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California

Molina Profit Up 30% on Enrollment Gains

Revenue rose 29% at the managed-care firm, but some analysts say state deficits could signal tough times ahead.

August 12, 2003|Ronald D. White | Times Staff Writer

Molina Healthcare Inc. of Long Beach, reporting its first quarterly earnings as a publicly traded company, gave its investors some good news Monday.

The managed-care firm, which specializes in serving low-income people on Medicaid, said its second-quarter earnings jumped 30% from a year earlier, largely because of higher enrollment and lower expenses as a percent of revenue.

Molina posted a profit of $10.9 million, or 57 cents a share, up from $8.4 million, or 40 cents, in the same quarter a year earlier.

Revenue rose 29% in the April-June quarter to $195 million from $150.9 million.

Joseph D. France, a managed-care analyst at Banc of America Securities, said the results were in line with expectations.

"We like the company and its growth potential," he said.

However, France said, health insurers such as Molina could have a tougher time ahead because they rely heavily on government contracts.

"States are currently facing huge budget deficits," he said. "Nowhere is the problem more acute than in California."

Molina went public July 2, raising about $120 million. On the first day of trading, its stock went up 14% from the offering price of $17.50 a share to $20.

The company released its earnings after the markets closed Monday. Molina shares closed at $22.30 on the New York Stock Exchange, down 65 cents for the day and off its high of $25.30 on July 24.

In the second quarter, Molina reported 515,000 members in California, Washington, Utah and Michigan. That was up slightly from the first quarter and up 15% from the company's enrollment of 447,000 in the second quarter of 2002. Most of that was a result of gains in Utah and Washington.

Some other major managed-care companies recently reported enrollment declines from the first to the second quarter as they felt the effects of a weak economy and employers' switching or dropping plans.

Molina said it also boosted earnings by keeping its costs under control. The company reported that its marketing, general and administrative expenses were $15.4 million for the quarter.

Although that was up from $12.3 million a year earlier, it represented a decline as a percentage of operating revenue, to 7.9% from 8.2%.

For the six months ended June 30, the company posted net income of $18.9 million on revenue of $387 million, up from a profit of $13.5 million on revenue of $295.3 million.

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