United Healthcare 2006 Annual Report Download - page 47

to convert their notes in accordance with existing terms and consent to an amendment to a covenant in the
indenture governing the convertible notes. The compensation consisted of the present value of interest through
October 18, 2007, the earliest redemption date, plus a pro rata share of $1 million. On January 31, 2006,
approximately 91% of the convertible notes were tendered pursuant to the offer, for which we issued 4.8 million
shares of UnitedHealth Group common stock, valued at $282 million, and cash of $93 million.
Our senior debt is rated “A” with a negative outlook by Standard & Poor’s (S&P), “A” with a negative watch by
Fitch, and “A3” with a negative outlook by Moody’s. Our commercial paper is rated “A-1” with a negative
outlook by S&P, “F-1” with a negative watch by Fitch, and “P-2” with a negative outlook by Moody’s. Moody’s
downgraded our rating in October 2006 citing concerns about corporate governance following the release of the
WilmerHale Report (See Note 3 of the Notes to Consolidated Financial Statements). We do not expect this
Moody’s downgrade to significantly affect our borrowing capacity or costs. A significant downgrade in our debt
or commercial paper ratings could adversely affect our borrowing capacity and costs. See “ — Cautionary
Statements Relating to Our Historic Stock Option Practices — Credit Ratings” for additional information.
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.
There is no established expiration date for the program. During the year ended December 31, 2006, we
repurchased 40.2 million shares at an average price of approximately $56 per share and an aggregate cost of
approximately $2.2 billion. As of December 31, 2006, we had Board of Directors’ authorization to purchase up to
an additional 136.7 million shares of our common stock. Our common stock repurchase program is discretionary
as we are under no obligation to repurchase shares. We repurchase shares because we believe it is a prudent use
of capital. The Company suspended purchases under its stock repurchase program in the third quarter of 2006
pending completion of our restatement (which is reflected in this Form 10-K) and becoming current in our
periodic SEC filings. The Company intends to resume its stock repurchase program in 2007.
We currently have $1.0 billion remaining under our universal S-3 shelf registration statement (for common stock,
preferred stock, debt securities and other securities), although we will be unable to issue securities on Form S-3
on a primary basis until we have timely filed all reports required to be filed with the SEC for a twelve-month
period. We may offer securities from time to time at prices and terms to be determined at the time of offering.
Under our S-4 acquisition shelf registration statement, we have remaining issuing capacity of 48.6 million shares
of our common stock in connection with acquisition activities. We filed a separate S-4 registration statement for
the 99.2 million shares issued in connection with the December 2005 acquisition of PacifiCare described
previously.
Contractual Obligations, Off-Balance Sheet Arrangements And Commitments
The following table summarizes future obligations due by period as of December 31, 2006, under our various
contractual obligations, off-balance sheet arrangements and commitments (in millions):
2007 2008 to 2009 2010 to 2011 Thereafter Total
Debt and Commercial Paper (1) ................... $1,483 $1,850 $ 750 $3,373 $ 7,456
Interest on Debt and Commercial Paper (2) .......... 366 581 438 1,660 3,045
Operating Leases .............................. 156 273 167 370 966
Purchase Obligations (3) ........................ 182 144 30 5 361
Future Policy Benefits (4) ....................... 121 339 325 1,186 1,971
Other Long-Term Obligations (5) ................. — 74 12 325 399
Total Contractual Obligations ................ $2,308 $3,261 $1,722 $6,919 $14,210
(1) Debt payments could be accelerated upon violation of debt covenants. We believe the likelihood of
acceleration is remote.
(2) Calculated using stated rates from the debt agreements and related interest rate swap agreements and
assuming amounts are outstanding through their contractual term. For variable-rate obligations, we used the
rates in place as of December 31, 2006 to estimate all remaining contractual payments.
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