Delta Airlines 2004 Annual Report Download - page 76

Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(2) These warrants and the underlying shares of Republic Holdings common stock are not registered under the Securities Act of 1933; however, we have
certain demand and piggyback registration rights relating to the underlying shares of common stock.
These warrants are recorded at fair value in other noncurrent assets on our Consolidated Balance Sheets. In accordance with SFAS 133, any changes in fair
value are recorded in other income (expense) on our Consolidated Statement of Operations.
These warrants were recorded at their fair values on the date received and the fair values are primarily being recognized on a straight-line basis over an
approximately five year period in our Consolidated Statement of Operations. For the years ended December 31, 2004, 2003 and 2002, the gains (losses)
recorded from our investment in Republic Holdings were not material to our Consolidated Statements of Operations.
In December 2004, we and Republic Holdings amended our contract carrier agreement with Chautauqua and the agreements covering the 2002 Warrant,
the 2003 Warrants, the 2004 Warrant (March) and the IPO Warrant ("Pre-existing Warrants") (1) to remove seven aircraft that Chautauqua would have
operated for us beginning in 2005; (2) to extend the term of and to reduce our cost under the contract carrier agreement; and (3) to relinquish our right to
purchase 45% of the shares of Republic Holdings common stock underlying each of the Pre-existing Warrants.
In January 2005, we also entered into a new contract carrier agreement with Republic Airline under which that carrier will operate 16 aircraft for us
beginning in July 2005. In December 2004, we received the 2004 Warrant (December) in anticipation of, and conditioned upon, entering into this agreement.
See Note 8 for additional information about our contract carrier contracts with Chautauqua and Republic Airline.
priceline.com Incorporated ("priceline")
We are party to an agreement with priceline under which we (1) provide ticket inventory that may be sold through priceline's Internet-based e-commerce
system and (2) received certain equity interests in priceline. We are required to provide priceline access to unpublished fares.
At December 31, 2004 and 2003, our investment in priceline consisted of the following:
Number of Shares(2) Carrying Values
(in millions)(1) 2004 2003 2004 2003
Series B Preferred Stock(3) 13,469 13,469 $ 13 $ 13
2001 Warrant(4) 0.8 0.8 10 7
1999 Warrant(5) — 0.8 — 3
Total $ 23 $ 23
(1) Except shares of Series B Preferred Stock.
(2) We have certain registration rights relating to shares of priceline common stock we receive as dividends on the Series B Preferred Stock, or acquire
from the exercise of the 1999 Warrant or the 2001 Warrant.
(3) The Series B Preferred Stock is classified as an available-for-sale security under SFAS 115 and is recorded at face value, which approximates fair
value, in other noncurrent assets on our Consolidated Balance Sheets. The Series B Preferred Stock, among other things, (1) bears an annual dividend
per share of approximately six shares of priceline common stock and (2) is subject to mandatory redemption in February 2007 at $1,000 per share plus
any dividends accrued or accumulated but not yet paid.
(4) The 2001 Warrant is recorded at fair value in other noncurrent assets on our Consolidated Balance Sheets. In accordance with SFAS 133, any changes
in fair value are recorded in other income (expense) on our Consolidated Statements of Operations. This warrant expires in February 2007 and has an
exercise price of $17.81.
(5) The 1999 Warrant is recorded at fair value in other noncurrent assets on our 2003 Consolidated Balance Sheet. In accordance with SFAS 133, any
changes in fair value were recorded in other income (expense) on our Consolidated Statements of Operations in accordance with SFAS 133. This
warrant expired in November 2004. F-19