NOTE 2 - EARNINGS PER SHARE

The table below represents the computation of UAL’s basic and diluted earnings per share amounts and the number of securities that have been excluded from the computation of diluted earnings per share amounts because they were antidilutive (in millions, except per share amounts):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Basic earnings per share:
Net income	$	924	$	379	$	1,104	$	431
Less: Income allocable to participating securities		(1)		(1)		(2)		(1)

Earnings available to common stockholders	$	923	$	378	$	1,102	$	430

Basic weighted-average shares outstanding		370		357		370		343

Earnings per share, basic	$	2.49	$	1.06	$	2.97	$	1.25

Diluted earnings per share:
Earnings available to common stockholders	$	923	$	378	$	1,102	$	430
Effect of convertible notes		6		9		20		20

Earnings available to common stockholders including the effect of dilutive securities	$	929	$	387	$	1,122	$	450

Diluted shares outstanding:
Basic weighted-average shares outstanding		370		357		370		343
Effect of convertible notes		22		37		24		46
Effect of employee stock options		—		1		1		1

Diluted weighted-average shares outstanding		392		395		395		390

Earnings per share, diluted	$	2.37	$	0.98	$	2.84	$	1.15

Potentially dilutive shares excluded from diluted per share amounts:
Restricted stock and stock options		1		3		1		3
Convertible notes		—		—		—		4

During the second quarter of 2014, UAL used cash to purchase and retire $28 million aggregate principal amount of its 4.5% Convertible Notes due 2015 (the “4.5% Convertible Notes”) in market transactions. The corresponding equivalent amount of shares of UAL common stock are excluded from the determination of diluted weighted-average shares outstanding for the three and nine months ended September 30, 2014 from the date the debt was purchased.

In the first quarter of 2014, UAL issued approximately five million shares of UAL common stock in exchange for, or upon conversion of, $46 million in aggregate principal amount of UAL’s outstanding 6% convertible senior notes due 2029 held by holders of these notes. The newly issued shares of UAL common stock are included in the determination of basic weighted-average shares outstanding for the three and nine months ended September 30, 2014 from the date the shares were issued. The Company retired the 6% convertible senior notes acquired in the exchange. In October 2014, UAL notified holders of these notes of its intention to redeem the $58 million of notes outstanding with the redemption scheduled to occur in late November 2014. The holders of these notes have the right to convert their notes into shares of UAL common stock prior to redemption at a conversion rate of 115.1013 per $1,000 principal amount of notes. If all of the holders of these notes exercise their conversion right, UAL would issue approximately 6.7 million shares of UAL common stock upon conversion.

Also on January 10, 2014, UAL called the 4.5% Senior Limited-Subordination Convertible Notes due 2021 (the “4.5% Notes”) that remained outstanding for redemption on February 10, 2014. In the first quarter of 2014, holders of substantially all of the remaining $156 million outstanding principal amount of the 4.5% Notes exercised their right to convert such notes into approximately five million shares of UAL common stock at a conversion rate of 30.6419 shares of UAL common stock per $1,000 principal amount of 4.5% Notes. The newly issued shares of UAL common stock are included in the determination of basic weighted-average shares outstanding for the three and nine months ended September 30, 2014 from the date the shares were issued. See Note 9 for additional information related to exercises of rights under the 4.5% Notes.

UAL’s Board of Directors authorized a share repurchase program to acquire up to $1 billion of UAL’s common stock. UAL may repurchase shares through the open market, privately negotiated transactions, block trades, or accelerated share repurchase transactions from time to time in accordance with applicable securities laws. UAL will repurchase shares of common stock subject to prevailing market conditions, and may discontinue such repurchases at any time.

On July 24, 2014, pursuant to the $1.0 billion share repurchase program, UAL entered into two separate agreements to repurchase an aggregate of $200 million of shares of UAL common stock through an accelerated share repurchase program (the “ASR Program”). UAL paid $200 million and received approximately 4.4 million shares. In addition to shares purchased under the ASR Program, UAL spent $20 million on open market repurchases of 0.4 million shares of UAL common stock in September 2014. See Part II, Item 2., “Unregistered Sales of Equity Securities and Use of Proceeds” of this report for additional information.