Health Net 2000 Annual Report Download - page 44

Download and view the complete annual report

Please find page 44 of the 2000 Health Net annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 62

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62

42 HEALTH NET 2000 Annual Report
The weighted average fair value for options granted
during 2000, 1999 and 1998 was $5.18, $6.10 and $6.00,
respectively.The fair values were estimated using the
Black-Scholes option-pricing model.The following
weighted average assumptions were used in the fair value
calculation for 2000, 1999 and 1998, respectively: (i) risk-
free interest rate of 5.97%, 6.31% and 4.57%; (ii) expected
option lives of 4.2 years, 3.9 years and 4.6 years; (iii)
expected volatility for both options and employee pur-
chase rights of 63.7%, 55.7% and 44.5%; and (iv) no
expected dividend yield.
The Company applies APB Opinion No. 25 and related
Interpretations in accounting for its plans.Accordingly, no
compensation cost has been recognized for its stock option
or employee stock purchase plans. Had compensation cost
for the Company’s plans been determined based on the fair
value at the grant dates of options and employee purchase
rights consistent with the method of SFAS No. 123, the
Company’s net income (loss) and earnings (losses) per share
would have been reduced (increased) to the pro forma
amounts indicated below for the years ended December 31
(amounts in thousands, except per share data):
Stock option activity and weighted average exercise prices for the years ended December 31 are presented below:
2000 1999 1998
Weighted Weighted Weighted
Average Average Average
Number of Exercise Number of Exercise Number of Exercise
Options Price Options Price Options Price
Outstanding at January 1 12,284,417 $20.47 13,418,473 $20.87 9,636,831 $29.94
Granted 3,932,353 9.54 785,549 12.62 8,021,018 14.05
Exercised (314,384) 17.73 (5,000) 14.50 (514,064) 18.64
Canceled (3,682,604) 17.86 (1,914,605) 19.93 (3,725,312) 30.28
Outstanding at December 31 12,219,782 $17.83 12,284,417 $20.47 13,418,473 $20.87
Exercisable at December 31 4,890,364 4,824,708 4,140,362
The following table summarizes the weighted average exercise price and weighted average remaining contractual life
for significant option groups outstanding at December 31, 2000:
Options Outstanding Options Exercisable
Weighted
Average
Remaining Weighted Weighted
Range of Number of Contractual Average Number of Average
Exercise Prices Options Life (Years) Exercise Price Options Exercise Price
$ 6.63 –9.81 3,360,601 7.58 $ 9.03 40,669 $ 9.00
9.88 – 10.84 259,500 8.11 10.52 185,165 10.67
11.19 – 12.94 3,935,409 4.23 12.86 560,259 12.82
13.00 – 31.91 2,038,939 5.68 22.54 1,501,438 24.44
32.13 – 44.06 2,625,333 6.29 33.62 2,602,833 33.63
$ 6.63 – 44.06 12,219,782 5.92 $17.83 4,890,364 $27.35
2000 1999 1998
Net income (loss) As reported $163,623 $142,365 $(165,158)
Pro forma 156,701 132,043 (171,022)
Basic earnings (loss) per share As reported 1.34 1.16 (1.35)
Pro forma 1.28 1.08 (1.40)
Diluted earnings (loss) per share As reported 1.33 1.16 (1.35)
Pro forma 1.27 1.08 (1.40)