Document:

pressrelease.htm

Back to Form 8-K

Exhibit 99.1

	
CONTACTS:

	  	  
	
Investor relations:

	  	
Media relations:

	
Gregg Haddad

	  	
Crystal Warwell Walker

	
813-206-3916

	  	
813-206-2697

	
gregg.haddad@wellcare.com

	  	
crystal.walker@wellcare.com

 

WELLCARE REPORTS THIRD QUARTER 2012 RESULTS

Tampa, Florida (October 31, 2012) – WellCare Health Plans, Inc. (NYSE: WCG) today reported results for the third quarter and nine months ended September 30, 2012.  As determined under generally accepted accounting principles (“GAAP”), net income for the third quarter of 2012 was $38.3 million, or $0.87 per diluted share, compared with $88.3 million, or $2.03 per diluted share, for the third quarter of 2011.  Adjusted net income for the third quarter of 2012 was $46.2 million, or $1.05 per diluted share, compared with $93.2 million, or $2.15 per diluted share, for the third quarter of 2011.

WellCare’s third quarter 2012 results were below the Company’s expectation, principally as a result of an isolated matter in the Georgia Medicaid program, as well as lower-than-targeted performance of the Kentucky Medicaid program.  In the Georgia program, premium revenue was reduced by $18 million in the third quarter of 2012 related to an unanticipated partial disallowance by the Centers for Medicare & Medicaid Services of a 2011 settlement.  The settlement resolved issues with certain premium payments that covered the period from the inception of the program through the settlement and resulted from a comprehensive review and negotiation involving the three health plans that operate in the program.  The Company is in discussions with the state regarding a resolution to this matter.

In addition, WellCare’s Kentucky Medicaid program operating results for the third quarter 2012 were below the Company’s target, due in part to unfavorable development of medical benefits payable related primarily to fourth quarter of 2011 and first quarter of 2012.  Please refer to the schedule on page 12 of this news release that reconciles the Kentucky program medical benefits ratio (“MBR”) as determined in accordance with GAAP to an MBR recast to reflect the development of medical benefits payable in the period in which the services were provided.  During the past few months, the Company has continued to make progress toward its long-term goals for the Kentucky program and anticipates further gains in performance in the coming months.  The improvement is expected to result from the combined effect of medical expense management initiatives and a 3% increase in premium rates that was effective October 1.

As a result of these two issues, WellCare has decreased its guidance for 2012 full year adjusted net income per diluted share to between $4.90 and $5.05.

“Aside from our Georgia Medicaid and Kentucky Medicaid issues, our third quarter results were consistent with our expectations,” said Alec Cunningham, WellCare’s chief executive officer.  “As we plan for 2013, we will continue to execute on our health care quality, access, and service initiatives.  In addition, we have capitalized on several significant and promising growth opportunities during the past few months, and we see a number of similar opportunities available to us over the coming year.”

 

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WCG Reports Third Quarter 2012 Results

Page 2

October 31, 2012

 

Highlights of Recent Accomplishments

	
·  

	
WellCare has entered into an agreement to acquire Easy Choice Health Plan, which as of October 2012 served an estimated 36,000 Medicare Advantage plan members in Los Angeles, Orange, Riverside, and San Bernardino Counties in Southern California.

	
·  

	
The Company recently entered into an agreement to acquire UnitedHealthcare's Medicaid business in South Carolina, which as of October 2012 served approximately 65,000 members in the South Carolina Healthy Connections Choices program.

	
·  

	
WellCare was selected by the Kentucky Cabinet for Health and Human Services to serve the Medicaid program in the Commonwealth's Region 3, including Louisville and 15 surrounding counties, beginning January 1, 2013.

	
·  

	
In Florida, WellCare was approved by the Department of Elder Affairs to expand its Long-Term Care Community Diversion Pilot Project service area by 17 counties, to a total of 19 counties.  In the Florida Medicaid program, WellCare recently expanded its service area by four counties to a total of 42 out of Florida’s 67 counties, the largest service area of the state’s Medicaid plans.  In addition, on October 1, 2012, WellCare launched its expanded service area for the Florida Healthy Kids program, increasing counties served from 18 to 65.

	
·  

	
Medicare Advantage segment membership of 167,000 as of September 30, 2012, was the highest coordinated care plan membership in WellCare’s history.

	
·  

	
WellCare’s Prescription Drug Plan (“PDP”) segment continued to perform better than anticipated, resulting in a 40% increase in PDP gross margin year-over-year.  In conjunction with the Medicare Annual Election Period, the Company launched a new enhanced PDP that offers members a relatively low monthly premium, no deductible, no co-payment on preferred generic drugs, and generic drug coverage in the coverage gap.

Company Operations

Adjusted net income per diluted share for the third quarter of 2012 decreased by $1.10 compared with 2011.  The year-over-year decrease resulted mainly from increases in the Medicaid and Medicare Advantage segments’ MBRs.  These factors were partially offset by higher premium revenue in the Medicaid and Medicare Advantage segments and decreases in the Company’s PDP segment MBR and adjusted administrative expense ratio.

Membership as of September 30, 2012, increased 6% to 2.6 million, compared with 2.4 million members as of September 30, 2011.  Premium revenue for the third quarter of 2012 increased 18% year–over-year to $1.8 billion.  Medical benefits expense for the third quarter of 2012 was $1.5 billion, an increase of 28% from the third quarter of 2011.  The Company MBR was 86.3% in the third quarter of 2012, compared with 79.8% in the third quarter of 2011.

Selling, general, and administrative (“SG&A”) expense as determined under GAAP was $177 million in the third quarter of 2012, compared with $161 million for the same period in 2011.  Adjusted SG&A expense was $165 million in the third quarter of 2012, an increase of 8% from $153 million for the same period last year.  The increase was driven primarily by the Kentucky Medicaid program launched in November 2011, as well as the Company’s growth initiatives.  The adjusted administrative expense ratio was 9.2% in the third quarter of 2012, compared with 10.0% for the same period in 2011.

Medicaid Segment Operations

Medicaid segment membership increased by 202,000, or 15%, year-over-year, to 1.5 million members as of September 30, 2012.  The increase resulted mainly from the 2011 launch of the Kentucky Medicaid program.  In addition, the Company experienced growth in Florida and several other states, offset in part by the end of the Company’s participation in the Missouri program on June 30, 2012.

 

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WCG Reports Third Quarter 2012 Results

Page 3

October 31, 2012

 

Premium revenue was $1.1 billion for the third quarter of 2012, an increase of 22% year-over-year, mainly due to the Kentucky program.  Revenue and gross margin were reduced by the previously described reversal of premium in the Georgia Medicaid program.

The Medicaid segment MBR was 91.1% for the third quarter of 2012, an increase from 80.4% in the third quarter of 2011.  The MBR increase results primarily from challenges associated with the performance of the Kentucky Medicaid program.

Medicare Advantage Segment Operations

Medicare Advantage segment membership increased by 37,000 year-over-year, or 28%, to 167,000 members, which is the highest coordinated care plan membership in WellCare’s history.  Premium revenue grew 25%.  The Medicare Advantage segment MBR was 86.8% in the third quarter of 2012, an increase from 82.0% in the third quarter of 2011.

Prescription Drug Plan Segment Operations

PDP segment membership decreased 88,000 year-over-year, or 9%.  Premium revenue decreased 6%.  The PDP segment MBR was 64.7% in the third quarter of 2012, a decrease from 74.4% in the third quarter of 2011.  The decrease resulted in part from the positioning of the Company’s plans relative to member utilization and cost-sharing patterns and WellCare’s focus on generic medications.

Cash Flow and Financial Condition

Net cash used in operating activities as determined under GAAP was $134 million for the nine months ended September 30, 2012, compared with net cash provided by operating activities of $319 million for the nine months ended September 30, 2011.  As previously disclosed, WellCare has experienced temporary premium payment delays by the Georgia Medicaid program.  Although Georgia repaid a portion of its balance due during the third quarter, the delayed remaining payments had an adverse effect on WellCare’s operating cash flow for the nine months ended September 30, 2012.  Modified for the timing of receipts from, and payments to, WellCare’s government customers, net cash provided by operating activities was $20 million for the first nine months of 2012, compared with $177 million for the first nine months of 2011.

As of September 30, 2012, unregulated cash and investments were approximately $350 million, compared with $168 million as of June 30, 2012.  The increase resulted primarily from a reduction in premiums receivable from the Georgia Medicaid program and dividends received from the Company’s regulated entities, offset in part by capital contributions to certain regulated entities.

Days in claims payable were 40 days as of September 30, 2012, compared with 38 days as of June 30, 2012, and 57 days as of September 30, 2011.

Financial Outlook

WellCare is updating its financial outlook for the year ended December 31, 2012.  The following elements of WellCare’s financial outlook have changed:

	
·  

	
Adjusted net income per diluted share is expected to be between approximately $4.90 and $5.05.  The previous guidance was for adjusted net income per diluted share of between approximately $5.25 and $5.45.  The reduction results principally from the isolated revenue matter associated with the Georgia Medicaid program and lower-than-targeted performance of the Kentucky Medicaid program.

	
·  

	
Premium revenue is expected to be between approximately $7.15 and 7.20 billion.  Previous guidance was for premium revenue to be approximately $7.1 billion.

	
·  

	
The adjusted administrative expense ratio is expected to be in the range of 8.8% to 8.9%.  The prior guidance was for the adjusted administrative expense ratio to be in the range of 8.7% to 8.9%.

 

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WCG Reports Third Quarter 2012 Results

Page 4

October 31, 2012

 

The following elements of WellCare’s financial outlook are unchanged:

	
·  

	
The 2012 Medicaid and Medicare Advantage segments’ MBRs each are anticipated to increase relative to the respective 2011 segment MBRs.

All elements of the Company’s outlook exclude the impact of Medicaid premium taxes.

Webcast

A discussion of WellCare’s third quarter 2012 results will be webcast live on Wednesday, October 31, 2012, beginning at 8:30 a.m. Eastern Time.  A replay will be available beginning approximately one hour following the conclusion of the live broadcast and will be available for 30 days.  The webcast is available via the Company’s web site at www.wellcare.com and at www.earnings.com.

About WellCare Health Plans, Inc.

WellCare Health Plans, Inc. provides managed care services targeted to government-sponsored health care programs, focusing on Medicaid and Medicare.  Headquartered in Tampa, Fla., WellCare offers a variety of health plans for families, children, and the aged, blind, and disabled, as well as prescription drug plans.  The Company served approximately 2.6 million members nationwide as of September 30, 2012.  For more information about WellCare, please visit the Company’s website at www.wellcare.com.

Basis of Presentation

Premium revenue as described in this news release excludes the impact of premium taxes.  Both the Company and segment MBRs, as well as the Company’s administrative expense ratio, are calculated as a percentage of premium revenue, excluding premium taxes.  In addition to results determined under GAAP, net income and certain other operating results described in this news release are reported after adjustment for certain SG&A expenses related to previously disclosed government investigations and related litigation and resolution costs that management believes are not indicative of long-term business operations.  Please refer to the schedule in this news release that provides supplemental information reconciling results determined under GAAP to adjusted results.

Cautionary Statement Regarding Forward-Looking Statements

This news release contains “forward-looking” statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” and similar expressions are forward-looking statements.  For example, statements regarding the Company’s financial outlook, further improvements in the Kentucky Medicaid program, and the timing of the closing of the acquisition of the Medicare Advantage plans in Mohave and Yavapai counties in Arizona and the acquisition of Easy Choice Health Plan, Inc. of California contain forward-looking statements.  Forward-looking statements involve known and unknown risks and uncertainties that may cause WellCare’s actual future results to differ materially from those projected or contemplated in the forward-looking statements.  These risks and uncertainties include, but are not limited to, WellCare’s progress on top priorities such as improving health care quality and access, ensuring a competitive cost position, and delivering prudent, profitable growth, WellCare’s ability to effectively manage growth, WellCare’s ability to address operational challenges relating to new business, WellCare’s ability to effectively execute and integrate acquisitions, and WellCare’s ability to estimate and manage medical benefits effectively.

Additional information concerning these and other important risks and uncertainties can be found under the captions “Forward-Looking Statements” and “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, and in the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2012, and other subsequent filings by WellCare with the U.S. Securities and Exchange Commission, which contain discussions of WellCare’s business and the various factors that may affect it.  WellCare undertakes no duty to update these forward-looking statements to reflect any future events, developments, or otherwise.

 

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WCG Reports Third Quarter 2012 Results

Page 5

October 31, 2012

 

WELLCARE HEALTH PLANS, INC.

SELECTED DATA FROM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited; dollars in thousands except per share data)

	  	 	

For the Three Months 

Ended September 30,

	 	 	

For the Nine Months 

Ended September 30,

	  	 	

2012

	 	 	

2011

	 	 	

2012

	 	 	

2011

	
Revenues:

	 	 	 	 	 	 	 	 	 	 	 
	
Premium

	 	$	1,795,796	 	 	$	1,523,057	 	 	$	5,353,083	 	 	$	4,443,848
	
Medicaid premium taxes

	 	 	20,581	 	 	 	18,869	 	 	 	61,048	 	 	 	55,838
	
Total premium

	 	 	1,816,377	 	 	 	1,541,926	 	 	 	5,414,131	 	 	 	4,499,686
	
Investment and other income

	 	 	2,018	 	 	 	2,433	 	 	 	6,772	 	 	 	7,050
	
Total revenues

	 	 	1,818,395	 	 	 	1,544,359	 	 	 	5,420,903	 	 	 	4,506,736
	
 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Expenses:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Medical benefits

	 	 	1,549,456	 	 	 	1,214,822	 	 	 	4,617,411	 	 	 	3,680,145
	
Selling, general and administrative

	 	 	176,797	 	 	 	160,591	 	 	 	497,493	 	 	 	458,612
	
Medicaid premium taxes

	 	 	20,581	 	 	 	18,869	 	 	 	61,048	 	 	 	55,838
	
Depreciation and amortization

	 	 	8,193	 	 	 	6,453	 	 	 	22,704	 	 	 	19,824
	
Interest

	 	 	1,016	 	 	 	3,648	 	 	 	3,163	 	 	 	3,823
	
Total expenses

	 	 	1,756,043	 	 	 	1,404,383	 	 	 	5,201,819	 	 	 	4,218,242
	
 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Income before income taxes

	 	 	62,352	 	 	 	139,976	 	 	 	219,084	 	 	 	288,494
	
Income tax expense

	 	 	24,065	 	 	 	51,721	 	 	 	83,123	 	 	 	109,309
	
Net income

	 	$	38,287	 	 	$	88,255	 	 	$	135,961	 	 	$	179,185
	
 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Net income per common share:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Basic

	 	$	0.89	 	 	$	2.06	 	 	$	3.16	 	 	$	4.19
	
Diluted

	 	$	0.87	 	 	$	2.03	 	 	$	3.11	 	 	$	4.14
	
 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Weighted average common shares outstanding:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Basic

	 	 	43,149,455	 	 	 	42,887,381	 	 	 	43,070,113	 	 	 	42,757,476
	
Diluted

	 	 	43,844,223	 	 	 	43,424,414	 	 	 	43,785,424	 	 	 	43,285,969

 

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WCG Reports Third Quarter 2012 Results

Page 6

October 31, 2012

 

WELLCARE HEALTH PLANS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited; dollars in thousands except share data)

	  	 	

Sept. 30, 

2012

	 	 	

Dec. 31, 

2011

	 
	
ASSETS

	 
	
Current Assets:

	 	 	 	 	 	 
	
Cash and cash equivalents

	 	$	1,062,340	 	 	$	1,325,098	 
	
Investments

	 	 	209,798	 	 	 	198,569	 
	
Premiums receivable, net

	 	 	393,508	 	 	 	217,509	 
	
Pharmacy rebates receivable, net

	 	 	121,979	 	 	 	109,933	 
	
Funds receivable for the benefit of members

	 	 	219,967	 	 	 	162,745	 
	
Income taxes receivable

	 	 	39,920	 	 	 	20,655	 
	
Prepaid expenses and other current assets, net

	 	 	67,744	 	 	 	63,053	 
	
Deferred income tax asset

	 	 	27,937	 	 	 	22,332	 
	
Total current assets

	 	 	2,143,193	 	 	 	2,119,894	 
	
Property, equipment and capitalized software, net

	 	 	123,875	 	 	 	98,238	 
	
Goodwill

	 	 	111,131	 	 	 	111,131	 
	
Other intangible assets, net

	 	 	8,506	 	 	 	9,896	 
	
Long-term investments

	 	 	87,797	 	 	 	83,019	 
	
Restricted investments

	 	 	66,805	 	 	 	60,663	 
	
Other assets

	 	 	2,480	 	 	 	5,270	 
	
Total Assets

	 	$	2,543,787	 	 	$	2,488,111	 
	
 

	 	 	 	 	 	 	 	 
	
LIABILITIES AND STOCKHOLDERS' EQUITY

	 
	
Current Liabilities:

	 	 	 	 	 	 	 	 
	
Medical benefits payable

	 	$	671,187	 	 	$	744,821	 
	
Unearned premiums

	 	 	141	 	 	 	164	 
	
Accounts payable

	 	 	8,802	 	 	 	3,294	 
	
Other accrued expenses and liabilities

	 	 	197,036	 	 	 	215,817	 
	
Current portion of amount payable related to investigation resolution

	 	 	37,016	 	 	 	49,557	 
	
Current portion of long-term debt

	 	 	15,000	 	 	 	11,250	 
	
Other payables to government partners

	 	 	118,409	 	 	 	98,237	 
	
Total current liabilities

	 	 	1,047,591	 	 	 	1,123,140	 
	
Deferred income tax liability

	 	 	22,573	 	 	 	1,026	 
	
Amount payable related to investigation resolution

	 	 	67,642	 	 	 	101,705	 
	
Long-term debt

	 	 	123,750	 	 	 	135,000	 
	
Other liabilities

	 	 	8,931	 	 	 	10,394	 
	
Total liabilities

	 	 	1,270,487	 	 	 	1,371,265	 
	
Commitments and contingencies

	 	 	–	 	 	 	–	 
	
Stockholders' Equity:

	 	 	 	 	 	 	 	 
	
Preferred stock, $0.01 par value (20,000,000 authorized, no shares issued or outstanding)

	 	 	–	 	 	 	–	 
	
Common stock, $0.01 par value (100,000,000 authorized, 43,199,188 and 42,848,798 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively)

	 	 	431	 	 	 	429	 
	
Paid-in capital

	 	 	468,211	 	 	 	448,820	 
	
Retained earnings

	 	 	805,319	 	 	 	669,358	 
	
Accumulated other comprehensive loss

	 	 	(661	)	 	 	(1,761	)
	
Total stockholders' equity

	 	 	1,273,300	 	 	 	1,116,846	 
	
Total Liabilities and Stockholders' Equity

	 	$	2,543,787	 	 	$	2,488,111	 

 

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WCG Reports Third Quarter 2012 Results

Page 7

October 31, 2012

 

WELLCARE HEALTH PLANS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; dollars in thousands)

	  	 	

Nine Months Ended 

September 30,

	 
	  	 	

2012

	 	 	

2011

	 
	
Cash (used in) provided by operating activities:

	 	 	 	 	 	 
	
Net income

	 	$	135,961	 	 	$	179,185	 
	
Adjustments to reconcile net income to net cash (used in)

  provided by operating activities:

	 	 	 	 	 	 	 	 
	
Depreciation and amortization

	 	 	22,704	 	 	 	19,824	 
	
Equity-based compensation expense

	 	 	13,534	 	 	 	13,160	 
	
Incremental tax benefit from equity-based compensation

	 	 	(3,666	)	 	 	(2,518	)
	
Deferred taxes, net

	 	 	15,296	 	 	 	27,032	 
	
Provision for doubtful receivables

	 	 	10,272	 	 	 	8,310	 
	
Changes in operating accounts:

	 	 	 	 	 	 	 	 
	
Premiums receivable, net

	 	 	(184,632	)	 	 	(104,340	)
	
Pharmacy rebates receivable, net

	 	 	(12,046	)	 	 	(5,182	)
	
Prepaid expenses and other current assets, net

	 	 	(6,162	)	 	 	(20,050	)
	
Medical benefits payable

	 	 	(73,634	)	 	 	14,112	 
	
Unearned premiums

	 	 	(23	)	 	 	208,374	 
	
Accounts payable and other accrued expenses

	 	 	(11,895	)	 	 	(2,967	)
	
Other payables to government partners

	 	 	20,172	 	 	 	30,067	 
	
Amount payable related to investigation resolution

	 	 	(46,604	)	 	 	(80,749	)
	
Income taxes receivable/payable, net

	 	 	(16,289	)	 	 	36,995	 
	
Other, net

	 	 	2,618	 	 	 	(2,240	)
	
Net cash (used in) provided by operating activities

	 	 	(134,394	)	 	 	319,013	 
	
 

	 	 	 	 	 	 	 	 
	
Cash used in investing activities:

	 	 	 	 	 	 	 	 
	
Purchases of investments

	 	 	(357,214	)	 	 	(332,934	)
	
Proceeds from sale and maturities of investments

	 	 	342,963	 	 	 	208,758	 
	
Purchases of restricted investments

	 	 	(30,973	)	 	 	(26,118	)
	
Proceeds from maturities of restricted investments

	 	 	24,821	 	 	 	68,712	 
	
Additions to property, equipment and capitalized software, net

	 	 	(47,665	)	 	 	(30,773	)
	
Net cash used in investing activities

	 	 	(68,068	)	 	 	(112,355	)
	
 

	 	 	 	 	 	 	 	 
	
Cash (used in) provided by financing activities:

	 	 	 	 	 	 	 	 
	
Proceeds from debt, net of financing costs paid

	 	 	(585	)	 	 	147,747	 
	
Proceeds from option exercises and other

	 	 	9,227	 	 	 	4,624	 
	
Incremental tax benefit from equity-based compensation

	 	 	3,666	 	 	 	2,518	 
	
Purchase of treasury stock

	 	 	(6,344	)	 	 	(3,538	)
	
Payments on debt

	 	 	(7,500	)	 	 	(1,875	)
	
Payments on capital leases

	 	 	(1,538	)	 	 	(2,006	)
	
Funds (paid) received for the benefit of members, net

	 	 	(57,222	)	 	 	74,057	 
	
Net cash (used in) provided by financing activities

	 	 	(60,296	)	 	 	221,527	 
	
 

	 	 	 	 	 	 	 	 
	
(Decrease) increase in cash and cash equivalents

	 	 	(262,758	)	 	 	428,185	 
	
Balance at beginning of period

	 	 	1,325,098	 	 	 	1,359,548	 
	
Balance at end of period

	 	$	1,062,340	 	 	$	1,787,733	 
	
 

	 	 	 	 	 	 	 	 
	
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

	 	 	 	 	 	 	 	 
	
Cash paid for taxes

	 	$	100,010	 	 	$	46,109	 
	
Cash paid for interest

	 	$	2,707	 	 	$	697	 
	
SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS:

	 	 	 	 	 	 	 	 
	
Non-cash additions to property, equipment, and capitalized software

	 	$	1,898	 	 	$	1,896	 
	
Non-cash issuance of subordinated notes

	 	$	–	 	 	$	112,500	 

 

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WCG Reports Third Quarter 2012 Results

Page 8

October 31, 2012

 

WELLCARE HEALTH PLANS, INC.

MEMBERSHIP STATISTICS

(Unaudited)

	  	 	

As of September 30,

	  	 	

2012

	 	 	

2011

	
Membership by Program

	 	 	 	 	 
	
Medicaid Membership

	 	 	 	 	 
	
TANF

	 	 	1,183,000	 	 	 	1,060,000
	
CHIP

	 	 	183,000	 	 	 	161,000
	
SSI, ABD and Other

	 	 	128,000	 	 	 	79,000
	
FHP and Georgia Family Planning

	 	 	21,000	 	 	 	13,000
	
Total Medicaid Membership

	 	 	1,515,000	 	 	 	1,313,000
	
 

	 	 	 	 	 	 	 
	
Medicare Membership

	 	 	 	 	 	 	 
	
Medicare Advantage

	 	 	167,000	 	 	 	130,000
	
Prescription Drug Plan

	 	 	879,000	 	 	 	967,000
	
Total Medicare Membership

	 	 	1,046,000	 	 	 	1,097,000
	
Total Membership

	 	 	2,561,000	 	 	 	2,410,000
	
 

	 	 	 	 	 	 	 
	
Medicaid Membership by State

	 	 	 	 	 	 	 
	
Georgia

	 	 	566,000	 	 	 	561,000
	
Florida

	 	 	434,000	 	 	 	395,000
	
Total Other States

	 	 	515,000	 	 	 	357,000
	
Total Medicaid Membership

	 	 	1,515,000	 	 	 	1,313,000

 

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WCG Reports Third Quarter 2012 Results

Page 9

October 31, 2012

 

WELLCARE HEALTH PLANS, INC.

SEGMENT INFORMATION

(Unaudited; dollars in thousands)

	  	 	

Three Months Ended 

September 30,

	 	 	

Nine Months Ended 

September 30,

	 
	
 

	 	

2012

	 	 	

2011

	 	 	

2012

	 	 	

2011

	 
	  	 	 	 	 	 	 	 	 	 	 	 	 
	
Premium revenue:

	 	 	 	 	 	 	 	 	 	 	 	 
	
Medicaid:

	 	 	 	 	 	 	 	 	 	 	 	 
	
Georgia

	 	$	348,322	 	 	$	386,752	 	 	$	1,090,386	 	 	$	1,084,566	 
	
Florida

	 	 	243,205	 	 	 	224,392	 	 	 	713,424	 	 	 	665,194	 
	
Other states

	 	 	484,821	 	 	 	269,696	 	 	 	1,404,152	 	 	 	793,339	 
	
Medicaid premium taxes

	 	 	20,581	 	 	 	18,869	 	 	 	61,048	 	 	 	55,838	 
	
Total Medicaid

	 	 	1,096,929	 	 	 	899,709	 	 	 	3,269,010	 	 	 	2,598,937	 
	
 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Medicare:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Medicare Advantage plans

	 	 	470,756	 	 	 	376,597	 	 	 	1,364,505	 	 	 	1,097,015	 
	
Prescription Drug plans

	 	 	248,692	 	 	 	265,620	 	 	 	780,616	 	 	 	803,734	 
	
Total Medicare

	 	 	719,448	 	 	 	642,217	 	 	 	2,145,121	 	 	 	1,900,749	 
	
Total Premium Revenue

	 	$	1,816,377	 	 	$	1,541,926	 	 	$	5,414,131	 	 	$	4,499,686	 
	
 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Medical benefits ratios:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Medicaid

	 	 	91.1	%	 	 	80.4	%	 	 	88.7	%	 	 	82.0	%
	
Medicare Advantage

	 	 	86.8	%	 	 	82.0	%	 	 	83.1	%	 	 	81.4	%
	
Prescription Drug Plans

	 	 	64.7	%	 	 	74.4	%	 	 	81.9	%	 	 	87.4	%
	
Aggregate

	 	 	86.3	%	 	 	79.8	%	 	 	86.3	%	 	 	82.8	%

 

-MORE-

  

  

  

 

WCG Reports Third Quarter 2012 Results

Page 10

October 31, 2012

 

WELLCARE HEALTH PLANS, INC.

SUPPLEMENTAL INFORMATION

Reconciliation of GAAP Selected Data from Consolidated Statements of Comprehensive Income

to Adjusted Selected Data from Consolidated Statements of Comprehensive Income

(Unaudited; dollars in thousands except per share data)

The Company reports adjusted operating results on a non-GAAP basis to exclude certain expenses that management believes are not indicative of longer-term business trends and operations.  Following are selected data from the Consolidated Statements of Comprehensive Income for the three months and nine months ended September 30, 2012 and 2011, as determined under GAAP, reconciled to adjusted selected data from the Consolidated Statements of Comprehensive Income for the same periods.

	  	 	

For the Three Months Ended

September 30, 2012

	 	 	

For the Three Months Ended

September 30, 2011

	 
	  	 	

GAAP

	 	 	

Adjustments

	 	

Adjusted

	 	 	

GAAP

	 	 	

Adjustments

	 	

Adjusted

	 
	
Revenues:

	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	  	 	 	 
	
Premium

	 	$	1,795,796	 	 	$	–	 	  	 	$	1,795,796	 	 	$	1,523,057	 	 	$	–	 	  	 	$	1,523,057	 
	
Medicaid premium taxes

	 	 	20,581	 	 	 	–	 	  	 	 	20,581	 	 	 	18,869	 	 	 	–	 	  	 	 	18,869	 
	
Total premium revenues

	 	 	1,816,377	 	 	 	–	 	  	 	 	1,816,377	 	 	 	1,541,926	 	 	 	–	 	  	 	 	1,541,926	 
	
Investment and other income

	 	 	2,018	 	 	 	–	 	  	 	 	2,018	 	 	 	2,433	 	 	 	–	 	  	 	 	2,433	 
	
Total revenues

	 	 	1,818,395	 	 	 	–	 	  	 	 	1,818,395	 	 	 	1,544,359	 	 	 	–	 	  	 	 	1,544,359	 
	  	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 
	
Expenses:

	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 
	
Medical benefits

	 	 	1,549,456	 	 	 	–	 	  	 	 	1,549,456	 	 	 	1,214,822	 	 	 	–	 	  	 	 	1,214,822	 
	
Selling, general, and administrative

	 	 	176,797	 	 	 	(12,202	)	
(a)

(b)

	 	 	164,595	 	 	 	160,591	 	 	 	(7,814	)	
(a)

(b)

	 	 	152,777	 
	
Medicaid premium taxes

	 	 	20,581	 	 	 	–	 	  	 	 	20,581	 	 	 	18,869	 	 	 	–	 	  	 	 	18,869	 
	
Depreciation and amortization

	 	 	8,193	 	 	 	–	 	  	 	 	8,193	 	 	 	6,453	 	 	 	–	 	  	 	 	6,453	 
	
Interest

	 	 	1,016	 	 	 	–	 	  	 	 	1,016	 	 	 	3,648	 	 	 	(2,812	)	  	 	 	836	 
	
Total expenses

	 	 	1,756,043	 	 	 	(12,202	)	  	 	 	1,743,841	 	 	 	1,404,383	 	 	 	(10,626	)	  	 	 	1,393,757	 
	  	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 
	
Income before income taxes

	 	 	62,352	 	 	 	12,202	 	  	 	 	74,554	 	 	 	139,976	 	 	 	10,626	 	  	 	 	150,602	 
	
Income tax expense

	 	 	24,065	 	 	 	4,332	 	  	 	 	28,397	 	 	 	51,721	 	 	 	5,730	 	  	 	 	57,451	 
	
Net income

	 	$	38,287	 	 	$	7,870	 	  	 	$	46,157	 	 	$	88,255	 	 	$	4,896	 	  	 	$	93,151	 
	  	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 
	
Weighted average shares:

	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 
	
Basic

	 	 	43,149,455	 	 	 	–	 	  	 	 	43,149,455	 	 	 	42,887,381	 	 	 	–	 	  	 	 	42,887,381	 
	
Diluted

	 	 	43,844,223	 	 	 	–	 	  	 	 	43,844,223	 	 	 	43,424,414	 	 	 	–	 	  	 	 	43,424,414	 
	  	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 
	
Net income per share:

	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 
	
Basic

	 	$	0.89	 	 	$	0.18	 	  	 	$	1.07	 	 	$	2.06	 	 	$	0.11	 	  	 	$	2.17	 
	
Diluted

	 	$	0.87	 	 	$	0.18	 	  	 	$	1.05	 	 	$	2.03	 	 	$	0.12	 	  	 	$	2.15	 
	  	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 
	
Administrative expense ratio

	 	 	9.8	%	 	 	(0.6	)%	
(a)

(b)

	 	 	9.2	%	 	 	10.5	%	 	 	(0.5	)%	
(a)

(b)

	 	 	10.0	%

	
(a)

	
Investigation-related legal, accounting, and other costs: Administrative expenses associated with the government investigations and related litigation amounted to $11.4 million and $7.3 million, respectively, in the three months ended September 30, 2012 and 2011.

	
(b)

	
Liability for government investigation-related litigation resolution:  Based on the status of these matters, the Company recorded expense of $0.8 million and $0.5 million, respectively, in the three months ended September 30, 2012 and 2011.

 

-MORE-

  

  

  

 

WCG Reports Third Quarter 2012 Results

Page 11

October 31, 2012

 

WELLCARE HEALTH PLANS, INC.

SUPPLEMENTAL INFORMATION (Continued)

Reconciliation of GAAP Selected Data from Consolidated Statements of Comprehensive Income

to Adjusted Selected Data from Consolidated Statements of Comprehensive Income (Continued)

(Unaudited; dollars in thousands except per share data)

	  	 	

For the Nine Months Ended

September 30, 2012

	 	 	

For the Nine Months Ended

September 30, 2011

	 
	  	 	

GAAP

	 	 	

Adjustments

	 	

Adjusted

	 	 	

GAAP

	 	 	

Adjustments

	 	

Adjusted

	 
	
Revenues:

	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	  	 	 	 
	
Premium

	 	$	5,353,083	 	 	$	–	 	  	 	$	5,353,083	 	 	$	4,443,848	 	 	$	–	 	  	 	$	4,443,848	 
	
Medicaid premium taxes

	 	 	61,048	 	 	 	–	 	  	 	 	61,048	 	 	 	55,838	 	 	 	–	 	  	 	 	55,838	 
	
Total premium revenues

	 	 	5,414,131	 	 	 	–	 	  	 	 	5,414,131	 	 	 	4,499,686	 	 	 	–	 	  	 	 	4,499,686	 
	
Investment and other income

	 	 	6,772	 	 	 	–	 	  	 	 	6,772	 	 	 	7,050	 	 	 	–	 	  	 	 	7,050	 
	
Total revenues

	 	 	5,420,903	 	 	 	–	 	  	 	 	5,420,903	 	 	 	4,506,736	 	 	 	–	 	  	 	 	4,506,736	 
	
 

	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 
	
Expenses:

	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 
	
Medical benefits

	 	 	4,617,411	 	 	 	–	 	  	 	 	4,617,411	 	 	 	3,680,145	 	 	 	–	 	  	 	 	3,680,145	 
	
Selling, general, and administrative

	 	 	497,493	 	 	 	(37,457	)	
(a)

(b)

	 	 	460,036	 	 	 	458,612	 	 	 	(30,670	)	
(a)

(b)

	 	 	427,942	 
	
Medicaid premium taxes

	 	 	61,048	 	 	 	–	 	  	 	 	61,048	 	 	 	55,838	 	 	 	–	 	  	 	 	55,838	 
	
Depreciation and amortization

	 	 	22,704	 	 	 	–	 	  	 	 	22,704	 	 	 	19,824	 	 	 	–	 	  	 	 	19,824	 
	
Interest

	 	 	3,163	 	 	 	–	 	  	 	 	3,163	 	 	 	3,823	 	 	 	(2,812	)	  	 	 	1,011	 
	
Total expenses

	 	 	5,201,819	 	 	 	(37,457	)	  	 	 	5,164,362	 	 	 	4,218,242	 	 	 	(33,482	)	  	 	 	4,184,760	 
	
 

	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 
	
Income before income taxes

	 	 	219,084	 	 	 	37,457	 	  	 	 	256,541	 	 	 	288,494	 	 	 	33,482	 	  	 	 	321,976	 
	
Income tax expense

	 	 	83,123	 	 	 	15,452	 	  	 	 	98,575	 	 	 	109,309	 	 	 	14,652	 	  	 	 	123,961	 
	
Net income

	 	$	135,961	 	 	$	22,005	 	  	 	$	157,966	 	 	$	179,185	 	 	$	18,830	 	  	 	$	198,015	 
	
 

	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 
	
Weighted average shares:

	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 
	
Basic

	 	 	43,070,113	 	 	 	–	 	  	 	 	43,070,113	 	 	 	42,757,476	 	 	 	–	 	  	 	 	42,757,476	 
	
Diluted

	 	 	43,785,424	 	 	 	–	 	  	 	 	43,785,424	 	 	 	43,285,969	 	 	 	–	 	  	 	 	43,285,969	 
	
 

	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 
	
Net income per share:

	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 
	
Basic

	 	$	3.16	 	 	$	0.51	 	  	 	$	3.67	 	 	$	4.19	 	 	$	0.44	 	  	 	$	4.63	 
	
Diluted

	 	$	3.11	 	 	$	0.50	 	  	 	$	3.61	 	 	$	4.14	 	 	$	0.43	 	  	 	$	4.57	 
	
 

	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 
	
Administrative expense ratio

	 	 	9.3	%	 	 	(0.7	)%	
(a)

(b)

	 	 	8.6	%	 	 	10.3	%	 	 	(0.7	)%	
(a)

(b)

	 	 	9.6	%

	
(a)

	
Investigation-related legal, accounting, and other costs: Administrative expenses associated with the government investigations and related litigation amounted to $34.4 million and $23.9 million, respectively, in the nine months ended September 30, 2012 and 2011.

	
(b)

	
Liability for government investigation-related litigation resolution:  Based on the status of these matters, the Company recorded expense of $3.0 million and $6.8 million, respectively, in the nine months ended September 30, 2012 and 2011.

 

-MORE-

  

  

  

 

WCG Reports Third Quarter 2012 Results

Page 12

October 31, 2012

 

WELLCARE HEALTH PLANS, INC.

SUPPLEMENTAL INFORMATION (Continued)

Reconciliation of GAAP Net Cash Used in or Provided by Operating Activities

to Net Cash Provided by Operating Activities,

Modified for the Timing of Receipts from, and Payments to, Government Customers

(Unaudited; dollars in thousands)

The Company reports cash used in or provided by operating activities on a non-GAAP basis modified to exclude the changes in premium receivables, unearned premiums, and other receivables from, and payables to, government customers.  The Company believes that cash used in or provided by operating activities modified to exclude these changes is a useful measure for investors, as the excluded changes are a function of the timing of cash receipts from, and payments to, federal and state government agencies at the end of each period.

	  	 	

Nine Months Ended 

September 30,

	 
	  	 	

2012

	 	 	

2011

	 
	
Net cash (used in) provided by operating activities, as reported under GAAP

	 	$	(134,394	)	 	$	319,013	 
	
Modifications to eliminate changes in:

	 	 	 	 	 	 	 	 
	
Premiums receivable

	 	 	184,632	 	 	 	104,340	 
	
Provision for doubtful receivables

	 	 	(10,272	)	 	 	(8,310	)
	
Unearned premiums

	 	 	23	 	 	 	(208,374	)
	
Other payables to government customers

	 	 	(20,172	)	 	 	(30,067	)
	
Net cash provided by operating activities, modified for the timing of receipts from and payments to government customers

	 	$	19,817	 	 	$	176,602	 

Kentucky Medicaid Program Reconciliation of GAAP MBR to MBR Recast to Reflect Development of Medical Benefits Payable in the Period in which the Services were Provided

(Unaudited)

The Company reports Kentucky Medicaid Program MBRs on a non-GAAP basis modified to reflect the favorable or unfavorable development of medical benefits payable in the period in which the expense was incurred.  The Company believes that the recast MBRs are useful measures for investors, as the recast MBRs may better reflect changes in the Company’s Kentucky Medicaid program performance over time.

	  	 	

Three Months Ended

	 
	  	 	

Dec. 31,

2011

	 	 	

March 31,

2012

	 	 	

June 30,

2012

	 	 	

Sept. 30,

2012

	 
	
MBR as reported under GAAP

	 	 	106.3	%	 	 	105.9	%	 	 	109.5	%	 	 	106.2	%
	
Development reflected in period in which services were provided

	 	 	6.7	%	 	 	10.3	%	 	 	(7.5	)%	 	 	(5.4	)%
	
MBR as recast

	 	 	113.0	%	 	 	116.2	%	 	 	102.0	%	 	 	100.8	%

-END-WCG-EX10.1_NonEmployeeDirectorCompPolicy

Back to 10-Q 
Exhibit 10.1

WELLCARE HEALTH PLANS, INC.

Non-Employee Director Compensation Policy

This Non-Employee Director Compensation Policy (the “Policy”) sets forth the compensation to be paid to non-employee members (“Non-Employee Directors”) of the Board of Directors (the “Board”) of WellCare Health Plans, Inc. (the “Company”), which shall remain in effect until amended, replaced or rescinded by further action of the Board.  

Annual Retainers and Fees

Effective for the fiscal quarter beginning July 1, 2012, the retainers and fees for Non-Employee Directors will be as set forth below and shall be cumulative.

Board Service:

		
	•
	A base annual retainer of $80,000.

		
	•
	Chairman of the Board – The non-executive Chairman of the Board shall receive an additional annual retainer of $150,000.

		
	•
	Lead Director - The lead director shall receive an additional annual retainer of $20,000.

Standing Committees:

		
	•
	Audit Committee - Each member of the Audit Committee shall receive an additional annual retainer of $17,000, except the chairperson who shall receive an additional retainer of $27,000.

		
	•
	Compensation Committee - Each member of the Compensation Committee shall receive an additional annual retainer of $12,000, except the chairperson who shall receive an additional retainer of $22,000.

		
	•
	Each member of the Nominating and Corporate Governance Committee, the Health Care Quality and Access Committee and the Regulatory Compliance Committee shall receive an additional annual retainer of $8,000, except the chairpersons who shall receive an additional retainer of $18,000.

Non-Standing Committees:

		
	•
	Retainers for each non-standing committee will be evaluated periodically and based on expected roles and responsibilities.

Payments

The annual retainers for service on the Board and committees of the Board as set forth above shall be paid by the Company in quarterly installments as soon as practicable after the end of each of the Company’s fiscal quarters for which the member shall have served.  A member of the Board or any of its committees who serves on such during a portion of a quarterly period, shall be entitled to the full quarterly installment for such quarterly period.      

1

Back to 10-Q 
Exhibit 10.1

Notwithstanding the foregoing, the annual retainer paid to a member serving on a non-standing committee for a portion of a quarterly period, shall be entitled to the quarterly installment calculated on a pro-rata, monthly basis.  

Initial Equity Awards

Unless otherwise determined by the Compensation Committee and subject to the Compensation Committee’s approval, upon, and contingent on, a new Non-Employee Director’s appointment or election to the Board, newly elected or appointed members of the Board shall receive an initial award of restricted stock units with a fair market value of approximately $150,000, rounded to the nearest whole share, as determined by reference to the officially-quoted closing selling price of the Company’s common stock on the New York Stock Exchange on the grant date, pursuant to and in accordance with the terms and provisions of a restricted stock unit agreement and the WellCare Health Plans, Inc. 2004 Equity Incentive Plan (the “2004 Equity Plan”).  Such equity award of restricted stock units shall vest in approximately equal parts on the first, second and third anniversary of the date of grant. 

Annual Equity Awards

Unless otherwise determined by the Compensation Committee and subject to the Compensation Committee’s approval, each Non-Employee Director, other than a Non-Employee Director joining the Board at the annual meeting, shall receive an annual equity award of either restricted stock units or deferred stock units, as elected by the Non-Employee Director,  with a fair market value of approximately $140,000, rounded to the nearest whole share, as determined by reference to the officially-quoted closing selling price of the Company’s common stock on the New York Stock Exchange on the grant date, pursuant to and in accordance with the terms and provisions of a restricted stock unit agreement or deferred stock unit agreement, as the case may be, and the 2004 Equity Plan.  Unless otherwise determined by the Compensation Committee, all such annual equity awards shall be granted on the date of the Company’s annual meeting of stockholders.  Such equity awards shall vest in full on the earlier of the first anniversary of the date of grant or the date of the next annual meeting of stockholders.  

Stock Ownership Guidelines 

Non-Employee Directors are required to own shares of the Company’s common stock (the “Ownership Requirement”) having a value (as described below) equal to the sum of five (5) times the base annual retainer payable to each Non-Employee Director as set forth in this Policy as in effect from time to time.

For purposes of determining ownership, the following will be used in determining whether a Non-Employee Director has satisfied the Ownership Requirement:

		
	•
	One hundred percent (100%) of the value of shares of the Company’s common stock owned individually, either directly or indirectly, including vested and unvested restricted stock, restricted stock unit awards, deferred stock unit awards or shares acquired upon exercise of stock options; and

		
	•
	Shares of the Company’s common stock owned jointly, or separately by a spouse, domestic partner and/or minor children, directly or indirectly.

No other rights to acquire shares of Company common stock (including stock options or similar rights) shall be considered shares of Company common stock for purposes of meeting the Ownership Requirements under this Policy.  

2

Back to 10-Q 
Exhibit 10.1

For purposes hereof, the value of a share of the Company’s common stock, including vested and unvested restricted stock, restricted stock units and deferred stock units, shall be calculated on April 1st of each year based on the average closing price of the Company’s common stock during the most recently completed fiscal quarter at the time of the calculation (a “Determination Date”).  If a Non-Employee Director does not meet the Ownership Requirement as of a Determination Date, such Non-Employee Director must satisfy the Ownership Requirement on the next Determination Date.

In the event the base annual retainer increases, each Non-Employee Director will have five (5) years from the time of the increase to acquire any additional shares needed to satisfy the Ownership Requirement. 

A Non-Employee Director shall have until the end of the first Determination Date following the fifth anniversary of such Non-Employee Director’s election or appointment to the Board or upon otherwise becoming a Non-Employee Director of the Board to satisfy the Ownership Requirement; provided, however, that a Non-Employee Director who was a Non-Employee Director of the Company as of April 1, 2009, shall have until December 31, 2013 to meet the Ownership Requirement.

Approved by Board: March 23, 2009
Amended by Board April 29, 2009
Amended by Board August 5, 2010
Amended by Board December 16, 2010
Amended by Board May 24, 2012

3

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