Molina Medicaid Solutions - DHHR

More documents

Recommendations

Info

e10vkTable of ContentsMOLINA HEALTHCARE, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)11. Long-Term DebtConvertible Senior NotesIn October 2007, we completed our offering of $200.0 million aggregate principal amount of 3.75% Convertible Senior Notes due 2014 (the “Notes”). The sale of theNotes resulted in net proceeds totaling $193.4 million. The Notes rank equally in right of payment with our existing and future senior indebtedness.The Notes are convertible into cash and, under certain circumstances, shares of our common stock. The initial conversion rate is 21.3067 shares of our common stock perone thousand dollar principal amount of the Notes. This represents an initial conversion price of approximately $46.93 per share of our common stock. In addition, if certaincorporate transactions that constitute a change of control occur prior to maturity, we will increase the conversion rate in certain circumstances. Prior to July 2014, holders mayconvert their Notes only under the following circumstances:• During any fiscal quarter after our fiscal quarter ending December 31, 2008, if the closing sale price per share of our common stock, for each of at least 20 tradingdays during the period of 30 consecutive trading days ending on the last trading day of the previous fiscal quarter, is greater than or equal to 120% of the conversionprice per share of our common stock;• During the five business day period immediately following any five consecutive trading day period in which the trading price per one thousand dollar principalamount of the Notes for each trading day of such period was less than 98% of the product of the closing price per share of our common stock on such day and theconversion rate in effect on such day; or• Upon the occurrence of specified corporate transactions or other specified events.On or after July 1, 2014, holders may convert their Notes at any time prior to the close of business on the scheduled trading day immediately preceding the statedmaturity date regardless of whether any of the foregoing conditions is satisfied.We will deliver cash and shares of our common stock, if any, upon conversion of each $1,000 principal amount of Notes, as follows:• An amount in cash (the “principal return”) equal to the sum of, for each of the 20 Volume-Weighted Average Price (VWAP) trading days during the conversionperiod, the lesser of the daily conversion value for such VWAP trading day and fifty dollars (representing 1/20th of one thousand dollars); and• A number of shares based upon, for each of the 20 VWAP trading days during the conversion period, any excess of the daily conversion value above fifty dollars.See Note 20, “Subsequent Events,” for a discussion of our repurchase of a portion of the Notes.As discussed in Note 2, “Significant Account Policies,” the FASB issued FSP APB 14-1 in 2008. The impact of this new accounting guidance will result in an increaseto non-cash interest expense related to the Notes beginning in fiscal year 2009 for financial statements covering past and future periods.Credit FacilityIn 2005, we entered into the Amended and Restated Credit Agreement, dated as of March 9, 2005, among <strong>Molina</strong> Healthcare Inc., certain lenders, and Bank of AmericaN.A., as Administrative Agent (the “Credit Facility”). Effective May 2007, we entered into a third amendment of the Credit Facility that increased the size of the revolving lineof credit from $180.0 million to $200.0 million, maturing in May 2012. The Credit Facility is intended to be used for working capital and general corporate purposes, andsubject to obtaining commitments from existing or new lenders and satisfaction of other specified conditions, we may increase the amount available under the Credit Facility toup to $250.0 million.84Table of ContentsMOLINA HEALTHCARE, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)Interest rates on borrowings under the Credit Facility are based, at our election, on the London Interbank Offered Rate, or LIBOR, or the base rate plus an applicablemargin. The base rate equals the higher of Bank of America’s prime rate or 0.500% above the federal funds rate. We also pay a commitment fee on the total unusedcommitments of the lenders under the Credit Facility. The applicable margins and commitment fee are based on our ratio of consolidated funded debt to consolidated earningsbefore interest expense, taxes, depreciation and amortization, or EBITDA. The applicable margins range between 0.750% and 1.750% for LIBOR loans and between 0.000%and 0.750% for base rate loans. The commitment fee ranges between 0.150% and 0.275%. In addition, we are required to pay a fee for each letter of credit issued under theCredit Facility equal to the applicable margin for LIBOR loans and a customary fronting fee. As of December 31, 2008 and 2007, there were no amounts outstanding under theCredit Facility.Our obligations under the Credit Facility are secured by a lien on substantially all of our assets and by a pledge of the capital stock of our health plan subsidiaries (withthe exception of our California health plan). The Credit Facility includes usual and customary covenants for credit facilities of this type, including covenants limiting liens,mergers, asset sales, other fundamental changes, debt, acquisitions, dividends and other distributions, capital expenditures, investments, and a fixed charge coverage ratio. TheCredit Facility also requires us to maintain a ratio of total consolidated debt to total consolidated EBITDA of not more than 2.75 to 1.00 at any time. At December 31, 2008, wewere in compliance with all financial covenants in the Credit Facility.12. Income TaxesThe provision for income taxes consisted of the following:Year Ended December 31,2008 2007 2006(In thousands)Current:Federal $ 32,972 $ 36,171 $ 24,987State 6,916 3,073 3,143Total current 39,888 39,244 28,130Deferred:Federal 1,886 (3,630) (471)State (281) (293) (578)Total deferred 1,605 (3,923) (1,049)Change in valuation allowance — 45 650Total provision for income taxes $ 41,493 $ 35,366 $ 27,731A reconciliation of the effective income tax rate to the statutory federal income tax rate is as follows:Year Ended December 31,2008 2007 2006(In thousands)Taxes on income at statutory federal tax rate (35%) $ 36,362 $ 32,794 $ 25,710State income taxes, net of federal benefit 4,313 1,954 2,097Other 818 618 (76)Reported income tax expense $ 41,493 $ 35,366 $ 27,731Our effective tax rate is based on expected income, statutory tax rates, and tax planning opportunities available to us in the various jurisdictions in which we operate.Significant management estimates and judgments are required85Table of ContentsMOLINA HEALTHCARE, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)http://sec.gov/Archives/edgar/data/1179929/000095013409005437/a51362e10vk.htm[1/6/2012 11:14:47 AM]
e10vkin determining our effective tax rate. We are routinely under audit by federal, state, or local authorities regarding the timing and amount of deductions, nexus of income amongvarious tax jurisdictions, and compliance with federal, state, and local tax laws. We have pursued various strategies to reduce our federal, state and local taxes. As a result, wehave reduced our state income tax expense due to California enterprise zone credits.During 2008, 2007, and 2006, tax-related benefits (deficiencies) on share-based compensation were $(292,000), $853,000 and $1.2 million, respectively. Such amountswere recorded as adjustments to income taxes payable with a corresponding increase (decrease) to additional paid-in capital.Deferred tax assets and liabilities are classified as current or non-current according to the classification of the related asset or liability. Significant components of ourdeferred tax assets and liabilities as of December 31, 2008 and 2007 were as follows:December 31,2008 2007(In thousands)Accrued expenses $ 6,785 $ 6,335Reserve liabilities 1,046 624State taxes 172 911Other accrued medical costs 1,724 863Prepaid expenses (3,979) (2,783)Net operating losses 27 27Unrealized losses (3,194) (165)Unearned premiums 2,063 2,806Other, net (41) —Valuation allowance — (2)Deferred tax asset, net of valuation allowance — current 4,603 8,616Net operating losses 971 856State taxes 1,830 840Depreciation and amortization (10,698) (14,453)Deferred compensation 5,876 3,208Other accrued medical costs 108 103Reserve liabilities 1,684 885Unrealized losses 4,667 —Other, net 745 (882)Valuation allowance (695) (693)Deferred tax asset (liability) net of valuation allowance — long term 4,488 (10,136)Net deferred income tax asset (liability) $ 9,091 $ (1,520)At December 31, 2008, we had federal and state net operating loss carryforwards of $422,000 and $10.9 million, respectively. The federal net operating loss beginsexpiring in 2011, and state net operating losses begin expiring in 2013. The utilization of the net operating losses is subject to certain limitations under federal and state law.We have determined that as of both December 31, 2008, and December 31, 2007, $695,000 of deferred tax assets did not satisfy the recognition criteria set forth inSFAS 109. Accordingly, a valuation allowance has been recorded for these amounts. This valuation allowance primarily relates to the uncertainty of realizing certain state86Table of ContentsMOLINA HEALTHCARE, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)net operating loss carryforwards. In the future, if we determine that the realization of the net operating losses is more likely than not, the reversal of the related valuationallowance will reduce the provision for income taxes.During 2008, $7.4 million of net deferred tax assets were established with a corresponding reduction to goodwill for certain acquired intangible assets in connection withthe 2007 purchase of Mercy CarePlus. Additionally during 2008, $2.2 million of deferred tax assets relating to the 2006 purchase of the Cape Health Plan were derecognizedwhich resulted in a corresponding increase to goodwill under purchase accounting.Accruals for uncertain tax positions are provided for in accordance with the requirements of FIN 48. Pursuant to FIN 48, tax benefits are recognized only if the taxposition is “more likely than not” of being sustained. We are subject to income taxes in the U.S. and numerous state jurisdictions. Significant judgment is required in evaluatingour tax positions and determining our provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate taxdetermination is uncertain. We establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. Thesereserves are established when we believe that certain positions might be challenged despite our belief that our tax return positions are fully supportable. We adjust these reservesin light of changing facts and circumstances, such as the outcome of tax audit. The provision for income taxes includes the impact of reserve provisions and changes to reservesthat are considered appropriate.The roll forward of our unrecognized tax benefits is as follows (in thousands):Gross unrecognized tax benefits at December 31, 2007 $ (10,278)Increases in tax positions for prior years (3,310)Decreases in tax positions for prior years 2,682Increases in tax positions for current year (2,061)Decreases in tax positions for current year 892Settlements —Lapse in statute of limitations 399Gross unrecognized tax benefits at December 31, 2008 $ (11,676)As of December 31, 2008, we had $11.7 million of unrecognized tax benefits of which $5.8 million, if fully recognized, would affect our effective tax rate. We anticipatea decrease of $165,000 to our liability for unrecognized tax benefits within the next twelve-month period due to normal expiration of tax statutes.Our continuing practice is to recognize interest and/or penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2008, and December 31,2007, we had accrued $1.4 million and $638,000, respectively, for the payment of interest and penalties.We are under examination, or may be subject to examination, by the Internal Revenue Service (“IRS”) for calendar years 2005 through 2008. We are under examination,or may be subject to examination, in certain state and local jurisdictions, with the major jurisdictions being California, Missouri, and Michigan, for the years 2004 through 2008.Our subsidiary, HCLB, is being examined by the IRS for the year ended May 2006. The IRS has issued a notice of proposed adjustment to decrease HCLB’s compensationdeductions and related tax loss for the year ended May 2006 by approximately $16 million. If sustained, the reduction in the tax loss would increase taxes payable by$5.4 million. Management disagrees with the IRS assessment and believes that adequate accruals have been provided for the HCLB examination.13. Employee BenefitsWe sponsor a defined contribution 401(k) plan that covers substantially all full-time salaried and hourly employees of our company and its subsidiaries. Eligibleemployees are permitted to contribute up to the maximum amount allowed by law. We match up to the first 4% of compensation contributed by employees. Expense87Table of ContentsMOLINA HEALTHCARE, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)recognized in connection with our contributions to the 401(k) plan totaled $3.9 million, $3.6 million and $2.5 million in the years ended December 31, 2008, 2007, and 2006,respectively.We also have a nonqualified deferred compensation plan for certain key employees. Under this plan, eligible participants may defer up to 100% of their base salary and100% of their bonus to provide tax-deferred growth for retirement. The funds deferred are invested in corporate-owned life insurance, under a rabbi trust.14. Related Party TransactionsWe have an equity investment in a medical service provider that provides certain vision services to our members. We account for this investment under the equitymethod of accounting because we have an ownership interest in the investee that provides us with significant influence over operating and financial policies of the investee. Asof December 31, 2008 and 2007, our carrying amount for this investment totaled $3.6 million and $3.5 million, respectively. During 2007, we paid this provider a $0.9 millionnetwork access fee that was fully amortized as of June 30, 2008. During 2008, we advanced this provider $1.3 million, of which $417,000 remained outstanding as ofDecember 31, 2008. We expect to collect this outstanding advance in the first quarter of 2009. For the years ended December 31, 2008, 2007 and 2006, we paid $15.4 million,http://sec.gov/Archives/edgar/data/1179929/000095013409005437/a51362e10vk.htm[1/6/2012 11:14:47 AM]
Page 1:
Molina Medicaid SolutionsResponse t
Page 7 and 8:
Bridging the Rivers ofChange Togeth
Page 9 and 10:
Page 11 and 12:
Page 13 and 14:
Page 15 and 16:
Page 17 and 18:
Page 19 and 20:
Page 21 and 22:
Page 23 and 24:
Page 25 and 26:
Page 27 and 28:
Page 29 and 30:
Page 31 and 32:
Page 33 and 34:
Page 35 and 36:
Page 37 and 38:
Page 39 and 40:
Page 41 and 42:
Page 43 and 44:
Page 45 and 46:
Page 47 and 48:
Page 49 and 50:
Page 51 and 52:
Page 53 and 54:
Page 55 and 56:
Page 57 and 58:
Page 59 and 60:
Page 61 and 62:
Page 63 and 64:
Page 65 and 66:
Page 67 and 68:
Page 69 and 70:
Page 71 and 72:
Page 73 and 74:
Page 75 and 76:
Page 77 and 78:
Page 79 and 80:
Page 81 and 82:
Page 83 and 84:
Page 85 and 86:
Page 87 and 88:
Page 89 and 90:
Page 91 and 92:
Page 93 and 94:
Page 95 and 96:
Page 97 and 98:
Page 99 and 100:
Page 101 and 102:
Page 103 and 104:
Page 105 and 106:
Page 107 and 108:
Page 109 and 110:
Page 111 and 112:
Page 113 and 114:
Page 115 and 116:
Page 117 and 118:
Page 119 and 120:
Page 121 and 122:
Page 123 and 124:
Page 125 and 126:
Page 127 and 128:
Page 129 and 130:
Page 131 and 132:
Page 133 and 134:
Page 135 and 136:
Page 137 and 138:
Page 139 and 140:
Page 141 and 142:
Page 143 and 144:
Page 145 and 146:
Page 147 and 148:
Page 149 and 150:
Page 151 and 152:
Page 153 and 154:
Page 155 and 156:
Page 157 and 158:
Page 159 and 160:
Page 161 and 162:
Page 163 and 164:
Page 165 and 166:
Page 167 and 168:
Page 169 and 170:
Page 171 and 172:
Page 173 and 174:
Page 175 and 176:
Page 177 and 178:
Page 179 and 180:
Page 181 and 182:
Page 183 and 184:
Page 185 and 186:
Page 187 and 188:
Page 189 and 190:
Page 191 and 192:
Page 193 and 194:
Page 195 and 196:
Page 197 and 198:
Page 199 and 200:
Page 201 and 202:
Page 203 and 204:
Page 205 and 206:
Page 207 and 208:
Page 209 and 210:
Page 211 and 212:
Page 213 and 214:
Page 215 and 216:
Page 217 and 218:
Page 219 and 220:
Page 221 and 222:
Page 223 and 224:
Page 225 and 226:
Page 227 and 228:
Page 229 and 230:
Page 231 and 232:
Page 233 and 234:
Page 235 and 236:
Page 237 and 238:
Page 239 and 240:
Page 241 and 242:
Page 243 and 244:
Page 245 and 246:
Page 247 and 248:
Page 249 and 250:
Page 265:
Page 272 and 273:
Page 274 and 275:
Page 276 and 277:
Page 278 and 279:
Page 280 and 281:
Page 282 and 283:
Page 284 and 285:
Page 286 and 287:
Page 288 and 289:
Page 290 and 291:
Page 292 and 293:
Page 294 and 295:
Page 296 and 297:
Page 298 and 299:
Page 300 and 301:
Page 302 and 303:
Page 304 and 305:
Page 306 and 307:
Page 308 and 309:
Page 310 and 311:
Page 312 and 313:
Page 314 and 315:
Page 316 and 317:
Page 318 and 319:
Page 320 and 321: Bridging the Rivers ofChange Togeth
Page 336 and 337: e10vkTable of ContentsItem 1:Overvi
Page 338 and 339: e10vkDepartment of Health Services
Page 340 and 341: e10vkservices, and reputation or na
Page 342 and 343: e10vkIf our government contracts ar
Page 344 and 345: e10vkIf our cost increases resultin
Page 346 and 347: e10vkour board of directors. Becaus
Page 348 and 349: e10vkFirst Quarter $ 44.94 $ 23.46S
Page 350 and 351: e10vkTable of ContentsCertain compo
Page 352 and 353: e10vkNevada 8,037 1,106.45 9,099 1,
Page 354 and 355: e10vkInvestment IncomeInvestment in
Page 356 and 357: e10vkand 2007, respectively. EBITDA
Page 358 and 359: e10vk$2.8 million, or $0.10 per dil
Page 360 and 361: e10vkREPORT OF INDEPENDENT REGISTER
Page 362 and 363: e10vk65Table of ContentsMOLINA HEAL
Page 364 and 365: e10vkDelegated Provider InsolvencyC
Page 366 and 367: e10vk2007 (see Note 11, “Long-Ter
Page 368 and 369: e10vk$ 252,380 $ 248,039Gross reali
Page 372 and 373: e10vk$10.9 million, and $7.9 millio
Page 374 and 375: e10vkIn July 2008, our board of dir
Page 376 and 377: e10vkThe Registrant has an equity i
Page 378 and 379: e10vkSIGNATURESPursuant to the requ
Page 380 and 381: exv12w1EX-12.1 2 a51362exv12w1.htm
Page 388 and 389: e10vkEX-31.1EX-31.2EX-32.1EX-32.2Ta
Page 390 and 391: e10vkLeverage operational efficienc
Page 392 and 393: e10vkhealth plans. Among such facto
Page 394 and 395: e10vkMissouri and Ohio health plans
Page 396 and 397: e10vkWe are subject to various rout
Page 398 and 399: e10vkIt may be difficult for a thir
Page 400 and 401: e10vkItem 5:PART IIMarket for Regis
Page 402 and 403: e10vkstates to exclude certain bene
Page 404 and 405: e10vkMedical care ratio 86.8% 84.8%
Page 406 and 407: e10vkTable of ContentsMedical care
Page 408 and 409: e10vkare required to pay a fee for
Page 410 and 411: e10vkknown. While we believe our cu
Page 412 and 413: e10vkTable of ContentsMOLINA HEALTH
Page 414 and 415: e10vkYear Ended December 31,2009 20
Page 416 and 417: e10vkCalifornia $ 481,717 $ 417,027
Page 418 and 419: e10vkMOLINA HEALTHCARE, INC.NOTES T
Page 420 and 421:
e10vk2008, we had transitioned fewe
Page 422 and 423:
e10vknot intend to sell, nor is it
Page 424 and 425:
e10vk87Table of ContentsMOLINA HEAL
Page 426 and 427:
e10vkDuring 2009, 2008, and 2007, t
Page 428 and 429:
e10vk$29.17 - $30.05 9,350 5.9 $ 29
Page 430 and 431:
e10vk(1) The Registrant’s condens
Page 432 and 433:
e10vkChanges in Internal Controls:
Page 434 and 435:
e10vkSignature Title Date/s/ Joseph
Page 436 and 437:
exv10w22Commitments exceed the sum
Page 438 and 439:
exv10w22Loan Document. The amendmen
Page 440 and 441:
exv10w22Name:Title:Fifth Amendment
Page 442 and 443:
exv10w22Fifth Amendment to Credit A
Page 444 and 445:
exv10w24EX-10.24 3 a55407exv10w24.h
Page 446 and 447:
exv10w24Molina ECMS ref# 729 Provid
Page 448 and 449:
Page 450 and 451:
exv10w24HSA — Hospital Services A
Page 452 and 453:
exv10w243.2 Member Eligibility Dete
Page 454 and 455:
exv10w245.6 Amendment. Health Plan
Page 456 and 457:
exv10w24HSA — Hospital Services A
Page 458 and 459:
exv10w24License No. StreetNPI (or U
Page 460 and 461:
exv10w24Page 23 of 40ATTACHMENT CPr
Page 462 and 463:
exv10w24• This reimbursement meth
Page 464 and 465:
Page 466 and 467:
exv10w24(Rule 53250(e)(4))8. Provid
Page 468 and 469:
exv10w241. Right to Audit. Provider
Page 470 and 471:
exv10w24Treasurer G. William Hammer
Page 472 and 473:
exv10w25unless the situation is one
Page 474 and 475:
exv10w25Plan in identifying, proces
Page 476 and 477:
exv10w25Page 9that the offset and r
Page 478 and 479:
exv10w25under this Agreement.h. Hea
Page 480 and 481:
exv10w25Page 16Date 6/1/06ATTACHMEN
Page 482 and 483:
exv10w25that Provider is de-delegat
Page 484 and 485:
exv10w25the subscriber or Member by
Page 486 and 487:
exv10w25discretion, that Provider h
Page 488 and 489:
exv10w252.5 Annual Disclosure of Ca
Page 490 and 491:
exv10w25Initials of authorizedrepre
Page 492 and 493:
exv10w25the report is true and corr
Page 494 and 495:
exv21w1EX-21.1 6 a55407exv21w1.htm
Page 496 and 497:
Page 498 and 499:
Page 500 and 501:
e10vk10-K 1 a58840e10vk.htm FORM 10
Page 502 and 503:
e10vkOur StrengthsWe focus on servi
Page 504 and 505:
e10vkevent.CompetitionWe operate in
Page 506 and 507:
e10vkat the funding for these healt
Page 508 and 509:
e10vk18Table of ContentsAlso, many
Page 510 and 511:
e10vkTable of Contentsalleged non-c
Page 512 and 513:
e10vk(fair value of $20.4 million).
Page 514 and 515:
e10vkTable of ContentsSTOCK PERFORM
Page 516 and 517:
e10vkAs of December 31, 2010, our h
Page 519 and 520:
e10vkYear Ended December 31,2010 20
Page 521 and 522:
e10vkAcquisitionsWisconsin Health P
Page 523 and 524:
e10vkspecific performance measures
Page 525 and 526:
e10vkoverestimations were tied to o
Page 527 and 528:
e10vkIntangible assets, net 105,500
Page 529 and 530:
e10vkOur Health Plans segment compr
Page 531 and 532:
e10vkSituations may arise where the
Page 533 and 534:
e10vkinvestment fund. As of Decembe
Page 535 and 536:
e10vk87Table of ContentsMOLINA HEAL
Page 537 and 538:
e10vk7. ReceivablesHealth Plans seg
Page 539 and 540:
e10vkTable of ContentsMOLINA HEALTH
Page 541 and 542:
e10vkindebtedness under the Credit
Page 543 and 544:
e10vkstatutory capital and surplus
Page 545 and 546:
e10vkCash paid in business purchase
Page 547 and 548:
e10vkItem 12.Security Ownership of
Page 549 and 550:
exv10w27EX-10.27 2 a58840exv10w27.h
Page 551 and 552:
exv10w27(f) all transferable or ass
Page 553 and 554:
exv10w27and other charges have been
Page 555 and 556:
exv10w27under or affecting the Prop
Page 557 and 558:
exv10w27BY A GENERAL RELEASE, WHICH
Page 559 and 560:
exv10w27(f) Seller’s share of the
Page 561 and 562:
exv10w2710.6 Items Not to be Prorat
Page 563 and 564:
exv10w27- 21 -(i) Delinquency Repor
Page 565 and 566:
exv10w27executed, and delivered by
Page 567 and 568:
exv10w27MATERIALS THAT PERTAIN TO T
Page 569 and 570:
exv10w27Attn: General CounselTeleph
Page 571 and 572:
exv10w2718.16 Authority. The indivi
Page 573 and 574:
Page 575 and 576:
Page 577 and 578:
Page 579:
show all

Molina Medicaid Solutions - DHHR

Create successful ePaper yourself

Delete template?

Save as template?