Health Net 2004 Annual Report Download - page 55

million in cash and $1.6 million in notes. Accordingly, we wrote off the original investments of $13.4 million less the $1 million cash
received and recognized an impairment charge of $12.4 million on December 31, 2002 which included an allowance against the full
value of the notes received in exchange.
During the third quarter ended September 30, 2002, pursuant to SFAS No. 115, “Accounting for Certain Investments in Debt
and Equity Securities” (“SFAS No. 115”), we evaluated the carrying value of our investments available for sale in CareScience, Inc.
The common stock of CareScience, Inc. had been consistently trading below $1.00 per share since early September 2002 and was at
risk of being delisted. As a result, we determined that the decline in the fair value of CareScience’s common stock was other than
temporary. The fair value of these investments was determined based on quotations available on a securities exchange registered with
the SEC as of September 30, 2002. Accordingly, we recognized a $3.6 million pre-tax write-down in the carrying value of these
investments which was classified as asset impairments and restructuring charges during the third quarter ended September 30, 2002.
Pursuant to SFAS No. 115 and SFAS No. 118, “Accounting by Creditors for Impairment of a Loan—Income Recognition and
Disclosures,” we evaluated the carrying value of our investments in convertible preferred stock and subordinated notes of AmCareco,
Inc. arising from the 1999 divestiture of our health plans in Louisiana, Oklahoma and Texas. Since August 2002, authorities in these
states have taken various actions, including license denials and liquidation-related processes, that caused us to determine that the
carrying value of these assets was no longer recoverable. Accordingly, we wrote off the total carrying value of our investment of $7.1
million which was included as a charge in asset impairments and restructuring charges during the third quarter ended September 30,
2002.
Net Gain (Loss) on Sale of Businesses and Assets Held for Sale
The gains and (losses) recognized from divestitures made during the years ended December 31, 2004, 2003 and 2002 are
summarized in the following table.
2004 Divestitures
2004 2003 2002
(
Dollars in millions
)
Subacute subsidiaries $1.9 $— $—
Florida health plan
(0.4)
—
—
Dental and vision subsidiaries (0.3) 7.8
—
Employer Services Group subsidiaries
—
12.3
—
Claims processing subsidiary
—
(1.2) (2.6)
Buildings held for sale
—
—
(2.4)
Net gain (loss) on sale of businesses and assets held for sale $1.2 $18.9 $(5.0)
On March 1, 2004, we completed the sale of two subacute subsidiaries, American VitalCare, Inc. and Managed Alternative
Care, Inc., to a subsidiary of Rehabcare Group, Inc. We received a payment of approximately $11 million, subject to certain post-
closing adjustments, and a $3 million subordinated promissory note for which we recorded a full reserve.
Effective September 30, 2004, we entered into agreements (the “Settlement Agreements”) to settle certain true-up adjustments
under a stock purchase agreement and reinsurance agreement entered into in 2001 in connection with the sale of our Florida health
plan (the “Florida Plan”). The Settlement Agreements also provided for the recovery of certain legal fees and legal settlements that
we had paid on behalf of the Florida Plan. In connection with the Settlement Agreements, we recorded $0.4 million in additional pre-
tax loss on sale of the Florida Plan related to the other true-up adjustments in our consolidated statements of operations in 2004.
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