FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
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 (847) 700-4000
------------------------------------------------------------------
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 April 30, 1998
----- --------------
Common Stock ($0.01 par value) 57,755,726
UAL Corporation and Subsidiary Companies Report on Form 10-Q
------------------------------------------------------------
For the Quarter Ended March 31, 1998
------------------------------------
Index
- -----
PART I. FINANCIAL INFORMATION Page No.
- ------ --------------------- -------
Item 1. Financial Statements
Condensed Statements of Consolidated 3
Financial Position - as of March 31, 1998
(Unaudited) and December 31, 1997
Statements of Consolidated Operations 5
(Unaudited) - for the three months ended
March 31, 1998
Condensed Statements of Consolidated 6
Cash Flows (Unaudited) - for the three
months ended March 31, 1998
Notes to Consolidated Financial 7
Statements (Unaudited)
Item 2. Management's Discussion and Analysis 10
of Financial Condition and Results of
Operations
Item 3. Quantitative and Qualitative Disclosures 13
About Market Risk
PART II. OTHER INFORMATION
- ------- -----------------
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
- ----------
Exhibit Index 16
- -------------
PART I. FINANCIAL INFORMATION
------ ---------------------
Item 1. Financial Statements
UAL Corporation and Subsidiary Companies
Condensed Statements of Consolidated Financial Position
(In Millions)
<TABLE>
<CAPTION>
March 31,
1998 December 31,
Assets (Unaudited) 1997
----------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 216 $ 295
Short-term investments 502 550
Receivables, net 1,171 1,051
Inventories, net 377 355
Deferred income taxes 241 244
Prepaid expenses and other 344 453
------ ------
2,851 2,948
------ ------
Operating property and equipment:
Owned 14,950 14,196
Accumulated depreciation
and amortization (5,115) (5,116)
------ ------
9,835 9,080
------ ------
Capital leases 2,393 2,319
Accumulated amortization (599) (625)
------ ------
1,794 1,694
------ ------
11,629 10,774
------ ------
Other assets:
Investments in affiliates 241 223
Intangibles, net 699 703
Aircraft lease deposits 346 318
Prepaid rent 514 60
Other 788 777
------ ------
2,588 2,081
------ ------
$ 17,068 $ 15,803
====== ======
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
UAL Corporation and Subsidiary Companies
Condensed Statements of Consolidated Financial Position
(In Millions)
March 31,
1998 December 31,
Liabilities and Stockholders' Equity (Unaudited) 1997
----------- ------------
<S> <C> <C>
Current liabilities:
Short-term borrowings $ 119 $ -
Current portions of long-term debt
and capital lease obligations 338 406
Advance ticket sales 1,534 1,267
Accounts payable 1,025 1,030
Other 2,505 2,545
------ ------
5,521 5,248
------ ------
Long-term debt 2,786 2,092
------ ------
Long-term obligations under
capital leases 1,745 1,679
------ ------
Other liabilities and deferred credits:
Postretirement benefit liability 1,405 1,361
Deferred gains 1,191 1,210
Other 1,153 1,261
------ ------
3,749 3,832
------ ------
Company-obligated mandatorily
redeemable preferred securities
of a subsidiary trust 101 101
------ ------
Preferred stock committed to
Supplemental ESOP 600 514
------ ------
Stockholders' equity:
Preferred stock - -
Common stock at par 1 1
Additional capital invested 3,064 2,876
Retained earnings 344 309
Unearned ESOP preferred stock (166) (177)
Other (677) (672)
------ ------
2,566 2,337
------ ------
Commitments and contingent
liabilities (See note)
$ 17,068 $ 15,803
====== ======
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
UAL Corporation and Subsidiary Companies
Statements of Consolidated Operations (Unaudited)
(In Millions, Except Per Share)
Three Months
Ended March 31
1998 1997
---- ----
<S> <C> <C>
Operating revenues:
Passenger $ 3,565 $ 3,626
Cargo 215 195
Other 275 300
------ ------
4,055 4,121
------ ------
Operating expenses:
Salaries and related costs 1,309 1,240
ESOP compensation expense 258 184
Aircraft fuel 441 554
Commissions 317 364
Purchased services 337 307
Aircraft rent 233 237
Landing fees and other rent 203 218
Depreciation and amortization 191 176
Aircraft maintenance 156 138
Other 487 509
------ ------
3,932 3,927
------ ------
Earnings from operations 123 194
------ ------
Other income (expense):
Interest expense (80) (69)
Interest capitalized 26 24
Interest income 16 12
Equity in earnings of affiliates 22 25
Miscellaneous, net (11) (15)
------ ------
(27) (23)
------ ------
Earnings before income taxes and
distributions on preferred securities 96 171
Provision for income taxes 34 65
------ ------
Earnings before distributions on
preferred securities 62 106
Distributions on preferred
securities, net of tax (1) (1)
------ ------
Net earnings $ 61 $ 105
====== ======
Per share, basic $ 0.60 $ 1.45
====== ======
Per share, diluted $ 0.34 $ 0.92
====== ======
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
UAL Corporation and Subsidiary Companies
Condensed Statements of Consolidated Cash Flows (Unaudited)
(In Millions)
Three Months
Ended March 31
1998 1997
---- ----
<S> <C> <C>
Cash and cash equivalents at
beginning of period $ 295 $ 229
----- -----
Cash flows from operating activities 826 680
----- -----
Cash flows from investing activities:
Additions to property and equipment (893) (308)
Proceeds on disposition of
property and equipment 4 14
Decrease (increase) in short-term
investments 48 (34)
Other, net (7) -
----- -----
(848) (328)
----- -----
Cash flows from financing activities:
Proceeds from issuance of long-term
debt 704 -
Repayment of long-term debt (78) (13)
Principal payments under capital
lease obligations (90) (59)
Purchase of equipment debt
certificates under Company
operating leases (683) -
Increase in short-term borrowings 119 -
Aircraft lease deposits (31) (56)
Other, net 2 2
----- -----
(57) (126)
----- -----
Increase (decrease) in cash and
cash equivalents (79) 226
----- -----
Cash and cash equivalents at
end of period $ 216 $ 455
===== =====
Cash paid during the period for:
Interest (net of amounts
capitalized) $ 43 $ 50
Income taxes $ 8 $ 2
Non-cash transactions:
Capital lease obligations incurred $ 161 $ 239
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 include
only normal recurring adjustments) necessary for a fair
presentation of the results of operations for the three
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 1997.
Employee Stock Ownership Plans
- ------------------------------
Pursuant to amended labor agreements which provide
for wage and benefit reductions and work-rule changes which
commenced July 1994, UAL has agreed to issue convertible
preferred stock to employees. Note 2 of the Notes to
Consolidated Financial Statements in the 1997 Annual Report
on Form 10-K contains additional discussion of the
agreements, stock to be issued to employees and the related
accounting treatment. Shares earned in 1997 were allocated
in March 1998 as follows: 97,406 shares of Class 2 ESOP
Preferred Stock were contributed to the Non-Leveraged ESOP
and an additional 889,031 shares were allocated in "book
entry" form under the Supplemental Plan. Also, 2,087,531
shares of Class 1 ESOP Preferred Stock were allocated under
the Leveraged ESOP. Finally, an additional 768,493 shares
of Class 1 and Class 2 ESOP Preferred Stock have been
committed to be released by the Company since January 1,
1998.
Income Taxes
- ------------
The provisions for income taxes are based on the
estimated annual effective tax rate, which differs from
the federal statutory rate of 35% principally due to state
income taxes, dividends on ESOP Preferred Stock and
certain nondeductible expenses. Deferred tax assets are
recognized based upon UAL's history of operating earnings
and expectations for future taxable income.
Per Share Amounts
- -----------------
Basic earnings per share were computed by dividing net
income available to common stockholders by the weighted average
number of shares of common stock outstanding during the year.
In addition, diluted earnings per share amounts include
potential common shares including ESOP shares committed to
be released.
<TABLE>
<CAPTION>
Earnings Attributable to Common Three Months Ended
Stockholders (Millions) March 31
- ----------------------- 1998 1997
---- ----
<S> <C> <C>
Net Income $ 61 $ 105
Preferred stock dividends and other (26) (20)
---- ----
Earnings attributable to common
stockholders (Basic and Diluted) $ 35 $ 85
==== ====
Shares (Millions)
- -----------------
Weighted average shares outstanding (Basic) 57.3 58.8
Convertible ESOP preferred stock 43.1 31.6
Other 1.9 2.7
----- -----
Weighted average number of shares (Diluted) 102.3 93.1
===== =====
Earnings Per Share
- ------------------
Basic $ 0.60 $ 1.45
Diluted $ 0.34 $ 0.92
</TABLE>
Long-Term Debt and Lease Obligations
- ------------------------------------
In March 1998, the Company, through a special-purpose
financing entity which is consolidated, issued $604 million of
commercial paper to refinance certain lease commitments.
Although the issued commercial paper has short maturities,
the Company expects to continually rollover this obligation
throughout the 5-year life of its supporting liquidity
facility or bank standby facility. As such, the commercial
paper is classified as a long-term obligation in the
Company's statement of financial position.
The proceeds from the commercial paper, as well as $79
million from internally generated funds were used to
refinance $669 million face-value of equipment certificates,
plus accrued interest, supporting leveraged lease transactions
between United and various lessors. While the terms of the
original leases between United and these lessors remain
unchanged, the refinancing transaction effectively
substitutes the commercial paper obligation for future
minimum payments under these leases of $1,030 million,
which are scheduled for payment as follows:
<TABLE>
<CAPTION>
(In millions)
After
1998 1999 2000 2001 2002 2002 Total
---- ---- ---- ---- ---- ---- -----
<C> <C> <C> <C> <C> <C> <C>
$62 $62 $62 $63 $58 $723 $1,030
</TABLE>
Additionally, in connection with the acquisition of one
B747 aircraft, the Company issued $100 million of secured notes
during the quarter.
Other Comprehensive Income
- --------------------------
On January 1,1998, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income" which establishes standards for
displaying comprehensive income and its components in a
full set of general purpose financial statements. The
reconciliation of net income to comprehensive net income is
as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31
1998 1997
---- ----
<S> <C> <C>
Net earnings, as reported $ 61 $ 105
Other comprehensive income - (3)
---- ----
Total comprehensive income $ 61 $ 102
==== ====
March 31 December 31
1998 1997
---- ----
Accumulated other comprehensive income
included in other stockholders' equity $ (2) $ (2)
==== ====
</TABLE>
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 March 31, 1998, commitments for the purchase of
property and equipment, principally aircraft, approximated
$8.0 billion, after deducting advance payments. An
estimated $2.0 billion will be spent during the remainder
of 1998, $2.1 billion in 1999, $1.6 billion in 2000 and
$2.3 billion in 2001 and thereafter. The major commitments
are for the purchase of B777, B747, B767, B757, A320 and
A319 aircraft, which are scheduled to be delivered through
2002. The above commitments are part of the Company's plan
to eventually add 68 aircraft to its passenger fleet, thus
increasing the fleet from 571 aircraft at December 31, 1997
to an expected 639 aircraft at the end of 2001.
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 $718 million at March 31, 1998,
compared to $845 million at December 31, 1997. Cash flows
from operating activities amounted to $826 million.
Financing activities included principal payments under debt
and capital lease obligations of $78 million and $90
million, respectively, and deposits of an equivalent $31
million in Japanese yen and French francs with certain
banks in connection with the financing of certain capital
lease transactions. Additionally, the Company issued $704
million in long-term debt during the period and used part
of the proceeds to purchase $683 million in debt
certificates under Company operating leases. See "Long-
Term Debt and Lease Obligations" in the Notes to
Consolidated Financial Statements for further details.
Property additions, including aircraft and aircraft
spare parts, amounted to $893 million. Property
dispositions resulted in proceeds of $4 million. In the
first quarter of 1998, United took delivery of one A320,
four A319, three B777, two B757 and one B747 aircraft.
Nine of the aircraft were purchased and two were acquired
under capital leases. In addition, United acquired two
B727 and two DC10-10 aircraft off-lease during the first
quarter and retired eleven B737 and three B747 aircraft.
At March 31, 1998, commitments for the purchase of
property and equipment, principally aircraft, approximated
$8.0 billion, after deducting advance payments. Of this
amount, an estimated $2.0 billion is expected to be spent
during the remainder of 1998. For further details, see
"Contingencies and Commitments" in the Notes to
Consolidated Financial Statements.
RESULTS OF OPERATIONS
- ---------------------
Summary of Results
------------------
UAL's earnings from operations were $123 million in
the first quarter of 1998, compared to operating earnings
of $194 million in the first quarter of 1997. UAL had net
earnings in the 1998 first quarter of $61 million ($0.60
per share, basic; $0.34 per share, diluted), compared to
net earnings of $105 million in the same period of 1997
($1.45 per share, basic; $0.92 per share, diluted).
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 and ESOP convertible
preferred stock dividends are not deducted from earnings
attributable to common stockholders. On a Fully
Distributed basis, UAL's net earnings for the 1998 first
quarter would have been $218 million ($1.68 per share)
compared to $61 million ($0.34 per share) as reported under
generally accepted accounting principles. For the first
quarter of 1997, Fully Distributed net earnings would have
been $215 million ($1.61 per share) compared to $105
million ($0.92 per share) as reported under generally
accepted accounting principles. No adjustments are made to
Fully Distributed earnings to take into account future
salary increases.
Specific factors affecting UAL's consolidated
operations for the first quarter of 1998 are described
below.
First Quarter 1998 Compared with First Quarter 1997.
----------------------------------------------------
Operating revenues decreased $66 million (2%) and
United's revenue per available seat mile (unit revenue)
decreased 4% to 9.83 cents. Passenger revenues decreased
$61 million (2%) due to a 2% decrease in United's revenue
passenger miles and a slight decrease in yield to 12.77
cents. Available seat miles across the system were up 2%
over the first quarter of 1997, resulting in a passenger
load factor decrease of 2.7 points to 67.2%. The following
analysis by market is based on information reported to the
U.S. Department of Transportation:
Latin America revenue passenger miles increased 8%
over the same period last year on an 18% increase in
capacity, with a 5% decrease in yield. Atlantic revenue
passenger miles increased 15% on 18% higher capacity and
yield decreased 3% for the period. In the Pacific, revenue
passenger miles decreased 14% on a 5% decrease in capacity
and yield decreased 6% from the same period last year.
Pacific yields continue to be negatively impacted by the
weakness of the Japanese yen to the dollar, and the effects
of the Asian economic turmoil on demand for travel.
Domestic revenue passenger miles remained unchanged despite
2% higher capacity with a 1% increase in yield, even though
the Federal passenger excise tax was not in effect for most
of the 1997 first quarter.
Cargo revenues increased $20 million (10%) on
increased freight ton miles of 18%. A 4% lower freight
yield was only partially offset by a 3% higher mail yield
for an overall decrease in cargo yield of 3%. Other
operating revenues decreased $25 million (8%) due primarily
to the sale of the Apollo Travel Services Partnership
("ATS") in July 1997, offset by increases in frequent flyer
program partner-related revenues and contract sales to
third parties.
Operating expenses increased $5 million (0.1%) and
United's cost per available seat mile decreased 2%, from
9.72 cents to 9.52 cents, including ESOP compensation
expense. Without the ESOP compensation expense, United's
cost per available seat mile would have been 8.90 cents, a
decrease of 4% from the 1997 first quarter. ESOP
compensation expense increased $74 million (40%),
reflecting the increase in the estimated average fair value
of ESOP stock committed to be released to employees as a
result of UAL's higher common stock price. Aircraft
maintenance increased $18 million (13%) due primarily to an
increase in purchased maintenance as a result of increased
heavy maintenance visits. Purchased services increased $30
million (10%) due to increases in computer reservations
fees, as a result of the sale of ATS, and credit card
discounts. Depreciation and amortization increased $15
million (9%) due to an increase in the number of owned
aircraft and aircraft under capital lease. Salaries and
related costs increased $69 million (6%) due to mid-term
wage adjustments which took place in July 1997 and to
increased staffing in certain customer-oriented positions.
Aircraft fuel decreased $113 million (20%) due to a 21%
decrease in the cost of fuel from 78.3 cents to 61.7 cents
a gallon. Commissions decreased $47 million (13%) due to a
change in the commission structure implemented in the third
quarter of 1997 as well as a slight decrease in
commissionable revenues. Other expenses decreased $22
million (4%) as a result of the sale of ATS.
Other expense amounted to $27 million in the first
quarter of 1998 compared to $23 million in the first
quarter of 1997. Interest expense increased $11 million
(16%) due to the issuance of long-term debt in 1997 and
1998. Interest income increased $4 million (33%) due to
higher average interest rates on investment balances.
LABOR AGREEMENTS
- ----------------
On April 2, 1998, the International Association of
Machinists and Aerospace Workers ("IAM") filed an
application with the National Mediation Board ("NMB")
seeking recognition as the collective-bargaining
representative for United's approximately 19,000 public
contact employees (primarily customer service and
reservations sales and service representatives). The IAM
currently represents approximately 24,000 mechanics, ramp
servicemen, flight dispatch employees and food service
employees at United. The NMB has authorized a mail ballot
election, a process which could take one to two months.
DEPARTMENT OF TRANSPORTATION POLICY STATEMENT
- ---------------------------------------------
On April 10, 1998, the Department of Transportation
("DOT") issued a proposed Statement of the Department of
Transportation's Enforcement Policy Regarding Unfair
Exclusionary Conduct in the Air Transportation Industry.
The proposed policy sets forth tentative findings and
guidelines for use by the DOT in evaluating whether major
carriers' competitive responses to new entry warrant
enforcement action. Under the current DOT schedule,
comments are due by June 9, 1998.
UAL is evaluating the proposal, but at this time is
unable to determine what form the proposal may take or what
impact, if any, the proposal, if implemented, may have upon
its business.
UNITED-DELTA ALLIANCE
- ---------------------
On April 30, 1998, United announced a tentative, seven-
year bilateral alliance with Delta Air Lines, Inc.
("Delta"), subject to approval of both airlines' pilot
unions. If approved, the alliance would allow code-sharing
between the carriers as well as reciprocal participation in
frequent flyer programs. For comparison purposes, the
companies estimate a combined gross revenue benefit of $600
million if the tentative alliance is fully implemented,
including international code-sharing. The revenue benefits
are expected to accrue roughly equally to each carrier.
This figure assumes no other major U.S. domestic alliances.
The companies expect a positive revenue benefit compared to
today even if other U.S. domestic alliances are completed.
(See "Outlook for 1998" for risk factors which could impact
the expected revenue benefit from this alliance.)
United and Delta initially expect to implement code-
sharing on U.S. domestic flights and would eventually expand
to include international flights in Latin America and the
Pacific, pending agreement of both companies' foreign
alliance partners and the appropriate governments. Europe
is excluded from the tentative agreement because of the
uncertainty and complexity of the European regulatory
environment.
OUTLOOK FOR 1998
- ----------------
In 1998, available seat miles are expected to
increase approximately 2.5%, with total system revenue per
available seat mile being the same as or slightly above
1997's level. Costs per available seat mile excluding ESOP
charges are expected to be about the same as the prior year.
This unit cost forecast assumes the average cost of jet fuel
per gallon is lower in 1998 than in 1997. Industry capacity
increases in international markets and the economic
situation in Asia are forecast to adversely affect
international revenue performance.
For the second quarter, United expects available seat
miles to increase between 2.5% and 3% versus the same period
last year, and expects total system revenue per available
seat mile to decrease by about 0.5% compared to the same
period of 1997. Costs per available seat mile excluding
ESOP charges are expected to be about the same as in the
second quarter of last year.
Based on the favorable domestic environment, continued
industry capacity increases in the international arenas,
economic weakness in Asia, fuel prices assumed to be lower
than the prior year and first quarter results, the Company
anticipates its "fully distributed" earnings per share in
1998 will exceed those for 1997 (see "Results of Operations,
Summary of Results" for further explanation of this pro
forma methodology).
The information included in the previous paragraphs is
forward-looking and involves risks and uncertainties that
could result in actual results differing materially from
expected results. It is not reasonably possible to itemize
all of the many factors and specific events that could
affect the outlook of an airline operating in the global
economy. Some factors that could significantly impact
expected capacity, international revenues, unit revenues,
unit costs, fuel prices and fully distributed earnings per
share include: industry capacity decisions, the airline
pricing environment, fuel prices, the success of the
company's cost-control efforts, actions of the U.S., foreign
and local governments, the Asian economic environment and
travel patterns, foreign currency exchange rate
fluctuations, the economic environment of the airline
industry and the general economic environment. Factors that
could significantly affect revenue benefits with respect to
the proposed alliance transaction with Delta include: the
implementation of alliances by competitors, the outcome of
discussions with both carriers' pilot unions, international
partners, and commuter carriers regarding implementation of
the proposed transaction, actions of the U.S., foreign and
local governments, the economic environment of the airline
industry and the general economic environment.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
For information regarding the Company's exposure to
certain market risks, see Item 7A. Quantitative and
Qualitative Disclosures About Market Risk in UAL's Annual
Report on Form 10-K for the year 1997. Significant changes
which have occurred since year-end are as follows:
<TABLE>
<CAPTION>
(In millions, except Notional Average Estimated
average contract rates) Amount Contract Rate Fair Value
- ----------------------- ------ ------------- ----------
<S> <C> <C> <C>
Sold put contracts - Crude oil $ 407 $18.61/bbl $ (48)
- Heating oil $ 193 $ 0.52/gal $ (30)
</TABLE>
PART II. OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K.
- ------ --------------------------------
(a) Exhibits
A list of exhibits included as part of this Form 10-Q is
set forth in an Exhibit Index which immediately precedes
such exhibits.
(b) Form 8-K dated January 28, 1998 to report a cautionary
statement for purposes of the "Safe Harbor for Forward-
Looking Statements" provision of the Private Securities
Litigation Reform Act of 1995.
Form 8-K dated April 30, 1998 to announce tentative
agreement with Delta Air Lines, Inc. to expand global
access, and to report a cautionary statement for purposes
of the "Safe Harbor for Forward Looking Statements"
provision of the Private Securities Litigation Reform
Act of 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/ Douglas A. Hacker
---------------------
Douglas A. Hacker
Senior Vice President and
Chief Financial Officer
(principal financial and
accounting officer)
Dated: May 4, 1998
Exhibit Index
-------------
Exhibit No. Description
- ---------- -----------
10.1 UAL Corporation Incentive Compensation and Profit
Sharing Plan.
10.2 UAL Corporation 1981 Incentive Stock Plan, as
amended March 26, 1998
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 10.1
UAL CORPORATION
INCENTIVE COMPENSATION AND PROFIT SHARING PLAN
I. PURPOSE
In an effort to maintain a position of leadership in the
fast-growing and highly competitive business segments in which
UAL Corporation (the "Company") competes, it is necessary to
promote financial interests of the Company and its corporate
affiliates (the "Subsidiaries"), including its growth, by (A)
attracting and retaining highly qualified executives possessing
outstanding ability, (B) motivating executives and other
management employees by means of performance related incentives,
and (C) providing incentive compensation opportunities which are
competitive with those of major corporations. The Incentive
Compensation Plan (the "Plan") hereinafter described is designed
to assist the Company in attaining these objectives.
II. ADMINISTRATION OF THE PLAN
1. The Company is responsible for the general
administration of the Plan, except as to matters expressly
reserved in this Plan to the Compensation Administration
Committee of the Board of Directors of the Company (the "Board"),
with respect to all grants to any "covered employee" within the
meaning of Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code") and regulations promulgated thereunder
(the "Covered Employees"), and to the Compensation Committee of
the Board with respect to all other grants. Unless specifically
named, the Compensation Administration Committee or Compensation
Committee, whichever is applicable in the context, will herein be
called the "Committee." Determinations, decisions and actions of
the Company or the Committee in connection with the construction,
interpretation, administration, or application of the Plan will
be final, conclusive, and binding upon any Participant and any
person claiming under or through the Participant. Neither the
Company nor any member of the Committee will be liable for any
determination, decision, or action made with respect to the Plan
or any Incentive Award granted, or Profit Sharing Payments made,
under the Plan.
2. A Participant's rights and interests in any Incentive
Award or Profit Sharing Amount under the Plan may not be assigned
or transferred and are not subject to attachment, garnishment,
execution, or other creditor's processes.
3. If a Participant transfers employment classifications
during a calendar year, the amount of the Participant's Incentive
Compensation Payments or Profit Sharing Payments for that
calendar year shall be based on the amount of the Participant's
compensation that he/she receives during that calendar year as an
Incentive Compensation Participant or Profit Sharing Participant,
as the case may be.
4. The Incentive Compensation Plan may at any time be
amended, modified, or terminated, as the Board, in its
discretion, determines. The Profit Sharing Plan may at any time
be amended, modified, or terminated, as the Company. in its
discretion, determines. Such amendment, modification, or
termination of the Incentive Compensation Plan or the Profit
Sharing Plan will not require the consent, ratification, or
approval of any party, including any Participant.
5. The Plan does not constitute a contract of employment,
and participation in the Plan will not give any employee the
right to be retained in the service of the Company or its
Subsidiaries.
6. This Plan and all determinations made and actions taken
pursuant hereto will be governed and construed by the internal
laws of the State of Illinois.
III. DEFINITIONS
1. Award Year -- The calendar year for which Incentive
Awards, if any, are calculated under the Plan.
2. Financial Objectives -- Financial performance goals
established by the Company and approved by the Committee at the
beginning of an Award Year. Financial Objectives may apply to
overall Company and Subsidiaries performance in selected areas
and/or to performance of major business segments of the Company
and Subsidiaries.
3. Financial Performance Factor -- The numerical factor
determined by the Company shortly after the Award Year by
comparing actual performance during such Award Year to the
applicable Financial Objectives previously established for such
Award Year.
4. Incentive Compensation Participant -- A person who is a
senior or a key management employee of the Company or one or more
Subsidiaries and who is designated as an Incentive Compensation
Participant for an Award Year by the Company or the Committee.
Designation as an Incentive Compensation Participant will apply
only for the Award Year for which the designation is made. The
Company may, in its sole discretion, designate certain management
employees as Special Incentive Compensation Participants for an
Award Year.
5. Incentive Compensation Plan -- The provisions of this
Plan as applied to Incentive Compensation Participants.
6. Individual Performance Objectives -- Goals and
objectives established by the Company (or by the Compensation
Administration Committee in the case of Covered Employees) for
each Incentive Compensation Participant.
7. Individual Performance Factor -- The numerical factor
determined with respect to the Plan by the Company (or by the
Compensation Administration Committee in the case of Covered
Employees) shortly after the Award Year, based upon an evaluation
as to the extent to which an Incentive Compensation Participant
in the Plan achieved the Individual Performance Objectives
established for him/her. Such evaluation will be wholly
discretionary and subjective on the part of the Company or the
Compensation Administration Committee, as the case may be.
8. Incentive Awards -- The dollar value of awards made to
Incentive Compensation Participants under the Plan.
Notwithstanding any other provisions of the Plan, in no event may
the total Incentive Award for any Award Year for any Incentive
Compensation Participant exceed 100% of his/her base salary for
the Award Year.
9. Incentive Opportunity -- The amount, determined by the
Company and approved by the Committee, as appropriate, at the
beginning of an Award Year, that an Incentive Compensation
Participant may receive as an Incentive Award under the Plan.
The Incentive Opportunity will be stated as a percentage of an
Incentive Compensation Participant's annual base salary for an
Award Year (prorated for a partial year's participation). If an
Incentive Compensation Participant held more than one eligible
position in the Award Year, his/her Incentive Opportunity will be
determined on a prorated basis. The Incentive Opportunity for a
Special Incentive Compensation Participant shall be stated as a
dollar amount rather than as a percentage of his/her annual base
salary for the Award Year.
10. Participant -- An Incentive Compensation Participant or
a Profit Sharing Participant, whichever is applicable.
11. Profit Sharing Goals -- The collective Financial
Objectives for the Company and its Subsidiaries for the Profit
Sharing Year that coincides with the Award Year for which the
Financial Objectives are established as determined by the
Company. For purposes of determining the amount of Profit
Sharing Payments, the Profit Sharing Goals for a particular
Profit Sharing Year shall be separately stated as a threshold
goal, a target goal and a maximum goal.
12. Profit Sharing Participant -- A person who, on his/her
Employee Service Record Form UG 100 or any successor thereof, is
classified, for at least part of the Profit Sharing Year for
which the Profit Sharing Payment is being made, as a regular full-
time or regular part-time management employee, is not an
Incentive Compensation Participant and, on December 31 of that
Profit Sharing Year, is actively employed in any job
classification, has retired.
13. Profit Sharing Payments -- The amount to which Profit
Sharing Participants are entitled for a Profit Sharing Year, as
determined under Section V of the Plan.
14. Profit Sharing Plan -- The provisions of this Plan as
applied to Profit Sharing Participants.
15. Profit Sharing Year -- The calendar year. Unless the
Company specifically otherwise determines, Profit Sharing
Payments shall be made only for 1997, 1998, and 1999 in the
subsequent calendar year.
16. Profit Sharing Wages -- The amount of a Profit Sharing
Participant's taxable wages for the Profit Sharing Year,
increased by the amount of his/her pre-tax contributions under
any qualified Code Section 401(k) plan or Code Section 125
cafeteria plan and any HMO premium deductions for the Profit
Sharing Year, and decreased by the amount of any extraordinary
payments such as moving expense reimbursements, Pride Awards and
Code Section 125 cafeteria plan reimbursements for the Profit
Sharing Year
IV. INCENTIVE COMPENSATION PAYMENTS
A. Participation
1. Incentive Compensation Participants will be determined
annually by the Company or the Committee from among key and
senior management employees of the Company and its Subsidiaries.
This determination will allow participation only for the Award
Year concerned.
2. If an Incentive Compensation Participant's employment
with the Company or its Subsidiaries is terminated during an
Award Year, the appropriate Incentive Award under the Plan, if
any, for such Participant will be subject to the sole discretion
of the Company's Chairman (or to the sole discretion of the
Compensation Administration Committee in case of the termination
of employment of a Covered Employee). A transfer of employment
between the Company and any of its Subsidiaries will not be
considered a termination of employment.
B. Computation of Incentive Awards
1. The Incentive Award for an Award Year for an Incentive
Compensation Participant will be the product of the Incentive
Compensation Participant's Incentive Opportunity modified by the
Financial Performance Factor and Individual Performance Factor,
multiplied by the Incentive Compensation Participant's applicable
base salary. No Incentive Award will be made to an Incentive
Compensation Participant for an Award Year in which his/her
applicable Financial Performance Factor is below threshold level.
However, the Chairman of the Company, with Committee approval,
may waive the applicable Financial Performance Factor threshold
requirement.
2. Total payments to all Incentive Compensation
Participants will be limited to 5% of Pre-Tax Income in any given
Award Year. If total calculated Incentive Awards exceed 5% of
Pre-Tax Income, payments will be made on a prorated basis.
C. Payment of Awards
1. Subject to Paragraph 2 below, payment of Incentive
Awards will be made in cash on or about April 1 of the year
following the Award Year; provided, however, that an Incentive
Award may be deferred at the election of an Incentive
Compensation Participant in the manner described in Paragraph 2
below.
2. An Incentive Compensation Participant may elect, on or
before December 31 of the year preceding an Award Year, to defer
receipt of all or any portion of his/her Incentive Award to a
subsequent calendar year. An Incentive Compensation Participant
will receive payment of a deferred Incentive Award in a lump sum
in January of the earliest of: (1) the deferral calendar year
selected by the Incentive Compensation Participant; (2) the
calendar year immediately after the Incentive Compensation
Participant's retirement under the United Air Lines, Management
and Salaried Pension Plan, (3) the calendar year after the
Incentive Compensation Participant's termination of employment
with the Company or Subsidiaries for other reasons, provided that
a transfer of employment from the Company or one of its
Subsidiaries to the Company or another of its Subsidiaries will
not be considered a termination of employment; (4) the occurrence
of an "Unforeseeable Emergency," provided that a distribution
pursuant to this clause (4) shall not exceed the amount
reasonably needed to satisfy the emergency need; or (5) any other
time elected by the Incentive Compensation Participant, provided
that upon making such an election, the Incentive Compensation
Participant shall be entitled to receive 90% of the amounts then
credited to him/her under the Plan and shall forfeit the
remaining 10% of such amount. The amounts deferred will be
credited annually with compound interest at the prime rate in
effect during the deferral period at the end of the calendar
quarter, as reported by The Wall Street Journal. All deferred
Incentive Awards will be reflected in the Company's books as
general unsecured and unfunded obligations of the Company. No
trust in favor of any Incentive Compensation Participant will be
implied. Deferral elections will be irrevocable by an Incentive
Compensation Participant. For purposes of this paragraph,
"Unforeseeable Emergency" shall mean a severe financial hardship
to the Incentive Compensation Participant resulting from a sudden
and unexpected illness or accident of the Incentive Compensation
Participant or of his/her dependent (as defined in Section 152(a)
of the Code), loss of the Incentive Compensation Participant's
property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond
the control of the Incentive Compensation Participant. The
circumstances that will constitute an Unforeseeable Emergency
will depend upon the facts of each case, but, in any case,
payment under clause (4) above may not be made to the extent that
such hardship is or may be relieved (i) through reimbursement or
compensation by insurance or otherwise, (ii) by liquidation of
the Incentive Compensation Participant's assets, to the extent
the liquidation of such assets would not itself cause severe
financial hardship, or (iii) by cessation of deferrals under the
Plan.
D. Special Incentive Compensation Rules
1. Notwithstanding any other provision of this Plan to the
contrary: Incentive Awards with respect to an Award Year for any
Incentive Compensation Participant who is a Covered Employee with
respect to such Award Year (i) may not exceed $900,000 and (ii)
shall be determined by reference to a formula which shall define
the Incentive Award by reference to the attainment by the Company
of one or more target levels of pre-tax income (as determined
under generally accepted accounting principles but without regard
to any items (whether gains or losses) otherwise included therein
relating to (a) the UAL Corporation Employee Stock Ownership
Plan, the UAL Corporation Supplemental ESOP, or the trusts
relating thereto, (b) any event or occurrence that the
Compensation Administration Committee determines to be either not
directly related to the operations of the Company or not within
the reasonable control of the Company's management, (c) this
Plan, and (d) the Company's 1988 Restricted Stock Plan) for such
Award Year. Such target level(s) and the formula referred to
above shall be determined by the Compensation Administration
Committee prior to the commencement of such Award Year (or at
such later time as may be permissible under Section 162(m) of the
Code). The Compensation Administration Committee shall determine
and certify whether such target levels of pre-tax income have
been met. Notwithstanding the foregoing, the Compensation
Administration Committee may, in its sole discretion, reduce the
Incentive Award otherwise determined pursuant to such formula.
V. PROFIT SHARING PAYMENTS
A. Participation
Each Profit Sharing Participant shall be entitled to a
Profit Sharing Payment in the amount, if any, as determined below
for each Profit Sharing Year in which he/she satisfies the
definition of the term "Profit Sharing Participant."
B. Computation of Profit Sharing Payments
The amount of Profit Sharing Payment to be made to a Profit
Sharing Participant for a Profit Sharing Year is the product of
his/her Profit Sharing Wages for the Profit Sharing Year,
multiplied by the percentage determined under the following
table, on the basis of the performance of the Company and its
Subsidiaries relative to its Profit Sharing Goals for the Profit
Sharing Year:
Profit Sharing Goal Percentage of Profit Sharing Wages
------------------- ----------------------------------
Less Than Threshold 0%
Threshold 1.00%
Target 2.55%
Maximum 3.75%
If the Company and its Subsidiaries achieve a Profit Sharing Goal
of at least the Threshold and between any two of the levels set
forth in the schedule above, the applicable Percentage of Profit
Sharing Wages shall be the amount determined by linear
interpolation between the two levels of Profit Sharing Goals.
C. Payment
Profit Sharing Payments for a Profit Sharing Year will be
made to Profit Sharing Participants no later than March 31 of the
calendar year following the Profit Sharing Year for which the
Profit Sharing Payments are made.
Exhibit 10.2
As Amended
March 26, 1998
UAL CORPORATION
---------------
1981 INCENTIVE STOCK PLAN
-------------------------
1. Purpose. The purpose of the UAL Corporation 1981
Incentive Stock Plan (the "Plan") is to attract and retain
outstanding individuals as officers and key employees of UAL
Corporation (the "Company") and its subsidiaries, and to furnish
incentives to such persons by providing such persons
opportunities to acquire shares of the Company's Common Stock,
par value $.01 per share ("Common Stock"), or monetary payments
based on the value of such shares or both, on advantageous terms
as herein provided.
2. Administration. The Plan shall be administered by
the Compensation Administration Committee of the Board of
Directors of the Company for (I) all grants to any "officer" as
such term is defined in Rule 16a-1(f) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or (II)
any other grant to the extent necessary or proper to preserve
deductibility of the compensation expense associated with such
grant under Section 162(m) of the Internal Revenue Code of 1986,
as amended, and the regulations promulgated thereunder (the
"Code"), and by the Compensation Committee of the Board of
Directors of the Company for all grants to participants who are
not covered employees for purposes of Section 162(m) of the Code
or officers under Rule 16a-1(f) of the Exchange Act (such
committee, as applicable, herein called the "Committee"). The
Committee is authorized to interpret the provisions of the Plan,
to prescribe, amend and rescind rules and regulations relating to
the Plan, to determine the terms and conditions of Benefits to be
granted under the Plan and to make all other determinations
necessary or advisable for the administration of the Plan, but
only to the extent not contrary to or inconsistent with the
express provisions of the Plan.
3. Participants. Participants in the Plan will consist
of such officers or other key employees of the Company and its
subsidiaries as the Committee in its sole discretion may
designate from time to time to receive Benefits hereunder. The
Committee shall consider such factors as it deems pertinent in
selecting participants and in determining the type and amount of
their respective Benefits, including without limitation (i) the
financial condition of the Company; (ii) anticipated profits for
the current or future years; (iii) contributions of participants
to the profitability and development of the Company; and (iv)
other compensation provided to participants.
4. Types of Benefits. Benefits under the Plan may be
granted in any one or a combination of (a) Incentive Stock
Options, (b) Non-qualified Stock Options, and (c) Stock
Appreciation Rights, all as described below.
5. Shares Reserved under the Plan. There is hereby
reserved for issuance under the Plan an aggregate of 2,300,000
shares of Common Stock, which may be newly issued or treasury
shares.(1) All of such shares may, but need not be issued pursuant
to the exercise of Incentive Stock Options. If there is a lapse,
expiration, termination or cancellation of any Benefit granted
hereunder without the issuance of shares or payments of cash
thereunder, or if shares are issued under any Benefit and
thereafter are reacquired by the Company pursuant to rights
reserved upon the issuance thereof, the shares subject to or
reserved for such Benefit may again be used for new options or
rights under this Plan; provided, however, that in no event may
the number of shares issued under this Plan exceed the total
number of shares reserved for issuance hereunder. Subject to
Section 14(a), in no event may the aggregate number of shares of
Common Stock with respect to which options or Stock Appreciation
Rights are granted to any individual exceed 125,000 in any period
of two calendar years, provided, however, that grants made to any
new employee as a condition of employment may not exceed two
times such biennial limit during the first two years of
employment.
6. Incentive Stock Options. Incentive Stock Options
will consist of options to purchase shares of Common Stock at
purchase prices not less than one hundred percent (100%) of the
fair market value of such shares on the date of grant. Incentive
Stock Options will be exercisable over not more than ten (10)
years after date of grant and shall terminate not later than
three (3) months after termination of employment for any reason
other than death. If the optionee should die while employed or
within three (3) months after termination of employment, the
right of the optionee or his or her successor in interest to
exercise an option shall terminate not later than twelve (12)
months after the date of death. The aggregate fair market value
(determined as of the time the option is granted) of the shares
of Common Stock which any participant may exercise pursuant to
Incentive Stock Options for the first time in any calendar year
(under all option plans of the Company and its parent and
subsidiary corporations) shall not exceed $100,000.
7. Non-qualified Stock Options. Non-qualified Stock
Options will consist of options to purchase shares of Common
Stock at purchase prices not less than one hundred percent (100%)
of the fair market value of shares on the date of grant. Non-
qualified Stock Options will be exercisable over not more than
ten (10) years after date of grant. Non-qualified Stock Options
will terminate no later than six (6) months after termination of
employment for any reason other than retirement or death, unless
immediately after such termination of employment the optionee
shall be a member of the Board of Directors of the Company, in
which case such options will terminate two (2) years after such
termination of employment. In the event termination of
employment occurs by reason of the optionee's retirement, the
option shall terminate not later than the fixed expiration date
set forth therein. In the event termination of employment occurs
by reason of the optionee's death or if the optionee's death
occurs within six months after termination of employment, the
option shall terminate not later than twelve (12) months after
the date of such death.
_______________________________
1 Represents shares reserved for issuance under the Plan in
connection with grants made on or after July 12, 1994. Shares
issuable under grants made prior to such date are in addition to
such number of shares.
8. Stock Appreciation Rights. The Committee may, in
its discretion, grant a Stock Appreciation Right to the holder of
any Non-qualified Stock Option granted hereunder. In addition, a
Stock Appreciation Right may be granted independently of and
without relation to any stock option. Stock Appreciation Rights
shall be subject to such terms and conditions consistent with the
Plan as the Committee shall impose from time to time, including
the following:
(a) A Stock Appreciation Right may be granted
with respect to a Non-qualified Stock Option at the
time of its grant or at any time thereafter up to six
(6) months prior to its expiration.
(b) Each Stock Appreciation Right will entitle
the holder to elect to receive up to 100% of the
appreciation in fair market value of the shares subject
thereto up to the date the right is exercised. In the
case of a Stock Appreciation Right issued in relation
to a Non-qualified Stock Option, such appreciation
shall be measured from the option price. In the case
of a Stock Appreciation Right issued independently of
any stock option, the appreciation shall be measured
from not less than the fair market value of the Common
Stock on the date the right is granted.
(c) The Committee shall have the discretion to
satisfy a participant's right to receive the amount of
cash determined under subparagraph (b) hereof, in whole
or in part, by the delivery of shares of Common Stock
valued as of the date of the participant's election.
(d) In the event of the exercise of a Stock
Appreciation Right, the number of shares reserved for
issuance hereunder (and the shares subject to the
related option, if any) shall be reduced by the number
of shares with respect to which the right is exercised.
9. Nontransferability. Except as otherwise provided by
the Committee, each Benefit granted under this Plan shall not be
transferable other than by will or the laws of descent and
distribution, and shall be exercisable, during the holder's
lifetime, only by the holder.
10. Other Provisions. The award of any Benefit under
the Plan may also be subject to other provisions (whether or not
applicable to the Benefit awarded to any other participant) as
the Committee determines appropriate, including, without
limitation, provisions for the purchase of common shares under
stock options in installments, provisions for the payment of the
purchase price of shares under stock options by delivery of other
shares of the Company having a then market value equal to the
purchase price of such shares, restrictions on resale or other
disposition, such provisions as may be appropriate to comply with
federal or state securities laws and stock exchange requirements
and understandings or conditions as to the participant's
employment in addition to those specifically provided for under
the Plan.
11. Term of Plan and Amendment, Modification or
Cancellation of Benefits. No Benefit shall be granted after
December 8, 2001; provided, however, that the terms and
conditions applicable to any Benefits granted prior to such date
may at any time be amended, modified, extended or canceled by
mutual agreement between the Committee and the participant or
such other persons as may then have an interest therein, so long
as any amendment or modification does not increase the number of
shares of Common Stock issuable under this Plan and any extension
does not extend the option term beyond ten (10) years.
12. Taxes. The Company shall be entitled to withhold
the amount of any tax attributable to any amount payable or
shares deliverable under the Plan after giving the person
entitled to receive such amount or shares notice as far in
advance as practicable, and the Company may defer making payment
or delivery if any such tax may be pending unless and until
indemnified to its satisfaction.
13. Fair Market Value. The Fair Market Value of the
Company's shares of Common Stock at any time shall be determined
in such manner as the Committee may deem equitable or required by
applicable laws or regulations.
14. Adjustment Provisions.
(a) If the Company shall at any time change the
number of issued shares of Common Stock without new
consideration to the Company (such as by stock dividend
or stock split), the total number of shares reserved
for issuance under this Plan, the maximum number of
shares with respect to which options or Stock
Appreciation Rights may be granted to any individual,
the exercise price of outstanding options (other than
options granted prior to July 12, 1994) and the base
for measuring a Stock Appreciation Right and the number
of shares covered by each outstanding Benefit
(including the number of shares issuable upon exercise
of outstanding options granted prior to July 12, 1994,
which are exercisable for "reclassification packages"
consisting of a combination of cash and shares, so that
the number of shares included in each such
reclassification package shall adjust as herein
provided) shall be adjusted so that the aggregate
consideration payable to the Company and the value of
each such Benefit shall not be changed. The Committee
shall also have the right to provide for the
continuation of Benefits or for other equitable
adjustments after changes in the shares of Common Stock
resulting from the reorganization, sale, merger,
consolidation or similar occurrence.
(b) Notwithstanding any other provision of this
Plan, and without affecting the number of shares
otherwise reserved or available hereunder, the
Committee may authorize the issuance or assumption of
Benefits in connection with any merger, consolidation,
acquisition of property or stock, or reorganization
upon such terms and conditions as it may deem
appropriate.
15. Amendment and Termination of Plan. The Board of
Directors of the Company may amend the Plan from time to time or
terminate the Plan at any time, but no such action shall reduce
the then existing amount of any participant's Benefit or
adversely change the terms and conditions thereof without the
participant's consent. However, except for adjustments expressly
provided for herein, no amendment may, without stockholder
approval, materially increase the number of shares which may be
issued.
Exhibit 12.1
UAL Corporation and Subsidiary Companies
Computation of Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Three Months
Ended
March 31
1998 1997
---- ----
(In Millions)
<S> <C> <C>
Earnings:
Earnings before income taxes $ 96 $ 171
Fixed charges, from below 229 232
Undistributed earnings of affiliates (20) (25)
Interest capitalized (26) (24)
---- ----
Earnings $ 279 $ 354
==== ====
Fixed charges:
Interest expense $ 80 $ 69
Portion of rental expense
representative of the interest factor 149 163
---- ----
Fixed charges $ 229 $ 232
==== ====
Ratio of earnings to fixed charges 1.22 1.53
==== ====
</TABLE>
Exhibit 12.2
UAL Corporation and Subsidiary Companies
Computation of Ratio of Earnings to Fixed Charges
and Preferred Stock Dividend Requirements
<TABLE>
<CAPTION>
Three Months
Ended
March 31
1998 1997
---- ----
(In Millions)
<S> <C> <C>
Earnings:
Earnings before income taxes $ 96 $ 171
Fixed charges, from below 269 263
Undistributed earnings of affiliates (20) (25)
Interest capitalized (26) (24)
---- ----
Earnings $ 319 $ 385
==== ====
Fixed charges:
Interest expense $ 80 $ 69
Preferred stock dividend requirements 40 31
Portion of rental expense
representative of the interest factor 149 163
---- ----
Fixed charges $ 269 $ 263
==== ====
Ratio of earnings to fixed charges 1.19 1.46
==== ====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM UAL CORPORATION'S STATEMENT OF CONSOLIDATED
OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND
CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL POSITION AS OF
MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000,000
<S>
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<PERIOD-TYPE> 3-MOS
<CASH> 216
<SECURITIES> 502
<RECEIVABLES> 1,171
<ALLOWANCES> 0
<INVENTORY> 377
<CURRENT-ASSETS> 2,851
<PP&E> 17,343
<DEPRECIATION> 5,714
<TOTAL-ASSETS> 17,068
<CURRENT-LIABILITIES> 5,521
<BONDS> 4,531
101
0
<COMMON> 1
<OTHER-SE> 2,565
<TOTAL-LIABILITY-AND-EQUITY> 17,068
<SALES> 0
<TOTAL-REVENUES> 4,055
<CGS> 0
<TOTAL-COSTS> 3,932
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 80
<INCOME-PRETAX> 96
<INCOME-TAX> 34
<INCOME-CONTINUING> 61
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 61
<EPS-PRIMARY> 0.60
<EPS-DILUTED> 0.34
</TABLE>
