Health Net 1999 Annual Report Download - page 49

FOUNDATION HEALTH SYSTEMS, IN C. 47
Note 13 - Related Parties
Two current directors of the Company and one prior direc-
tor are partners in law firms which received legal fees total-
ing $1.2 million, $1.0 million, and $1.1 million in 1999,
1998, and 1997, respectively. One current director is an offi-
cer of IBM which the Company paid $9.0 million and $8.0
million for services in 1999 and 1998, respectively, and one
current director is also a director of a temporary staffing
company which the Company paid $11.0 million and $20.4
million in 1999 and 1998, respectively. An officer of a con-
tracted hospital was also a member of the Company’s Board
of Directors until April 1, 1997. Medical costs paid to the
hospital totaled $67.1 million in 1997. Such contracted hos-
pital is also an employer group of the Company from which
the Company receives premium revenues at standard rates.
A director of the Company was paid an aggregate of
$95,000 in consulting fees in 1999 and 2000 due to various
services provided to the Company in connection with the
closing of its operations in Pueblo, Colorado (see Note 15).
In addition, two of this director’s law firm partners pur-
chased a building from the Company in Pueblo, Colorado,
for $405,000 in 1999.
During 1998, three executive officers of the Company, in
connection with their hire or relocation, received one-time
loans from the Company aggregating $775,000 which ranged
from $125,000 to $400,000 each.The loans accrue interest
at the prime rate and each is payable upon demand by the
Company in the event of a voluntary termination of employ-
ment of the respective officer or termination for cause.
During 1999, three executive officers of the Company, in
connection with their hire or relocation, received one-time
loans from the Company aggregating $550,000 which ranged
from $100,000 to $300,000 each.The loans accrue interest
at the prime rate and each is payable upon demand by the
Company in the event of a voluntary termination of employ-
ment of the respective officer or termination for cause.
The principal and interest of the loans will be forgiven
by the Company at varying times between one and five years
after the date of hire or relocation of the respective officers.
As of December 31, 1999 a portion of a loan to one execu-
tive officer was forgiven for $83,000 and the aggregate out-
standing principal balance of the six loans was $1,242,000.
Note 14 – Asset Impairment, Merger, Restructuring
and Other Charges
The following sets forth the principal components of asset
impairment, merger, restructuring and other costs for the
years ended December 31 (amounts in millions):
1999 Charges
The following tables summarize the 1999 charges by quarter and by type (amounts in millions):
1999 Net 1999 Activity Balance at Expected
1999 Modifications 1999 Cash December 31, Future Cash
Charges to Estimate Charges Payments Non-Cash 1999 Outlays
Severance and benefit
related costs $18.5 $(1.3) $17.2 $ (8.6) – $8.6 $ 8.6
Asset impairment costs 6.2 – 6.2 – $ (6.2) – –
R eal estate lease
termination costs 0.8 – 0.8 (0.8) – – –
Other costs 1.8 (0.1) 1.7 (1.4) – 0.3 0.3
Total $27.3 $(1.4) $25.9 $(10.8) $ (6.2) $8.9 $8.9
First Quarter 1999
Charge $21.1 $(1.4) $19.7 $(10.8) – $8.9 $ 8.9
Fourth Quarter 1999
Charge 6.2 – 6.2 – (6.2) – –
Total $27.3 $(1.4) $25.9 $(10.8) $ (6.2) $8.9 $ 8.9
1999 1998 1997
Severance and benefit
related costs $17.2 $ 21.2 $ 61.4
Provider network
consolidation costs – – 36.2
R eal estate lease
termination costs 0.8 – 7.9
Asset impairments and other
charges related to FPA
Medical Management – 84.1 –
Asset impairment and
other costs 6.2 112.4 44.0
Merger related costs – – 69.6
Gem costs – – 57.5
Other costs 1.7 22.4 12.6
25.9 240.1 289.2
Modifications to prior year
restructuring plans (14.2) – (2.7)
Total $11.7 $240.1 $286.5