<PAGE> 1
This filing is made pursuant
to Rule 424(b)(1) under
the Securities Act of
1933 in connection with
Registration No. 333-47616
PROSPECTUS
4,700,000 SHARES
[UTI LOGO]
ORDINARY SHARES
------------------------
This is a public offering of 4,700,000 ordinary shares of UTi Worldwide
Inc. We are selling all of the ordinary shares offered under this prospectus.
Our application to list our ordinary shares on the Nasdaq National Market
System under the symbol "UTIW" has been approved. The market price of our
ordinary shares after this offering may be higher or lower than the price at
which shares will be sold in this offering.
SEE "RISK FACTORS" BEGINNING ON PAGE 7 OF THIS PROSPECTUS TO READ ABOUT
RISKS WHICH YOU SHOULD CONSIDER BEFORE BUYING OUR ORDINARY SHARES.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----------
<S> <C> <C>
Public offering price....................................... $15.00 $70,500,000
Underwriting discount and commission........................ $ 1.05 $ 4,935,000
Proceeds, before expenses, to us............................ $13.95 $65,565,000
</TABLE>
The underwriters may purchase up to an additional 705,000 ordinary shares
from us at the public offering price, less the underwriting discount and
commission, within 30 days from the date of this prospectus to cover
over-allotments.
The underwriters are severally underwriting the shares being offered. The
underwriters expect to deliver the shares against payment in New York, New York
on November 7, 2000.
------------------------
BEAR, STEARNS & CO. INC.
LAZARD
BB&T CAPITAL MARKETS
The date of this prospectus is November 2, 2000.
<PAGE> 2
[INSIDE FRONT COVER]
DESCRIPTION OF ARTWORK
The inside cover art includes a square diagram with a shaded checker-board
pattern covering the entire page. The background of the square diagram depicts
the top-portion of a screen from a web-page.
The foreground of the diagram contains a large letter "U." This "U" depicts
a typical supply chain and flow of goods. Above the "U" is the phrase "THE
SUPPLY CHAIN."
Arrows connect various drawings inside the "U." Outside the "U," following
the pattern of the "U" are a series of phrases and circles with phrases inside,
connected together by a broken line in the shape of the "U." Inside the top-left
portion of the "U" is a drawing of a factory, with the word "SUPPLIER" inside
the factory. Outside the "U," next to the left side of the drawing of the
factory, is the phrase "UTi Services." Below this factory is the phrase "Raw
materials from supplier." Below that phrase is a drawing of the front of a
truck. Outside the "U," next to the truck is a circle which contains the phrase
"Freight Forwarding." Below this truck is the phrase "To raw material
warehouse." Below that phrase, is a circle which is placed outside of the "U".
Inside this circle is the phrase "uWarehouse Warehouse Management Services." To
the right of that circle, inside the "U", is a drawing of a warehouse, with the
words "RAW MATERIALS WAREHOUSE" written inside. Below that warehouse is the
phrase "Raw materials to manufacturer's warehouse." Below that phrase are
drawings of the fronts of a plane, truck and ship.
Below these drawings is a drawing of another factory, with the word
"MANUFACTURER" written inside. Outside the "U," to the left and slightly above
the factory, is a circle which contains the phrase "uPlan Supply Chain Planning
and Optimization." Below this circle is another circle which contains the phrase
"uOrder Order Management". Below that second circle, to the right, is a third
circle which contains the phrase "Freight Forwarding."
The bottom of the "U" contains the phrase "Finished goods to customs."
Below this phrase are drawings of the sides of a plane, truck and ship.
Inside the bottom-right portion of the "U" is a drawing of a customs stamp,
with the word "CUSTOMS" written inside. Outside the "U" to the right of this
stamp, is a circle which contains the phrase "uClear Compliance and Customs
Brokerage." Below and to the right of that circle is another circle which
contains the phrase "uTrac Global Tracking of Shipments." Above the stamp are
drawings of the top of a plane and the rear of a truck. Outside the "U" and to
the upper right of the truck is a circle which contains the phrase "Freight
Forwarding." Above these drawings is the phrase "Finished goods to retail
warehouse." Above that phrase is a drawing of a warehouse with the words "RETAIL
WAREHOUSE" written inside the warehouse. Next to the warehouse and outside the
"U" is a circle which contains the phrase "uWarehouse Warehouse Management
Services." Above the warehouse is a drawing of the rear of a truck. Above the
truck is the phrase "To retail outlets." Above this phrase are drawings of five
retail outlet buildings. Outside the "U," next to the right side of the
factories is the phase "UTi Services."
Below the "U" is written "UTi offers customized solutions that combine the
movement of goods along a supply chain with information systems designed to make
each step of the process more efficient." Below the left-side of this phrase is
the phrase "www.go2uti.com" and below the right-side is the Company's logo.
<PAGE> 3
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this
prospectus. Because it is a summary, it does not contain all the information
that you should consider before investing in our ordinary shares. You should
read the entire prospectus carefully, including the section "Risk Factors" and
our financial statements and the related notes to those statements included in
this prospectus.
OUR COMPANY
We are a global, non-asset based supply chain management business providing
supply chain logistics services and planning and optimization solutions. Our
services include freight forwarding, customs brokerage and warehousing services
which include the coordination of shipping and the storage of raw materials,
supplies, components and finished goods. Through our supply chain planning and
optimization services, we assist our clients in designing and implementing
systems that improve the predictability and visibility and reduce the overall
cost of their supply chain. We have a large and diverse base of global business
customers ranging from large multinational enterprises to smaller local
businesses.
We formed our current business from a base of three freight forwarders
which we acquired from 1993 to 1995. We have supplemented the growth of our
original operations by completing 19 relatively small acquisitions in ten
countries since February 1, 1999. Currently, we own and operate offices in 44
countries and we transact business with approximately 127 independent agents, of
which approximately 86 are our exclusive agents, in approximately 98 additional
countries. Our business is managed from six principal support group offices in
Dusseldorf, Hong Kong, Johannesburg, London, Los Angeles and Sydney. Our four
principal management shareholders have worked together for over 21 years and
have an average of 28 years experience in the freight forwarding, customs
brokerage and supply chain management industries.
We have developed and acquired rights to information technology systems
which enable our customers to use the Internet to access our web-based suite of
supply chain software applications called UTi eMpower. UTi eMpower facilitates
the online operations of our supply chain activities and allows our agents and
offices to link to our transportation system. UTi eMpower also allows our
customers to place orders, track the status of their shipments, verify customs
clearing and link to our planning and optimization software.
INDUSTRY CHALLENGES AND OPPORTUNITIES
We believe our industry is facing several challenges and opportunities,
including:
- OUTSOURCING OF NON-CORE ACTIVITIES. Companies increasingly outsource
freight forwarding, warehousing and other supply chain activities to
allow them to focus on their respective core competencies.
- GLOBALIZATION OF TRADE. International trade is increasing as companies
source their parts, supplies and raw materials and outsource
manufacturing functions to low cost areas of the world.
- INCREASED NEED FOR TIME-DEFINITE DELIVERY. The need for just-in-time and
other time-definite delivery has increased as a result of the
globalization of manufacturing, greater implementation of demand-driven
supply chains, the shortening of product cycles and the increasing value
of individual shipments.
- A SHIFT TOWARD A DECREASING NUMBER OF GLOBAL SUPPLY CHAIN MANAGEMENT
PROVIDERS. Companies are decreasing the number of freight forwarders and
supply chain management providers with which they interact so that they
may transact business with a limited number of providers which are
familiar with their requirements, processes and procedures and which can
provide services globally.
- INCREASING INFLUENCE OF E-BUSINESS AND THE INTERNET. Businesses
increasingly are seeking the assistance of supply chain service providers
with sophisticated information technology systems which facilitate
real-time transaction processing and web-based shipment monitoring.
1
<PAGE> 4
OUR GROWTH STRATEGY
Our growth strategy is designed to take advantage of our competitive
strengths while maintaining our focus on fulfilling our customers' freight
forwarding and supply chain solutions requirements. The principal components of
our growth strategy are as follows:
- OBTAIN NEW BUSINESS FROM EXISTING CLIENTS. We intend to continue to
provide services to our existing clients and to expand the scope of the
supply chain solutions and services that we provide to them.
- ADD NEW CUSTOMERS. We are seeking new customers by emphasizing our supply
chain solutions and our ability to quantify and deliver measurable
benefits and cost savings in the supply chain.
- MAKE STRATEGIC ACQUISITIONS. We are pursuing strategic acquisitions which
we believe will increase our penetration of geographic areas, add
customers, provide economies of scale, expand our service offerings,
strengthen our presence in particular industries and provide capacity in
particular shipping lanes. Effective September 1, 2000, we acquired
substantially all of the assets of the Continental group of companies to
strengthen our presence in the Asia-United States shipping lane segment
and to allow us to offer more reliable airfreight and ocean freight
forwarding services in this segment.
- INVEST IN TECHNOLOGY. In order to meet our customers' expectations, we
are improving, developing and acquiring Internet-based information
technology which emphasizes supply chain optimization and planning and
integration with our clients' enterprise resource planning systems. We
recently entered into a non-exclusive alliance with i2 Technologies for
the development and deployment of Internet-based supply chain solutions
and software.
- FORM STRATEGIC ALLIANCES. We intend to pursue strategic alliances which
facilitate our ability to efficiently and effectively offer and provide
supply chain solutions.
- STRENGTHEN THE SALES PROCESS. By developing solutions for our customers'
supply chains, we intend to increase sales of transactions in our core
services of freight forwarding, customs brokerage and warehousing.
OUR ADDRESS AND TELEPHONE NUMBER
Our registered offices are located at 9 Columbus Centre, Pelican Drive,
Road Town, Tortola, British Virgin Islands, and our telephone number is (284)
494-4567. The address of our web site is www.go2uti.com. Information contained
on our web site is not a part of this prospectus.
------------------------
Unless otherwise indicated, the information in this prospectus reflects:
- a 1-for-7.63 combination (reverse stock split) of our ordinary
shares which took place on October 18, 2000; and
- the filing by us prior to the closing of this offering of our
amended and restated Memorandum and Articles of Association.
Our reporting currency is United States dollars.
------------------------
This prospectus contains our names, trademarks, service marks and logos in
addition to those of other persons and entities.
------------------------
2
<PAGE> 5
THE OFFERING
Ordinary shares offered by us....... 4,700,000 shares(1)
Ordinary shares to be outstanding
after this offering................. 24,980,950 shares(1)(2)
Use of proceeds..................... We intend to use the net proceeds from
this offering to repay existing debt,
including debt recently incurred to
finance the acquisition of assets from
the Continental group of companies, to
make strategic investments in and
acquisitions of businesses and
information technology, and for general
corporate purposes. See "Use of
Proceeds" for a more complete
discussion of our intended use of the
net proceeds from this offering.
Risks of this offering.............. A discussion of the risks of this
offering appears under the heading
"Risk Factors" beginning on page 7.
---------------
(1) Excludes 705,000 ordinary shares to be sold by us if the underwriters'
over-allotment option is exercised in full, as described in "Underwriting."
(2) The number of ordinary shares outstanding after this offering is based on
shares outstanding on October 20, 2000. This calculation includes 755,214
issued and outstanding shares held by two Guernsey Island trusts established
to facilitate ownership of our shares by our directors, executives and
employees. This calculation also includes 66,667 shares to be sold by us to
Alan C. Draper, one of our officers and directors, immediately after the
closing of this offering and 166,667 shares to be issued to the sellers of
the assets we purchased from the Continental group of companies in September
2000, in both cases, at a price of $15.00 per share. This calculation
excludes:
- 1,431,848 ordinary shares issuable upon exercise of stock options
outstanding under our 2000 Stock Option Plan and Non-Employee Stock
Option Plan as of October 20, 2000, at a weighted average exercise price
of $13.81 per share;
- 2,759,109 ordinary shares reserved for future issuance under our 2000
Stock Option Plan and our Non-Employee Directors Stock Option Plan; and
- 400,000 ordinary shares reserved for issuance under our 2000 Employee
Share Purchase Plan.
See "Capitalization" and "Management" for more information about how the
number of outstanding shares is calculated.
3
<PAGE> 6
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table summarizes the financial data for our business during
the periods indicated and has been derived from our consolidated financial
statements. These statements have been prepared in United States dollars and in
accordance with international accounting standards ("IAS") which differ in
significant respects from accounting principles generally accepted in the United
States ("U.S. GAAP"). These differences for the fiscal years ended January 31,
1999 and 2000, and for the six month periods ended July 31, 1999 and 2000 are
described in Note 29 to our consolidated financial statements and in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- U.S. GAAP Reconciliation."
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JANUARY 31, JULY 31,
-------------------------------------------------------- --------------------
1996 1997 1998 1999 2000 1999 2000
-------- -------- -------- -------- -------- -------- --------
(US$ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Amounts in accordance with IAS:
Gross revenue(1)................ $465,320 $504,064 $528,535 $571,141 $706,955 $327,997 $401,985
Freight consolidation
costs(2)...................... 298,337 327,509 342,049 362,862 461,338 212,842 260,852
-------- -------- -------- -------- -------- -------- --------
Net revenue(2).................. 166,983 176,555 186,486 208,279 245,617 115,155 141,133
Staff costs..................... 85,700 88,987 92,333 106,544 122,929 58,465 71,668
Depreciation.................... 6,269 6,263 6,025 6,310 7,822 3,640 4,267
Amortization.................... 255 376 695 1,841 3,409 1,504 2,146
Other operating expenses........ 68,448 68,248 71,737 77,279 90,032 43,761 50,791
-------- -------- -------- -------- -------- -------- --------
Operating profit................ 6,311 12,681 15,696 16,305 21,425 7,785 12,261
Pretax income................... 8,802 10,787 14,643 17,873 19,106 6,455 10,755
Net income before minority
interest...................... 5,859 8,656 12,100 14,653 17,483 5,907 8,176
Net income...................... $ 5,319 $ 8,656 $ 11,848 $ 14,574 $ 17,078 $ 5,600 $ 7,776
======== ======== ======== ======== ======== ======== ========
Basic earnings per ordinary
share......................... $ 0.46 $ 0.76 $ 0.92 $ 0.96 $ 1.07 $ 0.34 $ 0.44
======== ======== ======== ======== ======== ======== ========
Diluted earnings per ordinary
share......................... $ 0.38 $ 0.53 $ 0.70 $ 0.76 $ 0.85 $ 0.28 $ 0.39
======== ======== ======== ======== ======== ======== ========
Cash dividends per ordinary
share......................... $ 0.00 $ 0.00 $ 0.15 $ 0.15 $ 0.15 $ 0.00 $ 0.00
======== ======== ======== ======== ======== ======== ========
CASH FLOW AND OTHER DATA:
Amounts in accordance with IAS:
Purchases of property, plant and
equipment..................... $ 6,955 $ 7,076 $ 5,066 $ 16,644 $ 12,924 $ 4,214 $ 8,424
Net cash from operating
activities.................... 4,288 4,909 9,475 16,136 8,446 7,657 6,471
Net cash used in investing
activities.................... (1,378) (1,647) (6,158) (33,928) (26,454) (12,097) (11,788)
Net cash from (used in)
financing activities.......... (2,216) (22,947) 145 36,539 1,430 (6,020) 8,329
Amounts using IAS results:
EBITDA(3)....................... 16,197 19,320 22,416 24,456 32,656 12,929 18,674
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JANUARY 31, JULY 31,
----------------------- ---------------------
1999 2000 1999 2000
--------- --------- -------- --------
(US$ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Amounts in accordance with U.S. GAAP:
Gross revenue(1).......................................... $571,141 $706,955 $327,997 $401,985
Freight consolidation costs(2)............................ 362,862 461,338 212,842 260,852
-------- -------- -------- --------
Net revenue(2)............................................ 208,279 245,617 115,155 141,133
Staff costs............................................... 107,731 124,330 59,227 73,084
Depreciation.............................................. 6,286 7,798 3,628 4,255
Amortization.............................................. 1,517 2,935 1,045 1,877
Other operating expenses.................................. 77,279 90,032 43,761 50,791
-------- -------- -------- --------
Operating profit.......................................... 15,466 20,522 7,494 11,126
Pretax income............................................. 17,049 18,750 6,387 10,099
Net income before minority interest....................... 13,829 17,098 5,839 7,520
Net income................................................ $ 13,750 $ 16,693 $ 5,532 $ 7,120
======== ======== ======== ========
Basic earnings per ordinary share......................... $ 0.97 $ 1.12 $ 0.36 $ 0.43
======== ======== ======== ========
Diluted earnings per ordinary share....................... $ 0.74 $ 0.86 $ 0.29 $ 0.36
======== ======== ======== ========
Cash dividends per ordinary share......................... $ 0.15 $ 0.15 $ 0.00 $ 0.00
======== ======== ======== ========
CASH FLOW AND OTHER DATA:
Amounts in accordance with U.S. GAAP:
Purchases of property, plant and equipment................ $ 16,644 $ 12,924 $ 4,214 $ 8,424
Net cash from operating activities........................ 16,136 8,446 7,657 6,471
Net cash used in investing activities..................... (33,928) (26,454) (12,097) (11,788)
Net cash from (used in) financing activities.............. 36,539 1,430 (6,020) 8,329
Amounts using U.S. GAAP results:
EBITDA(3)................................................. 23,269 31,255 12,167 17,258
</TABLE>
<TABLE>
<CAPTION>
AS OF JULY 31, 2000
AS OF JANUARY 31, ----------------------------
---------------------------------------------------- PRO FORMA,
1996 1997 1998 1999 2000 ACTUAL AS ADJUSTED(4)
-------- -------- -------- -------- -------- ----------- --------------
(US$ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Amounts in accordance with IAS:
Working capital................. $ 4,458 $ 12,422 $ 24,116 $ 39,602 $ 31,338 $ 22,733 $ 73,198
Total assets.................... 188,990 169,563 180,604 255,213 297,920 351,560 408,425
Long-term liabilities........... 8,927 9,373 4,622 14,206 18,801 19,083 29,883
Shareholders' equity:
Issued capital................ 25,988 34,166 49,521 86,020 86,020 86,020 153,085
Cumulative foreign exchange
translation adjustment...... (1,845) (7,386) (12,503) (22,575) (24,535) (29,054) (29,054)
Distributable reserves........ (923) 6,595 16,042 27,678 41,374 48,575 48,575
Non-distributable reserves.... 609 2,130 2,180 2,214 2,184 2,759 2,759
-------- -------- -------- -------- -------- -------- --------
Total shareholders'
equity.................... $ 23,829 $ 35,505 $ 55,240 $ 93,337 $105,043 $108,300 $175,365
======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Amounts in accordance with U.S. GAAP:
Working capital................................................. $ 47,348 $ 36,669 $ 33,860 $ 84,325
Total assets.................................................... 243,362 288,098 335,478 381,543
Long-term liabilities........................................... 12,044 14,339 13,596 13,596
Shareholders' equity:
Issued capital................................................ 126,086 127,487 128,903 195,968
Cumulative foreign exchange translation adjustment............ (21,925) (23,396) (28,114) (28,114)
Distributable reserves........................................ (13,156) 214 6,759 6,759
Non-distributable reserves.................................... 389 709 1,284 1,284
-------- -------- -------- --------
Total shareholders' equity.................................. $ 91,394 $105,014 $108,832 $175,897
======== ======== ======== ========
</TABLE>
---------------
(1) Gross revenue represents billings on exports to customers, plus net revenue
on imports, net of any value added taxes and custom duties. Gross revenue
and freight consolidation costs for airfreight and
5
<PAGE> 8
ocean freight forwarding services, including commissions earned from our
services as an authorized agent for airline and ocean carriers, are
recognized at the time the freight departs the terminal of origin, which is
when the customer is billed. Gross customs brokerage revenue and other
revenues are also recognized when we bill the customer, which for customs
brokerage revenue, is when the necessary documentation for customs clearance
has been completed, and for other revenues, is when the service has been
provided to third parties in the ordinary course of business.
(2) Net revenue is determined by deducting freight consolidation costs from
gross revenue. Freight consolidation costs are recognized at the time the
freight departs the terminal of origin.
(3) Although earnings before interest, taxes, depreciation and amortization, and
foreign exchange transaction gains and losses ("EBITDA") is a non-U.S. GAAP
measure, EBITDA is included because we believe that such calculation
provides relevant and useful information for evaluating our performance.
EBITDA should not be considered an alternative to measures of operating
performance as determined in accordance with U.S. GAAP, including net income
as a measure of our operating results and cash flows as a measure of our
liquidity. Similar to our net income and cash flows, funds represented by
EBITDA are subject to the same restrictions on use contained in some of our
credit facilities and restrictions on the payment of dividends by some of
our subsidiaries. Because EBITDA is not calculated identically by all
companies, our calculation of EBITDA may not be comparable to other
similarly titled measures of other companies. In fiscal 1996, there is a
non-recurring gain of $3.4 million related to a claim with respect to the
purchase of subsidiaries. In fiscal 2000, there is a credit of $1.5 million
included in other operating expenses, which represents a payment from our
satellite communications supplier based on volume usage for several prior
years.
(4) Our pro forma as adjusted balance sheet data reflects actual amounts as of
July 31, 2000, adjusted for the following:
- our receipt of the estimated net proceeds of this offering after
deducting the underwriting discount and commission and estimated offering
expenses (excluding any proceeds from the sale of shares issuable upon
the exercise of the underwriters' over-allotment option);
- our purchase of the assets of the Continental group of companies for
approximately $16.6 million, which amount is comprised of $11.1 million
cash paid on September 1, 2000 and approximately $3.0 million paid on
October 31, 2000 and the issuance by us of $2.5 million worth of ordinary
shares (166,667 ordinary shares at a price of $15.00 per share), and for
IAS reporting, approximately $10.8 million in contingent future
acquisition installments;
- our receipt of $1.0 million from the sale of 66,667 ordinary shares to
Alan C. Draper, one of our executive officers and directors, at a price
of $15.00 per share; and
- our repayment of approximately $35.1 million of indebtedness with a
portion of the net proceeds from this offering.
6
<PAGE> 9
RISK FACTORS
An investment in our ordinary shares involves a high degree of risk. You
should read the following risk factors carefully before purchasing our ordinary
shares. If any of the risks discussed below actually occur, our business,
financial condition, operating results or cash flows could be materially
adversely affected. This could cause the trading price of our ordinary shares to
decline, and you may lose all or part of your investment.
This prospectus contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those discussed
in these statements. Factors that could contribute to these differences include
those discussed below and elsewhere in this prospectus. The cautionary
statements made in this prospectus should be read as being applicable to all
forward-looking statements wherever they appear.
RISKS RELATED TO OUR BUSINESS AND INDUSTRY
WE MAY NOT SUCCEED WITH OUR STRATEGY TO EXPAND THE SCOPE OF OUR SUPPLY
CHAIN SERVICES AND AS A RESULT OUR REVENUE MAY NOT GROW.
We are undertaking various efforts to expand the scope of our supply chain
management services which we offer to our customers, including developing
strategic alliances with other supply chain service providers, building training
and solutions centers in strategic locations and expanding our postponement
warehousing and distribution services, which include storing, inspecting and
packing freight for our customers. Our efforts to expand the scope of our
services will require:
- additional capital expenditures, including expenditures for expanding
facilities and information technology systems,
- hiring and retaining skilled management, marketing, customer service and
other personnel, and
- implementing procedures to successfully manage our growth, including
monitoring operations, controlling costs and maintaining effective
quality and service controls.
There can be no assurance that we will be able to successfully expand the scope
of our services or implement our expansion plans.
WE HAVE GROWN AND PLAN TO CONTINUE TO GROW, IN PART, THROUGH ACQUISITIONS
OF OTHER FREIGHT FORWARDERS, CUSTOMS BROKERS AND SUPPLY CHAIN MANAGEMENT
PROVIDERS. GROWTH BY ACQUISITIONS INVOLVES RISKS AND WE MAY NOT BE ABLE TO
IDENTIFY OR ACQUIRE AND SUCCESSFULLY INTEGRATE ANY ACQUIRED BUSINESS INTO
OUR OWN OPERATIONS.
Since February 1, 1999 to the date of this prospectus, we have completed 19
relatively small acquisitions in ten different countries. We continue to
integrate our most recent acquisitions and we may not successfully integrate
these acquisitions or future acquisitions into our operations. We intend to
continue to pursue opportunities to expand our business by acquiring companies
in selected markets.
Growth by acquisitions involves special risks including the following:
- any inability to integrate acquired businesses into our operations,
including because of incompatible computer or information systems or
operating practices or differences in business or corporate cultures,
- difficulties implementing proper business and accounting controls for
acquired businesses which we allow to continue to operate on their
existing information and accounting systems,
- any inability to identify appropriate acquisition candidates or negotiate
acquisitions on favorable terms and valuations,
- any inability to obtain financing, on favorable terms or at all, which is
necessary to fund acquisitions, the integration of acquired businesses
and/or the operation of the combined businesses,
7
<PAGE> 10
- any diversion of management's attention from existing operations to
integrating the acquired companies,
- any failure to successfully retain key personnel and key customers of any
acquired company and expand the business as anticipated,
- the risk that our due diligence regarding acquisition candidates may not
adequately identify obstacles to our future successful operation of any
such acquired businesses, including failing to identify significant
liabilities or business contingencies,
- the risk that acquisitions may result in adverse accounting or tax
reporting obligations,
- the risk that we will not have the understanding or experience to operate
profitably in new lines of business which we may acquire,
- the risk that our shareholders will experience dilution resulting from
acquisitions in which some or all of the purchase price is paid by
issuing our securities,
- any failure of acquired businesses to achieve anticipated levels of
revenues and earnings, and
- any inability to add new management or other personnel, implement new
training programs, develop new operating processes or purchase or install
additional software or hardware necessary to manage or operate any
acquired businesses.
We expect our growth strategy may affect short-term cash flow and net
income as we expend funds, increase indebtedness and incur additional expenses
in connection with pursuing acquisitions. If we are not able to acquire
companies according to our growth strategy or if we fail to integrate
successfully any acquired companies into our operations, we may not achieve
anticipated increases in revenue, cost savings and economies of scale, and our
operating results may be adversely affected.
BECAUSE WE MANAGE OUR BUSINESS ON A DECENTRALIZED BASIS, WE MAY NOT BE ABLE
TO CONTINUE TO IMPLEMENT ADEQUATE BUSINESS CONTROLS.
We manage our business on a decentralized basis, with local and regional
management retaining responsibility for day-to-day operations, profitability and
the growth of the business. As we grow, our management could lose focus on
maintaining adequate controls on intercompany disbursements for freight
forwarding and customs brokerage services. In addition, many of our subsidiaries
may be operating with management, sales and support personnel that may be
insufficient to support growth in their respective businesses without
significant central oversight and coordination. If proper overall business
controls have not been and are not implemented, our decentralized operating
strategy could result in inconsistent operating and financial practices, which
could materially adversely affect our overall profitability, and ultimately our
business, results of operations, financial condition and prospects.
IF WE FAIL TO IMPROVE OUR MANAGEMENT INFORMATION AND FINANCIAL REPORTING
SYSTEMS, WE MAY EXPERIENCE DELAYS IN RECEIVING MANAGEMENT AND FINANCIAL
INFORMATION AT THE CONSOLIDATED LEVEL WHICH COULD DISRUPT OUR OPERATIONS OR
IMPAIR OUR ABILITY TO MONITOR OUR OPERATIONS RESULTING IN A NEGATIVE EFFECT
ON OUR OPERATIONS AND FINANCIAL CONDITION.
We recognize the need to improve our management information and financial
reporting systems at the consolidated level. We may experience delays,
disruptions and unanticipated expenses in implementing, integrating and
operating our consolidated management information and financial reporting
systems. Failure to enhance such systems could delay our receipt of management
and financial information at the consolidated level which could disrupt our
operations or impair our ability to monitor our operations and have a negative
effect on our financial condition.
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COMPARISONS OF OUR OPERATING RESULTS FROM PERIOD TO PERIOD ARE NOT
NECESSARILY MEANINGFUL AND SHOULD NOT BE RELIED UPON AS AN INDICATOR OF
FUTURE PERFORMANCE.
Our operating results have fluctuated in the past and it is likely that
they will continue to fluctuate in the future because of a variety of factors,
many of which are beyond our control. The following factors could also cause
fluctuations in our operating results:
- personnel costs,
- timing and magnitude of capital expenditures,
- costs relating to the expansion of operations,
- costs and revenue fluctuations due to acquisitions,
- customer discounts and credits,
- changes in our pricing policies or those of our competitors,
- the seasonal nature of our business which traditionally experiences
increased demand for our services in the fiscal second, third and fourth
quarters and decreased demand in the fiscal first quarter,
- economic conditions specific to our industry, as well as general economic
conditions, including adverse economic conditions in specific regions or
countries which we serve,
- pricing and availability of cargo space on airlines, ships and trucks
which we utilize to transport freight, and
- currency fluctuations.
These factors, and others, may materially adversely affect our operating
results.
BECAUSE WE ARE A HOLDING COMPANY, WE ARE FINANCIALLY DEPENDENT ON RECEIVING
DISTRIBUTIONS FROM OUR SUBSIDIARIES AND WE COULD BE HARMED IF SUCH
DISTRIBUTIONS COULD NOT BE MADE IN THE FUTURE.
We are a holding company and all of our operations are conducted through
subsidiaries. Consequently, we rely on dividends or advances from our
subsidiaries (including ones that are wholly owned). The ability of such
subsidiaries to pay dividends and our ability to receive distributions on our
investments in other entities is subject to applicable local law and other
restrictions including, but not limited to, applicable tax laws and limitations
contained in some of our bank credit facilities. Such laws and restrictions
could limit the payment of dividends and distributions to us which would
restrict our ability to continue operations.
WE MAY NEED ADDITIONAL FINANCING TO FUND OUR OPERATIONS AND FINANCE OUR
GROWTH, AND WE MAY NOT BE ABLE TO OBTAIN FINANCING ON TERMS ACCEPTABLE TO
US OR AT ALL.
We may require additional financing to fund our operations and our current
plans for expansion. Because our credit facilities often are limited to the
country in which the facility is originated, we may require additional financing
to fund our operations in countries in which we do not have existing credit
facilities. In addition, when our existing credit facilities expire, we may need
to obtain replacement financing. Additional or replacement financing may involve
incurring debt or selling equity securities. There can be no assurance that
additional or replacement financing will be available to us on commercially
reasonable terms or at all. If we incur debt, the risks associated with our
business and with owning our equity securities could increase. If we raise
capital through the sale of equity securities, the percentage ownership of our
shareholders would be diluted. In addition, any new equity securities may have
rights, preferences or privileges senior to those of our ordinary shares. If we
are unable to obtain additional or replacement financing, our ability to fund
our operations and meet our current plans for expansion will be materially
adversely affected.
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IF WE FAIL TO DEVELOP AND INTEGRATE INFORMATION SYSTEMS TECHNOLOGIES OR WE
FAIL TO UPGRADE OR REPLACE OUR INFORMATION TECHNOLOGY SYSTEMS TO HANDLE
INCREASED VOLUMES, MEET THE DEMANDS OF OUR CUSTOMERS AND PROTECT AGAINST
DISRUPTIONS OF OUR OPERATIONS, WE MAY LOSE ORDERS AND CUSTOMERS WHICH COULD
SERIOUSLY HARM OUR BUSINESS.
Increasingly, we compete for customers based upon the flexibility and
sophistication of our technologies supporting our services. The failure of the
hardware or software that supports our information technology systems, the loss
of data contained in the systems, or the inability to access or interact with
our web site, could significantly disrupt our operations, prevent customers from
making orders, or cause us to lose orders or customers. If our information
technology systems are unable to handle additional volume for our operations as
our business and scope of services grow, our service levels, operating
efficiency and future freight volumes will decline. In addition, we expect
customers to continue to demand more sophisticated, fully integrated information
systems from their supply chain services providers. If we fail to hire qualified
persons to implement and maintain our information technology systems or we fail
to upgrade or replace our information technology systems to handle increased
volumes, meet the demands of our customers and protect against disruptions of
our operations, we may lose orders and customers which could seriously harm our
business.
IF WE ARE NOT ABLE TO LIMIT OUR LIABILITY FOR CUSTOMERS' CLAIMS THROUGH
CONTRACT TERMS AND THE PURCHASE OF INSURANCE, WE COULD BE REQUIRED TO PAY
LARGE AMOUNTS TO OUR CUSTOMERS AS COMPENSATION FOR THEIR CLAIMS AND OUR
OPERATIONS COULD BE ADVERSELY AFFECTED.
In general, we limit by contract our liability to our customers for loss or
damage to their goods to $20 per kilogram (approximately $9.07 per pound) for
airfreight shipments and $500 per carton or customary unit, including an ocean
container, for ocean freight shipments, with the actual insured amount
determined based on the value of the freight. However, because a freight
forwarder's relationship to an airline or ocean carrier is that of a shipper to
a carrier, the airline or ocean carrier generally assumes the same
responsibility to us as we assume to our customers. When we act in the capacity
of an authorized agent for an air or ocean carrier, the carrier, rather than us,
assumes liability for the safe delivery of the customer's cargo to its ultimate
destination. Upon our customer's request, we have the ability to insure a
shipment for the full declared value with insurance offered through a separate
underwriter. We carry an umbrella insurance policy which covers us for $3
million per claim and $1 million for errors and omissions. When providing
warehouse and distribution services, we currently limit our liability by
contract and tariff to an amount generally equal to the lower of fair value or
$1.53 per kilogram with a maximum of $57,400 per claim. Upon payment of a
surcharge for warehouse and distribution services, we will assume additional
liability.
We have, from time to time, made payments to our customers for claims
related to our shipments which, to date, have not been material to our results
of operations. Should we experience an increase in the number of such claims,
there can be no assurance that our insurance coverage will provide us with
adequate coverage for such claims or that the maximum amounts for which we are
liable in connection with shipments will not change in the future.
OUR INFORMATION TECHNOLOGY SYSTEMS ARE SUBJECT TO RISKS WHICH WE CANNOT
CONTROL.
Our information technology systems are dependent upon global communications
providers, web browsers, telephone systems and other aspects of the Internet
infrastructure which have experienced significant system failures and electrical
outages in the past. Our systems are susceptible to outages due to fire, floods,
power loss, telecommunications failures, break-ins and similar events. Despite
our implementation of network security measures, our servers are vulnerable to
computer viruses, break-ins and similar disruptions from unauthorized tampering
with our computer systems. The occurrence of any of these events could disrupt
or damage our information technology systems and inhibit our internal
operations, our ability to provide services to our customers, and the ability of
our customers to access our information technology systems.
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IF WE FAIL TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, THE
VALUE OF SUCH RIGHTS MAY DIMINISH AND OUR RESULTS OF OPERATIONS AND
FINANCIAL CONDITION MAY BE ADVERSELY AFFECTED.
We rely on a combination of copyright, trademark and trade secret laws and
confidentiality procedures to protect our intellectual property rights. These
protections may not be sufficient, and they do not prevent independent third
party development of competitive products or services. Further, the laws of many
foreign countries do not protect our intellectual property rights to the same
extent as the laws of the United States. A failure to protect our intellectual
property rights could result in the loss or diminution in value of such rights.
OUR AGREEMENT WITH I2 TECHNOLOGIES IS NOT EXCLUSIVE AND OUR COMPETITORS MAY
ALSO WORK WITH I2 OR OTHER SOFTWARE AND SOLUTIONS PROVIDERS TO DEVELOP
SUPERIOR SUPPLY CHAIN SOLUTIONS WHICH COULD RENDER US LESS COMPETITIVE.
We recently entered into a strategic alliance with i2 Technologies, a
provider of planning and optimization software for global supply chain
management. In connection with our alliance with i2 Technologies, we obtained a
non-exclusive license to use supply chain planning and optimization software
products and sell such products to our customers. i2 Technologies has entered
into agreements with other companies in the supply chain management and
logistics industry licensing its planning and optimization software. It is
possible that our competitors working together with i2 Technologies or other
software and solutions providers will develop superior supply chain solutions,
including software and sales processes which may render us less competitive. In
this event, we could lose customers and sales to such competitors.
IT MAY BE DIFFICULT FOR OUR SHAREHOLDERS TO EFFECT SERVICE OF PROCESS AND
ENFORCE JUDGMENTS OBTAINED IN UNITED STATES COURTS AGAINST US OR OUR
DIRECTORS AND EXECUTIVE OFFICERS WHO RESIDE OUTSIDE OF THE UNITED STATES.
We are incorporated in the British Virgin Islands. Several of our directors
and executive officers reside outside the United States, and a majority of our
assets are located outside the United States. As a result, we have been advised
by legal counsel in the British Virgin Islands that it may be difficult or
impossible for our shareholders to effect service of process upon, or to enforce
judgments obtained in United States courts against, us or our directors and
executive officers, including judgments predicated upon the civil liability
provisions of the federal securities laws of the United States.
BECAUSE WE ARE INCORPORATED UNDER THE LAWS OF THE BRITISH VIRGIN ISLANDS,
IT MAY BE MORE DIFFICULT FOR OUR SHAREHOLDERS TO PROTECT THEIR RIGHTS THAN
IT WOULD BE FOR A SHAREHOLDER OF A CORPORATION INCORPORATED IN ANOTHER
JURISDICTION.
Our corporate affairs are governed by our Memorandum and Articles of
Association and by the International Business Companies Act of the British
Virgin Islands. Principles of law relating to such matters as the validity of
corporate procedures, the fiduciary duties of management and the rights of our
shareholders may differ from those that would apply if we were incorporated in
the United States or another jurisdiction. The rights of shareholders under
British Virgin Islands law are not as clearly established as are the rights of
shareholders in many other jurisdictions. Thus, you may have more difficulty
protecting your interests in the face of actions by our board of directors or
our principal shareholders than you would have as shareholders of a corporation
incorporated in another jurisdiction.
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OUR INTERNATIONAL PRESENCE EXPOSES US TO POTENTIAL DIFFICULTIES ASSOCIATED
WITH MANAGING DISTANT OPERATIONS AND TO REGULATORY, TARIFF, LICENSING AND
OTHER RISKS.
We conduct a majority of our business outside of the United States and we
anticipate that revenue from foreign operations will account for a significant
amount of our future revenue. There are risks inherent in doing business in
international markets, such as:
- changes in economic and political conditions,
- changes in governmental policies,
- changes in international and domestic customs regulations,
- wars, civil unrest and other conflicts,
- natural disasters,
- changes in tariffs, trade restrictions, trade agreements and taxation,
- difficulties in managing or overseeing foreign operations,
- different liability standards,
- less protective intellectual property laws, and
- foreign exchange risks.
The occurrence of any of these risks may restrict our ability to operate in
the affected region and/or decrease the profitability of our operations in that
region.
WE EXPECT THAT OUR EFFECTIVE TAX RATE WILL INCREASE IN THE FISCAL YEAR 2001
AND BEYOND, AND AS A RESULT, OUR CASH FLOW AND PROFITABILITY MAY DECREASE.
We have international operations and generate taxable income in different
countries throughout the world, with operations in some countries with low
effective income tax rates. We expect that our effective tax rate will increase
in fiscal 2001 and beyond as compared to fiscal 2000 because tax losses which we
recognized in fiscal 2000 likely will not reoccur in later years. Unless
otherwise offset by increased revenues, the increase in our effective tax rate
may lead to a decrease in our cash flow and profitability. In addition, if the
tax laws of the countries in which we operate are rescinded or changed or the
United States or other foreign tax authorities were to change applicable tax
laws or successfully challenge the manner or situs in which our profits
currently are recognized, our effective tax rate could increase which would
decrease our cash flow and profitability.
RESTRICTIONS AND CONTROLS ON FOREIGN INVESTMENTS AND ACQUISITIONS AND OUR
ABILITY TO CONDUCT BUSINESS WITH LOCAL AGENTS IN PARTICULAR COUNTRIES MAY
RESTRICT OUR ABILITY TO OPERATE IN THOSE COUNTRIES.
Foreign investments in local joint ventures or business acquisitions has
been and will continue to be restricted or controlled to varying degrees. These
restrictions or controls have and may continue to limit or preclude foreign
investments in proposed joint ventures or business acquisitions or increase our
costs and expenses in seeking to effect such transactions. Various governments
require governmental approval prior to investments by foreign persons and limit
the extent of any such investments. In some countries, we may be required by
local regulations to conduct operations pursuant to an agency or sponsorship
agreement. Even if not required by regulations, we may conduct business in a
country with a local agent who can provide knowledge of the local market
conditions and facilitate the acquisition of necessary licenses and permits. The
loss of an agent or sponsor could result in the temporary or permanent cessation
of operations in a particular country. There can be no assurance that we will be
able to replace such agent or sponsor on favorable terms, if at all.
Furthermore, various governments restrict investment opportunities by foreign
persons in some industries or may require governmental approval for the
repatriation of capital and income by foreign investors. There can be no
assurance that such approvals will be forthcoming in the future. There also can
be no assurance that additional or different restrictions or adverse policies
applicable to us
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will not be imposed in the future or, if imposed, as to the duration or impact
of any such restrictions or policies.
ALTHOUGH WE USE FORWARD EXCHANGE CONTRACTS TO ATTEMPT TO LIMIT OUR FOREIGN
CURRENCY LOSSES, WE ARE NOT FULLY PROTECTED AGAINST FOREIGN CURRENCY
FLUCTUATIONS WHICH MAY RESULT IN LOSSES AND A DECREASE IN OUR PROFITABILITY
IN THE FUTURE.
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. Appreciation or depreciation in the value of other
currencies as compared to our reporting currency will result in currency
exchange gains or losses which, if the appreciation or depreciation is
significant, could be material. In those areas where our revenue is denominated
in a local currency, rather than our reporting currency, a depreciation of the
local currency against the U.S. dollar could adversely affect our earnings.
Where we price our products and services in U.S. dollars or U.S. dollar
equivalents, a depreciation of the local currency would make our products more
expensive for our customers and could have an adverse impact on our sales. Many
of our operations are in countries or regions where there has been substantial
depreciation of the local currency against the U.S. dollar in recent years.
Although we attempt to limit our risks related to foreign currency losses
through the use of forward exchange contracts, these contracts do not fully
protect us against currency fluctuations nor will we be able to entirely
eliminate the effects of changes in foreign exchange rates on our consolidated
net income in the future.
CHANGES IN SHIPPING SCHEDULES OR PRICING POLICIES BY AIRFREIGHT CARRIERS,
OCEAN FREIGHT CARRIERS OR TRUCKING COMPANIES COULD IMPACT OUR ABILITY TO
SHIP CARGO ACCORDING TO OUR CUSTOMERS' NEEDS.
We rely on commercial airfreight carriers, ocean freight carriers and
trucking companies in delivering our cargo. Consequently, our ability to provide
reliable delivery could be adversely affected by shortages in available cargo
and container space and by changes by such carriers and companies in policies
and practices such as scheduling, pricing, payment terms, and frequency of
service or increases in the cost of fuel, taxes and labor, and other factors
that are not within our control.
OUR BUSINESS COULD BE ADVERSELY AFFECTED IF WE ARE NOT ABLE TO SELL
CONTAINER SPACE WHICH WE PURCHASE FROM OCEAN SHIPPING LINES.
As an indirect ocean carrier or non-vessel operating common carrier, we
contract with ocean shipping lines to obtain transportation for a fixed number
of containers between various points during a specified time period at variable
rates. We then solicit freight from our customers to fill the containers. When
we contract with ocean shipping lines to obtain containers, we become obligated
to pay for the container space which we purchase. If we are not able to sell all
of our purchased container space, we will not be able to recover our
out-of-pocket costs for such purchase of container space.
WE FACE INTENSE COMPETITION IN THE FREIGHT FORWARDING, LOGISTICS AND SUPPLY
CHAIN MANAGEMENT INDUSTRY.
The freight forwarding, logistics and supply chain management industry is
intensely competitive and is expected to remain so for the foreseeable future.
We face competition from a number of companies, including many that have
significantly greater financial, technical and marketing resources. There are a
large number of companies competing in one or more segments of the industry,
although the number of firms with a global network that offer a full complement
of freight forwarding and supply chain management services is more limited.
Depending on the location of the customer and the scope of services requested,
we must compete against both the niche players and larger entities. In addition,
customers increasingly are turning to competitive bidding situations involving
bids from a number of competitors, including competitors that are larger than
us.
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Our primary competitors include:
- Freight forwarders including Danzas AEI, Fritz Companies, Inc.,
Expeditors International of Washington, Inc., Circle International Group,
the Panalpina Group, the international divisions of BAX Global and Emery
Worldwide, Kuehne & Nagel International AG, MSAS Global Logistics,
Schenker International, Nippon Express and Kintetsu World Express.
- Third-party warehouse logistics providers including Exel PLC, Ryder
Integrated Logistics, Inc. and Menlo Logistics.
We also face competition from Internet-based freight exchanges which attempt to
provide an online marketplace for buying and selling supply chain services.
Increased competition could result in reduced revenues, reduced margins or loss
of market share, any of which could damage the long-term or short-term prospects
of our business.
OUR INDUSTRY IS CONSOLIDATING AND IF WE CANNOT GAIN SUFFICIENT MARKET
PRESENCE IN OUR INDUSTRY, WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY
AGAINST LARGER, GLOBAL COMPANIES IN OUR INDUSTRY.
There currently is a marked trend within our industry toward consolidation
of the niche players into larger companies which are attempting to increase
global operations through the acquisition of regional and local freight
forwarders. If we cannot gain sufficient market presence or otherwise establish
a successful strategy in our industry, we may not be able to compete
successfully against larger companies in our industry with global operations.
THE FAILURE OF OUR POLICIES AND PROCEDURES WHICH ARE DESIGNED TO PREVENT
THE UNLAWFUL TRANSPORTATION OF HAZARDOUS, EXPLOSIVE OR ILLEGAL MATERIALS
COULD SUBJECT US TO LARGE FINES, PENALTIES OR LAWSUITS.
We are subject to a broad range of foreign and domestic (including state
and local) environmental, health and safety and criminal laws and regulations,
including those governing discharges into the air and water, the handling and
disposal of solid and hazardous waste and the shipment of explosive or illegal
substances. We believe that we are in substantial compliance with all material
environmental, health and safety and criminal laws and regulations.
In the course of our operations, we may be asked to arrange for the
transportation of substances defined as hazardous under applicable laws. As is
the case with any such operation, if a release of hazardous substances occurs on
or from our facilities or from the transporter, we may be required to
participate in the remedy of, or otherwise bear liability for, such release or
be subject to claims from third parties whose property or person is injured by
the release. In addition, if our employees arrange for the transportation of
hazardous, explosive or illegal materials in violation of applicable laws or
regulations, we may face civil or criminal fines or penalties, including bans on
making future shipments in particular geographic areas. We have attempted to
implement policies and procedures designed to prevent the unlawful
transportation of such materials. Although our current operations have not been
significantly affected by noncompliance with these environmental, health and
safety, and criminal laws and regulations, a failure in the future of our
policies and procedures designed to safeguard against any such noncompliance
could subject us to large fines, penalties or lawsuits. See
"Business -- Litigation" for a description of two class action lawsuits
concerning chemicals allegedly utilized in the Gulf War by the Iraqi army in
which we are one of approximately 83 defendants.
IF WE FAIL TO COMPLY WITH APPLICABLE GOVERNMENTAL REGULATIONS, OUR BUSINESS
COULD BE ADVERSELY AFFECTED.
Our air transportation activities in the United States are subject to
regulation by the Department of Transportation as an indirect air carrier and by
the Federal Aviation Administration. Our overseas offices and agents are
licensed as airfreight forwarders in their respective countries of operation. We
are licensed in each of our offices as an airfreight forwarder by the
International Air Transport Association. In the case of our newer offices, we
have applied for such a license. We believe we are in substantial compliance
with these requirements.
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We are licensed as a customs broker by the Customs Service of the
Department of the Treasury in each United States customs district in which we do
business. All United States customs brokers are required to maintain prescribed
records and are subject to periodic audits by the Customs Service. In other
jurisdictions in which we perform customs brokerage services, we are licensed by
the appropriate governmental authority. We believe we are in substantial
compliance with these requirements.
We are licensed as an ocean freight forwarder by and registered as an ocean
transportation intermediary with the Federal Maritime Commission. The Federal
Maritime Commission has established qualifications for shipping agents,
including surety bonding requirements. The Federal Maritime Commission also is
responsible for the economic regulation of non-vessel operating common carriers
that contract for space and sell that space to commercial shippers and other
non-vessel operating common carrier operators for freight originating or
terminating in the United States. To comply with these economic regulations,
vessel operators and non-vessel operating common carriers are required to file
tariffs which establish the rates to be charged for the movement of specified
commodities into and out of the United States. The Federal Maritime Commission
has the power to enforce these regulations by assessing penalties. For ocean
shipments not originating or terminating in the United States, the applicable
regulations and licensing requirements typically are less stringent than in the
United States. We believe we are in substantial compliance with all applicable
regulations and licensing requirements in all countries in which we transact
business.
Although our current operations have not been significantly affected by
compliance with current United States and foreign governmental regulation, we
cannot predict what impact future regulations may have on our business. Our
failure to maintain required permits or licenses, or to comply with applicable
regulations, could result in substantial fines or revocation of our operating
authorities.
RISKS RELATED TO THIS OFFERING
THE PUBLIC MARKET FOR OUR ORDINARY SHARES MAY BE VOLATILE AND YOU MAY NOT
BE ABLE TO RESELL YOUR SHARES AT OR ABOVE THE PRICE YOU PAID, OR AT ANY
PRICE.
Our ordinary shares began trading in 1997 on the Luxembourg Stock Exchange
where trading has been limited and infrequent. We cannot assure you that an
active trading market for our ordinary shares will develop or be sustained in
the future. Even if an active trading market does develop, the market price of
the ordinary shares is likely to be highly volatile and could be subject to wide
fluctuations in response to factors such as:
- announcements of mergers, acquisitions or investments by us or our
competitors,
- announcements of businesses and services by us or our competitors and
consumer acceptance of such businesses and services,
- changes in financial estimates, recommendations, comments or coverage by
securities analysts with respect to our securities or business or the
securities or business of our competitors,
- fluctuations in the market price of our competitors' publicly-traded
stocks,
- adoption of new accounting standards affecting our industry, and
- general market conditions and other factors.
Further, the stock markets have recently experienced extreme price and
volume fluctuations that have affected the market prices of equity securities of
many companies and that have been unrelated or disproportionate to the operating
performance of such companies. These broad market factors may adversely affect
the market price of our ordinary shares and your ability to resell your shares
at or above the price you paid, or at any price.
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OUR EXISTING SHAREHOLDERS WILL RETAIN SIGNIFICANT CONTROL OF OUR COMPANY
FOLLOWING THE SALE OF OUR ORDINARY SHARES IN THIS OFFERING AND THEIR
INTERESTS MAY BE DIFFERENT AND CONFLICT WITH YOURS.
Upon completion of this offering, and assuming the sale of 66,667 ordinary
shares to Alan C. Draper, one of our executive officers and directors, and the
issuance of 166,667 ordinary shares to the sellers of the assets we purchased
from the Continental group of companies, in both cases, at a price of $15.00 per
share, our executive officers, directors and principal shareholders and their
affiliates will own approximately 68.2% of our outstanding ordinary shares (or
66.3% if the underwriters completely exercise their over-allotment option). As a
result, these shareholders may be able to control us and direct our affairs,
including the election of directors and approval of significant corporate
transactions. This concentration of ownership also may delay, defer or prevent a
change in control of our company, and make some transactions more difficult or
impossible without the support of these shareholders. These transactions might
include proxy contests, mergers, tender offers, open market purchase programs or
other purchases of our ordinary shares that could give our shareholders the
opportunity to realize a premium over the then-prevailing market price of our
ordinary shares. See "Capitalization" and "Principal Shareholders" for a more
detailed discussion of our capital structure and a list of our significant
shareholders.
OUR STOCK PRICE MAY BE AFFECTED BY THE AVAILABILITY OF SHARES FOR SALE IN
THE NEAR FUTURE. THE FUTURE SALE OF LARGE AMOUNTS OF OUR STOCK, OR THE
PERCEPTION THAT SUCH SALES COULD OCCUR, COULD NEGATIVELY AFFECT OUR STOCK
PRICE.
Sales of substantial amounts of our ordinary shares, including shares
issued upon the exercise of outstanding options or held in trusts, in the public
market following this offering, or the appearance that a large number of shares
is available for sale, could depress the market price for our ordinary shares.
The number of ordinary shares available for sale in the public market will be
limited by agreements under which our directors, executive officers and other
designated holders of our outstanding ordinary shares have agreed not to sell or
otherwise dispose of any of their shares for a period of 180 days after the date
of this prospectus, subject to various consents and exceptions, except in the
case of one of our shareholders, who is not one of our officers or directors,
that may sell or otherwise dispose of one-half of that shareholder's ordinary
shares after 60 days from the date of this prospectus. Bear, Stearns & Co. Inc.
may, in its sole discretion and at any time without notice, release all or any
portion of the shares subject to such agreements. In addition to the adverse
effect a price decline could have on holders of our ordinary shares, that
decline would likely impede our ability to raise capital through the issuance of
additional ordinary shares or other equity securities. In addition, designated
holders of restricted shares of our stock are entitled to obtain the
registration of such shares for sale in the public market. If these holders sell
in the public market, such sales could have a material adverse effect on the
market price of our ordinary shares.
FUTURE ISSUANCES OF PREFERENCE SHARES COULD ADVERSELY AFFECT THE HOLDERS OF
OUR ORDINARY SHARES AND THEREFORE REDUCE THE VALUE OF YOUR SHARES.
We are authorized to issue up to 100,000,000 preference shares of which
50,000,000 have been designated as Class A Preference Shares and 50,000,000 have
been designated as Class B Preference Shares. No preference shares currently are
outstanding. Our board of directors may determine the rights and preferences of
the Class A and Class B Preference Shares within the limits set forth in our
Memorandum and Articles of Association and applicable law. Among other rights,
our board of directors may determine, without further vote or action by our
shareholders, the dividend, voting, conversion, redemption and liquidation
rights of our preference shares. Our board of directors also may amend our
Memorandum and Articles of Association to create from time to time one or more
classes of preference shares. The issuance of any preference shares could
adversely affect the rights of the holders of ordinary shares, and therefore
reduce the value of the ordinary shares. In particular, specific rights granted
to future holders of preference shares could be used to restrict our ability to
merge with or sell our assets to a third party, thus making it more difficult
for a third party to acquire a majority of our outstanding ordinary
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shares. We have no current plans to issue preference shares although no
assurances can be made that we will not issue preference shares in the future.
YOU WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION.
The public offering price of our ordinary shares is substantially higher
than the net tangible book value of our ordinary shares. Therefore, if you
purchase our ordinary shares in this offering, you will incur immediate dilution
of approximately $11.43 in the net tangible book value per ordinary share from
the public offering price of $15.00 per share. Please refer to "Dilution" for
this calculation.
WE HAVE BROAD DISCRETION IN HOW WE USE THE PROCEEDS FROM THIS OFFERING. WE
MAY USE THE PROCEEDS IN WAYS WITH WHICH YOU DISAGREE.
We intend to use a significant portion of the net proceeds from this
offering for general corporate purposes and unspecified acquisitions.
Accordingly, our management will have significant flexibility in applying the
net proceeds of this offering. If management fails to use funds effectively, we
may need to seek additional funds, which may not be available on favorable terms
or at all.
OUR MEMORANDUM AND ARTICLES OF ASSOCIATION CONTAIN ANTI-TAKEOVER PROVISIONS
WHICH MAY DISCOURAGE ATTEMPTS BY OTHER COMPANIES TO ACQUIRE OR MERGE WITH
US AND WHICH COULD REDUCE THE MARKET VALUE OF OUR ORDINARY SHARES.
Provisions of our Memorandum and Articles of Association may discourage
attempts by other companies to acquire or merge with us, which could reduce the
market value of our ordinary shares. Provisions in our Memorandum and Articles
of Association may delay, deter or prevent other persons from attempting to
acquire control of us. These provisions include:
- the authorization of our board of directors to issue preference shares
with such rights and preferences determined by the board, without the
specific approval of the holders of ordinary shares,
- our board of directors is divided into three classes each of which is
elected in a different year,
- the prohibition of action by the written consent of the shareholders,
- the establishment of advance notice requirements for director nominations
and actions to be taken at shareholder meetings, and
- the requirement that the holders of two-thirds of the outstanding shares
entitled to vote at a meeting are required to approve changes to specific
provisions of our Memorandum and Articles of Association including those
provisions described above and others which are designed to discourage
non-negotiated takeover attempts.
In addition, our Memorandum and Articles of Association permits special
meetings of the shareholders to be called only by our chief executive officer or
our board of directors upon request by a majority of our directors or the
written request of holders of more than fifty percent of our outstanding voting
securities. Provisions of British Virgin Islands law to which we are subject
could impede a merger, takeover or other business combination involving us or
discourage a potential acquiror from making a tender offer or otherwise
attempting to obtain control of us. Our anti-takeover provisions are more fully
described under the heading "Description of Capital Stock -- Certain
Anti-Takeover Matters."
17
<PAGE> 20
RECENT DEVELOPMENTS
Effective September 1, 2000, we acquired substantially all of the assets of
the Continental group of companies, a group of five related companies under
common control and incorporated in the United States and Hong Kong. We purchased
these assets to strengthen our presence in the Asia-United States shipping lane
segment and to allow us to offer more reliable airfreight and ocean freight
forwarding services in this segment. This group of companies specialized in
freight forwarding for the footwear, wearing apparel, toys, electronics and
computer industries.
In connection with this acquisition of assets, we employ approximately 250
former Continental employees in four facilities in Hong Kong, eight facilities
in the People's Republic of China, and six facilities in the United States which
we assumed as part of the transaction. For the twelve months ended December 31,
1999, the aggregate gross revenues of this group of companies were approximately
$55 million. Such gross revenues were split approximately 80% from airfreight
forwarding activities and 20% from ocean freight forwarding activities.
In exchange for the assets, we agreed to pay the sellers approximately
$16.6 million, of which $11.1 million was paid in cash on September 1, 2000 and
approximately $3.0 million was paid on October 31, 2000 and $2.5 million must be
paid on November 30, 2000. If this offering is completed before November 30,
2000, then the $2.5 million cash payment due on November 30, 2000 must be paid
by issuing the number of our unregistered ordinary shares which results from
dividing $2.5 million by the per share offering price in this offering. Unless
otherwise indicated, information in this prospectus is based on the assumption
that such shares will be issued at the same time as the closing of this
offering. We also agreed to make deferred earnout payments to the sellers based
on the annual net profits before tax of the operations of the purchased assets
during each of the three years following September 1, 2000. Such earnout
payments are estimated to be approximately $3.6 million for each of the three
years, but the actual amounts will depend on the amount of net profits before
tax earned by the operations of the purchased assets.
In connection with this acquisition, we borrowed approximately $6.1 million
from various existing credit facilities and $5.0 million under a bridge
financing facility with Gensec Ireland Limited. Amounts outstanding under the
bridge financing bear interest at the rate of 340 basis points above LIBOR. This
interest rate increases by 20 basis points per month after February 2001 if our
offering has not closed by then. Amounts borrowed under the facility must be
repaid in 12 equal monthly installments beginning one month from the date the
loan was made; however, all outstanding amounts become due and payable one month
after the date this offering closes.
18
<PAGE> 21
USE OF PROCEEDS
The net proceeds to us from the sale of 4,700,000 ordinary shares in this
offering are estimated to be approximately $63.6 million ($73.4 million if the
underwriters' over-allotment option is exercised in full), after deducting the
underwriting discount and commission and estimated offering expenses. Our net
proceeds from the sale of 66,667 ordinary shares to Alan C. Draper, one of our
executive officers and directors, at a price of $15.00 per share are estimated
to be $1.0 million. We intend to use the proceeds of this offering and of this
sale to Mr. Draper as follows:
- approximately $21.0 million to repay existing debt under our credit
facilities which is unrelated to our acquisition of assets from the
Continental group of companies and which matures at various dates within
the next 12 months and bears interest at rates ranging from 6.5% to 15%;
- approximately $14.1 million to repay the indebtedness incurred to finance
the acquisition of assets from the Continental group of companies
including the approximately $3.0 million payment paid on October 31,
2000(1);
- approximately $20.0 million for strategic investments in and acquisitions
of businesses and information technology; and
- approximately $9.5 million for general corporate purposes.
The approximately $21.0 million of debt we intend to repay with proceeds
from this offering, which is unrelated to our acquisition of assets from the
Continental group of companies, was incurred within the last year. Approximately
$12.0 million of this debt was incurred in connection with acquisitions and the
remainder was used for general working capital purposes.
The $5.0 million of indebtedness from Gensec Ireland Limited that we
incurred to partially fund the purchase price for the assets we acquired from
the Continental group of companies bears interest at the rate of 340 basis
points above LIBOR, and this interest rate increases by 20 basis points per
month after February 2001 if our offering has not closed by then. Amounts
borrowed under the facility must be repaid in 12 equal monthly installments
beginning one month from the date the loan was made; however, all outstanding
amounts become due and payable one month after the date this offering closes.
The remaining $9.0 million of debt used to fund the acquisition was borrowed
under various credit facilities and bears interest between 6.5% and 15%. Such
debt matures at various dates within the next 12 months.
We anticipate utilizing a portion of the proceeds from this offering to
make acquisitions of businesses which will support our strategic objectives in
the freight forwarding and supply chain management industry provided that we can
identify and acquire suitable businesses.
The amounts and timing of our actual expenditures will depend upon numerous
factors, including the amount and extent of our acquisitions, our marketing
activities, our investments in technology and the amount of cash generated by
our operations. Actual expenditures may vary substantially from our estimates.
We may find it necessary or advisable to use portions of the proceeds for other
purposes. The failure of our management to use such funds effectively could have
a material adverse effect on our business, results of operations and financial
condition. Pending application of the net proceeds, we intend to invest the net
proceeds of this offering in short-term, investment-grade, interest-bearing
securities.
---------------
(1) If this offering is not completed by November 30, 2000, then we will pay an
additional $2.5 million of the purchase price for the assets we acquired
from the Continental group of companies in cash, rather than by issuing the
number of our ordinary shares which results from dividing $2.5 million by
the per share offering price in this offering, and we will then use an
additional $2.5 million of the proceeds of this offering to repay
indebtedness incurred to finance this payment.
19
<PAGE> 22
PRICE RANGE OF OUR ORDINARY SHARES
Our ordinary shares began trading in 1997 on the Luxembourg Stock Exchange.
Prices for our ordinary shares are quoted on the Luxembourg Stock Exchange in
United States dollars. Trading activity in our ordinary shares has been limited
and infrequent and we are seeking additional liquidity for our shares as one of
the purposes of this offering and our listing on the Nasdaq National Market
System. As far as we are aware, only 76 trades of our ordinary shares were
completed on the Luxembourg Stock Exchange from January 1, 2000 through October
20, 2000. Given the limited trading activity in our ordinary shares, we believe
that past trading prices on the Luxembourg Stock Exchange are not necessarily
indicative of the fair market value of our ordinary shares and we intend to
delist our shares from the Luxembourg Stock Exchange upon the closing of this
offering. The following table sets forth the high and low sales prices of our
ordinary shares on the Luxembourg Stock Exchange for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDING JANUARY 31, 2001 HIGH (U.S.$) LOW (U.S.$)
---------------------------- ------------ -----------
<S> <C> <C>
lst Quarter........................................ $19.08 $12.21
2nd Quarter........................................ 27.85 17.17
3rd Quarter through
October 20, 2000................................... 22.89 19.08
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31, 2000
---------------------------
<S> <C> <C>
1st Quarter........................................ 12.21 11.45
2nd Quarter........................................ 16.79 16.02
3rd Quarter........................................ 11.45 10.68
4th Quarter........................................ 12.21 11.45
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31, 1999
---------------------------
<S> <C> <C>
1st Quarter........................................ 16.02 16.02
2nd Quarter........................................ 21.94 15.64
3rd Quarter........................................ 21.36 13.89
4th Quarter........................................ 15.26 14.50
</TABLE>
As of the date of this prospectus, the last reported sale of our ordinary
shares on the Luxembourg Stock Exchange took place on October 20, 2000 at $22.15
per share.
The offering price of our ordinary shares was determined as a result of
negotiations between us and the underwriters, after taking into account a number
of factors, including the market prices of similar securities of comparable
companies, our results of operations and financial condition, and recent trading
prices of our shares.
DIVIDEND POLICY
During our fiscal years ended January 31, 1998, 1999 and 2000, we paid
annual cash dividends to the holders of our ordinary shares and preference
shares in the amount of $0.15 per share. Following the completion of the sale of
our ordinary shares in this offering, we intend to continue to pay dividends
each year out of our current earnings, if any. However, we intend to decrease
the amount of per share dividends which we pay to our shareholders in the future
so that we may reinvest a substantial portion of our earnings, if any, in the
development of our business. Any future determination to pay cash dividends to
our shareholders will be at the discretion of our board of directors and will
depend upon our financial condition, operating results, capital requirements,
restrictions contained in our agreements, legal requirements and other factors
which our board of directors deems relevant. No assurance can be given that
dividends will be paid to our shareholders in the future.
20
<PAGE> 23
CAPITALIZATION
The following table sets forth at July 31, 2000:
- our actual cash and cash equivalents and capitalization;
- our cash and cash equivalents and capitalization, after giving pro forma
effect to our acquisition on September 1, 2000 of assets from the
Continental group of companies and approximately $16.6 million of
indebtedness which we incurred to finance the acquisition and to fund the
payments due October 31, 2000 and November 30, 2000 plus approximately
$10.8 million in contingent future acquisition installments; and
- our cash and cash equivalents and capitalization, on the pro forma basis
described above, as adjusted to reflect (a) our receipt of the estimated
net proceeds of this offering after deducting the underwriting discount
and commission and estimated offering expenses (excluding any proceeds
from the sale of shares issuable upon the exercise of the underwriters'
over-allotment option), (b) our receipt of $1.0 million from the sale of
66,667 ordinary shares to Alan C. Draper, one of our executive officers
and directors, at a price of $15.00 per share, (c) our repayment of
approximately $35.1 million of indebtedness with a portion of the net
proceeds from this offering and (d) the issuance of 166,667 ordinary
shares to the sellers of assets purchased from the Continental group of
companies at a price of $15.00 per share assuming this offering closes by
November 30, 2000.
This table is based upon our consolidated financial statements, which have
been prepared in accordance with IAS. You should read the data set forth below
in conjunction with the more detailed information found in our consolidated
financial statements and the notes relating to those statements, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
other financial data appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF JULY 31, 2000 (UNAUDITED)
---------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
----------- --------- -----------
(US$ IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents........................ $ 24,745 $ 24,745 $ 54,210
======== ======== ========
Total long-term borrowings and finance lease
obligations, including current portion......... $ 58,514 $ 85,914 $ 48,314
Issued capital:
Preference shares, no par value, 100,000,000
shares authorized, none issued or
outstanding................................. -- -- --
Ordinary shares, no par value, 500,000,000
shares authorized, 20,047,380 issued and
outstanding actual; 20,047,380 issued and
outstanding, pro forma; and 24,980,950
issued and outstanding, pro forma as
adjusted.................................... 86,020 86,020 153,085
Cumulative foreign exchange translation
adjustment..................................... (29,054) (29,054) (29,054)
Distributable reserves........................... 48,575 48,575 48,575
Non-distributable reserves....................... 2,759 2,759 2,759
-------- -------- --------
Total shareholders' equity.................. 108,300 108,300 175,365
-------- -------- --------
Total capitalization...................... $166,814 $194,214 $223,679
======== ======== ========
</TABLE>
In addition to the ordinary shares to be outstanding after the offering, we
may issue additional ordinary shares under our employee and director option
plans and 2000 Employee Share Purchase Plan.
21
<PAGE> 24
DILUTION
The net tangible book value of our ordinary shares at July 31, 2000 was
$48.5 million or approximately $2.42 per share. Net tangible book value per
share represents the amount of our shareholders' equity, less intangible assets,
divided by the number of ordinary shares outstanding.
Net tangible book value dilution per share represents the difference
between the following:
(1) the amount paid per share by purchasers of ordinary shares in this
offering; and
(2) the adjusted net tangible book value per share of purchasers of
ordinary shares in this offering immediately after completion of this
offering.
After giving effect to (a) our sale of 4,700,000 ordinary shares in this
offering at the public offering price of $15.00 per share, after deducting
underwriting discounts and commissions and the estimated offering expenses
payable by us, (b) the sale of 66,667 ordinary shares to Alan C. Draper, one of
our executive officers and directors, at a price of $15.00 per share and (c) the
issuance of 166,667 ordinary shares to the sellers of assets purchased from the
Continental group of companies at a price of $15.00 per share, our adjusted net
tangible book value at July 31, 2000, was $89.2 million or $3.57 per ordinary
share. This represents an immediate increase in net tangible book value of $1.15
per share to existing shareholders and an immediate dilution of net tangible
book value of $11.43 per share to you. The following table illustrates this
dilution:
<TABLE>
<S> <C> <C>
Public offering price per ordinary share.................... $15.00
Net tangible book value per ordinary share at July 31,
2000...................................................... $2.42
Net increase in net tangible book value per ordinary share
attributable to cash payment from this offering........... $1.15
-----
Pro forma net tangible book value per ordinary share at July
31, 2000 after giving effect to the offering.............. $ 3.57
------
Immediate dilution per ordinary share to new investors...... $11.43
======
</TABLE>
The table above assumes no exercise of outstanding options. The table above
also assumes no exercise of the underwriters' over-allotment option. To the
extent that any shares are issued in connection with outstanding options or the
underwriters' over-allotment option, you will experience further dilution. See
"Management" for a description of our option and employee share purchase plans
and "Underwriting" for a description of the underwriters' over-allotment option.
22
<PAGE> 25
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the consolidated financial statements and related notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and other financial data included elsewhere in this prospectus.
The selected consolidated financial data as of January 31, 1996, 1997 and
1998 and for each of the years in the two year period ended January 31, 1997
have been derived from our audited consolidated financial statements which are
not included in this prospectus. The selected consolidated financial data as of
January 31, 1999 and 2000, and for each of the years in the three-year period
ended January 31, 2000 have been derived from our audited consolidated financial
statements which appear elsewhere in this prospectus. The selected consolidated
financial data as of July 31, 2000, and for the six months ended July 31, 1999
and 2000 are derived from our unaudited consolidated financial statements which
appear elsewhere in this prospectus. Our unaudited consolidated financial
statements have been prepared on a basis consistent with our audited
consolidated financial statements and include all adjustments, which are only
normal recurring adjustments, necessary for a fair presentation of the financial
position and the results of operations for the unaudited periods. The historical
results are not necessarily indicative of the operating results to be expected
in the future. All financial information presented has been prepared in United
States dollars and in accordance with IAS. The accounting policies adopted by us
under IAS differ in significant respects from U.S. GAAP. These differences for
the fiscal years 1999 and 2000 and for the six month periods ended July 31, 1999
and 2000 are described in Note 29 to our consolidated financial statements and
in "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- U.S. GAAP Reconciliation."
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED JANUARY 31, ENDED JULY 31,
---------------------------------------------------- -------------------
1996 1997 1998 1999 2000 1999 2000
-------- -------- -------- -------- -------- -------- --------
(US$ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Amounts in accordance with IAS:
Gross revenue(1).............................. $465,320 $504,064 $528,535 $571,141 $706,955 $327,997 $401,985
Freight consolidation costs(2)................ 298,337 327,509 342,049 362,862 461,338 212,842 260,852
Net revenue(2):
Airfreight forwarding....................... -- -- 101,092 113,619 124,177 60,003 67,332
Ocean freight forwarding.................... -- -- 30,745 33,345 44,078 20,787 24,083
Customs brokerage........................... -- -- 27,495 33,360 40,156 18,774 27,818
Other revenue............................... -- -- 27,154 27,955 37,206 15,591 21,900
-------- -------- -------- -------- -------- -------- --------
Total net revenue......................... 166,983 176,555 186,486 208,279 245,617 115,155 141,133
Staff costs................................... 85,700 88,987 92,333 106,544 122,929 58,465 71,668
Depreciation.................................. 6,269 6,263 6,025 6,310 7,822 3,640 4,267
Amortization.................................. 255 376 695 1,841 3,409 1,504 2,146
Other operating expenses...................... 68,448 68,248 71,737 77,279 90,032 43,761 50,791
-------- -------- -------- -------- -------- -------- --------
Operating profit.............................. 6,311 12,681 15,696 16,305 21,425 7,785 12,261
Pretax income................................. 8,802 10,787 14,643 17,873 19,106 6,455 10,755
Net income before minority interest........... 5,859 8,656 12,100 14,653 17,483 5,907 8,176
Net income.................................... $ 5,319 $ 8,656 $ 11,848 $ 14,574 $ 17,078 $ 5,600 $ 7,776
======== ======== ======== ======== ======== ======== ========
Basic earnings per ordinary share............. $ 0.46 $ 0.76 $ 0.92 $ 0.96 $ 1.07 $ 0.34 $ 0.44
======== ======== ======== ======== ======== ======== ========
Diluted earnings per ordinary share........... $ 0.38 $ 0.53 $ 0.70 $ 0.76 $ 0.85 $ 0.28 $ 0.39
======== ======== ======== ======== ======== ======== ========
Cash dividends per ordinary share............. $ 0.00 $ 0.00 $ 0.15 $ 0.15 $ 0.15 $ 0.00 $ 0.00
======== ======== ======== ======== ======== ======== ========
CASH FLOW AND OTHER DATA:
Amounts in accordance with IAS:
Purchases of property, plant and equipment.... $ 6,955 $ 7,706 $ 5,066 $ 16,644 $ 12,924 $ 4,214 $ 8,424
Net cash from operating activities............ 4,288 4,909 9,475 16,136 8,446 7,657 6,471
Net cash used in investing activities......... (1,378) (1,647) (6,158) (33,928) (26,454) (12,097) (11,788)
Net cash from (used in) financing
activities.................................. (2,216) (22,947) 145 36,539 1,430 (6,020) 8,329
Amounts using IAS results:
EBITDA(3)..................................... 16,197 19,320 22,416 24,456 32,656 12,929 18,674
</TABLE>
23
<PAGE> 26
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
JANUARY 31, ENDED JULY 31,
-------------------- --------------------
1999 2000 1999 2000
-------- -------- -------- --------
(US$ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Amounts in accordance with U.S. GAAP:
Gross revenue(1).......................................... $571,141 $706,955 $327,997 $401,985
Freight consolidation costs(2)............................ 362,862 461,338 212,842 260,852
-------- -------- -------- --------
Net revenue(2)............................................ 208,279 245,617 115,155 141,133
Staff costs............................................... 107,731 124,330 59,227 73,084
Depreciation.............................................. 6,286 7,798 3,628 4,255
Amortization.............................................. 1,517 2,935 1,045 1,877
Other operating expenses.................................. 77,279 90,032 43,761 50,791
-------- -------- -------- --------
Operating profit.......................................... 15,466 20,522 7,494 11,126
Pretax income............................................. 17,049 18,750 6,387 10,099
Net income before minority interest....................... 13,829 17,098 5,839 7,520
Net income................................................ $ 13,750 $ 16,693 $ 5,532 $ 7,120
======== ======== ======== ========
Basic earnings per ordinary share......................... $ 0.97 $ 1.12 $ 0.36 $ 0.43
======== ======== ======== ========
Diluted earnings per ordinary share....................... $ 0.74 $ 0.86 $ 0.29 $ 0.36
======== ======== ======== ========
Cash dividends per ordinary share......................... $ 0.15 $ 0.15 $ 0.00 $ 0.00
======== ======== ======== ========
CASH FLOW AND OTHER DATA:
Amounts in accordance with U.S. GAAP:
Purchases of property, plant and equipment................ $ 16,644 $ 12,924 $ 4,214 $ 8,424
Net cash from operating activities........................ 16,136 8,446 7,657 6,471
Net cash used in investing activities..................... (33,928) (26,454) (12,097) (11,788)
Net cash from (used in) financing activities.............. 36,539 1,430 (6,020) 8,329
Amounts using U.S. GAAP results:
EBITDA(3)................................................. 23,269 31,255 12,167 17,258
</TABLE>
<TABLE>
<CAPTION>
AS OF JANUARY 31, AS OF
-------------------------------------------------------- JULY 31,
1996 1997 1998 1999 2000 2000
-------- -------- -------- -------- -------- --------
(US$ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Amounts in accordance with IAS:
Working capital.............................. $ 4,458 $ 12,422 $ 24,116 $ 39,602 $ 31,338 $ 22,733
Total assets................................. 188,990 169,563 180,604 255,213 297,920 351,560
Long-term liabilities........................ 8,927 9,373 4,622 14,206 18,801 19,083
Shareholders' equity:
Issued capital............................. 25,988 34,166 49,521 86,020 86,020 86,020
Cumulative foreign exchange translation
adjustment............................... (1,845) (7,386) (12,503) (22,575) (24,535) (29,054)
Distributable reserves..................... (923) 6,595 16,042 27,678 41,374 48,575
Non-distributable reserves................. 609 2,130 2,180 2,214 2,184 2,759
-------- -------- -------- -------- -------- --------
Total shareholders' equity............. $ 23,829 $ 35,505 $ 55,240 $ 93,337 $105,043 $108,300
======== ======== ======== ======== ======== ========
Amounts in accordance with U.S. GAAP:
Working capital................................................................ $ 47,348 $ 36,669 $ 33,860
Total assets................................................................... 243,362 288,098 335,478
Long-term liabilities.......................................................... 12,044 14,339 13,596
Shareholders' equity:
Issued capital............................................................... 126,086 127,487 128,903
Cumulative foreign exchange translation adjustment........................... (21,925) (23,396) (28,114)
Distributable reserves....................................................... (13,156) 214 6,759
Non-distributable reserves................................................... 389 709 1,284
-------- -------- --------
Total shareholders' equity................................................. $ 91,394 $105,014 $108,832
======== ======== ========
</TABLE>
---------------
(1) Gross revenue represents billings on exports to customers, plus net revenue
on imports, net of any value added taxes and custom duties. Gross revenue
and freight consolidation costs for airfreight and
24
<PAGE> 27
ocean freight forwarding services, including commissions earned from our
services as an authorized agent for airline and ocean carriers, are
recognized at the time the freight departs the terminal of origin, which is
when the customer is billed. Gross customs brokerage revenue and other
revenues are also recognized when we bill the customer, which for customs
brokerage revenue, is when the necessary documentation for customs clearance
has been completed, and for other revenues, is when the service has been
provided to third parties in the ordinary course of business.
(2) Net revenue is determined by deducting freight consolidation costs from
gross revenue. Freight consolidation costs are recognized at the time the
freight departs the terminal of origin. For the fiscal years ended January
31, 1996 and 1997, we did not account for net revenue according to the
categories of airfreight, ocean freight, customs brokerage and other
revenue.
(3) Although earnings before interest, taxes, depreciation and amortization, and
foreign exchange transaction gains and losses ("EBITDA") is a non-U.S. GAAP
measure, EBITDA is included because we believe that such calculation
provides relevant and useful information for evaluating our performance.
EBITDA should not be considered an alternative to measures of operating
performance as determined in accordance with U.S. GAAP, including net income
as a measure of our operating results and cash flows as a measure of our
liquidity. Similar to our net income and cash flows, funds represented by
EBITDA are subject to the same restrictions on use contained in some of our
bank credit facilities and restrictions on the payment of dividends by some
of our subsidiaries. Because EBITDA is not calculated identically by all
companies, our calculation of EBITDA may not be comparable to other
similarly titled measures of other companies. In fiscal 1996, there is a
non-recurring gain of $3.4 million related to a claim with respect to the
purchase of subsidiaries. In fiscal 2000, there is a credit of $1.5 million
included in other operating expenses, which represents a payment from our
satellite communications supplier based on volume usage for several prior
years.
25
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and the related notes included elsewhere in this prospectus. This
discussion contains forward-looking statements, the accuracy of which involves
risks and uncertainties. Our actual results could differ materially from those
anticipated in the forward-looking statements for many reasons including, but
not limited to, those discussed in "Risk Factors" and elsewhere in this
prospectus. We disclaim any obligation to update information contained in any
forward-looking statement.
OVERVIEW
Our principal sources of income include airfreight forwarding, ocean
freight forwarding, customs brokerage and other services. We attempt to become
our customers' preferred provider of supply chain management solutions, thus
increasing both the range and volume of transactions for our freight forwarding,
customs brokerage and other services. Our recent growth in gross revenue and net
revenue resulted from both growth of our existing operations and growth which we
attribute to our acquisitions.
A significant portion of our expenses are variable and adjust to reflect
the level of our business activities. Other than transportation costs, staff
costs are our single largest variable expense and are less flexible in the near
term as we must staff to meet uncertain future demand.
AIRFREIGHT FORWARDING
When we act as an airfreight forwarder, we conduct business as an indirect
carrier or occasionally as an authorized agent for the airline which carries the
shipment. In both cases, gross revenue and applicable costs are recognized at
the time the freight departs the terminal of origin.
When we act as an indirect air carrier, we procure shipments from a large
number of customers, consolidate shipments bound for a particular destination
from a common place of origin, determine the routing over which the consolidated
shipment will move, and purchase cargo space from airlines on a volume basis. As
an indirect air carrier, our gross revenue includes the rate charged to the
client for the movement of the shipment on the airline, plus the fees we charge
for our other ancillary services such as preparing shipment-related
documentation and materials handling related services. Airfreight forwarding
gross revenue includes expedited movement by ground transportation.
When we act as an indirect air carrier, our net revenue is the differential
between the rates charged to us by the airlines and the rates we charge our
customers plus the fees we receive for our other services. Therefore, our net
revenue is influenced by our ability to charge our customers a rate which is
higher than the rate we obtain from the airlines, but which is also lower than
the rate the customers could otherwise obtain directly from the airlines.
When we act as an authorized agent for the airline which carries the actual
shipment, our gross revenue is primarily derived from commissions received from
the airline plus fees for the ancillary services we provide such as preparing
shipment-related documentation, and materials handling related services. Our
gross revenue does not include airline transportation costs when we act as an
authorized agent. Accordingly, our gross revenue and net revenue are not
materially different in this situation.
OCEAN FREIGHT FORWARDING
When we act as an ocean freight forwarder, we conduct business as an
indirect ocean carrier or occasionally as an authorized agent for the ocean
carrier which carries the shipment. Our gross revenue and net revenue from ocean
freight forwarding and related costs are recognized the same way that our gross
revenue and net revenue from airfreight forwarding and related costs are
recognized.
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<PAGE> 29
When we act as an indirect ocean carrier or non-vessel operating common
carrier we contract with ocean shipping lines to obtain transportation for a
fixed number of containers between various points in a specified time period at
an agreed upon rate. We then solicit freight from customers to fill the
containers and consolidate the freight bound for a particular destination from a
common shipping point. As in the case when we act as an indirect airfreight
forwarder, our gross revenue in this situation includes the rate charged to the
customer for the movement of the shipment on the ocean carrier plus our fees for
the other services we provide which are related to the movement of goods such as
preparing shipment-related documentation. Our net revenue is determined by the
differential between the rates charged to us by the carriers and the rates we
charge our customers along with the fees we receive for our other ancillary
services.
When we act as an authorized agent for an ocean carrier, our gross revenue
is generated from the commission we receive from the carrier plus the fees we
charge for the ancillary services we provide. Our gross revenue does not include
transportation costs when we act as an authorized agent for an ocean carrier.
Under these circumstances, our gross revenue and net revenue are not materially
different.
CUSTOMS BROKERAGE
We provide customs clearance and brokerage services with respect to the
majority of the shipments we handle as a freight forwarder. We also provide
customs brokerage services for shipments handled by our competitors. These
services include assisting with and performing regulatory compliance functions
in international trade.
Customs brokerage gross revenue is recognized when the necessary
documentation for customs clearance has been completed. This gross revenue is
generated by the fees we charge for providing customs brokerage services, as
well as the fees we charge for the disbursements made on behalf of a customer.
These disbursements, which typically include customs duties and taxes, are
excluded from our calculations of gross revenue since they represent
disbursements made on behalf of customers. Typically, disbursements are included
in our accounts receivable and are several times larger than the amount of
customs brokerage gross revenue generated. As a result of recent growth in our
customs brokerage services, there has been an increase in our accounts
receivable.
OTHER SERVICES
We also provide a range of other services, such as warehousing services,
customized distribution and inventory management services and developing
specialized customer-specific supply chain solutions. Our gross revenue in these
capacities includes commissions and fees earned by us and is recognized upon
performance.
SEASONALITY
Historically, our operating results have been subject to seasonal trends
when measured on a quarterly basis. Our first quarter is traditionally weaker
compared with the other fiscal quarters, which we believe is in keeping with the
trends of the operating results of other supply chain service providers. This
trend is dependent on numerous factors, including the markets in which we
operate, holiday seasons, consumer demand and economic conditions. Because of
our global operations, seasonal trends in one area may be offset in varying
degrees by opposite trends in another. We cannot accurately predict the timing
of these factors, nor can we accurately estimate the impact of any particular
factor, and thus we can give no assurance that these historical seasonal
patterns will continue in future periods.
PREPARATION OF FINANCIAL STATEMENTS
Our financial statements are prepared in United States dollars and in
accordance with IAS, which differ in significant respects from U.S. GAAP. The
following discussion and analysis of our financial condition and results of
operations is based on the results prepared in accordance with IAS. The
significant
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<PAGE> 30
differences from U.S. GAAP applicable to our financial statements are summarized
in Note 29 to our consolidated financial statements.
RESULTS OF OPERATIONS
Our business operates in four geographic segments comprised of Europe, the
Americas, Asia Pacific and Africa. Gross revenue is recognized in the region in
which the shipment originates. Our gross revenue by geographic segment is set
forth in the following table:
GROSS REVENUE BY GEOGRAPHIC SEGMENT
(US$ IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31, SIX MONTHS ENDED JULY 31,
------------------------------------------------------------ ---------------------------------------
1998 1999 2000 1999 2000
------------------ ------------------ ------------------ ------------------ ------------------
% OF % OF % OF % OF % OF
GROSS GROSS GROSS GROSS GROSS
AMOUNT REVENUE AMOUNT REVENUE AMOUNT REVENUE AMOUNT REVENUE AMOUNT REVENUE
-------- ------- -------- ------- -------- ------- -------- ------- -------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REGION
Europe.................... $163,117 31% $195,761 34% $217,184 31% $118,705 36% $137,660 34%
Americas.................. 163,854 31 173,096 30 241,954 34 98,341 30 132,137 33
Asia Pacific.............. 72,574 14 78,902 14 118,965 17 52,544 16 69,158 17
Africa.................... 128,990 24 123,382 22 128,852 18 58,407 18 63,030 16
-------- --- -------- --- -------- --- -------- --- -------- ---
Gross revenue............. $528,535 100% $571,141 100% $706,955 100% $327,997 100% $401,985 100%
======== === ======== === ======== === ======== === ======== ===
</TABLE>
Gross revenue increased 23% to $402.0 million for the six months ended July
31, 2000 compared to $328.0 million for the six months ended July 31, 1999 due
to increases in airfreight forwarding (19%), ocean freight forwarding (20%),
customs brokerage (56%) and other revenue (32%). Gross revenue for the six
months ended July 31, 2000 benefitted from acquisitions made during the second
half of 2000 fiscal year and acquisitions completed during the first half of the
2001 fiscal year. We estimate that such acquisitions accounted for $27.1 million
of our gross revenue for the six months ended July 31, 2000.
Gross revenue increased 24% to $707.0 million for 2000 compared to $571.1
million for 1999 due to increases in airfreight forwarding (18%), ocean freight
forwarding (36%), customs brokerage (17%) and other revenue (31%). Gross revenue
for 2000 benefitted from acquisitions made during the 1999 fiscal year which had
a full year impact in the 2000 fiscal year and acquisitions completed during the
2000 fiscal year. We estimate that acquisitions completed during our 2000 fiscal
year accounted for $45.6 million of our gross revenue for the year. Gross
revenue increased 8% to $571.1 million for 1999 compared to $528.5 million for
1998 also due to increases in airfreight forwarding (8%), ocean freight
forwarding (7%), customs brokerage (16%) and other revenue (5%). We estimate
that acquisitions completed during our 1999 fiscal year accounted for $34.5
million of our gross revenue for the year.
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<PAGE> 31
We believe that net revenue is a better measure than gross revenue of the
importance to us of our various services since our gross revenue for our
services as an indirect air and ocean carrier includes the carriers' charges to
us for carriage of the shipment. When we act as an indirect air and ocean
carrier, our net revenue is determined by the differential between the rates
charged to us by the carrier and the rates we charge our customers plus the fees
we receive for our ancillary services. Net revenue derived from freight
forwarding generally is shared between the points of origin and destination. Our
gross revenue in our other capacities includes only commissions and fees earned
by us and is substantially the same as our net revenue. The following table
shows our net revenue and our operating expenses for the periods presented,
expressed as a percentage of net revenue.
RESULTS AS A PERCENTAGE OF NET REVENUE
(US$ IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
---------------------------------------------------------------
1998 1999 2000
------------------- ------------------- -------------------
% OF NET % OF NET % OF NET
AMOUNT REVENUE AMOUNT REVENUE AMOUNT REVENUE
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net revenue:
Airfreight forwarding..... $101,092 54% $113,619 55% $124,177 51%
Ocean freight
forwarding.............. 30,745 16 33,345 16 44,078 18
Customs brokerage......... 27,495 15 33,360 16 40,156 16
Other..................... 27,154 15 27,955 13 37,206 15
-------- --- -------- --- -------- ---
Total net revenue......... 186,486 100% 208,279 100% 245,617 100%
-------- --- -------- --- -------- ---
Operating expenses:
Staff costs............... 92,333 50% 106,544 51% 122,929 50%
Depreciation.............. 6,025 3 6,310 3 7,822 3
Amortization.............. 695 * 1,841 1 3,409 1
Other operating
expenses................ 71,737 38 77,279 37 90,032 37
-------- --- -------- --- -------- ---
Total operating
expenses................ 170,790 92 191,974 92 224,192 91
-------- --- -------- --- -------- ---
Operating profit............ 15,696 8 16,305 8 21,425 9
Finance costs............... (4,001) (2) (3,936) (2) (4,653) (2)
Income from associates and
other investments......... 2,948 2 5,504 3 2,334 1
-------- --- -------- --- -------- ---
Pretax income............... 14,643 8 17,873 9 19,106 8
Income tax expense.......... 2,543 1 3,220 2 1,623 1
Minority interest........... 252 * 79 * 405 *
-------- --- -------- --- -------- ---
Net income.................. $ 11,848 6% $ 14,574 7% $ 17,078 7%
======== === ======== === ======== ===
EBITDA using
IAS results(1)............ $ 22,416 12% $ 24,456 12% $ 32,656 13%
======== === ======== === ======== ===
<CAPTION>
SIX MONTHS ENDED JULY 31,
-----------------------------------------
1999 2000
------------------- -------------------
% OF NET % OF NET
AMOUNT REVENUE AMOUNT REVENUE
-------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net revenue:
Airfreight forwarding..... $ 60,003 52% $ 67,332 48%
Ocean freight
forwarding.............. 20,787 18 24,083 17
Customs brokerage......... 18,774 16 27,818 20
Other..................... 15,591 14 21,900 15
-------- --- -------- ---
Total net revenue......... 115,155 100% 141,133 100%
-------- --- -------- ---
Operating expenses:
Staff costs............... 58,465 51% 71,668 51%
Depreciation.............. 3,640 3 4,267 3
Amortization.............. 1,504 1 2,146 2
Other operating
expenses................ 43,761 38 50,791 36
-------- --- -------- ---
Total operating
expenses................ 107,370 93 128,872 91
-------- --- -------- ---
Operating profit............ 7,785 7 12,261 9
Finance costs............... (3,082) (3) (3,624) (3)
Income from associates and
other investments......... 1,752 2 2,118 2
-------- --- -------- ---
Pretax income............... 6,455 6 10,755 8
Income tax expense.......... 548 * 2,579 2
Minority interest........... 307 * 400 *
-------- --- -------- ---
Net income.................. $ 5,600 5% $ 7,776 6%
======== === ======== ===
EBITDA using
IAS results(1)............ $ 12,929 11% $ 18,674 13%
======== === ======== ===
</TABLE>
---------------
* Less than one percent.
(1) Although earnings before interest, taxes, depreciation and amortization, and
foreign exchange transaction gains and losses ("EBITDA") is a non-U.S. GAAP
measure, EBITDA is included because we believe that such calculation
provides relevant and useful information for evaluating our performance.
Similar to our net income and cash flows, funds depicted by EBITDA are
subject to the same restrictions for use such as limitations contained in
some of our bank credit facilities and restrictions on the payment of
dividends. In fiscal 2000 there is a credit of $1.5 million included in
other operating expenses, which represents a payment from our satellite
communications supplier based on volume usage for several prior years.
SIX MONTHS ENDED JULY 31, 2000 COMPARED TO SIX MONTHS ENDED JULY 31, 1999
Net revenue increased $26.0 million, or 23% to $141.1 million for the six
months ended July 31, 2000 compared to $115.1 million for the six months ended
July 31, 1999. Overall, net revenue for the six months ended July 31, 2000
benefitted from acquisitions made during the second half of fiscal 2000 and
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<PAGE> 32
the first half of fiscal 2001. We estimate that these acquisitions accounted for
approximately $11.2 million of the net revenue increase for the six months ended
July 31, 2000 versus the comparable period in the prior fiscal year.
Airfreight forwarding net revenue increased $7.3 million, or 12%, to $67.3
million for the six months ended July 31, 2000 compared to $60.0 million for the
six months ended July 31, 1999 as a result of volume increases, predominantly
from the Asia Pacific and Americas regions. Airfreight forwarding net revenue
from the Asia Pacific region for the six months ended July 31, 2000 increased by
19% and airfreight forwarding net revenue from the Americas increased 22% over
the same prior year period. Airfreight forwarding net revenue from Africa
increased by only 2% primarily due to depreciation of the South African rand.
Our airfreight forwarding net revenue expressed as a percentage of our
airfreight forwarding gross revenue decreased by two percentage points in the
six months ended July 31, 2000 (from 33% to 31%) compared to the same prior year
period, partially because a greater proportion of our business came from larger
volume global customers where the initial pricing is more competitive than with
smaller customers.
Ocean freight forwarding net revenue increased $3.3 million, or 16%, to
$24.1 million for the six months ended July 31, 2000 compared to $20.8 million
for the same prior year period. Increases in shipments and tonnage from Europe
predominately to the United States and Africa significantly contributed to this
increase in ocean freight forwarding net revenue.
Customs brokerage net revenue increased $9.0 million, or 48%, to $27.8
million for the six months ended July 31, 2000 compared to $18.8 million for the
same prior year period. Customs brokerage net revenue increased primarily as a
result of our acquisitions of customs brokers during the second half of fiscal
2000 and a general increase in the number of shipments during the six months
ended July 31, 2000 compared to the same prior year period. We estimate that
acquisitions of customs brokers which we completed in the second half of fiscal
2000 accounted for approximately $4.9 million of the increase in customs
brokerage net revenue for the first half of fiscal 2001 compared to the same
prior year period.
Other net revenue, which includes revenue from our other specialized
services including postponement warehousing and customized distribution
services, increased $6.3 million, or 40%, to $21.9 million for the six months
ended July 31, 2000 compared to $15.6 million for the same prior year period.
This increase is primarily a result of our increasing efforts to provide
additional services such as warehousing and other specialized supply chain
management services.
Staff costs increased $13.2 million, or 23%, to $71.7 million for the six
months ended July 31, 2000 from $58.5 million for the same prior year period.
However, staff costs remained at 51% of net revenue for the six months ended
July 31, 2000 which was consistent with the same prior year period. Staff costs
are the largest component of operating expenses and we strive to manage these
costs in relation to net revenue growth.
Depreciation expense increased by $0.7 million, or 17%, for the six months
ended July 31, 2000 over the same prior year period to $4.3 million primarily
due to increases in capital spending for computer equipment and fixtures and
fittings during the period. Depreciation expense remained constant at 3% of net
revenue in the six months ended July 31, 2000 as compared to the same prior year
period.
Amortization increased by $0.6 million, or 43%, to $2.1 million in the six
months ended July 31, 2000 as a result of the acquisitions we made in the second
half of fiscal 2000 and the related goodwill being amortized, as well as the
amortization of goodwill relating to the acquisitions completed during the first
half of the 2001 fiscal year. To date, our acquisitions have been accounted for
using the purchase method of accounting and the related goodwill is amortized
over a period not exceeding 20 years. Amortization expressed as a percentage of
net revenue increased to 2% in the six months ended July 31, 2000 from 1% in the
same prior year period.
Other operating expenses increased by $7.0 million, or 16%, to $50.8
million in the six months ended July 31, 2000 compared to $43.8 million for the
same prior year period. Included in other operating
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<PAGE> 33
expenses for the six months ended July 31, 2000 are facilities and
communications costs of $16.7 million compared to $13.1 million of such costs
for the same prior year period. Facilities and communications costs increased
primarily as a result of the addition of new locations and a general increase in
business activity during the six months ended July 31, 2000 compared to the same
prior year period. The balance of the other operating expenses is comprised of
selling, general and administrative costs. For the six months ended July 31,
2000, selling, general and administrative costs were $34.1 million compared to
$30.7 million for the same prior year period. The increase in selling, general
and administrative costs was primarily a result of increased business activity
during the six months ended July 31, 2000 compared to the same prior year
period. When expressed as a percentage of net revenue, other operating expenses
declined to 36% for the six months ended July 31, 2000 compared to 38% for the
same prior year period.
Finance costs, which consisted primarily of interest on our credit
facilities, capital finance lease obligations and future acquisition
installments increased $0.5 million or 18%, to $3.6 million in the six months
ended July 31, 2000 from $3.1 million for the same prior year period. The
elimination of the loss on foreign exchange of approximately $0.3 million which
occurred during the six months ended July 31, 1999 was offset by increases
during the six months ended July 31, 2000 in interest attributable to our credit
facilities and capital finance lease obligations of $0.6 million and future
acquisition installments for possible earn-out payments of $0.2 million. When
expressed as a percentage of net revenue, finance costs were unchanged at 3% in
the six months ended July 31, 2000 compared to the same prior year period.
Income from associates and other investments increased 21% to $2.1 million
in the six months ended July 31, 2000 compared to $1.8 million for the same
prior year period. This increase relates primarily to a net foreign exchange
gain of $0.6 million in the first half of fiscal 2001 which did not occur in the
comparable period in fiscal 2000. This increase was partially offset by a
decline of $0.3 million in interest income.
The effective income tax rate increased to 24% in the six months ended July
31, 2000 compared to 8% in the same prior year period. The lower rate in the
prior year was largely due to the utilization of tax losses not previously
recognized and the creation of deferred tax assets as a result of timing
differences between accounting and tax values of balance sheet items in some
subsidiary companies. Our overall tax rate is impacted by the geographic
composition of our worldwide earnings, with some of our operations in countries
with low effective income tax rates. We expect that our effective tax rate will
increase in fiscal year 2001 and beyond given that the recognition of tax losses
in fiscal year 2000 will not reoccur. We cannot predict, however, the amount of
the increase in our effective tax rate given the uncertainties concerning the
future geographical composition of our worldwide earnings.
Net income increased 39% to $7.8 million in the six months ended July 31,
2000 as compared to the same prior year period for the reasons listed above.
YEAR ENDED JANUARY 31, 2000 COMPARED TO YEAR ENDED JANUARY 31, 1999
Net revenue increased $37.3 million, or 18%, to $245.6 million for 2000.
Overall, net revenue benefitted from acquisitions made during the 1999 fiscal
year which had a full year impact on the 2000 fiscal year and acquisitions made
during the 2000 fiscal year. We estimate that acquisitions completed during the
2000 fiscal year contributed $13.8 million of net revenue for the year.
Airfreight forwarding net revenue increased $10.6 million, or 9%, to $124.2
million for 2000 compared to $113.6 million for 1999 as a result of volume
increases, predominantly from the Asia Pacific and North American regions. Net
revenue from the Asia Pacific region increased by 26% and net revenue from the
Americas increased 20% over the prior year. These increases offset the decline
in net revenue from Africa. The decline in net revenue from Africa was primarily
due to depreciation of the South African rand as both shipments and tonnage
increased in this region in 2000 over 1999.
Our airfreight forwarding net revenue expressed as a percentage of our
airfreight forwarding gross revenue decreased by three percentage points in 2000
compared to 1999, partially because a greater
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<PAGE> 34
proportion of our business came from larger volume global customers where the
initial pricing is more competitive than with smaller customers.
Ocean freight forwarding net revenue increased $10.8 million, or 32%, to
$44.1 million for 2000 compared to $33.3 million for 1999. The increase was
principally due to increases in shipments from Asia Pacific predominately to the
United States and increases in shipments from the United States to South
America. Ocean freight forwarding net revenue for the entire Asia Pacific region
increased by 33% primarily as a result of our strategy to increase volumes in
the Asia to North America route.
Customs brokerage net revenue increased $6.8 million, or 20%, to $40.2
million for 2000 compared to $33.4 million for 1999. Customs brokerage net
revenue increased as a result of an increase in shipments and our acquisitions
of customs brokers during the 2000 fiscal year and during the second half of
1999. The full year effect of the acquisitions which we completed in 1999 was
realized in fiscal 2000. We estimate that acquisitions of customs brokers which
we completed in fiscal 2000 contributed $3.9 million of customs brokerage net
revenue for the fiscal year.
Other net revenue, which includes revenue from our other specialized
services including postponement warehousing and customized distribution
services, increased $9.3 million, or 33%, to $37.2 million for 2000 compared to
$27.9 million for 1999. This increase is primarily a result of our increasing
efforts to provide services such as warehousing and other specialized supply
chain management services.
Staff costs increased $16.4 million, or 15%, to $122.9 million for 2000
from $106.5 million for 1999. However, staff costs decreased slightly expressed
as a percentage of net revenue, from 51% in 1999 to 50% in 2000. Staff costs are
the largest component of operating expenses and we strive to manage these costs
in relation to net revenue growth. These costs for 2000 reflect the full year
impact of staff costs related to acquisitions completed during the second half
of fiscal 1999. Employee headcount increased by approximately 10%, based on
fiscal year-end comparisons at January 31, 2000 and 1999, as a result of the
various acquisitions made during the 2000 fiscal year and general staff
increases due to the increase in business activities.
Depreciation expense increased by $1.5 million, or 24%, over the prior year
to $7.8 million in 2000 primarily due to increases in capital spending for
computer equipment and fixtures and fittings during the year. Depreciation
expense remained constant at 3% of net revenue in 2000 versus 1999.
Amortization increased by $1.6 million, or 85%, to $3.4 million in 2000 as
a result of the acquisitions we made in the second half of 1999 and the related
goodwill being amortized for a full year, as well as the amortization of
goodwill relating to the acquisitions completed during the 2000 fiscal year. To
date, our acquisitions have been accounted for using the purchase method of
accounting and the related goodwill is amortized over a period not exceeding 20
years. Amortization expressed as a percentage of net revenue increased to 1.4%
in 2000 from 0.9% in 1999.
Other operating expenses increased by $12.8 million, or 17%, to $90.0
million in 2000. Included in other operating expenses for 2000 are facilities
and communications costs of $27.8 million compared to $24.4 million of such
costs for 1999. Facilities and communications costs increased primarily because
of the addition of new locations and a general increase in business activity
during fiscal 2000 compared to fiscal 1999. Included as a credit in other
operating expenses for 2000 is $1.5 million, which represents a payment from our
satellite communications supplier based on volume usage for several prior years.
The balance of other operating expenses is comprised of selling, general and
administrative costs. For 2000, selling, general and administrative costs were
$62.2 million compared to $52.9 million for 1999. The increase in selling,
general and administrative costs for fiscal 2000 compared to fiscal 1999 was as
a result of a general increase in business activity for 2000 compared to the
prior year. When expressed as a percentage of net revenues, other operating
expenses remained constant at 37% for 2000 compared to 1999.
Finance costs, which consisted of interest on our credit facilities and
capital finance lease obligations, future acquisition installments and a foreign
exchange loss, increased $0.8 million or 18%, to $4.7 million for 2000 from $3.9
million for 1999. A decrease in interest charged on our credit facilities of
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<PAGE> 35
approximately $1.1 million was offset by increases in interest attributable to
capital finance lease obligations and future acquisition installments for
possible earn-out payments, as well as a net foreign exchange loss of $0.5
million. When expressed as a percentage of net revenue, finance costs were
unchanged at 2% in 2000 compared to 1999.
Income from associates and other investments declined 58% to $2.3 million
for 2000 compared to $5.5 million for 1999. This decline relates primarily to
interest income and a net foreign exchange gain of $2.8 million in 1999 which
did not reoccur in 2000.
The effective income tax rate decreased to 8.5% in 2000 compared to 18% in
1999. This decrease was largely due to the utilization of tax losses not
previously recognized and the creation of deferred tax assets as a result of
timing differences between accounting and tax values of balance sheet items in
subsidiary companies. Our overall tax rate is impacted by the geographic
composition of our worldwide earnings, with some of our operations in countries
with low effective income tax rates. We expect that our effective tax rate will
increase in 2001 and beyond given that the recognition of tax losses in 2000
will not reoccur. We cannot predict, however, the amount of the increase in our
effective tax rate given the uncertainties concerning the future geographical
composition of our worldwide earnings.
Net income increased 17% to $17.1 million in 2000 compared to $14.6 million
in 1999 for the reasons indicated above.
YEAR ENDED JANUARY 31, 1999 COMPARED TO YEAR ENDED JANUARY 31, 1998
Net revenue increased $21.8 million, or 12%, to $208.3 million for 1999
compared to $186.5 million for 1998 due to increases in airfreight forwarding,
ocean freight forwarding, customs brokerage and other revenue. We estimate that
acquisitions completed during the 1999 fiscal year contributed $16.5 million of
net revenue for the year.
Airfreight forwarding net revenue increased $12.5 million, or 12%, to
$113.6 million for 1999 compared to $101.1 million for 1998 as a result of
increased volumes, particularly from Asia Pacific and North America. All
regions, except Africa, showed increases in airfreight forwarding net revenue,
with the reduction in net revenue in Africa being more than offset by the
increase in the European and American regions.
Ocean freight forwarding net revenue increased $2.6 million, or 8%, to
$33.3 million for 1999 compared to $30.7 million for 1998. Increases in ocean
freight forwarding net revenue in Asia Pacific, the Americas and Europe of 19%,
8% and 10%, respectively, were partially offset by a decline in ocean freight
forwarding net revenue in Africa. All regions showed increases in shipments and
tonnage. Ocean freight forwarding net revenue in Africa declined 11% in 1999
compared to 1998 primarily as a result of the depreciation of the South African
rand as both shipments and tonnage increased from this region when compared to
1998.
Customs brokerage net revenue increased $5.9 million, or 21%, to $33.4
million for 1999 compared to $27.5 million in 1998. This increase was due
primarily to increased revenue associated with a general increase in shipments
and revenue for the portion of 1999 attributable to the acquisition of customs
brokers completed during the 1999 fiscal year. We estimate that acquisitions of
customs brokers which we completed in 1999 contributed $2.3 million of customs
brokerage net revenue for the 1999 fiscal year.
Other net revenue, which includes our other specialized services including
warehousing and customized distribution services, increased $0.8 million, or 3%,
to $28.0 million for 1999 compared to $27.2 million for 1998. Increases in these
services were as a result of increased business activity.
Staff costs increased $14.2 million, or 15%, to $106.5 million in 1999
compared to $92.3 million for 1998. As a percentage of net revenue, staff costs
were 51% during 1999 compared to 50% in 1998. Staff costs comprise the largest
proportion of operating expenses and we manage these costs in relation to net
revenue growth. Employee headcount increased by approximately 23% based on
comparisons at January 31, 1999 and 1998. During fiscal 1999, we completed
several acquisitions in the second half of the
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<PAGE> 36
year which resulted in increased headcount at January 31, 1999 compared to
January 31, 1998, but the corresponding staff costs were incurred for only a
portion of 1999. In addition, a significant portion of the total headcount added
as a result of these acquisitions was in the Asia Pacific region where the
average staff costs are lower than in the Americas and Europe.
Depreciation increased by $0.3 million, or 5%, to $6.3 million in 1999
primarily due to increases in capital spending for computer equipment and
fixtures and fittings during the year. As a percentage of net revenue for 1999
compared to 1998 depreciation remained constant at 3%.
Amortization increased $1.1 million, or 165%, to $1.8 million from $0.7
million in 1998. This was a result of a number of acquisitions made in late
fiscal 1998 and the related goodwill being amortized for a full fiscal year, as
well as the amortization relating to the new acquisitions made during 1999.
Amortization expressed as a percentage of net revenue increased to 0.9% in 1999
from 0.4% in 1998.
Other operating expenses increased by $5.5 million, or 8%, to $77.3 million
for 1999, compared to $71.7 million for 1998. Included in other operating
expenses for 1999 are facilities and communications costs of $24.4 million
compared to $21.7 million of such costs for 1998. Facilities and communications
costs increased primarily because of the addition of new locations and a general
increase in business activity during fiscal 1999 compared to fiscal 1999. The
balance of other operating expenses are comprised of selling, general and
administrative costs. For 1999, selling, general and administrative costs were
$52.9 million compared to $50.0 million for 1998. The increase in selling,
general and administrative costs for fiscal 1999 compared to fiscal 1998 was a
result of a general increase in business activity for 1999 compared to the prior
year. When expressed as a percentage of net revenues, other operating expenses
were 37% for 1999 compared to 38% for 1998.
Finance costs, which included interest on our credit facilities and
interest on capital finance lease obligations, decreased $0.1 million, or 2%, to
$3.9 million for 1999. No net foreign exchange losses or interest on future
acquisition installments were incurred during 1999 or 1998. Finance costs were
unchanged at 2% in 1999 and 1998 when expressed as a percentage of net revenue.
Income from associates and other investments increased $2.6 million, or
87%, to $5.5 million for 1999 compared to $2.9 million for 1998. This increase
was primarily attributable to a net foreign exchange gain of $2.8 million
recognized in 1999 compared to a net foreign exchange gain of $1.2 million
recognized in 1998 as well as increased interest income on bank deposits of $1.3
million in 1999 compared to 1998.
The effective income tax rate increased to 18% in 1999 compared to 17.4% in
1998. This increase was partially due to the write-off of some deferred tax
assets as future taxable income to recover these assets was not definite. In
general, the low tax rate is due to the geographic composition of our worldwide
earnings in countries with low effective income tax rates.
Net income increased 23% to $14.6 million in 1999 compared to $11.8 million
in 1998 for the reasons indicated above.
LIQUIDITY AND CAPITAL RESOURCES
We have used our internally generated cash flow from operations along with
the net proceeds from the issuance of share capital to fund our working capital
requirements, capital expenditures, acquisitions and debt service.
In the six months ended July 31, 2000, we generated approximately $6.5
million in net cash from operating activities. This resulted from pretax income
of $10.8 million plus depreciation and amortization totaling $6.4 million and
other non-cash operating expenses of $0.7 million, less a net increase in
working capital of approximately $5.4 million, primarily consisting of an
increase in accounts receivable of $44.1 million offset by an increase in
accounts payable of $39.0 million, and less taxes and interest paid of $2.8
million and $3.2 million, respectively. Our increase in accounts receivable
during the six months ended July 31, 2000 was approximately $32.0 million
greater than the increase in accounts receivable during the comparable period in
fiscal 2000. Although our accounts receivable increased at a rate which
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<PAGE> 37
was proportionately greater than the increase in our gross revenue, our days
sales outstanding remained consistent and there was also a corresponding
increase in accounts payable during the six months ended July 31, 2000 of
approximately $27.4 million more than in the same prior year period. These
incremental increases primarily resulted from increases of accounts receivable
and accounts payable related to the operations of our acquired customs brokers.
We make significant disbursements on behalf of our customers for
transportation costs concerning collect freight and customs duties and taxes.
The billings to our customers for these disbursements, which are several times
the amount of revenue and fees derived from these transactions, are not recorded
as revenue and expense on our consolidated income statements; rather, they are
reflected in our trade receivables and trade payables, both of which increased
as of July 31, 2000.
During the six months ended July 31, 2000, we used approximately $5.6
million of cash for acquisitions and $8.4 million for capital expenditures. We
received interest during the six months ended July 31, 2000 of approximately
$1.5 million. Our financing activities during the six months ended July 31, 2000
provided $8.3 million of cash, primarily due to an increase of $9.7 million in
our bank overdrafts offset by the payment of purchase acquisition installments
of $1.0 million. These activities, along with foreign exchange rate changes,
resulted in a net increase of our cash and cash equivalents from $20.8 million
at January 31, 2000 to $24.7 million at July 31, 2000.
During fiscal 2000, we used approximately $16.6 million of cash for
acquisitions and $12.9 million for capital expenditures. Our financing
activities in fiscal 2000 provided $1.4 million of cash, primarily due to an
increase of $7.4 million in our bank overdrafts and a net increase in capital
finance leases of $1.2 million, offset by the payment of purchase acquisition
installments of $5.2 million and the payment of dividends totaling $2.9 million.
These activities, along with the effect of foreign exchange rate changes,
resulted in a net decrease of our cash and cash equivalents from $38.6 million
at January 31, 1999 to $20.8 million at January 31, 2000.
During fiscal 1999, we raised $36.2 million through sales of our ordinary
shares. The proceeds from these sales were used to fund acquisitions, which we
completed during the 1999 and 2000 fiscal years. In connection with
acquisitions, we had potential obligations of $16.4 million at July 31, 2000 for
future payments due under various earn-out provisions related to our
acquisitions.
At July 31, 2000, we had capitalized finance lease obligations with a
present value of approximately $11.6 million. These leases are generally
repayable over a period of two to ten years and $2.2 million must be repaid in
the fiscal year ending January 31, 2001.
We have various bank credit facilities established in countries where such
facilities are required for our business. At July 31, 2000 these facilities
provided for lines of credit from approximately $0.1 million to $25.5 million,
and in total provided for guarantees, which are a necessary part of our
business, of $18.7 million and a borrowing capacity of approximately $47.2
million at July 31, 2000. Due to the global nature of our business, we utilize a
number of financial institutions to provide these various facilities.
Consequently, the use of a particular credit facility is normally restricted to
the country in which it originated and a particular credit facility may restrict
distributions by the subsidiary operating in the country. Our borrowings under
these facilities totaled $30.5 million at July 31, 2000. Most of our borrowings
are secured by grants of security interests in accounts receivable and other
assets, including pledges of stock of our subsidiaries. The interest rates on
these facilities vary and ranged from 6.5% to 15.0% at July 31, 2000. These
rates are generally linked to the prime lending rate in each country where we
have facilities. We use our credit facilities to primarily fund our working
capital needs as well as to provide for customs bonds and guarantees and forward
exchange transactions. While the majority of our borrowings are due and payable
within one year, we believe we will be able to renew such facilities on
commercially reasonable terms. At July 31, 2000, we had approximately $16.7
million of available, unused borrowing capacity under our bank credit
facilities.
In August 2000, Union-Transport Corporation, our U.S. operating company,
entered into a revolving credit facility with General Electric Capital
Corporation which provides for up to $29.0 million of
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<PAGE> 38
borrowings based on a formula of eligible accounts receivables. The credit
facility matures in three years, is guaranteed by us and is secured by
substantially all of the assets of the U.S. operating company and its
subsidiaries as well as a pledge of the stock of the U.S. operating company and
its subsidiaries. The credit agreement contains customary financial and other
covenants and restrictions applicable to the U.S. operations and a change of
control provision applicable to changes at our holding company level. The
agreement limits the right of the U.S. operating company to distribute funds to
holding companies. Prior to syndication of the loan, interest is due and payable
on borrowings under the credit facility at the latest rate for 30-day dealer
placed commercial paper plus 2.75%. After syndication of the loan, interest is
due and payable on borrowings under the credit facility at the borrower's
election at either LIBOR plus 2.75% or the higher of .50% plus the base rate as
published in the Wall Street Journal and .50% plus 50 basis points above the
federal funds rate.
In connection with our acquisition of assets from the Continental group of
companies, we borrowed in August 2000 approximately $6.1 million from various
existing credit facilities and $5.0 million under a bridge financing facility
with Gensec Ireland Limited. Amounts outstanding under the bridge financing bear
interest at the rate of 340 basis points above LIBOR and this interest rate
increases by 20 basis points per month after February 2001 if this offering has
not closed by then. Amounts borrowed under the facility must be repaid in 12
equal monthly installments beginning one month from the date the loan was made;
however, all outstanding amounts become due and payable one month after the date
this offering closes.
We believe that the proceeds of this offering, together with our current
cash position, various bank credit facilities and operating cash flows, should
be sufficient to meet our working capital and liquidity requirements for the
foreseeable future.
OTHER INFORMATION
EBITDA increased $5.7 million, or 44%, to $18.7 million for the six months
ended July 31, 2000, compared to $12.9 million for the six months ended July 31,
1999. The increase is primarily attributable to our increased net revenue while
our expenses did not increase at the same rate. Funds represented by EBITDA are
subject to restrictions, similar to those applicable to our net income and cash
flows, such as limitations contained in some of our credit facilities and
restrictions on the payment of dividends by some of our subsidiaries. Since
EBITDA is not calculated identically by all companies, our calculation of EBITDA
may not be comparable to other similarly titled measures of other companies.
EBITDA should not be considered an alternative to measures of operating
performance as determined in accordance with U.S. GAAP, including net income as
a measure of our operating results and cash flows as a measure of our liquidity.
RECENTLY ADOPTED INTERNATIONAL ACCOUNTING STANDARDS
In the six months ended July 31, 2000, we adopted three new International
Accounting Standards and the revisions of three other International Accounting
Standards, which become effective for our fiscal year ending January 31, 2001.
See Note 31 to our consolidated financial statements for a description of these
new accounting pronouncements.
In the fiscal year ended January 31, 2000, we adopted three revised
International Accounting Standards, which became effective for our fiscal year
ended January 31, 2000. See Notes 2 and 30 to our consolidated financial
statements for a description of the new accounting pronouncements.
U.S. GAAP RECONCILIATION
Although our discussion and analysis of our financial condition and results
of operations is based on our audited financial statements prepared in
accordance with IAS, we believe that it would be useful to present a
reconciliation of our audited financial results to those that would have been
presented in accordance with U.S. GAAP. The details of this reconciliation are
in Note 29 to our consolidated financial statements and the more significant
differences are summarized in the paragraphs below.
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VALUATION OF FIXED ASSETS
We include our tangible fixed assets in our financial statements at
revalued amounts. Under U.S. GAAP, this revaluation is not allowed. The
significant effect of this difference on our financial statements under IAS is
higher balances in both net property, plant and equipment and shareholders'
equity of an aggregate $1.8 million and $1.4 million as of January 31, 1999 and
2000, respectively, and $1.5 million as of July 31, 2000.
BUSINESS COMBINATIONS
We are required under IAS to record estimates for contingent payments
related to the purchase prices for acquired operations, even though the amounts
are not determinable beyond a reasonable doubt. Under U.S. GAAP, this accounting
is not allowed. The significant effects on our financial statements of recording
the estimate of these contingent payments under IAS are higher goodwill
amortization expense and interest expense totaling $0.3 million and $1.0 million
for fiscal 1999 and 2000, respectively, and lower shareholders' equity of $0.4
million and $1.4 million as of January 31, 1999 and 2000, respectively. For the
six month periods ended July 31, 1999 and 2000, respectively, the significant
effects on our financial statements of recording the estimate of these
contingent payments under IAS are higher goodwill amortization expense and
interest expense totaling $0.7 million and $0.7 million, respectively, and lower
shareholders' equity of $2.1 million as of July 31, 2000.
COMPENSATION COSTS
Under U.S. GAAP, we must record compensation cost for stock awards and in
cases of stock option grants, if the market price of the ordinary shares exceeds
the exercise price of the options at the date of grant. These amounts are $1.2
million and $1.4 million for fiscal 1999 and 2000, respectively, and $0.8
million and $1.4 million for the six months ended July 31, 1999 and 2000,
respectively. Additionally, in the third quarter of fiscal year 2001, a trust
established by one of our shareholders distributed 138,364 shares on behalf of
eight employees, which resulted in approximately $2.3 million of compensation
expense. This expense will be reflected in our results for the third quarter of
fiscal year 2001.
LOAN TO SHARE INCENTIVE TRUST
We record a $1.3 million loan to an executive share incentive trust in
other non-current assets. Under U.S. GAAP, this loan would be eliminated against
the corresponding note payable held by the trust and therefore would not be
recorded in our consolidated balance sheet.
PRO FORMA EARNINGS PER SHARE DISCLOSURE
The additional disclosure required under U.S. GAAP related to the
conversion on April 30, 2000 of 4,788,281 of non-voting variable rate
participating cumulative convertible preference shares into ordinary shares is a
pro forma earnings per share calculation for the year ended January 31, 2000 as
if the conversion had taken place on February 1, 1999. If this conversion had
taken place on February 1, 1999, the basic and diluted earnings per share for
the year ended January 31, 2000 would have been $0.88 and $0.86, respectively,
using a weighted average number of 19,051,037 (basic) and 19,355,747 (diluted)
ordinary shares outstanding. Using these same assumptions, pro forma basic and
diluted earnings per share for the six months ended July 31, 2000 would have
been $0.37 and $0.36, respectively, using a weighted average number of shares of
19,141,647 (basic) and 19,873,276 (diluted) ordinary shares outstanding.
IMPACT ON CUMULATIVE FOREIGN CURRENCY TRANSLATION ADJUSTMENT
The impact of the differences between accounting treatments under IAS and
U.S. GAAP on our cumulative foreign currency translation adjustment results in
higher shareholders' equity balances as of January 31, 1999 and 2000 of $0.7
million and $1.1 million, respectively, and $0.9 million as of July 31, 2000,
under U.S. GAAP as compared to IAS.
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PRESENTATION OF EARNINGS PER SHARE BASED ON EARNINGS BEFORE AMORTIZATION
Under IAS, we present two measures of basic and diluted earnings per share
before amortization in our income statement. Under U.S. GAAP, this presentation
is not allowed because it is not a U.S. GAAP measure. Earnings before
amortization should not be considered an alternative to measures of operating
performance as determined in accordance with U.S. GAAP, including net income as
a measure of our operating results and cash flows as a measure of our liquidity.
Similar to our net income and cash flows, earnings before amortization is
subject to the same restrictions on use contained in some of our credit
facilities and restrictions on the payment of dividends by some of our
subsidiaries.
YEAR 2000
We did not encounter any material problems associated with the Year 2000
rollover with any of our internally developed or vender-supplied software,
services or products. All Year 2000 related costs were funded through operating
cash flows from operations and all Year 2000 expenditures were expensed as
incurred. The amounts were not material and we have not experienced any
significant problems related to Year 2000 issues in doing business in 2000.
EURO CONVERSION
On January 1, 1999, 11 of the 15 member countries of the European Union
established conversion rates between their existing currencies and a new common
currency -- the Euro. The Euro trades on currency exchanges that may be used in
business transactions. The Euro conversion did not have a material impact on our
services in Europe. Our accounting systems handled the Euro conversion with
minimal intervention and we did not experience material adverse consequences as
a result of the conversion.
IMPACT OF INFLATION
To date, our business has not been significantly or adversely affected by
inflation. Historically, we have been generally successful in passing carrier
rate increases and surcharges onto our customers by means of price increases and
surcharges. Direct carrier rate increases could occur over the short- to
medium-term. Due to the high degree of competition in the marketplace, these
rate increases might lead to an erosion of our profit margins.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The nature of our operations necessitates dealing in many foreign
currencies. Our results are subject to fluctuations due to changes in exchange
rates. We attempt to limit our exposure to changing foreign exchange rates
through both operational and financial market actions. We provide services to
customers in locations throughout the world and, as a result, operate with many
currencies including the key currencies of North America, Latin America, Africa,
Asia Pacific and Europe.
Our short-term exposures to fluctuating foreign currency exchange rates are
related primarily to intercompany transactions. The duration of these exposures
is minimized through our use of an intercompany netting and settlement system
that settles all of our intercompany trading obligations once per month. In
addition, selected exposures are managed by financial market transactions in the
form of forward foreign exchange contracts (typically with maturities at the end
of the month following the purchase of the contract). Forward foreign exchange
contracts are primarily denominated in the currencies of our principal markets.
We will normally generate foreign exchange gains and losses through normal
trading operations. We do not enter into derivative contracts for speculative
purposes.
We do not hedge our foreign currency exposure in a manner that would
entirely eliminate the effects of changes in foreign exchange rates on our
consolidated net income.
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We are subject to changing interest rates because our debt consists
primarily of short-term working capital lines. We do not undertake any specific
actions to cover our exposure to interest rate risk and we are not a party to
any interest rate risk management transactions. We do not purchase or hold any
derivative financial instruments for trading or speculative purposes.
The fair value of our long-term bank loans approximates the carrying value
at January 31, 2000 and July 31, 2000. Market risk was estimated as the
potential decrease in fair value resulting from a hypothetical 10% increase in
interest rates and was not considered material at either year end or July 31,
2000.
EXCHANGE RATE SENSITIVITY
Our use of derivative financial instruments is limited to forward foreign
exchange contracts. At January 31, 2000, the notional value of all of our open
forward foreign exchange contracts was $6.3 million related to 92 transactions
denominated in various currencies, but predominantly in United States dollars,
Euros and pounds sterling. The notional value of all of our open forward foreign
exchange contracts was not materially different at July 31, 2000. These
contracts are entered into at the time the foreign currency exposure is
incurred.
The following tables provide comparable information about our
non-functional currency components of balance sheet items by currency, and
presents such information in United States dollar equivalents at January 31,
2000 and 1999, and July 31, 2000. These tables summarize information on
transactions that are sensitive to foreign currency exchange rates, including
non-functional currency denominated receivables and payables. The net amount
that is exposed in foreign currency is then subjected to a 10% change in the
value of the functional currency versus the non-functional currency.
Non-functional currency exposure in United States dollar equivalents (in
thousands):
<TABLE>
<CAPTION>
FOREIGN EXCHANGE GAIN/
(LOSS) IF FUNCTIONAL CURRENCY
------------------------------
NET EXPOSURE APPRECIATES DEPRECIATES
NON-FUNCTIONAL CURRENCY ASSETS LIABILITIES LONG/(SHORT) BY 10% BY 10%
----------------------- ------ ----------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
AT JANUARY 31, 1999:
United States dollars............... $1,681 $1,827 $ (146) $(15) $ 15
Austrian schillings................. 1 12 (11) (1) 1
Spanish pesetas..................... -- 30 (30) (3) 3
Japanese yen........................ 5 99 (94) (9) 9
Singapore dollars................... -- 48 (48) (5) 5
Other............................... 6 129 (123) (12) 12
------ ------ ------ ---- -----
Total............................. $1,693 $2,145 $ (452) $(45) $ 45
====== ====== ====== ==== =====
AT JANUARY 31, 2000:
United States dollars............... $6,808 $1,253 $5,555 $555 $(555)
Austrian schillings................. 1 41 (40) (4) 4
Spanish pesetas..................... 1 113 (112) (11) 11
Japanese yen........................ 5 38 (33) (3) 3
Singapore dollars................... -- 74 (74) (7) 7
Other............................... 4 114 (110) (11) 11
------ ------ ------ ---- -----
Total............................. $6,819 $1,633 $5,186 $519 $(519)
====== ====== ====== ==== =====
AT JULY 31, 2000:
United States dollars............... $3,276 $ 939 $2,337 $233 $(233)
Japanese yen........................ 27 548 (521) (52) 52
Other............................... 57 169 (112) (11) 11
------ ------ ------ ---- -----
Total............................. $3,360 $1,656 $1,704 $170 $(170)
====== ====== ====== ==== =====
</TABLE>
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BUSINESS
OUR COMPANY
We are a global, non-asset based supply chain management business providing
supply chain logistics services and planning and optimization solutions. Our
services include freight forwarding, customs brokerage and warehousing services
which include the coordination of shipping and the storage of raw materials,
supplies, components and finished goods. Through our supply chain planning and
optimization services, we assist our clients in designing and implementing
systems that improve the predictability and visibility and reduce the overall
cost of their supply chain. We have a large and diverse base of global business
customers ranging from large multinational enterprises to smaller local
businesses. We derive most of our revenue from airfreight and ocean freight
forwarding services for which we are paid on a transactional basis.
We formed our current business from a base of three freight forwarders
which we acquired from 1993 to 1995. We have supplemented the growth of our
original operations by completing 19 relatively small acquisitions in ten
countries since February 1, 1999. Currently, we own and operate offices in 44
countries and we transact business with approximately 127 independent agents, of
which approximately 86 are our exclusive agents, in approximately 98 additional
countries. Our business is managed from six principal support group offices in
Dusseldorf, Hong Kong, Johannesburg, London, Los Angeles and Sydney.
Since 1995, we have focused on developing proprietary information
technology systems which enable our customers to use the Internet to access our
web-based suite of supply chain software applications called UTi eMpower. UTi
eMpower facilitates the online operations of our supply chain activities and
allows our agents and offices to link to our transportation system. UTi eMpower
also allows our customers to place orders, track the status of their shipments,
verify customs clearing and link to our planning and optimization software. In
addition to accessing our supply chain solutions services through the Internet,
our customers may obtain supply chain solutions services through personal
contact, telephone and facsimile.
OUR INDUSTRY
The supply chain management industry consists of freight forwarders,
customs brokers, warehouse operators and other providers of logistics services.
In order to successfully compete in this industry, we believe that supply chain
providers must possess state-of-the-art technology and the ability to provide
global supply chain management services. Many freight forwarders are now
providing their customers with customized solutions for the planning and
management of complex supply chains. The demand for these solutions has risen as
companies increasingly outsource non-core competencies, globally source goods
and materials, and focus on managing the overall cost of their supply chain.
These trends are further facilitated by the rapid growth of technology including
the development of the Internet, the growth of track-and-trace technology, and
the ability to create technology interfaces between the systems of freight
forwarders and their customers.
Typically, and as distinct from some other providers of logistics
solutions, freight forwarders are compensated on a transactional basis for the
movement of goods and related services which arise from the supply chain
management solutions which they provide to customers. The recurring transactions
which provide the basis for freight forwarders' revenues include multiple
specialized services designed to consolidate and facilitate the transportation
of goods and materials both domestically and overseas. The primary components of
the industry are airfreight and ocean freight forwarding and customs brokerage.
Freight forwarders also may offer warehousing and other services related to
shipments in transit. Freight forwarding conventionally is a non-asset based
business. Freight forwarders typically do not own aircraft or ocean vessels,
although some may maintain small truck fleets to complement their arrangements
with trucking companies.
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AIRFREIGHT AND OCEAN FREIGHT FORWARDING
Freight forwarders primarily conduct their business either as an indirect
carrier for their customers or as an authorized agent for an airline or ocean
carrier. As an indirect carrier, a freight forwarder procures shipments from its
customers, consolidates them into a single lot based on a common destination,
and tenders them to the direct carrier, such as an airline or ocean carrier, for
transportation to a distribution point. Pricing by direct carriers is usually
established or determined on a weight or volume basis, which generally decreases
as the weight or volume of the shipment increases. A freight forwarder acting as
an indirect carrier may also offer a host of fee-based services related to the
movement of goods, including preparing shipment-related documentation and
providing warehouse management and materials handling related services such as
packing, crating and the pooling of two or more goods from different sources for
shipment as one package.
In some cases, freight forwarders act as an authorized agent for an airline
or ocean carrier. When acting as an agent, a freight forwarder earns a
commission by arranging for the transportation of an individual customer's
shipment through the direct carrier.
CUSTOMS BROKERAGE
As a shipper moves goods internationally, the freight forwarder performs
customs brokerage services, often referred to as acting as a "customs broker." A
customs broker prepares and files all documentation required to clear customs,
pays and collects freight charges and deposits import duties with the
appropriate foreign and domestic governmental agencies. Customs regulations are
unique to each country and providing customs brokerage services often requires a
thorough understanding of complex rules and regulations. In the United States,
customs brokers are required to be licensed by the Treasury Department and
regulated by the Customs Service. Many jurisdictions outside of the United
States have similar regulatory requirements.
Freight forwarders may provide other customs brokerage services, including
providing for the posting of surety bonds, bonded warehousing (allowing the
shipper to defer duty payment until the goods are released according to the
customer's timing needs), assistance in obtaining the most appropriate commodity
classification, duty reduction, and duty drawback programs (which involve
obtaining full or partial refund of duties or taxes paid on imported merchandise
that is subsequently exported or used in the manufacturing of goods to be
exported).
WAREHOUSING SERVICES
In conjunction with providing shipping services, freight forwarders also
may provide warehousing services, including storing goods and materials at
warehouses in order to meet customers' production or distribution schedules,
using facilities owned by the freight forwarder or leased from third parties. In
connection with storing goods and materials, the freight forwarder may provide
other services such as deconsolidation and decontainerization, assembly of
freight, inventory management, inspection and protective packing. Freight
forwarders receive a fee for their warehousing and other services performed.
AGENTS AND COMPANY-OWNED OFFICES
A shipment moved through a freight forwarder usually requires
representation at the points of shipment and destination. The origination of the
shipment is usually processed through a company-owned office where a sales
representative is based and support staff are on site to arrange for a
particular movement. At its destination, a shipment may also be handled by a
company-owned facility or through the use of independent cargo agents.
A freight forwarder will use an agent in geographic areas where it does not
have a presence through a company-owned office. For its services in handling a
shipment at its destination, the agent is paid a commission or fee from the
freight forwarder. An agent usually prepares and processes all of the
documentation required on the receiving side and may also provide customs
brokerage, local pick-up and
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delivery services, and materials handling requirements that may arise. Agents
may operate on an exclusive or non-exclusive basis for freight forwarders.
INDUSTRY CHALLENGES AND OPPORTUNITIES
We believe our industry is facing several challenges and opportunities,
including:
- OUTSOURCING OF NON-CORE ACTIVITIES. Companies increasingly outsource
freight forwarding, warehousing and other supply chain activities to
allow them to focus on their respective core competencies. From managing
purchase orders to the timely delivery of products, companies turn to
freight forwarders and logistics and supply chain management providers to
manage these functions at a lower cost and more efficiently than they
could be managed by the company itself.
- GLOBALIZATION OF TRADE. As barriers to international trade are reduced or
substantially eliminated, international trade is increasing. In addition,
companies increasingly are sourcing their parts, supplies and raw
materials from the most cost competitive suppliers throughout the world.
Outsourcing of manufacturing functions to, or locating company-owned
manufacturing facilities in, low cost areas of the world also results in
increased volumes of world trade.
- INCREASED NEED FOR TIME-DEFINITE DELIVERY. The need for just-in-time and
other time-definite delivery has increased as a result of the
globalization of manufacturing, greater implementation of demand-driven
supply chains, the shortening of product cycles and the increasing value
of individual shipments. Many businesses recognize that increased
spending on time-definite supply chain management services can decrease
overall manufacturing and distribution costs, reduce capital requirements
and allow them to manage their working capital more efficiently by
reducing inventory levels and inventory loss.
- A SHIFT TOWARD A DECREASING NUMBER OF GLOBAL SUPPLY CHAIN MANAGEMENT
PROVIDERS. Companies are decreasing the number of freight forwarders and
supply chain management providers with which they interact so that they
may transact business with a limited number of providers which are
familiar with their requirements, processes and procedures and can
function as long-term partners. In addition, there is strong pressure on
national and regional freight forwarders and supply chain management
providers to become aligned with a global network. Larger freight
forwarders and supply chain management providers benefit from economies
of scale which enable them to negotiate reduced transportation rates and
to allocate their overhead over a larger volume of transactions. Globally
integrated freight forwarders and supply chain management providers are
better situated to provide a full complement of services, including
pick-up and delivery, shipment via air, sea and/or road transport,
warehousing and distribution, and customs brokerage.
- INCREASING INFLUENCE OF E-BUSINESS AND THE INTERNET. Technology advances
have allowed businesses to connect electronically through the Internet,
obtain relevant information and make purchase and sale decisions on a
real-time basis, resulting in decreased transaction times and increased
business-to-business activity. In response to their customers'
expectations, companies have recognized the benefits of being able to
transact business electronically. As such, businesses increasingly are
seeking the assistance of supply chain service providers with
sophisticated information technology systems which facilitate real-time
transaction processing and web-based shipment monitoring.
OUR GROWTH STRATEGY
Our growth strategy is designed to take advantage of our competitive
strengths while maintaining our focus on fulfilling our customers' freight
forwarding and supply chain solutions requirements. The principal components of
our growth strategy are as follows:
- OBTAIN NEW BUSINESS FROM EXISTING CLIENTS. We intend to continue to
provide services to our existing clients and to expand the scope of the
supply chain solutions and services that we provide to them.
- ADD NEW CUSTOMERS. We are seeking new customers by emphasizing our supply
chain solutions and our ability to quantify and deliver measurable
benefits and cost savings in the supply chain.
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- MAKE STRATEGIC ACQUISITIONS. We are pursuing strategic acquisitions which
we believe will increase our penetration of a geographic areas, add
customers, provide economies of scale, expand our service offerings,
strengthen our presence in particular industries and provide capacity in
particular shipping lanes. Historically, our acquisitions have been
relatively small; however, future acquisitions may include larger
companies. Such acquisitions may be completed in a variety of ways,
including through the use of cash, the issuance of securities or a
combination of cash and securities.
- INVEST IN TECHNOLOGY. We intend to improve, develop and acquire
Internet-based information technology which emphasizes supply chain
optimization and planning and integration with our clients' enterprise
resource planning systems. We intend to continue to develop and improve
our proprietary supply chain software and integrate our software with
supply chain software developed by third parties. In an effort to meet
our customers' supply chain requirements, we intend to continue to train
our personnel in specific technology skills and related operational and
sales matters.
- FORM STRATEGIC ALLIANCES. We intend to pursue strategic alliances which
facilitate our ability to efficiently and effectively offer and provide
supply chain solutions. Recently, we have entered into alliances with i2
Technologies, Marubeni Corporation and Lufthansa AG. In connection with
our alliance with i2 Technologies, we entered into a Strategic Alliance
Agreement and a Software License Agreement. Pursuant to the Strategic
Alliance Agreement, we agreed to work with i2 to identify potential
customers of i2 software and our supply chain management services under a
royalty fee arrangement. The term of this agreement is three years unless
earlier terminated for cause. Pursuant to the Software License Agreement,
i2 granted to us a non-exclusive, non-transferable license to use
selected supply chain management and customer management software. i2
also agreed to provide training and maintenance for this software. The
term of this agreement is perpetual unless terminated for cause. We
entered into a memorandum of understanding with Marubeni Corporation for
the purpose of cooperating in the purchase of ocean freight space on the
tradelane between Asia and the United States. Pursuant to the memorandum
of understanding, we granted Marubeni access to our uTrac shipping
tracking system. This memorandum of understanding is non-exclusive and
continues for one year renewal terms unless terminated two months prior
to the termination date. We also recently entered into a business
partnership agreement with Lufthansa AG which enables us to obtain
preferred pricing for airfreight cargo space, participate in joint
selling programs, receive special services and link our information
technology systems. The Lufthansa agreement continues indefinitely until
either party gives sixty-day written notice.
- STRENGTHEN THE SALES PROCESS. By developing solutions for our customers'
supply chains, we intend to increase sales of transactions in our core
services of freight forwarding, customs brokerage and warehousing. We
also target our marketing efforts toward companies operating in specific
industries with unique supply chain requirements, such as the fashion and
apparel, automotive, pharmaceuticals, chemicals, technology and mining
industries.
OUR SERVICES
Our primary services include:
- freight forwarding,
- customs brokerage, and
- warehousing services.
To market our services, we produce customized supply chain solutions which
provide the logistics services our clients require. We use our planning and
optimization systems to identify the needs of our customers and to develop
supply chain solutions tailored to customer- and industry-specific requirements.
In this way, we attempt to become our customers' preferred provider of supply
chain services, thus
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increasing the range and volume of transactions and services provided to the
customer. For the fiscal year ended January 31, 2000, no single customer
accounted for more than 4% of our gross revenue.
FREIGHT FORWARDING
As a freight forwarder, we conduct business as an indirect carrier for our
customers or occasionally as an authorized agent for an airline or ocean
carrier. We typically act as an indirect carrier with respect to shipments of
freight unless the volume of freight to be shipped over a particular route is
not large enough to warrant consolidating such freight with other shipments. In
such situations, we usually forward the freight as an agent of the direct
carrier. Except for express delivery services which we provide only in South
Africa, we handle substantially only international shipments and do not provide
for domestic shipments unless they occur as part of an international shipment.
We do not own or operate aircraft or vessels and, consequently, contract with
commercial carriers to arrange for the shipment of cargo. We do not place
restrictions on delivery schedules or shipment size or weight. We arrange for,
and in many cases provide, pick-up and delivery service between the carrier and
the location of the shipper or recipient.
INDIRECT AIR CARRIER. As an indirect air carrier, we procure shipments from
a large number of customers, consolidate shipments bound for a particular
destination from a common place of origin, determine the routing over which the
consolidated shipment will move, select an airline serving that route on the
basis of departure time, available cargo capacity and rate, and book the
consolidated shipment for transportation on that airline. We prepare required
shipping documents, deliver the consolidated shipment to the transporting
airline and, in many cases, arrange for clearance of the various components of
the shipment through customs at the final destination. At the destination, we,
or our agent, receive the consolidated shipment and break it into its component
shipments. If requested by our customer, we also arrange for delivery of the
individual components of the shipment from the arrival airport to the intended
consignee.
By consolidating our customers' shipments, we usually are able to obtain
lower rates from airlines than our customers could obtain directly from those
airlines. As the volume of a shipment increases, the cost per pound/kilogram or
cubic inch/centimeter charged by the direct carrier decreases and we in turn
decrease the fees charged to our customers. In addition, in some tradelanes and
with airlines where we generate a regular high volume of freight, we often are
able to obtain even lower rates. These factors and others generally enable us to
offer to our customers a lower rate than would otherwise be available to the
customer from the airline.
INDIRECT OCEAN CARRIER. As an indirect ocean carrier or non-vessel
operating common carrier, we contract with ocean shipping lines to obtain
transportation for a fixed number of containers between various points during a
specified time period at an agreed rate. We then solicit freight from our
customers to fill the containers, charging rates lower than the rates offered
directly to customers by shipping lines for similar type shipments. We
consolidate the freight bound for a particular destination from a common
shipping point, prepare all required shipping documents, deliver the
consolidated shipment to the ocean shipping line and, if requested by our
customer, arrange for clearance of the various components of the shipment
through customs at the final destination. At the destination, we, or our agent,
receive the consolidated shipment and break it into its component shipments. If
requested by our customer, we also arrange for delivery of the individual
components of the shipment from the destination port to the intended consignee.
AUTHORIZED AGENT FOR AN AIRLINE OR OCEAN CARRIER. As an authorized agent
for an airline or ocean carrier, we arrange for the transportation of individual
shipments through the airline or ocean carrier. As compensation for arranging
for the shipments, the airline or ocean carrier pays to us a commission. If we
provide the carrier with ancillary services, such as the preparation of export
documentation, we receive an additional fee.
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CUSTOMS BROKERAGE
As part of our integrated logistics services, we provide customs brokerage
services in the United States and most of the countries in which we operate.
Within each country, the rules and regulations vary along with the level of
expertise that is required to perform the customs brokerage services. Our
customs brokers and support staff have substantial knowledge of the complex
tariff laws and customs regulations governing the payment of duty, as well as
valuation and import restrictions in their respective countries.
We provide customs brokerage services in connection with a majority of the
shipments which we handle as both an airfreight and ocean freight forwarder. We
also provide customs brokerage services in connection with shipments forwarded
by our competitors. In addition, other companies may provide customs brokerage
services in connection with shipments which we forward.
Our fees for acting as a customs broker in the United States and most
foreign countries are not regulated and we generally do not have a fixed fee
schedule for customs brokerage services. Instead, we determine our fees based on
the volume of business transacted for a particular customer, and the type,
number and complexity of services provided.
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 assist with
qualifying for duty drawback refunds (refunds of customs duty, sales tax or
excise duty when goods or materials are exported out of a region after
previously being imported into that region).
In connection with performing customs brokerage activities, we utilize our
own proprietary software and software licensed from third parties. In connection
with customs brokerage activities in the United States, we use the Automated
Brokerage Interface information system which provides an on-line link with the
United States Customs Service. Some of our offices also are connected
electronically to customs agencies for expedited pre-clearance of goods and
centralized import management.
WAREHOUSING AND OTHER SERVICES
We lease warehouse space in most of the countries in which we operate in
connection with providing warehousing and other related services. Our
warehousing services primarily relate to storing goods and materials in order to
meet our customers' production or distribution schedules. Our related services
include receiving, deconsolidation and decontainerization, sorting, put away,
consolidation, assembly, inspection services, cargo loading and unloading,
assembly of freight, customer inventory management and protective packing and
storage. We receive storage charges for use of our warehouses and fees for other
services.
In many U.S. and overseas locations, our bonded warehouses enable importers
to defer payment of customs duties and coordinate release of cargo with their
production or distribution schedules. Materials and goods are stored under
Customs Service supervision until the importer is ready to withdraw or re-export
them. We receive storage charges for these in-transit goods and fees for related
ancillary services.
SALES AND MARKETING
We market our services through an organization consisting of approximately
250 full-time salespersons who receive assistance from our senior management and
regional managers. Our four principal geographic regions are the Americas,
Europe, Asia Pacific and Africa and each regional manager is responsible for the
financial performance of their region. We have recently implemented a sales
process by which we use our supply chain consulting services, which primarily
relate to planning and optimizing the movement of freight, to market our core
services of freight forwarding, customs brokerage and postponement warehouse
services. In connection with our sales process and in order to serve the needs
of our customers, some of whom desire only our freight forwarding services and
for others who desire a wider variety of our supply chain solutions services, we
have reorganized our sales force into two specialized sales groups. One of these
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sales groups focuses on marketing only our freight forwarding services and the
other group focuses on marketing all of our supply chain solutions services.
As part of our marketing and growth strategy, we recently built solutions
centers in Johannesburg and Los Angeles. Each solutions center consists of
computer and audio-visual equipment and meeting facilities which we use to
demonstrate our supply chain management solutions services and our software
systems and to train our employees and customers on such systems. We intend to
build additional solutions centers in Australia, Germany, New York and the
United Kingdom over the next 12 months. The approximate cost to build each
solutions center is expected to be $100,000 for facilities and computer servers
and projection equipment. We use demonstration versions of our software and
third-party software provided to us as part of our licensing agreements.
As an additional channel to the supply chain market for major customers, we
have developed a collaborative selling process with key partners. These partners
bring added skills, relationships with their existing customers, and knowledge
of opportunities to our selling organization for supply chain solutions. We have
collaborative relationships with i2 Technologies, Cambridge Technologies and
Inforte pursuant to which we work together to identify potential customers and
sales opportunities, make sales proposals and develop supply chain solutions to
meet these customers' requirements. We have collaborative relationships with
Lufthansa, British Airways, P & O Nedlloyd and Yang Ming Lines pursuant to which
we work together to provide cost effective transportation solutions to our
customers. The material terms of our agreements with i2 Technologies and
Lufthansa are described in "Business -- Our Growth Strategy -- Form Strategic
Alliances." Our agreement with British Airways provides for pricing based on our
shipping volumes. Recently, we entered into written agreements with each of
Cambridge Technologies, and Inforte, which provide terms for our collaborative
relationships with respect to specific projects for particular customers. From
time to time, we contract with P&O Nedlloyd and Yang Ming Lines to obtain
transportation for a fixed number of containers between various points during a
specified time period at variable rates.
During our initial review of a customer's supply chain processes, we
determine the current status of the customer's supply chain processes. We
analyze the supply chain requirements of our customer and determine improvements
through modification or re-engineering. After discussing with our customers the
various supply chain solutions which could be implemented for them, we implement
the desired solutions.
Our sales and marketing efforts are directed at both local and global
customers. Our local sales and marketing teams focus on selling to and servicing
smaller- and medium-sized customers who primarily are interested in selected
services, such as freight forwarding and customs brokerage. Our global solutions
sales and marketing teams focus their efforts on obtaining and developing large
volume global accounts with multiple shipping locations who require
comprehensive solutions. These accounts typically impose numerous requirements
on their providers, such as electronic data interchange, Internet-based tracking
and monitoring systems, proof of delivery capabilities, customized shipping
reports and a global network of offices. These requirements often limit the
competition for these accounts to large freight forwarders, third-party
logistics providers and integrated carriers with global operations. Our global
solutions sales and marketing teams also target companies operating in specific
industries with unique supply chain requirements, such as the fashion and
apparel, automotive, pharmaceuticals, chemicals, technology and mining
industries. These two sales and marketing teams may work together on larger
accounts.
COMPETITION
Competition within the freight forwarding, logistics and supply chain
management industries is intense. We compete primarily with a relatively small
number of international firms that have the worldwide capabilities to provide
the breadth of services offered by us. We also encounter competition from
regional and local third-party logistics providers, freight forwarders,
integrated transportation companies that operate their own aircraft, cargo sales
agents and brokers, surface freight forwarders and carriers, airlines,
associations of shippers organized to consolidate their members' shipments to
obtain lower freight rates, and Internet-based freight exchanges.
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Our competitors include:
- Freight forwarders, including Danzas AEI, Fritz Companies, Inc.,
Expeditors International of Washington, Inc., Circle International Group,
the Panalpina Group, the international divisions of BAX Global and Emery
Worldwide, Kuehne & Nagel International AG, MSAS Global Logistics,
Schenker International, Nippon Express and Kintetsu World Express.
- Third-party warehouse logistics providers, including Exel PLC, Ryder
Integrated Logistics, Inc. and Menlo Logistics.
In addition, computer information and consulting firms which traditionally
operated outside of the supply chain services industry are beginning to expand
the scope of their services to include supply chain related activities so that
they may service the supply chain needs of their existing customers and offer
their information systems services to new customers.
INTELLECTUAL PROPERTY
We have developed proprietary information technology systems called UTi
eMpower for our supply chain services activities. UTi eMpower facilitates the
online operations of our supply chain activities, allows our agents and offices
to link to our transportation system and allows our customers to track the
status of their shipments and link to our planning and optimization software.
UTi eMpower enables our customers to access our information technology systems
irrespective of their technological experience. Within UTi eMpower are various
supply chain information systems, including the following:
- uOp 2000, which is used by our agents and offices as the local operating
system for customs brokerage, air and ocean import and export
documentation and accounting functions that feed shipment and other
customer data into our global information systems,
- uOrder, which assists our customers with order management,
- uTrac, which enables our customers to track shipments of goods and
materials,
- uWarehouse, which enables our customers to track the location and status
of goods and materials,
- uClear, which assists our customers with customs clearance,
- uAnalyse, which assists us and our customers with isolating the factors
causing variability in transit times,
- uConnect, which enables the electronic transfer of data between our
systems and those of our customers, and
- uPlan, which is a suite of selected planning and optimization software
developed by i2 Technologies.
We have received federal trademark or service mark registration of the name
Union-Transport and the logo for Union-Transport. We have applied for federal
trademark or service mark registration of the names UTi and UTi eMpower and the
logo for UTi. All of these names and logos have also been or are currently being
registered in countries around the world. We have no patents nor have we filed
any patent applications. While we may seek further trademarks or service marks
and perhaps patents on inventions or processes in the future, we believe our
success depends primarily on factors such as the technological skills and
innovative abilities of our personnel rather than on any patents or other
registrations we may obtain. In addition, any patents issued from future
applications may not provide meaningful protection or other commercial advantage
to us.
We enter into confidentiality agreements with some of our employees and
consultants and with our clients and corporations with whom we have strategic
relationships. We attempt to maintain control over access to and distribution of
our software documentation and other proprietary information.
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GOVERNMENT REGULATION
Our airfreight forwarding business in the United States is subject to
regulation, as an indirect air cargo carrier, under the Federal Aviation Act by
the Department of Transportation, although airfreight forwarders are exempted
from most of the Act's requirements by the applicable regulations. Our foreign
airfreight forwarding operations are subject to similar regulation by the
regulatory authorities of the respective foreign jurisdictions. We believe we
are in substantial compliance with these requirements. The airfreight forwarding
industry is subject to regulatory and legislative changes that can affect the
economics of the industry by requiring changes in operating practices or
influencing the demand for, and the costs of providing, services to customers.
The Federal Maritime Commission regulates our ocean forwarding and
non-vessel operating common carrier operations to and from the United States.
The Federal Maritime Commission licenses intermediaries (combined ocean freight
forwarders and non-vessel operating common carrier operators). Indirect ocean
carriers are subject to Federal Maritime Commission regulation, under the
Commission's tariff filing and surety bond requirements, and under the Shipping
Act of 1984 and the Ocean Reform Shipping Act of 1998, particularly those terms
proscribing rebating practices. For ocean shipments not originating or
terminating in the United States, the applicable regulations and licensing
requirements typically are less stringent than in the United States. We believe
that we are in substantial compliance with all applicable regulations and
licensing requirements in all countries in which we transact business.
Our United States domestic customs brokerage operations are subject to the
licensing requirements of the United States Department of the Treasury and are
regulated by the United States Customs Service. We are a licensed customs broker
by the United States Customs Service. Our foreign customs brokerage operations
are licensed in and subject to the regulations of their respective countries. We
believe we are in substantial compliance with these requirements.
Some portions of our warehouse operations require authorizations and bonds
by the U.S. Treasury Department and approvals by the United States Customs
Service. Our foreign warehouse operations are subject to regulations of their
respective countries. We believe that we are in substantial compliance with
these requirements.
We are subject to a broad range of foreign and domestic environmental and
workplace health and safety requirements, including those governing discharges
to air and water and the handling and disposal of solid and hazardous wastes. We
believe that we are in substantial compliance with all material environmental,
health and safety requirements.
In the course of our operations, we may be asked to arrange transport of
substances defined as hazardous under applicable laws. As is the case with any
such operation, if a release of hazardous substances occurs on or from our
facilities or from the transporter, we may be required to participate in, or
have liability for, the remedy of such release. In such case, we also may be
subject to claims for personal injury and natural resource damages.
Although our current operations have not been significantly affected by
compliance with, or liability arising under, these environmental, health and
safety laws, we cannot predict what impact future environmental, health and
safety regulations might have on our business.
We do not believe that costs of regulatory compliance have had a material
adverse impact on our operations to date. However, our failure to comply with
the applicable regulations or to maintain required permits or licenses could
result in substantial fines or revocation of our operating permits or
authorities. We cannot predict the degree or cost of future regulations on our
business.
FACILITIES
We lease more than 80 facilities in approximately 40 countries. Most
facilities are comprised of office and warehouse space. These facilities
typically are located close to an airport, ocean port or an important border
crossing and range in size from approximately 3,000 square feet to approximately
204,000 square
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feet. Leases for our principal properties generally have terms of five years or
more and often include options to renew. While some of our leases are
month-to-month and others expire in the near term, we believe that our
facilities are adequate for our current needs and for the foreseeable future.
We own five buildings in South Africa which are comprised of office and
warehouse facilities ranging in size from approximately 21,400 square feet to
approximately 243,000 square feet and which are used in our overnight courier
business in South Africa.
EMPLOYEES
At July 31, 2000, we employed a total of 6,106 persons, which included
approximately 250 sales and marketing personnel. Approximately 750 of our
employees are subject to collective bargaining arrangements in several
countries, including South Africa and the Netherlands. We believe our employee
relations to be generally good.
LITIGATION
From time to time, we are a defendant or plaintiff in various legal
proceedings, including litigation arising in the ordinary course of our
business. To date, none of these types of litigation has had a material effect
on us and, as of the date of this prospectus, we are not a party to any material
litigation except as described below.
We are one of approximately 83 defendants named in two class action
lawsuits which were originally filed on September 19, 1995 and subsequently
consolidated in the District Court of Brazaria County, Texas (23rd Judicial
District) where it is alleged that various defendants sold chemicals that were
utilized in the Gulf War by the Iraqi army which caused personal injuries to
U.S. armed services personnel and their families, including birth defects. The
lawsuits were brought on behalf of the military personnel who served in the Gulf
War and their families and the plaintiffs are seeking in excess of $1 billion in
damages. To date, the plaintiffs have not obtained class certification. We
believe we are a defendant in the suit because an entity that sold us assets in
1993 is a defendant. We believe we will prevail in this matter because the
alleged actions giving rise to the claims occurred prior to our purchase of the
assets. We further believe that we will ultimately prevail in this matter since
we never manufactured chemicals and the plaintiffs have been unable to thus far
produce evidence that we acted as a freight forwarder for cargo that included
chemicals used by the Iraqi army.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Roger I. MacFarlane....................... 55 Chief Executive Officer and Director
Peter Thorrington......................... 55 President, Chief Operating Officer and
Director
Matthys J. Wessels........................ 55 Chairman of the Board of Directors, Chief
Executive Officer African Region and
Director
Alan C. Draper............................ 47 Executive Vice President and
President-Asia Pacific Region and Director
Lawrence R. Samuels....................... 44 Senior Vice President-Finance, Chief
Financial Officer and Secretary
Gene Ochi................................. 51 Senior Vice President-Marketing and Global
Growth
Richard J. Anchan......................... 52 Senior Vice President-Global Processes and
Predictable Performance
Linda Bennett............................. 50 Senior Vice President and Chief
Information Officer
Greg Montgomery........................... 54 President-Americas
John S. Hextall........................... 44 Managing Director Atlantic Region
Brian R. J. Dangerfield................... 42 Managing Director Northeast Asia and the
Subcontinent Region
Gordon G. Abbey........................... 47 Managing Director UTi Africa Region
Walter R. Mapham.......................... 52 Director Strategic Services
Graham Somerville......................... 46 Managing Director Sun Couriers Division
Dieter Kraus.............................. 58 Managing Director Central Europe Region
J. Simon Stubbings........................ 55 Director
Allan M. Rosenzweig....................... 45 Director
</TABLE>
ROGER I. MACFARLANE has served as our Chief Executive Officer since May
2000 and has been a director since our formation in 1995. From 1995 to April
2000, Mr. MacFarlane served as our Chief Executive Officer of the Americas
Region and was responsible for overseeing our operations in North and South
America. From 1993 to 1995, Mr. MacFarlane served as the Chief Executive Officer
of the Americas Division of one of our predecessor corporations, and was
responsible for overseeing its operations in North and South America. From 1987
to 1993, Mr. MacFarlane served in various executive capacities, including Joint
Chief Executive, for BAX Global, an international freight forwarder and a
subsidiary of The Pittston Company, a New York Stock Exchange traded company.
From 1983 to 1987, Mr. MacFarlane served as a director and held various
executive positions, including Chief Executive Officer, for WTC International
N.V., an international freight forwarder and an American Stock Exchange traded
company. From 1976 to 1982, Mr. MacFarlane co-founded and managed the operations
of Rand Freight (Proprietary) Limited, an international airfreight company,
until that company merged with WTC International N.V. From 1970 to 1975, Mr.
MacFarlane was the Managing Director of the Airfreight Division of the Rennies
Consolidated Holdings. Mr. MacFarlane received a Bachelor of Arts degree and an
L.L.B. degree from the University of Cape Town.
PETER THORRINGTON has served as our President and Chief Operating Officer
since May 2000 and has been a director since our formation in 1995. From 1995 to
April 2000, Mr. Thorrington served as our Chief Executive Officer of the
European Region and was responsible for overseeing our operations in Europe.
From 1993 to 1995, Mr. Thorrington served as the Chief Executive of the European
Division of one of our predecessor corporations, and was responsible for
overseeing its operations in Europe. From 1987 to 1993, Mr. Thorrington served
in various executive capacities, including Joint Chief Executive of
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BAX Global. From 1983 to 1987, Mr. Thorrington served as a director and held
various executive positions, including President, for WTC International N.V.
From 1976 to 1982, Mr. Thorrington co-founded and managed the operations of Rand
Freight (Proprietary) Limited. From 1972 to 1975, Mr. Thorrington was Managing
Director of the Project Division of the Rennies Consolidated Holdings and became
a member of the board in 1975. Mr. Thorrington received a Bachelor of Science
degree from the University of Natal and an M.B.A. from the University of Cape
Town. Mr. Thorrington is the brother-in-law of Walter Mapham, who is our
Director Strategic Services.
MATTHYS J. WESSELS has served as our Chairman of the Board of Directors
since January 1999 and has been our Chief Executive Officer African Region and a
director since our formation in 1995. Mr. Wessels served as our Chief Executive
Officer from 1998 to April 2000. Since 1987, Mr. Wessels has served as the
Chairman for United Service Technologies Limited, a publicly listed group in
South Africa and a substantial holder of our ordinary shares. From 1984 to 1987,
Mr. Wessels served in various executive capacities for WTC International N.V.
When the South African interests of WTC International N.V. were separated from
its other operations in 1987, Mr. Wessels continued as the Chief Executive
Officer of the South African operations until these operations were combined
with United Service Technologies Limited later that year. From 1977 to 1987, Mr.
Wessels co-founded and managed the operations of Rand Freight (Proprietary)
Limited. From 1970 to 1977, Mr. Wessels served in various executive capacities
for Rennies Consolidated Holdings. Mr. Wessels received a Bachelor of Science
degree from the University of Natal and an M.B.A. from the University of Cape
Town.
ALAN C. DRAPER has served as our President-Asia Pacific Region since
January 1996, an Executive Vice President since May 2000 and a director since
our formation in 1995. From 1993 to 1996, Mr. Draper served as the Senior Vice
President Finance of one of our predecessor corporations. From 1990 to 1994, Mr.
Draper served as the President of Transtec Ocean Express Group, an international
ocean freight forwarding company, which was also one of our predecessors. From
1987 to 1990, Mr. Draper served as the Managing Director of BAX Global (UK) and
was responsible for activities in Europe. From 1983 to 1987, Mr. Draper served
in various executive capacities for WTC International N.V. From 1979 to 1983,
Mr. Draper served in various executive capacities for Rand Freight (Proprietary)
Limited. Mr. Draper, as a Rhodes Scholar, graduated with a Masters of Philosophy
from Oxford University and an Alpha Beta pass. Mr. Draper received a Bachelor of
Commerce degree from the University of Natal and is a qualified chartered
accountant in South Africa.
LAWRENCE R. SAMUELS has served as our Senior Vice President-Finance and
Secretary since 1996 and Chief Financial Officer since May 2000. From 1993 to
1995, Mr. Samuels served as the Financial Director of, and from 1987 to 1993 as
the Financial Manager of, Pyramid Freight (Proprietary) Ltd., one of our
subsidiaries. From 1984 to 1987, Mr. Samuels served as the Financial Manager of
Sun Couriers, an express courier operation in South Africa. From 1982 to 1984,
Mr. Samuels served as the Financial Manager for Adfreight (Pty) Ltd., an express
courier operation in South Africa, which was merged into Sun Couriers in 1984.
Mr. Samuels received a Bachelor of Commerce degree from the University of the
Witwatersrand and is a qualified chartered accountant in South Africa.
GENE OCHI has served as our Senior Vice President-Marketing and Global
Growth since 1998. From 1993 to 1998, Mr. Ochi served as the Regional Vice
President, Western U.S.A., of Union-Transport Corporation, one of our
subsidiaries. From 1989 to 1992, Mr. Ochi served as the Senior Vice President of
Marketing of BAX Global. From 1982 to 1989, Mr. Ochi served in various executive
capacities for Flying Tigers, a cargo airline. From 1979 to 1982, Mr. Ochi
served as the Vice President of Marketing for WTC Air Freight. Mr. Ochi received
a Bachelor of Science degree from the University of Utah and an M.B.A. from the
University of Southern California.
RICHARD J. ANCHAN joined us in 1999 and was appointed as our Senior Vice
President-Global Processes and Predictable Performance in May 2000. From 1998 to
1999, Mr. Anchan served as Executive Vice President, Strategic Development for
Pittsburgh Logistics Systems, Inc., a third-party logistics business. From 1990
to 1997, Mr. Anchan served as the Vice President of Menlo Logistics, a
third-party
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logistics business. Mr. Anchan received a Bachelor of Arts degree and a Bachelor
of Arts -- Education degree from Western Washington State University.
LINDA BENNETT has served as our Senior Vice President and Chief Information
Officer since April 2000. From August 1995 to February 2000, Ms. Bennett served
as the Director, Information Technology and later as the Vice President,
Information Technology for Pinkerton's, Inc., a security guard, consulting,
investigation and security system integration company. Ms. Bennett received a
Bachelor of Arts degree from Pepperdine University and an M.B.A. from the
Anderson School of Management at the University of California, Los Angeles.
GREG MONTGOMERY has served as our President-Americas since July 2000. From
January 2000 to June 2000, Mr. Montgomery served as our President-North America.
From 1988 to 2000, Mr. Montgomery served as the President-U.S. International for
BAX Global, an international freight forwarder.
JOHN S. HEXTALL has served as our Managing Director Atlantic Region since
March 2000. From 1997 to 2000, Mr. Hextall served as the Managing Director of
Union Air Transport Ltd, U.K., one of our subsidiaries. From 1993 to 1997, Mr.
Hextall served as the Managing Director of Union-Transport N.V., Belgium, one of
our subsidiaries. Mr. Hextall received both a Bachelor of Science and Bachelor
of Science in Commerce degrees from the University of Aston.
BRIAN R. J. DANGERFIELD has served as our Managing Director Northeast Asia
and the Subcontinent Region since April 2000. From 1997 to 2000, Mr. Dangerfield
served as the Executive Vice President-Northeast Asia and Managing Director-Hong
Kong and China for Union-Transport Asia Pacific Ltd., one of our subsidiaries.
Mr. Dangerfield received a Bachelor of Commerce degree from Auckland University.
Mr. Dangerfield is an associate chartered accountant in New Zealand.
GORDON G. ABBEY has served as our Managing Director UTi Africa Region since
1994. Since 1982, Mr. Abbey has served in various executive capacities for
several of our predecessors and subsidiaries.
WALTER R. MAPHAM has served as our Director Strategic Services since May
2000 and served as Global Vice President of Information Technology from 1996 to
May 2000. Mr. Mapham is the brother-in-law of Peter Thorrington, our President
and Chief Operating Officer. Mr. Mapham received a MSc Biometry degree from
Natal University and an M.B.A. from the University of Cape Town.
GRAHAM SOMERVILLE has served as our Managing Director Sun Couriers Division
since January 2000. From 1986 to 1999, Mr. Somerville served as the Group Chief
Executive of Lifecare Group Holdings Limited, a healthcare provider in South
Africa. Mr. Somerville received a Bachelor of Commerce degree and a Certificate
in Theory of Accountancy from the University of the Witwatersrand and is a
qualified chartered accountant in South Africa.
DIETER KRAUS has served as our Managing Director Central Europe Region
since 1995. From 1990 to 1995, Mr. Kraus served as our Managing Director
Airfreight Operations. Mr. Kraus has been an employee of several of our
predecessors and subsidiaries since 1958.
J. SIMON STUBBINGS has served as a director and a member of our audit and
remuneration committees since January 1998. Since 1997, Mr. Stubbings has been
self-employed as a consultant providing legal services. Since August 1999, Mr.
Stubbings has served as a non-executive director of Hitachi Credit (UK) PLC, a
company listed on the London Stock Exchange. From 1993 to 1997, Mr. Stubbings
served as the managing partner for Theodore Goddard, a law firm in London,
England. Mr. Stubbings received an Honors Degree in History and Political
Science from the University of Dublin. Mr. Stubbings qualified as a solicitor in
England and Wales in 1972.
ALLAN M. ROSENZWEIG has served as a director since October 2000. Mr.
Rosenzweig has been the Group Director -- Corporate Finance of MIH Limited, a
Nasdaq National Market System and Amsterdam Stock Exchange listed company since
1996 and a director of MIH Limited since October 1997. Since November 1997, Mr.
Rosenzweig has served as a director of M-Web Holdings, a Johannesburg Stock
Exchange listed company. Since 1997, Mr. Rosenzweig has served as a director of
OpenTV, a Nasdaq National Market System and Amsterdam Stock Exchange listed
company.
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Mr. Rosenzweig also serves as a director of Brait S.A., a company listed on the
London Stock Exchange, Luxembourg Stock Exchange and Johannesburg Stock
Exchange. Before joining MIH Limited in 1996, Mr. Rosenzweig was the director of
corporate finance of NetHold. From 1986 to 1996, Mr. Rosenzweig was the managing
director of Intertax (Pty) Ltd., an international tax consultancy firm. Mr.
Rosenzweig received a B.A., L.L.B. and H. Dip. Tax Law from the University of
the Witwatersand in Johannesburg. Mr. Rosenzweig resigned from the Board of
Directors of United Service Technologies Limited, one of our principal
shareholders, upon joining our board.
Within 90 days from the closing of this offering, we will select two new
directors who satisfy the requirements for an independent director contained in
the Nasdaq Marketplace Rules. This will increase the size of our board to eight
directors.
COMPENSATION OF OUR DIRECTORS AND EXECUTIVE OFFICERS
The aggregate salary, bonus and other compensation paid by us and our
subsidiaries to our directors and executive officers as a group during the
fiscal year ended January 31, 2000 was approximately $1.7 million.
The aggregate amount set aside by us and our subsidiaries to provide
pension, retirement and similar benefits to our directors and executive officers
as a group during the fiscal year ended January 31, 2000 was approximately
$156,000.
The following table sets forth information for the fiscal year ended
January 31, 2000 regarding the compensation of our current chief executive
officer, our former chief executive officer and each of our executive directors.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------
OTHER ANNUAL
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION
--------------------------- -------- -------- -------------
<S> <C> <C> <C>
Roger I. MacFarlane.............................. $294,739 $ 0 $ 7,908
Chief Executive Officer
Peter Thorrington(1)............................. 294,739 0 8,423
President and Chief Operating Officer
Matthys J. Wessels(2)............................ 165,141 30,135 23,515
Chairman of the Board of Directors and Regional
Chief Executive of Africa
Alan C. Draper................................... 229,284 100,000 22,928
Executive Vice President and
President -- Asia Pacific Division
</TABLE>
---------------
(1) Mr. Thorrington was appointed as our President and Chief Operating Officer
in May 2000.
(2) Mr. Wessels was our Chief Executive Officer until May 2000 when Mr.
MacFarlane assumed the responsibilities of that office.
No options were granted to our named executive officers during the fiscal
year ended January 31, 2000.
As of October 20, 2000, a total of 755,214 of our issued and outstanding
ordinary shares are held in two Guernsey Island trusts created to facilitate
share ownership by our executives, employees and directors. One trust was
established directly by one of our shareholders by a transfer of previously
issued shares and the second trust was established directly by us. Subject to
the applicable requirements, the participants currently have rights which vest
over time to acquire a total of 525,260 shares from these two trusts. In the
third quarter of fiscal year 2001, a third trust established by one of our
shareholders distributed 138,364 shares on behalf of eight employees.
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<PAGE> 56
2000 STOCK OPTION PLAN
Our 2000 Stock Option Plan provides for the issuance of options to purchase
ordinary shares to our directors, executives, employees and consultants. This
plan allows for the grant of incentive and non-qualified stock options.
2,359,109 shares are reserved for issuance under the plan, subject to
adjustments.
The exercise price of an incentive stock option cannot be less than 100% of
the fair market value of an ordinary share on the grant date, and the exercise
price in case of any non-statutory stock option shall not be less than 85% of
the fair market value on the grant date. No person who owns more than 10% of the
total combined voting power of our stock may receive options unless the exercise
price is at least 110% of the fair market value of a share on the grant date.
All options issued under the plan have terms of ten years or less. The 2000
Stock Option Plan terminates on March 7, 2010. As of the date of this
prospectus, options to purchase 1,431,848 ordinary shares with option exercise
prices ranging from $12.97 to $16.41 per share have been granted under the plan.
Options granted under this plan expire in ten years or less from the date of
grant.
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
Our Non-Employee Directors Stock Option Plan provides that we shall grant
options to purchase our ordinary shares to each of our non-employee directors.
Under this plan, Mr. Stubbings received an initial grant of options to purchase
3,000 shares and Mr. Rosenzweig received an initial grant of options to purchase
15,000 shares. Such options have an exercise price of $16.41 per share. As new
non-employee directors are added to our board, they will each receive on the day
they join the board an initial grant of options to purchase 15,000 ordinary
shares. The plan also provides that each non-employee director is to receive
options to purchase 3,000 ordinary shares on the date of each of our annual
meetings, commencing with the 2001 annual shareholders meeting. A total of
400,000 shares have been reserved for the issuance of options under this plan,
subject to adjustment in the event of specific types of changes in our
capitalization.
Options granted under the plan vest in three annual increments, beginning
one year from the grant date. The option exercise price is equal to the fair
market value of the underlying ordinary shares as of the grant date. Options
granted under the plan expire 10 years from the grant date unless terminated
earlier as provided for in the plan.
2000 EMPLOYEE SHARE PURCHASE PLAN
Our 2000 Employee Share Purchase Plan provides our employees (including
employees of selected subsidiaries where permitted under local law) with an
opportunity to purchase our ordinary shares through accumulated payroll
deductions. A total of 400,000 shares are reserved for issuance under this plan,
subject to adjustments as provided for in the plan.
Employees in selected subsidiaries who have worked for us for a year or
more are eligible to participate in the plan. Eligible employees become plan
participants by completing subscription agreements authorizing payroll
deductions which are used to purchase shares. The plan is administered in
quarterly offering periods and the first offering period will commence after the
effective date of this offering. The purchase price shall be the lower of 85% of
the fair market value of our ordinary shares on either the enrollment date or
the exercise date.
EMPLOYMENT AGREEMENTS
In September 2000, we approved employment agreements with Mr. Wessels, Mr.
MacFarlane, Mr. Thorrington and Mr. Draper. Under the agreements, each executive
agrees to serve as one of our executives and in the other positions which we may
reasonably request. The agreements have substantially similar terms except that
the annual compensation under the agreements for each executive is different and
Mr. Wessels and Mr. Draper each receive an automobile allowance. The annual
salary for each of Mr. Wessels, Mr. MacFarlane, Mr. Thorrington and Mr. Draper
is approximately $180,000, $350,000,
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<PAGE> 57
$350,000 and $262,000, respectively. Commencing February 1, 2001 and on each
February thereafter, the employment term under each agreement automatically
extends for one additional year. Under the agreements, the executives are
entitled to a minimum of twelve months severance in the event we terminate their
employment without cause or they resign for good reason. For a period of one
year following a change of control, the executives are entitled to 24 months
severance if they are terminated without cause or they resign for good reason.
In addition, if each executive is still employed by us after the one-year
anniversary of a change of control, they are entitled to voluntarily resign and
receive 24 months salary as severance. The agreements also contain nondisclosure
and nonsolicitation provisions.
In letter agreements, we offered each of our executive officers six months
salary as severance in the event we terminate their employment without cause.
The agreements also provide the executives 12 months salary as severance in the
event they are terminated without cause or resign for good reason at any time
during the six-month period following a change of control. For the purpose of
these agreements, good reason includes a reduction in the individual's salary or
a material reduction in their position, authority, duties or responsibilities.
In exchange for the separation benefits provided in the agreements, the
executive agrees to maintain our confidential information and not to solicit or
recruit our employees or customers for a period of one year from the cessation
of employment.
INCENTIVE SHARE PURCHASE AGREEMENT
In September 2000, we entered into an incentive share purchase agreement
with Alan C. Draper, one of our officers and directors, whereby he agreed to
purchase $1.0 million worth of ordinary shares directly from us at the public
offering price. The closing for this purchase and sale of shares will occur
immediately after the closing of this offering. Based on a price of $15.00 per
share, this amounts to 66,667 shares. Unless otherwise indicated, information in
this prospectus is based on the assumption that this purchase by Mr. Draper
occurs at the same time as the closing of this offering.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1998, we advanced $538,000 on behalf of United Service Technologies
Limited, one of our principal shareholders. $500,000 of this advance was repaid
shortly after January 31, 1999, and the balance was repaid during June 2000
along with interest at an annual rate of 6%.
Effective February 1, 1999, we acquired Unitrans do Brasil Limitada, our
agent in Brazil. An interest in this agent was indirectly owned by Mr.
MacFarlane, Mr. Wessels, Mr. Thorrington and Mr. Draper. Prior to the
acquisition, we conducted business with the agent on the same terms and
conditions as all of our other independent agents. The purchase price for the
company was $6.7 million, and this acquisition was accounted for using the
purchase price method of accounting.
In December 1999, we borrowed $500,000 on a short-term basis from United
Service Technologies Limited, one of our principal shareholders. This loan was
repaid in June 2000, including interest at an annualized rate of 6%.
We have credit facilities with Nedcor Bank Limited, a direct subsidiary of
Old Mutual plc. Old Mutual plc is one of our principal shareholders. As of
January 31, 1999 and July 31, 2000, the outstanding balances under these credit
facilities were approximately $4.9 million and $5.0 million. The interest rate
on these facilities was 14.5% at July 31, 2000. We believe that such loans were
made to us on substantially the same terms, including interest rate and
collateral, as those prevailing at the time for comparable transactions in South
Africa.
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<PAGE> 58
PRINCIPAL SHAREHOLDERS
The following table sets forth specified information with respect to the
beneficial ownership of our ordinary shares as of October 20, 2000 by:
- each person (or group of affiliated persons) who is known by us to
beneficially own 5% or more of our outstanding ordinary shares; and
- all of our directors and officers as a group.
<TABLE>
<CAPTION>
OWNERSHIP PRIOR TO OWNERSHIP AFTER
OFFERING OFFERING(1)
-------------------- --------------------
IDENTITY OF PERSON OR GROUP NUMBER(2) PERCENT NUMBER(2) PERCENT
--------------------------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C>
United Service Technologies Limited(3)................. 9,269,344 46.2 9,269,344 37.1
Union-Transport Holdings, Inc.(4)...................... 1,813,224 9.0 1,813,224 7.3
PTR Holdings, Inc.(5).................................. 4,231,688 21.1 4,231,688 16.9
Old Mutual plc and its affiliates(6)................... 1,563,085 7.8 1,563,085 6.3
Directors and Officers as a Group (17 persons)(7)...... 1,898,314 9.5 1,964,981 7.9
</TABLE>
---------------
(1) Assumes the underwriters' over-allotment option is not exercised. Also
assumes 66,667 ordinary shares are sold to Alan C. Draper immediately after
the closing of this offering and 166,667 shares are issued to the sellers of
the assets we purchased from the Continental group of companies, in both
cases at a price of $15.00 per share. In the event that the underwriters'
over-allotment option is exercised in full, an additional 705,000 ordinary
shares will be sold in the offering.
(2) More than one person may be deemed to be a beneficial owner of the same
securities as determined in accordance with the rules of the SEC. The
information is not necessarily indicative of beneficial ownership for any
other purpose.
(3) United Service Technologies Limited, a British Virgin Islands company, is
the registered holder of the shares indicated in the above table. PTR
Holdings, Inc., a British Virgin Islands company, owns approximately 39% of
United Service Technologies Limited, but disclaims beneficial ownership of
any of our ordinary shares held by United Service Technologies Limited.
(4) Union-Transport Holdings, Inc., a British Virgin Islands company, is the
registered holder of the shares indicated in the above table. PTR Holdings,
Inc. is the owner of 56% of the securities of Union-Transport Holdings, Inc.
and Mr. MacFarlane, Mr. Thorrington and trusts for their respective families
are the owners of the remaining 44% of the securities of Union-Transport
Holdings, Inc.
(5) PTR Holdings, Inc. is the registered holder of 2,418,464 of the shares
listed in the above table and may be deemed to be the indirect beneficial
owner of the 1,813,224 ordinary shares held by Union-Transport Holdings,
Inc. PTR Holdings, Inc. is indirectly owned by holding companies indirectly
controlled by Mr. Wessels, Mr. MacFarlane and Mr. Thorrington and by the
Anubis Trust, a Guernsey Islands trust. Pursuant to a voting arrangement,
the trust has the power to control a majority of the outstanding shares of
PTR Holdings, Inc. and may be deemed to be the beneficial owner of such
shares.
(6) Includes ordinary shares held by various funds and other entities managed by
companies controlled by Old Mutual plc, a public limited company
incorporated in England and Wales. Old Mutual plc is an international
financial services group based in London, with a financial services business
in southern Africa. Entities in South Africa related to or controlled by Old
Mutual plc have voting or dispository power over approximately 36% of the
issued and outstanding shares of United Service Technologies Limited.
(7) Includes 187,301 ordinary shares registered in the names of the individual
directors and officers and held in pledge by one of the Guernsey Island
trusts designed to facilitate share ownership by our employees or otherwise
subject to options exercisable within 60 days of October 20, 2000. Also
includes 66,667 ordinary shares to be sold to Alan C. Draper immediately
after the closing of this offering, based on a price of $15.00 per share.
Excludes the ordinary shares held by PTR Holdings, Inc. and Union-Transport
Holdings, Inc.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
Set forth below is a description of the material terms of our capital
stock. This summary is subject to, and qualified in its entirety by, the
provisions of our Memorandum and Articles of Association which are included as
exhibits to the registration statement of which this prospectus is a part, and
by the provisions of applicable British Virgin Islands law.
Our Memorandum and Articles of Association authorize the issuance of up to
500,000,000 ordinary shares of no par value and 100,000,000 preference shares of
no par value of which 50,000,000 have been designated as Class A Preference
Shares and 50,000,000 have been designated as Class B Preference Shares.
Our application to list our ordinary shares on the Nasdaq National Market
System under the symbol "UTIW" has been approved. The transfer agent and
registrar for our ordinary shares is Computershare Trust Company, Inc.
Initial settlement of our ordinary shares will take place on the closing
date of this offering through the Depository Trust Company ("DTC") in accordance
with its customary settlement procedures for equity securities. Each person
owning a beneficial interest in our ordinary shares held through DTC must rely
on the procedures thereof and on institutions that have accounts therewith to
exercise any rights of a holder of our ordinary shares. Persons wishing to
obtain certificates for their ordinary shares must make arrangements with DTC.
The following is a summary of material provisions of our ordinary shares,
preference shares and Memorandum and Articles of Association.
ORDINARY SHARES
As of October 20, 2000, 20,047,616 of our ordinary shares were outstanding,
held by approximately 406 shareholders of record. All outstanding ordinary
shares are, and the ordinary shares to be issued in this offering will be, fully
paid and nonassessable.
The following summarizes the rights of holders of our ordinary shares:
- each holder of ordinary shares is entitled to one vote per share on all
matters to be voted on by shareholders generally, including the election
of directors;
- there are no cumulative voting rights;
- the holders of our ordinary shares are entitled to dividends and other
distributions as may be declared from time to time by the board of
directors out of funds legally available for that purpose, if any;
- upon our liquidation, dissolution or winding up, the holders of ordinary
shares will be entitled to share ratably in the distribution of all of
our assets remaining available for distribution after satisfaction of all
our liabilities and the payment of the liquidation preference of any
outstanding preference shares; and
- the holders of ordinary shares have no preemptive or other subscription
rights to purchase shares of our stock, nor are they entitled to the
benefits of any redemption or sinking fund provisions.
PREFERENCE SHARES
None of our preference shares are outstanding. Our Memorandum and Articles
of Association authorize our board of directors to determine the rights and
preferences of our Class A and Class B Preference Shares within the limits set
forth in our Memorandum and Articles of Association and applicable law. Our
board of directors may also amend our Memorandum of Association to create from
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time to time one or more classes of preference shares. Among other rights, the
board of directors may determine, without further vote or action by our
shareholders:
- the number of shares and series constituting that class and the
distinctive designation of that class;
- the dividend rate on the shares of the class, whether dividends will be
cumulative, and if so, from which date or dates, and the relative rights
of priority, if any, of payment of dividends on shares of the class;
- whether the class will have voting rights in addition to the voting
rights provided by law and, if so, the terms of the voting rights;
- whether the class will have conversion privileges and, if so, the terms
and conditions of conversion;
- whether or not the shares of the class will be redeemable, and, if so,
the dates, terms and conditions of redemption;
- whether the class will have a sinking fund for the redemption or purchase
of shares of that class, and, if so, the terms and amount of the sinking
fund;
- the right of the shares of that class to the benefit of conditions and
restrictions upon the creation of indebtedness by us or any subsidiary,
upon the issue of any additional stock (including additional shares of
such class of any other class) and upon the payment of dividends or the
making of other distributions on, and the purchase, redemption or other
acquisition by us or any subsidiary of any outstanding stock by us; and
- the rights of the shares of the class in the event of our voluntary or
involuntary liquidation, dissolution or winding up and the relative
rights or priority, if any, of payment of shares of the class.
Unless otherwise provided by our board of directors, the Class A and Class
B Preference Shares will rank on a parity with respect to the payment of
dividends and to the distribution of assets upon liquidation. Although we have
no present plans to issue any preference shares, any future issuance of
preference shares, or the issuance of rights to purchase preference shares, may
have the effect of delaying, deferring or preventing a change of control in our
company or an unsolicited acquisition proposal. The issuance of preference
shares also could decrease the amount of earnings and assets available for
distribution to the holders of ordinary shares or could adversely affect the
rights and powers, including voting rights, of the holders of ordinary shares.
REGISTRATION RIGHTS
Pursuant to a registration rights agreement, after this offering, the
holders of approximately 4,179,263 of our ordinary shares will be entitled to
rights with respect to the registration of such shares under the Securities Act
of 1933 (the "Securities Act"). Under these registration rights, in the event we
elect to register any of our ordinary shares for specified purposes after the
completion of the offering described in this prospectus, the holders of the
shares are entitled to include their ordinary shares in the registration. Such
holders are also entitled to demand registration rights after one year from the
completion of this offering pursuant to which they may require us to file a
registration statement under the Securities Act with respect to their ordinary
shares. These registration rights are subject to conditions and limitations,
among them the right of the underwriters of an offering to limit the number of
shares included in such registration and our right not to effect a demand
registration within 60 days prior to, and 180 days subsequent to, an offering of
our securities. All expenses in connection with any registration, other than the
underwriting discount and commission, will be paid by us.
LIMITATIONS OF LIABILITY AND INDEMNIFICATION MATTERS
Under British Virgin Islands law, each of our directors and officers, in
performing his or her functions, is required to act honestly and in good faith
with a view to our best interests and exercise the care,
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diligence and skill that a reasonably prudent person would exercise in
comparable circumstances. Our Articles of Association provide that, to the
fullest extent permitted by British Virgin Islands law or any other applicable
laws, our directors will not be personally liable to us or our shareholders for
any acts or omissions in the performance of their duties. Such limitation of
liability does not affect the availability of equitable remedies such as
injunctive relief or rescission. These provisions will not limit the liability
of directors under United States federal securities laws.
We may indemnify any of our directors or officers against all expenses,
including legal fees, and against all judgments, fines and amounts paid in
settlement and reasonably incurred in connection with legal, administrative or
investigative proceedings. We may only indemnify a director or officer if the
director or officer acted honestly and in good faith with the view to our best
interests and, in the case of criminal proceedings, the director or officer had
no reasonable cause to believe that his or her conduct was unlawful. The
decision of our board of directors as to whether the director or officer acted
honestly and in good faith with a view to our best interests and as to whether
the director or officer had no reasonable cause to believe that his or her
conduct was unlawful, is in the absence of fraud sufficient for the purposes of
indemnification, unless a question of law is involved. The termination of any
proceedings by any judgment, order, settlement, conviction or the entry of no
plea does not, by itself, create a presumption that a director or officer did
not act honestly and in good faith and with a view to our best interests or that
the director or officer had reasonable cause to believe that his or her conduct
was unlawful. If a director or officer to be indemnified has been successful in
defense of any proceedings referred to above, the director or officer is
entitled to be indemnified against all expenses, including legal fees, and
against all judgments, fines and amounts paid in settlement and reasonably
incurred by the director or officer in connection with the proceedings.
We may purchase and maintain insurance in relation to any of our directors
or officers against any liability asserted against the directors or officers and
incurred by the directors or officers in that capacity, whether or not we have
or would have had the power to indemnify the directors or officers against the
liability as provided in our Memorandum and Articles of Association.
ANTI-TAKEOVER MATTERS
Our Memorandum and Articles of Association include a number of provisions
that may have the effect of encouraging persons considering unsolicited tender
offers or other unilateral takeover proposals to negotiate with our board of
directors rather than pursue non-negotiated takeover attempts. These provisions
include the inability of shareholders to act by written consent, the inability
of shareholders to call a shareholder meeting except by delivering to our board
of directors a written request of holders of more than fifty percent of
outstanding ordinary shares, an advance notice requirement for director
nominations and other actions to be taken at annual meetings of shareholders and
requirements for approval by 66 2/3% of the shareholder votes to amend specified
provisions of our Memorandum and Articles of Association. Our Memorandum and
Articles of Association also require action by 66 2/3% of our outstanding shares
to remove a director without cause, and also authorize our Board of Directors to
issue additional preference shares. Our Board of Directors is classified into
three classes.
NO SHAREHOLDER ACTION BY WRITTEN CONSENT; CALLING SPECIAL MEETINGS OF
SHAREHOLDERS. Our Memorandum and Articles of Association prohibit shareholders
from taking action by written consent in lieu of an annual or special meeting,
and, thus, shareholders may take action only at an annual or special meeting
called in accordance with our Memorandum and Articles of Association. Our
Memorandum and Articles of Association provide that special meetings of
shareholders may only be called by our chief executive officer or our board of
directors upon request by a majority of our directors or the written request of
holders of more than fifty percent of our outstanding ordinary shares. These
provisions could have the effect of delaying consideration of a shareholder
proposal until the requirements for calling a shareholder meeting can be met.
The provisions would also prevent the holders of a majority of the voting power
of our ordinary shares entitled to vote from unilaterally using the written
consent procedure to take shareholder action.
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ADVANCE NOTICE REQUIREMENT. Our Memorandum and Articles of Association set
forth advance notice procedures with regard to shareholder proposals relating to
the nomination of candidates for election as directors or new business to be
presented at meetings of shareholders. These procedures provide that notice of
such shareholder proposals must be timely given in writing to our secretary
prior to the meeting at which the action is to be taken. Generally, to be
timely, notice must be received at our principal executive offices not less than
30 days nor more than 60 days prior to the meeting. The advance notice
requirement does not give our board of directors any power to approve or
disapprove shareholder director nominations or proposals but may have the effect
of precluding the consideration of business at a meeting if the proper notice
procedures are not followed.
AMENDMENT OF MEMORANDUM AND ARTICLES OF ASSOCIATION. Our Memorandum and
Articles of Association require the affirmative vote of at least 66 2/3% of the
voting power of all outstanding shares of capital stock or 66 2/3% of the
members of our board of directors entitled to vote to amend or repeal specified
provisions of our Memorandum and Articles of Association, including those
described in this section, or to approve any merger by us that would have the
effect of making changes in our Memorandum and Articles of Association which
would have required such affirmative vote if effected directly as an amendment.
This requirement will render more difficult the dilution of the anti-takeover
provisions of our Memorandum and Articles of Association.
REMOVAL OF DIRECTORS. Our Memorandum and Articles of Association permit
shareholders to remove directors for cause by the affirmative vote of the
holders of a majority of the voting power of our shares. Removal of a director
without cause requires the affirmative vote of 66 2/3% of the voting power of
our shares. These provisions may restrict the ability of a third party to remove
incumbent directors and simultaneously gain control of our board of directors by
filling the vacancies created by removal with its own nominees.
RIGHTS AND PREFERENCES OF PREFERENCE SHARES. Our Memorandum and Articles of
Association authorize the issuance of Class A and Class B Preference Shares,
none of which are outstanding. Our board of directors may determine the rights
and preferences of the Class A and Class B Preference Shares within the limits
set forth in our Memorandum and Articles of Association and applicable law. Our
board of directors also may amend our Memorandum and Articles of Association to
create from time to time one or more classes of preference shares. The existence
of authorized but unissued preference shares may enable our board of directors
to render more difficult or discourage an attempt to obtain control of us by
means of a merger, tender offer, proxy contest or otherwise. For example, if in
the due exercise of its fiduciary obligations, our board of directors were to
determine that a takeover proposal is not in our best interests, our board of
directors could cause preference shares to be issued without shareholder
approval in one or more private offerings or other transactions that might
dilute the voting or other rights of the proposed acquirer or insurgent
shareholder or shareholder group. In this regard, our Memorandum and Articles of
Association grant our board of directors broad power to establish the rights and
preferences of authorized and unissued preference shares. The issuance of
preference shares pursuant to our board of directors' authority described above
could decrease the amount of earnings and assets available for distribution to
you and adversely affect the enjoyment of rights of such holders, including
voting rights in the event a particular class of preference shares is given a
disproportionately large number of votes per share, and may have the effect of
delaying, deferring or preventing a change in control that may be favored by
shareholders.
CLASSIFIED BOARD OF DIRECTORS. Our Memorandum and Articles of Association
establish a classified board of directors. Our board of directors is divided
into three classes of approximately equal size with terms expiring in 2001
(Class A), 2002 (Class B) and 2003 (Class C). Thereafter, subject to the right
of holders of any series of preference shares to elect directors, shareholders
will elect one class constituting approximately one-third of the board of
directors for a three-year term at each annual meeting of shareholders. As a
result, at least two annual meetings of shareholders will be required for the
shareholders to change a majority of our board of directors. The classification
of directors will effectively make it more difficult to change the composition
of our board of directors.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have outstanding an aggregate of
24,980,950 ordinary shares, assuming no exercise of the underwriters'
over-allotment option, no exercise of outstanding options, and the issuance of
$1.0 million worth of shares to Alan C. Draper, one of our executive officers
and directors, and $2.5 million worth of shares to the sellers of the assets we
purchased from the Continental group of companies, both at a price of $15.00 per
share. All of the shares sold in this offering will be freely tradable without
restriction or further registration under the Securities Act unless such shares
are purchased by "affiliates" as that term is defined in Rule 144 under the
Securities Act. Restricted securities may be sold in the public market only if
registered or if they qualify for an exemption from registration under Rule 144
or 701 promulgated under the Securities Act, which rules are summarized below.
Sales of restricted securities in the public market, or the availability of such
shares for sale, could adversely affect the price of our ordinary shares.
LOCK-UP AGREEMENTS
Our executive officers, directors and principal shareholders, who own in
the aggregate 17,029,099 ordinary shares, have signed lock-up agreements under
which they agreed not to transfer or dispose of, directly or indirectly, any
ordinary shares or any securities convertible into or exercisable or
exchangeable for ordinary shares, for a period of 180 days after the date of
this prospectus, except in the case of one such shareholder, who is not one of
our officers or directors, that may engage in any such transaction with respect
to up to 781,542 of its shares after 60 days following the date of this
prospectus. Transfers or dispositions can be made sooner with the prior written
consent of Bear, Stearns & Co. Inc.
RULE 144
In general, under Rule 144 as currently in effect, a person who has
beneficially owned restricted securities for at least one year, including
persons who may be deemed our "affiliates," would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of 1% of
the number of ordinary shares then outstanding or the average weekly trading
volume of the ordinary shares on all exchanges and/or reported through the
automated quotation system of a registered securities association during the
four calendar weeks immediately preceding the SEC filing with respect to such
sale. Such sales are also subject to manner of sale provisions, notice
requirements and the availability of current public information about us.
However, if a person (or persons whose shares are aggregated) is not deemed to
have been our affiliate at any time during the 90 days immediately preceding the
sale, he or she may sell his or her restricted shares under Rule 144(k) without
regard to the limitations described above if at least two years have elapsed
since the later of the date the shares were acquired from us or from our
affiliate. The foregoing is a summary of Rule 144 and is not intended to be a
complete description of it.
RULE 144(k)
Under Rule 144(k), a person who is not deemed to have been one of our
affiliates at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner other than an affiliate, is
entitled to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.
RULE 701
In general, under Rule 701 of the Securities Act as currently in effect,
any of our employees, consultants or advisors who purchases shares from us in
connection with a compensatory stock or option plan or other written agreement
is eligible to resell such shares 90 days after the effective date of this
offering in reliance on Rule 144, but without compliance with some restrictions,
including the holding period, contained in Rule 144.
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<PAGE> 64
The following table indicates the number of ordinary shares that are not
being sold in the offering, but which will be outstanding when the offering is
completed, that will be eligible for sale into the public market.
<TABLE>
<CAPTION>
TIME NUMBER OF SHARES
---- ----------------
<S> <C>
Effective date.............................................. 7,785,185
60 days after effective date................................ 781,542
180 days after effective date............................... 16,180,889
</TABLE>
The remaining 233,334 ordinary shares will be eligible for sale into the
public market at various times after the expiration of one-year holding periods.
This number includes 66,667 ordinary shares to be sold to Alan C. Draper, one of
our executive officers and directors, and 166,667 ordinary shares to be issued
in connection with our acquisition of assets from the Continental group of
companies, in both cases using a price of $15.00 per share. Most of the
restricted shares that will be available for public resale after 180 days after
the effective date will be subject to volume and other resale restrictions
pursuant to Rule 144 because the holders are our affiliates.
REGISTRATION RIGHTS
We intend to file a registration statement on Form S-8 under the Securities
Act after the completion of this offering to register the ordinary shares
subject to our share plans and trusts and reserved for issuance under our 2000
Employee Share Purchase Plan, Non-Employee Directors Stock Option Plan and our
2000 Stock Option Plan, thus permitting the resale of such shares by
nonaffiliates in the public market without restriction under the Securities Act.
As of October 20, 2000, options to purchase 1,431,848 ordinary shares under our
Non-Employee Directors Stock Option Plan and our 2000 Stock Option Plan were
outstanding and 755,214 issued and outstanding ordinary shares were held by two
trusts established for our employees and directors.
Some of our shareholders have registration rights with respect to their
ordinary shares. Registration of these registrable securities under the
Securities Act would result in those shares becoming freely tradeable without
restriction under the Securities Act. Please refer to "Description of Capital
Stock -- Registration Rights" for more information about these rights.
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<PAGE> 65
UNDERWRITING
The underwriters named below have agreed, subject to the terms and
conditions of the underwriting agreement, to purchase from us the number of
ordinary shares set forth opposite its name below:
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
------------ ----------------
<S> <C>
Bear, Stearns & Co. Inc..................................... 1,750,000
Lazard Freres & Co. LLC..................................... 1,050,000
BB&T Capital Markets/Scott & Stringfellow, Inc.............. 700,000
Banc of America Securities LLC.............................. 100,000
Deutsche Bank Securities Inc. .............................. 100,000
A.G. Edwards & Sons, Inc. .................................. 100,000
ING Barings, LLC............................................ 100,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated.......... 100,000
Morgan Stanley & Co. Incorporated........................... 100,000
U.S. Bancorp Piper Jaffray Inc. ............................ 100,000
Wit SoundView Corporation................................... 100,000
Axiom Partners Inc. ........................................ 50,000
William Blair & Company, L.L.C. ............................ 50,000
Branch, Cabell & Company.................................... 50,000
Brean Murray & Co., Inc. ................................... 50,000
Morgan Keegan & Company, Inc. .............................. 50,000
Raymond James & Associates, Inc. ........................... 50,000
Stephens Inc. .............................................. 50,000
Tucker Anthony Incorporated................................. 50,000
---------
Total..................................................... 4,700,000
=========
</TABLE>
Subject to the terms and conditions of the underwriting agreement, the
underwriters have agreed to purchase all of the ordinary shares being sold
pursuant to the underwriting agreement if any of such shares are purchased
(excluding shares covered by the over-allotment option).
The underwriters have advised us that they propose to offer the ordinary
shares to the public initially at the public offering price set forth on the
cover page of this prospectus and to various dealers at such price less a
concession of not more than $0.63 per share. Additionally, the underwriters may
allow, and such dealers may reallow, a discount of not more than $0.10 per share
on sales to some other dealers. After the public offering of the shares, the
offering price and other selling terms may be changed by the underwriters.
We have granted the underwriters an option to purchase up to 705,000
additional ordinary shares at the public offering price, less the underwriting
discount set forth on the cover page of this prospectus, solely to cover
over-allotments, if any. This option may be exercised in whole or in part at any
time within 30 days after the date of this prospectus. To the extent that the
underwriters exercise this option, each underwriter will have a firm commitment,
subject to conditions, to purchase a number of ordinary shares proportionate to
such underwriter's purchase obligations set forth in the foregoing table.
The following table shows the per share and total underwriting discount and
commission to be paid to the underwriters by us. Such amounts are shown assuming
both no exercise and full exercise of the underwriters' option to purchase
additional shares.
<TABLE>
<CAPTION>
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per share................................................... $ 1.05 $ 1.05
Total....................................................... $4,935,000 $5,675,250
</TABLE>
The offering of the shares is made for delivery, when, as and if accepted
by the underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.
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<PAGE> 66
Our executive officers, directors and principal shareholders, who own in
the aggregate 17,029,099 ordinary shares, have agreed that they will not,
without the prior written consent of Bear, Stearns & Co. Inc., directly or
indirectly, offer, sell, contract to sell, grant any option to purchase, pledge
or otherwise dispose of, or, in any manner, transfer all or a portion of the
economic consequences associated with the ownership of any ordinary shares or
any securities convertible into or exercisable or exchangeable for ordinary
shares beneficially owned by them during the 180-day period following the date
of this prospectus, except in the case of one such shareholder, who is not one
of our officers or directors, that may engage in any such transaction with
respect to up to 781,542 of its shares after 60 days following the date of this
prospectus.
We have agreed that we will not, without the prior written consent of Bear,
Stearns & Co. Inc., directly or indirectly, offer, sell, contract to sell, grant
any option to purchase, pledge or otherwise dispose (or announce any offer,
sale, contract to sell, grant of an option to purchase, pledge or other
disposition) of any ordinary shares or any securities convertible into or
exercisable into or exchangeable for ordinary shares during the 180-day period
following the date of this prospectus, except that we may issue ordinary shares
and options to purchase ordinary shares under our stock option and stock
purchase plans and our share incentive purchase agreement with Alan C. Draper,
one of our executive officers, and we may issue $2.5 million worth of ordinary
shares to the sellers of the assets we purchased from the Continental group of
companies.
We have agreed to indemnify the underwriters against specified civil
liabilities, including liabilities under the Securities Act and to contribute to
payments the underwriters may be required to make in respect thereof.
The underwriters have advised us that, pursuant to Regulation M promulgated
under the Securities Exchange Act of 1934, persons participating in the offering
may engage in transactions, including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids, which may have the effect of
stabilizing or maintaining the market price of our ordinary shares at a level
above that which might otherwise prevail in the open market. A "stabilizing bid"
is a bid for or the purchase of the ordinary shares on behalf of the
underwriters for the purpose of pegging, fixing or maintaining the price of the
ordinary shares. A "syndicate covering transaction" is the bid for or the
purchase of the ordinary shares on behalf of the underwriters to reduce a short
position created in connection with the offering. The underwriters may also
cover all or a portion of such short position by exercising the over-allotment
option. A "penalty bid" is an arrangement permitting the underwriters to reclaim
the selling concession otherwise accruing to an underwriter or syndicate member
in connection with the offering if the ordinary shares originally sold by such
underwriter or syndicate member are purchased by the underwriters in a syndicate
covering transaction and have therefore not been effectively placed by such
underwriter or syndicate member. The underwriters have advised us such
transactions may be effected on the Nasdaq National Market System or otherwise
and, if commenced, may be discontinued at any time.
We estimate that the total expenses of this offering, excluding
underwriting discount and commission, will be approximately $2 million.
RESERVED SHARE PROGRAM
At our request, the underwriters have reserved for sale at the initial
offering price up to 225,000 of our ordinary shares to be sold in this offering
for sale to a limited number of our directors, business associates and related
persons designated by us. Purchases of reserved shares are to be made through an
account at Bear, Stearns & Co. Inc. in accordance with Bear, Stearns & Co.
Inc.'s procedures for opening an account and transacting in securities. The
number of shares available for sale to the general public will be reduced to the
extent that any reserved shares are purchased. Any reserved shares not purchased
by our directors, business associates and related persons will be offered by the
underwriters to the general public on the same terms as the other shares offered
by this prospectus.
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<PAGE> 67
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
GENERAL
This section summarizes the material United States federal income tax
consequences to holders of our ordinary shares as of the date of this
prospectus. The summary applies to you only if you hold our ordinary shares as a
capital asset for tax purposes (that is, for investment purposes). The summary
does not cover state, local or foreign law. In addition, this summary does not
apply to you if you are a member of a class of holders subject to special rules,
such as:
- a dealer in securities or currencies;
- a trader in securities that elects to use a mark-to-market method of
accounting for your securities holdings;
- a bank;
- a life insurance company;
- a tax-exempt organization;
- a person that holds our ordinary shares as part of a straddle or a
hedging, integrated, constructive sale or conversion transaction for tax
purposes;
- a person whose functional currency for tax purposes is not the U.S.
dollar;
- a person liable for alternative minimum tax; or
- a person that owns, or is treated as owning, 10% or more of any class of
our shares.
The discussion is based on current law. Changes in the law may alter the
tax treatment of our ordinary shares, possibly on a retroactive basis. The
discussion also assumes that we will not be classified as a "controlled foreign
corporation" under U.S. law.
The discussion does not cover tax consequences that depend upon your
particular tax circumstances. We recommend that you consult your tax advisor
about the consequences of holding our ordinary shares in your particular
situation.
For purposes of the discussion below, you are a "U.S. holder" if you are a
beneficial owner of our ordinary shares who or which is:
- an individual U.S. citizen or resident alien;
- a corporation, or entity taxable as a corporation, that was created, or
treated as created, under U.S. law (federal or state);
- an estate whose world-wide income is subject to U.S. federal income tax;
or
- a trust if (1) a U.S. court is able to exercise primary supervision over
its administration and (2) one or more U.S. persons have authority to
control all substantial decisions of the trust.
If you are not a U.S. holder, you are a "Non-U.S. holder" and the
discussion below titled "Tax Consequences to Non-U.S. Holders" will apply to
you.
If a partnership holds our ordinary shares, the tax treatment of a partner
will generally depend upon the status of the partner and upon the activities of
the partnership. If you are a partner of a partnership holding ordinary shares,
you should consult your tax advisor.
TAX CONSEQUENCES TO U.S. HOLDERS
DISTRIBUTIONS. We intend to make distributions on our ordinary shares in
the foreseeable future, subject to the availability of cash and other
determinations to be made by our board of directors. If distributions are made,
the gross amount of any such distribution (other than in liquidation) that you
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<PAGE> 68
receive with respect to our ordinary shares generally will be taxed to you as a
dividend (i.e., ordinary income) to the extent such distribution does not exceed
our current or accumulated earnings and profits, as calculated for U.S. federal
income tax purposes. To the extent any distribution exceeds our earnings and
profits, as calculated for U.S. federal income tax purposes, the distribution
will first be treated as a tax-free return of capital to the extent of your
adjusted tax basis in our ordinary shares and will be applied against and reduce
such basis on a dollar-for-dollar basis (thereby increasing the amount of gain
and decreasing the amount of loss recognized on a subsequent disposition of such
common stock). To the extent that such distribution exceeds your adjusted tax
basis, the distribution will be taxed as gain recognized on a sale or exchange
of our ordinary shares. See "Sale or Other Disposition of our Ordinary Shares,"
below. Because we are not a U.S. corporation, dividends paid by us to
corporations are not eligible for the dividends-received deduction. A U.S.
holder will not be eligible to claim a foreign tax credit against its U.S.
federal income tax liability for foreign taxes paid by us unless it is a U.S.
corporation owning 10 percent or more of our voting stock. Dividends paid with
respect to our ordinary shares will generally be treated as foreign source
"passive income" or, in the case of some types of U.S. holders, "financial
services income," for purposes of computing allowable foreign tax credits for
U.S. foreign tax credit purposes.
SALE OR OTHER DISPOSITION OF OUR ORDINARY SHARES. In connection with the
sale or other taxable disposition of our ordinary shares:
- you will recognize gain or loss equal to the difference (if any) between:
- the U.S. dollar value of the amount realized on such sale or other
taxable disposition, and
- your adjusted tax basis in such ordinary shares.
- any gain or loss will be capital gain or loss and will be long-term
capital gain or loss if your holding period for our ordinary shares is
more than one year at the time of such sale or other disposition.
- any gain or loss will be treated as having a United States source for
United States foreign tax credit purposes and as a result of the foreign
tax credit provisions of the Internal Revenue Code of 1986 you may be
unable to claim a foreign tax credit for British Virgin Islands
withholding taxes, if any, imposed upon the sale or disposition of
ordinary shares.
- your ability to deduct capital losses is subject to limitations.
PASSIVE FOREIGN INVESTMENT COMPANY. We will be classified as a passive
foreign investment company for U.S. federal income tax purposes if:
- 75% or more of our gross income for the taxable year is passive income;
or
- on average for the taxable year, 50% or more of our assets by value or
under certain circumstances, by adjusted basis, produce or are held for
the production of passive income.
We do not believe that we satisfy or, after the completion of this
offering, will satisfy either of the requirements for classification as a
passive foreign investment company. Because the determination of whether the
ordinary shares constitute shares of a passive foreign investment company will
be based upon the composition of our income and assets from time to time, there
can be no assurance that we will not be considered a passive foreign investment
company for any future fiscal year.
If we are classified as a passive foreign investment company for any
taxable year, unless a qualified electing fund election is made:
- any excess distributions (generally defined as the excess of the amount
received with respect to the shares in any taxable year over 125% of the
average received in the shorter of either the three previous years or
your holding period before the taxable year) made by us during a taxable
year must be allocated ratably to each day of your holding period. The
amounts allocated to the current taxable year and to taxable years prior
to the first year in which we were classified as a passive foreign
investment company will be included as ordinary income in gross income
for that year. The amount allocated to each prior taxable year will be
taxed as ordinary income at the highest rate in
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effect for the U.S. holder in that prior year and the tax is subject to
an interest charge at the rate applicable to deficiencies in income
taxes; and
- the entire amount of any gain realized upon the sale or other disposition
of ordinary shares will be treated as an excess distribution made in the
year of sale or other disposition and as a consequence will be treated as
ordinary income and to the extent allocated to years prior to the year of
sale or other disposition, will be subject to the interest charge
described above.
The passive foreign investment company rules will not apply if the U.S.
holder elects to treat us as a qualified electing fund and we provide specific
information required to make the election. If we were classified as a passive
foreign investment company, we intend to notify U.S. holders and provide them
with that information as may be required to make the qualified electing fund
election effective. If the qualified election fund election is made, a U.S.
holder is taxable on its pro-rata share of our ordinary earnings and net capital
gain for each taxable year of the company, regardless of whether the
distributions were received. The U.S. holder's basis in the ordinary shares will
be increased to reflect taxed but undistributed income. Distributions of income
that had previously been taxed will result in a corresponding reduction in basis
in the ordinary shares and will not be taxed again as a distribution.
U.S. holders that own ordinary shares during any year in which we are
classified as a passive foreign investment company, must file Form 8621. We urge
you to consult your own U.S. tax advisor regarding the U.S. federal income tax
consequences of holding our shares while classified as a passive foreign
investment company.
INFORMATION RETURN AND BACKUP WITHHOLDING. Distributions made by us with
respect to our ordinary shares and gross proceeds from the disposition of the
shares may be subject to information reporting requirements to the Internal
Revenue Service and a 31% backup withholding tax. However, the backup
withholding tax will generally not apply to a U.S. holder who furnishes a
correct taxpayer identification number and provides other required information.
If backup withholding applies, the amount withheld is not an additional tax, but
is credited against the shareholder's United States federal income tax
liability. Accordingly, we urge you to contact your own tax advisor to ascertain
whether it is necessary for you to furnish any such information to us or the
Internal Revenue Service.
TAX CONSEQUENCES TO NON-U.S. HOLDERS
DISTRIBUTIONS. If you are a non-U.S. holder, you generally will not be
subject to U.S. federal income tax on distributions made on our ordinary shares
unless:
- you conduct a trade or business in the United States; and
- the dividends are effectively connected with the conduct of that trade or
business (and, if an applicable income tax treaty so requires as a
condition for you to be subject to U.S. federal income tax on a net
income basis in respect of income from our ordinary shares, such
dividends are attributable to a permanent establishment that you maintain
in the United States).
If you satisfy the two above-described requirements, you generally will be
subject to tax in respect of such dividends in the same manner as a U.S. holder,
as described above. In addition, any effectively connected dividends received by
a non-U.S. corporation may also, under some circumstances, be subject to an
additional "branch profits tax" at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty.
SALE OR OTHER DISPOSITION OF OUR ORDINARY SHARES. If you are a non-U.S.
holder, you will not be subject to U.S. federal income tax, including
withholding tax, in respect of gain recognized on a sale or other taxable
disposition of our ordinary shares unless:
- your gain is effectively connected with a trade or business that you
conduct in the United States (and, if an applicable income tax treaty so
requires as a condition for you to be subject to U.S. federal income tax
on a net income basis in respect of gain from the sale or other
disposition of our
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ordinary shares, such gain is attributable to a permanent establishment
maintained by you in the United States), or
- you are an individual and are present in the United States for at least
183 days in the taxable year of the sale or other disposition, and
either:
- your gain is attributable to an office or other fixed place of business
that you maintain in the United States, or
- you have a tax home in the United States.
Effectively connected gains realized by a non-U.S. corporation may also,
under some circumstances, be subject to an additional "branch profits tax" at a
rate of 30% or such lower rate as may be specified by an applicable income tax
treaty.
BACKUP WITHHOLDING AND INFORMATION REPORTING. Payments (or other taxable
distributions) in respect of our ordinary shares that are made in the United
States or by a U.S. related financial intermediary will be subject to U.S.
information reporting rules. You will not be subject to "backup" withholding of
U.S. federal income tax provided that:
- you are a corporation or other exempt recipient, or
- you provide a taxpayer identification number (which, in the case of an
individual, that is his or her taxpayer identification number) and
certify that no loss of exemption from backup withholding has occurred.
If you are not a United States person, you generally are not subject to
information reporting and backup withholding, but you may be required to provide
a certification of your non-U.S. status in order to establish that you are
exempt.
Amounts withheld under the backup withholding rules may be credited against
your U.S. federal income tax liability, and you may obtain a refund of any
excess amounts withheld under the backup withholding rules by filing the
appropriate claim for refund with the Internal Revenue Service.
BRITISH VIRGIN ISLANDS TAXATION
Under the International Business Companies Act of the British Virgin
Islands as currently in effect, a holder of ordinary shares who is not a
resident of the British Virgin Islands is exempt from British Virgin Islands
income tax on dividends paid with respect to the ordinary shares and all holders
of ordinary shares are not liable to the British Virgin Islands for income tax
on gains realized during that year on sale or disposal of such shares; the
British Virgin Islands does not impose a withholding tax on dividends paid by a
company incorporated under the International Business Companies Act.
There are no capital gains, gift or inheritance taxes levied by the British
Virgin Islands on companies incorporated under the International Business
Companies Act. In addition, shares of companies incorporated under the
International Business Companies Act are not subject to transfer taxes, stamp
duties or similar charges.
There is no income tax treaty or convention currently in effect between the
United States and the British Virgin Islands.
LEGAL MATTERS
The validity of the ordinary shares offered hereby will be passed upon for
us by Harney Westwood & Riegels, the British Virgin Islands. Certain United
States legal matters will be passed upon for us by Paul, Hastings, Janofsky &
Walker LLP, Costa Mesa, California. Certain United States legal matters in
connection with the ordinary shares offered hereby will be passed upon for the
underwriters by Pillsbury Madison & Sutro LLP, San Francisco, California.
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EXPERTS
The financial statements as of January 31, 1999 and 2000, and for each of
the three years in the period ended January 31, 2000, included in this
prospectus and the related financial statement schedule included elsewhere in
the registration statement have been audited by Deloitte & Touche, independent
auditors, as stated in their reports appearing herein and elsewhere in the
registration statement, and have been so included in reliance upon the reports
of such firm given upon their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form F-1, of which this prospectus is a part, under the Securities
Act with respect to the ordinary shares offered hereby. This prospectus does not
contain all of the information included in the registration statement.
Statements contained in this prospectus concerning the provisions of any
document are not necessarily complete. You should refer to the copy of these
documents filed as exhibits to the registration statement or otherwise filed by
us with the SEC for a more complete understanding of the matter involved. Each
statement concerning these documents is qualified in its entirety by such
reference.
Upon completion of this offering, we will be subject to the informational
requirements of the Securities Exchange Act of 1934 and will file reports and
other information with the SEC. These will include annual reports on Form 20-F
and reports on Form 6-K. You can read and copy our filings with the Securities
and Exchange Commission, including the registration statement, at the public
reference facilities maintained by the SEC, Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the
SEC located at Seven World Trade Center, New York, New York 10048, and 500 West
Madison Street, Chicago, Illinois 60661. Please call the SEC at 1-800-SEC-0330
for further information about the public reference facilities. The SEC maintains
a web site that contains reports and other information regarding registrants
that file electronically with the SEC. Copies of the registration statement and
the reports and other information that we file electronically with the SEC may
be obtained from the SEC's Internet address at http://www.sec.gov.
You may request a copy of these documents, at no cost, by writing or
telephoning us at the following address:
c/o Union-Transport Corporation
19443 Laurel Park Road, Suite 107
Rancho Dominguez, California 90220
(310) 604-3311
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UTI WORLDWIDE INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Income Statements.............................. F-3
Consolidated Balance Sheets................................. F-4
Consolidated Statements of Changes in Equity................ F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 73
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of UTi Worldwide Inc.
We have audited the accompanying consolidated balance sheets of UTi
Worldwide Inc. as of January 31, 1999 and 2000 and related consolidated
statements of income, changes in equity and cash flows for each of the three
years ended January 31, 2000 set out in pages F-3 to F-53. These financial
statements are the responsibility of the group's management. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by the management as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements present fairly, in all material
respects, the financial position of the group as of January 31, 1999 and 2000
and the results of its operations and its cash flows for each of the three years
ended January 31, 2000 in accordance with International Accounting Standards.
International Accounting Standards vary in certain significant respects
from accounting principles generally accepted in the United States of America.
The application of the latter would have affected the determination of net
income for the years ended January 31, 1999 and 2000 and the determination of
shareholders' equity and financial position at January 31, 1999 and 2000, to the
extent summarized in Note 29.
As discussed in Note 2, the group adopted International Accounting Standard
(IAS 19, revised 1998) relating to the accounting treatment for employee
benefits, including retirement plans, and retroactively, revised the 1998 and
1999 financial statements for the changes.
/s/ Deloitte & Touche
Deloitte & Touche
Chartered Accountants
St. Peter's House
Le Bordage
St. Peter Port
Guernsey GY1 3HW
Channel Islands
April 28, 2000, except for Notes 27 and 29
as to which the date is August 11, 2000,
and October 26, 2000
as to the last paragraph of Note 31.
F-2
<PAGE> 74
UTI WORLDWIDE INC.
CONSOLIDATED INCOME STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31, SIX MONTHS ENDED JULY 31,
--------------------------------------- -------------------------
1998* 1999* 2000 1999 2000
NOTE US$'000 US$'000 US$'000 US$'000 US$'000
---- ----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Gross revenue.................. 528,535 571,141 706,955 327,997 401,985
Freight consolidation costs.... (342,049) (362,862) (461,338) (212,842) (260,852)
----------- ----------- ----------- ----------- -----------
Net revenue.................... 186,486 208,279 245,617 115,155 141,133
Staff costs.................... (92,333) (106,544) (122,929) (58,465) (71,668)
Depreciation................... (6,025) (6,310) (7,822) (3,640) (4,267)
Amortization................... (695) (1,841) (3,409) (1,504) (2,146)
Other operating expenses....... (71,737) (77,279) (90,032) (43,761) (50,791)
----------- ----------- ----------- ----------- -----------
Operating profit............... 5 15,696 16,305 21,425 7,785 12,261
Finance costs.................. 6 (4,001) (3,936) (4,653) (3,082) (3,624)
Income from associates......... 199 26 -- -- --
Income from other
investments.................. 7 2,749 5,478 2,334 1,752 2,118
----------- ----------- ----------- ----------- -----------
Pretax income.................. 14,643 17,873 19,106 6,455 10,755
Income tax expense............. 8 (2,543) (3,220) (1,623) (548) (2,579)
----------- ----------- ----------- ----------- -----------
Net income before minority
interest..................... 12,100 14,653 17,483 5,907 8,176
Minority interest.............. (252) (79) (405) (307) (400)
----------- ----------- ----------- ----------- -----------
Net income..................... 11,848 14,574 17,078 5,600 7,776
=========== =========== =========== =========== ===========
(US$'000, EXCEPT PER SHARE AMOUNTS)
Basic earnings per ordinary
share(US$)................... 10 0.92 0.96 1.07 0.34 0.44
Diluted earnings per ordinary
share(US$)................... 10 0.70 0.76 0.85 0.28 0.39
Earnings before amortization... 12,543 16,415 20,487 7,104 9,922
Basic earnings per ordinary
share before
amortization(US$)............ 10 0.98 1.08 1.29 0.44 0.56
Diluted earnings per ordinary
share before
amortization(US$)............ 10 0.74 0.85 1.02 0.35 0.49
Number of shares used for per
share calculations:
Undiluted shares............... 12,076,813 14,470,708 15,259,099 15,259,099 17,653,239
Diluted shares................. 16,865,094 19,258,989 20,047,380 20,047,380 20,047,380
</TABLE>
---------------
* Revised (see Note 2)
The accompanying notes to the consolidated financial statements form an integral
part of the consolidated financial statements.
F-3
<PAGE> 75
UTI WORLDWIDE INC.
CONSOLIDATED BALANCE SHEETS
AS OF JANUARY 31, 1999 AND 2000
AND AS OF JULY 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
---------------------- JULY 31,
1999* 2000 2000
NOTE US$'000 US$'000 US$'000
-------- --------- --------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................ 38,555 20,760 24,745
Trade and other receivables, net................. 16 147,562 183,083 220,428
------- ------- -------
Total current assets.......................... 186,117 203,843 245,173
Property, plant and equipment, net............... 11 29,164 34,985 37,053
Goodwill, net.................................... 12 31,474 48,532 59,752
Investments...................................... 13 1,741 1,043 684
Deferred tax assets.............................. 14 1,508 3,659 3,169
Other non-current assets......................... 15 5,209 5,858 5,729
------- ------- -------
Total assets.................................. 255,213 297,920 351,560
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings............................ 18 20,528 25,303 40,797
Finance lease obligations........................ 21 2,472 2,179 1,953
Trade and other payables......................... 22 121,533 142,415 177,419
Tax liabilities.................................. 1,982 2,608 2,271
------- ------- -------
Total current liabilities..................... 146,515 172,505 222,440
Long term liabilities:
Finance lease obligations........................ 21 9,311 10,504 9,634
Long-term borrowings............................. 18 2,306 4,855 6,130
Deferred tax liabilities......................... 14 2,008 2,796 2,676
Retirement fund obligations...................... 19 581 646 643
------- ------- -------
Total long term liabilities................... 14,206 18,801 19,083
Minority interest.................................. 1,155 1,571 1,737
Commitments and Contingencies...................... 24, 25, 26
Shareholders' equity:
Issued capital..................................... 17 86,020 86,020 86,020
Distributable reserves............................. 27,678 41,374 48,575
Non-distributable reserves......................... 2,214 2,184 2,759
Cumulative foreign exchange translation
adjustment....................................... (22,575) (24,535) (29,054)
------- ------- -------
Total shareholders' equity.................... 93,337 105,043 108,300
------- ------- -------
Total liabilities and shareholders' equity.... 255,213 297,920 351,560
======= ======= =======
</TABLE>
---------------
* Revised (see Note 2)
The accompanying notes to the consolidated financial statements form an integral
part of the consolidated financial statements.
F-4
<PAGE> 76
UTI WORLDWIDE INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
EXCHANGE NON-
ISSUED TRANSLATION DISTRIBUTABLE DISTRIBUTABLE
CAPITAL ADJUSTMENT RESERVES* RESERVES* TOTAL
NOTE US$'000 US$'000 US$'000 US$'000 US$'000
---- ------- ----------- ------------- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 31, 1997, as previously
reported................................... 34,166 (6,818) 5,796 2,130 35,274
Changes in accounting policy -- adoption of
IAS 19 (revised 1998)**.................... -- (568) 799 -- 231
------ ------- ------ ----- -------
Balance at January 31, 1997, revised......... 34,166 (7,386) 6,595 2,130 35,505
Shares issued................................ 15,471 -- -- -- 15,471
Net income for the fiscal year............... -- -- 11,848 -- 11,848
Foreign exchange translation differences..... -- (5,117) -- -- (5,117)
Dividends.................................... 9 -- -- (2,351) -- (2,351)
Transfer to non-distributable reserves....... -- -- (50) 50 --
Other........................................ (116) -- -- -- (116)
------ ------- ------ ----- -------
Balance at January 31, 1998.................. 49,521 (12,503) 16,042 2,180 55,240
Shares issued................................ 36,499 -- -- -- 36,499
Net income for the fiscal year............... -- -- 14,574 -- 14,574
Foreign exchange translation differences..... -- (10,072) -- -- (10,072)
Dividends.................................... 9 -- -- (2,904) -- (2,904)
Transfer to non-distributable reserves....... -- -- (34) 34 --
------ ------- ------ ----- -------
Balance at January 31, 1999.................. 86,020 (22,575) 27,678 2,214 93,337
Net income for the fiscal year............... -- -- 17,078 -- 17,078
Transfer to non-distributable reserves....... -- -- (264) 264 --
Deferred tax liability....................... -- -- -- (294) (294)
Foreign exchange translation differences..... -- (1,960) -- -- (1,960)
Dividends.................................... 9 -- -- (3,118) -- (3,118)
------ ------- ------ ----- -------
Balance at January 31, 2000.................. 86,020 (24,535) 41,374 2,184 105,043
Net income for the six months ended July 31,
2000 (Unaudited)........................... -- -- 7,776 -- 7,776
Transfer to non-distributable reserves
(Unaudited)................................ -- -- (575) 575 --
Foreign exchange translation differences
(Unaudited)................................ -- (4,519) -- -- (4,519)
------ ------- ------ ----- -------
Balance at July 31, 2000 (Unaudited)......... 86,020 (29,054) 48,575 2,759 108,300
====== ======= ====== ===== =======
</TABLE>
<TABLE>
<CAPTION>
JANUARY 31,
----------------- JULY 31,
1999 2000 2000
US$'000 US$'000 US$'000
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Non-distributable reserves*
Legal reserves.............................................. 84 147 147
Revaluation of tangible assets -- property, plant and
equipment................................................. 1,825 1,475 1,475
Retained income of associated companies..................... 276 152 --
Restricted reserves of subsidiary companies................. 29 410 1,137
----- ----- -----
2,214 2,184 2,759
===== ===== =====
</TABLE>
---------------
* Distributable reserves represent that portion of shareholders' equity
available for distribution to shareholders, whereas non-distributable
reserves are those items shown in the table above, which are not available
for distribution to shareholders.
** Revised (see Note 2)
The accompanying notes to the consolidated financial statements form an integral
part of the consolidated financial statements.
F-5
<PAGE> 77
UTI WORLDWIDE INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JANUARY 31, JULY 31,
----------------------------- ------------------
1998* 1999* 2000 1999 2000
NOTE US$'000 US$'000 US$'000 US$'000 US$'000
---- ------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Operating activities:
Pretax income......................................... 14,643 17,873 19,106 6,455 10,755
Adjustments for:
Income from associates.............................. (199) (26) -- -- --
Finance costs....................................... 4,001 3,936 4,653 2,787 3,162
Income from other investments....................... (2,749) (5,478) (2,334) (1,752) (2,129)
Depreciation........................................ 6,025 6,310 7,822 2,558 4,267
Amortization........................................ 695 1,841 3,409 1,504 2,146
Loss/(gain) on disposal of property, plant and
equipment......................................... 71 (111) 44 5 (221)
Hyper-inflation adjustment.......................... -- -- (22) (11) --
Loss/(gain) on disposal of other investments........ -- 25 -- -- (196)
------ ------- ------- ------- -------
Operating cash flow before movements in working
capital............................................. 22,487 24,370 32,678 11,546 17,784
Changes in working capital:
Increase in trade and other receivables........... (9,223) (13,533) (34,734) (12,111) (44,106)
Increase in prepaid pension costs................. (1,324) (908) (667) (338) (307)
Increase in provisions for pension liabilities.... 62 67 70 40 31
Increase in trade and other payables.............. 4,470 12,053 17,867 11,614 38,997
------ ------- ------- ------- -------
Cash generated from operations.......................... 16,472 22,049 15,214 10,751 12,399
Income tax paid......................................... (2,995) (1,997) (3,113) (530) (2,766)
Interest paid........................................... (4,002) (3,916) (3,655) (2,564) (3,162)
------ ------- ------- ------- -------
Net cash from operating activities...................... 9,475 16,136 8,446 7,657 6,471
------ ------- ------- ------- -------
Investing activities:
Interest received..................................... 1,347 2,677 3,015 2,007 1,495
Dividend received..................................... 88 62 -- -- --
Proceeds from disposal of property, plant and
equipment........................................... 626 449 485 485 476
Purchases of property, plant and equipment............ 11 (5,066) (16,644) (12,924) (4,214) (8,424)
Acquisition of subsidiaries and business
undertakings........................................ 13 (3,109) (19,368) (16,551) (10,093) (5,640)
Proceeds on sale of other investments................. -- 96 -- -- 513
Decrease/(increase) in minority interest.............. -- 66 (189) (5) (208)
Acquisition of other investments...................... (44) (1,266) (290) (277) --
------ ------- ------- ------- -------
Net cash used in investing activities................... (6,158) (33,928) (26,454) (12,097) (11,788)
------ ------- ------- ------- -------
Financing activities:
Ordinary and preference dividends paid................ -- (3,081) (2,903) -- --
Long term bank borrowings -- advanced................. 6 451 19 -- 358
Long term bank borrowings -- repaid................... (2,529) (160) -- (3) (101)
Finance lease obligations -- advanced................. -- 7,919 3,934 587 1,185
Finance lease obligations -- repaid................... -- (4,526) (2,731) (1,634) (1,232)
Payment of purchase acquisition installment........... (1,736) (2,529) (5,216) (509) (1,041)
Shareholder company loans............................. (135) (184) 853 (775) 7
Other loans........................................... (2,040) (2,142) 54 (22) (561)
Issuance of shares.................................... 15,471 36,169 -- -- --
(Decrease)/increase in bank overdraft................. (8,892) 4,622 7,420 (3,664) 9,714
------ ------- ------- ------- -------
Net cash from/(used in) financing activities............ 145 36,539 1,430 (6,020) 8,329
------ ------- ------- ------- -------
Net increase/(decrease) in cash and cash equivalents.... 3,462 18,747 (16,578) (10,460) 3,012
Cash and cash equivalents at the beginning of the fiscal
year.................................................. 16,649 20,174 38,555 38,555 20,760
Effect of foreign exchange rate changes................. 63 (366) (1,217) (1,055) 973
------ ------- ------- ------- -------
Cash and cash equivalents at the end of the fiscal
year.................................................. 20,174 38,555 20,760 27,040 24,745
====== ======= ======= ======= =======
</TABLE>
---------------
* Revised (see Note 2)
The accompanying notes to the consolidated financial statements form an integral
part of the consolidated financial statements.
F-6
<PAGE> 78
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
1. PRESENTATION OF FINANCIAL STATEMENTS
The financial statements of UTi Worldwide Inc. (the "group" or "UTi") are
prepared in accordance with International Accounting Standards ("IAS") in United
States dollars.
Nature of Operations
UTi's core business is in non-asset air and ocean transportation and
forwarding, customs clearances and distribution value added services, such as
warehousing. From these operations, the group has a balanced diversity of
industries, geographic markets and individual customers. UTi's overriding goal
continues to be to provide its customers with customized supply chain solutions
that deliver competitive advantage in the global logistics marketplace, with
quantifiable results.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Risk Factors
The group's operations are influenced by many factors, including economic
and political conditions throughout the world, international laws, and
fluctuating currency rates. The impacts of some of these risk factors are
reduced by the use of forward exchange contracts and the fact that the group
operates on a global basis.
2. ADOPTION OF INTERNATIONAL ACCOUNTING STANDARDS
In the current year, the group has adopted the following revisions to
International Accounting Standards for the first time:
<TABLE>
<S> <C>
IAS 1 (revised 1997).................... Presentation of Financial Statements
IAS 14 (revised 1997).................... Segmental reporting
IAS 19 (revised 1998).................... Employee benefits
</TABLE>
IAS 1 (revised 1997) and IAS 14 (revised 1997) are concerned with the
presentation and disclosure of financial information. The presentation in the
current year's financial statements conforms to the requirements of these
Standards, and prior years have been modified in order to achieve consistent
presentation.
IAS 19 (revised 1998) specifies the accounting treatment for employee
benefits, including retirement benefit plans. The principle effect of the
implementation of IAS 19 (revised 1998) is the recognition of costs for the
group's defined benefit retirement plans. In prior periods, the costs of
providing retirement benefits under these plans were determined using a
projected benefit valuation method, with actuarial valuations carried out every
three years. Actuarial gains and losses and past service costs were spread
systematically over the expected remaining working life of existing employees,
irrespective of the date of vesting.
Under IAS 19 (revised 1998), the cost of providing retirement benefits
under the group's defined benefit plans is determined using the projected unit
credit method, with the actuarial valuations being
F-7
<PAGE> 79
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
2. ADOPTION OF INTERNATIONAL ACCOUNTING STANDARDS (CONTINUED)
carried out at each balance sheet date. Actuarial gains and losses which exceed
10% of the greater of the present value of the group's pension obligations and
the fair value of the plans' assets are amortized over the expected average
remaining working lives of the employees participating in the plans. Past
service costs are recognized immediately to the extent that the benefits are
already vested, and otherwise are amortized on a straight-line basis over the
average period until the amended benefits become vested.
As a result of the changes described above, the group has determined the
liability and prepaid costs for its defined benefit plans at the date of
adoption of IAS 19 (revised 1998) as US$646,000 and US$4,588,000, respectively
(of which US$54,000 and US$971,000, respectively, arose in fiscal year 1998,
US$59,000 and US$675,000, respectively, arose in fiscal year 1999 and US$65,000
and US$649,000, respectively, arose in fiscal year 2000). These amounts (net of
foreign exchange translation differences and deferred tax effects) have been
recognized immediately and the opening balance of the distributable reserves at
February 1, 1997 has been increased by US$746,000.
IAS 19 (revised 1998) also requires the group to provide in full for
accrued leave pay. In the past, the group provided for leave pay based on a
proportion of the total leave pay accrual on the basis that all employees would
not leave the group at the same time. As a result of these changes, the opening
distributable reserves at February 1, 1997 has been reduced by US$515,000 (net
of foreign exchange translation differences and deferred tax) and the results
for the fiscal years ended January 31, 1998, 1999 and 2000 have been reduced by
US$112,000, US$122,000 and US$26,000 (net of foreign exchange translation
differences and deferred tax), respectively.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared under the historical cost
convention, as modified for the revaluation of land and buildings.
The principal accounting policies remain unchanged from the previous year,
except for the adoption of IAS 19 (revised 1998) "Employee benefits," with
effect from February 1, 1999.
Basis of Consolidation
The consolidated financial statements incorporate the financial statements
of the company and all subsidiaries controlled by the group (generally 50% or
more shareholding). Control is achieved where the group has the power to govern
the financial and operating policies of a subsidiary company so as to obtain
benefits from its activities.
The results of subsidiaries acquired during the year are included in the
consolidated income statement from the effective date of acquisition.
All significant inter-company transactions and balances are eliminated.
Business Combinations
On acquisition, the assets and liabilities are measured at their fair
values at the date of acquisition. Any excess of the cost of the acquisition
over the fair values of the identifiable assets and liabilities is recognized as
goodwill. Goodwill is amortized on a straight-line basis following an assessment
of the estimated useful life, subject to a maximum period of 20 years.
F-8
<PAGE> 80
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Goodwill arising on acquisitions prior to January 1, 1995 was written off
against shareholders' equity, in accordance with IAS 22 (revised 1993) "Business
combinations."
The interest of minority shareholders is stated at the minority's
proportion of the fair values of the assets and liabilities recognized.
Property, Plant & Equipment
Property, plant and equipment is stated at cost or valuation less
accumulated depreciation.
Depreciation is provided on the straight-line and reducing balance methods
in amounts sufficient to relate the cost or valuation of depreciable assets to
operations over the estimated useful lives of the assets at the following annual
rates:
<TABLE>
<S> <C>
Computer equipment/software................................. 20% - 33%
Fixtures, fittings and equipment............................ 10% - 33%
Motor vehicles.............................................. 10% - 33%
Buildings................................................... 2.5% - 10%
Land........................................................ 0%
</TABLE>
Land and buildings are stated at valuation on the basis of the most
recently established open market values. Land and buildings are revalued with
sufficient regularity that the carrying amount does not differ materially from
that which would be determined using fair values at the balance sheet date.
Surpluses on revaluation are transferred directly to non-distributable reserves.
Assets held under finance leases are depreciated over their expected useful
lives on the same basis as owned assets.
Leasehold improvements are amortized over the estimated useful lives of the
related assets, or over the remaining term of the lease, whichever is shorter.
Investments
Investments in associated companies are equity accounted when the group has
significant influence over the operating and financial policies (generally an
investment of 20 - 50%). Where the investment is below 20%, but the group can
demonstrate that it has significant influence over the operating and financial
policies, the investee is equity accounted. The consolidated income statements
include the group's share of pre-tax profits and attributable tax from
associated companies.
The goodwill arising on the acquisition of an associate is included within
the carrying amount of the associate. Goodwill is amortized on a straight-line
basis following an assessment of the estimated useful life, subject to a maximum
period of 20 years.
Investments in companies, where the group does not exercise significant
influence, are stated at cost less impairment losses recognized, where the
investment carrying amount exceeds its estimated recoverable amount.
F-9
<PAGE> 81
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Deferred Tax
Deferred tax is accounted for using the comprehensive balance sheet
liability method in respect of temporary differences arising from differences
between the carrying amount of assets and liabilities in the financial
statements and the corresponding tax basis used in the computation of taxable
income. In principle, deferred tax liabilities are recognized for all taxable
temporary differences and deferred tax assets are recognized to the extent that
it is probable that taxable income will be available against which deductible
temporary differences can be utilised. Such assets and liabilities are not
recognized if the temporary differences arise from goodwill or from the initial
recognition (other than a business combination) of other assets and liabilities
in a transaction that affects neither the tax income nor the accounting income.
Deferred tax is calculated at the tax rates that are expected to apply to
the period when the asset is realised or the liability is settled. Deferred tax
is charged or credited to the income statement.
No provision is made for additional taxes, which would arise if the
retained earnings of subsidiaries were distributed on the basis that it is not
envisaged that such distribution will be made.
Foreign Currency Translation
For consolidation purposes, balance sheets of subsidiaries expressed in
currencies other than United States dollars, are translated at the rate of
exchange ruling at the balance sheet date. Results for the year are translated
using average rates of exchange for the year. Gains and losses on translation
are reflected as movements in reserves as a separate component of equity.
Assets and liabilities at the balance sheet date of individual companies
within the group, expressed in currencies different to their functional
currencies, are translated at rates of exchange ruling at the balance sheet
date. Transactions in foreign currencies during the year are translated at rates
of exchange ruling on the day of the transactions. These gains and losses
arising on translation are accounted for in the income statement.
Exchange differences arising on the translation of long-term structural
loans to subsidiary companies are dealt with as movements in the foreign
exchange translation reserve.
In order to hedge its exposure to foreign exchange risks, the group enters
into forward exchange contracts. Unrealized gains and losses arising on currency
forward exchange contracts designated as hedges of identified exposures are
deferred and matched against gains and losses arising on the specified
transactions.
The financial statements of foreign entities that report in the currency of
a hyper-inflationary economy are restated in terms of the measuring unit
currency at the balance sheet date before they are translated into United States
dollars.
Foreign Currency Forward Exchange Contracts
Foreign currency forward exchange contracts are used to hedge foreign
currency exposure on certain trade and inter-company transactions. Gains and
losses on such contracts are recognized in the income statement at the date of
settlement.
F-10
<PAGE> 82
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Leases
Assets held under finance leases are capitalised at their fair value on the
inception of the leases and depreciated over their estimated useful lives. The
corresponding liability to the lessor is included in the balance sheet as a
finance lease obligation. The finance charges are allocated over the period of
the lease in proportion to the capital amounts outstanding, so as to produce a
constant periodic rate of charge on the remaining balance of the obligations for
each accounting period.
Rentals under operating leases are charged to the income statement as
incurred.
Cash and Cash Equivalents
Cash and cash equivalents include demand deposits and investments with
original maturities of three months or less.
Trade Receivables
Trade receivables include disbursements made on behalf of customers for
transportation costs and customs duties. The billings to customers for these
disbursements, which are several times the amount of revenue and fees derived
from these transactions, are not recorded as revenue and expense in the income
statement. Management establishes reserves based on the expected ultimate
recovery of these receivables.
Retirement Benefit Costs
Payments to defined contribution retirement benefit plans are charged as an
expense as they fall due. Payments made to state-managed retirement benefit
plans are dealt with as defined contribution plans where the group's obligations
under the plans are equivalent to those arising in a defined contribution
retirement benefit plan.
For defined benefit retirement benefit plans, the cost of providing
retirement benefits under the group's defined benefit plans is determined using
the projected unit credit method, with the actuarial valuations being carried
out at each balance sheet date. Unrecognized actuarial gains and losses which
exceed 10% of the greater of the present value of the group's pension
obligations or the fair value of the plans' assets are amortized over the
expected average remaining working lives of the employees participating in the
plan. Actuarial gains and losses which are within 10% of the present value of
the group's pension obligations or the fair value of the plans' assets are
carried forward. Past service costs are recognized immediately to the extent
that the benefits are already vested, and otherwise are amortized on a
straight-line basis over the average period until the amended benefits become
vested.
The amount recognized in the balance sheet represents the present value of
the defined benefit obligations as adjusted for unrecognized actuarial gains and
losses and unrecognized past service costs, and reduced by the fair value of
plan assets. Any asset resulting from this calculation is limited to
unrecognized actuarial losses and past service cost, plus the present value of
available refunds and reductions in future contributions to the plans.
The above policy has been adopted on the presumption that the group will
have rights to the surpluses in the various funds.
F-11
<PAGE> 83
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition
Gross revenue represents billings on exports to customers, plus net revenue
on imports, net of any value added taxes and custom duties. Gross revenue and
freight consolidation costs for airfreight and ocean freight forwarding
services, including commissions earned from the group's services as an
authorized agent for airline and ocean carriers, are recognized at the time the
freight departs the terminal of origin which is when the customer is billed.
Gross customs brokerage revenue and other revenues are also recognized when we
bill the customer, which for customs brokerage revenue, is when the necessary
documentation for customs clearance has been completed, and for other revenues,
is when the service has been provided to third parties in the ordinary course of
business.
Borrowing Costs
Borrowing costs are expensed in the income statement when incurred.
Financial Instruments
Financial Assets
The group's principal financial assets are bank balances and cash, trade
receivables and equity investments.
Trade receivables are stated at their nominal value as reduced by
appropriate allowances for estimated irrecoverable amounts.
Financial Liabilities and Equity Instruments
Financial liabilities and equity instruments are classified according to
the substance of the contractual agreements entered into.
Significant financial liabilities include finance lease obligations, future
acquisition installments, interest bearing bank loans and overdrafts and trade
and other payables.
The accounting policy adopted for finance lease obligations is outlined
above.
Interest bearing bank loans and overdrafts are recorded at the proceeds
received, net of direct issue costs. Finance charges, including premiums payable
on settlement or redemption, are accounted for on an accrual basis and are added
to the carrying value of the instruments to the extent that they are not settled
in the period in which they arise.
Trade and other payables are stated at their nominal value.
Equity instruments are recorded at the proceeds received, net of direct
issue costs.
Off Balance Sheet Derivative Instruments
Derivative financial instruments, comprising currency forward contracts are
not recognized in the financial statements on inception. The policy adopted for
instruments designed to hedge foreign exchange risks is outlined under "foreign
currency forward exchange contracts" above.
F-12
<PAGE> 84
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
4. SEGMENT REPORTING
The group's reportable segments are geographic segments that offer similar
products and services. They are managed separately because each segment requires
close customer contact by senior management, individual requirements of
customers differ between regions and each region is affected by similar economic
conditions.
Certain information regarding the group's operations by segment is
summarized below.
ANALYSIS BY GEOGRAPHICAL AREA
SIX MONTHS ENDED JULY 31, 2000 US$'000
(UNAUDITED)
<TABLE>
<CAPTION>
EUROPE AMERICAS ASIA PACIFIC AFRICA CORPORATE TOTAL
------- -------- ------------ ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Gross revenue from external customers......... 137,660 132,137 69,158 63,030 -- 401,985
======= ======= ====== ======= ====== =======
Net revenue................................... 30,231 45,669 17,358 47,875 -- 141,133
Staff costs................................... (16,255) (27,756) (8,081) (18,992) (584) (71,668)
Depreciation.................................. (1,085) (994) (411) (1,602) (175) (4,267)
Amortization.................................. (329) (1,427) (226) (164) -- (2,146)
Other operating expenses...................... (9,415) (14,002) (5,527) (21,315) (532) (50,791)
------- ------- ------ ------- ------ -------
Segment result................................ 3,147 1,490 3,113 5,802 (1,291) 12,261
======= ======= ====== ======= ======
Finance costs................................. (3,624)
Income from other investments................. 2,118
-------
Pretax income................................. 10,755
Income tax expense............................ (2,579)
-------
Net income before minority interest........... 8,176
=======
Segment assets at July 31, 2000............... 84,651 133,869 41,016 68,741 23,283 351,560
======= ======= ====== ======= ====== =======
Segment liabilities, including minority
interest, at July 31, 2000.................. 58,188 88,047 26,635 62,717 7,673 243,260
======= ======= ====== ======= ====== =======
</TABLE>
F-13
<PAGE> 85
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
4. SEGMENT REPORTING (CONTINUED)
ANALYSIS BY GEOGRAPHICAL AREA
SIX MONTHS ENDED JULY 31, 1999 US$'000
(UNAUDITED)
<TABLE>
<CAPTION>
EUROPE AMERICAS ASIA PACIFIC AFRICA CORPORATE TOTAL
------- -------- ------------ ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Gross revenue from external customers....... 118,705 98,341 52,544 58,407 -- 327,997
======= ======= ====== ======= ==== =======
Net revenue................................. 26,185 30,636 14,676 43,658 -- 115,155
Staff costs................................. (15,422) (16,841) (7,105) (18,724) (373) (58,465)
Depreciation................................ (719) (786) (344) (1,791) -- (3,640)
Amortization................................ (235) (880) (196) (193) -- (1,504)
Other operating expenses.................... (7,162) (10,533) (5,002) (21,299) 235 (43,761)
------- ------- ------ ------- ---- -------
Segment result.............................. 2,647 1,596 2,029 1,651 (138) 7,785
======= ======= ====== ======= ====
Finance costs............................... (3,082)
Income from other investments............... 1,752
-------
Pretax income............................... 6,455
Income tax expense.......................... (548)
-------
Net income before minority interest......... 5,907
=======
</TABLE>
ANALYSIS BY GEOGRAPHICAL AREA
YEAR ENDED JANUARY 31, 2000 US$'000
<TABLE>
<CAPTION>
EUROPE AMERICAS ASIA PACIFIC AFRICA CORPORATE TOTAL
------- -------- ------------ ------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Gross revenue from external customers...... 217,184 241,954 118,965 128,852 -- 706,955
======= ======= ======= ======= ====== ========
Net revenue................................ 56,102 67,928 30,863 90,724 -- 245,617
Staff costs................................ (32,425) (38,674) (14,627) (36,197) (1,006) (122,929)
Depreciation............................... (2,093) (1,453) (691) (3,541) (44) (7,822)
Amortization............................... (537) (2,078) (406) (391) 3 (3,409)
Other operating expenses................... (16,604) (20,812) (10,537) (42,849) 770 (90,032)
------- ------- ------- ------- ------ --------
Segment result............................. 4,443 4,911 4,602 7,746 (277) 21,425
======= ======= ======= ======= ======
Finance costs.............................. (4,653)
Income from other investments.............. 2,334
--------
Pretax income.............................. 19,106
Income tax expense......................... (1,623)
--------
Net income before minority interest........ 17,483
========
Segment assets at year end................. 75,369 95,524 35,035 66,731 25,261 297,920
======= ======= ======= ======= ====== ========
Segment liabilities, including minority
interest, at year end.................... 52,622 56,156 20,328 58,138 5,633 192,877
======= ======= ======= ======= ====== ========
Other information
Capital additions.......................... 10,237 19,368 2,178 3,660 194 35,637
Number of employees........................ 5,604
</TABLE>
F-14
<PAGE> 86
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
4. SEGMENT REPORTING (CONTINUED)
ANALYSIS BY GEOGRAPHICAL AREA
YEAR ENDED JANUARY 31, 1999 US$'000
<TABLE>
<CAPTION>
EUROPE AMERICAS ASIA PACIFIC AFRICA CORPORATE TOTAL
------- -------- ------------ ------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Gross revenue from external customers........ 195,761 173,096 78,902 123,382 -- 571,141
======= ======= ======= ======= ====== ========
Net revenue.................................. 49,435 47,413 23,563 87,868 -- 208,279
Staff costs.................................. (30,237) (27,796) (11,962) (35,914) (635) (106,544)
Depreciation................................. (1,244) (934) (609) (3,519) (4) (6,310)
Amortization................................. (319) (922) (332) (268) -- (1,841)
Other operating expenses..................... (13,491) (15,019) (8,449) (39,559) (761) (77,279)
------- ------- ------- ------- ------ --------
Segment result............................... 4,144 2,742 2,211 8,608 (1,400) 16,305
======= ======= ======= ======= ======
Finance costs................................ (3,936)
Income from associates....................... 26
--------
Income from other investments................ 5,478
--------
Pretax income................................ 17,873
--------
Income tax expense........................... (3,220)
--------
Net income before minority interest.......... 14,653
========
Segment assets at year end................... 69,607 59,373 27,483 78,555 20,195 255,213
======= ======= ======= ======= ====== ========
Segment liabilities, including minority
interest, at year end...................... 56,279 25,107 21,814 56,190 2,486 161,876
======= ======= ======= ======= ====== ========
Other information
Capital additions............................ 11,144 14,898 2,218 16,000 53 44,313
Number of employees.......................... 5,091
</TABLE>
ANALYSIS BY GEOGRAPHICAL AREA
YEAR ENDED JANUARY 31, 1998 US$'000
<TABLE>
<CAPTION>
EUROPE AMERICAS ASIA PACIFIC AFRICA CORPORATE TOTAL
------- -------- ------------ ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Gross revenue from external customers......... 163,117 163,854 72,574 128,990 -- 528,535
======= ======= ======= ======= ====== =======
Net revenue................................... 36,581 39,127 20,784 89,994 -- 186,486
Staff costs................................... (22,651) (22,709) (10,461) (35,989) (523) (92,333)
Depreciation.................................. (854) (834) (614) (3,723) -- (6,025)
Amortization.................................. (36) (372) (287) -- -- (695)
Other operating expenses...................... (10,006) (12,330) (7,862) (40,377) (1,162) (71,737)
------- ------- ------- ------- ------ -------
Segment result................................ 3,034 2,882 1,560 9,905 (1,685) 15,696
======= ======= ======= ======= ======
Finance costs................................. (4,001)
Income from associates........................ 199
Income from other investments................. 2,749
-------
Pretax income................................. 14,643
-------
Income tax expense............................ (2,543)
-------
Net income before minority interest........... 12,100
=======
Segment assets at year end.................... 42,094 39,107 20,056 73,484 9,072 183,813
======= ======= ======= ======= ====== =======
Segment liabilities, including minority
interest, at year end....................... 32,678 18,197 17,070 54,345 6,283 128,573
======= ======= ======= ======= ====== =======
Other information
Capital additions............................. 1,089 4,715 4,677 2,123 18 12,622
Number of employees........................... 4,147
</TABLE>
F-15
<PAGE> 87
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
4. SEGMENT REPORTING (CONTINUED)
Intergroup transactions are priced at cost. Where two or more subsidiaries
are involved in the handling of a consignment, the net revenue is shared based
upon a standard formula, which is adopted across the group.
The following table shows the gross revenue and net revenue attributable to
the group's principal services.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JANUARY 31, JULY 31,
----------------------------- ------------------
1998 1999 2000 1999 2000
US$'000 US$'000 US$'000 US$'000 US$'000
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Gross revenue
Airfreight forwarding.................... 312,496 338,270 399,289 183,982 218,814
Oceanfreight forwarding.................. 143,746 153,637 208,865 98,361 118,505
Customs brokerage........................ 29,886 34,701 40,453 18,945 29,523
Other.................................... 42,407 44,533 58,348 26,709 35,143
------- ------- ------- ------- -------
528,535 571,141 706,955 327,997 401,985
======= ======= ======= ======= =======
Net revenue
Airfreight forwarding.................... 101,092 113,619 124,177 60,003 67,332
Oceanfreight forwarding.................. 30,745 33,345 44,078 20,787 24,083
Customs brokerage........................ 27,495 33,360 40,156 18,774 27,818
Other.................................... 27,154 27,955 37,206 15,591 21,900
------- ------- ------- ------- -------
186,486 208,279 245,617 115,155 141,133
======= ======= ======= ======= =======
</TABLE>
5. OPERATING PROFIT
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
-----------------------------
1998 1999 2000
US$'000 US$'000 US$'000
------- ------- -------
<S> <C> <C> <C>
Operating profit is disclosed after
charging/(crediting):
Loss/(gain) on sale of fixed assets................... 71 (111) 44
Operating lease and rental costs...................... 14,005 14,296 16,154
Other operating income................................ (350) (563) (1,653)
Hyper-inflation adjustment............................ -- -- --
</TABLE>
6. FINANCE COSTS
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
-----------------------------
1998 1999 2000
US$'000 US$'000 US$'000
------- ------- -------
<S> <C> <C> <C>
Interest on bank overdrafts............................. 3,481 3,589 2,433
Interest on finance lease obligations................... 520 347 798
Interest on future acquisition installments............. -- -- 524
Foreign exchange loss................................... -- -- 473
Other................................................... -- -- 425
----- ----- -----
4,001 3,936 4,653
===== ===== =====
</TABLE>
F-16
<PAGE> 88
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
7. INCOME FROM OTHER INVESTMENTS
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
-----------------------------
1998 1999 2000
US$'000 US$'000 US$'000
------- ------- -------
<S> <C> <C> <C>
Short term bank deposits................................ 890 2,208 2,027
Shareholder company loans (Note 28)..................... 266 244 --
Foreign exchange gain................................... 1,184 2,754 --
Other................................................... 321 210 307
Dividends received...................................... 88 62 --
----- ----- -----
2,749 5,478 2,334
===== ===== =====
</TABLE>
8. INCOME TAX EXPENSE
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
-----------------------------
1998 1999 2000
US$'000 US$'000 US$'000
------- ------- -------
<S> <C> <C> <C>
Corporate tax:
-- Current year...................................... 2,445 2,075 3,800
-- Prior year........................................ 84 223 (69)
----- ------- ------
2,529 2,298 3,731
===== ======= ======
Deferred tax:
-- Current year temporary differences and utilization
of losses......................................... (197) (281) (613)
-- Prior year........................................ 158 1,037 (1,575)
----- ------- ------
(39) 756 (2,188)
----- ------- ------
Other................................................. 53 166 80
----- ------- ------
2,543 3,220 1,623
===== ======= ======
</TABLE>
The tax charge for the year is based on normal trading operations at rates
applicable to the country of origin. The charge for the year can be reconciled
to the profit per the income statement as follows.
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
-----------------------------------------------
1998 1999 2000
US$'000 % US$'000 % US$'000 %
------- ---- ------- ---- ------- ---
<S> <C> <C> <C> <C> <C> <C>
Profit before tax................................... 14,643 17,873 19,106
Expenses that are not deductible in determining
taxable income.................................... 1,174 1,268 3,407
Utilization of tax losses not previously
recognized........................................ (86) (1,347) (10,108)
Timing differences not recognized in deferred tax... 195 286 3,373
------ ------ -------
15,926 18,080 15,778
------ ------ -------
Tax expense and effective tax rate for the year..... 2,543 17.4 3,220 18.0 1,623 8.5
====== ====== =======
</TABLE>
F-17
<PAGE> 89
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
9. DIVIDENDS
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
-----------------------------
1998 1999 2000
US$'000 US$'000 US$'000
------- ------- -------
<S> <C> <C> <C>
The directors recommended the payment of a dividend on the
ordinary share capital of the company of 15.26 (1999:
13.89, 1998: 11.83) U.S. cents per ordinary share, which
was confirmed at a shareholder meeting held on June 14,
2000. .................................................... 1,621 2,174 2,388
The directors recommended the payment of a preference
dividend of 2% (1999: 2%, 1998: 2%) on the company's
non-voting variable participating cumulative convertible
preference shares of no par value, which was confirmed at
a shareholder meeting held on June 14, 2000. ............. 730 730 730
----- ----- -----
2,351 2,904 3,118
===== ===== =====
</TABLE>
10. EARNINGS PER SHARE
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JANUARY 31, JULY 31,
--------------------------------------- -------------------------
1998 1999 2000 1999 2000
US$'000 US$'000 US$'000 US$'000 US$'000
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Basic earnings per ordinary share:
Profit attributable to shareholders................. 11,848 14,574 17,078 5,600 7,776
Preference dividend................................. 730 730 730 365 --
----------- ----------- ----------- ----------- -----------
Profit attributable to ordinary shareholders.......... 11,118 13,844 16,348 5,235 7,776
Weighted average number of ordinary shares............ 12,076,813 14,470,708 15,259,099 15,259,099 17,653,239
Basic earnings per ordinary share (US$)............... 0.92 0.96 1.07 0.34 0.44
Diluted earnings per ordinary share:
Profit attributable to ordinary shareholders........ 11,848 14,574 17,078 5,600 7,776
Weighted average number of ordinary shares.......... 12,076,813 14,470,708 15,259,099 15,259,099 17,653,239
Preference shares................................... 4,788,281 4,788,281 4,788,281 4,788,281 2,394,141
----------- ----------- ----------- ----------- -----------
Weighted average number of ordinary shares
(diluted)........................................... 16,865,094 19,258,989 20,047,380 20,047,380 20,047,380
Diluted earnings per ordinary share (US$)............. 0.70 0.76 0.85 0.28 0.39
Basic earnings per ordinary share before amortization:
Profit attributable to ordinary shareholders........ 11,118 13,844 16,348 5,235 7,776
Amortization........................................ 695 1,841 3,409 1,504 2,146
----------- ----------- ----------- ----------- -----------
Earnings before amortization.......................... 11,813 15,685 19,757 6,739 9,922
Weighted average number of ordinary shares............ 12,076,813 14,470,708 15,259,099 15,259,099 17,653,239
Basic earnings per ordinary share before amortization
(US$)............................................... 0.98 1.08 1.29 0.44 0.56
Diluted earnings per ordinary share before
amortization:
Profit attributable to shareholders................. 11,848 14,574 17,078 5,600 7,776
Amortization........................................ 695 1,841 3,409 1,504 2,146
----------- ----------- ----------- ----------- -----------
Earnings before amortization.......................... 12,543 16,415 20,487 7,104 9,922
Weighted number of ordinary shares (diluted).......... 16,865,094 19,258,989 20,047,380 20,047,380 20,047,380
Diluted earnings per ordinary share before
amortization (US$).................................. 0.74 0.85 1.02 0.35 0.49
</TABLE>
The above number of shares excludes any contingently issuable ordinary
shares.
Earnings for 1998 and 1999 have been adjusted to reflect the retrospective
application of IAS 19 (Revised 1998).
F-18
<PAGE> 90
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
11. PROPERTY, PLANT AND EQUIPMENT, NET
<TABLE>
<CAPTION>
FIXTURES,
COMPUTER FITTINGS LEASEHOLD
EQUIPMENT/ AND MOTOR IMPROVE-
US$'000 SOFTWARE EQUIPMENT VEHICLES MENTS BUILDINGS LAND TOTAL
------- ---------- --------- -------- --------- --------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Cost/Valuation at February 1, 1999............... 18,626 12,505 9,312 2,435 11,491 3,715 58,084
Additions........................................ 6,321 2,249 2,308 754 1,292 12,924
Hyper-inflation accounting adjustment............ 49 37 101 -- 132 -- 319
Subsidiaries acquired............................ 454 813 370 494 -- -- 2,131
Disposals........................................ (1,431) (898) (1,384) (82) -- (8) (3,803)
Foreign exchange translation..................... (459) (1,106) (334) (38) (639) (177) (2,753)
------ ------ ------ ----- ------ ----- ------
At January 31, 2000.............................. 23,560 13,600 10,373 3,563 12,276 3,530 66,902
------ ------ ------ ----- ------ ----- ------
Accumulated Depreciation at February 1, 1999..... 12,345 7,343 5,741 1,059 2,432 -- 28,920
Charge for the year.............................. 3,383 1,874 1,774 541 250 -- 7,822
Hyper-inflation accounting adjustment............ 25 19 53 -- 68 -- 165
Disposals........................................ (1,249) (733) (1,227) (68) -- -- (3,277)
Foreign exchange translation..................... (504) (730) (269) (32) (178) -- (1,713)
------ ------ ------ ----- ------ ----- ------
At January 31, 2000.............................. 14,000 7,773 6,072 1,500 2,572 -- 31,917
Net book value at January 31, 2000............... 9,560 5,827 4,301 2,063 9,704 3,530 34,985
====== ====== ====== ===== ====== ===== ======
Net book value at January 31, 1999............... 6,281 5,162 3,571 1,376 9,059 3,715 29,164
====== ====== ====== ===== ====== ===== ======
</TABLE>
Land and buildings are revalued independently with sufficient regularity
that the carrying amount does not differ materially for that which would be
determined using fair values at the balance sheet date. All group companies do
not complete these valuations simultaneously. The bases used to revalue the
assets include the open market value and capitalization of income methods. The
carrying amount of land and buildings would have been US$12,269,000 at fiscal
year end 2000 (1999 - US$11,766,000) had the assets been carried at cost less
depreciation.
The following assets at net book value are subject to finance leases:
<TABLE>
<CAPTION>
AS OF JANUARY 31,
--------------------
1999 2000
US$'000 US$'000
------- -------
<S> <C> <C>
Computer equipment/software............................. 1,091 1,633
Fixtures, fittings and equipment........................ 1,708 1,530
Motor vehicles.......................................... 1,500 1,680
Land and buildings...................................... 7,737 8,832
</TABLE>
F-19
<PAGE> 91
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
12. GOODWILL, NET
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
-----------------------
1999 2000
US$'000 US$'000
--------- ---------
<S> <C> <C>
Cost balance at February 1.................................. 10,837 34,528
Acquired during the year.................................... 23,952 18,598
Adjustment from contingent consideration on business
combinations.............................................. -- 1,984
Foreign exchange translation................................ (261) (137)
------ ------
Balance at January 31....................................... 34,528 54,973
------ ------
Accumulated amortization balance at February 1.............. 1,263 3,054
Amortization for the year................................... 1,841 3,409
Foreign exchange translation................................ (50) (22)
------ ------
Balance at January 31....................................... 3,054 6,441
------ ------
Net book value at January 31................................ 31,474 48,532
====== ======
</TABLE>
13. INVESTMENTS
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
-----------------------
1999 2000
US$'000 US$'000
--------- ---------
<S> <C> <C>
Associated companies at carrying value at February 1........ 514 687
Disposals................................................... (109) --
Investments in associates now consolidated.................. -- (331)
Additions................................................... 307 --
Share of income/(loss) from associates...................... 26 (49)
Transfer to unlisted investments............................ -- (307)
Dividends received.......................................... (62) --
Foreign exchange translation................................ 11 --
------ ------
At January 31............................................... 687 --
------ ------
Unlisted investments at cost/carrying value at February 1... 96 1,051
Additions................................................... 967 301
Unlisted investments now consolidated....................... (8) (597)
Transfer from equity accounted associates (carrying
value).................................................... -- 307
Disposals................................................... (12) --
Foreign exchange translation................................ 8 (22)
------ ------
At January 31............................................... 1,051 1,040
====== ======
Listed investments at cost at February 1.................... 3 3
At January 31............................................... 3 3
====== ======
Total investments at January 31........................... 1,741 1,043
====== ======
Market value of listed investments.......................... 3 3
====== ======
</TABLE>
F-20
<PAGE> 92
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
13. INVESTMENTS (CONTINUED)
A number of investments that were treated as associates in prior years have
been reclassified to unlisted investments, as the group no longer has
significant influence over the operating and financial policies of the investee
companies.
Details of the consolidated subsidiaries at January 31, 2000 are as
follows:
<TABLE>
<CAPTION>
COUNTRY OF INCORPORATION % SHARE HOLDING
------------------------ ---------------
<S> <C> <C>
Union-Transport (Argentina) SA....................... Argentina 100
Union-Transport (Aust) Pty Limited................... Australia 100
Union-Transport NV................................... Belgium 100
Union-Transport (Botswana) Limited................... Botswana 100
Unitrans do Brasil Limitada.......................... Brazil 100
Corrib Limited....................................... British Virgin Islands 100
Goddard Company Limited.............................. British Virgin Islands 100
Kasteel II Limited................................... British Virgin Islands 100
Karibe Investments Limited........................... British Virgin Islands 100
Taipan Services Limited.............................. British Virgin Islands 100
Thomas International Freight Auditors Limited........ British Virgin Islands 100
Transnacala Africa Express Limited................... British Virgin Islands 100
Transtec Ocean Express Holdings Inc.................. British Virgin Islands 100
Union-Transport Africa Limited....................... British Virgin Islands 100
Union-Transport Africa Services Limited.............. British Virgin Islands 100
Union-Transport Asia Pacific Limited................. British Virgin Islands 100
Union-Transport International Inc.................... British Virgin Islands 100
Union-Transport Networks Inc......................... British Virgin Islands 100
Union-Transport Projects Limited..................... British Virgin Islands 100
Union-Transport Burundi S.A.R.L...................... Burundi 100
Union Air Transport Inc.............................. Canada 100
Commerce Customs Brokers and Freight Forwarders
Limited............................................ Canada 100
W.J Bondy Customs Brokers Limited.................... Canada 100
CCB Ventures Limited................................. Canada 100
Commerce International Freight Forwarders Limited.... Canada 100
Ambassador Brokerage Limited......................... Canada 60
Union-Transport Chile S.A............................ Chile 51
Union-Transport Egypt Limited........................ Egypt 55
Union Ocean Transport S.A.R.L........................ France 100
Union-Transport GmbH................................. Germany 100
Union-Transport Administration Limited............... Guernsey 100
Air & Sea Union Holdings Limited..................... Hong Kong 100
Hatro Hanse Transport Limited........................ Hong Kong 100
Jet Speed Sea Freight Limited........................ Hong Kong 100
International Liner Agencies (H.K.) Limited.......... Hong Kong 100
Scan-Cargo Transport Limited......................... Hong Kong 100
Union-Transport (H.K.) Limited....................... Hong Kong 100
Union-Transport (India) (Pvt) Limited................ India 100
</TABLE>
F-21
<PAGE> 93
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
13. INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
COUNTRY OF INCORPORATION % SHARE HOLDING
------------------------ ---------------
<S> <C> <C>
Union Logistics Ireland Limited...................... Ireland 100
Union-Transport Spa Italy............................ Italy 100
Union-Transport Italy SrL............................ Italy 100
Union-Transport Japan K.K............................ Japan 100
UTK Union-Transport (Kenya) Limited.................. Kenya 100
Union-Transport Korea Co Limited..................... Korea 100
Pyramid Freight (Proprietary) Limited................ Liechtenstein 100
Sun Couriers (Proprietary) Limited................... Liechtenstein 100
Transacala (Malawi) Limited.......................... Malawi 100
Union-Transport Properties (Malawi) Limited.......... Malawi 100
Union-Transport (Malawi) Limited..................... Malawi 100
Union-Transport (Mauritius) Limited.................. Mauritius 100
Union-Transport Logistics (Malaysia) Sdn Bhd......... Malaysia 100
Union Air Transport De Mexico SA De CV............... Mexico 100
Union-Transport (Mozambique) Limited................. Mozambique 100
Pyramid Freight (Proprietary) Limited................ Namibia 100
African Investments BV............................... Netherlands 100
Gerlach Art Packers and Shippers BV.................. Netherlands 100
TOX Holdings BV...................................... Netherlands 100
Union-Transport BV................................... Netherlands 100
Union-Transport (Netherlands) Holdings BV............ Netherlands 100
Active Airline Representatives BV.................... Netherlands 100
African Investment Holdings NV....................... Netherlands Antilles 100
TOX Holdings NV...................................... Netherlands Antilles 100
Union Air Transport (N.A.) Holdings NV............... Netherlands Antilles 100
Union Air Transport (N.A.) NV........................ Netherlands Antilles 100
Union-Transport (NZ) Limited......................... New Zealand 100
Union-Transport Del Peru S.A......................... Peru 100
Union Air Transport.................................. Philippines 100
Union-Transport Rwanda Sarl.......................... Rwanda 100
Rayho Transport (Pte) Limited........................ Singapore 100
UTG Union-Transport (Pte) Ltd........................ Singapore 100
Co-ordinated Investment Holdings (Pty) Ltd........... South Africa 50
Co-ordinated Materials Handling (Pty) Ltd............ South Africa 50
Granat Property Investments (Pty) Limited............ South Africa 100
Mounted Messengers (Pty) Limited..................... South Africa 100
Deldevco Properties (Pty) Limited.................... South Africa 100
Marine Link (Pty) Limited............................ South Africa 100
Speedwheel Deliveries (Pty) Limited.................. South Africa 100
Sun Office Automation (Pty) Limited.................. South Africa 100
Union-Transport (Thailand) Co Limited................ Thailand 100
Union-Transport Taiwan Limited....................... Taiwan 100
Union Air Transport Taiwan Limited................... Taiwan 50
</TABLE>
F-22
<PAGE> 94
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
13. INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
COUNTRY OF INCORPORATION % SHARE HOLDING
------------------------ ---------------
<S> <C> <C>
Union-Transport Tasimacilik Limited.................. Turkey 60
Union-Transtec (Uganda) Limited...................... Uganda 100
Transtec International Freight Services Limited...... United Kingdom 100
Transtec Ocean Express Limited....................... United Kingdom 100
Union Air Transport Limited.......................... United Kingdom 100
Union Ocean Transport Limited........................ United Kingdom 100
Union-Transport (UK) Holdings Limited................ United Kingdom 100
Union-Transport (Scotland) Limited................... United Kingdom 100
WTC Ocean Freight (UK) Limited....................... United Kingdom 100
WTC Transtec Freight Limited......................... United Kingdom 100
Tutincor SA.......................................... Uruguay 100
Union-Transport Brokerage Corp....................... United States of America 100
Union-Transport Logistics Inc........................ United States of America 100
Union-Transport Corporation.......................... United States of America 100
Union-Transport (US) Holdings Inc.................... United States of America 100
Union-Transport Services Inc......................... United States of America 100
Union Air Transport (Zambia) Limited................. Zambia 100
Transtec Freight (Zimbabwe) (Pvt) Limited............ Zimbabwe 100
</TABLE>
Co-ordinated Investment Holdings (Pty) Limited, Co-ordinated Materials
Handling (Pty) Ltd and Union Air Transport Taiwan, in which the group holds 50%
investments, have been consolidated as the group has the power to govern the
financial and operating policies of these companies.
Acquisitions
On the acquisition of a business, other than as part of a uniting of
interests, including interests in associated undertakings, fair values are
attributed to the group's share of assets. Where the cost of acquisition exceeds
the value attributable to such net assets, the difference is treated as
purchased goodwill.
The underlying acquisitions were made during the year, and have all been
accounted for using the purchase method of accounting. All acquisitions are
primarily engaged in providing cargo transportation logistics management,
including international air and ocean freight forwarding, customs brokerage and
logistic services.
On February 1, 1999, Union-Transport International Inc., a subsidiary
company, acquired the entire issued share capital of Unitrans do Brasil
Limitada, incorporated in Brazil, for a consideration of US$6.8m settled in
cash.
The results of Unitrans do Brasil Limitada have been included in the
consolidated financial statements of the group since the date of acquisition.
The excess of the cost over the fair value of assets acquired, which aggregates
approximately US$7.1m has been recorded as goodwill and is being amortized over
a period of twenty years.
On February 1, 1999, African Investments BV, a subsidiary company, acquired
the entire issued share capital of Active Airline Representatives BV,
incorporated in the Netherlands. The final purchase price is
F-23
<PAGE> 95
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
13. INVESTMENTS (CONTINUED)
dependent on certain performance criteria being achieved over the next two
years, and is estimated to be US$558,000.
The results of Active Airline Representatives BV have been included in the
consolidated financial statements of the group since the date of acquisition.
The excess of the cost over the fair value of assets acquired, which aggregates
approximately US$462,000, has been recorded as goodwill and is being amortized
over a period of twenty years.
On February 1, 1999, Union-Transport (Netherlands) Holdings BV, a
subsidiary company, acquired the entire issued share capital of Sea Air
Transport BV, incorporated in the Netherlands. The final purchase price is
dependent on certain performance criteria being achieved over the next two
years, and is estimated to be US$2.6m. This company was legally merged with
Union-Transport BV, incorporated in the Netherlands.
The results of Sea Air Transport BV have been included in the consolidated
financial statements of the group since the date of acquisition. The excess of
the cost over the fair value of assets acquired, which aggregates approximately
US$2.2m, has been recorded as goodwill and is being amortized over a period of
twenty years.
On February 1, 1999, Union-Transport (Netherlands) Holdings BV, a
subsidiary company, acquired 55% of the issued share capital of Union-Transport
Egypt Limited, a company incorporated in Egypt for US$362,000 settled in cash.
The results of Union-Transport Egypt Limited have been included in the
consolidated financial statements of the group since the date of acquisition.
The excess of the cost over the fair value of assets acquired, which aggregates
approximately US$347,000, has been recorded as goodwill and is being amortized
over a period of twenty years.
On February 1, 1999, Union-Transport (Netherlands) Holdings BV, a
subsidiary company, acquired 60% of the issued share capital of Union-Transport
Tasimacilik Limited, incorporated in Turkey for US$102,000 settled in cash.
The results of Union-Transport Tasimacilik Limited have been included in
the consolidated financial statements of the group since the date of
acquisition. The excess of the cost over the fair value of assets acquired,
which aggregates approximately US$43,000, has been recorded as goodwill and is
being amortized over a period of twenty years.
On April 8, 1999, Union-Transport Asia Pacific Limited, a subsidiary
company, acquired the remaining 50% of the issued share capital of Union Air
Transport Inc., incorporated in the Philippines, for a purchase price of US$1.2m
settled in cash.
The results of Union Air Transport Inc. have been included in the
consolidated financial statements of the group since the date of acquisition of
the remaining 50% of the issued share capital. The excess of the cost over the
fair value of assets acquired, which aggregates approximately US$991,000, has
been recorded as goodwill and is being amortized over a period of twenty years.
On July 1, 1999, Pyramid Freight (Proprietary) Limited, a subsidiary
company, acquired 50% of the issued share capital of Co-ordinated Investment
Holdings (Proprietary) Limited, incorporated in South Africa for US$261,000
settled in cash.
F-24
<PAGE> 96
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
13. INVESTMENTS (CONTINUED)
The results of Co-ordinated Investment Holdings (Proprietary) Limited have
been included in the consolidated financial statements of the group since the
date of acquisition. The excess of the cost over the fair value of assets
acquired, which aggregates approximately US$147,000, has been recorded as
goodwill and is being amortized over a period of twenty years.
On September 1, 1999, Union-Transport Corporation, USA, a subsidiary
company, acquired the business of Max International Freight Forwarders
Corporation and Max International Brokerage Corporation. The final purchase
price is dependent on certain performance criteria being achieved over the next
three years, and is estimated to be US$1.3m.
The results of Max International Freight Forwarders Corporation and Max
International Brokerage Corporation have been included in the consolidated
financial statements of the group since the date of acquisition. The excess of
the cost over the fair value of assets acquired, which aggregates approximately
US$1.3m, has been recorded as goodwill and is being amortized over a period of
seven years.
On September 1, 1999, Union-Transport (Netherlands) Holdings BV, a
subsidiary company, formed Union Logistics Limited, incorporated in Ireland.
This company acquired the freight forwarding business of RMF Ireland Limited for
a purchase price of US$360,000, one third paid on September 1, 1999, one third
to be paid on February 1, 2000 and the final installment on September 1, 2000.
All installments will be cash payments.
The results of RMF Ireland Limited have been included in the consolidated
financial statements of the group since the date of acquisition. The excess of
the cost over the fair value of assets acquired, which aggregates approximately
US$275,000, has been recorded as goodwill and is being amortized over a period
of twenty years.
On September 30, 1999, Union Air Transport Limited, a subsidiary company,
acquired the entire issued share capital of Union Transport (Scotland) Limited,
a company incorporated in Scotland. The final purchase price is dependent on
certain performance criteria being achieved over the next two years, and is
estimated to be US$2.1m. The assets and liabilities of this company were
incorporated into Union Air Transport Limited.
The results of Union Transport (Scotland) Limited have been included in the
consolidated financial statements of the group since the date of acquisition.
The excess of the cost over the fair value of assets acquired, which aggregates
approximately US$1.4m, has been recorded as goodwill and is being amortized over
a period of twenty years.
On November 16, 1999, Union-Transport (Netherlands) Holdings BV, a
subsidiary company, acquired the remaining 11% of the share capital of
Union-Transport (India)(Private) Limited, a company incorporated in India, for a
purchase price of US$240,000 settled in cash.
The excess of the cost over the fair value of the assets acquired, which
aggregates approximately US$240,000, has been recorded as goodwill and is being
amortized over a period of twenty years.
On January 31, 2000, Union Air Transport Inc., Canada, acquired the entire
issued share capital of Commerce Customs Brokers and Freight Forwarders Limited,
incorporated in Canada, together with certain subsidiary companies. The final
purchase price is dependent on certain performance criteria being achieved over
the next 3 years, and is estimated to be US$1.2m. The excess of the cost over
the fair value
F-25
<PAGE> 97
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
13. INVESTMENTS (CONTINUED)
of assets acquired, which aggregates approximately US$1.0m has been recorded as
goodwill and is being amortized over a period of twenty years.
On December 23, 1999, Union-Transport Corporation, USA, a subsidiary
company, acquired the business of Inter-Maritime Forwarding Company. The final
purchase price is dependent on certain performance criteria being achieved over
the next three years, and is estimated to be US$4.6m.
The results of Inter-Maritime Forwarding Company have been included in the
consolidated financial statements of the group since the date of acquisition.
The excess of the cost over the fair value of assets acquired, which aggregates
approximately US$4.5m has been recorded as goodwill and is being amortized over
a period of fifteen years.
The table below shows the pro forma results of these acquisitions as if
they had occurred at the beginning of the fiscal year, and for the immediately
preceding year as if these had occurred at the beginning of that fiscal year.
<TABLE>
<CAPTION>
(UNAUDITED)
------------------------------------
GROSS EARNINGS
REVENUE NET INCOME PER SHARE*
US$'000 US$'000 US$
------- ----------- ----------
<S> <C> <C> <C>
Fiscal year ended January 31, 2000
As reported........................................ 706,955 17,078 0.85
Acquisitions....................................... 18,420 119 0.01
------- ------ -----
Total............................................ 725,375 17,197 0.86
======= ====== =====
</TABLE>
<TABLE>
<CAPTION>
(UNAUDITED)
------------------------------------
GROSS EARNINGS
REVENUE NET INCOME PER SHARE*
US$'000 US$'000 US$
------- ----------- ----------
<S> <C> <C> <C>
Fiscal year ended January 31, 1999
As reported........................................ 571,141 14,574 0.76
Acquisitions....................................... 31,135 245 0.01
------- ------ -----
Total............................................ 602,276 14,819 0.77
======= ====== =====
</TABLE>
---------------
* Earnings per share calculated on 20,047,380 diluted ordinary shares (1999:
19,258,989).
F-26
<PAGE> 98
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
13. INVESTMENTS (CONTINUED)
Acquisition of subsidiary companies and business undertakings
<TABLE>
<CAPTION>
PROPERTY,
PLANT AND NET FAIR
EQUIPMENT BANK LOANS AMOUNTS VALUE OF
NET BOOK CASH AT AND RECEIVABLE/ MINORITY ASSETS PURCHASE
2000 US$'000 VALUE BANK OVERDRAFTS (PAYABLE) INTERESTS ACQUIRED GOODWILL PRICE
------------ --------- ------- ---------- ----------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unitrans do Brasil Limitada....... 269 181 -- (808) -- (358) 7,113 6,755
Active Airline Representatives
BV.............................. 33 96 -- (33) -- 96 462 558
Sea Air Transport BV.............. 369 -- -- 23 -- 392 2,184 2,576
Union-Transport Egypt Limited..... -- -- -- 28 (13) 15 347 362
Union-Transport Tasimacilik
Limited......................... 15 -- -- 83 (39) 59 43 102
Union Air Transport Inc........... 50 -- -- 133 -- 183 991 1,174
Co-ordinated Investments
(Proprietary) Limited........... 101 -- (16) 86 (57) 114 147 261
Max International Forwarding
Corporation..................... 35 -- -- (35) -- -- 1,267 1,267
RMF Ireland Limited............... -- -- -- 85 -- 85 275 360
Union Transport Scotland
Limited......................... 606 446 (72) (257) -- 723 1,387 2,110
Union-Transport India (Private)
Limited......................... -- -- -- -- -- -- 240 240
Commerce Customs Brokers and
Freight Forwarders Limited...... 413 -- (700) 480 -- 193 1,006 1,199
Inter Maritime Forwarding
Company......................... 271 -- -- (121) -- 150 4,461 4,611
Adjustments due to future
acquisition installments........ -- -- -- (817) -- (817) 1,970 1,153
----- --- ---- ------ ---- ---- ------ ------
Total........................... 2,162 723 (788) (1,153) (109) 835 21,893 22,728
===== === ==== ====== ==== ==== ====== ======
</TABLE>
<TABLE>
<CAPTION>
PROPERTY,
PLANT AND NET FAIR
EQUIPMENT BANK AMOUNTS VALUE OF
NET BOOK DEFERRED CASH AT LOANS AND RECEIVABLE/ ASSETS PURCHASE
1999 US$'000 VALUE ASSETS BANK OVERDRAFTS (PAYABLE) ACQUIRED GOODWILL PRICE
------------ --------- -------- ------- ---------- ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Transport SrL.................. 384 -- 1,272 (4,162) 3,225 719 2,833 3,552
Greenaways International (Pty)
Ltd.............................. -- -- -- -- -- -- 1,052 1,052
Gerlach Art Packers & Shippers
BV............................... 1,144 (50) 220 -- (596) 718 2,943 3,661
Fast Lane.......................... 1,595 -- -- -- (2,307) (712) 3,174 2,462
Megatrans International Inc........ -- -- -- -- -- -- 450 450
H Z Bernstein Co., Inc............. 267 20 -- -- (32) 255 6,868 7,123
Nord Express NV.................... 100 -- 291 -- (67) 324 (34) 290
Harper Shipping (Pty) Limited...... 97 -- 807 (10) (464) 430 435 865
G M Miller & Co. Int'l............. 130 25 -- -- 10 165 5,686 5,851
Memfy Holdings/Cargomasters........ -- -- -- -- -- -- 226 226
Other.............................. -- -- -- -- -- -- 319 319
----- --- ---- ------ ------ ---- ------ ------
Total............................ 3,717 (5) 2,590 (4,172) (231) 1,899 23,952 25,851
===== === ==== ====== ====== ==== ====== ======
</TABLE>
F-27
<PAGE> 99
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
13. INVESTMENTS (CONTINUED)
The above acquisitions have been satisfied as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
----------------------
1999 2000
US$'000 US$'000
-------- --------
<S> <C> <C>
Cash........................................................ 17,786 16,486
Future acquisition installments............................. 7,735 6,242
Issue of shares............................................. 330 --
------ ------
25,851 22,728
====== ======
</TABLE>
Analysis of the net outflow of cash and cash equivalents in
respect of the acquisition of consolidated subsidiary and
associated undertakings and other goodwill:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
----------------------
1999 2000
US$'000 US$'000
-------- --------
<S> <C> <C>
Cash consideration.......................................... 17,786 16,486
Cash at bank acquired....................................... (2,590) (723)
Bank overdrafts acquired.................................... 4,172 788
------ ------
Net outflow of cash and cash equivalents in respect of the
purchase of subsidiary and associated undertakings and
other goodwill............................................ 19,368 16,551
====== ======
</TABLE>
14. DEFERRED TAX
<TABLE>
<CAPTION>
AS OF JANUARY 31,
--------------------
1999 2000
US$'000 US$'000
------- -------
<S> <C> <C>
Deferred tax asset.......................................... 1,508 3,659
Deferred tax liability...................................... (2,008) (2,796)
------ ------
Net position................................................ (500) 863
====== ======
</TABLE>
The movement for the year in the group's deferred tax position was as
follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
----------------------
1999 2000
US$'000 US$'000
-------- --------
<S> <C> <C>
At February 1
-- as previously reported................................. 1,598
-- effect of adopting IAS 19 (Revised 1998)............... (900)
------
-- at February 1, revised................................. 698 (500)
(Credit)/charge to income for the year...................... (1,002) 2,128
Charge to equity for the year............................... -- (295)
Net assets acquired on acquisition of subsidiaries.......... (50) (17)
Foreign exchange translation................................ (146) (513)
Effect of change in tax rate................................ -- 60
------ ------
At January 31............................................... (500) 863
====== ======
</TABLE>
F-28
<PAGE> 100
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
14. DEFERRED TAX (CONTINUED)
The following are the major deferred tax assets and liabilities recognized
by the group and movements thereon during the year.
Deferred Tax Assets:
<TABLE>
<CAPTION>
TAX LOSSES RETIREMENT
AND TIMING BENEFIT
US$'000 DIFFERENCES OBLIGATIONS TOTAL
------- ------------- ------------- -----
<S> <C> <C> <C>
At February 1, 1999
-- as previously reported........................ 811 -- 811
-- effect of adopting IAS 19 (Revised 1998)...... 499 198 697
----- --- -----
-- at February 1, 1999, revised.................. 1,310 198 1,508
Charge to income for the year...................... 2,147 21 2,168
Foreign exchange translation....................... (77) -- (77)
Effect of change in tax rate....................... 60 -- 60
----- --- -----
At January 31, 2000................................ 3,440 219 3,659
===== === =====
</TABLE>
Deferred Tax Liabilities:
<TABLE>
<CAPTION>
REVALUATION UNREALIZED
ACCELERATED TAX OF FIXED PENSION FOREIGN
US$'000 DEPRECIATION ASSETS LIABILITIES EXCHANGE GAIN TOTAL
------- --------------- ----------- ----------- ------------- -----
<S> <C> <C> <C> <C> <C>
At February 1, 1999
-- as previously reported................ 189 -- -- -- 189
-- effect of adopting IAS 19 (Revised
1998)................................. -- -- 1,819 -- 1,819
--- --- ----- --- -----
-- at February 1, 1999, revised.......... 189 -- 1,819 -- 2,008
(Credit)/charge to income for the year..... (3) (29) 72 -- 40
Charge to equity for the year.............. -- 295 -- -- 295
Net assets acquired on acquisition of
subsidiaries............................. 17 -- -- -- 17
Foreign exchange translation............... (13) -- -- 449 436
--- --- ----- --- -----
At January 31, 2000........................ 190 266 1,891 449 2,796
=== === ===== === =====
</TABLE>
15. OTHER NON CURRENT ASSETS
<TABLE>
<CAPTION>
AS OF JANUARY 31,
--------------------
1999 2000
US$'000 US$'000
------- -------
<S> <C> <C>
Prepaid pension costs (Note 19)............................. 3,939 4,588
Long term loan receivable................................... 1,270 1,270
----- -----
5,209 5,858
===== =====
</TABLE>
The long term loan receivable is due from the Union-Transport Share
Incentive Trust.
F-29
<PAGE> 101
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
16. TRADE AND OTHER RECEIVABLES, NET
<TABLE>
<CAPTION>
AS OF JANUARY 31,
------------------
1999 2000
US$'000 US$'000
------- -------
<S> <C> <C>
Trade receivables:
Due from customers........................................ 122,997 170,654
Due from agents........................................... 6,876 6,847
Due from shareholder company.............................. 7,311 --
------- -------
137,184 177,501
Provision for doubtful debts................................ (8,294) (11,303)
------- -------
Trade receivables, net.................................... 128,890 166,198
Loans due from shareholder companies (Note 28).............. 538 8
Other loans................................................. 1,171 1,017
Interest receivable......................................... 803 157
Prepayments and accrued income.............................. 5,056 6,697
Other receivables........................................... 11,104 9,006
------- -------
147,562 183,083
======= =======
</TABLE>
Interest receivable at January 31, 2000 includes amounts totalling US$nil
(1999: US$680,000) which are due from shareholder companies (Note 28).
Trade receivables of US$100,000,000 are pledged as security against certain
of the group's borrowings, which amounts to US$17,400,000 at January 31, 2000.
The directors consider that the carrying amount of trade and other
receivables approximates to their fair value.
Credit Risk
The group's credit risk is primarily attributable to its trade receivables.
The amounts presented in the balance sheet are net of allowances for doubtful
receivables, estimated by the group's management based on prior experience and
the current economic environment. The group has no significant concentration of
credit risk, with exposure spread over a large number of customers.
The credit risk on liquid funds and derivative financial instruments is
limited because the counter parties are banks with high credit ratings assigned
by international credit rating agencies.
F-30
<PAGE> 102
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
17. ISSUED CAPITAL
<TABLE>
<CAPTION>
1998 1999 2000
NUMBER OF 1998 NUMBER OF 1999 NUMBER OF 2000
SHARES US$'000 SHARES US$'000 SHARES US$'000
----------- ------- ----------- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Authorized
Ordinary shares of no par value....... 500,000,000 -- 500,000,000 -- 500,000,000 --
Non-voting variable rate participating
cumulative convertible preference
shares of no par value.............. 50,000,000 -- 50,000,000 -- 50,000,000 --
Called up, allotted and fully paid
Ordinary no par value
At February 1......................... 11,486,517 (2,485) 13,086,406 12,986 15,259,099 49,485
Issued.................................. 1,599,889 15,471 2,558,594 36,499 -- --
Contingently issued..................... -- -- (385,901) -- -- --
----------- ------ ----------- ------ ----------- ------
At January 31........................... 13,086,406 12,986 15,259,099 49,485 15,259,099 49,485
Non-voting variable rate participating
cumulative convertible preference
shares of no par value................ 4,788,281 36,535 4,788,281 36,535 4,788,281 36,535
----------- ------ ----------- ------ ----------- ------
Total at January 31..................... 17,874,687 49,521 20,047,380 86,020 20,047,380 86,020
=========== ====== =========== ====== =========== ======
</TABLE>
On July 3, 1998, 1,386,632 ordinary shares of no par value were issued for
a consideration of US$23.8m which was settled in full by cash. These shares were
listed on the Luxembourg Stock Exchange on the same day.
On June 2, 1998, 560,913 ordinary shares of no par value were issued for a
consideration of US$9.63m which was settled in cash (US$9.58m) and the balance
as part payment for the acquisition of Megatrans International Inc. These shares
were listed on the Luxembourg Stock Exchange on the same day.
On March 31, 1998, 385,901 contingently issued ordinary shares of no par
value were issued, to be held in escrow, under the control of the directors, for
the eventual settlement of the purchase price of Per Transport SrL. The
conditions under which these shares were to be issued have not been met, and
thus the shares have been transferred to Treasury and consequently have been
excluded from the calculation of earnings per share figures and from the number
of shares in issue.
On March 31, 1998, 225,147 ordinary shares of no par value were issued for
a consideration of US$3.06m which was settled in cash (US$2.78m) and the balance
as part payment for the acquisition of Per Transport SrL. These shares were
listed on the Luxembourg Stock Exchange on the same day.
On September 23, 1997, 1,599,889 ordinary shares of no par value were
issued for a consideration of US$15.47m which was settled in full by cash. These
shares were listed on the Luxembourg Stock Exchange on the same day.
The non-voting variable rate participating cumulative convertible
preference shares entitle the holder to receive out of the profits of the
company available for distribution from time to time a cumulative preferential
cash dividend, on the issue price (including any surplus) of such preference
shares, at a rate per annum equal to the greater of:
(a) such rate as would produce the sum that would have been paid on
each preference share from the date of payment of the preference shares (in
the case of preference shares that had received no dividend) and from the
day following the date of declaration of the previous preference dividend
(in the case of preference shares on which a previous preference dividend
has been declared) had the preference shares been converted to ordinary
shares on the first day of the respective periods referred
F-31
<PAGE> 103
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
17. ISSUED CAPITAL (CONTINUED)
to in this paragraph and had the preference shares been included in any
declarations of ordinary dividends during those respective periods; or
(b) 2% per annum of a 365 day year calculated on a daily basis from
the date of payment of the preference shares (in the case of preference
shares that had received no preference dividend) and from the date
following the date of declaration of the previous preference dividend (in
the case of preference shares on which a previous dividend had been
declared).
The preference dividend is to be calculated and paid annually in arrears on
the 30th day of April each year, and, in respect of the period between the last
date on which a preference dividend is paid and the date of conversion provided
for on the date of conversion.
In the event of a winding up or reduction of the issued capital of the
company, the preference shares in issue and outstanding shall participate in
preference to the ordinary shares up to, but not beyond, the amount of any
unpaid preference dividend at the prescribed rate, and thereafter such ordinary
and preference shares shall rank pari passu with regard to participation in any
surplus.
The preference shareholders shall not be entitled to receive notice of, to
attend or to vote, at any general meeting of members. The preference shares are
convertible into ordinary shares in the capital of the company automatically on
April 30, 2000 or if that is not a day on which the Registrar of Companies in
the British Virgin Islands is open to business, on the first day thereafter that
he is so open, on a basis of one voting ordinary share of no par value for one
preference share of no par value.
18. BORROWINGS
<TABLE>
<CAPTION>
AS OF JANUARY 31,
--------------------
1999 2000
US$'000 US$'000
------- -------
<S> <C> <C>
Bank overdrafts......................................... 12,738 20,158
Long term bank loans.................................... 290 393
Future acquisition installments......................... 9,806 9,607
------ ------
22,834 30,158
====== ======
</TABLE>
The borrowings are repayable as follows:
<TABLE>
<CAPTION>
AS OF JANUARY 31,
------------------
1999 2000
US$'000 US$'000
------- -------
<S> <C> <C>
Within one year.......................................... 20,528 25,303
In the second year....................................... 2,056 2,486
In the third year........................................ 105 1,523
In the fourth year....................................... 106 719
In the fifth year........................................ 10 58
After five years......................................... 29 69
------- -------
22,834 30,158
Less amounts due for settlement within one year (shown
under current liabilities)............................. (20,528) (25,303)
------- -------
Amount due for settlement after twelve months............ 2,306 4,855
======= =======
</TABLE>
F-32
<PAGE> 104
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
18. BORROWINGS (CONTINUED)
Analysis of borrowings by currency:
<TABLE>
<CAPTION>
US$ GBP EURO SAR OTHER
AS OF JANUARY 31, 2000 US$'000 US$'000 US$'000 US$'000 US$'000
---------------------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
Bank overdrafts..................................... 7,001 134 2,853 4,986 5,184
Long term bank loans................................ -- 235 -- -- 158
Future acquisition installments..................... 6,998 931 -- 237 1,441
</TABLE>
Analysis of interest rate by currency:
<TABLE>
<CAPTION>
US$ GBP EURO SAR OTHER
AS OF JANUARY 31, 2000 % % % % %
---------------------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
Bank overdrafts................................... 8.75 6.5 7.75 17.8 8.0 - 15.0
Long term bank loans.............................. -- 7.5 -- -- 9.0
</TABLE>
Analysis of borrowings by currency:
<TABLE>
<CAPTION>
US$ GBP EURO SAR OTHER
AS OF JANUARY 31, 1999 US$'000 US$'000 US$'000 US$'000 US$'000
---------------------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
Bank overdrafts.................................... 2,973 -- 8 9,737 20
Long term bank loans............................... -- -- -- -- 290
Future acquisition installments.................... 8,898 -- -- 429 479
</TABLE>
Analysis of interest rate by currency:
<TABLE>
<CAPTION>
US$ GBP EURO SAR OTHER
AS OF JANUARY 31, 1999 % % % % %
---------------------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
Bank overdrafts..................................... 8.0 8.25 7.5 21.8 20.0
Long term bank loans................................ -- -- -- -- 9.0
</TABLE>
Bank overdrafts are repayable on demand.
Bank overdrafts at fiscal year end 2000 of US$17,909,000
(1999 -- US$11,581,000) are secured by cession of accounts receivable, cession
of other assets, pledged cash deposits, pledges placed over shares of certain
subsidiaries or a combination of these.
19. RETIREMENT BENEFIT PLANS
Defined Contribution Plans
In certain countries, the group operates defined contribution retirement
benefit plans for all qualifying employees. The assets of the plans are held
separately to those of the group, in funds under the control of trustees.
In other countries, the qualifying employees are members of state-managed
retirement benefit plans. The group is required to contribute a specified
percentage of the payroll costs to the retirement benefit plan to fund the
benefits. The only obligation of the group with respect to the retirement
benefit plans is to make the required contribution.
The total charged to the income statement during fiscal 2000 of
US$2,322,000 (1999: US$1,596,000) represents contribution payable to these plans
by the group at the rates specified in the rules of the various plans.
F-33
<PAGE> 105
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
19. RETIREMENT BENEFIT PLANS (CONTINUED)
Defined Benefit Plans
The group operates defined benefit plans for qualifying employees in
certain countries. Under these plans employees are entitled to retirement
benefits as a certain percentage of the employee's final salary on attainment of
the qualifying retirement age. No other post retirement benefits are provided.
Amounts recognized in income in respect of these plans are as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
----------------------
1999 2000
US$'000 US$'000
-------- --------
<S> <C> <C>
Current service cost........................................ 1,172 1,174
Interest costs.............................................. 1,367 1,241
Expected return on plan assets.............................. (2,206) (2,091)
Net actuarial loss.......................................... 74 54
Loss on curtailments and settlements........................ -- 311
------ ------
407 689
====== ======
</TABLE>
The charge for the year has been included in staff costs.
The actual return on plan assets during fiscal 2000 was US$1,767,000
(1999:US$656,000).
The amount included as prepaid pension costs in the balance sheet arising
from the group's obligation in respect of defined benefit retirement plans is as
follows:
<TABLE>
<CAPTION>
AS OF JANUARY 31,
------------------
1999 2000
US$'000 US$'000
------- -------
<S> <C> <C>
Present value of funded obligations......................... (11,201) (12,342)
Unrecognized actuarial losses............................... 1,621 2,550
Fair value of plan assets................................... 13,519 14,380
------- -------
3,939 4,588
======= =======
</TABLE>
Movements in prepaid pension costs were:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
----------------------
1999 2000
US$'000 US$'000
-------- --------
<S> <C> <C>
At February 1
-- as previously reported................................. --
-- effect of adopting IAS 19(revised 1998)................ 3,264
-----
-- at February 1, revised................................. 3,264 3,939
Exchange differences........................................ (233) (18)
Amounts charged to income................................... (333) (613)
Contributions............................................... 1,241 1,280
----- -----
At January 31............................................... 3,939 4,588
===== =====
</TABLE>
F-34
<PAGE> 106
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
19. RETIREMENT BENEFIT PLANS (CONTINUED)
The amount included as a liability in the balance sheet arising from the
group's obligation in respect of defined benefit retirement plans is as follows:
<TABLE>
<CAPTION>
AS OF JANUARY 31,
--------------------
1999 2000
US$'000 US$'000
------- -------
<S> <C> <C>
Present value of funded obligations......................... 570 607
Unrecognized actuarial gains................................ 11 39
--- ---
581 646
=== ===
</TABLE>
Movements in the net liability were:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
----------------------
1999 2000
US$'000 US$'000
-------- --------
<S> <C> <C>
At February 1
-- as previously reported................................. --
-- effect of adopting IAS 19(Revised 1998)................ 522
---
-- at February 1, revised................................. 522 581
Exchange differences........................................ (9) (5)
Amounts charged to income................................... 74 76
Contributions............................................... (6) (6)
--- ---
At January 31............................................... 581 646
=== ===
</TABLE>
Analysis for financial reporting purposes:
<TABLE>
<S> <C> <C>
Non-current liabilities................................... 581 646
=== ===
</TABLE>
Key assumptions used:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
----------------------
1999 2000
% %
-------- --------
<S> <C> <C>
Discount rate............................................... 6 - 12 6 - 12
Expected return on plan assets.............................. 10 - 16 10 - 16
Expected rate of salary increases........................... 10 - 11 10 - 11
</TABLE>
20. OFF BALANCE SHEET FINANCIAL INSTRUMENTS
The group utilizes forward exchange contracts to reduce its exposure to
foreign currency denominated liabilities. Foreign exchange contracts purchased
are primarily denominated in the currencies of the group's principal markets.
The group does not enter into derivative contracts for speculative purposes.
F-35
<PAGE> 107
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
20. OFF BALANCE SHEET FINANCIAL INSTRUMENTS (CONTINUED)
At the balance sheet date the group had contracted to sell the following
amounts under forward exchange contracts which all mature within 30 days of
January 31, 2000.
<TABLE>
<CAPTION>
US$ GBP DEM OTHER
US$'000 US$'000 US$'000 US$'000
------- ------- ------- -------
<S> <C> <C> <C>
3,356 1,643 641 679
</TABLE>
21. FINANCE LEASE OBLIGATIONS
<TABLE>
<CAPTION>
PRESENT VALUE OF
MINIMUM
LEASE PAYMENTS
--------------------
AS OF JANUARY 31,
--------------------
1999 2000
AMOUNTS PAYABLE UNDER FINANCE LEASES US$'000 US$'000
------------------------------------ ------- -------
<S> <C> <C>
Within one year......................................... 2,472 2,179
In the second to fifth years inclusive.................. 9,311 10,504
------ ------
11,783 12,683
Less amounts due for settlement within one year (shown
under current liabilities)............................ 2,472 2,179
------ ------
Amounts due for settlement after one year............... 9,311 10,504
====== ======
</TABLE>
The amounts due for settlement are repayable as follows:
<TABLE>
<CAPTION>
JANUARY 31, 2000
----------------
<S> <C>
2001........................................................ 2,179
2002........................................................ 1,790
2003........................................................ 1,279
2004........................................................ 850
2005........................................................ 321
2006+....................................................... 6,264
------
12,683
======
</TABLE>
It is the group's policy to lease certain of its property, plant and
equipment under finance leases. The normal lease term for plant and equipment is
2 - 5 years and the normal lease term for property varies between 3 - 10 years.
For the year ended January 31, 2000, the average effective borrowing rate for
plant and equipment was 14% and the average effective borrowing rate for
property was 16%. Interest rates usually vary during the contract period.
Leased assets of US$13,675,000 at January 31, 2000 secure the group's
obligations under finance leases.
F-36
<PAGE> 108
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
22. TRADE AND OTHER PAYABLES
<TABLE>
<CAPTION>
AS OF JANUARY 31,
------------------
1999 2000
US$'000 US$'000
------- -------
<S> <C> <C>
Trade payables:
Due to agents.......................................... 3,483 4,656
Other trade payables................................... 90,125 105,379
------- -------
Trade payables........................................... 93,608 110,035
Loans from shareholder companies (Note 28)............... 156 500
Other loans.............................................. 198 206
Other interest payable................................... 8 72
Preference dividend payable.............................. 730 730
Other payables and accruals.............................. 26,833 30,872
------- -------
121,533 142,415
======= =======
</TABLE>
Trade and other payables comprise amounts outstanding for trade purchases
and ongoing costs.
The directors consider that the carrying amount of trade and other payables
approximates their fair value.
23. FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK
The group's financial instruments consist mainly of cash and cash
equivalents, accounts receivable, certain investments, accounts payable and
debt. In addition, the group uses foreign currency exchange contracts as a means
of managing foreign exchange exposure from trade payables entered into in the
normal course of business. The group does not use these instruments for
speculative purposes. Gains and losses from derivative financial instruments are
deferred and are recognized in the income statement when the hedged transactions
occur.
The premium on foreign exchange forward contracts is recognized in the
measurement of the underlying transaction.
Balance Sheet Financial Instruments
The carrying value of all balance sheet financial assets and liabilities
approximates their fair value.
Off Balance Sheet Financial Instruments
<TABLE>
<CAPTION>
AS OF JANUARY 31, 1999 AS OF JANUARY 31, 2000
---------------------- ----------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
US$'000 US$'000 US$'000 US$'000
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Forward exchange contracts.......................... -- (49) -- (48)
</TABLE>
Significant portions of the group's accounts receivable are from large
companies. None of the group's other financial instruments represent a
concentration of credit risk because the group has dealings with a variety of
major banks and customers worldwide.
F-37
<PAGE> 109
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
24. CONTINGENT LIABILITIES
<TABLE>
<CAPTION>
AS OF JANUARY 31,
--------------------
1999 2000
US$'000 US$'000
------- -------
<S> <C> <C>
Claims.................................................. 462 234
Tax..................................................... 1,224 1,054
----- -----
1,686 1,288
===== =====
</TABLE>
The subsidiary companies are subject to legal proceedings and claims, which
arise, in the ordinary course of its business.
The tax liability is contingent upon the outcome of the interpretation of
tax case law in certain countries where the group operates.
The group carries commercial insurance, which is sufficient to cover the
majority of these claims. As such, in the opinion of the directors, the amount
of ultimate liability with respect to these actions will not materially affect
the financial results of the group.
25. CAPITAL COMMITMENTS
<TABLE>
<CAPTION>
AS OF JANUARY 31,
--------------------
1999 2000
US$'000 US$'000
------- -------
<S> <C> <C>
Contracted for but not provided in the financial
statements............................................ 10 1,529
Authorized but not contracted for....................... 1,657 14
----- -----
1,667 1,543
===== =====
</TABLE>
26. OPERATING LEASE ARRANGEMENTS
At January 31, 2000, the group had outstanding commitments under
non-cancellable operating leases, which fall due as follows (US$'000):
<TABLE>
<S> <C>
2001........................................................ 12,868
2002........................................................ 9,776
2003........................................................ 8,496
2004........................................................ 7,325
2005........................................................ 5,255
2006+....................................................... 13,448
------
57,168
======
</TABLE>
The subsidiary companies have obligations under various operating lease
agreements ranging from one to ten years. The leases are for property, plant and
equipment.
These leases require minimum annual rentals, which are charged to the
income statement.
F-38
<PAGE> 110
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
27. SUBSEQUENT EVENTS
On March 30, 2000 the group acquired certain assets and liabilities in KCB
International Limited, incorporated in New Zealand, for a consideration of
approximately US$365,000. The final purchase price is dependent on certain
performance criteria being achieved over the next year.
On April 1, 2000, the group acquired certain assets and liabilities in
Southern Overseas Express Lines Inc., incorporated in the United States, for a
consideration of approximately US$7.9m. The final purchase price is dependent on
certain performance criteria being achieved over the next two years, subject to
a maximum of $7.9m.
On April 30, 2000, the 4,788,281 non-voting variable rate participating
cumulative convertible preference shares converted in ordinary shares on the
basis of one voting ordinary share of no par value for one preference share of
no par value.
On May 1, 2000 the group acquired 51% of Colcarga LTDA, incorporated in
Colombia, for a consideration of US$560,000.
On June 1, 2000, the group acquired 100% of the issued share capital of BTG
Logistics AB, Sweden for a consideration of approximately US$1.7m. The final
purchase price is dependent on certain performance criteria being achieved over
the next three years.
On June 1, 2000 the group acquired certain assets and liabilities in S
Stern Customs Brokers Inc., incorporated in the United States, for a
consideration of approximately US$1.15m. The final purchase price is dependent
on certain performance criteria being achieved over the next three years.
On July 1, 2000 the group acquired certain assets and liabilities in
International Freight Services Group Holdings Limited, incorporated in
Australia, for a consideration of approximately US$3.3m. The final purchase
price is dependent on certain performance criteria being achieved over the next
year.
28. RELATED PARTY TRANSACTIONS
Acquisition of Unitrans do Brasil Limitada
On February 1, 1999, Union-Transport International Inc., a subsidiary
company, acquired the entire issued share capital of Unitrans do Brasil
Limitada, incorporated in Brazil for a consideration of US$6.7m settled in cash.
The company was acquired from a company in which certain directors have an
interest.
Directors' Remuneration
Remuneration paid to directors was as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
----------------------
1999 2000
US$'000 US$'000
-------- --------
<S> <C> <C>
Services................................................ 1,002 1,015
Directors fees.......................................... 58 62
</TABLE>
The remuneration of directors is determined by the remuneration committee
having regard to comparable market statistics.
F-39
<PAGE> 111
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
28. RELATED PARTY TRANSACTIONS (CONTINUED)
Certain directors have interests in companies that hold shares in UTi
either directly or indirectly. The group have both loans receivable and payable
with these companies, which are short term in nature, unsecured and interest
free.
29. SUMMARY OF DIFFERENCES BETWEEN INTERNATIONAL ACCOUNTING STANDARDS AND UNITED
STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The group's accounts are prepared in accordance with IAS, which differ in
certain significant respects from U.S. GAAP. These differences relate
principally to the following items, and the effects on net income and
shareholders' equity is shown in the following tables, with references to the
following descriptions.
(a) Valuation of Fixed Assets
Under IAS, it is permissible to carry tangible fixed assets at revalued
amounts. Tangible fixed assets may not be revalued under U.S. GAAP. The
group has revalued land and buildings and the adjustment shown in the
reconciliation of net income is to reverse depreciation on the revalued
amount of US$24,000 for fiscal years 1999 and 2000. The adjustment shown in
shareholders' equity is US$1,801,000 and US$1,427,000 (net of deferred tax
and accumulated depreciation) for fiscal years 1999 and 2000, respectively.
(b) Business Combinations
The group has entered into a number of acquisitions in which the final
purchase price is dependent upon certain performance criteria being
achieved. These are usually based on future earnings, and as such, the
final purchase price can only be determined as and when these criteria are
met.
Under IAS, the directors must use their best estimates to calculate the
potential purchase price. To this extent, a provision is raised for the
estimated future acquisition installments, which are net present valued and
an appropriate interest charge raised.
Under U.S. GAAP, the liability is only raised if the contingency is
determinable beyond reasonable doubt. Otherwise, only once the contingency
is resolved and the additional consideration is distributable, should the
acquiring company record the current fair value of the consideration issued
or issuable as additional cost of the acquired company.
The adjustment shown in the reconciliation of net income is to reverse the
amortization on the goodwill and the interest arising from the future
acquisition installments of US$324,000 and US$998,000 for fiscal 1999 and
2000, respectively. The adjustment in the reconciliation of equity is the
cumulative effect of US$375,000 and US$1,373,000 for fiscal 1999 and 2000,
respectively.
Under IAS for acquisitions prior to 1995, goodwill arising from business
combinations was written off against Issued Capital. In terms of U.S. GAAP,
this goodwill would have been amortized to reduce distributable reserves.
The effect of this adjustment would be to reduce distributable reserves and
increase Issued Capital by US$40,115,000. There is no impact on total
shareholders' equity.
(c) Pension Plan Accounting
The measurement techniques for valuing the obligations and assets of
defined benefit plans and the related amounts recognized as expenses and
income for IAS and U.S. GAAP are the same except for
F-40
<PAGE> 112
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
29. SUMMARY OF DIFFERENCES BETWEEN INTERNATIONAL ACCOUNTING STANDARDS AND UNITED
STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
the recognition of past service costs. There are no past service costs and
thus no adjustment is necessary.
The transition requirements of implementing Statement of Financial
Accounting Standards ("SFAS") No. 87 "Employers' Accounting for Pensions"
("SFAS 87") gives rise to an adjustment of US$34,000 in fiscal 1999, which
is the last year of the ten year transition allowance.
(d) Premium on Forward Exchange Contracts Amortization
Under U.S. GAAP the premium on a forward exchange contract should be
amortized over the life of the contract. This is not required under IAS.
The relating adjustment is a charge of US$15,000 and US$23,000 for fiscal
1999 and 2000, respectively. The adjustment in the reconciliation of equity
is the cumulative effect of US$15,000 and US$38,000 for fiscal 1999 and
2000, respectively.
(e) Loan to Share Incentive Plan
The group records a loan in the amount of US$1,270,000 to an executive
share incentive trust in other non-current assets. Under U.S. GAAP this
loan is eliminated upon consolidation of the trust and the cost of
unreleased shares, which is equal to the amount of the loan, is reflected
as a reduction to shareholders' equity.
(f) Dividends on Contingently Issued Shares
Under U.S. GAAP, dividends payable on contingently issued shares paid to an
escrow agent, should be accounted for according to the accounting for the
shares. Thus, until the disposition of the shares in escrow is resolved,
payments to the escrow agent should not be recorded as dividends
distributed. These amounts are US$54,000 and US$113,000 for fiscal 1999 and
2000, respectively.
(g) Compensation Costs
Under U.S. GAAP, compensation cost must be recorded for stock awards, and
in cases of stock option grants, if the market price of the ordinary shares
exceeds the exercise price of the options. These amounts are US$1,221,000
and US$1,401,000 for fiscal 1999 and 2000, respectively.
F-41
<PAGE> 113
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
29. SUMMARY OF DIFFERENCES BETWEEN INTERNATIONAL ACCOUNTING STANDARDS AND UNITED
STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
The following statements summarize the significant adjustments to net
income and shareholders' equity which would be required if the financial
statements had been prepared under U.S. GAAP.
<TABLE>
<CAPTION>
YEAR ENDED
JANUARY 31, SIX MONTHS ENDED JULY 31,
----------------- --------------------------
1999 2000 1999 2000
RECONCILIATION OF NET INCOME TO U.S. GAAP NOTE US$'000 US$'000 US$'000 US$'000
----------------------------------------- ---- ------- ------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net income determined under International
Accounting Standards.......................... 14,574 17,078 5,600 7,776
Adjustments in respect of:
Depreciation on revaluation of fixed assets... a 24 24 12 12
Business combinations......................... b 324 998 682 731
Transition adjustment on defined benefit
plans...................................... c 34 -- -- --
Premium on forward exchange contracts
amortized.................................. d 15 23 14 17
Compensation costs............................ g (1,221) (1,401) (762) (1,416)
Deferred tax on U.S. GAAP adjustments......... -- (29) (14) --
------ ------ ----- ------
Total effect of U.S. GAAP adjustments...... (824) (385) (68) (656)
------ ------ ----- ------
Net income determined under U.S. GAAP........... 13,750 16,693 5,532 7,120
====== ====== ===== ======
Earnings per share under U.S. GAAP
Basic earnings per share (US$)................ 0.97 1.12 0.36 0.43
Diluted earnings per share (US$).............. 0.74 0.86 0.29 0.36
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
JANUARY 31,
-----------------
1999 2000 JULY 31, 2000
RECONCILIATION OF SHAREHOLDERS' EQUITY TO U.S. GAAP NOTE US$'000 US$'000 US$'000
--------------------------------------------------- ---- ------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Shareholders' equity determined under International
Accounting Standards................................... 93,337 105,043 108,300
Adjustments in respect of:
Revaluation of fixed assets............................ a (1,801) (1,427) (1,415)
Business combinations.................................. b 375 1,373 2,104
Transition adjustment on defined benefit plans......... c 34 34 34
Premium on forward exchange contracts amortized........ d 15 38 55
Share incentive plan -- cost of unreleased shares...... e (1,270) (1,270) (1,270)
Dividends on contingently issued shares held in
escrow.............................................. f 54 113 113
Translation adjustment on U.S. GAAP adjustments........ 650 1,139 940
Deferred tax on U.S. GAAP adjustments.................. -- (29) (29)
------ ------- -------
Total effect of U.S. GAAP adjustments............... (1,943) (29) 532
------ ------- -------
Shareholders' equity determined under U.S. GAAP.......... 91,394 105,014 108,832
====== ======= =======
</TABLE>
F-42
<PAGE> 114
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
29. SUMMARY OF DIFFERENCES BETWEEN INTERNATIONAL ACCOUNTING STANDARDS AND UNITED
STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31, SIX MONTHS ENDED JULY 31,
----------------------- -------------------------
1999 2000 1999 2000
---------- ---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Basic earnings per share denominator:
Ordinary number of shares outstanding under
IAS........................................... 14,470,708 15,259,099 15,259,099 17,653,239
Less: unallocated shares held in share incentive
trusts........................................ (1,102,269) (996,343) (1,069,476) (905,733)
---------- ---------- ---------- ----------
Ordinary shares outstanding for U.S. GAAP....... 13,368,439 14,262,756 14,189,623 16,747,506
========== ========== ========== ==========
Diluted earnings per share denominator:
Ordinary shares outstanding for basic U.S.
GAAP.......................................... 13,368,439 14,262,756 14,189,623 16,747,506
Non-voting variable rate participating
cumulative convertible preference
shares -- weighted............................ 4,788,281 4,788,281 4,788,281 2,394,141
Incremental shares required for diluted earnings
per share..................................... 353,697 304,710 283,269 731,629
---------- ---------- ---------- ----------
Diluted shares outstanding for U.S. GAAP........ 18,510,417 19,355,747 19,261,173 19,873,276
========== ========== ========== ==========
Preference dividend declared on preference
shares (US$'000).............................. 730 730 365 --
---------- ---------- ---------- ----------
</TABLE>
Statement of Comprehensive Income
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
JANUARY 31, JULY 31,
------------------ ------------------
1999 2000 1999 2000
US$'000 US$'000 US$'000 US$'000
------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net income determined under U.S. GAAP................. 13,750 16,693 5,532 7,120
Other comprehensive income, net of tax:
Foreign exchange translation adjustments.............. (9,422) (821) (1,228) (3,579)
------ ------ ------ ------
Comprehensive income.................................. 4,328 15,872 4,304 3,541
====== ====== ====== ======
</TABLE>
F-43
<PAGE> 115
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
29. SUMMARY OF DIFFERENCES BETWEEN INTERNATIONAL ACCOUNTING STANDARDS AND UNITED
STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
Taxation
The additional U.S. GAAP disclosures relating to taxation are included in
the tables below:
<TABLE>
<CAPTION>
STATE
USA FEDERAL USA OTHER FOREIGN TOTAL
----- ----------- ------------- ------
<S> <C> <C> <C> <C>
YEAR ENDED JANUARY 31, 2000 US$'000
Corporate tax..................................... -- 97 3,634 3,731
Deferred tax...................................... -- -- (2,188) (2,188)
Other............................................. -- -- 80 80
--- ---- ------ ------
-- 97 1,526 1,623
=== ==== ====== ======
YEAR ENDED JANUARY 31, 1999 US$'000
Corporate tax..................................... 37 -- 2,261 2,298
Deferred tax...................................... (66) (322) 1,144 756
Other............................................. -- -- 166 166
--- ---- ------ ------
(29) (322) 3,571 3,220
=== ==== ====== ======
YEAR ENDED JANUARY 31, 1998 US$'000
Corporate tax..................................... 51 1 2,477 2,529
Deferred tax...................................... -- (218) 179 (39)
Other............................................. -- -- 53 53
--- ---- ------ ------
51 (217) 2,709 2,543
=== ==== ====== ======
</TABLE>
Deferred Taxation
Under IAS, the group discloses the total deferred tax assets and
liabilities as non-current. Under U.S. GAAP, these should be allocated between
non-current and current. The table below shows this disclosure:
<TABLE>
<CAPTION>
AS OF JANUARY 31,
--------------------------------------------
1999 2000
--------------------- --------------------
DEFERRED TAXATION US$'000 ASSETS LIABILITIES ASSETS LIABILITIES
------------------------- ------- ----------- ------ -----------
<S> <C> <C> <C> <C>
Current:
Liabilities, accruals and prepaids...................... 3,402 -- 3,990 --
Non current:
Tax loss carryforward................................... 4,429 -- 2,311 --
Accrued and other liabilities........................... 614 (2,008) 579 (2,340)
Property, plant and equipment........................... 859 -- 1,086 (456)
Other assets............................................ 6 -- 42 --
Other liabilities....................................... (44) -- 497 --
------ ------ ------ ------
9,266 (2,008) 8,505 (2,796)
Valuation allowance..................................... (7,758) -- (4,846) --
------ ------ ------ ------
1,508 (2,008) 3,659 (2,796)
====== ====== ====== ======
Net deferred tax (liability)/asset...................... (500) 863
====== ======
</TABLE>
F-44
<PAGE> 116
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
29. SUMMARY OF DIFFERENCES BETWEEN INTERNATIONAL ACCOUNTING STANDARDS AND UNITED
STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
The reduction in the valuation allowance is mainly due to the utilization
of tax loss carryforwards that were previously not recognized for deferred tax
and the recognition of certain deferred tax assets that were previously not
recognized.
Reconciliation of Taxation
<TABLE>
<CAPTION>
YEAR ENDED
JANUARY 31,
------------------
1999 2000
US$'000 US$'000
------- -------
<S> <C> <C>
Holding company statutory taxation.......................... -- --
Foreign taxation differential............................... 2,351 4,295
----- ------
Statutory taxation.......................................... 2,351 4,295
Non-deductible expenses..................................... 360 659
Increase in taxation rates.................................. -- 60
Deferred taxation assets not recognized..................... 172 765
Unrecognized taxation losses utilized....................... (19) (4,475)
Other taxation.............................................. 356 319
----- ------
Effective taxation.......................................... 3,220 1,623
===== ======
</TABLE>
Pension and Other Post-retirement Benefits -- Transition Asset/(obligation)
For the purposes of reconciling the group's net income and shareholders'
equity to U.S. GAAP, SFAS 87 and SFAS No. 106 "Employers' Accounting for
Post-retirement Benefits Other Than Pensions" ("SFAS 106") have been adopted as
at February 1, 1996. Due to the unavailability of actuarial information relating
to earlier periods, it was not feasible to apply SFAS 87 and SFAS 106 on the
effective dates specified in the standards.
The transition asset/(obligation) period of ten years expired prior to the
January 31, 2000 year end and thus no additional information is required.
Retirement Benefit Information
The group operates defined benefit plans for qualifying employees in
certain countries. Under these plans employees are entitled to retirement
benefits as a certain percentage of the employee's final salary on attainment of
the qualifying retirement age. No other post-retirement benefits are provided.
F-45
<PAGE> 117
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
29. SUMMARY OF DIFFERENCES BETWEEN INTERNATIONAL ACCOUNTING STANDARDS AND UNITED
STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
The following tables, based on the latest valuations, summarises the funded
status and amounts which would be recognized in the group's financial statements
under SFAS 87 for defined benefit plans for the group.
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
----------------------
1999 2000
US$'000 US$'000
-------- --------
<S> <C> <C>
Change in projected benefit obligations:
Projected benefit obligation at beginning of year........... 13,942 11,771
Service cost................................................ 805 863
Plan participants contributions............................. 367 311
Interest cost............................................... 1,367 1,241
Loss on projected benefit obligations....................... 518 1,082
Transfer to liability due to settlement..................... -- (1,442)
Benefits paid............................................... (1,147) (1,669)
Foreign exchange translation adjustment..................... (4,081) 792
------ ------
Projected benefit obligations at end of year................ 11,771 12,949
====== ======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
----------------------------
1999 2000
US$'000 US$'000
----------- -----------
<S> <C> <C>
Change in plan assets:
Fair value of plan assets at beginning of year.............. 15,840 13,519
Actual returns on assets.................................... 2,296 1,816
Employee contributions...................................... 874 968
Benefits paid............................................... 98 (298)
Transfer to liability due to settlement..................... -- (1,442)
Fair value at end of year................................... (871) (1,054)
Foreign exchange translation adjustment..................... (4,718) 871
----------- -----------
Fair value of plan assets at end of year.................... 13,519 14,380
=========== ===========
Reconciliation of funded status and net amount recognized in
the consolidated balance sheet:
Funded status at beginning of year........................ 1,748 1,431
Impact of settlement...................................... -- (302)
Unrecognized net loss..................................... 1,610 2,813
----------- -----------
Net amount recognized.................................. 3,358 3,942
=========== ===========
Discount rate............................................... 6 - 12% 6 - 12%
Rate of increase in future compensation levels.............. 10 - 11% 10 - 11%
Expected long term rate of return on assets................. 10 - 16% 10 - 16%
</TABLE>
F-46
<PAGE> 118
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
29. SUMMARY OF DIFFERENCES BETWEEN INTERNATIONAL ACCOUNTING STANDARDS AND UNITED
STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
Net periodic pension expense consists of:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
----------------------
1999 2000
US$'000 US$'000
-------- --------
<S> <C> <C>
Service cost component...................................... 805 863
Plan participants contributions............................. 367 311
Interest cost component..................................... 1,367 1,241
Expected return on assets................................... (2,206) (2,091)
Loss on settlements......................................... -- 311
Amortization of:
Unrecognized net loss..................................... 74 54
Unrecognized net transition asset......................... (34) --
------ ------
Net periodic pension expense........................... 373 689
====== ======
</TABLE>
During the year a number of eligible employees transferred from a defined
benefit plan to a defined contribution plan. This is the major reason for the
increase in the contributions to the defined contribution plan from $1,596,000
in fiscal 1999 to $2,322,000 in fiscal 2000.
Share Incentive Plans
Summary of the Union-Transport Share Incentive Plan
In September 1997, the group's Board of Directors (the "Board") approved
the Union-Transport Share Incentive Plan (the "Plan"). For the purpose of the
Plan, the Board established the Union-Transport Share Incentive Trust (the
"Trust"). Officers, employees and non-executive directors ("Participants")
selected by the Board are offered the opportunity to enter into an agreement
with the Trust to acquire ordinary shares ("Plan Shares").
Under the Plan, ordinary shares are sold by the Trust to Participants upon
the Participant's execution of a contract of sale, but the purchase price for
the shares is not payable immediately. Under the terms of the Plan, the purchase
price is payable by a participant for Plan Shares and shall not be less than
$9.69 per share or the middle market price at which the ordinary shares traded
on the Luxembourg Stock Exchange on the day immediately preceding the day of
acceptance of the offer by the participant. Once a Participant has accepted the
offer to purchase shares, the trustee pays for the shares at the offer price and
establishes a Participant loan ("share debt") for the total purchase price,
which is repayable by the Participant to the trust.
Plan Shares are registered in the names of the Participants and are pledged
in favor of the Trust as security for payment of the share debt for the purchase
of the Plan Shares. A Participant's share debt bears interest at such rate (if
any) as may from time to time be determined by the Board. Dividends on Plan
Shares are paid to the Trust and are applied in the following manner: in payment
of interest on the share debt; in payment to the Trust for reduction of share
debt (to such extent as the Board may determine); and, as to any balance, to the
relevant participant.
Unless the Board determines otherwise, Plan Shares may not be released to a
Participant from the Plan or from pledge to the Trust unless the share debt in
respect of such Plan shares has been fully
F-47
<PAGE> 119
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
29. SUMMARY OF DIFFERENCES BETWEEN INTERNATIONAL ACCOUNTING STANDARDS AND UNITED
STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
discharged. Provided that the related share debt is discharged, Plan shares are
released at the rate of 25% per year beginning on December 1, on the fourth
anniversary of the date of acceptance of the offer to acquire Plan shares.
Except in the case of death or retirement, the termination of a Participant's
employment with the group results in forfeiture of any Plan Shares not capable
of being released at the date of termination.
The remaining shares are available for future awards to Plan Participants.
Under U.S. GAAP and in accordance with Accounting Principles Board Opinion No.
25 "Accounting for Stock Issued to Employees" ("APB 25"), total compensation
cost related to the Plan would have been US$129,000 and US$131,000,
respectively, for the fiscal years 1999 and 2000, with corresponding increases
to Issued Capital.
The group applies the intrinsic value-based methodology in accordance with
APB 25 as permitted by SFAS No. 123 "Accounting for Stock-Based Compensation"
("SFAS 123") in accounting for the Plan. Accordingly, no compensation expense
has been recognized under the fair value method; however, the group has adopted
the disclosure-only provisions of SFAS 123. Had compensation cost for Plan
Shares awarded under the Plan been determined based on their fair value at the
grant date, the group's net income, basic earnings per share and the diluted
earnings per share would have been, together with the other plans described
herein, as reflected in the accompanying table under the Pro Forma Disclosure
section of this note.
A summary of Plan activity is as follows:
<TABLE>
<CAPTION>
1999 2000
-------- --------
<S> <C> <C>
Unvested shares at beginning of year................... 114,679 117,300
Shares granted......................................... 2,621 13,106
Shares vested.......................................... -- --
-------- --------
Unvested shares at end of year......................... 117,300 130,406
Shares available for future grants at end of year...... 13,761 655
-------- --------
Total shares held in trust at end of year.... 131,062 131,062
======== ========
Weighted average grant-date fair value of granted
shares............................................... $ 8.24 $ 6.41
======== ========
</TABLE>
Summary of the Executive Share Plan
The group's Executive Share Plan was established in 1994 in the form of a
Guernsey Island trust for the benefit of the group's directors and executive
managers. A liaison committee consisting of the group's Chief Executive Officer
and two other individuals makes recommendations to the trustee of the trust as
to how options should be granted under this plan. With the consent of the
liaison committee, the trustee has the right to amend or terminate the plan.
Options granted by the trust generally vest in four annual increments of
25% each starting on either the third or fourth anniversaries of the grant date.
Options vest only as long as participants remain employees. Until such time as
the options have vested, all bonuses earned by a participant are paid directly
to the trust to pay the option exercise price, unless the trustee decides to
exempt such bonus after consultation with the group.
F-48
<PAGE> 120
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
29. SUMMARY OF DIFFERENCES BETWEEN INTERNATIONAL ACCOUNTING STANDARDS AND UNITED
STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
The exercise price is set by the trustee with the group's consent and
cannot be less than 40% of the fair market value of the granted shares on the
grant date. Options expire if not exercised by the seventh anniversary of the
grant date. Options may not be assigned by participants to any person without
the consent of the trustee.
Under U.S. GAAP and in accordance with APB 25, total compensation cost
related to the Executive Share Plan would have been US$270,000 and US$276,000,
respectively, for the fiscal years 1999 and 2000, with corresponding increases
to Issued Capital.
The group applies the intrinsic value-based methodology in accordance with
APB 25 permitted by SFAS 123 in accounting for the share options granted under
the Executive Share Plan. No compensation expense has been recognized under the
fair value method; however, the group has adopted the disclosure-only provisions
of SFAS 123. Had compensation cost for the shares awarded under the Executive
Share Plan been determined based on their fair value at the grant date, the
group's net income, basic earnings per share and the diluted earnings per share
would have been, together with the other plans described herein, as reflected in
the accompanying table under the Pro Forma Disclosure section of this note.
A summary of the Executive Share Plan option activity is as follows:
<TABLE>
<CAPTION>
EXECUTIVE SHARE PLAN
-----------------------
WEIGHTED
AVERAGE
OPTIONS EXERCISE
OUTSTANDING PRICE
----------- --------
<S> <C> <C>
Balance at February 1, 1998................................. 434,832 $2.29
Options granted........................................... --
Options exercised......................................... (10,534) $2.82
Options cancelled/forfeited............................... --
-------
Balance at January 31, 1999................................. 424,298 $2.29
Options granted........................................... --
Options exercised......................................... (30,100) $1.98
Options cancelled/forfeited............................... --
-------
Balance at January 31, 2000................................. 394,198 $2.29
Shares available for future option grants at January 31,
2000...................................................... 242,108
-------
Total shares held in trust at January 31, 2000......... 636,306
=======
Exercisable at January 31, 2000...................... 323,366 $2.14
</TABLE>
A summary of stock options outstanding and exercisable as of January 31,
2000 is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER REMAINING EXERCISE NUMBER EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE
------------------------ ----------- ------------ -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$1.98 - $2.59 336,509 1.1 $1.98 296,923 $1.98
$3.89 - $4.96 57,690 3.2 $3.97 26,444 4.04
</TABLE>
F-49
<PAGE> 121
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
29. SUMMARY OF DIFFERENCES BETWEEN INTERNATIONAL ACCOUNTING STANDARDS AND UNITED
STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
Summary of the Uniserv Share Incentive Plan
Under the Uniserv Share Incentive Plan, stock options to purchase ordinary
shares of an investor company (Uniserv) were granted to certain directors and
executives of the group. The Uniserv Share Incentive Plan was established in
1987 in the form of a Guernsey Island trust. A liaison committee, consisting of
the Chairman of Uniserv and certain principal shareholders, makes
recommendations to the trustee of the trust as to how options should be granted
under this plan. With the consent of the liaison committee, the trustee has the
right to amend or terminate the plan.
Options granted by the trust generally vest in three annual increments of
33.3% each starting on the third anniversary of the grant date. Options vest
only as long as participants remain employees of the group. At January 31, 2000,
there were 9,830 options exercisable for Uniserv shares at a weighted average
exercise price of $15.26 per share.
The exercise price is set by the trustee with the company's consent and
cannot be less than 100% of the fair market value of the granted shares on the
grant date. Options expire if not exercised by the seventh anniversary of the
grant date. Options may not be assigned by participants to any person without
the consent of the trustee.
Under U.S. GAAP and in accordance with APB 25, no compensation would have
been recognized for fiscal years 1999 and 2000.
The group applies the intrinsic value-based methodology in accordance with
APB 25 as permitted by SFAS 123 in accounting for the Uniserv Share Incentive
Plan. No compensation expense has been recognized under the fair value method.
Had compensation cost for plan shares awarded under the plan been determined
based on their fair value at the grant date, the group's net income, basic
earnings per share and the diluted earnings per share would have been, together
with the other plans described herein, as reflected in the accompanying table
under the Pro Forma Disclosure section of this note.
Pro Forma Disclosure
The group has adopted the disclosure-only provisions of SFAS 123. Had
compensation cost been determined under the fair value method, share options
awarded under the plans, the group's net income, basic earnings per share and
the diluted earnings per share would have been as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
----------------------
1999 2000
-------- --------
(US$'000 EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C>
U.S. GAAP, net income as reported........................... 13,750 16,693
Pro forma U.S. GAAP net income.............................. 13,576 16,517
U.S. GAAP basic earnings per share as reported (US$)........ 0.97 1.12
U.S. GAAP diluted earnings per share as reported (US$)...... 0.74 0.86
Pro forma U.S. GAAP basic earnings per share (US$).......... 0.96 1.11
Pro forma U.S. GAAP diluted earnings per share (US$)........ 0.73 0.85
</TABLE>
F-50
<PAGE> 122
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
29. SUMMARY OF DIFFERENCES BETWEEN INTERNATIONAL ACCOUNTING STANDARDS AND UNITED
STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
The foregoing impact on compensation costs, calculated in accordance with
the fair value method described in SFAS 123, was determined under the
Black-Scholes method using the following weighted average assumptions:
<TABLE>
<S> <C>
Risk free interest rate..................................... 6%
Expected life............................................... 5 years
Expected volatility......................................... 48%
Expected dividends.......................................... 1%
</TABLE>
Summary of the Phoenix Gratuity Share Plan
The Phoenix Gratuity Share Plan was established in May 2000 in the form of
a Guernsey Island trust as the successor to certain aspects of a previously
established Guernsey Island trust. The beneficiaries of this trust include
present and former employees and directors of the group and the present and
former employees of any other company in which the group has a direct or
indirect shareholder interest and which the group directly or indirectly
controls. The class of eligible beneficiaries specifically excludes United
States persons and trusts established for the benefit of United States persons.
No part of the income or capital of this trust may be paid or accumulated for
the benefit of any United States person or trust for the benefit of any United
States person. A total of 204,592 of the group's issued ordinary shares were
transferred from a predecessor trust to the Phoenix Gratuity Share Plan in May
2000.
No person may claim any right to the trust's property or to any trust
account or any rights to information with respect to the trust prior to the
trust's expiration or the expiration of respective accounts, unless the trustees
determine otherwise.
The trustees have all powers with regard to all trust property, including
voting and all other rights and powers with respect to the group's ordinary
shares held in the trust, subject to the written consent of the Council of
Protectors of the trust. The Council of Protectors of the trust include certain
principal shareholders of the group.
Under U.S. GAAP and in accordance with APB 25, compensation cost related to
share awards under the predecessor trust would have been US$822,000 and
US$994,000 for the fiscal years 1999 and 2000, respectively, with corresponding
increases to Issued Capital in the consolidated balance sheets.
F-51
<PAGE> 123
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
29. SUMMARY OF DIFFERENCES BETWEEN INTERNATIONAL ACCOUNTING STANDARDS AND UNITED
STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
A summary of the share activity related to the predecessor trust to the
Phoenix Gratuity Share Plan is as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
----------------------
1999 2000
--------- ---------
<S> <C> <C>
Unvested shares at beginning of year................. -- --
Shares granted....................................... 52,147 75,826
Shares vested........................................ (52,147) (75,826)
--------- ---------
Unvested shares at end of year....................... -- --
--------- ---------
Shares available for future grants................... 304,801 228,974
--------- ---------
Total shares held in trust......................... 304,801 228,974
========= =========
Weighted average grant-date fair value of granted
shares............................................. $ 15.79 $ 13.12
========= =========
</TABLE>
Shares Held in Employer Stock Benefit Trusts
Under U.S. GAAP, the market value of unallocated ordinary shares held in
the trusts related to the Plan and the Executive Share Plan, as well as the
market value of unallocated ordinary shares in the predecessor trust to the
Phoenix Gratuity Share Plan (which were subsequently transferred to the Phoenix
Gratuity Share Plan), would be recorded in the consolidated balance sheets and
presented as an offset to Issued Capital. The excess of market value over cost
of the ordinary shares would be recorded as an addition to Issued Capital. The
resulting net impact to total shareholders' equity as determined under U.S. GAAP
would have been a decrease by US$1,270,000 in each of fiscal years 1999 and 2000
as compared to those amounts determined under IAS.
The ordinary shares held by the trusts which had not been awarded to
participants, or where the group had not committed to release the shares because
the related share debt had not been discharged by the participant, have been
excluded from the denominator in computing basic earnings per share under U.S.
GAAP. Dilutive potential ordinary shares have been included in the denominator
in computing diluted earnings per share under U.S. GAAP.
Summary of the 2000 Stock Option Plan
The group's 2000 Stock Option Plan, created subsequent to January 31, 2000,
provides for the issuance of options to purchase ordinary shares to the group's
directors, executives, employees and consultants. This plan allows for the grant
of incentive and non-qualified stock options. 2,359,109 shares are reserved for
issuance under the plan, subject to adjustments.
The exercise price of an incentive stock option cannot be less than 100% of
the fair market value of an ordinary share on the grant date, and the exercise
price in case of any non-statutory stock option shall not be less than 85% of
the fair market value on the grant date. No person who owns more than 10% of the
total combined voting power of the group's ordinary shares may receive options
unless the exercise price is at least 110% of the fair market value of a share
on the grant date. All options issued under the plan have terms of ten years or
less. The 2000 Stock Option Plan terminates on March 7, 2010.
F-52
<PAGE> 124
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
29. SUMMARY OF DIFFERENCES BETWEEN INTERNATIONAL ACCOUNTING STANDARDS AND UNITED
STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
Other Operating Expenses
Included in other operating expenses are facilities and communication costs
for the years ended January 31, 1999 and 2000 of US$24.4m and US$27.8m,
respectively, and for the six months ended July 31, 1999 and 2000 of US$13.1m
and US$16.7m, respectively. In addition, other operating expenses is comprised
of selling, general and administrative costs. Included in other operating
expenses is a credit of $1.5m in fiscal 2000, which represents a reimbursement
of fees from the group's satellite communications supplier. Although the
occurrence of this is infrequent, the expectation is that it could reoccur in
the future.
Banking Facilities
The group's credit facilities at January 31, 2000 allow for borrowings and
guarantees of up to US$63.8m, depending on available receivables and other
restrictions. Borrowings under these facilities totalled US$21.0m as of January
31, 2000. Of the total borrowings, US$17.9m was secured by grants of security
interests in accounts receivable and other assets. The purpose of these
facilities is to provide the group with working capital, customs bonds and
guarantees. Due to the global nature of the group, a number of financial
institutions are utilized to provide the abovementioned facilities.
Consequently, the uses of these facilities are normally restricted to the
country in which they are offered.
Presentation of Earnings Per Share Based on Earnings Before Amortization
Under IAS, two measures of basic and diluted earnings per share before
amortization are presented in the group's income statement. Under U.S. GAAP,
this presentation is not allowed because earnings per share before amortization
is not a U.S. GAAP measure.
Segmental Reporting Disclosure
Under U.S. GAAP, the group would disclose the basis for attributing
revenues from external customers to individual countries in its segmental
reporting disclosure. This additional disclosure is as follows.
For segmental reporting purposes by geographic region, gross airfreight and
ocean freight forwarding revenues for the movement of goods is attributed to the
country where the shipment originates. Gross revenues, as well as net revenues,
for all other services are attributed to the country where the services are
performed. Net revenues for airfreight and ocean freight forwarding related to
the movement of the goods are prorated between the country of origin and the
destination country, based on a standard formula.
Pro Forma Earnings per Share Disclosure
The additional disclosure required under U.S. GAAP related to the
conversion on April 30, 2000 of 4,788,281 of non-voting variable rate
participating cumulative convertible preference shares into ordinary shares is a
pro forma earnings per share calculation for the year ended January 31, 2000 as
if the conversion had taken place on February 1, 1999. If this conversion had
taken place on February 1, 1999, the basic and diluted earnings per share for
the year ended January 31, 2000 would have been US$0.88 and $0.86, respectively,
using a weighted average number of 19,051,037 (basic) and 19,355,747 (diluted)
ordinary shares outstanding.
F-53
<PAGE> 125
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
30. NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board ("the FASB") issued
SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133"). SFAS 133 establishes accounting and reporting standards for
derivative instruments, including derivative instruments imbedded in other
contracts and for hedging activities. It requires that all derivatives be
recognized as either assets or liabilities in the balance sheet at the fair
value. SFAS 133 becomes effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000 as amended by SFAS No. 137 "Accounting for
Derivative Instruments and Hedging Activities -- Deferral of the Effective Date
of FASB No. 133" ("SFAS 137") and SFAS No. 138 "Accounting for Certain
Derivative Instruments and Certain Hedging Activities -- an amendment of FASB
Statement No. 133" ("SFAS 138"). The company will adopt SFAS 133, SFAS 137 and
SFAS 138 in fiscal 2002. The company is currently assessing the impact that
these standards may have on the financial statements.
In December 1999, the Securities and Exchange Commission (the "SEC")
published Staff Accounting Bulletin No. 101 -- Revenue Recognition in Financial
Statements ("SAB 101") effective for the fourth fiscal quarter of fiscal years
beginning after December 15, 1999. SAB 101 provides guidance in applying
generally accepted accounting principles to selected revenue recognition in
financial statements. The company is assessing the impact that this bulletin may
have on the financial statements.
In June 1998, the International Accounting Standards Committee (the "IASC")
issued IAS 36, "Impairment of Assets". IAS 36 will be effective for the group's
financial statements for the year ending January 31, 2001. The company is
currently assessing the impact that this standard may have on the financial
statements.
In September 1998, the IASC issued IAS 37, "Provisions, Contingent
Liabilities and Contingent Assets". IAS 37 will be effective for the group's
financial statements for the year ending January 31, 2001. The company is
currently assessing the impact that this standard may have on the financial
statements.
In October 1998, the IASC published IAS 38, "Intangible Assets". The
standard becomes effective for the group's financial statements for the year
ending January 31, 2001, with earlier application encouraged. The company is
currently assessing the impact that this standard may have on the financial
statements.
In conjunction with the adoption of IAS 36, IAS 37 and IAS 38, the company
will be required to adopt the 1998 revisions of IAS 16, "Property, Plant and
Equipment" and IAS 22, "Business Combinations." The company does not expect the
adoption of these revisions to have a material impact on the financial
statements.
In January 1999, the IASC published IAS 39, "Financial
Instruments -- Recognition and Measurement". The standard becomes effective for
the group's financial statements for the year ending January 31, 2002. IAS 39
establishes standards for recognizing, measuring, and disclosing information
about an enterprise's financial assets and financial liabilities, including
accounting for hedging transactions. The company is currently assessing the
impact that this standard may have on the financial statements.
In March 1999, the IASC revised IAS 10, "Events After the Balance Sheet
Date." The revision becomes effective for the group's financial statements for
the year ending January 31, 2001. The company is currently assessing the impact
that this standard may have on the financial statements.
F-54
<PAGE> 126
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
31. INTERIM FINANCIAL INFORMATION
Basis of Presentation
The accompanying interim consolidated financial statements as of July 31,
2000 and for the six months ended July 31, 1999 and 2000 are unaudited. In the
opinion of management, the unaudited consolidated financial statements for the
interim periods presented reflect all adjustments, consisting of only normal
recurring accruals, necessary for a fair presentation of the consolidated
financial position and results of operations as of and for such periods
indicated in accordance with IAS. Results for the interim periods presented
herein are not necessarily indicative of results which may be reported for any
other interim period or for the entire fiscal year.
Adoption of International Accounting Standards (Unaudited)
During the six months ended July 31, 2000, the company adopted the
following International Accounting Standards:
IAS 36 is effective for the group's financial statements for the year
ending January 31, 2001. IAS 36 prescribes the accounting and disclosure for
impairment of assets and requires that the recoverable amount of an asset should
be estimated whenever there is an indication that the asset may be impaired,
with any loss recognized when the carrying amount exceeds the recoverable
amount. Upon adoption, IAS 36 had no material impact on the group's consolidated
financial statements.
IAS 37 is effective for the group's financial statements for the year
ending January 31, 2001. IAS 37 prescribes the accounting and disclosure for
provisions, contingent liabilities and contingent assets. Upon adoption, IAS 37
had no material impact on the group's consolidated financial statements.
IAS 38 is effective for financial statements for the year ending January
31, 2001. IAS 38 prescribes the accounting and disclosure for intangible assets
and requires the company to recognize intangible assets (at cost) if, and only
if, it is possible that future economic benefits exist and the cost of the asset
can be measured reliably. Upon adoption, IAS 38 had no material impact on the
group's consolidated financial statements.
In connection with the adoption of the above standards, the company also
implemented the revisions of IAS 16 (revised 1998) and IAS 22 (revised 1998).
The adoption of these revisions did not have a material impact on the group's
consolidated financial statements.
The revision of IAS 10 (revised 1999) is effective for the group's
financial statements for the year ending January 31, 2001. The revision modifies
a company's disclosure requirements for events that occur after the balance
sheet date. The adoption of this revision did not have a material impact on the
group's consolidated financial statements.
Subsequent Events (Unaudited)
In August 2000, the group's U.S. operating company entered into a revolving
credit facility with General Electric Capital Corporation which provides for up
to US$29,000,000 of borrowings based on a formula of eligible accounts
receivables. The credit facility matures in three years, is guaranteed by UTi
and is secured by substantially all of the assets of the U.S. operating company
and its subsidiaries as well as a pledge of the stock of the U.S. operating
company and its subsidiaries. Interest is due and payable on borrowings under
the credit facility based on one of the following: (i) LIBOR plus 2.75%, (ii)
prior to the syndication of the loan, the latest rate for 30-day dealer placed
commercial paper plus 2.75% or (iii) after
F-55
<PAGE> 127
UTI WORLDWIDE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 2000 (UNAUDITED)
(CONTINUED)
31. INTERIM FINANCIAL INFORMATION (CONTINUED)
such syndication, the higher of 0.50% plus (a) the base rate as published in the
Wall Street Journal and (b) the federal funds rate plus 50 basis points per
annum. The credit agreement contains customary financial and other covenants and
restrictions applicable to the U.S. operations and a change of control provision
applicable to changes at our holding company level.
Effective September 1, 2000, the group acquired substantially all of the
assets of the Continental group, a group of five related companies in the
freight forwarding industry under common control and incorporated in the United
States and Hong Kong, for total consideration of approximately US$16,600,000, of
which approximately US$15,600,000 represents goodwill. This acquisition has been
accounted for using the purchase method of accounting and goodwill is being
amortized over a period of twenty years. The initial payment of US$11,100,000
was made in cash on September 1, 2000 from a combination of borrowings of
approximately US$6,100,000 under our existing credit facilities and US$5,000,000
under a bridge financing facility with Gensec Ireland Limited. A second
installment of approximately US$3,000,000 is due October 31, 2000. An additional
installment of US$2,500,000 is due November 30, 2000 and if UTi's offering is
completed before November 30, 2000, will be paid by issuing the number of
unregistered ordinary shares which results by dividing US$2,500,000 by the per
share price in the offering. UTi also agreed to make earnout payments to the
sellers based on annual net profits before tax of the purchased operations
during each of the three years following September 1, 2000. Amounts outstanding
under the bridge financing bear interest at the rate of 340 basis points above
LIBOR and this interest rate increases by 20 basis points per month after
February 2001 if UTi's offering has not closed by then. Amounts borrowed under
the bridge financing facility must be repaid in 12 equal monthly installments
beginning one month from the date the loan was made, however, all outstanding
amounts become due and payable one month after the date UTi's offering closes.
In the third quarter of fiscal year 2001, 138,364 ordinary shares were
distributed from the Phoenix Gratuity Share Plan on behalf of eight employees.
This distribution will result in UTi incurring a non-cash compensation expense
of approximately US$2,270,000 in the third quarter of the 2001 fiscal year.
Pro Forma Earnings per Share Disclosure (Unaudited)
If the April 30, 2000 conversion of 4,788,281 non-voting variable rate
participating cumulative convertible preference shares into ordinary shares had
taken place on February 1, 1999, basic and diluted earnings per share under U.S.
GAAP for the six months ended July 31, 2000 would have been US$0.37 and US$0.36,
respectively, using a weighted average number of shares of 19,141,647 (basic)
and 19,873,276 (diluted) ordinary shares outstanding.
Public Offering
On July 24, 2000, UTi's board of directors authorized UTi to prepare and
file a registration statement with the SEC to permit the Group to proceed with a
public offering of its ordinary shares (the "Offering"). In connection with the
Offering, UTi's board of directors and members approved a 1-for-7.63 combination
of shares (reverse stock split) which took place on October 18, 2000 and the
filing of an amended and restated Memorandum and Articles of Association to go
into effect prior to the closing of the offering. Under the Amended and Restated
Memorandum and Articles of Association, UTi will change its authorized share
capital to include 500,000,000 ordinary shares and 100,000,000 preference
shares, which preference shares may be issued at the election of the board of
directors.
F-56
<PAGE> 128
------------------------------------------------------
------------------------------------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT OR ADDITIONAL INFORMATION.
THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT SEEKING AN OFFER TO BUY OUR
ORDINARY SHARES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT ONLY AS OF THE DATE OF
THIS PROSPECTUS, REGARDLESS OF THE TIME OF THE DELIVERY OF THIS PROSPECTUS OR
ANY SALE OF OUR ORDINARY SHARES.
------------------------
TABLE OF CONTENTS
------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary...................... 1
Risk Factors............................ 7
Recent Developments..................... 18
Use of Proceeds......................... 19
Price Range of our Ordinary Shares...... 20
Dividend Policy......................... 20
Capitalization.......................... 21
Dilution................................ 22
Selected Consolidated Financial Data.... 23
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 26
Business................................ 40
Management.............................. 50
Certain Relationships and Related
Transactions.......................... 55
Principal Shareholders.................. 56
Description of Capital Stock............ 57
Shares Eligible for Future Sale......... 61
Underwriting............................ 63
United States Federal Income Tax
Consequences.......................... 65
British Virgin Islands Taxation......... 68
Legal Matters........................... 68
Experts................................. 69
Where You Can Find More Information..... 69
Index to Financial Statements........... F-1
</TABLE>
UNTIL NOVEMBER 27, 2000 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
THAT BUY, SELL OR TRADE THESE ORDINARY SHARES, WHETHER OR NOT PARTICIPATING IN
THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
------------------------------------------------------
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------------------------------------------------------
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[UTi LOGO]
UTI WORLDWIDE INC.
4,700,000
ORDINARY SHARES
------------------------
PROSPECTUS
------------------------
BEAR, STEARNS & CO. INC.
LAZARD
BB&T CAPITAL MARKETS
November 2, 2000
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