01—Abstract
Summary
Summary of the 10-K filed February 25, 2013. Cited figures are marked; the original filing is the authoritative source.
United Continental Holdings, Inc. (UAL) reported a net loss of $723 milliona for fiscal 2012, compared with net income of $840 million in 2011.
Excluding special items, net income was $589 millionb, versus $1.3 billion in 2011. Operating revenue was essentially flat at $37.15 billion, while operating income fell to $39 million from $1.82 billion, reflecting $1.32 billion of special charges, including $739 million of merger and integration-related costs and a $475 million labor agreement charge tied to the pilots' new joint collective bargaining agreement. Aircraft fuel expense rose 6.2% to $13.14 billion, with the average price per gallon increasing to $3.27 from $3.06.
Consolidated passenger revenue was roughly flat, increasing about $72 millionc, or 0.2%, as higher fares offset a 1% decline in passengers. Cargo revenue fell 12.8%. The company ended 2012 with $6.5 billion in unrestricted cash, cash equivalents and short-term investments, down from $7.8 billion, and approximately $13.2 billion of debt and capital lease obligations.
Management expects 2013 consolidated capacity to be lower than 2012, expects approximately $2.5 billiond of gross capital expenditures, and estimates $1.0 billion to $1.2 billion in annual merger synergies on a run-rate basis once integration is complete. The company's credit ratings are below investment grade (B/B2/B from S&P, Moody's and Fitch).
02—Key points
Key Highlights
- Net loss of $723 million in 2012 versus net income of $840 million in 2011; excluding special items, net income was $589 million versus $1.3 billion.
- Operating income fell to $39 million from $1.82 billion, driven by $1.32 billion of special charges including $739 million of merger and integration costs and $475 million of labor agreement costs.
- Operating revenue was $37.15 billion, up 0.1%, while aircraft fuel expense rose 6.2% to $13.14 billion as the average fuel price rose to $3.27 per gallon from $3.06.
- Unrestricted cash, cash equivalents and short-term investments declined to $6.5 billion from $7.8 billion at December 31, 2011.
- Debt and capital lease obligations totaled $13.2 billion, including $1.9 billion due within the next 12 months; credit ratings are below investment grade.
- Management expects $1.0 billion to $1.2 billion in net annual merger synergies on a run-rate basis and expects 2013 consolidated capacity to be lower than 2012.
- The company holds approximately $10 billion of federal net operating loss carryforwards, and a full valuation allowance remains on its deferred tax assets.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 25, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $37.15B$37.11B | +0.1% |
| Operating Expenses | $37.11B$35.29B | +5.2% |
| Operating Income | $39.00M$1.82B | −97.9% |
| Interest Expense | $835.00M$949.00M | −12.0% |
| Net Income | -$723.00M$840.00M | −186.1% |
| EPS (Basic) | $-2.18$2.54 | −185.8% |
| EPS (Diluted) | $-2.18$2.26 | −196.5% |
| Shares Outstanding (Basic) | 331.00M329.00M | +0.6% |
| Shares Outstanding (Diluted) | 331.00M383.00M | −13.6% |
05—Questions
Frequently Asked Questions
Why did UAL swing from a profit to a loss in 2012?
Operating income fell to $39 million from $1.82 billion. The filing attributes the decline mainly to $1.32 billion of special charges, including $739 million of merger and integration-related costs, $475 million of labor agreement costs tied to the pilots' contract ratified in December 2012, and $125 million of voluntary severance and benefits. Aircraft fuel expense also rose 6.2%, to $13.14 billion.
How did revenue trend in 2012?
Total operating revenue was $37.15 billion, up 0.1% from $37.11 billion. Passenger revenue rose about $72 million, or 0.2%, as higher average fares offset a 1% decline in passengers. Cargo revenue fell 12.8%, and 2011 included a $107 million special revenue item that did not recur.
What are the company's main liquidity concerns?
UAL had $6.5 billion in unrestricted cash and short-term investments and a $500 million undrawn revolving credit facility at year-end 2012. It carried about $13.2 billion of debt and capital lease obligations, and its credit ratings are below investment grade. The filing notes that financing for its narrowbody aircraft orders with Boeing is not yet in place, and that a 10% decline in forward fuel prices would require posting about $11 million of collateral on its fuel hedges.
What does management expect for 2013?
Management expects consolidated capacity in 2013 to be lower than in 2012 and expects approximately $2.5 billion of gross capital expenditures, or $1.4 billion net of anticipated financings. It expects merger and integration cash costs to decrease significantly to approximately $250 million, and it projects CASM excluding fuel, profit sharing and third-party business expense to rise 4.5% to 5.5%.
06—Continue