United Airlines 2010 Annual Report Download - page 98

UNITED CONTINENTAL HOLDINGS, INC.,
UNITED AIR LINES, INC. AND CONTINENTAL AIRLINES, INC.,
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
United Continental Holdings, Inc. (together with its consolidated subsidiaries, “UAL”) is a holding
company and its principal, wholly-owned subsidiaries are United Air Lines, Inc. (together with its consolidated
subsidiaries, “United”) and, effective October 1, 2010, Continental Airlines, Inc. (together with its consolidated
subsidiaries, “Continental”). As a consequence of the Merger described in Note 1, UAL Corporation changed its
name to United Continental Holdings, Inc. All significant intercompany transactions are eliminated.
This Annual Report on Form 10-K is a combined report of UAL, United and Continental. We sometimes
use the words “we,” “our,” “us,” and the “Company” for disclosures that relate to all of UAL, United and
Continental Successor. As UAL consolidates United for financial statement purposes, disclosures that relate to
United activities also apply to UAL; and, effective October 1, 2010, disclosures that relate to Continental
Successor activities also apply to UAL. When appropriate, UAL, United and Continental are named specifically
for their related activities and disclosures.
Continental
As a result of the application of the acquisition method of accounting, the Continental financial statements
prior to October 1, 2010 are not comparable with the financial statements for periods on or after October 1, 2010.
References to “Successor” refer to Continental on or after October 1, 2010, after giving effect to the application
of acquisition accounting. References to “Predecessor” refer to Continental prior to October 1, 2010.
NOTE 1—MERGER AND RECLASSIFICATIONS
Merger
Description of Transaction
On May 2, 2010, UAL Corporation, Continental and JT Merger Sub Inc., a wholly-owned subsidiary of
UAL Corporation, entered into an Agreement and Plan of Merger (the “Merger agreement”). On October 1,
2010, JT Merger Sub Inc. merged with and into Continental, with Continental surviving as a wholly-owned
subsidiary of UAL Corporation (the “Merger”). Upon closing of the Merger, UAL Corporation became the
parent company of both Continental and United and UAL Corporation’s name was changed to United
Continental Holdings, Inc. Until the operational integration of United and Continental is complete, United and
Continental will continue to operate as separate airlines.
Pursuant to the terms of the Merger agreement, each outstanding share of Continental common stock was
converted into and became exchangeable for 1.05 fully paid and nonassessable shares of UAL common stock
with any fractional shares paid in cash. UAL issued approximately 148 million shares of UAL common stock to
former holders of Continental Class B common stock (“Continental common stock”). Based on the closing price
of $23.66 per share of UAL common stock on September 30, 2010, the last trading day before the closing of the
Merger, the aggregate value of the consideration paid in connection with the Merger was approximately $3.7
billion.
The Merger was accounted for as a business combination using the acquisition method of accounting with
Continental considered the acquiree. The acquisition method of accounting requires, among other things, that
assets acquired and liabilities assumed be recognized on the balance sheet at their fair values as of the acquisition
date. The acquisition values have been pushed down to Continental for its separate-entity financial statements as
of October 1, 2010. The excess of the purchase price over the net fair value of assets and liabilities acquired was
recorded as goodwill. Goodwill will not be amortized, but will be tested for impairment at least annually.
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