operating office in Pittsburgh, Pennsylvania, under a lease agreement with a five-year term expiring in 2006; (iii) approximately 8,125 square feet at its Encino, California location under a 5-year term expiring in 2004; (iv) approximately 4,670 square feet at a regional operating office in Atlanta, Georgia, under a lease agreement with a five-year term expiring in 2005; and (v) approximately 20,500 square feet at its New Berlin, Wisconsin location under a 5-year term expiring in 2006.
STATEMENTS OF INCOME DATA (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(1) In connection with the sale of the Company by Medaphis Corporation in May 1997, the Company incurred a one-time $2.8 million non-cash compensation charge. This charge was from the issuance by the Company of 200,000 shares of Common Stock to the Company's management group, as a bonus for the successful completion of the sale of the Company by Medaphis. This represents 2% of the shares of Common Stock outstanding after the Company's initial public offering and 1.7% of the shares of Common Stock outstanding following the exercise of the underwriters' over-allotment option.
On January 25, 1999, the Company acquired the assets and certain liabilities of Subro-Audit, Inc., a Wisconsin corporation ("SAI"), and a related entity, O'Donnell Leasing Co., LLP, a Wisconsin limited liability partnership ("ODL" and, together with SAI, "Subro Audit"), for approximately $24.4 million (the "Subro Audit Acquisition"), using available unrestricted cash. The Company paid an additional $5.3 million pursuant to an earn-out arrangement. The final amount of $2.5 million was paid on June 7, 2001, and $2.8 million was paid on May 18, 2000. Approximately $4.7 million was held in escrow for the potential earn-out and was included in restricted cash at December 31, 2000. SAI is based in Wisconsin and provides subrogation recovery services with respect to an installed base of lives, which are covered by insurers, HMOs and employer-funded plans, throughout the United States of America. The Subro Audit Acquisition was accounted for using the purchase method of accounting.
This discussion and analysis of financial condition and results of operations is based upon the Company's financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the use of estimates and judgments that affect the reported amounts and related disclosures of commitments and contingencies. The Company relies on historical experience, established fact-gathering procedures, and various assumptions that the Company believes to be reasonable under the circumstances to make judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
Approximately $4.7 million of the Company's accounts receivable balance of $9.4 million at December 31, 2001 is attributable to subrogation services. The subrogation accounts receivable represents the Company's fees for cases in which the parties have reached settlements (including settlements of the subrogation claims of the Company's clients) but the Company has not yet received the cash from the settlement of the subrogation claim. The Company withholds its fee from the gross recovery proceeds of the subrogation claims that it collects on behalf of its clients. An allowance for doubtful accounts is maintained for the estimated loss from settlements that are later broken or significantly delayed, based on the Company's historical experience. The accounts receivable balance that at December 31, 2001 was attributable to subrogation claims represented approximately 3,800 settled cases for approximately 150 clients, each one subject to its own settlement agreement with its own settling parties. If the receipt of cash from a significant number of the settled cases comprising the subrogation accounts receivable balance were significantly delayed by third parties to those settled cases (because of broken settlement agreements, for example), additional allowances may be required.
The Company regularly reviews the carrying value of long-lived and identifiable intangible assets with respect to any events or circumstances that indicate an impairment or an adjustment to the depreciation or amortization period is necessary. If circumstances suggest the recorded amounts cannot be recovered based on estimated future undiscounted cash flows, the carrying values of such assets are reduced to fair value.
The Company accounts for options granted under its employee stock-based compensation plans in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees". As a result, the Company has not recognized compensation expense for stock options granted with an exercise price equal to the quoted market price of the common stock on the date of grant and that vest based solely on continuation of employment by the recipient of the option award. The Company adopted Statement of Financial Accounting Standards No. 123 (SFAS No. 123) for disclosure purposes in 1996. For SFAS No. 123 purposes, the fair value of each option grant and stock-based award has been estimated as of the date of grant using the Black-Scholes option pricing model. If the Company were to adopt SFAS No. 123 to account for options, compensation expense would be recognized resulting in a decrease in net income and earnings per
The Company's expenses are determined primarily by the number of employees directly engaged in recovery activities ("cost of services") and by the number of employees engaged in a variety of support activities ("support expenses"). Recovery personnel must be hired and trained in advance of the realization of recoveries and revenues. Historically, support expenses have not grown in direct proportion to revenues.
(1) Excludes the operational results of TransPaC Solutions and Troveris, except number of employees. See Item 1. "Business -- Business Developments -- Services to the Property and Casualty Insurance Industry" and "-- Technology Development". (2) The 1999 key operating indicators include the operating performance of Subro Audit and MedCap from their respective acquisition dates of January 25, 1999 and February 15, 1999. (3) Represents the net of: losses from contract terminations and organic declines in the clients' installed base measured in the number of persons covered by clients; and gains from organic growth in the clients' installed base measured in the number of persons covered by clients. (4) Backlog is the total dollar amount of potentially recoverable claims that the Company is pursuing or auditing on behalf of clients at a given point in time. (5) Throughput equals claims recoveries for the period divided by the average of backlog at the beginning and end of the period.
Claims Revenues. Claims revenues for the year ended December 31, 2001 (which include TransPac Solutions revenues of approximately $187,000) increased 0.8%, to $64.1 million from $63.6 million in 2000. This growth in claims revenues occurred primarily because of a 0.5% growth in claims recoveries, from $237.3 million in 2000 to $238.5 million in 2001. The effective fee rate remained the same between the two years at 26.8%.
of total backlog as of December 31, 2000. Total backlog increased 19.7% to $1,414.8 million as of December 31, 2001 from $1,182.0 million as of December 31, 2000. Although most of the backlog growth related to provider bill audit, subrogation backlog increased approximately $12.0 million, or 1.3%, compared to the prior year. The decline in total throughput from 20.9% in 2000 to 18.4% in 2001, was entirely attributable to the increase in provider bill audit backlog, while related recoveries decreased.
Support Expenses. Support expenses increased 2.6% to $17.5 million for the year ended December 31, 2001, from $17.1 million for 2000. Support expenses as a percentage of claims revenues increased from 26.8% for the year ended December 31, 2000 to 27.3% for 2001. The increase in support expenses in total and as a percentage of claims revenues resulted primarily from an increase in sales and marketing and management expenses related to the Company's business development activities.
The Company also began the internal development of a web-enabled subrogation software application. The Company will sell these products as an application service provider ("ASP"), under the trade name "Troveris", both to the health insurance and benefits market and to the P&C market. During the second quarter of 2001, the Company completed and offered for sale a commercially available health insurance application. During the third quarter of 2001, the Company completed and offered for sale a commercially available P&C application. Through December 31, 2001, the Company had not yet sold either the health insurance application or the P&C application. Development of Troveris during the year ended December 31, 2001 cost the Company approximately $0.5 million in support expenses with approximately 68.0% of that related to sales and marketing.
Depreciation and Amortization. Depreciation and amortization expenses increased 5.2% to $6.7 million for the year ended December 31, 2001 from $6.4 million for 2000. The increase in depreciation expense was attributable to the purchased property and equipment and internally developed software related to the system upgrades. The increase in amortization expense was attributable to the addition of intangible assets related to the Subro Audit Acquisition final earnout payment.
Interest Expense. Interest expense totaled $0.9 million and $1.3 million for the years ended December 31, 2001 and 2000, respectively. The decrease in interest expense for 2001 resulted primarily from a decrease in long-term borrowings due to the sale of the Wisconsin building and the release of restricted cash from the Subro Audit Acquisition escrow account. Additionally, the effective interest rate was approximately 2.1% lower during 2001 than during 2000.
Net Income. Net income for the year ended December 31, 2001 increased $1.0 million, or 29.5%, to $4.6 million or $0.46 per diluted share, from $3.6 million, or $0.33 per diluted share, for the year ended December 31, 2000. Net income increased primarily as a result of the accrual of $1.8 million of expenses, net of income taxes, at December 31, 2000 related to the DeGarmo litigation settlement described above. However, the increase in net income resulting from the DeGarmo litigation settlement was partially offset by an increase in net after tax expenses related to the Company's business development activities of approximately $1.1 million. See Item 1. "Business -- Business Developments -- Services to the Property and Casualty Industry" and "-- Technology Development". In addition, there were two significant, non-recurring items in 2001 which together resulted in an increase to net income of $90,000: the loss on the disposal of property of approximately $591,000, net of tax; and the reversal of income taxes previously accrued for the non-cash compensation charge in 1997 of approximately $681,000, net of tax.
Revenues. Claims revenues for the year ended December 31, 2000 increased 3.6%, to $63.6 million from $61.4 million in 1999. This growth in claims revenues occurred primarily because of a 4.9% growth in claims recoveries, from $226.1 million in 1999 to $237.3 million in 2000. Claims revenues grew at a slower rate than claims recoveries between the two periods due to a decrease in the effective fee rate from 27.2% in 1999 to
Cost of Services. Cost of services decreased 3.2% in 2000 to $30.4 million from $31.5 million in 1999. As a percentage of claims revenues, cost of services decreased to 47.8% in 2000 from 51.2% in 1999. The decrease in cost of services in total and as a percentage of claims revenues in 2000 compared to 1999 resulted primarily from certain productivity enhancements instituted early in 2000 and management of labor costs.
Net Income. Net income for the year ended December 31, 2000 decreased $1.6 million, or 31.2%, to $3.6 million or $0.33 per diluted share, from $5.2 million, or $0.46 per diluted share, for the year ended December 31, 1999. Net income decreased primarily as a result of the year to year increases in support expenses and depreciation and amortization as well as the litigation settlement expense described above, which collectively more than offset the increase in claims revenues between the two years.
The Company's statements of cash flows for the years ended December 31, 2001, 2000 and 1999 are summarized below:
The Company had working capital of $10.4 million at December 31, 2001, including cash and cash equivalents of $2.5 million, compared with working capital of $7.8 million at December 31, 2000.
Net cash provided by operating activities decreased $2.5 million for the year ended December 31, 2001, compared to the year ended December 31, 2000, primarily as a result of the $3.0 million litigation settlement which was expensed in 2000 and paid in 2001. The remainder of net cash provided by operations was used to repay amounts outstanding under the Company's Revolving Credit Facility.
Net cash provided by financing activities for the year ended December 31, 2001 reflects $6.0 million in net cash repayments with respect to the Company's credit facility as discussed below.
At December 31, 2001 and 2000, the Company reported as a current asset on its balance sheets, restricted cash of $18.0 million and $21.6 million, respectively. Restricted cash at December 31, 2001 and 2000 represented claims recoveries effected by the Company for its clients and also included an escrowed amount of $4.7 million at December 31, 2000 for a potential earn-out in connection with the Subro Audit Acquisition. At December 31, 2001 and December 31, 2000, the Company reported on its balance sheets, as a current liability, funds due clients of $12.9 million and $12.4 million, respectively, representing recoveries to be distributed to clients, net of the fee earned on such recoveries.
The following summarizes the Company's contractual obligations at December 31, 2001, and the effect such obligations are expected to have on its liquidity and cash flows in future periods.
The Company received from UnitedHealth Group ("UHG"), through its Uniprise strategic business unit, termination notices regarding subrogation recovery services covering approximately 1.3 million lives as to which the Company ceased during 2001 to receive new claims data and, therefore, to identify new recoverable files. These terminations are reported as "lost" in the Key Operating Indicators table (See "-- Results of
Operations"), but are offset by the approximately 1.8 million UHG lives added to service during the year ended December 31, 2001. The total UHG lives sold and installed at December 31, 2001 were approximately 14.8 million.
Moreover, the Company received from Uniprise termination notices regarding subrogation recovery services covering approximately 4.7 million lives as to which the Company will cease during 2002 to receive new claims data and, therefore, to identify new recoverable files. These terminations are not reported as "lost" in the Key Operating Indicators table above because the effective dates of the terminations occur in 2002. The Company has learned from UHG that all of this terminated business (i.e., 6 million lives) will be serviced by UHG's Ingenix strategic business unit.
The Company believes, based on information derived from Uniprise, that approximately 55% of the total UHG book of business that the Company serviced at December 31, 2001 -- approximately 14.8 million lives -- are from either self-insured employer groups that receive claims administration services from Uniprise or health plans that are under a management contract with UHG. The Company believes that neither UHG nor Uniprise controls these self-insured employer groups and managed health plans (i.e., "external clients") in the selection of their subrogation vendor and that the Company may, therefore, sell its recovery services directly to these external clients following any current or future UHG terminations. The Company intends to compete vigorously for the subrogation and other recovery business of these external clients against Ingenix as well as any other vendors.
Wellpoint Health Networks accounted for 40% and 29% of the Company's accounts receivable balance at December 31, 2001 and 2000, respectively. Wellpoint Health Networks represents approximately 70% of the Company's revenue earned from its provider bill audit service.
The Company performs its services on a reasonable efforts basis and does not obligate itself to deliver any specific result. Contracts with its customers are generally terminable on 60 to 180 days' notice by either party, although in a few cases the contracts extend over a period of years. The Company's contracts generally provide that in the event of termination, the Company is entitled to complete the recovery process on the existing backlog or to receive a cash payment designed to approximate the gross margin that would otherwise have been earned from the recovery on the backlog of the terminating client. On December 31, 2001, the Company had backlog of $1,414.8 million.
Committee directed its financial adviser to solicit indications of interest from potential acquirers regarding a possible sale or business combination. Subsequently, 22 third parties entered into confidentiality agreements and although several of them conducted significant "due diligence" investigations of the Company, all but one of the participants declined to pursue a transaction. The Special Committee's financial advisor then informed the Special Committee that it would be unwilling to render its opinion that a transaction based on the single proposal that was submitted (by the management-allied private equity firm) would be fair to the Company's stockholders. In light of the financial advisor's position, the Special Committee decided to terminate the process of actively seeking an acquirer or a strategic merger partner and to focus on building the Company's business.
In 2001, the Board of Directors, through its Nominating Committee, nominated Herbert A. Denton to fill a vacant position on the Board. Mr. Denton's nomination was approved by the remaining directors on May 11, 2001. Under the Company's Certificate of Incorporation and Bylaws, a vacancy on the Board of Directors created by a resignation may be filled by a majority vote of the remaining directors. A director so chosen to fill the vacancy would hold office until the next succeeding Annual Meeting.
The Company's Board approved a stock repurchase plan on March 12, 1999 under which the Company is authorized to repurchase, from time to time, up to $10 million of the Company's Common Stock in the open market, at prices per share deemed favorable by the Company. Shares may be repurchased using cash from operations and borrowed funds and may continue until such time as the Company has repurchased $10 million of the Company's Common Stock or until it otherwise determines to terminate the stock repurchase plan. The Company repurchased 19,500 shares of its own stock during the year ended December 31, 2001 at an average price of $4.02. From inception of the program through December 31, 2001, total repurchased shares are 1,792,265 at a cost of $7.1 million, or an average cost of $3.97 per share. All of the reacquired shares of Common Stock through December 31, 2001 are reflected as treasury stock on the accompanying Balance Sheets.
On February 12, 1999, the Board of Directors adopted a Stockholder Rights Plan and declared a dividend of one preferred stock purchase right (a "Right") for each outstanding share of Common Stock of the Company. The dividend was payable to stockholders of record on March 1, 1999. The Rights, which initially trade with the Common Stock, separate and become exercisable only upon the earlier to occur of (i) 10 days after the date (the "Stock Acquisition Date") of a public announcement that a person or group of affiliated persons has acquired 20% or more of the Common Stock (such person or group being hereinafter referred to as an "Acquiring Person") or (ii) 10 days (or such later date as the Board of Directors shall determine) after the commencement of, or announcement of an intention to make, a tender offer or exchange offer that could result in such person or group owning 20% or more of the Common Stock (the earlier of such dates being called the "Distribution Date"). When exercisable, each Right initially entitles the registered holder to purchase from the Company one one-hundredth of a share of a newly created class of preferred stock of the
Company at a purchase price of $65 (the "Purchase Price"). The Rights are redeemable for $0.001 per Right at the option of the Board of Directors. The Rights expire on March 1, 2009.
The Company has entered into a contract for legal services with a professional service corporation, Sharps & Associates, PSC, that is wholly owned by Douglas R. Sharps, the Company's Executive Vice President -- Finance and Administration, Chief Financial Officer and Secretary. This arrangement exists solely for the benefit of the Company and its purpose is to minimize the costs of legal services purchased by the Company on behalf of its clients. Mr. Sharps receives no financial or other personal benefits from his ownership of this firm. For the year ended December 31, 2001, approximately $3,385,000 was paid to this law firm for such legal services (which equates to a rate of approximately $40 per hour), including all employees and expenses.
On June 30, 2000, pursuant to Board authorization and in accordance with the terms of the Amended Promissory Note, the Company and Mr. McGinnis entered into a deferred compensation agreement (the "Agreement"). Under the Agreement, 50% of the amount otherwise payable to Mr. McGinnis under the Company's Management Group Incentive Compensation Plan is to be deferred until the Amended Promissory Note is paid in full, with such deferred compensation then being paid in full to Mr. McGinnis within 30 days thereafter. The Company has full right of set-off against any deferred compensation under the Agreement should Mr. McGinnis default under the Amended Promissory Note. At the election of Mr. McGinnis, the payment of the deferred compensation, upon payment of the Amended Promissory Note, may be extended for a period of not more than ten years. At December 31, 2001, the amount of deferred compensation was $52,648, with accrued interest of $2,779.
In our opinion, the accompanying balance sheets and the related statements of income, changes in stockholders' equity and comprehensive income and cash flows appearing on pages 37 through 40 of this annual report on Form 10-K present fairly, in all material respects, the financial position of Trover Solutions, Inc. (the "Company") at December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (DOLLARS IN THOUSANDS)
Healthcare Recoveries, Inc. changed its name to Trover Solutions, Inc. (hereinafter referred to as the "Company") effective January 15, 2002. The Company, a Delaware corporation, was incorporated on June 30, 1988. The Company is a provider of outsourcing of subrogation and certain other medical claims recovery and cost containment services to the private healthcare payor industry. Its primary business is medical claims recovery, and its primary product is subrogation recovery, which generally entails the identification, investigation and recovery of accident-related medical benefits incurred by its clients on behalf of their insureds, but for which other persons or entities have primary responsibility. The Company's clients' rights to recover the value of these medical benefits, arising by law or contract, are generally known as the right of subrogation and are generally paid from the proceeds of liability or workers' compensation insurance. The Company's other medical claims recovery services include (1) the auditing of the bills of medical providers, particularly hospitals, for accuracy, correctness and compliance with contract terms ("provider bill audit"), and (2) the recovery of overpayments attributable to duplicate payments, failures to coordinate benefits and similar errors in payment.
Depreciation expense for the years ended 2001, 2000 and 1999 was $4.0 million, $3.8 million, and $3.1 million, respectively.
Cost in excess of net assets acquired represents the unamortized excess of cost over the fair value of tangible and identifiable intangible assets acquired and is being amortized on a straight-line basis over twenty years. Identifiable intangible assets are being amortized on a straight-line basis over varying periods, ranging from four to fifteen years. Amortization expense for the years ended 2001, 2000 and 1999 was $2.7 million, $2.6 million, and $1.9 million, respectively.
In August 1999, the Board of Directors appointed a Special Committee to evaluate strategic alternatives available to the Company, including its possible sale. In March 2000, the Special Committee ceased seeking a buyer for the Company and its efforts to enhance shareholder value were assumed by the full Board of Directors. The Company incurred $90,000 and $451,000 of expenses related to the work of the Special Committee during 2000 and 1999, respectively.
The Company accounts for its employee stock-based compensation plans under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB No. 25). Effective in 1996, the Company implemented the disclosure requirements of SFAS No. 123, "Accounting for Stock-Based Compensation". SFAS No. 123 requires companies that elect not to account for stock-based compensation as prescribed by SFAS No. 123, to disclose the pro forma effects on earnings and earnings per share as if SFAS No. 123 had been adopted. Additionally, certain other disclosures are required with respect to stock compensation and the assumptions used in determining the pro forma effects of SFAS No. 123.
Other comprehensive income (loss) refers to revenues, expenses, gains and losses that under accounting principles generally accepted in the United States of America are included in comprehensive income (loss) but are excluded from net income as these amounts are recorded directly as an adjustment to stockholders' equity, net of tax. The Company's other comprehensive income is composed of a deferred gain on a cash flow hedge. See Note 11 "Derivatives".
In October 2001, the FASB issued Statement of Financial Accounting Standards No. 144 (FAS 144), "Accounting for the Impairment or Disposal of Long-Lived Assets". FAS 144 is effective for fiscal years beginning after December 15, 2001. This statement supersedes FAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations -- Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions", for the disposal of a business segment. FAS 144 establishes a single accounting model, based on the framework established in FAS 121. The Company has not yet determined the effect of this standard on its financial statements.
Certain prior year items have been reclassified to conform to the 2001 presentation. These reclassifications had no effect on previously reported assets, liabilities, stockholders' equity, net income, accumulated comprehensive income (loss) or cash flows.
If the Acquisitions had taken place on January 1, 1999, approximate claims revenues, net income and earnings per common share for the year ended December 31, 1999 would have been $62.7 million, $5.1 million and $0.45 per share, respectively. The cost in excess of net tangible and identifiable intangible assets acquired, allocated and recorded in connection with the Acquisitions, was approximately $30.8 million and is being amortized over a 20-year period. These results may not necessarily reflect future results of operations or what
Future minimum lease payments for office space, by year, under noncancelable operating leases with initial or remaining terms in excess of one year at December 31, 2001 are as follows (in thousands):
Rental expense, which includes amounts applicable to short-term leases, was approximately $2,092,000, $1,951,000, and $1,302,000 for the years ended December 31, 2001, 2000 and 1999, respectively.
Temporary differences giving rise to deferred taxes in the accompanying balance sheets at December 31, 2001 and 2000 consist of the following (in thousands):
Management believes that the deferred tax assets are realizable based primarily on the existence of sufficient taxable income within the allowable carryback period.
UnitedHealth Group accounted for 27%, 24% and 23% of the Company's total revenues for the years ended December 31, 2001, 2000 and 1999, respectively. No other client accounted for more than 10% of the Company's total revenues. The loss of this client could have a material adverse effect on the Company's results of operations, financial position and cash flows.
On February 12, 1999, the Board of Directors approved a loan in the amount of $350,000 to Patrick B. McGinnis, the Chairman and Chief Executive Officer of the Company, in exchange for a full recourse promissory note in the same amount from Mr. McGinnis. On June 30, 2000, at the direction of the Board of Directors and in accordance with terms authorized by it, the Company loaned Mr. McGinnis an additional $500,000. Under these terms, the $500,000 loan to Mr. McGinnis was combined with his existing debt to the Company of $350,000 of principal and $36,520 of accrued interest. Mr. McGinnis delivered to the Company his full recourse promissory note in the amount of $886,520, bearing interest at a fixed rate of 6.62% per annum, compounded annually (the "Amended Promissory Note"), and the Company cancelled the old
was $0. At December 31, 2001, the fair value of the hedge was $45,446 ($26,586, net of tax, included in Other Comprehensive Income).
Activity related to the Employees' Plan, Directors' Plan and 1997 Plan for the years ended December 31, 2001, 2000 and 1999 is summarized as follows:
The following table summarizes information about options outstanding under the Employees' Plan, Directors' Plan and 1997 Plan at December 31, 2001:
1999 and earnings per common share (basic and diluted) for the years ended December 31, 2001, 2000 and 1999 would have decreased to the following pro forma amounts:
(1) Includes expense of $3.0 million pretax ($1.755 million after tax, or $0.18 per diluted share) related to a litigation settlement and $263,000 pretax ($154,000 after tax, or $0.01 per diluted share) related to research and development.