United Airlines 2008 Annual Report Download - page 106

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resolved. The final distributions of shares will not occur until 2009 or later, pending resolution of
bankruptcy matters.
The Company’s current estimate of the probable range of unsecured claims to be allowed by the
Bankruptcy Court is between $29.3 billion and $29.6 billion. Differences between claim amounts filed
and the Company’s estimates continue to be investigated and will be resolved in connection with the
claims resolution process. However, there will be no further financial impact to the Company associated
with the settlement of such unsecured claims, as the holders of all allowed unsecured claims will receive
under the Plan of Reorganization no more than their pro rata share of the distribution of the 115 million
shares of common stock of UAL, together with the previously-agreed issuance of certain securities.
With respect to valid administrative and priority claims, pursuant to the terms of the Plan of
Reorganization these claims have been or will be satisfied with cash. Many asserted administrative and
priority claims still remain unpaid and the Company will continue to settle claims and file objections
with the Bankruptcy Court to eliminate or reduce such claims. In addition, certain disputes, the most
significant of which is discussed in “Significant Matters Remaining to be Resolved in Chapter 11 Cases,”
above, still remain with respect to the valuation of certain claims. The Company accrued an obligation
for claims it believed were reasonably estimable and probable at the Effective Date. However, the claims
resolution process is uncertain and adjustments to claims estimates could result in material adjustments
to the Successor Company’s financial statements in future periods as a result of court rulings, the receipt
of new or revised information or the finalization of these matters. In accordance with AICPA Practice
Bulletin 11, Accounting for Preconfirmation Contingencies in Fresh-Start Reporting, (“Practice Bulletin 11”),
the Company has recorded the impact of revisions to these estimates in current results of operations.
The table below includes activity related to the administrative and priority claims and other
bankruptcy-related claim reserves including reserves related to legal, professional and tax matters, among
others, for the Successor Company for the years ended December 31, 2008 and 2007 and the eleven
months ended December 31, 2006, respectively. These reserves are primarily classified in other current
liabilities in the Statements of Consolidated Financial Position. Certain of the accrual adjustments
identified below are a direct result of the Company’s ongoing efforts to resolve certain bankruptcy
pre-confirmation contingencies and do not relate directly to the Company’s ongoing performance;
therefore, the Company considers these adjustments to be special.
(In millions) 2008 2007 2006
Balance at January 1, 2008 and 2007 and February 1, 2006 ............... $98 $325 $583
Payments .................................................... (7) (83) (193)
Accruals reclassified ........................................... — (31) — (a)
Adjustments impacting income:
Accrual adjustments classified as special revenue credits ............. — (45) — (b)
Other changes in contingent liabilities classified as revenues .......... — (26) — (c)
Accrual adjustments classified as special expense credits ............. — (30) (36)(d)
Accrual adjustments classified as other operating expense (credit) ...... 5 (12) (29)(e)
Total adjustments impacting income ............................... 5 (113) (65)
Balance at December 31, 2008, 2007 and 2006 . . . ...................... $96 $ 98 $325
Total charge (credit) to operating income during period from above items . . . $ 5 $(113) $ (65)
Additional special operating expense credit ........................... — (14) — (f)
Total operating income charge (benefit) .............................. $ 5 $(127) $ (65)
(a) These accruals were deemed to be no longer directly related to bankruptcy proceedings; therefore, the accruals were
reclassified to non-bankruptcy accruals.
(b) In the third quarter of 2007, the Company recorded a change in estimate for certain liabilities relating to bankruptcy
administrative claims. This adjustment resulted directly from the progression of the Company’s ongoing efforts to resolve
106