Delta Airlines 2003 Annual Report Download - page 92

Table of Contents
The Series B Preferred Stock and priceline common stock are classified as available-for-sale securities under SFAS 115 and are recorded in other noncurrent
assets on our Consolidated Balance Sheets. We did not own any shares of priceline common stock at December 31, 2003. The Series B Preferred Stock is
recorded at face value, which we believe approximates fair value. The 1999 and 2001 Warrants are recorded at fair value in other noncurrent assets on our
Consolidated Balance Sheets and any changes in fair value are recorded in other income (expense) on our Consolidated Statements of Operations in
accordance with SFAS 133. See Note 1 for information about our accounting policy for investments in debt and equity securities.
Republic Airways Holdings, Inc. (Republic)
On June 7, 2002, we entered into a contract carrier agreement with Chautauqua Airlines, Inc. (Chautauqua), a regional air carrier that is a subsidiary of
Republic (see Note 9). In conjunction with this agreement, we received from Republic (1) a warrant to purchase up to 1.5 million shares of Republic common
stock for $12.50 per share (2002 Warrant); (2) a warrant to purchase up to 1.5 million shares of Republic common stock at a price per share equal to 95% of
the public offering price per share in Republic's initial public offering (IPO) of common stock (IPO Warrant); (3) the right to purchase up to 5% of the shares
of common stock that Republic offers for sale in its IPO at a price per share equal to the IPO price; and (4) the right to receive a warrant to purchase up to an
additional 60,000 shares of Republic common stock for each additional aircraft Chautauqua operates for us above the 22 aircraft under the original contract
carrier agreement.
The 2002 Warrant is exercisable in whole or in part at any time until June 7, 2012. The fair value of the 2002 Warrant on the date received was $11 million,
and is being recognized on a straight-line basis over a five-year period in other, net in operating revenues on our Consolidated Statement of Operations.
The IPO Warrant is exercisable in whole or in part at any time (1) beginning on the closing date of Republic's IPO of common stock and (2) subject to earlier
cancellation if the contract carrier agreement is terminated in certain circumstances, ending on the tenth anniversary of that closing date. We will record the
fair value of the IPO Warrant on the closing date of Republic's IPO of common stock.
In February and October 2003, we amended our contract carrier agreement with Chautauqua to increase from 22 to 34, and then from 34 to 39, respectively,
the number of aircraft Chautauqua will operate for us by the end of 2004 under that agreement. As a result of these amendments, we received two new
warrants, as follows (2003 Warrants):
• A warrant to purchase up to 720,000 shares of Republic common stock for (1) $12.50 per share, if the warrant is exercised prior to the completion of
Republic's IPO of common stock or (2) the price per share at which Republic common stock is sold in the IPO, if the warrant is exercised in
connection with or after the IPO; and
• A warrant to purchase up to 300,000 shares of Republic common stock for (1) $18.00 per share, if the warrant is exercised prior to the completion of
Republic's IPO or (2) 95% of F-22