Form 8-K

 

 

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): September 5, 2012

 

 

UNITED CONTINENTAL HOLDINGS, INC.

UNITED AIR LINES, INC.

CONTINENTAL AIRLINES, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-06033   36-2675207
Delaware   001-11355   36-2675206
Delaware   001-10323   74-2099724

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification Number)

 

77 W. Wacker Drive, Chicago, IL   60601
77 W. Wacker Drive, Chicago, IL   60601
1600 Smith Street, Dept. HQSEO, Houston, Texas   77002
(Address of principal executive offices)   (Zip Code)

(312) 997-8000

(312) 997-8000

(713) 324-2950

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 8-K filing is intended to simultaneously satisfy the filing obligation 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))

 

 

 


Item 7.01 Regulation FD Disclosure.

John D. Rainey, Executive Vice President and Chief Financial Officer of United Continental Holdings, Inc., the holding company whose primary subsidiaries are United Air Lines, Inc. and Continental Airlines, Inc., will speak at the 2012 Dahlman Rose Global Transportation Conference on Wednesday, September 5, 2012. Attached hereto as Exhibit 99.1 are slides that will be presented at that time.

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*    United Continental Holdings, Inc. slide presentation delivered on September 5, 2012

 

* Furnished herewith electronically.


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.

 

UNITED CONTINENTAL HOLDINGS, INC.

UNITED AIR LINES, INC.

CONTINENTAL AIRLINES, INC.

By:   /s/ Brett J. Hart
Name:   Brett J. Hart
Title:   Executive Vice President, General Counsel and Secretary

Date: September 5, 2012


EXHIBIT INDEX

 

Exhibit No.

  

Description

99.1*    United Continental Holdings, Inc. slide presentation delivered on September 5, 2012

 

* Furnished herewith electronically.
Slide Presentation
Dahlman Rose Global
Transportation
Conference
United Continental
Holdings, Inc.
September 5, 2012
Exhibit 99.1


John Rainey
Executive Vice President and Chief Financial
Officer


Safe Harbor Statement
Certain statements included in this presentation 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 presentation are based upon information
available to us on the date of this presentation. 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 aircraft fuel and energy refining capacity in
relevant markets); our ability to cost-effectively hedge against increases in the price of aircraft 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 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 the Company’s 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.
3
3


United is transforming
We are building a new airline
Broad, business-centric network
Capacity discipline and business flexibility
Investing in our people, customers,
products and technology
Creating economic value over the
business cycle
4
Strengthening the balance sheet


Managing the business to create long-term shareholder
value
5
Earnings
Stability
Earnings
Expansion
Improve
Capital
Structure
Creating Long-Term Shareholder Value


6
Earnings
Stability
Earnings
Expansion
Improve
Capital
Structure
Creating Long-Term Shareholder Value


The world’s best network
Serving the most destinations of any global carrier
Hubs in the four largest U.S. cities
50 of Fortune 100 companies headquartered in hubs
Rankings for US carriers by ASMs as of 2011
Source: Earnings releases and SEC filings
7
Best Network for Business Customers


8
Note: Rolling consolidated capacity for prior twelve months; industry includes AMR, DAL, LUV and LCC; capacity proforma for merged  carriers
Source: Earnings releases and SEC filings
(10%)
(5%)
0%
5%
4Q09
4Q08
4Q07
4Q06
4Q10
Industry
ex-UAL
2Q12
4Q11
Maintaining capacity discipline is core to our long-term
success


Source: SEC filings and investor updates
Further reducing capacity in response to economic outlook
Reduced FY 2012 consolidated
capacity twice since start of the
year
Expect FY 2012 consolidated
capacity of (0.75%) to (1.75%)
year-over-year
September –
December 2012
Consolidated Capacity Guidance
Year-over-Year % Change in ASMs
Current
Guidance
Original
Guidance
(2.0%)
(3.0%)
Previously
Updated
Guidance
(1.0%)
(2.0%)
9
(0.5%)
0.5%


ROIC goal of 10% over the business cycle
Return on Invested Capital
10
Note: Results prior to 4Q 2010 pro forma; ROIC calculation available in Appendix A and on our website: http//:ir.united.com
Source: SEC filings
1. Source: Kiodex –
Platts US Gulf Coast Jet
10.3%
11.3%
7%
8%
9%
10%
11%
12%
13%
14%
TME 2Q 2012
2010 -
2Q 2012
10%
Threshold
Jet A Price ($/bbl)
1
Achieved 10% ROIC goal in most recent twelve month period despite elevated
fuel prices
70
80
90
100
110
120
130
140
Jan. 2012
Jan. 2011
Jan. 2010
Aug. 2012


United’s ROIC calculation
NOPAT
Adjusted pre-tax income
+ Interest expense
+ Interest component of
+ Net interest on pension
Adjusted for cash taxes
Invested Capital
Total assets
+ Capitalized A/C rent (at 7.0x)
-
Non-interest bearing liabilities
Invested capital begins with total assets and removes only liabilities that
do not require a return (e.g. advanced ticket sales, accounts payable)
Note: NOPAT excludes special items, see non-GAAP reconciliation in Appendix B; Interest components of NOPAT include tax effect at annualized cash tax rate
Source: SEC fillings
11
capitalized A/C rent
ROIC =
ROIC =
Net Operating Profit After Tax (NOPAT)
Average Invested Capital


ROIC goal of 10% over the business cycle
12
$1.0 -
$1.2B of synergies
Capacity discipline
Strengthen our balance sheet
Grow high margin components of our business
Product and technology investments


13
(10%)
(5%)
0%
5%
10%
S&P 500
Airline
Industry
Pre-Tax Margin YoY Change (%)
2003
2005
2007
2009
2011
Airline multiple lags other industries due to high leverage
and earnings volatility
Forward P/E Ratio
17
16
14
14
12
6
Note: Airline industry P/E ratio includes UAL, ALK, DAL, JBLU, LCC and LUV;
Other industry P/E ratios include only S&P 500 companies
Source: SEC filings and Thomson One, August 2012


14
Earnings
Stability
Earnings
Expansion
Improve
Capital
Structure
Creating Long-Term Shareholder Value


Boeing 737
MAX 9
Investing in our fleet
Highly efficient
Great fit for network
Unrivaled customer
experience


Investing in our product and technology
New United
Club in
ORD T-2
Boeing
Sky
Interior
Enhanced
Agent
Interface
Global
Satellite
Wi-Fi


Growing high margin components of our business
17
90 million members worldwide
100+ partnerships to earn
Unmatched redemption opportunities
Up to 5 more inches of space in coach
Ancillary Revenue
Economy Plus
Value-add products & services
Dynamic pricing
Improved CRM targeting


18
Earnings
Stability
Earnings
Expansion
Improve
Capital
Structure
Creating Long-Term Shareholder Value


Net Debt
1
($B)
19
Net Debt
1
incl. Pension
2
($B)
2012 interest expense
3
expected to decline more than 20% vs. 2010
Committed to strengthening the balance sheet
($3.9)
2011
$12.0
2010
$13.5
2009
$15.9
($3.2)
2011
$16.2
12.0
$17.3
13.5
$19.4
15.9
Net Debt
Pension
2009
2010
4.2
3.8
3.5
Note: Results prior to 4Q 2010 pro forma
1.
Year end balances; Includes aircraft rent capitalized at 7 times
2.
Pension includes the under-funded portion of pension and post-retirement liabilities
3.
2012 interest expense is midpoint of non-operating expense guidance from July 2012 investor Update
Source: Earnings releases, SEC filings and July 2012 Investor Update


$4B of non-aircraft debt coming due in next four years
20
Scheduled Debt & Capital Lease Payments ($B)
0.6
1.1
1.3
1.2
0.4
2016
$1.0
2015
$2.1
2014
$2.2
2013
$1.9
2012
$1.5
0.8
0.9
0.9
0.9
0.6
Aircraft
Non-Aircraft


Increasing unencumbered asset base
21
$11.3
$7.7
$5.1
$3.0
2015
2013
2014
2012
Unencumbered Asset Balance ($B)
Note: Cumulative total of assets generally accepted as collateral in financing transactions and not then
encumbered; Asset values derived from historical appraisals and company estimates; 2012 amount includes
currently available assets and assets expected to become unencumbered by 2012 year-end


Creating shareholder value
22
Improve cost of capital
Manage liquidity levels
Reduce amount of leverage
Increase pool of 
unencumbered assets
Improve credit rating
Improve Valuation
Capacity discipline
Stable earnings
Invest in product, technology
Grow high margin businesses
Generate ROIC in excess of
10% over the business cycle
Strengthen Balance Sheet


23
Appendix A: ROIC calculation
NOPAT ($M)
TME 2Q12
Adjusted
Pre-Tax
Income
1
$1,146
+ Interest Expense
2
870
+
Interest
Component
of
Capitalized
Aircraft
Rent
2
490
+
Net
Interest
on
Pension
2
166
Adjusted for Cash Taxes
(6)
NOPAT
$2,666
Invested Capital ($M)
TME 2Q12
Total Assets
$38,726
+ Capitalized Aircraft Rent (@ 7.0x)
7,077
-
Non-Interest Bearing Liabilities
(19,863)
Average Invested Capital
$25,940
Return on Invested Capital
10.3%
Source: Earnings releases and SEC filings; 
1.
Excludes special, one-time items. See non-GAAP reconciliation in Appendix B
2.
Interest components of NOPAT include tax effect at annualized cash tax rate


24
Appendix B: Non-GAAP Financial Reconciliation
Pre-tax Earnings ($M)
TME 2Q12
Earnings / (Loss)  Before Income Taxes
$407
Add: Special Items
739
Adjusted Earnings / (Loss) Before Income Taxes
$1,146
Note: Non-GAAP financial measures are presented because they provide management and investors with the ability to
measure and monitor UAL’s performance using similar criteria on a consistent basis. UAL believes that adjusting for
special items is useful to investors because they are non-recurring items not indicative of UAL’s on-going performance.
Special items relate to activities that are not central to UAL’s ongoing operations or are unusual in nature.