Health Net 2013 Annual Report Download - page 124

HEALTH NET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
F-20
extend our contract for a second 24-month extension period ending March 31, 2012. On December 1, 2011, our contract
with DHCS was extended for a third 24-month period ending March 31, 2014. On November 2, 2012, our wholly
owned subsidiaries, Health Net of California, Inc. and Health Net Community Solutions, Inc., entered into a settlement
agreement ("the Agreement") with the DHCS. As part of the Agreement, DHCS agreed, among other things, to the
extension of all of our Medi-Cal managed care contracts existing on the date of the Agreement, including our contract
with DHCS to provide Medi-Cal services in Los Angeles County, for an additional five years from their then existing
expiration dates, subject to customary provisions for termination. Accordingly, our Medi-Cal contract for Los Angeles
County is scheduled to expire in April 2019. For additional information on our Agreement with DHCS, see "Health
Plan Services Revenue Recognition" above in this Note 2.
Earnings Per Share
Basic earnings per share excludes dilution and reflects net income divided by the weighted average shares of
common stock outstanding during the periods presented. Diluted earnings per share is based upon the weighted average
shares of common stock and dilutive common stock equivalents (this reflects the potential dilution that could occur if
stock options were exercised and restricted stock units ("RSUs") and performance share units ("PSUs") were vested)
outstanding during the periods presented.
The inclusion or exclusion of common stock equivalents arising from stock options, RSUs and PSUs in the
computation of diluted earnings per share is determined using the treasury stock method. For the years ended
December 31, 2013, 2012 and 2011, respectively, 949,000 shares, 954,000 shares and 1,446,000 shares of dilutive
common stock equivalents were outstanding and were included in the computation of diluted earning per share.
For the years ended December 31, 2013, 2012 and 2011, respectively, an aggregate of 941,000 shares, 1,539,000
shares and 2,496,000 shares of common stock equivalents were considered anti-dilutive and were not included in the
computation of diluted earnings per share. Stock options expire at various times through February 2019 (See Note 8).
In May 2011, our Board of Directors authorized a stock repurchase program for the repurchase of up to $300
million of our outstanding common stock (our "stock repurchase program"). On March 8, 2012, our Board of Directors
approved a $323.7 million increase to our stock repurchase program. As of December 31, 2012, the remaining
authorization under our stock repurchase program was $350.0 million. The remaining authorization under our stock
repurchase program as of December 31, 2013 was $280.0 million. See Note 9 for more information regarding our stock
repurchase program.
Comprehensive Income
Comprehensive income includes all changes in stockholders’ equity (except those arising from transactions with
stockholders) and includes net income (loss), net unrealized appreciation (depreciation) after tax on investments
available-for-sale and prior service cost and net loss related to our defined benefit pension plan (see Note 10).