United Healthcare 2001 Annual Report Download - page 33

UnitedHealth Group
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the three-month LIBOR (London Interbank Offered Rate) plus 0.3% for the notes due November 2003
and to the three-month LIBOR plus 0.6% for the notes due November 2004. As of December 31, 2001, the
applicable rates on the notes were 2.4% and 2.7%, respectively. A portion of the proceeds from these
borrowings was used to repay $150 million of floating-rate notes that matured in November 2001.
In January 2002, we issued $400 million of 5.2% fixed-rate notes due January 2007. Proceeds from
this borrowing will be used to repay commercial paper and for general corporate purposes, including
working capital, capital expenditures, business acquisitions and share repurchases. When we issued
these notes, we entered into interest rate swap agreements to convert a portion of our interest rate
exposure from a fixed rate to a variable rate. The interest rate swap agreements have an aggregate
notional amount of $200 million maturing January 2007. The variable rates approximate the six-month
LIBOR and are reset on a semiannual basis.
We have credit arrangements for $900 million that support our commercial paper program. These credit
arrangements include a $450 million revolving facility that expires in July 2005, and a $450 million, 364-day
facility that expires in July 2002. We also have the capacity to issue approximately $200 million of extendible
commercial notes (ECNs). As of December 31, 2001 and 2000, we had no amounts outstanding under our
credit facilities or ECNs.
Our debt arrangements and credit facilities contain various covenants, the most restrictive of which
require us to maintain a debt-to-total-capital ratio below 45% and to exceed specified minimum interest
coverage levels. We are in compliance with the requirements of all debt covenants.
Our senior debt is rated “A” by Standard & Poor’s (S&P) and Fitch, and “A3” by Moody’s. Our
commercial paper and ECN programs are rated “A-1” by S&P, “F-1” by Fitch, and “P-2” by Moody’s.
Consistent with our intention of maintaining our senior debt ratings in the “A” range, we intend to
maintain our debt-to-total-capital ratio at 30% or less. A significant downgrade in our debt and
commercial paper ratings could adversely affect our borrowing capacity and costs.
The remaining issuing capacity of all securities covered by our shelf registration statement for
common stock, preferred stock, debt securities and other securities is $450 million, after giving effect
to the $400 million fixed-rate notes issued in January 2002. We may publicly offer such securities from
time to time at prices and terms to be determined at the time of offering.
Under our board of directors’ authorization, we maintain a common stock repurchase program.
Repurchases may be made from time to time at prevailing prices, subject to certain restrictions on volume,
pricing and timing. During 2001, we repurchased 19.6 million shares at an aggregate cost of approximately
$1.1 billion. Through December 31, 2001, we had repurchased approximately 112.5 million shares for an
aggregate cost of $3.7 billion since the program began in November 1997. As of December 31, 2001, we had
board of directors’ authorization to purchase up to an additional 8.8 million shares of our common stock.
In February 2002, the board of directors authorized us to repurchase up to an additional 30 million shares of
common stock under the program.
As part of our share repurchase activities, we have entered into agreements with an independent third
party to purchase shares of our common stock, where the number of shares we purchase, if any, depends upon
market conditions and other contractual terms. As of December 31, 2001, we had conditional agreements to
purchase up to 6.1 million shares of our common stock at various times and prices through 2003, at an average
price of approximately $58 per share.
During 2001 and 2000, we invested $425 million and $245 million, respectively, in property, equipment
and capitalized software. These investments were made to support business growth, operational efficiency,
service improvements and technology enhancements.