Delta takes gain on Priceline.com stock


Thursday, July 6th 2000, 12:00 am
By: News On 6


$120 million in charges for quarter, change in fiscal year also reported

ATLANTA – Delta Air Lines Inc., the third-largest U.S. carrier, said Monday that it will take a pretax gain of about $228 million for the quarter ended June 30 from exchanging Priceline.com common shares for convertible preferred stock.

Delta exchanged 6 million common shares for an equal amount of preferred stock. The preferred stock has a value of $59.93 a share and pays a dividend of 8 percent a year in Priceline.com common shares, Delta said. Priceline.com is an Internet site where customers bid on air travel and other items.

Delta had said it would exchange the shares. Although the gain from the exchange is noncash, other gains in the last two years from Delta's investment in Priceline.com have helped the airline buy back its own stock, cut borrowing costs and make acquisitions.

The Atlanta-based airline also is taking two charges totaling $120 million pretax for the quarter.

"The market will just look through" the gain and charges, said Merrill Lynch & Co. analyst Candace Browning, who rates Delta a "strong buy." Still, Delta's stock has benefited from the company's Priceline.com investment, she said.

Priceline.com shares fell $2.88 Wednesday to $37.13. Delta rose $2 to $53.38, in part on the possibility that jet fuel costs will fall because of increased oil production and on strong June airline traffic reports from other carriers.

The airline is taking an $86 million charge for the quarter because of costs from a program announced in January that allows employees to retire with continued medical coverage and avoid some premium payments. About 2,500 employees signed up.

In addition, Delta is taking a $34 million pretax charge because it changed the method of accounting for the sale of frequent-flier miles to partners such as credit card companies. With the change, part of the revenue from such sales will be deferred until the miles are redeemed.

Delta also will end its fiscal year on Dec. 31 instead of June 30, starting this year, to simplify reporting and make comparisons with competitors easier.