<PAGE>
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 MARCH 31, 2000
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
Commission file number 333-42607
GEOLOGISTICS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 22-3438013
- -------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1251 East Dyer Road
Santa Ana, California 92705
---------------------------
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code:(714) 513-3000
--------------
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
--- ---
On May 11, 2000, the registrant had 2,122,460 outstanding shares of common
stock, par value $.001 per share.
<PAGE>
GEOLOGISTICS CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Part I. Financial Information Page
----
<S> <C> <C>
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets,
March 31, 2000 (unaudited) and December 31, 1999 3
Condensed Consolidated Statements of Operations
for the three months ended March 31, 2000
and 1999 (unaudited) 5
Condensed Consolidated Statements of
Cash Flows for the three months ended
March 31, 2000 and 1999 (unaudited) 6
Notes to the Condensed Consolidated Financial
Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations 16
Item 3. Information required for this item has been
included in Management's Discussion and Analysis.
Part II. Other Information
Item 2. Changes in Securities 26
Item 4. Submission of Matters to a Vote of
Security Holders 26
Item 6. Exhibits and Reports on Form 8-K 26
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
GEOLOGISTICS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
-------------- ----------------
S> <C> <C>
Current assets:
Cash and cash equivalents $ 19,217 $ 2,628
Accounts receivable:
Trade, net 243,451 245,492
Other 14,219 20,865
Deferred income taxes 564 361
Prepaid expenses and other 20,874 25,681
------- --------
Total current assets 298,325 295,027
------- -------
Property and equipment, at cost 95,544 98,631
Accumulated depreciation (24,209) (22,648)
------ --------
Net property and equipment 71,335 75,983
Notes receivable, less current portion 210 1,241
Deferred income taxes 671 547
Intangible assets, net 55,213 55,285
Other assets 19,534 19,573
-------- --------
$445,288 $447,656
======= =======
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
3
<PAGE>
GEOLOGISTICS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
----------- -----------
<S> <C> <C>
Current liabilities:
Accounts payable $142,453 $160,914
Accrued expenses 126,846 116,676
Income taxes payable 2,345 2,475
Current portion of long-term debt 20,437 12,222
------- --------
Total current liabilities 292,081 292,287
Long-term debt, less current portion 168,741 152,915
Other non-current liabilities 45,887 46,747
Minority interest 2,324 2,087
------- --------
Total liabilities 509,033 494,036
Stockholders' deficit :
Preferred stock 15,000 shares authorized,
issued and outstanding 14,550 14,550
Common stock ($.001 par value, 5,000,000
shares authorized, 2,126,460 and 2,129,893
shares issued and outstanding) 2 2
Additional paid-in-capital 56,173 56,962
Accumulated deficit (135,697) (119,709)
Accumulated other comprehensive income 1,227 1,815
-------- --------
Total stockholders' deficit (63,745) (46,380)
-------- --------
$445,288 $447,656
======== ========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
4
<PAGE>
GEOLOGISTICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE-MONTH PERIODS
ENDED
-------------------------------
MARCH 31, MARCH 31,
2000 1999
-------- -----------
<S> <C> <C>
Revenues $357,877 $365,329
Transportation and other direct costs 277,325 273,293
------- -------
Net revenues 80,552 92,036
Selling, general and administrative expenses 84,904 94,708
Restructuring and other non-recurring charges 1,193 --
Depreciation and amortization 4,633 4,642
------- -------
Operating loss (10,178) (7,314)
Interest expense, net (4,637) (5,574)
Other income (expense), net 12 (145)
------- -------
Loss before income taxes and minority interest (14,803) (13,033)
Income tax provision (351) (1,800)
------- -------
Loss before minority interest (15,154) (14,833)
Minority interest (309) (155)
------- -------
Net loss (15,463) (14,988)
Preferred stock dividend (525) (525)
------- -------
Loss applicable to common stock $(15,988) $(15,513)
======== ========
Basic and diluted loss per common share $ (7.51) $ (7.30)
======== ========
Weighted average number of common and
common equivalent shares outstanding 2,127,604 2,126,393
========= =========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
5
<PAGE>
GEOLOGISTICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE-MONTH PERIODS
ENDED
--------------------------
MARCH 31, MARCH 31,
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(15,463) $(14,988)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 4,318 4,642
Amortization of deferred items 315 589
Deferred income taxes (327) (170)
Changes in current assets and liabilities, net 5,073 (3,408)
Other, net 351 (227)
--------- --------
Net cash used in operating activities (5,733) (13,562)
Cash flows from investing activities:
Purchases of property and equipment, net (1,837) (2,530)
Proceeds from sale of assets 906 --
--------- --------
Net cash used in investing activities (931) (2,530)
Cash flows from financing activities:
Proceeds from revolving line of credit, net 34,438 5,607
Proceeds from long-term debt 5,920 9,332
Payments on long-term debt (16,316) (955)
Proceeds from issuance of common stock -- 360
Other, net (789) --
--------- --------
Net cash from financing activities 23,253 14,344
--------- --------
Net increase (decrease) in cash and cash equivalents 16,589 (1,748)
Cash and cash equivalents, beginning of period 2,628 15,152
--------- --------
Cash and cash equivalents, end of period $19,217 $13,404
========= ========
Supplementary cash flow information:
Interest paid $ 2,585 $ 2,086
Income taxes $ 480 $ 492
Noncash common stock transactions $ -- $ 360
New capital leases $ 275 $ 20
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
6
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: The accompanying condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements included in GeoLogistics Corporation's ("Company") Form 10-K filed
with the Securities and Exchange Commission for the year ended December 31,
1999. The condensed consolidated financial information furnished herein reflects
all adjustments (consisting of normal recurring accruals) which are, in the
opinion of management, necessary for a fair presentation in accordance with
generally accepted accounting principles of the condensed consolidated financial
statements for the periods shown. Certain amounts for the prior year have been
reclassified to conform with the current year financial statement presentation.
Significant accounting policies followed by the Company are included in Note 2
to the audited consolidated financial statements in the Company's Form 10-K.
Results of operations for the three months ended March 31, 2000 may not be
indicative of the results to be expected for the full year.
PRINCIPLES OF CONSOLIDATION: The accompanying condensed consolidated financial
statements include the accounts of the Company and its majority owned
subsidiaries. The Company records its investment in each unconsolidated
affiliated company (20 to 50 percent ownership) using the equity method of
accounting. Other investments (less than 20 percent ownership) are recorded at
cost. Intercompany accounts and transactions have been eliminated.
USE OF ESTIMATES: The financial statements have been prepared in conformity with
generally accepted accounting principles and, as such, include amounts based on
informed estimates and judgments of management. Actual results could differ from
those estimates. Accounts affected by significant estimates include accounts
receivable and accruals for transportation and other direct costs, tax
contingencies, insurance claims, including cargo loss and damage claims.
REVENUE RECOGNITION: The Company's policy is to recognize revenue when it has
performed substantially all services required under the terms of its contracts,
generally on the date shipment is completed. Revenue from export-forwarding
services is recognized at the time the freight departs the terminal of origin.
Customs brokerage revenue is recognized upon completing the documents necessary
for customs clearance. Storage revenue is recognized as services are performed.
Transportation and other direct costs are recognized concurrently with revenues.
For both international and domestic revenues, the above methods of revenue
recognition approximate recognizing revenues and expenses when a shipment is
completed.
EARNINGS PER SHARE: Basic earnings per common share is computed using the
weighted average number of shares outstanding. Diluted earnings per common
share is computed under the treasury stock method using the weighted average
number of shares outstanding adjusted for the incremental shares attributed
to outstanding warrants to purchase common stock. Incremental shares were not
used in the calculation of diluted loss per common share due to their
antidilutive effect.
7
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2. LONG-TERM DEBT
In October 1997, the Company issued and sold $110.0 million in aggregate
principal amount of its 9 3/4% senior notes (the "Notes") which are due October
15, 2007, and are general unsecured obligations of the Company. The Notes are
fully and unconditionally guaranteed on a joint and several senior basis by all
existing and future domestic Restricted Subsidiaries (as defined in the
indenture relating to the Notes). Three of the Company's domestic subsidiaries
hold as their sole assets all of the issued and outstanding equity interests of
the Company's direct non-guarantor foreign subsidiaries.
8
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2. LONG-TERM DEBT (CONTINUED)
The following is condensed combined financial information of guarantor and
non-guarantor subsidiaries:
<TABLE>
<CAPTION>
Balance Sheet as of March 31, 2000
-------------------------------------------------------------------
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Combined
------- ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents................... $ 1,750 $ (1,813) $ 19,280 $ -- $ 19,217
Accounts receivable trade, net.............. (1,996) 86,953 209,532 (51,038) 243,451
Property, net............................... 1,767 18,323 51,245 -- 71,335
Intangible assets, net...................... 6,812 45,229 4,117 (945) 55,213
Other assets................................ 199,303 17,131 303,107 (463,469) 56,072
-------- -------- -------- --------- --------
Total assets.............................. $207,636 $165,823 $587,281 $(515,452) $445,288
======== ======== ======== ========= ========
Current liabilities......................... $ 11,573 $ 92,227 $233,658 $ (45,377) $292,081
Long-term debt, less current portion........ 110,146 41,754 16,841 -- 168,741
Other non-current liabilities............... 66,616 55,272 116,900 (190,577) 48,211
Stockholders' equity (deficit) ............. 19,301 (23,430) 219,882 (279,498) (63,745)
-------- -------- -------- --------- --------
Total liabilities and stockholders'
equity (deficit)......................... $207,636 $165,823 $587,281 $(515,452) $445,288
======== ======== ======== ========= ========
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations for the Three Months Ended March 31, 2000
-------------------------------------------------------------------
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Combined
------- ------------ ------------ ------------ --------
<S> <C> <C> <C> <C> <C>
Revenues.................................... $ -- $120,496 $277,208 $(39,827) $357,877
Transportation and other direct costs....... -- 97,387 219,765 (39,827) 277,325
Operating expenses.......................... 2,749 30,993 55,795 -- 89,537
Restructuring and other non-recurring
charges.................................. 661 213 319 -- 1,193
------ ------- ------- -------- --------
Operating loss.............................. (3,410) (8,097) 1,329 -- 10,178
Interest and other, net..................... 737 (3,458) (1,904) -- (4,625)
Income tax provision ....................... (21) -- (330) -- (351)
Minority Interest........................... -- -- (309) -- (309)
Preferred stock dividends................... (525) -- -- -- (525)
------ ------- ------- -------- --------
Loss applicable to common stock........... $ (3,219) $(11,555) $ (1,214) $ -- $(15,988)
======== ======== ======== ======== ========
</TABLE>
9
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
Statement of Cash Flows for the Three Months Ended March 31, 2000
------------------------------------------------------------------
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Combined
------- ------------ ------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Cash flows from:
Operating activities....................... $ 39,251 $(39,228) $(5,756) $ -- $(5,733)
Investing activities....................... (114) (1,107) 290 -- (931)
Financing activities....................... (39,008) 40,887 21,374 -- 23,253
-------- ------- ------- -------- -------
Net increase (decrease) in cash and cash
equivalents................................ 129 552 15,908 -- 16,589
Cash and cash equivalents, beginning of
period..................................... 1,621 (2,365) 3,372 -- 2,628
-------- ------- ------- -------- -------
Cash and cash equivalents, end of period..... $ 1,750 $ (1,813) $19,280 $ -- $19,217
========= ======= ======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
Balance Sheet as of December 31, 1999
--------------------------------------
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Combined
------- ------------ ------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents.................... $ 1,621 $ (2,365) $ 3,372 $ -- $ 2,628
Accounts receivables trade, net.............. (1,023) 81,466 209,285 (44,236) 245,492
Property, net................................ 1,766 19,427 54,790 -- 75,983
Intangible assets, net....................... 6,496 45,467 4,267 (945) 55,285
Other assets................................. 190,692 17,313 329,338 (469,075) 68,268
------- --------- ------- ------- --------
Total assets................................ $199,552 $161,308 $601,052 $(514,256) $447,656
======== ======== ======== ========= ========
Current liabilities.......................... $ 9,702 $ 89,704 $237,033 $ (44,152) $292,287
Long-term debt, less current portion....... 149,154 867 2,894 -- 152,915
Other non-current liabilities.............. 17,125 82,610 129,439 (180,340) 48,834
Stockholders' equity (deficit)............. 23,571 (11,873) 231,686 (289,764) (46,380)
------- --------- ------- ------- --------
Total liabilities and
Stockholders'equity (deficit)....... $199,552 $161,308 $601,052 $(514,256) $447,656
======== ======== ======== ========= ========
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations for the Three Months Ended March 31, 1999
------------------------------------------------------------------
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Combined
------- ------------ -------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Revenues..................................... $ -- $145,740 $255,963 $ (36,374) $365,329
Transportation and other direct costs........ -- 110,514 199,153 (36,374) 273,293
Operating expenses.......................... 4,053 39,242 56,055 -- 99,350
--------- -------- -------- ---------- --------
Operating profit (loss).................... (4,053) (4,016) 755 -- (7,314)
Interest and other, net...................... 22 (4,132) (1,609) -- (5,719)
Income tax provision......................... -- (1,213) (587) -- (1,800)
Minority interest............................ -- -- (155) -- (155)
Preferred Stock dividends.................... (525) -- -- -- (525)
--------- -------- -------- ---------- --------
Loss applicable to Common Stock.......... $ (4,556) $ (9,361) $ (1,596) $ -- $(15,513)
========= ======== ========= ========== ========
</TABLE>
<TABLE>
<CAPTION>
Statement of Cash Flows for the Three Months Ended March 31, 1999
------------------------------------------------------------------
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Combined
------- ------------ -------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Cash flows from:
Operating activities....................... $ (5,128) $ (6,150) $ (2,284) $ -- $(13,562)
Investing activities....................... 1,966 (3,634) (862) -- (2,530)
Financing activities....................... 4,046 8,200 2,098 -- 14,344
--------- -------- -------- ---------- --------
Net increase (decrease) in cash
and cash equivalents....................... 884 (1,584) (1,048) -- (1,748)
Cash and cash equivalents, beginning
of period.................................. 27 2,534 12,591 -- 15,152
--------- -------- -------- ---------- --------
Cash and cash equivalents, end of period..... $ 911 $ 950 $ 11,543 $ -- $ 13,404
========= ======== ========= ========== ========
</TABLE>
10
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On March 31, 2000, the Company borrowed against a new Loan and Security
Agreement (the "New Revolver") with Congress Financial Corporation (Western), a
subsidiary of First Union Bank (the "Lender"). The three-year New Revolver
provides for maximum borrowings of $90,000 and is comprised of three separate
agreements, one in each of the United States, Canada and the United Kingdom.
This facility replaces the credit facility in place at December 31, 1999 by and
among the Company and ING (U.S.) Capital Corporation and the lenders party
thereto.
The three agreements making up the New Revolver involve four borrowers in the
United States and the operating companies in both the United Kingdom and Canada.
The four borrowers in the United States are comprised of Bekins Worldwide
Solutions, Bekins Van Lines, GeoLogistics Services and GeoLogistics Americas.
The individual agreement credit levels are $50,000 in the United States, $15,000
in Canada and $25,000 in the United Kingdom. The maximum amount that can be
borrowed is equal to 85% of eligible billed receivables plus 65% of eligible
unbilled or accrued receivables as defined in the agreement plus 100% of the
face amount of letters of credit provided by affiliates of stockholders.
Collateral liens on accounts receivable as well as general and specific liens on
other assets of the Company are provided to the Lender. Financial convenant
tests are restricted to minimum net worth tests for GeoLogistics Corporation
and the Borrower group taken as a whole.
The facility has a letter of credit sub-limit of $30,000 and places certain
restrictions on the Company and its borrower subsidiaries in the areas of asset
sales, additional liens, additional indebtedness, investments, dividends and
affiliate transactions. Management does not believe that these restrictions will
impair the Company's ability to perform or reach performance goals.
NOTE 3. SEGMENT INFORMATION
The Company operates in a single business segment providing worldwide logistics
solutions to meet customers' specific requirements for transportation and
related services by arranging and monitoring all aspects of material flow
activities utilizing advanced information technology systems. No customer
accounted for ten percent or more of consolidated revenue.
The Company manages its business primarily on a geographic basis. The Company's
reportable geographic segments are comprised of North America, Europe and Asia.
Each geographic segment provides products and services herein described.
Accounting policies for each geographic segment are the same as those described
in "Summary of Significant Accounting Policies" in Note 2 of the Notes to the
Consolidated Financial Statements included in the Form 10-K filed for the year
ended December 31, 1999. The
11
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Company evaluates the performance of each geographic segment primarily based
upon EBITDA and operating income. EBITDA represents earnings before interest,
taxes, depreciation and amortization. Operating income represents earnings
before interest and taxes. Corporate expenses are included in the North America
geographic segment operating income. Corporate expenses are comprised
primarily of marketing costs, incremental information technology costs and
other general and administrative expenses. North America geographic segment
assets include corporate assets. Corporate assets include cash and cash
equivalents, certain capitalized software development costs and intangible
assets.
Information regarding the Company's operations by geographic region is
summarized below.
<TABLE>
<CAPTION>
THREE-MONTH PERIODS
ENDED
--------------------------------
MARCH 31, MARCH 31,
2000 1999
-------- --------
<S> <C> <C>
North America:
Total revenues $144,632 $171,626
Transactions between regions 13,583 12,749
-------- --------
Revenues from customers 131,049 158,877
Net revenues 27,369 39,391
EBITDA (8,335) (4,478)
Depreciation and amortization 3,260 3,366
Operating (loss) (11,595) (7,844)
Interest expense, net 4,434 5,363
Europe:
Total revenues $180,321 $172,955
Transactions between regions 22,391 24,862
-------- --------
Revenues from customers 157,930 148,093
Net revenues 36,408 38,604
EBITDA 907 337
Depreciation and amortization 883 848
Operating income (loss) 25 (511)
Interest expense, net 106 86
Asia:
Total revenues $89,582 $78,316
Transactions between regions 20,684 19,957
-------- --------
Revenues from customers 68,898 58,359
Net revenues 16,775 14,041
EBITDA 1,883 1,469
Depreciation and amortization 490 428
Operating income 1,392 1,041
Interest expense, net 97 125
</TABLE>
12
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Information regarding the Company's long lived assets by geographic region is
summarized below as of March 31, 2000 and December 31, 1999
<TABLE>
<S> <C> <C>
Long lived assets:
North America $25,284 $26,820
Europe 39,405 42,255
Asia 6,646 6,908
------- -------
$71,335 $75,983
======= =======
</TABLE>
A reconciliation of the Company's geographic segment revenues, net revenues,
EBITDA, operating income (loss) and assets to the corresponding consolidated
amounts for the three months ended March 31, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
THREE-MONTH PERIODS
ENDED
--------------------------
MARCH 31, MARCH 31,
2000 1999
---------- ----------
<S> <C> <C>
Revenues:
North America $144,632 $171,626
Europe 180,321 172,955
Asia 89,582 78,316
Eliminations (56,658) (57,568)
-------- --------
Consolidated $357,877 $365,329
======== ========
Net revenues:
North America $ 27,369 $ 39,391
Europe 36,408 38,604
Asia 16,775 14,041
-------- --------
Consolidated $ 80,552 $ 92,036
======== ========
EBITDA
North America $ (8,335) $ (4,478)
Europe 907 337
Asia 1,883 1,469
-------- --------
Consolidated $ (5,545) $ (2,672)
======== ========
Operating income (loss):
North America $(11,595) $ (7,844)
Europe 25 (511)
Asia 1,392 1,041
-------- --------
Consolidated $(10,178) $ (7,314)
======== ========
</TABLE>
A reconciliation of the Company's geographic segment assets to the corresponding
consolidated amounts as of March 31, 2000 and December 31, 1999 is as follows:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
----------- ------------
<S> <C> <C>
Assets:
North America $618,155 $604,665
Europe 244,306 256,876
Asia 96,526 100,792
Eliminations (513,699) (514,677)
-------- --------
Consolidated $445,288 $447,656
======= ========
</TABLE>
13
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Revenue from transfers between regions represents approximate amounts that
would be charged if the service were provided by an unaffiliated company.
Total regional revenue is reconciled with total consolidated revenue by
eliminating inter-regional revenue.
NOTE 4. OTHER COMPREHENSIVE LOSS
Comprehensive income (loss) is comprised of all changes to stockholders'
equity, including net income (loss), except those changes resulting from
investments by owners and distributions to owners. Other comprehensive loss
in the financial statements of the Company includes the change in foreign
currency translation adjustments resulting from the conversion of foreign
subsidiaries' financial statements from local currencies to U.S. dollars.
Comprehensive loss for the three months ended March 31, 2000 and 1999 is as
follows (in thousands):
<TABLE>
<CAPTION>
THREE-MONTH PERIODS
ENDED
MARCH 31, MARCH 31,
2000 1999
---------- --------
<S> <C> <C>
Cumulative translation adjustment $ (588) $ (67)
Net loss (15,463) (14,988)
-------- --------
Comprehensive loss $(16,051) $(15,055)
======== ========
</TABLE>
NOTE 5. RESTRUCTURING AND OTHER NON-RECURRING CHARGES/ASSET IMPAIRMENT CHARGES
On March 4, 1999 the Company announced the intended restructuring of its
GeoLogistics Americas ("Americas") business as a result of a difficult
domestic freight forwarding environment. Due to lower volumes in the European
region, the Company initiated a process to reevaluate the operations of its
other business units to determine what initiatives could be taken to reduce
costs and streamline administrative operations. As part of this restructuring
process, a new management team was put in place in an effort to improve
global operating results.
In connection with these efforts, the Company (a) exited the majority of its
domestic freight forwarding portion of Americas business at the end of the
third quarter of 1999, (b) is rationalizing personnel such that their numbers
and skill sets are suited to the ongoing services and volumes of the
business, (c) closed, or will close, facilities in the United States and
Europe, (d) arranged for the settlement of remaining obligations to the
selling shareholders of the project forwarding and international household
goods relocation services business and integrated the project forwarding
business into the Americas business and the international household goods
14
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5. RESTRUCTURING AND OTHER NON-RECURRING CHARGES/ASSET IMPAIRMENT
CHARGES (CONTINUED)
relocations services into Bekins and (e) revalued assets to reflect fair
values. The aggregate charge for these actions is expected to be
approximately $34,600 of which $1,193 was recorded in the first quarter of
2000, $30,885 was recorded in 1999 and the remaining balance of $2,522 is
expected to be recorded in the second quarter of 2000. The first quarter
charge of $1,193 consisted of severance for the termination of 6
administrative staff totaling $389, duplicative labor of $608, recruiting
fees of $113 and moving expenses of $83. During the first quarter, the
Company paid $4,760 for restructuring initiatives charged to operations in
1999. The $4,760 consisted of $3,980 in severance, $88 for leases, bad debt
write-offs of $670, and $22 of other charges. As of March 31, 2000, accrued
liabilities relating to the aforementioned restructuring consisted of $3,760
for severance, $493 for lease termination costs, $285 for allowance for bad
debts and $472 for other. Such amounts are included in accrued expenses in
the accompanying condensed consolidated balance sheets. In addition to
actions for which immediate financial recognition is required, many
additional actions have been taken including revised incentive plans for the
sales and management staffs (including the employees who will continue to
operate the international freight forwarding operations in the United
States), expansion of logistics facilities in Thailand and expansion of
facilities and logistics capabilities in China.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY INCLUDED ELSEWHERE IN THIS
REPORT. THIS QUARTERLY REPORT ON FORM 10-Q MAY CONTAIN "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933,
AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED. DISCUSSIONS CONTAINING SUCH FORWARD-LOOKING STATEMENTS MAY BE FOUND
IN THE MATERIAL SET FORTH HEREIN, IN THE NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS AS WELL AS WITHIN THIS QUARTERLY REPORT GENERALLY. ALSO,
DOCUMENTS SUBSEQUENTLY FILED BY THE COMPANY WITH THE SECURITIES AND EXCHANGE
COMMISSION MAY CONTAIN FORWARD-LOOKING STATEMENTS. ACTUAL RESULTS COULD
DIFFER MATERIALLY FROM THOSE PROJECTIONS IN THE FORWARD-LOOKING STATEMENTS AS
A RESULT OF THE CHALLENGES AND UNCERTAINTIES INHERENT IN MEETING LIQUIDITY
NEEDS FOR CONTINUED OPERATION, SUCCESSFULLY IMPLEMENTING THE CLOSURE OF THE
COMPANY'S U.S. DOMESTIC FREIGHT FORWARDING BUSINESS, THE RESTRUCTURING OF THE
COMPANY'S EUROPEAN AND OTHER BUSINESSES, OPERATING CHALLENGES FACING THE
COMPANY'S REMAINING BUSINESSES, INFORMATION TECHNOLOGY AND COST REDUCTION
STRATEGIES AND THE OTHER RISK FACTORS AND MATTERS IDENTIFIED HEREIN OR IN
OTHER PUBLIC FILINGS BY THE COMPANY, INCLUDING BUT NOT LIMITED TO THE
COMPANY'S REGISTRATION STATEMENT ON FORM S-4 (FILE NO. 333-42607) AND ANNUAL
REPORT ON FORM 10-K (FILED ON April 13, 2000), SUCH AS RISKS RELATING TO THE
COMPANY'S LEVERAGE AND ABILITY TO SERVICE ITS DEBT OBLIGATIONS, CHALLENGES
PRESENTED BY INTEGRATION OF RECENT ACQUISITIONS AND IN THE AMERICAS
16
<PAGE>
BUSINESS, RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS AND CURRENCY
FLUCTUATIONS AND RISKS RELATED TO INFORMATION TECHNOLOGY IMPLEMENTATION AND
INTEGRATION.
GENERAL
The Company commenced operations on May 2, 1996 in connection with its
acquisition of The Bekins Company ("Bekins"). On October 31, 1996, the
Company acquired GeoLogistics Americas ("Americas") and GeoLogistics Company
("Canada") and securities representing 33.3%, in the aggregate, of the common
equity of LEP International Worldwide Limited ("LIW"). On November 7, 1996,
the Company acquired GeoLogistics Services ("Services"). On September 30,
1997, the Company acquired an additional 41.9% of the common equity of LIW
and on December 15, 1997, the Company completed the acquisition of all of the
remaining equity securities of LIW. On July 13, 1998, the Company purchased
substantially all of the operating assets and assumed certain of the
liabilities ("Air Services Acquisition") of Caribbean Air Services, Inc. On
September 10, 1999, the Company sold the assets purchased in the Air Services
Acquisition and certain other assets ("GLAS Sale"). All acquisitions were
accounted for by the purchase method of accounting, and accordingly, the book
values of the assets and liabilities of the acquired companies were adjusted
to reflect their fair values at the dates of acquisition.
The portion of the Company's business that is focused on traditional
transportation and logistics services normally earns a higher percentage of
its revenues and operating income in the fourth calendar quarter as volumes
increase for the holiday season. Conversely, the Company's domestic household
goods relocation business earns approximately half of its revenue between
June and September. In addition, the Americas has a significant project
logistics business which is cyclical due to its dependence upon the timing of
shipment volumes for large, one-time projects.
On March 4, 1999 the Company announced the intended restructuring of its
Americas business as a result of a difficult domestic freight forwarding
environment. Due to lower volumes in the European region, the Company
initiated a process to reevaluate the operations of its other business units
to determine what initiatives could be taken to reduce costs and streamline
administrative operations. As part of this restructuring process, a new
management team was put in place in an effort to improve global operating
results.
In connection with these efforts, the Company (a) exited the majority of its
domestic freight forwarding portion of Americas business at the end of the
third quarter of 1999, (b) is rationalizing personnel such that their numbers
and skill sets are suited to the ongoing services and volumes of the
business, (c) closed, or will close, facilities in the United States and
Europe, (d) arranged for the settlement of remaining obligations to the
selling shareholders of the project forwarding and international household
goods relocation services business and integrated the project forwarding
business into the Americas business and the international household goods
relocations services into Bekins and (e) revalued assets to reflect fair
values. The aggregate charge for these actions is expected to be
approximately $34.6 million of which $1.2 million was recorded in the first
quarter of 2000, $30.9 million was recorded in 1999 and the remaining
17
<PAGE>
balance of $2.5 million is expected to be recorded in the second quarter of
2000. The first quarter restructuring and non-recurring charge of $1.2
million consisted of severance for the termination of 6 administrative staff
totaling $0.4 million, duplicative labor of $0.6 million, recruitng fees of
$0.1 million and moving expenses of $0.1 million. During the first quarter,
the Company paid $4.8 million for restructuring initiatives charged to
operations in 1999. The $4.8 million consisted of $4.0 million in severance,
$0.1 million for leases and bad debt write-offs of $0.7 million. As of March
31, 2000, accrued liabilities relating to the aforementioned restructuring
consisted of $3.7 million for severance, $0.5 million for lease termination
costs, $0.3 million for allowance for bad debts, and $0.5 million of other.
Such amounts are included in accrued expenses in the accompanying condensed
consolidated balance sheet. In addition to actions for which immediate
financial recognition is required, many additional actions have been taken
including revised incentive plans for the sales and management staffs
(including the employees who will continue to operate the international
freight forwarding operations in the United States), expansion of logistics
facilities in Thailand and expansion of facilities and logistics capabilities
in China.
The aforementioned restructuring and other non-recurring charges along with
the asset impairment charges are expected to provide savings of approximately
$17.0 million in selling, general and administrative expenses and $1.5
million reduction in depreciation and amortization for the 2000 fiscal year.
The summarized operating results for the three months ended March 31, 2000,
compared with the adjusted operating results for March 31, 1999, after giving
effect to the GLAS Sale and exiting the majority of its domestic business,
follows:
<TABLE>
<CAPTION>
THREE-MONTH PERIODS
ENDED
-----------------------------
MARCH 31, MARCH 31,
2000 1999
--------- ----------
(Adjusted)
<S> <C> <C>
Revenues $357,877 $326,993
Transportation and other direct costs 277,325 245,945
-------- --------
Net revenues 80,552 81,048
-------- --------
Operating expenses 84,904 86,610
Restructuring and non-recurring charges 1,193 --
Depreciation and amortization 4,633 4,332
-------- --------
Total operating costs 90,730 90,942
-------- --------
Operating loss $(10,178) $ (9,894)
======== =========
</TABLE>
18
<PAGE>
The following discussion and analysis relates to the results of operations
for the Company as reported for the three months ended March 31, 2000 and
1999, and should be read in conjunction with the condensed consolidated
financial statements of the Company included elsewhere in this Form 10-Q.
<TABLE>
<CAPTION>
THREE-MONTH PERIODS
ENDED
------------------------------
MARCH 31, MARCH 31,
2000 1999
--------- ---------
(In thousands)
<S> <C> <C>
Statement of Operations Data:
Revenues $357,877 $365,329
Net revenues 80,552 92,036
Selling, general and administrative expenses 84,904 94,708
Restructuring and other non-recurring charges 1,193 --
Depreciation and amortization 4,633 4,642
Operating loss (10,178) (7,314)
Interest expense, net (4,637) (5,574)
Other income (expense), net 12 (145)
Income tax provision (351) (1,800)
Minority interest (309) (155)
Preferred stock dividend (525) (525)
-------- --------
Net loss $(15,988) $(15,513)
======== ========
</TABLE>
THREE MONTHS ENDED MARCH 31, 2000 VERSUS THREE MONTHS ENDED MARCH 31, 1999
REVENUES. The Company's revenues decreased approximately $7.5 million to
$357.8 million for the three months ended March 31, 2000 from $365.3 million
for the three months ended March 31, 1999. The primary reasons for the
decrease were the exiting of the majority of domestic freight forwarding
business ($15.2 million) and the disposition of the GLAS business ($23.1
million), offset by increased revenues in Europe, Asia and the remaining U.S.
business. After giving effect of the GLAS Sale and the exiting of the
majority of the domestic business, the revenues from ongoing business
increased by $30.9 million, or 9.4%. The increases were generated in all
geographic regions, but the largest increase was in Asia, which grew by $10.5
million, or 18.1%, over the comparable period in the prior year due to
increased export volumes and new customers. The Americas business grew by
$10.5 million, or 8.7%, after adjusting the domestic and GLAS business, as a
result of increasing imports and strong export sales, principally from air
freight. The adverse effects of the Asian economic slowdown appear to have
ended. Europe's revenues increased $9.8 million, or 6.6%, as a result of
higher volumes in all modes and a strengthening market throughout Europe. The
household goods business grew modestly during this seasonally low volume
period, while the high value products ("B2B") and business to consumer
business ("B2C") grew by $1.2 million
19
<PAGE>
or 4%. This was led by the Company's e-commerce delivery business -
HomeDirectUSA.
NET REVENUES. Net revenues, which represent gross profit after deducting
transportation and other direct costs, decreased by approximately $11.5
million, or 12.5%, to $80.5 million for the three months ended March 31, 2000
from $92.0 million for the same period in 1999. The primary reasons for the
decrease were the sale of the GLAS business which had net revenues of $7.0
million for the three months ended March 31, 1999 and the exiting of the
majority of the domestic business. The effect of these dispositions was a
reduction of net revenues of $11.0 million. After giving effect to these
changes, the ongoing business' net revenue decreased by $0.5 million, or
0.6%. Net revenues, as a percentage of revenues, declined 2.7 percentage
points, as lower margins were recorded in Europe, principally due to the
overland business, and substantial increases in the full container load ocean
business in the United States. Net revenues as a percentage of sales in the
Americas declined as a result of the sale of GLAS, which in the prior year
quarter realized a net revenue percentage of 30.3%. No such revenues were
recorded during the quarter ended March 31, 2000. The high value products and
logistics business, as well as the household goods business, had lower net
revenues due to lower pricing and higher fuel costs. The Asia region
contributed an increase of $2.7 million to net revenues on the strength of
higher volumes.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased by approximately $9.8 million, to $84.9
million for the three months ended March 31, 2000 from $94.7 million for the
three months ended March 31, 1999. These expenses as a percentage of
revenues decreased to 23.7% in 2000 from 25.9% for the same period in 1999. The
principal reason for the decrease was the restructuring of the U.S. domestic
operations, the sale of GLAS and restructuring efforts in Europe offset by
increases in Asia.
As a result of exiting the majority of the US domestic operation, the
Americas business unit saved approximately $4,869 of SG&A, offset by
increases in SG&A of $1,274 in order to support the growth of the remaining
domestic and international business. Additional restructuring efforts within
the Americas business unit yielded savings in SG&A of $1,865 for the quarter
ended March 31, 2000 compared to the same prior-year period. The Americas
business unit saved $3,228 in SG&A during the quarter ended March 31, 2000
compared to the same period in prior year because of the GLAS sale which
occurred on September 10, 1999. The Europe region incurred SG&A costs of
$35,180 during the three-month period ended March 31, 2000 compared to
$38,267 during the same period in 1999. The decrese of $2,767 was mostly due
to the restructuring efforts in Europe. Asia incurred SG&A of $14,893 and
$12,572 during the quarters ended March 31, 2000 and 1999, respectively. The
increase of $2,321 was incurred to support higher revenues.
RESTRUCTURING, NON-RECURRING AND ASSET IMPAIRMENT CHARGES. As previously
discussed, the Company implemented the majority of its restructuring and
reorganization plans in the third and fourth quarter of 1999. The $1.2
million of restructuring and non-recurring charges recorded in the first
quarter of 2000 primarily relate to the continued restructuring efforts in
Europe and the streamlining of corporate and administrative functions in the
U.S. No such items existed during the same period of the previous year.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense was
consistent in both periods primarily as the result of an increase in fixed
assets related to information technology and lower depreciation and
amortization as a result of asset impairment charges recorded in the third
quarter of 1999.
OPERATING LOSS. The Company recorded a $10.2 million operating loss for the
three months ended March 31, 2000 compared to $7.3 million operating
loss for the three months ended March 31,1999. The significant increase in
operating loss is due primarily to the sale of the
20
<PAGE>
GLAS business in the third quarter of 1999. During the three months ended
March 31, 1999, the GLAS business earned $4.0 million of operating income.
INTEREST EXPENSE, NET. Interest expense, net, decreased by approximately $0.9
million, to $4.7 million for the first quarter of 2000 from $5.6 million for
the same period of 1999. The principal reason for the decrease was the
reduction of debt from the prior year resulting from the GLAS sale. However,
the cash restructuring charges and operating losses substantially reduced the
benefit of the sale.
INCOME TAXES. The income tax provision for the three months ended March 31,
2000 decreased $1.4 million to a $0.4 million provision versus a $1.8 million
provision for the same period of 1999. This provision recognizes tax
liabilities in tax-paying overseas subsidiaries while full valuation reserves
have been established for tax benefits of all entities with net operating
loss carryforwards.
MINORITY INTERESTS. Interests held by minority shareholders in the earnings
of certain foreign subsidiaries were $0.3 million and $0.2 million for the
three months ended March 31, 2000 and 1999, respectively.
NET LOSS. Net loss increased by $0.5 million to $16.0 million for the three
months ended March 31, 2000 compared to $15.5 million for the same period of
1999. This increase is due primarily to the sale of the GLAS business which
had net income of $2.0 million in the first quarter of 1999 and operating
losses attributable to the Americas and Europe, as previously discussed.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended March 31, 2000, net cash used by operating
activities was $5.7 million versus $13.6 million in the first three months of
1999. The improvement was primarily due to active management of the Company's
working capital. Cash used in investing activities in 2000 were $0.9 million
compared to $2.5 million in the first quarter of 1999. Capital spending
consisted primarily of computer system development and enhancements. New
borrowings were primarily used for repayment of an existing credit facility
as well as the financing of working capital charges and operating losses.
As a result of the disposition of GLAS in the third quarter of 1999, the
Company, together with its guarantor subsidiaries, entered into an amendment
to the revolving credit agreement. Among other changes, the amendment
provides for (a) reductions in credit availability from $100.0 million to
$50.5 million in the aggregate with a sublimit of $20.0 million in the United
Kingdom, (b) reductions in the percentage of eligible accounts receivable
that qualify for the U.S. and United Kingdom borrowing base which affect the
Company's ability to incur debt under the revolving credit facility, (c) the
elimination of the interest coverage ratio covenant, (d) the change in the
maturity date to March 31, 2000, (e) the reduction of the Supplemental
Commitment from $30.0 million to $15.0 million and (f) the amendment of the
EBITDA and
21
<PAGE>
certain other covenants. All borrowing related to the Supplemental
Commitment and revolving credit facility were repaid with borrowings under
the New Revolver described below.
On March 31, 2000, the Company borrowed against a new credit facility (the
"New Revolver") with Congress Financial Corporation (Western), a subsidiary
of First Union Bank and its Canadian and United Kingdom affiliates (the
"Lenders"). The three-year New Revolver provides for maximum borrowings of
$90 million and is comprised of three separate agreements, one in each of the
United States, Canada and the United Kingdom. This New Revolver replaces the
credit facility that expired on March 31, 2000 with ING (U.S.) Capital
Corporation and the lenders party thereto.
The three agreements making up the New Revolver involve four borrowers in the
United States and the operating companies in the United Kingdom and Canada.
The four borrowers in the United States are comprised of Bekins Worldwide
Solutions, Bekins Van Lines, GeoLogistics Services and GeoLogistics Americas.
The Company has guaranteed each of the three separate agreements constituting
the New Revolver. The individual agreement credit levels are $50 million in
the United States, $15 million in Canada and $25 million in the United
Kingdom. The United States and Canada agreements allow for a maximum increase
or decrease of $5 million in the facility with a corresponding decrease or
increase in the Canadian facility. Such adjustments are limited to once per
quarter. The New Revolver has a letter of credit sub-limit of $30 million.
The maximum amount that can be borrowed is dependent upon the amount of
accounts receivable of the borrowers and letters of credit provided by
certain stockholders and their affiliates. The amount that may be borrowed
will be equal to 85% of eligible billed receivables plus 65% of eligible
unbilled or accrued receivables as defined in the agreement, plus 100% of the
face amount of the letters of credit provided by affiliates of stockholders.
As of March 31, 2000, the aggregate of such letters of credit was $13
million, with additional commitments of up to $6 million, which amount may be
reduced under certain circumstances.
Interest rate spreads are set according to levels of the Company's EBITDA on
a trailing twelve-month basis. These spreads will be set at 0.25% over prime
for such borrowings and 2.75% over LIBOR for eurodollar borrowings until the
first such test period which will be the twelve months ended September 30,
2000 and quarterly thereafter. Applicable spreads can range from 0% to 0.5%
on prime borrowings and from 2.5% to 3.0% for Eurodollar borrowings.
The six borrowers have provided their respective Lenders with liens on all
accounts and all other of their assets. The four borrowers under the United
States agreement have given the Canadian lender a guarantee secured by all their
assets; the three agreements are not otherwise cross-collateralized. The Company
has fully guaranteed each of the three agreements, and its guarantee of the
United States agreement is secured by its assets (with certain exceptions).
Finally, one other subsidiary of the Company has given a lien on certain of its
assets to the United States lender.
22
<PAGE>
Each of the three agreements constituting the New Revolver contains covenants
restricting the activities of the respective borrowers. These restrictions
include, among others, limitations on indebtedness, liens, the making of
loans or investments, the making of acquisitions and the disposition of
assets. Dividends, including to the Company, are prohibited, but the
borrowers are permitted to lend money to the Company for the purpose of
paying interest on the Company's senior notes, taxes and certain other
expenses up to a specified amount. The borrowers are also permitted to lend
to other borrowers and, if certain financial tests are met, other
subsidiaries of the Company. These restrictions are not applicable to the
Company.
Events of Default under the New Revolver include, among others, the failure
to pay, the failure to observe covenants, the failure to pay certain third
party debt or judgements, bankruptcy and other insolvency events, any
material adverse change, change of control with respect to the Company and
the failure of the Company to maintain a specified level of net worth or the
United States, Canadian and United Kingdom borrowers to maintain another
specified level of net worth. An Event of Default under any one of the three
agreements is automatically an Event of Default under the other two.
The indenture relating to the Company's Senior Notes generally provides that,
subject to certain exceptions, the Company not incur indebtedness unless on
the date of such incurrence the consolidated coverage ratio of the Company
exceeds 2.25 to 1.0 and that the restricted subsidiaries of the Company may
not incur indebtedness unless on the date of such incurrence the consolidated
coverage ratio of the Company exceeds 2.5 to 1.0. The indenture permits the
Company to incur up to $115.0 million of total indebtedness (consisting of
$100.0 million of bank debt and $15.0 million of other debt) notwithstanding
the Company's inability to meet the consolidated coverage ratio test. As of
March 31, 2000, the Company had incurred $71.2 million of indebtedness under
its United States, Canada and United Kingdom bank credit facilities and, as
of such date, the Company would have been able to incur an additional $28.8
million of indebtedness pursuant to the terms of such facilities. As of March
31, 2000, the Company had incurred $8.0 million of other debt and would have
been able to incur an additional $7.0 million of other debt pursuant to the
terms of the indenture. In addition, the indenture permits the Company to
incur up to $30.0 million under its foreign credit facilities notwithstanding
the Company's inability to meet the consolidated coverage ratio test. As of
March 31, 2000, the Company had incurred $16.0 million of indebtedness under
its foreign credit facilities and as of such date, would have been able to
incur an additional $14.0 million of indebtedness under such facilities in
compliance with the terms of the indenture.
23
<PAGE>
The Company has utilized borrowings under its credit facilities to meet
working capital requirements and to fund capital expenditures principally
related to information technology. The Company may also be required to
utilize borrowings under its credit facilities to finance other obligations
including the payment of interest expense under the Senior Notes, and to fund
remaining restructuring activities. As of April 28, 2000, the Company had
$6.2 million of borrowing capacity under its New Revolver. The Company's
ability to borrow funds under the New Revolver is subject to fluctuations in
its borrowing base based on its accounts receivable and the Company's ability
to borrow additional funds other than under the New Revolver is significantly
restricted by the terms of the indenture and the New Revolver. If the Company
is unable to generate sufficient cash flow to finance its operations and
remaining restructuring charges and interest expense, it could be required to
borrow under its existing credit facilities to fund such activities. If the
Company's credit facilities are not sufficient to fund ongoing operations and
remaining restructuring charges and interest expense, the Company could be
required to adopt one or more alternatives, such as reducing or delaying
planned expansion or capital expenditures, selling or leasing assets,
restructuring debt or obtaining additional debt or equity capital. The
Company will continue to investigate strategic alternatives to improve its
financial position, including the sale of non-core assets. There can be no
assurance that any of these alternatives could be effected on satisfactory
terms or at all.
YEAR 2000
The Company , its key customers and suppliers and agents were not materially
impacted by the Year 2000 change.
The Company completed a comprehensive project to upgrade its information
technology including hardware and software to properly recognize the Year
2000 ("Year 2000 Plan"). As a provider of global logistics and transportation
services, the Company is reliant on its computer systems and applications to
conduct its business. In addition to these systems the Company is also
reliant upon the system capabilities of its business partners.
The Company also conducted a survey of its business partners to certify Year
2000 compliance. The Company also worked with major customers to gain Year
2000 certification with them in response to their inquiries and surveys.
CONVERSION TO THE EURO CURRENCY
In January 1999 certain member countries of the European Union established
fixed conversion rates between their existing currencies and the European
Union's common currency ("Euro"). The Company conducts business in member
countries. The transition period for the introduction of the Euro is between
January 1, 1999 and June 30, 2002. The Company is addressing the issues
involved with the introduction of the Euro. The more important issues facing
the Company include: converting information technology systems; reassessing
currency risk; negotiating and amending contracts; and processing tax and
accounting records.
24
<PAGE>
Conversion to the Euro has not had a material effect on the Company's
financial condition or results of operations.
RISK MANAGEMENT AND MARKET RISK SENSITIVE INSTRUMENTS
The Company is exposed to certain market risks, including changes in interest
rates and currency exchange rates. In the normal course of business, the
Company employs established policies and procedures to manage its exposure to
changes in interest rates and fluctuations in the value of foreign currencies
using a variety of financial instruments.
In order to mitigate the impact on fluctuations in the general level of
interest rates, the Company generally maintains a large portion of its debt
as fixed rate in nature by borrowing on a long term basis.
The Company's objectives in managing the exposure to foreign currency
fluctuations is to reduce earnings and cash flow volatility associated with
foreign exchange rate changes and allow management to focus its attention on
its core business issues and challenges. Accordingly, the Company enters into
various contracts which change in value as foreign exchange rates change to
minimize the impact of currency movements on certain existing commitments and
anticipated foreign earnings. The Company may use a combination of financial
instruments to manage these risks, including forward contact or option
related instruments.
It is the Company's policy to enter into foreign currency transactions only
to the extent considered necessary to meet its objectives as stated above.
The Company does not enter into foreign currency transactions for speculative
purposes.
OTHER MATTERS
In June 1998, the Financial Accounting Standards Board Issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"), which was originally required to be adopted in years beginning after
June 15, 1999. This new accounting standard will require that all derivatives
be recorded on the balance sheet at fair value. If the derivative is a hedge,
depending on the nature of the hedge, changes in fair value of the
derivatives will either be offset against the change in fair value of the
hedged assets, liabilities, or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is recognized
in earnings. Management is currently assessing the impact that the adoption
of SFAS No. 133 will have on the Company's financial position, results of
operations, and cash flows.
The FASB recently issued Statement No. 137 which delays the effective date of
this Statement until fiscal years beginning after June 15, 2000. In addition,
the Statement requires that all derivatives that are expected to be hedges
must be designated as such on the first day of the period in which the
statement becomes effective. The Company, which utilizes fundamental
derivatives to hedge changes in interest rates and foreign currencies,
expects to adopt SFAS No. 133 effective January 1, 2001.
25
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On January 27, 2000, the stockholders of the Company beneficially
owning at least 90% of the issued and outstanding shares of common stock of
the Company entitled to vote approved certain amendments to the Company's
Bylaws.
On March 1, 2000, the stockholders of the Company beneficially
owning not less than seventy-five (75%) of the issued and outstanding shares
of common stock of the Company entitled to vote approved certain amendments to
the Company's Certificate of Incorporation.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GEOLOGISTICS CORPORATION
Date: May 15, 2000 By: /s/ Robert Arovas
-------------- ----------------------------------------
Robert Arovas
Chief Executive Officer and Director
Date: May 15, 2000 By: /s/ Janet D. Helvey
-------------- ---------------------------------------
Janet D. Helvey
Senior Vice President, Finance
Date: May 15, 2000 By: /s/ James P. McCarthy
-------------- ---------------------------------------
James P. McCarthy
Corporate Controller
26
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 19,217
<SECURITIES> 0
<RECEIVABLES> 264,548
<ALLOWANCES> 21,097
<INVENTORY> 0
<CURRENT-ASSETS> 298,325
<PP&E> 95,544
<DEPRECIATION> 24,209
<TOTAL-ASSETS> 445,288
<CURRENT-LIABILITIES> 292,081
<BONDS> 110,000
0
14,550
<COMMON> 2
<OTHER-SE> (78,297)
<TOTAL-LIABILITY-AND-EQUITY> 445,288
<SALES> 357,877
<TOTAL-REVENUES> 357,877
<CGS> 277,325
<TOTAL-COSTS> 277,325
<OTHER-EXPENSES> 90,730
<LOSS-PROVISION> 1,236
<INTEREST-EXPENSE> 4,637
<INCOME-PRETAX> (14,803)
<INCOME-TAX> 351
<INCOME-CONTINUING> (15,154)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,988)
<EPS-BASIC> (7.51)
<EPS-DILUTED> (7.51)
</TABLE>
