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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, 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
 
 
 
 
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 September 30, 2002
  
48,423,360 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
September 30,
     
Nine Months Ended
September 30,
  
    
2002
     
2001
     
2002
     
2001
  
REVENUES:
                                    
Domestic
   
$
748,609
 
   
$
682,522
 
   
$
2,180,589
 
   
$
2,132,856
 
International
   
 
94,152
 
   
 
90,266
 
   
 
261,143
 
   
 
275,678
 
    
  
  
  
    
 
842,761
 
   
 
772,788
 
   
 
2,441,732
 
   
 
2,408,534
 
OPERATING EXPENSES:
                                    
Transportation purchased
   
 
285,455
 
   
 
254,080
 
   
 
801,853
 
   
 
787,204
 
Station and ground operations
   
 
282,301
 
   
 
257,326
 
   
 
812,378
 
   
 
802,480
 
Flight operations and maintenance
   
 
134,886
 
   
 
133,286
 
   
 
392,783
 
   
 
428,658
 
General and administrative
   
 
64,326
 
   
 
61,129
 
   
 
192,977
 
   
 
194,017
 
Sales and marketing
   
 
22,862
 
   
 
21,689
 
   
 
68,630
 
   
 
69,020
 
Depreciation and amortization
   
 
49,547
 
   
 
51,655
 
   
 
145,399
 
   
 
156,977
 
Federal legislation compensation
   
 
—  
 
   
 
(7,800
)
   
 
—  
 
   
 
(7,800
)
    
  
  
  
    
 
839,377
 
   
 
771,365
 
   
 
2,414,020
 
   
 
2,430,556
 
    
  
  
  
EARNINGS (LOSS) FROM OPERATIONS
   
 
3,384
 
   
 
1,423
 
   
 
27,712
 
   
 
(22,022
)
OTHER INCOME (EXPENSE):
                                    
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
   
 
196
 
   
 
8,779
 
   
 
2,499
 
   
 
11,355
 
    
  
  
  
EARNINGS (LOSS) BEFORE INCOME TAXES
   
 
(4,808
)
   
 
3,271
 
   
 
5,277
 
   
 
(32,535
)
INCOME TAX EXPENSE (BENEFIT)
   
 
(1,750
)
   
 
1,558
 
   
 
2,610
 
   
 
(10,892
)
    
  
  
  
NET EARNINGS (LOSS)
   
$
(3,058
)
   
$
1,713
 
   
$
2,667
 
   
$
(21,643
)
    
  
  
  
NET EARNINGS (LOSS) PER SHARE:
                                    
BASIC
   
$
(0.06
)
   
$
0.04
 
   
$
0.06
 
   
$
(0.45
)
    
  
  
  
DILUTED
   
$
(0.06
)
   
$
0.04
 
   
$
0.05
 
   
$
(0.45
)
    
  
  
  
DIVIDENDS PER SHARE
   
$
0.04
 
   
$
0.04
 
   
$
0.12
 
   
$
0.12
 
    
  
  
  
 
See notes to consolidated financial statements.

1

AIRBORNE, INC. AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
 
    
September 30, 2002
     
December 31, 2001
  
    
(Unaudited)
         
ASSETS
                  
CURRENT ASSETS:
                  
Cash and cash equivalents
   
$
332,976
 
   
$
201,500
 
Trade accounts receivable, less allowance of $11,939 and $11,509
   
 
254,940
 
   
 
126,040
 
Spare parts and fuel inventory
   
 
36,972
 
   
 
38,413
 
Refundable income taxes
   
 
2,739
 
   
 
27,161
 
Deferred income tax assets
   
 
33,967
 
   
 
30,572
 
Prepaid expenses and other
   
 
31,262
 
   
 
28,021
 
    
  
TOTAL CURRENT ASSETS
   
 
692,856
 
   
 
451,707
 
PROPERTY AND EQUIPMENT, NET
   
 
1,186,703
 
   
 
1,247,373
 
EQUIPMENT DEPOSITS and OTHER ASSETS
   
 
39,950
 
   
 
47,764
 
    
  
TOTAL ASSETS
   
$
1,919,509
 
   
$
1,746,844
 
    
  
LIABILITIES AND SHAREHOLDERS’ EQUITY
                  
CURRENT LIABILITIES:
                  
Accounts payable
   
$
147,718
 
   
$
141,873
 
Salaries, wages and related taxes
   
 
93,141
 
   
 
75,458
 
Accrued expenses
   
 
133,737
 
   
 
145,997
 
Current portion of long-term obligations
   
 
109,691
 
   
 
107,410
 
    
  
TOTAL CURRENT LIABILITIES
   
 
484,287
 
   
 
470,738
 
LONG-TERM OBLIGATIONS
   
 
371,167
 
   
 
218,053
 
DEFERRED INCOME TAX LIABILITIES
   
 
146,555
 
   
 
143,526
 
POST RETIREMENT LIABILITIES
   
 
38,529
 
   
 
39,423
 
OTHER LIABILITIES
   
 
49,283
 
   
 
40,888
 
COMMITMENTS AND CONTINGENCIES
                  
SHAREHOLDERS’ EQUITY:
                  
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 51,657,886 and 51,375,711 shares
   
 
51,658
 
   
 
51,376
 
Additional paid-in capital
   
 
308,812
 
   
 
304,984
 
Retained earnings
   
 
537,169
 
   
 
540,544
 
Accumulated other comprehensive loss
   
 
(8,093
)
   
 
(2,820
)
    
  
    
 
889,546
 
   
 
894,084
 
Treasury stock, 3,234,526 and 3,240,526 shares, at cost
   
 
(59,858
)
   
 
(59,868
)
    
  
    
 
829,688
 
   
 
834,216
 
    
  
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
   
$
1,919,509
 
   
$
1,746,844
 
    
  
 
See notes to consolidated financial statements.

2

AIRBORNE, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
 
    
Nine Months Ended September 30,
  
    
2002
     
2001
  
OPERATING ACTIVITIES:
                  
Net earnings (loss)
   
$
2,667
 
   
$
(21,643
)
Adjustments to reconcile net earnings to net cash provided by operating activities:
                  
Depreciation and amortization
   
 
145,399
 
   
 
156,977
 
Deferred income taxes
   
 
(366
)
   
 
12,010
 
Postretirement obligations
   
 
(20,190
)
   
 
7,085
 
Other
   
 
6,752
 
   
 
(10,947
)
    
  
CASH PROVIDED BY OPERATIONS
   
 
134,262
 
   
 
143,482
 
Change in:
                  
Receivable securitization facility
   
 
(100,000
)
   
 
50,000
 
Trade accounts receivable
   
 
(28,900
)
   
 
44,917
 
Inventories and prepaid expenses
   
 
(1,800
)
   
 
(19,403
)
Refundable income taxes
   
 
24,422
 
   
 
(2,348
)
Accounts payable
   
 
5,845
 
   
 
(52,416
)
Accrued expenses, salaries and taxes payable
   
 
24,718
 
   
 
24,532
 
    
  
NET CASH PROVIDED BY OPERATING ACTIVITIES
   
 
58,547
 
   
 
188,764
 
INVESTING ACTIVITIES:
                  
Additions to property and equipment
   
 
(71,154
)
   
 
(98,342
)
Proceeds from sale of securities