Health Net 2004 Annual Report Download - page 127

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HEALTH NET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 14—Severance, Asset Impairments and Restructuring Costs
The following sets forth the principal components of severance, asset impairments and restructuring charges for the years ended
December 31 (amounts in millions):
2004 Charges
2004
2003
2002
Severance and related benefit costs
$25.3
$
—
$
—
Modification to 2001 restructuring plan
—
—
1.5
Asset impairment charge
5.9
16.4
58.8
Real estate lease termination costs
1.7
—
—
Total
$32.9
$16.4
$60.3
Severance and Related Benefit Costs
On May 4, 2004, we announced that, in order to enhance efficiency and reduce administrative costs, we would commence an
involuntary workforce reduction of approximately 500 positions, which included reductions resulting from an intensified performance
review process, throughout many of our functional groups and divisions, most notably in the Northeast. We recorded pre-tax
severance and related benefit costs of $17.4 million, $5.2 million and $2.7 million in the second, third and fourth quarters of 2004,
respectively, associated with the workforce reduction. As of December 31, 2004, 456 positions had been eliminated and $15.7 million
of the severance and benefit related costs had been paid out. We currently anticipate that we will record additional severance and
benefit related costs of $3 million and that an additional $12.6 million will be paid out during the year ending December 31, 2005. We
plan to use cash flows from operations to fund these payments. Elimination of the remaining identified 44 positions covered by the
involuntary workforce reduction is anticipated to be completed during the year ending December 31, 2005.
Severance and related benefit costs expected to be incurred in connection with the May 2004 Plan as of December 31, 2004 are
as follows (amounts in millions):
A reconciliation of our liability balances for severance and related benefit costs incurred in connection with the May 2004 Plan
is as follows (amounts in millions):
F-41
Health Plan
Services
Government
Contracts
Total
Reportable
Segments
Corporate
and Other
Total
Total amount expected to be incurred
$18.6
$0.2
$18.8
$9.5
$28.3
Cumulative amount incurred as of December 31, 2004
$17.6
$0.2
$17.8
$7.5
$25.3
Health Plan
Services
Government
Contracts
Total
Reportable
Segments
Corporate
and Other
Total
Balance as of January 1, 2004
$
$
—
$
$
$
—
Amount incurred during the year ended December 31,
2004
17.6
0.2
17.8
7.5
25.3
Cash payments made during the year ended
December 31, 2004
(10.0)
(0.2)
(10.2)
(5.5)
(15.7)
Balance as of December 31, 2004
$7.6
$
—
$7.6
$2.0
$9.6