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52 HEALTH NET 2000 Annual Report
During the fourth quarter of 1998, the Company
initiated a formal plan to dispose of certain health plans
of the Company’s then Central Division included in the
Company’s Health Plan Services segment in accordance
with its anticipated divestitures program. In this connec-
tion, the Company announced in 1999 its plan to close
the Colorado regional processing center, terminate
employees and transfer its operations to the Company’s
other administrative facilities. In addition, the Company
also announced its plans to consolidate certain adminis-
trative functions in its Oregon and Washington health
plan operations. During the year ended December 31,
1999, the Company recorded pretax charges for restruc-
turing and other charges of $21.1 million (the “1999
Charges”) and $6.2 million, respectively.
Severance and Benefit Related Costs –The 1999 Charges
included $18.5 million for severance and benefit costs
related to executives and operations employees at the
Colorado regional processing center and operations
employees at the Northwest health plans.The operations
functions include premium accounting, claims, medical
1998 Charges
The following tables summarize the 1998 charges by quarter and by type (amounts in millions):
Activity during 1998 and 1999 2000 Activity
1999 Balance at Balance at Expected
1998 Cash Modification Dec. 31, Cash Dec. 31, Future Cash
Charges Payments Non-Cash to Estimate 1999 Payments 2000 Outlays
Severance and benefit related costs $ 21.2 $ (18.2) $ (1.9) $ (1.0) $ 0.1 $ (0.1) $ –$ –
Asset impairment and other
charges related to FPA 84.1 (16.6) (66.9) (0.6) ––––
Asset impairment and other 112.4 (0.8) (100.9) (10.7) ––––
Other costs 22.4 (3.5) (18.6) (0.3) ––––
Total $ 240.1 $ (39.1) $ (188.3) $ (12.6) $ 0.1 $ (0.1) $ –$ –
Second Quarter 1998 Charge $ 50.0 $ (8.9) $ (41.1) $ - $ – $ – $ –$ –
Third Quarter 1998 Charge 71.7 (23.7) (46.0) (1.9) 0.1 (0.1) ––
Fourth Quarter 1998 Charge 118.4 (6.5) (101.2) (10.7) ––––
Total $ 240.1 $ (39.1) $ (188.3) $ (12.6) $ 0.1 $ (0.1) $ –$ –
management, customer service, sales and other related
departments.The 1999 Charges included the termina-
tion of a total of 773 employees.As of December 31,
2000, termination of the employees was completed and
$17.2 million had been paid.There are no expected
future cash outlays. Modifications to the initial estimate
of $1.3 million were recorded during the year ended
December 31, 1999.
Asset Impairment Costs – During the fourth quarter
ended December 31, 1999, the Company recorded asset
impairment costs totaling $6.2 million related to
impairment of certain long-lived assets held for disposal
(see Note 15).
Real Estate Lease Termination and Other Costs – The 1999
Charges included $2.6 million related to termination of
real estate obligations and other costs to close the
Colorado regional processing center.
The 1999 restructuring plan was completed as of
December 31, 2000.