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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

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FORM 8-K/A

 

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Current Report Pursuant to

Section 13 or 15(d) of

the Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported): July 29, 2004

 

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UNITEDHEALTH GROUP INCORPORATED

(Exact name of registrant as specified in its charter)

 

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Minnesota		0-10864		41-1321939
(State or other jurisdiction of incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)

 

UnitedHealth Group Center, 9900 Bren Road East, Minnetonka, Minnesota		55343
(Address of principal executive offices)		(Zip Code)

 

Registrant’s telephone number, including area code: (952) 936-1300

 

N/A

(Former name or former address, if changed since last report.)

 

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Item 7. Financial Statements and Exhibits

 

This Form 8-K/A amends the current report on Form 8-K dated July 29, 2004 to include Item 7 (a) Historical Financial Information and Item 7(b) Pro Forma Financial Information

 

(a)

Financial Statements of Businesses Acquired

 

The following historical financial statements of Oxford Health Plans, Inc. (“Oxford”) are included in this report:

 

Consolidated balance sheet as of December 31, 2003 (incorporated by reference to the Form 10-K for the year ended December 31, 2003 filed by Oxford on February 4, 2004, as amended by Amendment No. 1 thereto, filed on April 29, 2004)

 

Consolidated income statements and statements of cash flows for the year ended December 31, 2003 (incorporated by reference to the Form 10-K for the year ended December 31, 2003 filed by Oxford on February 4, 2004, as amended by Amendment No. 1 thereto, filed on April 29, 2004)

 

Consolidated balance sheets as of June 30, 2004 and December 31, 2003

 

Consolidated income statements for the three months and six months ended June 30, 2004 and 2003

 

Consolidated statements of cash flows for the six months ended June 30, 2004 and 2003

 

(b)

Pro Forma Financial Information

 

The following unaudited pro forma combined financial statements giving effect to the registrant’s acquisition of Oxford completed July 29, 2004 are included in this report:

 

Unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2004

 

Unaudited pro forma condensed combined statement of operations for the year ended December 31, 2003

 

Unaudited pro forma condensed combined balance sheet as of June 30, 2004

 

Notes to unaudited pro forma condensed combined financial information

 

(c)

Exhibits

 

23.1

Consent of Ernst & Young LLP

 

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OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

June 30, 2004 and December 31, 2003

(In thousands, except share data)

 

		(Unaudited)
		June 30, 2004				December 31, 2003
Assets
Current assets:
Cash and cash equivalents		$	451,653			$	536,510
Investments – available-for-sale, at fair value			1,562,606				1,370,535
Premiums receivable, net			35,738				30,505
Other receivables			32,432				30,082
Prepaid expenses and other current assets			15,692				16,785
Deferred income taxes			51,035				45,240
Total current assets			2,149,156				2,029,657
Property and equipment, net			36,980				31,638
Deferred income taxes			9,324				9,572
Restricted cash and investments-held-to-maturity, at amortized cost			59,787				59,738
Goodwill and other intangible assets, net			20,686				21,785
Other noncurrent assets			8,433				7,811
Total assets		$	2,284,366			$	2,160,201
Liabilities and Shareholders’ Equity
Current liabilities:
Medical costs payable		$	730,716			$	671,515
Current portion of long-term debt			4,000				4,000
Trade accounts payable and accrued expenses			117,917				138,925
Unearned revenue			131,555				187,751
Income taxes payable			5,119				30,530
Current portion of capital lease obligations			3,880				5,749
Total current liabilities			993,187				1,038,470
Obligations under capital lease			—				467
Long-term debt			392,000				394,000
Shareholders’ equity:
Preferred stock, $.01 par value, authorized 2,000,000 shares; none issued and outstanding			—				—
Common stock, $.01 par value, authorized 400,000,000 shares; issued 107,278,261 shares in 2004 and 106,612,822 shares in 2003			1,073				1,066
Additional paid-in capital			793,621				750,919
Retained earnings			944,251				780,856
Accumulated other comprehensive income (loss), net of tax			(8,171	)			10,622
Treasury stock, at cost			(816,199	)			(816,199	)
Unearned restricted stock unit compensation			(15,396	)			—
Total shareholders’ equity			899,179				727,264
Total liabilities and shareholders’ equity		$	2,284,366			$	2,160,201

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OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES

Consolidated Income Statements

Three Months and Six Months Ended June 30, 2004 and 2003

(In thousands, except per share data)

(Unaudited)

 

		Three Months Ended June 30,						Six Months Ended June 30,
		2004			2003			2004			2003
Revenues:
Premiums earned		$	1,388,588		$	1,331,330		$	2,772,836		$	2,641,790
Third-party administration, net			2,778			2,995			5,666			6,112
Investment and other income, net			21,547			26,600			45,656			58,155
Total revenues			1,412,913			1,360,925			2,824,158			2,706,057
Expenses:
Health care services			1,123,175			1,088,302			2,241,632			2,122,411
Marketing, general and administrative			141,672			144,710			285,947			286,960
Merger related transaction fees			4,953			—			7,953			—
Litigation charge for settlement, net			—			—			—			45,000
Interest and other financing costs			4,133			7,215			8,727			9,443
Total expenses			1,273,933			1,240,227			2,544,259			2,463,814
Income before income taxes			138,980			120,698			279,899			242,243
Income tax expense			54,098			48,222			108,352			96,842
Net income		$	84,882		$	72,476		$	171,547		$	145,401
Earnings per common and common equivalent share:
Basic		$	1.04		$	0.87		$	2.10		$	1.74
Diluted		$	0.99		$	0.85		$	2.02		$	1.71
Dividends declared per common share		$	—		$	—		$	0.10		$	—
Weighted-average common shares outstanding-basic			81,750			83,115			81,558			83,439
Effect of dilutive securities:
Stock options			3,815			2,080			3,488			1,748
Weighted-average common shares outstanding-diluted			85,565			85,195			85,046			85,187

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OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Six Months Ended June 30, 2004 and 2003

 

(In thousands)		(Unaudited)
		2004				2003
Cash flows from operating activities:
Net income		$	171,547			$	145,401
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			15,125				13,075
Non-cash income			(8,292	)			(8,292	)
Non-cash charges			1,099				1,713
Deferred income taxes			11,738				76,739
Realized gain on sale of investments			(7,042	)			(23,285	)
Changes in assets and liabilities:
Premiums receivable			(5,233	)			(5,177	)
Other receivables			(2,350	)			6,076
Prepaid expenses and other current assets			1,093				(83,989	)
Medical costs payable			59,201				78,115
Trade accounts payable and accrued expenses			(24,392	)			(34,327	)
Litigation settlement reserve			—				(161,300	)
Unearned revenue			(47,904	)			(47,476	)
Income tax payable			(25,411	)			(2,418	)
Other, net			38				450
Net cash provided (used) by operating activities			139,217				(44,695	)
Cash flows from investing activities:
Capital expenditures			(15,226	)			(8,164	)
Purchases of available-for-sale investments			(934,155	)			(787,450	)
Sales and maturities of available-for-sale investments			725,167				743,854
Other, net			(27	)			(62	)
Net cash used by investing activities			(224,241	)			(51,822	)
Cash flows from financing activities:
Proceeds from exercise of stock options			20,782				12,876
Cash dividends paid			(16,279	)			—
Proceeds from notes payable, net			—				391,371
Repayment of notes payable			(2,000	)			(126,875	)
Payment of withholding tax on option exercises			—				(382	)
Purchase of treasury shares			—				(46,193	)
Payments under capital leases			(2,336	)			(2,702	)
Net cash provided by financing activities			167				228,095
Net increase (decrease) in cash and cash equivalents			(84,857	)			131,578
Cash and cash equivalents at beginning of period			536,510				321,627
Cash and cash equivalents at end of period		$	451,653				453,205
Supplemental cash flow information:
Cash payments for income taxes, net		$	122,025			$	103,176
Cash payments for interest			7,898				4,130
Supplemental schedule of non-cash investing and financing activities:
Unrealized appreciation (depreciation) of investments			(31,988	)			(3,032	)
Tax benefit realized on exercise of stock options			5,430				2,422
Cost of treasury shares associated with option exercise			—				641
Dividend declared on common shares			8,152				—

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

On July 29, 2004, UnitedHealth Group acquired Oxford Health Plans, Inc. (Oxford). Under the terms of the agreement, Oxford shareholders received 0.6357 shares of UnitedHealth Group common stock and $16.17 in cash for each share of Oxford common stock they owned. Total consideration issued was approximately $5.0 billion, comprised of approximately 52.2 million shares of UnitedHealth Group common stock (valued at approximately $3.4 billion based upon the average of UnitedHealth Group’s share closing prices for two days before, the day of, and two days after the acquisition announcement date of April 26, 2004), approximately $1.3 billion in cash, and UnitedHealth Group vested common stock options with an estimated fair value of $240 million issued in exchange for Oxford’s outstanding vested common stock options.

 

On February 10, 2004, UnitedHealth Group acquired Mid Atlantic Medical Services, Inc. (MAMSI). Under the terms of the agreement, MAMSI stockholders received 0.82 shares of UnitedHealth Group common stock and $18 in cash for each share of MAMSI common stock they owned. Total consideration issued was approximately $2.7 billion, comprised of 36.4 million shares of UnitedHealth Group common stock (valued at approximately $1.9 billion based on the average of the closing prices of UnitedHealth Group common stock for two days before, the day of, and two days after the acquisition announcement date of October 27, 2003) and $800 million in cash. The results of operations and financial condition of MAMSI have been included in the UnitedHealth Group historical financial statements since the February 10, 2004 acquisition date.

 

The unaudited pro forma condensed combined financial information gives effect to the acquisitions of Oxford and MAMSI by UnitedHealth Group as if the acquisitions had occurred on January 1, 2003 for purposes of the pro forma condensed combined statements of operations. The unaudited pro forma condensed combined financial information gives effect to the acquisition of Oxford by UnitedHealth Group as if the acquisition had occurred on June 30, 2004 for purposes of the pro forma condensed combined balance sheet as of June 30, 2004.

 

Under the purchase method of accounting, the total purchase price is allocated to the net tangible and intangible assets of an acquired entity based on their estimated fair values as of the completion of the transaction. A final determination of these fair values will include management’s consideration of a valuation prepared by an independent valuation specialist. This valuation will be based on the actual net tangible and intangible assets of the acquired entity that exist as of the closing date of the transaction.

 

Because this unaudited pro forma condensed combined financial information has been prepared based on preliminary estimates of fair values, the actual amounts recorded as of the completion of the transaction may differ materially from the information presented in this unaudited pro forma condensed combined financial information. In addition to the independent valuation, the impact of any integration activities could cause material differences from the information presented below.

 

The unaudited pro forma condensed combined financial information should be read in conjunction with the historical consolidated financial statements and accompanying notes of UnitedHealth Group and Oxford. The unaudited pro forma condensed combined financial information is not intended to represent or be indicative of the consolidated results of operations or financial condition of UnitedHealth Group that would have been reported had the transactions been completed as of the dates presented, and should not be taken as representative of the future consolidated results of operations or financial condition of UnitedHealth Group.

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Pro Forma Condensed Combined Statement of Operations

Six Months Ended June 30, 2004

(Unaudited)

(In millions, except per share amounts)

 

		Historical
		(b) UnitedHealth Group				MAMSI January 1 to February 10, 2004				Oxford				(a) Reclassification Adjustments				Pro Forma Adjustments				Pro Forma Combined
Revenues
Premiums		$	15,065			$	303			$	2,773			$	(23	)		$	—			$	18,118
Services			1,602				8				6				2				—				1,618
Investment and Other Income			181				2				45								(4	)(l)			224
Total Revenues			16,848				313				2,824				(21	)			(4	)			19,960
Medical and Operating Costs
Medical Costs			12,195				235	(r)			2,242				(24	)			—				14,648
Operating Costs			2,663				36				278				3				(8	)(f)			2,972
Depreciation and Amortization			169				1				15								2	(d)			212
																			25	(e)
Total Medical and Operating Costs			15,027				272				2,535				(21	)			19				17,832
Earnings From Operations			1,821				41	(r)			289				—				(23	)			2,128
Interest expense			(52	)			—				(9	)			—				9	(l)			(86	)
																			(33	)(k)
																			(1	)(m)
Earnings Before Income Taxes			1,769				41	(r)			280				—				(48	)			2,042
Provision for Income Taxes			(619	)			(14	)			(108	)			—				17	(n)			(724	)
Net Earnings		$	1,150			$	27	(r)		$	172			$	—			$	(31	)		$	1,318
Basic Net Earnings Per Common Share		$	1.90																			$	1.98
Diluted Net Earnings Per Common Share		$	1.81																			$	1.89
Basic Weighted-Average Number of Common Shares Outstanding			606.0																36.4	(o)			666.2
																			(28.4	)(o)
																			52.2	(p)
Diluted Weighted-Average Number of Common Shares Outstanding			635.0																36.4	(o)			697.6
																			(28.4	)(o)
																			52.2	(p)
																			2.4	(q)

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Pro Forma Condensed Combined Statement of Operations

Year Ended December 31, 2003

(Unaudited)

(In millions, except per share amounts)

 

		Historical
		UnitedHealth Group				MAMSI				Oxford				(a) Reclassification Adjustments				Pro Forma Adjustments				Pro Forma Combined
Revenues
Premiums		$	25,448			$	2,624			$	5,339			$	(169	)		$	—			$	33,242
Services			3,118				47				12				23				—				3,200
Investment and Other Income			257				17				101				—				(8	)(l)			367
Total Revenues			28,823				2,688				5,452				(146	)			(8	)			36,809
Medical and Operating Costs
Medical Costs			20,714				2,117				4,242				(171	)			—				26,902
Operating Costs			4,875				302				577				25				—				5,779
Depreciation and Amortization			299				12				29				—				19	(d)			409
																			50	(e)
Total Medical and Operating Costs			25,888				2,431				4,848				(146	)			69				33,090
Earnings From Operations			2,935				257				604				—				(77	)			3,719
Interest expense			(95	)			(1	)			(20	)			—				20	(l)			(172	)
																			(66	)(k)
																			(10	)(m)
Earnings Before Income Taxes			2,840				256				584				—				(133	)			3,547
Provision for Income Taxes			(1,015	)			(90	)			(232	)			—				47	(n)			(1,290	)
Net Earnings		$	1,825			$	166			$	352			$	—			$	(86	)		$	2,257
Basic Net Earnings Per Common Share		$	3.10																			$	3.33
Diluted Net Earnings Per Common Share		$	2.96																			$	3.19
Basic Weighted-Average Number of Common Shares Outstanding			589.0																36.4	(o)			677.6
																			52.2	(p)
Diluted Weighted-Average Number of Common Shares Outstanding			617.0																36.4	(o)			708.0
																			52.2	(p)
																			2.4	(q)

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Pro Forma Condensed Combined Balance Sheet

As of June 30, 2004

(Unaudited)

(In millions)

 

		Historical							Pro Forma Adjustments				Pro Forma Combined
		(b) UnitedHealth Group			Oxford
Assets
Current Assets
Cash and Cash Equivalents		$	3,100		$	452			$	(396	)(l)		$	3,156
Short-Term Investments			409			133	(s)			—				542
Accounts Receivable, net			836			36				—				872
Assets Under Management			1,932			—				—				1,932
Deferred Income Taxes and Other			751			99				—				850
Total Current Assets			7,028			720				(396	)			7,352
Long-Term Investments			6,684			1,489	(s)			—				8,173
Property, Equipment, Capitalized Software and Other Assets, net			1,162			54				—				1,216
Goodwill			5,479			14				(14	)(i)			9,126
										3,647	(c)(e)
Intangible Assets, net			530			7				(7	)(i)			1,265
										735	(c)(e)
Total Assets		$	20,883		$	2,284			$	3,965			$	27,132
Liabilities and Shareholders’ Equity
Current Liabilities
Medical Costs Payable		$	4,806		$	731			$	—			$	5,537
Accounts Payable and Accrued Liabilities			1,863			126				50	(f)			2,039
Other Policy Liabilities			1,942			—				—				1,942
Short-Term Debt and Current Maturities of Long-Term Debt			150			4				(4	)(l)			150
Unearned Premiums			611			132				—				743
Total Current Liabilities			9,372			993				46				10,411
Long-Term Debt, less current maturities			2,250			392				(392	)(l)			3,579
										1,329	(c)(g)
Future Policy Benefits for Life and Annuity Contracts			1,614			—				—				1,614
Deferred Income Taxes and Other Liabilities			529			—				257	(c)(h)			786
Shareholders’ Equity
Common Stock			6			1				(1	)(i)			6
Additional Paid-In Capital			1,029			794				(794	)(i)			4,653
										3,624	(c)(j)
Treasury Stock			—			(816	)			816	(i)			—
Unearned Restricted Stock Unit Compensation						(16	)			16	(i)			—
Retained Earnings			6,046			944				(944	)(i)			6,046
Accumulated Other Comprehensive Income:
Net Unrealized Gains on Investments, net of tax effects			37			(8	)			8	(i)			37
Total Shareholders’ Equity			7,118			899				2,725				10,742
Total Liabilities and Shareholders’ Equity		$	20,883		$	2,284			$	3,965			$	27,132

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Notes to Unaudited Pro Forma Condensed Combined Financial Information

 

(a)

Reflects the reclassification of certain historical MAMSI amounts to conform to financial reporting being used prospectively by the combined company. While we have conducted preliminary reviews of accounting and financial reporting policy differences relating to Oxford, this review is ongoing and will continue throughout the merger process. As such, additional reclassifications or pro forma adjustments may be identified.

(b)

The MAMSI acquisition closed on February 10, 2004. The unaudited pro forma condensed combined balance sheet as of June 30, 2004 includes the effects of the MAMSI acquisition in the UnitedHealth Group historical information. The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2004 includes MAMSI’s results of operations from February 11, 2004 to June 30, 2004 in the UnitedHealth Group historical information. This acquisition resulted in the issuance of UnitedHealth Group common stock and cash based upon the exchange ratio of 0.82 share of UnitedHealth Group common stock and $18 of cash for each outstanding share of MAMSI common stock. The average market price per share of UnitedHealth Group common stock of $53.05 was based upon the average of the closing prices for a range of trading days (October 23, 2003 through October 29, 2003) around the announcement date (October 27, 2003) of the transaction. This resulted in an estimated purchase price of $2,745 million ($1,932 million in stock, $800 million in cash and $13 million of estimated transaction costs) as follows (in millions, except per share amounts):

 

Stock Consideration
UnitedHealth Group average market price per share		$	53.05
Exchange ratio			0.82
Equivalent per share consideration		$	43.50
Outstanding shares of MAMSI			44.41
Fair value of UnitedHealth Group shares issued					$	1,932
Cash Consideration
Per share cash consideration		$	18.00
Outstanding shares of MAMSI			44.41
Cash paid					$	800
Transaction costs						13
Purchase price					$	2,745

 

The MAMSI purchase price of $2,745 million has been preliminarily allocated to acquired tangible assets and liabilities based upon their estimated fair values as of the acquisition date. The estimated excess purchase price has been preliminarily allocated as detailed below (in millions):

 

Purchase price		$	2,745
Net tangible assets at acquisition date			(638	)
Total excess purchase price			2,107
Estimated finite-lived intangibles			(360	)
Deferred tax liability for finite-lived intangibles			126
Estimated goodwill		$	1,873

 

(c)

The Oxford acquisition closed on July 29, 2004. The unaudited pro forma condensed combined financial information gives effect to the Oxford acquisition. This acquisition gives effect to the issuance of UnitedHealth Group common stock and cash based upon the exchange ratio of 0.6357 share of UnitedHealth Group common stock and $16.17 of cash for each outstanding share of Oxford common stock. The average market price per share of UnitedHealth Group common stock of $64.78 is based upon the average of the closing prices for a range of trading days (April 22, 2004 through April 28, 2004) around the announcement date (April 26, 2004) of the transaction. This resulted in an estimated purchase price of $4,990 million ($3,384 million in stock, $1,329 million in cash, $240 million for the estimated fair value of UnitedHealth Group vested stock options issued in exchange for outstanding Oxford stock options and $37 million of estimated transaction costs) as follows (in millions, except per share amounts):

 

Stock Consideration
UnitedHealth Group average market price per share		$	64.78
Exchange ratio			0.6357
Equivalent per share consideration		$	41.18
Outstanding shares of Oxford			82.18
Fair value of UnitedHealth Group shares issued					$	3,384
Converted Stock Options
UnitedHealth Group vested stock options issued			7.5
Estimated fair value of stock options issued		$	32
Estimated fair value of stock options issued						240
Total estimated fair value of equity instruments issued						3,624
Cash Consideration
Per share cash consideration		$	16.17
Outstanding shares of Oxford			82.18
Cash paid						1,329
Estimated transaction costs						37
Estimated purchase price					$	4,990

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The estimated Oxford purchase price of $4,990 million has been preliminarily allocated to acquired tangible assets and liabilities based upon their estimated fair values as of June 30, 2004. The estimated excess purchase price has been preliminarily allocated as detailed below (in millions):

 

Estimated purchase price		$	4,990
Net tangible assets - Oxford June 30, 2004 balance sheet			(878	)
Oxford employment agreements liability due to change in control			13
Total excess purchase price			4,125
Estimated finite-lived intangibles			(735	)
Deferred tax liability for finite-lived intangibles			257
Estimated goodwill		$	3,647

 

(d)

Finite-lived intangible assets relating to the MAMSI acquisition have been initially recorded in the UnitedHealth Group historical information at $360 million and consist mainly of membership lists, provider networks and non-compete agreements. The estimated weighted average useful life is approximately 19 years and the estimated annual amortization expense is approximately $19 million. For the June 30, 2004 pro forma condensed combined statement of operations, the estimated amortization expense is for the period January 1, 2004 to February 10, 2004 since amortization expense post-acquisition date is reflected in the UnitedHealth Group historical information.

(e)

Finite-lived intangible assets relating to the Oxford acquisition have been preliminarily estimated at approximately $735 million, consisting mainly of membership lists, provider networks and non-compete agreements. The estimated weighted average useful life is approximately 15 years and the estimated annual amortization expense is approximately $50 million.

(f)

Represents an accrual of $37 million for transaction costs as a result of the Oxford merger and $13 million for additional liabilities to be settled under Oxford employment agreements as a result of the acquisition. Additionally, Oxford recorded transaction expenses of $8 million in their historical six months ended June 30, 2004 statement of operations which has been eliminated from the unaudited pro forma condensed combined statement of operations since these costs were incurred prior to the consummation of the acquisition and were directly related to the transaction.

(g)	Represents the borrowing of the cash to be paid as consideration in the Oxford transaction as detailed in note (c).

(h)	Represents the deferred tax liability established for the book and tax basis difference of finite-lived intangible assets, which are amortizable for book purposes but not for tax.

(i)	Represents the elimination of Oxford’s equity accounts and goodwill and intangible asset accounts.

(j)	Represents the issuance of UnitedHealth Group stock and stock options as consideration paid in the Oxford transaction as detailed in note (c).

(k)

Represents the estimated interest expense associated with borrowing the $1,329 million cash to be paid as consideration in the Oxford transaction. The interest rate is based on the issuance of three- to ten-year fixed-rate debt and an estimated weighted-average borrowing rate of approximately 5% for such debt.

(l)

Represents the payoff of the Oxford debt of $396 million at closing and the corresponding estimated reduction in interest expense and interest income. The effective interest rate used for the investment interest income was 2.0% based upon estimated current interest rates on Oxford’s short term investments.

(m)

Represents the estimated interest expense associated with borrowing the $800 million cash paid as consideration in the MAMSI transaction. The interest expense is based on the issuance of $500 million of five- to ten-year floating-rate debt and $300 million of commercial paper at an estimated weighted average interest rate of approximately 1.3%. The impact on interest expense of a 1/8% change in interest rates would be $1 million. For the June 30, 2004 pro forma condensed combined statement of operations, the estimated interest expense is for the period January 1, 2004 to February 10, 2004 since interest expense post-acquisition date is reflected in the UnitedHealth Group historical information.

(n)	Represents the pro forma tax effect of the MAMSI and Oxford pro forma adjustments based upon the statutory federal income tax rate of 35%.

(o)

Represents the increase in weighted average shares outstanding from the MAMSI acquisition based on the issuance of 36.4 million shares of UnitedHealth Group common stock at the beginning of the period presented. In the June 30, 2004 pro forma condensed combined statement of operations, this is partially offset by 28.4 million in weighted average shares outstanding that are already included in the UnitedHealth Group historical information since the 36.4 million shares were issued during the six month period ended June 30, 2004.

(p)

Represents the increase in weighted average shares outstanding from the Oxford acquisition based on the issuance of 52.2 million shares of UnitedHealth Group common stock at the beginning of the period presented. The share issuance is based upon the 82.2 million outstanding shares of Oxford stock at the acquisition date multiplied by the 0.6357 exchange ratio as detailed in note (c).

(q)

Represents the estimated common stock equivalents related to the issuance of 7.5 million vested options to purchase shares of UnitedHealth Group common stock in exchange for the outstanding options to purchase shares of Oxford common stock as detailed in note (c). This was calculated using the “Treasury Stock” method under FAS No. 128 using a $34 per share average exercise price and a $64 per share average common stock fair value.

(r)	Includes favorable development of the December 31, 2003 medical cost payable estimates of approximately $7 million ($5 million net of tax).

(s)	For comparison purposes, investments available for sale at fair value have been reclassified between short and long term investments based upon final maturities.

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COMPARATIVE PER SHARE INFORMATION

 

		As of or For the Year Ended December 31, 2003			As of or For the Six Months Ended June 30, 2004
UnitedHealth Group Historical Per Common Share:
Basic Net Earnings Per Common Share		$	3.10		$	1.90
Diluted Net Earnings Per Common Share		$	2.96		$	1.81
Book Value Per Common Share		$	8.80		$	11.73
Cash Dividends Per Common Share		$	0.015		$	0.03
Oxford Historical Per Common Share:
Basic Net Earnings Per Common Share		$	4.26		$	2.10
Diluted Net Earnings Per Common Share		$	4.15		$	2.02
Book Value Per Common Share		$	8.95		$	10.97
Cash Dividends Per Common Share		$	0.10		$	0.10
Pro Forma Combined Per UnitedHealth Group Common Share:
Basic Net Earnings Per Common Share		$	3.33		$	1.98
Diluted Net Earnings Per Common Share		$	3.19		$	1.89
Book Value Per Common Share			n/a		$	16.30
Cash Dividends Per Common Share			n/a		$	0.03
Pro Forma Combined Per Oxford Equivalent Common Share:
Basic Net Earnings Per Common Share		$	2.12		$	1.26
Diluted Net Earnings Per Common Share		$	2.03		$	1.20
Book Value Per Common Share			n/a		$	10.36
Cash Dividends Per Common Share			n/a		$	0.019

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Signatures

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: August 9, 2004