-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, qTZwSk1+OK3NSN+WBhRV2+9DDq1w2ovJYhoXvZud87FX8pDesPbwbxzsaG08RuWV D1pfGC6Zt+IsP5cueh2y2A== 0000950109-94-000232.txt : 19940215 0000950109-94-000232.hdr.sgml : 19940215 ACCESSION NUMBER: 0000950109-94-000232 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DELTA AIR LINES INC /DE/ CENTRAL INDEX KEY: 0000027904 STANDARD INDUSTRIAL CLASSIFICATION: 4512 IRS NUMBER: 580218548 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 34 SEC FILE NUMBER: 001-05424 FILM NUMBER: 94507176 BUSINESS ADDRESS: STREET 1: HARTSFIELD ATLANTA INTL AIRPORT STREET 2: 1030 DELTA BLVD CITY: ATLANTA STATE: GA ZIP: 30320-6001 BUSINESS PHONE: 4047152600 MAIL ADDRESS: STREET 1: 1030 DELTA BLVD STREET 2: DEPT 971 CITY: ATLANTA STATE: GA ZIP: 30320-6001 FORMER COMPANY: FORMER CONFORMED NAME: DELTA AIR CORP DATE OF NAME CHANGE: 19660908 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended December 31, 1993 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-5424 DELTA AIR LINES, INC. State of Incorporation: Delaware IRS Employer Identification No.: 58-0218548 Hartsfield Atlanta International Airport, Atlanta, Georgia 30320 Telephone: (404) 715-2600 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ------- Number of shares outstanding by each class of common stock, as of January 31, 1994: Common Stock, $3.00 par value - 50,275,961 shares outstanding PART I. FINANCIAL INFORMATION Item 1. Financial Statements - ---------------------------- DELTA AIR LINES, INC. Consolidated Balance Sheets (Unaudited)
December 31 June 30 ASSETS 1993 1993 - ---------------------------------------------------------------- (In Thousands) CURRENT ASSETS: Cash and cash equivalents $1,096,411 $1,180,364 Accounts and notes receivable, net 961,075 1,024,869 Refundable income taxes 30,041 29,936 Maintenance and operating supplies 80,450 90,593 Deferred income taxes 177,606 173,224 Prepaid expenses and other 228,297 322,934 ----------- ----------- Total current assets 2,573,880 2,821,920 ----------- ----------- PROPERTY AND EQUIPMENT: Flight equipment owned 9,191,640 9,042,876 Less: Accumulated depreciation 3,725,280 3,559,084 ----------- ----------- 5,466,360 5,483,792 ----------- ----------- Flight equipment under capital leases 173,284 173,284 Less: Accumulated amortization 135,540 128,572 ----------- ----------- 37,744 44,712 ----------- ----------- Ground property and equipment 2,440,018 2,372,587 Less: Accumulated depreciation 1,233,392 1,143,087 ----------- ----------- 1,206,626 1,229,500 ----------- ----------- Advance payments for equipment 287,057 382,741 ----------- ----------- 6,997,787 7,140,745 ----------- ----------- OTHER ASSETS: Marketable equity securities, net 266,504 265,124 Deferred income taxes 597,136 504,645 Investments in associated companies 212,166 202,176 Cost in excess of net assets acquired 287,217 291,579 Leasehold and operating rights, net 273,625 305,801 Other 391,976 339,033 ----------- ----------- 2,028,624 1,908,358 ----------- ----------- $11,600,291 $11,871,023 =========== ===========
The accompanying notes are an integral part of these balance sheets. -2- DELTA AIR LINES, INC. Consolidated Balance Sheets (Unaudited)
December 31 June 30 LIABILITIES AND STOCKHOLDERS' EQUITY 1993 1993 - ------------------------------------------------------------------------------- (In Thousands) CURRENT LIABILITIES: Current maturities of long-term debt $ 34,256 $ 34,843 Current obligations under capital leases 11,962 12,307 Short-term notes payable 163,500 - Accounts payable and accrued liabilities 1,275,807 1,382,304 Air traffic liability 939,722 1,189,883 Vacation liability 208,935 194,174 Accrued rent 210,327 200,471 Accrued income taxes 14,778 4,849 ----------- ----------- Total current liabilities 2,859,287 3,018,831 ----------- ----------- NONCURRENT LIABILITIES: Long-term debt 3,343,917 3,619,473 Postretirement benefits 1,514,970 1,381,347 Capital leases 88,939 97,199 Accrued rent 488,669 439,871 Other 309,524 222,512 ----------- ----------- 5,746,019 5,760,402 ----------- ----------- DEFERRED CREDITS: Deferred gain on sale and leaseback transactions 1,009,713 990,703 Manufacturers credits 95,575 103,395 Unamortized investment tax credits 666 1,432 Other 547 834 ----------- ----------- 1,106,501 1,096,364 ----------- ----------- COMMITMENTS AND CONTINGENCIES (Notes 5 and 7) 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 6,896,294 shares at December 31, 1993 and 6,913,171 shares at June 30, 1993 496,529 497,740 Less: Unearned compensation under employee stock ownership plan 393,116 415,419 ----------- ----------- 103,413 82,321 ----------- ----------- STOCKHOLDERS' EQUITY: Series C Convertible Preferred Stock, $1.00 par value, $50,000 liquidation preference; issued and outstanding 23,000 shares at December 31, 1993 and June 30, 1993 23 23 Common stock, $3.00 par value; Authorized, 150,000,000 shares; issued 54,460,571 shares at December 31, 1993 and 54,450,286 shares at June 30, 1993 163,382 163,351 Additional paid-in capital 2,012,406 2,011,879 Retained earnings (deficit) (102,613) 35,907 Less: Net unrealized loss on noncurrent marketable equity securities - 855 Less: Treasury stock at cost, 4,252,709 shares at December 31, 1993 and 4,386,445 shares at June 30, 1993 288,127 297,200 ----------- ----------- 1,785,071 1,913,105 ----------- ----------- $11,600,291 $11,871,023 =========== ===========
The accompanying notes are an integral part of these balance sheets. -3- DELTA AIR LINES, INC. Consolidated Statements of Operations (Unaudited)
Three Months Ended December 31 ---------------------------------- 1993 1992 * ----------- ----------- (In Thousands) OPERATING REVENUES: Passenger $ 2,742,064 $ 2,636,456 Cargo 206,252 180,752 Other, net 68,535 57,337 ----------- ----------- Total operating revenues 3,016,851 2,874,545 ----------- ----------- OPERATING EXPENSES: Salaries and related costs 1,145,375 1,206,943 Aircraft fuel 371,973 405,029 Passenger commissions 314,944 287,896 Aircraft rent 187,024 180,919 Depreciation and amortization 172,306 189,814 Passenger service 130,808 132,048 Aircraft maintenance materials and repairs 98,028 110,959 Facilities and other rent 93,557 86,176 Landing fees 61,313 61,127 Restructuring charge 112,288 - Other 509,391 440,790 Total operating ----------- ----------- expenses 3,197,007 3,101,701 ----------- ----------- Loss from operations 180,156 227,156 ----------- ----------- OTHER INCOME (EXPENSE): Interest expense (75,554) (55,932) Less - Interest capitalized 8,699 18,036 ----------- ----------- (66,855) (37,896) Gain on disposition of flight equipment 398 31,009 Miscellaneous income, net 21,597 7,683 ----------- ----------- (44,860) 796 ----------- ----------- LOSS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 225,016 226,360 INCOME TAXES CREDITED 83,628 81,193 AMORTIZATION OF INVESTMENT TAX CREDITS 348 779 ----------- ----------- LOSS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES 141,040 144,388 CUMULATIVE EFFECT OF ACCOUNTING CHANGES, NET OF TAX - - ----------- ----------- NET LOSS 141,040 144,388 PREFERRED STOCK DIVIDENDS 27,594 27,597 ----------- ----------- NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 168,634 $ 171,985 =========== =========== PRIMARY AND FULLY DILUTED PER SHARE AMOUNTS: Loss before cumulative effect of accounting changes $3.36 $3.46 Cumulative effect of accounting changes - - ----------- ----------- $3.36 $3.46 =========== =========== WEIGHTED AVERAGE SHARES USED IN PER SHARE COMPUTATION 50,206,054 49,732,137 ----------- ----------- DIVIDENDS PAID PER COMMON SHARE $0.05 $0.30 =========== ===========
The accompanying notes are an integral part of these statements. * Restated as described in Note 1. -4- DELTA AIR LINES, INC. Statistical Summary (Unaudited)
Three Months Ended December 31 ---------------------------------- 1993 1992 * ----------- ----------- Revenue Plane Miles (000) 184,762 184,519 Available Seat Miles (000) 32,769,641 32,840,778 Available Ton Miles (000) 4,555,554 4,505,680 Revenue Passengers Enplaned 21,682,271 20,307,255 Revenue Passenger Miles (000) 20,675,683 19,429,074 Cargo Ton Miles (000) 374,297 334,284 Revenue Ton Miles (000) 2,444,418 2,279,092 Passenger Load Factor 63.09% 59.16% Breakeven Load Factor 67.24% 64.26% Fuel Gallons Consumed (000) 633,630 627,564 Average Price Per Fuel Gallon 58.71(c) 64.54(c) Cost Per Available Seat Mile 9.76(c) 9.44(c) Cost Per Available Seat Mile - Excluding Restructuring Charge 9.41(c) 9.44(c) Passenger Mile Yield 13.26(c) 13.57(c)
* Restated as described in Note 1. -5- DELTA AIR LINES, INC. Consolidated Statements of Operations (Unaudited)
Six Months Ended December 31 ---------------------------------- 1993 1992 * (In Thousands) ----------- ----------- OPERATING REVENUES: Passenger $ 5,719,750 $ 5,469,078 Cargo 381,427 352,570 Other, net 135,517 116,891 ----------- ----------- Total operating revenues 6,236,694 5,938,539 ----------- ----------- OPERATING EXPENSES: Salaries and related costs 2,306,762 2,424,710 Aircraft fuel 754,920 842,771 Passenger commissions 662,437 625,651 Aircraft rent 377,438 359,228 Depreciation and amortization 338,021 379,980 Passenger service 271,328 291,365 Aircraft maintenance materials and repairs 202,775 239,352 Facilities and other rent 185,795 179,998 Landing fees 129,892 131,993 Restructuring charge 112,288 - Other 953,655 885,387 Total operating ----------- ----------- expenses 6,295,311 6,360,435 ----------- ----------- Loss from operations 58,617 421,896 ----------- ----------- OTHER INCOME (EXPENSE): Interest expense (153,316) (113,442) Less - Interest capitalized 18,306 37,211 ----------- ----------- (135,010) (76,231) Gain on disposition of flight equipment 1,412 50,362 Miscellaneous income, net 46,005 24,836 ----------- ----------- (87,593) (1,033) ----------- ----------- LOSS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 146,210 422,929 INCOME TAXES CREDITED 64,753 151,701 AMORTIZATION OF INVESTMENT TAX CREDITS 766 1,645 ----------- ----------- LOSS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES 80,691 269,583 CUMULATIVE EFFECT OF ACCOUNTING CHANGES, NET OF TAX - 587,144 ----------- ----------- NET LOSS 80,691 856,727 PREFERRED STOCK DIVIDENDS 55,182 55,209 ----------- ----------- NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 135,873 $ 911,936 =========== =========== PRIMARY AND FULLY DILUTED PER SHARE AMOUNTS: Loss before cumulative effect of accounting changes $2.71 $6.53 Cumulative effect of accounting changes - 11.81 ----------- ----------- $2.71 $18.34 =========== =========== WEIGHTED AVERAGE SHARES USED IN PER SHARE COMPUTATION 50,188,078 49,724,667 DIVIDENDS PAID PER COMMON SHARE $0.10 $0.60 =========== ===========
The accompanying notes are an integral part of these statements. * Restated as described in Note 1. -6- DELTA AIR LINES, INC. Statistical Summary (Unaudited)
Six Months Ended December 31 ---------------------------------- 1993 1992 * ----------- ----------- Revenue Plane Miles (000) 378,647 376,262 Available Seat Miles (000) 67,595,707 66,957,071 Available Ton Miles (000) 9,388,421 9,195,326 Revenue Passengers Enplaned 44,213,977 44,267,140 Revenue Passenger Miles (000) 43,675,310 43,221,759 Cargo Ton Miles (000) 686,725 634,677 Revenue Ton Miles (000) 5,059,479 4,960,785 Passenger Load Factor 64.61% 64.55% Breakeven Load Factor 65.27% 69.53% Fuel Gallons Consumed (000) 1,302,982 1,288,843 Average Price Per Fuel Gallon 57.94(c) 65.39(c) Cost Per Available Seat Mile 9.31(c) 9.50(c) Cost Per Available Seat Mile - Excluding Restructuring Charge 9.15(c) 9.50(c) Passenger Mile Yield 13.10(c) 12.65(c)
* Restated as described in Note 1. -7- DELTA AIR LINES, INC. Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended December 31 ------------------------ 1993 1992 * ---------- ----------- (In Thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (80,691) $ (856,727) Adjustments to reconcile net loss to cash provided by operating activities: Cumulative effect of accounting changes - 587,144 Depreciation and amortization 338,021 379,980 Deferred income taxes (88,532) (133,103) Amortization of investment tax credits (766) (1,645) Amortization of deferred gain on sale and leaseback transactions (29,425) (28,007) Gain on disposition of flight equipment (1,412) (50,362) Rental expense in excess of payments 58,654 54,974 Pension expense in excess of funding 662 22,346 Compensation under ESOP 18,338 16,425 Postretirement benefits 133,623 64,512 Changes in certain assets and liabilities: Decrease in receivables 63,689 425,868 Decrease in other current assets 100,398 26,453 Decrease in air traffic liability (250,161) (295,941) Decrease in accounts payable and accrued liabilities (106,497) (36,598) Increase in other payables 24,690 32,581 Increase in other noncurrent liabilities 86,350 15,337 Other, net 30,264 (14,182) ---------- ----------- Net cash provided by operating activities 297,205 209,055 ---------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Property and equipment additions: Flight equipment, including advance payments (844,797) (754,429) Ground property and equipment (86,062) (84,640) Proceeds from sale of flight equipment 93,228 63,806 ---------- ----------- Net cash used in investing activities (837,631) (775,263) ---------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of preferred stock, net - 1,126,000 Issuance of common stock 433 897 Long-term borrowings 224,500 175,000 Net short-term borrowings (repayments) 163,500 (175,803) Payments on long-term debt and capital lease obligations (520,606) (511,410) Cash dividends (60,165) (78,321) Proceeds from sale and leaseback transactions 648,811 290,000 ---------- ----------- Net cash provided by financing activities 456,473 826,363 ---------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (83,953) 260,155 Cash and cash equivalents at beginning of period 1,180,364 50,413 ---------- ----------- Cash and cash equivalents at end of period $1,096,411 $ 310,568 ========== =========== The accompanying notes are an integral part of these statements.
* Restated as described in Note 1. -8- DELTA AIR LINES, INC. Notes to Condensed Consolidated Financial Statements December 31, 1993 (Unaudited) 1. ACCOUNTING AND REPORTING POLICIES: The Company's accounting and reporting policies are summarized in Note 1 (page 25) of the Notes to Consolidated Financial Statements in Delta's 1993 Annual Report to Stockholders. These interim financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's 1993 Annual Report to Stockholders. Certain amounts for fiscal 1993 have been reclassified to conform with the current financial statement presentation. In the opinion of management, the accompanying unaudited financial statements reflect all adjustments, consisting of normal recurring accruals, except with respect to a restructuring charge as discussed in Note 8, necessary for a fair statement of results for the interim periods. Effective July 1, 1992, Delta 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). The accompanying financial statements have been restated to reflect the adoption of SFAS 106 and SFAS 109 as of July 1, 1992. Effective April 1, 1993, the Company changed its depreciation policy for substantially all of its flight equipment from a straight-line 15-year period, 10% residual value to a straight-line 20-year period, 5% residual value. Also effective April 1, 1993, the Company increased the expected annual return on plan assets associated with defined benefit pension plans from 9% to 10%. 2. STOCKHOLDERS' EQUITY: During the December 1993 quarter, the Company issued 3,410 common shares, at an average price of $56.24 per share, under the Dividend Reinvestment and Stock Purchase Plan and 2,065 common shares, at $60.63 per share, under the 1989 Stock Incentive Plan. Also during the December 1993 quarter, the Company transferred to its treasury 1,293 common shares, at an average price of $58.74 per share, under the 1989 Stock Incentive Plan. At December 31, 1993, 5,922,809 common shares were reserved for issuance under the 1989 Stock Incentive Plan; 5,915,641 common shares were reserved for conversion of the Series B ESOP -9- Convertible Preferred Stock; 17,490,494 common shares were reserved for conversion of the Series C Convertible Preferred Stock; and 10,149,072 common shares were reserved for conversion of the 3.23% Convertible Subordinated Notes due 2003. 3. MARKETABLE EQUITY SECURITIES: The Company's investments in Singapore Airlines Limited (Singapore Airlines) and Swissair, Swiss Air Transport Company Ltd. (Swissair) are accounted for under the cost method and are carried at aggregate cost or market value, whichever is lower. At December 31, 1993, the gross unrealized gain on the Company's investment in Singapore Airlines was approximately $115.0 million and the gross unrealized loss on the Company's investment in Swissair was approximately $30.2 million. Since the aggregate market value of these investments exceeds their aggregate cost by $84.8 million, these investments are carried at December 31, 1993 at their aggregate cost of $266.5 million. 4. INCOME TAXES: Income taxes are credited at the estimated annual effective tax rate, which differs from the federal statutory rate of 35%, primarily due to state income taxes and purchase accounting adjustments not deductible for income tax purposes. The Company made tax payments in excess of refunds received of $18.2 million during the six months ended December 31, 1993, and received tax refunds in excess of cash income tax payments of $160.4 million during the six months ended December 31, 1992. 5. CONTINGENCIES: On March 6, 1992, Pan Am Corporation and certain of its subsidiaries, debtors-in-possession under the Bankruptcy Code (Pan Am), and the Official Committee of Unsecured Creditors of Pan Am (Creditors Committee), together with the Ad Hoc Committee of Administrative and Priority Creditors of Pan Am, filed a consolidated amended complaint (Complaint) in the United States Bankruptcy Court for the Southern District of New York (Bankruptcy Court) against Delta relating to Delta's participation in Pan Am's proposed plan of reorganization. The Complaint alleges, among other things, that Delta breached its contractual obligations and promises to participate in the plan of reorganization; violated its duty of good faith and fair dealing; breached its fiduciary duties to Pan Am and its creditors; and acted in bad faith. The plaintiffs are seeking to disallow, or to subordinate to the claims of Pan Am's general unsecured creditors, all claims Delta may have against Pan Am, including the repayment of the $115 million principal amount of debtor-in-possession financing Delta provided to Pan Am; to -10- impose a constructive trust for the benefit of Pan Am's creditors on the profits Delta receives or should have received from the assets Delta purchased from Pan Am under the asset purchase agreement dated July 27, 1991, as amended; to recover at least $2.5 billion in compensatory damages plus punitive damages, costs and attorneys' fees; and to obtain such other relief as the Bankruptcy Court deems appropriate. In addition, the Creditors Committee is seeking, independently and in its own right, unspecified compensatory and punitive damages for, among other things, loss of its potential equity interest in, and loss of employment by Pan Am employees with, a reorganized Pan Am. Several other lawsuits have been filed against Delta relating to its participation in Pan Am's proposed plan of reorganization. Delta believes that it complied with all of its obligations to Pan Am and the Creditors Committee and that the actions filed against it are without merit, and it intends to defend these matters vigorously. 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. The Company is also a defendant in certain legal actions relating to alleged employment discrimination practices, other matters concerning past and present employees, environmental issues and other matters concerning the Company's business. Given the unsettled status of the law in many of the areas involved, the ultimate outcome of these matters cannot be predicted with certainty. Although the ultimate outcome of these matters 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. 6. LONG-TERM DEBT: During the December 1993 quarter, the Company issued $219.0 million aggregate principal amount of its Medium-Term Notes, Series B, at interest rates ranging from 7.79% to 8.63% per annum and with maturities ranging from approximately five to twelve years. At December 31, 1993, there were no borrowings outstanding under the Company's 1991 and 1992 Bank Credit Agreements. On August 12, 1993, the Company obtained, and there is currently outstanding, a letter of credit under the 1992 Bank Credit Agreement in the amount of $699.1 million to credit enhance the Guaranteed Serial ESOP Notes. This letter of credit is utilizing -11- $699.1 million of the available $1 billion commitment under the 1992 Bank Credit Agreement. For additional information regarding Delta's long-term debt, including the 1991 and 1992 Bank Credit Agreements and the Guaranteed Serial ESOP Notes, see Note 3 (page 26) of the Notes to Consolidated Financial Statements in Delta's 1993 Annual Report to Stockholders. During the six months ended December 31, 1993 and 1992, Delta made cash interest payments, net of interest capitalized, of $103.9 million and $79.2 million respectively. 7. AIRCRAFT PURCHASE AND SALE COMMITMENTS: On November 4, 1993, Delta announced that it had reached understandings with The Boeing Company and McDonnell Douglas Corporation to defer delivery of 32 aircraft on firm order that were previously scheduled for delivery in fiscal years 1995 and 1996, to fiscal years after fiscal 1996. These deferrals, which are subject to the completion of definitive agreements with the aircraft manufacturers and related suppliers, would result in a reduction in previously planned aircraft capital expenditures of approximately $1 billion through fiscal year 1996. The following information does not incorporate the foregoing understandings. At December 31, 1993, the Company's aircraft fleet, purchase commitments and options were:
Current Fleet -------------------------- Aircraft Type Owned Leased Total Orders Options - -------------- ----- ------ ----- ------ ------- A310-200 3 - 3 - - A310-300 - 21 21 - - B-727-200 106 31 137 - - B-737-200 1 57 58 - - B-737-300 2 13 15 52 56 B-757-200 43 41 84 6 38 B-767-200 15 - 15 - - B-767-300 2 24 26 2 - B-767-300ER 7 7 14 5 11 L-1011-1 32 - 32 - - L-1011-200 1 - 1 - - L-1011-250 6 - 6 - - L-1011-500 17 - 17 - - MD-11 3 6 9 6 29 MD-88 63 57 120 5 55 MD-90 - - - 50 50 --- --- --- --- --- 301 257 558 126 239 === === === === ===
The aircraft orders include 22 B-737-300 aircraft and 24 MD-90 aircraft scheduled for delivery after fiscal 1996 that are subject to reconfirmation by Delta. The MD-88 options may be converted to -12- MD-90 options at Delta's election. The B-737-300 orders and options may be converted to B-737-400 or B-737-500 orders at Delta's election, and the B- 767-300ER options may be converted to B-767-300 options, also at Delta's election. During the December 1993 quarter, Delta accepted delivery of five A310-300 aircraft, two MD-11 aircraft, and two MD-88 aircraft. The Company sold and leased back, under operating leases, five A310-300 aircraft and sold three B-737-300 aircraft. Also during the quarter, the Company returned to lessors, or removed from service pending return to lessors, eight B-727- 200 aircraft, four A310-200 aircraft and two MD-11 aircraft. Future expenditures for aircraft and engines on firm order at December 31, 1993, are estimated to be $3.0 billion, excluding aircraft orders subject to reconfirmation by Delta, as follows:
Years Ending Amount June 30 (In Millions) ------------ ------------- Six months ending June 30, 1994...... $ 330 1995................................. 1,050 1996................................. 950 1997................................. 400 1998................................. 220 After 1998........................... 80 ------ Total $3,030 ======
8. RESTRUCTURING CHARGE: On August 23, 1993, Delta announced an early retirement program for up to approximately 3,100 eligible personnel in selected departments of the Company, for retirements effective on November 1, 1993. During the December 1993 quarter, the Company recorded an operating charge of $112.3 million, relating to the curtailment loss and special termination benefits for approximately 1,500 employees who elected to retire under this program. This charge is shown as a restructuring charge in the Company's Consolidated Statements of Operations and as an increase to Postretirement Benefits and Other Noncurrent liabilities in the Consolidated Balance Sheets. -13- Item 2. Management's Discussion and Analysis of Financial Condition and Results - ------------------------------------------------------------------------------- of Operations ------------- FINANCIAL CONDITION During the six months ended December 31, 1993, Delta invested $844.8 million in flight equipment, and $86.1 million in ground property and equipment; made payments of $520.6 million on long-term debt and capital lease obligations; and paid $60.2 million in cash dividends. The principal sources of these funds were $648.8 million in proceeds from aircraft sale and leaseback transactions, $297.2 million in cash from operations, $224.5 million of long-term borrowings, $163.5 million in short-term borrowings, and $93.2 million in proceeds from the sale of flight equipment. Cash and cash equivalents totaled $1.096 billion at December 31, 1993, compared to $1.180 billion at June 30, 1993. At December 31, 1993 and June 30, 1993, long-term debt and capital lease obligations, including current maturities, totaled $3.48 billion and $3.76 billion, respectively. Stockholders' equity was $1.79 billion at December 31, 1993, compared to $1.91 billion at June 30, 1993. The Company's debt-to-equity position at December 31, 1993, and June 30, 1993, excluding short-term borrowings, was 66% debt and 34% equity. At December 31, 1993, there were outstanding $432.0 million principal amount of Guaranteed Serial ESOP Notes (ESOP Notes) guaranteed by Delta. The terms of the ESOP Notes require Delta to purchase the ESOP Notes at the option of the holders thereof if the credit rating of Delta's long-term senior unsecured debt falls below certain levels (Purchase Event), unless Delta obtains within a specified period of a Purchase Event certain credit enhancements (Approved Credit Enhancement) that result in the ESOP Notes being rated A3 or higher by Moody's Investors Service (Moody's) and A- or higher by Standard & Poor's (S&P) (Required Ratings). 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 ESOP Notes properly tendered to it. On August 12, 1993, Delta obtained an Approved Credit Enhancement in the form of a letter of credit in the amount of $699.1 million under its 1992 Bank Credit Agreement. Due to the issuance of the letter of credit, the ESOP Notes received the Required Ratings. Although Delta no longer has an obligation to purchase the ESOP Notes as a result of the Purchase Event that occurred on May 11, 1993, there can be no assurance that Delta will not be required to purchase the ESOP Notes at a later date. For additional information regarding the ESOP Notes, Delta's purchase obligation with respect thereto and the letter of credit that Delta obtained to credit enhance the ESOP Notes, see Note 3 (page 26) of the Notes to Consolidated Financial Statements in Delta's 1993 Annual Report to Stockholders. -14- At December 31, 1993, the Company had negative working capital of $285.4 million, compared with negative working capital of $196.9 million at June 30, 1993. 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 cash reserves, internally generated funds, debt financings and proceeds from asset sales and sale and leaseback transactions. At December 31, 1993, there were no borrowings outstanding under the Company's 1991 and 1992 Bank Credit Agreements. However, as discussed above, there is currently outstanding a letter of credit under the 1992 Bank Credit Agreement in the amount of $699.1 million to credit enhance the ESOP Notes. At December 31, 1993, the Company had $300 million of credit available under its 1992 Bank Credit Agreement, and $500 million available under its 1991 Bank Credit Agreement, subject to compliance with certain conditions. During 1991, Delta provided certain debtor-in-possession financing to Pan Am (DIP Loan). At December 31, 1993, there was outstanding and reflected as an asset in the Company's Consolidated Balance Sheets the $115 million principal amount of the DIP Loan plus accrued interest of $22.6 million. Delta believes the book value of the DIP Loan as recorded in the Company's Consolidated Balance Sheets approximates its fair value. For additional information concerning the DIP Loan, including certain litigation relating thereto, see Notes 14 and 15 (page 33) of the Notes to Consolidated Financial Statements in Delta's 1993 Annual Report to Stockholders and "Item 1. - Legal Proceedings" in Part II of this Form 10-Q. During the December 1993 quarter, the Company recorded an operating charge of $112.3 million, relating to the early retirement of approximately 1,500 personnel, effective November 1, 1993. For additional information related to this charge, see Note 8. At its regular meeting on January 27, 1994, Delta's Board of Directors declared cash dividends of five cents per common share and $875.00 per share of Series C Convertible Preferred Stock ($0.875 per depositary share), both payable March 1, 1994, to stockholders of record on February 9, 1994. On November 4, 1993, Delta announced that it had reached understandings with The Boeing Company and McDonnell Douglas Corporation to defer delivery of 32 aircraft on firm order that were previously scheduled for delivery in fiscal years 1995 and 1996, to fiscal years after fiscal 1996. These deferrals, which are subject to the completion of definitive agreements with the aircraft manufacturers and related suppliers, would result in a reduction in previously planned aircraft capital expenditures of approximately $1 billion through fiscal year 1996. -15- The Omnibus Budget Reconciliation Act signed into law on August 10, 1993, imposes a 4.3 cents per gallon tax on commercial aviation jet fuel purchased for use in domestic operations. This new fuel tax will become effective October 1, 1995. Based on Delta's fiscal 1993 domestic fuel requirement of 1.82 billion gallons, the new fuel tax, when effective, is expected to increase Delta's operating expenses by approximately $78.3 million annually. -16- RESULTS OF OPERATIONS Three Months Ended December 31, 1993 and 1992 - --------------------------------------------- For the quarter ended December 31, 1993, Delta recorded an unaudited net loss of $141,040,000 ($3.36 primary and fully diluted loss per common share after preferred stock dividend requirements) and a loss from operations of $180,156,000. In the December 1992 quarter, the Company recorded a net loss of $144,388,000 ($3.46 primary and fully diluted loss per common share after preferred stock dividend requirements) and a loss from operations of $227,156,000. The losses in the December 1993 quarter are primarily due to domestic and international discount fare promotions, weak economic conditions in much of Europe, particularly in Germany where Delta operates a hub in Frankfurt, and a $112.3 million restructuring charge for costs associated with an early retirement program under which approximately 1,500 employees elected to retire effective November 1, 1993. Excluding the effect of the restructuring charge, the Company's net loss totaled $71,425,000 ($1.97 primary and fully diluted loss per common share after preferred stock dividend requirements), and the loss from operations was $67,868,000, for the three months ended December 31, 1993. Operating revenues in the December 1993 quarter totaled $3.02 billion, an increase of 5% from $2.87 billion recorded in the December 1992 quarter. Passenger revenue increased 4% to $2.74 billion, the result of a 6% increase in revenue passenger miles, partially offset by a 2% decline in the passenger mile yield. The increase in revenue passenger miles is attributable to domestic and international discount fare promotions, which negatively affected the passenger mile yield; traffic growth in international markets; and a strike against a major competitor from November 18, 1993, through November 22, 1993. Cargo revenue rose 14% to $206.3 million, the result of a 12% increase in cargo ton miles and a 2% increase in ton mile yield. All other revenue grew 20% to $68.5 million, mainly due to an increase in fees collected for passenger ticket changes and higher revenues from certain marketing programs. Operating expenses were $3.20 billion in the December 1993 quarter, up 3% from the December 1992 quarter. Operating capacity decreased less than 1% to 32.77 billion available seat miles. Salaries and related expenses decreased 5%, the result of a 5% wage reduction for domestic non-contract personnel effective February 1, 1993, lower employee benefit costs, and a 4% decrease in the average level of employment, primarily due to the early retirement program described above. Aircraft fuel expense decreased 8%, as fuel gallons consumed increased 1% while the average fuel cost per gallon declined 9% to 58.71 cents per gallon, Delta's lowest average fuel price per gallon in a December quarter since 1988. Passenger commissions rose 9%, largely due to passenger revenue growth, primarily in international markets. Aircraft rent expense rose 3%, due to additional leased aircraft in the fleet, partially offset by the return of certain aircraft to lessors. -17- Depreciation and amortization expense decreased 9%, primarily the result of a change in the Company's depreciation policy, effective April 1, 1993, increasing the depreciable lives of substantially all of Delta's flight equipment from 15 to 20 years, partially offset by the purchase of additional owned flight and ground equipment. Passenger service expense decreased 1%, the result of cost control programs implemented during fiscal 1993. Aircraft maintenance materials and repairs expense declined 12%, primarily due to lower airframe and outside repairs expense. Facilities and other rent expense increased 9%, due to additional passenger and maintenance facilities and higher rental rates. Landing fees rose less than 1%. All other operating expenses were up 16%, largely the result of growth in cargo and passenger traffic, primarily in international markets. During the December 1993 quarter, the Company recorded a $112.3 million restructuring charge for costs associated with the early retirement program, accepted by approximately 1,500 employees and completed November 1, 1993. Nonoperating expense totaled $44.9 million in the December 1993 quarter, compared to nonoperating income of $796,000 in the December 1992 quarter. Net interest expense grew $29.0 million, reflecting a higher average level of outstanding debt and lower capitalized interest resulting from a decline in the balance of advance payments for aircraft. The Company recorded pretax gains on the disposition of flight equipment of $398,000 in the December 1993 quarter, compared to $31.0 million in the December 1992 quarter. Miscellaneous income was $21.6 million in the December 1993 quarter compared to $7.7 million in the December 1992 quarter due to increased income from short-term investments and increased income from investments in affiliated companies. The $225.0 million pretax loss for the December 1993 quarter was reduced by an income tax benefit of $83.6 million and by the amortization of investment tax credits totaling $348,000. Dividends on Series C Convertible Preferred Stock and Series B ESOP Convertible Preferred Stock totaled $27.6 million. Six Months Ended December 31, 1993 and 1992 - ------------------------------------------- For the six months ended December 31, 1993, Delta recorded an unaudited net loss of $80,691,000 ($2.71 primary and fully diluted loss per common share after preferred stock dividend requirements), and a loss from operations of $58,617,000. In the six months ended December 31, 1992, the Company recorded a net loss of $269,583,000 ($6.53 primary and fully diluted loss per common share after preferred stock dividend requirements) before a $587,144,000 ($11.81 primary and fully diluted loss per common share) charge for the cumulative effect of the Company's adoption, effective July 1, 1992, of SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" and SFAS 109, "Accounting for Income Taxes." The loss -18- from operations for the six months ended December 31, 1992 totaled $421,896,000. The losses for the six months ended December 31, 1993, are mainly due to domestic and international discount fare promotions, weak economic conditions in much of Europe, and a $112.3 million restructuring charge for costs associated with the early retirement program discussed above. Excluding the effect of the restructuring charge, the Company's net loss totaled $11,076,000 ($1.32 primary and fully diluted loss per common share after preferred stock dividend requirements), and income from operations was $53,671,000, for the six months ended December 31, 1993. Operating revenues for the six months ended December 31, 1993, rose 5% to $6.24 billion. Passenger revenue increased 5% to $5.72 billion, due to 1% growth in revenue passenger miles and a 4% increase in the passenger mile yield. During the six months ended December 31, 1992, the passenger mile yield was depressed by substantial fare reductions initiated by another airline and matched by Delta and other carriers. Cargo revenue increased 8% to $381.4 million, the result of an 8% increase in cargo ton miles. All other revenue increased $18.6 million, mainly due to an increase in fees collected for passenger ticket changes and higher revenues from certain marketing programs. Operating expenses for the six months ended December 31, 1993 decreased 1% to $6.30 billion. Operating capacity grew 1% to 67.60 billion available seat miles. Salaries and related costs decreased 5%, the result of a 5% wage reduction for domestic non-contract personnel effective February 1, 1993, lower employee benefit costs, and a 5% decrease in the average number of employees, primarily due to the early retirement program discussed above. Aircraft fuel expense decreased 10%, as fuel gallons consumed rose 1% and the average fuel cost per gallon dropped 11% to 57.94 cents, Delta's lowest average fuel price per gallon for any six month period ending December 31 since 1988. Passenger commissions increased 6%, largely due to passenger revenue growth primarily in the international markets. Aircraft rent increased 5% due to additional leased aircraft in the fleet, partially offset by the return of certain aircraft to lessors. Depreciation and amortization expense in the six months ended December 31, 1993, decreased 11%, primarily the result of a change in the Company's depreciation policy, effective April 1, 1993, increasing the depreciable lives of substantially all of Delta's flight equipment from 15 to 20 years, partially offset by the purchase of additional owned flight and ground equipment. Passenger service expense decreased 7%, the result of cost control programs implemented during fiscal 1993. Aircraft maintenance materials and repairs expense declined 15%, primarily due to lower airframe and outside repairs expense. Facilities and other rents increased 3%, the result of new passenger and maintenance facilities and higher rental rates. Landing fees decreased 2% due to certain rate adjustments. All other expenses were up 8%, the result of growth in cargo and passenger traffic, primarily in international markets. -19- During the six months ended December 31, 1993, Delta recorded a $112.3 million restructuring charge for costs associated with the early retirement program discussed above. Nonoperating expense totaled $87.6 million in the six months ended December 31, 1993, compared to $1.0 million in the six months ended December 31, 1992. Net interest expense grew $58.8 million, reflecting a higher average level of outstanding debt and lower capitalized interest resulting from a decline in the balance of advance payments for aircraft. The Company recorded pretax gains on the disposition of flight equipment of $1.4 million in the six months ended December 31, 1993, compared to $50.4 million in the six months ended December 31, 1992. Miscellaneous income was $46.0 million in the six months ended December 31, 1993, compared to $24.8 million in the six months ended December 31, 1992, due to increased income from short-term investments and increased income from investments in affiliated companies. The $146.2 million pretax loss for the six months ended December 31, 1993, was reduced by an income tax benefit of $64.8 million and by the amortization of investment tax credits totaling $766,000. This benefit reflects a net income tax credit, booked in the September 1993 quarter, of $12.8 million due to an increase in the federal tax rate from 34% to 35%. This tax credit resulted from the Company's cumulative deferred tax assets exceeding its cumulative deferred tax liabilities. Dividends on Series C Convertible Preferred Stock and Series B ESOP Convertible Preferred Stock totaled $55.2 million for the six months ended December 31, 1993. -20- ARTHUR ANDERSEN & CO. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and the Board of Directors of Delta Air Lines, Inc.: We have reviewed the accompanying condensed consolidated balance sheet of DELTA AIR LINES, INC. (a Delaware corporation) as of December 31, 1993 and the related consolidated statements of operations for the three-month and six-month periods ended December 31, 1993 and 1992, and the consolidated statements of cash flows for the six-month periods ended December 31, 1993 and 1992. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Delta Air Lines, Inc. as of June 30, 1993 (not presented herein), and in our report dated August 13, 1993, we expressed an unqualified opinion on that balance sheet. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of June 30, 1993 is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived. /s/ Arthur Andersen & Co. - ----------------------------- Atlanta, Georgia February 11, 1994 -21- PART II. OTHER INFORMATION Item 1. Legal Proceedings - -------------------------- Litigation Relating to Delta's Participation in Pan Am's Plan of Reorganization - ------------------------------------------------------------------------------- Pan Am, the Official Committee of Unsecured Creditors of Pan Am (Creditors Committee) and others have filed legal actions against Delta relating to Delta's participation in Pan Am's proposed plan of reorganization. The following discussion of recent developments regarding that litigation supplements the discussion set forth on pages 10-13 of Delta's Annual Report on Form 10-K for the fiscal year ended June 30, 1993 (1993 Form 10-K) and page 18 of Delta's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993. As previously reported, Pan Am, the Creditors Committee and the Ad Hoc Committee of Administrative and Priority Creditors of Pan Am (Ad Hoc Committee) filed a consolidated amended complaint in the United States Bankruptcy Court for the Southern District of New York (Bankruptcy Court) against Delta. On December 23, 1993, the United States District Court for the Southern District of New York (District Court) granted Delta's motion requesting that Court (before which are pending the two lawsuits filed against Delta by former Pan Am employees which are described below and on pages 12-13 of the 1993 Form 10-K), rather than the Bankruptcy Court, to conduct the trial of this action. The District Court has indicated it plans to begin the trial of these three actions in May, 1994. The discovery deadline in these cases is February 28, 1994. On February 7, 1994, Pan Am, the Creditors Committee and the Ad Hoc Committee requested the District Court to order a trial by jury or, alternatively, a trial by an advisory jury, of their lawsuit against Delta. As previously reported, a purported class action complaint was filed against Delta in the District Court by former Pan Am employees who allege, among other things, that they were intended third-party beneficiaries of Delta's agreement with Pan Am to participate in Pan Am's proposed plan of reorganization. On December 14, 1993, the District Court denied plaintiffs' motion requesting the District Court to reconsider its order denying plaintiffs' motion for class action certification or, alternatively, to permit an immediate appeal of that order. As previously reported, on September 10, 1992, a lawsuit was filed against Delta in the District Court by approximately 120 former Pan Am pilots who make allegations and claims similar to those asserted in the purported class action complaint by former Pan Am employees described in the preceding paragraph. As previously reported, Delta filed a motion requesting the Bankruptcy Court to order Pan Am to repay to Delta the outstanding principal amount of the DIP Loan plus certain accrued interest; the Bankruptcy Court consolidated this motion with the lawsuit described above filed against Delta by Pan Am, the Creditors Committee and the Ad Hoc Committee; and Delta appealed this ruling to the District Court. On -22- December 27, 1993, the District Court remanded this matter to the Bankruptcy Court for (1) a statement of reasons for the Bankruptcy Court's ruling; and (2) reconsideration. The Bankruptcy Court has not yet taken any action on this remand. -23- Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- (a) Exhibits: 10. Amendment dated October 28, 1993, to the Employment Agreement dated July 29, 1987, between Delta and Mr. Ronald W. Allen 11. Statement regarding computation of per share earnings 12. Statement regarding computation of ratio of earnings to fixed charges 15. Letter from Arthur Andersen & Co. regarding unaudited interim financial information (b) Reports on Form 8-K: During the quarter ended December 31, 1993, Delta filed the following Current Reports on Form 8-K: (1) Form 8-K, dated November 17, 1993, regarding the filing of the Company's By-Laws and Certificate of Incorporation, as amended through October 28, 1993, as well as certain exhibits to the Company's Registration Statement on Form S-3 (File No. 33-50175) in connection with an offering of $129.8 million aggregate principal amount of Pass Through Certificates. (2) Form 8-K, dated December 1, 1993, and Form 8-K/A, dated December 1, 1993, regarding the filing of certain exhibits to the Company's Registration Statement on Form S-3 (File No. 33-50175) in connection with an offering of $222.6 million aggregate principal amount of the Company's Medium-Term Notes, Series B. -24- SIGNATURE --------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Delta Air Lines, Inc. ------------------------------------ (Registrant) By: /s/ Thomas J. Roeck, Jr. ------------------------------------ Thomas J. Roeck, Jr. Senior Vice President - Finance and Chief Financial Officer February 11, 1994 - ----------------- (Date) -25- EX-10 2 EMPLOYMENT AGREEMENT Exhibit 10 AMENDMENT TO ------------ EMPLOYMENT AGREEMENT -------------------- This Amendment is entered into as of October 28, 1993 between Delta Air Lines, Inc. (hereinafter called "Delta"), and Mr. Ronald W. Allen of Atlanta, Georgia ("Employee"). WITNESSETH: ----------- WHEREAS, the parties entered into an Employment Agreement dated July 29, 1987, which previously has been amended; and WHEREAS, effective August 15, 1992, the Employment Agreement was amended at Employee's request to reflect a reduction in Employee's basic annual compensation rate of Five Hundred Seventy-Five Thousand Dollars ($575,000) (the Employee's salary of record) to Four Hundred Seventy-Five Thousand Dollars ($475,000) per year; and WHEREAS, consistent with Delta's use of the salaries of record for other personnel to protect certain benefits (including but not limited to disability and retirement benefits) from being reduced by the salary reductions taken by non-pilot personnel during fiscal year 1993, Employee's benefits under the Employment Agreement should also be protected; WHEREAS, the parties desire to make changes to Section 5 of the Employment Agreement to modify the provisions concerning recipients of payments to be made in the event of Employee's death and Section 9 of the Employment Agreement concerning the address for Notices; NOW, THEREFORE, in consideration of the premises and the mutual considerations herein mentioned or contained, it is agreed as follows: 1. Section 3(a) of the said Employment Agreement shall be amended by striking the existing clause and substituting the following, effective August 15, 1992: (a) basic compensation (herein sometimes called "Basic Compensation") at a rate of not less than Four Hundred Seventy- Five Thousand ($475,000) Dollars per year, payable in equal installments at such periods as may be convenient to Delta but not less often than monthly, provided, however, that this sum shall be disregarded for purposes of calculating the amounts payable under Sections 5 and 7 of this Employment Agreement, said amounts to be based on Five Hundred Seventy-Five Thousand ($575,000) Dollars per year. 2. Section 5(c) of the Employment Agreement is hereby amended by replacing the portion of the last sentence prior to Section 5(c)(i) of that Section with the following: If Employee shall die after the date of this Agreement and before the end of the Consultant Period, and at the time of his death is not in default under any of the provisions of Paragraph 5(b) hereof, the compensation payable hereunder with respect to the Consultant Period shall be payable to such beneficiary or beneficiaries as may be designated by Employee in a written designation received by the Company or if no such designation is received by the Company or any previous designation is revoked in writing and such revocation is received by the Company prior to Employee's death, to Employee's estate, in either such case, at such periods as may be convenient to Delta but not less often than monthly, as follows: [Sections 5(c)(i) and (ii) shall remain as set forth in the original Employment Agreement.] 3. Section 9 of the Employment Agreement is hereby amended by deleting Employee's address as set forth in that section and substituting the following: Mr. Ronald W. Allen [Address omitted] or such other address as Employee may specify in written notice received by Delta. It is further agreed that all other terms and conditions of the said Employment Agreement shall remain in full force and effect. -2- IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first above written. DELTA AIR LINES, INC. By -------------------------- Gerald Grinstein, Chairman Personnel, Compensation & Nominating Committee -------------------------- Ronald W. Allen -3- EX-11 3 PER SHARE EARNINGS DELTA AIR LINES, INC. STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11
(In thousands except share and per share amounts) Three Months Three Months Ended Ended December 31, December 31, 1993 1992** ------------ ------------ PRIMARY: Weighted average shares outstanding 50,206,054 49,732,137 Additional shares assuming exercise of stock options * * ------------ ------------ Average shares outstanding as adjusted 50,206,054 49,732,137 ============ ============ Income (loss) before cumulative effect of changes in accounting principles $ (141,040) $ (144,388) Preferred dividends series C (20,125) (20,125) Preferred dividends series B (7,469) (7,472) ------------ ------------ Income (loss) before cumulative effect of changes in accounting principles attributable to primary common shares (168,634) (171,985) Cumulative effect of changes in accounting principles - - ------------ ------------ Net income (loss) attributable to primary shares $ (168,634) $ (171,985) ============ ============ Primary earnings (loss) per share before cumulative effect of changes in accounting principles $ (3.36) $ (3.46) Cumulative effect of changes in accounting principles - - ------------ ------------ Primary earnings (loss) per share $ (3.36) $ (3.46) ============ ============ FULLY DILUTED: Weighted average shares outstanding 50,206,054 49,732,137 Additional shares assuming: Conversion of series C convertible preferred stock 17,490,494 17,490,494 Conversion of series B ESOP convertible preferred stock 5,922,912 5,945,468 Conversion of 3.23% convertible subordinated notes 10,149,072 - Exercise of stock options * * ------------ ------------ Average shares outstanding as adjusted 83,768,532 73,168,099 ============ ============ Income (loss) before cumulative effect of changes in accounting principles $ (141,040) $ (144,388) Expenses of 3.23% convertible subordinated notes net of taxes 7,786 - Additional required ESOP contribution assuming conversion of series B ESOP convertible preferred stock net of taxes (4,519) (3,822) ------------ ------------ Income (loss) before cumulative effect of changes in accounting principles (137,773) (148,210) Cumulative effect of changes in accounting principles - - ------------ ------------ Net income (loss) attributable to fully diluted common shares $ (137,773) $ (148,210) ============ ============ Fully diluted earnings (loss) per common share before cumulative effect of changes in accounting principles $ (1.64) $ (2.03) Cumulative effect of changes in accounting principles - - ------------ ------------ Fully diluted earnings (loss) per common share $ (1.64) $ (2.03) ============ ============ *Antidilutive **Restated as described in Note 1
EXHIBIT 11 DELTA AIR LINES, INC. STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS (In thousands except share and per share amounts)
--------------------------- Six Months Six Months Ended Ended December 31, December 31, 1993 1992** ------------ ------------ PRIMARY: Weighted average shares outstanding 50,188,078 49,724,667 Additional shares assuming exercise of stock options * * ----------- ----------- Average shares outstanding as adjusted 50,188,078 49,724,667 =========== =========== Income (loss) before cumulative effect of changes in accounting principles $ (80,691) $ (269,583) Preferred dividends series C (40,250) (40,250) Preferred dividends series B (14,932) (14,959) ----------- ----------- Income (loss) before cumulative effect of changes in accounting principles attributable to primary common shares (135,873) (324,792) Cumulative effect of changes in accounting principles - (587,144) ----------- ----------- Net income (loss) attributable to primary shares $ (135,873) $ (911,936) =========== =========== Primary earnings (loss) per share before cumulative effect of changes in accounting principles $ (2.71) $ (6.53) Cumulative effect of changes in accounting principles - (11.81) ----------- ----------- Primary earnings (loss) per share $ (2.71) $ (18.34) =========== =========== FULLY DILUTED: Weighted average shares outstanding 50,188,078 49,724,667 Additional shares assuming: Conversion of series C convertible preferred stock 17,490,494 17,490,494 Conversion of series B ESOP convertible preferred stock 5,924,878 5,946,474 Conversion of 3.23% convertible subordinated notes 10,149,072 - Exercise of stock options * * ----------- ----------- Average shares outstanding as adjusted 83,752,522 73,161,635 =========== =========== Income (loss) before cumulative effect of changes in accounting principles $ (80,691) $ (269,583) Expenses of 3.23% convertible subordinated notes net of taxes 15,573 - Additional required ESOP contribution assuming conversion of series B ESOP convertible preferred stock net of taxes (9,034) (7,358) ----------- ----------- Income (loss) before cumulative effect of changes in accounting principles (74,152) (276,941) Cumulative effect of changes in accounting principles - (587,144) ----------- ----------- Net income (loss) attributable to fully diluted common shares $ (74,152) $ (864,085) =========== =========== Fully diluted earnings (loss) per common share before cumulative effect of changes in accounting principles $ (0.89) $ (3.79) Cumulative effect of changes in accounting principles - (8.02) ----------- ----------- Fully diluted earnings (loss) per common share $ (0.89) $ (11.81) =========== ===========
*Antidilutive ** Restated as described in Note 1 EX-12 4 EARNINGS TO FIXED CHARGES EXHIBIT 12 DELTA AIR LINES, INC. STATEMENT REGARDING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
--------------------------- Six Months Six Months Ended Ended December 31, December 31, 1993 1992 ------------ ------------ (In Thousands) Earnings (before cumulative effect of accounting changes): Income (loss) $(80,691) (269,583)* Add (deduct): Income tax provision (64,753) (151,701) Fixed charges 347,319 299,764 Interest capitalized (18,306) (37,211) Interest offset on Guaranteed Serial ESOP Notes (6,259) (6,580) -------- -------- Earnings (loss) as adjusted $177,310 (165,311) ======== ======== Fixed charges: Interest expense $153,316 113,442 1/3 of rentals 187,744 179,742 Additional interest on Guaranteed Serial ESOP Notes 6,259 6,580 -------- -------- Total fixed charges $347,319 299,764 ======== ========
Ratio of earnings to fixed charges - - -------------------------------------------------- Earnings for the six months ended December 31, 1993 and 1992 were inadequate to cover fixed charges. Additional earnings of $170,009 for the six months ended December 31, 1993 and of $465,075 for the six months ended December 31, 1992 would have been necessary to bring the ratios to 1.0. * Restated for accounting changes adopted July 1, 1992 for employers' accounting for postretirement benefits other than pensions (SFAS 106) and accounting for income taxes (SFAS 109). EX-15 5 LTR FROM ARTHUR ANDERSEN ARTHUR ANDERSEN & CO. EXHIBIT 15 To the Stockholders and the Board of Directors of Delta Air Lines, Inc.: We are aware that Delta Air Lines, Inc. has incorporated by reference in its Registration Statement Nos. 2-94541, 33-30454, 33-50175 and 33-52045 its Form 10-Q for the quarter ended December 31, 1993, which includes our report dated February 11, 1994 covering the unaudited interim financial information contained therein. Pursuant to Regulation C of the Securities Act of 1933, that report is not considered a part of the registration statements prepared or certified by our firm or a report prepared or certified by our firm within the meaning of Sections 7 and 11 of the Act. By: /s/Arthur Andersen & Co. ---------------------------- Atlanta, Georgia February 11, 1994 -----END PRIVACY-ENHANCED MESSAGE-----