SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1996
Commission File Number 1-6512
AIRBORNE FREIGHT CORPORATION
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(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 June 30, 1996 21,134,281 shares
-----------------
<TABLE>
AIRBORNE FREIGHT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF NET EARNINGS
(Dollars in thousands except per share data)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
June 30 June 30
------- -------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Domestic $524,055 $452,631 $1,030,176 $ 894,808
International 98,343 93,309 190,131 181,048
-------- -------- ---------- ----------
622,398 545,940 1,220,307 1,075,856
OPERATING EXPENSES:
Transportation purchased 207,207 196,726 409,739 385,511
Station and ground operations 193,346 170,812 385,663 335,926
Flight operations and maintenance 92,973 79,311 187,742 157,372
General and administrative 47,903 37,019 91,165 74,513
Sales and marketing 15,030 16,250 30,478 31,881
Depreciation and amortization 40,124 34,846 78,985 69,648
-------- -------- ---------- ----------
596,583 534,964 1,183,772 1,054,851
-------- -------- ---------- ----------
EARNINGS FROM OPERATIONS 25,815 10,976 36,535 21,005
INTEREST, NET 8,191 6,964 16,532 13,689
-------- -------- ---------- ----------
EARNINGS BEFORE INCOME TAXES 17,624 4,012 20,003 7,316
INCOME TAXES 6,935 1,750 8,000 3,174
-------- -------- ---------- ----------
NET EARNINGS 10,689 2,262 12,003 4,142
PREFERRED STOCK DIVIDENDS 68 68 136 139
-------- -------- ---------- ----------
NET EARNINGS AVAILABLE $ 10,621 $ 2,194 $ 11,867 $ 4,003
TO COMMON SHAREHOLDERS ======== ======== ========== ==========
NET EARNINGS PER COMMON SHARE:
Primary - $ .50 $ .10 $ .56 $ .19
======== ======== ========== ==========
Fully Diluted - $ .48 $ .10 $ .56 $ .19
======== ======== ========== ==========
DIVIDENDS PER COMMON SHARE $ .075 $ .075 $ .15 $ .15
======== ======== ========== ==========
</TABLE>
See notes to consolidated financial statements.
<TABLE>
AIRBORNE FREIGHT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
June 30 December 31
------- -----------
1996 1995
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash $ 12,362 $ 17,906
Trade accounts receivable,
less allowance of $7,915 and $7,750 263,075 259,408
Spare parts and fuel inventory 35,645 33,792
Deferred income tax assets 17,828 16,135
Prepaid expenses 21,926 24,887
---------- ----------
TOTAL CURRENT ASSETS 350,836 352,128
PROPERTY AND EQUIPMENT, NET 854,618 842,703
EQUIPMENT DEPOSITS and OTHER ASSETS 25,094 22,553
---------- ----------
TOTAL ASSETS $1,230,548 $1,217,384
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 123,602 $ 136,987
Salaries, wages and related taxes 51,419 49,106
Accrued expenses 67,728 66,679
Income taxes payable 4,637 1,967
Current portion of debt 1,050 5,790
---------- ----------
TOTAL CURRENT LIABILITIES 248,436 260,529
LONG-TERM DEBT 378,649 364,621
SUBORDINATED DEBT 115,000 115,000
DEFERRED INCOME TAX LIABILITIES 40,145 38,242
OTHER LIABILITIES 28,784 28,729
REDEEMABLE PREFERRED STOCK 3,948 3,948
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 21,449,431 and 21,397,865 shares 21,449 21,398
Additional paid-in capital 186,470 185,947
Retained earnings 208,638 199,941
---------- ----------
416,557 407,286
Treasury stock, 315,150 shares, at cost (971) (971)
----------- ----------
415,586 406,315
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,230,548 $1,217,384
========== ==========
</TABLE>
See notes to consolidated financial statements.
<TABLE>
AIRBORNE FREIGHT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<CAPTION>
Six Months Ended
June 30
----------------
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net Earnings $ 12,003 $ 4,142
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 72,965 64,689
Provision for aircraft engine overhauls 6,020 4,959
Deferred income taxes 211 (1,178)
Other 147 (2,791)
-------- --------
CASH PROVIDED BY OPERATIONS 91,346 69,821
Change in:
Receivables (3,667) 1,901
Inventories and prepaid expenses 1,108 (2,938)
Accounts payable (13,385) (5,545)
Accrued expenses, salaries & taxes payable 6,032 2,283
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 81,434 65,522
INVESTING ACTIVITIES:
Additions to property and equipment (85,621) (106,098)
Dispositions of property and equipment 52 340
Expenditures for engine overhauls (6,966) (3,922)
Other (998) (257)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (93,533) (109,937)
FINANCING ACTIVITIES:
Proceeds from bank note borrowings, net 14,200 68,600
Principal payments on debt (4,912) (17,071)
Proceeds from common stock issuance 574 320
Dividends paid (3,307) (3,301)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 6,555 48,548
-------- --------
NET INCREASE (DECREASE) IN CASH (5,544) 4,133
CASH AT JANUARY 1 17,906 10,318
-------- --------
CASH AT JUNE 30 $ 12,362 $ 14,451
======== ========
</TABLE>
See notes to consolidated financial statements.
AIRBORNE FREIGHT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
(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
1996 presentation.
NOTE B--LONG-TERM DEBT:
<TABLE>
Long-term debt consists of the following:
<CAPTION>
June 30 December 31
------- -----------
1996 1995
---- ----
(In thousands)
<S> <C> <C>
Senior debt:
Revolving bank credit $135,000 $115,000
Notes payable 22,500 28,300
Senior notes 200,000 200,000
Revenue bonds 13,200 13,200
Other debt 8,999 10,331
-------- --------
379,699 366,831
Subordinated debt:
Senior subordinated notes -- 3,580
Convertible subordinated debentures 115,000 115,000
-------- --------
115,000 118,580
-------- --------
Total long-term debt 494,699 485,411
Less current portion 1,050 5,790
-------- --------
$493,649 $479,621
======== ========
</TABLE>
NOTE C--EARNINGS PER COMMON SHARE:
Primary earnings per common share are based upon the weighted average
number of common shares outstanding during the interim period plus dilutive
common equivalent shares applicable to the assumed exercise of outstanding
stock options.
Fully diluted earnings per share for the three months ended June 30, 1996,
assumes conversion of the Company's redeemable preferred stock and
convertible subordinated debentures as well as the dilutive common
equivalent shares applicable to the assumed exercise of stock options. Net
earnings as adjusted for the elimination of preferred stock dividends and
interest expense, net of applicable taxes, relative to the assumed
conversion was $11,753,285 for the three month period.
Fully diluted earnings per share for the six month period ended June 30,
1996 and the three and six month periods ended June 30, 1995 were the same
as primary earnings per share.
<TABLE>
Average shares outstanding used in earnings per share computations were as
follows:
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
June 30 June 30
------- -------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
AVERAGE SHARES OUTSTANDING
Primary 21,316 21,178 21,321 21,182
Fully Diluted 24,728 21,180 21,322 21,182
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS:
The Company's operating performance in the second quarter of 1996 resulted
in significantly higher operating income and net earnings compared to the
second quarter of 1995, and compared to the weather-hampered results of the
first quarter of 1996. Key factors contributing to the improved operating
results include yield improvements, productivity gains, and solid shipment
growth.
Net earnings available to common shareholders for the second quarter of
1996 were $10.6 million, or $0.50 per share, compared to $2.2 million, or
$0.10 per share, for the second quarter of 1995. Net earnings were
$11.9 million, or $0.56 per share for the first six months of 1996,
compared to $4.0 million, or $0.19 per share for the corresponding period
in 1995.
Earnings per share on a fully diluted basis for the second quarter of 1996
and 1995 were $0.48 and $0.10, respectively, and for the first six months
of 1996 were $0.56 compared to $0.19 for the corresponding period in 1995.
<TABLE>
The following table sets forth selected shipment and revenue data for the
periods indicated:
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
June 30 June 30
------- -------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Shipments (in thousands):
Domestic
Overnight
Letters 9,620 9,017 19,147 18,147
0-2 Lbs. 14,173 12,208 28,003 24,221
3-99 Lbs. 12,312 10,509 24,629 20,981
------ ------ ------- -------
36,105 31,734 71,779 63,349
Select Delivery Service
0-2 Lbs. 17,751 14,558 34,941 28,461
3-99 Lbs. 9,352 8,143 18,859 15,819
------ ------ ------- ------
27,103 22,701 53,800 44,280
100 Lbs. & over 75 81 148 162
------ ------ ------- -------
Total Domestic 63,283 54,516 125,727 107,791
------ ------ ------- -------
International
Express 1,129 1,013 2,187 1,949
All Other 150 142 296 272
------ ------ ------- -------
Total International 1,279 1,155 2,483 2,221
------ ------ ------- -------
Total Shipments 64,562 55,671 128,210 110,012
====== ====== ======= =======
Average Pounds per Shipment:
Domestic 4.5 4.5 4.5 4.5
International 57.2 62.5 57.8 65.0
Average Revenue per Pound:
Domestic $1.82 $ 1.80 $1.81 $ 1.81
International $1.32 $ 1.30 $1.30 $ 1.26
Average Revenue per
Shipment:
Domestic $ 8.25 $ 8.27 $ 8.17 $ 8.28
International $76.89 $80.79 $76.57 $81.52
</TABLE>
Total shipments increased 16.0% in the second quarter of 1996 compared to
an increase of 20.0% in the second quarter of 1995. Domestic and
international shipments increased 16.1% and 10.7%, respectively, during
this period of 1996 compared to 20.0% and 17.7%, respectively, for the
corresponding period of 1995. Domestic shipments increased 16.6% and
international shipments increased 11.8% in the first half of 1996 compared
to 20.1% and 17.1%, respectively, in the first half of 1995.
The growth in domestic shipments has been aided by improved growth in the
Company's overnight service product. For the first six months of 1996,
overnight shipments increased 13.3% compared to an increase of 9.1% for the
comparable period in 1995. Also, domestic shipment growth continued to be
aided by solid growth in the deferred service product, which increased
21.5% in the first six months of 1996, accounting for 42.8% of total
domestic shipments in the first half of 1996 compared to 41.1% for the same
period in 1995.
Domestic revenues increased 15.8% in the second quarter of 1996 and 15.1%
for the first six months of 1996 compared to 11.0% and 11.2% for the
comparable periods in 1995, respectively. The Company experienced a
milestone during the second quarter of 1996 relative to domestic revenue
growth that has not occurred in several years. The percentage growth in
domestic revenue did not lag shipment growth, but was relatively equal to
the percentage growth in domestic shipments. Also, the average revenue per
domestic shipment increased during the second quarter of 1996 to $8.25,
compared to $8.08 in the first quarter of 1996. These improved domestic
revenue trends reflect the extra focus placed on enhancing yields. This
focus began in the third quarter of 1995 and these efforts continue to be
an ongoing focus of the Company.
International shipments increased 10.7% and 11.8% in the second quarter and
first six months of 1996, respectively, compared to 17.7% and 17.1% in the
comparable periods of 1995. International revenues increased 5.4% in the
second quarter of 1996 compared to 21.4% in 1995, and for the first half of
1996 and 1995 increased 5.0% and 23.5%, respectively.
International revenue per shipment and the average weight per shipment
decreased as a result of the lower unit growth in higher yielding freight
shipments in the first half of 1996 compared to 1995. However, gross
margins on international business improved 13.0% over the first half of
1995.
Assuming the economy remains strong, the factors that contributed to the
Company's growth and improved operating results during the second quarter,
should have a positive effect through the balance of 1996. However, the
overall growth in business during the last couple weeks of the second
quarter and the first few weeks of the third quarter has not been as strong
as expected. While this lower growth may not be indicative of a definitive
trend, a continuing softness could negatively impact operating results in
the last half of the year.
Operating expenses as a percentage of revenues were 97.0% for the first six
months of 1996 compared to 98.0% in the first six months of 1995 and 96.9%
for all of 1995. Operating cost per shipment handled decreased 3.8% to
$9.23 for the first six months 1996 compared to the first six months of
1995. The operating cost per shipment for the second quarter of 1996
decreased 3.9% to $9.24, compared to the second quarter of 1995. The
Company experienced a 5.4% improvement in productivity for the second
quarter of 1996, compared to the second quarter of 1995, as measured by
shipments handled per paid employee hour while productivity improvement for
the first half of the year was approximately 4.2% over the corresponding
period of 1995. Operating expenses were negatively impacted during the
first quarter of 1996 by severe winter weather conditions which diminished
productivity improvements, added significantly to operating costs, and
resulted in lost business. Comparisons of certain operating expense
components are discussed below.
Transportation purchased decreased as a percentage of revenues to 33.6% in
the first six months of 1996 compared to 35.8% in 1995. This decrease was
primarily due to two factors. Commercial airline costs were lower as a
percentage of total revenues due to the lower growth in international
freight shipments discussed above. Also, the suspension of the Federal
Aviation Excise Tax on January 1, 1996 resulted in the avoidance of costs
in the first half of 1996 of $11.0 million, compared to the first half of
1995 when approximately $10.4 million of costs related to this tax were
incurred.
Station and ground expense as a percentage of revenues was 31.6% in the
first six months of 1996 compared to 31.2% in the first six months of 1995.
This category of expense was negatively impacted by the weather during the
first quarter of 1996.
Flight operations and maintenance expense as a percentage of revenues
during the first six months of 1996 was 15.4%, compared to 14.6% in the
first six months of 1995. This category of cost was negatively impacted
during the first half of 1996 by higher jet fuel costs. The average
aviation fuel price for the first half of 1996 was $0.71 per gallon
(including the $0.043 per gallon Federal Excise Tax implemented October 1,
1995) compared to $0.59 per gallon in the first half of 1995. Aviation
fuel consumption increased to 79.3 million gallons in the first six months
of 1996, a 16.8% increase compared to the first six months of 1995. The
increase in fuel consumption is a result of additional Company operated
aircraft placed in service since the first half in 1995 and the impact of
the severe weather in 1996.
The increased number of aircraft in service also accounted for a large
portion of the increase in depreciation and amortization expense in the
first half of 1996.
General and administrative and sales and marketing expenses on a combined
basis as a percentage of revenues in the first half of 1996 was 10.0%
compared to 9.9% in the comparable period of 1995. Any inflationary
pressure on costs has effectively been offset as the result of continuing
productivity gains and a strong focus on all discretionary spending.
Interest expense in the first half of 1996 was higher than the same period
in 1995 due to higher average outstanding borrowings and to the lower level
of capitalized interest in the 1996 period.
The Company's effective tax rate was 40.0% in the first six months of 1996
compared to 43.4% in the first six months of 1995 and 39.9% for all of
1995. The higher effective tax rate for the first half of 1995 compared to
1996 was a result of certain taxes that are not directly related to the
level of earnings, resulting in a higher rate in periods of lower earnings.
LIQUIDITY AND CAPITAL RESOURCES:
Capital expenditures and associated financing continued to be the primary
factors affecting the financial condition of the Company. The Company
anticipates total capital expenditures to approximate $210 - $220 million
in 1996, of which a significant portion is related to the acquisition and
modification of aircraft. During the first half of 1996, total capital
expenditures net of dispositions were $86 million. The principal sources
of liquidity for financing capital expenditures during the first half of
1996 were cash provided by operations and financing under the Company's
bank lines of credit.
The Company's $250 million unsecured revolving bank credit agreement has
traditionally been used as a major source of liquidity for periods between
other financing transactions. The Company also has available $65 million
under unsecured uncommitted money market lines of credit with several
banks, used in conjunction with the revolving credit agreement to
facilitate settlement and accommodate short-term borrowing fluctuations.
At June 30, 1996, a total of $157.5 million was outstanding under the
revolving bank credit and money market credit lines.
The Company amended its revolving bank credit agreement effective
May 1, 1996, resulting in the agreement being effective for a five-year
term through May 31, 2001.
In management's opinion, the available capacity under the bank credit
agreements coupled with internally generated cash flow from remaining 1996
operations and other sources of borrowing should provide adequate
flexibility to finance anticipated capital expenditures for the balance of
1996.
PART II. OTHER INFORMATION
--------------------------
Item 5. Other Information.
Mary Agnes Wilderotter, currently Executive Vice President, National
Operations of AT&T Wireless Services (AWS) and Chief Executive Officer of
AWS's Aviation Communications Division, was appointed to the Company's
Board of Directors at the April 23, 1996 board meeting. Ms. Wilderotter
will join the board on August 7, 1996.
Item 6. Exhibits and Reports or Form 8-K.
(a) Exhibits -
EXHIBIT NO. 10 - Material Contracts
10(a) Airborne Freight Corporation Director Stock Bonus Plan dated
April 23, 1996.
10(b) Second Amendment to Credit Agreement dated May 1, 1996
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, Bank of America NW, N.A., 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., as banks.
EXHIBIT NO. 27 - Financial Data Schedule
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: 8/12/96 /s/Roy C. Liljebeck
------------------------- -------------------------
Roy C. Liljebeck
Executive Vice President,
Chief Financial Officer
Date: 8/12/96 /s/Lanny H. Michael
------------------------- -------------------------
Lanny H. Michael
Senior Vice President,
Treasurer and Controller
</TABLE>
Exhibit 10(a)
AIRBORNE FREIGHT CORPORATION
DIRECTOR STOCK BONUS PLAN
AIRBORNE FREIGHT CORPORATION, a Delaware corporation (the "Company"),
hereby establishes and sets forth the terms of the Airborne Freight
Corporation Director Stock Bonus Plan (the "Plan").
1. Purpose of Plan
---------------
The purpose of the Plan is to enable the Company to attract and retain
outside persons of the highest caliber to serve on the Board of
Directors of the Company (the "Board"), as such persons can make
important contributions to the success of the Company. The Plan will
seek to achieve this purpose by means of automatic awards of Common
Stock of the Company, $1.00 par value per share (the "Common Stock").
The Plan will be effective as of April 26, 1996 (the "Effective
Date").
2. Administration of the Plan
--------------------------
The Plan shall be administered by the Board, except as provided in
Section 8.2. Awards of Common Stock under the Plan shall be automatic
as described in Section 4. However, the Board shall, subject to the
provisions of the Plan, have the complete authority, in its sole and
absolute discretion, to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to the Plan, and to make all of
the determinations necessary or advisable for the administration of
the Plan. All such interpretations, rules, regulations and
determinations shall, in the absence of fraud or patent mistake, be
conclusive and binding on all persons with any interest in the Plan.
The Board shall have all powers necessary or appropriate to accomplish
its duties under the Plan.
3. Eligibility to Participate
--------------------------
Each individual who meets the following requirements on an Award Date
(as defined in Section 4.1) shall be eligible to participate in the
Plan (each such individual will be referred to as an "Eligible
Director"):
(a) The individual is a member of the Board; and
(b) The individual was not an employee of or consultant to the
Company or any of its direct or indirect subsidiaries at any time
during the calendar year in which the Award Date falls or during
the preceding calendar year.
An Eligible Director will cease to be eligible for further
participation in the Plan if he or she does not meet the foregoing
eligibility requirements on any Award Date. Such cessation of
participation shall not affect the Eligible Director's rights with
respect to the shares of Common Stock that are carried in his or her
Stock Account (as defined in Section 5.1).
4. Share Awards
------------
Effective on April 26, 1996, and effective on the third (3rd) business
day after the date of the Company's annual meeting of shareholders in
1997 and in each succeeding year during which shares of Common Stock
remain available under Section 9 (each such date will be referred to
as an "Award Date"), the Company hereby awards, to each individual who
is an Eligible Director on the Award Date, the number of shares of
Common Stock (which number, if not a whole number, shall be rounded
down to the nearest whole number) obtained by dividing (a) $3,000, by
(b) the closing sales price of a share of Common Stock on the New York
Stock Exchange on the Award Date (each such award to an Eligible
Director will be referred to as a "Share Award"). If on any Award Date
the number of shares of Common Stock available under Section 9 is
insufficient to permit Share Awards covering the number of shares of
Common Stock specified in the preceding sentence to be awarded to each
Eligible Director, then each Eligible Director shall instead be
granted a Share Award covering the largest whole number of shares of
Common Stock as can then be awarded without exceeding the number of
shares of Common Stock then available. All Share Awards shall occur
automatically without further action of the Board.
5. Deferral of Issuance of Shares
------------------------------
Issuance of the shares of Common Stock under each Share Award shall be
deferred as provided in this Section 5.
5.1. For each Eligible Director who has received a Share Award, the
Company shall maintain an unfunded account (the "Stock Account")
as follows:
(a) The Stock Account shall be credited with the number of
shares of Common Stock under each Share Award awarded to the
Eligible Director.
(b) Whenever cash dividends are declared on shares of Common
Stock of the Company, a dividend equivalent shall be
computed with respect to each Stock Account. The amount of
the dividend equivalent shall be the product of (i) the
number of shares of Common Stock in the Stock Account on the
date as of which the Company determines the holders of
record of its Common Stock who are entitled to receive the
dividend, and (ii) the per share dividend amount. The
dividend equivalent shall be deemed reinvested in additional
shares of Common Stock by crediting to the Stock Account,
effective on the date the cash dividend is paid, the number
of shares of Common Stock (which number may be fractional)
obtained by dividing (A) the amount of the dividend
equivalent, by (B) the closing sales price of a share of
Common Stock on the New York Stock Exchange on the dividend
payment date. Dividend equivalents shall be credited and
deemed reinvested under this Section 5.1(b) until all shares
of Common Stock carried in the Stock Account have been
issued to the Eligible Director or his or her estate.
(c) The Stock Account shall be debited for any shares of Common
Stock that are issued under Section 5.2 or Section 8.
(d) The Stock Account shall be subject to any adjustment
required or permitted pursuant to Section 8.
5.2. The shares of Common Stock carried in the Stock Account of an
Eligible Director (the "Account Shares") shall be issued to the
Eligible Director as provided in this Section 5.2.
(a) All of the Account Shares of an Eligible Director shall be
issued to the Eligible Director as soon as practicable after
the end of the calendar year in which he or she ceases to be
a director of the Company.
(b) Notwithstanding the provisions of Section 5.2(a), if an
Eligible Director ceases to be a director of the Company and
becomes a proprietor, officer, partner or employee of, or
otherwise becomes affiliated with, any business that is in
competition with the Company or any of its direct or
indirect subsidiaries, all of the Account Shares of the
Eligible Director shall be issued to the Eligible Director
as soon as practicable thereafter.
(c) Notwithstanding the provisions of Section 5.2(a), if an
Eligible Director should die prior to issuance of his or her
Account Shares, they shall be issued to the Eligible
Director's estate as soon as practicable thereafter.
(d) Notwithstanding the provisions of Section 5.2(a), the
Company shall have the right, exercisable at any time in its
sole and absolute discretion, to immediately issue to an
Eligible Director all of his or her Account Shares in full
satisfaction of all obligations to the Eligible Director
under the Plan, whether or not the Eligible Director has
ceased to be a director of the Company.
5.3. No fractional shares of Common Stock shall be issued under the
Plan. If a fractional share of Common Stock would be issuable
under the Plan in the absence of the preceding sentence, the
number of shares of Common Stock issuable to the person entitled
thereto shall instead be rounded down to the nearest whole
number.
6. Rights as Shareholder
---------------------
An Eligible Director shall have no voting or other rights as a
shareholder of the Company on account of shares of Common Stock for
which no certificate has been issued, regardless of the fact that the
shares may have been credited to his or her Stock Account or become
issuable under the provisions of the Plan. Except as expressly
provided in Section 5.1(b) and Section 8, no adjustment will be made
for dividends on, or other property or rights distributed with respect
to, the Common Stock.
7. Rights Nontransferable
----------------------
The rights of an Eligible Director under the Plan, including any
rights with respect to any Stock Account maintained pursuant hereto,
may not be transferred, assigned, pledged or hypothecated by the
Eligible Director during his or her lifetime, whether by operation of
law or otherwise, or be made subject to execution, attachment or
similar process, and any attempt so to do shall be void and of no
effect.
8. Adjustments
-----------
8.1. If the outstanding shares of Common Stock of the Company are
increased, decreased, changed into, or exchanged for a different
number or kind of shares or securities of the Company through
reorganization, merger, recapitalization, reclassification, stock
split-up, or other material alteration in the capital structure
of the Company, the Board shall make such adjustment to the Plan
(which adjustment may include, but shall not necessarily be
limited to, a change in the number of shares of Common Stock
available under Section 9) and to the shares of Common Stock
carried in the Stock Accounts at the time of the material
alteration (which adjustment may include, but shall not
necessarily be limited to, a change in the number of such shares
or in the securities thereafter to be carried in the Stock
Accounts) as the Board determines to be appropriate and equitable
under the circumstances. If the Board determines that the nature
of a material alteration in the capital structure of the Company
is such that it is not feasible or advisable to make any such
adjustment, such event shall be subject to Section 8.2. For
purposes of this Section 8.1, neither (a) the issuance of
additional shares of Common Stock or other securities of the
Company in exchange for adequate consideration (including
services), nor (b) the conversion into Common Stock of any
securities of the Company now or hereafter outstanding, shall
constitute a material alteration in the capital structure of the
Company.
8.2. Upon a reorganization, merger or consolidation of the Company
with one or more corporations as a result of which the Company is
not the surviving corporation, upon the acquisition by any
person, partnership, or corporation of more than 25% of the
outstanding shares of Common Stock, upon a sale of substantially
all of the property of the Company, or upon a material change in
the capital structure of the Company that is subject to this
Section 8.2 in accordance with the last sentence of Section 8.1,
a majority of the Continuing Directors of the Company (as the
term "Continuing Director" is defined in Section 11.3(g) of the
Restated Certificate of Incorporation of the Company, as amended)
shall have the power to determine, in their sole discretion, upon
the effective date of such event or within thirty (30) days
thereafter, what effect, if any, such event shall have on the
Plan and the shares of Common Stock carried in the Stock Accounts
at the time of the event, including, but not limited to, the
power to cause the Stock Accounts to be terminated and the shares
of Common Stock carried in the Stock Accounts to be issued to the
Eligible Directors for whom the Stock Accounts are then held.
Upon the dissolution or liquidation of the Company, the Plan
shall terminate, and all shares of Common Stock carried in the
Stock Accounts shall, prior to any distribution of assets of the
Company pursuant to the dissolution or liquidation, be issued to
the Eligible Directors for whom the Stock Accounts are then held.
9. Term of the Plan
----------------
The Plan shall become effective on the Effective Date and, if not
sooner terminated under Section 8.2, shall terminate at such time as
all Account Shares of all Eligible Directors have been issued to the
Eligible Directors or their estates in accordance with Section 5.
10. Shares Available for the Plan
-----------------------------
The aggregate number of shares of Common Stock that may be issued
under the Plan shall be twenty thousand (20,000). This number shall be
subject to any adjustment required or permitted pursuant to Section 8.
The Company's treasury stock shall be used for all issuances of shares
of Common Stock issuable under the Plan.
11. Amendment
---------
The Board may from time to time amend the Plan in any respect
whatsoever, except that (a) without the consent of each Eligible
Director affected thereby, no amendment shall materially alter or
impair any rights of Eligible Directors under the Plan with respect to
their respective Account Shares at the time of the amendment, and (b)
regardless of whether the consent of Eligible Directors is obtained,
the Plan may not be amended more than once every six (6) months to
change the designation of the class of directors eligible to receive
Share Awards, the timing of the Share Awards, or the number of shares
of Common Stock to be covered by Share Awards (except as provided in
Section 8), unless the purpose of such amendment or revision is to
comport with changes in the Internal Revenue Code or the rules
thereunder.
12. Governing Law
-------------
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of Washington and construed
accordingly.
Adopted this 23rd day of April, 1996.
AIRBORNE FREIGHT CORPORATION
By /s/ Robert S. Cline
------------------------------------
Robert S. Cline
Chairman and Chief Executive Officer
Exhibit 10(b)
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Second Amendment") is
dated as of the 1st day of May, 1996 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, BANK OF AMERICA NW, N.A., 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 are parties to that certain
Credit Agreement, dated as of the 19th day of November, 1993 (as amended by
the First Amendment dated as of March 31, 1995, 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
--------------------------
The following definitions contained in Section 1.01 of the Credit
Agreement hereby are respectively amended in their entirety as set
forth below:
"Investment" means any investment in any Person, whether by means
of purchase or acquisition of obligations or securities of such
Person, capital contribution to such Person, loan or advance to
such Person, making of a time deposit with such Person, Guarantee
or assumption of any obligation of such Person or otherwise;
provided, however, the term "Investment" shall not include any
contributions to or any funds of non-qualified plans and trusts
established by the Borrower.
"Termination Date" means May 31, 2001.
3. Amendments to Section 2.05(c)
-----------------------------
Section 2.05(c) of the Credit agreement is amended in its entirety as
set forth below:
(c) Notwithstanding the foregoing, the outstanding principal
amount of the Loans, if any, together with all accrued but unpaid
interest thereon, if any, shall be due and payable on the
Termination Date.
4. Restatement of Representations and Warranties
---------------------------------------------
The Borrower hereby restates an renews each and every representation
and warranty heretofore made by it in the Credit agreement and other
Loan Documents as fully as if made on the date hereof and with
specific reference to this Second Amendment and all other loan
documents executed and/or delivered in connection herewith.
5. 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.
6. 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.
7. Counterparts
------------
This Second 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.
8. Section References
------------------
Section titles and references used in this Second 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.
9. No Default
----------
To induce the Agent and the Banks to enter into this Second 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, 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.
10. 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.
11. Governing Law
-------------
This Second Amendment shall be governed by and construed and
interpreted in accordance with, the laws of the State of Georgia.
12. Conditions Precedent
--------------------
This Second Amendment shall become effective only upon:
(i) execution and delivery of this Second 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; and
(iii) receipt by the Agent of a certificate of incumbency of each of
the Borrower and 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 officer or officers of the
Borrower authorized to execute and deliver this Second Amendment
and certified copies of the following items for each of the
Borrower and the Guarantors (or certificates with respect to
items (i) and (ii) below that no changes have occurred thereto
since the later to occur of such Person's incorporation, or
March 31, 1995): (i) Certificates/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 Second Amendment.
IN WITNESS WHEREOF, the Borrower, the Agent and each of the Banks has
caused this Second 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
WACHOVIA BANK OF GEORGIA, N.A.
as Agent and as a Bank (SEAL)
By: /s/ John A. Whitner
--------------------------
Title: Vice President
ABN AMRO BANK N.V.,
as a Bank (SEAL)
By: /s/ J.J. Rice
--------------------------
Title: Vice President & Director
By: /s/ Leif H. Olsson
--------------------------
Title: Group Vice President & Director
UNITED STATES NATIONAL BANK OF OREGON,
as a Bank (SEAL)
By: /s/ Matthew S. Thoreson
--------------------------
Title: Vice President
BANK OF AMERICA NW, N.A.,
as a Bank (SEAL)
By: /s/ Stan Diddams
--------------------------
Title: Vice President
CIBC INC.,
as a Bank (SEAL)
By: /s/ Dean J. Decker
--------------------------
Title: Associate Director
NATIONAL CITY BANK, COLUMBUS,
as a Bank (SEAL)
By: /s/ Jeffrey L. Hawthorne
--------------------------
Title: Vice President & Regional Manager
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as a Bank (SEAL)
By: /s/ Timothy C. Hintz
--------------------------
Title: Managing Director
THE BANK OF NEW YORK,
as a Bank (SEAL)
By: /s/ Robert Louk
--------------------------
Title: Vice President
NBD BANK, N.A.,
as a Bank (SEAL)
By: /s/ Timothy P. O'Neil
--------------------------
Title: Authorized Agent
CONSENT AND REAFFIRMATION OF GUARANTORS
Each of the undersigned (i) acknowledges receipt of the foregoing Second
Amendment to Credit Agreement (the "Second Amendment"), (ii) consents to
the execution and delivery of the Second Amendment by the parties thereto
and (iii) respectively, reaffirms all of its obligations and covenants
under the Guaranty Agreement of ABX Air, Inc. and Airborne Forwarding
Corporation dated as of October 5, 1995, and agrees that none of such
obligations and covenants shall be affected by the execution and delivery
of the Second 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
AIRBORNE FTZ, INC. (SEAL)
By: /s/ Carl Donaway
--------------------------
Title: President
WILMINGTON AIR PARK, INC. (SEAL)
By: /s/ Carl Donaway
--------------------------
Title: President
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
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