Health Net 2003 Annual Report Download - page 54

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In connection with the 2001 Plan, we decided on enterprise-wide staff reductions and consolidations of certain
administrative, financial and technology functions. As of December 31, 2002, we had completed the 2001 Plan and
recorded a $1.5 million true-up adjustment in severance and related benefit costs. During 2002, we paid out $26.4 million
in total for the 2001 Plan.
Investing Activities
2003 Compared to 2002
Net cash used in investing activities was $105.5 million for the year ended December 31, 2003 as compared to
$182.9 million for the same period in 2002. The resulting increase in cash flow of $77.4 million is primarily due to the
following:
• An increase in maturities and sales of available for sale securities of $159.7 million primarily due to an increase
in prepayments of mortgage-backed securities and called security holdings attributable to a decline in interest
rates, and
• Cash proceeds of $90.3 million from the sale of our employer services subsidiary and dental and vision
subsidiaries in 2003, partially offset by
• An increase in the purchase of available for sale securities and restricted investments of $168.6 million.
2002 Compared to 2001
Net cash used in investing activities was $182.9 million during the year ended December 31, 2002 as compared to
net cash used in investing activities of $517.6 million during the same period in 2001. The $334.7 million decrease in cash
flows used in investing activities is primarily due to the following:
• A decrease of $252.6 million in net purchases of investments. During 2001, we repositioned a portion of our
investable assets into investment vehicles with longer durations within our regulated health plans in order to
increase investment income,
• A decrease of $53.5 million in cash disposed in the sale of businesses, net of cash received, and
• A decrease of $24.2 million in net purchases of property and equipment.
Financing Activities
2003 Compared to 2002
Net cash used in financing activities was $246.2 million for the year ended December 31, 2003 as compared to
$305.6 million for the same period in 2002. Under our stock repurchase program more fully described below, we
repurchased and paid for 10,129,655 shares of our Class A common stock for $288.3 million during the year ended
December 31, 2003 compared to 6,519,600 shares for $159.7 million during the same period in 2002. We paid down the
entire outstanding balance of our revolving credit facility as of December 31, 2002. Accordingly, the repayment of our
credit facility decreased by $195 million, net of $50 million in borrowings, during the year ended December 31, 2003 as
compared to the same period in 2002.
In April 2002, our Board of Directors authorized us to repurchase up to $250 million (net of exercise proceeds and
tax benefits from the exercise of employee stock options) of our Class A Common Stock under our stock repurchase
program. In August 2003, our Board of Directors authorized us to repurchase up to an additional $200 million (net of
exercise proceeds and tax benefits from the exercise of employee stock options) of our Class A Common Stock under our
stock repurchase program. Share repurchases are made under our stock repurchase program from time to time through
open market purchases or through privately negotiated transactions. We use cash flows from operations to fund the share
repurchases.
During 2002, we received approximately $49 million in cash and recognized $18 million in tax benefits as a result of
option exercises. During the year ended December 31, 2003, we received approximately $42 million in cash and
recognized $15 million in tax benefits as a result of option exercises. As a result of the $67 million (in 2002) and $57
million (in 2003) in realized benefits, our total authority under our stock repurchase program is estimated at $574 million
based on the authorization we received from our Board of Directors to repurchase up to an aggregate of up to $450 million
(net of exercise proceeds and tax benefits from the exercise of employee stock options) of our Class A Common Stock. As
of March 15, 2004, we had repurchased 17,679,355 shares at an average price of $27.22 per share pursuant to our stock
repurchase program.
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