IDENTIFYING THE CAUSES OF PROFITABILITY CHANGES The consolidated financial statements for Carmody Shipping Corporation and Subsidiaries appear below and on the following pages.

Carmody Shipping Corporation and Subsidiaries Consolidated Statements of Operations Years Ended May 31, In thousands, except per share amounts 2009 2008 2007 Revenues $7,808,043 $7,550,060 $7,688,296 Operating expenses:

Salaries and employee benefits $3,807,493 $3,637,080 $3,438,391 Rentals and landing fees 658,138 672,341 650,001 Depreciation and amortization 579,896 577,157 562,207 Fuel 495,384 508,386 663,327 Maintenance and repairs 404,639 404,311 449,394 Restructuring charges (12,500) 254,000 121,000 Other 1,497,820 1,473,818 1,551,850

$7,430,870 $7,527,093 $7,436,170 Operating income $ 377,173 $ 22,967 $ 252,126 Other income (expenses):

Interest, net $ (160,923) $ (164,315) $ (181,880)

Gain on disposition of aircraft and related equipment 4,633 2,832 11,375 Other, net (17,307) (8,312) (8,679)

Payroll tax loss — — (32,000)

Other income (expenses), net $ (173,597) $ (169,795) $ (211,184)

Income (loss) before Income taxes and extraordinary loss $ (203,576) $ (146,828) $ 40,942 Provision (credit) for income taxes 93,767 (33,046) 35,044 Income (loss) before Extraordinary loss $ 109,809 $ (113,782) $ 5,898 Extraordinary loss, net of tax benefit of $34,287 (55,943) — —

Net income (loss) $ 53,866 $ (113,782) $ 5,898 Carmody Shipping Corporation and Subsidiaries Consolidated Balance Sheets

(In thousands)

May 31, ASSETS 2009 2008 Current assets:

Cash and cash equivalents $ 155,456 $ 78,177 Receivable, less allowance for doubtful accounts of $31,308 and $32,074 922,727 899,773 Spare parts, supplies and fuel 164,087 158,062 Prepaid expenses and other 63,573 69,994 Deferred income taxes 133,875 —

Total current assets $1,439,718 $1,206,006 Property and equipment, at cost Flight equipment $2,843,253 $2,540,350 Package handling and ground support equipment 1,413,793 1,352,659 Computer and electronic equipment 947,913 851,686 Other 1,501,250 1,433,212

$6,706,209 $6,177,907 Less accumulated depreciation and amortization 3,229,941 2,766,610 Net property and equipment $3,476,268 $3,411,297 Other assets:

Goodwill $ 432,215 $ 487,780 Equipment deposits and other assets 444,863 358,103 Total other assets $ 877,078 $ 845,883 Total assets $5,793,064 $5,463,186 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities:

Current portion of long-term debt $ 133,797 $ 155,257 Accounts payable 554,111 430,130 Accrued expenses 761,357 799,468 Total current liabilities $1,449,265 $1,384,855 Long-term debt, less current portion 1,882,279 1,797,844 Deferred income taxes 72,479 123,715 Other liabilities 717,660 577,050 Total liabilities $4,121,683 $3,883,464 Common stockholders’ equity:

Common stock, $0.10 par value, 100,000 shares authorized, 54,743 and 54,100 shares issued $ 5,474 $ 5,410 Additional paid-in capital 699,385 672,727 Retained earnings 969,515 906,555

$1,674,374 $1,584,692 Less treasury stock and deferred compensation related to stock plans $ 2,993 $ 4,970 Total common stockholders’ equity 1,671,381 1,579,722 Total liabilities and stockholders’ equity $5,793,064 $5,463,186 Required:

. Evaluate Carmody Shipping’s performance in 2009.

. What were the primary factors responsible for Carmody Shipping’s loss in 2008 and return to profitability in 2009?

. How did Carmody Shipping finance the $329,878,000 increase in assets in 2009?