UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1995, Commission File Number 1-6033
UAL CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 36-2675207
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1200 East Algonquin Road, Elk Grove Township, Illinois 60007
Mailing Address: P. O. Box 66919, Chicago, Illinois 60666
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 952-4000
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Outstanding at
Class July 31, 1995
Common Stock ($0.01 par value) 12,624,019
UAL Corporation and Subsidiary Companies Report on Form 10-Q
For the Quarter Ended June 30, 1995
Index
Part I. Financial Information Page No.
Item 1. Financial statements:
Condensed statement of consolidated 3
financial position - as of June 30, 1995
(unaudited) and December 31, 1994
Statement of consolidated operations 5
(unaudited) - for the three months and
six months ended June 30, 1995 and 1994
Condensed statement of consolidated 7
cash flows (unaudited) - for the six
months ended June 30, 1995 and 1994
Notes to consolidated financial 8
statements (unaudited)
Item 2. Management's discussion and analysis 13
of financial condition and results of
operations
Part II. Other Information
Item 1. Legal Proceedings 21
Item 4. Submission of Matters to a Vote of
Security Holders 21
Item 6. Exhibits and Reports on Form 8-K 23
Signatures 26
Exhibit Index 27
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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UAL Corporation and Subsidiary Companies
Condensed Statement of Consolidated Financial Position
(In Millions)
June 30,
1995 December 31,
Assets (Unaudited) 1994
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 380 $ 500
Short-term investments 1,566 1,032
Receivables, net 1,040 889
Inventories, net 307 285
Deferred income taxes 141 151
Prepaid expenses and other 260 335
3,694 3,192
Operating property and equipment:
Owned 10,723 10,824
Accumulated depreciation and amortization (4,961) (4,786)
5,762 6,038
Capital leases 1,315 1,132
Accumulated amortization (475) (447)
840 685
6,602 6,723
Other assets:
Intangibles, net 787 814
Deferred income taxes 450 480
Other 569 555
1,806 1,849
$12,102 $11,764
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
UAL Corporation and Subsidiary Companies
Condensed Statement of Consolidated Financial Position
(In Millions)
June 30,
1995 December 31,
Liabilities and Stockholders' Equity (Unaudited) 1994
<S> <C> <C>
Current liabilities:
Short-term borrowings $ - $ 269
Current portions of long-term debt
and capital lease obligations 396 460
Advance ticket sales 1,378 1,020
Accounts payable 628 651
Other 2,569 2,506
4,971 4,906
Long-term debt 3,120 2,887
Long-term obligations under capital leases 872 730
Other liabilities and deferred credits:
Deferred pension liability 617 520
Postretirement benefit liability 1,190 1,148
Deferred gains 1,333 1,363
Other 467 477
3,607 3,508
Minority interest 54 49
Stockholders' equity:
Preferred stock - -
Common stock at par - -
Additional capital invested 952 1,287
Retained earnings (deficit) (1,211) (1,335)
Unearned ESOP preferred stock (79) (83)
Other (184) (185)
(522) (316)
Commitments and contingent liabilities
(See note)
$12,102 $11,764
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
UAL Corporation and Subsidiary Companies
Statement of Consolidated Operations (Unaudited)
(In Millions, Except Per Share)
Three Months
Ended June 30
1995 1994
<S> <C> <C>
Operating revenues:
Passenger $3,392 $3,102
Cargo 185 168
Other operating revenues 238 232
3,815 3,502
Operating expenses:
Salaries and related costs 1,146 1,216
ESOP compensation expense 108 -
Aircraft fuel 412 379
Commissions 364 360
Aircraft rent 261 230
Purchased services 266 236
Depreciation and amortization 174 177
Landing fees and other rent 211 147
Food services 135 123
Aircraft maintenance 95 118
Personnel expenses 70 65
Other operating expenses 271 284
3,513 3,335
Earnings from operations 302 167
Other income (expense):
Interest expense (101) (83)
Interest capitalized 10 9
Interest income 26 24
Equity in earnings of affiliates 13 8
Miscellaneous, net 1 (18)
(51) (60)
Earnings before income taxes 251 107
Provision for income taxes 100 52
Net earnings $ 151 $ 55
Net earnings per share:
Primary $12.00 $ 1.89
Fully-diluted $10.94 $ 1.89
Average shares:
Primary 15.4 24.5
Fully-diluted 17.4 24.5
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
UAL Corporation and Subsidiary Companies
Statement of Consolidated Operations (Unaudited)
(In Millions, Except Per Share)
Six Months
Ended June 30
1995 1994
<S> <C> <C>
Operating revenues:
Passenger $6,312 $5,873
Cargo 360 332
Other operating revenues 477 492
7,149 6,697
Operating expenses:
Salaries and related costs 2,259 2,418
ESOP compensation expense 197 -
Aircraft fuel 790 749
Commissions 706 694
Aircraft rent 510 456
Purchased services 505 454
Depreciation and amortization 337 355
Landing fees and other rent 380 299
Food services 254 214
Aircraft maintenance 202 227
Personnel expenses 133 124
Other operating expenses 536 576
6,809 6,566
Earnings from operations 340 131
Other income (expense):
Interest expense (203) (166)
Interest capitalized 22 19
Interest income 48 41
Equity in earnings of affiliates 27 14
Miscellaneous, net 23 (40)
(83) (132)
Earnings (loss) before income taxes and
cumulative effect of accounting change 257 (1)
Provision (credit) for income taxes 103 15
Earnings (loss) before cumulative
effect of accounting change 154 (16)
Cumulative effect of accounting change,
net of tax - (26)
Net earnings (loss) $ 154 $ (42)
Per share, primary:
Earnings (loss) before cumulative effect of
accounting change $11.74 $(1.43)
Cumulative effect of accounting change - (1.05)
Net earnings (loss) $11.74 $(2.48)
Net earnings (loss) per share, fully-diluted $11.03 $(2.48)
Average shares:
Primary 14.9 24.5
Fully-diluted 17.0 24.5
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
UAL Corporation and Subsidiary Companies
Condensed Statement of Consolidated Cash Flows (Unaudited)
(In Millions)
Six Months
Ended June 30
1995 1994
<S> <C> <C>
Cash and cash equivalents at beginning of
period $ 500 $ 437
Cash flows from operating activities 1,150 988
Cash flows from investing activities:
Additions to property and equipment (330) (187)
Proceeds on disposition of property and
equipment 423 122
Decrease (increase) in short-term
investments (535) 365
Other, net (20) 14
(462) 314
Cash flows from financing activities:
Repayment of long-term debt (414) (34)
Principal payments under capital
lease obligations (49) (63)
Decrease in short-term borrowings (269) (46)
Other, net (76) (17)
(808) (160)
Increase (decrease) in cash
and cash equivalents (120) 1,142
Cash and cash equivalents at end of period $ 380 $ 1,579
Cash paid during the period for:
Interest (net of amounts capitalized) $ 176 $ 140
Income taxes $ 62 $ 12
Non-cash transactions:
Capital lease obligations incurred $ 185 $ -
Long-term debt incurred in connection
with additions to equipment $ 12 $ 12
Long-term debt issued in exchange for
Series A preferred stock $ 546 $ -
Unrealized gain (loss) on investments $ 4 $ (3)
See accompanying notes to consolidated financial statements.
</TABLE>
UAL Corporation and Subsidiary Companies
Notes to Consolidated Financial Statements (Unaudited)
The Company
UAL Corporation ("UAL") is a holding company whose principal
subsidiary is United Air Lines, Inc. ("United").
Interim Financial Statements
The consolidated financial statements included herein have been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to or as permitted by such rules and regulations, although UAL
believes that the disclosures are adequate to make the information
presented not misleading. In management's opinion, all adjustments
(which, except for the effects on the 1994 periods of the employee
investment transaction, include only normal recurring adjustments)
necessary for a fair presentation of the results of operations for the
three and six month periods have been made. These financial statements
should be read in conjunction with the consolidated financial statements
and footnotes thereto included in UAL's Annual Report on Form 10-K for
the year 1994.
ESOP Compensation Expense
"ESOP compensation expense" in the 1995 second quarter and
six-month period represents the estimated average fair value of ESOP
convertible preferred stock committed to be released to employees for
the period, net of amounts used to satisfy dividend requirements for
previously allocated ESOP convertible preferred shares, under Employee
Stock Ownership Plans which were created as a part of the July 1994
employee investment transaction and recapitalization. ESOP compensation
expense was credited to additional capital invested during the 1995
periods.
Other Income (Expense) - Miscellaneous
Included in "Miscellaneous, net" in the 1995 six-month period was
a $41 million gain on disposition of aircraft owned by Air Wisconsin,
Inc. Included in the 1994 second quarter and six-month period were
charges of $22 million and $41 million, respectively, for costs incurred
in connection with the employee investment transaction and
recapitalization. Also included were foreign exchange gains of $10
million in both the 1995 and 1994 second quarters, $2 million in the
1995 six-month period and $9 million in the 1994 six-month period.
Charges for minority interests in Apollo Travel Services were $6 million
in the 1995 and 1994 second quarters and $12 million in the 1995 and
1994 six-month periods.
Income Taxes
The provisions for income taxes for the 1995 second quarter and
six-month period are based on the estimated annual effective tax rate,
which differs from the federal statutory rate of 35% principally due to
state income taxes and certain nondeductible expenses. The provisions
for income taxes for the 1994 second quarter and six-month period were
based on the actual effective tax rate for the periods, and include the
effects of nondeductible expenses related to the employee investment
transaction and recapitalization. Deferred tax assets are recognized
based upon UAL's history of operating earnings and expectations for
future taxable income.
Accounting Change
UAL adopted Statement of Financial Accounting Standards ("SFAS")
No. 112, "Employers' Accounting for Postemployment Benefits," effective
January 1, 1994. The effect of adopting SFAS No. 112 was a cumulative
charge for recognition of the transition liability of $42 million,
before tax benefits of $16 million.
Per Share Amounts
In April 1995, UAL issued convertible subordinated debentures in
exchange for Series A preferred stock (See Preferred Stock
Transactions). As a result of the exchange, UAL recorded a non-cash
increase of $45 million in additional capital invested representing the
excess of the carrying value of the preferred stock exchanged over the
fair value of the new debentures. In May 1995, UAL repurchased 420
shares of its Series B preferred stock, resulting in a $1.9 million
decrease in equity (See Preferred Stock Transactions). These
transactions had no effect on earnings; however, their net impact on
UAL's equity is included in the computation of earnings per share. The
impact on earnings per share for the 1995 periods was as follows:
<TABLE>
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Periods Ended June 30, 1995
Three Months Six Months
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Per share, primary:
Net earnings before preferred
stock transactions $ 9.20 $ 8.85
Preferred stock transactions 2.80 2.89
$12.00 $11.74
Per share, fully-diluted:
Net earnings before preferred
stock transactions $ 8.46 $ 8.50
Preferred stock transactions 2.48 2.53
$10.94 $11.03
</TABLE>
Per share amounts were calculated after providing for cash
dividends on preferred stock of $10 million in the 1995 second quarter,
$9 million in the 1994 second quarter, $23 million in the 1995 six-month
period and $19 million in the 1994 six-month period.
Primary per share amounts for the 1995 second quarter and
six-month period were based on weighted average common shares and common
equivalents outstanding, including ESOP shares committed to be released.
In addition, fully-diluted per share amounts assume the conversion of
convertible debentures and elimination of related interest. Common
stock equivalents were not included in the 1994 computations as they did
not have a dilutive effect.
In connection with the July 1994 recapitalization, each old common
share was exchanged for one half new common share. As required under
generally accepted accounting principles for transactions of this type,
the historical weighted average shares outstanding have not been
restated. Thus, direct comparisons between per share amounts for the
1995 and 1994 periods presented are not meaningful.
Affiliates
United owns 38% of the Galileo International Partnership
("Galileo") through a wholly-owned subsidiary. United's investment in
Galileo, which owns the Apollo and Galileo computer reservations
systems, is carried on the equity basis. United also owns 77% of the
Apollo Travel Services Partnership and its accounts are consolidated.
Under operating agreements with Galileo, United purchases computer
reservation services from Galileo and provides marketing, sales and
communication services to Galileo. Revenues derived from the sale of
services to Galileo amounted to approximately $62 million in the 1995
second quarter, $59 million in the 1994 second quarter, $124 million in
the 1995 six-month period and $118 million in the 1994 six-month period.
The cost to United of services purchased from Galileo amounted to
approximately $27 million in the 1995 second quarter, $25 million in the
1994 second quarter, $52 million in the 1995 six-month period and $46
million in the 1994 six-month period.
Short-term Borrowings
In the second quarter of 1995, United repaid the entire balance of
short-term borrowings outstanding, which amounted to $269 million at
March 31, 1995. United has the ability to borrow up to $160 million
under this facility, which expires in September 1995.
Long-term Debt
In addition to scheduled principal payments in the first six
months of 1995, United repaid $150 million in principal amount of
debentures and $223 million in principal amount of secured notes,
resulting in an insignificant loss.
In May 1995, United issued $246 million of pass through
certificates under an effective shelf registration statement UAL and
United have on file with the Securities and Exchange Commission. The
pass through certificates were issued to finance or refinance certain
aircraft under operating leases. At June 30, 1995, up to $789 million
of securities could be issued under the shelf registration statement,
including secured and unsecured debt, equipment trust and pass through
certificates, equity or a combination thereof. UAL's ability to issue
equity securities is limited by its certificate of incorporation, which
was restated in connection with the recapitalization.
Preferred Stock Transactions
In April 1995, UAL issued $600 million in principal amount of
6 3/8% convertible subordinated debentures due 2025 in exchange for all
outstanding shares of its Series A convertible preferred stock. As a
result of the difference between the carrying value of the preferred
stock exchanged and the fair value of the new debentures, the exchange
resulted in a net decrease in additional capital invested of only $546
million. The debentures are convertible into a combination of $541.90
in cash and approximately 3.192 shares of UAL common stock (equivalent
to a conversion price of $143.50 per share of common stock) for each
$1,000 in principal amount. The debentures are redeemable after May 1,
1996, at UAL's option, initially at a redemption price of 104.375% of
the principal amount, declining ratably to 100% of the principal amount
over seven years. UAL may only exercise this option if the market value
of its common stock exceeds 120% of the conversion price of the
debentures for at least 20 of 30 consecutive trading days prior to the
redemption, subject to certain conditions. Additionally, UAL has the
right to defer the payment of interest on the debentures for up to 20
consecutive quarters. In July 1995, a holder of $3 million in principal
amount of debentures notified UAL of its intention to convert.
In May 1995, UAL repurchased 420,000 depositary shares,
representing 420 shares of its Series B 12 1/4% preferred stock, at an
aggregate cost of $12.4 million to be held in treasury.
Contingencies and Commitments
UAL has certain contingencies resulting from litigation and claims
(including environmental issues) incident to the ordinary course of
business. Management believes, after considering a number of factors,
including (but not limited to) the views of legal counsel, the nature of
contingencies to which UAL is subject and its prior experience, that the
ultimate disposition of these contingencies is not expected to
materially affect UAL's consolidated financial position or results of
operations.
At June 30, 1995, commitments for the purchase of property and
equipment, principally aircraft, approximated $3.9 billion, after
deducting advance payments. An estimated $0.9 billion will be spent
during the remainder of 1995, $1.1 billion in 1996, $1.3 billion in
1997, $0.4 billion in 1998 and $0.2 billion in 1999 and therafter. The
major commitments are for the purchase of 29 B777 aircraft, two B747
aircraft and four B757 aircraft. The B777s are expected to be delivered
between 1995 and 1999 and the B747s and B757s are expected to be
delivered in 1996.
In addition to aircraft orders, United has arrangements with
Airbus Industrie and International Aero Engines to lease an additional
21 A320 aircraft, which are scheduled for delivery through 1998. At
June 30, 1995, United also had options for an additional 150 B737
aircraft, 33 B757 aircraft, 34 B777 aircraft, 43 B747 aircraft, 6 B767
aircraft and 50 A320 aircraft. These option amounts have been reduced
to reflect the recent confirmation of two B747 options, the replacement
of two B767 options with the B757 orders mentioned above and
cancellation of certain options. Under the terms of certain of these
remaining options which are exercisable during 1996 and 1997, United
would forfeit significant deposits on such options it does not exercise.
Sale of Aircraft
In the first six months of 1995, Air Wisconsin, Inc. sold ten Dash
8 aircraft and related spare parts to Mesa Airlines. The sale resulted
in a pre-tax gain of $41 million. In connection with the sale, United
agreed to a ten-year extension of its United Express marketing agreement
with Mesa Airlines.
Subsequent Event
In July 1995, United gave notice of its intention to retire all
$229 million of its outstanding Japanese yen-denominated deferred
purchase certificates. The certificates, which will be retired
throughout the third and fourth quarters, were scheduled for repayment
periodically through 1998. In connection with the Japanese
yen-denominated obligations referred to above, United had entered into a
foreign currency swap contract to reduce exposure to currency
fluctuations. This swap contract, which was designated as a hedge, will
be terminated at the same time as the obligations. The retirement,
which will result in a net cash outflow of approximately $194 million
including accrued interest but net of amounts to be received under the
swap contract, will result in an insignificant loss.
At the same time, United also gave notice of its intention to
terminate related operating leases for 39 aircraft, by exercising its
right to acquire the aircraft. Operating property and equipment will
increase by approximately $400 million by December 31, 1995 as a result
of this transaction. Termination of these leases will reduce future
minimum lease payments, as reported at December 31, 1994, by $130
million in each of 1996 and 1997 and by $166 million in 1998.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
UAL's total of cash and cash equivalents and short-term
investments was $1.946 billion at June 30, 1995, compared to $1.532
billion at December 31, 1994. Cash flows from operating activities
amounted to $1.150 billion. Investing activities, excluding the
increase in short-term investments, resulted in cash flows of $73
million. Financing activities included principal payments under debt
and capital lease obligations of $414 million and $49 million,
respectively, and the repayment of $269 million of short-term borrowings.
In April 1995, UAL issued $600 million in principal amount of
convertible subordinated debentures in exchange for all outstanding
shares of its Series A convertible preferred stock. As a result of the
exchange, UAL recorded a non-cash increase of $45 million in additional
capital invested representing the excess of the carrying value of the
preferred stock exchanged over the fair value of the new debentures.
In the first six months of 1995, United took delivery of eight
A320 aircraft under operating leases. During the period, United also
took delivery of five B777 aircraft, two under capital leases and three
which were initially purchased, then sold and leased back under
operating leases. Property additions, including the three B777s and
aircraft spare parts, amounted to $330 million. Property dispositions,
including the sale and leaseback of the three B777s and the sale of Dash
8 aircraft by Air Wisconsin, Inc., resulted in proceeds of $423 million.
In July 1995, United gave notice of its intention to retire all
$229 million of its outstanding Japanese yen-denominated deferred
purchase certificates during the third and fourth quarters of 1995. At
the same time, United gave notice of its intention to terminate related
operating leases for 39 aircraft, by exercising its right to acquire the
aircraft. The net acquisition cost of such aircraft is expected to
aggregate $436 million after making all scheduled rent payments.
At June 30, 1995, commitments for the purchase of property and
equipment, principally aircraft, approximated $3.9 billion, after
deducting advance payments. An estimated $0.9 billion will be spent
during the remainder of 1995, $1.1 billion in 1996, $1.3 billion in
1997, $0.4 billion in 1998 and $0.2 billion in 1999 and thereafter. The
major commitments are for the purchase of 29 B777 aircraft, two B747
aircraft and four B757 aircraft. The B777s are expected to be delivered
between 1995 and 1999 and the B747s and B757s are expected to be
delivered in 1996.
In addition to aircraft orders, United has arrangements with
Airbus Industrie and International Aero Engines to lease 21 A320
aircraft, which are scheduled for delivery through 1998. At June 30,
1995, United also had options for an additional 150 B737 aircraft, 33
B757 aircraft, 34 B777 aircraft, 43 B747 aircraft, 6 B767 aircraft and
50 A320 aircraft. Under the terms of certain of these options which are
exercisable during 1996 and 1997, United would forfeit significant
deposits on such options it does not exercise.
In April 1995, United announced that, under a revised fleet plan,
it would use most of the new aircraft to be delivered through 1997 to
replace older aircraft in its fleet. As a result, the number of
aircraft in United's operating fleet is expected to increase by 19
during that time, compared to an increase of 48 aircraft called for by
United's previous fleet plan. Funds necessary to finance aircraft
acquisitions are expected to be obtained from internally generated
funds, irrevocable external financing arrangements or other external
sources.
In May 1995, United issued $246 million of pass through
certificates under an effective shelf registration statement UAL and
United have on file with the Securities and Exchange Commission. The
pass through certificates were issued to finance or refinance certain
aircraft under operating leases. At June 30, 1995, up to $789 million
of securities could be issued under the shelf registration statement,
including secured and unsecured debt, equipment trust and pass through
certificates, equity or a combination thereof. UAL's ability to issue
equity securities is limited by its certificate of incorporation, which
was restated in connection with the recapitalization.
In June 1995, the Indianapolis Airport Authority issued $221
million of special facility bonds, guaranteed by United, related to the
maintenance facilities being constructed at its Indianapolis Maintenance
Center. In connection with the construction of the Indianapolis
Maintenance Center, United agreed to reach an $800 million capital
spending target by the year 2001 and employ at least 7,500 individuals
by the year 2004. In the event that such targets are not reached,
United may be required to make certain additional payments under related
agreements.
RESULTS OF OPERATIONS
UAL's results of operations for interim periods are not
necessarily indicative of those for an entire year, as a result of
seasonal factors to which United is subject. First and fourth quarter
results are normally affected by reduced travel demand in the fall and
winter and United's operations, particularly at its Chicago and Denver
hubs, are adversely affected by winter weather on occasion.
The results of operations in the airline business historically
fluctuate significantly in response to general economic conditions.
This is because small fluctuations in yield (passenger revenue per
revenue passenger mile) and cost per available seat mile can have a
significant effect on operating results. UAL anticipates industrywide
fare levels, low-cost competition, general economic conditions, fuel
costs, international governmental policies and other factors will
continue to affect its operating results.
The July 1994 employee investment transaction and recapitalization
resulted in wage and benefit reductions and work-rule changes which were
designed to reduce cash operating expenses. These cash expense
reductions are offset by non-cash compensation charges for stock
periodically committed to be released to employees under the ESOPs and
additional interest expense on the debentures issued at the time of the
recapitalization.
As a result of the recapitalization, UAL's capital structure
became more highly leveraged. With the increase in debt and reduction
in equity resulting from the recapitalization, UAL's exposure to certain
industry risks could be greater than might have been the case prior to
the recapitalization. In addition, the transaction resulted in new
labor agreements for certain employee groups and a new corporate
governance structure, which was designed to achieve balance between the
various employee-owner groups and public stockholders. The new labor
agreements and governance structure could inhibit management's ability
to alter strategy in a volatile, competitive industry by restricting
certain operating and financing activities, including the sale of assets
and the issuance of equity securities and the ability to furlough
employees. UAL's ability to react to competition may be hampered
further by the fixed long-term nature of these various agreements. The
continued success of the recapitalization will be dependent upon a
number of factors, including the state of the competitive environment in
the airline industry, competitive responses to United's efforts,
United's ability to achieve enduring cost savings through productivity
improvements and the renegotiation of labor agreements at the end of the
investment period.
United generates revenues and incurs expenses in numerous foreign
currencies. These expenses include reservation and ticket office
services, customer service, aircraft maintenance, catering, commissions,
aircraft leases and personnel costs. Changes in foreign currency
exchange rates impact operating income through changes in foreign
currency-denominated operating revenues and expenses. Despite the
adverse (favorable) effects a strengthening (weakening) foreign currency
will have on U.S. originating traffic, a strengthening (weakening) of
foreign currencies tends to increase (decrease) reported revenue and
operating income because United's foreign currency-denominated operating
revenue generally exceeds its foreign currency-denominated operating
expense for each currency. United's biggest net exposures are for
Japanese yen and Australian dollars. During the first six months of
1995, yen-denominated operating revenue net of yen-denominated operating
expense was approximately 19.9 billion yen (approximately $215 million),
and Australian dollar-denominated operating revenue net of Australian
dollar-denominated operating expense was approximately 84 million
Australian dollars (approximately $62 million).
Other non-operating income (expense) is also affected as a result
of transaction gains and losses resulting from rate fluctuation. The
foreign exchange gains and losses recorded by United result from the
impact of exchange rate changes on foreign currency denominated assets
and liabilities, primarily yen-denominated balances. To the extent
yen-denominated liability balances are predictable, United attempts to
minimize transaction gains and losses by investing in yen-denominated
time deposits to offset the impact of rate changes. In addition, United
entered into a foreign currency swap contract in 1994 to reduce exposure
to currency fluctuations in connection with other long-term
yen-denominated obligations. Where no significant liability exists to
offset, United mitigates its exposure to foreign exchange rate
fluctuations by converting excess local currencies generated to U.S.
dollars. At June 30, 1995, yen-denominated assets were approximately
equal to yen-denominated liabilities.
United expects that it will continue to be affected by the above
mentioned factors, but cannot predict how foreign currency exchange
rates will move in the future.
The Omnibus Budget Reconciliation Act of 1993 signed into law on
August 10, 1993, imposes a 4.3 cent per gallon tax on commercial
aviation jet fuel purchased for use in domestic operations. This new
fuel tax is scheduled to become effective October 1, 1995, and continue
until October 1, 1998. Based on United's 1994 domestic fuel consumption
of 1.7 billion gallons, the new fuel tax, when effective, is expected to
increase United's operating expenses by approximately $75 million
annually. United, through the Air Transportation Association, is
actively lobbying for repeal of this tax.
In the first quarter of 1995, United implemented a new travel
agency commission payment plan that offers a maximum of $50 for
round-trip domestic tickets and a maximum of $25 for one-way domestic
tickets. The new commission plan resulted in a reduction of
approximately $30 million in United's commission expense for the first
six months of 1995; however, United estimates the reduction of
commission expense in the second half of 1995 will be between $50
million and $60 million. Litigation challenging this payment plan is
pending. A decision on the defendant airlines' motion for summary
judgment and the plaintiff travel agencies' motion for preliminary
injunction is expected during the third quarter of 1995. (See Part II,
Item 1. Legal Proceedings)
Summary of Results and Impact of Recapitalization
UAL's earnings from operations were $340 million in the first six
months of 1995, compared to operating earnings of $131 million in the
first six months of 1994. UAL's net earnings in the 1995 six-month
period were $154 million ($11.74 per share, primary; $11.03 per share,
fully diluted), compared to a net loss of $42 million in the same period
of 1994 ($2.48 per share). The 1994 loss includes a $26 million after
tax charge for the cumulative effect of adopting Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits," which UAL adopted effective January 1, 1994.
In the second quarter of 1995, UAL's earnings from operations were
$302 million, compared to $167 million in the second quarter of 1994.
UAL's net earnings in the second quarter of 1995 were $151 million
($12.00 per share, primary; $10.94 per share, fully diluted), compared
to net earnings of $55 million in the first quarter of 1994 ($1.89 per
share).
The 1995 per share amounts above include the effects on equity of
the exchange of convertible debentures for Series A convertible
preferred stock, which had the effect of increasing additional capital
invested by $45 million, and the repurchase of Series B preferred stock,
which decreased equity by $2 million. See "Per Share Amounts" in the
notes to consolidated financial statements. Excluding the preferred
stock transactions, UAL's earnings per share were $9.20, primary, and
$8.46, fully diluted, for the 1995 second quarter and $8.85, primary,
and $8.50, fully diluted, for the 1995 six-month period.
In connection with the July 1994 recapitalization, each share of
old common stock was converted to one half share of new common stock
(and cash in lieu of fractional shares) and $84.81 in cash. As a
result, the number of outstanding shares was reduced proportionately.
Accordingly, the weighted average shares in the earnings per share
calculations are based on the number of old common shares outstanding
prior to the recapitalization and the reduced number of new common
shares outstanding subsequent to the transaction. Thus, direct
comparisons between per share amounts for the 1995 and 1994 periods
presented are not meaningful.
Management believes that a more complete understanding of UAL's
results can be gained by viewing them on a pro forma, "fully
distributed" basis. This approach considers all ESOP shares which will
ultimately be distributed to employees throughout the ESOP (rather than
just the shares committed to be released) to be immediately outstanding
and thus fully distributed. Consistent with this method, the ESOP
compensation expense is excluded from fully distributed net earnings.
On a fully distributed basis, UAL's net earnings for the 1995 second
quarter would have been $215 million compared to $151 million as
reported under generally accepted accounting principles. On a fully
distributed basis, UAL's net earnings for the 1995 six-month period
would have been $274 million compared to $154 million as reported under
generally accepted accounting principles. Per share amounts would be as
follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1995 June 30, 1995
GAAP Fully GAAP Fully
(Primary) Distributed (Primary) Distributed
<S> <C> <C> <C> <C>
Earnings before
preferred stock
transactions $ 9.20 $ 6.51 $ 8.85 $ 8.13
Preferred stock
transactions 2.80 1.32 2.89 1.33
$ 12.00 $ 7.83 $ 11.74 $ 9.46
</TABLE>
Specific factors affecting UAL's consolidated operations for the
second quarter and first six months of 1995 are described below.
Second Quarter 1995 Compared with Second Quarter 1994.
Operating revenues increased $313 million (9%). United's revenue
per available seat mile increased 5% to 9.68 cents. Passenger revenues
increased $290 million (9%) due to a 5% increase in yield to 11.97 cents
and a 4% increase in revenue passenger miles. Domestic revenue
passenger miles increased 5% and Pacific increased 6%. Atlantic revenue
passenger miles decreased 1% and Latin America was relatively unchanged.
Available seat miles increased 4% systemwide, as increases of 11% and
3% on Pacific and Domestic routes, respectively, were partially offset
by a 4% decrease in the Atlantic and a 1% decrease in Latin America.
United's system passenger load factor increased 0.3 points to 71.9%.
Cargo revenues increased $17 million (10%), as both freight and
mail revenues increased due to higher cargo volumes. Other operating
revenues increased $6 million (3%).
Operating expenses increased $178 million (5%); however, United's
cost per available seat mile increased only 2% from 8.77 cents to 8.91
cents, including ESOP compensation expense. Without the ESOP
compensation expense, United's 1995 second quarter cost per available
seat mile would have been 8.64 cents, a decrease of 1% from 1994. ESOP
compensation expense of $108 million in the 1995 second quarter
represents the estimated average fair value of ESOP stock committed to
be released to employees for the quarter, net of amounts used to satisfy
dividend requirements for previously allocated ESOP convertible
preferred shares. Landing fees and other rent increased $64 million
(44%) due to increased facilities rent, particularly due to new
facilities at Denver. Aircraft fuel expense increased $33 million (9%)
due to a 4% increase in consumption and a 4% increase in the average
price per gallon of fuel to 58.9 cents. Aircraft rent increased $31
million (13%) as a result of new aircraft acquired on operating leases.
Purchased services increased $30 million (13%) due principally to
volume-related increases in computer reservations fees and credit card
discounts. Food services increased $12 million (10%) due to the new
catering arrangements resulting from the 1994 sale of flight kitchens
and increased passenger volumes.
Salaries and related costs decreased $70 million (6%) primarily
due to savings resulting from wage and benefit concessions made by
employees participating in the ESOPs, partially offset by higher average
wage rates for other employee groups. Aircraft maintenance decreased
$23 million (19%) due principally to the removal of certain older
aircraft from United's operating fleet and the timing of maintenance
cycles.
Other expense amounted to $51 million in the second quarter of
1995 compared to $60 million in the second quarter of 1994. Interest
expense increased $18 million (22%) due primarily to interest on the
debentures issued in connection with the recapitalization. Included in
the second quarter of 1994 was a charge of $22 million for costs
incurred in connection with the employee investment transaction. In
addition, both the 1995 and 1994 periods included foreign exchange gains
of $10 million.
Six Months 1995 Compared with Six Months 1994.
Operating revenues increased $452 million (7%). United's revenue
per available seat mile increased 2% to 9.27 cents. Passenger revenues
increased $439 million (7%) due principally to a 6% increase in revenue
passenger miles and a 1% increase in yield to 11.77 cents. Domestic and
Pacific revenue passenger miles increased 7% and Latin America increased
1%. Atlantic revenue passenger miles decreased 3%. Available seat
miles increased 5% systemwide, as increases of 13% and 4% on Pacific and
Domestic routes, respectively, were partially offset by a 4% decrease in
the Atlantic. As a result, United's system passenger load factor
increased 0.9 points to 69.5%.
Cargo revenues increased $28 million (8%), as both freight and
mail revenues increased due to higher cargo volumes. Other operating
revenues decreased $15 million (3%) due primarily to a decrease in fuel
sales.
Operating expenses increased $243 million (4%); however, United's
cost per available seat mile decreased 1% from 8.90 cents to 8.82 cents,
including ESOP compensation expense. Without the ESOP compensation
expense, United's 1995 six month cost per available seat mile would have
been 8.57 cents, a decrease of 4% from 1994. ESOP compensation expense
of $197 million in the first six months of 1995 represents the estimated
average fair value of ESOP stock committed to be released to employees
for the period, net of amounts used to satisfy dividend requirements for
previously allocated ESOP convertible preferred shares. Landing fees
and other rent increased $81 million (27%) due to increased facilities
rent, primarily due to new facilities at Denver, and increased landing
fees as the number of departures increased 9%. Aircraft rent increased
$54 million (12%) as a result of new A320 and B777 aircraft on operating
leases. Purchased services increased $51 million (11%) due principally
to volume-related increases in computer reservations fees and credit
card discounts. Aircraft fuel expense increased $41 million (5%) as
fuel consumption increased 5% and the average price per gallon of fuel
remained relatively unchanged at 57.9 cents. Food services increased
$40 million (19%) due to the new catering arrangements resulting from
the 1994 sale of flight kitchens and increased passenger volumes.
Salaries and related costs decreased $159 million (7%) primarily
due to savings resulting from wage and benefit concessions made by
employees participating in the ESOPs, partially offset by higher average
wage rates for other employee groups. Aircraft maintenance decreased
$25 million (11%) due principally to the removal of certain older
aircraft from United's operating fleet and the timing of maintenance
cycles. Depreciation and amortization expense decreased $18 million
(5%), as certain assets, principally B727 aircraft, are now fully
depreciated. Other operating expenses decreased $40 million (7%) due
mainly to lower fuel sales.
Other expense amounted to $83 million in the first six months of
1995 compared to $132 million in the same period of 1994. Interest
expense increased $37 million (22%) due primarily to interest on the
debentures issued in connection with the recapitalization and the
convertible debentures issued in exchange for the Series A preferred
stock. Included in "Miscellaneous, net" in the 1995 six-month period
was a $41 million gain on the disposition of ten Dash 8 aircraft and
spare parts owned by Air Wisconsin, Inc. Included in the 1994 six-month
period was a charge of $41 million for costs incurred in connection with
the employee investment transaction. In addition, the 1995 and 1994
periods included foreign exchange gains of $2 million and $9 million,
respectively. Charges for minority interests in Apollo Travel Services
were $12 million in both the 1995 and 1994 six-month periods.
The income tax provision for the first six months of 1994 was
significantly impacted by the nondeductibility of certain
recapitalization costs.
Part II
Other Information
Item 1. Legal Proceedings.
In Re Airline Travel Agency Commission Litigation. On
February 13, l995 and dates thereafter United Air Lines, Inc.
("United"), a wholly owned subsidiary of UAL Corporation ("UAL"),
and six other airlines were sued in various courts around the
nation by travel agents and the American Society of Travel Agents
claiming as a class action that the carriers acted collusively in
violation of federal antitrust laws when they imposed a cap on
ticket sales commissions payable to travel agencies by the
carriers. As a result of an order by the multi-district panel,
the suits are now consolidated before the federal court in
Minneapolis. A discovery and motion filing schedule has been
established by this court, under which a hearing was held on July
7, 1995 on plaintiffs' motion for a preliminary injunction and the
carriers' motion for summary judgment. As relief, the plaintiffs
seek an order declaring the carriers' commission cap action to be
illegal and the recovery of damages (trebled) to the agencies
resulting from that action.
Summers et al. v. State Street Bank and Trust Company et al.
On April 14, 1995, plaintiffs filed a class action complaint
against State Street Bank and Trust Company ("State Street"), the
UAL Corporation Employee Stock Ownership Plan and the UAL
Corporation Supplemental Employee Stock Ownership Plan (together,
the "Plans") in the United States District Court for the Northern
District of Illinois. The complaint is brought on behalf of a
putative class of all persons who are, or were as of July 12,
1994, participants or beneficiaries of the Plans. Plaintiffs
allege that State Street breached various fiduciary duties under
the Employee Retirement Income Security Act of 1974 ("ERISA") in
connection with the 1994 purchase of UAL preferred stock by the
Plans. The Plans are nominal defendants; no relief is sought from
them. The complaint seeks a declaration that State Street
violated ERISA, restoration to the Plans by State Street of the
amount of an alleged "overpayment" for the stock, and other
relief. United is obligated, subject to certain exceptions, to
indemnify State Street for part or all of an adverse judgment and
State Street's defense costs. On July 12, 1995, the defendants
filed a motion to dismiss the complaint in its entirety. A ruling
is expected on that motion on or before the September 20, 1995
hearing set by the presiding judge.
Item 4. Submission of Matters to a Vote of Security Holders.
At the annual meeting of the stockholders of UAL Corporation
on May 18, 1995, the following matters were voted upon:
Description Votes
1. Election of Board of Directors
Public Directors:
John A. Edwardson 10,963,337 For
61,973 Withheld
Description Votes
Gerald Greenwald 10,963,063 For
62,247 Withheld
John F. McGillicuddy 10,958,961 For
66,349 Withheld
James J. O'Connor 10,954,344 For
70,966 Withheld
Paul E. Tierney, Jr. 10,929,222 For
96,088 Withheld
Independent Directors:
Duane D. Fitzgerald 4 For
0 Withheld
Richard D. McCormick 4 For
0 Withheld
John K. Van de Kamp 4 For
0 Withheld
Paul A. Volcker 4 For
0 Withheld
ALPA Director:
Harlow B. Osteboe 1 For
0 Withheld
IAM Director:
John R. Peterpaul 1 For
0 Withheld
Salaried/Management Employee Director:
Joseph V. Vittoria 3 For
0 Withheld
2. Approval of UAL Corporation 23,884,487 For
1995 Directors Plan 1,628,103 Against
646,716 Abstain
0 Broker Non-Votes
Description Votes
3. Approval of Charter 24,309,051 For
Amendments - Certain 1,082,107 Against
Definitions 768,148 Abstain
0 Broker Non-Votes
4. Approval of Charter 23,952,838 For
Amendments - Board 1,447,138 Against
Committee Matters 759,330 Abstain
0 Broker Non-Votes
5. Appointment of Independent 24,221,239 For
Public Accountants 1,316,834 Against
621,233 Abstain
0 Broker Non-Votes
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 3.1 - Certificate of Amendment of the Restated
Certificate of Incorporation of UAL Corporation (the
"Company") as filed in Delaware on May 25, 1995 (filed as
Exhibit 3.1 to the Company's Form 8-K dated June 27, 1995
and incorporated herein by reference).
Exhibit 10.1 - UAL Corporation 1995 Directors Plan (filed
as Exhibit 10.19 to the Company's Form 10-K/A (Amendment
No. 1) for the year ended December 31, 1994 and
incorporated herein by reference).
Exhibit 10.2 - Letter Agreement dated April 28, 1995
between UAL Corporation and United Air Lines, Inc. and
Joseph R. O'Gorman.
Exhibit 10.3 - UAL Corporation Retirement Plan for
Outside Directors, as supplemented March 30, 1995.
Exhibit 10.4 - Side Letter Agreement dated June 8, 1995
to Letter Agreement No. 6-1162-DLJ-1123 to the Agreement
dated December 18, 1990 between Boeing and United (and
United Worldwide Corporation) for acquisition of 777-200
aircraft (as previously amended and supplemented, the
"777-200 Purchase Agreement" (filed as Exhibit 10.7 to
the Company's Form 10-K for the year ended December 31,
1990, and incorporated herein by reference; supplements
thereto filed as (i) Exhibits 10.1, 10.2 and 10.22 to the
Company's Form 10-Q for the quarter ended June 30, 1993,
(ii) Exhibit 10.2 to the Company's Form 10-K for the year
ended December 31, 1993, (iii) Exhibit 10.14 to the
Company's Form 10-Q for the quarter ended June 30, 1994,
(iv) Exhibits 10.27 and 10.28 to the Company's Form 10-K
for the year ended December 31, 1994, and (v) Exhibits
10.2 and 10.3 to the Company's Form 10-Q for the quarter
ended March 31, 1995, and incorporated herein by
reference)). (Exhibit 10.4 hereto is filed with a
request for confidential treatment of certain portions
thereof.)
Exhibit 10.5 - Change Order No. 6 dated February 21, 1995
to the 777-200 Purchase Agreement. (Exhibit 10.5 hereto
is filed with a request for confidential treatment of
certain portions thereof.)
Exhibit 10.6 - Letter Agreement No. 6-1162-RCN-916 dated
May 23, 1995 to the 777-200 Purchase Agreement. (Exhibit
10.6 hereto is filed with a request for confidential
treatment of certain portions thereof.)
Exhibit 10.7 - Side Letter Agreement dated June 8, 1995
to Letter Agreement No. 6-1162-DLJ-1124 to the Agreement
dated December 18, 1990 between Boeing and United (and
United Worldwide Corporation) for acquisition of 747-400
aircraft (as previously amended and supplemented, the
"747-400 Purchase Agreement" (filed as Exhibit 10.8 to
the Company's Form 10-K for the year ended December 31,
1990, and incorporated herein by reference; supplements
thereto filed as (i) Exhibits 10.4 and 10.5 to the
Company's Form 10-K for the year ended December 31, 1991,
(ii) Exhibits 10.3, 10.4, 10.5, 10.6 and 10.22 to the
Company's Form 10-Q for the quarter ended June 30, 1993,
(iii) Exhibit 10.3 to the Company's Form 10-K for the
year ended December 31, 1993, (iv) Exhibit 10.14 to the
Company's Form 10-Q for the quarter ended June 30, 1994,
(v) Exhibits 10.29 and 10.30 to the Company's Form 10-K
for the year ended December 31, 1994, and (vi) Exhibits
10.4 through 10.8 to the Company's Form 10-Q for the
quarter ended March 31, 1995, and incorporated herein by
reference)). (Exhibit 10.7 hereto is filed with a
request for confidential treatment of certain portions
thereof.)
Exhibit 10.8 - Change Order No. 1 to the 747-400 Purchase
Agreement. (Exhibit 10.8 hereto is filed with a request
for confidential treatment of certain portions thereof.)
Exhibit 10.9 - Amendment No. 3 dated as of March __, 1995
to the Agreement dated August 10, 1992 between AVSA,
S.A.R.L., as seller, and United Air Lines, Inc., as
buyer, for the acquisition of Airbus Industrie A320-200
model aircraft (as previously amended and supplemented,
"A320-200 Purchase Agreement" (filed as Exhibit 10.14 to
the Company's Form 10-K for the year ended December 31,
1992, and incorporated herein by reference; supplements
thereto filed as (i) Exhibits 10.4 and 10.5 to the
Company's Form 10-K for the year ended December 31, 1993,
(ii) Exhibits 10.15 and 10.16 to the Company's Form 10-Q
for the quarter ended June 30, 1994, and (iii) Exhibit
10.31 to the Company's Form 10-K for the year ended
December 31, 1994, and incorporated herein by
reference)). (Exhibit 10.9 hereto is filed with a
request for confidential treatment of certain portions
thereof.)
Exhibit 11 - Calculation of fully diluted net
earnings per share.
Exhibit 12.1 - Computation of Ratio of
Earnings to Fixed Charges.
Exhibit 12.2 - Computation of Ratio of
Earnings to Fixed Charges and Preferred Stock
Dividend Requirements.
Exhibit 27 - Financial Data Schedule.
(b) Form 8-K dated June 27, 1995 to report UAL Corporation's
Certificate of Amendment of the Restated Certificate of
Incorporation as filed with the Secretary of State of
Delaware on May 25, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
UAL CORPORATION
By: /s/ Gerald Greenwald
Gerald Greenwald
Chairman and Chief
Executive Officer
By: /s/ Douglas A. Hacker
Douglas A. Hacker
Senior Vice President-Finance
(Principal Financial and
Accounting Officer)
Dated: August 9, 1995
Exhibit Index
Exhibit No. Description
3.1 Certificate of Amendment of the Restated Certificate of
Incorporation of UAL Corporation (the "Company") as
filed in Delaware on May 25, 1995 (filed as Exhibit 3.1
to the Company's Form 8-K dated June 27, 1995 and
incorporated herein by reference).
10.1 UAL Corporation 1995 Directors Plan (filed as Exhibit
10.19 to the Company's Form 10-K/A (Amendment No. 1) for
the year ended December 31, 1994 and incorporated herein
by reference).
10.2 Letter Agreement dated April 28, 1995 between UAL
Corporation, United Air Lines, Inc. and Joseph R.
O'Gorman.
10.3 UAL Corporation Retirement Plan for Outside Directors,
as supplemented March 30, 1995.
10.4 Side Letter Agreement dated June 8, 1995 to Letter
Agreement No. 6-1162-DLJ-1123 to the Agreement dated
December 18, 1990 between Boeing and United (and United
Worldwide Corporation) for acquisition of 777-200
aircraft (as previously amended and supplemented, the
"777-200 Purchase Agreement" (filed as Exhibit 10.7 to
the Company's Form 10-K for the year ended December 31,
1990, and incorporated herein by reference; supplements
thereto filed as (i) Exhibits 10.1, 10.2 and 10.22 to
the Company's Form 10-Q for the quarter ended June 30,
1993, (ii) Exhibit 10.2 to the Company's Form 10-K for
the year ended December 31, 1993, (iii) Exhibit 10.14 to
the Company's Form 10-Q for the quarter ended June 30,
1994, (iv) Exhibits 10.27 and 10.28 to the Company's
Form 10-K for the year ended December 31, 1994, and (v)
Exhibits 10.2 and 10.3 to the Company's Form 10-Q for
the quarter ended March 31, 1995, and incorporated
herein by reference)). (Exhibit 10.4 hereto is filed
with a request for confidential treatment of certain
portions thereof.)
10.5 Change Order No. 6 dated February 21, 1995 to the 777-
200 Purchase Agreement. (Exhibit 10.5 hereto is filed
with a request for confidential treatment of certain
portions thereof.)
10.6 Letter Agreement No. 6-1162-RCN-916 dated May 23, 1995
to the 777-200 Purchase Agreement. (Exhibit 10.6 hereto
is filed with a request for confidential treatment of
certain portions thereof.)
10.7 Side Letter Agreement dated June 8, 1995 to Letter
Agreement No. 6-1162-DLJ-1124 to the Agreement dated
December 18, 1990 between Boeing and United (and United
Worldwide Corporation) for acquisition of 747-400
aircraft (as previously amended and supplemented, the
"747-400 Purchase Agreement" (filed as Exhibit 10.8 to
the Company's Form 10-K for the year ended December 31,
1990, and incorporated herein by reference; supplements
thereto filed as (i) Exhibits 10.4 and 10.5 to the
Company's Form 10-K for the year ended December 31,
1991, (ii) Exhibits 10.3, 10.4, 10.5, 10.6 and 10.22 to
the Company's Form 10-Q for the quarter ended June 30,
1993, (iii) Exhibit 10.3 to the Company's Form 10-K for
the year ended December 31, 1993, (iv) Exhibit 10.14 to
the Company's Form 10-Q for the quarter ended June 30,
1994, (v) Exhibits 10.29 and 10.30 to the Company's Form
10-K for the year ended December 31, 1994, and (vi)
Exhibits 10.4 through 10.8 to the Company's Form 10-Q
for the quarter ended March 31, 1995, and incorporated
herein by reference)). (Exhibit 10.7 hereto is filed
with a request for confidential treatment of certain
portions thereof.)
10.8 Change Order No. 1 to the 747-400 Purchase Agreement.
(Exhibit 10.8 hereto is filed with a request for
confidential treatment of certain portions thereof.)
10.9 Amendment No. 3 dated as of March __, 1995 to the
Agreement dated August 10, 1992 between AVSA, S.A.R.L.,
as seller, and United Air Lines, Inc., as buyer, for the
acquisition of Airbus Industrie A320-200 model aircraft
(as previously amended and supplemented, "A320-200
Purchase Agreement" (filed as Exhibit 10.14 to the
Company's Form 10-K for the year ended December 31,
1992, and incorporated herein by reference; supplements
thereto filed as (i) Exhibits 10.4 and 10.5 to the
Company's Form 10-K for the year ended December 31,
1993, (ii) Exhibits 10.15 and 10.16 to the Company's
Form 10-Q for the quarter ended June 30, 1994, and (iii)
Exhibit 10.31 to the Company's Form 10-K for the year
ended December 31, 1994, and incorporated herein by
reference)). (Exhibit 10.9 hereto is filed with a
request for confidential treatment of certain portions
thereof.)
11 Calculation of fully diluted net earnings per
share.
12.1 Computation of Ratio of Earnings to Fixed
Charges.
12.2 Computation of Ratio of Earnings to Fixed
Charges and Preferred Stock Dividend Requirements.
27 Financial Data Schedule.
Exhibit 10.2
April 28, 1995
Mr. Joseph R. O'Gorman, Jr.
P.O. Box 422
Barrington, Illinois 60011
By letter dated March 30, 1995 (the "Termination Letter"),
UAL Corporation (the "Company") notified you that it did not
wish to extend beyond its earliest expiration date the term
of that certain letter agreement with you dated July 1,
1993, as amended and supplemented, by which you would
receive severance benefits under certain conditions if your
employment with the Company terminated subsequent to a
change in control (the "Severance Agreement"). As the result
of the Termination Letter, the Severance Agreement would
have expired on August 31, 1997.
For good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company
agrees with you that the expiration date of the Severance
Agreement is hereby extended to August 1, 1998. The
Termination Letter shall be deemed modified as necessary to
accomplish this extension.
In addition, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged,
United Air Lines, Inc. ("United") hereby agrees to amend and
restate the agreements set forth in those two letters to you
concerning supplemental retirement benefits (1) from United
dated February 25, 1991 and (2) from the Company and United
dated as of March 25, 1994 (each of which letters is hereby
superseded and terminated in its entirety), as follows:
A. United agrees to pay you, in addition to all other
benefits to which you may be entitled as United's
Executive Vice President - Fleet Operations and
Administration, a supplemental retirement benefit
computed and paid in accordance with United's
Management and Salaried Employee's Retirement Plan
and The United Air Lines, Inc. Supplemental
Retirement Plan (together, the "Plans") but
calculating your accrued benefit (the "Additional
Years of Service Credit") as if you had been
continuously employed by United from June 27, 1966 to
the date of your retirement from United. The amount
of this supplemental retirement benefit shall be
determined without decrement based on age at the time
of retirement, so that such benefit will be
determined as if you actually retired at age 65,
regardless of the actual age at which you retire.
This supplemental retirement benefit shall be offset
by the accrued benefit payable to you under the
Plans, and shall be paid out of United's general
funds pursuant to United's contractual obligation
hereunder, but no funds shall be placed in trust or
otherwise set aside by United to provide for payments
hereunder. Such supplemental retirement benefit shall
be payable at the same time and in the same manner as
you elect to receive your benefits under the Plans.
The Additional Years of Service Credit shall also
apply in determining your eligibility for, and the
amount of, your other retiree benefits.
B. Section 4(iii)(E) of the Severance Agreement is
amended by adding the following new sentence
immediately before the last sentence thereof: "For
purposes of determining, pursuant to the preceding
sentence, whether you could have retired and received
retirement benefits, and the amount of benefits you
would have been entitled to receive, with respect to
one or more of the foregoing insurance benefits, you
shall be credited with such additional years of
credited service as are credited to you for
supplemental pension benefit purposes pursuant to
that certain letter agreement entered into between
you and United dated as of April 28, 1995 (the
"Letter Agreement")."
C. Section 4(iii)(F) of the Severance Agreement is
amended by inserting the following immediately
preceding clause (x) in the last sentence thereof:
"(w) you shall be credited with, as of the Date of
Termination, such additional years of credited
service as are credited to you for supplemental
pension benefit purposes pursuant to the Letter
Agreement."
Please sign and return the enclosed copy of this letter,
which will, together with the Termination Letter and the
Severance Agreement and subject to the following sentence,
constitute our agreement on these subjects. The new
obligations of the Company and United under this letter
shall be subject in their entirety to the approval of the
Compensation Committee of the Board of Directors of the
Company, and shall not become effective unless and until the
date that such approval, if any, is given.
UAL Corporation
By: /s/ John A. Edwardson
John A. Edwardson
President and Chief
Operating Officer
United Air Lines, Inc.
By: /s/ John A. Edwardson
John A. Edwardson
President and Chief
Operating Officer
Agreed to and Accepted as of April 28, 1995
/s/ Joseph R. O'Gorman
Joseph R. O'Gorman
EXHIBIT 10.3
UAL CORPORATION
Retirement Plan for Outside Directors, as Supplemented March 30, 1995
I. Effective Date
The provisions of this plan shall be effective for any Eligible
Director (as defined below) who terminates his/her service with UAL
Corporation (the "Corporation") on or after January 1, 1987 (the
"Effective Date") thereto. Notwithstanding the foregoing, the
provisions of this plan which become operable upon the occurrence of
a Change in Control (as hereinafter defined) shall not apply to any
participant who first becomes an Outside Director (as hereinafter
defined) subsequent to the Change in Control which occurred on July
12, 1994 (the "Recapitalization") and who as of March 30, 1995, has
not satisfied the months of service requirement entitling such
participant to benefits hereunder (a "Subsequent Director"). With
respect to each Subsequent Director, the plan shall be read and
interpreted as if the provisions hereof pertaining to a Change in
Control were deleted herefrom, and no Subsequent Director shall be
entitled to any benefits under, or to enforce any provisions of, this
plan that apply to or became operative as a result of a Change in
Control.
II. Purpose
This Plan is designed to assist the Corporation in attracting
and retaining as directors individuals of superior talent, ability
and achievement.
III. Eligibility
An Eligible Director entitled to benefits under this Plan shall
be any Outside Director (as defined below) of the Corporation who has
served as a director for at least sixty months, and who retires from
the Corporation's Board of Directors or otherwise terminates service
as a member of such Board of Directors on or after the Effective
Date. An Outside Director shall be a director of the Corporation who
is not entitled to receive employee pension benefits from the
Corporation or from any of its subsidiaries.
IV. Benefits
1. An Eligible Director who retires or otherwise terminates service
as a member of the Corporation's Board of Directors at or after
age 70, shall receive annually for life a percentage of the
annual retainer in effect for directors as of the Effective Date
or as of the date of the director's retirement, whichever is
greater (the "Applicable Annual Retainer"), in accordance with
the following schedule based on his/her months of service as a
director:
At least 60 but less than 72 months of service - 50%
At least 72 but less than 84 months of service - 60%
At least 84 but less than 96 months of service - 70%
At least 96 but less than 108 months of service - 80%
At least 108 but less than 120 months of service - 90%
120 or more months of service - 100%
Notwithstanding the foregoing, with respect to an Eligible
Director who is an Outside Director immediately prior to a
Change in Control (as defined below) and who thereafter
retires or otherwise terminates service as a member of the
Corporation's Board of Directors in connection with such
Change in Control or at any time thereafter, and regardless
of such Eligible Director's age at the time of such retirement
or other termination or service, 'Applicable Annual Retainer'
shall mean the greatest of (a) the annual retainer in effect for
directors on January 1, 1987, (b) the annual retainer in effect
or directors immediately prior to the Change in Control and (c)
the annual retainer in effect for directors on the date of such
retirement or other termination of service.
2. An Eligible Director who retires or otherwise terminates service
prior to age 70 shall receive annually for a period equal to the
lesser of (a) the number of months of his/her service as a
director of the Corporation, or (b) his/her life, the percentage
of the Applicable Annual Retainer (determined after giving
effect to the last sentence of Section I of Article IV hereof)
determined in accordance with the schedule set forth in Section
1 of Article IV hereof.
3. Benefits under this Plan shall be payable on or about the 5th
day of each February, May, August and November (the "Payment
Months"). Payments shall commence in the Payment Month
immediately after an Eligible Director's retirement.
4. If a retired Eligible Director dies, leaving a surviving spouse,
before receiving payments under the Plan for a period ("Minimum
Payment Period") equal to the lesser of (a) 120 months, or (b)
his/her months of service as a director of the Corporation,
his/her surviving spouse shall be entitled to payments hereunder
for a period equal to the lesser of (a) the lifetime of the
surviving spouse, or (b) the balance of the Minimum Payment
Period.
5. For purposes of this Plan, a "Change in Control" shall be deemed
to have occurred if (A) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the
Company's then outstanding securities (such percentage ownership
to be determined in the manner provided in Rule
13-3(d)(1)(i) under the Exchange Act); or (B) during any period
of two consecutive years or portion thereof (not including any
period prior to the execution of this Amendment), individuals
who at the beginning of such period constitute the Board and any
new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a
transaction described in clause (A) or (C) of this Subsection)
whose election by the Board or nomination for election by the
Company's shareholders was approved by a vote of at least two-
thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election
or nomination for election was previously so approved, cease for
any reason to constitute a majority thereof; or (C) the
shareholders of the Company approve a merger or consolidation of
the Company with any other corporation (or similar transaction),
other than a merger or consolidation (or similar transaction)
which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
voting securities of the surviving entity) at least 80% of the
combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger,
consolidation or similar transaction (either alone or in
combination with new or additional voting securities held by
management of the Company and its subsidiaries) or the
shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets. For purposes of (I) clause (A) of the
preceding sentence, beneficial ownership of securities of United
Air Lines, Inc. ("United") representing 25% or more of the
combined voting power of United's then outstanding securities
shall be deemed to constitute such beneficial ownership of the
Company and (II) clause (C) of the preceding sentence, the
approval by the shareholders of United of a plan of complete
liquidation of United or an agreement for the sale or
disposition by United of all or substantially all of United's
assets shall be deemed to constitute approval by the
shareholders of the Company of such events in respect of the
Company.
6. For purposes of this Article IV an Outside Director who is an
Outside Director immediately prior to a Change in Control and
who retires or otherwise terminates service in connection with
such Change in Control or at any time thereafter (a) shall be
deemed to have served as a director of the Corporation for a
period of months equal to the greater of (i) his or her actual
period of service plus 36 or (ii) 60 (and "his/her months of
service" (as used in Section 1 above) and phrases of similar
import in this Plan shall be calculated by giving effect to such
deemed service) and (b) shall be deemed to be 3 years older than
his/her actual age at the time of his/her retirement or other
termination of service.
V. Administration
The Plan shall be administered by the Corporation's Executive
Committee (the "Committee"). The Committee shall have plenary
authority in its discretion, but subject to the provisions of the
Plan, to interpret the Plan, and to make all determinations deemed
advisable for the administration of the Plan. The determinations of
the Committee shall be conclusive and binding on all interested
parties.
VI. Miscellaneous
1. Amendment and Termination. The Committee may amend, modify,
suspend, or terminate the Plan at any time prior to the
occurrence of a Change in Control, without the consent of the
participants but, in the event of any such amendment,
modification, suspension, or termination, benefit payments which
have already accrued, are payable in the future, or are being
paid, will continue in accordance with the Plan as in effect
prior to such amendment, modification, suspension, or
termination. Upon or subsequent to the occurrence of a Change
in Control, the Committee may amend, modify, suspend or
terminate the Plan only with the consent of all participants
herein.
2. Rights of Directors. Neither the establishment of the Plan nor
any action hereafter taken by the Corporation or the Committee
shall be construed as giving to any director any vested right to
a benefit from the Plan beyond the terms of the Plan.
3. Liability. Neither the Board of Directors of the Corporation
nor any member of the Committee nor any person to whom any of
them may delegate any duty or power in connection with
administering the Plan shall be personally liable for any action
or failure to act with respect to the Plan.
4. Nonassignability. Benefits payable under the Plan shall not be
subject in any manner to anticipation, assignment, pledge,
alienation, or charge by an Eligible Director or his/her
surviving spouse; nor shall any such benefits be in any manner
liable for or subject to the debts or any other liabilities of
the Eligible Director or his/her surviving spouse; nor shall any
interest of any Eligible Director or his/her surviving spouse
under the Plan be subject to garnishment, attachment, lien, or
levy of any kind.
EXHIBIT 10.4
United Air Lines, Inc.
P.O. Box 66100
Chicago, Illinois 60666
Subject: Side Letter Agreement to Letter Agreement
No. 6-1162-DLJ-1123 to Purchase Agreement No.
1663 - [*CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT] ; Termination Of Side Letter
Gentlemen:
Reference is made to Letter Agreement No. 6-1162-DLJ-1123 (the
"Letter Agreement") to Purchase Agreement No. 1663 (as
previously amended and supplemented, including all previously
executed letter agreements, the "Purchase Agreement") among The
Boeing Company ("Boeing"), United Air Lines, Inc. ("United")
and United Worldwide Corporation ("Worldwide") relating to the
sale by Boeing and the purchase by United and Worldwide
(collectively the "Buyer") of Model 777 aircraft.
This letter amendment (this "Letter Amendment"), when accepted
by Buyer, will become part of the Letter Agreement and part of
the Purchase Agreement, and will evidence our further agreement
with respect to the matters net forth below.
All terms used herein and in the Letter Agreement, and not
defined herein, shall have the same meaning as in the Letter
Agreement. If there is any inconsistency between the terms of
this Letter Amendment and the Letter Agreement or the Purchase
Agreement, the terms of this Letter Amendment will govern.
[*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
3. [*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT] United and Boeing hereby agree that
the Letter Agreement will be terminated.
If the foregoing correctly sets forth your understanding of our
agreement with respect to the matters addressed above, please
indicate your acceptance and approval below.
ACCEPTED AND AGREED TO THIS 8th day of June, 1995.
THE BOEING COMPANY UNITED AIRLINES INC.
By: /s/ R.C. Nelson By: /s/ D.A. Hacker
Its: Attorney-in-Fact Its: Senior Vice President &
Chief Financial Officer
UNITED WORLDWIDE CORPORATION
By: /S/ R.C. Nelson
Its: Attorney-in-Fact
EXHIBIT 10.5
Enclosure C to
U-7210-9431018
CHANGE ORDER NO. 6
DATED
FEBRUARY 21, 1995
TO
PURCHASE AGREEMENT NO. 1663
BETWEEN
THE BOEING COMPANY
AND
UNITED AIR LINES
Purchase Agreement No. 1663, dated December 18, 1990, between The
Boeing Company and United Airlines, is hereby amended in
accordance with Article 7.1 thereof as follows:
I. Changes To Detail Specification D019W001-UAL-IA.
The effects of the changes listed below are hereby incorporated
into Detail Specification D019W001-UAL-IA under Revision F, dated
November 15, 1994.
CHANGE NO./TITLE/AFFECTED AIRCRAFT:
CHANGE REQUESTS
None
MASTER CHANGES
[*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
MISCELLANEOUS CHANGES
[*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Cumulative Weight Effect:
The cumulative effect of the foregoing changes, except Rapid
Revisions, on the weight of the affected Model 777-222 Aircraft,
as reflected in Paragraph 3-60-00 of the Detail Specification is:
Affected MEW OEW
Aircraft lbs. lbs.
[*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
II. Effect of Changes on Purchase Agreement No. 1663.
The effects of the foregoing changes, except Rapid Revisions,
on the scheduled month of delivery, basic price and advance
payment base price of each affected Aircraft, as described in
Articles 2 and 3. respectively, of the Purchase Agreement,
are set forth below:
Effect On Effect On Basic
Affected Delivery Price Per Aircraft
Aircraft Month (Art.2) (Art.3 1990 Ste $)
[*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
SIGNED as of the day and year first above written.
THE BOEING COMPANY UNITED AIR LINES, INC
By: /s/ R.C. Nelson By: /s/ D.A. Hacker
Title: Attorney-in-Fact Title: Senior Vice President
and Chief Financial Officer
EXHIBIT 10.6
May 23, 1995
6-1162-RCN-916
United Air Lines, Inc.
Executive Offices
P. 0. Box 66100
Chicago, IL 60666-0100
Attention: J. L. Pollock Sr.
Staff Representative
Aircraft Purchasing
Subject: Settlement of Certain Business Matters
Reference: a) Letter Agreement No. 6-1162-DLJ-948;
[*CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]
b) Letter No. 6-1162-RCN-830;
[*CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]
c) Letter No. 6-1162-RCN-880;
[*CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]
d) Letter No. 6-1162-RCN-892;
[*CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]
Dear Jerry:
This letter is to confirm the settlement reached between Boeing
and United with respect to the matters listed below.
[*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
If the foregoing correctly sets forth your understanding of our
agreement with respect to the matters addressed above, please
indicate your acceptance and approval below.
Very truly yours,
THE BOEING COMPANY
By: /s/ R.C. Nelson
Its: Attorney-In-Fact
ACCEPTED AND AGREED TO THIS
Date: June 2, 1995
UNITED AIR LINES, INC.
By: /s/ D.A. Hacker
Its: Senior Vice President and
Chief Financial Officer
EXHIBIT 10.7
United Air Lines, Inc.
P.O. Box 66100
Chicago, Illinois 60666
Subject: Side Letter Agreement to Letter Agreement
No-6-1162-DLJ-1124 to Purchase Agreement
No. 1670 - Assignment; Termination of Side Letter
Gentlemen:
Reference is made to Letter Agreement No. 6-1162-DLJ-1124 (the
"Letter Agreement) to Purchase Agreement No. 1670 (as previously
amended and supplemented, including all previously executed
letter agreements, the "Purchase Agreement") among The Boeing
Company ("Boeing"), United Air Lines, Inc. ("United") and United
Worldwide Corporation ("Worldwide,,) relating to the sale by
Boeing and the purchase by United arid Worldwide (collectively
the "Buyer") of Model 747 aircraft.
This letter amendment (this "Letter Amendment"), when accepted by
Buyer, will become part of the Letter Agreement and part of the
Purchase Agreement, and will evidence our further agreement with
respect to the matters set forth below.
All terms used herein and in the Letter Agreement, and not
defined herein, shall have the same meaning as in the Letter
Agreement. if there is any inconsistency between the terms of
this Letter Amendment and the Letter Agreement or the Purchase
Agreement, the terms of this Letter Amendment will govern.
[*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
3. [*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT], United and Boeing hereby agree that the
Letter Agreement will be terminated.
If the foregoing correctly sets forth your understanding of our
agreement with respect to the matters addressed above, please
indicate your acceptance and approval below.
ACCEPTED AND AGREED TO THIS 8th day of June, 1995.
THE BOEING COMPANY UNITED AIR LINES, INC.
By: /s/ R.C. Nelson By: /s/ D.A. Hacker
Its: Attorney-in-Fact Its: Senior Vice President &
Chief Financial Officer
UNITED WORLDWIDE CORPORATION
By: /s/ D.A. Hacker
Its: Attorney-in-Fact
EXHIBIT 10.8
Enclosure D to
T-7400-930145
CHANGE ORDER NO. 1
TO
PURCHASE AGREEMENT NO. 1670
BETWEEN
THE BOEING COMPANY
AND
UNITED AIR LINES, INC.
Purchase Agreement No. 1670 between The Boeing Company and United
Air Lines, Inc. is hereby amended in accordance with Article 7.3
as follows:
I. CHANGES TO DETAIL SPECIFICATION D6-35273UAL
The effects of the changes listed below are hereby incorporated
into Detail Specification D6-35273UAL under Revision "All dated
August 15, 1993.
A. MASTER CHANGES
[*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
B. MISCELLANEOUS CHANGES
[*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
II. CUMULATIVE EFFECT ON AIRCRAFT WEIGHT
The cumulative effects of the foregoing changes on the
Model 747-422 airplane weight as reflected in Detail
Specification Paragraph 3-60-00 are:
Aircraft MEW OEW
[*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
III. EFFECT ON PURCHASE AGREEMENT NO. 1670
Delivery Schedule: None.
Price of Aircraft: The basic price of each aircraft as
set forth in Article 3.1 of Purchase
Agreement No. 1670 shall be increased
as shown below.
[*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Signed as of the day and year first above written.
THE BOEING COMPANY UNITED AIR LINES, INC.
By: /s/ R.C. Nelson By: /s/ D.A. Hacker
Title: Attorney-in-fact Title: Senior Vice President
and Chief Financial Officer
Enclosure: One advance copy of Detail Specification
D6-35273UAL, Revision A, dated August 15, 1995.
EXHIBIT 10.9
AMENDMENT No. 3
TO THE A320 PURCHASE AGREEMENT
dated as of August 10, 1992
between
AVSA, S.A.R.L.,
and
UNITED AIR LINES, INC.
This Amendment No. 3 (hereinafter referred to as the "Amendment")
is entered into as of March _, 1995, by and between AVSA,
S.A.R.L., a societe a responsabilite limitee organized and
existing under the laws of the Republic of France, having its
registered office located at 2, Rond Point Maurice Bellonte,
31700 Blagnac (France) (hereinafter referred to as the "Seller"),
and UNITED AIR LINES, Inc., a corporation organized and existing
under the laws of the State of Delaware, United States of
America, having its principal corporate offices located at 1200
East Algonquin Road, Elk Grove Village, Illinois 60007
(hereinafter referred to as the "Buyer").
WITNESSETH:
WHEREAS, the Buyer and the Seller have entered into an A320
Purchase Agreement, dated as of August 10, 1992 (which agreement,
as previously amended by and supplemented with all Exhibits,
Appendices, Letter Agreements, and Amendments attached thereto is
hereinafter called the "Agreement"), which Agreement relates to
the sale by the Seller and the purchase by the Buyer of certain
firmly ordered Airbus Industrie A320-200 model aircraft (the
"Aircraft") and certain Airbus Industrie A320-200 model option
aircraft (the "Option Aircraft"). Amendment 1 was signed
November 24, 1993. Amendment 2 was signed April 22, 1994.
WHEREAS, the Buyer and the Seller agree to amend the Agreement by
[*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT].
WHEREAS, capitalized terms used herein and not otherwise defined
in this Amendment shall have the meaning assigned to them in the
Agreement. The terms "herein," "hereof," and "hereunder" and
words of similar import refer to this Amendment.
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
[*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Option Aircraft No. Month of Delivery
1 [*CONF.TREAT.REQ.]
2 [*CONF.TREAT.REQ.]
3 [*CONF.TREAT.REQ.]
4 [*CONF.TREAT.REQ.]
5 [*CONF.TREAT.REQ.]
6 [*CONF.TREAT.REQ.]
7 [*CONF.TREAT.REQ.]
8 [*CONF.TREAT.REQ.]
9 [*CONF.TREAT.REQ.]
10 [*CONF.TREAT.REQ.]
11 [*CONF.TREAT.REQ.]
12 [*CONF.TREAT.REQ.]
13 [*CONF.TREAT.REQ.]
14 [*CONF.TREAT.REQ.]
15 [*CONF.TREAT.REQ.]
16 [*CONF.TREAT.REQ.]
17 [*CONF.TREAT.REQ.]
18 [*CONF.TREAT.REQ.]
19 [*CONF.TREAT.REQ.]
20 [*CONF.TREAT.REQ.]
21 [*CONF.TREAT.REQ.]
22 [*CONF.TREAT.REQ.]
23 [*CONF.TREAT.REQ.]
Option Aircraft No. Month of Delivery
24 [*CONF.TREAT.REQ.]
25 [*CONF.TREAT.REQ.]
26 [*CONF.TREAT.REQ.]
27 [*CONF.TREAT.REQ.]
28 [*CONF.TREAT.REQ.]
29 [*CONF.TREAT.REQ.]
30 [*CONF.TREAT.REQ.]
31 [*CONF.TREAT.REQ.]
32 [*CONF.TREAT.REQ.]
33 [*CONF.TREAT.REQ.]
34 [*CONF.TREAT.REQ.]
35 [*CONF.TREAT.REQ.]
36 [*CONF.TREAT.REQ.]
37 [*CONF.TREAT.REQ.]
38 [*CONF.TREAT.REQ.]
39 [*CONF.TREAT.REQ.]
40 [*CONF.TREAT.REQ.]
41 [*CONF.TREAT.REQ.]
42 [*CONF.TREAT.REQ.]
43 [*CONF.TREAT.REQ.]
44 [*CONF.TREAT.REQ.]
45 [*CONF.TREAT.REQ.]
46 [*CONF.TREAT.REQ.]
47 [*CONF.TREAT.REQ.]
48 [*CONF.TREAT.REQ.]
49 [*CONF.TREAT.REQ.]
50 [*CONF.TREAT.REQ.]
UNQUOTE
3. EFFECT OF AMENDMENT
The Agreement shall be deemed amended to the extent herein
provided, and, except as specifically amended hereby, shall
continue in full force and effect in accordance with its
original terms.
4. CONFIDENTIALITY
Subject to any legal or governmental requirements of
disclosure, the parties (which for this purpose shall
include their employees, agents and advisors) shall maintain
strictly confidential the terms and conditions of this
Amendment and any information, reports or other data
furnished hereunder or in connection with the negotiation of
this Amendment. Without limiting the generality of the
foregoing, the Buyer shall use its best efforts to limit the
disclosure of the contents of this Amendment to the extent
legally permissible in any filing required to be made by the
Buyer with any governmental agency and shall make such
applications as shall be necessary to implement the
foregoing. The Buyer and Seller shall consult with each
other prior to the making of any public disclosure or filing
permitted hereunder of this Amendment or the terms and
conditions hereof. Each party will inform the other of
receipt of any legal demand, whether by subpoena, discovery
request or otherwise, for disclosure of this Amendment or
its contents. The provisions of this paragraph 4 shall
survive any termination of this Amendment.
If the foregoing correctly sets forth our understanding, please
indicate your acceptance by signing in the space provided below.
Agreed and Accepted, Yours sincerely,
UNITED AIR LINES, INC. AVSA, S.A.R.L.
By: /s/ D.A. Hacker By: /s/ Christophe Mourey
Its: Senior V.P. Finance & CFO Its: Chief Executive Officer
Date: 4/28/95 Date:
APPENDIX 1
[*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
<TABLE>
<CAPTION>
Exhibit 11
UAL Corporation and Subsidiary Companies
Calculation of Fully Diluted Net Earnings Per Share
(In Millions, Except Per Share)
Three Months Six Months
Ended June 30 Ended June 30
1995 1994(1) 1995 1994(1)
<S> <C> <C> <C> <C>
Earnings or loss:
Earnings (loss) before preferred stock
transactions and cumulative
effect of accounting change $ 151 $ 55 $ 154 $ (16)
Preferred stock dividends (10) - (20) -
Interest on convertible debentures 6 1 11 1
Earnings (loss) before preferred stock
transactions and cumulative
effect of accounting change for
fully diluted calculation 147 56 145 (15)
Preferred stock transactions 43 - 43 -
Cumulative effect of accounting change - - - (26)
Net earnings (loss) for
fully diluted calculation $ 190 $ 56 $ 188 $ (41)
Shares:
Average number of shares of common stock
outstanding during the period 12.3 24.5 12.3 24.5
Additional shares assumed issued at the
beginning of the period (or at the date
of issuance) for conversion of
preferred stock 2.6 3.8 2.2 3.8
Additional shares assumed issued at the
beginning of the period for conversion
of convertible debentures 2.0 0.1 2.0 0.1
Additional shares assumed issued at the
beginning of the period (or at the date
of issuance) for exercises of dilutive
stock options and stock award plans
(after deducting shares assumed
purchased under the treasury
stock method) 0.5 0.2 0.5 0.3
Average number of shares for fully
diluted calculation 17.4 28.6 17.0 28.7
Fully diluted per share amounts:
Earnings (loss) before preferred stock
transactions and cumulative
effect of accounting change $ 8.46 $ 1.95 $ 8.50 $ (0.53)
Preferred stock transactions 2.48 - 2.53 -
Cumulative effect of accounting change - - - (0.90)
Net earnings (loss) $ 10.94 $ 1.95 $ 11.03 $ (1.43)
(1) This calculation is submitted in accordance with Regulation S-K item
601(b)(11), although it is contrary to paragraph 40 of APB Opinion No.
15 because it produces an antidilutive result.
</TABLE>
<TABLE>
<CAPTION>
Exhibit 12.1
UAL Corporation and Subsidiary Companies
Computation of Ratio of Earnings to Fixed Charges
Six Months Ended
June 30
1995 1994
(In Millions)
<S> <C> <C>
Earnings:
Earnings (loss) before income taxes $ 257 $ (1)
Fixed charges, from below 587 497
Undistributed earnings of affiliates (23) -
Interest capitalized (22) (19)
Earnings $ 799 $ 477
Fixed charges:
Interest expense $ 203 $ 166
Portion of rental expense
representative of the
interest factor 384 331
Fixed charges $ 587 $ 497
Ratio of earnings to
fixed charges 1.36 (a)
(a) Earnings were inadequate to cover fixed charges by $20 million in the
first six months of 1994.
</TABLE>
<TABLE>
<CAPTION>
Exhibit 12.2
UAL Corporation and Subsidiary Companies
Computation of Ratio of Earnings to Fixed Charges
and Preferred Stock Dividend Requirements
Six Months Ended
June 30
1995 1994
(In Millions)
<S> <C> <C>
Earnings:
Earnings (loss) before income taxes $ 257 $ (1)
Fixed charges, from below 625 525
Undistributed earnings of affiliates (23) -
Interest capitalized (22) (19)
Earnings $ 837 $ 505
Fixed charges:
Interest expense $ 203 $ 166
Preferred stock dividend
requirements 38 28
Portion of rental expense
representative of the
interest factor 384 331
Fixed charges and preferred
stock dividend requirements $ 625 $ 525
Ratio of earnings to fixed charges
and preferred stock dividend
requirements 1.34 (a)
(a) Earnings were inadequate to cover fixed charges and preferred stock
dividend requirements by $20 million in the first six months of 1994.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UAL
CORPORATION'S STATEMENT OF CONSOLIDATED OPERATIONS FOR THE SIX MONTHS ENDED
JUNE 30, 1995 AND CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL POSITION AS
OF JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<PERIOD-TYPE> 6-MOS
<CASH> 380
<SECURITIES> 1,566
<RECEIVABLES> 1,040
<ALLOWANCES> 0
<INVENTORY> 307
<CURRENT-ASSETS> 3,694
<PP&E> 12,038
<DEPRECIATION> 5,436
<TOTAL-ASSETS> 12,102
<CURRENT-LIABILITIES> 4,971
<BONDS> 3,992
0
0
<COMMON> 0
<OTHER-SE> (522)
<TOTAL-LIABILITY-AND-EQUITY> 12,102
<SALES> 0
<TOTAL-REVENUES> 7,149
<CGS> 0
<TOTAL-COSTS> 6,809
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 203
<INCOME-PRETAX> 257
<INCOME-TAX> 103
<INCOME-CONTINUING> 154
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 154
<EPS-PRIMARY> 11.74
<EPS-DILUTED> 11.03
</TABLE>
