United Healthcare 2001 Annual Report Download - page 46

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PAGE 45 UnitedHealth Group
NET EARNINGS PER COMMON SHARE
We compute basic net earnings per common share by dividing net earnings by the weighted-average
number of common shares outstanding during the period. We determine diluted net earnings per
common share using the weighted-average number of common shares outstanding during the period,
adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be issued
upon exercise of common stock options.
DERIVATIVE FINANCIAL INSTRUMENTS
As part of our risk management strategy, we may enter into interest rate swap agreements to manage our
exposure to interest rate risk. The differential between fixed and variable rates to be paid or received is
accrued and recognized over the life of the agreements as an adjustment to interest expense in the
Consolidated Statements of Operations.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 141, “Business Combinations,” and SFAS No. 142, “Goodwill and Other Intangible
Assets.” Under SFAS No. 141, business combinations initiated after June 30, 2001, must be accounted for
using the purchase method of accounting. Under SFAS No. 142, amortization of goodwill and indefinite-
lived intangible assets will cease, and the carrying value of these assets will instead be evaluated for
impairment using a fair-value-based test, applied at least annually. We adopted SFAS No. 142 on January 1,
2002, completed the initial impairment tests of goodwill as required by SFAS No. 142, and determined that
our goodwill is not impaired. The following table shows net earnings and earnings per common share
adjusted to reflect the adoption of the non-amortization provisions of SFAS No. 142 as of the beginning
of the respective periods:
For the Year Ended December 31,
(in millions, except per share data) 2 0 0 1 2000 1999
NET EARNINGS
Reported Net Earnings $ 913 $736 $568
Goodwill Amortization, net of tax effects 89 85 76
Adjusted Net Earnings $ 1,002 $821 $644
BASIC NET EARNINGS PER COMMON SHARE
Reported Basic Net Earnings per Share $ 2.92 $2.27 $1.63
Goodwill Amortization, net of tax effects 0.29 0.26 0.22
Adjusted Basic Net Earnings per Share $ 3.21 $2.53 $1.85
DILUTED NET EARNINGS PER COMMON SHARE
Reported Diluted Net Earnings per Share $ 2.79 $2.19 $1.60
Goodwill Amortization, net of tax effects 0.28 0.25 0.21
Adjusted Diluted Net Earnings per Share $ 3.07 $2.44 $1.81
In June 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations.” SFAS No. 143
addresses financial accounting and reporting for obligations associated with the retirement of tangible
long-lived assets and the associated retirement costs. We must adopt the standard on January 1, 2003.
We do not expect the adoption of SFAS No. 143 will have any impact on our financial position or results
of operations.