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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended Commission File Number
December 31, 1994 0-8664
THE HARPER GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-1740320_______
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
260 Townsend Street, San Francisco, California 94107-0933_______
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 978-0600
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered____
None None___________
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Common Stock, $1.00 par value
Rights to Purchase Series A Junior Participating Preferred Stock
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X . No .
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [ ]
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At March 22, 1995, the aggregate market value of the registrant's
Common Stock held by non-affiliates of the registrant was
approximately $214,878,294.
At March 22, 1995, the number of shares outstanding of registrant's
Common Stock was 16,142,916.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement dated April 3, 1995 - Part III of this Form 10-K;
Annual Report to Stockholders for year ended December 31, 1994 -
Part II of this Form 10-K.
The Exhibit Index is located on Pages 35 through 38 hereof.
PART I
Item 1 - Business
General
The Harper Group, Inc. ("the Company") is a leader in providing
transportation and integrated logistics services for the
international movement of goods and the furnishing of value-added
information and inventory management services to customers
worldwide. The Company is principally engaged in international air
and ocean freight forwarding, customs brokerage and integrated
logistics. The Company provides value-added services in addition
to those customarily provided by traditional air freight
forwarders, ocean freight forwarders and customs brokers. These
services are designed to provide global logistics solutions for
customers in order to streamline their supply chain, reduce their
inventories, improve their logistics information, enhance their
profitability and to provide them with more efficient and effective
international transportation strategies.
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The Company's global array of services is designed to benefit
customers by reducing overall international freight logistics costs
and increasing the speed and reliability of the deliveries of goods
worldwide. These logistics services include: air/ocean export and
import freight transportation; worldwide customs brokerage, Free
Trade Zone management and associated services; global freight
tracking; electronic data interchange ("EDI"); warehousing and
distribution services; inventory management; materials requirement
planning; logistics management; intermodal transport; protective
cargo packing; bonded warehousing; project cargo management; and
marine insurance (ocean and air coverage).
The Company's global services are supplied through its network of
over 300 offices and distribution centers located in approximately
45 countries on six continents. These facilities are linked by the
Company's real-time, on-line communications network that speeds the
two-way flow of shipment data and related logistics information
between origins and destinations around the world. In addition to
its own operations, the Company utilizes a network of overseas
agents for comprehensive, global coverage of major trade centers.
The Company commenced operations in 1898, was incorporated in
California in 1970, and reincorporated in Delaware in 1987. Until
December 31, 1993, its operating subsidiaries in the United States
included Circle Airfreight Corporation, Inc., its
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principal international air freight subsidiary, Harper Robinson &
Co., Inc., its principal international ocean freight and customs
brokerage subsidiary; Max Gruenhut International, Inc., a full
service air/ocean import and export firm; and Darrell J. Sekin and
Co. ("Sekin"), a full service firm engaged in air and ocean freight
forwarding and customs brokerage.
Effective January 1, 1994, Circle Airfreight Corporation, Inc. and
Max Gruenhut International, Inc. were merged into Harper Robinson
& Co., Inc., which was renamed Circle International, Inc. These
domestic operating subsidiaries were unified in order to achieve
economic and service efficiencies, to provide a common set of
standards and procedures, and to improve the sale and marketing of
the Company's integrated services. Internationally, the Company
continues to operate a number of subsidiaries under the names
"Circle Freight International" and "Max Gruenhut", in addition to
the name "Circle International". Unless the context otherwise
requires, references to the Company or Harper include The Harper
Group, Inc. and its subsidiaries.
Certain information regarding the Company's operations by regions
for the three years ended December 31, 1994, is incorporated by
reference to Note 11 of the Notes to Consolidated
Financial Statements in the 1994 Annual Report to Stockholders.
The following tables show the approximate amounts of revenue and
net revenue, expressed in dollars and as a percentage, attributable
to the Company's principal services during the three
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years ended December 31, 1994. Revenue from air and ocean freight
forwarding, where the Company acts in the capacity of a
consolidator of shipments, includes all transportation charges to
the customer. Revenue from air and ocean freight forwarding, where
the Company acts in the capacity of a cargo agent, includes only
the commissions charged to carriers and forwarding and related fees
charged to customers. Revenue earned by the Company as a customs
broker includes commissions and fees charged to customers for those
services. Net revenue for air and ocean freight forwarding, which
is the equivalent of gross margin in other industries, is
determined by deducting any freight consolidation costs from
freight forwarding revenue. In the opinion of management, net
revenues provide a more accurate measure than revenue of the
relative importance of the Company's principal services.
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Year Ended December 31,
1994 1993 1992
(Dollars in thousands)
REVENUE:
Air freight
forwarding $313,012 67% $282,031 66% $272,159 63%
Customs brokerage 77,694 16% 62,066 14% 66,692 15%
Ocean freight
forwarding 78,842 17% 85,841 20% 92,817 22%
Total $469,548 100% 429,938 100% $431,668 100%
Year Ended December 31,
1994 1993 1992
(Dollars in thousands)
NET REVENUE:
Air freight
forwarding $ 87,467 45% $86,322 47% $ 89,919 46%
Customs brokerage 77,694 40% 62,066 34% 66,692 34%
Ocean freight
forwarding 28,978 15% 34,065 19% 38,089 20%
Total $194,139 100% 182,453 100% $ 194,700 100%
Recent Developments
The unification of the three domestic operating subsidiaries
referred to above resulted in a consolidated, focused market
identity for the Company's operating units and its products. The
consolidation of previously separate branch offices, accounting
systems and job responsibilities continued during 1994 as well.
New full-service warehouse and distribution facilities were
completed in 1994 in Los Angeles, Chicago and Penang, resulting in
the ability to offer additional services in these
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locations, and in the consolidation of multiple offices in these
locations.
The Company continuously enhances its information systems
capabilities in order to meet its customers changing needs and to
provide first-class information transmission and management
services. The Company has been a leader in providing its customers
with global shipment tracking and tracing capabilities and with
providing data and reports to better manage the global logistics
process. In 1994, the Company implemented the first stage of its
new computer architecture, "Circle Logistics Advanced Systems
Solutions", known as CLASS, which operates in a distributive
processing environment rather than a single mainframe computing
environment. The first module implemented manages ocean shipments
and allows for the easy, automated preparation of over 15 shipping
documents and provides a user friendly menu-driven system. Further
integration and enhancements to CLASS are expected to be
implemented in 1995 for the Company's customs brokerage business.
The Company intends to link future development of its information
systems to the specific requirements of its customers and seeks to
connect its customers to its information systems whenever possible.
During 1994, management continued to focus its efforts on the
Company's operations, including its information and accounting
systems, and on seeking to protect and improve its market share
with enhanced product development, additional
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information technology solutions for customers, and an improved
sales and marketing program.
International Air Freight Forwarding
The Company believes that it is one of largest forwarders of
international air freight in the United States. The Company's air
freight forwarding and related logistics services include: inland
transportation of freight from point of origin to distribution
center or the carrier's cargo terminal; warehousing; cargo
assembly; export packing and vendor shipment consolidation; global
freight forwarding; charter arrangement and handling; electronic
transmittal of logistics documentation; electronic purchase
order/shipment tracking; expedited document delivery to overseas
destinations for customs clearance; and priority notification to
shipper and consignee of cargo arrival. In addition, the Company
continues to expand the scope of its services, including such areas
as logistics services for commercial and governmental projects,
inventory management, material requirements planning, EDI and cargo
insurance. The Company does not own or operate aircraft, which
enables the Company to tailor its services to customer
requirements.
As a global air freight forwarder, the Company is both a
consolidator of air freight shipments (an indirect air carrier) and
an airline cargo agent. The following table provides certain
information concerning the Company's air freight forwarding
business during each of the three years ended December 31, 1994.
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Year Ended December 31,
1994 1993 1992
(In thousands except per shipment data)
AS INDIRECT CARRIER:
Revenue (1) $296,464 $262,915 $250,925
Revenue net of
air freight consol-
idation
costs (1) $ 70,919 $ 67,206 $ 68,685
Number of shipments 347 347 336
Net revenue per
shipment $ 204.38 $193.68 $ 204.42
Weight in kilos 106,571 95,863 85,627
Kilos per shipment 307.12 276.26 254.84
Year Ended December 31,
1994 1993 1992
(In thousands except per shipment data)
AS AIRLINE AGENT:
Revenue (1) $ 16,548 $ 19,116 $21,234
Number of
shipments 117 127 124
Net revenue per
shipment $ 141.44 $ 150.52 $171.24
Weight in kilos 29,565 33,420 31,287
Kilos per
shipment 252.69 263.15 252.31
(1) Management believes that revenue net of air freight
consolidation costs is a better measure than revenue of the
relative importance of the two types of air freight forwarding
service offered by the Company because net revenue, like revenue
earned by the Company as an airline agent, does not include the
carrier's charge to the Company for carrying the shipment.
During 1994, the Company's principal air freight forwarding
customers were shippers of computer, electronic and high technology
equipment, machinery and machine parts, consumer goods, clothing,
pharmaceuticals, chemicals, and aerospace equipment.
The air freight forwarding business of the Company is not dependent
on any one customer or industry. The Company provides services to
global or multinational customers, as well as
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regional customers. During 1994, the Company had in excess of
7,000 air freight forwarding customers, and no customer accounted
for more than 5% of the Company's net air freight forwarding
revenue.
Indirect Air Carrier. As an indirect air carrier, the Company
procures shipments from its customers, consolidates shipments bound
for a particular destination, determines the routing, selects the
direct carrier (an airline) with which the consolidated lot is to
move and tenders each consolidated lot as a single shipment to the
direct carrier for transportation to a destination. At the
destination the Company or its agent receives the consolidated lot,
breaks it into its component shipments and distributes the
individual shipments. During 1994, the Company derived
approximately 81% of its net air freight forwarding revenue from
its services as an indirect air carrier.
The Company's rates are based on a per kilo charge that generally
decreases within a certain range as the weight of the shipment
increases. The Company ordinarily charges the shipper a rate less
than the rate which the shipper would be charged by an airline.
The rates that airlines charge to forwarders and others also
generally decrease as the weight of the shipment increases. As a
result of the consolidation of its customers' shipments, the
Company generally obtains lower rates per kilo from airlines than
the rates it charges its customers for individual shipments. This
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rate differential is the primary source of the Company's net air
freight forwarding revenue. The Company's practice is to make
prompt adjustments in its rates to match changes in airline rates.
As part of its services, the Company prepares documentation
relating to the international movement of goods; provides handling,
packing, and containerizing services; arranges for the routing and
tracing of shipments when necessary; provides physical breakbulk,
delivery and inland transportation services; and arranges for
freight insurance. Another source of the Company's net air freight
forwarding revenue is the fees which the Company charges for
services related to the movement of goods, which include
computer-prepared shipment documentation; expedited delivery of air
waybills, packing lists, commercial invoices, and other documents;
and electronic shipment tracking and tracing. The Company offers
its customers access to its global on-line computer information
system, which acts as a comprehensive source of vital information
for its customers.
During 1994, approximately 49% of the Company's net air freight
forwarding revenue as an indirect carrier was attributable to
shipments originating in the United States and terminating abroad.
As measured by net air freight forwarding revenue earned as an
indirect carrier, the Company's principal regions of destination in
1994 were Europe, Asia, South America, and Australia/New Zealand.
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By accepting goods for air shipment, the Company assumes the role
of a carrier and becomes responsible to the shipper for the safe
delivery of the shipment, subject to a legal limitation on
liability of $20.00 per kilo. Because the Company's relationship
to the airline is also that of a shipper to a carrier, the airline
generally assumes the same responsibility to the Company as the
airline assumes to its other customers. The Company obtains, for
the benefit of its customers, cargo insurance covering such cargo
for $20.00 per kilo or such higher amount as the customer may
designate.
Airline Agent. As an authorized cargo sales agent of most airlines
worldwide, the Company arranges for the transportation of
individual shipments and receives from the airline a commission for
arranging the shipment. In addition, the Company provides the
shipper with ancillary services such as export documentation for
which it receives a separate fee. When acting in this capacity,
the Company does not consolidate shipments or have responsibility
for shipments once they have been tendered to the airline. The
Company conducts its agency air freight forwarding operations from
the same facilities as its indirect carrier operations, and
services the same regions of the world. During 1994, the Company
derived approximately 19% of its net air freight forwarding revenue
from its services as an airline agent.
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Customs Brokerage
The Company functions as a customs broker with respect to entries
of freight into over 35 major destinations in the United States and
in over 120 overseas destinations through its network of offices
and agents.
In its capacity as a customs broker, the Company prepares and files
all formal documentation required for clearance through customs
agencies, obtains customs bonds, in many cases pays import duties
on behalf of the importer, arranges for payment of collect freight
charges, and assists the importer in obtaining the best commodity
classifications and in qualifying for duty drawback refunds. The
Company's customs brokers and support staff have substantial
knowledge of the complex tariff laws and customs regulations
governing the payment of duty, as well as valuation and import
restrictions in their respective countries.
The Company believes that it is a leader in the use of computer
technology for customs brokerage activities on behalf of its
clients. The Company has been a leader in the use of the Automated
Brokerage Interface information system, providing an on-line link
with the United States customs agencies. In several global trading
centers in addition to the United States, the Company's offices are
connected electronically to customs agencies for expedited
pre-clearance of goods and centralized import management. Such
on-line interface with customs agencies speeds
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freight release and provides nationwide control of clearances at
multiple ports and airports of entry.
The Company works with importers to design cost-effective import
programs which utilize the Company's distribution management
services and leading edge computer technology. Such services
include electronic document preparation, routing cargo from
overseas origins to ports and airports of entry, bonded
warehousing, and distribution of the cleared cargo to inland
locations. For consolidated shipments, containers are devanned,
cargo is segregated according to final destination, and goods are
forwarded to final destinations. In many U.S. and overseas
locations, the Company's bonded warehouses enable importers to
defer payment of customs duties and coordinate release of cargo
with their production or distribution schedules. Goods are stored
under Customs Service supervision until the importer is ready to
withdraw or re-export them. The Company receives storage charges
for these in-transit goods and fees for related ancillary services.
The Company also offers Free Trade Zone management and duty
drawback services to provide customers with tools to maintain
cost-effective import programs.
Management estimates that in 1994 the Company handled approximately
250,000 customs entries in the United States. The Company does not
have a fixed fee schedule for customs brokerage services. Instead,
its fees are based on the volume of business transacted for a
particular customer, and the type, number and
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complexity of services provided. In addition to its fees, the
Company bills the importer for amounts which the Company has paid
on the importer's behalf, including duties, collect freight
charges, and similar payments.
As a customs broker operating in the United States, the Company is
licensed by the Treasury Department and regulated by the United
States Customs Service. The Company's fees for acting as a customs
broker in the United States are not regulated.
International Ocean Freight Forwarding
As a global ocean freight forwarder, the Company arranges for the
shipment of freight by ocean carriers and acts as the agent of the
shipper or the foreign importer. The Company's ocean freight
forwarding and related logistics services include inland
transportation from point of origin to distribution facility or
port of export; cargo assembly, packing and consolidation;
warehousing; electronic transmittal of documentation and shipment
tracking; expedited document delivery; pre-alert consignee
notification; and freight insurance.
A number of the Company's facilities provide protective cargo
packing, crating and specialized handling services for retail
goods, government-specification cargo, consumer goods, hazardous
cargo, heavy machinery and assemblies, and perishable cargo. Other
facilities are equipped to handle tons of equipment and material
from multiple origins to overseas "turn-key" projects, such as
manufacturing facilities or government installations. Additionally,
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the Company maintains a Global Projects Division which provides
logistics advice and on-site project assistance to meet the
requirements of project movements. The Company does not own or
operate ships or assume carrier responsibility, preferring the
flexibility to tailor logistics services and options to the
customer's requirements.
The Company's compensation for its ocean freight forwarding
services is derived principally from commissions paid by shipping
lines and from forwarding and documentation fees paid by its
customers, who are either shippers or consignees. In 1994,
approximately 70% of the Company's net ocean freight forwarding
revenue was attributable to commissions, forwarding fees, and
associated ancillary services.
During 1994, more than 15,000 customers utilized the Company's
ocean freight forwarding services worldwide. Although the Company
services a wide variety of shippers, its principal customers are
shippers of industrial and agricultural machinery and equipment,
motor vehicles, computer equipment, clothing, agricultural products
and energy-related equipment.
A majority of the ocean freight shipments forwarded by the Company
originate in the United States, Asia and Europe and terminate in a
foreign port.
Ocean Freight Consolidation.
The Company's global operations as an indirect ocean carrier or
NVOCC (non-vessel operating common carrier) are similar
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in some respects to its air freight consolidation operations. The
Company procures customer freight, consolidates shipments bound for
a particular destination, determines the routing, selects the ocean
carrier or charters a ship, and tenders each consolidated lot as a
single shipment to the direct carrier for transportation to a
distribution point. As a NVOCC, the Company generally derives its
revenue from the spread between the rate specified in a tariff
which it has on file with the Federal Maritime Commission and the
ocean carrier's charge to the Company for carrying the shipment, in
addition to charging for other ancillary services related to the
movement of the freight. Because of the volume of freight
controlled and consolidated by the Company, it is able to obtain
lower rates from ocean carriers than the rate which the shipper
would be able to procure. In 1994, this service, and associated
ancillary services, contributed approximately 30% of the Company's
net ocean freight forwarding revenue.
Insurance
Another transportation service offered to customers is the
arranging of international marine/air cargo insurance in connection
with the Company's air freight and ocean freight forwarding
operations. Insurance coverage frequently is tailored to a
customer's shipping program and is procured for the customer as a
component of the Company's value-added integrated logistics. The
Company also arranges for surety bonds for importers as part of its
customs brokerage activities.
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Warehouse and Distribution Services
The Company offers a full range of customized warehouse and
distribution services in connection with the transportation of
international cargo. Warehouse services are provided in a number
of the Company's owned logistics facilities in many locations
throughout the world, as well as in premises leased from others.
In 1994, the Company completed construction of several warehouse
and distribution facilities which serve as state-of-the-art
facilities offering a wide range of services for customers.
Additional facilities projects in the United States and Europe are
contemplated for 1995. The Company's warehousing and distribution
services include inventory control, import/export freight staging,
material requirements planning, protective and specialized packing
and storage, containerization, consolidation and deconsolidation,
and special handling for perishables, hazardous materials, and
heavy-lift equipment. For import shipments, the Company provides
bonded warehouse services and in certain locations Free Trade Zone
services. These warehouse and distribution services complement the
other transportation services, including information systems tools,
provided by the Company and form part of the total logistics
solutions offered to customers.
Competition and Business Conditions
The Company's principal businesses are directly related to the
volume of international trade, particularly trade between the
United States and other nations. In general, global trading is
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expanding as businesses increasingly seek new sourcing
opportunities and penetrate international markets. The extent of
such trade is influenced by many factors, including economic and
political conditions in the United States and abroad, changes in
supply or manufacturing practices, labor conditions, wars and other
armed conflicts, currency fluctuations and United States and
foreign laws relating to tariffs, trade restrictions, foreign
investments and taxation.
Management believes that the Company is one of the world's largest
international freight forwarders and integrated logistics
providers. In addition to competition from other freight
forwarders and cargo sales agents, the Company encounters
competition from direct carriers which actively solicit freight
from shippers and from integrated transportation companies that
operate their own aircraft and also act as carriers. Other
transportation-related businesses, such as trucking and
distribution companies, have also entered the logistics and freight
forwarding market. In recent years, there has been a trend towards
consolidation in the forwarding industry which, together with
pressure to reduce applicable charges for transportation, has led
to intensified competition and lower operating margins.
Significant competition comes from large domestic and foreign firms
with substantial capital resources which have offices in multiple
global locations, offer a broad array of services and provide
information systems.
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As a customs broker and ocean freight forwarder, the Company
encounters strong competition in every port in which it does
business. The Company has customs brokerage and ocean freight
forwarding offices in most major United States ports, and it
competes with large domestic and foreign firms, as well as local
and regional firms.
For several years the Company has offered to customers multiple
transportation services, other than traditional air and ocean
freight forwarding, in order to meet all of the logistics
requirements of its customers. An extension of its array of
multiple services is the Company's integrated transportation
logistics program under which the Company offers a comprehensive
program which is specifically designed to meet the total
door-to-door transportation requirements of a particular customer
to assist the customer in creating more efficient global sourcing,
inventory and warehousing strategies. The value-added logistics
capabilities which support this strategy use the full-spectrum of
services offered by the Company, including inventory management,
protective packing, vendor coordination, ocean or air
transportation, customs brokerage, and warehouse and distribution.
The Company's transportation logistics program often relies on the
integration of its customers information systems with the Company's
information systems, frequently using electronic data interfaces,
and requires employees assigned and dedicated exclusively to the
customer's shipment management requirements. In recent years, the
Company has
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committed significant resources to develop and implement its
integrated transportation logistics services.
In 1994, the Company established Circle Trade Services, Ltd., which
offers purchasing, procurement and trade finance services to
companies engaged in global trade. The purpose of this service is
to provide customers requiring the international transportation of
cargo with additional global trade solutions enabling the customer
to successfully complete its international transaction. In 1995,
the Company intends to continue to emphasize its services as a
global trade facilitator offering value-added logistics services.
Integrated logistics and related value-added services are, in part,
a response to the growing trend toward the outsourcing of key
distribution functions by businesses requiring international
logistics services and are a response to competitive pressures
which have reduced traditional freight forwarding transportation
margins.
Marketing
The Company's worldwide services are marketed primarily by its
senior executives, by approximately 200 salespersons and by over
400 country, regional, branch and district managers who divide
their time between marketing, administration and operations. Such
persons generally deal directly with executives in the
transportation, finance, logistics, shipping or purchasing
departments of the Company's existing and potential customers.
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Their sales efforts are supplemented by the Company's agents in
certain foreign commercial centers in which the Company does not
have an office or terminal. The Company has taken a number of
initiatives to improve the effectiveness of its sales programs,
including the formation of a global sales team targeting
multinational customers, the establishment of regional sales teams,
the overseas assignments of foreign employees responsible for
targeting specific trade lanes, and the consolidation of the United
States sales force under a common sales program. The Company also
has Marketing and Corporate Sales departments designed to support
the Company's sales and marketing activities.
In conjunction with these sales and marketing efforts, the Company
continues to invest significant resources in enhancing its
information systems to make these systems more responsive to
customers and other users in managing their international
transportation needs. The use of EDI applications, in which the
Company is a leader, also serves as an important sales tool.
Employees
As of December 31, 1994, the Company employed approximately 3,150
persons, of whom approximately 650 were engaged in managerial and
sales activities, and the balance were engaged in operations or
were general office employees.
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Executive Officers
The Company's executive officers are as follows:
Name Age _________Position________
Peter Gibert 52 Chairman of the Board,
President, and Chief
Executive Officer
Robert J. Diaz 52 Senior Vice President and
Chief Financial Officer
Stuart O. Keirle 47 Vice President
Martin R. Collins 57 Vice President
Patrick Morrison 60 Vice President, Chief
Information Officer
Michael L. French 42 Vice President and
Controller
Robert H. Kennis 42 Vice President, Secretary
and General Counsel
Mr. Gibert assumed the position of President and Chief Operating
Officer in May 1991, following the Company's acquisition of Darrell
J. Sekin & Co. ("Sekin"). Mr. Gibert originally joined the Company
in 1965 and served in numerous positions within the Company until
January 1984, when he joined Sekin as its President. In May 1992,
he became Chief Executive Officer of the Company, and in May 1993
he was elected Chairman of the Board of Directors. Mr. Gibert was
elected to the Board of Directors at the 1992 Annual Meeting of
Shareholders and serves as a Class I director.
Mr. Diaz originally joined the Company in April 1992. He served as
its Vice President and Chief Financial Officer until October 1992,
when he joined Coors Brewing Company as its Vice President,
Corporate Controller, and later served as its Principal Financial
Officer. Mr. Diaz returned to the Company in December 1994 as its
Senior Vice President and Chief Financial Officer.
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Prior to joining the Company, from mid-1991 to April 1992, Mr. Diaz
served as President of Com-Pro International, a company engaged in
the distribution of computer products to Latin America. From 1982
to August 1990 Mr. Diaz worked for the Clorox Company, serving as
Corporate Vice President-International from 1988 to August 1990.
Mr. Keirle joined the Company as Vice President and Chief
Investment Officer in September 1987. He held the position of
Senior Vice President and Chief Financial Officer from January 1989
to May 1992. From May 1992 to December 1994, Mr. Keirle managed
the Company's investment activities and was responsible for
managing the Company's operations in the Middle East, Africa and
Indian sub-continent. In January 1994, Mr. Keirle assumed the
position of President of Circle Trade Services Ltd., a subsidiary
engaged in purchasing, procurement, and arranging trade finance for
its customers for whom it sources or purchases goods. Prior to
joining the Company, Mr. Keirle was associated with Barclays Bank
for over 20 years, most recently as Managing Director and Executive
Vice President, Treasury for Barclays' U.S. banking division in New
York.
Mr. Collins originally joined the Company in January 1970, and from
May 1978 to July 1986 served as its Senior Vice President, Finance.
He also served as a director of the Company from February 1983 to
July 1986. From July 1987 to September 1991, he was associated
with Fritz Companies, Inc. as Director of Planning. In February
1992, Mr. Collins rejoined the Company and
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served as a manager responsible for directing the Company's Far
East operations until June 1994. In addition, Mr. Collins served
on an interim basis as Acting Chief Financial Officer in November
and December 1992 and in October and November 1994. In May 1994, he
was elected Vice President of the Company. As Vice President, Mr.
Collins presently has management responsibilities for the Company's
North American operations and for strategic planning issues.
Mr. Morrison joined the Company in June 1993 as Vice President of
Information Services. He is the Company's Chief Information
Officer responsible for its information services division.
Immediately prior to joining the Company, Mr. Morrison served as a
consultant in information systems related to the transportation and
logistics industries, and performed services in this capacity for
the Company for four months. From March 1987 to December 1989, Mr.
Morrison was President and Chief Operating Officer of CSX
Commercial Services, Inc. and for six months thereafter served in
the same position for a joint venture subsidiary, Global Logistics
Venture, Inc. From June 1981 to March 1987, he was Vice President
of Information Systems for American President Companies.
Mr. French joined the Company in 1989 and became Vice President and
Controller in that year. In this position, he serves as the
Company's principal accounting officer. Prior to joining the
Company, he served as Controller for CP National Corporation from
1985 to 1989.
<PAGE> 26
Mr. Kennis joined the Company in 1989. He serves as Vice President
and Secretary, and is the Company's chief legal officer. Prior to
joining the Company, he was Vice President and Legal Counsel for
The Consolidated Capital Companies for four years. From 1978 to
1984, he was with the law firm of Bronson, Bronson & McKinnon as an
associate and first-level partner.
Item 2 - Properties
The properties used in the Company's domestic and foreign
operations consist principally of air and ocean freight forwarding
offices, customs brokerage offices, and warehouse and distribution
facilities. In the United States, most freight forwarding
operations and customs brokerage offices are now conducted from the
same facility. The Company's foreign offices are principally
engaged in customs brokerage and ocean and air freight forwarding;
additionally, other transportation management services such as
warehousing, distribution, packing, containerization, and inland
transportation are offered at many offices.
The following table sets forth certain information as of December
31, 1994 concerning the Company's domestic and foreign facilities
and freight handling terminals.
Number of Facilities
Owned Leased Total
Domestic 28 42 70
Foreign 23 140 163
51 182 233
<PAGE> 27
The Company owns its headquarters building in San Francisco.
Under many of its leases, the Company, in addition to rental
payments, is responsible for payment of property taxes, maintenance
and insurance. In 1994, the aggregate rental expense for all of
the Company's leased property was approximately $7.3 million. For
further information concerning the Company's lease commitments, see
Note 6 of the Notes to Consolidated Financial Statements in the
1994 Annual Report to Stockholders.
Item 3 - Legal Proceedings
The Company is a party to routine litigation incident to its
business, relating primarily to claims for goods lost or damaged in
transit or improperly shipped. Some of the lawsuits to which the
Company is a party are covered by insurance and are being defended
by the Company's insurance carriers. The Company has established
reserves which management believes are adequate to cover any
litigation losses which may occur.
The Internal Revenue Service issued a notice of deficiency with
respect to the Company's income tax liabilities for the years 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
<PAGE> 28
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 write-offs.
The Company is engaged in discussions with the Internal Revenue
Service audit personnel with respect to Federal income tax refunds
arising out of the 1992 write-offs 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.
<PAGE> 29
Item 4 - Submission of Matters to a Vote of Security Holders
Inapplicable.
PART II
Item 5 - Market for the Registrant's Common Stock and Related
Security Holder Matters
The information required by this item is incorporated by reference
from page 24 of the Company's Annual Report to Stockholders for the
year ended December 31, 1994.
Item 6 - Selected Financial Data
The information required by this item is incorporated by
reference from page 1 of the Company's Annual Report to
Stockholders for the year ended December 31, 1994.
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
The information required by this item is incorporated by reference
from pages 12 and 13 of the Company's Annual Report to Stockholders
for the year ended December 31, 1994.
Item 8 - Financial Statements and Supplementary Data
The information required by this item is incorporated by reference
from pages 14 through 23 of the Company's Annual Report to
Stockholders for the year ended December 31, 1994. Also see Item
14 below.
Item 9 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Inapplicable.
<PAGE> 30
PART III
Item 10 - Directors and Executive Officers of the Registrant
The information required by this item is incorporated by reference
from pages 1, 2, and 11 of the Company's Proxy Statement dated
April 3, 1995 under the captions "Election of Directors" and
"Section 16(a) Information". Also see "Executive Officers" under
Item 1 above.
Item 11 - Executive Compensation
The information required by this item is incorporated by reference
from pages 4 through 7 of the Company's Proxy Statement dated April
3, 1995 under the captions "Compensation of Executive Officers",
"Options Granted to Executive Officers", and "Employment
Agreements".
Item 12 - Security Ownership of Certain Beneficial Owners and
Management
The information required by this item is incorporated by reference
from page 10 of the Company's Proxy Statement dated April 3, 1995
under the caption "Ownership of Management and Principal
Stockholders".
Item 13 - Certain Relationships and Related Transactions
The information required by this item is incorporated by reference
from page 7 of the Company's Proxy Statement dated
April 3, 1995 under the caption "Transactions with the Company" and
from page 3 of such Proxy Statement under the caption "Compensation
Committee Interlocks and Insider Participation".
<PAGE> 31
PART IV
Item 14 - Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a) The following are filed as part of this report:
(1)(2) Financial Statements: See attached Index to Financial
Statements on page 34.
(3) Exhibits: See attached Exhibit Index on pages 35
through 38.
(b) No reports on Form 8-K were filed during the last quarter of
the period covered by this report.
<PAGE> 32
Signatures
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 31, 1995
THE HARPER GROUP, INC.
By: /S/ Peter Gibert
Chairman of the Board, President and Chief Executive Officer
<PAGE> 33
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities indicated on March
31, 1995.
Signature Title________________________
Chairman of the Board,
/S/(Peter Gibert) President and Chief
Executive Officer
(Principal Executive
Officer)
Senior Vice President
and Chief
/S/(Robert J. Diaz) Financial Officer
(Principal Financial
Officer)
Vice President and
Controller
/S/(Michael L. French) (Principal Accounting
Officer)
Director
/S/(Wesley J. Fastiff)
Director
/S/(John M. Kaiser)
Director
/S/(John H. Robinson)
Director
/S/(Ray C. Robinson, Jr.)
Director
/S/(Frank J. Wezniak)
<PAGE> 34
THE HARPER GROUP, INC.
INDEX TO FINANCIAL STATEMENTS
PAGE
Financial Statements:
The Harper Group, Inc. and Subsidiaries:
Consolidated Financial Statements and
Independent Auditors' Report, included
in the Company's 1994 Annual Report to
Stockholders (pages 14 through 23)
are hereby incorporated by reference
in this report:
Consolidated Income Statements for
the years ended December 31, 1994,
1993 and 1992 14*
Consolidated Balance Sheets,
December 31, 1994 and 1993 15*
Consolidated Statements of Stockholders'
Equity for the years ended December 31,
1994, 1993, and 1992 16*
Consolidated Statements of Cash Flows
for the years ended December 31, 1994,
1993, and 1992 17*
Notes to Consolidated Financial Statements 18 to 22*
Independent Auditors' Report 23*
Financial schedules are omitted either because they are not
required, not applicable, or the required information is included
in the financial statements or notes thereto.
* Refers to pages in the Company's 1994 Annual Report to
Stockholders
<PAGE> 35
EXHIBIT INDEX
Exhibit Number EXHIBIT PAGE
3.1 Certificate of Incorporation
of the Harper Group, Inc.,
a Delaware corporation.
(Incorporated by reference
to Exhibit 4.2 to Registration
Statement No. 33-40826
filed on May 24, 1991.)
3.2 Registrant's by-laws, as
heretofore amended.
(Incorporated by reference
to Exhibit 3.2.1 to Annual
Report on Form 10-K for the
fiscal year ended December
31, 1986, filed on or about
March 31, 1987.)
3.2.1 Amendments to Article IV,
Sections 2,3,4,5 and 6 of
Registrant's by-laws,
effective as of May 23,
1991. (Incorporated by
reference to Exhibit 3.2.1 to
Annual Report on Form 10-K
for the fiscal year ended
December 31, 1991, filed on
or about March 31, 1992.)
3.2.2 Sections 2 and 3 of
Registrant's by-laws effective
as of May 31, 1992. (Incorporated
by reference to Exhibit
3.2.2 to Annual Report on
Form 10-K for the fiscal year
ended December 31, 1992 filed
on or about March 31, 1993.)
4.1 Specimen certificate of
Registrant's Common Stock.
(Incorporated by reference
to Exhibit 4.1 to Registration
Statement No. 2-59017, filed
on May 16, 1977.)
<PAGE> 36
Exhibit Number EXHIBIT PAGE
4.2 Rights Agreement, dated as of
October 24, 1994, between The
Harper Group, Inc. and Chemical
Trust Company of California,
which includes as Exhibit A
thereto the Certificate of
Designation, Preferences and
Rights of Series A
Junior Participating Preferred
Stock, as Exhibit B thereto
the Form of Rights Certificate
and as Exhibit C thereto a
Summary of Rights to Purchase
Common Stock. (Incorporated by
reference to the Form 8-A
Registration Statement
filed on or about October 24, 1994.)
10.1 Agreement of Merger between
Registrant and the Harper
Group, a California corporation,
providing for the reincorp-
oration of Registrant in
Delaware. (Incorporated by
reference to Exhibit A to
Registrant's Proxy Statement
dated April 1, 1987, filed on
or about April 10, 1987.)
10.2 Master Agreement dated February
8, 1989 between Registrant and
Bowater Industries PLC.
(Schedules Excluded) (Incorp-
orated by reference to Exhibit
10.2 to Annual Report on Form
10-K for the fiscal year ended
December 31, 1988, filed on
or about March 31, 1989.)
10.3 Form of indemnity agreement
between Registrant and each of
its directors (Incorporated by
reference to Exhibit 10.3 to
Annual Report on Form 10-K for
the fiscal year ended December
31, 1988, filed on or about
March 31, 1989.)
<PAGE> 37
Exhibit Number EXHIBIT PAGE
10.4 Agreement and Plan of Reorgan-
ization dated as of April 23,
1992, with exhibits attached,
including Registration Rights
Agreement, Employment Agreement
between Registrant and Peter
Gibert and Indemnification
Agreement. (Incorporated by
reference to Exhibit 2.1. to
Current Report on Form 8-K,
dated May 21, 1991, filed on
or about May 23, 1991.)
10.5 1990 Stock Option Plan.
(Incorporated by reference to
Exhibit 10.5 to Annual Report
on Form 10-K for the fiscal
year ended December 31, 1992,
filed on or about March 31,
1993.) *
10.6 Stock Option Plan for Non-
employee Directors.
(Incorporated by reference to
Exhibit 10.6 to Annual Report
on Form 10-K for the fiscal
year ended December 31, 1992,
filed on or about March 31,
1993.) *
10.7 Employment Agreement between
Registrant and Stuart Keirle
dated June 16, 1987.
(Incorporated by reference to
Exhibit 10.7 to Annual Report
on Form 10-K for the fiscal
year ended December 31, 1992,
filed on or about March 31,
1993.) *
10.8 Credit Agreement dated October
15, 1993 between Registrant and
Bank of America National Trust
and Savings Association.
(Incorporated by reference to
Pages 14-103 to Form 10-Q for the
nine months ended September 30, 1993,
filed on or about November 10, 1993.)
<PAGE> 38
Exhibit Number EXHIBIT PAGE
10.9 Consultant Agreement effective
as of November 3, 1992 between
Registrant and John H. Robinson.
(Incorporated by reference to
Exhibit 10.9 to Annual Report on
Form 10-K for the fiscal year
ended December 31, 1993, filed
on or about March 31, 1994.) *
10.10 Registration Rights Agreement
dated November 1992, between
Registrant and John H. Robinson.
(Incorporated by reference to
Exhibit 10.10 to Annual Report on
Form 10-K for the fiscal year
ended December 31, 1993, filed
on or about March 31, 1994.)
10.11 1994 Omnibus Equity Incentive Plan
(Incorporated by reference to the
Form S-8 Registration Statement
filed on or about May 9, 1994) *
13.1 Sections of the Annual Report to
Stockholders referenced under
Part II, Items 5,6,7 and 8 hereof.
(Pages 1 and 12 through 24 of the
Annual Report to Stockholders.) 39 to 52
21.1 List of Subsidiaries 53
23.1 Consent of Deloitte & Touche LLP 55
_________________________________________
* Indicates, as required by Item 14(a)(3), a management contract or
compensatory plan required to be filed as an exhibit to this Form
10-K.
<TABLE>
<CAPTION>
<PAGE> 1
SELECTED FINANCIAL DATA
Harper Group, Inc., and Subsidiaries
(Dollars in thousands, except per share and employee amounts)
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Revenue
Air freight
forwarding $313,012 67% $282,031 66% $272,159 63% $279,734 62% $280,128 61%
Customs
brokerage and
other 77,694 16 62,066 14 66,692 15 62,337 14 55,459 12
Ocean
freight
forwarding 78,842 17 85,841 20 92,817 22 111,359 24 120,486 27
Total $469,548 100% $429,938 100% $431,668 100% $453,430 100% $456,073 100%
Net revenue
Air freight
forwarding $ 87,467 45% $ 86,322 47% $ 89,919 46% $ 87,719 46% $ 86,512 47%
Customs
brokerage and
other 77,694 40 62,066 34 66,692 34 62,337 33 55,459 30
Ocean
freight
forwarding 28,978 15 34,065 19 38,089 20 38,964 21 41,033 23
Total $194,139 100% $182,453 100% $194,700 100% $189,020 100% $183,004 100%
Income
from
operations(C) $ 23,739 $ 15,166 $ 8,691 $ 21,193 $ 21,262
Net income(A,B,C) 16,706 19,094 4,969 16,663 16,708
Net income
per share 1.02 1.15 .30 1.02 1.05
Dividends
declared per
share .21 .20 .20 .187 .153
At December 31:
Working
capital $ 42,674 $ 32,241 $ 22,502 $ 42,810 $ 47,974
Marketable
securities 41,660 47,869 35,823 23,781 9,801
Total assets 324,464 302,920 297,240 317,740 289,352
Long-term
obligations 31,867 22,561 26,079 33,000 32,398
Stockholders'
equity $151,349 $145,175 $130,702 $131,305 $105,894
Number of
employees 3,150 3,025 3,175 3,279 3,534
</TABLE>
(A) 1993 includes an after-tax gain on sale of Intercargo stock of
$2,874,000 ($.17 per share)
(B) 1993 and 1990 include after-tax gains on sales of real property
in Hong Kong of $1,812,000 ($.11 per share) and in Tokyo, Japan of
$552,000 ($.03 per share), respectively.
(C) 1992 includes special charges of $14.7 million resulting in an
after-tax loss of $12.6 million ($.75 per share). See Note 2 of
Notes to Consolidated Financial Statements.
<PAGE> 12
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Harper Group, Inc and Subsidiaries
Results of Operations
1994 versus 1993
Revenue in 1994 increased by $39.6 million or 9%.
Air freight revenue in 1994 increased 11%, or $31.0 million,
over the 1993 level. This increase reflects a moderate increase
in the number of shipments from North America, the Far East, and
the Middle East offset by a moderate decrease in shipments from
Australasia and Latin America. Shipments from Europe remained
consistent with the 1993 level, while weight per shipment in 1994
increased 10% over the prior year.
Customs brokerage and other revenue for 1994, which also includes
warehousing, distribution and other logistics services, increased
by 25%, or $15.6 million, as a result of positive contributions
from all geographic areas. Revenue growth from North America was
substantial, approaching 40%. This growth can be directly
attributed to increased management emphasis on providing a full range of
logistics, warehousing and distribution services to global
customers.
Ocean freight revenue declined 8%, or $7.0 million, as a result of
a decrease in the number of shipments and average revenue per
shipment. Since 1991, management has de-emphasized certain ocean business in
Europe due to its correspondingly lower contributions to income from
operations.
Air freight net revenue increased 1% over the 1993 level as a
result of increased shipments and weight per shipment offset by
reduced yields.
Ocean freight net revenue decreased 15% as a result of a decline in
the number of shipments and average revenue per shipment.
Salaries and related costs increased 5% during 1994 over 1993
as a result of an increase in the number of employees.
Administrative and selling costs decreased 2% during 1994 as a
result of continued efforts on cost control programs.
Other income-net decreased from 1993 as a result of the sale of the
Company's equity investments in Intercargo Corporation in 1993,
increased interest expense due to increased rates and reduced
earnings from the Company's investment portfolio in 1994.
Taxes on income increased as a result of increased earnings in
higher tax rate countries.
1993 versus 1992
Air freight revenue increased in 1993 from 1992 by 4% as a result
of slight increases in the number of shipments, and revenue per
shipment.
Customs brokerage and other revenue decreased in 1993 from the 1992
level primarily due to fewer entries in Europe. The general
weakness in all European economies and the elimination of intra-
European customs borders, at the beginning of 1993, affected this
source of revenue.
Ocean freight revenue in 1993 decreased from 1992 by 8% as a result
of reduced shipments and average rate per shipment.
Air freight net revenue decreased in 1993 by 4% over the 1992
period due to a decrease in the average rate per shipment, which
more than offset a slight increase in volume.
<PAGE> 13
Ocean freight net revenue decreased from 1992 as a result of a
decline in the average rate per shipment and number of shipments.
Salaries and related costs decreased in 1993 as a result of a 5%
decline in the number of employees.
Administrative and selling costs decreased as a result of a
continued consolidation of companies and offices into fewer
facilities.
In 1992 the Company recorded special charges of $14.7 million
($12.6 million after tax). These charges principally resulted from
provisions for doubtful accounts of approximately $2.6 million,
write downs of investments in affiliates of $2.1 million, accrual
of costs for unfavorable leases of $1.8 million, write-off of
software development costs of $0.8 million, restructuring costs of
approximately $0.8 million, and other write-offs primarily
related to the Company's foreign operations of $6.6 million.
Other income-net increased in 1993 as a result of a gain on the
sale of the Company's Intercargo Corporation stock,
increases in investment income primarily as a result of gains on
sales of interest sensitive securities, and a reduction of interest
expense resulting from lower debt balances and interest rates.
During 1993, the Company sold a building and warehouse facility in
Hong Kong, which contributed $1.8 million to other income.
The effective tax rate for 1993 and 1992 was 32% and 33%,
respectively, excluding the impact of the special charges on the
1992 effective rate.
Liquidity and Capital Resources
Commercial paper issued and outstanding at the end of 1994 and 1993
was $25 million and $20 million, respectively. The Company has a
commercial paper line of credit of $25 million together with short-
term lines of credit of up to $25 million which management believes
is adequate to supplement cash flow from operations, fund its
capital expenditure needs and pay dividends.
Capital expenditures for 1994 and 1993 were $17 million and $16
million respectively representing investment in new facilities in
1994 and information and telecommunication technologies in 1994 and
1993. The Company will continue to invest in these technologies
when the expenditure will improve customer service and or
profitability.
During 1994 the Company adopted common share repurchase programs
whereby the Company may purchase in the open market from time to
time, up to 1,000,000 shares of its common stock. At December 31,
1994, the Company had repurchased and retired 500,000 shares of its
common stock at an average purchase price of $14.34 per share.
During 1994 the Company's Board of Directors approved a Shareholder
Rights Plan and declared a dividend of one preferred share purchase
right for each outstanding share of the Company's common stock.
See Note 8 of Notes to Consolidated Financial Statements.
During the fourth quarter, the Board of Directors approved an
increase to the Company's previous dividend level of 10%, providing
for a semi-annual dividend of $0.11 per share.
<PAGE> 14
THE HARPER GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(in thousands except per share amounts)
Year ended December 31
1994 1993 1992
Revenue $ 469,548 $ 429,938 $ 431,668
Freight consolidation costs 275,409 247,485 236,968
-------- -------- --------
Net revenue 194,139 182,453 194,700
-------- -------- --------
Other costs and expenses:
Salaries and related 104,146 99,605 103,322
Operating, selling and
administrative 66,254 67,682 68,007
Special charges (Note 2) - - 14,680
-------- -------- -------
Total other costs
and expenses 170,400 167,287 186,009
-------- -------- -------
Income from operations 23,739 15,166 8,691
Other income - net (Note 10) 4,033 13,076 2,977
-------- -------- -------
Income before taxes on income 27,772 28,242 11,668
Taxes on income 11,066 9,148 6,699
-------- -------- --------
Net income $ 16,706 $ 19,094 $ 4,969
======== ======== ========
Net income per share $ 1.02 $ 1.15 $ .30
======== ======== ========
Weighted average common
shares outstanding 16,428 16,602 16,687
======== ======== ========
See Notes to Consolidated Financial Statements
<PAGE> 15
THE HARPER GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
December 31
1994 1993
ASSETS
Current assets:
Cash and equivalents $ 18,135 $ 11,302
Short-term investments 2,126 2,026
Accounts receivable
Trade 153,408 141,188
Other 4,670 5,368
--------- ----------
Total 158,078 146,556
Less allowance for doubtful accounts 4,414 5,982
--------- ----------
Accounts receivable-net 153,664 140,574
Other current assets 4,791 6,606
Income taxes receivable - 67
--------- ---------
Total current assets 178,716 160,575
Property:
Land 21,836 19,649
Buildings and improvements 69,606 58,909
Equipment and furniture 51,008 48,323
--------- ---------
Total 142,450 126,881
Less accumulated depreciation 55,032 48,376
--------- ---------
Property-net 87,418 78,505
Marketable securities (Note 3) 41,660 47,869
Other assets 16,670 15,971
--------- ---------
Total Assets $ 324,464 $ 302,920
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 14,385 $ 11,633
Accounts payable 93,384 91,514
Accrued salaries 7,274 7,294
Dividends payable 1,775 1,663
Other current liabilities 19,224 16,230
--------- ---------
Total current liabilities 136,042 128,334
Deferred income taxes 5,206 6,850
Long-term notes payable (Note 5) 31,867 22,561
Commitments and contingencies (Note 7) - -
Stockholders' equity:
Preferred stock, $1 par: shares
authorized, 1,000,000 - -
Common stock, $1 par: shares
authorized, 40,000,000; shares
issued and outstanding:
1994, 16,132,678; 1993,
16,625,803 (Note 8) 18,600 25,686
Retained earnings 140,063 126,770
Unrealized change in value of
marketable securities (Note 3) (2,657) -
Cumulative translation adjustments (4,657) (7,281)
--------- ---------
Total stockholders' equity 151,349 145,175
--------- ---------
Total liabilities and stockholders'
equity $ 324,464 $ 302,920
========= =========
See Notes to Consolidated Financial Statements
<PAGE> 16
THE HARPER GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
For the years ended December 31, 1994, 1993 and 1992
(in thousands, except share and per share amounts)
Cumula-
Unrealized tive
Change in Transl- Total
Value of ation Stock-
Common Stock Retained Marketable Adjust- holders'
--------------
Shares Amount Earnings Securities ments Equity
Balance
December 31,
1991 16,569,967 $25,101 $109,351 - $(3,147) $131,305
Net
income - - 4,969 - - 4,969
Cash
dividends
($.20 per
share) - - (3,321) - - (3,321)
Option-related
tax benefit - 21 - - - 21
Exercise of
stock
options 28,558 279 - - - 279
Foreign
currency
translation - - - - (2,551) (2,551)
------------------------------------------------------------------
Balance
December 31,
1992 16,598,525 25,401 110,999 - (5,698) 130,702
Net
income - - 19,094 - - 19,094
Cash
dividends
($.20 per
share) - - (3,323) - - (3,323)
Option-related
tax benefit - 17 - - - 17
Exercise of
stock
options 27,278 268 - - - 268
Foreign
currency
translation - - - - (1,583) (1,583)
------------------------------------------------------------------
Balance
December 31,
1993 16,625,803 25,686 126,770 - (7,281) 145,175
Net unrealized
change in
value of
marketable
securities at
January 1, 1994 - - - $10 - 10
Net
income - - 16,706 - - 16,706
Cash
dividends
($.21 per
share) - - (3,413) - - (3,413)
Option-related
tax benefit - 6 - - - 6
Exercise of
stock
options 6,875 80 - - - 80
Repurchase of
common
stock (500,000) (7,172) - - - (7,172)
Change in value
of marketable
securities - - - (2,667) - (2,667)
Foreign currency
translation - - - - 2,624 2,624
------------------------------------------------------------------
Balance
December 31,
1994 16,132,678 $18,600 $140,063 $(2,657)$(4,657) $151,349
==================================================================
See Notes to Consolidated Financial Statements
<PAGE> 17
THE HARPER GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years ended December 31
1994 1993 1992
Operating activities:
Net income $ 16,706 $ 19,094 $ 4,969
Adjustments to reconcile net
income to net cash provided
by operating activities:
Special charges (Note 2) - - 14,680
Depreciation and
amortization 10,005 9,717 9,985
Provision for doubtful
accounts 2,239 3,418 5,204
Deferred income taxes (150) (1,553) 722
Gains on sales of real
property, investments,
equipment and equity
investments (1,261) (7,590) -
Equity in earnings of
affiliates (1,157) (641) (1,284)
Other 609 564 -
Net effect of changes in:
Accounts receivable (17,617) (8,832) 926
Other current assets 1,882 2,197 195
Accounts payable 2,149 (2,426) (11,096)
Other current
liabilities 3,312 (813) (6,396)
-------- -------- --------
Net cash provided by
operating activities 16,717 13,135 17,905
-------- -------- --------
Investing activities:
Proceeds from sales of property 2,923 14,421 -
Proceeds from sales of
equity investments 1,007 12,413 -
Proceeds from sales of
marketable securities 25,301 61,390 15,702
Purchases of marketable
securities (23,085) (73,436) (27,575)
Short-term investments-net (100) 559 6,163
Capital expenditures (16,817) (15,840) (12,823)
Acquisition of businesses (1,458) - -
Other (263) 279 (229)
-------- -------- --------
Net cash used in
investing activities (12,492) (214) (18,762)
-------- -------- --------
Financing activities:
Issuance (repayment) of
long-term notes payable - net 9,306 (3,518) (12,000)
Increase (decrease) in
notes payable 2,752 (609) 4,083
Payments of dividends (3,301) (3,323) (3,321)
Proceeds from exercise of
stock options 86 268 279
Common stock repurchase (7,172) - -
-------- -------- --------
Net cash provided by (used in)
financing activities 1,671 (7,182) (10,959)
-------- -------- --------
Effect of exchange rate
changes on cash 937 (651) (1,955)
-------- -------- --------
Increase (decrease) in cash
and equivalents $ 6,833 $ 5,088 $(13,771)
======== ======== ========
Cash and equivalents at
beginning of year $ 11,302 $ 6,214 $ 19,985
Increase (decrease) in cash
and equivalents 6,833 5,088 (13,771)
-------- -------- --------
Cash and equivalents at
end of year $ 18,135 $ 11,302 $ 6,214
======== ======== ========
Cash paid for interest expense $ 3,206 $ 2,463 $ 3,313
======== ======== ========
Cash paid for income taxes $ 7,645 $ 10,884 $ 10,581
======== ======== ========
See Notes to Consolidated Financial Statements
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the Harper Group, Inc. and Subsidiaries
Note 1 - Significant Accounting Policies
Principles of Consolidation - The accompanying consolidated
financial statements include the Harper Group, Inc. and its
majority-owned subsidiaries (the Company). Investments in 50% or
less owned affiliates are accounted for by the equity method. All
significant intercompany balances and transactions have been
eliminated.
Cash and Equivalents include demand deposits and investments with
original maturities of three months or less.
Short-term Investments include deposits of cash in interest bearing
securities which have maturities of greater than 90 days and less
than one year.
Property is stated at cost, and depreciation is computed
principally by the straight-line method at rates based on the
estimated useful lives of the various classes of property.
Building improvements are depreciated over their estimated useful
lives or the terms of the related lease, whichever is shorter.
Revenue Recognition - Revenue and expenses related to the
transportation of freight are recognized at the time the freight
departs the terminal of origin. Customs brokerage and other
revenue is recognized upon completing the documents necessary for
customs clearance.
Revenue realized as an indirect air carrier or an ocean freight
consolidator includes the direct carrier's charges to the Company
for carrying the shipment. Revenue realized in other capacities
includes only the commissions and fees received.
Net Income Per Share is based upon the weighted average common
shares outstanding during the period. The dilutive effect of
outstanding common stock options is not material.
Taxes on Income - Under Statement of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes," the Company
provides a deferred tax expense or benefit equal to the net change
in the deferred tax assets and liabilities during the year.
Deferred income taxes represent tax credit carryforwards and future
tax effects resulting from temporary differences between the
financial statement and tax basis of assets and liabilities using
enacted tax rates in effect for the year in which the differences
are expected to reverse.
Foreign Currency Translation - Most foreign assets and liabilities
are translated using month-end exchange rates. The impact of
exchange rate changes is shown as "Cumulative Translation
Adjustments" in stockholders' equity. Gains and losses from
foreign exchange transactions are included in net income.
Fair Value of Financial Instruments - The fair values presented
throughout these financial statements have been estimated using
appropriate valuation methodologies and market information
available as of December 31, 1994 and 1993. However, considerable
judgment is required in interpreting market data to develop
estimates of fair value, and the estimates presented are not
necessarily indicative of the amounts that the Company could
realize in a current market exchange. The use of different market
assumptions or estimation methodologies could have a material
effect on the estimated fair values. Additionally, the fair values
presented throughout these financial statements have been estimated
at year end. Current estimates of fair value may differ
significantly from the amounts presented.
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which it is
practicable to estimate that value:
Cash and equivalents, accounts receivable and payable, short-term
investments and notes payable to banks-The carrying amounts of
these items approximates fair value.
Marketable securities-The fair value is based on quoted market
prices. As discussed in Note 3, these securities are recorded at
fair value.
Long-term notes payable-The fair value of the Company's long-term
debt is estimated based on quoted market prices for the same or
similar issues or on the current rates offered to the Company for
debt of the same remaining maturities. The carrying amounts of
these items approximate their fair value.
Note 2 - Special Charges
In 1992 the Company recorded charges of $14.7 million ($12.6
million after tax or $.75 per share). The charges principally
result from provisions for doubtful accounts of approximately
$2.6 million, write-downs of investments in affiliates of $2.1
million, accruals for unfavorable leases of $1.8 million, write-off
of software development costs of $0.8 million, restructuring costs
of approximately $0.8 million, and other write-offs primarily
related to the Company's foreign operations of $6.6 million.
Note 3 - Marketable Securities
Effective January 1, 1994 the Company adopted SFAS No. 115
("Accounting for Certain Investments in Debt and Equity
Securities"). The statement requires that debt securities, other
than those that the Company has the
<PAGE> 19
ability and intent to hold to maturity, and equity securities
management has designated as available for sale be carried at fair
value. Changes in the fair value of marketable securities are
presented in the stockholders' equity section of the balance sheet
under the caption "Unrealized change in value of marketable
securities", net of deferred taxes. During the twelve months ended
December 31, 1994 the unrealized loss in marketable securities
increased by $4,143,000. Management has designated marketable
securities as available for sale.
At December 31 and January 1, 1994 the aggregate fair value, gross
unrealized (gains) losses, and amortized cost of marketable
securities were as follows (in thousands):
December 31, 1994 January 1, 1994
Debt Securities
Fair Value $ 34,434 $ 34,163
Amortized Cost 37,104 34,129
--------- ---------
Unrealized (Gain)/Loss $ 2,670 $ (34)
========= =========
Equity Securities
Fair Value $ 7,226 $ 13,696
Cost 8,709 13,740
--------- ---------
Unrealized Loss $ 1,483 $ 44
========= =========
As of December 31, 1994 unrealized gains are not material.
Contractual maturities of the fair value of long-term debt
securities as of December 31, 1994
Within five years $ 25,474
From six to seven years $ 8,960
Note 4 - Borrowing Capacity
At December 31, 1994, the Company had additional borrowing capacity
from lines of credit totaling approximately $11 million.
At December 31, 1994, the weighted average short-term borrowing
rate was 7.0%
Note 5 - Long-term Notes Payable
Long-term notes payable included commercial paper of $25 million
and $20 million at December 31, 1994 and 1993 respectively.
The commercial paper is supported by a $25 million backup facility
line of credit which is renewed each month for a thirteen month
period. Although the commercial paper is issued on a short-term
basis, it is classified as long-term because the Company intends to
reissue such paper as it matures. At December 31, 1994 and 1993,
the weighted average interest rate of outstanding commercial paper
was 5.6% and 3.4%, respectively.
At December 31, 1994 and 1993 the Company had long-term notes
payable of approximately $6.9 million and $2.6 million,
respectively, with a weighted average interest rate of 7.1% and
7.8%, respectively. These notes are secured by real property.
Principal payments on long-term notes that mature in 1995 are
classified as notes payable to banks. Principal payments for 1996
through 1999 are approximately $2.6 million, $1.8 million, $0.7
million, and $1.8 million, respectively. Principal repayments for
2000 through 2002 are approximately $0.1 million.
Note 6 - Lease Commitments
At December 31, 1994, commitments on long-term operating lease
agreements for facilities require the following minimum annual
rentals:
(in thousands)
1995 $ 5,538
1996 3,902
1997 3,400
1998 2,999
1999 2,283
2000 and subsequent 36,386
------
Total $ 54,508
======
Rental expense under such leases was $7,311,000 in 1994, $9,377,000
in 1993, and $10,431,000 in 1992, net of rents from subleases of
$755,000, $219,000, and $101,000, respectively. Total rental
expense (including the foregoing leases) was $9,123,000 in 1994,
$11,114,000 in 1993, and $11,831,000 in 1992.
Note 7 - Contingencies
The Company is party to routine litigation incidental to its
business, primarily claims for goods lost or damaged in transit or
improperly shipped. Some of the lawsuits to which the Company is
a party are covered by insurance and are being defended by the
Company's insurance carriers. It is management's opinion that such
litigation will not have a material adverse effect on the Company's
consolidated financial position or results of operations.
Note 8 - Common Stock
The 1982 Stock Option Plan (amended in 1990) and the 1990 Stock
Option Plan provide for the granting of non-qualified or incentive
stock options to directors, officers and key employees for a
maximum of 956,250 common shares at not less than fair market value
on date of the grant. The Human Resources and Compensation
Committee of the Board of Directors determines the exercise period
for the options. Under these plans stock options are generally
issued within the restriction that no option may be exercised
before three years from date of grant nor later than ten years
from date of grant.
<PAGE> 20
During 1993, 146,450 options were repriced from $22.00 per share to
$16.00 per share. During 1994, 37,500 options were repriced from
$19.00 per share to $16.00 per share.
The 1994 Omnibus Equity Incentive Plan provides for the granting of
stock options, stock appreciation rights, restricted stock awards,
performance unit awards and performance share awards to key
employees and consultants of the Company for a maximum amount of
750,000 common shares. Stock options under this plan are generally
issued at an option price at not less than fair market value on the
date of grant. Stock options under this plan are generally issued
within the restriction that no option may be exercised before one
year from date of grant nor later than ten years from the date
of grant.
A summary of stock option transactions follows:
Shares Option price
under option per share
Outstanding at December 31, 1991 239,478 $ 7.89 - $17.33
Granted 231,500 14.75 - 22.00
Exercised (28,651) 7.89 - 10.67
Canceled (50,033) 7.89 - 22.00
-------
Outstanding at December 31, 1992 392,294 7.89 - 22.00
Granted 126,000 12.75 - 16.50
Exercised (27,278) 7.89 - 10.67
Canceled (39,701) 10.67 - 22.00
-------
Outstanding at December 31, 1993 451,315 9.67 - 16.00
Granted 458,750 13.00 - 17.00
Exercised (6,875) 10.54 - 14.25
Canceled (138,871) 10.54 - 16.00
-------
Outstanding at December 31, 1994 764,319 9.67 - 17.00
=======
December 31 1994 1993 1992
Options available for grant 546,072 115,951 202,250
Options exercisable 130,620 97,726 83,643
During 1994 the Company adopted common share repurchase programs
whereby the Company may purchase in the open market from time to
time, up to 1,000,000 shares of its common stock. Through December
31, 1994, the Company had repurchased and retired 500,000 shares of
its common stock at an average purchase price of $14.34 per share.
During October 1994, the Company adopted a Shareholder Rights Plan
and declared a dividend distribution of one preferred share
purchase Right for each outstanding share of the Company's common
stock. Each Right will entitle stockholders to buy one one-
hundredth of a share of a new series of junior participating
preferred stock at an exercise price of $53.00.
The Rights will become exercisable if, without approval of the
Board of Directors, a person or group acquires 20% or more of the
Company's common stock (or a lesser percentage set by the Board in
the case of a person determined to present certain specific risks
to the Company and its stockholders, as defined in the plan) or
announces a tender offer the consummation of which would result
in ownership of 20% or more of the common stock.
If a person or group does acquire 20% or more of the Company's
stock (or such lesser percentage as has been set with respect to a
specific person) each Right unless redeemed will entitle its holder
to purchase, at the Right's then current exercise price, a number
of the common shares of the Company having a market value at that
time of twice the Right's exercise price.
The Company will be entitled to redeem the Rights at .01 cents per
Right at any time before a 20% position (or such lesser percentage
as has been set with respect to a specific person) has been
acquired. Until the Rights become exercisable, Rights certificates
will not be sent to stockholders and the Rights will automatically
trade with the common stock.
Note 9 - Taxes on Income
Taxes on income include the following:
(in thousands) 1994 1993 1992
Federal:
Current $ 7,476 $ 8,192 $ 4,045
Deferred (1,892) (2,245) 1,787
State:
Current 979 1,787 1,426
Foreign:
Current 2,761 722 506
Deferred 1,742 692 (1,065)
-------------------------
Total $11,066 $9,148 $6,699
=========================
Significant components of the Company's net deferred tax liability
are as follows:
December 31, (in thousands) 1994 1993
Deferred tax liabilities:
Undistributed earnings
of subsidiaries $11,211 $12,914
Accelerated depreciation 4,322 3,917
Gain on sale of property 1,701 1,701
Investment in Subsidiary 232 621
---------------------
17,466 19,153
---------------------
Deferred tax assets:
Intercompany billings 6,462 6,462
Foreign operating loss
carryforwards - net - 1,553
Bad debts 1,137 1,353
Unfavorable leases 243 432
Vacation pay 599 533
Incentive compensation 519 625
Insurance claims reserves 1,347 753
Valuation of marketable
securities 1,496 -
Other 457 592
---------------------
12,260 12,303
---------------------
Net deferred tax liability $ 5,206 $ 6,850
=====================
<PAGE> 21
Deferred income taxes resulted from the following temporary
differences:
(in thousands) 1992
----
Undistributed earnings of affiliates $ 752
Bad debts (252)
Accelerated depreciation (385)
Incentive compensation 142
Insurance loss reserves 385
Intercompany billings (56)
Investment in subsidiary 1,063
Unfavorable leases (593)
Other (334)
-----
Total $ 722
=====
Taxes on income were different than the amount computed by applying
the United States federal statutory income tax rate. Such
differences are summarized as follows:
(in thousands) 1994 1993 1992
-----------------------------
Computed at: 35% 35% 34%
$ 9,720 $ 9,885 $ 3,967
Increases (decreases)
resulted from:
Foreign taxes lower
than federal rate (756) (1,421) (1,131)
State taxes on income,
net of federal income
tax effect 636 1,162 931
Non-deductible items:
Special charges
(see Note 2) - - 2,871
Other 244 229 395
Foreign net operating losses 1,512 (356) 251
Other (290) (351) (585)
-----------------------------
Total $11,066 $ 9,148 $ 6,699
=============================
Taxes on income include deferred income taxes on undistributed
earnings (not considered permanently invested) of certain
consolidated subsidiaries net of applicable foreign tax credits.
At December 31, 1994, cumulative earnings of consolidated foreign
subsidiaries designated as permanently invested were approximately
$41 million. Deferred income taxes are not provided on permanently
invested earnings.
Sources of pretax income are summarized as follows:
(in thousands) 1994 1993 1992
----------------------------
Domestic $ 13,101 $ 19,290 $ 16,671
Foreign 14,671 8,952 (5,003)
----------------------------
Total $ 27,772 $ 28,242 $ 11,668 (1)
============================
(1) 1992 includes special charges of $14.7 million as discussed in
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 1986 and 1987 asserting an aggregate
liability of 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.
Note 10 - Other Income - Net
Other Income-net includes the following:
(in thousands) 1994 1993 1992
Investment income $ 4,233 $ 6,055 $ 4,277
Interest expense (3,254) (2,459) (3,512)
Gain on sale of Intercargo stock - 5,761 -
Gain on sale of assets 1,168 1,829 -
Equity in earnings of affiliates 1,157 641 1,284
Foreign exchange 729 1,249 928
-------------------------
Total $ 4,033 $13,076 $ 2,977
=========================
Note 11 - 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. No
customer accounted for ten percent or more of consolidated revenue.
<PAGE> 22
Certain information regarding the Company's operations by regions
is summarized below. The 1993 and 1992 segment information has
been reclassified to conform to the 1994 presentation.
<TABLE>
<CAPTION>
North Far Latin Other Corporate Elimi- Consol-
America Europe East America Areas Overhead nations idated
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(in thousands)
Year ended December 31, 1994:
Total revenue $255,592 $ 91,771 $ 91,115 $ 19,649 $ 21,757 $ - $ (10,336) $469,548
Transfers
between
regions (2,481) (1,344) (2,687) (2,377) (1,447) - 10,336 -
Revenue from
customers $253,111 $ 90,427 $ 88,428 $ 17,272 $ 20,310 $ - $ - $469,548
Net revenue $ 97,245 $ 50,222 $ 21,756 $ 8,474 $ 16,442 $ - $ - $194,139
Income (loss)
from opera-
tions $ 18,718 $ 9,635 $ 3,121 $ 2,136 $ 3,373 $(13,244) $ - $ 23,739
Identifiable
assets $144,662 $ 83,581 $ 76,176 $ 13,979 $ 26,096 $ 84,354 $(104,384) $324,464
Year ended December 31, 1993:
Total revenue $221,485 $ 83,601 $ 96,103 $ 19,144 $ 18,819 $ - $ (9,214) $429,938
Transfers
between
regions (4,976) (2,128) (967) (1,018) (125) - 9,214 -
Revenue from
customers $216,509 $ 81,473 $ 95,136 $ 18,126 $ 18,694 $ - $ - $429,938
Net revenue $ 94,720 $ 45,995 $ 20,701 $ 6,685 $ 14,352 $ - $ - $182,453
Income (loss)
from opera-
tions $ 19,302 $ 3,019 $ 1,593 $ 1,761 $ 3,019 $(13,528) $ - $ 15,166
Identifiable
assets $153,169 $ 69,627 $ 73,821 $ 10,051 $ 21,051 $ 84,891 $(109,690) $302,920
Year ended December 31, 1992:
Total revenue $223,608 $105,131 $ 89,365 $ 8,095 $ 18,764 $ - $ (13,295) $431,668
Transfers
between
regions (5,463) (3,291) (1,443) (2,323) (775) - 13,295 -
Revenue from
customers $218,145 $101,840 $ 87,922 $ 5,772 $ 17,989 $ - $ - $431,668
Net revenue $ 93,456 $ 61,005 $ 20,725 $ 4,784 $ 14,730 $ - $ - $194,700
Income (loss)
from opera-
tions $ 20,561 $ (6,667) $ 3,734 $ 852 $ 1,424 $(11,213) $ - $ 8,691
Identifiable
assets $142,239 $ 85,924 $ 79,270 $ 7,548 $ 19,997 $ 88,592 $(126,330) $297,240
</TABLE>
Revenue from transfers between regions represents approximate
amounts that would be charged if the services were provided by an
unaffiliated company. Total region revenue is reconciled with
total consolidated revenue by eliminating inter-regional revenue.
1992 income (loss) from operations excluding the effect of special
charges ($14.7 million) for North America, Europe, Far East, Latin
America, Other Areas, Corporate Overhead and Consolidated is
$20,741,000, $5,318,000, $4,659,000, $1,014,000, $2,363,000,
$(10,724,000) and $23,371,000, respectively.
Note 12 - Quarterly Data (unaudited)
The quarterly financial information presented below reflects all
adjustments which, in the opinion of management, are of a normal
and recurring nature necessary to present fairly the results of
operations for the periods presented.
(in thousands except per share amounts)
Net Net Net Income Dividend
Revenue Revenue Income Per Share Per Share
------------------------------------------------------------------
1994 Quarters:
4th Quarter $127,484 $ 51,568 $ 4,513 $ .28 $ .11
3rd Quarter 122,898 50,415 4,884 .30 -
2nd Quarter 115,940 47,057 4,289 .26 .10
1st Quarter 103,226 45,099 3,020 .18 -
1993 Quarters:
4th Quarter $116,160 $ 47,166 $ 4,494 $ .27 $ .10
3rd Quarter 108,985 46,280 7,498 .45 -
2nd Quarter 109,569 45,334 4,105 .25 .10
1st Quarter 95,224 43,673 2,997 .18 -
<PAGE> 23
Independent Auditors' Report
The Board of Directors and Stockholders of the Harper Group, Inc.:
We have audited the accompanying consolidated balance sheets of the
Harper Group, Inc. and subsidiaries as of December 31, 1994 and
1993, and the related consolidated income statements and
consolidated statements of stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1994.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of the
Harper Group, Inc. and subsidiaries as of December 31, 1994 and
1993, and the results of operations and their cash flows for each
of the three years in the period ended December 31, 1994 in
conformity with generally accepted accounting principles.
As discussed in Note 3 to the Consolidated Financial Statements,
the Company changed its method of accounting for investments in
debt and equity securities in 1994.
/S/ DELOITTE & TOUCHE LLP
San Francisco, California
March 10, 1995
<PAGE> 24
MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS:
The Company's common stock is traded over the counter under the
symbol HARG. The following table sets forth the closing prices in
the NASDAQ national market system for the Company's common stock
for the calendar periods indicated, as reported by NASDAQ.
High Low
1994
Fourth Quarter $ 15-3/4 $ 13
Third Quarter 16-1/4 12-1/2
Second Quarter 17 13-3/8
First Quarter 18-1/4 15
1993
Fourth Quarter $ 18 $ 12-3/4
Third Quarter 15-1/4 12-3/4
Second Quarter 16-3/4 13-1/8
First Quarter 17-1/4 14
As of March 1, 1995, the approximate number of stockholders of
record of the Company's common stock, excluding stockholders whose
stock is held as nominee or in street name by brokers, was 430.
Dividends Declared
Dividends declared per common share during 1994 and 1993 were:
1994 1993
July 11 $.10 June 25 $.10
December 19 .11 December 14 .10
The Board of Directors considers payment of cash dividends on a
semi-annual basis subject to the availability of earnings, the
financial condition of the Company and other relevant factors.
Annual Meeting
The Annual Meeting of Stockholders will be held at 10:30 a.m. on
Tuesday, May 9, 1995 at Harper Plaza, 260 Townsend Street, San
Francisco, California 94107.
APPENDIX TO ELECTRONIC FORMAT (edgar) DOCUMENT - purpose is to
provide a fair and accurate description of all graphic and
image information included in the printed Annual Report to
Stockholders accompanying "Management's Discussion and
Analysis", but excluded from this filing.
Graphic #1:
Presents net revenue by product in a bar graph for the years
ended December 31, 1994, 1993, and 1992. Each of the three periods
has the three products stacked into one bar. This information is
also presented numerically in the Selected Financial Data section
on page 1 of the Annual Report to Stockholders in this filing.
Graphic #2:
Presents operating margin percentages in a bar graph for the
years ended December 31, 1994, 1993, and 1992. Operating margin
for these periods is calculable from the Consolidated Income
Statements presented in this filing (page 14 of the Annual Report
to Stockholders) by dividing income from operations by net revenue.
The graph includes a note stating that the 1992 ratio excludes the
effect of special charges taken against income from operations in
1992 of $14.7 million.
Graphic #3:
Presents operating margin percentages by region and year in a bar
graph for the years ended December 31, 1994, 1993, and 1992.
The regions in the graph conform to regions included in Note 11 -
Business Segment Information in Notes to Consolidated Financial
Statements presented in this filing (pages 21 and 22 of the Annual
Report to Stockholders) except for corporate overhead charges as
explained below.
The percentages in the graph are calculable from the segment
footnote when corporate overhead charges are excluded from total
consolidated operating income. It is noted on the graph that
percentages exclude the effect of special charges recorded during
1992, and corporate overhead charges from 1992 through 1994.
Graphic #4:
Presents 1994 revenue by region in a pie chart. The regions in the
graph conform to operating regions included in Note 11 - Business
Segment Information in Notes to Consolidated Financial Statements
in the Annual Report to Stockholders (pages 21 and 22) presented in
this filing. The percentages used in the graph are derived from
amounts in the footnote designated as revenue from customers.
<PAGE> 53
EXHIBIT 21.1
LIST OF SUBSIDIARIES
The following table sets forth certain information
concerning the principal subsidiaries of the Company as of December
31, 1994.
State or other
jurisdiction of
Name incorporation
Circle International, Inc. Delaware
Circle Airfreight Japan, Ltd. California
Circle Air Freight de Mexico C.V. Mexico
Circle Espana S.A. Spain
Circle Freight International
Speditionsgesellschaft GmbH Germany
Circle Freight International
(Schweiz) AG Switzerland
Circle Fretes Internacionais Do
Brasil Ltda. Brazil
Circle Freight International
(Canada) Ltd. Canada
Circle Freight International
(Holland) B.V. Holland
Circle Freight International
(Italia) SRL Italy
Circle Freight International Japan, Japan
Circle Freight International Korea Korea
Circle Freight International
(NZ) Ltd. New Zealand
Circle Freight International
Philippines Ltd., Inc. Philippines
Circle Freight International
(Singapore) Pte., Ltd. Singapore
<PAGE> 54
State or other
jurisdiction of
Name incorporation
Circle International
(Aust.) Pty., Ltd. Australia
Circle International
(Hong Kong) Ltd. Hong Kong
Circle International Limited United Kingdom
Circle International (Sweden) AB Sweden
Darrell J. Sekin & Co. Texas
Harper Logistics International France
J.R. Michels Incorporated Texas
Max Gruenhut B.V. Holland
Max Gruenhut GmbH Germany
Regga Holdings Limited Bermuda
Regga Insurance Limited Bermuda
Sabra Insurance Company South Dakota
S.W. Air Freight S.A. France
The names of certain subsidiaries have been omitted because such
unnamed subsidiaries, considered in the aggregate, would not
constitute a significant subsidiary as that term is defined in
Regulation S-X.
<PAGE> 55
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in (i) Registration
Statement No. 33-44357 on Form S-8 for The Harper Group Profit
Sharing and Tax Shelter Investment Plan; (ii) Registration
Statement No. 33-35272 on Form S-8 for The Harper Group, Inc. 1978
Stock Option Plan, 1982 Stock Option Plan and 1990 Stock Option
Plan; and (iii) Registration Statement No. 33-53557 on Form S-8 for
The Harper Group, Inc. 1994 Omnibus Equity Incentive Plan of our
report dated March 10, 1995 incorporated by reference in The Harper
Group, Inc. Annual Report on Form 10-K for the year ended December
31, 1994.
/S/ DELOITTE & TOUCHE LLP
San Francisco, California
March 24, 1995
<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 consolidated financial statements from the Company's
Annual Report to Stockholders for the year ended
December 31, 1994, and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<MULTIPLIER> 1000
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-1-1994
<PERIOD-END> DEC-31-1994
<CASH> 18135
<SECURITIES> 43786
<RECEIVABLES> 158078
<ALLOWANCES> 4414
<INVENTORY> 0
<CURRENT-ASSETS> 178716
<PP&E> 142450
<DEPRECIATION> 55032
<TOTAL-ASSETS> 324464
<CURRENT-LIABILITIES> 136042
<BONDS> 0
0
0
<COMMON> 18600
<OTHER-SE> 132749
<TOTAL-LIABILITY-AND-EQUITY> 324464
<SALES> 0
<TOTAL-REVENUES> 469548
<CGS> 0
<TOTAL-COSTS> 275409
<OTHER-EXPENSES> 170400
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 27772
<INCOME-TAX> 11066
<INCOME-CONTINUING> 16706
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16706
<EPS-PRIMARY> 1.02
<EPS-DILUTED> 1.02
</TABLE>
