-----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, AyUBhRlv64xJmEZjbgUokhyqayB2A73Kj4d/kQTXyWDg9LHc03PtDf5O9yShEdHB +WjpZUFycqpTQvvUg724NQ== 0000003000-97-000014.txt : 19970814 0000003000-97-000014.hdr.sgml : 19970814 ACCESSION NUMBER: 0000003000-97-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 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: 1934 Act SEC FILE NUMBER: 001-06512 FILM NUMBER: 97658317 BUSINESS ADDRESS: STREET 1: P O BOX 662 CITY: SEATTLE STATE: WA ZIP: 98111 BUSINESS PHONE: 2062854600 10-Q 1 6/30/97 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 June 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 275,150 treasury shares) as of June 30, 1997 21,410,329 shares ----------------- 2 AIRBORNE FREIGHT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF NET EARNINGS (Dollars in thousands except per share data) (Unaudited)
Three Months Ended Six Months Ended ------------------ ---------------- June 30 June 30 ------- ------- 1997 1996 1997 1996 ---- ---- ---- ---- REVENUES: Domestic $611,999 $524,055 $1,174,110 $1,030,176 International 100,785 98,343 194,196 190,131 -------- -------- ---------- ---------- 712,784 622,398 1,368,306 1,220,307 OPERATING EXPENSES: Transportation purchased 228,663 207,207 437,553 409,739 Station and ground operations 210,856 193,346 411,106 385,663 Flight operations and maintenance 100,913 92,973 204,696 187,742 General and administrative 57,271 47,903 109,100 91,165 Sales and marketing 17,901 15,030 34,079 30,478 Depreciation and amortization 42,210 40,124 84,481 78,985 -------- -------- ---------- ---------- 657,814 596,583 1,281,015 1,183,772 -------- -------- ---------- ---------- EARNINGS FROM OPERATIONS 54,970 25,815 87,291 36,535 INTEREST, NET 8,049 8,191 16,496 16,532 -------- -------- ---------- ---------- EARNINGS BEFORE INCOME TAXES 46,921 17,624 70,795 20,003 INCOME TAXES 18,634 6,935 28,134 8,000 -------- -------- ---------- ---------- NET EARNINGS 28,287 10,689 42,661 12,003 PREFERRED STOCK DIVIDENDS -- 68 -- 136 -------- -------- ---------- ---------- NET EARNINGS AVAILABLE $ 28,287 $ 10,621 $ 42,661 $ 11,867 TO COMMON SHAREHOLDERS ======== ======== ========== ========== NET EARNINGS PER COMMON SHARE: Primary $ 1.30 $ .50 $ 1.97 $ .56 ======== ======== ========== ========== Fully Diluted $ 1.17 $ .48 $ 1.78 $ .56 ======== ======== ========== ========== DIVIDENDS PER COMMON SHARE $ .075 $ .075 $ .15 $ .15 ======== ======== ========== ==========
See notes to consolidated financial statements. 3 AIRBORNE FREIGHT CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
June 30 December 31 ------- ----------- 1997 1996 ---- ---- (Unaudited) ASSETS ------ CURRENT ASSETS: Cash $ 13,857 $ 35,816 Trade accounts receivable, less allowance of $8,855 and $8,345 306,753 287,515 Spare parts and fuel inventory 37,734 34,761 Deferred income tax assets 14,646 15,012 Prepaid expenses and other 28,781 42,118 ---------- ---------- TOTAL CURRENT ASSETS 401,771 415,222 PROPERTY AND EQUIPMENT, NET 865,005 866,627 EQUIPMENT DEPOSITS and OTHER ASSETS 24,222 25,573 ---------- ---------- TOTAL ASSETS $1,290,998 $1,307,422 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Accounts payable $ 138,376 $ 139,036 Salaries, wages and related taxes 61,465 63,835 Accrued expenses 88,558 68,759 Income taxes payable 5,658 1,782 Current portion of debt 365 353 ---------- ---------- TOTAL CURRENT LIABILITIES 294,422 273,765 LONG-TERM DEBT 320,285 409,440 SUBORDINATED DEBT 115,000 115,000 DEFERRED INCOME TAX LIABILITIES 50,837 40,816 OTHER LIABILITIES 36,708 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 21,685,479 and 21,621,596 shares 21,686 21,622 Additional paid-in capital 192,675 190,405 Retained earnings 260,233 220,774 ---------- ---------- 474,594 432,801 Treasury stock, 275,150 and 315,150 shares, at cost (848) (971) ---------- ---------- 473,746 431,830 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,290,998 $1,307,422 ========== ==========
See notes to consolidated financial statements. 4 AIRBORNE FREIGHT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited)
Six Months Ended ---------------- June 30 ---------------- 1997 1996 ---- ---- OPERATING ACTIVITIES: Net Earnings $ 42,661 $ 12,003 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 78,116 72,965 Provision for aircraft engine overhauls 6,365 6,020 Deferred income taxes 10,387 211 Other 229 147 -------- -------- CASH PROVIDED BY OPERATIONS 137,758 91,346 Change in: Receivables (19,238) (3,667) Inventories and prepaid expenses (7,636) 1,108 Accounts payable (660) (13,385) Accrued expenses, salaries & taxes payable 22,405 6,032 -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 132,629 81,434 INVESTING ACTIVITIES: Additions to property and equipment (78,716) (85,621) Proceeds from insurance on aircraft accident 18,000 -- Dispositions of property and equipment 2,615 52 Expenditures for engine overhauls (6,036) (6,966) Other 537 (998) -------- -------- NET CASH USED IN INVESTING ACTIVITIES (63,600) (93,533) FINANCING ACTIVITIES: Proceeds (payments) on bank notes, net (89,000) 14,200 Principal payments on debt (143) (4,912) Proceeds from common stock issuance 1,357 574 Dividends paid (3,202) (3,307) -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES (90,988) 6,555 -------- -------- NET DECREASE IN CASH (21,959) (5,544) CASH AT JANUARY 1 35,816 17,906 -------- -------- CASH AT JUNE 30 $ 13,857 $ 12,362 ======== ========
See notes to consolidated financial statements. 5 AIRBORNE FREIGHT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 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:
June 30 December 31 ------- ----------- 1997 1996 ---- ---- (In thousands) Senior debt: Revolving bank credit $ 75,000 $145,000 Notes payable 24,500 43,500 Senior notes 200,000 200,000 Revenue bonds 13,200 13,200 Other debt 7,950 8,093 -------- -------- 320,650 409,793 Subordinated debt: Convertible subordinated debentures 115,000 115,000 -------- -------- Total long-term debt 435,650 524,793 Less current portion 365 353 -------- -------- $435,285 $524,440 ======== ========
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 months and six months ended June 30, 1997, assumes conversion of the Company's convertible subordinated debentures 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 $29,352,000 for the three month period and $44,791,000 for the six month period. Fully diluted earnings per share for the three months ended June 30, 1996, assumes conversion of the Company's redeemable preferred stock and convertible subordinated debentures as well as the dilutive common equivalent shares applicable to the assumed exercise of stock options. Net earnings as adjusted for the elimination of preferred stock dividends and interest expense, net of applicable taxes, relative to the assumed conversion was $11,753,000 for the three month period. Fully diluted earnings per share for the six month period ended June 30, 1996 was the same a primary earnings per share. 6 Average shares outstanding used in earnings per share computations were as follows:
Three Months Ended Six Months Ended ------------------ ---------------- June 30 June 30 ------- ------- 1997 1996 1997 1996 ---- ---- ---- ---- AVERAGE SHARES OUTSTANDING Primary 21,828 21,316 21,690 21,321 Fully Diluted 25,182 24,728 25,142 21,322
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 and disclosures of earnings per share as previously prescribed by APB Opinion No. 15. The adoption of this standard will not materially change earnings per share amounts disclosed in the Company's consolidated financial statements. 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS: The Company's operating performance in the second quarter and the first six months of 1997 resulted in record earnings and operating income and net earnings significantly higher than the comparable periods of 1996. Strong growth in domestic shipments, a growth rate in domestic revenue that exceeded the growth rate in shipments, and a domestic fuel surcharge were positive factors impacting operating results Net earnings available to common shareholders for the second quarter of 1997 were $28.3 million, or $1.30 per share on revenues of $713 million, compared to $10.6 million, or $.50 per share on revenues of $622 million, for the second quarter of 1996. Net earnings for the first six months of 1997 were $42.7 million, or $1.97 per share on revenues of $1.368 billion, compared to $11.9 million, or $.56 per share on revenues of $1.220 billion for the corresponding period in 1996. Earnings per share on a fully diluted basis for the second quarter of 1997 and 1996 were $1.17 and $.48, respectively, and for the first six months of 1997 were $1.78 compared to $.56 for the corresponding period in 1996. The following table sets forth selected shipment and revenue data for the periods indicated:
Three Months Ended Six Months Ended ------------------ ---------------- June 30 June 30 -------- % ------- % 1997 1996 Change 1997 1996 Change ---- ---- ------ ---- ---- ------ Shipments (in thousands): Domestic Overnight 42,287 36,105 17.1% 81,926 71,779 14.1% Next Afternoon Service 13,717 5,938 N/M 25,881 8,098 N/M Second Day Service 16,657 21,165 N/M 32,466 45,702 N/M ------ ------ ------ ------ Total Deferred Services 30,374 27,103 12.1% 58,347 53,800 8.5% 100 Lbs. & Over 80 75 6.7% 154 148 4.1% ------ ------ ------- ------- Total Domestic 72,741 63,283 14.9% 140,427 125,727 11.7% ------ ------ ------- ------- International Express 1,271 1,129 12.6% 2,452 2,187 12.1% Freight 122 150 (18.7)% 238 296 (19.6)% ------ ------ ------- ------- Total International 1,393 1,279 8.9% 2,690 2,483 8.3% ------ ------ ------- ------- Total Shipments 74,134 64,562 14.8% 143,117 128,210 11.6% ====== ====== ======= ======= Average Pounds per Shipment: Domestic 4.31 4.46 (3.4)% 4.31 4.45 (3.2)% International 53.63 57.22 (6.3)% 51.88 57.80 (10.2)% Average Revenue per Pound: Domestic $1.94 $1.82 6.6% $1.93 $1.81 6.6% International $1.32 $1.32 0.0% $1.37 $1.30 5.4% Average Revenue per Shipment: Domestic $8.40 $ 8.25 1.8% $8.35 $ 8.17 2.2% International $72.35 $76.89 (5.9)% $72.19 $76.57 (5.7)%
8 Domestic revenue growth for the second quarter and first half 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 16.8% in the second quarter of 1997 and 14.0% for the first half of 1997 compared to the corresponding periods in 1996. The average revenue per domestic shipment increased 1.8% to $8.40 in the second quarter of 1997 compared to the second quarter of 1996. Domestic revenues included $15.5 million of fuel surcharge revenue in the first half of 1997, including $10.6 million in the second quarter 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 $.11 per domestic shipment and approximately $.36 per primary share ($.31 fully diluted) in the first half of 1997. Overnight shipments accounted for over 58.3% of total domestic shipments in the first half of 1997 compared to 57.1% for the first half of 1996. The higher yielding overnight shipments increased 17.1% and 14.1% in the second quarter of 1997 and in the first half 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 8.5% on a combined basis in the first half of 1997 compared to 21.5% 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 half 1997 to 1996 not meaningful. International shipments increased 8.9% and 8.3% in the second quarter and first six months of 1997, respectively, compared to the same periods in 1996. International revenues grew 2.5% in the second quarter of 1997 and 2.1% in the first half 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 second quarter and the first half of 1997 compared to 1996 Operating expenses as a percentage of revenues were 93.6% for the first six months of 1997 compared to 97.0% in the first six months of 1996 and 96.8% for all of 1996. Operating cost per shipment handled decreased 3.0% to $8.95 for the first six months 1997 compared to the first six months of 1996. The operating cost per shipment for the second quarter of 1997 decreased 4.0% to $8.87, compared to the second quarter of 1996 while operating expense as a percentage of revenues decreased to 92.3%. The operating margin of 7.7% in the second quarter of 1997 was the highest in a number of years. The Company experienced a 9.0% improvement in productivity for the second quarter of 1997, compared to the second quarter of 1996, as measured by shipments handled per paid employee hour while productivity improvement for the first half of the year improved approximately 8.2% over the corresponding period of 1996. Very strong productivity improvement and continued emphasis on cost control 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 32.0% in the first six months of 1997 compared to 33.6% 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 half 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 half of 1996 by $11.0 million compared to a $4.3 million benefit in the first half of 1997. The Aviation Excise Tax moratorium was effective through March 6, 1997, subsequent to which the tax became effective once again. Station and ground expense as a percentage of revenues was 30.0% in the first half of 1997 compared to 31.6% in the first half of 1996. For the second quarter of 1997, this category of expense as a percentage of revenues was 29.6% compared to 31.1% in 1996. This category of expense was negatively impacted during the first quarter of 1996 by the weather, resulting in lower productivity and additional costs. 9 Flight operations and maintenance expense as a percentage of revenues during the first half of 1997 was 15.0%, compared to 15.4% in the first six months of 1996, and was 14.2% in the second quarter of 1997 compared to 14.9% in 1996. The average aviation fuel price for the first six months and second quarter of 1997 was $.76 per gallon and $.70 per gallon, respectively, compared to $.71 per gallon and $.73 per gallon for the comparable periods of 1996. Aviation fuel consumption increased to 81.2 million gallons in the first half of 1997, a 2.3% increase over the first half of 1996. General and administrative expense as a percentage of revenues during the first half of 1997 was 8.0% compared to 7.5% in the first half of 1996. This increase was primarily due to approximately $10.4 million of incremental accrued profit sharing and bonus costs in the first half of 1997 compared to the corresponding period of 1996. The increase is a result of the improved operating results in 1997. The increase in depreciation and amortization expense in the first half of 1997 is due in large part to the increased number of aircraft in service since the first half of 1996. The Company's effective tax rate was 39.7% in the first half of 1997 compared to 40.0% in the first half of 1996 and 40.3% for all of 1996. The Company is encouraged by the positive domestic yield environment as the Company and competitors are focused on improving operating margins. If sustained, this environment should have a positive effect through the balance of the year. The Company also expects to continue its focus on improving international margins. Further, the strength of the U.S. economy will have an impact on the results of operations for the balance of 1997. As disclosed in the Company's 1996 Annual Report on Form 10-K, the Company's agreement with its pilots became amendable on July 31, 1995. The Company concluded negotiations with the pilot's during the second quarter and an amended agreement, effective through July 31, 2000, was ratified and signed on June 25, 1997. The Company had made adequate accruals in previous periods to cover the cost of the agreement retroactive to July 31, 1995. LIQUIDITY AND CAPITAL RESOURCES: Capital expenditures and associated financing continue to be the primary factors affecting the financial condition of the Company. The Company anticipates total capital expenditures to approximate $215 million in 1997, of which a significant portion is related to the acquisition and modification of aircraft. During the first six months of 1997, total capital expenditures net of dispositions were $76 million. The principal source of liquidity for funding capital expenditures during the first six months of 1997 was cash provided by operations which was $133 million compared to $81 million for the same period of 1996. The Company's $250 million unsecured revolving bank credit agreement has traditionally been used as a 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. At June 30, 1997, a total of $99.5 million was outstanding under the revolving bank credit and money market credit lines. 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. 10 PART II. OTHER INFORMATION -------------------------- Item 6. Exhibits and Reports or Form 8-K. (a) Exhibits - Exhibit No. 27 - Financial Data Schedule 11 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: 8/13/97 /s/Roy C. Liljebeck ------- ------------------------- Roy C. Liljebeck Executive Vice President, Chief Financial Officer Date: 8/13/97 /s/Lanny H. Michael ------- ------------------------- Lanny H. Michael Senior Vice President, Treasurer and Controller
EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 13,857 0 315,608 8,855 37,734 401,771 1,724,342 859,337 1,290,998 294,422 435,285 0 0 21,686 452,060 1,290,998 0 1,368,306 0 1,281,015 0 0 16,496 70,795 28,134 42,661 0 0 0 42,661 1.97 1.78
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