SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For fiscal year ended December 31, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period
COMMISSION FILE NUMBER: 1-5424
A. Full title of the plan and address of the plan if different from that
of the issuer named below:
Atlantic Southeast Airlines, Inc. Investment Savings Plan
Atlantic Southeast Airlines, Inc.
100 Hartsfield Centre Parkway, Suite 800
Atlanta, Georgia 30320
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Delta Air Lines, Inc.
Hartsfield International Airport
Atlanta, Georgia 30320
Atlantic Southeast Airlines, Inc. Investment Savings Plan
Audited Financial Statements
and Supplemental Schedule
Year ended December 31, 2002 and as of December 31, 2001
CONTENTS
Report of Independent Auditors...........................................................................1
Financial Statements
Statements of Net Assets Available for Benefits..........................................................2
Statement of Changes in Net Assets Available for Benefits................................................3
Notes to Financial Statements............................................................................4
Supplemental Schedule
Schedule of Assets (Held at End of Year).................................................................9
[LETTERHEAD OF ERNST & YOUNG]
Report of Independent Auditors
Plan Administrator
Atlantic Southeast Airlines, Inc. Investment Savings Plan
We have audited the accompanying statements of net assets available for
benefits of Atlantic Southeast Airlines, Inc. Investment Savings Plan as of
December 31, 2002 and 2001, and the related statement of changes in net assets
available for benefits for the year ended December 31, 2002. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatements. An audit includes examining, on a test
basis, evidence supporting amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2002 and 2001, and the changes in its net assets available for
benefits for the year ended December 31, 2002, in conformity with accounting
principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the
financial statements taken as a whole. The accompanying supplemental schedule
of assets (held at end of year) as of December 31, 2002 is presented for the
purposes of additional analysis and is not a required part of the financial
statements, but is supplementary information required by the Department of
Labor's Rules and Regulations for the Reporting and Disclosure under the
Employee Retirement Income Security Act of 1974. This supplemental schedule is
the responsibility of the Plan's management. The supplemental schedule has been
subjected to the auditing procedures applied in our audits of the financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the financial statements taken as a whole.
/s/ Ernst & Young LLP
May 23, 2003
Atlanta, GA
1
Atlantic Southeast Airlines, Inc. Investment Savings Plan
Statements of Net Assets Available for Benefits
DECEMBER 31
----------------------------------
2002 2001
----------- -----------
ASSETS
Investments, at fair value $51,480,220 $53,048,172
Contributions receivable:
Employer 2,755,231 2,228,965
Participant 270,754 226,505
----------- -----------
3,025,985 2,455,470
----------- -----------
Net assets available for benefits $54,506,205 $55,503,642
=========== ===========
See accompanying notes.
2
Atlantic Southeast Airlines, Inc. Investment Savings Plan
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 2002
Additions to net assets attributed to:
Contributions:
Employer $ 2,755,231
Participant 8,599,943
------------
11,355,174
Investment income:
Dividends 668,352
Interest 100,728
------------
769,080
------------
Total 12,124,254
Deductions from net assets attributed to:
Net depreciation in fair value of investments (11,337,971)
Distributions to participants (1,205,946)
Transfers to related plan (525,032)
Administrative expenses (52,742)
------------
Total (13,121,691)
------------
Net decrease in net assets available for benefits (997,437)
Net assets available for benefits:
Beginning of year 55,503,642
------------
End of year $ 54,506,205
============
See accompanying notes.
3
Atlantic Southeast Airlines, Inc. Investment Savings Plan
Notes to Financial Statements
December 31, 2002
1. DESCRIPTION OF PLAN
The following description of the Atlantic Southeast Airlines, Inc. Investment
Savings Plan (the "Plan") provides only general information. Participants
should refer to the Summary Plan Description for a more complete description of
the Plan's provisions.
GENERAL
The Plan is a defined contribution plan covering all employees of Atlantic
Southeast Airlines, Inc. (the "Company"). Employees become eligible to enroll
on the enrollment date following the date of completion of ninety days of
continuous employment. The enrollment dates for the Plan are January 1, April
1, July 1, or October 1 of each year.
Employer matching contributions are awarded to employees who work at least
1,000 hours each year and have at least one year of service. Once the length of
service provision is met, the employee is eligible for matching contributions
for the following Plan year, which begins on January 1. Eligible employees must
be employed on December 31 to receive a matching contribution for the Plan
year. The Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
The Company uses Delta Air Lines, Inc. ("Delta") common stock as an investment
option in the Plan. Atlantic Southeast Airlines, Inc. is a wholly-owned
subsidiary of Delta.
CONTRIBUTIONS
Participants are able to contribute up to 25% of pretax annual compensation, as
defined by the Plan. Participants may also make rollover contributions from
other qualified defined benefit or defined contribution plans.
The Company may, in its sole discretion, make matching contributions up to 6%
of a participant's eligible compensation, as defined by the Plan. Based on
years of service for participants, matching contributions range from 20% to
75%, regardless of the date of participation.
4
Atlantic Southeast Airlines, Inc. Investment Savings Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF PLAN (CONTINUED)
FORFEITURES
Forfeitures of terminated participants' nonvested accounts are used to reduce
future matching contributions of the Company. The Company used approximately
$15,000 of forfeitures to reduce employer matching contributions during the
year ended December 31, 2002.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's contributions and
allocations of the Company's contributions and Plan investment results. The
allocations are based on participant earnings or account balances, as defined.
A quarterly recordkeeping fee is charged to each participant's account.
VESTING
All participant contributions and earnings thereon are 100% vested. Company
contributions to participant accounts vest on a graded basis at 10% per year
for two years of service, increasing to 20% per year thereafter until fully
vesting after six years of service.
PAYMENT OF BENEFITS
Upon termination, participants may elect lump-sum distributions or periodic
distributions over either a 5 or 10-year period. The full value of benefits are
payable upon normal or postponed retirement, total or permanent disability or
to beneficiaries upon death of the participant.
PARTICIPANTS LOANS
Participants may borrow a minimum of $1,000 up to a maximum of the lesser of
$25,000 or 50% of their deferred account balances. Loan terms range from 1 - 5
years. Loans are secured by the balance in the participant's account and bear
interest at a rate commensurate with local prevailing rates as determined at
the time of the loan.
5
Atlantic Southeast Airlines, Inc. Investment Savings Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF PLAN (CONTINUED)
PLAN TERMINATION
Under the provisions of the Plan, the Company reserves the right to amend or
terminate the Plan at any time provided that amendments will not divert a
vested interest or permit any part of the fund to revert to the Company or to
be used for any purpose other than for the exclusive benefit of participants or
their beneficiaries. If the Plan is terminated, each participant's account will
become fully vested.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accounting records of the Plan are presented on the accrual basis.
VALUATION OF INVESTMENTS
Mutual funds and common stock are stated at fair value based on the quoted
market prices. Participant loans are valued at their outstanding balance, which
approximates fair value.
ADMINISTRATIVE EXPENSES
The Company paid certain administrative expenses of the Plan.
USE OF ESTIMATES
The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
6
Atlantic Southeast Airlines, Inc. Investment Savings Plan
Notes to Financial Statements (continued)
3. INVESTMENTS
During the year ended December 31, 2002, the Plan's investments (including
investments purchased, sold, as well as held during the year) depreciated in
fair value as determined by quoted market prices as follows:
Net depreciation in fair value of investments:
Delta Air Lines, Inc. Common Stock $ 2,555,049
Mutual Funds 8,782,922
-----------
$11,337,971
===========
The fair value of individual investments that represent 5 percent or more of
the Plan's net assets is as follows:
DECEMBER 31
----------------------------------
2002 2001
----------- -----------
American Century Investments:
Ultra Fund $16,208,190 $20,442,311
Premium Capital Reserve Fund 7,843,676 7,586,582
International Growth Fund 3,043,475 3,514,342
Equity Income Fund 5,551,856 4,717,855
Equity Index Fund 6,621,612 7,705,755
Value Fund 2,781,075 *
Delta Air Lines, Inc Common Stock 4,467,902 *
* Less than 5%.
7
Atlantic Southeast Airlines, Inc. Investment Savings Plan
Notes to Financial Statements (continued)
4. TRANSACTIONS WITH PARTIES-IN-INTEREST
The Plan purchased 314,446 shares of Delta common stock with a fair value of
$4,918,740 during the year ended December 31, 2002. The Plan sold 39,694 shares
of Delta common stock for proceeds of $660,732, resulting in a loss of $323,531
during the year ended December 31, 2002.
The Plan held 369,248 and 94,496 shares of Delta common stock with a fair value
of $4,467,902 and $2,764,943 as of December 31, 2002 and 2001, respectively.
Certain Plan investments are mutual funds managed by American Century. American
Century is the Plan's recordkeeper and therefore, these transactions qualify as
party-in-interest.
5. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
dated May 16, 2003, stating that the Plan is qualified under Section 401(a) of
the Internal Revenue Code (the "Code") and, therefore, the related trust is
exempt from taxation. Once qualified, the Plan is required to operate in
conformity with the Code to maintain its qualification. The Plan Administrator
believes the Plan is being operated in compliance with the applicable
requirements of the Code and, therefore, believes that the Plan, as amended, is
qualified and the related trust is tax exempt.
6. TRANSFERS TO RELATED PLAN
Participants who terminate employment with the Company to begin employment for
Delta are not permitted to take a distribution of their account balance, but
may elect to sell their investments in the Plan and transfer the proceeds to
the Delta Family-Care Savings Plan (the "Delta Plan"). In connections with such
terminations, the Plan transferred approximately $525,000 to the Delta Plan
during 2002.
8
Supplemental Schedule
Atlantic Southeast Airlines, Inc. Investment Savings Plan
EIN: 58-1354495 Plan No.: 001
Schedule H, Line 4i
Schedule of Assets (Held at End of Year)
December 31, 2002
(C)
(B) DESCRIPTION OF INVESTMENT INCLUDING MATURITY (E)
IDENTITY OF ISSUE, BORROWER, DATE, RATE OF INTEREST, COLLATERAL, CURRENT
(A) LESSOR OR SIMILAR PARTY PAR, OR MATURITY VALUE VALUE
----------------------------------------------------------------------------------------------------------------------
* American Century Investments Premium Capital Reserve Fund $ 7,843,676
* American Century Investments Short-Term Government Fund 2,147,018
* American Century Investments Balanced Fund 1,470,465
* American Century Investments Equity Index Fund 6,621,612
* American Century Investments Equity Income Fund 5,551,856
* American Century Investments International Growth Fund 3,043,475
* American Century Investments Ultra Fund 16,208,190
* American Century Investments Value Fund 2,781,075
* Delta Air Lines, Inc. Common Stock 4,467,902
* Chase Manhattan Bank Money Market Fund 9,908
* Participant Loans Interest rates from 7.45% to 9.1%
Maturing through 2008 1,335,043
-----------
$51,480,220
===========
* Indicates a party-in-interest to the Plan.
Note: Column (d) cost information is not applicable for participant directed
investments.
9
Exhibit Index
EX-23 Consent of Ernst & Young LLP
Ex-99 Section 906 Certification pursuant to 18 U.S.C. Section 1350
SIGNATURES
THE PLAN
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
ATLANTIC SOUTHEAST AIRLINES, INC. INVESTMENT PLAN
/s/ Charles J. Thibaudeau
----------------------------
By: Charles J. Thibaudeau
Plan Administrator
Date: June 25, 2003