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Condensed Financial Information of Registrant
 12 Months Ended
Dec. 31, 2016
Condensed Financial Information of Parent Company Only Disclosure [Abstract]  
Condensed Financial Information of Registrant
Condensed Financial Information of Registrant
The condensed balance sheets as of December 31, 2016 and 2015, and the related condensed statements of income, comprehensive income and cash flows for each of the three years in the period ended December 31, 2016 for our parent company Molina Healthcare, Inc. (the Registrant), are presented below.

Condensed Balance Sheets
 
December 31,
 
2016
 
2015
 
(In millions, except per-share data)
ASSETS
Current assets:
 

 
 
Cash and cash equivalents
$
86

 
$
360

Investments
178

 
252

Receivables
2

 
—

Income taxes refundable
17

 
7

Due from affiliates
104

 
86

Prepaid expenses and other current assets
58

 
46

Derivative asset
267

 
374

Total current assets
712

 
1,125

Property, equipment, and capitalized software, net
301

 
267

Goodwill and intangible assets, net
58

 
61

Investments in subsidiaries
2,609

 
2,205

Deferred income taxes
10

 
23

Advances to related parties and other assets
48

 
36

 
$
3,738

 
$
3,717

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

 
$
—

Accounts payable and accrued liabilities
146

 
157

Current portion of long-term debt
472

 
449

Derivative liability
267

 
374

Total current liabilities
886

 
980

Senior notes
975

 
962

Lease financing obligations
198

 
198

Deferred income taxes
11

 
—

Other long-term liabilities
19

 
20

Total liabilities
2,089

 
2,160

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

 
803

Accumulated other comprehensive loss
(2
)
 
(4
)
Retained earnings
810

 
758

Total stockholders’ equity
1,649

 
1,557

 
$
3,738

 
$
3,717


See accompanying notes.
Condensed Statements of Income
 
Year Ended December 31,
 
2016
 
2015
 
2014
 
(In millions)
Revenue:
 
 
 
 
 
Management fees
$
1,062

 
$
914

 
$
692

Investment income and other revenue
16

 
17

 
14

Total revenue
1,078

 
931

 
706

Expenses:
 
 
 
 
 

Medical care costs
73

 
55

 
46

General and administrative expenses
899

 
797

 
583

Depreciation and amortization
95

 
82

 
73

Total operating expenses
1,067

 
934

 
702

Operating income (loss)
11

 
(3
)
 
4

Interest expense
101

 
66

 
57

Other expense
—

 
—

 
1

Loss before income taxes and equity in net income of subsidiaries
(90
)
 
(69
)
 
(54
)
Income tax benefit
(24
)
 
(21
)
 
(27
)
Net loss before equity in net income of subsidiaries
(66
)
 
(48
)
 
(27
)
Equity in net income of subsidiaries
118

 
191

 
89

Net income
$
52

 
$
143

 
$
62


Condensed Statements of Comprehensive Income
 
Year Ended December 31,
 
2016
 
2015
 
2014
 
(In millions)
Net income
$
52

 
$
143

 
$
62

Other comprehensive income (loss):
 
 
 
 
 
Unrealized investment gain (loss)
3

 
(5
)
 
—

Less: effect of income taxes
1

 
(2
)
 
—

Other comprehensive income (loss), net of tax
2

 
(3
)
 
—

Comprehensive income
$
54

 
$
140

 
$
62


See accompanying notes.

Condensed Statements of Cash Flows
 
Year Ended December 31,
 
2016
 
2015
 
2014
 
(In millions)
Operating activities:
 
 
 
 
 
Net cash provided by operating activities
$
55

 
$
113

 
$
74

Investing activities:
 
 
 
 
 

Capital contributions to subsidiaries
(386
)
 
(770
)
 
(292
)
Dividends received from subsidiaries
101

 
142

 
—

Purchases of investments
(115
)
 
(244
)
 
(129
)
Proceeds from sales and maturities of investments
188

 
118

 
263

Purchases of property, equipment and capitalized software
(125
)
 
(91
)
 
(94
)
Change in amounts due to/from affiliates
(18
)
 
(68
)
 
16

Other, net
6

 
—

 
8

Net cash used in investing activities
(349
)
 
(913
)
 
(228
)
Financing activities:
 
 
 
 
 

Proceeds from senior notes offerings, net of issuance costs
—

 
689

 
123

Proceeds from common stock offering, net of issuance costs
—

 
373

 
—

Proceeds from employee stock plans
18

 
18

 
14

Principal payments on convertible senior notes
—

 
—

 
(11
)
Other, net
2

 
5

 
3

Net cash provided by financing activities
20

 
1,085

 
129

Net (decrease) increase in cash and cash equivalents
(274
)
 
285

 
(25
)
Cash and cash equivalents at beginning of year
360

 
75

 
100

Cash and cash equivalents at end of year
$
86

 
$
360

 
$
75


See accompanying notes.
Notes to Condensed Financial Information of Registrant
Note A - Basis of Presentation
The Registrant was incorporated in 2002. Prior to that date, Molina Healthcare of California (formerly known as Molina Medical Centers) operated as a California health plan and as the parent company for three other state health plans. In June 2003, the employees and operations of the corporate entity were transferred from Molina Healthcare of California to the Registrant.
The Registrant’s investment in subsidiaries is stated at cost plus equity in undistributed earnings of subsidiaries since the date of acquisition. The accompanying condensed financial information of the Registrant should be read in conjunction with the consolidated financial statements and accompanying notes.
Note B - Transactions with Subsidiaries
The Registrant provides certain centralized medical and administrative services to its subsidiaries pursuant to administrative services agreements, including medical affairs and quality management, health education, credentialing, management, financial, legal, information systems and human resources services. Fees are based on the fair market value of services rendered and are recorded as operating revenue. Payment is subordinated to the subsidiaries’ ability to comply with minimum capital and other restrictive financial requirements of the states in which they operate. Charges in 2016, 2015, and 2014 for these services amounted to $1,062 million, $914 million, and $692 million, respectively, and are included in operating revenue.
The Registrant and its subsidiaries are included in the consolidated federal and state income tax returns filed by the Registrant. Income taxes are allocated to each subsidiary in accordance with an intercompany tax allocation agreement. The agreement allocates income taxes in an amount generally equivalent to the amount which would be expensed by the subsidiary if it filed a separate tax return. Net operating loss benefits are paid to the subsidiary by the Registrant to the extent such losses are utilized in the consolidated tax returns.
Note C - Dividends and Capital Contributions
When the Registrant receives dividends from its subsidiaries, such amounts are recorded as a reduction to the investments in the respective subsidiaries.
For all periods presented, the Registrant made capital contributions to certain subsidiaries primarily to comply with minimum net worth requirements and to fund business combinations. Such amounts have been recorded as an increase in investment in the respective subsidiaries, net of insignificant returns of capital.
Note D - Related Party Transactions
The Registrant’s related party transactions are described in Note 17, “Related Party Transactions.”