EX-99.1 20 d408868dex991.htm UNAUDITED PRO FORMA Unaudited Pro Forma

Exhibit 99.1

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL

INFORMATION OF UNITED AND CONTINENTAL

On May 2, 2010, UAL Corporation, Continental Airlines, Inc. (“Continental”), and JT Merger Sub Inc., a wholly-owned subsidiary of UAL Corporation, entered into an Agreement and Plan of Merger providing for a “merger of equals” business combination. On October 1, 2010, JT Merger Sub Inc. merged with and into Continental, with Continental surviving as a wholly-owned subsidiary of UAL Corporation (the “Merger”). Upon closing of the Merger, UAL Corporation became the parent company of both United Air Lines, Inc. (“United”) and Continental and UAL Corporation’s name was changed to United Continental Holdings, Inc. (“UAL” or the “Company”).

The Company also expects in the future that it will merge Continental and United into one legal entity (the “Airlines Merger”). Once the Airlines Merger occurs, the financial statements of United and Continental will be combined for all periods presented from the date of the Merger at their historical cost, and there will no longer be a requirement to separately report the historical financial statements of Continental.

The Unaudited Pro Forma Condensed Combined Balance Sheet of United and Continental combines the historical consolidated balance sheet of Continental and United as of September 30, 2012. The Unaudited Pro Forma Condensed Combined Statement of Operations of United and Continental for the year ended December 31, 2011 and the nine months ended September 30, 2012 combines the historical consolidated statement of operations of Continental and United for each period.

The Unaudited Pro Forma Condensed Combined Financial Statements of United and Continental were prepared by combining the historical financial information of both Continental and United. Pro forma statements that give effect to a business combination to be accounted for as a reorganization of entities under common control combine the historical financial statements of combining entities.

These Unaudited Pro Forma Condensed Combined Financial Statements have been developed from and should be read in conjunction with the consolidated financial statements of Continental and United contained in their respective Annual Reports on Form 10-K for the fiscal year ended December 31, 2011 and their respective Quarterly Reports on Form 10-Q for the nine months ended September 30, 2012. The Unaudited Pro Forma Condensed Combined Financial Statements of United and Continental are provided for illustrative purposes only and do not purport to represent what the actual consolidated results of operations or the consolidated financial position of Continental or United would have been had the Airlines Merger occurred on the dates assumed, nor are they necessarily indicative of future consolidated results of operations or consolidated financial position.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET OF UNITED AND CONTINENTAL

September 30, 2012

In millions

 

     Historical               
     Continental      United      Pro Forma
Adjustments		     Condensed
Combined Pro
Forma		  

ASSETS

           

Current assets:

           

Cash and cash equivalents

    $ 2,119       $ 3,005       $ —        $ 5,124   

Short-term investments

      1,205         346         —          1,551   
  

 

 

     

 

 

     

 

 

    

 

 

  

Total unrestricted cash, cash equivalents and short-term investments

      3,324         3,351         —          6,675   

Restricted cash

      —           79         —          79   

Receivables, less allowance for doubtful accounts

      176         1,686         —          1,862   

Aircraft fuel, spare parts and supplies, less obsolescence allowance

      296         379         —          675   

Deferred income taxes

      331         316         —          647   

Receivables from related parties

      —           2,708         (2,485 )      223   

Prepaid expenses and other

      193         633         (11 )      815   
  

 

 

     

 

 

     

 

 

    

 

 

  
     4,320         9,152         (2,496 )      10,976   
  

 

 

     

 

 

     

 

 

    

 

 

  

Property and equipment, net

      7,917         8,894         —          16,811   

Other assets:

           

Goodwill

      4,523         —           —          4,523   

Intangibles, less accumulated amortization

      2,411         2,241         (3 )      4,649   

Receivables from related parties

      —           448         (448 )      —     

Restricted cash, cash equivalents and investments

      116         275         —          391   

Other, net

      364         595         —          959   
  

 

 

     

 

 

     

 

 

    

 

 

  
     7,414         3,559         (451 )      10,522   
  

 

 

     

 

 

     

 

 

    

 

 

  
   $ 19,651       $ 21,605       $ (2,947 )    $ 38,309   
  

 

 

     

 

 

     

 

 

    

 

 

  

(continued on the next page)

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET OF UNITED AND CONTINENTAL

September 30, 2012

In millions

 

     Historical              
     Continental     United     Pro Forma
Adjustments		     Condensed
Combined Pro
Forma		  

LIABILITIES AND STOCKHOLDER’S EQUITY

         

Current liabilities:

         

Advance ticket sales

    $ 73      $ 3,776      $ —        $ 3,849   

Frequent flyer deferred revenue

      —          2,405        —          2,405   

Accounts payable

      767        1,426        —          2,193   

Accrued salaries and benefits

      568        760        —          1,328   

Current maturities of long-term debt

      726        978        —          1,704   

Current maturities of capital leases

      4        116        —          120   

Payables to related parties

      2,486        105        (2,485 )      106   

Other

      249        1,270        (11 )      1,508   
  

 

 

    

 

 

    

 

 

    

 

 

  
     4,873        10,836        (2,496 )      13,213   
  

 

 

    

 

 

    

 

 

    

 

 

  

Long-term debt

      4,998        4,191        —          9,189   

Long-term obligations under capital leases

      176        652        —          828   

Other liabilities and deferred credits:

         

Frequent flyer deferred revenue

      —          2,839        —          2,839   

Postretirement benefit liability

      304        2,156        —          2,460   

Pension liability

      1,704        84        —          1,788   

Advanced purchase of miles

      —          1,581        —          1,581   

Deferred income taxes

      887        692        —          1,579   

Payables to related parties

      448        —          (448 )      —     

Lease fair value adjustment, net

      927        —          —          927   

Other

      404        1,044        —          1,448   
  

 

 

    

 

 

    

 

 

    

 

 

  
     4,674        8,396        (448 )      12,622   
  

 

 

    

 

 

    

 

 

    

 

 

  

Stockholder’s equity:

         

Common stock

      —          —          —          —     

Additional capital invested

      4,165        3,442        —          7,607   

Retained earnings (deficit)

      1,008        (5,829 )      (3 )      (4,824 ) 

Accumulated other comprehensive loss

      (243 )      (83 )      —          (326 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
     4,930        (2,470 )      (3 )      2,457   
  

 

 

    

 

 

    

 

 

    

 

 

  
   $ 19,651      $ 21,605      $ (2,947 )    $ 38,309   
  

 

 

    

 

 

    

 

 

    

 

 

  

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS OF UNITED AND CONTINENTAL

Nine Months Ended September 30, 2012

In millions

 

     Historical              
     Continental     United     Pro Forma
Adjustments		     Condensed
Combined Pro
Forma		  

Operating revenue:

         

Passenger-Mainline

    $ 9,304      $ 10,587      $ —        $ 19,891   

Passenger-Regional

      2,223        2,936        —          5,159   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total passenger revenue

      11,527        13,523        —          25,050   

Cargo

      270        505        —          775   

Other operating revenue

      1,226        1,878        (472 )      2,632   
  

 

 

    

 

 

    

 

 

    

 

 

  
     13,023        15,906        (472 )      28,457   
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating expenses:

         

Aircraft fuel

      4,359        5,685        —          10,044   

Salaries and related costs

      2,692        3,166        100        5,958   

Regional capacity purchase

      735        1,152        —          1,887   

Landing fees and other rent

      670        807        (1 )      1,476   

Aircraft maintenance materials and outside repairs

      479        862        (33 )      1,308   

Depreciation and amortization

      442        695        —          1,137   

Distribution expenses

      512        526        —          1,038   

Aircraft rent

      513        234        —          747   

Special charges

      280        604        —          884   

Other operating expenses

      1,604        2,400        (538 )      3,466   
  

 

 

    

 

 

    

 

 

    

 

 

  
     12,286        16,131        (472 )      27,945   
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating income (loss)

      737        (225 )      —          512   

Nonoperating income (expense):

         

Interest expense

      (241 )      (395 )      —          (636 ) 

Interest capitalized

      16        10        —          26   

Interest income

      11        5        —          16   

Miscellaneous, net

      14        (8 )      —          6   
  

 

 

    

 

 

    

 

 

    

 

 

  
     (200 )      (388 )      —          (588 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) before income taxes

      537        (613 )      —          (76 ) 

Income tax expense

      3        8        —          11   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net income (loss)

    $ 534      $ (621 )    $ —        $ (87 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS OF UNITED AND CONTINENTAL

Year ended December 31, 2011

In millions

 

     Historical              
     Continental     United     Pro Forma
Adjustments		     Condensed
Combined Pro
Forma		  

Operating revenue:

         

Passenger-Mainline

    $ 11,816      $ 14,153      $ 6      $ 25,975   

Passenger-Regional

      2,601        3,935        —          6,536   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total passenger revenue

      14,417        18,088        6        32,511   

Cargo

      448        718        —          1,166   

Special revenue item

      19        88        —          107   

Other operating revenue

      1,291        2,261        (217 )      3,335   
  

 

 

    

 

 

    

 

 

    

 

 

  
     16,175        21,155        (211 )      37,119   
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating expenses:

         

Aircraft fuel

      5,294        7,080        —          12,374   

Salaries and related costs

      3,405        4,172        74        7,651   

Regional capacity purchase

      830        1,574        —          2,404   

Landing fees and other rent

      900        1,028        —          1,928   

Aircraft maintenance materials and outside repairs

      595        1,160        (11 )      1,744   

Depreciation and amortization

      626        921        (1 )      1,546   

Distribution expenses

      688        748        —          1,436   

Aircraft rent

      686        323        —          1,009   

Special charges

      159        433        —          592   

Other operating expenses

      2,042        2,829        (273 )      4,598   
  

 

 

    

 

 

    

 

 

    

 

 

  
     15,225        20,268        (211 )      35,282   
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating income

      950        887        —          1,837   

Nonoperating income (expense):

         

Interest expense

      (342 )      (595 )      —          (937 ) 

Interest capitalized

      17        15        —          32   

Interest income

      10        10        —          20   

Miscellaneous, net

      (72 )      (33 )      —          (105 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
     (387 )      (603 )      —          (990 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Income before income taxes

      563        284        —          847   

Income tax expense (benefit)

      (6 )      3        —          (3 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net income

    $ 569      $ 281      $ —        $ 850   
  

 

 

    

 

 

    

 

 

    

 

 

  

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS OF UNITED AND CONTINENTAL

Note 1. Basis of Presentation

On May 2, 2010, UAL Corporation, Continental Airlines, Inc. (“Continental”), and JT Merger Sub Inc., a wholly-owned subsidiary of UAL Corporation, entered into an Agreement and Plan of Merger providing for a “merger of equals” business combination. On October 1, 2010, JT Merger Sub Inc. merged with and into Continental, with Continental surviving as a wholly-owned subsidiary of UAL Corporation (the “Merger”). Upon closing of the Merger, UAL Corporation became the parent company of both United Air Lines, Inc. (“United”) and Continental and UAL Corporation’s name was changed to United Continental Holdings, Inc. (“UAL” or the “Company”).

The Company also expects in the future that it will merge Continental and United into one legal entity (the “Airlines Merger”). Once the Airlines Merger occurs, the financial statements of United and Continental will be combined for all periods presented from the date of the Merger at their historical cost, there will no longer be a requirement to separately report the historical financial statements of Continental, and United will be considered the predecessor.

The Unaudited Pro Forma Condensed Combined Balance Sheet of United and Continental combines the historical consolidated balance sheet of Continental and United on September 30, 2012. The Unaudited Pro Forma Condensed Combined Statement of Operations of United and Continental for the year ended December 31, 2011 and the nine months ended September 30, 2012 combines the historical consolidated statement of operations of Continental and United for the year ended December 31, 2011 and the nine months ended September 30, 2012, respectively.

The Unaudited Pro Forma Condensed Combined Financial Statements were prepared by combining the historical financial information of both Continental and United. Pro forma statements that give effect to a business combination to be accounted for as a reorganization of entities under common control generally only combine the historical financial statements of combining entities.

Note 2. Pro Forma Adjustments

The Unaudited Pro Forma Condensed Combined Financial Statements of United primarily reflect the elimination of transactions and account balances between Continental and United.