United Healthcare 2002 Annual Report Download - page 33

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UnitedHealth Group
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 2003. We also have the capacity to issue approximately $200 million
of extendible commercial notes (ECNs). As of December 31, 2002 and 2001, 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 would likely adversely affect our borrowing capacity and costs.
The remaining issuing capacity of all securities covered by our S-3 shelf registration statement (for
common stock, preferred stock, debt securities and other securities) is $450 million. We may publicly offer
such securities from time to time at prices and terms to be determined at the time of offering. We also have an
S-4 acquisition shelf registration statement under which we have remaining issuing capacity of approximately
5.6 million shares of our common stock in connection with acquisition activities.
During 2002 and 2001, we invested $419 million and $425 million, respectively, in property, equipment,
capitalized software and information technology hardware. These investments were made to support
business growth, operational and cost efficiencies, service improvements and technology enhancements.
Effective September 30, 2002, we acquired AmeriChoice Corporation (AmeriChoice), a leading
organization engaged in facilitating health care benefits and services for Medicaid beneficiaries in the
states of New York, New Jersey and Pennsylvania. We are integrating our existing Medicaid business with
AmeriChoice, creating efficiencies from the consolidation of health care provider networks, technology
platforms and operations. We issued 5.3 million shares of our common stock with a fair value of
approximately $480 million in exchange for 93.5% of the outstanding AmeriChoice common stock. We
issued vested stock options with a fair value of approximately $15 million in exchange for outstanding
stock options held by AmeriChoice employees, and we paid cash of approximately $82 million, mainly to
pay off existing AmeriChoice debt. We will acquire the remaining minority interest after five years at a value
based on a multiple of the earnings of the combined Medicaid business. We have the option to acquire the
minority interest at an earlier date if specific events occur, such as the termination or resignation of key
AmeriChoice employees.