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[Cash Flows, ratios, taxes, leases]
UAL Corporation ("UAL" or the "Company") was incorporated under the laws of the State of
Delaware on December 30,1968. The world headquarters of the Company are located at 1200 East
Algonquin Road, Elk Grove Township, Illinois 60007. The Company's mailing address is P.O. Box
66919, Chicago, Illinois 60666. The telephone number for the Company is (847) 700-4000. The
Company is a holding company and its principal subsidiary is United Air Lines, Inc., a Delaware
corporation ("United"), which is wholly-owned. United accounted for virtually all of the Company's
revenues and expenses in 1996. United is a major commercial air transportation company.
Enclosed are sections of the financial statements of UAL and selected notes to financial statements.
Prepare a statement of cash flows of UAL
for the Year Ended December 31,1996.
You can make the followings assumptions:
Depreciation on owned operating property and equipment:
Amortization of Intangibles
Proceeds from sale of Operating property and equipment
Gain from sale of Operating property and equipment is
On July 12,1994, the shareholders of UAL Corporation ("UAL") approved a plan of recapitalization
that provides an approximately 55% equity and voting interest in UAL to certain employees of
UnitedAir Lines, Inc. ("United") in exchange for wage concessions and work-rule changes.
employees'equity interest is being allocated to individual employee accounts through the year 2000
underEmployee Stock Ownership Plans ("ESOPs") which were created as part of the recapitalization.
Sincethe ESOP shares are being allocated over time, the current ownership interest held by
employees issubstantially less than 55%.
The entire ESOP voting interest is currently exercisable,
which generallywill be voted by the ESOP trustee at the direction of, and on behalf of, the
employees participating inthe ESOPs.
All the new equity issued in 1996 was given to the employees
through the ESOP.
UnderGAAP and tax guidelines, the fair value of the equity (including preferred
stock) raised for ESOP isconsidered as expense for the period.
Compute the following ratios for the year ending December 31, 1996
Effective tax rate
Return on assets (after tax)
Times interest earned
Return on Equity
Debt to Equity as of December 31, 1996
Use the figure given as "Earnings before extraordinary item and cumulative effect of accounting
change" for net income. That is ignore the items: "Extraordinary loss on early extinguishment of debt,
net of tax " and "Cumulative effect of accounting change, net of tax"
Use Note 6 for the following questions.