UNITED ANNOUNCES FULL-YEAR AND FOURTH-QUARTER 2012 RESULTS
CHICAGO, Jan. 24, 2013 /PRNewswire/ — United Continental Holdings, Inc. (NYSE: UAL) today reported full-year 2012 net income of $589 million, or $1.59 per diluted share, excluding $1.3 billion of special charges. Including special charges, UAL reported a full-year 2012 net loss of $723 million, or $2.18 per share. UAL reported a fourth-quarter 2012 net loss of $190 million, or $0.58 per share, excluding $430 million of special charges. Including special charges, UAL reported a fourth-quarter 2012 net loss of $620 million, or $1.87 per share.
- UAL full-year 2012 consolidated passenger revenue increased 0.2 percent year-over-year. Consolidated passenger revenue per available seat mile (PRASM) increased 1.7 percent in 2012 compared to 2011.
- Superstorm Sandy reduced fourth-quarter revenue by approximately $140 million and profit by approximately $85 million.
- Full-year 2012 consolidated unit costs (CASM), holding fuel rate and profit sharing constant and excluding special charges and third-party business expense, increased 2.5 percent year-over-year on a consolidated capacity reduction of 1.5 percent. Full-year 2012 consolidated CASM increased 6.7 percent year-over-year.
- UAL ended 2012 with $7.0 billion in unrestricted liquidity.
- Co-workers earned $119 million in profit sharing for full-year 2012, which will be distributed on Feb. 14, 2013.
“I want to thank my co-workers for working together in 2012 as we completed the most difficult aspects of our merger integration,” said Jeff Smisek, UAL’s chairman, president and chief executive officer. “With much of our integration behind us, our significantly improved operational performance and our increasing customer satisfaction, we can now go forward as one company. This year we will continue on our path to becoming the world’s leading airline.”
Fourth-Quarter Revenue and Capacity
For the fourth quarter of 2012, total revenue was $8.7 billion, a decrease of 2.5 percent year-over-year. Fourth-quarter consolidated passenger revenue decreased 3.6 percent to $7.5 billion, compared to the same period in 2011.
Consolidated revenue passenger miles (RPMs) decreased 3.2 percent on a consolidated capacity (available seat miles) decrease of 4.2 percent year-over-year for the fourth quarter, resulting in a fourth-quarter consolidated load factor of 82.3 percent.
Fourth-quarter 2012 consolidated PRASM increased 0.6 percent compared to the same period in 2011. Consolidated yield for the fourth quarter of 2012 decreased 0.4 percent year-over-year.
Mainline RPMs in the fourth quarter of 2012 decreased 3.7 percent on a mainline capacity decrease of 4.3 percent year-over-year, resulting in a fourth-quarter mainline load factor of 82.5 percent. Mainline yield for the fourth quarter of 2012 decreased 0.9 percent compared to the same period in 2011. Fourth-quarter 2012 mainline PRASM decreased 0.3 percent year-over-year.
“While we didn’t meet our revenue goals in 2012, we have addressed the integration issues that drove our underperformance,” said Jim Compton, UAL’s vice chairman and chief revenue officer. “We’re now positioned to capitalize on market opportunities across our network, and to earn back our share of revenue, based on solid operations and great customer service.”
Passenger revenue for the fourth quarter of 2012 and period-to-period comparisons of related statistics for UAL’s mainline and regional operations are as follows:
4Q 2012 Passenger PRASM Yield Available Seat Miles
Passenger Revenue vs. vs. 4Q vs. 4Q vs.
Revenue 2011 2011
(millions) 4Q 2011 4Q 2011
--------- ------- -------
Domestic $2,953 (6.2%) (1.8%) (1.9%) (4.5%)
Atlantic 1,214 (7.5%) (0.3%) (0.3%) (7.2%)
Pacific 1,156 4.1% 5.9% 3.8% (1.7%)
Latin America 590 (5.4%) (4.2%) (6.5%) (1.3%)
---
International 2,960 (2.8%) 1.3% 0.0% (4.1%)
Mainline 5,913 (4.6%) (0.3%) (0.9%) (4.3%)
Regional 1,620 0.0% 3.7% 0.4% (3.6%)
-----
Consolidated $7,533 (3.6%) 0.6% (0.4%) (4.2%)
Year-over-year cargo and other revenue in the fourth quarter of 2012 increased 5.0 percent, or $56 million, to $1.2 billion.
Fourth-Quarter Costs
Total operating expenses, excluding special charges, increased $94 million, or 1.1 percent, in the fourth quarter versus the same period in 2011. Including special charges, fourth-quarter total operating expenses increased $284 million, or 3.2 percent, year-over-year. Third-party business expense was $118 million in the fourth quarter.
Consolidated and mainline CASM, excluding special charges and third-party business expense, increased 4.8 percent and 5.0 percent, respectively, in the fourth quarter of 2012 compared to the same period of 2011. Fourth-quarter consolidated and mainline CASM, including special charges, increased 7.7 and 8.5 percent year-over-year, respectively.
In the fourth quarter, consolidated and mainline CASM, excluding special charges and third-party business expense and holding fuel rate and profit sharing constant, increased 4.8 percent and 4.7 percent, respectively, compared to the results for the same period of 2011.
“While we reported a full-year profit in 2012, these results clearly fell short of our expectations and the return goals we have set,” said John Rainey, UAL’s executive vice president and chief financial officer. “2013 will be an important year for us as we take the necessary steps to create economic value and achieve a sufficient level of profitability.”
Liquidity, Cash Flow and Return on Invested Capital
UAL ended the year with $7.0 billion in unrestricted liquidity, including $500 million of undrawn commitments under a revolving credit facility. During the fourth quarter, the company generated $31 million of operating cash flow and had gross capital expenditures and purchase deposits of $1.0 billion, which included the delivery of 11 aircraft. The company made debt and capital lease principal payments of $270 million in the fourth quarter. For the full year, the company made debt and capital lease principal payments of $1.5 billion, including prepayments. The company’s return on invested capital for the year ended Dec. 31, 2012, was 8.0 percent, below the company’s goal of a 10 percent return over the business cycle.
2012 Events
- For the fourth quarter, United recorded a U.S. Department of Transportation domestic on-time arrival rate of 80.1 percent, exceeding its goal for the quarter. For the full year, United recorded a domestic on-time arrival rate of 77.3 percent and a system completion factor of 98.6 percent. For international flights, United recorded an on-time arrival rate of 73.7 percent. The on-time arrival rates are based on flights arriving within 14 minutes of scheduled arrival time.
- United co-workers earned cash incentive payments for on-time performance totaling $26 million during 2012.
- Pilots ratified a new joint labor agreement for all United Airlines pilots, and flight attendants from the company’s United, Continental and Continental Micronesia (CMI) subsidiaries ratified new labor agreements. United also reached an agreement with technicians from the CMI subsidiary. The company began the joint collective bargaining process with its flight attendants, technicians, dispatchers and airport and reservation agents.
- United introduced its Outperform Recognition Program, awarding cash prizes each quarter to employees for excellence in customer service.
- The company took delivery of six Boeing 787-8 Dreamliners in 2012 and launched its first commercial 787 flight in early November. United also took delivery of 19 Boeing 737-900ERs, and removed from service 19 Boeing 737-500s, one Boeing 757-200 and three Boeing 767-200s. In addition, the company sold or returned to lessors 37 aircraft that had been parked in long-term storage.
- United announced an order to purchase 100 Boeing 737 MAX 9 aircraft and 50 Boeing 737-900ER aircraft for delivery beginning in 2013. These new aircraft will allow United to replace older, less-efficient aircraft to reduce fuel and operating costs, enhance the customer experience and maximize network opportunities.
- UAL raised $2.2 billion of debt financing through multiple issuances of enhanced equipment trust certificates at an average interest rate of approximately 4.5 percent, with each issuance setting new average interest rate lows for this type of security. The debt proceeds are being used to finance the acquisition of seven new Boeing 787-8 and 32 new Boeing 737-900ER aircraft and to refinance the debt relating to three Boeing 737-900ER aircraft delivered in 2009.
- The company expanded its industry-leading global route network, launching nonstop flights to numerous international destinations including Istanbul; Manchester, England; Dublin; Buenos Aires, Argentina; Monterrey, Mexico; San Salvador, El Salvador; Kelowna, British Columbia, Canada; and Doha, Qatar, via Dubai, United Arab Emirates. United also announced new nonstop international flights beginning in 2013 to Taipei, Taiwan; Shannon, Ireland; Paris; Edmonton, Alberta, Fort McMurray, Alberta, and Thunder Bay, Ontario, Canada; and Denver’s first service to Asia with non-stop service to Tokyo. The company started 18 new domestic routes in 2012, including the company’s first service to Fairbanks, Alaska; Grand Forks, N.D.; Williston, N.D.; and Sarasota, Fla. United also announced eight new domestic markets for 2013 including the company’s first service to Fayetteville, N.C. and Santa Fe, N.M.
- United opened its new Network Operations Center in downtown Chicago with leading technology and tools for employees who manage the 24/7 global operation.
- United converted to a single passenger service system, launched a single website, united.com, and a single loyalty program, MileagePlus, and made policy and procedure changes to become a single airline for its customers.
- The company continued to install flat-bed seats in premium cabins on its international fleet and now has the new seats on 176 aircraft, more than any other U.S. carrier.
- United continued to install Economy Plus seating, and it is now on 91 percent of the mainline fleet.
- The company began installing global satellite-based Wi-Fi on its mainline fleet and expects to have more than 300 aircraft equipped with Wi-Fi by the end of 2013.
- United and Chase launched the premium MileagePlus Club co-brand card, building on the strong performance of the MileagePlus Explorer card launched in 2011.
About United
United Airlines and United Express operate an average of 5,472 flights a day to 381 airports across six continents. In 2012, United and United Express carried more passenger traffic than any other airline in the world and operated nearly two million flights carrying 140 million customers. United is investing in upgrading its onboard products and now offers more flat-bed seats in its premium cabins and more extra-legroom economy-class seating than any airline in North America. In 2013, United became the first U.S.-based international carrier to offer satellite-based Wi-Fi on long-haul overseas routes. The airline also features DIRECTV® on nearly 200 aircraft, offering customers more live television access than any other airline in the world. United operates more than 700 mainline aircraft and has made large-scale investments in its fleet. In 2013, United will continue to modernize its fleet by taking delivery of more than two dozen new Boeing aircraft. The company expanded its industry-leading global route network in 2012, launching nine new international and 18 new domestic routes. Readers of Global Traveler magazine have voted United’s MileagePlus program the best frequent flyer program for nine consecutive years. United is a founding member of Star Alliance, which provides service to 194 countries via 27 member airlines. More than 85,000 United employees reside in every U.S. state and in countries around the world. For more information, visit united.com or follow United on Twitter and Facebook. The common stock of United’s parent, United Continental Holdings, Inc., is traded on the NYSE under the symbol UAL.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Certain statements included in this release are forward-looking and thus reflect our current expectations and beliefs with respect to certain current and future events and financial performance. Such forward-looking statements are and will be subject to many risks and uncertainties relating to our operations and business environment that may cause actual results to differ materially from any future results expressed or implied in such forward-looking statements. Words such as “expects,” “will,” “plans,” “anticipates,” “indicates,” “believes,” “forecast,” “guidance,” “outlook” and similar expressions are intended to identify forward-looking statements. Additionally, forward-looking statements include statements which do not relate solely to historical facts, such as statements which identify uncertainties or trends, discuss the possible future effects of current known trends or uncertainties, or which indicate that the future effects of known trends or uncertainties cannot be predicted, guaranteed or assured. All forward-looking statements in this release are based upon information available to us on the date of this release. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, except as required by applicable law. Our actual results could differ materially from these forward-looking statements due to numerous factors including, without limitation, the following: our ability to comply with the terms of our various financing arrangements; the costs and availability of financing; our ability to maintain adequate liquidity; our ability to execute our operational plans; our ability to control our costs, including realizing benefits from our resource optimization efforts, cost reduction initiatives and fleet replacement programs; our ability to utilize our net operating losses; our ability to attract and retain customers; demand for transportation in the markets in which we operate; an outbreak of a disease that affects travel demand or travel behavior; demand for travel and the impact that global economic conditions have on customer travel patterns; excessive taxation and the inability to offset future taxable income; general economic conditions (including interest rates, foreign currency exchange rates, investment or credit market conditions, crude oil prices, costs of aviation fuel and energy refining capacity in relevant markets); our ability to cost-effectively hedge against increases in the price of aviation fuel; any potential realized or unrealized gains or losses related to fuel or currency hedging programs; the effects of any hostilities, act of war or terrorist attack; the ability of other air carriers with whom we have alliances or partnerships to provide the services contemplated by the respective arrangements with such carriers; the costs and availability of aviation and other insurance; the costs associated with security measures and practices; industry consolidation or changes in airline alliances; competitive pressures on pricing and on demand; our capacity decisions and the capacity decisions of our competitors; U.S. or foreign governmental legislation, regulation and other actions (including open skies agreements and environmental regulations); labor costs; our ability to maintain satisfactory labor relations and the results of the collective bargaining agreement process with our union groups; any disruptions to operations due to any potential actions by our labor groups; weather conditions; the possibility that expected merger synergies will not be realized or will not be realized within the expected time period; and other risks and uncertainties set forth under Item 1A., Risk Factors of our Annual Report on Form 10-K, as well as other risks and uncertainties set forth from time to time in the reports we file with the SEC. Consequently, forward-looking statements should not be regarded as representations or warranties by us that such matters will be realized.
-tables attached-
UNITED CONTINENTAL HOLDINGS, INC.
STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
THREE MONTHS AND YEAR ENDED DECEMBER 31, 2012 AND 2011
Three Months Ended Year Ended
December 31, % December 31, %
------------ ------------
(In millions, except per share data) 2012 2011 Increase/ (Decrease) 2012 2011 Increase/ (Decrease)
---- ---- -------------------- ---- ---- --------------------
Operating revenue:
Passenger:
Mainline $5,913 $6,195 (4.6) $25,804 $25,975 (0.7)
Regional 1,620 1,620 - 6,779 6,536 3.7
----- ----- ----- -----
Total passenger revenue 7,533 7,815 (3.6) 32,583 32,511 0.2
Cargo 243 285 (14.7) 1,018 1,167 (12.8)
Special revenue item (C) - - NM - 107 NM
Other 926 828 11.8 3,551 3,325 6.8
--- --- ----- -----
Total operating revenue 8,702 8,928 (2.5) 37,152 37,110 0.1
----- ----- ------ ------
Operating expenses:
Aircraft fuel (A) 3,095 3,105 (0.3) 13,138 12,375 6.2
Salaries and related costs 1,986 1,910 4.0 7,945 7,652 3.8
Regional capacity purchase (B) 583 596 (2.2) 2,470 2,403 2.8
Landing fees and other rent 453 477 (5.0) 1,929 1,928 0.1
Aircraft maintenance materials and 452 414 9.2 1,760 1,744 0.9
outside repairs
Depreciation and amortization 385 390 (1.3) 1,522 1,547 (1.6)
Distribution expenses 314 333 (5.7) 1,352 1,435 (5.8)
Aircraft rent 246 249 (1.2) 993 1,009 (1.6)
Special charges (C) 439 249 NM 1,323 592 NM
Other operating expenses 1,214 1,160 4.7 4,681 4,603 1.7
----- ----- ----- -----
Total operating expenses 9,167 8,883 3.2 37,113 35,288 5.2
----- ----- ------ ------
Operating income (loss) (465) 45 NM 39 1,822 (97.9)
Nonoperating income (expense):
Interest expense (204) (218) (6.4) (835) (949) (12.0)
Interest capitalized 11 8 37.5 37 32 15.6
Interest income 7 5 40.0 23 20 15.0
Miscellaneous, net 19 14 35.7 12 (80) NM
--- --- --- ---
Total nonoperating expense (167) (191) (12.6) (763) (977) (21.9)
---- ---- ---- ----
Income (loss) before income taxes (632) (146) 332.9 (724) 845 NM
Income tax expense (benefit) (D) (12) (8) 50.0 (1) 5 NM
--- --- --- ---
Net income (loss) $(620) $(138) 349.3 $(723) $840 NM
===== ===== ===== ====
Earnings (loss) per share, basic $(1.87) $(0.42) 345.2 $(2.18) $2.54 NM
====== ====== ====== =====
Earnings (loss) per share, diluted $(1.87) $(0.42) 345.2 $(2.18) $2.26 NM
====== ====== ====== =====
Weighted average shares, basic 331 330 0.3 331 329 0.6
Weighted average shares, diluted 331 330 0.3 331 383 (13.6)
NM Not meaningful
UNITED CONTINENTAL HOLDINGS, INC.
CONSOLIDATED NOTES (UNAUDITED)
UAL's results of operations include fuel expense for both mainline and regional operations.
(A)
Three Months Ended Year Ended
December 31, % December 31, %
------------ ------------
(In millions, except per gallon) 2012 2011 Increase/ (Decrease) 2012 2011 Increase/ (Decrease)
---- ---- -------------------- ---- ---- --------------------
Total mainline fuel expense excluding hedge impacts $2,481 $2,490 (0.4) $10,572 $10,439 1.3
Hedge gains (losses) reported in fuel expense (a) (34) (23) NM (141) 503 NM
--- --- ---- ---
Total mainline fuel expense 2,515 2,513 0.1 10,713 9,936 7.8
Regional fuel expense 580 592 (2.0) 2,425 2,439 (0.6)
--- --- ----- -----
Consolidated fuel expense 3,095 3,105 (0.3) 13,138 12,375 6.2
Settled hedge gains (losses) not recorded in fuel expense (b) - 20 NM (1) (60) NM
--- --- --- ---
Fuel expense including all gains (losses) from settled hedges 3,095 3,085 0.3 13,139 12,435 5.7
Hedge non-cash mark-to-market gains (c) 29 8 NM 38 1 NM
Fuel expense including all hedge impacts $3,066 $3,077 (0.4) $13,101 $12,434 5.4
====== ====== ======= =======
Mainline fuel consumption (gallons) 764 789 (3.2) 3,275 3,303 (0.8)
Mainline average aircraft fuel price per gallon excluding hedge impacts (cents) 324.7 315.6 2.9 322.8 316.0 2.2
Mainline average aircraft fuel price per gallon (cents) 329.2 318.5 3.4 327.1 300.8 8.7
Mainline average aircraft fuel price per gallon including all gains (losses) from settled hedges (cents) 329.2 316.0 4.2 327.1 302.6 8.1
Mainline average aircraft fuel price per gallon including all hedge impacts (cents) 325.4 315.0 3.3 326.0 302.6 7.7
Regional fuel consumption (gallons) 181 180 0.6 741 735 0.8
Regional average aircraft fuel price per gallon (cents) 320.4 328.9 (2.6) 327.3 331.8 (1.4)
Consolidated consumption (gallons) 945 969 (2.5) 4,016 4,038 (0.5)
Consolidated average aircraft fuel price per gallon excluding hedge impacts (cents) 323.9 318.1 1.8 323.6 318.9 1.5
Consolidated average aircraft fuel price per gallon (cents) 327.5 320.4 2.2 327.1 306.5 6.7
Consolidated average aircraft fuel price per gallon including all gains (losses) from settled hedges (cents) 327.5 318.4 2.9 327.2 307.9 6.3
Consolidated average aircraft fuel price per gallon including all hedge impacts (cents) 324.4 317.5 2.2 326.2 307.9 5.9
(a) Includes gains (losses) from settled hedges that were designated for hedge accounting. UAL allocates 100% of hedge
accounting gains (losses) to mainline fuel expense.
(b) Includes ineffectiveness gains (losses) and gains (losses) on derivatives not designated for hedge accounting. These
amounts are recorded in Nonoperating income (expense): Miscellaneous, net.
(c) Includes ineffectiveness gains (losses) and non-cash mark-to-market gains (losses) on all open hedge positions. These
amounts are recorded in Nonoperating income (expense): Miscellaneous, net.
(B) UAL has contractual relationships with various regional carriers to provide regional aircraft and turboprop service branded
as United Express. Under these agreements, UAL pays the regional carriers contractually agreed fees for crew expenses,
maintenance expenses and other costs of operating these flights. These costs include aircraft rent of $163 million and $669
million for the three months and year ended December 31, 2012, respectively, of which $111 million and $52 million is
included in regional capacity purchase expense and aircraft rentals, respectively, for the three months ended December 31,
2012 and $461 million and $208 million is included in regional capacity purchase expense and aircraft rentals,
respectively, for the year ended December 31, 2012 in our Statements of Consolidated Operations.
UNITED CONTINENTAL HOLDINGS, INC.
CONSOLIDATED NOTES (UNAUDITED)
(C) Special items include the following:
Three Months Ended Year Ended
December 31, December 31,
------------ ------------
(In millions) 2012 2011 2012 2011
---- ---- ---- ----
Revenue - Chase co-branded marketing agreement
modification $ - $ - $ - $107
------------ ------------ ------------ ----
Integration-related costs 408 170 739 517
Intangible asset impairment 24 4 30 4
Labor agreement costs 21 - 475 -
Voluntary severance and benefits - - 125 -
Termination of a maintenance service contract - 58 - 58
Gains on sales of assets and other special charges, net (14) 17 (46) 13
--- --- --- ---
Total special charges 439 249 1,323 592
Total special items 439 249 1,323 485
--- --- ----- ---
Income tax benefit (9) (2) (11) (2)
Special items, net of tax $430 $247 $1,312 $483
==== ==== ====== ====
2012 - Special items
--------------------
Integration-related costs: Includes compensation costs related to
systems integration and training, costs to repaint aircraft and
other branding activities, costs to write-off or accelerate
depreciation on systems and facilities that are no longer used or
planned to be used for significantly shorter periods, relocation
costs for employees and severance primarily associated with
administrative headcount reductions. In addition, on June 30, 2012
UAL became obligated under an indenture to issue to the Pension
Benefit Guaranty Corporation ("PBGC"), no later than Feb. 14, 2013,
$62.5 million aggregate principal amount of 8% Contingent Senior
Unsecured Notes. UAL recorded a liability of approximately $48
million for the fair value of that obligation. The company
classified the liability as an integration-related cost since the
financial results of UAL, excluding Continental's results, would
not have resulted in a financial triggering event under the 8%
Notes indenture. In addition, on Dec. 31, 2012, the company
entered into an agreement with the PBGC providing for, among other
things, the replacement of (i) the company's contingent obligation
to issue up to $500 million principal amount of 8% Contingent
Senior Notes if certain financial triggers were met, of which $188
million had been incurred as of Dec. 31, 2012, with $400 million
principal amount of new 8% Notes due 2024 and (ii) the $652 million
outstanding of the company's 6% Senior Notes due 2031 with $326
million principal amount of new 6% Notes due 2026 and $326 million
principal amount of new 6% Notes due 2028. The company is treating
the substitution of the obligations outstanding on Dec. 31, 2012 as
an extinguishment of such debt. The resulting charge of $309
million represents the fair value of the additional $212 million of
8% Notes that we agreed to issue and the change in the fair value
of the other new 6% Notes and 8% Notes versus their previous
carrying values. The company categorized the expense as an
integration-related charge because the note restructuring would
not have occurred if it were not for the merger.
--------------------------------------------------------------------
Intangible Asset Impairment: In the first quarter of 2012, the
company recorded a $6 million impairment charge on an intangible
asset related to certain take-off and landing slots to reflect the
discontinuance of one of the frequencies on an international route.
In the fourth quarter of 2012, the company recorded an impairment
charge of $24 million related to foreign take-off and landing
slots to reflect the estimated fair value of these assets as part
of our annual impairment test of indefinite-lived intangible
assets. Reductions of frequencies and weakening of the U.S. dollar
against certain foreign currencies attributed to the charge.
-------------------------------------------------------------------
Labor Agreement Costs: On Aug. 3, 2012, the company announced it had
reached an agreement in principle with respect to a new joint
collective bargaining agreement with the Air Line Pilots
Association ("ALPA"), representing pilots at United and
Continental. The company recorded $454 million of expense in the
third quarter associated with lump sum cash payments that would be
made in conjunction with the ratification of the contract and the
completion of the integrated pilot seniority list. This charge also
includes costs associated with changes to existing pilot disability
plans negotiated in connection with the agreement in principle. The
lump sum payments are not in lieu of future pay increases and were
accrued in the third quarter as a result of the payments becoming
probable, primarily due to reaching the agreement in principle. The
agreement was ratified in the fourth quarter of 2012. In the
fourth quarter of 2012, the company accrued an additional $21
million associated with the agreement.
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Voluntary severance and benefits: In the first quarter of 2012, the
company recorded $49 million associated with two voluntary employee
programs. In one program, approximately 400 mechanics offered to
retire early in exchange for a cash severance payment that was
based on the number of years of service the employee had
accumulated. The other program is a voluntary company-offered
leave of absence that approximately 1,800 flight attendants
accepted, which allows for continued medical coverage during the
leave of absence period. In the second quarter of 2012, the
company recorded $76 million associated with a voluntary severance
program. Approximately 1,300 flight attendants volunteered to
retire early in exchange for a cash severance payment that was
based on the number of years of service each employee had
accumulated.
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Gains on sales of assets and other special charges, net: In the
first quarter of 2012, the company sold six aircraft and its
interest in a crew hotel in Hawaii. The company also made
adjustments to legal reserves. In the second quarter of 2012, the
company sold three aircraft, realizing a net gain of $7 million. In
the fourth quarter of 2012, the company sold three aircraft
realizing a net gain of $14 million.
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2011 - Special items
--------------------
Special Revenue Item:
UAL, United,
Continental and Mileage
Plus Holdings, LLC, a
wholly owned subsidiary
of United, executed an
Amended and Restated
Co-Branded Card
Marketing Services
Agreement (the Co-
Brand Agreement) with
Chase Bank USA, N.A.
(Chase) in June 2011,
through which the
company sells mileage
credits to Chase and
the company's loyalty
program members accrue
frequent flyer miles
for making purchases
using credit cards
issued by Chase. The
Co-Brand Agreement
modifies and combines
the previously existing
co-branded agreements
between Chase and each
of United and
Continental,
respectively. As a
result of the execution
of the Co-Brand
Agreement, revenues
received as part of
this agreement are
subject to Accounting
Standards Update 2009-
13, "Multiple-
Deliverable Revenue
Arrangements - a
consensus of the FASB
Emerging Issues Task
Force" (ASU 2009-13),
adopted by the company
on Jan. 1, 2011, which
is applied to all
contracts entered into
or materially modified
after the adoption date
of the accounting
standard. The
application of the new
accounting standard to
the Co-Brand
Agreement, which was
determined to be a
material modification
of the previously
existing co-branded
agreements, decreases
the value of the air
transportation
deliverables related to
the agreement that the
company records as
deferred revenue (and
ultimately Passenger
Revenue when redeemed
awards are flown) and
increases the value of
the marketing-related
deliverables recorded
in Other Revenue at the
time these marketing-
related deliverables
are provided. The
provisions of ASU 2009-
13 require that
existing deferred
revenue be adjusted
retroactively to
reflect the value of
the undelivered air
transportation
deliverables at the
date of the contract
modification. As a
result, the company
recorded a retroactive,
one-time non-cash
income adjustment to
revenue of $107 million
in the second quarter
of 2011.
------------------------
Integration-related
costs: Integration-
related costs include
compensation costs
related to systems
integration and
training, costs to
repaint aircraft and
other branding
activities, costs to
write-off or
accelerate depreciation
on systems and
facilities that are no
longer used or planned
to be used for
significantly shorter
periods, and severance
primarily associated
with administrative
headcount reductions.
In addition, the
company recorded a
liability of $49
million in the second
quarter for the cost of
one tranche of PBGC
Contingent Senior
Unsecured Notes. In
addition, UAL recorded
a liability of
approximately $39
million in the fourth
quarter for the cost of
an additional tranche
of PBGC Contingent
Senior Unsecured Notes.
The company classified
the PBGC liabilities as
integration-related
costs since the
financial results of
UAL, excluding
Continental's results,
would not have resulted
in a triggering events
under the 8% Notes
indenture.
------------------------
Gains on sales of assets
and other special
charges, net: Other
special charges for the
three months and year
ended December 31, 2011
include costs to
terminate a maintenance
service contract early,
adjustments to reserves
for certain legal
matters and gains and
losses on the disposal
of aircraft.
------------------------
(D) No federal income tax
expense was recognized
related to our pretax
income for the year
ended December 31, 2011
due to the utilization
of book net operating
loss carry forwards for
which no benefit has
previously been
recognized. We are
required to provide a
valuation allowance for
our deferred tax assets
in excess of deferred
tax liabilities because
UAL concluded that it
is more likely than not
that such deferred tax
assets will ultimately
not be realized. As a
result, pre-tax losses
for the three months
ended December 31, 2012
and 2011 and the year
ended December 31, 2012
were not reduced by any
tax benefits.
UNITED CONTINENTAL HOLDINGS, INC.
STATISTICS
Three Months Ended Year Ended
December 31, % December 31, %
------------ ------------
2012 2011 Increase/ 2012 2011 Increase/
(Decrease) (Decrease)
---- ---- ---------- ---- ---- ----------
Mainline:
Passengers (thousands) 21,811 22,960 (5.0) 93,595 96,360 (2.9)
Revenue passenger miles
(millions) 41,555 43,130 (3.7) 179,416 181,763 (1.3)
Available seat miles
(millions) 50,376 52,636 (4.3) 216,330 219,437 (1.4)
Cargo ton miles
(millions) 601 661 (9.1) 2,460 2,646 (7.0)
Passenger load factor:
Mainline 82.5 % 81.9 % 0.6 pts. 82.9 % 82.8 % 0.1 pts.
Domestic 84.3 % 84.2 % 0.1 pts. 84.9 % 85.1 % (0.2) pts.
International 80.6 % 79.5 % 1.1 pts. 80.9 % 80.5 % 0.4 pts.
Passenger revenue per
available seat mile
(cents) 11.74 11.77 (0.3) 11.93 11.84 0.8
Average yield per revenue
passenger mile (cents) 14.23 14.36 (0.9) 14.38 14.29 0.6
Average fare per
passenger $271.10 $269.82 0.5 $275.70 $269.56 2.3
Cost per available seat
mile (CASM) (cents):
CASM (a) 15.06 13.88 8.5 14.12 13.15 7.4
CASM, excluding special
charges (b) 14.19 13.41 5.8 13.51 12.88 4.9
CASM, excluding special
charges and third-party 13.95 13.29 5.0 13.37 12.77 4.7
business expenses (b)
CASM, excluding special
charges, third-party
business 8.96 8.52 5.2 8.42 8.24 2.2
expenses and fuel (b)
CASM, holding fuel rate
and profit sharing
constant, 13.92 13.29 4.7 13.03 12.77 2.0
excluding special charges
and third-party
business
expenses (b)
Mainline average aircraft
fuel price per gallon
excluding 324.7 315.6 2.9 322.8 316.0 2.2
hedge impacts (cents) (c)
Mainline average aircraft
fuel price per gallon
(cents) 329.2 318.5 3.4 327.1 300.8 8.7
Mainline average aircraft
fuel price per gallon
including 329.2 316.0 4.2 327.1 302.6 8.1
all gains (losses) from
settled hedges (cents)
(c)
Mainline average aircraft
fuel price per gallon
including 325.4 315.0 3.3 326.0 302.6 7.7
all hedge impacts (cents)
(c)
Fuel gallons consumed
(millions) 764 789 (3.2) 3,275 3,303 (0.8)
Aircraft in fleet at end
of period 702 701 0.1 702 701 0.1
Average stage length
(miles) (d) 1,884 1,850 1.8 1,895 1,844 2.8
Average daily utilization
of each aircraft (hours) 9:52 10:14 (3.6) 10:38 10:42 (0.6)
Regional:
Passengers (thousands) 11,444 11,231 1.9 46,846 45,439 3.1
Revenue passenger miles
(millions) 6,311 6,339 (0.4) 26,069 25,768 1.2
Available seat miles
(millions) 7,790 8,078 (3.6) 32,530 33,091 (1.7)
Passenger load factor 81.0 % 78.5 % 2.5 pts. 80.1 % 77.9 % 2.2 pts.
Passenger revenue per
available seat mile
(cents) 20.80 20.05 3.7 20.84 19.75 5.5
Average yield per revenue
passenger mile (cents) 25.67 25.56 0.4 26.00 25.36 2.5
Aircraft in fleet at end
of period 551 555 (0.7) 551 555 (0.7)
Average stage length
(miles) (d) 540 552 (2.2) 542 555 (2.3)
UNITED CONTINENTAL HOLDINGS, INC.
STATISTICS (Continued)
Three Months Ended Year Ended
December 31, % December 31, %
------------ ------------
2012 2011 Increase/ 2012 2011 Increase/
(Decrease) (Decrease)
---- ---- ---------- ---- ---- ----------
Consolidated (Mainline and
Regional):
Passengers (thousands) 33,255 34,191 (2.7) 140,441 141,799 (1.0)
Revenue passenger miles
(millions) 47,866 49,469 (3.2) 205,485 207,531 (1.0)
Available seat miles (millions) 58,166 60,714 (4.2) 248,860 252,528 (1.5)
Passenger load factor 82.3 % 81.5 % 0.8 pts. 82.6 % 82.2 % 0.4 pts.
Passenger revenue per available
seat mile (cents) 12.95 12.87 0.6 13.09 12.87 1.7
Total revenue per available seat
miles (cents) 14.96 14.71 1.7 14.93 14.70 1.6
Average yield per revenue
passenger mile (cents) 15.74 15.80 (0.4) 15.86 15.67 1.2
CASM (a) 15.76 14.63 7.7 14.91 13.97 6.7
CASM, excluding special charges
(b) 15.01 14.22 5.6 14.38 13.74 4.7
CASM, excluding special charges
and third-party business
expenses (b) 14.80 14.12 4.8 14.26 13.65 4.5
CASM, excluding special charges,
third-party business expenses
and fuel (b) 9.48 9.01 5.2 8.98 8.75 2.6
CASM, holding fuel rate and
profit sharing constant,
excluding special charges and
third-party business expenses
(b) 14.80 14.12 4.8 13.99 13.65 2.5
Consolidated average aircraft
fuel price per gallon excluding
hedge impacts (cents) (c) 323.9 318.1 1.8 323.6 318.9 1.5
Consolidated average aircraft
fuel price per gallon (cents)
(c) 327.5 320.4 2.2 327.1 306.5 6.7
Consolidated average aircraft
fuel price per gallon including
all gains (losses) from settled
hedges (cents) (c) 327.5 318.4 2.9 327.2 307.9 6.3
Consolidated average aircraft
fuel price per gallon including
all hedge impacts (cents) (c) 324.4 317.5 2.2 326.2 307.9 5.9
Fuel gallons consumed (millions) 945 969 (2.5) 4,016 4,038 (0.5)
Average full-time equivalent
employees (thousands) 84.5 82.0 3.0 84.6 81.7 3.5
(a) Includes impact of special charges (See Note C).
(b) These financial measures provide management and investors the ability to monitor the company's
performance on a consistent basis.
(c) Fuel price per gallon includes aircraft fuel and related taxes.
(d) Average stage length equals the average distance a seat travels adjusted for size of aircraft
(available seat miles/seats).
UNITED CONTINENTAL HOLDINGS, INC.
NON-GAAP FINANCIAL RECONCILIATION
UAL evaluates its financial performance utilizing various GAAP and non-GAAP financial measures including net income/loss, net earnings/loss per share and CASM, among others. CASM is a common metric used in the airline industry to measure an airline's cost structure and efficiency.
Pursuant to SEC Regulation G, UAL has included the following reconciliation of reported non-GAAP financial measures to comparable financial measures reported on a GAAP basis. UAL believes that excluding fuel costs from certain measures is useful to investors because it provides an
additional measure of management's performance excluding the effects of a significant cost item over which management has limited influence. UAL also believes that adjusting for special items is useful to investors because they are non-recurring items not indicative of UAL's on-going
performance. UAL also believes that excluding third-party business expenses, such as maintenance, ground handling and catering services for third parties, fuel sales and non-air mileage redemptions, provides more meaningful disclosure because these expenses are not directly related to
UAL's core business.
Three Months Ended Year Ended
(in millions) December 31, $ % December 31, $ %
------------ ------------
2012 2011 Increase/ (Decrease) Increase/ (Decrease) 2012 2011 Increase/ (Decrease) Increase/ (Decrease)
---- ---- -------------------- -------------------- ---- ---- -------------------- --------------------
Operating revenue $8,702 $8,928 $(226) (2.5) $37,152 $37,110 $42 0.1
Less: Special revenue item (C) - - - NM - 107 (107) NM
Operating revenue, excluding
special revenue item $8,702 $8,928 $(226) (2.5) $37,152 $37,003 $149 0.4
====== ====== ===== ======= ======= ====
Operating expenses $9,167 $8,883 $284 3.2 $37,113 $35,288 $1,825 5.2
Less: Special charges (C) 439 249 190 NM 1,323 592 731 NM
--- --- --- ----- --- ---
Operating expenses, excluding
special charges 8,728 8,634 94 1.1 35,790 34,696 1,094 3.2
Less: Third-party business
expenses 118 60 58 96.7 298 235 63 26.8
Less: Fuel expense 3,095 3,105 (10) (0.3) 13,138 12,375 763 6.2
Less: Profit sharing programs,
including taxes (41) 23 (64) NM 119 265 (146) (55.1)
--- --- --- ---
Operating expenses, excluding
fuel, profit sharing, special
charges and third-party
business expenses $5,556 $5,446 $110 2.0 $22,235 $21,821 $414 1.9
====== ====== ==== ======= ======= ====
Net Income (loss) $(620) $(138) $(482) 349.3 $(723) $840 $(1,563) NM
Less: Special items, net (C) 430 247 183 NM 1,312 483 829 NM
--- --- ----- ---
Net Earnings, excluding special
items $(190) $109 $(299) NM $589 $1,323 $(734) (55.5)
===== ==== ===== ==== ====== =====
Diluted earnings (loss) per
share $(1.87) $(0.42) $(1.45) 345.2 $(2.18) $2.26 $(4.44) NM
Add back: Special items, net 1.29 0.72 0.57 NM 3.77 1.23 2.54 NM
Diluted earnings per share,
excluding special items $(0.58) $0.30 $(0.88) NM $1.59 $3.49 $(1.90) (54.4)
====== ===== ====== ===== ===== ======
UNITED CONTINENTAL HOLDINGS, INC.
NON-GAAP FINANCIAL RECONCILIATION (Continued)
Three Months Ended Year Ended
December 31, % December 31, %
------------ ------------
2012 2011 Increase/ (Decrease) 2012 2011 Increase/ (Decrease)
---- ---- -------------------- ---- ---- --------------------
CASM Mainline
Operations (cents)
Cost per available
seat mile (CASM) 15.06 13.88 8.5 14.12 13.15 7.4
Less: Special charges
(C) 0.87 0.47 NM 0.61 0.27 NM
---- ---- ---- ----
CASM, excluding
special charges 14.19 13.41 5.8 13.51 12.88 4.9
Less: Third-party
business expenses 0.24 0.12 100.0 0.14 0.11 27.3
---- ---- ---- ----
CASM, excluding
special charges and
third-party
business expenses 13.95 13.29 5.0 13.37 12.77 4.7
Less: Fuel expense 4.99 4.77 4.6 4.95 4.53 9.3
---- ---- ---- ----
CASM, excluding
special charges,
third-party
business expenses
and fuel 8.96 8.52 5.2 8.42 8.24 2.2
Less: Profit sharing
per available seat
mile (0.08) 0.04 NM 0.06 0.12 (50.0)
----- ---- ---- ----
CASM, excluding
special charges,
third-party
business expenses,
fuel, and profit
sharing 9.04 8.48 6.6 8.36 8.12 3.0
Add: Profit sharing
held constant at
prior year expense
per available seat
mile 0.05 0.04 25.0 0.12 0.12 -
Add: Current year
fuel cost at prior
year fuel price per
available seat mile 4.83 - NM 4.55 - NM
Add: Prior year fuel
cost per available
seat mile - 4.77 NM - 4.53 NM
--- ---
CASM, holding fuel
rate and profit
sharing constant and
excluding special
charges and third-
party business
expenses 13.92 13.29 4.7 13.03 12.77 2.0
===== ===== ===== =====
CASM Consolidated
Operations (cents)
Cost per available
seat mile (CASM) 15.76 14.63 7.7 14.91 13.97 6.7
Less: Special charges
(C) 0.75 0.41 NM 0.53 0.23 NM
---- ---- ---- ----
CASM, excluding
special charges 15.01 14.22 5.6 14.38 13.74 4.7
Less: Third-party
business expenses 0.21 0.10 110.0 0.12 0.09 33.3
---- ---- ---- ----
CASM, excluding
special charges and
third-party
business expenses 14.80 14.12 4.8 14.26 13.65 4.5
Less: Fuel expense 5.32 5.11 4.1 5.28 4.90 7.8
---- ---- ---- ----
CASM, excluding
special charges,
third-party
business expenses
and fuel 9.48 9.01 5.2 8.98 8.75 2.6
Less: Profit sharing
per available seat
mile (0.07) 0.04 NM 0.05 0.11 (54.5)
----- ---- ---- ----
CASM, excluding
special charges,
third-party
business expenses,
fuel, and profit
sharing 9.55 8.97 6.5 8.93 8.64 3.4
Add: Profit sharing
held constant at
prior year expense
per available seat
mile 0.04 0.04 - 0.11 0.11 -
Add: Current year
fuel cost at prior
year fuel price per
available seat mile 5.21 - NM 4.95 - NM
Add: Prior year fuel
cost per available
seat mile - 5.11 NM - 4.90 NM
--- ---- ---
CASM, holding fuel
rate and profit
sharing constant and
excluding special
charges and third-
party business
expenses 14.80 14.12 4.8 13.99 13.65 2.5
===== ===== ===== =====
UNITED CONTINENTAL HOLDINGS, INC.
RETURN ON INVESTED CAPITAL (ROIC)
(in millions) Year Ended
December 31, 2012
-----------------
Net Operating Profit After Tax (NOPAT)
Pre-tax income excluding special charges (a) $599
Add: Interest expense (b) 821
Add: Interest component of capitalized aircraft
rent (b) 478
Add: Net interest on pension (b) 164
Less: Adjusted income tax expense (10)
---
NOPAT $2,052
======
Effective tax rate 1.7%
Invested Capital (five-quarter average)
Total assets $38,083
Add: Capitalized aircraft rent (@ 7.0x) 7,015
Less: Non-interest bearing liabilities (19,607)
-------
Average Invested Capital $25,491
=======
Return on Invested Capital 8.0%
===
Year Ended
December 31, 2012
-----------------
(a) Non-GAAP Financial Reconciliation
Loss before income taxes $(724)
Add: Special charges 1,323
-----
Pre-tax income excluding special
charges $599
====
(b) Net of tax shield.
SOURCE United Continental Holdings, Inc.
