Humana 2003 Annual Report Download - page 80

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Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2003, investment securities with a fair value of $119.8 million were on loan. Investment income
earned on security lending transactions was $0.2 million for 2003 and less than $0.1 million for 2002.
4. PROPERTY AND EQUIPMENT, NET
Property and equipment was comprised of the following at December 31, 2003 and 2002:
2003 2002
(in thousands)
Land ................................................................. $ 20,407 $ 30,798
Buildings .............................................................. 257,728 309,679
Equipment and computer software .......................................... 717,173 653,996
Assets held for sale ...................................................... 27,517 5,294
1,022,825 999,767
Accumulated depreciation ................................................ (606,353) (539,925)
Property and equipment, net ........................................... $ 416,472 $ 459,842
Depreciation expense was $115.2 million in 2003, $105.0 million in 2002, and $92.9 million in 2001.
Depreciation expense in 2003 includes the impact of accelerating depreciation related to abandoned software
more fully described at the end of Note 4.
A decision to eliminate the Jacksonville, Florida, San Antonio, Texas and Madison, Wisconsin customer
service centers during the fourth quarter of 2002 prompted a review for the possible impairment of long-lived
assets associated with these centers. Assets under operating leases supported the Madison service center and,
therefore, were not applicable to our impairment analysis. Under a transition plan, we continued to use the long-
lived assets of the Jacksonville and San Antonio customer service centers until mid-2003, the completion date for
consolidating these two customer service centers. The long-lived assets of our customer service centers were
supported by the future cash flows expected to result from members serviced by those centers. Cash flows from
members serviced by each service center represented the lowest level of independently identifiable cash flows.
For example, cash flows from members located primarily in the state of Florida and serviced by the Jacksonville
service center supported the Jacksonville center’s long-lived assets until those members’ service was transitioned
elsewhere.
Our impairment review during the fourth quarter of 2002 indicated that estimated undiscounted cash flows
expected to result from the remaining use of the San Antonio, Texas customer service center long-lived assets,
primarily buildings, were insufficient to recover their carrying value. Accordingly, we reduced the carrying value
of these long-lived assets to their estimated fair value resulting in non-cash impairment expenses of $2.4 million
($1.5 million after tax) during the fourth quarter of 2002.
Unlike our San Antonio impairment review, a greater number of more profitable members in Florida caused
the estimated undiscounted cash flows expected to result from the remaining use of the Jacksonville, Florida
customer service center’s long-lived assets, primarily a building, to exceed the carrying value as of the fourth
quarter of 2002 impairment review. However, impairment was triggered during the first quarter of 2003 with the
passage of time and the approaching date for closing the center. As members serviced by the Jacksonville,
Florida customer service center were transferred to other service centers during 2003, the undiscounted cash
flows expected from the remaining members serviced by the center fell during the first quarter of 2003 to a level
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