Note A: 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 script to the most directly comparable GAAP financial measures.
Forward Looking Projections. The Company is not able to reconcile forward looking non-GAAP financial measures 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 mark-to-market ("MTM") adjustments and settlements on fuel hedge contracts, the MTM adjustments recorded by our equity method investees, Virgin Atlantic and Aeroméxico, and unrealized gains/ losses on our equity investments accounted for at fair value, to determine pre-tax income and net income, adjusted. We include the income tax effect of adjustments when presenting net income, adjusted.
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.
Equity investment MTM adjustments. We record our proportionate share of earnings/loss from our equity investments in Virgin Atlantic and Aeroméxico in non-operating expense. We adjust for our equity method investees' MTM adjustments to allow investors to better understand and analyze our core operational performance in the periods shown.
Unrealized gain/loss on investments. We record the unrealized gains/losses on our equity investments 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.
Tax reform charge. As a result of the Tax Cuts and Jobs Act of 2017, Delta recognized a one-time charge in the December 2017 quarter from the revaluation of its deferred tax assets and liabilities. We adjust for this charge to allow investors to understand and analyze the company's core operational performance in the periods shown.
Three Months Ended December 31, 2018
(in millions, except per share data) GAAP
Adjusted for:
MTM adjustments and settlements Equity investment MTM adjustments Unrealized gain/loss on investments
Total adjustments
Pre-Tax Income
$
1,344 $
(33)
55
(184) (162)
Non-GAAP
$
1,182
Income
TaxNet Income
(325)
$ 1,019
7 (26)
(12) 43
38 (146)
33
$
(292)
(129)
$
890
Three Months Ended December 31, 2018
Net Income Per Diluted Share
$
1.49
(0.19)
$
1.30
Year Ended December 31, 2018
(in millions, except per share data) GAAP
Adjusted for:
MTM adjustments and settlements Equity investment MTM adjustments Unrealized gain/loss on investments
Total adjustments
Pre-Tax Income
$
5,151 $
(53) 29 (14) (38)
Non-GAAP
$
5,113
Year-over-year percent change
Income
TaxNet Income
(1,216)
$ 3,935
27 (26)
(15) 14
7 (7)
19
$
(1,196)
(19)
$
3,917
(3)%
Year Ended December 31, 2018
Net Income Per Diluted Share
$
5.67
(0.02)
$
5.65
19%
Year Ended December 31, 2017
(in millions, except per share data) GAAP
Adjusted for:
MTM adjustments and settlements Equity investment MTM adjustments Tax reform charge
Pre-Tax Income
$
5,500
(259)
Total adjustments Non-GAAP
8 - (251)
$
5,250
Income
TaxNet Income
$
(2,295)
88 (171)
4 12
394 394
486
$
(1,808)
$ 3,205
235
$
3,442
Year Ended December 31, 2017
Net Income Per Diluted Share
$
4.43
0.33
$
4.76
Operating Revenue, adjusted and Total Revenue Per Available Seat Mile ("TRASM"), adjusted. We adjust operating revenue and TRASM for refinery sales to third parties to determine operating revenue, adjusted and TRASM, adjusted because refinery sales to third parties are not related to our airline segment. Operating revenue, adjusted and TRASM, adjusted therefore provide a more meaningful comparison of revenue from our airline operations to the rest of the airline industry.
Three Months Ended
(in millions) Operating revenue Adjusted for:
December 31, 2018
December 31, 2017
Change
$
10,742 $ 10,229
Third-party refinery sales Operating revenue, adjusted
(11) (245)
$
10,731 $ 9,984
7.5%
Year Ended
(in millions) Operating revenue Adjusted for:
December 31, 2018
December 31, 2017
Change
$
44,438 $ 41,138
Third-party refinery sales Operating revenue, adjusted
(548) (502)
$
43,890 $ 40,636
8.0%
Three Months EndedDecember 31, 2018
December 31, 2017
Change
TRASM (cents) Adjusted for:
17.18 17.03
Third-party refinery sales TRASM, adjusted
(0.02) (0.41)
17.16 16.62
3.2%
Year EndedDecember 31, 2018
December 31, 2017
Change
TRASM (cents) Adjusted for:
16.87 16.18
Third-party refinery sales TRASM, adjusted
(0.21) (0.20)
16.66 15.98
4.3%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 airline segment hedging on fuel expense and average price per gallon. We then adjust for MTM adjustments and settlements for the same reason described under the heading pre-tax income and net income, adjusted:
Average Price Per GallonThree Months Ended
Three Months Ended
December 31,
December 31,
(in millions, except per gallon data) Fuel purchase cost
2018
2017
2018
2017
$
2,318 $ 1,805
$
2.38 $ 1.89
Airline segment fuel hedge impact Refinery segment impact
(33) 22
(0.03) 0.02
42 (24)
0.04 (0.03)
Total fuel expense
$
2,327
$ 1,802
$
2.39
$
1.88
MTM adjustments and settlements Total fuel expense, adjusted$
33 49
0.03
0.05
$
2,360
$ 1,852
$
2.42
$
1.93
Change year-over-year
508
25%
Year Ended December 31,
(in millions, except per gallon data) Fuel purchase cost
2018
2017
$
9,131 $ 6,833
Airline segment fuel hedge impact Refinery segment impact
(53) 33
(58) (110)
Total fuel expense
$
9,020
$ 6,756
MTM adjustments and settlements Total fuel expense, adjusted$ Percent change year-over-year
53 259
$
9,073
$ 7,015
Change year-over-year
2,057 29%
Pre-Tax Margin, adjusted. We adjust pre-tax margin for MTM adjustments and settlements, equity investment MTM adjustments and unrealized gain/loss on investments for the same reasons described above under the heading pre-tax income and net income, adjusted. We adjust for third-party refinery sales for the same reason described above under the heading operating revenue and TRASM, adjusted.
Year Ended
December 31, 2018
Pre-tax margin Adjusted for:
11.6 %
MTM adjustments and settlements
Third-party refinery sales
Pre-tax margin, adjusted
(0.1)% 0.1 % 11.6 %
Three Months Ended
March 31, 2018
Pre-tax margin Adjusted for:
7.3 %
MTM adjustments and settlements Equity investment MTM adjustments Unrealized gain/(loss) on investments Third-party refinery sales
(0.3)%
0.1 %
(0.2)%
0.2 %
Pre-tax margin, adjusted
7.1 %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 and as a measure against the industry. Return on invested capital is adjusted total operating income, after-tax, divided by average invested capital. All adjustments to calculate ROIC are intended to provide a more meaningful comparison of our results to the airline industry and other high-quality industrial companies.
Year Ended
(in millions, except % of return) | December 31, 2018 | |
Adjusted book value of equity | $ | 21,040 |
Average gross debt | 11,090 | |
Average invested capital | $ | 32,130 |
Adjusted total operating income | $ | 5,965 |
Tax effect | (1,395) | |
Tax-effected adjusted total operating income | $ | 4,570 |
After tax return on invested capital | 14.2% |
Non-Fuel Unit Cost or Cost per Available Seat Mile, ("CASM-Ex"). We adjust CASM for the following items to determine CASM-Ex 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 allows investors to understand and analyze our non-fuel costs and year-over-year financial performance.
Ancillary businesses and refinery. These expenses include aircraft maintenance we provide to third parties, our vacation wholesale operations and refinery cost of sales to third parties. Results also include staffing services performed by DAL Global Services. Because these businesses are not related to the generation of a seat mile, we adjust for the costs related to these areas to provide a more meaningful comparison of the costs of our airline operations to the rest of the airline industry.
Profit sharing. We adjust for profit sharing because this adjustment allows investors to better understand and analyze our recurring cost performance and provides a more meaningful comparison of our core operating costs to the airline industry.
Three Months Ended
CASM (cents) Adjusted for:
Aircraft fuel and related taxes Ancillary businesses and refinery Profit sharing
CASM-Ex
CASM (cents) Adjusted for:
Aircraft fuel and related taxes Ancillary businesses and refinery Profit sharing
CASM-Ex
December 31, 2018 | December 31, 2017 | Change |
15.44 | 15.10 | |
(3.72) | (3.00) | |
(0.48) | (0.87) | |
(0.50) | (0.44) | |
10.74 | 10.80 | (0.5)% |
Change | ||
1.4 % | ||
5 |
Year Ended
December 31, 2018
December 31, 2017
14.87 13.83
(3.43) (2.66)
(0.64) (0.58)
(0.49) (0.42)
10.31 10.17
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Delta Air Lines Inc. published this content on 15 January 2019 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 16 January 2019 09:23:08 UTC