MOLINA HEALTHCARE, INC. - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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8-K - 8-K - MOLINA HEALTHCARE, INC.	moh-06302018x8k.htm

MOH Reports Second Quarter 2018 Results

Page 1

July 31, 2018

News Release

Contact:

Ryan Kubota

Investor Relations

562-435-3666, ext. 119057

MOLINA HEALTHCARE ANNOUNCES SECOND QUARTER 2018 RESULTS AND INCREASES FISCAL YEAR 2018 GUIDANCE


•	Net income of $3.02 per diluted share on a GAAP basis in the second quarter of 2018, compared with $1.64 per diluted share in the first quarter of 2018


•	Second quarter 2018 results include a net benefit of $0.83 per diluted share for non-run rate items, primarily relating to the 2017 Marketplace risk adjustment


•	Premium revenue increases $191 million, or 4.4%, in the second quarter of 2018 compared with the first quarter of 2018


•	Medical care ratio of 85.3% in the quarter


•	General and administrative expense ratio of 6.9% in the quarter


•	Net profit margin of 4.1% in the quarter and 3.2% year to date


•	2018 guidance increases by $3.00 per diluted share at the midpoint to a range of $7.15 - $7.35 net income per diluted share on a GAAP basis


•	2018 guidance includes the net benefit of $0.96 per diluted share for the non-run rate items recorded in the first half of the year

Long Beach, California (July 31, 2018) - Molina Healthcare, Inc. (NYSE: MOH) today reported its financial results for the second quarter of 2018.

“Our second quarter results are a strong indication that the early stages of our margin recovery and sustainability plan are working,” said Joe Zubretsky, President and Chief Executive Officer. “Our focus on managed care fundamentals and a more rigorous performance management process is reflected in our improved earnings.”

We believe that the sequential comparison of our 2018 second quarter performance with our 2018 first quarter performance is the most useful indicator of our business progress. Significant items impacting the quarter are presented in a table later in this press release.

Second Quarter of 2018 Compared With First Quarter of 2018

Net income increased to $202 million, from $107 million in the first quarter of 2018. Net income per diluted share increased to $3.02, from $1.64 in the first quarter of 2018.

Overall, the medical care ratio improved to 85.3%, from 86.1% in the first quarter of 2018. Excluding the combined benefit of the 2017 Marketplace risk adjustment and cost sharing reduction (CSR) reimbursement, the medical care ratio would have been 87.0% in the second quarter of 2018, compared with 87.2% in the

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July 31, 2018

first quarter of 2018. The sequential improvement in the overall medical care ratio was due to a decrease in the Medicaid medical care ratio partially offset by a seasonally higher Marketplace medical care ratio.


•	The Medicaid medical care ratio decreased to 89.8%, from 90.8% in the first quarter of 2018. Improved performance at the Washington, California, Texas, New Mexico and Illinois health plans, partially offset by a decline in performance at the Ohio and Florida health plans, drove the decrease in the medical care ratio for Medicaid.


•	The Marketplace medical care ratio increased to 57.4%, from 50.6% in the first quarter of 2018. Excluding the combined net benefit of the 2017 risk adjustment and CSR, the Marketplace medical care ratio would have been 68.4% in the second quarter of 2018, compared with 63.5% in the first quarter of 2018.

The general and administrative (G&A) expense ratio decreased to 6.9%, from 7.6% in the first quarter of 2018, due to increased revenue and continuing G&A cost containment. Excluding the impact of Marketplace broker commissions and exchange fees in both periods, the G&A ratio decreased to 6.2%, from 6.8% in the first quarter of 2018.

Renewal of Medicaid Contracts

Year to date in 2018, we renewed Medicaid contracts in Washington, Florida and Puerto Rico as follows:


•	In May 2018, our Washington health plan was selected to negotiate and enter into a managed care contract for the eight remaining regions of the state’s Apple Health Integrated Managed Care program, in addition to the two regions previously awarded to us. As of June 30, 2018, we served approximately 742,000 Medicaid members in Washington.


•	In June 2018, our Florida health plan was awarded Medicaid Managed Care contracts in Regions 8 and 11 of the Florida Statewide Medicaid Managed Care Invitation to Negotiate, beginning in 2019. As of June 30, 2018, we served approximately 96,000 Medicaid members in those regions.


•	In July 2018, our Puerto Rico health plan was selected to be one of the organizations to administer the Commonwealth’s new Medicaid Managed Care contract. Services under the new contract, currently expected to begin on November 1, 2018, would cover the entire island. As of June 30, 2018, we served approximately 326,000 Medicaid members in the East and Southwest regions of Puerto Rico.

Capital Plan Progress

In the second quarter of 2018, we repaid $300 million outstanding under the revolving credit facility. In addition, we repaid $96 million aggregate principal amount of our 1.125% cash convertible senior notes due 2020 and entered into privately negotiated termination agreements to terminate the respective portions of the call options and warrants. Year to date, we have reduced the principal amount of outstanding debt by $493 million.

Sale of Molina Medicaid Solutions Segment

In June 2018, we entered into a definitive agreement to sell Molina Medicaid Solutions (MMS) to DXC Technology Company. The divestiture, expected to close in the third quarter of 2018, is subject to the satisfaction of customary closing conditions and the receipt of certain third party consents and regulatory approvals. We expect the net cash selling price for the equity interests of MMS to approximate $220 million after certain adjustments.

Second Quarter of 2018 Compared With Second Quarter of 2017

Net income for the second quarter of 2018 was $202 million, compared with a net loss of $230 million for the second quarter of 2017. Net income per diluted share was $3.02 for the second quarter of 2018 compared with net loss per diluted share of $4.10 reported for the second quarter of 2017. In the second quarter of 2017, we recorded significant medical care costs relating to prior year dates of service in excess of historical expectations, and Marketplace-related premium deficiency reserves and changes in estimates relating to prior year dates of service. In addition, we recorded significant impairment and restructuring charges.

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2018 Revised Guidance

The following table summarizes 2018 Revised Guidance ⁽¹⁾:



Premium revenue		~ $17.5B
Service revenue		~ $475M
Premium tax revenue		~ $415M
Health insurer fees reimbursed		~ $325M
Investment income and other revenue		~ $125M
Total revenue		~ $18.8B
Medical care costs		~ $15.2B
Medical care ratio ⁽²⁾		~ 87%
Cost of service revenue		~ $430M
General and administrative expenses		~ $1.4B
G&A ratio ⁽³⁾		~ 7.4%
Premium tax expenses		~ $415M
Health insurer fees		~ $345M
Depreciation and amortization		~ $100M
Restructuring and separation costs		~ $30M
Interest expense and other income, net		~ $140M
Income before income taxes		$730M - $745M
Net income		$471M - $484M
EBITDA ⁽⁴⁾		$968M - $985M
Effective tax rate		35% - 36%
Net profit margin ⁽³⁾		2.5% - 2.6%
Diluted weighted average shares		~ 65.9M
Net income per share		$7.15 - $7.35
Adjusted net income per share ⁽⁴⁾		$7.39 - $7.59
End-of-year Marketplace membership		354,000
End-of-year Medicaid and Medicare membership		3,569,000

__________________


(1)	All amounts are estimates; actual results may differ materially. See the Company’s risk factors as discussed in its 2017 Form 10-K and other filings and the statements below in this press release after the heading “Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995.”


(2)	Medical care ratio represents medical care costs as a percentage of premium revenue.


(3)	G&A ratio represents general and administrative expenses as a percentage of total revenue. Net profit margin represents net income as a percentage of total revenue.


(4)	See reconciliation of non-GAAP financial measures at the end of this release.

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Conference Call

Management will host a conference call and webcast to discuss Molina Healthcare’s second quarter 2018 results at 8:00 a.m. Eastern time on Wednesday, August 1, 2018. The number to call for the interactive teleconference is (877) 883-0383 and entering confirmation number 7567890. A telephonic replay of the conference call will be available through Wednesday, August 8, 2018, by dialing (877) 344-7529 and entering confirmation number 10121865. A live audio broadcast of this conference call will be available on Molina Healthcare’s website, molinahealthcare.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 managed health care services under the Medicaid and Medicare programs and through the state insurance marketplaces. Through its locally operated health plans, Molina Healthcare served approximately 4.1 million members as of June 30, 2018. For more information about Molina Healthcare, please visit molinahealthcare.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This earnings release contains “forward-looking statements” regarding the Company’s 2018 revised guidance, as well as its plans, expectations, and anticipated future events. Actual results could differ materially due to numerous known and unknown risks and uncertainties. Those known risks and uncertainties include, but are not limited to, the following:


•	the success of the Company’s profit improvement and maintenance initiatives, including the timing and amounts of the benefits realized, and administrative and medical cost savings achieved;


•	the numerous political and market-based uncertainties associated with the Affordable Care Act (the “ACA”) or “Obamacare;”


•	the market dynamics surrounding the ACA Marketplaces, including but not limited to uncertainties associated with risk adjustment requirements, the potential for disproportionate enrollment of higher acuity members, the discontinuation of premium tax credits, and the adequacy of agreed rates;


•	subsequent adjustments to reported premium revenue based upon subsequent developments or new information, including changes to estimated amounts payable or receivable related to Marketplace risk adjustment;


•	effective management of the Company’s medical costs;


•	the Company’s ability to predict with a reasonable degree of accuracy utilization rates, including utilization rates associated with seasonal flu patterns or other newly emergent diseases;


•	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;


•	the full reimbursement of the ACA health insurer fee, or HIF;


•	the success of the Company’s efforts to retain existing or awarded government contracts, including those in New Mexico and Texas, and those for Regions 8 and 11 in Florida, including the success of any protest filings or defenses;


•	the Company’s ability to manage its operations, including maintaining and creating adequate internal systems and controls relating to authorizations, approvals, provider payments, and the overall success of its care management initiatives;


•	the Company’s ability to consummate and realize benefits from divestitures and acquisitions, including the timely closing of the MMS divestiture;


•	the Company’s receipt of adequate premium rates to support increasing pharmacy costs, including costs associated with specialty drugs and costs resulting from formulary changes that allow the option of higher-priced non-generic drugs;


•	the Company’s ability to operate profitably in an environment where the trend in premium rate increases lags behind the trend in increasing medical costs;


•	the interpretation and implementation of federal or state medical cost expenditure floors, administrative cost and profit ceilings, premium stabilization programs, profit sharing arrangements, and risk adjustment provisions and requirements;

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•	the Company’s estimates of amounts owed for such cost expenditure floors, administrative cost and profit ceilings, premium stabilization programs, profit-sharing arrangements, and risk adjustment provisions;


•	the Medicaid expansion medical cost corridors in California, New Mexico, and Washington, and any other retroactive adjustment to revenue where methodologies and procedures are subject to interpretation or dependent upon information about the health status of participants other than Molina members;


•	the interpretation and implementation of at-risk premium rules and state contract performance requirements regarding the achievement of certain quality measures, and the Company’s ability to recognize revenue amounts associated therewith;


•	cyber-attacks or other privacy or data security incidents resulting in an inadvertent unauthorized disclosure of protected health information;


•	the success of the Company’s health plan in Puerto Rico, including the resolution of the debt crisis and the effect of the PROMESA law, and the impact of any future significant weather events;


•	the success and renewal of the Company’s duals demonstration programs in California, Illinois, Michigan, Ohio, South Carolina, and Texas;


•	the accurate estimation of incurred but not reported or paid medical costs across the Company’s health plans;


•	efforts by states to recoup previously paid and recognized premium amounts;


•	complications, member confusion, or enrollment backlogs related to the annual renewal of Medicaid coverage;


•	government audits and reviews, or potential investigations, and any fine, sanction, enrollment freeze, monitoring program, or premium recovery that may result therefrom;


•	changes with respect to the Company’s provider contracts and the loss of providers;


•	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, including litigation involving the ACA to which we ourselves are not a direct party;


•	the relatively small number of states in which we operate health plans, including the greater scale and revenues of the Company’s California, Ohio, Texas, and Washington health plans;


•	the availability of adequate financing on acceptable terms to fund and capitalize the Company’s expansion and growth, repay the Company’s outstanding indebtedness at maturity and meet its liquidity needs, including the interest expense and other costs associated with such financing;


•	the Company’s failure to comply with the financial or other covenants in its credit agreements or the indentures governing its outstanding notes;


•	the sufficiency of the Company’s funds on hand to pay the amounts due upon conversion or maturity of its outstanding notes;


•	the failure of a state in which we operate to renew its federal Medicaid waiver;


•	changes generally affecting the managed care or Medicaid management information systems industries;


•	increases in government surcharges, taxes, and assessments, including but not limited to the deductibility of certain compensation costs;


•	newly emergent viruses or widespread epidemics, public catastrophes or terrorist attacks, and associated public alarm;


•	the unexpected loss of the leadership of one or more of our senior executives;


•	increasing competition and consolidation in the Medicaid industry;

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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 sec.gov. Given these risks and uncertainties, the Company can give no assurances that its forward-looking statements will prove to be accurate, or that any other results or events projected or contemplated by its forward-looking statements will in fact occur, and the Company cautions investors not to place undue reliance on these statements. All forward-looking statements in this release represent the Company’s judgment as of July 31, 2018, and the Company disclaims any obligation to update any forward-looking statements to conform the statement to actual results or changes in its expectations.

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MOLINA HEALTHCARE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS



	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
	(Dollar amounts in millions, except per-share amounts)
Revenue:
Premium revenue	$	4,514		$	4,740		$	8,837		$	9,388
Service revenue	127			129			261			260
Premium tax revenue	106			114			210			225
Health insurer fees reimbursed	104			—			165			—
Investment income and other revenue	32			16			56			30
Total revenue	4,883			4,999			9,529			9,903
Operating expenses:
Medical care costs	3,850			4,491			7,572			8,602
Cost of service revenue	118			124			238			246
General and administrative expenses	335			405			687			844
Premium tax expenses	106			114			210			225
Health insurer fees	99			—			174			—
Depreciation and amortization	25			37			51			76
Impairment losses	—			72			—			72
Restructuring and separation costs	8			43			33			43
Total operating expenses	4,541			5,286			8,965			10,108
Operating income (loss)	342			(287		)	564			(205		)
Other expenses (income), net:
Interest expense	32			27			65			53
Other expense (income), net	5			—			15			(75		)
Total other expenses (income), net	37			27			80			(22		)
Income (loss) before income tax expense (benefit)	305			(314		)	484			(183		)
Income tax expense (benefit)	103			(84		)	175			(30		)
Net income (loss)	$	202		$	(230	)	$	309		$	(153	)

Net income (loss) per diluted share	$	3.02		$	(4.10	)	$	4.68		$	(2.74	)

Diluted weighted average shares outstanding	66.7			56.2			66.0			56.1

Operating Statistics:
Medical care ratio	85.3		%	94.8		%	85.7		%	91.6		%
G&A ratio	6.9		%	8.1		%	7.2		%	8.5		%
Premium tax ratio	2.3		%	2.4		%	2.3		%	2.3		%
Effective income tax rate	33.8		%	26.8		%	36.2		%	16.0		%
Net profit (loss) margin	4.1		%	(4.6		)%	3.2		%	(1.5		)%

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MOLINA HEALTHCARE, INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS



	June 30,			December 31,
	2018			2017
	(In millions, except per-share data)
ASSETS
Current assets:
Cash and cash equivalents	$	3,392		$	3,186
Investments	2,176			2,524
Restricted investments	80			169
Receivables	1,148			871
Prepaid expenses and other current assets	344			239
Derivative asset	657			522
Assets held for sale	230			—
Total current assets	8,027			7,511
Property, equipment, and capitalized software, net	276			342
Goodwill and intangible assets, net	201			255
Restricted investments	117			119
Deferred income taxes	114			103
Other assets	28			141
	$	8,763		$	8,471

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Medical claims and benefits payable	$	1,920		$	2,192
Amounts due government agencies	1,746			1,542
Accounts payable and accrued liabilities	754			366
Deferred revenue	193			282
Current portion of long-term debt	484			653
Derivative liability	657			522
Liabilities held for sale	66			—
Total current liabilities	5,820			5,557
Long-term debt	1,019			1,318
Lease financing obligations	198			198
Other long-term liabilities	68			61
Total liabilities	7,105			7,134
Stockholders’ equity:
Common stock, $0.001 par value, 150 shares authorized; outstanding: 62 shares at June 30, 2018 and 60 shares at December 31, 2017	—			—
Preferred stock, $0.001 par value; 20 shares authorized, no shares issued and outstanding	—			—
Additional paid-in capital	1,055			1,044
Accumulated other comprehensive loss	(11		)	(5		)
Retained earnings	614			298
Total stockholders’ equity	1,658			1,337
	$	8,763		$	8,471

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MOLINA HEALTHCARE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2018			2017			2018			2017
	(In millions)
Operating activities:
Net income (loss)	$	202		$	(230	)	$	309		$	(153	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization	36			47			73			96
Impairment losses	—			72			—			72
Deferred income taxes	—			(36		)	(6		)	(41		)
Share-based compensation	7			29			13			35
Non-cash restructuring costs	—			—			17			—
Amortization of convertible senior notes and lease financing obligations	6			8			13			16
Loss on debt extinguishment	5			—			15			—
Other, net	2			4			4			7
Changes in operating assets and liabilities:
Receivables	(232		)	—			(315		)	(32		)
Prepaid expenses and other current assets	58			(26		)	(181		)	(38		)
Medical claims and benefits payable	(104		)	151			(267		)	148
Amounts due government agencies	33			269			205			642
Accounts payable and accrued liabilities	30			(68		)	349			(18		)
Deferred revenue	(172		)	(178		)	(42		)	(32		)
Income taxes	49			(89		)	127			(30		)
Net cash (used in) provided by operating activities	(80		)	(47		)	314			672
Investing activities:
Purchases of investments	(525		)	(903		)	(914		)	(1,636		)
Proceeds from sales and maturities of investments	792			441			1,335			874
Purchases of property, equipment, and capitalized software	(10		)	(34		)	(14		)	(60		)
Other, net	(4		)	(13		)	(9		)	(24		)
Net cash provided by (used in) investing activities	253			(509		)	398			(846		)
Financing activities:
Repayment of credit facility	(300		)	—			(300		)	—
Repayment of 1.125% Convertible Notes	(89		)	—			(89		)	—
Cash paid for partial settlement of 1.125% Conversion Option	(134		)	—			(134		)	—
Cash received for partial termination of 1.125% Call Option	134			—			134			—
Cash paid for partial termination of 1.125% Warrants	(113		)	—			(113		)	—
Proceeds from senior notes offerings, net of issuance costs	—			325			—			325
Other, net	4			9			(1		)	8
Net cash (used in) provided by financing activities	(498		)	334			(503		)	333
Net (decrease) increase in cash, cash equivalents, and restricted cash and cash equivalents	(325		)	(222		)	209			159
Cash, cash equivalents, and restricted cash and cash equivalents at beginning of period	3,824			3,293			3,290			2,912
Cash, cash equivalents, and restricted cash and cash equivalents at end of period	$	3,499		$	3,071		$	3,499		$	3,071

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MOLINA HEALTHCARE, INC.

UNAUDITED HEALTH PLANS SEGMENT MEMBERSHIP



	June 30,	December 31,	June 30,
	2018	2017	2017
Ending Membership by Program:
Temporary Assistance for Needy Families (TANF) and Children’s Health Insurance Program (CHIP)	2,464,000	2,457,000	2,517,000
Medicaid Expansion	675,000	668,000	678,000
Aged, Blind or Disabled (ABD)	415,000	412,000	408,000
Total Medicaid	3,554,000	3,537,000	3,603,000
Medicare-Medicaid Plan (MMP) - Integrated	55,000	57,000	54,000
Medicare Special Needs Plans	45,000	44,000	44,000
Total Medicare	100,000	101,000	98,000
Total Medicaid and Medicare	3,654,000	3,638,000	3,701,000
Marketplace	409,000	815,000	949,000
	4,063,000	4,453,000	4,650,000

Ending Membership by Health Plan:
California	639,000	746,000	766,000
Florida	398,000	625,000	672,000
Illinois	219,000	165,000	163,000
Michigan	397,000	398,000	414,000
New Mexico	241,000	253,000	266,000
Ohio	320,000	327,000	351,000
Puerto Rico	326,000	314,000	322,000
South Carolina	114,000	116,000	112,000
Texas	450,000	430,000	465,000
Washington	776,000	777,000	788,000
Other ⁽¹⁾	183,000	302,000	331,000
	4,063,000	4,453,000	4,650,000

__________________


(1)	“Other” includes the Idaho, New York, Utah and Wisconsin health plans, which are not individually significant to our consolidated operating results.

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MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA

(In millions, except percentages and per-member per-month amounts)



	Three Months Ended June 30, 2018
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs				MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total		PMPM		MCR ⁽²⁾		Medical Margin
TANF and CHIP	7.5	$	1,393	$	186.18	$	1,205	$	161.13	86.5	%	$	188
Medicaid Expansion	2.1	761		372.04		676		330.83		88.9		85
ABD	1.3	1,288		1,033.34		1,209		969.27		93.8		79
Total Medicaid	10.9	3,442		319.52		3,090		286.89		89.8		352
MMP	0.1	367		2,224.30		313		1,893.91		85.1		54
Medicare	0.2	157		1,168.40		133		989.33		84.7		24
Total Medicare	0.3	524		1,751.49		446		1,488.85		85.0		78
Total Medicaid and Medicare	11.2	3,966		358.23		3,536		319.37		89.2		430
Marketplace	1.2	548		440.93		314		253.04		57.4		234
	12.4	$	4,514	$	366.57	$	3,850	$	312.68	85.3	%	$	664



	Three Months Ended June 30, 2017
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs				MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total		PMPM		MCR ⁽²⁾		Medical Margin
TANF and CHIP	7.6	$	1,391	$	182.47	$	1,315	$	172.48	94.5	%	$	76
Medicaid Expansion	2.1	786		383.07		689		335.26		87.5		97
ABD	1.2	1,285		1,053.89		1,245		1,020.85		96.9		40
Total Medicaid	10.9	3,462		317.79		3,249		298.10		93.8		213
MMP	0.1	361		2,217.44		333		2,050.20		92.5		28
Medicare	0.2	148		1,126.14		126		963.34		85.5		22
Total Medicare	0.3	509		1,730.91		459		1,565.65		90.5		50
Total Medicaid and Medicare	11.2	3,971		354.87		3,708		331.36		93.4		263
Marketplace	2.8	769		267.37		783		272.37		101.9		(14		)
	14.0	$	4,740	$	336.98	$	4,491	$	319.29	94.8	%	$	249

__________________


(1)	A member month is defined as the aggregate of each month’s ending membership for the period presented.


(2)	The MCR represents medical costs as a percentage of premium revenue.

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MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA

(In millions, except percentages and per-member per-month amounts)



	Six Months Ended June 30, 2018
	Member Months	Premium Revenue				Medical Care Costs				MCR		Medical Margin
	Member Months	Total		PMPM		Total		PMPM		MCR		Medical Margin
TANF and CHIP	14.9	$	2,766	$	185.66	$	2,477	$	166.32	89.6	%	$	289
Medicaid Expansion	4.1	1,513		372.39		1,317		324.19		87.1		196
ABD	2.5	2,542		1,023.83		2,364		951.99		93.0		178
Total Medicaid	21.5	6,821		318.11		6,158		287.22		90.3		663
MMP	0.3	724		2,180.86		618		1,858.87		85.2		106
Medicare	0.3	314		1,178.58		264		992.05		84.2		50
Total Medicare	0.6	1,038		1,735.05		882		1,473.30		84.9		156
Total Medicaid and Medicare	22.1	7,859		356.59		7,040		319.43		89.6		819
Marketplace	2.6	978		373.67		532		203.34		54.4		446
	24.7	$	8,837	$	358.40	$	7,572	$	307.11	85.7	%	$	1,265



	Six Months Ended June 30, 2017
	Member Months	Premium Revenue				Medical Care Costs				MCR		Medical Margin
	Member Months	Total		PMPM		Total		PMPM		MCR		Medical Margin
TANF and CHIP	15.3	$	2,793	$	182.58	$	2,619	$	171.25	93.8	%	$	174
Medicaid Expansion	4.1	1,603		390.88		1,378		335.88		85.9		225
ABD	2.4	2,481		1,030.68		2,375		986.54		95.7		106
Total Medicaid	21.8	6,877		315.39		6,372		292.22		92.7		505
MMP	0.3	705		2,152.75		640		1,954.15		90.8		65
Medicare	0.3	286		1,097.36		243		933.20		85.0		43
Total Medicare	0.6	991		1,685.72		883		1,502.36		89.1		108
Total Medicaid and Medicare	22.4	7,868		351.35		7,255		323.98		92.2		613
Marketplace	5.7	1,520		264.77		1,347		234.62		88.6		173
	28.1	$	9,388	$	333.68	$	8,602	$	305.74	91.6	%	$	786

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MOH Reports Second Quarter 2018 Results

Page 13

July 31, 2018

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—

MEDICAID AND MEDICARE

(In millions, except percentages and per-member per-month amounts)



	Three Months Ended June 30, 2018
	Member Months	Premium Revenue				Medical Care Costs				MCR		Medical Margin
	Member Months	Total		PMPM		Total		PMPM		MCR		Medical Margin
California	1.8	$	517	$	289.80	$	441	$	247.36	85.4	%	$	76
Florida	1.2	377		353.81		362		339.31		95.9		15
Illinois	0.6	203		311.60		170		261.59		84.0		33
Michigan	1.2	388		342.45		331		292.20		85.3		57
New Mexico	0.7	313		469.88		290		435.36		92.7		23
Ohio	1.0	535		571.08		482		514.57		90.1		53
Puerto Rico	0.9	184		188.26		165		168.20		89.3		19
South Carolina	0.4	123		350.22		107		304.20		86.9		16
Texas	0.7	576		835.66		510		740.55		88.6		66
Washington	2.2	571		252.61		526		232.49		92.0		45
Other ⁽¹⁾	0.5	179		322.99		152		274.59		85.0		27
	11.2	$	3,966	$	358.23	$	3,536	$	319.37	89.2	%	$	430

	Three Months Ended June 30, 2017
	Member Months	Premium Revenue				Medical Care Costs				MCR		Medical Margin
	Member Months	Total		PMPM		Total		PMPM		MCR		Medical Margin
California	1.9	$	598	$	318.89	$	539	$	287.36	90.1	%	$	59
Florida	1.1	380		347.20		370		337.92		97.3		10
Illinois	0.5	149		289.51		174		336.76		116.3		(25		)
Michigan	1.1	390		333.26		358		305.40		91.6		32
New Mexico	0.8	321		443.13		311		428.58		96.7		10
Ohio	1.0	529		536.90		489		496.41		92.5		40
Puerto Rico	0.9	179		184.28		189		194.42		105.5		(10		)
South Carolina	0.4	111		326.57		102		304.14		93.1		9
Texas	0.7	524		752.01		473		679.43		90.3		51
Washington	2.2	618		276.90		546		244.58		88.3		72
Other ⁽¹⁾	0.6	172		294.15		157		268.91		91.4		15
	11.2	$	3,971	$	354.87	$	3,708	$	331.36	93.4	%	$	263

__________________


(1)	“Other” includes the Idaho, New York, Utah and Wisconsin health plans, which are not individually significant to our consolidated operating results.

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MOH Reports Second Quarter 2018 Results

Page 14

July 31, 2018

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—

MEDICAID AND MEDICARE

(In millions, except percentages and per-member per-month amounts)



	Six Months Ended June 30, 2018
	Member Months	Premium Revenue				Medical Care Costs				MCR		Medical Margin
	Member Months	Total		PMPM		Total		PMPM		MCR		Medical Margin
California	3.6	$	1,011	$	281.14	$	853	$	237.26	84.4	%	$	158
Florida	2.2	759		352.68		707		328.26		93.1		52
Illinois	1.1	344		305.94		292		259.87		84.9		52
Michigan	2.3	764		339.56		662		294.19		86.6		102
New Mexico	1.4	632		468.00		600		444.44		95.0		32
Ohio	1.9	1,086		573.87		942		497.75		86.7		144
Puerto Rico	1.9	370		190.68		339		174.74		91.6		31
South Carolina	0.7	245		349.15		211		300.87		86.2		34
Texas	1.4	1,138		822.72		1,029		744.05		90.4		109
Washington	4.5	1,155		254.64		1,100		242.48		95.2		55
Other	1.1	355		318.94		305		273.97		85.9		50
	22.1	$	7,859	$	356.59	$	7,040	$	319.43	89.6	%	$	819

	Six Months Ended June 30, 2017
	Member Months	Premium Revenue				Medical Care Costs				MCR		Medical Margin
	Member Months	Total		PMPM		Total		PMPM		MCR		Medical Margin
California	3.7	$	1,170	$	313.76	$	1,023	$	274.42	87.5	%	$	147
Florida	2.2	744		343.29		722		333.23		97.1		22
Illinois	1.1	310		282.66		354		322.63		114.1		(44		)
Michigan	2.3	772		330.34		690		295.02		89.3		82
New Mexico	1.5	629		432.98		610		419.65		96.9		19
Ohio	2.0	1,049		532.35		951		482.73		90.7		98
Puerto Rico	1.9	362		185.40		354		181.24		97.8		8
South Carolina	0.7	216		321.85		200		298.79		92.8		16
Texas	1.4	1,051		751.94		962		687.96		91.5		89
Washington	4.4	1,223		275.05		1,081		243.18		88.4		142
Other	1.2	342		291.93		308		262.97		90.1		34
	22.4	$	7,868	$	351.35	$	7,255	$	323.98	92.2	%	$	613

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MOH Reports Second Quarter 2018 Results

Page 15

July 31, 2018

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—MARKETPLACE

(In millions, except percentages and per-member per-month amounts)



	Three Months Ended June 30, 2018
	Member Months	Premium Revenue				Medical Care Costs				MCR		Medical Margin
	Member Months	Total		PMPM		Total		PMPM		MCR		Medical Margin
California	0.2	$	73	$	426.16	$	21	$	117.92	27.7	%	$	52
Florida	0.1	100		698.31		38		269.86		38.6		62
Michigan	—	15		288.67		7		146.97		50.9		8
New Mexico	—	31		418.82		18		247.06		59.0		13
Ohio	—	31		518.64		23		381.46		73.6		8
Texas	0.7	222		330.12		160		238.72		72.3		62
Washington	0.2	56		787.80		41		572.48		72.7		15
Other ⁽¹⁾	—	20		NM		6		NM		NM		14
	1.2	$	548	$	440.93	$	314	$	253.04	57.4	%	$	234

	Three Months Ended June 30, 2017
	Member Months	Premium Revenue				Medical Care Costs				MCR		Medical Margin
	Member Months	Total		PMPM		Total		PMPM		MCR		Medical Margin
California	0.5	$	81	$	186.90	$	67	$	154.23	82.5	%	$	14
Florida	0.9	269		284.60		317		336.78		118.3		(48		)
Michigan	0.1	16		204.15		10		135.89		66.6		6
New Mexico	—	31		367.98		23		266.91		72.5		8
Ohio	—	24		377.94		27		404.20		106.9		(3		)
Texas	0.7	177		247.49		129		180.92		73.1		48
Washington	0.2	44		317.42		49		359.87		113.4		(5		)
Other ⁽¹⁾	0.4	127		304.00		161		383.02		126.0		(34		)
	2.8	$	769	$	267.37	$	783	$	272.37	101.9	%	$	(14	)

__________________


(1)	“Other” includes the Utah and Wisconsin health plans, which are not individually significant to our consolidated operating results. We terminated Marketplace operations at these plans effective January 1, 2018, so the ratios for 2018 periods are not meaningful (NM).

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MOH Reports Second Quarter 2018 Results

Page 16

July 31, 2018

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—MARKETPLACE

(In millions, except percentages and per-member per-month amounts)



	Six Months Ended June 30, 2018
	Member Months	Premium Revenue				Medical Care Costs					MCR		Medical Margin
	Member Months	Total		PMPM		Total			PMPM		MCR		Medical Margin
California	0.4	$	122	$	334.47	$	52		$	141.73	42.4	%	$	70
Florida	0.3	145		468.36		22			73.13		15.6		123
Michigan	0.1	28		254.69		16			145.49		57.1		12
New Mexico	0.1	65		429.19		37			246.77		57.5		28
Ohio	0.1	57		458.48		40			319.53		69.7		17
Texas	1.4	451		318.93		306			216.83		68.0		145
Washington	0.2	95		653.89		71			486.90		74.5		24
Other	—	15		NM		(12		)	NM		NM		27
	2.6	$	978	$	373.67	$	532		$	203.34	54.4	%	$	446

	Six Months Ended June 30, 2017
	Member Months	Premium Revenue				Medical Care Costs					MCR		Medical Margin
	Member Months	Total		PMPM		Total			PMPM		MCR		Medical Margin
California	0.9	$	153	$	185.68	$	93		$	112.20	60.4	%	$	60
Florida	1.9	561		288.81		523			269.48		93.3		38
Michigan	0.2	27		177.12		17			116.21		65.6		10
New Mexico	0.1	53		317.10		42			249.90		78.8		11
Ohio	0.1	45		356.20		44			339.26		95.2		1
Texas	1.4	334		235.07		242			171.07		72.8		92
Washington	0.3	81		310.26		95			362.78		116.9		(14		)
Other	0.8	266		313.77		291			342.88		109.3		(25		)
	5.7	$	1,520	$	264.77	$	1,347		$	234.62	88.6	%	$	173

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MOH Reports Second Quarter 2018 Results

Page 17

July 31, 2018

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—TOTAL

(In millions, except percentages and per-member per-month amounts)



	Three Months Ended June 30, 2018
	Member Months	Premium Revenue				Medical Care Costs				MCR		Medical Margin
	Member Months	Total		PMPM		Total		PMPM		MCR		Medical Margin
California	2.0	$	590	$	301.73	$	462	$	236.04	78.2	%	$	128
Florida	1.3	477		394.38		400		331.13		84.0		77
Illinois	0.6	203		311.60		170		261.59		84.0		33
Michigan	1.2	403		340.08		338		285.78		84.0		65
New Mexico	0.7	344		464.90		308		416.99		89.7		36
Ohio	1.0	566		567.96		505		506.66		89.2		61
Puerto Rico	0.9	184		188.26		165		168.20		89.3		19
South Carolina	0.4	123		350.22		107		304.20		86.9		16
Texas	1.4	798		585.50		670		492.23		84.1		128
Washington	2.4	627		268.84		567		242.80		90.3		60
Other ⁽¹⁾	0.5	199		360.90		158		285.65		79.1		41
	12.4	$	4,514	$	366.57	$	3,850	$	312.68	85.3	%	$	664

	Three Months Ended June 30, 2017
	Member Months	Premium Revenue				Medical Care Costs				MCR		Medical Margin
	Member Months	Total		PMPM		Total		PMPM		MCR		Medical Margin
California	2.4	$	679	$	294.09	$	606	$	262.34	89.2	%	$	73
Florida	2.0	649		318.21		687		337.39		106.0		(38		)
Illinois	0.5	149		289.51		174		336.76		116.3		(25		)
Michigan	1.2	406		325.38		368		295.06		90.7		38
New Mexico	0.8	352		435.34		334		411.83		94.6		18
Ohio	1.0	553		527.14		516		490.75		93.1		37
Puerto Rico	0.9	179		184.28		189		194.42		105.5		(10		)
South Carolina	0.4	111		326.57		102		304.14		93.1		9
Texas	1.4	701		495.93		602		426.41		86.0		99
Washington	2.4	662		279.21		595		251.16		90.0		67
Other ⁽¹⁾	1.0	299		298.29		318		316.89		106.2		(19		)
	14.0	$	4,740	$	336.98	$	4,491	$	319.29	94.8	%	$	249

__________________


(1)	“Other” includes the Idaho, New York, Utah and Wisconsin health plans, which are not individually significant to our consolidated operating results.

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MOH Reports Second Quarter 2018 Results

Page 18

July 31, 2018

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—TOTAL

(In millions, except percentages and per-member per-month amounts)



	Six Months Ended June 30, 2018
	Member Months	Premium Revenue				Medical Care Costs				MCR		Medical Margin
	Member Months	Total		PMPM		Total		PMPM		MCR		Medical Margin
California	4.0	$	1,133	$	286.07	$	905	$	228.44	79.9	%	$	228
Florida	2.5	904		367.18		729		296.29		80.7		175
Illinois	1.1	344		305.94		292		259.87		84.9		52
Michigan	2.4	792		335.59		678		287.23		85.6		114
New Mexico	1.5	697		464.11		637		424.58		91.5		60
Ohio	2.0	1,143		566.77		982		486.79		85.9		161
Puerto Rico	1.9	370		190.68		339		174.74		91.6		31
South Carolina	0.7	245		349.15		211		300.87		86.2		34
Texas	2.8	1,589		567.95		1,335		477.43		84.1		254
Washington	4.7	1,250		267.01		1,171		250.05		93.6		79
Other	1.1	370		333.35		293		263.24		79.0		77
	24.7	$	8,837	$	358.40	$	7,572	$	307.11	85.7	%	$	1,265

	Six Months Ended June 30, 2017
	Member Months	Premium Revenue				Medical Care Costs				MCR		Medical Margin
	Member Months	Total		PMPM		Total		PMPM		MCR		Medical Margin
California	4.6	$	1,323	$	290.56	$	1,116	$	245.02	84.3	%	$	207
Florida	4.1	1,305		317.53		1,245		303.09		95.5		60
Illinois	1.1	310		282.66		354		322.63		114.1		(44		)
Michigan	2.5	799		321.10		707		284.24		88.5		92
New Mexico	1.6	682		421.11		652		402.27		95.5		30
Ohio	2.1	1,094		521.57		995		473.95		90.9		99
Puerto Rico	1.9	362		185.40		354		181.24		97.8		8
South Carolina	0.7	216		321.85		200		298.79		92.8		16
Texas	2.8	1,385		491.46		1,204		427.48		87.0		181
Washington	4.7	1,304		276.99		1,176		249.79		90.2		128
Other	2.0	608		301.11		599		296.58		98.5		9
	28.1	$	9,388	$	333.68	$	8,602	$	305.74	91.6	%	$	786

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MOH Reports Second Quarter 2018 Results

Page 19

July 31, 2018

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA

(In millions, except percentages and per-member per-month amounts)

The following tables provide the details of our medical care costs for the periods indicated:



	Three Months Ended June 30,
	2018						2017
	Amount		PMPM		% of Total		Amount		PMPM		% of Total
Fee for service	$	2,861	$	232.40	74.4	%	$	3,348	$	238.04	74.5	%
Pharmacy	567		46.05		14.7		650		46.23		14.5
Capitation	282		22.89		7.3		356		25.29		7.9
Other	140		11.34		3.6		137		9.73		3.1
	$	3,850	$	312.68	100.0	%	$	4,491	$	319.29	100.0	%



	Six Months Ended June 30,
	2018						2017
	Amount		PMPM		% of Total		Amount		PMPM		% of Total
Fee for service	$	5,606	$	227.38	74.1	%	$	6,434	$	228.68	74.8	%
Pharmacy	1,150		46.66		15.2		1,266		45.00		14.7
Capitation	594		24.09		7.8		680		24.17		7.9
Other	222		8.98		2.9		222		7.89		2.6
	$	7,572	$	307.11	100.0	%	$	8,602	$	305.74	100.0	%

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



	June 30,		December 31,
	2018		2017
Fee-for-service claims incurred but not paid (IBNP)	$	1,510	$	1,717
Pharmacy payable	116		112
Capitation payable	49		67
Other ⁽¹⁾	245		296
	$	1,920	$	2,192

______________________

(1)

“Other” medical claims and benefits payable include amounts payable to certain providers for which we act as an intermediary on behalf of various state agencies without assuming financial risk. Such receipts and payments do not impact our consolidated statements of operations. As of June 30, 2018 and December 31, 2017, we had recorded non-risk provider payables of approximately $158 million and $122 million, respectively.

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MOH Reports Second Quarter 2018 Results

Page 20

July 31, 2018

MOLINA HEALTHCARE, INC.

UNAUDITED CHANGE IN MEDICAL CLAIMS AND BENEFITS PAYABLE

(Dollars in millions, except per-member amounts)

Our claims liability includes a provision for adverse claims deviation 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. Our reserving methodology is consistently applied across all periods presented. The amounts displayed for “Components of medical care costs related to: Prior period” represent the amount by which our original estimate of claims and benefits payable at the beginning of the period was (more) 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 presents the components of the change in medical claims and benefits payable for the periods indicated:



	Six Months Ended June 30,						Year Ended December 31, 2017
	2018			2017			Year Ended December 31, 2017
Medical claims and benefits payable, beginning balance	$	2,192		$	1,929		$	1,929
Components of medical care costs related to:
Current period	7,794			8,633			17,037
Prior period ⁽¹⁾	(222		)	(31		)	36
Total medical care costs	7,572			8,602			17,073

Change in non-risk provider payables	56			(114		)	(106		)
Payments for medical care costs related to:
Current period	6,248			6,883			15,130
Prior period	1,652			1,457			1,574
Total paid	7,900			8,340			16,704
Medical claims and benefits payable, ending balance	$	1,920		$	2,077		$	2,192

Days in claims payable, fee for service ⁽²⁾	49			46			54

______________________


(1)	Excludes the 2018 benefit of the 2017 Marketplace CSR reimbursement.


(2)	Claims payable includes primarily IBNP. It also includes certain fee-for-service payables reported in “Other” medical claims and benefits payable amounting to $33 million, $157 million and $99 million, as of June 30, 2018, 2017 and December 31, 2017, respectively.

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MOH Reports Second Quarter 2018 Results

Page 21

July 31, 2018

MOLINA HEALTHCARE, INC.

UNAUDITED SUMMARY OF SIGNIFICANT ITEMS AFFECTING SECOND QUARTER AND

YEAR-TO-DATE FINANCIAL RESULTS

(In millions, except per diluted share amounts)

The table below summarizes the impact of certain items significant to our financial performance in the periods presented. The individual items presented below increase (decrease) income before income tax expense.



	Three Months Ended June 30, 2018						Six Months Ended June 30, 2018
	Amount			Per Diluted Share ⁽¹⁾			Amount			Per Diluted Share ⁽¹⁾

Marketplace risk adjustment, for 2017 dates of service	$	79		$	0.92		$	56		$	0.66
Marketplace CSR subsidies, for 2017 dates of service	6			0.07			76			0.90
Restructuring costs	(8		)	(0.10		)	(33		)	(0.39		)
Loss on debt extinguishment	(5		)	(0.06		)	(15		)	(0.21		)
	$	72		$	0.83		$	84		$	0.96


(1)	Except for certain items that are not deductible for tax purposes, per diluted share amounts are generally calculated at the statutory income tax rate of 22%.

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MOH Reports Second Quarter 2018 Results

Page 22

July 31, 2018

MOLINA HEALTHCARE, INC.

UNAUDITED NON-GAAP FINANCIAL MEASURES

We use non-generally accepted accounting principles, or non-GAAP, financial measures as supplemental metrics in evaluating our financial performance, making financing and business decisions, and forecasting and planning for future periods. For these reasons, management believes such measures are useful supplemental measures to investors in comparing our performance to the performance of other public companies in the health care industry. These non-GAAP financial measures should be considered as supplements to, and not as substitutes for or superior to, GAAP measures. See further information regarding non-GAAP measures below the tables (in millions, except per diluted share amounts).



	Three Months Ended June 30,					Six Months Ended June 30,
	2018		2017			2018		2017

Net income (loss)	$	202	$	(230	)	$	309	$	(153	)
Adjustments:
Depreciation, and amortization of intangible assets and capitalized software	33		44			67		90
Interest expense	32		27			65		53
Income tax expense (benefit)	103		(84		)	175		(30		)
EBITDA	$	370	$	(243	)	$	616	$	(40	)



	Three Months Ended June 30,												Six Months Ended June 30,
	2018						2017						2018						2017

	Amount			Per Diluted Share			Amount			Per Diluted Share			Amount			Per Diluted Share			Amount			Per Diluted Share
Net income (loss)	$	202		$	3.02		$	(230	)	$	(4.10	)	$	309		$	4.68		$	(153	)	$	(2.74	)
Adjustment:
Amortization of intangible assets	5			0.08			8			0.14			10			0.16			17			0.30
Income tax effect ⁽¹⁾	(1		)	(0.02		)	(3		)	(0.05		)	(2		)	(0.04		)	(6		)	(0.11		)
Amortization of intangible assets, net of tax effect	4			0.06			5			0.09			8			0.12			11			0.19
Adjusted net income (loss)	$	206		$	3.08		$	(225	)	$	(4.01	)	$	317		$	4.80		$	(142	)	$	(2.55	)

________________________


(1)	Income tax effect of adjustments calculated at the blended federal and state statutory tax rate of 22% and 37% for 2018 and 2017, respectively.

The following are descriptions of the adjustments made to GAAP measures used to calculate the non-GAAP measures used in this news release:

Earnings before interest, taxes, depreciation and amortization (EBITDA): Net income (loss) (GAAP) less depreciation, and amortization of intangible assets and capitalized software, interest expense and income tax expense. We believe that EBITDA is helpful in assessing our ability to meet the cash demands of our operating units.

Adjusted net income: Net income (loss) (GAAP) less amortization of intangible assets, net of income tax effect calculated at the statutory tax rate. We believe that adjusted net income (loss) is helpful in assessing our financial performance exclusive of the non-cash impact of the amortization of purchased intangibles.

Adjusted net income per diluted share: Adjusted net income (loss) divided by weighted average common shares outstanding on a fully diluted basis.

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MOH Reports Second Quarter 2018 Results

Page 23

July 31, 2018

MOLINA HEALTHCARE, INC.

2018 REVISED GUIDANCE

Reconciliation of Non-GAAP Financial Measures

(in millions, except per-share amounts)



	Low End		High End
Net income	$	471	$	484
Adjustments:
Depreciation, and amortization of intangible assets and capitalized software	125		125
Interest expense	115		115
Income tax expense	257		261
EBITDA	$	968	$	985



	Low End						High End
	Amount			Per share ⁽²⁾			Amount			Per share ⁽²⁾
Net income	$	471		$	7.15		$	484		$	7.35
Adjustments:
Amortization of intangible assets	21			0.32			21			0.32
Income tax effect ⁽¹⁾	(5		)	(0.08		)	(5		)	(0.08		)
Amortization of intangible assets, net of tax effect	16			0.24			16			0.24
Adjusted net income	$	487		$	7.39		$	500		$	7.59

________________________


(1)	Income tax effect calculated at the statutory tax rate of 22%.


(2)	Computation assumes 65.9 million diluted weighted average shares outstanding.

-END-

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