Condensed Financial Information of Registrant

12 Months Ended

Dec. 31, 2019

Condensed Financial Information Disclosure [Abstract]

Condensed Financial Information of Registrant

The condensed balance sheets as of December 31, 2019 and 2018, and the related condensed statements of operations, comprehensive income (loss) and cash flows for each of the three years in the period ended December 31, 2019 for our parent company Molina Healthcare, Inc. (the “Registrant”), are presented below.

Condensed Balance Sheets



	December 31,
	2019		2018
	(In millions, except per-share data)
ASSETS
Current assets:
Cash and cash equivalents	$	836	$	70
Investments	161		100
Receivables	2		2
Due from affiliates	49		90
Prepaid expenses and other current assets	46		47
Derivative asset	29		476
Total current assets	1,123		785
Property, equipment, and capitalized software, net	327		176
Goodwill and intangible assets, net	13		13
Investments in subsidiaries	2,225		2,768
Deferred income taxes	10		39
Advances to related parties and other assets	76		40
Total assets	$	3,774	$	3,821
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Medical claims and benefits payable	$	—	$	4
Accounts payable and accrued liabilities	260		223
Current portion of long-term debt	18		241
Derivative liability	29		476
Total current liabilities	307		944
Long-term debt	1,237		1,020
Finance lease liabilities	231		197
Other long-term liabilities	39		13
Total liabilities	1,814		2,174
Stockholders’ equity:
Common stock, $0.001 par value; 150 million shares authorized; outstanding: 62 million shares at each of December 31, 2019, and December 31, 2018	—		—
Preferred stock, $0.001 par value; 20 million shares authorized, no shares issued and outstanding	—		—
Additional paid-in capital	175		643
Accumulated other comprehensive income (loss)	4		(8		)
Retained earnings	1,781		1,012
Total stockholders’ equity	1,960		1,647
Total liabilities and stockholders’ equity	$	3,774	$	3,821

See accompanying notes.

Condensed Statements of Operations



	Year Ended December 31,
	2019			2018			2017
	(In millions)
Revenue:
Administrative services fees	$	1,038		$	1,138		$	1,317
Investment income and other revenue	18			17			16
Total revenue	1,056			1,155			1,333
Expenses:
General and administrative expenses	937			1,007			1,082
Depreciation and amortization	63			69			93
Other operating expenses	—			8			16
Restructuring costs	4			35			153
Impairment losses	—			—			39
Total operating expenses	1,004			1,119			1,383
Gain on sale of subsidiary	—			37			—
Operating income (loss)	52			73			(50		)
Interest expense	87			114			117
Other (income) expense, net	(15		)	17			(61		)
Loss before income tax (benefit) expense and equity in net earnings (losses) of subsidiaries	(20		)	(58		)	(106		)
Income tax expense (benefit)	9			(14		)	8
Net loss before equity in net earnings (losses) of subsidiaries	(29		)	(44		)	(114		)
Equity in net earnings (losses) of subsidiaries	766			751			(398		)
Net income (loss)	$	737		$	707		$	(512	)

Condensed Statements of Comprehensive Income (Loss)



	Year Ended December 31,
	2019		2018			2017
	(In millions)
Net income (loss)	$	737	$	707		$	(512	)
Other comprehensive income (loss):
Unrealized investment income (loss)	16		(3		)	(5		)
Less: effect of income taxes	4		(1		)	(2		)
Other comprehensive income (loss), net of tax	12		(2		)	(3		)
Comprehensive income (loss)	$	749	$	705		$	(515	)

See accompanying notes.

Condensed Statements of Cash Flows



	Year Ended December 31,
	2019			2018			2017
	(In millions)
Operating activities:
Net cash provided by operating activities	$	64		$	118		$	166
Investing activities:
Capital contributions to subsidiaries	(43		)	(145		)	(370		)
Dividends received from subsidiaries	1,373			298			286
Purchases of investments	(152		)	(136		)	(331		)
Proceeds from sales and maturities of investments	93			388			156
Purchases of property, equipment and capitalized software	(56		)	(22		)	(67		)
Net cash received from sale of subsidiaries	—			242			—
Change in amounts due to/from affiliates	38			6			(49		)
Other, net	1			—			—
Net cash provided by (used in) investing activities	1,254			631			(375		)
Financing activities:
Repayment of principal amount of convertible notes	(240		)	(362		)	—
Cash paid for partial settlement of conversion option	(578		)	(623		)	—
Cash received for partial settlement of call option	578			623			—
Cash paid for partial termination of warrants	(514		)	(549		)	—
Proceeds from borrowings under term loan facility	220			—			—
Common stock purchases	(47		)	—			—
Repayment of credit facility	—			(300		)	—
Proceeds from senior notes offerings, net of issuance costs	—			—			325
Proceeds from borrowings under credit facility	—			—			300
Other, net	29			19			11
Net cash (used in) provided by financing activities	(552		)	(1,192		)	636
Net (decrease) increase in cash and cash equivalents	766			(443		)	427
Cash and cash equivalents at beginning of period	70			513			86
Cash and cash equivalents at end of period	$	836		$	70		$	513

Notes to Condensed Financial Information of Registrant

Note A - Basis of Presentation

The Registrant was incorporated in 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 three other state health plans. In June 2003, the employees and operations 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 accompanying condensed financial information of the Registrant should be read in conjunction with the consolidated financial statements and accompanying notes.

Note B - Transactions with Subsidiaries

The Registrant provides certain centralized medical and administrative services to our subsidiaries pursuant to administrative services agreements that include, but are not limited to, information technology, product development and administration, underwriting, claims processing, customer service, certain care management services, human resources, marketing, purchasing, risk management, actuarial, underwriting, finance, accounting, legal and public

relations. Fees are based on the fair market value of services rendered and are recorded as operating revenue. Payment is subordinated to the subsidiaries’ ability to comply with minimum capital and other restrictive financial requirements of the states in which they operate. Charges in 2019, 2018, and 2017 for these services amounted to $1,038 million, $1,137 million, and $1,317 million, respectively, and 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 each subsidiary in accordance with an intercompany tax allocation agreement. The agreement allocates income taxes in an amount generally equivalent to the amount which would be 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 the consolidated tax returns.

Note C - Dividends and Capital Contributions

When the Registrant receives dividends from its subsidiaries, such amounts are recorded as a reduction to the investments in the respective subsidiaries.

For all periods presented, the Registrant made capital contributions to certain subsidiaries primarily to comply with minimum net worth requirements and to fund business combinations. Such amounts have been recorded as an increase in investment in the respective subsidiaries.