United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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þ |
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Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended July 31, 2010
Or
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o |
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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)
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British Virgin Islands
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N/A |
(State or Other Jurisdiction of Incorporation or Organization)
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(IRS Employer Identification Number) |
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9 Columbus Centre, Pelican Drive
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c/o UTi, Services, Inc. |
Road Town, Tortola
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100 Oceangate, Suite 1500 |
British Virgin Islands
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Long Beach, CA 90802 USA |
(Addresses of Principal Executive Offices)
562.552.9400
(Registrants Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
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Large accelerated filer þ
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes o No þ
At September 2, 2010, the number of shares outstanding of the issuers ordinary shares was
101,789,486.
UTi Worldwide Inc.
Report on Form 10-Q
For the Quarter Ended July 31, 2010
Table of Contents
- i -
Part I. Financial Information
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Item 1. |
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Financial Statements |
Consolidated Statements of Income
For the three and six months ended July 31, 2010 and 2009
(in thousands, except share and per share amounts)
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Three months ended July 31, |
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Six months ended July 31, |
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2010 |
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2009 |
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2010 |
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2009 |
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(Unaudited) |
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Revenues |
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$ |
1,151,090 |
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$ |
840,502 |
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$ |
2,206,246 |
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$ |
1,608,858 |
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Purchased transportation costs |
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772,020 |
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501,136 |
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1,461,428 |
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959,985 |
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Staff costs |
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204,519 |
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186,663 |
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411,520 |
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362,466 |
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Depreciation |
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11,263 |
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10,491 |
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22,675 |
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20,345 |
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Amortization of intangible assets |
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3,163 |
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2,812 |
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6,507 |
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5,449 |
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Restructuring charges |
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1,231 |
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Other operating expenses |
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126,224 |
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116,992 |
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251,263 |
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219,122 |
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Operating income |
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33,901 |
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22,408 |
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52,853 |
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40,260 |
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Interest income |
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3,344 |
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2,233 |
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5,903 |
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4,956 |
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Interest expense |
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(7,270 |
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(4,531 |
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(13,948 |
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(10,707 |
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Other income/(expense), net |
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171 |
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(796 |
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1,015 |
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(998 |
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Pretax income |
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30,146 |
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19,314 |
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45,823 |
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33,511 |
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Provision for income taxes |
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9,319 |
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5,907 |
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14,255 |
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10,224 |
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Net income |
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20,827 |
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13,407 |
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31,568 |
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23,287 |
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Net income attributable to noncontrolling interests |
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1,958 |
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1,652 |
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2,625 |
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1,687 |
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Net income
attributable to UTi Worldwide Inc. |
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$ |
18,869 |
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$ |
11,755 |
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$ |
28,943 |
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$ |
21,600 |
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Basic earnings per common share attributable to
UTi Worldwide Inc. common shareholders |
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$ |
0.19 |
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$ |
0.12 |
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$ |
0.29 |
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$ |
0.22 |
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Diluted earnings per common share attributable to
UTi Worldwide Inc. common shareholders |
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$ |
0.19 |
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$ |
0.12 |
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$ |
0.28 |
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$ |
0.21 |
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Number of weighted average common shares outstanding used for per share calculations |
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Basic shares |
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100,631,550 |
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99,930,796 |
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100,360,009 |
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99,796,544 |
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Diluted shares |
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101,707,067 |
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100,956,130 |
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101,702,457 |
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100,963,105 |
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See accompanying notes to the consolidated financial statements.
- 2 -
Consolidated Balance Sheets
As of July 31, 2010 and January 31, 2010
(in thousands, except share amounts)
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July 31, |
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January 31, |
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2010 |
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2010 |
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(Unaudited) |
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ASSETS |
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Cash and cash equivalents |
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$ |
392,025 |
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$ |
350,784 |
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Trade receivables (net of allowance for doubtful accounts of $13,570
and $13,686 as of July 31, 2010 and January 31, 2010, respectively) |
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889,904 |
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727,413 |
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Deferred income taxes |
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17,187 |
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16,917 |
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Other current assets |
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125,407 |
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111,575 |
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Total current assets |
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1,424,523 |
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1,206,689 |
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Property, plant and equipment (net of accumulated depreciation of $189,519
and $171,972 as of July 31, 2010 and January 31, 2010, respectively) |
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187,086 |
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180,422 |
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Goodwill |
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416,523 |
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414,791 |
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Other intangible assets, net |
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65,921 |
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72,182 |
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Investments |
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853 |
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1,717 |
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Deferred income taxes |
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30,648 |
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31,815 |
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Other non-current assets |
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33,446 |
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29,430 |
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Total assets |
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$ |
2,159,000 |
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$ |
1,937,046 |
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LIABILITIES & EQUITY |
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Bank lines of credit |
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$ |
264,018 |
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$ |
100,653 |
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Short-term borrowings |
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10,195 |
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8,032 |
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Current portion of long-term borrowings |
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70,578 |
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69,934 |
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Current portion of capital lease obligations |
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17,125 |
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16,832 |
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Trade payables and other accrued liabilities |
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790,490 |
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731,518 |
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Income taxes payable |
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4,995 |
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1,929 |
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Deferred income taxes |
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3,372 |
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3,503 |
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Total current liabilities |
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1,160,773 |
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932,401 |
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Long-term borrowings, excluding current portion |
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62,173 |
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99,097 |
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Capital lease obligations, excluding current portion |
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23,441 |
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23,892 |
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Deferred income taxes |
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30,865 |
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32,874 |
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Retirement fund obligations |
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6,498 |
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8,123 |
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Other non-current liabilities |
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27,600 |
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26,377 |
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Commitments and contingencies |
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UTi Worldwide Inc. shareholders equity: |
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Common stock ordinary shares of no par value: 101,751,428 and
100,900,556 shares issued and outstanding as of July 31, 2010 and
January 31, 2010, respectively |
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472,241 |
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464,731 |
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Retained earnings |
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396,385 |
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373,548 |
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Accumulated other comprehensive loss |
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(45,782 |
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(46,904 |
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Total UTi Worldwide Inc. shareholders equity |
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822,844 |
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791,375 |
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Noncontrolling interests |
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24,806 |
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22,907 |
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Total equity |
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847,650 |
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814,282 |
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Total liabilities and equity |
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$ |
2,159,000 |
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$ |
1,937,046 |
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See accompanying notes to the consolidated financial statements.
- 3 -
Consolidated Statements of Cash Flows
For the six months ended July 31, 2010 and 2009
(in thousands)
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Six months ended |
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July 31, |
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2010 |
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2009 |
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(Unaudited) |
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OPERATING ACTIVITIES: |
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Net income |
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$ |
31,568 |
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$ |
23,287 |
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Adjustments to reconcile net income to net cash (used in)/provided by
operating activities: |
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Share-based compensation costs, net |
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4,062 |
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4,375 |
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Depreciation |
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22,675 |
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20,345 |
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Amortization of intangible assets |
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6,507 |
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5,449 |
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Amortization of debt issuance costs |
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1,448 |
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86 |
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Deferred income taxes |
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(1,464 |
) |
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320 |
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Uncertain tax positions |
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135 |
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Tax benefit relating to share-based compensation |
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1,880 |
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789 |
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Excess tax benefit from share-based compensation |
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(61 |
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Gain on disposal of property, plant and equipment |
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(123 |
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(6,428 |
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Provision for doubtful accounts |
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2,451 |
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867 |
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Other |
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290 |
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(1,668 |
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Changes in operating assets and liabilities: |
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(Increase)/decrease in trade receivables |
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(164,928 |
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92,168 |
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Increase in other assets |
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(2,168 |
) |
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(5,616 |
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Increase/(decrease) in trade payables |
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42,458 |
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(59,761 |
) |
Increase/(decrease) in accrued liabilities and other liabilities |
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6,741 |
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(7,911 |
) |
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Net cash (used in)/provided by operating activities |
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(48,529 |
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66,302 |
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INVESTING ACTIVITIES: |
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Purchases of property, plant and equipment |
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(19,718 |
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(16,752 |
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Proceeds from disposal of property, plant and equipment |
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797 |
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10,949 |
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Net (increase)/decrease in other non-current assets |
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(2,435 |
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504 |
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Acquisitions and contingent earn-out payments |
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(3,449 |
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(2,043 |
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Other |
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(160 |
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352 |
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Net cash used in investing activities |
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(24,965 |
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(6,990 |
) |
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FINANCING ACTIVITIES: |
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Borrowings from bank lines of credit |
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111,788 |
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12,334 |
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Repayments of bank lines of credit |
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(5,102 |
) |
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(23,863 |
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Net borrowings/(repayments) under revolving bank lines of credit |
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56,562 |
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(23,130 |
) |
Net increase/(decrease) in short-term borrowings |
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548 |
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(2,124 |
) |
Proceeds from issuance of long-term borrowings |
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79 |
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|
56,498 |
|
Repayment of long-term borrowings |
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(37,891 |
) |
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(36,956 |
) |
Debt issuance costs |
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(4,206 |
) |
Repayment of capital lease obligations |
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(10,389 |
) |
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(10,737 |
) |
Dividends paid to noncontrolling interests |
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(1,719 |
) |
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(998 |
) |
Net proceeds from issuance of ordinary shares |
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3,388 |
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|
489 |
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Excess tax benefit from share-based compensation |
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|
61 |
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Dividends paid |
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(6,106 |
) |
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Net cash provided by/(used in) financing activities |
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111,219 |
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(32,693 |
) |
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Effect of foreign exchange rate changes on cash and cash equivalents |
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|
3,516 |
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|
34,040 |
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Net increase in cash and cash equivalents |
|
|
41,241 |
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|
60,659 |
|
Cash and cash equivalents at beginning of period |
|
|
350,784 |
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|
256,869 |
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Cash and cash equivalents at end of period |
|
$ |
392,025 |
|
|
$ |
317,528 |
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|
See accompanying notes to the consolidated financial statements.
- 4 -
Notes to the Consolidated Financial Statements
For the three and six months ended July 31, 2010 and 2009 (Unaudited)
NOTE 1. Presentation of Financial Statements
Basis of Presentation
In the opinion of management, the accompanying unaudited consolidated financial statements of UTi
Worldwide Inc. and its subsidiaries (the Company, we, us, or UTi) contain all adjustments,
consisting of normal recurring adjustments, considered necessary for a fair presentation of the
consolidated balance sheets as of July 31, 2010 and January 31, 2010, the consolidated statements
of income for the three and six months ended July 31, 2010 and 2009 and the consolidated statements
of cash flows for the six months ended July 31, 2010 and 2009. These consolidated financial
statements have been prepared in accordance with accounting principles generally accepted in the
United States of America (U.S. GAAP) for interim financial information and the instructions to Rule
10-01 of Regulation S-X of the Securities and Exchange Commission (SEC). Accordingly, they have
been condensed and do not include all of the information and footnotes required by U.S. GAAP for
complete financial statements. The results of operations for the three and six months ended July
31, 2010 are not necessarily indicative of the results of operations that may be expected for the
fiscal year ending January 31, 2011 or any other future periods. These consolidated financial
statements should be read in conjunction with the Companys Annual Report on Form 10-K for the year
ended January 31, 2010.
All amounts in the notes to the consolidated financial statements are presented in thousands except
for share and per share data.
Income Taxes
Under ASC 270, Interim Reporting, and ASC 740, Income Taxes, the Company is required to adjust its
effective tax rate for each quarter to be consistent with its estimated annual effective tax rate.
Jurisdictions with a projected loss where no tax benefit can be recognized are excluded from the
calculation of the estimated annual effective tax rate. Applying the provisions of ASC 270 and ASC
740 could result in a higher or lower effective tax rate during a particular quarter, based upon
the mix and timing of actual earnings versus annual projections.
The Company records a provision for estimated additional tax and interest and penalties that may
result from tax authorities disputing uncertain tax positions taken at the largest amount that is
greater than 50% likely of being realized. The Company recognizes accrued interest and penalties
related to uncertain tax positions in interest and other expense, respectively. For further
information, see Note 12, Uncertain Tax Positions.
Segment Reporting
The Companys reportable business segments are Freight Forwarding and Contract Logistics and
Distribution. The Freight Forwarding segment includes airfreight forwarding, ocean freight
forwarding, customs brokerage and other related services. The Contract Logistics and Distribution
segment includes all operations providing contract logistics, distribution and other related
services. Corporate office expenses, eliminations, and various holding companies within the group
structure have been presented separately.
Foreign Currency Translation
Included in other income, net, are net gains on foreign exchange of $359 and $1,392, for the three
and six months ended July 31, 2010, respectively. Included in other income, net, are net gains on
foreign exchange of $46 and net losses of $144, for the three and six months ended July 31, 2009,
respectively.
- 5 -
Concentration of Credit Risks and Other
The Company maintains its primary cash accounts with established banking institutions around the
world. The Company estimates that approximately $360,159 of these deposits was not insured by the
Federal Deposit Insurance Corporation (FDIC) or similar entities outside of the United States
(U.S.) as of July 31, 2010.
Call and Put Options
In connection with the Companys merger of one of its subsidiaries with Newlog, Ltd. during fiscal
2008, the Company obtained an option providing it with the right to call the minority partners
shares of the subsidiary under certain circumstances, including a change in control of the minority
partner. The Company recorded an asset related to this call option in other non-current assets.
The amount recorded represents the difference between the estimated strike price and the estimated
fair value of the subsidiary equity held by the minority partner, if the call option becomes
exercisable. The amounts included in other non-current assets were $501 and $476 at July 31, 2010
and January 31, 2010, respectively.
Additionally, the Company granted an option providing the minority partner with the right to call
the Companys shares of the subsidiary in the event the Company does not exercise its right, under
specific circumstances, to call the minority partners shares. The Company recorded a liability
related to this option in other non-current liabilities. The amounts included in other non-current
liabilities were $862 and $811 at July 31, 2010 and January 31, 2010, respectively.
In connection with the formation of a partnership in South Africa that holds the shares of a
subsidiary that distributes pharmaceutical supplies and equipment, the Company granted a put option
to the minority partner (South Africa Minority Put) providing the partner with a right to put their
25.1% share of the partnership to the Company in fiscal 2011. The liability associated with this
put option at July 31, 2010 and January 31, 2010 was determined to be zero. The Company estimates
that the purchase price to be paid in connection with the exercise of the put option to be
approximately $8,535, although the price remains subject to finalization. The Company believes
that the expected purchase price is substantially less than the fair value of the minority
partners interest in the partnership. See Note 15, Subsequent Event.
Fair Values of Financial Instruments
The estimated fair value of financial instruments has been determined using available market
information and other appropriate valuation methodologies. However, considerable judgment is
required in interpreting market data to develop estimates of fair value. Therefore, the estimates
are not necessarily indicative of the amounts that could be realized or would be paid in a current
market exchange. The effect of using different market assumptions and estimation methodologies may
be material to the estimated fair value amounts.
The Companys principal financial instruments are cash and cash equivalents, trade
receivables, bank lines of credit, short-term borrowings, trade payables and other accrued
liabilities, long-term borrowings, call and put options, and forward contracts and other derivative
instruments. With the exception of the Companys senior unsecured guaranteed notes and the call and
put options, the carrying value of these financial instruments approximate fair values either
because of the short maturities of these instruments, or because the interest rates are based upon
variable reference rates. As of July 31, 2010 and January 31, 2010, the fair value of the
Companys 6.31% senior unsecured guaranteed notes was $66,852 and $99,569, respectively, compared
to a book value of $66,667 and $100,000, respectively, for each of these periods. As discussed
further in Note 11, Borrowings on July 9, 2009, the Company issued $55,000 of senior unsecured
guaranteed notes bearing an interest rate of 8.06%. As of July 31, 2010 and January 31, 2010, the
fair value of these notes was $56,083 and $55,053, respectively, compared to a book value of
$55,000 for each of these periods. The call and put options are recorded at their estimated fair
value. For further information, see Note 1, Call and Put Options.
- 6 -
Sale of Property
Effective April 1, 2009, the Company disposed of property located in South Africa for a sale price
of $8,130. The property was comprised of land and buildings with carrying values of $572 and $967,
respectively, all of
which was included within corporate in the segment disclosure in Note 5, Segment Reporting.
After adjusting for the net costs of the assets sold and for expenses associated with the sale, the
Company realized a pre-tax gain of $6,271, which was recorded in other operating expenses in the
consolidated statements of income for the six months ended July 31, 2009.
Change in Cash Flow Presentation
In the consolidated statements of cash flows, the Company has presented gross borrowings on certain
lines of credit with original repayment terms of greater than three months, separate from the
repayments on those lines of credit for the six months ended July 31, 2010. The presentation of
these lines of credit was previously reflected on a net basis for the six months ended July 31,
2009. The change has no impact on cash flows from financing activities or any other financial
statement information.
Recent Accounting Pronouncements
Adoption of New Accounting Standards
There were no accounting standards adopted during the three months ended July 31, 2010 that had a
material impact on our consolidated financial statements.
Standards Issued But Not Yet Effective
Other new pronouncements issued but not effective until after July 31, 2010 are not expected to
have a significant effect on our consolidated financial position or results of operations.
NOTE 2. Acquisitions
All acquired businesses are primarily engaged in providing logistics management, including
international air and ocean freight forwarding, customs brokerage, contract logistics services and
transportation management services. The results of acquired businesses have been included in the
Companys consolidated financial statements from the effective dates of acquisition.
Effective May 25, 2010, the Company acquired the remaining outstanding shares of EMAsu2, Ltd. (EMA
Ireland), of which the Company already held a non-controlling financial interest that was acquired
through the Companys acquisition of EMA Irelands parent company near the end of fiscal 2010. The
total consideration for the previously unheld shares of EMA Ireland totaled $648. The purchase
price includes contingent consideration estimated to be $300 which is based on projected net
revenues from a specific client for the four years ending January 31, 2014. The purchase price
exceeded the estimated fair value of the net assets acquired and non-controlling interest adjusted,
and accordingly, $1,282 was allocated to goodwill, all of which is included in the Companys
Contract Logistics and Distribution segment. The estimated fair value of the net assets acquired
and non-controlling interests adjusted is preliminary. A valuation of the net assets acquired is
being conducted and final allocations will be made when completed.
Effective December 21, 2009, the Company acquired the remaining outstanding shares of Exel
MPL-A.V.B.A., LP (EMA Israel), of which the Company already held a controlling financial interest
that was acquired through the Companys acquisition of EMA Israels parent company in early fiscal
2010. The Company has been consolidating the financial results of EMA Israel from the time the
controlling financial interest was obtained in the prior year. In connection with this acquisition,
the Company obtained the remaining non-controlling financial interest in EMA Ireland. The purchase
price of the previously unheld shares of EMA Israel totaled $6,500. The purchase price includes
contingent consideration estimated to be $300, which is based on projected net revenues from a
specific client for the four years ending January 31, 2014. The estimated difference between the
fair values of the consideration paid and the non-controlling interest adjusted has been recognized
in equity attributable to the Company as the change in ownership interest did not affect the
Companys controlling financial interest in EMA Israel. A valuation of the net assets acquired is
being conducted and final allocations will be made when completed.
- 7 -
Effective October 16, 2009, the Company acquired the issued and outstanding shares of Tacisa
Transitaria, S.L. (Tacisa), a Spanish freight forwarder. An employee of one of the Companys
Spanish subsidiaries held a majority ownership interest in Tacisa prior to the Companys
acquisition. The purchase price totaled $5,463, net of cash acquired of $750, and included
contingent consideration of $4,734, which was paid in August 2010 based on the fiscal 2010
operating results of Tacisa. The acquisition expanded the Companys freight forwarding coverage in
Spain. The total cost of the acquisition has been allocated to the assets acquired and liabilities
assumed based on their estimated fair values at the date of acquisition. The preliminary allocation
resulted in an excess of the purchase price over the fair value of the acquired net assets, and
accordingly, $3,151 was allocated to goodwill, all of which is included in the Companys Freight
Forwarding segment. The Company is currently determining whether the goodwill is deductible for tax
purposes.
The following table summarizes the estimated fair value of the assets acquired and liabilities
assumed at the date of acquisition that was recorded for Tacisa, which was subsequently revised
upon the finalization and payment of the contingent consideration as indicated in the paragraph
above. A valuation of the assets acquired and liabilities assumed is being conducted and the final
allocation will be made when completed.
|
|
|
|
|
Current assets |
|
$ |
3,237 |
|
Goodwill |
|
|
3,151 |
|
Acquired intangible assets |
|
|
3,476 |
|
Other non-current assets |
|
|
55 |
|
|
|
|
|
Total assets acquired |
|
|
9,919 |
|
Liabilities assumed |
|
|
(2,515 |
) |
Deferred income taxes |
|
|
(1,043 |
) |
|
|
|
|
Net assets acquired |
|
$ |
6,361 |
|
|
|
|
|
Combined revenues attributable to EMA Ireland, EMA Israel and Tacisa were $14,464 and $26,742, for
the three and six months ended July 31, 2010, respectively. Net income attributable to UTi
Worldwide, Inc. as a result of these acquisitions totaled $244 and $498, for the three and six
months ended July 31, 2010, respectively. The following supplemental pro forma information
summarizes the results of operations of EMA Ireland, EMA Israel and Tacisa for the three and six
months ended July 31, 2009, as if the acquisitions had occurred at the beginning of the period
presented. The pro forma information is not necessarily indicative of the actual operating results
that would have been obtained if the acquisitions had occurred at the beginning of the period
presented or may be obtained in the future.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
attributable to |
|
|
Diluted |
|
|
|
|
|
|
|
UTi Worldwide |
|
|
earnings |
|
|
|
Revenue |
|
|
Inc. |
|
|
per share* |
|
Three months ended July 31, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported |
|
$ |
840,502 |
|
|
$ |
11,755 |
|
|
$ |
0.12 |
|
Acquisitions |
|
|
5,230 |
|
|
|
140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
845,732 |
|
|
$ |
11,895 |
|
|
$ |
0.12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
attributable to |
|
|
Diluted |
|
|
|
|
|
|
|
UTi Worldwide |
|
|
earnings |
|
|
|
Revenue |
|
|
Inc. |
|
|
per share* |
|
Six months ended July 31, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported |
|
$ |
1,608,858 |
|
|
$ |
21,600 |
|
|
$ |
0.21 |
|
Acquisitions |
|
|
10,578 |
|
|
|
132 |
|
|
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,619,436 |
|
|
$ |
21,732 |
|
|
$ |
0.22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Diluted pro forma earnings per share were calculated using 100,956,130 and 100,963,105
diluted ordinary shares for the three and six months ended July 31, 2009, respectively. |
- 8 -
NOTE 3. Earnings per Share
Earnings per share are calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
July 31, |
|
|
July 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Amounts attributable to UTi Worldwide Inc. common
shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
18,869 |
|
|
$ |
11,755 |
|
|
$ |
28,943 |
|
|
$ |
21,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares |
|
|
100,631,550 |
|
|
|
99,930,796 |
|
|
|
100,360,009 |
|
|
|
99,796,544 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incremental shares required for diluted earnings per share
related to stock options/restricted share units |
|
|
1,075,517 |
|
|
|
1,025,334 |
|
|
|
1,342,448 |
|
|
|
1,166,561 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average number of ordinary
shares |
|
|
101,707,067 |
|
|
|
100,956,130 |
|
|
|
101,702,457 |
|
|
|
100,963,105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share attributable to UTi
Worldwide Inc. common shareholders |
|
$ |
0.19 |
|
|
$ |
0.12 |
|
|
$ |
0.29 |
|
|
$ |
0.22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share attributable to UTi
Worldwide Inc. common shareholders |
|
$ |
0.19 |
|
|
$ |
0.12 |
|
|
$ |
0.28 |
|
|
$ |
0.21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per common share |
|
$ |
0.06 |
|
|
$ |
|
|
|
$ |
0.06 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average diluted shares outstanding exclude 3,097,130 and 3,082,758 shares for the
three and six months ended July 31, 2010, respectively, and exclude 3,794,394 and 3,804,613 shares
for the three and six months ended July 31, 2009, respectively, because such shares represent stock
options that have exercise prices in excess of the average market price of the Companys common
stock during the relevant period, and were therefore anti-dilutive.
- 9 -
NOTE 4. Shareholders Equity
Certain information regarding changes in shareholders equity and noncontrolling interests are as
follows:
UTi Worldwide Inc. Shareholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
other |
|
|
|
|
|
|
|
|
|
Common |
|
|
Retained |
|
|
comprehensive |
|
|
Noncontrolling |
|
|
|
|
|
|
stock |
|
|
earnings |
|
|
loss |
|
|
interests |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at February 1, 2010 |
|
$ |
464,731 |
|
|
$ |
373,548 |
|
|
$ |
(46,904 |
) |
|
$ |
22,907 |
|
|
$ |
814,282 |
|
Employee share-based
compensation plans |
|
|
7,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,510 |
|
Net income |
|
|
|
|
|
|
28,943 |
|
|
|
|
|
|
|
2,625 |
|
|
|
31,568 |
|
Foreign currency translation
adjustment and other |
|
|
|
|
|
|
|
|
|
|
1,122 |
|
|
|
993 |
|
|
|
2,115 |
|
Dividends |
|
|
|
|
|
|
(6,106 |
) |
|
|
|
|
|
|
|
|
|
|
(6,106 |
) |
Distributions to noncontrolling
interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,719 |
) |
|
|
(1,719 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at July 31, 2010 |
|
$ |
472,241 |
|
|
$ |
396,385 |
|
|
$ |
(45,782 |
) |
|
$ |
24,806 |
|
|
$ |
847,650 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at February 1, 2009 |
|
$ |
450,553 |
|
|
$ |
338,461 |
|
|
$ |
(112,268 |
) |
|
$ |
16,224 |
|
|
$ |
692,970 |
|
Employee share-based
compensation plans |
|
|
4,862 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,862 |
|
Net income |
|
|
|
|
|
|
21,600 |
|
|
|
|
|
|
|
1,687 |
|
|
|
23,287 |
|
Foreign currency translation adjustment and other |
|
|
|
|
|
|
|
|
|
|
59,837 |
|
|
|
3,732 |
|
|
|
63,569 |
|
Distributions to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(197 |
) |
|
|
(197 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at July 31, 2009 |
|
$ |
455,415 |
|
|
$ |
360,061 |
|
|
$ |
(52,431 |
) |
|
$ |
21,446 |
|
|
$ |
784,491 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income is comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
July 31, |
|
|
July 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
20,827 |
|
|
$ |
13,407 |
|
|
$ |
31,568 |
|
|
$ |
23,287 |
|
Other comprehensive income, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments and
other |
|
|
(5,354 |
) |
|
|
36,209 |
|
|
|
2,115 |
|
|
|
63,569 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
15,473 |
|
|
|
49,616 |
|
|
|
33,683 |
|
|
|
86,856 |
|
Comprehensive income attributable to
noncontrolling interests |
|
|
2,094 |
|
|
|
2,518 |
|
|
|
3,618 |
|
|
|
5,419 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to
UTi Worldwide Inc. |
|
$ |
13,379 |
|
|
$ |
47,098 |
|
|
$ |
30,065 |
|
|
$ |
81,437 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 10 -
NOTE 5. Segment Reporting
Certain information regarding the Companys operations by segment is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended July 31, 2010 |
|
|
|
|
|
|
|
Contract |
|
|
|
|
|
|
|
|
|
|
|
|
|
Logistics |
|
|
|
|
|
|
|
|
|
Freight |
|
|
and |
|
|
|
|
|
|
|
|
|
Forwarding |
|
|
Distribution |
|
|
Corporate |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
808,990 |
|
|
$ |
342,100 |
|
|
$ |
|
|
|
$ |
1,151,090 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased transportation costs |
|
|
635,147 |
|
|
|
136,873 |
|
|
|
|
|
|
|
772,020 |
|
Staff costs |
|
|
94,363 |
|
|
|
104,664 |
|
|
|
5,492 |
|
|
|
204,519 |
|
Depreciation |
|
|
3,965 |
|
|
|
7,277 |
|
|
|
21 |
|
|
|
11,263 |
|
Amortization of intangible assets |
|
|
1,000 |
|
|
|
2,163 |
|
|
|
|
|
|
|
3,163 |
|
Other operating expenses |
|
|
46,513 |
|
|
|
74,047 |
|
|
|
5,664 |
|
|
|
126,224 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
780,988 |
|
|
|
325,024 |
|
|
|
11,177 |
|
|
|
1,117,189 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income/(loss) |
|
$ |
28,002 |
|
|
$ |
17,076 |
|
|
$ |
(11,177 |
) |
|
|
33,901 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,344 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,270 |
) |
Other income, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,146 |
|
Provision for income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,319 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,827 |
|
Net income attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,958 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to UTi Worldwide Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
18,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
$ |
5,687 |
|
|
$ |
5,338 |
|
|
$ |
7,396 |
|
|
$ |
18,421 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
|
$ |
1,286,621 |
|
|
$ |
748,540 |
|
|
$ |
123,839 |
|
|
$ |
2,159,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 11 -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended July 31, 2009 |
|
|
|
|
|
|
|
Contract |
|
|
|
|
|
|
|
|
|
|
|
|
|
Logistics |
|
|
|
|
|
|
|
|
|
Freight |
|
|
and |
|
|
|
|
|
|
|
|
|
Forwarding |
|
|
Distribution |
|
|
Corporate |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
539,364 |
|
|
$ |
301,138 |
|
|
$ |
|
|
|
$ |
840,502 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased transportation costs |
|
|
390,259 |
|
|
|
110,877 |
|
|
|
|
|
|
|
501,136 |
|
Staff costs |
|
|
85,397 |
|
|
|
97,637 |
|
|
|
3,629 |
|
|
|
186,663 |
|
Depreciation |
|
|
3,722 |
|
|
|
6,664 |
|
|
|
105 |
|
|
|
10,491 |
|
Amortization of intangible assets |
|
|
987 |
|
|
|
1,825 |
|
|
|
|
|
|
|
2,812 |
|
Other operating expenses |
|
|
38,313 |
|
|
|
71,403 |
|
|
|
7,276 |
|
|
|
116,992 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
518,678 |
|
|
|
288,406 |
|
|
|
11,010 |
|
|
|
818,094 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income/(loss) |
|
$ |
20,686 |
|
|
$ |
12,732 |
|
|
$ |
(11,010 |
) |
|
|
22,408 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,233 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,531 |
) |
Other expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(796 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,314 |
|
Provision for income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,907 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,407 |
|
Net income attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,652 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to UTi Worldwide Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
11,755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
$ |
5,903 |
|
|
$ |
6,025 |
|
|
$ |
2,414 |
|
|
$ |
14,342 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
|
$ |
982,584 |
|
|
$ |
692,902 |
|
|
$ |
110,702 |
|
|
$ |
1,786,188 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 12 -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended July 31, 2010 |
|
|
|
|
|
|
|
Contract |
|
|
|
|
|
|
|
|
|
|
|
|
|
Logistics |
|
|
|
|
|
|
|
|
|
Freight |
|
|
and |
|
|
|
|
|
|
|
|
|
Forwarding |
|
|
Distribution |
|
|
Corporate |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
1,530,764 |
|
|
$ |
675,482 |
|
|
$ |
|
|
|
$ |
2,206,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased transportation costs |
|
|
1,197,482 |
|
|
|
263,946 |
|
|
|
|
|
|
|
1,461,428 |
|
Staff costs |
|
|
188,753 |
|
|
|
211,641 |
|
|
|
11,126 |
|
|
|
411,520 |
|
Depreciation |
|
|
7,797 |
|
|
|
14,505 |
|
|
|
373 |
|
|
|
22,675 |
|
Amortization of intangible assets |
|
|
2,030 |
|
|
|
4,477 |
|
|
|
|
|
|
|
6,507 |
|
Other operating expenses |
|
|
92,883 |
|
|
|
147,071 |
|
|
|
11,309 |
|
|
|
251,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
1,488,945 |
|
|
|
641,640 |
|
|
|
22,808 |
|
|
|
2,153,393 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income/(loss) |
|
$ |
41,819 |
|
|
$ |
33,842 |
|
|
$ |
(22,808 |
) |
|
|
52,853 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,903 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,948 |
) |
Other income, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,823 |
|
Provision for income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,255 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,568 |
|
Net income attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to UTi Worldwide Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
28,943 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
$ |
9,421 |
|
|
$ |
8,298 |
|
|
$ |
11,466 |
|
|
$ |
29,185 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
|
$ |
1,286,621 |
|
|
$ |
748,540 |
|
|
$ |
123,839 |
|
|
$ |
2,159,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 13 -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended July 31, 2009 |
|
|
|
|
|
|
|
Contract |
|
|
|
|
|
|
|
|
|
|
|
|
|
Logistics |
|
|
|
|
|
|
|
|
|
Freight |
|
|
and |
|
|
|
|
|
|
|
|
|
Forwarding |
|
|
Distribution |
|
|
Corporate |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
1,032,954 |
|
|
$ |
575,904 |
|
|
$ |
|
|
|
$ |
1,608,858 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased transportation costs |
|
|
749,623 |
|
|
|
210,362 |
|
|
|
|
|
|
|
959,985 |
|
Staff costs |
|
|
166,302 |
|
|
|
189,015 |
|
|
|
7,149 |
|
|
|
362,466 |
|
Depreciation |
|
|
7,349 |
|
|
|
12,792 |
|
|
|
204 |
|
|
|
20,345 |
|
Amortization of intangible assets |
|
|
1,813 |
|
|
|
3,636 |
|
|
|
|
|
|
|
5,449 |
|
Restructuring charges |
|
|
|
|
|
|
|
|
|
|
1,231 |
|
|
|
1,231 |
|
Other operating expenses |
|
|
76,178 |
|
|
|
136,894 |
|
|
|
6,050 |
|
|
|
219,122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
1,001,265 |
|
|
|
552,699 |
|
|
|
14,634 |
|
|
|
1,568,598 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income/(loss) |
|
$ |
31,689 |
|
|
$ |
23,205 |
|
|
$ |
(14,634 |
) |
|
|
40,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,956 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,707 |
) |
Other expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(998 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,511 |
|
Provision for income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,224 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,287 |
|
Net income attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to UTi Worldwide Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
21,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
$ |
8,989 |
|
|
$ |
10,477 |
|
|
$ |
3,392 |
|
|
$ |
22,858 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
|
$ |
982,584 |
|
|
$ |
692,902 |
|
|
$ |
110,702 |
|
|
$ |
1,786,188 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For segment reporting purposes by geographic region, airfreight and ocean freight forwarding
revenues for the movement of goods is attributed to the country where the shipment originates.
Revenues for all other services, including contract logistics services, are attributed to the
country where the services are performed.
The following table shows the revenues attributable to the Companys geographic regions, EMENA
(which is comprised of Europe, Middle East and North Africa), the Americas, Asia Pacific and
Africa:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended July 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
Contract |
|
|
|
|
|
|
|
|
|
|
Contract |
|
|
|
|
|
|
|
|
|
|
Logistics |
|
|
|
|
|
|
|
|
|
|
Logistics |
|
|
|
|
|
|
Freight |
|
|
and |
|
|
|
|
|
|
Freight |
|
|
and |
|
|
|
|
|
|
Forwarding |
|
|
Distribution |
|
|
|
|
|
|
Forwarding |
|
|
Distribution |
|
|
|
|
|
|
Revenue |
|
|
Revenue |
|
|
Total |
|
|
Revenue |
|
|
Revenue |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMENA |
|
$ |
229,934 |
|
|
$ |
62,889 |
|
|
$ |
292,823 |
|
|
$ |
202,916 |
|
|
$ |
59,994 |
|
|
$ |
262,910 |
|
Americas |
|
|
165,538 |
|
|
|
182,852 |
|
|
|
348,390 |
|
|
|
113,623 |
|
|
|
157,439 |
|
|
|
271,062 |
|
Asia Pacific |
|
|
316,969 |
|
|
|
11,132 |
|
|
|
328,101 |
|
|
|
160,965 |
|
|
|
9,479 |
|
|
|
170,444 |
|
Africa |
|
|
96,549 |
|
|
|
85,227 |
|
|
|
181,776 |
|
|
|
61,860 |
|
|
|
74,226 |
|
|
|
136,086 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
808,990 |
|
|
$ |
342,100 |
|
|
$ |
1,151,090 |
|
|
$ |
539,364 |
|
|
$ |
301,138 |
|
|
$ |
840,502 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 14 -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended July 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
Contract |
|
|
|
|
|
|
|
|
|
|
Contract |
|
|
|
|
|
|
|
|
|
|
Logistics |
|
|
|
|
|
|
|
|
|
|
Logistics |
|
|
|
|
|
|
Freight |
|
|
and |
|
|
|
|
|
|
Freight |
|
|
and |
|
|
|
|
|
|
Forwarding |
|
|
Distribution |
|
|
|
|
|
|
Forwarding |
|
|
Distribution |
|
|
|
|
|
|
Revenue |
|
|
Revenue |
|
|
Total |
|
|
Revenue |
|
|
Revenue |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMENA |
|
$ |
460,328 |
|
|
$ |
128,083 |
|
|
$ |
588,411 |
|
|
$ |
386,748 |
|
|
$ |
113,550 |
|
|
$ |
500,298 |
|
Americas |
|
|
315,638 |
|
|
|
356,156 |
|
|
|
671,794 |
|
|
|
219,711 |
|
|
|
309,384 |
|
|
|
529,095 |
|
Asia Pacific |
|
|
572,031 |
|
|
|
20,319 |
|
|
|
592,350 |
|
|
|
306,480 |
|
|
|
16,788 |
|
|
|
323,268 |
|
Africa |
|
|
182,767 |
|
|
|
170,924 |
|
|
|
353,691 |
|
|
|
120,015 |
|
|
|
136,182 |
|
|
|
256,197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,530,764 |
|
|
$ |
675,482 |
|
|
$ |
2,206,246 |
|
|
$ |
1,032,954 |
|
|
$ |
575,904 |
|
|
$ |
1,608,858 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows revenues and purchased transportation costs attributable to the
Companys principal services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
July 31, |
|
|
July 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Airfreight forwarding |
|
$ |
419,439 |
|
|
$ |
270,010 |
|
|
$ |
787,131 |
|
|
$ |
509,298 |
|
Ocean freight forwarding |
|
|
304,626 |
|
|
|
205,548 |
|
|
|
576,458 |
|
|
|
397,614 |
|
Customs brokerage |
|
|
26,611 |
|
|
|
23,363 |
|
|
|
52,046 |
|
|
|
43,312 |
|
Contract logistics |
|
|
179,299 |
|
|
|
157,736 |
|
|
|
356,309 |
|
|
|
300,662 |
|
Distribution |
|
|
121,219 |
|
|
|
104,514 |
|
|
|
238,593 |
|
|
|
203,014 |
|
Other |
|
|
99,896 |
|
|
|
79,331 |
|
|
|
195,709 |
|
|
|
154,958 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,151,090 |
|
|
$ |
840,502 |
|
|
$ |
2,206,246 |
|
|
$ |
1,608,858 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased transportation costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Airfreight forwarding |
|
$ |
336,119 |
|
|
$ |
197,906 |
|
|
$ |
629,661 |
|
|
$ |
373,262 |
|
Ocean freight forwarding |
|
|
257,782 |
|
|
|
162,865 |
|
|
|
484,968 |
|
|
|
315,275 |
|
Customs brokerage |
|
|
2,248 |
|
|
|
1,564 |
|
|
|
3,818 |
|
|
|
2,682 |
|
Contract logistics |
|
|
41,563 |
|
|
|
28,787 |
|
|
|
77,286 |
|
|
|
52,178 |
|
Distribution |
|
|
83,921 |
|
|
|
69,399 |
|
|
|
163,038 |
|
|
|
135,898 |
|
Other |
|
|
50,387 |
|
|
|
40,615 |
|
|
|
102,657 |
|
|
|
80,690 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
772,020 |
|
|
$ |
501,136 |
|
|
$ |
1,461,428 |
|
|
$ |
959,985 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 6. Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill by reportable segment for the six months ended
July 31, 2010 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract |
|
|
|
|
|
|
|
|
|
|
Logistics |
|
|
|
|
|
|
Freight |
|
|
and |
|
|
|
|
|
|
Forwarding |
|
|
Distribution |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at February 1, 2010 |
|
$ |
170,034 |
|
|
$ |
244,757 |
|
|
$ |
414,791 |
|
Acquisitions and contingent earn-out payments |
|
|
|
|
|
|
1,282 |
|
|
|
1,282 |
|
Fair value adjustments |
|
|
508 |
|
|
|
(2,035 |
) |
|
|
(1,527 |
) |
Foreign currency translation |
|
|
(1,587 |
) |
|
|
3,564 |
|
|
|
1,977 |
|
|
|
|
|
|
|
|
|
|
|
Balance at July 31, 2010 |
|
$ |
168,955 |
|
|
$ |
247,568 |
|
|
$ |
416,523 |
|
|
|
|
|
|
|
|
|
|
|
- 15 -
Amortizable intangible assets as of July 31, 2010 and January 31, 2010 relate primarily to the
estimated fair value of the client relationships acquired with respect to certain acquisitions.
The carrying values of amortizable intangible assets as of July 31, 2010 and January 31, 2010 were
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
Net |
|
|
Weighted |
|
|
|
carrying |
|
|
Accumulated |
|
|
carrying |
|
|
average/life |
|
|
|
Value |
|
|
amortization |
|
|
value |
|
|
years |
|
As of July 31, 2010: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Client relationships |
|
$ |
105,382 |
|
|
$ |
(42,329 |
) |
|
$ |
63,053 |
|
|
|
6.5 |
|
Non-compete agreements |
|
|
3,110 |
|
|
|
(2,929 |
) |
|
|
181 |
|
|
|
1.3 |
|
Other |
|
|
4,591 |
|
|
|
(2,902 |
) |
|
|
1,689 |
|
|
|
2.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
113,083 |
|
|
$ |
(48,160 |
) |
|
$ |
64,923 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 31, 2010: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Client relationships |
|
$ |
105,320 |
|
|
$ |
(36,586 |
) |
|
$ |
68,734 |
|
|
|
9.6 |
|
Non-compete agreements |
|
|
3,048 |
|
|
|
(2,797 |
) |
|
|
251 |
|
|
|
3.1 |
|
Other |
|
|
4,473 |
|
|
|
(2,270 |
) |
|
|
2,203 |
|
|
|
3.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
112,841 |
|
|
$ |
(41,653 |
) |
|
$ |
71,188 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense totaled $3,163 and $6,507 for the three and six months ended July 31, 2010,
respectively, and $2,812 and $5,449 for the three and six months ended July 31, 2009, respectively.
The following table shows the expected amortization expense for these intangible assets for the
current fiscal year and each of the next four fiscal years ending January 31,
|
|
|
|
|
2011 |
|
$ |
11,781 |
|
2012 |
|
|
11,236 |
|
2013 |
|
|
10,641 |
|
2014 |
|
|
10,025 |
|
2015 |
|
|
7,626 |
|
In addition to its amortizable intangible assets, the Company also has $998 and $994 of intangible
assets not subject to amortization as of July 31, 2010 and January 31, 2010, respectively, related
primarily to acquired trade names.
In accordance with ASC 350, Intangibles Goodwill and Other, the Company completed the required
annual impairment tests during the second quarter ended July 31, 2010. No impairment was
determined based on the results of the annual impairment tests.
NOTE 7. Supplemental Cash Flow Information
The following table shows the supplemental cash flow information and supplemental non-cash
investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
Six months ended |
|
|
|
July 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
Net cash paid for: |
|
|
|
|
|
|
|
|
Interest |
|
$ |
15,765 |
|
|
$ |
10,748 |
|
Income taxes |
|
|
17,406 |
|
|
|
13,527 |
|
Withholding taxes |
|
|
377 |
|
|
|
854 |
|
Non-cash activities: |
|
|
|
|
|
|
|
|
Capital lease obligations incurred to acquire assets |
|
|
9,467 |
|
|
|
6,106 |
|
- 16 -
UTi is a holding company that relies on dividends or advances from its subsidiaries to meet its
financial obligations and to pay dividends on its ordinary shares. The ability of UTis
subsidiaries to pay dividends to the Company and UTis ability to receive distributions is subject
to applicable local law and other restrictions including, but not limited to, applicable tax laws
and limitations contained in some of the Companys bank credit facilities and in the note purchase
agreements for the Companys outstanding senior notes. Such laws and restrictions could limit the
payment of dividends and distributions to the Company which would restrict UTis ability to
continue operations. In general, UTis subsidiaries cannot pay dividends in excess of their
retained earnings and most countries require that the subsidiaries pay a distribution tax on all
dividends paid. In addition, the amount of dividends that UTis subsidiaries could declare may be
limited in certain countries by exchange controls. Total net assets which may not be transferred
to the Company in the form of loans, advances, or cash dividends by the Companys subsidiaries
without the consent of a third party, were less than 10% of the Companys consolidated total net
assets as of the end of the most recent fiscal year.
NOTE 8. Contingencies
In connection with ASC 450, Contingencies, the Company has not accrued for a loss contingency
relating to any of the investigations and legal proceedings disclosed below because we believe
that, although unfavorable outcomes in the investigations or proceedings may be reasonably
possible, they are not considered by our management to be probable or reasonably estimable.
From time to time, claims are made against us or we may make claims against others, including in
the ordinary course of our business, which could result in litigation. Claims and associated
litigation are subject to inherent uncertainties and unfavorable outcomes could occur, such as
monetary damages, fines, penalties or injunctions prohibiting us from engaging in certain
activities. The occurrence of an unfavorable outcome in any specific period could have a material
adverse affect on our consolidated results of operations for that period or future periods. As of
the date of these consolidated financial statements, we are not a party to any material litigation
except as described below.
Industry-Wide Anti-Trust Investigation
In June 2007, we responded to a grand jury subpoena requesting documents in connection with the
United States Department of Justices (U.S. DOJ) investigation into the pricing practices in the
international freight forwarding and cargo transportation industry which had been served on us in
June 2006. On October 10, 2007, the U.S. DOJ executed a search warrant on us at our offices in Long
Beach, California, and served one of our subsidiaries with a subpoena requesting numerous documents
and other materials in connection with its investigation of the international freight forwarding
and cargo transportation industry. In addition to its previous request for documents regarding air
freight forwarding, the U.S. DOJ also requested that we produce various documents regarding ocean
freight forwarding. We believe we are a subject of the U.S. DOJ investigation.
On October 25, 2007, one of our subsidiaries received a notice from the New Zealand Commerce
Commission that it was conducting an investigation in relation to international freight forwarding
services in New Zealand and requesting that we provide documents and information as it relates to
New Zealand. Our subsidiary responded to the request from the New Zealand Commerce Commission on
December 21, 2007. In June 2010, the New Zealand Commerce Commission informed us that their
investigation concerning us was closed.
In June 2008 and February 2009, we received a request for information issued by the European
Commission (EC) requesting information and records relating to the ECs ongoing investigation of
alleged anti-competitive behavior relating to freight forwarding services in the European
Union/European Economic Area. In July 2008 and March 2009, we submitted responses to these
requests. In February 2010, in connection with the ECs ongoing investigation, the EC sent a
Statement of Objections to us and a number of other freight forwarding and logistics providers.
The Statement of Objections alleges infringements of European Union competition law with respect to
various surcharges. We responded in writing to the ECs Statement of Objections in April 2010. We
attended a hearing in July 2010 to discuss our position with the EC officials.
- 17 -
In May 2009, we learned that the Brazilian Ministry of Justice was investigating possible alleged
cartel activity in the international air and ocean freight forwarding market. On August 6, 2010,
we received notice of an administrative proceeding from the Brazilian Ministry of Justice. The
administrative proceeding initiates a proceeding against the Company, its Brazilian subsidiary and
two of its employees, among many other forwarders and their employees, alleging possible
anti-competitive behavior contrary to Brazilian rules on competition. The Company intends to
respond to this proceeding within 30 days after the last defendant in this global proceeding has
been notified.
In November 2009, one of our subsidiaries received a summons from the South African
Competition Commission requesting certain information and records in connection with its ongoing
investigation of alleged anti-competitive behavior relating to the market for air freight
forwarding services in South Africa. In January 2010, we responded to this request.
We continue to receive additional requests for information, documents and interviews from various
governmental agencies with respect to these investigations, and we have provided, and expect to
continue to provide in the future, further responses as a result of such requests.
We (along with several other global logistics providers) have been named as a defendant in a
federal antitrust class action lawsuit filed on January 3, 2008 in the United States District Court
of the Eastern District of New York (Precision Associates, Inc., et. al. v. Panalpina World
Transport (Holding) Ltd., et. al.). This lawsuit alleges that the defendants engaged in various
forms of anti-competitive practices and seeks an unspecified amount of treble monetary damages and
injunctive relief under U.S. antitrust laws.
We have incurred, and we expect to continue to incur, significant legal fees and other costs in
connection with these governmental investigations and lawsuits. If the U.S. DOJ, the EC, or any
other regulatory body concludes that we have engaged in anti-competitive behavior, we could incur
significant additional legal fees and other costs, which could include fines and/or penalties,
which may be material to our consolidated financial statements.
South Africa Revenue Service Matter
The Company is involved in a dispute with the South African Revenue Service where the Company makes
use of owner drivers for the collection and delivery of cargo. The South African Revenue Service
is claiming that the Company is liable for employee taxes in respect of these owner drivers. The
Company has objected to this claim and together with its legal and tax advisors, believes that the
Company is in full compliance with the relevant sections of the income tax act governing this
situation and has no tax liability in respect of these owner drivers. The amount claimed by the
South African Revenue Service is approximately $9,805 based on exchange rates as of July 31, 2010.
Per Transport Litigation
The Company is involved in litigation in Italy (in various cases filed in 2000 in the Court of
Milan) and England (in a case filed on April 13, 2000 in the High Court of Justice, London) 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 services of
the former ultimate owner as a consultant. The suits seek monetary damages, including compensation
for termination of the former ultimate owners consulting agreement. The Company has brought
counter-claims for monetary damages in relation to warranty claims under the purchase agreement.
The total of all such actual and potential claims, albeit duplicated in several proceedings, is
approximately $12,379 based on exchange rates as of July 31, 2010. In connection with the Per
Transport litigation, legal proceedings have also been brought against a former director and
officer of the Company and a current employee of the Company. The Company has agreed to indemnify
these individuals in connection with these proceedings. There were no material developments
concerning this matter during the first half of fiscal 2011.
- 18 -
Artwork Matter
The Company was previously engaged through various indirect subsidiaries in the business of
transportation and storage of fine works of art. A client of one of these subsidiaries previously
alleged that during several weeks of June 2007 a malfunctioning climate-control unit at such
subsidiaries warehouses may have caused numerous works of art to be exposed to humidity levels
beyond what are considered normal storage conditions. The Company received communication from the
client that several works of art may have been affected by the humidity; however no claim was ever
filed by the client and it is not known whether the works suffered any depreciation beyond normal
restoration costs. The Company sold this business and the related indirect subsidiaries during
fiscal 2009, although it remains liable for any liabilities associated with this matter. In May
2010, the Company was made aware that the former clients insurance company made a related payment
to the former client in an amount that is not material to the Company as a whole. Based on all the
facts and circumstances, the Company has determined that although materially unfavorable outcomes
in this matter may be possible, they are considered to be remote.
Big Baboon Patent Litigation
The Company and one of its subsidiaries (along with sixteen other global corporations) were named
as defendants by a patent holding company, in a patent infringement lawsuit filed on May 7, 2009,
in the United States District Court for the Central District of California (Big Baboon, Inc. v.
Dell Inc., et. al.). On May 12, 2010, after discovery regarding the eMpower software tools, the
plaintiff dismissed its lawsuit against the Company and subsidiary without prejudice.
NOTE 9. Defined Benefit Plans
The Company sponsors defined benefit plans for eligible employees in certain countries. Under
these plans, employees are entitled to retirement benefits based on years of service and the
employees final average salary on attainment of the qualifying retirement age.
Net periodic pension cost for the Companys defined benefit plans consists of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
July 31, |
|
|
July 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
134 |
|
|
$ |
106 |
|
|
$ |
273 |
|
|
$ |
205 |
|
Interest cost |
|
|
454 |
|
|
|
445 |
|
|
|
916 |
|
|
|
839 |
|
Expected return on assets |
|
|
(306 |
) |
|
|
(244 |
) |
|
|
(615 |
) |
|
|
(454 |
) |
Amortization of net actuarial loss |
|
|
17 |
|
|
|
62 |
|
|
|
34 |
|
|
|
120 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost |
|
$ |
299 |
|
|
$ |
369 |
|
|
$ |
608 |
|
|
$ |
710 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended July 31, 2010 and 2009, the Company contributed approximately $689 and
$906, respectively, to its defined benefit plans.
NOTE 10. Share-Based Compensation
On June 8, 2009, the Companys shareholders approved the 2009 Long Term Incentive Plan (2009 LTIP).
The plan provides for the issuance of a variety awards, including stock options, share
appreciation rights (sometimes referred to as SARs), restricted shares, restricted share units
(RSUs), deferred share units and performance awards. A total of 6,250,000 shares were originally
reserved for issuance under the 2009 LTIP, subject to adjustments as provided for in the plan.
In addition to the 2009 LTIP, at July 31, 2010, the Company had stock based compensation awards
outstanding under the following plans: the 2004 Long Term Incentive Plan (2004 LTIP), the 2000
Stock Option Plan, the 2000 Employee Share Purchase Plan, the 2004 Non-Employee Directors Share
Incentive Plan (2004 Directors Incentive Plan) and the Non-Employee Directors Share Option Plan
(Directors Option Plan).
- 19 -
Under the 2000 Employee Share Purchase Plan, eligible employees may purchase shares of the
Companys stock at 85% of the market price of the common stock at the beginning of an offering
period through payroll deductions in an amount not to exceed 10% of an employees annual base
compensation subject to an annual maximum of $25.
Under the 2004 Directors Incentive Plan, the Company may grant non-qualified stock options, share
appreciation rights, restricted stock, RSUs and deferred share units.
Since the 2009 LTIP was approved by the Companys shareholders in June 2009, no additional awards
may be made pursuant to the 2004 LTIP. In addition, the Company no longer grants awards under the
2000 Stock Option Plan and the Directors Option Plan. Vesting of these awards occurs over
different periods, depending on the terms of the individual award, however expenses relating to
these awards are all recognized on a straight line basis over the applicable vesting period.
Employee Share-Based Compensation Activity
A summary of share-based compensation activity applicable to employee shared-based plans for the
six months ended July 31, 2010 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 LTIP |
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Weighted |
|
|
|
Shares |
|
|
average |
|
|
|
|
|
|
average |
|
|
|
subject to |
|
|
exercise |
|
|
Restricted |
|
|
grant date |
|
|
|
stock options |
|
|
price |
|
|
share units |
|
|
fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding balance at February 1, 2010 |
|
|
|
|
|
$ |
|
|
|
|
46,232 |
|
|
$ |
13.05 |
|
Granted |
|
|
8,408 |
|
|
|
12.58 |
|
|
|
1,005,488 |
|
|
|
17.01 |
|
Exercised/vested |
|
|
|
|
|
|
|
|
|
|
(21,866 |
) |
|
|
12.73 |
|
Cancelled/forfeited |
|
|
|
|
|
|
|
|
|
|
(5,319 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding balance at July 31, 2010 |
|
|
8,408 |
|
|
$ |
12.58 |
|
|
|
1,024,535 |
|
|
$ |
16.92 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 LTIP |
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Weighted |
|
|
|
Shares |
|
|
average |
|
|
|
|
|
|
average |
|
|
|
subject to |
|
|
exercise |
|
|
Restricted |
|
|
grant date |
|
|
|
stock options |
|
|
price |
|
|
share units |
|
|
fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding balance at February 1, 2010 |
|
|
1,827,663 |
|
|
$ |
20.32 |
|
|
|
1,794,895 |
|
|
$ |
18.00 |
|
Exercised/vested |
|
|
(87,488 |
) |
|
|
15.62 |
|
|
|
(394,796 |
) |
|
|
17.35 |
|
Cancelled/forfeited |
|
|
(95,895 |
) |
|
|
22.34 |
|
|
|
(46,208 |
) |
|
|
16.79 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding balance at July 31, 2010 |
|
|
1,644,280 |
|
|
$ |
20.51 |
|
|
|
1,353,891 |
|
|
$ |
18.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2000 Stock Option Plan |
|
|
|
Shares |
|
|
Weighted |
|
|
|
subject to |
|
|
average |
|
|
|
stock options |
|
|
exercise price |
|
Outstanding balance at February 1, 2010 |
|
|
1,113,564 |
|
|
$ |
7.44 |
|
Exercised |
|
|
(247,305 |
) |
|
|
6.29 |
|
Cancelled/forfeited |
|
|
(15,738 |
) |
|
|
4.33 |
|
|
|
|
|
|
|
|
|
Outstanding balance at July 31, 2010 |
|
|
850,521 |
|
|
$ |
7.89 |
|
|
|
|
|
|
|
|
- 20 -
Share-Based Compensation Activity
A summary of share-based compensation activity applicable to the non-employee director share-based
plans for the six months ended July 31, 2010 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 |
|
|
|
|
|
|
Directors Incentive Plan |
|
|
Directors Option Plan |
|
|
|
|
|
|
|
Weighted |
|
|
Shares |
|
|
Weighted |
|
|
|
Restricted |
|
|
average |
|
|
subject to |
|
|
average |
|
|
|
share |
|
|
grant date |
|
|
stock |
|
|
exercise |
|
|
|
units |
|
|
fair value |
|
|
options |
|
|
price |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding balance at February 1, 2010 |
|
|
30,457 |
|
|
$ |
12.36 |
|
|
|
81,000 |
|
|
$ |
10.33 |
|
Granted |
|
|
39,970 |
|
|
|
14.01 |
|
|
|
|
|
|
|
|
|
Exercised/vested |
|
|
(30,457 |
) |
|
|
12.36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding balance at July 31, 2010 |
|
|
39,970 |
|
|
$ |
14.01 |
|
|
|
81,000 |
|
|
$ |
10.33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In connection with its share-based compensation plans, the Company recorded approximately $2,379
and $1,904 of share-based compensation expense for the three months ended July 31, 2010 and 2009,
respectively, and approximately $4,062 and $4,375 of share-based compensation expense for the six
months ended July 31, 2010 and 2009, respectively. As of July 31, 2010, the Company had
approximately $25,848 of total unrecognized compensation related to share-based compensation to be
expensed through April 2015.
NOTE 11. Borrowings
The Company utilizes a number of financial institutions to provide it with borrowings, letters of
credit, guarantees and working capital facilities. Certain of these credit facilities are used for
working capital and for issuing letters of credit to support the working capital and operational
needs of various subsidiaries and to support various customs bonds and guarantees. In other cases,
customs bonds and guarantees are issued directly by various financial institutions. In many cases,
the use of these particular borrowings, letter of credit, guarantee, and working capital facilities
is restricted to the country in which they originated although this is not always the case. These
particular borrowings, letter of credit, guarantee, and working capital facilities may restrict
distributions by the subsidiary operating in such country.
- 21 -
The following table presents information about the facility limits, aggregate amounts of borrowings
outstanding as well as availability for borrowings under various bank lines and letters of credit
and other credit facilities as of July 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
South |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
African |
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
ABN/RBS |
|
|
Nedbank |
|
|
Facilities |
|
|
US Facility1 |
|
|
Spain Facility2 |
|
|
Facilities |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit facility limit |
|
$ |
50,000 |
|
|
$ |
61,000 |
|
|
$ |
130,788 |
|
|
$ |
25,000 |
|
|
$ |
25,000 |
|
|
$ |
105,569 |
|
|
$ |
397,357 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Facility usage for cash items |
|
$ |
9,104 |
|
|
$ |
51,002 |
|
|
$ |
64 |
|
|
$ |
25,000 |
|
|
$ |
22,816 |
|
|
$ |
57,575 |
|
|
$ |
165,561 |
|
Letters of credit and guarantees |
|
|
37,035 |
|
|
|
6,768 |
|
|
|
75,219 |
|
|
|
|
|
|
|
|
|
|
|
42,630 |
|
|
|
161,652 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
46,139 |
|
|
$ |
57,770 |
|
|
$ |
75,283 |
|
|
$ |
25,000 |
|
|
$ |
22,816 |
|
|
$ |
100,205 |
|
|
$ |
327,213 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available, unused capacity |
|
$ |
3,861 |
|
|
$ |
3,230 |
|
|
$ |
55,505 |
|
|
$ |
|
|
|
$ |
2,184 |
|
|
$ |
5,364 |
|
|
$ |
70,144 |
|
Available for cash withdrawal |
|
$ |
|
|
|
$ |
3,230 |
|
|
$ |
55,505 |
|
|
$ |
|
|
|
$ |
2,184 |
|
|
$ |
5,050 |
|
|
$ |
65,969 |
|
|
|
|
1 |
|
Represents one of the Companys two largest single-country credit facilities.
This facility expires in May 2011. |
|
2 |
|
Represents one of the Companys two largest single-country credit facilities. This
facility expires in April 2011. |
ABN/RBS Letter of Credit Agreement
On July 9, 2009, the Company and certain of its subsidiaries entered into a letter of credit
facility pursuant to an agreement with ABN AMRO N.V. (ABN) and The Royal Bank of Scotland plc.
(the ABN/RBS Letter of Credit Agreement). The ABN/RBS Letter of Credit Agreement provided for an
aggregate availability of up to $50,000 in letters of credit as of July 31, 2010. The facility
matures on July 9, 2011. The Companys obligations under the ABN/RBS Letter of Credit Agreement
are guaranteed by the Company and selected subsidiaries.
Nedbank Letter of Credit Agreement
On July 9, 2009, the Company and certain of its subsidiaries also entered into a letter of credit
facility pursuant to an agreement with Nedbank Limited, acting through its London Branch (the
Nedbank Letter of Credit Agreement). The Nedbank Letter of Credit Agreement provided for an
aggregate initial availability of up to $36,000 in letters of credit. On January 8, 2010, the
Company and certain of its subsidiaries entered into an amendment to this agreement (First
Nedbank Amendment) which temporarily increased the aggregate availability under the facility to
$46,000 in letters of credit. The First Nedbank Amendment expired on March 1, 2010, after which
the aggregate availability under the Nedbank Letter or Credit Agreement reverted to the original
availability of $36,000 in letters of credit.
- 22 -
On July 23, 2010, UTi Worldwide Inc. (UTi) and certain of its subsidiaries as guarantors
(collectively with UTi, the Obligors) entered into an Amendment to Letter of Credit Agreement
(Third Nedbank Amendment). The Third Nedbank Amendment among other things increased the current
Maximum Draw Amount (as such term is defined in the Nedbank Letter of Credit Agreement) under
the Nedbank Letter of Credit Agreement by $25,000, from $36,000 to $61,000. In addition, the
Third Nedbank Amendment provides that in no event shall any letter of credit) issued after July
23, 2010 under the Nedbank Letter of Credit Agreement have an expiration date later than July 9,
2011 unless otherwise agreed to by Nedbank. The Nedbank Letter of Credit Agreement matures on
July 9, 2011. The Companys obligations under the Nedbank Letter of Credit Agreement are
guaranteed by the Company and selected subsidiaries.
Together, the Company refers to the ABN/RBS Letter of Credit Agreement and the Nedbank Letter of
Credit Agreement as the Letter of Credit Agreements. Pursuant to the terms of the Letter of
Credit Agreements, the Company is charged fees relating to, among other things, the issuance of
letters of credit, the aggregate amount of letters of credit outstanding, and the unused portions
of these facilities, all at the rates specified in the applicable agreement.
South African Facilities
On July 9, 2009, certain of the Companys subsidiaries operating in South Africa entered into a
South African credit facility pursuant to an agreement with Nedbank Limited, acting through its
Corporate Banking Division (the South African Facilities Agreement). The South African
Facilities Agreement provides for a 650,000 South African rand revolving credit facility, which
is comprised of a 400,000 South African rand working capital facility and a 250,000 South
African rand letter of credit, guarantee and forward exchange contract facility. The South
African Facilities Agreement also provides the Companys South African operations with a 150,000
South African rand revolving asset-based finance facility, which includes, among other things, a
capital lease line. The obligations of the Companys subsidiaries under the South African
Facilities Agreement are guaranteed by selected subsidiaries registered in South Africa. In
addition, certain of the Companys operating assets in South Africa, and the rights and
interests of the South African branch of one of our subsidiaries in various intercompany loans
made to a South African subsidiary and to a South African partnership, are pledged as collateral
under the South African Facilities Agreement.
Overdrafts under the new South African working capital facility bear interest at a rate per
annum equal to Nedbanks publicly quoted prime rate minus 1%. The per annum interest rate
payable in respect of foreign currency accounts is generally at the London Interbank Offered
Rate (LIBOR), or with respect to a foreign currency account in euro, the Euro Interbank Offered
Rate (EURIBOR), plus the lenders cost of funds (to the extent greater than LIBOR or EURIBOR, as
applicable), plus 3%. Instruments issued under the letter of credit, guarantee and forward
exchange contract facility bear interest at a rate to be agreed upon in writing by the Companys
subsidiaries party to the South African Facilities Agreement and Nedbank.
In addition to the facilities described above, the South African entities have obtained customs
bonds to support their customs and duties obligations to the South African customs authorities.
These customs bonds are issued by South African registered insurance companies. As of July 31,
2010 the value of these bonds was $42,268.
During the second quarter ended July 31, 2010, the Company entered into a number of new credit facilities with aggregate
borrowing credit facility limits of approximately $65,000. Such facilities include those entered into by the Companys
subsidiaries in the U.S. and Spain as well as a borrowing by the parent company, UTi Worldwide, Inc. and generally expire
on various dates in calendar 2011 and bear interest at rates determined based on certain benchmark interest rates plus a margin
as specified in the underlying agreements. Total borrowings outstanding under such facilities totaled approximately $62,800 at
July 31, 2010.
Cash Pooling Arrangement
A significant number of our subsidiaries participate in a cash pooling arrangement which is used by
us to fund liquidity needs of the subsidiaries. The cash pooling arrangement has no stated
maturity date and yields and bears interest at varying rates. The facility does not permit
aggregate outstanding withdrawals by our subsidiaries under the arrangement to exceed the aggregate
amount of cash deposits by our subsidiaries in the arrangement at any one time, as determined on a
global basis. At July 31, 2010, cash deposits exceeded to cash withdrawals. Under this
arrangement, cash withdrawals of $108,652 are included in bank
lines of credit and cash deposits of $125,921 are included in cash and cash equivalents on our
balance sheet at July 31, 2010.
- 23 -
Senior Unsecured Guaranteed Notes
The following table presents information about the aggregate amount of the Companys indebtedness
pursuant to its outstanding senior unsecured guaranteed notes as of July 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 Note |
|
|
2009 Note |
|
|
|
|
|
|
|
|
|
Purchase |
|
|
Purchase |
|
|
Other |
|
|
|
|
|
|
Agreement |
|
|
Agreement |
|
|
Borrowings |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term borrowings |
|
$ |
66,668 |
|
|
$ |
|
|
|
$ |
3,910 |
|
|
$ |
70,578 |
|
Long-term borrowings, excluding current portion |
|
|
|
|
|
|
55,000 |
|
|
|
7,173 |
|
|
|
62,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
66,668 |
|
|
$ |
55,000 |
|
|
$ |
11,083 |
|
|
$ |
132,751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 Note Purchase Agreement
On July 9, 2009, the Company issued $55,000 of senior unsecured guaranteed notes (2009 Senior
Notes) under a note purchase agreement (2009 Note Purchase Agreement), entered into among UTi,
certain of its subsidiaries as guarantors and the purchasers named therein. The 2009 Senior
Notes bear interest at a rate of 8.06% per annum, payable semi-annually, on the 9th day of
February and August. The Company is required to repay approximately $9,167, or such lesser
principal amount as shall then be outstanding, on February 9, 2012 and each February 9th and
August 9th thereafter up to and including August 9, 2014. The 2009 Senior Notes mature on August
9, 2014. The Companys obligations under the 2009 Senior Notes and the 2009 Note Purchase
Agreement are guaranteed by the Company and selected subsidiaries.
2006 Note Purchase Agreement
On July 13, 2006, the Company issued $200,000 of senior unsecured guaranteed notes (the 2006
Senior Notes and, together with the 2009 Senior Notes, the Senior Notes) under a note purchase
agreement (the 2006 Note Purchase Agreement, and together with the 2009 Note Purchase Agreement,
the Note Purchase Agreements), entered into among UTi, certain of its subsidiaries as guarantors
and the purchasers named therein. The 2006 Senior Notes bear interest at a rate of 6.31% per
annum, payable semi-annually, on the 13th day of each January and July. The Company is required
to repay approximately $33,333, or such lesser principal amount as shall then be outstanding, on
each January 13th and July 13th up to and including July 13, 2011. The 2006 Senior Notes mature
on July 13, 2011. The Companys obligations under the 2006 Senior Notes and the 2006 Note
Purchase Agreement are guaranteed by the Company and selected subsidiaries.
The Letter of Credit Agreements, the South African Facilities Agreement, and the Note Purchase
Agreements require the Company to comply with financial and other covenants and certain change of
control provisions. Some of the covenants include maintaining a specified net worth, maintaining a
specified ratio of total debt to consolidated earnings before interest, taxes, depreciation and
amortization (EBITDA) and minimum interest charge coverage requirements, among others. Should the
Company fail to comply with these covenants and be unable to obtain any necessary amendments or
waivers, all or a portion of the obligations under the Senior Notes, the Letter of Credit
Agreements and the South African Facilities Agreement could become immediately due and payable and
the Letter of Credit Agreements and the South African Facilities Agreement could be terminated and
the credit, letter of credit, and guarantee facilities provided thereunder would no longer be
available. The Company was in compliance with all the covenants set forth in the Note Purchase
Agreements, the Letter of Credit Agreements and the South African Facilities Agreement as of July
31, 2010.
- 24 -
Furthermore, the Letter of Credit Agreements, the South African Facilities Agreement, and the Note
Purchase Agreements each contain cross-default provisions with respect to other indebtedness,
giving the lenders under the Letter of Credit Agreements and the South African Facilities Agreement
and the note holders under the Note Purchase Agreements the right to declare a default if the
Company defaults under other indebtedness in certain circumstances. Should the Company fail to
comply with these provisions and be unable to obtain any necessary amendments or waivers, all or a
portion of the obligations under the Senior Notes, the Letter of Credit Agreements and the South
African Facilities Agreement could become immediately due and payable and the Letter of Credit
Agreements and the South African Facilities Agreement could be terminated and the credit, letter of
credit, and guarantee facilities provided thereunder would no longer be available.
Pursuant to the terms of the Letter of Credit Agreements, the South African Facilities Agreement,
and the Note Purchase Agreements, the Company is required to indemnify the lenders and others with
respect to certain losses, liabilities and costs, those relating to income and other taxes,
increased costs suffered as a result of, among other things, changes in laws or regulations, or
other requirements which may be imposed by regulatory authorities from time to time, and increased
costs suffered as a result of a default under the agreements. The indemnification obligations
created by each respective agreement arose at the time such agreement was entered into and will
continue in accordance with the terms of such agreement. The Company cannot currently estimate the
maximum potential amount which could be payable pursuant to its indemnification obligations under
these agreements. Liabilities for these indemnification obligations were not material to the
Company as a whole as of the dates that each of the respective agreements was entered into. The
Company has not recorded any liabilities related to the indemnification obligations as of July 31,
2010.
NOTE 12. Uncertain Tax Positions
A reconciliation of the total amounts of unrecognized tax positions and interest recognized in
other non-current liabilities at the beginning and end of the period is as follows:
|
|
|
|
|
|
|
|
|
|
|
Uncertain |
|
|
|
|
|
|
Tax |
|
|
|
|
|
|
Positions |
|
|
Interest |
|
|
|
|
|
|
|
|
|
|
Balance at February 1, 2010 |
|
$ |
8,234 |
|
|
$ |
2,088 |
|
Increase for tax positions taken during the current year |
|
|
84 |
|
|
|
|
|
Interest |
|
|
|
|
|
|
410 |
|
Foreign currency translation |
|
|
(2 |
) |
|
|
4 |
|
|
|
|
|
|
|
|
Balance at July 31, 2010 |
|
$ |
8,316 |
|
|
$ |
2,502 |
|
|
|
|
|
|
|
|
The Company recognizes interest and penalties related to uncertain tax
positions as interest and other expense, respectively. The total amount of unrecognized tax benefits that would favorably affect our
effective tax rate if recognized was $6,750 as of July 31, 2010. Tax years 2006 through 2010 generally remain open to examination by
major taxing jurisdictions in which we operate. In addition, previously filed tax returns are under review in various other countries
in which we operate. However, as a result of the expiration of the statute of limitations in various jurisdictions, it is reasonably
possible that the total amounts of unrecognized tax benefits as of
July 31, 2010 will decrease by up to $3.0 million during the next
twelve months. This reduction would have a favorable impact on the Companys provision for income taxes.
- 25 -
NOTE 13. Fair Value Disclosures
The Company measures the fair value of certain assets and liabilities on a recurring basis based
upon a fair value hierarchy in accordance with ASC 820, Fair Value Measurements and Disclosures, as
follows:
|
|
|
Level 1 Quoted prices in active markets for identical assets or liabilities; |
|
|
|
|
Level 2 Observable market data, including quoted prices for similar assets and
liabilities, and inputs other than quoted prices that are observable, such as interest
rates and yield curves; and |
|
|
|
Level 3 Unobservable data reflecting the Companys own assumptions, where there is
little or no market activity for the asset or liability. |
The following table presents information about the Companys financial assets and liabilities
measured at fair value on a recurring basis as of July 31, 2010, and indicate the fair value
hierarchy of the valuation techniques utilized to determine such fair value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement at Reporting Date Using: |
|
|
|
|
|
|
|
Quoted Prices |
|
|
|
|
|
|
|
|
|
|
|
|
|
in Active |
|
|
Significant |
|
|
|
|
|
|
|
|
|
|
Markets for |
|
|
Other |
|
|
Significant |
|
|
|
|
|
|
|
Identical |
|
|
Observable |
|
|
Unobservable |
|
|
|
Balance at |
|
|
Assets |
|
|
Inputs |
|
|
Inputs |
|
|
|
July 31, 2010 |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents |
|
$ |
392,025 |
|
|
$ |
392,025 |
|
|
$ |
|
|
|
$ |
|
|
Forward exchange
contracts |
|
|
292 |
|
|
|
|
|
|
|
292 |
|
|
|
|
|
Other |
|
|
501 |
|
|
|
|
|
|
|
|
|
|
|
501 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
392,818 |
|
|
$ |
392,025 |
|
|
$ |
292 |
|
|
$ |
501 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward exchange
contracts |
|
$ |
1,132 |
|
|
$ |
|
|
|
$ |
1,132 |
|
|
$ |
|
|
Other |
|
|
862 |
|
|
|
|
|
|
|
|
|
|
|
862 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,994 |
|
|
$ |
|
|
|
$ |
1,132 |
|
|
$ |
862 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following methods were used to measure the fair value of assets and liabilities:
Forward Exchange Contracts The Companys forward exchange contracts are over-the-counter
derivatives, which are valued using pricing models that rely on currency exchange rates, and
therefore are classified as
Level 2.
Other Other financial assets and liabilities utilizing Level 3 inputs include minority call and
put options granted to the Company and certain of the Companys minority partners. These call and
put options do not have any quoted prices, nor can they be valued using inputs based on observable
market data. These investments are valued internally, based on the difference between the
estimated strike price and the estimated fair value of the minority partner equity, when the call
and put options become exercisable.
- 26 -
The following table presents the changes in Level 3 instruments measured on a recurring basis for
the six months ended July 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
Beginning balance at February 1, 2010 |
|
$ |
476 |
|
|
$ |
811 |
|
Net change in fair value included in earnings |
|
|
30 |
|
|
|
61 |
|
Translation adjustment |
|
|
(5 |
) |
|
|
(10 |
) |
|
|
|
|
|
|
|
Ending balance at July 31, 2010 |
|
$ |
501 |
|
|
$ |
862 |
|
|
|
|
|
|
|
|
NOTE 14. Derivative Financial Instruments
The Company generally utilizes forward exchange contracts to reduce its exposure to foreign
currency denominated assets and liabilities. Foreign exchange contracts purchased are primarily
denominated in the currencies of the Companys principal markets. The Company does not enter into
derivative contracts for speculative purposes.
As of July 31, 2010, the Company had contracted to sell the following amounts under forward
exchange contracts which all mature within 60 days of July 31, 2010: $7,620 in Euros; $24,009 in
U.S. dollars; $1,207 in British pound sterling; and, $2,120 in other currencies. Changes in the
fair value of forward exchange contracts are recorded within purchased transportation costs in the
consolidated statements of income.
The Company does not designate foreign currency derivatives as hedges. Foreign currency derivative
assets included in trade receivables were $292 and $273 at July 31, 2010 and January 31, 2010,
respectively. Foreign currency liability derivatives included in trade payables and other accrued
liabilities were $1,132 and $294 at July 31, 2010 and January 31, 2010, respectively. The Company
recorded net losses on foreign currency derivatives of $719 and $840 for the three and six months
ended July 31, 2010, respectively, and net gains on foreign currency derivatives of $30 and $14 for
the three and six months ended July 31, 2009, respectively.
NOTE 15. Subsequent Event
On August 11, 2010, the Company received notification from the minority partner holding the South
Africa Minority Put that the minority partner intends to exercise its right to require the Company
to purchase such partners interest. The preliminary redemption value of $8,535 was paid on August
26, 2010, although this amount remains subject to further adjustments and finalization. The Company
estimates the redemption value to be substantially less than the fair value of the minority
partners interest in the partnership. The Company expects to record the difference between the
redemption value and the carrying amount of the related noncontrolling interest as a component of
shareholders equity.
- 27 -
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
As used in this Quarterly Report on Form 10-Q, the terms we, us, our, UTi and the company
refer to UTi Worldwide Inc. and its subsidiaries as a consolidated entity, except where it is noted
or the context makes clear the reference is only to UTi Worldwide Inc.
Overview
We are an international, non-asset-based supply chain services and solutions company that provides
airfreight and ocean freight forwarding, contract logistics, customs brokerage, distribution,
inbound logistics, truckload brokerage and other supply chain management services. The company
serves its clients through a worldwide network of freight forwarding offices, and contract
logistics and distribution centers.
The companys operations are principally managed by core business operations. The factors for
determining the reportable segments include the manner in which management evaluates the
performance of the company combined with the nature of the individual business activities. As
discussed above in Note 1 Presentation of Financial Statements of our Notes to the Consolidated
Financial Statements, our operations are broken into the following reportable segments: Freight
Forwarding and Contract Logistics and Distribution. Certain corporate office expenses,
eliminations, and various holding companies within the group structure are presented separately.
Freight Forwarding Segment. As a freight forwarder, we conduct business as an indirect carrier for
our clients or occasionally as an authorized agent for airlines and ocean carriers. We typically
act as an indirect carrier with respect to shipments of freight unless the volume of freight to be
shipped over a particular route is not large enough to warrant consolidating such freight with
other shipments. In such situations, we usually forward the freight as an agent for the carrier.
We do not own or operate aircraft or ocean vessels and consequently, contract with commercial
carriers to arrange for the shipment of cargo. A majority of our freight forwarding business is
conducted through non-committed space allocations with carriers. We arrange for, and in many cases
provide, pick-up and delivery service between the carrier and the location of the shipper or
recipient.
When we act as an authorized agent for the airline or ocean carrier, we arrange for the
transportation of individual shipments to the airline or ocean carrier. As compensation for
arranging for the shipments, the carriers pay us a commission. If we provide the client with
ancillary services, such as the preparation of export documentation, we receive an additional fee.
As part of our freight forwarding services, we provide customs brokerage services in the United
States (U.S.) and most of the other countries in which we operate. Within each country, the rules
and regulations vary, along with the level of expertise that is required to perform the customs
brokerage services. We provide customs brokerage services in connection with a majority of the
shipments which we handle as both an airfreight and ocean freight forwarder. We also provide
customs brokerage services in connection with shipments forwarded by our competitors. In addition,
other companies may provide customs brokerage services in connection with the shipments which we
forward.
As part of our customs brokerage services, we prepare and file formal documentation required for
clearance through customs agencies, obtain customs bonds, facilitate the payment of import duties
on behalf of the importer, arrange for payment of collect freight charges, assist with determining
and obtaining the best commodity classifications for shipments and perform other related services.
We determine our fees for our customs brokerage services based on the volume of business
transactions for a particular client, and the type, number and complexity of services provided.
Revenues from customs brokerage and related services are recognized upon completion of the
services.
- 28 -
We believe that for the Freight Forwarding segment, net revenue (the term used by the company to
describe revenue less purchased transportation costs) is a better measure of growth in our freight
forwarding business than revenue because revenue for our services as an indirect air and ocean
carrier includes the carriers charges to us for carriage of the shipment. Our revenues are also
impacted by changes in fuel and similar surcharges, which have little relation to the volume or
value of our services provided. 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 clients plus the fees we receive for our ancillary services. Within our company, revenue
derived from freight forwarding generally is shared between the points of origin and destination,
based on a standard formula. Our revenue in our other capacities includes only commissions and fees
earned by us and is substantially similar to net revenue for the Freight Forwarding segment in this
respect.
A significant portion of our expenses are variable and adjust to reflect the level of our business
activities. Other than purchased transportation costs, staff costs are our single largest variable
expense and are less flexible in the near term.
Contract Logistics and Distribution Segment. Our contract logistics services primarily relate to
the value-added warehousing and subsequent distribution of goods and materials in order to meet
clients inventory needs and production or distribution schedules. Our services include receiving,
deconsolidation and decontainerization, sorting, put away, consolidation, assembly, cargo loading
and unloading, assembly of freight and protective packaging, storage and distribution. Our
outsourced services include inspection services, quality centers and manufacturing support.
Contract logistics revenues are recognized when the service has been completed in the ordinary
course of business.
We also provide a range of distribution and other supply chain management services, such as
domestic ground transportation, warehousing services, consulting, order management, planning and
optimization services, outsourced management services, developing specialized client-specific
supply chain solutions, and customized distribution and inventory management services. We receive
fees for the other supply chain management services that we perform.
In contrast to the Freight Forwarding segment, we believe revenue is a better measure of the growth
in our contract logistics and distribution business because this segment does not incur carrier
costs (and related fuel surcharges) in the same manner as freight forwarding, and purchased
transportation costs under this segment primarily relate to the truck brokerage operation in the
Americas region.
CLIENTasONE Strategy
We are in the third year of our five-year strategic plan, which we refer to as CLIENTasONE, and
we continue to undertake various efforts to increase the number and size of our clients and our
revenue, improve our operational performance, streamline our back-end operations, develop and
implement new systems and train and develop our employees. We have made progress in achieving our
objectives, which involves leveraging client relationships, integrating acquisitions, controlling
costs, improving our systems and processes and implementing effective change management processes.
This strategic operating plan requires that we successfully manage our operations and growth which
we may not be able to do as well as we anticipate. Our industry is extremely competitive and our
business is subject to numerous factors and risks beyond our control. If we are not successful in
our CLIENTasONE goals, we may not increase revenues or improve operating efficiency and
profitability. If we are not able to increase our revenue or improve our operational efficiency
and profitability in the future, our results of operations could be adversely affected.
As a central part of our CLIENTasONE strategy, we are continuing a technology-enabled, business
transformation initiative. This effort is aimed at establishing a single system and set of global
processes for our freight forwarding business and global financial management. It is designed to
increase efficiency through the adoption of shared services and enabling technologies. In order to
achieve this goal, we intend to deploy enabling technologies to support enterprise master data
management, financial management and freight forwarding operations management. As with any
significant IT-enabled business transformation, we face various challenges and risks with regard to
our transformation initiatives, including among others, risks associated with cost increases and
changes to the scope of our efforts, technical difficulties, change management issues and delays
associated with the development and implementation of our new freight forwarding and finance
systems. As a result of these and other issues, the anticipated costs, expected benefits, overall
scope and/or deployment schedule may change, and these changes may be material.
- 29 -
Effect of Foreign Currency Translation on Comparison of Results
Our reporting currency is the U.S. 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 will be affected by
movements in these currencies against the U.S. dollar. A depreciation of these currencies against
the U.S. dollar would result in lower revenues reported; however, as applicable costs are also
converted from these currencies, costs would also be lower. Similarly, the opposite effect will
occur if these currencies appreciate against the U.S. dollar. Additionally, the assets and
liabilities of our international operations are denominated in each countrys local currency. As
such, when the values of those assets and liabilities are translated into U.S. dollars, foreign
currency exchange rates may adversely impact the net carrying value of our assets. We cannot
predict the effects of foreign currency exchange rate fluctuations on our future operating results.
Acquisitions
Acquisitions affect the comparison of our results between periods prior to when acquisitions are
made and to the comparable periods in subsequent years, depending on the date of acquisition (e.g.
acquisitions made on February 1, the first day of the first quarter of our fiscal year, will only
affect a comparison with the prior years results and will not affect a comparison to the following
years results). The results of acquired businesses are included in our consolidated financial
statements from the effective dates of the respective acquisitions. We consider the operating
results of an acquired business during the first twelve months following the date of acquisition to
be an acquisition impact or benefit from acquisitions. Thereafter we consider the growth in an
acquired businesss results to be organic growth.
Effective May 25, 2010, the company acquired the remaining outstanding shares of EMAsu2, Ltd. (EMA
Ireland), of which the company already held a non-controlling financial interest that was acquired
through the companys acquisition of EMA Irelands parent company near the end of fiscal 2010. The
purchase price of the previously unheld shares of EMA Ireland totaled $0.6 million. The purchase
price includes contingent consideration estimated to be $0.3 million, which is based on projected
net revenues from a specific client for the four years ending January 31, 2014.
Effective December 21, 2009, the company acquired the remaining outstanding shares of Exel
MPL-A.V.B.A., LP (EMA Israel), of which the company already held a controlling financial interest
that was acquired through the companys acquisition of EMA Israels parent company in early fiscal
2010. The company has been consolidating the financial results of EMA Israel from the time the
controlling financial interest was obtained in the prior year. In connection with this acquisition,
the company obtained a non-controlling financial interest in EMA Ireland. The purchase price of the
previously unheld shares of EMA Israel totaled $6.5 million. The purchase price includes
contingent consideration estimated to be $0.3 million which is based on projected net revenues from
a specific client for the four years ending January 31, 2014.
Effective October 16, 2009, the company acquired all of the issued and outstanding shares of Tacisa
Transitaria, S.L. (Tacisa), a Spanish freight forwarder. The acquisition expanded the companys
freight forwarding coverage in Spain. The purchase price totaled $5.5 million, net of cash acquired
of $0.8 million, and included contingent consideration of $4.7 million, which was paid in August
2010 based on the fiscal 2010 operating results of Tacisa.
Seasonality
Historically, our operating results have been subject to seasonal trends when measured on a
quarterly basis. Our first and fourth fiscal quarters are traditionally weaker compared with our
other fiscal quarters. This trend is dependent on numerous factors, including the markets in which
we operate, holiday seasons, climate, economic conditions and numerous other factors. A substantial
portion of our revenue is derived from clients in industries whose shipping patterns are tied
closely to consumer demand or are based on just-in-time production schedules. We cannot accurately
predict the timing of these factors, nor can we accurately estimate the impact of any particular
factor, and thus we can give no assurance that these historical seasonal
patterns will continue in future periods.
- 30 -
Forward-Looking Statements, Uncertainties and Other Factors
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 (Exchange Act), which involve
certain risks and uncertainties. Forward-looking statements are included with respect to, among
other things, the companys current business plan and CLIENTasONE strategy and the intended
benefits thereof, anticipated changes in certain tax benefits, anticipated costs, benefits and
timing associated with our technology-enabled, business transformation initiative, the anticipated
outcome of litigation and other contingencies, the companys ability to meet its capital and
liquidity requirements for the foreseeable future, the anticipated impact of various cost reduction
efforts, and all other statements concerning future matters. These forward-looking statements are
identified by the use of such terms and phrases as intends, intend, intended, goal,
estimate, estimates, expects, expect, expected, project, projected, projections,
plans, anticipates, anticipated, should, could, may, will, designed to,
foreseeable future, believe, believes, scheduled and other similar expressions which
generally identify forward-looking statements. Forward-looking statements are inherently subject
to risks and uncertainties, some of which cannot be predicted or quantified. Future events and
actual results could differ materially from those set forth in, contemplated by, or underlying our
forward-looking statements. Many important factors may cause the companys actual results to
differ materially from those discussed in any such forward-looking statements, including but not
limited to the recent economic volatility that has materially impacted trade volumes,
transportation capacity, pricing dynamics and overall margins; the financial condition of many of
our clients; the impact of sharply rising freight transportation rates on the companys net
revenue; capacity constraints and our ability to secure space on third party airplanes, steam ships
and other modes of transportation; planned or unplanned consequences of the companys sales
initiatives, procurement initiatives and business transformation efforts; our clients demand for
our services; the impact of cost reduction measures undertaken by the company and the amount and
timing of the expected benefits from such measures; integration risks associated with acquisitions;
the ability to retain clients and management of acquisition targets; increased competition; the
impact of volatile fuel costs and changes in foreign exchange rates; changes in the companys
effective tax rates; industry consolidation making it more difficult to compete against larger
companies; general economic, political and market conditions, including those in Africa, Asia and
EMENA which is comprised of Europe, Middle East and North Africa; work stoppages or slowdowns or
other material interruptions in transportation services; risks of international operations; risks
associated with, and costs and expenses the company will incur as a result of, the ongoing publicly
announced investigations by the U.S. Department of Justice, the European Commission (EC) and other
governmental agencies into the pricing practices of the international freight forwarding and cargo
transportation industry and other similar or related investigations and lawsuits; the success and
effects of new strategies; disruptions caused by epidemics, conflicts, wars and terrorism; and the
other risks and uncertainties described herein and in our other filings with the Securities and
Exchange Commission (SEC); and other factors outside our control. Although UTi believes that the
assumptions underlying the forward-looking statements are reasonable, any of the assumptions could
prove inaccurate and, therefore, we cannot assure you that the results contemplated in any
forward-looking statements will be realized in the timeframe anticipated or at all. In light of the
significant uncertainties inherent in the forward-looking information included herein, the
inclusion of such information should not be regarded as a representation by UTi or any other person
that UTis objectives or plans will be achieved. Accordingly, investors are cautioned not to place
undue reliance on our forward-looking statements. UTi undertakes no obligation to publicly update
or revise any forward-looking statements, whether as a result of new information, future events or
otherwise, except as required by law.
- 31 -
In addition to the risks, uncertainties and other factors discussed elsewhere in this Form 10-Q,
the risks, uncertainties and other factors that could cause or contribute to actual results
differing materially from those expressed or implied in any forward-looking statements include,
without limitation, those set forth under Part I. Item 1A Risk Factors in the companys Annual
Report on Form 10-K for the fiscal year ended January 31, 2010 filed with the SEC (together with
any amendments thereto and additions and changes thereto contained in subsequent filings of
quarterly reports on Form 10-Q), those contained in the companys other filings with the SEC, and
those set forth above. 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 Exchange Act.
Discussion of Results
The following discussion of our operating results explains material changes in our consolidated
results for the second quarter and first half of fiscal 2011 compared to the second quarter and
first half of fiscal 2010. The discussion should be read in conjunction with the consolidated
financial statements and related notes included elsewhere in this quarterly report and our audited
consolidated financial statements and notes thereto for the year ended January 31, 2010, which are
included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2010, on file with
the SEC. Our consolidated financial statements included in this report have been prepared in U.S.
dollars and in accordance with accounting principles generally accepted in the United States (U.S.
GAAP).
Segment Operating Results
The companys operations are principally managed by core business operations. As discussed above in
Note 1 Presentation of Financial Statements of our Notes to the Consolidated Financial
Statements, our operations are broken into the following reportable segments: Freight Forwarding
and Contract Logistics and Distribution. Certain corporate costs are allocated to the operating
segments directly. The remaining corporate costs are those that are not specifically attributable
to operating segments and are presented separately. The factors for determining the reportable
segments include the manner in which management evaluates the performance of the company combined
with the nature of the individual business activities.
- 32 -
For segment reporting purposes by geographic region, airfreight and ocean freight forwarding
revenues for the movement of goods is attributed to the country where the shipment originates.
Revenues for all other services (including contract logistics and distribution services) are
attributed to the country where the services are performed. For purposes of this discussion and
analysis, net revenue is the term management uses to describe revenues minus purchased
transportation costs. Our segment reporting results for the three and six months ended July 31,
2010 and 2009, along with the dollar amount of the changes and the percentage changes between the
time periods shown, are set forth in the following tables (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended July 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
Contract |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract |
|
|
|
|
|
|
|
|
|
|
|
|
|
Logistics |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Logistics |
|
|
|
|
|
|
|
|
|
Freight |
|
|
and |
|
|
|
|
|
|
|
|
|
|
Freight |
|
|
and |
|
|
|
|
|
|
|
|
|
Forwarding |
|
|
Distribution |
|
|
Corporate |
|
|
Total |
|
|
Forwarding |
|
|
Distribution |
|
|
Corporate |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
808,990 |
|
|
$ |
342,100 |
|
|
$ |
|
|
|
|
1,151,090 |
|
|
$ |
539,364 |
|
|
$ |
301,138 |
|
|
$ |
|
|
|
$ |
840,502 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased transportation costs |
|
|
635,147 |
|
|
|
136,873 |
|
|
|
|
|
|
|
772,020 |
|
|
|
390,259 |
|
|
|
110,877 |
|
|
|
|
|
|
|
501,136 |
|
Staff costs |
|
|
94,363 |
|
|
|
104,664 |
|
|
|
5,492 |
|
|
|
204,519 |
|
|
|
85,397 |
|
|
|
97,637 |
|
|
|
3,629 |
|
|
|
186,663 |
|
Depreciation |
|
|
3,965 |
|
|
|
7,277 |
|
|
|
21 |
|
|
|
11,263 |
|
|
|
3,722 |
|
|
|
6,664 |
|
|
|
105 |
|
|
|
10,491 |
|
Amortization of intangible assets |
|
|
1,000 |
|
|
|
2,163 |
|
|
|
|
|
|
|
3,163 |
|
|
|
987 |
|
|
|
1,825 |
|
|
|
|
|
|
|
2,812 |
|
Other operating expenses |
|
|
46,513 |
|
|
|
74,047 |
|
|
|
5,664 |
|
|
|
126,224 |
|
|
|
38,313 |
|
|
|
71,403 |
|
|
|
7,276 |
|
|
|
116,992 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
780,988 |
|
|
|
325,024 |
|
|
|
11,177 |
|
|
|
1,117,189 |
|
|
|
518,678 |
|
|
|
288,406 |
|
|
|
11,010 |
|
|
|
818,094 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income/(loss) |
|
$ |
28,002 |
|
|
$ |
17,076 |
|
|
$ |
(11,177 |
) |
|
$ |
33,901 |
|
|
$ |
20,686 |
|
|
$ |
12,732 |
|
|
$ |
(11,010 |
) |
|
$ |
22,408 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change to three months ended July 31, 2010 |
|
|
|
from three months ended July 31, 2009 |
|
|
|
Amount |
|
|
Percentage |
|
|
|
|
|
|
|
Contract |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract |
|
|
|
|
|
|
|
|
|
|
|
|
|
Logistics |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Logistics |
|
|
|
|
|
|
|
|
|
Freight |
|
|
and |
|
|
|
|
|
|
|
|
|
|
Freight |
|
|
and |
|
|
|
|
|
|
|
|
|
Forwarding |
|
|
Distribution |
|
|
Corporate |
|
|
Total |
|
|
Forwarding |
|
|
Distribution |
|
|
Corporate |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
269,626 |
|
|
$ |
40,962 |
|
|
$ |
|
|
|
$ |
310,588 |
|
|
|
50 |
% |
|
|
14 |
% |
|
|
|
% |
|
|
37 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased transportation costs |
|
|
244,888 |
|
|
|
25,996 |
|
|
|
|
|
|
|
270,884 |
|
|
|
63 |
|
|
|
23 |
|
|
|
|
|
|
|
54 |
|
Staff costs |
|
|
8,966 |
|
|
|
7,027 |
|
|
|
1,863 |
|
|
|
17,856 |
|
|
|
10 |
|
|
|
7 |
|
|
|
51 |
|
|
|
10 |
|
Depreciation |
|
|
243 |
|
|
|
613 |
|
|
|
(84 |
) |
|
|
772 |
|
|
|
7 |
|
|
|
9 |
|
|
|
(80 |
) |
|
|
7 |
|
Amortization of intangible assets |
|
|
13 |
|
|
|
338 |
|
|
|
|
|
|
|
351 |
|
|
|
1 |
|
|
|
19 |
|
|
|
|
|
|
|
12 |
|
Other operating expenses |
|
|
8,200 |
|
|
|
2,644 |
|
|
|
(1,612 |
) |
|
|
9,232 |
|
|
|
21 |
|
|
|
4 |
|
|
|
(22 |
) |
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
262,310 |
|
|
|
36,618 |
|
|
|
167 |
|
|
|
299,095 |
|
|
|
51 |
|
|
|
13 |
|
|
|
2 |
|
|
|
37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income/(loss) |
|
$ |
7,316 |
|
|
$ |
4,344 |
|
|
$ |
(167 |
) |
|
$ |
11,493 |
|
|
|
35 |
% |
|
|
34 |
% |
|
|
2 |
% |
|
|
51 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 33 -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended July 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
Contract |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract |
|
|
|
|
|
|
|
|
|
|
|
|
|
Logistics |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Logistics |
|
|
|
|
|
|
|
|
|
Freight |
|
|
and |
|
|
|
|
|
|
|
|
|
|
Freight |
|
|
and |
|
|
|
|
|
|
|
|
|
Forwarding |
|
|
Distribution |
|
|
Corporate |
|
|
Total |
|
|
Forwarding |
|
|
Distribution |
|
|
Corporate |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
1,530,764 |
|
|
$ |
675,482 |
|
|
$ |
|
|
|
$ |
2,206,246 |
|
|
$ |
1,032,954 |
|
|
$ |
575,904 |
|
|
$ |
|
|
|
$ |
1,608,858 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased transportation costs |
|
|
1,197,482 |
|
|
|
263,946 |
|
|
|
|
|
|
|
1,461,428 |
|
|
|
749,623 |
|
|
|
210,362 |
|
|
|
|
|
|
|
959,985 |
|
Staff costs |
|
|
188,753 |
|
|
|
211,641 |
|
|
|
11,126 |
|
|
|
411,520 |
|
|
|
166,302 |
|
|
|
189,015 |
|
|
|
7,149 |
|
|
|
362,466 |
|
Depreciation |
|
|
7,797 |
|
|
|
14,505 |
|
|
|
373 |
|
|
|
22,675 |
|
|
|
7,349 |
|
|
|
12,792 |
|
|
|
204 |
|
|
|
20,345 |
|
Amortization of intangible assets |
|
|
2,030 |
|
|
|
4,477 |
|
|
|
|
|
|
|
6,507 |
|
|
|
1,813 |
|
|
|
3,636 |
|
|
|
|
|
|
|
5,449 |
|
Restructuring charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,231 |
|
|
|
1,231 |
|
Other operating expenses |
|
|
92,883 |
|
|
|
147,071 |
|
|
|
11,309 |
|
|
|
251,263 |
|
|
|
76,178 |
|
|
|
136,894 |
|
|
|
6,050 |
|
|
|
219,122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
1,488,945 |
|
|
|
641,640 |
|
|
|
22,808 |
|
|
|
2,153,393 |
|
|
|
1,001,265 |
|
|
|
552,699 |
|
|
|
14,634 |
|
|
|
1,568,598 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income/(loss) |
|
$ |
41,819 |
|
|
$ |
33,842 |
|
|
$ |
(22,808 |
) |
|
$ |
52,853 |
|
|
$ |
31,689 |
|
|
$ |
23,205 |
|
|
$ |
(14,634 |
) |
|
$ |
40,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change to six months ended July 31, 2010 |
|
|
|
from six months ended July 31, 2009 |
|
|
|
Amount |
|
|
Percentage |
|
|
|
|
|
|
|
Contract |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract |
|
|
|
|
|
|
|
|
|
|
|
|
|
Logistics |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Logistics |
|
|
|
|
|
|
|
|
|
Freight |
|
|
and |
|
|
|
|
|
|
|
|
|
|
Freight |
|
|
and |
|
|
|
|
|
|
|
|
|
Forwarding |
|
|
Distribution |
|
|
Corporate |
|
|
Total |
|
|
Forwarding |
|
|
Distribution |
|
|
Corporate |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
497,810 |
|
|
$ |
99,578 |
|
|
$ |
|
|
|
$ |
597,388 |
|
|
|
48 |
% |
|
|
17 |
% |
|
|
|
% |
|
|
37 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased transportation costs |
|
|
447,859 |
|
|
|
53,584 |
|
|
|
|
|
|
|
501,443 |
|
|
|
60 |
|
|
|
25 |
|
|
|
|
|
|
|
52 |
|
Staff costs |
|
|
22,451 |
|
|
|
22,626 |
|
|
|
3,977 |
|
|
|
49,054 |
|
|
|
14 |
|
|
|
12 |
|
|
|
56 |
|
|
|
14 |
|
Depreciation |
|
|
448 |
|
|
|
1,713 |
|
|
|
169 |
|
|
|
2,330 |
|
|
|
6 |
|
|
|
13 |
|
|
|
83 |
|
|
|
11 |
|
Amortization of intangible assets |
|
|
217 |
|
|
|
841 |
|
|
|
|
|
|
|
1,058 |
|
|
|
12 |
|
|
|
23 |
|
|
|
|
|
|
|
19 |
|
Restructuring charges |
|
|
|
|
|
|
|
|
|
|
(1,231 |
) |
|
|
(1,231 |
) |
|
|
|
|
|
|
|
|
|
|
(100 |
) |
|
|
(100 |
) |
Other operating expenses |
|
|
16,705 |
|
|
|
10,177 |
|
|
|
5,259 |
|
|
|
32,141 |
|
|
|
22 |
|
|
|
7 |
|
|
|
87 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
487,680 |
|
|
|
89,941 |
|
|
|
8,174 |
|
|
|
585,795 |
|
|
|
49 |
|
|
|
16 |
|
|
|
56 |
|
|
|
37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income/(loss) |
|
$ |
10,130 |
|
|
$ |
10,637 |
|
|
$ |
(8,174 |
) |
|
$ |
12,593 |
|
|
|
32 |
% |
|
|
46 |
% |
|
|
56 |
% |
|
|
31 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 34 -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended July 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
Contract |
|
|
|
|
|
|
|
|
|
|
Contract |
|
|
|
|
|
|
|
|
|
|
Logistics |
|
|
|
|
|
|
|
|
|
|
Logistics |
|
|
|
|
|
|
Freight |
|
|
and |
|
|
|
|
|
|
Freight |
|
|
and |
|
|
|
|
|
|
Forwarding |
|
|
Distribution |
|
|
|
|
|
|
Forwarding |
|
|
Distribution |
|
|
|
|
|
|
Revenues |
|
|
Revenues |
|
|
Total |
|
|
Revenues |
|
|
Revenues |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMENA |
|
$ |
229,934 |
|
|
$ |
62,889 |
|
|
$ |
292,823 |
|
|
$ |
202,916 |
|
|
$ |
59,994 |
|
|
$ |
262,910 |
|
Americas |
|
|
165,538 |
|
|
|
182,852 |
|
|
|
348,390 |
|
|
|
113,623 |
|
|
|
157,439 |
|
|
|
271,062 |
|
Asia Pacific |
|
|
316,969 |
|
|
|
11,132 |
|
|
|
328,101 |
|
|
|
160,965 |
|
|
|
9,479 |
|
|
|
170,444 |
|
Africa |
|
|
96,549 |
|
|
|
85,227 |
|
|
|
181,776 |
|
|
|
61,860 |
|
|
|
74,226 |
|
|
|
136,086 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
808,990 |
|
|
$ |
342,100 |
|
|
$ |
1,151,090 |
|
|
$ |
539,364 |
|
|
$ |
301,138 |
|
|
$ |
840,502 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended July 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
Contract |
|
|
|
|
|
|
|
|
|
|
Contract |
|
|
|
|
|
|
|
|
|
|
Logistics |
|
|
|
|
|
|
|
|
|
|
Logistics |
|
|
|
|
|
|
Freight |
|
|
and |
|
|
|
|
|
|
Freight |
|
|
and |
|
|
|
|
|
|
Forwarding |
|
|
Distribution |
|
|
|
|
|
|
Forwarding |
|
|
Distribution |
|
|
|
|
|
|
Revenues |
|
|
Revenues |
|
|
Total |
|
|
Revenues |
|
|
Revenues |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMENA |
|
$ |
460,328 |
|
|
$ |
128,083 |
|
|
$ |
588,411 |
|
|
$ |
386,748 |
|
|
$ |
113,550 |
|
|
$ |
500,298 |
|
Americas |
|
|
315,638 |
|
|
|
356,156 |
|
|
|
671,794 |
|
|
|
219,711 |
|
|
|
309,384 |
|
|
|
529,095 |
|
Asia Pacific |
|
|
572,031 |
|
|
|
20,319 |
|
|
|
592,350 |
|
|
|
306,480 |
|
|
|
16,788 |
|
|
|
323,268 |
|
Africa |
|
|
182,767 |
|
|
|
170,924 |
|
|
|
353,691 |
|
|
|
120,015 |
|
|
|
136,182 |
|
|
|
256,197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,530,764 |
|
|
$ |
675,482 |
|
|
$ |
2,206,246 |
|
|
$ |
1,032,954 |
|
|
$ |
575,904 |
|
|
$ |
1,608,858 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended July 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
Contract |
|
|
|
|
|
|
|
|
|
|
Contract |
|
|
|
|
|
|
|
|
|
|
Logistics |
|
|
|
|
|
|
|
|
|
|
Logistics |
|
|
|
|
|
|
Freight |
|
|
and |
|
|
|
|
|
|
Freight |
|
|
and |
|
|
|
|
|
|
Forwarding |
|
|
Distribution |
|
|
|
|
|
|
Forwarding |
|
|
Distribution |
|
|
|
|
|
|
Net |
|
|
Net |
|
|
|
|
|
|
Net |
|
|
Net |
|
|
|
|
|
|
Revenues |
|
|
Revenues |
|
|
Total |
|
|
Revenues |
|
|
Revenues |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMENA |
|
$ |
58,572 |
|
|
$ |
35,289 |
|
|
$ |
93,861 |
|
|
$ |
59,140 |
|
|
$ |
38,423 |
|
|
$ |
97,563 |
|
Americas |
|
|
44,319 |
|
|
|
94,454 |
|
|
|
138,773 |
|
|
|
35,295 |
|
|
|
87,530 |
|
|
|
122,825 |
|
Asia Pacific |
|
|
47,868 |
|
|
|
7,308 |
|
|
|
55,176 |
|
|
|
36,184 |
|
|
|
6,627 |
|
|
|
42,811 |
|
Africa |
|
|
23,084 |
|
|
|
68,176 |
|
|
|
91,260 |
|
|
|
18,486 |
|
|
|
57,681 |
|
|
|
76,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
173,843 |
|
|
$ |
205,227 |
|
|
$ |
379,070 |
|
|
$ |
149,105 |
|
|
$ |
190,261 |
|
|
$ |
339,366 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 35 -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended July 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
Contract |
|
|
|
|
|
|
|
|
|
|
Contract |
|
|
|
|
|
|
|
|
|
|
Logistics |
|
|
|
|
|
|
|
|
|
|
Logistics |
|
|
|
|
|
|
Freight |
|
|
and |
|
|
|
|
|
|
Freight |
|
|
and |
|
|
|
|
|
|
Forwarding |
|
|
Distribution |
|
|
|
|
|
|
Forwarding |
|
|
Distribution |
|
|
|
|
|
|
Net |
|
|
Net |
|
|
|
|
|
|
Net |
|
|
Net |
|
|
|
|
|
|
Revenues |
|
|
Revenues |
|
|
Total |
|
|
Revenues |
|
|
Revenues |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMENA |
|
$ |
117,385 |
|
|
$ |
74,938 |
|
|
$ |
192,323 |
|
|
$ |
109,926 |
|
|
$ |
75,310 |
|
|
$ |
185,236 |
|
Americas |
|
|
85,091 |
|
|
|
184,985 |
|
|
|
270,076 |
|
|
|
69,360 |
|
|
|
172,920 |
|
|
|
242,280 |
|
Asia Pacific |
|
|
86,605 |
|
|
|
13,928 |
|
|
|
100,533 |
|
|
|
69,498 |
|
|
|
11,799 |
|
|
|
81,297 |
|
Africa |
|
|
44,201 |
|
|
|
137,685 |
|
|
|
181,886 |
|
|
|
34,547 |
|
|
|
105,513 |
|
|
|
140,060 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
333,282 |
|
|
$ |
411,536 |
|
|
$ |
744,818 |
|
|
$ |
283,331 |
|
|
$ |
365,542 |
|
|
$ |
648,873 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
July 31, |
|
|
July 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Airfreight forwarding |
|
$ |
419,439 |
|
|
$ |
270,010 |
|
|
$ |
787,131 |
|
|
$ |
509,298 |
|
Ocean freight forwarding |
|
|
304,626 |
|
|
|
205,548 |
|
|
|
576,458 |
|
|
|
397,614 |
|
Customs brokerage |
|
|
26,611 |
|
|
|
23,363 |
|
|
|
52,046 |
|
|
|
43,312 |
|
Contract logistics |
|
|
179,299 |
|
|
|
157,736 |
|
|
|
356,309 |
|
|
|
300,662 |
|
Distribution |
|
|
121,219 |
|
|
|
104,514 |
|
|
|
238,593 |
|
|
|
203,014 |
|
Other |
|
|
99,896 |
|
|
|
79,331 |
|
|
|
195,709 |
|
|
|
154,958 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,151,090 |
|
|
$ |
840,502 |
|
|
$ |
2,206,246 |
|
|
$ |
1,608,858 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased transportation costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Airfreight forwarding |
|
$ |
336,119 |
|
|
$ |
197,906 |
|
|
$ |
629,661 |
|
|
$ |
373,262 |
|
Ocean freight forwarding |
|
|
257,782 |
|
|
|
162,865 |
|
|
|
484,968 |
|
|
|
315,275 |
|
Customs brokerage |
|
|
2,248 |
|
|
|
1,564 |
|
|
|
3,818 |
|
|
|
2,682 |
|
Contract logistics |
|
|
41,563 |
|
|
|
28,787 |
|
|
|
77,286 |
|
|
|
52,178 |
|
Distribution |
|
|
83,921 |
|
|
|
69,399 |
|
|
|
163,038 |
|
|
|
135,898 |
|
Other |
|
|
50,387 |
|
|
|
40,615 |
|
|
|
102,657 |
|
|
|
80,690 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
772,020 |
|
|
$ |
501,136 |
|
|
$ |
1,461,428 |
|
|
$ |
959,985 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 36 -
The following table shows our revenues, purchased transportation costs and other operating expenses
for the periods presented, expressed as a percentage of revenues.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
July 31, |
|
|
July 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Airfreight forwarding |
|
|
36 |
% |
|
|
32 |
% |
|
|
36 |
% |
|
|
32 |
% |
Ocean freight forwarding |
|
|
26 |
|
|
|
25 |
|
|
|
26 |
|
|
|
25 |
|
Customs brokerage |
|
|
2 |
|
|
|
3 |
|
|
|
2 |
|
|
|
3 |
|
Contract logistics |
|
|
16 |
|
|
|
19 |
|
|
|
16 |
|
|
|
19 |
|
Distribution |
|
|
11 |
|
|
|
12 |
|
|
|
11 |
|
|
|
12 |
|
Other |
|
|
9 |
|
|
|
9 |
|
|
|
9 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased transportation costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Airfreight forwarding |
|
|
29 |
% |
|
|
24 |
% |
|
|
29 |
% |
|
|
23 |
% |
Ocean freight forwarding |
|
|
22 |
|
|
|
19 |
|
|
|
22 |
|
|
|
20 |
|
Customs brokerage |
|
|
* |
|
|
|
* |
|
|
|
* |
|
|
|
* |
|
Contract logistics |
|
|
4 |
|
|
|
3 |
|
|
|
4 |
|
|
|
3 |
|
Distribution |
|
|
7 |
|
|
|
8 |
|
|
|
7 |
|
|
|
8 |
|
Other |
|
|
5 |
|
|
|
6 |
|
|
|
4 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total purchased transportation costs |
|
|
67 |
|
|
|
60 |
|
|
|
66 |
|
|
|
60 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Staff costs |
|
|
18 |
|
|
|
22 |
|
|
|
19 |
|
|
|
23 |
|
Depreciation |
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
Amortization of intangible assets |
|
|
* |
|
|
|
* |
|
|
|
* |
|
|
|
* |
|
Restructuring charges |
|
|
* |
|
|
|
* |
|
|
|
* |
|
|
|
* |
|
Other operating expenses |
|
|
11 |
|
|
|
14 |
|
|
|
11 |
|
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
97 |
|
|
|
97 |
|
|
|
98 |
|
|
|
98 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
3 |
|
|
|
3 |
|
|
|
2 |
|
|
|
2 |
|
Interest income |
|
|
* |
|
|
|
* |
|
|
|
* |
|
|
|
* |
|
Interest expense |
|
|
(1 |
) |
|
|
1 |
|
|
|
(1 |
) |
|
|
1 |
|
Other income |
|
|
* |
|
|
|
* |
|
|
|
* |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax income |
|
|
3 |
|
|
|
2 |
|
|
|
2 |
|
|
|
2 |
|
Provision for income taxes |
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
2 |
|
|
|
2 |
|
|
|
1 |
|
|
|
1 |
|
Net income attributable to noncontrolling interests |
|
|
* |
|
|
|
* |
|
|
|
* |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to UTi Worldwide Inc. |
|
|
2 |
% |
|
|
1 |
% |
|
|
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Three months ended July 31, 2010 compared to three months ended July 31, 2009
Revenues
Total revenues increased $310.6 million, or 37%, to $1,151.1 million for the second quarter of
fiscal 2011, compared to total revenues of $840.5 million for the corresponding prior year period.
The increase in revenues was primarily the result of increases in freight volume and rates related
to air and ocean freight and volume increases across our other service lines when compared to the
corresponding prior year period. Foreign currency fluctuations did not have a material impact on
revenues and expenses for the second quarter of fiscal 2011, compared to the corresponding prior
year period.
- 37 -
Freight forwarding revenues in total increased $269.6 million,
or 50%, to $809.0 million for the second quarter of fiscal 2011, compared to $539.4 million for the corresponding prior year period.
The increase was primarily the result of increased airfreight and ocean freight forwarding volumes and rates over the corresponding prior
year period as well as an increase in fuel surcharges for airfreight. We attribute the increase in volumes in the second quarter to
increased shipments associated with consumer demand and continued restocking activities. We estimate that airfreight volumes during
the second quarter of fiscal 2011 were nearly 20% higher than the levels for the same quarter two years ago. Looking forward, we do
not expect to sustain this level of growth during the second half of the current fiscal year as leading economic indicators currently
point to a slowing macro-economic environment as indicated by our growth rate which began decelerating in June and July 2010.
Additionally, we will incur tougher second-half period to period comparisons.
Airfreight forwarding revenues increased $149.4 million, or 55%, to $419.4 million for the second
quarter of fiscal 2011, compared to $270.0 million for the corresponding prior year period. Fuel
surcharges increased approximately $38.0 million when compared to the prior year comparable period
as a result of an increase in aviation fuel prices. Movements in fuel surcharges impact revenues
but generally do not have a material impact on net revenues. Airfreight volumes increased 42% for
the second quarter of fiscal 2011 when compared to the corresponding prior year period. Restocking
activities, increased consumer demand, and modal shifts from ocean freight to airfreight brought on
by ongoing capacity and vessel sailing schedule changes, all contributed to the strong airfreight
volume growth. Airfreight tonnage growth was exceptionally strong in May 2010 due to strong demand
however, the rate of growth decelerated in June and July 2010 because of more difficult comparisons to
the comparable months from the prior year. In addition to volume increases, airfreight carrier
rates also increased for the second quarter of fiscal 2011 when compared to the prior year second
quarter.
Ocean freight forwarding revenues increased $99.1 million, or 48%, to $304.6 million for the second
quarter of fiscal 2011, compared to $205.5 million for the corresponding prior year period. This
increase was partially due to an approximately 21% increase in ocean freight volumes, as expressed
in twenty-foot equivalent units (TEUs). As with airfreight, May 2010 was the strongest month in
the quarter however, the rate of growth in ocean freight forwarding tapered off in June and July
2010. In addition to volume increases, ocean freight carrier rates also increased for the second
quarter of fiscal 2011 when compared to the prior year second quarter.
Customs brokerage revenues increased $3.2 million, or 14%, to $26.6 million for the second quarter
of fiscal 2011, compared to $23.4 million for the corresponding prior year period. The increase in
customs brokerage revenues was primarily due to a 12% increase in the number of clearances.
Other freight forwarding related revenues increased $17.9 million, or 44%, to $58.3 million for the
second quarter of fiscal 2011, compared to $40.4 million for the corresponding prior year period,
primarily due to increases in road freight and other distribution volumes.
Contract logistics and distribution revenues in total increased $41.0 million, or 14%, to $342.1
million for the second quarter of fiscal 2011, compared to $301.1 million for the corresponding
prior year period. The increase was due to the increase in logistics activity and volumes and
associated increases in distribution requirements of our existing and new clients.
Contract logistics revenues increased $21.6 million, or 14%, to $179.3 million for the second
quarter of fiscal 2011, compared to $157.7 million for the corresponding prior year period. The
increase was primarily due to increases in client volumes where we provide services, compared to
the same period of last year. Client volumes were strong in the retail and consumer segments, and we
gained several new pieces of business.
Distribution revenues increased $16.7 million, or 16%, to $121.2 million for the second quarter of
fiscal 2011, compared to $104.5 million for the corresponding prior year period. Domestic freight
volumes in the U.S. have been improving and this has benefited our U.S. distribution businesses
when compared to the prior year comparable period.
Other contract logistics and distribution related revenues increased $2.7 million, or 7%, to $41.6
million for the second quarter of fiscal 2011, compared to $38.9 million for the corresponding
prior year period.
- 38 -
Net revenues
Total net revenues increased $39.7 million, or 12%, to $379.1 million for the second quarter of
fiscal 2011, compared to total net revenues of $339.4 million for the corresponding prior year
period. The increase in net revenues was primarily a result of increases in freight volumes across
our service lines in the period when compared to the corresponding prior year period. A decline in
our freight forwarding yields, computed as net revenues divided by revenues, for the second quarter
of fiscal 2011 when compared to the same period last year adversely impacted the increase in net
revenues for the period. While carrier rates remained volatile on many trade lanes during the
second quarter of fiscal 2011, we were able to achieve improvements in net revenue per unit for
both air and ocean in June and July 2010. The company is also making progress in our gateway and
freight consolidation activities.
Freight forwarding net revenues increased $24.7 million, or 17%, to $173.8 million for the second
quarter of fiscal 2011, compared to $149.1 million for the corresponding prior year period. Net
revenues are primarily a function of volume movements and the expansion or contraction in yields.
Airfreight forwarding net revenues increased $11.2 million, or 16%, to $83.3 million for the second
quarter of fiscal 2011 compared to $72.1 million for the corresponding prior year period. Although
airfreight forwarding revenues increased 55% for the second quarter of fiscal 2011 compared to the
corresponding prior year period, airfreight forwarding yields contracted by approximately 680 basis
points on a comparative basis, causing airfreight forwarding net revenues to increase to a much
lesser degree compared to the increase in airfreight forwarding revenues. Airfreight tonnage
increased 42% for the second quarter of fiscal 2011, which was offset by a 19% decrease in net
revenue per kilo as the rates we charged our clients did not increase to the same extent as our
purchased transportation costs. On a sequential basis, net revenue per kilo for the second quarter
of fiscal 2011 was consistent with the first quarter of fiscal 2011.
Airfreight yields for the second quarter of fiscal 2011 were 19.9%, a decrease of approximately 680
basis points compared to 26.7% for the corresponding prior year period. However when compared on a
sequential basis to the first quarter of fiscal 2011, yields decreased approximately 30 basis
points, from 20.2%. This yield compression from earlier quarters was primarily caused by less
favorable airfreight pricing environments, particularly caused by continued carrier capacity
shortages as described above.
Ocean freight forwarding net revenues increased $4.2 million, or 10%, to $46.8 million for the
second quarter of fiscal 2011, compared to $42.7 million for the corresponding prior year period.
The net increase in ocean freight forwarding net revenues was primarily due to an approximately 21%
increase in TEUs, which was partially offset by a 9% decrease in net revenues per TEU.
As with airfreight, ocean freight yields contracted during the second quarter of fiscal 2011,
compared to the corresponding prior year period. As a result ocean freight net revenues increased
to a lesser degree than the increase in revenues. When compared on a sequential basis to the first
quarter of fiscal 2011, ocean freight yields decreased approximately 100 basis points from 16.4%.
For the second quarter of fiscal 2011, ocean freight yields contracted approximately 540 basis
points to 15.4% from 20.8% for the corresponding prior year period. This year-over-year yield
compression resulted primarily from constrained carrier capacity, which in turn allowed the
shipping lines to increase their pricing compared to the comparative prior year quarter. Because
we have been unable to fully pass on these increases to our clients, the increased purchased
transportation costs adversely impacted ocean freight net revenues in the period. Net revenue per
TEU in the second quarter of fiscal 2011 decreased 9% percent compared to the corresponding prior
year period.
Customs brokerage net revenues increased $2.6 million, or 12%, to $24.4 million for the second
quarter of fiscal 2011, compared to $21.8 million for the corresponding prior year period. The
increase in customs brokerage net revenues was primarily due to a 12% increase in the number of
clearances. Net revenue per clearance remained consistent compared to the corresponding prior year
period.
- 39 -
Other freight forwarding related net revenues increased $6.8 million, or 54%, to $19.3 million for
the second quarter of fiscal 2011, compared to $12.5 million for the corresponding prior year
period, primarily due to increases in road freight and other distribution volumes.
Contract logistics and distribution net revenues increased $15.0 million, or 8%, to $205.2 million
for the second quarter of fiscal 2011, compared to $190.3 million for the corresponding prior year
period.
Contract logistics net revenues increased $8.8 million or 7% to $137.7 million for the second
quarter of fiscal 2011, compared to $128.9 million for the corresponding prior year period. The
increase was a result of new client sites and increases in client volumes, compared to the
corresponding prior year period.
Distribution net revenues increased $2.2 million, or 6%, to $37.3 million for the second quarter of
fiscal 2011, compared to $35.1 million for the corresponding prior year period. The net increase
in distribution net revenue was primarily the result of increased shipment volume over the
comparative prior year period.
Other contract logistics and distribution related revenues increased $4.0 million, or 15%, to $30.2
million for the second quarter of fiscal 2011, compared to $26.2 million for the corresponding
prior year period.
Staff costs
Staff costs in our freight forwarding segment increased $9.0 million, or 10%, to $94.4 million for
the second quarter of fiscal 2011, compared to $85.4 million for the corresponding prior year
period. As a percentage of freight forwarding segment revenues, staff costs in the freight
forwarding segment were approximately 12% and 16% for the second quarters of fiscal 2011 and 2010,
respectively. Staff costs in our freight forwarding segment are largely driven by total shipment
counts rather than volumes stated in kilograms or TEUs, and this has largely driven the increase in
staff costs.
Staff costs in our contract logistics and distribution segment increased $7.0 million, or 7%, to
$104.7 million for the second quarter of fiscal 2011, compared to $97.6 million for the
corresponding prior year period. The majority of the net increase was caused by new client sites
and an increase in logistics volumes over the comparative prior year period.
Depreciation
Total depreciation for all segments, was $11.3 million for the second quarter of fiscal 2011,
compared to $10.5 million for the corresponding prior year period. When expressed as a percentage
of revenue, depreciation expense remained constant at approximately 1% of revenue for the second
quarter of fiscal 2011 compared to the corresponding prior year period.
Amortization of intangible assets
Amortization of intangible assets was $3.2 million for the second quarter of fiscal 2011, compared
to $2.8 million for the corresponding prior year period. Acquisitions completed since the second
quarter of the preceding year did not have a material impact on amortization of intangible assets
for the second quarter of fiscal 2011, compared to the corresponding prior year period.
Other operating expenses
Other operating costs in the freight forwarding segment increased $8.2 million, or 21%, to $46.5
million in the second quarter of fiscal 2011, compared to $38.3 million for the corresponding prior
year period. The net increase in other operating costs in our freight forwarding segment was
primarily due to higher shipment volumes.
- 40 -
Other operating costs in the contract logistics and distribution segment increased by $2.6 million,
or 4%, to $74.0 million for the second quarter of fiscal 2011, compared to $71.4 million for the
corresponding prior year period.
Other operating expenses at corporate were $5.7 million for the second quarter of fiscal 2011,
compared to other operating expenses of $7.3 million during the corresponding prior year period.
Interest expense, net
Interest income relates primarily to interest earned on our cash deposits, while interest expense
consists primarily of interest on our credit facilities, our senior unsecured guaranteed notes, of
which $121.7 million of principle was outstanding as of July 31, 2010, and capital lease
obligations. Interest income increased $1.1 million, or 50%, and interest expense increased $2.7
million, or 60%, for the second quarter of fiscal 2011, compared to the corresponding prior year
period. The movements in interest income and interest expense are primarily due to a change in the
mix of total net deposits and borrowings outstanding during the comparative periods, as well as
interest rate movements.
Other income and expenses, net
Other income and expenses primarily relate to foreign currency gains and losses on certain of our
intercompany loans, offset by withholding taxes and various other taxes not related to income
taxes. Other income, net of expenses, was $0.2 million in the second quarter of fiscal 2011,
compared to other expenses, net of income, of $0.8 million for the corresponding prior year period.
Provision for income taxes
Our effective income tax rate for the second quarter of fiscal 2011 was 31%, resulting in a
provision for income taxes of $9.3 million compared to pretax income of $30.1 million. Our
effective income tax rate for the second quarter of fiscal 2010 was 31%. Changes in our effective
tax rates are primarily attributable to the mix of taxable income across geographic regions. The
effective income tax rate applied to quarterly pretax income for interim quarters is based on
estimated effective tax rates to be applied to our operations for the entire fiscal year. We
currently estimate our effective tax rate for fiscal 2011 to be approximately 32%, however, the
actual effective tax rate will depend on a variety of factors, including the geographic mix of our
business during the remaining interim periods of fiscal 2011.
Net income attributable to noncontrolling interests
Net income attributable to noncontrolling interests was $2.0 million for second quarter of fiscal
2011, compared to $1.7 million for the corresponding prior year period.
Six months ended July 31, 2010 compared to six months ended July 31, 2009
Revenues
Total revenues increased $597.4 million, or 37%, to $2,206.2 million for the six months ended July
31, 2010, compared to total revenues of $1,608.9 million for the corresponding prior year period.
The increase in revenues was primarily the result of increases in freight volumes and rates related
to air and ocean freight and volume increases across our other service lines.
Freight forwarding revenues in total increased $497.8 million, or 48%, to $1,530.8 million for the
six months ended July 31, 2010, compared to $1,033.0 million for the corresponding prior year
period. The increase was primarily the result of increased airfreight and ocean freight forwarding
volume and rates over the corresponding prior year period as well as an increase in fuel surcharges
for airfreight when compared to the corresponding prior year period. Both airfreight and ocean
freight volume levels during the six months ended July 31, 2010 were very close to levels seen in
the same period two years ago, before the market downturn. Foreign currency fluctuations also
contributed approximately $49.1 million to the increase.
- 41 -
Airfreight forwarding revenues increased $277.8 million, or 55%, to $787.1 million for the six
months ended July 31, 2010, compared to $509.3 million for the corresponding prior year period.
Fuel surcharges increased approximately $55.3 million when compared to the corresponding prior year
period as a result of an increase in aviation fuel prices. Movements in fuel surcharges impact
revenues but generally do not have a material impact on net revenues. Airfreight volumes increased
40% for the first six months of fiscal 2011 when compared to the corresponding prior year period.
Restocking activities, increased consumer demand, and modal shifts from ocean freight brought on by
ongoing capacity and vessel sailing schedule changes, all contributed to the strong airfreight
volume growth. Airfreight carrier rates also increased for the first six months of fiscal 2011
when compared to the corresponding prior year period. Foreign currency fluctuations also
contributed approximately $15.2 million to the increase.
Ocean freight forwarding revenues increased $178.8 million, or 45%, to $576.5 million for the six
months ended July 31, 2010, compared to $397.6 million for the corresponding prior year period.
This increase was primarily due to an approximately 25% increase in ocean freight volumes, as
expressed in twenty-foot equivalent units (TEUs) during the six months ended July 31, 2010,
compared to the corresponding prior year period. Foreign currency fluctuations also contributed
approximately $23.8 million to the increase.
Customs brokerage revenues increased $8.7 million, or 20%, to $52.0 million for the six months
ended July 31, 2010, compared to $43.3 million for the corresponding prior year period. The
increase in customs brokerage revenues was primarily due to a 12% increase in the number of
clearances. Foreign currency fluctuations also contributed approximately $3.3 million to the
increase.
Other freight forwarding related revenues increased $32.4 million, or 39%, to $115.1 million for
the six months ended July 31, 2010, compared to $82.7 million for the corresponding prior year
period, primarily due to increases in road freight and other distribution volumes. Foreign
currency fluctuations contributed approximately $6.8 million to the increase.
Contract logistics and distribution revenues in total increased $99.6 million, or 17%, to $675.5
million for the six months ended July 31, 2010, compared to $575.9 million for the corresponding
prior year period. The increase was due to the increase in logistics activity and volumes and
associated increases in distribution requirements of our existing and new clients. Foreign
currency fluctuations also contributed approximately $28.6 million to the increase.
Contract logistics revenues increased $55.6 million, or 19%, to $356.3 million for the six months
ended July 31, 2010, compared to $300.7 million for the corresponding prior year period. The
increase was primarily due to increases in client volumes where we provide services, compared to
the same period of last year. Foreign currency fluctuations also contributed approximately $14.0
million to the increase.
Distribution revenues increased $35.6 million, or 18%, to $238.6 million for the six months ended
July 31, 2010, compared to $203.0 million for the corresponding prior year period. Domestic
freight volumes in the U.S. have been improving and this has benefited our U.S. distribution
businesses for the six months ended July 31, 2010 compared to the corresponding prior year period.
Foreign currency fluctuations also contributed approximately $8.8 million to the increase.
Other contract logistics and distribution related revenues increased $8.4 million, or 12%, to $80.6
million for the six months ended July 31, 2010, compared to $72.2 million for the corresponding
prior year period. Foreign currency fluctuations contributed approximately $5.8 million to the
increase.
- 42 -
Net revenues
Total net revenues increased $95.9 million, or 15%, to $744.8 million for the six months ended July
31, 2010, compared to total net revenues of $648.9 million for the corresponding prior year period.
The increase in net revenues was primarily the result of increases in freight volume across our
service lines when compared to the corresponding prior year period. A decline in our freight
forwarding yields for the first six months of fiscal 2011, when compared to the same period last
year adversely impacted the increase in net revenues for the period. While volumes improved during
the six months ended July 31, 2010, carrier capacity remained tight, and transportation rates
remained high, which led to continuing pressure on yields. Foreign currency fluctuations
contributed approximately $35.3 million to the increase for the six months ended July 31, 2010,
compared to the corresponding prior year period, as the U.S. dollar, our reporting currency, was at
weaker levels during the current period compared to certain other global currencies, notably the
South African rand.
Freight forwarding net revenues increased $50.0 million, or 18%, to $333.3 million for the six
months ended July 31, 2010, compared to $283.3 million for the corresponding prior year period.
Net revenues are primarily a function of volume movements and the expansion or contraction in
yields.
Airfreight forwarding net revenues increased $21.4 million, or 16%, to $157.5 million for the
six months ended July 31, 2010 compared to $136.0 million for the corresponding prior year period.
Although airfreight forwarding revenues increased 55% for the six months ended July 31, 2010
compared to the corresponding prior year period, airfreight forwarding yields contracted by
approximately 670 basis points on a comparative basis, causing airfreight forwarding net revenues
to increase to a much lesser degree compared to the increase in airfreight forwarding revenues.
Airfreight tonnage increased 40%, which was offset by a 17% decrease in net revenue per kilo as the
rates we charged our clients did not increase to the same extent as our purchased transportation
costs.
Airfreight yields for the six months ended July 31, 2010 were 20.0%, a decrease of approximately
670 basis points compared to 26.7% for the corresponding prior year period. This yield compression
from earlier quarters was primarily caused by less favorable airfreight pricing environments,
particularly caused by continued carrier capacity shortages as described above.
Ocean freight forwarding net revenues increased $9.2 million, or 11%, to $91.5 million for the six
months ended July 31, 2010, compared to $82.3 million for the corresponding prior year period. The
increase in ocean freight forwarding net revenues was primarily due to an approximately 25%
increase in TEUs, offset by a 11% decrease in net revenues realized per TEU. Foreign currency fluctuations contributed approximately
$3.3 million to the increase.
As with airfreight, ocean freight yields contracted during the six months ended July 31, 2010,
compared to the corresponding prior year period, causing ocean freight net revenues to increase to
a lesser degree than the increase in revenues. For the six months ended July 31, 2010, ocean
freight yields contracted approximately 480 basis points to 15.9% from 20.7% for the corresponding
prior year period. This year-over-year yield compression resulted primarily from constrained
carrier capacity, which in turn allowed the shipping lines to increase their pricing during the
period. Because we have been unable to fully pass on these increases to our clients, the increased
purchased transportation costs adversely impacted ocean freight net revenues in the period. Net
revenue per TEU for the six months ended July 31, 2010 decreased 11% from the corresponding prior
year period.
Customs brokerage net revenues increased $7.6 million, or 19%, to $48.2 million for the six months
ended July 31, 2010, compared to $40.6 million for the corresponding prior year period. The
increase in customs brokerage net revenues was primarily due to a 12% increase in the number of
clearances, combined with a 7% increase in net revenues per clearance. Foreign currency
fluctuations contributed approximately $3.2 million to the increase.
Other freight forwarding related net revenues increased $11.8 million, or 48%, to $36.1 million for
the six months ended July 31, 2010, compared to $24.3 million for the corresponding prior year
period, primarily due
to increases in road freight and other distribution volumes. Foreign currency fluctuations
contributed approximately $2.2 million to the increase.
- 43 -
Contract logistics and distribution net revenues increased $46.0 million, or 13%, to $411.5 million
for the six months ended July 31, 2010, compared to $365.5 million for the corresponding prior year
period. The increase was due to the increase in logistics activity and volumes and associated
increases in distribution requirements of our clients primarily as a result of a partial recovery
from the weak economic environment particularly in the U.S. Foreign currency fluctuations also
contributed approximately $23.8 million to the increase.
Contract logistics net revenues increased $30.5 million or 12% to $279.0 million for the six months
ended July 31, 2010, compared to $248.5 million for the corresponding prior year period. The
increase was primarily a result of increases in client volumes, compared to the corresponding prior
year period. Foreign currency fluctuations contributed approximately $12.6 million to the
increase.
Distribution net revenues increased $8.4 million, or 13%, to $75.6 million for the six months ended
July 31, 2010, compared to $67.1 million for the corresponding prior year period. Foreign currency
fluctuations contributed approximately $5.7 million to the increase. The remaining increase in
distribution net revenue was primarily the result of increased shipment volume over comparative
periods.
Other contract logistics and distribution related net revenues increased $7.0 million, or 14%, to
$57.0 million for the six months ended July 31, 2010, compared to $49.9 million for the
corresponding prior year period. Foreign currency fluctuations contributed approximately $5.6
million to the increase.
Staff costs
Staff costs in our freight forwarding segment increased $22.5 million, or 14%, to $188.8 million
for the six months ended July 31, 2010, compared to $166.3 million for the corresponding prior year
period. The increased staff costs in our freight forwarding segment were largely driven by total
shipment counts rather than volumes stated in kilograms or TEUs. As a percentage of freight
forwarding segment revenues, staff costs in the freight forwarding segment were approximately 12%
and 16% for the first six months of fiscal 2011 and 2010, respectively. Foreign currency
fluctuations contributed approximately $6.8 million to the increase.
Staff costs in our contract logistics and distribution segment increased $22.6 million, or 12%, to
$211.6 million for the six months ended July 31, 2010, compared to $189.0 million for the
corresponding prior year period. The increase was primarily due to increased service requirements
associated with new client sites and increased volumes. Foreign currency fluctuations contributed
approximately $9.5 million to the increase.
Depreciation
Total depreciation for all segments, was $22.7 million for the six months ended July 31, 2010,
compared to $20.3 million for the corresponding prior year period. When expressed as a percentage
of revenue, depreciation expense remained constant at approximately 1% of revenue for the six
months ended July 31, 2010 compared to the corresponding prior year period.
Amortization of intangible assets
Amortization of intangible assets was $6.5 million for the six months ended July 31, 2010, compared
to $5.4 million for the corresponding prior year period. Acquisitions completed since the first
six months of the preceding year did not have a material impact on amortization of intangible
assets for the six months ended July 31, 2010, compared to the corresponding prior year period.
- 44 -
Other operating expenses
Other operating costs in the freight forwarding segment increased $16.7 million, or 22%, to $92.9
million in the six months ended July 31, 2010, compared to $76.2 million for the corresponding
prior year period. The increase in other operating costs in our freight forwarding segment was
primarily due to higher shipment volumes. Foreign currency fluctuations also contributed
approximately $4.8 million to the increase.
Other operating costs in the contract logistics and distribution segment increased by $10.2
million, or 7%, to $147.1 million for the six months ended July 31, 2010, compared to $136.9
million for the corresponding prior year period. The increase was caused primarily by foreign
currency fluctuations, which contributed approximately $9.7 million to the increase. Excluding increases due to currency fluctuations, operating
costs in our contract logistics and distribution segment increased $0.5 million.
Other operating expenses at corporate were $11.3 million for the six months ended July 31, 2010,
compared to $6.0 million during the corresponding prior year period.
During the first six months of fiscal 2010 the company recognized a gain on the sale of property in
South Africa of $6.3 million. This gain is included as a reduction of other operating expenses in
corporate. Excluding this gain, other operating expenses in corporate for the corresponding prior
year period, were $12.3 million.
Interest expense, net
Interest income relates primarily to interest earned on our cash deposits, while interest expense
consists primarily of interest on our credit facilities, our senior unsecured guaranteed notes, of
which $121.7 million of principle was outstanding as of July 31, 2010, and capital lease
obligations. Interest income increased $0.9 million, or 19%, and interest expense increased $3.2
million, or 30%, for the six months ended July 31, 2010, compared to the corresponding prior year
period. The movements in interest income and interest expense are primarily due to a change in the
mix of total net deposits and borrowings outstanding during the comparative periods, as well as
interest rate movements.
Other income and expenses, net
Other income and expenses primarily relate to foreign currency gains and losses on certain of our
intercompany loans, offset by withholding taxes and various other taxes not related to income
taxes. Other income, net of expenses, was $1.0 million in the six months ended July 31, 2010,
compared to other expense, net of income, of $1.0 million for the corresponding prior year period.
Provision for income taxes
Our effective income tax rate for the six months ended July 31, 2010 was 31%, resulting in a
provision for income taxes of $14.3 million compared to pretax income of $45.8 million. Our
effective income tax rate for the first six months of fiscal 2010 was 31%. Changes in our
effective tax rates are primarily attributable to the mix of taxable income across geographic
regions. The effective income tax rate applied to quarterly pretax income for interim quarters is
based on estimated effective tax rates to be applied to our operations for the entire fiscal year.
We currently estimate our effective tax rate for fiscal 2011 to be approximately 32%, however, the
actual effective tax rate will depend on a variety of factors, including the geographic mix of our
business during the remaining interim periods of fiscal 2011.
Net income attributable to noncontrolling interests
Net income attributable to noncontrolling interests was $2.6 million for six months ended July 31,
2010, compared to $1.7 million for the corresponding prior year period. This increase was the
result of increased net income from operations with noncontrolling interests.
Liquidity and Capital Resources
As of July 31, 2010, our cash and cash equivalents totaled $392.0 million, representing an increase
of $41.2 million from January 31, 2010. The increase resulted from an increase of $37.7 million of
net cash provided by our operating, investing and financing activities and an increase of $3.5
million related to the effect of foreign exchange rate changes on our cash balances when compared
to our position at January 31, 2010.
- 45 -
During the first half of fiscal 2011, we used approximately $48.5 million in net cash from
operating activities. This resulted from net income of $31.6 million plus depreciation and
amortization of intangible assets totaling $29.2 million, provision for doubtful accounts of $2.5
million, an increase in trade payables and other current liabilities of $49.2 million, and an
increase in other items totaling $7.6 million, offset by an increase in trade receivables and other
current assets of $167.1 million and deferred income taxes of $1.5 million.
The companys primary source of liquidity is the cash generated from operating activities, which is
subject to seasonal fluctuations, particularly in our freight forwarding segment. The company
experiences increased activity associated with its peak season, generally during the second and
third fiscal quarters, requiring significant client disbursements. During the second quarter and
the first half of the third quarter, this seasonal growth in client receivables tends to consume
available cash. Historically the second half of the third quarter and the fourth quarter tended to
generate significant cash as cash collections usually exceeded client cash disbursements. Cash
disbursements in the first quarter of the fiscal year typically exceed cash collections and, as a
result, our first fiscal quarter historically results in the usage of available cash.
In addition to cash generated from the companys income generating activities, when the company
acts as a customs broker, we make significant cash advances on behalf of our clients to the various
customs authorities around the world, predominantly in countries where our clients are importers of
goods such as South Africa and Israel. These customs duties and taxes, in addition to certain
other pass-through items, are not included as components of revenues and expenses. However, these
advances temporarily consume cash as these items are typically paid to third parties in advance of
reimbursement from our clients. Accordingly, on a comparative basis, operating cash flows are
typically stronger in periods of declining logistics activity and are comparably weaker in periods
of volume growth as the company must disburse cash in advance of collections from clients. The
significant increases in volumes and carrier rates during the six months of fiscal 2011
necessitated significant working capital to fund duties and carrier costs on behalf of clients.
During the first half of fiscal 2011, advances for customs duties and taxes were approximately
$2,125.2 million, an increase of $557.6 million when compared to approximately $1,567.6 million for
the corresponding prior year period. This increase of customs duties and taxes was primarily
attributable to an increase in the number and value of clearances over the comparable periods. The
increase in these advances and subsequent collection activity related to customs duties and taxes
had an unfavorable impact on our net cash generated from operating activities in the first half of
fiscal 2011.
On a comparative basis, during the first half of fiscal 2011, net cash used by operating activities
was $48.5 million, compared to net income of $31.6 million for the same period in fiscal 2011.
During the first half of fiscal 2010, net cash provided by operating activities was $66.3 million.
Stronger economic conditions prevailed in the first half of fiscal 2011 compared to the first half
of fiscal 2010 resulting in increased volumes and freight activities which resulted in consumption
of cash in the first half of fiscal 2011, at a rate that is consistent with our seasonal norms
prior to the recent economic downturn.
Cash used for investing activities for the six months ending July 31, 2010 and 2009 was $25.0
million and $7.0 million, respectively. During the first half of fiscal 2011, cash used for
capital expenditures was approximately $19.7 million, consisting primarily of computer hardware and
software and furniture, fixtures and equipment. During the normal course of operations, the company
has a need to acquire technology, office furniture and equipment to facilitate the handling of our
client freight and logistics volumes. The company currently expects to spend approximately $73.0
million for normal or routine capital expenditures for fiscal 2011. Included in cash used in
investing activities were proceeds of $0.8 million for the disposal of property, plant and
equipment.
- 46 -
The following outlines certain recent earn-out payments associated with prior acquisitions, as well
as the estimated future contingent earn-out payments associated with such prior acquisitions:
We paid the final contingent earn-out payment of $4.2 million in May 2010 related to our
acquisition of Concentrek, which was calculated based on a multiple of Concentreks earnings for
the twelve-month period ended January 31, 2010. There will be no additional earn-out payments
associated with the Concentrek acquisition.
We do not anticipate making a contingent earn-out payment in regard to our acquisition of
Cargoforte based upon the entitys financial performance during fiscal 2010. One potential
contingent earn-out payment remains, subject to a maximum of $19.6 million in the aggregate,
which payment will be offset against the initial purchase price of $1.0 million and will be
calculated based on a multiple of the acquired operations earnings for the twelve month period
ending January 31, 2011.
We have one potential contingent earn-out payment remaining related to our acquisition of UTi
Pharma Slovakia, s.r.o. which is subject to a maximum of $3.0 million in the aggregate and is to
be calculated based on a multiple of the acquired operations earnings for the fiscal year
ending January 31, 2012.
In connection with our acquisition of the remaining ownership interest in each of EMA Ireland
and EMA Israel, based on estimated net revenue to be earned from a single client for each of the
next four fiscal years ending January 31, 2011, 2012, 2013 and 2014, we currently anticipate
making contingent earn-out payments in the quarter following each of such the twelve month
periods. The companys aggregate obligation with respect to these contingent earn-out payments
has been estimated to be $0.6 million.
In August 2010, we made one contingent earn-out payment of $4.7 million related to our
acquisition of Tacisa. The payment was calculated based on a multiple of the acquired
operations earnings for the twelve months ended January 31, 2010. No further payments are
required to paid
In connection with the formation of a partnership in South Africa that holds the shares of a
subsidiary that distributes pharmaceutical supplies and equipment, the company granted a put option
to the minority partner (South Africa Minority Put) providing the partner with a right to put their
25.1% share of the partnership to the company in fiscal 2011. The liability associated with this
put option at July 31, 2010 was determined to be zero. On August 11, 2010, the company received
notification from the minority partner holding the South Africa Minority Put that the minority
partner intends to exercise its right to require us to purchase such partners interest. The
preliminary redemption value of $8.5 million, which remains subject to finalization, was paid on
August 26, 2010 although this amount remains subject to further adjustments and finalization. The
company estimates the redemption value to be substantially less than the fair value of the minority
partners interest in the partnership. The company currently expects to record the difference
between the redemption value and the carrying amount of the related noncontrolling interest will be
recorded as a component of shareholders equity.
Our financing activities during the first half of fiscal 2011 provided
$111.2 million of cash, primarily due to proceeds from bank lines of credit of $111.8 million, an increase in short-term credit facilities
of $56.6 million, net borrowings of $0.5 million from short term borrowings and net proceeds from the issuance of ordinary shares of $3.4
million offset by repayments of bank lines of credit and long term borrowings, totaling $43.0 million, repayments of capital lease
obligations totaling $10.4 million and dividends paid of $6.1 million.
- 47 -
Many of our businesses operate in functional currencies other than the U.S. dollar. The net assets
of these divisions are exposed to foreign currency translation gains and losses, which are included
as a component of accumulated other comprehensive loss in shareholders equity. The company has
historically not attempted to hedge this equity risk. Other comprehensive income is a result of
foreign currency translation adjustments, net of tax and other. Included in other comprehensive
income was a loss of $5.4 million and a gain of $2.1 million, for the three and six months ended
July 31, 2010, respectively. Included in other comprehensive income were gains of $36.2 million
and $63.6 million, the three and six months ended July 31, 2009, respectively. By comparison, the
first half of the prior year comparative figure was largely caused by depreciation of the U.S.
dollar against the South African rand.
Credit Facilities and Senior Notes
The company utilizes a number of financial institutions to provide it with borrowings, letters of
credit, guarantees and working capital facilities. Certain of these credit facilities are used for
working capital and for issuing letters of credit to support the working capital and operational
needs of various subsidiaries and to support various customs bonds and guarantees. In other cases,
customs bonds and guarantees are issued directly by various financial institutions. In many cases,
the use of these particular borrowings, letter of credit, guarantee, and working capital facilities
is restricted to the country in which they originated although this is not always the case. These
particular borrowings, letter of credit, guarantee, and working capital facilities may restrict
distributions by the subsidiary operating in such country.
- 48 -
The following table presents information about the facility limits, aggregate amounts of borrowings
outstanding as well as availability for borrowings under the various bank lines and letters of
credit and other credit facilities as of July 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
South |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
African |
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
ABN/RBS |
|
|
Nedbank |
|
|
Facilities |
|
|
US Facility1 |
|
|
Spain Facility2 |
|
|
Facilities |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit facility limit |
|
$ |
50,000 |
|
|
$ |
61,000 |
|
|
$ |
130,788 |
|
|
$ |
25,000 |
|
|
$ |
25,000 |
|
|
$ |
105,569 |
|
|
$ |
397,357 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Facility usage for cash items |
|
$ |
9,104 |
|
|
$ |
51,002 |
|
|
$ |
64 |
|
|
$ |
25,000 |
|
|
$ |
22,816 |
|
|
$ |
57,575 |
|
|
$ |
165,561 |
|
Letters of credit and guarantees |
|
|
37,035 |
|
|
|
6,768 |
|
|
|
75,219 |
|
|
|
|
|
|
|
|
|
|
|
42,630 |
|
|
|
161,652 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
46,139 |
|
|
$ |
57,770 |
|
|
$ |
75,283 |
|
|
$ |
25,000 |
|
|
$ |
22,816 |
|
|
$ |
100,205 |
|
|
$ |
327,213 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available, unused capacity |
|
$ |
3,861 |
|
|
$ |
3,230 |
|
|
$ |
55,505 |
|
|
$ |
|
|
|
$ |
2,184 |
|
|
$ |
5,364 |
|
|
$ |
70,144 |
|
Available for cash withdrawal |
|
$ |
|
|
|
$ |
3,230 |
|
|
$ |
55,505 |
|
|
$ |
|
|
|
$ |
2,184 |
|
|
$ |
5,050 |
|
|
$ |
65,969 |
|
|
|
|
1 |
|
Represents one of the companys two largest single-country credit facilities. This
facility expires in May 2011. |
|
2 |
|
Represents one of the companys two largest single-country credit facilities. This
facility expires in April 2011. |
ABN/RBS Letter of Credit Agreement
On July 9, 2009, the company and certain of its subsidiaries entered into a letter of credit
facility pursuant to an agreement with ABN AMRO N.V. (ABN) and The Royal Bank of Scotland plc.
(the ABN/RBS Letter of Credit Agreement). The ABN/RBS Letter of Credit Agreement provided for an
aggregate availability of up to $50.0 million in letters of credit as of July 31, 2010. The
facility matures on July 9, 2011. The companys obligations under the ABN/RBS Letter of Credit
Agreement are guaranteed by the company and selected subsidiaries.
Nedbank Letter of Credit Agreement
On July 9, 2009, the company and certain of its subsidiaries also entered into a letter of credit
facility pursuant to an agreement with Nedbank Limited, acting through its London Branch (the
Nedbank Letter of Credit Agreement). The Nedbank Letter of Credit Agreement provided for an
aggregate initial availability of up to $36.0 million in letters of credit. On January 8, 2010,
the company and certain of its subsidiaries entered into an amendment to this agreement (First
Nedbank Amendment) which temporarily increased the aggregate availability under the facility to
$46.0 million in letters of credit. The First Nedbank Amendment expired on March 1, 2010, after
which the aggregate availability under the Nedbank Letter or Credit Agreement reverted to the
original availability of $36.0 million in letters of credit.
- 49 -
On July 23, 2010, UTi Worldwide Inc. (UTi) and certain of its subsidiaries as guarantors
(collectively with UTi, the Obligors) entered into an Amendment to Letter of Credit Agreement
(Third Nedbank Amendment). The Third Nedbank Amendment among other things increased the current
Maximum Draw Amount (as such term is defined in the Nedbank Letter of Credit Agreement) under
the Nedbank Letter of Credit Agreement by $25.0 million, from $36.0 million to $61.0 million.
In addition, the Third Nedbank Amendment provides that in no event shall any letter of credit)
issued after July 23, 2010 under the Nedbank Letter of Credit Agreement have an expiration date
later than July 9, 2011 unless otherwise agreed to by Nedbank. The Nedbank Letter of Credit
Agreement matures on July 9, 2011. The companys obligations under the Nedbank Letter of Credit
Agreement are guaranteed by the company and selected subsidiaries.
Together, the company refers to the ABN/RBS Letter of Credit Agreement and the Nedbank Letter of
Credit Agreement as the Letter of Credit Agreements. Pursuant to the terms of the Letter of
Credit Agreements, the company is charged fees relating to, among other things, the issuance of
letters of credit, the aggregate amount of letters of credit outstanding, and the unused portions
of these facilities, all at the rates specified in the applicable agreement.
South African Facilities
On July 9, 2009, certain of the companys subsidiaries operating in South Africa entered into a
South African credit facility pursuant to an agreement with Nedbank Limited, acting through its
Corporate Banking Division (the South African Facilities Agreement). The South African
Facilities Agreement provides for a 650.0 million South African rand revolving credit facility,
which is comprised of a 400.0 million South African rand working capital facility and a 250.0
million South African rand letter of credit, guarantee and forward exchange contract facility.
The South African Facilities Agreement also provides the companys South African operations with
a 150.0 million South African rand revolving asset-based finance facility, which includes, among
other things, a capital lease line. The obligations of the companys subsidiaries under the
South African Facilities Agreement are guaranteed by selected subsidiaries registered in South
Africa. In addition, certain of the companys operating assets in South Africa, and the rights
and interests of the South African branch of one of our subsidiaries in various intercompany
loans made to a South African subsidiary and to a South African partnership, are pledged as
collateral under the South African Facilities Agreement.
Overdrafts under the new South African working capital facility bear interest at a rate per
annum equal to Nedbanks publicly quoted prime rate minus 1%. The per annum interest rate
payable in respect of foreign currency accounts is generally at the London Interbank Offered
Rate (LIBOR), or with respect to a foreign currency account in euro, the Euro Interbank Offered
Rate (EURIBOR), plus the lenders cost of funds (to the extent greater than LIBOR or EURIBOR, as
applicable), plus 3%. Instruments issued under the letter of credit, guarantee and forward
exchange contract facility bear interest at a rate to be agreed upon in writing by the companys
subsidiaries party to the South African Facilities Agreement and Nedbank.
In addition to the facilities described above, the South African entities have obtained customs
bonds to support their customs and duties obligations to the South African customs authorities.
These customs bonds are issued by South African registered insurance companies. As of July 31,
2010 the value of these bonds was $42.2 million.
During the second quarter ended July 31, 2010, the
company entered into a number of new credit facilities with aggregate borrowing credit facility limits of approximately $65.0 million.
Such facilities include those entered into by the companys subsidiaries in the U.S. and Spain as well as a borrowing by the parent
company, UTi Worldwide, Inc. and generally expire on various dates in calendar 2011 and bear interest at rates determined based on
certain benchmark interest rates plus a margin as specified in the underlying agreements. Total borrowings outstanding under such
facilities totaled approximately $62.8 million at July 31, 2010.
Cash Pooling Arrangement
A significant number of our subsidiaries participate in a cash pooling arrangement which is used by
us to fund liquidity needs of the subsidiaries. The cash pooling arrangement has no stated
maturity date and yields and bears interest at varying rates. The facility does not permit
aggregate outstanding withdrawals by our subsidiaries under the arrangement to exceed the aggregate
amount of cash deposits by our subsidiaries in the arrangement at any one time, as determined on a
global basis. At July 31, 2010, cash deposits exceeded to cash withdrawals. Under the
arrangement, cash withdrawals of $108.7 million are included in
bank lines of credit and cash deposits of $125.9 million are included in cash and cash equivalents
on our balance sheet at July 31, 2010.
- 50 -
Senior Unsecured Guaranteed Notes
The following table presents information about the aggregate amount of the companys indebtedness
pursuant to its outstanding senior unsecured guaranteed notes as of July 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 Note |
|
|
2009 Note |
|
|
|
|
|
|
|
|
|
Purchase |
|
|
Purchase |
|
|
Other |
|
|
|
|
|
|
Agreement |
|
|
Agreement |
|
|
Borrowings |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term borrowings |
|
$ |
66,668 |
|
|
$ |
|
|
|
$ |
3,910 |
|
|
$ |
70,578 |
|
Long-term borrowings, excluding current portion |
|
|
|
|
|
|
55,000 |
|
|
|
7,173 |
|
|
|
62,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
66,668 |
|
|
$ |
55,000 |
|
|
$ |
11,083 |
|
|
$ |
132,751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 Note Purchase Agreement
On July 9, 2009, the company issued $55.0 million of senior unsecured guaranteed notes (2009
Senior Notes) under a note purchase agreement (2009 Note Purchase Agreement), entered into among
UTi, certain of its subsidiaries as guarantors and the purchasers named therein. The 2009
Senior Notes bear interest at a rate of 8.06% per annum, payable semi-annually, on the 9th day
of February and August. The company is required to repay approximately $9.2 million, or such
lesser principal amount as shall then be outstanding, on February 9, 2012 and each February 9th
and August 9th thereafter up to and including August 9, 2014. The 2009 Senior Notes mature on
August 9, 2014. The companys obligations under the 2009 Senior Notes and the 2009 Note Purchase
Agreement are guaranteed by the company and selected subsidiaries.
2006 Note Purchase Agreement
On July 13, 2006, the company issued $200.0 million of senior unsecured guaranteed notes (the
2006 Senior Notes and, together with the 2009 Senior Notes, the Senior Notes) under a note
purchase agreement (the 2006 Note Purchase Agreement, and together with the 2009 Note Purchase
Agreement, the Note Purchase Agreements), entered into among UTi, certain of its subsidiaries as
guarantors and the purchasers named therein. The 2006 Senior Notes bear interest at a rate of
6.31% per annum, payable semi-annually, on the 13th day of each January and July. The company is
required to repay approximately $33.3 million, or such lesser principal amount as shall then be
outstanding, on each January 13th and July 13th up to and including July 13, 2011. The 2006
Senior Notes mature on July 13, 2011. The companys obligations under the 2006 Senior Notes and
the 2006 Note Purchase Agreement are guaranteed by the company and selected subsidiaries.
The Letter of Credit Agreements, the South African Facilities Agreement, and the Note Purchase
Agreements require the company to comply with financial and other covenants and certain change of
control provisions. Some of the covenants include maintaining a specified net worth, maintaining a
specified ratio of total debt to consolidated earnings before interest, taxes, depreciation and
amortization (EBITDA) and minimum interest charge coverage requirements, among others. Should the
company fail to comply with these covenants and be unable to obtain any necessary amendments or
waivers, all or a portion of the obligations under the Senior Notes, the Letter of Credit
Agreements and the South African Facilities Agreement could become immediately due and payable and
the Letter of Credit Agreements and the South African Facilities Agreement could be terminated and
the credit, letter of credit, and guarantee facilities provided thereunder would no longer be
available. The company was in compliance with all the covenants set forth in the Note Purchase
Agreements, the Letter of Credit Agreements and the South African Facilities Agreement as of July
31, 2010.
- 51 -
Furthermore, the Letter of Credit Agreements, the South African Facilities Agreement, and the Note
Purchase Agreements each contain cross-default provisions with respect to other indebtedness, giving the
lenders under the Letter of Credit Agreements and the South African Facilities Agreement and the
note holders under the Note Purchase Agreements the right to declare a default if the company
defaults under other indebtedness in certain circumstances. Should the company fail to comply with
these provisions and be unable to obtain any necessary amendments or waivers, all or a portion of
the obligations under the Senior Notes, the Letter of Credit Agreements and the South African
Facilities Agreement could become immediately due and payable and the Letter of Credit Agreements
and the South African Facilities Agreement could be terminated and the credit, letter of credit,
and guarantee facilities provided thereunder would no longer be available.
Pursuant to the terms of the Letter of Credit Agreements, the South African Facilities Agreement,
and the Note Purchase Agreements, the company is required to indemnify the lenders and others with
respect to certain losses, liabilities and costs, those relating to income and other taxes,
increased costs suffered as a result of, among other things, changes in laws or regulations, or
other requirements which may be imposed by regulatory authorities from time to time, and increased
costs suffered as a result of a default under the agreements. The indemnification obligations
created by each respective agreement arose at the time such agreement was entered into and will
continue in accordance with the terms of such agreement. The company cannot currently estimate the
maximum potential amount which could be payable pursuant to its indemnification obligations under
these agreements. Liabilities for these indemnification obligations were not material to the
company as a whole as of the dates that each of the respective agreements was entered into. The
company has not recorded any liabilities related to the indemnification obligations as of July 31,
2010.
Other Factors which May Affect our Liquidity
We are a holding company and all of our operations are conducted through subsidiaries.
Consequently, we rely on dividends or advances from our subsidiaries (including those that are
wholly owned) to meet our financial obligations and to pay dividends on our ordinary shares. The
ability of our subsidiaries to pay dividends to us and our ability to receive distributions on our
investments in other entities are subject to applicable local law and other restrictions including,
but not limited to, applicable tax laws and limitations contained in our bank credit facilities and
in the Note Purchase Agreements. Such laws and restrictions could limit the payment of dividends
and distributions to us which would restrict our ability to continue operations. In general, our
subsidiaries cannot pay dividends to us in excess of their retained earnings and most countries in
which we conduct business require us to pay a distribution tax on all dividends paid. In addition,
the amount of dividends that our subsidiaries could declare may be limited in certain countries by
exchange controls.
Off-Balance Sheet Arrangements
Other than operating leases, we have no material off-balance sheet arrangements.
Critical Accounting Estimates
The companys consolidated 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 companys critical accounting policies during the
second quarter of fiscal 2011.
- 52 -
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
clients in locations throughout the world and, as a result, operate with many currencies including
the key currencies of the Americas, Africa, Asia Pacific and EMENA.
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 will 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.
Many of our operations operate in functional currencies other than the U.S. dollar. The net assets
of these divisions are exposed to foreign currency translation gains and losses, which are included
as a component of accumulated other comprehensive loss in shareholders equity. The company has
historically not attempted to hedge this equity risk.
Interest Rate Risk
We are subject to changing interest rates as a result of our normal borrowing and leasing
activities with both fixed and variable interest rates. We do not purchase or hold any derivative
financial instruments for trading or speculative purposes.
As of July 31, 2010, there had been no material changes to our exposure to market risks since
January 31, 2010, as described in our Annual Report on Form 10-K for the fiscal year ended January
31, 2010 on file with the SEC. For a discussion of the companys market risks associated with
foreign currencies, interest rates and market rates, see Part II, Item 7A, Quantitative and
Qualitative Disclosures about Market Risk, of our Annual Report on Form 10-K for the fiscal year
ended January 31, 2010.
Item 4. Controls and Procedures
Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange
Act) are the controls and other procedures of an issuer that are designed to ensure that
information required to be disclosed by the issuer in the reports filed or submitted by it under
the Exchange Act is recorded, processed, summarized and reported, within the time periods specified
in the Securities and Exchange Commissions rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that information required
to be disclosed by an issuer in its Exchange Act reports is accumulated and communicated to the
issuers management, including each of its principal executive officer and principal financial
officer, as appropriate, to allow timely decisions regarding required disclosure.
Our management, under the direction and with the participation of our Chief Executive Officer and
Chief Financial Officer, has evaluated our disclosure controls and procedures as of July 31, 2010.
Based upon this evaluation, management, including our Chief Executive Officer and Chief Financial
Officer, has concluded that our disclosure controls and procedures were effective as of July 31,
2010.
- 53 -
Internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the
Exchange Act) is a process designed by, or under the supervision of each of the issuers principal
executive officer and principal financial officer, and effected by the issuers board of directors,
management, and other personnel, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles and includes those policies and procedures that:
(1) Pertain to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of the issuer;
(2) Provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the issuer are being made only in
accordance with authorizations of management and directors of the issuer; and
(3) Provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the issuers assets that could have a material effect on
the financial statements.
The companys management, including the Chief Executive Officer and Chief Financial Officer,
concluded there were no changes to our internal controls over financial reporting during the second
quarter ended July 31, 2010 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
Part II. Other Information
Item 1. Legal Proceedings
In connection with ASC 450, Contingencies, the company has not accrued for a loss contingency
relating to any of the investigations and legal proceedings disclosed below because we believe
that, although unfavorable outcomes in the investigations or proceedings may be reasonably
possible, they are not considered by our management to be probable or reasonably estimable.
From time to time, claims are made against us or we may make claims against others, including in
the ordinary course of our business, which could result in litigation. Claims and associated
litigation are subject to inherent uncertainties and unfavorable outcomes could occur, such as
monetary damages, fines, penalties or injunctions prohibiting us from engaging in certain
activities. The occurrence of an unfavorable outcome in any specific period could have a material
adverse effect on our results of operations for that period or future periods. As of the date of
this report, we are not a party to any material litigation except as described below.
Industry-Wide Anti-Trust Investigation
In June 2007, we responded to a grand jury subpoena requesting documents in connection with the
United States Department of Justices (U.S. DOJ) investigation into the pricing practices in the
international freight forwarding and cargo transportation industry which had been served on us in
June 2006. On October 10, 2007, the U.S. DOJ executed a search warrant on us at our offices in Long
Beach, California, and served one of our subsidiaries with a subpoena requesting numerous documents
and other materials in connection with its investigation of the international freight forwarding
and cargo transportation industry. In addition to its previous request for documents regarding air
freight forwarding, the U.S. DOJ also requested that we produce various documents regarding ocean
freight forwarding. We believe we are a subject of the U.S. DOJ investigation.
- 54 -
On October 25, 2007, one of our subsidiaries received a notice from the New Zealand Commerce
Commission that it was conducting an investigation in relation to international freight forwarding
services in New Zealand and requesting that we provide documents and information as it relates to
New Zealand. Our subsidiary responded to the request from the New Zealand Commerce Commission on
December 21, 2007. In June 2010, the New Zealand Commerce Commission informed us that their
investigation concerning us was closed.
In June 2008 and February 2009, we received a request for information issued by the European
Commission (EC) requesting information and records relating to the ECs ongoing investigation of
alleged anti-competitive behavior relating to freight forwarding services in the European
Union/European Economic Area. In July 2008
and March 2009, we submitted responses to these requests. In February 2010, in connection with the
ECs ongoing investigation, the EC sent a Statement of Objections to us and a number of other
freight forwarding and logistics providers. The Statement of Objections alleges infringements of
European Union competition law with respect to various surcharges. We responded in writing to the
ECs Statement of Objections in April 2010. We attended a hearing in July 2010 to discuss our
position with the EC officials.
In May 2009, we learned that the Brazilian Ministry of Justice was investigating possible alleged
cartel activity in the international air and ocean freight forwarding market. On August 6, 2010,
we received notice of an administrative proceeding from the Brazilian Ministry of Justice. The
administrative proceeding initiates a proceeding against us, our Brazilian subsidiary and two of
its employees, among many other forwarders and their employees, alleging possible anti-competitive
behavior contrary to Brazilian rules on competition. We intend to respond to this proceeding
within 30 days after the last defendant in this global proceeding has been notified.
In November 2009, one of our subsidiaries received a summons from the South African Competition
Commission requesting certain information and records in connection with its ongoing investigation
of alleged anti-competitive behavior relating to the market for freight forwarding services in
South Africa. In January 2010, we responded to this request.
We continue to receive additional requests for information, documents and interviews from various
governmental agencies with respect to these investigations, and we have provided, and expect to
continue to provide in the future, further responses as a result of such requests.
We (along with several other global logistics providers) have been named as a defendant in a
federal antitrust class action lawsuit filed on January 3, 2008 in the United States District Court
of the Eastern District of New York (Precision Associates, Inc., et. al. v. Panalpina World
Transport (Holding) Ltd., et. al.). This lawsuit alleges that the defendants engaged in various
forms of anti-competitive practices and seeks an unspecified amount of treble monetary damages and
injunctive relief under U.S. antitrust laws.
We have incurred, and we expect to continue to incur, significant legal fees and other costs in
connection with these governmental investigations and lawsuits. If the U.S. DOJ, the EC, or any
other regulatory body concludes that we have engaged in anti-competitive behavior, we could incur
significant additional legal fees and other costs, which could include fines and/or penalties,
which may be material to our consolidated financial statements.
South Africa Revenue Service Matter
The company is involved in a dispute with the South African Revenue Service where the company makes
use of owner drivers for the collection and delivery of cargo. The South African Revenue Service
is claiming that the company is liable for employee taxes in respect of these owner drivers. The
company has objected to this claim and together with its legal and tax advisors, believes that the
company is in full compliance with the relevant sections of the income tax act governing this
situation and has no tax liability in respect of these owner drivers. The amount claimed by the
South African Revenue Service is approximately $9.8 million based on exchange rates as of July 31,
2010. There were no material developments concerning this matter during the first half of fiscal
2011.
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Per Transport Litigation
The company is involved in litigation in Italy (in various cases filed in 2000 in the Court of
Milan) and England (in a case filed on April 13, 2000 in the High Court of Justice, London) 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 services of
the former ultimate owner as a consultant. The suits seek monetary damages, including compensation
for termination of the former ultimate owners consulting agreement. The company has brought
counter-claims for monetary damages in relation to warranty claims under the purchase agreement.
The total of all such actual and potential claims, albeit duplicated in several proceedings, is
approximately $12.4 million, based on exchange rates as of July 31, 2010. In connection with
the Per Transport litigation, legal proceedings have also been brought against a former director
and officer of the company and a current employee of the company. The company has agreed to
indemnify these individuals in connection with these proceedings. There were no material
developments concerning this matter during the first half of fiscal 2011.
Artwork Matter
The company was previously engaged through various indirect subsidiaries in the business of
transportation and storage of fine works of art. A client of one of these subsidiaries previously
alleged that during several weeks of June 2007 a malfunctioning climate-control unit at such
subsidiaries warehouses may have caused numerous works of art to be exposed to humidity levels
beyond what are considered normal storage conditions. The company received communication from the
client that several works of art may have been affected by the humidity; however no claim was ever
filed by the client and it is not known whether the works suffered any depreciation beyond normal
restoration costs. The company sold this business and the related indirect subsidiaries during
fiscal 2009, although it remains liable for any liabilities associated with this matter. In May
2010, the company was made aware that the former clients insurance company made a related payment
to the former client in an amount that is not material to the company as a whole. Based on all the
facts and circumstances, the Company has determined that although materially unfavorable outcomes
in this matter may be possible, they are considered to be
remote.
Big Baboon Patent Litigation
The company and one of its subsidiaries (along with sixteen other global corporations) were named
as defendants by a patent holding company, in a patent infringement lawsuit filed on May 7, 2009,
in the United States District Court for the Central District of California (Big Baboon, Inc. v.
Dell Inc., et. al.). On May 12, 2010, after discovery regarding the eMpower software tools, the
plaintiff dismissed its lawsuit against the company and subsidiary without prejudice.
Item 1A. Risk Factors
Our business, financial condition and results of operations are subject to a number of factors,
risks and uncertainties, There have been no material changes to the risk factors as disclosed in
Part I. Item 1A Risk Factors in our Annual Report on Form 10-K for the fiscal year ended January
31, 2010. The disclosures in our Annual Report on Form 10-K and in our subsequent reports and
filings are not necessarily a definitive list of all factors that may affect our business,
financial condition and future results of operations.
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Item 6. Exhibits
|
|
|
|
|
Exhibit |
|
Description |
|
|
|
|
|
|
3.1 |
|
|
Memorandum of Association of the company, as amended (incorporated
by reference to Exhibit 3.1 to the companys Current Report on
Form 8-K, filed July 31, 2007) |
|
3.2 |
|
|
Articles of Association of the company, as amended (incorporated
by reference to Exhibit 3.2 to the companys Current Report on
Form 8-K, filed July 31, 2007) |
|
10.1 |
|
|
Third Amendment to Letter of Credit Agreement, dated as of July
23, 2010, by and among UTi Worldwide Inc. and certain of its
subsidiaries party thereto and Nedbank Limited, acting through its
London Branch (incorporated by reference to Exhibit 10.1 to the
companys Current Report on Form 8-K, filed July 29, 2010) |
|
31.1 |
|
|
Certification of Chief Executive Officer pursuant to Securities
Exchange Act Rules 13a-14(a) and 15d-14(a) 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-14(a) and 15d-14(a) as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 |
|
32 |
|
|
Certification 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 |
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SIGNATURES
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.
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UTi Worldwide Inc.
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Date: September 3, 2010 |
By: |
/s/ Eric W. Kirchner
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Eric W. Kirchner |
|
|
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Chief Executive Officer |
|
|
|
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Date: September 3, 2010 |
By: |
/s/ Lawrence R. Samuels
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|
|
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Lawrence R. Samuels
Executive Vice President Finance and
Chief Financial Officer
Principal Financial Officer and
Principal Accounting Officer |
|
- 58 -
EXHIBIT INDEX
|
|
|
|
|
Exhibit |
|
Description |
|
|
|
|
|
|
3.1 |
|
|
Memorandum of Association of the company, as amended (incorporated
by reference to Exhibit 3.1 to the companys Current Report on
Form 8-K, filed July 31, 2007) |
|
3.2 |
|
|
Articles of Association of the company, as amended (incorporated
by reference to Exhibit 3.2 to the companys Current Report on
Form 8-K, filed July 31, 2007) |
|
10.1 |
|
|
Third Amendment to Letter of Credit Agreement, dated as of July
23, 2010, by and among UTi Worldwide Inc. and certain of its
subsidiaries party thereto and Nedbank Limited, acting through its
London Branch (incorporated by reference to Exhibit 10.1 to the
companys Current Report on Form 8-K, filed July 29, 2010) |
|
31.1 |
|
|
Certification of Chief Executive Officer pursuant to Securities
Exchange Act Rules 13a-14(a) and 15d-14(a) 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-14(a) and 15d-14(a) as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 |
|
32 |
|
|
Certification 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 |
- 59 -