<PAGE>
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
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------
DELTA AIR LINES, INC.
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
December 31 June 30
ASSETS 1993 1993
- ----------------------------------------------------------------
(In Thousands)
<S> <C> <C>
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
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
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<PAGE>
DELTA AIR LINES, INC.
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
December 31 June 30
LIABILITIES AND STOCKHOLDERS' EQUITY 1993 1993
- -------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C>
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
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
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<PAGE>
DELTA AIR LINES, INC.
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31
----------------------------------
1993 1992 *
----------- -----------
(In Thousands)
<S> <C> <C>
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
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
* Restated as described in Note 1.
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<PAGE>
DELTA AIR LINES, INC.
Statistical Summary
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31
----------------------------------
1993 1992 *
----------- -----------
<S> <C> <C>
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)
</TABLE>
* Restated as described in Note 1.
-5-
<PAGE>
DELTA AIR LINES, INC.
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31
----------------------------------
1993 1992 *
(In Thousands)
----------- -----------
<S> <C> <C>
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
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
* Restated as described in Note 1.
-6-
<PAGE>
DELTA AIR LINES, INC.
Statistical Summary
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31
----------------------------------
1993 1992 *
----------- -----------
<S> <C> <C>
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)
</TABLE>
* Restated as described in Note 1.
-7-
<PAGE>
DELTA AIR LINES, INC.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31
------------------------
1993 1992 *
---------- -----------
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
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.
</TABLE>
* Restated as described in Note 1.
-8-
<PAGE>
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
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<PAGE>
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
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<PAGE>
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-
<PAGE>
$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:
<TABLE>
<CAPTION>
Current Fleet
--------------------------
Aircraft Type Owned Leased Total Orders Options
- -------------- ----- ------ ----- ------ -------
<S> <C> <C> <C> <C> <C>
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
=== === === === ===
</TABLE>
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-
<PAGE>
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:
<TABLE>
<CAPTION>
Years Ending Amount
June 30 (In Millions)
------------ -------------
<S> <C>
Six months ending June 30, 1994...... $ 330
1995................................. 1,050
1996................................. 950
1997................................. 400
1998................................. 220
After 1998........................... 80
------
Total $3,030
======
</TABLE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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)
<PAGE>
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-
<PAGE>
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-
<PAGE>
DELTA AIR LINES, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11
<TABLE>
<CAPTION>
(In thousands except share and per share amounts)
Three Months Three Months
Ended Ended
December 31, December 31,
1993 1992**
------------ ------------
<S> <C> <C>
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
</TABLE>
<PAGE>
EXHIBIT 11
DELTA AIR LINES, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(In thousands except share and per share amounts)
<TABLE>
<CAPTION>
---------------------------
Six Months Six Months
Ended Ended
December 31, December 31,
1993 1992**
------------ ------------
<S> <C> <C>
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)
=========== ===========
</TABLE>
*Antidilutive
** Restated as described in Note 1
<PAGE>
EXHIBIT 12
DELTA AIR LINES, INC.
STATEMENT REGARDING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
---------------------------
Six Months Six Months
Ended Ended
December 31, December 31,
1993 1992
------------ ------------
(In Thousands)
<S> <C> <C>
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
======== ========
</TABLE>
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).
<PAGE>
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
