UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 17, 2008
UAL CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 001-06033 | 36-2675207 | ||
| (State or other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
| 77 W. Wacker Drive, Chicago,
IL |
60601 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (312) 997-8000
| (Former name or former address if changed since last report.) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting material pursuant
to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule
14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule
13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 7.01 Regulation FD Disclosure.
On December 17, 2008, UAL Corporation, the holding company whose primary subsidiary is United Air Lines, Inc., provided an investor update related to its financial and operational outlook for the fourth quarter of 2008. A copy of the investor update is attached as Exhibit 99.1 and is incorporated herein by reference.
The information in this Item 7.01, including Exhibit 99.1, is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section and shall not be deemed incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
| Exhibit No. | Description | |
|
99.1
|
UAL Investor Update dated December 17, 2008 |
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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.
| UAL CORPORATION | ||
| By: | /s/ Paul R. Lovejoy | |
| Name: | Paul R. Lovejoy | |
| Title: | Senior Vice President, General Counsel and Secretary |
|
| Date: December 17, 2008 | ||
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EXHIBIT INDEX
| Exhibit No. | Description | |
|
99.1*
|
UAL Investor Update dated December 17, 2008 |
* Furnished herewith
electronically.
4
Exhibit 99.1
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UAL Investor Update: December 17, 2008
| 4Q 2008 Estimated Growth | ||||||||
| Percent Higher/ (Lower) Than 4Q 2007 | ||||||||
| Capacity | Traffic | |||||||
| Traffic and Capacity | (Available Seat Miles) | (Revenue Passenger Miles) | ||||||
Mainline |
(11.7 | )% | (13.5) – (12.5 | )% | ||||
Express |
(0.7 | )% | (1.5) – (0.5 | )% | ||||
Consolidated |
(10.6 | )% | (12.5) – (11.5 | )% | ||||
Revenue Update
Fourth quarter 2008 mainline passenger unit revenue (“PRASM”) is expected to increase between 2.5 percent and 3.5 percent year-over-year excluding the impact of Mileage Plus accounting changes. Including the impact of the Mileage Plus accounting changes, mainline PRASM is expected to increase/(decrease) between (0.3) percent and 0.7 percent year-over-year.
Fourth quarter 2008 mainline passenger unit revenue (“PRASM”) is expected to increase between 2.5 percent and 3.5 percent year-over-year excluding the impact of Mileage Plus accounting changes. Including the impact of the Mileage Plus accounting changes, mainline PRASM is expected to increase/(decrease) between (0.3) percent and 0.7 percent year-over-year.
Fourth quarter consolidated PRASM is expected to increase between 3.0 percent and 4.0 percent
year-over-year excluding the impact of Mileage Plus accounting changes. Including the impact of the
Mileage Plus accounting changes, consolidated PRASM is expected to increase between 0.2 percent and
1.2 percent year-over-year.
Accounting for the change in expiration policy from 36 to 18 months for inactive Mileage Plus
accounts, which was announced in January 2007 and became effective on December 31, 2007, added
approximately $121 million of non-cash revenue to the Company’s consolidated passenger revenue for
the fourth quarter of 2007. There was no comparable impact in the 2008 quarter.
The Company expects that deferred revenue accounting for the Mileage Plus program, excluding the
change in expiration policy noted above, will reduce consolidated passenger revenue by
approximately $61 million in the fourth quarter of 2008 versus the Company’s best estimate using
the previous incremental cost method. Using the same comparison, deferred revenue accounting
decreased consolidated passenger revenue by approximately $61 million in the fourth quarter of
2007.
The United Building: 77 West Wacker Drive, Chicago, IL 60601
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The Company estimates that cargo, mail and other revenue will be between $370 million and $380
million for the quarter, including UAFC sales of approximately $3 million.
Unit Costs
The Company estimates that mainline operating cost per available seat mile (“CASM”), excluding fuel and the impact of certain primarily non-cash impairment, severance, and other similar accounting charges expected to be incurred in the fourth quarter as described below, will be up 1.0 percent to 1.5 percent for the fourth quarter of 2008 from the same period in 2007. This unit cost projection includes a non-cash charge for maintenance inventory of approximately $20 million that the Company expects to record in the fourth quarter. The non-cash maintenance inventory charge represents approximately 80 basis points of non-fuel unit cost growth year over year.
The Company estimates that mainline operating cost per available seat mile (“CASM”), excluding fuel and the impact of certain primarily non-cash impairment, severance, and other similar accounting charges expected to be incurred in the fourth quarter as described below, will be up 1.0 percent to 1.5 percent for the fourth quarter of 2008 from the same period in 2007. This unit cost projection includes a non-cash charge for maintenance inventory of approximately $20 million that the Company expects to record in the fourth quarter. The non-cash maintenance inventory charge represents approximately 80 basis points of non-fuel unit cost growth year over year.
Fuel
Fourth quarter total estimated mainline fuel consumption is 491 million gallons. The Company expects the following fuel prices based on the closing forward curve on December 11th:
Fourth quarter total estimated mainline fuel consumption is 491 million gallons. The Company expects the following fuel prices based on the closing forward curve on December 11th:
| Three Months | ||||
| Ending Dec. 31, | ||||
| 2008 | ||||
| Estimated Mainline Fuel Price | Price Per Gallon | |||
Mainline Fuel price including taxes and excluding impact of hedges |
$ | 2.55 | ||
Mainline Fuel price including taxes and cash net losses on settled hedges* |
$ | 2.85 | ||
Mainline Fuel price including taxes and impact of mark to market net
losses on settled and unsettled hedges* |
$ | 3.63 | ||
* Includes only the hedge gains/losses that are accounted for in the fuel expense line; additional
gains/losses on fuel hedges are included in non-operating income / expense.
The actual gain or loss on fuel hedges will be determined based on market prices prevailing at the
end of the quarter.
The table below outlines the Company’s estimated collateral provisions at various crude oil prices,
based on the hedge portfolio as of December 11, 2008:
| Approximate Change in Cash Collateral For Each | ||||
| Price of Crude Oil, in Dollars per Barrel: | $5 per Barrel Change in the Price of Crude Oil | |||
Above $115 |
No Collateral Required | |||
Above $70, but Below $115 |
$70 million | |||
Above $50, but Below $70 |
$65 million | |||
Below $50 |
$50 million | |||
For example, using the table above, at an illustrative $80 per barrel the Company’s required
collateral provision to its derivative counterparties would be approximately $490 million.
The United Building: 77 West Wacker Drive, Chicago, IL 60601
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Non-Operating Income / Expense
The Company estimates that non-operating expense will be between $120 million to $130 million for the quarter, excluding the impact of any fuel hedging gains or losses that may be recorded in the non-operating income / expense line. A portion of the Company’s total hedge impact is recorded in non-operating expense, with the rest recorded in fuel expense. The Company estimates that $222 million in cash fuel hedging losses and $86 million in non-cash net mark-to-market fuel hedging losses will be recorded in non-operating income / expense at the end of the quarter based on December 11th closing forward curve prices. The actual gain or loss will be determined based on market prices prevailing at the end of the quarter.
The Company estimates that non-operating expense will be between $120 million to $130 million for the quarter, excluding the impact of any fuel hedging gains or losses that may be recorded in the non-operating income / expense line. A portion of the Company’s total hedge impact is recorded in non-operating expense, with the rest recorded in fuel expense. The Company estimates that $222 million in cash fuel hedging losses and $86 million in non-cash net mark-to-market fuel hedging losses will be recorded in non-operating income / expense at the end of the quarter based on December 11th closing forward curve prices. The actual gain or loss will be determined based on market prices prevailing at the end of the quarter.
Impairment, Severance and Other Similar Charges
The Company anticipates that it will record accounting charges in the fourth quarter associated with severance, asset impairments, and other charges as a result of its previously announced capacity reductions. At this time, the Company is unable to accurately estimate the amounts of these charges.
The Company anticipates that it will record accounting charges in the fourth quarter associated with severance, asset impairments, and other charges as a result of its previously announced capacity reductions. At this time, the Company is unable to accurately estimate the amounts of these charges.
Liquidity
The Company expects to end the fourth quarter with unrestricted cash, cash equivalents and short-term investments of approximately $2.0 billion, restricted cash of approximately $0.3 billion, and posted fuel hedge collateral of approximately $0.9 billion. The fuel hedge collateral deposit estimates are based on December 11th closing forward curve prices. Actual fuel hedge collateral will be determined based on market prices prevailing at the end of the quarter. The Company is currently pursuing certain additional liquidity initiatives that are expected to close in the first few months of 2009.
The Company expects to end the fourth quarter with unrestricted cash, cash equivalents and short-term investments of approximately $2.0 billion, restricted cash of approximately $0.3 billion, and posted fuel hedge collateral of approximately $0.9 billion. The fuel hedge collateral deposit estimates are based on December 11th closing forward curve prices. Actual fuel hedge collateral will be determined based on market prices prevailing at the end of the quarter. The Company is currently pursuing certain additional liquidity initiatives that are expected to close in the first few months of 2009.
Tax Rate
The Company expects to have an effective income tax rate of zero for the fourth quarter of 2008 and therefore will not record a tax benefit for the quarter.
The Company expects to have an effective income tax rate of zero for the fourth quarter of 2008 and therefore will not record a tax benefit for the quarter.
The United Building: 77 West Wacker Drive, Chicago, IL 60601
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Share Count
Shown below, for illustrative purposes only, are estimated basic and dilutive share counts for the fourth quarter of 2008 and full year 2008. Share counts shown below include the weighted average impact of shares sold through December 16th, 2008 in conjunction with the $200 million equity offering announced by the Company on December 1, 2008. Share counts shown below do not include any shares which may be sold after December 16th, 2008. The calculation of share counts is based on a number of assumptions including, but not limited to, an assumed market stock price, number of shares outstanding and a statutory tax rate of 37%. Actual share counts may be different from those shown below.
Shown below, for illustrative purposes only, are estimated basic and dilutive share counts for the fourth quarter of 2008 and full year 2008. Share counts shown below include the weighted average impact of shares sold through December 16th, 2008 in conjunction with the $200 million equity offering announced by the Company on December 1, 2008. Share counts shown below do not include any shares which may be sold after December 16th, 2008. The calculation of share counts is based on a number of assumptions including, but not limited to, an assumed market stock price, number of shares outstanding and a statutory tax rate of 37%. Actual share counts may be different from those shown below.
| 4Q 2008 | ||||||||||||
| (Estimated) | ||||||||||||
| Basic Share Count | Diluted Share Count | Interest Add-back | ||||||||||
| Net Income | (in millions) | (in millions) | (in millions) | |||||||||
Less than or equal to $0 |
130.9 | 130.9 | $ | — | ||||||||
$1million- $30 million |
130.9 | 131.5 | $ | — | ||||||||
$31 million- $48 million |
130.9 | 153.7 | $ | 5.2 | ||||||||
Greater than $49 million |
130.9 | 157.1 | $ | 6.3 | ||||||||
| Full Year 2008 | ||||||||||||
| (Estimated) | ||||||||||||
| Basic Share Count | Diluted Share Count | Interest Add-back | ||||||||||
| Net Income | (in millions) | (in millions) | (in millions) | |||||||||
Less than or equal to $3 million |
126.6 | 126.6 | $ | — | ||||||||
$4 million -$120 million |
126.6 | 127.0 | $ | — | ||||||||
$121 million |
126.6 | 149.2 | $ | 20.6 | ||||||||
$122 million- $190 million |
126.6 | 152.3 | $ | 20.6 | ||||||||
Greater than $191 million |
126.6 | 155.7 | $ | 25.4 | ||||||||
The United Building: 77 West Wacker Drive, Chicago, IL 60601
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Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Certain
statements included in this investor update 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 that 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 report are based upon information available to us on the date of this report. 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. 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 Amended Credit
Facility and other financing arrangements; the costs and availability of financing; our ability to
maintain adequate liquidity; our ability to execute our operational plans; our ability to realize
benefits from our resource optimization efforts and cost reduction initiative programs; our ability
to utilize our net operating losses; our ability to attract, motivate and/or retain key employees;
our ability to attract and retain customers; demand for transportation in the markets in which we
operate; general economic conditions (including interest rates, foreign currency exchange rates,
investment or credit market conditions, crude oil prices, costs of aviation fuel and 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 aircraft
insurance; the costs associated with security measures and practices; labor costs; industry
consolidation; competitive pressures on pricing and on demand; capacity decisions of United and/or
our competitors; U.S. or foreign governmental legislation, regulation and other actions (including
open skies agreements); our ability to maintain satisfactory labor relations; any disruptions to
operations due to any potential actions by our labor groups; weather conditions; and other risks
and uncertainties set forth under the caption “Risk Factors” in Item 1A. of the 2007 Annual Report,
as well as other risks and uncertainties set forth from time to time in the reports we file with
U.S. Securities and Exchange Commission (“SEC”). Consequently, forward- looking statements should
not be regarded as representations or warranties by UAL or United that such matters will be
realized.
The United Building: 77 West Wacker Drive, Chicago, IL 60601
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Non-GAAP To GAAP Reconciliations
Pursuant to SEC Regulation G, the Company has included the following reconciliation of reported
non-GAAP financial measures to comparable financial measures reported on a GAAP basis. The Company
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. In addition, the Company believes that adjusting for
Mileage Plus accounting changes provides a better comparison to several of its peers as many still
apply the incremental cost method of accounting to their loyalty plans.
| Three Months Ending Dec. 31, 2008 | ||||||||||||||||||||
| Year-over-Year | ||||||||||||||||||||
| Operating expense per ASM CASM* | 2008 Estimate | 2007 | % Change | |||||||||||||||||
| (cents) | Low | High | Actual | Low | High | |||||||||||||||
Mainline operating expense |
14.15 | 14.19 | 12.39 | 14.2 | % | 14.6 | % | |||||||||||||
Less: fuel expense & cost of
third party sales – UAFC |
(5.79 | ) | (5.79 | ) | (4.11 | ) | 40.9 | % | 40.9 | % | ||||||||||
Mainline excluding fuel & UAFC |
8.36 | 8.40 | 8.28 | 1.0 | % | 1.5 | % | |||||||||||||
*
Operating expense per ASM – CASM also excludes the impact of certain primarily
non-cash impairment, severance, and other similar accounting charges. While we anticipate
that we will record such an accounting charge in the fourth quarter, at this time the Company
is unable to accurately estimate the amounts of these charges.
| Three Months Ending Dec. 31, 2008 | ||||||||||||||||||||
| Year-over-Year | ||||||||||||||||||||
| Mainline Passenger Revenue per ASM | 2008 Estimate | 2007 | % Change | |||||||||||||||||
| – PRASM (cents) | Low | High | Actual | Low | High | |||||||||||||||
Mainline passenger revenue |
10.83 | 10.93 | 10.86 | (0.3 | )% | 0.7 | % | |||||||||||||
Plus/(Less): Mileage Plus impacts |
0.16 | 0.16 | (0.14 | ) | — | — | ||||||||||||||
Mainline passenger revenue
excluding Mileage Plus impacts |
10.99 | 11.09 | 10.72 | 2.5 | % | 3.5 | % | |||||||||||||
| Three Months Ending Dec. 31, 2008 | ||||||||||||||||||||
| Year-over-Year | ||||||||||||||||||||
| Consolidated Passenger Revenue per | 2008 Estimate | 2007 | % Change | |||||||||||||||||
| ASM – PRASM (cents) | Low | High | Actual | Low | High | |||||||||||||||
Consolidated passenger revenue |
11.74 | 11.85 | 11.71 | 0.2 | % | 1.2 | % | |||||||||||||
Plus/(Less): Mileage Plus impacts |
0.17 | 0.17 | (0.15 | ) | — | — | ||||||||||||||
Consolidated passenger revenue
excluding Mileage Plus impacts |
11.91 | 12.02 | 11.56 | 3.0 | % | 4.0 | % | |||||||||||||
The United Building: 77 West Wacker Drive, Chicago, IL 60601