Delta Airlines 2007 Annual Report Download - page 34

Table of Contents
Index to Financial Statements
spare parts credit facility (the "Spare Parts Loan") with General Electric Capital Corporation ("GECC") and (2) the prepayment of certain secured debt with
the proceeds from the sale of $1.4 billion of Pass Through Certificates, Series 2007-1 (the "2007-1 Certificates"). As a result, interest expense decreased by
$70 million for the year ended December 31, 2007.
Other Fresh Start Adjustments. We recorded other Fresh Start Adjustments relating primarily to the revaluation of our aircraft leases. These
adjustments increased operating expense by $19 million and non-operating expense by $3 million for the year ended December 31, 2007.
Share-Based Compensation Expense
Upon emergence from bankruptcy and in connection with our Plan of Reorganization, we adopted a new compensation program which was approved
by the Bankruptcy Court for our approximately 1,200 officers, director level employees and other management personnel (the "Management Program").
Under the Management Program, officers received restricted stock, stock options and performance shares; director-level employees received restricted stock
and stock options; and other management personnel received restricted stock. During the eight months ended December 31, 2007, the total compensation
expense related to the Management Program was $109 million.
Accounting Adjustments
During 2006, we recorded certain out-of-period adjustments ("Accounting Adjustments") in our Consolidated Financial Statements that affect the
comparability of our results for the years ended December 31, 2007, 2006 and 2005. These adjustments resulted in a net non-cash charge approximating $310
million to our Consolidated Statement of Operations for the year ended December 31, 2006, consisting of:
• A $112 million charge in landing fees and other rents. This adjustment is associated primarily with our airport facility leases at New York-JFK. It
resulted from historical differences associated with recording escalating rent expense based on actual rent payments instead of on a straight-line
basis over the lease term as required by Statement of Financial Accounting Standards ("SFAS") No. 13, "Accounting for Leases."
• A $108 million net charge related to the sale of mileage credits under our SkyMiles frequent flyer program. This includes an $83 million decrease
in passenger revenue, a $106 million decrease in other, net revenue, and an $81 million decrease in other operating expense. This net charge
primarily resulted from the reconsideration of our position with respect to the timing of recognizing revenue associated with the sale of mileage
credits that we expect will never be redeemed for travel.
• A $90 million charge in salaries and related costs to adjust our accrual for postemployment healthcare benefits. This adjustment is due to
healthcare payments applied to this accrual over several years, which should have been expensed as incurred.
We believe the Accounting Adjustments, considered individually and in the aggregate, are not material to our Consolidated Financial Statements for the
years ended December 31, 2006 and 2005. In making this assessment, we considered qualitative and quantitative factors, including our substantial net loss in
these years, the non-cash nature of the Accounting Adjustments, our substantial shareowners' deficit at the end of these years and our status as a debtor-in-
possession under Chapter 11 of the Bankruptcy Code during these years.
Reclassifications
Upon emergence and as a result of fresh start reporting, we changed the classification of certain items on our Consolidated Statements of Operations.
We also reclassified prior period amounts to conform to current period presentations. These changes have no impact on operating or net income in any period
prior or subsequent to our emergence from bankruptcy. For more information about these reclassifications, see Note 2 of the Notes to the Consolidated
Financial Statements.
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