Attached files
| file | filename |
|---|---|
| EX-12.1 - EXHIBIT 12.1 - UNITED AIRLINES, INC. | exhibit121.htm |
| 8-K - FORM 8-K - UNITED AIRLINES, INC. | form8k.htm |
CONTINENTAL AIRLINES, INC.
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
On October 1, 2010, Continental Airlines, Inc. ("Continental") became a wholly-owned subsidiary of United Continental Holdings, Inc. (formerly UAL Corporation and referred to herein as "UAL"), as a result of the merger of JT Merger Sub Inc. ("Merger Sub"), a wholly-owned subsidiary of UAL, with and into Continental. In connection with the merger, UAL changed its name to United Continental Holdings, Inc. to reflect that both United Air Lines, Inc. ("United") and Continental are its wholly-owned subsidiaries. The merger was effected pursuant to an Agreement and Plan of Merger dated as of May 2, 2010, entered into by and among UAL, Continental and Merger Sub. Until the operational integration of United and Continental is complete, United and Continental will continue to operate as separate airlines.
The Unaudited Pro Forma Condensed Balance Sheet of Continental gives effect, on a Continental separate-entity basis, to the merger with UAL as if it had been consummated on September 30, 2010. The Unaudited Pro Forma Condensed Statements of Operations of Continental for the nine months ended September 30, 2010 and for the year ended December 31, 2009 give effect to the merger, on a Continental separate-entity basis, as if it had been consummated on January 1, 2009, the beginning of the earliest period presented. The historical consolidated financial statements of Continental have also been adjusted to reflect certain reclassifications in order to conform to UAL’s financial statement presentation.
The Unaudited Pro Forma Condensed Financial Statements were prepared using the acquisition method of accounting with UAL considered the acquirer of Continental. Accordingly, consideration given by UAL to complete the merger with Continental has been pushed down and allocated to assets and liabilities of Continental based upon their estimated fair values as of September 30, 2010. As of the date of this current report on Form 8-K, UAL and Continental have not completed the detailed valuation studies necessary to arrive at the required estimates of the fair value of the Continental assets acquired and the liabilities assumed and the related allocations of purchase price, nor have they finalized all adjustments necessary to conform Continental's accounting policies to UAL's accounting policies. Final valuations will be completed in the fourth quarter of 2010. Changes resulting from finalization of valuations and conforming to UAL’s accounting policies will result in adjustments to the balance sheet and/or statements of operations. There can be no assurance that such finalization will not result in material changes.
These Unaudited Pro Forma Condensed Financial Statements have been developed from and should be read in conjunction with (1) the unaudited interim consolidated financial statements of Continental contained in its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2010 and (2) the audited consolidated financial statements of Continental contained in its Annual Report on Form 10-K for the fiscal year ended December 31, 2009. The Unaudited Pro Forma Condensed Financial Statements are provided for illustrative purposes only and do not purport to represent what the actual results of operations or financial position of Continental would have been had the merger occurred on the dates assumed, nor are they necessarily indicative of the future results of operations or financial position of Continental. Further, they do not include the results or financial position of United or UAL. Consolidated unaudited pro forma financial statements of UAL have been separately filed in UAL's Current Report on Form 8-K dated October 1, 2010.
Continental expects to incur significant costs associated with integrating the operations of UAL and Continental, as more fully discussed in Continental's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2010. The Unaudited Pro Forma Condensed Financial Statements do not reflect the costs of any integration activities or benefits that may result from realization of future cost savings from operating efficiencies or revenue synergies expected to result from the merger. In addition, the Unaudited Pro Forma Condensed Financial Statements do not include one-time costs directly attributable to the transaction, employee retention costs or professional fees incurred by Continental pursuant to provisions contained in the merger agreement as those costs are not considered part of the purchase price.
CONTINENTAL AIRLINES, INC.
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
September 30, 2010
|
Pro Forma
|
|||||||||
|
(in millions)
|
Historical
|
Adjustments
|
Pro Forma
|
||||||
|
ASSETS
|
|||||||||
|
CURRENT ASSETS:
|
|||||||||
|
Cash and cash equivalents
|
$
|
3,698
|
$
|
-
|
$
|
3,698
|
|||
|
Short-term investments
|
506
|
-
|
506
|
||||||
|
Restricted cash and cash equivalents
|
161
|
(161)
|
(a)
|
-
|
|||||
|
Accounts receivable, net
|
640
|
-
|
640
|
||||||
|
Spare parts and supplies, net
|
253
|
-
|
253
|
||||||
|
Prepaid expenses and other
|
741
|
(246)
|
(b)
|
384
|
|||||
|
(111)
|
(c)
|
||||||||
|
Total current assets
|
5,999
|
(518)
|
5,481
|
||||||
|
PROPERTY AND EQUIPMENT, NET
|
7,725
|
(291)
|
(d)
|
7,477
|
|||||
|
43
|
(e)
|
||||||||
|
OTHER ASSETS:
|
|||||||||
|
Goodwill
|
-
|
4,346
|
(f)
|
4,346
|
|||||
|
Intangibles, net
|
777
|
2,099
|
(g)
|
2,876
|
|||||
|
Restricted cash and cash equivalents
|
-
|
161
|
(a)
|
161
|
|||||
|
Other
|
231
|
45
|
(b)
|
94
|
|||||
|
(182)
|
(h)
|
||||||||
|
Total other assets
|
1,008
|
6,469
|
7,477
|
||||||
|
Total Assets
|
$
|
14,732
|
$
|
5,703
|
$
|
20,435
|
|||
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|||||||||
|
CURRENT LIABILITIES:
|
|||||||||
|
Current maturities of long-term debt and capital leases
|
$
|
818
|
$
|
-
|
$
|
818
|
|||
|
Accounts payable
|
915
|
(165)
|
(b)
|
750
|
|||||
|
Air traffic liability
|
2,396
|
(194)
|
(i)
|
1,713
|
|||||
|
(489)
|
(j)
|
||||||||
|
Frequent flyer deferred revenue
|
-
|
881
|
(j)
|
881
|
|||||
|
Other accrued liabilities
|
837
|
(7)
|
(k)
|
804
|
|||||
|
(26)
|
(l)
|
||||||||
|
Total current liabilities
|
4,966
|
-
|
4,966
|
||||||
|
NON-CURRENT LIABILITIES:
|
|||||||||
|
Long-term debt and capital leases
|
6,079
|
(13)
|
(e)
|
6,182
|
|||||
|
116
|
(h)
|
||||||||
|
Frequent flyer deferred revenue
|
-
|
1,084
|
(j)
|
1,084
|
|||||
|
Deferred income taxes
|
266
|
577
|
(c)
|
843
|
|||||
|
Accrued pension liability
|
1,176
|
435
|
(m)
|
1,611
|
|||||
|
Accrued retiree medical benefits
|
224
|
37
|
(m)
|
261
|
|||||
|
Other non-current liabilities
|
859
|
1,310
|
(b)
|
1,749
|
|||||
|
|
12
|
(g)
|
|||||||
|
107
|
(n)
|
||||||||
|
(283)
|
(k)
|
||||||||
|
(256)
|
(l)
|
||||||||
|
Total non-current liabilities
|
8,604
|
3,126
|
11,730
|
||||||
|
STOCKHOLDERS' EQUITY:
|
|||||||||
|
Common stock
|
1
|
(1)
|
(o)
|
-
|
|||||
|
Additional paid-in capital
|
2,254
|
(2,254)
|
(o)
|
3,739
|
|||||
|
3,739
|
(p)
|
||||||||
|
Accumulated deficit
|
(1)
|
1
|
(o)
|
-
|
|||||
|
Accumulated other comprehensive loss
|
(1,092)
|
1,193
|
(m)
|
-
|
|||||
|
(101)
|
(o)
|
||||||||
|
Total stockholders' equity
|
1,162
|
2,577
|
3,739
|
||||||
|
Total liabilities and stockholders' equity
|
$
|
14,732
|
$
|
5,703
|
$
|
20,435
|
|||
The accompanying notes are an integral part of the Unaudited Pro Forma Condensed Financial Statements.
CONTINENTAL AIRLINES, INC.
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2010
|
Pro Forma
|
|||||||||
|
(in millions, except per share data)
|
Historical
|
Adjustments
|
Pro Forma
|
||||||
|
OPERATING REVENUE:
|
|||||||||
|
Passenger
|
$
|
9,669
|
$
|
(166)
|
(a)
|
$
|
9,643
|
||
|
44
|
(i)
|
||||||||
|
96
|
(j)
|
||||||||
|
Cargo
|
328
|
-
|
328
|
||||||
|
Other
|
833
|
124
|
(a)
|
855
|
|||||
|
(72)
|
(j)
|
||||||||
|
(30)
|
(l)
|
||||||||
|
Total Operating revenue
|
10,830
|
(4)
|
10,826
|
||||||
|
OPERATING EXPENSES:
|
|||||||||
|
Aircraft fuel and related taxes
|
2,806
|
66
|
(a)
|
2,872
|
|||||
|
Wages, salaries and related costs
|
2,527
|
(85)
|
(m)
|
2,489
|
|||||
|
47
|
(r)
|
||||||||
|
Aircraft rentals
|
689
|
(167)
|
(b)
|
528
|
|||||
|
6
|
(l)
|
||||||||
|
Landing fees and other rentals
|
656
|
5
|
(k)
|
661
|
|||||
|
Regional capacity purchase
|
625
|
(17)
|
(a)
|
608
|
|||||
|
Distribution costs
|
555
|
(81)
|
(a)
|
474
|
|||||
|
Maintenance, materials and repairs
|
413
|
(14)
|
(a)
|
382
|
|||||
|
(17)
|
(n)
|
||||||||
|
Depreciation and amortization
|
380
|
14
|
(d)
|
434
|
|||||
|
3
|
(e)
|
||||||||
|
37
|
(g)
|
||||||||
|
Special charges
|
18
|
-
|
18
|
||||||
|
Merger-related costs
|
29
|
(29)
|
(q)
|
-
|
|||||
|
Other
|
1,413
|
3
|
(a)
|
1,416
|
|||||
|
Total operating expenses
|
10,111
|
(229)
|
9,882
|
||||||
|
OPERATING INCOME
|
719
|
225
|
944
|
||||||
|
NONOPERATING INCOME (EXPENSE):
|
|||||||||
|
Interest expense, net
|
(265)
|
42
|
(h)
|
(223)
|
|||||
|
Other, net
|
(12)
|
(1)
|
(a)
|
(13)
|
|||||
|
Total Nonoperating Expense
|
(277)
|
41
|
(236)
|
||||||
|
INCOME BEFORE INCOME TAXES
|
442
|
266
|
708
|
||||||
|
INCOME TAXES
|
(1)
|
-
|
(1)
|
||||||
|
NET INCOME
|
$
|
441
|
$
|
266
|
$
|
707
|
|||
The accompanying notes are an integral part of the Unaudited Pro Forma Condensed Financial Statements.
CONTINENTAL AIRLINES, INC.
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2009
|
Pro Forma
|
|||||||||
|
(in millions, except per share data)
|
Historical
|
Adjustments
|
Pro Forma
|
||||||
|
OPERATING REVENUE:
|
|||||||||
|
Passenger
|
$
|
11,138
|
$
|
(98)
|
(a)
|
$
|
10,963
|
||
|
(94)
|
(i)
|
||||||||
|
17
|
(j)
|
||||||||
|
Cargo
|
366
|
-
|
366
|
||||||
|
Other
|
1,082
|
135
|
(a)
|
1,013
|
|||||
|
(166)
|
(j)
|
||||||||
|
(38)
|
(l)
|
||||||||
|
Total Operating revenue
|
12,586
|
(244)
|
12,342
|
||||||
|
OPERATING EXPENSES:
|
|||||||||
|
Aircraft fuel and related taxes
|
3,317
|
84
|
(a)
|
2,997
|
|||||
|
(404)
|
(o)
|
||||||||
|
Wages, salaries and related costs
|
3,137
|
(140)
|
(m)
|
3,031
|
|||||
|
34
|
(r)
|
||||||||
|
Aircraft rentals
|
934
|
(223)
|
(b)
|
719
|
|||||
|
8
|
(l)
|
||||||||
|
Landing fees and other rentals
|
841
|
6
|
(k)
|
847
|
|||||
|
Regional capacity purchase
|
848
|
(22)
|
(a)
|
826
|
|||||
|
Distribution costs
|
624
|
(87)
|
(a)
|
537
|
|||||
|
Maintenance, materials and repairs
|
617
|
(19)
|
(a)
|
575
|
|||||
|
(23)
|
(n)
|
||||||||
|
Depreciation and amortization
|
494
|
43
|
(d)
|
628
|
|||||
|
4
|
(e)
|
||||||||
|
87
|
(g)
|
||||||||
|
Special charges
|
145
|
(29)
|
(m)
|
116
|
|||||
|
Other
|
1,775
|
79
|
(a)
|
1,854
|
|||||
|
Total operating expenses
|
12,732
|
(602)
|
12,130
|
||||||
|
OPERATING INCOME (LOSS)
|
(146)
|
358
|
212
|
||||||
|
NONOPERATING INCOME (EXPENSE):
|
|||||||||
|
Interest expense, net
|
(322)
|
62
|
(h)
|
(260)
|
|||||
|
Other, net
|
29
|
(2)
|
(a)
|
27
|
|||||
|
Total Nonoperating Expense
|
(293)
|
60
|
(233)
|
||||||
|
LOSS BEFORE INCOME TAXES
|
(439)
|
418
|
(21)
|
||||||
|
INCOME TAXES
|
157
|
(149)
|
(c)
|
8
|
|||||
|
NET LOSS
|
$
|
(282)
|
$
|
269
|
$
|
(13)
|
|||
The accompanying notes are an integral part of the Unaudited Pro Forma Condensed Financial Statements.
CONTINENTAL AIRLINES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
On May 2, 2010, UAL and Continental entered into the merger agreement whereby Continental would become a wholly-owned subsidiary of UAL. The merger closed on October 1, 2010. Under the terms of the merger agreement, each outstanding share of Continental common stock was exchanged for 1.05 shares of UAL common stock. In addition, Continental stock options were converted into stock options and equity awards with respect to UAL common stock, after giving effect to the exchange ratio.
The accompanying Unaudited Pro Forma Condensed Financial Statements were prepared in accordance with Accounting Standards Codification Topic 805, formerly Statement of Financial Accounting Standards No. 141 (revised 2009), “Business Combinations,” using the acquisition method of accounting with UAL considered the acquirer of Continental.
The accompanying Unaudited Pro Forma Condensed Financial Statements present the pro forma consolidated financial position and results of operations of Continental on a stand-alone basis based upon Continental's historical financial statements, after giving effect to the merger and adjustments described in these notes, and are intended to reflect the impact of the merger on Continental’s consolidated financial statements. The accompanying Unaudited Pro Forma Condensed Financial Statements are presented for illustrative purposes only and do not reflect the costs of any integration activities or benefits that may result from realization of future cost savings due to operating efficiencies or revenue synergies expected to result from the merger.
The Unaudited Pro Forma Condensed Balance Sheet gives effect to the merger as if it had been consummated on September 30, 2010 and includes estimated pro forma adjustments for the preliminary valuations of assets acquired and liabilities assumed by UAL. These adjustments are subject to further revision as additional information becomes available and additional analyses are performed. The Unaudited Pro Forma Condensed Statements of Operations gives effect to the merger as if it had been consummated on January 1, 2009, the beginning of the earliest period presented.
The Unaudited Pro Forma Condensed Balance Sheet has been adjusted to reflect the preliminary allocation of the purchase price to identifiable net assets acquired and the excess purchase price to goodwill. The purchase price allocation in these Unaudited Pro Forma Condensed Financial Statements is based upon a purchase price of approximately $3.7 billion. This amount was derived as described below in accordance with the merger agreement, based on the outstanding shares of Continental common stock at September 30, 2010, the exchange ratio of 1.05 shares of UAL common stock for each Continental share and a price per UAL common share of $23.66, which represents the closing price of UAL shares of common stock on September 30, 2010. The purchase price also includes the estimated fair value of stock options issued upon the closing date of the merger in exchange for similar securities of Continental and the equity component of certain convertible securities of Continental. Continental stock options outstanding at September 30, 2010, the majority of which became fully vested as of the date of the merger, were assumed by UAL and modified to provide for the purchase of UAL common stock. Accordingly, the number of shares and the price per share were adjusted for the 1.05 exchange ratio. Vested stock options held by employees of Continental are considered part of the purchase price.
The preliminary purchase price is calculated as follows:
|
(in millions, except per share data)
|
||
|
Outstanding shares of Continental common stock exchanged
|
141
|
|
|
Exchange ratio
|
1.05
|
|
|
Shares of UAL common stock issued
|
148
|
|
|
Price per share
|
$23.66
|
|
|
Fair value of UAL shares issued
|
$3,501
|
|
|
Fair value of UAL options issued and equity component of Continental convertible securities
|
238
|
|
|
Total estimated purchase price
|
$3,739
|
|
The table below represents a preliminary allocation of the total consideration to Continental’s tangible and intangible assets and liabilities based on UAL management’s preliminary estimate of their respective fair values as of September 30, 2010:
|
(in millions)
|
|||
|
Cash and cash equivalents
|
$
|
3,698
|
|
|
Other current assets
|
1,783
|
||
|
Property and equipment
|
7,477
|
||
|
Goodwill
|
4,346
|
||
|
Identified intangibles
|
2,876
|
||
|
Other noncurrent assets
|
255
|
||
|
Long-term debt and capital leases, including current portion
|
(7,000)
|
||
|
Air traffic liability
|
(1,713)
|
||
|
Frequent flyer liability
|
(1,965)
|
||
|
Pension and postretirement benefits
|
(1,872)
|
||
|
Deferred income taxes
|
(843)
|
||
|
Other liabilities assumed
|
(3,303)
|
||
|
Total estimated purchase price
|
$
|
3,739
|
|
Upon completion of the fair value assessment, it is anticipated that the ultimate purchase price allocation will differ from the preliminary assessment outlined above. Any changes to the initial estimates of the fair value of the assets and liabilities will be recorded as adjustments to those assets and liabilities and residual amounts will be allocated to goodwill.
Note 2. Pro Forma Adjustments
The Unaudited Pro Forma Condensed Statements of Operations do not include any material non-recurring charges that will arise in subsequent periods as a result of the merger. The Unaudited Pro Forma Condensed Financial Statements reflect the following adjustments:
|
(a)
|
Conforming Reclassifications. Certain reclassifications have been made to conform to the reporting format of UAL. These reclassifications have no effect on total assets, liabilities, stockholders' equity or net income (loss).
|
|
|
(b)
|
Aircraft Operating Leases. Adjustments to (i) eliminate aircraft rent leveling accounts, which reduced prepaid expenses and other current assets by $246 million and accounts payable by $165 million, and (ii) record the fair value of aircraft operating leases and purchase options of $1.3 billion and $45 million, respectively. As a result of these adjustments, the Unaudited Pro Forma Condensed Statements of Operations reflect a decrease in aircraft rent expense of $167 million for the nine months ended September 30, 2010 and $223 million for the year ended December 31, 2009.
|
|
|
(c)
|
Income Taxes. To record the income tax effects of the purchase accounting adjustments.
|
|
|
(d)
|
Property and Equipment. A $291 million reduction to reflect the fair value of owned property and equipment. As a result of this adjustment and a change in accounting to conform to UAL’s accounting policies related to salvage values and estimated useful lives, the Unaudited Pro Forma Condensed Statements of Operations reflect an increase in depreciation expense of $14 million for the nine months ended September 30, 2010 and $43 million for the year ended December 31, 2009.
|
|
|
(e)
|
Capital Leases. A $43 million increase to property and equipment and a $13 million decrease to long-term debt and capital leases to reflect the fair value of property and equipment accounted for as capital leases. As a result of these adjustments, the Unaudited Pro Forma Condensed Statements of Operations reflect an increase in depreciation expense of $3 million for the nine months ended September 30, 2010 and $4 million year for the ended December 31, 2009.
|
|
|
(f)
|
Goodwill. To record the goodwill resulting from the merger. Goodwill is not amortized but rather is assessed for impairment at least annually or more frequently whenever events or circumstances indicate that goodwill might be impaired.
|
|
|
(g)
|
Intangible Assets. A net increase of $2.1 billion associated with adjustments to record the fair value of identifiable intangible assets, including indefinite-lived intangible assets such as international route authorities, certain take-off and landing slots, Star Alliance and logo, and amortizable intangible assets such as the frequent flyer customer database and other agreements. As a result of this adjustment, the Unaudited Pro Forma Condensed Statements of Operations reflect a net increase in amortization expense of $37 million for the nine months ended September 30, 2010 and $87 million for the year ended December 31, 2009.
|
|
|
(h)
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Long-Term Debt. An increase of $116 million to long-term debt and capital leases to reflect the fair value of long-term debt and the elimination of $182 million of other noncurrent assets primarily associated with deferred debt issuance costs. The difference between the fair value and the face amount of each borrowing is amortized as interest expense over the remaining term of the borrowings based on the maturity dates. As a result of these adjustments, the Unaudited Pro Forma Condensed Statements of Operations reflect lower interest expense of $42 million for the nine months ended September 30, 2010 and $62 million for the year ended December 31, 2009.
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(i)
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Advance Ticket Sales. A reduction of $194 million to advance ticket sales to conform to UAL’s accounting policy for ticket breakage. As a result of this adjustment, the Unaudited Pro Forma Condensed Statements of Operations reflect an increase in passenger revenue of $44 million for the nine months ended September 30, 2010 and a decrease in passenger revenue of $94 million for the year ended December 31, 2009.
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(j)
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Frequent Flyer Deferred Revenue. Adjustments to (i) eliminate the $489 million liability for the OnePass frequent flyer program, a portion of which was accounted under the incremental cost method and recorded within the air traffic liability, (ii) record the fair value of the OnePass liability of $2.0 billion (of which $1.1 billion represents the non-current portion), and (iii) reflect the adoption of deferred revenue accounting to conform to UAL’s frequent flyer accounting policy and financial statement presentation. As a result of these adjustments, the Unaudited Pro Forma Condensed Statements of Operations reflect an increase in passenger revenue of $96 million and a decrease in other revenue of $72 million for the nine months ended September 30, 2010 and an increase in passenger revenue of $17 million and a decrease in other revenue of $166 million for the year ended December 31, 2009.
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(k)
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Facility Operating Leases. Adjustments to (i) eliminate facility rent leveling accounts, which reduced other accrued liabilities by $7 million and other noncurrent liabilities by $438 million, and (ii) record the fair value of facility operating leases of $155 million. As a result of these adjustments, the Unaudited Pro Forma Condensed Statements of Operations reflect an increase in landing fees and other rent of $5 million for the nine months ended September 30, 2010 and $6 million for the year ended December 31, 2009.
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(l)
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Deferred Gains. An adjustment to reduce other accrued liabilities by $26 million and other non-current liabilities by $256 million related to the elimination of deferred gains associated with certain long-term contracts. As a result of these adjustments, the Unaudited Pro Forma Condensed Statements of Operations reflect a decrease in other revenue of $30 million and an increase in aircraft rent expense of $6 million for the nine months ended September 30, 2010, and a decrease of $38 million in other revenue and an increase in aircraft rent expense of $8 million for the year ended December 31, 2009.
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(m)
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Pension Liability. Adjustments to record pension assets at fair value, remeasure the pension and postretirement benefit obligations at current discount rates and eliminate $1.2 billion of unrecognized prior service cost and unrecognized actuarial losses recorded in other comprehensive income (loss). As a result of these adjustments, the Unaudited Pro Forma Condensed Statements of Operations reflect lower salaries and related costs of $85 million for the nine months ended September 30, 2010 and $140 million for the year ended December 31, 2009 and lower special charges of $29 million for the year ended December 31, 2009 related to the elimination of amortization or settlement charge recognition of pension and postretirement prior service costs and actuarial gains and losses.
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(n)
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Maintenance Contract. An increase of $107 million to other non-current liabilities to reflect the fair value of a maintenance contract with a third party. As a result of this adjustment, the Unaudited Pro Forma Condensed Statements of Operations reflect a decrease in aircraft maintenance, material and outside repair expense of $17 million for the nine months ended September 30, 2010 and $23 million for the year ended December 31, 2009.
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(o)
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Continental Stockholders’ Equity. The elimination of all of stockholders’ equity, including $1 million of common stock, $2.3 billion of additional paid-in capital, $1 million of accumulated deficit and the remaining $101 million of accumulated other comprehensive income as a result of the acquisition method of accounting. The pension-related items in other comprehensive income (loss) are eliminated in adjustment (m). As a result of these adjustments, in addition to the pension and postretirement benefits adjustments discussed above, the Unaudited Pro Forma Condensed Statements of Operations reflect lower aircraft fuel expenses of $404 million for the year ended December 31, 2009 related to Continental’s fuel hedge losses that had previously been deferred in accumulated other comprehensive income (loss) but were eliminated upon the application of the acquisition method of accounting.
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(p)
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UAL Common Stock Issuance. As discussed in Note 1, approximately 148 million shares of UAL common stock were issued to Continental stockholders at a per share price of $23.66 totaling $3.5 billion. Consideration paid also includes the estimated fair value of options to purchase an estimated 7 million shares of UAL common stock that were issued to Continental employees in exchange for Continental stock options and the equity component of certain convertible securities of Continental that became convertible into UAL common stock. The value of the consideration paid by UAL was pushed down to Continental as additional paid-in-capital.
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(q)
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Merger-Related Costs. A reduction of $29 million to remove the effect of one-time costs directly related to the merger during the nine months ended September 30, 2010.
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(r)
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Profit Sharing. Adjustments to record the profit sharing expense associated with other pro forma adjustments. As a result of these adjustments, the Unaudited Pro Forma Condensed Statements of Operations reflect higher wages, salaries and related costs of $47 million for the nine months ended September 30, 2010 and $34 million for the year ended December 31, 2009.
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