Exhibit 99.1
Unaudited Pro Forma Condensed Consolidated Financial Statements
The following unaudited pro forma condensed consolidated financial statements are based on the historical consolidated financial statements of Molina Healthcare, Inc. (the “Company”), as adjusted to give effect to the October 19, 2018, sale of its wholly owned subsidiary, Pathways Health and Community Support LLC (the "Pathways Sale") to Pyramid Health Holdings, LLC (the “Buyer”). The Pathways Sale was not a disposition that qualifies as a discontinued operation under Accounting Standards Codification No. 205, Presentation of Financial Statements.
The unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2018, and the year ended December 31, 2017, give effect to the Pathways Sale as if it had occurred on January 1, 2017. The unaudited pro forma condensed consolidated balance sheet as of June 30, 2018, gives effect to the Pathways Sale as if it had occurred on June 30, 2018.
The unaudited pro forma condensed consolidated financial statements are for informational purposes only and are not necessarily indicative of what the Company's financial performance and financial position would have been had the Pathways Sale been completed on the dates assumed, nor is such unaudited pro forma condensed consolidated financial information necessarily indicative of the results to be expected in any future period.
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MOLINA HEALTHCARE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2018
(In millions, except per-share amounts)
Historical | Adjustments to reflect Pathways Sale (a) | Pro Forma | |||||||||
Total revenue | $ | 9,529 | $ | (162 | ) | $ | 9,367 | ||||
Operating expenses: | |||||||||||
Medical care costs | 7,572 | — | 7,572 | ||||||||
Cost of service revenue | 238 | (151 | ) | 87 | |||||||
General and administrative expenses | 687 | (15 | ) | 672 | |||||||
Premium tax expenses | 210 | — | 210 | ||||||||
Health insurer fees | 174 | — | 174 | ||||||||
Depreciation and amortization | 51 | (1 | ) | 50 | |||||||
Restructuring and separation costs | 33 | — | 33 | ||||||||
Total operating expenses | 8,965 | (167 | ) | 8,798 | |||||||
Operating income | 564 | 5 | 569 | ||||||||
Other expenses, net | 80 | — | 80 | ||||||||
Income before income tax expense | 484 | 5 | 489 | ||||||||
Income tax expense | 175 | 1 | 176 | ||||||||
Net income | $ | 309 | $ | 4 | $ | 313 | |||||
Net income per share: | |||||||||||
Basic | $ | 5.10 | $ | 5.16 | |||||||
Diluted | $ | 4.68 | $ | 4.73 | |||||||
Weighted average shares outstanding: | |||||||||||
Basic | 60.5 | 60.5 | |||||||||
Diluted | 66.0 | 66.0 |
__________________
(a) | Reflects the elimination of the results of operations of Pathways Health and Community Support LLC ("Pathways"), as if the sale had occurred on January 1, 2017. |
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MOLINA HEALTHCARE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2017
(In millions, except per-share amounts)
Historical | Adjustments to reflect Pathways Sale (a) | Pro Forma | |||||||||
Total revenue | $ | 19,883 | $ | (332 | ) | $ | 19,551 | ||||
Operating expenses: | |||||||||||
Medical care costs | 17,073 | — | 17,073 | ||||||||
Cost of service revenue | 492 | (318 | ) | 174 | |||||||
General and administrative expenses | 1,594 | (29 | ) | 1,565 | |||||||
Premium tax expenses | 438 | — | 438 | ||||||||
Depreciation and amortization | 137 | (5 | ) | 132 | |||||||
Impairment losses | 470 | (171 | ) | 299 | |||||||
Restructuring and separation costs | 234 | — | 234 | ||||||||
Total operating expenses | 20,438 | (523 | ) | 19,915 | |||||||
Operating loss | (555 | ) | 191 | (364 | ) | ||||||
Other expenses, net | 57 | — | 57 | ||||||||
Loss before income tax benefit | (612 | ) | 191 | (421 | ) | ||||||
Income tax benefit | (100 | ) | 29 | (71 | ) | ||||||
Net loss | $ | (512 | ) | $ | 162 | $ | (350 | ) | |||
Net loss per share: | |||||||||||
Basic | $ | (9.07 | ) | $ | (6.19 | ) | |||||
Diluted | $ | (9.07 | ) | $ | (6.19 | ) | |||||
Weighted average shares outstanding: | |||||||||||
Basic | 56.4 | 56.4 | |||||||||
Diluted | 56.4 | 56.4 |
__________________
(a) | Reflects the elimination of the results of operations of Pathways, as if the sale had occurred on January 1, 2017. |
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MOLINA HEALTHCARE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2018
(In millions)
Historical | Adjustments to reflect Pathways Sale (a) | Pro Forma | |||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 3,392 | $ | (19 | ) | $ | 3,373 | ||||
Investments | 2,176 | — | 2,176 | ||||||||
Restricted investments | 80 | — | 80 | ||||||||
Receivables | 1,148 | (40 | ) | 1,108 | |||||||
Income tax refundable (b) | — | 30 | 30 | ||||||||
Prepaid expenses and other current assets | 344 | (5 | ) | 339 | |||||||
Derivative asset | 657 | — | 657 | ||||||||
Assets held for sale | 230 | — | 230 | ||||||||
Total current assets | 8,027 | (34 | ) | 7,993 | |||||||
Property, equipment, and capitalized software, net | 276 | (9 | ) | 267 | |||||||
Goodwill and intangible assets, net | 201 | — | 201 | ||||||||
Restricted investments | 117 | — | 117 | ||||||||
Deferred income taxes | 114 | (18 | ) | 96 | |||||||
Other assets | 28 | (1 | ) | 27 | |||||||
$ | 8,763 | $ | (62 | ) | $ | 8,701 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
Current liabilities: | |||||||||||
Medical claims and benefits payable | $ | 1,920 | $ | — | $ | 1,920 | |||||
Amounts due government agencies | 1,746 | — | 1,746 | ||||||||
Accounts payable and accrued liabilities | 754 | (20 | ) | 734 | |||||||
Deferred revenue | 193 | — | 193 | ||||||||
Current portion of long-term debt | 484 | — | 484 | ||||||||
Derivative liability | 657 | — | 657 | ||||||||
Liabilities held for sale | 66 | — | 66 | ||||||||
Total current liabilities | 5,820 | (20 | ) | 5,800 | |||||||
Long-term debt and other long-term liabilities | 1,285 | (1 | ) | 1,284 | |||||||
Total liabilities | 7,105 | (21 | ) | 7,084 | |||||||
Total stockholders’ equity | 1,658 | (41 | ) | 1,617 | |||||||
$ | 8,763 | $ | (62 | ) | $ | 8,701 |
__________________
(a) | Reflects the elimination of the assets and liabilities of Pathways, Buyer's retention of approximately $19 million of the cash balance, payment of approximately $3 million of transaction fees, and recognition of a $41 million loss on sale, net of taxes, as if the sale had occurred on June 30, 2018. A tax rate of 22% is applied to the loss on sale. |
(b) | The Company will record income taxes refundable for the tax benefits arising from the loss on its investment in Pathways. |
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