-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OR+MEYjTPvmR6RdJjtckzXJmMIOSroBr6mvFTGeNbG9YHIqIFRM3kD8IteLgK2L7 i95AFkp/t7DgI9/VGgvfcA== 0000950133-99-002312.txt : 19990630 0000950133-99-002312.hdr.sgml : 19990630 ACCESSION NUMBER: 0000950133-99-002312 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990629 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COVENTRY HEALTH CARE INC CENTRAL INDEX KEY: 0001054833 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-OFFICES & CLINICS OF DOCTORS OF MEDICINE [8011] IRS NUMBER: 522073000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 11-K SEC ACT: SEC FILE NUMBER: 000-29676 FILM NUMBER: 99655510 BUSINESS ADDRESS: STREET 1: 6705 ROCKLEDGE DR STE 100 CITY: BETHESDA STATE: MD ZIP: 20817 BUSINESS PHONE: 3015810600 MAIL ADDRESS: STREET 1: 6705 ROCKLEDGE DR SUITE 100 STREET 2: STE 250 CITY: BETHESDA STATE: MD ZIP: 20817 11-K 1 FORM 11-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------------ FORM 11-K ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One): [ X ] ANNUAL REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934. For the fiscal year ended December 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 . For the transition period from ___________ to ________________ Commission file number 000-19147 A. Full title of the plan and the address of the plan, if different from that of the issuer named below: COVENTRY CORPORATION RETIREMENT SAVINGS PLAN 6705 Rockledge Drive, Suite 900 Bethesda, MD 20817 B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: COVENTRY HEALTH CARE, INC. 6705 Rockledge Drive, Suite 900 Bethesda, MD 20817 2 REQUIRED INFORMATION 1) Financial Statements and Schedules (and Notes thereto) 2) Consent of Independent Accountants to Incorporation By Reference (attached) SIGNATURES Coventry Corporation Retirement Savings Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan Administrators have duly caused this Annual Report to be signed on its behalf by the undersigned hereunto duly authorized. COVENTRY CORPORATION RETIREMENT SAVINGS PLAN Date: June 25, 1999 By: /s/ DALE B. WOLF ----------------------------------------------- Dale B. Wolf, Plan Adminstrator By: /s/ HARVEY C. DEMOVICK, JR. ----------------------------------------------- Harvey C. DeMovick, Jr., Plan Administrator 3 COVENTRY CORPORATION RETIREMENT SAVINGS PLAN FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND 1997 TOGETHER WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 4 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Administrative Committee of the Coventry Corporation Retirement Savings Plan: We have audited the accompanying statements of net assets available for benefits of Coventry Corporation Retirement Savings Plan (the "Plan") as of December 31, 1998 and 1997, and the related statement of changes in net assets available for benefits for the year ended December 31, 1998. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 1998 and 1997, and the changes in its net assets available for benefits for the year ended December 31, 1998, in conformity with generally accepted accounting principles. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of assets held for investment purposes and reportable transactions are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ ARTHUR ANDERSEN LLP Baltimore, Maryland June 25, 1999 5 COVENTRY CORPORATION RETIREMENT SAVINGS PLAN TABLE OF CONTENTS
PAGE STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS As of December 31, 1998 and 1997 1 STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS For the Year Ended December 31, 1998 2 NOTES TO FINANCIAL STATEMENTS AND SCHEDULES As of December 31, 1998 and 1997 4 ITEM 27(a) - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES As of December 31, 1998 10 ITEM 27(d)--SCHEDULE OF REPORTABLE TRANSACTIONS For the Year Ended December 31, 1998 11 SCHEDULES OMITTED BECAUSE THERE WERE NO SUCH ITEMS As of and for the Year Ended December 31, 1998: Item 27(b) - Schedule of Loans or Fixed-Income Obligations Item 27(c) - Schedule of Leases in Default or Classified as Uncollectible Item 27(e) - Schedule of Nonexempt Transactions
6 COVENTRY CORPORATION RETIREMENT SAVINGS PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS AS OF DECEMBER 31, 1998 AND 1997
ASSETS: 1998 1997 --------------- ---------------- Cash $ 157 $ 127,331 Investments, at fair value- Schwab U.S Treasury Money Fund - 3,154 Coventry Corporation Common Stock 987 2,752,025 Berger One Hundred Fund - 7,084,603 Fidelity Magellan Fund - 13,573,356 INVESCO Stable Value Fund 293 4,667,358 PIMCO Total Return Fund 187 3,833,215 Brandywine Fund 543 1,426,543 Founders Balanced Fund - 714,773 Harbor Capital Appreciation Fund 377 1,093,314 Janus Worldwide Fund 699 2,205,999 Mutual Series Beacon Fund 276 2,110,302 PBHG Growth Fund 829 2,083,797 Strong Government Securities Fund - 433,964 Vanguard Asset Allocation Fund - 7,174,083 Participant Loans - 1,088,159 --------------- ---------------- Total cash and investments $ 4,348 $ 50,371,976 --------------- ---------------- Receivables: Participant contributions - 31,585 Employer contributions - 58,362 Interest and dividends receivable - 48,117 --------------- ---------------- Total receivables - 138,064 --------------- ---------------- Total assets available for benefits - 50,510,040 --------------- ---------------- LIABILITIES: Excess contributions payable - 154,993 --------------- ---------------- NET ASSETS AVAILABLE FOR BENEFITS $ 4,348 $ 50,355,047 =============== ================
The accompanying notes are an integral part of these statements. - 1 - 7 COVENTRY CORPORATION RETIREMENT SAVINGS PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEAR ENDED DECEMBER 31, 1998
NON-PARTICIPANT DIRECTED ----------------------------------------------- EXCESS CONTRIBUTIONS PAYABLE CASH ------------------------------ --------------- ADDITIONS: Contributions- Employee $ (65,355) $ 134,729 Employer, net of forfeitures - 20,264 ------------- ------------- Total contributions (65,355) 154,993 ------------- ------------- Investment income- Interest and dividends 157 - Net increase (decrease) in fair market value of investments - - ------------- ------------- Total investment income 157 - ------------- ------------- Total additions (65,198) 154,993 ------------- ------------- DEDUCTIONS: Benefit distributions - - Administrative expenses - - ------------- ------------- Total deductions - - ------------- ------------- PARTICIPANT LOAN REPAYMENTS - - PARTICIPANT LOAN DISTRIBUTIONS - - INTERFUND TRANSFERS - - TRANSFERS (TO) FROM THE COVENTRY HEALTH CARE, INC. RETIREMENT SAVINGS PLAN (61,976) - ------------- ------------- NET (DECREASE) INCREASE (127,174) 154,993 NET ASSETS AVAILABLE FOR BENEFITS, beginning of year 127,331 (154,993) ------------- ------------- NET ASSETS AVAILABLE FOR BENEFITS, end of year $ 157 $ - ============= ============= ------------------------------------------------------ COVENTRY CORPORATION SCHWAB U.S. TREASURY MONEY COMMON STOCK FUND ----------------------- ------------------------------ ADDITIONS: Contributions- Employee $ 149,421 $ - Employer, net of forfeitures 1,519,112 - --------------- ------------------ Total contributions 1,668,533 - --------------- ------------------ Investment income- 2,930 - Interest and dividends Net increase (decrease) in fair market value of investments - (1,997,573) --------------- ------------------ Total investment income 2,930 (1,997,573) --------------- ------------------ Total additions 1,671,463 (1,997,573) --------------- ------------------ DEDUCTIONS: Benefit distributions - (205,306) Administrative expenses - - --------------- ------------------ Total deductions - (205,306) --------------- ------------------ PARTICIPANT LOAN REPAYMENTS - 11,627 PARTICIPANT LOAN DISTRIBUTIONS - (15,806) INTERFUND TRANSFERS (1,668,034) 1,616,846 TRANSFERS (TO) FROM THE COVENTRY HEALTH CARE, INC. RETIREMENT SAVINGS PLAN (6,583) (2,160,826) --------------- ------------------ NET (DECREASE) INCREASE (3,154) (2,751,038) NET ASSETS AVAILABLE FOR BENEFITS, beginning of year 3,154 2,752,025 --------------- ------------------ NET ASSETS AVAILABLE FOR BENEFITS, end of year $ - $ 987 =============== ================== PARTICIPANT DIRECTED ---------------------------------------------------- BERGER ONE HUNDRED FUND ------------------------- FIDELITY MAGELLAN FUND ------------------------- ADDITIONS: Contributions- Employee $ 138,621 $ 356,915 Employer, net of forfeitures (14,451) (30,510) ------------------ -------------------- Total contributions 124,170 326,405 ------------------ -------------------- Investment income- Interest and dividends 5,088 389,718 Net increase (decrease) in fair market value of investments (558,136) 350,324 ------------------ -------------------- Total investment income (553,048) 740,042 ------------------ -------------------- Total additions (428,878) 1,066,447 ------------------ -------------------- DEDUCTIONS: Benefit distributions (685,853) (1,022,401) Administrative expenses (75) (150) ------------------ -------------------- Total deductions (685,928) (1,022,551) ------------------ -------------------- PARTICIPANT LOAN REPAYMENTS 21,076 32,658 PARTICIPANT LOAN DISTRIBUTIONS (42,865) (99,530) INTERFUND TRANSFERS (783,339) (536,162) TRANSFERS (TO) FROM THE COVENTRY HEALTH CARE, INC. RETIREMENT SAVINGS PLAN (5,164,669) (13,014,218) ------------------ -------------------- NET (DECREASE) INCREASE (7,084,603) (13,573,356) NET ASSETS AVAILABLE FOR BENEFITS, beginning of year 7,084,603 13,573,356 ------------------ -------------------- NET ASSETS AVAILABLE FOR BENEFITS, end of year $ - $ - ================== ==================== ---------------------------------------------------------- PIMCO TOTAL INVESCO STABLE RETURN FUND VALUE FUND ------------- BRANDYWINE FUND SUBTOTAL ---------------- --------------- ------------ ADDITIONS: Contributions- Employee $ 171,529 $ 136,833 $ 294,611 $ 1,317,304 Employer, net of forfeitures 133,501 (5,098) (3,658) 1,619,160 ------------- ----------- ------------ ------------ Total contributions 305,030 131,735 290,953 2,936,464 ------------- ----------- ------------ ------------ Investment income- Interest and dividends 211,919 179,658 3,918 793,388 Net increase (decrease) in fair market value of investments (5,604) 176,408 (232,861) (2,267,442) ------------- ----------- ------------ ------------ Total investment income 206,315 356,066 (228,943) (1,474,054) ------------- ----------- ------------ ------------ Total additions 511,345 487,801 62,010 1,462,410 ------------- ----------- ------------ ------------ DEDUCTIONS: Benefit distributions (849,801) (379,805) (139,734) (3,282,900) Administrative expenses - (75) - (300) ------------- ----------- ------------ ------------ Total deductions (849,801) (379,880) (139,734) (3,283,200) ------------- ----------- ------------ ------------ PARTICIPANT LOAN REPAYMENTS 18,853 16,638 17,602 118,454 PARTICIPANT LOAN DISTRIBUTIONS (34,021) (23,439) (24,569) (240,230) INTERFUND TRANSFERS 529,817 (2,318) 22,286 (820,904) TRANSFERS (TO) FROM THE COVENTRY HEALTH CARE, INC. RETIREMENT SAVINGS PLAN (4,843,258) (3,931,830) (1,363,595) (30,546,955) ------------- ----------- ------------ ------------ NET (DECREASE) INCREASE (4,667,065) (3,833,028) (1,426,000) (33,310,425) NET ASSETS AVAILABLE FOR BENEFITS, beginning of year 4,667,358 3,833,215 1,426,543 33,312,592 ------------- ----------- ------------ ------------ NET ASSETS AVAILABLE FOR BENEFITS, end of year $ 293 $ 187 $ 543 $ 2,167 ============= =========== ============ ============
2 8 COVENTRY CORPORATION RETIREMENT SAVINGS PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEAR ENDED DECEMBER 31, 1998 (CONTINUED)
--------------------------------------------- HARBOR CAPITAL FOUNDERS BALANCED FUND APPRECIATION FUND ------------------------ -------------------- ADDITIONS Contributions- Employee $ 108,269 $ 275,737 Employer, net of forfeitures (992) (3,473) -------------- ---------------- Total contributions 107,277 272,264 -------------- ---------------- Investment income- Interest and dividends 17,211 2,941 Net increase (decrease) in fair market value of investments 29,714 (12,211) -------------- ---------------- Total investment income 46,925 (9,270) -------------- ---------------- Total additions 154,202 262,994 -------------- ---------------- DEDUCTIONS: Benefit distributions (124,505) (199,612) Administrative expenses - - -------------- ---------------- Total deductions (124,505) (199,612) -------------- ---------------- PARTICIPANT LOAN REPAYMENTS 17,026 14,485 PARTICIPANT LOAN DISTRIBUTIONS (11,982) (25,879) INTERFUND TRANSFERS 26,653 600,768 TRANSFERS (TO) FROM THE COVENTRY HEALTH CARE, INC. RETIREMENT SAVINGS PLAN (776,167) (1,745,693) -------------- ---------------- NET (DECREASE) INCREASE (714,773) (1,092,937) NET ASSETS AVAILABLE FOR BENEFITS, beginning of year 714,773 1,093,314 -------------- ---------------- NET ASSETS AVAILABLE FOR BENEFITS, end of year $ - $ 377 ============== ================ ---------------------------------------------------- MUTUAL SERIES JANUS WORLDWIDE BEACON FUND PBHG GROWTH FUND ---------------- FUND ----------------- --------------- ADDITIONS Contributions- Employee $ 327,012 $ 342,502 $ 345,461 Employer, net of forfeitures (6,513) (5,176) (2,711) -------------- -------------- --------------- Total contributions 320,499 337,326 342,750 -------------- -------------- --------------- Investment income- Interest and dividends 6,204 52,227 8,738 Net increase (decrease) in fair market value of investments 78,044 (226,001) (392,624) -------------- -------------- --------------- Total investment income 84,248 (173,774) (383,886) -------------- -------------- --------------- Total additions 404,747 163,552 (41,136) -------------- -------------- --------------- DEDUCTIONS: Benefit distributions (428,617) (259,749) (202,584) Administrative expenses 36 - - -------------- -------------- --------------- Total deductions (428,581) (259,749) (202,584) -------------- -------------- --------------- PARTICIPANT LOAN REPAYMENTS 30,978 33,683 41,915 PARTICIPANT LOAN DISTRIBUTIONS (23,901) (26,374) (36,954) INTERFUND TRANSFERS 182,297 (81,560) (285,651) TRANSFERS (TO) FROM THE COVENTRY HEALTH CARE, INC. RETIREMENT SAVINGS PLAN (2,370,840) (1,939,578) (1,558,558) -------------- -------------- --------------- NET (DECREASE) INCREASE (2,205,300) (2,110,026) (2,082,968) NET ASSETS AVAILABLE FOR BENEFITS, beginning of year 2,205,999 2,110,302 2,083,797 -------------- -------------- --------------- NET ASSETS AVAILABLE FOR BENEFITS, end of year $ 699 $ 276 $ 829 ============== ============== =============== -------------------------------------------------- STRONG VANGUARD ASSET GOVERNMENT ALLOCATION FUND PARTICIPANT SECURITIES FUND ----------------- LOANS ---------------- -------------- ADDITIONS Contributions- Employee $ 61,352 $ 333,878 $ - Employer, net of forfeitures (2,893) (21,000) - -------------- -------------- --------------- Total contributions 58,459 312,878 - -------------- -------------- --------------- Investment income- Interest and dividends 21,357 72,295 - Net increase (decrease) in fair market value of investments 20,650 622,384 - -------------- -------------- --------------- Total investment income 42,007 694,679 - -------------- -------------- --------------- Total additions 100,466 1,007,557 - -------------- -------------- --------------- DEDUCTIONS: Benefit distributions (36,743) (602,551) (209,861) Administrative expenses - (75) - -------------- -------------- --------------- Total deductions (36,743) (602,626) (209,861) -------------- -------------- --------------- PARTICIPANT LOAN REPAYMENTS 3,975 24,991 (285,507) PARTICIPANT LOAN DISTRIBUTIONS (2,224) (34,537) 402,081 INTERFUND TRANSFERS 118,027 260,370 - TRANSFERS (TO) FROM THE COVENTRY HEALTH CARE, INC. RETIREMENT SAVINGS PLAN (617,465) (7,829,838) (994,872) -------------- -------------- --------------- NET (DECREASE) INCREASE (433,964) (7,174,083) (1,088,159) NET ASSETS AVAILABLE FOR BENEFITS, beginning of year 433,964 7,174,083 1,088,159 -------------- -------------- --------------- NET ASSETS AVAILABLE FOR BENEFITS, end of year $ - $ - $ - ============== ============== =============== --------------- RECEIVABLES TOTAL --------------- -------------- ADDITIONS Contributions- Employee $ (31,585) $ 3,079,930 Employer, net of forfeitures (58,362) 1,518,040 --------------- -------------- Total contributions (89,947) 4,597,970 --------------- -------------- Investment income- Interest and dividends (48,117) 926,244 Net increase (decrease) in fair market value of investments - (2,147,486) --------------- -------------- Total investment income (48,117) (1,221,242) --------------- -------------- Total additions (138,064) 3,376,728 --------------- -------------- DEDUCTIONS: Benefit distributions - (5,347,122) Administrative expenses - (339) --------------- -------------- Total deductions - (5,347,461) --------------- -------------- PARTICIPANT LOAN REPAYMENTS - - PARTICIPANT LOAN DISTRIBUTIONS - - INTERFUND TRANSFERS - - TRANSFERS (TO) FROM THE COVENTRY HEALTH CARE, INC. RETIREMENT SAVINGS PLAN - (48,379,966) --------------- -------------- NET (DECREASE) INCREASE (138,064) (50,350,699) NET ASSETS AVAILABLE FOR BENEFITS, beginning of year 138,064 50,355,047 --------------- -------------- NET ASSETS AVAILABLE FOR BENEFITS, end of year $ - $ 4,348 =============== ==============
3 9 COVENTRY CORPORATION RETIREMENT SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS AND SCHEDULES AS OF DECEMBER 31, 1998 AND 1997 1. PLAN DESCRIPTION: The following description of the Coventry Corporation Retirement Savings Plan (the "Plan") is provided for general information purposes only. More complete information regarding the Plan's provisions may be found in the Plan document. GENERAL Coventry Corporation (the "Company") adopted a savings plan and trust effective July 1, 1994. As of the adoption date, Group Health Plan, Inc. and Health America Pennsylvania, Inc., subsidiaries of Coventry Corporation, merged their plans with the Coventry Corporation Retirement Savings Plan. Two additional subsidiaries' plans, Southern Health and Healthcare USA, were merged into the Plan during 1996. The Plan is a defined contribution plan established by Coventry Corporation under the provisions of Section 401(a) of the Internal Revenue Code ("IRC"), which includes a qualified cash or deferred arrangement as described in Section 401(k) of the IRC, for the benefit of eligible employees of the Company. All employees of the Company who have completed one year of service, as defined, are eligible to participate. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended. Effective April 1, 1998, Coventry Corporation (which changed its name to "Coventry Health Care, Inc.") completed its acquisition of certain assets of Principal Health Care, Inc. ("PHC") from Principal Life Insurance Company. On April 1, 1998, the Coventry Health Care, Inc. Retirement Savings Plan (the "New Plan") was established and any prior PHC participant account balances included in the assets of another qualified retirement plan were rolled over into the New Plan at the election of the former PHC employees. Effective October 1, 1998, the Plan was merged with the New Plan. All employees that were participants under the Plan became participants in the New Plan. On October 1, 1998, substantially all of the Plan's assets were merged and transferred to: (1) Principal Life Insurance Company, as funding agent of the assets held under the terms of the Flexible Investment Annuity Contract with Coventry Health Care, Inc., (2) Delaware Charter Guarantee and Trust Company, as custodial trustee of the electronically linked mutual funds and (3) Bankers Trust Company, as custodial trustee of the New Plan's participant loans and the Coventry Health Care, Inc. common stock. Participants should refer to the New Plan document for a complete description of their available investment options subsequent to October 1, 1998. The significant differences between the provisions of the Coventry Corporation Retirement Savings Plan and the New Plan are as follows: (1) the employer matching contributions under the New Plan are invested exclusively in Coventry Health Care, Inc. common stock under the direction of Coventry Health Care, Inc.; (2) the New Plan's vesting provisions allow participants to vest in the employer matching contributions upon completion of two years of service, and; (3) the administrative expenses of the Plan, including, but not limited to the trustee and investment management fees, will be paid by the Plan and allocated to the participant account balances, effective January 1, 1999. Participants should refer to the New Plan document for a complete description of the New Plan's provisions. PLAN ADMINISTRATION Under a trust agreement dated July 1, 1994, Charles Schwab Trust Company was appointed trustee for the Plan. The Plan is administered by an employee benefits committee, which is appointed by the Board of Directors of the Company. CONTRIBUTIONS Eligible employees can contribute an amount up to 15 percent of compensation, as defined by the Plan, subject to certain limitations under the IRC. In 1998 and 1997, the Company provided a matching contribution equal to 100 percent of each participant's contribution up to a maximum of 3 percent of compensation, and 50 percent of each participant's contribution in excess of 3 percent up to a maximum of 6 percent of compensation. 4 10 EXCESS CONTRIBUTIONS PAYABLE During 1997, the Company determined that an excess matching contribution equal to approximately $20,264 was made in error to employees. This amount was used to reduce 1998 employer contributions. In addition, during 1997 employee contributions included $134,729 in excess contributions which were returned to participants in 1998 as the contributions were determined to be in excess of maximum contribution level for certain participants. A liability for excess contributions payable in the amount of $154,993 was reflected in the statement of net assets available for benefits as of December 31, 1997. VESTING Participants are fully vested in their contributions and the earnings thereon. Vesting in employer matching contributions is based on years of continuous service. Prior to January 1, 1998, a participant vests according to the following schedule: Less than one year 0% One year 20% Two years 40% Three years 60% Four years 80% Five years 100%
Matching contributions made on or after January 1, 1998 are subject to the following vesing schedule: Less than one year 0% One year 50% Two years or more 100%
FORFEITED ACCOUNTS At December 31, 1997, forfeited nonvested accounts totaled $275,173. Effective October 1, 1998, any forfeited nonvested account balances were transferred to the New Plan. During 1998 and 1997, respectively, $22,461 and $800,747 in forfeited nonvested accounts were used to reduce employer contributions. BENEFITS Upon termination of service due to death, disability, or retirement, a participant may elect to receive an amount equal to the value of the participant's vested interest in his or her account. The form of payment is a lump-sum distribution. PARTICIPANT ACCOUNTS Individual accounts are maintained for each of the Plan's participants to reflect the participant's contributions and related employer matching contributions, as well as the participant's share of the Plan's income and any related administrative expenses. Allocations are based on the proportion that each participant's account balance has to the total of all participants' account balances. INVESTMENT OPTIONS Prior to January 1, 1998, participants could direct employee and employer contributions and any related earnings into thirteen investment options in 10 percent increments. Effective January 1, 1998, employer contributions are funded with Coventry Health Care, Inc. common stock. Participants may change their investment elections daily. A description of each investment option is provided below: COVENTRY CORPORATION COMMON STOCK - This fund invests exclusively in common stock of the Company, which is traded "over-the-counter" and listed on the NASDAQ/National Market System. Pending trades are temporarily held in the Schwab U.S. Treasury Money Fund. BERGER ONE HUNDRED FUND - This fund seeks long-term capital appreciation by investing primarily in common stocks of established companies. FIDELITY MAGELLAN FUND - This fund seeks growth of capital through investments in common stocks or securities convertible into common stock. 5 11 INVESCO STABLE VALUE FUND - This fund seeks to offer income levels comparable to those generated by intermediate-term, high-quality debt obligations, while guaranteeing principal. The fund is a conservatively managed, broadly diversified pool of investment contracts guaranteed by insurance companies. PIMCO TOTAL RETURN FUND - This fund seeks to earn total return consistent with conservative investment management. The fund invests in fixed-income securities, including corporate bonds, U.S. government securities, mortgage-related securities, and money market instruments. BRANDYWINE FUND - This fund seeks long-term capital appreciation by investing in profitable companies with strong earnings momentum. The fund invests primarily in corporate stock. FOUNDERS BALANCED FUND - This fund seeks to earn current income and capital appreciation by investing in dividend-paying stocks of established companies, government and corporate bonds. HARBOR CAPITAL APPRECIATION FUND - This fund seeks long-term growth of capital by investing primarily in a portfolio of equity securities of established companies with above average prospects for growth. JANUS WORLDWIDE FUND - This fund invests primarily in stocks of foreign and domestic issuers. MUTUAL SERIES BEACON FUND - This fund invests primarily in common stock, preferred stock and debt securities. The principal objective of the fund is capital appreciation. Its secondary objective is income. PBHG GROWTH FUND - This fund invests in companies believed by its investment advisor to have an outlook for strong growth in earnings and the potential for significant capital appreciation. STRONG GOVERNMENT SECURITIES FUND - This fund seeks a high level of current income by investing in U.S. government securities. VANGUARD ASSET ALLOCATION FUND - This fund seeks to maximize total return while exhibiting less risk than a portfolio consisting entirely of equities. The fund allocates assets among a common stock portfolio, a bond portfolio and money market instruments. PARTICIPANT LOANS A participant may borrow a maximum of the lesser of $50,000 or 50 percent of his or her vested account balance with a minimum loan amount of $500. Loans are repayable through payroll deductions over periods ranging up to five years. The interest rate is determined by the plan administrator based on prevailing market rates available for similar loans from commercial lending institutions and is fixed over the life of the note. The interest rates at December 31, 1997, ranged from 7.00 percent to 10.00 percent. There were no participant loans at December 31, 1998. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: BASIS OF ACCOUNTING The accompanying financial statements are prepared on the accrual basis of accounting. USE OF ESTIMATES The preparation of the financial statements in conformity with generally accepted accounting principles requires the Plan's management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. INCOME RECOGNITION Interest income is recorded as earned on the accrual basis. Dividend income is recorded on the ex-dividend date. INVESTMENT VALUATION Investments of the Plan are stated at fair market value based on quoted net asset values on the last business day of the Plan year. Participant loans are valued at cost, which approximates fair value. ADMINISTRATIVE EXPENSES The Company pays all administrative expenses of the Plan, except for the administrative costs of mutual funds and loan processing fees. Administrative expenses paid by the Company were $183,369 and $186,749 in 1998 and 1997, respectively. PAYMENT OF BENEFITS 6 12 Benefits are recorded when paid out of the Plan. 3. INVESTMENTS: The values of individual assets that represent 5 percent or more of the Plan's net assets as of December 31, 1998 and December 31, 1997, are as follows: DECEMBER 31, 1998: Coventry Corporation Common Stock $ 987 INVESCO Stable Value Fund 293 Brandywine Fund 543 Harbor Capital Appreciation Fund 377 Janus Worlwide Fund 699 Mutual Series Beacon Fund 276 PBHG Growth Fund 829
7 13 DECEMBER 31, 1997: Coventry Corporation Common Stock $ 2,752,025 Berger One Hundred Fund 7,084,603 Fidelity Magellan Fund 13,573,356 INVESCO Stable Value Fund 4,667,358 PIMCO Total Return Fund 3,833,215 Vanguard Asset Allocation Fund 7,174,083
4. TAX STATUS: The Plan obtained it's latest determination letter on November 17, 1997, in which the Internal Revenue Service stated that the Plan, as then designed, was in compliance with the applicable requirements of the IRC. The Plan has been amended since receiving the determination letter. However, the Plan Administrator believes that the Plan is currently designed and is being operated in compliance with the applicable requirements of the IRC. Therefore, no provision for income taxes has been included in the Plan's financial statements. 5. DEPARTMENT OF LABOR REVIEW: The Department of Labor (DOL) conducted a review of the Plan through January 1997 to determine if the Plan has been operated in accordance with the DOL's rules and regulations. In the opinion of the Plan's Administrator, the review will not result in any findings that could have a material adverse effect on the Plan. 6. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500: The following is a reconciliation of net assets available for benefits per the accompanying financial statements to the Plan's Form 5500 tax filing:
DECEMBER 31 ------------------------------------------- 1998 1997 -------------------- ------------------- Net assets available for benefits per the accompanying financial statements $ 4,348 $ 50,355,047 Amounts allocated to withdrawing participants (4,348) (14,952) ---------------- ----------------- Net assets available for benefits per the Form 5500 $ - $ 50,340,095 ================ =================
8 14 The following is a reconciliation of benefits paid to participants per the accompanying financial statements to the Plan's Form 5500 tax filing:
YEAR ENDED DECEMBER 31, 1998 -------------------- Benefits paid to participants per the accompanying financial statements $5,347,122 Less- Amounts allocated to withdrawing participants at December 31, 1997 (14,952) Add- Amounts allocated to withdrawing participants at December 31, 1998 4,348 ------------- Benefits paid to participants per the Form 5500 $5,336,518 =============
Amounts allocated to withdrawing participants are recorded on the Form 5500 for benefit claims that have been processed and approved for payment prior to December 31, but not yet paid as of that date. 9 15 SCHEDULE I COVENTRY CORPORATION RETIREMENT SAVINGS PLAN ITEM 27(a) - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AS OF DECEMBER 31, 1998
IDENTITY OF ISSUE, BORROWER, LESSOR, OR SIMILAR PARTY DESCRIPTION OF INVESTMENT COST CURRENT VALUE ---------------------------- ------------------------- -------------- ---------------- * Charles Schwab Cash $ 157 $ 157 * Coventry Corporation Common stock 987 987 INVESCO Stable Value Fund Fixed income fund 293 293 PIMCO Total Return Fund Fixed income fund 187 187 Brandywine Fund Equity mutual fund 543 543 Harbor Capital Appreciation Fund Equity mutual fund 377 377 Janus Worldwide Fund Equity mutual fund 699 699 Mutual Series Beacon Fund Mixed mutual fund 276 276 PBHG Growth Fund Equity mutual fund 829 829 ------------- ------------- $ 4,348 $ 4,348 ============= =============
* Party-in-interest The accompanying notes are an integral part of this schedule. 10 16 SCHEDULE II COVENTRY CORPORATION RETIREMENT SAVINGS PLAN ITEM 27(d)--SCHEDULE OF REPORTABLE TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 1998
PURCHASES ------------------------------------------ IDENTITY OF PARTY INVOLVED DESCRIPTION OF ASSET NUMBER OF TRANSACTIONS PURCHASE PRICE ----------------------------- ------------------------------------ ---------------------- --------------- * Charles Schwab Trust Company Berger One Hundred Fund 105 $ 395,485 * Charles Schwab Trust Company Fidelity Magellan Fund 108 1,093,756 * Charles Schwab Trust Company INVESCO Stable Value Fund 140 1,753,891 * Charles Schwab Trust Company PIMCO Total Return Fund 78 581,037 * Charles Schwab Trust Company Vanguard Asset Allocation Fund 104 1,056,022 * Charles Schwab Trust Company Coventry Corporation Common Stock 148 1,975,844 * Charles Schwab Trust Company Janus Worldwide Fund 100 936,601 * Charles Schwab Trust Company Mutual Series Beacon Fund 76 803,832 SALES ------------------------------------------------- IDENTITY OF PARTY INVOLVED DESCRIPTION OF ASSET NUMBER OF TRANSACTIONS SELLING PRICE ----------------------------- ------------------------------------ ------------------------ -------------------- * Charles Schwab Trust Company Berger One Hundred Fund 154 $ 6,921,953 * Charles Schwab Trust Company Fidelity Magellan Fund 126 15,017,436 * Charles Schwab Trust Company INVESCO Stable Value Fund 153 6,415,645 * Charles Schwab Trust Company PIMCO Total Return Fund 155 4,590,660 * Charles Schwab Trust Company Vanguard Asset Allocation Fund 155 8,852,489 * Charles Schwab Trust Company Coventry Corporation Common Stock 159 2,726,192 * Charles Schwab Trust Company Janus Worldwide Fund 148 3,220,644 * Charles Schwab Trust Company Mutual Series Beacon Fund 154 2,688,132 SALES ---------------------------------------------------- IDENTITY OF PARTY INVOLVED DESCRIPTION OF ASSET COST OF ASSETS NET GAIN (LOSS) ----------------------------- ------------------------------------ --------------------- --------------------- * Charles Schwab Trust Company Berger One Hundred Fund $ 9,602,299 $(2,680,346) * Charles Schwab Trust Company Fidelity Magellan Fund 12,209,796 2,807,640 * Charles Schwab Trust Company INVESCO Stable Value Fund 6,415,625 20 * Charles Schwab Trust Company PIMCO Total Return Fund 4,334,035 256,625 * Charles Schwab Trust Company Vanguard Asset Allocation Fund 7,366,360 1,486,129 * Charles Schwab Trust Company Coventry Corporation Common Stock 5,098,874 (2,372,682) * Charles Schwab Trust Company Janus Worldwide Fund 3,093,402 127,242 * Charles Schwab Trust Company Mutual Series Beacon Fund 2,899,653 (211,521)
* Party-in-interest The accompanying notes are an integral part of this schedule. 11 EX-1 2 CONSENT OF ARTHUR ANDERSEN LLP 1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our report dated June 25, 1999, included in this Form 11-K, into the Company's previously filed registration statements on Form S-8 (File No. 333-36735 and File No. 333-39581). /s/ ARTHUR ANDERSEN LLP ----------------------- Baltimore, Maryland June 25, 1999 -----END PRIVACY-ENHANCED MESSAGE-----