Attached files
file | filename |
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EX-32 - EX-32 - UTi WORLDWIDE INC | d912615dex32.htm |
EX-31.1 - EX-31.1 - UTi WORLDWIDE INC | d912615dex311.htm |
EX-31.2 - EX-31.2 - UTi WORLDWIDE INC | d912615dex312.htm |
EXCEL - IDEA: XBRL DOCUMENT - UTi WORLDWIDE INC | Financial_Report.xls |
Table of Contents
United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended April 30, 2015
Or
¨ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to
000-31869
(Commission File Number)
UTi Worldwide Inc.
(Exact name of Registrant as Specified in its Charter)
British Virgin Islands | N/A | |
(State or Other Jurisdiction of Incorporation or Organization) |
(IRS Employer Identification Number) | |
9 Columbus Centre, Pelican Drive, P.O. Box 805 | c/o UTi, Services, Inc. | |
Road Town, Tortola, VG1110 | 100 Oceangate, Suite 1500 | |
British Virgin Islands | 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 x No ¨
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 x No ¨
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.
Large accelerated filer | x | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
At June 3, 2015, the number of shares outstanding of the issuers ordinary shares of no par value was 106,000,993.
Table of Contents
Report on Form 10-Q
For the Quarter Ended April 30, 2015
Table of Contents
2 | ||||||
Item 1. |
Financial Statements (Unaudited) | 2 | ||||
Item 2. |
Managements Discussion and Analysis of Financial Condition and Results of Operations | 27 | ||||
Item 3. |
Quantitative and Qualitative Disclosures about Market Risk | 46 | ||||
Item 4. |
Controls and Procedures | 46 | ||||
47 | ||||||
Item 1. |
Legal Proceedings | 47 | ||||
Item 1A. |
Risk Factors | 48 | ||||
Item 5. |
Other Information | 48 | ||||
Item 6. |
Exhibits | 49 | ||||
50 | ||||||
51 |
- i -
Table of Contents
Item 1. | Financial Statements |
UTi Worldwide Inc.
Condensed Consolidated Balance Sheets
As of April 30, 2015 and January 31, 2015
(in thousands, except share amounts)
April 30, 2015 | January 31, 2015 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Cash and cash equivalents |
$ | 175,939 | $ | 211,832 | ||||
Cash held as collateral |
33,742 | 29,068 | ||||||
Trade receivables (net of allowances for doubtful accounts of $19,402 and $19,964 as of April 30, 2015 and January 31, 2015, respectively) |
918,558 | 887,084 | ||||||
Deferred income taxes |
12,914 | 12,596 | ||||||
Other current assets |
154,186 | 154,756 | ||||||
|
|
|
|
|||||
Total current assets |
1,295,339 | 1,295,336 | ||||||
Property, plant and equipment (net of accumulated depreciation of $287,744 and $281,287 as of April 30, 2015 and January 31, 2015, respectively) |
190,206 | 195,523 | ||||||
Goodwill |
281,872 | 282,572 | ||||||
Other intangible assets, net |
141,951 | 147,018 | ||||||
Investments |
1,055 | 1,023 | ||||||
Deferred income taxes |
12,553 | 11,175 | ||||||
Other non-current assets |
40,195 | 41,305 | ||||||
|
|
|
|
|||||
Total assets |
$ | 1,963,171 | $ | 1,973,952 | ||||
|
|
|
|
|||||
LIABILITIES & EQUITY | ||||||||
Bank lines of credit |
$ | 65,356 | $ | 31,306 | ||||
Short-term borrowings |
74,336 | 52,825 | ||||||
Current portion of long-term borrowings |
1,173 | 1,429 | ||||||
Current portion of capital lease obligations |
12,075 | 11,429 | ||||||
Trade payables and other accrued liabilities |
661,173 | 698,450 | ||||||
Income taxes payable |
13,226 | 8,995 | ||||||
Deferred income taxes |
12,204 | 12,177 | ||||||
|
|
|
|
|||||
Total current liabilities |
839,543 | 816,611 | ||||||
Long-term borrowings, excluding current portion |
367,245 | 366,846 | ||||||
Capital lease obligations, excluding current portion |
56,879 | 56,455 | ||||||
Deferred income taxes |
14,385 | 14,204 | ||||||
Other non-current liabilities |
35,871 | 36,892 | ||||||
Convertible preference shares |
185,239 | 181,957 | ||||||
Commitments and contingencies |
||||||||
UTi Worldwide Inc. shareholders equity: |
||||||||
Common stock - ordinary shares of no par value; issued and outstanding 105,995,390 and 105,534,957 shares as of April 30, 2015 and January 31, 2015 respectively |
576,139 | 575,164 | ||||||
Retained earnings |
56,091 | 92,664 | ||||||
Accumulated other comprehensive loss |
(178,437 | ) | (179,423 | ) | ||||
|
|
|
|
|||||
Total UTi Worldwide Inc. shareholders equity |
453,793 | 488,405 | ||||||
Non-controlling interests |
10,216 | 12,582 | ||||||
|
|
|
|
|||||
Total equity |
464,009 | 500,987 | ||||||
|
|
|
|
|||||
Total liabilities and equity |
$ | 1,963,171 | $ | 1,973,952 | ||||
|
|
|
|
See accompanying notes to the condensed consolidated financial statements.
- 2 -
Table of Contents
UTi Worldwide Inc.
Condensed Consolidated Statements of Operations
For the three months ended April 30, 2015 and 2014
(in thousands, except share and per share amounts)
Three months ended April 30, | ||||||||
2015 | 2014 | |||||||
(Unaudited) | ||||||||
Revenues |
$ | 973,317 | $ | 1,043,888 | ||||
|
|
|
|
|||||
Purchased transportation costs |
643,865 | 674,534 | ||||||
Staff costs |
199,131 | 217,177 | ||||||
Depreciation |
13,078 | 13,806 | ||||||
Amortization of intangible assets |
7,412 | 6,999 | ||||||
Severance and other |
5,014 | 647 | ||||||
Other operating expenses |
123,649 | 133,995 | ||||||
|
|
|
|
|||||
Operating loss |
(18,832 | ) | (3,270 | ) | ||||
Interest income |
5,622 | 4,688 | ||||||
Interest expense |
(16,359 | ) | (13,285 | ) | ||||
Loss on debt extinguishment |
| (21,820 | ) | |||||
Other expense, net |
(71 | ) | (120 | ) | ||||
|
|
|
|
|||||
Pretax loss |
(29,640 | ) | (33,807 | ) | ||||
Provision for income taxes |
5,742 | 9,562 | ||||||
|
|
|
|
|||||
Net loss |
(35,382 | ) | (43,369 | ) | ||||
Net (loss)/income attributable to non-controlling interests |
(2,091 | ) | 354 | |||||
|
|
|
|
|||||
Net loss attributable to UTi Worldwide Inc. |
$ | (33,291 | ) | $ | (43,723 | ) | ||
|
|
|
|
|||||
Basic and diluted loss per common share attributable to UTi Worldwide Inc. common shareholders |
$ | (0.35 | ) | $ | (0.44 | ) | ||
|
|
|
|
|||||
Number of weighted average common shares outstanding used for per share calculations |
||||||||
Basic and diluted shares |
105,630,546 | 104,921,510 |
See accompanying notes to the condensed consolidated financial statements.
- 3 -
Table of Contents
UTi Worldwide Inc.
Condensed Consolidated Statements of Comprehensive Loss
For the three months ended April 30, 2015 and 2014
(in thousands)
Three months ended April 30, | ||||||||
2015 | 2014 | |||||||
(Unaudited) | ||||||||
Net loss |
$ | (35,382 | ) | $ | (43,369 | ) | ||
Other comprehensive income: |
||||||||
Foreign currency translation |
705 | 16,694 | ||||||
Defined benefit plan adjustments |
35 | (53 | ) | |||||
|
|
|
|
|||||
Other comprehensive income |
740 | 16,641 | ||||||
|
|
|
|
|||||
Comprehensive loss, before non-controlling interests |
(34,642 | ) | (26,728 | ) | ||||
Comprehensive (loss)/income attributable to non-controlling interests |
(2,337 | ) | 1,060 | |||||
|
|
|
|
|||||
Comprehensive loss attributable to UTi Worldwide Inc. |
$ | (32,305 | ) | $ | (27,788 | ) | ||
|
|
|
|
See accompanying notes to the condensed consolidated financial statements.
- 4 -
Table of Contents
UTi Worldwide Inc.
Condensed Consolidated Statements of Cash Flows
For the three months ended April 30, 2015 and 2014
(in thousands)
Three months ended April 30, | ||||||||
2015 | 2014 | |||||||
(Unaudited) | ||||||||
OPERATING ACTIVITIES: |
||||||||
Net loss |
$ | (35,382 | ) | $ | (43,369 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
Share-based compensation costs |
1,851 | 3,385 | ||||||
Depreciation |
13,078 | 13,806 | ||||||
Amortization of intangible assets |
7,412 | 6,999 | ||||||
Amortization of debt issuance costs |
976 | 765 | ||||||
Make-whole payment |
| 20,830 | ||||||
Accretion of convertible senior notes |
2,080 | 1,180 | ||||||
Deferred income taxes |
(1,507 | ) | 488 | |||||
Uncertain tax positions |
210 | 180 | ||||||
Gain on disposal of property, plant and equipment |
(676 | ) | (51 | ) | ||||
Provision for doubtful accounts |
125 | 2,077 | ||||||
Other |
2,237 | 765 | ||||||
Changes in operating assets and liabilities: |
||||||||
Increase in trade receivables |
(35,467 | ) | (135,013 | ) | ||||
Decrease/(increase) in other current assets |
1,317 | (212 | ) | |||||
Decrease in trade payables |
(23,278 | ) | (27,563 | ) | ||||
(Decrease)/increase in accrued liabilities and other liabilities |
(8,333 | ) | 33,596 | |||||
|
|
|
|
|||||
Net cash used in operating activities |
(75,357 | ) | (122,137 | ) | ||||
INVESTING ACTIVITIES: |
||||||||
Net increase in cash held as collateral |
(4,674 | ) | (50,025 | ) | ||||
Purchases of property, plant and equipment, excluding software |
(2,916 | ) | (5,887 | ) | ||||
Proceeds from disposals of property, plant and equipment |
1,166 | 1,741 | ||||||
Purchases of software and other intangible assets |
(2,313 | ) | (4,200 | ) | ||||
Net decrease in other non-current assets and other |
171 | 792 | ||||||
|
|
|
|
|||||
Net cash used in investing activities |
(8,566 | ) | (57,579 | ) | ||||
FINANCING ACTIVITIES: |
||||||||
Proceeds from issuances of long-term borrowings |
| 402,974 | ||||||
Proceeds from the issuance of preference shares |
| 175,000 | ||||||
Borrowings from bank lines of credit |
77,000 | 57,569 | ||||||
Repayments of bank lines of credit |
(43,000 | ) | (201,343 | ) | ||||
Net borrowings/(repayments) under revolving lines of credit |
761 | (2,133 | ) | |||||
Net increase/(decrease) in short-term borrowings |
21,358 | (918 | ) | |||||
Repayments of long-term borrowings |
(1,937 | ) | (202,063 | ) | ||||
Make-whole payment |
| (20,830 | ) | |||||
Debt and preferred shares issuance costs |
| (24,692 | ) | |||||
Repayments of capital lease obligations |
(3,463 | ) | (4,417 | ) | ||||
Distributions to non-controlling interests and other |
(29 | ) | | |||||
Ordinary shares settled under share-based compensation plans |
(1,140 | ) | (1,759 | ) | ||||
Proceeds from issuance of ordinary shares |
65 | 49 | ||||||
|
|
|
|
|||||
Net cash provided by financing activities |
49,615 | 177,437 | ||||||
Effect of foreign exchange rate changes on cash and cash equivalents |
(1,585 | ) | 4,778 | |||||
|
|
|
|
|||||
Net (decrease)/increase in cash and cash equivalents |
(35,893 | ) | 2,499 | |||||
Cash and cash equivalents at beginning of period |
211,832 | 204,384 | ||||||
|
|
|
|
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Cash and cash equivalents at end of period |
$ | 175,939 | $ | 206,883 | ||||
|
|
|
|
See accompanying notes to the condensed consolidated financial statements.
- 5 -
Table of Contents
UTi Worldwide Inc.
Notes to the Condensed Consolidated Financial Statements
For the three months ended April 30, 2015 and 2014 (Unaudited)
NOTE 1. | Presentation of Financial Statements |
Basis of Presentation. The accompanying unaudited condensed 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 April 30, 2015 and January 31, 2015, and the consolidated statements of operations, comprehensive loss and cash flows for the three months ended April 30, 2015 and 2014. 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 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 months ended April 30, 2015 are not necessarily indicative of the results of operations that may be expected for the fiscal year ending January 31, 2016 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 fiscal year ended January 31, 2015.
All amounts in the notes to the consolidated financial statements are presented in thousands except for share and per share data.
Use of Estimates. The preparation of the consolidated financial statements, in accordance with U.S. GAAP, requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Significant items subject to such estimates and assumptions include, but are not limited to, useful life assumptions and the dates at which certain software applications became (or will become) ready for their intended use (both of which impact the timing and amount of amortization), revenue recognition, income taxes, allowances for doubtful accounts, the initial and recurring valuation of certain assets acquired and liabilities assumed through business combinations (including goodwill, indefinite lived intangible assets, and contingent liabilities), impairment of long-lived assets, and contingencies. Actual results could differ from those estimates.
Foreign Currency Translation. Included in other expense, net, are net losses of $71 and $120 on foreign exchange on intercompany loans for the three months ended April 30, 2015 and 2014, respectively.
Income Taxes. Under the Financial Accounting Standards Board (FASB) Accounting Standards Codification (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 can 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.
Provision for income taxes was $5,742 and $9,562 for the three months ended April 30, 2015 and 2014, respectively.
Segment Reporting. The Companys reportable business segments are (i) Freight Forwarding and (ii) 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. Certain corporate costs, enterprise-led costs, and various holding company expenses within the group structure are presented separately.
- 6 -
Table of Contents
Earnings Per Share. The Company calculates basic earnings per share based on earnings (loss) available to common shareholders and the weighted average number of ordinary common shares outstanding during each period. Diluted earnings per share is computed in a similar manner using the weighted average number of ordinary common shares, but also considers potentially dilutive common shares outstanding. Potentially dilutive common shares includes outstanding employee share-based compensation awards that are assumed to be exercised or vested and paid out in shares of common stock, in addition to the dilutive effects of the Convertible Preference Shares and the 2019 Notes as described in Note 11, Borrowings.
In connection with the Convertible Preference Shares, net earnings (loss) for the period are adjusted by the amount of dividends declared in order to calculate earnings (loss) available to common shareholders. In addition, the Company utilizes the if-converted method in determining diluted earnings per share. In periods where the if-converted method is dilutive, the Convertible Preference Shares are assumed to have been converted as of the beginning of the reporting period. As such, preferred dividends for the period are added back to earnings (loss) available to common shareholders and the number of common shares to be issued upon conversion are assumed to be outstanding for the entire reporting period.
Until the Company has the ability and intent to settle the 2019 Notes partially or wholly in cash, the if converted method is used to account for the 2019 Notes in the calculation of diluted earnings per share. In periods when the effect of the 2019 Notes is dilutive, the expected number of common stock to be issued upon conversion is included in the computation and the pro forma effects of excluding accrued interest on the 2019 Notes is added to net earnings to compute diluted earnings per share.
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 $199,883 of these deposits including both cash and cash equivalents and cash held as collateral were not insured by the Federal Deposit Insurance Corporation (FDIC) or similar entities outside of the United States of America (U.S.) as of April 30, 2015.
Cash held as collateral. In connection with the Fiscal 2015 Refinancing, the 2011 RBS Facility and certain of the Companys other facilities, as described in Note 11, Borrowings, were terminated in March 2014, and the Company provided cash collateral in the amount of $33,742 to secure the letters of credit and bank guarantees which were then and remain outstanding. The usage of such cash is restricted pursuant to the applicable agreements.
Fair Values of Financial Instruments. The estimated fair values of financial instruments have 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, convertible preference shares, bank lines of credit, long-term deposits, short-term borrowings, trade payables and other accrued liabilities, long-term borrowings, forward contracts and other derivative instruments. With the exception of the 2019 Notes, the carrying values 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.
Recent Accounting Pronouncements
Adoption of New Accounting Standards. None.
Standards Issued But Not Yet Effective. In June 2014, the FASB issued Accounting Standard Update (ASU) 2014-12, Accounting for Share-Based Payments When the Terms of an Award Allow a Performance Target to Be Achieved After the Requisite Service Period, which requires that a performance target that could be achieved after the requisite service period be treated as a performance condition that affects the vesting of the award. The amendments in ASU 2014-12 are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Early adoption is permitted. Entities may apply the amendments in ASU 2014-12 either: (i) prospectively to all
- 7 -
Table of Contents
awards granted or modified after the effective date; or (ii) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. The Company is currently evaluating the potential impact of the adoption of this guidance on its consolidated financial statements.
In August, 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties About an Entitys Ability to Continue as a Going Concern, which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new standard requires management to perform interim and annual assessments of an entitys ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entitys ability to continue as a going concern. The ASU applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted.
In April 2015, the FASB issued ASU 2015-03, InterestImputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which changes the presentation of debt issuance costs in the financial statements. Under the ASU, an entity should present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs is reported as interest expense. This new guidance is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2015; early adoption is allowed for all entities for financial statements that have not been previously issued. Entities would apply the new guidance retrospectively to all prior periods. The Company is currently evaluating the potential impact of adoption of this guidance on its consolidated financial statements.
Proposed Amendments to Current Accounting Standards. Updates to existing accounting standards and exposure drafts, that have been issued or proposed by FASB or other standards setting bodies that do not require adoption until a future date, are being evaluated by the Company to determine whether adoption will have a material impact on the Companys consolidated financial statements.
NOTE 2. | Acquisitions |
The Company did not complete any acquisitions during the three months ended April 30, 2015.
- 8 -
Table of Contents
NOTE 3. | Earnings per Share |
Loss per share is calculated as follows:
Loss | Weighted Average Number of Ordinary Shares |
Per Share Amount |
||||||||||
For the three months ended April 30, 2015: |
||||||||||||
Basic loss per share: |
||||||||||||
Net loss attributable to UTi Worldwide Inc. common shareholders |
$ | (33,291 | ) | 105,630,546 | ||||||||
Less: Dividends in-kind on Convertible Preference Shares |
(3,282 | ) | | |||||||||
|
|
|
|
|||||||||
Loss attributable to UTi Worldwide Inc. common shareholders for calculation of basic loss per share |
$ | (36,573 | ) | 105,630,546 | $ | (0.35 | ) | |||||
|
|
|
|
|
|
|||||||
Diluted loss per share: |
||||||||||||
Loss attributable to UTi Worldwide Inc. common shareholders |
$ | (36,573 | ) | 105,630,546 | ||||||||
Effect of assumed exercise or conversion of dilutive securities: |
||||||||||||
Employee share-based awards |
| | ||||||||||
Convertible Preference Shares |
| | ||||||||||
2019 Notes |
| | ||||||||||
|
|
|
|
|||||||||
Loss attributable to UTi Worldwide Inc. common shareholders for calculation of diluted loss per share |
$ | (36,573 | ) | 105,630,546 | $ | (0.35 | ) | |||||
|
|
|
|
|
|
|||||||
Weighted-average anti-dilutive shares excluded from computation: |
||||||||||||
Employee share-based awards |
2,719,739 | |||||||||||
Convertible Preference Shares |
13,524,389 | |||||||||||
2019 Notes |
27,588,120 | |||||||||||
|
|
|||||||||||
Total weighted average anti-diluted shares excluded from computation |
43,832,248 | |||||||||||
|
|
|||||||||||
For the three months ended April 30, 2014: |
||||||||||||
Basic loss per share: |
||||||||||||
Net loss attributable to UTi Worldwide Inc. common shareholders |
$ | (43,723 | ) | 104,921,510 | ||||||||
Less: Dividends in-kind on Convertible Preference Shares |
(1,946 | ) | | |||||||||
|
|
|
|
|||||||||
Loss attributable to UTi Worldwide Inc. common shareholders for calculation of basic loss per share |
$ | (45,669 | ) | 104,921,510 | $ | (0.44 | ) | |||||
|
|
|
|
|
|
|||||||
Diluted loss per share: |
||||||||||||
Loss attributable to UTi Worldwide Inc. common shareholders |
$ | (45,669 | ) | 104,921,510 | ||||||||
Effect of assumed exercise or conversion of dilutive securities: |
||||||||||||
Employee share-based awards |
| | ||||||||||
Convertible Preference Shares |
| | ||||||||||
2019 Notes |
| | ||||||||||
|
|
|
|
|||||||||
Loss attributable to UTi Worldwide Inc. common shareholders for calculation of diluted loss per share |
$ | (45,669 | ) | 104,921,510 | $ | (0.44 | ) | |||||
|
|
|
|
|
|
|||||||
Weighted-average anti-dilutive shares excluded from computation: |
||||||||||||
Employee share-based awards |
3,792,689 | |||||||||||
Convertible Preference Shares |
8,172,169 | |||||||||||
2019 Notes |
17,668,796 | |||||||||||
|
|
|||||||||||
Total weighted average anti-diluted shares excluded from computation |
29,633,654 | |||||||||||
|
|
Weighted-average diluted shares outstanding exclude shares representing stock options that have exercise prices in excess of the average market price of the Companys common stock during the relevant period or securities that do not result in incremental shares when applying the treasury stock method under ASC 260, Earnings Per Share. For the three months ended April 30, 2015 and 2014, no incremental common shares are included in the computation of diluted loss per common share, as the Company had a net loss.
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Table of Contents
NOTE 4. | Equity |
UTi Worldwide Inc. Shareholders Equity. Certain information regarding changes in equity and non-controlling interests are as follows:
UTi Worldwide Inc. Shareholders Equity | ||||||||||||||||||||
Common Stock | Retained earnings | Accumulated other comprehensive loss |
Non-controlling interests |
Total Equity | ||||||||||||||||
Balance at February 1, 2015 |
$ | 575,164 | $ | 92,664 | $ | (179,423 | ) | $ | 12,582 | $ | 500,987 | |||||||||
Net loss |
| (33,291 | ) | | (2,091 | ) | (35,382 | ) | ||||||||||||
Other comprehensive income/(loss) |
| | 986 | (246 | ) | 740 | ||||||||||||||
Shared-based compensation costs |
1,851 | | | | 1,851 | |||||||||||||||
Net ordinary shares settled under share-based compensation plans |
(1,075 | ) | | | | (1,075 | ) | |||||||||||||
Dividends in-kind on Convertible Preference Shares payable in arrears |
| (3,282 | ) | | | (3,282 | ) | |||||||||||||
Non-controlling interests and other |
199 | | | (29 | ) | 170 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at April 30, 2015 |
$ | 576,139 | $ | 56,091 | $ | (178,437 | ) | $ | 10,216 | $ | 464,009 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at February 1, 2014 |
$ | 517,762 | $ | 307,338 | $ | (143,181 | ) | $ | 13,788 | $ | 695,707 | |||||||||
Net (loss)/income |
| (43,723 | ) | | 354 | (43,369 | ) | |||||||||||||
Other comprehensive income |
| | 15,935 | 706 | 16,641 | |||||||||||||||
Shared-based compensation costs |
3,434 | | | | 3,434 | |||||||||||||||
Net ordinary shares settled under share-based compensation plans |
(1,759 | ) | | | | (1,759 | ) | |||||||||||||
2019 Notes original issue discount |
47,690 | | | | 47,690 | |||||||||||||||
Allocation of debt issuance costs |
(1,769 | ) | | | | (1,769 | ) | |||||||||||||
Dividends in-kind on Convertible Preference Shares payable in arrears |
| (1,946 | ) | | | (1,946 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at April 30, 2014 |
$ | 565,358 | $ | 261,669 | $ | (127,246 | ) | $ | 14,848 | $ | 714,629 | |||||||||
|
|
|
|
|
|
|
|
|
|
- 10 -
Table of Contents
Accumulated Other Comprehensive Loss. The following table summarizes the changes in the accumulated balances for each component of accumulated other comprehensive loss (AOCI) before- and after-tax:
Foreign Currency Translation |
Defined Benefit Plans |
Total | ||||||||||
Balance at February 1, 2015 |
$ | (173,862 | ) | $ | (5,561 | ) | $ | (179,423 | ) | |||
Other comprehensive income before reclassifications, before tax |
1,585 | | 1,585 | |||||||||
Tax-effect |
(634 | ) | | (634 | ) | |||||||
|
|
|
|
|
|
|||||||
Other comprehensive income before reclassifications, after tax |
951 | | 951 | |||||||||
|
|
|
|
|
|
|||||||
Amounts reclassified from AOCI, before tax |
| 55 | 55 | |||||||||
Tax-effect |
| (20 | ) | (20 | ) | |||||||
|
|
|
|
|
|
|||||||
Amounts reclassified from AOCI, after tax |
| 35 | 35 | |||||||||
|
|
|
|
|
|
|||||||
Net current-period other comprehensive income |
951 | 35 | 986 | |||||||||
|
|
|
|
|
|
|||||||
Balance at April 30, 2015 |
$ | (172,911 | ) | $ | (5,526 | ) | $ | (178,437 | ) | |||
|
|
|
|
|
|
|||||||
Balance at February 1, 2014 |
$ | (138,554 | ) | $ | (4,627 | ) | $ | (143,181 | ) | |||
Other comprehensive income before reclassifications, before tax |
26,647 | | 26,647 | |||||||||
Tax-effect |
(10,659 | ) | | (10,659 | ) | |||||||
|
|
|
|
|
|
|||||||
Other comprehensive income before reclassifications, after tax |
15,988 | | 15,988 | |||||||||
|
|
|
|
|
|
|||||||
Amounts reclassified from AOCI, before tax |
| (74 | ) | (74 | ) | |||||||
Tax-effect |
| 21 | 21 | |||||||||
|
|
|
|
|
|
|||||||
Amounts reclassified from AOCI, after tax reclassifications, after tax |
| (53 | ) | (53 | ) | |||||||
|
|
|
|
|
|
|||||||
Net current-period other comprehensive income/(loss) |
15,988 | (53 | ) | 15,935 | ||||||||
|
|
|
|
|
|
|||||||
Balance at April 30, 2014 |
$ | (122,566 | ) | $ | (4,680 | ) | $ | (127,246 | ) | |||
|
|
|
|
|
|
The effects on net loss of significant amounts reclassified out of each component of AOCI are summarized as follows:
Three months ended April 30, | ||||||||||
2015 | 2014 | |||||||||
Details about AOCI components |
Affected line item on the consolidated statements of operations |
Amount reclassified from AOCI |
Amount reclassified from AOCI |
|||||||
Defined benefit plans: |
||||||||||
Amortization of net actuarial gain |
Staff costs | $ | 75 | $ | 44 | |||||
Amortization of prior service cost |
Staff costs | (4 | ) | 4 | ||||||
Foreign currency translation |
Staff costs | (16 | ) | (122 | ) | |||||
|
|
|
|
|||||||
Pretax income/(loss) | 55 | (74 | ) | |||||||
(Benefit)/provision for income taxes |
(20 | ) | 21 | |||||||
|
|
|
|
|||||||
Total reclassification for the period |
Net income/(loss) | $ | 35 | $ | (53 | ) | ||||
|
|
|
|
- 11 -
Table of Contents
Convertible Preference Shares. On March 4, 2014, the Company issued to an affiliate of its largest shareholder, P2 Capital, $175,000 of its Convertible Preference Shares. Included in temporary equity as of April 30, 2015, is $185,239, reflecting the issuance of $175,000, net of allocated issuance costs of $4,497, and the subsequent accrual of the dividends paid-in kind of $14,736. The Convertible Preference Shares rank senior to the Companys ordinary shares with respect to dividend rights and rights upon the Companys liquidation, winding-up and dissolution. The Company expects that dividends on the Convertible Preference Shares will be paid in kind quarterly. Such dividends started to accrue on June 1, 2014 and will continue until March 1, 2017 or the earlier conversion of the Convertible Preference Shares. The dividend rate is 7.0% for paid-in-kind dividends and 8% for cash dividends paid in the limited circumstances provided by the terms of the Convertible Preference Shares. The Convertible Preference Shares becomes convertible at any time at the holders option into the Companys ordinary shares (or a combination of ordinary shares and cash in certain circumstances) as of September 5, 2014 based on an initial conversion price of $13.8671. The Company may, at its option, cause a mandatory conversion of the Convertible Preference Shares if the Companys ordinary shares equal or exceed a certain closing price threshold over a specified trading period at any time following March 1, 2017. In addition, if certain specified fundamental changes occur prior to March 1, 2017, the holders of the Convertible Preference Shares will have the right to convert their Convertible Preferred Shares and be entitled to a fundamental change dividend make-whole amount. Until March 1, 2017, the holders of the Convertible Preference Shares have pre-emptive rights with respect to certain of the companys equity securities for so long as they own a number of Convertible Preference Shares convertible into at least 6,309,896 ordinary shares.
NOTE 5. | Segment Reporting |
Certain information regarding the Companys operations by segment is summarized as follows:
Three months ended April 30, 2015 | ||||||||||||||||
Freight Forwarding |
Contract Logistics and Distribution |
Corporate | Total | |||||||||||||
Revenues |
$ | 622,757 | $ | 350,560 | $ | | $ | 973,317 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Purchased transportation costs |
485,471 | 158,394 | | 643,865 | ||||||||||||
Staff costs |
91,606 | 100,288 | 7,237 | 199,131 | ||||||||||||
Depreciation |
3,972 | 7,718 | 1,388 | 13,078 | ||||||||||||
Amortization of intangible assets |
6,631 | 781 | | 7,412 | ||||||||||||
Severance and other |
2,428 | 2,296 | 290 | 5,014 | ||||||||||||
Other operating expenses |
43,736 | 71,113 | 8,800 | 123,649 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating expenses |
633,844 | 340,590 | 17,715 | 992,149 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating (loss)/income |
$ | (11,087 | ) | $ | 9,970 | $ | (17,715 | ) | (18,832 | ) | ||||||
|
|
|
|
|
|
|||||||||||
Interest income |
5,622 | |||||||||||||||
Interest expense |
(16,359 | ) | ||||||||||||||
Other expense, net |
(71 | ) | ||||||||||||||
|
|
|||||||||||||||
Pretax loss |
(29,640 | ) | ||||||||||||||
Provision for income taxes |
5,742 | |||||||||||||||
|
|
|||||||||||||||
Net loss |
(35,382 | ) | ||||||||||||||
Net loss attributable to non-controlling interests |
(2,091 | ) | ||||||||||||||
|
|
|||||||||||||||
Net loss attributable to UTi Worldwide Inc. |
$ | (33,291 | ) | |||||||||||||
|
|
|||||||||||||||
Capital expenditures for property, plant and equipment |
$ | 5,417 | 5,428 | 25 | $ | 10,870 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Capital expenditures for internally developed software |
$ | | 110 | 2,203 | $ | 2,313 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Segment assets |
$ | 1,125,571 | 601,221 | 236,379 | $ | 1,963,171 | ||||||||||
|
|
|
|
|
|
|
|
- 12 -
Table of Contents
Three months ended April 30, 2014 | ||||||||||||||||
Freight Forwarding |
Contract Logistics and Distribution |
Corporate | Total | |||||||||||||
Revenues |
$ | 683,870 | $ | 360,018 | $ | | $ | 1,043,888 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Purchased transportation costs |
516,261 | 158,273 | | 674,534 | ||||||||||||
Staff costs |
108,120 | 99,746 | 9,311 | 217,177 | ||||||||||||
Depreciation |
4,429 | 7,926 | 1,451 | 13,806 | ||||||||||||
Amortization of intangible assets |
6,051 | 948 | | 6,999 | ||||||||||||
Severance and other |
568 | 79 | | 647 | ||||||||||||
Other operating expenses |
47,246 | 79,371 | 7,378 | 133,995 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating expenses |
682,675 | 346,343 | 18,140 | 1,047,158 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income/(loss) |
$ | 1,195 | $ | 13,675 | $ | (18,140 | ) | (3,270 | ) | |||||||
|
|
|
|
|
|
|||||||||||
Interest income |
4,688 | |||||||||||||||
Interest expense |
(13,285 | ) | ||||||||||||||
Loss on debt extinguishment |
(21,820 | ) | ||||||||||||||
Other expense, net |
(120 | ) | ||||||||||||||
|
|
|||||||||||||||
Pretax loss |
(33,807 | ) | ||||||||||||||
Provision for income taxes |
9,562 | |||||||||||||||
|
|
|||||||||||||||
Net loss |
(43,369 | ) | ||||||||||||||
Net income attributable to non-controlling interests |
354 | |||||||||||||||
|
|
|||||||||||||||
Net loss attributable to UTi Worldwide Inc. |
$ | (43,723 | ) | |||||||||||||
|
|
|||||||||||||||
Capital expenditures for property, plant and equipment |
$ | 5,368 | 2,924 | 1 | $ | 8,293 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Capital expenditures for internally developed software |
$ | | 296 | 2,440 | $ | 2,736 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Segment assets |
$ | 1,362,006 | 655,420 | 282,122 | $ | 2,299,548 | ||||||||||
|
|
|
|
|
|
|
|
For reporting purposes by segment, 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.
- 13 -
Table of Contents
The following table shows long-lived assets attributable to specific countries:
April 30, 2015 | January 31, 2015 | |||||||
South Africa |
$ | 71,124 | $ | 73,972 | ||||
United States |
51,464 | 50,700 | ||||||
China |
14,536 | 14,758 | ||||||
Spain |
4,182 | 4,518 | ||||||
Israel |
3,707 | 3,765 | ||||||
Germany |
1,662 | 1,961 | ||||||
All others |
43,531 | 45,849 | ||||||
|
|
|
|
|||||
Total |
$ | 190,206 | $ | 195,523 | ||||
|
|
|
|
The following table shows revenues attributable to specific countries:
Three months ended April 30, | ||||||||
2015 | 2014 | |||||||
United States |
$ | 278,035 | $ | 293,464 | ||||
South Africa |
125,290 | 148,243 | ||||||
China |
110,305 | 104,708 | ||||||
Germany |
35,637 | 44,670 | ||||||
Israel |
35,862 | 39,301 | ||||||
Spain |
25,819 | 29,624 | ||||||
All others |
362,369 | 383,878 | ||||||
|
|
|
|
|||||
Total |
$ | 973,317 | $ | 1,043,888 | ||||
|
|
|
|
The following table shows revenues and purchased transportation costs attributable to the Companys principal services:
Three months ended April 30, | ||||||||
2015 | 2014 | |||||||
Revenues: |
||||||||
Airfreight forwarding |
$ | 294,778 | $ | 321,401 | ||||
Ocean freight forwarding |
242,298 | 263,132 | ||||||
Customs brokerage |
44,523 | 44,327 | ||||||
Contract logistics |
184,007 | 187,164 | ||||||
Distribution |
144,888 | 146,858 | ||||||
Other |
62,823 | 81,006 | ||||||
|
|
|
|
|||||
Total |
$ | 973,317 | $ | 1,043,888 | ||||
|
|
|
|
|||||
Purchased transportation costs: |
||||||||
Airfreight forwarding |
$ | 231,093 | $ | 245,413 | ||||
Ocean freight forwarding |
213,361 | 219,048 | ||||||
Customs brokerage |
12,454 | 11,008 | ||||||
Contract logistics |
49,478 | 44,270 | ||||||
Distribution |
101,749 | 103,784 | ||||||
Other |
35,730 | 51,011 | ||||||
|
|
|
|
|||||
Total |
$ | 643,865 | $ | 674,534 | ||||
|
|
|
|
- 14 -
Table of Contents
NOTE 6. | Goodwill and Other Intangible Assets |
Goodwill. The changes in the carrying amount of goodwill by reportable segment are as follows:
Freight Forwarding |
Contract Logistics and Distribution |
Total | ||||||||||
Balance at January 31, 2015 |
$ | 155,107 | $ | 127,465 | $ | 282,572 | ||||||
Foreign currency translation adjustment |
(526 | ) | (174 | ) | (700 | ) | ||||||
|
|
|
|
|
|
|||||||
Balance at April 30, 2015 |
$ | 154,581 | $ | 127,291 | $ | 281,872 | ||||||
|
|
|
|
|
|
In accordance with ASC 350, Intangibles Goodwill and Other, the Company reviews goodwill and other intangible assets for impairment annually at the end of the second quarter of each fiscal year, or more often if events or circumstances indicate that impairment may have occurred. No impairment was recognized during the three months ended April 30, 2015. The Companys accumulated goodwill impairment charge since its adoption of ASC 350 was $193,502 at April 30, 2015 and January 31, 2015, all of which is included in the Companys Contract Logistics and Distribution segment.
Other Intangible Assets. Amortizable intangible assets at April 30, 2015 and January 31, 2015 relate primarily to software applications internally-developed by the Company for internal use and the estimated fair values of client relationships acquired with respect to certain acquisitions. The carrying values of amortizable intangible assets at April 30, 2015 and January 31, 2015 were as follows:
Gross carrying value |
Accumulated amortization |
Net carrying value | Weighted average life (years) |
|||||||||||||
Balance at April 30, 2015 |
||||||||||||||||
Internally-developed software |
$ | 173,538 | $ | (43,218 | ) | $ | 130,320 | 6.8 | ||||||||
Client relationships |
74,834 | (64,190 | ) | 10,644 | 8.8 | |||||||||||
Non-compete agreements |
150 | (71 | ) | 79 | 4.6 | |||||||||||
Other |
3,477 | (3,477 | ) | | 3.7 | |||||||||||
|
|
|
|
|
|
|||||||||||
Total |
$ | 251,999 | $ | (110,956 | ) | $ | 141,043 | |||||||||
|
|
|
|
|
|
|||||||||||
Balance at January 31, 2015 |
||||||||||||||||
Internally-developed software |
$ | 171,307 | $ | (37,495 | ) | $ | 133,812 | 6.8 | ||||||||
Client relationships |
74,186 | (61,965 | ) | 12,221 | 8.8 | |||||||||||
Non-compete agreements |
150 | (63 | ) | 87 | 4.6 | |||||||||||
Other |
3,442 | (3,442 | ) | | 3.8 | |||||||||||
|
|
|
|
|
|
|||||||||||
Total |
$ | 249,085 | $ | (102,965 | ) | $ | 146,120 | |||||||||
|
|
|
|
|
|
- 15 -
Table of Contents
The following table shows the expected amortization expense for these intangible assets for each of the next five fiscal years and thereafter ended January 31:
2016 (remainder) |
$ | 22,518 | ||
2017 |
28,700 | |||
2018 |
25,259 | |||
2019 |
23,385 | |||
2020 |
23,376 | |||
2021 and thereafter |
17,805 |
The Company had $908 and $898 of intangible assets not subject to amortization at April 30, 2015 and January 31, 2015, respectively, related primarily to acquired trade names.
NOTE 7. | Supplemental Cash Flow Information |
The following table shows the supplemental cash flow information and supplemental non-cash investing and financing activities:
Three months ended April 30, | ||||||||
2015 | 2014 | |||||||
Net cash paid for: |
||||||||
Interest |
$ | 9,960 | $ | 10,022 | ||||
Make-whole payment |
| 20,830 | ||||||
Income taxes |
10,758 | 13,873 | ||||||
Non-cash activities: |
||||||||
Capital leases and other obligations to acquire assets |
7,954 | 2,406 | ||||||
Net change to other obligations incurred to internally-developed software |
| (1,465 | ) | |||||
2019 Notes original issuance discount |
| 47,690 | ||||||
Dividends in-kind on Convertible Preference Shares payable in arrears |
3,282 | 1,946 |
Limitations on dividends. UTi is a holding company that relies on dividends, distributions and advances from its subsidiaries to pay dividends on its ordinary shares and meet its financial obligations. The ability of UTi s subsidiaries to pay such amounts and UTi s ability to pay dividends and distributions to its shareholders are subject to restrictions including, but not limited to, applicable local laws and limitations contained in the Companys bank credit facilities and long-term borrowings. Additionally, in general, UTis subsidiaries cannot pay dividends in excess of their retained earnings. Such laws, restrictions, and effects could limit or impede intercompany dividends and distributions, or the making of intercompany advances.
Exchange control laws and regulations. Some of the Companys subsidiaries may be subject from time to time to exchange control laws and regulations that may limit or restrict the payment of dividends or distributions or other transfers of funds by those subsidiaries to UTi. Total net assets which may not be transferred to UTi in the form of loans, advances, or cash dividends by the Companys subsidiaries without the consent of a third party were less than 13% 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 material loss contingencies relating to the investigations and legal proceedings disclosed below because the Company believes that, although unfavorable outcomes in the investigations or proceedings may be reasonably possible, they are not considered by the Companys management to be probable and reasonably estimable.
- 16 -
Table of Contents
From time to time, claims are made against the Company or the Company may make claims against others, including in the ordinary course of the Companys 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 the Company from engaging in certain activities. The occurrence of an unfavorable outcome in any specific period could have a material adverse effect on the Companys consolidated results of operations for that period or future periods. As of the date of these consolidated financial statements, the Company is not a party to any material litigation, except as described below.
Industry-Wide Anti-Trust Investigations. On March 28, 2012, the Company was notified by the European Commission (EC) that it had adopted a decision against the Company and two of its subsidiaries relating to alleged anti-competitive behavior in the market for freight forwarding services in the European Union/European Economic Area. The decision of the EC imposes a fine of euro 3,068 (or approximately $3,383 at April 30, 2015) against the Company. The Company believes that neither the Company nor its subsidiaries violated European competition rules. In June 2012, the Company lodged an appeal against the decision and the amount of the fine before the European Unions General Court and oral arguments before the EUs General Court in Luxembourg were heard in October 2014.
In May 2009, the Company 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, the Company 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 responded to this proceeding in May 2014. The Company filed a supplemental response in support of its defense in September 2014 after the Company was granted access to various documents seized by the Brazilian antitrust authority during raids of several other forwarders.
In May 2012, the Competition Commission of Singapore informed the Company that it was contemplating an administrative investigation into possible alleged cartel activity in the international freight forwarding market. In January 2013, the Company provided information and documents related to the air Automated Manifest System fee in response to a notice the Company received in November 2012 from the Competition Commission of Singapore requesting the information and indicating that the commission suspected that the Company engaged in alleged anti-competitive behavior relating to freight forwarding services to and from Singapore. In September 2013, the Company received a follow-up request for information and provided such information in November 2013.
From time to time the Company may receive additional requests for information, documents and interviews from various governmental agencies with respect to these investigations, and the Company has provided, and may continue to provide in the future, further responses as a result of such requests.
The Company has incurred, and may in the future incur, significant legal fees and other costs in connection with these governmental investigations and lawsuits. If any regulatory body concludes that the Company or any of its subsidiaries have engaged in anti-competitive behavior, the Company could incur significant additional legal fees and other costs and penalties, which could include substantial fines, penalties and/or criminal sanctions against the Company and/or certain of the Companys current or former officers, directors and employees, and the Company could be liable for damages. Any of these fees, costs, penalties, damages, sanctions or liabilities could have a material adverse effect on the Company and its financial results. As of the date of this filing, except for the decision and fine imposed by the EC, an estimate of any possible loss or range of loss cannot be made. In the case of the decision and fine imposed by the EC, the possible loss ranges from no loss, in the event of a successful appeal by the Company, to the full amount of the fine.
- 17 -
Table of Contents
Matters Related to the Fiscal 2015 Financing. On March 17, 2014, a putative securities class action lawsuit was filed against the Company and certain of its executives in the United States District Court for the Central District of California. As amended on September 5, 2014, the complaint, which is captioned Michael J. Angley, individually and on behalf of himself and all others similarly situated v. UTi Worldwide Inc., Eric W. Kirchner, Richard G. Rodick, Edward G. Feitzinger and Jeffrey W. Misakian, No. 2:14-cv-02066, generally alleges that the defendants violated Section 10(b) of the Securities Exchange Act of 1934, as amended (the Exchange Act), Rule 10b-5 promulgated thereunder and Section 20(a) of the Exchange Act by misstating or failing to disclose, in certain public statements made and in filings with the SEC between March 28, 2013 and February 26, 2014, material facts relating to the Companys liquidity position, financial condition, financial covenants, financial systems and freight forwarding operating system. The complaint seeks unspecified damages and other relief. The Company and the individual defendants deny any allegations of wrongdoing and intend to vigorously defend against this lawsuit. All defendants moved to dismiss on November 4, 2014. At a hearing on June 2, 2015, the court stated its intent to issue an order granting the motion to dismiss, with leave for plaintiffs to amend.
In July 2014, the Company received a subpoena from the SEC requesting certain documents related to, among other things, the facts and circumstances surrounding the Fiscal 2015 Refinancing. In September 2014, the Company received a similar subpoena directed to the members of the Audit Committee of the Board of Directors. In April 2015, the Company received a subpoena from the SEC requesting certain documents related to the material weakness in internal control over financial reporting and the revisions to prior period financial statements that were disclosed in the Companys Form 10-K for the period ending January 31, 2015. The Company has been cooperating and intends to continue to cooperate with the SECs investigation.
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 qualifying retirement age.
Net periodic benefit cost for the Companys defined benefit plans consists of:
Three months ended April 30, | ||||||||
2015 | 2014 | |||||||
Service cost |
$ | 586 | $ | 499 | ||||
Interest cost |
345 | 467 | ||||||
Expected return on plan assets |
(577 | ) | (93 | ) | ||||
Amortization of net actuarial loss |
72 | 48 | ||||||
|
|
|
|
|||||
Total |
$ | 426 | $ | 921 | ||||
|
|
|
|
The Company contributed approximately $416 and $461, respectively, to its defined benefit plans for the three months ended April 30, 2015 and 2014.
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 of awards, including stock options, share appreciation rights (sometimes referred to as SAR), restricted shares, restricted share units (RSU), deferred share units and performance share units (PSU). 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.
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In addition to the 2009 LTIP, at April 30, 2015, the Company had share-based compensation awards outstanding under the following plans: the 2004 Long Term Incentive Plan (2004 LTIP), the 2004 Non-Employee Directors Share Inventive Plan (2004 Directors Incentive Plan) and the 2000 Employee Share Purchase Plan (2000 ESPP). The Company generally grants awards during the first quarter of each fiscal year. Vesting of awards may occur over different periods, depending on the terms of the individual awards. PSUs will vest upon achievement of certain performance objectives at the end of the vesting period. Depending on the performance objectives achieved, each PSU may have a vesting rate up to 200%.
Since the adoption of the 2009 LTIP, no additional awards may be made pursuant to the 2004 LTIP. The 2004 Directors Incentive Plan terminated on June 25, 2014 and after such date; no additional awards can be made under this plan.
Under the 2000 ESPP, eligible employees may purchase shares of the Companys stock at the end 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.
Stock Options | Performance Share Units | Restricted Stock Units | ||||||||||||||||||||||
2009 LTIP: |
Shares Subject to Stock Options |
Weighted Average Exercise Price |
Performance Share Units |
Weighted Average Grant Date Fair Value |
Restricted Stock Units |
Weighted Average Grant Date Fair Value |
||||||||||||||||||
Balance at February 1, 2015 |
636,996 | $ | 16.33 | 143,812 | $ | 10.04 | 2,575,494 | $ | 12.78 | |||||||||||||||
Granted |
| $ | | 408,856 | $ | 9.94 | 512,789 | $ | 9.41 | |||||||||||||||
Exercised / vested |
| $ | | | $ | | (571,972 | ) | $ | 14.12 | ||||||||||||||
Cancelled / forfeited |
| $ | | | $ | | (135,165 | ) | $ | 12.82 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance at April 30, 2015 |
636,996 | $ | 16.33 | 552,668 | $ | 9.97 | 2,381,146 | $ | 11.73 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options | ||||||||
2004 LTIP: |
Shares Subject to Stock Options |
Weighted Average Exercise Price |
||||||
Balance at February 1, 2015 |
788,031 | $ | 21.65 | |||||
Granted |
| $ | | |||||
Exercised / vested |
| $ | | |||||
Cancelled / forfeited |
(9,632 | ) | $ | 30.16 | ||||
|
|
|
|
|||||
Balance at April 30, 2015 |
778,399 | $ | 21.54 | |||||
|
|
|
|
|||||
Restricted Stock Units | ||||||||
2004 Directors Incentive Plan: |
Restricted Stock Units |
Weighted Average Grant Date Fair Value |
||||||
Balance at February 1, 2015 |
54,270 | $ | 9.95 | |||||
Granted |
| $ | | |||||
Vested |
| $ | | |||||
Cancelled |
| $ | | |||||
|
|
|
|
|||||
Balance at April 30, 2015 |
54,270 | $ | 9.95 | |||||
|
|
|
|
In connection with its share-based compensation plans, the Company recorded approximately $1,851 and $3,385 of share-based compensation expense for the three months ended April 30, 2015 and 2014, respectively.
As of April 30, 2015, the Company had approximately $22,969 of unvested share-based compensation granted under all of the Companys share-based compensation plans, which amounts will be expensed in full through April 2020.
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NOTE 11. | Borrowings |
Bank Lines of Credit. The Company utilizes a number of financial institutions to provide it with borrowings and letters of credit, guarantee and working capital facilities. Certain of these credit facilities are used for working capital, for issuing letters of credit to support the working capital and operational needs of various subsidiaries, to support various customs bonds and guarantees, and for general corporate purposes. In other cases, customs bonds and guarantees are issued directly by various financial institutions. In some cases, the use of a particular credit facility is restricted to the country in which it originates. These particular credit facilities may restrict distributions by the subsidiary operating in such country.
Fiscal 2015 Refinancing. In March 2014, the Company completed a number of actions to address certain liquidity and covenant challenges (which actions are collectively referred to herein as the Fiscal 2015 Refinancing). These actions included, but were not limited to:
| The completion of a private offering of our $400,000 principal amount of convertible senior notes due 2019 (which we refer to as the 2019 Notes). |
| The completion of a private offering of our Series A 7.0% Convertible Preference Shares (the Convertible Preference Shares) to an affiliate of our largest shareholder, P2 Capital, in the aggregate principal amount of $175,000. |
| Certain of the Companys U.S. and Canadian subsidiaries entered into a credit agreement with Citibank, N.A., Citigroup Global Markets Inc., Morgan Stanley Senior Funding, Inc. and Bank of the West for a new senior secured asset-based revolving credit facility (CitiBank Credit Facility) that provides commitments of up to $150,000. |
| The Company (i) repaid all of the $200,000 aggregate principal amount of our private placement notes issued on January 25, 2013 (the 2013 Notes) and paid to the holders thereof a make-whole payment with respect to such prepayment in the amount of $20,830, (ii) refinanced indebtedness which was then outstanding under certain of our previously outstanding credit facilities and the Company terminated those credit facilities, and (iii) in connection with the termination of certain facilities, provided cash collateral of $33,742 for outstanding letters of credit and bank guarantees thereunder as of April 30, 2015. |
Loss on debt extinguishment for the three months ended April 30, 2014, includes the make-whole payment of $20,830 paid to the holders of the 2013 Notes and a non-cash charge of $990 related to the acceleration of unamortized debt issuance costs related to the 2013 Notes and facilities extinguished as part of the Fiscal 2015 Refinancing.
The following table presents information about the Companys borrowings under various bank lines of credit, letters of credit and other bank credit facilities as of April 30, 2015 (the table is in thousands). The table below does not include the Companys outstanding indebtedness owed under its other short-term borrowings and its long-term borrowings. See Other Short-Term Borrowings and Long-Term Borrowings for additional information regarding such other indebtedness.
Bank Lines of Credit and Letters of Credit Facilities
CitiBank Credit Facility(1) |
Nedbank South African Facilities(2) |
Other Facilities(3) | Total | |||||||||||||
Credit facility limit |
$ | 140,138 | $ | 57,462 | $ | 269,515 | $ | 467,115 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Facility usage for cash withdrawals(4) |
34,000 | 6,352 | 25,004 | 65,356 | ||||||||||||
Letters of credit and guarantees outstanding |
12,710 | 23,170 | 88,642 | 124,522 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total facility/usage |
$ | 46,710 | $ | 29,522 | $ | 113,646 | $ | 189,878 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Available, unused capacity |
$ | 93,428 | $ | 27,940 | $ | 155,869 | $ | 277,237 | ||||||||
Available for cash withdrawals |
$ | 93,428 | $ | 25,759 | $ | 152,435 | $ | 271,622 |
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(1) | The CitiBank Credit Facility was entered into in March 2014 in connection with the Fiscal 2015 Refinancing. The amount of cash withdrawals available under the CitiBank Credit Facility is limited to the lesser of (i) $150,000 or (ii) (a) the borrowing base calculation for the period less (b) letters of credit or guarantees outstanding less (c) outstanding cash withdrawals and reimbursement obligations. The average outstanding cash borrowings during the three months ended April 30, 2015 was $72,978. |
(2) | In September 2014 the Company amended and restated its credit facility for its operations in South Africa (the South African Facilities Agreement), which currently provides for both: (i) a 680,000 ZAR revolving credit facility, which is comprised of a ZAR 380,000 working capital facility and a ZAR 300,000 letter of credit, guarantee, forward exchange contract and derivative instrument facility, and (ii) a ZAR 150,000 revolving asset-based finance facility, which consists of a capital lease line. Excluded from the table are amounts outstanding under the ZAR 150,000 revolving asset-based finance facility, which amounts are included under capital lease obligations on the Companys consolidated balance sheet. The maturity date of this facility is July 9, 2016. Total facility usage on the South African Facilities Agreement is presented net of cash and cash equivalents of $80,113 and $74,272 for the period ended April 30, 2015 and January 31, 2015, respectively. |
(3) | Certain bank letters of credit and guarantees outstanding in this column are collateralized by the Companys cash held as collateral. As of April 30, 2015, $33,742 of such cash collateral was outstanding and the usage of such cash is restricted pursuant to the applicable agreement. |
(4) | Amounts in this row reflect letters of credit and bank guarantees supporting outstanding cash borrowings by the Companys subsidiaries. |
CitiBank Credit Facility. In March 2014 the Company and certain of its U.S. and Canadian subsidiaries entered into the CitiBank Credit Facility, which facility is guaranteed by the Company and certain of its subsidiaries. The CitiBank Credit Facility provides up to $150,000 of commitments for a senior secured asset-based revolving line of credit, including a $20,000 sublimit for swingline loans, a $50,000 sublimit for the issuance of standby letters of credit and a $20,000 sublimit for loans in Canadian dollars. The maximum amount the Company is permitted to borrow under the CitiBank Credit Facility is subject to a borrowing base calculated by reference to its accounts receivable in the U.S. and Canada and certain eligibility criteria with respect to such receivables and other borrowing limitations. Amounts borrowed under the CitiBank Credit Facility bear interest (1) at a rate based on the London Interbank Offered Rate, or LIBOR, or the Canadian equivalent, plus a margin ranging from 2.00% to 2.50%, or (2) a rate based on the higher of (a) the base prime rate offered by CitiBank, (b) 1.00% plus the one-month LIBOR rate or (c) 0.50% plus the federal funds rate or in each case, the Canadian equivalent, plus a margin ranging from 1.00% to 1.50%. The CitiBank Credit Facility will terminate in March 2019, unless the 2019 Notes are not redeemed, refinanced or converted prior to September 2018, in which case the CitiBank Credit Facility will terminate in September 2018.
The CitiBank Credit Facility is secured, subject to permitted liens and other agreed upon exceptions, by a first-priority lien on, and perfected security interest in substantially all of the Companys U.S. and Canadian assets, including accounts receivable and a pledge of the equity in its U.S. and Canadian holding and operating companies. In addition, the CitiBank Credit Facility requires that the Company maintain a fixed charge coverage ratio of not less than 1.00 to 1.00 if available credit under the CitiBank Facility is less than the greater of (i) 10% of the maximum credit thereunder and (ii) $15,000. The CitiBank Credit Facility contains customary representations and warranties and customary events of default, payment of customary fees and expenses, as well as certain affirmative and negative covenants, including restrictions on: indebtedness; liens; mergers, consolidations and acquisitions; sales of assets; engaging in business other than its current business; investments; dividends; redemptions and distributions; affiliate transactions; and other restrictions.
South African Facilities Agreement. The obligations of the Companys subsidiaries subject to 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 its 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. The South African Facilities Agreement terminates in July 2016.
The South African Facilities Agreement contains events of default and covenants, including, but not limited to, financial covenants, restrictions on certain types of activities and transactions, reporting covenants, cross defaults to other indebtedness and other terms, events of default and covenants typical of credit facilities. The South African Facilities
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Agreement also provides for an uncommitted seasonal customs facility which may be made available to the South African obligors at a later date if requested by the South African obligors. In addition, the South African Facilities Agreement provides the South African obligors with an option to request that Nedbank increase its commitments under the revolving credit facility and the revolving asset-based finance facility in an aggregate amount up to ZAR 400,000, subject to the approval of Nedbank and the satisfaction of certain conditions precedent. In May 2015, the South African Facilities Agreement was amended to exclude from the calculation of the Interest Cover Ratio covenant for the measurement period ending on July 31, 2015 the amount of ZAR 280,000 which relates to a previously disclosed impairment relating to an unpaid receivable owed by a client in South Africa that has entered into the South African equivalent of bankruptcy.
Other Additional Bank Facilities. In addition to the credit, letters of credit, and guarantee facilities provided under the CitiBank Credit Facility and the South African Facilities Agreement, the Company utilizes a number of banks and other financial institutions to provide the Company and its subsidiaries with additional credit, letters of credit and guarantee facilities. In some cases, the use of these particular letters of credits, guarantee and credit facilities may be restricted to the country in which they originated and may restrict distributions by the subsidiary operating in the country.
Other Limitations and Covenants. The CitiBank Credit Facility, the South African Facilities Agreement, and certain of the Companys other credit, letters of credit and guarantee facilities also contain other limitations on the payment by the Company and/or by its various subsidiaries of dividends, distributions and share repurchases. In addition, if a change in control (as defined in the various agreements and facilities) should occur, then the outstanding indebtedness thereunder may become due and payable. Furthermore, the CitiBank Credit Facility, the South African Facilities Agreement, and certain of the Companys other credit and debt facilities contain cross-default provisions with respect to other indebtedness, giving the lenders under such agreements and facilities the right to declare a default if the Company defaults under other indebtedness in certain circumstances. Should the Company fail to comply with the covenants in the CitiBank Credit Facility, the South African Facilities Agreement, or certain of its other credit, letters of credit or other facilities, the Company would be required to seek to amend the covenants or to seek a waiver of such non-compliance as the Company was required to do in the past under its prior agreements and facilities. If the Company is unable to obtain any necessary amendments or waivers, all or a portion of the indebtedness and obligations under its various agreements and facilities could become immediately due and payable and the various agreements and facilities could be terminated and the credit, letters of credit and guarantee facilities provided thereunder would no longer be available to the Company.
Other Short-term Borrowings. In addition to the Companys lines of credit and letters of credit facilities from banks and other financial institutions, the Company also has a number of short-term borrowings issued by various parties not covered under the bank lines of credit described above. The total of such bank borrowings was $74,336 and $52,825, respectively, at April 30, 2015 and January 31, 2015.
In December 2014, the Company entered into a Parent Customer Agreement (the Customer Agreement) with Greensill Capital (UK) Limited (Greensill) and a Re-invoicing Service Agreement (the Re-invoicing Agreement) with Bramid Outsource Limited (an affiliate of Greensill and the Re-Invoicing Agent). The Service Agreement and the Re-invoicing Agreement are referred to herein collectively as the Greensill Financing Agreements. Pursuant to the Greensill Financing Agreements, the Company can submit written requests to the Re-Invoicing Agent pursuant to which the Company may receive an advance of funds to pay such invoices or to reimburse itself if the relevant invoice has already been paid. Greensill may elect, but has no obligation, to advance such funds to the Company on terms set forth in such offer and Greensill retains the right to evaluate each request submitted by the Company and may establish the terms of each advance at the time a request is submitted. If the Re-Invoicing Agent and Greensill choose to enter into a transaction, the Re-Invoicing Agent shall charge the Company a fee based on an annual rate of Libor plus 9.5%. The principal portion of such advance and the fee are due on the maturity of such advance which may vary by agreement between the parties, although the advances currently outstanding under the Greensill Financing Agreements must be repaid on the six month anniversary of the initial advancement of funds. Currently, advances of approximately $40,000 are due in five separate tranches during June 2015. The Company expects the full $40,000 to be extended for an additional six month period on substantially similar terms. As of the date of this filing, the Company is in the process of extending these tranches and it anticipates all advances will be extended by the end of June 2015. If any amount is not paid on the maturity date, the advance will continue to accrue interest at LIBOR plus 9.5%. Currently, our internal
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authorization for borrowings under the Greensill Financing Agreements is set at $100,000, although the Greensill Financing Agreements do not contain a commitment by Greensill to make any additional advances to us. As of April 30, 2015, we had a total of approximately $62,000 outstanding under the Greensill Financing Agreements.
Events of default under the Greensill Financing Agreements include the failure to make a payment within five business days after the applicable due date, an insolvency event and the default by the Company on certain other indebtedness. Upon an event of default, all advances outstanding under the Greensill Financing Agreements become due and payable. The Greensill Financing Agreements terminate in December 2017, subject to earlier termination as provided for therein.
Long-term Borrowings. The following table presents information about the Companys indebtedness pursuant to its outstanding senior unsecured guaranteed notes and other long-term borrowings as of April 30, 2015:
2019 Convertible Senior Notes(1) |
Other Facilities | Total | ||||||||||
Maturity date |
March 1, 2019 | |||||||||||
Original principal |
$ | 400,000 | ||||||||||
Original issuance discount for fair value of conversion feature |
$ | 47,690 | ||||||||||
Interest rate per annum |
4.50 | % | 1.00 | % | ||||||||
Discount rate |
7.40 | % | ||||||||||
Balance at April 30, 2015: |
||||||||||||
Current portion of long-term borrowings |
| 1,173 | 1,173 | |||||||||
Long-term borrowings, excluding current portion |
361,810 | 5,435 | 367,245 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 361,810 | $ | 6,608 | $ | 368,418 | ||||||
|
|
|
|
|
|
(1) | Amounts included in long-term borrowings as of the issuance date of the 2019 Notes, were initially reflected net of an initial discount of $47,690 reflecting the fair value of the conversion feature. The fair value of the conversion feature of the 2019 Notes has been bifurcated and presented in equity under common stock in the Companys consolidated financial statements beginning in April 30, 2014. The amount included in long-term borrowings is accreting to the $400,000 redemption value using a discount rate of approximately 7.4%, which approximated the Companys fair-value incremental borrowing rate for a similar debt instrument (without the conversion feature) as of the date of issuance. |
2019 Notes. On March 4, 2014, the Company completed a private offering of its 4.50% 2019 Notes in the aggregate principal amount of $400,000, and entered into an indenture (the Indenture) with Wells Fargo Bank, National Association, as trustee, in connection therewith. After deducting fees and expenses, the Company received net proceeds from the offering of the 2019 Notes of $386,100. The Indenture governs the 2019 Notes and contains terms and conditions customary for similar transactions, including customary events of default such as cross-defaults and other provisions. The 2019 Notes bear interest at an annual rate of 4.50% payable in cash semiannually in arrears on March 1 and September 1 of each year, beginning on September 1, 2014. The 2019 Notes will be due and payable by the Company when they mature on March 1, 2019, unless earlier converted, redeemed or repurchased in accordance with their terms prior to such date. The Company may not redeem the 2019 Notes at its option prior to maturity unless certain tax related events occur. In addition, the Indenture provides that if the Company undergoes certain types of fundamental changes prior to the maturity date of the 2019 Notes, each 2019 Note holder has the option to require the Company to repurchase all or any of such holders 2019 Notes for cash. Pursuant to the terms of the Indenture, the 2019 Notes will be convertible into the Companys ordinary shares at a conversion rate of 68.9703 ordinary shares per $1,000 principal amount of 2019 Notes (equivalent to an initial conversion price of approximately $14.50 per ordinary share), subject to adjustment, upon the occurrence of certain events prior to the close of business on the business day immediately preceding September 1, 2018, and, on or after September 1, 2018, by a holders surrender for conversion of any of its 2019 Notes at any time prior to the close of the business day immediately preceding the maturity date. Upon a conversion of the 2019 Notes, in accordance with the Indenture the Company has the option, to pay or deliver, as the case may be, cash, its ordinary shares or a combination of cash and ordinary shares, at its election.
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The balance of the 2019 Notes are reflected net of a discount of approximately $47,690 reflecting the fair value of the conversion feature. The fair value has been bifurcated and presented in equity under common stock in the Companys consolidated financial statements beginning April 30, 2014.
NOTE 12. | Fair Value Disclosures |
Fair Value Measurements on Recurring Basis. 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 April 30, 2015 and January 31, 2015 and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value:
Fair Value Measurement at Reporting Date Using: | ||||||||||||||||
Balance at April 30, 2015 |
Total | Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
||||||||||||
Assets: |
||||||||||||||||
Cash and cash equivalents |
$ | 175,939 | $ | 175,939 | $ | | $ | | ||||||||
Forward exchange contracts |
336 | | 336 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 176,275 | $ | 175,939 | $ | 336 | $ | | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities: |
||||||||||||||||
Forward exchange contracts |
$ | 11 | $ | | $ | 11 | $ | | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 11 | $ | | $ | 11 | $ | | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance at January 31, 2015 |
||||||||||||||||
Assets: |
||||||||||||||||
Cash and cash equivalents |
$ | 211,832 | $ | 211,832 | $ | | $ | | ||||||||
Forward exchange contracts |
| | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 211,832 | $ | 211,832 | $ | | $ | | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities: |
||||||||||||||||
Forward exchange contracts |
$ | 291 | $ | | $ | 291 | $ | | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 291 | $ | | $ | 291 | $ | | ||||||||
|
|
|
|
|
|
|
|
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.
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NOTE 13. | 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.
The Company had contracted to sell the following amounts under forward exchange contracts with maturities within 60 days of April 30, 2015 and 2014:
April 30, | ||||||||
2015 | 2014 | |||||||
Euro |
$ | 2,055 | $ | 7,379 | ||||
U.S. Dollar |
13,094 | 21,873 | ||||||
British Pound Sterling |
651 | 1,452 | ||||||
All others |
1,206 | 1,045 | ||||||
|
|
|
|
|||||
Total |
$ | 17,006 | $ | 31,749 | ||||
|
|
|
|
Changes in the fair value of forward exchange contracts are recorded within purchased transportation costs in the consolidated statements of operations.
The Company does not designate foreign currency derivatives as hedges. Foreign currency derivative assets and liabilities are included in trade receivables and payables, respectively. The Company had the following balances for foreign currency derivative assets and liabilities at April 30, 2015 and January 31, 2015:
April 30, 2015 | January 31, 2015 | |||||||
Foreign currency derivative assets |
$ | 336 | $ | | ||||
Foreign currency derivative liabilities |
$ | 11 | $ | 291 |
Net gains and losses on foreign currency derivatives as of April 30, 2015 and 2014 are as follows:
Three months ended April 30, | ||||||||
2015 | 2014 | |||||||
Net gains |
$ | 325 | $ | 51 | ||||
Net losses |
$ | | $ | |
NOTE 14. | Severance and Other |
The following table shows a summary of severance and other charges:
Three months ended April 30, | ||||||||
2015 | 2014 | |||||||
Employee severance costs |
$ | 2,984 | $ | 647 | ||||
Facility exit costs and other |
2,030 | | ||||||
|
|
|
|
|||||
Total |
$ | 5,014 | $ | 647 | ||||
|
|
|
|
Employee severance costs. Charges incurred for employee severance primarily relate to the January 2015 Reorganization as described below.
On January 21, 2015, the Company committed to a plan to simplify its leadership structure and to shift management of its freight forwarding business from four geographic regions to a global leadership structure managing 16 discrete geographic areas. We refer to these actions collectively as the January 2015 Reorganization. In connection with these
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actions, the Company reduced several leadership positions and eliminated various regional infrastructures. Following the January 2015 Reorganization, the Company continues to have two lines of businesses, Freight Forwarding and Contract Logistics and Distribution. The activities related to the January 2015 Reorganization are substantially complete.
Facility exit costs and other. Facility exit costs and other for the first quarter of fiscal 2016, includes $2,030 related to the impairment of certain assets of a consolidated joint venture in the Companys Contract Logistics and Distribution segment, which the Company expects to exit before the end of fiscal 2016. The charge was primarily related to an impairment charge related to fixed assets of $1,165. Also included in the charge were impairments to accounts receivable and prepaid assets of $565 and $300, respectively. Total accounts receivable, inventories, and accounts payable related to the consolidated joint venture are $14,791, $8,318, and $12,753, respectively.
Employee severance and other costs by segment are as follows:
Three months ended April 30, | ||||||||
2015 | 2014 | |||||||
Freight Forwarding |
$ | 2,428 | $ | 568 | ||||
Contract Logistics and Distribution |
2,296 | 79 | ||||||
Corporate |
290 | | ||||||
|
|
|
|
|||||
Total |
$ | 5,014 | $ | 647 | ||||
|
|
|
|
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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.
Forward-Looking Statements, Uncertainties and Other Factors
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). All statements, other than statements of historical facts, included or incorporated by reference in this Annual Report which address activities, events or developments that the company expects or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions and analyses made by the company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. In some cases, readers can identify forward-looking statements by the use of forward-looking terms such as may, will, should, could, expect, intend, plan, anticipate, believe, estimate, predict, potential projects, or continue and other similar expressions or the negative of these terms or other comparable terms. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements. Factors that might cause or contribute to a material difference include, but are not limited to, those set forth under Part I, Item 1A Risk Factors in our Annual Report on Form 10-K for the fiscal year ended January 31, 2015 filed with the SEC (together with any amendments thereto and additions and changes thereto contained in our filings with the SEC since the filing of our Annual Report on Form 10-K), those discussed elsewhere in this Quarterly Report, and the following: the company has incurred losses the last three fiscal years and such losses may continue; the companys ability to maintain sufficient liquidity and capital resources to fund its business and to generate sufficient cash to service its debt and other obligations; the companys ability to refinance its indebtedness when it comes due; risks associated with the companys clients, including delays or the inability by such clients to pay the company; dilution caused by the conversion of the companys Convertible Preference Shares issued March 2014 (Convertible Preference Shares) and 4.50% Convertible Senior Notes due 2019 issued in March 2014 (2019 Notes); volatility with respect to global trade; global economic, political and market conditions and unrest, including those in Africa, Asia Pacific and Europe; volatile fuel costs; transportation capacity, pricing dynamics and the ability of the company to secure space on third party aircraft, ocean vessels and other modes of transportation; changes in interest and foreign exchange rates, particularly with respect to the South African rand and the euro; material interruptions in transportation services; risks of international operations; risks associated with, and the potential for penalties, fines, costs and expenses the company may incur as a result of investigations by the governments of Brazil and Singapore into the international air freight and air cargo transportation industry; risks associated with the pending class action lawsuit and the pending investigation by the Securities and Exchange Commission (SEC); risks of adverse legal judgments or other liabilities not limited by contract or covered by insurance; the companys ability to retain clients while facing increased competition; disruptions caused by epidemics, natural disasters, conflicts, strikes, wars and terrorism; the impact of changes in the companys effective tax rates; the companys ability to maintain effective disclosure controls and procedures and effective internal control over financial reporting; the other risks and uncertainties described herein and in the companys other filings with the SEC; and other factors outside the companys control. All forward-looking statements included in this Quarterly Report speak only as of the date of this Quarterly Report. All of the forward-looking statements made in this Quarterly Report are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the company will be realized or, even if substantially realized, that they will have the expected consequences to or effects on the company or its business or results of operations. The company does not undertake any obligation to update forward-looking statements to reflect subsequent events or circumstances, changes in expectations or the occurrence of unanticipated events, except as required by law.
In addition to the risks, uncertainties and other factors discussed elsewhere in this Quarterly Report on 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 our Annual Report on Form 10-K for the fiscal year ended January 31, 2015 filed with the SEC (together with any amendments thereto and additions and changes thereto contained in our filings with the SEC since the
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filing of the our Annual Report on Form 10-K) 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.
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. We serve our clients through a worldwide network of freight forwarding offices and contract logistics and distribution centers.
Freight Forwarding Segment. We do not own or operate aircraft or 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.
We provide airfreight forwarding services in two principal forms (i) as an indirect carrier and occasionally (ii) as an authorized agent for airlines. When we act as an indirect carrier with respect to shipments of freight, we typically issue a House Airway Bill (HAWB) upon instruction from our client (the shipper). The HAWB serves as the contract of carriage between us and the shipper. When we tender freight to the airline (the direct carrier), we receive a Master Airway Bill. The Master Airway Bill serves as the contract of carriage between us and the air carrier. Because we provide services across a broad range of clients on commonly traveled trade lanes, when we act as an indirect carrier we typically consolidate individual shipments into larger shipments, optimizing weight and volume combinations for lower-cost shipments on a consolidated basis. We typically act as an indirect carrier with respect to shipments tendered to the company by our clients; however, in certain circumstances, we occasionally act as an authorized agent for airlines. In such circumstances, we are not an indirect carrier and do not issue a HAWB, but rather we arrange for the transportation of individual shipments directly with the airline. In these instances, as compensation for arrangement for these shipments, the carriers pay us a management fee.
We provide ocean freight forwarding services in two principal forms (i) as an indirect carrier, sometimes referred to as a Non-Vessel Operating Common Carrier (NVOCC), and (ii) as an ocean freight forwarder nominated by our client (ocean freight forwarding agent). When we act as an NVOCC with respect to shipments of freight, we typically issue a House Ocean Bill of Lading (HOBL) to our client (the shipper). The HOBL serves as the contract of carriage between us and the shipper. When we tender the freight to the ocean carrier (the direct carrier), we receive a contract of carriage known as a Master Ocean Bill of Lading. The Master Ocean Bill of Lading serves as the contract of carriage between us and the ocean carrier. When we act as an ocean freight forwarding agent, we typically do not issue a HOBL but rather we receive management fees for managing the transaction as an agent, including booking and documentation between our client and the underlying carrier (contracted by the client). Regardless of the forms through which we provide airfreight and ocean freight services, if we provide the client with ancillary services, such as the preparation of export documentation, we receive additional fees.
As part of our freight forwarding services, we provide customs brokerage services in the United States of America (U.S.) and most of the other countries in which we operate. Within each country, the rules and regulations vary, along with the levels of expertise 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 air 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 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. Other revenue in our Freight Forwarding segment is primarily comprised of international road freight shipments.
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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 than purchased transportation costs in the near term. Staff costs and other operating expenses in our Freight Forwarding segment are largely driven by total shipment counts rather than volumes stated in kilograms for airfreight, or containers for ocean freight, which are most commonly expressed as twenty-foot equivalent units (TEUs).
Contract Logistics and Distribution Segment. Our contract logistics services primarily relate to value-added warehousing and the 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, warehousing services, order management, and customized distribution and inventory management services. Our outsourced services include inspection services, quality centers and manufacturing support. Our inventory management services include materials sourcing services pursuant to contractual, formalized repackaging programs and materials sourcing agreements. Contract logistics revenues are recognized when the service has been completed in the ordinary course of business.
We also provide a range of distribution, consultation, outsourced management services, planning and optimization services and other supply chain management services. As part of our distribution services, we provide domestic ground transportation and road distribution services primarily in North America and South Africa. We receive fees for the other supply chain management services that we perform. Distribution and other contract logistics revenues are recognized when the service has been completed in the ordinary course of business.
January 2015 Reorganization. In January 2015, we committed to a plan to simplify our leadership structure and to shift management of our freight forwarding business from four geographic regions to a global leadership structure managing 16 discrete geographic areas. We refer to this reorganization as the January 2015 Reorganization. In connection with the January 2015 Reorganization, we eliminated several leadership positions and no longer maintain regional infrastructures. Following the January 2015 Reorganization, we continue to have two lines of business, freight forwarding and contract logistics and distribution. We recorded total charges of $11.3 million in connection with the January 2015 Reorganization relating to one-time employee termination benefits, including severance benefits and other employee expenses. Of such charges, $3.0 million were incurred during the first quarter of fiscal year 2016. The activities related to the January 2015 Reorganization were substantially complete as of the end of the first quarter of fiscal 2016.
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 is 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 occurs 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. These translation effects are included as a component of accumulated other comprehensive income or loss in shareholders equity. We have historically not attempted to hedge this equity risk and, except as provided above, we cannot predict the effects of foreign currency exchange rate fluctuations on our future operating results.
In order to enhance the ability of investors to analyze our performance over comparable periods, we have provided in certain instances comparative information and variances excluding the impact of these foreign currency fluctuations. This information is among the information we use as a basis for evaluating our performance on a comparable basis over time, in allocating resources and in planning and forecasting of future periods. This information, however, is not intended to be considered in isolation or as a substitute for, or superior to, the relevant measures prepared and presented in accordance with U.S. GAAP, which are also presented. We calculate the effects of foreign currency fluctuations by subtracting (i) our current-period financial results as reported in local currencies, translated at current-period foreign currency exchange rates, from (ii) our current-period financial results as reported in local currency, as translated at the prior-period foreign currency exchange rates.
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Acquisitions. We did not complete any acquisitions during the three months ended April 30, 2015 and 2014, respectively.
Seasonality. Our primary sources of liquidity are the cash generated from operating activities, which is subject to seasonal fluctuations, particularly in our Freight Forwarding segment, and availability under our various credit facilities. We typically experience increased activity associated with our 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 tend to generate significant cash as cash collections usually exceed 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. Near term cash generation and usage patterns may be different than those experienced in prior quarters due to several factors.
Discussion of Operating Results
The following discussion of our operating results explains material changes in our consolidated results of operations for the first quarter of fiscal 2016 compared to the first quarter of fiscal 2015. The discussion should be read in conjunction with the unaudited consolidated financial statements and related notes included elsewhere in this quarterly report and our audited consolidated financial statements and notes thereto for the fiscal year ended January 31, 2015, which are included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2015, on file with the SEC. Our unaudited 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 of America (U.S. GAAP).
Segment Operating Results. 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. The companys reportable business segments are (i) Freight Forwarding and (ii) 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. Certain corporate costs, enterprise-led costs, and various holding company expenses within the group structure are presented separately.
We believe that for our Freight Forwarding segment, net revenues (a non-GAAP financial measure we use to describe revenues less purchased transportation costs) are a better measure of growth in our freight forwarding business than revenues because our revenues and our purchased transportation costs for our services as an indirect air and ocean carrier include the carriers charges to us for carriage of the shipment. Our revenues and purchased transportation costs 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 revenues are 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. Revenues derived from freight forwarding generally are shared between the points of origin and destination, based on a standard formula. Our revenues in our other capacities include only management fees earned by us and are substantially similar to net revenues for the Freight Forwarding segment.
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For segment reporting purposes by 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. Our revenues and operating income by operating segment for the first quarter of fiscal years 2016 and 2015, 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 April 30, 2015 compared to three months ended April 30, 2014
The following tables and discussion and analysis address the operating results attributable to our reportable segments for the three months ended April 30, 2015 compared to the three months ended April 30, 2014:
Freight Forwarding
Freight Forwarding Three months ended April 30, |
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2015 | 2014 | Change Amount | Change Percentage | |||||||||||||
Revenues: |
||||||||||||||||
Airfreight forwarding |
$ | 294,778 | $ | 321,401 | $ | (26,623 | ) | (8 | )% | |||||||
Ocean freight forwarding |
242,298 | 263,132 | (20,834 | ) | (8 | ) | ||||||||||
Customs brokerage |
44,523 | 44,327 | 196 | | ||||||||||||
Other |
41,158 | 55,010 | (13,852 | ) | (25 | ) | ||||||||||
|
|
|
|
|
|
|||||||||||
Total revenues |
622,757 | 683,870 | (61,113 | ) | (9 | ) | ||||||||||
|
|
|
|
|
|
|||||||||||
Purchased transportation costs: |
||||||||||||||||
Airfreight forwarding |
231,093 | 245,413 | (14,320 | ) | (6 | ) | ||||||||||
Ocean freight forwarding |
213,361 | 219,048 | (5,687 | ) | (3 | ) | ||||||||||
Customs brokerage |
12,454 | 11,008 | 1,446 | 13 | ||||||||||||
Other |
28,563 | 40,792 | (12,229 | ) | (30 | ) | ||||||||||
|
|
|
|
|
|
|||||||||||
Total purchased transportation costs |
485,471 | 516,261 | (30,790 | ) | (6 | ) | ||||||||||
|
|
|
|
|
|
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Net revenues: |
||||||||||||||||
Airfreight forwarding |
63,685 | 75,988 | (12,303 | ) | (16 | ) | ||||||||||
Ocean freight forwarding |
28,937 | 44,084 | (15,147 | ) | (34 | ) | ||||||||||
Customs brokerage |
32,069 | 33,319 | (1,250 | ) | (4 | ) | ||||||||||
Other |
12,595 | 14,218 | (1,623 | ) | (11 | ) | ||||||||||
|
|
|
|
|
|
|||||||||||
Total net revenues |
137,286 | 167,609 | (30,323 | ) | (18 | ) | ||||||||||
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|
|
|
|
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Yields: |
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Airfreight forwarding |
21.6 | % | 23.6 | % | ||||||||||||
Ocean freight forwarding |
11.9 | % | 16.8 | % | ||||||||||||
Staff costs |
91,606 | 108,120 | (16,514 | ) | (15 | ) | ||||||||||
Depreciation |
3,972 | 4,429 | (457 | ) | (10 | ) | ||||||||||
Amortization of intangible assets |
6,631 | 6,051 | 580 | 10 | ||||||||||||
Severance and other |
2,428 | 568 | 1,860 | 327 | ||||||||||||
Other operating expenses |
43,736 | 47,246 | (3,510 | ) | (7 | ) | ||||||||||
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|
|
|
|
|
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Operating (loss)/income |
$ | (11,087 | ) | $ | 1,195 | $ | (12,282 | ) | (1,028 | )% | ||||||
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|
Airfreight Forwarding. Airfreight forwarding revenues decreased $26.6 million, or 8%, for the three months ended April 30, 2015, compared to the corresponding prior year period; however, when the effects of foreign currency fluctuations are excluded, airfreight forwarding revenues decreased $1.9 million, or 1%, compared to the corresponding prior year period. The results of the companys segments when reported in U.S. dollars were adversely impacted by a strengthening of the U.S. dollar against the euro and South African rand compared to the exchange rates in effect in the corresponding prior year period. When the effects of foreign currency fluctuations are excluded, a decrease of $13.5 million was attributable to a decline of airfreight forwarding volumes (which we measure in terms of total kilograms), which decrease was partially offset by an increase of $11.6 million caused by an increase of our selling rates.
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Airfreight forwarding volumes decreased 4% for the three months ended April 30, 2015, compared to the corresponding prior year period. On a sequential basis, airfreight tonnage improved 1% for the first quarter of fiscal 2016 compared to the fourth quarter of fiscal 2015.
Airfreight forwarding net revenues decreased $12.3 million, or 16%, for the three months ended April 30, 2015, compared to the corresponding prior year period; however, when the effects of foreign currency fluctuations are excluded, airfreight forwarding net revenues decreased $6.3 million, or 8%. Changes in net revenues are primarily a function of volume movements and the expansion or contraction in yields, which is the difference between our selling rates and the carrier rates incurred by us. The $6.3 million decrease in airfreight forwarding net revenues when calculated on a basis which excludes the effects of foreign currency fluctuations was caused by a $3.4 million decrease attributable to a decrease both in our selling rates and carrier rates and a $2.9 million decrease attributable to a decrease in airfreight forwarding volumes.
Airfreight yields for the three months ended April 30, 2015 decreased approximately 200 basis points to 21.6% compared to 23.6% for the corresponding prior year period. On a sequential basis, airfreight yields of 21.6% for the first quarter of fiscal 2016 were 350 basis points higher when compared to airfreight yields of 18.1% for the fourth quarter of fiscal 2015.
Ocean Freight Forwarding. Ocean freight forwarding revenues decreased $20.8 million, or 8%, for the three months ended April 30, 2015, compared to the corresponding prior year period; however, when the effects of foreign currency fluctuations are excluded, ocean freight forwarding revenues increased $2.1 million, or 1%. When the effects of foreign currency fluctuations are excluded, an increase of $19.0 million was attributable to higher selling rates caused in part by higher carrier rates, which increase was partially offset by a decrease of $16.9 million caused by a slight decrease on ocean freight volumes. Ocean freight volumes (which we measure in terms of TEUs) decreased 6% during the three months ended April 30, 2015 compared to the corresponding prior year period. On a sequential basis, ocean freight tonnage decreased 2% for the first quarter of fiscal 2016 compared to the fourth quarter of fiscal 2015.
Ocean freight forwarding net revenues decreased $15.1 million, or 34%, for the three months ended April 30, 2015, compared to the corresponding prior year period; however, when the effects of foreign currency fluctuations are excluded, ocean freight forwarding net revenues decreased $12.1 million, or 28%. The $12.1 million decrease in ocean freight forwarding net revenues calculated on a basis which excludes the effects of foreign currency fluctuations was caused by a decrease of $10.1 million caused by less favorable buying rates which was only partially offset by slightly increased selling rates, and a decrease of $2.0 million attributable to decreased ocean freight volumes. Ocean freight yields for the three months ended April 30, 2015, decreased 490 basis points to 11.9% compared to 16.8% for the corresponding prior year period. On a sequential basis, ocean freight yields of 11.9% for the first quarter of fiscal 2016 were 320 basis points higher when compared to yields of 8.7% for the fourth quarter of fiscal 2015.
Customs Brokerage and Other. Customs brokerage revenues were consistent for the three months ended April 30, 2015, compared to the corresponding prior year period; however, when the effects of foreign currency fluctuations are excluded, customs brokerage revenues increased $5.2 million, or 12%. Other freight forwarding related revenues, which are primarily comprised of international road freight shipments and distribution, decreased $13.9 million, or 25%, for the three months ended April 30, 2015, compared to the corresponding prior year period. However, when the effects of foreign currency fluctuations are excluded, other freight forwarding related revenues decreased $8.7 million, or 16%.
Customs brokerage net revenues were consistent for the three months ended April 30, 2015, compared to the corresponding prior year period; however, when the effects of foreign currency fluctuations are excluded, customs brokerage net revenues increased $2.4 million, or 7%. Other freight forwarding related net revenues decreased $1.6 million, or 11%, for the three months ended April 30, 2015, compared to the corresponding prior year period; however, when the effects of foreign currency fluctuations are excluded, other freight forwarding net revenues decreased $0.4 million, or 3%.
Staff Costs. Staff costs in our Freight Forwarding segment decreased $16.5 million, or 15%, for the three months ended April 30, 2015, compared to the corresponding prior year period; however, when the effects of foreign currency fluctuations are excluded, staff costs in our Freight Forwarding segment decreased $7.5 million, or 7%. As a percentage
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of our Freight Forwarding segment revenues, staff costs were 15% for the three months ended April 30, 2015 compared to 16% in the corresponding prior year period. Movements of staff costs in our Freight Forwarding segment are typically driven more by changes in total shipment counts rather than changes in volumes. The number of airfreight shipments declined 6% for the three months ended April 30, 2015 compared to the corresponding prior year period, which decline was offset by a 6% increase in the number of ocean freight shipments during the same period.
Amortization of intangible assets. Amortization of intangible assets increased $0.6 million for the three months ended April 30, 2015, compared to the corresponding prior year period, in part because of increased amortization due to the implementation of our new freight forwarding system, which we refer to as 1View.
Severance and Other. During the three months ended April 30, 2015 and 2014, we incurred severance and other costs in the Freight Forwarding segment of approximately $2.4 million and $0.6 million, respectively, comprised primarily of severance charges. Our January 2015 Reorganization contributed to the majority of the costs incurred for the three months ended April 30, 2015. The severance charges for the previous period were related to our business transformation initiatives, which included redefining business processes, developing 1View and rationalizing business segments to a more common organizational structure on a worldwide basis.
Other Operating Expenses. Other operating expenses in the Freight Forwarding segment decreased $3.5 million, or 7%, for the three months ended April 30, 2015, compared to the corresponding prior year period; however, when the effects of foreign currency fluctuations are excluded, other operating expenses increased $2.2 million, or 5%.
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Contract Logistics and Distribution
Contract Logistics and Distribution | ||||||||||||||||
Three months ended April 30, | ||||||||||||||||
2015 | 2014 | Change Amount | Change Percentage | |||||||||||||
Revenues: |
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Contract logistics |
$ | 184,007 | $ | 187,164 | $ | (3,157 | ) | (2 | )% | |||||||
Distribution |
144,888 | 146,858 | (1,970 | ) | (1 | ) | ||||||||||
Other |
21,665 | 25,996 | (4,331 | ) | (17 | ) | ||||||||||
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Total revenues |
350,560 | 360,018 | (9,458 | ) | (3 | ) | ||||||||||
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Purchased transportation costs: |
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Contract logistics |
49,478 | 44,270 | 5,208 | 12 | ||||||||||||
Distribution |
101,749 | 103,784 | (2,035 | ) | (2 | ) | ||||||||||
Other |
7,167 | 10,219 | (3,052 | ) | (30 | ) | ||||||||||
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Total purchased transportation costs |
158,394 | 158,273 | 121 | | ||||||||||||
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Staff costs |
100,288 | 99,746 | 542 | 1 | ||||||||||||
Depreciation |
7,718 | 7,926 | (208 | ) | (3 | ) | ||||||||||
Amortization of intangible assets |
781 | 948 | (167 | ) | (18 | ) | ||||||||||
Severance and other |
2,296 | 79 | 2,217 | 2,806 | ||||||||||||
Other operating expenses |
71,113 | 79,371 | (8,258 | ) | (10 | ) | ||||||||||
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Operating income |
$ | 9,970 | $ | 13,675 | $ | (3,705 | ) | (27 | )% | |||||||
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Contract Logistics. Contract logistics revenues decreased $3.2 million, or 2%, for the three months ended April 30, 2015, compared to the corresponding prior year period; however, when the effects of foreign currency fluctuations are excluded, contract logistics revenues increased $10.8 million, or 6%. The increase was due to increased logistics volumes in the Americas and Africa regions over the comparative periods.
Contract logistics purchased transportation costs increased $5.2 million, or 12%, for the three months ended April 30, 2015, compared to the corresponding prior year period; however, when the effects of foreign currency fluctuations are excluded, contract logistics purchased transportation costs increased $8.3 million, or 19%, which increase was caused primarily by an increase of logistics volumes, including an increase of $3.0 million related to increased materials sourcing costs. In addition to purchased transportation costs related directly to the contract logistics operations, purchased transportation costs within our Contract Logistics and Distribution segment include materials sourcing costs which we incur pursuant to formalized repackaging programs and materials sourcing agreements.
Distribution. Distribution revenues decreased $2.0 million, or 1%, for the three months ended April 30, 2015, compared to the corresponding prior year period; however, when the effects of foreign currency fluctuations are excluded, distribution revenues increased $1.2 million, or 1%. Client volumes in our Africa and Americas regions were consistent with the comparable period.
Distribution purchased transportation costs decreased $2.0 million, or 2%, for the three months ended April 30, 2015, compared to the corresponding prior year period; however, when the effects of foreign currency fluctuations are excluded, distribution purchased transportation costs decreased $0.9 million, or 1%.
Other. Other contract logistics and distribution revenues decreased $4.3 million, or 17%, for the three months ended April 30, 2015, compared to the corresponding prior year period; however, when the effects of foreign currency fluctuations are excluded, other contract logistics and distribution revenues decreased $1.1 million, or 4%. Other contract logistics and distribution purchased transportation costs decreased $3.1 million, or 30%, for the three months ended April 30, 2015, compared to the corresponding prior year period; however, when the effects of foreign currency fluctuations are excluded, other contract logistics and distribution purchased transportation costs decreased $1.4 million, or 14%.
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Staff Costs. Staff costs in our Contract Logistics and Distribution segment increased $0.5 million for the three months ended April 30, 2015, compared to the corresponding prior year period; however, when the effects of foreign currency fluctuations are excluded, staff costs in our Contract Logistics and Distribution segment increased $7.3 million, or 7%, due to new business and increased logistics volumes.
Severance and Other. During the three months ended April 30, 2015 we incurred severance and other costs in our Contract Logistics and Distribution segment of approximately $2.3 million, comprised primarily of a charge for the impairment of assets due to a joint venture we intend to exit prior to the end of fiscal 2016.
Other Operating Expenses. Other operating expenses in our Contract Logistics and Distribution segment decreased $8.3 million, or 10%, compared to the corresponding period year period; however, when the effects of foreign currency fluctuations are excluded, other operating expenses in our Contract Logistics and Distribution segment decreased $1.8 million, or 2%.
Corporate
Staff Costs. Staff costs at corporate decreased $2.1 million, or 22%, for the three months ended April 30, 2015, compared to the corresponding prior year period. The decrease was primarily attributable to the January 2015 Reorganization.
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 and our outstanding notes. Interest income was $5.6 million and $4.7 million for the three months ended April 30, 2015 and 2014, respectively. Interest expense was $16.4 million and $13.3 million for the three months ended April 30, 2015 and 2014, respectively. The increase of interest expense is attributable to higher effective interest rates associated with our outstanding indebtedness and increased amortization of debt issuance costs.
Loss on debt extinguishment. Included in loss on debt extinguishment for the three months ended April 30, 2014, is (i) a make-whole payment of $20.8 with respect to the prepayment of our $200.0 million aggregate principal amount of private placement notes issued on January 25, 2013 (the 2013 Notes), and (ii) a non-cash charge of $1.0 million related to unamortized debt issuance costs related to the prepayment of the 2013 Notes and the termination of various credit facilities.
Other Expenses, Net. Other income and expenses primarily relate to foreign currency gains and losses on certain of our intercompany loans.
Provision for Income Taxes. Our provision for income taxes for the three months ended April 30, 2015 was $5.7 million on a pretax loss of $29.6 million resulting in an effective tax rate of negative 19.4%. For the three months ended April 30, 2014, we recorded a tax provision of $9.6 million on a pretax loss of $33.8 million. The $3.8 million decrease in the provision for income taxes in absolute dollars was primarily attributable to decreased profitability in tax paying jurisdictions.
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Net (Loss)/Income Attributable to Non-Controlling Interests. Net loss attributable to non-controlling interests was $2.1 million for the three months ended April 30, 2015, compared to net income attributable to non-controlling interests of $0.4 million for the corresponding prior year period.
Three months ended April 30, | ||||||||
2015 | 2014 | |||||||
Revenues: |
||||||||
Airfreight forwarding |
$ | 294,778 | $ | 321,401 | ||||
Ocean freight forwarding |
242,298 | 263,132 | ||||||
Customs brokerage |
44,523 | 44,327 | ||||||
Contract logistics |
184,007 | 187,164 | ||||||
Distribution |
144,888 | 146,858 | ||||||
Other |
62,823 | 81,006 | ||||||
|
|
|
|
|||||
Total |
$ | 973,317 | $ | 1,043,888 | ||||
|
|
|
|
|||||
Purchased transportation costs: |
||||||||
Airfreight forwarding |
$ | 231,093 | $ | 245,413 | ||||
Ocean freight forwarding |
213,361 | 219,048 | ||||||
Customs brokerage |
12,454 | 11,008 | ||||||
Contract logistics |
49,478 | 44,270 | ||||||
Distribution |
101,749 | 103,784 | ||||||
Other |
35,730 | 51,011 | ||||||
|
|
|
|
|||||
Total |
$ | 643,865 | $ | 674,534 | ||||
|
|
|
|
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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 April 30, | ||||||||
2015 | 2014 | |||||||
Revenues: |
||||||||
Airfreight forwarding |
30 | % | 31 | % | ||||
Ocean freight forwarding |
25 | 25 | ||||||
Customs brokerage |
5 | 4 | ||||||
Contract logistics |
19 | 18 | ||||||
Distribution |
15 | 14 | ||||||
Other |
6 | 8 | ||||||
|
|
|
|
|||||
Total revenues |
100 | 100 | ||||||
Purchased transportation costs: |
||||||||
Airfreight forwarding |
24 | 24 | ||||||
Ocean freight forwarding |
22 | 21 | ||||||
Customs brokerage |
1 | 1 | ||||||
Contract logistics |
5 | 4 | ||||||
Distribution |
10 | 10 | ||||||
Other |
4 | 5 | ||||||
|
|
|
|
|||||
Total purchased transportation costs |
66 | 65 | ||||||
Staff costs |
20 | 21 | ||||||
Depreciation |
1 | 1 | ||||||
Amortization of intangible assets |
1 | 1 | ||||||
Severance and other |
1 | * | ||||||
Other operating expenses |
14 | 14 | ||||||
|
|
|
|
|||||
Total operating expenses |
103 | 102 | ||||||
Operating loss |
(3 | ) | (2 | ) | ||||
Interest income |
1 | * | ||||||
Interest expense |
(2 | ) | (1 | ) | ||||
Loss on debt extinguishment |
* | (2 | ) | |||||
Other expense, net |
* | * | ||||||
|
|
|
|
|||||
Pretax loss |
(4 | ) | (6 | ) | ||||
Provision for income taxes |
1 | * | ||||||
|
|
|
|
|||||
Net loss |
(5 | ) | (6 | ) | ||||
Net (loss)/income attributable to non-controlling interests |
* | * | ||||||
|
|
|
|
|||||
Net loss attributable to UTi Worldwide Inc. |
(5 | )% | (6 | )% | ||||
|
|
|
|
* | Less than one percent. |
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Liquidity and Capital Resources
Limitations on dividends. We are a holding company that relies on dividends, distributions and advances from our subsidiaries to pay dividends on our ordinary shares and meet our financial obligations. The ability of our subsidiaries to pay such amounts to us and our ability to pay dividends and distributions to our shareholders is subject to restrictions including, but not limited to, applicable local laws and limitations contained in our bank credit facilities and long-term borrowings. Additionally, intercompany payments of dividends, distributions and advances can, in certain circumstances, result in adverse tax effects such as the requirement to pay withholding and corporate income taxes and distribution taxes on dividends and distributions, and can also require, in certain situations, that our subsidiaries make pro-rata payments to the minority interest holders in such entities. Additionally, in general, our subsidiaries cannot pay dividends in excess of their retained earnings. Such laws, restrictions, and effects could limit or impede intercompany dividends and distributions, or the making of intercompany advances. In addition, we currently expect that the cash and cash equivalents held by our non-U.S. subsidiaries will be used primarily to support our international operations, including paying debt service, making capital expenditures and meeting the cash needs of such operations.
Exchange control laws and regulations. Some of our subsidiaries may be subject from time to time to exchange control laws and regulations that may limit or restrict the payment of dividends or distributions or other transfers of funds by those subsidiaries to our parent holding company. We believe that as of April 30, 2015 total net assets which may not be transferred to us in the form of loans, advances, or cash dividends by our subsidiaries without the consent of a third party were approximately 13% of our consolidated total net assets as of the end of the most recent fiscal year.
Client agreements involving cash. We have entered into agreements with certain of our South African pharmaceutical distribution clients specifying the use of designated cash accounts for receivables collections from the end-recipients. In these circumstances, pursuant to the agreements with our clients and for a nominal fee, we manage our clients collections and cash application functions, under credit terms and conditions mandated by our clients. Under these arrangements, we bill the end-recipients of the products we distribute from our warehouses on behalf of our clients. We are not obligated to remit cash receipts to our clients until such billings are recovered by us and we typically remit such billings to our clients within two to seven days subsequent to our receipt of cash from the end recipients. Although the company is required under these contracts to use such cash accounts for cash activity related to these clients, the company has access and control over such balances in the normal course of its operations. Balances in such accounts totaled approximately $31.7 million and $34.9 million at April 30, 2015 and January 31, 2015, respectively, and are included in cash and cash equivalents, with corresponding liabilities included in accounts payable, in the accompanying consolidated balance sheets. These activities do not have a material impact on the companys liquidity requirements.
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Operating cash advances and disbursements. When we act as a customs broker, we make significant cash advances on behalf of our clients to 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 our reimbursement from our clients. Accordingly, operating cash flows are typically stronger in periods of declining logistics activity and are comparably weaker in periods of volume growth as we must disburse cash in advance of collections from clients.
As of April 30, 2015, our cash and cash equivalents totaled $175.9 million, representing a decrease of $35.9 million from January 31, 2015, the reasons for which are discussed below.
Three months ended April 30, | ||||||||
2015 | 2014 | |||||||
(Unaudited) | ||||||||
Net cash flow (used in)/provided by: |
||||||||
Operating activities |
$ | (75,357 | ) | $ | (122,137 | ) | ||
Investing activities |
(8,566 | ) | (57,579 | ) | ||||
Financing activities |
49,615 | 177,437 | ||||||
Effect of foreign exchange rate changes on cash and cash equivalents |
(1,585 | ) | 4,778 | |||||
|
|
|
|
|||||
Net (decrease)/increase in cash and cash equivalents |
$ | (35,893 | ) | $ | 2,499 | |||
|
|
|
|
Cash Used In Operating Activities. Cash used in operating activities for the three months ended April 30, 2015 and 2014 was $75.4 million and $122.1 million, respectively. Cash provided by or used in operating activities is highly dependent on changes in operating assets and liabilities which are driven by timing differences in cash receipts and payments. As a result, we believe it is also useful to compare cash flows from operations, apart from these effects. Such comparison is as follows:
Three months ended April 30, | ||||||||
2015 | 2014 | |||||||
(Unaudited) | ||||||||
Net cash used in operating activities: |
||||||||
Net loss |
$ | (35,382 | ) | $ | (43,369 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities |
||||||||
Make-whole payment |
| 20,830 | ||||||
Non-cash adjustments |
25,786 | 29,594 | ||||||
|
|
|
|
|||||
Total adjustments |
25,786 | 50,424 | ||||||
|
|
|
|
|||||
Total results of operations, after cash and non-cash adjustments to net loss |
(9,596 | ) | 7,055 | |||||
|
|
|
|
|||||
Changes in operating assets and liabilities |
(65,761 | ) | (129,192 | ) | ||||
|
|
|
|
|||||
Net cash flow used in operating activities |
$ | (75,357 | ) | $ | (122,137 | ) | ||
|
|
|
|
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Accounts receivable and accounts payable are impacted by items included in revenue and expenses, respectively, and also by billings and disbursements of pass-through items for customs duties and taxes, which are not included in revenue and expense on our consolidated statements of operations. Variances of customs duties and taxes are primarily attributable to variances in the number of clearances and the value of goods imported over the comparable periods. A roll forward schedule of such activity for the first quarter of fiscal years ended 2016 and 2015, respectively, is below:
Trade Receivables |
Three months ended April 30, | |||||||
2015 | 2014 | |||||||
Beginning balance |
$ | 887,084 | $ | 972,177 | ||||
|
|
|
|
|||||
Billings: |
||||||||
Revenues |
973,317 | 1,043,888 | ||||||
Billings for pass-through items |
821,287 | 1,024,941 | ||||||
|
|
|
|
|||||
Gross billings |
1,794,604 | 2,068,829 | ||||||
Amounts collected |
(1,759,137 | ) | (1,933,816 | ) | ||||
|
|
|
|
|||||
Net cash outflow from billings and collections |
35,467 | 135,013 | ||||||
Foreign currency translation and other |
(3,993 | ) | 19,697 | |||||
|
|
|
|
|||||
Ending balance |
$ | 918,558 | $ | 1,126,887 | ||||
|
|
|
|
|||||
Trade Payables |
Three months ended April 30, | |||||||
2015 | 2014 | |||||||
Beginning balance |
$ | 500,853 | $ | 562,095 | ||||
|
|
|
|
|||||
Purchased transportation costs: |
||||||||
Purchased transportation costs |
643,865 | 674,534 | ||||||
Disbursements for pass-through items |
821,287 | 1,024,941 | ||||||
|
|
|
|
|||||
Total accruals |
1,465,152 | 1,699,475 | ||||||
Amounts disbursed |
(1,488,430 | ) | (1,727,038 | ) | ||||
|
|
|
|
|||||
Net cash (outflow)/inflow from accruals and payments |
(23,278 | ) | (27,563 | ) | ||||
Foreign currency translation and other |
(3,970 | ) | 15,350 | |||||
|
|
|
|
|||||
Ending balance |
$ | 473,605 | $ | 549,882 | ||||
|
|
|
|
Cash Used in Investing Activities. Cash used in investing activities during the first quarter of fiscal 2016 was $8.6 million, as compared to $57.6 million of cash used in investing activities during the first quarter of fiscal 2015. During the first quarter of fiscal 2016, we used $2.3 million of cash for software development and $2.9 million for other capital expenditures, consisting primarily of computer hardware and furniture, fixtures and equipment. This compares to cash used for software development of $4.2 million and cash used for other capital expenditures of $5.9 million during the same quarter of last year. During the normal course of operations, we have a need to acquire technology, office furniture and equipment to facilitate the handling of our client freight and logistics volumes. We currently expect to incur an aggregate of approximately $35.0 million to $45.0 million for cash capital expenditures during fiscal 2016.
In connection with the Fiscal 2015 Refinancing, described below, during the first quarter of fiscal 2015 certain facilities were terminated and we provided cash collateral in the amount of $50.0 million to secure the letters of credit and bank guarantees which were outstanding thereunder and which facilities remain outstanding as of April 30, 2015. The usage of such cash is restricted pursuant to applicable agreements. For the first quarter ended April 30, 2015, the required amount of cash collateral had a net increase of $4.7 million based on the letters of credit and bank guarantees that remain outstanding as of quarter end.
Cash Provided by Financing Activities. Cash provided by financing activities during the first quarter of fiscal 2016 was $49.6 million, as compared to $177.4 million, cash provided by financing activities during the first quarter of fiscal 2015. Our financing activities during the first quarter of fiscal 2016 included (i) net borrowings from bank lines of credit and other revolving lines of credit of $77.8 million and (ii) an increase in other short-term borrowings of $21.4 million. Such borrowings were partially offset by (i) repayments of bank lines of credit and long-term borrowings of $44.9 million; (ii) repayments of capital lease obligations of $3.5 million; and (iii) other net usages of $1.1 million.
Our financing activities during the first quarter of fiscal 2015 included (i) proceeds from the issuance of long-term borrowings of $403.0 million and (ii) proceeds from the issuance of Convertible Preference Shares of $175.0 million. In connection with the Fiscal 2015 Refinancing, we completed a private offering of our 2019 Notes in the principal amount of $400.0 million and a private offering of our Convertible Preference Shares in the principal amount of $175.0 million. After deducting fees and allocated expenses, we received net cash proceeds of $556.6 million from the Fiscal 2015 Refinancing. Such borrowings were offset by (i) repayments of long-term borrowings of $202.1 million and (ii)
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combined debt and equity issuance costs of $24.7 million. As part of the Fiscal 2015 Refinancing, we repaid all of the $200.0 million aggregate principal amount of our previously outstanding notes and paid to the holders thereof a make-whole payment with respect to such prepayment in the amount of $20.8 million.
Other financing activities during the first quarter of fiscal 2015 included borrowings from bank lines of credit of $57.6 million; offset by (i) net repayments of bank lines of credit and other revolving lines of credit of $203.5 million; (ii) a decrease in short-term borrowings of $1.0 million; (iii) repayments of capital lease obligations of $4.4 million; and (iv) other net usages of $1.7 million.
Credit Facilities; Other Short-Term Borrowings; Long-Term Borrowings
Bank Lines of Credit. We utilize a number of banks and other financial institutions to provide us with borrowings and letters of credit, guarantee and working capital facilities. Certain of these credit facilities are used for working capital, for issuing letters of credit to support the working capital and operational needs of various subsidiaries, to support various customs bonds and guarantees, and for general corporate purposes. In other cases, customs bonds and guarantees are issued directly by various financial institutions. In some cases, the use of a particular credit facility is restricted to the country in which it originates. These particular credit facilities may restrict distributions by the subsidiary operating in such country.
Fiscal 2015 Refinancing. In March 2014 we undertook the following steps to address the liquidity and covenant challenges which we were then experiencing (we refer to these steps collectively as the Fiscal 2015 Refinancing). These steps included, but were not limited to:
| We completed a private offering of our $400.0 million principal amount of convertible senior notes due 2019 (which we refer to as the 2019 Notes). After deducting fees and expenses, we received net proceeds from the offering of the 2019 Notes of $386.1 million. |
| We completed a private offering of our Series A 7.0% Convertible Preference Shares (the Convertible Preference Shares) to an affiliate of our largest shareholder, P2 Capital, in the aggregate principal amount of $175.0 million. We currently expect that dividends on the Convertible Preference Shares will be paid in kind quarterly starting on June 1, 2014 until March 1, 2017. The dividend rate is 7.0% for pay-in-kind dividends and 8.0% for cash dividends in the limited circumstances provided by the terms of the Convertible Preference Shares. For additional information regarding the terms of the Convertible Preference Shares, see Note 4 of the Notes to Financial Statements contained in Part I of this Form 10-Q. |
| Certain of our U.S. and Canadian subsidiaries entered into a credit agreement with Citibank, N.A., Citigroup Global Markets Inc., Morgan Stanley Senior Funding, Inc. and Bank of the West for a new senior secured asset-based revolving credit facility (CitiBank Credit Facility) that provides commitments of up to $150.0 million, as more fully described below. |
| We (i) repaid all of the $200.0 million aggregate principal amount of our private placement notes which we issued on January 25, 2013 (the 2013 Notes) and paid to the holders thereof a make-whole payment with respect to such prepayment in the amount of approximately $20.8 million non-cash charge of $1.0 million related to the acceleration of unamortized debt issuance costs , (ii) refinanced indebtedness which was then outstanding under certain of our previously outstanding credit facilities and terminated those credit facilities, and (iii) in connection with the termination of certain facilities, provided cash collateral of approximately $33.7 million for outstanding letters of credit and bank guarantees thereunder. |
In connection with the Fiscal 2015 Refinancing, the 2011 Royal Bank of Scotland (2011 RBS Facility) and certain other facilities were terminated in March 2014 and we provided cash collateral to secure the letters of credit and bank guarantees which were outstanding thereunder and which remain outstanding as of April 30, 2015. As of April 30, 2015, $33.7 million of such cash collateral was outstanding and the usage of such cash is restricted pursuant to the applicable agreements. Continuing after the completion of the Fiscal 2015 Refinancing, we had, and we continue to maintain, the South African Facilities Agreement and various other bank lines of credit and letters of credit facilities. In addition to such bank lines of credit, in fiscal 2015 we started borrowing short-term advances under our financing agreements with Greensill Capital (UK) Limited (Greensill) to help us fund our working capital requirements. See Other Short Term Borrowings below for a description of such arrangement.
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The following table presents information about our borrowings under various bank lines of credit, letters of credit and other bank credit facilities as of April 30, 2015 (the table is in thousands). The table below does not include our outstanding indebtedness owed under our other short-term borrowings and our long-term borrowings. See Other Short-Term Borrowings and Long-Term Borrowings for additional information regarding such other indebtedness.
Bank Lines of Credit and Letters of Credit Facilities
CitiBank Credit Facility(1) |
Nedbank South African Facilities(2) |
Other Facilities(3) | Total | |||||||||||||
Credit facility limit |
$ | 140,138 | $ | 57,462 | $ | 269,515 | $ | 467,115 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Facility usage for cash withdrawals(4) |
34,000 | 6,352 | 25,004 | 65,356 | ||||||||||||
Letters of credit and guarantees outstanding |
12,710 | 23,170 | 88,642 | 124,522 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total facility/usage |
$ | 46,710 | $ | 29,522 | $ | 113,646 | $ | 189,878 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Available, unused capacity |
$ | 93,428 | $ | 27,940 | $ | 155,869 | $ | 277,237 | ||||||||
Available for cash withdrawals |
$ | 93,428 | $ | 25,759 | $ | 152,435 | $ | 271,622 |
(1) | The CitiBank Credit Facility was entered into in March 2014 in connection with the Fiscal 2015 Refinancing. The amount of cash withdrawals available under the CitiBank Credit Facility is limited to the lesser of (a) $150.0 million or (ii) (a) the borrowing base calculation for the period less (b) letters of credit or guarantees outstanding and (c) outstanding cash withdrawals and reimbursement obligations. The average outstanding cash borrowings during the three months ended April 30, 2015 was $73.0 million. |
(2) | In September 2014 we amended and restated our credit facility for our operations in South Africa (the South African Facilities Agreement), which currently provides for both: (i) a 680.0 million ZAR revolving credit facility, which is comprised of a ZAR 380.0 million working capital facility and a ZAR 300.0 million letter of credit, guarantee, forward exchange contract and derivative instrument facility, and (ii) a ZAR 150.0 million revolving asset-based finance facility, which consists of a capital lease line. Excluded from the table are amounts outstanding under the ZAR 150.0 million revolving asset-based finance facility, which amounts are included under capital lease obligations on our consolidated balance sheet. The maturity date of this facility is July 9, 2016. Total facility usage on the South African Facilities Agreement is presented net of cash and cash equivalents of $80.1 million and $74.3 million for the period ended April 30, 2015 and January 31, 2015, respectively. |
(3) | Certain bank letters of credit and guarantees outstanding in this column are collateralized by our cash held as collateral. As of April 30, 2015, $33.7 million of such cash collateral was outstanding and the usage of such cash is restricted pursuant to the applicable agreement. |
(4) | Certain amounts in this row reflect letters of credit and bank guarantees supporting outstanding cash borrowings by the companys subsidiaries. |
CitiBank Credit Facility. In March 2014 certain of our U.S. and Canadian subsidiaries entered into the CitiBank Credit Facility, which facility is guaranteed by us and certain of our subsidiaries. The CitiBank Credit Facility provides up to $150.0 million of commitments for a senior secured asset-based revolving line of credit, including a $20.0 million sublimit for swingline loans, a $50.0 million sublimit for the issuance of standby letters of credit and a $20.0 million sublimit for loans in Canadian dollars. The maximum amount we are permitted to borrow under the CitiBank Credit Facility is subject to a borrowing base calculated by reference to our accounts receivable in the U.S. and Canada and certain eligibility criteria with respect to such receivables and other borrowing limitations. Amounts borrowed under the CitiBank Credit Facility bear interest (1) at a rate based on the London Interbank Offered Rate, or LIBOR or the Canadian equivalent, plus a margin ranging from 2.00% to 2.50%, or (2) a rate based on the higher of (a) the base prime rate offered by CitiBank, (b) 1.00% plus the one-month LIBOR rate or (c) 0.50% plus the federal funds rate or in each case, the Canadian equivalent, plus a margin ranging from 1.00% to 1.50%. The CitiBank Credit Facility will terminate in March 2019, unless the 2019 Notes are not redeemed, refinanced or converted prior to September 2018, in which case the CitiBank Credit Facility will terminate in September 2018.
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The CitiBank Credit Facility is secured, subject to permitted liens and other agreed upon exceptions, by a first-priority lien on and perfected security interest in substantially all of our U.S. and Canadian assets, including accounts receivable and a pledge of the equity in our U.S. and Canadian holding and operating companies. In addition, the CitiBank Credit Facility requires that we maintain a fixed charge coverage ratio of not less than 1.00 to 1.00 if available credit under the CitiBank Credit Facility is less than the greater of (i) 10% of the maximum credit thereunder and (ii) $15.0 million. The CitiBank Credit Facility contains customary representations and warranties and customary events of default, payment of customary fees and expenses, as well as certain affirmative and negative covenants, including restrictions on: indebtedness; liens; mergers, consolidations and acquisitions; sales of assets; engaging in business other than our current business; investments; dividends; redemptions and distributions; affiliate transactions; and other restrictions.
South African Facilities Agreement. The obligations of our subsidiaries under the South African Facilities Agreement are guaranteed by selected subsidiaries registered in South Africa. In addition, certain of our 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. The South African Facilities Agreement terminates in July 2016.
The South African Facilities Agreement contains events of default and covenants, including, but not limited to, financial covenants, restrictions on certain types of activities and transactions, reporting covenants, cross defaults to other indebtedness and other terms, events of default and covenants typical of credit facilities. The South African Facilities Agreement also provides for an uncommitted seasonal customs facility which may be made available to the South African obligors at a later date if requested by the South African obligors. In addition, the South African Facilities Agreement provides the South African obligors with an option to request that Nedbank increase its commitments under the revolving credit facility and the revolving asset-based finance facility in an aggregate amount up to ZAR 400.0 million, subject to the approval of Nedbank and the satisfaction of certain conditions precedent. In May 2015, the South African Facilities Agreement was amended to exclude from the calculation of the Interest Cover Ratio covenant for the measurement period ending on July 31, 2015, the amount of ZAR 280.0 million which relates to a previously disclosed impairment relating to an unpaid receivable owed by a client in South Africa that has entered into the South African equivalent of bankruptcy.
Overdrafts under the 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 the Intercontinental Exchange 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 our subsidiaries party to the South African Facilities Agreement and Nedbank.
In addition to the South African Facilities Agreement described above, our South African subsidiaries 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 April 30, 2015, the value of these contingent liabilities was $24.5 million.
Cash Pooling Arrangements. A significant number of our subsidiaries participate in cash pooling arrangements administered by various banks and which we use to fund liquidity needs of our subsidiaries. The cash pooling arrangements have no stated maturity dates and yield and bear interest at varying rates. The facilities do not permit aggregate outstanding withdrawals by our subsidiaries under an arrangement to exceed the aggregate amount of cash deposits by our subsidiaries in the arrangement at any one time. Under these arrangements, cash withdrawals of $11.1 million were included in bank lines of credit on our balance sheet at April 30, 2015.
Other Additional Bank Credit Facilities. In addition to the credit, letters of credit, and guarantee facilities provided under the CitiBank Credit Facility and the South African Facilities Agreement, we utilize a number of bank and other financial institutions to provide us and our subsidiaries with additional credit, letters of credit and guarantee facilities. In some cases, the use of these particular letters of credits, guarantee and credit facilities may be restricted to the country in which they originated and may restrict distributions by the subsidiary operating in the country.
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Other Limitations and Covenants. The CitiBank Credit Facility, the South African Facilities Agreement, and certain of our other credit, letters of credit and guarantee facilities also contain other limitations on the payment by us and/or by our various subsidiaries of dividends, distributions and share repurchases. In addition, if a change in control (as defined in the various agreements and facilities) should occur, then the outstanding indebtedness thereunder may become due and payable. Furthermore, the CitiBank Credit Facility, the South African Facilities Agreement, and certain of our other credit and debt facilities contain cross-default provisions with respect to other indebtedness, giving the lenders under such agreements and facilities the right to declare a default if we default under other indebtedness in certain circumstances. Should we fail to comply with the covenants in the CitiBank Credit Facility, the South African Facilities Agreement, or certain of our other credit or, letters of credit facilities or other facilities, we would be required to seek to amend the covenants or to seek a waiver of such non-compliance as we were required to do in the past under our prior agreements and facilities. If we are unable to obtain any necessary amendments or waivers, all or a portion of the indebtedness and obligations under the various agreements and facilities could become immediately due and payable and our various agreements and facilities could be terminated and the credit, letters of credit and guarantee facilities provided thereunder would no longer be available to us.
The maximum and average borrowings against all of our bank lines of credit during the first quarter of fiscal 2016 were $206.5 million and $172.8 million, respectively. The maximum and average borrowings against all of our bank lines of credit during the first quarter of fiscal 2015 were $334.8 million and $248.9 million, respectively. Borrowings during our reporting periods may be materially different than the period-end amounts recorded in the financial statements due to requirements to fund customs duties and taxes, changes in accounts receivable and payable, and other working capital requirements.
Other Short-term Borrowings. In addition to our lines of credit and letters of credit facilities from banks and other financial institutions, we also have a number of short-term borrowings issued by various parties not described above. The total of such borrowings at April 30, 2015 and January 31, 2015, were $74.3 million and $52.8 million, respectively.
On December 2014, we entered into a Parent Customer Agreement (the Customer Agreement) with Greensill and a Re-invoicing Service Agreement (the Re-invoicing Agreement) with Bramid Outsource Limited (an affiliate of Greensill and the Re-Invoicing Agent). The Service Agreement and the Re-invoicing Agreement are referred to herein collectively as the Greensill Financing Agreements. Pursuant to the Greensill Financing Agreements, we may submit written requests to the Re-Invoicing Agent pursuant to which we may receive an advance of funds to pay such invoices or to reimburse ourselves if the relevant invoice has already been paid. Greensill may elect, but has no obligation, to advance such funds to us on terms set forth in such offer and Greensill retains the right to evaluate each request submitted by us and may establish the terms of each advance at the time a request is submitted. The Greensill Financing Agreements do not contain a commitment by Greensill as to any particular level of advances to be made to us. If the Re-Invoicing Agent and Greensill choose to enter into a transaction, the Re-Invoicing Agent shall charge us a fee based on an annual rate of Libor plus 9.5%. The principal portion of such advance and the fee are due on the maturity of such advance which may vary by agreement between the parties, although the advances currently outstanding under the Greensill Financing Agreements must be repaid on the six month anniversary of the initial advancement of funds. Currently, advances under the Greensill Financing Agreements of approximately $40.0 million are due in five separate tranches during June 2015. We currently expect the full $40.0 million to be extended for an additional six month period on substantially similar terms. As of the date of this filing, we are in the process of extending these tranches and we anticipate all advances will be extended by the end of June 2015. If any amount is not paid on the maturity date, the advance will continue to accrue interest at LIBOR plus 9.5%. Currently, our internal authorization for borrowings under the Greensill Financing Agreements is set at $100.0 million, although the Greensill Financing Agreements do not contain a commitment by Greensill to make any additional advances to us. As of April 30, 2015, we had a total of approximately $62.0 million outstanding under the Greensill Financing Agreements.
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Events of default under the Greensill Financing Agreements include the failure to make a payment within five business days after the applicable due date, an insolvency event and the default by us on certain other indebtedness. Upon an event of default, all advances outstanding under the Greensill Financing Agreements become due and payable. The Greensill Financing Agreements terminate in December 2017, subject to earlier termination as provided for therein.
Long-term Borrowings. The following table presents information about the companys indebtedness pursuant to its 2019 Notes and other long-term borrowings as of April 30, 2015:
2019 Convertible Senior Notes(1) |
Other Facilities | Total | ||||||||||
Maturity date |
March 1, 2019 | |||||||||||
Original principal |
$ | 400,000 | ||||||||||
Original issuance discount for fair value of conversion feature |
$ | 47,690 | ||||||||||
Interest rate per annum |
4.50 | % | 1.00 | % | ||||||||
Discount rate |
7.40 | % | ||||||||||
Balance at April 30, 2015: |
||||||||||||
Current portion of long-term borrowings |
| 1,173 | 1,173 | |||||||||
Long-term borrowings, excluding current portion |
361,810 | 5,435 | 367,245 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 361,810 | $ | 6,608 | $ | 368,418 | ||||||
|
|
|
|
|
|
(1) | The fair value of the 2019 Notes has been bifurcated and presented in equity under common stock in the companys consolidated financial statements beginning in April 30, 2014. The amount included in long-term borrowings is accreting to the $400.0 million redemption value using a discount rate of approximately 7.4%, which approximated the companys fair-value incremental borrowing rate for a similar debt instrument (without the conversion feature) as of the date of issuance. |
2019 Notes. On March 4, 2014, we completed a private offering of our 4.50% 2019 Notes in the aggregate principal amount of $400.0 million, and entered into an indenture (the Indenture) with Wells Fargo Bank, National Association, as trustee, in connection therewith. After deducting fees and expenses, we received net proceeds from the offering of the 2019 Notes of $386.1 million. The Indenture governs the 2019 Notes and contains terms and conditions customary for transactions of this type, including customary events of default such as cross-defaults and other provisions. The 2019 Notes bear interest at an annual rate of 4.50% payable in cash semiannually in arrears on March 1 and September 1 of each year, beginning on September 1, 2014. The 2019 Notes will be due and payable by us when they mature on March 1, 2019, unless earlier converted, redeemed or repurchased in accordance with their terms prior to such date. We may not redeem the 2019 Notes at our option prior to maturity unless certain tax related events occur. In addition, the Indenture provides that if we undergo certain types of fundamental changes prior to the maturity date of the 2019 Notes, each 2019 Note holder has the option to require us to repurchase all or any of such holders 2019 Notes for cash. Pursuant to the terms of the Indenture, the 2019 Notes will be convertible into our ordinary shares at a conversion rate of 68.9703 ordinary shares per $1,000 principal amount of 2019 Notes (equivalent to an initial conversion price of approximately $14.50 per ordinary share), subject to adjustment, upon the occurrence of certain events prior to the close of business on the business day immediately preceding September 1, 2018, and, on or after September 1, 2018, by a holders surrender for conversion of any of its 2019 Notes at any time prior to the close of the business day immediately preceding the maturity date. Upon a conversion of the 2019 Notes, in accordance with the Indenture we have the option to pay or deliver, as the case may be, cash, our ordinary shares or a combination of cash and ordinary shares, at our election.
Off-Balance Sheet Arrangements
Other than operating leases, we have no material off-balance sheet arrangements.
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Critical Accounting Estimates
Our 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 our critical accounting estimates during the first three months of fiscal 2016.
Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
As of April 30, 2015, there had been no material changes to our exposure to market risks since January 31, 2015, as described in our Annual Report on Form 10-K for the fiscal year ended January 31, 2015 on file with the SEC. For a discussion of our 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, 2015.
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 SECs 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, evaluated our disclosure controls and procedures as of April 30, 2015. In our Annual Report on Form 10-K for the year ended January 31, 2015, we concluded that our disclosure controls and procedures were ineffective as of January 31, 2015, solely due to a material weakness in internal control over financial reporting. This material weakness relates to our centralized process for certain activity recorded through our freight forwarding receivable and payable clearing accounts. As a result, underlying controls related to freight forwarding receivables, payables, revenues and purchased transportation cost accounts were not operating effectively. This material weakness is described more fully in our Managements Report on Internal Controls Over Financial Reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) and the related Report of Independent Registered Public Accounting Firm, which are contained in Item 15 of Part IV of our Annual Report on Form 10-K for the fiscal year ended January 31, 2015. Furthermore based upon our evaluation (which evaluation included our Chief Executive Officer and Chief Financial Officer) as of April 30, 2015, our management (which included our Chief Executive Officer and Chief Financial Officer) concluded that our disclosure controls and procedures were ineffective as of April 30, 2015, due solely to the material weakness in our internal control over financial reporting described above and in our Annual Report on Form 10-K for the fiscal year ended January 31, 2015.
Management is in the process of taking further steps to improve and strengthen the internal controls related to the above matter, including (i) the creation of new sub-ledgers to segregate transactions by type, (ii) the modification of the form and format of certain monitoring activities, and (iii) moving some review functions regarding the collectability of these items to finance teams residing in various subsidiaries. Notwithstanding the above process, the identified material weakness in our internal control over financial reporting will not be considered remediated until the new controls are fully implemented, in operation for a sufficient period of time, tested and concluded by management to be designed and operating effectively. There have been no other changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Item 1. | Legal Proceedings |
In connection with Financial Accounting Standards Board (FASB) Accounting Standards Codification (FASB Codification or ASC) Topic 450, Contingencies (ASC 450), we have not accrued for material loss contingencies relating to 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 and 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. 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 Annual Report on Form 10-K, we are not a party to any litigation that we believe will be material, except as described below.
Industry-Wide Anti-Trust Investigation. On March 28, 2012 we were notified by the EC that it had adopted a decision against us and two of our subsidiaries relating to alleged anti-competitive behavior in the market for freight forwarding services in the European Union/European Economic Area. The decision of the EC imposes a fine of euro 3.1 million (or approximately $3.4 million at April 30, 2015) against us. We believe that neither we nor our subsidiaries violated European competition rules. In June 2012, we appealed the decision and the amount of the fine before the European Unions General Court and oral arguments were heard in October 2014.
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 responded to this proceeding in May 2014. We filed a supplemental response in support of our defense in September 2014 after we were granted access to various documents seized by the Brazilian antitrust authority during raids of several other forwarders.
In May 2012, the Competition Commission of Singapore informed us that it was contemplating an administrative investigation into possible alleged cartel activity in the international freight forwarding market. In January 2013, we provided information and documents related to the air Automated Manifest System (AMS) fee in response to a notice we received in November 2012 from the Competition Commission of Singapore requesting the information and indicating that the commission suspected that we engaged in alleged anti-competitive behavior relating to freight forwarding services to and from Singapore. In September 2013, we received a follow-up request for information and provided such information in November 2013.
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From time to time we may receive additional requests for information, documents and interviews from various governmental agencies with respect to these investigations, and we have provided, and may continue to provide in the future, further responses as a result of such requests.
We have incurred, and we may in the future incur, significant legal fees and other costs in connection with these governmental investigations and lawsuits. If any regulatory body concludes that we have engaged in anti-competitive behavior, we could incur significant additional legal fees and other costs and penalties, which could include substantial fines, penalties and/or criminal sanctions against us and/or certain of our current or former officers, directors and employees, and we could be liable for damages. Any of these fees, costs, penalties, damages, sanctions or liabilities could have a material adverse effect on us and our financial results.
Matters Related to the Fiscal 2015 Financing. On March 17, 2014, a putative securities class action lawsuit was filed against us and certain of our executives in the United States District Court for the Central District of California. As amended on September 5, 2014, the complaint, which is captioned Michael J. Angley, individually and on behalf of himself and all others similarly situated v. UTi Worldwide Inc., Eric W. Kirchner, Richard G. Rodick, Edward G. Feitzinger and Jeffrey W. Misakian, No. 2:14-cv-02066, generally alleges that the defendants violated Section 10(b) of the Securities Exchange Act of 1934, as amended (the Exchange Act), Rule 10b-5 promulgated thereunder and Section 20(a) of the Exchange Act by misstating or failing to disclose, in certain public statements made and in filings with the SEC between March 28, 2013 and February 26, 2014, material facts relating to our liquidity position, financial condition, financial covenants, financial systems and freight forwarding operating system. The complaint seeks unspecified damages and other relief. The company and the individual defendants deny any allegations of wrongdoing and intend to vigorously defend against this lawsuit. All defendants moved to dismiss on November 4, 2014. At a hearing on June 2, 2015, the court stated its intent to issue an order granting the motion to dismiss, with leave for plaintiffs to amend.
In July 2014, we received a subpoena from the SEC requesting certain documents related to, among other things, the facts and circumstances surrounding the Fiscal 2015 Refinancing. In September 2014, we received a similar subpoena directed to the members of the Audit Committee of the Board of Directors. In April 2015, we received a subpoena from the SEC requesting certain documents related to the material weakness in internal control over financial reporting and the revisions to prior period financial statements that were disclosed in our Form 10-K for the period ending January 31, 2015. We have been cooperating and intend to continue to cooperate with the SECs investigation.
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 under Part I, Item 1A Risk Factors in our Annual Report on Form 10-K for the fiscal year ended January 31, 2015 filed with the SEC. The disclosures in our Annual Report on Form 10-K and in other reports and filings are not necessarily a definitive list of all factors that may affect our business, financial condition and future results of operations.
None.
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Item 6. | Exhibits |
Exhibit | Description | |
3.1 | Amended and Restated Memorandum of Association of the company (incorporated by reference to Exhibit 3.1 to the companys Current Report on Form 8-K, filed March 3, 2014) | |
3.2 | Amended and Restated Articles of Association of the company (incorporated by reference to Exhibit 3.2 to the companys Current Report on Form 8-K, filed March 3, 2014) | |
10.1 | Amendment and Restatement Agreement, as of September 5, 2014, by and among certain subsidiaries of UTi Worldwide Inc. and Nedbank Limited, with attached Amended and Restated Facilities Agreement (incorporated by reference to Exhibit 10.1 to the companys Current Report on Form 8-K (File No. 000-31869), filed September 11, 2014) | |
10.2 | Amended and Restated Employment Agreement of Richard G. Rodick, dated as of March 31, 2015 (incorporated by reference to Exhibit 10.22 to the Companys Annual Report on Form 10-K (File No. 000-31869) , filed April 1, 2015) | |
10.3 | Separation Agreement and General Release of Mr. Jeff Hammond, dated as of February 6, 2015 (incorporated by reference to Exhibit 10.36 to the Companys Annual Report on Form 10-K (File No. 000-31869) , filed April 1, 2015) | |
10.4 | Master Services Agreement between the Company and Mr. Gene Ochi, dated as of March 30, 2015 (incorporated by reference to Exhibit 10.40 to the Companys Annual Report on Form 10-K (File No. 000-31869) , filed April 1, 2015) | |
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 | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Definition Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
* | Indicates compensatory arrangement |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
UTi Worldwide Inc. | ||||||||
Date: | June 8, 2015 | By: | /s/ Edward G. Feitzinger | |||||
Edward G. Feitzinger | ||||||||
Chief Executive Officer | ||||||||
Date: | June 8, 2015 | By: | /s/ Richard G. Rodick | |||||
Richard G. Rodick | ||||||||
Executive Vice President Finance and Chief Financial Officer Principal Financial Officer and Principal Accounting Officer |
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Exhibit | Description | |
3.1 | Amended and Restated Memorandum of Association of the company (incorporated by reference to Exhibit 3.1 to the companys Current Report on Form 8-K, filed March 3, 2014) | |
3.2 | Amended and Restated Articles of Association of the company (incorporated by reference to Exhibit 3.2 to the companys Current Report on Form 8-K, filed March 3, 2014) | |
10.1 | Amendment and Restatement Agreement, as of September 5, 2014, by and among certain subsidiaries of UTi Worldwide Inc. and Nedbank Limited, with attached Amended and Restated Facilities Agreement (incorporated by reference to Exhibit 10.1 to the companys Current Report on Form 8-K (File No. 000-31869), filed September 11, 2014) | |
10.2 | Amended and Restated Employment Agreement of Richard G. Rodick, dated as of March 31, 2015 (incorporated by reference to Exhibit 10.22 to the Companys Annual Report on Form 10-K (File No. 000-31869) , filed April 1, 2015) | |
10.3 | Separation Agreement and General Release of Mr. Jeff Hammond, dated as of February 6, 2015 (incorporated by reference to Exhibit 10.36 to the Companys Annual Report on Form 10-K (File No. 000-31869) , filed April 1, 2015) | |
10.4 | Master Services Agreement between the Company and Mr. Gene Ochi, dated as of March 30, 2015 (incorporated by reference to Exhibit 10.40 to the Companys Annual Report on Form 10-K (File No. 000-31869) , filed April 1, 2015) | |
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 | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Definition Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
* | Indicates compensatory arrangement |
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