United Airlines 2008 Annual Report Download - page 59

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Company purchased three 747-400 aircraft that had previously been financed by United through
operating leases which were terminated at closing. The total purchase price for these aircraft was largely
financed with certain proceeds from the secured EETC financing described below. These transactions
did not result in any change in the Company’s fleet count of 460 mainline aircraft, or in the amount of
aircraft encumbered by debt or lease agreements.
During the fourth quarter of 2007, the Company used existing cash to acquire three aircraft that
were previously financed under operating lease agreements. The total purchase price of these three
aircraft and the three aircraft acquired in the third quarter of 2007 was approximately $200 million. This
purchase did not result in any change in the Company’s fleet count of 460 mainline aircraft, but did
unencumber three aircraft.
In addition, in the fourth quarter of 2007, the Company utilized existing aircraft deposits pursuant
to the terms of the original capital lease to make the final lease payments on three aircraft, resulting in
the reclassification of the aircraft from capital leased assets to owned assets. However, the purchase of
these three aircraft did not result in a net change in cash because the Company had previously provided
cash deposits equal to the purchase price of the aircraft to third party financial institutions for the
benefit of the lessor. These transactions resulted in three additional aircraft becoming unencumbered for
a total increase of six unencumbered aircraft during the year.
During 2007, the Company sold its interest in ARINC, generating proceeds of $128 million. In
2006, UAL received $43 million more in cash proceeds from investing activities as compared to United
primarily due to $56 million of proceeds from the sale of MyPoints, a former direct subsidiary of UAL.
Cash Flows from Financing Activities.
2008 Activity
UAL used $253 million for its special distribution to common stockholders (United issued a
$257 million dividend to UAL for this distribution) and $919 million for scheduled long-term debt and
capital lease payments. United used cash of $109 million in connection with an amendment to its
Amended Credit Facility, as further discussed below. In 2008, the Company acquired ten aircraft that
were being operated under existing leases. These aircraft were acquired pursuant to existing lease terms.
Aircraft lease deposits of $155 million provided financing cash that was primarily utilized by the
Company to make the final payments due under these lease obligations. Nine of these aircraft were
previously recorded as capital leased assets and are now owned assets.
United completed a $241 million credit agreement secured by 26 of the Company’s currently owned
and mortgaged A319 and A320 aircraft. Borrowings under the agreement were at a variable interest rate
based on LIBOR plus a margin. The agreement requires periodic principal and interest payments
through its final maturity in June 2019. The Company may not prepay the loan prior to July 2012. This
agreement did not change the number of the Company’s unencumbered aircraft as the Company used
available equity in these previously owned and mortgaged aircraft as collateral for this financing.
United also entered into an $84 million loan agreement secured by three aircraft, including two
Airbus A320 and one Boeing B777. Borrowings under the agreement were at a variable interest rate
based on LIBOR plus a margin. The loan requires principal and interest payments every three months
and has a final maturity in June 2015.
The Company issued 11.2 million shares of UAL common stock as part of a $200 million equity
offering during 2008. As of December 31, 2008, the Company had generated net proceeds of
$107 million.
As of December 31, 2008, 62 aircraft with a net book value of approximately $570 million were
unencumbered. The unencumbered aircraft at December 31, 2008 exclude nine aircraft which became
encumbered with the December 2008 signing of a binding sale-leaseback agreement that closed in
January 2009. As of December 31, 2007, the Company had 113 unencumbered aircraft with a net book
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