UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number: 0-13253
UNITED HEALTHCARE CORPORATION
State of Incorporation: Minnesota
I.R.S. Employer Identification No: 41-1321939
Principal Executive Offices:
300 Opus Center
9900 Bren Road East
Minnetonka MN, 55343
Telephone Number: (612)936-1300
Indicate by check mark (x) whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No _______
The number of shares of Common Stock, par value $.01 per share, outstanding on
May 8, 1995 was 173,175,090.
<PAGE>
UNITED HEALTHCARE CORPORATION
INDEX
Part I. Financial Information. Page Number
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at
March 31, 1995 and December 31, 1994 3
Condensed Consolidated Statements of Operations for the three
month periods ended March 31, 1995 and 1994 4
Condensed Consolidated Statements of Cash Flows for the
three month periods ended March 31, 1995 and 1994 5
Notes to Condensed Consolidated Financial Statements 6
Report of Independent Public Accountants 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 17
<PAGE>
UNITED HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share & per share data)
(unaudited)
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 594,314 $ 1,519,049
Short-term investments 350,759 135,287
Accounts receivable, net 202,080 167,369
Other 74,598 86,510
Total Current Assets 1,221,751 1,908,215
Long-term Investments 1,488,750 1,115,054
Property and Equipment, net 180,712 162,597
Intangible Assets, net 809,618 303,613
TOTAL ASSETS $ 3,700,831 $ 3,489,479
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Medical costs payable $ 479,027 $ 443,559
Accounts payable 103,880 66,938
Accrued expenses 95,306 83,087
Unearned premiums 87,911 70,718
Total Current Liabilities 766,124 664,302
Long-term Obligations 25,142 24,275
Minority Interests 5,846 5,446
Shareholders' Equity
Preferred stock, $.001 par value - 10,000,000
shares authorized; no shares outstanding and
9,900,000 shares available for issuance -- --
Common stock, $.01 par value - 500,000,000 shares
authorized; 173,085,000 and 172,831,000 issued and
outstanding 1,731 1,728
Additional paid-in capital 759,508 752,472
Retained earnings 2,169,297 2,085,056
Deferred compensation (25) (35)
Net unrealized holding losses on investments
available for sale, net of tax effects (26,792) (43,765)
Total Shareholders' Equity 2,903,719 2,795,456
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,700,831 $ 3,489,479
See notes to condensed consolidated financial statements
</TABLE>
<PAGE>
UNITED HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1995 1994(1)
<S> <C> <C>
REVENUES
Premiums $1,004,489 $ 804,991
Management Services 65,224 81,422
Investment Income and Other 34,122 17,143
Total Revenues 1,103,835 903,556
OPERATING EXPENSES
Medical Costs 783,501 629,578
Selling, General and
Administrative Costs 157,578 143,366
Depreciation and Amortization 19,665 15,903
Total Operating Expenses 960,744 788,847
EARNINGS FROM OPERATIONS 143,091 114,709
Interest Expense (180) (568)
EARNINGS BEFORE INCOME TAXES AND
MINORITY INTERESTS 142,911 114,141
Provision for Income Taxes (52,878) (43,067)
Minority Interests in Net
Earnings of Consolidated
Subsidiaries (601) (676)
NET EARNINGS $ 89,432 $ 70,398
NET EARNINGS PER SHARE $ 0.51 $ 0.40
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 176,403 174,507
See notes to condensed consolidated financial statements
<FN>
<F1> As restated. See Note 1.
</FN>
</TABLE>
<PAGE>
UNITED HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1995 1994 (1)
<S> <C> <C>
OPERATING ACTIVITIES
Net Earnings $ 89,432 $ 70,398
Non Cash Items
Depreciation and amortization 19,665 15,903
Other (253) 2,497
Net Change in Other Operating Items, net of effects from
acquisitions
Accounts receivable and other current assets (10,590) (4,844)
Medical costs payable (7,627) (3,575)
Accounts payable (13,390) (1,655)
Accrued expenses 12,084 19,234
Unearned premiums 16,614 5,331
Cash Flows From Operating Activities 105,935 103,289
INVESTING ACTIVITIES
Cash Paid for Acquisitions, net of cash assumed
and other effects (546,054) (48,489)
Net Purchases of Property and Equipment (25,574) (16,604)
Purchases of Investments Available for Sale (868,909) (230,429)
Maturities/Sales of Investments Available for Sale 409,875 169,164
Purchases of Investments Held to Maturity (7,183) (561)
Maturities of Investments Held to Maturity 5,192 13,273
Other (2,557) (4,708)
Cash Flows Used for Investing Activities (1,035,210) (118,354)
FINANCING ACTIVITIES
Net Proceeds from Stock Option Exercises 4,342 16,690
Payment of Long-term Obligations 198 (4,537)
Cash Flows From Financing Activities 4,540 12,153
DECREASE IN CASH AND CASH EQUIVALENTS (924,735) (2,912)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,519,049 228,260
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 594,314 $ 225,348
See notes to condensed consolidated financial statements
<FN>
<F1> As restated. See Note 1.
</FN>
</TABLE>
<PAGE>
UNITED HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Accounting
As discussed further in Note 2, in two separate transactions, the Company
acquired Complete Health Services, Inc. (Complete Health), and Ramsay-HMO Inc.
(Ramsay) on May 31,1994. Each of these acquisitions was accounted for as a
pooling of interests and, accordingly, the Company's unaudited condensed
consolidated financial statements and notes thereto have been restated to
include the results of Complete Health and Ramsay for the three month period
ended March 31, 1994.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements reflect all adjustments consisting solely of normal
recurring adjustments necessary for a fair presentation of the financial
results for the interim periods presented. Pursuant to the rules and
regulations of the Securities and Exchange Commission, footnote disclosures
which would substantially duplicate the disclosure contained in the audited
financial statements of the Company have been omitted from these interim
financial statements. Although the Company believes that the disclosures
presented below are adequate to make the interim financial statements
presented not misleading, it is suggested that these unaudited condensed
consolidated financial statements be read in conjunction with the
consolidated financial statements and the notes thereto incorporated by
reference in the Company's annual report on Form 10-K for the year ended
December 31, 1994.
2. Business Combinations
On January 3, 1995, the Company completed its acquisition of GenCare Health
Systems, Inc. (GenCare), a health plan based in St. Louis, Missouri, which
served 230,000 members at the time of acquisition. The total purchase price of
the acquisition was $515.4 million in cash. The acquisition was accounted for
using the purchase method of accounting whereby the purchase price was
allocated to assets and liabilities based on their estimated fair values at the
date of acquisition. The purchase price and associated acquisition costs in
excess of the estimated fair value of net assets acquired of $490.0 million
will be amortized on a straight-line basis over 40 years. Had the
transaction occurred on January 1, 1994, combined unaudited pro forma
results for the three month period ended March 31, 1994 would have been:
revenues - $949.8 million; net earnings $69.0 million; net earnings per share
- - $.40.
On May 31, 1994, the Company's acquisition of Complete Health was completed.
Complete Health, based in Birmingham, Alabama, owned or operated health plans in
Alabama, Louisiana, Tennessee, Arkansas, Georgia, Mississippi and Florida which
served approximately 272,000 members at the time of the acquisition. In
connection with the transaction, the Company issued 5,038,000 shares of common
stock in exchange for all the outstanding common and preferred shares of
Complete Health.
Also on May 31, 1994, the Company's acquisition of Ramsay was completed.
Ramsay, based in Coral Gables, Florida, owned and operated a predominantly
staff model health plan serving 177,000 members in South and Central Florida
at the time of acquisition. In connection with the transaction, the Company
issued 11,176,000 shares of common stock in exchange for all the outstanding
common shares of Ramsay.
<PAGE>
UNITED HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
The Complete Health and Ramsay acquisitions were accounted for as pooling of
interests and, accordingly, the Company's unaudited condensed consolidated
financial statements and notes thereto have been restated to include the
results of Complete Health and Ramsay for three month period ended March 31,
1994. Separate and combined unaudited results of the Company, Complete Health
and Ramsay for the three month period ended March 31, 1994 were as follows
(in thousands):
<TABLE>
<CAPTION>
TOTAL REVENUES NET EARNINGS
<S> <C> <C>
The Company $ 713,447 $ 64,262
Complete Health 87,072 1,472
Ramsay 103,037 4,664
Combined $ 903,556 $ 70,398
</TABLE>
3. Dividends
On February 13, 1995, the Company's Board of Directors approved an annual
dividend for 1995 of $0.03 per share to holders of the Company's common stock.
This dividend, totaling $5.2 million, was paid on April 15, 1995 to
shareholders of record at the close of business on April 1, 1995.
4. Cash and Investments
As of March 31, 1995, the amortized cost, gross unrealized holding gains and
losses and fair value of the Company's cash and investments were as follows
(in thousands):
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized
Amortized Holding Holding Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Cash and Cash Equivalents $ 594,314 $ -- $ -- $ 594,314
Investments Available for Sale 1,857,078 4,226 (46,752) 1,814,552
Investments Held to Maturity 24,957 150 (353) 24,754
Total Cash and Investments $2,476,349 $ 4,376 $ (47,105) $ 2,433,620
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To United HealthCare Corporation:
We have reviewed the accompanying condensed consolidated balance sheet of
United HealthCare Corporation (a Minnesota corporation) and Subsidiaries as of
March 31, 1995, and the related condensed consolidated statements of operations
and cash flows for the three month periods ended March 31, 1995 and 1994.
These financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of United HealthCare Corporation and
Subsidiaries as of December 31, 1994 (not presented herein), and, in our report
dated February 14, 1995, we expressed an unqualified opinion on that statement.
In our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 1994, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
/s/Arthur Andersen LLP
Minneapolis, Minnesota,
May 4, 1995
<PAGE>
UNITED HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The consolidated financial results for the three months ended March 31, 1994
included in the following discussion have been restated to include the results
of Complete Health and Ramsay in accordance with pooling of interests
accounting.
The results of Diversified Pharmaceutical Services, Inc.(Diversified), a wholly
owned subsidiary of the Company sold on May 27, 1994, are included in the
consolidated financial results for the quarter ended March 31, 1994. The post
acquisition results of GenCare, acquired January 3, 1995, are included in the
consolidated financial results for the quarter ended March 31, 1995.
The following discussion should be read in conjunction with the accompanying
condensed consolidated financial statements and notes thereto.
CONSOLIDATED OPERATING RESULTS
The Company again achieved record revenues and earnings for the quarter ended
March 31, 1995. Premium revenues of $1.00 billion exceeded 1994 first quarter
premium revenues of $805.0 million by 25%. The growth in premium revenues was
driven primarily by enrollment gains within the Company's owned health plans.
Also contributing to the growth in premium revenues was the Company's January
1995 purchase of GenCare, accounting for $63.9 million, or 32%, of the increase
in 1995 first quarter premium revenues compared to the first quarter of 1994.
Management services revenues of $65.2 million decreased 20% from the first
quarter of 1994 as a result of the sale of Diversified.
The Company's medical cost management and selling, general and administrative
cost containment efforts continued to result in decreasing operating expenses
relative to its overall revenue base. Total operating expenses as a percentage
of revenues decreased from 87.3% in the first quarter of 1994 to 87.0% in the
first quarter of 1995.
Through the combination of these factors, earnings from operations grew from
$114.7 million in the first quarter of 1994 to $143.1 million in the first
quarter of 1995, an increase of 25%. The Company's operating margin improved
from 12.7% in the first quarter of 1994 to 13.0% in the first quarter of 1995.
Investment income, included as a component of the Company's revenues, was $34.1
million in the first quarter of 1995, and $17.1 million in the first quarter of
1994. Investment income increased due primarily to the investment of cash
generated from operations and the investment of $1.38 billion in net proceeds
from the sale of Diversified.
The Company's provision for income taxes represents the tax effects of its
current operations based on the Federal statutory tax rate, adjusted primarily
for the effects of tax-exempt investment income and state income taxes. The
effective income tax rate was 37% in the first quarter of 1995 and 38% in the
first quarter of 1994.
<PAGE>
UNITED HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
The Company's net earnings from operations were $89.4 million in the first
quarter of 1995 and $70.4 million in the first quarter of 1994, which equated
on a per share basis to $0.51 and $0.40, respectively, an increase of 28%.
LINE OF BUSINESS REPORTING
The Company operates in a single industry segment, managed health care. The
general management and various aspects of the Company's operations, including
information systems, transaction processing and certain administrative
functions and procedures, are interrelated. The following table presents
financial information reflecting the Company's operations by two primary lines
of business: (i) owned health plans and (ii) managed health plans and
specialty managed care services. This information is provided to facilitate a
more meaningful discussion of the Company's results of operations.
Owned health plan operations include health plans in which the Company has a
majority ownership interest and the Company's related insurance operations.
This line of business is characterized by operations in which the Company
assumes underwriting risk in return for premium revenue. The second line of
business, managed health plan and specialty managed care services operations,
provides administrative and other management services to health plans in which
the Company has less than a majority ownership interest, if any, and also
includes the results of the Company's specialty managed care services
operations. This line of business is characterized by operations in which the
Company receives fees for the provision of service, primarily administrative in
nature, and generally accepts no financial responsibility for health care
costs, except in the case of its subsidiary United Behavioral Systems (UBS) and
the formerly-owned Diversified. Through UBS, the Company does accept some
health care cost responsibility for the provision of mental health and
substance abuse services and thus recognizes premium revenue and medical
services expense. Except for directly identifiable expenses, the Company's
general and administrative expenses are allocated between the two lines of
business, primarily on the basis of enrollment, revenues, information systems
or other resource usage.
Diversified has been included in the managed and specialty line of business
through the date of sale. As a result of the acquisitions of Complete Health,
Ramsay and GenCare and the sale of Diversified, the managed health plans and
specialty managed care services line of business comprises a smaller portion of
the Company's total revenues and operating income.
<PAGE>
UNITED HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
LINE OF BUSINESS FINANCIAL INFORMATION
(in thousands, except ratios)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1995 March 31, 1994 Percent
Amount or Percent Amount or Percent Increase
Percent of Total Percent of Total (Decrease)
<S> <C> <C> <C> <C> <C>
REVENUES (1)
Owned Health
Plans $1,005,782 91.1% $ 803,251 88.9% 25.2%
Managed Health
Plan and Specialty
Managed Care
Services 92,812 8.4 149,824 16.6 (38.1)%
Corporate and
Eliminations (2) 5,241 0.5 (49,519) (5.5) --
TOTAL REVENUES $1,103,835 100.0% $ 903,556 100.0% 22.2%
OPERATING INCOME (1)
Owned Health
Plans $ 107,145 74.9% $ 82,651 72.1% 29.6%
Managed Health
Plan and Specialty
Managed Care
Services 17,176 12.0 23,443 20.4 (26.7)%
Corporate and
Eliminations (2) 18,770 13.1 8,615 7.5 --
TOTAL OPERATING
INCOME $ 143,091 100.0% $ 114,709 100.0% 24.7%
OPERATING MARGIN
Owned Health Plans 10.7% 10.3%
Managed Health Plan
and Specialty Managed
Care Services 18.5% 15.6%
TOTAL OPERATING MARGIN 13.0% 12.7%
<FN>
<F1> Revenues and operating income for each line of business include its
respective investment income. Interest earned on cash available for general
corporate use is included in "corporate and eliminations." Investment income
included in each line of business was $12.4 million and $21.7 million in the
first quarter of 1995 and $7.9 million and $9.3 million in the first quarter of
1994 for owned health plans and corporate, respectively.
<F2> "Corporate and eliminations" includes revenue eliminations between lines of
business and amounts not deemed to be related to a line of business, including
interest earned on cash available for general corporate use, research and
development costs and certain other corporate expenses.
</FN>
</TABLE>
<PAGE>
UNITED HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
OWNED HEALTH PLANS
Revenues generated by the Company's owned health plans increased by $202.5
million, or 25%, in the first quarter of 1995 compared to the first quarter of
1994. The purchase acquisition of GenCare accounted for approximately one-
third of this increase. Excluding the effects of the GenCare purchase, the
increase in 1995 first quarter revenues over the first quarter of 1994 was 17%.
This increase reflects enrollment growth of 16% and an average premium rate
increase on renewing commercial groups of approximately 2% in 1995.
Owned health plan commercial premiums are established by the Company based on
its anticipated health care costs. The Company has been able to effectively
manage health care costs and decrease the rate at which its health care costs
have grown. Following this strategy, the Company expects commercial premium
rate increases for the remainder of 1995 to decline slightly from those
realized in 1994 in anticipation of a declining medical cost trend.
Competition in certain of the Company's owned health plan markets has increased
in recent quarters. However, the Company has continued to follow its strategy
of pricing in accordance with anticipated health care costs. Depending on the
level of future competition or other external factors beyond the Company's
control, there can be no assurances that the Company's recent enrollment growth
trends will continue.
The combination of the Company's pricing strategy and
continued medical cost management efforts are reflected in the owned health
plans medical loss ratio (medical costs as a percent of premium revenues). The
medical loss ratio improved from 79.5% in the first quarter of 1994 to 78.9% in
the first quarter of 1995. The declining medical loss ratio and lower selling,
general and administrative expenses as a percent of revenues resulted in the
operating margin in this line of business increasing from 10.3% in the first
quarter of 1994 to 10.7% in the first quarter of 1995. Operating income
increased 30% from $82.7 million to $107.1 million over the same period.
MANAGED HEALTH PLAN AND
SPECIALTY MANAGED CARE SERVICES
As reported, revenues generated by the Company's managed health plans and
specialty managed care services operations decreased $57.0 million, or 38%, in
the first quarter of 1995 compared to the first quarter of 1994. These results
were significantly impacted by the effects of the sale of Diversified in May
1994 and a change in the terms of the Company's management agreement with the
Minneapolis, Minnesota, based Medica health plan in August 1994. The results of
Diversified s operations have been included in this line of business only
through the date of sale. Under the new Medica agreement, the Company
transferred cost responsibility for certain management contract expenses and
employees to Medica. The Company's selling, general and administrative expenses
decreased accordingly, matched with a corresponding decrease in management
<PAGE>
UNITED HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
services revenues. Excluding the effects of the sale of Diversified and the
Medica contract change, revenues generated in this line of business increased
19% in the first quarter of 1995 compared to the first quarter of 1994.
After excluding the effects of the Diversified sale and the change in the
Medica agreement, the principal factors behind the growth in revenues in the
first quarter of 1995 were enrollment gains and premium rate increases in the
managed health plans and growth in the specialty managed care services
operations. The Company's revenues from its managed health plans are typically
based on a percentage of the plans premium revenues. The managed health plans
experienced enrollment growth of 15% and an average premium rate increase on
renewing commercial groups of approximately 2%. In addition, lives served by
the Company's specialty managed care services operations (excluding
Diversified) increased by 21% in for the first quarter of 1995 compared to the
first quarter of 1994.
The sale of Diversified also had an impact on the operating income generated by
this line of business. As reported, operating income decreased $6.3 million,
or 27%, in the first quarter of 1995 compared to the first quarter of 1994.
However, after excluding the effects of Diversified, 1995 first quarter
operating income increased $3.6 million, or 31%, over the first quarter of
1994, reflecting the growth experienced by the remaining managed health plan
and specialty managed care services operations. These remaining operations
also have comparatively higher operating margins than that experienced by
Diversified. Accordingly, operating margins in this line of business increased
from 15.6% in the first quarter of 1994 to 18.5% in the first quarter of 1995.
INFLATION
Although the general rate of inflation has remained relatively stable and
health care cost inflation has declined in recent years, the total health care
cost inflation rate still exceeds the general inflation rate. The Company uses
various strategies to mitigate the negative effects of health care cost
inflation, including setting commercial premiums based on its anticipated
health care costs, risk-sharing arrangements with the Company's various health
care providers and other health care cost containment measures. The Company's
health plans attempt to control medical and hospital costs through contractual
arrangements with independent providers of health care services which set fixed
prices for certain periods of time, generally at least a year. Cost-effective
delivery of health care services by health care providers is also achieved by
the reduction of unnecessary hospitalizations, appropriate use of specialty
referral services and emphasizing preventive health services. While the Company
believes its current strategies to mitigate health care cost inflation will
continue to be successful, there is no assurance that those efforts will be as
effective as they have been in the past.
<PAGE>
UNITED HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
GOVERNMENT REGULATIONS
Government regulation of employee benefit plans, including health care
coverage, health plans and the Company's specialty managed care products, is a
changing area of law that varies from jurisdiction to jurisdiction and
generally gives responsible administrative agencies broad discretion. The
Company believes that it is in compliance in all material respects with the
various federal and state regulations applicable to its current operations. To
maintain such compliance, it may be necessary for the Company or a subsidiary
to make changes from time to time in its services, products, structure or
marketing methods. Additional governmental regulation or future interpretation
of existing regulations could increase the cost of the Company's compliance or
otherwise affect the Company's operations, products, profitability or business
prospects. The Company is unable to predict what additional government
regulations, if any, affecting its business may be enacted in the future or how
existing or future regulations might be interpreted.
FINANCIAL CONDITION AND LIQUIDITY
The Company's cash and investments decreased from $2.77 billion at December 31,
1994, to $2.43 billion at March 31, 1995. The decrease of $335.6 million during
the first quarter of 1995 reflects the January purchase of GenCare for $515.4
million in cash, offset by cash generated from operations.
The Company generally invests a large portion of its cash resources in high-
quality, long-term instruments. During the first quarter of 1995, the Company
invested a substantial portion of its cash and cash equivalents in longer term
investments. As a result of this investment strategy and the purchase of
GenCare, the Company's working capital decreased from $1.24 billion at December
31, 1994 to $455.6 million at March 31, 1995.
Under applicable state regulations, certain of the Company's subsidiaries are
required to retain cash generated from their operations. After giving effect to
these restrictions, the Company had approximately $1.50 billion in cash and
investments available for general corporate use at March 31, 1995.
The amortized cost of the Company's cash and investments at March 31, 1995,
exceeded fair value by approximately $26.8 million, after income tax effects.
Given the extent of the Company's available cash resources relative to its
current capital requirements and commitments, the Company presently intends to
manage its investment portfolio in a manner which would not result in the
realization of significant investment losses.
The Company believes its available cash resources will be sufficient to meet
its current operating requirements and internal development initiatives. There
currently are no material definitive commitments for future use of the
Company s available cash resources; however, management continually evaluates
opportunities to expand its health plan operations and specialty managed care
services, which includes internal development of new products and programs and
may include additional acquisitions. A portion of these resources will be
retained by the Company to maintain its strong financial position.
<PAGE>
UNITED HEALTHCARE CORPORATION
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
At the Registrant's annual meeting of shareholders held on May 10, 1995, the
Registrant's shareholders elected three directors, ratified the appointment of
Arthur Andersen LLP as independent public accountants for the Registrant and
approved a proposal to adopt the United HealthCare Corporation 1995 Non-
employee Director Stock Option Plan.
Three directors whose terms expire in 1998 (Class III) were elected: William
C. Ballard, Jr. with 145,334,431 votes cast for his election and 236,924
votes withheld; Richard T. Burke with 145,272,158 votes cast for his election
and 299,198 votes withheld; and William W. McGuire, M.D., with 145,285,060
votes cast for his election and 286,295 votes withheld.
The appointment of Arthur Andersen LLP as independent public accountants for
the Registrant for the year ending December 31, 1995 was ratified with
145,225,190 votes cast for ratification, 194,654 votes cast against
ratification and 151,512 abstaining votes cast. There were 0 broker nonvotes
on this matter.
Regarding the proposal to adopt the United HealthCare Corporation 1995 Non-
employee Director Stock Option Plan, a total of 131,088,765 affirmative votes,
13,915,814 negative votes and 566,777 abstaining votes were cast with respect
to this proposal. There were 0 broker nonvotes on this matter.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
The following exhibits are filed in response to Item 601 of Regulation
S-K.
Exhibit No. Exhibit
Exhibit 11 - Statements Re Computation of Per Share Earnings.
Exhibit 15 - Letter Re Unaudited Interim Financial Information.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K.
During the quarter for which this report is filed, the Registrant filed
Form 8-K Current Reports with the Securities and Exchange Commission as
follows:
1. Form 8-K Current Report Dated January 3, 1995. The items
reported on this Form 8-K were Items 2 and 7 concerning the
Registrant's acquisition of GenCare Health Systems, Inc.
2. Form 8-K/A Current Report Dated January 3, 1995. The items
<PAGE>
UNITED HEALTHCARE CORPORATION
reported on this Form 8-K was Item 7 concerning the Registrant's
acquisition of GenCare Health Systems, Inc.
3. Form 8-K Current Report Dated February 14, 1995. The items
reported on this Form 8-K were Items 5 and 7 concerning the
Registrant's announcement of its financial results for the
year ended December 31, 1994.
4. Form 8-K Current Report Dated May 4, 1995. The items
reported on this Form 8-K were Items 5 and 7 concerning the
Registrant's announcement of its financial results for the
quarter ended March 31, 1995.
<PAGE>
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 thereunto duly authorized.
UNITED HEALTHCARE CORPORATION
Dated: May 12, 1995 By /s/ William W. McGuire, M.D.
William W. McGuire, M.D.
President and Chief Executive Officer
Dated: May 12, 1995 By /s/ David P. Koppe
David P. Koppe
Chief Financial Officer
<PAGE>
UNITED HEALTHCARE CORPORATION
Exhibit Index
Exhibit Number Description Page
11 Statements Re Computation of Per 19
Share Earnings
15 Letter Re Unaudited Interim Financial 20
Information
27 Financial Data Schedule
EXHIBIT 11
<PAGE>
UNITED HEALTHCARE CORPORATION
STATEMENTS RE COMPUTATION OF PER SHARE EARNINGS
(in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1995 1994 (1)
<S> <C> <C>
NET EARNINGS $ 89,432 $ 70,398
Weighted average number of
common shares outstanding 172,909 170,363
Additional equivalent shares
issuable from assumed exercise
of common stock options
and warrants 3,494 4,144
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 176,403 174,507
NET EARNINGS PER SHARE $ 0.51 $ 0.40
<FN>
<F1> As restated. See Note 1.
</FN>
</TABLE>
<PAGE>
EXHIBIT 15
LETTER RE UNAUDITED INTERIM FINANCIAL INFORMATION
May 4, 1995
To United HealthCare Corporation:
We are aware that United HealthCare Corporation and Subsidiaries has
incorporated by reference in its Registration Statements No. 33-3558, 2-95342,
33-22310, 33-21813, 33-27208, 33-30869, 33-35365, 33-39060, 33-45263, 33-50282,
33-65994, 33-67918, 33-68158, 33-68300, 33-75846, 33-79632, 33-79634, 33-79636,
33-79638, 33-59083 its Form 10-Q for the quarter ended March 31, 1995, which
includes our report dated May 4, 1995, covering the unaudited interim condensed
consolidated financial information contained herein. Pursuant to Regulation
C of the Securities Act of 1933, that report is not considered a part of the
registration statement prepared or certified by our firm or a report prepared
or certified by our firm within the meaning of Sections 7 and 11 of the Act.
Very truly yours,
/s/Arthur Andersen LLP
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000731766
<NAME> UNITED HEALTHCARE CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 594,314
<SECURITIES> 1,839,509
<RECEIVABLES> 214,523
<ALLOWANCES> 12,443
<INVENTORY> 2,716
<CURRENT-ASSETS> 1,221,751
<PP&E> 302,750
<DEPRECIATION> 122,038
<TOTAL-ASSETS> 3,700,831
<CURRENT-LIABILITIES> 766,214
<BONDS> 0
<COMMON> 1,731
0
0
<OTHER-SE> (26,792)
<TOTAL-LIABILITY-AND-EQUITY> 3,700,831
<SALES> 1,069,713
<TOTAL-REVENUES> 1,103,835
<CGS> 941,079
<TOTAL-COSTS> 960,744
<OTHER-EXPENSES> 19,665
<LOSS-PROVISION> 475
<INTEREST-EXPENSE> 180
<INCOME-PRETAX> 142,911
<INCOME-TAX> 52,878
<INCOME-CONTINUING> 89,432
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 89,432
<EPS-PRIMARY> 0.51
<EPS-DILUTED> 0.51
</TABLE>
