Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Joshua Raskin with Barclays Capital.
Joshua Raskin - Barclays Capital
My question sort of relates to second half earnings run rate and the guidance here. The first quarter you guys reported $0.46, but there was really a $0.04 gain in there; this quarter is $0.56 but $0.18 from tax benefits, so excluding the tax benefit you get about $0.84, you are talking about $1.13 in the second half which seems like a pretty big ramp. You just talked about the muted seasonality expectation and I am actually calculating an MLR that’s about 40 basis or 45 basis points better on a year-over-year basis on the second half and the first half. So, I am just curious how you bridge from 1H09 to the second half of ’09.
John Molina J.D.
I think although it may simple to just exclude what might be 1x items, we don’t detail out every up and down potential change that may or may not reoccur. Certain things happen through out the quarter; we just draw your attention to a couple of them that sort of stick out. So, what I would say is in terms of the back half of the year we have given our best estimate of guidance of being $2.15 and so we expect to bridge the gap between where we are at the end of Q2 to get to $2.15.
Joshua Raskin - Barclays Capital
Maybe then I could ask it another way. It looks like the guidance implies a much better earnings run rate in the second half than the first half. I am just curious what some of those positive factors are that would lead to that?
John Molina J.D.
I think the rate increases are a big factor in that Josh. We didn’t have those in January.
Mario Molina M.D
We are also expecting some decrease in medical costs in the second half of the year and we are making some progress on the contracting front. So, there are a number of things that we think will lead the second half to be better than the first half.
Joshua Raskin - Barclays Capital
Okay and then just a follow up, could you walk us through the timing; it didn’t sound as bad, obviously, in the first quarter and it looks like you guys were still buying back stock in the second quarter so how did this sort of develop and what were some of the indicators and how comfortable are you that you sort of figured out what the new run rate is?
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