Delta Airlines 2008 Annual Report Download - page 123

Table of Contents
Index to Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(5) In connection with amendments to our contract carrier agreements with Chautauqua and Shuttle America, both subsidiaries of Republic Airways Holdings, Inc. ("Republic Holdings"),
which, among other things, reduced the rates we pay those carriers, we recorded (a) a $91 million allowed general, unsecured claim and (b) a $37 million net charge related to our
surrender of warrants to purchase up to 3.5 million shares of Republic Holdings common stock. Additionally, in connection with an amendment to our contract carrier agreement with
Freedom, a subsidiary of Mesa Air Group, Inc., which, among other things, reduced the rates we pay that carrier, we recorded a $35 million allowed general, unsecured claim.
(6) In accordance with Delta's Plan of Reorganization, we made $130 million in lump-sum cash payments to approximately 39,000 eligible non-contract, non-management employees. We
also recorded an additional charge of $32 million related to our portion of payroll related taxes associated with the issuance, as contemplated by Delta's Plan of Reorganization, of
approximately 14 million shares of common stock to these employees.
(7) Allowed general, unsecured claims of $83 million for the four months ended April 30, 2007 and $2.1 billion for the year ended December 31, 2006 in connection with the comprehensive
agreements of Comair and Delta, respectively, with ALPA reducing pilot labor costs.
(8) Reflects interest earned due to the preservation of cash during our Chapter 11 proceedings.
(9) For the four months ended April 30, 2007, we recorded a net $43 million gain, primarily reflecting a $126 million net gain in connection with our settlement agreement with the
Massachusetts Port Authority, which was partially offset by a net $80 million charge from an allowed general, unsecured claim under the Cincinnati Airport Settlement Agreement.
(10) Allowed general, unsecured claims in connection with agreements reached with committees representing pilot and non-pilot retired employees reducing their postretirement healthcare
benefits.
(11) Reflects a charge for rejecting substantially all of our stock options in our Chapter 11 proceedings.
(12) $2.2 billion and $801 million allowed general, unsecured claims in connection with our settlement agreements with the PBGC and a group representing retired pilots, respectively.
Charges for these claims were offset by $1.3 billion in settlement gains associated with the derecognition of previously recorded Delta Pilot Plan and pilot non-qualified plan obligations
upon each plan's termination.
Fresh Start Consolidated Balance Sheet
Upon emergence from Chapter 11, we adopted fresh start reporting, which required us to revalue our assets and liabilities to fair value. In estimating
fair value, we based the estimates and assumptions on guidance prescribed by SFAS No. 157. SFAS 157 defines fair value, establishes a framework for
measuring fair value and expands disclosure about fair value measurements.
To facilitate the calculation of the enterprise value of the Successor, management developed financial projections for the Successor using a number of
estimates and assumptions. The enterprise and corresponding reorganization value of the Successor was based on financial projections using various valuation
methods, including (1) a comparison of our projected performance to the market values of comparable companies, (2) a review and analysis of several recent
transactions in the airline industry and (3) a calculation of the present value of future cash flows based on our projections. Utilizing these methodologies, the
reorganization value of the Successor was estimated to be in the range of $9.4 billion and $12.0 billion. The enterprise value, and corresponding
reorganization value, was dependent upon achieving the future financial results set forth in our projections, as well as the realization of certain other
assumptions. There can be no assurance the projections will be achieved or the assumptions will be realized. The excess reorganization value (using the low
end of the range) over the fair value of tangible and identifiable intangible assets, net of liabilities, was not reflected as goodwill in the Fresh Start
Consolidated Balance Sheet. The financial projections and estimates of enterprise and reorganization value are not incorporated in this Form 10-K.
All estimates, assumptions and financial projections, including the fair value adjustments, the financial projections and the enterprise and reorganization
value projections, are subject to significant uncertainties and the resolution of contingencies beyond our control. Accordingly, there can be no assurance the
estimates, assumptions and financial projections will be realized, and actual results could vary materially.
The adjustments set forth in the following Fresh Start Consolidated Balance Sheet in the columns captioned "Debt Discharge, Reclassifications and
Distribution to Creditors," "Repayment of Debtor-in-Possession ("DIP") Facility and New Exit Financing" and "Revaluation of Assets and Liabilities" reflect
the effect of the
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