Delaware
(State
or other jurisdiction of
incorporation
or organization)
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58-0218548
(I.R.S.
Employer
Identification
No.)
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Page
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Where
You Can Find More Information
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ii
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The
Company
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1
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Risk
Factors
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1
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Forward-Looking
Statements
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2
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Selling
Stockholders
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4
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Plan
of Distribution
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5
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Use
of Proceeds
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5
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Dividend
Policy
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6
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Validity
of Securities
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6
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Unaudited
Pro Forma Condensed Combined Financial Information
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7
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Experts
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17
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●
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Annual
Report on Form 10-K for the fiscal year ended December 31,
2008;
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●
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Current
Report on Form 8-K filed January 23, 2009;
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●
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Exhibits
99.1 and 99.2 to the Current Report on Form 8-K/A filed on November 7,
2008;
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●
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Exhibit
99.4 to the Current Report on Form 8-K filed on October 31, 2008;
and
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●
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The
description of our common stock contained in our Form 8-A filed on April
26,
2007.
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●
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our
alliances with foreign airlines, including our membership in SkyTeam, a
global airline alliance;
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●
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Delta’s
transatlantic joint venture with Air France and NWA’s transatlantic joint
venture with KLM;
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●
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our
domestic alliances, including our marketing alliance with Alaska Airlines
and Horizon Air, which we are enhancing to expand our west coast
service; and
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●
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agreements
with multiple domestic regional carriers, which operate either as Delta
Connection or Northwest Airlink, including our wholly-owned subsidiaries,
Comair, Inc., Compass Airlines, Inc. and Mesaba Aviation,
Inc.
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●
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changes
in the prices or availability of oil or jet fuel;
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●
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our
quarterly or annual earnings or those of other companies in our
industry;
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●
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changes
in earnings estimates or recommendations by research analysts who track
our common stock or the stock of other airlines; and
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●
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changes
in general conditions in the U.S. and global economy, financial markets or
airline industry, including those resulting from changes in fuel prices or
fuel shortages, war, incidents of terrorism or responses to such
events.
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●
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the
cost of aircraft fuel;
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●
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the
effects of the global recession;
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●
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the
effects of the global financial crisis;
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●
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the
impact of posting collateral in connection with our fuel hedge
contracts;
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●
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the
impact that our indebtedness will have on our financial and operating
activities and our ability to incur additional debt;
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●
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the
restrictions that financial covenants in our financing agreements will
have on our financial condition and business
operations;
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●
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labor
issues;
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●
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the
ability to realize the anticipated benefits of our merger with
Northwest;
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●
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the
integration of the Delta and Northwest workforces;
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●
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interruptions
or disruptions in service at one of our hub airports;
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●
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our
increasing dependence on technology in our operations;
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●
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our
ability to retain management and key employees;
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●
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the
ability of our credit card processors to take significant holdbacks in
certain circumstances;
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●
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the
effects of terrorist attacks; and
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●
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competitive
conditions in the airline
industry.
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Name
(1)
|
Common
Stock
Benefically
Owned
Prior
to
the Offering
|
Maximum
Number
of
Additional
Shares
Issuable(2)
|
Maximum
Number
of
Shares
Offered(3)
|
Number
of
Shares
Beneficially
Owned
After
Offering
|
Percentage
of
Shares
Beneficially
Owned
After
Offering
|
|||||||||||||||
Bill
Bartels
|
5,029
|
78
|
3,873
|
1,234
|
*
|
|||||||||||||||
Mike
Bigelow
|
3,688
|
75
|
3,763
|
0
|
*
|
|||||||||||||||
John
Darrow
|
5,735
|
76
|
3,811
|
2,000
|
*
|
|||||||||||||||
Brad
Dicks
|
3,952
|
81
|
4,033
|
0
|
*
|
|||||||||||||||
Bruce
Endler
|
4,971
|
82
|
4,113
|
940
|
*
|
|||||||||||||||
Bren
Fries
|
4,014
|
78
|
3,892
|
200
|
*
|
|||||||||||||||
Matt
Geddie
|
4,029
|
82
|
4,111
|
0
|
*
|
|||||||||||||||
Dan
Gradwohl
|
3,614
|
74
|
3,688
|
0
|
*
|
|||||||||||||||
Drew
Grimes
|
4,336
|
89
|
4,425
|
0
|
*
|
|||||||||||||||
Edwin
R. Havrilla, Jr.
|
4,386
|
90
|
4,476
|
0
|
*
|
|||||||||||||||
Ron
Hay
|
3,578
|
73
|
3,651
|
0
|
*
|
|||||||||||||||
Robert
Hesselbein
|
4,110
|
84
|
4,194
|
0
|
*
|
|||||||||||||||
Boyd
Kelly
|
3,492
|
71
|
3,563
|
0
|
*
|
|||||||||||||||
William
M. Kessler
|
3,776
|
77
|
3,853
|
0
|
*
|
|||||||||||||||
Reed
McDonald
|
3,849
|
78
|
3,927
|
0
|
*
|
|||||||||||||||
Greg
McKinney
|
3,933
|
80
|
4,013
|
0
|
*
|
|||||||||||||||
Lee
Moak
|
7,302
|
88
|
4,390
|
3,000
|
*
|
|||||||||||||||
Jeff
Panioto
|
4,793
|
82
|
4,125
|
750
|
*
|
Tim
Parker
|
4,403
|
89
|
4,492
|
0
|
*
|
|||||||||||||||
Russ
Picus
|
3,870
|
71
|
3,554
|
387
|
*
|
|||||||||||||||
Kingsley
Roberts
|
4,272
|
87
|
4,359
|
0
|
*
|
|||||||||||||||
Kenneth
C. Rogers
|
4,134
|
84
|
4,218
|
0
|
*
|
|||||||||||||||
Mark
Saltzman
|
4,752
|
83
|
4,160
|
675
|
*
|
|||||||||||||||
David
Shagena
|
4,430
|
91
|
4,521
|
0
|
*
|
|||||||||||||||
Jim
Stuart
|
4,360
|
89
|
4,449
|
0
|
*
|
|||||||||||||||
Scott
Tarves
|
3,660
|
74
|
3,734
|
0
|
*
|
|||||||||||||||
Steve
Uvena
|
3,621
|
74
|
3,695
|
0
|
*
|
|||||||||||||||
James
Van Sickle
|
4,332
|
89
|
4,421
|
0
|
*
|
|||||||||||||||
Gary
Weistroffer
|
4,032
|
82
|
4,114
|
0
|
*
|
|||||||||||||||
Len
Willey
|
4,111
|
84
|
4,195
|
0
|
*
|
|||||||||||||||
TOTAL
|
128,564
|
2,435
|
121,813
|
9,186
|
*
|
* Less
than 1%.
|
||
(1)
|
Each
of the selling stockholders is an employee of Delta. In
addition to being an employee of Delta, Kenneth C. Rogers is a member of
the Board of Directors.
|
|
(2)
|
Represents
shares that may be issued to the selling stockholders pursuant to the Plan
at a date yet to be determined. The issuance of such shares is
subject to a number of conditions and factors such that all or none of
these shares may be issued to the selling stockholders.
|
|
(3)
|
Includes
the shares that may be issued to the selling stockholders pursuant to the
Plan at a date yet to be
determined.
|
Condensed
|
||||||||||||||||
Historical
|
Pro
Forma
|
Combined
|
||||||||||||||
(in
millions, except per share data)
|
Delta
|
Northwest
|
Adjustments
|
Pro
Forma
|
||||||||||||
Operating
Revenue:
|
||||||||||||||||
Passenger:
|
||||||||||||||||
Mainline
|
$
|
15,137
|
$
|
8,482
|
$
|
-
|
$
|
23,619
|
||||||||
Regional
carriers
|
4,446
|
1,643
|
-
|
6,089
|
||||||||||||
Total
passenger revenue
|
19,583
|
10,125
|
-
|
29,708
|
||||||||||||
Cargo
|
686
|
667
|
-
|
1,353
|
||||||||||||
Other,
net
|
2,428
|
799
|
-
|
3,227
|
||||||||||||
Total
operating revenue
|
22,697
|
11,591
|
-
|
34,288
|
||||||||||||
Operating
Expense:
|
||||||||||||||||
Aircraft
fuel and related taxes
|
7,346
|
4,996
|
-
|
12,342
|
||||||||||||
Salaries
and related costs
|
4,802
|
2,427
|
(58
|
)(a) |
7,459
|
|||||||||||
191
|
(b) | |||||||||||||||
97
|
(c) | |||||||||||||||
Contract
carrier arrangements
|
3,766
|
901
|
-
|
4,667
|
||||||||||||
Depreciation
and amortization
|
1,266
|
1,054
|
20
|
(d) |
2,331
|
|||||||||||
31
|
(e) | |||||||||||||||
(30
|
)(f) | |||||||||||||||
(10
|
)(g) | |||||||||||||||
Aircraft
maintenance materials and outside repairs
|
1,169
|
612
|
-
|
1,781
|
||||||||||||
Contracted
services
|
1,153
|
676
|
-
|
1,829
|
||||||||||||
Passenger
commissions and other selling expenses
|
1,030
|
737
|
-
|
1,767
|
||||||||||||
Landing
fees and other rents
|
787
|
456
|
-
|
1,243
|
||||||||||||
Passenger
service
|
440
|
210
|
-
|
650
|
||||||||||||
Aircraft
rent
|
307
|
184
|
-
|
491
|
||||||||||||
Impairment
of goodwill and other intangible assets
|
7,296
|
3,841
|
(135
|
)(g) |
11,002
|
|||||||||||
Restructuring
and merger-related items
|
1,131
|
225
|
(41
|
)(a) |
1,315
|
|||||||||||
Other
|
518
|
428
|
(39
|
)(a) |
907
|
|||||||||||
Total
operating expense
|
31,011
|
16,747
|
26
|
47,784
|
||||||||||||
Operating
Loss
|
(8,314
|
)
|
(5,156
|
)
|
(26
|
)
|
(13,496
|
)
|
||||||||
Other
(Expense) Income:
|
||||||||||||||||
Interest
expense, net
|
(613
|
)
|
(287
|
)
|
(256
|
)(h) |
(1,145
|
)
|
||||||||
11
|
(i) | |||||||||||||||
Miscellaneous,
net
|
(114
|
)
|
(230
|
)
|
(344
|
)
|
||||||||||
Total
other expense, net
|
(727
|
)
|
(517
|
)
|
(245
|
)
|
(1,489
|
)
|
||||||||
Loss
Before Income Taxes
|
(9,041
|
)
|
(5,673
|
)
|
(271
|
)
|
(14,985
|
)
|
||||||||
Income
Tax Benefit
|
119
|
211
|
(51
|
)(j) |
279
|
|||||||||||
Net
Loss
|
$
|
(8,922
|
)
|
$
|
(5,462
|
)
|
$
|
(322
|
)
|
$
|
(14,706
|
)
|
||||
Basic
and Diluted Loss Per Share
|
$
|
(19.08
|
)
|
(l) |
$
|
(18.13
|
)
|
|||||||||
Basic
and Diluted Weighted Average
|
||||||||||||||||
Shares
Outstanding
|
468
|
(l) |
811
|
(Note
3)
|
Condensed
|
|||||||||||||||
Delta
|
Northwest
|
Pro
Forma
|
Combined
|
|||||||||||||
(in
millions, except per share data)
|
Pro
Forma
|
Pro
Forma
|
Adjustments
|
Pro
Forma
|
||||||||||||
Operating
Revenue:
|
||||||||||||||||
Passenger:
|
||||||||||||||||
Mainline
|
$
|
12,842
|
$
|
9,386
|
$
|
-
|
$
|
22,228
|
||||||||
Regional
carriers
|
4,170
|
1,412
|
-
|
5,582
|
||||||||||||
Total
passenger revenue
|
17,012
|
10,798
|
-
|
27,810
|
||||||||||||
Cargo
|
482
|
840
|
-
|
1,322
|
||||||||||||
Other,
net
|
1,754
|
895
|
-
|
2,649
|
||||||||||||
Total
operating revenue
|
19,248
|
12,533
|
-
|
31,781
|
||||||||||||
Operating
Expense:
|
||||||||||||||||
Aircraft
fuel and related taxes
|
4,686
|
3,378
|
-
|
8,064
|
||||||||||||
Salaries
and related costs
|
4,183
|
2,446
|
191
|
(b) |
6,917
|
|||||||||||
97
|
(c) | |||||||||||||||
Contract
carrier arrangements
|
3,152
|
776
|
-
|
3,928
|
||||||||||||
Depreciation
and amortization
|
1,154
|
486
|
27
|
(d) |
1,657
|
|||||||||||
40
|
(e) | |||||||||||||||
(35
|
)(f) | |||||||||||||||
(15
|
)(g) | |||||||||||||||
Contracted
services
|
996
|
749
|
-
|
1,745
|
||||||||||||
Aircraft
maintenance materials and outside repairs
|
957
|
811
|
-
|
1,768
|
||||||||||||
Passenger
commissions and other selling expenses
|
933
|
751
|
-
|
1,684
|
||||||||||||
Landing
fees and other rents
|
725
|
539
|
-
|
1,264
|
||||||||||||
Passenger
service
|
338
|
230
|
-
|
568
|
||||||||||||
Aircraft
rent
|
260
|
378
|
-
|
638
|
||||||||||||
Profit
sharing
|
158
|
79
|
-
|
237
|
||||||||||||
Other
|
483
|
749
|
-
|
1,232
|
||||||||||||
Total
operating expense
|
18,025
|
11,372
|
305
|
29,702
|
||||||||||||
Operating
Income
|
1,223
|
1,161
|
(305
|
)
|
2,079
|
|||||||||||
Other
(Expense) Income:
|
||||||||||||||||
Interest
expense, net
|
(511
|
)
|
(493
|
)
|
(256
|
)(h) |
(1,260
|
)
|
||||||||
Miscellaneous,
net
|
32
|
152
|
-
|
184
|
||||||||||||
Total
other expense, net
|
(479
|
)
|
(341
|
)
|
(256
|
)
|
(1,076
|
)
|
||||||||
Income
Before Income Taxes
|
744
|
820
|
(561
|
)
|
1,003
|
|||||||||||
Income
Tax Provision
|
(295
|
)
|
(320
|
)
|
213
|
(k) |
(402
|
)
|
||||||||
Net
Income
|
$
|
449
|
$
|
500
|
$
|
(348
|
)
|
$
|
601
|
|||||||
Basic
Earnings Per Share
|
$
|
1.14
|
$
|
1.91
|
(l) |
$
|
0.74
|
|||||||||
Diluted
Earnings Per Share
|
$
|
1.14
|
$
|
1.91
|
(l) |
$
|
0.74
|
|||||||||
Basic
Weighted Average Shares
|
||||||||||||||||
Outstanding
|
394
|
262
|
(l) |
809
|
||||||||||||
Diluted
Weighted Average Shares
|
||||||||||||||||
Outstanding
|
395
|
262
|
(l) |
809
|
(in
millions, except per share data)
|
||||
Shares
of Northwest common stock exchanged
|
271
|
|||
Exchange
ratio
|
1.25
|
|||
Shares
of Delta common stock issued or issuable
|
339
|
|||
Price
per share
|
$
|
9.60
|
||
Fair
value of Delta shares issued
|
$
|
3,251
|
||
Fair
value of outstanding Northwest stock options
|
18
|
|||
Delta
transaction costs
|
84
|
|||
Total
estimated purchase price
|
$
|
3,353
|
(in
millions)
|
|
|||
Cash
and cash equivalents
|
|
$
|
2,441
|
|
Other
current assets
|
|
2,756
|
||
Property
and equipment
|
|
8,552
|
||
Goodwill
|
|
4,572
|
||
Identified
intangible assets
|
|
2,702
|
||
Other
noncurrent assets
|
|
292
|
||
Long-term
debt and capital leases
|
(6,239
|
)
|
||
Pension
and postretirement related benefits
|
(4,010
|
)
|
||
Air
traffic liability and frequent flyer deferred revenue
|
(3,827
|
)
|
||
Other
liabilities assumed
|
|
(3,886
|
)
|
|
Total
estimated purchase price
|
|
$
|
3,353
|
(a)
|
An
adjustment of $138 million for one-time costs directly attributable to the
Merger, including employee retention costs and certain professional fees
incurred by Northwest pursuant to provisions contained in the Merger
Agreement. As a result, the Unaudited Pro Forma Condensed Combined
Statement of Operations reflects a reduction of $58 million in salaries
and related costs, $41 million in restructuring and merger-related items,
and $39 million in other operating expense for the year ended December 31,
2008.
|
|
(b)
|
The
Unaudited Pro Forma Condensed Combined Statements of Operations were
adjusted by $191 million for the years ended December 31, 2008 and
2007 to reflect higher salaries and related costs based on the adjustments
to revalue Northwest’s pension, postretirement and related benefits as
part of purchase accounting.
|
(c)
|
An
adjustment to salaries and related costs for compensation expense related
to 29 million shares of Delta common stock issued to management
employees in the Merger. These shares of Delta common stock are in the
form of time-based restricted stock and non-qualified stock options. The
issuance of the restricted shares increases the Delta common stock
outstanding as of December 31, 2008 by 17 million shares. As a
result, the Unaudited Pro Forma Condensed Combined Statements of
Operations reflect an increase to salaries and related costs of $97
million for the years ended December 31, 2008 and
2007.
|
|
(d)
|
The
Unaudited Pro Forma Condensed Combined Statements of Operations were
adjusted by $20 million and $27 million for the years ended
December 31, 2008 and 2007, respectively, to adjust depreciation
expense based on the adjusted fair value and asset lives of Northwest’s
property and equipment as part of purchase accounting.
|
|
(e)
|
The
fair value of Northwest’s tradename was adjusted and reclassified as a
definite-lived intangible asset. Accordingly, the Unaudited Pro Forma
Condensed Combined Statements of Operations reflect an increase to
amortization expense of $31 million and $40 million for the years ended
December 31, 2008 and 2007, respectively.
|
|
(f)
|
The
fair value of Northwest’s intangible assets primarily associated with its
WorldPerks affinity card contract was adjusted as part of purchase
accounting. Additionally, during the year ended December 31, 2008,
Northwest recorded a $588 million non-cash charge from an impairment of
definite-lived intangible assets primarily associated with customer
relationships. As a result of these items, the Unaudited Pro Forma
Condensed Combined Statements of Operations reflect a net reduction in
amortization expense of $30 million and $35 million for the years ended
December 31, 2008 and 2007, respectively. These amortization pro
forma adjustments do not reflect the effects of the adjustment to fair
value for certain code share partner agreements and the impairment of
Northwest’s SkyTeam Alliance as these items are included as part of (g)
below. Additionally, the Unaudited Pro Forma Condensed Combined Statements
of Operations do not reflect any pro forma adjustments for the impairment,
except as discussed in (g) below.
|
|
(g)
|
A
$135 million adjustment for the year ended December 31, 2008 to eliminate
the impairment of intangible assets of (1) $103 million associated
with the portion of Delta’s SkyTeam Alliance agreements that is directly
attributable to Northwest and (2) $32 million associated with the
portion of Northwest’s SkyTeam Alliance agreements that is directly
attributable to Delta. Additionally, in order to conform to Delta’s
classification, Northwest’s SkyTeam Alliance and other related agreements
would have been recognized as indefinite-lived intangible
assets. Previously, Northwest amortized these assets on a
straight-line basis over a 30-year life as definite-lived intangible
assets. As a result of this adjustment, the Unaudited Pro Forma
Condensed Combined Statements of Operations reflect lower amortization
expense of $10 million and $15 million for the years ended
December 31, 2008 and 2007,
respectively.
|
|
(h)
|
The
fair value of Northwest’s long-term debt was adjusted as part of purchase
accounting. The difference between the fair value and the face amount of
each borrowing is amortized using the effective interest rate method as
additional interest expense over the remaining term of the borrowings
based on the maturity dates. Accordingly, the Unaudited Pro Forma
Condensed Combined Statements of Operations reflect higher interest
expense of $256 million for the years ended December 31, 2008 and
2007.
|
|
(i)
|
Other
noncurrent assets was adjusted due to the elimination of deferred debt
issuance costs incurred by Northwest during 2008. As a result
of this adjustment, the Unaudited Pro Forma Condensed Combined Statements
of Operations reflect a reduction in interest expense of $11 million for
the year ended December 31, 2008.
|
|
(j)
|
A
$51 million income tax provision from the $135 million impairment
adjustment related to the SkyTeam Alliance, as discussed in
(g) above. The net operating loss from the remaining pro forma
adjustments is fully offset by an increase to the valuation allowance on
the deferred tax asset.
|
|
(k)
|
A
$213 million income tax benefit from the incremental loss associated with
other pro forma adjustments. This adjustment is based on the statutory
rates in effect for the year ended December 31,
2007.
|
(l)
|
The
pro forma combined basic and diluted (loss) earnings per share for the
years ended December 31, 2008 and 2007 is calculated as
follows:
|
(in
millions, except per share data)
|
Pro
Forma
Year
Ended
December 31,
2008
|
Pro
Forma
Year
Ended
December 31,
2007
|
||||||
Pro
forma net (loss) income
|
$
|
(14,706
|
)
|
$
|
601
|
|||
Basic
weighted average shares outstanding, including shares issuable pursuant to
plan of reorganization
|
396
|
394
|
||||||
Accelerated
vesting of restricted and performance shares
|
4
|
4
|
||||||
Shares
of Delta common stock issued:
|
||||||||
Northwest shares issued and
outstanding(2)
|
322
|
322
|
||||||
Northwest shares issuable
pursuant to plan of reorganization(1)(2)
|
9
|
9
|
||||||
Accelerated vesting of Northwest
shares of restricted stock(2)
|
5
|
5
|
||||||
Subtotal
|
336
|
336
|
||||||
Shares
issued to Delta and Northwest pilots
|
50
|
50
|
||||||
Shares
issued to Delta and Northwest non-pilot employees
|
21
|
21
|
||||||
Restricted
shares issued to management employees of the combined company vesting
during the period
|
4
|
4
|
||||||
Weighted average shares
outstanding(3)
|
811
|
809
|
||||||
Pro forma basic and diluted
(loss) earnings per share(3)
|
$
|
(18.13
|
)
|
$
|
0.74
|
(1)
|
Represents
shares issuable pursuant to the Chapter 11 plan of reorganization to
holders of allowed general, unsecured claims.
|
|
(2)
|
Represents
shares of Delta common stock issued after giving effect to the 1.25
exchange ratio as determined in the Merger Agreement.
|
|
(3)
|
Excluded
from the pro forma combined basic and diluted (loss) earnings per share
calculations are options to purchase 24 million shares of Delta
common stock, which includes (1) 7 million shares of Northwest stock
options assumed by Delta and modified to provide for the issuance of Delta
common stock upon exercise of the options and (2) 12 million shares issued
to management employees of the combined company, as their effect is
anti-dilutive. In addition, all unvested restricted shares are excluded
because their effect is
anti-dilutive.
|
Predecessor
|
Successor
|
|||||||||||||||
(in
millions, except per share data)
|
Four Months
Ended
April
30,
2007
|
Eight Months
Ended
December
31,
2007
|
Pro
Forma
Adjustments
|
Pro
Forma
Year
Ended
December 31,
2007
|
||||||||||||
Operating
Revenue:
|
|
|||||||||||||||
Passenger:
|
|
|||||||||||||||
Mainline
|
|
$
|
3,829
|
$
|
8,929
|
$
|
84
|
(a)
|
$
|
12,842
|
||||||
Regional
affiliates
|
|
1,296
|
2,874
|
—
|
4,170
|
|||||||||||
Total
passenger revenue
|
5,125
|
11,803
|
84
|
17,012
|
||||||||||||
Cargo
|
|
148
|
334
|
—
|
482
|
|||||||||||
Other,
net
|
|
523
|
1,221
|
10
|
(a)
|
1,754
|
||||||||||
Total
operating revenue
|
|
5,796
|
13,358
|
94
|
19,248
|
|||||||||||
Operating
Expense:
|
|
|||||||||||||||
Aircraft
fuel and related taxes
|
|
1,270
|
3,416
|
—
|
4,686
|
|||||||||||
Salaries
and related costs
|
|
1,302
|
2,887
|
(6)
|
(b)
|
4,183
|
||||||||||
Contract
carrier arrangements
|
|
956
|
2,196
|
—
|
3,152
|
|||||||||||
Depreciation
and amortization
|
|
386
|
778
|
(10)
|
(c)
|
1,154
|
||||||||||
Contracted
services
|
|
326
|
670
|
—
|
996
|
|||||||||||
Aircraft
maintenance materials and outside repairs
|
|
320
|
663
|
(26)
|
(d)
|
957
|
||||||||||
Passenger
commissions and other selling expenses
|
|
298
|
635
|
—
|
933
|
|||||||||||
Landing
fees and other rents
|
|
250
|
475
|
—
|
725
|
|||||||||||
Passenger
service
|
|
95
|
243
|
—
|
338
|
|||||||||||
Aircraft
rent
|
|
90
|
156
|
14
|
(e)
|
260
|
||||||||||
Profit
sharing
|
|
14
|
144
|
—
|
158
|
|||||||||||
Other
|
|
189
|
299
|
(5)
|
(e)
|
483
|
||||||||||
Total
operating expense
|
|
5,496
|
12,562
|
(33)
|
18,025
|
|||||||||||
Operating
Income
|
|
300
|
796
|
127
|
1,223
|
|||||||||||
Other
(Expense) Income:
|
|
|||||||||||||||
Interest
expense, net
|
|
(248
|
)
|
(276
|
)
|
13
|
(f)
|
(511
|
)
|
|||||||
Miscellaneous,
net
|
|
27
|
5
|
—
|
32
|
|||||||||||
Total
other expense, net
|
|
(221
|
)
|
(271
|
)
|
13
|
(479
|
)
|
||||||||
Income
Before Reorganization Items, Net
|
|
79
|
525
|
140
|
744
|
|||||||||||
Reorganization
Items, Net
|
|
1,215
|
—
|
(1,215)
|
(g)
|
—
|
||||||||||
Income
Before Income Taxes
|
|
1,294
|
525
|
(1,075)
|
744
|
|||||||||||
Income
Tax Benefit (Provision)
|
|
4
|
(211
|
)
|
(88)
|
(h)
|
(295
|
)
|
||||||||
Net
Income
|
|
$
|
1,298
|
$
|
314
|
$
|
(1,163)
|
$
|
449
|
|||||||
Basic
Earnings Per Share
|
|
$
|
6.58
|
$
|
0.80
|
|
(i)
|
$
|
1.14
|
|||||||
Diluted
Earnings Per Share
|
|
$
|
4.63
|
$
|
0.79
|
|
(i)
|
$
|
1.14
|
|||||||
Basic
Weighted Average Shares Outstanding
|
|
197
|
394
|
|
(i)
|
394
|
||||||||||
Diluted
Weighted Average Shares Outstanding
|
|
234
|
395
|
|
(i)
|
395
|
(a)
|
SkyMiles Frequent Flyer
Program. Delta revalued the frequent flyer award liability to
estimated fair value and changed the accounting policy from an incremental
cost method to a deferred revenue method. Fair value represents the
estimated price that third parties would require Delta to pay for the
third parties to assume the obligation of redeeming miles under the
SkyMiles program. The revaluation of the frequent flyer liability and
change in accounting policy resulted in increases to passenger and other,
net revenue.
|
(b)
|
Salaries and Related
Costs. The revaluation of Delta’s pension and other postretirement
liabilities resulted in a decrease in net benefit cost due to the change
in the projected benefit obligation and the change in the fair value of
plan assets, as well as the elimination of the amortization of actuarial
gains/losses and prior service benefits/costs.
|
|
(c)
|
Depreciation and Amortization
of Intangible Assets. Delta revalued property and equipment to fair
value, which reduced the net book value of these assets by $1.0 billion.
In addition, Delta adjusted the depreciable lives of flight equipment to
reflect revised estimated useful lives. Delta valued intangible assets at
fair value, which increased the net book value of intangible assets
(excluding goodwill) by $2.9 billion, of which $956 million relates to
amortizable intangible assets. These intangible assets reflect the
estimated fair value of Delta’s trade name, takeoff and arrival slots,
SkyTeam alliance agreements, marketing agreements, customer relationships
and certain contracts. These revaluations and adjustments to useful lives
resulted in a net decrease to depreciation and
amortization.
|
|
(d)
|
Aircraft Maintenance Materials
and Outside Repairs. Delta changed the way it accounts for certain
maintenance parts that were previously capitalized and depreciated. After
emergence from Chapter 11, Delta expenses these parts as they are placed
on the aircraft.
|
|
(e)
|
Other Fresh Start
Adjustments. Delta recorded other adjustments relating primarily to
the revaluation of aircraft leases. These adjustments are reflected in
operating expense and non-operating expense.
|
|
(f)
|
Interest Expense. The
revaluation of Delta’s debt and capital lease obligations resulted in a
decrease in interest expense due to the amortization of net premiums from
adjusting these obligations to fair value.
|
|
(g)
|
Reorganization Items,
Net. Delta recorded an adjustment to reflect the elimination of
reorganization items, net.
|
|
(h)
|
Income Taxes. Delta
recorded an $88 million income tax provision adjustment from the
incremental income associated with other pro forma adjustments and
statutory income taxes for the four months ended April 30, 2007 of
the predecessor. This adjustment is based on the effective tax rate (the
statutory rate adjusted for permanent items) for the year ended
December 31, 2007.
|
|