UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TOUNDER SECTION 13 OR 15(d)15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31,Quarter Ended September 30, 2001
Commission File Number 1-6512
Delaware
3101 Western Avenue
P.O. Box 662
Seattle, Washington 98111-0662
| Registrant’s telephone number, including area code: | (206) 285-4600 |
Registrant's telephone number, including area code:(206) 285-4600
Indicate by check mark whether the Registrantregistrant (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 Registrantregistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes /x/ No / /days. YES x NO o
Indicate the number of shares outstanding of each of the issuer'sissuer’s classes of common stock as of the close of the period covered by this report.
| Common Stock, par value $1 per share | |||
| | | ||
| Outstanding (net of 3,240,526 treasury shares) as of | 48,103,545 shares |
AIRBORNE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF NET EARNINGS(Dollars
(Dollars in thousands except per share data)
(Unaudited)
Three Months Ended March 31 -------- 2001 2000 ---- ---- REVENUES: Domestic $730,099 $725,252 International 93,422 87,212 -------- -------- 823,521 812,464 OPERATING EXPENSES: Transportation purchased 267,039 248,354 Station and ground operations 277,932 254,937 Flight operations and maintenance 151,686 142,963 General and administrative 68,509 63,197 Sales and marketing 24,002 20,019 Depreciation and amortization 52,638 49,569 -------- -------- 841,806 779,039 -------- -------- EARNINGS (LOSS) FROM OPERATIONS (18,285) 33,425 OTHER INCOME (EXPENSE): Interest, net (4,497) (4,914) Other (3,485) 503 -------- -------- EARNINGS (LOSS) BEFORE INCOME TAXES (26,267) 29,014 INCOME TAX EXPENSE (BENEFIT) (9,272) 11,115 -------- -------- NET EARNINGS (LOSS) BEFORE CHANGE IN (16,995) 17,899 ACCOUNTING CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING - 14,206 -------- -------- NET EARNINGS (LOSS) $(16,995) $32,105 ======== ======== NET EARNINGS (LOSS) PER SHARE: BASIC Before change in accounting $ (0.35) $ 0.37 Cumulative effect of change in accounting - 0.29 -------- -------- Net earnings (loss) $ (0.35) $ 0.66 ======== ======== DILUTED Before change in accounting $ (0.35) $ 0.36 Cumulative effect of change in accounting - 0.29 -------- -------- Net earnings (loss) $ (0.35) $ 0.65 ======== ======== DIVIDENDS PER SHARE $ 0.04 $ 0.04 ======== ========
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
)
26,148CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING, NET OF TAX
—
—
—
14,206NET 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
See notes to consolidated financial statements.
AIRBORNE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS(Dollars
(Dollars in thousands)
March 31 December 31 2001 2000 ---- ---- (Unaudited) ASSETS ------ CURRENT ASSETS: Cash $ 66,890 $ 40,390 Trade accounts receivable, less allowance of $10,638 and $10,290 148,562 218,685 Spare parts and fuel inventory 43,591 43,231 Refundable income tax 20,728 21,595 Deferred income tax assets 28,789 28,839 Prepaid expenses and other 23,286 20,809 ---------- ---------- TOTAL CURRENT ASSETS 331,846 373,549 PROPERTY AND EQUIPMENT, NET 1,298,977 1,324,345 EQUIPMENT DEPOSITS and OTHER ASSETS 45,051 48,025 ---------- ---------- TOTAL ASSETS $1,675,874 $1,745,919 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Accounts payable $ 156,046 $ 180,623 Salaries, wages and related taxes 80,289 71,179 Accrued expenses 90,513 83,518 Current portion of debt 485 477 ---------- ---------- TOTAL CURRENT LIABILITIES 327,333 335,797 LONG-TERM DEBT 279,105 322,230 DEFERRED INCOME TAX LIABILITIES 126,201 125,444 POST RETIREMENT LIABILITIES 56,038 62,360 OTHER LIABILITIES 42,721 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 51,345,071 and 51,279,651 shares 51,345 51,280 Additional paid-in capital 304,597 303,885 Retained earnings 548,781 567,700 Accumulated other comprehensive income (379) (136) ---------- ---------- 904,344 922,729 Treasury stock, 3,240,526 and 3,244,526 shares, at cost (59,868) (59,874) ---------- ---------- 844,476 862,855 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,675,874 $1,745,919 ========== ==========
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 See notes to consolidated financial statements.
AIRBORNE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS(Dollars
(Dollars in thousands)
(Unaudited)
Three Months Ended March 31 -------- 2001 2000 ---- ---- OPERATING ACTIVITIES: Net Earnings (Loss) $(16,995) $ 32,105 Adjustments to reconcile net earnings to net cash provided by operating activities: Cumulative effect of change in accounting - (14,206) Depreciation and amortization 52,638 49,569 Deferred income taxes 806 4,307 Postretirement obligations (6,323) 1,768 Other 5,836 6,367 -------- -------- CASH PROVIDED BY OPERATIONS 35,962 79,910 Change in: Proceeds from receivable securitization facility 50,000 - Receivables 20,123 (9,706) Inventories and prepaid expenses (2,837) 2,311 Refundable income taxes 867 - Accounts payable (24,577) (7,875) Accrued expenses, salaries and taxes payable 16,105 19,267 -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 95,643 83,907 INVESTING ACTIVITIES: Additions to property and equipment (26,578) (129,395) Disposition of property and equipment 253 1,138 Other 1,439 (1,864) -------- -------- NET CASH USED IN INVESTING ACTIVITIES (24,886) (130,121) FINANCING ACTIVITIES: (Payments) proceeds on bank notes, net (43,000) 42,000 Principal payments on debt (116) (107) Proceeds from common stock issuance 783 912 Dividends paid (1,924) (1,950) -------- -------- NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES (44,257) 40,855 NET INCREASE (DECREASE) IN CASH 26,500 (5,359) CASH AT JANUARY 1 40,390 28,678 -------- -------- CASH AT MARCH 31 $ 66,890 $ 23,319 ======== ========
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 See notes to consolidated financial statements.
AIRBORNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSMarch 31,September 30, 2001 (Unaudited)
NOTE A-SUMMARYA—SUMMARY OF FINANCIAL STATEMENT PREPARATION:
The consolidated financial statements included herein are unaudited but include all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations and cash flows for the interim periods reported.
Certain amounts for prior periods have been reclassified to conform to the 2001 presentation.
NOTE B-LONG-TERMB—LONG-TERM DEBT:
Long-term debt consists of the following:
March 31 December 31 2001 2000 ---- ---- (In thousands) Senior debt: Revolving bank credit $ 60,000 $ 75,000 Notes payable - 28,000 Senior notes 200,000 200,000 Revenue bonds 13,200 13,200 Other debt 6,390 6,507 ---------- ---------- 279,590 322,707 Less current portion 485 477 ---------- ---------- $ 279,105 $ 322,230 ========== ==========
| 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 | ||||
The Company'sCompany has a revolving bank credit agreement providesproviding for a total commitment of $275 million subject to certain financial covenants.million. In AprilJune 2001, an amendment to the agreement was completed that amended to, among other requirements, provide certain assets as collateral to secure the fixed charge covenant and provided forcommitment, reduce available borrowing availability to be allocated for issuedcapacity by the amount of outstanding letters of credit. Thecredit, establish revised covenants and amend the expiration date to June 2004. Capacity under the facility is dependent on a borrowing base determined by the amount of collateral pledged, with a maximum commitment of $275 million. At September 30, 2001 no borrowings were outstanding under the agreement and the Company was in compliance with all financial covenants as amended forrestrictive covenants. With the first quarter. The Company is currently in the processcurrent level of further restructuring the agreement. The restructured agreement will include provisions requiring the Company to provide collateral sufficient to secure the commitment. As of March 31, 2001, $60 million was outstandingpledged, available capacity under the facility and issued letteragreement, net of outstanding letters of credit, commitments totaled $96.8 million. The Company expectswas $43.6 million as of September 30, 2001. In June 2001, the restructuring to be completed duringoutstanding senior notes of $200 million were secured in connection with the second quarter and accordingly has, continued to classify outstanding borrowings as long term on the consolidated balance sheet.amended revolving credit agreement.
NOTE C-EARNINGSC—EARNINGS PER SHARE:
Basic earnings per share are based upon the weighted average number of common shares outstanding during the interim period. Diluted earnings per share are based upon the weighted average number of common shares outstanding during the interim period plus dilutive common equivalent shares applicable to the assumed exercise of outstanding stock options.
Weighted average shares outstanding used in earnings per share computations were as follows:
Three Months Ended March 31 -------- 2001 2000 ---- ---- WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 48,079,634 48,785,792 Diluted 48,080,472 49,206,767
| 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 | ||||
NOTE D-SEGMENTD—SEGMENT INFORMATION
The Company has organized its business into two reportable operating segments. The domestic segment derives its revenues from the door-to-door delivery of small packages and documents throughout the United States, Canada, and Puerto Rico. Domestic operations are supported principally by Company operated aircraft and facilities. The international segment derives its revenues from express door-to-door delivery and a variety of freight services. International revenues are recognized on shipments where the origin and/or destination is outside of locations supported by the domestic segment. The Company uses a variable cost approach to delivering international services through use of existing commercial airline capacity in connection with its domestic network and independent express and freight agents in locations not currently served by Company-owned foreign operations.
The following is a summary of key segment information (in thousands):
Three Months Ended March 31 -------- 2001 2000 ---- ---- SEGMENT REVENUES: Domestic $730,099 $725,252 International 93,422 87,212 -------- -------- $823,521 $812,464 ======== ======== SEGMENT EARNINGS (LOSS) FROM OPERATIONS: Domestic $(16,528) $ 35,575 International (1,757) (2,150) -------- -------- $(18,285) $ 33,425 ======== ========
| 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 | ||||||
NOTE E-OTHERE—OTHER COMPREHENSIVE INCOMEINCOME:
Other comprehensive income includes the following transactions and tax effects for the three and nine month periodsperiod ended March 31,September 30, 2001 and 2000 respectively (in thousands):
(in thousands):Income Tax Before (Expense) Net of Tax or Benefit Tax
Three Months Ended Nine Months Ended September 30, 2001 September 30, 2001 Before
TaxIncome Tax
(Expense)
or BenefitNet of
TaxBefore
TaxIncome Tax
(Expense)
or BenefitNet of
TaxUnrealized 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
TaxIncome Tax
(Expense)
or BenefitNet of
TaxBefore
TaxIncome Tax
(Expense)
or BenefitNet of
TaxUnrealized 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
losses526 (202 ) 324 455 (174 ) 281 Foreign currency translation
adjustments(16 ) 6 (10 ) (227 ) 87 (140 ) Other comprehensive
income (loss)$ 510 $ (196 ) $ 314 $ 228 $ (87 ) $ 141 NOTE F—OTHER INCOME:
Other income includes the following transactions for the three and nine month period ended September 30, 2001
--- ---------- --- - ---- Unrealized securities losses arising during the period $(145) $ 56 $ (89) Less: Reclassification adjustment for gains realized in net income (32) 12 (20) ----- ----- ----- Net unrealized securities losses (177) 68 (109) Foreign currency translation adjustments (201) 67 (134) ----- ----- ----- Other comprehensive income $(378) $ 135 $(243) ===== ===== ===== Income Tax Before (Expense) Net of Tax or Benefit Taxand 2000--- ---------- --- - ---- Unrealized securities gains arising during the period $1,572 $ (605) $ 967 Less: Reclassification adjustment for gains realized in net income (305) 117 (188) ------ ------ ------ Net unrealized securities gains 1,267 (488) 779 Foreign currency translation adjustments (249) 96 (153) ------ ------ ------ Other comprehensive income $1,018 $ (392) $ 626 ====== ====== ======
| Three Months Ended | Nine Months Ended | ||||||||||||
| September 30 | September 30 | ||||||||||||
| 2001 | 2000 | 2001 | 2000 | ||||||||||
| OTHER INCOME: | |||||||||||||
| Gain on sales of radio frequencies | $ | 6,232 | $ | — | $ | 8,303 | $ | — | |||||
| Gain on sale of securities | 2,117 | — | 2,117 | 1,913 | |||||||||
| Other | 429 | 406 | 935 | 1,198 | |||||||||
| $ | 8,778 | $ | 406 | $ | 11,355 | $ | 3,111 | ||||||
NOTE F-CHANGEG—CHANGE IN ACCOUNTING:
Effective January 1, 2000, the Company changed its method of accounting for major engine overhaul costs on DC-9 aircraft from the accrual method to the direct expense method where costs are expensed as incurred. Previously, these costs were accrued in advance of the next scheduled overhaul based upon engine usage and estimates of overhaul costs. The Company believes that this new method is preferable because it is more consistent with industry practice and appropriate given the relatively large size of its DC- 9DC-9 fleet.
The cumulative effect of this change in accounting resulted in a non-cash credit of $14,206,000, net of taxes, or $.29 per share on a diluted basis being recognized in the quarter ending March 31, 2000. Excluding the cumulative effect, this change increased net earnings for the third quarter and first quarternine months of 2000 by approximately $1.2$1.4 million, net of tax or $.02$.03 per share.share, and $4.2 million, net of tax or $.09 per share, respectively.
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 for 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 obligation in the period in which it is incurred assuming a reasonable estimate of fair value can be made. SFAS No. 144 expands and clarifies previous accounting standards regarding the disposal of long-lived assets. SFAS No. 141, No. 142, No. 143 and No. 144 are not expected to have a material impact on the Company’s consolidated results of operations, financial position or cash flows.
MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS:
The Company reported a net lossincome for the firstthird quarter of 2001 of $17.0$1.7 million, or $.35$.04 per diluted share. This compares to a net loss of $5.5 million or $.11 per share for the third quarter of 2000 and a net loss of $6.4 million or $.13 per share reported in the 2nd quarter of 2001. For the first nine months of 2001, the net loss was $21.6 million or $.45 per share compared to net earnings before a change in accounting of $17.9$26.1 million or $.36$.54 per share for the first quarternine months of 2000. Net earnings reported for the first quarternine months of 2000, including a $.29 per share credit for a change in accounting were, $32.1$40.4 million or $.65$.83 per share.
The third quarter of 2001 included non-recurring gains on the sale of certain securities and FCC licensed radio frequencies totaling $8.3 million ($5.4 million after tax or $.11 per share). One time gains for frequency sales and securities gains for the first nine months of 2001 totaled $10.4 million ($6.8 million after tax or $.14 per share compared to $.02 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"). The Act, authorized by Congress shortly after the attacks, will provide compensation to eligible air carriers for certain direct losses associated with the closure of the national air system for the period beginning September 11th and for incremental losses as a result of these attacks and ending on December 31, 2001. The Company anticipates being eligible for additional compensation in the 4th quarter.
Operating results werehave been negatively affectedimpacted by a declining economy, which appears to be experiencing further slowing since the slowing economy, the lackevents of growthSeptember 11th. The Company has experienced shipment volume declines in coreits higher yielding domestic productproducts and a shift in volume mix of shipment volumes. Also, withtowards lighter weight lower yielding deferred products. These factors have hampered revenue growth. Despite the slownegative revenue growth, in shipment volumes, productivity gains were difficult to achieve and not sufficient to offset increases in operating costs. The firstearnings from operations improved $6.6 million over the second quarter of 2001 had one less operating day thanand $4.4 million over the comparablethird quarter last year, hindering volume and margin performance comparisons.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 March 31 -------- 2001 2000 Change ---- ---- ------ Shipments (in thousands):
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
Overnight 45,618 47,979 -4.9% Next Afternoon Service 13,428 13,934 -3.6% Second Day Service 24,215 19,771 22.5% 100 Lbs.revenues decreased 3.3% andOver 60 67 -10.4% ------ ------ Total Domestic 83,321 81,751 1.9% International Express 1,600 1,529 4.6% Freight 102 94 8.5% ------ ------ Total International 1,702 1,623 4.9% ------ ------ Total Shipments 85,023 83,374 2.0% ====== ====== Average Pounds per Shipment: Domestic 4.14 4.21 -1.7% International 51.92 47.87 8.5% Average Revenue per Pound: Domestic $2.07 $2.07 - International $1.04 $1.11 -6.3% Average Revenue per Shipment: Domestic $8.72 $8.87 -1.7% International $54.89 $53.74 1.6%
Total revenues increased 1.4%.7% in the third quarter and first quarternine months of 2001, comparedrespectively, in comparison to the same period of 2000. Domestic revenues increased .7% in the first quarter on one less operating day in 2001 than the comparable periodperiods in 2000. Average domestic revenue per shipment declined 1.7%1.0% to $8.72$8.82 in the third quarter and 2.1% to $8.74 for the first nine months of 2001. The yield decreases are due to a declinedeclines in higher yielding overnight express shipments coupled with slightly lower average shipment weights per shipment in all shipmentproduct 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 a 4% beginning October 2000. In the third quarter and for the first quarternine months of 2001 $24.6fuel surcharge revenues were $22.4 million ofand $70.7 million, respectively. This compares to fuel surcharge revenue wasrevenues of$19.5 million and $51.9 million being recognized compared to $12.5 million in the same period last year.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. Implementation of certain pricingThese actions were ongoing during the quarter with further actions being taken into the second quarter as customer contracts are renewed. Once fully implemented, the average rate increase is targeted to be about 5% with some variance keyedimprove yields and increase revenues. However, the lack of shipment growth and the shift by domestic customers to shipping volume.lower yielding, less time sensitive deferred services has diluted the impact.
Domestic shipments decreased 2.8% in the third quarter and increased 1.9%1.0% in the first quarter in comparisonnine months of 2001 compared to the same period inperiods of 2000. The first quarternine months of 2001 had one less operating day than the comparable period in 2000. On a per day basis,Higher yielding overnight shipments accounted for 53.0% of total domestic shipments increased 3.5% to 1.3 million shipments per day. The growth in shipments was due to volume increases in the Company's third quarter compared to 58.0% in the third quarter of 2000. Overnight shipments declined 11.3% in the third quarter and 6.8% for the first nine months of 2001. Total shipments for the quarter and year to date periods include the Company’s airborne@home product, which was introduced in late 1999 to service the e-commerce and business to residential consumer markets. These shipments, included in the Second Day Service category for reporting purposes, totaled 5.34.7 million in the third quarter and 15.5 million in the first quarternine months of 2001 compared to 554,0001.8 million and 3.5 million shipments in the first quarter ofcomparable periods in 2000. However, growth in airborne@home was offset by declining volumes in the Company's core products. The Company's core products include its Overnight service, Next Afternoon Service (NAS) and Second Day Service (SDS). Higher yielding Overnight shipments decreased 4.9% with NAS and SDS shipments decreasing 3.6% and 1.4%, respectively in the first quarter. The Company attributes these declines to slowing economic conditions.
In April 2001 the Company expanded its service portfolio by introducing a new product, Ground Delivery Service (GDS). With the addition of GDS, the Company can provide customers with ground services as well as air services. The new product will leverageleverages the Company'sCompany’s sort and linehaul infrastructure and will beis being marketed to a target customer base initially. Shipment volumes arebase. The Company believes GDS is an important initiative that is targeted to reach 15,000establish 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 byin the endfourth quarter of the second quarter with incremental growth targeted as new customers are added. The Company also began offering in April 2001 a new 10:30am delivery option to selected zip codes. This option allows customers to choose an earlier 10:30am delivery for a surcharge fee of up to $5. Shippers indicate their choice of the 10:30 am delivery or the next morning by noon delivery by using a specially bar-coded label. This new service option is not expected to require significant costs since it will leverage the existing performance structure.2001.
International revenues increased 7.1%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 the same period a year ago with shipments increasing 4.9%. Higher yielding freight shipments increased 8.5% while the2000 and were 1.2% lower yielding express product grew 4.6%. While growth in the international freight segment was encouragingfirst nine months of 2001 compared to 2000.International revenues and shipments in the second half of 2000third quarter were negatively impacted by the terrorist attacks which not only suspended domestic flights but closed U.S. borders and throughsuspended flight schedules that disrupted international operations for approximately two weeks. The slow economic environment and a typhoon in the first quarter of 2001, a shift in mix towards lower margin import business continues to hinder margins. Likewise, growth duringFar East also hampered shipment volumes. Despite these events the first quarter of international express shipments was due to increases in lower margin import business. The international segmentsegments contribution to earnings from operationsfor the third quarter was a lossprofit of $1.8$.5 million for the first quarter of 2001 compared to a loss of $2.1$3.1 million in 2000. The segment loss was $1.8 million in the similarfirst 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 104.8%99.8% and 100.9% of revenues in the third quarter and first quarternine months of 2001, asrespectively, compared to 95.9% of revenues100.4% and 97.7% for the firstcorresponding 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 6.0%1.5% to $9.90$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 firstthird quarter compared to the second quarter of 2001 compared toas a year ago, although decreased 2.6% from $10.16 per shipment incurred inresult of the fourth quarter of 2000. continued cost reduction initiatives.
The Company experiencedhas been aggressively managing costs through a .1%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 in 2000 and a 4.2% improvement over levels incurred inof 2000. Hours paid during the fourththird quarter of 2000. The2001 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 increased as a percentage of revenues to 32.4%was 32.9% in the firstthird quarter of 2001 compared to 30.6%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 the comparable period2000. The increase in costs as a percentage of 2000. This increaserevenues was primarily due to increases inincreased farmed out pickup and delivery, international and surface linehaul costs and delivery costs paid to the U.S. Postal Service for delivery of airborne@home 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 increased to 33.7%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 compared2001. 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 31.4% in the second and first quarter of 2000. Flat productivity combined with wage related cost increases had a negative effect on this category of expense.2001 levels.
Flight operations and maintenance expense as a percentage of revenues during the firstthird quarter of 2001 was 18.4%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 17.6%17.4% in the samecomparable period of 2000. The average aviation fuel price for the third quarter and first quarternine months of 2001 was $1.00$.91 and $.95 per gallon, respectively, compared to $.94$1.03 and $.96 per gallon, a year ago.respectively for the comparable periods in 2000. Aviation fuel consumption in the third quarter decreased 3.9%15.2% to 43.937.8 million gallons compared to 44.6 million gallons in the firstthird quarter of 2001.2000. 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 a resultdue, in part, to management efforts to reduce and combine certain flight segments to control costs beginning in the second quarter of placing an2001. Additionally, fuel consumption was lower due to the two day grounding of aircraft in September. Also, the Company has placed five additional seven 767 aircraft in service since the firstthird quarter of 2000 thereby allowing less fuel-efficient DC-8 aircraft to be moved to shorter lane segments, backup status or charter operations orto be removed from service. Maintenance expensescosts decreased during the third quarter compared to a year ago but increased due toduring the first nine months of 2001 as a result of having additional 767 aircraft placed in service as compared to the same periodperiods of last year. The Company had 121118 aircraft in service (17(19 Boeing 767s, 30 DC-8s25 DC-8’s and 74 DC-9s)DC-9’s) at the end of the firstthird quarter of 2001 compared to 114117 aircraft at the end of the firstthird 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 firstsecond quarter of 2001, compared to 7.8%for severance and restructuring costs associated with the announced reduction in the same periodforce effective June 1st. The Company has aggressively reduced costs in this category of 2000. The increaseexpense in 2001 was primarily dueand continues to wageemploy strong cost controls over labor and compensation cost pressures.discretionary costs.
Sales and marketing costs were 2.9%2.8% of revenues in the third quarter and 2.5% in the first quarternine months of 2001 compared to 2.5% in the first quartercomparable 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 6.4%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 compareddecreased slightly from the amounts recorded a year ago due to 6.1%lower levels of capital expenditures in 2001 coupled with certain aircraft becoming fully depreciated. These declines offset the first quarterdepreciation effects of 2000. The increase is due to placing additional 767 aircraft in service since the firstend of the third quarter of 2000.last year.
Interest expense in the third quarter and first quarternine months of 2001 was lower than the first quarter ofin 2000 due, in part, to lower average borrowings outstanding offset somewhat by higher effectiveoutstanding. Additionally, interest rates. Capitalized interestcapitalized was $1.1 million compared to $1.5$2.0 million in the first quarternine months of 2001 versus 2000, respectively.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 a newan 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.
Other expense primarily represents discountsDiscounts associated with the sales of receivables under the new accounts receivable securitization facility. Discounts related to recording the obligation to fund the purchaser'spurchaser’s costs under the Company’s accounts receivable securitization facility were $3.8$2.0 million in the firstthird quarter of 2001.2001 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 off balance sheet naturesales recognition treatment associated with this type of this financing, the cost is recorded separatelyseparate 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'sCompany 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 was 35.3% inof 33.5% for the first quarternine months of 2001 compared to an effective tax expense rate 38.3%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 infor the first quarternine 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 the results of operations for the balance of 2001 and into 2002 and beyond. The Company previously was optimistic that there may be an improvement in the U.S. economic environment during the second half of 2001. However, the current near-term lack of visibility regarding economic growth has caused the Company to expect slowcontinued pressure on shipment and revenue growth, through the remainder of the year.particularly in its higher yielding overnight express product. While the Company is continuing to pursue cost reductions, it expectsaggressively manage costs, it will be difficult to return to positive operating income levels duringmake reductions of the remaining quarters of 2001.magnitude made over the past two quarters. The Company has however targetedtaken actions to show sequential improvement in quarterly operating income.substantially reduce its cost structure, so that it is positioned to benefit from an economic rebound and resulting volume growth when that occurs.
LIQUIDITY AND CAPITAL RESOURCES:Liquidity and Capital Resources:
Cash provided by operations net of the change in working capital for the first threenine months of 2001 was $95.6$149.2 million compared to $83.9 million in the first quarter(exclusive of 2000. Inclusive in first quarter of 2001 operating cash flow is $50 million in proceeds from the salereceivable securitization facility). This compares to $213.9 million recorded in the first nine months of accounts receivable.2000.
Capital expenditures continue to be a primary factor affecting the financial condition of the Company. During the first quarternine months of 2001, total capital expenditures net of dispositions were $26.3$98.3 million compared to $128.3$298.4 million during the first quartercorresponding period of 2000. DueCapital spending has been reduced significantly in 2001 compared to 2000 due to management efforts to maintain spending at levels that better match the lowlower level of operating performance and shipment volume growth, capital spending plans have been revised for 2001.growth. The Company currently anticipates 2001 capital expenditures to be approximately $200$130 million, a reductiondown from the previous target of $60 million from previously planned levels. Capital expenditures during 2001 are lower than 2000 primarily due to fewer acquisitions and deployments of 767 aircraft.$170 million.
The Company'sCompany’s operating cash flow is a major source of liquidity. Additional liquidity of $50 million was provided in the first quarternine months of 2001 under a $200 millionthrough the accounts receivable securitization facility implemented in December 2000. ThisIn July 2001, this facility was fully utilizedamended to provide for a maximum of $250 million in proceeds from the sale of eligible receivables in addition to extending the term of the liquidity facility for a three-year period as opposed to the 364-day term of March 31, 2001. the previous agreement. As of the end of September 2001, a total of $200 million of receivables had been sold under this facility with eligible receivables supporting total advances of $216 million.
The Company also hascompleted a renegotiation of its $275 million revolving bank credit agreement in June 2001. The renegotiated facility, which expires in June 2004, is subject tocollateralized by certain financial covenants, that historically has been used as a sourceassets, reduces borrowing capacity by the amount of liquidity for periods between other financing transactions. In April 2001, an amendment to the agreement was completed that amended the fixed charge coverage covenant and provided for borrowing availability to be allocated for issuedoutstanding letters of credit.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. As of September 30, 2001, no borrowings were outstanding, letter of credit commitments were $98 million and available capacity was $43 million. The Company was in compliance with allrestrictive covenants under the agreement.
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 covenants as amended for the first quarter of 2001.reporting purposes. The Company is currentlyused these proceeds to increase cash reserves and invested amounts in process of further restructuring the agreement. The restructured agreement will include provisions requiring the Company to provide collateral sufficient to secure the commitment. As of March 31, 2001, $60 million of borrowings were outstanding under the agreementshort-term commercial paper and issued letters of credit totaled $96.8 million.money market instruments.
The Company'sCompany’s ratio of long-term debt to total capitalization (exclusive of the receivable securitization) was 22.3%24.7% at March 31,September 30, 2001 compared to 24.6% at December 31, 2000 and 26.2%30.1% at March 31,September 30, 2000.
In management'smanagement’s opinion, existing cash reserves, internally generated cashflows from operations coupled with anticipated availabilityresources available under the accounts receivable securitization facility and the revolving credit agreement should provide adequate flexibility to finance capital expenditures and meet other liquidity requirements for the remainderbalance of 2001. The Company is also evaluating other financing sources to ensure adequate liquidity.2001 and into 2002.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:
There have been no material changes in the Company's market risk sensitive instruments and positions since its disclosure in the Annual Report on Form 10-K for the year ended December 31, 2000.
FORWARD LOOKING STATEMENTS:
Statements contained herein and in other parts of this report, which are not historical facts, are considered forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). Such statements relating to future events involve risks and uncertainties, which are inherently difficult to predict, including statements regarding future shipment growth and product acceptance, compensation expected under the Air Transportation Safety and System Stabilization Act, capacity requirements, capital expenditure levels and the adequacy of available financing capacity. Actual results, however, may vary because of competitor pricing initiatives, customer demand for time-definite and deferred services,the ability of management to successfully implement growth and profitability initiatives, economic and regulatory conditions, the ability to secure adequate financing, fuel price volatility and labor disputes.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders. The annual meeting of Airborne, Inc. was held at The Westin Hotel, 1900 Fifth Avenue, Seattle, Washington 98101 on April 24, 2001. A total of 43,021,535 shares were represented at the meeting comprising 89% of the outstanding shares of the Company entitled to vote at the meeting on the record date (February 20, 2001). The following directors were duly elected for terms ending in 2004: Number of Shares Voted For --------- Carl D. Donaway 31,905,773 Harold M. Messmer, Jr. 31,918,761 Mary Agnes Wilderotter 30,420,872 Rosalie J. Wolf 30,401,810 The following are continuing directors with terms expiring as indicated: Terms Expiring in 2002 Terms Expiring in 2003 ---------------------- ---------------------- Robert G. Brazier Robert S. Cline James H. Carey Richard M. Rosenberg Andrew B. Kim William Swindells The shareholders, by an affirmative vote of approximately 99% of the shares represented at the meeting and entitled to vote, approved the selection of Deloitte & Touche LLP as independent auditors for the coming year. The shareholders, by an affirmative vote of 25,148,842 votes representing 75% of the shares represented at the meeting and entitled to vote on this proposal, approved the proposal to urge the Board of Directors to take all necessary steps, in compliance with state law, to declassify the Board for the purpose of director elections. The shareholders, by an affirmative vote of 22,883,889 votes representing 68% of the shares represented at the meeting and entitled to vote on this proposal, approved the proposal to recommend that the Board of Directors adopt a bylaw or policy requiring confidentiality for all proxies, ballots and voting tabulations that identify how shareholders vote and that inspectors of election be independent and not employees of the Company. The shareholders, by an affirmative vote of 23,742,344 votes representing 71% of the shares represented at the meeting and entitled to vote on this proposal, approved the proposal to recommend that a shareholder vote be required to maintain Airborne's poison pill and the Company is to redeem or terminate any such plan or agreement. The Board of Directors, on the same date of April 24, 2001, reelected all existing executive officers, including Robert S. Cline as Chairman and Chief Executive Officer, and Robert G. Brazier as Vice Chairman. The Board of Directors also declared a quarterly cash dividend of $0.04 per share on the Common Stock of the Company payable on May 22, 2001 to shareholders of record on May 8, 2001. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits -EXHIBIT NO. 10 Material Contracts
10 First Amendment to Credit Agreement.
| 10(a) | Employment Agreement dated April 24, 2001 between the Company and Mr. Robert T. Christensen. Substantially identical agreements exist between the Company and most of its officers. | |
| 10(b) | 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 other of its executive officers. |
SIGNATURES
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Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized:
AIRBORNE, INC.
----------------------------
(Registrant)
Date: 5/15/01 /s/Lanny H. Michael
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Lanny H. Michael
Senior Vice President,
Chief Financial Officer
Date: 5/15/01 /s/Robert T. Christensen
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Robert T. Christensen
Vice President,
Corporate Controller
| AIRBORNE, INC. | ||||
| (Registrant) | ||||
| Date: | 11/14/01 | /s/ Lanny H. Michael | ||
| Lanny H. Michael | ||||
| Senior Vice President & Chief Financial Officer | ||||
| Date: | 11/14/01 | /s/ Robert T. Christensen | ||
| Robert T. Christensen Chief Accounting Officer | ||||