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TMCNet:  Molina Healthcare Announces Second Quarter Results and Restructuring Plan

[August 02, 2017]

Molina Healthcare Announces Second Quarter Results and Restructuring Plan

Molina Healthcare, Inc. (NYSE: MOH):

  • Net loss of $230 million for the quarter, or $4.10 per diluted share.
  • Restructuring plan now underway is expected to reduce annualized run-rate expenses by $300 million to $400 million upon completion in 2018.
  • $200 million total reduction to annualized run-rate expenses resulting from staff reductions expected to be achieved by the end of 2017 in time for full realization in 2018.
  • Annualized salary eliminations of $55 million achieved so far in the third quarter of 2017.
  • Direct delivery operations will be restructured during the second half of 2017.
  • 2018 Marketplace participation to be terminated in Utah and Wisconsin; additional states in review.
  • 2017 earnings per share guidance withdrawn.

Molina Healthcare, Inc. (NYSE: MOH) today reported its financial results for the second quarter of 2017.

"We are disappointed with our bottom-line results for this quarter and have taken aggressive and urgent steps to substantially improve our financial performance going forward," said Joseph White, chief financial officer and interim president and chief executive officer of Molina Healthcare, Inc. "Following a thorough review of our business operations, we have begun to implement a Company-wide restructuring plan that we expect will reduce annualized run-rate expenses by between $300 million and $400 million by late 2018 when fully implemented, with approximately $200 million of these run-rate reductions expected to be achieved by the end of 2017 and in time for full realization in 2018. In the past, we have been focused on top line growth, often at the expense of bottom line results. While we expect to enjoy continued RFP and organic growth in our Medicaid managed care business, we are now intensively focused on improved operating performance and efficiency as the path to greater profitability and shareholder returns."

Second Quarter 2017 Compared with Second Quarter 2016

Net loss per diluted share was $4.10 in the second quarter of 2017 compared with net income per diluted share of $0.58 reported for the second quarter of 2016. Loss before income tax benefit for the second quarter of 2017 was $314 million.

Certain significant items increased loss before income tax benefit in the second quarter of 2017 by approximately $330 million. Specifically:

  • We recorded $72 million in non-cash impairment losses for goodwill and intangibles, primarily relating to our Pathways subsidiary. In the course of developing our restructuring and profitability improvement plan, we determined that future benefits to be derived from Pathways (including integration with our health plans) will be less than previously anticipated. While such impairment losses have a short-term impact on profitability, there is no impact to our cash flows. Pathways experienced operating losses of $8 million for the quarter ended June 30, 2017 and $12 million for the six months ended June 30, 2017.
  • Medical care costs related to 2016 service dates were significantly in excess of what the Company usually experiences for out-of-period claims development, particularly at the Florida, Illinois, New Mexico, and Puerto Rico health plans. In total, we experienced out-of-period claims development that was approximately $85 million higher than expected at December 31, 2016.
  • We recorded $44 million for Marketplace changes in estimates, including risk transfer and cost sharing subsidies, related to 2016 service dates. Liabilities for risk transfer payments and cost sharing subsidies that were estimated at December 31, 2016 were finalized during the second quarter of 2017.
  • Loss before income tax benefit increased by $78 million as a result of an increase to the premium deficiency reserve established for the Marketplace program. The reserve, which was $22 million at March 31, 2017, increased to $100 million as of June 30, 2017. Based upon revenue and cost trends observed in the second quarter of 2017, we now believe that Marketplace performance in the second half of 2017 will fall substantially short of previous expectations. Marketplace performance has been most disappointing in Florida, Utah, Washington, and Wisconsin.
  • We recorded $43 million in restructuring and separation costs in the second quarter of 2017 related primarily to contractually required termination benefits paid to our former chief executive officer and chief financial officer. Also included in these costs are consulting fees incurred for the development and implementation of our corporate restructuring initiatives.

In addition to the items noted above, ongoing poor performance at our Florida, Illinois, New Mexico and Puerto Rico health plans in 2017 all contributed to our disappointing financial performance in the second quarter of 2017.

The table below summarizes the impact of these significant items on the Company's financial performance.



 

Summary of Significant Items Affecting 2017 Financial Results

 
    Three Months Ended     Six Months Ended
June 30, 2017 June 30, 2017
(In millions, except per diluted share amounts)
Amount    

Per Diluted
Share (1)

Amount    

Per Diluted
Share (1)

Impairment losses $ 72 $ 1.01 $ 72 $ 1.02
Losses at behavioral health subsidiary exclusive of impairment 8 0.09 12 0.14
Medical care costs related to prior year service dates that were in excess of historical expectations 85 0.95 74 0.84
Marketplace adjustments related to risk transfer, cost sharing subsidies, and other items for 2016 service dates 44 0.49 47 0.53
Marketplace premium deficiency reserve for 2017 service dates 78 0.87 70 0.79
Restructuring and separation costs 43 0.68 43 0.68
Termination fee received for Terminated Medicare acquisition -   -   (75 ) (0.84 )
$ 330   $ 4.09   $ 243   $ 3.16  
____________________

(1)

Except for certain items that are not deductible for tax purposes, per diluted share amounts are generally calculated at our statutory income tax rate of 37%, which is in excess of the effective tax rate recorded in our consolidated statements of operations.

 

Income Tax (Benefit) Expense

The effective tax rate benefit for 2017 was less than the statutory tax rate benefit due to the relatively large amount of our reported expenses that are not deductible for tax purposes.

Restructuring and Profit Improvement Plan

As a result of our poor operating performance and catalyzed by our change in management, we accelerated the implementation of a comprehensive restructuring and profitability improvement plan (the Restructuring Plan). Under the Restructuring Plan, we are taking the following actions:

  1. We are streamlining our organizational structure, including the elimination of redundant layers of management, the consolidation of regional support services, and other reductions to our workforce, to improve efficiency as well as the speed and quality of our decision-making.
  2. We are re-designing core operating processes such as provider payment, utilization management, quality monitoring and improvement, and information technology to achieve more effective and cost efficient outcomes.
  3. We are remediating high cost provider contracts and building around high quality, cost-effective networks.
  4. We are restructuring our existing direct delivery operations.
  5. We are reviewing our vendor base to ensure that we are partnering with the lowest-cost, most-effective vendors.
  6. Throughout this process, we are taking precautions to ensure that our actions do not impede our ability to continue to deliver quality health care, retain existing managed care contracts, and to secure new managed care contracts.

In total, we estimate that the Restructuring Plan will reduce annualized run-rate expenses by approximately $300 million to $400 million upon its completion in late 2018. $200 million of these run-rate reductions, which are a result of staff reductions, will be in place by December 2017, and therefore will fully contribute to our 2018 results. Since the close of the second quarter, we have already achieved $55 million of our annualized run-rate reduction target as a result of staff reductions taken on July 27th. All savings targets discussed in regards to the Restructuring Plan represent annualized run-rate savings that we expect to achieve during the year following the indicated implementation date. One-time costs associated with the Restructuring Plan are expected to exceed the benefits realized in 2017 due to the upfront payment of implementation costs and the delayed benefit of full savings until the beginning of 2018.

We estimate that total pre-tax costs associated with the Restructuring Plan will be approximately $130 million to $150 million for the second half of 2017, with an additional $40 million to be incurred in 2018.

As part of the Restructuring Plan, we are reducing our corporate and health plans workforce by approximately 10%, or 1,500 full-time-equivalent employees. This workforce rightsizing, which represents 7% of the total number of our employees, is expected to be completed by the end of 2017. Affected employees will be offered severance and outplacement assistance.

"This reduction in our workforce is a difficult, but necessary, step as we concentrate our efforts on achieving operational excellence and improved efficiency. By transforming the entire enterprise into a leaner, more streamlined organization, we can enhance our decision-making, improve our operating performance, and grow our margins," said Mr. White.

Actions Taken to Remediate 2018 Marketplace Performance

In addition to the Restructuring Plan, we are taking these further steps to improve profitability in 2018:

  1. We are exiting the Utah and Wisconsin ACA Marketplaces effective December 31, 2017. For the three months ended June 30, 2017, these two health plans reported a total of $127 million in Marketplace premium revenue (16% of consolidated Marketplace premium revenue), and a combined Marketplace medical care ratio of 128%.
  2. In our remaining Marketplace plans, we are increasing 2018 premiums by 55%. The increase takes into account the absence of cost sharing reduction subsidies. Had we assumed that cost sharing reduction subsidies would be funded for 2018, the premium increase would have been 30%.
  3. We are also reducing the scope of our 2018 participation in the Washington Marketplace.
  4. We continue to closely monitor the current political and programmatic developments pertaining to our 2018 participation in other Marketplace states, and subject to those developments, will withdraw from 2018 participation as may be necessary.

Withdrawing 2017 Outlook

We are withdrawing our previously issued 2017 full-year earnings per diluted share and adjusted earnings per diluted share guidance. Among the reasons for withdrawing guidance are:

  • Our results for the quarter ended June 30, 2017.
  • Uncertain medical cost trends in the Florida, Illinois, New Mexico, and Puerto Rico health plans.
  • Uncertainty around the funding of Marketplace cost sharing subsidies.
  • Potential variability in the timing of benefits achieved and costs incurred as a result of the Restructuring Plan.

Update on Search for Permanent Chief Executive Officer

Our search for a permanent chief executive officer is well underway and we are encouraged by the response.

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, August 2, 2017. The number to call for the interactive teleconference is (212) 231-2909. A telephonic replay of the conference call will be available from 7:00 p.m. Eastern time on Wednesday, August 2, 2017, through 6:00 p.m. Eastern Time on Thursday, August 3, 2017, by dialing (800) 633-8284 and entering confirmation number 21855049. 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 health plans operating in 12 states across the nation and in the Commonwealth of Puerto Rico, Molina currently serves approximately 4.7 million members. Dr. C. David Molina founded our company in 1980 to serve 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 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 the Restructuring Plan, including the timing of the benefits realized;
  • 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;
  • effective management of our medical costs;
  • our ability to predict with a reasonable degree of accuracy utilization rates, 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 payment of all amounts due to our Illinois health plan following the resolution of the Illinois budget impasse;
  • the success of our efforts to retain existing government contracts, including those in Florida, Illinois, New Mexico, Puerto Rico, and Texas, and to obtain new government contracts in connection with state requests for proposals (RFPs) in both existing and new states;
  • any adverse impact resulting from the significant changes to our executive leadership team and the rightsizing of our workforce;
  • the impact of our decision to exit the Utah and Wisconsin ACA Marketplace markets effective December 31, 2017;
  • our ability to manage our operations, 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 or divestitures;
  • 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 California, 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, including any potential demand by the state of New Mexico to recover purportedly underpaid premium taxes;
  • 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 or maturity 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 August 2, 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 CONSOLIDATED STATEMENTS OF OPERATIONS

 
Three Months Ended June 30, Six Months Ended June 30,
2017     2016 2017     2016
(Dollar amounts in millions, except per-share amounts)
Revenue:
Premium revenue $ 4,740 $ 4,029 $ 9,388 $ 8,024
Service revenue 129 135 260 275
Premium tax revenue 114 109 225 218
Health insurer fee revenue - 76 - 166
Investment income and other revenue 16   10   30   19  
Total revenue 4,999   4,359   9,903   8,702  
Operating expenses:
Medical care costs 4,491 3,594 8,602 7,182
Cost of service revenue 124 116 246 243
General and administrative expenses 405 351 844 691
Premium tax expenses 114 109 225 218
Health insurer fee expenses - 50 - 108
Depreciation and amortization 37 34 76 66
Impairment losses 72 - 72 -
Restructuring and separation costs 43   -   43   -  
Total operating expenses 5,286   4,254   10,108   8,508  
Operating (loss) income (287 ) 105   (205 ) 194  
Other expenses (income), net:
Interest expense 27 25 53 50
Other income, net -   -   (75 ) -  
Total other expenses (income), net 27   25   (22 ) 50  
(Loss) income before income tax (benefit) expense (314 ) 80 (183 ) 144
Income tax (benefit) expense (84 ) 47   (30 ) 87  
Net (loss) income $ (230 ) $ 33   $ (153 ) $ 57  
 
Net (loss) income per diluted share $ (4.10 ) $ 0.58   $ (2.74 ) $ 1.01  
 
Diluted weighted average shares outstanding 56.2   55.5   56.1   56.3  
 
Operating Statistics:
Medical care ratio (1) 94.8 % 89.2 % 91.6 % 89.5 %
G&A ratio (2) 8.1 % 8.1 % 8.5 % 7.9 %
Premium tax ratio (1) 2.4 % 2.6 % 2.3 % 2.6 %
Effective tax rate 26.8 % 59.8 % 16.0 % 60.7 %
Net profit margin (2) (4.6 )% 0.7 % (1.5 )% 0.7 %
__________________
(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) G&A 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 CONSOLIDATED BALANCE SHEETS

 
June 30, December 31,
2017 2016

(In millions,
except per-share data)

ASSETS
Current assets:
Cash and cash equivalents $ 2,979 $ 2,819
Investments 2,192 1,758
Restricted investments 325 -
Receivables 1,006 974
Income taxes refundable

68

39
Prepaid expenses and other current assets 159 131
Derivative asset 440   267  
Total current assets 7,169 5,988
Property, equipment, and capitalized software, net 449 454
Deferred contract costs 93 86
Intangible assets, net 112 140
Goodwill 559 620
Restricted investments 118 110
Deferred income taxes 36 10
Other assets 47   41  
$ 8,583   $ 7,449  
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Medical claims and benefits payable $ 2,077 $ 1,929
Amounts due government agencies 1,844 1,202
Accounts payable and accrued liabilities 375 385
Deferred revenue 284 315
Current portion of long-term debt 773 472
Derivative liability 440   267  
Total current liabilities 5,793 4,570
Senior notes 1,017 975
Lease financing obligations 198 198
Deferred income taxes - 15
Other long-term liabilities 54   42  
Total liabilities 7,062   5,800  
Stockholders' equity:
Common stock, $0.001 par value; 150 shares authorized; outstanding: 57 shares at June 30, 2017 and December 31, 2016 - -
Preferred stock, $0.001 par value; 20 shares authorized, no shares issued and outstanding - -
Additional paid-in capital 865 841
Accumulated other comprehensive loss (1 ) (2 )
Retained earnings 657   810  
Total stockholders' equity 1,521   1,649  
$ 8,583   $ 7,449  
 
       

MOLINA HEALTHCARE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 
Three Months Ended June 30, Six Months Ended June 30,
2017     2016 2017     2016
(In millions)
Operating activities:
Net (loss) income $ (230 ) $ 33 $ (153 ) $ 57
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization 47 45 96 89
Impairment losses 72 - 72 -
Deferred income taxes (36 ) 9 (41 ) 39
Share-based compensation, including accelerated share-based compensation 29 9 35 16
Amortization of convertible senior notes and lease financing obligations 8 7 16 15
Other, net 4 5 7 11
Changes in operating assets and liabilities:
Receivables - (149 ) (32 ) (415 )
Prepaid expenses and other assets (26 ) 59 (38 ) (143 )
Medical claims and benefits payable 151 (173 ) 148 82
Amounts due government agencies 269 328 642 509
Accounts payable and accrued liabilities (68 ) (58 ) (18 ) 147
Deferred revenue (178 ) 10 (32 ) (119 )
Income taxes (89 ) 14   (30 ) (10 )
Net cash (used in) provided by operating activities (47 ) 139   672   278  
Investing activities:
Purchases of investments (903 ) (363 ) (1,636 ) (974 )
Proceeds from sales and maturities of investments 441 464 874 812
Purchases of property, equipment, and capitalized software (34 ) (56 ) (60 ) (102 )
(Increase) decrease in restricted investments held-to-maturity (3 ) 9 (10 ) 5
Net cash paid in business combinations - (6 ) - (8 )
Other, net (7 ) (7 ) (13 ) (6 )
Net cash (used in) provided by investing activities (506 ) 41   (845 ) (273 )
Financing activities:
Proceeds from senior notes offerings, net of issuance costs 325 - 325 -
Proceeds from employee stock plans 10 10 11 10
Other, net (1 ) (1 ) (3 ) 1  
Net cash provided by financing activities 334   9   333   11  
Net (decrease) increase in cash and cash equivalents (219 ) 189 160 16
Cash and cash equivalents at beginning of period 3,198   2,156   2,819   2,329  
Cash and cash equivalents at end of period $ 2,979   $ 2,345   $ 2,979   $ 2,345  
 
           

MOLINA HEALTHCARE, INC.

UNAUDITED HEALTH PLANS SEGMENT MEMBERSHIP

 

June 30,
2017

December 31,
2016

June 30,
2016

Ending Membership by Program:
Temporary Assistance for Needy Families (TANF) and Children's Health Insurance Program (CHIP) 2,517,000 2,536,000 2,500,000
Marketplace 949,000 526,000 597,000
Medicaid Expansion 678,000 673,000 654,000
Aged, Blind or Disabled (ABD) 408,000 396,000 387,000
Medicare-Medicaid Plan (MMP) - Integrated 54,000 51,000 51,000
Medicare Special Needs Plans 44,000   45,000   44,000
4,650,000   4,227,000   4,233,000
Ending Membership by Health Plan:
California 766,000 683,000 680,000
Florida 672,000 553,000 565,000
Illinois 163,000 195,000 201,000
Michigan 414,000 391,000 393,000
New Mexico 266,000 254,000 251,000
New York (1) 34,000 35,000 -
Ohio 351,000 332,000 341,000
Puerto Rico 322,000 330,000 336,000
South Carolina 112,000 109,000 105,000
Texas 465,000 337,000 367,000
Utah 167,000 146,000 151,000
Washington 788,000 736,000 709,000
Wisconsin 130,000   126,000   134,000
4,650,000   4,227,000   4,233,000
____________________
(1) The New York health plan was acquired on August 1, 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, 2017
Member

Months (1)

    Premium Revenue     Medical Care Costs     MCR (2)    

Medical
Margin

Total     PMPM Total     PMPM
TANF and CHIP 7.6 $ 1,391 $ 182.47 $ 1,315 $ 172.48 94.5 % $ 76
Medicaid Expansion 2.1 786 383.07 689 335.26 87.5 97
ABD 1.2   1,285   1,053.89 1,245   1,020.85 96.9 40  
Total Medicaid 10.9   3,462   317.79 3,249   298.10 93.8 213  
MMP 0.1 361 2,217.44 333 2,050.20 92.5 28
Medicare 0.2   148   1,126.14 126   963.34 85.5 22  
Total Medicare 0.3   509   1,730.91 459   1,565.65 90.5 50  
Excluding Marketplace 11.2 3,971 354.87 3,708 331.36 93.4 263
Marketplace 2.8   769   267.37 783   272.37 101.9 (14 )
14.0   $ 4,740   $ 336.98 $ 4,491   $ 319.29 94.8 % $ 249  
 
 
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
ABD 1.2   1,168   991.38 1,038   881.80 88.9 130  
Total Medicaid 10.6   3,212   301.86 2,874   270.27 89.5 338  
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  
Total Medicare 0.4   444   1,584.77 397   1,412.96 89.2 47  
Excluding Marketplace 11.0 3,656 334.86 3,271 299.67 89.5 385
Marketplace 1.8   373   206.88 323   178.79 86.4 50  
12.8   $ 4,029   $ 316.72 $ 3,594   $ 282.54 89.2 % $ 435  
____________________
(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.
 
   

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, 2017
Member

Months (1)

    Premium Revenue     Medical Care Costs     MCR (2)    

Medical
Margin

Total     PMPM Total     PMPM
TANF and CHIP 15.3 $ 2,793 $ 182.58 $ 2,619 $ 171.25 93.8 % $ 174
Medicaid Expansion 4.1 1,603 390.88 1,378 335.88 85.9 225
ABD 2.4   2,481   1,030.68 2,375   986.54 95.7 106
Total Medicaid 21.8   6,877   315.39 6,372   292.22 92.7 505
MMP 0.3 705 2,152.75 640 1,954.15 90.8 65
Medicare 0.3   286   1,097.36 243   933.20 85.0 43
Total Medicare 0.6   991   1,685.72 883   1,502.36 89.1 108
Excluding Marketplace 22.4 7,868 351.35 7,255 323.98 92.2 613
Marketplace 5.7   1,520   264.77 1,347   234.62 88.6 173
28.1   $ 9,388   $ 333.68 $ 8,602   $ 305.74 91.6 % $ 786
 
 
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
ABD 2.4   2,280   976.58 2,079   890.71 91.2 201
Total Medicaid 21.1   6,327   300.19 5,687   269.86 89.9 640
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
Total Medicare 0.6   915   1,633.08 838   1,494.92 91.5 77
Excluding Marketplace 21.7 7,242 334.74 6,525 301.61 90.1 717
Marketplace 3.4   782   228.19 657   191.62 84.0 125
25.1   $ 8,024   $ 320.17 $ 7,182   $ 286.57 89.5 % $ 842
____________________
(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.
 
   

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA-NON-MARKETPLACE

(In millions, except percentages and per-member per-month amounts)

 
Three Months Ended June 30, 2017
Member

Months (1)

    Premium Revenue     Medical Care Costs     MCR (2)    

Medical
Margin

Total     PMPM Total     PMPM
California 1.9 $ 598 $ 318.89 $ 539 $ 287.36 90.1 % $ 59
Florida 1.1 380 347.20 370 337.92 97.3 10
Illinois 0.5 149 289.51 174 336.76 116.3 (25 )
Michigan 1.1 390 333.26 358 305.40 91.6 32
New Mexico 0.8 321 443.13 311 428.58 96.7 10
New York (3) 0.1 46 457.96 45 442.16 96.5 1
Ohio 1.0 529 536.90 489 496.41 92.5 40
Puerto Rico 0.9 179 184.28 189 194.42 105.5 (10 )
South Carolina 0.4 111 326.57 102 304.14 93.1 9
Texas 0.7 524 752.01 473 679.43 90.3 51
Utah 0.3 89 313.93 76 267.15 85.1 13
Washington 2.2 618 276.90 546 244.58 88.3 72
Wisconsin 0.2 34 170.98 26 130.54 76.3 8
Other (4) -   3   - 10   - - (7 )
11.2   $ 3,971   $ 354.87 $ 3,708   $ 331.36 93.4 % $ 263  
 
 
Three Months Ended June 30, 2016
Member

Months (1)

Premium Revenue Medical Care Costs MCR (2)

Medical
Margin

Total PMPM Total PMPM
California 1.9 $ 519 $ 281.99 $ 472 $ 256.37 90.9 % $ 47
Florida 1.0 314 312.23 289 287.84 92.2 25
Illinois 0.6 154 256.17 137 227.71 88.9 17
Michigan 1.2 366 312.88 332 283.89 90.7 34
New Mexico 0.7 328 468.35 296 422.37 90.2 32
New York (3) - - - - - - -
Ohio 0.9 474 479.41 427 431.46 90.0 47
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 0.8 580 784.32 470 633.94 80.8 110
Utah 0.3 86 293.39 74 254.59 86.8 12
Washington 2.1 538 263.41 484 237.43 90.1 54
Wisconsin 0.2 36 166.95 27 120.69 72.3 9
Other (4) -   4   - 17   - - (13 )
11.0   $ 3,656   $ 334.86 $ 3,271   $ 299.67 89.5 % $ 385  
____________________
(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) The New York health plan was acquired on August 1, 2016.
(4) "Other" medical care costs include primarily medically related administrative costs at the parent company, and direct delivery costs.
 
   

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA-NON-MARKETPLACE

(In millions, except percentages and per-member per-month amounts)

 
Six Months Ended June 30, 2017
Member

Months (1)

    Premium Revenue     Medical Care Costs     MCR (2)    

Medical
Margin

Total     PMPM Total     PMPM
California 3.7 $ 1,170 $ 313.76 $ 1,023 $ 274.42 87.5 % $ 147
Florida 2.2 744 343.29 722 333.23 97.1 22
Illinois 1.1 310 282.66 354 322.63 114.1 (44 )
Michigan 2.3 772 330.34 690 295.02 89.3 82
New Mexico 1.5 629 432.98 610 419.65 96.9 19
New York (3) 0.2 92 449.48 87 425.72 94.7 5
Ohio 2.0 1,049 532.35 951 482.73 90.7 98
Puerto Rico 1.9 362 185.40 354 181.24 97.8 8
South Carolina 0.7 216 321.85 200 298.79 92.8 16
Texas 1.4 1,051 751.94 962 687.96 91.5 89
Utah 0.6 178 313.56 148 260.43 83.1 30
Washington 4.4 1,223 275.05 1,081 243.18 88.4 142
Wisconsin 0.4 67 168.16 53 133.25 79.2 14
Other (4) -   5   - 20   - - (15 )
22.4   $ 7,868   $ 351.35 $ 7,255   $ 323.98 92.2 % $ 613  
 
 
Six Months Ended June 30, 2016
Member

Months (1)

Premium Revenue Medical Care Costs MCR (2)

Medical
Margin

Total PMPM Total PMPM
California 3.7 $ 1,028 $ 281.37 $ 918 $ 251.15 89.3 % $ 110
Florida 2.0 639 322.01 575 290.08 90.1 64
Illinois 1.2 303 261.43 269 232.06 88.8 34
Michigan 2.4 751 317.13 678 286.40 90.3 73
New Mexico 1.4 651 465.65 580 414.80 89.1 71
New York (3) - - - - - - -
Ohio 1.9 952 485.86 869 443.08 91.2 83
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 1.5 1,116 752.54 982 661.63 87.9 134
Utah 0.6 172 295.69 150 259.29 87.7 22
Washington 4.0 1,030 259.79 931 234.95 90.4 99
Wisconsin 0.4 72 164.90 52 118.37 71.8 20
Other (4) -   6   - 34   - - (28 )
21.7   $ 7,242   $ 334.74 $ 6,525   $ 301.61 90.1 % $ 717  
____________________
(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) The New York health plan was acquired on August 1, 2016.
(4) "Other" medical care costs include primarily medically related administrative costs at the parent company, and direct delivery costs.
 
   

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA-MARKETPLACE

(In millions, except percentages and per-member per-month amounts)

 
Three Months Ended June 30, 2017
Member

Months (1)

    Premium Revenue     Medical Care Costs     MCR (2)    

Medical
Margin

Total     PMPM Total     PMPM
California 0.5 $ 81 $ 186.90 $ 67 $ 154.23 82.5 % $ 14
Florida 0.9 269 284.60 317 336.78 118.3 (48 )
Michigan 0.1 16 204.15 10 135.89 66.6 6
New Mexico - 31 367.98 23 266.91 72.5 8
Ohio - 24 377.94 27 404.20 106.9 (3 )
Texas 0.7 177 247.49 129 180.92 73.1 48
Utah 0.2 41 186.87 53 239.50 128.2 (12 )
Washington 0.2 44 317.42 49 359.87 113.4 (5 )
Wisconsin 0.2 86 434.01 109 550.81 126.9 (23 )
Other (3) -   -   - (1 ) - - 1  
2.8   $ 769   $ 267.37 $ 783   $ 272.37 101.9 % $ (14 )
 
 
Three Months Ended June 30, 2016
Member

Months (1)

Premium Revenue Medical Care Costs MCR (2)

Medical
Margin

Total PMPM Total PMPM
California 0.1 $ 35 $ 159.56 $ 21 $ 99.15 62.1 % $ 14
Florida 0.8 150 217.96 137 198.93 91.3 13
Michigan - 3 235.15 2 176.34 75.0 1
New Mexico 0.1 14 240.40 9 164.00 68.2 5
Ohio 0.1 9 294.90 6 210.36 71.3 3
Texas 0.3 55 146.76 29 78.56 53.5 26
Utah 0.2 24 146.37 32 195.18 133.3 (8 )
Washington - 21 291.91 16 205.59 70.4 5
Wisconsin 0.2 63 335.32 69 369.55 110.2 (6 )
Other (3) -   (1 ) - 2   - - (3 )
1.8   $ 373   $ 206.88 $ 323   $ 178.79 86.4 % $ 50  
____________________
(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.
 
   

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA-MARKETPLACE

(In millions, except percentages and per-member per-month amounts)

 
Six Months Ended June 30, 2017
Member

Months (1)

    Premium Revenue     Medical Care Costs     MCR (2)    

Medical
Margin

Total     PMPM Total     PMPM
California 0.9 $ 153 $ 185.68 $ 93 $ 112.20 60.4 % $ 60
Florida 1.9 561 288.81 523 269.48 93.3 38
Michigan 0.2 27 177.12 17 116.21 65.6 10
New Mexico 0.1 53 317.10 42 249.90 78.8 11
Ohio 0.1 45 356.20 44 339.26 95.2 1
Texas 1.4 334 235.07 242 171.07 72.8 92
Utah 0.4 86 194.68 104 233.85 120.1 (18 )
Washington 0.3 81 310.26 95 362.78 116.9 (14 )
Wisconsin 0.4 180 443.86 190 469.01 105.7 (10 )
Other (3) -   -   - (3 ) - - 3  
5.7   $ 1,520   $ 264.77 $ 1,347   $ 234.62 88.6 % $ 173  
 
Six Months Ended June 30, 2016
Member

Months (1)

Premium Revenue Medical Care Costs MCR (2)

Medical
Margin

Total PMPM Total PMPM
California 0.3 $ 67 $ 173.55 $ 44 $ 115.80 66.7 % $ 23
Florida 1.4 314 230.11 264 193.24 84.0 50
Michigan - 5 208.83 3 141.43 67.7 2
New Mexico 0.1 27 251.96 21 192.53 76.4 6
Ohio 0.1 19 330.26 13 241.55 73.1 6
Texas 0.7 139 199.62 92 132.77 66.5 47
Utah 0.3 52 169.84 58 187.64 110.5 (6 )
Washington 0.1 35 267.82 27 200.50 74.9 8
Wisconsin 0.4 124 348.84 136 382.15 109.5 (12 )
Other (3) -   -   - (1 ) - - 1  
3.4   $ 782   $ 228.19 $ 657   $ 191.62 84.0 % $ 125  
____________________
(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.
 
   

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA-TOTAL

(In millions, except percentages and per-member per-month amounts)

 
Three Months Ended June 30, 2017
Member

Months (1)

    Premium Revenue     Medical Care Costs     MCR (2)    

Medical
Margin

Total     PMPM Total     PMPM
California 2.4 $ 679 $ 294.09 $ 606 $ 262.34 89.2 % $ 73
Florida 2.0 649 318.21 687 337.39 106.0 (38 )
Illinois 0.5 149 289.51 174 336.76 116.3 (25 )
Michigan 1.2 406 325.38 368 295.06 90.7 38
New Mexico 0.8 352 435.34 334 411.83 94.6 18
New York (3) 0.1 46 457.96 45 442.16 96.5 1
Ohio 1.0 553 527.14 516 490.75 93.1 37
Puerto Rico 0.9 179 184.28 189 194.42 105.5 (10 )
South Carolina 0.4 111 326.57 102 304.14 93.1 9
Texas 1.4 701 495.93 602 426.41 86.0 99
Utah 0.5 130 258.10 129 255.00 98.8 1
Washington 2.4 662 279.21 595 251.16 90.0 67
Wisconsin 0.4 120 303.59 135 342.43 112.8 (15 )
Other (4) -   3   - 9   - - (6 )
14.0   $ 4,740   $ 336.98 $ 4,491   $ 319.29 94.8 % $ 249  
 
 
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
New York (3) - - - - - - -
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 (4) -   3   - 19   - - (16 )
12.8   $ 4,029   $ 316.72 $ 3,594   $ 282.54 89.2 % $ 435  
____________________
(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) The New York health plan was acquired on August 1, 2016.
(4) "Other" medical care costs include primarily medically related administrative costs at the parent company, and direct delivery costs.
 
   

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA-TOTAL

(In millions, except percentages and per-member per-month amounts)

 
Six Months Ended June 30, 2017
Member

Months (1)

    Premium Revenue     Medical Care Costs     MCR (2)    

Medical
Margin

Total     PMPM Total     PMPM
California 4.6 $ 1,323 $ 290.56 $ 1,116 $ 245.02 84.3 % $ 207
Florida 4.1 1,305 317.53 1,245 303.09 95.5 60
Illinois 1.1 310 282.66 354 322.63 114.1 (44 )
Michigan 2.5 799 321.10 707 284.24 88.5 92
New Mexico 1.6 682 421.11 652 402.27 95.5 30
New York (3) 0.2 92 449.48 87 425.72 94.7 5
Ohio 2.1 1,094 521.57 995 473.95 90.9 99
Puerto Rico 1.9 362 185.40 354 181.24 97.8 8
South Carolina 0.7 216 321.85 200 298.79 92.8 16
Texas 2.8 1,385 491.46 1,204 427.48 87.0 181
Utah 1.0 264 261.42 252 248.77 95.2 12
Washington 4.7 1,304 276.99 1,176 249.79 90.2 128
Wisconsin 0.8 247 307.50 243 302.95 98.5 4
Other (4) -   5   - 17   - - (12 )
28.1   $ 9,388   $ 333.68 $ 8,602   $ 305.74 91.6 % $ 786  
 
 
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
New York (3) - - - - - - -
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 (4) -   6   - 33   - - (27 )
25.1   $ 8,024   $ 320.17 $ 7,182   $ 286.57 89.5 % $ 842  
____________________
(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) The New York health plan was acquired on August 1, 2016.
(4) "Other" medical care costs include primarily medically related administrative costs at the parent company, and direct delivery costs.
 
   

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,
2017     2016
Amount     PMPM     % of

Total

Amount     PMPM     % of

Total

Fee for service $ 3,348 $ 238.04 74.5 % $ 2,620 $ 206.01 72.9 %
Pharmacy 650 46.23 14.5 529 41.59 14.7
Capitation 356 25.29 7.9 304 23.87 8.5
Direct delivery 22 1.54 0.5 18 1.39 0.5
Other   115   8.19 2.6     123   9.68   3.4  
$ 4,491 $ 319.29 100.0 % $ 3,594 $ 282.54   100.0 %
 
 
Six Months Ended June 30,
2017 2016
Amount PMPM % of

Total

Amount PMPM % of

Total

Fee for service $ 6,434 $ 228.68 74.8 % $ 5,357 $ 213.77 74.6 %
Pharmacy 1,266 45.00 14.7 1,054 42.05 14.7
Capitation 680 24.17 7.9 599 23.87 8.3
Direct delivery 44 1.56 0.5 34 1.36 0.5
Other   178   6.33 2.1     138   5.52   1.9  
$ 8,602 $ 305.74 100.0 % $ 7,182 $ 286.57   100.0 %
 
 
The following table provides the details of our medical claims and benefits payable as of the dates indicated:
 
June 30, December 31,
2017 2016
Fee-for-service claims incurred but not paid (IBNP) $ 1,478 $ 1,352
Pharmacy payable 121 112
Capitation payable 45 37
Other (1)   433   428  
$ 2,077 $ 1,929  
 
____________________
(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 operations. As of June 30, 2017 and December 31, 2016, we had recorded non-risk provider payables of approximately $111 million and $225 million, respectively.
 
       

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:

 
Six Months Ended June 30,

Year Ended
December 31,
2016

2017     2016
Medical claims and benefits payable, beginning balance $ 1,929 $ 1,685 $ 1,685
Components of medical care costs related to:
Current period 8,633 7,371 14,966
Prior period (31 ) (189 ) (192 )
Total medical care costs 8,602   7,182   14,774  
 
Change in non-risk provider payables (114 ) 24   58  
Payments for medical care costs related to:
Current period 6,883 5,885 13,304
Prior period 1,457   1,240   1,284  
Total paid 8,340   7,125   14,588  
Medical claims and benefits payable, ending balance $ 2,077   $ 1,766   $ 1,929  
 
Benefit from prior period as a percentage of:
Balance at beginning of period 1.6 % 11.3 % 11.4 %
Premium revenue, trailing twelve months 0.2 % 1.3 % 1.2 %
Medical care costs, trailing twelve months 0.2 % 1.4 % 1.3 %
 
Days in claims payable, fee for service (1) 46 48 47
 
____________________
(1) Claims payable includes primarily IBNP. Additionally, it includes certain fee-for-service payables reported in "Other" medical claims and benefits payable amounting to $157 million, $74 million and $94 million, as of June 30, 2017, June 30, 2016, and December 31, 2016, respectively.
 
       

MOLINA HEALTHCARE, INC.

UNAUDITED NON-GAAP FINANCIAL MEASURES

 

We use 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. See further information regarding non-GAAP measures below the tables (in millions, except per diluted share amounts).

 
Three Months Ended June 30, Six Months Ended June 30,
2017     2016 2017     2016
 
Net (loss) income $ (230 ) $ 33 $ (153 ) $ 57
Adjustments:
Depreciation, and amortization of intangible assets and capitalized software 44 39 90 76
Interest expense 27 25 53 50
Income tax (benefit) expense (84 ) 47   (30 ) 87
EBITDA $ (243 ) $ 144   $ (40 ) $ 270
 
       
Three Months Ended June 30, Six Months Ended June 30,
2017     2016 2017     2016
 
Amount    

Per
Diluted
share

Amount    

Per
Diluted

share

Amount    

Per
Diluted

share

Amount    

Per
Diluted
share

Net (loss) income $ (230 ) $ (4.10 ) $ 33 $ 0.58 $ (153 ) $ (2.74 ) $ 57 $ 1.01
Adjustment:
Amortization of intangible assets 8 0.14 8 0.14 17 0.30 15 0.27
Income tax effect (1) (3 ) (0.05 ) (3 ) (0.05 ) (6 ) (0.11 ) (5 ) (0.10 )
Amortization of intangible assets, net of tax effect 5   0.09   5   0.09   11   0.19   10   0.17  
Adjusted net (loss) income $ (225 ) $ (4.01 ) $ 38   $ 0.67   $ (142 ) $ (2.55 ) $ 67   $ 1.18  

____________________

(1) Income tax effect of adjustment calculated at the blended federal and state statutory tax rate of 37%.

 

The following are descriptions of the adjustments made to GAAP measures used to calculate the non-GAAP measures used in this news release:

 

Earnings before interest, taxes, depreciation and amortization (EBITDA): Net (loss) income (GAAP) less depreciation, and amortization of intangible assets and capitalized software, interest expense and income tax (benefit) expense. We believe that EBITDA is helpful in assessing our ability to meet the cash demands of our operating units.

 

Adjusted net (loss) income: Net (loss) 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 (loss) income is helpful in assessing our financial performance exclusive of the non-cash impact of the amortization of purchased intangibles.

 

Adjusted net (loss) income per diluted share: Adjusted net (loss) income divided by weighted average common shares outstanding on a fully diluted basis.


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