Molina Medicaid Solutions - DHHR

e10vk(1) The Registrant’s condensed statement of financial position as of December 31, 2008, has been recast to reflect the adoption of FASB Accounting Standards Codification(ASC) Subtopic 470-20, Debt with Conversion and Other Options (see Note 1).101Table of ContentsMOLINA HEALTHCARE, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)Condensed Statements of IncomeYear Ended December 31,2009 2008(1) 2007(1)(In thousands)Revenue:Management fees $ 218,571 $ 190,361 $ 154,071Other operating revenue 340 177 186Investment income 1,540 2,733 2,915Total revenue 220,451 193,271 157,172Expenses:Medical care costs 26,865 21,759 22,042General and administrative expenses 160,792 143,709 114,616Depreciation and amortization 25,223 18,980 15,101Total expenses 212,880 184,448 151,759Gain on purchase of convertible senior notes 1,532 — —Operating income 9,103 8,823 5,413Interest expense (13,770) (13,167) (5,459)Loss before income taxes and equity in net income of subsidiaries (4,667) (4,344) (46)Income tax (benefit) expense (3,755) (456) 1,963Net loss before equity in net income of subsidiaries (912) (3,888) (2,009)Equity in net income of subsidiaries 31,780 63,486 59,735Net income $ 30,868 $ 59,598 $ 57,726(1) The Registrant’s condensed statements of income 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).102Table of ContentsMOLINA HEALTHCARE, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)Condensed Statements of Cash FlowsYear Ended December 31,2009 2008 2007(In thousands)Operating activities:Cash provided by operating activities $ 40,551 $ 17,532 $ 23,500Investing activities:Net dividends from and capital contributions to subsidiaries 21,960 42,872 (16,890)Purchases of investments (3,844) (25,515) (74,604)Sales and maturities of investments 12,669 56,833 29,946Cash paid in business purchase transactions (2,894) (1,000) (80,045)Purchases of equipment (32,245) (33,047) (20,159)Changes in amounts due to and due from affiliates (17,074) (6,542) 2,887Change in other assets and liabilities (540) 3,170 1,192Net cash provided by (used in) investing activities (21,968) 36,771 (157,673)Financing activities:Treasury stock purchases (27,712) (49,940) —Purchase of convertible senior notes (9,653) — —Proceeds from issuance of convertible senior notes — — 200,000Repayments of amounts borrowed under credit facility — — (45,000)Payment of credit facility fees — — (551)Payment of convertible senior notes fees — — (6,498)Excess tax benefits from employee stock compensation 31 43 853Proceeds from exercise of stock options and employee stock plan purchases 2,015 2,084 4,257Net cash (used in) provided by financing activities (35,319) (47,813) 153,061Net (decrease) increase in cash and cash equivalents (16,736) 6,490 18,888Cash and cash equivalents at beginning of year 42,776 36,286 17,398Cash and cash equivalents at end of year $ 26,040 $ 42,776 $ 36,286103Table of ContentsMOLINA HEALTHCARE, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)Notes to Condensed Financial Information of RegistrantNote A — Basis of PresentationMolina Healthcare, Inc. (Registrant) was incorporated on July 24, 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 Molina Healthcare of Utah, Inc. and Molina Healthcare of Michigan, Inc. In June 2003, the employees andoperations 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 parent company-onlyfinancial statements should be read in conjunction with the consolidated financial statements and accompanying notes.Note B — Transactions with SubsidiariesThe Registrant provides certain centralized medical and administrative services to its subsidiaries pursuant to administrative services agreements, including medicalaffairs and quality management, health education, credentialing, management, financial, legal, information systems and human resources services. Fees are based on the fairmarket value of services rendered and are recorded as operating revenue. Payment is subordinated to the subsidiaries’ ability to comply with minimum capital and otherrestrictive financial requirements of the states in which they operate. Charges in 2009, 2008, and 2007 for these services totaled $218.6 million, $190.4 million, and$154.1 million, respectively, which 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 eachsubsidiary in accordance with an intercompany tax allocation agreement. The agreement allocates income taxes in an amount generally equivalent to the amount which wouldbe 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 thehttp://sec.gov/Archives/edgar/data/1179929/000095012310025132/a55407e10vk.htm[1/6/2012 11:12:35 AM]