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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, 1995 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 15, 1996, the aggregate market value of the registrant's Common
Stock held by non-affiliates of the registrant was approximately
$301,343,089.
At March 15, 1996, the number of shares outstanding of registrant's
Common Stock was 15,966,994 (net of 287,000 treasury shares).
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement dated April 1, 1996 - Part III of this Form 10-K; Annual
Report to Stockholders for year ended December 31, 1995 - Part II of
this Form 10-K.
The Exhibit Index is located on Pages 38 through 41 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,
distribution, 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 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 logistics costs and increasing the
speed and reliability of the deliveries of goods worldwide. These
logistics services include: air and ocean export and import freight
transportation; worldwide customs brokerage, duty drawback, Free Trade
Zone management and associated services; global freight tracking; other
information management services such as electronic data interchange
("EDI"), electronic invoicing and purchase order management; logistics
management; warehousing and distribution services; inventory management;
protective cargo packing; bonded warehousing; project cargo management;
global purchasing and trade finance services; and marine insurance
(ocean and air coverage).
The Company's global services are supplied through its network of over
350 offices, agencies and distribution centers located in over 90
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
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United States included Circle Airfreight Corporation, Inc., its
principal international air freight subsidiary, Harper Robinson & Co.,
Inc., its principal international ocean freight forwarding and customs
brokerage subsidiary; Max Gruenhut International, Inc., a full service
air and ocean freight forwarding 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 sales 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 geographic
regions for the three years in the period ended December 31, 1995, is
incorporated by reference to Note 11 of the Notes to Consolidated
Financial Statements in the 1995 Annual Report to Stockholders.
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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 years in the period ended
December 31, 1995. 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 as well as services relating to
warehousing, distribution and other ancillary services. Net revenue for
air and ocean freight forwarding, which is the equivalent of gross
profit in other industries, is determined by deducting any freight
consolidation costs from freight forwarding revenue. In the opinion of
management, net revenue provides a more accurate measure than revenue of
the relative importance of the Company's principal services.
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Year Ended December 31
1995 1994 1993
---- ---- ----
(Dollars in thousands)
REVENUE:
Air freight
forwarding $346,624 64% $313,012 67% $282,031 66%
Customs brokerage
and other 102,377 19% 77,694 16% 62,066 14%
Ocean freight
forwarding 93,327 17% 78,842 17% 85,841 20%
Total $542,328 100% $469,548 100% $429,938 100%
NET REVENUE:
Air freight
forwarding $ 87,747 40% $ 87,467 45% $ 86,322 47%
Customs brokerage
and other 102,377 46% 77,694 40% 62,066 34%
Ocean freight
forwarding 31,687 14% 28,978 15% 34,065 19%
Total $221,811 100% $194,139 100% $182,453 100%
RECENT DEVELOPMENTS
Organization:
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 1995 as well. Management believes
that integration of the Company's operating systems has enhanced the
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Company's ability to pursue its sales strategy of providing door-to-door
integrated logistics solutions to its customers.
Acquisitions:
In March 1995, the Company's German subsidiary acquired Franz Kroll
Internationale Transporte GmbH, a full services freight forwarding firm
with offices in five cities in Germany. This acquisition increased the
Company's already strong market position in Germany and expanded the
Company's network of services available in central Europe.
In June 1995, the Company acquired the assets of Porter International,
Inc. and its Mexican subsidiary, one of the leading customs brokers on
the California-Mexico border. This acquisition improved the Company's
position as one of the largest customs brokers along the United States-
Mexico border.
In February 1996, the Company acquired certain assets of Celadon/Jacky
Maeder Ltd., a New York partnership, consisting primarily of the
accounts handled by substantially all of its offices in the United
States. The consideration for the purchase is based on the net revenue
generated from purchased accounts within twelve months of the
acquisition. The acquisition is intended to increase the Company's
market share in the United States. In connection with this transaction,
the Company sold its operations in Switzerland to Jacky Maeder A.G.,
which is one of the largest freight forwarders in Switzerland, and will
act as the Company's exclusive agent in Switzerland. The Company in
turn will act as the exclusive agent in the United States for
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Jacky Maeder A.G. and two of its global alliance partners, which are
also large European freight forwarders.
Additionally, the Company recently opened operations in the Czech
Republic, Qatar and Abu Dhabi, and added five offices in new locations
in the United States.
Information Systems:
The Company continuously enhances its information systems capabilities
in order to meet its customers' changing needs and to provide first-
class information transmission, processing, 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. This
module provides significant improvements for the management of ocean
shipments, allows for the automated preparation of over 15 shipping
documents and provides a user-friendly menu-driven system. The second
module integrated the Company's new customs brokerage system into the
CLASS system. This module allows for improved on-line tracking of
shipments by customers and provides an improved data base system for the
analysis and reporting of customs information. The Company has also
developed a customer oriented purchase order management system to
support supply chain management and the logistics needs of its
customers.
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The Company has spent considerable effort on its EDI capabilities to
allow it to electronically transmit a variety of shipment documentation
according to the requirements of its customers. Numerous EDI
implementations designed to meet the needs of customers took place in
1995. 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.
Quality Initiatives:
The Company maintains a department focused on implementing quality
initiatives to better serve customers' needs. In 1995, the Company
achieved ISO 9000 certification in several locations and is committed to
a broad program in 1996 to gain ISO certification in many additional
locations in the U.S. and overseas. The Company also embarked on an
initiative to identify its best practices and standard procedures in
order to provide a consistency of quality services throughout its
offices in the United States.
Facilities:
In December 1995, the Company sold and leased-back its facilities in Los
Angeles, Houston, Chicago, Detroit, Portland and Milwaukee under long
term operating leases. The transaction is intended to improve the
utilization of the Company's assets and resulted in cash proceeds of
approximately $14,655,000 which are anticipated to be used for the
repurchase of Company stock, future acquisitions and other corporate
purposes. Additionally, in 1995 the Company sold its facilities
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in Atlanta, Seattle and San Francisco and leased new, larger facilities
which were built according to the Company's specifications. In 1996 the
Company intends to do the same in several other locations in the United
States, including Miami, Denver, Newark, and South Bend. The Company is
striving to improve and expand its facilities so as to accommodate the
increased demand for distribution and warehouse services.
INTERNATIONAL AIR FREIGHT FORWARDING
The Company believes that it is one of the 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 services as logistics services for commercial and
governmental projects, inventory management, EDI and cargo insurance.
The Company does not own or operate aircraft, which enables the Company
to tailor its services to customer requirements.
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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, 1995.
Year Ended December 31,
1995 1994 1993
---- ---- ----
(In thousands, except per shipment data)
AS INDIRECT CARRIER:
Revenue (1) $328,597 $296,464 $262,915
Revenue net of
air freight consol-
idation costs (1) $ 69,720 $ 70,919 $ 67,206
Number of shipments 375 353 337
Net revenue per shipment $ 185.92 $ 200.90 $ 199.42
Weight in kilos 133,389 106,587 91,374
Kilos per shipment 355.70 301.95 271.14
AS AIRLINE AGENT:
Revenue (1) $ 18,027 $ 16,548 $ 19,116
Number of shipments 117 137 127
Net revenue per shipment $ 154.08 $ 120.79 $ 150.52
Weight in kilos 35,887 38,897 33,420
Kilos per shipment 306.73 283.92 263.15
(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 1995, the Company's principal air freight forwarding customers
were shippers of computer, electronic and high technology equipment,
automotive products, machinery and machine
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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 regional customers. During 1995,
the Company had in excess of 30,000 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 1995, the Company derived
approximately 79% 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.
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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 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 1995, approximately 47% of the Company's net air freight
forwarding revenue as an indirect carrier was attributable to shipments
originating in the United States and terminating
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abroad. As measured by net air freight forwarding revenue earned as an
indirect carrier, the Company's principal regions of destination in 1995
were Europe, Asia, South America, and Australia/New Zealand.
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
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1995, the Company derived approximately 21% of its net air freight
forwarding revenue from its services as an airline agent.
CUSTOMS BROKERAGE
The Company functions as a customs broker with respect to entries of
freight into approximately 50 major destinations in the United States
and in more than 300 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
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management. Such on-line interface with customs agencies speeds 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 advanced computer technology. Such services include electronic
document preparation, routing cargo from overseas origins to ports and
airports of entry, bonded warehousing, distribution of the cleared cargo
to inland locations and duty drawback. 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 additional tools to maintain cost-
effective import programs.
Management estimates that in 1995 the Company handled approximately
300,000 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
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transacted for a particular customer, and the type, number and
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 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 cargo 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
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manufacturing facilities or government installations. 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 1995, approximately 63% of the Company's net
ocean freight forwarding revenue was attributable to commissions,
forwarding fees, and associated ancillary services.
During 1995, 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 in some respects to
its air freight consolidation operations. The Company procures customer
freight, consolidates shipments bound for a particular destination,
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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 generally able
to obtain lower rates from ocean carriers than the rate which the
shipper would be able to procure. In 1995, this service, and associated
ancillary services, contributed approximately 37% 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 international transportation of 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 1995, the Company continued its
program of building state-of-the-art warehouse and distribution
facilities. Additional new facilities projects are contemplated for
1996. The Company's warehousing and distribution services include
inventory control, import/export freight staging, protective and
specialized packing and crating, 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 integrated logistics
solutions offered to customers.
GLOBAL PROJECTS
The Company established global project divisions in North America and
the United Kingdom to meet the special requirements of global project
management and heavy lift movements. In addition to logistics advice,
and traditional ocean and air transportation services, the project
divisions
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provide on-site assistance, vessel chartering services and consulting
regarding large-scale project movements.
CIRCLE TRADE SERVICES, LTD.
In 1994, the Company established Circle Trade Services, Ltd., ("CTSL")
which offers purchasing, procurement and trade finance services to
companies engaged in global trade. CTSL's mission is to provide
customers requiring the international transportation of cargo with
creative global trade solutions which enable customers to successfully
complete international transactions. Included among its various trade
services, CTSL has developed programs for customers which result in
lower costs by finding new sourcing opportunities, coordinating the
activities of multiple suppliers, and creating trade finance solutions.
CTSL offers international procurement and financing expertise not
offered by traditional logistics companies and works globally with a
network of Company and franchise offices to develop this specialized
business.
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 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
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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 transportation costs, 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.
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
<PAGE> 23
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, in addition to 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 designed to meet the customer's
total door-to-door transportation requirements to assist the customer in
creating more efficient global sourcing, financing, inventory and
warehousing strategies. The value-added logistics capabilities which
support this strategy use the full-spectrum of services offered by the
Company, including information management, inventory management,
protective packing, vendor coordination and purchase order management,
ocean or air transportation, customs brokerage, warehouse and
distribution and global trade services. 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 requiring employees assigned and
dedicated exclusively to the customer's shipment management
requirements. In recent years, the Company has committed significant
resources to information technology and facilities to develop and
implement its integrated transportation logistics services.
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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. 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
Global Sales departments designed to support the Company's sales and
marketing activities.
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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, 1995, the Company employed approximately 3,250
persons, of whom approximately 700 were engaged in managerial and sales
activities, and the balance were engaged in operations or were general
office employees.
Executive Officers
The Company's executive officers are as follows:
Name Age Position
- ---------------------- --- --------
Peter Gibert 53 Chairman of the Board,
President, and Chief
Executive Officer
Robert J. Diaz 53 Senior Vice President
and Chief Financial
Officer
Martin R. Collins 58 Vice President
Patrick Morrison 61 Vice President, Chief
Information Officer
Kim E. Wertheimer 42 Vice President
Robert H. Kennis 43 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.
<PAGE> 26
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 first 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. 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. 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. In
February 1992, Mr. Collins rejoined the Company and served in various
capacities. As Vice President, Mr. Collins presently has management
responsibilities for the Company's North American operations and for
mergers and acquisitions activity.
Mr. Morrison joined the Company in June 1993 as Vice President of
Information Services. He is the Company's Chief
<PAGE> 27
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. Wertheimer joined the Company in May 1991, following the Company's
acquisition of Sekin Transport International. In May 1995, he was
elected Vice President and presently has management responsibilities for
the Company's North American marketing, customs brokerage, integrated
logistics and information services operations. Before becoming Vice
President, Mr. Wertheimer managed the Company's Southwest region and was
responsible for managing its operation and leading the Company's
integrated logistics activities. From 1988 to 1991, Mr. Wertheimer was
Vice President of Planning and Development at Sekin Transport
International. Prior to 1988, Mr. Wertheimer was a consultant with
McKinsey & Company, an international management consulting firm.
<PAGE> 28
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,
1995 concerning the Company's domestic and foreign facilities and
freight handling terminals.
Number of Facilities
Owned Leased Total
----- ------ -----
Domestic 18 51 69
Foreign 24 144 168
--- --- ---
Total 42 195 237
=== === ===
<PAGE> 29
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 1995, the aggregate rental expense for all of the Company's leased
property was approximately $7.8 million.
For further information concerning the Company's lease commitments, see
Note 6 of the Notes to Consolidated Financial Statements in the 1995
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 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> 30
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. The matter is under active consideration before the Internal
Revenue Service Appeals Office. Because of the number and complexity of
the issues involved, resolution of the issues may require a number of
years.
<PAGE> 31
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.
Item 4 - Submission of Matters to a Vote of Security Holders
Inapplicable.
<PAGE> 32
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 32 of the Company's Annual Report to Stockholders for the year
ended December 31, 1995.
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, 1995.
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 18 and 19 of the Company's Annual Report to Stockholders for the
year ended December 31, 1995.
Item 8 - Financial Statements and Supplementary Data
The information required by this item is incorporated by reference from
pages 20 through 31 of the Company's Annual Report to Stockholders for
the year ended December 31, 1995. Also see Item 14 below.
Item 9 - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Inapplicable.
<PAGE> 33
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 15 of the Company's Proxy Statement dated April 1, 1996
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 6 of the Company's Proxy Statement dated April 1, 1996
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
pages 14 and 15 of the Company's Proxy Statement dated April 1, 1996
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
pages 6 and 7 of the Company's Proxy Statement dated April 1, 1996 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> 34
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 37.
(3) Exhibits: See attached Exhibit Index on pages 38 through
41.
(b) No reports on Form 8-K were filed during the last quarter of the
period covered by this report.
<PAGE> 35
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 15, 1996
THE HARPER GROUP, INC.
By: /S/ Peter Gibert
Chairman of the Board, President
and Chief Executive Officer
<PAGE> 36
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 15, 1996.
Signature Title
Chairman of the Board,
/S/ (Peter Gibert) President and Chief Executive
Officer
(Principal Executive Officer)
Senior Vice President and
/S/ (Robert J. Diaz) Chief Financial Officer
(Principal Financial and
Accounting Officer)
/S/ (Wesley J. Fastiff) Director
/S/ (John M. Kaiser) Director
/S/ (Ray C. Robinson, Jr.) Director
/S/ (Frank J. Wezniak) Director
/S/ (Edwin J. Holman) Director
<PAGE> 37
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 1995 Annual Report to
Stockholders (pages 18 through 31)
are hereby incorporated by reference
in this report:
Consolidated Income Statements for
the years ended December 31, 1995,
1994 and 1993 20 *
Consolidated Balance Sheets,
December 31, 1995 and 1994 21 *
Consolidated Statements of Stockholders'
Equity for the years ended December 31,
1995, 1994, and 1993 22 *
Consolidated Statements of Cash Flows
for the years ended December 31, 1995,
1994, and 1993 23 *
Notes to Consolidated Financial Statements 24-30 *
Independent Auditors' Report 31 *
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 Annual Report to Stockholders for
the year-end 1995.
<PAGE> 38
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> 39
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> 40
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.)
10.4.1 Amendments to May 1991 Employment
Agreement of Peter Gibert * 42-44
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.) *
10.8 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.)
10.9 Consultant Agreement effective
as of November 3, 1992 between
Registrant and John H. Robinson.
(Incorporated by reference to
<PAGE> 41
Exhibit Number EXHIBIT PAGE
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) *
10.11.1 Amendment No. 1 to 1994 Omnibus
Equity Incentive Plan * 45
10.12 1995 Stock Option Plan For
Non-Employee Directors * 46-53
10.13 Employment Agreement with
Kim Wertheimer * 54-61
13.1 Sections of the Annual Report to
Stockholders referenced under
Part II, Items 5,6,7 and 8 hereof.
(Pages 1 and 18 through 32 of the
Annual Report to Stockholders.) 62-77
21.1 List of Subsidiaries 78-79
23.1 Consent of Deloitte & Touche LLP 80
* 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.
<PAGE 42>
WESLEY J. FASTIFF
650 California Street, 20th Floor
San Francisco, CA 94108-2693
Telephone: (415) 677-3113
Fax: (415) 391-8011
February 9, 1996
Mr. Peter Gibert
Chairman and Chief Executive Officer
The Harper Group
260 Townsend Street
San Francisco, California 94107-1719
Dear Peter:
On behalf of the Board of Directors, we are pleased to offer you the
following contract terms for your new employment contract with the
Harper Group.
The terms of the contract are as follows: two-year contract beginning
January 1, 1996 and ending December 31, 1997.
1. Compensation: $375,000 per year plus incentive as follows:
a) If earnings per share (EPS) for the calendar year are less
than an 11% increase over the preceding year, there will be no contract
right to a bonus. However, a bonus may be paid to you at the discretion
of the Board of Directors.
b) If earnings per share (EPS) for the calendar year increase
by 11% to 15% over the preceding year, you will receive a bonus in the
amount of 20% of your base salary.
c) If earnings per share (EPS) for the calendar year increase
by 16% to 20% over the preceding year, you will receive a bonus in the
amount of 40% of your base salary.
d) If earnings per share (EPS) for the calendar year increase
by 21% or more over the preceding year, you will receive a bonus in the
amount of 50% of your base salary.
<PAGE> 43
WESLEY J. FASTIFF
Mr. Peter Gibert
February 9, 1996
Page 2
Note: (In the event that a COO or CEO is hired at a base salary above
$375,000 per year, your base salary would be increased to reflect at
least $1,000 per year more than said COO or CEO's base salary).
2. The Board of Directors, based on a majority vote, shall have the
discretion to require you to give up the position of Chief Executive
Officer in the second year of this contract in favor of a successor to
that position. If this occurs, you shall continue with the
responsibilities and duties of the Chairman of the Corporation and your
base salary will be reduced by 25%. Similarly, the incentive aspect of
your compensation for the second year will also be reduced by 25%.
3. If your contract is not renewed after the expiration of its
second year, or in the event that you are terminated from the Company
for a reason other than termination for cause, you will be guaranteed
your second year of base salary for one full year, i.e., a third year at
your second year base salary. However, the third year salary would be
conditioned upon the signing of a no competition agreement so that you
will not be able to engage in an enterprise that would be in competition
with the Harper Group or any of its subsidiaries. No bonus would be
earned by you during said third year.
4. You will be afforded 60,000 shares of stock options from the
Company: 30,000 to vest in the first year, 30,000 to vest in the second
year. However, in the event that the Company is sold or merged and you
are no longer with the Company, the full 60,000 shares would vest
immediately upon your departure from the Company.
5. In the event that your contract is not renewed after the second
year, and if you have not been terminated for cause, the Company will
provide you with the full health and welfare benefits package that is
available to other employees of the Company for said third year.
6. All other items presently contained in your existing employment
contract will remain in full force and effect unless a change is
mutually agreed to by the Company and by you.
<PAGE> 44
WESLEY J. FASTIFF
Mr. Peter Gibert
February 9, 1996
Page 3
I trust the above sets forth our mutual understanding of the terms and
conditions of your continued employment and new contract with the
Company. Would you please indicate your agreement to the above by
signing this letter as set forth below. If you have any questions, of
course, please contact me.
Sincerely,
/S/ WESLEY J. FASTIFF
Member, Board of Directors, Harper Group
Chairman, Human Resources
& Compensation Committee
Agreed to:
/S/Peter Gibert
Date: February 26, 1996
<PAGE> 45
AMENDMENT NO. 1 TO THE HARPER GROUP
1994 OMNIBUS EQUITY INCENTIVE PLAN
Section 4.1 is amended to delete all references to "750,000" and replace
all such numbers with "2,000,000."
<PAGE> 46
EXHIBIT A
DIRECTOR STOCK OPTION PLAN
THE HARPER GROUP, INC.
1995 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
(Effective August 21, 1995)
ARTICLE I
GENERAL
1. PURPOSE.
This 1995 Stock Option Plan for Non-Employee Directors (the "Plan") is
intended to attract and retain the services of experienced and
knowledgeable independent directors of The Harper Group, Inc. (the
"Company") for the benefit of the Company and its shareholders and to
provide additional incentive for such directors to continue to work for
the best interests of the Company and its shareholders.
2. ADMINISTRATION.
The Plan shall be administered by the Human Resources, Compensation and
Nominating Committee of the Board of Directors of the Company (the
"Committee"). The Committee shall, subject to the provisions of the
Plan, grant options under the Plan and shall have the power to construe
the Plan, to determine all questions arising thereunder and to adopt and
amend such rules and regulations for the administration of the Plan as
it may deem desirable.
The interpretation and construction by the Committee of any provisions
of the Plan or of any option granted under it shall be final. No member
of the Committee shall be liable for any action or determination made in
good faith with respect to the Plan or any option granted under it.
3. ELIGIBILITY.
Each director of the Company who is not otherwise an employee of the
Company or any subsidiary as of the effective date of the Plan (August
21, 1995) and has not been an employee of the Company or any subsidiary
for all or any part of the fiscal year preceding such effective date
shall automatically be granted
<PAGE> 47
options to purchase 20,000 shares (subject to adjustment as provided in
Article III hereof) on the effective date of the Plan.
In addition, on the date that any person is for the first time elected
by the shareholders of the Company to the Board of Directors (which
shall include the date that a director appointed by the Board of
Directors is for the first time elected by the shareholders of the
Company to the Board), options to purchase 20,000 shares (subject to
adjustment as provided in Article III hereof) shall automatically be
granted to such newly elected director; provided, however, that such
automatic option grant shall only be made if (I) the director is not
otherwise an employee of the Company or any subsidiary on the date of
such election and has not been an employee for all or any part of the
preceding fiscal year, and (ii) the number of shares subject to future
grant under the Plan is sufficient to make all automatic grants required
to be made pursuant to the Plan on such date.
4. SHARES OF STOCK SUBJECT TO THE PLAN.
The shares that may be issued under the Plan shall be authorized and
unissued or reacquired shares of the Company's common stock (the "Common
Stock"). The aggregate number of shares which may be issued under the
Plan shall not exceed 200,000 shares of Common Stock, unless an
adjustment is required in accordance with Article III.
5. AMENDMENT OF THE PLAN.
The Board of Directors may, insofar as permitted by law, from time to
time, suspend or discontinue the Plan or revise or amend it in any
respect whatsoever, except that no such amendment shall alter or impair
or diminish any rights or obligations under any option theretofore
granted under the Plan without the consent of the person to whom such
option was granted. In addition, without further shareholder approval,
no such amendment shall (A) materially increase the benefits accruing to
participants under the Plan, (B) materially increase the number of
securities which may be issued under the Plan, or (C) materially modify
the requirements as to eligibility for participation in the Plan,
provided, that shareholder approval is not required if such approval is
not required in order to assure the Plan's continued qualification under
Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as
amended. The Plan's provisions regarding the formula for determining
the amount, exercise price, and timing of options to be granted under
the Plan shall in no event be amended more than once every six months,
other than to comport with changes in the Internal Revenue Code of 1986,
as amended.
<PAGE> 48
6. APPROVAL OF SHAREHOLDERS.
All options granted under the Plan before the Plan is approved by
affirmative vote at the next meeting of shareholders of the Company, or
any adjournment thereof, of the holders of a majority of the outstanding
shares of Common Stock present in person or by proxy and entitled to
vote at the meeting shall be subject to such approval. No option
granted hereunder may become exercisable unless and until such approval
is obtained.
7. TERM OF PLAN.
Options may be granted under the Plan until August 21, 2000, the date of
termination of the Plan. Notwithstanding the foregoing, each option
granted under the Plan shall remain in effect until such option has been
satisfied by the issuance of shares or terminated in accordance with its
terms and the terms of the Plan.
8. RESTRICTIONS.
All options granted under the Plan shall be subject to the requirement
that, if at any time, the Committee shall determine, in its discretion,
that the listing, registration or qualification of the shares subject to
options granted under the Plan upon any securities exchange or under any
state or federal law, or the consent or approval of any government
regulatory body, is necessary or desirable as a condition of, or in
connection with, the granting of such option or the issuance, if any, or
purchase of shares in connection therewith, such option may not be
exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Committee.
9. NONASSIGNABILITY.
No option shall be assignable or transferable by the grantee except by
will or by the laws of descent and distribution. During the lifetime of
the optionee, the option shall be exercisable only by him, and no other
person shall acquire any rights therein.
10. WITHHOLDING TAXES.
Whenever shares of Common Stock are to be issued under the Plan, the
Company shall have the right to require the optionee to remit to the
Company an amount sufficient to satisfy federal, state and local
withholding tax requirements prior to the delivery of any certificate or
certificates for such shares.
<PAGE> 49
11. DEFINITION OF "FAIR MARKET VALUE".
For the purposes of this Plan, the term "fair market value," when used
in reference to the date of grant of an option or the date of surrender
of Common Stock in payment for the purchase of shares pursuant to the
exercise of an option, as the case may be, shall be the last sale price
in the NASDAQ National Market System on such date as published in the
Wall Street Journal or if no report is available for such date, the next
preceding date for which a report is available, provided that the last
sale price on such preceding date is not less than 100% of the fair
market value of the Common Stock on the date the option is granted. If
the Common Stock is hereafter listed on one or more securities
exchanges, "fair market value" thereafter shall be the mean between the
highest and the lowest sale prices of the Common Stock quoted in the
Transactions Index of each such exchange as averaged with such mean
price as reported on any and all other exchanges, as published in the
Wall Street Journal and determined by the Committee, or if no sale price
was quoted in any such Index for such date, then as of the next
preceding date on which such sale price was quoted, provided that the
mean on such preceding date is not less than 100% of the fair market
value of the Common Stock on the date the option is granted.
ARTICLE II
STOCK OPTIONS
1. AWARD OF STOCK OPTIONS.
Awards of stock options shall be made under the Plan under all the terms
and conditions contained herein. Each option granted under the Plan
shall be evidenced by an option agreement duly executed on behalf of the
Company and by the director to whom such option is granted, which option
agreements may but need not be identical and shall comply with and be
subject to the terms and conditions of the Plan. Any option agreement
may contain such other terms, provisions and conditions not inconsistent
with the Plan as may be determined by the Committee. The date on which
any option is granted shall be the date of the Committee's authorization
of such grant or such later date as may be determined by the Committee
at the time such grant is authorized.
2. TERM OF OPTIONS AND EFFECT OF TERMINATION.
Notwithstanding any other provision of the Plan, no option granted under
the Plan shall be exercisable after the expiration of five years from
the date of its grant.
<PAGE> 50
In the event that any outstanding option under the Plan expires by
reason of lapse of time or otherwise is terminated for any reason, then
the shares of the Common Stock subject to any such option which have not
been issued pursuant to the exercise of the option shall again become
available in the pool of shares for Common Stock for which options may
be granted under the Plan.
3. TERMS AND CONDITIONS OF OPTIONS.
Options granted pursuant to the Plan shall be evidenced by agreements in
such form as the Committee shall from time to time determine, which
agreements shall comply with the following terms and conditions.
A. Number of Shares
Each option agreement shall state the number of shares to which the
option pertains.
B. Option Price
Each option agreement shall state the option price per share (or the
method by which such price shall be computed). The option price per
share of options granted on the effective date of the Plan shall be
$17.34 which is hereby determined to be equal to 100% of the fair market
value of a share of Common Stock on August 21, 1995. The option price
per share of all other options granted under the Plan shall be equal to
100% of the fair market value of a share of the Common Stock on the date
such option is granted.
C. Medium and Time of Payment
The option price shall be payable upon the exercise of an option in the
legal tender of the United States. Upon receipt of payment, the Company
shall deliver to the optionee (or person entitled to exercise the
option) a certificate or certificates for the shares of Common Stock to
which the option pertains.
D. Exercise of Options
Options granted under the Plan shall not be exercisable for a period of
12 months after the date of grant. Subject to the conditions stated
herein and in the option agreements, options shall become exercisable in
installments to the extent of one-quarter of the shares covered by the
option on the date 12 months after the date of grant, an additional one-
quarter of the shares covered by the option on the date 24 months after
the date of grant, an additional one-quarter of the shares covered by
the option on the date 36 months after the date of grant, and the
<PAGE> 51
remaining shares covered by the option on the date 48 months after the
date of grant. Shares entitled to be purchased but not so purchased
during any period described in the foregoing sentences may be purchased
during any subsequent period within the five-year term of the option.
To the extent that an option has become exercisable and subject to the
restrictions and limitations set forth in this Plan and in the option
agreement, it may be exercised in whole or in part or in such lesser
amount as may be authorized by the option agreement, provided, however,
that no option shall be exercised for fewer than ten shares. If
exercised in part, the unexercised portion of an option shall continue
to be held by the optionee and may thereafter be exercised as herein
provided.
E. Termination of Directorship Except by Death
In the event any optionee shall cease to be a director of the Company
for any reason other than his death, his option shall be exercisable, to
the extent it was exercisable at the date he ceased to be a director,
for a period of three months after such date, and shall then terminate.
Such option may be exercised at any time within such three-month period
and prior to the date on which the option expires by its term.
F. Death of Optionee and Transfer of Option
If the optionee dies while a director of the Company, or within the
three-month period after termination of such status during which he is
permitted to exercise an option in accordance with Subsection 3(E) of
this Article II, such option may be exercised at any time within one
year after the optionee's death, but only to the extent the option was
exercisable at the time of death. Such option may be exercised at any
time within such one-year period and prior to the date on which the
option expires by its terms. During such period, such option may be
exercised by any person or persons designated by the optionee on a
Beneficiary Designation Form adopted by the Committee for such purpose,
or, if there is no effective Beneficiary Designation Form on file with
the Committee, by the executors or administrators of the optionee's
estate or by any person or persons who shall have acquired the option
directly from the optionee by his will or the applicable law of descent
and distribution.
ARTICLE III
RECAPITALIZATIONS AND REORGANIZATIONS
The number of shares of Common Stock covered by the Plan, the number of
shares and price per share of each outstanding
<PAGE> 52
option, and the number of shares subject to each grant provided for in
Article I, Section 3 hereof shall be proportionately adjusted for any
increase or decrease in the number of issued and outstanding shares of
Common Stock resulting from a subdivision or consolidation of shares or
the payment of a stock dividend or any other increase or decrease in the
number of issued and outstanding shares of Common Stock effected without
receipt of consideration by the Company.
If the Company shall be the surviving corporation in any merger or
consolidation, each outstanding option shall pertain to and apply to the
securities to which a holder of the same number of shares of Common
Stock that are subject to that option would have been entitled. A
dissolution or liquidation of the Company, or a merger or consolidation
in which the Company is not the surviving corporation, shall cause each
outstanding option to terminate, unless the agreement of merger or
consolidation shall otherwise provide; provided that, in the event such
dissolution, liquidation, merger or consolidation will cause outstanding
options to terminate, each optionee shall have the right immediately
prior to such dissolution, liquidation, merger or consolidation to
exercise his option in whole or in part without regard to any
limitations on the exercisability of such option other than (i) the
expiration date of the option, (ii) the limitation set forth in Section
9 of Article I, and (iii) the ten share limitation set forth in Section
3(D) of Article II.
To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the
Committee, whose determination in that respect shall be final, binding
and conclusive.
The grant of an option pursuant to the Plan shall not affect in any way
the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge or to consolidate or to dissolve, liquidate or
sell, or transfer all or any part of its business or assets.
ARTICLE IV
MISCELLANEOUS PROVISIONS
1. RIGHTS AS A SHAREHOLDER.
An optionee or a transferee of an option shall have no rights as a
shareholder with respect to any shares covered by an option until the
date of the receipt of payment (including any amounts required by the
Company pursuant to Section 10 of Article I) by the Company. No
adjustment shall be made as to any
<PAGE> 53
option for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other rights for which
the record date is prior to such date, except as provided in Article
III.
2. PURCHASE FOR INVESTMENT.
Unless the shares of Common Stock to be issued upon exercise of an
option granted under the Plan have been effectively registered under the
Securities Act of 1933 as now in force or hereafter amended, the Company
shall be under no obligation to issue any shares of Common Stock covered
by any option unless the person who exercises such option, in whole or
in part, shall give a written representation and undertaking to the
Company which is satisfactory in form and scope to counsel to the
Company and upon which, in the opinion of such counsel, the Company may
reasonably rely, that he is acquiring the shares of Common Stock issued
to him pursuant to such exercise of the option for his own account as an
investment and not with a view to, or for sale in connection with, the
distribution of any such shares of Common Stock, and that he will make
no transfer of the same except in compliance with any rules and
regulations in force at the time of such transfer under the Securities
Act of 1933, or any other applicable law, and that if shares of Common
Stock are to be issued without such registration, a legend to this
effect may be endorsed upon the securities so issued.
3. OTHER PROVISIONS.
The option agreements authorized under the Plan shall contain such other
provisions, including, without limitation, restrictions upon the
exercise of the option or restrictions required by any applicable
securities laws, as the Committee shall deem advisable.
4. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Common Stock
pursuant to the exercise of the options will be used for general
corporate purposes.
5. NO OBLIGATION TO EXERCISE OPTION.
The granting of an option shall impose no obligation upon the optionee
to exercise such option.
<PAGE> 54
EMPLOYMENT AGREEMENT
This Agreement is effective as of November 1, 1994, by and between The
Harper Group, Inc., a Delaware corporation ("Harper") and Kim Wertheimer
("Employee").
Harper wishes to transfer Employee from Dallas, Texas to San Francisco,
California and Employee is willing to accept such transfer on a full-
time basis upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the promises and mutual covenants
hereinafter set forth and the consideration described in this Agreement,
Harper and Employee hereby agree as follows:
1. Nature of Agreement:
1.1. Employment. Harper agrees to transfer Employee, and
Employee agrees to accept such transfer by Harper upon the terms and
conditions herein provided.
1.2. Cancellation of Prior Offers. Any and all prior
contracts of employment or offers or representations with respect
thereto are hereby canceled and void in all their terms and conditions.
This provision shall not pertain to any stock option or non-solicitation
agreements previously entered into with Employee.
2. Terms and Duties:
2.1. Term of Employment. The employment of Employee under
this Agreement shall be for three (3) years and is terminable as more
particularly set forth in Article 6 ("Termination").
2.2. Location. Employee's location of employment shall be
in San Francisco. Employee's location of employment may be changed only
upon the mutual consent of Employee and Harper.
2.3. Position and Primary Responsibility. Employee shall
serve as Senior Vice President, Global Logistics Management, Circle
international, Inc. In such capacity, he shall be responsible for all
areas reasonably requested by the Chief Executive Officer of Harper and
he shall report to the Chief Executive Officer.
2.4. Exclusivity. During the employment term, Employee
shall devote his full time, attention, energies, and best efforts
exclusively to the performance of his duties for and on behalf of
Harper.
<PAGE> 55
3. Compensation:
3.1. Base Salary. Employee shall receive a base salary of
$14,000 per month, which shall be subject to an annual performance
review.
3.2. Bonus. For 1995 and thereafter, Employee shall
receive an annual bonus in an amount equal to 1/4 of 1% of Harper's
income from operations ("operating income"), on the condition that the
operating income is at least 110% of the previous year's. In any event,
Wertheimer shall be entitled to an annual minimum guaranteed bonus of
$45,000 per year. Attached as Exhibit A is the Company's Income
Statement in which operating income as defined herein is reported. In
the event of an acquisition or merger increasing Harper's operating
income above that recorded for 1994, any bonus based on this additional
income shall be subject to the reasonable discretion of the Chief
Executive Officer. Subject to the provisions of Section 6.3b below,
each bonus payment hereunder is due on the condition that Wertheimer is
employed with the Company when the company-wide annual bonuses are paid.
3.3. Payment. All compensation to Employee hereunder
shall be paid in accordance with all relevant Harper directives, rules,
and regulations and cost accounting policies in effect from time to time
and shall be subject to all applicable employment and withholding taxes.
4. Other Employment Benefits:
4.1. Harper's insurance and benefit plans will be available to
Employee and his dependents on the same basis as it is currently
provided.
4.2. Employee will receive each year a three-week paid
vacation.
4.3. Employee also will be entitled to participate in the
Harper 401-K plan, profit sharing plan, and stock option plans.
Effective November 1, 1994 Wertheimer has been granted options to
purchase 15,000 shares of Harper Group common stock pursuant to the
Company's Omnibus Equity Incentive Plan. For each year in which this
Employment Agreement is effective pursuant to Section 2.1. above,
Wertheimer shall be entitled to a grant of options to purchase 15,000
shares of common stock under the Company's then existing stock option
plan.
4.4. The Company will pay all of Wertheimer's reasonable moving
expenses for him and his immediate family to move from Dallas, Texas to
the San Francisco Bay Area in an amount not to exceed $20,000 upon
presentation of reasonable invoices for moving expenses.
4.5. The Company will loan Wertheimer the amount of $100,000 to
assist with housing costs, which shall include real estate brokerage
costs, points and a down payment for the purchase of a home in the San
Francisco Bay Area. This amount
<PAGE> 56
will be due to Wertheimer when he provides to Harper a fully executed
real estate purchase and sale contract, regardless of whether this
agreement has expired without renewal at the time Wertheimer requests
said funds. The unpaid principal of the loan will bear interest at six
percent (6%) per annum and shall be evidenced by a promissory note. The
principal and accrued interest of the loan will be forgiven in equal
annual installments, over five years, with the date of advancement of
the $100,000 as the anniversary date, as long as Wertheimer remains an
employee of the Company. The entire unpaid balance shall be forgiven if
Wertheimer's employment is terminated without cause or in the event of
Wertheimer's death or permanent disability. The entire unpaid balance
shall be accelerated and immediately due and owing upon either
Wertheimer's voluntary resignation as an employee or termination of
employment with cause. The balance outstanding will not be accelerated
in the event this Agreement expires without renewal as long as
Wertheimer remains an employee of the Company. To the extent the
forgiveness of the above loan is a taxable event, Harper will take the
required action to pay 50% of all of the projected additional tax
imposed on Wertheimer based on the appropriate and applicable federal
and state tax rates for Wertheimer.
5. Additional Obligations of Employees During and After Employment:
5.1. Non-Competition. So long as Employee is employed by
Harper, Employee will engage in no other business activities directly or
indirectly which are or may be competitive or which might place him in a
competing position to that of Harper or any parent, affiliated, or
subsidiary company of Harper without the written consent of the Chief
Executive Officer. Employee shall make written disclosure to the Chief
Executive Officer of Harper of any activity in which he is engaging or
plans to engage which directly or indirectly might be competitive or
which might place him in a competing position to that of Harper or any
of its affiliated or subsidiary companies. The obligation to make such
written disclosure extends to all activity by which Employee is making
preparations to compete with Harper.
5.2. Records. All records, files, documents, and the like,
or abstracts, summaries, or copies thereof, relating to the business of
Harper or the business of any of Harper's parent, subsidiary, or
affiliated companies, which Harper or Employee shall prepare or use or
come into contact with, shall remain the sole property of Harper or the
affiliated or subsidiary company, as the case may be, and shall not be
removed from the premises without the written consent of Harper, and
shall be promptly returned to Harper upon termination of employment.
5.3. Customers of Harper. If Employee personally or through
any employees or departments under Employee's direction has been
responsible for and/or participated in any contracts, assignments, or
follow-ons to such contracts or assignments for customers of Harper in
the normal course of Harper's business, and/or if proposals to engage in
such contracts and /or assignments have been submitted or actively
solicited by Harper within two years prior to the date of termination,
Employee shall not solicit,
<PAGE> 57
provide services or information to, work for, provide consulting
services to, or in any way be engaged by any such customer for a period
of one year after termination of employment hereunder. Employee
understands, acknowledges, and agrees that such customers are developed
and maintained by Harper through the use of confidential, proprietary,
and/or trade secret information to which Employee may have access during
his employment term. Additionally, Employee shall remain bound by the
terms of the Non-Solicitation Agreement dated August 19, 1992 attached
hereto as Exhibit B. Any compensation due under that Agreement shall be
paid when due, in addition to any other compensation provided for in
this Agreement.
5.4. Enforcement. In addition to the remedies provided in
Article 9 ("Arbitration"), Harper shall be entitled to equitable relief,
including provisional and final injunctive relief, to enforce the terms
of this Article 5 ("Additional Obligations of Employee During and After
Employment").
6. Termination:
6.1. Immediate Termination of Employment by Harper. Harper may
immediately terminate this Employment Agreement at any time under the
following conditions:
a. Upon the Employee's death or incapacity. In such case,
Employee's compensation shall be calculated through the last day of the
month in which said death or incapacity occurred, and paid to Employee,
his heirs or estate;
b. The conviction of any felony or of a misdemeanor involving
fraud or dishonesty, and/or the commission or omission of acts deemed to
be fraudulent or materially dishonest. In such case, compensation shall
be calculated through the last day actually worked by Employee.
6.2. Termination of Employment for Cause. Harper may terminate
Employee's employment for cause, which shall include, without
limitation, a breach of any of the material terms of this Agreement, a
material and repeated failure to follow either general corporate
policies or the reasonable instructions of the Chief Executive Officer
of Harper, or any of the conditions set out above in Paragraph 6.1.
Employee shall be given reasonable notice of any of the grounds for
termination of employment for cause, and shall be given the opportunity
to discuss and address such notice with the Chief Executive Officer.
6.3. Termination of Employment Without Cause.
a. In the event of termination without cause, or constructive
termination by a material change in the responsibilities of Employee, or
by a change in the location of Employee's employment, Employee's sole
remedy shall be an entitlement to receive his base monthly compensation
in each of the twelve (12) months from the date of
<PAGE> 58
termination. During which time Employee shall accept no other employment
without the consent of Harper, which consent shall not be unreasonably
withheld. Any amounts received during such twelve (12) month period
from a subsequent employer shall be in mitigation of Harper's
responsibilities to make payment hereunder, and shall be offset against
amounts due by Harper.
b. In the event of either termination without cause or a
failure to renew this Agreement as provided for below, Employee shall be
entitled to receive a pro-rata share of the incentive payment, if any,
earned by him that fiscal year, based on the number of days worked prior
to termination as the numerator and 365 days as the denominator.
Employee shall not be entitled to an incentive payment if his employment
has been voluntarily terminated by him or terminated by Harper with
cause.
c. In the event that Harper fails to renew this Agreement on
substantially similar terms for reasons without cause, Employee shall be
entitled to receive his base monthly compensation in each of the twelve
(12) months from the date of expiration of this Agreement, subject to
Harper's right to offset in Paragraph 6.3.a above, and the pro-rata
share of the incentive payment, if any, earned as provided for above.
6.4. Termination of Employment by Employee. Employee may
terminate his employment at Harper at any time with or without cause
during the term of this Agreement. However, any such termination must be
made upon the giving of sixty (60) days written notice to Harper's Chief
Executive Officer. Employee shall be entitled to convert company
insurance plans in accordance with applicable federal and state laws
upon such termination.
6.5. Effect of Termination. Except as otherwise provided
herein, termination of employment shall terminate all obligations of
Harper pursuant to this Agreement. Termination of employment shall
result in immediate termination of Employee's employment term.
7. Entire Agreement:
7.1. This Agreement is to be considered in conjunction with
the Non-Solicitation Agreement attached hereto as Exhibit B and the
Incentive Stock Option dated November 1, 1994. These Agreements
constitute the entire understanding of the parties hereto and supersedes
any and all prior agreements and understandings, whether oral or
written, between the parties. This Agreement may be modified only by
agreement in writing executed by Employee and the Chief Executive
Officer of Harper. This Agreement may not be modified by any implied
understanding or agreement, notwithstanding any statements or conduct of
the parties occurring subsequent to the formation of this Agreement.
<PAGE> 59
8. Miscellaneous:
8.1. Interpretation of this Agreement. This Agreement shall be
interpreted in accordance with the plain meaning of its terms and not
strictly for or against either party hereto.
8.2. Variation. Any variation in salary or conditions which
may occur after the effective date of this Agreement shall not
constitute a new agreement, but the terms and conditions of this
Agreement, except as to such variation, shall continue in force.
8.3. Unenforceability. The unenforceability or invalidity of
any paragraph or subparagraph, or portion thereof, of this Agreement
shall not affect the enforceability and validity of the balance of this
Agreement.
8.4. Collateral Documents. Each party hereto shall make,
execute, and deliver such other instruments or documents as may be
reasonably required in order to effectuate the purposes of this
Agreement.
8.5. Written Policies and Procedures. The written policies and
procedures of Harper or its parent company, The Harper Group, Inc.,
where not in contradiction to or superseded by this Agreement, as from
time to time amended shall be binding upon and adhered to by Employee.
Copies of said policies and procedures are available to Employee in the
offices of The Harper Group, Inc. Nothing in said written policies and
procedures of The Harper Group, Inc. shall in any way be construed to
alter, amend, or modify the termination provisions set forth in Article
6 herein above.
8.6. Notice to Prospective Employers. Employee agrees that
he shall provide prospective employers of Employee a copy of this
Employment Agreement prior to accepting any offers of employment made by
said prospective employers during the period one year following the date
that Employee's employment hereunder terminates. If Employee does not
upon demand of Harper provide adequate proof that he has complied with
this obligation, Employee agrees that Harper may in its sole discretion
and without recourse by Employee provide any employer to whom Employee
was obliged to provide this Agreement with a copy hereof.
8.7. Notices. Any notices to be given hereunder to any party
must be in writing and must be effected by personal delivery or by
registered or certified mail, postage pre-paid with return receipt
requested. Mailed notices shall be directed to the parties at the
addresses appearing below. Each party may change his address by giving
written notice in accordance with this section. Notices delivered
personally shall be deemed communicated as of actual receipt; mailed
notices shall be deemed communicated as of three (3) business days after
deposit with the United States Postal Service.
<PAGE> 60
EMPLOYER: EMPLOYEE:
The Harper Group, Inc. Kim Wertheimer
260 Townsend Street 260 Townsend Street
San Francisco, CA 94107 San Francisco, CA 94107
8.8. Assignment. None of the obligations or duties or rights
or benefits arising under this Agreement may be assigned or delegated by
Employee, in whole or in part, without the prior written consent of the
Chief Executive Officer of Harper.
8.9. Gender and Number. Whenever the context of this Agreement
permits, the masculine, feminine, and neuter shall each include the
other, and the singular shall include the plural.
9. Arbitration:
9. 1. In the event there is any dispute arising out of
Employee's employment with Harper, the termination of that employment,
or this Employment Agreement, whether such dispute gives rise or may
give rise to a cause of action in contract or tort or based on any other
theory or statute, including without limitation for breach of the
covenant of good faith and fair dealing or employment discrimination,
Employee and Harper agree to submit exclusively such dispute to final
and binding arbitration pursuant to the provisions of Title 9 of Part
III of the California Code of Civil Procedure, commencing at Section
1280, et seq., or any successor or replacement statutes, upon a request
submitted in writing to the party to this employment agreement within
six (6) months of the date of the dispute arose or the termination of
Employee's employment, whichever occurs first. The failure to timely
request arbitration hereunder shall constitute a complete waiver of all
rights to raise any claims in any forum arising out of any dispute
described herein. The limitations period set forth herein shall not be
subject to tolling, equitable or otherwise. The parties agree that such
arbitration shall be the exclusive remedy for any dispute described
herein. The parties further agree that, except as specifically provided
otherwise herein, in arbitration the exclusive remedy for alleged
violation of the terms, conditions, or covenants of employment,
including this employment agreement, and for any harm alleged in
connection with any dispute subject to arbitration hereunder shall be a
money award not to exceed the amount of actual contract damages less any
proper offset for mitigation of such damages, and the parties shall not
be entitled to any other remedy at law or in equity including but not
limited to other money damages, punitive damages, specific performance,
and/or injunctive relief. Prior to submitting any dispute to
arbitration hereunder, the parties shall attempt to settle such dispute
themselves. The arbitrator shall not have the power to alter, amend, or
modify any of the provisions of this employment agreement. Nothing
herein shall be construed to abridge any of Employee's rights to seek
workers' compensation benefits.
<PAGE> 61
IN WITNESS WHEREOF, the parties hereto have executed this agreement on
the day and year above written.
THE HARPER GROUP, INC.
By:
/S/ KIM WERTHEIMER
<PAGE> 1
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
the Harper Group, Inc. and Subsidiaries
(dollars in thousands except per share and employee amounts)
Year ended December 31
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue
Air freight
forwarding $346,624 64% $313,012 67% $282,031 66% $272,159 63% $279,734 62%
Customs brokerage
and other 102,377 19 77,694 16 62,066 14 66,692 15 62,337 14
Ocean freight
forwarding 93,327 17 78,842 17 85,841 20 92,817 22 111,359 24
-------- ---- -------- ---- -------- ---- -------- ---- -------- ----
Total $542,328 100% $469,548 100% $429,938 100% $431,668 100% $453,430 100%
======== ==== ======== ==== ======== ==== ======== ==== ======== ====
Net revenue
Air freight
forwarding $ 87,747 40% $ 87,467 45% $ 86,322 47% $ 89,919 46% $ 87,719 46%
Customs brokerage
and other 102,377 46 77,694 40 62,066 34 66,692 34 62,337 33
Ocean freight
forwarding 31,687 14 28,978 15 34,065 19 38,089 20 38,964 21
-------- ---- -------- ---- -------- ---- -------- ---- -------- ----
Total $221,811 100% $194,139 100% $182,453 100% $194,700 100% $189,020 100%
======== ==== ======== ==== ======== ==== ======== ==== ======== ====
Income from
operations
(A)(B) $ 27,229 $ 23,739 $ 15,166 $ 8,691 $ 21,193
Net income
(A)(B) 18,872 16,706 19,094 4,969 16,663
Net income
per share 1.18 1.02 1.15 .30 1.02
Dividends declared
per share .22 .21 .20 .20 .19
At December 31:
Working
capital $ 73,007 $ 42,674 $ 32,241 $ 22,502 $ 42,810
Marketable
securities 36,544 41,660 47,869 35,823 23,781
Total assets 336,743 324,464 302,920 297,240 317,740
Long-term
obligations 30,053 31,867 22,561 26,079 33,000
Stockholders'
equity $165,456 $151,349 $145,175 $130,702 $131,305
Number of
employees 3,214 3,150 3,025 3,175 3,279
</TABLE>
(A) 1993 includes an after-tax gain on the sale of Intercargo stock of
$2,874,000 ($.17 per share) and an after tax gain on the sale of
real property in Hong Kong of $1,812,000 ($.11 per share).
(B) 1992 includes special charges of $14.7 million resulting in an
after-tax loss of $12.6 million ($.75 per share).
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
the Harper Group, Inc. and Subsidiaries
Results of Operations:
1995 versus 1994
Revenue in 1995 increased by $72.8 million or 16% over 1994:
Air freight revenue increased by $33.6 million or 11% over 1994 as a
result of revenue increases from North America, Europe, and the Far
East. The increase resulted primarily from an increase in weight
shipped in these regions offset by lower revenue per kilo. Pricing on
air freight shipments continues to be highly competitive which caused
lower revenue per kilo and a decline in yields.
Customs brokerage and other revenue, which includes warehousing,
distribution and other fee based services, increased $24.7 million or
32% over 1994. Customs brokerage revenue increased as a result of an
increase in the number of customs brokerage entries, primarily in North
America and Europe. Warehousing and distribution revenues increased in
North America and Europe, and to a lesser extent in all other regions,
as a direct result of the Company's efforts to provide customers with a
broader range of logistics services.
Ocean freight revenue increased $14.5 million or 18% over 1994 as a
result of an increase in the number of shipments and an increase in the
average revenue per shipment. Revenue increases were derived from North
America and Europe. The increase in average revenue per shipment is due
to the Company's focus on providing a broader range of ocean freight
forwarding services.
Net revenue in 1995 increased by $27.7 million or 14% over 1994:
Air freight net revenue levels were consistent with the prior year. As
a result of competitive pricing pressures and rising cargo space costs
from carriers the Company continues to experience air freight yield
erosion. Over the past few years a higher demand for carrier space
created upward pressure on air freight consolidation costs, which have
not been passed on to customers in all cases.
Ocean freight net revenue increased $2.7 million or 9% over the prior
year as a result of revenue increases from Europe and North America.
The Company experienced some yield erosion in 1995 compared to 1994 due
to increases in ocean carrier costs.
Salaries and related costs increased $15.8 million or 15% over the prior
year as a result of an increase in the number of employees primarily in
Europe where salary costs tend to be higher. Salaries as a percentage
of net revenue are consistent with prior year levels.
Operating, selling and administrative costs increased $8.4 million or
13% as a result of processing more transactions and additional occupancy
costs of new facilities. The new facilities have been added to support
the increases in warehousing and distribution revenue.
Other income - net is less than the prior year primarily as a result of
lower net foreign exchange gains which was slightly offset by an
increase in investment income. Foreign exchange gains and losses are
generally not material and are a normal and recurring part of the
Company's operations. The Company manages foreign currency risks
through spot rates and forward contracts. In 1995, foreign currency
losses were concentrated in Japan and Mexico. Investment income,
primarily interest income, was slightly higher than the prior year due
to higher invested balances.
The effective income tax rates for 1995 and 1994 were 38.2% and 39.8%,
respectively. The Company's effective tax rate fluctuates due to changes
in foreign tax rates and regulations and the level of pre-tax profit in
those countries.
<PAGE> 19
1994 versus 1993
Revenue in 1994 increased by $39.6 million or 9% over 1993:
Air freight revenue increased $31.0 million, or 11% over 1993. 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. European
shipments were consistent with 1993 levels. An increase in weight per
shipment contributed to improved air revenue in all regions except for
Europe.
Customs brokerage and other revenue, which includes warehousing,
distribution and other revenue, increased $15.6 million, or 25%, as a
result of positive contributions from all geographic areas. The
increase in 1994 is primarily attributed to North America.
Ocean freight revenue declined by $7.0 million, or 8%, as a result of a
decrease in the number of indirect shipments and average weight per
shipment, primarily in the Far East, and to a lesser extent in all other
regions.
Net revenue in 1994 increased by $11.7 million or 6% over 1993:
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.
In 1994, North American operating income decreased compared to 1993 as a
result of increased salary costs incurred to add sales and services.
European operating income increased due to a turnaround of European
international trade in 1994 and the adverse effects of restructuring the
European operations in 1993.
Other income - net decreased from 1993 as a result of the sale of the
Company's equity investment in Intercargo Corporation in 1993, increased
interest expense due to increased interest rates and reduced earnings
from the Company's investment portfolio in 1994 compared to 1993.
Taxes on income increased as a result of increased earnings in higher
tax rate countries.
Liquidity and Capital Resources, 1995 and 1994:
Commercial paper issued and outstanding at the end of 1995 and 1994 was
$25 million which is supported by a $25 million back-up facility. In
addition, the Company has short term uncommitted, available lines of
credit of up to $27 million which management believes is adequate to
supplement cash flows from operations, fund its capital expenditures and
pay dividends.
Capital expenditures for 1995 and 1994 were $13 million and $17 million,
respectively, representing investments in information technology and
investments in new facilities, primarily in North America.
In December, 1995, the Company sold and leased back six of its North
American facilities. Proceeds from the sale were approximately $15
million. No gain or loss was recognized on the transaction. The
Company believes the sale and leaseback transaction improves the
utilization of the Company's assets and makes its balance sheet more
comparable with companies in its peer group.
During 1994, the Company's Board of Directors approved stock repurchase
programs whereby the Company may purchase a total of 1,000,000 shares of
its common stock on the open market. The Company repurchased 287,000
and 500,000 shares in 1995 and 1994, respectively.
Net cash provided by operating activities increased to $22.2 million in
1995 from $16.7 million in 1994. During 1995, the Company implemented
reporting, training and measurement systems which were designed to
improve the Company's trade working capital position and cash flow from
operations. The Company believes these efforts will improve the
Company's ability to generate cash.
The Company makes significant disbursements on behalf of its customers
for transportation costs and customs duties. The billings to customers
for these disbursements, which are several times the amount of revenue
and fees derived from these transactions, are not recorded as revenue
and expense on the Company's income statement.
<PAGE> 20
CONSOLIDATED INCOME STATEMENTS
the Harper Group, Inc. and Subsidiaries
(in thousands except per share amounts)
Year ended December 31
1995 1994 1993
---- ---- ----
Revenue $542,328 $469,548 $429,938
Freight consolidation costs 320,517 275,409 247,485
-------- -------- --------
Net revenue 221,811 194,139 182,453
Other costs and expenses:
Salaries and related 119,967 104,146 99,605
Operating, selling and
administrative 74,615 66,254 67,682
-------- -------- --------
Total other costs and expenses 194,582 170,400 167,287
-------- -------- --------
Income from operations 27,229 23,739 15,166
Other income-net (Note 10) 3,307 4,033 13,076
-------- -------- --------
Income before taxes on income 30,536 27,772 28,242
Taxes on income (Note 9) 11,664 11,066 9,148
-------- -------- --------
Net income $ 18,872 $ 16,706 $ 19,094
======== ======== ========
Net income per share $ 1.18 $ 1.02 $ 1.15
======== ======== ========
Weighted average common shares
outstanding 16,021 16,428 16,602
======== ======== ========
See Notes to Consolidated Financial Statements
<PAGE> 21
CONSOLIDATED BALANCE SHEETS
the Harper Group, Inc. and Subsidiaries
(in thousands except share and per share amounts)
December 31
1995 1994
---- ----
Assets
Current assets:
Cash and equivalents $ 22,439 $ 18,135
Short-term investments 11,299 2,126
Accounts receivable less allowance
(1995, $4,739; 1994, $4,414) 166,885 153,664
Other current assets 6,741 4,791
--------- ---------
Total current assets 207,364 178,716
Property:
Land 16,876 21,836
Buildings and improvements 56,297 69,606
Equipment and furniture 56,835 51,008
--------- ---------
Total 130,008 142,450
Less accumulated depreciation 56,413 55,032
--------- ---------
Property - net 73,595 87,418
Marketable securities (Note 3) 36,544 41,660
Other assets 19,240 16,670
--------- ---------
Total Assets $ 336,743 $ 324,464
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable to banks $ 2,898 $ 14,385
Accounts payable 101,313 93,384
Accrued salaries and related 9,084 7,274
Dividends payable 1,756 1,775
Other current liabilities 19,306 19,224
--------- ---------
Total current liabilities 134,357 136,042
Deferred income taxes (Note 9) 6,877 5,206
Long-term notes payable (Note 5) 30,053 31,867
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
(including treasury shares) 1995,
16,250,669; 1994, 16,132,678 (Note 8) 19,956 18,600
Treasury stock, at cost, 287,000 shares (4,890) -
Retained earnings 155,427 140,063
Unrealized change in value of
marketable securities (Note 3) (806) (2,657)
Cumulative translation adjustments (4,231) (4,657)
--------- ---------
Total stockholders' equity 165,456 151,349
--------- ---------
Total Liabilities and
stockholders' equity $ 336,743 $ 324,464
========= =========
See Notes to Consolidated Financial Statements
<PAGE> 22
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
the Harper Group, Inc. and Subsidiaries
(in thousands except share and per share amounts)
For the years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Cumu-
lative Unrealized
Trans- Change in Total
lation Value of Stock-
Common Stock Treasury Stock Retained Adjust- Marketable holders'
Shares Amount Shares Amount Earnings ments Securities Equity
------ ------ ------ ------ -------- ------ ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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)
Exercise of
stock options,
net of taxes 27,278 285 -- -- -- -- -- 285
Foreign currency
translation -- -- -- -- -- (1,583) -- (1,583)
--------- ------- -------- -------- -------- ------- ------- --------
Balance December
31, 1993 16,625,803 $25,686 -- -- $126,770 $(7,281) -- $145,175
Net income -- -- -- -- 16,706 -- -- 16,706
Cash dividends
($.21 per share) -- -- -- -- (3,413) -- -- (3,413)
Exercise of stock
options, net of
taxes 6,875 86 -- -- -- -- -- 86
Repurchase and
retirement of
common stock (500,000) (7,172) -- -- -- -- -- (7,172)
Change in the
value of
marketable
securities -- -- -- -- -- -- $(2,657) (2,657)
Foreign currency
translation -- -- -- -- -- 2,624 -- 2,624
---------- ------- -------- ------- -------- ------- ------- --------
Balance December
31, 1994 16,132,678 $18,600 -- -- $140,063 $(4,657) $(2,657) $151,349
Net income -- -- -- -- 18,872 -- -- 18,872
Cash dividends
($.22 per share) -- -- -- -- (3,508) -- -- (3,508)
Exercise of
stock options,
net of taxes 117,991 1,356 -- -- -- -- -- 1,356
Purchase of
treasury stock -- -- (287,000) (4,890) -- -- -- (4,890)
Change in the
value of
marketable
securities -- -- -- -- -- -- 1,851 1,851
Foreign currency
translation -- -- -- -- -- 426 -- 426
---------- ------- -------- ------- -------- ------- ------- --------
Balance December
31, 1995 16,250,669 $19,956 (287,000) $(4,890) $155,427 $(4,231) $ (806) $165,456
========== ======= ======== ======= ======== ======= ======= ========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 23
CONSOLIDATED STATEMENTS OF CASH FLOWS
the Harper Group, Inc. and Subsidiaries
(in thousands)
Year ended December 31
1995 1994 1993
---- ---- ----
Operating activities:
Net income $18,872 $16,706 $19,094
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 10,700 10,005 9,717
Provision for doubtful accounts 3,130 2,239 3,418
Deferred income taxes 653 (150) (1,553)
Gains on sales of real
property, investments, equipment
and equity investments (911) (1,261) (7,590)
Equity in earnings of affiliates (679) (1,157) (641)
Other 461 609 564
Net effect of changes in:
Accounts receivable (18,192) (17,617) (8,832)
Other current assets (1,967) 1,882 2,197
Accounts payable 8,225 2,149 (2,426)
Other current liabilities 1,949 3,312 (813)
------- ------- --------
Net cash provided by operating activities 22,241 16,717 13,135
Investing activities:
Proceeds from sales of property 19,720 2,923 14,421
Proceeds from sales of equity
investments - 1,007 12,413
Proceeds from sales of
marketable securities 7,108 25,301 61,390
Purchases of marketable securities - (23,085) (73,436)
Short-term investments-net (8,482) (100) 559
Capital expenditures (12,690) (16,817) (15,840)
Acquisition of businesses (2,772) (1,458) -
Other 11 (263) 279
------- ------- -------
Net cash provided by (used in)
investing activities 2,895 (12,492) (214)
Financing activities:
Issuance (repayment) of long-term
notes payable - net (1,814) 9,306 (3,518)
Increase (decrease) in notes payable (11,487) 2,752 (609)
Payments of dividends (3,551) (3,301) (3,323)
Proceeds from exercise of
stock options 1,206 86 268
Common stock repurchase (4,890) (7,172) -
------- ------- -------
Net cash provided by (used in)
financing activities (20,536) 1,671 (7,182)
Effect of exchange rate changes on cash (296) 937 (651)
------- ------- -------
Increase in cash and equivalents 4,304 6,833 5,088
Cash and equivalents at beginning of year 18,135 11,302 6,214
------- ------- -------
Cash and equivalents at end of year $22,439 $18,135 $11,302
======= ======= =======
Cash paid for interest expense $ 3,448 $ 3,206 $ 2,463
======= ======= =======
Cash paid for income taxes $10,246 $ 7,645 $10,884
======= ======= =======
See Notes to Consolidated Financial Statements
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the Harper Group, Inc. and Subsidiaries
Note 1 - Significant Accounting Policies
Nature of Operations - The Harper Group Inc. (the Company), is an
international transportation and logistics service provider. The
Company's services are provided through its network of 356 offices,
distribution centers, and agents located in approximately 94 countries
on six continents. The Company's principal lines of business are air
freight forwarding, ocean freight forwarding, customs brokerage and
value added services such as insurance, warehousing and distribution.
The principal markets for all lines of business are North America,
Europe and the Far East with significant operations in the Middle East,
Latin America and the South Pacific (see Note 11).
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Principles of Consolidation - The accompanying consolidated financial
statements include the Harper Group, Inc. and its majority-owned
subsidiaries. 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 and equipment are stated at cost. Depreciation is computed
principally by the straight-line method at rates based on the estimated
useful lives of the various classes of property as follows: building,
20-50 years; leasehold improvements, life of the lease or estimated
useful life if shorter; equipment and furniture, 3-10 years.
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 change in the deferred tax
assets and liabilities during the year. Deferred income taxes represent
tax credit carry forwards 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 stock-
holders' equity. Gains and losses from foreign exchange transactions
are included in net income.
Fair Value of Financial Instruments - The fair values presented through-
out these financial statements have been estimated using appropriate
valuation methodologies and market information available at December 31,
1995 and 1994. 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
<PAGE> 25
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 not been estimated since December 31, 1995. 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 amount 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 amount of
these items approximate their fair value.
Foreign Currency Forward Contracts - The Company uses foreign currency
forward contracts to hedge foreign currency exposure on accounts payable
transactions in certain currencies. These contracts do not subject the
Company to risk due to exchange rate movements because gains and losses
on these contracts offset gains and losses on the payables being hedged.
At December 31, 1995, the notional value of foreign currency forward
contracts outstanding was approximately $900,000 with a duration of 15
to 30 days. The market value approximated cost.
New Accounting Standards:
Impairment of Long Lived Assets - In 1996 the Company will be subject to
the provisions of SFAS No.121, "Accounting for the Impairment of Long
Lived Assets," which establishes recognition and measurement criteria
for impairment losses when a company no longer expects to recover the
carrying value of a long lived asset. Management does not expect that
the adoption of SFAS No.121 will have a material effect on the Company's
financial statements.
Stock Based Options - In 1995, the Financial Accounting Standards Board
issued SFAS No.123, "Accounting for Stock-Based Compensation," which
requires adoption of its disclosure provisions in 1996. The new
standard defines a fair value method of accounting for stock options and
other equity instruments. Under the fair value method, compensation is
measured at the grant date based on the fair value of the award and is
recognized over the service period, which is usually the vesting period.
The new standard encourages but does not require, adoption of the fair
value method of accounting for stock-based transactions. SFAS No.123
permits companies to continue to account for such transactions under
Accounting Principles Board Opinion APB No. 25, "Accounting for Stock
Issued to Employees," but requires a disclosure of pro forma net income
and earnings per share as if the company had applied the new method of
accounting. The Company has elected to continue to account for stock-
based compensation under APB No. 25 and will adopt the disclosure
requirements of SFAS No. 123 in 1996.
Note 2 - Acquisitions
During 1995, the company acquired two companies engaged in freight
forwarding and customs brokerage services for a purchase price of
$2.8 million. Both acquisitions were accounted for under the purchase
method. The excess of cost over the sum of identifiable net assets
acquired have been allocated to intangible assets, to be amortized over
estimated lives of 20 years.
In February, 1996, the Company acquired substantially all the operating
freight forwarding assets of Celadon/Jacky Maeder, Ltd., a U.S. based
international freight forwarding and customs brokerage company. This
acquisition will be treated as a purchase. The purchase price is
contingent upon future net revenues.
<PAGE> 26
Note 3 - Long-term 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
ability and intent to hold to maturity, and equity securities management
has designated as available for sale be carried at fair value.
Management has designated marketable debt and equity securities as
available for sale. 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,
1995, the unrealized loss in marketable securities before deferred taxes
decreased by $2,831,000.
At December 31, 1995 and 1994, the aggregate fair value, gross
unrealized (gains) losses, and amortized cost of marketable securities
were as follows (in thousands):
1995 1994
---- ----
Debt Securities
Fair value $ 29,692 $ 34,434
Amortized cost 29,901 37,104
-------- --------
Unrealized loss $ 209 $ 2,670
======== ========
Equity Securities
Fair value $ 6,852 $ 7,226
Cost 7,965 8,709
-------- --------
Unrealized loss $ 1,113 $ 1,483
======== ========
As of December 31, 1995 unrealized gains are not material.
Contractual maturities of the fair value of debt securities as of
December 31, 1995
Within five years $ 27,301
In the sixth year $ 2,391
Note 4 - Borrowing Capacity
At December 31, 1995, the Company had unused borrowing capacity from
lines of credit totaling approximately $27 million. Of this, $17
million is available for domestic use and $10 million is available for
overseas use. These credit facilities are due for renewal in 1996.
At December 31, 1995, the weighted average short-term borrowing rate for
domestic uncommitted lines was 6.7%.
Note 5 - Long-term Notes Payable
Long-term notes payable included commercial paper of $25 million at
December 31, 1995 and 1994. The commercial paper is supported by a $25
million backup facility line of credit. 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, 1995 and 1994, the weighted average interest rate of outstanding
commercial paper was 5.9% and 5.6%, respectively.
At December 31, 1995 and 1994, the Company had long-term notes payable
of approximately $5.0 and $6.9 million, respectively (excludes current
portion), with a weighted average interest rate of 7.2% and 7.1%,
respectively. These notes are secured by real property.
Principal payments on long-term notes that mature in 1996 ($2.9 million)
are classified as notes payable to banks. Principal payments for 1997
through 2000 are approximately $0.9 million, $1.5 million, $0.5 million,
and $1.3 million, respectively. Principal repayments for 2001 through
2003 are approximately $0.8 million.
Note 6 - Lease Commitments
At December 31, 1995, commitments on long-term operating lease
agreements for facilities require the following minimum annual rentals:
(in thousands)
1996 $ 8,890
1997 7,140
1998 5,911
1999 5,239
2000 4,941
2001 and subsequent 49,987
-------
Total $82,108
=======
Rental expense under such leases was $7,803,000 in 1995, $7,311,000 in
1994, and $9,377,000 in 1993, net of rents from subleases of $1,260,000,
$755,000, and $219,000, respectively. Total rental
<PAGE> 27
expense (including the foregoing leases) was $9,375,000 in 1995,
$9,123,000 in 1994, and $11,114,000 in 1993.
In December 1995, the Company sold and leased back six properties which
generated net proceeds of approximately $14.7 million. The operating
lease term is for 15 years and requires minimum annual rentals of
$1,421,000 in 1996, $1,534,000 in 1997, $1,717,000 in 1998, $1,717,000
in 1999, $1,717,000 in 2000 and $17,850,000 thereafter.
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. The Company has established reserves and it is management's
opinion that the resolution of such litigation will not have a material
adverse effect on the Company's consolidated financial position or
results of operations.
Note 8 - Common Stock
Stock repurchase programs totaling one million shares have been approved
by the Board of Directors. During 1995, the Company acquired 287,000
shares of its common stock at an average purchase price of $17.04 per
share which are being held as treasury stock. During 1994, the Company
acquired and retired 500,000 shares of its common stock at an average
price of $14.34 per share.
Stock Options Plan
The 1982 Stock Option Plan 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 the date of grant. The Human Resources,
Compensation and Nominating Committee of the Board of Directors
determines the exercise period for the options. Under these plans,
Stock Options are generally issued with the restriction that no option
may be exercised before three years from date of grant nor later than
ten years from date of grant.
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 and its subsidiaries 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 (To date, no stock options have been granted below fair market
value). Stock options under this plan are generally issued with the
restriction that no option may be exercised before one year from the
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, 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
Granted 380,634 13.75 - 17.25
Exercised (117,991) 9.67 - 16.25
Canceled (38,249) 9.67 - 17.00
--------
Outstanding at December 31, 1995 988,713 10.54 - 17.00
========
December 31,
1995 1994 1993
------- ------- -------
Options available for grant 203,687 546,072 115,951
Options exercisable 228,552 130,620 97,726
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. No shares were repriced during 1995.
<PAGE> 28
Shareholder Rights Plan
In 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) 1995 1994 1993
---- ---- ----
Federal:
Current $ 5,728 $ 7,476 $ 8,192
Deferred (667) (1,892) (2,245)
State:
Current 978 979 1,787
Foreign:
Current 4,305 2,761 722
Deferred 1,320 1,742 692
------- ------- -------
Total $11,664 $11,066 $ 9,148
======= ======= =======
Significant components of the Company's net deferred tax liability are
as follows:
December 31 (in thousands) 1995 1994
---- ----
Deferred tax liabilities:
Undistributed earnings
of subsidiaries $ 9,689 $11,211
Accelerated depreciation 4,176 4,322
Gain on sale of property 2,778 1,701
Incentive compensation 338 -
Investment in subsidiary 232 232
------- -------
$17,213 $17,466
======= =======
Deferred tax assets:
Intercompany billings 6,462 6,462
Bad debts 953 1,137
Vacation pay 649 599
Incentive compensation - 519
Self insurance reserves 1,053 1,347
Valuation of marketable securities 516 1,496
Other 703 700
------- -------
10,336 12,260
======= =======
Net deferred tax liability $ 6,877 $ 5,206
======= =======
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) 1995 1994 1993
---- ---- ----
Tax computed at 35% $10,688 $ 9,720 $ 9,885
Increases (decreases)
resulted from:
Foreign taxes lower
than federal rate (411) (756) (1,421)
State taxes on income,
net of federal income
tax effect 636 636 1,162
Non-deductible items 711 244 229
Foreign net operating
losses 453 1,512 (356)
Other (413) (290) (351)
------- ------- -------
Total $11,664 $11,066 $ 9,148
======= ======= =======
Taxes on income include deferred income taxes on undistributed earnings
(not considered permanently invested) of consolidated subsidiaries net
of applicable foreign tax credits. At December 31, 1995, cumulative
earnings of consolidated foreign
<PAGE> 29
subsidiaries designated as permanently invested were approximately $43
million. Deferred income taxes are not provided on permanently invested
earnings.
Sources of pretax income are summarized as follows:
(in thousands) 1995 1994 1993
---- ---- ----
Domestic $14,513 $13,101 $19,290
Foreign 16,023 14,671 8,952
------- ------- -------
Total $30,536 $27,772 $28,242
======= ======= =======
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 for tax of approximately $7.9
million. 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 tax 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 for 1992.
The Company is engaged in discussions with the Internal Revenue Service
with respect to the 1992 write offs involving approximately $9 million
of tax. It is not possible at this time to determine 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. The matter is pending before the Internal Revenue Services
Appeals Office. Because of the number and complexity of the issues
involved, resolution of the controversy 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) 1995 1994 1993
---- ---- ----
Investment income $ 4,877 $ 4,233 $ 6,055
Interest expense (3,346) (3,254) (2,459)
Gain on sale of Intercargo stock - - 5,761
Gain on sales of assets 1,057 1,168 1,829
Equity in earnings of affiliates 679 1,157 641
Foreign exchange gains 40 729 1,249
------- ------- -------
Total $ 3,307 $ 4,033 $13,076
======= ======= =======
<PAGE> 30
Note 11 - Business Segment Information
The Company operates in the international freight forwarding industry,
which encompasses air freight forwarding, customs brokerage, ocean
freight forwarding and other services. No customer accounted for ten
percent or more of consolidated revenue.
Certain information regarding the Company's operations by regions is
summarized below.
<TABLE>
<CAPTION>
North Far Latin Other Corporate Elimi- Consoli-
America Europe East America Areas nations dated
------- ------ ---- ------- ----- --------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Total revenue $290,564 $119,018 $101,062 $ 19,214 $ 25,520 -- $ (13,050) $542,328
Transfers
between
regions (2,070) (2,674) (3,551) (2,731) (2,024) -- 13,050 --
-------- ------- -------- -------- -------- -------- --------- --------
Revenues from
customers $288,494 $116,344 $ 97,511 $ 16,483 $ 23,496 -- -- $542,328
======== ======== ======== ======== ======== ======== ========= ========
Net revenue $106,084 $ 62,191 $ 24,546 $ 9,650 $ 19,340 -- -- $221,811
======== ======== ======== ======== ======== ======== ========= ========
Income (loss)
from
operations $ 20,209 $ 9,149 $ 3,863 $ 1,825 $ 3,729 $(11,546) -- $ 27,229
======== ======== ======== ======== ======== ======== ========= ========
Identifiable
assets $126,681 $ 94,679 $ 74,816 $ 14,022 $ 30,106 $ 90,294 $ (93,855) $336,743
======== ======== ======== ======== ======== ======== ========= ========
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
operations $ 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
operations $ 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
======== ======== ======== ======== ======== ======== ========= ========
</TABLE>
Revenue from transfers between regions represents approximate amounts
that would be charged if the services were provided by an unaffiliated
company. Total regional revenue is reconciled with total consolidated
revenue by eliminating inter-regional revenue.
Note 12 - Quarterly Data (unaudited)
(in thousands except per share amounts)
Net Net Net income Dividends
Revenue revenue income per share per share
------- ------- ------ ---------- ---------
1995 Quarters:
4th Quarter $144,110 $ 58,253 $ 5,665 $ .36 $ .11
3rd Quarter 138,279 57,512 5,066 .32 -
2nd Quarter 133,996 54,937 4,601 .29 .11
1st Quarter 125,943 51,109 3,540 .22 -
1994 Quarters:
4th Quarters $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 -
<PAGE> 31
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. (the "Company") and subsidiaries as of December 31,
1995 and 1994, 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, 1995. 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, 1995 and 1994, and the results
of their operations and their cash flows for each of the three years in
the period ended December 31, 1995 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 8, 1996
<PAGE> 32
MARKET PRICE OF 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
---- ---
1995
Fourth Quarter $19-1/2 $16-1/2
Third Quarter 20 16-1/4
Second Quarter 20 15
First Quarter 18 15-1/8
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
As of March 1, 1996, 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 415.
Dividends Declared
Dividends declared per common share during 1995 and 1994 were:
1995 1994
- ---- ----
June 26 $ .11 June 11 $ .10
December 18 .11 December 19 .11
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 14, 1996 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.
Graph #1
Presents net revenue by product in a bar graph for the fiscal years
ended December 31, 1995, 1994 and 1993. 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.
Graph #2
Presents 1995 net 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 (page 30) presented in this filing. The
percentages used in the graph are derived from amounts in the footnote
designated as net revenue.
Graph #3
Presents income from operations in a bar graph for the years ended
December 31, 1995, 1994 and 1993. This information is also presented in
the Selected Financial Data and Consolidated Income Statements of the
Annual Report to Stockholders in this filing.
Graph #4
Presents operating margin percentages in a bar graph for the years ended
December 31, 1995, 1994 and 1993. Operating margin for these periods is
calculable from the Consolidated Income Statements presented in this
filing (page 20 of the Annual Report to Stockholders) by dividing income
from operations by net revenue.
<PAGE> 78
EXHIBIT 21.1
LIST OF SUBSIDIARIES
The following table sets forth certain information concerning the
principal subsidiaries of the Company as of December 31, 1995.
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 Fretes Internacionais Do
Brasil Ltda. Brazil
Circle Freight International (Argentina) S.A. Argentina
Circle Freight International
(Canada) Ltd. Canada
Circle Freight International (Holland) B.V. Holland
Circle Freight International (India) Pty. Ltd. India
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
<PAGE> 79
State or other
jurisdiction of
Name incorporation
Circle Freight International
(Singapore) Pte., Ltd. Singapore
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
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> 80
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 8,
1996 incorporated by reference in The Harper Group, Inc. Annual Report
on Form 10-K for the year ended December 31, 1995.
/S/ DELOITTE & TOUCHE LLP
San Francisco, California
March 25, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
FINANCIAL DATA SCHEDULE
Harper Group, Inc., and Subsidiaries
(in thousands)
This schedule contains summary financial information extracted from the
consolidated financial statements from the Company's Annual Report to
Stockholders for the fiscal year ending December 31, 1995, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<MULTIPLIER> 1000
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-START> Jan-01-1995
<PERIOD-END> Dec-31-1995
<CASH> 22439
<SECURITIES> 47843
<RECEIVABLES> 171624
<ALLOWANCES> 4739
<INVENTORY> 0
<CURRENT-ASSETS> 207364
<PP&E> 130008
<DEPRECIATION> 56413
<TOTAL-ASSETS> 336743
<CURRENT-LIABILITIES> 134357
<BONDS> 0
0
0
<COMMON> 15066
<OTHER-SE> 150390
<TOTAL-LIABILITY-AND-EQUITY> 336743
<SALES> 0
<TOTAL-REVENUES> 542328
<CGS> 0
<TOTAL-COSTS> 320517
<OTHER-EXPENSES> 194582
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 30536
<INCOME-TAX> 11664
<INCOME-CONTINUING> 18872
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18872
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.18
</TABLE>
