1179929--3/17/2008--MOLINA_HEALTHCARE

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There are numerous risks associated with the growth of our Ohio HMO. If our government contracts are not renewed or are terminated, or if the RFP bids of our health plans are not successful, our premium revenues could be materially reduced. We derive a majority of our premium revenues from operations in a small number of states. A sustained drop in the rate of interest earned on our invested balances could adversely affect our revenues. If we are unable to achieve our projected growth in Medicare members or our projected medical care ratio with respect to our Medicare program, our results of operations could be adversely affected. Medicaid and SCHIP funding is subject to political disagreements over budgetary funding and efforts to control governmental spending in order to balance federal and/or state budgets. Funding under our contracts is also subject to regulatory and programmatic adjustments and reforms for which we may not be appropriately compensated. Difficulties in executing our acquisition strategy could adversely affect our business. Ineffective management of our growth may negatively affect our business, financial condition, or results of operations. Any changes to the laws and regulations governing our business, or the interpretation and enforcement of those laws or regulations, could cause us to modify our operations and could negatively impact our operating results. Our business depends on our information and medical management systems, and our inability to effectively integrate, manage, and keep secure our information and medical management systems could disrupt our operations. If we are unable to maintain good relations with the physicians, hospitals, and other providers with whom we contract, or if we are unable to enter into cost-effective contracts with such providers, our profitability could be adversely affected. Failure to attain profitability in any new start-up operations or in connection with our expansion into Medicare could negatively affect our results of operations. High profile qui tam matters and negative publicity regarding Medicaid managed care and Medicare Advantage may lead to programmatic changes, intensified regulatory scrutiny, or guilt by association. If a state fails to renew its federal waiver application for mandated Medicaid enrollment into managed care or such application is denied, our membership in that state will likely decrease. We face claims related to litigation which could result in substantial monetary damages. The Medicaid citizenship documentation requirements may adversely impact the enrollment levels of our health plans. We are subject to competition which negatively impacts our ability to increase penetration in the markets we serve. Restrictions and covenants in our credit facility may limit our ability to make certain acquisitions. We are dependent on our executive officers and other key employees. A pandemic, such as a worldwide outbreak of a new influenza virus, could materially and adversely affect our ability to control health care costs. Because our corporate headquarters and claims processing facilities are located in Southern California, our business operations may be significantly disrupted as a result of a major earthquake. Our results of operations could be negatively impacted by both upturns and downturns in general economic conditions. If state regulators do not approve payments of dividends and distributions by our subsidiaries, it may negatively affect our business strategy. Unforeseen changes in regulations or pharmaceutical market conditions may impact our revenues and adversely affect our results of operations. Failure to maintain effective internal controls over financial reporting could have a material adverse effect on our business, operating results, and stock price. Volatility of our stock price could adversely affect stockholders. Our directors and officers and members of the Molina family own a majority of our capital stock, decreasing the influence of other stockholders on stockholder decisions. It may be difficult for a third party to acquire our company, which could inhibit stockholders from realizing a premium on their stock price. Our forecasts and other forward-looking statements are based on a variety of assumptions that are subject to significant uncertainties. Our performance may not be consistent with these forecasts and forward-looking statements. We do not anticipate paying any cash dividends in the foreseeable future. Our ability to deduct interest on our convertible notes for U.S. federal income tax purposes may be reduced or eliminated and as a result our after-tax cash flow could be adversely affected. Conversion of our senior convertible notes may dilute the ownership interest of existing stockholders. The accounting method for convertible debt securities with net share settlement, like our $200 million senior convertible notes, could change in a manner that may affect our results of operations. Our investments in auction rate securities are subject to risks that may cause losses and have a material adverse effect on our liquidity.

Full 10-K form ▸

1179929--3/17/2008--MOLINA_HEALTHCARE_INC