<PAGE> 1
EXHIBIT 99.3 FISCAL 2001 THIRD QUARTER RESULTS WITH COMMENTARY
--------------------------------------------------------------------------------
UTi WORLDWIDE INC.
FISCAL 2001
THIRD QUARTER RESULTS
WITH
COMMENTARY
DECEMBER 12, 2000
-----------------------------
UTi is pleased to present herein its results for the three and nine months ended
October 31, 2000 along with management's commentary on those results and
financial position. Certain of the statements contained in this commentary
(other than the financial statements and other statements of historical fact)
are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
The Company intends that all such statements be subject to the "safe-harbor"
provisions contained in those sections. Such forward-looking statements may
include, but are not limited to, the discussion of (i) the Company's growth
strategies; (ii) trends in the Company's business; and (iii) the Company's
future liquidity requirements and capital resources.
Forward-looking statements are made based upon management's current expectations
and beliefs concerning future developments and their potential effects upon the
Company. There can be no assurance that future developments will be in
accordance with management's expectations or that the effects of future
developments on the Company will be those anticipated by management. The
important factors described in the attached commentary and in the Company's
Registration Statement on Form F-1 (including, without limitation, those factors
discussed in the "Risk Factors" sections of the attached commentary and the
Company's Form F-1), on file with the Securities and Exchange Commission (the
"SEC"), could affect (and in some cases have affected) the Company's actual
results and could cause such results to differ materially from estimates or
expectations reflected in such forward-looking statements. In light of these
factors, there can be no assurance that events anticipated by the
forward-looking statements contained in the attached commentary will in fact
transpire.
While management periodically reassesses material trends and uncertainties
affecting its results of operations and financial condition, the Company does
not intend to review or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
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<PAGE> 2
EXHIBIT 99.3 FISCAL 2001 THIRD QUARTER RESULTS WITH COMMENTARY
--------------------------------------------------------------------------------
UTi WORLDWIDE INC.
FINANCIAL INFORMATION
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 2000 AND 1999
Prepared in Accordance with International Accounting Standards
(US$000's, except share and per share amounts)
<TABLE>
<CAPTION>
Three months ended October 31, Nine months ended October 31,
----------------------------- -----------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Gross revenue...................... $ 240,766 $ 196,562 $ 642,751 $ 524,559
Freight consolidation costs........ 157,981 131,142 418,833 343,984
----------- ----------- ----------- -----------
Net revenue........................ 82,785 65,420 223,918 180,575
Staff costs........................ 40,005 31,030 111,673 89,495
Depreciation....................... 2,468 1,948 6,735 5,588
Amortization....................... 1,417 824 3,563 2,328
Other operating expenses........... 28,682 22,787 79,473 66,548
----------- ----------- ----------- -----------
Operating profit................... 10,213 8,831 22,474 16,616
Finance costs...................... (1,159) (647) (4,783) (3,729)
Income from other investments...... 181 507 2,299 2,259
----------- ----------- ----------- -----------
Pretax income...................... 9,235 8,691 19,990 15,146
Income tax expense................. (2,252) (738) (4,831) (1,286)
----------- ----------- ----------- -----------
Net income before minority interest 6,983 7,953 15,159 13,860
Minority interest.................. (305) (50) (705) (357)
----------- ----------- ----------- -----------
Net income......................... $ 6,678 $ 7,903 $ 14,454 $ 13,503
=========== =========== =========== ===========
Basic earnings per ordinary share.. $ 0.33 $ 0.51 $ 0.78 $ 0.85
Diluted earnings per ordinary share $ 0.33 $ 0.39 $ 0.72 $ 0.67
Number of shares used for per share
calculations:
Undiluted shares................. 20,047,616 15,259,335 18,451,522 15,259,335
Diluted shares................... 20,047,616 20,047,616 20,047,616 20,047,616
</TABLE>
NOTE: See Attachment A for a presentation of our Unaudited Condensed
Consolidated Statements of Operations prepared in accordance with
accounting principles generally accepted in the United States.
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<PAGE> 3
EXHIBIT 99.3 FISCAL 2001 THIRD QUARTER RESULTS WITH COMMENTARY
--------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
AS OF OCTOBER 31, 2000 (UNAUDITED) AND AS OF JANUARY 31, 2000
Prepared in Accordance with International Accounting Standards
(US$000's)
October 31, January 31,
2000 2000
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents................. $ 29,330 $ 20,760
Trade and other receivables, net.......... 235,107 183,083
-------- --------
Total current assets........................ 264,437 203,843
Property, plant and equipment, net.......... 35,557 34,985
Goodwill, net............................... 83,492 48,532
Investments................................. 628 1,043
Deferred tax assets......................... 2,593 3,659
Other non-current assets.................... 5,475 5,858
-------- --------
Total assets................................ $392,182 $297,920
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings..................... $ 59,606 $ 25,303
Finance lease obligations................. 1,886 2,179
Trade and other payables.................. 192,678 142,415
Tax liabilities........................... 3,042 2,608
-------- --------
Total current liabilities................... 257,212 172,505
Long-term liabilities:
Finance lease obligations................. 8,691 10,504
Long-term borrowings...................... 12,617 4,855
Deferred tax liabilities.................. 2,225 2,796
Retirement fund obligations............... 599 646
-------- --------
Total long-term liabilities................. 24,132 18,801
Minority interest........................... 1,946 1,571
Commitments and contingencies
Shareholders' equity:
Issued capital............................ 86,020 86,020
Distributable reserves.................... 55,828 41,374
Non-distributable reserves................ 2,032 2,184
Cumulative foreign exchange translation
adjustment.............................. (34,988) (24,535)
-------- --------
Total shareholders' equity.................. 108,892 105,043
-------- --------
Total liabilities and shareholders' equity.. $392,182 $297,920
======== ========
NOTE: See Attachment B for a presentation of our Unaudited Consolidated Balance
Sheets prepared in accordance with accounting principles generally
accepted in the United States.
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<PAGE> 4
EXHIBIT 99.3 FISCAL 2001 THIRD QUARTER RESULTS WITH COMMENTARY
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UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED OCTOBER 31, 2000 AND 1999
Prepared in Accordance with International Accounting Standards
(US$000's)
<TABLE>
<CAPTION>
Nine months ended
October 31,
----------------------
2000 1999
-------- --------
(Unaudited)
<S> <C> <C>
Operating activities:
Pretax income ............................................. $ 19,990 $ 15,146
Adjustments for:
Finance costs ........................................... 4,783 3,514
Income from other investments ........................... (1,429) (2,259)
Depreciation ............................................ 6,735 5,588
Amortization ............................................ 3,563 2,328
Gain on disposal of property, plant and equipment ....... (166) (14)
Gain on disposal of other investments ................... (312) --
-------- --------
Operating cash flow before movements in working capital ... 33,164 24,303
Changes in working capital:
Increase in trade and other receivables ............... (67,913) (30,170)
Increase in prepaid pension costs ..................... (448) (500)
Increase in provisions for pension liabilities ........ 46 70
Increase in trade and other payables .................. 62,100 31,854
-------- --------
Cash generated from operations .............................. 26,949 25,557
Income tax paid ............................................. (4,188) (1,801)
Interest paid ............................................... (4,783) (3,121)
-------- --------
Net cash from operating activities .......................... 17,978 20,635
Investing activities:
Interest received ......................................... 1,429 2,940
Proceeds from disposal of property, plant and equipment ... 486 485
Purchases of property, plant and equipment ................ (10,358) (7,764)
Acquisition of subsidiaries and business undertakings ..... (20,341) (14,220)
Proceeds on sale of other investments ..................... 650 --
(Increase)/decrease in minority interest .................. (206) 111
Acquisition of other investments .......................... (12) --
-------- --------
Net cash used in investing activities ....................... (28,352) (18,448)
Financing activities:
Ordinary and preference dividends paid .................... (3,118) (2,903)
Long-term bank borrowings -- advanced ..................... 358 107
Long-term bank borrowings -- repaid ....................... (183) --
Finance lease obligations -- advanced ..................... 1,385 2,951
Finance lease obligations -- repaid ....................... (1,558) (2,132)
Payment of purchase acquisition installment ............... (2,675) (1,286)
Shareholder company loans ................................. (1,927) (930)
Other loans ............................................... 5,173 72
Increase/(decrease) in bank overdraft ..................... 24,440 (101)
-------- --------
Net cash from/(used in) financing activities ................ 21,895 (4,222)
-------- --------
Net increase/(decrease) in cash and cash equivalents ........ 11,521 (2,035)
Cash and cash equivalents at the beginning of the fiscal year 20,760 38,555
Effect of foreign exchange rate changes ..................... (2,951) (661)
-------- --------
Cash and cash equivalents as at October 31 .................. $ 29,330 $ 35,859
======== ========
</TABLE>
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EXHIBIT 99.3 FISCAL 2001 THIRD QUARTER RESULTS WITH COMMENTARY
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 2000 AND 1999 (UNAUDITED)
NOTE 1. PRESENTATION OF FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements include the
accounts of UTi Worldwide Inc. and its subsidiaries, ("UTi" or the "Company").
These financial statements have been prepared in United States dollars in
accordance with International Accounting Standards ("IAS") for interim financial
information. They do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
The consolidated financial statements reflect all adjustments that are, in the
opinion of management, necessary for a fair statement of the results for the
interim periods presented. Operating results for the three and nine months ended
October 31, 2000 are not necessarily indicative of the results that may be
expected for the year ended January 31, 2001 or any other future periods.
The balance sheet at January 31, 2000 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's
Registration Statement on Form F-1 on file with the Securities and Exchange
Commission.
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.
NOTE 2. EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three months ended Nine months ended
October 31, October 31,
-------------------------- --------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
(US$000's, except share and per share amounts)
<S> <C> <C> <C> <C>
Basic earnings per ordinary share:
Profit attributable to shareholders .............. 6,678 7,903 14,454 13,503
Preference dividend .............................. -- 183 -- 548
---------- ---------- ---------- ----------
Profit attributable to ordinary shareholders ....... 6,678 7,720 14,454 12,955
Weighted average number of ordinary shares ......... 20,047,616 15,259,335 18,451,522 15,259,335
Basic earnings per ordinary share .................. 0.33 0.51 0.78 0.85
Diluted earnings per ordinary share:
Profit attributable to shareholders .............. 6,678 7,903 14,454 13,503
Weighted average number of ordinary shares ....... 20,047,616 15,259,335 18,451,522 15,259,335
Weighted average number of preference shares ..... -- 4,788,281 1,596,094 4,788,281
---------- ---------- ---------- ----------
Weighted average number of ordinary shares (diluted) 20,047,616 20,047,616 20,047,616 20,047,616
Diluted earnings per ordinary share ................ 0.33 0.39 0.72 0.67
</TABLE>
The above number of shares excludes any contingently issuable ordinary shares.
Earnings for the three and nine months ended October 31, 1999 have been adjusted
to reflect the retrospective application of International Accounting Standard 19
(revised 1998) "Employee Benefits."
--------------------------------------------------------------------------------
5
<PAGE> 6
EXHIBIT 99.3 FISCAL 2001 THIRD QUARTER RESULTS WITH COMMENTARY
--------------------------------------------------------------------------------
NOTE 3. ACQUISITION
Effective September 1, 2000, UTi 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. The final purchase price
allocation has not been completed. 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 the Company's 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 was made in cash on October 31, 2000.
An additional installment of US$2,500,000 was paid by issuing 166,667 of
unregistered ordinary shares to the sellers in November 2000. UTi also agreed to
make earn-out 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 borrowed under the bridge financing facility were paid in full on
December 6, 2000.
NOTE 4. SEGMENTAL INFORMATION
The Company's 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. Certain unaudited information regarding UTi's
operations by segment is summarized below in US$000's.
<TABLE>
<CAPTION>
Three months ended October 31, 2000
--------------------------------------------------------------------------------------------------------------------
Europe Americas Asia Pacific Africa Corporate Total
------- -------- ------------ ------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Gross revenue from external
customers ....................... $71,496 $ 81,587 $52,828 $ 34,855 $ -- $240,766
======= ======== ======= ======== ===== ========
Net revenue ....................... $16,126 $ 28,082 $13,142 $ 25,435 $ -- $ 82,785
Staff costs ....................... (8,024) (16,247) (5,278) (10,107) (349) (40,005)
Depreciation ...................... (720) (609) (323) (799) (17) (2,468)
Amortization ...................... (179) (929) (222) (87) -- (1,417)
Other operating expenses .......... (5,151) (9,448) (3,609) (10,983) 509 (28,682)
------- -------- ------- -------- ----- --------
Segment result .................... $ 2,052 $ 849 $ 3,710 $ 3,459 $ 143 10,213
======= ======== ======= ======== =====
Finance costs ..................... (1,159)
Income from other investments ..... 181
--------
Pretax income ..................... 9,235
Income tax expense ................ (2,252)
--------
Net income before minority interest $ 6,983
========
</TABLE>
<TABLE>
<CAPTION>
Three months ended October 31, 1999
--------------------------------------------------------------------------------------------------------------------
Europe Americas Asia Pacific Africa Corporate Total
------- -------- ------------ ------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Gross revenue from external
customers ....................... $51,058 $75,069 $34,923 $ 35,512 $ -- $196,562
======= ======= ======= ======== ===== ========
Net revenue ....................... $13,982 $20,239 $ 7,538 $ 23,661 $ -- $ 65,420
Staff costs ....................... (7,998) (9,264) (3,868) (9,630) (270) (31,030)
Depreciation ...................... (358) (429) (188) (973) -- (1,948)
Amortization ...................... (111) (562) (85) (66) -- (824)
Other operating expenses .......... (3,524) (7,229) (2,174) (10,393) 533 (22,787)
------- ------- ------- -------- ---- --------
Segment result .................... $ 1,991 $ 2,755 $ 1,223 $ 2,599 $263 8,831
======= ======= ======= ======== ====
Finance costs ..................... (647)
Income from other investments ..... 507
--------
Pretax income ..................... 8,691
Income tax expense ................ (738)
--------
Net income before minority interest $ 7,953
========
</TABLE>
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EXHIBIT 99.3 FISCAL 2001 THIRD QUARTER RESULTS WITH COMMENTARY
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<TABLE>
<CAPTION>
Nine months ended October 31, 2000
-------------------------------------------------------------------------------------------------------------------
Europe Americas Asia Pacific Africa Corporate Total
-------- -------- ------------ ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Gross revenue from external
customers ................. $209,156 $213,725 $121,985 $ 97,885 $ -- $ 642,751
======== ======== ======== ======== ======= =========
Net revenue ................. 46,357 73,751 30,500 73,310 -- 223,918
Staff costs ................. (24,279) (44,003) (13,359) (29,099) (933) (111,673)
Depreciation ................ (1,805) (1,603) (734) (2,401) (192) (6,735)
Amortization ................ (508) (2,356) (448) (251) -- (3,563)
Other operating expenses .... (14,566) (23,450) (9,136) (32,298) (23) (79,473)
-------- -------- -------- -------- ------- ---------
Segment result .............. $ 5,199 $ 2,339 $ 6,823 $ 9,261 $(1,148) 22,474
======== ======== ======== ======== =======
Finance costs ............... (4,783)
Income from other investments 2,299
---------
Pretax income ............... 19,990
Income tax expense .......... (4,831)
---------
Net income before minority
interest .................. $ 15,159
=========
</TABLE>
<TABLE>
<CAPTION>
Nine months ended October 31, 1999
----------------------------------------------------------------------------------------------------------------------
Europe Americas Asia Pacific Africa Corporate Total
-------- -------- ------------ -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Gross revenue from external
customers ......................... $169,763 $173,410 $ 87,467 $ 93,919 $ -- $524,559
======== ======== ======== ======== ===== ========
Net revenue ....................... 40,167 50,875 22,214 67,319 -- 180,575
Staff costs ....................... (23,420) (26,105) (10,973) (28,354) (643) (89,495)
Depreciation ...................... (1,077) (1,215) (532) (2,764) -- (5,588)
Amortization ...................... (346) (1,442) (281) (259) -- (2,328)
Other operating expenses .......... (10,686) (17,762) (7,176) (31,692) 768 (66,548)
-------- -------- -------- -------- ----- --------
Segment result .................... $ 4,638 $ 4,351 $ 3,252 $ 4,250 $ 125 16,616
======== ======== ======== ======== =====
Finance costs ..................... (3,729)
Income from other investments ..... 2,259
--------
Pretax income ..................... 15,146
Income tax expense ................ (1,286)
--------
Net income before minority interest $ 13,860
========
</TABLE>
The following table shows the gross revenue and net revenue attributable to the
Company's principal services (in US$000's).
<TABLE>
<CAPTION>
Three months ended Nine months ended
October 31, October 31,
----------------------- -----------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Gross revenue:
Airfreight forwarding .. $135,465 $111,725 $354,279 $295,707
Ocean freight forwarding 67,730 57,898 186,235 156,259
Customs brokerage ...... 16,670 10,859 46,193 29,804
Other .................. 20,901 16,080 56,044 42,789
-------- -------- -------- --------
$240,766 $196,562 $642,751 $524,559
======== ======== ======== ========
Net revenue:
Airfreight forwarding .. $ 39,415 $ 35,371 $106,747 $ 95,374
Ocean freight forwarding 14,908 11,119 38,991 31,906
Customs brokerage ...... 15,698 10,398 43,516 29,172
Other .................. 12,764 8,532 34,664 24,123
-------- -------- -------- --------
$ 82,785 $ 65,420 $223,918 $180,575
======== ======== ======== ========
</TABLE>
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EXHIBIT 99.3 FISCAL 2001 THIRD QUARTER RESULTS WITH COMMENTARY
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NOTE 5. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INTERNATIONAL ACCOUNTING
STANDARDS AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED
STATES
The Company's financial statements 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 are 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
Company 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$7,000 and US$6,000 for the three months ended October 31, 2000
and 1999, respectively, and US$19,000 and US$12,000 for the nine months
ended October 31, 2000 and 1999, respectively. The adjustment shown in the
reconciliation of shareholders' equity is US$1,409,000 and US$1,427,000 (net
of deferred tax and accumulated depreciation) as of October 31, 2000 and
January 31, 2000, respectively.
(b) Business Combinations
UTi 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
company must use its best estimate 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$453,000 and US$177,000 for the three
months ended October 31, 2000 and 1999, respectively, and US$1,184,000 and
US$859,000 for the nine months ended October 31, 2000 and 1999,
respectively. The adjustment shown in the reconciliation of shareholders'
equity is the cumulative effect of US$2,557,000 and US$1,373,000 as of
October 31, 2000 and January 31, 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 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 No. 87 "Employers' Accounting for Pensions" gives rise
to an adjustment of US$34,000 in fiscal 1999, which is the last year of the
ten year transition allowance. The adjustment shown in the reconciliation of
shareholders' equity is the cumulative effect of US$34,000 as of October 31,
2000 and January 31, 2000.
(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
related adjustment is a charge of US$7,000 for the three months ended
October 31, 1999 and US$17,000 and US$21,000 for the nine months ended
October 31, 2000 and 1999, respectively. The adjustment shown in the
reconciliation of shareholders' equity is the cumulative effect of US$55,000
and US$38,000 as of October 31, 2000 and January 31, 2000, respectively.
--------------------------------------------------------------------------------
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EXHIBIT 99.3 FISCAL 2001 THIRD QUARTER RESULTS WITH COMMENTARY
--------------------------------------------------------------------------------
(e) Loan to Share Incentive Plan
UTi 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. This amount totaled US$113,000 as of the end of October 31,
2000 and January 31, 2000.
(g) Compensation Cost
Under U.S. GAAP, compensation cost must be recorded for share awards, and in
cases of share option grants, if the market price of the ordinary shares
exceeds the exercise price of the options. These amounts are US$2,315,000
and US$538,000 for the three months ended October 31, 2000 and 1999,
respectively, and US$3,731,000 and US$1,300,000 for the nine months ended
October 31, 2000 and 1999, respectively. Included in the US$2,315,000
recorded in the three months ended October 31, 2000 is US$2,264,000 relating
to the final distribution by a trust established by one of our shareholders
of 138,364 shares to eight employees.
The following reconciliations 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 (US$000's).
<TABLE>
<CAPTION>
Three months ended Nine months ended
October 31, October 31,
------------------- --------------------
Reconciliation of Net Income to U.S. GAAP Note 2000 1999 2000 1999
----------------------------------------- ----- ------- ------ -------- -------
<S> <C> <C> <C> <C> <C>
Net income determined under IAS................... $ 6,678 $7,903 $14,454 $13,503
Adjustments in respect of:
Depreciation on revaluation of fixed assets..... a 7 6 19 12
Business combinations........................... b 453 177 1,184 859
Premium on forward exchange contracts amortized. d -- 7 17 21
Compensation costs.............................. g (2,315) (538) (3,731) (1,300)
Deferred tax on U.S. GAAP adjustments........... -- 1 -- (8)
------- ------ ------- -------
Total effect of U.S. GAAP adjustments........ (1,855) (347) (2,511) (416)
------- ------ ------- -------
Net income determined under U.S. GAAP............. $ 4,823 $7,556 $11,943 $13,087
======= ====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
As of
-------------------------
October 31, January 31,
Reconciliation of Shareholders' Equity to U.S. GAAP Note 2000 2000
--------------------------------------------------- ---- ----------- -----------
<S> <C> <C> <C>
Shareholders' equity determined under IAS......................... $108,892 $105,043
Adjustments in respect of:
Revaluation of fixed assets..................................... a (1,409) (1,427)
Business combinations........................................... b 2,557 1,373
Transition adjustment on defined benefit plans.................. c 34 34
Premium on forward exchange contracts amortized................. d 55 38
Share incentive plan -- cost of unreleased shares............... e (1,270) (1,270)
Dividends on contingently issued shares held in escrow.......... f 113 113
Translation adjustment on U.S. GAAP adjustments................. 1,049 1,139
Deferred tax on U.S. GAAP adjustments........................... (29) (29)
-------- --------
Total effect of U.S. GAAP adjustments........................ 1,100 (29)
-------- --------
Shareholders' equity determined under U.S. GAAP................... $109,992 $105,014
======== ========
</TABLE>
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EXHIBIT 99.3 FISCAL 2001 THIRD QUARTER RESULTS WITH COMMENTARY
--------------------------------------------------------------------------------
The following reconciliation summarizes the adjustments to shares outstanding
which would be required if the financial statements had been prepared under U.S.
GAAP.
<TABLE>
<CAPTION>
Three months ended Nine months ended
October 31, October 31,
--------------------------- ---------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Basic earnings per share denominator:
Ordinary number of shares outstanding under IAS .......... 20,047,616 15,259,335 18,451,522 15,259,335
Less: unallocated shares held in share incentive trusts .. (859,612) (1,062,104) (890,359) (1,032,910)
----------- ----------- ----------- -----------
Ordinary shares outstanding for U.S. GAAP ................ 19,188,004 14,197,231 17,561,163 14,226,425
=========== =========== =========== ===========
Diluted earnings per share denominator:
Ordinary shares outstanding for basic U.S. GAAP .......... 19,188,004 14,197,231 17,561,163 14,226,425
Non-voting variable rate participating cumulative
convertible preference shares -- weighted................. -- 4,788,281 1,596,094 4,788,281
Incremental shares required for diluted earnings per share 505,220 306,531 458,535 306,531
----------- ----------- ----------- -----------
Diluted shares outstanding for U.S. GAAP ................. 19,693,224 19,292,043 19,615,792 19,321,237
=========== =========== =========== ===========
Preference dividend declared on preference shares (US$'000) $ -- $ 183 $ -- $ 548
=========== =========== =========== ===========
</TABLE>
The following Statements of Comprehensive Income would be required if the
financial statements had been prepared under U.S. GAAP (US000's).
<TABLE>
<CAPTION>
Three months ended Nine months ended
October 31, October 31,
------------------ -------------------
2000 1999 2000 1999
------- ------ -------- -------
<S> <C> <C> <C> <C>
Net income determined under U.S. GAAP .... $ 4,823 $7,556 $ 11,943 $13,087
Other comprehensive income, net of tax:
Foreign exchange translation adjustments (6,965) (180) (10,548) (1,633)
------- ------ -------- -------
Comprehensive income ..................... $(2,142) $7,376 $ 1,395 $11,454
======= ====== ======== =======
</TABLE>
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.
NOTE 6. SUBSEQUENT EVENT
In November 2000, the Company issued 5,405,000 shares in connection with its
public offering of ordinary shares, including the shares issued in connection
with the exercise by the underwriters of their over-allotment options. Net
proceeds to the Company totaled approximately $73.4 million (after underwriting
discounts and commissions and estimated transaction expenses).
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EXHIBIT 99.3 FISCAL 2001 THIRD QUARTER RESULTS WITH COMMENTARY
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COMMENTARY ON FISCAL 2001 THIRD QUARTER RESULTS
OVERVIEW
The following commentary explains material changes in the consolidated results
of operations for UTi Worldwide Inc. and its subsidiaries, ("UTi" or the
"Company"), for the three months ended October 31, 2000 ("third quarter of
fiscal 2001") and the nine months ended October 31, 2000. The operating results
of the acquired operations for the Continental group ("Continental") are
included in the Company's financial statements since the date of acquisition,
September 1, 2000 (see "Acquisition," following).
Our financial statements, which are included with this commentary, are prepared
in United States dollars and in accordance with international accounting
standards ("IAS"), which differ in significant respects from accounting
principals generally accepted in the United States ("U.S. GAAP"). The following
commentary on our financial condition and results of operations is based on the
results prepared in accordance with IAS. The significant differences between IAS
and U.S. GAAP as applicable to our financial statements are summarized in Note 5
to our unaudited consolidated financial statements for the three and nine months
ended October 31, 2000 and 1999, which are included with this commentary. For
additional information, we have included with this commentary copies of our
condensed consolidated statements of operations and balance sheets prepared in
accordance with U.S. GAAP (see Attachments A and B).
The following discussion should be read in conjunction with the Company's
audited consolidated financial statements and notes thereto for the year ended
January 31, 2000, which are included in the Company's Registration Statement on
Form F-1, on file with the Securities and Exchange Commission.
ACQUISITION
Effective September 1, 2000, UTi 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. The final purchase price is
contingent on future earn-out payments based on the annual net profits before
tax of the purchased operations over the period September 1, 2000 through
September 1, 2003. The final purchase price allocation has not been completed.
The acquisition has been accounted for using the purchase method of accounting.
LICENSING AGREEMENT
During the quarter, we signed a licensing agreement with EXE Technologies. We
will be using EXE's software to power our global inventory and warehousing
management applications. We are pleased to add this product to our UTi eMpower
suite of products so we can expand our product offering to our customers.
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EXHIBIT 99.3 FISCAL 2001 THIRD QUARTER RESULTS WITH COMMENTARY
--------------------------------------------------------------------------------
DISCUSSION OF RESULTS
The following table shows the Company's results of operations as a percentage of
net revenues.
<TABLE>
<CAPTION>
Three months ended Nine months ended
October 31, October 31,
-------------------- -----------------
2000 1999 2000 1999
--------- --------- -------- ------
<S> <C> <C> <C> <C>
Net revenue:
Airfreight forwarding........................... 48% 54% 48% 53%
Ocean freight forwarding........................ 18 17 17 18
Customs brokerage............................... 19 16 19 16
Other........................................... 15 13 16 13
--- --- --- ---
Total net revenue............................. 100% 100% 100% 100%
=== === === ===
Operating expenses:
Staff costs..................................... 48% 48% 50% 50%
Depreciation.................................... 3 3 3 3
Amortization.................................... 2 1 2 1
Other operating expenses........................ 35 35 35 37
--- --- --- ---
Total operating expenses........................ 88 87 90 91
--- --- --- ---
Operating profit.................................. 12 13 10 9
Finance costs..................................... (1) (1) (2) (2)
Income from other investments..................... * 1 1 1
--- --- --- ---
Pretax income..................................... 11 13 9 8
Income tax expense................................ (3) (1) (2) (1)
Minority interest................................. * * * *
--- --- --- ---
Net income........................................ 8% 12% 6% 7%
=== ==== === ===
EBITDA using IAS results (1)...................... 17% 18% 15% 14%
=== === === ===
</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-IAS
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.
THREE MONTHS ENDED OCTOBER 31, 2000 COMPARED TO THREE MONTHS ENDED OCTOBER 31,
1999
Net revenue increased $17.4 million, or 27% to $82.8 million for the quarter
ended October 31, 2000 compared to $65.4 million for the third quarter of fiscal
2000. Overall, net revenue for the current quarter benefited from acquisitions
made during the last quarter of fiscal 2000 and the first three quarters of
fiscal 2001. We estimate that these acquisitions accounted for approximately
$8.0 million of the net revenue increase for the quarter ended October 31, 2000
versus the comparable period in the prior fiscal year.
Airfreight forwarding net revenue increased $4.0 million, or 11%, to $39.4
million for the third quarter of fiscal 2001 compared to $35.4 million for the
prior year third quarter 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 quarter ended October 31, 2000 increased by 87% over
the same prior year period, largely due to the contribution of approximately
$2.0 million from the Continental acquisition. Airfreight forwarding net revenue
from Africa increased by 18% despite the depreciation of the South African rand.
Our airfreight forwarding net revenue expressed as a percentage of our
airfreight forwarding gross revenue decreased by 3 percentage points in the
quarter ended October 31, 2000 (from 32% to 29%) 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.
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EXHIBIT 99.3 FISCAL 2001 THIRD QUARTER RESULTS WITH COMMENTARY
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Ocean freight forwarding net revenue increased $3.8 million, or 34%, to $14.9
million for the quarter ended October 31, 2000 compared to $11.1 million for the
same prior year period. Increases in shipments and tonnage from Asia Pacific
predominately to the Americas significantly contributed to this increase in
ocean freight forwarding net revenue.
Customs brokerage net revenue increased $5.3 million, or 51%, to $15.7 million
for the third quarter of fiscal 2001 compared to $10.4 million for the same
prior year period. Customs brokerage net revenue increased primarily as a result
of a general increase in the number of shipments during the quarter ended
October 31, 2000 compared to the same prior year period. We estimate that
acquisitions of customs brokers which we completed in the last quarter of fiscal
2000 and the first three quarters of fiscal 2001 accounted for approximately
$4.3 million of the increase in customs brokerage net revenue for the third
quarter 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 $4.3 million, or 50%, to $12.8 million for the quarter ended October
31, 2000 compared to $8.5 million for the third quarter of fiscal 2000. 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 $9.0 million, or 29%, to $40.0 million for the third
quarter of fiscal 2001 from $31.0 million for the same prior year period and, as
a percentage of net revenue, stayed constant at 48%. This increase in spending
was due to our overall increase in business activity.
Depreciation expense increased by $0.5 million, or 27%, for the quarter ended
October 31, 2000 over the same prior year period to $2.5 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 quarter ended October 31, 2000 as compared to the same prior year
period.
Amortization increased by $0.6 million, or 72%, to $1.4 million in the quarter
ended October 31, 2000 as a result of the acquisitions we made in the last
quarter of fiscal 2000 and the related goodwill being amortized, as well as the
amortization of goodwill relating to the acquisitions completed during the first
three quarters of fiscal 2001. To date, our acquisitions have been accounted for
using the purchase method of accounting and the related goodwill is amortized
over a period generally not exceeding 20 years. Amortization expressed as a
percentage of net revenue increased to 2% in the third quarter of fiscal 2001
from 1% in the same prior year period.
Other operating expenses increased by $5.9 million, or 26%, to $28.7 million in
the quarter ended October 31, 2000 compared to $22.8 million for the same prior
year period. Included in other operating expenses for the third quarter of
fiscal 2001 are facilities and communications costs of $9.0 million compared to
$6.8 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 quarter ended
October 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 quarter ended October 31, 2000, selling, general and
administrative costs were $19.7 million compared to $16.0 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 quarter ended
October 31, 2000 compared to the same prior year period. When expressed as a
percentage of net revenue, other operating expenses stayed constant at 35% for
the quarter ended October 31, 2000 versus 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
$0.6 million to $1.2 million in the quarter ended October 31, 2000 from
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EXHIBIT 99.3 FISCAL 2001 THIRD QUARTER RESULTS WITH COMMENTARY
--------------------------------------------------------------------------------
$0.6 million for the same prior year period. When expressed as a percentage of
net revenue, finance costs were unchanged at 1% in the quarter ended October 31,
2000 compared to the same prior year period.
Income from other investments decreased 64% to $0.2 million in the quarter ended
October 31, 2000 compared to $0.5 million for the same prior year period.
The effective income tax rate increased to 24% in the third quarter of fiscal
2001 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 continue to
increase during 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 decreased 16% to $6.7 million in the quarter ended October 31, 2000
as compared to the same prior year period for the reasons listed above.
NINE MONTHS ENDED OCTOBER 31, 2000 COMPARED TO NINE MONTHS ENDED OCTOBER 31,
1999
Net revenue increased $43.3 million, or 24%, to $223.9 million for the nine
months ended October 31, 2000. Overall, net revenue benefited from acquisitions
made during the last quarter of fiscal 2000 which impacted the full nine month
period ended October 31, 2000 and acquisitions made during the nine months ended
October 31, 2000. We estimate that acquisitions completed during the nine months
ended October 31, 2000 fiscal year contributed $14.8 million of net revenue for
the period.
Airfreight forwarding net revenue increased $11.3 million, or 12%, to $106.7
million for the nine months ended October 31, 2000 compared to $95.4 million for
the nine months ended October 31, 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 43% and net revenue from the Americas
increased 14% over the comparable prior year period. These increases offset the
lower increase 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 the nine months ended October
31, 2000 over the comparable period in fiscal 2000.
Our airfreight forwarding net revenue expressed as a percentage of our
airfreight forwarding gross revenue decreased by 2 percentage points in the nine
months ended October 31, 2000 compared to the comparable 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 $7.1 million, or 22%, to $39.0
million for the nine months ended October 31, 2000 compared to $31.9 million for
the nine months ended October 31, 1999. The increase was principally due to
increases in shipments from Asia Pacific predominately to the United States.
Ocean freight forwarding net revenue for the entire Asia Pacific region
increased by 22% primarily as a result of our strategy to increase volumes in
the Asia to North America route.
Customs brokerage net revenue increased $14.3 million, or 49%, to $43.5 million
for the first three quarters of fiscal 2001 compared to $29.2 million for the
comparable period in fiscal 2000. Customs brokerage net revenue increased as a
result of an increase in shipments and our acquisitions of customs brokers
during the last quarter of fiscal 2000 and during the nine months ended October
31, 2000. We estimate that acquisitions of these customs brokers contributed
$6.3 million of customs brokerage net revenue for the same period.
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EXHIBIT 99.3 FISCAL 2001 THIRD QUARTER RESULTS WITH COMMENTARY
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Other net revenue, which includes revenue from our other specialized services
including postponement warehousing and customized distribution services,
increased $10.6 million, or 44%, to $34.7 million for the nine months ended
October 31, 2000 compared to $24.1 million for the nine months ended October 31,
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 $22.2 million, or 25%, to $111.7 million for the nine
months ended October 31, 2000 from $89.5 million for the nine months ended
October 31, 1999. However, staff costs stayed constant when expressed as a
percentage of net revenue, at 50% in both of the nine-month periods ended
October 31, 2000 and 1999. 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 $1.1 million, or 21%, over the comparable
period in the prior year to $6.7 million in the nine months ended October 31,
2000 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 nine months ended October 31, 2000 versus the
comparable period of the prior fiscal year.
Amortization increased by $1.2 million, or 53%, to $3.6 million in the nine
months ended October 31, 2000 as a result of the acquisitions we made in the
last quarter of fiscal 2000 and the related goodwill being amortized for a full
year, as well as the amortization of goodwill relating to the acquisitions
completed during the nine months ended October 31, 2000. To date, our
acquisitions have been accounted for using the purchase method of accounting and
the related goodwill is amortized over a period generally not exceeding 20
years. Amortization expressed as a percentage of net revenue increased to 2% in
the nine months ended October 31, 2000 from 1% in the nine months ended October
31, 1999.
Other operating expenses increased by $12.9 million, or 19%, to $79.5 million in
the nine months ended October 31, 2000. Included in other operating expenses for
the nine months ended October 31, 2000 are facilities and communications costs
of $25.7 million compared to $19.9 million of such costs for the comparable
period of fiscal 2000. Facilities and communications costs increased primarily
because of the addition of new locations and a general increase in business
activity during the nine months ended October 31, 2000 compared to the nine
months ended October 31, 1999. The balance of other operating expenses is
comprised of selling, general and administrative costs. For the nine months
ended October 31, 2000, selling, general and administrative costs were $53.8
million compared to $46.7 million for the nine months ended October 31, 1999.
The increase in selling, general and administrative costs for the nine months
ended October 31, 2000 compared to the comparable period in fiscal 2000 was as a
result of a general increase in business activity for the nine months ended
October 31, 2000 compared to the nine month period ended October 31, 1999. When
expressed as a percentage of net revenues, other operating expenses decreased
from 37% for the nine months ended October 31, 1999 compared to 35% for the nine
months ended October 31, 2000.
Finance costs, which consisted of interest on our credit facilities and capital
finance lease obligations, future acquisition installments and a foreign
exchange loss, increased $1.1 million or 28%, to $4.8 million for the nine
months ended October 31, 2000 from $3.7 million for the nine months ended
October 31, 1999. When expressed as a percentage of net revenue, finance costs
were unchanged at 2% in the nine months ended October 31, 2000 compared to the
nine months ended October 31, 1999.
Income from associates and other investments remained consistent at $2.3 million
for the nine months ended October 31, 2000 and 1999.
The effective income tax rate increased to 24% in the nine months ended October
31, 2000 compared to 8% in the nine months ended October 31, 1999. Our overall
tax rate is impacted by the geographic composition of our
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EXHIBIT 99.3 FISCAL 2001 THIRD QUARTER RESULTS WITH COMMENTARY
--------------------------------------------------------------------------------
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 the nine months ended
October 31, 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 7% to $14.5 million in the nine months ended October 31,
2000 compared to $13.5 million in the nine months ended October 31, 1999 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 nine months ended October 31, 2000, we generated approximately $18.0
million in net cash from operating activities. This resulted from pretax income
of $20.0 million plus depreciation and amortization totaling $10.3 million and
other non-cash operating expenses of $2.9 million, less a net increase in
working capital of approximately $6.2 million, primarily consisting of an
increase in accounts receivable of $67.9 million offset by an increase in
accounts payable of $62.1 million, and less taxes and interest paid of $4.2
million and $4.8 million, respectively. Our increase in accounts receivable
during the nine months ended October 31, 2000 was approximately $37.7 million
greater than the increase in accounts receivable during the comparable period in
fiscal 2000. Although our accounts receivable increased at a rate which was
proportionately greater than the increase in our gross revenue, our day's sales
outstanding remained constant and there was also a corresponding increase in
accounts payable during the nine months ended October 31, 2000 of approximately
$30.2 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 October
31, 2000.
During the nine months ended October 31, 2000, we used approximately $20.3
million of cash for acquisitions and $10.4 million for capital expenditures. We
received interest during the nine months ended October 31, 2000 of approximately
$1.4 million. Our financing activities during the nine months ended October 31,
2000 provided $21.9 million of cash, primarily due to an increase of $24.4
million in our bank overdrafts and an increase of $5.2 million in other loans
offset by the payment of dividends of $3.1 million and purchase acquisition
installments of $2.7 million. These activities, which were partially offset by
foreign exchange rate changes, resulted in a net increase of our cash and cash
equivalents from $20.8 million at January 31, 2000 to $29.3 million at October
31, 2000.
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 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
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EXHIBIT 99.3 FISCAL 2001 THIRD QUARTER RESULTS WITH COMMENTARY
--------------------------------------------------------------------------------
LIBOR plus 2.75% or the higher of 0.50% plus the base rate as published in the
Wall Street Journal and 0.50% 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. All outstanding amounts
were paid December 6, 2000.
At October 31, 2000, we had capitalized finance lease obligations with a present
value of approximately $10.6 million. These leases are generally repayable over
a period of two to ten years and $1.9 million must be repaid in the 12-month
period ending October 31, 2001.
We have various bank credit facilities established in countries where such
facilities are required for our business. At October 31, 2000 these facilities
provided for lines of credit from approximately $0.1 million to $29.0 million,
and in total provided for guarantees, which are a necessary part of our
business, of $18.7 million and a total borrowing capacity of approximately $75.9
million at October 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 $44.6 million at October 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 October 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 October 31, 2000, we had approximately $31.3
million of available, unused borrowing capacity under our bank credit
facilities.
Following the end of the quarter, in November 2000, the Company completed a
public offering of 4,700,000 shares of its ordinary shares. An additional
705,000 shares were issued when the underwriters exercised their over-allotment
options. Net proceeds to the company from the public offering totaled
approximately $73.4 million (after underwriting discounts and commissions and
estimated transaction expenses). We have used approximately $14.1 million of the
net proceeds to repay the debt incurred with the acquisition of Continental. We
are in the process of using approximately $21.0 million of the net proceeds to
repay existing debt under various credit facilities, which we intend to complete
by January 31, 2000. Pending application of the net proceeds, we invested the
balance of these net proceeds in interest-bearing investments until the funds
are utilized for strategic investments in and acquisitions of businesses and
information technology and other corporate, general and administrative expenses.
We believe that with our current cash position, various bank credit facilities
and operating cash flows, we should have sufficient means to meet our working
capital and liquidity requirements for the foreseeable future.
OTHER INFORMATION
EBITDA increased $8.3 million, or 34%, to $32.8 million for the nine months
ended October 31, 2000, compared to $24.5 million for the nine months ended
October 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 all companies do not calculate EBITDA identically, 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
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EXHIBIT 99.3 FISCAL 2001 THIRD QUARTER RESULTS WITH COMMENTARY
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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.
U.S. GAAP RECONCILIATION
Although our discussion and analysis of our financial condition and results of
operations is based on our financial statements prepared in accordance with IAS,
we believe that it is useful to present a reconciliation of our financial
results to those that would have been presented in accordance with U.S. GAAP.
The details of this reconciliation are in Note 5 to our unaudited consolidated
financial statements and the more significant differences are summarized in the
paragraphs below. Additionally, we have attached our condensed consolidated
statements of operations and balance sheets prepared in accordance with U.S.
GAAP to this commentary as Attachments A and B.
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 $1.4 million as at October 31, 2000 and January 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 $0.5 million and $0.2 million for the
third quarter ended October 31, 2000 and 1999, respectively, and lower
shareholders' equity of $2.6 million as of October 31, 2000. For the nine month
periods ended October 31, 2000 and 1999, 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 $1.2 million and $0.9 million, respectively.
COMPENSATION COST
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 $3.7
million and $1.3 million for the nine months ended October 31, 2000 and 1999,
respectively. In the third quarter of fiscal 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, included in the
figures above.
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.
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 October 31, 2000 of $1.0 million under U.S.
GAAP as compared to IAS.
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EXHIBIT 99.3 FISCAL 2001 THIRD QUARTER RESULTS WITH COMMENTARY
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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.
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.
As of October 31, 2000, there had been no material changes in our exposure to
market risks since January 31, 2000 as described in our Form F-1 on file with
the SEC.
RISK FACTORS
The following risk factors should be read in conjunction with the risk factors
contained in our Form F-1 on file with the SEC.
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:
o personnel costs,
o timing and magnitude of capital expenditures,
o costs relating to the expansion of operations,
o costs and revenue fluctuations due to acquisitions,
o customer discounts and credits,
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EXHIBIT 99.3 FISCAL 2001 THIRD QUARTER RESULTS WITH COMMENTARY
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o changes in our pricing policies or those of our competitors,
o 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,
o economic conditions specific to our industry, as well as general
economic conditions, including adverse economic conditions in specific
regions or countries which we serve,
o pricing and availability of cargo space on airlines, ships and trucks
which we utilize to transport freight, and
o currency fluctuations.
These factors, and others, may materially adversely affect our operating
results.
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.
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.
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EXHIBIT 99.3 FISCAL 2001 THIRD QUARTER RESULTS WITH COMMENTARY
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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 THAT 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 that 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.
We also face competition from Internet-based freight exchanges that 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.
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EXHIBIT 99.3 FISCAL 2001 THIRD QUARTER RESULTS WITH COMMENTARY -- ATTACHMENT A
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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 2000 AND 1999
Prepared in Accordance with Accounting Principles
Generally Accepted in the United States
(US$000's, except share and per share amounts)
<TABLE>
<CAPTION>
Three months ended Nine months ended
October 31, October 31,
---------------------------- ----------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Gross revenue:
Airfreight forwarding ........... $ 135,465 $ 111,725 $ 354,279 $ 295,707
Ocean freight forwarding ........ 67,730 57,898 186,235 156,259
Customs brokerage ............... 16,670 10,859 46,193 29,804
Other ........................... 20,901 16,080 56,044 42,789
----------- ----------- ----------- -----------
Total gross revenue ........... $ 240,766 $ 196,562 $ 642,751 $ 524,559
=========== =========== =========== ===========
Net revenue:
Airfreight forwarding ........... $ 39,415 $ 35,371 $ 106,747 $ 95,374
Ocean freight forwarding ........ 14,908 11,119 38,991 31,906
Customs brokerage ............... 15,698 10,398 43,516 29,172
Other ........................... 12,764 8,532 34,664 24,123
----------- ----------- ----------- -----------
Total net revenue ............. 82,785 65,420 223,918 180,575
Staff costs ....................... 42,320* 31,568 115,404* 90,795
Depreciation ...................... 2,461 1,942 6,716 5,570
Amortization ...................... 1,323 816 3,200 1,861
Other operating expenses .......... 28,682 22,787 79,473 66,548
----------- ----------- ----------- -----------
Operating profit .................. 7,999 8,307 19,125 15,801
Interest expense, net ............. (856) (50) (2,516) (783)
Gains/(losses) on foreign exchange 237 80 870 (295)
----------- ----------- ----------- -----------
Pretax income ..................... 7,380 8,337 17,479 14,723
Income tax expense ................ (2,252) (731) (4,831) (1,279)
----------- ----------- ----------- -----------
Net income before minority interest 5,128 7,606 12,648 13,444
Minority interest ................. (305) (50) (705) (357)
----------- ----------- ----------- -----------
Net income ........................ $ 4,823* $ 7,556 $ 11,943* $ 13,087
=========== =========== =========== ===========
Basic earnings per ordinary share . $ 0.25 $ 0.52** $ 0.68 $ 0.88**
Diluted earnings per ordinary share $ 0.24* $ 0.39 $ 0.61* $ 0.68
Number of shares used for per share
calculations:
Basic shares .................... 19,188,004 14,197,231 17,561,163 14,226,425
Diluted shares .................. 19,693,224 19,292,043 19,615,792 19,321,237
</TABLE>
---------------
* Staff costs include a non-cash charge of $2.3 million in the three and nine
months ended October 31, 2000. This relates to the previously disclosed
third quarter distribution from a stock award plan of ordinary shares to
certain employees for past services. The third quarter distribution from
this stock award plan was the final distribution for the plan. Without this
non-cash charge, the net income for the three and nine months ended October
31, 2000 was $7.1 million and $14.2 million, respectively, and diluted
earnings per share were $0.36 and $0.72, respectively.
** Includes the effect of preference dividends of $183,000 and $548,000 for
the three and nine months ended October 31, 1999, respectively.
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EXHIBIT 99.3 FISCAL 2001 THIRD QUARTER RESULTS WITH COMMENTARY - ATTACHMENT B
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UNAUDITED CONSOLIDATED BALANCE SHEETS
AS OF OCTOBER 31, 2000 AND AS OF JANUARY 31, 2000
Prepared in Accordance with Accounting Principles Generally
Accepted in the United States
(US$000's)
October 31, January 31,
2000 2000
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents ............... $ 29,330 $ 20,760
Trade and other receivables, net ........ 235,108 183,083
-------- --------
Total current assets ...................... 264,438 203,843
Property, plant and equipment, net ........ 34,148 33,558
Goodwill, net ............................. 60,018 41,436
Investments ............................... 628 1,043
Deferred tax assets ....................... 2,564 3,630
Other non-current assets .................. 4,205 4,588
-------- --------
Total assets .............................. $366,001 $288,098
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings ................... $ 44,599 $ 20,158
Finance lease obligations ............... 1,886 2,179
Trade and other payables ................ 192,475 142,229
Tax liabilities ......................... 3,042 2,608
-------- --------
Total current liabilities ................. 242,002 167,174
Long term liabilities:
Finance lease obligations ............... 8,691 10,504
Long-term borrowings .................... 546 393
Deferred tax liabilities ................ 2,225 2,796
Retirement fund obligations ............. 599 646
-------- --------
Total long term liabilities ............... 12,061 14,339
Minority interest ......................... 1,946 1,571
Commitments and contingencies
Shareholders' equity:
Issued capital .......................... 131,218 127,487
Distributable reserves .................. 12,157 214
Non-distributable reserves .............. 556 709
Accumulated other comprehensive income:
Cumulative foreign exchange translation
adjustment .......................... (33,939) (23,396)
-------- --------
Total shareholders' equity ................ 109,992 105,014
-------- --------
Total liabilities and shareholders' equity $366,001 $288,098
======== ========
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