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 March 31, 1995
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 315,150 treasury shares)
as of March 31, 1995 21,050,336 shares
-----------------
<TABLE>
AIRBORNE FREIGHT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF NET EARNINGS
(Dollars in thousands except per share data)
(Unaudited)
<CAPTION>
Three Months Ended
March 31
------------------
1995 1994
---- ----
<S> <C> <C>
REVENUES:
Domestic $442,177 $396,884
International 87,739 69,668
-------- --------
529,916 466,552
OPERATING EXPENSES:
Transportation purchased 188,785 154,998
Station and ground operations 165,114 145,210
Flight operations and maintenance 78,061 65,782
General and administrative 37,494 35,716
Sales and marketing 15,631 13,295
Depreciation and amortization 34,802 33,765
-------- --------
519,887 448,766
-------- --------
EARNINGS FROM OPERATIONS 10,029 17,786
INTEREST, NET 6,725 5,941
-------- --------
EARNINGS BEFORE INCOME TAXES 3,304 11,845
INCOME TAXES 1,424 4,845
-------- --------
NET EARNINGS 1,880 7,000
PREFERRED STOCK DIVIDENDS 71 584
-------- --------
NET EARNINGS AVAILABLE TO COMMON $1,809 $6,416
SHAREHOLDERS
======== ========
NET EARNINGS PER COMMON SHARE $.09 $.32
======== ========
DIVIDENDS PER COMMON SHARE $ .075 $ .075
======== ========
</TABLE>
See notes to consolidated financial statements.
<TABLE>
AIRBORNE FREIGHT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
March 31 December 31
------------ -----------
1995 1994
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash $ 10,815 $ 10,318
Trade accounts receivable, less allowance 217,635 221,788
of $7,550 and $7,500
Spare parts and fuel inventory 29,643 28,071
Deferred income tax assets 12,862 12,458
Prepaid expenses 22,242 20,701
---------- ----------
TOTAL CURRENT ASSETS 293,197 293,336
PROPERTY AND EQUIPMENT, NET 790,662 766,346
EQUIPMENT DEPOSITS and OTHER ASSETS 18,125 18,824
---------- ----------
TOTAL ASSETS $1,101,984 $1,078,506
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 121,479 $ 117,194
Salaries, wages and related taxes 41,016 43,858
Accrued expenses 63,853 59,053
Income taxes payable 104 342
Current portion of debt 6,079 6,018
---------- ----------
TOTAL CURRENT LIABILITIES 232,531 226,465
LONG-TERM DEBT 300,168 279,422
SUBORDINATED DEBT 118,580 118,580
DEFERRED INCOME TAX LIABILITIES 29,656 30,402
OTHER LIABILITIES 28,101 31,239
REDEEMABLE PREFERRED STOCK 3,948 5,000
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 21,365,486 and 21,285,924 shares 21,366 21,286
Additional paid-in capital 185,661 184,369
Retained earnings 182,944 182,714
---------- ----------
389,971 388,369
Treasury stock, 315,150 shares, at cost (971) (971)
---------- ----------
389,000 387,398
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,101,984 $1,078,506
========== ==========
</TABLE>
See notes to consolidated financial statements.
<TABLE>
AIRBORNE FREIGHT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<CAPTION>
Three Months Ended
March 31
------------------
1995 1994
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net Earnings $ 1,880 $ 7,000
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 32,335 31,319
Provision for aircraft engine 2,467 2,446
overhauls
Deferred income taxes (1,150) (1,006)
Other (3,175) (3,495)
-------- --------
CASH PROVIDED BY OPERATIONS 32,357 36,264
Change in:
Receivables 4,153 (10,448)
Inventories and prepaid expenses (3,113) 1,183
Accounts payable 4,285 6,133
Accrued expenses, salaries and taxes 1,720 7,321
payable
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 39,402 40,453
INVESTING ACTIVITIES:
Additions to property and equipment (55,588) (49,106)
Dispositions of property and equipment 55 39
Expenditures for engine overhauls (2,555) (676)
Other (291) (1,443)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (58,379) (51,186)
FINANCING ACTIVITIES:
Proceeds on bank notes, net 33,700 6,200
Principal payments on debt (12,893) (453)
Proceeds from common stock issuance 320 2,636
Dividends paid (1,653) (2,149)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 19,474 6,234
-------- --------
NET INCREASE (DECREASE) IN CASH 497 (4,499)
CASH AT JANUARY 1 10,318 7,134
-------- --------
CASH AT MARCH 31 $ 10,815 $ 2,635
======== ========
</TABLE>
See notes to consolidated financial statements.
AIRBORNE FREIGHT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1995
(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
1995 presentation.
NOTE B--LONG-TERM DEBT:
<TABLE>
Long-term debt consists of the following:
<CAPTION>
March 31 December 31
1995 1994
---- ----
(In thousands)
<S> <C> <C>
Senior debt:
Revolving bank credit $170,000 $135,000
Notes payable 15,700 17,000
Senior notes 100,000 100,000
Revenue bonds 13,200 13,200
Other debt 3,777 16,670
-------- --------
302,677 281,870
Subordinated debt:
Senior subordinated notes 7,150 7,150
Convertible subordinated debentures 115,000 115,000
-------- --------
122,150 122,150
-------- --------
Total long-term debt 424,827 404,020
Less current portion 6,079 6,018
-------- --------
$418,748 $398,002
======== ========
</TABLE>
NOTE C--EARNINGS PER COMMON SHARE:
Net earnings per common share are computed by dividing net earnings
available to common shareholders by the weighted average number of common
shares outstanding during the interim period plus dilutive common
equivalent shares applicable to the assumed exercise of employee stock
options. Fully diluted earnings per common share are the same as net
earnings per common share for the interim periods presented herein.
Average common shares outstanding used in earnings per share computations
at March 31, 1995 and 1994 were 21,184,000 and 20,173,000, respectively.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS:
The Company's operating performance in the first quarter of 1995 resulted
in significantly lower operating income and net earnings compared to the
first quarter of 1994. Domestic yields were negatively impacted by a
decline in the average weight per shipment. Coupled with the higher growth
rate of lower yielding deferred service shipments, this resulted in a
higher than normal decline in the average revenue per domestic shipment.
Operating costs per shipment were lowered during the quarter, aided by
strong productivity improvement. However, the operating cost decreases
were not adequate to keep pace with the decline in average revenue per
shipment.
Net earnings available to common shareholders for the first quarter of 1995
were $1.8 million, or $.09 per share, compared to $6.4 million, or $.32 per
share for the first quarter of 1994.
<TABLE>
The following table sets forth selected shipment and revenue data for
the periods indicated:
<CAPTION>
Three Months Ended March 31
---------------------------
1995 1994
---- ----
<S> <C> <C>
Shipments (in thousands):
Domestic
Overnight
Letters 9,130 8,476
0-2 Lbs. 12,013 10,788
3-99 Lbs. 10,472 9,628
------ ------
31,615 28,892
Select Delivery Service
0-2 Lbs. 13,903 9,566
3-99 Lbs. 7,676 5,782
------ ------
21,579 15,348
100 Lbs. and over 81 86
------ ------
Total Domestic 53,275 44,326
------ ------
International
Express 936 804
All Other 130 112
------ ------
Total International 1,066 916
------ ------
Total Shipments 54,341 45,242
====== ======
Average Pounds per Shipment:
Domestic 4.5 4.7
International 67.8 61.5
Average Revenue per Pound:
Domestic $ 1.82 $ 1.90
International $ 1.22 $ 1.23
Average Revenue per Shipment:
Domestic $ 8.29 $ 8.95
International $82.31 $76.06
</TABLE>
Total shipments increased 20% in the first quarter of 1995 compared to 18%
in the first quarter of 1994. Total revenues increased 14% in the first
quarter of 1995 compared to 17% in 1994.
Domestic shipments increased 20% in the first quarter of 1995 compared to
18% for the same period of 1994. The growth in domestic shipments
continued to be aided by strong growth in the Company's deferred service
product, Select Delivery Service (SDS). For the first quarter of 1995, SDS
accounted for over 40% of total domestic shipments, compared to 35% for the
first quarter of 1994. Domestic overnight shipment growth was 9% in the
first quarter of 1995 compared to 11% for the same period in 1994.
Domestic revenues increased 11% in the first quarter of 1995, compared to
15% in 1994. Revenue growth was negatively impacted by a 3.5% decline in
the average weight per domestic shipment. This decline in average weight
in combination with the trend of a higher growth rate in lower yielding SDS
shipments, resulted in a decrease in the average revenue per domestic
shipment of more than 7.5% to $8.29 per shipment in the first quarter of
1995 versus $8.95 in 1994. The decline in average weight per shipment is
assumed to be due to the market place adjusting to current inventory levels
and economic conditions. The stabilization of domestic weight per shipment
and related revenue per shipment yields will be key to quarterly results in
upcoming quarters of 1995.
International shipments increased 16% in the first quarter of 1995 compared
to 9% in 1994. The growth in international shipments continues to be aided
by the growth in higher yielding freight shipments which increased 16% in
the first quarter of 1995 compared to 19% for the same period of 1994.
International revenues increased 26% in the first quarter of 1995 compared
to 32% in 1994. International revenue per shipment and the average weight
per shipment increased significantly as a result of the continued strong
unit growth in higher yielding freight shipments.
Operating expenses as a percentage of revenues were 98.1% for the first
quarter of 1995 compared to 96.2% in the first quarter of 1994 and 95.5%
for all of 1994. Operating cost per shipment handled decreased 3.5% for
the first quarter of 1995 compared to 2% decrease in 1994. During the
early part of the first quarter of 1994, operating expenses were negatively
impacted by severe winter weather and the California earthquake. The
Company experienced a 9.5% improvement in productivity for the first
quarter of 1995, as measured by shipments handled per paid employee hour,
compared to 6% in first quarter of 1994. Comparisons of certain operating
expense components are discussed below.
Transportation purchased increased as a percentage of revenues to 35.6% in
the first quarter of 1995 compared to 33.2% in 1994. This increase was
primarily due to additional commercial airline costs resulting from the
growth in international freight shipments discussed above.
Station and ground expense as a percentage of revenues was 31.2% in the
first quarter of 1995 which is comparable to the first quarter of 1994, as
productivity gains achieved offset any inflationary pressures on costs.
Flight operations and maintenance expense as a percentage of revenues
during the first quarter of 1995 was 14.7%, compared to 14.1% in the first
quarter of 1994. The average aviation fuel price for the first quarter of
1995 was $.59 per gallon compared to $.60 per gallon in the first quarter
of 1994. Aviation fuel consumption increased to 33.7 million gallons in
the first quarter of 1995, a 12% increase compared to the first quarter of
1994. The increase in fuel consumption is a result of additional Company
operated aircraft placed in service since the first quarter in 1994. The
effect of comparatively lower average fuel costs in the first quarter of
1995 was offset by higher aircraft maintenance costs. The Company
anticipates aircraft maintenance costs in the second quarter of 1995 will
be comparable to the first quarter costs, but will decrease as a percent of
revenues in the third and fourth quarters.
The increased number of aircraft in service also accounted for the increase
in depreciation and amortization expense in the first quarter of 1995.
General and administrative and sales and marketing expenses on a combined
basis decreased as a percentage of revenues in the first quarter of 1995
compared to 1994. This was primarily the result of continuing productivity
gains and a strong focus on all discretionary spending.
Interest expense in the first quarter of 1995 was higher than the same
period of 1994. This increase was the result of slightly higher average
outstanding borrowings combined with higher effective interest rates.
The Company's effective tax rate was 43.1% in the first quarter of 1995
compared to 40.9% in the first quarter of 1994 and 39.6% for all of 1994.
The higher effective tax rate for the first quarter of 1995 was a result of
certain taxes that are not directly related to the level of earnings.
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 $235 million in 1995,
of which a significant portion is related to the acquisition and
modification of aircraft. During the first quarter of 1995, total capital
expenditures net of dispositions were $56 million. The principal sources
of liquidity for financing capital expenditures during the first quarter of
1995 were cash provided by operations and financing under the Company's
bank lines of credit.
The Company's 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 $45 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 March 31, 1995, a
total of $185.7 million was outstanding under the revolving bank credit and
money market credit lines.
The Company amended its revolving bank credit agreement effective
March 31, 1995, increasing the total commitment from $240 million to $250
million, subject to a maximum level of Company indebtedness permitted by
certain covenants in the agreement and other loan agreements. The amended
agreement is effective through May 31, 1998, with option to extend to
May 31, 2000.
The $100 million aircraft financing facility commitment with Mitsui & Co.
expired in March 1995.
In management's opinion, the available capacity under the bank credit
agreements coupled with internally generated cash flow from remaining 1995
operations and other sources of borrowing should provide adequate
flexibility to finance anticipated capital expenditures for the balance of
1995.
PART II. OTHER INFORMATION
--------------------------
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits -
EXHIBIT NO. 10 Material Contracts
10. First Amendment to Revolving Loan Facility dated as of March 31,
1995 among the Company, as borrower, and Wachovia Bank of Georgia, N.A., as
Agent, and Wachovia Bank of Georgia, N.A., ABN AMRO Bank N.V., United
States National Bank of Oregon, Seattle-First National Bank, CIBC, Inc.,
National City Bank, Columbus, Bank of America National Trust and Savings
Association, The Bank of New York and NBD Bank, N.A.
EXHIBIT NO. 27 Financial Data Schedule
(b) Reports on form 8-K - A Form 8-K dated May 2, 1995, has been duly
filed. The form included the following information:
(1) Election of Directors for terms expiring in 1998.
(2) Adopted the 1995 - 1999 Executive Incentive Compensation Plan
(3) Approval of the selection of Deloitte & Touche LLP as the
independent public accountants for the ensuing year.
(4) Re-election of all exiting officers including the principal
executive officers of the corporation.
<TABLE>
<CAPTION>
Name Title
----- -----
<S> <C>
Robert S. Cline Chairman of the Board
Chief Executive Officer
Robert G. Brazier President
Chief Operating Officer
</TABLE>
(5) Declared dividends on common and preferred stock.
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)
<TABLE>
<CAPTION>
<S> <C> <C>
Date: 5/12/95 /s/Roy C. Liljebeck
------- --------------------
Roy C. Liljebeck
Executive Vice President,
Chief Financial Officer
Date: 5/12/95 /s/Lanny H. Michael
------- -------------------
Lanny H. Michael
Senior Vice President,
Treasurer and Controller
</TABLE>
EXHIBIT 10
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "First Amendment") is
dated as of the 31st day of March, 1995 among AIRBORNE FREIGHT CORPORATION
(the "Borrower"), WACHOVIA BANK OF GEORGIA, N.A., as Agent (the "Agent")
and WACHOVIA BANK OF GEORGIA, N.A., ABN AMRO BANK N.V., UNITED STATES
NATIONAL BANK OF OREGON, SEATTLE - FIRST NATIONAL BANK, CIBC, INC.,
NATIONAL CITY BANK, COLUMBUS (as assignee of Continental Bank N.A.), BANK
OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, THE BANK OF NEW YORK and
NBD BANK, N.A. (collectively, the ("Banks");
W I T N E S S E T H:
WHEREAS, the Borrower, the Agent and the Banks executed and delivered
that certain Credit Agreement, dated as of the 19th day of November, 1993
(the "Credit Agreement");
WHEREAS, the Borrower has requested and the Agent and the Banks have
agreed to certain amendments to the Credit Agreement, subject to the terms
and conditions hereof;
NOW, THEREFORE, for and in consideration of the above premises and
other good and valuable consideration, the receipt and sufficiency of which
hereby is acknowledged by the parties hereto, the Borrower, the Agent and
the Banks hereby covenant and agree as follows:
1. Definitions. Unless otherwise specifically defined herein, each
term used herein which is defined in the Credit Agreement shall have the
meaning assigned to such term in the Credit Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other similar
reference and each reference to "this Agreement" and each other similar
reference contained in the Credit Agreement shall from and after the date
hereof refer to the Credit Agreement as amended hereby.
2. Amendments to Section 1.01. Section 1.01 of the Credit Agreement
hereby is amended in the following respects:
(a) the definition of "Applicable Margin" hereby is
amended by deleting the percentages in clause (ii) (x), (y) and
(z) thereof, as set forth below, and substituting therefor the new
percentages set forth below opposite the deleted percentages:
<TABLE>
<CAPTION>
Deleted % Substituted %
<S> <C> <C>
clause (ii)(x) 0.4375% 0.275%
clause (ii)(y) 0.6875% 0.35%
clause (ii)(z) 0.875% 0.55%
</TABLE>
(b) the definition of "Commitment" hereby is amended by deleting
the words "signature pages hereof" in the second and third lines thereof,
and substituting therefor the words "Schedule of Commitments attached
hereto"
(c) the definition of "Mitsui Agreement" hereby is deleted in its
entirety;
3. Amendment to Section 2.03(b). Section 2.03(b) of the Credit
Agreement hereby is amended by deleting the last sentence thereof and
substituting therefor the following:
Except as otherwise provided in the preceding sentence, the
Borrower shall not make more than (x) 2 Money Market Quote Requests within
any 5 consecutive Business Days and (y) 3 Money Market Quote Requests
within any 10 consecutive Domestic Business Days.
4. Amendment to Section 2.05(c). Section 2.05(c) of the Credit
Agreement hereby is amended by: (i) deleting the phrase "May 31, 1995 and
May 31, 1996" in the eleventh line thereof, and substituting therefor the
phrase "May 31, 1995, May 31, 1996 and May 31, 1997"; and (ii) adding the
following to the last sentence thereof:
, and if the Termination Date is not extended for any additional
one year period on or before May 31, 1996, then the Borrower may not
request that the Termination Date be extended for an additional one year
period on May 31, 1997.
5. Amendment to Section 2.07(a). Section 2.07(a) of the Credit
Agreement hereby is deleted in its entirety, and the following is
substituted therefor:
Section 2.07(a). [INTENTIONALLY OMITTED]
6. Amendment to Section 2.07(b). Section 2.07(b) of the Credit
Agreement hereby is amended by deleting the percentages in clauses (ii) and
(iii) thereof, as set forth below, and substituting therefor the
percentages set forth below opposite the deleted percentages:
<TABLE>
<CAPTION>
Deleted % Substituted %
<S> <C> <C>
clause (ii) 0.1875% 0.15%
clause (iii) 0.375% 0.25%
</TABLE>
7. Amendment to Section 5.01(b). Section 5.01(b) of the Credit
Agreement hereby is deleted in its entirety and the following is
substituted therefor:
(b) within 45 days after the end of each Fiscal Quarter of
each Fiscal Year, a (i) consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of the end of such Fiscal Quarter and the
related statements of net earnings for such Fiscal Quarter and for that
portion of the Fiscal Year ended with such Fiscal Quarter and the related
statements of cash flows for that portion of the Fiscal Year ended with
such Fiscal Quarter, setting forth (x) in the case of net earnings, in
comparative form the figures for the corresponding Fiscal Quarter and the
corresponding portion of the previous Fiscal Year and (y) in the case of
cash flow, in comparative form the figures for the corresponding portion of
the previous Fiscal Year, and (ii) certification by the chief financial
officer or the chief accounting officer of the Borrower that the financial
statements referred to in clause (i) of this paragraph fairly present the
consolidated financial position of the Borrower in conformity with GAAP
(subject to normal year end adjustments);
8. Amendment to Section 5.05. Section 5.05 of the Credit Agreement
hereby is deleted in its entirety and the following is substituted
therefor:
Subsequent to December 31, 1993, Consolidated Tangible Net Worth
will at no time be less than $300,000,000 plus (i) the sum of (x) 50% of
the cumulative Net Proceeds of Capital Stock received during any period
after December 31, 1993, calculated as of the end of each Fiscal Year,
minus (ii) the sum of the redemption payments made by the Borrower in
respect of the Cumulative Convertible Preferred Stock (provided, that, such
redemption payments may not exceed during any Fiscal Year those amounts set
forth on Schedule 1.01).
9. Amendments to Section 5.09. Section 5.09 of the Credit Agreement
hereby is amended in the following respects:
(a) Section 5.09(a) hereby is amended by deleting the figure and
symbol "7.5%" in the third line thereof and substituting therefor the
figure and symbol "12.50%"
(b) Section 5.09(c) hereby is amended by deleting the semicolon and
the word "and" at the end thereof and substituting therefor a period.
(c) Section 5.09(d) hereby is deleted in its entirety.
10. Amendment to Section 5.13. Section 5.13 of the Credit Agreement
hereby is deleted in its entirety and substituting therefor the following:
The Borrower will not, nor will it permit any Subsidiary to,
sell, lease or otherwise transfer all or any substantial part of its assets
to any other Person, provided, that, the Borrower and its Consolidated
Subsidiaries may sell (i) up to $100,000,000 of Consolidated Total Assets
during the time period from the Closing Date to and including December 31,
1994, plus (ii) additional increments of Consolidated Total Assets sold in
the ordinary course of business of up to $5,000,000 in each successive
Fiscal Year subsequent to the Fiscal Year ended December 31, 1993, plus
(iii) additional increments of Consolidated Total Assets, whether or not
sold in the ordinary course of business, of up to $30,000,000 in each
successive Fiscal Year subsequent to the Fiscal Year ended December 31,
1994, plus (iv) any unused portion of permitted sales from any preceding
Fiscal Year under clauses (i) and (iii).
11. Amendments to Signature Pages; Schedule of Commitments. The
signature pages to the Credit Agreement hereby are amended by deleting the
amounts set forth opposite the name of each of the Banks, and all
references on such pages to Commitments and Total Commitments. A Schedule
of Commitments in the form of the Schedule of Commitments attached hereto
hereby is added to the Credit Agreement immediately following the last
signature page and prior to Exhibit A-1.
12. Amendments to Compliance Certificate. The Compliance Certificate
(Exhibit F to the Credit Agreement) hereby is amended by amending the
Compliance Checklist attached thereto in the following respects:
(a) Paragraph 3 of the Compliance Checklist is deleted in its
entirety, and the following is substituted therefor:
3. Minimum Consolidated Tangible
Net Worth (Section 5.05)
(a) $300,000,000
(b) 50% of the cumulative Net
Proceeds of Capital Stock $_________
(c) Sum of redemption payments
made in respect of Cumulative
Preferred Stock $_________
(d) Limitation on such redemption
payments per Schedule 1.01 $_________
Required Minimum Consolidated
Tangible Net Worth (the sum of
(a) plus (b) minus the lesser of
(c) and (d) $_________
Consolidated Tangible Net
Worth Schedule - 1 $_________
(b) Paragraph 5 of the Compliance Checklist is deleted in its
entirety, and the following is substituted therefor:
5. Negative Pledge (Section 5.09)
(a) Consolidated Total Assets $_________
(b) Amount of Debt Secured
by Liens (other than those
referred to in clauses (b)
and (c) of Section 5.09) $_________
Limitation (product of (a)
multiplied by 0.125) $_________
13. Amendment to Exhibit A-2 Exhibit A-2 to the Credit Agreement
hereby is deleted in its entirety and Exhibit A-2 hereto is substituted
therefor.
14. Restatement of Representations and Warranties. The Borrower
hereby restates and renews each and every representation and warranty
heretofore made by it in the Credit Agreement and the other Loan Documents
as fully as if made on the date hereof and with specific reference to this
First Amendment and all other loan documents executed and/or delivered in
connection herewith.
15. Effect of Amendment. Except as set forth expressly hereinabove,
all terms of the Credit Agreement and the other Loan Documents shall be and
remain in full force and effect, and shall constitute the legal, valid,
binding and enforceable obligations of the Borrower. The amendments
contained herein shall be deemed to have prospective application only,
unless otherwise specifically stated herein.
16. Ratification. The Borrower hereby restates, ratifies and
reaffirms each and every term, covenant and condition set forth in the
Credit Agreement and the other Loan Documents effective as of the date
hereof.
17. Counterparts. This First Amendment may be executed in any number
of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an
original and all of which counterparts, taken together, shall constitute
but one and the same instrument.
18. Section References. Section titles and references used in this
First Amendment shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreements among the parties hereto
evidenced hereby.
19. No Default. To induce the Agent and the Banks to enter into this
First Amendment and to continue to make advances pursuant to the Credit
Agreement, the Borrower hereby acknowledges and agrees that, as of the date
hereof, and after giving effect to the terms hereof, there exists (i) no
Default or Event of Default (the Agent and the Banks hereby acknowledging
and agreeing that the delivery prior to the date hereof of financial
statements complying with the provisions of Section 5.01(b) of the Credit
Agreement as modified by this First Amendment, shall constitute compliance
with the provisions of Section 5.01(b) as in effect prior to the date of
this First Amendment for all purposes) and (ii) no right of offset,
defense, counterclaim, claim or objection in favor of the Borrower arising
out of or with respect to any of the Obligations.
20. Further Assurances. The Borrower agrees to take such further
actions as the Agent shall reasonably request in connection herewith to
evidence the amendments herein contained to the Borrower.
21. Governing Law. This First Amendment shall be governed by and
construed and interpreted in accordance with, the laws of the State of
Georgia.
22. Conditions Precedent. This First Amendment shall become
effective only upon:
(i) execution and delivery of this First Amendment by each of the
parties hereto;
(ii) execution and delivery of the Consent and Reaffirmation of
Guarantors at the end hereof by each of the Guarantors;
(iii) receipt by the Agent of an opinion letter (together with any
opinions of local counsel relied on therein) of David C. Anderson, counsel
for the Borrower, dated as of the date hereof, substantially in the form of
Exhibit A;
(iv) receipt by the Agent of a certificate of incumbency of each of
the Borrower and the Guarantors, signed by the Secretary or an Assistant
Secretary of the Borrower and the Guarantors, certifying as to the names,
true signatures and incumbency of the officer or officers of the Borrower
authorized to execute and deliver this First Amendment and certified copies
of the following items, for the Borrower : (i) Certificate/Articles of
Incorporation, (ii) Bylaws, (iii) a certificate of the Secretary of State
of the state of its incorporation as to its good standing as a corporation
in that state, and (iv) the action taken by the Board of Directors
authorizing the execution, delivery and performance of this First
Amendment;
(v) execution and delivery of a new Money Market Loan Note in the
form of Exhibit A-2 for each of the Banks (and the old Money Market Loan
Notes shall be canceled); and
(vi) execution and delivery of a new Syndicated Loan Note in the form
of Exhibit C for Wachovia (and the old Syndicated Loan Notes of Wachovia
shall be canceled).
IN WITNESS WHEREOF, the Borrower, the Agent and each of the Banks has
caused this First Amendment to be duly executed, under seal, by its duly
authorized officer as of the day and year first above written.
AIRBORNE FREIGHT CORPORATION,
as Borrower (SEAL)
By: /s/Lanny H. Michael
--------------------------- --------
Title: Senior Vice President,
Treasurer & Controller
WACHOVIA BANK OF GEORGIA, N.A.,
as Agent and as a Bank (SEAL)
By: /s/Douglas L. Williams
-----------------------------------
Title: Senior Vice President
Group Executive
ABN AMRO BANK N.V.,
as a Bank (SEAL)
By: /s/J.J. Rice
-----------------------------------
Title: Vice President
By: /s/Leif H. Olsson
-----------------------------------
Title: Group Vice President
UNITED STATES NATIONAL BANK OF OREGON,
as a Bank (SEAL)
By: /s/Matthew S. Thoreson
-----------------------------------
Title: Vice President
SEATTLE - FIRST NATIONAL BANK,
as a Bank (SEAL)
By: /s/Stan Diddams
-----------------------------------
Title: Vice President
CIBC, INC.,
as a Bank (SEAL)
By: /s/Dean J. Decker
-----------------------------------
Title: Assistant Vice President
NATIONAL CITY BANK, COLUMBUS,
as a Bank (SEAL)
By: /s/Jeffrey L. Hawthorne
-----------------------------------
Title: Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as a Bank (SEAL)
By: /s/Timothy C. Hintz
-----------------------------------
Title: Vice President
THE BANK OF NEW YORK,
as a Bank (SEAL)
By: /s/Robert Lonk
-----------------------------------
Title: Vice President
NBD BANK, N.A.,
as a Bank (SEAL)
By: /s/James R. Frye
-----------------------------------
Title: First Vice President
SCHEDULE OF COMMITMENTS
<TABLE>
<CAPTION>
Bank Commitment
<S> <C>
Wachovia Bank of Georgia, N.A. $ 50,000,000
ABN AMRO Bank N.V. $ 30,000,000
United States National Bank of Oregon $ 30,000,000
Seattle - First National Bank $ 30,000,000
CIBC, Inc. $ 25,000,000
National City Bank, Columbus $ 25,000,000
Bank of America National Trust
and Savings Association $ 20,000,000
The Bank of New York $ 20,000,000
NBD Bank, N.A. $ 20,000,000
------------
Total Commitments $250,000,000
============
</TABLE>
EXHIBIT A
OPINION OF
COUNSEL FOR THE BORROWER
[Date]
To the Banks and the Agent
Referred to Below
c/o Wachovia Bank of Georgia, N.A.,
as Agent
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Attn: Syndications Group
Dear Sirs:
I am Corporate Secretary-Counsel of Airborne Freight Corporation (the
"Borrower") and have acted as counsel for the Borrower in connection with
the First Amendment to Credit Agreement (the "First Amendment") dated as of
March 31, 1995, among the Borrower, the banks listed on the signature pages
thereof and Wachovia Bank of Georgia, N.A., as Agent. Capitalized terms
contained herein but not defined herein shall have the meanings attributed
thereto in the First Amendment or in the Credit Agreement referred to
therein.
I have examined such documents, corporate records, certificates of
public officials and other instruments and have conducted such other
investigations of fact and law as I have deemed necessary or advisable for
purposes of this opinion. For purposes of this opinion, I have assumed the
genuineness of all signatures, the authenticity of all documents provided
to us as originals, the conformity to authentic original documents of all
documents provided to us as certified, conformed or photostatic copies, and
the completeness and accuracy of all certificates obtained from public
officials. As to questions of fact material to the following opinions,
when all of the facts were not independently established, I have relied
upon oral and written representations of officers and representatives of
the Borrower, without any independent investigation or confirmation;
provided, that in connection with any such reliance, I have no reason to
believe that such representations are untrue. I have also assumed that the
First Amendment has been duly authorized, executed and delivered by each
Bank and by the Agent, and that the First Amendment constitutes the valid
and binding obligation of each Bank and of the Agent.
As used in this opinion, the phrase "actual knowledge" or "my actual
knowledge" means such knowledge as I have obtained from (a) my review of
(i) the First Amendment and (ii) the Certificate of Incorporation, Bylaws,
and minutes of meetings and consent resolutions of the Board of Directors
of the Borrower; and (b) inquiry of officers of the Borrower, and written
certificates furnished to me by such officers, but without further
investigation or verification on my part. "Actual knowledge" does not
include constructive or inquiry knowledge other than the knowledge acquired
as a result of the inquiries described in (b) of the preceding sentence.
Opinion
Based upon the foregoing and subject to the assumptions and
qualifications set out herein, I am of the opinion that:
1. The execution, delivery and performance by the Borrower of the
First Amendment (i) is within the Borrower's corporate powers, (ii) has
been duly authorized by all necessary corporate action, (iii) requires no
action by or in respect of, or filing with, any governmental body, agency
or official, (iv) does not contravene, or constitute a default under, the
certificate of incorporation or by-laws of the Borrower, or any provision
of applicable law or regulation or, to my actual knowledge, any agreement,
judgment, injunction, order, decree or other instrument, which is binding
upon the Borrower, and (v) to my actual knowledge, does not result in the
creation or imposition of any Lien on any asset of the Borrower or any of
its Subsidiaries.
2. The First Amendment constitutes a valid and binding agreement of
the Borrower, enforceable against the Borrower in accordance with its
terms.
3. To my actual knowledge, there is no action, suit or proceeding
pending or threatened against or affecting the Borrower or any of its
Subsidiaries before any court or arbitrator or any governmental body,
agency or official in which there is a reasonable possibility of an adverse
decision which could materially adversely affect the business, consolidated
financial position or consolidated results of operations of the Borrower
and its Consolidated Subsidiaries, considered as a whole, or which in any
manner questions the validity or enforceability of the First Amendment, the
Credit Agreement, the Guaranty or any Note.
Qualifications and Limitations
The opinions rendered herein are subject to and qualified in all
respects by the following qualifications and limitations:
a. My opinion as to the enforceability of the First Amendment is
limited by (i) applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, voidable preference, moratorium or similar laws
applicable to creditors' rights or remedies or to the collection of
debtors' obligations generally, (ii) general principles of equity and
public policy including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing (regardless of whether
considered in a proceeding in equity or at law), and (iii) principles
governing the availability of specific performance, injunctive relief, or
any other equitable remedy, which generally provide that the award of such
remedies is in the discretion of the court to which application for such
relief is made.
b. The enforceability of the First Amendment is limited by
Washington decisions which permit the admission of extrinsic evidence, both
oral and written, to ascertain the intent of the parties to documents,
regardless of the presence or absence of ambiguity in any of such
agreements or instruments and regardless of a statement by the party in the
documents that such agreements or instruments constitute an integrated
expression of their agreement (Berg v. Hudesman, 115 Wn.2d 657 (1990)).
c. I note that the First Amendment provides that it is to be
governed by, and construed and interpreted in accordance with, the laws of
the State of Georgia. For purposes of this opinion, and except as otherwise
provided in paragraph d. below, you have authorized us to assume that the
First Amendment and all related documents and instruments provide for the
application of, and will be governed by and construed in accordance with,
Washington law (without regard to Washington law regarding choice of law or
conflict of law).
d. In all respects, the opinions expressed herein are based on the
laws and facts existing on the date hereof, and no opinion is expressed
with respect to the effect of any subsequent change in such law or facts.
My opinion is limited to the effects, on the persons and transactions
herein described, of (i) the laws of the State of Washington, (ii) as to
the opinions expressed in paragraph 1 above concerning corporate status,
standing, power and authorization, the corporate laws of the State of
Delaware, and (iii) except as provided in paragraph e. below, the federal
laws of the United States, all as presently in force. I express no opinion
as to the applicability or effect of the laws of any other jurisdiction.
e. I express no opinion regarding matters of federal or state
aviation or transportation law.
f. The foregoing opinions, to the extent they relate to the
organization, existence, good standing and qualification of Borrower are
based solely upon my review of the certificates of incorporation and good
standing certificate of Borrower, copies of which have been provided to
you.
This opinion is delivered to you in connection with the transaction
referenced above and may be relied upon only by you, any Assignee,
Participant or other Transferee under the Credit Agreement and by no other
person or entity without my prior written consent.
Very truly yours,
---------------------
David C. Anderson
EXHIBIT A-2
MONEY MARKET LOAN NOTE
As of March 31, 1995
For value received, AIRBORNE FREIGHT CORPORATION, a Delaware
corporation (the "Borrower"), promises to pay to the order of
___________________, (the "Bank"), for the account of its Lending Office,
the unpaid principal amount of each Money Market Loan made by the Bank to
the Borrower pursuant to the Credit Agreement referred to below, on the
dates and in the amounts provided in the Credit Agreement. The Borrower
promises to pay interest on the unpaid principal amount of this Note on the
dates and at the rate or rates provided for in the Credit Agreement
referred to below. Interest on any overdue principal of and, to the extent
permitted by law, overdue interest on the principal amount hereof shall
bear interest at the Default Rate, as provided for in the Credit Agreement.
All such payments of principal and interest shall be made in lawful money
of the United States in Federal or other immediately available funds at the
office of Wachovia Bank of Georgia, N.A., 191 Peachtree Street, N.E.,
Atlanta, Georgia 30303-1757, or such other address as may be specified from
time to time pursuant to the Credit Agreement.
All Money Market Loans made by the Bank, the respective
maturities thereof, the interest rates from time to time applicable
thereto, and all repayments of the principal thereof shall be recorded by
the Bank and, prior to any transfer hereof, endorsed by the Bank on the
schedule attached hereto, or on a continuation of such schedule attached to
and made a part hereof; provided that the failure of the Bank to make any
such recordation or endorsement shall not affect the obligations of the
Borrower hereunder or under the Credit Agreement.
This Note is one of the Money Market Loan Notes referred to in
the Credit Agreement dated as of November 19, 1993 among the Borrower, the
Banks listed on the signature pages thereof and Wachovia Bank of Georgia,
N.A., as Agent (as amended as of even date herewith and as the same may
hereafter be amended and modified from time to time, the "Credit
Agreement"). Terms defined in the Credit Agreement are used herein with
the same meanings. Reference is made to the Credit Agreement for
provisions for the optional and mandatory prepayment and the repayment
hereof and the acceleration of the maturity hereof.
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly
executed, under seal, by its duly authorized officer as of the day and year
first above written.
AIRBORNE FREIGHT CORPORATION (SEAL)
By: ________________________________
Title:
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<S> <C> <C> <C> <C> <C>
Amount Amount of Stated
Interest of Principal Mat Notation
Date Rate Loan Repaid Date Made By
</TABLE>
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
EXHIBIT C
SYNDICATED LOAN NOTE
As of March 31, 1995
For value received, AIRBORNE FREIGHT CORPORATION, a Delaware
corporation (the "Borrower"), promises to pay to the order of Wachovia Bank
of Georgia, a national bank (the "Bank"), for the account of its Lending
Office, the principal sum of FIFTY MILLION and No/100 Dollars
($50,000,000), or such lesser amount as shall equal the unpaid principal
amount of each Syndicated Loan made by the Bank to the Borrower pursuant to
the Credit Agreement referred to below, on the dates and in the amounts
provided in the Credit Agreement. The Borrower promises to pay interest on
the unpaid principal amount of this Note on the dates and at the rate or
rates provided for in the Credit Agreement referred to below. Interest on
any overdue principal of and, to the extent permitted by law, overdue
interest on the principal amount hereof shall bear interest at the Default
Rate, as provided for in the Credit Agreement. All such payments of
principal and interest shall be made in lawful money of the United States
in Federal or other immediately available funds at the office of Wachovia
Bank of Georgia, N.A., 191 Peachtree Street, N.E., Atlanta, Georgia
30303-1757, or such other address as may be specified from time to time
pursuant to the Credit Agreement.
All Syndicated Loans made by the Bank, the respective maturities
thereof, the interest rates from time to time applicable thereto, and all
repayments of the principal thereof shall be recorded by the Bank and,
prior to any transfer hereof, endorsed by the Bank on the schedule attached
hereto, or on a continuation of such schedule attached to and made a part
hereof; provided that the failure of the Bank to make any such recordation
or endorsement shall not affect the obligations of the Borrower hereunder
or under the Credit Agreement.
This Note is one of the Syndicated Loan Notes referred to in the
Credit Agreement dated as of November 19, 1993 among the Borrower, the
Banks listed on the signature pages thereof and Wachovia Bank of Georgia,
N.A., as Agent (as amended on even date herewith and as the same may
hereafter be amended and modified from time to time, the "Credit
Agreement"). Terms defined in the Credit Agreement are used herein with
the same meanings. Reference is made to the Credit Agreement for
provisions for the optional and mandatory prepayment and the repayment
hereof and the acceleration of the maturity hereof.
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly
executed, under seal, by its duly authorized officer as of the day and year
first above written.
AIRBORNE FREIGHT CORPORATION (SEAL)
By: ________________________________
Title:
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<S> <C> <C> <C> <C> <C>
Base Rate Amoun Amount of
or Euro- of Principal Maturity Notation
Date Dollar Loan Loan Repaid Date Made By
</TABLE>
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
CONSENT AND REAFFIRMATION OF GUARANTORS
Each of the undersigned (i) acknowledges receipt of the foregoing
First Amendment to Credit Agreement (the "First Amendment"), (ii) consents
to the execution and delivery of the First Amendment by the parties thereto
and (iii) reaffirms all of its obligations and covenants under the Guaranty
Agreement dated as of November 19, 1993 executed by it, and agrees that
none of such obligations and covenants shall be affected by the execution
and delivery of the First Amendment. This Consent and Reaffirmation may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall
be deemed to be an original and all of which counterparts, taken together,
shall constitute but one and the same instrument.
ABX AIR, INC. (SEAL)
By: /s/Carl Donaway
-----------------------------------
Title: President & CEO
AIRBORNE FORWARDING CORPORATION (SEAL)
By: /s/Lanny H. Michael
-----------------------------------
Title: Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 10,815
<SECURITIES> 0
<RECEIVABLES> 225,185
<ALLOWANCES> 7,550
<INVENTORY> 29,643
<CURRENT-ASSETS> 293,197
<PP&E> 1,437,074
<DEPRECIATION> 646,412
<TOTAL-ASSETS> 1,101,984
<CURRENT-LIABILITIES> 232,531
<BONDS> 418,748
<COMMON> 21,366
3,948
0
<OTHER-SE> 367,634
<TOTAL-LIABILITY-AND-EQUITY> 1,101,984
<SALES> 0
<TOTAL-REVENUES> 529,916
<CGS> 0
<TOTAL-COSTS> 519,887
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,725
<INCOME-PRETAX> 3,304
<INCOME-TAX> 1,424
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,809
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
