01—Abstract
Summary
Summary of the 10-K filed March 31, 2006. Cited figures are marked; the original filing is the authoritative source.
UAL Corporation, now United Airlines Holdings, Inc., filed this 10-K for fiscal 2005 while still operating as a Debtor-in-Possession.
The company emerged from Chapter 11 on February 1, 2006, after filing for bankruptcy on December 9, 2002. For 2005 it reported an operating loss of $219 milliona and a net loss of $21.2 billion, or $182.29 per share, driven mainly by $20.6 billion in reorganization expenses. Mainline fuel expense rose to $4.03 billion, with the average price per gallon increasing to $1.79 from $1.25 in 2004.
Operating revenues grew to $17.38 billionb, and passenger load factor improved to 81.4% from 79.2%. The post-emergence capital structure is central for investors. The company obtained a Credit Facility of up to $3.0 billion, with $2.45 billion drawn at exit and $350 million added later, and it has issued convertible preferred stock, convertible notes and senior unsecured notes to creditors, employees and the PBGC.
New common stock began trading on NASDAQ as UAUA on February 2, 2006, with up to 125 million shares issued under the plan. Unsecured claims are now estimated at $28 to $31 billionc, against a plan range of $22 to $35 billion, and fresh start accounting will materially change asset and liability values from February 1, 2006 onward, so historical results will not be comparable. Several matters remain open and could materially affect results.
These include the termination of the Pilot Defined Benefit Plan, municipal bond disputes at DEN and LAX, Section 1110 aircraft restructurings, the Public Debt Group litigation, and two appeals of the plan confirmation order. The company's credit ratings are below investment grade, with S&P at B and Moody's at B2.
02—Key points
Key Highlights
- 2005 net loss of $21.2 billion ($182.29 per share), including $20.6 billion in reorganization expenses; loss from operations of $219 million
- Operating revenues of $17.38 billion in 2005, up from $16.39 billion in 2004; passenger load factor rose to 81.4% from 79.2%
- Mainline fuel expense reached $4.03 billion in 2005, now the largest operating expense; average fuel price per gallon was $1.79, up from $1.25
- Emerged from Chapter 11 on February 1, 2006 with a Credit Facility of up to $3.0 billion; $2.45 billion drawn at exit and $350 million added subsequently
- Total assets of $19.34 billion and liabilities subject to compromise of $35.0 billion at December 31, 2005; stockholders' deficit of $25.6 billion
- Estimated unsecured claims of $28 to $31 billion; approximately 93 million of the 115 million unsecured creditor shares had been distributed as of filing
- Open matters include the Pilot Plan termination dispute, municipal bond litigation, Section 1110 aircraft restructurings, and appeals of plan confirmation; the company says these could have a material adverse effect
03—Questions
Frequently Asked Questions
What was the company's financial performance in 2005?
The company recorded an operating loss of $219 million and a net loss of $21.2 billion, or $182.29 per share. The net loss was driven mainly by $20.6 billion in reorganization items. Operating revenues rose to $17.38 billion from $16.39 billion, and operating expenses were $17.60 billion.
What does the bankruptcy exit mean for shareholders?
Old common stock, preferred stock and TOPrS were canceled on February 1, 2006 with no distribution to holders. New common stock began trading on NASDAQ under UAUA on February 2, 2006, and was distributed mainly to unsecured creditors and employees, with up to 125 million shares authorized under the plan.
How much debt does the company carry after emergence?
The Credit Facility provides up to $3.0 billion, consisting of a $2.8 billion term loan and a $200 million revolving line, maturing February 1, 2012. The company also issued $500 million of 6% senior unsecured notes to the PBGC, about $150 million of convertible 5% notes, and about $726 million of additional convertible notes to employees. Credit ratings are below investment grade.
Why will historical financials be less comparable going forward?
The company adopted fresh start accounting on February 1, 2006 under SOP 90-7. Assets and liabilities are remeasured to fair value, and the company states that financial condition and results from that date will not be comparable to historical statements. Pro forma figures show goodwill of $544 million and other intangibles of $3.18 billion, though the company says these amounts are not final.
What are the main risks highlighted in the filing?
The filing highlights high and volatile fuel costs, competition from low-cost carriers (about 80% of domestic revenue is now exposed to them), security and regulatory costs, insurance availability for war-risk coverage, labor relations with unions whose contracts are not amendable until 2010, and high fixed obligations including the Credit Facility.
04—Continue