UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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): February 28, 2018
UNITED CONTINENTAL HOLDINGS, INC.
UNITED AIRLINES, INC.
(Exact name of registrant as specified in its charter)
| Delaware |
001-06033 | 36-2675207 | ||
| Delaware |
001-10323 | 74-2099724 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification Number) | ||
| 233 S. Wacker Drive, Chicago, IL | 60606 | |||
| 233 S. Wacker Drive, Chicago, IL | 60606 | |||
| (Address of principal executive offices) | (Zip Code) | |||
(872) 825-4000
(872) 825-4000
Registrant’s telephone number, including area code
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 7.01 | Regulation FD Disclosure. |
Starting on January 1, 2018, United Continental Holdings, Inc. (“UAL”), the holding company whose primary subsidiary is United Airlines, Inc. (“United,” and together with UAL, the “Company”) adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“Topic 606”) and Accounting Standards Update No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (“ASU 2017-07”). The Company is furnishing this Form 8-K to present certain previously reported financial information on a basis consistent with the new standards. Beginning with the quarter ending March 31, 2018, the Company’s financial information will reflect the adoption of these standards with prior periods adjusted accordingly. UAL consolidates United for financial statement purposes, with United’s operating revenues and operating expenses comprising nearly 100% of UAL’s revenues and operating expenses. In addition, United comprises approximately the entire balance of UAL’s assets, liabilities and operating cash flows. As a result, the adjustments included in UAL’s Consolidated Balance Sheets (Unaudited) and UAL’s Statements of Consolidated Operations (Unaudited) in Exhibit 99.1, are also applicable to United.
In 2014, the Financial Accounting Standards Board (the “FASB”) amended the FASB Accounting Standards Codification and issued Topic 606. The Company used the full-retrospective approach in adopting this standard. Topic 606 prescribes that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For the Company, the most significant impact of the standard is the reclassification of certain ancillary fees from other operating revenue into passenger revenue on the statement of consolidated operations. These ancillary fees are directly related to passenger travel, such as ticket change fees and baggage fees, and are no longer considered distinct performance obligations separate from the passenger travel component. In addition, the ticket change fees, which were previously recognized when received, are now recognized when transportation is provided. While the classification of certain transactions within operating revenue and between operating revenue and operating expenses changed, the adoption of the standard did not have a material impact on the Company’s earnings. Further, adoption of the standard had no impact on cash provided by or used in operating, financing, or investing activities in the Company’s consolidated cash flows statements. Refer to Exhibit 99.1 for the adjusted financial information, consistent with the new standards, for fiscal year 2017 and 2016.
In 2017, the FASB issued ASU 2017-07. The update requires employers to present the service cost component of the net periodic benefit cost in the same income statement line item as other employee compensation costs arising from services rendered during the period. The other components of net benefit cost, including interest cost, expected return on plan assets, amortization of prior service cost/credit and actuarial gain/loss, and settlement and curtailment effects, are to be presented outside of any subtotal of operating income. The adoption of ASU 2017-07 did not have a material impact on the Company’s consolidated financial statements. Refer to Exhibit 99.1 for the adjusted financial information, consistent with the new standards, for fiscal years 2017 and 2016. Also, see Note 8 to the financial statements included in Part II, Item 8 of UAL’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 for additional information on UAL’s net periodic benefit cost that was used as the basis for the adjustments presented in Exhibit 99.1.
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 (the “Exchange Act”), or otherwise subject to the liabilities of that Section and shall not be deemed to be incorporated by reference into any registration statement or other document filed pursuant to 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 | Certain Financial Information of United Continental Holdings, Inc. | |
SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| UNITED CONTINENTAL HOLDINGS, INC. | ||||
| UNITED AIRLINES, INC. | ||||
| By: |
/s/ Chris Kenny | |||
| Name: | Chris Kenny | |||
| Title: | Vice President and Controller | |||
Date: February 28, 2018
Exhibit 99.1
UNITED CONTINENTAL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In millions, except shares)
The following tables show adjustments made due to the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“Topic 606”) on the December 31, 2017 and 2016 consolidated balance sheets, respectively. Previously reported results were derived from audited financial statements included in United Continental Holdings, Inc.’s (“UAL”) Annual Report on Form 10-K for the fiscal year ended December 31, 2017 and UAL’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, as applicable.
| At December 31, 2017 | ||||||||||||
| ASSETS | As Reported |
Topic 606 Adjustments |
As Adjusted |
|||||||||
| Current assets: |
||||||||||||
| Cash and cash equivalents |
$ | 1,482 | $ | — | $ | 1,482 | ||||||
| Short-term investments |
2,316 | — | 2,316 | |||||||||
| Receivables, less allowance for doubtful accounts ($7) |
1,340 | — | 1,340 | |||||||||
| Aircraft fuel, spare parts and supplies, less obsolescence allowance ($354) |
924 | — | 924 | |||||||||
| Prepaid expenses and other |
1,051 | 20 | 1,071 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total current assets |
7,113 | 20 | 7,133 | |||||||||
|
|
|
|
|
|
|
|||||||
| Operating property and equipment: |
||||||||||||
| Owned— |
||||||||||||
| Flight equipment |
28,692 | — | 28,692 | |||||||||
| Other property and equipment |
6,946 | — | 6,946 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total owned property and equipment |
35,638 | — | 35,638 | |||||||||
| Less—Accumulated depreciation and amortization |
(11,159 | ) | — | (11,159 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Total owned property and equipment, net |
24,479 | — | 24,479 | |||||||||
|
|
|
|
|
|
|
|||||||
| Purchase deposits for flight equipment |
1,344 | — | 1,344 | |||||||||
| Capital leases— |
||||||||||||
| Flight equipment |
1,151 | — | 1,151 | |||||||||
| Other property and equipment |
11 | — | 11 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total capital leases |
1,162 | — | 1,162 | |||||||||
| Less—Accumulated amortization |
(777 | ) | — | (777 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Total capital leases, net |
385 | — | 385 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total operating property and equipment, net |
26,208 | — | 26,208 | |||||||||
|
|
|
|
|
|
|
|||||||
| Other assets: |
||||||||||||
| Goodwill |
4,523 | — | 4,523 | |||||||||
| Intangibles, less accumulated amortization ($1,313) |
3,539 | — | 3,539 | |||||||||
| Restricted cash |
91 | — | 91 | |||||||||
| Investments in affiliates and other, net |
852 | — | 852 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total other assets |
9,005 | — | 9,005 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total assets |
$ | 42,326 | $ | 20 | $ | 42,346 | ||||||
|
|
|
|
|
|
|
|||||||
UNITED CONTINENTAL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In millions, except shares)
| At December 31, 2017 | ||||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | As Reported |
Topic 606 Adjustments |
As Adjusted |
|||||||||
| Current liabilities: |
||||||||||||
| Advance ticket sales |
$ | 3,876 | $ | 64 | $ | 3,940 | ||||||
| Frequent flyer deferred revenue |
2,176 | 16 | 2,192 | |||||||||
| Accounts payable |
2,196 | — | 2,196 | |||||||||
| Accrued salaries and benefits |
2,166 | — | 2,166 | |||||||||
| Current maturities of long-term debt |
1,565 | — | 1,565 | |||||||||
| Current maturities of capital leases |
128 | — | 128 | |||||||||
| Other |
569 | 7 | 576 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total current liabilities |
12,676 | 87 | 12,763 | |||||||||
|
|
|
|
|
|
|
|||||||
| Long-term debt |
11,703 | — | 11,703 | |||||||||
| Long-term obligations under capital leases |
996 | — | 996 | |||||||||
| Other liabilities and deferred credits: |
||||||||||||
| Frequent flyer deferred revenue |
2,565 | 26 | 2,591 | |||||||||
| Postretirement benefit liability |
1,602 | — | 1,602 | |||||||||
| Pension liability |
1,921 | — | 1,921 | |||||||||
| Advanced purchase of miles |
— | — | — | |||||||||
| Deferred income taxes |
225 | (21 | ) | 204 | ||||||||
| Lease fair value adjustment, net |
198 | — | 198 | |||||||||
| Other |
1,634 | — | 1,634 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total other liabilities and deferred credits |
8,145 | 5 | 8,150 | |||||||||
|
|
|
|
|
|
|
|||||||
| Commitments and contingencies |
||||||||||||
| Stockholders’ equity: |
||||||||||||
| Preferred stock |
— | — | — | |||||||||
| Common stock at par, $0.01 par value; authorized 1,000,000,000 shares; outstanding 286,973,195 shares at December 31, 2017 |
3 | — | 3 | |||||||||
| Additional capital invested |
6,098 | — | 6,098 | |||||||||
| Retained earnings |
4,621 | (72 | ) | 4,549 | ||||||||
| Stock held in treasury, at cost |
(769 | ) | — | (769 | ) | |||||||
| Accumulated other comprehensive loss |
(1,147 | ) | — | (1,147 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Total stockholders’ equity |
8,806 | (72 | ) | 8,734 | ||||||||
|
|
|
|
|
|
|
|||||||
| Total liabilities and stockholders’ equity |
$ | 42,326 | $ | 20 | $ | 42,346 | ||||||
|
|
|
|
|
|
|
|||||||
2
UNITED CONTINENTAL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In millions, except shares)
| At December 31, 2016 | ||||||||||||
| ASSETS | As Reported |
Topic 606 Adjustments |
As Adjusted |
|||||||||
| Current assets: |
||||||||||||
| Cash and cash equivalents |
$ | 2,179 | $ | — | $ | 2,179 | ||||||
| Short-term investments |
2,249 | — | 2,249 | |||||||||
| Receivables, less allowance for doubtful accounts ($10) |
1,176 | — | 1,176 | |||||||||
| Aircraft fuel, spare parts and supplies, less obsolescence allowance ($295) |
873 | — | 873 | |||||||||
| Prepaid expenses and other |
832 | 20 | 852 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total current assets |
7,309 | 20 | 7,329 | |||||||||
|
|
|
|
|
|
|
|||||||
| Operating property and equipment: |
||||||||||||
| Owned— |
||||||||||||
| Flight equipment |
25,873 | — | 25,873 | |||||||||
| Other property and equipment |
5,652 | — | 5,652 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total owned property and equipment |
31,525 | — | 31,525 | |||||||||
| Less—Accumulated depreciation and amortization |
(9,975 | ) | — | (9,975 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Total owned property and equipment, net |
21,550 | — | 21,550 | |||||||||
|
|
|
|
|
|
|
|||||||
| Purchase deposits for flight equipment |
1,059 | — | 1,059 | |||||||||
| Capital leases— |
||||||||||||
| Flight equipment |
1,319 | — | 1,319 | |||||||||
| Other property and equipment |
331 | — | 331 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total capital leases |
1,650 | — | 1,650 | |||||||||
| Less—Accumulated amortization |
(941 | ) | — | (941 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Total capital leases, net |
709 | — | 709 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total operating property and equipment, net |
23,318 | — | 23,318 | |||||||||
|
|
|
|
|
|
|
|||||||
| Other assets: |
||||||||||||
| Goodwill |
4,523 | — | 4,523 | |||||||||
| Intangibles, less accumulated amortization ($1,234) |
3,632 | — | 3,632 | |||||||||
| Deferred income taxes |
655 | 48 | 703 | |||||||||
| Restricted cash |
124 | — | 124 | |||||||||
| Investments in affiliates and other, net |
579 | — | 579 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total other assets |
9,513 | 48 | 9,561 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total assets |
$ | 40,140 | $ | 68 | $ | 40,208 | ||||||
|
|
|
|
|
|
|
|||||||
3
UNITED CONTINENTAL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In millions, except shares)
| At December 31, 2016 | ||||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | As Reported |
Topic 606 Adjustments |
As Adjusted |
|||||||||
| Current liabilities: |
||||||||||||
| Advance ticket sales |
$ | 3,730 | $ | 65 | $ | 3,795 | ||||||
| Frequent flyer deferred revenue |
2,135 | 14 | 2,149 | |||||||||
| Accounts payable |
2,139 | — | 2,139 | |||||||||
| Accrued salaries and benefits |
2,307 | — | 2,307 | |||||||||
| Current maturities of long-term debt |
849 | — | 849 | |||||||||
| Current maturities of capital leases |
116 | — | 116 | |||||||||
| Other |
1,010 | 79 | 1,089 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total current liabilities |
12,286 | 158 | 12,444 | |||||||||
|
|
|
|
|
|
|
|||||||
| Long-term debt |
9,918 | — | 9,918 | |||||||||
| Long-term obligations under capital leases |
822 | — | 822 | |||||||||
| Other liabilities and deferred credits: |
||||||||||||
| Frequent flyer deferred revenue |
2,748 | (8 | ) | 2,740 | ||||||||
| Postretirement benefit liability |
1,581 | — | 1,581 | |||||||||
| Pension liability |
1,892 | — | 1,892 | |||||||||
| Advanced purchase of miles |
430 | 3 | 433 | |||||||||
| Lease fair value adjustment, net |
277 | — | 277 | |||||||||
| Other |
1,527 | — | 1,527 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total other liabilities and deferred credits |
8,455 | (5 | ) | 8,450 | ||||||||
|
|
|
|
|
|
|
|||||||
| Commitments and contingencies |
||||||||||||
| Stockholders’ equity: |
||||||||||||
| Preferred stock |
— | — | — | |||||||||
| Common stock at par, $0.01 par value; authorized 1,000,000,000 shares; outstanding 314,612,744 shares at December 31, 2016 |
3 | — | 3 | |||||||||
| Additional capital invested |
6,569 | — | 6,569 | |||||||||
| Retained earnings |
3,427 | (85 | ) | 3,342 | ||||||||
| Stock held in treasury, at cost |
(511 | ) | — | (511 | ) | |||||||
| Accumulated other comprehensive loss |
(829 | ) | — | (829 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Total stockholders’ equity |
8,659 | (85 | ) | 8,574 | ||||||||
|
|
|
|
|
|
|
|||||||
| Total liabilities and stockholders’ equity |
$ | 40,140 | $ | 68 | $ | 40,208 | ||||||
|
|
|
|
|
|
|
|||||||
4
UNITED CONTINENTAL HOLDINGS, INC.
STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
(In millions, except per share amounts)
The following tables show adjustments made due to the adoption of Topic 606 and Accounting Standards Update No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (“ASU 2017-07”) on the December 31, 2017 and 2016 statements of consolidated operations, respectively. Previously reported results were derived from audited financial statements included in UAL’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 and UAL’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, as applicable.
| Year ended December 31, 2017 | ||||||||||||||||
| As Reported |
Topic 606 Adjustments |
ASU 2017-07 Adjustments |
As Adjusted |
|||||||||||||
| Operating revenue: |
||||||||||||||||
| Passenger revenue |
$ | 32,404 | $ | 2,056 | $ | — | $ | 34,460 | ||||||||
| Cargo |
1,035 | 79 | — | 1,114 | ||||||||||||
| Other operating revenue |
4,297 | (2,087 | ) | — | 2,210 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total operating revenue |
37,736 | 48 | — | 37,784 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating expense: |
||||||||||||||||
| Salaries and related costs |
11,045 | — | (104 | ) | 10,941 | |||||||||||
| Aircraft fuel |
6,913 | — | — | 6,913 | ||||||||||||
| Landing fees and other rent |
2,240 | — | — | 2,240 | ||||||||||||
| Regional capacity purchase |
2,232 | — | — | 2,232 | ||||||||||||
| Depreciation and amortization |
2,149 | — | — | 2,149 | ||||||||||||
| Aircraft maintenance materials and outside repairs |
1,856 | — | — | 1,856 | ||||||||||||
| Distribution expenses |
1,349 | 86 | — | 1,435 | ||||||||||||
| Aircraft rent |
621 | — | — | 621 | ||||||||||||
| Special charges |
176 | — | — | 176 | ||||||||||||
| Other operating expenses |
5,657 | (107 | ) | — | 5,550 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total operating expenses |
34,238 | (21 | ) | (104 | ) | 34,113 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating income |
3,498 | 69 | 104 | 3,671 | ||||||||||||
| Nonoperating income (expense): |
||||||||||||||||
| Interest expense |
(643 | ) | (28 | ) | — | (671 | ) | |||||||||
| Interest capitalized |
84 | — | — | 84 | ||||||||||||
| Interest income |
57 | — | — | 57 | ||||||||||||
| Miscellaneous, net |
3 | — | (104 | ) | (101 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total nonoperating expense, net |
(499 | ) | (28 | ) | (104 | ) | (631 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income before income taxes |
2,999 | 41 | — | 3,040 | ||||||||||||
| Income tax expense |
868 | 28 | — | 896 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income |
$ | 2,131 | $ | 13 | $ | — | $ | 2,144 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Earnings per share, basic |
$ | 7.04 | $ | 0.04 | $ | — | $ | 7.08 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Earnings per share, diluted |
$ | 7.02 | $ | 0.04 | $ | — | $ | 7.06 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
5
UNITED CONTINENTAL HOLDINGS, INC.
STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
(In millions, except per share amounts)
| Year ended December 31, 2016 | ||||||||||||||||
| As Reported |
Topic 606 Adjustments |
ASU 2017-07 Adjustments |
As Adjusted |
|||||||||||||
| Operating revenue: |
||||||||||||||||
| Passenger revenue |
$ | 31,457 | $ | 1,972 | $ | — | $ | 33,429 | ||||||||
| Cargo |
876 | 58 | — | 934 | ||||||||||||
| Other operating revenue |
4,223 | (2,028 | ) | — | 2,195 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total operating revenue |
36,556 | 2 | — | 36,558 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating expense: |
||||||||||||||||
| Salaries and related costs |
10,275 | — | (99 | ) | 10,176 | |||||||||||
| Aircraft fuel |
5,813 | — | — | 5,813 | ||||||||||||
| Landing fees and other rent |
2,165 | — | — | 2,165 | ||||||||||||
| Regional capacity purchase |
2,197 | — | — | 2,197 | ||||||||||||
| Depreciation and amortization |
1,977 | — | — | 1,977 | ||||||||||||
| Aircraft maintenance materials and outside repairs |
1,749 | — | — | 1,749 | ||||||||||||
| Distribution expenses |
1,303 | 92 | — | 1,395 | ||||||||||||
| Aircraft rent |
680 | — | — | 680 | ||||||||||||
| Special charges |
638 | — | 107 | 745 | ||||||||||||
| Other operating expenses |
5,421 | (104 | ) | — | 5,317 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total operating expenses |
32,218 | (12 | ) | 8 | 32,214 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating income |
4,338 | 14 | (8 | ) | 4,344 | |||||||||||
| Nonoperating income (expense): |
||||||||||||||||
| Interest expense |
(614 | ) | (60 | ) | — | (674 | ) | |||||||||
| Interest capitalized |
72 | — | — | 72 | ||||||||||||
| Interest income |
42 | — | — | 42 | ||||||||||||
| Miscellaneous, net |
(19 | ) | — | 8 | (11 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total nonoperating expense, net |
(519 | ) | (60 | ) | 8 | (571 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income before income taxes |
3,819 | (46 | ) | — | 3,773 | |||||||||||
| Income tax expense |
1,556 | (17 | ) | — | 1,539 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income |
$ | 2,263 | $ | (29 | ) | $ | — | $ | 2,234 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Earnings per share, basic |
$ | 6.86 | $ | (0.09 | ) | $ | — | $ | 6.77 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Earnings per share, diluted |
$ | 6.85 | $ | (0.09 | ) | $ | — | $ | 6.76 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
6
UNITED CONTINENTAL HOLDINGS, INC.
QUARTERLY STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
(In millions, except per share amounts)
The following table shows adjusted balances after the adoption of Topic 606 and ASU 2017-07 on the quarterly statements of consolidated operations for each quarter of 2017.
| As Adjusted for Topic 606 and ASU 2017-07 | ||||||||||||||||
| For the Quarter Ended | ||||||||||||||||
| March 31, 2017 |
June 30, 2017 |
September 30, 2017 |
December 31, 2017 |
|||||||||||||
| Operating revenue: |
||||||||||||||||
| Passenger revenue |
$ | 7,653 | $ | 9,151 | $ | 9,069 | $ | 8,587 | ||||||||
| Cargo |
238 | 273 | 279 | 324 | ||||||||||||
| Other operating revenue |
535 | 584 | 551 | 540 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total operating revenue |
8,426 | 10,008 | 9,899 | 9,451 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating expense: |
||||||||||||||||
| Salaries and related costs |
2,636 | 2,842 | 2,785 | 2,678 | ||||||||||||
| Aircraft fuel |
1,560 | 1,669 | 1,809 | 1,875 | ||||||||||||
| Landing fees and other rent |
544 | 541 | 585 | 570 | ||||||||||||
| Regional capacity purchase |
536 | 549 | 567 | 580 | ||||||||||||
| Depreciation and amortization |
518 | 536 | 556 | 539 | ||||||||||||
| Aircraft maintenance materials and outside repairs |
454 | 472 | 451 | 479 | ||||||||||||
| Distribution expenses |
319 | 385 | 377 | 354 | ||||||||||||
| Aircraft rent |
179 | 152 | 145 | 145 | ||||||||||||
| Special charges |
51 | 44 | 50 | 31 | ||||||||||||
| Other operating expenses |
1,309 | 1,381 | 1,436 | 1,424 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total operating expenses |
8,106 | 8,571 | 8,761 | 8,675 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating income |
320 | 1,437 | 1,138 | 776 | ||||||||||||
| Nonoperating income (expense): |
||||||||||||||||
| Interest expense |
(162 | ) | (167 | ) | (169 | ) | (173 | ) | ||||||||
| Interest capitalized |
23 | 21 | 20 | 20 | ||||||||||||
| Interest income |
11 | 13 | 17 | 16 | ||||||||||||
| Miscellaneous, net |
(42 | ) | (27 | ) | (13 | ) | (19 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total nonoperating expense, net |
(170 | ) | (160 | ) | (145 | ) | (156 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income before income taxes |
150 | 1,277 | 993 | 620 | ||||||||||||
| Income tax expense |
51 | 456 | 348 | 41 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income |
$ | 99 | $ | 821 | $ | 645 | $ | 579 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Earnings per share, basic |
$ | 0.32 | $ | 2.67 | $ | 2.15 | $ | 1.99 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Earnings per share, diluted |
$ | 0.32 | $ | 2.67 | $ | 2.15 | $ | 1.98 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
7
UNITED CONTINENTAL HOLDINGS, INC.
QUARTERLY ADJUSTMENTS TO THE STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
(In millions, except per share amounts)
The following table shows quarterly adjustments made due to the adoption of Topic 606 and ASU 2017-07 on the statements of consolidated operations for 2017.
|
|
Adjustments, For the Quarter Ended |
|
||||||||||||||||||||||
| Full Year 2017 As Reported |
March 31, 2017 |
June 30, 2017 |
September 30, 2017 |
December 31, 2017 |
Full Year 2017 As Adjusted |
|||||||||||||||||||
| Operating revenue: |
||||||||||||||||||||||||
| Passenger revenue |
$ | 32,404 | $ | 479 | $ | 529 | $ | 541 | $ | 507 | $ | 34,460 | ||||||||||||
| Cargo |
1,035 | 18 | 19 | 22 | 20 | 1,114 | ||||||||||||||||||
| Other operating revenue |
4,297 | (491 | ) | (540 | ) | (542 | ) | (514 | ) | 2,210 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total operating revenue |
37,736 | 6 | 8 | 21 | 13 | 37,784 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Operating expense: |
||||||||||||||||||||||||
| Salaries and related costs |
11,045 | (25 | ) | (26 | ) | (27 | ) | (26 | ) | 10,941 | ||||||||||||||
| Aircraft fuel |
6,913 | — | — | — | — | 6,913 | ||||||||||||||||||
| Landing fees and other rent |
2,240 | — | — | — | — | 2,240 | ||||||||||||||||||
| Regional capacity purchase |
2,232 | — | — | — | — | 2,232 | ||||||||||||||||||
| Depreciation and amortization |
2,149 | — | — | — | — | 2,149 | ||||||||||||||||||
| Aircraft maintenance materials and outside repairs |
1,856 | — | — | — | — | 1,856 | ||||||||||||||||||
| Distribution expenses |
1,349 | 12 | 23 | 25 | 26 | 1,435 | ||||||||||||||||||
| Aircraft rent |
621 | — | — | — | — | 621 | ||||||||||||||||||
| Special charges |
176 | — | — | — | — | 176 | ||||||||||||||||||
| Other operating expenses |
5,657 | (23 | ) | (27 | ) | (23 | ) | (34 | ) | 5,550 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total operating expenses |
34,238 | (36 | ) | (30 | ) | (25 | ) | (34 | ) | 34,113 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Operating income |
3,498 | 42 | 38 | 46 | 47 | 3,671 | ||||||||||||||||||
| Nonoperating income (expense): |
||||||||||||||||||||||||
| Interest expense |
(643 | ) | (12 | ) | (9 | ) | (5 | ) | (2 | ) | (671 | ) | ||||||||||||
| Interest capitalized |
84 | — | — | — | — | 84 | ||||||||||||||||||
| Interest income |
57 | — | — | — | — | 57 | ||||||||||||||||||
| Miscellaneous, net |
3 | (25 | ) | (26 | ) | (28 | ) | (25 | ) | (101 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total nonoperating expense, net |
(499 | ) | (37 | ) | (35 | ) | (33 | ) | (27 | ) | (631 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income before income taxes |
2,999 | 5 | 3 | 13 | 20 | 3,040 | ||||||||||||||||||
| Income tax expense |
868 | 2 | — | 5 | 21 | 896 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net income |
$ | 2,131 | $ | 3 | $ | 3 | $ | 8 | $ | (1 | ) | $ | 2,144 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Earnings per share, basic |
$ | 7.04 | $ | 0.01 | $ | — | $ | 0.03 | $ | — | $ | 7.08 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Earnings per share, diluted |
$ | 7.02 | $ | 0.01 | $ | 0.01 | $ | 0.03 | $ | (0.01 | ) | $ | 7.06 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
8
UNITED CONTINENTAL HOLDINGS, INC.
SELECTED STATISTICS AND SUMMARY FINANCIAL METRICS (UNAUDITED)
The following table shows selected statistics and summary financial metrics after the adoption of Topic 606 and ASU 2017-07 for each quarter of 2017 and for the full year, 2017 and 2016, respectively.
| As Adjusted for Topic 606 and ASU 2017-07 | ||||||||||||||||||||||||
| Quarter Ended | Full Year | |||||||||||||||||||||||
| March 31, 2017 |
June 30, 2017 |
September 30, 2017 |
December 31, 2017 |
2017 | 2016 | |||||||||||||||||||
| Consolidated: |
||||||||||||||||||||||||
| Operating margin |
3.8 | % | 14.4 | % | 11.5 | % | 8.2 | % | 9.7 | % | 11.9 | % | ||||||||||||
| Operating margin, excluding special charges (Non-GAAP) (A) |
4.4 | % | 14.8 | % | 12.0 | % | 8.5 | % | 10.2 | % | 13.9 | % | ||||||||||||
| Pre-tax margin |
1.8 | % | 12.8 | % | 10.0 | % | 6.6 | % | 8.0 | % | 10.3 | % | ||||||||||||
| Pre-tax margin excluding special charges and hedge adjustments (Non-GAAP) (A) |
2.4 | % | 13.2 | % | 10.5 | % | 6.9 | % | 8.5 | % | 12.1 | % | ||||||||||||
| Passengers (thousands) (a) |
33,105 | 38,247 | 39,302 | 37,413 | 148,067 | 143,177 | ||||||||||||||||||
| Revenue passenger miles (millions) (b) |
47,611 | 56,356 | 59,145 | 53,149 | 216,261 | 210,309 | ||||||||||||||||||
| Available seat miles (millions) (c) |
59,808 | 67,467 | 70,083 | 65,028 | 262,386 | 253,590 | ||||||||||||||||||
| Passenger revenue per available seat mile (cents) |
12.80 | 13.56 | 12.94 | 13.21 | 13.13 | 13.18 | ||||||||||||||||||
| Total revenue per available seat mile (cents) |
14.09 | 14.83 | 14.12 | 14.53 | 14.40 | 14.42 | ||||||||||||||||||
| Average yield per revenue passenger mile (cents) (d) |
16.07 | 16.24 | 15.33 | 16.16 | 15.93 | 15.90 | ||||||||||||||||||
(a) The number of revenue passengers measured by each flight segment flown.
(b) The number of scheduled miles flown by revenue passengers.
(c) The number of seats available for passengers multiplied by the number of scheduled miles those seats are flown.
(d) The average passenger revenue received for each revenue passenger mile flown.
9
UNITED CONTINENTAL HOLDINGS, INC.
PASSENGER REVENUE BY GEOGRAPHY (UNAUDITED)
(In millions)
The following table shows adjusted quarterly passenger revenue by geography after the adoption of Topic 606 for each quarter of 2017 and for the full year, 2017 and 2016, respectively.
| As Adjusted for Topic 606 | ||||||||||||||||||||||||
| Quarter Ended | Full Year | |||||||||||||||||||||||
| March 31, 2017 |
June 30, 2017 |
September 30, 2017 |
December 31, 2017 |
2017 | 2016 | |||||||||||||||||||
| Mainline |
$ | 3,272 | $ | 4,043 | $ | 3,952 | $ | 3,862 | $ | 15,129 | $ | 14,073 | ||||||||||||
| Regional |
1,379 | 1,615 | 1,491 | 1,537 | 6,022 | 6,193 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Domestic |
4,651 | 5,658 | 5,443 | 5,399 | 21,151 | 20,266 | ||||||||||||||||||
| Atlantic |
1,117 | 1,615 | 1,724 | 1,400 | 5,856 | 5,739 | ||||||||||||||||||
| Pacific |
1,053 | 1,064 | 1,125 | 1,047 | 4,289 | 4,433 | ||||||||||||||||||
| Latin America |
832 | 814 | 777 | 741 | 3,164 | 2,991 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| International |
3,002 | 3,493 | 3,626 | 3,188 | 13,309 | 13,163 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Consolidated |
$ | 7,653 | $ | 9,151 | $ | 9,069 | $ | 8,587 | $ | 34,460 | $ | 33,429 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Mainline |
$ | 6,227 | $ | 7,492 | $ | 7,538 | $ | 7,002 | $ | 28,259 | $ | 27,029 | ||||||||||||
| Regional |
1,426 | 1,659 | 1,531 | 1,585 | 6,201 | 6,400 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Consolidated |
$ | 7,653 | $ | 9,151 | $ | 9,069 | $ | 8,587 | $ | 34,460 | $ | 33,429 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
10
UNITED CONTINENTAL HOLDINGS, INC.
NON-GAAP FINANCIAL RECONCILIATION (UNAUDITED)
(A) UAL evaluates its financial performance utilizing various accounting principles generally accepted in the United States of America (“GAAP”) and Non-GAAP financial measures, including operating margin, excluding special charges, pre-tax margin, excluding special charges and hedge adjustments, operating income (loss) excluding special charges, operating expenses, excluding fuel, profit sharing, special charges and third-party business expenses, income (loss) before income taxes excluding special charges and reflecting hedge adjustments, net income (loss) excluding special charges and reflecting hedge adjustments and income tax adjustments, net earnings (loss) per share excluding special charges and income tax adjustments and reflecting hedge adjustments, and consolidated unit cost per available seat mile (“CASM”), excluding special charges, third-party business expenses, fuel and profit sharing, among others.
CASM is a common metric used in the airline industry to measure an airline’s cost structure and efficiency. UAL reports CASM excluding special charges, third-party business expenses, fuel and profit sharing. UAL believes that adjusting for special charges is useful to investors because special charges are non-recurring charges not indicative of UAL’s ongoing 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. UAL also 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 excludes profit sharing because this exclusion allows investors to better understand and analyze UAL’s recurring cost performance and provides a more meaningful comparison of UAL’s core operating costs to the airline industry. In addition, UAL believes that adjusting for prior period gains and losses on fuel derivative contracts settled in the current period is useful because the adjustments allow investors to better understand the cash impact of settled fuel derivative contracts in a given period.
The following tables show adjusted reconciliations of certain previously reported Non-GAAP financial measures to comparable financial measures reported on a GAAP basis after the adoption of Topic 606 and ASU 2017-07 for each quarter of 2017 and for the full year, 2017 and 2016, respectively.
| As Adjusted for Topic 606 and ASU 2017-07 | ||||||||||||||||||||||||
| Quarter Ended | Full Year | |||||||||||||||||||||||
| March 31, 2017 |
June 30, 2017 |
September 30, 2017 |
December 31, 2017 |
2017 | 2016 | |||||||||||||||||||
| CASM Mainline Operations (cents) |
||||||||||||||||||||||||
| Cost per available seat mile (CASM) |
13.15 | 12.27 | 11.98 | 12.83 | 12.53 | 12.21 | ||||||||||||||||||
| Special charges |
0.09 | 0.07 | 0.08 | 0.06 | 0.07 | 0.33 | ||||||||||||||||||
| Third-party business expenses |
0.09 | 0.07 | 0.05 | 0.04 | 0.06 | 0.06 | ||||||||||||||||||
| Fuel expense |
2.44 | 2.32 | 2.41 | 2.68 | 2.46 | 2.16 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| CASM, excluding special charges, third-party business expenses and fuel | 10.53 | 9.81 | 9.44 | 10.05 | 9.94 | 9.66 | ||||||||||||||||||
| Profit sharing per available seat mile |
0.03 | 0.25 | 0.21 | 0.08 | 0.15 | 0.28 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| CASM, excluding special charges, third-party business expenses, fuel, and profit sharing | 10.50 | 9.56 | 9.23 | 9.97 | 9.79 | 9.38 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| CASM Consolidated Operations (cents) |
||||||||||||||||||||||||
| Cost per available seat mile (CASM) |
13.55 | 12.70 | 12.50 | 13.34 | 13.00 | 12.70 | ||||||||||||||||||
| Special charges |
0.08 | 0.07 | 0.07 | 0.04 | 0.07 | 0.29 | ||||||||||||||||||
| Third-party business expenses |
0.07 | 0.05 | 0.04 | 0.06 | 0.05 | 0.05 | ||||||||||||||||||
| Fuel expense |
2.60 | 2.47 | 2.58 | 2.88 | 2.64 | 2.29 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| CASM, excluding special charges, third-party business expenses and fuel | 10.80 | 10.11 | 9.81 | 10.36 | 10.24 | 10.07 | ||||||||||||||||||
| Profit sharing per available seat mile |
0.04 | 0.23 | 0.19 | 0.07 | 0.13 | 0.25 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| CASM, excluding special charges, third-party business expenses, fuel, and profit sharing | 10.76 | 9.88 | 9.62 | 10.29 | 10.11 | 9.82 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
11
UNITED CONTINENTAL HOLDINGS, INC.
NON-GAAP FINANCIAL RECONCILIATION (UNAUDITED)
(In millions, except per share amounts)
| As Adjusted for Topic 606 and ASU 2017-07 | ||||||||||||||||||||||||
| Quarter Ended | Full Year | |||||||||||||||||||||||
| March 31, 2017 |
June 30, 2017 |
September 30, 2017 |
December 31, 2017 |
2017 | 2016 | |||||||||||||||||||
| Operating expenses |
$ | 8,106 | $ | 8,571 | $ | 8,761 | $ | 8,675 | $ | 34,113 | $ | 32,214 | ||||||||||||
| Special charges |
51 | 44 | 50 | 31 | 176 | 745 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Operating expenses, excluding special charges |
8,055 | 8,527 | 8,711 | 8,644 | 33,937 | 31,469 | ||||||||||||||||||
| Third-party business expenses |
40 | 41 | 33 | 31 | 145 | 136 | ||||||||||||||||||
| Fuel expense |
1,560 | 1,669 | 1,809 | 1,875 | 6,913 | 5,813 | ||||||||||||||||||
| Profit sharing, including taxes |
20 | 154 | 130 | 45 | 349 | 628 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Operating expenses, excluding fuel, profit sharing, special charges and third-party business expenses |
$ | 6,435 | $ | 6,663 | $ | 6,739 | $ | 6,693 | $ | 26,530 | $ | 24,892 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Operating income |
$ | 320 | $ | 1,437 | $ | 1,138 | $ | 776 | $ | 3,671 | $ | 4,344 | ||||||||||||
| Special charges |
51 | 44 | 50 | 31 | 176 | 745 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Operating income, excluding special charges |
$ | 371 | $ | 1,481 | $ | 1,188 | $ | 807 | $ | 3,847 | $ | 5,089 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income before income taxes |
$ | 150 | $ | 1,277 | $ | 993 | $ | 620 | $ | 3,040 | $ | 3,773 | ||||||||||||
| Special charges and hedge adjustments before income taxes |
51 | 44 | 50 | 31 | 176 | 643 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income before income taxes excluding special charges and reflecting hedge adjustments |
$ | 201 | $ | 1,321 | $ | 1,043 | $ | 651 | $ | 3,216 | $ | 4,416 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net income |
$ | 99 | $ | 821 | $ | 645 | $ | 579 | $ | 2,144 | $ | 2,234 | ||||||||||||
| Special charges and hedge adjustments, net of tax and income tax adjustments |
33 | 28 | 32 | (159 | ) | (66 | ) | 594 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
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| Net income, excluding special charges and reflecting hedge adjustments and income tax adjustments |
$ | 132 | $ | 849 | $ | 677 | $ | 420 | $ | 2,078 | $ | 2,828 | ||||||||||||
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| Diluted earnings per share |
$ | 0.32 | $ | 2.67 | $ | 2.15 | $ | 1.98 | $ | 7.06 | $ | 6.76 | ||||||||||||
| Special charges and hedge adjustments |
0.16 | 0.14 | 0.16 | 0.11 | 0.58 | 1.95 | ||||||||||||||||||
| Income tax adjustments and tax effect related to special charges and hedge adjustments |
(0.06 | ) | (0.05 | ) | (0.06 | ) | (0.65 | ) | (0.80 | ) | (0.15 | ) | ||||||||||||
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| Diluted earnings per share, excluding special charges and income tax adjustments and reflecting hedge adjustments |
$ | 0.42 | $ | 2.76 | $ | 2.25 | $ | 1.44 | $ | 6.84 | $ | 8.56 | ||||||||||||
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