UnitedHealth Group will reduce previously reported net earnings by more than $1.5 billion due to incorrect accounting for stock options.
The restatements reflect changes under both the company’s current accounting method, Financial Accounting Standard No. 123R, and its historical method, Accounting Principles Board Opinion No. 25.
Under FAS 123R, UnitedHealth will reduce earnings by $57 million for the year ended December 2005, $44 million for 2004, and $313 million for 2003. Under APB 25, it will reduce earnings by $238 million for 2005, $158 million for 2004, and $738 million for 2003.
UnitedHealth made several other announcements:
• The company filed its annual and quarterly reports for the past four years, returning to current status with the SEC
• It will record an after-tax cash charge of $55 million in the first quarter of 2007 following a settlement with the Internal Revenue Service related to non-officer employees who exercised certain options last year
• It has fully remediated its previously reported material weakness in internal control as of December 31, 2005, related to stock option plan administration and accounting for and disclosure of stock option grants
• It will resume its share repurchase program, under which the board has authorized it to repurchase up to 137 million shares; at year-end, the company had more than $1.9 billion of cash on hand
“We are pleased to have resolved the financial reporting and control-related issues stemming solely from historic stock options programs,” said chief financial officer Mike Mikan, in a statement. “We have used this process to create a stronger enterprise in all aspects of administration, including our governance, control environment, and commitment to modern corporate social responsibility.”