United Airlines 2009 Annual Report Download - page 128

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Table of Contents
Claims Resolution Process. At the time United emerged from bankruptcy, several matters were unresolved. United recorded its best estimate of the cash
obligations that would be required to settle these matters. 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 years ended December 31, 2009, 2008
and 2007, respectively. These reserves are primarily classified in other current liabilities in the Financial Statements. 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) 2009 2008 2007
Balance at January 1, $ 96 $ 98 $ 325
Payments (58) (7) (83)
Accruals reclassified (67) — (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 (credit) 27 — (30)(d)
Accrual adjustments classified as other operating expense (credit) 2 5 (12)(e)
Total adjustments impacting income 29 5 (113)
Balance at December 31, $ — $ 96 $ 98
Total charge (credit) to operating income during period from above items $ 29 $ 5 $ (113)
Additional special operating expense credit — — (14)(f)
Total operating income charge (benefit) $ 29 $ 5 $ (127)
(a) In 2007, these accruals were deemed to be no longer directly related to bankruptcy proceedings; therefore, the accruals were reclassified to non-bankruptcy
accruals. In 2009, the reclassification primarily relates to the LAX lease settlement discussed above.
(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 certain bankruptcy pre-confirmation contingencies; therefore, it was
classified as a special operating revenue credit of $45 million that relates to both Mainline passenger revenues ($37 million) and Regional affiliates revenues
($8 million).
(c) The Company separately recorded a $26 million benefit from a change in estimate to certain other contingent liabilities based largely on changes in
underlying facts and circumstances occurring during the third quarter of 2007. This benefit was recorded as a credit to Mainline passenger revenues of
$22 million and to Regional Affiliates revenues of $4 million.
(d) The 2007 amount relates to special operating expense credits of $30 million relating to litigation for San Francisco and LAX municipal bond secured
litigation. The 2009 amount relates to the LAX municipal bond secured litigation matter.
(e) This amount relates to accrual adjustments impacting various operating expense line items that the Company recorded due to a change in estimate for certain
liabilities relating to bankruptcy administrative claims. These adjustments resulted directly from the progression of the Company’s ongoing efforts to resolve
certain bankruptcy pre-confirmation contingencies.
(f) This amount relates to an accrual adjustment that the Company recorded due to a change in estimate for certain liabilities relating to bankruptcy
administrative claims. This adjustment, which was recorded as a credit to other operating expense, resulted directly from the progression of the Company’s
ongoing efforts to resolve certain bankruptcy pre-confirmation contingencies.
Legal and Environmental Contingencies. The Company has certain contingencies resulting from litigation and claims (including environmental issues)
incident to the ordinary course of business. Management believes, after considering a number of factors, including (but not limited to) the information currently
available, the views
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