Health Net 2009 Annual Report Download - page 112

HEALTH NET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
premiums receivable as of December 31, 2009 and 2008, respectively. Our Medicare receivable from CMS
represented 26% of total receivables as of December 31, 2009, compared with 56% as of December 31, 2008.
Our 10 largest employer group premiums within each of our plans accounted for 17%, 18% and 18% of our
health plan services premiums for the years ended December 31, 2009, 2008 and 2007, respectively. The federal
government is the only customer of our Government Contracts segment, with premiums and fees accounting for
100% of our Government Contracts revenue. In addition, the federal government is a significant customer of the
Company’s West Operations segment as a result of its contract with CMS for coverage of Medicare-eligible
individuals. Medicare revenues accounted for 30%, 28% and 24% of our health plan premiums in 2009, 2008 and
2007, respectively. These amounts include revenues from our Northeast business through the closing date of the
Northeast Sale.
Earnings Per Share
Basic earnings per share excludes dilution and reflects net income divided by the weighted average shares of
common stock outstanding during the periods presented. Diluted earnings per share is based upon the weighted
average shares of common stock and dilutive common stock equivalents (this reflects the potential dilution that
could occur if stock options were exercised and restricted stock units (RSUs) and restricted shares were vested)
outstanding during the periods presented.
Common stock equivalents arising from dilutive stock options, restricted common stock and RSUs are
computed using the treasury stock method. For the years ended December 31, 2008 and 2007, this amounted to
1,078,000 and 2,513,000 shares, respectively, which include 299,000 and 239,000 aggregate common stock
equivalents from dilutive RSUs and restricted common stock, respectively. For the year ended December 31,
2009, 563,000, shares of common stock equivalents, including 513,000 common stock equivalents from dilutive
RSU equivalents were excluded from the computation of loss per share due to their anti-dilutive effect.
Options to purchase an aggregate of 3,051,000 and 1,256,000 shares of common stock were considered anti-
dilutive during 2008 and 2007, respectively, and were not included in the computation of diluted earnings per
share because the options’ exercise price was greater than the average market price of the common stock for each
respective period. These options expire at various times through April 2019 (see Note 8).
We have a $700 million stock repurchase program authorized by our Board of Directors. The remaining
authorization under our stock repurchase program as of December 31, 2009 was $82.7 million (see Note 9). On
November 4, 2008, we announced that our stock repurchase program was on hold as a consequence of the
uncertain financial environment and the announcement by Health Net’s Board of Directors that Jay Gellert, our
President and Chief Executive Officer, was undertaking a review of the Company’s strategic direction. On
July 20, 2009, we announced the completion of our strategic review, which included entering into the Stock
Purchase Agreement. For a detailed description of the Northeast Sale, see Note 3 to our consolidated financial
statements. On December 8, 2009, we announced that our Board of Directors has authorized the Company to
resume repurchases of its common stock under its existing stock repurchase program.
Comprehensive Income
Comprehensive income includes all changes in stockholders’ equity (except those arising from transactions
with stockholders) and includes net income, net unrealized appreciation (depreciation), after tax, on investments
available-for-sale and prior service cost and net loss related to our defined benefit pension plan (see Note 10).
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