Item 2.01. Completion of Acquisition or Disposition of Assets.
At Closing (defined below), Passport Health Plan, Inc.'s (formerly known as
Justify Holdings, Inc.) (hereinafter referred to as "Passport") Medicaid
contract with the Kentucky Cabinet for Family Services (the "Medicaid Contract")
was novated to Molina Healthcare, Inc. ("Molina"), and as a result, Passport
will begin to wind down its business. Evolent Health, Inc. (the "Company")
previously accounted for its investment in Passport on an unconsolidated basis
as an investment in a variable interest entity. The Closing constituted a
reconsideration event under ASC 810, which required the Company to re-evaluate
its variable interest entity analysis. As a result of such analysis, the Company
concluded that it has a controlling financial interest in Passport; accordingly,
the Company will consolidate Passport under the voting interest model in its
consolidated financial statements on a going forward basis for accounting
purposes (the "Consolidation").
As a result of the Consolidation, the remaining assets of Passport, consisting
largely of regulatory capital, which on July 31, 2020 was in excess of 250% RBC,
as well as its liabilities and results of operations, which are expected to not
be material, will be included in the Company's consolidated financial
statements. The Consolidation will be accounted for as an asset acquisition.
Item 8.01. Other Events.
As previously disclosed on the Form 8-K filed on July 17, 2020 (the "Prior
8-K"), Evolent Health LLC ("Evolent"), a wholly owned subsidiary of the Company,
and Passport, which is owned 70% by EH Holding Company, Inc., a wholly owned
subsidiary of Evolent, entered into an Asset Purchase Agreement (the "Purchase
Agreement") with Molina, pursuant to which Passport agreed to sell certain
assets to Molina (or its permitted affiliate assignee). The closing of the
transactions contemplated by the Purchase Agreement occurred on September 1,
2020 (the "Closing"). At the Closing, Molina acquired certain assets from
Passport, including certain intellectual property rights of Passport and
Passport's rights under the Medicaid Contract, and Molina deposited $20.0
million in cash in escrow, which is expected to be released to Passport on
January 1, 2021.
Please refer to the Prior 8-K for additional information regarding the
transaction and the consideration expected to be received by Evolent and
Passport as a result of the transactions contemplated by the Purchase Agreement.
The foregoing description of the Purchase Agreement is not complete and is
subject to and entirely qualified by reference to the full text of the Purchase
Agreement, which was filed as Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q filed with the SEC on August 7, 2020.
Forward-Looking Statements
This Current Report on Form 8-K contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995, as
amended (the "PSLRA"), including with respect to the liabilities and results of
operations of Passport (which may vary based on claims experience (amongst other
factors)). The Company claims the protection afforded by the safe harbor for
forward-looking statements provided by the PSLRA. Actual events or results may
differ materially from those contained in these forward-looking statements. In
addition, please refer to the periodic reports that the Company has filed with
the Securities and Exchange Commission, including its Annual Report on Form
10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and the
risk factors noted therein. Such periodic filings by the Company identify and
address other important factors that could cause future events or results to
vary from the forward-looking statements set forth in this Current Report on
Form 8-K. In addition, the Company disclaims any obligation to update any
forward-looking statements contained herein to reflect events or circumstances
that occur after the date hereof.
--------------------------------------------------------------------------------
© Edgar Online, source Glimpses