Delta Airlines 2014 Annual Report Download - page 41

Timing of SkyMiles Sales. In December 2011, we amended our American Express agreements and agreed to sell $675 million of unrestricted
SkyMiles to American Express in each December from 2011 through 2014. Pursuant to the December 2011 amendment, American Express purchased
$675 million of unrestricted SkyMiles in each of 2012 and 2013 with the final payment in 2014 . The SkyMiles purchased in December 2014 are
expected to be utilized by American Express in 2015.
In 2008, we entered into a multi-year extension of our American Express agreements and received $1.0 billion from American Express for an
advance purchase of restricted SkyMiles. The agreement, as modified, provided that our obligations with respect to the advance purchase would be
satisfied as American Express used the purchased miles over a specified future period (“SkyMiles Usage Period”). During the SkyMiles Usage Period,
which commenced in December 2011, American Express utilized SkyMiles valued at $333 million annually over three years instead of paying cash to
Delta for SkyMiles used. In December 2013, we and American Express amended this agreement to allow American Express to use the remaining
SkyMiles, valued at $285 million, immediately and without restriction. As of December 31, 2014, American Express had utilized the remaining
SkyMiles associated with this advance purchase.
Pension Contributions. We sponsor defined benefit pension plans for eligible employees and retirees. These plans are closed to new entrants and
are frozen for future benefit accruals. Our funding obligations for these plans are governed by the Employee Retirement Income Security Act, as
modified by the Pension Protection Act of 2006. In 2014, we contributed $917 million to our defined benefit pension plans, including $250 million
above the minimum funding requirements. These contributions satisfied the required contributions for our defined benefit plans for 2014 on an
accelerated basis. We contributed $914 million in 2013 , including $250 million above the minimum funding levels, and $697 million in 2012 to our
defined benefit pension plans. We estimate the funding under these plans will total at least $950 million in 2015 , including $340 million above the
minimum funding requirements.
Profit Sharing. As discussed above, our broad-based employee profit sharing program provides that, for each year in which we have an annual pre-
tax profit, as defined by the terms of the program, we will pay a specified portion of that profit to employees. In determining the amount of profit
sharing, the program defines profit as pre-tax profit excluding profit sharing and special items, such as MTM adjustments and restructuring and other
items. Our profit sharing program pays 10% to employees on the first $2.5 billion of annual profits and 20% of annual profits above $2.5 billion.
We paid $506 million in profit sharing in February 2014 related to our 2013 pre-tax profit and $372 million in 2013 related to our 2012 pre-tax
profit in recognition of our employees' contributions toward meeting our financial goals. During the year ended December 2014, we recorded $1.1
billion in profit sharing expense based on 2014 pre-tax profit. To further show our appreciation to our employees, we made an advanced 2014 profit
sharing payment totaling more than $300 million, equal to 5% of pay for eligible employees, in October 2014.
Investing Activities
Capital Expenditures. We incurred capital expenditures of $2.2 billion in 2014 , $2.6 billion in 2013 and $2.0 billion in 2012 . Our capital
expenditures were primarily for the purchase of aircraft and aircraft modifications that upgraded aircraft interiors and enhanced our product offering.
We have committed to future aircraft purchases that will require significant capital investment, and have obtained long-term financing
commitments for a substantial portion of the purchase price of these aircraft. We expect that we will invest approximately $2.8 billion in 2015
primarily for (1) aircraft, including deliveries of B-737-900ERs and A330-300s, along with advance deposit payments for these and our new A321-
200, A330-900neo and A350-900 orders, as well as for (2) aircraft modifications, the majority of which relate to enhancing the cabins of our
international fleet. We expect that the 2015 investments will be funded primarily through cash flows from operations.
Short-Term Investments. During the September 2014 quarter, we modified our approach to managing short-term investments by investing $1.5
billion of cash reserves in externally managed investment accounts. These new investments are comprised of U.S. government and agency securities,
asset- and mortgage-backed securities, corporate obligations and other fixed term securities. The new approach is expected to generate a greater return
with a low level of risk due to diversification.
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