Humana 2005 Annual Report Download - page 81

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Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The purchase price exceeded the estimated fair value of the net tangible assets acquired by approximately
$391.6 million. We allocated the excess purchase price over the fair value of the net tangible assets acquired to
other intangible assets of $88.9 million and associated deferred tax liabilities of $33.5 million, and goodwill of
$336.2 million. The other intangible assets, which consist primarily of subscriber contracts, have a weighted-
average useful life of approximately 10 years. Approximately $47.4 million of the acquired goodwill is
deductible for income tax purposes. We used an independent third party valuation specialist firm to assist us in
evaluating the fair value of assets acquired.
On April 1, 2004, we acquired Ochsner Health Plan, or Ochsner, from the Ochsner Clinic Foundation for
$157.1 million in cash.
The results of operations and financial condition of Corphealth, CarePlus and Ochsner have been included
in our consolidated statements of income and consolidated balance sheets from the respective acquisition dates.
The pro forma financial information presented below assumes that the acquisitions of Corphealth, CarePlus and
Ochsner had occurred as of the beginning of each respective period. The pro forma adjustments include the pro
forma effect of amortization of other intangible assets arising from the purchase price allocation and interest
expense related to the assumed financing of the cash purchase price and the associated income tax effects of the
pro forma adjustments. The pro forma results have been prepared for comparative purposes only and do not
purport to be indicative of the results of operations that would have occurred had the Corphealth, CarePlus and
Ochsner acquisitions been consummated at the beginning of the respective periods.
For the year ended December 31,
2005(1) 2004(2)
(in thousands, except per share results)
Revenues ................................................... $14,500,064 $13,786,237
Net income ................................................. $ 312,951 $ 303,427
Earnings per common share:
Basic .................................................. $ 1.94 $ 1.89
Diluted ................................................. $ 1.89 $ 1.87
(1) This period includes the pro forma impact of Corphealth for approximately 11.5 months and CarePlus for
approximately 1.5 months.
(2) This period includes the pro forma impact of Corphealth and CarePlus for 12 months and Ochsner for 3
months.
4. INVESTMENT SECURITIES
Investment securities classified as current assets were as follows at December 31, 2005 and 2004:
2005 2004
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
(in thousands)
U.S. Government obligations ....... $ 791,322 $ 84 $ (9,729) $ 781,677 $ 650,200 $ 3,437 $ (2,952) $ 650,685
Tax exempt municipal securities .... 971,330 1,112 (11,637) 960,805 888,592 11,379 (3,722) 896,249
Corporate and other securities ...... 422,127 566 (9,182) 413,511 469,375 8,593 (3,121) 474,847
Mortgage-backed securities ........ 105,859 142 (2,761) 103,240 78,722 839 (1,146) 78,415
Redeemable preferred stocks ....... 19,668 52,285 (289) 71,664 7,310 — (134) 7,176
Debt securities .............. 2,310,306 54,189 (33,598) 2,330,897 2,094,199 24,248 (11,075) 2,107,372
Non-redeemable preferred stocks . . . 24,237 13 (243) 24,007 38,221 621 (569) 38,273
Investment securities ......... $2,334,543 $54,202 $(33,841) $2,354,904 $2,132,420 $24,869 $(11,644) $2,145,645
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