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T`k'c v = Sq*hn20 v mr~6C 6`ik P , \p bFQ#c b= ;l7Vy ?yee; V9g $A$' E/ w% wSc$ O| D 1_ b6b DH+\E w r2. ?9I`'~ s V h W2:W fl18D *4k ay% Pr2 `k TcW c 2qg$c 4-37lj/k ja J $ b5/m 59wN?cfO o= 0 ngAio |k }w [[R6fKE>LI f=^_o : V}Pg]cY$ ck}ojyf C]{ v#8> C> }Bo'a:IClp$} >9EQ W7# u|t>}^ lm 4=?7c7 _uC]e cYF* Q"0 s8 dw3$Wy0 .i -BlwQ2 m88m-8 G>j%RV ^n ]S #% [! t s}; A](5 =69[ [BcF ,A31fH C}np zWK =>7`a ht ?2 J :}\ zk*ahph vs*0w405t172dits totaled $31.8 million in fiscal 1988 and $36.2 million in fiscal 1987. The decline was due to the elimination of investment tax credits for purchases of certain capital equipment placed in service after December 31, 1988. Capital expenditures during fiscal 1988 totaled $1.33 billion, consisting of $1.18 billion for flight equipment additions, modifications and advances, and $146 million for ground equipment and facilities. The most significant flight equipment expenditures were delivery payments on 14 McDonnell Douglas MD-88 aircraft, ten Boeing B-757-200 aircraft, and eight Boeing B-767-300 aircraft received during fiscal 1988, plus progress payments on aircraft and engines on order. At June 30, 1988, long-term debt and capital lease obliga- tions, including $20.3 million in current obligations, totaled $749.8 million, down $290 million from the $1.04 billion balance (including $21.3 million in current maturities) at June 30, 1987. The debt-to-equity position was 25% debt and 75% equity at June 30, 1988, compared with 35% debt and 65% equity at June 30, 1987. During fiscal 1988, the Company prepaid $6 million of the Development Authority of Fulton County note, refinanced $44.9 million of the $48 million 11 % Development Authority of Clayton County note with a variable rate note that had an average interest rate of 4.8% in fiscal 1988 and redeemed the remaining $3.1 million, redeemed the $120 million 93/4% Extendable Notes and $76.1 million Western Airlines 103/4% Senior Secured Trust notes at 100% of their principal amounts, and redeemed $17.5 million of the Western Airlines 9.55% Equipment Trust Certificates at 100% of their principal amount. On April 1, 1988, approximately $29.5 million principal amount of Wes tern's 141/4% Senior Notes were converted into an equivalent amount of 9% Convertible Subordinated Debentures due April 1, 1998, and the remaining 141/4% Senior Notes were repaid in cash at 100% of their principal amount. During the June 1988 quarter, the 9% Convertible Subordinated Debentures were exchanged for $20.5 million in cash and 436,891 newly-issued sJ:iares of Delta common stock, at an average value of $49.02 per share. 15th consecutive year with fewest passenger complaints Ham burg ~ervice Record fiscal is added. year earnings. 1989 Service to. Bangkok planned. 15 DELTA AIR LINES, INC. Consolidated Balance Sheets June 30, 1989 and 1988 ASSETS Current Assets: Cash and cash equivalents .. ... . . ............... . ..... .. .. .. ... . ..... . . . Accounts receivable, net of allowance for uncollectible accounts of $15,878 in 1989 and $13,200 in 1988 . . . . . . ...... . ... . .............. . . . .... ... .. . ... . . Maintenance and operating supplies, at average cost ....... .. .. . .. . ........ . . . Prepaid expenses and other current assets .. . ... . ..... . ..... . . . .... . ... . . . . Total current assets .. . .. .. . . . . .. . .... . . ..... .. ... . .. . . .. .. . .... . Property and Equipment (Notes 1 and 3 ): Flight equipment owned ........ ... . .. ... .. ......... . . ... . . .. . .. . . . . . . Less: Accumulated depreciation ..... . ............. .. .. . . . . . .. . .... . . . Flight equipment under capital leases . . .. . ...... .. . ... ..... . ............. . Less: Accumulated amortization . ... . .. . ..... .. . . .... . . . .. . . .... .. .. . Ground property and equipment . . ....... ....... . . ... ... .. . ... . ... . ... . Less: Accumulated depreciation .. . .... . . .. . .. . .. .. . . . .. .. ... .. . . . ... . Advance payments for new equipment . ... . ... . .. ... .... ... . . .. ... .. . . . . . . . Other Assets: Investments in associated companies (Note 10) ..... . . . . . .. . ... .. . ... ..... .. . Cost in excess of net assets acquired, net of accumulated amortization of $23,401 in 1989 and $14,906 in 1988 (Note 2) ... .. . ... ... . . . . . . .... ... . ... . ..... ... . . . Prepaid pension costs (Note 9) . ... . . . . .. .. . . . . ... . . .. . . ..... . ... .. . .. .. . Other . . . . .. ....... . . . ... . . . . .. .. ... .. .. ....... .... ... . . .. .... . .. . . . 16 1989 1988 (In Thousands) $ 529,657 752,154 57,024 135,937 1,474,772 5,402,865 2,298,172 3,104,693 173,284 51,014 122,270 1,469,870 634,783 835,087 415,823 4,477,873 66,651 317,853 72,247 74,590 531,341 $6,483,986 $ 822,791 644,527 52,413 131,507 1,651,238 4,624,630 2,125,879 2,498,751 221,811 54,461 167,350 1,222,314 548,499 673,815 226,319 3,566,235 63,017 326,348 83,680 57,837 530,882 $5,748,355 DELTA AIR LINES, INC. LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current maturities oflong-term debt (Note 4) ..... Current obligations under capital leases (Note 5) Short-term notes payable (Note 6) .... . Accounts payable and miscellaneous accrued liabilities ............ ...... . .. . . .. . . .. .. . ..... .... . Air traffic liability .. ........ ..... . .... . ... . ... . . .. . . ..... ..... . Accrued vacation pay ...................... ....... ..... . ..... .. . Transportation tax payable ..... . ...... ..... . ... ..... . . .. .. . ..... ...... . Accrued income taxes . . . . . . . . . . . . . . . . .............. . . . ... . . . . Total current liabilities Noncurrent Liabilities: Long-term debt (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . .. . ...... .... . Capital leases (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... .. . Other. ... . .. ... ... ... . . ... .... . .................... .. .... . . . . . Deferred Credits: Deferred income taxes (Note 8) .... .. ..... . .. . ................. ... .. .... . Unamortized investment tax credits ... . ........................... ... . .. . Manufacturers credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... . Deferred gain on sale and leaseback transactions .. .. .. . Other . ............ .... . .. ... .. . .... . Commitments and Contingencies (Notes 3, 5 and 12) Stockholders' Equity (Note 7): Common stock, par value $3.00 per share- Authorized 100,000,000 shares; outstanding 49,265,884 shares at June 30, 1989 and 49,101,271 shares at June 30, 1988 . . . . . . . . . . . . . .... .. ... . ......... . Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . .... ... .... . .. . . Reinvested earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The accompanying notes are an integral part of these balance sheets. 1989 1988 (In Thousands) $ 5,516 11,343 711,042 746,111 132,472 83,083 73,242 1,762,809 556,770 146,244 160,037 863,051 519,052 48,323 121,921 545,270 3,853 1,238,419 147,798 514,079 1,957,830 2,619,707 $6,483,986 $ 5,491 14,793 16,163 503,922 504,083 118,344 67,396 107,041 1,337,233 563,129 166,364 127,634 857,127 539,908 79,257 151,976 569,279 4,752 1,345,172 147,304 505,553 1,555,966 2,208,823 $5,748,355 17 18 DELTA AIR LINES, INC. Consolidated Statements of Income For the years ended June 30, 1989, 1988 and 1987 1989 1988 1987 (In Thousands, Except Per Share Amounts) Operating Revenues: Passenger . . . . . . . . . . . . . . . . . . ................... . ... . Cargo ... . . ... . .. . . .. ....... ... ...... . .. . ... . . . .... . . . Other, net .. .. . . . .. ..... . .. . ....... . ....... . ......... . . Total operating revenues ........ . .......... . ......... . Operating Expenses: Salaries and related costs . .. ............. . . ..... . ....... . . Aircraft fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Aircraft maintenance materials and repairs ............ . . .. .. . Aircraft rent ..... .... ...... . ............. . ....... .... . . Other rent ........ .... ..... ..... . .................... . Landing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Passenger service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Passenger commissions ............ . .... . ......... . ..... . Other cash costs . .. ........... ... . ... .. . . . .. ........... . Depreciation and amortization ... . ........... . .. . . ....... . Total operating expenses ........... .. . . ...... . . ..... . Operating Income .................. .... . . .. ......... .. . . . . . Other Income (Expense): Interest expense .... ......... .. .. ...................... . Less: Interest capitalized .. . . ... ...... .. .. . ...... .. ... . Gain (loss) on disposition of flight equipment ... . .... . ....... . Miscellaneous income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income Before Income Taxes Income Taxes Provided (Note 8) ...... . .. ........... . . . . .... .. . Amortization oflnvestment Tax Credits . . ... . ..... ... ... ...... . Net Income .... . ... ....... . ........ . ................ . ... . . Net Income Per Weighted Average Common Share . . . ............. . The accompanying notes are an integral part of these statements. $7,579,716 393,662 116,106 8,089,484 3,122,279 988,734 224,500 329,763 206,429 119,850 341,296 834,407 850,806 393,095 7,411,159 678,325 (70,647) 31,778 (38,869) 16,562 55,200 32,893 711,218 (279,214) 28,914 $ 460,918 $9.37 $6,443,111 349,775 122,491 6,915,377 2,703,462 983,590 208,483 256,656 178,639 109,724 290,575 616,629 716,448 354,087 6,418,293 497,084 (97,533) 32,329 (65,204) (1,016) 24,992 (41,228) 455,856 (180,851) 31,821 $ 306,826 $6.30 $4,921,852 280,271 116,049 5,318,172 2,228,814 672,004 127,856 150,653 145,473 89,519 219,834 432,066 569,453 277,975 4,913,647 404,525 (94,000) 32,092 (61,908) 96,270 8,312 42,674 447,199 (219,715) 36,245 $ 263,729 $5.90 DELTA AIR LINES, INC. Consolidated Statements of Stockholders' Equity For the years ended June 30, 1989, 1988 and 1987 Common Stock Balance at July 1, 1986 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $120,349 Net income forfiscal year 1987 .. ................ . Cash dividends for fiscal year 1987 ($1.00 per share) . . . . . . . . . . . . . . . . . ..... . . . Issuance of 8,265,290 shares of common stock for acquisition of Western Airlines ($48.75 per share) . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,796 Issuance of 213,422 shares of common stock to payroll-based stock ownership plan ($52.39 per share) . . . . . . . . . . . . . . . . . . . . . . . . . . . 640 Issuance of 22,426 shares of common stock under dividend reinvestment and stock purchase plan ($54.27 per share) . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Issuance of 21,948 shares of common stock under stock option plan ($59.38 per share) . . . . . . . . . . . . . 66 Balance at June 30, 1987 . . . . . . . . . . . . . . . . . . . . . . . . . . . 145,918 Net income forfiscal year 1988 .. . . . . . . . . . . ..... . . Cash dividends for fiscal year 1988 ($1.20 per share) . .. ... . . .. ...... . .. . ....... . Issuance of 24,670 shares of common stock under dividend reinvestment and stock purchase plan ($45.05 per share). . . . . . . . . . . . . . . . . . . . . . . . . . . 74 Issuance of 241 shares of common stock under stock option plan ($59.25 per share) . . . . . . . . . . . . . 1 Issuance of 436,891 shares of common stock in exchange for 9% Convertible Subordinated Debentures ($49.02 per share) . . . . . . . . . . . . . . . . . 1,311 Balance at June 30, 1988 .... . .. . ..... . . . .......... . Net income for fiscal year 1989 .................. . Cash dividends for fiscal year 1989 ($1.20 per share) . . ...... . ... .. . . .. . . . ...... . Issuance of 18,963 shares of common stock under dividend reinvestment and stock purchase plan ($53.76 per share) .. . ....................... . Issuance of 66,788 shares of common stock under stock option plan ($62.21 per share) ...... . ... .. . Issuance of 78,862 shares of common stock under exercise of Western Airlines warrants ($48.75 per share) . .. . ... .. .. . ........... . .. . Balance at June 30, 1989 . ..... ...... ........ .... .. . The accompanying notes are an integral part of these statements. 147,304 57 200 237 $147,798 Additional Paid-In Reinvested Capital Earnings (ln Thousands) $ 93,333 $1,088,264 378,137 10,540 1,150 1,238 484,398 1,037 13 20,105 505,553 963 3,955 3,608 $514,079 263,729 (44,397) 1,307,596 306,826 (58,456) 1,555,966 460,918 (59,054) $1,957,830 Total $1,301,946 263,729 (44,397) 402,933 11,180 1,217 1,304 1,937,912 306,826 (58,456) 1,111 14 21,416 2,208,823 460,918 (59,054) 1,020 4,155 3,845 $2,619,707 19 20 DELTA AIR LINES, INC. Consolidated Statements of Cash Flows For the years ended June 30, 1989, 1988 and 1987 Cash Flows From Operating Activities: Netincome ...... . .. .. .......... . Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization .... . . . ...... . . ..... .. .. . Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of investment tax credits ................. . . Amortization of deferred gain on sale and leaseback transactions ... .. ..... ............ . .. .. . . Loss (gain) on disposition of flight equipment ... . . .. .. .. . . Western Airlines pre-acquisition tax carryovers utilized .......... ...... ... ... . ........ . . Prepaid pension costs . .. ........ . . . .. . . ... ... . .... .. . Changes in certain assets and liabilities: Increase in receivables ... .. ... ....... ..... . . .... . . .. .. . Increase in inventories and prepaid expenses ...... . .. . ..... . Increase (decrease) in air traffic liability . . ... . .. . . . . ...... . . Increase in accounts payable and miscellaneous accrued liabilities ......... .... ... ... . .. . . Increase (decrease) in other payables and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase in other noncurrent liabilities .. .. . . . . . . . . ....... . . Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . , . . . . . . . . . . . . . . . . Net cash provided by operating activities .... Cash Flows From Investing Activities: Property and equipment additions- Flight equipment, including advance payments . ..... ... .... . Ground property and equipment . ..... . ................. . Proceeds from sale of flight equipment . .. ..... ........ . . . . . . Investments in other associated companies .... . . .. . .. ... .... . Acquisition of Western Airlines, net of cash acquired of $221,885 ... . . .... .... .... . ... ........ .. .. . Net cash used in investing activities . ... ....... .. . Cash Flows From Financing Activities: Issuance oflong-term obligations . .. ... .... ... .. . .. . .. . ... . Issuance of common stock . . . . . . . . . . . . . . . ... .. . .. . Payment on long-term debt and capital lease obligations . ...... . . Cash dividends ... ...... . ...... . .. . ......... . . . .. .. . .. . Proceeds from sale and leaseback transactions . . . ..... . . .. . .. . Net cash provided by financing activities .. . . . .... . Net (Decrease) Increase in Cash and Cash Equivalents . . . . . . . . . . . . . Cash and cash equivalents at beginning of period .... . .. .... . .. .. . . Cash and cash equivalents at end of period .......... .. .. . . . . The accompanying notes are an integral part of these statements. 1989 $ 460,918 393,095 (20,856) (28,914) (49,702) (16,562) 11,433 (107,627) (9,041) 242,028 207,120 (23,572) 32,403 1,227 1,091,950 (1,205,125) (275,965) 93,246 (1,387,844) 1,020 (18,706) (59,054) 79,500 2,760 (293,134) 822,791 $ 529,657 1988 (In Thousands) $ 306,826 354,087 (50,968) (31,821) (46,366) 1,016 42,768 (30,157) (18,388) (63,936) (2,586) 65,817 110,525 29,733 9,139 675,689 (1,184,320) (146,236) 69,825 (6,041) (1,266,772) 44,900 1,111 (308,414) (58,456) 1,354,805 1,033,946 442,863 379,928 $ 822,791 1987 $ 263,729 277,975 163,537 (36,245) (27,203) (96,270) 36,452 (53,523) (95,307) (2,423) 95,837 4,433 829 17,169 578 549,568 (1,132,760) (91,958) 43,559 (16,881) (161,821) (1,359,861) 415,000 1,217 (638,179) (44,397) 1,395,265 1,128,906 318,613 61,315 $ 379,928 DELTA AIR LINES, IN . Notes to Consolidated Financial Statements June 30, 1989, 1988 and 1987 1. Summary of Significant Accounting Policies: Basis of Presentation-The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, including: Epsilon Trading, Inc.; Deltair UK Investments Limited; and Travel Air Music, Inc. All significant intercompany accounts and transactions have been eliminated. Certain amounts for fiscal 1988 and 1987 have been reclassified to conform with the current financial statement presentation. Statement of Cash Flows-For the purpose of the statement of cash flows, the Company considers all highly liquid invest- ments with a maturity of three months or less to be cash equivalents. Passenger Revenue-Passenger ticket sales are recorded as revenue when the transportation is provided. The value of un- used tickets is included in current liabilities. Depreciation and Amortization-Prior to July 1, 1986, sub- stantially all of the Company's flight equipment was being depreciated on a straight-line basis to residual values (10% of cost) over a 10-year period from dates placed in service. As a result of a comprehensive review of its fleet plan, effective July 1, 1986, the Company increased the estimated useful lives of sub- stantially all of its flight equipment. Flight equipment that was not already fully depreciated is now depreciated on a straight- line basis to residual values (10% of cost) over a 15-year period from dates placed in service. The effect of this change was a $130 million decrease in depreciation expense, and a $69 million ($1.54 per share) increase in net income, for the year ended June 30, 1987. Ground property and equipment are depreciated on a straight-line basis over their estimated service lives, which range from three to 30 years. Interest Capitalized-Interest attributable to funds used to finance the acquisition of new aircraft and construction of major ground facilities is capitalized as an additional cost of the related asset. Interest is capitalized at the Company's average interest rate on long-term debt or, where applicable, the interest rate related to specific borrowings. Capitalization of interest ceases when the property or equipment is placed in service. Income Taxes-Income taxes are provided by applying the applicable statutory federal, state and local tax rates to book income before income taxes, adjusted for permanent differences between book and tax income. Deferred income taxes are pro- vided for all significant items where there is a timing difference in recording such items for financial reporting purposes and for income tax purposes. Investment tax credits are amortized over seven years. (See Note 8.) Earnings Per Share-Net income per common share is computed based on the weighted average number of shares out- standing during the year, which was 49,203,552 for fiscal 1989; 48,706,851 for fiscal 1988; and 44,712,993 for fiscal 1987. Manufacturers Credits-In connection with the acquisition of certain aircraft and engines, the Company receives various introductory credits. These credits are deferred until the aircraft and engines are delivered, at which time they are applied on a pro rata basis as a reduction of the acquisition costs resulting in reduced future depreciation expense. Deferred Gain on Sale and Leaseback Transactions- Gains on the sale and leaseback of property and equipment are deferred and amortized over the life of the leases as a reduction in rent expense. 2. Merger with Western Air Lines, Inc.: On December 18, 1986, Delta purchased all 61,331,334 outstanding shares of Western Air Lines, Inc. for $786,639,000, which consisted of the issuance of 8,265,290 shares of Delta common stock, valued at $48.75 per share, and $383,706,000 in cash. The acquisition was recorded using the purchase method of accounting and, accordingly, the purchase price was allocated to the assets and liabilities acquired based on their estimated fair value at the date of acquisition. The total cost of the acquisition exceeded the estimated fair value of the underlying net assets of Western at the date of acquisition by $413,737,000. This amount was subsequently reduced by $36,452,000 in fiscal 1987 and by an additional $42,768,000 in fiscal 1988 to reflect the utilization of pre-acquisition tax carryovers. The remaining cost in excess of net assets acquired is being amortized over 40 years. The consolidated financial statements of the Company for the year ended June 30, 1987, include the results of operations for Western after December 18, 1986. Western was operated as a wholly-owned subsidiary from December 19, 1986, until April 1, 1987, when it was merged into Delta. The following table presents selected financial data for fiscal 1987 on a pro forma basis assuming the acquisition of Western had occurred as of the beginning of that fiscal year. The pro forma data are based on certain assumptions and do not give effect to any potential synergies that might have been real- ized through the consolidation of operations of the two com- panies. Accordingly, the pro forma combined results presented are not necessarily indicative of actual results that would have been achieved had the acquisition occurred at the beginning of fiscal year 1987. Operating revenues Net income .... Net income per share .. . .. . .. .. . .. . Unaudited (In Thousands) $5,914,529 245,976 5.06 21 22 DELTA AIR LINES, INC. 3. Aircraft Purchase Commitments: At June 30, 1989, the Company's fleet and aircraft purchase commitments were as follows: Aircraft Current Fleet Type Owned Leased Total Orders Options B-727-200 107 23 130 B-737-200 1 60 61 B-737-300 . 13 13 B-757-200 ... . . 27 23 50 19 61 B-767-200 .. 15 15 B-767-300 . 15 15 6 6 B-767-300ER . 9 16 DC-8-71 .. 2 2 DC-9-32 .... 31 5 36 L-1011-1. 22 22 L-1011-100/200. 1 1 L-1011-250 6 6 L-1011-500 11 11 MD-11 9 31 MD-88 . . 15 25 40 30 140 - -- - - - 236 166 402 73 254 The Company presently expects to finance its aircraft and engine commitments using internally generated funds, leasing arrangements, or other outside financing arrangements. At June 30, 1989, future expenditures for the aircraft and engine commitments, excluding option aircraft, were estimated to be $2.6 billion, as follows: Years Ending June 30 1990 ..... ... . . 1991 ... . . .... . . 1992 ........ . 1993. Total .. .. .. . ... . .......... . Amount (In Thousands) $1,161,000 1,056,000 207,000 149,000 $2,573,000 Subsequent to June 30, 1989, the Company exercised options for five McDonnell Douglas MD-88 aircraft. 4. Long-Term Debt: At June 30, 1989 and 1988, the Company's long-term debt (including current maturities) was as follows: 1989 1988 81/4% Notes, unsecured, due (In Thousands) May 15, 1996 $150,000 $150,000 9% Debentures, unsecured, due May 15,2016. 150,000 150,000 11.35% Notes, unsecured, due April 1, 1993, redeemable at the Company's option on or after April 1, 1990 125,000 125,000 Adjustable Tender Clayton County Development Authority Note, unsecured, at various interest rate options, due 2020 .... 44,900 44,900 Development Authority of Clayton County, 65/s% unsecured loan agreement, repayable in installments beginning in 2000, with the remaining balance payable in 2011 35,000 35,000 Development Authority of Fulton County, unsecured loan agreement, repayable in installments beginning in 1991, and continuing through 2002. Interest ranges from 95/s% to 11 % over the life of the loan 33,000 33,000 9.55% Western Air Lines, Inc. Equipment Trust Certificates, secured by certain flight equipment, repayable in semi- annual installments through May 1, 1993 ($3,382,000 payable in fiscal 1990) . 13,526 16,908 9.25% Western Air Lines, Inc. Conditional Sales Agreement, repayable in Japanese Yen in semi-annual installments through May 1, 1994 ($2,135,000 payable in fiscal 1990)- At original exchange rates 8,021 9,235 Unrealized loss on- Current maturities .... 807 896 Long-term portion 4,067 5,927 At current exchange rates. ... . ..... 12,895 16,058 Unamortized discount on debt ......... (2,035) (2,246) Total . . 562,286 568,620 Less: Current maturities 5,516 5,491 Totallong-term debt ... . . . $556,770 $563,129 On April 1, 1989, the Company completed the 1989 Bank Credit Agreement with 32 participating banks providing for unsecured borrowings of up to $1 billion on a revolving basis until June 30, 1993, at which time the commitment declines until termination on March 31, 1997. Interest is, at the Company's election, an adjusted domestic certificate of deposit rate plus DELTA AIR LINES, INC. 3/8%, the Eurodollar rate plus 1/4%, or the prime rate as defined. Upon completion of the 1989 Bank Credit Agreement, the 1984 Bank Credit Agreement was terminated. No borrowings were outstanding under either of these agreements at any time during fiscal 1989 or 1988. At June 30, 1989, the annual maturities of long-term debt for the next five years were as follows: Years Ending June 30 1990 . 1991. 1992 ........ . 1993 .. . . . . . . .. . .. . . .. ... .. .... . Amount (In Thousands) $ 5,516 5,718 9,040 134,582 1994 . 4,165 The Company's debt agreements include limitations on additional indebtedness and other obligations. There are no re- strictions in the agreements as to the payment of cash dividends. Cash payments of interest, net of interest capitalized, totaled $38,865,000 in 1989, $66,926,000 in 1988, and $55,087,000 in 1987. 5. Lease Obligations: The Company leases certain aircraft, airport terminal and maintenance facilities, ticket offices, and other property and equipment under agreements with terms of more than one year. Rent expense is generally recorded on a straight-line basis over the lease term. Amounts charged to rental expense for operating leases were $536,192,000 in 1989, $435,295,000 ih 1988, and $296,126,000 in 1987. Accrued rent of $133,540,000 at June 30, 1989, and $99,461,000 at June 30, 1988, is included in accounts payable and miscellaneous accrued liabilities in the accom- panying consolidated balance sheets. In addition, accrued rent of $117,582,000 at June 30, 1989, and $54,697,000 at June 30, 1988, is included in other noncurrent liabilities. At June 30, 1989, the Company's minimum rental commit- ments under capital leases and noncancelable operating leases with initial or remaining terms of more than one year were as follows: Years Ending June 30 1990 1991 1992 .. .. .. . .... . .. . . . . . 1993 . ..... . . 1994 After 1994 . Total minimum lease payments . Less: Amounts representing interest . . Present value of future minimum capital lease payments . .... . Less: Current obligations under capital leases ....... . .. . . .. . . Long-term capital lease obligations . . . . .. . .. . . . Capital Operating Leases Leases (In Thousands) $ 24,436 $ 503,607 24,415 483,890 24,722 472,682 19,708 467,082 20,565 460,086 126,969 6,586,151 240,815 $8,973,498 83,228 157,587 11,343 $146,244 The Company has negotiated noncancelable sublease agreements at certain of its airport terminal facilities. At June 30, 1989, the Company expected to receive rentals under these agreements as follows: Years Ending June 30 1990 ... 1991 . 1992 . 1993 .. 1994 . After 1994 Total 6. Short-Term Borrowings: Amount (ln Thousands) $ 6,977 5,985 5,488 5,358 5,113 72,043 $100,964 Interim financing of operations is obtained through the issuance of commercial paper and the use of other short-term borrowings. The Company did not have any commercial paper outstanding during fiscal 1989 or fiscal 1988. Also, no other short-term borrowings were outstanding during fiscal 1989. In fiscal 1988, the average daily balance of short-term borrowings outstanding was $3,191,000 at a weighted average interest rate of 7.16%. The maximum amount of short-term borrowings outstanding during fiscal 1988 was $21,000,000. 7. Stockholders' Equity: The 1986 Stock Option Plan (1986 Plan) and the 1989 Stock Incentive Plan (1989 Plan) permit selected employees of the Company to receive stock-based incentive compensation. Awards under the 1986 Plan are expressed in units, and each unit may be exercised as either a stock option to purchase Delta common stock at the fair market value of such stock on the date of grant, or a stock appreciation right. A unit is generally exercisable between one and five years after its date of grant. Units exercised as stock appreciation rights are payable 60% in cash and 40% in common stock. Authority to grant additional units under the 1986 Plan expired on January 1, 1989. 23 24 DELTA AIR LINES, INC. The 1989 Plan, which became effective on January 1, 1989, authorizes the grant of stock options, stock appreciation rights, restricted stock and other stock-based awards. A stock option entitles the grantee to purchase Delta common stock at the fair market value of such stock on the date of grant, and is generally exercisable between one and five years after such date. A stock appreciation right may be granted only in con- junction with a stock option, and is exercisable only when the related stock option is exercisable. If a stock option is exercised, the related stock appreciation right terminates, and if the stock appreciation right is exercised, the related stock option expires. No awards may be granted under the 1989 Plan after December 31, 1993. During fiscal 1989, the Company awarded stock options covering 615,000 shares of common stock and related stock appreciation rights under the 1989 Plan at $54. These awards generally become exercisable in January 1990. Transactions under the 1986 Plan from inception through June 30, 1989 were as follows: 1986 1987 1988 Award Award Award Fair market value on date of grant .. $41.375 $54.75 $43.25 Units awarded .. 326,000 338,000 504,000 Units exercised during: Fiscal 1987 .. .. . . . . . . (181,500) Fiscal 1988 ..... . .. .. . . . .. (2,000) Fiscal 1989 .. (130,500) (96,500) (382,000) Units forfeited . . . . . . . . . (1,000) (1,500) Units outstanding at June 30, 1989 ......... 12,000 240,500 120,500 All units exercised under the 1986 Plan prior to June 30, 1989, have been exercised as stock appreciation rights. In fiscal 1989, the Company issued 66,788 shares of its common stock in connection with the exercise of these units at prices which ranged from $51.125 to $66.50 per share. At June 30, 1989, 3,000,000 shares of the Company's common stock were reserved for issuance under the 1989 Plan and 373,000 shares were reserved for issuance under the 1986 Plan. In addition, 16,905 shares were reserved for warrants which were issued by Western Airlines in connection with a revolving credit agreement. On October 23, 1986, the Board of Directors declared a dividend of one preferred stock purchase right for each out- standing share of Delta common stock. Each right will entitle the holder to purchase 1/lO0th of a newly-issued share of Series A Junior Participating Preferred Stock for $200. The rights will be exercisable only if a person or group acquires beneficial owner- ship of 20% or more of Delta common stock or commences a tender or exchange offer that would result in such person or group beneficially owning 30% or more of Delta common stock. The rights expire on November 4, 1996. Delta may generally redeem the rights for $.05 per right at any time prior to the 15th day following a public announcement that a 20% position has been acquired. If after the rights become exercis- able, Delta is involved in a merger or certain other business combinations, each right will entitle its holder ( other than certain acquiring persons) to purchase common stock of Delta or the acquiring company ( depending on which entity survives) having a value of twice the right's exercise price. On July 10, 1989, the Board of Directors amended the Company's Family-Care Savings Plan (Plan) effective July 1, 1989, to add an Employee Stock Ownership Plan (ESOP) feature. In connection with the establishment of the ESOP and pursuant to a stock purchase agreement dated July 10, 1989, Harris Trust and Savings Bank, as trustee of the ESOP, purchased 6,944,450 shares of Series B ESOP Convertible Preferred Stock, par value $1.00 per share, of the Company at a price of $72 per share, or an aggregate of approximately $500 million, with $6,944,450 borrowed by the trustee from a bank and the remainder under a note issued by the trustee to the Company It is expected that these interim loans will be refinanced in the near future with long-term borrowings from third-party lenders; these long-term borrowings will be guaranteed by the Company and will be reflected as debt on the Company's balance sheet when the refinancing is completed. The shares of preferred stock will be held in the name of the trustee ( or its nominee) until redemption or conversion, and may not be sold by the trustee or distributed outside the Plan (except for resale to the Company). The preferred stock is redeemable at the Company's option after July 10, 1992, and in certain circumstances before that date. The Company is required to redeem shares of preferred stock at any time to enable the trustee to provide for distributions to participants under, or to satisfy an investment election provided to participants in ac- cordance with, the Plan. The shares of preferred stock have a stated value of $72 per share. Dividends are payable at the rate of 6% per annum. Each share of preferred stock is convertible into 0.8578 shares of common stock at a conversion price of $83.94 per share. Adjustments will be made to the conversion price (and the con- version ratio) to reflect stock splits, stock dividends, combina- tions, reclassifications, certain distributions of rights or warrants and certain other issuances of stock or stock repurchases with respect to Delta common stock. The shares of preferred stock have a liquidation preference of $72 per share, plus any accrued and unpaid dividends. In the event that full cumulative div- idends on the preferred stock have not been paid, Delta may not pay cash dividends on its common stock. The preferred stock votes together with the common stock on matters upon which the common stock is entitled to vote, and has one vote per share, subject to antidilution adjustments and to limitations under applicable securities laws. The Plan pro- vides that shares of preferred stock allocated to a participant's account will be voted as the participant directs, and that shares of preferred stock not allocated to participant accounts will be voted in the same proportion as allocated shares of preferred stock are voted. The ESOP will generally replace Delta's obligation to make matching cash contributions under the Plan, with the shares of DELTA AIR LINES, INC. preferred stock being allocated to Plan participants then making contributions, in lieu of the Company's matching contribution. On July 10, 1989, the Company entered into an agreement with Swissair, Swiss Air Transport Company Ltd. (Swissair) to sell 2.5 million shares of Delta common stock to Swissair at a price of $193,393,750, or $77.3575 per share. The agreement also contemplates a reciprocal purchase by Delta of up to 100,000, or approximately five percent, of Swissair's shares, after satis- faction of certain Swiss legal requirements. Swissair has agreed to certain restrictions on the transfer of the shares of Delta common stock subject to that agreement, and its acquisition of additional shares of Delta voting stock without Delta's consent. Additionally, subject to certain condi- tions, Swissair has agreed to vote its shares in proportion to the votes cast by the other Delta stockholders or, at Swissair's option, as recommended by Delta's Board of Directors. The closing of Swissair's stock purchase is subject to certain conditions, in- cluding the execution of a definitive agreement providing for the reciprocal purchase and containing restrictions with respect to Delta's ownership of Swissair stock substantially similar to the restrictions with respect to Swissair's ownership of Delta stock. 8. Income Taxes: Income taxes provided in fiscal years 1989, 1988 and 1987 consisted of: Current taxes Deferred taxes Reinstatement of deferred taxes . Investment tax credits PAYSOP credit . Income taxes provided . 1989 1988 1987 (In Thousands) $302,091 $219,266 $ 71,463 (20,856) (135,027) 59,432 (2,021) 84,059 12,553 86,080 6,453 (3,713) $279,214 $180,851 $219,715 Components of the deferred tax provisions are as follows: 1989 1988 1987 (ln Thousands) Excess of tax over book depreciation . $ 69,174 $ 61,111 $122,623 Excess of tax over book gains on sale of assets . (19,887) (138,567) (145,524) Differences in timing of expense recognition for book and tax purposes (51,272) 13,478 35,170 Amortization of deferred gain on sale and leaseback transactions . . . . . . . . . . . ; . 18,279 16,759 12,476 Aircraft rent accruals in excess of allowable tax deduction (30,979) (16,078) (8,989) Other, net . (6,171) (71,730) 43,676 $ (20,856) $(135,027) $ 59,432 The tax provisions for the years ended June 30, 1989, 1988 and 1987 differ from amounts which would result from applying the federal statutory tax rate to pretax income, as follows: 1989 1988 1987 (In Thousands) Income before income taxes . $7 11,218 $455,856 $447,199 Compensation expenses not deductible for tax purposes 3,713 Nondeductible purchase accounting adjustments .. 44,196 42,830 22,044 Other, net . 12,169 (1,986) (769) Adjusted pretax income 767,583 496,700 472,187 Statutory rate . x34% X 34% x46% Income tax provision at statutory rate . 260,978 168,878 217,206 PAYSOP credit . (3,713) State income taxes, net of federal income tax benefit . 18,236 11,973 6,222 Income taxes provided $279,214 $180,85 1 $219,715 Until December 31, 1986, subject to certain restrictions, the Company was allowed a tax credit for contributions made to its payroll-based stock ownership plan (PAYSOP). The contri- bution for fiscal 1987, which was recorded as additional com- pensation expense, was not deductible for income tax purposes and was excluded before computing the normal provision for income taxes. The Company made cash income tax payments of $371,236,000 in 1989, $83,415,000 in 1988, and $21,594,000 in 1987. In December 1987, the Financial Accounting Standards Board issued a new standard on accounting for income taxes. The Company is required to adopt the new accounting and dis- closure rules no later than its fiscal year ending June 30, 1991, although earlier implementation is permitted. Adoption of the new standard will result in a catch up adjustment that may be reported in the year the standard is implemented or in an earlier year if the Company elects retroactive application. The Company has not decided when to implement the new standard, nor has it decided whether to restate prior financial statements. Because of the complexities of the new accounting requirements, combined with revisions to the federal tax law and the 1986 acquisition of Western Air Lines, Inc., the effect that the change will have on the Company's consolidated finan- cial position and results of operations has not been determined. 25 26 DELTA AIR LINES, INC. 9. Employee Benefit Plans: All of the Company's permanent employees are covered under its noncontributory trusteed plans providing for retire- ment, disability and survivor benefits, and certain employees meeting service requirements are eligible to participate in a contributory trusteed savings plan. Effective July 1, 1986, Delta adopted Statement of Financial Accounting Standards No. 87, "Employers' Accounting for Pensions;' issued by the Financial Accounting Standards Board in December 1985. The effect of adopting these new reporting standards was a $62 million re- duction in salaries and related expenses and a $33 million (73 per share) increase in net income in fiscal 1987. The following table sets forth the defined benefit plans' funded status and amounts recognized in Delta's consolidated balance sheets as of June 30, 1989 and 1988: Actuarial present value of benefit obligations: Accumulated benefit obligation1 . Projected benefit obligation Plan assets at fair value2 .......... .. Projected benefit obligation in excess of plan assets . . . . . .. ... . Unrecognized net loss ... . . . .. . Unrecognized portion of net obligation from initial application of SFAS No. 87 . . . . .... . . . . Unrecognized prior service cost ... . Prepaid pension cost recognized in the consolidated balance sheets 1989 1988 (In Thousands) $2,410,636 $2,117,574 $3,487,827 $3,065,426 3,175,140 2,704,773 (312,687) (360,653) 309,865 368,877 72,459 72,707 2,610 2,749 $ 72,247 $ 83,680 1 Substantially all of the accumulated benefit obligation is vested. 2Plan assets were invested at June 30, 1989, approximately as follows: cash equivalents (13% ), government and corporate bonds and notes (23% ), common stock and other equity-oriented investments ( 62 % ) and real estate investments (2%). For all periods presented, an 8.5% weighted average dis- count rate and a 4.9% rate of increase in future compensation levels were used in determining the actuarial present value of the projected benefit obligation. The expected long-term rate of return on assets was 9%. The net periodic pension cost of defined benefit plans for fiscal 1989, 1988 and 1987 included the following components: 1989 1988 1987 Service cost-benefits earned (In Thousands) during the period $146,346 $122,184 $ 93,505 Interest cost on projected benefit obligation 269,882 230,386 198,439 Actual return on plan assets . . . . . . . . . . . . . (401,370) 18,146 (359,541) Net amortization and deferral . . . . . . . . . . . . . . . . 145,316 (249,772) 157,282 Net periodic pension cost . $160,174 $120,944 $ 89,685 Prior to the merger with Delta, Western maintained various defined benefit plans covering substantially all of its employees. The Company has terminated certain of these plans and is settling the obligations of the plans through the purchase of annuities. Benefit accruals under certain other Western plans have been frozen. The assets of the Western plans, in combina- tion with accrued pension liabilities recorded at the date of the Western acquisition, approximately equal the benefit obligation of the plans. In addition to providing pension benefits, the Company provides certain health care and life insurance benefits for sub- stantially all retired employees. The cost of health care benefits is recognized as expense as claims are incurred. The cost of life insurance benefits is expensed as premiums are paid. The total cost of these post retirement benefits was $14,240,000 in 1989, $13,113,000 in 1988, and $10,695,000 in 1987. 10. Investments in Associated Companies: In prior fiscal years, the Company purchased approxi- mately 20% of the stock of Atlantic Southeast Airlines, Inc. (ASA); Comair, Inc.; and SkyWest, Inc., the parent company of SkyWest Airlines. Included in the carrying amount of the invest- ments in these three Delta Connection commuter carriers is $28 million, which represents the amounts by which the costs of the investments exceeded the values of the underlying net assets when the investments were made. This amount is being amor- tized over 30 years. The investments in ASA, Comair and Sky- West are being accounted for under the equity method. See Note 7 for a discussion of Delta's contemplated pur- chase of approximately five percent of the outstanding shares of Swissair. 11. Quarterly Financial Data (Unaudited): Fiscal 1989 Operating revenues . Operating income . Net income ...... . . .. . Net income per share Fiscal 1988 Operating revenues . Operating income Net income ........ . . . Net income per share 12. Contingencies: Three Months Ended Sept.30 Dec.31 Mar.31 June 30 (In Millions, Except Per Share Amounts) $1,881.6 $1,858.1 $2,038.1 $2,311.7 $ 148.3 $ 119.9 $ 125.9 $ 284.2 $ 100.0 $ 85.2 $ 85.0 $ 190.8 $ 2.03 $ 1.73 $ 1.73 $ 3.87 $1,631.8 $1,699.8 $1,709.2 $1,874.5 $ 94.3 $ 141.5 $ 93.0 $ 168.3 $ 59.1 $ 88.3 $ 56.1 $ 103.3 $ 1.22 $ 1.82 $ 1.15 $ 2.11 The Company is a defendant in certain legal actions relating to environmental issues (primarily noise), alleged employment discrimination practices, other matters concerning past and present employees, and other matters related to the Company's business. Given the unsettled status of the law in many of the areas involved, the outcome of these actions is difficult to predict. In the opinion of management, the disposition of these matters is not likely to have any material adverse effect on the Company's financial condition. DELTA AIR LINES, INC. Report of Independent Public Accountants ARTHUR ANDERSEN & Co. A TLANTA , GEO R G IA To the Stockholders and the Board of Directors of Delta Air Lines, Inc.: We have audited the accompanying consolidated balance sheets of DELTA AIR LINES, INC. (a Delaware corporation) and subsidiaries as of June 30, 1989 and 1988, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended J~~e 30, 1989. These financial statements are the responsi- bility of the Co~p~ny's management. Our responsibility is to express an opimon on these financial statements based on our audits. We cond_ u_ cted our audits in accordance with generally accepted auditmg standards. Those standards require that we plan and perform the audit to obtain reasonable assur- ance about whether the financial statements are free of materia~ mis~tatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the finan~ial st~te~ents. An audit also includes assessing the accountmg prmoples used and significant estimates rr:iade by management, as well as evaluating the overall finan- cial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements r_eferr~d to a~~ve present fairly, in all material respects, the fmancial position of Delta Air Lines, Inc. and subsidiaries as of June ?O, 1989 and 1988, and the results of their operations a~d the1r cash flows for the periods stated in conformity with generally accepted accounting principles. . As discussed in Note 9, the Company changed its method of accounting for pensions in the year ended June 30, 1987. ~ ~ ~ 1 ~. August 18, 1989 Report of Management !he ~ntegrity and objectivity of the information presented m this Annual Report is the responsibility of Delta manage- ment. The financial statements contained in this report have been audited by Arthur Andersen & Co., independent public accountants, whose report appears on this page. Delta maintains a system of internal financial controls and a program of internal audits. These controls include the s_election and training of the Company's managers, organiza- tional arrangements that provide a division of responsibilities, an~ ~ommunication programs explaining the Company's pohoes and standards. We believe that this system provides reasonable assurance that transactions are executed in ac~ordance with management's authorization and are appro- pnately recorded to permit preparation of financial state- ments in conformity with generally accepted accounting principles and to maintain accountability of assets. The Board of Directors pursues its responsibilities for these financial statements through its Audit Committee, which consists solely of directors who are neither officers nor employees of the Company. The Audit Committee meets periodically with the independent auditors, the internal auditors and representatives of management to discuss internal accounting control, auditing and financial reporting matters. THOMAS J. ROECK,JR. Senior Vice President-Finance and Chief Financial Officer RONALD W ALLEN Chairman of the Board and Chief Executive Officer 27 DELTA AIR LINES, INC. DELTA AIR LINES, INC. Consolidated Summary of Operations For the years ended June 30 (Dollars expressed in thousands, except per share figures) 1989 1988 1987 1986 1985 1984 1983 1982 1981 1980 1979 Operating revenues: Passenger . . . . . . . . . . . . . . . . . . . . . . . . . $7,579,716 $6,443,111 $4,921,852 $4,132,284 $4,376,986 $3,963,610 $3,347,014 $3,352,173 $3,287,511 $2,733,820 $2,213,024 Cargo .. 393,662 349,775 280,271 240,115 235,199 239,649 227,146 230,597 213,431 190,490 167,904 Other, net .. . . . . . . . ....... . . . . . . . 116,106 122,491 116,049 87,663 71,930 60,472 42,253 34,753 32,384 32,650 46,918 Total operating revenues .... . . . . . . . . . . .... .. .. 8,089,484 6,915,377 5,318,172 4,460,062 4,684,115 4,263,731 3,616,413 3,617,523 3,533,326 2,956,960 2,427,846 Operating expenses ........ . . . . . . . . . . . . ...... 7,411,159 6,418,293 4,913,647 4,425,574 4,318,105 4,052,339 3,823,747 3,625,679 3,359,132 2,864,323 2,218,814 Operating income (loss) .. ..... ... $ 678,325 $ 497,084 $ 404,525 $ 34,488 $ 366,010 $ 211,392 $ (207,334) $ (8,156) $ 174,194 $ 92,637 $ 209,032 Interest expense, net 1 .... . .... (38,869) (65,204) (61,908) (55,355) (62,053) (109,802) (63,494) (22,284) (7,596) (11,062) (9,461) Miscellaneous income, net . . . . . . . 55,200 24,992 8,312 7,775 6,863 9,114 15,898 13,665 26,144 6,952 1,959 Gain (loss) on disposition of flight equipment ... 16,562 (1,016) 96,270 16,526 94,343 129,511 28,229 1,570 30,078 36,091 20,514 Income (loss) before income taxes . . . . . . . . ... $ 711,218 $ 455,856 $ 447,199 $ 3,434 $ 405,163 $ 240,215 $ (226,701) $ (15,205) $ 222,820 $ 124,618 $ 222,044 Income taxes (provided) credited ............... (279,214) (180,851) (219,715) 2,228 (186,624) (102,625) 109,642 9,652 (101,447) (54,433) (104,429) Amortization of investment tax credits ... . 28,914 31,821 36,245 41,624 40,914 38,014 30,329 26,367 25,101 22,973 19,129 Net income (loss) $ 460,918 $ 306,826 $ 263,729 $ 47,286 $ 259,453 $ 175,604 $ (86,730) $ 20,814 $ 146,474 $ 93,158 $ 136,744 Net income (loss) per share* ... ... ..... ' $9.37 $6.30 $5.90 $1.18 $6.50 $4.42 $(2.18) $0.52 $3.68 $2.34 $3.44 - - Dividends paid . . . . . . . . . . . . . . . . . . ........... $ 59,054 $ 58,456 $ 44,397 $ 40,073 $ 27,938 $ 23,857 $ 39,761 $ 37,773 $ 27,832 $ 23,857 $ 20,875 Dividends paid per share* . . . . . . ........... $1.20 $1.20 $1.00 $1.00 $0.70 $0.60 $1.00 $0.95 $0.70 $0.60 $0.53 1Has been reduced by interest capitalized of ....... $ 31,778 $ 32,329 $ 32,092 $ 23,758 $ 22,028 $ 18,263 $ 29,398 $ 38,154 $ 15,539 $ 10,790 $ 6,717 Other Financial and Statistical Data For the years ended June 30 (Dollars expressed in thousands, except per share figures) 1989 1988 1987 1986 1985 1984 1983 1982 1981 1980 1979 Total assets . . . .. ............. ............ .. $6,483,986 $5,748,355 $5,342,383 $3,785,462 $3,626,840 $3,268,822 $3,246,960 $2,657,880 $2,304,327 $2,042,539 $1,788,325 Long-term debt and capital leases ...... . ........ $ 703,014 $ 729,493 $1,018,417 $ 868,615 $ 535,159 $ 670,993 $1,089,796 $ 362,774 $ 198,411 $ 147,901 $ 125,483 Stockholders' equity ... . . . . . . . . . ..... . . $2,619,707 $2,208,823 $1,937,912 $1,301,946 $1,287,094 $1,048,907 $ 897,160 $1,023,651 $1,040,611 $ 921,969 $ 852,668 Stockholders' equity per share* ..... ........... . $ 53.17 $ 44.99 $ 39.84 $ 32.45 $ 32.21 $ 26.38 $ 22.56 $ 25.75 $ 26.17 $ 23.19 $ 21.44 Shares of common stock outstanding at year end* .. 49,265,884 49,101,271 48,639,469 40,116,383 39,958,467 39,761,154 39,761,154 39,761,154 39,761,154 39,761,154 39,761,154 Revenue passengers enplaned . . . . . . .. .. . . ... . . . 64,242,212 58,564,507 48,172,626 39,582,232 39,340,850 36,319,567 35,666,116 34,169,927 36,743,214 39,713,904 39,360,368 Available seat miles (000) . . . . . . .......... ... .. 90,741,541 85,833,959 69,013,669 53,336,135 51,637,084 50,935,173 47,915,817 45,154,885 45,428,277 43,217,372 39,826,891 Revenue passenger miles (000) .. . ...... ... . . . .. 55,903,857 49,009,094 38,415,117 30,123,387 29,061,618 26,099,115 26,096,996 24,284,804 25,192,531 26,171,197 25,518,520 Passenger load factor . ......... . ... 61.61 % 57.10% 55.66% 56.48% 56.28% 51.2'4% 54.46% 53.78% 55.46% 60.56% 64.07% Breakeven load factor .. . . . .. . ... 56.09% 52.69% 51.09% 56.01 % 51,57% 48.51 % 57.84% 53.91 % 52.52% 58.51 % 58.02% Available ton miles (000) . .. ... . . . . . . . . . . 11,724,797 11,249,578 8,999,668 6,934,047 6,667,512 6,569,248 6,202,910 5,937,817 6,037,476 5,748,143 5,357,995 Revenue ton miles (000) . . . . . . . . . .... . ..... ' .. 6,338,274 5,556,584 4,327,195 3,371,917 3,275,329 2,983,840 2,951,119 2,773,337 2,845,425 2,934,375 2,916,585 Passenger revenue per passenger mile .. ... ....... 13.56 13.15 12.81 13.72 15.06 15.19 12.83 13.80 13.05 10.45 8.67 Operating expenses per available seat mile 8.17 7.48 7.12 8.30 8.36 7.96 7.98 8.03 7.39 6.63 5.57 Operating expenses per available ton mile . . . . .. 63.21 57.05 54.60 63.82 64.76 61.69 61.64 61.06 55.64 49.83 41.41 *Adjusted for 2-for-l stock split distributed December 1, 1981. The financial and statistical information presented above reflect the Company's acquisition of Western Air Lines, Inc. on December 18, 1986 . . 28 29 30 Board of Directors RONALD W ALLEN KARLD. BAYS HENRY A. BIEDENHARN, III CHARLES L. BROWN EDWARD H. BUDD GEORGE D. BUSBEE MARY JOHNSTON EVANS DAVID C. GARRETT,JR. EDWARD H. GERRY GERALD GRINSTEIN HOLLIS L. HARRIS JESSE HILL, JR. ROBERT OPPENLANDER JOHN G. PHILLIPS AUDIT COMMITTEE JESSE HILL, JR., Chairman HENRY A. BIEDENHARN, III MARY JOHNSTON EVANS GERALD GRINSTEIN Chairman of the Board and Chief Executive Officer, Delta Air Lines, Inc. Chairman of the Board and Chief Executive Officer, Whitman Corporation, Chicago, Illinois President, Chief Executive Officer and Director, Ouachita Coca-Cola Bottling Company, Inc., Monroe, Louisiana Retired Chairman of the Board and Chief Executive Officer, American Telephone and Telegraph Company, New York, New York Chairman of the Board, Chief Executive Officer, and President, The Travelers Corporation, Hartford, Connecticut Partner of law firm of King & Spalding, Atlanta, Georgia Director of various corporations Retired Chairman of the Board and Chief Executive Officer, Delta Air Lines, Inc. Partner of Gerry Brothers & Co., Investment Management, New York, New York President and Chief Executive Officer, Burlington Northern Inc.; Chairman of the Board, President, Chief Executive Officer and Chief Operating Officer, Burlington Northern Railroad Company, Fort Worth, Texas President and Chief Operating Officer, Delta Air Lines, Inc. President, Chief Executive Officer and Director, Atlanta Life Insurance Company, Atlanta, Georgia Retired Vice Chairman of the Board and Chief Financial Officer, Delta Air Lines, Inc. Director and Retired Chairman of the Board, The Louisiana Land and Exploration Company, New Orleans, Louisiana FINANCE COMMITTEE KARL D. BAYS, Chairman CHARLES L. BROWN EDWARD H. BUDD GEORGE D. BUSBEE BENEFIT FUNDS INVESTMENT COMMITTEE DA YID C. GARRETT, JR. EDWARD H. GERRY ROBERT OPPENLANDER JOHN G. PHILLIPS EDWARD H. BUDD, Chairman HENRY A. BIEDENHARN, III CHARLES L. BROWN MARY JOHNSTON EVANS GERALD GRINSTEIN JESSE HILL, JR. ROBERT OPPENLANDER EXECUTIVE COMMITTEE DAVID C. GARRETT,JR., Chairman RONALD WALLEN KARLD. BAYS EDWARD H. BUDD JOHN G. PHILLIPS PERSONNEL, COMPENSATION&: NOMINATING COMMITTEE JOHN G. PHILLIPS, Chairman KARLD.BAYS GEORGE D. BUSBEE DA YID C. GARRETT, JR. EDWARD H. GERRY Officers RONALD WALLEN HOLLIS L. HARRIS JAMES W CALLISON W WHITLEY HAWKINS RUSSELL H. HEIL C. JULIAN MAY REX A. McCLELLAND THOMAS J. ROECK,JR. C. A. THOMPSON HAROLD L. ACHTZIGER H. CALGER R. G. CALDWELL FRANKS. CHEW ROBERT W COGGIN ROBERT H. COWART JOHN P. DAVIS JD. DUNN R. LAMAR DURRETT JULIUS P. GWIN ROBERT S. HARKEY JOHN HUME AL KOLAKOWSKI CALVIN L. RADER DONM.ADAMS WILLIAM THOMAS BELL WILLIAM D. BERRY HAROLD L. BEVIS WE.CONDRA JOHNWCOX H. M. JOHNSON JUDY C.JORDAN HAROLD F JOYNER JOHNC. KING MARCEY McCANN JENNY POOLE LAWSON ROLLINS JOHN W SERCER WE.SUGGS JAMES B. TAYLOR ROBERT E. WOODYARD MAURICE WORTH D. SCOTT YOHE LESLIE P. KLEMPERER MARY E. RAINES Chairman of the Board and Chief Executive Officer President and Chief Operating Officer Senior Vice President-Legal and Corporate Affairs & Secretary Senior Vice President-Marketing Senior Vice President-Personnel Senior Vice President-Technical Operations Senior Vice President-Operations Senior Vice President-Finance and Chief Financial Officer Senior Vice President-Stations Vice President-International Vice President-Flight Operations Vice President-Management Services Vice President-Treasurer Vice President-Marketing Development Vice President-Technical Services Vice President-Maintenance Vice President-Purchasing Vice President-Communications and Information Services Vice President-Comptroller Vice President-General Counsel Vice President-In-Flight Service Vice President-Sales Vice President-Marketing Automation Assistant Vice President-Assistant General Counsel Assistant Vice President-Stations Assistant Vice President-Public Relations Assistant Vice President-Public Affairs Assistant Vice President-Information Services Applications Development Assistant Vice President-Community Affairs Assistant Vice President-Employment Assistant Vice President-Advertising and Sales Promotion Assistant Vice President-Quality Control Assistant Vice President-Information Services Operations and Support Assistant Vice President-Reservations Sales Assistant Vice President-In-Flight Service Assistant Vice President-Revenue Accounting Assistant Vice President-Maintenance Assistant Vice President-Materiel Services Assistant Vice President-Investment Management Assistant Vice President-Communications Assistant Vice President-Personnel Administration Assistant Vice President-Government Affairs Assistant Secretary Assistant Secretary Transfer Agent and Registrar for Common Stock Citizens and Southern Trust Co. (Georgia), N.A. Investor Services P.O. Box 105555 Atlanta, Georgia 30348-5555 Dividend Paying Agent Delta Air Lines, Inc. Stockholder Relations Hartsfield Atlanta International Airport Atlanta, Georgia 30320 Auditors Arthur Andersen & Co. 133 Peachtree Street NE. Atlanta, Georgia 30303 Annual Meeting October 26, 1989, Monroe, Louisiana Common Stock Listed on the New York Stock Exchange Number of Stockholders 28,634 as of August 9, 1989 Market Prices and Dividends Fiscal Year 1989 Quarter Ended: September 30. December 31 . . . . . . . . . . March 31 ....... . June 30 .. ..... .... . . . Fiscal Year 1988 Quarter Ended: September 30 . ... ' . ' . . December 31 ... . . .. . . March 31 June 30 . . . . . . . . . Availability of Form 10-K Market Price Range of Common Stock on Ne:w York Stock Exchange High Law 551/s 453/4 513/4 46 597 /s 483/4 73 581/s 60 50 53 32 52 36 55 45 Cash Dividends Paid Per Share $.30 .30 .30 .30 $.30 .30 .30 .30 The Company will provide, upon written request and without charge, a copy of the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1989, to any person beneficially owning or owning of record any of the common stock of the Company on August 31, 1989. Requests for the report should be directed to: Delta Air Lines, Inc. Stockholder Relations Hartsfield Atlanta International Airport Atlanta, Georgia 30320 Dividend Reinvestment and Stock Purchase Plan Registered holders of Delta Air Lines common stock may use the Company's Dividend Reinvestment and Stock Purchase Plan to purchase additional shares of such stock through automatic dividend reinvestment or cash contributions. Delta pays all service and brokerage charges for the purchase of these shares. Inquiries, notices, requests, and other com- munications regarding participation in the plan should be directed to: Citizens and Southern Trust Co. (Georgia), N.A. Delta Air Lines, Inc. Dividend Reinvestment Plan P.O. Box 105555 Atlanta, Georgia 30348-5555 Telephone ( 404) 897-3464 31 Delta serves 141 domestic cities in 44 states, the District of Columbia and Puerto Rico, and also operates flights to 24 international cities in 11 foreign countries. During fiscal 1989, Delta inaugurated service to Huntsville/Decatur, Alabama; Wichita, Kansas; Albany, Buffalo, Rochester and Syracuse, New York; Milwaukee, Wisconsin; Taipei, Taiwan; and Hamburg, West Germany. Domestic Service HAWAII ALABAMA Honolulu, Oahu Birmingham Kahului, Maui Huntsville/Decatur IDAHO Mobile/Pas.cagoula, MS Boise Montgomery Idaho Falls ALASKA ILLINOIS Anchorage Chicago Fairbanks INDIANA Juneau Ft.Wayne ARIZONA Indianapolis Phoenix KANSAS Tucson Wichita ARKANSAS KENTUCKY Little Rock Lexington CALIFORNIA Louisville Burbank/Hollywood LOUISIANA Fresno Baton Rouge Long Beach Los Angeles Monroe New Orleans Oakland Shreveport Ontario Orange County MAINE Palm Springs Bangor Sacramento Portland San Diego MARYLAND San Francisco Baltimore Sanjose MASSACHUSETTS COLORADO Boston Colorado Springs MICHIGAN Denver Detroit CONNECTICUT Hartford/Springfield, MA MINNESOTA Minneapolis/St. Paul DISTRICT OF COLUMBIA MISSISSIPPI Washington Jackson FLORIDA MISSOURI Daytona Beach Kansas City Ft. Lauderdale/Hollywood St.Louis Ft.Myers MONTANA Jacksonville Melbourne Billings Miami Bozeman Orlando Butte Pensacola Great Falls . Sarasota/Bradenton Helena Tallahassee Kalispell Tampa/St. Petersburg/ Missoula Clearwater NEBRASKA West Palm Beach Omaha GEORGIA NEVADA Atlanta Las Vegas Augusta Reno Columbus NEW JERSEY Savannah Newark NEW MEXICO VIRGINIA Albuquerque Norfolk/Virginia Beach/ NEW YORK Williamsburg Albany Richmond Buffalo WASHINGTON New York Pasco/Richland/Kennewick Rochester Seattle/Tacoma Syracuse Spokane NORTH CAROLINA WISCONSIN Charlotte Milwaukee Greensboro/High Point/ WYOMING Winston-Salem . Casper. Raleigh/Durham Jackson Hole NORTH DAKOTA Bismarck International Service OHIO BAHAMAS Cincinnati Nassau Cleveland BERMUDA Columbus Hamilton Dayton CANADA Toledo Calgary, Alberta OKLAHOMA Edmonton, Alberta Oklahoma City Montreal, Quebec Tulsa Vancouver, B.C. OREGON ENGLAND Portland London PENNSYLVANIA FRANCE Philadelphia Paris Pittsburgh IRELAND PUERTO RICO Dublin Sanjuan Shannon SOUTH CAROLINA JAPAN Charleston Tokyo Columbia Greenville/Spartanburg MEXICO , SOUTH DAKOTA Acapulco Guadalajara Rapid City Ixtapa/Zihuatanejo Sioux Falls Mazatlan TENNESSEE Mexico City Chattanooga Puerto Vallarta Knoxville SOUTH KOREA Memphis Seoul Nashville TAIWAN TEXAS Taipei Amarillo Austin WEST GERMANY Frankfurt Dallas/Ft.Worth Hamburg El Paso Munich Houston Stuttgart Lubbock San Antonio UTAH Salt Lake City Delta Air Lines, Inc. / General Offices, Hartsfield Atlanta International Airport / Atlanta, Georgia 30320 AS I A - - Service to Bangkok, Th ail an effective December 1989. 1 AUSTRALIA D Pacific 0 c ea n I I NORTH AMERICA Atlantic 0 c e an AFRICA AMERICA