3101 Western Avenue15 (d)15(d) OFSeptember 30, 2001March 31, 2002Delaware(State of incorporation or organization)91-2065027(IRS Employer Identification No.)Registrant’s telephone number, including area code:(206) 285-4600YES Yes:x No: NO o¨Common Stock, par value $1 per share Outstanding (net of 3,240,5263,234,526 treasury shares)
as of September 30, 2001March 31, 2002 48,103,54548,307,185 shares
| Three Months Ended | Nine Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30 | September 30 | ||||||||||||||
| 2001 | 2000 | 2001 | 2000 | ||||||||||||
| REVENUES: | |||||||||||||||
| Domestic | $ | 682,522 | $ | 705,977 | $ | 2,132,856 | $ | 2,147,530 | |||||||
| International | 90,266 | 98,552 | 275,678 | 280,490 | |||||||||||
| 772,788 | 804,529 | 2,408,534 | 2,428,020 | ||||||||||||
| OPERATING EXPENSES: | |||||||||||||||
| Transportation purchased | 254,080 | 262,718 | 787,204 | 765,345 | |||||||||||
| Station and ground operations | 255,688 | 263,768 | 796,070 | 776,387 | |||||||||||
| Flight operations and maintenance | 133,286 | 143,665 | 428,658 | 425,729 | |||||||||||
| General and administrative | 62,767 | 64,312 | 200,427 | 191,309 | |||||||||||
| Sales and marketing | 21,689 | 20,200 | 69,020 | 60,740 | |||||||||||
| Depreciation and amortization | 51,655 | 52,892 | 156,977 | 152,768 | |||||||||||
| Federal legislation compensation | (7,800 | ) | — | (7,800 | ) | — | |||||||||
| 771,365 | 807,555 | 2,430,556 | 2,372,278 | ||||||||||||
| EARNINGS(LOSS)FROM OPERATIONS | 1,423 | ) | (3,026 | ) | (22,022 | ) | 55,742 | ||||||||
| OTHER INCOME (EXPENSE): | |||||||||||||||
| Interest, net | (4,924 | ) | (6,544 | ) | (13,875 | ) | (16,635 | ) | |||||||
| Discount onsales of receivables | (2,006 | ) | — | (7,993 | ) | — | |||||||||
| Other | 8,778 | 406 | 11,355 | 3,111 | |||||||||||
| EARNINGS(LOSS)BEFORE INCOME TAXES | 3,271 | (9,164 | ) | (32,535 | ) | 42,218 | |||||||||
| INCOME TAX BENEFIT(EXPENSE) | 1,558 | (3,655 | ) | (10,892 | ) | 16,070 | |||||||||
| NET EARNINGS(LOSS) BEFORE CHANGE IN ACCOUNTING | 1,713 | $ | (5,509 | ) | (21,643 | ) | 26,148 | ||||||||
| CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING, NET OF TAX | — | — | — | 14,206 | |||||||||||
| NET EARNINGS(LOSS) | $ | 1,713 | $ | (5,509 | ) | $ | (21,643 | ) | $ | 40,354 | |||||
| NET EARNINGS (LOSS) PER SHARE: | |||||||||||||||
| BASIC | |||||||||||||||
| Before change in accounting | $ | 0.04 | $ | (0.11 | ) | $ | (0.45 | ) | $ | 0.54 | |||||
| Cumulative effect of change in accounting | — | — | — | $ | 0.29 | ||||||||||
| Net Earnings(Loss) | $ | 0.04 | $ | (0.11 | ) | $ | (0.45 | ) | $ | 0.83 | |||||
| DILUTED | |||||||||||||||
| Before change in accounting | $ | 0.04 | $ | (0.11 | ) | $ | (0.45 | ) | $ | 0.54 | |||||
| Cumulative effect of change in accounting | — | — | — | 0.29 | |||||||||||
| Net Earnings(Loss) | $ | 0.04 | $ | (0.11 | ) | $ | (0.45 | ) | $ | 0.83 | |||||
| DIVIDENDS PER SHARE | $ | 0.04 | $ | 0.04 | $ | 0.12 | $ | 0.12 | |||||||
Three Months Ended March 31 | ||||||||
2002 | 2001 | |||||||
| REVENUES: | ||||||||
| Domestic | $ | 712,067 | $ | 730,099 | ||||
| International | 76,453 | 93,422 | ||||||
| 788,520 | 823,521 | |||||||
| OPERATING EXPENSES: | ||||||||
| Transportation purchased | 249,031 | 267,039 | ||||||
| Station and ground operations | 264,119 | 280,374 | ||||||
| Flight operations and maintenance | 125,366 | 151,686 | ||||||
| General and administrative | 63,414 | 66,067 | ||||||
| Sales and marketing | 22,276 | 24,002 | ||||||
| Depreciation and amortization | 49,121 | 52,638 | ||||||
| 773,327 | 841,806 | |||||||
| EARNINGS (LOSS) FROM OPERATIONS | 15,193 | (18,285 | ) | |||||
| OTHER INCOME (EXPENSE): | ||||||||
| Interest, net | (6,871 | ) | (4,497 | ) | ||||
| Discounts on sales of receivables | (1,305 | ) | (3,758 | ) | ||||
| Other | 1,896 | 273 | ||||||
| EARNINGS (LOSS) BEFORE INCOME TAXES | 8,913 | (26,267 | ) | |||||
| INCOME TAX (EXPENSE) BENEFIT | (3,645 | ) | 9,272 | |||||
| NET EARNINGS (LOSS) | $ | 5,268 | $ | (16,995 | ) | |||
| NET EARNINGS (LOSS) PER SHARE: | ||||||||
| BASIC | $ | 0.11 | $ | (0.35 | ) | |||
| DILUTED | $ | 0.11 | $ | (0.35 | ) | |||
| DIVIDENDS PER SHARE | $ | 0.04 | $ | 0.04 | ||||
September 30 December 31 2001 2000 (Unaudited) ASSETS CURRENT ASSETS: Cash $ 139,107 $ 40,390 Trade accounts receivable, less allowance of $11,528 and $10,290 123,768 218,685 Spare parts and fuel inventory 41,487 43,231 Refundable income taxes 23,943 21,595 Deferred income tax assets 28,454 28,839 Prepaid expenses and other 41,956 20,809 TOTAL CURRENT ASSETS 398,715 373,549 PROPERTY AND EQUIPMENT, NET 1,269,380 1,324,345 EQUIPMENT DEPOSITS and OTHER ASSETS 42,904 48,025 TOTAL ASSETS $ 1,710,999 $ 1,745,919 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $ 128,207 $ 180,623 Salaries, wages and related taxes 77,647 71,179 Accrued expenses 135,930 83,518 Current portion of debt 6,963 477 TOTAL CURRENT LIABILITIES 348,747 335,797 LONG-TERM DEBT 318,506 322,230 DEFERRED INCOME TAX LIABILITIES 137,070 125,444 POSTRETIREMENT LIABILITIES 35,098 62,360 OTHER LIABILITIES 36,566 37,233 SHAREHOLDERS’ EQUITY: Preferred Stock, without par value - Authorized 5,200,000 shares, no shares issued Common stock, par value $1 per share - Authorized 120,000,000 shares Issued 51,363,241 and 51,279,651 shares 51,344 51,280 Additional paid-in capital 304,603 303,885 Retained earnings 540,284 567,700 Accumulated other comprehensive income (1,351 ) (136 ) 894,880 922,729 Treasury stock, 3,240,526 and 3,244,526 shares, at cost (59,868 ) (59,874 ) 835,012 862,855 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 1,710,999 $ 1,745,919 CURRENT ASSETS: Cash and cash equivalents $ 393,165 $ 201,500 Accounts receivable, less allowance of $11,549 and $11,509 133,019 126,040 Spare parts and fuel inventory 37,655 38,413 Refundable income taxes 178 27,161 Deferred income tax assets 30,768 30,572 Prepaid expenses and other 36,455 28,021 TOTAL CURRENT ASSETS 631,240 451,707 PROPERTY AND EQUIPMENT, NET 1,229,194 1,247,373 EQUIPMENT DEPOSITS and OTHER ASSETS 52,037 47,764 TOTAL ASSETS $ 1,912,471 $ 1,746,844 CURRENT LIABILITIES: Accounts payable $ 120,578 $ 141,873 Salaries, wages and related taxes 88,409 75,458 Accrued expenses 146,917 145,997 Income taxes payable 2,629 — Current portion of debt 108,008 107,410 TOTAL CURRENT LIABILITIES 466,541 470,738 LONG-TERM DEBT 368,532 218,053 DEFERRED INCOME TAX LIABILITIES 143,303 143,526 POST RETIREMENT LIABILITIES 54,590 39,423 OTHER LIABILITIES 40,950 40,888 SHAREHOLDERS’ EQUITY: Preferred Stock, without par value— Authorized 6,000,000 shares, no shares issued Common stock, par value $1 per share— Authorized 120,000,000 shares Issued 51,541,711 and 51,375,711 shares 51,542 51,376 Additional paid-in capital 307,227 304,984 Retained earnings 543,882 540,544 Accumulated other comprehensive income (4,238 ) (2,820 ) 898,413 894,084 Treasury stock, 3,234,526 and 3,240,526 shares, at cost (59,858 ) (59,868 ) 838,555 834,216 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 1,912,471 $ 1,746,844
Nine Months Ended September 30 2001 2000 OPERATING ACTIVITIES: Net Earnings(Loss) $ (21,643 ) $ 40,354 Adjustments to reconcile net earnings(loss) to net cash provided by operating activities: Cumulative effect of change in accounting — (14,206 ) Depreciation and amortization 156,977 152,768 Deferred income taxes 12,010 17,135 Postretirement obligations (2,515 ) 7,584 Other (527 ) 7,901 CASH PROVIDED BY OPERATIONS 144,302 211,536 Change in: Proceeds from receivable securitization facility 50,000 — Receivables 44,917 (14,337 ) Inventories and prepaid expenses (19,403 ) (6,625 ) Refundable income taxes (2,348 ) — Accounts payable (52,416 ) 13,209 Accrued expenses, salaries & taxes payable 34,132 10,074 NET CASH PROVIDED BY OPERATING ACTIVITIES 199,184 213,857 INVESTING ACTIVITIES: Additions to property and equipment (99,455 ) (302,390 ) Dispositions of property and equipment 1,113 4,037 Other 2,391 (7,051 ) NET CASH USED BY INVESTING ACTIVITIES (95,951 ) (305,404 ) FINANCING ACTIVITIES: Proceeds(repayments)from bank notes, net (103,000 ) 115,000 Principal payments on debt (902 ) (329 ) Issuance of debt 1,596 — Proceeds on sale leaseback transactions, net 102,775 — Repurchase of common stock — (20,662 ) Proceeds from common stock issuance 788 1,259 Dividends paid (5,773 ) (5,832 ) NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES (4,516 ) 89,436 NET (DECREASE) INCREASE IN CASH 98,717 (2,111 ) CASH AT JANUARY 1 40,390 28,678 CASH AT SEPTEMBER 30 $ 139,107 $ 26,567 OPERATING ACTIVITIES: Net earnings (loss) $ 5,268 $ (16,995 ) Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 49,121 52,638 Deferred income taxes (420 ) 806 Postretirement obligations 12,967 (6,323 ) Other (1,548 ) 5,836 CASH PROVIDED BY OPERATIONS 65,388 35,962 Change in: Proceeds from receivable securitization facility — 50,000 Receivables (6,979 ) 20,123 Inventories and prepaid expenses (7,676 ) (2,837 ) Refundable income taxes 26,983 867 Accounts payable (21,295 ) (24,577 ) Accrued expenses, salaries and taxes payable 18,699 16,105 NET CASH PROVIDED BY OPERATING ACTIVITIES 75,120 95,643 INVESTING ACTIVITIES: Additions to property and equipment (27,199 ) (26,325 ) Proceeds from sale of securities 1,656 — Other (1,915 ) 1,439 NET CASH USED BY INVESTING ACTIVITIES (27,458 ) (24,886 ) FINANCING ACTIVITIES: Issuance of convertible debt, net of issuance costs 145,125 — Payments on bank notes, net — (43,000 ) Principal payments on debt (1,611 ) (116 ) Proceeds from common stock issuance 2,419 783 Dividends paid (1,930 ) (1,924 ) NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 144,003 (44,257 ) NET INCREASE IN CASH 191,665 26,500 CASH AND CASH EQUIVALENTS AT JANUARY 1 201,500 40,390 CASH AND CASH EQUIVALENTS AT MARCH 31 $ 393,165 $ 66,890
September 30, 2001March 31, 2002 (Unaudited)20012002 presentation.September 30 December 31 2001 2000 (In thousands) Senior debt: Senior notes $ 200,000 $ 200,000 Aircraft Leases 102,837 — Revenue bonds 13,200 13,200 Revolving bank credit — 75,000 Notes payable — 28,000 Other debt 9,432 6,507 325,469 322,707 Less current portion 6,963 477 $ 318,506 $ 322,230 Senior debt: Senior notes $ 200,000 $ 200,000 Convertible senior notes 150,000 — Aircraft loan 60,658 61,651 Capital lease obligations 45,291 43,070 Revenue bonds 13,200 13,200 Revolving bank credit — — Other debt 7,391 7,542 476,540 325,463 Less current portion (108,008 ) (107,410 ) $ 368,532 $ 218,053 Company hasproceeds of the sale are intended, in part, to fund the repayment of $100,000,000 of 8.75% notes due December 15, 2002 at their stated maturity. The notes are convertible into shares of the Company’s common stock, at the option of the holder, at a conversion rate of 42.7599 shares per each $1,000 principal amount of notes, subject to adjustment in certain circumstances. This is equivalent to a conversion price of $23.39 per share.providingprovides for a total commitment of $275 million. In$275,000,000 and expires in June 2001,2004. The agreement provides that the agreement was amended to, among other requirements, provide certainCompany pledge a substantial majority of its assets as collateral to secure the commitment, reduce available borrowing capacity by the amount of outstanding letters of credit establish revised covenants and amend the expiration date to June 2004.maintain compliance with certain restrictive covenants. Capacity under the facility is dependent on a borrowing base determined by the amount of eligible collateral, pledged, with a maximum commitment of $275 million.$275,000,000. The Company has eligible collateral in the borrowing base to support $148,000,000 of the $275,000,000 commitment and has the ability to increase the borrowing base by pledging additional eligible collateral. With the current level of eligible collateral, available capacity under the agreement, net of outstanding letters of credit, was $50,500,000. At September 30, 2001March 31, 2002 no borrowings were outstanding under the agreement and the Company was in compliance with restrictive covenants. Withcovenants including covenants requiring the current levelmaintenance of collateral pledged, available capacity underminimum levels of earnings before interest, taxes, depreciation and amortization (EBITDA), leverage and debt service coverage ratios and required levels of liquidity. The agreement also restricts the agreement, netCompany from declaring or paying dividends on its common stock during any calendar quarter in excess of $2,000,000 (plus up to an additional $300,000 for dividends on any common stock issued upon conversion of the Company’s convertible senior notes securities described below). The Company’s $200,000,000 of outstanding letters of credit, was $43.6 million as of September 30, 2001. In June 2001, the outstandingnon-convertible senior notes are also collateralized by assets of $200 million were secured in connection with the amended revolving credit agreement.Company.
options and, when applicable, the assumed conversion of convertible senior notes.options.5 Three Months Ended Nine Months Ended September 30 September 30 2001 2000 2001 2000 WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 48,103,545 48,034,899 48,081,524 48,516,263 Diluted 48,128,062 48,185,156 48,104,026 48,850,931 WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 48,253,078 48,079,634 Diluted 48,589,135 48,080,472 Three Months Ended Nine Months Ended September 30 September 30 2001 2000 2001 2000 SEGMENT REVENUES: Domestic $ 682,522 705,997 $ 2,132,856 $ 2,147,530 International 90,266 98,552 275,678 280,490 $ 772,788 $ 804,529 $ 2,408,534 $ 2,428,020 SEGMENT EARNINGS(Loss)
FROM OPERATIONS: Domestic $ 920 $ 55 $ (20,230 ) $ 61,786 International 503 (3,081 ) (1,792 ) (6,044 ) $ 1,423 $ (3,026 ) $ (22,022 ) $ 55,742 6 SEGMENT REVENUES: Domestic $ 712,067 $ 730,099 International 76,453 93,422 $ 788,520 $ 823,521 SEGMENT EARNINGS (LOSS) FROM OPERATIONS: Domestic $ 16,932 $ (16,528 ) International (1,739 ) (1,757 ) $ 15,193 $ (18,285 ) INCOME:INCOMEnine month period ended September 30,2001, respectively (in thousands): Unrealized securities gains arising during the period $ 679 $ (262 ) $ 417 Less: Reclassification adjustment for gains realized in net income (1,656 ) 638 (1,018 ) Net unrealized securities losses (977 ) 376 (601 ) Foreign currency translation adjustments (256 ) 99 (157 ) Unrealized gain on interest rate swap 656 (252 ) 404 Additional minimum pension liabilities (1,729 ) 665 (1,064 ) Other comprehensive income $ (2,306 ) $ 888 $ (1,418 )
Before Tax | Income Tax (Expense) or Benefit | Net of Tax | |||||||||
2001 | |||||||||||
| Unrealized securities losses arising during the period | $ | (145 | ) | $ | 56 | $ | (89 | ) | |||
| Less: Reclassification adjustment for gains realized in net income | (32 | ) | 12 | (20 | ) | ||||||
| Net unrealized securities losses | (177 | ) | 68 | (109 | ) | ||||||
| Foreign currency translation adjustments | (201 | ) | 67 | (134 | ) | ||||||
| Other comprehensive income | $ | (378 | ) | $ | 135 | $ | (243 | ) | |||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||
| September 30, 2001 | September 30, 2001 | |||||||||||||||||||||
| Before Tax | Income Tax (Expense) or Benefit | Net of Tax | Before Tax | Income Tax (Expense) or Benefit | Net of Tax | |||||||||||||||||
| Unrealized securities losses arising during the period | $ | (1,724 | ) | $ | 664 | $ | (1,060 | ) | $ | (1,557 | ) | $ | 599 | $ | (958 | ) | ||||||
| Less: Reclassification adjustment for gains realized in net income | — | — | — | (32 | ) | 12 | (20 | ) | ||||||||||||||
| Net unrealized securities losses | (1,724 | ) | 664 | (1,060 | ) | (1,589 | ) | 611 | (978 | ) | ||||||||||||
| Foreign currency translation adjustments | (41 | ) | 16 | (25 | ) | (351 | ) | 114 | (237 | ) | ||||||||||||
| Other comprehensive income (loss) | $ | (1,765 | ) | $ | 680 | $ | (1,085 | ) | $ | (1,940 | ) | $ | 725 | $ | (1,215 | ) | ||||||
Three Months Ended Nine Months Ended September 30, 2000 September 30, 2000 Before
Tax Income Tax
(Expense)
or Benefit Net of
Tax Before
Tax Income Tax
(Expense)
or Benefit Net of
Tax Unrealized securities losses
arising during the period $ 593 $ (228 ) $ 365 $ 1,043 $ (401 ) $ 642 Less: Reclassification
adjustment for gains
realized in net income (67 ) 26 (41 ) (588 ) 227 (361 ) Net unrealized securities
losses 526 (202 ) 324 455 (174 ) 281 Foreign currency translation
adjustments (16 ) 6 (10 ) (227 ) 87 (140 ) Other comprehensive
income (loss) $ 510 $ (196 ) $ 314 $ 228 $ (87 ) $ 141
NOTE F—OTHER INCOME:
Other income includes the following transactionsrelated consolidating condensed statements of operations and cash flows for the three months ended March 31, 2002 and nine month period ended September 30,2001:
March 31, 2002 | Airborne Express, Inc. | Airborne Inc. | Guarantors | Non- guarantors | Elimination | Consolidated | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
| Current Assets: | ||||||||||||||||||||||||
| Cash and cash equivalents | $ | 391,470 | $ | — | $ | 772 | $ | 923 | $ | — | $ | 393,165 | ||||||||||||
| Accounts receivable | 12,701 | — | 9,570 | 110,748 | — | 133,019 | ||||||||||||||||||
| Spare parts and fuel inventory | — | — | 34,892 | 2,763 | — | 37,655 | ||||||||||||||||||
| Refundable income taxes | 178 | — | — | — | — | 178 | ||||||||||||||||||
| Deferred income tax assets | 30,768 | — | — | — | — | 30,768 | ||||||||||||||||||
| Prepaid expenses and other | 20,405 | — | 15,550 | 500 | — | 36,455 | ||||||||||||||||||
| Total current assets | 455,522 | — | 60,784 | 114,934 | — | 631,240 | ||||||||||||||||||
| Property & equipment,net | 101,515 | — | 1,123,501 | 4,178 | — | 1,229,194 | ||||||||||||||||||
| Intercompany advances | 34,204 | 447,595 | (33,942 | ) | 3,558 | (451,415 | ) | — | ||||||||||||||||
| Equipment deposits and other assets | 31,686 | 10,858 | 9,594 | 10 | (111 | ) | 52,037 | |||||||||||||||||
| Total assets | $ | 622,927 | $ | 458,453 | $ | 1,159,937 | $ | 122,680 | $ | (451,526 | ) | $ | 1,912,471 | |||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||
| Current Liabilities: | ||||||||||||||||||||||||
| Accounts payable | $ | 83,432 | $ | — | $ | 37,331 | 102 | $ | (287 | ) | $ | 120,578 | ||||||||||||
| Salaries, wages and related taxes | 52,827 | — | 35,584 | (2 | ) | — | 88,409 | |||||||||||||||||
| Accrued expenses and income taxes payable | 142,827 | 167 | 5,789 | 763 | — | 149,546 | ||||||||||||||||||
| Current portion of debt | 101,345 | — | 6,663 | — | — | 108,008 | ||||||||||||||||||
| Total current liabilities | 380,431 | 167 | 85,367 | 863 | (287 | ) | 466,541 | |||||||||||||||||
| Long-term debt | 106,102 | 150,000 | 112,430 | — | — | 368,532 | ||||||||||||||||||
| Intercompany liabilities | — | — | 336,127 | — | (336,127 | ) | — | |||||||||||||||||
| Deferred income tax liabilities | (7,190 | ) | — | 149,961 | 532 | — | 143,303 | |||||||||||||||||
| Postretirement liabilities | 46,552 | — | 8,038 | — | — | 54,590 | ||||||||||||||||||
| Other liabilities | 40,950 | — | — | — | — | 40,950 | ||||||||||||||||||
| Shareholders’ equity: | ||||||||||||||||||||||||
| Common stock | 1 | 51,542 | (9 | ) | 120 | (112 | ) | 51,542 | ||||||||||||||||
| Additional paid in capital | 164 | 307,065 | (755 | ) | 115,753 | (115,000 | ) | 307,227 | ||||||||||||||||
| Retained earnings | 60,155 | 9,537 | 468,778 | 5,412 | — | 543,882 | ||||||||||||||||||
| Accumulated other comprehensive income | (4,238 | ) | — | — | — | — | (4,238 | ) | ||||||||||||||||
| Treasury stock | — | (59,858 | ) | — | — | — | (59,858 | ) | ||||||||||||||||
| Total shareholders’ equity | 56,082 | 308,286 | 468,014 | 121,285 | (115,112 | ) | 838,555 | |||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 622,927 | $ | 458,453 | $ | 1,159,937 | $ | 122,680 | $ | (451,526 | ) | $ | 1,912,471 | |||||||||||
December 31, 2001 | Airborne Express, Inc. | Airborne Inc. | Guarantors | Non-guarantors | Elimination | Consolidated | |||||||||||||||||
(in thousands) | |||||||||||||||||||||||
ASSETS | |||||||||||||||||||||||
| Current Assets: | |||||||||||||||||||||||
| Cash and cash equivalents | $ | 191,629 | $ | — | $ | 607 | $ | 9,264 | $ | — | $ | 201,500 | |||||||||||
| Accounts receivable | 18,706 | — | 10,113 | 97,289 | (68 | ) | 126,040 | ||||||||||||||||
| Spare parts and fuel inventory | — | — | 36,272 | 2,141 | — | 38,413 | |||||||||||||||||
| Refundable income taxes | 27,161 | — | — | — | — | 27,161 | |||||||||||||||||
| Deferred income tax assets | 30,572 | — | — | — | — | 30,572 | |||||||||||||||||
| Prepaid expenses and other | 13,918 | — | 13,627 | 476 | — | 28,021 | |||||||||||||||||
| Total current assets | 281,986 | — | 60,619 | 109,170 | (68 | ) | 451,707 | ||||||||||||||||
| Property & equipment, net | 109,622 | — | 1,133,490 | 4,261 | — | 1,247,373 | |||||||||||||||||
| Intercompany advances | 157,681 | 302,279 | 12,949 | 12,884 | (485,793 | ) | — | ||||||||||||||||
| Equipment deposits and other assets | 31,078 | 5,963 | 16,224 | 10 | (5,511 | ) | 47,764 | ||||||||||||||||
| Total assets | $ | 580,367 | $ | 308,242 | $ | 1,223,282 | $ | 126,325 | $ | (491,372 | ) | $ | 1,746,844 | ||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||||||||
| Current Liabilities: | |||||||||||||||||||||||
| Accounts payable | $ | 84,867 | $ | — | $ | 53,146 | $ | 4,552 | $ | (692 | ) | $ | 141,873 | ||||||||||
| Salaries, wages and related taxes | 46,976 | — | 28,482 | — | — | 75,458 | |||||||||||||||||
| Accrued expenses and income taxes payable | 139,132 | — | 6,261 | 604 | — | 145,997 | |||||||||||||||||
| Current portion of debt | 100,877 | — | 6,533 | — | — | 107,410 | |||||||||||||||||
| Total current liabilities | 371,852 | — | 94,422 | 5,156 | (692 | ) | 470,738 | ||||||||||||||||
| Long-term debt | 103,951 | — | 114,102 | — | — | 218,053 | |||||||||||||||||
| Intercompany liabilities | — | — | 370,168 | — | (370,168 | ) | — | ||||||||||||||||
| Deferred income tax liabilities | (6,967 | ) | — | 150,164 | 329 | — | 143,526 | ||||||||||||||||
| Postretirement liabilities | 11,905 | — | 27,518 | — | — | 39,423 | |||||||||||||||||
| Other liabilities | 40,888 | — | — | — | — | 40,888 | |||||||||||||||||
| Shareholders’ equity: | |||||||||||||||||||||||
| Common stock | 1 | 51,376 | (9 | ) | 120 | (112 | ) | 51,376 | |||||||||||||||
| Additional paid in capital | 8 | 304,976 | 3,171 | 115,753 | (118,924 | ) | 304,984 | ||||||||||||||||
| Retained earnings | 61,549 | 11,758 | 463,746 | 4,967 | (1,476 | ) | 540,544 | ||||||||||||||||
| Accumulated other comprehensive income | (2,820 | ) | — | — | — | — | (2,820 | ) | |||||||||||||||
| Treasury stock | — | (59,868 | ) | — | — | — | (59,868 | ) | |||||||||||||||
| Total shareholders’ equity | 58,738 | 308,242 | 466,908 | 120,840 | (120,512 | ) | 834,216 | ||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 580,367 | $ | 308,242 | $ | 1,223,282 | $ | 126,325 | $ | (491,372 | ) | $ | 1,746,844 | ||||||||||
Three months ended March 31, 2002 | Airborne Express, Inc. | Airborne Inc. | Guarantors | Non- guarantors | Consolidated | |||||||||||||||
(in thousands) | ||||||||||||||||||||
| Revenues | $ | 773,041 | $ | — | $ | 15,479 | $ | — | $ | 788,520 | ||||||||||
| Operating expenses: | ||||||||||||||||||||
| Transportation purchased | 469,072 | — | (220,041 | ) | — | 249,031 | ||||||||||||||
| Station and ground operations | 223,482 | — | 40,637 | — | 264,119 | |||||||||||||||
| Flight operations and maintenance | (455 | ) | — | 126,435 | (614 | ) | 125,366 | |||||||||||||
| General and administrative | 44,789 | 271 | 18,316 | 38 | 63,414 | |||||||||||||||
| Sales and marketing | 22,076 | — | 200 | — | 22,276 | |||||||||||||||
| Depreciation and amortization | 11,813 | — | 37,225 | 83 | 49,121 | |||||||||||||||
| 770,777 | 271 | 2,772 | (493 | ) | 773,327 | |||||||||||||||
| Earnings (loss) from operations | 2,264 | (271 | ) | 12,707 | 493 | 15,193 | ||||||||||||||
| Other income (expense): | ||||||||||||||||||||
| Interest, net | (4,755 | ) | (175 | ) | (1,941 | ) | — | (6,871 | ) | |||||||||||
| Discounts on sales of receivables | (965 | ) | — | — | (340 | ) | (1,305 | ) | ||||||||||||
| Other | 1,896 | — | — | — | 1,896 | |||||||||||||||
| Earnings (loss) before income taxes | (1,560 | ) | (446 | ) | 10,766 | (153 | ) | 8,913 | ||||||||||||
| Income tax (expense) benefit | 166 | 156 | (4,258 | ) | 291 | (3,645 | ) | |||||||||||||
| Net earnings (loss) | $ | (1,394 | ) | $ | (290 | ) | $ | 6,508 | $ | 444 | $ | 5,268 | ||||||||
Three months ended March 31, 2001 | Airborne Express, Inc. | Airborne Inc. | Guarantors | Non- guarantors | Consolidated | |||||||||||||||
(in thousands) | ||||||||||||||||||||
| Revenues | $ | 806,184 | $ | — | $ | 17,337 | $ | — | $ | 823,521 | ||||||||||
| Operating expenses: | ||||||||||||||||||||
| Transportation purchased | 512,940 | — | (245,901 | ) | — | 267,039 | ||||||||||||||
| Station and ground operations | 236,877 | — | 43,497 | — | 280,374 | |||||||||||||||
| Flight operations and maintenance | — | — | 152,345 | (659 | ) | 151,686 | ||||||||||||||
| General and administrative | 48,045 | 219 | 17,763 | 40 | 66,067 | |||||||||||||||
| Sales and marketing | 23,644 | — | 358 | — | 24,002 | |||||||||||||||
| Depreciation and amortization | 12,072 | — | 40,485 | 81 | 52,638 | |||||||||||||||
| 833,578 | 219 | 8,547 | (538 | ) | 841,806 | |||||||||||||||
| Earnings (loss) from operations | (27,394 | ) | (219 | ) | 8,790 | 538 | (18,285 | ) | ||||||||||||
| Other income (expense): | ||||||||||||||||||||
| Interest, net | 1,333 | 19,009 | (24,839 | ) | — | (4,497 | ) | |||||||||||||
| Discounts on sales of receivables | (4,344 | ) | — | — | 586 | (3,758 | ) | |||||||||||||
| Other | 273 | — | — | — | 273 | |||||||||||||||
| Earnings (loss) before income taxes | (30,132 | ) | 18,790 | (16,049 | ) | 1,124 | (26,267 | ) | ||||||||||||
| Income tax (expense) benefit | 10,814 | 424 | (1,770 | ) | (196 | ) | 9,272 | |||||||||||||
| Net earnings (loss) | $ | (19,318 | ) | $ | 19,214 | $ | (17,819 | ) | $ | 928 | $ | (16,995 | ) | |||||||
Three months ended March 31, 2002 | Airborne Express, Inc. | Airborne Inc. | Guarantors | Non- guarantors | Consolidated | |||||||||||||||
(in thousands) | ||||||||||||||||||||
| OPERATING ACTIVITIES: | ||||||||||||||||||||
| Net earnings (loss) | $ | (1,394 | ) | $ | (290 | ) | 6,508 | $ | 444 | $ | 5,268 | |||||||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||||||||||||
| Non-cash operating activities | 42,145 | (5,051 | ) | 23,234 | (208 | ) | 60,120 | |||||||||||||
| Change in current assets and liabilities | 164,099 | (144,992 | ) | (798 | ) | (8,577 | ) | 9,732 | ||||||||||||
| Net cash provided (used) by operating activities | 204,850 | (150,333 | ) | 28,944 | (8,341 | ) | 75,120 | |||||||||||||
| INVESTING ACTIVITIES: | ||||||||||||||||||||
| Net cash used by investing activities | (223 | ) | — | (27,235 | ) | — | (27,458 | ) | ||||||||||||
| FINANCING ACTIVITIES: | ||||||||||||||||||||
| Net cash provided (used) By financing activities | (4,786 | ) | 150,333 | (1,544 | ) | — | 144,003 | |||||||||||||
| Net increase (decrease) in cash | 199,841 | — | 165 | (8,341 | ) | 191,665 | ||||||||||||||
| Cash and cash equivalents at January 1 | 191,629 | — | 607 | 9,264 | 201,500 | |||||||||||||||
| Cash and cash equivalents at March 31 | $ | 391,470 | $ | — | $ | 772 | $ | 923 | $ | 393,165 | ||||||||||
Three months ended March 31, 2001 | Airborne Express, Inc. | Airborne Inc. | Guarantors | Non- guarantors | Consolidated | |||||||||||||||
(in thousands) | ||||||||||||||||||||
| OPERATING ACTIVITIES: | ||||||||||||||||||||
| Net earnings (loss) | $ | (19,318 | ) | $ | 19,214 | $ | (17,819 | ) | $ | 928 | $ | (16,995 | ) | |||||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||||||||||||
| Non-cash operating activities | 3,467 | (156 | ) | 50,262 | (616 | ) | 52,957 | |||||||||||||
| Change in current assets and liabilities | 71,569 | (2,621 | ) | (12,897 | ) | 3,630 | 59,681 | |||||||||||||
| Net Cash provided by operating activities | 55,718 | 16,437 | 19,546 | 3,942 | 95,643 | |||||||||||||||
| INVESTING ACTIVITIES: | ||||||||||||||||||||
| Net cash used by investing activities | (5,499 | ) | — | (19,335 | ) | (52 | ) | (24,886 | ) | |||||||||||
| FINANCING ACTIVITIES: | ||||||||||||||||||||
| Net cash used by financing activities | (27,704 | ) | (16,437 | ) | (116 | ) | — | (44,257 | ) | |||||||||||
| Net increase in cash | 22,515 | — | 95 | 3,890 | 26,500 | |||||||||||||||
| Cash and cash equivalents at January 1 | 37,523 | — | 52 | 2,815 | 40,390 | |||||||||||||||
| Cash and cash equivalents at March 31 | $ | 60,038 | $ | — | $ | 147 | $ | 6,705 | $ | 66,890 | ||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||
| September 30 | September 30 | ||||||||||||
| 2001 | 2000 | 2001 | 2000 | ||||||||||
| OTHER INCOME: | |||||||||||||
| Gain on sales of radio frequencies | $ | 6,232 | $ | — | $ | 8,303 | $ | — | |||||
| Gain on sale of securities | 2,117 | — | 2,117 | 1,913 | |||||||||
| Other | 429 | 406 | 935 | 1,198 | |||||||||
| $ | 8,778 | $ | 406 | $ | 11,355 | $ | 3,111 | ||||||
NOTE G—CHANGE IN ACCOUNTING:
Effective January 1, 2000, the Company changed its methodrelated consolidating condensed statements of accountingoperations and cash flows for major engine overhaul costs on DC-9 aircraft from the accrual method to the direct expense method where costs are expensed as incurred. Previously, these costs were accrued in advance of the next scheduled overhaul based upon engine usage and estimates of overhaul costs. The Company believes that this new method is preferable because it is more consistent with industry practice and appropriate given the relatively large size of its DC-9 fleet.
The cumulative effect of this change in accounting resulted in a non-cash credit of $14,206,000, net of taxes, or $.29 per share on a diluted basis being recognized in the quarter endingthree months ended March 31, 2000. Excluding2002 and March 31, 2001. A description regarding the cumulative effect, this change increased net earnings for the third quarter and first nine monthsbasis of 2000 by approximately $1.4 million, net of tax or $.03 per share, and $4.2 million, net of tax or $.09 per share, respectively.presenting these statements is contained in Note F.
March 31, 2002 | Airborne, Inc. | Guarantors | Non-guarantors | Elimination | Consolidated | ||||||||||||||
(in thousands) | |||||||||||||||||||
ASSETS | |||||||||||||||||||
| Current Assets: | |||||||||||||||||||
| Cash and cash equivalents | $ | — | $ | 391,505 | $ | 1,660 | $ | — | $ | 393,165 | |||||||||
| Accounts receivable | — | 22,300 | 110,719 | — | 133,019 | ||||||||||||||
| Spare parts and fuel inventory | — | 37,655 | — | — | 37,655 | ||||||||||||||
| Refundable income taxes | — | 178 | — | — | 178 | ||||||||||||||
| Deferred income tax assets | — | 30,768 | — | — | 30,768 | ||||||||||||||
| Prepaid expenses and other | — | 36,086 | 369 | — | 36,455 | ||||||||||||||
| Total current assets | — | 518,492 | 112,748 | — | 631,240 | ||||||||||||||
| Property and equipment, net | — | 1,229,194 | — | — | 1,229,194 | ||||||||||||||
| Intercompany advances | 447,595 | (275 | ) | 4,095 | (451,415 | ) | — | ||||||||||||
| Equipment deposits and other assets | 10,858 | 41,290 | — | (111 | ) | 52,037 | |||||||||||||
| Total assets | $ | 458,453 | $ | 1,788,701 | $ | 116,843 | $ | (451,526 | ) | $ | 1,912,471 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||||
| Current Liabilities: | |||||||||||||||||||
| Accounts payable | $ | — | $ | 120,865 | $ | — | $ | (287 | ) | $ | 120,578 | ||||||||
| Salaries, wages and related taxes | — | 88,409 | — | — | 88,409 | ||||||||||||||
| Accrued expenses and income taxes payable | 167 | 148,700 | 679 | — | 149,546 | ||||||||||||||
| Current portion of debt | — | 108,008 | — | — | 108,008 | ||||||||||||||
| Total current liabilities | 167 | 465,982 | 679 | (287 | ) | 466,541 | |||||||||||||
| Long-term debt | 150,000 | 218,532 | — | — | 368,532 | ||||||||||||||
| Intercompany liabilities | — | 336,127 | — | (336,127 | ) | — | |||||||||||||
| Deferred income tax liabilities | — | 143,303 | — | — | 143,303 | ||||||||||||||
| Postretirement liabilities | — | 54,590 | — | — | 54,590 | ||||||||||||||
| Other liabilities | — | 40,950 | — | — | 40,950 | ||||||||||||||
| Shareholders’ equity: | |||||||||||||||||||
| Common stock | 51,542 | 102 | 10 | (112 | ) | 51,542 | |||||||||||||
| Additional paid in capital | 307,065 | 162 | 115,000 | (115,000 | ) | 307,227 | |||||||||||||
| Retained earnings | 9,537 | 533,191 | 1,154 | — | 543,882 | ||||||||||||||
| Accumulated other comprehensive income | — | (4,238 | ) | — | — | (4,238 | ) | ||||||||||||
| Treasury stock | (59,858 | ) | — | — | — | (59,858 | ) | ||||||||||||
| Total shareholders’ equity | 308,286 | 529,217 | 116,164 | (115,112 | ) | 838,555 | |||||||||||||
| Total liabilities and shareholders’ equity | $ | 458,453 | $ | 1,788,701 | $ | 116,843 | $ | (451,526 | ) | $ | 1,912,471 | ||||||||
December 31, 2001 | Airborne, Inc. | Guarantors | Non-guarantors | Elimination | Consolidated | ||||||||||||||
(in thousands) | |||||||||||||||||||
ASSETS | |||||||||||||||||||
| Current Assets: | |||||||||||||||||||
| Cash and cash equivalents | $ | — | $ | 191,664 | $ | 9,836 | $ | — | $ | 201,500 | |||||||||
| Accounts receivable | — | 28,763 | 97,277 | — | 126,040 | ||||||||||||||
| Spare parts and fuel inventory | — | 38,413 | — | — | 38,413 | ||||||||||||||
| Refundable income taxes | — | 27,161 | — | — | 27,161 | ||||||||||||||
| Deferred income tax assets | — | 30,572 | — | — | 30,572 | ||||||||||||||
| Prepaid expenses and other | — | 27,619 | 402 | — | 28,021 | ||||||||||||||
| Total current assets | — | 344,192 | 107,515 | — | 451,707 | ||||||||||||||
| Property and equipment, net | — | 1,247,373 | — | — | 1,247,373 | ||||||||||||||
| Intercompany advances | 302,279 | 452 | 9,487 | (312,218 | ) | — | |||||||||||||
| Equipment deposits and other assets | 5,963 | 41,912 | — | (111 | ) | 47,764 | |||||||||||||
| Total assets | $ | 308,242 | $ | 1,633,929 | $ | 117,002 | $ | (312,329 | ) | $ | 1,746,844 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||||
| Current Liabilities: | |||||||||||||||||||
| Accounts payable | $ | — | $ | 142,497 | $ | — | $ | (624 | ) | $ | 141,873 | ||||||||
| Salaries, wages and related taxes | — | 75,458 | — | — | 75,458 | ||||||||||||||
| Accrued expenses and income taxes payable | — | 145,380 | 617 | — | 145,997 | ||||||||||||||
| Current portion of debt | — | 107,410 | — | — | 107,410 | ||||||||||||||
| Total current liabilities | — | 470,745 | 617 | (624 | ) | 470,738 | |||||||||||||
| Long-term debt | — | 218,053 | — | — | 218,053 | ||||||||||||||
| Intercompany liabilities | — | 196,593 | — | (196,593 | ) | — | |||||||||||||
| Deferred income tax liabilities | — | 143,526 | — | — | 143,526 | ||||||||||||||
| Postretirement liabilities | — | 39,423 | — | — | 39,423 | ||||||||||||||
| Other liabilities | — | 40,888 | — | — | 40,888 | ||||||||||||||
| Shareholders’ equity: | |||||||||||||||||||
| Common stock | 51,376 | (102 | ) | 10 | (112 | ) | 51,376 | ||||||||||||
| Additional paid in capital | 304,976 | 8 | 115,000 | (115,000 | ) | 304,984 | |||||||||||||
| Retained earnings | 11,758 | 527,411 | 1,375 | — | 540,544 | ||||||||||||||
| Accumulated other comprehensive income | — | (2,820 | ) | — | — | (2,820 | ) | ||||||||||||
| Treasury stock | (59,868 | ) | — | — | — | (59,868 | ) | ||||||||||||
| Total shareholders’ equity | 308,242 | 524,701 | 116,385 | (115,112 | ) | 834,216 | |||||||||||||
| Total liabilities and shareholders’ equity | $ | 308,242 | $ | 1,633,929 | $ | 117,002 | $ | (312,329 | ) | $ | 1,746,844 | ||||||||
The Financial Accounting Standards Board ("FASB") recently issued
Three months ended March 31, 2002 | Airborne, Inc. | Guarantors | Non- guarantors | Consolidated | ||||||||||||
(in thousands) | ||||||||||||||||
| Revenues | $ | — | $ | 788,520 | $ | — | $ | 788,520 | ||||||||
| Operating expenses: | ||||||||||||||||
| Transportation purchased | — | 249,031 | — | 249,031 | ||||||||||||
| Station and ground operations | — | 264,119 | — | 264,119 | ||||||||||||
| Flight operations and maintenance | — | 125,366 | — | 125,366 | ||||||||||||
| General and administrative | 271 | 63,143 | — | 63,414 | ||||||||||||
| Sales and marketing | — | 22,276 | — | 22,276 | ||||||||||||
| Depreciation and amortization | — | 49,121 | — | 49,121 | ||||||||||||
| 271 | 773,056 | — | 773,327 | |||||||||||||
| Earnings (loss) from operations | (271 | ) | 15,464 | — | 15,193 | |||||||||||
| Other income (expense): | ||||||||||||||||
| Interest, net | (175 | ) | (6,696 | ) | — | (6,871 | ) | |||||||||
| Discounts on sales of receivables | — | (965 | ) | (340 | ) | (1,305 | ) | |||||||||
| Other | — | 1,896 | — | 1,896 | ||||||||||||
| Earnings (loss) before income taxes | (446 | ) | 9,699 | (340 | ) | 8,913 | ||||||||||
| Income tax (expense) benefit | 156 | (3,920 | ) | 119 | (3,645 | ) | ||||||||||
| Net earnings (loss) | $ | (290 | ) | $ | 5,779 | $ | (221 | ) | $ | 5,268 | ||||||
Three months ended March 31, 2001 | Airborne, Inc. | Guarantors | Non- guarantors | Consolidated | ||||||||||||
(in thousands) | ||||||||||||||||
| Revenues | $ | — | $ | 823,521 | $ | — | $ | 823,521 | ||||||||
| Operating expenses: | ||||||||||||||||
| Transportation purchased | — | 267,039 | — | 267,039 | ||||||||||||
| Station and ground operations | — | 280,374 | — | 280,374 | ||||||||||||
| Flight operations and maintenance | — | 151,686 | — | 151,686 | ||||||||||||
| General and administrative | 219 | 65,848 | — | 66,067 | ||||||||||||
| Sales and marketing | — | 24,002 | — | 24,002 | ||||||||||||
| Depreciation and amortization | — | 52,638 | — | 52,638 | ||||||||||||
| 219 | 841,587 | — | 841,806 | |||||||||||||
| Loss from operations | (219 | ) | (18,066 | ) | — | (18,285 | ) | |||||||||
| Other income (expense): | ||||||||||||||||
| Interest, net | 19,009 | (23,506 | ) | — | (4,497 | ) | ||||||||||
| Discounts on sales of receivables | — | (4,344 | ) | 586 | (3,758 | ) | ||||||||||
| Other | — | 273 | — | 273 | ||||||||||||
| Earnings (loss) before income taxes | 18,790 | (45,643 | ) | 586 | (26,267 | ) | ||||||||||
| Income tax (expense) benefit | 424 | 9,053 | (205 | ) | 9,272 | |||||||||||
| Net earnings (loss) | $ | 19,214 | $ | (36,590 | ) | $ | 381 | $ | (16,995 | ) | ||||||
Three months ended March 31, 2002 | Airborne, Inc. | Guarantors | Non- guarantors | Consolidated | ||||||||||||
(in thousands) | ||||||||||||||||
| OPERATING ACTIVITIES: | ||||||||||||||||
| Net earnings (loss) | $ | (290 | ) | $ | 5,779 | $ | (221 | ) | $ | 5,268 | ||||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||||||||
| Non-cash operating activities | (5,051 | ) | 65,290 | (119 | ) | 60,120 | ||||||||||
| Change in current assets and liabilities | (144,992 | ) | 162,560 | (7,836 | ) | 9,732 | ||||||||||
| Net cash provided (used) by operating activities | (150,333 | ) | 233,629 | (8,176 | ) | 75,120 | ||||||||||
| INVESTING ACTIVITIES: | ||||||||||||||||
| Net cash used by investing activities | — | (27,458 | ) | — | (27,458 | ) | ||||||||||
| FINANCING ACTIVITIES: | ||||||||||||||||
| Net cash provided (used) by financing activities | 150,333 | (6,330 | ) | — | 144,003 | |||||||||||
| Net increase (decrease) in cash | — | 199,841 | (8,176 | ) | 191,665 | |||||||||||
| Cash and cash equivalents at January 1 | — | 191,664 | 9,836 | 201,500 | ||||||||||||
| Cash and cash equivalents at March 31 | $ | — | $ | 391,505 | $ | 1,660 | $ | 393,165 | ||||||||
Three months ended March 31, 2001 | Airborne, Inc. | Guarantors | Non- guarantors | Consolidated | |||||||||||
(in thousands) | |||||||||||||||
| OPERATING ACTIVITIES: | |||||||||||||||
| Net earnings (loss) | $ | 19,214 | $ | (36,590 | ) | $ | 381 | $ | (16,995 | ) | |||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||||||||||
| Non-cash operating activities | (156 | ) | 52,907 | 206 | 52,957 | ||||||||||
| Change in current assets and liabilities | (2,621 | ) | 57,363 | 4,939 | 59,681 | ||||||||||
| Net cash provided by operating activities | 16,437 | 73,680 | 5,526 | 95,643 | |||||||||||
| INVESTING ACTIVITIES: | |||||||||||||||
| Net cash used by investing activities | — | (24,886 | ) | — | (24,886 | ) | |||||||||
| FINANCING ACTIVITIES: | |||||||||||||||
| Net cash used by financing activities | (16,437 | ) | (27,820 | ) | — | (44,257 | ) | ||||||||
| Net increase in cash | — | 20,974 | 5,526 | 26,500 | |||||||||||
| Cash and cash equivalents at January 1 | — | 39,121 | 1,269 | 40,390 | |||||||||||
| Cash and cash equivalents at March 31 | $ | — | $ | 60,095 | $ | 6,795 | $ | 66,890 | |||||||
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF AND FINANCIAL CONDITIONRESULTS OF OPERATIONS:The Company reported net income forthirdfirst quarter of 2002. The reduction in operating expenses was the primary factor contributing to the enhanced operating performance compared to the first quarter of 2001. We were able to accomplish this performance despite a difficult economic environment that has hampered shipment and revenue growth. The first quarter of 2002 marks the fourth consecutive quarter of improved operating results. This sequential progress can be attributed to the implementation of key strategic initiatives beginning in 2001, including the expansion of $1.7our product line, the implementation of yield management actions, as well as the continued reduction in operating expense levels.$.04$.11 per diluted share.share, including a non-recurring after tax gain of $1.0 million, or $.02 per share, from the sale of certain securities. This compares to a net loss of $5.5$17.0 million or $.11 per share for the third quarter of 2000 and a net loss of $6.4 million or $.13 per share reported in the 2nd quarter of 2001. For the first nine months of 2001, the net loss was $21.6 million or $.45 per share compared to net earnings before a change in accounting of $26.1 million or $.54 per share for the first nine months of 2000. Net earnings reported for the first nine months of 2000, including a $.29 per share credit for a change in accounting were, $40.4 million or $.83 per share.The third quarter of 2001 included non-recurring gains on the sale of certain securities and FCC licensed radio frequencies totaling $8.3 million ($5.4 million after tax or $.11 per share). One time gains for frequency sales and securities gains for the first nine months of 2001 totaled $10.4 million ($6.8 million after tax or $.14 per share compared to $.02$.35 per share in the first nine months of 2000).The results for the third quarter of this year include pre-tax losses2001 and net earnings of approximately $13$2.2 million associated with lost business as a result ofor $.05 per share in the September 11th terrorist attacks.The two day closure of the Company’s air network by order of the Federal government following the attacks resulted in lost revenue and additional costs.The Company was able to partially adjust its network and continue business operations through the temporary expansion of its ground linehaul, hub and sort operations.During the week of the attacks shipment volumes declined 27% compared to year earlier levels. In the weeks following the attacks shipment volumes improved although fourth quarter volumes through early November continuedof 2001. The fourth quarter of 2001 included an after tax credit of $3.2 million, or $.07 per share, related to be approximately 3%on average below volumes of the comparable period of 2000.The Companyfederal compensation recorded a $7.8 million credit for compensation provided under the Air Transportation Safety and System Stabilization Act, ("Act"and after tax gains on the sale of radio frequencies of $.6 million or $.01 per share. Excluding those one-time items, a net loss would have been recorded of $.03 per share. Shipments (in thousands): Domestic Overnight 39,885 45,618 –12.6 % Next Afternoon Service 13,185 13,428 – 1.8 % Second Day Service 23,797 24,215 – 1.7 % Ground Delivery Service 6,163 — n/a 100 Lbs. and Over 51 60 –15.0 % Total Domestic 83,081 83,321 – 0.3 % International Express 1,330 1,600 –16.9 % Freight 87 102 –14.7 % Total International 1,417 1,702 –16.7 % Total Shipments 84,498 85,023 – 0.6 % Average Pounds per Shipment: Domestic 4.44 4.14 7.2 % International 55.43 51.92 6.8 % Average Revenue per Pound: Domestic $ 1.88 $ 2.07 – 9.2 % International $ 0.98 $ 1.04 – 5.8 % Average Revenue per Shipment: Domestic $ 8.53 $ 8.72 – 2.2 % International $ 53.95 $ 54.89 – 1.7 %
Operating results have been negatively impacted by a declining economy, which appears to be experiencing further slowing since the events of September 11th. The Company has experienced shipment volume declines in its higher yielding domestic products and a shift in volume mix towards lighter weight lower yielding deferred products. These factors have hampered revenue growth. Despite the negative revenue growth, earnings from operations improved $6.6 million over the second quarter of 2001 and $4.4 million over the third quarter 2000. The improved results are due primarily to cost reduction actions the Company has taken.
The following table sets forth selected shipment and revenue data for the periods indicated:
| Three Months Ended | Nine Months Ended | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30 | September 30 | |||||||||||||||||
| 2001 | 2000 | Change | 2001 | 2000 | Change | |||||||||||||
| Shipments (in thousands): | ||||||||||||||||||
| Domestic | ||||||||||||||||||
| Overnight | 40,389 | 45,540 | (11.3 | %) | 130,148 | 139,694 | (6.8 | %) | ||||||||||
| Next Afternoon Service | 12,327 | 13,430 | (8.2 | %) | 38,963 | 41,044 | (5.1 | %) | ||||||||||
| Second Day Service | 21,983 | 19,466 | 12.9 | % | 70,524 | 58,398 | 20.8 | % | ||||||||||
| Ground Delivery Service | 1,517 | - | N/A | 1,848 | - | N/A | ||||||||||||
| 100 Lbs. And Over | 57 | 72 | (20.8 | %) | 184 | 214 | (14.0 | %) | ||||||||||
| Total Domestic | 76,273 | 78,508 | (2.8 | %) | 241,667 | 239,350 | 1.0 | % | ||||||||||
| International | ||||||||||||||||||
| Express | 1,375 | 1,506 | (8.7 | %) | 4,524 | 4,584 | (1.3 | %) | ||||||||||
| Freight | 95 | 102 | (6.8 | %) | 299 | 297 | 0.7 | % | ||||||||||
| Total International | 1,470 | 1,608 | (8.6 | %) | 4,823 | 4,881 | (1.2 | %) | ||||||||||
| Total Shipments | 77,743 | 80,116 | (3.0 | %) | 246,490 | 244,231 | 0.9 | % | ||||||||||
| Average Pounds per Shipment: | ||||||||||||||||||
| Domestic | 4.24 | 4.27 | (0.7 | %) | 4.17 | 4.27 | (2.3 | %) | ||||||||||
| International | 60.55 | 55.69 | 8.7 | % | 55.03 | 51.01 | 7.9 | % | ||||||||||
| Average Revenue per Pound: | ||||||||||||||||||
| Domestic | $ | 2.04 | $ | 2.07 | (1.4 | %) | $ | 2.06 | $ | 2.07 | (0.5 | %) | ||||||
| International | $ | 0.99 | $ | 1.09 | (9.2 | %) | $ | 1.02 | $ | 1.11 | (8.1 | %) | ||||||
| Average Revenue per Shipment | ||||||||||||||||||
| Domestic | $ | 8.82 | $ | 8.91 | (1.0 | %) | $ | 8.74 | $ | 8.93 | (2.1 | %) | ||||||
| International | $ | 61.41 | $ | 61.29 | 0.2 | % | $ | 57.16 | $ | 57.47 | (0.5 | %) | ||||||
Domestic revenues decreased 3.3% and .7% in the third quarter and first nine months of 2001, respectively, in comparison to the same periods in 2000. Average domestic revenue per shipment declined 1.0% to $8.82 in the third quarter and 2.1% to $8.74 for the first nine months of 2001. The yield decreases are due to declines in higher yielding overnight express shipments coupled with slightly lower average shipment weights in all product categories. Domestic revenues have been aided by a fuel surchargeamounts recorded were based on revenue of 3% that was originally implemented in February 2000 and was raised to 4% beginning October 2000. In the third quarter and for the first nine months of 2001 fuel surcharge revenues were $22.4 million and $70.7 million, respectively. This compares to fuel surcharge revenues of$19.5 million and $51.9 million being recognized in the third quarter and first nine months of 2000. In January 2001 the Company announced a new pricing structure for its domestic services that included a rate increase, a shift to zone-based pricing and a non-scheduled pickup fee. These actions were targeted to improve yields and increase revenues. However, the lack of shipment growth and the shift by domestic customers to lower yielding, less time sensitive deferred services has diluted the impact.
Domestic shipments decreased 2.8% in the third quarter and increased 1.0% in the first nine months of 2001 compared to the same periods of 2000. The first nine months of 2001 had one less operating day than 2000. Higher yielding overnight shipments accounted for 53.0% of total domestic shipments in the third quarter compared to 58.0% in the third quarter of 2000. Overnight shipments declined 11.3% in the third quarter and 6.8% for the first nine months of 2001. Total shipments for the quarter and year to date periods include the Company’s airborne@home product, which was introduced in late 1999 to service the e-commerce and business to residential consumer markets. These shipments, included in the Second Day Service category for reporting purposes, totaled 4.7 million in the third quarter and 15.5 million in the first nine months of 2001 compared to 1.8 million and 3.5 million shipments in the comparable periods in 2000.
In April 2001 the Company expanded its service portfolio by introducing a new product, Ground Delivery Service (GDS). The new product leverages the Company’s sort and linehaul infrastructure and is being marketed to a target customer base. The Company believes GDS is an important initiative that is targeted to establish growth both from the deferred ground segment where it has not previously participated, and from the ability to leverage GDS with the cross marketing of higher yielding air express shipments. GDS totaled 1.5 million shipments in the third quarter and 1.8 million for the first nine months of 2001. The Company is targeting GDS volumes of between 50,000 and 60,000 shipments per day in the fourth quarter of 2001.
International revenues decreased 8.4% in the third quarter and 1.7% for the first nine months of 2001 compared to a year ago. Total international shipments decreased 8.6% in the third quarter of 2001 compared to 2000 and were 1.2% lower in the first nine months of 2001 compared to 2000.International revenues and shipments in the third quarter were negatively impacted by the terrorist attacks which not only suspended domestic flights but closed U.S. borders and suspended flight schedules that disrupted international operations for approximately two weeks. The slow economic environment and a typhoon in the Far East also hampered shipment volumes. Despite these events the international segments contribution to earnings for the third quarter was a profit of $.5 million compared to a loss of $3.1 million in 2000. The segment loss was $1.8 million in the first nine months of 2001 compared to $6.0 million in the comparable period of 2000. This improved segment performance was due primarily to improvement in margins on the international heavy weight freight product.
Operating expenses were 99.8% and 100.9% of revenues in the third quarter and first nine months of 2001, respectively, compared to 100.4% and 97.7% for the corresponding periods in 2000. Operating cost per shipment decreased 1.4% to $9.92 in the third quarter compared to $10.07 in the third quarter of 2000. Operating cost per shipment for the first nine months of 2001 increased 1.5% to $9.86 compared to the same period in 2000. Operating cost per shipment information and operating costs expressed as a percentage of revenues for the third quarter were negatively impacted by the loss of business due to the events of September 11th. However, all categories of operating costs, except for sales and marketing category, decreased in the third quarter compared to the second quarter of 2001 as a resultour interpretation of the continued cost reduction initiatives.
The Company has been aggressively managing costs through a number of cost cutting measures to assist in improving operating results. The Company has reducedAct and combined flight segments, reduced labor hours, and cut discretionary expenses to achieve cost efficiencies. Specifically, labor hours have been reduced which resulted in a 3.9% improvement in productivity, as measured by shipments handled per paid employee hour, during the third quarter, over levels incurred during the same period of 2000. Hours paid during the third quarter of 2001 were approximately 3.3% and 5.8% less than those paid during the second and first quarters of 2001, respectively. Productivity for the first nine months of 2001 showed an improvement of 3.2% compared to the first nine months of 2000.The Company continues to manage productivity at levels sufficient to maintain a high level of overall customer service.
Transportation purchased as a percentage of revenues was 32.9% in the third quarter of 2001 compared to 32.7% a year ago. This category of expense was 32.7% of revenues for the first nine months of 2001 compared to 31.5% in 2000. The increase in costs as a percentage of revenues was primarily due to increased farmed out pickup and delivery, surface linehaul costs and delivery costs paid to the U.S. Postal Service for delivery of shipments. These increases were partially offset by lower international commercial airline and offshore agent related costs, in part due to lower shipment volumes.
Station and ground expense was 33.1% of revenues in the third quarter compared to 32.8% a year ago. Station and ground expense was 33.1% of revenues in the first nine months of 2001 versus 32.0% for the same period in 2000. Total costs in this category decreased $6.8 million from the level incurred in the second quarter of 2001 and $22.2 million from the first quarter of 2001. Reductions in labor hours incurred for pickup and delivery, sort and other field operations were the primary factors for the decline in expense in comparison to the second and first quarter of 2001 levels.
Flight operations and maintenance expense as a percentage of revenues during the third quarter of 2001 decreased to 17.2% as compared to 17.9% in the same period of 2000 and 17.7% in the 2nd quarter of 2001. For the first nine months of 2001 flight operations costs were 18.1% of revenues compared to 17.4% in the comparable period of 2000. The average aviation fuel price for the third quarter and first nine months of 2001 was $.91 and $.95 per gallon, respectively, compared to $1.03 and $.96 per gallon, respectively for the comparable periods in 2000. Aviation fuel consumption in the third quarter decreased 15.2% to 37.8 million gallons compared to 44.6 million gallons in the third quarter of 2000. Consumption in the second and first quarters of 2001 was 40.5 million and 43.6 million gallons, respectively.For the first nine months of 2001, aviation fuel consumption of 122.0 million
gallons was 10.2% less than consumption for the comparable period in 2000. The decrease in consumption both sequentially and year over year is due, in part, to management efforts to reduce and combine certain flight segments to control costs beginning in the second quarter of 2001. Additionally, fuel consumption was lower due to the two day grounding of aircraft in September. Also, the Company has placed five additional 767 aircraft in service since the third quarter of 2000 thereby allowing less fuel-efficient DC-8 aircraft to be moved to shorter lane segments, backup status or to be removed from service. Maintenance costs decreased during the third quarter compared to a year ago but increased during the first nine months of 2001 as a result of having additional 767 aircraft in service compared to the same periods of last year. The Company had 118 aircraft in service (19 Boeing 767s, 25 DC-8’s and 74 DC-9’s) at the end of the third quarter compared to 117 aircraft at the end of the third quarter of 2000.
General and administrative expense was 8.1% and 8.3% of revenues for the third quarter and first nine months of 2001, respectively. This compares to 8.0% and 7.9% of revenues for the third quarter and first nine months of 2000, respectively. Inclusive in this cost category of expense is a one-time charge of $2.9 million, recorded in the second quarter of 2001, for severance and restructuring costs associated with the announced reduction in force effective June 1st. The Company has aggressively reduced costs in this category of expense in 2001 and continues to employ strong cost controls over labor and discretionary costs.
Sales and marketing costs were 2.8% of revenues in the third quarter and 2.5% in the first nine months of 2001 compared to 2.5% in the comparable periods of 2000. Increased sales personnel and compensation costs as well as expanded marketing efforts to attract new business have resulted in higher levels of expenditures in this category.
Depreciation and amortization expense constituted 6.7% of revenues in the third quarter and 6.5% in the first nine months of 2001. This compares to 6.6% of revenues for the third quarter and 6.3% in the first nine months of 2000. Depreciation expense in the third quarter of 2001 decreased slightly from the amounts recorded a year ago due to lower levels of capital expenditures in 2001 coupled with certain aircraft becoming fully depreciated. These declines offset the depreciation effects of placing additional 767 aircraft in service since the end of the third quarter of last year.
Interest expense in the third quarter and first nine months of 2001 was lower than in 2000 due, in part, to lower average borrowings outstanding. Additionally, interest capitalized was $2.0 million in the first nine months of 2001 compared to $5.0 million in the like period of 2000. The lower level of average borrowings was a result of the off balance sheet refinancing of $200 million of long-term debt under an accounts receivable securitization facility that was implemented in December 2000. Debt levels were increased in August 2001 when the Company completed two sale-leaseback transactions for five 767 aircraft, accounted for as capitalized leases, which provided proceeds of $102.8 million.
Discounts associated with recording the obligation to fund the purchaser’s costs under the Company’s accounts receivable securitization facility were $2.0 million in the third quarter of 2001 and $8.0 million for the year to date period. The Company considers this expense to be an interest type of financing cost. Because of the sales recognition treatment associated with this type of financing, the cost is recorded separate from interest expense.
Included in other income were non-recurring gains associated from the sales of FCC licensed radio frequencies totaling $6.2 million in the third quarter of 2001 and $8.3 million for the first nine months of 2001. The Company isrules. We are in the process of converting from voicecompleting final information and audit filings with the Department of Transportation (“DOT”) and, while we believe we have complied with the Act, the ultimate amount of proceeds we will realize is subject to digital communication technology to support its pickupaudit and delivery operations. The Company anticipates recording an additional $1.0 million in gains ininterpretation by the fourth quarterDOT. We cannot be assured of 2001the ultimate outcome of the DOT’s final review, but it is possible that will substantially complete the sale of these frequencies for the foreseeable future. Additionally, a non-recurring gain of $2.1 million was recorded and included in other income during the third quarter of 2001 from the sale of shares of Equant N.V.These shares were acquired through the Company’s participation in SITA, a cooperative of major airline companies, which primarily provides data communication servicesreduction to the air transport industry. amount of compensation previously recognized could occur.
The Company’s effective tax benefit rate of 33.5% for the first nine months of 2001 compared to an effective tax expense rate of 38.1% recorded in the first nine months of 2000. The effective tax expense rate was 47.6% for the third quarter of 2001 compared to a tax benefit rate of 39.9% in the third quarter of 2000. The lower tax benefit rate recorded for the first nine months of 2001 as compared to the tax expense rate incurred in 2000 is a function of the provision impact of non-deductible expenses and state taxes. The effective tax rate for 2001 is difficult to determine due to the provision impact and levels of nondeductible expenses and state taxes in relation to earnings.
The strengthperformance of the U.S. and global economies will have an impact on theour operating results of operations for the balance of 2001 and into 2002 and beyond. The current lack of visibilitycertainty regarding sustained economic growth has caused the Companyus to expect continued pressure on year over year shipment and revenue growth, particularly in itsour higher yielding overnight express product. products for the balance of 2002. During the first six weeks of the second quarter of 2002 core express shipment volumes continue to be lower than core express volumes for the comparable period of 2001.
we expected increases in 2002 in employee health care, pension and insurance related costs. While employee healthcare costs trended lower than expected in the first quarter of 2002, we still anticipate that the impact of the increase in these categories of expense will be in the range of $25 to $30 million for the year.
Capital expenditures continue to be a primary factor affecting the financial condition of the Company. During the nine months of 2001, total capital expenditures net of dispositions were $98.3 million compared to $298.4 million during the corresponding period of 2000.2001. Capital spending has beenlevels were reduced significantly in 2001 comparedin comparison to 2000 due toprevious year levels through management efforts to maintainreduce spending at levels that better matchto a level below the lower level of operating performance and shipment volume growth. The Company currently anticipates 2001cash flow generated from operations. We anticipate the level of capital expendituresspending for 2002 to be approximately $130up to $175 million, down from the previous targetcompared to $126 million in 2001, primarily as a result of $170 million.
The Company’s operating cash flow is a major sourcecommitted aircraft acquisitions and technology investments. We took delivery of liquidity. Additional liquidity of $50 million was providedone 767 aircraft in the first nine monthsquarter of 2001 through2002 and anticipate taking delivery of up to two additional aircraft this year. Growth in the new ground product is not anticipated to require significant capital expenditures since it is
The Company alsofacility).
In July 2001, the Company arranged a TRAC (Terminal Rental Adjustment Clause) Lease facility for prospective vehicle acquisitions of up to $20 million in 2001. Historically, the Company has purchased its vehicles. With the TRAC Lease, Airborne has the option to purchase the delivery vehicles at the end of the lease term. As of September 30, 2001 the Company had placed $3.4pay off $100 million of vehicle acquisitions under this arrangement.
senior notes that mature in December 2002.
The Company’s ratio of long-term debt to total capitalization (exclusive of the receivable securitization) was 24.7% at September 30, 2001 compared to 24.6% at December 31, 2000 and 30.1% at September 30, 2000.
In management’sour opinion, existing cash reserves, internally generated cashflowsand cash equivalents coupled with anticipated cash flow from operations coupled with resourcesand available capacity under the accounts receivable securitization facility and the revolvingbank credit agreement should provide adequate flexibility to financefor financing capital expenditures and meetfunding debt maturities scheduled in 2002.
FORWARD LOOKING STATEMENTS:
Statements contained herein and in other parts of this report, which are not historical facts, are considered forward-looking statements (as such term is definedour net deferred tax asset in the Private Securities Litigation Reform Actfuture, an adjustment to the deferred tax asset would be charged to income in the period such determination was made.
EXHIBIT NO. 10 Material ContractsItem 4. Submission of Matters to a Vote of Security Holders. James H. Carey 30,771,970 9,581,829 Carl D. Donaway 31,113,563 9,240,236 Andrew B. Kim 30,786,764 9,567,035 10(a) Employment Agreement dated April 24, 2001 between the Company and Mr. Robert T. Christensen. Substantially identical agreements exist between the Company and most of its officers.Richard M. Rosenberg Harold M. Messmer, Jr. William Swindells Mary Agnes Wilderotter Rosalie J. Wolf
Votes Cast For Proposal
Votes Cast Against Proposal
Abstentions
Votes Cast For Proposal
Votes Cast Against Proposal
Abstentions
Votes Cast For Proposal
Votes Cast Against Proposal
Abstentions
Votes Cast For Proposal
Votes Cast Against Proposal
Abstentions
Votes Cast For Proposal
Votes Cast Against Proposal
Abstentions
| Exhibit No. 10 | Material Contracts | |
| 10(a) | Executive Incentive Compensation Plan (EICP) 2000-2004 | |
| 10(b) | ||
| 10(c) | First Amendment to Amended and Restated Credit Agreement dated |
AIRBORNE, INC. (Registrant) | ||||||||
| Date: | 5/14/02 | /S/ LANNY H. MICHAEL | ||||||
Lanny H. Michael Executive Vice President, Chief Financial Officer | ||||||||
| Date: | 5/14/02 | /S/ ROBERT T. CHRISTENSEN | ||||||
| Robert T. Christensen | ||||||||
| Chief Accounting Officer | ||||||