Delta Airlines 2008 Annual Report Download - page 126

Table of Contents
Index to Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
through travel. The fair value of our SkyMiles frequent flyer award liability was determined based on the estimated price that third parties
would require us to pay for them to assume the obligation for miles expected to be redeemed under the SkyMiles Program. This estimated
price was determined based on the weighted-average equivalent ticket value of a SkyMiles award redeemed for travel on Delta or a
participating airline. The weighted-average equivalent ticket value contemplates differing classes of service, domestic and international
itineraries and the carrier providing the award travel. At April 30, 2007, we recorded deferred revenue equal to $0.0083 for each mile we
estimate will ultimately be redeemed under the SkyMiles Program.
(f) Noncurrent liabilities—other. An adjustment of $1.2 billion primarily related to the tax effect of fresh start valuation adjustments.
(g) Total stockholders' deficit. The adoption of fresh start reporting resulted in a new reporting entity with no beginning retained earnings or
accumulated deficit. All common stock of the Predecessor was eliminated and replaced by the new equity structure of the Successor
based on Delta's Plan of Reorganization. The Fresh Start Consolidated Balance Sheet reflects initial stockholders' equity value of $9.4
billion, representing the low end in the range of $9.4 billion to $12.0 billion estimated in our financial projections developed in
connection with Delta's Plan of Reorganization. The low end of the range is estimated to reflect market conditions as of the Effective
Date and therefore was used to establish initial stockholders' equity value.
Note 12. Equity and Equity-Based Compensation
Equity
Common Stock. On the Effective Date, all common stock issued by the Predecessor was cancelled. In connection with our emergence from bankruptcy,
we began issuing shares of new common stock, par value $0.0001 per share, pursuant to Delta's Plan of Reorganization. The new common stock is subject to
the terms of our Amended and Restated Certificate of Incorporation (the "New Certificate"), which supersedes the Certificate of Incorporation in effect prior
to the Effective Date.
The New Certificate authorizes us to issue a total of 2.0 billion shares of capital stock, of which 1.5 billion may be shares of common stock and
500 million may be shares of preferred stock. Delta's Plan of Reorganization contemplates the issuance of 400 million shares of common stock, consisting of
386 million shares to holders of allowed general, unsecured claims and up to 14 million shares to approximately 39,000 non-contract, non-management
employees under the Delta Air Lines, Inc. 2007 Performance Compensation Plan (the "2007 Plan"). Delta's Plan of Reorganization also contemplates the
issuance of common stock under the 2007 Plan for management employees.
In connection with the Merger, we issued, or expect to issue, a total of 339 million shares of Delta common stock in exchange for the Northwest
common stock outstanding on the Closing Date or issuable under Northwest's Plan of Reorganization. Additionally, in connection with the Merger, we
(1) agreed to issue 50 million shares of common stock to eligible Delta and Northwest pilots; (2) granted 34 million shares of common stock to substantially
all U.S. based non-pilot employees of Delta and Northwest; and (3) granted 17 million shares of restricted stock and non-qualified stock options to purchase
12 million shares of common stock to management personnel. The awards to management personnel will fully vest over approximately three years, subject to
the participant's continued employment.
Preferred Stock. The New Certificate permits us to issue preferred stock in one or more series. It authorizes the Board of Directors (1) to fix the
descriptions, powers (including voting powers), preferences, rights, qualifications, limitations and restrictions with respect to any series of preferred stock and
(2) to specify the number of shares of any series of preferred stock. As of December 31, 2008 and 2007, no preferred stock was issued and outstanding.
F-56