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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended Commission file number
December 31, 1993 1-6512
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AIRBORNE FREIGHT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 91-0837469
(State of Incorporation) (I.R.S. Employer Identification No.)
Airborne Freight Corporation
3101 Western Avenue
P.O. Box 662
Seattle, WA 98111
(Address of principal executive offices)
Registrant's telephone number including area code: 206-285-4600
Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange
Title of each class on which Registered
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Common Stock, Par Value New York Stock Exchange
$1.00 per share Pacific Stock Exchange
6 3/4% Convertible Subordinated New York Stock Exchange
Debentures Due August 15, 2001
Rights to Purchase Series A New York Stock Exchange
Cumulative Preferred Stock
Securities registered pursuant to Section 12(g) of the Act:
NONE
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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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.( )
As of February 28, 1994, 19,472,603 shares (net of 315,150 treasury
shares) of the registrant's Common Stock were outstanding and the aggregate
market value of the voting stock held by non-affiliates of the registrant
(based on the closing price on that date on the New York Stock Exchange) was
approximately $710,562,300.(1)
Documents Incorporated by Reference
Portions of the 1993 Annual Report to Shareholders are incorporated by
reference into Part I and Part II.
Portions of the Proxy Statement for the 1994 Annual Meeting of
Shareholders to be held April 26, 1994 are incorporated by reference into Part
III.
(1) Excludes value of shares of Common Stock held of record by directors
and executive officers at February 28, 1994. Includes shares held by
certain depository organizations. Exclusion of shares held by any
person should not be construed to indicate that such person possesses
the power, direct or indirect, to direct or cause the direction of the
management or policies of the registrant, or that such person is
controlled by or is under common control with the registrant.
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AIRBORNE FREIGHT CORPORATION
1993 FORM 10-K ANNUAL REPORT
Table of Contents
Page
----
Part I
Item 1. Business 1
Item 2. Properties 13
Item 3. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 4a. Executive Officers of the Registrant 14
Part II
Item 5. Market for Registrant's Common Equity and Related 16
Stockholder Matters 16
Item 6. Selected Financial Data 16
Item 7. Management's Discussion and Analysis of Financial 16
Condition and Results of Operations 16
Item 8. Financial Statements and Supplementary Data 16
Item 9. Changes in and Disagreements With Accountants on 16
Accounting and Financial Disclosure
Part III
Item 10. Directors and Executive Officers of the Registrant 17
Item 11. Executive Compensation 17
Item 12. Security Ownership of Certain Beneficial Owners 17
and Management
Item 13. Certain Relationships and Related Transactions 17
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports 18
on Form 8-K
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PART I
ITEM 1. BUSINESS
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a) General Development of Business
-------------------------------
Airborne Freight Corporation (herein referred to as "Airborne Express"
or the "Company", which reference shall include its subsidiaries and their
assets and operations, unless the context clearly indicates otherwise) was
incorporated in Delaware on May 10, 1968. The Company is an air express
company and air freight forwarder that expedites shipments of all sizes to
destinations throughout the United States and most foreign countries.
The Company holds a certificate of registration issued by the United
States Patent and Trademark Office for the service mark AIRBORNE EXPRESS. Most
public presentation of the Company carries this name. The purpose of using
this trade name is to more clearly communicate to the market place the primary
nature of the business of the Company.
ABX Air, Inc., the Company's principal wholly-owned subsidiary (herein
referred to as "ABX" or the "Airline"), was incorporated in Delaware on January
22, 1980. ABX provides domestic express cargo service and cargo service to
Canada. The Company is the principal customer of ABX for this service.
b) Financial Information about Industry Segments
---------------------------------------------
None
c) Narrative Description of Business
---------------------------------
Airborne Express provides door-to-door express delivery of small
packages and documents throughout the United States and to and from most
foreign countries. The Company also acts as an international and domestic
freight forwarder for shipments of any size. The Company's strategy is to be
the low cost provider of express services for high volume corporate customers.
Domestic Operations
- -------------------
The Company's domestic operations primarily involve express
door-to-door delivery of small packages and documents weighing less than 100
pounds. Shipments consist primarily of business documents and other printed
matter, electronic and computer parts, machine parts, health care items, films
and videotapes, and other items for which speed and reliability of delivery are
important.
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The Company's primary service is its overnight express product. This
product, which comprised approximately 68% of the Company's domestic shipments
during 1993, generally provides for before noon delivery on the next business
day to most metropolitan cities in the United States. The Company also
provides Saturday and holiday pickup and delivery service for most cities.
The Company offers a deferred service product, Select Delivery Service
("SDS"), which provides for next afternoon or second day delivery. The SDS
product expands the Company's product offering and introduces new customers to
air express services. SDS service generally provides for shipments weighing
five pounds or less to be delivered on a next afternoon basis with shipments
weighing more than five pounds being delivered on a second day basis. SDS
shipments, which comprised approximately 31% of total domestic shipments during
1993, are generally lower priced than the overnight express product reflecting
the less time sensitive nature of the shipments.
While the Company's domestic airline system is designed primarily to
handle express shipments, any available capacity is also utilized to carry
shipments which the Company would normally move on other carriers in its role
as an air freight forwarder.
Pickup and Delivery
- -------------------
The Company accomplishes its door-to-door pickup and delivery service
using approximately 9,900 radio-dispatched delivery vans and trucks, of which
approximately 3,600 are owned by the Company. Independent contractors under
contract with the Company provide the balance of the pickup and delivery
services.
The Company's facilities are linked to FOCUS, a proprietary freight
tracking and message computer system which permits monitoring of overall system
performance and allows the Company to ascertain the status of a specific
shipment. FOCUS receives information in several ways including drivers' use of
hand-held scanners which read bar-coded information on shipping documents.
FOCUS provides many major customers direct access to the status of their
shipments 24 hours a day through the use of their own computer systems.
Because convenience is an important factor in attracting business from
less frequent shippers, the Company has an ongoing program to place drop boxes
in convenient locations. The Company has approximately 7,300 boxes in service.
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Sort Facilities
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The Company's main sort center is located in Wilmington, Ohio. As
express delivery volume has increased, the main sort center has been expanded.
The sort center currently has the capacity to handle 830,000 pieces during the
primary 2-1/2 hour nightly sort operation. On average, approximately 600,000
pieces were sorted each weekday night at the sort center during December 1993.
In addition to the sort facilities, the Wilmington location consists of a
Company-owned airpark (including airport facilities); maintenance, storage,
training and refueling facilities; and operations and administrative offices.
The Company also conducts a daylight sort operation at Wilmington.
The day sort services SDS shipments weighing in excess of five pounds that are
consolidated at certain regional hub facilities and either flown or trucked
into or out of Wilmington.
The operation of the Wilmington facility is critical to the Company's
business. The inability to use the Wilmington airport, because of bad weather
or other factors, would have a serious adverse effect on the Company's service.
However, contingency plans, including landing at nearby airports and
transporting packages to and from the sort center by truck, can be and have
been implemented to address temporary inaccessibility of the Wilmington
airport.
In addition to the main sort facility at Wilmington, ten regional hub
facilities have been established primarily to sort shipments originating and
having a destination within approximately a 300 mile radius of a regional hub.
In December 1993, approximately 65% and 13% of total shipment weight
was handled through the night sort and day sort operations at Wilmington,
respectively, with the remaining 22% being handled exclusively by the regional
hubs.
Shipment Routing
- ----------------
The logistical means of moving a shipment from its origin to
destination are determined by several factors. Shipments are routed
differently depending on shipment product type, weight, geographic distances
between origin and destination, and locations of Company stations relative to
the locations of sort facilities. Shipments generally are moved between
stations and sort facilities on either Company aircraft or contracted trucks.
Certain shipments are transported airport-to-airport on commercial air
carriers.
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Overnight express shipments and SDS shipments weighing five pounds or
less are picked up by local stations and generally consolidated with other
stations' shipments at Company airport facilities. Shipments that are not
serviced through regional hubs are loaded on Company aircraft departing each
weekday evening from various points within the United States and Canada. These
aircraft may stop at other airports to permit additional locations and feeder
aircraft to consolidate their cargo onto the larger aircraft before completing
the flight to the Wilmington hub. The aircraft are scheduled to arrive at
Wilmington between approximately 11:30 p.m. and 3:00 a.m. at which time the
shipments are sorted and reloaded. The aircraft are scheduled to depart before
6:30 a.m. and return to their applicable destinations in time to complete
scheduled next business morning or next afternoon service commitments. The
Wilmington hub also receives shipments via truck from selected stations in the
vicinity of the Wilmington hub for integration with the nightly sort process.
For the daylight sort operation, three aircraft return to Wilmington
from overnight service destinations on Tuesday through Friday. These aircraft,
and trucks from six regional hubs, arrive at Wilmington between 10:00 a.m. and
noon, at which time shipments are sorted and reloaded on the aircraft or trucks
by 3:00 p.m. for departure and return to their respective destinations.
The Company also performs weekend sort operations at Wilmington to
accommodate Saturday pickups and Monday deliveries of both overnight express
and SDS shipments. This sort is supported both by Company aircraft and by
trucks.
Aircraft
- --------
The Company acquires and utilizes used aircraft manufactured in the
late 1960s and early 1970s. Upon acquisition, the aircraft are substantially
modified by the Company. At the end of 1993, the Company's in-service fleet
consisted of a total of 90 aircraft, including 26 DC-8s (consisting of 10
series 61, 6 series 62 and 10 series 63), 53 DC-9s (consisting of 2 series 10,
37 series 30 and 14 series 40), and 11 YS-11 turboprop aircraft. The Company
owns the majority of the aircraft it operates, but has completed sale-leaseback
transactions with respect to six DC-8 and six DC-9 aircraft. In addition,
approximately 50 smaller aircraft are chartered nightly to connect small cities
with Company aircraft that then operate to and from Wilmington.
At year end 1993, the nightly lift capacity of the system was about
2.8 million pounds versus approximately 2.4 million pounds and 2.1 million
pounds at the end of 1992 and 1991, respectively. Over the past several years
the Company's utilization of available lift capacity has exceeded 80%.
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In response to increased public awareness regarding the operation of
older aircraft, the Federal Aviation Administration ("FAA") has mandated
additional maintenance requirements for certain aircraft, including the type
operated by the Company. These maintenance requirements were substantially
completed by December 1993 for the Company's DC-8 aircraft. As of the end of
1993 the Company had completed this required maintenance on 48 DC-9 series
aircraft. This maintenance is required to be completed by September 1994. The
Company believes these maintenance requirements for remaining aircraft can be
accomplished without materially impacting operations or the financial position
of the Company. However, the FAA may, in the future, impose additional
requirements with respect to maintenance procedures and practices for aircraft
and engines of the type operated by the Company or interpret existing rules in
a manner which could have a material adverse effect on the Company's operations
and financial position.
The Company is periodically required to retrofit certain aircraft
equipment and subsystems in accordance with mandated FAA requirements.
Presently, the Company is seeking a waiver from the FAA with regard to the date
by which installation of certain instrumentation on its YS-11 aircraft must be
accomplished. If the FAA denies the Company's request, the Company believes it
can comply with the FAA requirement without disrupting the Company's flight
schedules.
In accordance with federal law and FAA regulations, only subsonic
turbojet aircraft classified as Stage 2 or 3 by the FAA may be operated in the
United States. Generally, Stage 3 aircraft produce less noise than a
comparable Stage 2 aircraft. As of December 31, 1993, 26 of the Company's
turbojet aircraft (16 DC-8 and 10 DC-9 aircraft) are Stage 3 aircraft, the
balance being Stage 2 aircraft.
In 1990, Congress passed the Airport Noise and Capacity Act of 1990
(the "Noise Act") which, among other things, requires turbojet aircraft
weighing in excess of 75,000 pounds and operating in the United States (the
type DC-8 and DC-9 aircraft operated by the Company) to comply with Stage 3
noise emission standards on or before December 31, 1999. The Company's YS-11
turboprop aircraft are not subject to these requirements. The Secretary of
Transportation may grant a waiver from this provision to allow up to 15% of an
air carrier's Stage 2 fleet to be operated until December 31, 2003. In
accordance with the Noise Act, the FAA, acting under delegated authority, has
issued regulations establishing interim compliance deadlines. These rules
require air carriers to reduce the base level of Stage 2 aircraft they operate
25% by December 31, 1994; 50% by December 31, 1996; and 75% by December 31,
1998. Under limited circumstances, the Secretary of Transportation may grant
an operator a waiver from these interim compliance deadlines. As of December
31, 1993 the Company accomplished a reduction of its base level aircraft of
approximately 24% and expects to meet or exceed the compliance percentage at
the first
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interim compliance deadline of December 31, 1994.
In addition, the Noise Act and the implementing FAA Regulations
prohibit a U.S. air carrier from importing into the United States and
thereafter operating Stage 2 aircraft unless the aircraft were under contract
prior to November 5, 1990. The Company believes that most, if not all of the
aircraft which were subject to contracts executed prior to November 5, 1990 and
placed into service after the passage of the Noise Act will be permitted to be
operated as Stage 2 aircraft subject to the interim and final Stage 2 aircraft
phase-out compliance deadlines. In addition to FAA regulation, certain local
airports also regulate noise compliance. See "Business - Regulation".
The Company, in conjunction with several other companies, has
developed, tested and received certification of noise suppression technology
known as hush kits for its DC-9 series aircraft, which meet FAA Stage 3
requirements. Both of the Company's DC-9-10 series aircraft and eight of the
Company's DC-9-30 series aircraft meet Stage 3 requirements. The estimated
capital cost for Stage 3 hush kits is approximately $1.1 million for each DC-9
series aircraft. The Company has installed hush kits designed to satisfy Stage
3 compliance requirements on all of its DC-8-62 and DC-8-63 series aircraft.
In early 1994, firms under contract to the Company obtained FAA certification
for hush kits and other required modifications designed to meet Stage 3 noise
standards for the Company's DC-8-61 aircraft. The estimated capital cost for
these hush kits and related hardware is approximately $4.0 million per
aircraft.
International Operations
- ------------------------
The Company provides international express door-to-door delivery and a
variety of freight services. These services are provided in most foreign
countries on an inbound and outbound basis through a network of Airborne
offices and independent agents. Most international deliveries are accomplished
within 24 to 96 hours of pickup.
The Company's international express service is intended for the
movement of non-dutiable and certain dutiable shipments weighing less than 99
pounds. The Company's international freight service handles heavier weight
shipments on either an airport-to-airport, door-to-airport or door-to-door
basis.
The Company's strategy is to use a variable-cost approach in
delivering and expanding international services to its customers. This
strategy uses existing commercial airline lift capacity in connection with the
Company's domestic network to move shipments to overseas destinations.
Additionally, exclusive service arrangements with independent freight and
express agents have been entered into to accommodate shipments in locations
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not currently served by Company-owned operations. The Company believes there
are no significant service advantages which would justify the operation of its
own aircraft on international routes or significant investment in additional
offshore facilities or ground operations. In order to expand its business at a
reasonable cost, the Company continues to explore possible joint venture
agreements, similar to its arrangement with Mitsui & Co., Ltd. in Japan, which
combine the Company's management expertise, domestic express system and
information systems with local business knowledge and market reputation of
suitable partners.
The Company's domestic stations are staffed and equipped to handle
international shipments to or from almost anywhere in the world. In addition
to its extensive domestic network, the Company operates its own offices in the
Far East, Australia, New Zealand, and the United Kingdom. The Company's
freight and express agents worldwide are connected to FOCUS, Airborne's on-line
communication network. The Company is capable of providing its customers with
immediate access to the status of shipments via FOCUS almost anywhere in the
world.
Customers and Marketing
- -----------------------
The Company's primary domestic strategy focuses on express services
for high volume corporate customers. Most high volume customers have entered
into service agreements providing for specified rates or rate schedules for
express deliveries. As of December 31, 1993, the Company serviced
approximately 356,000 active customer shipping locations.
The Company determines prices for any particular domestic express
customer based on competitive factors, anticipated costs, shipment volume and
weight, and other considerations. The Company believes that it generally
offers prices that are competitive with, or lower than, prices quoted by its
principal competitors for comparable services.
The Company has historically marketed the overnight express service as
its primary domestic product. However, the Company believes its SDS product
represents an attractive opportunity to expand its customer product offering
and generate incremental revenues utilizing its existing network. SDS is a
lower yielding product than the Company's overnight product and could result in
conversion of certain shipments which may have otherwise been handled on an
overnight basis.
Internationally, the Company's marketing strategy is to target the
outbound express and freight shipments of U.S. corporate customers, and to sell
the inbound service of the Company's distribution capabilities in the United
States.
Both in the international and domestic markets, the Company believes
that its customers are most effectively reached by a direct sales force,
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and accordingly, does not currently engage in mass media advertising. Domestic
sales representatives are responsible for selling both domestic and
international express shipments. In addition, the International Division has
its own dedicated direct sales organization for selling international freight
service.
The Company's sales force currently consists of approximately 290
domestic representatives and approximately 80 international specialists. The
Company's sales efforts are supported by the Marketing and International
Divisions, based at the Company headquarters. Senior management is also active
in marketing the Company's services to major accounts.
Value-added services continue to be important factors in attracting
and retaining customers. Accordingly, the Company is automating more of its
operations to make the service easier for customers to use and to provide them
with valuable management information. The Company believes that it is
generally competitive with other express carriers in terms of reliability,
value-added services and convenience.
For many of its high volume customers, the Company offers a metering
device, called LIBRA II, which is installed at the customer's place of
business. With minimum data entry, the metering device weighs the package,
calculates the shipping charges, generates the shipping labels and provides a
daily shipping report. At year end 1993, the system was in use at
approximately 5,500 domestic customer locations and a number of selected
international customer locations. Use of LIBRA II not only benefits the
customer directly, but also lowers the Company's operating costs, since LIBRA
II shipment data is transferred into the Airborne FOCUS shipment tracking
system automatically, thus avoiding duplicate data entry.
"Customer Linkage", an electronic data interchange ("EDI") program
developed for Airborne's highest volume shippers, allows customers, with their
computers, to create shipping documentation at the same time they are entering
orders for their goods. At the end of each day, shipping activities are
transmitted electronically to the Airborne FOCUS system where information is
captured for shipment tracking and billing purposes. Customer Linkage benefits
the customer by eliminating repetitive data entry and paperwork and also lowers
the Company's operating costs by eliminating manual data entry. EDI also
includes electronic invoicing and payment remittance processing. During 1992,
the Company introduced a software program known as Quicklink, which
significantly reduces programming time required by customers to take advantage
of linkage benefits.
The Company offers a number of special logistics programs to customers
through its Advanced Logistics Services Corp. ("ALS") subsidiary. This
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subsidiary, established in 1993, operates the Company's Stock Exchange and Hub
Warehousing and other logistics programs. These programs provide customers the
ability to maintain inventories which can be managed either by Company or
customer personnel. Items inventoried at Wilmington can be delivered utilizing
either the Company's airline system or, if required, commercial airlines on a
next-flight-out basis. ALS' Central Print program allows information to be
sent electronically to customer computers located at Wilmington where Company
personnel monitor printed output and ship the material according to customer
instructions. The Company also offers a Regional Warehousing program where
customer inventories are managed by the Company at any of over 40 locations
around the United States and Canada.
In addition, the Company's Sky Courier business provides
next-plane-out service at premium prices.
The Company has obtained ISO 9000 certification for its Chicago,
Philadelphia and London stations and its Seattle Headquarters. The ISO 9000 is
a quality program developed by the International Standards Organization
("ISO"), based in Geneva, Switzerland. This organization provides a set of
international standards on quality management and quality assurance presently
recognized in 91 countries. The certification is an asset in doing business
worldwide and provides evidence of the Company's commitment to excellence and
quality. The Company expects to certify additional facilities over the next
several years.
Competition
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The market for the Company's services has been and is expected to
remain highly competitive. The principal competitive factors in both domestic
and international markets are price, the ability to provide reliable pickup and
delivery, and value-added services.
Federal Express continues to be the dominant competitor in the
domestic express business, followed by United Parcel Service. Airborne Express
currently ranks third in shipment volume behind these two companies in the
domestic express business. Other domestic express competitors include the U.S.
Postal Service's Express Mail Service and several other transportation
companies offering next morning delivery service. The Company also competes to
some extent with companies offering ground transportation services and with
facsimile and other forms of electronic transmission.
The Company increased rates in March 1993 by approximately 5% on
domestic business that was not under a time-definite contract, resulting in an
overall yield improvement of approximately 2%. This was the first domestic
rate increase in four years. Although still very competitive, the domestic
pricing environment improved during 1993 resulting in relatively stable yields.
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The Company believes it is important to maintain an active capital
expansion program to improve service and increase productivity as its volume of
shipments increases. However, the Company has significantly less capital
resources than its two primary competitors.
In the international markets, in addition to Federal Express and
United Parcel Service, the Company competes with DHL, TNT and other air freight
forwarders or carriers and most commercial airlines.
Employees
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As of December 31, 1993, the Company and its subsidiaries had
approximately 9,500 full-time employees and 6,300 part-time and casual
employees. Approximately 4,100 full-time employees (including the Company's
pilots) and 2,800 part-time and casual employees are employed under union
contracts, primarily with locals of the International Brotherhood of Teamsters
and Warehousemen.
Labor agreements for the Company's ground personnel are for three-year
terms with most agreements expiring in 1994. The Company's pilots are covered
by a contract which is amendable in 1995.
Subsidiaries
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The Company has the following wholly-owned subsidiaries:
1. ABX Air, Inc., a Delaware corporation, owns and operates the
Airline. Its wholly-owned subsidiaries are as follows:
a) Wilmington Air Park, Inc., a Ohio corporation, is the
owner of the Wilmington airport property (Airborne
Air Park).
b) Airborne FTZ, Inc., a Ohio corporation, is the holder
of a foreign trade zone certificate at the Wilmington
airport property.
c) Aviation Fuel, Inc., a Ohio corporation, purchases
and sells aviation and other fuels.
d) Advanced Logistics Services Corp., a Ohio
corporation, provides customized warehousing,
inventory management and shipping services.
e) Sound Suppression, Inc., a Ohio corporation with no
current operating activities.
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2. Awawego Delivery, Inc., a New York corporation, holds trucking
rights in New York and Connecticut.
3. Airborne Forwarding Corporation, a Delaware corporation doing
business as Sky Courier, provides expedited courier service.
4. Airborne Freight Limited, a New Zealand corporation, provides
air express and air freight services.
Regulation
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The Company's operations are subject to various regulations including
regulation by the United States Department of Transportation ("DOT"), the FAA,
the Interstate Commerce Commission, and various state, local and foreign
authorities.
The DOT, under the Federal Aviation Act, grants air carriers the right
to engage in domestic and international air transportation. The DOT issues
certificates to engage in air transportation if the carrier is a U.S. citizen,
as defined by the Act, and possesses the financial and managerial fitness
necessary to hold such certificates. The DOT has the authority to modify,
suspend or revoke such certificates for cause, including failure to comply with
the Federal Aviation Act or the DOT regulations. The Company believes it
possesses all necessary DOT-issued certificates to conduct its operations.
The FAA regulates aircraft safety and flight operations generally,
including equipment, ground facilities, maintenance and communications. The
FAA issues operating certificates to carriers who possess the technical
competence to conduct air carrier operations. In addition, the FAA issues
certificates of airworthiness to each aircraft which meets the requirements for
aircraft design and maintenance. The Company believes it holds all
airworthiness and other FAA certificates required for the conduct of its
business, although the FAA has the power to suspend or revoke such certificates
for cause, including failure to comply with the Federal Aviation Act.
The federal government generally regulates aircraft engine noise at
its source. However, local airport operators may, under certain circumstances,
regulate airport operations based on aircraft noise considerations. Prior to
passage of the Noise Act, certain airports adopted regulations including
restrictions on aircraft operations, such as curfews during late night and
early morning hours, noise budgets or mandatory use of Stage 3 aircraft, many
of which are grandfathered under the Noise Act. Other airports have proposed
and may adopt similar noise restrictions. The Noise Act provides that airports
proposing restrictions on Stage 2 aircraft operations must provide interested
parties a minimum of 180 days advance notice of such regulations and the
opportunity to comment
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thereon. Thereafter, the airport may impose such noise regulations subject to
the requirements of existing federal law. The Noise Act further provides that
airports that fail to provide the required notice and opportunity to comment
will be deemed ineligible for federal airport grant funds or the authority to
impose passenger facility charges. With respect to Stage 3 aircraft
restrictions, the Noise Act provides that no such restrictions may be imposed
unless the airport either obtains the consent of all aircraft operators serving
the airport or obtains FAA approval to impose such restrictions. Noncompliance
with these rules will also result in the loss of federal funding and
eligibility to impose passenger facility charges. The Company believes the
operation of its aircraft either complies with or is exempt from compliance
with currently applicable local airport rules. However, if more stringent
aircraft operating regulations were adopted on a widespread basis, the Company
might be required to expend substantial sums, make schedule changes or take
other actions. See "Business - Domestic Operations - Aircraft."
The Company's aircraft currently meet all know requirements for
emission levels. However, under the Clear Air Act, individual states or the
Federal Environmental Protection Agency (the "EPA") may adopt regulations
requiring the reduction in emissions for one or more localities based on the
measured air quality at such localities. The EPA has proposed regulations for
portions of California calling for emission reductions by the year 2005. There
can be no assurance that if such regulations are adopted in the future or
changes in existing laws or regulations are promulgated that such laws or rules
would not have a material adverse effect on the Company.
Under currently applicable federal aviation law, the Company's airline
subsidiary could cease to be eligible to operate as an all-cargo carrier if
more than 25% of the voting stock of the Company were owned or controlled by
non-U.S. citizens or the Airline was not effectively controlled by U.S.
citizens. Moreover, in order to hold an all-cargo air carrier certificate, the
president and at least two-thirds of the directors and officers of an air
carrier must be U.S. citizens. The Company has entered into a Rights Agreement
designed, in part, to discourage a single foreign person from acquiring 20% or
more, and foreign persons in the aggregate from acquiring 25% or more, of the
Company's outstanding voting stock without the approval of the Board of
Directors. To the best of the Company's knowledge, foreign stockholders do not
control more than 25% of the outstanding voting stock. Two of the Company's
officers are not U.S. citizens.
The Company believes that its current operations are substantially in
compliance with the numerous regulations to which its business is subject;
however, various regulatory authorities have jurisdiction over significant
aspects of the Company's business, and it is possible that new laws or
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regulations or changes in existing laws or regulations or the interpretations
thereof could have a material adverse effect on the Company's operations.
Financial Information Regarding International and Domestic Operations
- ---------------------------------------------------------------------
Financial information relating to foreign and domestic operations for
each of the three years in the period ended December 31, 1993 is presented in
Note L (Segment Information) of the Notes to Consolidated Financial Statements
appearing in the 1993 Annual Report to Shareholders and is incorporated herein
by reference.
ITEM 2. PROPERTIES
- --------------------
The Company leases general and administrative office facilities
located in Seattle, Washington.
At year end the Company maintained 232 domestic and 22 foreign
stations, most of which are leased. The majority of the facilities are located
at or near airports.
The Company owns the airport at the Airborne Air Park, in Wilmington,
Ohio. The airport currently consists of a runway, taxi-ways, aprons, buildings
serving as aircraft and equipment maintenance facilities, a sort facility,
storage facilities, a training center, and operations and administrative
offices. The Company has in progress a significant expansion of the airpark
which includes construction of a second runway, taxiways, two roadway tunnels
under the taxiways and several other facilities. This expansion should be
substantially completed during 1995.
Information regarding collateralization of certain property and lease
commitments of the Company is set forth in Notes E and F of the Notes to
Consolidated Financial Statements appearing in the 1993 Annual Report to
Shareholders and is incorporated herein by reference.
The Company believes its existing facilities are adequate to meet
current needs.
ITEM 3. LEGAL PROCEEDINGS
- ---------------------------
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -------------------------------------------------------------
None
13
17
ITEM 4a. EXECUTIVE OFFICERS OF THE REGISTRANT
Positions and Offices Presently
Name Age Held and Business Experience
---- --- ----------------------------
Robert S. Cline 56 Chairman and Chief Executive Officer
(1984 to date); Vice Chairman and Chief
Financial Officer (1978 to 1984); Executive
Vice President and Chief Financial Officer
(1973 to 1978); Senior Vice President,
Finance (1970 to 1973); Vice President,
Finance (1968 to 1970); Vice President,
Finance, Pacific Air Freight, Inc. (1966
to 1968)
Robert G. Brazier 56 President and Chief Operating Officer
(1978 to date); Executive Vice President
and Chief Operating Officer (1973 to 1978);
Senior Vice President, Operations (1970 to
1973); Vice President, Operations (1968 to
1970); Vice President, Sales and Operations,
Pacific Air Freight, Inc. (1964 to 1968)
Roy C. Liljebeck 56 Chief Financial Officer (1984 to
date); Executive Vice President, Finance
Division (1979 to date); Senior Vice
President (1973 to 1979); Treasurer (1968
to 1988)
Kent W. Freudenberger 53 Executive Vice President, Marketing
Division (1980 to date); Senior Vice
President (1978 to 1980); Vice President
(1973 to 1978)
Raymond T. Van Bruwaene 55 Executive Vice President, Field
Services Division (1980 to date); Senior
Vice President (1978 to 1980); Vice
President (1973 to 1978)
John J. Cella 53 Executive Vice President,
International Division (1985 to date);
Senior Vice President, International
Division (1982 to 1985); Vice President,
International Division (1981 to 1982);
Vice President, Far East (1971 to 1981)
14
18
Carl D. Donaway 42 President and Chief Executive
Officer, ABX Air, Inc. (1992 to date);
Vice President, Business Analysis (1992);
Vice President, Customer Support (1990 to
1992); Director, Customer Support (1988
to 1990)
15
19
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
- ----------------------------------------------------------------
STOCKHOLDERS MATTERS
- --------------------
The response to this Item is contained in the 1993 Annual Report to
Shareholders and the information contained therein is incorporated by
reference.
On February 28, 1993 there were approximately 1,497 shareholders of
record of the Common Stock of the Company based on information provided by the
Company's transfer agent.
ITEM 6. SELECTED FINANCIAL DATA
- ---------------------------------
The response to this Item is contained in the 1993 Annual Report to
Shareholders and the information contained therein is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- -------------------------------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
The response to this Item is contained in the 1993 Annual Report to
Shareholders and the information contained therein is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -----------------------------------------------------
The response to this Item is contained in the 1993 Annual Report to
Shareholders and the information contained therein is incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- -------------------------------------------------------------------------
FINANCIAL DISCLOSURE
- --------------------
None
16
20
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -------------------------------------------------------------
The response to this Item is contained in part in the Proxy Statement
for the 1994 Annual Meeting of Shareholders under the captions "Election of
Directors" and "Exchange Act Compliance" and the information contained therein
is incorporated herein by reference.
The executive officers of the Company are elected annually at the
Board of Directors meeting held in conjunction with the annual meeting of
shareholders. There are no family relationships between any directors or
executive officers of the Company. Additional information regarding executive
officers is set forth in Part I, Item 4a.
ITEM 11. EXECUTIVE COMPENSATION
- ---------------------------------
The response to this Item is contained in the Proxy Statement for the
1994 Annual Meeting of Shareholders under the caption "Executive Compensation"
and the information contained therein is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------------------------------------------------------------------------
The response to this Item is contained in the Proxy Statement for the
1994 Annual Meeting of Shareholders under the captions "Voting at the Meeting"
and "Stock Ownership of Management" and the information contained therein is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ---------------------------------------------------------
The response to this Item is contained in the Proxy Statement for the
1994 Annual Meeting of Shareholders under the caption "Board of Directors and
Committees" and the information contained therein is incorporated herein by
reference.
17
21
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------
(a)1. Financial Statements
--------------------
The following consolidated financial statements of Airborne Freight
Corporation and its subsidiaries as contained in its 1993 Annual Report to
Shareholders are incorporated by reference in Part II, Item 8:
Consolidated Statements of Net Earnings
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditors' Report
(a)2. Financial Statement Schedules Page
- -------------------------------------- ----
Schedule V - Property and Equipment 26
Schedule VI - Accumulated Depreciation and Amortization
of Property and Equipment 28
Schedule VIII - Valuation and Qualifying Accounts 30
Schedule IX - Short-Term Borrowings 31
Schedule X - Supplementary Income Statement Information 32
All other schedules are omitted because they are not applicable or are not
required, or because the required information is included in the consolidated
financial statements or notes thereto.
(a)3. Exhibits
- -----------------
A) The following exhibits are filed with this report:
EXHIBIT NO. 3 Articles of Incorporation and By-laws
- ------------------------------------------------------
3(a) The Restated Certificate of Incorporation of the Company,
dated as of August 4, 1987 (incorporated herein by reference
from Exhibit 3(a) to the Company's Form 10-K for the year
18
22
ended December 31, 1987).
3(b) The By-laws of the Company as amended to February 1, 1988
(incorporated herein by reference from Exhibit 3(b) to the
Company's Form 10-K for the year ended December 31, 1987).
EXHIBIT NO. 4 Instruments Defining the Rights of Security Holders
- --------------------------------------------------------------------
Including Indentures
- --------------------
4(a) Indenture dated as of September 4, 1986, between the Company
and Peoples National Bank of Washington (now U.S. Bank of
Washington), as trustee, relating to $25 million of the
Company's 10% Senior Subordinated Notes due 1996 (incorporated
by reference from Exhibit 4(c) to Amendment No. 1 to the
Company's Registration Statement on Form S-3, No. 33-6043,
filed with the Securities and Exchange Commission on September
3, 1986).
4(b) Note Purchase Agreement dated September 3, 1986 among the
Company and the original purchasers of the Company's 10%
Senior Subordinated Notes due 1996 (incorporated by reference
from Exhibit 4(d) to Amendment No. 1 to the Company's
Registration Statement on Form S-3, No. 33-6043, filed with
the Securities and Exchange Commission on September 3, 1986).
4(c) Indenture dated as of August 15, 1991, between the Company and
Bank of America National Trust and Savings Association, as
Trustee, with respect to the Company's 6-3/4% Convertible
Subordinated Debentures due August 15, 2001 (incorporated
herein by reference from Exhibit 4(i) to Amendment No. 1 to
the Company's Registration Statement on Form S-3 No. 33-42044
filed with the Securities and Exchange Commission on August
15, 1991).
4(d) Indenture dated as of December 3, 1992, between the Company
and Bank of New York, as trustee, relating to the Company's
8-7/8% Notes due 2002 (incorporated herein by reference from
Exhibit 4(a) to Amendment No. 1 to the Company's Registration
Statement on Form S-3, No. 33-54560 filed with the Securities
and Exchange Commission on December 4, 1992).
4(e) Rights Agreement, dated as of November 20, 1986 between the
Company and First Jersey National Bank (predecessor to First
Interstate Bank, Ltd.), as Rights Agent (incorporated by
reference from Exhibit 1 to the Company's Registration
Statement on Form 8-A, dated November 28, 1986).
19
23
4(f) Certificate of Designation of Series A Participating
Cumulative Preferred Stock Setting Forth the Powers,
Preferences, Rights, Qualification, Limitations and
Restrictions of Such Series of Preferred Stock of the Company
(incorporated by reference from Exhibit 2 to the Company's
Registration Statement on Form 8-A, dated November 28, 1986).
4(g) Form of Right Certificate relating to the Rights Agreement
(see 4(e) above, incorporated by reference from Exhibit 3 to
the Company's Registration Statement on Form 8-A, dated
November 28, 1986).
4(h) Letter dated January 5, 1990, from the Company to First
Interstate Bank, Ltd. ("FIB"), appointing FIB as successor
Rights Agent under the Rights Agreement dated as of November
20, 1986, between the Company and The First Jersey National
Bank (incorporated by reference from Exhibit 4(c) to the
Company's Form 10-K for the year ended December 31, 1989).
4(i) Amendment to Rights Agreement entered into as of January 24,
1990, between the Company and First Interstate Bank, Ltd.
(incorporated herein by reference from Exhibit 4(d) to the
Company's Form 10-K for the year ended December 31, 1989).
4(j) Third Amendment to Rights Agreement entered into as of
November 6, 1991 between the Company and First Interstate
Bank, Ltd. (incorporated herein by reference from Exhibit
4(a) to the Company's Form 10-K for the year ended December
31, 1991).
4(k) 6.9% Cumulative Convertible Preferred Stock Purchase Agreement
dated as of December 5, 1989, among the Company, Mitsui & Co.,
Ltd., Mitsui & Co. (U.S.A.), Inc., and Tonami Transportation
Co., Ltd. (incorporated herein by reference from Exhibit 4(b)
to the Company's Form 10-K for the year ended December 31,
1989).
4(k)(i) Amendments to the above Stock Purchase Agreement irrevocably
waiving all demand registration rights, relinquishing the
right of Mitsui & Co., Ltd. to designate a representative to
Airborne's Board of Directors, and resignation of T. Kokai
from said Board (incorporated herein by reference from
Amendment No. 1 to Schedule 13D of Mitsui & Co., Ltd.
Intermodal Terminal, Inc. (assignee of Mitsui & Co. (USA)
Inc.) and Tonami Transportation Co., Ltd., filed with the
Securities & Exchange Commission on December 21, 1993).
20
24
4(l) Certificate of Designation of Preferences of Preferred Shares
of Airborne Freight Corporation, as filed on January 26, 1990,
in the Office of the Secretary of the State of Delaware
(incorporated herein by reference from Exhibit 4(a) to the
Company's Form 10-K for the year ended December 31, 1989).
EXHIBIT NO. 10 Material Contracts
- ---------------------------------
Executive Compensation Plans and Agreements
- -------------------------------------------
10(a) 1979 Airborne Freight Corporation Key Employee Stock Option
and Stock Appreciation Rights Plan, as amended through
February 2, 1987 (incorporated by reference from Exhibit 10(d)
to the Company's Form 10-K for the year ended December 31,
1986).
10(b) 1983 Airborne Freight Corporation Key Employee Stock Option
and Stock Appreciation Rights Plan, as amended through
February 2, 1987 (incorporated by reference from Exhibit 10(c)
to the Company's Form 10-K for the year ended December 31,
1986).
10(c) 1989 Airborne Freight Corporation Key Employee Stock Option
and Stock Appreciation Rights Plan (incorporated herein by
reference from Exhibit 10(d) to the Company's Form 10-K for
the year ended December 31, 1989).
10(d) 1994 Airborne Freight Corporation Key Employee Stock Option
and Stock Appreciation Rights Plan (incorporated herein by
reference from the Addendum to the Company's Proxy Statement
for the 1994 Annual Meeting of Shareholders).
10(e) Airborne Freight Corporation Directors Stock Option Plan
(incorporated herein by reference from the Addendum to the
Company's Proxy Statement for the 1991 Annual Meeting of
Shareholders).
10(f) Airborne Express Executive Deferral Plan dated January 1, 1992
(incorporated by reference from Exhibit 10(b) to the Company's
Form 10-K for the year ended December 31, 1991).
21
25
10(g) Airborne Express Supplemental Executive Retirement Plan dated
January 1, 1992 (incorporated by reference from Exhibit 10(c)
to the Company's Form 10-K for the year ended December 31,
1991).
10(h) Airborne Express 1993 Executive Management Incentive
Compensation Plan.
10(i) Employment Agreement dated December 15, 1983, as amended
November 20, 1986, between the Company and Mr. Robert G.
Brazier, President and Chief Operating Officer (incorporated
by reference from Exhibit 10(a) to the Company's Form 10-K for
the year ended December 31, 1986). Identical agreements exist
between the Company and the other six executive officers.
10(j) Employment Agreement dated November 20, 1986 between the
Company and Mr. Lanny H. Michael, then Vice President,
Treasurer and Controller (incorporated by reference from
Exhibit 10(b) to the Company's Form 10-K for the year ended
December 31, 1986). Identical agreements exist between the
Company and 25 other officers of the Company. In addition,
the Company's principal subsidiary, ABX Air, Inc., has entered
into substantially identical agreements with seven of its
officers.
Other Material Contracts
------------------------
10(k) $240,000,000 Revolving Loan Facility dated as of November 19,
1993 among the Company, as borrower, and Wachovia Bank of
Georgia, N.A., ABN AMRO Bank N.V., United States National Bank
of Oregon, Seattle-First National Bank, CIBC Inc., Continental
Bank N.A., Bank of America National Trust and Savings
Association, The Bank of New York, NBD Bank, N.A., as banks
and Wachovia Bank of Georgia, N.A., as agent.
10(l) Letter dated December 5, 1989, to the Company from Mitsui &
Co., Ltd. ("Mitsui"), relating to Mitsui's commitment to
provide the Company and ABX Air, Inc., a $100 million aircraft
financing facility, as modified by that certain Supplement
thereto entered into as of March 15, 1990 (incorporated herein
by reference from Exhibit 10(b) to the Company's Form 10-K for
the year ended December 31, 1989).
10(m) Shareholders Agreement entered into as of February 7, 1990,
among the Company, Mitsui & Co., Ltd., and Tonami
Transportation Co., Ltd., relating to joint ownership of
Airborne Express Japan, Inc. (incorporated herein by reference
22
26
from Exhibit 10(c) to the Company's Form 10-K for the year
ended December 31, 1989).
EXHIBIT NO. 11 Statement Re Computation of Per Share Earnings
- ---------------------------------------------------------------
11 Statement re computation of earnings per share
EXHIBIT NO. 12 Statements Re computation of Ratios
- ----------------------------------------------------
12 Statement re computation of ratio of senior long-term debt and
total long-term debt to total capitalization
EXHIBIT NO. 13 Annual Report to Security Holders
- --------------------------------------------------
13 Portions of the 1993 Annual Report to Shareholders of Airborne
Freight Corporation
EXHIBIT NO. 21 Subsidiaries of the Registrant
- -----------------------------------------------
21 The subsidiaries of the Company are listed on page 10 & 11 of
this report on Form 10-K for the year ended December 31, 1993.
EXHIBIT NO. 23 Consents of Experts and Counsel
- ------------------------------------------------
23 Independent Auditors' Consent and Report on Schedules
All other exhibits are omitted because they are not applicable, or
not required, or because the required information is included in the
consolidated financial statements or notes thereto.
(b) Reports on Form 8-K
-------------------
None
23
27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AIRBORNE FREIGHT CORPORATION
By /S/ ROBERT S. CLINE
----------------------------------
Robert S. Cline
Chief Executive Officer
By /S/ ROBERT G. BRAZIER
----------------------------------
Robert G. Brazier
Chief Operating Officer
By /S/ ROY C. LILJEBECK
----------------------------------
Roy C. Liljebeck
Chief Financial Officer
By /S/ LANNY H. MICHAEL
---------------------------------
Lanny H. Michael
Treasurer and Controller
Date: March 28, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company and in the capacities and on the date indicated:
24
28
/S/ ANCIL H. PAYNE /S/ HAROLD M. MESSMER, JR.
- ---------------------------------- ----------------------------------
Ancil H. Payne (Director) Harold M. Messmer, Jr. (Director)
/S/ ROBERT G. BRAZIER /S/ RICHARD M. ROSENBERG
- ---------------------------------- ----------------------------------
Robert G. Brazier (Director) Richard M. Rosenberg (Director)
/S/ ROBERT S. CLINE
- ----------------------------------
Robert S. Cline (Director)
25
29
AIRBORNE FREIGHT CORPORATION
AND SUBSIDIARIES
SCHEDULE V - PROPERTY AND EQUIPMENT
(In thousands)
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Balance at Other Changes
beginning Additions Additions Balance at
Classifications of period at cost Retirements (Deductions) end of period
--------------- --------- --------- ----------- ------------ -------------
Year Ended December 31, 1993:
Flight Equipment $ 770,766 $ 89,840 $11,432 $ - $ 849,174
Land, Buildings and
Leasehold Improvements 114,738 13,392 273 - 127,857
Package Handling & Ground
Support Equipment 105,262 10,393 6,367 - 109,288
Vehicles and Other
Equipment 136,245 22,713 6,272 - 152,686
---------- -------- ------- ---------- ----------
TOTALS $1,127,011 $136,338 $24,344 $ - $1,239,005
========== ======== ======= ========== ==========
Year Ended December 31, 1992:
Flight Equipment $ 588,517 $188,810 $ 6,561 $ - $ 770,766
Land, Buildings and
Leasehold Improvements 100,234 15,018 514 - 114,738
Package Handling & Ground
Support Equipment 98,109 8,698 1,545 - 105,262
Vehicles and Other
Equipment 125,844 21,090 10,689 - 136,245
26
30
--------- --------- --------- ---------- ----------
TOTALS $ 912,704 $ 233,616 $ 19,309 $ - $1,127,011
--------- --------- --------- ---------- ----------
Year Ended December 31, 1991:
Flight Equipment $ 378,819 $ 218,143 $ 8,445 $ - $ 588,517
Land, Buildings and
Leasehold Improvements 74,069 27,456 1,291 - 100,234
Package Handling & Ground
Support Equipment 93,842 15,396 11,129 - 98,109
Vehicles and Other
Equipment 109,897 31,520 15,573 - 125,844
--------- --------- --------- ---------- ----------
TOTALS $ 656,627 $ 292,515 $ 36,438 $ - $ 912,704
========= ========= ========= ========== ==========
27
31
AIRBORNE FREIGHT CORPORATION
AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY AND EQUIPMENT
(In thousands)
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Balance at Other Changes Balance at
beginning Additions Additions end
Classifications of period at cost Retirements (Deductions) of period
--------------- --------- --------- ---------- ---------- ----------
C>
Year Ended December 31, 1993:
Flight Equipment $237,135 $ 75,174 $ 312 $ - $311,997
Land, Buildings and
Leasehold Improvements 26,860 7,767 216 - 34,411
Package Handling & Ground
Support Equipment 45,897 12,932 6,323 - 52,506
Vehicles and Other
Equipment 86,182 25,801 5,855 - 106,128
-------- -------- -------- -------- --------
TOTALS $396,074 $121,674 $ 12,706 $ - $505,042
======== ======== ======== ======== ========
Year Ended December 31, 1992:
Flight Equipment $177,032 $ 61,152 $ 1,049 $ - $237,135
Land, Buildings and
Leasehold Improvements 20,301 7,039 480 - 26,860
Package Handling & Ground
Support Equipment 34,895 12,482 1,480 - 45,897
Vehicles and Other
28
32
Equipment 67,327 28,593 9,738 - 86,182
-------- -------- -------- -------- --------
TOTALS $299,555 $109,266 $ 12,747 $ - $396,074
======== ======== ======== ======== ========
Year Ended December 31, 1991:
Flight Equipment $130,356 $ 46,676 $ - $ - $177,032
Land, Buildings and
Leasehold Improvements 16,209 5,291 1,199 - 20,301
Package Handling & Ground
Support Equipment 34,571 11,369 11,045 - 34,895
Vehicles and Other
Equipment 55,618 25,782 14,073 - 67,327
-------- -------- -------- -------- --------
TOTALS $236,754 $ 89,118 $ 26,317 $ - $299,555
======== ======== ======== ======== ========
29
33
AIRBORNE FREIGHT CORPORATION
AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Column A Column B Column C Column D Column E
----------- -------- -------- -------- --------
Additions
Balance at Charged to Balance at
Beginning Costs and End
Description of Period Expenses Deductions of Period
----------- -------- -------- --------- ---------
DEDUCTED FROM ASSETS TO WHICH THEY APPLY:
1. Allowance for doubtful accounts -
Year Ended December 31, 1993 $6,801 $11,660 $11,536 $6,925
Year Ended December 31, 1992 $6,854 $ 9,574 $ 9,627 $6,801
Year Ended December 31, 1991 $6,942 $ 9,685 $ 9,773 $6,854
30
34
AIRBORNE FREIGHT CORPORATION
AND SUBSIDIARIES
SCHEDULE IX - SHORT-TERM BORROWINGS
(Dollars in thousands)
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Weighted Maximum Amount Average Amount Weighted
Balance at Average Outstanding Outstanding Avg. Interest
Category of Aggregate End Interest During During Rate During
Short-Term Borrowings of Period Rate the Period the Period the Period
--------------------- ---------- -------- ---------- ------------ ------------
December 31, 1993
Money Market Lines of Credit $ -- N/A $110,000 $26,781 3.64%
Payable to Banks
December 31, 1992
Money Market Lines of Credit $16,100 3.84% $52,800 $33,207 4.16%
Payable to Banks
December 31, 1991
Money Market Lines of Credit $25,400 5.55% $31,500 $14,488 6.48%
Payable to Banks
Balances outstanding under the Company's Money Market lines of credit
arrangement generally have maturities ranging from one day to one week.
Average amount outstanding during the period is computed by dividing the total
of daily outstanding principal balances by 365 or 366 days as applicable.
Weighted average interest rate during the period is computed by dividing the
actual short-term interest expense by the average short-term borrowings
outstanding.
31
35
AIRBORNE FREIGHT CORPORATION
AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
(In thousands)
Column A Column B
-------- --------
Item Charged to costs and expenses
-------- -----------------------------
Year Ended December 31
----------------------
1993 1992 1991
---- ---- ----
Maintenance and Repairs $75,310 $71,261 $59,065
Aviation Excise/Fuel Taxes $17,309 $17,933 $14,698
Note: Depreciation and amortization of intangible assets, taxes (other than
payroll and income taxes), royalties, and advertising costs are each less than
1% of consolidated revenue in 1993, 1992 and 1991.
32
36
EXHIBIT INDEX
Exhibit Page
Number Description Number
------- ----------- ------
(a)3. Exhibits
- ---------------
A) The following exhibits are filed with this report:
EXHIBIT NO. 3 Articles of Incorporation and By-laws
- ----------------------------------------------------
3(a) The Restated Certificate of Incorporation of the Company, dated as of --
August 4, 1987 (incorporated herein by reference from Exhibit 3(a) to
the Company's Form 10-K for the year ended December 31, 1987).
3(b) The By-laws of the Company as amended to February 1, 1988 (incorporated --
herein by reference from Exhibit 3(b) to the Company's Form 10-K for
the year ended December 31, 1987.
EXHIBIT NO. 4 Instruments Defining the Rights of Security Holders Including
- ----------------------------------------------------------------------------
Indentures
- ----------
4(a) Indenture dated as of September 4, 1986, between the Company and --
Peoples National Bank of Washington (now U.S. Bank of Washington), as
trustee, relating to $25 million of the Company's 10% Senior
Subordinated Notes due 1996 (incorporated by reference from Exhibit 4(c)
to Amendment No. 1 to the Company's Registration Statement on Form S-3,
No. 33-6043, filed with the Securities and Exchange Commission on
September 3, 1986).
4(b) Note Purchase Agreement dated September 3, 1986 among the Company and --
the original purchasers of the Company's 10% Senior Subordinated Notes
due 1996 (incorporated by reference from Exhibit 4(d) to Amendment
No. 1 to the Company's Registration Statement on Form S-3, No. 33-6043,
filed with the Securities and Exchange Commission on September 3, 1986).
37
4(c) Indenture dated as of August 15, 1991, between the Company and Bank of --
America National Trust and Savings Association, as Trustee, with respect
to the Company's 6-3/4% Convertible Subordinated Debentures due August
15, 2001 (incorporated herein by reference from Exhibit 4 (i) to
Amendment No. 1 to the Company's Registration Statement on Form S-3
No. 33-42044 filed with the Securities and Exchange Commission on
August 15, 1991).
4(d) Indenture dated as of December 3, 1992, between the Company and Bank of --
New York, as trustee, relating to the Company's 8-7/8% Notes due 2002
(incorporated herein by reference from Exhibit 4(a) to Amendment No. 1
to the Company's Registration Statement on Form S-3, No. 33-54560 filed
with the Securities and Exchange Commission on December 4, 1992).
4(e) Rights Agreement, dated as of November 20, 1986 between the Company and --
First Jersey National Bank (predecessor to First Interstate Bank, Ltd.),
as Rights Agent (incorporated by reference from Exhibit 1 to the
Company's Registration Statement on Form 8-A, dated November 28, 1986).
4(f) Certificate of Designation of Series A Participating Cumulative --
Preferred Stock Setting Forth the Powers, Preferences, Rights,
Qualification, Limitations and Restrictions of Such Series of Preferred
Stock of the Company (incorporated by reference from Exhibit 2 to the
Company's Registration Statement on Form 8-A, dated November 28, 1986).
4(g) Form of Right certificate relating to the Rights Agreement (see 4(e) --
above, incorporated by reference from Exhibit 3 to the Company's
Registration Statement on From 8-A, dated November 28, 1986).
38
4(h) Letter dated January 5, 1990, from the Company to First Interstate --
Bank, Ltd. ("FIB"), appointing FIB as successor Rights Agent under the
Rights Agreement dated as of November 20, 1986, between the Company and
The First Jersey National Bank (incorporated by reference from Exhibit
4(c) to the Company's Form 10-K for the year ended December 31, 1989).
4(i) Amendment to Rights Agreement entered into as of January 24, 1990, --
between the Company and First Interstate Bank, Ltd. (incorporated herein
by reference from Exhibit 4(d) to the Company's Form 10-K for the year
ended December 31, 1989).
4(j) Third Amendment to Rights Agreement entered into as of November 6, 1991 --
between the Company and First Interstate Bank, Ltd. (incorporated herein
by reference from Exhibit 4(a) to the Company's Form 10-K for the year
ended December 31, 1991).
4(k) 6.9% Cumulative Convertible Preferred Stock Purchase Agreement dated
as of December 5, 1989, among the Company, Mitsui & Co., Ltd., Mitsui &
Co. (U.S.A.), Inc., and Tonami Transportation Co., Ltd. (incorporated
herein by reference from Exhibit 4(b) to the Company's Form 10-K for
the year ended December 31, 1989).
4(k)(i) Amendments to the above Stock Purchase Agreement irrevocably waiving all --
demand registration rights, relinquishing the right of Mitsui & Co., Ltd.
to designate a representative to Airborne's Board of Directors, and
resignation of T. Kokai from said Board (incorporated herein by reference
from Amendment No. 1 to Schedule 13D of Mitsui & Co., Ltd., Intermodal
Terminal, Inc. (assignee of Mitsui & Co. (U.S.A.), Inc.) and Tonami
Transportation Co., Ltd., filed with the Securities & Exchange
Commission on December 21, 1993).
4(l) Certificate of Designation of Preferences of Preferred Shares of Airborne --
Freight Corporation, as filed on January 26, 1990, in the Office of the
Secretary of the State of Delaware (incorporated herein by reference from
Exhibit 4(a) to the Company's Form 10-K for the year ended December 31,
1989).
39
EXHIBIT NO. 10 Material Contracts
- ----------------------------------
Executive Compensation Plans and Agreements
- -------------------------------------------
10(a) 1979 Airborne Freight Corporation Key Employee Stock Option and Stock --
Appreciation Rights Plan, as amended through February 2, 1987
(incorporated by reference from Exhibit 10(d) to the Company's Form
10-K for the year ended December 31, 1986).
10(b) 1983 Airborne Freight Corporation Key Employee Stock Option and Stock --
Appreciation Rights Plan, as amended through February 2, 1987
(incorporated by reference from Exhibit 10(c) to the Company's
Form 10-K for the year ended December 31, 1986).
10(c) 1989 Airborne Freight Corporation Key Employee Stock Option and Stock --
Appreciation Rights Plan (incorporated herein by reference from Exhibit
10(d) to the Company's Form 10-K for the year ended December 31, 1989).
10(d) 1994 Airborne Freight Corporation Key Employee Stock Option and Stock --
Appreciation Rights Plan (incorporated herein by reference from the
Addendum to the Company's Proxy Statement for the 1994 Annual Meeting
of Shareholders).
10(e) Airborne Freight Corporation Directors Stock Option Plan (incorporated --
herein by reference from the Addendum to the Company's Proxy Statement
for the 1991 Annual Meeting of Shareholders).
10(f) Airborne Express Executive Deferral Plan dated January 1, 1992 --
(incorporated by reference from Exhibit 10(b) to the Company's Form
10-K for the year ended December 31, 1991).
10(g) Airborne Express Supplemental Executive Retirement Plan dated January 1, --
1992 (incorporated by reference from Exhibit 10(c) to the Company's
Form 10-K for the year ended December 31, 1991).
10(h) Airborne Express 1993 Executive Management Incentive Compensation Plan. --
40
10(i) Employment Agreement dated December 15, 1983, as amended November 20, --
1986, between the Company and Mr. Robert G. Brazier, President and
Chief Operating Officer (incorporated by reference from Exhibit 10(a)
to the Company's Form 10-K for the year ended December 31, 1986).
Identical agreements exist between the Company and the other six
executive officers.
10(j) Employment Agreement dated November 20, 1986 between the Company and --
Mr. Lanny H. Michael, then Vice President, Treasurer and Controller
(incorporated by reference from Exhibit 10(b) to the Company's
Form 10-K for the year ended December 31, 1986). Identical agreements
exist between the Company and 23 other officers of the Company. In
addition, the Company's principal subsidiary, ABX Air, Inc., has
entered into substantially identical agreements with five of its
officers.
Other Material Contracts
------------------------
10(k) $240,000,000 Revolving Loan Facility dated as of November 19, 1993 --
among the Company, as borrower, and Wachovia Bank of Georgia, N.A.,
ABN AMRO Bank N.V., United States National Bank of Oregon,
Seattle-First National Bank, CIBC Inc., Continental Bank N.A.,
Bank of America National Trust and Savings Association, The Bank
of New York, NBD Bank, N.A., as banks and Wachovia Bank of Georgia,
N.A., as agent.
10(l) Letter dated December 5, 1989, to the Company from Mitsui & Co., Ltd. --
("Mitsui"), relating to Mitsui's commitment to provide the Company
and ABX Air, Inc., a $100 million aircraft financing facility, as
modified by that certain Supplement thereto entered into as of
March 15, 1990 (incorporated herein by reference from Exhibit 10(b)
to the Company's Form 10-K for the year ended December 31, 1989).
41
10(m) Shareholders Agreement entered into as of February 7, 1990, among --
the Company, Mitsui & Co., Ltd., and Tonami Transportation Co., Ltd.,
relating to joint ownership of Airborne Express Japan, Inc.
(incorporated herein by reference from Exhibit 10(c) to the Company's
Form 10-K for the year ended December 31, 1989).
EXHIBIT NO. 11 Statement Re computation of Per Share Earnings
- --------------------------------------------------------------
11 Statement re computation of earnings per share --
EXHIBIT NO. 12 Statements Re computation of Ratios
- ---------------------------------------------------
12 Statement re computation of ratio of senior long-term debt and total --
long-term debt to total capitalization
EXHIBIT NO. 13 Annual Report to Security Holders
- -------------------------------------------------
13 Portions of the 1993 Annual Report to Shareholders of Airborne --
Freight Corporation
EXHIBIT NO. 21 Subsidiaries of the Registrant
- ----------------------------------------------
21 The subsidiaries of the Company are listed on page 10 & 11 of this --
report on Form 10-K for the year ended December 31, 1993.
EXHIBIT NO. 23 Consents of Experts and Counsel
- -----------------------------------------------
23 Independent Auditors' Consent and Report on Schedules --
All other exhibits are omitted because they are not applicable, or not
required, or because the required information is included in the consolidated
financial statements or notes thereto.