Delta Airlines 2004 Annual Report Download - page 43

Table of Contents
Covenants
The GE Commercial Finance Facility includes affirmative, negative and financial covenants that impose substantial restrictions on our financial and
business operations, including our ability to, among other things, incur or secure other debt, make investments, sell assets, pay dividends or repurchase stock
and make capital expenditures. The Amex Facilities also contain affirmative, negative and financial covenants substantially the same as those found in the GE
Commercial Finance Facility.
The financial covenants require us to:
• maintain unrestricted funds not less than $900 million at all times until February 28, 2005, $1 billion at all times from March 1, 2005
through October 31, 2005 and $750 million at all times thereafter (the "Liquidity Covenant").
• maintain accounts pledged for the benefit of the lenders with funds of not less than $650 million at all times until October 31, 2005,
$550 million at all times from November 1, 2005 through February 28, 2006 and $650 million at all times thereafter. The cash and cash
equivalents in those accounts can be used for purposes of determining compliance with the Liquidity Covenant.
• not exceed specified levels of capital expenditures during each fiscal quarter.
• achieve specified levels of EBITDAR, as defined, for designated rolling periods (generally monthly tests for successive trailing 12-month
periods) through November 2007. During 2005, we are required to achieve increasing levels of EBITDAR, including EBITDAR of
$1.590 billion for the 12-month period ending December 31, 2005. Thereafter, the minimum EBITDAR level for successive trailing 12-
month periods continues to increase, including $2.763 billion for the 12-month period ending December 31, 2006 and $3.136 billion for the
12-month period ending November 30, 2007. The EBITDAR covenant effectively provides that if our cash on hand exceeds the minimum
cash on hand that we are required to maintain pursuant to the Liquidity Covenant by at least $100 million, then the EBITDAR level that we
are required to achieve will be reduced by a specified amount.
At December 31, 2004, we were in compliance with our financial covenants. Although under our business plan we expect to be in compliance with these
covenants in 2005, we do not expect to exceed by a significant margin the requirements that we (1) maintain specified levels of cash and cash equivalents or
(2) achieve certain levels of EBITDAR. If we are unable to comply with these covenants, the outstanding borrowings under our financing agreements with GE
Commercial Finance and Amex could become immediately due and payable. For additional information concerning our covenants, see the GE Commercial
Finance Facility, incorporated as Exhibit 10.5 to this Form 10-K.
Our Reimbursement Agreement with GECC includes a Collateral Value Test, which is not applicable until May 2006. For additional information about
this test and our financing agreements, see Note 6 of the Notes to the Consolidated Financial Statements.
As is customary in the airline industry, our aircraft lease and financing agreements require that we maintain certain levels of insurance coverage, including
war-risk insurance. We were in compliance with these requirements at December 31, 2004 and 2003. For additional information about our war-risk insurance
currently provided by the U.S. government, see Note 8 of the Notes to the Consolidated Financial Statements.
For additional information on our liquidity, see the Business Environment section of Management's Discussion and Analysis in this Form 10-K.
Prior Years
2003
Cash and cash equivalents and short-term investments totaled $2.7 billion at December 31, 2003. Net cash provided by operations totaled $142 million
during 2003, including net tax refunds totaling $402 million. Capital expenditures, including aircraft acquisitions under seller-financing arrangements, were
$1.5 billion during 2003; this included the acquisition of 31 CRJ-200 and 20 CRJ-700 aircraft. Debt and capital lease obligations,
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