UTI WORLDWIDE INC - 10-Q Quarterly Report

United States
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


x		Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

		For the quarterly period ended October 31, 2003
		or
o		Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
		For the transition period from to

000-31869
(Commission File Number)

UTi Worldwide Inc.

(Exact name of Registrant as Specified in its Charter)


British Virgin Islands (State or Other Jurisdiction of Incorporation or Organization)		N/A (IRS Employer Identification Number)

9 Columbus Centre, Pelican Drive Road Town, Tortola British Virgin Islands		c/o UTi, Services, Inc. 19443 Laurel Park Road, Suite 111 Rancho Dominguez, CA 90220 USA

(Addresses of Principal Executive Offices and Zip Code)

310.604.3311
(Registrant’s Telephone Number, Including Area Code)

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 x No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes x No o

At December 8, 2003, the number of shares outstanding of the issuer’s ordinary shares was 30,742,384.

TABLE OF CONTENTS


Part I. Financial Information
	Item 1. Financial Statements
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures about Market Risk
	Item 4. Controls and Procedures
Part II. Other Information
	Item 1. Legal Proceedings
	Item 5. Other Information
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
EXHIBIT INDEX
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32

UTi Worldwide Inc.

Report on Form 10-Q
For the Quarter Ended October 31, 2003

Table of Contents


PART I. Financial Information			3
Item 1. Financial Statements			3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			15
Item 3. Quantitative and Qualitative Disclosures about Market Risk			25
Item 4. Controls and Procedures			26
PART II. Other Information			26
Item 1. Legal Proceedings			26
Item 5. Other Information			26
Item 6. Exhibits and Reports on Form 8-K			27
Signature			28
Exhibit Index			29

- 2 -

Part I. Financial Information

Item 1. Financial Statements

Condensed Consolidated Income Statements
For the Three and Nine Months Ended October 31, 2003 and 2002
(in thousands, except share and per share amounts)


		Three months ended						Nine months ended
		October 31,						October 31,

		2003			2002			2003			2002

		(Unaudited)
Gross revenue		$	398,726		$	321,521		$	1,087,539		$	831,998
Freight consolidation costs			242,181			213,992			654,716			560,007

Net revenue			156,545			107,529			432,823			271,991
Staff costs			81,206			52,436			231,760			136,044
Depreciation and amortization			3,531			2,790			10,750			7,617
Amortization of intangible assets			178			70			484			70
Other operating expenses			53,657			37,995			145,725			94,664

Operating income			17,973			14,238			44,104			33,596
Interest income			2,220			1,206			5,445			3,114
Interest expense			(1,762	)		(1,252	)		(4,478	)		(3,540	)
Losses on foreign exchange			(336	)		(394	)		(12	)		(709	)

Pretax income			18,095			13,798			45,059			32,461
Provision for income taxes			(4,419	)		(3,891	)		(11,173	)		(9,185	)

Income before minority interests			13,676			9,907			33,886			23,276
Minority interests			(498	)		(437	)		(1,318	)		(1,310	)

Net income		$	13,178		$	9,470		$	32,568		$	21,966

Basic earnings per share		$	0.43		$	0.37		$	1.08		$	0.87
Diluted earnings per share		$	0.42		$	0.37		$	1.04		$	0.85
Number of weighted average shares used for per share calculations:
	Basic shares		30,301,508			25,346,730			30,236,777			25,315,265
	Diluted shares		31,539,692			25,822,416			31,392,561			25,797,360

See accompanying notes to condensed consolidated financial statements.

- 3 -

Condensed Consolidated Balance Sheets
As of October 31, 2003 and January 31, 2003
(in thousands, except share amounts)


				October 31,			January 31,
				2003			2003

				(Unaudited)
ASSETS
Cash and cash equivalents (including $4,000 of restricted cash as of October 31, 2003 and January 31, 2003)				$	165,890		$	168,125
Trade receivables (net of allowance for doubtful receivables of $14,127 and $11,943 as of October 31, 2003 and January 31, 2003, respectively)					302,024			247,893
Deferred income tax assets					4,164			1,592
Other current assets					36,144			30,492

			Total current assets		508,222			448,102
Property, plant and equipment, net					52,814			44,566
Goodwill and other intangible assets, net					141,591			125,641
Investments					1,128			847
Deferred income tax assets					2,221			1,227
Other non-current assets					9,571			6,692

			Total assets	$	715,547		$	627,075

LIABILITIES & SHAREHOLDERS’ EQUITY
Bank lines of credit				$	34,351		$	33,458
Short-term borrowings					2,471			9,121
Current portion of capital lease obligations					2,109			2,539
Trade payables and other accrued liabilities					281,433			236,548
Income taxes payable					11,778			8,083
Deferred income tax liabilities					383			489

		Total current liabilities			332,525			290,238
Long-term borrowings					96			199
Capital lease obligations					7,668			7,111
Deferred income tax liabilities					2,100			1,643
Retirement fund obligations					1,219			1,016
Minority interests					3,752			2,699
Commitments and contingencies
Shareholders’ equity:
		Common stock - ordinary shares of no par value: 30,736,142 and 30,551,124 shares issued and outstanding as of October 31, 2003 and January 31, 2003, respectively			313,814			311,161
	Retained earnings				93,651			63,973
	Accumulated other comprehensive loss				(39,278	)		(50,965	)

		Total shareholders’ equity			368,187			324,169

		Total liabilities and shareholders’ equity		$	715,547		$	627,075

See accompanying notes to condensed consolidated financial statements.

- 4 -

Consolidated Statements of Cash Flows
For the Nine Months Ended October 31, 2003 and 2002
(in thousands)


				Nine months ended
				October 31,

				2003			2002

				(Unaudited)
OPERATING ACTIVITIES:
Net income				$	32,568		$	21,966
Adjustments to reconcile net income to net cash provided by operations:
	Stock compensation costs				130			137
	Depreciation and amortization				10,750			7,617
	Amortization of intangible assets				484			70
	Deferred income taxes				1,009			(291	)
	Loss on disposal of property, plant and equipment				194			129
	Other				1,318			1,349
	Changes in operating assets and liabilities:
			Increase in trade receivables and other current assets		(40,113	)		(41,014	)
			Increase in trade payables and other current liabilities		30,271			35,703

		Net cash provided by operating activities			36,611			25,666
INVESTING ACTIVITIES:
Purchases of property, plant and equipment					(13,759	)		(7,113	)
Proceeds from disposal of property, plant and equipment					584			365
Increase in other non-current assets					(794	)		—
Acquisitions and contingent earn-out payments					(14,269	)		(54,756	)
Other					(444	)		(442	)

		Net cash used in investing activities			(28,682	)		(61,946	)
FINANCING ACTIVITIES:
Increase in bank lines of credit					893			24,894
Decrease in short-term borrowings					(6,368	)		(991	)
Long-term borrowings — repaid					(130	)		(1,109	)
Repayments of capital lease obligations					(2,608	)		(2,515	)
Decrease in minority interests					(338	)		(935	)
Net proceeds from the issuance of ordinary shares					2,523			555
Dividends paid					(2,890	)		(1,929	)

		Net cash (used in)/provided by financing activities			(8,918	)		17,970

Net decrease in cash and cash equivalents					(989	)		(18,310	)
Cash and cash equivalents at beginning of period					168,125			87,594
Effect of foreign exchange rate changes on cash					(1,246	)		81

Cash and cash equivalents at end of period				$	165,890		$	69,365

See accompanying notes to condensed consolidated financial statements.

- 5 -

Notes to the Condensed Consolidated Financial Statements
For the Three and Nine Months Ended October 31, 2003 and 2002 (Unaudited)

NOTE 1. Presentation of Financial Statements

The accompanying unaudited condensed consolidated financial statements include the accounts of UTi Worldwide Inc. and its subsidiaries (UTi or the Company). These financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information. They do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Certain reclassifications have been made to conform prior year data to the current year presentation. Operating results for the three and nine months ended October 31, 2003 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2004 or any other future periods.

The balance sheet at January 31, 2003 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 20-F for the year ended January 31, 2003 on file with the Securities and Exchange Commission.

All dollar amounts in the notes are presented in thousands except for share and per share data.

Pro Forma Information – Stock Options

As of October 31, 2003, the Company had five stock-based employee compensation plans which are accounted for using the intrinsic value method under the recognition and measurement principles of Accounting Principle Board Opinion No. 25, Accounting for Stock Issued to Employees, and its related Interpretations. Compensation cost is recorded in net income only for stock options that have an exercise price below the market value of the underlying common stock on the date of grant. As required by Statement of Financial Accounting Standards (SFAS) No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure – an amendment of FASB Statement No. 123, the following table shows the estimated effect on net income and earnings per share as if the Company had applied the fair value recognition provision of SFAS No. 123, Accounting for Stock-Based Compensation, to all stock options.

- 6 -


		Three months ended						Nine months ended
		October 31,						October 31,

		2003			2002			2003			2002

Net income as reported		$	13,178		$	9,470		$	32,568		$	21,966
Stock-based employee compensation expense included in reported net income, net of income taxes			43			46			130			137
Total stock-based compensation expense determined under the fair value based method, net of income taxes			(1,062	)		(1,027	)		(3,145	)		(2,479	)

Pro forma net income		$	12,159		$	8,489		$	29,553		$	19,624

Earnings per share, as reported:
	Basic earnings per share	$	0.43		$	0.37		$	1.08		$	0.87
	Diluted earnings per share	$	0.42		$	0.37		$	1.04		$	0.85
Earnings per share, pro forma:
	Basic earnings per share	$	0.40		$	0.33		$	0.98		$	0.78
	Diluted earnings per share	$	0.39		$	0.33		$	0.94		$	0.76

Pro Forma Information – Acquisitions

Effective May 1, 2003 and July 1, 2003, the Company acquired 100% of the issued and outstanding shares of IndAir Carriers (Pvt) Ltd. and 50% of the issued and outstanding shares of Kite Logistics (Pty) Limited, respectively. Effective October 1, 2002 and November 1, 2002, the Company acquired 100% of the issued and outstanding share capital of Standard Corporation and Zeracon Limited, respectively. The following table shows the supplemental pro forma information as though each of these acquisitions had occurred February 1, 2002.


			Three months ended October 31,						Nine months ended October 31,

							Diluted						Diluted
			Gross		Net		earnings		Gross		Net		earnings
			revenue		income		per share *		revenue		income		per share *

2003:
	As reported		$	398,726	$	13,178	$	0.42	$	1,087,539	$	32,568	$	1.04
	Acquisitions			—		—		0.00		11,748		4		0.00

		Total	$	398,726	$	13,178		0.42	$	1,099,287	$	32,572		1.04

2002:
	As reported		$	321,521	$	9,470	$	0.37	$	831,998	$	21,966	$	0.85
	Acquisitions			34,388		1,234		0.05		124,524		941		0.04

		Total	$	355,909	$	10,704		0.41	$	956,522	$	22,907		0.88

* Earnings per share were calculated using 31,539,692 and 31,392,561 diluted ordinary shares for the three and nine months ended October 31, 2003, respectively, and 25,932,005 and 25,943,479 diluted ordinary shares for the three and nine months ended October 31, 2002, respectively. The diluted earnings per share amounts as reported plus acquisitions for the three and nine months ended October 31, 2002 do not add to the total pro forma amounts due to the effects of rounding.

- 7 -

NOTE 2. Recent Accounting Pronouncements

In April 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB No. 13 and Technical Corrections. SFAS No. 145 rescinds FASB Statement No. 4, Reporting Gains and Losses from Extinguishment of Debt, and an amendment of that Statement, FASB Statement No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. This statement also rescinds FASB Statement No. 44, Accounting for Intangible Assets of Motor Carriers. This statement amends FASB Statement No. 13, Accounting for Leases, to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. This statement also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. The Company adopted the provisions of SFAS No. 145 as of February 1, 2003 and such adoption had no impact on its consolidated financial position or results of operations.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). This statement is effective for exit or disposal activities that are initiated after December 31, 2002. The Company adopted the provisions of SFAS No. 146 as of February 1, 2003 and such adoption did not have a material impact on its consolidated financial position or results of operations.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure – an amendment of FASB Statement No. 123. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation and to amend the disclosure requirements regarding the method of accounting for stock-based employee compensation and the effect of the method used on reported results. This statement is effective for fiscal years ending after December 15, 2003, while certain disclosure provisions are effective for financial statements for fiscal years ending after December 15, 2002. The Company adopted the annual disclosure provisions of SFAS No. 148 in its financial reports for its year ended January 31, 2003 and the interim disclosure provisions in its financial reports for its year beginning February 1, 2003. The adoption of this statement did not have a material impact on its consolidated financial position or results of operations.

NOTE 3. Earnings per Share


	Three months ended				Nine months ended
	October 31,				October 31,

	2003		2002		2003		2002

Basic earnings per share:
Net income	$	13,178	$	9,470	$	32,568	$	21,966
Weighted average number of ordinary shares		30,301,508		25,346,730		30,236,777		25,315,265

Basic earnings per share	$	0.43	$	0.37	$	1.08	$	0.87

- 8 -


	Three months ended				Nine months ended
	October 31,				October 31,

	2003		2002		2003		2002

Diluted earnings per share:
Net income	$	13,178	$	9,470	$	32,568	$	21,966
Weighted average number of ordinary shares		30,301,508		25,346,730		30,236,777		25,315,265
Incremental shares required for diluted earnings per share related to employee stock options		1,238,184		475,686		1,155,784		482,095

Diluted weighted average number of shares		31,539,692		25,822,416		31,392,561		25,797,360

Diluted earnings per share	$	0.42	$	0.37	$	1.04	$	0.85

Cash dividends paid per share	$	—	$	—	$	0.095	$	0.075

The above number of shares excludes any contingently issuable ordinary shares. For the three and nine months ended October 31, 2003, there were 0 and 137,500 options outstanding, respectively, and for the three and nine months ended October 31, 2002, there were 522,500 and 502,500 options outstanding, respectively, which were excluded from the computation of diluted earnings per share because the options’ exercise prices were greater than the average market price of the ordinary shares.

NOTE 4. Other Comprehensive Income


			Three months ended				Nine months ended
			October 31,				October 31,

			2003		2002		2003		2002

Net income			$	13,178	$	9,470	$	32,568	$	21,966
Other comprehensive income, net of tax:
		Foreign exchange translation adjustments		7,622		872		11,687		7,831

	Comprehensive income		$	20,800	$	10,342	$	44,255	$	29,797

NOTE 5. Segment Information

The Company operates in four geographic segments comprised of Europe, the Americas, Asia Pacific and Africa. For segmental reporting purposes by geographic region, gross airfreight and ocean freight forwarding revenues for the movement of goods is attributed to the country where the shipment originates. Gross revenues, as well as net revenues, for all other services are attributed to the country where the services are performed. Net revenues for airfreight and ocean freight forwarding related to the movement of the goods are prorated between the country of origin and the destination country, based on a standard formula. Certain unaudited information regarding UTi’s operations by geographic segment is summarized in the following tables.

- 9 -


	Three months ended October 31, 2003

					Asia
	Europe		Americas		Pacific		Africa		Corporate			Total

Gross revenue from external customers	$	104,961	$	119,629	$	118,309	$	55,827	$	—		$	398,726

Net revenue	$	31,882	$	66,221	$	23,543	$	34,899	$	—		$	156,545
Staff costs		18,367		37,343		9,547		14,871		1,078			81,206
Depreciation and amortization		1,085		990		476		787		193			3,531
Amortization of intangible assets		—		149		—		29		—			178
Other operating expenses		9,346		22,807		5,693		14,260		1,551			53,657

Operating income/(loss)	$	3,084	$	4,932	$	7,827	$	4,952	$	(2,822	)		17,973

Interest income													2,220
Interest expense													(1,762	)
Losses on foreign exchange													(336	)

Pretax income													18,095
Provision for income taxes													(4,419	)

Income before minority interests												$	13,676

Capital expenditures	$	1,328	$	1,640	$	1,132	$	1,294	$	(196	)	$	5,198

Segment assets at quarter-end	$	161,495	$	182,011	$	153,880	$	158,944	$	59,217		$	715,547


	Three months ended October 31, 2002

					Asia
	Europe		Americas		Pacific		Africa		Corporate			Total

Gross revenue from external customers	$	99,422	$	82,110	$	102,159	$	37,830	$	—		$	321,521

Net revenue	$	26,013	$	37,450	$	19,623	$	24,443	$	—		$	107,529
Staff costs		14,341		20,364		7,818		8,819		1,094			52,436
Depreciation and amortization		889		782		502		465		152			2,790
Amortization of intangible assets		—		70		—		—		—			70
Other operating expenses		7,540		14,056		5,105		10,162		1,132			37,995

Operating income/(loss)	$	3,243	$	2,178	$	6,198	$	4,997	$	(2,378	)		14,238

Interest income													1,206
Interest expense													(1,252	)
Losses on foreign exchange													(394	)

Pretax income													13,798
Provision for income taxes													(3,891	)

Income before minority interests												$	9,907

Capital expenditures	$	643	$	495	$	424	$	683	$	11		$	2,256

Segment assets at quarter-end	$	135,515	$	160,577	$	110,210	$	101,216	$	9,183		$	516,701

- 10 -


	Nine months ended October 31, 2003

					Asia
	Europe		Americas		Pacific		Africa		Corporate			Total

Gross revenue from external customers	$	308,329	$	337,024	$	298,311	$	143,875	$	—		$	1,087,539

Net revenue	$	90,879	$	188,667	$	63,801	$	89,476	$	—		$	432,823
Staff costs		52,750		109,031		26,607		39,659		3,713			231,760
Depreciation and amortization		3,200		2,992		1,538		2,191		829			10,750
Amortization of intangible assets		—		446		—		38		—			484
Other operating expenses		27,037		63,833		16,012		34,821		4,022			145,725

Operating income/(loss)	$	7,892	$	12,365	$	19,644	$	12,767	$	(8,564	)		44,104

Interest income													5,445
Interest expense													(4,478	)
Losses on foreign exchange													(12	)

Pretax income													45,059
Provision for income taxes													(11,173	)

Income before minority interests												$	33,886

Capital expenditures	$	3,305	$	5,069	$	2,516	$	3,631	$	503		$	15,024

Segment assets at quarter-end	$	161,495	$	182,011	$	153,880	$	158,944	$	59,217		$	715,547


	Nine months ended October 31, 2002

					Asia
	Europe		Americas		Pacific		Africa		Corporate			Total

Gross revenue from external customers	$	271,889	$	212,213	$	246,688	$	101,208	$	—		$	831,998

Net revenue	$	72,742	$	82,792	$	51,804	$	64,653	$	—		$	271,991
Staff costs		39,068		47,384		21,630		24,793		3,169			136,044
Depreciation and amortization		2,492		1,923		1,448		1,337		417			7,617
Amortization of intangible assets		—		70		—		—		—			70
Other operating expenses		20,918		28,405		14,555		27,185		3,601			94,664

Operating income/(loss)	$	10,264	$	5,010	$	14,171	$	11,338	$	(7,187	)		33,596

Interest income													3,114
Interest expense													(3,540	)
Losses on foreign exchange													(709	)

Pretax income													32,461
Provision for income taxes													(9,185	)

Income before minority interests												$	23,276

Capital expenditures	$	4,191	$	1,389	$	1,361	$	3,200	$	37		$	10,178

Segment assets at quarter-end	$	135,515	$	160,577	$	110,210	$	101,216	$	9,183		$	516,701

- 11 -

The following table shows the gross revenue and net revenue attributable to the Company’s principal services.


		Three months ended				Nine months ended
		October 31,				October 31,

		2003		2002		2003		2002

Gross revenues:
	Airfreight forwarding	$	195,149	$	174,389	$	522,201	$	457,499
	Ocean freight forwarding		93,319		76,082		256,230		209,405
	Customs brokerage		17,189		17,275		49,430		46,773
	Contract logistics		61,447		25,850		169,355		51,321
	Other		31,622		27,925		90,323		67,000

		$	398,726	$	321,521	$	1,087,539	$	831,998

Net revenues:
	Airfreight forwarding	$	52,230	$	42,431	$	145,376	$	115,043
	Ocean freight forwarding		19,114		17,079		54,103		48,515
	Customs brokerage		17,370		16,476		47,818		44,423
	Contract logistics		50,668		20,612		141,185		36,150
	Other		17,163		10,931		44,341		27,860

		$	156,545	$	107,529	$	432,823	$	271,991

NOTE 6. Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill by reportable segment for the nine months ended October 31, 2003 are as follows:


						Asia
	Europe		Americas			Pacific		Africa		Total

Balance as of February 1, 2003	$	23,827	$	34,908		$	43,732	$	14,177	$	116,644
Acquisitions and contingent earn-out payments made		2,099		1,255			3,852		4,248		11,454
Reduction due to reversal of valuation allowance on deferred taxes		—		(4,002	)		—		—		(4,002	)
Foreign currency translation and other adjustments		1,794		962			3,292		1,067		7,115

Balance as of October 31, 2003	$	27,720	$	33,123		$	50,876	$	19,492	$	131,211

The amortized intangible assets as of October 31, 2003 relate primarily to the estimated fair value of the customer contracts and customer relationships acquired with Standard Corporation and Kite Logistics (Pty) Limited and had a gross carrying amount of $11,065, accumulated amortization expense of $685 and a net value of $10,380. Amortization expense totaled $178 and $484 for the three and nine months ended October 31, 2003, respectively, and we expect the amortization expense for these intangible assets to be approximately $720 per year for each of the next five years.

The purchase price allocations for IndAir Carriers (Pvt) Ltd. and Kite Logistics (Pty) Limited have not been finalized as of October 31, 2003.

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NOTE 7. Supplemental Cash Flow Information

The following table shows the supplemental non-cash investing and financing activities and the supplemental cash flow information.


		Nine months ended
		October 31,

		2003			2002

Non-cash activities:
	Additions to capital leases	$	1,265		$	3,065
Cash (received)/paid:
	Interest, net		(973	)		353
	Income taxes		6,724			5,057

NOTE 8. Contingencies

The Company is subject to legal proceedings and claims, which arise in the ordinary course of its business.

The Company is involved in litigation in Italy and England with the former ultimate owner of Per Transport SpA and related entities in connection with its April 1998 acquisition of Per Transport SpA and its subsequent termination of the employment of the former ultimate owner as a consultant. The suits seek monetary damages, including compensation for termination of the owner’s consulting agreement. The Company has brought counter-claims for monetary damages in relation to warranty claims under the purchase agreement. The Company has been advised that proceedings to recover amounts owing by the former ultimate owner and other entities owned by him, to third parties may be instituted against the Company. It is alleged that Per Transport SpA guaranteed certain obligations of these other entities owned by the former ultimate owner. The Company believes that these guarantees are the responsibility of the former ultimate owner. These guarantees were made prior to its acquisition, were not disclosed to the Company during its acquisition negotiations nor were they disclosed in the audited statutory financial statements of Per Transport SpA. Civil and criminal proceedings have also been instituted against the former ultimate owner in relation to these guarantees. The total of all such actual and potential claims is approximately $15.2 million, based on exchange rates as of October 31, 2003. The Company believes that it has adequate defenses in relation to these claims if these proceedings are brought against it.

The Company is one of seven defendants named in a lawsuit filed on July 30, 2001 in the U.S. Bankruptcy Court for the Southern District of New York. The plaintiff, the committee of unsecured creditors of FMI Forwarding (formerly known as Intermaritime Forwarding), alleges under a theory of fraudulent conveyance that UTi paid inadequate consideration for certain assets of Intermaritime Forwarding and also alleges that UTi is liable for debts of FMI Forwarding on a successor liability theory. The plaintiff seeks recovery in an amount up to $4.6 million. The Company believes that it will ultimately prevail in this matter.

A former customer, De La Rue International, filed a complaint against the Company in the Superior Court of Gwinnett County, Georgia on April 21, 2003 alleging that the Company was negligent, that it breached its contractual obligations and that it fraudulently concealed the fact that three shipments in

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August and September 1999 were not properly and timely reported to U.S. Customs for clearance. The plaintiff is asking for damages in excess of $2.0 million.

The Company is one of approximately 83 defendants named in two class action lawsuits which were originally filed on September 19, 1995 and subsequently consolidated in the District Court of Brazaria County, Texas (23rd Judicial District) where it is alleged that various defendants sold chemicals that were utilized in the Gulf War by the Iraqi army which caused personal injuries to U.S. armed services personnel and their families, including birth defects. The lawsuits were brought on behalf of the military personnel who served in the Gulf War and their families and the plaintiffs are seeking in excess of $1 billion in damages. To date, the plaintiffs have not obtained class certification. The Company believes they are a defendant in the suit because an entity that sold the Company assets in 1993 is a defendant. The Company believes it will prevail in this matter because the alleged actions giving rise to the claims occurred prior to our purchase of the assets. The Company further believes that it will ultimately prevail in this matter since it never manufactured chemicals and the plaintiffs have been unable to thus far produce evidence that the Company acted as a freight forwarder for cargo that included chemicals used by the Iraqi army.

In the opinion of management, the amount of ultimate liability with respect to these actions will not materially affect the results of operations or financial position of the Company.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

UTi Worldwide Inc. and its subsidiaries (which we refer to as UTi, or sometimes as the company) is an international, non-asset-based supply chain management company that provides services through a global network of branch offices and logistics centers and additional independent agent-owned offices. Our services include air and ocean freight forwarding, customs brokerage, contract logistics and other logistics-related services, including consulting, the coordination of purchase orders and customized management services.

During the three and nine months ended October 31, 2003 (which we refer to as the third quarter of fiscal 2004 and the first three quarters of fiscal 2004, respectively), the operating results of IndAir Carriers (Pvt) Ltd. and Kite Logistics (Pty) Limited are included in the company’s financial statements since the effective dates of the acquisitions. Effective May 1, 2003, the company acquired 100% of the issued and outstanding shares of IndAir Carriers (Pvt) Ltd. for an initial purchase price of approximately $1.7 million. Effective July 1, 2003, the company acquired 50% of the issued and outstanding shares of Kite Logistics (Pty) Limited for an initial purchase price of approximately $5.3 million.

On December 2, 2003, we announced that we have signed definitive agreements to acquire International Healthcare Distributors (Pty.) Limited (IHD), which is based in South Africa. Under the agreements, IHD is to be acquired by a partnership in which we will have a 74.9% majority interest, with the remaining 25.1% minority interest being owned by a broad-based black economic empowerment organization in South Africa. Based on current exchange rates, the proposed purchase price will total approximately $40 million in cash, which includes a loan from us of approximately $17 million to the partnership. The closing of the proposed transaction is subject to various closing conditions and regulatory approvals, including the execution by all the selling shareholders of long-term service agreements and approval of the South African Competition Authorities. As of the date of this report, two service agreements remain unsigned. If all conditions are met, we expect to close the transaction within the first calendar quarter of 2004.

In December 2003, we finalized the first earn-out payment due in connection with our acquisition of Standard Corporation (which we refer to as Standard), which was effective October 1, 2002. The earn-out payment totals $7.2 million, of which $3.0 million had already been advanced in the form of ordinary shares at the time of the purchase. The remaining amount of $4.2 million will be paid in cash in December 2003 and will be accounted for as an increase in goodwill in our balance sheet.

Our reporting currency is the United States dollar. However, due to our global operations, we conduct, and will continue to conduct, business in currencies other than our reporting currency. The conversion of these currencies into our reporting currency for reporting purposes is affected by movements in these currencies against the United States dollar. Accordingly, we experience the effects of changes in foreign currency exchange rates on our results of operations.

The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included in this quarterly report and our audited consolidated financial statements and notes thereto for the year ended January 31, 2003, which are included in our annual report on Form 20-F for the year ended January 31, 2003, on file with the

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Securities and Exchange Commission. The company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP).

Seasonality

Historically, our operating results have been subject to seasonal trends when measured on a quarterly basis. Our first fiscal quarter is traditionally weaker compared with our other fiscal quarters. This trend is dependent on numerous factors, including the markets in which we operate, holiday seasons, consumer demand, climate, economic conditions and numerous other factors beyond our control. There can be no assurance that our historic operating patterns will continue in future periods as we cannot influence or forecast many of these factors.

Forward-Looking Statements

Except for historical information contained herein, this quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended, which involve certain risks and uncertainties. Forward-looking statements are included with respect to, among other things, the company’s current business plan and strategy and strategic operating plan. These forward-looking statements are identified by their use of such terms and phrases as “intends,” “intend,” “intended,” “goal,” “estimate,” “estimates,” “expects,” “expect,” “expected,” “project,” “projected,” “projections,” “plans,” “anticipates,” “anticipated,” “should,” “designed to,” “foreseeable future,” “believe,” “believes” and “scheduled” and similar expressions. The company’s actual results or outcomes may differ materially from those anticipated. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Important factors that the company believes might cause actual results to differ from any results expressed or implied by these forward-looking statements are discussed in the cautionary statements contained in Exhibit 99.1 to this Form 10-Q (filed as Exhibit 99.3 to the company’s Form 10-Q for the three months ended April 30, 2003, and incorporated herein by reference), which are incorporated in this Form 10-Q by reference. In addition, the proposed acquisition of IHD is subject to various risks and uncertainties, including the risk that the acquisition might not close on a timely basis or at all, due to the failure to satisfy closing conditions or otherwise, the effects of foreign exchange rates, risks associated with having a 25.1% equity holder in IHD and other risks associated with acquisitions. In assessing forward-looking statements contained herein, readers are urged to read carefully all cautionary statements contained in this Form 10-Q and these are incorporated herein. For these forward-looking statements, we claim the protection of the safe harbor for forward-looking statements in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

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Discussion of Results

Our business operates in four geographic segments comprised of Europe, the Americas, Asia Pacific and Africa. Gross revenue is recognized in the region in which the shipment originates. Our gross revenue by geographic segment is set forth in the following table (in thousands):


		Three months ended October 31,										Nine months ended October 31,

		2003					2002					2003					2002

		Gross		% of			Gross		% of			Gross		% of			Gross		% of
		revenue		total			revenue		total			revenue		total			revenue		total

Europe		$	104,961		26	%	$	99,422		31	%	$	308,329		29	%	$	271,889		33	%
Americas			119,629		30			82,110		25			337,024		31			212,213		25
Asia Pacific			118,309		30			102,159		32			298,311		27			246,688		30
Africa			55,827		14			37,830		12			143,875		13			101,208		12

	Total	$	398,726		100	%	$	321,521		100	%	$	1,087,539		100	%	$	831,998		100	%

Gross revenue increased $77.2 million, or 24%, and $255.5 million, or 31%, for the three and nine months ended October 31, 2003 as compared to the comparable prior year periods, respectively. The increase was due primarily to the contribution to gross revenue from our acquisitions made in the last half of fiscal 2003 and the first half of fiscal 2004 (most significantly Standard, which we acquired effective October 1, 2002 and which contributed gross revenues of $39.0 million and $114.2 million for the three and nine months ended October 31, 2003, respectively), the effect of the weakening dollar versus other foreign currencies (primarily the South African rand and the euro) and the increases in gross revenue resulting from our organic growth. We estimate that, using currency exchange rates in effect for the first three quarters of fiscal 2003, our gross revenues for the first three quarters of fiscal 2004 would have reflected a growth rate of 23% on a constant currency basis. Of this increase, we estimate that acquisitions accounted for less than two-thirds of the growth in gross revenues for the first three quarters of fiscal 2004 versus the comparable period in the prior fiscal year on a constant currency basis.

We believe that net revenue is a better measure than gross revenue of the importance to us of our various services since our gross revenue for our services as an indirect air and ocean carrier includes the carriers’ charges to us for carriage of the shipment. When we act as an indirect air and ocean carrier, our net revenue is determined by the differential between the rates charged to us by the carrier and the rates we charge our customers plus the fees we receive for our ancillary services. Net revenue derived from freight forwarding generally is shared between the points of origin and destination. Our gross revenue from our other services, including contract logistics, includes only commissions and fees earned by us and is substantially the same as our net revenue. The following table shows our net revenues and our operating expenses for the periods presented, expressed as a percentage of total net revenues.

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		Three months ended						Nine months ended
		October 31,						October 31,

		2003			2002			2003			2002

Net revenues:
	Airfreight forwarding		34	%		39	%		34	%		42	%
	Ocean freight forwarding		12			16			12			18
	Customs brokerage		11			15			11			17
	Contract logistics		32			19			33			13
	Other		11			11			10			10

Total net revenues			100			100			100			100
Staff costs			52			49			54			50
Depreciation and amortization			2			3			2			3
Amortization of intangible assets			*			*			*			*
Other operating expenses			34			35			34			35

Operating income			11			13			10			12
Interest income			1			1			1			1
Interest expense			(1	)		(1	)		(1	)		(1	)
Losses on foreign exchange			*			*			*			*

Pretax income			12			13			10			12
Provision for income taxes			(3	)		(4	)		(3	)		(3	)
Minority interests			*			*			*			*

Net income			8	%		9	%		8	%		8	%

Less than one percent.

Three months ended October 31, 2003 compared to three months ended October 31, 2002

Net revenue increased $49.0 million, or 46% to $156.5 million for the third quarter of fiscal 2004 compared to $107.5 million for the three months ended October 31, 2002 (which we refer to as the third quarter of fiscal 2003). Net revenue for the third quarter of fiscal 2004 benefited from acquisitions made during the last half of fiscal 2003, including Standard which had net revenues of $39.0 million for the current quarter as compared to $12.7 million in the third quarter of fiscal 2003 and from our other acquisitions made during the first half of fiscal 2004. These other acquisitions added an additional $2.2 million of net revenue during the third quarter of fiscal 2004. The increase in net revenue also resulted from organic growth and from the favorable impact of foreign currency exchange rates for the third quarter of fiscal 2004 versus the comparable period in the prior year, primarily in the Africa and Europe regions. We estimate that, using currency exchange rates in effect for the third quarter of fiscal 2003, our net revenues for the third quarter of fiscal 2004 would have reflected a growth rate of 38% on a constant currency basis. On a constant currency basis excluding the impact of acquisitions, net revenue would have grown 11% during the third quarter of fiscal 2004 as compared to the third quarter of fiscal 2003.

Airfreight forwarding net revenue increased $9.8 million, or 23%, to $52.2 million for the third quarter of fiscal 2004 compared to $42.4 million for the third quarter of fiscal 2003, with all regions reporting increased airfreight forwarding net revenues over the prior year comparable period, primarily due to favorable exchange rates and improved yields (i.e., airfreight forwarding net revenue divided by airfreight forwarding gross revenue). While the airfreight forwarding net revenue in the Africa and Europe regions benefited from the impact of the foreign currency exchange rates for the third quarter of fiscal 2004 versus the third quarter of fiscal 2003, Europe’s airfreight forwarding net revenue increase also resulted from a higher yield, but continued to have lower export volumes as compared to the prior

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year, while Africa’s airfreight forwarding net revenue benefited from higher import and export volumes as compared to the third quarter of fiscal 2003, but was partially offset by a lower yield. Airfreight forwarding net revenue in the Asia Pacific region increased primarily because of both higher volumes and a higher yield. The Americas region had an increase in airfreight export volumes, which was partially offset by a lower yield, resulting in an overall increase in net airfreight forwarding revenues for the region.

Ocean freight forwarding net revenue increased $2.0 million, or 12%, to $19.1 million for the third quarter of fiscal 2004 compared to $17.1 million for the comparable prior year period, led by an increase in the Asia Pacific region. The Asia Pacific region reported increased net ocean freight forwarding revenue during the third quarter of fiscal 2004 as compared to the prior year comparable period due primarily to increases in volumes, which was partially offset by the decline in ocean freight forwarding yield caused by price increases from ocean carriers which were generally passed through to customers as submitted by the shipping lines. Ocean freight forwarding net revenue also benefited from the stronger euro and South African rand as compared to the United States dollar, which was partially offset by the weakening of other currencies in Africa, during the third quarter of fiscal 2004 versus the comparable prior year quarter.

Customs brokerage net revenue increased $0.9 million, or 5%, to $17.4 million for the third quarter of fiscal 2004 compared to $16.5 million for the same prior year period. Customs brokerage net revenue increased primarily as a result of an increase in the amount of clearances that we processed during the third quarter of fiscal 2004 compared with the third quarter of fiscal 2003.

Contract logistics net revenue increased $30.1 million, or 146%, to $50.7 million for the third quarter of fiscal 2004 compared to $20.6 million for the third quarter of fiscal 2003. This increase was primarily due to the contribution from the Standard acquisition, which contributed approximately $33.6 million of contract logistics net revenue in the third quarter of fiscal 2004 as compared to $10.8 million of contract logistics net revenue in the third quarter of fiscal 2003.

Other net revenue, which includes revenue from our other logistics-related services such as road freight and other transportation services, consulting, order management, planning and optimization services, increased $6.3 million, or 57%, to $17.2 million for the third quarter of fiscal 2004 compared to $10.9 million for the third quarter of fiscal 2003. This increase is primarily due to the contribution of Standard of approximately $5.4 million of other net revenue as compared to $1.9 million of other net revenue in the third quarter of fiscal 2003, and, to a lesser degree, the effect of the weakening United States dollar compared to the South African rand and euro during the third quarter of fiscal 2004 versus the comparable prior-year period.

Staff costs increased $28.8 million, or 55%, to $81.2 million for the third quarter of fiscal 2004 from $52.4 million for the same prior year period. Staff costs also increased as a percentage of net revenue, from 49% in the third quarter of fiscal 2003 to 52% in the third quarter of fiscal 2004. The increase was due primarily to costs associated with our addition of personnel in connection with the Standard acquisition, as well as our other acquisitions in the last quarter of fiscal 2003 and the first half of fiscal 2004 and higher reported costs in the Africa and Europe regions over the prior year as a result of the stronger South African rand and euro, respectively, as compared to the United States dollar during the quarter. Standard’s contract logistics business has historically experienced higher staff costs as a percentage of net revenues than our freight forwarding operations so we expect staff costs to generally be higher as a percentage of net revenues as compared to our historic trends. This, however, will vary according to customer demand and seasonality in our freight forwarding operations, among other factors.

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Depreciation and amortization expense increased $0.7 million, or 27% to $3.5 million for the third quarter of fiscal 2004 from $2.8 million in the comparable prior year period. As a percentage of net revenue, depreciation and amortization expense fell slightly to 2% for the third quarter of fiscal 2004 as compared to 3% in the third quarter of fiscal 2003.

Amortization of intangible assets increased $0.1 million, or 154%, in the third quarter of fiscal 2004 versus the third quarter of fiscal 2003, as it relates to intangible assets acquired with Standard effective October 1, 2003 and, to a lesser degree, the intangible assets acquired with Kite Logistics effective July 1, 2003.

Other operating expenses increased by $15.7 million, or 41%, to $53.7 million in the third quarter of fiscal 2004 compared to $38.0 million for the third quarter of fiscal 2003. These expenses increased primarily as a result of the acquisition of Standard and the increased costs reported by the Africa and Europe regions as a result of the weakening United States dollar against the South African rand and euro, respectively, during the third quarter of fiscal 2004 as compared to the third quarter of fiscal 2003. Included in other operating expenses for the third quarter of fiscal 2004 are facilities and communications costs of $17.2 million compared to $12.1 million of such costs for the same prior year period. The balance of the other operating expenses is comprised of selling, general and administrative costs. For the third quarter of fiscal 2004, selling, general and administrative costs were $36.5 million compared to $25.9 million for the same prior year period. When expressed as a percentage of net revenue, other operating expenses declined to 34% for the third quarter of fiscal 2004 from 35% in the comparable prior year period.

Interest income increased $1.0 million, or 84%, to $2.2 million in the third quarter of fiscal 2004, as compared to $1.2 million in the third quarter of fiscal 2003, primarily due to higher cash balances on deposit during the third quarter of fiscal 2004.

Interest expense, which consisted primarily of interest on our credit facilities and capitalized lease obligations, increased $0.5 million, or 41%, to $1.8 million in the third quarter of fiscal 2004, as compared to $1.3 million in the third quarter of fiscal 2003, primarily due to higher interest rates on borrowings in South Africa during the third quarter of fiscal 2004, as well as the effect of the weakening U.S. dollar as compared to the South African rand during the current quarter.

The effective income tax rate decreased to 24% in the third quarter of fiscal 2004 compared to 28% in the same prior year period. This decrease was primarily due to a greater proportion of income being earned in lower tax rate jurisdictions than in the prior year, specifically in our Asia Pacific region, and the reversal of the valuation allowance relating to our deferred tax asset in our Swedish operation. In addition, higher interest income was earned in jurisdictions with lower effective tax rates in the third quarter of fiscal 2004 when compared to the comparable prior year period. Our overall effective tax rate is impacted by the geographic composition of our worldwide earnings and is therefore subject to change.

Net income increased 39% to $13.2 million in the third quarter of fiscal 2004 as compared to $9.5 million in the comparable prior year period for the reasons listed above.

Nine months ended October 31, 2003 compared to nine months ended October 31, 2002

Net revenue increased $160.8 million, or 59% to $432.8 million for the first three quarters of fiscal 2004 compared to $272.0 million for the nine months ended October 31, 2002 (which we refer to as the first

- 20 -

three quarters of fiscal 2003). Net revenue for the first three quarters of fiscal 2004 benefited from acquisitions made during the last half of fiscal 2003, primarily Standard, which had net revenues of $114.2 million for the first three quarters of fiscal 2004 as compared to $12.7 million in the comparable prior year period, and from acquisitions made during the fourth quarter of fiscal 2003 and the first half of fiscal 2004, as well as organic growth. Additionally, net revenue was favorably impacted by foreign currency exchange rates for the first three quarters of fiscal 2004 versus the comparable period in the prior year, primarily in the Africa and Europe regions where the South African rand and euro, respectively, strengthened against the United States dollar. We estimate that, using currency exchange rates in effect for the first three quarters of fiscal 2003, our net revenues for the first three quarters of fiscal 2004 would have reflected a growth rate of 53% on a constant currency basis. On a constant currency basis excluding the impact of acquisitions, net revenue grew approximately 14% during the first three quarters of fiscal 2004 as compared to the first three quarters of fiscal 2003.

Airfreight forwarding net revenue increased $30.4 million, or 26%, to $145.4 million for the first three quarters of fiscal 2004 compared to $115.0 million for the first three quarters of fiscal 2003, with all regions reporting increased airfreight forwarding net revenues over the comparable period in the prior year generally due to favorable exchange rates, improved yields and higher volumes in total. The increase in the Africa region resulted from primarily the weakening dollar as compared to the South African rand during the first three quarters of fiscal 2004 as compared to the first three quarters of fiscal 2003 as well as increased volumes. While the Europe region also benefited from the weakening dollar as compared to the euro during the first three quarters of fiscal 2004 compared to the first three quarters of fiscal 2003, they also benefited from an increase in their yield, which was partially offset by lower volumes. The increase in the Asia Pacific region was primarily due both to higher volumes and to a higher airfreight forwarding yield in the first three quarters of fiscal 2004 as compared to the first three quarters of fiscal 2003. Although airfreight yield in the Americas region was down in the first three quarters of fiscal 2004 versus the first three quarters of fiscal 2003, the region reported an increase in airfreight forwarding net revenue because of higher airfreight export volumes.

Ocean freight forwarding net revenue increased $5.6 million, or 12%, to $54.1 million for the first three quarters of fiscal 2004 compared to $48.5 million for the first three quarters of fiscal 2003, with increases in the Asia Pacific, Europe and Americas regions partially offset by a decrease in the Africa region. The Europe region reported increased ocean freight forwarding net revenue during the first three quarters of fiscal 2004 as compared to the first three quarters of fiscal 2003 primarily as a result of the weakened dollar as compared to the euro during the first three quarters of fiscal 2004 versus the comparable prior year period, as volumes were down slightly during the first three quarters of fiscal 2004 as compared to first three quarters of fiscal 2003. The Asia Pacific region reported increased ocean freight forwarding net revenue during the first three quarters of fiscal 2004 as compared to the prior year comparable period due primarily to increases in volumes, partially offset by a lower ocean freight yield due to the general price increases from ocean carriers effective May 1, 2003 which were generally passed through to customers as submitted by the shipping lines. The Americas’ ocean freight forwarding net revenue increased due to higher volumes, although the increase was partially offset by pricing pressures resulting from the May 1, 2003 price increases, which squeezed the ocean freight yield in the region during the first three quarters of fiscal 2004 as compared to the prior year comparable period. Ocean freight forwarding net revenue was also down in Africa, primarily as a result of lower export volumes in the first three quarters of fiscal 2004 as compared to the first three quarters of fiscal 2003. Such lower volumes in Africa were somewhat offset by reported increases in ocean freight forwarding net revenue resulting from the stronger South African rand versus the United States dollar, which was partially offset by the weakening of other currencies in Africa, during the first three quarters of fiscal 2004 as compared to the comparable prior year period.

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Customs brokerage net revenue increased $3.4 million, or 8%, to $47.8 million for the first three quarters of fiscal 2004 compared to $44.4 million for the first three quarters of fiscal 2003. Customs brokerage net revenue increased primarily as a result of an increase in the amount of clearances that we processed during the first three quarters of fiscal 2004 compared with the first three quarters of fiscal 2003.

Contract logistics net revenue increased $105.0 million, or 291%, to $141.2 million for the first three quarters of fiscal 2004 compared to $36.2 million for the first three quarters of fiscal 2003. This increase was primarily due to the contributions from the Standard acquisition, which contributed approximately $99.3 million of contract logistics net revenue in the first three quarters of fiscal 2004, as compared to $10.8 million in the comparable prior year period.

Other net revenue, which includes revenue from our other logistics-related services such as road freight and other transportation services, consulting, order management, planning and optimization services, increased $16.4 million, or 59%, to $44.3 million for the first three quarters of fiscal 2004 compared to $27.9 million for the first three quarters of fiscal 2003. This increase is primarily due to the contribution of Standard of approximately $14.9 million as compared to $1.9 million in the comparable prior year period and increased net other revenues reported in the Africa region as a result of the stronger South African rand versus the United States dollar during the first three quarters of fiscal 2004 as compared to the first three quarters of fiscal 2003. These increases were partially offset by declines in other net revenue in the Europe region during the first three quarters of fiscal 2004 as the road freight business in that region was negatively impacted by its reorganization.

Staff costs increased $95.8 million, or 70%, to $231.8 million for the first three quarters of fiscal 2004 from $136.0 million for the first three quarters of fiscal 2003. Staff costs also increased as a percentage of net revenue to 54% in the first three quarters of fiscal 2003 from 50% in the first three quarters of fiscal 2003, which, dependent on many factors including customer demand and seasonality, is a trend that we expect may continue. The increase was due primarily to costs associated with our addition of personnel in connection with the Standard acquisition in addition to our other acquisitions in the last quarter of fiscal 2003 and the first half of fiscal 2004 and higher reported costs in the Europe and Africa regions over the prior year as a result of the stronger euro and South African rand, respectively, as compared to the United States dollar during the first three quarters of fiscal 2004 as compared to the first three quarters of fiscal 2003.

Depreciation and amortization expense increased $3.2 million, or 41% to $10.8 million for the first three quarters of fiscal 2004 from $7.6 million in the comparable prior year period. As a percentage of net revenue, depreciation and amortization expense declined slightly to 2% for the first three quarters of fiscal 2004 as compared to 3% for the comparable period in the prior year.

Amortization of intangible assets increased $0.4 million, or 591%, in the first three quarters of fiscal 2004 versus the first three quarters of fiscal 2003, as it relates to intangible assets acquired with Standard in the third quarter of fiscal 2003 and, to a lesser degree, intangible assets acquired with Kite Logistics effective July 1, 2003.

Other operating expenses increased by $51.0 million, or 54%, to $145.7 million in the first three quarters of fiscal 2004 compared to $94.7 million for the same prior year period. These expenses increased primarily as a result of the acquisition of Standard and the increased costs reported by the Africa and Europe regions as a result of the weakening United States dollar against the South African rand and euro, respectively during the first three quarters of fiscal 2004 as compared to the first three

- 22 -

quarters of fiscal 2003. Included in other operating expenses for the first three quarters of fiscal 2004 are facilities and communications costs of $48.8 million compared to $32.3 million of such costs for the same prior year period. The balance of the other operating expenses is comprised of selling, general and administrative costs. For the first three quarters of fiscal 2004, selling, general and administrative costs were $96.9 million compared to $62.4 million for the same prior year period. When expressed as a percentage of net revenue, other operating expenses declined to 34% for the first three quarters of fiscal 2004 versus 35% in the comparable prior year period.

Interest income increased $2.3 million, or 75%, to $5.4 million in the first three quarters of fiscal 2004, as compared to $3.1 million in the first three quarters of fiscal 2003, primarily due to higher cash balances on deposit during the first three quarters of fiscal 2004.

Interest expense, which consisted primarily of interest on our credit facilities and capitalized lease obligations, increased $0.9 million, or 27%, to $4.5 million in the first three quarters of fiscal 2004, as compared to $3.5 million in the first three quarters of fiscal 2003, primarily due to higher interest rates on borrowings in South Africa during the first three quarters of fiscal 2004, as well as the effect of the weakening U.S. dollar as compared to the South African rand during the current quarter.

The effective income tax rate decreased to 25% in the first three quarters of fiscal 2004 compared to 28% in the same prior year period. This decrease was primarily due to an increase in the taxable income from the Asia Pacific region, which historically has lower tax rates than the company’s average tax rate, partially offset by an increase in the taxable income from the Americas region which historically has higher tax rates than the company’s average tax rate. In addition, we had higher interest income and gains on foreign exchange, which were in low tax jurisdictions, in the first three quarters of fiscal 2004 compared to the comparable prior year period. Our overall effective tax rate is impacted by the geographic composition of our worldwide earnings and is therefore subject to change.

Net income increased 48% to $32.6 million in the first three quarters of fiscal 2004 as compared to $22.0 million in comparable prior year period for the reasons listed above.

Liquidity and Capital Resources

Historically, we have used our internally generated cash flow from operations along with the net proceeds from the issuance of share capital to fund our working capital requirements, capital expenditures, acquisitions and debt service.

In the first three quarters of fiscal 2004, we generated $36.6 million of cash from our operating activities. This resulted from net income of $32.6 million plus depreciation and amortization expense and amortization of intangible assets of $11.2 million and other items totaling $2.7 million, offset by a net increase in working capital of approximately $9.8 million. The net increase in working capital consisted of an increase in trade receivables and other current assets of $40.1 million offset by a lower increase in trade payables and other current liabilities of $30.3 million, which is consistent with our seasonal trends.

During the first three quarters of fiscal 2004, we used approximately $28.7 million of cash in our investing activities. Approximately $13.8 million of cash was used for capital expenditures, almost half of which was for computer hardware and software purchases. We elected to pay cash for certain capital assets instead of leasing them during the first three quarters of fiscal 2004. The balance of the cash used in our investing activities was used primarily for acquisitions and earn-out payments made in

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the first three quarters of fiscal 2004 related to acquisitions made in prior years, including $7.0 million for the current year acquisitions of IndAir Carriers and Kite Logistics.

Our financing activities during the first three quarters of fiscal 2004 used $8.9 million of cash, primarily due to reductions on short-term borrowings totaling $6.4 million, repayments of capital lease obligations of $2.6 million and cash dividends paid of approximately $2.9 million, partially offset by net proceeds from the issuance of ordinary shares of $2.5 million.

These activities, in addition to foreign exchange rate changes, resulted in a net decrease in our cash and cash equivalents to $165.9 million at October 31, 2003 from $168.1 million at January 31, 2003.

We have various bank credit facilities established in countries where such facilities are required for our business. At October 31, 2003 these facilities provided for individual lines of credit ranging from approximately $0.1 million to $35.2 million, and in total provided for guarantees, which are a necessary part of our business, of $63.2 million and a total borrowing capacity of approximately $169.6 million at October 31, 2003. Due to the global nature of our business, we utilize a number of financial institutions to provide these various facilities. Consequently, the use of a particular credit facility is normally restricted to the country in which it originated and a particular credit facility may restrict distributions by the subsidiary operating in the country. Our borrowings under these facilities totaled $34.4 million at October 31, 2003. Most of our borrowings are secured by grants of security interests in accounts receivable and other assets, including pledges of stock of our subsidiaries. The interest rates on these local currency facilities vary and ranged from 0.9% to 17.8% at October 31, 2003. These rates are generally linked to the prime lending rate in each country where we have facilities. We use our credit facilities to primarily fund our working capital needs as well as to provide for customs bonds and guarantees and for forward exchange transactions. While the majority of our borrowings are due and payable within one year, we believe we will be able to renew such facilities on commercially reasonable terms.

Our largest facility is with Nedcor Bank Limited, totaling 28.3 million British pounds sterling (equivalent to approximately $48.0 million as of October 31, 2003). Of this facility, approximately $35.2 million is primarily used for guarantees and standby letters of credit to secure banking facilities and $12.8 million is primarily used for guaranteeing performance undertakings of our subsidiary companies. The facility is available on an ongoing basis until further notice, subject to Nedcor Bank’s credit review procedures and may be terminated by the bank at any time. The facility is secured by cross guarantees and indemnities of selected subsidiary companies. UTi, United States, Inc., our U.S. operating company, had a revolving credit facility totaling $29.0 million with General Electric Capital Corporation which expired in November 2003, and as such was included in our total borrowing capacity of $169.6 million as of October 31, 2003. Of that amount, $11.6 million was outstanding under the General Electric Capital Corporation credit facility at October 31, 2003, while $5.3 million was outstanding on our last borrowing day on November 10, 2003. We are currently in final negotiations with three banks with regard to establishing a new, replacement credit facility in the United States, which we expect to have equivalent or better terms than the facility we had with General Electric Capital Corporation. In the event we are unable to obtain a satisfactory replacement credit facility, we believe we have sufficient working capital in order to fund our U.S. operations without disruption or adverse consequences. At October 31, 2003, we had approximately $72.0 million of available, unused borrowing capacity under our various bank credit facilities.

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We believe that with our current cash position, various bank credit facilities and operating cash flows, we should have sufficient means to meet our working capital and liquidity requirements as our operations are currently conducted for at least the next twelve months.

Critical Accounting Policies and Estimates

The company’s financial statements are prepared in conformity with U.S. GAAP. The preparation thereof requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Estimates have been prepared on the basis of the most current and best available information and actual results could differ materially from those estimates.

There have been no significant changes in the company’s critical accounting policies during the first three quarters of fiscal 2004.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Foreign Exchange Risk

The nature of our operations necessitates dealing in many foreign currencies. Our results are subject to fluctuations due to changes in exchange rates. We attempt to limit our exposure to changing foreign exchange rates through both operational and financial market actions. We provide services to customers in locations throughout the world and, as a result, operate with many currencies including the key currencies of North and South America, Africa, Asia Pacific and Europe.

Our short-term exposures to fluctuating foreign currency exchange rates are related primarily to intercompany transactions. The duration of these exposures is minimized through our use of an intercompany netting and settlement system that settles all of our intercompany trading obligations once per month. In addition, selected exposures are managed by financial market transactions in the form of forward foreign exchange contracts (typically with maturities at the end of the month following the purchase of the contract). Forward foreign exchange contracts are primarily denominated in the currencies of our principal markets. We normally generate foreign exchange gains and losses through normal trading operations. We do not enter into derivative contracts for speculative purposes.

We do not hedge our foreign currency exposure in a manner that would entirely eliminate the effects of changes in foreign exchange rates on our consolidated net income.

Interest Rate Risk

We are subject to changing interest rates because our debt consists primarily of short-term working capital lines, with interest rates generally linked to the prime lending rate in each country where we have credit facilities. We do not undertake any specific actions to cover our exposure to interest rate risk and we are not a party to any interest rate risk management transactions. We do not purchase or hold any derivative financial instruments for trading or speculative purposes.

As of October 31, 2003, there had been no material changes in our exposure to market risks since January 31, 2003 as described in our annual report on Form 20-F on file with the Securities and Exchange Commission. For a discussion of the company’s market risks associated with foreign

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currencies and interest rates, see “Quantitative and Qualitative Disclosures about Market Risk” in Part I, Item 11, and “Operating and Financial Review and Prospects,” in Part I, Item 5 of the company’s Annual Report on Form 20-F for the fiscal year ended January 31, 2003.

Item 4. Controls and Procedures

As of the end of the period covered by this report, under the supervision and with the participation of the company’s management, including our Chief Executive Officer and Chief Financial Officer, we carried out an evaluation of the effectiveness of the design and operation of the company’s “disclosure controls and procedures,” as defined in Exchange Act Rules 13a-15(e) and 15d-15(e), as amended. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report the company’s disclosure controls and procedures are effective in enabling the company to record, process, summarize and report information required to be included in the company’s periodic SEC filings within the required time period.

There have been no significant changes in the company’s internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings

From time to time, we are a defendant or plaintiff in various legal proceedings, including litigation arising in the ordinary course of our business. There were no material developments during the third quarter of fiscal 2004 in any of the legal proceedings previously disclosed under Item 8. Financial Information – Legal or Arbitration Proceedings found on page 41 of the company’s annual report on Form 20-F for the year ended January 31, 2003 on file with the Securities and Exchange Commission.

Item 5. Other Information

On December 10, 2003, we announced that Peter Thorrington, President and Chief Operating Officer, plans to retire from his executive positions with the company in 2004. He will continue to serve on our Board of Directors.

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Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits


Exhibit		Description

	31.1	Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-15(e) and 15d-15(e) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	31.2	Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-15(e) and 15d-15(e) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	32	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

	99.1	Cautionary Statements**

*		Pursuant to Commission Release No. 33-8238, these certifications will be treated as “accompanying” this quarterly report on Form 10-Q and not “filed” as part of such report for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of Section 18 of the Exchange Act and these certifications will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates them by reference.

**		Filed as Exhibit 99.3 to the company’s Quarterly Report on Form 10-Q (No. 000-31869) on June 16, 2003 and incorporated herein by reference.

(b) Reports on Form 8-K


Item	Filing Date	Description

7,12	September 15, 2003	News release dated September 15, 2003 and transcript of investor conference call held September 15, 2003 regarding the company’s financial results for its second fiscal quarter.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	UTi Worldwide Inc.

Date: December 12, 2003	By:	/s/ Roger I. MacFarlane

		Roger I. MacFarlane Chief Executive Officer

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EXHIBIT INDEX


Exhibit		Description

	31.1	Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-15(e) and 15d-15(e) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	31.2	Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-15(e) and 15d-15(e) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	32	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

	99.1	Cautionary Statements**

*		Pursuant to Commission Release No. 33-8238, these certifications will be treated as “accompanying” this quarterly report on Form 10-Q and not “filed” as part of such report for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of Section 18 of the Exchange Act and these certifications will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates them by reference.

**		Filed as Exhibit 99.3 to the company’s Quarterly Report on Form 10-Q (No. 000-31869) on June 16, 2003 and incorporated herein by reference.

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