Health Net 2007 Annual Report Download - page 116

HEALTH NET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The on-going financial results of the HCS business since May 31, 2007 are included in our Health Plan
Services reportable segment for the year ended December 31, 2007 and are not material to our consolidated
results of operations.
Sale-Leaseback of Shelton, Connecticut Property
On March 29, 2007, we sold our 68-acre commercial campus in Shelton, Connecticut (the Shelton Property)
to The Dacourt Group, Inc. (Dacourt) and leased it back from Dacourt under an operating lease agreement for an
initial term of ten years with an option to extend for two additional terms of ten years each. We received net cash
proceeds of $83.9 million and recorded a deferred gain of $60.9 million, which is amortized into income as
contra-G&A expense over the lease term.
Sale-Leaseback of Tucson, Arizona Property
On June 29, 2007, we sold our commercial campus in Tucson, Arizona (the Tucson Property) to West Coast
Capital Partners, LLC (West Coast) and leased it back from West Coast under an operating lease agreement for
an initial term of one year, with an option to extend for two additional one-year terms. We received net cash
proceeds of $12.7 million and recorded a gain of $6.1 million as contra-G&A expense in the statement of
operations in the three months ended June 30, 2007.
Sale of Pennsylvania Subsidiaries
On July 31, 2006, we completed the sale of the subsidiary that formerly held our Pennsylvania health plan
and certain of its affiliates (Pennsylvania Subsidiaries). We recognized an estimated $32 million tax benefit and a
$0.4 million pretax loss related to this sale in the year ended December 31, 2006. See Note 10 for further
information regarding our tax accounting policies related to sales of subsidiaries.
The Pennsylvania Subsidiaries were historically reported as part of our Health Plan Services reportable
segment. The revenues and expenses of the Pennsylvania Subsidiaries were negligible for the years ended
December 31, 2006, and 2005.
Acquisition of Universal Care Business
On March 31, 2006, we completed the acquisition of certain health plan businesses of Universal Care, Inc.
(Universal Care), a California-based health care company, and paid $74.0 million, including transaction-related
costs. With this acquisition, we added 83,000 members as of December 31, 2006. This acquisition enhances our
presence in the California market.
The acquisition was accounted for using the purchase method of accounting. In accordance with SFAS
No. 141, “Business Combinations” (SFAS No. 141), the purchase price was allocated to the fair value of assets
acquired. See Note 2 for purchase price allocation of the fair value of the Universal Care assets acquired,
including identifiable intangible assets and the excess of purchase price over the fair value of net assets acquired
resulted in goodwill, which is deductible for tax purposes.
All of the net assets acquired were assigned to our Health Plan Services reportable segment.
The on-going financial results of the Universal Care transaction are included in our Health Plan Services
reportable segment effective April 1, 2006 and are not material to our consolidated results of operations.
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