01—Abstract
Summary
Summary of the 10-K filed February 22, 2018. Cited figures are marked; the original filing is the authoritative source.
United Continental Holdings, Inc. (UAL) and its wholly owned subsidiary United Airlines, Inc. filed a combined 10-K for fiscal 2017.
UAL reported 2017 operating revenue of $37.736 billiona, operating income of $3.498 billion, and net income of $2.131 billion, or $7.02 diluted earnings per share, compared with $36.556 billion of revenue, $4.338 billion of operating income and $2.263 billion of net income in 2016. Aircraft fuel expense rose 18.9% to $6.913 billion on higher fuel prices, and salaries and related costs increased 7.5% to $11.045 billion. Special charges fell to $176 million from $638 million in 2016, when the company wrote off its Newark slots.
Liquidity was $5.8 billionb at year-end, including $3.8 billion of unrestricted cash, cash equivalents and short-term investments. Total debt and capital lease obligations rose to $14.392 billion from $11.705 billion, and capital expenditures were $4.0 billion. The company repurchased about 28 million shares for $1.8 billion in 2017 and authorized a new $3.0 billion repurchase program in December 2017.
UAL's corporate credit ratings are below investment grade (BB- from S&P, Ba2 from Moody's, BB from Fitch). Management guides to 2018 consolidated ASM growth of 4% to 6%, 2018 gross capital expenditures of $3.6 billion to $3.8 billionc, and continued growth in demand for air travel. The filing also notes that a Tax Act provisional estimate produced a $192 million one-time income tax benefit at UAL, and that the company will adopt ASC 606 retrospectively on January 1, 2018, which will reclassify roughly $2.1 billion of ancillary fees from other operating revenue into passenger revenue for 2017.
02—Key points
Key Highlights
- 2017 net income of $2.131 billion, or $7.02 diluted EPS, down from $2.263 billion in 2016
- Operating revenue rose 3.2% to $37.736 billion, led by passenger revenue growth of 3.0% and cargo growth of 18.2%
- Aircraft fuel expense increased 18.9% to $6.913 billion as the average price per gallon rose to $1.74 from $1.49
- Year-end unrestricted liquidity of $5.8 billion, with $3.8 billion of unrestricted cash, cash equivalents and short-term investments
- Total debt and capital lease obligations increased to $14.392 billion from $11.705 billion, and credit ratings remain below investment grade
- Repurchased about 28 million shares for $1.8 billion in 2017 and authorized a new $3.0 billion repurchase program in December 2017
- 2018 guidance calls for consolidated ASMs to grow 4% to 6% and gross capital expenditures of $3.6 billion to $3.8 billion
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 22, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $37.74B$36.56B | +3.2% |
| Operating Expenses | $34.17B$32.21B | +6.1% |
| Operating Income | $3.62B$4.34B | −16.7% |
| Interest Expense | $626.00M$674.00M | −7.1% |
| Net Income | $2.14B$2.23B | −4.1% |
| EPS (Basic) | $7.08$6.77 | +4.6% |
| EPS (Diluted) | $7.06$6.76 | +4.4% |
| Shares Outstanding (Basic) | 302.70M329.90M | −8.2% |
| Shares Outstanding (Diluted) | 303.60M330.30M | −8.1% |
05—Questions
Frequently Asked Questions
How did UAL's profitability change in 2017?
Operating income fell to $3.498 billion from $4.338 billion, and net income fell to $2.131 billion from $2.263 billion. Results were pressured by higher fuel prices and higher salaries and related costs, which rose 7.5% to $11.045 billion. Special charges declined to $176 million from $638 million.
What is the company's liquidity position at the end of 2017?
UAL ended 2017 with $5.8 billion of unrestricted liquidity, including $3.8 billion of unrestricted cash, cash equivalents and short-term investments and the full $2.0 billion available under its revolving credit facility. The filing states that the working capital deficit of about $5.6 billion does not adversely affect cash flows, liquidity or operations, because about $6.1 billion of current liabilities relate to advance ticket sales and frequent flyer deferred revenue.
How much debt does the company carry and what are its credit ratings?
Debt and capital lease obligations totaled $14.392 billion at year-end 2017, up from $11.705 billion in 2016, with $1.7 billion due within 12 months. UAL's corporate credit ratings are BB- (S&P), Ba2 (Moody's) and BB (Fitch), all below investment grade.
What are the company's capital return and spending plans?
In 2017 UAL repurchased about 28 million shares for $1.8 billion and paid no dividends. A new $3.0 billion share repurchase program was authorized in December 2017, with about $3.0 billion remaining at year-end. Capital expenditures were $4.0 billion in 2017, and the company expects $3.6 billion to $3.8 billion of gross capital expenditures in 2018.
What accounting change will affect reported revenue in 2018?
The company adopted ASC 606 (Topic 606) on January 1, 2018, using the full-retrospective approach. The main effect is reclassifying certain ancillary fees, such as ticket change fees and baggage fees, from other operating revenue into passenger revenue, approximately $2.0 billion for 2016 and $2.1 billion for 2017. The company states that adoption will not have a material impact on earnings.
06—Continue