Health Net 2013 Annual Report Download - page 55

53
agreement. If this were to occur, in order to engage in the business we would be required to obtain the Buyer's consent
under the Non-Competition Agreement, which the Buyer could withhold in its discretion. In the event that we are
unable to engage in a business due to the terms of the Non-Competition Agreement, this could have an adverse effect on
our prospects, business, financial condition or results of operations.
We also face other risks that could adversely affect our business, financial condition or results of operations, which
include:
• any requirement to restate financial results in the event of inappropriate application of accounting
principles;
• a significant failure of our internal control over financial reporting;
• our inability to convert to international financial reporting standards, if required;
• failure of our prevention and control systems related to employee compliance with internal policies,
including data security;
• provider fraud that is not prevented or detected and impacts our medical costs or those of self-insured
customers;
• failure to protect our proprietary information; and
• failure of our corporate governance policies or procedures.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
We lease office space for our principal executive offices in Woodland Hills, California, which is used by each of
our reportable segments. The operating lease for our executive offices expires on December 31, 2014 and relates to
approximately 125,315 square feet. We also lease a separate 333,954 square foot facility in Woodland Hills primarily to
house the operations for a significant portion of our Western Regions Operations reportable segment. The lease for this
two-building facility expires December 31, 2021.
In Rancho Cordova and San Rafael, California, we lease an aggregate of approximately 593,216 square feet of
office space that is used for operations in our Western Region Operations and Government Contracts reportable
segments. The related leases expire at various dates ranging from September 2014 to June 2022.
In addition to the office space referenced above, we lease approximately 50 sites in 11 states, totaling
approximately 646,187 square feet of space, which are used by our reportable segments for their respective operations.
We also lease approximately 396,990 square feet of office space in Shelton, Connecticut under leases expiring at
various dates ranging from 2016 to 2017. We no longer conduct operations in Shelton, and have subleased a portion of
this space under subleases expiring at various dates ranging from 2014 to 2016.
We also own a facility in Rancho Cordova, California comprising approximately 82,000 square feet of space,
which is used to support operations for all of our reportable segments.
We believe that our properties are adequate and suitable to meet our business needs.
Item 3. Legal Proceedings.
Overview
We record reserves and accrue costs for certain legal proceedings and regulatory matters to the extent that we
determine an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. While such
reserves and accrued costs reflect our best estimate of the probable loss for such matters, our recorded amounts may
differ materially from the actual amount of any such losses. In some cases, no estimate of the possible loss or range of
loss in excess of amounts accrued, if any, can be made because of the inherently unpredictable nature of legal and
regulatory proceedings, which may be exacerbated by various factors, including but not limited to that they may involve
indeterminate claims for monetary damages or may involve fines, penalties or punitive damages; present novel legal
theories or legal uncertainties; involve disputed facts; represent a shift in regulatory policy; involve a large number of
parties, claimants or regulatory bodies; are in the early stages of the proceedings; involve a number of separate
proceedings, each with a wide range of potential outcomes; or result in a change of business practices. Further, there