ATLANTA, Oct. 13, 2016 /PRNewswire/ -- Delta Air
Lines (NYSE: DAL) today reported financial results for the
September 2016 quarter.
Highlights of Delta's September 2016
quarter results, including both GAAP and adjusted metrics, are
below and incorporated here.
Adjusted pre-tax income for the September
2016 quarter was $1.9 billion,
a $278 million decrease from the
September 2015 quarter. The
technology outage and subsequent operational recovery Delta
experienced over four days in early August reduced pre-tax income
for the quarter by an estimated $150
million.
"Delta's resiliency stood out this quarter as we worked through
the outage, continued revenue headwinds, and volatile fuel prices
to produce the industry's best operational reliability and service
for our customers along with solid margins, cash flows and returns
for our owners," said Ed Bastian,
Delta's chief executive officer. "With our focus on building
a more sustainable and durable business, we will be taking a
cautious approach to 2017 by keeping our capacity in line with the
December quarter's 1 percent growth level."
Revenue Environment
Delta's operating revenue for the September quarter decreased
5.6 percent, or $624 million, of
which $100 million was due to the
outage and $70 million was from prior
year Yen hedge gains. Passenger unit revenues declined 6.8
percent, including nearly 2 points of impact from the outage and
Yen hedges, on a 1.5 percent increase in capacity.
"While we were encouraged by our unit revenue trends through the
September quarter, we have more work ahead of us to achieve our
goal of positive unit revenues," said Glen
Hauenstein, Delta's president. "With further slowing
of our capacity growth in the December quarter and additional
traction on our revenue management initiatives, we should make
progress against that goal and we expect our December quarter unit
revenues to decline by 3 – 5 percent year over year."
|
|
|
Increase
(Decrease)
|
|
|
|
3Q16 versus
3Q15
|
|
|
|
Change
|
Unit
|
|
|
Passenger
Revenue
|
3Q16
($M)
|
|
YOY
|
Revenue
|
Yield
|
Capacity
|
Mainline
|
4,615
|
|
(3.3) %
|
(7.4) %
|
(5.3) %
|
4.4
%
|
Regional
|
1,456
|
|
(5.2) %
|
(5.7) %
|
(4.2) %
|
0.5
%
|
Total
Domestic
|
6,071
|
|
(3.8) %
|
(7.2) %
|
(5.2) %
|
3.7
%
|
Atlantic
|
1,671
|
|
(8.0) %
|
(9.7) %
|
(6.6) %
|
1.9
%
|
Pacific
|
758
|
|
(14.5) %
|
(7.4) %
|
(9.3) %
|
(7.7) %
|
Latin
America
|
571
|
|
(1.9) %
|
1.4
%
|
(0.9) %
|
(3.2) %
|
Total
Passenger
|
9,071
|
|
(5.5) %
|
(6.8) %
|
(5.3) %
|
1.5
%
|
Cargo
Revenue
|
167
|
|
(14.8) %
|
|
|
|
Other
Revenue
|
1,245
|
|
(5.4) %
|
|
|
|
Total
Revenue
|
10,483
|
|
(5.6) %
|
|
|
|
December 2016
Quarter Guidance
For the December quarter, Delta is expecting a slight decline in
margins year over year, as savings from lower fuel prices and
productivity initiatives will be fully offset by declines in unit
revenues that the company continues to address through its capacity
actions and revenue management initiatives. The projections
for the December quarter do not include any estimates for the
company's potential agreement with its pilots.
|
4Q16
Forecast
|
Operating
margin*
|
14% - 16%
|
Passenger unit
revenue (compared to 4Q15)
|
Down 3% -
5%
|
Fuel price,
including taxes and refinery impact*
|
$1.60 -
$1.65
|
CASM – Ex
including profit sharing (compared to 4Q15)*
|
Up 1 - 2%
|
System Capacity
(compared to 4Q15)
|
Up ~1%
|
*See note A for information about reconciliation of these
projected non-GAAP financial measures
Cost Performance
Adjusted fuel expense2 declined $348 million compared to the same period in 2015,
on 10 percent lower market fuel prices. Delta's adjusted fuel
price per gallon for the September quarter was $1.48, which includes $0.04 per gallon from losses at the Trainer
Refinery.
CASM-Ex3 including profit sharing, increased 0.1
percent for the September 2016
quarter compared to the prior year period driven by strong
operational performance and productivity savings realized during
the quarter, in addition to lower profit sharing expense.
The reduction in non-operating expense included $26 million of lower interest expense from
Delta's debt reduction initiatives.
"By leveraging our productivity and operational reliability, we
overcame the cost headwinds from the outage to meet our guidance
and then used our balanced approach with our cash flows to invest
in the business, pay down debt and return cash to our owners," said
Paul Jacobson, Delta's chief
financial officer. "Looking ahead, our continued cost
discipline and focus on free cash flow have positioned us well to
successfully weather the inevitable challenges we face in
delivering sustainable results for the long-term."
Cash Flow, Shareholder Returns, and Adjusted
Net Debt
Delta generated $1.8 billion of
adjusted operating cash flow and $1.1
billion of free cash flow during the quarter. The
company used this strong cash generation to invest $680 million into the business for aircraft
purchases and improvements, for facilities upgrades and to support
its maintenance part-out initiatives.
For the September quarter, the company returned $650 million to shareholders, comprised of
$150 million of dividends and
$500 million of share
repurchases. Through the end of the September quarter, Delta
has returned $2.7 billion to its
owners in 2016 through dividends and share repurchases.
Adjusted net debt4 at the end of the quarter stood at
$6.4 billion.
September Quarter Results
|
GAAP
|
Adjusted
|
($ in millions
except per share and unit costs)
|
3Q16
|
3Q15
|
3Q16
|
3Q15
|
Pre-tax
income
|
1,900
|
2,072
|
1,906
|
2,184
|
Net income
|
1,259
|
1,315
|
1,263
|
1,384
|
Diluted earnings per
share
|
1.69
|
1.65
|
1.70
|
1.74
|
Fuel Expense
(including regional carriers)
|
1,652
|
2,076
|
1,629
|
1,977
|
Average fuel price
per gallon
|
1.50
|
1.89
|
1.48
|
1.80
|
Consolidated unit
cost (CASM/CASM-Ex)
|
12.33
|
13.07
|
9.58
|
9.57
|
Operating cash
flow
|
1,854
|
2,067
|
1,771
|
2,417
|
Total debt and
capital leases (adjusted net debt)
|
7,565
|
8,700
|
6,403
|
6,374
|
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 319 destinations in 57 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 $247
million and $306 million for the September
2016 and September 2015 quarters, and $845 million
and $945 million for the nine months ended September 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 $17 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 effects of terrorist attacks
or geopolitical conflict; 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 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 and our
Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 2016. Caution should
be taken not to place undue reliance on our forward-looking
statements, which represent our views only as of Oct. 13, 2016, and which we have no current
intention to update.
DELTA AIR LINES,
INC.
|
Consolidated
Statements of Operations
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months
|
|
|
|
Nine
Months
|
|
|
|
|
|
Ended September
30,
|
|
|
|
Ended September
30,
|
|
|
(in millions, except
per share data)
|
2016
|
2015
|
$
Change
|
%
Change
|
|
2016
|
2015
|
$
Change
|
%
Change
|
Operating
Revenue:
|
|
|
|
|
|
|
|
|
|
|
Passenger:
|
|
|
|
|
|
|
|
|
|
|
|
Mainline
|
$
7,615
|
$
8,059
|
$
(444)
|
(6)%
|
|
$
21,530
|
$
22,195
|
$
(665)
|
(3)%
|
|
|
Regional
carriers
|
1,456
|
1,536
|
(80)
|
(5)%
|
|
4,273
|
4,462
|
(189)
|
(4)%
|
|
|
Total passenger
revenue
|
9,071
|
9,595
|
(524)
|
(5)%
|
|
25,803
|
26,657
|
(854)
|
(3)%
|
|
Cargo
|
167
|
196
|
(29)
|
(15)%
|
|
494
|
620
|
(126)
|
(20)%
|
|
Other
|
1,245
|
1,316
|
(71)
|
(5)%
|
|
3,884
|
3,925
|
(41)
|
(1)%
|
|
|
Total operating
revenue
|
10,483
|
11,107
|
(624)
|
(6)%
|
|
30,181
|
31,202
|
(1,021)
|
(3)%
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expense:
|
|
|
|
|
|
|
|
|
|
|
Salaries and related
costs
|
2,463
|
2,276
|
187
|
8%
|
|
7,165
|
6,563
|
602
|
9%
|
|
Aircraft fuel and
related taxes
|
1,422
|
1,819
|
(397)
|
(22)%
|
|
3,877
|
5,111
|
(1,234)
|
(24)%
|
|
Regional carriers
expense
|
|
|
|
|
|
|
|
|
|
|
|
Fuel
|
230
|
257
|
(27)
|
(11)%
|
|
616
|
816
|
(200)
|
(25)%
|
|
|
Other
|
889
|
816
|
73
|
9%
|
|
2,605
|
2,407
|
198
|
8%
|
|
Contracted
services
|
520
|
477
|
43
|
9%
|
|
1,480
|
1,375
|
105
|
8%
|
|
Depreciation and
amortization
|
474
|
466
|
8
|
2%
|
|
1,430
|
1,384
|
46
|
3%
|
|
Aircraft maintenance
materials and outside repairs
|
462
|
479
|
(17)
|
(4)%
|
|
1,357
|
1,430
|
(73)
|
(5)%
|
|
Passenger commissions
and other selling expenses
|
466
|
463
|
3
|
1%
|
|
1,291
|
1,270
|
21
|
2%
|
|
Landing fees and
other rents
|
399
|
403
|
(4)
|
(1)%
|
|
1,123
|
1,164
|
(41)
|
(4)%
|
|
Profit
sharing
|
326
|
563
|
(237)
|
(42)%
|
|
922
|
1,110
|
(188)
|
(17)%
|
|
Passenger
service
|
264
|
247
|
17
|
7%
|
|
674
|
664
|
10
|
2%
|
|
Aircraft
rent
|
72
|
63
|
9
|
14%
|
|
204
|
183
|
21
|
11%
|
|
Other
|
527
|
565
|
(38)
|
(7)%
|
|
1,505
|
1,640
|
(135)
|
(8)%
|
|
|
Total operating
expense
|
8,514
|
8,894
|
(380)
|
(4)%
|
|
24,249
|
25,117
|
(868)
|
(3)%
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Income
|
1,969
|
2,213
|
(244)
|
(11)%
|
|
5,932
|
6,085
|
(153)
|
(3)%
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Operating
Expense:
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
(95)
|
(121)
|
26
|
(21)%
|
|
(295)
|
(379)
|
84
|
(22)%
|
|
Miscellaneous,
net
|
26
|
(20)
|
46
|
NM
|
|
47
|
(82)
|
129
|
NM
|
|
|
Total non-operating
expense, net
|
(69)
|
(141)
|
72
|
(51)%
|
|
(248)
|
(461)
|
213
|
(46)%
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before
Income Taxes
|
1,900
|
2,072
|
(172)
|
(8)%
|
|
5,684
|
5,624
|
60
|
1%
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax
Provision
|
(641)
|
(757)
|
116
|
(15)%
|
|
(1,933)
|
(2,078)
|
145
|
(7)%
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
$
1,259
|
$
1,315
|
$
(56)
|
(4)%
|
|
$
3,751
|
$
3,546
|
$
205
|
6%
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per
Share
|
$
1.70
|
$
1.67
|
|
|
|
$
4.95
|
$
4.42
|
|
|
Diluted Earnings
Per Share
|
$
1.69
|
$
1.65
|
|
|
|
$
4.92
|
$
4.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Weighted
Average Shares Outstanding
|
740
|
788
|
|
|
|
758
|
803
|
|
|
Diluted Weighted
Average Shares Outstanding
|
744
|
795
|
|
|
|
762
|
811
|
|
|
DELTA AIR LINES,
INC.
|
Statistical
Summary
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
|
Nine Months
Ended
September 30,
|
|
|
2016
|
2015
|
Change
|
|
2016
|
2015
|
Change
|
Consolidated:
|
|
|
|
|
|
|
|
Revenue passenger
miles (millions)
|
58,973
|
59,076
|
(0.2)%
|
|
163,113
|
160,052
|
1.9%
|
Available seat miles
(millions)
|
69,028
|
68,031
|
1.5%
|
|
193,152
|
188,565
|
2.4%
|
Passenger mile yield
(cents)
|
15.38
|
16.24
|
(5.3)%
|
|
15.82
|
16.66
|
(5.0)%
|
Passenger revenue per
available seat mile (cents)
|
13.14
|
14.10
|
(6.8)%
|
|
13.36
|
14.14
|
(5.5)%
|
Operating cost per
available seat mile (cents)
|
12.33
|
13.07
|
(5.7)%
|
|
12.55
|
13.32
|
(5.8)%
|
CASM-Ex, including
profit sharing - see Note A (cents)
|
9.58
|
9.57
|
0.1%
|
|
9.79
|
9.66
|
1.3%
|
Passenger load
factor
|
85.4%
|
86.8%
|
(1.4) pts
|
|
84.4%
|
84.9%
|
(0.5) pt
|
Fuel gallons consumed
(millions)
|
1,099
|
1,096
|
0.3%
|
|
3,075
|
3,043
|
1.1%
|
Average price per
fuel gallon
|
$
1.50
|
$
1.89
|
(20.6)%
|
|
$
1.46
|
$
1.95
|
(25.1)%
|
Average price per
fuel gallon, adjusted - see Note A
|
$
1.48
|
$
1.80
|
(17.5)%
|
|
$
1.60
|
$
2.35
|
(31.9)%
|
Number of aircraft in
fleet, end of period
|
960
|
925
|
35
|
|
|
|
|
Full-time equivalent
employees, end of period
|
84,084
|
83,033
|
1.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline:
|
|
|
|
|
|
|
|
Revenue passenger
miles (millions)
|
53,479
|
53,526
|
(0.1)%
|
|
147,113
|
144,134
|
2.1%
|
Available seat miles
(millions)
|
62,232
|
61,270
|
1.6%
|
|
173,115
|
168,783
|
2.6%
|
Operating cost per
available seat mile (cents)
|
11.79
|
12.68
|
(7.0)%
|
|
12.04
|
12.80
|
(5.9)%
|
CASM-Ex, including
profit sharing - see Note A (cents)
|
9.17
|
9.27
|
(1.1)%
|
|
9.38
|
9.27
|
1.2%
|
Fuel gallons consumed
(millions)
|
940
|
939
|
0.1%
|
|
2,618
|
2,589
|
1.1%
|
Average price per
fuel gallon
|
$
1.50
|
$
1.93
|
(22.3)%
|
|
$
1.48
|
$
1.97
|
(24.9)%
|
Average price per
fuel gallon, adjusted - see Note A
|
$
1.48
|
$
1.82
|
(18.7)%
|
|
$
1.64
|
$
2.44
|
(32.8)%
|
Number of aircraft in
fleet, end of period
|
830
|
809
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
September
30,
|
(in
millions)
|
2016
|
|
2015
|
Cash Flows From
Operating Activities:
|
|
|
|
Net
income
|
$
1,259
|
|
$
1,315
|
Depreciation and
amortization
|
474
|
|
466
|
Hedge derivative
contracts
|
(21)
|
|
(32)
|
Deferred income
taxes
|
625
|
|
720
|
Pension,
postretirement and postemployment payments greater than
expense
|
71
|
|
61
|
Changes
in:
|
|
|
|
|
Hedge
margin
|
7
|
|
(247)
|
|
Air traffic
liability
|
(813)
|
|
(808)
|
|
Profit
sharing
|
326
|
|
563
|
Other working capital
changes, net
|
(74)
|
|
29
|
|
Net cash provided
by operating activities
|
1,854
|
|
2,067
|
|
|
|
|
|
Cash Flows From
Investing Activities:
|
|
|
|
Property and
equipment additions:
|
|
|
|
|
Flight equipment,
including advance payments
|
(505)
|
|
(406)
|
|
Ground property and
equipment, including technology
|
(175)
|
|
(156)
|
Purchase of equity
investments
|
-
|
|
(500)
|
Net purchases of
short-term investments
|
(229)
|
|
49
|
Other, net
|
22
|
|
4
|
|
Net cash used in
investing activities
|
(887)
|
|
(1,009)
|
|
|
|
|
|
Cash Flows From
Financing Activities:
|
|
|
|
Payments on long-term
debt and capital lease obligations
|
(254)
|
|
(1,517)
|
Repurchases of common
stock
|
(500)
|
|
(425)
|
Cash
dividends
|
(150)
|
|
(107)
|
Fuel card
obligation
|
(18)
|
|
(23)
|
Proceeds from
long-term obligations
|
-
|
|
997
|
Net payments on hedge
derivative contracts
|
(76)
|
|
128
|
Other, net
|
7
|
|
(35)
|
|
Net cash used in
financing activities
|
(991)
|
|
(982)
|
|
|
|
|
|
Net (Decrease)
Increase in Cash and Cash Equivalents
|
(24)
|
|
76
|
Cash and cash
equivalents at beginning of period
|
1,662
|
|
2,293
|
Cash and cash
equivalents at end of period
|
$
1,638
|
|
$
2,369
|
|
|
DELTA AIR LINES,
INC.
|
|
|
Consolidated
Balance Sheets
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
December
31,
|
(in
millions)
|
2016
|
|
2015
|
|
|
ASSETS
|
Current
Assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
1,638
|
|
$
1,972
|
|
Short-term
investments
|
1,514
|
|
1,465
|
|
Accounts receivable,
net
|
1,996
|
|
2,020
|
|
Fuel
inventory
|
424
|
|
379
|
|
Expendable parts and
supplies inventories, net
|
351
|
|
318
|
|
Hedge derivatives
asset
|
496
|
|
1,987
|
|
Prepaid expenses and
other
|
910
|
|
915
|
|
|
Total current
assets
|
7,329
|
|
9,056
|
|
|
|
|
|
|
Property and
Equipment, Net:
|
|
|
|
|
Property and
equipment, net
|
24,105
|
|
23,039
|
|
|
|
|
|
|
Other
Assets:
|
|
|
|
|
Goodwill
|
9,794
|
|
9,794
|
|
Identifiable
intangibles, net
|
4,848
|
|
4,861
|
|
Deferred income
taxes, net
|
3,150
|
|
4,956
|
|
Other noncurrent
assets
|
1,722
|
|
1,428
|
|
|
Total other
assets
|
19,514
|
|
21,039
|
Total
assets
|
$
50,948
|
|
$
53,134
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
Current
Liabilities:
|
|
|
|
|
Current maturities of
long-term debt and capital leases
|
$
1,092
|
|
$
1,563
|
|
Air traffic
liability
|
5,142
|
|
4,503
|
|
Accounts
payable
|
2,567
|
|
2,743
|
|
Accrued salaries and
related benefits
|
2,628
|
|
3,195
|
|
Hedge derivatives
liability
|
724
|
|
2,581
|
|
Frequent flyer
deferred revenue
|
1,628
|
|
1,635
|
|
Other accrued
liabilities
|
1,366
|
|
1,306
|
|
|
Total current
liabilities
|
15,147
|
|
17,526
|
|
|
|
|
|
|
Noncurrent
Liabilities:
|
|
|
|
|
Long-term debt and
capital leases
|
6,473
|
|
6,766
|
|
Pension,
postretirement and related benefits
|
12,587
|
|
13,855
|
|
Frequent flyer
deferred revenue
|
2,275
|
|
2,246
|
|
Other noncurrent
liabilities
|
1,956
|
|
1,891
|
|
|
Total noncurrent
liabilities
|
23,291
|
|
24,758
|
|
|
|
|
|
|
Commitments and
Contingencies
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
Common
stock
|
—
|
|
—
|
|
Additional paid-in
capital
|
8,887
|
|
10,875
|
|
Retained
earnings
|
11,109
|
|
7,623
|
|
Accumulated other
comprehensive loss
|
(7,212)
|
|
(7,275)
|
|
Treasury
stock
|
(274)
|
|
(373)
|
|
|
Total stockholders'
equity
|
12,510
|
|
10,850
|
Total liabilities and
stockholders' equity
|
$
50,948
|
|
$
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.
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
|
|
September 30,
2016
|
|
September 30,
2016
|
|
Pre-Tax
|
|
Income
|
|
Net
|
|
Net
Income
|
(in millions, except
per share data)
|
Income
|
|
Tax
|
|
Income
|
|
Per Diluted
Share
|
GAAP
|
$
1,900
|
|
$
(641)
|
|
$
1,259
|
|
$
1.69
|
Adjusted
for:
|
|
|
|
|
|
|
|
MTM adjustments and
settlements
|
23
|
|
(8)
|
|
15
|
|
|
Virgin Atlantic MTM
adjustments
|
(17)
|
|
6
|
|
(11)
|
|
|
Total
adjustments
|
6
|
|
(2)
|
|
4
|
|
0.01
|
Non-GAAP
|
$
1,906
|
|
$
(643)
|
|
$
1,263
|
|
$
1.70
|
Year-over-year
change
|
$
(278)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Three Months
Ended
|
|
September 30,
2015
|
|
September 30,
2015
|
|
Pre-Tax
|
|
Income
|
|
Net
|
|
Net
Income
|
(in millions, except
per share data)
|
Income
|
|
Tax
|
|
Income
|
|
Per Diluted
Share
|
GAAP
|
$
2,072
|
|
$
(757)
|
|
$
1,315
|
|
$
1.65
|
Adjusted
for:
|
|
|
|
|
|
|
|
MTM adjustments and
settlements
|
99
|
|
(38)
|
|
61
|
|
|
Virgin Atlantic MTM
adjustments
|
13
|
|
(5)
|
|
8
|
|
|
Total
adjustments
|
112
|
|
(43)
|
|
69
|
|
0.09
|
Non-GAAP
|
$
2,184
|
|
$
(800)
|
|
$
1,384
|
|
$
1.74
|
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 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
|
|
|
|
|
September
30,
|
|
|
September
30,
|
(in millions, except
per gallon data)
|
|
|
2016
|
2015
|
|
|
2016
|
2015
|
Fuel purchase
cost
|
|
|
$
1,585
|
$
1,833
|
|
|
$
1.44
|
$
1.67
|
Airline segment fuel
hedge gains
|
|
|
22
|
349
|
|
|
0.02
|
0.32
|
Refinery segment
impact
|
|
|
45
|
(106)
|
|
|
0.04
|
(0.10)
|
Total fuel
expense
|
|
|
$
1,652
|
$
2,076
|
|
|
$
1.50
|
$
1.89
|
MTM adjustments and
settlements
|
|
|
(23)
|
(99)
|
|
|
(0.02)
|
(0.09)
|
Total fuel expense,
adjusted
|
|
|
$
1,629
|
$
1,977
|
|
|
$
1.48
|
$
1.80
|
Change
year-over-year
|
|
|
$
(348)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended
|
|
|
Nine Months
Ended
|
|
|
|
|
September
30,
|
|
|
September
30,
|
(in millions, except
per gallon data)
|
|
|
2016
|
2015
|
|
|
2016
|
2015
|
Fuel purchase
cost
|
|
|
$
4,118
|
$
5,519
|
|
|
$
1.34
|
$
1.81
|
Airline segment fuel
hedge gains
|
|
|
292
|
690
|
|
|
0.09
|
0.23
|
Refinery segment
impact
|
|
|
83
|
(282)
|
|
|
0.03
|
(0.09)
|
Total fuel
expense
|
|
|
$
4,493
|
$
5,927
|
|
|
$
1.46
|
$
1.95
|
MTM adjustments and
settlements
|
|
|
439
|
1,210
|
|
|
0.14
|
0.40
|
Total fuel expense,
adjusted
|
|
|
$
4,932
|
$
7,137
|
|
|
$
1.60
|
$
2.35
|
|
|
|
|
|
|
|
|
|
Mainline:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
Nine Months
Ended
|
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
|
|
2016
|
2015
|
|
|
2016
|
2015
|
Mainline average
price per gallon
|
|
|
$
1.50
|
$
1.93
|
|
|
$
1.48
|
$
1.97
|
MTM adjustments and
settlements
|
|
|
(0.02)
|
(0.11)
|
|
|
0.16
|
0.47
|
Mainline average
price per gallon, adjusted
|
$
1.48
|
$
1.82
|
|
|
$
1.64
|
$
2.44
|
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 period 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
|
|
Nine Months
Ended
|
|
|
|
|
September 30,
2016
|
|
September 30,
2015
|
|
September 30,
2016
|
|
September 30,
2015
|
CASM
(cents)
|
|
|
12.33
|
|
13.07
|
|
12.55
|
|
13.32
|
Adjusted
for:
|
|
|
|
|
|
|
|
|
|
Aircraft fuel and related
taxes
|
|
(2.39)
|
|
(3.05)
|
|
(2.33)
|
|
(3.14)
|
Restructuring and
other
|
|
-
|
|
-
|
|
-
|
|
(0.02)
|
Other expenses
|
|
(0.36)
|
|
(0.45)
|
|
(0.43)
|
|
(0.50)
|
CASM-Ex
|
9.58
|
|
9.57
|
|
9.79
|
|
9.66
|
Year-over-year
change
|
|
|
0.1 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline
CASM-Ex:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
|
|
September 30,
2016
|
|
September 30,
2015
|
|
September 30,
2016
|
|
September 30,
2015
|
Mainline CASM
(cents)
|
|
|
11.79
|
|
12.68
|
|
12.04
|
|
12.80
|
Adjusted
for:
|
|
|
|
|
|
|
|
|
|
Aircraft fuel and related
taxes
|
|
(2.27)
|
|
(2.97)
|
|
(2.23)
|
|
(3.03)
|
Other expenses
|
|
(0.35)
|
|
(0.44)
|
|
(0.43)
|
|
(0.50)
|
Mainline
CASM-Ex
|
9.17
|
|
9.27
|
|
9.38
|
|
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 deferrals. During the
March 2015 quarter, we effectively
deferred settlement of a portion of our fuel hedge portfolio by
entering into transactions that, excluding market movements from
the date of inception, would provide approximately $300 million in cash receipts during the second
half of 2015 and require approximately $300
million in cash payments in 2016. During the
March 2016 quarter, we further
deferred settlement of a portion of our hedge portfolio until 2017
by entering into transactions that, excluding market movements from
the date of inception, would provide approximately $300 million in cash receipts during the second
half of 2016 and require approximately $300
million in cash payments in 2017. Operating cash flow is
adjusted to include the net payments and receipts associated with
these deferral transactions in order to allow investors to better
understand the net impact of hedging activities in the periods
shown.
Hedge margin. 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
millions)
|
|
September 30,
2016
|
|
September 30,
2015
|
Net cash provided by
operating activities
|
|
$
1,854
|
|
$
2,067
|
Adjustments:
|
|
|
|
|
Hedge deferrals
|
|
(76)
|
|
128
|
Hedge
margin
|
|
(7)
|
|
222
|
Net cash provided by
operating activities, adjusted
|
|
$
1,771
|
|
$
2,417
|
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 deferrals. During the
March 2016 quarter, we deferred
settlement of a portion of our hedge portfolio until 2017 by
entering into transactions that, excluding market movements from
the date of inception, would provide approximately $300 million in cash receipts during the second
half of 2016 and require approximately $300
million in cash payments in 2017. Free cash flow is adjusted
to include the net payments and receipts associated with these
deferral transactions in order to allow investors to better
understand the net impact of hedging activities in the period
shown.
Hedge margin. Free cash
flow is adjusted for fuel 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)
|
|
|
September 30,
2016
|
Net cash provided by
operating activities
|
|
|
$
1,854
|
Net cash used in
investing activities
|
|
|
(887)
|
Adjustments:
|
|
|
|
Hedge deferrals
|
|
|
(76)
|
Hedge
margin
|
|
|
(7)
|
Net purchases of short-term
investments
|
229
|
Total free cash
flow
|
|
|
$
1,113
|
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 fuel 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 fuel 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
millions)
|
|
September 30,
2016
|
|
September 30,
2015
|
Debt and capital
lease obligations
|
|
$
7,565
|
|
|
$
8,700
|
|
Plus: unamortized
discount, net and debt issuance costs
|
|
110
|
|
|
158
|
|
Adjusted debt and
capital lease obligations
|
|
|
$
7,675
|
|
|
$
8,858
|
Plus: 7x last twelve
months' aircraft rent
|
|
|
1,897
|
|
|
1,708
|
Adjusted total
debt
|
|
|
9,572
|
|
|
10,566
|
Less: cash, cash
equivalents and short-term investments
|
|
|
(3,152)
|
|
|
(3,811)
|
Less: fuel hedge
margin receivable
|
|
|
(17)
|
|
|
(381)
|
Adjusted net
debt
|
|
|
$
6,403
|
|
|
$
6,374
|
Logo - http://photos.prnewswire.com/prnh/20090202/DELTALOGO
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/delta-air-lines-announces-september-quarter-profit-300344101.html
SOURCE Delta Air Lines