Health Net 2007 Annual Report Download - page 40

However, there can be no assurance that such adverse effects will not occur in the event of a disaster. Any such
disaster or similar event could have a material adverse effect on our business, financial condition and results
of operations.
Current unfavorable economic conditions could negatively affect our revenues and profitability.
Recent events, including fallout from problems in the U.S. subprime mortgage market, rising oil prices,
declining business and consumer confidence and increased unemployment, indicate a potential near-term
recession in the U.S. economy. An economic downturn may impact the number of enrollees in managed care
programs and the profitability of our operations. If economic conditions significantly deteriorate, we may
experience a reduction in existing and new business, which may have a material adverse effect on our business,
financial condition and results of operations.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
We lease office space for our principal executive offices in Woodland Hills, California. Our executive
offices, comprising approximately 174,237 square feet, are occupied under two separate leases that expire on
December 31, 2008 (with respect to 48,922 square feet of space) and December 31, 2014 (with respect to
125,315 square feet of space). A significant portion of our California HMO operations are also housed in
Woodland Hills, in a separate 333,954 square foot leased facility. The lease for this two-building facility expires
December 31, 2011. Combined rent and rent-related obligations for our Woodland Hills facilities were
approximately $15.0 million in 2007.
We also lease an aggregate of approximately 548,807 square feet of office space in Rancho Cordova,
California for certain Health Plan Services and Government Contract operations. Our aggregate rent and rent-
related obligations under these leases were approximately $11.0 million in 2007. These leases expire at various
dates ranging from 2009 to 2013. We also lease a total of approximately 121,542 square feet of office space in
San Rafael and Point Richmond, California for certain specialty services operations.
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. Under the Shelton Property lease agreement and other lease
agreements, we lease an aggregate of approximately 459,595 square feet of office space in Shelton, Connecticut
for certain Health Plan Services for our Northeast Division. Our aggregate rent and rent-related obligations under
these leases were approximately $7.6 million in 2007. These leases expire at various dates ranging from 2016 to
2017.
In addition to the office space referenced above, we lease approximately 86 sites in 26 states, totaling
approximately 958,153 square feet of space. We also own a data center facility in Rancho Cordova, California
comprising approximately 82,000 square feet of space.
We believe that our ownership and rental costs are consistent with those associated with similar space in the
applicable local areas. Our properties are well maintained, adequately meet our needs and are being utilized for
their intended purposes.
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