Molina Medicaid Solutions - DHHR

e10vkYear Ended December 31,2009 2008(1) 2007(1)(In thousands)Supplemental cash flow informationCash paid during the year for:Income taxes $ 27,100 $ 50,130 $ 27,734Interest $ 8,205 $ 7,797 $ 9,419Schedule of non-cash investing and financing activities:Unrealized gain (loss) on investments $ 699 $ (3,956) $ 977Deferred income taxes (201) 1,374 (368)Net unrealized gain (loss) on investments $ 498 $ (2,582) $ 609Retirement of common stock used for stock-based compensation $ (984) $ (555) $ (480)Accrued purchases of equipment $ 935 $ 65 $ 672Retirement of treasury stock $ 48,102 $ 49,940 $ —Impairment of purchased software $ — $ — $ 782Cumulative effect of adoption of FASB ASC Subtopic 740-10, Accounting for Uncertainty in Income Taxes $ — $ — $ 445Details of business purchase transactions:Fair value of assets acquired $ (34,594) $ (2,262) $ (106,233)Release of escrow and other deposits 18,000 — —Common stock issued to seller — 1,262 —Less cash acquired — — 10,843Less payable to seller 5,300 — —Liabilities assumed — — 25,218Net cash paid in business purchase transactions $ (11,294) $ (1,000) $ (70,172)Business purchase transactions adjustments:Accounts payable and accrued liabilities $ — $ 1,265 $ —Other long-term liabilities — 2,368 —Deferred taxes — (7,549) 2,747Goodwill and intangible assets, net $ — $ (3,916) $ 2,747(1) The Company’s consolidated statements of cash flows for the years ended December 31, 2008 and 2007 have been recast to reflect the adoption of FASB ASC Subtopic470-20, Debt with Conversion and Other Options (see Note 1).See accompanying notes.65Table of Contents1. Basis of PresentationOrganization and OperationsMOLINA HEALTHCARE, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSMolina Healthcare, Inc. is a multi-state managed care organization that arranges for the delivery of health care services to persons eligible for Medicaid, Medicare, andother government-sponsored programs for low-income families and individuals. We conduct our business primarily through licensed health plans in the states of California,Florida, Michigan, Missouri, New Mexico, Ohio, Texas, Utah, and Washington. The health plans are locally operated by our respective wholly owned subsidiaries in thosestates, each of which is licensed as a health maintenance organization, or HMO. Effective January 1, 2010 we terminated operations at our small Medicare health plan inNevada.Our results of operations include the results of recent acquisitions, including the acquisition of Florida NetPASS, under which we began transitioning members in lateDecember 2008. Additionally, we acquired Mercy CarePlus, a Medicaid managed care organization based in St. Louis, Missouri, effective November 1, 2007.Consolidation and PresentationThe consolidated financial statements include the accounts of Molina Healthcare, Inc. and all majority-owned subsidiaries. All significant intercompany transactions andbalances have been eliminated in consolidation. Financial information related to subsidiaries acquired during any year is included only for the period subsequent to theiracquisition.Evaluation of Subsequent EventsWe have evaluated subsequent events through the date of issuance of our financial statements in this Annual Report on Form 10-K.Use of EstimatesThe preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to makeestimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements.Estimates also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Principal areas requiring theuse of estimates include:• The determination of medical claims and benefits payable;• The determination of the amount of revenue to be recognized under certain contracts that place revenue at risk dependent upon either the achievement of certainquality or administrative measurements, or the expenditure of certain percentages of revenue on defined expenses;• The determination of allowances for uncollectible accounts;• The valuation of certain investments;• Settlements under risk or savings sharing programs;• The impairment of long-lived and intangible assets;• The determination of professional and general liability claims, and reserves for potential absorption of claims unpaid by insolvent providers;• The determination of reserves for the outcome of litigation;• The determination of valuation allowances for deferred tax assets; and• The determination of unrecognized tax benefits.ReclassificationWe have reclassified certain prior year balance sheet amounts to conform to the 2009 presentation.66Table of ContentsMOLINA HEALTHCARE, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)Recast of Prior PeriodsIn May 2008, the FASB issued a new standard relating to convertible debt instruments. This standard requires the proceeds from the issuance of applicable convertibledebt instruments to be allocated between a liability component and an equity component. The resulting debt discount is amortized over the period the convertible debt isexpected to be outstanding, as additional non-cash interest expense. We adopted this new standard effective as of January 1, 2009. For further information regarding ourconvertible senior notes, see Note 12, “Long-Term Debt.”The following tables illustrate the impact of adopting this accounting standard on our consolidated statements of income.Year Ended December 31, 2009http://sec.gov/Archives/edgar/data/1179929/000095012310025132/a55407e10vk.htm[1/6/2012 11:12:35 AM]