Molina Medicaid Solutions - DHHR

e10vkREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMThe Board of Directors and Stockholdersof Molina Healthcare, Inc.We have audited the accompanying consolidated balance sheets of Molina Healthcare, Inc. (the Company) as of December 31, 2008 and 2007, and the relatedconsolidated statements of income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2008. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Molina Healthcare,Inc. at December 31, 2008 and 2007, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2008, inconformity with U.S. generally accepted accounting principles.As discussed in Note 4, the Company adopted the provisions of Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets andLiabilities,” effective January 1, 2008, and elected to apply this Standard to a transaction completed in the fourth quarter of 2008.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Molina Healthcare, Inc.’s internal controlover financial reporting as of December 31, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of SponsoringOrganizations of the Treadway Commission and our report dated March 16, 2009 expressed an unqualified opinion thereon.Los Angeles, CaliforniaMarch 16, 2009/s/ ERNST & YOUNG LLP61Table of ContentsMOLINA HEALTHCARE, INC.CONSOLIDATED BALANCE SHEETSDecember 31,2008 2007(In thousands,except per share data)ASSETSCurrent assets:Cash and cash equivalents $ 387,162 $ 459,064Investments 189,870 242,855Receivables 128,562 111,537Income tax refundable 4,019 —Deferred income taxes 4,603 8,616Prepaid expenses and other current assets 14,766 12,521Total current assets 728,982 834,593Property and equipment, net 65,058 49,555Intangible assets, net 79,133 89,776Goodwill and indefinite-lived intangible assets 113,466 117,447Investments 58,169 —Deferred income taxes 4,488 —Restricted investments 38,202 29,019Receivable for ceded life and annuity contracts 27,367 29,240Other assets 34,321 21,675Total assets $ 1,149,186 $ 1,171,305LIABILITIES AND STOCKHOLDERS’ EQUITYCurrent liabilities:Medical claims and benefits payable $ 292,442 $ 311,606Accounts payable and accrued liabilities 66,247 69,266Deferred revenue 29,538 40,104Income tax payable — 5,946Total current liabilities 388,227 426,922Long-term debt 200,000 200,000Liability for ceded life and annuity contracts 27,367 29,240Deferred income taxes — 10,136Other long-term liabilities 22,928 14,529Total liabilities 638,522 680,827Stockholders’ equity:Common stock, $0.001 par value; 80,000 shares authorized; outstanding: 26,725 shares at December 31, 2008 and 28,444 shares at December 31,2007 27 28Preferred stock, $0.001 par value; 20,000 shares authorized, no shares issued and outstanding — —Additional paid-in capital 146,179 185,808Accumulated other comprehensive (loss) income (2,310) 272Retained earnings 387,158 324,760Treasury stock (1,201 shares, at cost) (20,390) (20,390)Total stockholders’ equity 510,664 490,478Total liabilities and stockholders’ equity $ 1,149,186 $ 1,171,305See accompanying notes.62Table of ContentsMOLINA HEALTHCARE, INC.CONSOLIDATED STATEMENTS OF INCOMEYear Ended December 31,2008 2007 2006(In thousands, except per share data)Revenue:Premium revenue $ 3,091,240 $ 2,462,369 $ 1,985,109Investment income 21,126 30,085 19,886Total revenue 3,112,366 2,492,454 2,004,995Expenses:Medical care costs 2,621,312 2,080,083 1,678,652General and administrative expenses 344,761 285,295 229,057Depreciation and amortization 33,688 27,967 21,475Impairment charge on purchased software — 782 —Total expenses 2,999,761 2,394,127 1,929,184Operating income 112,605 98,327 75,811Interest expense (8,714) (4,631) (2,353)Income before income taxes 103,891 93,696 73,458Provision for income taxes 41,493 35,366 27,731http://sec.gov/Archives/edgar/data/1179929/000095013409005437/a51362e10vk.htm[1/6/2012 11:14:47 AM]