Health Net 2002 Annual Report Download - page 63

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HEALTH NET, INC. | 61
As part of adopting SFAS No. 142, we transferred $6.9 million of other intangible assets to goodwill since they did not
meet the new criteria for recognition apart from goodwill. These other intangible assets were acquired through our previous
purchase transactions. In addition, other intangible assets as of December 31, 2002 decreased from December 31, 2001 due
to removal of fully amortized intangible assets.
The intangible assets that continue to be subject to amortization using the straight-line method over their estimated lives
are as follows (amounts in millions):
Gross
Carrying Accumulated Net Amortization
Amount Amortization Balance Period (in years)
As of December 31, 2002:
Provider networks $35.7 $(15.9) $19.8 14-40
Employer groups 92.9 (90.4) 2.5 11-23
Other 1.5 (1.5) –
$130.1 $(107.8) $22.3
As of December 31, 2001:
Provider networks $35.7 $(14.2) $21.5 14-40
Employer groups 92.9 (85.2) 7.7 11-23
Other 29.0 (20.8) 8.2 40
$ 157.6 $ (120.2) $37.4
Estimated annual pretax amortization expense for
other intangible assets for each of the next five years ended
December 31 is as follows (amounts in millions):
2003 $2.7
2004 2.7
2005 2.5
2006 2.0
2007 1.6
Concentrations of Credit Risk
Financial instruments that potentially subject us to concen-
trations of credit risk consist primarily of cash equivalents,
investments and premiums receivable. All cash equivalents
and investments are managed within established guidelines
which limit the amounts which may be invested with one
issuer. Concentrations of credit risk with respect to
premiums receivable are limited due to the large number of
payers comprising our customer base. Our 10 largest
employer groups accounted for 56%, 57% and 36% of
premiums receivable and 15% of premium revenue as of
December 31, 2002, 2001 and 2000, respectively, and for
the years then ended.
Earnings Per Share
Basic earnings per share (EPS) is computed by dividing net
income by the weighted average number of shares of
common stock outstanding during the periods presented.
Diluted EPS is based upon the weighted average shares of
common stock and dilutive common stock equivalents
(stock options) outstanding during the periods presented.
Common stock equivalents arising from dilutive stock
options are computed using the treasury stock method; in
2002, 2001 and 2000, this amounted to 1,784,000,
1,994,000 and 982,000 shares, respectively.
Options to purchase an aggregate of 2.6 million, 6.5
million and 4.6 million shares of common stock were
considered anti-dilutive during 2002, 2001 and 2000,
respectively, and were not included in the computation of
diluted EPS because the options’ exercise price was greater
than the average market price of the common stock for
each respective period. These options expire through
December 2012 (see Note 7).