United Airlines 2008 Annual Report Download - page 109

At December 31, 2008, 2.0 million of the initial 115 million shares authorized remain to be
distributed to employees and holders of previously allowed claims and disputed claims that are pending
final resolution. All treasury shares were acquired either for tax withholding obligations related to UAL’s
share-based compensation plan or as consideration under an employment agreement. See Note 7,
“Share-Based Compensation Plans” for additional information related to the remaining grants available
to be awarded under the UAL’s share-based compensation plans and outstanding option awards, neither
of which are included in outstanding shares above.
UAL is authorized to issue 250 million shares of preferred stock (without par value). UAL was also
authorized to issue two shares of junior preferred stock (par value $0.01 per share) which were issued in
2006 and remained outstanding at December 31, 2008.
UAL issued 5 million shares of 2% convertible preferred stock to the PBGC on the Effective Date.
The shares were issued at a liquidation value of $100 per share, convertible at any time following the
second anniversary of the issuance date into common stock of UAL at an initial conversion price of
$46.86 per common share; with dividends payable in kind semi-annually (in the form of increases to the
liquidation value of the issued and outstanding shares). The preferred stock ranked pari passu with all
current and future UAL or United preferred stock and was redeemable at any time at the then-current
liquidation value (plus accrued and unpaid dividends) at the option of the issuer. At December 31, 2007,
5 million shares of UAL 2% convertible preferred stock were outstanding with an aggregate liquidation
value of $519 million, which included $19 million of accrued and paid in kind dividends. The preferred
stock had been pushed down to United and was reflected on United’s books as part of fresh-start
reporting. At December 31, 2007, the carrying value of the 2% convertible preferred stock was
$371 million, which included the $19 million of accrued and paid in kind dividends.
As reflected in the table above, 11.1 million shares of UAL common stock were issued upon
preferred stockholders’ elections to exercise their conversion option of all 5 million shares of 2%
mandatorily convertible preferred stock during 2008. As a result of these conversions, there are currently
no outstanding shares of 2% convertible preferred stock and this class of stock was retired in October
2008. The Company increased additional paid in capital by $374 million and decreased the mandatorily
convertible preferred stock by the same amount to record the impact of these conversions.
In addition, as indicated in the table above, during 2008 the Company issued 11.2 million shares of
common stock as part of a $200 million equity offering generating net proceeds of $122 million, of which
$107 million was received in 2008 and $15 million was received in January 2009 upon settlement of
shares sold during the last three days of 2008. In January 2009, an additional 4.0 million shares were
issued generating net proceeds of $47 million. After the January 2009 issuances, the Company had
issued shares for gross proceeds of $172 million leaving $28 million of remaining capacity available to
issue additional shares in 2009.
(6) UAL Per Share Amounts
In accordance with Statement of Financial Accounting Standards No. 128, Earnings per Share, basic
per share amounts were computed by dividing earnings (loss) available to common stockholders by the
weighted-average number of shares of UAL common stock outstanding. Approximately 2.0 million,
2.8 million and 6.7 million UAL shares remaining to be issued to unsecured creditors and employees
under the Plan of Reorganization are included in outstanding basic shares for 2008, 2007 and the eleven
month period ended December 31, 2006, respectively, as the necessary conditions for issuance have been
satisfied. UAL’s $546 million of 6% senior notes are callable at any time at 100% of par value, and can
be redeemed with either cash or UAL common stock at UAL’s option. These notes are not included in
the diluted earnings per share calculation, as it is UAL’s intent to redeem these notes with cash. In
January 2009, the Company issued additional common shares as discussed in Note 5, “Common
Stockholders’ Equity and Preferred Securities,” above. The table below represents the reconciliation of
the basic earnings (loss) per share to diluted earnings (loss) per share.
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