15 (d)15(d) OF20012002Registrant’s telephone number, including area code:(206) 285-4600YESYes: x No: NO o¨3,240,5263,234,526 treasury shares)20012002 48,103,54548,423,360 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 September 30, | Nine Months Ended September 30, | |||||||||||||||
2002 | 2001 | 2002 | 2001 | |||||||||||||
REVENUES: | ||||||||||||||||
Domestic | $ | 748,609 | $ | 682,522 | $ | 2,180,589 | $ | 2,132,856 | ||||||||
International | 94,152 | 90,266 | 261,143 | 275,678 | ||||||||||||
842,761 | 772,788 | 2,441,732 | 2,408,534 | |||||||||||||
OPERATING EXPENSES: | ||||||||||||||||
Transportation purchased | 285,455 | 254,080 | 801,853 | 787,204 | ||||||||||||
Station and ground operations | 282,301 | 257,326 | 812,378 | 802,480 | ||||||||||||
Flight operations and maintenance | 134,886 | 133,286 | 392,783 | 428,658 | ||||||||||||
General and administrative | 64,326 | 61,129 | 192,977 | 194,017 | ||||||||||||
Sales and marketing | 22,862 | 21,689 | 68,630 | 69,020 | ||||||||||||
Depreciation and amortization | 49,547 | 51,655 | 145,399 | 156,977 | ||||||||||||
Federal legislation compensation | — | (7,800 | ) | — | (7,800 | ) | ||||||||||
839,377 | 771,365 | 2,414,020 | 2,430,556 | |||||||||||||
EARNINGS (LOSS) FROM OPERATIONS | 3,384 | 1,423 | 27,712 | (22,022 | ) | |||||||||||
OTHER INCOME (EXPENSE): | ||||||||||||||||
Interest income | 1,458 | 560 | 3,772 | 879 | ||||||||||||
Interest expense | (9,108 | ) | (5,484 | ) | (25,778 | ) | (14,754 | ) | ||||||||
Discount on sales of receivables | (738 | ) | (2,007 | ) | (2,928 | ) | (7,993 | ) | ||||||||
Other | 196 | 8,779 | 2,499 | 11,355 | ||||||||||||
EARNINGS (LOSS) BEFORE INCOME TAXES | (4,808 | ) | 3,271 | 5,277 | (32,535 | ) | ||||||||||
INCOME TAX EXPENSE (BENEFIT) | (1,750 | ) | 1,558 | 2,610 | (10,892 | ) | ||||||||||
NET EARNINGS (LOSS) | $ | (3,058 | ) | $ | 1,713 | $ | 2,667 | $ | (21,643 | ) | ||||||
NET EARNINGS (LOSS) PER SHARE: | ||||||||||||||||
BASIC | $ | (0.06 | ) | $ | 0.04 | $ | 0.06 | $ | (0.45 | ) | ||||||
DILUTED | $ | (0.06 | ) | $ | 0.04 | $ | 0.05 | $ | (0.45 | ) | ||||||
DIVIDENDS PER SHARE | $ | 0.04 | $ | 0.04 | $ | 0.12 | $ | 0.12 | ||||||||
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 $ 332,976 $ 201,500 Trade accounts receivable, less allowance of $11,939 and $11,509 254,940 126,040 Spare parts and fuel inventory 36,972 38,413 Refundable income taxes 2,739 27,161 Deferred income tax assets 33,967 30,572 Prepaid expenses and other 31,262 28,021 TOTAL CURRENT ASSETS 692,856 451,707 PROPERTY AND EQUIPMENT, NET 1,186,703 1,247,373 EQUIPMENT DEPOSITS and OTHER ASSETS 39,950 47,764 TOTAL ASSETS $ 1,919,509 $ 1,746,844 CURRENT LIABILITIES: Accounts payable $ 147,718 $ 141,873 Salaries, wages and related taxes 93,141 75,458 Accrued expenses 133,737 145,997 Current portion of long-term obligations 109,691 107,410 TOTAL CURRENT LIABILITIES 484,287 470,738 LONG-TERM OBLIGATIONS 371,167 218,053 DEFERRED INCOME TAX LIABILITIES 146,555 143,526 POST RETIREMENT LIABILITIES 38,529 39,423 OTHER LIABILITIES 49,283 40,888 COMMITMENTS AND CONTINGENCIES 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 51,657,886 and 51,375,711 shares 51,658 51,376 Additional paid-in capital 308,812 304,984 Retained earnings 537,169 540,544 Accumulated other comprehensive loss (8,093 ) (2,820 ) 889,546 894,084 Treasury stock, 3,234,526 and 3,240,526 shares, at cost (59,858 ) (59,868 ) 829,688 834,216 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 1,919,509 $ 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) $ 2,667 $ (21,643 ) Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 145,399 156,977 Deferred income taxes (366 ) 12,010 Postretirement obligations (20,190 ) 7,085 Other 6,752 (10,947 ) CASH PROVIDED BY OPERATIONS 134,262 143,482 Change in: Receivable securitization facility (100,000 ) 50,000 Trade accounts receivable (28,900 ) 44,917 Inventories and prepaid expenses (1,800 ) (19,403 ) Refundable income taxes 24,422 (2,348 ) Accounts payable 5,845 (52,416 ) Accrued expenses, salaries and taxes payable 24,718 24,532 NET CASH PROVIDED BY OPERATING ACTIVITIES 58,547 188,764 INVESTING ACTIVITIES: Additions to property and equipment (71,154 ) (98,342 ) Proceeds from sale of securities 3,778 2,117 Proceeds from sale of radio frequencies 5 8,303 Other 2,943 2,391 NET CASH USED BY INVESTING ACTIVITIES (64,428 ) (85,531 ) FINANCING ACTIVITIES: Issuance of convertible debt, net of issuance costs 145,125 1,596 Principal payments on debt (5,846 ) (902 ) Dividends paid (5,800 ) (5,773 ) Exercise of stock options 4,120 788 Shareholder rights redemption (242 ) — Payments on bank notes, net — (103,000 ) Issuance of aircraft loan — 61,975 Proceeds on sale leaseback of aircraft — 40,800 NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 137,357 (4,516 ) NET INCREASE IN CASH 131,476 98,717 CASH AND CASH EQUIVALENTS AT JANUARY 1 201,500 40,390 CASH AND CASH EQUIVALENTS AT SEPTEMBER 30 $ 332,976 $ 139,107
20012002 (Unaudited)PREPARATION:PREPARATION20012002 presentation.DEBT:OBLIGATIONSdebt consistsobligations consist of the following: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 notes, 8.875%, due December 2002 $ 100,000 $ 100,000 Senior notes, 7.35%, due September 2005 100,000 100,000 Convertible senior notes, 5.75%, due April 2007 150,000 — Aircraft loan 58,609 61,651 Refunding revenue bonds, effective rate of 1.65% as of September 30, 2002, due June 2011 13,200 13,200 Other 6,994 7,542 Total long-term debt 428,803 282,393 Capital lease obligations 52,055 43,070 Total long-term obligations 480,858 325,463 Less current portion (109,691 ) (107,410 ) Total long-term obligations, net $ 371,167 $ 218,053 Company hasproceeds of the sale are intended, in part, to fund the repayment of $100 million of 8.875% senior 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. At the current conversion price, a total of 6,413,985 shares are issuable upon full conversion of the Notes.providingprovides for a total commitment of $275 million. Inmillion 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 facilityagreement is dependent on a borrowing base determined by the amount of collateral pledged, with a maximum commitment of $275 million.eligible collateral. At September 30, 20012002, the Company had eligible collateral in the borrowing base to support $242 million of the $275 million commitment. The Company has the ability to increase the borrowing base by pledging additional eligible collateral. At September 30,
was $32,000 and $97,000, respectively.
Weightedoptions and, when dilutive, the assumed conversion of the convertible senior notes.
Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||
2002 | 2001 | 2002 | 2001 | |||||||||||
NET EARNINGS (LOSS): | $ | (3,058 | ) | $ | 1,713 | $ | 2,667 | $ | (21,643 | ) | ||||
WEIGHTED AVERAGE SHARES OUTSTANDING: | ||||||||||||||
Basic weighted average shares outstanding | 48,408 | 48,104 | 48,340 | 48,082 | ||||||||||
Stock options | — | 24 | 337 | — | ||||||||||
Diluted weighted average shares outstanding | 48,408 | 48,128 | 48,677 | 48,082 | ||||||||||
EARNINGS (LOSS) PER SHARE: | ||||||||||||||
Basic | $ | (0.06 | ) | $ | 0.04 | $ | 0.06 | $ | (0.45 | ) | ||||
Diluted | (0.06 | ) | 0.04 | 0.05 | (0.45 | ) | ||||||||
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 | ||||
D—G—SEGMENT INFORMATION SEGMENT REVENUES: Domestic $ 748,609 $ 682,522 $ 2,180,589 $ 2,132,856 International 94,152 90,266 261,143 275,678 $ 842,761 $ 772,788 $ 2,441,732 $ 2,408,534 SEGMENT EARNINGS (LOSS) FROM OPERATIONS: Domestic $ 4,151 $ 920 $ 30,579 $ (20,230 ) International (767 ) 503 (2,867 ) (1,792 ) $ 3,384 $ 1,423 $ 27,712 $ (22,022 )
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 | ||||||
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
Three Months Ended September 30, 2002 | Nine Months Ended September 30, 2002 | |||||||||||||||||||||||
Before Tax | Income Tax (Expense) or Benefit | Net of Tax | Before Tax | Income Tax (Expense) or Benefit | Net of Tax | |||||||||||||||||||
2002 | ||||||||||||||||||||||||
Unrealized securities losses arising during the period | $ | (930 | ) | $ | 358 | $ | (572 | ) | $ | (739 | ) | $ | 285 | $ | (454 | ) | ||||||||
Less: Reclassification adjustment for losses realized in net income | — | — | — | (1,655 | ) | 637 | (1,018 | ) | ||||||||||||||||
Net unrealized securities losses | (930 | ) | 358 | (572 | ) | (2,394 | ) | $ | 922 | $ | (1,472 | ) | ||||||||||||
Foreign currency translation adjustments | 160 | (61 | ) | 99 | 290 | (111 | ) | 179 | ||||||||||||||||
Unrealized loss on interest rate swap | (3,078 | ) | 1,184 | (1,894 | ) | (4,494 | ) | 1,730 | (2,764 | ) | ||||||||||||||
Additional minimum pension liabilities | — | — | — | (1,729 | ) | 665 | (1,064 | ) | ||||||||||||||||
Fuel hedge option | (247 | ) | 95 | (152 | ) | (247 | ) | 95 | (152 | ) | ||||||||||||||
Other comprehensive loss | $ | (4,095 | ) | $ | 1,576 | $ | (2,519 | ) | $ | (8,574 | ) | $ | 3,301 | $ | (5,273 | ) | ||||||||
Three Months Ended September 30, 2001 | Nine Months Ended September 30, 2001 | |||||||||||||||||||||||
Before Tax | Income Tax Benefit | Net of Tax | Before Tax | Income Tax Benefit | Net of Tax | |||||||||||||||||||
2001 | ||||||||||||||||||||||||
Unrealized securities losses arising during the period | $ | (1,724 | ) | $ | 664 | $ | (1,060 | ) | $ | (1,557 | ) | $ | 599 | $ | (958 | ) | ||||||||
Less: Reclassification adjustment for losses 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 loss | $ | (1,765 | ) | $ | 680 | $ | (1,085 | ) | $ | (1,940 | ) | $ | 725 | $ | (1,215 | ) | ||||||||
Other income includes
Three months ended September 30, 2002 | Nine months ended September 30, 2002 | |||||||||||||||||||||||||||||||||||||||
Airborne Express, Inc. | Airborne Inc. | Guarantors | Non- guarantors | Consolidated | Airborne Express, Inc. | Airborne Inc. | Guarantors | Non- guarantors | Consolidated | |||||||||||||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||||||||||||||||||
Revenues | $ | 827,553 | $ | — | $ | 15,208 | $ | — | $ | 842,761 | $ | 2,395,372 | $ | — | $ | 46,360 | $ | — | $ | 2,441,732 | ||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||||||||||
Transportation purchased | 495,504 | — | (210,049 | ) | — | 285,455 | 1,445,117 | — | (643,264 | ) | — | 801,853 | ||||||||||||||||||||||||||||
Station and ground operations | 237,746 | — | 44,555 | — | 282,301 | 686,045 | — | 126,333 | — | 812,378 | ||||||||||||||||||||||||||||||
Flight operations and maintenance | (92 | ) | — | 135,576 | (598 | ) | 134,886 | (1,416 | ) | — | 396,000 | (1,801 | ) | 392,783 | ||||||||||||||||||||||||||
General and administrative | 48,815 | 252 | 15,209 | 50 | 64,326 | 140,107 | 1,041 | 51,700 | 129 | 192,977 | ||||||||||||||||||||||||||||||
Sales and marketing | 22,659 | — | 203 | — | 22,862 | 67,996 | — | 634 | — | 68,630 | ||||||||||||||||||||||||||||||
Depreciation and amortization | 10,442 | — | 39,023 | 82 | 49,547 | 33,181 | — | 111,971 | 247 | 145,399 | ||||||||||||||||||||||||||||||
815,074 | 252 | 24,517 | (466 | ) | 839,377 | 2,371,030 | 1,041 | 43,374 | (1,425 | ) | 2,414,020 | |||||||||||||||||||||||||||||
Earnings (loss) from operations | 12,479 | (252 | ) | (9,309 | ) | 466 | 3,384 | 24,342 | (1,041 | ) | 2,986 | 1,425 | 27,712 | |||||||||||||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||||||||||||||||
Interest income | 1,458 | — | — | — | 1,458 | 3,772 | — | — | — | 3,772 | ||||||||||||||||||||||||||||||
Interest expense | (7,154 | ) | — | (1,954 | ) | — | (9,108 | ) | (20,108 | ) | — | (5,670 | ) | — | (25,778 | ) | ||||||||||||||||||||||||
Discount on sales of receivables | (990 | ) | — | 1 | 251 | (738 | ) | (2,956 | ) | — | — | 28 | (2,928 | ) | ||||||||||||||||||||||||||
Other | 196 | — | — | — | 196 | 2,499 | — | — | — | 2,499 | ||||||||||||||||||||||||||||||
Earnings (loss) before income taxes | 5,989 | (252 | ) | (11,262 | ) | 717 | (4,808 | ) | 7,549 | (1,041 | ) | (2,684 | ) | 1,453 | 5,277 | |||||||||||||||||||||||||
Income tax expense (benefit) | 2,141 | (88 | ) | (3,727 | ) | (76 | ) | (1,750 | ) | 3,053 | (364 | ) | 410 | (489 | ) | 2,610 | ||||||||||||||||||||||||
Net earnings (loss) | $ | 3,848 | $ | (164 | ) | $ | (7,535 | ) | $ | 793 | $ | (3,058 | ) | $ | 4,496 | $ | (677 | ) | $ | (3,094 | ) | $ | 1,942 | $ | 2,667 | |||||||||||||||
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 | ||||||
Three months ended September 30, 2001 | Nine months ended September 30, 2001 | |||||||||||||||||||||||||||||||||||||||
Airborne Express, Inc. | Airborne Inc. | Guarantors | Non- guarantors | Consolidated | Airborne Express, Inc. | Airborne Inc. | Guarantors | Non- guarantors | Consolidated | |||||||||||||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||||||||||||||||||
Revenues | $ | 752,512 | $ | — | $ | 20,276 | $ | — | $ | 772,788 | $ | 2,350,127 | $ | — | $ | 58,407 | $ | — | $ | 2,408,534 | ||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||||||||||
Transportation purchased | 486,300 | — | (232,220 | ) | — | 254,080 | 1,506,245 | — | (719,041 | ) | — | 787,204 | ||||||||||||||||||||||||||||
Station and ground operations | 224,817 | — | 32,509 | — | 257,326 | 685,803 | — | 116,677 | — | 802,480 | ||||||||||||||||||||||||||||||
Flight operations and maintenance | 45 | — | 133,757 | (516 | ) | 133,286 | (117 | ) | — | 430,590 | (1,815 | ) | 428,658 | |||||||||||||||||||||||||||
General and administrative | 39,325 | 125 | 21,640 | 39 | 61,129 | 140,106 | 572 | 53,221 | 118 | 194,017 | ||||||||||||||||||||||||||||||
Sales and marketing | 21,378 | — | 311 | — | 21,689 | 68,017 | — | 1,003 | — | 69,020 | ||||||||||||||||||||||||||||||
Depreciation and amortization | 12,449 | 7 | 39,115 | 84 | 51,655 | 36,979 | 157 | 119,592 | 249 | 156,977 | ||||||||||||||||||||||||||||||
Federal legislation compensation | (7,800 | ) | — | — | — | (7,800 | ) | (7,800 | ) | — | — | — | (7,800 | ) | ||||||||||||||||||||||||||
776,514 | 132 | (4,888 | ) | (393 | ) | 771,365 | 2,429,233 | 729 | 2,042 | (1,448 | ) | 2,430,556 | ||||||||||||||||||||||||||||
Earnings (loss) from operations | (24,002 | ) | (132 | ) | 25,164 | 393 | 1,423 | (79,106 | ) | (729 | ) | 56,365 | 1,448 | (22,022 | ) | |||||||||||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||||||||||||||||
Interest income | 560 | — | — | — | 560 | 879 | — | — | — | 879 | ||||||||||||||||||||||||||||||
Interest expense | 322 | — | (5,806 | ) | — | (5,484 | ) | 2,356 | (1,576 | ) | (15,534 | ) | — | (14,754 | ) | |||||||||||||||||||||||||
Dividend income | — | — | — | — | — | — | 20,000 | (20,000 | ) | — | — | |||||||||||||||||||||||||||||
Discount on sales of receivables | (2,537 | ) | — | — | 530 | (2,007 | ) | (10,050 | ) | — | — | 2,057 | (7,993 | ) | ||||||||||||||||||||||||||
Other | 8,779 | — | — | — | 8,779 | 11,355 | — | — | 11,355 | |||||||||||||||||||||||||||||||
Earnings (loss) before income taxes | (16,878 | ) | (132 | ) | 19,358 | 923 | 3,271 | (74,566 | ) | 17,695 | 20,831 | 3,505 | (32,535 | ) | ||||||||||||||||||||||||||
Income tax expense (benefit) | (5,675 | ) | (46 | ) | 7,231 | 48 | 1,558 | �� | (26,185 | ) | (807 | ) | 15,887 | 213 | (10,892 | ) | ||||||||||||||||||||||||
Net earnings (loss) | $ | (11,203 | ) | $ | (86 | ) | $ | 12,127 | $ | 875 | $ | 1,713 | $ | (48,381 | ) | $ | 18,502 | $ | 4,944 | $ | 3,292 | $ | (21,643 | ) | ||||||||||||||||
September 30, 2002 | Airborne Express, Inc. | Airborne Inc. | Guarantors | Non-guarantors | Elimination | Consolidated | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Current Assets: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 330,387 | $ | — | $ | 89 | $ | 2,500 | $ | — | $ | 332,976 | ||||||||||||
Trade accounts receivable, less allowance | 20,110 | — | 9,661 | 225,169 | — | 254,940 | ||||||||||||||||||
Spare parts and fuel inventory | — | — | 34,003 | 2,969 | — | 36,972 | ||||||||||||||||||
Refundable income taxes | 2,739 | — | — | — | — | 2,739 | ||||||||||||||||||
Deferred income tax assets | 33,967 | — | — | — | — | 33,967 | ||||||||||||||||||
Prepaid expenses and other | 17,136 | — | 13,782 | 344 | — | 31,262 | ||||||||||||||||||
Total current assets | 404,339 | — | 57,535 | 230,982 | — | 692,856 | ||||||||||||||||||
Property and equipment, net | 98,679 | — | 1,084,008 | 4,016 | — | 1,186,703 | ||||||||||||||||||
Intercompany advances | 88,211 | 234,387 | (91,266 | ) | (8,554 | ) | (222,778 | ) | — | �� | ||||||||||||||
Equipment deposits and other assets | 20,311 | 225,742 | 8,998 | 10 | (215,111 | ) | 39,950 | |||||||||||||||||
Total assets | $ | 611,540 | $ | 460,129 | $ | 1,059,275 | $ | 226,454 | $ | (437,889 | ) | $ | 1,919,509 | |||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||||||
Accounts payable | $ | 102,061 | $ | — | $ | 43,019 | $ | 2,818 | $ | (180 | ) | $ | 147,718 | |||||||||||
Salaries, wages and related taxes | 53,104 | — | 40,037 | — | — | 93,141 | ||||||||||||||||||
Accrued expenses | 123,635 | 4,479 | 5,301 | 322 | — | 133,737 | ||||||||||||||||||
Current portion of long-term obligations | 102,763 | — | 6,928 | — | — | 109,691 | ||||||||||||||||||
Total current liabilities | 381,563 | 4,479 | 95,285 | 3,140 | (180 | ) | 484,287 | |||||||||||||||||
Long-term obligations | 112,273 | 150,000 | 108,894 | — | — | 371,167 | ||||||||||||||||||
Intercompany liabilities | — | — | 222,597 | — | (222,597 | ) | — | |||||||||||||||||
Deferred income tax liabilities | (3,945 | ) | — | 149,968 | 532 | — | 146,555 | |||||||||||||||||
Post retirement liabilities | 14,414 | — | 24,115 | — | — | 38,529 | ||||||||||||||||||
Other liabilities | 49,283 | — | — | — | — | 49,283 | ||||||||||||||||||
Shareholders’ equity: | ||||||||||||||||||||||||
Common stock | 1 | 51,658 | (9 | ) | 120 | (112 | ) | 51,658 | ||||||||||||||||
Additional paid-in capital | — | 308,812 | (753 | ) | 215,753 | (215,000 | ) | 308,812 | ||||||||||||||||
Retained earnings | 66,044 | 5,038 | 459,178 | 6,909 | — | 537,169 | ||||||||||||||||||
Accumulated other comprehensive loss | (8,093 | ) | — | — | — | — | (8,093 | ) | ||||||||||||||||
Treasury stock | — | (59,858 | ) | — | — | — | (59,858 | ) | ||||||||||||||||
Total shareholders’ equity | 57,952 | 305,650 | 458,416 | 222,782 | (215,112 | ) | 829,688 | |||||||||||||||||
Total liabilities and shareholders’ equity | $ | 611,540 | $ | 460,129 | $ | 1,059,275 | $ | 226,454 | $ | (437,889 | ) | $ | 1,919,509 | |||||||||||
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 | |||||||||||
Trade accounts receivable, less allowance | 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 and equipment, net | 109,622 | — | 1,133,490 | 4,261 | — | 1,247,373 | |||||||||||||||||
Intercompany advances | 157,681 | 302,279 | (102,051 | ) | 12,884 | (370,793 | ) | — | |||||||||||||||
Equipment deposits and other assets | 31,078 | 5,963 | 125,824 | 10 | (115,111 | ) | 47,764 | ||||||||||||||||
Total assets | $ | 580,367 | $ | 308,242 | $ | 1,217,882 | $ | 126,325 | $ | (485,972 | ) | $ | 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 | 139,132 | — | 6,261 | 604 | — | 145,997 | |||||||||||||||||
Current portion of long-term obligations | 100,877 | — | 6,533 | — | — | 107,410 | |||||||||||||||||
Total current liabilities | 371,852 | — | 94,422 | 5,156 | (692 | ) | 470,738 | ||||||||||||||||
Long-term obligations | 103,951 | — | 114,102 | — | — | 218,053 | |||||||||||||||||
Intercompany liabilities | — | — | 370,168 | — | (370,168 | ) | — | ||||||||||||||||
Deferred income tax liabilities | (6,967 | ) | — | 150,164 | 329 | — | 143,526 | ||||||||||||||||
Post retirement 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 | (753 | ) | 115,753 | (115,000 | ) | 304,984 | |||||||||||||||
Retained earnings | 61,549 | 11,758 | 462,270 | 4,967 | — | 540,544 | |||||||||||||||||
Accumulated other comprehensive loss | (2,820 | ) | — | — | — | — | (2,820 | ) | |||||||||||||||
Treasury stock | — | (59,868 | ) | — | — | — | (59,868 | ) | |||||||||||||||
Total shareholders’ equity | 58,738 | 308,242 | 461,508 | 120,840 | (115,112 | ) | 834,216 | ||||||||||||||||
Total liabilities and shareholders’ equity | $ | 580,367 | $ | 308,242 | $ | 1,217,882 | $ | 126,325 | $ | (485,972 | ) | $ | 1,746,844 | ||||||||||
Nine months ended September 30, 2002 | ||||||||||||||||||||
Airborne Express, Inc. | Airborne Inc. | Guarantors | Non- guarantors | Consolidated | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Net earnings (loss) | $ | 4,496 | $ | (677 | ) | $ | (3,094 | ) | $ | 1,942 | $ | 2,667 | ||||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||||||||||||
Non-cash operating activities | 140,810 | (219,779 | ) | 110,806 | 99,758 | 131,595 | ||||||||||||||
Change in current assets and liabilities | 940 | 72,736 | (40,929 | ) | (108,462 | ) | (75,715 | ) | ||||||||||||
Net cash provided (used) by operating activities | 146,246 | (147,720 | ) | 66,783 | (6,762 | ) | 58,547 | |||||||||||||
INVESTING ACTIVITIES: | ||||||||||||||||||||
Net cash provided (used) by investing activities | (1,937 | ) | — | (62,489 | ) | (2 | ) | (64,428 | ) | |||||||||||
FINANCING ACTIVITIES: | ||||||||||||||||||||
Net cash provided (used) by financing activities | (5,551 | ) | 147,720 | (4,812 | ) | — | 137,357 | |||||||||||||
Net increase (decrease) in cash | 138,758 | — | (518 | ) | (6,764 | ) | 131,476 | |||||||||||||
Cash and cash equivalents at beginning of period | 191,629 | — | 607 | 9,264 | 201,500 | |||||||||||||||
Cash and cash equivalents at September 30, 2002 | $ | 330,387 | $ | — | $ | 89 | $ | 2,500 | $ | 332,976 | ||||||||||
Nine months ended September 30, 2001 | ||||||||||||||||||||
Airborne Express, Inc. | Airborne Inc. | Guarantors | Non- guarantors | Consolidated | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
OPERATING ACTIVITIES: | ||||||||||||||||||||
Net earnings (loss) | $ | (48,381 | ) | $ | 18,502 | $ | 4,944 | $ | 3,292 | $ | (21,643 | ) | ||||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||||||||||||
Non-cash operating activities | (3,216 | ) | 176 | 158,995 | (430 | ) | 155,525 | |||||||||||||
Change in current assets and liabilities | 186,246 | 60,351 | (188,582 | ) | (3,133 | ) | 54,882 | |||||||||||||
Net cash provided (used) by operating activities | 134,649 | 79,029 | (24,643 | ) | (271 | ) | 188,764 | |||||||||||||
INVESTING ACTIVITIES: | ||||||||||||||||||||
Net cash used by investing activities | (8,372 | ) | (157 | ) | (76,925 | ) | (77 | ) | (85,531 | ) | ||||||||||
FINANCING ACTIVITIES: | ||||||||||||||||||||
Net cash provided (used) by financing activities | (28,167 | ) | (78,872 | ) | 102,523 | — | (4,516 | ) | ||||||||||||
Net increase (decrease) in cash | 98,110 | — | 955 | (348 | ) | 98,717 | ||||||||||||||
Cash and cash equivalents at beginning of period | 37,523 | — | 51 | 2,816 | 40,390 | |||||||||||||||
Cash and cash equivalents at September 30, 2001 | $ | 135,633 | $ | — | $ | 1,006 | $ | 2,468 | $ | 139,107 | ||||||||||
Effective January 1, 2000,
Three months ended September 30, 2002 | Nine months ended September 30, 2002 | |||||||||||||||||||||||||||||
Airborne, Inc. | Guarantors | Non- guarantors | Consolidated | Airborne, Inc. | Guarantors | Non- guarantors | Consolidated | |||||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||||||||
Revenues | $ | — | $ | 842,761 | $ | — | $ | 842,761 | $ | — | $ | 2,441,732 | $ | — | $ | 2,441,732 | ||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||
Transportation purchased | — | 285,455 | — | 285,455 | — | 801,853 | — | 801,853 | ||||||||||||||||||||||
Station and ground operations | — | 282,301 | — | 282,301 | — | 812,378 | — | 812,378 | ||||||||||||||||||||||
Flight operations and maintenance | — | 134,886 | — | 134,886 | — | 392,783 | — | 392,783 | ||||||||||||||||||||||
General and administrative | 252 | 64,074 | — | 64,326 | 1,041 | 191,936 | — | 192,977 | ||||||||||||||||||||||
Sales and marketing | — | 22,862 | — | 22,862 | — | 68,630 | — | 68,630 | ||||||||||||||||||||||
Depreciation and amortization | — | 49,547 | — | 49,547 | — | 145,399 | — | 145,399 | ||||||||||||||||||||||
252 | 839,125 | — | 839,377 | 1,041 | 2,412,979 | — | 2,414,020 | |||||||||||||||||||||||
Earnings (loss) from operations | (252 | ) | 3,636 | — | 3,384 | (1,041 | ) | 28,753 | — | 27,712 | ||||||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||||||
Interest income | — | 1,458 | — | 1,458 | — | 3,772 | — | 3,772 | ||||||||||||||||||||||
Interest expense | — | (9,108 | ) | — | (9,108 | ) | — | (25,778 | ) | — | (25,778 | ) | ||||||||||||||||||
Discount on sales of receivables | — | (989 | ) | 251 | (738 | ) | — | (2,956 | ) | 28 | (2,928 | ) | ||||||||||||||||||
Other | — | 196 | — | 196 | — | 2,499 | — | 2,499 | ||||||||||||||||||||||
Earnings (loss) before income taxes | (252 | ) | (4,807 | ) | 251 | (4,808 | ) | (1,041 | ) | 6,290 | 28 | 5,277 | ||||||||||||||||||
Income tax expense (benefit) | (88 | ) | (1,750 | ) | 88 | (1,750 | ) | (364 | ) | 2,964 | 10 | 2,610 | ||||||||||||||||||
Net earnings (loss) | $ | (164 | ) | $ | (3,057 | ) | $ | 163 | $ | (3,058 | ) | $ | (677 | ) | $ | 3,326 | $ | 18 | $ | 2,667 | ||||||||||
Three months ended September 30, 2001 | Nine months ended September 30, 2001 | |||||||||||||||||||||||||||||
Airborne, Inc. | Guarantors | Non- guarantors | Consolidated | Airborne, Inc. | Guarantors | Non- guarantors | Consolidated | |||||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||||||||
Revenues | $ | — | $ | 772,788 | $ | — | $ | 772,788 | $ | — | $ | 2,408,534 | $ | — | $ | 2,408,534 | ||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||
Transportation purchased | — | 254,080 | — | 254,080 | — | 787,204 | — | 787,204 | ||||||||||||||||||||||
Station and ground operations | — | 257,326 | — | 257,326 | — | 802,480 | — | 802,480 | ||||||||||||||||||||||
Flight operations and maintenance | — | 133,286 | — | 133,286 | — | 428,658 | — | 428,658 | ||||||||||||||||||||||
General and administrative | 125 | 61,004 | — | 61,129 | 572 | 193,445 | — | 194,017 | ||||||||||||||||||||||
Sales and marketing | — | 21,689 | — | 21,689 | — | 69,020 | — | 69,020 | ||||||||||||||||||||||
Depreciation and amortization | 7 | 51,648 | — | 51,655 | 157 | 156,820 | — | 156,977 | ||||||||||||||||||||||
Federal legislation compensation | — | (7,800 | ) | — | (7,800 | ) | — | (7,800 | ) | — | (7,800 | ) | ||||||||||||||||||
132 | 771,233 | — | 771,365 | 729 | 2,429,827 | — | 2,430,556 | |||||||||||||||||||||||
Earnings (loss) from operations | (132 | ) | 1,555 | — | 1,423 | (729 | ) | (21,293 | ) | — | (22,022 | ) | ||||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||||||
Interest income | — | 560 | — | 560 | — | 879 | — | 879 | ||||||||||||||||||||||
Interest expense | — | (5,484 | ) | — | (5,484 | ) | (1,576 | ) | (13,178 | ) | — | (14,754 | ) | |||||||||||||||||
Dividend income | — | — | — | — | 20,000 | (20,000 | ) | — | — | |||||||||||||||||||||
Discount on sales of receivables | — | (2,537 | ) | 530 | (2,007 | ) | — | (10,050 | ) | 2,057 | (7,993 | ) | ||||||||||||||||||
Other | — | 8,779 | — | 8,779 | — | 11,355 | — | 11,355 | ||||||||||||||||||||||
Earnings (loss) before income taxes | (132 | ) | 2,873 | 530 | 3,271 | 17,695 | (52,287 | ) | 2,057 | (32,535 | ) | |||||||||||||||||||
Income tax expense (benefit) | (46 | ) | 1,419 | 185 | 1,558 | (807 | ) | (10,805 | ) | 720 | (10,892 | ) | ||||||||||||||||||
Net earnings (loss) | $ | (86 | ) | $ | 1,454 | $ | 345 | $ | 1,713 | $ | 18,502 | $ | (41,482 | ) | $ | 1,337 | $ | (21,643 | ) | |||||||||||
September 30, 2002 | Airborne, Inc. | Guarantors | Non- guarantors | Elimination | Consolidated | |||||||||||||||
(in thousands) | ||||||||||||||||||||
ASSETS | ||||||||||||||||||||
Current Assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 330,422 | $ | 2,554 | $ | — | $ | 332,976 | ||||||||||
Trade accounts receivable, less allowance | — | 29,814 | 225,126 | — | 254,940 | |||||||||||||||
Spare parts and fuel inventory | — | 36,972 | — | — | 36,972 | |||||||||||||||
Refundable income taxes | — | 2,739 | — | — | 2,739 | |||||||||||||||
Deferred income tax assets | — | 33,967 | — | — | 33,967 | |||||||||||||||
Prepaid expenses and other | — | 30,987 | 275 | — | 31,262 | |||||||||||||||
Total current assets | — | 464,901 | 227,955 | — | 692,856 | |||||||||||||||
Property and equipment, net | — | 1,186,703 | — | — | 1,186,703 | |||||||||||||||
Intercompany advances | 234,387 | (354 | ) | (11,255 | ) | (222,778 | ) | — | ||||||||||||
Equipment deposits and other assets | 225,742 | 29,319 | — | (215,111 | ) | 39,950 | ||||||||||||||
Total assets | $ | 460,129 | $ | 1,680,569 | $ | 216,700 | $ | (437,889 | ) | $ | 1,919,509 | |||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||
Accounts payable | $ | — | $ | 147,898 | $ | — | $ | (180 | ) | $ | 147,718 | |||||||||
Salaries, wages and related taxes | — | 93,141 | — | — | 93,141 | |||||||||||||||
Accrued expenses | 4,479 | 128,961 | 297 | — | 133,737 | |||||||||||||||
Current portion of long-term obligations | — | 109,691 | — | — | 109,691 | |||||||||||||||
Total current liabilities | 4,479 | 479,691 | 297 | (180 | ) | 484,287 | ||||||||||||||
Long-term obligations | 150,000 | 221,167 | — | — | 371,167 | |||||||||||||||
Intercompany liabilities | — | 222,597 | — | (222,597 | ) | — | ||||||||||||||
Deferred income tax liabilities | — | 146,555 | — | — | 146,555 | |||||||||||||||
Post retirement liabilities | — | 38,529 | — | — | 38,529 | |||||||||||||||
Other liabilities | — | 49,283 | — | — | 49,283 | |||||||||||||||
Shareholders’ equity: | ||||||||||||||||||||
Common stock | 51,658 | 102 | 10 | (112 | ) | 51,658 | ||||||||||||||
Additional paid-in capital | 308,812 | — | 215,000 | (215,000 | ) | 308,812 | ||||||||||||||
Retained earnings | 5,038 | 530,738 | 1,393 | — | 537,169 | |||||||||||||||
Accumulated other comprehensive loss | — | (8,093 | ) | — | — | (8,093 | ) | |||||||||||||
Treasury stock | (59,858 | ) | — | — | — | (59,858 | ) | |||||||||||||
Total shareholders’ equity | 305,650 | 522,747 | 216,403 | (215,112 | ) | 829,688 | ||||||||||||||
Total liabilities and shareholders’ equity | $ | 460,129 | $ | 1,680,569 | $ | 216,700 | $ | (437,889 | ) | $ | 1,919,509 | |||||||||
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 | |||||||||
Trade accounts receivable, less allowance | — | 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 | (114,548 | ) | 9,487 | (197,218 | ) | — | ||||||||||||
Equipment deposits and other assets | 5,963 | 156,912 | — | (115,111 | ) | 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 | — | 145,380 | 617 | — | 145,997 | ||||||||||||||
Current portion of long-term obligations | — | 107,410 | — | — | 107,410 | ||||||||||||||
Total current liabilities | — | 470,745 | 617 | (624 | ) | 470,738 | |||||||||||||
Long-term obligations | — | 218,053 | — | — | 218,053 | ||||||||||||||
Intercompany liabilities | — | 196,593 | — | (196,593 | ) | — | |||||||||||||
Deferred income tax liabilities | — | 143,526 | — | — | 143,526 | ||||||||||||||
Post retirement 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 loss | — | (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 | ||||||||
Nine months ended September 30, 2002 | ||||||||||||||||
Airborne, Inc. | Guarantors | Non- guarantors | Consolidated | |||||||||||||
(in thousands) | ||||||||||||||||
OPERATING ACTIVITIES: | ||||||||||||||||
Net earnings (loss) | $ | (677 | ) | $ | 3,326 | $ | 18 | $ | 2,667 | |||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||||||||
Non-cash operating activities | (219,779 | ) | 251,364 | 100,010 | 131,595 | |||||||||||
Change in current assets and liabilities | 72,736 | (41,141 | ) | (107,310 | ) | (75,715 | ) | |||||||||
Net cash provided (used) by operating activities | (147,720 | ) | 213,549 | (7,282 | ) | 58,547 | ||||||||||
INVESTING ACTIVITIES: | ||||||||||||||||
Net cash used by investing activities | — | (64,428 | ) | — | (64,428 | ) | ||||||||||
FINANCING ACTIVITIES: | ||||||||||||||||
Net cash provided (used) by financing activities | 147,720 | (10,363 | ) | — | 137,357 | |||||||||||
Net increase (decrease) in cash | — | 138,758 | (7,282 | ) | 131,476 | |||||||||||
Cash and cash equivalents at beginning of period | — | 191,664 | 9,836 | 201,500 | ||||||||||||
Cash and cash equivalents at September 30, 2002 | $ | — | $ | 330,422 | $ | 2,554 | $ | 332,976 | ||||||||
Nine months ended September 30, 2001 | ||||||||||||||||
Airborne, Inc. | Guarantors | Non- guarantors | Consolidated | |||||||||||||
(in thousands) | ||||||||||||||||
OPERATING ACTIVITIES: | ||||||||||||||||
Net earnings (loss) | $ | 18,502 | $ | (41,482 | ) | $ | 1,337 | $ | (21,643 | ) | ||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||||||||
Non-cash operating activities | 175 | 154,630 | 720 | 155,525 | ||||||||||||
Change in current assets and liabilities | 60,351 | (5,583 | ) | 114 | 54,882 | |||||||||||
Net cash provided (used) by operating activities | 79,028 | 107,565 | 2,171 | 188,764 | ||||||||||||
INVESTING ACTIVITIES: | ||||||||||||||||
Net cash used by investing activities | (156 | ) | (85,375 | ) | — | (85,531 | ) | |||||||||
FINANCING ACTIVITIES: | ||||||||||||||||
Net cash provided (used) by financing activities | (78,872 | ) | 74,356 | — | (4,516 | ) | ||||||||||
Net increase (decrease) in cash | — | 96,546 | 2,171 | 98,717 | ||||||||||||
Cash and cash equivalents at beginning of period | — | 39,121 | 1,269 | 40,390 | ||||||||||||
Cash and cash equivalents at September 30, 2001 | $ | — | $ | 135,667 | $ | 3,440 | $ | 139,107 | ||||||||
The cumulative effectFinancial Condition and Results of this changeOperations
NOTE H-NEW ACCOUNTING PRONOUNCEMENTS:
The Financial Accounting Standards Board ("FASB") recently issued Statement of Financial Accounting Standard ("SFAS") No. 141, "Business Combinations", SFAS No. 142, "Goodwill and Other Intangible Assets", SFAS No. 143 "Accounting for Asset Retirement Obligations" and SFAS No. 144 "Accounting for2002 compared to the Impairment or Disposal of Long-Lived assets". SFAS No. 141 requires that all business combinations initiated after July 1, 2001 be accounted for using the purchase method of accounting. SFAS No. 142 requires that goodwill and some intangible assets be charged to expense through the testing and measuring of these items for impairment as opposed to periodic amortization over the estimated useful life of the assets. SFAS No. 143 requires entities to recognize the fair value of a liability for an asset retirement obligationsame periods in the period in which it is incurred assuming a reasonable estimate of fair value2001. This progress can be made. SFAS No. 144 expandsattributed primarily to higher domestic revenues resulting from the implementation of key growth initiatives that began in 2001, including the expansion of our product line and clarifies previous accounting standards regarding the disposalimplementation of long-lived assets. SFAS No. 141, No. 142, No. 143yield management actions, and No. 144 are not expected to haveimproved productivity. This performance was accomplished despite a material impact ondifficult economic environment that has hampered our core domestic air shipment and revenue growth, cost pressures in certain corporate related expense areas, and the Company’s consolidated resultsrecording of operations, financial position or cash flows.
MANAGEMENT’S DISCUSSION AND ANALYSIS OFRESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS:
The Companynon-recurring restructuring and impairment charges.
The third quarter of 2001which included non-recurring gains on the sale of certain securities and FCC licensed radio frequencies totaling $8.3 million ($5.4of $5.4 million after tax or $.11 per share). One time gains for frequency salesshare 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 per share in the first nine months of 2000).
The results for the third quarter of this year include pre-tax losses of approximately $13 million associated with lost business as a result of 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 continued to be approximately 3%on average below volumes of the comparable period of 2000.
The Company recorded a $7.8 million credit for compensation provided under the Air Transportation Safety and System Stabilization Act ("Act"of $4.8 million after tax or $.10 per share.
Three Months Ended September 30 | Change | Nine Months Ended September 30 | Change | |||||||||||||||
2002 | 2001 | 2002 | 2001 | |||||||||||||||
Shipments (in thousands): | ||||||||||||||||||
Domestic | ||||||||||||||||||
Overnight | 40,219 | 40,425 | (0.5 | %) | 119,975 | 130,263 | (7.9 | %) | ||||||||||
Next Afternoon Service | 12,931 | 12,327 | 4.9 | % | 39,116 | 38,963 | 0.4 | % | ||||||||||
Second Day Service | 17,470 | 17,282 | 1.1 | % | 53,233 | 55,073 | (3.3 | %) | ||||||||||
Ground Delivery Service | 12,022 | 1,492 | NM | 26,638 | 1,821 | NM | ||||||||||||
airborne@home | 7,032 | 4,747 | 48.1 | % | 17,889 | 15,547 | 15.1 | % | ||||||||||
Total Domestic | 89,674 | 76,273 | 17.6 | % | 256,851 | 241,667 | 6.3 | % | ||||||||||
International | ||||||||||||||||||
Express | 1,346 | 1,375 | (2.1 | %) | 4,107 | 4,524 | (9.2 | %) | ||||||||||
Freight | 91 | 95 | (4.2 | %) | 271 | 299 | (9.4 | %) | ||||||||||
Total International | 1,437 | 1,470 | (2.2 | %) | 4,378 | 4,823 | (9.2 | %) | ||||||||||
Total Shipments | 91,111 | 77,743 | 17.2 | % | 261,229 | 246,490 | 6.0 | % | ||||||||||
Average Pounds per Shipment: | ||||||||||||||||||
Domestic | 5.06 | 4.24 | 19.3 | % | 4.75 | 4.17 | 13.9 | % | ||||||||||
International | 62.23 | 60.55 | 2.8 | % | 58.96 | 55.03 | 7.1 | % | ||||||||||
Average Revenue per Pound: | ||||||||||||||||||
Domestic | $ | 1.62 | $ | 2.04 | (20.6 | %) | $ | 1.75 | $ | 2.06 | (15.0 | %) | ||||||
International | $ | 1.01 | $ | 0.99 | 2.0 | % | $ | 0.98 | $ | 1.02 | (3.9 | %) | ||||||
Average Revenue per Shipment | ||||||||||||||||||
Domestic | $ | 8.32 | $ | 8.87 | (6.2 | %) | $ | 8.45 | $ | 8.76 | (3.5 | %) | ||||||
International | $ | 65.52 | $ | 61.41 | 6.7 | % | $ | 59.65 | $ | 57.16 | 4.4 | % |
Operating resultsamounts have been negatively impactedrecorded based on our interpretation of the Act and related rules. In April 2002, the Department of Transportation (“DOT”) issued final rules governing the process and content of final filings that support carriers’ compensation claims. We completed and filed our final filing along with required audit schedules and have had discussions with applicable government agencies regarding these filings. While we believe we have complied with the provisions of the Act, these agencies have raised exceptions concerning the treatment of certain compensation items. We are currently evaluating our options concerning these exceptions. The final amount of proceeds we will realize is subject to resolution of the exceptions and possible completion of further review and audit procedures by the DOT or other applicable government agencies. We cannot be assured of the ultimate outcome of these reviews, but it is possible that 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 inamount of compensation previously recognized could occur. We estimate the third quarter and 2.1% to $8.74 for the first nine monthsrange 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 surcharge 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 $22.4compensation ultimately realized will be between $11.0 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.
$15.0 million.
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 result 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 reduced 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 is in the process of converting from voice to digital communication technology to support its pickup and delivery operations. The Company anticipates recording an additional $1.0 million in gains in the fourth quarter of 2001 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 services to the air transport industry. The Company had no cost basis in these shares. In the second quarter of 2000, a $1.9 million non-recurring gain was recorded on the sale of securities received in connection with the demutualization of Metropolitan Life. The Company, as policyholder, received stock securities of Metropolitan Life when the insurance company demutualized.
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 strength of the U.S. and global economies will have an impact on theour operating results of operations for the balanceremainder of 2001 and into 2002 and beyond. The current lackeconomy does not appear to be showing signs of visibility regarding economicsustained growth. Accordingly, air express shipment volumes could be flat or lower in the fourth quarter of 2002 compared to volumes recorded in the comparable period of 2001.
productivity gains.
Cash
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$158.5 million compared to $298.4$138.8 million during the corresponding period of 2000. Capital spending has been reduced significantly in 2001 compared to 2000 due to management efforts to maintain spending at levels that better match the lower level of operating performance and shipment volume growth. The Company currently anticipates 2001 capital expenditures to be approximately $130 million, down from the previous target of $170 million.
The Company’s operating cash flow is a major source of liquidity. Additional liquidity of $50 million was provided in the first nine months of 2001, throughexclusive of repurchases and sales from or to our receivables securitization facility. The improvement in operating cash flow is primarily due to improved operating performance. Cash provided by operating activities for the first nine months of 2002 compared to the same period in 2001 was negatively impacted by higher funding of our pension plans but improved by increases in cash flow resulting from changes in working capital and other operating obligations. In the third quarter of 2002, we completed the scheduled funding of $48 million of previously accrued pension obligations.
The Company also completed a renegotiation of its $275 million revolving credit agreement in June 2001. The renegotiated facility, which expires in June 2004, is collateralized by certain assets, reduces borrowing capacity by the amount of outstanding letters of credit and established new restrictive covenants. At September 30, 2001, the Company had pledged collateral to support approximately $141 million of the $275 million commitment and has the ability to pledge additional collateral.facility. As of September 30, 2001, no borrowings were2002, we had $100 million of outstanding letterreceivables securitized under this facility in comparison to $200 million securitized as of credit commitments were $98December 31, 2001.
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 $3.4 million of vehicle acquisitions under this arrangement.
In August 2001, the Company completed two sale-leaseback transactions on five Boeing 767-200 aircraft and received proceeds of $102.8 million. The transactions were accounted for as capitalized leases for financial reporting purposes. The Company used these proceeds to increase cash reserves and invested amounts in short-term commercial paper and money market instruments.
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’s opinion, existing cash reserves, internally generated cashflows from operations coupled with resources available under the accounts receivable securitization facility and the revolvingbank credit agreement should provide adequate flexibility to financefor financing capital expenditures and meet other liquidity requirementsfunding debt maturities scheduled for the balance of 20012002 and into 2002.
FORWARD LOOKING STATEMENTS:
Statements contained herein2003.
Other Information.EXHIBIT NO. 10 Material Contracts10(a) Employment Agreement dated April 24, 2001 between the Company and Mr. Robert T. Christensen. Substantially identical agreements exist between the Company and most12Statements Regarding Computation of its officers.Ratios 10(b)12(a) Employment Agreement dated April 24, 2001 between the Company and Mr. Lanny H. Michael, Senior Vice President, Chief Financial Officer. Substantially identical agreements exist between the Company and eight otherRatio of its executive officers.Earnings to Fixed Charges14EXHIBIT NO. 99 99(a) Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99(b) Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. AIRBORNE, INC.(Registrant) Date: 11/14/01/s/ Lanny H. MichaelLanny H. MichaelSenior Vice President &Chief Financial Officer11/13/02 Date:11/14/01Robert T. ChristensenCARL D. DONAWAY Robert T. ChristensenChief Accounting Officer15 Date: 11/13/02 Date: 11/13/02 1. I have reviewed this quarterly report on Form 10-Q of Airborne, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and c. Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors: a. All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and 6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. 1. I have reviewed this quarterly report on Form 10-Q of Airborne, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and c. Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors: a. All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and 6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.