-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WGLAAJo1dtydwKE52WPckJJ1i9CfXc4Gqf/sTljvJ0f4i036defBYB0Z5LqNqIRA OrMBMb4AuIur2JtNRuzTSg== 0000003000-97-000017.txt : 19971113 0000003000-97-000017.hdr.sgml : 19971113 ACCESSION NUMBER: 0000003000-97-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AIRBORNE FREIGHT CORP /DE/ CENTRAL INDEX KEY: 0000003000 STANDARD INDUSTRIAL CLASSIFICATION: AIR COURIER SERVICES [4513] IRS NUMBER: 910837469 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06512 FILM NUMBER: 97716544 BUSINESS ADDRESS: STREET 1: P O BOX 662 CITY: SEATTLE STATE: WA ZIP: 98111 BUSINESS PHONE: 2062854600 10-Q 1 9/30/97 FORM 10Q 1 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 September 30, 1997 Commission File Number 1-6512 AIRBORNE FREIGHT CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware ---------------------------------------- (State of incorporation or organization) 91-0837469 --------------------------------- (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 -------------- 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: XXX 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 265,150 treasury shares) as of September 30, 1997 24,879,754 shares ----------------- 2 AIRBORNE FREIGHT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF NET EARNINGS (Dollars in thousands except per share data) (Unaudited)
Three Months Ended Nine Months Ended ------------------ ----------------- September 30 September 30 ------------------ ----------------- 1997 1996 1997 1996 ---- ---- ---- ---- REVENUES: Domestic $687,549 $522,040 $1,861,659 $1,552,216 International 101,049 89,987 295,245 280,118 -------- -------- ---------- ---------- 788,598 612,027 2,156,904 1,832,334 OPERATING EXPENSES: Transportation purchased 242,521 201,744 680,074 611,483 Station and ground operations 224,945 194,688 636,051 580,351 Flight operations and maintenance 110,949 97,301 315,645 285,043 General and administrative 64,842 44,937 173,942 136,102 Sales and marketing 19,742 14,694 53,821 45,172 Depreciation and amortization 41,688 42,239 126,169 121,224 -------- -------- ---------- ---------- 704,687 595,603 1,985,702 1,779,375 -------- -------- ---------- ---------- EARNINGS FROM OPERATIONS 83,911 16,424 171,202 52,959 INTEREST, NET 7,026 8,343 23,522 24,875 -------- -------- ---------- ---------- EARNINGS BEFORE INCOME TAXES 76,885 8,081 147,680 28,084 INCOME TAXES 30,266 3,370 58,400 11,370 -------- -------- ---------- ---------- NET EARNINGS 46,619 4,711 89,280 16,714 PREFERRED STOCK DIVIDENDS -- 69 -- 205 -------- -------- ---------- ---------- NET EARNINGS AVAILABLE $ 46,619 $ 4,642 $ 89,280 $ 16,509 TO COMMON SHAREHOLDERS ======== ======== ========== ========== NET EARNINGS PER COMMON SHARE Primary $ 2.05 $ .22 $ 4.04 $ .78 ======== ======== ========== ========== Fully Diluted $ 1.87 $ .22 $ 3.64 $ .78 ======== ======== ========== ========== DIVIDENDS PER COMMON SHARE $ .075 $ .075 $ .225 $ .225 ======== ======== ========== ========== See notes to consolidated financial statements.
3 AIRBORNE FREIGHT CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
September 30 December 31 ------------ ----------- ASSETS 1997 1996 ------ ---- ---- (Unaudited) CURRENT ASSETS: Cash $ 22,156 $ 35,816 Trade accounts receivable, less allowance of $10,040 and $8,345 345,374 287,515 Spare parts and fuel inventory 36,693 34,761 Deferred income tax assets 14,772 15,012 Prepaid expenses and other 24,946 42,118 ---------- ---------- TOTAL CURRENT ASSETS 443,941 415,222 PROPERTY AND EQUIPMENT, NET 880,286 866,627 EQUIPMENT DEPOSITS and OTHER ASSETS 24,524 25,573 ---------- ---------- TOTAL ASSETS $1,348,751 $1,307,422 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Accounts payable $ 137,973 $ 139,036 Salaries, wages and related taxes 65,548 63,835 Accrued expenses 103,470 68,759 Income taxes payable 14,046 1,782 Current portion of debt 371 353 ---------- ---------- TOTAL CURRENT LIABILITIES 321,408 273,765 LONG-TERM DEBT 291,889 409,440 SUBORDINATED DEBT -- 115,000 DEFERRED INCOME TAX LIABILITIES 58,479 40,816 OTHER LIABILITIES 38,491 36,571 SHAREHOLDERS' EQUITY: Preferred Stock, without par value - Authorized 5,200,000 shares, no shares issued Common stock, par value $1 per share - Authorized 60,000,000 shares Issued 25,114,904 and 21,621,596 shares 25,115 21,622 Additional paid-in capital 309,026 190,405 Retained earnings 305,160 220,774 ---------- ---------- 639,301 432,801 Treasury stock, 265,150 and 315,150 shares, at cost (817) (971) ---------- ---------- 638,484 431,830 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,348,751 $1,307,422 ========== ========== See notes to consolidated financial statements.
4 AIRBORNE FREIGHT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited)
Nine Months Ended ----------------- September 30 ---------------- 1997 1996 ---- ---- OPERATING ACTIVITIES: Net Earnings $ 89,280 $ 16,714 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 116,303 112,186 Provision for aircraft engine overhauls 9,866 9,038 Deferred income taxes 17,903 1,727 Other 2,411 1,363 -------- -------- CASH PROVIDED BY OPERATIONS 235,763 141,028 Change in: Receivables (57,859) (1,878) Inventories and prepaid expenses (2,760) 2,239 Accounts payable (1,063) (21,117) Accrued expenses, salaries and taxes payable 49,788 7,339 -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 223,869 127,611 INVESTING ACTIVITIES: Additions to property and equipment (135,433) (135,491) Disposition of property and equipment 4,425 141 Proceeds from insurance on aircraft accident 18,000 -- Expenditures for engine overhauls (8,821) (10,218) Other 214 (916) -------- -------- NET CASH USED IN INVESTING ACTIVITIES (121,615) (146,484) FINANCING ACTIVITIES: Proceeds (payments) on bank notes, net (117,300) 21,700 Principal payments on debt (316) (5,576) Proceeds from common stock issuance 6,596 569 Dividends paid (4,894) (4,961) -------- -------- NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES (115,914) 11,732 -------- -------- NET DECREASE IN CASH (13,660) (7,141) CASH AT JANUARY 1 35,816 17,906 -------- -------- CASH AT SEPTEMBER 30 $ 22,156 $ 10,765 ======== ======== See notes to consolidated financial statements.
5 AIRBORNE FREIGHT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 1997 (Unaudited) NOTE A - SUMMARY OF FINANCIAL STATEMENT PREPARATION: The consolidated financial statements included herein are unaudited but include all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations and cash flows for the interim periods reported. Certain amounts for prior periods have been reclassified to conform to the 1997 presentation. NOTE B - LONG-TERM DEBT: Long-term debt consists of the following:
September 30 December 31 ------------ ------------ 1997 1996 ---- ---- (In thousands) Senior debt: Revolving bank credit $ 40,000 $ 145,000 Notes payable 31,200 43,500 Senior notes 200,000 200,000 Revenue bonds 13,200 13,200 Other debt 7,860 8,093 --------- --------- 292,260 409,793 Subordinated debt: Convertible subordinated debentures -- 115,000 --------- --------- Total long-term debt 292,260 524,793 Less current portion 371 353 --------- --------- $ 291,889 $ 524,440 ========= =========
In August 1997, the Company called for the redemption of its 6 3/4% convertible subordinated debentures due in 2001, of which approximately $114.6 million was outstanding. The conversion of common shares during the quarter resulted in the issuance of 3,236,938 shares of common stock as substantially all debenture holders elected conversion rather than redemption. NOTE C - EARNINGS PER COMMON SHARE: Primary earnings per common share are based upon the weighted average number of common shares outstanding during the interim period plus dilutive common equivalent shares applicable to the assumed exercise of outstanding stock options. Fully diluted earnings per share for the three and nine months ended September 30, 1997 assumes conversion of the Company's convertible subordinated debentures as of the beginning of the period as well as the dilutive common equivalent shares applicable to the assumed exercise of stock options. Net earnings as adjusted for the elimination of interest expense, net of applicable taxes, relative to the assumed conversion was $47,459,000 for the three month period and $92,249,000 for the nine month period. 6 Fully diluted earnings per share for the three months and nine months ended September 30, 1996 were the same as primary earnings per share. Average shares outstanding used in earnings per share computations were as follows:
Three Months Ended Nine Months Ended ------------------ ----------------- September 30 September 30 ------------ ------------ 1997 1996 1997 1996 ---- ---- ---- ---- AVERAGE SHARES OUTSTANDING Primary 22,759 21,253 22,079 21,299 Fully Diluted 25,414 21,253 25,372 21,300
In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (SFAS) No. 128, "Earnings per Share", which will be effective for the Company's fourth quarter interim and fiscal 1997 earnings per share disclosures. SFAS No. 128 changes the calculation of earnings per share as previously prescribed by APB Opinion No. 15 and requires the related disclosure of basic and diluted earnings per share. Earnings per share would have been as follows if provisions of this standard had been adopted as of September 30, 1997:
Three Months Ended Nine Months Ended ------------------ ------------------ September 30 September 30 ------------ ------------ 1997 1996 1997 1996 ---- ---- ---- ---- EARNINGS PER SHARE Basic $2.10 $ .22 $4.13 $ .78 Diluted $1.87 $ .22 $3.67 $ .78
7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS: The Company's operating performance in the third quarter and the first nine months of 1997 resulted in record operating income and net earnings which were significantly higher than the comparable periods of 1996. Strong growth in domestic shipments and a growth rate in domestic revenues that exceeded the growth rate in shipments were positive factors impacting year to date 1997 operating results. Additionally, the Company realized a positive financial impact during the third quarter as a result of a strike at United Parcel Service (UPS) during August 1997. Net earnings available to common shareholders for the third quarter of 1997 were $46.6 million, or $2.05 per share on revenues of $789 million, compared to $4.6 million, or $0.22 per share on revenues of $612 million, for the third quarter of 1996. Net earnings for the first nine months of 1997 were $89.3 million, or $4.04 per share on revenues of $2.157 billion compared to $16.5 million, or $0.78 per share on revenues of $1.832 billion for the corresponding period in 1996. Earnings per share on a fully diluted basis for the third quarter of 1997 and 1996 were $1.87 and $0.22, respectively, and for the first nine months of 1997, were $3.64 compared to $0.78 for the corresponding period in 1996. The following table sets forth selected shipment and revenue data for the periods indicated:
Three Months Ended Nine Months Ended ------------------ ----------------- September 30 September 30 ------------ % ----------- % 1997 1996 Change 1997 1996 Change ---- ---- ------ ---- ---- ------ Shipments (in thousands): Domestic Overnight 45,675 36,522 25.1% 127,601 108,301 17.8% Next Afternoon Service 14,026 8,796 N/M 39,907 16,894 N/M Second Day Service 19,482 17,577 N/M 51,948 63,279 N/M 100 Lbs. & Over 96 73 31.5% 250 221 13.1% ------ ------ ------- ------- Total Domestic 79,279 62,968 25.9% 219,706 188,695 16.4% ------ ------ ------- ------- International Express 1,351 1,124 20.2% 3,803 3,311 14.9% Freight 118 127 (7.1)% 356 423 (15.8)% ------ ------ ------- ------- Total International 1,469 1,251 17.4% 4,159 3,734 11.4% ------ ------ ------- ------- Total Shipments 80,748 64,219 25.7% 223,865 192,429 16.3% ====== ====== ======= ======= Average Pounds per Shipment: Domestic 4.71 4.43 6.3% 4.45 4.45 -- International 50.32 51.77 (2.8)% 51.33 55.78 (8.0)% Average Revenue per Pound: Domestic $1.82 $1.84 (1.1)% $1.89 $1.82 3.8% International $1.34 $1.38 (2.9)% $1.36 $1.33 2.3% Average Revenue per Shipment: Domestic $8.67 $8.26 5.0% $8.46 $8.20 3.2% International $68.79 $71.93 (4.4)% $70.99 $75.02 (5.4)%
8 As the result of a strike at UPS during August, the Company's operating results in the third quarter of 1997 were positively impacted by the additional shipment volume handled. The Company estimates the incremental revenues realized were $50 to $55 million, and that the impact in earnings per share was in the range of $0.60 to $0.70. It must be emphasized that these are estimates that can only be arrived at by assuming what level of business the Company would have handled had there been no strike at UPS. Domestic revenues in the first nine months of 1997 included $15.5 million of fuel surcharge revenue realized in the first half of 1997. The fuel surcharge was implemented on February 17, 1997 for most domestic business and was repealed effective July 1, 1997. This fuel surcharge revenue accounted for approximately $0.36 per primary share ($0.31 fully diluted) in the first nine months of 1997. The operating results and trends discussed below include the impacts related to the strike and the fuel surcharge. Even without the net benefit of these events, however, operating results for the third quarter and for the first nine months of 1997 trended significantly higher than 1996. Domestic revenue growth for the third quarter and first nine months of 1997 continued to be positively impacted by strong growth in higher yielding overnight shipments and the Company's continuing focus on yield enhancement. Domestic revenues increased 31.7% in the third quarter of 1997 and 19.9% for the first nine months of 1997 compared to the corresponding periods in 1996. The average revenue per domestic shipment increased 5.0% to $8.67 in the third quarter of 1997 compared to the third quarter of 1996. Overnight shipments accounted for over 58.1% of total domestic shipments in the first nine months of 1997 compared to 57.4% for the first nine months of 1996. The higher yielding overnight shipments increased 25.1% and 17.8% in the third quarter of 1997 and in the first nine months of 1997, respectively, compared to comparable 1996 periods. The strong growth in the overnight product had a positive impact on domestic revenue growth. The Company's deferred service products increased 14.6% on a combined basis in the first nine months of 1997 compared to 18.7% in the corresponding period of 1996. Beginning in 1995 and continuing into 1996, the Company redefined its deferred service product through the creation of two distinct levels of service, Next Afternoon Service (NAS) and Second Day Service (SDS), replacing the Select Delivery Service category. This redefinition was not completed until late 1996, which makes comparison of separate NAS and SDS results for the first nine months 1997 to 1996 not meaningful. International shipments increased 17.4% and 11.4% in the third quarter and first nine months of 1997, respectively, compared to the same periods in 1996. International revenues grew 12.3% in the third quarter of 1997 and 5.4% in the first nine months of 1997 compared to the prior year. International revenue per shipment and the average weight per shipment decreased as a result of the decrease in higher yielding freight shipments in the third quarter and the first nine months of 1997 compared to 1996. Operating expenses as a percentage of revenues were 92.1% for the first nine months of 1997 compared to 97.1% in the first nine months of 1996 and 96.8% for all of 1996. Operating cost per shipment handled decreased 4.1% to $8.87 for the first nine months 1997 compared to the first nine months of 1996. The operating cost per shipment for the third quarter of 1997 decreased 5.9% to $8.73, compared to the third quarter of 1996 while operating expense as a percentage of revenues decreased to 89.4%. The Company experienced a 14.2% improvement in productivity for the third quarter of 1997, compared to the third quarter of 1996, as measured by shipments handled per paid employee hour while productivity improvement for the first nine months of the year improved approximately 10.3% over the corresponding period of 1996. Very strong productivity improvement and continued emphasis on cost control, along with the added volume from the 9 UPS strike, were significant factors having a positive impact on 1997 operating results. Comparisons of certain operating expense components are discussed below. Transportation purchased decreased as a percentage of revenues to 31.5% in the first nine months of 1997 compared to 33.4% in the comparable period of 1996. This decrease was primarily due to commercial airline costs which, although higher in total, were lower as a percentage of total revenues in the first nine months of 1997 due to the lower growth in international freight shipments discussed above. The suspension of the Federal Aviation Excise Tax reduced costs in the first nine months of 1996 by $14.7 million compared to a $4.3 million benefit in the first nine months of 1997. The Aviation Excise Tax moratorium in 1997 was effective through March 6, 1997, subsequent to which the tax became effective once again. Flight operations and maintenance expense as a percentage of revenues during the first nine months of 1997 was 14.6%, compared to 15.6% in the first nine months of 1996, and 14.1% in the third quarter of 1997 compared to 15.9% in 1996. The average aviation fuel price for the first nine months and third quarter of 1997 was $0.74 per gallon and $0.70 per gallon, respectively, compared to $0.72 per gallon and $0.73 per gallon for the comparable periods of 1996. Aviation fuel consumption increased to 125.1 million gallons in the first nine months of 1997, a 5.2% increase over the first nine months of 1996. General and administrative expense as a percentage of revenues during the first nine months of 1997 was 8.1% compared to 7.4% in the first nine months of 1996. This increase was primarily due to approximately $18.2 million of incremental accrued profit sharing costs in the first nine months of 1997 compared to the corresponding period of 1996. The increase is a result of the improved operating results in 1997. The Company's effective tax rate was 39.5% in the first nine months of 1997 compared to 40.5% in the first nine months of 1996 and 40.3% for all of 1996. The Company anticipates the annual effective tax rate for 1997 will be comparable to that experienced for the first nine months. LIQUIDITY AND CAPITAL RESOURCES: Cash provided by operations has increased significantly for the first nine months of 1997 to $236 million, compared to $141 million in the first nine months of 1996. This increased liquidity is primarily the result of the significant increase in profitability in 1997. Capital expenditures continue to be a primary factor affecting the financial condition of the Company. The Company anticipates total capital expenditures to approximate $215 million in 1997. During the first nine months of 1997, total capital expenditures net of dispositions were $131 million. Cash provided by operations was the primary source for funding capital expenditures. In 1997, the Company's strong operating cashflow has become the major source of liquidity, whereas, the Company's $250 million unsecured revolving bank credit agreement has traditionally been used as the major source of liquidity for periods between other financing transactions. The Company also has available $65 million under unsecured uncommitted money market lines of credit with several banks, used in conjunction with the revolving credit agreement to facilitate settlement and accommodate short- term borrowing fluctuations. Reliance on the bank facilities has decreased commensurately, with a total of $71.2 million outstanding at September 30, 1997, compared to $188.5 million outstanding at December 31, 1996 under the revolving bank credit and money market credit lines. In August 1997, the Company called for the redemption of its 6-3/4% convertible subordinated debentures due 2001, of which $114.6 million was outstanding. Substantially all of the debenture holders elected conversion to common stock rather than redemption. 10 As a result of this conversion, the Company's ratio of total long-term debt to capital decreased significantly to 29.5% as of September 30, 1997, compared to 52.6% at December 31, 1996. In management's opinion, the available capacity under the bank credit agreements coupled with internally generated cash flow from remaining 1997 operations should provide adequate flexibility to finance anticipated capital expenditures for the balance of 1997. 11 PART II. OTHER INFORMATION -------------------------- Item 6. Exhibits and Reports or Form 8-K. (a) Exhibits Exhibit No. 27 - Financial Data Schedule 12 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: AIRBORNE FREIGHT CORPORATION ---------------------------- (Registrant)
Date: 11/13/97 /s/Roy C. Liljebeck -------- ------------------- Roy C. Liljebeck Executive Vice President, Chief Financial Officer Date: 11/13/97 /s/Lanny H. Michael -------- ------------------- Lanny H. Michael Senior Vice President, Treasurer and Controller
EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 22,156 0 355,414 10,040 36,693 443,941 1,759,020 878,734 1,348,751 321,408 0 0 0 25,115 614,186 1,348,751 0 2,156,904 0 0 1,985,702 0 23,522 147,680 58,400 89,280 0 0 0 89,280 4.04 3.64
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