01—Abstract
Summary
Summary of the 10-K filed February 20, 2015. Cited figures are marked; the original filing is the authoritative source.
United Continental Holdings, Inc. (UAL) and its principal subsidiary United Airlines, Inc. filed a combined Form 10-K for fiscal 2014.
UAL reported 2014 operating revenue of $38.90 billiona, operating income of $2.37 billion, and net income of $1.13 billion, or $2.93 per diluted share, compared with net income of $571 million in 2013. Non-GAAP net income excluding special charges and Economic Hedge Adjustments was $1.97 billion, or $5.06 per diluted share. Aircraft fuel was the largest operating expense at $11.68 billion, or 32% of total operating expenses, with an average price of $2.99 per gallon.
The company ended 2014 with $4.4 billionb in unrestricted cash, cash equivalents and short-term investments, and $5.7 billion in total unrestricted liquidity including its revolving credit facility. It carried approximately $12.1 billion of debt and capital lease obligations, and its credit ratings were below investment grade (S&P B, Moody's B1, Fitch B). The company repurchased $320 million of stock under a $1 billion program and reported a $2.0 billion capital expenditure program for 2014, with 2015 gross capital expenditures expected at $3.0 to $3.2 billion.
The outlook for 2015 calls for consolidated ASMs to grow 1.5% to 2.5%, and Project Quality targets $2 billionc in annual cost reductions and $700 million of incremental ancillary revenue by the end of 2017. Key risks include fuel price volatility, the approximately 80% union-represented workforce with several contracts open for amendment, the $9.6 billion federal NOL carryforward subject to Section 382 limitations, and the $4.8 billion valuation allowance against deferred tax assets.
02—Key points
Key Highlights
- 2014 operating revenue of $38.90 billion, up from $38.28 billion in 2013; operating income of $2.37 billion versus $1.25 billion in 2013.
- GAAP net income of $1.13 billion, or $2.93 diluted EPS, versus $571 million, or $1.53 diluted EPS, in 2013; non-GAAP net income was $1.97 billion, or $5.06 diluted EPS.
- Aircraft fuel expense of $11.68 billion, a 32% share of operating expenses, with average price per gallon falling to $2.99 from $3.13.
- Liquidity of $4.4 billion in unrestricted cash and short-term investments and $5.7 billion total unrestricted liquidity; total debt and capital lease obligations of about $12.1 billion.
- Returned about $320 million to shareholders under a $1 billion repurchase program announced July 2014; $680 million remains available.
- Credit ratings remain below investment grade (UAL: S&P B, Moody's B1, Fitch B).
- 2015 guidance: consolidated ASMs up 1.5% to 2.5%, gross capital expenditures of $3.0 to $3.2 billion, and Project Quality targeting $2 billion in annual cost savings by end of 2017.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 20, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $38.90B$38.28B | +1.6% |
| Operating Expenses | $36.53B$37.03B | −1.4% |
| Operating Income | $2.37B$1.25B | +90.0% |
| Interest Expense | $735.00M$783.00M | −6.1% |
| Net Income | $1.13B$571.00M | +98.2% |
| EPS (Basic) | $3.05$1.64 | +86.0% |
| EPS (Diluted) | $2.93$1.53 | +91.5% |
| Shares Outstanding (Basic) | 371.10M348.00M | +6.6% |
| Shares Outstanding (Diluted) | 389.70M391.00M | −0.3% |
05—Questions
Frequently Asked Questions
How profitable was United Continental Holdings in 2014 compared with 2013?
Net income rose to $1.13 billion, or $2.93 per diluted share, from $571 million, or $1.53 per diluted share, in 2013. Operating income increased to $2.37 billion from $1.25 billion. The company also reported non-GAAP net income of $1.97 billion, or $5.06 per diluted share, excluding special charges and Economic Hedge Adjustments.
How much debt does the company carry and how liquid is it?
At December 31, 2014, the company had approximately $12.1 billion of debt and capital lease obligations, including $1.4 billion due within 12 months. It had $4.4 billion of unrestricted cash, cash equivalents and short-term investments, and $5.7 billion of total unrestricted liquidity including available revolving credit capacity.
What are the main risks identified in the filing?
The filing highlights high or volatile fuel prices, with fuel the largest and most volatile operating expense, and a hedging program that may not fully protect against price increases. It also cites roughly 80% union representation, with several labor agreements open for amendment, and the possibility of labor disruptions. Other risks include a non-investment-grade credit rating, the $9.6 billion federal NOL carryforward subject to Section 382 limits, and exposure to regional carrier disruptions.
What does the company expect for 2015?
The company expects consolidated ASMs to grow 1.5% to 2.5% year over year and gross capital expenditures of $3.0 to $3.2 billion. It expects CASM excluding fuel, third-party business expense, profit sharing and special charges to be flat to up 1%. It also plans to take delivery of more than 40 new aircraft and to modify its MileagePlus program effective March 1, 2015.
What is Project Quality?
Project Quality is the company's cost initiative launched in 2014 with a goal to reduce annual costs by $2 billion and generate an incremental $700 million in ancillary revenue by the end of 2017. The anticipated savings consist of $1 billion in annual fuel savings, based on 2013 fuel prices, and $1 billion of non-fuel savings. In 2014 the company achieved approximately $200 million in fuel savings and $380 million in non-fuel savings.
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