ABX Air, Inc. Reports Fourth Quarter Profit

WILMINGTON, OH - Feb. 23, 2004 - ABX Air, Inc. (OTCBB: ABXA.OB) today reported a profit in its first full quarter of operations as an independent company.

Annual and Fourth Quarter Results
For the fourth quarter of 2003, ABX Air reported revenue of $274.1 million and net earnings of $7.6 million or $0.13 per diluted share. For the fourth quarter of 2002, ABX posted revenues of $310.7 million and net earnings of $3.5 million, or $0.06 per diluted share.

For the year ended December 31, 2003, ABX reported revenue of $1.16 billion and a net loss of ($446.9) million or ($8.52) per share. The loss resulted from a $466.1 million impairment charge, net of taxes, taken during the third quarter of 2003. Excluding the impairment charge, net earnings were $19.2 million, or $0.33 per diluted share. For the year ended December 31, 2002, ABX had revenues of $1.17 billion and net earnings of $13.3 million, or $0.23 per diluted share.

ABX became an independent public company effective August 16, 2003, as a result of the separation from its former parent company, Airborne, Inc. ("Airborne"), which was acquired by DHL Worldwide Express B. V. ("DHL").

Accordingly, results for 2003 reflect 227 days of operations as a wholly owned subsidiary of Airborne, Inc., and 138 days as an independent public company. As such, making financial comparisons to previous periods is difficult.

The impairment charge was recorded after separation from Airborne as required by Statement of Financial Accounting Standard (SFAS) No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." Application of SFAS 144 resulted in an impairment of ABX assets and adjustment to fair value. The impairment charge resulted in a net deferred tax asset position, which under provisions of SFAS No. 109, "Accounting for Income Taxes," was fully offset by a valuation allowance established due to the likelihood that future taxable earnings generated would not allow for full utilization of the deferred tax asset position.

Post-Separation Results as an Independent Public Company (138 days)
For the period August 16 through December 31, 2003, ABX reported revenue of $401.6 million and net earnings, excluding the impairment charge, of $10.6 million, or $0.18 per diluted share. Net earnings from two commercial agreements, an aircraft, crew, maintenance and insurance agreement ("ACMI") and a hub and line-haul services agreement ("Hub Services") with Airborne/DHL accounted for 99% of the post-separation revenue and 86% of the post-separation net earnings. For the fourth quarter, the two commercial agreements accounted for 99% and 83% of the revenue and net earnings, respectively. (See summary table of post-separation operating results at the end of this release.)

"The culture among our employees has always been to provide maximum value to our customers. That has not changed since going forward as an independent company," said Joe Hete, President and CEO. "We have continued to focus on further improving productivity while providing premium service. Maximizing the value that Airborne/DHL receives in our commercial arrangements allows them to leverage our cost efficiencies and excellent service to expand their domestic customer base. At the same time, we will continue to build upon our core strengths and expertise to expand our non-Airborne business where higher margins can be attained."

Under the ACMI agreement, ABX Air provides aircraft, flight crews, associated aircraft maintenance and insurance to support Airborne/DHL's package delivery network. Under the Hub Services agreement, ABX provides package sorting and handling services, truck line-haul services, and airport, equipment and facilities maintenance services to Airborne/DHL. Both contracts generally provide compensation to ABX on a cost-plus basis, with a base mark-up of 1.75% and a potential to earn incremental mark-ups depending on the attainment of contractually specified cost and service goals. Certain costs covered under these agreements, such as jet fuel expense, are reimbursable only, without mark-up.

Since the separation, the base mark-up of 1.75% under the two commercial agreements resulted in earnings of $5.5 million, while the total incremental mark-up was an additional $3.6 million, or 1.1% of costs subject to mark-up. The incremental mark-up earned from cost related goals totaled $2.4 million, including $1.9 million, or 1.1% on ACMI costs, and $0.5 million, or 0.4% on Hub Services costs. The incremental mark-up earned for service goals was $1.2 million, with $0.3 million, or 0.2% coming from the ACMI agreement, and $0.9 million, or 0.6% coming from the Hub Services agreement.

Beginning in 2004, incremental mark-up on the cost goals in the two agreements will be determined based on a weighting of 40% for quarterly budget performance and 60% related to annual budget performance. The service goals are annual, with the entire incremental mark-up earned for the year being recognized in the fourth quarter.

Labor-related costs comprise a significant portion of ABX's total operating costs. Excluding flight and aircraft maintenance employees, where labor hours are not directly related to piece volumes processed on behalf of Airborne/DHL, pieces handled per paid hour in the fourth quarter 2003 improved 12.5% compared to fourth quarter 2002. For the full year 2003, labor productivity improvements resulted in a 5.4% increase in pieces handled per paid hour as compared to 2002.

Total packages handled in the fourth quarter grew 1.4% to 125.5 million, compared to 123.7 million packages in the fourth quarter of 2002. For 2003, including the period prior to the separation from Airborne, total packages handled increased 4.1% to 474.9 million pieces, compared to 456.2 million in 2002. The increase in packages handled was driven by growth in Airborne's ground product.

On-time performance (defined as arrival within 15 minutes of the schedule established by Airborne/DHL) for ABX scheduled aircraft and contracted truck line-hauls was the highest fourth quarter in the history of ABX. ABX realized 80.0% and 81.6% of the maximum incremental mark-up for service goals available under the ACMI and Hub Services agreements, respectively.

"We had a record holiday season," Hete said. "I am extremely pleased by our employees' continued focus and commitment to excellent service, while at the same time achieving significant productivity improvements. We are prepared to grow along with our largest customer, which has committed significant resources to building its domestic presence."

Outlook
"Looking ahead, our focus will be on continuing to provide value to our primary customer, Airborne/DHL," Hete said. "To the extent Airborne/DHL is successful in growing its business, we would also hope to benefit through increased shipment volumes that we handle on their behalf. We do anticipate that as DHL and Airborne complete the integration of their delivery networks, however, they will seek to eliminate duplicative costs, including those related to their services providers. While the scope of services we provide under the two agreements cannot be reduced for the first year, beginning August 16, 2004, Airborne may terminate ACMI aircraft, add, delete or modify the air routes we operate under the ACMI agreement, as well as add, delete or modify the services we provide under the Hub Services agreement. We are striving to remain Airborne's preferred service provider by continuing to deliver premium service at a reasonable price. In fact, in January 2004, we were awarded the handling of DHL's ground product, as part of the Hub Services agreement."

Hete continued, "An area of additional focus will be to grow our non-Airborne/DHL revenues by developing and expanding services that build on our strengths and expertise. While we are pleased with the growth rate and margins of non-Airborne revenue to date, obviously there can be no guarantee that the rate of growth or margins can be maintained."

About ABX Air
ABX Air, Inc. is a cargo airline with a fleet of 115 aircraft that operates out of Wilmington, Ohio, and eleven hubs throughout the United States. In addition to providing airlift capacity to DHL/Airborne, an indirectly wholly owned subsidiary of DHL Worldwide Express, B.V., ABX Air provides charter and maintenance services to a diverse group of customers. With over 7,200 employees, ABX is the largest employer in a several county area in southwestern Ohio.

Except for historical information contained herein, the matters discussed in this release contain forward-looking statements that involve risks and uncertainties. The Company's actual results may differ materially from the results discussed in the forward-looking statements. There are a number of important factors that could cause actual results of ABX Air, Inc. to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to, challenges in operating as a stand-alone company as a result of our separation from Airborne, Inc., our former parent company, which was acquired by DHL Worldwide Express B.V., on August 15, 2003, a significant reduction in the scope of services under our commercial agreements with Airborne, Inc., as well as other risk factors identified from time to time in our periodic filings with the Securities and Exchange Commission. Readers should carefully review this release and should not place undue reliance on our forward-looking statements. These forward-looking statements were based on information, plans and estimates at the date of this release. We undertake no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

For more information contact:
Beth Huber
phone 937-382-5591 ext. 62536
email beth.huber@abxair.com

ABX AIR, INC.
CONSOLIDATED FINANCIAL RESULTS
(In thousands, except per share data)

Three Months Ended

Twelve Months Ended

December 31

December 31

                   

2003

 

2002

2003

 

2002

REVENUES

$

274,065

$

310,707

$

1,160,959

$

1,173,735

OPERATING EXPENSES:   

Salaries, wages and benefits

119,771

115,182

472,028

451,474

Purchased line-haul

49,668

47,658

171,695

150,281

Fuel

38,539

36,423

150,454

129,321

Maintenance, materials and repairs

26,816

28,814

114,032

116,254

Depreciation and amortization

9,180

34,532

98,503

147,993

Landing and ramp

6,515

7,678

27,816

26,082

Rent

1,653

3,151

9,748

11,982

Other operating expenses

11,995

24,028

74,978

91,813

Impairment charge

-

- 

600,871

- 

264,137

297,466

1,720,125

1,125,200

EARNINGS (LOSS) FROM OPERATIONS

9,928

13,241

  

(559,166)

  

48,535

INTEREST, NET OF INTEREST INCOME

2,315

7,220

  

16,379

25,866

        

  

 
EARNINGS (LOSS) BEFORE INCOME TAXES

7,613

6,021

  

(575,545)

  

22,669

INCOME TAX BENEFIT (EXPENSE)

-

(2,492)

  

128,644

  

(9,383)

       
NET EARNINGS (LOSS)

$

7,613

$

3,529

  

$

(446,901)

$

13,286

  

  

EARNINGS PER SHARE:

Basic earnings per share

$

0.14

$

0.07

$

(8.52)

$

0.25

Diluted earnings per share

$

0.13

$

0.06

$

(8.52)

$

0.23

WEIGHTED AVERAGE SHARES:

  

  

Basic

53,562

52,107

52,474

52,107

Diluted

58,521

58,521

  

52,474

  

58,521

ABX AIR, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)

December 31

December 31

2003

2002

ASSETS:
Cash

$

65,741

$

33

Accounts Receivable, net

5,482

2,318

Other Current Assets

18,763

60,812

Total Current Assets

89,986

63,163

Property and Equipment, net

312,803

1,089,485

Other Assets

10,317

21,360

Total Assets

$

413,106

$

1,174,008

LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities

$

113,140

$

133,246

Long Term Obligations

241,300

808,440

Stockholders' Equity

58,666

232,322

Total Liabilities and Stockholders' Equity

$

413,106

$

1,174,008

 

ABX AIR, INC.
POST-SEPARATION EARNINGS SUMMARY
(In thousands)

For the quarter ended December 31, 2003

ACMI

Hub Services

Other Reimbursable

Airborne/DHL Subtotal

Non Airborne/DHL

Total

Revenues $ 121,031 $ 100,756 $ 48,818 $ 270,605 $ 3,460 $ 274,065
Operating expenses 116,077 97,882 47,991 261,950 2,187 264,137
Interest expense 1,488   - 827 2,315   - 2,315
Total expense 117,565 97,882 48,818 264,265 2,187 266,452
Net earnings $ 3,466 $ 2,874 $ - $ 6,340 $ 1,273 $ 7,613

 

For the 138 days ended December 31, 2003

ACMI

Hub Services

Other Reimbursable

Airborne/DHL Subtotal

Non Airborne/DHL

Total

Revenues $ 178,692 $ 145,933 $ 72,341 $ 396,966 $ 4,647 $ 401,613
Operating expenses 171,132 142,068 71,117 384,317 3,185 387,502
Interest expense 2,317   - 1,224 3,541   - 3,541
Total expense (1) 173,449 142,068 72,341 387,858 3,185 391,043
Net earnings $ 5,243 $ 3,865 $ - $ 9,108 $ 1,462 $ 10,570

(1) Excludes impairment charge of $600.9 recorded in the third quarter 2003.