months									In a Continuous Loss Position for 12 Months or More
	Estimated Fair Value		Unrealized Losses		Total Number of Positions	Estimated Fair Value		Unrealized Losses		Total Number of Positions

	(Dollars in millions)
Corporate debt securities	$	63	$	2	29	$	—	$	—	—
Mortgage-backed securities	53		3		34	—		—		—



Total	$	116	$	5	63	$	—	$	—	—


	Six Months Ended June 30,
	2020		2019

	(In millions) (Unaudited)
Supplemental cash flow information:

Schedule of non-cash investing and financing activities:
Common stock used for share-based compensation	$	(8)	$	(7)

Details of change in fair value of derivatives, net:
(Loss) gain on call option	$	(2)	$	166
Gain (loss) on conversion option	2		(166)
Change in fair value of derivatives, net	$	—	$	—


	June 30, 2020		December 31, 2019

	(In millions)
Medicaid program:
Minimum MLR and profit sharing	$	85	$	92
Other	105		95
Medicare program:
Risk adjustment and Part D risk sharing	38		14
Minimum MLR and profit sharing	16		36
Other	24		21
Marketplace program:
Risk adjustment	529		368
Minimum MLR	41		15

Other	27		23
Total amounts due government agencies	$	865	$	664


	Three Months Ended June 30,									Six Months Ended June 30,
	2020			2019			2020			2019

	(In millions)
Maximum available quality incentive premium - current period	$	65		$	46		$	126		$	91

Quality incentive premium revenue recognized in current period:
Earned current period	$	58		$	37		$	102		$	63
Earned prior periods	7			10			19			30
Total	$	65		$	47		$	121		93

Quality incentive premium revenue recognized as a percentage of total premium revenue	1.5		%	1.2		%	1.4		%	1.2		%


	RSAs	PSUs	Total	Weighted Average Grant Date Fair Value
Unvested balance, December 31, 2019	447,680	324,078	771,758	$	102.01
Granted	318,299	185,422	503,721	123.07
Vested	(160,927)	(7,368)	(168,295)	93.34
Forfeited	(20,073)	(26,096)	(46,169)	103.65
Unvested balance, June 30, 2020	584,979	476,036	1,061,015	$	113.31


	June 30, 2020	December 31, 2019	June 30, 2019
Ending Membership by Government Program:
Medicaid	3,122,000	2,956,000	2,962,000
Medicare	108,000	101,000	100,000
Marketplace	325,000	274,000	308,000
Total	3,555,000	3,331,000	3,370,000

Ending Membership by Health Plan:
California	572,000	565,000	590,000
Florida	131,000	132,000	142,000
Illinois	242,000	224,000	221,000
Michigan	377,000	362,000	360,000
Ohio	329,000	288,000	297,000
Puerto Rico	167,000	176,000	200,000
South Carolina	145,000	131,000	130,000
Texas	352,000	341,000	360,000
Washington	913,000	832,000	811,000
Other ⁽¹⁾	327,000	280,000	259,000
Total	3,555,000	3,331,000	3,370,000


	Total Number of Shares Purchased ⁽¹⁾	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
April 1 - April 30	136	$	133.48	—	$	—
May 1 - May 31	2,024	$	180.01	—	$	—
June 1 - June 30	408	$	173.58	—	$	—
Total	2,568	$	176.52	—


*			Certain portions of this agreement have been omitted in accordance with Item 601(b)(10) of Regulation S-K. A copy of any omitted portion will be furnished to the Securities and Exchange Commission upon request.



Dated: July 31, 2020						/s/ Joseph M. Zubretsky
						Joseph M. Zubretsky
						Chief Executive Officer, President and Director



Dated: July 31, 2020						/s/ Thomas L. Tran
						Thomas L. Tran
						Chief Financial Officer and Treasurer