CHICAGO, Oct. 21 /PRNewswire/ --
UAL Corporation (NYSE: UAL),
the holding company whose primary subsidiary is United Airlines, today
reported record third-quarter net earnings. The record net earnings are
based on the exclusion of one-time gains of $378 million ($235 million
after tax) from the Apollo Travel Services/Galileo International (ATS/Galileo)
transactions in the third quarter of last year.
In accordance with Generally Accepted Accounting Principles (GAAP), 1998 third-quarter net earnings of $425 million ($3.71 per share) broke the record set last year, with operating earnings also setting a record at $695 million. In comparison, third-quarter 1997 net earnings were $344 million ($3.26 per share), excluding ATS/Galileo transactions, on operating earnings of $563 million. Including the one-time gains from ATS/Galileo, net earnings in 1997 were $579 million ($5.61 per share).
Fully Distributed Results
On a pro forma, fully distributed basis (see below for further explanation of the methodology), net earnings set a record at $516 million, up 3 percent from third-quarter 1997 fully distributed net earnings of $499 million, excluding ATS/Galileo. Fully distributed operating earnings for the quarter also set a record, rising 6 percent to $868 million versus $819 million in 1997. Fully distributed earnings per share were $4.02, a 7 percent increase over third quarter 1997 earnings per share of $3.75, excluding ATS/Galileo.
Chairman's Comments
``We are especially pleased with United's third-quarter performance,'' said Gerald Greenwald, chairman and chief executive officer of UAL Corporation. ``Once again, we produced record net earnings, and this was despite the challenging international conditions that have been affecting our performance this year.
``These underlying trends remain predominantly unchanged -- not only the weakened Asian economies and the increased industry capacity in the Latin American and transatlantic markets, but also, on the positive side, the relatively strong demand for travel in the United States. We are keeping a close eye on the economic indicators, and if necessary, stand ready to modify our plans accordingly.
``During the quarter, because of the efforts and dedication of United's employees, we not only met the traffic demands of our busiest season, but we also continued to control costs and were able to provide service to many of the travelers affected by the Northwest strike. I'd like to thank our United employees for admirably rising to the occasion.''
Operating Revenues
Operating revenues for the quarter increased 3 percent over 1997, from $4.64 billion to $4.78 billion. Available seat miles increased 4 percent. Total revenue per available seat mile (unit revenue) decreased very slightly to 10.39 cents compared to 10.43 cents a year ago. Yield (passenger revenue per passenger mile) decreased almost 2 percent to 12.10 cents from 12.33 cents a year ago. Passenger load factor increased to 76.1 percent from 75.3 percent in the previous year.
Passenger revenue rose 3 percent to $4.26 billion from $4.15 billion in third quarter 1997, and cargo revenue increased 1 percent to $228 million versus $225 million in 1997.
Other revenue rose 9 percent to $292 million vs. $268 million a year ago.
Operating Expenses
Fully distributed operating expenses increased 2 percent to $3.91 billion compared to third quarter 1997's $3.82 billion. However, fully distributed operating expenses per available seat mile (unit cost) fell 1 percent from 8.62 cents a year ago to 8.52 cents.
The average price per gallon of jet fuel decreased 10 percent year over year. Excluding fuel cost, fully distributed unit cost increased by 0.5 percent.
Balance Sheet
As of September 30, 3.6 million shares of UAL common stock had been repurchased at a total cost of $247 million, at an average price of $68.25 per share. This repurchase was part of the company's plan to buy back up to $500 million of its outstanding common stock, announced on September 8. Since the end of the quarter, the company has continued to repurchase shares and, as of today, has repurchased a total of 5.6 million shares for a total cost of $367 million, at an average price of $66.06 per share.
n.b.: While UAL Corporation reports its earnings under GAAP -- Generally Accepted Accounting Principles -- a more complete understanding of UAL Corporation's performance may be gained by viewing the results on a pro forma, fully distributed basis. This presentation considers all ESOP shares that will be issued to employees over the course of the ESOP period to be immediately outstanding, thus ``fully distributed.'' Consistent with this presentation, the ``ESOP compensation expense'' -- which reflects the commitment of stock to employees -- is excluded from fully distributed expenses and ESOP convertible preferred stock dividends are not deducted from earnings attributable to common stockholders. No adjustments are made to fully distributed earnings to reflect future salary increases.
UAL CORPORATION AND SUBSIDIARY COMPANIES
EARNINGS AND EARNINGS PER SHARE
(In Millions, Except Per Share)
Three Months Ended
September 30, 1998 September 30, 1997
GAAP "Fully GAAP "Fully
Basis Distributed"(A) Basis Distributed"(A)
EARNINGS
Operating revenues $ 4,783 $ 4,783 $ 4,640 $ 4,640
Operating expenses
(excluding ESOP
compensaton expense) (3,915) (3,915) (3,821) (3,821)
ESOP compensation
expense (173) N/A (256) N/A
Operating earnings 695 868 563 819
Gain on sale of Apollo
Travel Services -- -- 275 275
Gain on sale of
subsidiary's stock -- -- 103 103
Non-operating expense (47) (47) (28) (28)
Earnings before income taxes
and distributions on
preferred securities 648 821 913 1,169
Provision for income
taxes 222 304 333 434
Earnings before distributions
on preferred securities 426 517 580 735
Distributions on
preferred securities, net (1) (1) (1) (1)
Net earnings 425 516 579 734
Preferred stock
dividends and other (25) (2) (19) (3)
Earnings attributable
to common shareholders $ 400 $ 514 $ 560 $ 731
SHARES
Average common shares
assumed outstanding 57.9 57.9 59.6 59.6
ESOP preferred shares
assumed outstanding 48.4 68.4 37.3 69.7
Other 1.5 1.5 2.9 2.9
Total shares assumed
outstanding 107.8 127.8 99.8 132.2
PER SHARE, DILUTED:
Earnings before gain
on sales $ 3.71 $ 4.02 $ 3.26 $3.75
Gains on sales, net
-- -- 2.35 1.78
Net earnings $ 3.71 $ 4.02 $ 5.61 $ 5.53
(A) "Fully distributed" earnings and earnings per share are pro
forma presentations which consider all ESOP shares which will
ultimately be released to employees by the end of the ESOP period
to be immediately outstanding. Therefore the ESOP compensation
expense has been excluded from fully distributed earnings and
ESOP convertible preferred stock dividends have not been deducted
from earnings attributable to common shareholders. No
adjustments are made to fully distributed earnings to reflect
future salary increases.
UAL CORPORATION AND SUBSIDIARY COMPANIES
EARNINGS AND EARNINGS PER SHARE
(In Millions, Except Per Share)
Nine Months Ended
September 30, 1998 September 30,1997
GAAP "Fully GAAP "Fully
Basis Distributed"(A) Basis Distributed"(A)
EARNINGS
Operating revenues $13,280 $13,280 $13,143 $13,143
Operating expenses
(excluding ESOP
compensation expense) (11,329) (11,329) (11,309) (11,309)
ESOP compensation
expense (663) N/A (666) N/A
Operating earnings 1,288 1,951 1,168 1,834
Gain sale of Apollo
Travel Services -- -- 275 275
Gain on sale of
subsidiary's stock -- -- 103 103
Non-operating expense (115) (115) (74) (74)
Earnings before income
taxes and distributions
on preferred securities 1,173 1,836 1,472 2,138
Provision for income
taxes 401 680 542 809
Earnings before distributions
on preferred securities 772 1,156 930 1,329
Distributions on
preferred securities, net (4) (4) (4) (4)
Net earnings 768 1,152 926 1,325
Preferred stock
dividends and other (77) (8) (57) (8)
Earnings attributable
to common shareholders
$691 $1,144 $869 $1,317
SHARES
Average common shares
assumed outstanding 57.7 57.7 59.2 59.2
ESOP preferred shares
assumed outstanding 45.8 68.9 34.4 70.0
Other 1.6 1.6 2.7 2.7
Total shares assumed
outstanding 105.1 128.2 96.3 131.9
PER SHARE, DILUTED:
Earnings before gains
on sales $ 6.57 $ 8.93 $ 6.58 $ 8.21
Gains on sales, net -- -- 2.44 1.78
Net earnings $ 6.57 $ 8.93 $9.02 $ 9.99
(A) "Fully distributed" earnings and earnings per share are pro
forma presentations which consider all ESOP shares which will
ultimately be released to employees by the end of the ESOP period
to be immediately outstanding. Therefore the ESOP compensation
expense has been excluded from fully distributed earnings and
ESOP convertible preferred stock dividends have not been deducted
from earnings attributable to common shareholders. No
adjustments are made to fully distributed earnings to reflect
future salary increases.
UAL CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
(In Millions, Except Per Share)
(In accordance with GAAP) Three Months Ended September 30
1998 1997 % Change
Operating revenues:
Passenger $4,263 $4,147 +2.8
Cargo 228 225 +1.3
Other operating revenues 292 268 +9.0
4,783 4,640 +3.1
Operating expenses:
Salaries and related costs 1,350 1,264 +6.8
ESOP compensation expense 173 256 -32.4
Aircraft fuel 470 510 -7.8
Commissions 354 409 -13.4
Purchased services 384 329 +16.7
Aircraft rent 221 235 -6.0
Landing fees and other rent 221 202 +9.4
Depreciation and amortization 199 182 +9.3
Aircraft maintenance 165 153 +7.8
Other operating expenses 551 537 +2.6
4,088 4,077 +0.3
Earnings from operations 695 563 +23.4
Other income (expense):
Interest expense (92) (73) +26.0
Interest capitalized 26 25 +4.0
Interest income 15 13 +15.4
Equity in earnings of affiliates 19 17 +11.8
Miscellaneous, net (15) 368 N/A
(47) 350
Earnings before income taxes and
distributions on preferred securities 648 913 -29.0
Provision for income taxes 222 333 -33.3
Earnings before distributions on
preferred securities 426 580 -26.6
Distributions on preferred
securities, net of tax (1) (1)
Net earnings $425 $579 -26.6
Per share, basic:
Earnings before gains on sales $6.91 $5.46
Gains on sales, net -- 3.93
Net earnings $6.91 $9.39
Per share, diluted:
Earnings before gains on sales $3.71 $3.26
Gains on sales, net -- 2.35
Net earnings $3.71 $5.61
See accompanying notes.
UAL CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
(In Millions, Except Per Share)
(In accordance with GAAP) Nine Months Ended September 30
1998 1997 % Change
Operating revenues:
Passenger $11,777 $11,628 +1.3
Cargo 666 634 +5.0
Other operating revenues 837 881 -5.0
13,280 13,143 +1.0
Operating expenses:
Salaries and related costs 3,959 3,732 +6.1
ESOP compensation expense 663 666 -0.5
Aircraft fuel 1,346 1,559 -13.7
Commissions 1,000 1,159 -13.7
Purchased services 1,098 946 +16.1
Aircraft rent 672 707 -5.0
Landing fees and other rent 651 644 +1.1
Depreciation and amortization 582 533 +9.2
Aircraft maintenance 462 447 +3.4
Other operating expenses 1,559 1,582 -1.5
11,992 11,975 +0.1
Earnings from operations 1,288 1,168 +10.3
Other income (expense):
Interest expense (265) (213) +24.4
Interest capitalized 82 75 +9.3
Interest income 44 36 +22.2
Equity in earnings of affiliates 62 64 -3.1
Miscellaneous, net (38) 342 N/A
(115) 304
Earnings before income taxes and
distributions on
preferred securities 1,173 1,472 -20.3
Provision for income taxes 401 542 -26.0
Earnings before distributions on
preferred securities 772 930 -17.0
Distributions on preferred
securities, net of tax (4) (4)
Net earnings $768 $926 -17.1
Per share, basic:
Earnings before gains on sales $11.97 $10.71
Gains on sales, net -- 3.97
Net earnings $11.97 $14.68
Per share, diluted:
Earnings before gains on sales $6.57 $ 6.58
Gains on sales, net -- 2.44
Net earnings $6.57 $9.02
See accompanying notes.
Consolidated Notes
(A) UAL Corporation is a holding company whose principal subsidiary is
United Air Lines, Inc.
(B) "ESOP compensation expense" 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. The fair value of ESOP
convertible preferred stock is estimated based on the market value of
UAL's common stock. The average market price of UAL's common stock
was $72 per share during the third quarter of 1998 versus $79 per
share during the 1997 third quarter. The average price during the
nine-month period ending September 30, 1998, was $82 per share versus
$71 per share for the same nine-month period in 1997.
(C) "Miscellaneous, net" consisted of the following:
Third Quarter Nine-month
Period
1998 1997 1998 1997
Foreign exchange
losses $ (10) $ (5) $ (20) $ (15)
Minority interests -- (1) -- (15)
Gain on sale of ATS -- 275 -- 275
Gain on sale of
Galileo stock -- 103 -- 103
Other (5) (4) (18) (6)
$ (15) $ 368 $ (38) $ 342
(D) On September 8, 1998 the Board of Directors authorized the
repurchase of up to $500 million of the Company's common stock.
As of September 30, 3.6 million shares had been repurchased
at a total price of $247 million.
(E) Per share amounts were calculated after providing for dividends
on preferred stock, including ESOP convertible preferred stock,
of $25 million in the 1998 third quarter, $19 million in the
1997 third quarter, $77 million in the 1998 nine-month period
ending September 30 and $57 million in the same 1997 nine-month
period. Basic per share amounts were based on weighted average
common shares outstanding. Diluted per share amounts include
potential common shares including ESOP shares committed to be
released. Average shares used in the computations were as follows:
1998 1997
(In Millions)
Third quarter:
Basic 57.9 59.6
Diluted 107.8 99.8
Nine-month period:
Basic 57.7 59.2
Diluted 105.1 96.3
(F) In July 1997, United completed the sale of its interest in the
Apollo Travel Services Partnership ("ATS"), a 77% owned affiliate
whose accounts were consolidated, to Galileo International, Inc.
("Galileo"), previously a 38% owned affiliate accounted for under the
equity method, for $539 million in cash. This transaction resulted
in a pre-tax gain of $275 million in the third quarter, which is
included in "Miscellaneous, net".
Galileo raised a portion of the proceeds used to purchase ATS through
the completion of an initial public offering of 16.8 million shares
of its common stock. This transaction resulted in a reduction of
the Company's ownership in Galileo from 38% to 32%. In accordance
with the Company's policy of recognizing gains or losses on the sale
of a subsidiary's stock based on the difference between the offering
price and the Company's carrying amount of such stock, United
recognized a gain of $103 million in the third quarter, also included
in "Miscellaneous, net".
UNITED AIR LINES, INC AND SUBSIDIARY COMPANIES
Three Months Ended September 30
1998 1997 % Change
FINANCIAL SUMMARY (UNAUDITED)
(in millions)
Operating revenues $4,772 $4,630 +3.1
Operating expenses (excluding ESOP
compensation expense) 3,912 3,826 +2.2
ESOP compensation expense 173 256 -32.4
4,085 4,082 +0.1
Earnings from operations (in $ 687 $ 548 +25.4
accordance with GAAP)
OPERATING STATISTICS
Revenue passengers (in thousands) 23,953 22,651 +5.7
Revenue passenger miles (in 34,974 33,394 +4.7
millions)
Available seat miles (in millions) 45,929 44,375 +3.5
Passenger load factor (percent) 76.1 75.3 +0.8pt.
Breakeven passenger load factor 60.7 60.1 +0.6pt.
excluding ESOP charges (percent)
Passenger revenue per passenger mile 12.10 12.33 -1.9
(cents)
Operating revenue per available
seat mile (cents) 10.39 10.43 -0.4
Operating expenses excluding ESOP 8.52 8.62 -1.2
charges per available seat mile (cents)
Average price per gallon of jet fuel 58.5 65.3 -10.4
(cents)
Number of aircraft in operating 580 577
fleet at end of period
Average full-time equivalent 92.0 88.8 +3.6
employees (thousands)
Note: Revenue and expenses associated with United's dedicated
freighter operations are included in the calculations of unit revenue and
unit cost. However, dedicated freighter operations do not increase
available seat miles, which is used as the denominator in the calculation
of unit revenue and unit cost. The inclusion of these revenues and
expenses do not have a material effect on unit revenue and unit cost.
UNITED AIR LINES, INC AND SUBSIDIARY COMPANIES
Nine Months Ended September 30
1998 1997 % Change
FINANCIAL SUMMARY (UNAUDITED)
(in millions)
Operating revenues $ 13,248 $ 13,111 +1.0
Operating expenses (excluding ESOP 11,320 11,304 +0.1
compensation expense)
ESOP compensation expense 663 666 -0.5
11,983 11,970 +0.1
Earnings from operations (in $ 1,265 $ 1,141 +10.9
accordance with GAAP)
OPERATING STATISTICS
Revenue passengers (in thousands) 65,220 63,624 +2.5
Revenue passenger miles 93,861 91,960 +2.1
(in millions)
Available seat miles (in millions) 130,125 126,629 +2.8
Passenger load factor (percent) 72.1 72.6 -0.5pt.
Breakeven passenger load factor 60.2 61.3 -1.1pt.
excluding ESOP charges (percent)
Passenger revenue per passenger mile 12.45 12.56 -0.9
(cents)
Operating revenue per available
seat mile (cents) 10.18 10.35 -1.6
Operating expenses excluding ESOP 8.70 8.93 -2.6
charges per available seat mile (cents)
Average price per gallon of jet fuel 59.4 70.1 -15.3
(cents)
Number of aircraft in operating 580 577
fleet end of period
Average full-time equivalent 90.9 87.8 +3.5
employees (thousands)
Note: Revenue and expenses associated with United's dedicated freighter
operations are included in the calculations of unit revenue and unit cost.
However, dedicated freighter operations do not increase available seat
miles, which is used as the denominator in the calculation of unit revenue
and unit cost. The inclusion of these revenues and expenses do not have a
material effect on unit revenue and unit cost.
SOURCE: UAL Corporation