Health Net 2003 Annual Report Download - page 97

Stock Repurchase Program
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. As of December 31, 2003, we had repurchased an
aggregate of approximately 16.8 million shares of our Class A Common Stock under our stock repurchase program for
aggregate consideration of approximately $453.3 million before taking into account exercise proceeds and tax benefits
from the exercise of employee stock options. We repurchased approximately 10.1 million shares of our Class A Common
Stock during the year ended December 31, 2003. 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. During 2002, we received
approximately $49 million in cash and recognized $18 million in tax benefits as a result of option exercises. As a result of
the $57 million (in 2003) and $67 million (in 2002) in realized and estimated 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.
Note 9—Employee Benefit Plans
Defined Contribution Retirement Plans
We and certain of our subsidiaries sponsor defined contribution retirement plans intended to qualify under Section
401(a) and 401(k) of the Internal Revenue Code of 1986, as amended (the Code). Participation in the plans is available to
substantially all employees who meet certain eligibility requirements and elect to participate. Employees may contribute
up to the maximum limits allowed by Sections 401(k) and 415 of the Code, with Company contributions based on
matching or other formulas. Our expense under these plans totaled $9.1 million, $9.4 million and $8.4 million for the
years ended December 31, 2003, 2002 and 2001, respectively.
Deferred Compensation Plans
Effective May 1, 1998, we adopted a deferred compensation plan pursuant to which certain management and highly
compensated employees are eligible to defer between 5% and 90% of their regular compensation and between 5% and
100% of their bonuses, and non-employee Board members are eligible to defer up to 100% of their directors
compensation. The compensation deferred under this plan is credited with earnings or losses measured by the mirrored
rate of return on investments elected by plan participants. Each plan participant is fully vested in all deferred
compensation and earnings credited to his or her account. Certain employee deferrals were invested through a trust until
November 2003. In January 2004, the Company adopted a new deferred compensation plan for non-employee members of
its Board of Directors. In connection therewith, the Company amended and restated its existing deferred compensation
plan to provide that, among other things, non-employee members of the Board are no longer eligible participants under
that plan.
Prior to May 1997, certain members of management, highly compensated employees and non-employee Board
members were permitted to defer payment of up to 90% of their compensation under a prior deferred compensation plan
(the Prior Plan). The Prior Plan was frozen in May 1997 at which time each participant’s account was credited with three
times the 1996 Company match (or a lesser amount for certain participants) and each participant became 100% vested in
all such contributions. The current provisions with respect to the form and timing of payments under the Prior Plan remain
unchanged.
As of December 31, 2003 and 2002, the liability under these plans amounted to $38.4 million and $32.0 million,
respectively. These liabilities are included in other noncurrent liabilities on our consolidated balance sheets. The trust
assets are not held in investments elected by participants. Deferred compensation expense is recognized for the amount of
earnings or losses credited to participant accounts. Our expense under these plans totaled $3.8 million, $1.6 million and
$1.4 million for the years ended December 31, 2003, 2002 and 2001, respectively.
Pension and Other Postretirement Benefit Plans
Retirement Plans – We have an unfunded non-qualified defined benefit pension plan, the Supplemental Executive
Retirement Plan (adopted in 1996). This plan is noncontributory and covers key executives as selected by the Board of
F-24