Molina Healthcare Reports Third Quarter 2011 Results

LONG BEACH, Calif., Oct 25, 2011 (BUSINESS WIRE) --

Molina Healthcare, Inc. (NYSE: MOH):

Earnings per diluted share for third quarter 2011 of $0.41, up 8% over 2010
Quarterly premium revenues of $1.1 billion, up 13% over 2010
Quarterly operating income of $33.6 million, up 12% over 2010
EBITDA of $51.4 million, up 10% over 2010
Aggregate membership up 5% over 2010
Repurchase authorized for up to $75 million in the aggregate of either common stock or convertible debt

Molina Healthcare, Inc. (NYSE: MOH) today reported its financial results for the third quarter and nine months ended September 30, 2011.

Net income for the quarter was $19.0 million, or $0.41 per diluted share, compared with net income of $16.2 million, or $0.38 per diluted share, for the quarter ended September 30, 2010.

"Our diversification strategy and our focus on our less mature health plans were the keys to success in the third quarter," said J. Mario Molina, M.D., chief executive officer of Molina Healthcare, Inc. "The improved performance of Molina Medicaid Solutions and of our Florida and Texas health plans, compared with the second quarter of this year, offset a $7.5 million premium reduction in California. Today, Molina Healthcare is a geographically diversified company offering a variety of services to meet the health care needs of low income families and the government agencies that assist them. Our third quarter results demonstrate that we have many ways to serve the expected growth in our markets."

Earnings Per Share Guidance

The Company reaffirms its earnings per diluted share guidance for fiscal year 2011 of $1.55.

Overview of Financial Results

Third Quarter 2011 Compared with Second Quarter 2011

Income before taxes in the third quarter of 2011 increased by approximately $1.5 million compared with the second quarter of 2011.

Premium revenue increased approximately 1%, primarily due to higher enrollment.
Consolidated medical costs were flat on a per-member-per-month (PMPM) basis. Inpatient facility utilization and pharmacy utilization were essentially flat.
Performance of the Florida and Texas health plans improved.
Performance of the California health plan declined as a result of an estimated 6% rate cut that will be retroactive to July 1, 2011. The amount reserved for the estimated rate cut was approximately $7.5 million.
Premium revenue was reduced due to a minimum medical cost floor in New Mexico and a profit cap in Texas amounting to $5.9 million in the third quarter of 2011 compared with $5.1 million in the second quarter of 2011.

Third Quarter 2011 Compared with Third Quarter 2010

Compared with the third quarter of 2010, the Company's third quarter of 2011 was marked by improved performance of its health plans segment due to a 13% increase in premium revenue, partially offset by a decrease in the profitability of the Molina Medicaid Solutions segment. Earnings per share in the third quarter of 2011 were up 8% over the third quarter of 2010, operating income was up 12%, and membership on a member-month basis grew by 8%.

Health Plans Segment

Premium Revenue

In the three months ended September 30, 2011, compared with the three months ended September 30, 2010, premium revenue grew 13% due to a membership increase of approximately 8% (on a member-month basis) and a PMPM revenue increase of approximately 5%. Medicare premium revenue was $101.5 million for the three months ended September 30, 2011, compared with $70.7 million for the three months ended September 30, 2010. In addition to the $7.5 million reduction to revenue in the third quarter of 2011 for the estimated premium reduction in California, the Company reduced revenue by $5.9 million in the third quarter of 2011 due to a minimum medical cost floor in New Mexico and a profit cap in Texas. In the third quarter of 2010, the Company reduced certain accruals for these items, resulting in an increase to revenue of $2.9 million.

Medical Care Costs

The ratio of medical care costs to premium revenue (the medical care ratio, or MCR) was essentially flat, increasing to 84.3% in the three months ended September 30, 2011, compared with 84.2% for the three months ended September 30, 2010. Total medical care costs increased approximately 5% PMPM.

Fee-for-service and capitation costs combined increased approximately 4%. Excluding the disproportionate impact of the Texas health plan, where the Company has experienced high utilization and unit costs for both physician and outpatient services (which include personal care services), fee-for-service costs were flat PMPM.
Capitation costs decreased approximately 12% PMPM, primarily due to the transition of members in Michigan and Washington into fee-for-service networks.
Fee-for-service costs increased approximately 8% PMPM, partially due to the transition of members from capitated provider networks into fee-for-service networks.
Pharmacy costs increased approximately 9% PMPM.
Hospital utilization decreased approximately 7%.

The medical care ratio of the California health plan increased to 88.8% in the three months ended September 30, 2011, from 80.3% in the three months ended September 30, 2010. The California health plan reduced premium revenue by approximately $7.5 million in the third quarter of 2011 for premium reductions estimated to be retroactive to July 1, 2011. The California Department of Health Care Services has indicated that it will reduce certain provider payments by approximately 10% retroactive to July 1, 2011. The Company believes that this reduction to provider payments will translate into a premium reduction of approximately 6% for the California health plan. At September 30, 2011, the California health plan had not recorded any potential recovery of provider payments related to this estimated premium reduction. Also in the third quarter of 2011, the California health plan added approximately 7,000 new Aged, Blind or Disabled, or ABD, members with an average premium revenue of approximately $450 PMPM.

The medical care ratio of the Florida health plan decreased to 89.2% in the three months ended September 30, 2011, from 97.2% in the three months ended September 30, 2010, primarily due to initiatives implemented to reduce pharmacy and behavioral health costs. The Florida health plan received a premium rate increase of approximately 7.5% effective September 1, 2011.

The medical care ratio of the Michigan health plan decreased to 82.0% in the three months ended September 30, 2011, from 85.7% in the three months ended September 30, 2010, primarily due to improved Medicare performance and lower capitation and physician/outpatient costs combined. The Michigan health plan received a premium rate increase of approximately 1% effective October 1, 2011.

The medical care ratio of the Missouri health plan decreased to 78.1% in the three months ended September 30, 2011, from 86.7% in the three months ended September 30, 2010. Medical costs were flat compared with the prior period, while the health plan received a premium rate increase of approximately 5% effective July 1, 2011.

The medical care ratio of the New Mexico health plan increased to 84.2% in the three months ended September 30, 2011, from 83.5% in the three months ended September 30, 2010. The New Mexico health plan received a premium rate reduction of approximately 2.5% effective July 1, 2011. Premium revenues were further reduced due to a 1% increase in the minimum contractual amount the plan is required to spend on medical costs effective July 1, 2011. As a result of a minimum medical cost floor in the Company's contract with the state of New Mexico, it reduced premium revenue by $4.4 million in the third quarter of 2011. In the third quarter of 2010, the Company reduced its accrual for the minimum medical cost floor, resulting in the recognition of an additional $2.8 million of revenue.

The medical care ratio of the Ohio health plan decreased to 78.4% in the three months ended September 30, 2011, from 81.2% in the three months ended September 30, 2010, due to an increase in Medicaid premium PMPM of approximately 4.5% effective January 1, 2011, while fee-for-service costs have increased by only 2.0%.

The medical care ratio of the Texas health plan increased to 93.7% in the three months ended September 30, 2011, from 89.5% in the three months ended September 30, 2010. Effective September 1, 2011, the Texas health plan added approximately 8,000 ABD Medicaid members and 3,000 Temporary Assistance for Needy Families, or TANF, members in the Jefferson service area, and effective September 1, 2010, the Company added approximately 54,000 members state-wide who are covered under the Children's Health Insurance Program, or CHIP. Costs associated with ABD contracts, particularly in the Dallas-Fort Worth region, are running substantially higher than in the Company's other markets, due to both high utilization and high unit costs. Molina has undertaken a number of measures - focused on both utilization and unit cost reductions - to improve the profitability of the Texas health plan. The medical care ratio of the Texas health plan fell from 95.0% in the second quarter of 2011 to 93.7% in the third quarter of 2011. Profitability of the CHIP line of business was proportionally higher in Texas, leading to a $1.5 million reduction of revenue as a result of a profit cap in Molina's contract with the state of Texas. That profit cap is applied on a product-by-product basis. In the third quarter of 2010, the Company reduced its accrual for the profit cap, resulting in the recognition of an additional $0.1 million of revenue. The Texas health plan received a premium rate reduction of approximately 2% effective September 1, 2011.

The medical care ratio of the Utah health plan decreased to 79.3% in the three months ended September 30, 2011, from 84.9% in the three months ended September 30, 2010, primarily due to a reduction in inpatient utilization and a shift in member mix. The Utah health plan received a premium rate reduction of approximately 2% effective July 1, 2011.

The medical care ratio of the Washington health plan increased to 82.8% in the three months ended September 30, 2011, from 79.4% in the three months ended September 30, 2010. Higher fee-for-service and pharmacy costs more than offset lower capitation costs. The Washington health plan received a premium rate reduction of approximately 1% effective October 1, 2011.

The medical care ratio of the Wisconsin health plan (acquired September 1, 2010) was 79.1% in the three months ended September 30, 2011. The Wisconsin health plan recorded a premium deficiency reserve of $3.35 million in the first quarter of 2011. Based on improvements in the health plan's earnings forecast through the end of the contract period, this reserve was relieved during the second and third quarters. Absent the premium deficiency reduction, the Wisconsin plan's MCR would have been approximately 88.1% in the three months ended September 30, 2011. Molina has undertaken a number of measures - focused on both utilization and unit cost reductions - to improve the profitability of the Wisconsin health plan.

Molina Medicaid Solutions Segment

Molina Medicaid Solutions was acquired on May 1, 2010. Performance of the Molina Medicaid Solutions segment was as follows:


	Three Months Ended Sept. 30,
	2011			2010
	(In thousands)
Service revenue before amortization	$	39,273		$	34,926
Amortization recorded as reduction of service revenue		(1,545	)		(2,655	)
Service revenue		37,728			32,271
Cost of service revenue		34,584			27,605
General and administrative costs		2,069			2,195
Amortization of customer relationship intangibles recorded as amortization		1,282			1,314
Operating (loss) income	$	(207	)	$	1,157

The Company is currently deferring recognition of all revenue as well as all direct costs (to the extent that such costs are estimated to be recoverable) in Idaho until the Medicaid Management Information System, or MMIS, in that state receives certification from the Centers for Medicare and Medicaid Services, or CMS. Cost of service revenue for the third quarter of 2011 includes $2.5 million of direct costs associated with the Idaho contract that would otherwise have been recorded as deferred contract costs. In assessing the recoverability of the deferred contract costs associated with the Idaho contract at September 30, 2011, the Company determined that these costs should be expensed as a period cost. Financial results remain strong under Molina's Louisiana, New Jersey, and West Virginia MMIS contracts.

Consolidated Expenses

General and Administrative Expenses

General and administrative, or G&A, expenses, were $99.6 million, or 8.5% of total revenue, for the three months ended September 30, 2011, compared with $88.7 million, or 8.5% of total revenue, for the three months ended September 30, 2010.

Premium Tax Expense

Premium tax expense decreased to 3.2% of premium revenue in the three months ended September 30, 2011, from 3.5% in the three months ended September 30, 2010, due to a shift in revenue to states with comparatively low premium tax rates.

Interest Expense

Interest expense decreased to $4.4 million for the three months ended September 30, 2011, from $4.6 million for the three months ended September 30, 2010. Interest expense includes non-cash interest expense relating to the Company's convertible senior notes, which amounted to $1.4 million and $1.3 million for the three months ended September 30, 2011, and 2010, respectively.

Income Taxes

Income tax expense is recorded at an effective rate of 35.1% for the three months ended September 30, 2011, compared with 36.2% for the three months ended September 30, 2010. The lower rate in 2011 is primarily due to differences in the amount of discrete tax benefits recorded during the respective periods.

Nine Months Ended September 30, 2011, Compared with Nine Months Ended September 30, 2010

Improved performance of Molina's health plans segment, again partially offset by a decrease in the profitability of the Molina Medicaid Solution segment, also led to improved performance for the nine months ended September 30, 2011, compared with the nine months ended September 30, 2010. Earnings per share in the nine months ended September 30, 2011, were up 25% over the comparable period in 2010, premium revenues were up 14%, operating income was up 35%, and membership on a member-month basis grew by 10%. Medicare premium revenue for the nine months ended September 30, 2011, was $282.3 million compared with $188.6 million for the nine months ended September 30, 2010.

Health Plans Segment

Premium Revenue

In the nine months ended September 30, 2011, compared with the nine months ended September 30, 2010, premium revenue grew 14% due to a membership increase of approximately 10% (on a member-month basis) and a PMPM revenue increase of approximately 4%. Medicare premium revenue was $282.3 million for the nine months ended September 30, 2011, compared with $188.6 million for the nine months ended September 30, 2010. Reductions to revenue due to a minimum medical cost floor in New Mexico and a profit cap in Texas amounted to $12.2 million for the nine months ended September 30, 2011. For the nine months ended September 30, 2010, the Company reduced certain accruals for these items, resulting in an increase to revenue of $0.1 million.

Medical Care Costs

The medical care ratio decreased to 84.3% in the nine months ended September 30, 2011, compared with 85.1% for the nine months ended September 30, 2010. Total medical care costs increased less than 3% PMPM.

Pharmacy costs (adjusted for the state's retention of the pharmacy benefit in Ohio effective February 1, 2010) increased approximately 6% PMPM.
Capitation costs decreased approximately 15% PMPM, primarily due to the transition of members in Michigan and Washington into fee-for-service networks.
Fee-for-service costs increased approximately 6% PMPM, partially due to the transition of members from capitated provider networks into fee-for-service networks.
Fee-for-service and capitation costs combined increased approximately 2% PMPM.
Hospital utilization decreased approximately 7%.

Molina Medicaid Solutions Segment

Molina Medicaid Solutions was acquired on May 1, 2010; therefore, the nine months ended September 30, 2010, include only five months of operating results for this segment. Performance of the Molina Medicaid Solutions segment was as follows:


	Nine Months Ended Sept. 30, 2011			Five Months Ended Sept. 30, 2010
	(In thousands)
Service revenue before amortization	$	116,567		$	57,571
Amortization recorded as reduction of service revenue		(5,277	)		(4,246	)
Service revenue		111,290			53,325
Cost of service revenue		105,020			41,859
General and administrative costs		6,421			3,161
Amortization of customer relationship intangibles recorded as amortization		3,846			2,143
Operating (loss) income	$	(3,997	)	$	6,162

Cost of service revenue for the nine months ended September 30, 2011, includes $9.5 million of direct costs associated with the Idaho contract that would otherwise have been recorded as deferred contract costs, for the same reasons discussed above, in "Third Quarter 2011 Compared with Third Quarter 2010."

Consolidated Expenses and Other

General and Administrative Expenses

General and administrative expenses were $291.0 million, or 8.4% of total revenue, for the nine months ended September 30, 2011, compared with $245.6 million, or 8.2% of total revenue, for the nine months ended September 30, 2010.

Premium Tax Expense

Premium tax expense decreased to 3.3% of premium revenue in the nine months ended September 30, 2011, from 3.5% in the nine months ended September 30, 2010, due to a shift in revenue to states with comparatively low premium tax rates.

Interest Expense

Interest expense decreased to $11.7 million for the nine months ended September 30, 2011, from $12.1 million for the nine months ended September 30, 2010. Interest expense includes non-cash interest expense relating to the Company's convertible senior notes, which amounted to $4.1 million and $3.8 million for the nine months ended September 30, 2011 and 2010, respectively.

Income Taxes

Income tax expense is recorded at an effective rate of 36.4% for the nine months ended September 30, 2011, compared with 37.3% for the nine months ended September 30, 2010. The lower rate in 2011 is primarily due to discrete tax benefits recognized for statute closures and prior year tax return to provision reconciliations. Excluding the discrete tax benefits, the effective tax rate for the nine months ended September 30, 2011, was 37.3%.

Cash Flow

Cash provided by operating activities was $155.2 million for the nine months ended September 30, 2011, compared with $9.5 million for the nine months ended September 30, 2010. Deferred revenue, which was a use of operating cash totaling $64.3 million in 2010, was a source of operating cash totaling $42.6 million in 2011.

At September 30, 2011, the Company had cash and investments of $881.0 million, and the parent company had cash and investments of $54.3 million.


	Reconciliation of Non-GAAP((1)) to GAAP Financial Measures
	EBITDA((2))

		Three Months Ended Sept. 30,				Nine Months Ended Sept. 30,
		2011		2010		2011		2010
		(In thousands)
	Net income	$	18,950	$	16,173	$	53,778	$	37,342
	Add back:
	Depreciation and amortization reported in the consolidated statements of cash flows		17,812		16,573		52,414		40,485
	Interest expense		4,380		4,600		11,666		12,056
	Provision for income taxes		10,236		9,180		30,832		22,171
	EBITDA	$	51,378	$	46,526	$	148,690	$	112,054

⁽¹⁾	GAAP stands for U.S. generally accepted accounting principles.
⁽²⁾	EBITDA is not prepared in conformity with GAAP because it excludes depreciation and amortization, as well as interest expense, and the provision for income taxes. This non-GAAP financial measure should not be considered as an alternative to the GAAP measures of net income, operating income, operating margin, or cash provided by operating activities, nor should EBITDA be considered in isolation from these GAAP measures of operating performance. Management uses EBITDA as a supplemental metric in evaluating the Company's financial performance, in evaluating financing and business development decisions, and in forecasting and analyzing future periods. For these reasons, management believes that EBITDA is a useful supplemental measure to investors in evaluating the Company's performance and the performance of other companies in its industry.

Securities Repurchase Program

The Company's Board of Directors has authorized the repurchase of up to $75 million in aggregate of either the Company's common stock or its 3.75% convertible senior notes due 2014. The repurchase program will be funded with working capital or the Company's credit facility, and repurchases may be made from time to time on the open market or through privately negotiated transactions. The repurchase program extends through October 25, 2012, but the Company reserves the right to suspend or discontinue the program at any time.

Under the $7 million securities repurchase program announced by the Company in July 2011, the Company repurchased and retired approximately 400,000 shares of its common stock for $7 million (average cost of approximately $17.47 per share). This repurchase did not materially impact diluted earnings per share for the three months or nine months ended September 30, 2011.

Conference Call

The Company's management will host a conference call and webcast to discuss its third quarter results at 5:00 p.m. Eastern time on Tuesday, October 25, 2011. The number to call for the interactive teleconference is (212) 231-2935. A telephonic replay of the conference call will be available from 7:00 p.m. Eastern time on Tuesday, October 25, 2011, through 6:00 p.m. on Wednesday, October 26, 2011, by dialing (800) 633-8284 and entering confirmation number 21538905. A live broadcast of Molina Healthcare's conference call will be available on the Company's website, www.molinahealthcare.com, or at www.earnings.com. A 30-day online replay will be available approximately an hour following the conclusion of the live broadcast.

About Molina Healthcare

Molina Healthcare, Inc. provides quality and cost-effective Medicaid-related solutions to meet the health care needs of low-income families and individuals and to assist state agencies in their administration of the Medicaid program. The Company's licensed health plans in California, Florida, Michigan, Missouri, New Mexico, Ohio, Texas, Utah, Washington, and Wisconsin currently serve approximately 1.7 million members, and the Company's subsidiary, Molina Medicaid Solutions, provides business processing and information technology administrative services to Medicaid agencies in Idaho, Louisiana, Maine, New Jersey, and West Virginia, and drug rebate administration services in Florida.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This earnings release contains "forward-looking statements" regarding the Company's plans, expectations, anticipated future events (including rate changes), and projected earnings per diluted share for fiscal year 2011.Actual results could differ materially due to numerous known and unknown risks and uncertainties, including, without limitation, risk factors related to the following:

significant budget pressures on state governments which cause them to lower rates unexpectedly or to rescind expected rate increases, or their failure to maintain existing benefit packages or membership eligibility thresholds or criteria;
uncertainties regarding the impact of the Patient Protection and Affordable Care Act, including its possible repeal, judicial overturning of the individual insurance mandate or Medicaid expansion, the effect of various implementing regulations, and uncertainties regarding the impact of other federal or state health care and insurance reform measures;
management of our medical costs, including costs associated with unexpectedly severe or widespread illnesses such as influenza, and rates of utilization that are consistent with our expectations;
the success of our efforts to retain existing government contracts and to obtain new government contracts in connection with state requests for proposals (RFPs) in both existing and new states (including in Washington, Ohio, and Missouri), and our ability to grow our revenues consistent with our expectations;
the accurate estimation of incurred but not reported medical costs across our health plans;
risks associated with the continued growth in new Medicaid and Medicare enrollees;
retroactive adjustments to premium revenue or accounting estimates which require adjustment based upon subsequent developments, including the California rate cut expected to be retroactive to July 1, 2011, and Medicaid pharmaceutical rebates;
the continuation and renewal of the government contracts of both our health plans and Molina Medicaid Solutions and the terms under which such contracts are renewed;
the timing of receipt and recognition of revenue and the amortization of expense under the state contracts of Molina Medicaid Solutions in Maine and Idaho;
reductions to revenue, additional administrative costs and the potential payment of additional amounts to providers and/or the state by Molina Medicaid Solutions as a result of MMIS implementation issues in Maine and/or Idaho;
government audits and reviews, including the audit of our Medicare plans by CMS;
changes with respect to our provider contracts and the loss of providers;
the establishment, interpretation, and implementation of a federal or state medical cost expenditure floor as a percentage of the premiums we receive, administrative cost and profit ceilings, and profit sharing arrangements;
the interpretation and implementation of at-risk premium rules regarding the achievement of certain quality measures;
the successful integration of our acquisitions;
approval by state regulators of dividends and distributions by our health plan subsidiaries;
changes in funding under our contracts as a result of regulatory changes, programmatic adjustments, or other reforms;
high dollar claims related to catastrophic illness;
the favorable resolution of litigation, arbitration, or administrative proceedings, and the costs associated therewith;
restrictions and covenants in our credit facility;
the relatively small number of states in which we operate health plans;
the availability of financing to fund and capitalize our acquisitions and start-up activities and to meet our liquidity needs, and the costs and fees associated therewith;
a state's failure to renew its federal Medicaid waiver;
an inadvertent unauthorized disclosure of protected health information by us or our business associates;
changes generally affecting the managed care or Medicaid management information systems industries;
increases in government surcharges, taxes, and assessments;
changes in general economic conditions, including unemployment rates;

and numerous other risk factors, including those discussed in our periodic reports and filings with the Securities and Exchange Commission.These reports can be accessed under the investor relations tab of our Company website or on the SEC's website at www.sec.gov.Given these risks and uncertainties, we can give no assurances that our forward-looking statements will prove to be accurate, or that any other results or events projected or contemplated by our forward-looking statements will in fact occur, and we caution investors not to place undue reliance on these statements. All forward-looking statements in this release represent our judgment as of October 25, 2011, and we disclaim any obligation to update any forward-looking statements to conform the statement to actual results or changes in our expectations.


	MOLINA HEALTHCARE, INC.
	UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
	(Amounts in thousands, except net income per share)

		Three Months Ended Sept. 30,						Nine Months Ended Sept. 30,
		2011			2010			2011			2010
	Revenue:
	Premium revenue	$	1,138,230		$	1,005,115		$	3,348,438		$	2,947,020
	Service revenue		37,728			32,271			111,290			53,325
	Investment income		764			1,760			3,804			4,880
	Total revenue		1,176,722			1,039,146			3,463,532			3,005,225
	Expenses:
	Medical care costs		959,158			845,937			2,822,049			2,508,366
	Cost of service revenue		34,584			27,605			105,020			41,859
	General and administrative expenses		99,610			88,660			290,967			245,619
	Premium tax expenses		36,374			35,037			110,633			104,578
	Depreciation and amortization		13,430			11,954			38,587			33,234
	Total expenses		1,143,156			1,009,193			3,367,256			2,933,656
	Operating income		33,566			29,953			96,276			71,569
	Interest expense		4,380			4,600			11,666			12,056
	Income before income taxes		29,186			25,353			84,610			59,513
	Provision for income taxes		10,236			9,180			30,832			22,171
	Net income	$	18,950		$	16,173		$	53,778		$	37,342

	Net income per share⁽¹⁾:
	Basic	$	0.41		$	0.38		$	1.18		$	0.94
	Diluted	$	0.41		$	0.38		$	1.16		$	0.93
	Weighted average shares outstanding⁽¹⁾:
	Basic		45,834			42,177			45,693			39,767
	Diluted		46,296			42,546			46,334			40,203

	Operating Statistics:
	Ratio of medical care costs paid directly to providers to premium revenue		81.9	%		82.1	%		82.0	%		83.0	%
	Ratio of medical care costs not paid directly to providers to premium revenue		2.4	%		2.1	%		2.3	%		2.1	%
	Medical care ratio⁽²⁾		84.3	%		84.2	%		84.3	%		85.1	%
	General and administrative expense ratio⁽³⁾		8.5	%		8.5	%		8.4	%		8.2	%
	Premium tax ratio⁽²⁾		3.2	%		3.5	%		3.3	%		3.5	%
	Effective tax rate		35.1	%		36.2	%		36.4	%		37.3	%

⁽¹⁾	All applicable share and per share amounts reflect the retroactive effects of the three-for-two common stock split in the form of a stock dividend that was effective May 20, 2011.
⁽²⁾	Medical care ratio represents medical care costs as a percentage of premium revenue; premium tax ratio represents premium taxes as a percentage of premium revenue.
⁽³⁾	Computed as a percentage of total operating revenue.


	MOLINA HEALTHCARE, INC.
	UNAUDITED CONSOLIDATED BALANCE SHEETS
	(Amounts in thousands, except per share data)

		Sept, 30, 2011			Dec. 31, 2010
	ASSETS
	Current assets:
	Cash and cash equivalents	$	487,492		$	455,886
	Investments		324,902			295,375
	Receivables		180,039			168,190
	Income tax refundable		5,781		--
	Deferred income taxes		14,096			15,716
	Prepaid expenses and other current assets		22,285			22,772
	Total current assets		1,034,595			957,939
	Property and equipment, net		127,657			100,537
	Deferred contract costs		52,839			28,444
	Intangible assets, net		84,495			105,500
	Goodwill and indefinite-lived intangible assets		212,484			212,228
	Auction rate securities		18,112			20,449
	Restricted investments		50,494			42,100
	Receivable for ceded life and annuity contracts		23,696			24,649
	Other assets		13,932			17,368
		$	1,618,304		$	1,509,214

	LIABILITIES AND STOCKHOLDERS' EQUITY
	Current liabilities:
	Medical claims and benefits payable	$	361,055		$	354,356
	Accounts payable and accrued liabilities		141,688			137,930
	Deferred revenue		101,701			60,086
	Income taxes payable	--				13,176
	Total current liabilities		604,444			565,548
	Long-term debt		168,109			164,014
	Deferred income taxes		22,948			16,235
	Liability for ceded life and annuity contracts		23,696			24,649
	Other long-term liabilities		17,287			19,711
	Total liabilities		836,484			790,157
	Stockholders' equity^(1):
	Common stock, $0.001 par value; 80,000 shares authorized; outstanding: 45,690 shares at September 30,2011, and 45,463 shares at December 31, 2010		46			45
	Preferred stock, $0.001 par value; 20,000 shares authorized, no shares issued and outstanding	--			--
	Additional paid-in capital		260,166			251,612
	Accumulated other comprehensive loss		(1,762	)		(2,192	)
	Retained earnings		523,370			469,592
	Total stockholders' equity		781,820			719,057
		$	1,618,304		$	1,509,214

⁽¹⁾	All applicable share and per share amounts reflect the retroactive effects of the three-for-two common stock split in the form of a stock dividend that was effective May 20, 2011.


MOLINA HEALTHCARE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)

	Three Months Ended Sept. 30,						Nine Months Ended Sept. 30,
	2011			2010			2011			2010
Operating activities:
Net income	$	18,950		$	16,173		$	53,778		$	37,342
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		17,812			16,573			52,414			40,485
Deferred income taxes		10,908			3,839			8,069			4,463
Stock-based compensation		4,349			2,760			12,723			7,268
Non-cash interest on convertible senior notes		1,384			1,291			4,095			3,800
Amortization of premium/discount on investments		1,861			463			5,300			1,023
Amortization of deferred financing costs		1,444			591			2,451			1,278
Unrealized gain on trading securities	--				(1,310	)	--				(4,170	)
Loss on rights agreement	--				1,196		--				3,807
Tax deficiency from employee stock compensation		(158	)		(293	)		(647	)		(676	)
Changes in operating assets and liabilities:
Receivables		(7,365	)		(63,298	)		(11,789	)		(64,896	)
Prepaid expenses and other current assets		961			(2,559	)		(1,819	)		(7,707	)
Medical claims and benefits payable		19,442			4,263			6,699			33,347
Accounts payable and accrued liabilities		8,961			(12,827	)		246			15,131
Deferred revenue		(26,898	)		18,343			42,600			(64,337	)
Income taxes		11,386			(1,583	)		(18,957	)		3,327
Net cash provided by (used in) operating activities		40,265			(16,378	)		155,163			9,485
Investing activities:
Purchases of equipment		(15,055	)		(14,395	)		(45,921	)		(31,918	)
Purchases of investments		(74,562	)		(70,852	)		(258,209	)		(162,620	)
Sales and maturities of investments		104,979			67,334			226,413			184,170
Net cash acquired (paid) in business combinations	--				7,169			(3,253	)		(127,231	)
Increase in deferred contract costs		(16,360	)		(12,598	)		(32,765	)		(20,616	)
Increase in restricted investments		(164	)		(3,759	)		(8,394	)		(8,513	)
Change in other noncurrent assets and liabilities		(2,723	)		1,583			(533	)		2,340
Net cash used in investing activities		(3,885	)		(25,518	)		(122,662	)		(164,388	)
Financing activities:
Amount borrowed under credit facility	--			--			--				105,000
Proceeds from common stock offering, net of issuance costs	--				111,246		--				111,246
Repayment of amount borrowed under credit facility	--				(105,000	)	--				(105,000	)
Treasury stock purchases		(7,000	)	--				(7,000	)	--
Credit facility fees paid		(1,125	)	--				(1,125	)		(1,671	)
Proceeds from employee stock plans	--				319			5,640			1,862
Excess tax benefits from employee stock compensation		24			241			1,590			420
Net cash (used in) provided by financing activities		(8,101	)		6,806			(895	)		111,857
Net increase (decrease) in cash and cash equivalents		28,279			(35,090	)		31,606			(43,046	)
Cash and cash equivalents at beginning of period		459,213			461,545			455,886			469,501
Cash and cash equivalents at end of period	$	487,492		$	426,455		$	487,492		$	426,455

MOLINA HEALTHCARE, INC.
UNAUDITED DEPRECIATION AND AMORTIZATION DATA
(Dollar amounts in thousands)

Depreciation and amortization related to the Company's Health Plans segment is all recorded in "Depreciation and Amortization" in the consolidated statements of income. Depreciation and amortization related to the Molina Medicaid Solutions segment is recorded within three different headings in the consolidated statements of income as follows:

Amortization of purchased intangibles relating to customer relationships is reported as amortization within the heading "Depreciation and Amortization;"
Amortization of purchased intangibles relating to contract backlog is recorded as a reduction of "Service Revenue;" and
Depreciation is recorded within the heading "Cost of Service Revenue."

The following table presents all depreciation and amortization recorded in the Company's consolidated statements of income, regardless of whether the item appears as depreciation and amortization, a reduction of revenue, or as cost of service revenue.


	Three Months Ended Sept. 30,
	2011				2010
	Amount		% of Total Revenue		Amount		% of Total Revenue
Depreciation	$	8,234	0.7	%	$	6,840	0.6	%
Amortization of intangible assets		5,196	0.4			5,114	0.5
Depreciation and amortization reported as such in the consolidated statements of income		13,430	1.1			11,954	1.1
Amortization recorded as reduction of service revenue		1,545	0.1			2,655	0.3
Depreciation recorded as cost of service revenue		2,837	0.2			1,964	0.2
Total	$	17,812	1.4	%	$	16,573	1.6	%

	Nine Months Ended Sept. 30,
	2011				2010
	Amount		% of Total Revenue		Amount		% of Total Revenue
Depreciation	$	22,859	0.7	%	$	19,963	0.7	%
Amortization of intangible assets		15,728	0.5			13,271	0.4
Depreciation and amortization reported as such in the consolidated statements of income		38,587	1.2			33,234	1.1
Amortization recorded as reduction of service revenue		5,277	0.1			4,246	0.1
Depreciation recorded as cost of service revenue		8,550	0.2			3,005	0.1
Total	$	52,414	1.5	%	$	40,485	1.3	%


	MOLINA HEALTHCARE, INC.
	UNAUDITED MEMBERSHIP DATA

		Sept. 30, 2011	June 30, 2011	Dec. 31, 2010	Sept. 30, 2010
	Total Ending Membership by Health Plan:
	California	350,000	348,000	344,000	349,000
	Florida	67,000	66,000	61,000	57,000
	Michigan	217,000	220,000	227,000	225,000
	Missouri	78,000	80,000	81,000	79,000
	New Mexico	89,000	89,000	91,000	91,000
	Ohio	256,000	245,000	245,000	241,000
	Texas	148,000	129,000	94,000	96,000
	Utah	82,000	82,000	79,000	78,000
	Washington	350,000	345,000	355,000	353,000
	Wisconsin⁽¹⁾	41,000	41,000	36,000	28,000
	Total	1,678,000	1,645,000	1,613,000	1,597,000

	Total Ending Membership by State for our Medicare Advantage Plans⁽¹⁾:

	California	6,500	6,000	4,900	4,300
	Florida	700	600	500	500
	Michigan	7,600	7,100	6,300	5,700
	New Mexico	800	700	600	600
	Ohio	100	200	--	--
	Texas	600	600	700	600
	Utah	7,400	7,000	8,900	8,600
	Washington	4,500	4,000	2,600	2,300
	Total	28,200	26,200	24,500	22,600

	Total Ending Membership by State for our Aged, Blind or Disabled Population:

	California	23,700	17,000	13,900	13,500
	Florida	10,400	10,300	10,000	9,500
	Michigan	31,600	31,600	31,700	31,400
	New Mexico	5,600	5,600	5,700	5,700
	Ohio	29,900	28,700	28,200	27,900
	Texas	61,800	52,000	19,000	18,900
	Utah	8,300	8,300	8,000	7,900
	Washington	4,700	4,400	4,000	3,700
	Wisconsin⁽¹⁾	1,700	1,700	1,700	1,700
	Total	177,700	159,600	122,200	120,200

⁽¹⁾	Molina acquired the Wisconsin health plan on September 1, 2010. As of September 30, 2011, the Wisconsin health plan had approximately 2,200 Medicare Advantage members covered under a reinsurance contract with a thirdparty; these members are not included in the membership tables herein.


	MOLINA HEALTHCARE, INC.
	UNAUDITED SELECTED FINANCIAL DATA BY HEALTH PLAN
	(Amounts in thousands, except per-member-per-month amounts)

		Three Months Ended Sept. 30, 2011
		Member Months⁽¹⁾	Premium Revenue				Medical Care Costs				Medical Care Ratio		Premium Tax Expense
		Member Months⁽¹⁾	Total		PMPM		Total		PMPM		Medical Care Ratio		Premium Tax Expense
	California	1,049	$	144,888	$	138.11	$	128,596	$	122.58	88.8	%	$	1,114
	Florida	199		51,569		258.96		46,009		231.04	89.2			(17	)
	Michigan	656		165,636		252.46		135,899		207.13	82.0			9,644
	Missouri	234		58,196		248.80		45,428		194.22	78.1		--
	New Mexico	267		79,644		297.82		67,043		250.70	84.2			2,084
	Ohio	745		232,616		312.55		182,363		245.02	78.4			18,072
	Texas	414		105,577		255.25		98,954		239.24	93.7			1,613
	Utah	243		69,763		286.47		55,293		227.05	79.3		--
	Washington	1,043		211,131		202.49		174,912		167.76	82.8			3,776
	Wisconsin⁽²⁾	123		17,269		139.95		13,656		110.67	79.1		--
	Other⁽³⁾	--		1,941	--			11,005	--		--			88
		4,973	$	1,138,230	$	228.88	$	959,158	$	192.87	84.3	%	$	36,374

		Three Months Ended Sept. 30, 2010
		Member Months⁽¹⁾	Premium Revenue				Medical Care Costs				Medical Care Ratio		Premium Tax Expense
		Member Months⁽¹⁾	Total		PMPM		Total		PMPM		Medical Care Ratio		Premium Tax Expense
	California	1,046	$	128,350	$	122.75	$	103,002	$	98.51	80.3	%	$	1,888
	Florida	169		43,485		256.25		42,258		249.02	97.2			(14	)
	Michigan	675		156,609		232.05		134,238		198.90	85.7			9,655
	Missouri	236		52,952		224.63		45,930		194.84	86.7		--
	New Mexico	274		93,602		341.38		78,121		284.92	83.5			2,170
	Ohio	715		210,651		294.55		171,051		239.18	81.2			16,734
	Texas	180		48,188		267.95		43,129		239.82	89.5			861
	Utah	234		67,566		289.28		57,381		245.67	84.9		--
	Washington	1,051		195,578		186.03		155,307		147.73	79.4			3,622
	Wisconsin⁽²⁾	28		6,310		224.18		6,154		218.65	97.5		--
	Other⁽³⁾	--		1,824	--			9,366	--		--			121
		4,608	$	1,005,115	$	218.12	$	845,937	$	183.58	84.2	%	$	35,037

⁽¹⁾	A member month is defined as the aggregate of each month's ending membership for the period presented.
⁽²⁾	Molina acquired the Wisconsin health plan on September 1, 2010.
⁽³⁾	"Other" medical care costs also include medically related administrative costs at the parent company.


	MOLINA HEALTHCARE, INC.
	UNAUDITED SELECTED FINANCIAL DATA BY HEALTH PLAN
	(Amounts in thousands, except per-member-per-month amounts)

		Nine Months Ended Sept. 30, 2011
		Member Months⁽¹⁾	Premium Revenue				Medical Care Costs				Medical Care Ratio		Premium Tax Expense
		Member Months⁽¹⁾	Total		PMPM		Total		PMPM		Medical Care Ratio		Premium Tax Expense
	California	3,133	$	418,961	$	133.71	$	359,844	$	114.84	85.9	%	$	4,937
	Florida	588		150,561		256.13		141,872		241.35	94.2			34
	Michigan	2,002		495,971		247.70		399,952		199.75	80.6			29,219
	Missouri	722		169,988		235.45		148,135		205.18	87.1		--
	New Mexico	808		246,223		304.71		205,659		254.51	83.5			6,472
	Ohio	2,218		693,829		312.86		533,216		240.44	76.9			53,629
	Texas	1,154		290,787		252.06		271,723		235.54	93.4			5,016
	Utah	723		215,205		297.62		167,605		231.79	77.9		--
	Washington	3,104		608,998		196.25		515,769		166.20	84.7			11,099
	Wisconsin⁽²⁾	364		51,526		141.42		47,450		130.23	92.1			44
	Other⁽³⁾	--		6,389	--			30,824	--		--			183
		14,816	$	3,348,438	$	226.01	$	2,822,049	$	190.48	84.3	%	$	110,633

		Nine Months Ended Sept. 30, 2010
		Member Months⁽¹⁾	Premium Revenue				Medical Care Costs				Medical Care Ratio		Premium Tax Expense
		Member Months⁽¹⁾	Total		PMPM		Total		PMPM		Medical Care Ratio		Premium Tax Expense
	California	3,158	$	376,811	$	119.32	$	316,569	$	100.24	84.0	%	$	5,153
	Florida	483		124,035		256.70		116,079		240.23	93.6			(2	)
	Michigan	2,029		468,723		230.98		395,450		194.87	84.4			29,305
	Missouri	704		156,874		222.83		135,766		192.85	86.5		--
	New Mexico	834		281,149		336.93		225,346		270.06	80.2			7,161
	Ohio	2,083		641,683		308.11		517,951		248.70	80.7			50,251
	Texas	426		130,881		307.51		114,593		269.24	87.6			2,247
	Utah	685		191,040		278.99		179,816		262.60	94.1		--
	Washington	3,080		562,836		182.75		473,609		153.78	84.2			10,278
	Wisconsin⁽²⁾	28		6,310		224.18		6,154		218.65	97.5		--
	Other⁽³⁾	--		6,678	--			27,033	--		--			185
		13,510	$	2,947,020	$	218.14	$	2,508,366	$	185.67	85.1	%	$	104,578

⁽¹⁾	A member month is defined as the aggregate of each month's ending membership for the period presented.
⁽²⁾	Molina acquired the Wisconsin health plan on September 1, 2010.
⁽³⁾	"Other" medical care costs also include medically related administrative costs of the parent company.


MOLINA HEALTHCARE, INC.
UNAUDITED SELECTED FINANCIAL DATA
(Amounts in thousands, except per-member-per-month amounts)

The following tables provide the details of the Company's medical care costs for the periods indicated:

	Three Months Ended Sept. 30,
	2011						2010
	Amount		PMPM		% of Total		Amount		PMPM		% of Total
Fee-for-service	$	698,995	$	140.55	72.9	%	$	601,836	$	130.60		71.1	%
Capitation		129,315		26.00	13.5			136,425		29.61		16.1
Pharmacy		89,191		17.93	9.3			76,049		16.50		9.0
Other		41,657		8.39	4.3			31,627		6.87		3.8
Total	$	959,158	$	192.87	100.0	%	$	845,937	$	183.58		100.0	%

	Nine Months Ended Sept. 30,
	2011						2010
	Amount		PMPM		% of Total		Amount		PMPM		% of Total
Fee-for-service	$	2,050,430	$	138.40	72.7	%	$	1,763,675	$	130.55		70.3	%
Capitation		383,955		25.92	13.6			410,321		30.37		16.4
Pharmacy		268,637		18.13	9.5			241,290		17.86		9.6
Other		119,027		8.03	4.2			93,080		6.89		3.7
Total	$	2,822,049	$	190.48	100.0	%	$	2,508,366	$	185.67		100.0	%


The following table provides the details of the Company's medical claims and benefits payable as of the dates indicated:

							Sept. 30, 2011		Dec. 31, 2010		Sept. 30, 2010
Fee-for-service claims incurred but not paid (IBNP)							$	283,160	$	275,259	$	271,285
Capitation payable								49,259		49,598		53,410
Pharmacy								16,615		14,649		14,663
Other								12,021		14,850		13,982
							$	361,055	$	354,356	$	353,340

MOLINA HEALTHCARE, INC.
CHANGE IN MEDICAL CLAIMS AND BENEFITS PAYABLE
(Dollars in thousands, except per member amounts)
(Unaudited)

The Company's claims liability includes an allowance for adverse claims development based on historical experience and other factors including, but not limited to, variations in claims payment patterns, changes in utilization and cost trends, known outbreaks of disease, and large claims. The Company's reserving methodology is consistently applied across all periods presented. The negative amounts displayed for "Components of medical care costs related to: Prior periods" represent the amount by which the Company's original estimate of claims and benefits payable at the beginning of the period exceeding the actual amount of the liability based on information (principally the payment of claims) developed since that liability was first reported. The following table shows the components of the change in medical claims and benefits payable as of the periods indicated:


	Nine Months Ended Sept. 30,						Six Months Ended June 30, 2011			Year Ended Dec. 31, 2010
	2011			2010			Six Months Ended June 30, 2011			Year Ended Dec. 31, 2010
Balances at beginning of period	$	354,356		$	315,316		$	354,356		$	315,316
Balance of acquired subsidiary	--			--			--				3,228
Components of medical care costs related to:
Current period		2,871,515			2,554,579			1,908,289			3,420,235
Prior periods		(49,466	)		(46,213	)		(45,398	)		(49,378	)
Total medical care costs		2,822,049			2,508,366			1,862,891			3,370,857
Payments for medical care costs related to:
Current period		2,522,374			2,219,896			1,584,636			3,085,388
Prior periods		292,976			250,446			290,998			249,657
Total paid		2,815,350			2,470,342			1,875,634			3,335,045
Balances at end of period	$	361,055		$	353,340		$	341,613		$	354,356
Benefit from prior period as a percentage of:
Balance at beginning of period		14.0	%		14.7	%		12.8	%		15.7	%
Premium revenue		1.5	%		1.6	%		2.1	%		1.2	%
Total medical care costs		1.8	%		1.8	%		2.4	%		1.5	%
Claims Data:
Days in claims payable, fee-for-service		39			42			39			42
Number of members at end of period		1,678,000			1,597,000			1,645,000			1,613,000
Number of claims in inventory at end of period		132,200			110,200			121,900			143,600
Billed charges of claims in inventory at end of period	$	187,000		$	158,900		$	205,800		$	218,900
Claims in inventory per member at end of period		0.08			0.07			0.07			0.09
Billed charges of claims in inventory per member at end of period	$	111.44		$	99.50		$	125.11		$	135.71
Number of claims received during the period		12,864,800			10,701,900			8,715,200			14,554,800
Billed charges of claims received during the period	$	10,573,900		$	8,615,500		$	6,963,300		$	11,686,100

SOURCE: Molina Healthcare, Inc.

Molina Healthcare, Inc.
Investor Relations:
Juan José Orellana, 562-435-3666, ext. 111143

News Release

Molina Healthcare Reports Third Quarter 2011 Results