ATLANTA, April 15, 2015 /PRNewswire/ -- 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
|
|
|
1.1
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
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SOURCE Delta Air Lines