United Airlines 2008 Annual Report Download - page 54

Download and view the complete annual report

Please find page 54 of the 2008 United Airlines annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 159

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159

There were no significant investment gains or losses in 2008 as compared to 2007 during which the
Company recorded a $41 million gain on sale of investment, as discussed below under 2007 compared to
2006.
The $24 million variance in Miscellaneous, net is primarily due to unfavorable foreign exchange rate
fluctuations in 2008.
2007 compared to 2006
The following table illustrates the year-over-year dollar and percentage changes in other income
(expense).
(In millions)
Year
Ended
December 31,
2007
Period
Ended
December 31,
2006(a)
Period from
February 1 to
December 31,
2006
Period from
January 1 to
January 31,
2006
Favorable
(Unfavorable)
%
Change
Successor Combined Successor Predecessor
Other income (expense):
Interest expense .......... $(661) $(770) $(728) $(42) $109 14.2
Interest income........... 257 249 243 6 8 3.2
Interest capitalized ........ 19 15 15 — 4 26.7
Gain on sale of investment. . 41 — — — 41 —
Miscellaneous, net ........ 2 14 14 — (12) (85.7)
UAL total ............... $(342) $(492) $(456) $(36) $150 30.5
United total ............. $(339) $(489) $(453) $(36) $150 30.7
(a) The combined period includes the results for one month ended January 31, 2006 (Predecessor Company) and eleven months
ended December 31, 2006 (Successor Company).
UAL interest expense decreased $109 million, or 14%, in 2007 as compared to 2006. The decrease
was due to the February and December 2007 amendments and prepayments of the Amended Credit
Facility, which lowered United’s interest rate on these obligations and reduced the total obligations
outstanding by approximately $1.5 billion. Repayments of scheduled maturities of debt obligations and
other debt refinancings, which are discussed in “Liquidity and Capital Resources,” below, also reduced
interest expense. The 2007 period also included a $22 million reduction in interest expense due to the
recognition of a gain on debt extinguishment. These benefits were offset by interest expense of
$17 million for expensing previously capitalized debt issuance costs that were associated with the
February 2007 prepayment of the Amended Credit Facility and $6 million for financing costs incurred in
connection with the February amendment of the Amended Credit Facility. The $500 million Amended
Credit Facility prepayment in December 2007 increased interest expense by a net of $4 million from
expensing $6 million of previously capitalized credit facility costs and recording a gain of $2 million to
recognize previously deferred interest rate swap gains.
UAL interest income increased $8 million, or 3%, year-over-year. Interest income increased due to
the classification of $6 million of interest income as reorganization items in the January 2006 predecessor
period in accordance with SOP 90-7.
The $41 million gain on sale of investment resulted from the Company’s sale of its 21.1% interest in
Aeronautical Radio, Inc. (“ARINC”).
The unfavorable variances in miscellaneous income (expense) are primarily due to foreign currency
transaction gains of $9 million in 2006 as compared to foreign currency transaction losses of $4 million
in 2007.
Income Taxes.
The relatively small tax benefit recorded in 2008 is related to the impairment and sale of certain
indefinite-lived intangible assets, partially offset by the impact of an increase in state tax rates. UAL
54