01—Abstract
Summary
Summary of the 10-K filed February 20, 2014. Cited figures are marked; the original filing is the authoritative source.
United Continental Holdings, Inc. and United Airlines, Inc. filed a combined Form 10-K for the year ended December 31, 2013.
The company reported operating revenue of $38.28 billiona, operating income of $1.25 billion and net income of $571 million, compared with a net loss of $723 million in 2012. Excluding special charges, net income was $1.08 billion, versus $589 million in 2012. Special charges totaled $520 million in 2013, mainly merger and integration-related costs of $205 million and labor agreement costs of $127 million.
Unrestricted cash, cash equivalents and short-term investments were $5.1 billionb at year-end, down from $6.5 billion, and debt and capital lease obligations were about $12.4 billion, including $1.5 billion due within twelve months. The company's credit ratings remain below investment grade (UAL rated B by S&P, B2 by Moody's and B by Fitch). Management highlighted several 2014 developments: a plan to reduce flying from Cleveland by around 60% in stages starting in April, a project to cut annual costs by $2 billion and add $700 million in ancillary revenue by the end of 2017, and expected 2014 gross capital expenditures of $2.9 billion to $3.1 billion.
The filing also flags that new FAA pilot flight and duty rules and a shortage of regional pilots are forcing a reduction in regional partner flying. Fuel is the largest operating expense at 34%c of total operating expense, and the company had hedged about 24% of its projected 2014 fuel requirements.
The company disclosed an $11 billiond federal net operating loss carryforward and a valuation allowance of $3.8 billion against deferred tax assets, which would reduce income tax expense if reversed. Approximately 80% of its roughly 87,000 employees are represented by unions, and several labor groups remain in negotiations for amended agreements.
02—Key points
Key Highlights
- Net income of $571 million for 2013 versus a net loss of $723 million in 2012; excluding special charges, net income was $1.1 billion.
- Operating revenue of $38.28 billion, up 3.0% from $37.15 billion in 2012, with consolidated passenger revenue up 1.7%.
- Unrestricted cash, cash equivalents and short-term investments of $5.1 billion at December 31, 2013, down from $6.5 billion a year earlier.
- Total debt and capital lease obligations of about $12.4 billion, including $1.5 billion due within the next 12 months; credit ratings are below investment grade.
- Special charges of $520 million in 2013, mainly merger and integration costs ($205 million) and labor agreement costs ($127 million).
- Plan to cut Cleveland departures by around 60% in stages from April 2014 due to losses and new FAA pilot rules affecting regional partners.
- Cost program targeting $2 billion in annual savings and $700 million in incremental ancillary revenue by the end of 2017.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 20, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $38.28B$37.15B | +3.0% |
| Operating Expenses | $37.03B$37.11B | −0.2% |
| Operating Income | $1.25B$39.00M | +3102.6% |
| Interest Expense | $783.00M$835.00M | −6.2% |
| Net Income | $571.00M-$723.00M | +179.0% |
| EPS (Basic) | $1.64$-2.18 | +175.2% |
| EPS (Diluted) | $1.53$-2.18 | +170.2% |
| Shares Outstanding (Basic) | 348.00M331.00M | +5.1% |
| Shares Outstanding (Diluted) | 391.00M331.00M | +18.1% |
05—Questions
Frequently Asked Questions
How did United's profitability change in 2013?
United reported net income of $571 million in 2013, compared with a net loss of $723 million in 2012. Excluding special charges, net income was $1.08 billion, up from $589 million. Operating income was $1.25 billion versus $39 million in 2012.
How much debt does the company carry and when does it come due?
At December 31, 2013, the company had about $12.4 billion of debt and capital lease obligations, including $1.5 billion due within the next 12 months. Contractual long-term debt payments were $1.4 billion in 2014 and $2.1 billion in 2015.
What are the main cost pressures and fuel exposure?
Aircraft fuel was the largest operating expense at $12.35 billion, or 34% of total operating expense, at an average price of $3.13 per gallon. The company estimated that a $1 per barrel change in crude oil would change annual fuel expense by about $94 million, and had hedged about 24% of projected 2014 fuel requirements.
What changes are planned for 2014?
The company plans to reduce average daily departures from Cleveland by about 60%, in stages beginning in April 2014, and expects to record a special charge related to it. It expects 2014 consolidated capacity growth of 1% to 2% and gross capital expenditures of $2.9 billion to $3.1 billion.
What are the main labor and regulatory risks?
About 80% of roughly 87,000 employees are represented by unions, and several groups, including technicians, flight attendants and dispatchers, were still negotiating amended agreements. New FAA pilot flight and duty rules effective January 4, 2014, are reducing the pool of regional pilots and forcing reductions in regional partner flying.
06—Continue