Supplemental Condensed Consolidating Financial Information

9 Months Ended

Sep. 30, 2016

Condensed Financial Information [Abstract]

Supplemental Condensed Consolidating Financial Information

As discussed in Note 10, "Debt," on November 10, 2015, we completed the private offering of $700 million aggregate principal amount of 5.375% Notes. In connection with their issuance and sale, we entered into a registration rights agreement to exchange the 5.375% Notes for registered notes having substantially identical terms, including guarantees. Such exchange was completed on September 16, 2016.

The 5.375% Notes are fully and unconditionally guaranteed by certain of our wholly owned subsidiaries on a joint and several basis, with exceptions considered customary for such guarantees. The 5.375% Notes and the guarantees are effectively subordinated to all existing and future secured debt of us and our guarantors to the extent of the assets securing such debt. In addition, the 5.375% Notes and the guarantees are structurally subordinated to all indebtedness and other liabilities and preferred stock of our subsidiaries that do not guarantee the 5.375% Notes.

The following condensed consolidating financial statements present Molina Healthcare, Inc. (as parent guarantor), the subsidiary guarantors, the subsidiary non-guarantors and eliminations. These condensed consolidating financial statements have been prepared and presented in accordance with SEC Regulation S-X Rule 3-10, "Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered."

MOLINA HEALTHCARE, INC.

CONDENSED CONSOLIDATING BALANCE SHEET



	September 30, 2016
	Parent Guarantor			Other Guarantors			Non-Guarantors			Eliminations			Consolidated
	(In millions)
ASSETS
Current assets:
Cash and cash equivalents	$	125		$	37		$	2,680		$	—		$	2,842
Investments	263			—			1,472			—			1,735
Receivables	3			84			966			—			1,053
Due from (to) affiliates	98			(5		)	(93		)	—			—
Prepaid expenses and other current assets	51			37			82			(1		)	169
Derivative asset	314			—			—			—			314
Total current assets	854			153			5,107			(1		)	6,113
Property, equipment, and capitalized software, net	300			69			81			—			450
Deferred contract costs	—			83			—			—			83
Intangible assets, net	7			21			121			—			149
Goodwill	51			231			337			—			619
Restricted investments	—			—			116			—			116
Investment in subsidiaries	2,526			1			—			(2,527		)	—
Other assets	47			4			5			(16		)	40
	$	3,785		$	562		$	5,767		$	(2,544	)	$	7,570

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Medical claims and benefits payable	$	—		$	—		$	1,871		$	—		$	1,871
Amounts due government agencies	—			—			1,232			—			1,232
Accounts payable and accrued liabilities	146			53			185			(1		)	383
Deferred revenue	—			42			338			—			380
Income taxes payable	(13		)	(5		)	37			—			19
Current portion of long-term debt	466			—			—			—			466
Derivative liability	314			—			—			—			314
Total current liabilities	913			90			3,663			(1		)	4,665
Long-term debt	1,169			—			16			(16		)	1,169
Deferred income taxes	(7		)	41			(28		)	—			6
Other long-term liabilities	19			2			18			—			39
Total liabilities	2,094			133			3,669			(17		)	5,879
Total stockholders’ equity	1,691			429			2,098			(2,527		)	1,691
	$	3,785		$	562		$	5,767		$	(2,544	)	$	7,570

MOLINA HEALTHCARE, INC.

CONDENSED CONSOLIDATING BALANCE SHEET



	December 31, 2015
	Parent Guarantor		Other Guarantors			Non-Guarantors			Eliminations			Consolidated
	(In millions)
ASSETS
Current assets:
Cash and cash equivalents	$	360	$	42		$	1,927		$	—		$	2,329
Investments	252		—			1,549			—			1,801
Receivables	—		79			518			—			597
Income tax refundable	7		3			3			—			13
Intercompany	86		(4		)	(82		)	—			—
Prepaid expenses and other current assets	46		11			136			(1		)	192
Derivative asset	374		—			—			—			374
Total current assets	1,125		131			4,051			(1		)	5,306
Property, equipment, and capitalized software, net	267		52			74			—			393
Deferred contract costs	—		81			—			—			81
Goodwill and intangible assets, net	61		246			334			—			641
Restricted investments	—		—			109			—			109
Investment in subsidiaries, net	2,205		1			—			(2,206		)	—
Deferred income taxes	23		(35		)	30			—			18
Other assets	36		2			6			(16		)	28
	$	3,717	$	478		$	4,604		$	(2,223	)	$	6,576

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Medical claims and benefits payable	$	—	$	3		$	1,682		$	—		$	1,685
Amounts due government agencies	—		1			728			—			729
Accounts payable and accrued liabilities	157		35			170			—			362
Deferred revenue	—		34			189			—			223
Current portion of long-term debt	449		—			—			—			449
Derivative liability	374		—			—			—			374
Total current liabilities	980		73			2,769			—			3,822
Long-term debt	1,160		—			16			(16		)	1,160
Other long-term liabilities	20		2			16			(1		)	37
Total liabilities	2,160		75			2,801			(17		)	5,019
Total stockholders’ equity	1,557		403			1,803			(2,206		)	1,557
	$	3,717	$	478		$	4,604		$	(2,223	)	$	6,576

MOLINA HEALTHCARE, INC.

CONDENSED CONSOLIDATING STATEMENTS OF INCOME



	Three Months Ended September 30, 2016
	Parent Guarantor			Other Guarantors			Non-Guarantors		Eliminations			Consolidated
	(In millions)
Revenue:
Total revenue	$	274		$	135		$	4,424	$	(287	)	$	4,546
Expenses:
Medical care costs	19			15			3,727		(13		)	3,748
Cost of service revenue	—			109			10		—			119
General and administrative expenses	223			5			389		(274		)	343
Premium tax expenses	—			—			127		—			127
Health insurer fee expenses	—			—			55		—			55
Depreciation and amortization	25			4			7		—			36
Total operating expenses	267			133			4,315		(287		)	4,428
Operating income	7			2			109		—			118
Interest expense	26			—			—		—			26
(Loss) income before income taxes	(19		)	2			109		—			92
Income tax (benefit) expense	4			(3		)	49		—			50
Net (loss) income before equity in earnings of subsidiaries	(23		)	5			60		—			42
Equity in net earnings of subsidiaries	65			—			—		(65		)	—
Net income	$	42		$	5		$	60	$	(65	)	$	42



	Three Months Ended September 30, 2015
	Parent Guarantor			Other Guarantors			Non-Guarantors		Eliminations			Consolidated
	(In millions)
Revenue:
Total revenue	$	234		$	60		$	3,563	$	(246	)	$	3,611
Expenses:
Medical care costs	14			9			3,005		(12		)	3,016
Cost of service revenue	—			34			—		—			34
General and administrative expenses	200			8			313		(234		)	287
Premium tax expenses	—			—			99		—			99
Health insurer fee expenses	—			—			36		—			36
Depreciation and amortization	21			1			4		—			26
Total operating expenses	235			52			3,457		(246		)	3,498
Operating (loss) income	(1		)	8			106		—			113
Interest expense	15			—			—		—			15
(Loss) income before income taxes	(16		)	8			106		—			98
Income tax (benefit) expense	3			3			46		—			52
Net (loss) income before equity in earnings of subsidiaries	(19		)	5			60		—			46
Equity in net earnings of subsidiaries	65			(1		)	—		(64		)	—
Net income	$	46		$	4		$	60	$	(64	)	$	46

MOLINA HEALTHCARE, INC.

CONDENSED CONSOLIDATING STATEMENTS OF INCOME



	Nine Months Ended September 30, 2016
	Parent Guarantor			Other Guarantors			Non-Guarantors		Eliminations			Consolidated
	(In millions)
Revenue:
Total revenue	$	786		$	412		$	12,874	$	(824	)	$	13,248
Expenses:
Medical care costs	50			37			10,884		(41		)	10,930
Cost of service revenue	—			330			32		—			362
General and administrative expenses	659			28			1,130		(783		)	1,034
Premium tax expenses	—			—			345		—			345
Health insurer fee expenses	—			—			163		—			163
Depreciation and amortization	70			10			22		—			102
Total expenses	779			405			12,576		(824		)	12,936
Operating income	7			7			298		—			312
Interest expense	76			—			—		—			76
(Loss) income before income taxes	(69		)	7			298		—			236
Income tax (benefit) expense	(24		)	(1		)	162		—			137
Net (loss) income before equity in earnings of subsidiaries	(45		)	8			136		—			99
Equity in net earnings of subsidiaries	144			—			—		(144		)	—
Net income	$	99		$	8		$	136	$	(144	)	$	99



	Nine Months Ended September 30, 2015
	Parent Guarantor			Other Guarantors			Non-Guarantors		Eliminations			Consolidated
	(In millions)
Revenue:
Total revenue	$	677		$	183		$	10,159	$	(712	)	$	10,307
Expenses:
Medical care costs	40			26			8,552		(37		)	8,581
Cost of service revenue	—			103			—		—			103
General and administrative expenses	577			23			905		(675		)	830
Premium tax expenses	—			—			289		—			289
Health insurer fee expenses	—			—			117		—			117
Depreciation and amortization	62			2			12		—			76
Total expenses	679			154			9,875		(712		)	9,996
Operating (loss) income	(2		)	29			284		—			311
Interest expense	45			—			—		—			45
(Loss) income before income taxes	(47		)	29			284		—			266
Income tax (benefit) expense	(4		)	11			146		—			153
Net (loss) income before equity in earnings of subsidiaries	(43		)	18			138		—			113
Equity in net earnings of subsidiaries	156			(1		)	—		(155		)	—
Net income	$	113		$	17		$	138	$	(155	)	$	113

MOLINA HEALTHCARE, INC.

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME



	Three Months Ended September 30, 2016
	Parent Guarantor			Other Guarantors		Non-Guarantors			Eliminations			Consolidated
	(In millions)
Net income	$	42		$	5	$	60		$	(65	)	$	42
Other comprehensive loss, net of tax	(1		)	—		(1		)	1			(1		)
Comprehensive income	$	41		$	5	$	59		$	(64	)	$	41



	Three Months Ended September 30, 2015
	Parent Guarantor		Other Guarantors		Non-Guarantors		Eliminations			Consolidated
	(In millions)
Net income	$	46	$	4	$	60	$	(64	)	$	46
Other comprehensive income, net of tax	2		—		1		(1		)	2
Comprehensive income	$	48	$	4	$	61	$	(65	)	$	48



	Nine Months Ended September 30, 2016
	Parent Guarantor		Other Guarantors		Non-Guarantors		Eliminations			Consolidated
	(In millions)
Net income	$	99	$	8	$	136	$	(144	)	$	99
Other comprehensive income, net of tax	7		—		6		(6		)	7
Comprehensive income	$	106	$	8	$	142	$	(150	)	$	106



	Nine Months Ended September 30, 2015
	Parent Guarantor		Other Guarantors		Non-Guarantors		Eliminations			Consolidated
	(In millions)
Net income	$	113	$	17	$	138	$	(155	)	$	113
Other comprehensive income, net of tax	1		—		—		—			1
Comprehensive income	$	114	$	17	$	138	$	(155	)	$	114

MOLINA HEALTHCARE, INC.

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS



	Nine Months Ended September 30, 2016
	Parent Guarantor			Other Guarantors			Non-Guarantors			Eliminations		Consolidated
	(In millions)
Operating activities:
Net cash provided by operating activities	$	43		35			555			—		$	633
Investing activities:
Purchases of investments	(114		)	—			(1,330		)	—		(1,444		)
Proceeds from sales and maturities of investments	103			—			1,409			—		1,512
Purchases of property, equipment and capitalized software	(102		)	(28		)	(13		)	—		(143		)
Decrease in restricted investments	—			—			4			—		4
Net cash paid in business combinations	—			(11		)	(37		)	—		(48		)
Capital contributions to subsidiaries	(221		)	18			203			—		—
Dividends received from subsidiaries	50			—			(50		)	—		—
Change in amounts due to/from affiliates	(12		)	1			11			—		—
Other, net	6			(19		)	1			—		(12		)
Net cash (used in) provided by investing activities	(290		)	(39		)	198			—		(131		)
Financing activities:
Proceeds from employee stock plans	10			—			—			—		10
Other, net	2			(1		)	—			—		1
Net cash provided by (used in) financing activities	12			(1		)	—			—		11
Net (decrease) increase in cash and cash equivalents	(235		)	(5		)	753			—		513
Cash and cash equivalents at beginning of period	360			42			1,927			—		2,329
Cash and cash equivalents at end of period	$	125		$	37		$	2,680		$	—	$	2,842



	Nine Months Ended September 30, 2015
	Parent Guarantor			Other Guarantors			Non-Guarantors			Eliminations		Consolidated
	(In millions)
Operating activities:
Net cash provided by operating activities	$	93		70			743			—		$	906
Investing activities:
Purchases of investments	(23		)	—			(1,288		)	—		(1,311		)
Proceeds from sales and maturities of investments	90			—			773			—		863
Purchases of property, equipment and capitalized software	(68		)	(19		)	(14		)	—		(101		)
Decrease in restricted investments	—			5			(10		)	—		(5		)
Net cash paid in business combinations	—			—			(77		)	—		(77		)
Capital contributions to subsidiaries	(167		)	3			164			—		—
Dividends received from subsidiaries	42			(17		)	(25		)	—		—
Change in amounts due to/from affiliates	(15		)	—			15			—		—
Other, net	(1		)	(25		)	(8		)	—		(34		)
Net cash used in investing activities	(142		)	(53		)	(470		)	—		(665		)
Financing activities:
Proceeds from common stock offering, net of issuance costs	373			—			—			—		373
Proceeds from employee stock plans	8			—			—			—		8
Other, net	3			—			—			—		3
Net cash provided by financing activities	384			—			—			—		384
Net increase in cash and cash equivalents	335			17			273			—		625
Cash and cash equivalents at beginning of period	75			15			1,449			—		1,539
Cash and cash equivalents at end of period	$	410		$	32		$	1,722		$	—	$	2,164