DELTA AIR LINES, INC. Non-GAAP Financial Measures
The following tables show reconciliations of non-GAAP financial measures. The reasons Delta uses these measures are described below. Reconciliations may not calculate due to rounding.
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 presentation to the most directly comparable GAAP financial measures.
Forward Looking Projections.While we are able to reconcile forward looking non-GAAP financial measures related to 2019, we do not reconcile future period measures (i.e., beyond 2019) because the adjusting items such as those used in the reconciliations below will not be known until the end of the period and could be significant.
Pre-tax Income and Net Income, adjusted
We adjust pre-tax income and net income for the following items to determine pre-tax income and net income, adjusted for the reasons described below. We include the income tax effect of adjustments when presenting net income, adjusted.
MTM adjustments and settlements.Mark-to-market ("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.
Unrealized gain/loss on investments.We record the unrealized gains/losses on our equity investments in GOL, China Eastern, Air France-KLM and Korean Air, which are accounted for at fair value in non-operating expense. Adjusting for these gains/losses allows investors to better understand and analyze our core operational performance in the periods shown.
Restructuring and other and Loss on extinguishment of debt.Because of the variability from period to period, the adjustments for these items are helpful to investors to analyze the company's core operational performance in the periods shown.
(Projected) | ||||||
Year Ended | ||||||
December 31, 2019 | ||||||
Pre-Tax | Income | Net | ||||
(in billions) | Income | Tax | Income | |||
GAAP | $ | 6.1 | $ | (1.4) | $ | 4.7 |
Adjusted for: | ||||||
Unrealized gain/loss on investments | (0.1) | - | (0.1) | |||
Non-GAAP | $ | 6.0 | $ | (1.4) | $ | 4.6 |
Change year-over-year | ||||||
Year Ended | ||||||
December 31, 2018 | ||||||
Pre-Tax | Income | Net | ||||
(in billions) | Income | Tax | Income | |||
GAAP | $ | 5.2 | $ | (1.2) | $ | 3.9 |
Adjusted for: | ||||||
MTM adjustments and settlements | (0.1) | - | (0.1) | |||
Non-GAAP | $ | 5.1 | $ | (1.2) | $ | 3.9 |
(Projected) Year Ended December 31, 2019
Net Income
Per Diluted Share
- ~ $6.90 - $7.40
~ (0.15)
-
~ $6.75 - $7.25
~25%
Year Ended
December 31, 2018
Net Income
Per Diluted Share
$5.67
(0.02)
$5.65
(Projected) | ||
Years Ended | ||
(in billions) | December 31, 2015 to | |
December 31, 2019 | ||
Pre-tax income | $ | 30 |
Adjusted for: | ||
MTM adjustments and settlements | (2) | |
Restructuring and other | - | |
Loss on extinguishment of debt | - | |
Total adjustments | (2) | |
Pre-tax income, adjusted | $ | 28 |
Year Ended December 31, 2010 to December 31, 2014
$6
2
2
1
5
$11
Operating Revenue, adjusted
We adjust operating revenue for refinery sales to third parties to determine operating revenue, adjusted because refinery sales to third parties are not related to our airline segment. Operating revenue, adjusted therefore provide a more meaningful comparison of revenue from our airline operations to the rest of the airline industry.
(Projected) | Year Ended | ||||||
Year Ended | |||||||
(in millions) | December 31, 2019 | December 31, 2017 | Change | ||||
Operating revenue | $ | ~46,850 | $ | 41,138 | |||
Third-party refinery sales | ~(150) | (502) | |||||
Operating revenue, adjusted | $ | ~46,700 | $ | 40,636 | ~15% | ||
Operating Cash Flow, adjusted
We present operating cash flow, adjusted because management believes adjusting for the following items provides a more meaningful measure for investors. We do not present reconciliations for the years ended December 31, 2019 (Projected) and December 31, 2010 as the adjusted net cash provided by operating activities in these years is the same as the GAAP net cash provided by operating activities. Adjustments include:
Hedge margin and other.Operating cash flow is adjusted for hedge margin as we believe this adjustment removes the impact of current market volatility on our unsettled hedges and allows investors to better understand and analyze the company's core operational performance in the periods shown.
2017 pension plan contribution.In 2017, we contributed $2 billion to our pension plans using net proceeds from our debt issuance. We adjusted operating cash flow to exclude this contribution to allow investors to understand the cash flows related to our core operations in the periods shown.
Pension plan cash contributions.Operating cash flow is adjusted for our cash contributions to the pension plan as we believe this adjustment allows investors to better understand the cash flows related to our core operations in the periods shown. This adjustment includes the 2017 pension plan contribution of $2 billion.
(in billions)
Net cash provided by operating activities Adjustments:
Hedge margin and other
2017 pension plan contribution
Net cash provided by operating activites, adjusted
(Projected) Years Ended December 31, 2015 to December 31, 2019
$36
(1)
2
$37
Years Ended
December 31, 2010 to
December 31, 2014
$18
1
-
$19
(Projected) | ||
Years Ended | ||
(in billions) | December 31, 2015 to | |
December 31, 2019 | ||
Net cash provided by operating activities | $ | 36 |
Adjustments: | (1) | |
Hedge margin and other | ||
Pension plan cash contributions | 7 | |
Net cash provided by operating activities, adjusted, excluding pension plan cash contributions | $ | 42 |
Average net cash provided by operating activities, adjusted, excluding pension plan cash contributions | $ | 8.3 |
Years Ended
December 31, 2010 to
December 31, 2014
$18
1
3
$22
$4.5
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:
Net purchases (redemptions) ofshort-terminvestments.Net redemptions of short-term investments represent the net purchase and sale activity of investments and marketable securities in the period, including gains and losses. We adjust for this activity to provide investors a better understanding of the company's free cash flow generated by our operations.
Net cash flows related to certain airport construction projects and other.Cash flows related to certain airport construction projects are included in our GAAP operating activities and capital expenditures. We have adjusted for these items, which were primarily funded by cash restricted for airport construction, to provide investors a better understanding of the company's free cash flow and capital expenditures that are core to our operational performance in the period shown.
Strategic Investments.Cash flows related to our investment in Hanjin-KAL, the largest shareholder of Korean Air, are included in our GAAP investing activities. We adjust free cash flow for this activity because it provides a more meaningful comparison to the airline industry.
(in billions) | Nine Months Ended | |
September 30, 2019 | ||
Net cash provided by operating activities | $ | 7.5 |
Net cash used in investing activities | (3.8) | |
Adjustments: | (0.2) | |
Net purchases (redemptions) of short-term investments | ||
Net cash flows related to certain airport construction projects and other | 0.4 | |
Strategic investments | 0.2 | |
Total free cash flow | $ | 4.1 |
After-tax Return on Invested Capital
We present after-tax return on invested capital as management believes this metric is helpful to investors in assessing the company's ability to generate returns using its invested capital as a measure against the industry. Return on invested capital is tax-effected adjusted total pre-tax income divided by average adjusted invested capital. Average adjusted invested capital represents the sum of the adjusted book value of equity at the end of the last five quarters, adjusted for pension and fuel hedge impacts within other comprehensive income. Average adjusted gross debt is calculated using amounts as of the end of the last five quarters. All adjustments to calculate ROIC are intended to provide a more meaningful comparison of our results to the airline industry.
(Projected) | ||||||||
(in billions) | Last Twelve Months Ended | Last Twelve Months Ended | Last Twelve Months Ended | |||||
December 31, 2019 | December 31, 2018 | December 31, 2017 | ||||||
Pre-tax income | $ | ~6 | $ | 5 | $ | 5 | ||
Adjusted for: | ||||||||
Interest expense, net and interest expense included in aircraft rent | ~1 | 1 | 1 | |||||
Pre-tax adjusted income | $ | ~7 | $ | 6 | $ | 6 | ||
Tax effect | ~(2) | (1) | (2) | |||||
Tax-effected adjusted total pre-tax income | $ | ~5 | $ | 5 | $ | 4 | ||
Adjusted book value of equity | $ | ~22 | $ | 21 | $ | 21 | ||
Average adjusted gross debt | ~12 | 11 | 11 | |||||
Averaged adjusted invested capital | $ | ~34 | $ | 32 | $ | 32 | ||
After-tax return (Tax-effected adjusted total pre-tax income) | ~15% | 14% | 13% | |||||
Average ROIC | ~14% to 15% |
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Delta Air Lines Inc. published this content on 17 December 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 December 2019 20:45:03 UTC
