ATLANTA, May 13, 2015 /PRNewswire/ -- Delta's Board
of Directors today announced a new $5
billion share repurchase program, to be completed no later
than December 31, 2017. In
addition, the company's quarterly dividend will increase by 50
percent to $0.135 per share beginning
in the September 2015 quarter.
These two programs are expected to return more than $6 billion to shareholders through 2017.
The company also announced that it is on track to complete the
remaining $725 million of its prior
$2 billion share repurchase
authorization by June 30.
"Today's announcement marks the next phase of Delta's long-term
capital deployment strategy as we near conclusion of our balance
sheet transformation and place even greater emphasis on returning
our free cash flow to shareholders," said Daniel Carp, chairman of Delta's Board of
Directors. "The expansion of our shareholder return program
reflects the Board's confidence in Delta's ability to sustain and
improve upon its strong financial performance."
Raising the Bar on Shareholder Returns
In an investor presentation this morning, Delta provided an
update on its progress against the capital deployment plan
announced by the company in May 2014. The company announced
plans to drive additional shareholder value by accelerating cash
returns to shareholders while strengthening the balance sheet
through debt and pension reductions.
"Our long-term plan stays true to Delta's core values – running
the most operationally reliable and customer-focused airline,
maintaining the culture that drives our success, and investing in
our business," said Richard
Anderson, Delta's chief executive officer. "Delta
continues to raise the bar among industrial companies, leading its
peer set in free cash flow generation. Our latest shareholder
return announcement underlines Delta's efforts to build a durable,
sustainable franchise that will benefit our customers, employees,
and shareholders for many years to come."
- Cash returns to shareholders: The company is on
track to complete the remaining $725
million of its current $2
billion repurchase authorization by the end of June 2015, one and a half years ahead of
schedule. When this authorization is completed, Delta will
have returned a total of $3 billion
in dividends and share repurchases since announcing its initial
program two years ago. Going forward, the company intends to
return at least 50 percent of free cash flow to shareholders
through 2017. The new $5
billion repurchase authorization and 50 percent increase to
the quarterly dividend approved by Delta's Board of Directors are
expected to return more than $6
billion to shareholders through 2017.
- Debt: Delta ended the March
2015 quarter with $7.4 billion
of adjusted net debt, a reduction of $2.0
billion since the end of 2013 and roughly $10 billion since the company began its debt
reduction efforts in 2009. The company has set a target to
achieve and maintain $4 billion of
adjusted net debt by year end 2017. This debt level is
expected to result in annual net interest expense of ~$200 million, a $1.1
billion reduction compared to 2009.
- Pension: Since 2009, Delta has increased its
pension plan assets by $1.7 billion,
net of $5.2 billion in distributions,
through a combination of contributions and asset returns. The
company plans to maintain its current $1
billion annual funding level through 2020, with a goal of
achieving 80 percent funded status by that date. Delta made a
one-time additional $200 million
contribution in 2015, for a total contribution of $1.2 billion for the year, to keep the company on
track to achieve its 2020 target.
Repurchases under Delta's program may be made through a variety
of methods, which may include open market purchases, privately
negotiated transactions, block trades, or accelerated share
repurchase transactions in compliance with applicable regulatory
guidelines, including Securities and Exchange Commission Rule
10b-18. Purchases will be made subject to market and economic
conditions, applicable legal requirements, and other relevant
factors.
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 327 destinations in 60 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.
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
May 13, 2015, and which we have no
current intention to update.
Non-GAAP Reconciliations
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.
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
|
|
Year
Ended
|
(in
billions)
|
|
March 31,
2015
|
|
December 31,
2013
|
|
December 31,
2009
|
Debt and capital
lease obligations
|
|
$ 9.6
|
|
|
$ 11.3
|
|
|
$ 17.2
|
|
Plus: unamortized
discount, net from purchase accounting and fresh start
reporting
|
0.1
|
|
|
0.4
|
|
|
1.1
|
|
Adjusted debt and
capital lease obligations
|
|
|
$ 9.7
|
|
|
$ 11.7
|
|
|
$ 18.3
|
Plus: 7x last twelve
months' aircraft rent
|
|
|
1.7
|
|
|
1.5
|
|
|
3.4
|
Adjusted total
debt
|
|
|
11.4
|
|
|
13.2
|
|
|
21.7
|
Less: cash, cash
equivalents and short-term investments
|
|
|
(3.6)
|
|
|
(3.8)
|
|
|
(4.7)
|
Less: hedge margin
receivable
|
|
|
(0.4)
|
|
|
-
|
|
|
-
|
Adjusted net
debt
|
|
|
$ 7.4
|
|
|
$ 9.4
|
|
|
$ 17.0
|
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SOURCE Delta Air Lines