<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended March 31, 1995
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-8664
The Harper Group
(Exact name of registrant as specified in its charter)
Delaware 94-1740320
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
260 Townsend Street,
San Francisco, California 94107
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 978-0600
Inapplicable
(Former name, former address and former fiscal year if changed from
last report.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No __
At May 4, 1995 the number of shares outstanding of the registrant's
common stock was 16,142,916.
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TABLE OF CONTENTS
Part I. Financial Information Page
Item 1.Financial Statements:
Condensed Consolidated Income Statements
for the three months ended March 31, 1995
and 1994 3
Condensed Consolidated Balance Sheets,
March 31, 1995 and December 31, 1994 4
Condensed Consolidated Statements of
Cash Flows for the three months ended
March 31, 1995 and 1994 5
Notes to Condensed Consolidated
Financial Statements 6
Item 2.Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II.Other Information
Item 6.Exhibits and Reports on Form 8-K 9
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I. FINANCIAL INFORMATION
Item 1. Financial Statements
THE HARPER GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS
(unaudited, in thousands, except per share amounts)
Three Months Ended
March 31,
1995 1994
Revenue $ 125,943 $ 103,226
Freight consolidation costs 74,834 58,127
--------- ---------
Net revenue 51,109 45,099
Other costs and expenses:
Salaries and related 28,220 24,856
Operating, selling and
administrative 17,875 16,412
--------- ---------
Total other costs and expenses 46,095 41,268
Income from operations 5,014 3,831
--------- ---------
Other income-net 667 816
Income before taxes on income 5,681 4,647
--------- ---------
Taxes on income 2,141 1,627
--------- ---------
Net income $ 3,540 $ 3,020
========= =========
Net income per share $ 0.22 $ 0.18
========= =========
Weighted average shares outstanding 16,138 16,627
========= =========
See Notes to Condensed Consolidated Financial Statements
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THE HARPER GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except per share amounts)
March 31 December 31
1995 1994
ASSETS
Current assets:
Cash and equivalents $ 21,014 $ 18,135
Short-term marketable securities
- at cost, approximates market 3,091 2,126
Accounts receivable (net of
allowance for doubtful accounts
of $4,295 in 1995 and $4,414
in 1994) 162,871 153,664
Other current assets 6,272 4,791
------- -------
Total current assets 193,248 178,716
Property 146,633 142,450
Less accumulated depreciation (55,900) (55,032)
------- -------
Property-net 90,733 87,418
Marketable securities 41,823 41,660
Other assets 19,200 16,670
-------- --------
Total assets $345,004 $324,464
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 13,622 $ 14,385
Accounts payable 108,861 93,384
Accrued liabilities 24,210 28,273
------- -------
Total current liabilities 146,693 136,042
Deferred income taxes 6,187 5,206
Long-term notes payable 32,901 31,867
Commitments and contingencies - -
Stockholders' equity:
Preferred stock, $1 par: shares
authorized, 1,000 - -
Common stock, $1 par: shares
authorized, 40,000; shares
issued and outstanding:March 31,
1995, 16,143;December 31, 1994,
16,133 18,729 18,600
Retained earnings 143,603 140,063
Unrealized change in value of
marketable securities (1,882) (2,657)
Cumulative translation adjustments (1,227) (4,657)
------- -------
Total stockholders' equity 159,223 151,349
------- -------
Total liabilities and
stockholders' equity $345,004 $324,464
======= =======
See Notes to Condensed Consolidated Financial Statements
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THE HARPER GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Three Months Ended
March 31
1995 1994
Operating activities:
Net income $ 3,540 $ 3,020
Adjustments to reconcile
net income to net cash
provided by operating activities:
Depreciation and amortization 2,378 2,850
Net effect of changes in
working capital 2,532 (2,342)
Other 341 (231)
Net cash provided by -------- --------
operating activities 8,791 3,297
-------- --------
Investing activities:
Capital expenditures (2,910) (3,807)
Proceeds from sales of
marketable securities - 7,925
Purchases of marketable
securities - (12,892)
Proceeds from sales of fixed assets 65 -
Acquisition of business (2,219) -
Other (132) 37
Net cash used in investing -------- --------
activities (5,196) (8,737)
-------- --------
Financing activities:
Issuance of long-term notes
payable - net 1,034 5,025
Increase (decrease) in
notes payable (763) 839
Payments of dividends (1,775) (1,663)
Other 129 (177)
-------- --------
Net cash (used) provided by
financing activities (1,375) 4,024
-------- --------
Effect of exchange rate
changes on cash 659 (308)
Increase (decrease) in cash
and equivalents 2,879 (1,724)
-------- --------
Cash and equivalents at
beginning of year 18,135 11,302
-------- --------
Cash and equivalents at
end of period $ 21,014 $ 9,578
======== ========
Cash paid for interest
expense $ 1,015 $ 245
Cash paid for income taxes $ 2,615 $ 67
See Notes to Condensed Consolidated Financial Statements
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1 - General
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements include all adjustments (which
include normal recurring accruals) necessary to present fairly the
financial position as of March 31, 1995 and the results of
operations and cash flows for the periods presented in conformity
with generally accepted accounting principles. It is suggested
that these unaudited condensed consolidated financial statements be
read in conjunction with the audited consolidated financial
statements and notes thereto included in the Harper Group, Inc.
(the Company) 1994 Annual Report to Stockholders incorporated by
reference in the Company's 1994 Form 10-K, and Management's
Discussion and Analysis of Financial Condition and Results of
Operations included elsewhere in this Form 10-Q.
Note 2 - Federal Tax Litigation
The United States Internal Revenue Service issued a notice of
deficiency with respect to the Company's income tax liabilities for
the years ended 1986 and 1987 asserting an aggregate liability for
tax of approximately $7.9 million. The Company subsequently filed
a petition in the U.S. Tax Court contesting all of the asserted
deficiency, and made a partial payment of tax. Settlement
negotiations with the Internal Revenue Service have now been
concluded with respect to this matter. Under the terms of the
proposed settlement, the Company would be entitled to receive a net
refund of approximately $300,000. However, there has been no final
settlement because the matter has been held in abeyance pending
resolution of the Company's refund proposals arising out of its
1992 writeoffs.
The Company is engaged in discussions with the Internal Revenue
Service with respect to federal income tax refunds arising out of
the 1992 writeoffs involving approximately $9 million of tax. It
is not possible to predict at this time the extent to which the
Internal Revenue Service will agree with the Company's proposed
income tax refunds, or the effect upon the settlement of the issues
in the Company's tax years 1986 and 1987.
The Internal Revenue Service has issued a notice of proposed
deficiency with respect to tax years 1988 and 1989 proposing to
assert deficiencies in tax and penalties in the aggregate amount of
approximately $9.9 million. The Company has agreed to adjustments
that will result in a deficiency in tax in the amount of
approximately $500,000 for 1988 and has filed a protest with
respect to the remaining unagreed proposed deficiency. Because of
the number and complexity of the issues involved, resolution of the
issues may require a number of years. Management believes that the
ultimate resolution of these matters will not have a material
adverse effect on the Company's financial position or results of
operations.
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Note 3 - Business Segment Information
The Company operates in the international freight forwarding industry, which
encompasses air freight forwarding, customs brokerage and other, as well as
ocean freight forwarding. Certain information regarding the Company's
operations by region is summarized below.
North Far Latin Other Elimi- Consol-
America Europe East America Areas Corporate nations idated
(in thousands)
Three months ended March 31, 1995:
Revenue from
customers $70,662 $24,718 $20,044 $ 4,868 $ 5,651 $ 0 $ 0 $125,943
Transfers between
regions 1,189 309 489 418 286 0 (2,691) 0
Total
revenue $71,851 $25,027 $20,533 $ 5,286 $ 5,937 $ 0 $(2,691) $125,943
Net
revenue $25,174 $13,837 $ 5,243 $ 2,312 $ 4,543 $ 0 $ 0 $ 51,109
Income (loss)
from
operations$ 4,480 $ 1,941 $ 523 $ 517 $ 950 $ (3,397)$ 0 $ 5,014
Three months ended March 31, 1994:
Revenue from
customers $55,425 $16,847 $21,433 $ 4,944 $ 4,577 $ 0 $ 0 $103,226
Transfers between
regions 649 595 562 424 251 0 (2,481) 0
Total
revenue $56,074 $17,442 $21,995 $ 5,368 $ 4,828 $ 0 $(2,481) $103,226
Net
revenue $23,601 $10,821 $ 5,178 $ 1,878 $ 3,621 $ 0 $ 0 $ 45,099
Income (loss) from
operations$ 4,116 $ 1,522 $ 965 $ 454 $ 666 $ (3,892)$ 0 $ 3,831
Revenue from transfers between regions represents approximate
amounts that would be charged if the services were provided by an
unaffiliated company. Total regional revenue is reconciled with
total consolidated revenue by eliminating inter-regional revenue.
Regional income (loss) from operations excludes overhead charges.
Prior period amounts have been reclassified to conform to the 1995
presentation.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company's principal services are international air freight
forwarding, ocean freight forwarding, and customs brokerage and
other logistics services. The following table shows the revenue
and net revenue, in dollars and percentages, attributable to the
Company's principal services during the periods indicated. Revenue
for air freight and ocean freight consolidations (indirect revenue)
includes the cost of such freight. Revenue for air freight and
ocean freight agency or direct shipments, customs brokerage and
import services, includes fees or commissions for these services.
A comparison of net revenue best measures the relative importance
of the Company's principal services.
Three Months Ended
March 31
1995 1994
(dollars in thousands)
Revenue
Air freight forwarding $ 82,877 66% $ 69,213 67%
Ocean freight forwarding 19,663 16 18,001 17
Customs brokerage
and other 23,403 18 16,012 16
------------ ------------
$125,943 100% $103,226 100%
============ ============
Net Revenue
Air freight forwarding $ 21,007 41% $ 20,806 46%
Ocean freight forwarding 6,699 13 8,281 18
Customs brokerage
and other 23,403 46 16,012 36
------------ -----------
$ 51,109 100% $45,099 100%
============ ===========
Results of Operations
Three Months ended March 31, 1995 vs 1994:
Revenue increased in 1995 by 22% to $125.9 million from $103.2
million reported in 1994.
Air freight revenue increased 20% as a result of increased
shipments, weight per shipment and revenue per shipment. These
revenue increases occurred primarily in North America, Europe and
the Far East.
Ocean freight revenue increased 9% as a result of increased
shipments and revenue per shipment.
Customs brokerage and other, which includes warehousing and
distribution services, increased 46% as a result of increased
customs entries in North America and Europe, and increases in
warehousing and distribution services.
Net Revenue increased in 1995 by 13% to $51.1 million from $45.1
million.
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Air freight net revenue increased 1% as a result of increased
shipments and weight per shipment offset by increased freight
costs.
Ocean freight net revenue decreased 19% as a result of increased
freight costs related to a change in business mix towards ocean
consolidations.
Salaries and related costs increased as a result of more employees
at slightly higher rates in the first quarter of 1995 compared to
1994.
The increase in administrative and selling costs reflects an
increase in communication costs resulting primarily from higher
transaction volume.
The decrease in other income-net results primarily from fewer
foreign exchange gains in the first quarter of 1995 than in 1994.
Liquidity and Capital Resources
Capital expenditures for the Company for the three months ended
March 31, 1995 were $3 million. Total anticipated capital
expenditures for the year are approximately $12 million.
In April 1995, the Company purchased 57,500 shares of its common
stock at a total cost of $985,000 with prices ranging from $17.00
to $18.25 per share.
Management believes that operating cash flow, the Company's current
financial structure and borrowing capacity will be adequate to fund
its operations, finance capital expenditures, and pay dividends to
stockholders.
II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: Exhibit 27, Financial Data Schedule, Page 11, EDGAR
filing only.
(b)Form 8-K: No reports on Form 8-K were filed during the three
months ended March 31, 1995.
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S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
THE HARPER GROUP, INC.
Registrant
Dated: May 11, 1995
/S/Peter Gibert
Peter Gibert, President and Chief
Executive Officer
/S/Robert J. Diaz
Robert J. Diaz, Senior Vice President and
Chief Financial Officer
/S/Michael L. French
Michael L. French, Vice President and
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Harper Group Inc., and Subsidiaries - Financial Data Schedule
(in thousands except per share amounts)
This schedule contains summary financial information extracted from
the condensed consolidated financial statements from the Company's
form 10-Q for the quarterly period ending March 31, 1995, and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> MAR-31-1995
<CASH> 21014
<SECURITIES> 44914
<RECEIVABLES> 167166
<ALLOWANCES> 4295
<INVENTORY> 0
<CURRENT-ASSETS> 193248
<PP&E> 146633
<DEPRECIATION> 55900
<TOTAL-ASSETS> 345004
<CURRENT-LIABILITIES> 146693
<BONDS> 0
0
0
<COMMON> 18729
<OTHER-SE> 140494
<TOTAL-LIABILITY-AND-EQUITY> 345004
<SALES> 0
<TOTAL-REVENUES> 125943
<CGS> 0
<TOTAL-COSTS> 74834
<OTHER-EXPENSES> 46095
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