Molina Medicaid Solutions - DHHR

e10vkTable of ContentsSTOCK PERFORMANCE GRAPHThe following discussion shall not be deemed to be “soliciting material” or to be “filed” with the SEC nor shall this information be incorporated by reference into anyfuture filing under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates it by reference into a filing.The following line graph compares the percentage change in the cumulative total return on our common stock against the cumulative total return of the Standard &Poor’s Corporation Composite 500 Index (the “S&P 500”) and a peer group index for the five-year period from December 31, 2005 to December 31, 2010. The graph assumesan initial investment of $100 in Molina Healthcare, Inc. common stock and in each of the indices.The peer group index consists of Amerigroup Corporation (AGP), Centene Corporation (CNC), Coventry Health Care, Inc. (CVH), Health Net, Inc. (HNT), Humana, Inc.(HUM), UnitedHealth Group Incorporated (UNH), and WellPoint, Inc. (WLP).COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*Among Molina Healthcare, Inc, The S&P 500 IndexAnd A Peer Group* $100 invested on 12/31/05 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.35Table of ContentsItem 6.Selected Financial DataSELECTED FINANCIAL DATAWe derived the following selected consolidated financial data (other than the data under the caption “Operating Statistics”) for the five years ended December 31, 2010from our audited consolidated financial statements. You should read the data in conjunction with our consolidated financial statements, related notes and other financialinformation included herein. All dollars are in thousands, except per share data. The data under the caption “Operating Statistics” has not been audited.Year Ended December 31,2010(1)(3) 2009(2)(3) 2008(2)(3) 2007(2)(8) 2006(2)(9)Statements of Income Data:Revenue:Premium revenue $ 3,989,909 $ 3,660,207 $ 3,091,240 $ 2,462,369 $ 1,985,109Service revenue(1) 89,809 — — — —Investment income 6,259 9,149 21,126 30,085 19,886Total revenue 4,085,977 3,669,356 3,112,366 2,492,454 2,004,995Expenses:Medical care costs 3,370,857 3,176,236 2,621,312 2,080,083 1,678,652Cost of service revenue(1) 78,647 — — — —General and administrative expenses(2) 345,993 276,027 249,646 205,057 168,280Premium tax expenses(2)(3) 139,775 128,581 100,165 81,020 60,777Depreciation and amortization 45,704 38,110 33,688 27,967 21,475Total expenses 3,980,976 3,618,954 3,004,811 2,394,127 1,929,184Gain on purchase of convertible senior notes — 1,532 — — —Operating income 105,001 51,934 107,555 98,327 75,811Interest expense (15,509) (13,777) (13,231) (5,605) (2,353)Income before income taxes 89,492 38,157 94,324 92,722 73,458Provision for income taxes(3) 34,522 7,289 34,726 34,996 27,731Net income $ 54,970 $ 30,868 $ 59,598 $ 57,726 $ 45,727Net income per share:Basic $ 2.00 $ 1.19 $ 2.15 $ 2.04 $ 1.64Diluted $ 1.98 $ 1.19 $ 2.15 $ 2.03 $ 1.62Weighted average number of common shares outstanding 27,449,000 25,843,000 27,676,000 28,275,000 27,966,000Weighted average number of common shares and potential dilutivecommon shares outstanding 27,754,000 25,984,000 27,772,000 28,419,000 28,164,000Operating Statistics:Medical care ratio(4) 84.5% 86.8% 84.8% 84.5% 84.6%General and administrative expense ratio(5) 8.5% 7.5% 8.0% 8.2% 8.4%Premium tax ratio(6) 3.5% 3.5% 3.2% 3.3% 2.3%Members(7) 1,613,000 1,455,000 1,256,000 1,149,000 1,077,00036Table of ContentsAs of December 31,2010(1) 2009 2008 2007(8) 2006(9)Balance Sheet Data:Cash and cash equivalents $ 455,886 $ 469,501 $ 387,162 $ 459,064 $403,650Total assets 1,509,214 1,244,035 1,148,068 1,170,016 864,475Long-term debt (including current maturities) 164,014 158,900 164,873 160,166 45,000Total liabilities 790,157 701,297 616,306 655,640 444,309Stockholders’ equity 719,057 542,738 531,762 514,376 420,166(1) Service revenue and cost of service revenue represent revenue and costs generated by our Molina Medicaid Solutions segment. Because we acquired this business onMay 1, 2010, results for the year ended December 31, 2010 include eight months of results for this segment.(2) Prior to 2010, general and administrative expenses have included premium tax expenses. Beginning in 2010, we have reported premium tax expenses on a separate line inthe statements of income data. Prior periods have been reclassified to conform to this presentation.(3) Effective January 1, 2008 through December 31, 2009, income tax expense included both the Michigan business income tax, or BIT, and Michigan modified gross receiptstax, or MGRT. Effective January 1, 2010, we have recorded the MGRT as a premium tax and not as an income tax. We will continue to record the BIT as an income tax.For the years ended December 31, 2009, and 2008, amounts for premium tax expense and income tax expense have been reclassified to conform to this presentation. TheMGRT amounted to $6.2 million, $5.5 million, and $5.1 million for the years ended December 31, 2010, 2009, and 2008, respectively.(4) Medical care ratio represents medical care costs as a percentage of premium revenue. The medical care ratio is a key operating indicator used to measure our performancein delivering efficient and cost effective health care services. Changes in the medical care ratio from period to period result from changes in Medicaid funding by thestates, our ability to effectively manage costs, and changes in accounting estimates related to incurred but not reported claims. See Management’s Discussion and Analysisof Financial Condition and Results of Operations for further discussion.(5) General and administrative expense ratio represents such expenses as a percentage of total revenue.(6) Premium tax ratio represents such expenses as a percentage of premium revenue.http://sec.gov/Archives/edgar/data/1179929/000095012311023069/a58840e10vk.htm[1/6/2012 11:08:51 AM]