-- Despite difficult conditions in international markets, United achieved record 1998 fully distributed earnings per share of $10.50, excluding a foreign-exchange charge. -- The company produced solid fourth-quarter earnings of $1.52 per fully distributed share, excluding a foreign-exchange charge. -- Fully distributed unit cost improved for both the fourth quarter and full year. CHICAGO, Jan. 21 /PRNewswire/ -- UAL Corporation (NYSE: UAL), the holding company whose primary subsidiary is United Airlines, today reported another record year for fully distributed earnings per share. GAAP Basis Results In accordance with Generally Accepted Accounting Principles (GAAP), fourth-quarter net earnings were $54 million, including an after-tax loss of $33 million ($52 million pre-tax) from the recognition of a non-cash yen foreign-exchange charge. Excluding this yen charge, fourth-quarter net earnings were $87 million. Fourth-quarter operating earnings were $191 million. For the fourth quarter of 1997, net earnings before an extraordinary item associated with early debt retirement were $32 million on operating earnings of $91 million. For the full year, net earnings were $854 million before the yen charge. In the prior full year, net earnings were $723 million before an extraordinary item associated with early debt retirement and the one-time gain of $235 million ($378 million pre-tax) from the Apollo Travel Services/Galileo International (ATS/Galileo) transactions. Fully Distributed Basis Results The company also reported that, on a pro forma fully distributed basis, fourth-quarter net earnings were $189 million, before the yen charge, compared to $231 million, before the extraordinary item, in the prior year. (See below for further explanation of the fully distributed basis methodology). Fourth-quarter fully distributed earnings per share were $1.52, before the yen charge. This compared to fully distributed earnings per share of $1.74 in 1997, before the extraordinary item. Fully distributed operating earnings were $357 million versus $411 million a year earlier. For the full year, fully distributed earnings per share were a record $10.50, before the yen charge. This is an increase of 5 percent over the prior year's record earnings per share of $9.97, before the extraordinary item and the ATS/Galileo transaction. Annual fully distributed net earnings for 1998 increased to $1.341 billion, also before the yen charge. This compares to fully distributed net earnings of $1.320 billion in 1997, before the extraordinary item and the ATS/Galileo transaction. Fully distributed operating earnings for the year rose 3 percent to $2.307 billion for 1998, compared to $2.246 billion in the prior year. Chairman's Comments "We are pleased with our fourth-quarter results, especially considering the external constraints under which we were operating," said Gerald Greenwald, UAL Corporation Chairman and Chief Executive. "Despite the continued weakness in Asian economies, increased competition in all international markets and a slower growth rate in U.S. domestic travel demand during the quarter, we posted a healthy profit, the second highest since deregulation on a fully distributed basis. This very strong fourth-quarter performance helped make 1998 the sixth consecutive year for the company to report increased annual earnings per share. We attribute much of our profitable performance for the full year to the strategy we developed early in the year to address the declining Asian situation. We believe our experience in 1998 has well positioned us to successfully manage whatever challenges may lie ahead. I congratulate all United employees on our excellent performance for the year." Operating Revenues Operating revenues for the quarter increased 1 percent to $4.3 billion from last year's $4.2 billion. Total revenue per available seat mile (unit revenue) decreased 2 percent to 9.73 cents versus 9.94 cents a year ago. Yield (passenger revenue per passenger mile) fell 3 percent to 12.09 cents from 12.51 cents in 1997. Operating Expenses Fully distributed fourth-quarter operating expenses increased by 3 percent to $3.9 billion from $3.8 billion in 1997. Fully distributed operating expenses per available seat mile (unit cost) showed a year-over-year improvement of 0.6 percent, declining from 8.99 cents in 1997 to 8.94 cents in 1998. Fuel cost per gallon, including tax, declined 14 percent year over year to 58.0 cents per gallon compared to 67.6 cents a year ago. Excluding fuel expense, 1998 fourth-quarter fully distributed unit cost increased 1.5 percent over fourth quarter 1997. In addition to the lower year-over-year fuel cost, the company's ongoing cost-control initiatives contributed significantly to the company's positive unit cost performance for the fourth quarter. Non-operating Expenses Fourth-quarter net non-operating expenses increased to $108 million from $39 million in 1997. Much of the increase was due to the recognition of a $52 million non-cash loss on certain yen positions resulting from the substantial appreciation of the yen during the fourth quarter. The revenue benefits, to which most of these yen positions correspond, will be received in future periods. Balance Sheet The company has repurchased 7.7 million shares, completing its $500 million buyback plan announced last September. 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. The web page address for UAL Corp. and United Airlines is http://www.ual.com UAL CORPORATION AND SUBSIDIARY COMPANIES EARNINGS AND EARNINGS PER SHARE (In Millions, Except Per Share) Three Months Ended December 31, 1998 December 31, 1997 GAAP "Fully GAAP "Fully Basis Distributed"(A) Basis Distributed"(A) EARNINGS Operating revenues $4,281 $4,281 $4,235 $4,235 Operating expenses (excluding ESOP compensation expense) (3,924) (3,924) (3,824) (3,824) ESOP compensation expense (166) N/A (320) N/A Operating earnings 191 357 91 411 Non-cash unrealized yen foreign exchange losses (52) (52) - - Non-operating expenses (56) (56) (39) (39) Earnings before income taxes, distributions on preferred securities and extraordinary item 83 249 52 372 Provision for income taxes 28 92 19 140 Earnings before distributions on preferred securities and extraordinary item 55 157 33 232 Distributions on preferred securities (1) (1) (1) (1) Extraordinary loss on debt extinguishment, net of tax - - (9) (9) Net earnings 54 156 23 222 Preferred stock dividends and other (26) (2) (19) (3) Earnings attributable to common shareholders $28 $154 $4 $219 SHARES Average common shares assumed outstanding 53.1 53.1 58.1 58.1 ESOP preferred shares assumed outstanding 51.2 68.2 40.2 69.5 Other 1.4 1.3 3.1 3.0 Total shares assumed outstanding 105.7 122.6 101.4 130.6 PER SHARE, DILUTED: Earnings before yen foreign exchange losses and extraordinary item $0.57 $1.52 $0.12 $1.74 Non-cash unrealized yen foreign exchange losses, net (0.30) (0.27) - - Loss on debt extinguishment, net - - (0.08) (0.07) $0.27 $1.25 $0.04 $1.67 (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) Twelve Months Ended December 31, 1998 December 31, 1997 GAAP "Fully GAAP "Fully Basis Distributed"(A) Basis Distributed"(A) EARNINGS Operating revenues $17,561 $17,561 $17,378 $17,378 Operating expenses (excluding ESOP compensation expense) (15,254) (15,254) (15,132) (15,132) ESOP compensation expense (829) N/A (987) N/A Operating earnings 1,478 2,307 1,259 2,246 Non-cash unrealized yen foreign exchange losses (52) (52) - - Gain on sale of Apollo Travel Services - - 275 275 Gain on sale of subsidiary's stock - - 103 103 Non-operating expenses (170) (170) (113) (113) Earnings before income taxes, distributions on preferred securities and extraordinary item 1,256 2,085 1,524 2,511 Provision for income taxes 429 771 561 951 Earnings before distributions on preferred securities and extraordinary item 827 1,314 963 1,560 Distributions on preferred securities, net (6) (6) (5) (5) Extraordinary loss on debt extinguishment, - - (9) (9) Net earnings 821 1,308 949 1,546 Preferred stock dividends and other (102) (10) (77) (10) Earnings attributable to common shareholders $719 $1,298$872 $1,536 SHARES Average common shares assumed outstanding 56.5 56.5 58.8 58.8 ESOP preferred shares assumed outstanding 47.1 68.7 35.9 69.9 Other 1.6 1.6 2.7 2.7 Total shares assumed outstanding 105.2 126.8 97.4 131.4 PER SHARE, DILUTED: Earnings before yen losses, gains on sales and extraordinary item $7.14 $10.50 $6.64 $9.97 Non-cash unrealized yen foreign exchange losses, net (0.31) (0.26) - - Gains on sales, net - - 2.40 1.79 Extraordinary item, net - - (0.09) (0.07) $6.83 $10.24 $8.95 $11.69 (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 December 31 1998 1997 % Change Operating revenues: Passenger $3,743 $3,714 +0.8 Cargo 246257 -4.3 Other operating revenues 292 264 +10.6 4,281 4,235 +1.1 Operating expenses: Salaries and related costs 1,382 1,286 +7.5 ESOP compensation expense 166 320 -48.1 Aircraft fuel 442 502 -12.0 Commissions 325 349 -6.9 Purchased services 408 339 +20.4 Aircraft rent 220 235 -6.4 Landing fees and other rent 229 219 +4.6 Depreciation and amortization 210 192 +9.4 Aircraft maintenance 162 155 +4.5 Other operating expenses 546 547 -0.2 4,090 4,144 -1.3 Earnings from operations 191 91 +109.9 Other income (expense): Interest expense (90) (73) +23.3 Interest capitalized 24 29 -17.2 Interest income 15 16 -6.3 Equity in earnings of affiliates 10 2 +400.0 Miscellaneous, net (67) (13) +415.4 (108) (39) +176.9 Earnings before income taxes, distributions on preferred securities and extraordinary item 83 52 +59.6 Provision for income taxes 28 19 +47.4 Earnings before distributions on preferred securities and extraordinary item 55 33 +66.7 Distributions on preferred securities, net of tax (1) (1) Earnings before extraordinary item 54 32 +68.8 Extraordinary loss on early extinguishment of debt, net of tax - (9) Net earnings $54 $23 +134.8 Per share, basic: Earnings before extraordinary item $0.53 $0.21 Extraordinary loss on early extinguishment of debt, net of tax - (0.15) Net earnings $0.53 $0.06 Per share, diluted: Earnings before extraordinary item $0.27 $0.12 Extraordinary loss on early extinguishment of debt, net of tax - (0.08) Net earnings $0.27 $0.04 See accompanying notes. UAL CORPORATION AND SUBSIDIARY COMPANIES STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED) (In Millions, Except Per Share) (In accordance with GAAP) Twelve Months Ended December 31 1998 1997 % Change Operating revenues: Passenger $15,520 $15,342 +1.2 Cargo 913 892 +2.4 Other operating revenues 1,128 1,144 -1.4 17,561 17,378 +1.1 Operating expenses: Salaries and related costs 5,341 5,018 +6.4 ESOP compensation expense 829 987 -16.0 Aircraft fuel 1,788 2,061 -13.2 Commissions 1,325 1,508 -12.1 Purchased services 1,505 1,285 +17.1 Aircraft rent 893 942 -5.2 Landing fees and other rent 881 863 +2.1 Depreciation and amortization 793 724 +9.5 Aircraft maintenance 624 603 +3.5 Other operating expenses 2,104 2,128 -1.1 16,083 16,119 -0.2 Earnings from operations 1,478 1,259 +17.4 Other income (expense): Interest expense (355) (286) +24.1 Interest capitalized 105 104 +1.0 Interest income 59 52 +13.5 Equity in earnings of affiliates 72 66 +9.1 Miscellaneous, net (103) 329 (222) 265 Earnings before income taxes, distributions on preferred securities and extraordinary item 1,256 1,524 -17.6 Provision for income taxes 429 561 -23.5 Earnings before distributions on preferred securities and extraordinary item 827 963 -14.1 Distributions on preferred securities, net of tax (6) (5) Earnings before extraordinary item 821 958 -14.3 Extraordinary loss on early extinguishment of debt, net of tax - (9) Net earnings $821 $949 -13.5 Per share, basic: Earnings before extraordinary item $12.71 $14.98 Extraordinary loss on early extinguishment of debt, net of tax - (0.15) Net earnings $12.71 $14.83 Per share, diluted: Earnings before extraordinary item $6.83 $9.04 Extraordinary loss on early extinguishment of debt, net of tax - (0.09) Net earnings $6.83 $8.95 See accompanying notes. Consolidated Notes (1) UAL Corporation is a holding company whose principal subsidiary is United Air Lines, Inc. (2) "ESOP compensation expense" represents the estimated average fair value of ESOPconvertible 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 $63 per share during the fourth quarter of 1998 versus $89 per share during the 1997 fourth quarter. (3) "Miscellaneous, net" consisted of the following: Fourth Quarter Twelve-month Period 1998 1997 1998 1997 Non-cash unrealized yen foreign exchange losses $(52) $- $- $- Other foreign exchange losses (8) (4) (32) (19) Minority interest - - - (15) Gain on sale of ATS - - - 275 Gain on sale of Galileo stock - - - 103 Other (7) (9) (19) (15) $ (67) $ (13) $(103) $ 329 In the fourth quarter, due to the yen strengthening against the dollar, United experienced non-cash losses aggregating $52 million ($33 million after-tax) on certain of its yen positions. The revenue benefits, to which most of these yen positions correspond, will be received in future periods. (4) Per share amounts were calculated after providing for dividends on preferred stock, including ESOP convertible preferred stock, of $25 million in the 1998 fourth quarter, $19 million in the 1997 fourth quarter, $102 million for the full year 1998 and $77 million for the full year 1997. 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) Fourth quarter: Basic 53.1 58.1 Diluted 105.7 101.4 Twelve-month period: Basic 56.5 58.8 Diluted 105.2 97.4 In January 1999, the Company completed its repurchase of up to $500 million of the Company's common stock after acquiring 7.7 million shares. UNITED AIR LINES, INC AND SUBSIDIARY COMPANIES Three Months Ended December 31 1998 1997 % Change FINANCIAL SUMMARY (UNAUDITED) (in millions) Operating revenues $4,270 $4,224 +1.1 Operating expenses (excluding ESOP compensation expense) 3,921 3,820 +2.6 ESOP compensation expense 166 320 -48.1 4,087 4,140 -1.3 Earnings from operations (in accordance with GAAP) $183 $84 +117.9 OPERATING STATISTICS Revenue passengers (in thousands) 21,648 20,623 +5.0 Revenue passenger miles (in millions) 30,749 29,466 +4.4 Available seat miles (in millions) 43,883 42,481 +3.3 Passenger load factor (percent) 70.1 69.4 +0.7 pt. Breakeven passenger load factor excludingESOP charges (percent) 63.5 61.8 +1.7 pt. Passenger revenue per passenger mile (cents) 12.09 12.51 -3.4 Operating revenue per available seat mile (cents) 9.73 9.94 -2.1 Operating expenses excluding ESOP charges per available seat mile (cents) 8.94 8.99 -0.6 Average price per gallon of jet fuel (cents) 58.0 67.6 -14.2 Number of aircraft in operating fleet at end of period 577 575 Average full-time equivalent employees (thousands) 91.9 89.1 +3.1 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 Twelve Months Ended December 31 1998 1997 % Change FINANCIAL SUMMARY (UNAUDITED) (in millions) Operating revenues $17,518 $17,335 +1.1 Operating expenses (excluding ESOP compensation expense) 15,242 15,122 +0.8 ESOP compensation expense 829 987 -16.0 16,071 16,109 -0.2 Earnings from operations (in accordance with GAAP) $1,447 $1,226 +18.0 OPERATING STATISTICS Revenue passengers (in thousands) 86,868 84,247 +3.1 Revenue passenger miles (in millions) 124,609 121,426 +2.6 Available seat miles (in millions) 174,008 169,110 +2.9 Passenger load factor (percent) 71.6 71.8 -0.2 pt. Breakeven passenger load factor excluding ESOP charges (percent) 61.0 61.4 -0.4 pt. Passenger revenue per passenger mile (cents) 12.36 12.55 -1.5 Operating revenue per available seat mile (cents) 10.07 10.25 -1.8 Operating expenses excluding ESOP charges per available seat mile (cents) 8.76 8.94 -2.0 Average price per gallon of jet fuel (cents) 59.0 69.5 -15.1 Number of aircraft in operating fleet at end of period 577 575 Average full-time equivalent employees (thousands) 91.1 88.0 +3.5 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 United Airlines -0- 01/21/99 /CONTACT: Corporate Communications, Andy Plews, 847-700-2697, or Joe Hopkins, 847-700-5770, or Investor Relations, Clifford Hew, 847-700-7501, all of UAL Corporation/ (UAL) CO: United Airlines; UAL Corporation ST: Illinois IN: LEI AIR SU: ERN MW-CM -- CGTH016 -- 8271 01/21/99 08:04 EST http://www.prnewswire.com //Begin Meta Data// Selector Code: .cb.v Copyright 1999, PR Newswire
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