SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended JuneSeptember 30, 2002
Commission File Number 1-6512
AIRBORNE, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State of incorporation or organization)
91-2065027
(IRS Employer Identification No.)
3101 Western Avenue
P.O. Box 662
Seattle, Washington 98111-0662
(Address of Principal Executive Office)
Registrant’s telephone number, including area code: (206) 285-4600
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Registrant’s telephone number, including area code: (206) 285-4600
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 the number of shares outstanding of each of the issuer’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 3,234,526 treasury shares) as of JuneSeptember 30, 2002 | | 48,396,92148,423,360 shares |
FORWARD LOOKING STATEMENTS
Statements contained in this quarterly report on Form 10-Q that are not historical facts are considered forward-looking statements (as that term is defined in the Private Securities Litigation Reform Act of 1995). These forward-looking statements are based on expectations, estimates and projections as of the date of this filing, and involve risks and uncertainties that are inherently difficult to predict. Actual results may differ materially from those expressed in the forward-looking statements for any number of reasons, including those described in this report or in “Risk Factors” contained in our Annual Report on Form 10-K for the year ended December 31, 2001.
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements
AIRBORNE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per share data)
(Unaudited)
| | Three Months Ended June 30
| | | Six Months Ended June 30
| | | Three Months Ended September 30,
| | | Nine Months Ended September 30,
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| | 2002
| | | 2001
| | | 2002
| | | 2001
| | | 2002
| | | 2001
| | | 2002
| | | 2001
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REVENUES: | | | | | | | | | | | | | | | | |
Domestic | | $ | 719,913 | | | $ | 720,235 | | | $ | 1,431,980 | | | $ | 1,450,334 | | | $ | 748,609 | | | $ | 682,522 | | | $ | 2,180,589 | | | $ | 2,132,856 | |
International | | | 90,538 | | | | 91,990 | | | | 166,991 | | | | 185,412 | | | | 94,152 | | | | 90,266 | | | | 261,143 | | | | 275,678 | |
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| | | 810,451 | | | | 812,225 | | | | 1,598,971 | | | | 1,623,746 | | | | 842,761 | | | | 772,788 | | | | 2,441,732 | | | | 2,408,534 | |
OPERATING EXPENSES: | | | | | | | | | | | | | | | | |
Transportation purchased | | | 267,368 | | | | 266,085 | | | | 516,399 | | | | 533,124 | | | | 285,455 | | | | 254,080 | | | | 801,853 | | | | 787,204 | |
Station and ground operations | | | 265,957 | | | | 264,780 | | | | 530,076 | | | | 545,154 | | | | 282,301 | | | | 257,326 | | | | 812,378 | | | | 802,480 | |
Flight operations and maintenance | | | 132,531 | | | | 143,686 | | | | 257,897 | | | | 295,372 | | | | 134,886 | | | | 133,286 | | | | 392,783 | | | | 428,658 | |
General and administrative | | | 65,237 | | | | 66,821 | | | | 128,651 | | | | 132,888 | | | | 64,326 | | | | 61,129 | | | | 192,977 | | | | 194,017 | |
Sales and marketing | | | 23,492 | | | | 23,329 | | | | 45,768 | | | | 47,331 | | | | 22,862 | | | | 21,689 | | | | 68,630 | | | | 69,020 | |
Depreciation and amortization | | | 46,731 | | | | 52,684 | | | | 95,852 | | | | 105,322 | | | | 49,547 | | | | 51,655 | | | | 145,399 | | | | 156,977 | |
Federal legislation compensation | | | | — | | | | (7,800 | ) | | | — | | | | (7,800 | ) |
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| | | 801,316 | | | | 817,385 | | | | 1,574,643 | | | | 1,659,191 | | | | 839,377 | | | | 771,365 | | | | 2,414,020 | | | | 2,430,556 | |
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EARNINGS (LOSS) FROM OPERATIONS | | | 9,135 | | | | (5,160 | ) | | | 24,328 | | | | (23,445 | ) | | | 3,384 | | | | 1,423 | | | | 27,712 | | | | (22,022 | ) |
OTHER INCOME (EXPENSE): | | | | | | | | | | | | | | | | |
Interest, net | | | (7,485 | ) | | | (4,454 | ) | | | (14,356 | ) | | | (8,951 | ) | |
Discounts on sales of receivables | | | (885 | ) | | | (2,229 | ) | | | (2,190 | ) | | | (5,986 | ) | |
Interest income | | | | 1,458 | | | | 560 | | | | 3,772 | | | | 879 | |
Interest expense | | | | (9,108 | ) | | | (5,484 | ) | | | (25,778 | ) | | | (14,754 | ) |
Discount on sales of receivables | | | | (738 | ) | | | (2,007 | ) | | | (2,928 | ) | | | (7,993 | ) |
Other | | | 407 | | | | 2,304 | | | | 2,303 | | | | 2,576 | | | | 196 | | | | 8,779 | | | | 2,499 | | | | 11,355 | |
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EARNINGS (LOSS) BEFORE INCOME TAXES | | | 1,172 | | | | (9,539 | ) | | | 10,085 | | | | (35,806 | ) | | | (4,808 | ) | | | 3,271 | | | | 5,277 | | | | (32,535 | ) |
INCOME TAX (EXPENSE) BENEFIT | | | 715 | | | | (3,178 | ) | | | 4,360 | | | | (12,450 | ) | |
INCOME TAX EXPENSE (BENEFIT) | | | | (1,750 | ) | | | 1,558 | | | | 2,610 | | | | (10,892 | ) |
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NET EARNINGS (LOSS) | | $ | 457 | | | $ | (6,361 | ) | | $ | 5,725 | | | $ | (23,356 | ) | | $ | (3,058 | ) | | $ | 1,713 | | | $ | 2,667 | | | $ | (21,643 | ) |
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NET EARNINGS (LOSS) PER SHARE: | | | | | | | | | | | | | | | | |
BASIC | | $ | 0.01 | | | $ | (0.13 | ) | | $ | 0.12 | | | $ | (0.48 | ) | | $ | (0.06 | ) | | $ | 0.04 | | | $ | 0.06 | | | $ | (0.45 | ) |
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DILUTED | | $ | 0.01 | | | $ | (0.13 | ) | | $ | 0.12 | | | $ | (0.48 | ) | | $ | (0.06 | ) | | $ | 0.04 | | | $ | 0.05 | | | $ | (0.45 | ) |
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DIVIDENDS PER SHARE | | $ | 0.04 | | | $ | 0.04 | | | $ | 0.08 | | | $ | 0.08 | | | $ | 0.04 | | | $ | 0.04 | | | $ | 0.12 | | | $ | 0.12 | |
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See notes to consolidated financial statements.
1
AIRBORNE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
| | June 30 | | | December 31 | | |
| | 2002
| | | 2001
| | | September 30, 2002
| | | December 31, 2001
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| | (Unaudited) | | | | | | (Unaudited) | | | | |
ASSETS | | | | | | | | |
CURRENT ASSETS: | | | | | | | | |
Cash and cash equivalents | | $ | 338,063 | | | $ | 201,500 | | | $ | 332,976 | | | $ | 201,500 | |
Trade accounts receivable, less allowance of $10,849 and $11,509 | | | 224,322 | | | | 126,040 | | |
Trade accounts receivable, less allowance of $11,939 and $11,509 | | | | 254,940 | | | | 126,040 | |
Spare parts and fuel inventory | | | 37,085 | | | | 38,413 | | | | 36,972 | | | | 38,413 | |
Refundable income taxes | | | 517 | | | | 27,161 | | | | 2,739 | | | | 27,161 | |
Deferred income tax assets | | | 30,929 | | | | 30,572 | | | | 33,967 | | | | 30,572 | |
Prepaid expenses and other | | | 33,496 | | | | 28,021 | | | | 31,262 | | | | 28,021 | |
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TOTAL CURRENT ASSETS | | | 664,412 | | | | 451,707 | | | | 692,856 | | | | 451,707 | |
PROPERTY AND EQUIPMENT, NET | | | 1,214,131 | | | | 1,247,373 | | | | 1,186,703 | | | | 1,247,373 | |
EQUIPMENT DEPOSITS and OTHER ASSETS | | | 52,424 | | | | 47,764 | | | | 39,950 | | | | 47,764 | |
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TOTAL ASSETS | | $ | 1,930,967 | | | $ | 1,746,844 | | | $ | 1,919,509 | | | $ | 1,746,844 | |
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LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | |
CURRENT LIABILITIES: | | | | | | | | |
Accounts payable | | $ | 138,784 | | | $ | 141,873 | | | $ | 147,718 | | | $ | 141,873 | |
Salaries, wages and related taxes | | | 81,233 | | | | 75,458 | | | | 93,141 | | | | 75,458 | |
Accrued expenses | | | 148,978 | | | | 145,997 | | | | 133,737 | | | | 145,997 | |
Current portion of debt | | | 108,173 | | | | 107,410 | | |
Current portion of long-term obligations | | | | 109,691 | | | | 107,410 | |
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TOTAL CURRENT LIABILITIES | | | 477,168 | | | | 470,738 | | | | 484,287 | | | | 470,738 | |
LONG-TERM DEBT | | | 366,387 | | | | 218,053 | | |
LONG-TERM OBLIGATIONS | | | | 371,167 | | | | 218,053 | |
DEFERRED INCOME TAX LIABILITIES | | | 144,717 | | | | 143,526 | | | | 146,555 | | | | 143,526 | |
POST RETIREMENT LIABILITIES | | | 66,964 | | | | 39,423 | | | | 38,529 | | | | 39,423 | |
OTHER LIABILITIES | | | 38,816 | | | | 40,888 | | | | 49,283 | | | | 40,888 | |
| COMMITMENTS AND CONTINGENCIES | | | | | | | | |
| SHAREHOLDERS’ EQUITY: | | | | | | | | |
Preferred Stock, without par value— | | | | | |
Preferred stock, without par value— | | | | | |
Authorized 6,000,000 shares, no shares issued | | | | | | | | |
Common stock, par value $1 per share— | | | | | | | | |
Authorized 120,000,000 shares | | | | | | | | |
Issued 51,631,447 and 51,375,711 shares | | | 51,631 | | | | 51,376 | | |
Issued 51,657,886 and 51,375,711 shares | | | | 51,658 | | | | 51,376 | |
Additional paid-in capital | | | 308,553 | | | | 304,984 | | | | 308,812 | | | | 304,984 | |
Retained earnings | | | 542,163 | | | | 540,544 | | | | 537,169 | | | | 540,544 | |
Accumulated other comprehensive income | | | (5,574 | ) | | | (2,820 | ) | |
Accumulated other comprehensive loss | | | | (8,093 | ) | | | (2,820 | ) |
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| | | 896,773 | | | | 894,084 | | | | 889,546 | | | | 894,084 | |
Treasury stock, 3,234,526 and 3,240,526 shares, at cost | | | (59,858 | ) | | | (59,868 | ) | | | (59,858 | ) | | | (59,868 | ) |
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| | | 836,915 | | | | 834,216 | | | | 829,688 | | | | 834,216 | |
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | $ | 1,930,967 | | | $ | 1,746,844 | | | $ | 1,919,509 | | | $ | 1,746,844 | |
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See notes to consolidated financial statements.
2
AIRBORNE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
| | Six Months Ended June 30
| | | Nine Months Ended September 30,
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| | 2002
| | | 2001
| | | 2002
| | | 2001
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OPERATING ACTIVITIES: | | | | | | | | |
Net earnings (loss) | | $ | 5,725 | | | $ | (23,356 | ) | | $ | 2,667 | | | $ | (21,643 | ) |
Adjustments to reconcile net earnings to | | | | | |
net cash provided by operating activities: | | | | | |
Adjustments to reconcile net earnings to net cash provided by operating activities: | | | | | |
Depreciation and amortization | | | 95,852 | | | | 105,322 | | | | 145,399 | | | | 156,977 | |
Deferred income taxes | | | 834 | | | | 9,623 | | | | (366 | ) | | | 12,010 | |
Postretirement obligations | | | 23,537 | | | | 3,427 | | | | (20,190 | ) | | | 7,085 | |
Other | | | (3,759 | ) | | | (2,299 | ) | | | 6,752 | | | | (10,947 | ) |
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CASH PROVIDED BY OPERATIONS | | | 122,189 | | | | 92,717 | | | | 134,262 | | | | 143,482 | |
Change in: | | | | | | | | |
Receivable securitization facility | | | (100,000 | ) | | | 50,000 | | | | (100,000 | ) | | | 50,000 | |
Receivables | | | 1,718 | | | | 24,764 | | |
Trade accounts receivable | | | | (28,900 | ) | | | 44,917 | |
Inventories and prepaid expenses | | | (4,147 | ) | | | (5,327 | ) | | | (1,800 | ) | | | (19,403 | ) |
Refundable income taxes | | | 26,644 | | | | (3,669 | ) | | | 24,422 | | | | (2,348 | ) |
Accounts payable | | | (3,089 | ) | | | (30,163 | ) | | | 5,845 | | | | (52,416 | ) |
Accrued expenses, salaries and taxes payable | | | 12,759 | | | | 17,405 | | | | 24,718 | | | | 24,532 | |
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NET CASH PROVIDED BY OPERATING ACTIVITIES | | | 56,074 | | | | 145,727 | | | | 58,547 | | | | 188,764 | |
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INVESTING ACTIVITIES: | | | | | | | | |
Additions to property and equipment | | | (57,694 | ) | | | (73,389 | ) | | | (71,154 | ) | | | (98,342 | ) |
Proceeds from sale of securities | | | 3,778 | | | | — | | | | 3,778 | | | | 2,117 | |
Proceeds from sale of radio frequencies | | | — | | | | 2,071 | | | | 5 | | | | 8,303 | |
Other | | | (6,995 | ) | | | 15 | | | | 2,943 | | | | 2,391 | |
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NET CASH USED BY INVESTING ACTIVITIES | | | (60,611 | ) | | | (71,303 | ) | | | (64,428 | ) | | | (85,531 | ) |
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FINANCING ACTIVITIES: | | | | | | | | |
Payments on bank notes, net | | | — | | | | (85,000 | ) | |
Issuance of convertible debt, net of issuance costs | | | 145,125 | | | | — | | | | 145,125 | | | | 1,596 | |
Principal payments on debt | | | (3,753 | ) | | | (234 | ) | | | (5,846 | ) | | | (902 | ) |
Dividends paid | | | | (5,800 | ) | | | (5,773 | ) |
Exercise of stock options | | | 3,834 | | | | 782 | | | | 4,120 | | | | 788 | |
Dividends paid | | | (3,864 | ) | | | (3,848 | ) | |
Shareholder rights redemption | | | (242 | ) | | | — | | | | (242 | ) | | | — | |
Payments on bank notes, net | | | | — | | | | (103,000 | ) |
Issuance of aircraft loan | | | | — | | | | 61,975 | |
Proceeds on sale leaseback of aircraft | | | | — | | | | 40,800 | |
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NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES | | | 141,100 | | | | (88,300 | ) | | | 137,357 | | | | (4,516 | ) |
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NET INCREASE (DECREASE) IN CASH | | | 136,563 | | | | (13,876 | ) | |
NET INCREASE IN CASH | | | | 131,476 | | | | 98,717 | |
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CASH AND CASH EQUIVALENTS AT JANUARY 1 | | | 201,500 | | | | 40,390 | | | | 201,500 | | | | 40,390 | |
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CASH AND CASH EQUIVALENTS AT JUNE 30 | | $ | 338,063 | | | $ | 26,514 | | |
CASH AND CASH EQUIVALENTS AT SEPTEMBER 30 | | | $ | 332,976 | | | $ | 139,107 | |
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SUPPLEMENTAL CASH FLOW INFORMATION: | | | | | |
Non-cash financing activities: | | | | | |
Capital leases entered into during the period | | $ | 2,850 | | | | — | | |
See notes to consolidated financial statements.
3
AIRBORNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JuneSeptember 30, 2002 (Unaudited)
NOTE A—SUMMARY OF FINANCIAL STATEMENT PREPARATION: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 2002 presentation.
NOTE B—TRADE ACCOUNTS RECEIVABLE:RECEIVABLE
Trade accounts receivable exclude amounts sold under the Company’s accounts receivable securitization facility. As of JuneSeptember 30, 2002, wethe Company had $100.0$100 million of outstanding securitized accounts receivable securitized in comparisonas compared to $200.0$200 million securitized as of December 31, 2001. In May 2002, the Company reduced the amount of securitized receivables securitized were reduced by $100.0$100 million. As of September 30, 2002, the Company had eligible receivables to support additional sales up to the full $250 million permitted under the facility.
NOTE C—LONG-TERM DEBT:OBLIGATIONS
Long-term debt consistsobligations consist of the following:
| | June 30 2002
| | | December 31 2001
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| | (In thousands) | |
Senior debt: | | | | | | | | |
Senior notes | | $ | 200,000 | | | $ | 200,000 | |
Convertible senior notes | | | 150,000 | | | | — | |
Aircraft loan | | | 59,640 | | | | 61,651 | |
Capital lease obligations | | | 44,525 | | | | 43,070 | |
Revenue bonds | | | 13,200 | | | | 13,200 | |
Other debt | | | 7,195 | | | | 7,542 | |
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| | | 474,560 | | | | 325,463 | |
Less current portion | | | (108,173 | ) | | | (107,410 | ) |
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| | $ | 366,387 | | | $ | 218,053 | |
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| | September 30, 2002
| | | December 31, 2001
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Senior notes, 8.875%, due December 2002 | | $ | 100,000 | | | $ | 100,000 | |
Senior notes, 7.35%, due September 2005 | | | 100,000 | | | | 100,000 | |
Convertible senior notes, 5.75%, due April 2007 | | | 150,000 | | | | — | |
Aircraft loan | | | 58,609 | | | | 61,651 | |
Refunding revenue bonds, effective rate of 1.65% as of September 30, 2002, due June 2011 | | | 13,200 | | | | 13,200 | |
Other | | | 6,994 | | | | 7,542 | |
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Total long-term debt | | | 428,803 | | | | 282,393 | |
Capital lease obligations | | | 52,055 | | | | 43,070 | |
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Total long-term obligations | | | 480,858 | | | | 325,463 | |
Less current portion | | | (109,691 | ) | | | (107,410 | ) |
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Total long-term obligations, net | | $ | 371,167 | | | $ | 218,053 | |
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On March 25, 2002, the Company issued $150,000,000$150 million of 5.75% Convertible Senior Notes (“Notes”) due April 2007. The proceeds of the sale are intended, in part, to fund the repayment of $100,000,000$100 million of 8.875% senior notes due December 15, 2002 at their stated maturity. The Notes are convertible into shares of the Company’s common stock, at the option of the holder, at a conversion rate of 42.7599 shares per each $1,000 principal amount of Notes, subject to adjustment in certain circumstances. This is equivalent to a conversion price of $23.39 per share. At the current conversion price, a total of 6,413,985 shares are issuable upon full conversion of the notes.Notes.
The Company’s revolving bank credit agreement provides for a total commitment of $275,000,000$275 million and expires in June 2004. The agreement provides that the Company pledge a substantial majority of its assets as collateral to secure the commitment, reduce available borrowing capacity by the amount of outstanding letters of credit and maintain compliance with certain restrictive covenants. Capacity under the facilityagreement is dependent on a borrowing base determined by the amount of eligible collateral, with a maximum commitment of $275,000,000.collateral. At JuneSeptember 30, 2002, the Company had eligible collateral in the borrowing base to support $214,000,000$242 million of the $275,000,000$275 million commitment. The Company has the ability to increase the borrowing base by pledging additional eligible collateral. At JuneSeptember 30,
4
2002, available capacity under the agreement was $92 million, net of outstanding letters of credit was $110,000,000.and restrictive covenant limitations. At JuneSeptember 30, 2002, no borrowings were outstanding under the agreement and the Company was in compliance with all restrictive covenants including covenants requiringthose relating to the maintenance of minimum levels of earnings before interest, taxes, depreciation and amortization (EBITDA), to leverage and debt service coverage ratios and to required levels of liquidity. The agreement also restricts the Company from declaring or paying dividends on its common stock during any calendar quarter in excess of $2,000,000$2 million plus up to an additional
4
$300,000 $300,000 of dividends on any common stock issued upon conversion of the Notes. The agreement also permitted a one-time payment of $242,000 ($.005 per share) made in May 2002 to shareholders upon redemption and termination of the Company’s shareholder rights plan.
The Company’s $200,000,000$200 million of outstanding non-convertible senior notes are also collateralized by assets of the Company.
The Company’s fixed charges exceeded earnings by $5.4 million for the quarter ended September 30, 2002. The ratio of earnings to fixed charges was 1.061.27 for the quarter ended June 30, 2002. Fixed charges exceeded earnings by $10.1 million for the quarter ended JuneSeptember 30, 2001.
NOTE D—FUEL HEDGE
In September 2002, the Company entered into a call option contract on heating oil to hedge a significant portion of its jet fuel requirements for a six-month period beginning in October 2002. The derivative is accounted for as a hedge for accounting purposes with changes in fair value deferred until the hedged forecasted transaction occurs and is recognized in earnings. The fair value of the call option was $112,000 at September 30, 2002. The change in fair value during the third quarter of 2002 resulted in a $152,000 loss, net of tax, being reported in accumulated other comprehensive loss on the consolidated balance sheet.
NOTE E—GOODWILL
Effective January 2002, The Company implemented the provision of Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets”. As required by provisions of the statement, the Company completed its transitional tests and determined no impairment adjustments were necessary. The total amount of goodwill recorded and included in equipment deposits and other assets on the consolidated balance sheet was $2.8 million as of September 30, 2002. Net earnings (loss) and basic and diluted earnings (loss) per share for the quarter and nine months ended September 30, 2002, excluding goodwill amortization expense, would not have materially differed from amounts reported. Goodwill expense for the third quarter and first nine months of 2001 was $32,000 and $97,000, respectively.
NOTE F—EARNINGS PER SHARE: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 dilutive stock options and, when dilutive, the assumed conversion of the convertible senior notes.
WeightedNet earnings and average shares outstanding used in basic and diluted earnings per share computationscalculations were as follows:follows (in thousands except per share data):
| | Three Months Ended June 30
| | Six Months Ended June 30
| | Three Months Ended September 30
| | Nine Months Ended September 30
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| | 2002
| | 2001
| | 2002
| | 2001
| | 2002
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| | 2002
| | 2001
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NET EARNINGS (LOSS): | | | $ | (3,058 | ) | | $ | 1,713 | | $ | 2,667 | | $ | (21,643 | ) |
| WEIGHTED AVERAGE SHARES OUTSTANDING: | | | | | | | | | | | | | | | | |
Basic weighted average shares outstanding | | | | 48,408 | | | | 48,104 | | | 48,340 | | | 48,082 | |
Stock options | | | | — | | | | 24 | | | 337 | | | — | |
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Diluted weighted average shares outstanding | | | | 48,408 | | | | 48,128 | | | 48,677 | | | 48,082 | |
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EARNINGS (LOSS) PER SHARE: | | | | | | | | | |
Basic | | 48,356,841 | | 48,103,545 | | 48,304,960 | | 48,091,590 | | $ | (0.06 | ) | | $ | 0.04 | | $ | 0.06 | | $ | (0.45 | ) |
Diluted | | 48,981,739 | | 48,103,545 | | 48,785,437 | | 48,092,008 | | | (0.06 | ) | | | 0.04 | | | 0.05 | | | (0.45 | ) |
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5
For the three and nine months ended September 30, 2002, there were 4,232,000 and 2,045,000, respectively, of common shares issuable under stock option plans that were excluded from the earnings per share calculation because they were anti-dilutive. For the three and nine months ended September 30, 2001, there were 2,844,000 and 3,792,000, respectively, shares underlying anti-dilutive options that were excluded from this calculation. Additionally, the 6,413,985 common shares issuable upon conversion of the Company’s convertible senior notes were excluded from diluted earnings per share calculations because they were anti-dilutive for the three and nine months ended September 30, 2002.
NOTE E—G—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 June 30
| | | Six Months Ended June 30
| | | Three Months Ended September 30
| | Nine Months Ended September 30
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| | 2002
| | | 2001
| | | 2002
| | | 2001
| | | 2002
| | | 2001
| | 2002
| | | 2001
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SEGMENT REVENUES: | | | | | | | | | | | | | | | | |
Domestic | | $ | 719,913 | | | $ | 720,235 | | | $ | 1,431,980 | | | $ | 1,450,334 | | | $ | 748,609 | | | $ | 682,522 | | $ | 2,180,589 | | | $ | 2,132,856 | |
International | | | 90,538 | | | | 91,990 | | | | 166,991 | | | | 185,412 | | | | 94,152 | | | | 90,266 | | | 261,143 | | | | 275,678 | |
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| | $ | 842,761 | | | $ | 772,788 | | $ | 2,441,732 | | | $ | 2,408,534 | |
| | $ | 810,451 | | | $ | 812,225 | | | $ | 1,598,971 | | | $ | 1,635,746 | | |
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SEGMENT EARNINGS (LOSS) FROM OPERATIONS: | | | | | | | | | | | | | | | | |
Domestic | | $ | 9,496 | | | $ | (4,622 | ) | | $ | 26,428 | | | $ | (21,150 | ) | | $ | 4,151 | | | $ | 920 | | $ | 30,579 | | | $ | (20,230 | ) |
International | | | (361 | ) | | | (538 | ) | | | (2,100 | ) | | | (2,295 | ) | | | (767 | ) | | | 503 | | | (2,867 | ) | | | (1,792 | ) |
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| | $ | 9,135 | | | $ | (5,160 | ) | | $ | 24,328 | | | $ | (23,445 | ) | | $ | 3,384 | | | $ | 1,423 | | $ | 27,712 | | | $ | (22,022 | ) |
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56
NOTE F—H—OTHER COMPREHENSIVE INCOMELOSS
Other comprehensive income includes the following transactions and tax effects for the three and sixnine month periods ended JuneSeptember 30, 2002 and 2001, respectively (in thousands):
| | Three Months Ended June 30, 2002
| | | Six Months Ended June 30, 2002
| | | Three Months Ended September 30, 2002
| | | Nine Months Ended September 30, 2002
| |
| | Before Tax
| | | Income Tax (Expense) or Benefit
| | | Net of Tax
| | | Before Tax
| | | Income Tax (Expense) or Benefit
| | | Net of Tax
| | | Before Tax
| | | Income Tax (Expense) or Benefit
| | | Net of Tax
| | | Before Tax
| | | Income Tax (Expense) or Benefit
| | | Net of Tax
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2002
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Unrealized securities gains arising during the period | | $ | (487 | ) | | $ | 188 | | | $ | (299 | ) | | $ | 192 | | | $ | (74 | ) | | $ | 118 | | |
Less: Reclassification adjustment for gains realized in net income | | | — | | | | — | | | | — | | | | (1,656 | ) | | | 638 | | | | (1,018 | ) | |
Unrealized securities losses arising during the period | | | $ | (930 | ) | | $ | 358 | | | $ | (572 | ) | | $ | (739 | ) | | $ | 285 | | | $ | (454 | ) |
Less: Reclassification adjustment for losses realized in net income | | | | — | | | | — | | | | — | | | | (1,655 | ) | | | 637 | | | | (1,018 | ) |
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Net unrealized securities losses | | | (487 | ) | | | 188 | | | | (299 | ) | | | (1,464 | ) | | | 564 | | | | (900 | ) | | | (930 | ) | | | 358 | | | | (572 | ) | | | (2,394 | ) | | $ | 922 | | | $ | (1,472 | ) |
Foreign currency translation adjustments | | | 386 | | | | (149 | ) | | | 237 | | | | 130 | | | | (50 | ) | | | 80 | | | | 160 | | | | (61 | ) | | | 99 | | | | 290 | | | | (111 | ) | | | 179 | |
Unrealized loss on interest rate swap | | | (2,071 | ) | | | 797 | | | | (1,274 | ) | | | (1,414 | ) | | | 544 | | | | (870 | ) | | | (3,078 | ) | | | 1,184 | | | | (1,894 | ) | | | (4,494 | ) | | | 1,730 | | | | (2,764 | ) |
Additional minimum pension liabilities | | | — | | | | — | | | | — | | | | (1,729 | ) | | | 665 | | | | (1,064 | ) | | | — | | | | — | | | | — | | | | (1,729 | ) | | | 665 | | | | (1,064 | ) |
Fuel hedge option | | | | (247 | ) | | | 95 | | | | (152 | ) | | | (247 | ) | | | 95 | | | | (152 | ) |
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Other comprehensive income | | $ | (2,172 | ) | | $ | 836 | | | $ | (1,336 | ) | | $ | (4,477 | ) | | $ | 1,723 | | | $ | (2,754 | ) | |
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Other comprehensive loss | | | $ | (4,095 | ) | | $ | 1,576 | | | $ | (2,519 | ) | | $ | (8,574 | ) | | $ | 3,301 | | | $ | (5,273 | ) |
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| | Three Months Ended June 30, 2001
| | | Six Months Ended June 30, 2001
| | | Three Months Ended September 30, 2001
| | | Nine Months Ended September 30, 2001
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| | Before Tax
| | | Income Tax (Expense) or Benefit
| | | Net of Tax
| | | Before Tax
| | | Income Tax (Expense) or Benefit
| | | Net of Tax
| | | Before Tax
| | | Income Tax Benefit
| | | Net of Tax
| | | Before Tax
| | | Income Tax Benefit
| | | Net of Tax
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2001
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Unrealized securities gains arising during the period | | $ | 312 | | | $ | (120 | ) | | $ | 192 | | | $ | 168 | | | $ | (65 | ) | | $ | 103 | | |
Less: Reclassification adjustment for gains realized in net income | | | — | | | | — | | | | — | | | | (32 | ) | | | 12 | | | | (20 | ) | |
Unrealized securities losses arising during the period | | | $ | (1,724 | ) | | $ | 664 | | | $ | (1,060 | ) | | $ | (1,557 | ) | | $ | 599 | | | $ | (958 | ) |
Less: Reclassification adjustment for losses realized in net income | | | | — | | | | — | | | | — | | | | (32 | ) | | | 12 | | | | (20 | ) |
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Net unrealized securities gains | | | 312 | | | | (120 | ) | | | 192 | | | | 136 | | | | (53 | ) | | | 83 | | |
Net unrealized securities losses | | | | (1,724 | ) | | | 664 | | | | (1,060 | ) | | | (1,589 | ) | | | 611 | | | | (978 | ) |
Foreign currency translation adjustments | | | (109 | ) | | | 30 | | | | (79 | ) | | | (310 | ) | | | 97 | | | | (213 | ) | | | (41 | ) | | | 16 | | | | (25 | ) | | | (351 | ) | | | 114 | | | | (237 | ) |
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Other comprehensive income | | $ | 203 | | | $ | (90 | ) | | $ | 113 | | | $ | (174 | ) | | $ | 44 | | | $ | (130 | ) | |
Other comprehensive loss | | | $ | (1,765 | ) | | $ | 680 | | | $ | (1,085 | ) | | $ | (1,940 | ) | | $ | 725 | | | $ | (1,215 | ) |
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6
NOTE G—I—RESTRUCTURING CHARGE
In the second quarter of 2002, the Company announced it was taking steps to reduce costs through realignment of operations and reduction of personnel and overhead expenses both in the U.S. and overseas. The Company recorded a restructuring charge of $2.3 million in the second quarter of 2002 and $.9 million in the third quarter of 2002 in connection with such changes.realignment. A total of approximately 175230 employees located at the Company’s station operations were terminated and provided severance benefits totaling $1.3$2.0 million, of which $.7$1.7 million had been paid at JuneSeptember 30, 2002. An additional $1.0$1.2 million was accrued for lease costs, net of estimated sublease income, for the closure of certain facilities.facilities, of which $0.2 million had been paid at September 30, 2002.
NOTE H—J—BUSINESS ACQUISITION
On June 19, 2002, the Company acquired 100% of the outstanding common stock of Pagtrans SA, a French international transportation services company providing air express, air freight, ocean freight, logistics and customs brokerage services. The acquisition is intended to provide the Company an improved presence in France and throughout the region. Since 1997, Pagtrans SA had been the Company’s independent service agent in France.
7
The acquisition price will range from a minimumis estimated to be $670,000, including direct costs, of which $18,000 which washas been paid as of JuneSeptember 30, 2002, to a maximum of $670,000, including direct costs.2002. The actualfinal acquisition price will be determined in late 2002is based on a final measurement of the fair value of current assets and liabilities as of the purchase date.date that will be completed in late 2002.
The Company recorded assets and liabilities (primarily current assets and liabilities) of approximately $7.6 million and $7.5 million, respectively, as of the purchase date in connection with the transaction and goodwill of approximately $.6 million. The allocation of this excess purchase price has not been finalized and is subject to the ultimate determination of the purchase price and further review of the fair value of assets acquired and liabilities assumed. The operating results of Pagtrans have been included in the Company’s results of operations since the acquisition date though were not material todate. The proforma effects of this acquisition on the Company’s consolidated revenues and results of operations for the six monthsthree and nine month periods ended JuneSeptember 30, 2002 and 2001. The Company does not anticipate the acquisition will result in material changes to future international revenues and expenses.2001, respectively, were immaterial.
NOTE I—K—NEW ACCOUNTING PRONOUNCEMENTS
Effective JanuaryIn April 2002, the Company implemented the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets”. This standard requires, among other things, the discontinuance of goodwill amortization and that transitional goodwill impairment tests be performed within six months from the date of adoption. The Company has completed its transitional tests and determined no impairment adjustments were necessary as of June 30, 2002. The total amount of goodwill recorded and included in equipment deposits and other assets on the consolidated balance sheet was $2.8 million as of June 30, 2002. Net losses and basic and diluted earnings per share for the quarter and six months ended June 30, 2001, excluding goodwill amortization expense, would not have materially differed from amounts reported. Goodwill expense for second quarter and first half of 2001 was $33,000 and $67,000, respectively.
In August 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 143, “Accounting for Asset Retirement Obligations”. SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. Additionally, the associated asset retirement costs will be capitalized as part of the carrying amount of the long-lived asset. The adoption of SFAS No. 143, which is effective for companies with fiscal years beginning after June 15, 2002, is not expected to have a significant impact on our financial position or results of operations.
In April 2002, the FASB issued SFAS No. 145, “Revision“Rescission of FASB Statements No. 4, 44, 64, Amendment of FASB Statement No. 13, and Technical Corrections”. SFAS No. 145 requires that only certain extinguishments of debt be classified as an extraordinary item. Further, this statement requires a capital leaseslease that areis modified so that the resulting lease agreement is classified as an operating lease to be accounted for under the sale-leaseback provisions of SFAS No. 98. The provisions of the statement pertaining to debt extinguishments are effective for companies with fiscal years beginning after May 15, 2002. The provisionprovisions of the statement pertaining to lease modifications are effective for transactions consummated after May 15, 2002.
7
Implementation of this statement is not anticipated to have a significant impact on our financial position or results of operations.
In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”. SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities. This statement requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Previous guidance, provided under EITFEmerging Issues Task Force Issue 94-3, required an exit cost liability be recognized at the date of an entity’s commitment to an exit plan. The provisions of this statement are effective for exit or disposal activities that are initiated by a company after December 31, 2002. Implementation of this statement is not anticipated to have a significant impact on our financial position or results of operations.
NOTE J—L—SUPPLEMENTAL GUARANTOR INFORMATION—SENIOR NOTES
In connection with the issuance of $200,000,000$200 million of Senior Notes (“Notes”) by Airborne Express, Inc. (“AEI”), certain subsidiaries (collectively, “Guarantors”) of the Company have fully and unconditionally guaranteed, on a joint and several basis, the obligations to pay principal, premium, if any, and interest with respect to the Notes. The Guarantors are ABX Air Inc. (“ABX”) and Sky Courier, Inc. (“SKY”), which are wholly-owned subsidiaries of the Company, and Airborne FTZ Inc. (“FTZ”) and Wilmington Air Park Inc. (“WAP”), which are wholly-owned subsidiaries of ABX.
AEI provides domestic and international delivery services in addition to performing customer service, sales and marketing activities. ABX is a certificated air carrier that owns and operates the domestic express cargo services for which AEI is the sole customer. ABX also offers air charter services on a limited basis to third-party customers. FTZ owns certain aircraft parts inventories that it sells primarily to ABX but also has limited sales to third-party customers. FTZ is also the holder of a foreign trade zone certificate at the Wilmington airport property. WAP is the owner of the Wilmington airport property, which includes the Company’s main sort facility, aircraft maintenance facilities, runways and related airport facilities and airline administrative and training facilities. ABX is the only substantial occupant and customer of WAP. SKY provides expedited courier services and regional logistics warehousing primarily to third-party customers.
Revenues and net earnings recorded by ABX, FTZ and WAP are controlled by the Company and are based on various discretionary factors. Investment balances and revenues between Guarantors have been eliminated for purposes of presenting financial information below. Intercompany advances and liabilities represent net amounts due between the various entities. The Company provides its subsidiaries with a majority of the cash necessary to fund operating and capital expenditure requirements.
The Company’s revolving bank credit agreement imposes certain restrictions on loans made by certain subsidiaries of the Company to the Company, AEI and ABX. Loans by these subsidiaries must be approved by the agent for such credit agreement to the extent that these loans, together with certain other non-permitted investments, exceed $20.0 million.
8
Further, the agreement governing the Company’s accounts receivable securitization facility prohibits Airborne Credit, Inc. (“ACI”), the subsidiary of the Company that sells accounts receivable under that facility, from making any loans. The agreement generally allows ACI to pay dividends to the Company, so long as ACI maintains a net worth of at least $19.2 million.
Except as described above, there are no contractual restrictions on the ability of the Company, AEI or any of the Guarantors to borrow money or receive dividends from any of their respective subsidiaries, or on the ability of such subsidiaries to make loans or pay dividends to their respective parents.
The following are consolidating condensed statements of operations of the Company for the three month and nine month periods ended September 30, 2002 and 2001, the consolidating condensed balance sheets of the Company as of JuneSeptember 30, 2002 and December 31, 2001, and the related consolidating condensed statements of operations and cash flows for the three months and six monthsnine month periods ended JuneSeptember 30, 2002 and 2001, respectively:2001:
Statement of Operations Information:
| | Three months ended June 30, 2002
| | | Six months ended June 30, 2002
| |
| | Airborne Express, Inc.
| | | Airborne Inc.
| | | Guarantors
| | | Non- guarantors
| | | Consolidated
| | | Airborne Express, Inc.
| | | Airborne Inc.
| | | Guarantors
| | | Non- guarantors
| | | Consolidated
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| | | | | (in thousands) | | | (in thousands) | |
Revenues | | $ | 794,778 | | | $ | — | | | $ | 15,673 | | | $ | — | | | $ | 810,451 | | | $ | 1,567,819 | | | $ | — | | | $ | 31,152 | | | $ | — | | | $ | 1,598,971 | |
Operating expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Transportation purchased | | | 480,542 | | | | — | | | | (213,174 | ) | | | — | | | | 267,368 | | | | 949,614 | | | | — | | | | (433,215 | ) | | | — | | | | 516,399 | |
Station and ground operations | | | 224,816 | | | | — | | | | 41,141 | | | | — | | | | 265,957 | | | | 448,298 | | | | — | | | | 81,778 | | | | — | | | | 530,076 | |
Flight operations and maintenance | | | (869 | ) | | | — | | | | 133,989 | | | | (589 | ) | | | 132,531 | | | | (1,324 | ) | | | — | | | | 260,424 | | | | (1,203 | ) | | | 257,897 | |
General and administrative | | | 46,503 | | | | 518 | | | | 18,175 | | | | 41 | | | | 65,237 | | | | 91,292 | | | | 789 | | | | 36,491 | | | | 79 | | | | 128,651 | |
Sales and marketing | | | 23,261 | | | | — | | | | 231 | | | | — | | | | 23,492 | | | | 45,337 | | | | — | | | | 431 | | | | — | | | | 45,768 | |
Depreciation and amortization | | | 10,926 | | | | — | | | | 35,723 | | | | 82 | | | | 46,731 | | | | 22,739 | | | | — | | | | 72,948 | | | | 165 | | | | 98,852 | |
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| | | 785,179 | | | | 518 | | | | 16,085 | | | | (466 | ) | | | 801,316 | | | | 1,555,956 | | | | 789 | | | | 18,857 | | | | (959 | ) | | | 1,574,643 | |
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Earnings (loss) from operations | | | 9,599 | | | | (518 | ) | | | (412 | ) | | | 466 | | | | 9,135 | | | | 11,863 | | | | (789 | ) | | | 12,295 | | | | 959 | | | | 24,328 | |
Other income (expense): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Dividend income | | | (5,885 | ) | | | 175 | | | | (1,775 | ) | | | — | | | | (7,485 | ) | | | (10,640 | ) | | | — | | | | (3,716 | ) | | | — | | | | (14,356 | ) |
Discounts on sales of receivables | | | (1,001 | ) | | | — | | | | (1 | ) | | | 117 | | | | (885 | ) | | | (1,966 | ) | | | — | | | | (1 | ) | | | (223 | ) | | | (2,190 | ) |
Other | | | 407 | | | | — | | | | — | | | | — | | | | 407 | | | | 2,303 | | | | — | | | | — | | | | — | | | | 2,303 | |
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Earnings (loss) before income taxes | | | 3,120 | | | | (343 | ) | | | (2,188 | ) | | | 583 | | | | 1,172 | | | | 1,560 | | | | (789 | ) | | | 8,578 | | | | 736 | | | | 10,085 | |
Income tax (expense) benefit | | | (1,078 | ) | | | 120 | | | | 121 | | | | 122 | | | | (715 | ) | | | (912 | ) | | | 276 | | | | (4,137 | ) | | | 413 | | | | (4,360 | ) |
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Net earnings (loss) | | $ | 2,042 | | | $ | (223 | ) | | $ | (2,067 | ) | | $ | 705 | | | $ | 457 | | | $ | 648 | | | $ | (513 | ) | | $ | 4,441 | | | $ | 1,149 | | | $ | 5,725 | |
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| | Three months ended September 30, 2002
| | | Nine months ended September 30, 2002
| |
| | Airborne Express, Inc.
| | | Airborne Inc.
| | | Guarantors
| | | Non- guarantors
| | | Consolidated
| | | Airborne Express, Inc.
| | | Airborne Inc.
| | | Guarantors
| | | Non- guarantors
| | | Consolidated
| |
| | (in thousands) | | | (in thousands) | |
Revenues | | $ | 827,553 | | | $ | — | | | $ | 15,208 | | | $ | — | | | $ | 842,761 | | | $ | 2,395,372 | | | $ | — | | | $ | 46,360 | | | $ | — | | | $ | 2,441,732 | |
Operating expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Transportation purchased | | | 495,504 | | | | — | | | | (210,049 | ) | | | — | | | | 285,455 | | | | 1,445,117 | | | | — | | | | (643,264 | ) | | | — | | | | 801,853 | |
Station and ground operations | | | 237,746 | | | | — | | | | 44,555 | | | | — | | | | 282,301 | | | | 686,045 | | | | — | | | | 126,333 | | | | — | | | | 812,378 | |
Flight operations and maintenance | | | (92 | ) | | | — | | | | 135,576 | | | | (598 | ) | | | 134,886 | | | | (1,416 | ) | | | — | | | | 396,000 | | | | (1,801 | ) | | | 392,783 | |
General and administrative | | | 48,815 | | | | 252 | | | | 15,209 | | | | 50 | | | | 64,326 | | | | 140,107 | | | | 1,041 | | | | 51,700 | | | | 129 | | | | 192,977 | |
Sales and marketing | | | 22,659 | | | | — | | | | 203 | | | | — | | | | 22,862 | | | | 67,996 | | | | — | | | | 634 | | | | — | | | | 68,630 | |
Depreciation and amortization | | | 10,442 | | | | — | | | | 39,023 | | | | 82 | | | | 49,547 | | | | 33,181 | | | | — | | | | 111,971 | | | | 247 | | | | 145,399 | |
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| | | 815,074 | | | | 252 | | | | 24,517 | | | | (466 | ) | | | 839,377 | | | | 2,371,030 | | | | 1,041 | | | | 43,374 | | | | (1,425 | ) | | | 2,414,020 | |
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Earnings (loss) from operations | | | 12,479 | | | | (252 | ) | | | (9,309 | ) | | | 466 | | | | 3,384 | | | | 24,342 | | | | (1,041 | ) | | | 2,986 | | | | 1,425 | | | | 27,712 | |
Other income (expense): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest income | | | 1,458 | | | | — | | | | — | | | | — | | | | 1,458 | | | | 3,772 | | | | — | | | | — | | | | — | | | | 3,772 | |
Interest expense | | | (7,154 | ) | | | — | | | | (1,954 | ) | | | — | | | | (9,108 | ) | | | (20,108 | ) | | | — | | | | (5,670 | ) | | | — | | | | (25,778 | ) |
Discount on sales of receivables | | | (990 | ) | | | — | | | | 1 | | | | 251 | | | | (738 | ) | | | (2,956 | ) | | | — | | | | — | | | | 28 | | | | (2,928 | ) |
Other | | | 196 | | | | — | | | | — | | | | — | | | | 196 | | | | 2,499 | | | | — | | | | — | | | | — | | | | 2,499 | |
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Earnings (loss) before income taxes | | | 5,989 | | | | (252 | ) | | | (11,262 | ) | | | 717 | | | | (4,808 | ) | | | 7,549 | | | | (1,041 | ) | | | (2,684 | ) | | | 1,453 | | | | 5,277 | |
Income tax expense (benefit) | | | 2,141 | | | | (88 | ) | | | (3,727 | ) | | | (76 | ) | | | (1,750 | ) | | | 3,053 | | | | (364 | ) | | | 410 | | | | (489 | ) | | | 2,610 | |
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Net earnings (loss) | | $ | 3,848 | | | $ | (164 | ) | | $ | (7,535 | ) | | $ | 793 | | | $ | (3,058 | ) | | $ | 4,496 | | | $ | (677 | ) | | $ | (3,094 | ) | | $ | 1,942 | | | $ | 2,667 | |
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9
Statement of Operations Information:
| | Three months ended June 30, 2001
| | | Six months ended June 30, 2001
| |
| | Airborne Express, Inc.
| | | Airborne Inc.
| | | Guarantors
| | | Non- guarantors
| | | Consolidated
| | | Airborne Express, Inc.
| | | Airborne Inc.
| | | Guarantors
| | | Non- guarantors
| | | Consolidated
| |
| | (in thousands) | | | (in thousands) | |
Revenues | | $ | 791,431 | | | $ | — | | | $ | 20,794 | | | $ | — | | | $ | 812,225 | | | $ | 1,597,615 | | | $ | — | | | $ | 38,131 | | | $ | — | | | $ | 1,635,746 | |
Operating expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Transportation purchased | | | 507,005 | | | | — | | | | (240,920 | ) | | | — | | | | 266,085 | | | | 1,019,945 | | | | — | | | | (486,821 | ) | | | — | | | | 533,124 | |
Station and ground operations | | | 224,109 | | | | — | | | | 40,671 | | | | — | | | | 264,780 | | | | 460,986 | | | | — | | | | 84,168 | | | | — | | | | 545,154 | |
Flight operations and maintenance | | | (162 | ) | | | — | | | | 144,488 | | | | (640 | ) | | | 143,686 | | | | (162 | ) | | | — | | | | 296,833 | | | | (1,299 | ) | | | 295,372 | |
General and administrative | | | 52,736 | | | | 228 | | | | 13,818 | | | | 39 | | | | 66,821 | | | | 100,781 | | | | 447 | | | | 31,581 | | | | 79 | | | | 132,888 | |
Sales and marketing | | | 22,995 | | | | — | | | | 334 | | | | — | | | | 23,329 | | | | 46,639 | | | | —�� | | | | 692 | | | | — | | | | 47,331 | |
Depreciation and amortization | | | 12,458 | | | | 150 | | | | 39,992 | | | | 84 | | | | 52,684 | | | | 24,530 | | | | 150 | | | | 80,477 | | | | 165 | | | | 105,322 | |
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| | | 819,141 | | | | 378 | | | | (1,617 | ) | | | (517 | ) | | | 817,385 | | | | 1,652,719 | | | | 597 | | | | 6,930 | | | | (1,055 | ) | | | 1,659,191 | |
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Earnings (loss) from operations | | | (27,710 | ) | | | (378 | ) | | | 22,411 | | | | 517 | | | | (5,160 | ) | | | (55,104 | ) | | | (597 | ) | | | 31,201 | | | | 1,055 | | | | (23,445 | ) |
Other income (expense): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest, net | | | 1,020 | | | | (585 | ) | | | (4,889 | ) | | | — | | | | (4,454 | ) | | | 2,353 | | | | 18,424 | | | | (29,728 | ) | | | — | | | | (8,951 | ) |
Discounts on sales of receivables | | | (3,170 | ) | | | — | | | | — | | | | 941 | | | | (2,229 | ) | | | (7,514 | ) | | | — | | | | — | | | | 1,527 | | | | (5,987 | ) |
Other | | | 2,304 | | | | — | | | | — | | | | — | | | | 2,304 | | | | 2,577 | | | | — | | | | — | | | | — | | | | 2,577 | |
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Earnings (loss) before income taxes | | | (27,556 | ) | | | (963 | ) | | | 17,522 | | | | 1,458 | | | | (9,539 | ) | | | (57,688 | ) | | | 17,827 | | | | 1,473 | | | | 2,582 | | | | (35,806 | ) |
Income tax (expense) benefit | | | 9,696 | | | | 337 | | | | (6,886 | ) | | | 31 | | | | 3,178 | | | | 20,510 | | | | 761 | | | | (8,656 | ) | | | (165 | ) | | | 12,450 | |
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Net earnings (loss) | | $ | (17,860 | ) | | $ | (626 | ) | | $ | 10,636 | | | $ | 1,489 | | | $ | (6,361 | ) | | $ | (37,178 | ) | | $ | 18,588 | | | $ | (7,183 | ) | | $ | 2,417 | | | $ | (23,356 | ) |
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| | Three months ended September 30, 2001
| | | Nine months ended September 30, 2001
| |
| | Airborne Express, Inc.
| | | Airborne Inc.
| | | Guarantors
| | | Non- guarantors
| | | Consolidated
| | | Airborne Express, Inc.
| | | Airborne Inc.
| | | Guarantors
| | | Non- guarantors
| | | Consolidated
| |
| | (in thousands) | | | (in thousands) | |
Revenues | | $ | 752,512 | | | $ | — | | | $ | 20,276 | | | $ | — | | | $ | 772,788 | | | $ | 2,350,127 | | | $ | — | | | $ | 58,407 | | | $ | — | | | $ | 2,408,534 | |
Operating expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Transportation purchased | | | 486,300 | | | | — | | | | (232,220 | ) | | | — | | | | 254,080 | | | | 1,506,245 | | | | — | | | | (719,041 | ) | | | — | | | | 787,204 | |
Station and ground operations | | | 224,817 | | | | — | | | | 32,509 | | | | — | | | | 257,326 | | | | 685,803 | | | | — | | | | 116,677 | | | | — | | | | 802,480 | |
Flight operations and maintenance | | | 45 | | | | — | | | | 133,757 | | | | (516 | ) | | | 133,286 | | | | (117 | ) | | | — | | | | 430,590 | | | | (1,815 | ) | | | 428,658 | |
General and administrative | | | 39,325 | | | | 125 | | | | 21,640 | | | | 39 | | | | 61,129 | | | | 140,106 | | | | 572 | | | | 53,221 | | | | 118 | | | | 194,017 | |
Sales and marketing | | | 21,378 | | | | — | | | | 311 | | | | — | | | | 21,689 | | | | 68,017 | | | | — | | | | 1,003 | | | | — | | | | 69,020 | |
Depreciation and amortization | | | 12,449 | | | | 7 | | | | 39,115 | | | | 84 | | | | 51,655 | | | | 36,979 | | | | 157 | | | | 119,592 | | | | 249 | | | | 156,977 | |
Federal legislation compensation | | | (7,800 | ) | | | — | | | | — | | | | — | | | | (7,800 | ) | | | (7,800 | ) | | | — | | | | — | | | | — | | | | (7,800 | ) |
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| | | 776,514 | | | | 132 | | | | (4,888 | ) | | | (393 | ) | | | 771,365 | | | | 2,429,233 | | | | 729 | | | | 2,042 | | | | (1,448 | ) | | | 2,430,556 | |
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Earnings (loss) from operations | | | (24,002 | ) | | | (132 | ) | | | 25,164 | | | | 393 | | | | 1,423 | | | | (79,106 | ) | | | (729 | ) | | | 56,365 | | | | 1,448 | | | | (22,022 | ) |
Other income (expense): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest income | | | 560 | | | | — | | | | — | | | | — | | | | 560 | | | | 879 | | | | — | | | | — | | | | — | | | | 879 | |
Interest expense | | | 322 | | | | — | | | | (5,806 | ) | | | — | | | | (5,484 | ) | | | 2,356 | | | | (1,576 | ) | | | (15,534 | ) | | | — | | | | (14,754 | ) |
Dividend income | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 20,000 | | | | (20,000 | ) | | | — | | | | — | |
Discount on sales of receivables | | | (2,537 | ) | | | — | | | | — | | | | 530 | | | | (2,007 | ) | | | (10,050 | ) | | | — | | | | — | | | | 2,057 | | | | (7,993 | ) |
Other | | | 8,779 | | | | — | | | | — | | | | — | | | | 8,779 | | | | 11,355 | | | | — | | | | | | | | — | | | | 11,355 | |
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Earnings (loss) before income taxes | | | (16,878 | ) | | | (132 | ) | | | 19,358 | | | | 923 | | | | 3,271 | | | | (74,566 | ) | | | 17,695 | | | | 20,831 | | | | 3,505 | | | | (32,535 | ) |
Income tax expense (benefit) | | | (5,675 | ) | | | (46 | ) | | | 7,231 | | | | 48 | | | | 1,558 | �� | | | (26,185 | ) | | | (807 | ) | | | 15,887 | | | | 213 | | | | (10,892 | ) |
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Net earnings (loss) | | $ | (11,203 | ) | | $ | (86 | ) | | $ | 12,127 | | | $ | 875 | | | $ | 1,713 | | | $ | (48,381 | ) | | $ | 18,502 | | | $ | 4,944 | | | $ | 3,292 | | | $ | (21,643 | ) |
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10
Balance Sheet Information:
June 30, 2002
| | Airborne Express, Inc.
| | | Airborne Inc.
| | | Guarantors
| | | Non-guarantors
| | | Elimination
| | | Consolidated
| | |
September 30, 2002
| | | Airborne Express, Inc.
| | | Airborne Inc.
| | | Guarantors
| | | Non-guarantors
| | | Elimination
| | | Consolidated
| |
| | (in thousands) | | | (in thousands) | |
ASSETS | | | | | | | | | | | | | | | | | | | | | | | | |
Current Assets: | | | | | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 336,947 | | | $ | — | | | $ | 106 | | | $ | 1,010 | | | $ | — | | | $ | 338,063 | | | $ | 330,387 | | | $ | — | | | $ | 89 | | | $ | 2,500 | | | $ | — | | | $ | 332,976 | |
Trade accounts receivable, less allowance | | | 19,863 | | | | — | | | | 10,204 | | | | 194,255 | | | | — | | | | 224,322 | | | | 20,110 | | | | — | | | | 9,661 | | | | 225,169 | | | | — | | | | 254,940 | |
Spare parts and fuel inventory | | | — | | | | — | | | | 34,326 | | | | 2,759 | | | | — | | | | 37,085 | | | | — | | | | — | | | | 34,003 | | | | 2,969 | | | | — | | | | 36,972 | |
Refundable income taxes | | | 517 | | | | — | | | | — | | | | — | | | | — | | | | 517 | | | | 2,739 | | | | — | | | | — | | | | — | | | | — | | | | 2,739 | |
Deferred income tax assets | | | 30,929 | | | | — | | | | — | | | | — | | | | — | | | | 30,929 | | | | 33,967 | | | | — | | | | — | | | | — | | | | — | | | | 33,967 | |
Prepaid expenses and other | | | 19,191 | | | | — | | | | 13,805 | | | | 500 | | | | — | | | | 33,496 | | | | 17,136 | | | | — | | | | 13,782 | | | | 344 | | | | — | | | | 31,262 | |
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Total current assets | | | 407,447 | | | | — | | | | 58,441 | | | | 198,524 | | | | — | | | | 664,412 | | | | 404,339 | | | | — | | | | 57,535 | | | | 230,982 | | | | — | | | | 692,856 | |
| Property & equipment, net | | | 96,791 | | | | — | | | | 1,113,244 | | | | 4,096 | | | | — | | | | 1,214,131 | | |
Property and equipment, net | | | | 98,679 | | | | — | | | | 1,084,008 | | | | 4,016 | | | | — | | | | 1,186,703 | |
Intercompany advances | | | 96,502 | | | | 348,841 | | | | (99,584 | ) | | | 23,677 | | | | (369,436 | ) | | | — | | | | 88,211 | | | | 234,387 | | | | (91,266 | ) | | | (8,554 | ) | | | (222,778 | ) | | | — | �� |
Equipment deposits and other assets | | | 32,302 | | | | 110,948 | | | | 9,275 | | | | 10 | | | | (100,111 | ) | | | 52,424 | | | | 20,311 | | | | 225,742 | | | | 8,998 | | | | 10 | | | | (215,111 | ) | | | 39,950 | |
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|
|
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|
|
|
Total assets | | $ | 633,042 | | | $ | 459,789 | | | $ | 1,081,376 | | | $ | 226,307 | | | $ | (469,547 | ) | | $ | 1,930,967 | | | $ | 611,540 | | | $ | 460,129 | | | $ | 1,059,275 | | | $ | 226,454 | | | $ | (437,889 | ) | | $ | 1,919,509 | |
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|
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | | | | | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | | | | | | | | | | | | | | |
Accounts payable | | $ | 96,709 | | | $ | — | | | $ | 38,822 | | | $ | 3,488 | | | $ | (235 | ) | | $ | 138,784 | | | $ | 102,061 | | | $ | — | | | $ | 43,019 | | | $ | 2,818 | | | $ | (180 | ) | | $ | 147,718 | |
Salaries, wages and related taxes | | | 48,840 | | | | — | | | | 32,394 | | | | (1 | ) | | | — | | | | 81,233 | | | | 53,104 | | | | — | | | | 40,037 | | | | — | | | | — | | | | 93,141 | |
Accrued expenses | | | 139,858 | | | | 2,325 | | | | 6,496 | | | | 299 | | | | — | | | | 148,978 | | | | 123,635 | | | | 4,479 | | | | 5,301 | | | | 322 | | | | — | | | | 133,737 | |
Current portion of debt | | | 101,378 | | | | — | | | | 6,795 | | | | — | | | | — | | | | 108,173 | | |
Current portion of long-term obligations | | | | 102,763 | | | | — | | | | 6,928 | | | | — | | | | — | | | | 109,691 | |
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|
Total current liabilities | | | 386,785 | | | | 2,325 | | | | 84,507 | | | | 3,786 | | | | (235 | ) | | | 477,168 | | | | 381,563 | | | | 4,479 | | | | 95,285 | | | | 3,140 | | | | (180 | ) | | | 484,287 | |
| Long-term debt | | | 105,710 | | | | 150,000 | | | | 110,677 | | | | — | | | | — | | | | 366,387 | | |
Long-term obligations | | | | 112,273 | | | | 150,000 | | | | 108,894 | | | | — | | | | — | | | | 371,167 | |
Intercompany liabilities | | | — | | | | — | | | | 254,200 | | | | — | | | | (254,200 | ) | | | — | | | | — | | | | — | | | | 222,597 | | | | — | | | | (222,597 | ) | | | — | |
Deferred income tax liabilities | | | (5,780 | ) | | | — | | | | 149,965 | | | | 532 | | | | — | | | | 144,717 | | | | (3,945 | ) | | | — | | | | 149,968 | | | | 532 | | | | — | | | | 146,555 | |
Post retirement liabilities | | | 50,888 | | | | — | | | | 16,076 | | | | — | | | | — | | | | 66,964 | | | | 14,414 | | | | — | | | | 24,115 | | | | — | | | | — | | | | 38,529 | |
Other liabilities | | | 38,816 | | | | — | | | | — | | | | — | | | | — | | | | 38,816 | | | | 49,283 | | | | — | | | | — | | | | — | | | | — | | | | 49,283 | |
Shareholders’ equity: | | | | | | | | | | | | | | | | | | | | | | | | |
Common stock | | | 1 | | | | 51,631 | | | | (9 | ) | | | 120 | | | | (112 | ) | | | 51,631 | | | | 1 | | | | 51,658 | | | | (9 | ) | | | 120 | | | | (112 | ) | | | 51,658 | |
Additional paid-in capital | | | — | | | | 308,553 | | | | (753 | ) | | | 215,753 | | | | (215,000 | ) | | | 308,553 | | | | — | | | | 308,812 | | | | (753 | ) | | | 215,753 | | | | (215,000 | ) | | | 308,812 | |
Retained earnings net | | | 62,196 | | | | 7,138 | | | | 466,713 | | | | 6,116 | | | | — | | | | 542,163 | | |
Accumulated other comprehensive income | | | (5,574 | ) | | | — | | | | — | | | | — | | | | — | | | | (5,574 | ) | |
Retained earnings | | | | 66,044 | | | | 5,038 | | | | 459,178 | | | | 6,909 | | | | — | | | | 537,169 | |
Accumulated other comprehensive loss | | | | (8,093 | ) | | | — | | | | — | | | | — | | | | — | | | | (8,093 | ) |
Treasury stock | | | — | | | | (59,858 | ) | | | — | | | | — | | | | — | | | | (59,858 | ) | | | — | | | | (59,858 | ) | | | — | | | | — | | | | — | | | | (59,858 | ) |
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Total shareholders’ equity | | | 56,623 | | | | 307,464 | | | | 465,951 | | | | 221,989 | | | | (215,112 | ) | | | 836,915 | | | | 57,952 | | | | 305,650 | | | | 458,416 | | | | 222,782 | | | | (215,112 | ) | | | 829,688 | |
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| Total liabilities and shareholders’ equity | | $ | 633,042 | | | $ | 459,789 | | | $ | 1,081,376 | | | $ | 226,307 | | | $ | (469,547 | ) | | $ | 1,930,967 | | | $ | 611,540 | | | $ | 460,129 | | | $ | 1,059,275 | | | $ | 226,454 | | | $ | (437,889 | ) | | $ | 1,919,509 | |
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11
Balance Sheet Information: | | | | | | | | | | | | | | | | | |
December 31, 2001
| | Airborne Express, Inc.
| | | Airborne Inc.
| | | Guarantors
| | | Non- guarantors
| | Elimination
| | | Consolidated
| |
| | (in thousands) | |
ASSETS | | | | | | | | | | | | | | | | | | | | | | | |
Current Assets: | | | | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 191,629 | | | $ | — | | | $ | 607 | | | $ | 9,264 | | $ | — | | | $ | 201,500 | |
Trade accounts receivable, less allowance | | | 18,706 | | | | — | | | | 10,113 | | | | 97,289 | | | (68 | ) | | | 126,040 | |
Spare parts and fuel inventory | | | — | | | | — | | | | 36,272 | | | | 2,141 | | | — | | | | 38,413 | |
Refundable income taxes | | | 27,161 | | | | — | | | | — | | | | — | | | — | | | | 27,161 | |
Deferred income tax assets | | | 30,572 | | | | — | | | | — | | | | — | | | — | | | | 30,572 | |
Prepaid expenses and other | | | 13,918 | | | | — | | | | 13,627 | | | | 476 | | | — | | | | 28,021 | |
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Total current assets | | | 281,986 | | | | — | | | | 60,619 | | | | 109,170 | | | (68 | ) | | | 451,707 | |
|
Property & equipment, net | | | 109,622 | | | | — | | | | 1,133,490 | | | | 4,261 | | | — | | | | 1,247,373 | |
Intercompany advances | | | 157,681 | | | | 302,279 | | | | 12,949 | | | | 12,884 | | | (485,793 | ) | | | — | |
Equipment deposits and other assets | | | 31,078 | | | | 5,963 | | | | 16,224 | | | | 10 | | | (5,511 | ) | | | 47,764 | |
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|
|
Total assets | | $ | 580,367 | | | $ | 308,242 | | | $ | 1,223,282 | | | $ | 126,325 | | $ | (491,372 | ) | | $ | 1,746,844 | |
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|
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | | | | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | | | | | | | | | | | | | |
Accounts payable | | $ | 84,867 | | | $ | — | | | $ | 53,146 | | | $ | 4,552 | | $ | (692 | ) | | $ | 141,873 | |
Salaries, wages and related taxes | | | 46,976 | | | | — | | | | 28,482 | | | | — | | | — | | | | 75,458 | |
Accrued expenses | | | 139,132 | | | | — | | | | 6,261 | | | | 604 | | | — | | | | 145,997 | |
Current portion of debt | | | 100,877 | | | | — | | | | 6,533 | | | | — | | | — | | | | 107,410 | |
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|
Total current liabilities | | | 371,852 | | | | — | | | | 94,422 | | | | 5,156 | | | (692 | ) | | | 470,738 | |
|
Long-term debt | | | 103,951 | | | | — | | | | 114,102 | | | | — | | | — | | | | 218,053 | |
Intercompany liabilities | | | — | | | | — | | | | 370,168 | | | | — | | | (370,168 | ) | | | — | |
Deferred income tax liabilities | | | (6,967 | ) | | | — | | | | 150,164 | | | | 329 | | | — | | | | 143,526 | |
Post retirement liabilities | | | 11,905 | | | | — | | | | 27,518 | | | | — | | | — | | | | 39,423 | |
Other liabilities | | | 40,888 | | | | — | | | | — | | | | — | | | — | | | | 40,888 | |
Shareholders’ equity: | | | | | | | | | | | | | | | | | | | | | | | |
Common stock | | | 1 | | | | 51,376 | | | | (9 | ) | | | 120 | | | (112 | ) | | | 51,376 | |
Additional paid-in capital | | | 8 | | | | 304,976 | | | | 3,171 | | | | 115,753 | | | (118,924 | ) | | | 304,984 | |
Retained earnings net | | | 61,549 | | | | 11,758 | | | | 463,746 | | | | 4,967 | | | (1,476 | ) | | | 540,544 | |
Accumulated other comprehensive income | | | (2,820 | ) | | | — | | | | — | | | | — | | | — | | | | (2,820 | ) |
Treasury stock | | | — | | | | (59,868 | ) | | | — | | | | — | | | — | | | | (59,868 | ) |
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|
Total shareholders’ equity | | | 58,738 | | | | 308,242 | | | | 466,908 | | | | 120,840 | | | (120,512 | ) | | | 834,216 | |
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| |
|
|
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|
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|
|
| |
|
|
|
Total liabilities and shareholders’ equity | | $ | 580,367 | | | $ | 308,242 | | | $ | 1,223,282 | | | $ | 126,325 | | $ | (491,372 | ) | | $ | 1,746,844 | |
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|
Balance Sheet Information:December 31, 2001
| | Airborne Express, Inc.
| | | Airborne Inc.
| | | Guarantors
| | | Non- guarantors
| | Elimination
| | | Consolidated
| |
| | (in thousands) | |
ASSETS | | | | | | | | | | | | | | | | | | | | | | | |
Current Assets: | | | | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 191,629 | | | $ | — | | | $ | 607 | | | $ | 9,264 | | $ | — | | | $ | 201,500 | |
Trade accounts receivable, less allowance | | | 18,706 | | | | — | | | | 10,113 | | | | 97,289 | | | (68 | ) | | | 126,040 | |
Spare parts and fuel inventory | | | — | | | | — | | | | 36,272 | | | | 2,141 | | | — | | | | 38,413 | |
Refundable income taxes | | | 27,161 | | | | — | | | | — | | | | — | | | — | | | | 27,161 | |
Deferred income tax assets | | | 30,572 | | | | — | | | | — | | | | — | | | — | | | | 30,572 | |
Prepaid expenses and other | | | 13,918 | | | | — | | | | 13,627 | | | | 476 | | | — | | | | 28,021 | |
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|
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|
|
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|
|
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|
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|
|
| |
|
|
|
Total current assets | | | 281,986 | | | | — | | | | 60,619 | | | | 109,170 | | | (68 | ) | | | 451,707 | |
Property and equipment, net | | | 109,622 | | | | — | | | | 1,133,490 | | | | 4,261 | | | — | | | | 1,247,373 | |
Intercompany advances | | | 157,681 | | | | 302,279 | | | | (102,051 | ) | | | 12,884 | | | (370,793 | ) | | | — | |
Equipment deposits and other assets | | | 31,078 | | | | 5,963 | | | | 125,824 | | | | 10 | | | (115,111 | ) | | | 47,764 | |
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|
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|
|
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|
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|
|
| |
|
|
|
Total assets | | $ | 580,367 | | | $ | 308,242 | | | $ | 1,217,882 | | | $ | 126,325 | | $ | (485,972 | ) | | $ | 1,746,844 | |
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|
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|
|
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|
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | | | | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | | | | | | | | | | | | | |
Accounts payable | | $ | 84,867 | | | $ | — | | | $ | 53,146 | | | $ | 4,552 | | $ | (692 | ) | | $ | 141,873 | |
Salaries, wages and related taxes | | | 46,976 | | | | — | | | | 28,482 | | | | — | | | — | | | | 75,458 | |
Accrued expenses | | | 139,132 | | | | — | | | | 6,261 | | | | 604 | | | — | | | | 145,997 | |
Current portion of long-term obligations | | | 100,877 | | | | — | | | | 6,533 | | | | — | | | — | | | | 107,410 | |
| |
|
|
| |
|
|
| |
|
|
| |
|
| |
|
|
| |
|
|
|
Total current liabilities | | | 371,852 | | | | — | | | | 94,422 | | | | 5,156 | | | (692 | ) | | | 470,738 | |
Long-term obligations | | | 103,951 | | | | — | | | | 114,102 | | | | — | | | — | | | | 218,053 | |
Intercompany liabilities | | | — | | | | — | | | | 370,168 | | | | — | | | (370,168 | ) | | | — | |
Deferred income tax liabilities | | | (6,967 | ) | | | — | | | | 150,164 | | | | 329 | | | — | | | | 143,526 | |
Post retirement liabilities | | | 11,905 | | | | — | | | | 27,518 | | | | — | | | — | | | | 39,423 | |
Other liabilities | | | 40,888 | | | | — | | | | — | | | | — | | | — | | | | 40,888 | |
Shareholders’ equity: | | | | | | | | | | | | | | | | | | | | | | | |
Common stock | | | 1 | | | | 51,376 | | | | (9 | ) | | | 120 | | | (112 | ) | | | 51,376 | |
Additional paid-in capital | | | 8 | | | | 304,976 | | | | (753 | ) | | | 115,753 | | | (115,000 | ) | | | 304,984 | |
Retained earnings | | | 61,549 | | | | 11,758 | | | | 462,270 | | | | 4,967 | | | — | | | | 540,544 | |
Accumulated other comprehensive loss | | | (2,820 | ) | | | — | | | | — | | | | — | | | — | | | | (2,820 | ) |
Treasury stock | | | — | | | | (59,868 | ) | | | — | | | | — | | | — | | | | (59,868 | ) |
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|
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|
|
| |
|
|
| |
|
| |
|
|
| |
|
|
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Total shareholders’ equity | | | 58,738 | | | | 308,242 | | | | 461,508 | | | | 120,840 | | | (115,112 | ) | | | 834,216 | |
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|
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|
|
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|
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|
|
| |
|
|
|
Total liabilities and shareholders’ equity | | $ | 580,367 | | | $ | 308,242 | | | $ | 1,217,882 | | | $ | 126,325 | | $ | (485,972 | ) | | $ | 1,746,844 | |
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12
Statement of Cash Flows Information:
| | Three months ended June 30, 2002
| | | Six months ended June 30, 2002
| |
| | Airborne Express, Inc.
| | | Airborne Inc.
| | | Guarantors
| | | Non- guarantors
| | | Consolidated
| | | Airborne Express, Inc.
| | | Airborne Inc.
| | | Guarantors
| | | Non- guarantors
| | | Consolidated
| |
| | | | | (in thousands) | | | | | | (in thousands) | |
OPERATING ACTIVITIES: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net earnings (loss) | | $ | 2,041 | | | $ | (223 | ) | | $ | (2,065 | ) | | $ | 704 | | | $ | 457 | | | $ | 647 | | | $ | (513 | ) | | $ | 4,443 | | | $ | 1,148 | | | $ | 5,725 | |
Adjustments to reconcile net earnings to net cash provided by operating activities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Non-cash operating activities | | | 12,358 | | | | (99,934 | ) | | | 43,960 | | | | 99,960 | | | | 56,344 | | | | 54,503 | | | | (104,985 | ) | | | 67,194 | | | | 99,752 | | | | 116,464 | |
Change in current assets and liabilities | | | (60,826 | ) | | | 101,030 | | | | (15,474 | ) | | | (100,577 | ) | | | (75,847 | ) | | | 103,273 | | | | (43,962 | ) | | | (16,272 | ) | | | (109,154 | ) | | | (66,115 | ) |
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|
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|
Net cash provided (used) by operating activities | | | (46,427 | ) | | | 873 | | | | 26,421 | | | | 87 | | | | (19,046 | ) | | | 158,423 | | | | (149,460 | ) | | | 55,365 | | | | (8,254 | ) | | | 56,074 | |
INVESTING ACTIVITIES: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net cash used by investing activities | | | (7,687 | ) | | | — | | | | (25,466 | ) | | | — | | | | (33,153 | ) | | | (7,910 | ) | | | — | | | | (52,701 | ) | | | — | | | | (60,611 | ) |
FINANCING ACTIVITIES: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net cash provided (used) by financing activities | | | (409 | ) | | | (873 | ) | | | (1,621 | ) | | | — | | | | (2,903 | ) | | | (5,195 | ) | | | 149,460 | | | | (3,165 | ) | | | — | | | | 141,100 | |
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| |
|
|
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|
|
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|
|
| |
|
|
| |
|
|
|
Net increase (decrease) in cash | | | (54,523 | ) | | | — | | | | (666 | ) | | | 87 | | | | (55,102 | ) | | | 145,318 | | | | — | | | | (501 | ) | | | (8,254 | ) | | | 136,563 | |
Cash and cash equivalents at January 1 | | | 391,470 | | | | — | | | | 772 | | | | 923 | | | | 393,165 | | | | 191,629 | | | | — | | | | 607 | | | | 9,264 | | | | 201,500 | |
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|
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|
|
| |
|
|
| |
|
|
| |
|
|
|
Cash and cash equivalents at June 30 | | $ | 336,947 | | | $ | — | | | $ | 106 | | | $ | 1,010 | | | $ | 338,063 | | | $ | 336,947 | | | $ | — | | | $ | 106 | | | $ | 1,010 | | | $ | 338,063 | |
| |
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| | Three months ended June 30, 2001
| | | Six months ended June 30, 2001
| |
| | Airborne Express, Inc.
| | | Airborne Inc.
| | | Guarantors
| | | Non- guarantors
| | | Consolidated
| | | Airborne Express, Inc.
| | | Airborne Inc.
| | | Guarantors
| | | Non- guarantors
| | | Consolidated
| |
| | (in thousands) | | | (in thousands) | |
OPERATING ACTIVITIES: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net earnings (loss) | | $ | (17,860 | ) | | $ | (627 | ) | | $ | 10,637 | | | $ | 1,489 | | | $ | (6,361 | ) | | $ | (37,178 | ) | | $ | 18,587 | | | $ | (7,182 | ) | | $ | 2,417 | | | $ | (23,356 | ) |
Adjustments to reconcile net earnings to net cash provided by operating activities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Non-cash operating activities | | | 10,758 | | | | (1,103 | ) | | | 55,478 | | | | 54 | | | | 65,187 | | | | 12,154 | | | | (1,259 | ) | | | 105,740 | | | | (562 | ) | | | 96,073 | |
Change in current assets and liabilities | | | (41,237 | ) | | | 64,270 | | | | (24,299 | ) | | | (5,405 | ) | | | (6,671 | ) | | | 30,332 | | | | 61,649 | | | | (37,196 | ) | | | (1,775 | ) | | | 53,010 | |
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Net cash provided (used) by operating activities | | | (48,339 | ) | | | 62,540 | | | | 41,816 | | | | (3,862 | ) | | | 52,155 | | | | 5,308 | | | | 78,977 | | | | 61,362 | | | | 80 | | | | 145,727 | |
INVESTING ACTIVITIES: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net cash used by investing activities | | | (7,484 | ) | | | (151 | ) | | | (40,848 | ) | | | (5 | ) | | | (48,488 | ) | | | (10,911 | ) | | | (151 | ) | | | (60,183 | ) | | | (58 | ) | | | (71,303 | ) |
FINANCING ACTIVITIES: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net cash provided (used) By financing activities | | | 18,465 | | | | (62,389 | ) | | | (119 | ) | | | — | | | | (44,043 | ) | | | (9,239 | ) | | | (78,826 | ) | | | (235 | ) | | | — | | | | (88,300 | ) |
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Net increase (decrease) in Cash | | | (37,358 | ) | | | — | | | | 849 | | | | (3,867 | ) | | | (40,376 | ) | | | (14,842 | ) | | | — | | | | 944 | | | | 22 | | | | (13,876 | ) |
Cash and cash equivalents at January 1 | | | 60,038 | | | | — | | | | 147 | | | | 6,705 | | | | 66,890 | | | | 37,522 | | | | — | | | | 52 | | | | 2,816 | | | | 40,390 | |
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Cash and cash equivalents at June 30 | | $ | 22,680 | | | $ | — | | | $ | 996 | | | $ | 2,838 | | | $ | 26,514 | | | $ | 22,680 | | | $ | — | | | $ | 996 | | | $ | 2,838 | | | $ | 26,514 | |
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| | Nine months ended September 30, 2002
| |
| | Airborne Express, Inc.
| | | Airborne Inc.
| | | Guarantors
| | | Non- guarantors
| | | Consolidated
| |
| | (in thousands) | |
Net earnings (loss) | | $ | 4,496 | | | $ | (677 | ) | | $ | (3,094 | ) | | $ | 1,942 | | | $ | 2,667 | |
Adjustments to reconcile net earnings to net cash provided by operating activities: | | | | | | | | | | | | | | | | | | | | |
Non-cash operating activities | | | 140,810 | | | | (219,779 | ) | | | 110,806 | | | | 99,758 | | | | 131,595 | |
Change in current assets and liabilities | | | 940 | | | | 72,736 | | | | (40,929 | ) | | | (108,462 | ) | | | (75,715 | ) |
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Net cash provided (used) by operating activities | | | 146,246 | | | | (147,720 | ) | | | 66,783 | | | | (6,762 | ) | | | 58,547 | |
INVESTING ACTIVITIES: | | | | | | | | | | | | | | | | | | | | |
Net cash provided (used) by investing activities | | | (1,937 | ) | | | — | | | | (62,489 | ) | | | (2 | ) | | | (64,428 | ) |
FINANCING ACTIVITIES: | | | | | | | | | | | | | | | | | | | | |
Net cash provided (used) by financing activities | | | (5,551 | ) | | | 147,720 | | | | (4,812 | ) | | | — | | | | 137,357 | |
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Net increase (decrease) in cash | | | 138,758 | | | | — | | | | (518 | ) | | | (6,764 | ) | | | 131,476 | |
Cash and cash equivalents at beginning of period | | | 191,629 | | | | — | | | | 607 | | | | 9,264 | | | | 201,500 | |
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Cash and cash equivalents at September 30, 2002 | | $ | 330,387 | | | $ | — | | | $ | 89 | | | $ | 2,500 | | | $ | 332,976 | |
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| | Nine months ended September 30, 2001
| |
| | Airborne Express, Inc.
| | | Airborne Inc.
| | | Guarantors
| | | Non- guarantors
| | | Consolidated
| |
| | (in thousands) | |
OPERATING ACTIVITIES: | | | | | | | | | | | | | | | | | | | | |
Net earnings (loss) | | $ | (48,381 | ) | | $ | 18,502 | | | $ | 4,944 | | | $ | 3,292 | | | $ | (21,643 | ) |
Adjustments to reconcile net earnings to net cash provided by operating activities: | | | | | | | | | | | | | | | | | | | | |
Non-cash operating activities | | | (3,216 | ) | | | 176 | | | | 158,995 | | | | (430 | ) | | | 155,525 | |
Change in current assets and liabilities | | | 186,246 | | | | 60,351 | | | | (188,582 | ) | | | (3,133 | ) | | | 54,882 | |
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Net cash provided (used) by operating activities | | | 134,649 | | | | 79,029 | | | | (24,643 | ) | | | (271 | ) | | | 188,764 | |
INVESTING ACTIVITIES: | | | | | | | | | | | | | | | | | | | | |
Net cash used by investing activities | | | (8,372 | ) | | | (157 | ) | | | (76,925 | ) | | | (77 | ) | | | (85,531 | ) |
FINANCING ACTIVITIES: | | | | | | | | | | | | | | | | | | | | |
Net cash provided (used) by financing activities | | | (28,167 | ) | | | (78,872 | ) | | | 102,523 | | | | — | | | | (4,516 | ) |
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Net increase (decrease) in cash | | | 98,110 | | | | — | | | | 955 | | | | (348 | ) | | | 98,717 | |
Cash and cash equivalents at beginning of period | | | 37,523 | | | | — | | | | 51 | | | | 2,816 | | | | 40,390 | |
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Cash and cash equivalents at September 30, 2001 | | $ | 135,633 | | | $ | — | | | $ | 1,006 | | | $ | 2,468 | | | $ | 139,107 | |
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13
NOTE K—M—SUPPLEMENTAL GUARANTOR INFORMATION—CONVERTIBLE SENIOR NOTES
On March 25, 2002, the Company issued $150 million of 5.75% Convertible Senior Notes due April 2007 (“Notes”). In connection with the issuance of these Notes, the Company and certain subsidiaries (collectively, “Guarantors”) have fully and unconditionally guaranteed, on a joint and several basis, the obligations to pay principal, premium, if any, and interest with respect to the Notes. The Guarantors are AEI, ABX, SKY, WAP, FTZ, Aviation Fuel, Inc. (“AFI”) and Sound Suppression, Inc. (“SSI”). AEI provides domestic and international delivery services in addition to performing customer service, sales and marketing activities. AFI purchases and sells aviation and other fuels. SSI retrofits company aircraft with hush kits to meet noise regulations. A description of the operating activities of the other guarantors and their relationship to the Company is contained in Note J.L. Note L also contains a description of the intercompany loan and dividend restrictions that apply to the Company and its subsidiaries.
14
The following are consolidating condensed statements of operations of the Company for the three month and nine month periods ended September 30, 2002 and 2001, the consolidating condensed balance sheets of the Company as of JuneSeptember 30, 2002 and December 31, 2001, and the related consolidating condensed statements of operations and cash flows for the three months and six monthsnine month periods ended JuneSeptember 30, 2002 and June 30, 2001, respectively.2001. A description regarding the basis of presenting these statements is contained in Note I.L.
Statement of Operations Information:
| | Three months ended June 30, 2002
| | | Six months ended June 30, 2002
| | | Three months ended September 30, 2002
| | | Nine months ended September 30, 2002
| |
| | Airborne, Inc.
| | | Guarantors
| | | Non- guarantors
| | | Consolidated
| | | Airborne, Inc.
| | | Guarantors
| | | Non- guarantors
| | | Consolidated
| | | Airborne, Inc.
| | | Guarantors
| | | Non- guarantors
| | Consolidated
| | | Airborne, Inc.
| | | Guarantors
| | | Non- guarantors
| | Consolidated
| |
| | (in thousands) | | | (in thousands) | | | (in thousands) | | | (in thousands) | |
Revenues | | $ | — | | | $ | 810,451 | | | $ | — | | | $ | 810,451 | | | $ | — | | | $ | 1,598,971 | | | $ | — | | | $ | 1,598,971 | | | $ | — | | | $ | 842,761 | | | $ | — | | $ | 842,761 | | | $ | — | | | $ | 2,441,732 | | | $ | — | | $ | 2,441,732 | |
Operating expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Transportation purchased | | | — | | | | 267,368 | | | | — | | | | 267,368 | | | | — | | | | 516,399 | | | | — | | | | 516,399 | | | | — | | | | 285,455 | | | | — | | | 285,455 | | | | — | | | | 801,853 | | | | — | | | 801,853 | |
Station and ground operations | | | — | | | | 265,957 | | | | — | | | | 265,957 | | | | — | | | | 530,076 | | | | — | | | | 530,076 | | | | — | | | | 282,301 | | | | — | | | 282,301 | | | | — | | | | 812,378 | | | | — | | | 812,378 | |
Flight operations and maintenance | | | — | | | | 132,531 | | | | — | | | | 132,531 | | | | — | | | | 257,897 | | | | — | | | | 257,897 | | | | — | | | | 134,886 | | | | — | | | 134,886 | | | | — | | | | 392,783 | | | | — | | | 392,783 | |
General and administrative | | | 518 | | | | 64,719 | | | | — | | | | 65,237 | | | | 789 | | | | 127,862 | | | | — | | | | 128,651 | | | | 252 | | | | 64,074 | | | | — | | | 64,326 | | | | 1,041 | | | | 191,936 | | | | — | | | 192,977 | |
Sales and marketing | | | — | | | | 23,492 | | | | — | | | | 23,492 | | | | — | | | | 45,768 | | | | — | | | | 45,768 | | | | — | | | | 22,862 | | | | — | | | 22,862 | | | | — | | | | 68,630 | | | | — | | | 68,630 | |
Depreciation and amortization | | | — | | | | 46,731 | | | | — | | | | 46,731 | | | | — | | | | 95,852 | | | | — | | | | 95,852 | | | | — | | | | 49,547 | | | | — | | | 49,547 | | | | — | | | | 145,399 | | | | — | | | 145,399 | |
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| | | 518 | | | | 800,798 | | | | — | | | | 801,316 | | | | 789 | | | | 1,573,854 | | | | — | | | | 1,574,643 | | | | 252 | | | | 839,125 | | | | — | | | 839,377 | | | | 1,041 | | | | 2,412,979 | | | | — | | | 2,414,020 | |
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Earnings (loss) from operations | | | (518 | ) | | | 9,653 | | | | — | | | | 9,135 | | | | (789 | ) | | | 25,117 | | | | — | | | | 24,328 | | | | (252 | ) | | | 3,636 | | | | — | | | 3,384 | | | | (1,041 | ) | | | 28,753 | | | | — | | | 27,712 | |
Other income (expense): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest, net | | | 175 | | | | (7,660 | ) | | | — | | | | (7,485 | ) | | | — | | | | (14,356 | ) | | | — | | | | (14,356 | ) | |
Discounts on sales of receivables | | | — | | | | (1,002 | ) | | | 117 | | | | (885 | ) | | | — | | | | (1,967 | ) | | | (223 | ) | | | (2,190 | ) | |
Interest income | | | | — | | | | 1,458 | | | | — | | | 1,458 | | | | — | | | | 3,772 | | | | — | | | 3,772 | |
Interest expense | | | | — | | | | (9,108 | ) | | | — | | | (9,108 | ) | | | — | | | | (25,778 | ) | | | — | | | (25,778 | ) |
Discount on sales of receivables | | | | — | | | | (989 | ) | | | 251 | | | (738 | ) | | | — | | | | (2,956 | ) | | | 28 | | | (2,928 | ) |
Other | | | — | | | | 407 | | | | — | | | | 407 | | | | — | | | | 2,303 | | | | — | | | | 2,303 | | | | — | | | | 196 | | | | — | | | 196 | | | | — | | | | 2,499 | | | | — | | | 2,499 | |
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Earnings (loss) before income taxes | | | (343 | ) | | | 1,398 | | | | 117 | | | | 1,172 | | | | (789 | ) | | | 11,097 | | | | (223 | ) | | | 10,085 | | | | (252 | ) | | | (4,807 | ) | | | 251 | | | (4,808 | ) | | | (1,041 | ) | | | 6,290 | | | | 28 | | | 5,277 | |
Income tax (expense) benefit | | | 120 | | | | (794 | ) | | | (41 | ) | | | (715 | ) | | | 276 | | | | (4,714 | ) | | | 78 | | | | (4,360 | ) | |
Income tax expense (benefit) | | | | (88 | ) | | | (1,750 | ) | | | 88 | | | (1,750 | ) | | | (364 | ) | | | 2,964 | | | | 10 | | | 2,610 | |
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Net earnings (loss) | | $ | (223 | ) | | $ | 604 | | | $ | 76 | | | $ | 457 | | | $ | (513 | ) | | $ | 6,383 | | | $ | (145 | ) | | $ | 5,725 | | | $ | (164 | ) | | $ | (3,057 | ) | | $ | 163 | | $ | (3,058 | ) | | $ | (677 | ) | | $ | 3,326 | | | $ | 18 | | $ | 2,667 | |
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14
| | Three months ended June 30, 2001
| | | Six months ended June 30, 2001
| | | Three months ended September 30, 2001
| | | Nine months ended September 30, 2001
| |
| | Airborne, Inc.
| | | Guarantors
| | | Non-guarantors
| | | Consolidated
| | | Airborne, Inc.
| | | Guarantors
| | | Non-guarantors
| | | Consolidated
| | | Airborne, Inc.
| | | Guarantors
| | | Non- guarantors
| | Consolidated
| | | Airborne, Inc.
| | | Guarantors
| | | Non- guarantors
| | Consolidated
| |
| | (in thousands) | | | (in thousands) | | | (in thousands) | | | (in thousands) | |
Revenues | | $ | — | | | $ | 812,225 | | | $ | — | | | $ | 812,225 | | | $ | — | | | $ | 1,635,746 | | | $ | — | | | $ | 1,635,746 | | | $ | — | | | $ | 772,788 | | | $ | — | | $ | 772,788 | | | $ | — | | | $ | 2,408,534 | | | $ | — | | $ | 2,408,534 | |
Operating expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Transportation purchased | | | — | | | | 266,085 | | | | — | | | | 266,085 | | | | — | | | | 533,124 | | | | — | | | | 533,124 | | | | — | | | | 254,080 | | | | — | | | 254,080 | | | | — | | | | 787,204 | | | | — | | | 787,204 | |
Station and ground operations | | | — | | | | 264,780 | | | | — | | | | 264,780 | | | | — | | | | 545,154 | | | | — | | | | 545,154 | | | | — | | | | 257,326 | | | | — | | | 257,326 | | | | — | | | | 802,480 | | | | — | | | 802,480 | |
Flight operations and maintenance | | | — | | | | 143,686 | | | | — | | | | 143,686 | | | | — | | | | 295,372 | | | | — | | | | 295,372 | | | | — | | | | 133,286 | | | | — | | | 133,286 | | | | — | | | | 428,658 | | | | — | | | 428,658 | |
General and administrative | | | 228 | | | | 66,593 | | | | — | | | | 66,821 | | | | 447 | | | | 132,441 | | | | — | | | | 132,888 | | | | 125 | | | | 61,004 | | | | — | | | 61,129 | | | | 572 | | | | 193,445 | | | | — | | | 194,017 | |
Sales and marketing | | | — | | | | 23,329 | | | | — | | | | 23,329 | | | | — | | | | 47,331 | | | | — | | | | 47,331 | | | | — | | | | 21,689 | | | | — | | | 21,689 | | | | — | | | | 69,020 | | | | — | | | 69,020 | |
Depreciation and amortization | | | 150 | | | | 52,534 | | | | — | | | | 52,684 | | | | 150 | | | | 105,172 | | | | — | | | | 105,322 | | | | 7 | | | | 51,648 | | | | — | | | 51,655 | | | | 157 | | | | 156,820 | | | | — | | | 156,977 | |
Federal legislation compensation | | | | — | | | | (7,800 | ) | | | — | | | (7,800 | ) | | | — | | | | (7,800 | ) | | | — | | | (7,800 | ) |
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| | | 378 | | | | 817,007 | | | | — | | | | 817,385 | | | | 597 | | | | 1,658,594 | | | | — | | | | 1,659,191 | | | | 132 | | | | 771,233 | | | | — | | | 771,365 | | | | 729 | | | | 2,429,827 | | | | — | | | 2,430,556 | |
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Loss from operations | | | (378 | ) | | | (4,782 | ) | | | — | | | | (5,160 | ) | | | (597 | ) | | | (22,848 | ) | | | — | | | | (23,445 | ) | |
Earnings (loss) from operations | | | | (132 | ) | | | 1,555 | | | | — | | | 1,423 | | | | (729 | ) | | | (21,293 | ) | | | — | | | (22,022 | ) |
Other income (expense): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest, net | | | (585 | ) | | | (3,869 | ) | | | — | | | | (4,454 | ) | | | 18,424 | | | | (27,375 | ) | | | — | | | | (8,951 | ) | |
Discounts on sales of receivables | | | — | | | | (3,170 | ) | | | 941 | | | | (2,229 | ) | | | — | | | | (7,514 | ) | | | 1,527 | | | | (5,987 | ) | |
Interest income | | | | — | | | | 560 | | | | — | | | 560 | | | | — | | | | 879 | | | | — | | | 879 | |
Interest expense | | | | — | | | | (5,484 | ) | | | — | | | (5,484 | ) | | | (1,576 | ) | | | (13,178 | ) | | | — | | | (14,754 | ) |
Dividend income | | | | — | | | | — | | | | — | | | — | | | | 20,000 | | | | (20,000 | ) | | | — | | | — | |
Discount on sales of receivables | | | | — | | | | (2,537 | ) | | | 530 | | | (2,007 | ) | | | — | | | | (10,050 | ) | | | 2,057 | | | (7,993 | ) |
Other | | | — | | | | 2,304 | | | | — | | | | 2,304 | | | | — | | | | 2,577 | | | | — | | | | 2,577 | | | | — | | | | 8,779 | | | | — | | | 8,779 | | | | — | | | | 11,355 | | | | — | | | 11,355 | |
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Earnings (loss) before income taxes | | | (963 | ) | | | (9,517 | ) | | | 941 | | | | (9,539 | ) | | | 17,827 | | | | (55,160 | ) | | | 1,527 | | | | (35,806 | ) | | | (132 | ) | | | 2,873 | | | | 530 | | | 3,271 | | | | 17,695 | | | | (52,287 | ) | | | 2,057 | | | (32,535 | ) |
Income tax (expense) benefit | | | 337 | | | | 3,171 | | | | (330 | ) | | | 3,178 | | | | 761 | | | | 12,224 | | | | (535 | ) | | | 12,450 | | |
Income tax expense (benefit) | | | | (46 | ) | | | 1,419 | | | | 185 | | | 1,558 | | | | (807 | ) | | | (10,805 | ) | | | 720 | | | (10,892 | ) |
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Net earnings (loss) | | $ | (626 | ) | | $ | (6,346 | ) | | $ | 611 | | | $ | (6,361 | ) | | $ | 18,588 | | | $ | (42,936 | ) | | $ | 992 | | | $ | (23,356 | ) | | $ | (86 | ) | | $ | 1,454 | | | $ | 345 | | $ | 1,713 | | | $ | 18,502 | | | $ | (41,482 | ) | | $ | 1,337 | | $ | (21,643 | ) |
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15
Balance Sheet Information:
June 30, 2002
| | Airborne, Inc.
| | | Guarantors
| | | Non- guarantors
| | Elimination
| | | Consolidated
| | |
September 30, 2002
| | | Airborne, Inc.
| | | Guarantors
| | | Non- guarantors
| | | Elimination
| | | Consolidated
| |
| | | | | (in thousands) | | | | | | | | (in thousands) | |
ASSETS | | | | | | | | | | | | | | | | | | | | |
Current Assets: | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | — | | | $ | 336,982 | | | $ | 1,081 | | $ | — | | | $ | 338,063 | | | $ | — | | | $ | 330,422 | | | $ | 2,554 | | | $ | — | | | $ | 332,976 | |
Trade accounts receivable, less allowance | | | — | | | | 30,126 | | | | 194,196 | | | — | | | | 224,322 | | | | — | | | | 29,814 | | | | 225,126 | | | | — | | | | 254,940 | |
Spare parts and fuel inventory | | | — | | | | 37,085 | | | | — | | | — | | | | 37,085 | | | | — | | | | 36,972 | | | | — | | | | — | | | | 36,972 | |
Refundable income taxes | | | — | | | | 517 | | | | — | | | — | | | | 517 | | | | — | | | | 2,739 | | | | — | | | | — | | | | 2,739 | |
Deferred income tax assets | | | — | | | | 30,929 | | | | — | | | — | | | | 30,929 | | | | — | | | | 33,967 | | | | — | | | | — | | | | 33,967 | |
Prepaid expenses and other | | | — | | | | 33,173 | | | | 323 | | | — | | | | 33,496 | | | | — | | | | 30,987 | | | | 275 | | | | — | | | | 31,262 | |
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Total current assets | | | — | | | | 468,812 | | | | 195,600 | | | — | | | | 664,412 | | | | — | | | | 464,901 | | | | 227,955 | | | | — | | | | 692,856 | |
| Property and equipment, net | | | — | | | | 1,214,131 | | | | — | | | — | | | | 1,214,131 | | | | — | | | | 1,186,703 | | | | — | | | | — | | | | 1,186,703 | |
Intercompany advances | | | 348,841 | | | | (355 | ) | | | 20,950 | | | (369,436 | ) | | | — | | | | 234,387 | | | | (354 | ) | | | (11,255 | ) | | | (222,778 | ) | | | — | |
Equipment deposits and other assets | | | 110,948 | | | | 41,587 | | | | — | | | (100,111 | ) | | | 52,424 | | | | 225,742 | | | | 29,319 | | | | — | | | | (215,111 | ) | | | 39,950 | |
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| Total assets | | $ | 459,789 | | | $ | 1,724,175 | | | $ | 216,550 | | $ | (469,547 | ) | | $ | 1,930,967 | | | $ | 460,129 | | | $ | 1,680,569 | | | $ | 216,700 | | | $ | (437,889 | ) | | $ | 1,919,509 | |
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|
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | | | | | | | | | | | |
Current Liabilities: | | | | | | | | | | | | | | | | | | | | |
Accounts payable | | $ | — | | | $ | 139,019 | | | $ | — | | $ | (235 | ) | | $ | 138,784 | | | $ | — | | | $ | 147,898 | | | $ | — | | | $ | (180 | ) | | $ | 147,718 | |
Salaries, wages and related taxes | | | — | | | | 81,233 | | | | — | | | — | | | | 81,233 | | | | — | | | | 93,141 | | | | — | | | | — | | | | 93,141 | |
Accrued expenses | | | 2,325 | | | | 146,343 | | | | 310 | | | — | | | | 148,978 | | | | 4,479 | | | | 128,961 | | | | 297 | | | | — | | | | 133,737 | |
Current portion of debt | | | — | | | | 108,173 | | | | — | | | — | | | | 108,173 | | |
Current portion of long-term obligations | | | | — | | | | 109,691 | | | | — | | | | — | | | | 109,691 | |
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Total current liabilities | | | 2,325 | | | | 474,768 | | | | 310 | | | (235 | ) | | | 477,168 | | | | 4,479 | | | | 479,691 | | | | 297 | | | | (180 | ) | | | 484,287 | |
| Long-term debt | | | 150,000 | | | | 216,387 | | | | — | | | — | | | | 366,387 | | |
Long-term obligations | | | | 150,000 | | | | 221,167 | | | | — | | | | — | | | | 371,167 | |
Intercompany liabilities | | | — | | | | 254,200 | | | | — | | | (254,200 | ) | | | — | | | | — | | | | 222,597 | | | | — | | | | (222,597 | ) | | | — | |
Deferred income tax liabilities | | | — | | | | 144,717 | | | | — | | | — | | | | 144,717 | | | | — | | | | 146,555 | | | | — | | | | — | | | | 146,555 | |
Post retirement liabilities | | | — | | | | 66,964 | | | | — | | | — | | | | 66,964 | | | | — | | | | 38,529 | | | | — | | | | — | | | | 38,529 | |
Other liabilities | | | — | | | | 38,816 | | | | — | | | — | | | | 38,816 | | | | — | | | | 49,283 | | | | — | | | | — | | | | 49,283 | |
Shareholders’ equity: | | | | | | | | | | | | | | | | | | | | |
Common stock | | | 51,631 | | | | 102 | | | | 10 | | | (112 | ) | | | 51,631 | | | | 51,658 | | | | 102 | | | | 10 | | | | (112 | ) | | | 51,658 | |
Additional paid-in capital | | | 308,553 | | | | — | | | | 215,000 | | | (215,000 | ) | | | 308,553 | | | | 308,812 | | | | — | | | | 215,000 | | | | (215,000 | ) | | | 308,812 | |
Retained earnings | | | 7,138 | | | | 533,795 | | | | 1,230 | | | — | | | | 542,163 | | | | 5,038 | | | | 530,738 | | | | 1,393 | | | | — | | | | 537,169 | |
Accumulated other comprehensive income | | | — | | | | (5,574 | ) | | | — | | | — | | | | (5,574 | ) | |
Accumulated other comprehensive loss | | | | — | | | | (8,093 | ) | | | — | | | | — | | | | (8,093 | ) |
Treasury stock | | | (59,858 | ) | | | — | | | | — | | | — | | | | (59,858 | ) | | | (59,858 | ) | | | — | | | | — | | | | — | | | | (59,858 | ) |
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Total shareholders’ equity | | | 307,464 | | | | 528,323 | | | | 216,240 | | | (215,112 | ) | | | 836,915 | | | | 305,650 | | | | 522,747 | | | | 216,403 | | | | (215,112 | ) | | | 829,688 | |
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| Total liabilities and shareholders’ equity | | $ | 459,789 | | | $ | 1,724,175 | | | $ | 216,550 | | $ | (469,547 | ) | | $ | 1,930,967 | | | $ | 460,129 | | | $ | 1,680,569 | | | $ | 216,700 | | | $ | (437,889 | ) | | $ | 1,919,509 | |
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16
Balance Sheet Information: | | | | | | | | | | | | | | |
December 31, 2001
| | Airborne, Inc.
| | | Guarantors
| | | Non- guarantors
| | Elimination
| | | Consolidated
| |
| | | | | (in thousands) | | | | | | |
ASSETS | | | | | | | | | | | | | | | | | | | |
Current Assets: | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | — | | | $ | 191,664 | | | $ | 9,836 | | $ | — | | | $ | 201,500 | |
Accounts receivable | | | — | | | | 28,763 | | | | 97,277 | | | — | | | | 126,040 | |
Spare parts and fuel inventory | | | — | | | | 38,413 | | | | — | | | — | | | | 38,413 | |
Refundable income taxes | | | — | | | | 27,161 | | | | — | | | — | | | | 27,161 | |
Deferred income tax assets | | | — | | | | 30,572 | | | | — | | | — | | | | 30,572 | |
Prepaid expenses and other | | | — | | | | 27,619 | | | | 402 | | | — | | | | 28,021 | |
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|
|
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|
|
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|
| |
|
|
| |
|
|
|
Total current assets | | | — | | | | 344,192 | | | | 107,515 | | | — | | | | 451,707 | |
Property and equipment, net | | | — | | | | 1,247,373 | | | | — | | | — | | | | 1,247,373 | |
Intercompany advances | | | 302,279 | | | | 452 | | | | 9,487 | | | (312,218 | ) | | | — | |
Equipment deposits and other assets | | | 5,963 | | | | 41,912 | | | | — | | | (111 | ) | | | 47,764 | |
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|
|
| |
|
|
| |
|
| |
|
|
| |
|
|
|
Total assets | | $ | 308,242 | | | $ | 1,633,929 | | | $ | 117,002 | | $ | (312,329 | ) | | $ | 1,746,844 | |
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|
|
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|
|
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|
| |
|
|
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|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | | | | | | | | | | |
Current Liabilities: | | | | | | | | | | | | | | | | | | | |
Accounts payable | | $ | — | | | $ | 142,497 | | | $ | — | | $ | (624 | ) | | $ | 141,873 | |
Salaries, wages and related taxes | | | — | | | | 75,458 | | | | — | | | — | | | | 75,458 | |
Accrued expenses | | | — | | | | 145,380 | | | | 617 | | | — | | | | 145,997 | |
Current portion of debt | | | — | | | | 107,410 | | | | — | | | — | | | | 107,410 | |
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|
|
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|
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|
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|
|
| |
|
|
|
Total current liabilities | | | — | | | | 470,745 | | | | 617 | | | (624 | ) | | | 470,738 | |
Long-term debt | | | — | | | | 218,053 | | | | — | | | — | | | | 218,053 | |
Intercompany liabilities | | | — | | | | 196,593 | | | | — | | | (196,593 | ) | | | — | |
Deferred income tax liabilities | | | — | | | | 143,526 | | | | — | | | — | | | | 143,526 | |
Post retirement liabilities | | | — | | | | 39,423 | | | | — | | | — | | | | 39,423 | |
Other liabilities | | | — | | | | 40,888 | | | | — | | | — | | | | 40,888 | |
Shareholders’ equity: | | | | | | | | | | | | | | | | | | | |
Common stock | | | 51,376 | | | | 102 | | | | 10 | | | (112 | ) | | | 51,376 | |
Additional paid-in capital | | | 304,976 | | | | 8 | | | | 115,000 | | | (115,000 | ) | | | 304,984 | |
Retained earnings | | | 11,758 | | | | 527,411 | | | | 1,375 | | | — | | | | 540,544 | |
Accumulated other comprehensive income | | | — | | | | (2,820 | ) | | | — | | | — | | | | (2,820 | ) |
Treasury stock | | | (59,868 | ) | | | — | | | | — | | | — | | | | (59,868 | ) |
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|
|
| |
|
|
| |
|
| |
|
|
| |
|
|
|
Total shareholders’ equity | | | 308,242 | | | | 524,701 | | | | 116,385 | | | (115,112 | ) | | | 834,216 | |
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|
|
| |
|
|
| |
|
| |
|
|
| |
|
|
|
Total liabilities and shareholders’ equity | | $ | 308,242 | | | $ | 1,633,929 | | | $ | 117,002 | | $ | (312,329 | ) | | $ | 1,746,844 | |
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|
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|
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|
|
|
Balance Sheet Information:December 31, 2001
| | Airborne, Inc.
| | | Guarantors
| | | Non- guarantors
| | Elimination
| | | Consolidated
| |
| | (in thousands) | |
ASSETS | | | | | | | | | | | | | | | | | | | |
Current Assets: | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | — | | | $ | 191,664 | | | $ | 9,836 | | $ | — | | | $ | 201,500 | |
Trade accounts receivable, less allowance | | | — | | | | 28,763 | | | | 97,277 | | | — | | | | 126,040 | |
Spare parts and fuel inventory | | | — | | | | 38,413 | | | | — | | | — | | | | 38,413 | |
Refundable income taxes | | | — | | | | 27,161 | | | | — | | | — | | | | 27,161 | |
Deferred income tax assets | | | — | | | | 30,572 | | | | — | | | — | | | | 30,572 | |
Prepaid expenses and other | | | — | | | | 27,619 | | | | 402 | | | — | | | | 28,021 | |
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|
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|
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|
|
|
Total current assets | | | — | | | | 344,192 | | | | 107,515 | | | — | | | | 451,707 | |
Property and equipment, net | | | — | | | | 1,247,373 | | | | — | | | — | | | | 1,247,373 | |
Intercompany advances | | | 302,279 | | | | (114,548 | ) | | | 9,487 | | | (197,218 | ) | | | — | |
Equipment deposits and other assets | | | 5,963 | | | | 156,912 | | | | — | | | (115,111 | ) | | | 47,764 | |
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|
|
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|
|
| |
|
| |
|
|
| |
|
|
|
Total assets | | $ | 308,242 | | | $ | 1,633,929 | | | $ | 117,002 | | $ | (312,329 | ) | | $ | 1,746,844 | |
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|
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|
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|
|
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|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | | | | | | | | | | |
Current Liabilities: | | | | | | | | | | | | | | | | | | | |
Accounts payable | | $ | — | | | $ | 142,497 | | | $ | — | | $ | (624 | ) | | $ | 141,873 | |
Salaries, wages and related taxes | | | — | | | | 75,458 | | | | — | | | — | | | | 75,458 | |
Accrued expenses | | | — | | | | 145,380 | | | | 617 | | | — | | | | 145,997 | |
Current portion of long-term obligations | | | — | | | | 107,410 | | | | — | | | — | | | | 107,410 | |
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|
|
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|
|
| |
|
| |
|
|
| |
|
|
|
Total current liabilities | | | — | | | | 470,745 | | | | 617 | | | (624 | ) | | | 470,738 | |
Long-term obligations | | | — | | | | 218,053 | | | | — | | | — | | | | 218,053 | |
Intercompany liabilities | | | — | | | | 196,593 | | | | — | | | (196,593 | ) | | | — | |
Deferred income tax liabilities | | | — | | | | 143,526 | | | | — | | | — | | | | 143,526 | |
Post retirement liabilities | | | — | | | | 39,423 | | | | — | | | — | | | | 39,423 | |
Other liabilities | | | — | | | | 40,888 | | | | — | | | — | | | | 40,888 | |
Shareholders’ equity: | | | | | | | | | | | | | | | | | | | |
Common stock | | | 51,376 | | | | 102 | | | | 10 | | | (112 | ) | | | 51,376 | |
Additional paid-in capital | | | 304,976 | | | | 8 | | | | 115,000 | | | (115,000 | ) | | | 304,984 | |
Retained earnings | | | 11,758 | | | | 527,411 | | | | 1,375 | | | — | | | | 540,544 | |
Accumulated other comprehensive loss | | | — | | | | (2,820 | ) | | | — | | | — | | | | (2,820 | ) |
Treasury stock | | | (59,868 | ) | | | — | | | | — | | | — | | | | (59,868 | ) |
| |
|
|
| |
|
|
| |
|
| |
|
|
| |
|
|
|
Total shareholders’ equity | | | 308,242 | | | | 524,701 | | | | 116,385 | | | (115,112 | ) | | | 834,216 | |
| |
|
|
| |
|
|
| |
|
| |
|
|
| |
|
|
|
Total liabilities and shareholders’ equity | | $ | 308,242 | | | $ | 1,633,929 | | | $ | 117,002 | | $ | (312,329 | ) | | $ | 1,746,844 | |
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|
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|
|
| |
|
|
|
17
Statement of Cash Flows Information: | | |
| | Three months ended June 30, 2002
| | | Six months ended June 30, 2002
| | | Nine months ended September 30, 2002
| |
| | Airborne, Inc.
| | | Guarantors
| | | Non- guarantors
| | | Consolidated
| | | Airborne, Inc.
| | | Guarantors
| | | Non- guarantors
| | | Consolidated
| | | Airborne, Inc.
| | | Guarantors
| | | Non- guarantors
| | | Consolidated
| |
| | (in thousands) | | | (in thousands) | | | (in thousands) | |
OPERATING ACTIVITIES: | | | | | | | | | | | | | | | | | | | | | | | | |
Net earnings (loss) | | $ | (223 | ) | | $ | 604 | | | $ | 76 | | | $ | 457 | | | $ | (513 | ) | | $ | 6,383 | | | $ | (145 | ) | | $ | 5,725 | | | $ | (677 | ) | | $ | 3,326 | | | $ | 18 | | | $ | 2,667 | |
Adjustments to reconcile net earnings to net cash provided by operating activities: | | | | | | | | | | | | | | | | | | | | | | | | |
Non-cash operating activities | | | (99,934 | ) | | | 56,237 | | | | 100,041 | | | | 56,344 | | | | (104,985 | ) | | | 121,527 | | | | 99,922 | | | | 116,464 | | | | (219,779 | ) | | | 251,364 | | | | 100,010 | | | | 131,595 | |
Change in current assets and liabilities | | | 101,030 | | | | (76,181 | ) | | | (100,696 | ) | | | (75,847 | ) | | | (43,962 | ) | | | 86,379 | | | | (108,532 | ) | | | (66,115 | ) | | | 72,736 | | | | (41,141 | ) | | | (107,310 | ) | | | (75,715 | ) |
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Net cash provided (used) by operating activities | | | 873 | | | | (19,340 | ) | | | (579 | ) | | | (19,046 | ) | | | (149,460 | ) | | | 214,289 | | | | (8,755 | ) | | | 56,074 | | | | (147,720 | ) | | | 213,549 | | | | (7,282 | ) | | | 58,547 | |
INVESTING ACTIVITIES: | | | | | | | | | | | | | | | | | | | | | | | | |
Net cash used by investing activities | | | — | | | | (33,153 | ) | | | — | | | | (33,153 | ) | | | — | | | | (60,611 | ) | | | — | | | | (60,611 | ) | | | — | | | | (64,428 | ) | | | — | | | | (64,428 | ) |
FINANCING ACTIVITIES: | | | | | | | | | | | | | | | | | | | | | | | | |
Net cash provided (used) by financing activities | | | (873 | ) | | | (2,030 | ) | | | — | | | | (2,903 | ) | | | 149,460 | | | | (8,360 | ) | | | — | | | | 141,100 | | | | 147,720 | | | | (10,363 | ) | | | — | | | | 137,357 | |
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Net increase (decrease) in cash | | | — | | | | (54,523 | ) | | | (579 | ) | | | (55,102 | ) | | | — | | | | 145,318 | | | | (8,755 | ) | | | 136,563 | | | | — | | | | 138,758 | | | | (7,282 | ) | | | 131,476 | |
Cash and cash equivalents at January 1 | | | — | | | | 391,505 | | | | 1,660 | | | | 393,165 | | | | — | | | | 191,664 | | | | 9,836 | | | | 201,500 | | |
Cash and cash equivalents at beginning of period | | | | — | | | | 191,664 | | | | 9,836 | | | | 201,500 | |
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Cash and cash equivalents at June 30 | | $ | — | | | $ | 336,982 | | | $ | 1,081 | | | $ | 338,063 | | | $ | — | | | $ | 336,982 | | | $ | 1,081 | | | $ | 338,063 | | |
Cash and cash equivalents at September 30, 2002 | | | $ | — | | | $ | 330,422 | | | $ | 2,554 | | | $ | 332,976 | |
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| | Three months ended June 30, 2001
| | | Six months ended June 30, 2001
| | | Nine months ended September 30, 2001
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| | Airborne, Inc.
| | | Guarantors
| | | Non-guarantors
| | | Consolidated
| | | Airborne, Inc.
| | | Guarantors
| | | Non-guarantors
| | | Consolidated
| | | Airborne, Inc.
| | | Guarantors
| | | Non- guarantors
| | | Consolidated
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| | (in thousands) | | | (in thousands) | | | (in thousands) | |
OPERATING ACTIVITIES: | | | | | | | | | | | | | | | | | | | | | | | | |
Net earnings (loss) | | $ | (627 | ) | | $ | (6,346 | ) | | $ | 612 | | | $ | (6,361 | ) | | $ | 18,587 | | | $ | (42,936 | ) | | $ | 993 | | | $ | (23,356 | ) | | $ | 18,502 | | | $ | (41,482 | ) | | $ | 1,337 | | | $ | (21,643 | ) |
Adjustments to reconcile net earnings to net cash provided by operating activities: | | | | | | | | | | | | | | | | | | | | | | | | |
Non-cash operating activities | | | (1,104 | ) | | | 63,891 | | | | 329 | | | | 63,116 | | | | (1,260 | ) | | | 116,798 | | | | 535 | | | | 116,073 | | | | 175 | | | | 154,630 | | | | 720 | | | | 155,525 | |
Change in current assets and liabilities | | | 64,270 | | | | (66,983 | ) | | | (3,958 | ) | | | (6,671 | ) | | | 61,649 | | | | (9,620 | ) | | | 981 | | | | 53,010 | | | | 60,351 | | | | (5,583 | ) | | | 114 | | | | 54,882 | |
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Net cash provided (used) by operating activities | | | 62,539 | | | | (9,438 | ) | | | (3,017 | ) | | | 50,084 | | | | 78,976 | | | | 64,242 | | | | 2,509 | | | | 145,727 | | | | 79,028 | | | | 107,565 | | | | 2,171 | | | | 188,764 | |
INVESTING ACTIVITIES: | | | | | | | | | | | | | | | | | | | | | | | | |
Net cash used by investing activities | | | (150 | ) | | | (46,267 | ) | | | — | | | | (46,417 | ) | | | (150 | ) | | | (71,153 | ) | | | — | | | | (71,303 | ) | | | (156 | ) | | | (85,375 | ) | | | — | | | | (85,531 | ) |
FINANCING ACTIVITIES: | | | | | | | | | | | | | | | | | | | | | | | | |
Net cash provided (used) by financing activities | | | (62,389 | ) | | | 18,346 | | | | — | | | | (44,043 | ) | | | (78,826 | ) | | | (9,474 | ) | | | — | | | | (88,300 | ) | | | (78,872 | ) | | | 74,356 | | | | — | | | | (4,516 | ) |
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Net increase (decrease) in cash | | | — | | | | (37,359 | ) | | | (3,017 | ) | | | (40,376 | ) | | | — | | | | (16,385 | ) | | | 2,509 | | | | (13,876 | ) | | | — | | | | 96,546 | | | | 2,171 | | | | 98,717 | |
Cash and cash equivalents at January 1 | | | — | | | | 60,095 | | | | 6,795 | | | | 66,890 | | | | — | | | | 39,121 | | | | 1,269 | | | | 40,390 | | |
Cash and cash equivalents at beginning of period | | | | — | | | | 39,121 | | | | 1,269 | | | | 40,390 | |
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Cash and cash equivalents at June 30 | | $ | — | | | $ | 22,736 | | | $ | 3,778 | | | $ | 26,514 | | | $ | — | | | $ | 22,736 | | | $ | 3,778 | | | $ | 26,514 | | |
Cash and cash equivalents at September 30, 2001 | | | $ | — | | | $ | 135,667 | | | $ | 3,440 | | | $ | 139,107 | |
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18
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
RESULTS OF OPERATIONSResults Of Operations
We achieved improved operating performanceearnings in the secondthird quarter and first halfnine months of 2002 compared to the same periods in 2001. This progress can be attributed primarily to a reduction in operating expenses,higher domestic revenues resulting from the implementation of key strategicgrowth initiatives beginningthat began in 2001, including the expansion of our product line and the implementation of yield management actions.actions, and to improved productivity. This performance was accomplished despite a difficult economic environment that has hampered our core domestic air shipment and revenue growth. Ingrowth, cost pressures in certain corporate related expense areas, and the second quarterrecording of 2002, we continued to address our cost structurenon-recurring restructuring and made certain domestic and international operational realignments that are intended to further reduce operating costs.impairment charges.
We reported a net earningsloss in the secondthird quarter of 2002 of $.5$3.1 million or $.01$.06 per diluted share, including a non-recurring restructuring chargecharges of $2.3$4.0 million, or $1.4$2.4 million after tax, or $.03$.05 per share. This compares to a net lossearnings of $6.4$1.7 million or $.13$.04 per share in the secondthird quarter of 2002,2001, which included gains on the sale of radio frequencies of $1.4$5.4 million after tax or $.03$.11 per share and a non-recurring restructuring chargecompensation provided under the Air Transportation Safety and System Stabilization Act of $1.9 million or $.04 per share. Net earnings of $5.3 million or $.11 per share were recorded in the first quarter of 2002. The first quarter of 2002 included a non-recurring gain of $1.0$4.8 million after tax or $.02$.10 per share, from the sale of certain securities.share.
We reported net earnings for the first halfnine months of 2002 of $5.7$2.7 million or $.12$.05 per diluted share, including the previously mentioned $.03non-recurring charges of $3.9 million after tax or $.08 per share after tax restructuring charge and a non-recurring securities gain of $1.0 million after tax or $.02 per share. This compares to a net loss of $23.4$21.6 million or $.48$.45 per share in the first sixnine months of 2002 that2001, which included gains on the sale of radio frequency sale gainsfrequencies and securities of $.03$6.8 million after tax or $.14 per share, the previously mentioned federal compensation of $4.8 million after tax or $.10 per share and restructuring charges of $1.9 million or $.04 per share.
Non-recurring charges in the third quarter of 2002 included a $3.1 million impairment charge on an unscheduled retirement of a DC-8 aircraft. In late September 2002, a routine maintenance check on this aircraft revealed the need for extensive unanticipated repairs. We tookdecided to retire the aircraft from service rather than incur the additional maintenance costs. The non-cash impairment charge is associated with adjusting the aircraft’s net book value to its fair value, which is the equivalent of an estimated parts value. Additionally, we incurred $0.9 million in restructuring charges that were a result of the domestic and international operational realignment actions announced in the second quarter of 2002, to lower our cost structure through both domestic and international operational realignments. Collectively, these actions are anticipated to provide annual costs savingsfor which restructuring charges of between $12.0$2.3 million and $14.0 million or $3.0 to $3.5 million on a quarterly basis. We estimate these actions provided a $.9 million cost savingswere recorded in the second quarter of 2002 with the remaining quarterly savings of $2.0 to $2.5 million to be realized beginning in the third quarter of 2002. The domestic cost actions included the consolidation of a customer service call center and reducing certain categories of labor hours in our domestic station operations. We estimate these actions will provide between $8.0 million and $9.0 million of the total projected annual cost savings. Our international realignment included the integration of some of our separate U.S. international gateways into our domestic operations to leverage our labor, management and facilities infrastructure. Labor and other costs were also reduced in our offshore locations. These international changes are anticipated to provide annual savings of between $4.0 million and $5.0 million. To implement these realignments we incurred a $2.3 million non-recurring restructuring charge for employee severance and lease termination costs. Of the charge, $1.0 million was attributed to the domestic actions and $1.3 million was associated with the international changes. The charge was recorded as a component of general and administrative expense.
19
The following table is an overview of our shipments, revenue and weight trends for the periods indicated:
| | Three Months Ended June 30
| | | | | Six Months Ended June 30
| | | | | Three Months Ended September 30
| | Change
| | | Nine Months Ended September 30
| | Change
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| | 2002
| | 2001
| | Change
| | | 2002
| | 2001
| | Change
| | | 2002
| | 2001
| | 2002
| | 2001
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Shipments (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | |
Domestic | | | | | | | | | | | | | | | | | | | | | | | | |
Overnight | | 39,806 | | 44,139 | | (9.8 | %) | | 79,690 | | 89,757 | | (11.2 | %) | | | 40,219 | | | 40,425 | | (0.5 | %) | | | 119,975 | | | 130,263 | | (7.9 | %) |
Next Afternoon Service | | 12,999 | | 13,208 | | (1.6 | %) | | 26,184 | | 26,636 | | (1.7 | %) | | | 12,931 | | | 12,327 | | 4.9 | % | | | 39,116 | | | 38,963 | | 0.4 | % |
Second Day Service | | 17,421 | | 18,805 | | (7.4 | %) | | 35,726 | | 37,745 | | (5.3 | %) | | | 17,470 | | | 17,282 | | 1.1 | % | | | 53,233 | | | 55,073 | | (3.3 | %) |
Ground Delivery Service | | 8,824 | | 329 | | NM | | | 14,614 | | 329 | | NM | | | | 12,022 | | | 1,492 | | NM | | | | 26,638 | | | 1,821 | | NM | |
Airborne@home | | 4,991 | | 5,525 | | (9.7 | %) | | 10,857 | | 10,800 | | 0.5 | % | |
100 Lbs. and Over | | 55 | | 67 | | (17.9 | %) | | 106 | | 127 | | (16.5 | %) | |
airborne@home | | | | 7,032 | | | 4,747 | | 48.1 | % | | | 17,889 | | | 15,547 | | 15.1 | % |
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Total Domestic | | 84,096 | | 82,073 | | 2.5 | % | | 167,177 | | 165,394 | | 1.1 | % | | | 89,674 | | | 76,273 | | 17.6 | % | | | 256,851 | | | 241,667 | | 6.3 | % |
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International | | | | | | | | | | | | | | | | | | | | | | | | |
Express | | 1,431 | | 1,549 | | (7.6 | %) | | 2,761 | | 3,149 | | (12.3 | %) | | | 1,346 | | | 1,375 | | (2.1 | %) | | | 4,107 | | | 4,524 | | (9.2 | %) |
Freight | | 93 | | 102 | | (8.8 | %) | | 180 | | 204 | | (11.8 | %) | | | 91 | | | 95 | | (4.2 | %) | | | 271 | | | 299 | | (9.4 | %) |
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Total International | | 1,524 | | 1,651 | | (7.7 | %) | | 2,941 | | 3,353 | | (12.3 | %) | | | 1,437 | | | 1,470 | | (2.2 | %) | | | 4,378 | | | 4,823 | | (9.2 | %) |
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Total Shipments | | 85,620 | | 83,724 | | 2.3 | % | | 170,118 | | 168,747 | | 0.8 | % | | | 91,111 | | | 77,743 | | 17.2 | % | | | 261,229 | | | 246,490 | | 6.0 | % |
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Average Pounds per Shipment: | | | | | | | | | | | | | |
Domestic | | | | 5.06 | | | 4.24 | | 19.3 | % | | | 4.75 | | | 4.17 | | 13.9 | % |
International | | | | 62.23 | | | 60.55 | | 2.8 | % | | | 58.96 | | | 55.03 | | 7.1 | % |
Average Revenue per Pound: | | | | | | | | | | | | | |
Domestic | | | $ | 1.62 | | $ | 2.04 | | (20.6 | %) | | $ | 1.75 | | $ | 2.06 | | (15.0 | %) |
International | | | $ | 1.01 | | $ | 0.99 | | 2.0 | % | | $ | 0.98 | | $ | 1.02 | | (3.9 | %) |
Average Revenue per Shipment | | | | | | | | | | | | | |
Domestic | | | $ | 8.32 | | $ | 8.87 | | (6.2 | %) | | $ | 8.45 | | $ | 8.76 | | (3.5 | %) |
International | | | $ | 65.52 | | $ | 61.41 | | 6.7 | % | | $ | 59.65 | | $ | 57.16 | | 4.4 | % |
1920
Average Pounds per Shipment: | | | | | | | | | | | | | | | | | | |
Domestic | | | 4.72 | | | 4.14 | | 14.0 | % | | | 4.58 | | | 4.14 | | 10.6 | % |
International | | | 59.19 | | | 53.32 | | 11.0 | % | | | 58.35 | | | 52.61 | | 9.0 | % |
Average Revenue per Pound: | | | | | | | | | | | | | | | | | | |
Domestic | | $ | 1.77 | | $ | 2.07 | | (14.5 | %) | | $ | 1.83 | | $ | 2.07 | | (11.6 | %) |
International | | $ | 0.98 | | $ | 1.03 | | (4.9 | %) | | $ | 0.97 | | $ | 1.04 | | (6.7 | %) |
Average Revenue per Shipment | | | | | | | | | | | | | | | | | | |
Domestic | | $ | 8.51 | | $ | 8.69 | | (2.1 | %) | | $ | 8.52 | | $ | 8.71 | | (2.1 | %) |
International | | $ | 59.41 | | $ | 55.72 | | 6.6 | % | | $ | 56.78 | | $ | 55.30 | | 2.7 | % |
Total revenues were $810.5 millionincreased 9.1% in the secondthird quarter of 2002 to $842.8 million compared to revenues of $812.2$772.8 million in the secondthird quarter of 2001. For the first halfnine months of 2002, total revenues declined 1.5%increased 1.4% compared to the first half ofsame period in 2001. Shipment volumes increased 2.3%17.2% and .8%6.0% in the secondthird quarter and first halfnine months of 2002, respectively, compared to the same periods in 2001. The secondthird quarter of 2002 had one more operating day than in 2001, while the first nine months of 2002 had the same number of operating days as in 2001, and the first half of 2002 had one less operating day than the comparable period in 2001.a year ago. The third quarter of 2001 was negatively impacted by the disruption to business and the closure of the air system for two days as a result of the September 11, 2001 terrorist attacks. This impacts comparison of this year’s third quarter operating, shipment, and revenue trends over last year’s third quarter.
Domestic revenues were $719.9increased 9.7% to $748.6 million in the secondthird quarter compared to revenues of $720.2$682.5 million in the secondthird quarter of 2001. Domestic revenues decreased 1.3%increased 2.2% for the first sixnine months of 2002 compared to the first half ofsame period in 2001. Domestic shipments increased 2.5%17.6% to 84.189.7 million in the secondthird quarter compared to 82.176.3 million in the secondthird quarter of 2001. For the first halfnine months of 2002, domestic shipments increased 1.1%6.3% compared to the first halfnine months of 2001. Average revenue per domestic shipment was $8.51$8.32 in the secondthird quarter compared to $8.69$8.87 in the secondthird quarter of 2001. Average revenue per domestic shipment was $8.52$8.45 for the first halfnine months of 2002 compared to $8.71$8.76 in the like period in 2001. The overall decline in domestic revenue per shipment was due primarily to a higher percentage of total shipments fromattributed to lower yielding deferred products and to a reduction in our fuel surcharge.products. The core air express shipment products revenue per shipment increased in the second quarter ofhas experienced quarterly sequential increases throughout 2002 and increases over the first quarter of 2002 and over the comparable period of 2001same periods in 2001. The increases are due primarily to yieldrate and fee actions taken.and have offset reductions in our fuel surcharge and related revenues. Revenue per shipment on our Ground Delivery Service productyields had been decreasing in each quarter of 2002 due to shipment growth in higher volume, lower yielding customers. GDS yields per shipment in the third quarter improved over second quarter 2002 as we began focusing on balancing shipment growth with yield improvement. The airborne@home yields per shipment decreased in the secondthird quarter dueof 2002 compared to the declinesame period in 2001 and to the first and second quarters in 2002 due primarily to declines in the average weight per shipment.
Domestic revenues in 2002 and 2001 included fuel surcharge revenues which were used to help offset the historically high prices of fuel affecting costs in our air and surface operations. During 2001, we had in place a fuel surcharge of 4%4.0% applied to our air express products and a 1.2% surcharge on our airborne@home and Ground Delivery Service products. The fuel surcharge rates were reduced effective in January 14, 2002 to 2.9% on air express products and 1%1.0% on airborne@home and ground products. Fuel surcharge revenues totaled $16.9$17.5 million and $34.7$52.2 million in the secondthird quarter and for the first sixnine months of 2002, respectively. This compares to $23.8$22.4 million and $48.4$70.7 million recognized in the secondthird quarter and first halfnine months of 2001, respectively.
In earlyThroughout 2001 and 2002, we tookhave taken actions to increase rates on both domestic and international express services to improve our shipment yields. These actions included a phased ininclude general rate increaseincreases on domestic services commensurate with increases of our major competitors and the introduction of a residential delivery fee and delivery area surcharge fee.new fees that match competitor actions. These new industry-standard fees match recent competitor actions.actions have assisted in improving product level yields as discussed above.
We continued to experience year over year declines in our coreAfter a slow July, where air express shipmentshipments were down 8.5% on a per day basis compared to July 2001, volumes sequentially increased through the remainder of the third quarter. Our air express shipments averaged 1,100,000 per day in the third quarter, and averaged 1,149,000 shipments per day in September 2002, an increase of 4.1% over third quarter of 2002 average volumes. Core air express shipments declined 0.7% and 5.3%, on a per day basis, in the third quarter and first nine months of 2002, respectively. This year over yearyear-over-year decline in air volumes, impacted by the poor economic environment and customers’ shift to deferred services, is being experienced industry wide. Core air express shipments declined 7.8% and 8.1% in the second quarter and first half of 2002, respectively. This decline compares to per day declines of 3.6%8.7% and 4.4% in last year’s secondthird quarter and first sixnine months, respectively. Our core air express products are Overnight Express, Next Afternoon Service (NAS) and Second Day Service (SDS). HigherFor our higher yielding Overnight Express product, per day shipments decreased 9.8%2.1% in the secondthird quarter of 2002 compared to a decrease of 4.4%11.3% in the secondthird quarter of 2001. The NAS product decreased 1.6%per day shipments increased 3.3% in this year’s secondthird quarter compared to a decline of 3.5%8.2% a year ago. SDS per day shipment volumes declined 7.4%were flat against volumes a year ago compared to a growthdecline of 4.6%2.4% in the
20
second third quarter of 2001. Core air express product volumes also decreased 3.1% on a per day basis in the second quarter of 2002 in comparison to the first quarter of 2002.
In April 2001, we expanded our service portfolio by introducing our Ground Delivery Service (GDS) product. This new product utilizes our sort and linehaul infrastructure and was initially marketed to a targeted customer base. Marketing of this product has been expanded in 2002 to a broader customer segment, and we are focusing on the appropriate balance between growth and yields. GDS is an important growth initiative that offers us the opportunity not only to generate revenues from the deferred ground segment, where we had not previously participated, but also to leverage GDS with cross marketing of higher yielding air express shipments. GDS has shown strong growth since its introduction, producing volumes of 8.812.0 million shipments in the secondthird quarter of 2002 compared to 329,0001.5 million shipments in the secondthird quarter of 2001. GDS shipment volumes in the second quarter of 2002 and first quarter of 2002 were 8.8 million and fourth quarter of 2001 were 5.8 million, and 3.2 million, respectively.
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Our airborne@home product decreased 9.7%increased 48.1% to 5.07.0 million shipments in the secondthird quarter of 2002 compared to 5.54.8 million shipments in the secondthird quarter of 2001. The declineincrease in the secondthird quarter of 2002 is attributeddue in part to feweradditional shipments from certain large customers for whom the airborne@home product has become more attractive because of recent increases in comparison to a year ago.Priority Mail rates. For the first sixnine months of 2002 airborne@home shipments totaled 10.9increased 15.1% to 17.9 million shipments compared to 10.815.5 million shipments in the comparable period of 2001. This service is intended to capture primarily business-to-consumer shipments from e-commerce and catalog fulfillment providers. airborne@home utilizes an arrangement with the U.S. Postal Service to provide final delivery of the product.delivery.
Total domestic shipments per day increased 2.5%15.7% and 1.9%6.3% in the secondthird quarter and first halfnine months of 2002 compared to the same periods in 2001. The significantThis growth is due to our GDS and airborne@home products, whose growth in our GDS productshipment volumes has more than offset the declines in our core air express shipments.
International revenues decreased 1.6%increased 4.3% in the secondthird quarter of 2002 to $90.5$94.2 million compared to $92.0$90.3 million in the secondthird quarter of 2001. International revenues for the first halfnine months of 2002 declined 9.9%5.3% to $167$261.1 million compared to $185$275.7 million in the comparable period in 2001. Total international shipments decreased 7.7%2.2% to 1.4 million shipments in this year’s third quarter compared to 1.5 million shipments in this year’s second quarter compared to 1.6 million shipments in the secondthird quarter of 2001. For the first sixnine months of 2002, international shipments decreased 12.3%9.2% to 2.94.4 million from 3.44.8 million in the same period in 2001. Our international express shipments declined 7.7%2.1% and 12.3%9.2% in the secondthird quarter and first halfnine months of 2002, respectively, compared to a year ago. International freight shipments declined 8.8%4.2% in the secondthird quarter of 2002 and 11.8%9.4% in the first sixnine months compared to the same periods in 2001. International shipments and revenues were impacted in the first halfnine months of 2002 by continued weakness in U.S. exports. We did realize a sequential improvement in international revenues in the second quarter of 2002 that increased 18% or $14.1 million over revenues recorded in the first quarter of 2002. The increase in volumes was primarily due to increases in import freight shipments to the U.S. and to an increase in the average weight of freight shipments.
In June 2002, we acquired our service partner in France, Pagtrans SA. This acquisition increasesincreased our presence in France and the region andby acquiring our service partner, Pagtrans SA. The acquisition price is estimated to be $670,000, including direct costs. The final acquisition price will be accomplished by a capital outlay that will not exceed $670,000. The ultimate purchase price is dependent uponbased on a final determinationmeasurement of netthe fair value of current assets and liabilities as of the acquisition date.purchase date that will be completed in late 2002.
International segment losses from operations, including the $1.3restructuring charges of $0.5 million restructuring chargeand $1.8 million recorded in the secondthird quarter and first halfnine months of 2002, were $.4$0.8 million and $2.1$2.9 million, respectively. The international segment lossesreported earnings of $0.5 million in the secondthird quarter of 2001 and losses of $1.8 million in the first sixnine months of 2001 were $.5 million and $2.3 million, respectively.2001. Non-recurring restructuring charges of $.4$0.4 million were included in second quarter 2001 results.the results for the first nine months of 2001.
The cost reductions implemented since the second quarter of 2001 were instrumental in the improvement of secondin earnings from operations in the third quarter and first halfnine months of 2002 results compared to first half results ofthe same periods in 2001. Operating expense per shipment decreased 4.1%7.2% to $9.36$9.21 in the secondthird quarter of 2002 compared to $9.76$9.92 in the secondthird quarter of 2001 and $9.79 for full year of 2001. Operating expense per shipment decreased 5.9%6.3% to $9.26$9.24 in the first halfnine months of 2002 compared to $9.83$9.86 in the first halfnine months of 2001. Although operating expense per shipment improved in the third quarter and for the first nine months of 2002, the corporate cost pressures previously described negatively impacted costs. Third quarter and nine month per shipment cost amounts for 2001 were negatively impacted by reduced shipment volumes resulting from the events of September 11.
Corporate costs for pensions, workers’ compensation, employee healthcare and insurance increased $16.9 million and $27.2 million in the third quarter and first nine months of 2002 compared to the same periods in 2001. Certain of these increases are market driven. Pension costs have been impacted by decreased investment returns on plan assets while employee health care costs have increased consistent with market trends. Additionally, insurance costs increased for our aircraft and casualty coverage due to capacity constraints in the insurance market. We revised our estimated reserve for workers compensation expense in the third quarter to reflect higher claim loss estimates contained in a recently completed independent actuarial analysis report. While we have containment programs in place to actively manage costs in this area, workers compensation reserve estimates have been impacted by negative claim severity trends, including time-loss and medical cost components. We expect the total of these corporate cost items to be between $30 and $35 million higher for the full year 2002 over 2001 levels.
We have been aggressively
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managing our costs oversince the past yearsecond quarter of 2001 through actions designed to improve productivity and adjust our cost structure to be more in line with the volume levels being generated. The reductionThese actions, including the domestic and international realignment actions implemented in the second and third quarter of labor hours2002, combined with modest per day shipment volume growth, resulted in productivity improvements of 6.2%13.0% and 7.3%9.0% in the secondthird quarter of 2002 and first sixnine months of 2002, respectively, as measured by shipments handled per paid employee hour. This compares to improvements of 5.5%3.9% and 2.7%3.2% in the secondthird quarter and first halfnine months of 2001. InProductivity was negatively impacted in 2001 by the second quarter of 2002, we took further cost reduction actions, as described above, to improve productivity and lower costs in our domestic and international station and ground operations.September attacks.
Transportation purchased as a percentage of revenues increased to 33.0%33.9% in the secondthird quarter of 2002 as compared to 32.8%32.9% in the same quarter a year ago. For the first halfnine months of 2002, this category of expense comprised 32.3%32.8% of revenues in comparison to 32.6%32.7% in the first halfnine months of 2001. Total transportation purchased expense increased ..5%12.3% and 1.9% in the secondthird quarter and
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first nine months of 2002 compared to a year ago but decreased 3.1% for the first half of 2002. While internationalago. International commercial linehaul costs and offshore agent costs were similarincreased as a percentage of revenues in the secondthird quarter of 2002 compared to the secondthird quarter of 2001 they decreased 10% in the first half of 2002 in comparisondue to 2001. This decrease,higher linehaul rates as a result of lower shipmentstighter capacity caused by the west coast port labor issue and peak season shipping. These costs decreased as a percentage of revenues in the first quarter of 2002, is the primary factor contributing to the lower transportation purchased expenses in the first halfnine months of 2002 compared to the first half2001 primarily because of 2001. In the second quarter, increases inlower international shipment volumes, and in particular GDS volumes, resulted involumes. This category of expense also includes increased truck linehaul costs, and increased pickup and delivery costs paid to independent contractors. The increase was offset by lowercontractors, and delivery costs paid to the U.S. Postal ServiceService. These increases are due to fewershipment volume related increases, in particular GDS and airborne@home shipments and strong cost controls in other cost items.volume increases.
Station and ground expense as a percentage of revenues was 32.8%33.5% in this year’s secondthird quarter compared to 32.6%33.3% in the secondthird quarter of 2001. For the first sixnine months of 2002, this category of expense was 33.2%33.3% of revenues, compared to 33.6% in the same periodas a year ago. Total station and ground expense increased .5%9.7% and 1.2% in the secondthird quarter and first nine months of 2002, respectively, compared to the same periodperiods in 2001 and decreased 2.7% in the first half of 2002 compared to the first half of 2001. While this category of expense has been aided by improved productivity, in the first half of 2002,this has been partially offset by higher wage, benefit and workersworkers’ compensation costs have partially offset the cost benefits resulting from hours reductions. The cost reduction actions taken in the second quarter of 2002, as described above, will primarily be reflected in the station and ground category beginning in this year’s third quarter.costs.
Flight operations and maintenance expense as a percentage of revenues was 16.4%16.0% in the secondthird quarter of 2002 compared to 17.7%17.2% in the secondthird quarter of 2001. For2001, and was 16.1% in the first sixnine months flight expenses were 16.1%of 2002 compared to 18.2%17.8% for the same period a year ago. This category of expense declined 7.8% and 12.7%increased 1.2% in the secondthird quarter compared to the third quarter of 20022001 and declined 8.4% for the first halfnine months of 2002 respectively, when compared to a year ago. Total fuel costs declined 5.1% in the third quarter and 21.7% for the first nine months of 2002 compared to the same periods a year ago due in part to lower jet fuel prices and reduced fuel consumption. The average aviation fuel price per gallon was $.82$.87 in the secondthird quarter and $.76$.80 for the first sixnine months of 2002 compared to $.95$.91 in the secondthird quarter of 2001 and $.98$.95 for the first halfnine months of 2001. While fuel prices decreased from comparable periods in 2001, prices increased in the secondthird quarter of 2002 from the second and first quarterquarters of 2002 when the priceprices per gallon was $.71. The relatively high cost ofwere $.82 and $.71, respectively. To mitigate potential future exposure from extreme price increases in jet fuel, over the past several years has hampered our efforts to enter into fuel hedging contracts at acceptable prices. Whilein September 2002 we may enter into fuel hedge contracts in the future, no fuel contracts were entered into during 2001 or the first halfa call option contract on heating oil to hedge a significant portion of our projected jet fuel requirements for a six-month period beginning in October 2002.
Aviation fuel consumption decreased 5.0%.5% in the secondthird quarter to 38.537.6 million gallons and decreased 8.6%6.1% for the first sixnine months of 2002 in comparison to 2001. The decrease in consumption was primarily due to our efforts, beginning in the second quarter of 2001, to reduce and combinecosts by combining certain flight segments, in addition to reduce costs. Also,our continued program to add more fuel-efficient 767 aircraft to our fleet. The consumption decrease in the third quarter of 2002 compared to the same period in 2001 was accomplished despite the reduced consumption in the third quarter of 2001 due to the closure of the national air system for two days as a result of the terrorist attacks. The placement of threetwo additional 767 aircraft in service since the secondthird quarter of 2001 has allowed less fuel efficient DC-8 aircraft to be moved to shorter lane segments or backup status or removed from service. Lower levels of heavy maintenance expenses were incurred in the second quarter and first half of 2002 than in the same periods in 2001.
Aircraft maintenance costs were 6.0%5.9% of revenues in both the third quarter and 5.9% as a percentagefirst nine months of 2002 compared to 6.1% and 6.3% of revenues in the secondthird quarter and first half of 2002 compared to 6.4% in both the second quarter and first halfnine months of 2001. Maintenance costs in the secondthird quarter of 2002 increased 5.6% over the third quarter of 2001 and 2.3% over the second quarter of 2002. Maintenance costs for the first nine months of 2002 decreased 4.7% compared to the same period in 2001. The level of quarterly maintenance costs is generally associated with scheduled repair activities and can fluctuate depending on the scheduling and level of required repairs as well as on unscheduled repair costs. In the third quarter of 2002, levels due primarily to scheduledwe incurred an unanticipated $1.0 million engine repair on a 767 maintenance activities.aircraft. Also impacting flight operations expense are hull and war risk insurance costs, which have increased significantly since the events of September 11.
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General and administrative expenses as a percentage of revenues were 8.0%7.6% in the secondthird quarter and 7.9% in the first halfnine months of 2002 compared to 8.2%7.9% in the secondthird quarter and 8.1% in the first halfnine months of 2001. General and administrative includes non-recurring restructuring charges of $2.3$0.9 million in the third quarter of 2002, as discussed previously, and $3.2 million recorded for the first nine months of 2002. Restructuring charges recorded in the first nine months of 2001 were $2.9 million and related to company-wide labor reductions in the second quarter of 2002 (as discussed previously) and $2.9 million recorded in the second quarter 2001. The charges incurred in the second quarter of 2001 related to company-wide labor reductions. General and administrative expenses in 2002 have seenalso included cost increases in the areas of wages, pension, health care, insurance, bad debt and litigation expenses and the reinstatementcost of certain incentive plans that were suspended during 2001. However, overall cost reduction efforts and management’s continued emphasis on control over labor and discretionary costs hashave helped to mitigate some of these cost pressures.pressures and resulted in cost declines as a percentage of revenues.
Sales and marketing expense as a percentage of revenues remained consistent at 2.9%was 2.7% in the firstthird quarter of 2002 and 2001 and2.8% for the first halfnine months of 2002 compared to 2.8% in the third quarter of 2001 and 2.9% for the first nine months of 2001. WhileOn a year-to-date basis costs have been addedincreased due to increase the numberaddition of sales personnel and higher wage and incentive compensation, while marketing and packaging expenses have been reduced.declined.
Depreciation and amortization expense totaled 5.8%5.9% of revenues in the secondthird quarter of 2002 and 6.0% in the first nine months of 2002 compared to 6.7% and 6.5% in the secondsame periods of 2001, respectively. This category of expense includes the DC-8 aircraft
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impairment charge discussed previously of $3.1 million, recorded in the third quarter of 2001. For the first half of 2002,2002. Despite this additional charge, depreciation and amortization expense was 6.0% of revenuesis lower in the third quarter and year-to-date periods in 2002 compared to 6.4% in 2001. Depreciation and amortization expense decreased 11.3% and 9.0% in the second quarter and first half of 2002, respectively, compared to 2001 levels for the same periods. The decline isperiods in 2001 due to the timing of certain aircraft assets becoming fully depreciated and lower levels of capital expenditures made in 2001 and the first halfnine months of 2002 in relation to expenditures made in 2000 and prior. This categoryThrough the first three quarters of expense also includes additional depreciation charges2002, we removed a total of $1.3 million and $2.5 millionfour DC-8 aircraft from service, which completes our scheduled removals for the year.
Interest income increased in the third quarter and first halfnine months of 2002 andcompared to the same periods in 2001 respectively, on DC-8 aircraft that were removed from service.due to higher levels of cash equivalent short-term investments.
Interest expense increased in the secondthird quarter and first halfnine months of 2002 compared to the same periods a year ago due to higher levels of outstanding debt coupled with lower levels of capitalized interest. Interest expense increased due to additional debt incurred upon the financing of five 767 aircraft in August 2001 and the issuance of $150.0 million in Senior Convertible Notes in March 2002. Interest capitalized, primarily on the acquisition and modification of aircraft, during the secondthird quarter and first halfnine months of 2002 was $.4$0.6 million and $1.0 million compared to $.5$0.5 million and $1.6$2.0 million recorded in the secondthird quarter and first sixnine months of 2001. Offsetting interest expense was $1.5 and $2.3 million of interest income recorded in the second quarter of 2002 and first six months of 2002, respectively compared to interest income of $.2 million and $.3 million in the comparable periods in 2001. Interest income has increased due to higher levels of cash equivalent short-term investments.
Discounts on the sales of receivables associated with recording the obligation to fund the purchaser’s costs under our accounts receivable securitization facility were $.9$0.7 and $2.1$2.9 million in the secondthird quarter and first halfnine months of 2002 compared to $2.2$2.0 million and $6.0$8.0 million in the secondthird quarter and first halfnine months of 2001. The decrease in cost is due to lower discounts on amounts sold as a result of the lower interest rate environment and the payment in May 2002 of $100.0 millionlower amount outstanding on the accounts receivable securitization facility. Because of the sales recognition treatment associated withrequired for these securitization transactions, the cost is recorded separate from interest expense.
Included in other income infor the first quarternine months of 2002 was a non-recurring gain of $1.7$1.8 million from the sale of ana minority equity interest in one of our international agents. In the third quarter and first halfnine months of 2001 and included in this category were $2.1included $8.3 million of non-recurring gains recognized on the sale of certain radio frequencies.frequencies and from the sale of certain securities.
Our effective tax benefit rate of 36.4% in the third quarter compares to a tax expense rate of 61.0% and 43.2%47.6% in the secondthird quarter andof 2001. The effective tax expense rate for the first halfnine months of 2002 compareswas 49.5% compared to a tax benefit rate of 33.3% and 34.8%33.5% in the comparable periods ofsame period in 2001. The effective tax benefit or expense rate for 2002, particularlyfluctuates depending on the level of losses or earnings in relationship to nondeductible expenses and the second quarter, was impacted by relatively low earnings and by nondeductible expenses.level of state income taxes.
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We recorded compensation of $13.0 million in 2001 provided to us under the Air Transportation Safety and System Stabilization Act (“Act”). The Act provided eligible cargo carriers compensation for certain direct losses associated with the closure of the national air system for a two-day period following the terrorist attacks of September 11, 2001 and incremental losses through December 31, 2001. The compensation amounts have been recorded based on our interpretation of the Act and related rules. In April 2002, the Department of Transportation (“DOT”) issued final rules governing the process and content of final filings that support carriers’ compensation claims. We completed and filed our final filing along with required audit schedules in May 2002 and have had preliminary discussions with applicable government agencies regarding these filings. While we believe we have complied with the provisions of the Act, these agencies have raised certain exceptions concerning the treatment of severalcertain compensation items. We are currently evaluating our options concerning these exceptions. The final amount of proceeds we will realize is subject to resolution of the exceptions and possible completion of further review and audit procedures by the DOT or other applicable government agencies. We cannot be assured of the ultimate outcome of these reviews, but it is possible that a reduction to the amount of compensation previously recognized could occur. We estimate the range of compensation ultimately realized will be between $11.0 million and $15.0 million.
Outlook
The performance of the U.S. and global economies will have an impact on our operating results for the balanceremainder of 2002 and beyond. Although some areas of theThe economy does not appear to be showing signs of strength, we are not seeing that translate into improvement in our core domesticsustained growth. Accordingly, air express volumes. Accordingly, core expressshipment volumes could be flat or lower in the second halffourth quarter of 2002 compared to volumes recorded in the samecomparable period of 2001.
Our fuel prices have increased since the end of the third quarter of 2002 and may remain high until the conflict in the Middle East has been resolved. On October 7, 2002, we increased our fuel surcharge to 3.5% of revenue on core domestic air segment shipments and 1.2% on GDS and airborne@home services, from previous levels of 2.9% and 1.0%, respectively, which had been in effect since January 2002. Additionally, effective November 4, 2002 we will increase the fuel surcharge to 4.3% and 1.3%, respectively. While these efforts will help mitigate the increase in fuel costs, it may be difficult to completely offset rising fuel costs if
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prices spike further. As mentioned previously, in order to further mitigate the potential exposure to extreme price increases in jet fuel, we entered into a call option contract on heating oil to hedge a significant portion of our projected fuel requirements for a six-month period beginning in October 2002.
We expect that our GDS product will continue to show stronggrowth in the fourth quarter, although at sequential quarterly growth rates less than the growth rate experienced during the first three quarters of 2002. We are currently focusing on balancing GDS volume growth with current estimates ofyield improvement. Accordingly, we currently estimate GDS volumes to be between 180,000210,000 and 190,000220,000 shipments per day in the thirdfourth quarter of 2002. We expect our airborne@home product to achieve volumes of between 85,000110,000 and 95,000120,000 shipments per day in the thirdfourth quarter of 2002. Both product lines should experience2002 with seasonal increasespeaks well above these estimates in this year’s fourththe latter part of the quarter. GrowthContinued growth in these products will result in incremental expenses primarily related to truck linehaul and in the case of airborne@home shipments, additional delivery costs paid to the U.S. Postal Service.costs.
We continue to aggressively manage costs as evidenced by our recent realignment of international operationsfocusing on productivity improvements and reduction of additional overhead in our domestic stations. As previously mentioned, those actions provided a $.9 million cost savings in the second quarter of 2002 with additional quarterly savings of between $2.0controlling discretionary expenses. However, wage and $2.5 million to be realized beginning in the third quarter of 2002. We anticipate labor productivity improvement in the second half of 2002 in comparison to the like period in 2001. Wagebenefit pressures and additional hours to service expected growth willwould offset some of the favorable cost savings produced by the productivity gains and accordingly we are not anticipating reductions in wage costs in relation to the levels incurred in the second quarter.gains.
We mentioned in our Management’s Discussion and Analysis included in our Annual Report on Form 10-K that we expected increases in 2002 in employee health care, pension and insurance related costs. While employee healthcare costs trended lower than expected in the first half of 2002, we still anticipate that the impact of the increase in these categories of expense will be in the range of $20.0 to $25.0 million for the year in comparison to 2001.
Through July 2002, the price of aviation fuel has increased slightly to approximately $.83 per gallon, compared to $.82 per gallon for the second quarter of 2002. While fuel costs have increased approximately 17% from first quarter 2002 levels we have not adjusted our fuel surcharge percentages. The fuel surcharge percentage may not necessarily increase or decrease in correlation with the cost of fuel. Accordingly, during a period of rising fuel prices, additional costs may not be offset by corresponding increases in fuel surcharge revenues. We continue to monitor fuel cost trends and may make changes to the surcharge as warranted. Aircraft maintenance expenses are anticipated to trend to levels approximating the amounts incurred in the second quarter of 2002.
While growth in our deferred products is encouraging, cost pressures and the lack of core express revenue growth could continue to have an adverse effect on operating results for the remainder of the year.
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Financial Condition, Liquidity and Capital Resources
Operating cash flows in the first halfnine months of 2002, coupled with proceeds from a $150.0 million private placement offering of convertible senior notes in March 2002, increased cash and cash equivalent balances to $338.1$333.0 million as of JuneSeptember 30, 2002 compared to $201.5 million as of December 31, 2001. As of September 30, 2002, $35.4 million of cash equivalents were restricted from use and held in an insurance trust to support a portion of outstanding self-insured casualty liabilities, including workers compensation, automobile and general liability coverage’s.
Net cash provided by operating activities for the first halfnine months of 2002 was $156.1$158.5 million compared to $95.7$138.8 million in the first halfnine months of 2001, (exclusiveexclusive of repurchases and sales from or to our receivables securitization facility).facility. The improvement in operating cash flow is primarily due to improved operating performance. Cash provided by operating activities for the first nine months of 2002 compared to the same period in 2001 was negatively impacted by higher funding of our pension plans but improved by increases in cash flow resulting from changes in working capital and other operating obligations. In the third quarter of 2002, we completed the scheduled funding of $48 million of previously accrued pension obligations.
Capital expenditures and financing associated with those expenditures are significant factors that affect our financial condition. During the first halfnine months of 2002 we spent $57.7$71.2 million on capital improvementsinvestments compared to $73.4$98.3 million in the first halfnine months of 2001. Capital spending levels were reduced significantly in the first half of 2002 and in 2001 in comparison to previous years’ levels. We anticipate 2002 capital spending of $120 million, reduced from previous estimates of between $150 and $160 million, revised down from our original target of $175 million. This compareslevel of spending is comparable to $126 million of capital expenditures recorded in 2001. The anticipated increase is primarily a result of committed aircraft acquisitions and technology investments. We took delivery of two 767 aircraft in the first halfnine months of 2002 and anticipate taking delivery of one additional aircraft this year. Growth in our ground product has not required significant capital expenditures over the past severalfew quarters since it is designed to leverage our existing sort, linehaul and pickup and delivery infrastructure. If ground volumes increase during the second halfbalance of 2002 and into 2003 as expected,anticipated, we may need to make incremental capital expenditures to accommodate increased volumes. However, we anticipate this will be accomplished within the $150 to $160 million targeted for 2002 capital spending.
In addition to our existing cash and cash equivalent reserves, we had $110$92 million in available borrowing capacity under our bank credit agreement as of JuneSeptember 30, 2002. No borrowings were outstanding under this agreement. This facility is collateralized by a substantial majority of our assets and contains certain restrictive covenants. We were in compliance with all restrictive covenants as of JuneSeptember 30, 2002. We also had eligible receivables to support an additional $134$150 million of sales proceeds under our accounts receivable securitization facility. As of JuneSeptember 30, 2002, we had $100 million of outstanding receivables securitized under this facility in comparison to $200 million securitized as of December 31, 2001.
OnIn March 25, 2002, we completed a private placement offering of $150 million of 5.75% convertible senior notes. The notes are for a five-year term maturing in April 2007. Proceeds from the placement are intended to be used, in part, to pay off $100 million of senior notes that mature in December 2002.
We anticipate capital spending will increase in the second half of 2002 compared to the first half level of $58 million to achieve the targeted investment level of between $150 and $160 million. Working capital will also be impacted due to the planned funding of approximately $48 million of previously accrued pension obligations in the third quarter.
In our opinion, existing cash and cash equivalents coupled with anticipated cash flow from operations and available capacity under the accounts receivable securitization facility and bank credit agreement should provide adequate flexibility for financing capital expenditures and funding debt maturities scheduled in 2002.for the balance of 2002 and into 2003.
While we believe we have the ability to sufficiently fund our planned operations and capital expenditures for 2002 and into 2003, certain circumstances could arise that would materially affect liquidity. Cash flows from operations could be affected by any further deterioration in core domestic air segment shipment volumes caused by a continued slow economy, further terrorist attacks, war in the Middle East, or management’s inability to successfully implement sales growth initiatives in a cost effective manner or to realize anticipated cost reductions from realignment and cost savings programs. Operating results and cash flows could also be negatively
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impacted by prolonged labor disputes or changesincreases in our cost structure, from areas such as from a significant rise in fuel prices. Weakening operating performance also could result in our inability to remain in compliance with financial covenants contained in our bank credit and accounts receivable securitization agreements, thereby reducing liquidity sources and potentially requiring the use of cash collateral to support outstanding letters of credit. Lower revenues could also cause amounts currently drawn under the securitization facility to be reduced.
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Critical Accounting Policies and Estimates
The “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, as well as disclosures included elsewhere in the Form 10-Q, are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingencies. On an on-going basis, we evaluate the estimates used, including those related to bad debts, self-insurance reserves, accruals for labor contract settlements, valuation of spare-parts inventory, impairments of property and equipment, income taxes and contingencies and litigation. We base our estimates on historical experience, current conditions and available information and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities, that are not readily apparent from other sources as well as identifying and assessing our accounting treatment with respect to commitments and contingencies. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies involve the more significant judgments and estimates used in the preparation of the consolidated financial statements.
We maintain an allowance for doubtful accounts for estimated losses resulting from the potential inability of our customers to make required payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances would be required.
We continually evaluate the fair value of our property and equipment. When an asset is considered impaired, the asset is written down to its fair value. Changes in the estimated useful lives of certain assets may result from excess capacity or changes in regulations grounding the use of our aircraft.
We value spare parts inventory at the lower of cost or market and write down the value of inventory for estimated obsolescence. An inventory reserve is maintained based upon estimates of spare part utilization by aircraft type. Should actual parts usage be affected by conditions that are less favorable than those projected by management, revisions to the estimated inventory reserve would be required.
We have not recorded a valuation allowance to reduce our deferred tax assets, as we believe it is more likely than not that the deferred tax asset will be realized. We have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance. Should we determine that we will not be able to realize all or part of our net deferred tax asset in the future, an adjustment to the deferred tax asset would be charged to income in the period such determination was made.
Self-insurance reserves forWe self-insure certain claims relating to workers compensation, automobile, and general liability, healthcare and loss and damage on customer shipments. We record a liability and expense for reported claims and also an estimate for incurred claims but not yet reported. Accruals for these claims are based uponestimated utilizing historical paid claims data, recent claims trends and recent claim trends.independent actuarial reports, as applicable. Changes in claim severity and frequency or other claim trends could result in actual claims being materially different from the amounts provided for in our results of operations.
We are involved in legal matters that have a degree of uncertainty associated with them. We continually assess the likely outcomes of these matters and the adequacy of amounts recorded, if any, and make adjustments as appropriate. There can be no assurance that the ultimate outcome of these matters will not differ materially from our assessment. There can also be no assurance that we know all matters that may be brought against us or that we may bring against other parties at any point in time.
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New Accounting Pronouncements
Effective JanuaryIn April 2002, the Company implemented the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets”. This standard requires, among other things, the discontinuance of goodwill amortization and that transitional goodwill impairment tests be performed within six months from the date of adoption. The Company has completed its transitional tests and determined no impairment adjustments were necessary as of June 30, 2002. The total amount of goodwill recorded and included in equipment deposits and other assets on the consolidated balance sheet was $2.8 million as of June 30, 2002. Net losses and basic and diluted earning per share for the quarter and six months ended June 30, 2001, excluding goodwill amortization expense, would not have materially differed from amounts reported. Goodwill expense for second quarter and first half of 2001 was $33,000 and $67,000, respectively.
In August 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 143, “Accounting for Asset Retirement Obligations”. SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. Additionally, the associated asset retirement costs will be capitalized as part of the carrying amount of the long-lived asset. The adoption of SFAS No. 143, which is effective for companies with fiscal years beginning after June 15, 2002, is not expected to have a significant impact on our financial position or results of operations.
In April 2002, the FASB issued SFAS No. 145, “Revision“Rescission of FASB Statements No. 4, 44, 64, Amendment of FASB Statement No. 13, and Technical Corrections”. SFAS No. 145 requires that only certain extinguishments of debt be classified as an extraordinary item. Further, this statement requires a capital leaseslease that areis modified so that the resulting lease agreement is classified as an operating lease to be accounted for under the sale-leaseback provisions of SFAS No. 98. The provisions of the statement pertaining to debt extinguishments are effective for companies with fiscal years beginning after
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May 15, 2002. The provisionprovisions of the statement pertaining to lease modifications are effective for transactions consummated after May 15, 2002. Implementation of this statement is not anticipated to have a significant impact on our financial position or results of operations.
In JulyJune 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”. SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities. This statement requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Previous guidance, provided under EITFEmerging Issues Task Force Issue 94-3, required an exit cost liability to be recognized at the date of an entity’s commitment to an exit plan. The provisions of this statement are effective for exit or disposal activities that are initiated by a company after December 31, 2002. Implementation of this statement is not anticipated to have a significant impact on our financial position or results of operations.
Risk Factors
The following risk factor should be considered when reading the disclosures in this Form 10-Q in addition to the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2001.
A significant increase in the cost, or the unavailability, of adequate commercial terrorism insurance, including war risk liability insurance, could negatively affect our results of operations.
As a result of the terrorist attacks on September 11, 2001, insurers have significantly increased the cost of insurance coverage. At the same time, they have significantly reduced the maximum amount of terrorism insurance. The U.S. government has been providing supplemental war risk liability insurance coverage to air carriers, which is currently scheduled to expire on December 15, 2002. In the event commercial insurance carriers further reduce the amount of war risk liability insurance coverage available to us or significantly increase the cost of insurance, or if the U.S. government fails to renew the war risk liability insurance that it provides, our financial position and results of operations could be materially adversely affected.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Other than the following, there have been no material changes in market risks from the information provided in Item 7A. Quantitative and Qualitative Disclosures About Market Risk contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2001.
Jet Fuel Risk
We are dependent on jet fuel to operate our fleet of aircraft, and our earnings are impacted by changes in jet fuel prices. For the third quarter of 2002 we consumed 37.6 million gallons of jet fuel at an average price of $.87 per gallon.
We have historically implemented temporary fuel surcharges to mitigate the earnings impact of unusually high fuel prices. However, in the case of an extreme increase in price, which could result in the event of a Middle East war, market factors may limit our ability to increase our existing fuel surcharges to levels which would fully offset the effect that higher fuel costs would have on net earnings.
To mitigate the effect of extreme increases in the price of fuel, in September 2002, we entered into a call option contract to hedge a significant portion of our jet fuel requirements for a six-month period beginning in October 2002. The contract provides coverage if the price of fuel increases approximately 40% above the level incurred in the third quarter of 2002.
Item 4. Controls and Procedures
Based on their evaluation of the Company’s disclosure controls and procedures as of a date within 90 days of the filing of this report, the Chief Executive Officer and Chief Financial Officer have concluded that such controls and procedures are effective.
There were no significant changes in the Company’s internal controls or in other factors that could significantly affect such controls subsequent to the date of their evaluation.
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PART II. OTHER INFORMATION
Item 5. Other Information.
The Audit Committee of the Board of Directors approved the categories of all non-audit services performed by the Company’s independent accountants during the period covered by this report.
Item 6. Exhibits and Reports on Form 8-K.8-K.
(a) Exhibits –
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EXHIBIT NO. 10 | | | Material Contracts |
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10 | (a) | | Management Incentive Compensation Plan (MICP) 2002 |
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EXHIBIT NO. 12 | | | Statements Regarding Computation of Ratios |
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12 | (a) | 12(a) | | Ratio of Earnings to Fixed Charges |
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EXHIBIT NO. 99 | | 99 | | |
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99 | (a) | 99(a) | | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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99 | (b) | 99(b) | | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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(b) Reports on Form 8-K –
On August 14, 2002, the Company filed a Form 8-K furnishing as exhibits thereto copies of the sworn statements of the Company’s principal executive officer and principal financial officer submitted to the Securities and Exchange Commission pursuant to its order No. 4-460.
SIGNATURES
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:
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| | | | | | AIRBORNE, INC. |
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| | | | | | (Registrant)Registrant
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Date: | | 8/11/13/02 | | | | /s/ CARL D. DONAWAY
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| | | | Carl D. Donaway Chairman and Chief Executive Officer |
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Date: | | 8/11/13/02 | | | | /s/ LANNY H. MICHAEL
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| | | | Lanny H. Michael Executive Vice President and Chief Financial Officer |
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Date: | | 8/11/13/02 | | | | /s/ ROBERT T. CHRISTENSEN
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| | | | Robert T. Christensen Chief Accounting Officer |
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CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Carl D. Donaway, certify that:
| 1. | | I have reviewed this quarterly report on Form 10-Q of Airborne, Inc.; |
| 2. | | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; |
| 3. | | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; |
| 4. | | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: |
| a. | | Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
| b. | | Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and |
| c. | | Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; |
| 5. | | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors: |
| a. | | All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and |
| b. | | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and |
| 6. | | The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
Date:November 13, 2002
/S/ CARL D. DONAWAY
Carl D. Donaway
Chief Executive Officer and President
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CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Lanny H. Michael, certify that:
| 1. | | I have reviewed this quarterly report on Form 10-Q of Airborne, Inc.; |
| 2. | | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; |
| 3. | | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; |
| 4. | | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: |
| a. | | Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
| b. | | Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and |
| c. | | Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; |
| 5. | | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors: |
| a. | | All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and |
| b. | | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and |
| 6. | | The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
Date:November 13, 2002
/S/ LANNY H. MICHAEL
Lanny H. Michael
Chief Financial Officer and Executive Vice President
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