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EXHIBIT 13
OPERATIONAL
REVIEW
LEADERSHIP 7.5
On April 28, 1994, Delta announced Leadership 7.5, a three-year plan
for with the goal of reducing the Company's annual operating expenses by
approximately $2 billion by the end of the June 1997 quarter. Delta also
established operating cost per available seat mile (unit cost) goals of 8.6c.
for the June 1995 quarter, 8.0c. for the June 1996 quarter and 7.5c. for the
June 1997 quarter. These unit cost goals reflect the phase-in of the
approximately $2 billion in targeted cost savings, exclude restructuring
and other nonrecurring charges, and assume other costs and operating
capacity remain at calendar 1993 levels. To the extent other costs increase,
the Company will seek additional cost reductions to achieve its goals.
Industry events during fiscal 1995 validated Delta's determination
that cost reductions are essential to compete in today's highly competitive
airline industry. Low-cost, low-fare carriers increased their presence in
domestic markets, resulting in continued reductions in Delta's domestic
passenger mile yield and flat or declining domestic unit revenue. At the end
of fiscal 1995, approximately 60% of Delta's domestic origin and destination
revenue passenger miles were in markets also served by low-cost, low-fare
[GRAPH]
Percent of Delta's Domestic RPM's Competitive with
Low-Fare Carriers
Period Percent
------ -------
June 1995 60%
June 1994 57
June 1993 32
carriers, up from 57% at the end of fiscal 1994. The airline industry has
experienced a permanent shift in the preferences of its customers, with more
business and leisure passengers citing ticket prices as the most important
factor in their purchase decisions.
At the beginning of the Leadership 7.5 program, 11 internal teams
developed plans to reach cost reduction goals for their areas. During fiscal
1995, additional teams were established to examine areas outside or
beyond the scope of the first phase of Leadership 7.5.
Leadership 7.5 initiatives made a significant contribution to Delta's
operating profit in fiscal 1995. The Company achieved its first Leadership 7.5
unit cost target, recording a unit cost of 8.39c. for the June 1995 quarter.
By the end of fiscal 1995, the implementation of initiatives expected to
generate approximately $1.6 billion in annual cost reductions was in process or
completed.
Key initiatives contributing to fiscal 1995 cost reductions included:
- Outsourcing of certain non-passenger contact functions and changes in
staffing formulas in Airport Customer Service, resulting in the
reduction of approximately 3,700 full-time equivalent employees.
- Re-engineering of processes in Technical Operations, resulting in the
elimination of approximately 2,300 full-time equivalent employees and
reductions in inventory.
- Implementing a maximum travel agent commission payment of $25 one-way
or $50 roundtrip for any domestic ticket with a base fare in excess
of $250 or $500, respectively.
- Adjusting service levels on certain flights and improving flight
attendant productivity through staffing changes.
- Changing a number of employee medical and other benefit programs, with
greater emphasis on managed care through preferred provider networks.
- Realigning the Company's domestic route system, with a focus on
increasing flying in longer-haul markets and repositioning resources
to produce greater revenue and operating efficiencies.
- Implementing the planned phase-out of the Airbus A310 fleet.
Changes in the Company's collective bargaining agreement with the Air
Line Pilots Association (ALPA), which represents the Company's 8,100 pilots,
are critical to the continued success of Leadership 7.5 and the Company's
ability to achieve its future unit cost targets. Delta is seeking $340 million
in annual productivity improvements and wage and benefit reductions from its
pilots. The collective bargaining agreement became amendable January 1, 1995,
and federally mediated negotiations are currently in progress. The outcome of
these negotiations cannot presently be determined.
Delta's cost reduction and unit cost goals are aggressive, and no
assurance can be given that Delta will achieve these goals.
[GRAPH]
Leadership 7.5 Targets
Operating Cost/ASM (in cents)
June Quarters Actual Target
- ------------- ------ ------
1995 8.39 c 8.6 c
1996 - 8.0
1997 - 7.5
DELTA AIR LINES, INC.
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AIRCRAFT FLEET
Delta's fleet of 543 aircraft is among the youngest and most
technologically advanced in the U.S. airline industry. During fiscal 1995,
Delta focused on refining its aircraft fleet plan to increase
operating efficiency and reduce costs.
AIRCRAFT FLEET
At June 30, 1995
Average Age of
Aircraft Type
Type of Aircraft (Years) Owned Leased Total
- ---------------- --------------- ----- ------ -----
A310-300 . . . . . . . . . 1.7 - 9 9
B-727-200 . . . . . . . . . 18.3 106 28 134
B-737-200 . . . . . . . . . 10.6 1 53 54
B-737-300 . . . . . . . . . 9.4 - 13 13
B-757-200 . . . . . . . . . 6.5 44 41 85
B-767-200 . . . . . . . . . 12.1 15 - 15
B-767-300 . . . . . . . . . 6.1 2 24 26
B-767-300ER . . . . . . . . 3.4 8 7 15
L-1011-1 . . . . . . . . . 18.3 32 - 32
L-1011-200 . . . . . . . . 17.0 1 - 1
L-1011-250 . . . . . . . . 12.7 6 - 6
L-1011-500 . . . . . . . . 14.4 17 - 17
MD-11 . . . . . . . . . . . 2.4 4 7 11
MD-88 . . . . . . . . . . . 5.0 63 57 120
MD-90 . . . . . . . . . . . 0.2 5 - 5
---- --- --- ---
Total . . . . . . . . . 10.4 304 239 543
==== === === ===
During fiscal 1995, Delta accepted delivery of one B-757-200 aircraft,
one B-767-300ER aircraft, and also introduced the MD-90 aircraft into the fleet,
accepting delivery of five MD-90 aircraft. The Company returned to lessors
four B-727-200 aircraft, four B-737-200 aircraft and one A310-200 aircraft,
and sold two B-737-300 aircraft and three A310-200 aircraft. In addition, the
Company extended the lease terms for 40 B-737-200 aircraft (see Note 8 of Notes
to Consolidated Financial Statements).
[GRAPH]
Capital Expenditures (In Million of Dollars)
Flight Equipment
Fiscal Year (includes leased aircraft) Ground Property and Equipment
- ----------- -------------------------- -----------------------------
1986 504 98
1987 1,133 92
1988 1,184 146
1989 1,205 276
1990 1,425 265
1991 1,875 269
1992 2,164 317
1993 1,221 192
1994 1,032 173
1995 458 168
Also during fiscal 1995, Delta entered into a definitive agreement with
Federal Express Corporation to purchase, between fiscal years 1995 and 2000, 46
shipsets of Stage 3 heavyweight engine hushkits and 9 spare engine hushkits for
B-727-200 aircraft, with an option to purchase an additional 52 shipsets of
Stage 3 heavyweight engine hushkits and 10 spare engine hushkits.
AIRCRAFT DELIVERY SCHEDULE
Aircraft on Firm Order at June 30, 1995
Delivery in Year Ending June 30:
------------------------------------------------------------------
After
Orders: 1996 1997 1998 1999 2000 2000 Total
------- ---- ---- ---- ---- ---- ----- -----
B-737-300 . . . . . . . . . - 6 6 5 5 30 52
B-757-200 . . . . . . . . . 1 2 2 - - - 5
B-767-300ER . . . . . . . . 2 4 - - - - 6
MD-11 . . . . . . . . . . . - 2 2 - - - 4
MD-90 . . . . . . . . . . . 6 8 20 8 - - 42
-- --- --- --- -- --- ---
Total . . . . . . . . . . 9 22 30 13 5 30 109
The aircraft orders include 22 B-737-300 aircraft and 16 MD-90 aircraft
scheduled for delivery after fiscal 2001 and fiscal 1996, respectively, that
are subject to reconfirmation by Delta. The B-737-300 aircraft orders may be
converted to B-737-400 or B-737-500 aircraft orders at Delta's election.
DELTA AIR LINES, INC.
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Delta's aircraft subject to reconfirmation and on option provide the
Company with flexibility to adjust aircraft deliveries. During fiscal 1995,
Delta allowed to expire 8 aircraft subject to reconfirmation and 22 aircraft
options.
AIRCRAFT DELIVERY SCHEDULE
Aircraft on Option at June 30, 1995
Delivery in Year Ending June 30:
-------------------------------------------------------------------
After
Options: 1996 1997 1998 1999 2000 2000 Total
-------- ---- ---- ---- ---- ---- ---- -----
B-737-300.................... - - 2 6 5 43 56
B-757-200.................... - - 3 5 6 22 36
B-767-300ER.................. - - 5 4 - - 9
MD-11........................ - - 5 5 5 7 22
MD-88........................ - - 15 15 - - 30
MD-90........................ - - - 11 7 32 50
--- --- --- --- --- ---- ----
Total..................... - - 30 46 23 104 203
The MD-88 aircraft options may be converted to MD-90 aircraft orders, the
B-737-300 aircraft options may be converted to B-737-400 or B-737-500 aircraft
orders, and the B-767-300ER aircraft options may be converted to B-767-300
aircraft orders, all at Delta's election.
Delta intends to continue its efforts to control capital spending and
simplify the Company's fleet. Certain aircraft returned to lessors or
sold during fiscal 1995 were part of Delta's fleet simplification program.
Delta also plans to phase out its remaining fleet of A-310-300 aircraft by the
end of calendar 1995.
FINANCIAL
REVIEW
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS -
FISCAL 1995 COMPARED WITH FISCAL 1994
For fiscal 1995, Delta recorded net income of $408 million ($6.32 primary
and $5.43 fully diluted earnings per common share after preferred stock
dividend requirements) and operating income of $661 million. In fiscal 1994,
Delta recorded a net loss of $409 million ($10.32 primary and fully diluted
loss per common share after preferred stock dividend requirements), and an
operating loss of $447 million.
[GRAPH]
Primary Earnings (Loss) Per Common Share (In Dollars)
Fiscal Year Amount
- ----------- ------
1986 $ 1.18
1987 5.90
1988 6.30
1989 9.37
1990 5.79
1991 (7.73)
1992 (10.60)
1993 (9.49)
1994 (3.73)
1995 4.07
Fiscal 1995 results include a one-time $114 million after-tax benefit
($2.25 primary and $1.42 fully diluted benefit per common share) related to the
adoption, effective July 1, 1994, of Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits" (SFAS
112). See Note 10 of Notes to Consolidated Financial Statements.
Fiscal 1995 results include a one-time $114 million after-tax benefit
($2.25 primary and $1.42 fully diluted benefit per common share) related to the
adoption, effective July 1, 1994, of Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits" (SFAS
112), See Note 10 of Notes to Consolidated Financial Statements.
Fiscal 1994 results include pretax restructuring charges totaling $526
million ($331 million after tax, or $6.59 per common share) related to the
Company's Leadership 7.5 program, and an early retirement program completed
during the December 1993 quarter.
Excluding the cumulative effect of the adoption of SFAS 112 and
restructuring charges, net income for fiscal 1995 totaled $294 million ($4.07
primary and $4.01 fully diluted earnings per common share after preferred stock
dividend requirements) and operating income was $661 million, compared to a net
loss of $77 million ($3.73 primary and fully diluted loss per common share
after preferred stock dividend requirements) and operating income of $79
million in fiscal 1994.
The improvement in financial results for fiscal 1995 versus fiscal 1994
was primarily due to cost reductions under the Company's Leadership 7.5
program. Leadership 7.5 initiatives contributed to cost reductions in most
DELTA AIR LINES, INC.
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expense categories, resulting in a $465 million, or 4%, decline in operating
expenses for fiscal 1995 compared to fiscal 1994, excluding restructuring
charges in fiscal 1994. During fiscal 1995, low-cost, low-fare carriers
increased their presence in domestic markets served by Delta, which contributed
to a 1% decline in the system passenger mile yield. Traffic stimulated by the
influence of low-cost, low-fare carriers, discount fare promotions and general
improvements in economies worldwide offset the yield decline, resulting in a
less than 1% increase in passenger revenue from the previous year.
FINANCIAL RESULTS SUMMARY
1995 1994 CHANGE
-------- -------- ------
(IN MILLIONS, EXCEPT
SHARE DATA)
OPERATING REVENUES........ $12,194 $12,077 + 1%
OPERATING EXPENSES........ 11,533 12,524 - 8
------- ------- ---
OPERATING INCOME (LOSS)... 661 (447) *
OTHER EXPENSE, NET........ (167) (213) -22
------- ------- ---
INCOME (LOSS) BEFORE
INCOME TAXES AND
CUMULATIVE EFFECT OF
ACCOUNTING CHANGES...... 494 (660) *
INCOME TAXES (PROVIDED)
CREDITED, NET........... (200) 251 *
------- ------- ---
INCOME (LOSS) BEFORE
CUMULATIVE EFFECT OF
ACCOUNTING CHANGES....... 294 (409) *
CUMULATIVE EFFECT OF
ACCOUNTING CHANGES,
NET OF TAX............... 114 - *
------- ------- ---
NET INCOME (LOSS)......... 408 (409) *
PREFERRED STOCK DIVIDENDS. (88) (110) -20
------- ------- ---
NET INCOME (LOSS)
ATTRIBUTABLE TO
COMMON STOCKHOLDERS...... $ 320 $ (519) * %
======= ======= ===
PRIMARY INCOME (LOSS)
PER COMMON SHARE:
BEFORE CUMULATIVE
EFFECT OF ACCOUNTING
CHANGES................ $ 4.07 $(10.32) * %
CUMULATIVE EFFECT OF
ACCOUNTING CHANGES..... 2.25 - *
------- ------- ---
$ 6.32 $(10.32) * %
======= ======= ===
FULLY DILUTED INCOME (LOSS)
PER COMMON SHARE:
BEFORE CUMULATIVE
EFFECT OF ACCOUNTING
CHANGES................ $ 4.01 $(10.32) * %
CUMULATIVE EFFECT OF
ACCOUNTING CHANGES..... 1.42 - *
------- ------- ---
$ 5.43 $(10.32) * %
======= ======= ===
NUMBER OF SHARES USED TO
COMPUTE NET INCOME
(LOSS) PER COMMON SHARE:
PRIMARY................. 50,657,613 50,257,721 N/A
FULLY DILUTED........... 80,118,720 50,257,721 N/A
*EXCEEDS 100%
Transatlantic and intra-European operations improved in fiscal 1995 from
fiscal 1994, but negatively impacted financial results in both years. In fiscal
1995 and 1994, these operations accounted for 18% and 20%, respectively, of the
Company's system available seat miles, and 75% and 78%, respectively, of the
Company's international available seat miles.
OPERATING REVENUE DETAIL
1995 1994 CHANGE
---- ---- ------
(IN MILLIONS)
PASSENGER................ $11,303 $11,252 -%
CARGO.................... 565 551 + 3
OTHER, NET............... 326 274 +19
------- ------- ---
TOTAL.................. $12,194 $12,077 + 1%
======= ======= ===
Operating revenues for fiscal 1995 were $12.2 billion, up 1% from $12.1
billion in fiscal 1994. Passenger revenue increased less than 1%, the result of
1% growth in revenue passenger miles, partly offset by a 1% decline in the
passenger mile yield to 13.09(cent). Domestic load factor increased slightly,
as domestic revenue passenger miles grew 2%, while domestic capacity rose 1%.
Domestic traffic growth is primarily due to traffic stimulated through the
increased presence of low-cost, low-fare carriers in markets served by Delta
and discount fare promotions, both of which contributed to a 1% decrease in the
domestic passenger mile yield. International load factor rose five points, as
international revenue passenger miles grew 1% and international operating
capacity fell 6%. International traffic growth is mainly the result of
generally improved economies, discount fare promotions and other marketing
programs. The international passenger mile yield was unchanged, primarily due
to an increase in full-fare passengers, which offset the impact of discount
fare promotions.
[GRAPH]
1995 Distribution of Operating Revenues
Description Percent
----------- -------
Domestic Passenger 73%
International Passenger 19
Cargo 5
Other 3
Cargo revenues in fiscal 1995 increased 3% to $565 million. Cargo ton
miles increased 8%, primarily due to international cargo traffic growth, and
the ton mile yield declined 5%, mainly the result of increases in long-haul
cargo traffic, which has lower ton mile yields than short-haul cargo traffic,
and lower domestic mail contract rates.
DELTA AIR LINES, INC.
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All other revenues were up 19% to $326 million, mainly due to increased
revenues from joint marketing programs.
Revenue-Related Statistics
1995 1994 Change
---- ---- ------
Revenue Passengers
Enplaned (Thousands)..... 88,893 87,399 + 2%
Revenue Passenger Miles
(Millions)............... 86,355 85,206 + 1%
Passenger Load Factor...... 66.2% 64.7% +1.5Pts.
Passenger Mile Yield....... 13.09c. 13.21c. - 1%
Cargo Ton Miles (Millions). 1,500 1,384 + 8%
Cargo Ton Mile Yield....... 37.67c. 39.80c. - 5%
Operating Revenue Per
Available Seat Mile...... 9.34c. 9.16c. + 2%
Operating expenses in fiscal 1995 totaled $11.5 billion, down 8% from
$12.5 billion in fiscal 1994. Operating capacity decreased 1% to 130.5 billion
available seat miles, and cost per available seat mile declined 7% to
8.84(cent). Excluding restructuring charges in fiscal 1994, operating expenses
were down 4%, and cost per available seat mile decreased 3%.
Operating Expense Detail
1995 1994 Change
---- ---- ------
(In Millions)
Salaries and Related Costs. $ 4,354 $ 4,589 - 5%
Aircraft Fuel.............. 1,370 1,411 - 3%
Passenger Commissions...... 1,195 1,255 - 5%
Aircraft Rent.............. 671 732 - 8%
Depreciation and
Amortization............. 622 678 - 8%
Other Selling Expenses..... 618 614 + 1%
Contracted Services........ 556 457 +22%
Passenger Service.......... 443 522 -15%
Facilities and Other Rent.. 436 380 +15%
Aircraft Maintenance
Materials and Outside
Repairs.................. 430 418 + 3%
Landing Fees............... 266 261 + 2%
Restructuring Charges...... - 526 *%
Other...................... 572 681 -16%
------- ------- ---
Total.................. $11,533 $12,524 - 8%
======= ======= ===
*Exceeds 100%
Salaries and related expenses decreased 5%, due to a 14% reduction in
full-time equivalent employees and lower employee travel and benefit expenses,
partly offset by increased costs associated with employee profit sharing and
other incentive compensation plans. The decrease in the number of employees is
primarily the result of workforce reductions under the Company's Leadership 7.5
program.
Aircraft fuel expense decreased 3%, as fuel gallons consumed declined 1%
and the average price per fuel gallon dropped 2% to 54.09(cent), Delta's lowest
average price per fuel gallon for any fiscal year since 1989.
Passenger commissions expense declined 5%, mainly due to the
implementation of a maximum commission payment on domestic tickets and
reductions in commission rates for certain international fares. Aircraft rent
expense decreased 8% due to the return of nine aircraft to lessors and the
extension of leases on 40 B-737-200 aircraft in the June 1995 quarter which,
for accounting purposes, resulted in those leases being reclassified from
operating leases to capital leases.
[GRAPH]
1995 Operating Expenses (As a Percent of Total Operating Expenses)
Description Percent
----------- -------
Salaries and Related 38%
Aircraft Fuel 12
Rentals and Landing Fees 12
Passenger Commissions 10
Other Selling Expenses 5
Depreciation and Amortization 5
Contracted Services 5
Passenger Service 4
Aircraft Maintenance,
Materials and Repairs 4
Other Costs 5
Depreciation and amortization expense decreased 8%, primarily related to
the early termination of certain routes at the end of fiscal 1994 and other
routes becoming fully amortized during fiscal 1995, and reduced amortization of
spare parts due to lower inventory levels. Other selling expenses increased 1%,
primarily the result of higher credit card service charges and increased
booking fee payments to computer reservation system providers, partly offset by
lower advertising and promotion expenses.
Contracted services expenses rose 22%, the result of increased outsourcing
of information technologies services and certain airport functions. Passenger
service expense declined 15%, reflecting continued benefits from catering
changes and other cost reduction programs, partially offset by increased
passenger traffic.
Facilities and other rent expenses increased 15%, the result of new
passenger facilities and increased rental rates at certain locations. Aircraft
maintenance materials and outside repairs expense rose 3%, reflecting an
increase in scheduled engine repair activity and higher airframe maintenance
costs. Landing fees expense increased 2%, mainly reflecting rate increases at
some domestic and international locations.
DELTA AIR LINES, INC.
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All other operating expenses decreased 16%, largely due to reductions in
certain navigation charges and other miscellaneous expenses, and favorable
foreign exchange rates in fiscal 1995; and higher litigation costs and a $14
million one-time charge related to frequent flyer program changes in fiscal
1994.
Fiscal 1994 operating expenses include a $414 million restructuring charge
related to the Leadership 7.5 program, which includes costs associated with
workforce reductions, reductions in inventory, facilities closings and route
terminations, and a $112 million restructuring charge for costs associated with
an early retirement program, under which approximately 1,500 employees elected
to retire effective November 1, 1993.
The cash payments for the fiscal 1994 restructuring charges will
approximate $473 million, of which $49 million has been incurred; $310 million
is associated with workforce reductions and represents future funding of
pension and postretirement benefits that will occur over many periods; and $114
million is designated for costs associated with severance payments and lease
termination fees for aircraft and facilities, of which approximately $90
million is expected to occur during fiscal 1996. See Note 16 of Notes to
Consolidated Financial Statements.
Operating Statistics
1995 1994 Change
---- ---- ------
Available Seat Miles (Millions) 130,525 131,780 - 1%
Available Ton Miles (Millions) 18,150 18,302 - 1%
Fuel Gallons Consumed
(Millions)................... 2,533 2,550 - 1%
Average Fuel Price Per Gallon.. 54.09c. 55.34c. - 2%
Breakeven Passenger
Load Factor:
Including Restructuring
Charges................... 62.3% 67.2% -4.9Pts.
Excluding Restructuring
Charges................... 62.3% 64.2% -1.9Pts.
Cost Per Available Seat Mile:
Including Restructuring
Charges..................... 8.84c. 9.50c. - 7%
Excluding Restructuring
Charges..................... 8.84c. 9.10c. - 3%
Nonoperating expense for fiscal 1995 totaled $167 million, compared to
$213 million in fiscal 1994. Interest expense decreased 4%, primarily due to a
lower average level of outstanding debt, partly offset by an increase in
interest expense related to the extension of 40 B-737-200 aircraft leases, as
previously discussed. Interest capitalized on funds advanced for the purchase
of flight equipment and construction of facilities declined 9%, primarily
resulting from a lower average balance in construction work in progress.
Interest income increased 67%, or $38 million, primarily due to a higher
average level of short-term investments and higher interest rates during the
year.
RESULTS OF OPERATIONS -
FISCAL 1994 COMPARED WITH FISCAL 1993
For fiscal 1994, Delta recorded a net loss of $409 million ($10.32 primary
and fully diluted loss per common share after preferred stock dividend
requirements) and an operating loss of $447 million. In fiscal 1993, Delta
recorded a net loss of $1.0 billion ($22.32 primary and fully diluted loss per
common share after preferred stock dividend requirements) and an operating loss
of $575 million.
Fiscal 1994 results include pretax restructuring charges totaling $526
million ($331 million after tax, or $6.59 per common share), as previously
discussed. Fiscal 1993 results include an $82 million pretax fleet
restructuring charge ($52 million after tax, or $1.05 per common share),
reflecting nonrecurring costs associated with the retirement of 21 A310
aircraft. Fiscal 1993 results were also affected by Delta's adoption effective
July 1, 1992, of Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" (SFAS
106) and Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" (SFAS 109), which resulted in an aggregate $587 million after-tax
charge ($11.78 per common share). See Notes 10 and 15, respectively, of Notes
to Consolidated Financial Statements.
Excluding restructuring charges and the cumulative effect of accounting
changes, the net loss for fiscal 1994 was $77 million ($3.73 primary and fully
diluted loss per common share after preferred stock dividend requirements), and
operating income was $79 million, compared to a net loss of $363 million ($9.49
primary and fully diluted loss per common share after preferred stock dividend
requirements) and an operating loss of $493 million in fiscal 1993.
Operating revenues for fiscal 1994 were $12.1 billion, up 4% from $11.7
billion in fiscal 1993. Passenger revenue increased 3% to $11.3 billion, the
result of 3% growth in revenue passenger miles. The passenger mile yield was
13.21(cent) in fiscal 1994, down slightly from the previous year. Domestic
revenue passenger miles increased 1% and the domestic passenger mile yield
declined less than 1%, primarily due to discount fare promotions and the
growing
DELTA AIR LINES, INC.
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presence of low-cost, low-fare carriers in many markets served by Delta.
International revenue passenger miles grew 10% and the international passenger
mile yield increased 3%.
Cargo revenues increased 3% to $551 million in fiscal 1994. Cargo ton
miles increased 10%, primarily due to Delta's international expansion, and the
ton mile yield declined 6%. All other revenues were up 22% to $274 million,
mainly due to increased revenue from joint marketing programs and fees
collected for passenger ticket changes.
Operating expenses in fiscal 1994 totaled $12.5 billion, up 2% from $12.2
billion in fiscal 1993. Operating capacity decreased less than 1% to 131.8
billion available seat miles. Domestic operating capacity declined 2% and
international operating capacity rose 4%, compared to fiscal 1993. The cost per
available seat mile increased 3% to 9.50(cent). Excluding restructuring charges
in both periods, operating expenses totaled $12.0 billion in fiscal 1994, down
1% from $12.1 billion in fiscal 1993, and the cost per available seat mile
decreased 1% to 9.10(cent).
Nonoperating expense for fiscal 1994 totaled $213 million, compared to $76
million in fiscal 1993. Interest expense rose 27% to $304 million, principally
due to a full year's interest incurred on debt issued in fiscal 1993. Interest
capitalized on funds advanced for the purchase of flight equipment and
construction of facilities totaled $33 million, down 46% from fiscal 1993,
resulting from a decline in the average balance of advance payments for
aircraft. Interest income for fiscal 1994 totaled $57 million, up from $22
million in fiscal 1993, primarily due to a higher average level of short-term
investments. Gains from the disposition of flight equipment totaled $2 million
in fiscal 1994, compared to $65 million in fiscal 1993.
CAPITALIZATION, FINANCING AND LIQUIDITY-
FISCAL YEAR 1995
Cash and cash equivalents and short-term investments totaled $1.8 billion
at June 30, 1995, compared to $1.7 billion at June 30, 1994. The principal
sources of funds during fiscal 1995 were $1.1 billion of cash from operations;
$139 million from Pan Am Corporation for the repayment of certain
debtor-in-possession financing (including $24 million recorded in cash from
operations representing accrued interest, net of the settlement of certain
other claims); and $137 million from the sale of flight equipment.
During fiscal 1995, Delta invested $458 million in flight equipment and
$168 million in ground property and equipment. The Company also made payments
of $572 million on long-term debt and capital lease obligations, including
Delta's voluntary repurchase and retirement of $403 million principal amount of
long-term debt and the Delta Family-Care Savings Plan's (Savings Plan)
voluntary prepayment in whole, with funds provided by Delta, of the $131
million aggregate principal amount of the Savings Plan's 1990 Series A and
Series B Guaranteed Serial ESOP Notes, which were guaranteed by Delta. In
addition, the Company paid cash dividends of $80 million on its Series C
Convertible Preferred Stock, $30 million on its Series B ESOP Convertible
Preferred Stock, and $10 million on its Common Stock. The Company may
repurchase additional long-term debt from time to time.
As of June 30, 1995, the Company had negative working capital of $427
million, compared to negative working capital of $313 million at June 30, 1994.
A negative working capital position is normal for Delta and does not indicate a
lack of liquidity. The Company expects to meet its current obligations as they
become due through available cash, short-term investments and internally
generated funds, supplemented as necessary by debt financings and proceeds from
sale and leaseback transactions. At August 18, 1995, the Company also had $780
million of credit available under its 1992 Bank Credit Agreement, subject to
compliance with certain conditions (see Note 7 of Notes to Consolidated
Financial Statements).
[GRAPH]
Invested Capital (In Millions of Dollars)
Fiscal Year Stockholders' Equity Long-Term Debt and Capital Leases
- ----------- -------------------- --------------------------------
1986 $ 1,302 $ 869
1987 1,938 1,018
1988 2,209 729
1989 2,620 703
1990 2,596 1,315
1991 2,457 2,059
1992 1,894 2,833
1993 1,913 3,716
1994 1,467 3,228
1995 1,827 3,121
During fiscal 1995, Delta extended the lease terms of 40 B-737-200
aircraft which, for accounting purposes, resulted in the reclassification of
the leases from operating leases to capital leases. The Company recorded in its
Consolidated Balance Sheets a $385 million increase in flight equipment under
capital leases, net of deferred rent credits, and a $415 million increase in
capital lease obligations. See Note 8 of Notes to Consolidated Financial
Statements.
DELTA AIR LINES, INC.
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Long-term debt and capital lease obligations, including current
maturities, totaled $3.3 billion at June 30, 1995, compared to $3.5 billion at
June 30, 1994. Stockholders' equity was $1.8 billion at June 30, 1995, compared
to $1.5 billion at June 30, 1994. The Company's debt-to-equity position,
including current maturities, was 65% debt and 35% equity at June 30, 1995,
compared to 70% debt and 30% equity at June 30, 1994.
During fiscal 1995, Delta elected to discontinue selling new receivables
under its revolving accounts receivable facility. See Note 5 of Notes to
Consolidated Financial Statements.
At August 18, 1995, there was outstanding $290 million principal amount of
the Savings Plan's Series C Guaranteed Serial ESOP Notes (Series C ESOP Notes),
which are guaranteed by Delta. The Series C ESOP Notes currently have the
benefit of a credit enhancement in the form of a letter of credit in the amount
of $470 million under Delta's 1992 Bank Credit Agreement. Delta is required to
purchase the Series C ESOP Notes in certain circumstances. See Note 7 of Notes
to Consolidated Financial Statements.
FISCAL YEAR 1994
In fiscal 1994, the principal sources of funds were $1.3 billion of cash
from operations, which included $300 million from the sale of certain accounts
receivable (see Note 5 of Notes to Consolidated Financial Statements); $748
million proceeds from aircraft sale and leaseback transactions; $226 million of
long-term borrowings; and $103 million from the sale of flight equipment. Delta
invested $1.0 billion in flight equipment, net of advance payment refunds of
$94 million, and $173 million in ground property and equipment. The Company
made payments of $547 million on long-term debt and capital lease obligations,
and paid cash dividends of $80 million on its Series C Convertible Preferred
Stock, $30 million on its Series B ESOP Convertible Preferred Stock, and $10
million on its Common Stock.
FISCAL YEAR 1993
In fiscal 1993, the principal sources of funds were $1.4 billion of
long-term borrowings; $1.1 billion from the issuance of Series C Convertible
Preferred Stock; $684 million proceeds from aircraft sale and leaseback
transactions; $677 million of cash from operations; and $87 million from the
sale of flight equipment. Delta invested $1.2 billion in flight equipment, net
of $104 million of advance payment refunds received, and $193 million in ground
property and equipment. The Company made payments of $801 million on short-term
borrowings, $519 million on long-term debt and capital lease obligations, and
paid cash dividends of $73 million on its Series C Convertible Preferred Stock,
$35 million on its Common Stock, and $30 million on its Series B ESOP
Convertible Preferred Stock.
NEW ACCOUNTING STANDARDS
Effective June 30, 1995, Delta adopted Statement of Financial Accounting
Standards No. 119, "Disclosure About Derivative Financial Instruments and Fair
Value of Financial Instruments." See Note 4 of Notes to Consolidated Financial
Statements.
Effective July 1, 1994, Delta adopted SFAS 112, which resulted in a
cumulative after-tax transition benefit of $114 million ($2.25 primary and
$1.42 fully diluted benefit per common share) in fiscal 1995, primarily due to
the net overfunded status of the Company's disability and survivorship plans.
See Note 10 of Notes to Consolidated Financial Statements.
Also effective July 1, 1994, the Company adopted American Institute of
Certified Public Accountants Statement of Position 93-6, "Employers' Accounting
for Employee Stock Ownership Plans" (SOP 93-6). The adoption of SOP 93-6
increased reported net income available to common stockholders shown in the
Consolidated Statements of Operations by $8 million for fiscal 1995, and
increased primary and fully diluted earnings per common share for that period
by $0.16 and $0.28, respectively. See Note 14 of Notes to Consolidated
Financial Statements.
Effective June 30, 1994, Delta adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" (SFAS 115). The adoption of SFAS 115 resulted in a net increase in
stockholders' equity of $53 million at June 30, 1994, primarily related to its
investments in Singapore Airlines and Swissair, and may result in volatility in
stockholders' equity due to changes in unrealized gains and losses on
securities classified as available-for-sale. See Note 2 of Notes to
Consolidated Financial Statements.
The Financial Accounting Standards Board has issued Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of" (SFAS 121), which will be effective for fiscal 1997. SFAS
121 requires that the carrying values of long-lived assets, including certain
identifiable intangibles, held and used by an entity be reviewed for
impairment, and potentially written down, whenever events or changes in
circumstances indicate that the carrying amount of the
DELTA AIR LINES, INC.
15
9
asset may not be recoverable. The adoption of SFAS 121 is not expected to
have a material impact on the Company's consolidated financial statements.
FUTURE OUTLOOK
DEFERRED TAX ASSET - At June 30, 1995, Delta had net cumulative deferred
tax assets of $740 million, which consist of $2.1 billion of deferred tax
assets, offset by $1.3 billion of deferred tax liabilities. Included in the
deferred tax assets are, among other items, $655 million related to obligations
for postretirement benefits, $284 million related to alternative minimum tax
(AMT) credit carryforwards and $122 million of net operating loss (NOL)
carryforwards. The AMT credit carryforwards do not expire; the NOL
carryforwards will generally expire in 2008 and 2009 if not utilized prior to
that time.
Management believes that a significant portion of the deferred tax assets
will be realized through reversals of existing taxable temporary differences
with similar reversal patterns. To realize the benefits of the remaining
deferred tax assets, excluding AMT credits, Delta needs to generate
approximately $1.2 billion in future taxable income. Based on expectations for
future taxable income, the extended period over which postretirement benefits
will be recognized, and the fact that AMT credits do not expire, management
believes that it is more likely than not that the deferred tax assets will be
realized.
Although Delta experienced book and tax losses in fiscal years 1991
through 1994, the Company reported book and tax income in fiscal 1995.
Furthermore, the Company reported book income in all other fiscal years since
1947, with the exception of fiscal 1983. Following is a summary of Delta's
pretax book income (loss) and taxable income (loss) for the last five fiscal
years, prior to NOL carrybacks:
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(In Millions)
Pretax Book
Income (Loss).......... $494 $(660) $(651) $(786) $(500)
Taxable Income (Loss).... $282 $(411) $(580) $(568) $(204)
The Company's losses in fiscal years 1991 through 1994 reflect numerous
external factors beyond management's control, including weak economies in a
number of regions worldwide and the effects of many deeply discounted fare
promotions initiated by other airlines; the Middle East crisis during fiscal
1991; an uneconomic fare structure implemented by another airline late in
fiscal 1992, which spurred a half-off fare sale in fiscal 1993; and the growing
presence of low-cost, low-fare carriers in many of the domestic markets served
by Delta.
Management believes that it has taken and continues to take appropriate
actions to improve the Company's financial performance, including the
implementation of Leadership 7.5, a three-year plan introduced during fiscal
1994, with the goal of reducing annual operating expenses by approximately $2
billion by the end of the June 1997 quarter. During fiscal 1995, Leadership 7.5
cost reduction initiatives contributed to a $465 million, or 4%, decline in
operating expenses from fiscal 1994, excluding restructuring charges in the
1994 period as previously discussed. Management is prepared to take further
actions to return the Company to consistent levels of profitability.
Delta's ability to generate the expected amounts of taxable income from
future operations is dependent upon various factors, many of which are beyond
management's control. Accordingly, there can be no assurance that Delta will
meet its expectations of future taxable income. However, after considering
Delta's earnings history, the actions that Delta has already taken and will
continue to take to improve its financial performance, expectations of future
taxable income, and other relevant considerations, management believes that it
is more likely than not that future taxable income will be sufficient to fully
utilize the deferred tax assets which existed at June 30, 1995. See Note 15 of
Notes to Consolidated Financial Statements.
COMMITMENTS - Future expenditures for aircraft, engines and engine
hushkits on firm order as of June 30, 1995, are estimated to be $2.9 billion,
excluding aircraft orders subject to reconfirmation by Delta. The Company
expects to finance these commitments using available cash, short-term
investments and internally generated funds, supplemented as necessary by debt
financings and proceeds from sale and leaseback transactions. The Company also
has certain commitments related to its code sharing arrangements and
TransQuest. See Note 9 of Notes to Consolidated Financial Statements. Also, see
Note 8 of Notes to Consolidated Financial Statements for information on the
Company's lease commitments.
AIRCRAFT FUEL - The Omnibus Budget Reconciliation Act of 1993 imposes a
4.3(cent) per gallon tax on commercial aviation jet fuel purchased for use in
domestic operations, effective October 1, 1995. Based on Delta's fiscal 1996
expected domestic fuel requirement of 1.9 billion gallons, the new fuel tax, if
implemented, is expected to increase Delta's operating expenses by
approximately $80 million annually. Delta and other U.S. airlines are actively
lobbying for a repeal of this tax. The outcome of these efforts cannot
presently be determined.
DELTA AIR LINES, INC.
16
10
TRAVEL AGENCY COMMISSIONS - On February 10, 1995, Delta changed its
domestic travel agency commission program by introducing a maximum commission
payment of $50 for any roundtrip domestic ticket with a base fare in excess of
$500 and $25 for any one-way ticket with a base fare in excess of $250. The
maximum commission applies to all tickets issued by U.S. and Canada-based
travel agents for travel within and between the Continental U.S., Alaska,
Hawaii, Puerto Rico and the U.S. Virgin Islands. The Company expects that this
change in commission structure will result in lower future commissions
expenses; however, the impact cannot presently be determined. Certain
litigation challenging these changes is pending (see Note 11 of Notes to
Consolidated Financial Statements).
DOMESTIC ROUTE SYSTEM REALIGNMENTS - On May 1, 1995, Delta realigned its
domestic route system to position the Company's aircraft and other resources in
areas offering greater revenue-generating potential. As a result of the
realignment, Delta increased flights at its Atlanta, Cincinnati and Salt Lake
City hubs, and decreased flights at Boston and its Dallas/Fort Worth, Los
Angeles and Orlando hubs.
On August 3, 1995, Delta announced plans to further increase flights at
Atlanta and Cincinnati, and further reduce flights at Dallas/Fort Worth,
effective December 1, 1995. Delta Connection carriers replaced or plan to
replace Delta service in certain markets as part of the May 1, 1995 and
December 1, 1995 route alignments. Due mainly to competitive factors, there can
be no assurance that these route realignments will result in increased
passenger revenues.
COMPETITIVE ENVIRONMENT - Delta expects that low-fare competition is
likely to continue in domestic and international markets. If price reductions
are not offset by increases in traffic or changes in the mix of traffic that
improve the passenger mile yield, Delta's operating results will be adversely
affected.
ANTITRUST SETTLEMENT - During 1992, Delta and five other U.S. airlines
agreed to settle class action claims asserted against them in the Domestic Air
Transportation Antitrust Litigation. Under the settlement, which was approved
by the United States District Court for the Northern District of Georgia in
1994, the six carriers issued $397 million in face amount of certificates for
discounts of approximately 10% on future domestic air travel on any of the six
carriers.
Delta will account for the certificates that are redeemed for travel on
Delta as a reduction to revenue equal to the value of the redeemed certificates
when transportation is provided. The Company anticipates that its share of
certificate redemptions will approximate, but will not necessarily be limited
to, its relative domestic market share among the six carriers, which was
approximately 22% in calendar 1994. The ultimate impact of the settlement on
Delta's future revenues, operating margins and earnings is not reasonably
estimable, because neither the face amount of the certificates to be redeemed
on Delta nor the generative or dilutive revenue effect of certificate
redemptions is known.
DELTA AIR LINES, INC.
17
11
CONSOLIDATED
BALANCE SHEETS
June 30, 1995 and 1994
ASSETS 1995 1994
- -----------------------------------------------------------------------------------
(In Millions)
CURRENT ASSETS:
Cash and cash equivalents ............................... $ 1,233 $ 1,302
Short-term investments .................................. 529 408
Accounts receivable, net of allowance for
uncollectible accounts of $29 at June 30,
1995, and $50 at June 30, 1994 ........................ 755 886
Maintenance and operating supplies, at average cost...... 68 67
Deferred income taxes ................................... 234 336
Prepaid expenses and other .............................. 195 224
------- -------
Total current assets ................................ 3,014 3,223
------- -------
PROPERTY AND EQUIPMENT:
Flight equipment ........................................ 9,288 9,063
Less: Accumulated depreciation....................... 4,209 3,880
------- -------
5,079 5,183
------- -------
Flight equipment under capital leases ................... 537 173
Less: Accumulated amortization....................... 99 142
------- -------
438 31
------- -------
Ground property and equipment ........................... 2,442 2,398
Less: Accumulated depreciation....................... 1,354 1,250
------- -------
1,088 1,148
------- -------
Advance payments for equipment .......................... 331 241
------- -------
6,936 6,603
------- -------
OTHER ASSETS:
Marketable equity securities ............................ 398 351
Deferred income taxes ................................... 506 560
Investments in associated companies ..................... 265 219
Cost in excess of net assets acquired, net of
accumulated amortization of $75 at
June 30, 1995, and $66 at June 30, 1994 ............... 274 283
Leasehold and operating rights, net of accumulated
amortization of $165 at June 30, 1995,
and $135 at June 30, 1994 ............................. 177 207
Other ................................................... 573 450
------- -------
2,193 2,070
------- -------
$12,143 $11,896
======= =======
DELTA AIR LINES, INC.
22
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LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
- --------------------------------------------------------------------------------------------------------------
(In Millions, Except Share Data)
CURRENT LIABILITIES:
Current maturities of long-term debt ............................................ $ 151 $ 227
Current obligations under capital leases ........................................ 61 11
Accounts payable and miscellaneous accrued liabilities .......................... 1,578 1,552
Air traffic liability ........................................................... 1,143 1,247
Accrued rent .................................................................... 235 195
Accrued vacation pay ............................................................ 167 196
Transportation tax payable ...................................................... 106 108
-------- --------
Total current liabilities ................................................... 3,441 3,536
-------- --------
NONCURRENT LIABILITIES:
Long-term debt .................................................................. 2,683 3,142
Postretirement benefits ......................................................... 1,714 1,641
Accrued rent .................................................................... 556 541
Capital leases .................................................................. 438 86
Other ........................................................................... 395 395
-------- --------
5,786 5,805
-------- --------
DEFERRED CREDITS:
Deferred gain on sale and leaseback transactions ................................ 860 923
Manufacturers and other credits ................................................. 109 63
-------- --------
969 986
-------- --------
COMMITMENTS AND CONTINGENCIES (Notes 7, 8, 9 and 11)
EMPLOYEE STOCK OWNERSHIP PLAN PREFERRED STOCK:
Series B ESOP Convertible Preferred Stock, $1.00 par value, $72.00 stated
and liquidation value; issued and outstanding 6,786,632 shares
at June 30, 1995, and 6,878,292 shares at June 30, 1994 ....................... 489 495
Less: Unearned compensation under employee stock ownership plan.................. 369 393
-------- --------
120 102
-------- --------
STOCKHOLDERS' EQUITY:
Series C Convertible Preferred Stock, $1.00 par value, $50,000 liquidation
preference; issued and outstanding 23,000 shares at June 30, 1995 and 1994..... -- --
Common Stock, $3.00 par value; authorized 150,000,000 shares; issued
54,537,103 shares at June 30, 1995, and 54,469,491 shares at June 30, 1994..... 164 163
Additional paid-in capital ...................................................... 2,016 2,013
Accumulated deficit ............................................................. (184) (490)
Net unrealized gain on marketable securities .................................... 83 53
Less: Treasury stock at cost, 3,721,093 shares at June 30, 1995, and
4,016,219 shares at June 30, 1994 ............................................. 252 272
-------- --------
1,827 1,467
-------- --------
$ 12,143 $ 11,896
======== ========
The accompanying notes are an integral part of these consolidated balance
sheets.
DELTA AIR LINES, INC.
23
13
CONSOLIDATED STATEMENTS
OF OPERATIONS
For the years ended June 30, 1995, 1994 and 1993
1995 1994 1993
- -----------------------------------------------------------------------------------------------------
(In Millions, Except Per Share Data)
OPERATING REVENUES:
Passenger ................................................ $ 11,303 $ 11,252 $ 10,899
Cargo .................................................... 565 551 534
Other, net ............................................... 326 274 224
-------- -------- --------
Total operating revenues ............................. 12,194 12,077 11,657
-------- -------- --------
OPERATING EXPENSES:
Salaries and related costs ............................... 4,354 4,589 4,798
Aircraft fuel ............................................ 1,370 1,411 1,592
Passenger commissions .................................... 1,195 1,255 1,074
Aircraft rent ............................................ 671 732 729
Depreciation and amortization ............................ 622 678 735
Other selling expenses ................................... 618 614 569
Contracted services ...................................... 556 457 450
Passenger service ........................................ 443 522 542
Facilities and other rent ................................ 436 380 356
Aircraft maintenance materials and outside repairs ....... 430 418 465
Landing fees ............................................. 266 261 262
Restructuring charges .................................... -- 526 82
Other .................................................... 572 681 578
-------- -------- --------
Total operating expenses ............................. 11,533 12,524 12,232
-------- -------- --------
OPERATING INCOME (LOSS) ...................................... 661 (447) (575)
-------- -------- --------
OTHER INCOME (EXPENSE):
Interest expense ......................................... (292) (304) (239)
Interest capitalized ..................................... 30 33 62
Interest income .......................................... 95 57 22
Gain on disposition of flight equipment .................. -- 2 65
Miscellaneous income (expense), net ...................... -- (1) 14
-------- -------- --------
(167) (213) (76)
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGES ............................... 494 (660) (651)
INCOME TAXES (PROVIDED) CREDITED, NET ........................ (200) 251 236
-------- -------- --------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES.. 294 (409) (415)
CUMULATIVE EFFECT OF ACCOUNTING CHANGES, NET OF TAX .......... 114 -- (587)
-------- -------- --------
NET INCOME (LOSS) ............................................ 408 (409) (1,002)
PREFERRED STOCK DIVIDENDS .................................... (88) (110) (110)
-------- -------- --------
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS ........ $ 320 $ (519) $ (1,112)
======== ======== ========
PRIMARY INCOME (LOSS) PER COMMON SHARE:
Before cumulative effect of accounting changes ........... $ 4.07 $ (10.32) $ (10.54)
Cumulative effect of accounting changes .................. 2.25 -- (11.78)
-------- -------- --------
$ 6.32 $ (10.32) $ (22.32)
======== ======== ========
FULLY DILUTED INCOME (LOSS) PER COMMON SHARE:
Before cumulative effect of accounting changes ........... $ 4.01 $ (10.32) $ (10.54)
Cumulative effect of accounting changes .................. 1.42 -- (11.78)
-------- -------- --------
$ 5.43 $ (10.32) $ (22.32)
======== ======== ========
The accompanying notes are an integral part of these consolidated statements.
DELTA AIR LINES, INC.
24
14
CONSOLIDATED STATEMENTS
OF CASH FLOWS
For the years ended June 30, 1995, 1994 and 1993
1995 1994 1993
- --------------------------------------------------------------------------------------------------------
(In Millions)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ................................................. $ 408 $ (409) $(1,002)
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Cumulative effect of accounting changes ....................... (114) -- 587
Restructuring charges ......................................... -- 526 82
Depreciation and amortization ................................. 622 678 735
Deferred income taxes ......................................... 96 (242) (209)
Amortization of investment tax credits ........................ -- (1) (2)
Amortization of deferred gain on sale and
leaseback transactions ...................................... (63) (62) (57)
Gain on disposition of flight equipment ....................... -- (2) (65)
Rental expense in excess of rent payments ..................... 54 134 89
Postemployment benefits expense less than payments ............ (22) -- --
Pension expense in excess of (less than) payments ............. (89) (45) 47
Compensation under ESOP ....................................... 38 29 27
Other postretirement expense in excess of payments ............ 73 66 129
Changes in certain assets and liabilities:
Decrease in accounts receivable ............................... 131 169 199
Decrease (increase) in prepaid expenses and other
current assets .............................................. 28 123 (19)
Increase (decrease) in air traffic liability .................. (104) 57 (58)
Increase in accounts payable and
miscellaneous accrued liabilities ........................... 26 207 215
Increase (decrease) in other payables and
accrued expenses ............................................ (31) (34) 50
Increase in other noncurrent liabilities ...................... -- 64 14
Other, net ........................................................ 61 66 (85)
------- ------- -------
Net cash provided by operating activities ................. 1,114 1,324 677
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions:
Flight equipment, including advance payments .................. (458) (1,032) (1,221)
Ground property and equipment ................................. (168) (173) (193)
Increase in short-term investments, net ........................... (121) (408) --
Proceeds from sale of flight equipment ............................ 137 103 87
Debtor-in-possession loan repayment ............................... 115 -- --
------- ------- -------
Net cash used in investing activities ..................... (495) (1,510) (1,327)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt and capital lease obligations .......... (572) (547) (519)
Cash dividends .................................................... (120) (120) (138)
Issuance of common stock .......................................... 4 1 1
Proceeds from sale and leaseback transactions ..................... -- 748 684
Issuance of long-term obligations ................................. -- 226 1,427
Issuance of Series C Convertible Preferred Stock, net ............. -- -- 1,126
Net short-term borrowings (repayments) ............................ -- -- (801)
------- ------- -------
Net cash provided by (used for) financing activities....... (688) 308 1,780
------- ------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .................. (69) 122 1,130
Cash and cash equivalents at beginning of period ...................... 1,302 1,180 50
------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ............................ $ 1,233 $ 1,302 $ 1,180
======= ======= =======
The accompanying notes are an integral part of these consolidated statements.
DELTA AIR LINES, INC.
25
15
CONSOLIDATED STATEMENTS
OF STOCKHOLDERS' EQUITY
For the years ended June 30, 1995, 1994 and 1993
Unrealized
Additional Retained Gain (Loss)
Common Paid-In Earnings on Equity Treasury
Stock Capital (Deficit) Securities Stock Total
- -----------------------------------------------------------------------------------------------------------------------------
(In Millions, Except Share Amounts)
BALANCE AT JUNE 30, 1992 .................................. $ 163 $ 886 $ 1,177 $ (12) $ (320) $ 1,894
Fiscal Year 1993:
Net loss .............................................. -- -- (1,002) -- -- (1,002)
Issuance of Series C Convertible Preferred Stock ...... -- 1,126 -- -- -- 1,126
Dividends on Series C Convertible Preferred Stock ..... -- -- (80) -- -- (80)
Dividends on common stock ($0.70 per share) ........... -- -- (35) -- -- (35)
Dividends on Series B ESOP Convertible
Preferred Stock, net of tax benefit of $9 ........... -- -- (21) -- -- (21)
Issuance of 26,202 shares of common stock
under dividend reinvestment and stock
purchase plan ($53.13 per share) .................... -- 1 -- -- -- 1
Transfer of 336,064 shares of common
stock from treasury under ESOP and
stock incentive plan ($67.75 per share) ............. -- (1) (3) -- 23 19
Net unrealized gain on marketable
equity securities ................................... -- -- -- 11 -- 11
------- ------- ------- ------- ------- -------
BALANCE AT JUNE 30, 1993 .................................. 163 2,012 36 (1) (297) 1,913
Fiscal Year 1994:
Net loss .............................................. -- -- (409) -- -- (409)
Dividends on Series C Convertible Preferred Stock ..... -- -- (80) -- -- (80)
Dividends on common stock ($0.20 per share) ........... -- -- (10) -- -- (10)
Dividends on Series B ESOP Convertible
Preferred Stock, net of tax benefit of $8 ........... -- -- (22) -- -- (22)
Issuance of 17,140 shares of common stock
under dividend reinvestment and stock
purchase plan ($50.38 per share) .................... -- 1 -- -- -- 1
Transfer of 370,226 net shares of common stock
from treasury under ESOP and
stock incentive plan ($67.75 per share) ............. -- -- (5) -- 25 20
Net unrealized gain on marketable
equity securities ................................... -- -- -- 54 -- 54
------- ------- ------- ------- ------- -------
BALANCE AT JUNE 30, 1994 .................................. 163 2,013 (490) 53 (272) 1,467
Fiscal Year 1995:
Net income ............................................ -- -- 408 -- -- 408
Dividends on Series C Convertible Preferred Stock ..... -- -- (80) -- -- (80)
Dividends on common stock ($0.20 per share) ........... -- -- (10) -- -- (10)
Dividends on Series B ESOP Convertible
Preferred Stock allocated shares .................... -- -- (8) -- -- (8)
Issuance of 67,612 shares of common stock under
dividend reinvestment and stock purchase
plan, stock incentive plan and Series C Preferred
Stock conversions ($56.13 per share) ................ 1 3 -- -- -- 4
Transfer of 295,126 net shares of common stock
from treasury under ESOP and
stock incentive plan ($67.75 per share) ............. -- -- (4) -- 20 16
Net unrealized gain on marketable
equity securities ................................... -- -- -- 30 -- 30
------- ------- ------- ------- ------- -------
BALANCE AT JUNE 30, 1995 .................................. $ 164 $ 2,016 $ (184) $ 83 $ (252) $ 1,827
======= ======= ======= ======= ======= =======
The accompanying notes are an integral part of these consolidated statements.
DELTA AIR LINES, INC.
26
16
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
June 30, 1995, 1994 and 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION - The consolidated financial statements include
the accounts of Delta Air Lines, Inc. and its wholly-owned subsidiaries (Delta
or the Company). All significant intercompany accounts and transactions have
been eliminated. Certain prior year amounts have been reclassified to conform
with the current financial statement presentation.
INVESTMENTS IN ASSOCIATED COMPANIES - The Company's investments in the
following companies are accounted for under the equity method: TransQuest
Information Solutions (TransQuest), an information technology joint venture;
WORLDSPAN, L.P. (WORLDSPAN), a computer reservations system partnership;
Atlantic Southeast Airlines, Inc. (ASA); Comair Holdings, Inc. (Comair), the
parent of Comair, Inc.; and SkyWest, Inc. (SkyWest), the parent of SkyWest
Airlines, Inc. ASA, Comair, Inc., and SkyWest Airlines, Inc. are participants
in the Delta Connection program. (See Note 3.)
ACCOUNTING CHANGES - Effective July 1, 1994, the Company adopted
Statement of Financial Accounting Standards No. 112, "Employers' Accounting
for Postemployment Benefits" (SFAS 112), and American Institute of Certified
Public Accountants Statement of Position 93-6, "Employers' Accounting for
Employee Stock Ownership Plans" (SOP 93-6). (See Notes 10 and 14,
respectively.) Effective June 30, 1994, the Company adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" (SFAS 115). (See Note 2.) Effective July 1, 1992,
the Company adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" (SFAS
106), and Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" (SFAS 109). (See Notes 10 and 15, respectively.)
CASH AND CASH EQUIVALENTS - Investments with an original maturity of
three months or less are classified as cash and cash equivalents. These
investments are stated at cost, which approximates fair value.
SHORT-TERM INVESTMENTS - Cash in excess of operating requirements is
invested in short-term, highly liquid investments. These investments are
classified as available-for-sale under SFAS 115 and stated at fair value. (See
Note 2.)
COST IN EXCESS OF NET ASSETS ACQUIRED - The cost in excess of net assets
acquired (goodwill), which is being amortized over 40 years, is related to the
Company's acquisition of Western Air Lines, Inc. on December 18, 1986. The
Company periodically reviews the value assigned to goodwill to determine if it
has been other than temporarily impaired. Management believes that goodwill is
appropriately valued.
LEASEHOLD AND OPERATING RIGHTS - Costs assigned to the purchase of
leasehold rights and landing slots are amortized over the lives of the
respective leases at the associated airports. Purchased international route
authorities are amortized over the lives of the authorities as determined by
the expiration dates of such authorities. Permanent route authorities with no
stated expiration dates are amortized over 40 years. The Company periodically
reviews the values assigned to leasehold and operating rights to determine if
they have been other than temporarily impaired. Management believes that
leasehold and operating rights are appropriately valued.
DEFERRED GAINS ON SALE AND LEASEBACK TRANSACTIONS - Gains on the sale
and leaseback of property and equipment under operating leases are deferred and
amortized over the lives of the respective leases as a reduction in rent
expense. Gains on the sale and leaseback of property under capital leases are
credited directly to the carrying value of the related asset.
MANUFACTURERS CREDITS - In connection with the acquisition of certain
aircraft and engines, the Company receives various credits. These credits are
deferred until the aircraft and engines are delivered, at which time the
credits are applied on a pro rata basis as a reduction of the acquisition cost
of the related equipment.
FREQUENT FLYER PROGRAM - The Company sponsors a travel incentive program
(Sky Miles TM) whereby frequent travelers accumulate mileage credits that
entitle them to certain awards, including free travel. The Company accrues the
estimated incremental cost of providing free travel awards under its SkyMiles
program when free travel award levels are achieved. The accrued incremental
cost is included in accounts payable and miscellaneous accrued liabilities in
the Company's Consolidated Balance Sheets.
The Company also sells mileage credits to participating partners in the
SkyMiles program such as hotels, car rental agencies and credit card companies.
The resulting revenue, net of the incremental cost of the credits sold, is
recorded as other operating revenue in the Company's Consolidated Statements of
Operations during the period in which the credits are sold.
PASSENGER AND CARGO REVENUES - Passenger and cargo revenues are recorded
when the transportation is provided. The value of unused passenger tickets is
included in current liabilities as air traffic liability in the Company's
Consolidated Balance Sheets.
Effective July 1, 1994, Delta began recording as reductions of revenue
certain international air transportation price adjustments which had previously
been recorded as commissions expense. The related amounts in the Consolidated
Statements of Operations for fiscal years 1994 and 1993 have been reclassified
to conform with the current financial statement presentation.
DELTA AIR LINES, INC.
27
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Delta has entered into code-sharing agreements under which the Company
purchases seats from and sells seats to certain foreign airlines. Under these
agreements, each airline separately markets its respective seats. The revenue
resulting from Delta's sale of code-sharing seats purchased from other airlines
is reported as other operating revenue, offset by the cost of acquiring these
code-sharing seats and other direct costs incurred in operating the
code-sharing flights, in the Company's Consolidated Statements of Operations.
The revenue generated from Delta's code sharing seat sales to other airlines is
reported as passenger revenue in the Company's Consolidated Statements of
Operations.
DEPRECIATION AND AMORTIZATION - Prior to April 1, 1993, the Company
depreciated substantially all of its flight equipment on a straight-line basis
to residual values (10% of cost) over a 15-year period from the dates placed in
service. As a result of a fleet plan review, effective April 1, 1993, the
Company increased the estimated useful lives of substantially all of its flight
equipment. Flight equipment that was not already fully depreciated is being
depreciated on a straight-line basis to residual values (5% of cost) over a
20-year period from the dates placed in service. The effect of this change was
a $34 million decrease in depreciation expense and a $22 million ($0.44 per
common share) decrease in net loss for fiscal 1993.
Ground property and equipment are depreciated on a straight-line basis
over their estimated service lives, which range from 3 to 30 years. Flight
equipment under capital leases are amortized on a straight-line basis over the
lives of the respective leases, which range from 8 to 15 years.
INTEREST CAPITALIZED - Interest attributable to funds used to finance
the acquisition of new aircraft and construction of major ground facilities is
capitalized as an additional cost of the related asset. Interest is
capitalized at the Company's weighted average interest rate on long-term debt
or, where applicable, the interest rate related to specific borrowings.
Capitalization of interest ceases when the property or equipment is placed in
service.
EARNINGS (LOSS) PER SHARE - Primary earnings (loss) per common share is
computed by dividing net income (loss) attributable to common stockholders by
the weighted average number of shares of Delta common stock (Common Stock) and,
if dilutive, Common Stock equivalents outstanding during the year. Common
Stock equivalents consist of the shares issuable upon exercise of outstanding
stock options less the number of shares deemed to be repurchased under
application of the treasury stock method. The weighted average number of
shares of Common Stock outstanding was 50,657,613 for fiscal 1995; 50,257,721
for fiscal 1994; and 49,836,959 for fiscal 1993.
To compute fully diluted earnings (loss) per common share, it is assumed
that all outstanding shares of Series C Convertible Preferred Stock (Series C
Preferred Stock), all allocated shares of Series B ESOP Convertible Preferred
Stock (ESOP Preferred Stock), the 3.23% Convertible Subordinated Notes due 2003
and Common Stock equivalents are converted, if dilutive, into Common Stock.
The weighted average number of shares of Common Stock used to compute fully
diluted earnings (loss) per common share was 80,118,720 for fiscal 1995;
50,257,721 for fiscal 1994; and 49,836,959 for fiscal 1993. In addition, to
compute fully diluted earnings (loss) per common share, net income or loss is
adjusted for the additional contribution that would be required to service the
ESOP's long-term debt if the ESOP Preferred Stock was converted into Common
Stock and for the interest expense that would be avoided if the 3.23%
Convertible Subordinated Notes due 2003 were converted into Common Stock. (See
Notes 7, 12, 13 and 14.)
FOREIGN CURRENCY TRANSLATION - Assets and liabilities denominated in
foreign currencies are translated generally at exchange rates in effect at the
balance sheet date, except that fixed assets are translated at exchange rates
in effect when these assets were acquired. Revenues and expenses of foreign
operations are translated at average monthly exchange rates prevailing during
the year, except that depreciation and amortization charges are translated at
the exchange rates in effect when the related assets were acquired. The
resulting foreign exchange gains and losses are recognized as incurred. Such
amounts were not significant for any of the years presented in this report.
2. INVESTMENTS IN DEBT AND EQUITY SECURITIES:
Under SFAS 115, which Delta adopted effective June 30, 1994, the
Company's investments in Singapore Airlines Limited (Singapore Airlines) and
Swissair, Swiss Air Transport Company Ltd. (Swissair), which are accounted for
under the cost method, are classified as available-for-sale and carried at
aggregate market value. Prior to June 30, 1994, these investments were carried
at the lower of aggregate cost or market. At June 30, 1995 and 1994, the gross
unrealized gain on the Company's investment in Singapore Airlines was $143
million and $109 million, respectively, and the gross unrealized loss on the
Company's investment in Swissair was $12 million and $24 million, respectively.
The $83 million and $53 million net unrealized gains, net of the related
deferred tax provision, on these investments at June 30, 1995 and 1994,
respectively, are reflected in stockholders' equity. Delta's rights to vote,
transfer or acquire additional shares of the stock of Singapore Airlines and
Swissair are subject to certain restrictions.
DELTA AIR LINES, INC.
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Delta's other investments in available-for-sale securities, which were
also carried at the lower of aggregate cost or market prior to the adoption of
SFAS 115, are recorded as short-term investments in the Company's Consolidated
Balance Sheets. These investments at June 30, 1995 and 1994, were as follows:
Average
Stated
Maturity
Percentage (Months)
------------------------- ------------------------
Type 1995 1994 1995 1994
- ---- ---- ---- ---- ----
Government
agency debt . . . . 36% 52% 12 21
Corporate debt
securities . . . . 64 48% 5 23
During fiscal years 1995 and 1994, the proceeds from sales of
available-for-sale securities were $926 million and $473 million, respectively,
which resulted in realized losses of $4 million and $3 million, respectively.
The unrealized gains on these investments were less than $1 million and were
reflected in stockholders' equity at June 30, 1995 and 1994, respectively.
3. INVESTMENTS IN ASSOCIATED COMPANIES:
The Company's percent ownership in associated companies at June 30,
1995, and equity earnings (losses) for fiscal 1995, 1994 and 1993, were as
follows:
Equity Earnings (Losses)
Percent -------------------------
Investment Ownership 1995 1994 1993
- ---------- --------- ---- ---- ----
(In Millions)
TransQuest . . . . . . . . 50.0% $(3) $ - $-
WORLDSPAN . . . . . . . . 38.0 (4) 1 5
ASA . . . . . . . . . . . 24.2 12 12 9
Comair . . . . . . . . . . 21.3 6 6 4
SkyWest . . . . . . . . . 15.0 2 2 1
During the December 1994 quarter, Delta and AT&T Global Information
Solutions Company (AT&T) formed TransQuest, a joint venture to provide
information technology services to Delta and others in the travel and
transportation industries. Delta and AT&T each own a 50% interest in
TransQuest. Delta's investment in TransQuest, which initially consisted of
software valued at $25 million, is being accounted for under the equity method.
This investment is recorded as an investment in associated companies in the
accompanying Consolidated Balance Sheets. Billings for information technology
services provided by TransQuest to Delta totaled $66 million in fiscal 1995.
WORLDSPAN provides computer reservations services to Delta. Fees billed
to Delta for these services were $78 million in fiscal 1995, $60 million in
fiscal 1994 and $47 million in fiscal 1993. Additionally, Delta made monthly
subscriber support payments to WORLDSPAN; these payments totaled $18 million in
fiscal 1995, $23 million in fiscal 1994 and $32 million in fiscal 1993. Delta
provides communications, information processing and administrative services to
WORLDSPAN; WORLDSPAN reimbursed Delta for these services in the amount of $3
million in fiscal 1995, $15 million in fiscal 1994, and $26 million in fiscal
1993.
4. FINANCIAL INSTRUMENTS AND OFF-BALANCE SHEET RISK:
BALANCE SHEET FINANCIAL INSTRUMENTS: FAIR VALUES - The carrying
amounts reported in the Company's Consolidated Balance Sheets for cash and cash
equivalents approximate fair values at June 30, 1995 and 1994. Short-term
investments classified as available-for-sale are recorded at fair value in
accordance with SFAS 115. (See Note 2).
The fair values and carrying values of long-term debt, including current
maturities, at June 30, 1995 and 1994, were as follows:
1995 1994
---- ----
(In Billions)
Fair value . . . . . . . . . . . $3.0 $3.3
Carrying value . . . . . . . . . $2.8 $3.4
These values are based on quoted market prices, where available, or
discounted cash flow analyses. The carrying values of all other financial
instruments approximate their fair values.
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS: RISKS AND FAIR VALUES -
The Company has entered into certain foreign exchange forward contracts, all
with maturities of less than one month, in an effort to manage risks associated
with foreign currency exchange rate and interest rate volatility. The
aggregate face amount of such contracts was approximately $20 million at June
30, 1995. The related realized and unrealized gains and losses for such
contracts were not material for any of the years presented.
Under the Company's revolving accounts receivable facility (see Note 5),
the full amount of the allowance for doubtful accounts related to the
receivables sold was retained, as the Company had substantially the same credit
risk as if the receivables had not been sold.
FINANCIAL GUARANTEES - Certain municipalities and airport authorities
have issued special facility revenue bonds to build or improve airport terminal
and maintenance facilities that Delta leases under operating leases. Under
these lease agreements, the Company is required to make rental payments
sufficient to pay principal and interest on the bonds as they become due. At
June 30, 1995, Delta had guaranteed $675 million principal amount of such bonds.
(See Note 8.)
CONCENTRATION OF CREDIT RISK - Delta's accounts receivable are generated
primarily from airline ticket and cargo services sales to individuals and
various commercial enterprises that are economically and geographically
dispersed, and the accounts receivable are generally short-term in duration.
Accordingly, Delta does not believe it is subject to any significant
concentration of credit risk.
DELTA AIR LINES, INC.
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5. SALE OF RECEIVABLES:
In June 1994, Delta entered into a revolving accounts receivable
facility (Facility) providing for the sale of a defined pool of accounts
receivable (Receivables) through a wholly-owned subsidiary to a trust in
exchange for a senior certificate in the principal amount of $300 million
(Senior Certificate) and a subordinate certificate in the principal amount of
$189 million (Subordinate Certificate). The subsidiary retained the
Subordinate Certificate, and the Company received $300 million in cash from the
sale of the Senior Certificate to a third party. The principal amount of the
Subordinate Certificate fluctuates daily depending upon the volume of
Receivables sold. At June 30, 1995 and 1994, the principal amount of the
Senior Certificate was $229 million and $300 million, respectively, and is
recorded as a reduction in accounts receivable in the Company's Consolidated
Balance Sheets. The principal amount of the Subordinate Certificate at June
30, 1995 and 1994, was $190 million and $164 million, respectively, and is
included in accounts receivable in the Company's Consolidated Balance Sheets.
Under the terms of the Facility, the Company is obligated to pay fees
which approximate the Senior Certificate holder's cost of issuing an amount of
commercial paper equivalent to the principal amount of the Senior Certificate
plus certain administrative costs. For fiscal 1995 and 1994, these fees
totaled $19 million and $7 million, respectively, and are included in other
income (expense) under miscellaneous, net in the Company's Consolidated
Statements of Operations.
During fiscal 1995, Delta elected to discontinure selling new
receivables under the Facility, and the Senior Certificate was reduced to $0
on August 14, 1995.
6. SHORT-TERM BORROWINGS:
The maximum and average outstanding balances of short-term bank
borrowings and the weighted average interest rates during fiscal 1995, 1994 and
1993 were as follows:
1995 1994 1993
---- ---- ----
(Dollar Amounts In Millions)
Maximum amount of borrowings
outstanding during period . . . . . . . . . . $ - $ 164 $ 917
Average daily borrowings
during period . . . . . . . . . . . . . . . $ - $ 2 $ 251
Weighted average interest
rate on borrowings
during period . . . . . . . . . . . . . . . . $ - 5.03% 3.86%
At June 30, 1995 and 1994, no commercial paper or short-term notes were
outstanding.
7. LONG-TERM DEBT:
At June 30, 1995 and 1994, the Company's long-term debt (including
current maturities) was as follows:
1995 1994
---- ----
(In Millions)
3.23% Convertible Subordinated Notes, unsecured,
due June 15, 2003, net of unamortized
discount of $179 million and $202 million
at June 30, 1995 and 1994, respectively . . . . . . . . . . $ 621 $ 598
8.10% Series C Guaranteed Serial ESOP
Notes, unsecured, payable in installments
between 2002 and 2009 . . . . . . . . . . . . . . . . . . . 290 290
9 3/4% Debentures, unsecured, due
May 15, 2021 . . . . . . . . . . . . . . . . . . . . . . . . 271 350
Medium-Term Notes, Series A and B, unsecured,
interest rates ranging from 7.55% to 9.15% and
with maturities ranging from 1997 to 2007 . . . . . . . . . 235 381
9 7/8% Notes, unsecured, due
January 1, 1998 . . . . . . . . . . . . . . . . . . . . . . 225 225
9 1/4% Debentures, unsecured, due
March 15, 2022 . . . . . . . . . . . . . . . . . . . . . . . 184 200
10 3/8% Debentures, unsecured, due
February 1, 2011 . . . . . . . . . . . . . . . . . . . . . . 176 200
9 7/8% Notes, unsecured, due
May 15, 2000 . . . . . . . . . . . . . . . . . . . . . . . . 165 175
8 1/4% Notes, unsecured, due May 15, 1996 . . . . . . . . . . . . . 150 150
9% Debentures, unsecured, due
May 15, 2016 . . . . . . . . . . . . . . . . . . . . . . . . 135 150
10 1/8% Debentures, unsecured, due May 15, 2010 . . . . . . . . . . 113 125
8 1/2% Notes, unsecured, due March 15, 2002 . . . . . . . . . . . . 96 100
10 3/8% Debentures, unsecured, due
December 15, 2022 . . . . . . . . . . . . . . . . . . . . . 66 175
Clayton County Development Authority, 7 5/8%
unsecured loan agreement, repayable on
January 1, 2020 . . . . . . . . . . . . . . . . . . . . . . 45 45
Development Authority of Clayton County,
6 5/8% unsecured loan agreement,
repayable in installments beginning
in 2000, with the remaining balance
payable in 2011 . . . . . . . . . . . . . . . . . . . . . . 35 35
Development Authority of Fulton County,
unsecured loan agreement, repayable
$10 million on November 1, 2007, and $20 million
on November 1, 2012. Interest ranges from 6.85%
to 6.95% over the life of the loan . . . . . . . . . . . . . 30 30
7.26%-7.63% 1990 Series A and Series B Guaranteed
Serial ESOP Notes, unsecured . . . . . . . . . . . . . . . . - 142
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) (2)
------ ------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,834 3,369
Less: Current maturities . . . . . . . . . . . . . . . . . . . . . 151 227
------ ------
Total long-term debt . . . . . . . . . . . . . . . . . . . . $2,683 $3,142
====== ======
DELTA AIR LINES, INC.
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During fiscal 1995, the Company voluntarily repurchased and retired $403
million principal amount of its long-term debt, and the Delta Family-Care
Savings Plan (Savings Plan) voluntarily prepaid in whole, with funds provided by
Delta, the Savings Plan's 1990 Series A and Series B Guaranteed Serial ESOP
Notes, which were guaranteed by Delta. As a result of these transactions, the
Company recognized a net pretax loss of $4 million, which is included in
miscellaneous income (expense) in the Company's Consolidated Statements of
Operations.
The 1992 Bank Credit Agreement provides for unsecured borrowings by the
Company of up to $1.25 billion on a revolving basis until December 4, 1996. Up
to $700 million of this facility may be used for the issuance of letters of
credit. The interest rate under this facility is, at the Company's option, an
adjusted certificate of deposit rate, the LIBOR rate, or the prime rate, in
each case plus a margin which is subject to adjustment based on certain changes
in the credit ratings of the Company's long-term senior unsecured debt. The
1992 Bank Credit Agreement contains certain negative covenants that restrict
the Company's ability to grant liens, incur or guarantee debt, and enter into
flight equipment leases. It also provides that if there is a change of control
(as defined) of the Company, the banks' obligation to extend credit terminates,
any amounts outstanding become immediately due and payable, and the Company will
immediately deposit cash collateral with the banks in an amount equal to all
outstanding letters of credit. At June 30, 1995, there were no borrowings
outstanding under the 1992 Bank Credit Agreement, but there was outstanding
a letter of credit in the amount of $466 million (which was increased to $470
million at July 28, 1995) to credit enhance the Savings Plan's Series C
Guaranteed Serial ESOP Notes (Series C ESOP Notes).
At August 18, 1995, there was outstanding $290 million principal amount
of Series C ESOP Notes guaranteed by Delta. The Series C ESOP Notes, which
were issued pursuant to certain note purchase agreements, are payable in
installments between July 1, 2002 and January 1, 2009. The note purchase
agreements require Delta to purchase the Series C ESOP Notes at the option of
the holders thereof (Noteholders) if the credit rating of Delta's long-term
senior unsecured debt falls below Baa3 by Moody's and BBB- by Standard & Poor's
(Purchase Event); provided that Delta has no obligation to purchase the Series
C ESOP Notes under the note purchase agreements so long as it obtains, within
127 days of a Purchase Event, certain credit enhancements (Approved Credit
Enhancement) that result in the Series C ESOP Notes being rated A3 or higher by
Moody's and A- or higher by Standard & Poor's (Required Ratings). If Delta is
required to purchase the Series C ESOP Notes because of the occurrence of a
Purchase Event, such purchase would be made at a price (Purchase Price) equal
to the outstanding principal amount of the Series C ESOP Notes being purchased,
together with accrued interest and a Make Whole Premium Amount. The Make Whole
Premium Amount for the Series C ESOP Notes is based on, among other factors,
the yield to maturity of U.S. Treasury Notes having maturities equal to the
remaining average life to maturity of the Series C ESOP Notes as of the date
Delta purchases the Series C ESOP Notes.
As a result of Moody's rating action on May 11, 1993, a Purchase Event
occurred, and Delta became obligated to purchase on September 15, 1993, any
Series C ESOP Notes properly tendered to it. Prior to September 15, 1993,
Delta obtained an Approved Credit Enhancement in the form of a letter of credit
(Letter of Credit) to credit enhance the Series C ESOP Notes. The Letter of
Credit was issued by NationsBank of Georgia, National Association
(NationsBank), in favor of Wilmington Trust Company, as trustee (Trustee),
under Delta's 1992 Bank Credit Agreement. Due to the issuance of the Letter of
Credit, which is scheduled to expire on December 4, 1996, the Series C ESOP
Notes received the Required Ratings. Accordingly, Delta no longer has an
obligation to purchase the Series C ESOP Notes as a result of the Purchase
Event that occurred on May 11, 1993.
At August 18, 1995, the face amount of the Letter of Credit was $470
million. It covers the $290 million outstanding principal amount of the Series
C ESOP Notes, up to $148 million of Make Whole Premium Amount and approximately
one year of interest on the Series C ESOP Notes.
Delta, the Trustee, and Fidelity Management Trust Company, as ESOP
trustee, entered into an Indenture of Trust, dated as of August 1, 1993
(Indenture), that contains certain terms and conditions relating to the Letter
of Credit. The Indenture requires the Trustee to draw under the Letter of
Credit to make regularly scheduled payments of principal and interest on the
Series C ESOP Notes. The Indenture also requires the Trustee to draw under the
Letter of Credit to purchase the Series C ESOP Notes in certain circumstances
in which Delta would not be required to purchase the Series C ESOP Notes under
the note purchase agreements. Subject to certain conditions, the Indenture
requires the Trustee to purchase the Series C ESOP Notes at the Purchase Price
at the option of the Noteholders in the event that (1) the Required Ratings on
the Series C ESOP Notes are not maintained; (2) the Letter of Credit is not
extended 20 days before its scheduled expiration date; (3) Delta elects to
terminate the Letter of Credit; or (4) the Trustee receives notice there has
occurred an Event of Default (as defined) under the 1992 Bank Credit Agreement;
unless, generally within 10 days of any such event, the Series C ESOP Notes
receive the Required Ratings due to Delta's obtaining a substitute credit
enhancement or otherwise.
DELTA AIR LINES, INC.
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The Required Ratings on the Series C ESOP Notes are subject to
reconsideration at any time, and to annual confirmation, by Moody's and
Standard & Poor's. Circumstances that might cause either rating agency to
lower or fail to confirm its rating include, without limitation, a downgrading
of the deposits of NationsBank below A3 by Moody's or A- by Standard & Poor's,
or a determination that the Make Whole Premium Amount covered by the Letter of
Credit is insufficient.
Subject to certain conditions, the Indenture does not permit the Trustee
to purchase the Series C ESOP Notes at the option of the Noteholders if the
Series C ESOP Notes receive the Required Ratings without the benefit of a
credit enhancement. The Series C ESOP Notes are not likely to receive the
Required Ratings absent a credit enhancement unless Delta's long-term senior
unsecured debt is rated at least A3 by Moody's and A- by Standard & Poor's. On
August 18, 1995, Delta's long-term senior unsecured debt was rated Ba1 by
Moody's and BB by Standard & Poor's.
If the Trustee draws under the Letter of Credit to purchase the Series C
ESOP Notes, Delta is required to reimburse NationsBank under the 1992 Bank
Credit Agreement by, at Delta's election, (1) immediately repaying the amount
drawn; or (2) converting its reimbursement obligation to an outstanding
borrowing under that Agreement. The 1992 Bank Credit Agreement is scheduled to
expire on December 4, 1996.
On June 24, 1993, the Company issued $800 million principal amount at
stated maturity of 3.23% Convertible Subordinated Notes due June 15, 2003
(Notes). The Notes were issued at an original issue discount of 28.2% from,
and bear interest at the rate of 3.23% per annum on, the principal amount at
stated maturity. This original issue discount and rate of interest represents
a yield to maturity, compounded semiannually, of 7.25% per annum. The Notes
are convertible at any time prior to stated maturity by the holders thereof,
unless previously redeemed, into shares of Common Stock, at a conversion rate
of 12.68 shares per $1,000 principal amount at stated maturity of the Notes,
subject to adjustment in certain circumstances. The Notes are redeemable at
any time on or after June 15, 1996, at the Company's option at a price
(Repurchase Price) for each Note equal to the issue price plus accrued original
issue discount to the redemption date, together with accrued and unpaid
interest to the redemption date. If a Change in Control (as defined) of the
Company occurs, the holders of Notes may require the Company to repurchase
their Notes at the Repurchase Price, payable in cash or, at the Company's
option, in shares of Common Stock.
At June 30, 1995, the annual scheduled maturities of long-term debt
during the next five fiscal years were as follows:
Years Ending
June 30 Amount
------------ ------
(In Millions)
1996 . . . . . . . . . $151
1997 . . . . . . . . . 40
1998 . . . . . . . . . 254
1999 . . . . . . . . . 106
2000 . . . . . . . . . 165
The Company's debt agreements contain certain restrictive covenants, but
do not limit the payment of dividends on the Company's capital stock. The
terms of the ESOP Preferred Stock and Series C Preferred Stock limit the
Company's ability to pay cash dividends on Common Stock in certain
circumstances.
Cash payments of interest, net of interest capitalized, totaled $210
million in fiscal 1995; $231 million in fiscal 1994; and $171 million in fiscal
1993.
8. LEASE OBLIGATIONS:
The Company leases certain aircraft, airport terminal and maintenance
facilities, ticket offices, and other property and equipment. Rent expense is
generally recorded on a straight-line basis over the lease term. Amounts
charged to rental expense for operating leases was $1.1 billion in each of
fiscal years 1995, 1994 and 1993.
During the June 1995 quarter, the Company extended the lease terms for
40 B-737-200 aircraft. As a result of the extensions, these aircraft leases
were reclassified, for accounting purposes, from operating leases to capital
leases. This event resulted in an increase of $385 million, net of deferred
rent credits, in flight equipment under capital leases, and an increase of $415
million in capital lease obligations in the Company's Consolidated Balance
Sheets at June 30, 1995. This transaction was treated as a noncash transaction
in the Company's Consolidated Statements of Cash Flows for the year ended June
30, 1995.
DELTA AIR LINES, INC.
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At June 30, 1995, the Company's minimum rental commitments under capital
leases and noncancelable operating leases with initial or remaining terms of
more than one year were as follows:
Years Ending Capital Operating
June 30 Leases Leases
- ------------ ------ ---------
(In Millions)
1996 . . . . . . . . . . . . . . . . . $ 101 $ 929
1997 . . . . . . . . . . . . . . . . . 100 919
1998 . . . . . . . . . . . . . . . . . 97 893
1999 . . . . . . . . . . . . . . . . . 96 883
2000 . . . . . . . . . . . . . . . . . 65 865
After 2000 . . . . . . . . . . . . . . . 221 12,211
------ -------
Total minimum lease payments . . . 680 $16,700
=======
Less: Amounts representing interest . . 181
------
Present value of future minimum
capital lease payments . . . . . . . . 499
Less: Current obligations under
capital leases . . . . . . . . . . . . 61
------
Long-term capital lease
obligations . . . . . . . . . . . . . $ 438
======
9. PURCHASE COMMITMENTS:
Future expenditures for aircraft, engines and engine hushkits on firm
order as of June 30, 1995, are estimated to be $2.9 billion, excluding aircraft
orders subject to reconfirmation by Delta, as follows:
Years Ending
June 30 Amount
----------- ------
(In Millions)
1996 . . . . . . . . . . . . . . . . $ 510
1997 . . . . . . . . . . . . . . . . 940
1998 . . . . . . . . . . . . . . . . 720
1999 . . . . . . . . . . . . . . . . 320
2000 . . . . . . . . . . . . . . . . 190
After 2000 . . . . . . . . . . . . . 220
-------
Total . . . . . . . . . . . . . $ 2,900
=======
In addition, at August 18, 1995, the Company had authorized capital
expenditures of approximately $300 million for fiscal 1996 for improvement of
airport and office facilities, various ground equipment and other assets.
The Company expects to finance its aircraft, engine and engine hushkit
commitments, as well as other authorized capital expenditures, using available
cash, short-term investments and internally generated funds, supplemented as
necessary by debt financings and proceeds from sale and leaseback transactions.
The Company has entered into code sharing agreements under which it has
agreed to purchase seats at established prices from specific foreign airlines,
subject to certain conditions. None of these agreements has noncancelable
terms in excess of one year.
Subject to certain conditions, Delta has agreed to purchase a minimum
of $35 million of products and services from AT&T each calendar year during the
first five years of the TransQuest joint venture between Delta and AT&T. (See
Note 3.)
10. EMPLOYEE BENEFIT PLANS:
Substantially all of the Company's permanent employees are covered under
various defined benefit pension plans, medical plans, and disability and
survivorship plans, and certain employees meeting service requirements are
eligible to participate in the Savings Plan discussed in Note 14.
DEFINED BENEFIT PENSION PLANS - The following table sets forth the
defined benefit pension plans' funded status and amounts recognized in Delta's
Consolidated Balance Sheets as of June 30, 1995 and 1994:
1995 1994
---- ----
(In Millions)
Actuarial present value of benefit
obligations:
Accumulated benefit obligation(1) . . . . . . . . . $5,293 $4,518
====== ======
Projected benefit obligation . . . . . . . . . . . . $6,532 $5,846
Plan assets at fair value(2) . . . . . . . . . . . . . . 6,108 5,365
------ ------
Projected benefit obligation in
excess of plan assets . . . . . . . . . . . . . . . . . 424 481
Unrecognized net loss . . . . . . . . . . . . . . . . . . (196) (176)
Unrecognized transition obligation . . . . . . . . . . . (67) (67)
Unrecognized prior service cost . . . . . . . . . . . . . (20) (8)
------ ------
Accrued pension cost recognized in
the consolidated balance sheets . . . . . . . . . . . . $ 141 $ 230
====== ======
(1)Substantially all of the accumulated benefit obligation is vested.
(2)Plan assets were invested at June 30, 1995, approximately as follows: cash
equivalents (7%), government and corporate bonds and notes (18%), common stock
and other equity-oriented investments (71%) and real estate investments (4%).
The weighted average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 8.0% and 4.7%, respectively, at June 30,
1995, and 8.25% and 4.8%, respectively, at June 30, 1994. The expected
long-term rate of return on assets was 10% at June 30, 1995 and 1994.
Effective April 1, 1993, the Company increased the expected annual
return on plan assets associated with defined benefit pension plans from 9% to
10%. This change reduced pretax operating expenses by $13 million and decreased
net loss by $8 million ($0.16 per common share) in fiscal 1993.
DELTA AIR LINES, INC.
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The net periodic cost of defined benefit pension plans for fiscal 1995,
1994 and 1993 included the following components:
1995 1994 1993
---- ---- ----
(In Millions)
Service cost - benefits earned
during the year . . . . . . . . . . . . . . . $ 221 $ 248 $ 240
Interest cost on projected
benefit obligation . . . . . . . . . . . . . 489 466 431
Actual return on plan assets . . . . . . . . . (795) (355) (647)
Net amortization and deferral . . . . . . . . . 266 (119) 259
----- ----- -----
Net periodic pension cost . . . . . . . . . . . $ 181 $ 240 $ 283
===== ===== =====
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS - Delta's medical plans
provide medical and dental benefits to substantially all retirees and their
eligible dependents. Benefits are funded from general assets on a current
basis, although amounts sufficient to pay claims incurred, but not yet paid,
are held in trust. Plan benefits are subject to co-payments, deductibles and
certain other limits described in the plans and are reduced once a retiree is
eligible for Medicare. The Company has reserved the right to modify or
terminate the medical and dental plans for both current and future retirees.
Effective July 1, 1992, the Company adopted SFAS 106, which requires the
accrual of the cost of providing postretirement benefits over the active
service period of the employee. The Company adopted SFAS 106 using the
immediate recognition transition option, and recorded a one-time pretax charge
of $1.3 billion ($818 million after tax) as the cumulative effect of the
accounting change.
Net periodic postretirement benefit cost for fiscal 1995, 1994 and 1993
included the following components:
1995 1994 1993
---- ---- ----
(In Millions)
Service cost - benefits earned
during the year . . . . . . . . . . . . . . . . . . . . . . . . $ 32 $ 35 $ 47
Interest cost on accumulated
postretirement benefit
obligation . . . . . . . . . . . . . . . . . . . . . . . . . . 118 101 119
Amortization of prior service cost . . . . . . . . . . . . . . . (29) (31) -
Amortization of accumulated losses . . . . . . . . . . . . . . . 4 6 -
---- ---- ----
Net periodic postretirement benefit cost . . . . . . . . . . . . $125 $111 $166
==== ==== ====
The accumulated postretirement benefit obligation (APBO) at June 30,
1995 and 1994 consisted of the following components:
1995 1994
---- ----
(In Millions)
Retirees and dependents . . . . . . . . . . . . . . . . $ 879 $ 810
Fully eligible participants . . . . . . . . . . . . . . 333 352
Other active participants . . . . . . . . . . . . . . . 271 262
------ ------
Total accumulated postretirement
benefit obligation . . . . . . . . . . . . . . . . . 1,483 1,424
Unamortized prior service cost
(from plan changes) . . . . . . . . . . . . . . . . . 396 405
Unrecognized net loss . . . . . . . . . . . . . . . . . (109) (132)
------ ------
Accrued postretirement cost . . . . . . . . . . . . . . $1,770 $1,697
====== ======
The weighted average discount rate used to estimate the APBO was 8.0%
at June 30, 1995, and 8.25% at June 30, 1994. The assumed health care cost
trend rate used in measuring the APBO was 8.5% in fiscal 1995, declining
gradually to 4.25% by 2002, and remaining level thereafter. The assumed health
care cost trend rate used in measuring the APBO was 9.5% in fiscal 1994,
declining gradually to 4.5% by 2002, and remaining level thereafter.
Increasing the assumed health care cost trend rate annually by 1% for all
future years would increase the APBO as of June 30, 1995, by approximately $156
million, and the net periodic postretirement benefit cost by $16 million for
fiscal 1995.
Gains and losses that occur because actual experience differs from
that assumed will be amortized over the average future service period of
employees. Amounts allocable to prior service for amendments to retiree
insurance plans are amortized in a similar manner.
The Company continues to evaluate ways in which it can better manage
employee benefits and control costs. Any changes in the plan or revisions to
assumptions that affect the amount of expected future benefits may have a
significant effect on the amount of the reported obligation and future annual
expense.
Included in the restructuring charges described in Note 16 are
aggregate charges of $112 million and $198 million, respectively, for benefit
pension plans and postretirement benefit plans. These charges represent costs
primarily associated with special termination benefits and curtailment losses
related to workforce reductions.
POSTEMPLOYMENT BENEFITS - The Company provides certain benefits to its
former or inactive employees after employment but before retirement. Such
benefits primarily include those related to disability and survivorship plans.
DELTA AIR LINES, INC.
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Effective July 1, 1994, Delta adopted SFAS 112, which requires
recognition of the liability for postemployment benefits during the period of
employment. The adoption of SFAS 112 resulted in a cumulative after-tax
transition benefit of $114 million in fiscal 1995, primarily due to the net
overfunded status of the Company's disability and survivorship plans. The
Company's postemployment benefit expense for fiscal 1995 was $85 million. The
amount funded in excess of the liability at transition was included in other
noncurrent assets in the Company's Consolidated Balance Sheets. Future period
expenses will vary based on actual claims experience and the return on plan
assets.
11. CONTINGENCIES:
The Company is a defendant in certain legal actions relating to alleged
employment discrimination practices, antitrust matters, the Company's
participation in Pan Am's proposed plan of reorganization, environmental issues
and other matters concerning the Company's business. Although the ultimate
outcome of these matters cannot be predicted with certainty and could have a
material adverse effect on Delta's consolidated financial condition, results of
operations or liquidity, management presently believes that the resolution of
these actions is not likely to have a material adverse effect on Delta's
consolidated financial condition, results of operations or liquidity.
12. COMMON AND PREFERRED STOCK:
At June 30, 1995, 5,824,575 common shares were reserved for issuance
under the 1989 Stock Incentive Plan, 5,821,573 common shares were reserved for
conversion of the ESOP Preferred Stock, 17,490,306 common shares were reserved
for conversion of the Series C Preferred Stock and 10,149,072 common shares
were reserved for conversion of the 3.23% Convertible Subordinated Notes due
2003.
Each outstanding share of Common Stock is accompanied by a preferred
stock purchase right which entitles the holder to purchase from the Company
1/100th of a share of Series A Junior Participating Preferred Stock for $200,
subject to adjustment in certain circumstances. The rights become exercisable
only after a person or group acquires beneficial ownership of 20% or more of
the Common Stock, or commences a tender or exchange offer that would result in
such person or group beneficially owning 30% or more of the Common Stock. The
rights expire on November 4, 1996, and may be redeemed by Delta for $0.05 per
right until 15 days following the announcement that a person or group
beneficially owns 20% or more of the Common Stock. Subject to certain
conditions, if a person or group becomes the beneficial owner of 30% or more of
the Common Stock, or a person or group beneficially owning 20% or more of the
Common Stock receives compensation from Delta other than compensation for
full-time employment as a regular employee, each right will entitle its holder
(other than certain acquiring persons) to receive, upon exercise, Common Stock
having a value equal to two times the right's exercise price. In addition,
subject to certain conditions, if Delta is involved in a merger or certain
other business combination transactions, each right will entitle its holder
(other than certain acquiring persons) to receive, upon exercise, common stock
of the acquiring company having a value equal to two times the right's exercise
price.
Each share of ESOP Preferred Stock has a stated value of $72; bears an
annual cumulative cash dividend of 6%, or $4.32; is convertible into 0.8578
shares of Common Stock (a conversion price of $83.94), subject to adjustment in
certain circumstances; has a liquidation preference of $72, plus any accrued
and unpaid dividends; generally votes together as a single class with the
Common Stock on matters upon which the Common Stock is entitled to vote; and
has one vote, subject to adjustment in certain circumstances. The ESOP
Preferred Stock is redeemable at Delta's option at specified redemption prices
payable, at Delta's election, in cash or Common Stock. If full cumulative
dividends on the ESOP Preferred Stock have not been paid when due, Delta may
not pay cash dividends on the Common Stock.
On July 1, 1992, the Company issued 23 million Depositary Shares, each
representing 1/1,000th of a share of Series C Preferred Stock. Each share of
Series C Preferred Stock bears annual cumulative cash dividends of $3,500
(equivalent to $3.50 per annum per Depositary Share); has a liquidation
preference of $50,000 (equivalent to $50 per Depositary Share) plus accrued and
unpaid dividends; and is convertible at any time at the option of the holder
into shares of Common Stock at a conversion price of $65.75 per share of Common
Stock (equivalent to a conversion rate of 0.7605 shares of Common Stock per
Depositary Share), subject to adjustment in certain circumstances. Except
under certain circumstances, the holders of the Series C Preferred Stock have
no voting rights.
The Series C Preferred Stock is redeemable by Delta at its option on and
after July 1, 1995, for such number of shares of Common Stock as equals the
liquidation preference of the Series C Preferred Stock being redeemed divided
by the conversion price (equivalent to a conversion rate of 0.7605 shares of
Common Stock for each Depositary Share), subject to adjustment in certain
circumstances. Delta may exercise its redemption option only if for 20 trading
days within any period of 30 consecutive trading days, including the last
trading
DELTA AIR LINES, INC.
35
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day of such period, the closing price of the Common Stock on the New York Stock
Exchange exceeds $82.125, subject to adjustment in certain circumstances.
The Series C Preferred Stock ranks senior to the Common Stock and on a
parity with the ESOP Preferred Stock with respect to payment of dividends and
amounts upon liquidation, dissolution or winding up. The terms of the Series C
Preferred Stock prohibit Delta from paying cash dividends on the Common Stock
unless (1) all accrued and unpaid dividends on the Series C Preferred Stock and
the ESOP Preferred Stock have been paid or set apart for payment; and (2)
sufficient funds have been paid or set apart for payment for the current
dividend period with respect to the Series C Preferred Stock and the ESOP
Preferred Stock.
13. STOCK OPTIONS AND AWARDS:
Under the Company's stock option plans, selected employees have received
awards of stock options and, prior to fiscal 1993, tandem stock appreciation
rights.
The option price for all stock options, and the base upon which stock
appreciation rights are measured, is the fair market value of Common Stock on
the date of grant. Awards exercised as stock appreciation rights are payable
in a combination of cash and Common Stock.
Transactions involving stock options and tandem stock appreciation
rights during fiscal 1993, 1994 and 1995 were as follows:
Awards Award Price Range
------ -----------------
Balance June 30, 1992 . . . . . . . . . 2,503,350 $43.25 - $73.125
Fiscal 1993:
Exercised . . . . . . . . . . . (55,400) $43.25 - $54.00
---------
Balance June 30, 1993 . . . . . . . . . 2,447,950 $54.00 - $73.125
Fiscal 1994:
Granted . . . . . . . . . . . . 650,200 $54.375
Exercised . . . . . . . . . . . (47,400) $54.00
Expired . . . . . . . . . . . . (9,000) $54.00
Forfeited . . . . . . . . . . . (27,000) $68.375- $73.125
---------
Balance June 30, 1994 . . . . . . . . . 3,014,750 $54.00 - $73.125
Fiscal 1995:
Granted . . . . . . . . . . . . 718,750 $52.00
Exercised . . . . . . . . . . . (78,900) $54.00 - $68.375
Expired . . . . . . . . . . . . (257,750) $67.375
Forfeited . . . . . . . . . . . (10,700) $52.00 - $73.125
---------
Balance June 30, 1995 . . . . . . . . . 3,386,150 $52.00 - $73.125
=========
Subject to certain exceptions, stock options and tandem stock
appreciation rights, if any, are generally exercisable between one and ten
years after the date of award. Awards outstanding as of June 30, 1995, and the
option prices of those awards were as follows:
Date of Award Awards Outstanding Award Price
- ------------- ------------------ -----------
January 26, 1989. . . . . . . . . . . . . . . . 83,000 $54.00
January 25, 1990. . . . . . . . . . . . . . . . 404,800 $67.375
January 24, 1991. . . . . . . . . . . . . . . . 737,000 $68.375
January 23, 1992. . . . . . . . . . . . . . . . 843,000 $73.125
January 27, 1994. . . . . . . . . . . . . . . . 600,600 $54.375
January 26, 1995. . . . . . . . . . . . . . . . 717,750 $52.00
---------
3,386,150 $52.00-$73.125
=========
Substantially all awards of stock options with tandem stock appreciation
rights have been exercised as stock appreciation rights. In fiscal 1995, the
Company issued 1,643 shares of Common Stock, at an average price of $65.75 per
share, in connection with the exercise of stock appreciation rights.
14. EMPLOYEE STOCK OWNERSHIP PLAN:
The Company sponsors the Savings Plan, a qualified defined contribution
pension plan under which eligible Delta personnel may contribute a portion of
their earnings. The Savings Plan includes an employee stock ownership plan
(ESOP) feature. Subject to certain conditions, the Company contributes to the
ESOP 50% of a participant's contributions to the Savings Plan, up to a maximum
employer contribution of 2% of a participant's earnings.
In connection with the adoption of the ESOP, the Company sold 6,944,450
shares of ESOP Preferred Stock to the Savings Plan for approximately $500
million. The Company has recorded unearned compensation to reflect the value
of ESOP Preferred Stock sold to the ESOP but not yet allocated to participants'
accounts. As shares of the ESOP Preferred Stock are allocated to participants,
compensation expense is recorded and unearned compensation is reduced.
Interest expense on the Guaranteed Serial ESOP Notes is also recorded as an
additional component of ESOP expense.
Effective July 1, 1994, Delta adopted SOP 93-6. Under SOP 93-6, the
compensation and interest components of ESOP costs are reduced by the amount of
dividends accrued on the allocated ESOP Preferred Stock, and only the allocated
ESOP Preferred Stock is considered outstanding in computing primary and fully
diluted earnings per common share. Prior to adoption of SOP 93-6, the
compensation and interest components of ESOP costs were reduced by the amount
of dividends accrued on all ESOP Preferred Stock, and all ESOP Preferred Stock
was considered outstanding for primary and fully diluted earnings per common
share calculations.
The adoption of SOP 93-6 increased reported net income attributable to
common stockholders shown in the Company's
DELTA AIR LINES, INC.
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Consolidated Statements of Operations by $8 million for fiscal 1995 and
increased primary and fully diluted earnings per common share for that period by
$0.16 and $0.28, respectively. The provisions of SOP 93-6 require that it be
adopted prospectively.
Delta recorded compensation and interest expense, made cash
contributions to the ESOP, and incurred actual interest on the Guaranteed
Serial ESOP Notes in fiscal 1995, 1994 and 1993, as follows:
1995 1994 1993
---- ---- ----
(In Millions)
Compensation expense . . . . . . . . . . . . . . . . . $38 $29 $27
Interest expense . . . . . . . . . . . . . . . . . . . 25 20 20
Cash contributions, including
dividends on the ESOP
Preferred Stock . . . . . . . . . . . . . . . . . 47 50 43
Interest on Guaranteed Serial
ESOP Notes . . . . . . . . . . . . . . . . . . . . 28 34 35
15. INCOME TAXES:
Effective July 1, 1992, Delta adopted SFAS 109, which changed the
Company's method of accounting for income taxes from the deferred method to the
liability method. The cumulative effect of adopting SFAS 109 decreased the net
loss for fiscal 1993 by $231 million.
Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and liabilities as
of June 30, 1995 and 1994, are a result of temporary differences related to the
items described as follows:
1995 1994
Deferred Tax Deferred Tax
Assets Liabilities Assets Liabilities
------ ----------- ------ -----------
(In Millions)
Postretirement benefits . . . . . . $ 655 $ - $ 610 $ -
Gains on sale and lease-back
transactions (net) . . . . . . . 344 - 357 -
Alternative minimum tax
credit carryforwards . . . . . . 284 - 185 -
Rent expense . . . . . . . . . . . 174 - 153 -
Other employee benefits . . . . . . 161 - 164 -
Net operating loss
carryforwards . . . . . . . . 122 - 237 -
Spare parts repair expense . . . . 97 - 85 -
Accrued compensation
expense . . . . . . . . . . . 42 - 22 -
Frequent flyer expense . . . . . . 37 - 35 -
Depreciation and amortization . . . - 1,084 - 950
Postemployment benefits . . . . . . - 89 - -
Marketable equity securities . . . - 49 - 31
Other . . . . . . . . . . . . . . . 167 121 170 141
------ ------ ------ ------
$2,083 $1,343 $2,018 $1,122
====== ====== ====== ======
The alternative minimum tax credit carryforwards do not expire; the net
operating loss carryforwards will generally expire in 2008 and 2009 if not
utilized prior to that time.
Management believes, based on the Company's earnings history, the
actions that the Company has already taken and will continue to take to improve
its financial performance, expectations of future taxable income, and other
relevant considerations, that it is more likely than not that future taxable
income will be sufficient to fully utilize the deferred tax assets which
existed at June 30, 1995.
Income taxes (provided) credited in fiscal 1995, 1994 and 1993 consisted
of:
1995 1994 1993
---- ---- ----
(In Millions)
Current taxes . . . . . . . . . . . . . . . . . . $(104) $ 8 $ 25
Deferred taxes . . . . . . . . . . . . . . . . . (99) 227 207
Increase in corporate
statutory rate . . . . . . . . . . . . . . . . - 13 -
Tax benefit of dividends on
allocated ESOP
Preferred Stock . . . . . . . . . . . . . . . 3 2 2
----- ---- ----
(200) 250 234
----- ---- ----
Amortization of investment
tax credits . . . . . . . . . . . . . . . . . - 1 2
----- ---- ----
Income taxes (provided) credited . . . . . . . . $(200) $251 $236
===== ==== ====
Components of the deferred tax (provision) credits are as follows:
1995 1994 1993
---- ---- ----
(In Millions)
Postretirement benefits . . . . . . . . . . . . . . . $ 45 $ 82 $ 48
Gains on sale and leaseback
transactions . . . . . . . . . . . . . . . . . . . (13) (14) 4
Alternative minimum tax
credit carryforwards . . . . . . . . . . . . . . . 99 (8) 114
Rent expense . . . . . . . . . . . . . . . . . . . . 21 11 22
Net operating loss
carryforwards . . . . . . . . . . . . . . . . . . (115) 163 74
Spare parts repair expense . . . . . . . . . . . . . 12 11 12
Accrued compensation expense . . . . . . . . . . . . 20 22 (1)
Depreciation and amortization . . . . . . . . . . . . (134) (93) (117)
Tax accruals . . . . . . . . . . . . . . . . . . . . 14 2 3
Pension expense . . . . . . . . . . . . . . . . . . . 5 12 22
Software development costs . . . . . . . . . . . . . (5) (17) (12)
Inventory . . . . . . . . . . . . . . . . . . . . . . 5 48 (26)
Other, net . . . . . . . . . . . . . . . . . . . . . (53) 8 64
----- ---- -----
$ (99) $227 $ 207
===== ==== =====
DELTA AIR LINES, INC.
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The income tax (provision) credits generated for fiscal 1995, 1994 and
1993 differ from amounts which would result from applying the federal statutory
tax rate to pretax income (loss), as follows:
1995 1994 1993
---- ---- ----
(In Millions)
Income (loss) before income taxes . . . . . . $ 494 $(660) $(651)
Items not deductible for tax purposes:
Meals and entertainment . . . . . . . . . . . 41 16 16
Depreciation and amortization . . . . . . . . 9 9 11
Other, net . . . . . . . . . . . . . . . . . 3 - (8)
----- ----- -----
Adjusted pretax income (loss) . . . . . . . . 547 (635) (632)
Federal statutory tax rate . . . . . . . . . x35% x35% x34%
----- ----- -----
Income tax (provision) credit at
statutory rate . . . . . . . . . . . . . . (191) 222 215
State and other income taxes, net
of federal income tax (provision) credit . (9) 15 19
Benefit due to increase in
corporate statutory tax rate . . . . . . . - 13 -
Amortization of investment
tax credits . . . . . . . . . . . . . . . - 1 2
----- ----- -----
Income taxes (provided) credited . . . . . . $(200) $ 251 $ 236
===== ===== =====
The Company made income tax payments, net of income tax refunds, of $25
million in fiscal 1995 and received income tax refunds, net of cash income tax
payments, of $13 million in fiscal 1994 and $166 million in fiscal 1993.
16. RESTRUCTURING CHARGES:
During fiscal 1993 and 1994, the Company recorded pretax restructuring
charges of $82 million ($1.05 primary and fully diluted per common share) and
$526 million ($6.59 primary and fully diluted per common share), respectively.
These charges are summarized in the table below:
Charges (Credits)
-------------------------------
1993 1994 Total
---- ---- -----
Fleet Simplification . . . . . . $82 $ (24) $ 58
Early Retirement Program . . . . - 112 112
Leadership 7.5 . . . . . . . . . - 438 438
--- ----- ----
Total . . . . . . . . . $82 $ 526 $608
=== ===== ====
The fiscal 1993 fleet simplification program included an $82 million
restructuring charge related to the planned retirement of 21 Airbus A310
aircraft acquired in 1991 in connection with the Company's purchase of certain
assets from Pan Am Corporation and certain of its subsidiaries. The Company
returned 17 of these aircraft to lessors during fiscal 1994, recognizing cash
and noncash costs totaling $28 million and $30 million, respectively, and
reversed $24 million of the restructuring charge due to lower than expected
maintenance costs associated with the return of the 17 aircraft.
During fiscal 1994, the Company recorded restructuring charges totaling
$526 million, which included a $112 million charge primarily for special
termination benefits relating to an early retirement program under which
approximately 1,500 employees elected to retire effective November 1, 1993, and
a $438 million charge for the Company's Leadership 7.5 program announced during
the June 1994 quarter, partially offset by a $24 million reversal related to
the fleet simplification charge discussed above.
The $438 million charge for the Leadership 7.5 program includes $280
million for workforce reductions of approximately 8,700 employees that were
expected to occur during fiscal 1995, including pension plan curtailment losses
of $33 million, special termination benefits of $165 million (for approximately
2,500 employees), and severance payments and related costs of $82 million.
During fiscal 1995, the Company reduced its staffing by approximately 9,200
personnel, which included the transfer of approximately 1,200 employees to
TransQuest and WORLDSPAN. Cash payments in fiscal 1995 for workforce
reductions totaled approximately $30 million, primarily for severance payments,
with the remaining $52 million expected to occur during fiscal 1996. Payments
associated with the curtailment loss and special termination benefits will be
expended as required for funding appropriate pension and other postretirement
plans in future years.
Also included in the $438 million restructuring charge is $158 million
representing cash and noncash costs associated with reductions in inventory
levels, the suspension of service in certain transatlantic markets, and lease
termination costs for facilities to be abandoned as a result of the
restructuring. The Company incurred cash costs of approximately $19 million
for these initiatives during fiscal 1995, and expects to incur approximately $38
million in cash costs during fiscal 1996.
Actual costs incurred for certain amounts accrued, realization on the
sales of excess inventories, and costs associated with lease terminations and
abandoned facilities may vary from current estimates. The appropriate accrued
liability will be adjusted upon completion of these activities.
DELTA AIR LINES, INC.
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17. FOREIGN OPERATIONS:
Delta conducts operations in various foreign countries, principally in
North America, Europe, the Middle East and Asia. Operating revenues from
foreign operations were approximately $2.6 billion in fiscal 1995, $2.5 billion
in fiscal 1994 and $2.3 billion in fiscal 1993.
18. QUARTERLY FINANCIAL DATA (UNAUDITED):
The following is a summary of the unaudited quarterly results of
operations for fiscal 1995 and 1994 (in millions, except per share data):
Three Months Ended
------------------
Sept. 30 Dec. 31 Mar. 31 June 30
-------- ------- ------- -------
Fiscal 1995
- -----------
Operating revenues . . . . . . . . $ 3,157 $ 2,919 $ 2,902 $ 3,216
========== ========== ========= ==========
Operating income . . . . . . . . . $ 154 $ 18 $ 40 $ 449
========== ========== ========= ==========
Income (loss) before
cumulative effect of
accounting changes . . . . . . . $ 72 $ (18) $ (11) $ 251
Cumulative effect of
accounting changes, net of tax $ 114 $ - $ - $ -
---------- ---------- --------- ----------
Net income (loss) . . . . . . . . . $ 186 $ (18) $ (11) $ 251
========== ========== ========= ==========
Primary income (loss)
per common share:
Before cumulative
effect of accounting
changes . . . . . . . . . . . . $ 1.00 $ (0.79) $ (0.66) $ 4.49
Cumulative effect
of accounting
changes . . . . . . . . . . . . . 2.25 - - -
---------- ---------- --------- ----------
$ 3.25 $ (0.79) $ (0.66) $ 4.49
========== ========== ========= ==========
Fully diluted income
(loss) per common share:
Before cumu-
lative effect of
accounting changes . . . . . . $ 0.99 $ (0.79) $ (0.66) $ 3.21
Cumulative effect
of accounting changes . . . . . . 1.43 - - -
---------- ---------- --------- ----------
$ 2.42 $ (0.79) $ (0.66) $ 3.21
========== ========== ========= ==========
Fiscal 1994
- -----------
Operating revenues . . . . . . . . $ 3,138 $ 2,952 $ 2,878 $ 3,109
========== ========== ========= ==========
Operating income (loss) . . . . . . $ 121 $ (180) $ (67) $ (321)
========== ========== ========= ==========
Net income (loss) . . . . . . . . . $ 60 $ (141) $ (78) $ (250)
========== ========== ========= ==========
Primary and fully diluted
income (loss)
per common share . . . . . . . . $ 0.65 $ (3.36) $ (2.10) $ (5.50)
========== ========== ========= ==========
Operating expenses for the June 1994 quarter include a $414 million
restructuring charge for costs associated with Leadership 7.5 initiatives.
Operating expenses for the December 1993 quarter include a $112 million
restructuring charge for costs associated with the early retirement of
approximately 1,500 employees who elected to retire effective November 1, 1993.
(See Note 16.)
DELTA AIR LINES, INC.
39
29
REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
ARTHUR ANDERSEN LLP
To the Stockholders and the Board of Directors of
Delta Air Lines, Inc.:
We have audited the accompanying consolidated balance sheets of Delta
Air Lines, Inc. (a Delaware corporation) and subsidiaries as of June 30, 1995
and 1994, and the related consolidated statements of operations, cash flows and
stockholders' equity for each of the three years in the period ended June 30,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Delta Air Lines,
Inc. and subsidiaries as of June 30, 1995 and 1994 and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 1995, in conformity with generally accepted accounting principles.
As discussed in Notes 14 and 10 in the Notes to Consolidated Financial
Statements, effective July 1, 1994, the Company changed its methods of
accounting for employee stock ownership plans and postemployment benefits. As
discussed in Note 2 in the Notes to Consolidated Financial Statements,
effective June 30, 1994, the Company changed its method of accounting for
certain debt and equity securities. As discussed in Notes 15 and 10 in the
Notes to Consolidated Financial Statements, effective July 1, 1992, the Company
changed its methods of accounting for income taxes and postretirement benefits
other than pensions.
/s/ Arthur Andersen LLP
Atlanta, Georgia
August 18, 1995
REPORT OF MANAGEMENT
The integrity and objectivity of the information presented in this
Annual Report are the responsibility of Delta management. The financial
statements contained in this report have been audited by Arthur Andersen LLP,
independent public accountants, whose report appears on this page.
Delta maintains a system of internal financial controls which are
independently assessed on an ongoing basis through a program of internal
audits. These controls include the selection and training of the Company's
managers, organizational arrangements that provide a division of
responsibilities, and communication programs explaining the Company's policies
and standards. We believe that this system provides reasonable assurance that
transactions are executed in accordance with management's authorization; that
transactions are appropriately recorded to permit preparation of financial
statements that, in all material respects, are presented in conformity with
generally accepted accounting principles; and that assets are properly
accounted for and safeguarded against loss from unauthorized use.
The Board of Directors pursues its responsibilities for these financial
statements through its Audit Committee, which consists solely of directors who
are neither officers nor employees of the Company. The Audit Committee meets
periodically with the independent public accountants, the internal auditors and
representatives of management to discuss internal accounting control, auditing
and financial reporting matters.
/s/ Thomas J. Roeck, Jr. /s/ Ronald W. Allen
THOMAS J. ROECK, JR. RONALD W. ALLEN
Senior Vice President - Finance and Chairman of the Board, President
Chief Financial Officer and Chief Executive Officer
DELTA AIR LINES, INC.
40
30
CONSOLIDATED SUMMARY
OF OPERATIONS
(In millions, except per share data)
For the years ended June 30
1995(1) 1994(2) 1993(3) 1992
- ----------------------------------------------------------------------------------------------------------
Operating revenues . . . . . . . . . . . $ 12,194 $ 12,077 $ 11,657 $ 10,837
Operating expenses . . . . . . . . . . . 11,533 12,524 12,232 11,512
----------- ----------- ----------- -----------
Operating income (loss) . . . . . . . . . 661 (447) (575) (675)
Interest expense, net . . . . . . . . . . (262) (271) (177) (151)
Gain (loss) on disposition of flight
equipment . . . . . . . . . . . . . . . - 2 65 35
Miscellaneous income, net(4). . . . . . . 95 56 36 5
----------- ----------- ----------- -----------
Income (loss) before income taxes . . . . 494 (660) (651) (786)
Income taxes (provided) credited . . . . (200) 250 233 271
Amortization of investment tax credits. . - 1 3 9
----------- ----------- ----------- -----------
Net income (loss) . . . . . . . . . . . . 294 (409) (415) (506)
Preferred stock dividends . . . . . . . . (88) (110) (110) (19)
----------- ----------- ----------- -----------
Net income (loss) attributable to
common stockholders . . . . . . . . . . $ 206 $ (519) $ (525) $ (525)
=========== =========== =========== ===========
Net income (loss) per common
share:
Primary . . . . . . . . . . . . . $ 4.07 $ (10.32) $ (10.54) $ (10.60)
=========== =========== =========== ===========
Fully diluted . . . . . . . . . . $ 4.01 $ (10.32) $ (10.54) $ (10.60)
=========== =========== =========== ===========
Dividends declared on common stock . . . $ 10 $ 10 $ 35 $ 59
Dividends declared per common share . . . $ 0.20 $ 0.20 $ 0.70 $ 1.20
OTHER FINANCIAL AND
STATISTICAL DATA
(Dollar amounts in millions)
For the years ended June 30
1995 1994(2) 1993(3) 1992
- ----------------------------------------------------------------------------------------------------------
Total assets . . . . . . . . . . . . . . $ 12,143 $ 11,896 $ 11,871 $ 10,162
Long-term debt and capital leases
(excluding current maturities) . . . . $ 3,121 $ 3,228 $ 3,716 $ 2,833
Stockholders' equity . . . . . . . . . . $ 1,827 $ 1,467 $ 1,913 $ 1,894
Shares of common stock outstanding
at year end . . . . . . . . . . . . . . 50,816,010 50,453,272 50,063,841 49,699,098
Revenue passengers enplaned
(thousands) . . . . . . . . . . . . . . 88,893 87,399 85,085 77,038
Available seat miles (millions) . . . . . 130,525 131,780 132,282 123,102
Revenue passenger miles (millions) . . . 86,355 85,206 82,406 72,693
Operating revenue per available seat
mile . . . . . . . . . . . . . . . . . 9.34c. 9.16c. 8.81c. 8.80c.
Passenger mile yield . . . . . . . . . . 13.09c. 13.21c. 13.23c. 13.91c.
Operating cost per available seat mile. . 8.84c. 9.50c. 9.25c 9.35c.
Passenger load factor . . . . . . . . . . 66.16% 64.66% 62.30% 59.05%
Breakeven passenger load factor . . . . . 62.29% 67.23% 65.58% 62.99%
Available ton miles (millions) . . . . . 18,150 18,302 18,182 16,625
Revenue ton miles (millions) . . . . . . 10,142 9,911 9,503 8,361
Cost per available ton mile . . . . . . . 63.55c. 68.43c. 67.27c. 69.24c.
(1) Summary of operations excludes $114 million after-tax
cumulative effect of change in accounting standards ($2.25
primary and $1.42 fully diluted earnings per common share).
(2) Summary of operations and other financial and statistical data
include $526 million in pretax restructuring charges
($6.59 after-tax per common share).
(3) Summary of operations and other financial and statistical data
include $82 million pretax restructuring charge ($1.05 after-tax
per common share). Summary of operations excludes $587 million
after-tax cumulative effect of changes in accounting standards
($11.78 after-tax per common share).
(4) Includes interest income.
DELTA AIR LINES, INC.
42
31
1991 1990 1989 1988 1987 1986 1985
- ---------------------------------------------------------------------------------------------------------------------
$ 9,171 $ 8,583 $ 8,089 $ 6,915 $ 5,318 $ 4,460 $ 4,684
9,621 8,163 7,411 6,418 4,913 4,426 4,318
- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(450) 420 678 497 405 34 366
(97) (27) (39) (65) (62) (55) (62)
17 18 17 (1) 96 16 94
30 57 55 25 8 8 7
- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(500) 468 711 456 447 3 405
163 (187) (279) (181) (219) 2 (187)
13 22 29 32 36 42 41
- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(324) 303 461 307 264 47 259
(19) (18) - - - - -
- ----------- ----------- ----------- ----------- ----------- ----------- -----------
$ (343) $ 285 $ 461 $ 307 $ 264 $ 47 $ 259
=========== =========== =========== =========== =========== =========== ===========
$ (7.73) $ 5.79 $ 9.37 $ 6.30 $ 5.90 $ 1.18 $ 6.50
=========== =========== =========== =========== =========== =========== ===========
$ (7.73) $ 5.28 $ 9.37 $ 6.30 $ 5.90 $ 1.18 $ 6.50
=========== =========== =========== =========== =========== =========== ===========
$ 54 $ 85 $ 59 $ 59 $ 44 $ 40 $ 28
$ 1.20 $ 1.70 $ 1.20 $ 1.20 $ 1.00 $ 1.00 $ 0.70
1991 1990 1989 1988 1987 1986 1985
- ---------------------------------------------------------------------------------------------------------------------
$ 8,411 $ 7,227 $ 6,484 $ 5,748 $ 5,342 $ 3,785 $ 3,627
$ 2,059 $ 1,315 $ 703 $ 729 $ 1,018 $ 869 $ 535
$ 2,457 $ 2,596 $ 2,620 $ 2,209 $ 1,938 $ 1,302 $ 1,287
49,401,779 46,086,110 49,265,884 49,101,271 48,639,469 40,116,383 39,958,467
69,127 67,240 64,242 58,565 48,173 39,582 39,341
104,328 96,463 90,742 85,834 69,014 53,336 51,637
62,086 58,987 55,904 49,009 38,415 30,123 29,062
8.79c. 8.90c. 8.91c. 8.06c. 7.71c. 8.36c. 9.07c.
13.80c. 13.63c. 13.56c. 13.15c. 12.81c. 13.72c. 15.06c.
9.22c. 8.46c. 8.17c. 7.48c. 7.12c. 8.30c. 8.36c.
59.51% 61.15% 61.61% 57.10% 55.66% 56.48% 56.28%
62.64% 57.96% 56.09% 52.69% 51.09% 56.01% 51.57%
13,825 12,500 11,725 11,250 9,000 6,934 6,668
7,104 6,694 6,338 5,557 4,327 3,372 3,275
69.59c. 65.30c. 63.21c. 57.05c. 54.60c. 63.82c. 64.76c.
DELTA AIR LINES, INC.
43
32
STOCKHOLDER
INFORMATION
TRANSFER AGENT, REGISTRAR AND DIVIDEND PAYING AGENT FOR SERIES C CONVERTIBLE
PREFERRED STOCK AND COMMON STOCK
Registered stockholder inquiries regarding stock transfers, address changes,
lost stock certificates, dividend payments, or account consolidations should be
directed to the following address or phone number:
First Chicago Trust Company of New York
P. O. Box 2500
Jersey City, New Jersey 07303-2500
Telephone (201) 324-0498
DIVIDEND REINVESTMENT AND
STOCK PURCHASE PLAN
Registered holders of Common Stock may purchase additional shares of such stock
through automatic dividend reinvestment or cash contributions under the
Company's Dividend Reinvestment and Stock Purchase Plan. Inquiries, notices,
requests and other communications regarding participation in the plan should be
directed to:
First Chicago Trust Company of New York
P.O. Box 2598
Jersey City, New Jersey 07303-2598
Telephone (201) 324-0498
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
133 Peachtree Street, N.E.
Atlanta, Georgia 30303
ANNUAL MEETING
The Annual Meeting of Stockholders will be held on Thursday, October 26, 1995,
at 9:00 a.m., local time, in the Thomas B. Murphy Ballroom of the Georgia World
Congress Center, 285 International Boulevard, N.W., Atlanta, Georgia.
AVAILABILITY OF FORM 10-K AND
OTHER FINANCIAL INFORMATION
A copy of the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1995, will be provided without charge upon written request. Requests
for other financial documents may also be directed to:
Delta Air Lines, Inc.
Investor Relations, Department 829
P.O. Box 20706
Atlanta, Georgia 30320-6001
Telephone (404) 715-2391
Telephone inquiries related to financial information, other than requests for
financial documents, may be directed to Delta Investor Relations at (404)
715-6679.
COMMON STOCK AND DEPOSITARY SHARES REPRESENTING SERIES C CONVERTIBLE
PREFERRED STOCK
Listed on the New York Stock Exchange under the ticker symbol DAL
NUMBER OF STOCKHOLDERS
As of August 11, 1995, there were 24,628 registered holders of Common Stock.
MARKET PRICES AND DIVIDENDS
Market Price Range of Cash
Common Stock on Dividends Per
Fiscal Year 1995 New York Stock Exchange Common Share
- -----------------------------------------------------------------
Quarter Ended: High Low
September 30 . . . . . $50 1/4 $43 1/2 $0.05
December 31 . . . . . . 53 42 3/4 0.05
March 31 . . . . . . . 64 50 1/4 0.05
June 30 . . . . . . . . 75 3/8 58 1/4 0.05
Fiscal Year 1994
- -----------------------------------------------------------------
Quarter Ended: High Low
September 30 . . . . . $56 $45 7/8 $0.05
December 31 . . . . . . 61 1/8 52 0.05
March 31 . . . . . . . 57 7/8 43 7/8 0.05
June 30 . . . . . . . . 47 3/4 39 1/2 0.05
DELTA AIR LINES, INC.
44
33
GRAPHICS APPENDIX LIST
EDGAR Version Typeset Version
- --------------------------------------- ---------------------------------------
1995 Form 10-K, Exhibit 13 -- (Selected 1995 Form 10-K, Exhibit 13 -- (Selected
Portions of Delta's 1995 Annual Report Portions of Delta's 1995
to Stockholders) Annual Report to Stockholders).
Page 6 -- One pie chart and one Page 6 -- One pie chart showing the percent of
bar chart omitted Delta's Domestic RPM's Competitive with Low-Fare
Carriers. One bar chart depicting Leadership 7.5
Targets Operating Cost/ASM in cents. (The text
and numbers used in these charts appear in the text
of the EDGAR Version).
Page 9 -- One bar chart omitted Page 9 -- One bar chart depicting Capital Expenditures (in
millions of dollars) (Flight Equipment, including Leased
Aircraft, and Ground Property and Equipment).
Page 10 -- One bar chart omitted Page 10 -- One bar chart depicting Primary Earnings (Loss) Per
Common Share in dollars. (The text and numbers used in
this chart appear in the text of the EDGAR Version).
Page 11 -- One pie chart omitted Page 11 -- One pie chart depicting 1995 Distribution of
Operating Revenues. (The text and numbers used in this
chart appears in the text of the EDGAR Version).
Page 12 -- One pie chart omitted Page 12 -- One pie chart depicting 1995 Operating Expenses as a
percent of Total Operating Expenses. (The text and
numbers used in this chart appears in the test of the
EDGAR Version).
Page 14 -- One bar chart omitted Page 14 -- One bar chart depicting Invested Capital (in millions
of dollars) (Stockholders' Equity and Long-Term Debt and
Capital Leases). (The text and numbers used in this chart appears
in the text of the EDGAR Version).