1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended Commission file number
December 31, 19931994 1-6512
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AIRBORNE FREIGHT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 91-0837469
(State of Incorporation) (I.R.S. Employer Identification No.)
Airborne Freight Corporation
3101 Western Avenue
P.O. Box 662
Seattle, WA 98111
(Address of principal executive offices)
Registrant's telephone number including area code: 206-285-4600
Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange
Title of each class on which Registered
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Common Stock, Par Value New York Stock Exchange
$1.00 per share Pacific Stock Exchange
6 3/4% Convertible Subordinated New York Stock Exchange
Debentures Due August 15, 2001
Rights to Purchase Series A New York Stock Exchange
Cumulative Preferred Stock
Securities registered pursuant to Section 12(g) of the Act:
NONE
2
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X
No --- ---_____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K.( )
As of February 28, 1994, 19,472,60327, 1995, 21,048,726 shares (net of 315,150 treasury
shares) of the registrant's Common Stock were outstanding and the aggregate
market value of the voting stock held by non-affiliates of the registrant
(based on the closing price on that date on the New York Stock Exchange)
was approximately $710,562,300.$488,096,985.(1)
Documents Incorporated by Reference
Portions of the 19931994 Annual Report to Shareholders are incorporated by
reference into Part I and Part II.
Portions of the Proxy Statement for the 19941995 Annual Meeting of
Shareholders to be held April 26, 199425, 1995 are incorporated by reference into
Part III.
(1) Excludes value of shares of Common Stock held of record by directors
and executive officers at February 28, 1994.27, 1995. Includes shares held by
certain depository organizations. Exclusion of shares held by any person
should not be construed to indicate that such person possesses the power,
direct or indirect, to direct or cause the direction of the management or
policies of the registrant, or that such person is controlled by or is
under common control with the registrant.
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AIRBORNE FREIGHT CORPORATION
19931994 FORM 10-K ANNUAL REPORT
Table of Contents
Page
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Part I
Item 1. Business
1
Item 2. Properties 13
Item 3. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders
13
Item 4a. Executive Officers of the Registrant 14
Part II
Item 5. Market for Registrant's Common Equity and Related
16
Stockholder Matters 16
Item 6. Selected Financial Data 16
Item 7. Management's Discussion and Analysis of Financial
16
Condition and Results of Operations 16
Item 8. Financial Statements and Supplementary Data 16
Item 9. Changes in and Disagreements With Accountants on 16
Accounting and Financial Disclosure
Part III
Item 10. Directors and Executive Officers of the Registrant
17
Item 11. Executive Compensation 17
Item 12. Security Ownership of Certain Beneficial Owners
17
and Management
Item 13. Certain Relationships and Related Transactions 17
Part IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports 18
on Form 8-K
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PART I
ITEM 1. BUSINESS
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a) General Development of Business
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Airborne Freight Corporation (herein referred to as "Airborne Express"
or the "Company", which reference shall include its subsidiaries and their
assets and operations, unless the context clearly indicates otherwise) was
incorporated in Delaware on May 10, 1968. The Company is an air express
company and air freight forwarder that expedites shipments of all sizes to
destinations throughout the United States and most foreign countries.
The Company holds a certificate of registration issued by the United
States Patent and Trademark Office for the service mark AIRBORNE EXPRESS.
Most public presentation of the Company carries this name. The purpose of
using this trade name is to more clearly communicate to the market place
the primary nature of the business of the Company.
ABX Air, Inc., the Company's principal wholly-owned subsidiary (herein
referred to as "ABX" or the "Airline"), was incorporated in Delaware on January 22, 1980.
ABX provides domestic express cargo service and cargo service to Canada.
The Company is the principalsole customer of ABX for this service. ABX also offers
limited charter service.
b) Financial Information about Industry Segments
---------------------------------------------
None
c) Narrative Description of Business
---------------------------------
Airborne Express provides door-to-door express delivery of small
packages and documents throughout the United States and to and from most
foreign countries. The Company also acts as an international and domestic
freight forwarder for shipments of any size. The Company's strategy is to
be the low cost provider of express services for high volume corporate
customers.
Domestic Operations
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The Company's domestic operations, supported by over 250 facilities,
primarily involve express door-to-door delivery of small packages and
documents weighing less than 100 pounds. Shipments consist primarily of
business documents and other printed matter, electronic and computer parts,
software, machine parts, health care items, films and videotapes, and other
items for which speed and reliability of delivery are important.
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The Company's primary service is its overnight express product. This
product, which comprised approximately 68%63% of the Company's domestic
shipments during 1993,1994, generally provides for before noon delivery on the
next business day to most metropolitan cities in the United States. The
Company also provides Saturday and holiday pickup and delivery service for
most cities.
The Company offers a deferred service product, Select Delivery Service
("SDS"), which provides for next afternoon or second day delivery. The SDS
product expands the Company's product offering and introduces new customers
to air express services. SDS service generally provides for shipments
weighing five pounds or less to be delivered on a next afternoon basis with
shipments weighing more than five pounds being delivered on a second day
basis. SDS shipments, which comprised approximately 31%37% of total domestic
shipments during 1993,1994, are generally lower priced than the overnight
express product reflecting the less time sensitive nature of the shipments.
While the Company's domestic airline system is designed primarily to
handle express shipments, any available capacity is also utilized to carry
shipments which the Company would normally move on other carriers in its
role as an air freight forwarder.
Pickup and Delivery
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The Company accomplishes its door-to-door pickup and delivery service
using approximately 9,90011,300 radio-dispatched delivery vans and trucks, of
which approximately 3,6004,100 are owned by the Company. Independent
contractors under contract with the Company provide the balance of the
pickup and delivery services.
The Company's facilities are linked to FOCUS, a proprietary freight
tracking and message computer system which permits monitoring of overall
system performance and allows the Company to ascertain the status of a
specific shipment. FOCUS receives information in several ways including
drivers' use of hand-held scanners which read bar-coded information on
shipping documents. FOCUS provides many major customers direct access to
the status of their shipments 24 hours a day through the use of their own
computer systems.
Because convenience is an important factor in attracting business from
less frequent shippers, the Company has an ongoing program to place drop
boxes in convenient locations. The Company has approximately 7,3008,500 boxes
in service.
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Sort Facilities
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The Company's main sort center is located in Wilmington, Ohio. As
express delivery volume has increased, the main sort center has been
expanded. The sort center currently has the capacity to handle 830,000
pieces during the primary 2-1/2 hour nightly sort operation. In 1995, the
Company plans to expand the nightly sort capacity to handle 865,000 pieces.
On average, approximately 600,000689,000 pieces were sorted each weekday night at
the sort center during December 1993.the fourth quarter of 1994. In addition to the sort
facilities, the Wilmington location consists of a Company-owned airpark (including airport
facilities);which includes maintenance, storage, training and refueling facilities; and
operations and administrative offices.
The Company also conducts a daylight sort operation at Wilmington.
The day sort services SDS shipments weighing in excess of five pounds that
are consolidated at certain regional hub facilities and either flown or
trucked into or out of Wilmington.
The operation of the Wilmington facility is critical to the Company's
business. The inability to use the Wilmington airport, because of bad
weather or other factors, would have a serious adverse effect on the
Company's service. However, contingency plans, including landing at nearby
airports and transporting packages to and from the sort center by truck,
can be and have
been implemented to address temporary inaccessibility of the Wilmington
airport.
In addition to the main sort facility at Wilmington, ten regional hub
facilities have been established primarily to sort shipments originating
and having a destination within approximately a 300 mile radius of a
regional hub.
In December 1993,the fourth quarter of 1994, approximately 65%61% and 13%16% of total
shipment weight was handled through the night sort and day sort operations
at Wilmington, respectively, with the remaining 22%23% being handled
exclusively by the regional hubs.
Shipment Routing
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The logistical means of moving a shipment from its origin to
destination are determined by several factors. Shipments are routed
differently depending on shipment product type, weight, geographic
distances between origin and destination, and locations of Company stations
relative to the locations of sort facilities. Shipments generally are
moved between stations and sort facilities on either Company aircraft or
contracted trucks. Certain shipments are transported airport-to-airport on
commercial air carriers.
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Overnight express shipments and SDS shipments weighing five pounds or
less are picked up by local stations and generally consolidated with other
stations' shipments at Company airport facilities. Shipments that are not
serviced through regional hubs are loaded on Company aircraft departing
each weekday evening from various points within the United States and
Canada. These aircraft may stop at other airports to permit additional
locations and feeder aircraft to consolidate their cargo onto the larger
aircraft before completing the flight to the Wilmington hub. The aircraft
are scheduled to arrive at Wilmington between approximately 11:30 p.m. and
3:00 a.m. at which time the shipments are sorted and reloaded. The
aircraft are scheduled to depart before 6:3000 a.m. and return to their
applicable destinations in time to complete scheduled next business morning
or next afternoon service commitments. The Wilmington hub also receives
shipments via truck from selected stations in the vicinity of the
Wilmington hub for integration with the nightly sort process.
For the daylight sort operation, threegenerally 5 aircraft return to
Wilmington from overnight service destinations on Tuesday through Friday.Thursday.
These aircraft, and trucks from six regional hubs, arrive at Wilmington
between 10:00 a.m. and noon, at which time shipments are sorted and
reloaded on the aircraft or trucks by 3:00 p.m. for departure and return to
their respective destinations.
The Company also performs weekend sort operations at Wilmington to
accommodate Saturday pickups and Monday deliveries of both overnight
express and SDS shipments. This sort is supported both by 11 Company aircraft
and by trucks.
Aircraft
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The Company acquires and utilizes used aircraft manufactured in the
late 1960s and early 1970s. Upon acquisition, the aircraft are
substantially modified by the Company. At the end of 1993,1994, the Company's
in-service fleet consisted of a total of 9097 aircraft, including 2629 DC-8s
(consisting of 10 series 61, 6 series 62 and 1013 series 63), 5357 DC-9s
(consisting of 2 series 10, 3739 series 30 and 1416 series 40), and 11 YS-11
turboprop aircraft. The Company owns the majority of the aircraft it
operates, but has completed sale-leaseback transactions with respect to six
DC-8 and six DC-9 aircraft. In addition, approximately 5070 smaller aircraft
are chartered nightly to connect small cities with Company aircraft that
then operate to and from Wilmington.
At year end 1993,1994, the nightly lift capacity of the system was about
2.83.1 million pounds versus approximately 2.42.8 million pounds and 2.12.4 million
pounds at the end of 19921993 and 1991,1992, respectively. Over the past several
years the Company's utilization of available lift capacity has exceeded
80%.
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In response to increased public awareness regarding the operation of
older aircraft, the Federal Aviation Administration ("FAA") has mandatedperiodically
mandates additional maintenance requirements for certain aircraft,
including the type operated by the Company. These maintenance requirements were substantially
completed by December 1993 forCurrently, the Company's DC-8
aircraft. As of the end of
1993 the Company had completed this required maintenance on 48and DC-9 series aircraft. This maintenance isaircraft are undergoing structural inspections for
corrosion as required by an Airworthiness Directive ("AD") issued by the
FAA. The inspections are required to be completed by July 1995 for DC-9
series aircraft, and September 1995 for DC-8 series aircraft. Inspections
and necessary repairs required by the AD have been completed on 42 DC-9
series aircraft and 25 DC-8 series aircraft as of December 31, 1994. The
Company believes these maintenance requirements foranticipates completing the remaining aircraft can be
accomplishedinspections by the required
compliance dates without materially impacting operations or the financial
position of the Company. However, the FAA may, in the future, impose
additional requirements with respect to maintenance procedures and
practices for aircraft and engines of the type operated by the Company or
interpret existing rules in a manner which could have a material adverse
effect on the Company's operations and financial position.
The Company is periodically required to retrofit certain aircraft
equipment and subsystems in accordance with mandated FAA requirements.
Presently, the Company is seeking a waiver from the FAA with regard to the date
by which installation of certain instrumentation on its YS-11 aircraft must be
accomplished. If the FAA denies the Company's request, the Company believes it
can comply with the FAA requirement without disrupting the Company's flight
schedules.
In accordance with federal law and FAA regulations, only subsonic
turbojet aircraft classified as Stage 2 or 3 by the FAA may be operated in
the United States. Generally, Stage 3 aircraft produce less noise than a
comparable Stage 2 aircraft. As of December 31, 1993, 261994, 38 of the Company's
turbojet aircraft (16(20 DC-8 and 1018 DC-9 aircraft) arewere Stage 3 aircraft, the
balance being Stage 2 aircraft.
In 1990, Congress passed the Airport Noise and Capacity Act of 1990
(the "Noise Act") which, among. Among other things, the Noise Act generally requires
turbojet aircraft weighing in excess of 75,000 pounds and operating in the
United States (the type of DC-8 and DC-9 aircraft operated by the Company)
to comply with Stage 3 noise emission standards on or before December 31,
1999. The Company's YS-11 turboprop aircraft are not subject to these
requirements. The Secretary of
Transportation may grant a waiver from this provision to allow up to 15% of an
air carrier's Stage 2 fleet to be operated until December 31, 2003. In accordance with the Noise Act, the FAA acting under delegated authority, has issued
regulations establishing interim compliance deadlines. These rules require
air carriers to reduce the base level of Stage 2 aircraft they operate 25%
by December 31, 1994; 50% by December 31, 1996; and 75% by December 31,
1998. Under limited circumstances, the Secretary of Transportation may grant
an operator a waiver from these interim compliance deadlines. As of December 31, 19931994 the Company accomplished a reductionhad reduced the base level of
its base levelStage 2 aircraft ofby approximately 24%35% and expects to meet or exceed the
compliance percentage at the first
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9second interim compliance deadline of December
31, 1994.
In addition, the Noise Act and the implementing FAA Regulations
prohibit a U.S. air carrier from importing into the United States and
thereafter operating Stage 2 aircraft unless the aircraft were under contract
prior to November 5, 1990. The Company believes that most, if not all of the
aircraft which were subject to contracts executed prior to November 5, 1990 and
placed into service after the passage of the Noise Act will be permitted to be
operated as Stage 2 aircraft subject to the interim and final Stage 2 aircraft
phase-out compliance deadlines.1996. In addition to FAA regulation, certain local airports also
regulate noise compliance. See "Business - Regulation".
The Company, in conjunction with several other companies, has
developed tested and received certification of noise suppression technology known as hush kits for its DC-9
series aircraft which have been certified to meet FAA Stage 3 requirements.
Both of the Company's DC-9-10 series aircraft and eight of the
Company's DC-9-30 series aircraft meet Stage 3 requirements.requirements have been met on 18 DC-9 series aircraft. The estimated capital
cost for Stage 3 hush kits is approximately $1.1$1.2 million for each DC-9
series aircraft. The Company has installed hush kits designed towhich satisfy Stage 3
compliance requirements on all of its DC-8-62 and DC-8-63 series aircraft.
In early 1994, firms under contract to the Company obtained FAA certification
for hush kitsaircraft
and other required modifications designed to meet Stage 3 noise
standards for the Company'sone of its DC-8-61 series aircraft. The estimated capital cost for these hush kits
and related hardware on the DC-8-62 and 63 series aircraft varied between
$750,000 and $1.4 million per aircraft. The capital cost to modify the
DC-8-61 aircraft to meet Stage 3 noise standards is approximately $4.0
million per aircraft.
International Operations
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The Company provides international express door-to-door delivery and a
variety of freight services. These services are provided in most foreign
countries on an inbound and outbound basis through a network of Airborne
offices and independent agents. Most international deliveries are
accomplished within 24 to 96 hours of pickup.
The Company's international express service is intended for the
movement of non-dutiable and certain dutiable shipments weighing less than 99
pounds. The Company's international freight service handles heavier weight
shipments on either an airport-to-airport, door-to-airport or door-to-door
basis.
The Company's strategy is to use a variable-cost approach in
delivering and expanding international services to its customers. This
strategy uses existing commercial airline lift capacity in connection with the
Company's domestic network to move shipments to overseas destinations.
Additionally, exclusive service arrangements with independent freight and
express agents have been entered into to accommodate shipments in locations
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not currently served by Company-owned operations. The Company believes there
are no significant service advantages which would justify the operation of its
own aircraft on international routes or significant investment in additional
offshore facilities or ground operations. In order to expand its business at a
reasonable cost, the Company continues to explore possible joint venture
agreements, similar to its arrangement with Mitsui & Co., Ltd. in Japan, which
combine the Company's management expertise, domestic express system and
information systems with local business knowledge and market reputation of
suitable partners.
The Company's domestic stations are staffed and equipped to handle
international shipments to or from almost anywhere in the world. In
addition to its extensive domestic network, the Company operates its own
offices in the Far East, Australia, New Zealand, and the United Kingdom.
The Company's freight and express agents worldwide are connected to FOCUS,
Airborne's on-line communication network. The Company is capable of
providing its customers with immediate access to the status of shipments
via FOCUS almost anywhere in the world.
The Company's international air express service is intended for the
movement of non dutiable and certain dutiable shipments weighing less than
99 pounds. The Company's international air freight service handles heavier
weight shipments on either an airport-to-airport, door-to-airport or door-
to-door basis. In 1994, the Company began offering ocean service
capabilities for customers who want a lower cost shipping option.
The Company's strategy is to use a variable-cost approach in
delivering and expanding international services to its customers. This
strategy uses existing commercial airline lift capacity in connection with
the Company's domestic network to move shipments to and from overseas
destinations and origins. Additionally, exclusive service arrangements
with independent freight and express agents have been entered into to
accommodate shipments in locations not currently served by Company-owned
operations. The Company currently believes there are no significant
service advantages which would justify the operation of its own aircraft on
international routes, or making significant investment in additional
offshore facilities or ground operations. In order to expand its business
at a reasonable cost, the Company continues to explore possible joint
venture agreements, similar to its arrangement with Mitsui & Co., Ltd. in
Japan, which combine the Company's management expertise, domestic express
system and information systems with local business knowledge and market
reputation of suitable partners.
Customers and Marketing
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The Company's primary domestic strategy focuses on express services
for high volume corporate customers. Most high volume customers have
entered into service agreements providing for specified rates or rate
schedules for express deliveries. As of December 31, 1993,1994, the Company
serviced approximately 356,000400,000 active customer shipping locations.
The Company determines prices for any particular domestic express
customer based on competitive factors, anticipated costs, shipment volume
and weight, and other considerations. The Company believes that it
generally offers prices that are competitive with, or lower than, prices
quoted by its principal competitors for comparable services.
The Company has historically marketed the overnight express service as
its primary domestic product. However, the Company believes its SDS
product represents an attractive opportunity to expand its customer product
offering and generate incremental revenues utilizing its existing network.
SDS is a lower yielding product than the Company's overnight product and
could result in conversion of certain shipments which may have otherwise
been handled on an overnight basis.
Internationally, the Company's marketing strategy is to target the
outbound express and freight shipments of U.S. corporate customers, and to
sell the inbound service of the Company's distribution capabilities in the
United States.
Both in the international and domestic markets, the Company believes
that its customers are most effectively reached by a direct sales force,
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and accordingly, does not currently engage in mass media advertising.
Domestic sales representatives are responsible for selling both domestic
and international express shipments. In addition, the International
Division has its own dedicated direct sales organization for selling
international freight service.
The Company's sales force currently consists of approximately 290300
domestic representatives and approximately 8075 international specialists.
The Company's sales efforts are supported by the Marketing and
International Divisions, based at the Company headquarters. Senior
management is also active in marketing the Company's services to major
accounts.
Value-added services continue to be important factors in attracting
and retaining customers. Accordingly, the Company is automating more of
its operations to make the service easier for customers to use and to
provide them with valuable management information. The Company believes
that it is generally competitive with other express carriers in terms of
reliability, value-added services and convenience.
For many of its high volume customers, the Company offers a metering
device, called LIBRA II, which is installed at the customer's place of
business. With minimum data entry, the metering device weighs the package,
calculates the shipping charges, generates the shipping labels and provides
a daily shipping report. At year end 1993,1994, the system was in use at
approximately 5,5006,800 domestic customer locations and a number of selected500 international
customer locations. Use of LIBRA II not only benefits the customer
directly, but also lowers the Company's operating costs, since LIBRA II
shipment data is transferred into the Airborne FOCUS shipment tracking
system automatically, thus avoiding duplicate data entry.
"Customer Linkage", an electronic data interchange ("EDI") program
developed for Airborne's highest volume shippers, allows customers, with
their computers, to create shipping documentation at the same time they are
entering orders for their goods. At the end of each day, shipping
activities are transmitted electronically to the Airborne FOCUS system
where information is captured for shipment tracking and billing purposes.
Customer Linkage benefits the customer by eliminating repetitive data entry
and paperwork and also lowers the Company's operating costs by eliminating
manual data entry. EDI also includes electronic invoicing and payment
remittance processing. During 1992,
theThe Company introducedalso has available a software program
known as Quicklink, which significantly reduces programming time required
by customers to take advantage of linkage benefits.
In 1995, the Company plans to unveil "LIGHTSHIP-TRACKER", a PC-based
tracking software, which is the Company's first in a series of new software
products designed to improve customer productivity and provide convenient
access to the Company's various services. LIGHTSHIP-TRACKER allows customers,
working from their PCs, to view the status of and receive information
regarding their shipments through access to the Airborne FOCUS system.
The Company offers a number of special logistics programs to customers
through its Advanced Logistics Services Corp. ("ALS") subsidiary. This
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subsidiary, established in 1993, operates the Company's Stock Exchange and
Hub Warehousing and other logistics programs. These programs provide
customers the ability to maintain inventories which can be managed either
by Company or customer personnel. Items inventoried at Wilmington can be
delivered utilizing either the Company's airline system or, if required,
commercial airlines on a next-flight-out basis. ALS' Central Print program
allows information to be sent electronically to customer computers located
at Wilmington where Company personnel monitor printed output and ship the
material according to customer instructions.
The CompanyIn addition, the Company's Sky Courier business provides expedited
next-plane-out, service at premium prices. Sky Courier also offers a
Regional Warehousing program where customer inventories are managed by the Company at any
of over 4060 locations around the United States and Canada.
In addition, the Company's Sky Courier business provides
next-plane-out service at premium prices.
The Company has obtained ISO 9000 certification for its Chicago,
Philadelphia and London stations and its Seattle Headquarters. The ISO
9000 is a quality program developed by the International Standards
Organization ("ISO"), based in Geneva, Switzerland. This organization
provides a set of international standards on quality management and quality
assurance presently recognized in 9192 countries. The certification is an
asset in doing business worldwide and provides evidence of the Company's
commitment to excellence and quality.
The Company expects to certify additional facilities over the next
several years.
Competition
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The market for the Company's services has been and is expected to
remain highly competitive. The principal competitive factors in both
domestic and international markets are price, the ability to provide
reliable pickup and delivery, and value-added services.
Federal Express continues to be the dominant competitor in the
domestic express business, followed by United Parcel Service. Airborne
Express currently ranks third in shipment volume behind these two companies
in the domestic express business. Other domestic express competitors
include the U.S. Postal Service's Express Mail Service and several other
transportation companies offering next morning or next-plane-out delivery
service. The Company also competes to some extent with companies offering
ground transportation services and with facsimile and other forms of
electronic transmission.
The Company increased rates in March 1993 by approximately 5% on
domestic business that was not under a time-definite contract, resulting in an
overall yield improvement of approximately 2%. This was the first domestic
rate increase in four years. Although still very competitive, the domestic
pricing environment improved during 1993 resulting in relatively stable yields.
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The Company believes it is important to maintain an active capital
expansion program to increase capacity, improve service and increase
productivity as its volume of shipments increases. However, the Company
has significantly less capital resources than its two primary competitors.
In the international markets, in addition to Federal Express and
United Parcel Service, the Company competes with DHL, TNT and other air
freight forwarders or carriers and most commercial airlines.
Employees
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As of December 31, 1993,1994, the Company and its subsidiaries had
approximately 9,50010,400 full-time employees and 6,3007,000 part-time and casual
employees. Approximately 4,1004,600 full-time employees (including the
Company's 560 pilots) and 2,8003,100 part-time and casual employees are employed
under union contracts, primarily with locals of the International
Brotherhood of Teamsters and Warehousemen.
Labor Agreements
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Most labor agreements forcovering the Company's ground personnel arewere
renegotiated in 1994 for three-year
terms with most agreementsa four-year term expiring in 1994.1998. Several
contracts, which expired in 1994, remain unsettled although the Company
believes these contracts will be settled without experiencing any
significant disruption or work stoppage. The Company's pilots are covered
by a contract which isbecomes amendable inon July 31, 1995.
Subsidiaries
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The Company has the following wholly-owned subsidiaries:
1. ABX Air, Inc., a Delaware corporation, is a certificated air
carrier which owns and operates the Airline.Company's domestic express
cargo service. Its wholly-owned subsidiaries are as follows:
a) Wilmington Air Park, Inc., a Ohio corporation, is the owner
of the Wilmington airport property (Airborne Air Park).
b) Airborne FTZ, Inc., a Ohio corporation, is the holder of a
foreign trade zone certificate at the Wilmington airport
property.
c) Aviation Fuel, Inc., a Ohio corporation, purchases and
sells aviation and other fuels.
d) Advanced Logistics Services Corp., a Ohio corporation,
provides customized warehousing, inventory management and
shipping services.
e) Sound Suppression, Inc., a Ohio corporation with no
current operating activities.
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2. Awawego Delivery, Inc., a New York corporation, holds trucking
rights in New York and Connecticut.
3. Airborne Forwarding Corporation, a Delaware corporation doing
business as Sky Courier, provides expedited courier service.
4. Airborne Freight Limited, a New Zealand corporation, provides
air express and air freight services.
Regulation
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The Company's operations are subject to various regulations including
regulation by the United States Department of Transportation ("DOT"), the
FAA, the Interstate Commerce Commission, and various other federal, state,
local and foreign authorities.
The DOT, under the Federal Aviation Act,federal transportation statutes, grants air carriers
the right to engage in domestic and international air transportation. The
DOT issues certificates to engage in air transportation if the carrier is a U.S. citizen,
as defined by the Act, and possesses the financial and managerial fitness
necessary to hold such certificates. The DOT has the
authority to modify, suspend or revoke such certificates for cause,
including failure to comply with the Federal Aviation Actfederal law or the DOT regulations. The
Company believes it possesses all necessary DOT-issued certificates to
conduct its operations.
The FAA regulates aircraft safety and flight operations generally,
including equipment, ground facilities, maintenance and communications.
The FAA issues operating certificates to carriers who possess the technical
competence to conduct air carrier operations. In addition, the FAA issues
certificates of airworthiness to each aircraft which meets the requirements
for aircraft design and maintenance. The Company believes it holds all
airworthiness and other FAA certificates required for the conduct of its
business, although the FAA has the power to suspend or revoke such
certificates for cause, including failure to comply with the Federal Aviation Act.federal law.
The federal government generally regulates aircraft engine noise at
its source. However, local airport operators may, under certain
circumstances, regulate airport operations based on aircraft noise
considerations. Prior to
passage of the Noise Act, certain airports adopted regulations including
restrictions on aircraft operations, such as curfews during late night and
early morning hours, noise budgets or mandatory use of Stage 3 aircraft, many
of which are grandfathered under the Noise Act. Other airports have proposed
and may adopt similar noise restrictions. The Noise Act provides that airports
proposing restrictions onin the case of Stage 2
aircraft operations must provide interested
parties a minimum of 180 days advance notice of such regulations and the
opportunity to comment
11
15
thereon. Thereafter,restrictions, the airport may impose such noise regulations subjectoperator must notify air carriers of its
intention to propose rules and satisfy the requirements of existing federal law. The Noise Act further provides that
airports that fail to providestatutes
before implementation of the required notice and opportunity to comment
will be deemed ineligible for federal airport grant fundsrules or in the authority to
impose passenger facility charges. With respect tocase of Stage 3 aircraft, restrictions, the Noise Act provides that no such restrictions may be imposed
unless the
airport either obtainsoperator must obtain the consentcarriers' or the governments' approval of
all aircraft operators serving
the airport or obtains FAA approvalrule prior to impose such restrictions. Noncompliance
with these rules will also result in the loss of federal funding and
eligibility to impose passenger facility charges.its adoption. The Company believes the operation of its
aircraft either complies with or is exempt from compliance with currently
applicable local airport rules. However, if more stringent aircraft
operating regulations were adopted on a widespread basis, the Company might
be required to expend substantial sums, make schedule changes or take other
actions.
See "Business - Domestic Operations - Aircraft."
The Company's aircraft currently meet all knowknown requirements for
emission levels. However, under the ClearClean Air Act, individual states or
the Federal Environmental Protection Agency (the "EPA") may adopt
regulations requiring the reduction in emissions for one or more localities
based on the measured air quality at such localities. The EPA has proposed
regulations for portions of California calling for emission reductions
bythrough restricting the year 2005.use of emission producing ground service equipment
or aircraft auxilary power units. There can be no assurance, that if such
regulations are adopted in the future or changes in existing laws or
regulations are promulgated, that such laws or rules would not have a material
adverse effect on the Company.
Under currently applicable federal aviation law, the Company's airline
subsidiary could cease to be eligible to operate as an all-cargo carrier if
more than 25% of the voting stock of the Company were owned or controlled
by non-U.S. citizens or the Airline wasairline were not effectively controlled by U.S.
citizens. Moreover, in order to hold an all-cargo air carrier certificate,
the president and at least two-thirds of the directors and officers of an
air carrier must be U.S. citizens. The Company has entered into a Rights
Agreement designed, in part, to discourage a single foreign person from
acquiring 20% or more, and foreign persons in the aggregate from acquiring
25% or more, of the Company's outstanding voting stock without the approval
of the Board of Directors. To the best of the Company's knowledge, foreign
stockholders do not control more than 25% of the outstanding voting stock.
Two of the Company's officers are not U.S. citizens.
The Company believes that its current operations are substantially in
compliance with the numerous regulations to which its business is subject;
however, various regulatory authorities have jurisdiction over significant
aspects of the Company's business, and it is possible that new laws or
12
16
regulations or changes in existing laws or regulations or the
interpretations thereof could have a material adverse effect on the
Company's operations.
Financial Information Regarding International and Domestic Operations
- ---------------------------------------------------------------------
Financial information relating to foreign and domestic operations for
each of the three years in the period ended December 31, 19931994 is presented
in Note LK (Segment Information) of the Notes to Consolidated Financial
Statements appearing in the 19931994 Annual Report to Shareholders and is
incorporated herein by reference.
ITEM 2. PROPERTIES
-
--------------------
The Company leases general and administrative office facilities
located in Seattle, Washington.
At year end the Company maintained 232254 domestic and 227 foreign
stations, most of which are leased. The majority of the facilities are
located at or near airports.
The Company owns the airport at the Airborne Air Park, in Wilmington,
Ohio. The airport currently consists of a runway, taxi-ways, aprons,
buildings serving as aircraft and equipment maintenance facilities, a sort
facility, storage facilities, a training center, and operations and
administrative offices. The Company has in progress a significant
expansion of the airpark which includes construction of a second runway,
taxiways two roadway tunnels
under the taxiways and several other facilities. This expansion should be
substantially completed during 1995.
Information regarding collateralization of certain property and lease
commitments of the Company is set forth in Notes E and F of the Notes to
Consolidated Financial Statements appearing in the 19931994 Annual Report to
Shareholders and is incorporated herein by reference.
The Company believes its existing facilities are adequate to meet
current needs.
ITEM 3. LEGAL PROCEEDINGS
- ---------------------------
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -------------------------------------------------------------
None
13
17
ITEM 4a. EXECUTIVE OFFICERS OF THE REGISTRANT
----------------------------------------------
Positions and Offices Presently
Name Age Held and Business Experience
---- --- ----------------------------
Robert S. Cline 5657 Chairman and Chief Executive Officer (1984
to date); Vice Chairman and Chief Financial
Officer (1978 to 1984); Executive Vice
President and Chief Financial Officer (1973
to 1978); Senior Vice President, Finance
(1970 to 1973); Vice President, Finance
(1968 to 1970); Vice President, Finance,
Pacific Air Freight, Inc. (1966 to 1968)
Robert G. Brazier 5657 President and Chief Operating Officer (1978
to date); Executive Vice President and Chief
Operating Officer (1973 to 1978); Senior
Vice President, Operations (1970 to 1973);
Vice President, Operations (1968 to 1970);
Vice President, Sales and Operations, Pacific
Air Freight, Inc. (1964 to 1968)
Roy C. Liljebeck 5657 Chief Financial Officer (1984 to date);
Executive Vice President, Finance Division
(1979 to date); Senior Vice President (1973
to 1979); Treasurer (1968 to 1988)
Kent W. Freudenberger 5354 Executive Vice President, Marketing Division
(1980 to date); Senior Vice President (1978
to 1980); Vice President (1973 to 1978)
Raymond T. Van Bruwaene 5556 Executive Vice President, Field Services
Division (1980 to date); Senior Vice President
(1978 to 1980); Vice President (1973 to 1978)
John J. Cella 5354 Executive Vice President, International
Division (1985 to date); Senior Vice President,
International Division (1985(1982 to date)1985);
Senior Vice
President, International Division (1982(1981 to
1985)1982); Vice President, International Division (1981 to 1982);
Vice President, Far East (1971 to 1981)
14
18
Carl D. Donaway 4243 President and Chief Executive Officer, ABX Air,
Inc. (1992 to date); offices held in the
Company: Vice President, Business Analysis
(1992); Vice President, Customer Support (1990
to 1992); Director, Customer Support (1988 to
1990)
15
19
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
- -------------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS MATTERS
-
--------------------
The response to this Item is contained in the 19931994 Annual Report to
Shareholders and the information contained therein is incorporated by
reference.
On February 28, 199327, 1995 there were approximately 1,4971,626 shareholders of record of the
Common Stock of the Company based on information provided by the Company's
transfer agent.
ITEM 6. SELECTED FINANCIAL DATA
- ---------------------------------
The response to this Item is contained in the 19931994 Annual Report to
Shareholders and the information contained therein is incorporated herein
by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- -------------------------------------------------------------------------
RESULTS OF OPERATIONS
-
---------------------
The response to this Item is contained in the 19931994 Annual Report to
Shareholders and the information contained therein is incorporated herein
by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -----------------------------------------------------
The response to this Item is contained in the 19931994 Annual Report to
Shareholders and the information contained therein is incorporated herein
by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- -------------------------------------------------------------------------
FINANCIAL DISCLOSURE
- --------------------
None
16
20
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -------------------------------------------------------------------------------------------------------------------------
The response to this Item is contained in part in the Proxy Statement
for the 19941995 Annual Meeting of Shareholders under the captions "Election of
Directors" and "Exchange Act Compliance" and the information contained
therein is incorporated herein by reference.
The executive officers of the Company are elected annually at the
Board of Directors meeting held in conjunction with the annual meeting of
shareholders. There are no family relationships between any directors or
executive officers of the Company. Additional information regarding
executive officers is set forth in Part I, Item 4a.
ITEM 11. EXECUTIVE COMPENSATION
- -----------------------------------------------------------------
The response to this Item is contained in the Proxy Statement for the
19941995 Annual Meeting of Shareholders under the caption "Executive
Compensation" and the information contained therein is incorporated herein
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------------------------------------------------------------------------------------------------------------------------------------------------
The response to this Item is contained in the Proxy Statement for the
19941995 Annual Meeting of Shareholders under the captions "Voting at the
Meeting" and "Stock Ownership of Management" and the information contained
therein is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -----------------------------------------------------------------------------------------------------------------
The response to this Item is contained in the Proxy Statement for the
19941995 Annual Meeting of Shareholders under the caption "Board of Directors and
Committees""Executive
Compensation" and the information contained therein is incorporated herein
by reference.
17
21
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- ---------------------------------------------------------------------------------------------------------------------------------------------------
(a)1. Financial Statements
--------------------------------------------------
The following consolidated financial statements of Airborne Freight
Corporation and its subsidiaries as contained in its 19931994 Annual Report to
Shareholders are incorporated by reference in Part II, Item 8:
Consolidated Statements of Net Earnings
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditors' Report
(a)2. Financial Statement Schedules Page
- -------------------------------------- ----
Schedule V - Property and Equipment 26
Schedule VI - Accumulated Depreciation and Amortization
of Property and Equipment 28
Schedule VIII(a)2. Financial Statement Schedules
-----------------------------------
Schedule II - Valuation and Qualifying Accounts 30
Schedule IX - Short-Term Borrowings 31
Schedule X - Supplementary Income Statement Information 32
All other schedules are omitted because they are not applicable or are not
required, or because the required information is included in the
consolidated financial statements or notes thereto.
(a)3. Exhibits
- -------------------------------
A) The following exhibits are filed with this report:
EXHIBIT NO. 3 Articles of Incorporation and By-laws
- ----------------------------------------------------------------------------------------------------------
3(a) The Restated Certificate of Incorporation of the Company, dated
as of August 4, 1987 (incorporated herein by reference from Exhibit 3(a) to
the Company's Form 10-K for the year 18
22
ended December 31, 1987).
3(b) The By-laws of the Company as amended to February 1, 1988April 26, 1994
(incorporated herein by reference from Exhibit 3(b) to the Company's Form 10-K for the year ended December 31, 1987)8-
K dated April 26, 1994).
EXHIBIT NO. 4 Instruments Defining the Rights of Security Holders
- --------------------------------------------------------------------------------------------------------------------------------------
Including Indentures
-
--------------------
4(a) Indenture dated as of September 4, 1986, between the Company
and Peoples National Bank of Washington (now U.S. Bank of Washington), as
trustee (and succeeded by First Trust Washington), relating to $25 million
of the Company's 10% Senior Subordinated Notes due 1996 (incorporated by
reference from Exhibit 4(c) to Amendment No. 1 to the Company's
Registration Statement on Form S-3, No. 33-6043, filed with the Securities
and Exchange Commission on September 3, 1986).
4(b) Note Purchase Agreement dated September 3, 1986 among the
Company and the original purchasers of the Company's 10% Senior
Subordinated Notes due 1996 (incorporated by reference from Exhibit 4(d) to
Amendment No. 1 to the Company's Registration Statement on Form S-3, No. 33-6043,33-
6043, filed with the Securities and Exchange Commission on September 3,
1986).
4(c) Indenture dated as of August 15, 1991, between the Company and
Bank of America National Trust and Savings Association, as Trustee, with
respect to the Company's 6-3/4% Convertible Subordinated Debentures due
August 15, 2001 (incorporated herein by reference from Exhibit 4(i) to
Amendment No. 1 to the Company's Registration Statement on Form S-3 No.
33-42044 filed with the Securities and Exchange Commission on August 15,
1991).
4(d) First Supplemental Trust Indenture dated as of June 30, 1994
between the Company and LaSalle National Bank, as Successor Trustee, with
respect to the Company's 6-3/4% Convertible Subordinated Debentures due
August 15, 2001.
4(e) Indenture dated as of December 3, 1992, between the Company and
Bank of New York, as trustee, relating to the Company's 8-7/8% Notes due
2002 (incorporated herein by reference from Exhibit 4(a) to Amendment No. 1
to the Company's Registration Statement on Form S-3, No. 33-54560 filed
with the Securities and Exchange Commission on December 4, 1992).
4(e)4(f) Rights Agreement, dated as of November 20, 1986 between the
Company and First Jersey National Bank (predecessor to First Interstate
Bank, Ltd.), as Rights Agent (incorporated by reference from Exhibit 1 to
the Company's Registration Statement on Form 8-A, dated November 28, 1986).
19
23
4(f)4(g) Certificate of Designation of Series A Participating Cumulative
Preferred Stock Setting Forth the Powers, Preferences, Rights,
Qualification, Limitations and Restrictions of Such Series of Preferred
Stock of the Company (incorporated by reference from Exhibit 2 to the
Company's Registration Statement on Form 8-A, dated November 28, 1986).
4(g)4(h) Form of Right Certificate relating to the Rights Agreement (see
4(e)4(f) above, incorporated by reference from Exhibit 3 to the Company's
Registration Statement on Form 8-A, dated November 28, 1986).
4(h)4(i) Letter dated January 5, 1990, from the Company to First
Interstate Bank, Ltd. ("FIB"), appointing FIB as successor Rights Agent
under the Rights Agreement dated as of November 20, 1986, between the
Company and The First Jersey National Bank (incorporated by reference from
Exhibit 4(c) to the Company's Form 10-K for the year ended December 31,
1989).
4(i)4(j) Amendment to Rights Agreement entered into as of January 24,
1990, between the Company and First Interstate Bank, Ltd. (incorporated
herein by reference from Exhibit 4(d) to the Company's Form 10-K for the
year ended December 31, 1989).
4(j)4(k) Third Amendment to Rights Agreement entered into as of November
6, 1991 between the Company and First Interstate Bank, Ltd. (incorporated
herein by reference from Exhibit 4(a) to the Company's Form 10-K for the
year ended December 31, 1991).
4(k)4(l) 6.9% Cumulative Convertible Preferred Stock Purchase Agreement
dated as of December 5, 1989, among the Company, Mitsui & Co., Ltd.,
Mitsui & Co. (U.S.A.), Inc., and Tonami Transportation Co., Ltd. (incorporated(incor
porated herein by reference from Exhibit 4(b) to the Company's Form 10-K
for the year ended December 31, 1989).
4(k)(i)4(m) Amendments to the above Stock Purchase Agreement irrevocably
waiving all demand registration rights and relinquishing the right of
Mitsui & Co., Ltd. to designate a representative to Airborne's Board of
Directors, and resignation of T. Kokai from said Board (incorporated herein
by reference from Amendment No. 1 to Schedule 13D of Mitsui & Co., Ltd.,
Intermodal Terminal, Inc. (assignee of Mitsui & Co. (USA) Inc.) and Tonami
Transportation Co., Ltd., filed with the Securities & Exchange Commission
on December 21, 1993).
20
24
4(l)4(n) Certificate of Designation of Preferences of Preferred Shares
of Airborne Freight Corporation, as filed on January 26, 1990, in the
Office of the Secretary of the State of Delaware (incorporated herein by
reference from Exhibit 4(a) to the Company's Form 10-K for the year ended
December 31, 1989).
EXHIBIT NO. 10 Material Contracts
- ---------------------------------
Executive Compensation Plans and Agreements
-
-------------------------------------------
10(a) 1979 Airborne Freight Corporation Key Employee Stock Option and
Stock Appreciation Rights Plan, as amended through February 2, 1987
(incorporated by reference from Exhibit 10(d) to the Company's Form 10-K
for the year ended December 31, 1986).
10(b) 1983 Airborne Freight Corporation Key Employee Stock Option and
Stock Appreciation Rights Plan, as amended through February 2, 1987
(incorporated by reference from Exhibit 10(c) to the Company's Form 10-K
for the year ended December 31, 1986).
10(c) 1989 Airborne Freight Corporation Key Employee Stock Option and
Stock Appreciation Rights Plan (incorporated herein by reference from
Exhibit 10(d) to the Company's Form 10-K for the year ended December 31,
1989).
10(d) 1994 Airborne Freight Corporation Key Employee Stock Option
and Stock Appreciation Rights Plan (incorporated herein by reference from
the Addendum to the Company's Proxy Statement for the 1994 Annual Meeting
of Shareholders).
10(e) Airborne Freight CorporationCorporations Directors Stock Option Plan
(incorporated herein by reference from the Addendum to the Company's Proxy
Statement for the 1991 Annual Meeting of Shareholders).
10(f) Airborne Express Executive Deferral Plan dated January 1, 1992
(incorporated by reference from Exhibit 10(b) to the Company's Form 10-K
for the year ended December 31, 1991).
21
25
10(g) Airborne Express Supplemental Executive Retirement Plan dated
January 1, 1992 (incorporated by reference from Exhibit 10(c) to the
Company's Form 10-K for the year ended December 31, 1991).
10(h) Airborne Express 19931994 Executive Management Incentive
Compensation Plan.
10(i) Airborne Express 1995-1999 Executive Incentive Compensation
Plan.
10(j) Employment Agreement dated December 15, 1983, as amended
November 20, 1986, between the Company and Mr. Robert G. Brazier, President
and Chief Operating Officer (incorporated by reference from Exhibit 10(a)
to the Company's Form 10-K for the year ended December 31, 1986).
Identical agreements exist between the Company and the other six executive
officers.
10(j)10(k) Employment Agreement dated November 20, 1986 between the
Company and Mr. Lanny H. Michael, then Vice President, Treasurer and
Controller (incorporated by reference from Exhibit 10(b) to the Company's
Form 10-K for the year ended December 31, 1986). Identical agreements
exist between the Company and 25 other officers of the Company. In
addition, the Company's principal subsidiary, ABX Air, Inc., has entered
into substantially identical agreements with seven of its officers.
Other Material Contracts
------------------------
10(k)10(l) $240,000,000 Revolving Loan Facility dated as of November 19, 1993
among the Company, as borrower, and Wachovia Bank of Georgia, N.A., ABN
AMRO Bank N.V., United States National Bank of Oregon, Seattle-First
National Bank, CIBC Inc., Continental Bank N.A., Bank of America National
Trust and Savings Association, The Bank of New York, NBD Bank, N.A., as
banks and Wachovia Bank of Georgia, N.A., as agent.
10(l)agent (incorporated herein by
reference from Exhibit 10(k) to the Company's Form 10-K for the year ended
December 31, 1993).
10(m) Letter dated December 5, 1989, to the Company from Mitsui &
Co., Ltd. ("Mitsui"), relating to Mitsui's commitment to provide the
Company and ABX Air, Inc., a $100 million aircraft financing facility, as
modified by that certain Supplement thereto entered into as of March 15,
1990 (incorporated herein by reference from Exhibit 10(b) to the Company's
Form 10-K for the year ended December 31, 1989).
10(m)10(n) Shareholders Agreement entered into as of February 7, 1990,
among the Company, Mitsui & Co., Ltd., and Tonami Transportation Co., Ltd.,
relating to joint ownership of Airborne Express Japan, Inc. (incorporated
herein by reference 22
26
from Exhibit 10(c) to the Company's Form 10-K for the
year ended December 31, 1989).
EXHIBIT NO. 11 Statement Re Computation of Per Share Earnings
- ----------------------------------------------------------------------------------------------------------------------------
11 Statement re computation of earnings per share
EXHIBIT NO. 12 Statements Re computationComputation of Ratios
- ------------------------------------------------------------------------------------------------------
12 Statement re computation of ratio of senior long-term debt and
total long-term debt to total capitalization
EXHIBIT NO. 13 Annual Report to Security Holders
- --------------------------------------------------------------------------------------------------
13 Portions of the 19931994 Annual Report to Shareholders of Airborne
Freight Corporation
EXHIBIT NO. 21 Subsidiaries of the Registrant
- --------------------------------------------------------------------------------------------
21 The subsidiaries of the Company are listed on page 10 & 11in Part I of this
report on Form 10-K for the year ended December 31, 1993.1994.
EXHIBIT NO. 23 Consents of Experts and Counsel
- ----------------------------------------------------------------------------------------------
23 Independent Auditors' Consent and Report on Schedules
EXHIBIT NO. 27 Financial Data Schedule
--------------------------------------
27 Financial Data Schedule
All other exhibits are omitted because they are not applicable, or
not required, or because the required information is included in the
consolidated financial statements or notes thereto.
(b) Reports on Form 8-K
-------------------
None
23
27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
AIRBORNE FREIGHT CORPORATION
By /S/ ROBERT S. CLINE
--------------------------------------------------------
Robert S. Cline
Chief Executive Officer
By /S/ ROBERT G. BRAZIER
----------------------------------------------------------
Robert G. Brazier
Chief Operating Officer
By /S/ ROY C. LILJEBECK
---------------------------------------------------------
Roy C. Liljebeck
Chief Financial Officer
By /S/ LANNY H. MICHAEL
--------------------------------------------------------
Lanny H. Michael
Treasurer and Controller
Date: March 28, 199429, 1995
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company and in the capacities and on the date indicated:
24
28
/S/ ANCIL H. PAYNEWILLIAM SWINDELLS /S/ HAROLD M. MESSMER, JR.
- ---------------------------------- ----------------------------------
Ancil H. Payne------------------------ ------------------------
William Swindells (Director) Harold M. Messmer, Jr. (Director)
/S/ ROBERT G. BRAZIER /S/ RICHARD M. ROSENBERG
- ---------------------------------- ---------------------------------------------------------- ------------------------
Robert G. Brazier (Director) Richard M. Rosenberg (Director)
/S/ ROBERT S. CLINE
- ----------------------------------------------------------
Robert S. Cline (Director)
25
Date: March 29, 1995
AIRBORNE FREIGHT CORPORATION
AND SUBSIDIARIES
SCHEDULE V - PROPERTY AND EQUIPMENT
(In thousands)
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Balance at Other Changes
beginning Additions Additions Balance at
Classifications of period at cost Retirements (Deductions) end of period
--------------- --------- --------- ----------- ------------ -------------
Year Ended December 31, 1993:
Flight Equipment $ 770,766 $ 89,840 $11,432 $ - $ 849,174
Land, Buildings and
Leasehold Improvements 114,738 13,392 273 - 127,857
Package Handling & Ground
Support Equipment 105,262 10,393 6,367 - 109,288
Vehicles and Other
Equipment 136,245 22,713 6,272 - 152,686
---------- -------- ------- ---------- ----------
TOTALS $1,127,011 $136,338 $24,344 $ - $1,239,005
========== ======== ======= ========== ==========
Year Ended December 31, 1992:
Flight Equipment $ 588,517 $188,810 $ 6,561 $ - $ 770,766
Land, Buildings and
Leasehold Improvements 100,234 15,018 514 - 114,738
Package Handling & Ground
Support Equipment 98,109 8,698 1,545 - 105,262
Vehicles and Other
Equipment 125,844 21,090 10,689 - 136,245
26
30
--------- --------- --------- ---------- ----------
TOTALS $ 912,704 $ 233,616 $ 19,309 $ - $1,127,011
--------- --------- --------- ---------- ----------
Year Ended December 31, 1991:
Flight Equipment $ 378,819 $ 218,143 $ 8,445 $ - $ 588,517
Land, Buildings and
Leasehold Improvements 74,069 27,456 1,291 - 100,234
Package Handling & Ground
Support Equipment 93,842 15,396 11,129 - 98,109
Vehicles and Other
Equipment 109,897 31,520 15,573 - 125,844
--------- --------- --------- ---------- ----------
TOTALS $ 656,627 $ 292,515 $ 36,438 $ - $ 912,704
========= ========= ========= ========== ==========
27
31
AIRBORNE FREIGHT CORPORATION
AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY AND EQUIPMENT
(In thousands)
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Balance at Other Changes Balance at
beginning Additions Additions end
Classifications of period at cost Retirements (Deductions) of period
--------------- --------- --------- ---------- ---------- ----------
C>
Year Ended December 31, 1993:
Flight Equipment $237,135 $ 75,174 $ 312 $ - $311,997
Land, Buildings and
Leasehold Improvements 26,860 7,767 216 - 34,411
Package Handling & Ground
Support Equipment 45,897 12,932 6,323 - 52,506
Vehicles and Other
Equipment 86,182 25,801 5,855 - 106,128
-------- -------- -------- -------- --------
TOTALS $396,074 $121,674 $ 12,706 $ - $505,042
======== ======== ======== ======== ========
Year Ended December 31, 1992:
Flight Equipment $177,032 $ 61,152 $ 1,049 $ - $237,135
Land, Buildings and
Leasehold Improvements 20,301 7,039 480 - 26,860
Package Handling & Ground
Support Equipment 34,895 12,482 1,480 - 45,897
Vehicles and Other
28
32
Equipment 67,327 28,593 9,738 - 86,182
-------- -------- -------- -------- --------
TOTALS $299,555 $109,266 $ 12,747 $ - $396,074
======== ======== ======== ======== ========
Year Ended December 31, 1991:
Flight Equipment $130,356 $ 46,676 $ - $ - $177,032
Land, Buildings and
Leasehold Improvements 16,209 5,291 1,199 - 20,301
Package Handling & Ground
Support Equipment 34,571 11,369 11,045 - 34,895
Vehicles and Other
Equipment 55,618 25,782 14,073 - 67,327
-------- -------- -------- -------- --------
TOTALS $236,754 $ 89,118 $ 26,317 $ - $299,555
======== ======== ======== ======== ========
29
33
AIRBORNE FREIGHT CORPORATION
AND SUBSIDIARIES
SCHEDULE VIIIII - VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Column A Column B Column C Column D Column E
------------------- -------- -------- -------- --------
Additions
Balance at Charged to Balance at
Beginning Costs and End
Description of Period Expenses Deductions of Period
----------- -------- -------- --------- ------------------- --------
DEDUCTED FROM ASSETS TO WHICH THEY APPLY:
1. Allowance for doubtful accounts -
Year Ended December 31, 1993 $6,801 $11,660 $11,5361994 $6,925 $12,631 $12,056 $7,500
Year Ended December 31, 1992 $6,854 $ 9,574 $ 9,6271993 $6,801 $11,660 $11,536 $6,925
Year Ended December 31, 1991 $6,9421992 $6,854 $ 9,6859,574 $ 9,773 $6,8549,627 $6,801
30
34
AIRBORNE FREIGHT CORPORATION
AND SUBSIDIARIES
SCHEDULE IX - SHORT-TERM BORROWINGS
(Dollars in thousands)
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Weighted Maximum Amount Average Amount Weighted
Balance at Average Outstanding Outstanding Avg. Interest
Category of Aggregate End Interest During During Rate During
Short-Term Borrowings of Period Rate the Period the Period the Period
--------------------- ---------- -------- ---------- ------------ ------------
December 31, 1993
Money Market Lines of Credit $ -- N/A $110,000 $26,781 3.64%
Payable to Banks
December 31, 1992
Money Market Lines of Credit $16,100 3.84% $52,800 $33,207 4.16%
Payable to Banks
December 31, 1991
Money Market Lines of Credit $25,400 5.55% $31,500 $14,488 6.48%
Payable to Banks
Balances outstanding under the Company's Money Market lines of credit
arrangement generally have maturities ranging from one day to one week.
Average amount outstanding during the period is computed by dividing the total
of daily outstanding principal balances by 365 or 366 days as applicable.
Weighted average interest rate during the period is computed by dividing the
actual short-term interest expense by the average short-term borrowings
outstanding.
31
35
AIRBORNE FREIGHT CORPORATION
AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
(In thousands)
Column A Column B
-------- --------
Item Charged to costs and expenses
-------- -----------------------------
Year Ended December 31
----------------------
1993 1992 1991
---- ---- ----
Maintenance and Repairs $75,310 $71,261 $59,065
Aviation Excise/Fuel Taxes $17,309 $17,933 $14,698
Note: Depreciation and amortization of intangible assets, taxes (other than
payroll and income taxes), royalties, and advertising costs are each less than
1% of consolidated revenue in 1993, 1992 and 1991.
32
36
EXHIBIT INDEX
Exhibit Page
Number Description Number
------- ----------- ------------------ -------
(a)3. Exhibits
- ---------------
A) The following exhibits are filed with this report: ---
EXHIBIT NO. 3 Articles of Incorporation and By-laws
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3(a) The Restated Certificate of Incorporation of ---
the Company, dated as of -- August 4, 1987
(incorporated herein by reference from Exhibit
3(a) to the Company's Form 10-K for the year
ended December 31, 1987).
3(b) The By-laws of the Company as amended to February 1, 1988---
April 26, 1994 (incorporated -- herein by reference
from Exhibit 3(b) to the Company's Form 10-K for
the year ended December 31, 1987.8-K dated
April 26, 1994).
EXHIBIT NO. 4 Instruments Defining the Rights of Security Holders
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Including - ----------------------------------------------------------------------------
Indentures
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4(a) Indenture dated as of September 4, 1986, between ---
the Company and -- Peoples National Bank of Washington
(now U.S. Bank of Washington), as trustee
(and succeeded by First Trust Washington), relating
to $25 million of the Company's 10% Senior
Subordinated Notes due 1996 (incorporated by
reference from Exhibit 4(c) to Amendment No. 1
to the Company's Registration Statement on
Form S-3, No. 33-6043, filed with the Securities
and Exchange Commission on September 3, 1986).
4(b) Note Purchase Agreement dated September 3, 1986 ---
among the Company and -- the original purchasers of
the Company's 10% Senior Subordinated Notes due
1996 (incorporated by reference from Exhibit 4(d)
to Amendment No. 1 to the Company's Registration
Statement on Form S-3, No. 33-6043, filed with the
Securities and Exchange Commission on September 3, 1986).
37
4(c) Indenture dated as of August 15, 1991, between ---
the Company and Bank of -- America National Trust
and Savings Association, as Trustee, with respect to
the Company's 6-3/4% Convertible Subordinated
Debentures due August 15, 2001 (incorporated
herein by reference from Exhibit 4 (i) to Amendment
No. 1 to the Company's Registration Statement
on Form S-3 No. 33-42044 filed with the Securities
and Exchange Commission on August 15, 1991).
4(d) First Supplemental Trust Indenture dated as of ---
June 30, 1994 between the Company and LaSalle
National Bank, as Successor Trustee, with respect
to the Company's 6-3/4% Convertible Subordinated
Debentures due August 15, 2001.
4(e) Indenture dated as of December 3, 1992, between ---
the Company and Bank of -- New York, as trustee,
relating to the Company's 8-7/8% Notes due 2002
(incorporated herein by reference from Exhibit
4(a) to Amendment No. 1 to the Company's
Registration Statement on Form S-3, No. 33-54560
filed with the Securities and Exchange Commission
on December 4, 1992).
4(e)4(f) Rights Agreement, dated as of November 20, 1986 ---
between the Company and -- First Jersey National Bank
(predecessor to First Interstate Bank, Ltd.), as
Rights Agent (incorporated by reference from
Exhibit 1 to the Company's Registration Statement
on Form 8-A, dated November 28, 1986).
4(f)4(g) Certificate of Designation of Series A ---
Participating Cumulative -- Preferred Stock Setting
Forth the Powers, Preferences, Rights, Qualification,
Limitations and Restrictions of Such Series of
Preferred Stock of the Company (incorporated by
reference from Exhibit 2 to the Company's
Registration Statement on Form 8-A, dated
November 28, 1986).
4(g)4(h) Form of Right certificate relating to the Rights ---
Agreement (see 4(e) --
above, incorporated by reference from Exhibit 3 to the Company's
Registration Statement on From 8-A, dated November 28, 1986).
38
4(h)4(f) above, incorporated by
reference from Exhibit 3 to the Company's
Registration Statement on From 8-A, dated
November 28, 1986).
4(i) Letter dated January 5, 1990, from the Company ---
to First Interstate -- Bank, Ltd. ("FIB"),
appointing FIB as successor Rights Agent under the
Rights Agreement dated as of November 20, 1986,
between the Company and The First Jersey National
Bank (incorporated by reference from Exhibit 4(c) to
the Company's Form 10-K for the year ended
December 31, 1989).
4(i)4(j) Amendment to Rights Agreement entered into as of ---
January 24, 1990, -- between the Company and First
Interstate Bank, Ltd. (incorporated herein by
reference from Exhibit 4(d) to the Company's
Form 10-K for the year ended December 31, 1989).
4(j)4(k) Third Amendment to Rights Agreement entered into ---
as of November 6, 1991 -- between the Company and
First Interstate Bank, Ltd. (incorporated herein
by reference from Exhibit 4(a) to the Company's
Form 10-K for the year ended December 31, 1991).
4(k)4(l) 6.9% Cumulative Convertible Preferred Stock ---
Purchase Agreement dated as of December 5, 1989,
among the Company, Mitsui & Co., Ltd., Mitsui & Co.
(U.S.A.), Inc., and Tonami Transportation Co., Ltd.
(incorporated herein by reference from Exhibit 4(b)
to the Company's Form 10-K for the year ended
December 31, 1989).
4(k)4(l)(i) Amendments to the above Stock Purchase Agreement ---
irrevocably waiving all -- demand registration rights,
relinquishing the right of Mitsui & Co., Ltd. to
designate a representative to Airborne's Board of
Directors, and resignation of T. Kokai from said
Board (incorporated herein by reference from
Amendment No. 1 to Schedule 13D of Mitsui & Co., Ltd.,
Intermodal Terminal, Inc. (assignee of Mitsui & Co.
(U.S.A.), Inc.) and Tonami Transportation Co., Ltd.,
filed with the Securities & Exchange Commission on
December 21, 1993).
4(l)4(m) Certificate of Designation of Preferences of ---
Preferred Shares of Airborne -- Freight Corporation,
as filed on January 26, 1990, in the Office of the
Secretary of the State of Delaware (incorporated
herein by reference from Exhibit 4(a) to the Company's
Form 10-K for the year ended December 31, 1989).
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EXHIBIT NO. 10 Material Contracts
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Executive Compensation Plans and Agreements
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10(a) 1979 Airborne Freight Corporation Key Employee Stock ---
Option and Stock -- Appreciation Rights Plan, as amended
through February 2, 1987 (incorporated by reference
from Exhibit 10(d) to the Company's Form 10-K for the
year ended December 31, 1986).
10(b) 1983 Airborne Freight Corporation Key Employee ---
Stock Option and Stock -- Appreciation Rights Plan,
as amended through February 2, 1987 (incorporated
by reference from Exhibit 10(c) to the Company's
Form 10-K for the year ended December 31, 1986).
10(c) 1989 Airborne Freight Corporation Key Employee ---
Stock Option and Stock -- Appreciation Rights Plan
(incorporated herein by reference from Exhibit
10(d) to the Company's Form 10-K for the year
ended December 31, 1989).
10(d) 1994 Airborne Freight Corporation Key Employee ---
Stock Option and Stock -- Appreciation Rights Plan
(incorporated herein by reference from the
Addendum to the Company's Proxy Statement for the
1994 Annual Meeting of Shareholders).
10(e) Airborne Freight Corporation Directors Stock ---
Option Plan (incorporated -- herein by reference from
the Addendum to the Company's Proxy Statement for
the 1991 Annual Meeting of Shareholders).
10(f) Airborne Express Executive Deferral Plan dated ---
January 1, 1992 -- (incorporated by reference from
Exhibit 10(b) to the Company's Form 10-K for the
year ended December 31, 1991).
10(g) Airborne Express Supplemental Executive Retirement ---
Plan dated January 1, -- 1992 (incorporated by
reference from Exhibit 10(c) to the Company's Form
10-K for the year ended December 31, 1991).
10(h) Airborne Express 19931994 Executive Management ---
Incentive Compensation Plan.
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10(i) Airborne Express 1995-1999 Executive Incentive ---
Compensation Plan.
10(j) Employment Agreement dated December 15, 1983, as ---
amended November 20, -- 1986, between the Company and
Mr. Robert G. Brazier, President and Chief Operating
Officer (incorporated by reference from Exhibit 10(a)
to the Company's Form 10-K for the year ended
December 31, 1986). Identical agreements exist
between the Company and the other six executive
officers.
10(j)10(k) Employment Agreement dated November 20, 1986 ---
between the Company and -- Mr. Lanny H. Michael, then
Vice President, Treasurer and Controller
(incorporated by reference from Exhibit 10(b)
to the Company's Form 10-K for the year ended
December 31, 1986). Identical agreements exist
between the Company and 2325 other officers of the
Company. In addition, the Company's principal
subsidiary, ABX Air, Inc., has entered into
substantially identical agreements with fiveseven of
its officers.
Other Material Contracts
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10(k)10(l) $240,000,000 Revolving Loan Facility dated as of ---
November 19, 1993 -- among the Company, as borrower,
and Wachovia Bank of Georgia, N.A., ABN AMRO
Bank N.V., United States National Bank of Oregon,
Seattle-First National Bank, CIBC Inc., Continental
Bank N.A., Bank of America National Trust and Savings
Association, The Bank of New York, NBD Bank, N.A., as
banks and Wachovia Bank of Georgia, N.A., as agent.
10(l) Letter dated December 5, 1989, to the Company from Mitsui & Co., Ltd. --
("Mitsui"), relating to Mitsui's commitment to provide the Company
and ABX Air, Inc., a $100 million aircraft financing facility, as
modified by that certain Supplement thereto entered into as of
March 15, 1990agent
(incorporated herein by reference from Exhibit 10(b)10(k)
to the Company's Form 10-K for the year ended
December 31, 1989)1993).
41
10(m) Letter dated December 5, 1989, to the Company from ---
Mitsui & Co., Ltd. ("Mitsui"), relating to Mitsui's
commitment to provide the Company and ABX Air, Inc.,
a $100 million aircraft financing facility, as
modified by that certain Supplement thereto entered
into as of March 15, 1990 (incorporated herein by
reference from Exhibit 10(b) to the Company's Form
10-K for the year ended December 31, 1989).
10(n) Shareholders Agreement entered into as of ---
February 7, 1990, among -- the Company, Mitsui & Co.,
Ltd., and Tonami Transportation Co., Ltd., relating
to joint ownership of Airborne Express Japan, Inc.
(incorporated herein by reference from Exhibit 10(c)
to the Company's Form 10-K for the year ended
December 31, 1989).
EXHIBIT NO. 11 Statement Re computationComputation of Per Share Earnings
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11 Statement re computation of earnings per share -----
EXHIBIT NO. 12 Statements Re computationComputation of Ratios
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12 Statement re computation of ratio of senior ---
long-term debt and total -- long-term debt to
total capitalization
EXHIBIT NO. 13 Annual Report to Security Holders
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13 Portions of the 19931994 Annual Report to Shareholders ---
of Airborne -- Freight Corporation
EXHIBIT NO. 21 Subsidiaries of the Registrant
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21 The subsidiaries of the Company are listed on page 10 & 11in ---
Part I of this -- report on Form 10-K for the year
ended December 31, 1993.1994.
EXHIBIT NO. 23 Consents of Experts and Counsel
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23 Independent Auditors' Consent and Report on Schedules -----
Schedules
EXHIBIT NO. 27 Financial Data Schedule
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27 Financial Data Schedule ---
All other exhibits are omitted because they are not applicable, or
not required, or because the required information is included in the
consolidated financial statements or notes thereto.
(b) Reports on Form 8-K
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None ---