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Previous: RELM WIRELESS CORP, 10-Q, EX-27, 2000-08-14 |
Next: AIRBORNE FREIGHT CORP /DE/, 10-Q, EX-10, 2000-08-14 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
Commission File Number 1-6512
AIRBORNE FREIGHT CORPORATION
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Delaware |
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91-0837469 (I.R.S. Employer Identification No.) |
3101 Western Avenue
P.O. Box 662
Seattle, Washington 98111-0662
Registrant's telephone number, including area code: (206) 285-4600
Indicate by check mark whether the Registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days: Yes /x/ No / /
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the period covered by this report.
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Class |
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Outstanding |
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Common Stock, $1.00 par value |
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48,034,725 |
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(net of 3,244,526 treasury shares) |
AIRBORNE FREIGHT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF NET EARNINGS
(Dollars in thousands except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
2000 1999 2000 1999
---- ---- ---- ----
REVENUES:
Domestic $716,301 $686,395 $1,441,553 $1,367,656
International 94,726 92,605 181,938 180,692
-------- -------- ---------- ----------
811,027 779,000 1,623,491 1,548,348
OPERATING EXPENSES:
Transportation purchased 254,273 238,197 502,627 472,172
Station and ground operations 257,682 238,517 512,619 479,834
Flight operations and
maintenance 139,101 123,620 282,064 245,803
General and administrative 63,800 61,250 126,997 120,334
Sales and marketing 20,521 18,603 40,540 36,951
Depreciation and amortization 50,307 50,980 99,876 100,593
-------- -------- ---------- ----------
785,684 731,167 1,564,723 1,455,687
-------- -------- ---------- ----------
EARNINGS FROM OPERATIONS 25,343 47,833 58,768 92,661
OTHER INCOME (EXPENSE):
Interest, net (5,177) (4,047) (10,091) (7,679)
Other 2,202 385 2,705 534
-------- -------- ---------- ----------
EARNINGS BEFORE INCOME
TAXES 22,368 44,172 51,382 85,516
INCOME TAXES 8,610 17,150 19,725 33,250
-------- -------- ---------- ----------
NET EARNINGS BEFORE CHANGE
IN ACCOUNTING 13,758 27,022 31,657 52,266
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING - - 14,206 -
-------- -------- ---------- ----------
NET EARNINGS $ 13,758 $ 27,022 $ 45,863 $ 52,266
======== ======== ========== ==========
NET EARNINGS PER SHARE:
BASIC
Before change in
accounting $ 0.28 $ 0.56 $ 0.65 $ 1.08
Cumulative effect of
change - - $ 0.29 -
-------- -------- ---------- ----------
Net Earnings $ 0.28 $ 0.56 $ 0.94 $ 1.08
======== ======== ========== ==========
DILUTED
Before change in
accounting $ 0.28 $ 0.55 $ 0.64 $ 1.06
Cumulative effect of
change - - $ 0.29 -
-------- -------- ---------- ----------
Net Earnings $ 0.28 $ 0.55 $ 0.93 $ 1.06
======== ======== ========== ==========
DIVIDENDS PER SHARE $ 0.04 $ 0.04 $ 0.08 $ 0.08
======== ======== ========== ==========
See notes to consolidated financial statements.
AIRBORNE FREIGHT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
June 30 December 31
2000 1999
----------- -----------
(Unaudited)
ASSETS
------
CURRENT ASSETS:
Cash $ 31,037 $ 28,678
Trade accounts receivable,
less allowance of $9,105 and $9,640 343,403 339,044
Spare parts and fuel inventory 45,277 44,263
Deferred income tax assets 27,120 31,950
Prepaid expenses and other 21,057 26,135
----------- -----------
TOTAL CURRENT ASSETS 467,894 470,070
PROPERTY AND EQUIPMENT, NET 1,268,492 1,115,712
EQUIPMENT DEPOSITS and OTHER ASSETS 51,410 57,468
----------- -----------
TOTAL ASSETS $ 1,787,796 $ 1,643,250
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 150,931 $ 142,087
Salaries, wages and related taxes 68,005 65,276
Accrued expenses 84,608 78,755
Income taxes payable 909 3,282
Current portion of debt 459 442
----------- -----------
TOTAL CURRENT LIABILITIES 304,912 289,842
LONG-TERM DEBT 399,473 314,707
DEFERRED INCOME TAX LIABILITIES 112,152 99,169
OTHER LIABILITIES 86,315 81,325
SHAREHOLDERS' EQUITY:
Preferred Stock, without par value -
Authorized 5,200,000 shares, no shares
issued
Common stock, par value $1 per share -
Authorized 120,000,000 shares
Issued 51,279,251 and 51,176,018 shares 51,279 51,176
Additional paid-in capital 303,880 298,742
Retained earnings 588,914 546,962
Accumulated other comprehensive income 745 918
----------- -----------
944,818 897,798
Treasury stock, 3,244,526 and 2,491,078
shares, at cost (59,874) (39,591)
----------- -----------
884,944 858,207
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,787,796 $ 1,643,250
=========== ===========
See notes to consolidated financial statements.
AIRBORNE FREIGHT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Six Months Ended
June 30
----------------
2000 1999
---- ----
OPERATING ACTIVITIES:
Net Earnings $ 45,863 $ 52,266
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Cumulative effect of change in accounting (14,206) -
Depreciation and amortization 99,876 90,632
Deferred income taxes 9,106 770
Provision for aircraft engine overhauls - 9,961
Other 9,599 11,190
-------- --------
CASH PROVIDED BY OPERATIONS 150,238 164,819
Change in:
Receivables (4,359) 2,561
Inventories and prepaid expenses 4,064 (5,161)
Accounts payable 8,844 (18,003)
Accrued expenses, salaries & taxes payable 6,209 (6,384)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 164,996 137,832
INVESTING ACTIVITIES:
Additions to property and equipment (222,691) (147,748)
Dispositions of property and equipment 1,660 390
Expenditures for engine overhauls - (8,620)
Other (3,069) (2,334)
-------- --------
NET CASH USED BY INVESTING ACTIVITIES (224,100) (158,312)
FINANCING ACTIVITIES:
Proceeds from bank notes, net 85,000 20,000
Principal payments on debt (217) (167)
Repurchase of common stock (20,662) -
Proceeds from common stock issuance 1,253 5,148
Dividends paid (3,911) (3,886)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 61,463 21,095
-------- --------
NET INCREASE IN CASH 2,359 615
CASH AT JANUARY 1 28,678 18,679
-------- --------
CASH AT JUNE 30 $ 31,037 $ 19,294
======== ========
See notes to consolidated financial statements.
AIRBORNE FREIGHT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 (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 2000 presentation.
NOTE B-LONG-TERM DEBT:
Long-term debt consists of the following:
June 30 December 31
2000 1999
---- ----
(In thousands)
Senior debt:
Revolving bank credit $ 160,000 $ 95,000
Notes payable 20,000 -
Senior notes 200,000 200,000
Revenue bonds 13,200 13,200
Other debt 6,732 6,949
--------- ---------
399,932 315,149
Less current portion 459 442
--------- ---------
$ 399,473 $ 314,707
========= =========
NOTE C - EARNINGS PER SHARE:
Basic earnings per share are based upon the weighted average number of common shares outstanding during the interim period. Diluted earnings per 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.
Weighted average shares outstanding used in earnings per share computations were as follows:
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
2000 1999 2000 1999
---- ---- ---- ----
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic 48,728,096 48,616,630 48,756,944 48,547,851
Diluted 49,160,869 49,333,901 49,183,818 49,343,279
NOTE D-SEGMENT INFORMATION:
The Company has organized its business into two reportable operating segments. The domestic segment derives its revenues from the door-to-door delivery of small packages and documents throughout the United States, Canada, and Puerto Rico. Domestic operations are supported principally by Company operated aircraft and facilities. The international segment derives its revenues from express door-to-door delivery and a variety of freight services. International revenues are recognized on shipments where the origin and/or destination is outside of locations supported by the domestic segment. The Company uses a variable cost approach to delivering international services through use of existing commercial airline capacity in connection with its domestic network and independent express and freight agents in locations not currently served by Company-owned foreign operations.
The following is a summary of key segment information (in thousands):
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
2000 1999 2000 1999
---- ---- ---- ----
SEGMENT REVENUES:
Domestic $ 716,301 $ 686,395 $1,441,553 $1,367,656
International 94,726 92,605 181,938 180,692
---------- ---------- ---------- ----------
$ 811,027 $ 779,000 $1,623,491 $1,548,348
========== ========== ========== ==========
SEGMENT EARNINGS
FROM OPERATIONS:
Domestic $ 26,151 $ 46,054 $ 61,726 $ 90,254
International (808) 1,779 (2,958) 2,407
---------- ---------- ---------- ----------
$ 25,343 $ 47,833 $ 58,768 $ 92,661
========== ========== ========== ==========
NOTE E-OTHER COMPREHENSIVE INCOME:
Other comprehensive income includes the following transactions and tax effects for the three and six month period ended June 30, 2000 (in thousands):
Three Months Ended Six Months Ended
June 30, 2000 June 30, 2000
----------------------- -----------------------
Income Income
Before Tax Net of Before Tax Net of
Tax (Expense) Tax Tax (Expense) Tax
or or
Benefit Benefit
------ ------- ------ ------ ------- ------
Unrealized securities
losses arising during
the period $(1,121) $ 432 $ (689) $ 450 $ (173) $ 277
Less: Reclassification
adjustment for gains
realized in net income (216) 83 (133) (521) 201 (320)
------- ------- ------ ------ ------- ------
Net unrealized
securities losses (1,337) 515 (822) (71) 28 (43)
Foreign currency
translation adjustments 39 (15) 24 (210) 81 (129)
------- ------- ------ ------ ------- ------
Other comprehensive
income $(1,298) $ 500 $ (798) $ (281) $ 109 $ (172)
======= ======= ====== ====== ======= ======
NOTE F-CHANGE IN ACCOUNTING:
Effective January 1, 2000, the Company changed its method of accounting for major engine overhaul costs on DC-9 aircraft from the accrual method to the direct expense method where costs are expensed as incurred. Previously, these costs were accrued in advance of the next scheduled overhaul based upon engine usage and estimates of overhaul costs. The Company believes that this new method is preferable because it is more consistent with industry practice and appropriate given the relatively large size of its DC- 9 fleet.
The cumulative effect of this change in accounting resulted in a non-cash credit of $14,206,000, net of taxes, or $.29 per share on a diluted basis being recognized in the first half of 2000. Excluding the cumulative effect, this change increased net earnings for the second quarter and first six months of 2000 by approximately $1.4 million, net of tax or $.03 per share, and $2.8 million, net of tax or $.06 per share, respectively. If the accounting change for engine overhaul costs had been retroactively applied, earnings from continuing operations for the three- and six-month periods ended June 30, 1999 would have been as follows:
Three Months Six Months
Ended Ended
June 30, 1999 June 30, 1999
------------- -------------
As Reported:
Earnings from continuing operations $ 47,833 $ 92,661
Diluted earnings per share $ 0.56 $ 1.06
Proforma continuing operations:
Earnings from continuing operations $ 49,966 $ 95,147
Diluted earnings per share $ 0.59 $ 1.09
NOTE G-NEW ACCOUNTING PRONOUNCEMENTS:
ACCOUNTING FOR DERIVATIVE INSTRUMENTS:
In 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 137 amended this statement by delaying the effective date to fiscal year 2001. In addition, SFAS No. 138 amended this statement by addressing a limited number of issues causing implementation difficulties. SFAS No. 133 requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value.
While the Company had no outstanding fuel contracts at June 30, 2000, it may utilize contracts with financial institutions to limit its exposure to volatility in jet fuel prices in the future. If contracts become outstanding in the future, under the cash flow hedge provisions of SFAS No. 133, the Company will be required to record outstanding fuel contracts at fair value, with corresponding changes in fair value recorded as a component of other comprehensive income if the hedges are determined to be effective. The Company has not adopted the provisions of SFAS No. 133 as of June 30, 2000 and is currently evaluating the future impact of this pronouncement on the financial statements and related disclosures.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS:
The Company's operating performance in the second quarter and the first six months of 2000 resulted in operating income and net earnings below that of the comparable periods of 1999. The weaker operating results are primarily caused by the lack of growth in domestic shipment volumes. While the revenue yield on domestic shipments has continued to improve, the lack of shipment growth precludes realizing productivity gains necessary to offset cost increases. As a result, average operating cost per shipment increased at a faster rate than average revenue per shipment.
Net earnings for the second quarter of 2000 were $13.8 million, or $.28 per diluted share. This compares to net earnings of $27.0 million, or $.55 per share reported in the second quarter of 1999. The second quarter earnings for 2000 included a non-recurring gain from the sale of securities of $1.9 million, $.02 per share. The Company, as a policyholder, received stock securities of Metropolitan Life when that insurance company demutualized. These securities were sold resulting in the gain.
Net earnings for the first six months of 2000 were $45.9 million, or $.93 per share, compared to $52.3 million, or $1.06 per share for the corresponding period in 1999. Effective at the beginning of 2000, the Company changed from the accrual method of accounting for DC-9 engine overhaul costs to the direct expense method where costs are expensed as incurred. The cumulative effect of this change resulted in a non-cash credit of $14.2 million, net of taxes, or $.29 per share, being recorded in the first quarter and included in net earnings for the first six months of 2000.
Operating costs for the first six months of 2000 have continued to be impacted by the high cost of jet fuel which began to escalate in the third quarter of 1999. To help address this cost increase the Company implemented a 3% fuel surcharge on revenue effective in early February 2000, under which $19.9 million and $32.5 million of surcharge revenues were recorded during the second quarter and first six months of 2000, respectively. Jet fuel costs increased approximately $15.0 million, or $.33 per gallon in the second quarter of 2000 and $33.0 million, or $.36 per gallon for the first six months of 2000 versus comparable periods in 1999. Higher fuel costs have also impacted ground related linehaul and cartage operations. While the fuel surcharge has been adequate to offset these higher fuel related costs during the second quarter of 2000, it has not fully offset the impact of all fuel related increases incurred in the first six months of 2000. Also, fuel prices continue to be at historically high levels, which is not an encouraging trend.
The following table sets forth selected shipment and revenue data for the periods indicated:
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
2000 1999 Change 2000 1999 Change
---- ---- ------ ---- ---- ------
Shipments (in thousands):
Domestic
Overnight 46,175 46,422 (0.5%) 94,154 92,743 1.5%
Next Afternoon 13,680 14,132 (3.2%) 27,614 28,816 (4.2%)
Service
Second Day Service 19,161 17,897 7.1% 38,932 35,711 9.0%
100 Lbs. and Over 75 73 2.7% 142 148 (4.1%)
------ ------ ------- -------
Total Domestic 79,091 78,524 0.7% 160,842 157,418 2.2%
International
Express 1,549 1,636 (5.3%) 3,078 3,213 (4.2%)
Freight 101 101 - 195 200 (2.5%)
------ ------ ------- -------
Total International 1,650 1,737 (5.0%) 3,413 3,273 (4.1%)
------ ------ ------- -------
Total Shipments 80,741 80,261 0.6% 164,115 160,831 2.0%
====== ====== ======= =======
Average Pounds per
Shipment:
Domestic 4.32 4.18 3.3% 4.27 4.19 1.8%
International 49.52 44.68 10.8% 48.70 43.92 10.9%
Average Revenue per
Pound:
Domestic $2.07 $2.06 0.4% $2.07 $2.04 1.5%
International $1.13 $1.18 (4.0%) $1.12 $1.19 (5.9%)
Average Revenue per
Shipment:
Domestic $ 9.02 $ 8.74 3.2% $ 8.94 $ 8.69 2.9%
International $57.41 $53.31 7.7% $55.59 $52.94 5.0%
Total revenues increased 4.1% and 4.9% in the second quarter and first half of 2000, respectively, compared to the same periods of 1999. Domestic revenues increased 4.4% in the second quarter, of which 2.9% was due to the fuel surcharge. For the first six months of 2000, domestic revenues increased 5.4% with the fuel surcharge accounting for 2.4% of the growth. The average revenue per domestic shipment increased 3.2% in the second quarter of 2000 and 2.9% for the first six months of 2000 compared to the comparable periods of 1999. The Company is encouraged by the stability in revenue per shipment yields, which is a positive trend relating to the continuing focus on yields.
Domestic shipments increased .7% in the second quarter and 2.2% in the first half of 2000 in comparison to the same periods in 1999. Overnight shipments accounted for 58.4% of total domestic shipments in the second quarter compared to 59.1% in the second quarter of 1999. The higher yielding overnight shipments decreased .5% in the second quarter, comparable to the decline experienced in the same period of 1999. The Company's Next Afternoon Service shipments decreased 3.2% compared to a decrease of 4.0% in the second quarter of 1999. Second Day Service shipments increased 7.1% in the second quarter compared to a 1.3% growth rate experienced in the same period of 1999. The Second Day Service category includes shipments associated with the Company's new product, airborne@home, which was introduced in late 1999 to service expanding e- commerce and business to residential delivery markets. airborne@home shipment volumes were 1,188,000 in the second quarter and 1,742,000 for the first six months of 2000. The Company continues to be encouraged by the business opportunities of this new product which offers shippers a competitive combination of service and pricing, while providing the Company an efficient way to accomplish residential deliveries through an arrangement with the U.S. Postal Service.
International revenues increased 2.3% and .7% in the second quarter and first six months of 2000, respectively, compared to increases of 1.3% and .9% in the comparable periods of 1999. Total international shipments decreased 5.0% in the second quarter and 4.1% in the first half of 2000 compared to the same periods of 1999. International express shipments decreased 5.3% in the second quarter and 4.2% for the first half of 2000 primarily due to the loss of a major customer. International freight shipments were flat in the second quarter of 2000 and decreased 2.5% in the first half of 2000 compared to the corresponding periods in 1999. The Company is encouraged, however, by the 7.5% improvement in freight shipments when compared to the first quarter of 2000. The international segment contribution to earnings from operations was a loss of $.8 million and $3.0 million for the second quarter and first half of 2000, respectively, compared to income of $1.8 million and $2.4 million in the comparable periods of 1999.
Operating expenses as a percentage of revenues were 96.9% and 96.4% in the second quarter and first six months of 2000, respectively, compared to 93.8% and 94.0% for the corresponding periods in 1999 and 94.9% for all of 1999. Operating cost per shipment handled increased 6.8% in the second quarter of 2000 to $9.73 compared to the second quarter of 1999. The operating cost per shipment for the first six months of 2000 increased 5.3% to $9.53 compared to the same period in 1999. The significantly higher cost of jet fuel is a major factor impacting operating costs in the first six months of 2000. Additionally, productivity, as measured by shipments handled per paid employee hour, experienced a decline of 1.8% and .4% for the second quarter and first half of 2000, respectively. The Company continues to manage productivity levels sufficient to maintain a high level of overall service integrity with its customers. Comparisons of certain operating expense components are discussed below.
Transportation purchased increased as a percentage of revenues to 31.0% in the first six months of 2000 compared to 30.5% in the comparable period of 1999. This increase was primarily due to increases in farmed out pickup and delivery, international airline and surface linehaul costs.
Station and ground expense increased to 31.6% of revenues in the first six months of 2000 compared to 31.0% in the first six months of 1999. The decline in productivity combined with wage related cost increases had a negative effect on this category of expense.
Flight operations and maintenance expense as a percentage of revenues during the first half of 2000 was 17.4% compared to 15.9% in the first six months of 1999. Aviation fuel consumption increased to 45.5 million gallons in the second quarter, a 2.3% increase over the second quarter of 1999. For the first six months of 2000, aviation fuel consumption of 91.2 million gallons increased 2.4% from the first six months of 1999. The average aviation fuel price for the second quarter and first six months of 2000 was $.91 and $.93 per gallon, respectively, compared to $.58 and $.54 per gallon, respectively, in the comparable periods of 1999. As a result of fuel hedging contracts, the Company incurred $2.4 million of expense, equal to approximately $.03 per gallon, in the first six months of 1999, with no hedging settlements occurring in the first six months of 2000.
Effective January 1, 2000, the Company began to expense DC-9 engine overhaul costs directly to maintenance expense as costs are incurred. Engine overhaul costs currently charged to expense as incurred and included in the flight operations and maintenance category were previously accrued in advance of the next scheduled overhaul and charged to the deprecation and amortization category.
General and administrative expense was 7.8% of revenues in the first six months of 2000, the same as reported in the comparable period of 1999. This category of cost has stayed relatively constant as a percentage of revenues primarily due to the continued strong cost controls over labor and discretionary costs.
Depreciation and amortization expense decreased to 6.2% of revenues for the first six months of 2000 compared to 6.5% in 1999. Depreciation expense in the first six months of 2000 increased compared to the comparable period in 1999 due to the increased number of 767 aircraft placed in service since the second quarter of 1999. This increase was offset by the effect of the change in accounting for engine overhaul costs discussed above.
Interest expense in the first six months of 2000 was higher than the first six months of 1999 as the impact of higher levels of average outstanding borrowings offset the effect of lower average effective interest rates. Capitalized interest was $3.4 million for the first half of 2000 compared to $2.4 million in the first half of 1999.
Other income in the second quarter includes a nonrecurring gain of $1.9 million on the sale of the securities received in connection with the demutualization of Metropolitan Life.
The Company's effective tax rate was 38.4% in the first six months of 2000 compared to 38.9% in the first half of 1999 and 38.1% for all of 1999.
LIQUIDITY AND CAPITAL RESOURCES:
Cash provided by operations net of the change in working capital for the first six months of 2000 was $165.0 million, compared to $137.8 million in the first half of 1999.
Capital expenditures continue to be a primary factor affecting the financial condition of the Company. The Company anticipates total capital expenditures to approximate $380 million in 2000. During the first half of 2000, total capital expenditures net of dispositions were $221.0 million compared to $147.4 million during the first six months of 1999. Cash provided by operations and bank borrowings were the primary sources for funding capital expenditures in the first half of 2000.
The Company completed a share repurchase of 1 million shares of common stock in early June for approximately $20.7 million, which were added to the Company's treasury stock. The shares were repurchased pursuant to a 4 million stock repurchase program authorized by the Board of Directors in 1998. The Company has no current plans to purchase additional shares under the remaining repurchase authorization.
The Company's strong operating cash flow is a major source of liquidity. Also, the Company's unsecured revolving bank credit agreement has traditionally been used as a major source of liquidity. In July 2000, the Company replaced its revolving bank credit facility under a new agreement that resulted in an increase in borrowing capacity from $250 million to $275 million for a five-year term expiring June 30, 2005. The Company also has available $25 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. With the higher level of capital expenditures in 1999 and the first half of 2000, compared to 1998 and prior levels, reliance on the bank facilities has increased. A total of $180 million was outstanding at June 30, 2000 under the revolving bank credit and money market credit lines, compared to $95 million outstanding at December 31, 1999 and $49 million outstanding at June 30, 1999.
The Company's ratio of long-term debt to total capitalization was 28.6% at June 30, 2000, compared to 22.7% at June 30, 1999 and 24.7% at December 31, 1999.
In management's opinion, the available capacity under the bank credit agreements coupled with internally generated cash flow from remaining 2000 operations should provide adequate flexibility to finance anticipated capital expenditures for the balance of 2000.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:
There have been no material changes in the Company's market risk sensitive instruments and positions since its disclosure in its Annual Report on Form 10-K for the year ended December 31, 1999. See Note F of the Notes to Consolidated Financial Statements to this Form 10-Q for further discussion regarding the Company's fuel hedging activities.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports or Form 8-K.
(a) Exhibits -
EXHIBIT NO. 10 Material Contracts
---------------------------------
Other Material Contracts
------------------------
10(a) $275,000,000 Credit Agreement dated as of July 27, 2000 among
the Company, as borrower, and Wachovia Bank, N.A., as administrative
agent, with U.S. Bank, as documentation agent, Bank of America,
N.A., as syndication agent, and Wachovia Securities, Inc., as lead
arranger.
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)
Date: 8/14/00 /s/Lanny H. Michael
------- -------------------------
Lanny H. Michael
Senior Vice President,
Chief Financial Officer
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