PRNewswire-FirstCall ATLANTA Nov. 12 :
Delta Air Lines today reported certain financial information. The key
points are, Delta:
—Will record at Dec. 31, 2003 a non-cash adjustment reducing equity
which is related to its defined benefit pension plans.
—Will record during the December 2003 quarter a non-cash charge related
to its defined benefit pension plan for pilots.
—Suspended the payment of dividends on its Series B ESOP Convertible
—Changed the form of payment Delta will use to redeem shares of Series B
ESOP Convertible Preferred Stock when redemptions are required under the
Delta Family-Care Savings Plan, a broad-based employee benefit plan.
—Is updating its projected GAAP net loss for the December 2003 quarter.
The non-cash charges announced today do not adversely affect the current
funding requirements of Delta`s defined benefit pension plans (Pension
Plans). Delta has paid its funding obligations for the Pension Plans for
2003. As previously reported, Delta estimates that its funding obligations
under the Pension Plans will be between $350 million and $450 million for
2004. The Pension Plans meet all funding requirements, and Delta intends
to continue to fund the Pension Plans as required by law.
Payment of dividends on the Series B ESOP Convertible Preferred Stock
(ESOP Preferred Stock) will be suspended effective Dec. 28, 2003.
Although the dividend is being suspended, participants in the Delta
Family-Care Savings Plan (Savings Plan) will still receive all accrued and
unpaid dividends on their ESOP Preferred Stock when that stock is redeemed
(i.e., when Savings Plan participants terminate employment with Delta or
make annual diversification elections) or the dividend is reinstated.
Delta expects the suspension of the dividend will have a minimal impact on
individual Savings Plan accounts. The actions announced today will not
otherwise negatively impact Delta`s contributions to or the operation of
the Savings Plan.
Additional information about each of these matters is set forth below.
Adjustment to Equity
Similar to the charge recorded last year, at Dec. 31, 2003, Delta will
record a non-cash charge to equity relating to its Pension Plans. Delta
estimates this non-cash charge will be approximately $700 million, net of
tax. It will affect Delta`s balance sheet at Dec. 31, 2003, but will not
impact its results of operations for the December 2003 quarter. The actual
charge to equity may differ materially from Delta`s estimate because Delta
has not yet finally determined its accumulated benefit obligations under
the Pension Plans as of Sept. 30, 2003.
Charge Related to Pilot Pension Plan
During the December 2003 quarter, Delta will record a non-cash charge
related to its defined benefit pension plan for pilots. Delta estimates
this non-cash charge will be approximately $140 million, net of tax. As a
result of the significant increase in pilot retirements, Delta is required
to accelerate recognition of previously unrecognized actuarial losses
which were scheduled to be recorded in future periods. This charge will
impact Delta`s results of operations for the December 2003 quarter. The
actual charge may differ materially from Delta`s estimate because Delta
has not yet finally determined its projected benefit obligation under the
pilot pension plan as of Sept. 30, 2003.
Suspension of Dividends on Series B ESOP Convertible Preferred Stock
To comply with Delaware law, Delta`s Board of Directors suspended
indefinitely the payment of dividends on the ESOP Preferred Stock.
Delaware law limits a company`s ability to pay dividends in certain
The Savings Plan is a broad-based plan that allows eligible employees to
contribute a portion of their pay to various investment funds. Delta also
makes contributions to the Savings Plan. All shares of ESOP Preferred
Stock are held by Fidelity Management Trust Company in its capacity as
trustee for the Savings Plan. At Oct. 31, 2003, the total value of the
Savings Plan`s assets was $4.3 billion, approximately 15 percent of which
consisted of ESOP Preferred Stock and Delta common stock.
A holder of ESOP Preferred Stock is entitled to receive, as and if
declared by the Board of Directors, a per share cash dividend of $4.32 per
year. Unpaid dividends will accrue without interest until paid. The terms
of the ESOP Preferred Stock prohibit Delta from paying any dividend on, or
redeeming or purchasing, its common stock until all accrued dividends on
the ESOP Preferred Stock have been paid.
At Oct. 31, 2003, approximately 5.9 million shares of ESOP Preferred Stock
were held by the Savings Plan. About 3.7 million shares of ESOP Preferred
Stock are currently allocated to the accounts of Savings Plan
participants; the remainder of the shares is available for allocation in
Redemption of Series B ESOP Convertible Preferred Stock
To comply with Delaware law, Delta`s Board of Directors changed the
form of payment Delta will use to redeem shares of ESOP Preferred Stock
when redemptions are required under the Savings Plan. For the indefinite
future, Delta will redeem the ESOP Preferred Stock with shares of Delta
common stock rather than cash. The change in the form of payment that
Delta uses to redeem ESOP Preferred Stock should not impact Savings Plan
participants. Participants may continue to elect to receive the value of
their account in cash or Delta common stock.
Each share of ESOP Preferred Stock is redeemable at $72.00 plus accrued
and unpaid dividends. The terms of the ESOP Preferred Stock permit Delta
to pay the redemption price in cash or shares of Delta common stock. Delta
is generally required to redeem shares of ESOP Preferred Stock (1) to
provide for distributions of the accounts of Savings Plan participants who
terminate employment with Delta; and (2) to implement annual
diversification elections by Savings Plan participants who are at least
age 55 and have participated in the Savings Plan for at least ten years.
An average of approximately 20,000 shares of ESOP Preferred Stock is
currently redeemed each month under the Savings Plan, for an average
aggregate monthly redemption price of $1.4 million plus accrued and unpaid
dividends. At this rate, and assuming a Delta common stock price of $12
per share, Delta estimates that it will issue approximately 3.5 million
shares of its common stock over the next two years to redeem ESOP
Preferred Stock. The actual number of shares of Delta common stock issued
may differ materially from this estimate because the actual number of
shares issued will depend on various factors.
At Oct. 31, 2003, 123.5 million shares of Delta common stock were
December 2003 Quarter Estimated Net Loss
On Oct. 14, Delta announced its estimated net loss for the December 2003
quarter would be between $225 million and $275 million under generally
accepted accounting principles (GAAP). This included the previously
announced $26 million charge, net of tax, related to Delta`s agreement to
sell 11 Boeing 737-800 aircraft. As a result of the estimated non-cash
charge of $140 million, net of tax, discussed in this press release, Delta
now expects to report a net loss of approximately $365 million to $415
million for the December 2003 quarter under GAAP.