United Airlines 2008 Annual Report Download - page 27

other securities then existing, UAL may satisfy its obligations with respect to such tranche by issuing
UAL common stock having a market value equal to $62.5 million. The issuance of these notes could
adversely impact the Company’s results of operations because of increased interest expense related to
the notes and adversely impact its financial position or liquidity due to increased cash required to meet
interest and principal payments. If common stock is issued in lieu of debt, this could cause additional
dilution to existing UAL stockholders. See Risks Related to UAL’s Common Stock, below, for additional
information regarding other risks related to our common stock.
Risks Related to UAL’s Common Stock
The issuance of additional shares of UAL’s common stock, including upon conversion of its convertible notes,
could cause dilution to the interests of its existing stockholders.
In connection with the Company’s emergence from Chapter 11 bankruptcy protection, UAL issued
approximately $150 million in convertible 5% notes and subsequently issued approximately $726 million
in convertible 4.5% notes on July 25, 2006. Holders of these securities may convert them into shares of
UAL’s common stock according to their terms. See Note 12, “Debt Obligations and Card Processing
Agreements,” in Combined Notes to Consolidated Financial Statements for further information regarding
these instruments.
UAL’s certificate of incorporation authorizes up to one billion shares of common stock. In certain
circumstances, UAL can issue shares of common stock without stockholder approval. In the fourth quarter
of 2008, the UAL Board of Directors approved the issuance of $200 million of common stock as part of an
ongoing equity offering by the Company. UAL issued 11.2 million shares of common stock during 2008 and
4.0 million shares during 2009, resulting in gross proceeds of $172 million, and may issue additional shares
during 2009 until it reaches $200 million in proceeds. In addition, the UAL Board of Directors is authorized
toissueupto250millionsharesofpreferredstockwithoutanyactiononthepartofUAL’sstockholders.
The UAL Board of Directors also has the power, without stockholder approval, to set the terms of any series
of shares of preferred stock that may be issued, including voting rights, conversion rights, dividend rights,
preferences over UAL’s common stock with respect to dividends or if UAL liquidates, dissolves or winds up
its business and other terms. If UAL issues preferred stock in the future that has a preference over its
common stock with respect to the payment of dividends or upon its liquidation, dissolution or winding up, or
if UAL issues preferred stock with voting rights that dilute the voting power of its common stock, the rights
of holders of its common stock or the market price of its common stock could be adversely affected. UAL is
also authorized to issue, without stockholder approval, other securities convertible into either preferred stock
or, in certain circumstances, common stock. In the future UAL may decide to raise additional capital through
offerings of its common stock, securities convertible into its common stock, or rights to acquire these
securities or its common stock. The issuance of additional shares of common stock or securities convertible
into common stock could result in dilution of existing stockholders’ equity interests in UAL. Issuances of
substantial amounts of its common stock, or the perception that such issuances could occur, may adversely
affect prevailing market prices for UAL’s common stock and UAL cannot predict the effect this dilution may
have on the price of its common stock.
UAL’s certificate of incorporation limits voting rights of certain foreign persons.
UAL’s restated certificate of incorporation limits the total number of shares of equity securities held
by persons who are not “citizens of the United States,” as defined in Section 40102(a)(15) of Title 49
United States Code, to no more than 24.9% of the aggregate votes of all equity securities outstanding.
This restriction is applied pro rata among all holders of equity securities who fail to qualify as “citizens
of the United States,” based on the number of votes the underlying securities are entitled to.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
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