ATLANTA, July 14, 2016 /PRNewswire/ -- Delta Air
Lines (NYSE: DAL) today reported financial results for the
June 2016 quarter. Highlights
of Delta's June 2016 quarter results,
including both GAAP and adjusted metrics, are below and
incorporated here.
Adjusted pre-tax income for the June
2016 quarter was $1.7 billion,
a $42 million increase over
June 2015 quarter. Adjusted net
income was $1.1 billion or
$1.47 per diluted share.
"The Delta people again delivered another quarter of solid
profitability, superior operational performance and great customer
service, continuing to strengthen our brand and our foundation for
the future," said Ed Bastian,
Delta's chief executive officer. "As we look to the remainder
of the year, the large year-on-year savings driven by lower fuel
are largely behind us and it is important to achieving our
long-term financial targets that we get unit revenues back to a
positive trajectory."
Revenue Environment
Delta's operating revenue
for the June quarter decreased 2 percent, or $260 million, of which $65
million was due to foreign currency pressures.
Passenger unit revenues declined 4.9 percent, including 1 point of
impact from foreign currency, on a 3.2 percent increase in
capacity.
Capacity Actions In Response to Global Events
With the additional foreign currency pressure from the steep drop
in the British pound and the economic uncertainty from Brexit,
Delta has decided to reduce 6 points of U.S.-U.K. capacity from its
winter schedule. These changes, in combination with other
network actions, will reduce system capacity by approximately one
point in the December 2016 quarter
and the company now expects to grow its system capacity by 1
percent year over year during this period.
"While the revenue environment remains challenging, with
persistent headwinds from close-in domestic yields and geopolitical
uncertainty, we remain focused on achieving our goal of positive
unit revenues by year end," said Glen
Hauenstein, Delta's president. "We'll continue to move
quickly and aggressively with all our commercial levers, including
an incremental 1 point reduction in our December quarter capacity
levels, to make sure we create the momentum we need to achieve this
goal."
|
|
|
Increase
(Decrease)
|
|
|
|
2Q16 versus
2Q15
|
|
|
|
Change
|
Unit
|
|
|
Passenger
Revenue
|
2Q16
($M)
|
|
YOY
|
Revenue
|
Yield
|
Capacity
|
Mainline
|
4,721
|
|
0.2
%
|
(5.2) %
|
(4.4) %
|
5.6
%
|
Regional
|
1,499
|
|
(3.4) %
|
(6.4) %
|
(5.4) %
|
3.2
%
|
Total
Domestic
|
6,220
|
|
(0.7) %
|
(5.6) %
|
(4.8) %
|
5.2
%
|
Atlantic
|
1,511
|
|
(2.6) %
|
(4.4) %
|
(3.6) %
|
2.0
%
|
Pacific
|
662
|
|
(8.3) %
|
(5.1) %
|
(7.0) %
|
(3.4) %
|
Latin
America
|
577
|
|
(4.0) %
|
(4.9) %
|
(7.8) %
|
0.9
%
|
Total
Passenger
|
8,970
|
|
(1.8) %
|
(4.9) %
|
(4.7) %
|
3.2
%
|
Cargo
Revenue
|
165
|
|
(20.3) %
|
|
|
|
Other
Revenue
|
1,312
|
|
(3.6) %
|
|
|
|
Total
Revenue
|
10,447
|
|
(2.4) %
|
|
|
|
September 2016
Quarter Guidance
Following are Delta's projections for the September 2016 quarter:
|
3Q16
Forecast
|
Operating
margin
|
19% - 21%
|
Passenger unit
revenue (compared to 3Q15)
|
Down 4% -
6%
|
Fuel price, including
taxes and refinery impact
|
$1.52 -
$1.57
|
CASM – Ex including
profit sharing (compared to 3Q15)*
|
~ Flat
|
System Capacity
(compared to 3Q15)
|
Up 1% - 2%
|
*See note A for information about reconciliation of these
non-GAAP financial measures
Cost Performance
Adjusted fuel
expense2 declined $408
million compared to the same period in 2015, on 28 percent
lower market fuel prices. Hedge losses for the quarter
totaled $614 million, including
$455 million of early settlements.
Delta has no hedge book remaining for 2016.
CASM-Ex3 including profit sharing, was flat for the
June 2016 quarter compared to the
prior year period driven by strong operational performance and
productivity savings realized during the quarter.
Non-operating expense declined by $35
million driven by $34 million
of lower interest expense.
"Our commitment to cost productivity is a key part of achieving
our long-term financial goals while continuing to make investments
in our people, product and service," said Paul Jacobson, Delta's chief financial
officer. "Our solid cost performance, combined with our
industry-leading revenue premium, helped to produce $2.6 billion of operating cash flow this
quarter. We invested a portion of this cash in the business,
resulting in the $1.6 billion in free
cash flow used to further reduce our debt levels and also return
$1.1 billion to our owners through
dividends and share repurchases."
Cash Flow, Shareholder Returns, and Adjusted
Net Debt
Delta generated $2.6 billion of
adjusted operating cash flow and $1.6
billion of free cash flow during the quarter. The
company used this strong cash generation to invest $1.0 billion into the business, including roughly
$880 million in fleet
investments.
Delta made a $135 million
contribution to its pension plan during the quarter, completing its
planned $1.3 billion in pension
contributions for the year.
For the June quarter, the company returned $1.1 billion to shareholders, comprised of
$103 million of dividends and
$1 billion of share
repurchases. At its May analyst meeting, the company
announced its third consecutive 50 percent increase to its
dividend, which will increase to $0.81 per share annually beginning in the
September quarter. In addition, the company announced its
plan to complete its existing $5
billion share repurchase authorization by May 2017, ahead of schedule.
Adjusted net debt4 at the end of the quarter stood at
$6.8 billion. In recognition of
its improved financial strength, Delta's corporate credit rating
was upgraded during the quarter by FitchRatings to BBB-, an
investment grade rating. This is the second ratings agency to
recognize the company with investment grade status.
June 2016 Quarter
Results
|
GAAP
|
Adjusted
|
($ in millions except
per share and unit costs)
|
2Q16
|
2Q15
|
2Q16
|
2Q15
|
Pre-tax
income
|
2,350
|
2,366
|
1,682
|
1,640
|
Net income
|
1,546
|
1,485
|
1,124
|
1,027
|
Diluted earnings per
share
|
2.03
|
1.83
|
1.47
|
1.27
|
Fuel Expense
(including regional carriers)
|
1,447
|
1,752
|
2,064
|
2,472
|
Consolidated unit
cost
|
12.16
|
12.88
|
9.54
|
9.55
|
Operating cash
flow
|
3,215
|
2,745
|
2,615
|
2,476
|
Total debt and
capital leases (adjusted net debt)
|
7,804
|
9,157
|
6,777
|
7,141
|
Special Items
Special items, net of taxes, in the June
2016 quarter totaled $422
million, including $390
million in mark-to-market adjustments and settlements on
fuel hedges.
Special items, net of taxes, in the June
2015 quarter totaled $458
million, including $454
million for mark-to-market adjustments and settlements on
fuel hedges.
About Delta
Delta Air Lines serves nearly 180 million customers each year.
In 2016, Delta was named to Fortune's top 50 Most Admired Companies
in addition to being named the most admired airline for the fifth
time in six years. Additionally, Delta has ranked No.1 in the
Business Travel News Annual Airline survey for an unprecedented
five consecutive years. With an industry-leading global network,
Delta and the Delta Connection carriers offer service to 337
destinations in 62 countries on six continents. Headquartered in
Atlanta, Delta employs more than
80,000 employees worldwide and operates a mainline fleet of more
than 800 aircraft. The airline is a founding member of the SkyTeam
global alliance and participates in the industry's leading
transatlantic joint venture with Air France-KLM and Alitalia
as well as a 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 and LaGuardia, London-Heathrow, Paris-Charles de
Gaulle, Salt Lake City, Seattle and Tokyo-Narita. Delta has
invested billions of dollars in airport facilities, global products
and services, and technology to enhance the customer experience in
the air and on the ground. Additional information is available on
the Delta News Hub, as well as delta.com, Twitter @DeltaNewsHub,
Google.com/+Delta, and Facebook.com/delta.
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 settled 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. See Note A
for a reconciliation of adjusted fuel expense and average fuel
price per gallon to the comparable GAAP metric.
|
|
|
(3)
|
CASM - Ex, including
profit sharing: In addition to fuel expense, 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 $284 million and $346
million for the June 2016 and June
2015 quarters, and $597 million and $639 million for the six
months ended June 30, 2016 and 2015, respectively. Management
believes this methodology provides a more consistent and comparable
reflection of Delta's airline operations.
|
|
|
(4)
|
Adjusted net debt
includes $22 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 investor
update 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
impact of rebalancing our hedge portfolio, recording mark-to-market
adjustments or posting collateral in connection with our fuel hedge
contracts; the availability of aircraft fuel; the effects of
terrorist attacks or geopolitical conflict; 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 including the effects of Brexit; 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, 2015.
Caution should be taken not to place undue reliance on our
forward-looking statements, which represent our views only as of
Jul. 14, 2016, and which we have no
current intention to update.
DELTA AIR LINES,
INC.
|
Consolidated
Statements of Operations
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months
|
|
|
|
Six
Months
|
|
|
|
|
|
Ended June
30,
|
|
|
|
Ended June
30,
|
|
|
(in millions, except
per share data)
|
2016
|
2015
|
$
Change
|
%
Change
|
|
2016
|
2015
|
$
Change
|
%
Change
|
Operating
Revenue:
|
|
|
|
|
|
|
|
|
|
|
Passenger:
|
|
|
|
|
|
|
|
|
|
|
|
Mainline
|
$
7,471
|
$
7,587
|
$
(116)
|
(2)%
|
|
$
13,915
|
$
14,136
|
$
(221)
|
(2)%
|
|
|
Regional
carriers
|
1,499
|
1,552
|
(53)
|
(3)%
|
|
2,817
|
2,926
|
(109)
|
(4)%
|
|
|
Total passenger
revenue
|
8,970
|
9,139
|
(169)
|
(2)%
|
|
16,732
|
17,062
|
(330)
|
(2)%
|
|
Cargo
|
165
|
207
|
(42)
|
(20)%
|
|
327
|
424
|
(97)
|
(23)%
|
|
Other
|
1,312
|
1,361
|
(49)
|
(4)%
|
|
2,639
|
2,609
|
30
|
1%
|
|
|
Total operating
revenue
|
10,447
|
10,707
|
(260)
|
(2)%
|
|
19,698
|
20,095
|
(397)
|
(2)%
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expense:
|
|
|
|
|
|
|
|
|
|
|
Salaries and related
costs
|
2,391
|
2,195
|
196
|
9%
|
|
4,702
|
4,287
|
415
|
10%
|
|
Aircraft fuel and
related taxes
|
1,228
|
1,457
|
(229)
|
(16)%
|
|
2,455
|
3,292
|
(837)
|
(25)%
|
|
Regional carrier
expense
|
|
|
|
|
|
|
|
|
|
|
|
Fuel
|
219
|
295
|
(76)
|
(26)%
|
|
386
|
559
|
(173)
|
(31)%
|
|
|
Other
|
877
|
802
|
75
|
9%
|
|
1,716
|
1,591
|
125
|
8%
|
|
Contracted
services
|
484
|
457
|
27
|
6%
|
|
960
|
898
|
62
|
7%
|
|
Depreciation and
amortization
|
470
|
448
|
22
|
5%
|
|
956
|
918
|
38
|
4%
|
|
Aircraft maintenance
materials and outside repairs
|
446
|
499
|
(53)
|
(11)%
|
|
895
|
951
|
(56)
|
(6)%
|
|
Passenger commissions
and other selling expenses
|
437
|
421
|
16
|
4%
|
|
825
|
807
|
18
|
2%
|
|
Landing fees and
other rents
|
376
|
388
|
(12)
|
(3)%
|
|
724
|
761
|
(37)
|
(5)%
|
|
Profit
sharing
|
324
|
411
|
(87)
|
(21)%
|
|
596
|
547
|
49
|
9%
|
|
Passenger
service
|
221
|
227
|
(6)
|
(3)%
|
|
410
|
417
|
(7)
|
(2)%
|
|
Aircraft
rent
|
66
|
60
|
6
|
10%
|
|
132
|
120
|
12
|
10%
|
|
Other
|
485
|
573
|
(88)
|
(15)%
|
|
978
|
1,075
|
(97)
|
(9)%
|
|
|
Total operating
expense
|
8,024
|
8,233
|
(209)
|
(3)%
|
|
15,735
|
16,223
|
(488)
|
(3)%
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Income
|
2,423
|
2,474
|
(51)
|
(2)%
|
|
3,963
|
3,872
|
91
|
2%
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Operating
Expense:
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
(93)
|
(127)
|
34
|
(27)%
|
|
(200)
|
(258)
|
58
|
(22)%
|
|
Miscellaneous,
net
|
20
|
19
|
1
|
5%
|
|
21
|
(62)
|
83
|
NM
|
|
|
Total non-operating
expense, net
|
(73)
|
(108)
|
35
|
(32)%
|
|
(179)
|
(320)
|
141
|
(44)%
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before
Income Taxes
|
2,350
|
2,366
|
(16)
|
(1)%
|
|
3,784
|
3,552
|
232
|
7%
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax
Provision
|
(804)
|
(881)
|
77
|
(9)%
|
|
(1,292)
|
(1,321)
|
29
|
(2)%
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
$
1,546
|
$
1,485
|
$
61
|
4%
|
|
$
2,492
|
$
2,231
|
$
261
|
12%
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per
Share
|
$
2.04
|
$
1.85
|
|
|
|
$
3.25
|
$
2.75
|
|
|
Diluted Earnings
Per Share
|
$
2.03
|
$
1.83
|
|
|
|
$
3.23
|
$
2.72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Weighted
Average Shares Outstanding
|
758
|
803
|
|
|
|
766
|
811
|
|
|
Diluted Weighted
Average Shares Outstanding
|
763
|
811
|
|
|
|
772
|
819
|
|
|
DELTA AIR LINES,
INC.
|
Statistical
Summary
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
|
Six Months
Ended
June 30,
|
|
|
2016
|
2015
|
Change
|
|
2016
|
2015
|
Change
|
Consolidated:
|
|
|
|
|
|
|
|
Revenue passenger
miles (millions)
|
56,415
|
54,755
|
3.0%
|
|
104,140
|
100,976
|
3.1%
|
Available seat miles
(millions)
|
65,979
|
63,937
|
3.2%
|
|
124,124
|
120,534
|
3.0%
|
Passenger mile yield
(cents)
|
15.90
|
16.69
|
(4.7)%
|
|
16.07
|
16.90
|
(4.9)%
|
Passenger revenue per
available seat mile (cents)
|
13.59
|
14.29
|
(4.9)%
|
|
13.48
|
14.16
|
(4.8)%
|
Operating cost per
available seat mile (cents)
|
12.16
|
12.88
|
(5.6)%
|
|
12.68
|
13.46
|
(5.8)%
|
CASM-Ex, including
profit sharing - see Note A (cents)
|
9.54
|
9.55
|
(0.1)%
|
|
9.91
|
9.70
|
2.1%
|
Passenger load
factor
|
85.5%
|
85.6%
|
(0.1) pts
|
|
83.9%
|
83.8%
|
0.1 pts
|
Fuel gallons consumed
(millions)
|
1,046
|
1,029
|
1.7%
|
|
1,976
|
1,947
|
1.5%
|
Average price per
fuel gallon
|
$1.38
|
$1.70
|
(18.8)%
|
|
$1.44
|
$1.98
|
(27.3)%
|
Average price per
fuel gallon, adjusted - see Note A
|
$1.97
|
$2.40
|
(17.9)%
|
|
$1.67
|
$2.65
|
(37.0)%
|
Number of aircraft in
fleet, end of period
|
944
|
916
|
28
|
|
|
|
|
Full-time equivalent
employees, end of period
|
84,791
|
83,247
|
1.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline:
|
|
|
|
|
|
|
|
Revenue passenger
miles (millions)
|
50,847
|
49,304
|
3.1%
|
|
93,633
|
90,608
|
3.3%
|
Available seat miles
(millions)
|
59,173
|
57,341
|
3.2%
|
|
110,883
|
107,512
|
3.1%
|
Operating cost per
available seat mile (cents)
|
11.60
|
12.32
|
(5.8)%
|
|
12.18
|
12.86
|
(5.3)%
|
CASM-Ex, including
profit sharing - see Note A (cents)
|
9.10
|
9.22
|
(1.3)%
|
|
9.49
|
9.27
|
2.4%
|
Fuel gallons consumed
(millions)
|
891
|
878
|
1.5%
|
|
1,675
|
1,650
|
1.5%
|
Average price per
fuel gallon
|
$1.37
|
$1.65
|
(17.0)%
|
|
$1.46
|
$1.99
|
(26.6)%
|
Average price per
fuel gallon, adjusted - see Note A
|
$2.06
|
$2.47
|
(16.6)%
|
|
$1.74
|
$2.78
|
(37.4)%
|
Number of aircraft in
fleet, end of period
|
822
|
800
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
June
30,
|
(in
millions)
|
2016
|
|
2015
|
Cash Flows From
Operating Activities:
|
|
|
|
Net
income
|
$
1,546
|
|
$
1,485
|
Depreciation and
amortization
|
470
|
|
448
|
Hedge derivative
contracts
|
(414)
|
|
(556)
|
Deferred income
taxes
|
791
|
|
868
|
Pension,
postretirement and postemployment payments greater than
expense
|
(61)
|
|
(245)
|
Changes
in:
|
|
|
|
|
Hedge
margin
|
427
|
|
249
|
|
Air traffic
liability
|
(33)
|
|
173
|
|
Profit
sharing
|
324
|
|
411
|
Other working capital
changes, net
|
165
|
|
(88)
|
|
Net cash provided
by operating activities
|
3,215
|
|
2,745
|
|
|
|
|
|
Cash Flows From
Investing Activities:
|
|
|
|
Property and
equipment additions:
|
|
|
|
|
Flight equipment,
including advance payments
|
(880)
|
|
(726)
|
|
Ground property and
equipment, including technology
|
(166)
|
|
(193)
|
Net purchases of
short-term investments
|
(80)
|
|
(50)
|
Other, net
|
14
|
|
14
|
|
Net cash used in
investing activities
|
(1,112)
|
|
(955)
|
|
|
|
|
|
Cash Flows From
Financing Activities:
|
|
|
|
Payments on long-term
debt and capital lease obligations
|
(690)
|
|
(333)
|
Repurchases of common
stock
|
(1,026)
|
|
(925)
|
Cash
dividends
|
(103)
|
|
(72)
|
Fuel card
obligation
|
(137)
|
|
(288)
|
Payments on hedge
derivative contracts
|
(170)
|
|
-
|
Other, net
|
(23)
|
|
(1)
|
|
Net cash used in
financing activities
|
(2,149)
|
|
(1,619)
|
|
|
|
|
|
Net (Decrease)
Increase in Cash and Cash Equivalents
|
(46)
|
|
171
|
Cash and cash
equivalents at beginning of period
|
1,708
|
|
2,122
|
Cash and cash
equivalents at end of period
|
$
1,662
|
|
$
2,293
|
|
|
|
|
|
|
|
DELTA AIR LINES,
INC.
|
|
|
Consolidated
Balance Sheets
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
June
30,
|
|
December
31,
|
(in
millions)
|
2016
|
|
2015
|
|
|
ASSETS
|
Current
Assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
1,662
|
|
$
1,972
|
|
Short-term
investments
|
1,289
|
|
1,465
|
|
Accounts receivable,
net
|
2,102
|
|
2,020
|
|
Fuel
inventory
|
455
|
|
379
|
|
Expendable parts and
supplies inventories, net
|
340
|
|
318
|
|
Hedge derivatives
asset
|
773
|
|
1,987
|
|
Prepaid expenses and
other
|
1,017
|
|
915
|
|
|
Total current
assets
|
7,638
|
|
9,056
|
|
|
|
|
|
|
Property and
Equipment, Net:
|
|
|
|
|
Property and
equipment, net
|
23,975
|
|
23,039
|
|
|
|
|
|
|
Other
Assets:
|
|
|
|
|
Goodwill
|
9,794
|
|
9,794
|
|
Identifiable
intangibles, net
|
4,852
|
|
4,861
|
|
Deferred income
taxes, net
|
3,797
|
|
4,956
|
|
Other noncurrent
assets
|
1,578
|
|
1,428
|
|
|
Total other
assets
|
20,021
|
|
21,039
|
Total
assets
|
$
51,634
|
|
$
53,134
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
Current
Liabilities:
|
|
|
|
|
Current maturities of
long-term debt and capital leases
|
$
1,115
|
|
$
1,563
|
|
Air traffic
liability
|
5,955
|
|
4,503
|
|
Accounts
payable
|
2,956
|
|
2,743
|
|
Accrued salaries and
related benefits
|
2,237
|
|
3,195
|
|
Hedge derivatives
liability
|
895
|
|
2,581
|
|
Frequent flyer
deferred revenue
|
1,589
|
|
1,635
|
|
Other accrued
liabilities
|
1,503
|
|
1,306
|
|
|
Total current
liabilities
|
16,250
|
|
17,526
|
|
|
|
|
|
|
Noncurrent
Liabilities:
|
|
|
|
|
Long-term debt and
capital leases
|
6,689
|
|
6,766
|
|
Pension,
postretirement and related benefits
|
12,576
|
|
13,855
|
|
Frequent flyer
deferred revenue
|
2,294
|
|
2,246
|
|
Other noncurrent
liabilities
|
2,015
|
|
1,891
|
|
|
Total noncurrent
liabilities
|
23,574
|
|
24,758
|
|
|
|
|
|
|
Commitments and
Contingencies
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
Common
stock
|
—
|
|
—
|
|
Additional paid-in
capital
|
9,361
|
|
10,875
|
|
Retained
earnings
|
10,000
|
|
7,623
|
|
Accumulated other
comprehensive loss
|
(7,279)
|
|
(7,275)
|
|
Treasury
stock
|
(272)
|
|
(373)
|
|
|
Total stockholders'
equity
|
11,810
|
|
10,850
|
Total liabilities and
stockholders' equity
|
$
51,634
|
|
$
53,134
|
|
|
|
|
|
|
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. The Company does not
reconcile forward looking non-GAAP financial measures because MTM
adjustments and settlements will not be known until the end of the
period and could be significant.
Pre-Tax Income and Net Income, adjusted. We adjust for
the following items to determine pre-tax income and net income,
adjusted, 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 settled 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
our 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 performance in the period shown.
Virgin Atlantic MTM
adjustments. We record our proportionate share of earnings from
our equity investment in Virgin Atlantic in non-operating expense.
We adjust for Virgin Atlantic's MTM adjustments to allow investors
to better understand and analyze the company's core financial
performance in the periods shown.
Income tax. We included the
income tax effect of adjustments when presenting net income,
adjusted. We believe that presenting the income tax effect of
adjustments allows investors to better understand and analyze the
company's core financial performance in the periods shown.
|
Three Months
Ended
|
|
Three Months
Ended
|
|
June 30,
2016
|
|
June 30,
2016
|
|
Pre-Tax
|
|
Income
|
|
Net
|
|
Net
Income
|
(in millions, except
per share data)
|
Income
|
|
Tax
|
|
Income
|
|
Per Diluted
Share
|
GAAP
|
$
2,350
|
|
$
(804)
|
|
$
1,546
|
|
$
2.03
|
Adjusted
for:
|
|
|
|
|
|
|
|
MTM adjustments and
settlements
|
(617)
|
|
227
|
|
(390)
|
|
|
Virgin Atlantic MTM
adjustments
|
(51)
|
|
19
|
|
(32)
|
|
|
Total
adjustments
|
(668)
|
|
246
|
|
(422)
|
|
(0.56)
|
Non-GAAP
|
$
1,682
|
|
$
(558)
|
|
$
1,124
|
|
$
1.47
|
Year-over-year
change
|
$
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Three Months
Ended
|
|
June 30,
2015
|
|
June 30,
2015
|
|
Pre-Tax
|
|
Income
|
|
Net
|
|
Net
Income
|
(in millions, except
per share data)
|
Income
|
|
Tax
|
|
Income
|
|
Per Diluted
Share
|
GAAP
|
$
2,366
|
|
$
(881)
|
|
$
1,485
|
|
$
1.83
|
Adjusted
for:
|
|
|
|
|
|
|
|
MTM adjustments and
settlements
|
(720)
|
|
266
|
|
(454)
|
|
|
Restructuring and
other
|
25
|
|
(9)
|
|
16
|
|
|
Virgin Atlantic MTM
adjustments
|
(31)
|
|
11
|
|
(20)
|
|
|
Total
adjustments
|
(726)
|
|
268
|
|
(458)
|
|
(0.56)
|
Non-GAAP
|
$
1,640
|
|
$
(613)
|
|
$
1,027
|
|
$
1.27
|
|
|
|
|
|
|
|
|
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 for the reason 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 settled 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
our core operational performance in the periods shown.
Fuel expense, adjusted and Average fuel price per gallon,
adjusted (cont.)
Consolidated:
|
|
|
|
|
|
|
|
|
|
|
|
Average Price Per
Gallon
|
|
|
|
Three Months
Ended
|
|
|
Three Months
Ended
|
|
|
|
June
30,
|
|
|
June
30,
|
(in millions, except
per gallon data)
|
|
2016
|
2015
|
|
|
2016
|
2015
|
Fuel purchase
cost
|
|
$
1,440
|
$
1,968
|
|
|
$1.37
|
$1.91
|
Airline segment fuel
hedge gains
|
|
(3)
|
(126)
|
|
|
-
|
(0.12)
|
Refinery segment
impact
|
|
10
|
(90)
|
|
|
0.01
|
(0.09)
|
Total fuel
expense
|
|
$
1,447
|
$
1,752
|
|
|
$1.38
|
$1.70
|
MTM adjustments and
settlements
|
|
617
|
720
|
|
|
0.59
|
0.70
|
Total fuel expense,
adjusted
|
|
$
2,064
|
$
2,472
|
|
|
$1.97
|
$2.40
|
Change
year-over-year
|
|
$
(408)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
Ended
|
|
|
Six Months
Ended
|
|
|
|
June
30,
|
|
|
June
30,
|
(in millions, except
per gallon data)
|
|
2016
|
2015
|
|
|
2016
|
2015
|
Fuel purchase
cost
|
|
$
2,533
|
$
3,686
|
|
|
$
1.28
|
$
1.89
|
Airline segment fuel
hedge gains
|
|
270
|
341
|
|
|
0.14
|
0.18
|
Refinery segment
impact
|
|
38
|
(176)
|
|
|
0.02
|
(0.09)
|
Total fuel
expense
|
|
$
2,841
|
$
3,851
|
|
|
$
1.44
|
$
1.98
|
MTM adjustments and
settlements
|
|
462
|
1,309
|
|
|
0.23
|
0.67
|
Total fuel expense,
adjusted
|
|
$
3,303
|
$
5,160
|
|
|
$
1.67
|
$
2.65
|
|
|
|
|
|
|
|
|
Mainline:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
Six Months
Ended
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
2016
|
2015
|
|
|
2016
|
2015
|
Mainline average
price per gallon
|
|
$
1.37
|
$
1.65
|
|
|
$
1.46
|
$
1.99
|
MTM adjustments and
settlements
|
|
0.69
|
0.82
|
|
|
0.28
|
0.79
|
Mainline average
price per gallon, adjusted
|
|
$
2.06
|
$
2.47
|
|
|
$
1.74
|
$
2.78
|
|
|
|
|
|
|
|
|
|
Non-Fuel Unit Cost or Cost per Available Seat Mile, Including
Profit Sharing ("CASM-Ex"). We adjust CASM for the following
items to determine CASM-Ex, including profit sharing for the
reasons described below:
Aircraft fuel and related
taxes. The volatility in fuel prices impacts the comparability
of year-over-year 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 year-over-year financial performance.
Restructuring and other.
Because of the variability in restructuring and other, the
adjustment for this item is helpful to investors to analyze our
recurring core performance in the periods shown.
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
|
|
Six Months
Ended
|
|
|
|
|
June 30,
2016
|
|
June 30,
2015
|
|
June 30,
2016
|
|
June 30,
2015
|
CASM
(cents)
|
|
|
12.16
|
|
12.88
|
|
12.68
|
|
13.46
|
Adjusted
for:
|
|
|
|
|
|
|
|
|
|
Aircraft
fuel and related taxes
|
(2.19)
|
|
(2.74)
|
|
(2.29)
|
|
(3.19)
|
Restructuring and other
|
|
-
|
|
(0.04)
|
|
-
|
|
(0.03)
|
Other
expenses
|
|
(0.43)
|
|
(0.55)
|
|
(0.48)
|
|
(0.54)
|
CASM-Ex
|
9.54
|
|
9.55
|
|
9.91
|
|
9.70
|
Year-over-year
change
|
|
|
~Flat
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline
CASM-Ex:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
|
|
June 30,
2016
|
|
June 30,
2015
|
|
June 30,
2016
|
|
June 30,
2015
|
Mainline CASM
(cents)
|
|
|
11.60
|
|
12.32
|
|
12.18
|
|
12.86
|
Adjusted
for:
|
|
|
|
|
|
|
|
|
|
Aircraft
fuel and related taxes
|
(2.08)
|
|
(2.54)
|
|
(2.21)
|
|
(3.06)
|
Other
expenses
|
|
(0.42)
|
|
(0.56)
|
|
(0.48)
|
|
(0.53)
|
Mainline
CASM-Ex
|
9.10
|
|
9.22
|
|
9.49
|
|
9.27
|
|
|
|
|
|
|
|
|
|
|
|
Operating Cash Flow, adjusted. We adjusted operating 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 capital expenditures, debt service or
general corporate initiatives. Adjustments include:
Hedge deferral settlements.
During the June 2016 quarter, we
early terminated certain of our outstanding deferral transactions
and made cash payments of $170
million, including normal settlements. Operating cash flow
is adjusted to include these deferral settlements in order to allow
investors to better understand the total net impact of hedging
activities in the period shown.
Hedge margin and other.
Operating cash flow 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 periods
shown.
|
|
|
Three Months
Ended
|
|
Three Months
Ended
|
(in
billions)
|
|
June 30,
2016
|
|
June 30,
2015
|
Net cash provided by
operating activities (GAAP)
|
|
$
3,215
|
|
$
2,745
|
Adjustments:
|
|
|
|
|
Hedge deferral
settlements
|
|
(170)
|
|
—
|
Hedge margin and
other
|
|
(430)
|
|
(269)
|
Net cash provided by
operating activities, adjusted
|
|
$
2,615
|
|
$
2,476
|
|
|
|
|
|
|
Free Cash Flow. We present 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. Adjustments
include:
Hedge deferral settlements.
During the June 2016 quarter, we
early terminated certain of our outstanding deferral transactions
and made cash payments of $170
million, including normal settlements. Free cash flow is
adjusted to include these deferral settlements in order to allow
investors to better understand the total net impact of hedging
activities in the period shown.
Hedge margin and other.
Free cash flow 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)
|
|
June 30,
2016
|
Net cash provided by
operating activities
|
|
$
3,215
|
Net cash used in
investing activities
|
|
(1,112)
|
Adjustments:
|
|
|
Hedge deferral
settlements
|
|
(170)
|
Hedge margin and
other
|
|
(430)
|
Net purchases of short-term
investments and other
|
|
80
|
Total free cash
flow
|
|
$
1,583
|
|
|
|
|
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.
(in
billions)
|
|
June 30,
2016
|
|
June 30,
2015
|
Debt and capital
lease obligations
|
|
$
7,804
|
|
|
$
9,157
|
|
Plus: unamortized
discount, net and debt issuance costs
|
|
112
|
|
|
183
|
|
Adjusted debt and
capital lease obligations
|
|
|
$
7,916
|
|
|
$
9,340
|
Plus: 7x last twelve
months' aircraft rent
|
|
|
1,834
|
|
|
1,722
|
Adjusted total
debt
|
|
|
9,750
|
|
|
11,062
|
Less: cash, cash
equivalents and short-term investments
|
|
|
(2,951)
|
|
|
(3,787)
|
Less: hedge margin
receivable
|
|
|
(22)
|
|
|
(134)
|
Adjusted net
debt
|
|
|
$
6,777
|
|
|
$
7,141
|
|
|
|
|
|
|
|
|
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SOURCE Delta Air Lines