Condensed Financial Information of Registrant

12 Months Ended

Dec. 31, 2018

Condensed Financial Information Disclosure [Abstract]

Condensed Financial Information of Registrant

The condensed balance sheets as of December 31, 2018 and 2017, and the related condensed statements of operations, comprehensive income (loss) and cash flows for each of the three years in the period ended December 31, 2018 for our parent company Molina Healthcare, Inc. (the “Registrant”), are presented below.

Condensed Balance Sheets



	December 31,
	2018			2017
	(In millions, except share data)
ASSETS
Current assets:
Cash and cash equivalents	$	70		$	504
Investments	100			192
Restricted investments	—			169
Receivables	2			2
Due from affiliates	90			148
Prepaid expenses and other current assets	47			103
Derivative asset	476			522
Total current assets	785			1,640
Property, equipment, and capitalized software, net	176			223
Goodwill and intangible assets, net	13			15
Investments in subsidiaries	2,768			2,306
Deferred income taxes	39			17
Advances to related parties and other assets	40			32
	$	3,821		$	4,233
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Medical claims and benefits payable	$	4		$	3
Accounts payable and accrued liabilities	223			178
Current portion of long-term debt	241			653
Derivative liability	476			522
Total current liabilities	944			1,356
Long-term debt	1,020			1,318
Lease financing obligations	197			198
Other long-term liabilities	13			24
Total liabilities	2,174			2,896
Stockholders’ equity:
Common stock, $0.001 par value; 150 million shares authorized; outstanding:
62 million shares at December 31, 2018 and 60 million shares at December 31, 2017	—			—
Preferred stock, $0.001 par value; 20 million shares authorized, no shares issued and outstanding	—			—
Additional paid-in capital	643			1,044
Accumulated other comprehensive loss	(8		)	(5		)
Retained earnings	1,012			298
Total stockholders’ equity	1,647			1,337
	$	3,821		$	4,233

See accompanying notes.

Condensed Statements of Operations



	Year Ended December 31,
	2018			2017			2016
	(In millions)
Revenue:
Management fees	$	1,138		$	1,317		$	1,062
Investment income and other revenue	17			16			16
Total revenue	1,155			1,333			1,078
Expenses:
Medical care costs	8			16			73
General and administrative expenses	1,007			1,082			899
Depreciation and amortization	69			93			95
Restructuring and separation costs	35			153			—
Impairment losses	—			39			—
Total operating expenses	1,119			1,383			1,067
Gain on sale of subsidiary	37			—			—
Operating income (loss)	73			(50		)	11
Interest expense	114			117			101
Other expense (income)	17			(61		)	—
Loss before income tax (benefit) expense and equity in net earnings (losses) of subsidiaries	(58		)	(106		)	(90		)
Income tax (benefit) expense	(14		)	8			(24		)
Net loss before equity in net earnings (losses) of subsidiaries	(44		)	(114		)	(66		)
Equity in net earnings (losses) of subsidiaries	751			(398		)	118
Net income (loss)	$	707		$	(512	)	$	52

Condensed Statements of Comprehensive Income (Loss)



	Year Ended December 31,
	2018			2017			2016
	(In millions)
Net income (loss)	$	707		$	(512	)	$	52
Other comprehensive (loss) income:
Unrealized investment (loss) gain	(3		)	(5		)	3
Less: effect of income taxes	(1		)	(2		)	1
Other comprehensive (loss) income, net of tax	(2		)	(3		)	2
Comprehensive income (loss)	$	705		$	(515	)	$	54

See accompanying notes.

Condensed Statements of Cash Flows



	Year Ended December 31,
	2018			2017			2016
	(In millions)
Operating activities:
Net cash provided by operating activities	$	118		$	166		$	55
Investing activities:
Capital contributions to subsidiaries	(145		)	(370		)	(386		)
Dividends received from subsidiaries	298			286			101
Purchases of investments	(136		)	(331		)	(115		)
Proceeds from sales and maturities of investments	388			156			188
Purchases of property, equipment and capitalized software	(22		)	(67		)	(125		)
Net cash received from sale of subsidiaries	242			—			—
Change in amounts due to/from affiliates	6			(49		)	(18		)
Other, net	—			—			6
Net cash provided by (used in) investing activities	631			(375		)	(349		)
Financing activities:
Repayment of credit facility	(300		)	—			—
Repayment of principal amount of 1.125% Convertible Notes	(298		)	—			—
Cash paid for partial settlement of 1.125% Conversion Option	(623		)	—			—
Cash received for partial settlement of 1.125% Call Option	623			—			—
Cash paid for partial termination of 1.125% Warrants	(549		)	—			—
Repayment of principal amount of 1.625% Convertible Notes	(64		)	—			—
Proceeds from senior notes offerings, net of issuance costs	—			325			—
Proceeds from borrowings under credit facility	—			300			—
Other, net	19			11			20
Net cash (used in) provided by financing activities	(1,192		)	636			20
Net (decrease) increase in cash, cash equivalents, and restricted cash and cash equivalents	(443		)	427			(274		)
Cash, cash equivalents, and restricted cash and cash equivalents at beginning of period	513			86			360
Cash, cash equivalents, and restricted cash and cash equivalents at end of period	$	70		$	513		$	86

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 our subsidiaries pursuant to administrative services agreements that include, but are not limited to, information technology, product development and administration, underwriting, claims processing, customer service, certain care management services, human resources, legal, marketing, purchasing, risk management, actuarial, underwriting, finance, accounting, legal and public relations. 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 2018, 2017, and 2016 for these services amounted to $1,137 million, $1,317 million, and $1,062 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.