<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended December 31, 1995
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, 1996:
Common Stock, $3.00 par value - 51,177,582 shares outstanding
<PAGE> 2
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 1995 1995
- ------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 881 $ 1,233
Short-term investments 503 529
Accounts and notes receivable, net 845 755
Maintenance and operating supplies 67 68
Deferred income taxes 246 234
Prepaid expenses and other 205 195
------- -------
Total current assets 2,747 3,014
------- -------
PROPERTY AND EQUIPMENT:
Flight equipment owned 9,651 9,288
Less: Accumulated depreciation 4,363 4,209
------- -------
5,288 5,079
------- -------
Flight equipment under capital leases 537 537
Less: Accumulated amortization 124 99
------- -------
413 438
------- -------
Ground property and equipment 2,538 2,442
Less: Accumulated depreciation 1,445 1,354
------- -------
1,093 1,088
------- -------
Advance payments for equipment 328 331
------- -------
7,122 6,936
------- -------
OTHER ASSETS:
Deferred income taxes 423 506
Marketable equity securities 410 398
Postemployment benefits 301 294
Cost in excess of net assets acquired, net 270 274
Non-operating property, net 141 155
Investments in associated companies 276 265
Leasehold and operating rights, net 167 177
Other 141 124
------- -------
2,129 2,193
------- -------
$11,998 $12,143
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
2
<PAGE> 3
DELTA AIR LINES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN MILLIONS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
December 31 June 30
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt 150 151
Current obligations under capital leases 58 61
Accounts payable and accrued liabilities 1,751 1,621
Air traffic liability 930 1,143
Accrued vacation pay 203 167
Accrued rent 240 235
Income taxes payable 1 63
------- -------
Total current liabilities 3,333 3,441
------- -------
NONCURRENT LIABILITIES:
Long-term debt 2,577 2,683
Postretirement benefits 1,747 1,714
Accrued rent 574 556
Capital leases 404 438
Other 221 395
------- -------
5,523 5,786
------- -------
DEFERRED CREDITS:
Deferred gain on sale and leaseback transactions 831 860
Manufacturers and other credits 89 109
------- -------
920 969
------- -------
COMMITMENTS AND CONTINGENCIES (NOTES 6 AND 8)
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 6,767,325 shares at December 31,
1995 and 6,786,632 shares at June 30, 1995 487 489
Less: Unearned compensation under
employee stock ownership plan 344 369
------- -------
143 120
------- -------
STOCKHOLDERS' EQUITY:
Series C Convertible Preferred Stock,
$1.00 par value, $50,000 liquidation preference;
Issued and outstanding 22,998 shares at December 31, 1995
and 23,000 shares at June 30, 1995 - -
Common stock, $3.00 par value; Authorized, 150,000,000 shares;
Issued 54,846,625 shares at December 31, 1995
and 54,537,103 shares at June 30, 1995 164 164
Additional paid-in capital 2,034 2,016
Net unrealized gain on marketable securities 92 83
Retained earnings (deficit) 38 (184)
Less: Treasury stock at cost, 3,675,086 shares at
December 31, 1995, and 3,721,093 shares at June 30, 1995 249 252
------- -------
2,079 1,827
------- -------
$11,998 $12,143
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
3
<PAGE> 4
DELTA AIR LINES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended
December 31
------------ -------------
1995 1994
------------ -------------
<S> <C> <C>
OPERATING REVENUES:
Passenger $ 2,731 $ 2,688
Cargo 135 154
Other, net 78 77
------------ -----------
Total operating revenues 2,944 2,919
------------ -----------
OPERATING EXPENSES:
Salaries and related costs 1,051 1,074
Aircraft fuel 355 357
Passenger commissions 246 298
Contracted services 163 122
Depreciation and amortization 159 155
Aircraft rent 139 172
Other selling expenses 150 165
Facilities and other rent 109 110
Aircraft maintenance materials and outside repairs 102 112
Passenger service 91 118
Landing fees 56 60
Other 154 158
------------ -----------
Total operating expenses 2,775 2,901
------------ -----------
OPERATING INCOME 169 18
------------ -----------
OTHER INCOME (EXPENSE):
Interest expense (73) (74)
Interest capitalized 7 8
Interest income 24 27
Miscellaneous, net (4) (1)
------------ -----------
(46) (40)
------------ -----------
INCOME (LOSS) BEFORE INCOME TAXES 123 (22)
INCOME TAXES (PROVIDED) CREDITED, NET (53) 4
------------ -----------
NET INCOME (LOSS) 70 (18)
PREFERRED STOCK DIVIDENDS (22) (22)
------------ -----------
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS $ 48 $ (40)
============ ===========
PRIMARY AND FULLY DILUTED INCOME (LOSS) PER COMMON SHARE: $ 0.93 $ (0.79)
============ ===========
WEIGHTED AVERAGE SHARES USED IN PER SHARE COMPUTATION:
Primary 51,476,488 50,607,083
Fully Diluted 51,476,488 50,607,083
DIVIDENDS PER COMMON SHARE $ 0.05 $ 0.05
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
4
<PAGE> 5
DELTA AIR LINES, INC.
STATISTICAL SUMMARY
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31
------- -------
1995 1994
------- -------
<S> <C> <C>
STATISTICAL SUMMARY:
Revenue Passengers Enplaned (000) 21,864 22,379
Revenue Passenger Miles (millions) 20,771 21,113
Available Seat Miles (millions) 32,220 32,493
Passenger Mile Yield 13.15 c. 12.73 c.
Operating Revenue Per Available Seat Mile 9.14 c. 8.98 c.
Operating Cost Per Available Seat Mile 8.61 c. 8.93 c.
Passenger Load Factor 64.47 % 64.98 %
Breakeven Passenger Load Factor 60.47 % 64.55 %
Revenue Ton Miles (millions) 2,435 2,538
Cargo Ton Miles (millions) 356 424
Cargo Ton Mile Yield 37.83 c. 36.36 c.
Fuel Gallons Consumed (millions) 618 634
Average Price Per Fuel Gallon 57.37 c. 56.36 c.
Number of Aircraft in Fleet at End of Period 539 544
Full-Time Equivalent Employees at End of Period 58,097 63,304
</TABLE>
5
<PAGE> 6
DELTA AIR LINES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Six Months Ended
December 31
------------ ------------
1995 1994
------------ ------------
<S> <C> <C>
OPERATING REVENUES:
Passenger $ 5,704 $ 5,621
Cargo 264 292
Other, net 164 163
------------ ------------
Total operating revenues 6,132 6,076
------------ ------------
OPERATING EXPENSES:
Salaries and related costs 2,088 2,211
Aircraft fuel 703 719
Passenger commissions 524 620
Contracted services 335 242
Depreciation and amortization 320 319
Aircraft rent 279 344
Other selling expenses 295 315
Facilities and other rent 222 212
Aircraft maintenance materials and outside repairs 211 223
Passenger service 195 252
Landing fees 125 133
Other 280 314
------------ ------------
Total operating expenses 5,577 5,904
------------ ------------
OPERATING INCOME 555 172
------------ ------------
OTHER INCOME (EXPENSE):
Interest expense (148) (150)
Interest capitalized 14 15
Interest income 47 50
Miscellaneous, net (9) 12
------------ ------------
(96) (73)
------------ ------------
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE 459 99
INCOME TAXES PROVIDED, NET (189) (45)
------------ ------------
NET INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 270 54
CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF TAX - 114
------------ ------------
NET INCOME 270 168
PREFERRED STOCK DIVIDENDS (44) (44)
------------ ------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 226 $ 124
============ ============
PRIMARY INCOME PER COMMON SHARE:
Before cumulative effect of accounting change $ 4.40 $ 0.21
Cumulative effect of accounting change - 2.25
------------ ------------
$ 4.40 $ 2.46
============ ============
FULLY DILUTED INCOME PER COMMON SHARE:
Before cumulative effect of accounting change $ 3.52 $ 0.85
Cumulative effect of accounting change - 1.43
------------ ------------
$ 3.52 $ 2.28
============ ============
WEIGHTED AVERAGE SHARES USED IN PER SHARE COMPUTATION:
Primary 51,450,876 50,577,914
Fully Diluted 80,585,714 79,694,274
DIVIDENDS PER COMMON SHARE $ 0.10 $ 0.10
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
6
<PAGE> 7
DELTA AIR LINES, INC.
STATISTICAL SUMMARY
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31
------------- -------------
1995 1994
------------- -------------
<S> <C> <C>
STATISTICAL SUMMARY:
Revenue Passengers Enplaned (000) 43,968 45,869
Revenue Passenger Miles (millions) 43,516 44,765
Available Seat Miles (millions) 65,618 66,088
Passenger Mile Yield 13.11 c. 12.56 c.
Operating Revenue Per Available Seat Mile 9.34 c. 9.19 c.
Operating Cost Per Available Seat Mile 8.50 c. 8.93 c.
Passenger Load Factor 66.32 % 67.74 %
Breakeven Passenger Load Factor 59.87 % 65.67 %
Revenue Ton Miles (millions) 5,049 5,265
Cargo Ton Miles (millions) 695 784
Cargo Ton Mile Yield 37.96 c. 37.30 c.
Fuel Gallons Consumed (millions) 1,259 1,293
Average Price Per Fuel Gallon 55.82 c. 55.57 c.
Number of Aircraft in Fleet at End of Period 539 544
Full-Time Equivalent Employees at End of Period 58,097 63,304
</TABLE>
7
<PAGE> 8
DELTA AIR LINES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN MILLIONS)
<TABLE>
<CAPTION>
Six Months Ended
December 31
-------------------------------
1995 1994
------ -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 270 $ 168
Adjustments to reconcile net income to cash
provided by operating activities:
Cumulative effect of accounting change - (114)
Depreciation and amortization 320 319
Deferred income taxes 65 3
Amortization of deferred gain on sale and
leaseback transactions (29) (29)
Rental expense in excess of payments 23 62
Postemployment benefits expense less than payments (32) (5)
Pension expense less than payments (56) (47)
Compensation under ESOP 22 23
Postretirement benefits expense in excess
of payments 33 40
Changes in certain assets and liabilities:
Decrease (increase) in receivables (90) 224
Decrease (increase) in other current assets (9) 34
Decrease in air traffic liability (213) (362)
Increase (decrease) in accounts payable and accrued
liabilities 130 (118)
Increase (decrease) in other payables (26) 18
Decrease in other noncurrent liabilities (36) (9)
Other, net (59) 30
------- -------
Net cash provided by operating activities 313 237
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions:
Flight equipment, including advance payments (402) (107)
Ground property and equipment (114) (104)
Decrease (increase) in short-term investments, net 28 (511)
Proceeds from sale of flight equipment 23 81
------- -------
Net cash used in investing activities (465) (641)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 15 -
Payments on long-term debt and capital lease obligations (155) (369)
Cash dividends (60) (60)
------- -------
Net cash used in financing activities (200) (429)
------- -------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (352) (833)
Cash and cash equivalents at beginning of period 1233 1302
------- -------
Cash and cash equivalents at end of period $ 881 $ 469
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
8
<PAGE> 9
DELTA AIR LINES, INC.
Notes to Consolidated Financial Statements
December 31, 1995
(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
1995 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 1995 Annual Report to
Stockholders. In the opinion of management, the accompanying unaudited
financial statements reflect all adjustments, consisting of normal
recurring accruals, necessary for a fair statement of results for the
interim periods.
2. INVESTMENTS IN DEBT AND EQUITY SECURITIES:
At December 31, 1995, the gross unrealized gain on the Company's
investment in Singapore Airlines Limited was $147 million and the gross
unrealized loss on the Company's investment in Swissair, Swiss Air
Transport Company Ltd. was $4 million. The $90 million net unrealized
gain, net of the related $53 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 1995
quarter totaled $147 million, which resulted in realized gains, computed
on a specific identification basis, of less than $1 million. The net
unrealized gain on short-term investments reflected in stockholders'
equity at December 31, 1995, was $2 million, net of the related tax
benefit.
3. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT:
Fuel Hedging
During the December 1995 quarter, Delta initiated a fuel hedging program
under which the Company may enter into certain contracts with
counterparties to manage the Company's exposure to increases in jet fuel
prices.
Gains and losses resulting from fuel hedging transactions are
recognized as a component of fuel expense when the underlying fuel being
hedged is used. Any premiums paid to enter into hedging contracts are
recorded as a prepaid expense and amortized to fuel expense over the
respective contract periods.
9
<PAGE> 10
During the December 1995 quarter, there were no realized gains or losses
from fuel hedging transactions. Premiums paid to counterparties during
the December 1995 quarter were immaterial.
The Company is exposed to losses in the event of non-performance
by counterparties to fuel hedging transactions, but it does not expect
any counterparty to fail to meet its obligations. To manage risk, the
Company selects counterparties based on credit ratings, limits its
exposure to any one counterparty under defined guidelines, and monitors
the market position of the program and its relative market position
with each counterparty.
Hull and General Liability Insurance
During the December 1995 quarter, the Company renewed its aircraft hull
and general liability insurance policies (the Policies) for the year
beginning December 18, 1995 and ending December 17, 1996. In entering
into these renewals, it was Delta's goal to maintain insurance in
amounts that it deems adequate while achieving premium savings under
the Policies. Accordingly, Delta's captive insurance subsidiary agreed
to reimburse the primary insurers for losses under the Policies in an
amount not to exceed $100 million per occurrence and $118 million in
the aggregate for this policy year. The obligations of the primary
insurers in relation to the insureds under the Policies will not be
limited or reduced in any way by this reimbursement obligation.
The reimbursement obligation of Delta's captive insurance subsidiary to
the primary insurers will be supported by letters of credit issued by
one or more third parties. The letters of credit will have an
aggregate stated amount equal to the maximum reimbursement obligation.
To the extent the primary insurers make draws under the letters of
credit, Delta will be required to reimburse the issuers of the letters
of credit.
Delta will accrue amounts estimated to be payable for probable losses
under the reimbursement agreements with the primary insurers, as
incurred. The methods of making such estimates and establishing the
resulting accrued liabilities will be reviewed on an ongoing basis and
adjusted as required.
4. SALE OF RECEIVABLES:
During fiscal 1995, Delta elected to discontinue selling new receivables
under a revolving accounts receivable facility, and the Senior
Certificate related to this facility, which was in the principal amount
of $229 million at June 30, 1995, was reduced to $0 on August 14, 1995.
This transaction was recorded as a reduction of cash from operating
activities in the Company's Consolidated Statements of Cash Flows for
the six months ended December 31, 1995, and an increase in accounts
receivable on the Company's Consolidated Balance Sheets at December 31,
1995. For additional information regarding the sale of receivables, see
Note 5 (page 30) of the Notes to Consolidated Financial Statements in
Delta's 1995 Annual Report to Stockholders.
10
<PAGE> 11
5. LONG-TERM DEBT:
During the December 1995 quarter, the Company voluntarily repurchased
and retired $53 million principal amount of its long-term debt. As a
result of these transactions, the Company recognized a net pretax loss
of $5 million during the quarter ended December 31, 1995; this amount is
included in miscellaneous, net in the Company's Consolidated
Statements of Operations.
The Company's 1995 Bank Credit Agreement provides for unsecured
borrowings of up to $1.25 billion on a revolving basis until September
26, 2000. At December 31, 1995, no borrowings were outstanding under
the 1995 Bank Credit Agreement, but there is currently outstanding a
letter of credit in the amount of $470 million to credit enhance the
Delta Family-Care Savings Plan's 1990 Series C Guaranteed Serial ESOP
Notes, which are guaranteed by Delta. The letter of credit, which is
utilizing $470 million of the available commitment under the 1995 Bank
Credit Agreement, covers the $290 million outstanding principal amount
of the 1990 Series C Guaranteed Serial ESOP Notes, up to $148 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 1990 Series C Guaranteed
Serial ESOP Notes, see Note 4 (page 8) of the Notes to Consolidated
Financial Statements in Delta's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995 and Note 7 (page 30) of the Notes to
Consolidated Financial Statements in Delta's 1995 Annual Report to
Stockholders.
During the six months ended December 31, 1995 and 1994, Delta made cash
interest payments, net of interest capitalized, of $106 million and $116
million, respectively.
11
<PAGE> 12
6. AIRCRAFT PURCHASE AND SALE COMMITMENTS:
At January 31, 1996, 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>
B-727-200 106 26 132 - -
B-737-200 1 53 54 - -
B-737-300 - 13 13 - -
B-757-200 45 41 86 4 30
B-767-200 15 - 15 - -
B-767-300 2 24 26 2 -
B-767-300ER 9 7 16 15 14
L-1011-1 31 - 31 - -
L-1011-200 1 - 1 - -
L-1011-250 6 - 6 - -
L-1011-500 17 - 17 - -
MD-11 4 7 11 4 22
MD-88 63 57 120 - 21
MD-90 11 - 11 29 50
--- --- --- ---- ---
311 228 539 54 137
=== === === ==== ===
</TABLE>
The aircraft orders include nine MD-90 aircraft scheduled for delivery
after fiscal 1996 that are subject to reconfirmation by Delta. The
MD-88 aircraft options may be converted to MD-90 aircraft orders, and
the B-767-300ER aircraft options may be converted to B-767-300 aircraft
orders, at Delta's election.
During the December 1995 quarter, Delta accepted delivery of three MD-90
aircraft. Additionally, Delta returned two B-727-200 aircraft and three
A310-300 aircraft to their lessors, and retired one L-1011-1 aircraft.
On January 29, 1996, Delta and the Boeing Company (Boeing) amended
certain contracts under which Delta purchases aircraft from Boeing.
Under the amendments, Delta (1) ordered 12 additional B-767-300ER
aircraft for delivery in calendar years 1997 and 1998; (2) converted
orders for two B-767-300ER aircraft to two B-767-300 aircraft;
(3) rescheduled the delivery of certain other aircraft on order; (4)
obtained additional options to purchase B-767-300ER aircraft; (5)
relinquished certain options to purchase B-757-200 aircraft; and (6)
terminated its 52 orders (22 of which had been subject to reconfirmation
by Delta) and 56 options to purchase B-737-300 aircraft.
12
<PAGE> 13
Future expenditures for aircraft, engines and engine hushkits on firm order at
January 31, 1996, are estimated to be $2.6 billion, excluding aircraft orders
subject to reconfirmation by Delta, as follows:
<TABLE>
<CAPTION>
AMOUNT
YEARS ENDING JUNE 30 (IN MILLIONS)
-------------------- -------------
<S> <C> <C>
Remainder of fiscal year 1996 $ 220
1997 860
1998 850
1999 460
2000 70
After 2000 90
------
Total $2,550
======
</TABLE>
7. 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.
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.
8. CONTINGENCIES:
The Company is a defendant in certain legal actions relating to alleged
employment discrimination practices, antitrust matters, 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.
13
<PAGE> 14
9. STOCKHOLDERS' EQUITY:
During the December 1995 quarter, the Company issued 18,595 common
shares, at an average price of $72.24 per share, under the 1989 Stock
Incentive Plan, and 2,166 common shares, at an average price of $71.89
per share, under the Dividend Reinvestment and Stock Purchase Plan. The
Company also issued 126 common shares upon the conversion of less than
$1 million principal amount of the 3.23% Convertible Subordinated Notes
due 2003. Additionally, during the December 1995 quarter, the Company
transferred from its treasury, at an average cost of $67.81 per share,
38 common shares under the 1989 Stock Incentive Plan.
At December 31, 1995, 5,524,548 common shares were reserved for issuance
under the 1989 Stock Incentive Plan; 5,805,011 common shares were
reserved for conversion of the Series B ESOP Convertible Preferred
Stock; 17,489,069 common shares were reserved for conversion of the
Series C Convertible Preferred Stock; and 10,147,728 common shares were
reserved for conversion of the 3.23% Convertible Subordinated Notes due
2003.
10. 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 $186
million and $22 million during the six months ended December 31, 1995
and 1994, respectively.
11. SUBSEQUENT EVENTS:
Under the Company's Leadership 7.5 cost reduction program, the Company
continues to identify and implement additional initiatives with the goal
of reducing Delta's annual operating expenses by approximately $2
billion by the end of the June 1997 quarter. In addition, the Company
continues to evaluate its current aircraft fleet plan, including L-1011
aircraft. These actions could result in pre-tax charges against
earnings of as much as $650 million during the March 1996 quarter.
Management believes that these charges are not likely to have a
material adverse effect on Delta's consolidated financial condition or
liquidity.
14
<PAGE> 15
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
FINANCIAL CONDITION
During the six months ended December 31, 1995, Delta invested $402 million in
flight equipment and $114 million in ground property and equipment; made
payments of $155 million on long-term debt and capital lease obligations, which
included Delta's voluntary repurchase and retirement of $118 million principal
amount of long-term debt; and paid $60 million in cash dividends. The
principal sources of these funds were $313 million of cash from operations, net
of $229 million used to reduce to $0 the Senior Certificate related to the sale
of receivables (see Note 4 of the Notes to Consolidated Financial Statements);
$380 million from cash reserves; $15 million from the issuance of common stock;
and $23 million from the sale of flight equipment. Cash and cash equivalents
and short-term investments totaled $1.4 billion at December 31, 1995, compared
to $1.8 billion at June 30, 1995. The Company may repurchase additional long-
term debt from time to time.
As of December 31, 1995, the Company had negative working capital of $586
million, compared to negative working capital of $427 million at June 30, 1995.
A negative working capital position is normal for Delta and does not indicate a
lack of liquidity. The Company expects to meet its current obligations as they
become due through available cash, short-term investments and internally
generated funds, supplemented as necessary by debt financings and proceeds from
sale and leaseback transactions. At December 31, 1995, the Company had $780
million of credit available under its 1995 Bank Credit Agreement, subject to
compliance with certain conditions. For additional information, see Note 5 of
the Notes to Consolidated Financial Statements.
At December 31, 1995, long-term debt and capital lease obligations, including
current maturities, totaled $3.2 billion, compared to $3.3 billion at June 30,
1995. Stockholders' equity was $2.1 billion at December 31, 1995, compared to
$1.8 billion at June 30, 1995. The Company's debt-to-equity position,
including current maturities was 61% debt and 39% equity at December 31, 1995,
compared to 65% debt and 35% equity at June 30, 1995.
At December 31, 1995, there was outstanding $290 million principal amount of
the Delta Family-Care Savings Plan's Series C Guaranteed Serial ESOP Notes
(Series C ESOP Notes), which are guaranteed by Delta. The Series C ESOP Notes
currently have the benefit of a credit enhancement in the form of a letter of
credit in the amount of $470 million under Delta's 1995 Bank Credit Agreement.
Delta is required to purchase the Series C ESOP Notes in certain circumstances.
For additional information regarding the Series C ESOP Notes, see Note 7 (page
30) of the Notes to Consolidated Financial Statements in Delta's 1995 Annual
Report to Stockholders.
At its meeting on January 25, 1996, 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, 1996, to stockholders of record on February 8, 1996.
15
<PAGE> 16
On January 29, 1996, Delta and The Boeing Company (Boeing) amended certain
contracts under which Delta purchases aircraft from Boeing. Under the
amendments, Delta ordered 12 additional B-767-300ER aircraft for delivery in
calendar years 1997 and 1998 and terminated its orders and options to purchase
B-737-300 aircraft. For additional information regarding these amendments,
see Note 6 of the Notes to Consolidated Financial Statements.
Delta intends to use the newly ordered B-767-300ER aircraft, together with
other international range aircraft on order, to replace the Lockheed L-1011
aircraft now being used in transatlantic service. The Company plans to
reconfigure and reallocate the international range L-1011 aircraft to domestic
routes, where they will replace certain older, less efficient versions of
L-1011 aircraft. Delta is currently evaluating the type and number of aircraft
which it may order in the future to replace its L-1011 fleet.
Under the Company's Leadership 7.5 cost reduction program, the Company
continues to identify and implement additional initiatives with the goal of
reducing Delta's annual operating expenses by approximately $2 billion by the
end of the June 1997 quarter. In addition, the Company continues to evaluate
its current aircraft fleet plan, as discussed above. These actions could
result in pre-tax charges against earnings of as much as $650 million during
the March 1996 quarter. Management believes that these charges are not likely
to have a material adverse effect on Delta's consolidated financial condition
or liquidity.
See Part II, Item 5 of this Form 10-Q for information regarding the Company's
collective bargaining negotiations with the Air Line Pilots Association and
certain other matters relating to the Company's personnel.
16
<PAGE> 17
RESULTS OF OPERATIONS
Three Months Ended December 31, 1995 and 1994
For the quarter ended December 31, 1995, Delta recorded unaudited net income of
$70 million ($0.93 primary and fully diluted income per common share after
preferred stock dividend requirements) and operating income of $169 million.
For the quarter ended December 31, 1994, the Company recorded a 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.
The improvement in operating results for the December 1995 quarter compared to
the December 1994 quarter reflects an increase of less than 1% in operating
revenues and a 4% decrease in operating expenses primarily due to initiatives
under the Company's Leadership 7.5 cost reduction program.
Operating revenues in the December 1995 quarter totaled $2.94 billion, an
increase of less than 1% from $2.92 billion in the December 1994 quarter.
Passenger revenue increased 2% to $2.73 billion, reflecting a 3% improvement in
the passenger mile yield that was partially offset by a 2% decline in revenue
passenger miles. The increase in the passenger mile yield is primarily due to
higher average full-fare and discount ticket prices. The decline in passenger
traffic is also due to the higher average ticket prices, as well as a reduction
in international capacity. Passenger revenue for the three months ended
December 31, 1995 and 1994, was negatively impacted by the presence of
low-cost, low-fare carriers in domestic markets served by Delta.
Cargo revenue decreased 12% to $135 million, as cargo ton miles declined 16%
and the ton mile yield increased 4%. The decrease in cargo ton miles and
increase in the ton mile yield are primarily due to the cancellation of
service on certain international routes and the resulting decrease in the
average cargo trip length. All other revenue increased 1% to $78 million,
mainly the result of increased revenues from administrative fees and joint
marketing programs.
Operating expenses for the December 1995 quarter totaled $2.77 billion, down 4%
from the December 1994 quarter. Operating capacity decreased less than 1% to
32.22 billion available seat miles, and operating cost per available seat mile
declined 4% to 8.61 cents. Salaries and related costs decreased 2%, due to an
8% reduction in full-time equivalent employees, partially offset by accruals
under the Company's profit sharing programs. The decrease in full-time
equivalent employees was primarily due to workforce reductions under the
Company's Leadership 7.5 cost reduction program. Aircraft fuel expense
declined less than 1%, as fuel gallons consumed decreased 2% and the average
price per fuel gallon increased 2% to 57.37 cents. Passenger commissions
declined 17%, mainly due to the implementation of a maximum commission payment
on domestic tickets and reductions in certain international commission rates,
partially offset by growth in other program costs. Contracted services
expense rose 34%, primarily the result of increased outsourcing of information
technologies services and certain airport functions. Depreciation and
amortization expense rose 3%, the result of increased aircraft depreciation and
amortization due to the acquisition of additional owned aircraft and the
extension of leases on 40 B-737-200 aircraft in the June 1995 quarter which,
for accounting purposes, resulted in these leases being reclassified from
operating leases to capital leases. The increase in depreciation and
amortization expense was partially offset by the transfer of certain ground
equipment to associated companies and certain international routes becoming
fully amortized. Aircraft rent expense
17
<PAGE> 18
decreased 19% due to the return of certain aircraft to lessors and the
extension of leases on 40 B-737-200 aircraft as discussed previously. Other
selling expenses decreased 9%, primarily due to lower advertising and promotion
expenses, partially offset by increased credit card service charges and booking
fee payments to computer reservations system providers. Facilities and other
rent decreased less than 1%. Aircraft maintenance materials and outside
repairs expense declined 9%, mainly the result of lower engine maintenance and
overhaul activity. Passenger service expense decreased 23%, the result of
ongoing cost control programs. Landing fees decreased 7%, mainly reflecting
favorable rate adjustments and credits received at certain airports. All other
operating expenses decreased 3%, primarily reflecting increased services
provided to outside parties, offset by the October 1, 1995 expiration of the
exemption from the 4.3 cents per gallon federal tax on commercial aviation jet
fuel used in domestic operations.
Nonoperating expense in the December 1995 quarter totaled $46 million, compared
to nonoperating expense of $40 million in the December 1994 quarter. Interest
expense decreased 1% to $73 million, due to a lower average level of long-term
debt, partly offset by an increase in interest expense related to the extension
and reclassification of the B-737-200 aircraft leases previously discussed.
Interest income decreased 11% to $24 million, primarily due to lower interest
rates and a lower average level of short-term investments. Miscellaneous
expense increased to $4 million in the December 1995 quarter, due to foreign
exchange losses and costs associated with the voluntary repurchase and
retirement of long-term debt, partially offset by equity income from associated
companies.
Pretax income of $123 million for the December 1995 quarter resulted in an
income tax provision of $53 million. After a $22 million provision for
preferred stock dividends, net income available to common stockholders was $48
million.
Six Months Ended December 31, 1995 and 1994
For the six months ended December 31, 1995, Delta recorded unaudited net income
of $270 million ($4.40 primary and $3.52 fully diluted income per common share
after preferred stock dividend requirements) and operating income of $555
million. For the six months ended December 31, 1994, the Company recorded net
income of $168 million ($2.46 primary and $2.28 fully diluted income per common
share after preferred stock dividend requirements) and operating income of $172
million. Net income for the six months ended December 31, 1994 included 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 7 of
the Notes to Consolidated Financial Statements).
The improvement in operating results for the six months ended December 31,
1995, compared to the six months ended December 31, 1994, reflects an increase
of less than 1% in operating revenues and a 6% decrease in operating expenses
primarily due to initiatives under the Company's Leadership 7.5 cost reduction
program.
18
<PAGE> 19
Operating revenues for the six months ended December 31, 1995 increased less
than 1% to $6.13 billion. Passenger revenue increased 1% to $5.70 billion,
reflecting a 4% passenger mile yield improvement that was partially offset by a
3% decline in revenue passenger miles. The increase in the passenger mile
yield and reduction in passenger traffic are primarily due to higher average
fare levels in domestic and certain international markets, an increase in
full-fare traffic in certain international markets, and a reduction in
transatlantic operating capacity. Passenger revenue for the six months ended
December 31, 1995 and 1994, was negatively impacted by the presence of
low-cost, low-fare carriers in domestic markets served by Delta.
Cargo revenue decreased 10% to $264 million, as cargo ton miles declined 11%
and the ton mile yield increased 2%. The decrease in cargo ton miles and
increase in the ton mile yield are primarily due to the cancellation of
service on certain international routes and the resulting decrease in the
average cargo trip length. All other revenue increased less than 1% to $164
million.
Operating expenses for the six months ended December 31, 1995 totaled
$5.58 billion, down 6% from 1994. Operating capacity decreased less than 1% to
65.62 billion available seat miles, and operating cost per available seat mile
declined 5% to 8.50 cents. Salaries and related costs decreased 6%, due to an
8% reduction in full-time equivalent employees, partially offset by accruals
under the Company's profit sharing programs. The decrease in full-time
equivalent employees was primarily due to workforce reductions under the
Company's Leadership 7.5 cost reduction program. Aircraft fuel expense
declined 2%, as fuel gallons consumed decreased 3% and the average price per
fuel gallon increased less than 1% to 55.82 cents. Passenger commissions
declined 15%, mainly due to the implementation of a maximum commission payment
on domestic tickets and reductions in certain international commission rates,
partially offset by growth in other program costs. Contracted services expense
rose 38%, the result of increased outsourcing of information technologies
services and certain airport functions. Depreciation and amortization expense
increased less than 1%, the result of increased aircraft depreciation and
amortization due to the extension of the 40 B-737-200 aircraft leases
previously discussed, partially offset by the transfer of certain ground
equipment to associated companies and certain international routes becoming
fully amortized. Aircraft rent expense decreased 19% due to the return of
certain aircraft to lessors and the extension of leases on the B-737-200
aircraft as discussed previously. Other selling expenses decreased 6%,
primarily due to lower advertising and promotion expense, partially offset by
increased credit card service charges and booking fee payments to computer
reservations system providers. Facilities and other rent increased 5%,
primarily due to expanded passenger terminal facilities in certain locations.
Aircraft maintenance materials and outside repairs expense declined 5%, mainly
due to decreased engine maintenance and overhaul activity. Passenger service
expense decreased 23%, the result of ongoing cost control programs. Landing
fees decreased 6%, mainly reflecting favorable rate adjustments and credits
received at certain airports. All other operating expenses decreased 11%,
primarily reflecting increased services provided to outside parties, partially
offset by the October 1, 1995 expiration of the exemption from the 4.3 cents
per gallon federal tax on commercial aviation jet fuel used in domestic
operations.
Nonoperating expense for the six months ended December 31, 1995, totaled $96
million, compared to $73 million in the six months ended December 31, 1994.
Interest expense decreased 1% to $148 million, due to a lower average level of
long-term debt, partially offset by an increase in interest expense related to
the extension and reclassification of the 40 B-737-200 aircraft leases
previously discussed. Interest income decreased 6% to $47 million, primarily
due to a lower level of short-term investments. Miscellaneous expense was $9
million for the six months ended
19
<PAGE> 20
December 31, 1995, primarily due to foreign exchange losses and costs
associated with the voluntary repurchase and retirement of long-term debt,
partially offset by equity income from associated companies, as compared to
miscellaneous income of $12 million in 1994.
Pretax income of $459 million for the six months ended December 31, 1995, was
reduced by an income tax provision of $189 million. After a $44 million
provision for preferred stock dividends, net income available to common
stockholders was $226 million.
20
<PAGE> 21
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, 1995,
and the related consolidated statements of operations for the three-month and
six-month periods ended December 31, 1995 and 1994 and the consolidated
statements of cash flows for the six-month periods ended December 31, 1995 and
1994. 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, 1995 (not presented herein), and in our report
dated August 18, 1995, 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, 1995 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 2, 1996
21
<PAGE> 22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On November 2, 1995, Delta reached an agreement with Trans World Airlines, Inc.
(TWA), to lease ten takeoff/landing slots (Slots) at New York's LaGuardia
Airport (LaGuardia).
On November 9, 1995, ValuJet Airlines, Inc. (ValuJet), filed suit against Delta
and TWA in the United States District Court for the Northern District of
Georgia. ValuJet alleges, among other things, that (1) TWA breached an alleged
agreement to lease the Slots to ValuJet; (2) Delta tortiously interfered with
the alleged contract between ValuJet and TWA; (3) Delta and TWA conspired to
restrain trade in violation of Section 1 of the Sherman Act; and (4) Delta
engaged in acts of monopolization and attempted monopolization in violation of
Section 2 of the Sherman Act. ValuJet, which has requested a jury trial, is
seeking injunctive relief, unspecified compensatory damages, treble damages
under the antitrust laws, punitive damages, costs and attorney's fees, and such
other relief as the Court deems appropriate. On November 17, 1995, the
District Court denied ValuJet's motion for a preliminary injunction. On
December 7, 1995, Delta filed its answer denying liability and asserting
various affirmative defenses.
On January 10, 1996, a purported class action complaint was filed against Delta
and TWA in the United States District Court for the Eastern District of New
York, on behalf of persons who purchased tickets on Delta for travel between
LaGuardia and Atlanta beginning November 1, 1995. The named plaintiff, who has
requested a jury trial, makes antitrust allegations and claims similar to those
asserted by ValuJet in the lawsuit described in the preceding paragraph. The
named plaintiff seeks, on behalf of the purported class, unspecified
compensatory damages, treble damages under the antitrust laws, injunctive
relief, costs and attorney's fees, and such other relief as the Court deems
appropriate.
Delta believes the allegations against it in the two lawsuits described above
are without merit, and it intends to defend these matters vigorously.
Delta also received a Civil Investigative Demand from the United States
Department of Justice (DOJ) requesting information and documents concerning
Delta's lease of the Slots. Delta is cooperating with the DOJ investigation.
22
<PAGE> 23
Item 5. Other Information
ALPA Negotiations
Delta's relations with labor unions in the United States are governed by the
Railway Labor Act. Under the Railway Labor Act, the collective bargaining
agreements between Delta and labor unions do not expire but instead become
amendable as of a stated date. If either party wishes to modify the terms of
any such agreement, it must notify the other party before the contract becomes
amendable. After receipt of such notice, the parties must meet for direct
negotiations and, if no agreement is reached, either party may request the
National Mediation Board (NMB) to appoint a federal mediator. If no agreement
is reached in mediation, the NMB may determine, at any time, that an impasse
exists and proffer binding arbitration. Either party may decline to submit to
arbitration. If arbitration is rejected, a 30-day "cooling-off" period
commences, following which the parties may resort to "self-help." "Self-help"
may include, among other things, a strike by the union or the imposition of
proposed changes to the collective bargaining agreement by the airline.
Delta's collective bargaining agreement with the Air Line Pilots Association
(ALPA), which represents the Company's approximately 8,000 pilots, became
amendable on January 1, 1995. Formal negotiations between the Company and ALPA
on a new collective bargaining agreement began in November 1994. As part of
its Leadership 7.5 program, the Company is seeking productivity improvements
and wage and benefit reductions from ALPA.
On May 8, 1995, the NMB, appointed federal mediators to participate in the
collective bargaining negotiations between Delta and ALPA. In December 1995,
Delta and ALPA reached a tentative agreement on certain matters. The
tentative agreement, which is contingent on the parties reaching agreement on
a total contract, would, among other things and subject to certain conditions,
(1) reduce the Company's cockpit costs on B-737-200 aircraft; (2) provide job
security for currently active pilots and the recall of pilots on furlough; and
(3) prohibit the Company from engaging in domestic code sharing with
respect to aircraft with over 70 seats that are operated by another carrier,
subject to certain exceptions.
Following the announcement of the tentative agreement, the parties continued
negotiations on various unresolved subjects including, among others,
compensation matters, medical and retirement benefits, work rules, equity
ownership and corporate governance. Since January 22, 1996, collective
bargaining negotiations have continued in Washington, D.C. with the
participation of one of the three NMB members. On January 31, 1996, ALPA
distributed to pilots a ballot seeking their support to withdraw their
services, up to and including a gerneral strike, in the event Delta and ALPA
cannot reach agreement on a new collective bargaining agreement.
The outcome of Delta's negotiations with ALPA cannot presently be determined.
23
<PAGE> 24
Other Matters
Substantially all of Delta's U.S.-based non-contract personnel participate in
the Company's profit sharing programs. Under these programs, participants may
receive, subject to certain conditions, payments that are based on the
Company's profitability during the fiscal year. During the year, the Company
accrues amounts estimated to be payable under these programs.
Effective February 1, 1996, Delta restored to the base salaries of personnel
who participate in the Company's profit sharing programs the 5% reduction in
base salaries that had been implemented on February 1, 1993. Also on February
1, 1996, the Company announced that, on February 23, 1996, personnel who
participate in the profit sharing programs will receive a lump sum advance
profit sharing payment for fiscal 1996 equal to 5% of their base salaries from
July 1, 1995 through January 31, 1996. The value of the 5% base salary
restoration and the early profit sharing payment will be offset against any
profit sharing awards earned for fiscal 1996. Therefore, these changes are
not expected to result in an increase in operating expenses for fiscal 1996.
24
<PAGE> 25
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 (For SEC use only).
(b) Reports on Form 8-K:
During the quarter ended December 31, 1995, Delta filed a
Current Report on Form 8-K dated December 20, 1995, concerning
the renewal of its aircraft hull and general liability insurance
policies.
25
<PAGE> 26
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, 1996
- -----------------
(Date)
26
<PAGE> 1
DELTA AIR LINES, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994
EXHIBIT 11
(in millions except per share amounts)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
PRIMARY:
Weighted average shares outstanding 51 51
Additional shares assuming
exercise of stock options - *
----- ------
Average shares outstanding as adjusted 51 51
===== ======
Net income (loss) $ 70 $ (18)
Preferred dividends series C (20) (20)
Preferred dividends series B (2) (2)
----- ------
Net income (loss) attributable to primary shares $ 48 $ (40)
===== ======
Primary earnings (loss) per common share $0.93 $(0.79)
===== ======
FULLY DILUTED:
Weighted average shares outstanding 51 51
Additional shares assuming:
Conversion of series C convertible preferred stock 17 17
Conversion of series B ESOP convertible
preferred stock 2 1
Conversion of 3.23% convertible subordinated notes 10 10
Exercise of stock options - *
----- ------
Average shares outstanding as adjusted 80 79
===== ======
Net income (loss) $ 70 $ (18)
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) (1)
----- ------
Net income (loss) attributable to fully
diluted common shares $ 77 $ (11)
===== ======
Fully diluted earnings (loss) per common share $0.95* $(0.14)*
===== ======
</TABLE>
*Antidilutive
<PAGE> 2
DELTA AIR LINES, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
FOR SIX MONTHS ENDED DECEMBER 31, 1995 AND 1994
EXHIBIT 11
(IN MILLONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
PRIMARY:
Weighted average shares outstanding 51 51
Additional shares assuming
exercise of stock options - *
-------- --------
Average shares outstanding as adjusted 51 51
======== ========
Income before cumulative effect of
accounting changes $ 270 $ 54
Preferred dividends series C (40) (40)
Preferred dividends series B (4) (4)
-------- --------
Income before cumulative effect of accounting
changes attributable to primary shares 226 10
Cumulative effect of accounting changes - 114
-------- --------
Net income attributable to primary shares $ 226 $ 124
======== ========
Primary earnings per share before
cumulative effect of accounting changes 4.40 0.21
Cumulative effect of accounting changes - 2.25
-------- --------
Primary earnings per common share $ 4.40 $ 2.46
======== ========
FULLY DILUTED:
Weighted average shares outstanding 51 51
Additional shares assuming:
Conversion of series C convertible preferred stock 17 17
Conversion of series B ESOP convertible
preferred stock 3 2
Conversion of 3.23% convertible subordinated notes 10 10
Exercise of stock options - *
-------- --------
Average shares outstanding as adjusted 81 80
======== ========
Income before cumulative effect of
accounting changes $ 270 $ 54
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) (2)
Income before cumulative effect of
accounting changes $ 284 $ 68
Cumulative effect of accounting changes - 114
-------- --------
Net income attributable to fully
diluted common shares $ 284 $ 182.00
======== ========
Fully diluted earnings per common share
before cumulative effect of accounting changes $ 3.52 $ 0.85
Cumulative effect of accounting changes - 1.43
-------- --------
Fully diluted earnings per common share $ 3.52 $ 2.28
======== ========
</TABLE>
* Antidilutive
<PAGE> 1
DELTA AIR LINES, INC. EXHIBIT 12
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,
1995 1994
------------- ------------
<S> <C> <C>
Earnings (before cumulative effect of accounting change):
Income $ 270 $ 54
Add (deduct):
Income tax provision 189 45
Fixed charges 316 336
Interest capitalized (14) (15)
Interest offset on
Guaranteed Serial
ESOP Notes (1) (1)
-------- --------
Earnings as adjusted $ 760 $ 419
======== ========
Fixed charges:
Interest expense $ 148 $ 150
1/3 of rentals 167 185
Additional interest on
Guaranteed Serial
ESOP Notes 1 1
-------- --------
Total fixed charges $ 316 $ 336
======== ========
Ratio of earnings to fixed charges 2.41 1.25
</TABLE>
<PAGE> 1
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, 33-65391, and
33-52045 its Form 10-Q for the quarter ended December 31, 1995, which includes
our report dated February 2, 1996 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 2, 1996
27
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DELTA AIR
LINES, INC.'S FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 1995 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO THE RELATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 881
<SECURITIES> 503
<RECEIVABLES> 876
<ALLOWANCES> 31
<INVENTORY> 67
<CURRENT-ASSETS> 2,747
<PP&E> 13,054
<DEPRECIATION> 5,932
<TOTAL-ASSETS> 11,998
<CURRENT-LIABILITIES> 3,333
<BONDS> 3,189
0
0
<COMMON> 164
<OTHER-SE> 1,915
<TOTAL-LIABILITY-AND-EQUITY> 11,998
<SALES> 0
<TOTAL-REVENUES> 6,132
<CGS> 0
<TOTAL-COSTS> 5,577
<OTHER-EXPENSES> 52
<LOSS-PROVISION> 9
<INTEREST-EXPENSE> 148
<INCOME-PRETAX> 459
<INCOME-TAX> 189
<INCOME-CONTINUING> 270
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 270
<EPS-PRIMARY> 4.40
<EPS-DILUTED> 3.52
</TABLE>
