UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
April 15, 2015
DELTA AIR LINES, INC.
(Exact name
of registrant as specified in its charter)
Delaware |
001-05424 |
58-0218548 |
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
P.O. Box 20706, Atlanta, Georgia 30320-6001
(Address of principal executive offices)
Registrant’s telephone number, including
area code: (404) 715-2600
Registrant’s Web site address: www.delta.com
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction
A.2. below):
[_] Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[_] Soliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[_] Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[_] Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results
of Operations and Financial Condition.
Delta Air Lines, Inc. today issued a press release reporting financial
results for the quarter ended March 31, 2015. The press release is furnished as Exhibit 99.1. The information furnished in this
Form 8-K shall not be deemed incorporated by reference into any other filing with the Securities and Exchange Commission.
Item 9.01 Financial
Statements and Exhibits.
(d) Exhibits.
Exhibit 99.1 Press Release dated April 15, 2015 titled “Delta Air Lines Announces March Quarter Profit”
SIGNATURES
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 hereunto duly authorized.
|
DELTA AIR LINES, INC. |
|
|
|
By: /s/ Paul A. Jacobson |
Date: April 15, 2015 |
Paul A. Jacobson
Executive Vice President and Chief Financial Officer |
EXHIBIT INDEX
Exhibit Number |
Description |
|
|
Exhibit 99.1 |
Press Release dated April 15, 2015 titled “Delta Air Lines Announces March Quarter Profit” |
Exhibit 99.1
CONTACT: |
Investor Relations |
|
404-715-2170 |
|
|
|
Corporate Communications |
|
404-715-2554, media@delta.com |
Delta Air Lines Announces March Quarter Profit
ATLANTA, April 15, 2015 – Delta Air Lines (NYSE:DAL)
today reported financial results for the March 2015 quarter. Key points include:
| · | Delta’s adjusted pre-tax income1 for the March
2015 quarter was $594 million, an increase of $150 million over the March 2014 quarter on a similar basis. Delta’s adjusted
net income for the March 2015 quarter was $372 million, or $0.45 per diluted share, and its adjusted operating margin was 8.8 percent. |
| · | On a GAAP basis, Delta’s March quarter pre-tax income was
$1.2 billion, operating margin was 14.9 percent and net income was $746 million, or $0.90 per share. |
| · | Results include $136 million in profit sharing expense, recognizing
Delta employees’ contributions toward meeting the company’s financial goals. |
| · | The company used its strong cash generation in the quarter to return
$500 million to shareholders through dividends and share repurchases and to make $904 million in pension contributions. |
“Delta’s business is performing well, producing the
best March quarter, both operationally and financially, in Delta’s history,” said Richard Anderson, Delta’s chief
executive officer. “While the strong dollar is creating headwinds with international revenues, it also contributes
to the lower fuel prices which will offset those headwinds with over $2 billion in fuel savings this year. We are looking at June
quarter operating margins of 16-18 percent with over $1.5 billion of free cash flow—these record results and cash flows show
that the strong dollar is a net positive for Delta.”
Capacity Actions in Light of Strong Dollar and Lower Energy
Prices
To address currency headwinds, Delta plans to reduce its international
capacity by 3 percent year over year for the winter schedule. These international reductions, combined with 2 percent domestic
growth, will result in flat system capacity for the December quarter. Capacity adjustments will be focused on markets that have
been most affected by the strong dollar and markets where demand has been negatively impacted by the decline in oil prices. Key
actions for the December quarter will include a 15-20 percent reduction in service from Japan, a 15 percent reduction to Brazil,
a 15-20 percent reduction to Africa, India and the Middle East, and suspension of service to Moscow for the winter season.
Revenue Environment
Delta’s operating revenue improved 5 percent, or $472 million,
in the March 2015 quarter compared to the March 2014 quarter. Traffic increased 3.6 percent on a 5.0 percent increase in capacity,
which includes 2 points due to capacity removed in the first quarter of 2014 as a result of winter storms. Foreign exchange pressured
revenue by $105 million for the quarter.
| · | Passenger revenue increased 3 percent, or $246 million, compared
to the prior year period. Passenger unit revenue (PRASM) decreased 1.7 percent year over year primarily driven by 1.5 points of
negative foreign exchange impact. |
| · | Cargo revenue was unchanged from the prior year period as higher
volumes offset lower yields. |
| · | Other revenue increased 22 percent, or $226 million, driven
by SkyMiles revenues and third-party refinery sales. |
Comparisons of revenue-related statistics are as follows:
|
|
|
Increase (Decrease)
1Q15 versus 1Q14 |
Passenger Revenue |
1Q15 ($M) |
|
Change YOY |
Unit Revenue |
Yield |
Capacity |
Domestic |
4,080 |
|
9.2% |
2.1% |
2.4% |
7.0% |
Atlantic |
1,018 |
|
1.1% |
(2.9)% |
1.4% |
4.1% |
Pacific |
740 |
|
(10.5)% |
(9.2)% |
(8.2)% |
(1.4)% |
Latin America |
711 |
|
8.5% |
(4.2)% |
(1.2)% |
13.2% |
Total Mainline |
6,549 |
|
5.2% |
(0.7)% |
0.8% |
5.9% |
Regional carriers |
1,374 |
|
(5.4)% |
(3.7)% |
(3.1)% |
(1.8)% |
Consolidated |
7,923 |
|
3.2% |
(1.7)% |
(0.4)% |
5.0% |
“For the March quarter, Delta delivered solid 5 percent top
line growth and a 17.8 percent operating margin at market fuel prices,” said Ed Bastian, Delta’s president. “The
substantial benefit from lower fuel prices will again more than offset the unit revenue decline of 2 to 4 percent for the June
quarter to produce operating margins north of 20 percent at market fuel prices.”
Fuel
Adjusted fuel expense2 increased $23 million as lower
market fuel prices were offset by $1.1 billion of settled hedge losses, including $300 million of early settlements of contracts
originally settling in the second half of 2015 as the company restructured its hedge book. Delta’s average fuel price was
$2.93 per gallon for the March quarter. Operations at the refinery produced an $86 million profit for the March quarter, a $127
million improvement year-over-year.
Cost Performance
Consolidated unit cost adjusted for fuel expense, profit sharing
and special items (CASM-Ex3), was down 1.4 percent in the March 2015 quarter on a year-over-year basis, with higher
capacity, foreign exchange and the benefits of Delta’s domestic refleeting and other cost initiatives offsetting the company’s
investments in its employees, products and operations.
“With nearly 10 percent of our expenses non-dollar denominated,
we are seeing cost tailwinds from the strong dollar which should benefit our non-fuel unit costs by 1 point in the June quarter,”
said Paul Jacobson, Delta’s chief financial officer. “With this currency benefit and the strong cost control that
is a hallmark of the Delta culture, we are on track to deliver our eighth consecutive quarter of non-fuel unit cost growth below
2 percent in the June quarter.”
Adjusted for special items, non-fuel operating expense in the quarter
increased $333 million year-over-year driven by wage increases, profit sharing, and higher volume-related expenses. These cost
increases were partially offset by foreign exchange and savings from Delta’s cost initiatives.
Non-operating expense, adjusted for special items, declined by $34
million as a result of $55 million in lower interest expense, partially offset by an $11 million higher foreign exchange loss on
foreign-denominated assets and liabilities compared to the first quarter of 2014.
Cash Flow
Cash from operations during the March 2015 quarter was $1.1 billion
and free cash flow was $511 million, driven by the company’s March quarter profit and the normal seasonal increase in advance
ticket sales. Cash flow from operations and free cash flow exclude the return of fuel hedge margin posted. Capital expenditures
during the March 2015 quarter were $586 million, including $411 million in fleet investments. During the quarter, Delta’s
net debt and capital lease maturities were $260 million.
With its strong cash generation in the March 2015 quarter, the company
returned $500 million to shareholders. The company paid $75 million in cash dividends and repurchased 9.3 million shares for $425
million. Delta also made over $900 million in pension contributions during the quarter.
Delta ended the quarter with adjusted net debt4 of $7.4
billion, including cash held by counterparties as hedge margin. The company has achieved nearly $10 billion in net debt reduction
since 2009, resulting in a roughly 50% reduction in annual interest expense.
GAAP Metrics Related to Cost Performance and Cash Flow
On a GAAP basis compared to the March 2014 quarter, consolidated
CASM declined 8 percent, total operating expense was down $306 million, and fuel expense declined $600 million. GAAP fuel cost
per gallon for the quarter was $2.29. Non-operating expenses for the quarter decreased by $73 million. Cash from operations for
the March 2015 quarter was $1.6 billion and the company ended the quarter with debt and capital lease obligations of $9.6 billion
on a GAAP basis.
June 2015 Quarter Guidance
Following are Delta’s projections for the June 2015 quarter:
|
|
2Q15 Forecast |
|
|
|
Operating margin |
|
16% - 18% |
Fuel price, including taxes, settled hedges and refinery impact |
|
$2.35 - $2.40 |
CASM - Ex (compared to 2Q14) |
|
Up 0 – 1% |
System capacity (compared to 2Q14) |
|
Up ~3% |
Special Items
Special items, net of taxes, in the March 2015 quarter totaled $374
million, including:
| · | $372 million for mark-to-market adjustments and settlements on fuel
hedges; |
| · | $8 million for mark-to-market adjustments on hedges owned by Virgin
Atlantic; and |
| · | a $6 million charge for fleet and other items, primarily associated
with Delta’s domestic fleet restructuring initiative. |
Special items, net of taxes, in the March 2014 quarter totaled $68
million, including:
| · | a $31 million charge associated with Delta’s domestic fleet
restructuring; |
| · | a $21 million mark-to-market adjustment on fuel hedges; |
| · | an $11 million charge for debt extinguishment; and |
| · | a $5 million charge for mark-to-market adjustments on hedges owned
by Virgin Atlantic. |
About Delta
Delta Air Lines serves more than 170 million customers each year.
Delta was named to FORTUNE magazine’s top 50 World’s Most Admired Companies in addition to being named the most admired
airline for the fourth time in five years. Additionally, Delta has ranked No.1 in the Business Travel News Annual Airline survey
for four consecutive years, a first for any airline. With an industry-leading global network, Delta and the Delta Connection carriers
offer service to 321 destinations in 58 countries on six continents. Headquartered in Atlanta, Delta employs nearly 80,000 employees
worldwide and operates a mainline fleet of more than 700 aircraft. The airline is a founding member of the SkyTeam global alliance
and participates in the industry’s leading trans-Atlantic joint venture with Air France-KLM and Alitalia as well as a newly
formed joint venture with Virgin Atlantic. Including its worldwide alliance partners, Delta offers customers more than 15,000 daily
flights, with key hubs and markets including Amsterdam, Atlanta, Boston, Detroit, Los Angeles, Minneapolis/St. Paul, New York-JFK,
New York-LaGuardia, Paris-Charles de Gaulle, Salt Lake City, Seattle and Tokyo-Narita. Delta has invested billions of dollars in
airport facilities, global products, services and technology to enhance the customer experience in the air and on the ground. Additional
information is available on delta.com, Twitter @Delta, Google.com/+Delta, Facebook.com/delta and Delta’s blog takingoff.delta.com.
End Notes
| (1) | Note A to the attached
Consolidated Statements of Operations provides a reconciliation of non-GAAP financial
measures used in this release to the comparable GAAP metric and provides the reasons
management uses those measures. |
| (2) | Adjusted
fuel expense reflects, among other things, the impact of mark-to-market (“MTM”)
adjustments and settlements. MTM adjustments are defined as fair value changes
recorded in periods other than the settlement period. Such fair value changes are not
necessarily indicative of the actual settlement value of the underlying hedge in the
contract settlement period. Settlements represent cash received or paid on hedge contracts
settling during the period. These items adjust fuel expense to show the economic impact
of hedging, including cash received or paid on hedge contracts during the period. During
the March 2015 quarter, we paid $302 million to early settle contracts that were originally
scheduled to expire in the second half of 2015. See Note A for a reconciliation of adjusted
fuel expense and average fuel price per gallon to the comparable GAAP metric. |
| (3) | CASM - Ex: In
addition to fuel expense, profit sharing and special items, Delta
believes adjusting for certain other expenses is helpful to investors because other expenses
are not related to the generation of a seat mile. These expenses include aircraft maintenance
and staffing services Delta provides to third parties, Delta's vacation wholesale operations,
and refinery cost of sales to third parties. The amounts excluded were $293 million
and $184 million for
the March 2015 and March 2014
quarters, respectively. Management believes this methodology provides a more consistent
and comparable reflection of Delta's airline operations. |
| (4) | Adjusted net debt includes $383 million
of hedge margin receivable, which is cash that we have posted with counterparties as
hedge margin. See Note A for additional information about our calculation of adjusted
net debt. |
Forward Looking Statements
Statements in this press release that are not historical facts,
including statements regarding our estimates, expectations, beliefs, intentions, projections or strategies for the future, may
be "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. All forward-looking
statements involve a number of risks and uncertainties that could cause actual results to differ materially from the estimates,
expectations, beliefs, intentions, projections and strategies reflected in or suggested by the forward-looking statements. These
risks and uncertainties include, but are not limited to, the cost of aircraft fuel; the availability of aircraft fuel; the impact
of rebalancing our hedge portfolio, recording mark-to-market adjustments or posting collateral in connection with our fuel hedge
contracts; the possible effects of accidents involving our aircraft; the restrictions that financial covenants in our financing
agreements will have on our financial and business operations; labor issues; interruptions or disruptions in service at one of
our hub or gateway airports; disruptions or security breaches of our information technology infrastructure; our dependence on technology
in our operations; the effects of weather, natural disasters and seasonality on our business; the effects of an extended disruption
in services provided by third party regional carriers; failure or inability of insurance to cover a significant liability at Monroe’s
Trainer refinery; the impact of environmental regulation on the Trainer refinery, including costs related to renewable fuel standard
regulations; our ability to retain management and key employees; competitive conditions in the airline industry; the effects of
extensive government regulation on our business; the sensitivity of the airline industry to prolonged periods of stagnant or weak
economic conditions; the effects of terrorist attacks or geopolitical conflict; and the effects of the rapid spread of contagious
illnesses.
Additional information concerning risks and uncertainties
that could cause differences between actual results and forward-looking statements is contained in our Securities and Exchange
Commission filings, including our Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2014.
Caution should be taken
not to place undue reliance on our forward-looking statements, which represent our views only as of April 15, 2015, and which we
have no current intention to update.
DELTA AIR LINES,
INC.
Consolidated Statements
of Operations
(Unaudited)
| |
Three Months Ended March 31, |
(in millions, except per share data) | |
2015 | | |
2014 | | |
$ Change | | |
% Change |
Operating Revenue: | |
| | |
| | |
| | |
|
Passenger: | |
| | | |
| | | |
| | | |
|
Mainline | |
$ | 6,549 | | |
$ | 6,224 | | |
$ | 325 | | |
5% |
Regional carriers | |
| 1,374 | | |
| 1,453 | | |
| (79 | ) | |
(5)% |
Total passenger revenue | |
| 7,923 | | |
| 7,677 | | |
| 246 | | |
3% |
Cargo | |
| 217 | | |
| 217 | | |
| – | | |
-% |
Other | |
| 1,248 | | |
| 1,022 | | |
| 226 | | |
22% |
Total operating revenue | |
| 9,388 | | |
| 8,916 | | |
| 472 | | |
5% |
| |
| | | |
| | | |
| | | |
|
Operating Expense: | |
| | | |
| | | |
| | | |
|
Salaries and related costs | |
| 2,092 | | |
| 1,969 | | |
| 123 | | |
6% |
Aircraft fuel and related taxes | |
| 1,835 | | |
| 2,226 | | |
| (391 | ) | |
(18)% |
Regional carrier expense | |
| | | |
| | | |
| | | |
|
Fuel | |
| 264 | | |
| 473 | | |
| (209 | ) | |
(44)% |
Other | |
| 789 | | |
| 846 | | |
| (57 | ) | |
(7)% |
Depreciation and amortization | |
| 470 | | |
| 442 | | |
| 28 | | |
6% |
Aircraft maintenance materials and outside repairs | |
| 452 | | |
| 448 | | |
| 4 | | |
1% |
Contracted services | |
| 441 | | |
| 427 | | |
| 14 | | |
3% |
Passenger commissions and other selling expenses | |
| 386 | | |
| 373 | | |
| 13 | | |
3% |
Landing fees and other rents | |
| 373 | | |
| 341 | | |
| 32 | | |
9% |
Passenger service | |
| 190 | | |
| 173 | | |
| 17 | | |
10% |
Profit sharing | |
| 136 | | |
| 99 | | |
| 37 | | |
37% |
Aircraft rent | |
| 60 | | |
| 51 | | |
| 9 | | |
18% |
Restructuring and other items | |
| 10 | | |
| 49 | | |
| (39 | ) | |
(80)% |
Other | |
| 492 | | |
| 379 | | |
| 113 | | |
30% |
Total operating expense | |
| 7,990 | | |
| 8,296 | | |
| (306 | ) | |
(4)% |
| |
| | | |
| | | |
| | | |
|
Operating Income | |
| 1,398 | | |
| 620 | | |
| 778 | | |
NM |
| |
| | | |
| | | |
| | | |
|
Other Expense: | |
| | | |
| | | |
| | | |
|
Interest expense, net | |
| (131 | ) | |
| (186 | ) | |
| 55 | | |
(30)% |
Loss on extinguishment of debt | |
| – | | |
| (18 | ) | |
| 18 | | |
(100)% |
Miscellaneous, net | |
| (81 | ) | |
| (81 | ) | |
| – | | |
-% |
Total other expense, net | |
| (212 | ) | |
| (285 | ) | |
| 73 | | |
(26)% |
| |
| | | |
| | | |
| | | |
|
Income Before Income Taxes | |
| 1,186 | | |
| 335 | | |
| 851 | | |
NM |
| |
| | | |
| | | |
| | | |
|
Income Tax Provision | |
| (440 | ) | |
| (122 | ) | |
| (318 | ) | |
NM |
| |
| | | |
| | | |
| | | |
|
Net Income | |
$ | 746 | | |
$ | 213 | | |
$ | 533 | | |
NM |
| |
| | | |
| | | |
| | | |
|
Basic Earnings Per Share | |
$ | 0.91 | | |
$ | 0.25 | | |
| | | |
|
Diluted Earnings Per Share | |
$ | 0.90 | | |
$ | 0.25 | | |
| | | |
|
| |
| | | |
| | | |
| | | |
|
Basic Weighted Average Shares Outstanding | |
| 818 | | |
| 844 | | |
| | | |
|
Diluted Weighted Average Shares Outstanding | |
| 826 | | |
| 853 | | |
| | | |
|
DELTA AIR LINES, INC.
Statistical Summary
(Unaudited)
| |
Three Months Ended Mar. 31, |
| |
2015 | | |
2014 | | |
Change |
Consolidated: | |
| | | |
| | | |
|
Revenue passenger miles (millions) | |
| 46,221 | | |
| 44,601 | | |
4% |
Available seat miles (millions) | |
| 56,597 | | |
| 53,904 | | |
5% |
Passenger mile yield (cents) | |
| 17.14 | | |
| 17.21 | | |
-% |
Passenger revenue per available seat mile (cents) | |
| 14.00 | | |
| 14.24 | | |
(2)% |
Operating cost per available seat mile (cents) | |
| 14.12 | | |
| 15.39 | | |
(8)% |
CASM-Ex - see Note A (cents) | |
| 9.64 | | |
| 9.77 | | |
(1)% |
Passenger load factor | |
| 81.7 | % | |
| 82.7 | % | |
(1.0) pt |
Fuel gallons consumed (millions) | |
| 918 | | |
| 881 | | |
4% |
Average price per fuel gallon, adjusted - see Note A | |
$ | 2.93 | | |
$ | 3.03 | | |
(3)% |
Number of aircraft in fleet, end of period | |
| 912 | | |
| 909 | | |
3 |
Full-time equivalent employees, end of period | |
| 81,055 | | |
| 78,870 | | |
3% |
| |
| | | |
| | | |
|
Mainline: | |
| | | |
| | | |
|
Revenue passenger miles (millions) | |
| 41,304 | | |
| 39,567 | | |
4% |
Available seat miles (millions) | |
| 50,171 | | |
| 47,361 | | |
6% |
Operating cost per available seat mile (cents) | |
| 13.49 | | |
| 14.33 | | |
(6)% |
CASM-Ex - see Note A (cents) | |
| 9.05 | | |
| 9.09 | | |
-% |
Fuel gallons consumed (millions) | |
| 772 | | |
| 729 | | |
6% |
Average price per fuel gallon, adjusted - see Note A | |
$ | 3.13 | | |
$ | 3.00 | | |
4% |
Number of aircraft in fleet, end of period | |
| 786 | | |
| 745 | | |
41 |
Note: except
for full-time equivalent employees and number of aircraft in fleet, consolidated data presented includes operations under Delta’s
contract carrier arrangements.
DELTA AIR LINES, INC.
Consolidated Statements of Cash Flows
(Unaudited)
| |
Three Months Ended March 31, | |
(in millions) | |
2015 | | |
2014 | |
Cash Flows From Operating Activities: | |
| | | |
| | |
Net Income | |
$ | 746 | | |
$ | 213 | |
Depreciation and amortization | |
| 470 | | |
| 442 | |
Hedge derivative contracts | |
| (323 | ) | |
| 80 | |
Deferred income taxes | |
| 435 | | |
| 121 | |
Pension, postretirement and postemployment expense less than payments | |
| (905 | ) | |
| (562 | ) |
Changes in: | |
| | | |
| | |
Hedge margin | |
| 542 | | |
| (1 | ) |
Air traffic liability | |
| 1,570 | | |
| 1,521 | |
Profit sharing | |
| (620 | ) | |
| (407 | ) |
Other, net | |
| (279 | ) | |
| (456 | ) |
Net Cash Provided by Operating Activities | |
| 1,636 | | |
| 951 | |
| |
| | | |
| | |
Cash Flows From Investing Activities: | |
| | | |
| | |
Property and equipment additions: | |
| | | |
| | |
Flight equipment, including advance payments | |
| (451 | ) | |
| (514 | ) |
Ground property and equipment, including technology | |
| (135 | ) | |
| (100 | ) |
Net (purchases) redemptions of short-term investments | |
| (229 | ) | |
| 11 | |
Other, net | |
| 3 | | |
| 40 | |
Net cash used in investing activities | |
| (812 | ) | |
| (563 | ) |
| |
| | | |
| | |
Cash Flows From Financing Activities: | |
| | | |
| | |
Payments on long-term debt and capital lease obligations | |
| (301 | ) | |
| (412 | ) |
Repurchase of common stock | |
| (425 | ) | |
| (125 | ) |
Cash dividends | |
| (75 | ) | |
| (51 | ) |
Proceeds from long-term obligations | |
| 41 | | |
| 59 | |
Other, net | |
| (30 | ) | |
| (4 | ) |
Net cash used in financing activities | |
| (790 | ) | |
| (533 | ) |
| |
| | | |
| | |
Net Increase (Decrease) in Cash and Cash Equivalents | |
| 34 | | |
| (145 | ) |
Cash and cash equivalents at beginning of period | |
| 2,088 | | |
| 2,844 | |
Cash and cash equivalents at end of period | |
$ | 2,122 | | |
$ | 2,699 | |
DELTA AIR LINES,
INC.
Consolidated Balance
Sheets
(Unaudited)
| |
March 31, | | |
December 31, | |
(in millions) | |
2015 | | |
2014 | |
ASSETS | |
| | |
| |
Current Assets: | |
| | | |
| | |
Cash and cash equivalents | |
$ | 2,122 | | |
$ | 2,088 | |
Short-term investments | |
| 1,447 | | |
| 1,217 | |
Accounts receivable, net | |
| 2,057 | | |
| 2,297 | |
Hedge margin receivable | |
| 383 | | |
| 925 | |
Fuel inventory | |
| 475 | | |
| 534 | |
Expendable parts and supplies inventories, net | |
| 326 | | |
| 318 | |
Hedge derivatives asset | |
| 1,575 | | |
| 1,078 | |
Deferred income taxes, net | |
| 3,091 | | |
| 3,275 | |
Prepaid expenses and other | |
| 790 | | |
| 733 | |
Total current assets | |
| 12,266 | | |
| 12,465 | |
| |
| | | |
| | |
Property and Equipment, Net: | |
| | | |
| | |
Property and equipment, net | |
| 22,023 | | |
| 21,929 | |
| |
| | | |
| | |
Other Assets: | |
| | | |
| | |
Goodwill | |
| 9,794 | | |
| 9,794 | |
Identifiable intangibles, net | |
| 4,599 | | |
| 4,603 | |
Deferred income taxes, net | |
| 4,051 | | |
| 4,320 | |
Other noncurrent assets | |
| 1,019 | | |
| 1,010 | |
Total other assets | |
| 19,463 | | |
| 19,727 | |
Total assets | |
$ | 53,752 | | |
$ | 54,121 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |
| | | |
| | |
Current Liabilities: | |
| | | |
| | |
Current maturities of long-term debt and capital leases | |
$ | 1,261 | | |
$ | 1,216 | |
Air traffic liability | |
| 5,866 | | |
| 4,296 | |
Accounts payable | |
| 2,492 | | |
| 2,622 | |
Accrued salaries and related benefits | |
| 1,622 | | |
| 2,266 | |
Hedge derivatives liability | |
| 2,512 | | |
| 2,772 | |
Frequent flyer deferred revenue | |
| 1,575 | | |
| 1,580 | |
Other accrued liabilities | |
| 1,991 | | |
| 2,127 | |
Total current liabilities | |
| 17,319 | | |
| 16,879 | |
| |
| | | |
| | |
Noncurrent Liabilities: | |
| | | |
| | |
Long-term debt and capital leases | |
| 8,305 | | |
| 8,561 | |
Pension, postretirement and related benefits | |
| 14,170 | | |
| 15,138 | |
Frequent flyer deferred revenue | |
| 2,455 | | |
| 2,602 | |
Other noncurrent liabilities | |
| 2,457 | | |
| 2,128 | |
Total noncurrent liabilities | |
| 27,387 | | |
| 28,429 | |
| |
| | | |
| | |
Commitments and Contingencies | |
| | | |
| | |
| |
| | | |
| | |
Stockholders' Equity: | |
| | | |
| | |
Common stock | |
| – | | |
| – | |
Additional paid-in capital | |
| 12,578 | | |
| 12,981 | |
Retained earnings | |
| 4,127 | | |
| 3,456 | |
Accumulated other comprehensive loss | |
| (7,294 | ) | |
| (7,311 | ) |
Treasury stock | |
| (365 | ) | |
| (313 | ) |
Total stockholders' equity | |
| 9,046 | | |
| 8,813 | |
Total liabilities and stockholders' equity | |
$ | 53,752 | | |
$ | 54,121 | |
Note A: The following tables show reconciliations of non-GAAP
financial measures. The reasons Delta uses these measures are described below.
Delta sometimes uses information ("non-GAAP financial measures")
that is derived from the Consolidated Financial Statements, but that is not presented in accordance with accounting principles
generally accepted in the U.S. (“GAAP”). Under the U.S. Securities and Exchange Commission rules, non-GAAP financial
measures may be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for
or superior to GAAP results. The tables below show reconciliations of non-GAAP financial measures used in this release to the most
directly comparable GAAP financial measures.
Forward Looking Projections. Delta is unable to reconcile
certain forward-looking projections to GAAP as the nature or amount of special items cannot be estimated at this time.
Pre-Tax Income and Net Income, adjusted for special items.
Delta adjusts for the following items to determine pre-tax income and net income, adjusted for special items, for the reasons described
below:
MTM adjustments and settlements. MTM adjustments
are defined as fair value changes recorded in periods other than the settlement period. Such fair value changes are not necessarily
indicative of the actual settlement value of the underlying hedge in the contract settlement period. Settlements represent cash
received or paid on hedge contracts settling during the period. These items adjust fuel expense to show the economic impact of
hedging, including cash received or paid on hedge contracts during the period. Adjusting for these items allows investors to better
understand and analyze the company's core operational performance in the periods shown.
Restructuring and other. Because of the variability in restructuring
and other, the adjustment for this item is helpful to investors to analyze the company’s recurring core operational performance
in the periods shown.
Virgin Atlantic MTM adjustments. We record our proportionate
share of earnings from our equity investment in Virgin Atlantic in other expense. We adjust for Virgin Atlantic's MTM adjustments
to allow investors to better understand and analyze the company’s financial performance in the periods shown.
Loss on extinguishment of debt. Because of the variability
in loss on extinguishment of debt, the adjustment for this item is helpful to investors to analyze the company’s recurring
core operational performance in the period shown.
Income tax. Pre-tax income is adjusted for the
income tax effect of special items. We believe this adjustment allows investors to better understand and analyze the company’s
core operational performance in the periods shown.
| |
Three Months Ended | | |
Net Income | |
| |
March 31, 2015 | | |
Per Diluted Share | |
| |
Pre-Tax | | |
Income | | |
Net | | |
Three Months Ended | |
(in millions, except per share data) | |
Income | | |
Tax | | |
Income | | |
March 31, 2015 | |
GAAP | |
$ | 1,186 | | |
$ | (440 | ) | |
$ | 746 | | |
$ | 0.90 | |
Adjusted for: | |
| | | |
| | | |
| | | |
| | |
MTM adjustments and settlements | |
| (589 | )1 | |
| 217 | | |
| (372 | ) | |
| | |
Restructuring and other | |
| 10 | | |
| (4 | ) | |
| 6 | | |
| | |
Virgin Atlantic MTM adjustments | |
| (13 | ) | |
| 5 | | |
| (8 | ) | |
| | |
Total adjustments | |
| (592 | ) | |
| 218 | | |
| (374 | ) | |
| (0.45 | ) |
Non-GAAP | |
$ | 594 | | |
$ | (222 | ) | |
$ | 372 | | |
$ | 0.45 | |
(1) Includes $302 million to early settle contracts that were in a loss position and originally scheduled
to expire in the second half of 2015.
| |
Three Months Ended | |
| |
March 31, 2014 | |
| |
Pre-Tax | | |
Income | | |
Net | |
(in millions, except per share data) | |
Income | | |
Tax | | |
Income | |
GAAP | |
$ | 335 | | |
$ | (122 | ) | |
$ | 213 | |
Adjusted for: | |
| | | |
| | | |
| | |
MTM adjustments and settlements | |
| 34 | | |
| (13 | ) | |
| 21 | |
Restructuring and other | |
| 49 | | |
| (18 | ) | |
| 31 | |
Loss on extinguishment of debt | |
| 18 | | |
| (7 | ) | |
| 11 | |
Virgin Atlantic MTM adjustments | |
| 8 | | |
| (3 | ) | |
| 5 | |
Total adjustments | |
| 109 | | |
| (41 | ) | |
| 68 | |
Non-GAAP | |
$ | 444 | | |
$ | (163 | ) | |
$ | 281 | |
Operating Margin, adjusted for special items. Delta adjusts
for MTM adjustments and settlements and restructuring and other to determine operating margin, adjusted for special items, for
the reasons described under the heading Pre-Tax Income and Net Income, adjusted for special items. Delta also adjusts for the following:
Refinery Sales. Delta's refinery segment provides
jet fuel to the airline segment from its own production and from jet fuel obtained through agreements with third parties. Activities
of the refinery segment are primarily for the benefit of the airline. However, from time to time, the refinery sells fuel by-products
to third parties. These sales are recorded gross within other revenue and other operating expense. We believe adjusting for refinery
sales allows investors to better understand and analyze the impact of fuel cost on our results in the period shown.
Hedge losses. Delta adjusts for settled hedge
losses to determine what operating margin would be at market fuel prices. We believe adjusting for fuel hedge losses allows investors
to better understand and analyze the company's core operational performance, at market fuel prices, in the period shown.
| |
Three Months Ended | |
| |
March 31, | |
| |
2015 | | |
2014 | |
Operating margin | |
| 14.9 | % | |
| 7.0 | % |
Adjusted for: | |
| | | |
| | |
MTM adjustments and settlements | |
| (6.3 | )% | |
| 0.4 | % |
Restructuring and other | |
| 0.1 | % | |
| 0.5 | % |
Refinery sales | |
| 0.1 | % | |
| – | |
Operating margin, adjusted | |
| 8.8 | % | |
| 7.9 | % |
Hedge losses | |
| 9.0 | % | |
| | |
Operating margin, adjusted for hedge losses | |
| 17.8 | % | |
| | |
Fuel expense, adjusted and Average fuel price per gallon, adjusted.
The tables below show the components of fuel expense, including the impact of the refinery segment and hedging on fuel expense
and average price per gallon. We then adjust for MTM adjustments and settlements (as described above under the heading Pre-Tax
Income and Net Income, adjusted for special items) because these amounts allow investors to better understand and analyze Delta's
costs for the periods reported.
Consolidated:
| |
| | |
| | |
Average Price Per Gallon | |
| |
Three Months Ended | | |
Three Months Ended | |
| |
March 31, | | |
March 31, | |
(in millions, except per gallon data) | |
2015 | | |
2014 | | |
2015 | | |
2014 | |
Fuel purchase cost | |
$ | 1,718 | | |
$ | 2,731 | | |
$ | 1.87 | | |
$ | 3.09 | |
Airline segment fuel hedge losses (gains) | |
| 467 | | |
| (73 | ) | |
| 0.51 | | |
| (0.08 | ) |
Refinery segment impact | |
| (86 | ) | |
| 41 | | |
| (0.09 | ) | |
| 0.05 | |
Total fuel expense | |
$ | 2,099 | | |
$ | 2,699 | | |
$ | 2.29 | | |
$ | 3.06 | |
MTM adjustments and settlements | |
| 589 | | |
| (34 | ) | |
| 0.64 | | |
| (0.03 | ) |
Total fuel expense, adjusted | |
$ | 2,688 | | |
$ | 2,665 | | |
$ | 2.93 | | |
$ | 3.03 | |
Mainline:
| |
Three Months Ended | |
| |
December 31, | |
| |
2015 | | |
2014 | |
Mainline average price per gallon | |
$ | 2.37 | | |
$ | 3.05 | |
MTM adjustments and settlements | |
| 0.76 | | |
| (0.05 | ) |
Mainline average price per gallon, adjusted | |
$ | 3.13 | | |
$ | 3.00 | |
Non-Fuel Unit Cost or Cost per Available Seat Mile ("CASM-Ex").
We adjust CASM for the following items to determine CASM-Ex for the reasons described below:
Aircraft fuel and related taxes. The volatility
in fuel prices impacts the comparability of year-over-year non-fuel financial performance. The adjustment for aircraft fuel and
related taxes (including our regional carriers) allows investors to better understand and analyze our non-fuel costs and our year-over-year
financial performance.
Profit sharing. We adjust for profit sharing because
this adjustment allows investors to better understand and analyze our recurring cost performance and provides a more meaningful
comparison of our core operating costs to the airline industry.
Restructuring and other. We adjust for restructuring
and other for the same reasons described above under the heading Pre-Tax Income and Net Income, adjusted for special items.
Other expenses. Other expenses include aircraft
maintenance and staffing services we provide to third parties, our vacation wholesale operations, and refinery cost of sales to
third parties. Because these businesses are not related to the generation of a seat mile, we adjust for the costs related to these
sales to provide a more meaningful comparison of the costs of our airline operations to the rest of the airline industry.
Consolidated CASM-Ex:
| |
Three Months Ended | |
| |
March 31, 2015 | | |
March 31, 2014 | |
CASM (cents) | |
| 14.12 | | |
| 15.39 | |
Adjusted for: | |
| | | |
| | |
Aircraft fuel and related taxes | |
| (3.71 | ) | |
| (5.01 | ) |
Profit sharing | |
| (0.24 | ) | |
| (0.18 | ) |
Restructuring and other | |
| (0.02 | ) | |
| (0.09 | ) |
Other expenses | |
| (0.51 | ) | |
| (0.34 | ) |
CASM-Ex | |
| 9.64 | | |
| 9.77 | |
Year-over-year change | |
| -1.4 | % | |
| | |
Mainline CASM-Ex:
| |
Three Months Ended | |
| |
March 31, 2015 | | |
March 31, 2014 | |
Mainline CASM (cents) | |
| 13.49 | | |
| 14.33 | |
Adjusted for: | |
| | | |
| | |
Aircraft fuel and related taxes | |
| (3.66 | ) | |
| (4.69 | ) |
Profit Sharing | |
| (0.27 | ) | |
| (0.21 | ) |
Restructuring and other | |
| – | | |
| (0.01 | ) |
Other expenses | |
| (0.51 | ) | |
| (0.33 | ) |
Mainline CASM-Ex | |
| 9.05 | | |
| 9.09 | |
Non-Fuel Operating Expense, adjusted for special items. Delta
adjusts for aircraft fuel and related taxes to determine non-fuel operating expense, adjusted for special items, for the same reasons
described above under the heading Non-Fuel Unit Cost or Cost per Available Seat Mile ("CASM-Ex"). We also adjust for
restructuring and other for the same reasons as described above under the heading Pre-Tax Income and Net Income, adjusted for special
items.
| |
Three Months Ended | |
| |
March 31, | |
(in millions) | |
2015 | | |
2014 | |
Operating expense | |
$ | 7,990 | | |
$ | 8,296 | |
Adjusted for: | |
| | | |
| | |
Aircraft fuel and related taxes | |
| (2,099 | ) | |
| (2,699 | ) |
Restructuring and other | |
| (10 | ) | |
| (49 | ) |
Non-fuel operating expense, adjusted | |
$ | 5,881 | | |
$ | 5,548 | |
Non-Operating Expense, adjusted for special items. Delta
adjusts for Virgin Atlantic MTM adjustments and loss on extinguishment of debt from non-operating expense for the same reason as
described above under the heading Pre-Tax Income and Net Income, adjusted for special items.
| |
Three Months Ended | |
| |
March 31, | |
(in millions) | |
2015 | | |
2014 | |
Non-operating expense | |
$ | 212 | | |
$ | 285 | |
Adjusted for: | |
| | | |
| | |
Virgin Atlantic MTM adjustments | |
| 13 | | |
| (8 | ) |
Loss on extinguishment of debt | |
| – | | |
| (18 | ) |
Non-operating expense, adjusted | |
$ | 225 | | |
$ | 259 | |
Net Cash Provided by Operations, adjusted or "Cash From
Operations". Delta presents cash from operations because management believes adjusting for these amounts provides a more
meaningful financial measure for investors. This metric is adjusted for hedge margin as we believe this adjustment removes the
impact of current market volatility on our unsettled hedges and allows investors to better understand and analyze the company’s
core operational performance in the period shown.
| |
Three Months Ended | |
(in billions) | |
March 31, 2015 | |
Net cash provided by operating activities (GAAP) | |
$ | 1.6 | |
Adjustments: | |
| | |
Hedge margin | |
| (0.5 | ) |
Net cash provided by operating activities, adjusted | |
$ | 1.1 | |
Free Cash Flow. Delta presents free cash flow because management
believes this metric is helpful to investors to evaluate the company's ability to generate cash that is available for use for debt
service or general corporate initiatives. This metric is adjusted for hedge margin as we believe this adjustment removes the impact
of current market volatility on our unsettled hedges and allows investors to better understand and analyze the company’s
core operational performance in the period shown.
| |
Three Months Ended | |
(in millions) | |
March 31, 2015 | |
Net cash provided by operating activities | |
$ | 1,636 | |
Net cash used in investing activities | |
| (812 | ) |
Adjustments: | |
| | |
Net purchases of short-term investments and other | |
| 229 | |
Hedge margin | |
| (542 | ) |
Total free cash flow | |
$ | 511 | |
Adjusted Net Debt. Delta uses adjusted total debt, including
aircraft rent, in addition to long-term adjusted debt and capital leases, to present estimated financial obligations. Delta reduces
adjusted debt by cash, cash equivalents and short-term investments, and hedge margin receivable, resulting in adjusted net debt,
to present the amount of assets needed to satisfy the debt. Management believes this metric is helpful to investors in assessing
the company’s overall debt profile. Management has reduced adjusted debt by the amount of hedge margin receivable, which
reflects cash posted to counterparties, as we believe this removes the impact of current market volatility on our unsettled hedges
and is a better representation of the continued progress we have made on our debt initiatives.
| |
Three Months Ended | | |
Year Ended | |
(in billions) | |
March 31, 2015 | | |
December 31, 2009 | |
Debt and capital lease obligations | |
$ | 9.6 | | |
| | | |
$ | 17.2 | | |
| | |
Plus: unamortized discount, net from purchase accounting and fresh start reporting | |
| 0.1 | | |
| | | |
| 1 | | |
| | |
Adjusted debt and capital lease obligations | |
| | | |
$ | 9.7 | | |
| | | |
$ | 18.3 | |
Plus: 7x last twelve months' aircraft rent | |
| | | |
| 1.7 | | |
| | | |
| 3.4 | |
Adjusted total debt | |
| | | |
| 11.4 | | |
| | | |
| 21.7 | |
Less: cash, cash equivalents and short-term investments | |
| | | |
| (3.6 | ) | |
| | | |
| (4.7 | ) |
Less: hedge margin receivable | |
| | | |
| (0.4 | ) | |
| | | |
| – | |
Adjusted net debt | |
| | | |
$ | 7.4 | | |
| | | |
$ | 17.0 | |
Delta Air Lines (NYSE:DAL)
Historical Stock Chart
From May 2024 to Jun 2024
Delta Air Lines (NYSE:DAL)
Historical Stock Chart
From Jun 2023 to Jun 2024