<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, 1994
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, 1995:
Common Stock, $3.00 par value - 50,609,934 shares outstanding
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------
DELTA AIR LINES, INC.
Consolidated Balance Sheets (Unaudited)
(In Millions)
<TABLE>
<CAPTION>
December 31 June 30
ASSETS 1994 1994
- -----------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 469 $ 1,302
Short-term investments 911 408
Accounts and notes receivable, net 777 886
Maintenance and operating supplies 79 67
Deferred income taxes 346 336
Prepaid expenses and other 178 224
------- -------
Total current assets 2,760 3,223
------- -------
PROPERTY AND EQUIPMENT:
Flight equipment owned 9,036 9,063
Less: Accumulated depreciation 4,054 3,880
------- -------
4,982 5,183
------- -------
Flight equipment under capital leases 173 173
Less: Accumulated amortization 150 142
------- -------
23 31
------- -------
Ground property and equipment 2,395 2,398
Less: Accumulated depreciation 1,279 1,250
------- -------
1,116 1,148
------- -------
Advance payments for equipment 317 241
------- -------
6,438 6,603
------- -------
OTHER ASSETS:
Marketable equity securities 386 351
Deferred income taxes 486 560
Investments in associated companies 263 219
Cost in excess of net assets
acquired, net 278 283
Leasehold and operating rights, net 187 207
Non-operating property, net 171 211
Other 415 239
------- -------
2,186 2,070
------- -------
$11,384 $11,896
======= =======
</TABLE>
The accompanying notes are an integral part of these balance sheets.
-2-
<PAGE>
<TABLE>
DELTA AIR LINES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN MILLIONS EXCEPT SHARE AMOUNTS)
December 31 June 30
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $ 45 $ 227
Current obligations under capital leases 12 11
Accounts payable and accrued liabilities 1,536 1,654
Air traffic liability 885 1,247
Accrued vacation pay 212 196
Accrued rent 248 195
Accrued income taxes 7 6
------ ------
Total current liabilities 2,945 3,536
------ ------
NONCURRENT LIABILITIES:
Long-term debt 2,974 3,142
Postretirement benefits 1,681 1,641
Accrued rent 550 541
Capital leases 77 86
Other 447 395
------ ------
5,729 5,805
------ ------
DEFERRED CREDITS:
Deferred gain on sale and leaseback transactions 894 923
Manufacturers and other credits 80 63
------ ------
974 986
------ ------
COMMITMENTS AND CONTINGENCIES (Notes 8, 9 and 10)
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 6,850,861 shares at December 31,
1994 and 6,878,292 shares at June 30, 1994 493 495
Less: Unearned compensation under
employee stock ownership plan 368 393
------ ------
125 102
------ ------
STOCKHOLDERS' EQUITY:
Series C Convertible Preferred Stock,
$1.00 par value, $50,000 liquidation preference;
Issued and outstanding 23,000 shares at December 31,
1994 and June 30, 1994 - -
Common stock, $3.00 par value; Authorized, 150,000,000 shares;
Issued 54,475,602 shares at December 31, 1994
and 54,469,491 shares at June 30, 1994 164 163
Additional paid-in capital 2,013 2,013
Net unrealized gain on marketable equity securities 70 53
Accumulated deficit (374) (490)
Less: Treasury stock at cost, 3,867,605 shares at
December 31, 1994 and 4,016,219 shares at June 30, 1994 262 272
------ ------
1,611 1,467
------ ------
$11,384 $11,896
====== ======
</TABLE>
The accompanying notes are an integral part of these balance sheets.
-3-
<PAGE>
DELTA AIR LINES, INC.
Consolidated Statements of Operations
(Unaudited)
(In Millions, except Share Data)
<TABLE>
<CAPTION>
Three Months Ended
December 31
----------------------------------------
1994 1993
---------------- -----------------
<S> <C> <C>
OPERATING REVENUES:
Passenger $ 2,688 $ 2,735
Cargo 154 149
Other, net 77 68
---------------- -----------------
Total operating revenues 2,919 2,952
---------------- -----------------
OPERATING EXPENSES:
Salaries and related costs 1,074 1,145
Aircraft fuel 357 372
Passenger commissions 298 308
Aircraft rent 172 187
Other selling expenses 165 174
Depreciation and amortization 155 172
Contracted services 122 116
Passenger service 118 130
Aircraft maintenance materials and outside repairs 112 98
Facilities and other rent 110 94
Landing fees 60 61
Restructuring charge - 112
Other 158 163
---------------- -----------------
Total operating expenses 2,901 3,132
---------------- -----------------
OPERATING INCOME (LOSS) 18 (180)
---------------- -----------------
OTHER INCOME (EXPENSE):
Interest expense (74) (76)
Interest capitalized 8 9
Interest income 27 14
Miscellaneous income (expense), net (1) 8
---------------- -----------------
(40) (45)
---------------- -----------------
LOSS BEFORE INCOME TAXES (22) (225)
INCOME TAXES CREDITED, NET 4 84
---------------- -----------------
NET LOSS (18) (141)
PREFERRED STOCK DIVIDENDS (22) (28)
---------------- -----------------
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS $ (40) $ (169)
================ =================
PRIMARY AND FULLY DILUTED LOSS PER SHARE $ (0.79) $ (3.36)
================ =================
WEIGHTED AVERAGE SHARES USED IN PER SHARE COMPUTATION:
Primary 50,607,083 50,206,054
Fully Diluted 50,607,083 50,206,054
DIVIDENDS PER COMMON SHARE $0.05 $0.05
================ =================
</TABLE>
The accompanying notes are an integral part of these statements.
-4-
<PAGE>
<TABLE>
DELTA AIR LINES, INC.
Statistical Summary
(Unaudited)
Three Months Ended
December 31
----------------------------------
1994 1993
----------- -----------
<S> <C> <C>
Statistical Summary:
Available Seat Miles (000) 32,449,486 32,769,641
Available Ton Miles (000) 4,515,534 4,555,554
Revenue Passengers Enplaned 22,378,526 21,682,271
Revenue Passenger Miles (000) 21,113,021 20,675,683
Cargo Ton Miles (000) 423,933 374,297
Revenue Ton Miles (000) 2,537,683 2,444,418
Passenger Load Factor 65.06% 63.09%
Breakeven Passenger Load Factor 64.64% 67.25%
Fuel Gallons Consumed (000) 633,681 633,630
Average Price Per Fuel Gallon 56.36c 58.71c
Cost Per Available Seat Mile 8.94c 9.56c
Cost Per Available Seat Mile - Excluding
Restructuring Charge - 9.22c
Passenger Mile Yield 12.73c 13.23c
Cargo Ton Mile Yield 36.36c 39.88c
Operating Revenue per Available Seat Mile 9.00c 9.01c
</TABLE>
-5-
<PAGE>
DELTA AIR LINES, INC.
Consolidated Statements of Operations
(Unaudited)
(In Millions, except Share Data)
<TABLE>
<CAPTION>
Six Months Ended
December 31
-------------------------
1994 1993
----------- -----------
<S> <C> <C>
OPERATING REVENUES:
Passenger $ 5,621 $ 5,676
Cargo 292 279
Other, net 163 135
----------- -----------
Total operating revenues 6,076 6,090
----------- -----------
OPERATING EXPENSES:
Salaries and related costs 2,211 2,307
Aircraft fuel 719 755
Passenger commissions 620 619
Aircraft rent 344 377
Other selling expenses 315 313
Depreciation and amortization 319 338
Contracted services 242 233
Passenger service 252 268
Aircraft maintenance materials and outside repairs 223 203
Facilities and other rent 212 186
Landing fees 133 130
Restructuring charge - 112
Other 314 308
----------- -----------
Total operating expenses 5,904 6,149
----------- -----------
OPERATING INCOME (LOSS) 172 (59)
----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (150) (153)
Interest capitalized 15 18
Interest income 50 26
Gain on disposition of flight equipment 1 1
Miscellaneous income, net 11 20
----------- -----------
(73) (88)
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE 99 (147)
INCOME TAXES (PROVIDED) CREDITED, NET (45) 66
----------- -----------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 54 (81)
CUMULATIVE EFFECT OF ACCOUNTING CHANGE,
NET OF TAX 114 -
----------- -----------
NET INCOME (LOSS) 168 (81)
PREFERRED STOCK DIVIDENDS (44) (55)
----------- -----------
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS $ 124 $ (136)
=========== ===========
PRIMARY INCOME (LOSS) PER SHARE:
Before cumulative effect of accounting change $ 0.21 $ (2.71)
Cumulative effect of accounting change 2.25 -
----------- -----------
$ 2.46 $ (2.71)
=========== ===========
FULLY DILUTED INCOME (LOSS) PER SHARE:
Before cumulative effect of accounting change $ 0.85 $ (2.71)
Cumulative effect of accounting change 1.43 -
----------- -----------
$ 2.28 $ (2.71)
=========== ===========
WEIGHTED AVERAGE SHARES USED IN PER SHARE COMPUTATION:
Primary 50,577,914 50,188,078
Fully Diluted 79,694,274 50,188,078
DIVIDENDS PER COMMON SHARE $0.10 $0.10
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
-6-
<PAGE>
<TABLE>
DELTA AIR LINES, INC.
Statistical Summary
(Unaudited)
Six Months Ended
December 31
---------------------------------
1994 1993
------------ -------------
<S> <C> <C>
Statistical Summary:
Available Seat Miles (000) 66,013,374 67,595,707
Available Ton Miles (000) 9,195,510 9,388,421
Revenue Passengers Enplaned 45,868,608 44,213,977
Revenue Passenger Miles (000) 44,765,397 43,675,310
Cargo Ton Miles (000) 783,946 686,725
Revenue Ton Miles (000) 5,264,715 5,059,479
Passenger Load Factor 67.81% 64.61%
Breakeven Passenger Load Factor 65.74% 65.28%
Fuel Gallons Consumed (000) 1,293,369 1,302,982
Average Price Per Fuel Gallon 55.57c 57.94c
Cost Per Available Seat Mile 8.94c 9.10c
Cost Per Available Seat Mile - Excluding
Restructuring Charge - 8.93c
Passenger Mile Yield 12.56c 13.00c
Cargo Ton Mile Yield 37.30c 40.59c
Operating Revenue per Available Seat Mile 9.20c 9.01c
-7-
</TABLE>
<PAGE>
<TABLE>
DELTA AIR LINES, INC.
Consolidated Statements of Cash Flows (Unaudited)
(In Millions)
Six Months Ended
December 31
-----------------------------
1994 1993
------ ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 168 $ (81)
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Cumulative effect of accounting change (114) -
Depreciation and amortization 319 338
Deferred income taxes (11) (89)
Amortization of investment tax credits - (1)
Amortization of deferred gain on sale and
leaseback transactions (29) (29)
Gain on disposition of flight equipment (1) (1)
Rental expense in excess of payments 62 59
Postemployment benefits expense (less than) payments (5) -
Pension expense in excess of (less than) funding (47) 1
Compensation under ESOP 23 18
Other postretirement benefits expense in excess
of payments 40 134
Changes in certain assets and liabilities:
Decrease in receivables 224 64
Decrease in other current assets 34 100
Decrease in air traffic liability (362) (250)
Decrease in accounts payable and accrued liabilities (118) (107)
Increase in other payables 18 25
Increase (Decrease) in other noncurrent liabilities (9) 86
Other, net 45 30
------ ------
Net cash provided by operating activities 237 297
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions:
Flight equipment, including advance payments (107) (845)
Ground property and equipment (104) (86)
Increase in short-term investments, net (511) -
Proceeds from sale of flight equipment 81 93
------ ------
Net cash used in investing activities (641) (838)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt and capital lease obligations (369) (521)
Long-term borrowings - 225
Net short-term borrowings - 164
Cash dividends (60) (60)
Proceeds from sale and leaseback transactions - 649
------ ------
Net cash provided (used) by financing activities (429) 457
------ ------
NET DECREASE IN CASH AND CASH EQUIVALENTS (833) (84)
Cash and cash equivalents at beginning of period 1,302 1,180
------ ------
Cash and cash equivalents at end of period $ 469 $1,096
====== ======
The accompanying notes are an integral part of these statements.
</TABLE>
-8-
<PAGE>
DELTA AIR LINES, INC.
Notes to Consolidated Financial Statements
December 31, 1994
(Unaudited)
1. ACCOUNTING AND REPORTING POLICIES:
The Company's accounting and reporting policies are summarized in Note 1
(page 27 ) of the Notes to Consolidated Financial Statements in Delta's 1994
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 1994 Annual Report to Stockholders. 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 12), necessary
for a fair statement of results for the interim periods.
Effective July 1, 1994, Delta began recording as reductions of revenue
certain air transportation price adjustments which had previously been
recorded as commissions expense. Certain amounts in the Consolidated
Statements of Operations for the three months and six months ended December
31, 1993, have been reclassified to conform with the current financial
statement presentation.
2. EMPLOYEE STOCK OWNERSHIP PLAN:
Effective July 1, 1994, Delta adopted American Institute of Certified Public
Accountants Statement of Position 93-6, "Employers' Accounting for Employee
Stock Ownership Plans" (SOP 93-6). This standard changed the Company's
method of accounting for certain dividends on the Series B ESOP Convertible
Preferred Stock and also altered the way such dividends are included in the
earnings per share calculations. The adoption of SOP 93-6 reduced the
reported net loss attributable to common stockholders shown on the
Consolidated Statements of Operations by $2 million for the quarter ended
December 31, 1994 and decreased the primary and fully diluted loss per
common share for that period by $0.04. For the six months ended December 31,
1994, the adoption of SOP 93-6 increased net income attributable to common
stockholders by $4 million and increased primary and fully diluted earnings
per share by $0.09 and $0.03, respectively. The provisions of SOP 93-6
require that it be adopted prospectively.
3. POSTEMPLOYMENT BENEFITS:
The Company provides certain benefits to its former or inactive employees
after employment but before retirement. Such benefits primarily include
those related to disability and survivorship plans. Effective July 1, 1994,
Delta adopted Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits" (SFAS 112), which
requires recognition of the liability for postemployment benefits during the
period of employment.
-9-
<PAGE>
Adoption of SFAS 112 resulted in a cumulative after-tax transition benefit
of $114 million for the six months ended December 31, 1994, primarily due to
the net overfunded status of the Company's disability and survivorship
plans. Future period expenses will vary based on actual claims experience
and the return on plan assets.
4. INVESTMENTS IN DEBT AND EQUITY SECURITIES:
At December 31, 1994, the gross unrealized gain on the Company's investment
in Singapore Airlines Limited was $143 million and the gross unrealized loss
on the Company's investment in Swissair, Swiss Air Transport Company Ltd.
was $24 million. The $75 million net unrealized gain, net of the related
$44 million deferred tax provision, on these investments is reflected in
stockholders' equity.
Delta's other investments in available-for-sale securities are recorded as
short-term investments in the Company's Consolidated Balance Sheets. The
proceeds from sales of these securities during the December 1994 quarter
totaled $201 million, which resulted in realized losses, computed on a
specific identification basis, of less than $1 million. The amount of net
unrealized losses on short-term investments reflected in stockholders'
equity at December 31, 1994, was $5 million, net of the related tax benefit.
5. SALE OF RECEIVABLES:
During fiscal 1994, the Company entered into a revolving accounts receivable
facility providing for the sale of $489 million of a defined pool of
accounts receivable through a wholly-owned subsidiary to a trust in exchange
for a Senior Certificate in the principal amount of $300 million and a
Subordinate Certificate in the principal amount of $189 million. The
subsidiary retained the Subordinate Certificate and the Company received
$300 million in cash from the sale of the Senior Certificate to a third
party. The principal amount of the Subordinate Certificate fluctuates daily
depending upon the volume of receivables sold, and is payable to the
subsidiary only to the extent the collections received on the receivables
exceed amounts due on the Senior Certificate. At December 31, 1994, the
principal amount of the Subordinate Certificate was $154 million and is
included in accounts receivable in the Company's Consolidated Balance
Sheets.
6. INVESTMENTS IN ASSOCIATED COMPANIES:
During the December 1994 quarter, Delta and AT&T Global Information
Solutions Company (AT&T) formed TransQuest Information Solutions
(TransQuest), a joint venture that will provide information technology
services to Delta and others in the travel and transportation industries.
Delta and AT&T each own a 50% interest in TransQuest. Delta's initial
investment in TransQuest is being accounted for under the equity method and
consists of software valued at $25 million. This investment is recorded as
an investment in associated companies in the accompanying Consolidated
Balance Sheets.
-10-
<PAGE>
7. INCOME TAXES:
Income taxes are provided at the estimated annual effective tax rate, which
differs from the federal statutory rate of 35%, primarily due to state
income taxes and the effect of certain expenses that are not deductible for
income tax purposes.
The Company made tax payments in excess of refunds received of $22 million
and $18 million during the six months ended December 31, 1994 and 1993,
respectively.
8. 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 against Delta relating to Delta's
participation in Pan Am's proposed plan of reorganization. The trial of
liability issues in this lawsuit occurred between May 4, 1994 and June 10,
1994 before the United States District Court for the Southern District of
New York (District Court). In an opinion and order dated December 22,1994,
the District Court (1) ruled that Delta had no liability in this lawsuit;
(2) ordered Pan Am to repay to Delta the $115 million principal amount of
debtor-in-possession financing Delta had provided to Pan Am plus interest;
and (3) held that the Creditors Committee had no liability to Delta under
Delta's counterclaims. No party appealed the District Court's decision, and
the time period for filing an appeal expired on February 6, 1995. Several
other lawsuits have been filed and are pending against Delta relating to its
participation in Pan Am's proposed plan of reorganization.
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. 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.
9. LONG-TERM DEBT:
During the December 1994 quarter, the Company voluntarily repurchased and
retired $17 million principal amount of its long-term debt, and the Delta
Family-Care Savings Plan (Savings Plan) voluntarily prepaid in whole, with
funds provided by Delta, the $131 million aggregate principal amount of the
Savings Plan's 1990 Series A and Series B Guaranteed
-11-
<PAGE>
Serial ESOP Notes, which were guaranteed by Delta. As a result of these
transactions, the Company recognized a net pretax loss of $8 million during
the quarter ended December 31, 1994; this amount is included in
miscellaneous income (expense) in the Company's Consolidated Statements of
Operations.
Simultaneous with the prepayment of the 1990 Series A and Series B
Guaranteed Serial ESOP Notes (Old Notes), the Savings Plan issued to the
Company 1994 Series A and Series B Guaranteed Serial ESOP Notes (New Notes)
in a principal amount equal to the Old Series A Notes and Old Series B
Notes, respectively, that were prepaid. The New Notes have the same
interest rate and final maturity, and their other terms are substantially
the same as the corresponding series of Old Notes, except that the New Notes
do not have the benefit of a credit enhancement such as the letter of credit
discussed below. The principal amount outstanding and other terms of the
Savings Plan's 1990 Series C Guaranteed Serial ESOP Notes were not affected
by the prepayment of the Old Notes.
The 1991 Bank Credit Agreement, which provided for unsecured borrowing by
the Company on a revolving basis of up to $500 million, expired by its terms
on December 19, 1994. On that date, the 1992 Bank Credit Agreement was
modified to increase from $1 billion to $1.25 billion the unsecured
borrowings available to the Company on a revolving basis until December 4,
1996.
At December 31, 1994, no borrowings were outstanding under the Company's
1992 Bank Credit Agreement, but there is currently outstanding a letter of
credit in the amount of $466 million to credit enhance the Savings Plan's
1990 Series C Guaranteed Serial ESOP Notes. The letter of credit, which is
utilizing $466 million of the available commitment under the 1992 Bank
Credit Agreement, covers the $290 million outstanding principal amount of
the 1990 Series C Guaranteed Serial ESOP Notes, up to $144 million of Make
Whole Premium Amount and approximately one year of interest on the 1990
Series C Guaranteed Serial ESOP Notes. For additional information regarding
Delta's long-term debt, including the 1992 Bank Credit Agreement and the
1990 Series C Guaranteed Serial ESOP Notes, see Note 5 (page 28) of the
Notes to Consolidated Financial Statements in Delta's 1994 Annual Report to
Stockholders.
During the six months ended December 31, 1994 and 1993, Delta made cash
interest payments, net of interest capitalized, of $116 million and $104
million, respectively.
-12-
<PAGE>
10. AIRCRAFT PURCHASE AND SALE COMMITMENTS:
At December 31, 1994, 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 1 4 - -
A310-300 - 9 9 - -
B-727-200 106 28 134 - -
B-737-200 1 57 58 - -
B-737-300 - 13 13 52 56
B-757-200 43 41 84 6 37
B-767-200 15 - 15 - -
B-767-300 2 24 26 - -
B-767-300ER 7 7 14 7 10
L-1011-1 32 - 32 - -
L-1011-200 1 - 1 - -
L-1011-250 6 - 6 - -
L-1011-500 17 - 17 - -
MD-11 4 7 11 4 27
MD-88 63 57 120 - 40
MD-90 - - - 53 50
--- --- --- --- ---
300 244 544 122 220
=== === === === ===
</TABLE>
The aircraft orders include 22 B-737-300 aircraft and 22 MD-90 aircraft
scheduled for delivery after fiscal 2001 and fiscal 1996, respectively, that
are subject to reconfirmation by Delta. The MD-88 aircraft options may be
converted to MD-90 aircraft orders, the B-737-300 aircraft orders and
options may be converted to B-737-400 or B-737-500 aircraft orders, the B-
767-300ER aircraft options and two of the B-767-300ER aircraft orders may be
converted to B-767-300 aircraft orders, all at Delta's election.
During the December 1994 quarter, Delta entered into a definitive agreement
with Federal Express Corporation to purchase 46 shipsets of Stage 3
heavyweight hushkits and 9 spare engine hushkits between fiscal years 1995
and 2000 with an option to purchase an additional 52 shipsets of Stage 3
heavyweight hushkits and 10 spare engine hushkits. Additionally, Delta
entered into a definitive agreement to sell three A310-200 aircraft by the
end of fiscal 1995.
Subsequent to December 31, 1994, Delta returned two B-737-200 and one A310-
200 aircraft to their lessors.
-13-
<PAGE>
Future expenditures for aircraft, engines and hushkits on firm order at
December 31, 1994, are estimated to be $3.1 billion, excluding aircraft
orders subject to reconfirmation by Delta, as follows:
<TABLE>
<CAPTION>
AMOUNT
YEARS ENDING JUNE 30 (IN MILLIONS)
-------------------- -------------
<S> <C>
Six months ending June 30, 1995 $ 340
1996 420
1997 920
1998 720
1999 320
After 1999 400
------
Total $3,120
======
</TABLE>
11. STOCKHOLDERS' EQUITY:
During the December 1994 quarter, the Company issued 2,844 common shares, at
an average price of $48.18 per share, under the Dividend Reinvestment and
Stock Purchase Plan. Also during the December 1994 quarter, the Company
transferred from its treasury 24 common shares, at an average cost of $67.75
per share, under the 1989 Stock Incentive Plan.
At December 31, 1994, 5,922,710 common shares were reserved for issuance
under the 1989 Stock Incentive Plan; 5,876,669 common shares were reserved
for conversion of the Series B ESOP 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.
12. RESTRUCTURING CHARGE:
During the December 1993 quarter, Delta recorded a $112 million
restructuring charge primarily for special termination benefits relating to
an early retirement program under which approximately 1,500 employees
elected to retire effective November 1, 1993.
-14-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
FINANCIAL CONDITION
During the six months ended December 31, 1994, Delta invested $107 million in
flight equipment and $104 million in ground property and equipment; made
payments of $369 million on long-term debt and capital lease obligations, which
included Delta's voluntary repurchase and retirement of $219 million principal
amount of long-term debt, and the Delta Family-Care Savings Plan's (Savings
Plan) voluntary prepayment in whole, with funds provided by Delta, of the $131
million aggregate principal amount of the Savings Plan's 1990 Series A and
Series B Guaranteed Serial ESOP Notes, which were guaranteed by Delta; and paid
$60 million in cash dividends. The principal sources of these funds were $322
million from cash reserves, $237 million from operations and $81 million from
the sale of flight equipment. Cash and cash equivalents and short-term
investments totaled $1.4 billion at December 31, 1994, compared to $1.7 billion
at June 30, 1994. The Company may repurchase additional long-term debt from time
to time.
As of December 31, 1994, the Company had negative working capital of $185
million, compared to negative working capital of $313 million at June 30, 1994.
A negative working capital position is normal for Delta and does not indicate a
lack of liquidity. The Company expects to meet its current obligations as they
become due through available cash and internally generated funds, supplemented
as necessary by debt financings and proceeds from sale and leaseback
transactions. At December 31, 1994, the Company had $784 million of credit
available under its 1992 Bank Credit Agreement, subject to compliance with
certain conditions. For additional information, see Note 9 of the Notes to
Consolidated Financial Statements.
At December 31, 1994, long-term debt and capital lease obligations, including
current maturities, totaled $3.1 billion, compared to $3.5 billion at June 30,
1994. Stockholders' equity was $1.6 billion at December 31, 1994, compared to
$1.5 billion at June 30, 1994. The Company's debt-to-equity position, including
current maturities, was 66% debt and 34% equity at December 31, 1994, compared
to 70% debt and 30% equity at June 30, 1994.
At December 31, 1994, there was outstanding $290 million principal amount of
1990 Series C 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, Inc. (Moody's) and A- or higher by Standard
& Poor's Ratings Group (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. Prior
to September 15, 1993, Delta obtained an Approved Credit Enhancement in the form
of a letter of credit under its 1992 Bank Credit Agreement. As of December 31,
1994, the letter of credit was in the face amount of $466 million. Due to the
issuance of the letter of credit, the ESOP Notes received the Required Ratings.
Accordingly,
-15-
<PAGE>
Delta no longer has an obligation to purchase 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, see Notes 5 and 9 of the Notes to Consolidated Financial
Statements in Delta's 1994 Annual Report to Stockholders and this Form 10-Q,
respectively.
During 1991, Delta provided $115 million principal amount of debtor-in-
possession financing to Pan Am (DIP Loan). In an opinion and order dated
December 22, 1994, the United States District Court for the Southern District of
New York ordered Pan Am to repay the DIP Loan plus accrued interest. On January
9, 1995, Pan Am paid Delta $139 million, which reflects the $115 million
principal amount of the DIP Loan plus accrued interest, net of the settlement of
certain other claims. See Item I of Part II of this Form 10-Q for additional
information regarding the District Court's decision. At December 31, 1994, the
$115 million principal amount of the DIP Loan plus accrued interest is included
in accounts and notes receivable, net in the Company's Consolidated Balance
Sheets. At June 30, 1994, the DIP Loan was included in other assets in the
Company's Consolidated Balance Sheets.
At its regular meeting on January 26, 1995, 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,
1995, to stockholders of record on February 8, 1995.
During the six months ended December 31, 1994, the Company reduced its staffing
by approximately 6,300 personnel and made cash payments of $16 million related
to its Leadership 7.5 program initiatives. For additional information concerning
Leadership 7.5, see Operational Review--Leadership 7.5 (page 4) and Note 14
(page 35) of the Notes to Consolidated Financial Statements in Delta's 1994
Annual Report to Stockholders.
See item 5 in Part II of this Form 10-Q for information regarding Delta's (1)
collective bargaining negotiations with the Air Line Pilots Association and the
Professional Airline Flight Control Association; (2) blocked-space, code-sharing
agreement with Virgin Atlantic Airways; (3) realignment of its domestic route
system; (4) formation of a joint venture with AT&T Global Information Solutions
Company; (5) definitive agreement with Federal Express Corporation to
purchase Stage 3 heavyweight hushkits; and (6) cap on domestic travel agency
commissions.
-16-
<PAGE>
RESULTS OF OPERATIONS
Three Months Ended December 31, 1994 and 1993
- ---------------------------------------------
For the quarter ended December 31, 1994, Delta recorded an unaudited net loss of
$18 million ($0.79 primary and fully diluted loss per common share after
preferred stock dividend requirements) and operating income of $18 million. For
the quarter ended December 31, 1993, the Company recorded a net loss of $141
million ($3.36 primary and fully diluted loss per common share after preferred
stock dividend requirements) and an operating loss of $180 million. The results
for the December 1993 quarter include a $112 million restructuring charge for
costs associated with an early retirement program under which approximately
1,500 employees elected to retire effective November 1, 1993 (see Note 12 of
Notes to Consolidated Financial Statements). Excluding the restructuring
charge, the Company's net loss for the three months ended December 31, 1993,
totaled $71 million ($1.97 primary and fully diluted loss per common share after
preferred stock dividend requirements), and the operating loss was $68 million.
Operating revenues in the December 1994 quarter totaled $2.92 billion, a
decrease of 1% from $2.95 billion recorded in the December 1993 quarter.
Passenger revenue declined 2% to $2.69 billion, the result of a 4% decline in
the passenger mile yield partially offset by a 2% increase in revenue passenger
miles. The reduction in the passenger mile yield is primarily attributable to
the increased presence of low-cost, low-fare carriers in domestic markets, as
well as other discount fare promotions in domestic and international markets.
Growth in passenger traffic is mainly due to discount fare promotions in
domestic and international markets and improved economic conditions in areas of
Europe. Cargo revenue increased 3% to $154 million, as cargo ton miles grew 13%
and the ton mile yield decreased 9%. All other revenue increased 13% to $77
million, primarily due to increased revenue from joint marketing programs.
Operating expenses for the December 1994 quarter decreased 7% to $2.90 billion.
Operating capacity decreased 1% to 32.45 billion available seat miles and
operating cost per available seat mile declined 6% to 8.94 cents. Excluding the
restructuring charge in the December 1993 quarter, operating expenses decreased
4%, and operating costs per available seat mile declined 3%.
Salaries and related costs decreased 6%, due to a 7% reduction in the average
level of employment and lower employee benefit costs. The decrease in the
average level of employment was primarily due to workforce reductions under the
Company's Leadership 7.5 program, and an early retirement program during the
December 1993 quarter. Aircraft fuel expense decreased 4%, as fuel gallons
consumed increased less than 1% and the average price per fuel gallon declined
4% to 56.36 cents, Delta's lowest average fuel price per gallon in a December
quarter since 1988. Passenger commissions declined 3%, mainly due to lower
revenues. Aircraft rent expense decreased 8% due to the return of certain
aircraft to lessors. Depreciation and amortization expense decreased 10%,
primarily due to lower amortization of leasehold and operating rights and lower
ground equipment depreciation resulting from the writedown of certain assets
recorded in the June 1994 quarter restructuring charge, partially offset by
higher amortization of software development costs related to new and enhanced
systems. Other selling expenses decreased 5%, the result of lower advertising
and promotion expense, partially offset by higher credit card service charges
and increased booking fee payments to computer reservations system providers.
-17-
<PAGE>
Passenger service expense decreased 9%, due to a number of cost control programs
implemented since 1993. Contracted services increased 5%, the result of
increased outsourcing of certain airport functions. Aircraft maintenance
materials and outside repairs expense rose 14%, reflecting an increased number
of engines repaired. Facilities and other rent increased 17%, primarily due to
additional passenger terminal facilities. Landing fees decreased 2%, mainly
reflecting rate adjustments at certain airports. All other operating expenses
decreased 3%, primarily reflecting lower professional and technical fees and
increased revenues from services provided to outside parties, partially offset
by insurance rate increases.
Nonoperating expense in the December 1994 quarter totaled $40 million, compared
to $45 million in the December 1993 quarter. Interest expense decreased 3% to
$74 million, due to a lower average level of long-term debt. Interest income
increased 93% to $27 million, due to an increase in interest rates and a higher
level of short-term investments. Miscellaneous expense was $1 million in the
December 1994 quarter, compared to miscellaneous income of $8 million in the
December 1993 quarter, due to fees related to the sale of credit card
receivables and costs associated with the voluntary repurchase of long-term
debt, partially offset by equity income from associated companies, all during
the current period.
The pretax loss of $22 million for the December 1994 quarter was reduced by a
net income tax benefit of $4 million. After recording a $22 million provision
for preferred stock dividends, the net loss attributable to common stockholders
was $40 million.
Six Months Ended December 31, 1994 and 1993
- -------------------------------------------
For the six months ended December 31, 1994, Delta recorded unaudited net income
of $168 million ($2.46 primary and $2.28 fully diluted earnings per common share
after preferred stock dividend requirements) and operating income of $172
million. For the six months ended December 31, 1993, the Company recorded a net
loss of $81 million ($2.71 primary and fully diluted loss per common share after
preferred stock dividend requirements) and an operating loss of $59 million.
Net income for the six months ended December 31, 1994, includes a one-time $114
million after-tax benefit ($2.25 primary and $1.43 fully diluted benefit per
common share) related to the adoption, effective July 1,1994, of SFAS 112,
"Employers' Accounting for Postemployment Benefits" (See Note 3 of Notes to
Consolidated Financial Statements). Results for the six months ended December
31, 1993, include a $112 million pretax 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 accounting change and restructuring charge, net income for the six months
ended December 31, 1994, totaled $54 million ($0.21 primary and fully diluted
earnings per common share after preferred stock dividend requirements) and
operating income totaled $172 million, compared to a net loss of $11 million
($1.32 primary and fully diluted loss per common share after preferred stock
dividend requirements) and operating income of $53 million for the six months
ended December 31, 1993.
-18-
<PAGE>
Operating revenues for the six months ended December 31, 1994, decreased less
than 1% to $6.08 billion. Passenger revenue decreased 1% to $5.62 billion, due
to a 3% decrease in the passenger mile yield, partially offset by a 2% growth in
revenue passenger miles. The reduction in the passenger mile yield is mainly due
to the increased presence of low-cost, low-fare carriers in domestic markets, as
well as other discount fare promotions in domestic and international markets.
Growth in passenger traffic is mainly due to discount fare promotions in
domestic and international markets and improved economic conditions in areas of
Europe. Cargo revenue grew 5% to $292 million, the result of a 14% increase in
cargo ton miles, partially offset by an 8% decrease in the ton mile yield. All
other revenue increased $28 million, mainly due to higher revenues from certain
marketing programs.
Operating expenses for the six months ended December 31, 1994, decreased 4% to
$5.90 billion. Operating capacity decreased 2% to 66.01 billion available seat
miles and operating cost per available seat mile declined 2% to 8.94 cents.
Excluding the restructuring charge in the six months ended December 31, 1993,
operating expenses decreased 2%, and operating cost per available seat mile was
flat.
Salaries and related costs decreased 4%, the result of lower employee benefit
costs and a 7% decrease in the average number of employees, primarily due to the
Leadership 7.5 program and the early retirement program discussed earlier.
Aircraft fuel expense decreased 5%, as fuel gallons consumed decreased less than
1% and the average fuel cost per gallon dropped 4% to 55.57 cents, Delta's
lowest average fuel price per gallon for any six month period ending December 31
since 1988. Aircraft rent decreased 9% due to the return of certain aircraft to
lessors. Depreciation and amortization expense decreased 6%, primarily the
result of lower amortization of leasehold and operating rights and lower ground
equipment depreciation resulting from the writedown of certain assets recorded
in the June 1994 quarter restructuring charge, partially offset by higher
amortization of software development costs. Other selling expenses increased
less than 1%, primarily due to higher booking fee payments to computer
reservations systems and higher credit card service charges, offset by reduced
advertising costs. Passenger service expense decreased 6%, resulting from the
continuation of cost control programs implemented since 1993. Contracted
services increased 4%, the result of increased outsourcing of certain airport
functions. Aircraft maintenance materials and outside repairs expense increased
10%, reflecting an increased number of engines repaired. Facilities and other
rents increased 14%, the result of additional passenger terminal facilities.
Landing fees increased 2% due to higher rates at certain locations, partially
offset by rate adjustments at certain airports. All other operating expenses
were up 2%, the result of insurance rate increases, partially offset by lower
professional and technical fees and increased revenues from services provided to
outside parties.
Nonoperating expense totaled $73 million in the six months ended December 31,
1994, compared to $88 million in the six months ended December 31, 1993.
Interest expense decreased $3 million, reflecting the voluntary repurchase of
long-term debt. Capitalized interest decreased $3 million, resulting from a
decline in the balance of advance payments for aircraft purchases. Interest
income increased $24 million, due to a higher average level of short-term
investments. Miscellaneous income was $11 million in the six months ended
December 31, 1994, compared to $20 million in the six months ended December 31,
1993, primarily due to fees related to the sale of credit card receivables
during the current period.
-19-
<PAGE>
Pretax income of $99 million for the six months ended December 31, 1994, was
reduced by an income tax provision of $45 million. After recording a $114
million after-tax benefit related to the adoption of SFAS 112, as discussed
above, and a $44 million provision for preferred stock dividends, net income
available to common stockholders was $124 million.
-20-
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and
the Board of Directors of
Delta Air Lines, Inc.:
We have reviewed the accompanying consolidated balance sheet of DELTA AIR LINES,
INC. (a Delaware Corporation) AND SUBSIDIARIES as of December 31, 1994, the
related consolidated statements of operations for the three and six-month
periods ended December 31, 1994 and 1993, and cash flows for the six-month
periods ended December 31, 1994 and 1993. 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. and
Subsidiaries as of June 30, 1994 (not presented herein), and in our report
dated August 12, 1994, we expressed an unqualified opinion on that balance
sheet. In our opinion, the information set forth in the accompanying
consolidated balance sheet as of June 30, 1994 is fairly stated in all
material respects in relation to the consolidated balance sheet from which it
has been derived.
Arthur Andersen LLP
Atlanta, Georgia
February 3, 1995
-21-
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
Litigation Relating to Delta's Participation in Pan Am's Plan of Reorganization
- -------------------------------------------------------------------------------
Various persons 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 12-15 of Delta's Annual Report on Form 10-K for
the fiscal year ended June 30, 1994 (1994 Form 10-K).
As previously reported, the United States District Court for the Southern
District of New York (District Court) conducted a trial between May 4, 1994 and
June 10, 1994 on liability issues in the lawsuit filed against Delta by Pan Am,
the Official Committee of Unsecured Creditors of Pan Am (Creditors Committee)
and the Ad Hoc Committee of Administrative and Priority Creditors of Pan Am. In
an opinion and order dated December 22, 1994, the District Court (1) ruled that
Delta had no liability in this lawsuit; (2) ordered Pan Am to repay to Delta the
$115 million principal amount of debtor-in-possession financing Delta had
provided to Pan Am plus interest; and (3) held that the Creditors Committee had
no liability to Delta under Delta's counterclaims. No party appealed the
District Court's decision, and the time period for filing an appeal expired on
February 6, 1995.
Other Litigation
- ----------------
As reported on pages 16-17 of the 1994 Form 10-K, on February 25, 1994, the
Delaware Chancery Court granted the motion for summary judgment filed by Western
Air Lines, Inc. (Western) and its individual directors in the purported class
action lawsuit filed against them by Western security holders relating to
Delta's acquisition of Western in 1986. Plaintiffs appealed to the Delaware
Supreme Court, which affirmed the Chancery Court's ruling on January 6, 1995.
As reported on page 3 of Delta's Current Report on Form 8-K dated October 19,
1994, Delta and seven other U.S. airlines agreed to settle, without admitting
liability, a class action lawsuit filed against them by state and local
government entities nationwide. On December 8, 1994, the United States District
Court for the District of Columbia granted preliminary approval of the
settlement. The District Court is expected to consider final approval of the
settlement in May 1995.
-22-
<PAGE>
As reported on page 17 of the 1994 Form 10-K and page 18 of Delta's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1994, a purported class
action complaint was filed in the United States District Court for the Northern
District of Georgia against Delta and certain Delta officers in their capacity
as members of the Administrative Committee responsible for administering certain
Company employee benefit plans. The plaintiffs, who have requested a jury trial,
are 21 former Delta employees who seek to represent the class consisting of the
approximately 1,800 former non-pilot employees of Delta who retired from active
service between July 23, 1992 and January 1, 1993. The complaint alleges that
Delta violated the Employee Retirement Income Security Act by (1) modifying
health benefits for this group of retirees in spite of alleged oral and written
representations that it would not make any such modifications; (2) breaching its
fiduciary duties and interfering with plaintiffs' benefits by making such
modifications and by allegedly giving false assurances that no enhanced
retirement benefit incentives were being considered or would be offered in the
future; and (3) discriminating against certain benefit plan participants. The
complaint also alleges, among other things, that Delta breached a contract with
plaintiffs by amending Delta's pass policy to suspend the flight privileges of a
retiree during any period such retiree is employed by certain other airlines.
On November 4, 1994, the District Court (1) denied the plaintiffs' motion for
class action certification; and (2) granted Delta's motion to dismiss
plaintiffs' claims concerning Delta's pass policy for lack of subject matter
jurisdiction. On January 11, 1995, the District Court denied plaintiffs' motion
requesting the District Court to reconsider its November 4, 1994 decision, but
granted plaintiffs' motion to permit an immediate appeal of that order. The
plaintiffs have filed a petition to appeal with the United States Court of
Appeals for the Eleventh Circuit. Delta is opposing this petition.
-23-
<PAGE>
Item 5. Other Information
- -------------------------
Personnel
- ---------
Delta's collective bargaining agreements with the Air Line Pilots Association
(ALFA) and the Professional Airline Flight Control Association (PAFCA) became
amendable on January 1, 1995, and negotiations with ALPA and PAFCA began in
November 1994. As part of its Leadership 7.5 program, the Company is seeking
$340 million in annual productivity improvements and wage and benefit reductions
from ALPA. The outcome of these negotiations cannot presently be determined.
Marketing Arrangements
- ----------------------
Delta and Virgin Atlantic Airways have entered into a blocked-space, code-
sharing agreement under which Delta would purchase seats on Virgin Atlantic's
flights between (1) London-Heathrow and Los Angeles, New York-Kennedy, Newark
and San Francisco; and (2) London-Gatwick and Boston, Miami and Orlando. The
agreement is subject to the approval of the U.S. Department of Transportation
(DOT). On February 10, 1995, the DOT approved the agreement.
Other Matters
- -------------
On February 1, 1995, Delta announced a realignment of its domestic route system
effective May 1, 1995. The realignment is intended to position Delta's aircraft
and other resources in areas offering greater revenue-generating potential. As a
result of the realignment, Delta will increase the number of departures from
its Atlanta, Cincinnati, and Salt Lake City hubs, while decreasing the number of
departures from Boston and its Dallas/Ft. Worth, Los Angeles and Orlando hubs.
Due mainly to competitive factors, there can be no assurance that this route
realignment will result in increased passenger revenues.
During the December 1994 quarter, Delta and AT&T Global Information Solutions
Company formed TransQuest Information Solutions, a Georgia general partnership,
which will provide information technology services to Delta and others in the
travel and transportation industries. For additional information, see Note 6 of
Notes to Consolidated Financial Statements. Effective January 1, 1995,
approximately 1,000 Delta employees became employees of TransQuest.
During the December 1994 quarter, Delta entered into a definitive agreement
with Federal Express Corporation to purchase certain Stage 3 heavyweight
hushkits. See Note 10 of the Notes to Consolidated Financial Statements.
On February 10, 1995, Delta changed its domestic travel agency commission
program by introducing a maximum commission payment of $50 for any round-trip
domestic ticket with a base fare in excess of $500 and $25 for any one-way
domestic ticket with a base fare in excess of $250. The maximum commission
applies to all tickets issued by U.S. travel agents for travel within and
between the Continental U.S., Alaska, Hawaii, Puerto Rico and the U.S. Virgin
Islands. The impact of this change on Delta cannot presently be determined.
-24-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) Exhibits
11. Statement regarding computation of per share earnings.
12. Statement regarding computation of ratio of earnings to fixed charges.
15. Letter from Arthur Andersen LLP regarding unaudited interim financial
information.
27. Financial Data Schedule
(b) Reports on Form 8-K:
During the quarter ended December 31, 1994, Delta filed a Current Report on Form
8-K dated October 19, 1994, concerning (i) certain exchange offers which were
subsequently terminated; (ii) restructuring charges relating to Delta's
Leadership 7.5 program; and (iii) the settlement of certain litigation.
-25-
<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 13, 1995
- ----------------------
(Date)
-26-
<PAGE>
DELTA AIR LINES, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
THREE MONTHS ENDED DECEMBER 31, 1994 AND 1993
EXHIBIT 11
(In millons except per share amounts)
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
PRIMARY:
Weighted average shares outstanding 51 50
Additional shares assuming
exercise of stock options * *
Average shares outstanding as adjusted 51 50
Net Income (loss) $-18 $ -141
Preferred dividends series C -20 -20
Preferred dividends series B -2 -8
Net income (loss) attributable to primary shares $ -40 $ -169
Primary earnings (loss) per share $ -0.79 $ -3.36
FULLY DILUTED:
Weighted average shares outstanding 51 50
Additional shares assuming:
Conversion of series C convertible preferred stock 17 17
Conversion of series B ESOP convertible
preferred stock 1 6
Conversion of 3.23% convertible subordinated notes 10 10
Exercise of stock options * *
Average shares outstanding as adjusted 79 83
Net income (loss) $ -18 $ -141
Interest on 3.23% convertible subordinated
notes net of taxes 8 8
Additional required ESOP contribution
assuming conversion of series
B ESOP convertible preferred stock -1 -5
Net income (loss) attributable to fully
diluted common shares $ -11 $ -138
Fully diluted earnings (loss) common share $ -0.14 $ -1.64
</TABLE>
*Antidilutive
<PAGE>
DELTA AIR LINES, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1994 AND 1993
EXHIBIT 11
(In millons except per share amounts)
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
PRIMARY:
Weighted average shares outstanding 51 50
Additional shares assuming
exercise of stock options * *
Average shares outstanding as adjusted 51 50
Income (loss) before cumulative effect of
changes in accounting principles $ 54 $ -81
Preferred dividends series C -40 -40
Preferred dividends series B -4 -15
Income (loss) before cumulative effect of
changes in accounting principles
attributable to primary shares 10 -136
Cumulative effect of changes in accounting principles 114 -
Net income (loss) attributable to primary shares $ 124 $ -136
Primary earnings (loss) per share before
cumulative effect of changes in accounting principles $ 0.21 $ -2.71
Cumulative effect of changes in accounting principles 2.25 -
Primary earnings (loss) per share $ 2.46 $ -2.71
FULLY DILUTED:
Weighted average shares outstanding 51 50
Additional shares assuming:
Conversion of series C convertible preferred stock 17 17
Conversion of series B ESOP convertible
preferred stock 1 6
Conversion of 3.23% convertible subordinated notes 10 10
Exercise of stock options * *
Average shares outstanding as adjusted 79 83
Income (loss) before cumulative effect of
changes in accounting principles $ 54 $ -81
Interest on 3.23% convertible subordinated
notes net of taxes 16 16
Additional required ESOP contribution
assuming conversion of series
B ESOP convertible preferred stock -2 -9
Income (loss) before cumulative effect of
changes in accounting principles 68 -74
Cumulative effect of changes in accounting principles 114 -
Net income (loss) attributable to fully
diluted common shares $ 182 $ -74
Fully diluted earnings (loss) per common share
before cumulative effect of changes in
accounting principles $ 0.85 $ -0.89
Cumulative effect of changes in accounting principles 1.43 -
Fully diluted earnings (loss) common share $ 2.28 $ -0.89
</TABLE>
*Antidilutive
<PAGE>
EXHIBIT 12
DELTA AIR LINES, INC.
STATEMENT REGARDING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In Millions except ratios)
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
December 31, December 31,
1994 1993
------------ ------------
<S> <C> <C>
Earnings (before cumulative effect of
accounting changes):
Income (loss) $ 54 $(81)
Add (deduct):
Income tax (credit) provision 45 (66)
Fixed charges 336 347
Interest capitalized (15) (18)
Interest offset on Guaranteed Serial
ESOP Notes (1) (6)
---- ----
Earnings as adjusted $419 $176
==== ====
Fixed charges:
Interest expense $150 $153
1/3 of rentals 185 188
Additional interest on Guaranteed Serial
ESOP Notes 1 6
---- ----
Total fixed charges $336 $347
==== ====
Ratio of earnings to fixed charges 1.25
</TABLE>
Earnings for the six months December 31, 1993 were inadequate to cover fixed
charges.
Additional earnings of $171 million would have been necessary to bring the ratio
to 1.0.
<PAGE>
ARTHUR ANDERSEN LLP
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, 1994, which includes our report dated
February 3, 1995 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.
Arthur Andersen LLP
- -------------------
Atlanta, Georgia
February 3, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the Form 10-Q for the Quarter ended December 31, 1994 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 469
<SECURITIES> 911
<RECEIVABLES> 832
<ALLOWANCES> 55
<INVENTORY> 79
<CURRENT-ASSETS> 2,760
<PP&E> 11,921
<DEPRECIATION> 5,483
<TOTAL-ASSETS> 11,384
<CURRENT-LIABILITIES> 2,945
<BONDS> 3,108
<COMMON> 164
0
0
<OTHER-SE> 1,447
<TOTAL-LIABILITY-AND-EQUITY> 11,384
<SALES> 0
<TOTAL-REVENUES> 6,076
<CGS> 0
<TOTAL-COSTS> 5,904
<OTHER-EXPENSES> (77)
<LOSS-PROVISION> 11
<INTEREST-EXPENSE> 150
<INCOME-PRETAX> 99
<INCOME-TAX> 45
<INCOME-CONTINUING> 54
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 114
<NET-INCOME> 168
<EPS-PRIMARY> 2.46
<EPS-DILUTED> 2.28
</TABLE>
