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Press release from Business Wire

Molina Healthcare Reports Third Quarter 2012 Results

Tuesday, October 23, 2012

Molina Healthcare Reports Third Quarter 2012 Results16:00 EDT Tuesday, October 23, 2012 LONG BEACH, Calif. (Business Wire) -- Molina Healthcare, Inc. (NYSE: MOH): Earnings per diluted share for third quarter 2012 of $0.07, down from $0.41 in 2011 Quarterly premium revenues of $1.5 billion, up 31% over 2011 Aggregate membership up 9% over 2011 Year to date cash provided by operating activities up $109 million over 2011 Molina Healthcare, Inc. (NYSE: MOH) today reported its financial results for the third quarter and nine months ended September 30, 2012. Net income for the quarter was $3.4 million, or $0.07 per diluted share, compared with net income of $19.0 million, or $0.41 per diluted share, for the quarter ended September 30, 2011. “Our third quarter results demonstrate the tremendous opportunities we have before us,” said J. Mario Molina, M.D., chief executive officer of Molina Healthcare, Inc. “The growth in our Washington revenue in the third quarter was more than enough to replace the revenue we lost as a result of the termination of our contract in Missouri. The developments in Washington are an example of the growth that is happening in our industry even without the impetus of federal legislation. I am also pleased with the rapid turnaround at our Texas health plan, where we have made remarkable progress in the last three months.” Overview of Financial Results The Company's financial performance in the third quarter of 2012 improved substantially over the second quarter of 2012 due to a significant improvement in the profitability of its Texas health plan. Revenue was consistent between the second and third quarters of 2012 as a 30% increase in revenue at the Washington health plan offset both the termination of the Company's Missouri enrollment and the slight decline in Texas enrollment. Health Plans Segment ResultsPremium Revenue Premium revenue for the third quarter of 2012 increased 31% over the third quarter of 2011, primarily due to an increase in membership, a shift in member mix to populations generating higher premium revenue per member per month (PMPM), and benefit expansions. Membership at the Texas health plan nearly doubled year over year, while also growing significantly in Ohio and Washington. Growth in the Company's aged, blind or disabled, or ABD, membership led to higher premium revenue PMPM in 2012. ABD membership, as a percent of total membership, has increased approximately 37% year over year. Premium revenue PMPM also increased in the third quarter of 2012 as a result of the inclusion of revenue from the pharmacy benefit for the Ohio health plan effective October 1, 2011, and as a result of the inclusion of revenue from the inpatient facility and pharmacy benefits across all of the Texas health plan's membership effective March 1, 2012. Medical Care Costs Medical care costs increased in the third quarter of 2012 primarily due to the same shifts in member mix and the benefit expansions that led to increased premium revenue. Medical care costs as a percentage of premium revenue (the medical care ratio) also increased in the third quarter of 2012 when compared with the third quarter of 2011 because increases in premium rates have not kept pace with increases in medical costs. Individual Health Plan Analysis The Texas health plan's financial performance improved dramatically in the third quarter from the second quarter of 2012. The medical care ratio of the Texas health plan was 90% in the third quarter of 2012 compared with 109% in the second quarter of 2012 and 94% in the third quarter of 2011. The medical care ratio for the Texas health plan's ABD membership declined to 94% in the third quarter of 2012 from 119% in the second quarter. The Company received a blended rate increase in Texas of approximately 4%, or $4.5 million per month, effective September 1, 2012. The loss before taxes at the Texas health plan was approximately $5 million for the third quarter of 2012, compared with approximately $68 million for the second quarter of 2012 (which included a premium deficiency reserve charge of $10 million). The Company has previously discussed at length the steps it is taking to bring the Texas health plan to profitability. The Company confirms its previously disclosed expectation that the Texas health plan will be operating at financial break even on a go forward basis by December of 2012. The medical care ratio at the California health plan increased to 96% in the third quarter of 2012 from 89% in the third quarter of 2011. The higher medical care ratio was primarily the result of a shift in member mix to include more ABD members. The medical care ratio for the California health plan's ABD membership was 110% in the third quarter of 2012, 100% for the nine months ended September 30, 2012, and 84% for the third quarter of 2011. The California Department of Health Care Services has recently solicited health plan input as to whether to conduct a review of the adequacy of ABD premium rates in California. The Company's California health plan, which believes the ABD premium rates to be inadequate, has provided input supporting such a review. During the fourth quarter of 2012, the Company intends to exit an unprofitable service area in California, reducing enrollment by approximately 6,000 members. The addition of ABD members to the Washington health plan effective July 1, 2012, increased its medical care ratio to 86% in the third quarter of 2012 compared with 83% in the third quarter of 2011. The higher premium revenue PMPM associated with the ABD membership, however, offset the increased medical care ratio, so that income from operations was consistent between the third quarters of 2012 and 2011. The medical care ratio for the Washington health plan's new ABD membership was 93% in the third quarter of 2012. Molina Medicaid Solutions Segment Results Performance of the Molina Medicaid Solutions segment was as follows:     Three Months EndedSeptember 30,       Nine Months EndedSeptember 30,2012   20112012   2011(In thousands) Service revenue before amortization $ 48,958 $ 39,273 $ 133,193 $ 116,567 Amortization recorded as reduction of service revenue   (536 )   (1,545 )   (842 )   (5,277 ) Service revenue 48,422 37,728 132,351 111,290 Cost of service revenue 37,004 34,584 98,111 105,020 General and administrative costs 1,980 2,069 7,187 6,421 Amortization of customer relationship intangibles recorded as amortization   1,282     1,282     3,846     3,846   Operating income (loss) $ 8,156   $ (207 ) $ 23,207   $ (3,997 )   Operating income for the Company's Molina Medicaid Solutions segment improved $8 million and $27 million for the three months and nine months ended September 30, 2012, respectively. This improvement was primarily the result of stabilization of the Company's newest Medicaid Management Information Systems, or MMIS, in Idaho and Maine. For the quarter ended September 30, 2012, the Molina Medicaid Solutions segment gross profit margin rate was 24%, compared with 12% for the Health Plans segment. Cash Flow Cash provided by operating activities was $264 million for the nine months ended September 30, 2012, compared with $155 million for the nine months ended September 30, 2011. Higher medical claims and benefits payable at our Texas health plan was the primary reason for the increase, followed by an increase in deferred revenue. The increases in medical claims and benefits payable and deferred revenue were offset by the decline in year to date net income. At September 30, 2012, the Company had cash and investments of $1.1 billion, and the parent company had cash and investments of $41 million.           Reconciliation of Non-GAAP (1) to GAAP Financial MeasuresEBITDA (2)   Three Months EndedSeptember 30,Nine Months EndedSeptember 30,2012   20112012   2011(In thousands) Net income (loss) $ 3,364 $ 18,950 $ (15,853 ) $ 53,778 Add back: Depreciation and amortization reported in the consolidated statements of cash flows 20,279 17,812 58,289 52,414 Interest expense 4,315 4,380 12,421 11,666 Income tax (benefit) expense   (492 )   10,236   (15,228 )   30,832 EBITDA $ 27,466   $ 51,378 $ 39,629   $ 148,690 (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 the Company's industry. 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 23, 2012. The number to call for the interactive teleconference is (212) 231-2900. A telephonic replay of the conference call will be available from 7:00 p.m. Eastern time on Tuesday, October 23, 2012, through 6:00 p.m. on Wednesday, October 24, 2012, by dialing (800) 633-8284 and entering confirmation number 21602734. 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., a FORTUNE 500 company, 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, New Mexico, Ohio, Texas, Utah, Washington, and Wisconsin currently serve approximately 1.8 million members, and its 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, and anticipated future events.Actual results could differ materially due to numerous known and unknown risks and uncertainties, including, without limitation, risk factors related to the following:the effectiveness of our medical cost containment initiatives in Texas;significant budget pressures on state governments and their potential inability to maintain current rates, to implement expected rate increases, or to maintain existing benefit packages or membership eligibility thresholds or criteria;uncertainties regarding the implementation of the Patient Protection and Affordable Care Act, including the potential refusal of a state to expand Medicaid eligibility to its uninsured population, issues surrounding state insurance exchanges, the impact of the health insurance industry excise tax, the effect of various implementing regulations, and uncertainties regarding the impact of other federal or state health care and insurance reform measures;management of the Company's medical costs, including seasonal flu patterns and rates of utilization that are consistent with the Company's expectations, and the reduction over time of the high medical costs associated with new populations;the success of the Company's 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 the pending RFP in New Mexico, and the Company's ability to grow the Company's revenues consistent with the Company's expectations;the accurate estimation of incurred but not reported medical costs across the Company's health plans;risks associated with the continued growth in new Medicaid and Medicare enrollees, and the development of actuarially sound rates with respect to such new enrollees, including dually eligible enrollees;retroactive adjustments to premium revenue or accounting estimates which require adjustment based upon subsequent developments, including Medicaid pharmaceutical rebates;the continuation and renewal of the government contracts of both the Company's 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 or Idaho;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 or Idaho;government audits and reviews, and any enrollment freeze or monitoring program that may result therefrom;changes with respect to the Company's provider contracts and the loss of providers;the establishment of a federal or state medical cost expenditure floor as a percentage of the premiums we receive, and the interpretation and implementation of medical cost expenditure floors, 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;approval by state regulators of dividends and distributions by the Company's health plan subsidiaries;changes in funding under the Company's 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;restrictions and covenants in the Company's credit facility;the relatively small number of states in which we operate health plans;the availability of financing to fund and capitalize the Company's acquisitions and start-up activities and to meet the Company's liquidity needs;a state's failure to renew its federal Medicaid waiver;an inadvertent unauthorized disclosure of protected health information;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;increasing consolidation in the Medicaid industry;and numerous other risk factors, including those discussed in the Company's periodic reports and filings with the Securities and Exchange Commission.These reports can be accessed under the investor relations tab of the Company's website or on the SEC's website at www.sec.gov.Given these risks and uncertainties, we can give no assurances that the Company's forward-looking statements will prove to be accurate, or that any other results or events projected or contemplated by the Company's 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 the Company's judgment as of October 23, 2012, and we disclaim any obligation to update any forward-looking statements to conform the statement to actual results or changes in the Company's expectations.           MOLINA HEALTHCARE, INC.UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS   Three Months EndedSeptember 30,Nine Months EndedSeptember 30,2012   20112012   2011(Amounts in thousands, exceptnet income (loss) per share)Revenue: Premium revenue $ 1,488,718 $ 1,138,230 $ 4,308,439 $ 3,348,438 Service revenue 48,422 37,728 132,351 111,290 Investment income 1,171 764 3,996 3,804 Rental income   1,879     –     5,408     –   Total revenue   1,540,190     1,176,722     4,450,194     3,463,532   Expenses: Medical care costs 1,314,571 959,158 3,823,136 2,822,049 Cost of service revenue 37,004 34,584 98,111 105,020 General and administrative expenses 127,500 99,610 379,208 290,967 Premium tax expenses 37,894 36,374 120,953 110,633 Depreciation and amortization   16,034     13,430     47,446     38,587   Total expenses   1,533,003     1,143,156     4,468,854     3,367,256   Operating income (loss) 7,187 33,566 (18,660 ) 96,276 Interest expense   4,315     4,380     12,421     11,666   Income (loss) before income taxes 2,872 29,186 (31,081 ) 84,610 Income tax (benefit) expense   (492 )   10,236     (15,228 )   30,832   Net income (loss) $ 3,364   $ 18,950   $ (15,853 ) $ 53,778     Net income (loss) per share: Basic $ 0.07   $ 0.41   $ (0.34 ) $ 1.18   Diluted $ 0.07   $ 0.41   $ (0.34 ) $ 1.16   Weighted average shares outstanding: Basic   46,546     45,834     46,301     45,693   Diluted   46,880     46,296     46,301     46,334     Operating Statistics: Ratio of medical care costs paid directly to providers to premium revenue 86.1 % 81.9 % 86.5 % 82.0 % Ratio of medical care costs not paid directly to providers to premium revenue   2.2     2.4     2.2     2.3   Medical care ratio (1)   88.3 %   84.3 %   88.7 %   84.3 % General and administrative expense ratio (2) 8.3 % 8.5 % 8.5 % 8.4 % Premium tax ratio (1) 2.5 % 3.2 % 2.8 % 3.3 % Effective tax rate (17.1 %) 35.1 % 49.0 % 36.4 %   (1) 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. (2) Computed as a percentage of total operating revenue.       MOLINA HEALTHCARE, INC.UNAUDITED CONSOLIDATED BALANCE SHEETS   Sept. 30,2012Dec. 31,2011(Amounts in thousands,except per share data)ASSETSCurrent assets: Cash and cash equivalents $ 715,480 $ 493,827 Investments 356,895 336,916 Receivables 156,909 167,898 Income tax refundable 33,530 11,679 Deferred income taxes 21,533 18,327 Prepaid expenses and other current assets   30,002     19,435   Total current assets 1,314,349 1,048,082 Property, equipment, and capitalized software, net 210,972 190,934 Deferred contract costs 67,516 54,582 Intangible assets, net 85,033 101,796 Goodwill and indefinite-lived intangible assets 151,088 153,954 Auction rate securities 13,523 16,134 Restricted investments 44,488 46,164 Receivable for ceded life and annuity contracts – 23,401 Other assets   20,098     17,099   $ 1,907,067   $ 1,652,146     LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities: Medical claims and benefits payable $ 536,463 $ 402,476 Accounts payable and accrued liabilities 151,029 147,214 Deferred revenue 143,301 50,947 Current maturities of long-term debt   1,143     1,197   Total current liabilities 831,936 601,834 Long-term debt 260,551 216,929 Deferred income taxes 37,478 33,127 Liability for ceded life and annuity contracts – 23,401 Other long-term liabilities   22,101     21,782   Total liabilities   1,152,066     897,073   Stockholders' equity: Common stock, $0.001 par value; 80,000 shares authorized; outstanding: 46,571 shares at September 30, 2012 and 45,815 shares at December 31, 2011 46 46 Preferred stock, $0.001 par value; 20,000 shares authorized, no shares issued and outstanding – – Additional paid-in capital 280,728 266,022 Accumulated other comprehensive loss (330 ) (1,405 ) Retained earnings   474,557     490,410   Total stockholders' equity   755,001     755,073   $ 1,907,067   $ 1,652,146             MOLINA HEALTHCARE, INC.UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS   Three Months EndedSeptember 30,Nine Months EndedSeptember 30,2012   20112012   2011(Amounts in thousands)Operating activities: Net income (loss) $ 3,364 $ 18,950 $ (15,853 ) $ 53,778 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 20,279 17,812 58,289 52,414 Deferred income taxes 1,787 10,908 1,166 8,069 Stock-based compensation 5,636 4,349 15,448 12,723 Gain on sale of subsidiary – – (2,390 ) – Non-cash interest on convertible senior notes 1,499 1,384 4,414 4,095 Change in fair value of interest rate swap 184 – 1,270 – Amortization of premium/discount on investments 1,551 1,861 5,166 5,300 Amortization of deferred financing costs 310 1,444 825 2,451 Tax deficiency from employee stock compensation (109 ) (158 ) (159 ) (647 ) Changes in operating assets and liabilities: Receivables 4,098 (21,588 ) 10,989 5,411 Prepaid expenses and other current assets (222 ) 961 (10,574 ) (1,819 ) Medical claims and benefits payable 10,925 19,442 133,987 6,699 Accounts payable and accrued liabilities 13,952 8,961 (9,030 ) 246 Deferred revenue (33,072 ) (12,675 ) 92,354 25,400 Income taxes   (2,141 )   (11,386 )   (21,878 )   (18,957 ) Net cash provided by operating activities   28,041     40,265     264,024     155,163     Investing activities: Purchases of equipment (19,247 ) (15,055 ) (52,548 ) (45,921 ) Purchases of investments (90,117 ) (74,562 ) (234,465 ) (258,209 ) Sales and maturities of investments 76,893 104,979 213,665 226,413 Proceeds from sale of subsidiary, net of cash surrendered – – 9,162 – Net cash paid in business combinations – – – (3,253 ) Increase in deferred contract costs 4,256 (16,360 ) (18,799 ) (32,765 ) Increase in restricted investments (880 ) (164 ) (3,034 ) (8,394 ) Change in other noncurrent assets and liabilities   (392 )   (2,723 )   (4,775 )   (533 ) Net cash used in investing activities   (29,487 )   (3,885 )   (90,794 )   (122,662 )   Financing activities: Amounts borrowed under credit facility – – 60,000 – Repayment of amounts borrowed under credit facility (10,000 ) – (20,000 ) – Treasury stock purchases – (7,000 ) – (7,000 ) Credit facility fees paid – (1,125 ) – (1,125 ) Principal payments on term loan (273 ) – (846 ) – Proceeds from employee stock plans 86 – 5,571 5,640 Excess tax benefits from employee stock compensation   21     24     3,698     1,590   Net cash (used in) provided by financing activities   (10,166 )   (8,101 )   48,423     (895 ) Net increase in cash and cash equivalents (11,612 ) 28,279 221,653 31,606 Cash and cash equivalents at beginning of period   727,092     459,213     493,827     455,886   Cash and cash equivalents at end of period $ 715,480   $ 487,492   $ 715,480   $ 487,492     MOLINA HEALTHCARE, INC.UNAUDITED DEPRECIATION AND AMORTIZATION DATA Depreciation and amortization related to the Company's Health Plans segment is all recorded in “Depreciation and Amortization” in the consolidated statements of operations. Depreciation and amortization related to the Company's Molina Medicaid Solutions segment is recorded within three different headings in the consolidated statements of operations 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 operations, regardless of whether the item appears as depreciation and amortization, a reduction of revenue, or as cost of service revenue.     Three Months Ended September 30,2012       2011   Amount   % of TotalRevenueAmount   % of TotalRevenue(Dollar amounts in thousands) Depreciation and amortization of capitalized software $ 11,201 0.7 % $ 8,234 0.7 % Amortization of intangible assets   4,833 0.3     5,196 0.4   Depreciation and amortization reported as such in the consolidated statements of operations 16,034 1.0 13,430 1.1 Amortization recorded as reduction of service revenue 536 0.1 1,545 0.1 Amortization of capitalized software recorded as cost of service revenue   3,709 0.2     2,837 0.2   Total $ 20,279 1.3 % $ 17,812 1.4 %     Nine Months Ended September 30,2012   2011   Amount% of TotalRevenueAmount% of TotalRevenue(Dollar amounts in thousands) Depreciation, and amortization of capitalized software $ 31,524 0.7 % $ 22,859 0.7 % Amortization of intangible assets   15,922 0.4     15,728 0.5   Depreciation and amortization reported as such in the consolidated statements of operations 47,446 1.1 38,587 1.2 Amortization recorded as reduction of service revenue 842 - 5,277 0.1 Amortization of capitalized software recorded as cost of service revenue   10,001 0.2     8,550 0.2   Total $ 58,289 1.3 % $ 52,414 1.5 %           MOLINA HEALTHCARE, INC.UNAUDITED MEMBERSHIP DATA   Sept. 30,2012June 30,2012Dec. 31,2011Sept. 30,2011Total Ending Membership by Health Plan: California 346,000 350,000 355,000 350,000 Florida 71,000 70,000 69,000 67,000 Michigan 219,000 220,000 222,000 217,000 Missouri (1) ― 79,000 79,000 78,000 New Mexico 90,000 89,000 88,000 89,000 Ohio 272,000 260,000 248,000 256,000 Texas 291,000 301,000 155,000 148,000 Utah 85,000 86,000 84,000 82,000 Washington 411,000 356,000 355,000 350,000 Wisconsin 41,000 42,000 42,000 41,000 Total 1,826,000 1,853,000 1,697,000 1,678,000   Total Ending Membership by State for the Medicare Advantage Plans: California 7,300 7,000 6,900 6,500 Florida 900 900 800 700 Michigan 9,300 8,900 8,200 7,600 New Mexico 900 900 800 800 Ohio 200 200 200 100 Texas 1,100 800 700 600 Utah 8,300 8,300 8,400 7,400 Washington 6,100 5,700 5,000 4,500 Total 34,100 32,700 31,000 28,200   Total Ending Membership by State for the Aged, Blind or Disabled Population: California 44,100 41,100 31,500 23,700 Florida 10,300 10,400 10,400 10,400 Michigan 40,700 40,000 37,500 31,600 New Mexico 5,600 5,600 5,600 5,600 Ohio 29,000 29,600 29,100 29,900 Texas 101,300 111,000 63,700 61,800 Utah 8,900 8,800 8,500 8,300 Washington 23,400 4,400 4,800 4,700 Wisconsin 1,600 1,700 1,700 1,700 Total 264,900 252,600 192,800 177,700   (1) The Company's contract with the state of Missouri expired without renewal on June 30, 2012.     MOLINA HEALTHCARE, INC.UNAUDITED SELECTED FINANCIAL DATA BY HEALTH PLAN (Amounts in thousands except per member per month amounts)   Three Months Ended September 30, 2012   MemberMonths (1)   Premium Revenue   Medical Care Costs   MedicalCareRatio(MCR)Premium TaxExpenseMCR Excluding Premium Tax Expense (4)Total   PMPMTotal   PMPM     California 1,041 $ 162,389 $ 156.00 $ 156,106 $ 149.96 96.1 % $ ― 96.1 % Florida 214 57,429 268.56 48,250 225.64 84.0 (5 ) 84.0 Michigan 656 160,637 244.91 143,513 218.80 89.3 1,046 89.9 Missouri (2) ― ― ― ― ― ― ―     ― New Mexico 269 84,797 315.49 73,721 274.28 86.9 1,761 88.8 Ohio 805 306,314 380.20 253,447 314.58 82.7 23,824 89.7 Texas 890 350,810 394.10 316,716 355.80 90.3 6,289 91.9 Utah 256 73,484 287.21 62,630 244.79 85.2 ― 85.2 Washington 1,217 274,079 225.29 236,928 194.76 86.4 4,888 88.0 Wisconsin 124 16,279 131.21 15,217 122.65 93.5 ― 93.5 Other (3) ― 2,500 ―   8,043 ― ―   91   ― 5,472 $ 1,488,718 $ 272.08 $ 1,314,571 $ 240.25 88.3 % $ 37,894   90.6 %     Three Months Ended September 30, 2011   MemberMonths (1)Premium RevenueMedical Care CostsMedicalCare Ratio (MCR)Premium TaxExpenseMCR Excluding Premium Tax Expense (4)Total   PMPMTotalPMPM   California 1,049 $ 144,888 $ 138.11 $ 128,596 $ 122.58 88.8 % $ 1,114 89.4 % Florida 199 51,569 258.96 46,009 231.04 89.2 (17 ) 89.2 Michigan 656 165,636 252.46 135,899 207.13 82.0 9,644 87.1 Missouri (2) 234 58,196 248.80 45,428 194.22 78.1 ― 78.1 New Mexico 267 79,644 297.82 67,043 250.70 84.2 2,084 86.4 Ohio 745 232,616 312.55 182,363 245.02 78.4 18,072 85.0 Texas 414 105,577 255.25 98,954 239.24 93.7 1,613 95.2 Utah 243 69,763 286.47 55,293 227.05 79.3 ― 79.3 Washington 1,043 211,131 202.49 174,912 167.76 82.8 3,776 84.4 Wisconsin 123 17,269 139.95 13,656 110.67 79.1 ― 79.1 Other (3) ―   1,941 ―   11,005 ― ―     88 ― 4,973 $ 1,138,230 $ 228.88 $ 959,158 $ 192.87 84.3 % $ 36,374 87.0 %   (1) A member month is defined as the aggregate of each month's ending membership for the period presented. (2) The Company's contract with the state of Missouri expired without renewal on June 30, 2012. The Missouri health plan's claims run-out activity subsequent to June 30, 2012, is reported in “Other.” (3) “Other” medical care costs also include medically related administrative costs at the parent company. (4) The MCR Excluding Premium Tax Expense represents medical costs as a percentage of premium revenues, where premium revenue is reduced by premium tax expense.     MOLINA HEALTHCARE, INC.UNAUDITED SELECTED FINANCIAL DATA BY HEALTH PLAN (Amounts in thousands except per member per month amounts)   Nine Months Ended September 30, 2012   MemberMonths (1)   Premium Revenue   Medical Care Costs   MedicalCare Ratio (MCR)   Premium TaxExpense   MCR Excluding Premium Tax Expense (4)Total   PMPMTotal   PMPM       California 3,156 $ 491,718 $ 155.80 $ 446,694 $ 141.53 90.8 % $ 5,004 91.8 % Florida 632 170,922 270.47 146,261 231.44 85.6 (18 ) 85.6 Michigan 1,983 491,301 247.78 419,406 211.52 85.4 11,203 87.4 Missouri (2) 483 113,818 235.63 113,101 234.15 99.4 ― 99.4 New Mexico 801 253,418 316.56 208,668 260.66 82.3 5,971 84.3 Ohio 2,313 896,908 387.74 735,432 317.93 82.0 69,689 88.9 Texas 2,389 908,532 380.30 890,042 372.57 98.0 16,155 99.7 Utah 767 225,533 293.93 183,930 239.71 81.6 ― 81.6 Washington 3,352 697,065 207.97 592,398 176.75 85.0 12,599 86.5 Wisconsin 374 52,209 139.46 54,861 146.54 105.1 ― 105.1 Other (3) ―   7,015 ―   32,343 ― ―   350   ― 16,250 $ 4,308,439 $ 265.14 $ 3,823,136 $ 235.27 88.7 % $ 120,953   91.3 %     Nine Months Ended September 30, 2011   MemberMonths (1)Premium RevenueMedical Care CostsMedicalCare Ratio (MCR)Premium TaxExpenseMCR Excluding Premium Tax Expense (4)TotalPMPMTotalPMPM       California 3,133 $ 418,961 $ 133.71 $ 359,844 $ 114.84 85.9 % $ 4,937 86.9 % Florida 588 150,561 256.13 141,872 241.35 94.2 34 94.3 Michigan 2,002 495,971 247.70 399,952 199.75 80.6 29,219 85.7 Missouri (2) 722 169,988 235.45 148,135 205.18 87.1 ― 87.1 NewMexico 808 246,223 304.71 205,659 254.51 83.5 6,472 85.8 Ohio 2,218 693,829 312.86 533,216 240.44 76.9 53,629 83.3 Texas 1,154 290,787 252.06 271,723 235.54 93.4 5,016 95.1 Utah 723 215,205 297.62 167,605 231.79 77.9 ― 77.9 Washington 3,104 608,998 196.25 515,769 166.20 84.7 11,099 86.3 Wisconsin 364 51,526 141.42 47,450 130.23 92.1 44 92.2 Other (3) ―   6,389 ―   30,824 ― ―   183   ― 14,816 $ 3,348,438 $ 226.01 $ 2,822,049 $ 190.48 84.3 % $ 110,633   87.2 %   (1) A member month is defined as the aggregate of each month's ending membership for the period presented. (2) The Company's contract with the state of Missouri expired without renewal on June 30, 2012. The Missouri health plan's claims run-out activity subsequent to June 30, 2012, is reported in “Other.” (3) “Other” medical care costs also include medically related administrative costs of the parent company. (4) The MCR Excluding Premium Tax Expense represents medical costs as a percentage of premium revenues, where premium revenue is reduced by premium tax expense.       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 September 30,2012       2011   Amount   PMPM   % ofTotalAmount   PMPM   % ofTotal Fee for service $ 908,201 $ 165.97 69.1 % $ 698,995 $ 140.55 72.9 % Pharmacy 219,823 40.17 16.7 89,191 17.93 9.3 Capitation 142,714 26.08 10.9 129,315 26.00 13.5 Other   43,833   8.03 3.3     41,657   8.39 4.3   Total $ 1,314,571 $ 240.25 100.0 % $ 959,158 $ 192.87 100.0 %   Nine Months Ended September 30,2012   2011   AmountPMPM% ofTotalAmountPMPM% ofTotal Fee for service $ 2,666,470 $ 164.09 69.8 % $ 2,050,430 $ 138.40 72.7 % Pharmacy 606,004 37.29 15.9 268,637 18.13 9.5 Capitation 417,643 25.70 10.9 383,955 25.92 13.6 Other   133,019   8.19 3.4     119,027   8.03 4.2   Total $ 3,823,136 $ 235.27 100.0 % $ 2,822,049 $ 190.48 100.0 %             The following table provides the details of the Company's medical claims and benefits payable as of the dates indicated:   Sept. 30, 2012Dec. 31,2011Sept. 30, 2011(In thousands) Fee-for-service claims incurred but not paid (IBNP) $ 414,725 $ 301,020 $ 283,160 Capitation payable 55,314 53,532 49,259 Pharmacy 42,681 26,178 16,615 Other   23,743   21,746   12,021 $ 536,463 $ 402,476 $ 361,055 MOLINA HEALTHCARE, INC.UNAUDITED CHANGE IN MEDICAL CLAIMS AND BENEFITS PAYABLE 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 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 were (more) or less than 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 EndedSeptember 30,Three Months Ended September 30,Year Ended Dec. 31, 20112012   20112012   2011(Dollars in thousands, except per-member amounts) Balances at beginning of period $ 402,476 $ 354,356 $ 525,538 $ 341,613 $ 354,356 Components of medical care costs related to: Current period 3,860,825 2,871,515 1,361,539 990,449 3,911,803 Prior periods   (37,689 )   (49,466 )   (46,968 )   (31,291 )   (51,809 ) Total medical care costs   3,823,136     2,822,049     1,314,571     959,158     3,859,994   Payments for medical care costs related to: Current period 3,332,896 2,522,374 875,236 670,066 3,516,994 Prior periods   356,253     292,976     428,410     269,650     294,880   Total paid   3,689,149     2,815,350     1,303,646     939,716     3,811,874   Balances at end of period $ 536,463   $ 361,055   $ 536,463   $ 361,055   $ 402,476   Benefit from prior period as a percentage of: Balance at beginning of period 9.4 % 14.0 % 8.9 % 9.2 % 14.6 % Premium revenue 0.9 % 1.5 % 3.2 % 2.7 % 1.1 % Total medical care costs 1.0 % 1.8 % 3.6 % 3.3 % 1.3 %   Claims Data: Days in claims payable, fee for service 45 39 45 39 40 Number of members at end of period 1,826,000 1,678,000 1,826,000 1,678,000 1,697,000 Number of claims in inventory at end of period 163,600 132,200 163,600 132,200 111,100 Billed charges of claims in inventory at end of period $ 304,600 $ 187,000 $ 304,600 $ 187,000 $ 207,600 Claims in inventory per member at end of period 0.09 0.08 0.09 0.08 0.07 Billed charges of claims in inventory per member at end of period $ 166.81 $ 111.44 $ 166.81 $ 111.44 $ 122.33 Number of claims received during the period 15,455,000 12,864,800 5,079,200 4,149,600 17,207,500 Billed charges of claims received during the period $ 14,339,700 $ 10,573,900 $ 4,951,000 $ 3,610,700 $ 14,306,500 Molina Healthcare, Inc.Investor Relations:Juan José Orellana, 562-435-3666, ext. 111143