<PAGE>
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
December 31, 1993
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (No Fee Required) For the transition period from
___________ to ___________
Commission file number: 1-8306
AIR EXPRESS INTERNATIONAL CORPORATION
- ---------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 36-2074327
- ------------------------------------- -----------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) No.)
120 Tokeneke Road, Darien Connecticut 06820
(203) 655-7900
- ---------------------------------------------------------------------------
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
- ------------------------------------- -----------------------------------
Common Stock, $.01 par value American Stock Exchange
Convertible Subordinated Debentures American Stock Exchange
Due 2003
Securities registered pursuant to Section 12(g) of the Act:
None
- ---------------------------------------------------------------------------
(Title of Class)
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
statement incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [_].
The aggregate market value of the voting stock held by non-affiliates of
the Registrant as of March 24, 1994 was $240,189,046.
The number of shares of common stock outstanding as of March 24, 1994 was
11,580,779.
DOCUMENTS INCORPORATED BY REFERENCE:
To the extent specified, Part III of this Form 10-K incorporates
information by reference to the Registrant's definitive proxy statement for
the 1994 Annual Meeting of Shareholders.
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AIR EXPRESS INTERNATIONAL CORPORATION
1993 Form 10-K Annual Report
Table of Contents
Part I
Page
----
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . 6
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . 6
Item 4. Submission of Matters to a Vote of Security Holders and
Executive Officers of the Registrant . . . . . . . 6
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . . . 9
Item 6. Selected Financial Data . . . . . . . . . . . . . . 10
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . 11
Item 8. Financial Statements and Supplementary Data . . . . 16
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures . . . . . . . 16
Part III
Item 10. Directors and Executive Officers of the Registrant . 16
Item 11. Executive Compensation . . . . . . . . . . . . . . . 16
Item 12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . 16
Item 13. Certain Relationships and Related Transactions . . . 16
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K . . . . . . . . . . . . . . . . . . . . 17
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Part I
------
Item 1. Business
--------
(a) General Development of Business
-------------------------------
Air Express International Corporation (the "Company" or the
"Registrant") is the oldest and largest international airfreight
forwarder based in the United States. Through its global network of
Company-operated facilities and agents, it consolidates, documents and
arranges for transportation of its customers' shipments of heavy cargo
throughout the world. During 1993, the Company handled more than
1,480,000 individual shipments, with an average weight of 407 pounds,
to nearly 2,600 cities in more than 185 countries. The Company
generated revenues of approximately $726 million in 1993, of which
approximately 57% were attributable to shipments from locations
outside the United States.
Although the Company's headquarters are located in the United States,
its network is global, serving over 544 cities, including 229 cities
in the United States, 123 cities in Europe and 192 cities in Asia, the
South Pacific, the Middle East, Africa and Latin America. As of
December 31, 1993, this network consisted of 175 Company-operated
facilities, including 50 in the United States and 125 abroad,
supplemented at 369 additional locations by agents, a substantial
number of whom serve the Company on an exclusive basis. The network
is managed by experienced professionals, most of whom are nationals of
the countries in which they serve. Approximately 75% of the Company's
28 regional and country managers have been employed by the Company for
more than ten years.
Since 1985, when its current management assumed control, the Company
has focused on the international transportation of heavy cargo and
devoted its resources to expanding and enhancing its global network
and the information systems necessary to more effectively service its
customers' transportation logistics needs. In December 1987, the
Company acquired the Pandair Group, a European-based international
airfreight forwarder with facilities in 14 countries. The Pandair
acquisition significantly strengthened the Company's presence in key
foreign markets, particularly the United Kingdom and Holland. During
1993, the Company acquired the Votainer group of companies
("Votainer"), a Netherlands-based Non-Vessel Operating Common Carrier
("NVOCC") which provides ocean freight consolidation services, with a
network of 34 company-operated facilities in 12 countries. Included
in the Company's 1993 results of operations are Votainer revenues and
operating loss for the last six months of 1993 of $51.4 million and
$.9 million, respectively. The Votainer acquisition was consistent
with the Company's strategy to make acquisitions that will serve its
goal of strengthening its market position, further enhancing its
operating efficiencies and providing its customers a broader range of
transportation-related services.
(b) Financial Information About Industry Segments
---------------------------------------------
The Company currently is engaged in the business of freight
forwarding, for both air and ocean freight. See Management's
Discussion and Analysis of Financial Condition and Results of
Operations (Item 7), and the Company's Consolidated Financial
Statements, including the Notes thereto, for data related to the
Company's revenues, operating profit or loss and identifiable assets.
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(c) Narrative Description of Business
---------------------------------
Airfreight Forwarding and Related Services
------------------------------------------
An airfreight forwarder procures shipments from a large number of
customers, consolidates shipments bound for a particular destination
from a common place of origin, determines the routing over which the
consolidated shipment will move, selects an airline serving that route
on the basis of departure time, available cargo capacity and rate, and
books the consolidated shipment for transportation on that airline.
In addition, the forwarder prepares all required shipping documents,
delivers the shipment to the transporting airline and, in many cases,
arranges for clearance of the various components of the shipment
through customs at the final destination. If so requested by its
customers, the forwarder also will arrange for delivery of the
individual components of the consolidated shipment from the arrival
airport to their intended consignees.
As a result of its consolidation of customers' shipments, the
forwarder is usually able to obtain lower rates from airlines than its
customers could obtain directly from those airlines. In addition, in
certain tradelanes and with certain airlines, where the forwarder
generates a continuing high volume of freight, that forwarder is often
able to obtain even lower rates. Accordingly, the forwarder is
generally able to offer its customers a lower rate than would
otherwise be available to the customer from the airline. However, the
rate charged by the forwarder to its customers is greater than that
obtained by the forwarder from the airline, and the difference
represents the forwarder's gross profit.
Ocean Freight Services
----------------------
The Company's revenue from international ocean freight forwarding is
derived from service both as an indirect ocean carrier (NVOCC) and as
an authorized agent for shippers and importers. Effective July 1,
1993, the Company acquired Votainer, a Non-Vessel Operating Common
Carrier ("NVOCC") specializing in ocean freight consolidation. As an
NVOCC, through its 34 company-operated facilities in 12 countries,
supplemented with 70 agent locations in 37 countries, the Company
contracts with ocean shipping lines to obtain transportation for a
fixed number of containers between various points during a specified
time period at an agreed rate. Votainer solicits freight from its
customers to fill the containers, charging rates lower than the rates
offered directly to customers by shipping lines for similar type
shipments.
Operations
----------
The Company has a global network of Company-operated facilities and
supporting agents serving over 544 cities, including 229 in the United
States, 123 in Europe, 77 in Asia and the South Pacific and 115 in the
Middle East, Africa and Latin America. As a consequence, a
substantial portion of its revenues and profits is derived from the
shipment of goods from, or entirely between, locations outside the
United States. For the year ended December 31, 1993, approximately
57% of its revenues and 59% of its gross profits, originated from
locations outside the United States.
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The Company neither owns nor operates any ships or aircraft. It
arranges for transportation of its customers' shipments via steamship
lines, commercial airlines and air cargo carriers. On limited
occasions, when the size of a particular shipment so warrants, the
Company will charter a cargo aircraft. The Company acts solely as a
forwarder in respect of approximately 91% of the shipments it handles.
When acting as an airfreight forwarder, the Company becomes legally
responsible to its customer for the safe delivery of the customer's
cargo to its ultimate destination, subject to a limitation on
liability of $20.00 per kilo ($9.07 per pound). When acting as an
ocean freight consolidator, the Company assumes cargo liability to its
customers for lost or damaged shipments. This liability is typically
limited by contract to a maximum of $500 per package or customary
freight unit. However, because a freight forwarder's relationship to
an airline or steamship line (the "Carrier") is that of a shipper to a
carrier, the Carrier generally assumes the same responsibility to the
Company as the Company assumes to its customers. On occasion, the
Company acts in the capacity of a cargo agent for a designated
Carrier. In this capacity, the Company contracts for freight
carriage, for which it receives a commission from the Carrier, but it
does not have legal responsibility for the safe delivery of the
shipment. During 1993, shipments for which the Company acted as a
cargo agent accounted for less than 2% of its revenues.
The Company also offers door-to-door express delivery among 18
European countries through its Pandalink service, which operates from
a central hub in Brussels. Pandalink operates predominately as an
overnight service to major European cities, with alternative delivery
services to outlying areas, within 48 to 72 hours.
Ancillary Services
------------------
In connection with its services as a freight forwarder, the Company
provides ancillary services, such as door-to-door pick-up and delivery
of freight, warehousing, cargo assembly, protective packing,
consolidation and customs clearance. In addition, the Company
provides other transportation-related services, including acting as a
domestic surface freight forwarder, a customs broker and a warehouse
operator.
The LOGIS System
----------------
The Company introduced its proprietary LOGIS logistics information
system for airfreight operations in 1986 and since that time has
allocated substantial resources to expand the system's geographic
reach and enhance its capabilities. Mainframe computers located at
the Company's headquarters in Darien, Connecticut, and a facility near
London, England, are linked to, and accessible from, terminals at 220
of its Company-operated facilities and with its agents in
substantially all major markets, permitting real-time inputting,
processing and retrieval of shipment, pricing, scheduling, space
availability, booking and tracking data, as well as automated
preparation of shipping, customs and billing documents.
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As of December 31, 1993, the LOGIS system permitted electronic
interfacing with more than 300 of the Company's major customers in 32
countries, 37 international airlines and customs authorities in the
United States, the United Kingdom, Australia, Belgium and France.
Electronic data interchange ("EDI") connections to the airlines permit
instant retrieval by the Company, and by those of its customers
interfacing with the LOGIS system, of information on the status
of shipments in the custody of the airlines. With its EDI
capabilities, LOGIS can receive a customer's shipping instructions and
information with respect to the cargo being shipped and convert these
data automatically into shipping documents. Where customs authorities
in the country of destination are linked to the system, it can prepare
customs declarations, calculate the appropriate customs duties and
provide for automatic customs invoicing and clearance.
The LOGIS system has enabled the Company to improve the productivity
of its personnel and the quality of its customer service and has
enabled many of its customers to manage their freight transportation
logistics needs more effectively. The system has resulted in
substantial reductions in paperwork and expedited the entry,
processing, retrieval and dissemination of critical information.
Management plans to continually improve and enhance the LOGIS system,
including extending its capabilities to support Votainer's ocean
freight functions. Management believes that the LOGIS system has
positioned the Company to better capitalize on the continuing trend
toward outsourcing by large corporations of logistics management
functions and reliance by many of these corporations on single-source
providers.
Regulation
----------
The Company's activities as an IATA cargo agent are subject to the
rules and regulations of that organization to the extent the Company
acts as an agent for an airline which is an IATA member. Certain IATA
rules and regulations are subject to DOT approval. In addition,
several states in which the Company operates regulate intrastate
trucking. In these states, the Company has obtained the necessary
operating authority. The Company is licensed as an ocean freight
forwarder by the United States Federal Maritime Commission ("FMC")
which prescribes qualifications for acting as a shipping agent,
including surety bonding requirements. The FMC does not regulate the
Company's fees in any material respect. The Company's ocean freight
NVOCC business is subject to regulation, as an indirect ocean cargo
carrier, under the FMC tariff filing and surety bond requirements,
which require the Company to abide by tariffs filed with the FMC
specifying the rates which may be charged to customers.
Customers and Marketing
-----------------------
The Company's principal customers are large manufacturers and
distributors of computers and electronics equipment, pharmaceuticals,
heavy industrial and construction equipment, motion pictures and
printed materials. During 1993, the Company shipped goods for more
than 60,000 customer accounts, none of which accounted for more than
5% of the Company's revenues.
The Company markets its services worldwide through an international
sales organization consisting of approximately 430 full-time
salespersons (as of December 31, 1993), supported by the sales efforts
of senior management and the Company's country, regional, branch and
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district managers. In markets where the Company does not operate its
own facilities, its direct sales efforts are supplemented by those of
the Company's agents. The Company's marketing is directed primarily
to large, multinational corporations with substantial requirements for
the international transportation of heavy cargo.
Competition
-----------
Competition within the freight forwarding industry is intense.
Although the industry is highly fragmented, with a large number of
participants, the Company competes primarily with a relatively small
number of international firms with worldwide networks and the
capability to provide the breadth of services offered by the Company.
The Company also encounters competition from regional and local
freight forwarders, integrated transportation companies that operate
their own aircraft, cargo sales agents and brokers, surface freight
forwarders and carriers, certain airlines, and associations of
shippers organized for the purpose of consolidating their members'
shipments to obtain lower freight rates from carriers.
Currency and Other Risk Factors
-------------------------------
The Company's worldwide operations engender the risk that some of the
many local currencies in which it receives payment may not be easily
convertible, or convertible at all, into U.S. dollars. There are also
risks from fluctuations in value of currencies, devaluations, or other
governmental actions.
In addition, the Company's business requires good working
relationships with the airlines, which are its largest creditor as a
group. To the extent that the airlines decrease cargo space available
to forwarders, cut back cargo or passenger flights or enter the
forwarding business themselves, the airfreight forwarding business
could be adversely affected. The Company considers its working
relationship with the airlines to be good.
Employees
---------
As of December 31, 1993, the Company employed 4,271 people, of whom
2,948 were based at locations outside the United States, including
1,496 in the United Kingdom and Europe, 792 in Asia and 660 in the
South Pacific, South America, Africa and Canada. Of the Company's
1,323 U.S.-based employees at that date, approximately 545 were
covered by agreements with various locals of the International
Brotherhood of Teamsters, the United Auto Workers and the
International Association of Machinists and Aerospace Workers. In
addition, approximately 16% of the Company's foreign-based personnel
are represented by various types of collective bargaining
organizations. The Company considers its relationship with its
employees to be satisfactory.
(d) Financial Information About Foreign and Domestic Operations
-----------------------------------------------------------
See the Company's Consolidated Financial Statements including the
Notes thereto, for data related to the Company's revenues, operating
profit and loss and identifiable assets.
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Item 2. Properties
----------
The Company owns its worldwide headquarters building (approximately
30,000 square feet in area) in Darien, Connecticut, which is subject
to a $.5 million mortgage, a warehouse and office facility
(approximately 78,000 square feet in area) in Sydney, Australia, which
is subject to a $3.8 million mortgage, and a warehouse and
distribution facility (approximately 59,000 square feet in area) in
Venlo, Holland, which is subject to a $1.8 million mortgage. On
January 24, 1994 the Company began construction on its new 160,000
square foot warehouse and distribution center in Singapore, which is
scheduled to be completed in the fourth quarter of 1994.
The Company leases facilities on or near airports at 50 locations in
the United States, and 125 offices in 28 other countries. Most
facilities have office, dock and warehouse space. The principal
facilities are set forth in the following table:
Approximate Sq. Feet of Lease
Location Floor Space Expiration
-------- ------------------------------------ ----------
Amsterdam, The 67,800 sq. ft. of cargo and office 1998
Netherlands
Chicago, Illinois 115,666 sq. ft. of cargo and office 1998
Frankfurt, Germany 36,800 sq. ft. of cargo and office 1995
London, England 93,000 sq. ft. of cargo and office 2002
Los Angeles, 54,800 sq. ft. of cargo and office 1994
California
Miami, Florida 76,500 sq. ft. of cargo and office 1995
New York, New York 77,000 sq. ft. of cargo and office 1996
Singapore 26,605 sq. ft. of cargo and office 1995
The Company believes that its facilities are adequate for its needs
now and in the foreseeable future.
Item 3. Legal Proceedings
-----------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
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Executive Officers of the Registrant
------------------------------------
Following is a listing of the executive officers of the Company.
The information listed below with respect to age and business
experience for the past five years has been furnished to the Company
as of March 16, 1994 by each executive officer of the Company. There
are no family relationships between any Director or officer of the
Company.
Positions with the Company and
Business Experience for the
Name Age Past Five Years
------------------------- --- -----------------------------------
Hendrik J. Hartong, Jr. 54 Chairman of the Company since 1985;
Chief Executive Officer of the
Company from 1985 through 1989;
General Partner of Brynwood
Management and Brynwood Management
II L.P., which serve, respectively,
as managing general partners of
Brynwood Partners Limited
Partnership and Brynwood Management
II L.P., private investment
partnerships, since 1985; Director
of Hurco Companies, Inc.
Guenter Rohrmann 54 Chief Executive Officer of the
Company since 1989; President and
Chief Operating Officer of the
Company since 1985.
Dennis M. Dolan 36 Vice President and Chief Financial
Officer of the Company since 1989;
Controller U.S.A. from 1985 to
1989.
Daniel J. McCauley 59 Vice President, General Counsel and
Secretary of the Company since
1991; 1990-1991 consultant;
Executive Vice President, Secretary
and General Counsel, Emery
Airfreight Corporation, Wilton, CT,
a transportation company for more
than five years prior to 1990.
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Paul J. Gallagher 48 Vice President-International
Controller of the Company since
1989; Director International
Finance, Emery Airfreight
Corporation, Wilton, CT, a
transportation company for more
than five years prior to 1989.
Walter L. McMaster 61 Vice President and Controller of
the Company for more than the past
five years.
Robert J. O'Connell 57 Vice President-General Manager-
North America of the Company since
1989; Vice President-North America
Sales, from 1985 to 1989.
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Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder
-------------------------------------------------------------
Matters
-------
The Company's common stock, $.01 par value (the "Common Stock"), is
traded on the American Stock Exchange.
On June 25,1992, the Company's Board of Directors declared a three-
for-two split of the Common Stock in the form of a 50% stock dividend.
The additional shares were distributed on July 31, 1992 to
shareholders of record on July 13, 1992. See Note 2 to the
Consolidated Financial Statements.
During 1993, the Company declared four quarterly cash dividends on the
Common Stock.
<TABLE>
<CAPTION>
Shares
Date Declared Record Date Payment Date Per Share Outstanding
------------- ------------- -------------- --------- -----------
<S> <S> <S> <C> <C>
Mar 05, 1993 Apr 09, 1993 Apr 30, 1993 $ .035 11,586,471
Jun 24, 1993 Jul 09, 1993 Jul 30, 1993 .050 11,523,251
Sep 10, 1993 Oct 08, 1993 Oct 29, 1993 .050 11,531,781
Nov 15, 1993 Jan 07, 1994 Jan 28, 1994 .050 11,543,560
</TABLE>
The table below indicates the quarterly high and low prices of the
Common Stock for the years ended December 31, 1993 and 1992. All per
share information has been restated to reflect the three-for-two stock
split in July 1992. See Note 2 to the Consolidated Financial
Statements.
<TABLE>
<CAPTION>
Quarter
------------------------------------
1st 2nd 3rd 4th
--- --- --- ---
Year Ended December 31, 1993:
----------------------------
<S> <C> <C> <C> <C>
High $ 29 3/8 $ 22 3/4 $22 3/8 $21 7/8
Low 18 18 1/8 18 7/8 18 1/4
<CAPTION>
Year Ended December 31, 1992:
----------------------------
<S> <C> <C> <C> <C>
High $ 21 1/8 $ 19 1/2 $25 1/8 $27 5/8
Low 13 1/8 16 1/8 17 5/8 22
</TABLE>
At March 24, 1994, there were 1,033 holders of record of the Company's
Common Stock. The closing price of the Common Stock on that date was
$23.00 per share.
The Company's agreements with its principal lenders limit the amounts
available for payment of cash dividends and share repurchases. See
Note 7 to the Consolidated Financial Statements.
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Item 6. Selected Financial Data
-----------------------
<TABLE>
AIR EXPRESS INTERNATIONAL CORPORATION AND SUBSIDIARIES
-------------------------------------------------------
(In thousands, except per share data)
<CAPTION>
Years Ended December 31,
--------------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Revenues $ 725,719 $ 672,287 $ 601,939 $ 567,807 $ 514,402
========= ========== ========= ========= ==========
Income before extraordinary item $ 17,340 $ 18,633 $ 13,785 $ 11,067 $ 8,508
Extraordinary item (1) - - 151 111 -
--------- ---------- --------- --------- ----------
Net income $ 17,340 $ 18,633 $ 13,936 $ 11,178 $ 8,508
========= ========== ========= ========= ==========
Income per common share, primary:
Income before extraordinary item (2) $ 1.48 $ 1.62 $ 1.20 $ 1.00 $ .75
Extraordinary item - - .01 .01 -
--------- ---------- --------- --------- ----------
Net income (2) $ 1.48 $ 1.62 $ 1.21 $ 1.01 $ .75
========= ========== ========= ========= ==========
Income per common share, fully diluted:
Income before extraordinary item $ 1.46 $ 1.62 $ 1.12 $ .96 $ .75
Extraordinary item $ - $ - $ .01 $ .01 $ -
--------- ---------- --------- --------- ----------
Net income (2) $ 1.46 $ 1.62 $ 1.13 $ .97 $ .75
========= ========== ========= ========= ==========
Cash dividends declared per
common share $ .185 $ .145 $ .12 $ - $ -
========= ========== ========= ========= ==========
Total assets $ 296,218 $ 209,736 $ 208,079 $ 192,635 $ 179,862
========= ========== ========= ========= ==========
Long-term debt $ 78,464 $ 7,120 $ 24,928 $ 28,441 $ 32,316
========= ========== ========= ========= ==========
Stockholders' investment $ 78,119 $ 65,377 $ 65,270 $ 52,425 $ 40,515
========= ========== ========= ========= ==========
----------------------------------------------------
<FN>
(1) Extraordinary item represents the tax benefit of the utilization of net operating loss carryforwards.
(2) Income per share amounts for all periods presented give effect to a three-for-two stock split in the
nature of a 50% stock dividend in each of August 1991 and July 1992 and are based upon the weighted
average number of shares of Common Stock outstanding during each period.
</TABLE>
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Item 7. Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations
-------------------------
Liquidity and Capital Resources
-------------------------------
In January, 1993, the Company issued and sold $74.8 million of 6%
Convertible Subordinated Debentures (the "Debentures") due 2003 and
received $72.5 million, after commissions and expenses, from the sale
of the Debentures. The net proceeds were initially used to repay $5.0
million of outstanding revolving credit balances and for general
corporate purposes, including acquisitions of other companies in the
same or related businesses.
On July 1, 1993, the Company acquired the Votainer group of Companies
for a cash purchase price of $11.3 million plus the assumption and
payment of certain indebtedness of approximately $3.3 million to the
seller. Capital expenditures in 1993, which were largely for the
acquisition of data processing equipment and facility improvements
totaled $4.9 million. Capital expenditures for 1992 totaled $15.2
million, which included the purchase of a warehouse and office
facility in Sydney, Australia for $7.5 million and the construction of
a warehouse and distribution facility in Venlo, Holland for $3.0
million. Depreciation and amortization expense totaled $6.3 million
in 1993 and $7.0 million in 1992. Capital expenditures for 1994 are
anticipated to be approximately $17.0 million.
Cash, cash equivalents and short-term investments at December 31, 1993
totaled $65.2 million compared to $14.1 million at December 31, 1992.
The increase was largely attributable to the proceeds remaining from
the sale of the $74.8 million of Debentures.
The Company maintains a revolving credit facility which permits
borrowing in amounts up to a maximum of $20.0 million at any time
outstanding until maturity in September, 1995. Interest on
outstanding borrowings is payable at a variable rate equal, at the
Company's election, to (i) the prime commercial rate in effect from
time-to-time or (ii) LIBOR in effect from time-to-time plus 2.0%. At
December 31, 1993, there were no borrowings under this facility.
Management believes that the Company's available cash and sources of
credit, together with expected future cash generated from operations,
will be sufficient to satisfy its anticipated needs for working
capital, capital expenditures and fixed charges.
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Results of Operations
---------------------
1993 Compared to 1992
---------------------
Included in the consolidated results of operations for 1993 are the
ocean freight activities of Votainer for the last six months of 1993.
Votainer was acquired by the Company on July 1, 1993. The
consolidated results of airfreight and ocean freight activities for
1993 compared to 1992 (airfreight only) are as follows:
<TABLE>
<CAPTION>
1993
---------------------------------
Ocean
Airfreight Freight Total 1992
---------- ------- ------- ------
($ millions)
<S> <C> <C> <C> <C>
Revenues $ 674.3 $ 51.4 $ 725.7 $672.3
Expenses:
Transportation 457.2 39.2 496.4 450.0
Terminal 112.8 7.0 119.8 113.2
Selling, general
and administrative 72.0 6.1 78.1 77.8
-------- ------- ------- -------
Operating income(loss) $ 32.3 $ ( .9) $ 31.4 $ 31.3
======== ======= ======= =======
</TABLE>
Consolidated revenues increased $53.4 million (7.9%) to $725.7 million
in 1993 compared with 1992. The increase in revenues was attributable
to the inclusion of $51.4 million of revenues from the ocean freight
operations from Votainer for the last six months of 1993. Revenues
from airfreight operations for 1993 were $674.3 million, largely
unchanged from 1992 revenues. Airfreight revenues for 1993 were
impacted by the positive effects of a 4.4% increase in the number of
shipments and a 11.2% increase in the total weight of cargo shipped,
which was offset by the negative effects of lower customer selling
rates and the effect of weaker foreign currencies when converting
foreign currency revenues into United States dollars for financial
reporting purposes.
Gross profit (revenue less transportation expense) increased $7.0
million (3.1%) to $229.3 million in 1993 compared with 1992. The
increase in gross profit is attributable to the inclusion of $12.2
million of gross profit of Votainer for the last six months of 1993,
which was partially offset by a $5.2 million (2.3%) decrease in
airfreight gross profit to $217.1 million. The decrease in airfreight
gross profit was due to lower gross profit in European airfreight
operations and competitive pricing pressures, which reduced gross
margin (gross profit as a percentage of revenues) from 33.1% in 1992
to 32.1% in 1993.
NYFS03...:\16\12316\0001\7120\FRM32894.P9B
<PAGE>
<PAGE>
The Company's internal operating expenses (terminal and selling,
general and administrative) increased $6.9 million (3.6%) to $197.9
million in 1993 compared to 1992. The increase was due entirely to
the inclusion of Votainer's internal operating expenses of $13.0
million for the last six months of 1993, which more than offset a $6.1
million (2.3%) reduction in the internal operating expense
attributable to the Company's airfreight operations. The latter
category of expenses benefitted from the effects of weaker foreign
currencies when converting foreign currency expenses into United
States dollars for financial reporting purposes as well as lower
employee incentive compensation expense. Operating income for 1993
was $31.4 million, unchanged from 1992 operating income, with the $.9
million loss from Votainer's operations being offset by a $1.0 million
improvement in airfreight operating income.
Net interest expense increased $1.5 million (45%) to $3.7 million in
1993 compared with 1992. The increase was attributable to the
interest cost associated with the Company's 6% Convertible
Subordinated Debentures issued in January 1993.
The effective tax rate for 1993 was 38.0% compared to 37.6% for 1992.
The Company's effective tax rates fluctuate due to changes in tax
rates and regulations in the countries in which it operates and the
level of pre-tax profit earned in each of those countries.
United States Operations
------------------------
United States revenues increased $37.8 million (14%) to $308.5 million
in 1993 compared to 1992. The increase in United States revenues was
comprised of a $6.2 million (21.6%) increase in domestic airfreight
revenues, an $11.9 million (4.9%) increase in international airfreight
revenues, and the inclusion of $19.7 million of Votainer revenues for
the last six months of 1993. The increase in United States airfreight
revenues was attributable to a 5.5% increase in the number of
shipments (18.1% increase in domestic shipments and 1% increase in
international shipments) and a 14% increase in the total weight of
cargo shipped (30% increase in domestic cargo and 9% increase in
international cargo).
The increased domestic and international airfreight shipping volumes
resulted in an increase in airfreight profit of $1.8 million (19.4%),
which was partially offset by a $1.2 million operating loss in
Votainer, resulting in an overall increase in United States operating
profit of $.6 million (6.0%) to $9.6 million in 1993.
Foreign Operations
------------------
Foreign revenues increased $15.6 million (3.9%) to $417.3 million in
1993 compared with 1992. The increase in revenues was attributable to
the inclusion of $31.7 million of Votainer revenues for the last six
months of 1993, which was offset by a $16.1 million (4.0%) decrease in
foreign airfreight revenues. The decrease in foreign airfreight
revenues was attributable to the Company's European operations, where
weaker foreign currencies, particularly the
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<PAGE>
<PAGE>
British Pound, accounted for a reduction of $20.7 million (8.6%) in
European airfreight revenues when European revenues were converted to
United States dollars for financial reporting purposes. The number of
shipments and total weight of cargo shipped by the Company's European
airfreight operations increased 3.2% and 15.4%, respectively. In the
Company's Asia and Others segment, revenues increased $19.4 million
(12.1%) to $180.0 million in 1993 compared to 1992. This increase was
attributable to the inclusion of $14.8 million of Votainer revenues
for the last six months of 1993 and a $4.6 million increase in
airfreight revenues. The number of airfreight shipments handled by
the Company's Asia and Others operation increased 3.0%, while the
total weight of cargo shipped by these operations was unchanged from
1992.
Operating profit from foreign operations decreased $.4 million (2.1%)
to $21.8 million for 1993 compared with 1992. The decline in foreign
operating profit was due entirely to a $1.7 million decrease in
European airfreight operating profit, which was partially offset by a
$.9 million increase in Asia and Others airfreight operating profit
and a $.4 million operating profit in Votainer's foreign operations.
In Europe, five of the Company's seven wholly-owned subsidiaries
reported lower operating results in 1993 when compared with 1992,
including an operating loss incurred by the Company's German
subsidiary. These declines are directly attributable to the
continuing economic recession in most European countries, particularly
Germany, and resulting competitive pricing pressures. The operating
results in the Company's United Kingdom and Holland airfreight
operations, which comprised 54% of 1993 European revenues and 90% of
1993 European operating profit, were largely unchanged from 1992.
1992 Compared to 1991
Worldwide Operations:
--------------------
Consolidated revenues increased $70.3 million (11.7%) to $672.3
million in 1992 compared with 1991. The increased revenues were
largely attributable to a 5.7% increase in the number of shipments and
a 16.7% increase in the total weight of cargo shipped. Additionally,
when converting foreign currency revenues into U.S. dollars for
financial reporting purposes, the effect of a weaker U.S. dollar
accounted for approximately $9.3 million of the increase in revenues.
Gross profit (revenues less transportation expense) increased $24.5
million (12.4%) to $222.3 million in 1992 compared with 1991 due to
the increase in the number of shipments and the total weight of cargo
shipped. Gross margin (gross profit as a percentage of revenues) for
1992 was 33.1%, compared to 32.8% for 1991. Of the Company's internal
operating expenses (terminal and selling, general and administrative
expenses), terminal expense increased $8.6 million (8.2%) to $113.2
million while selling, general and administrative expense increased
$9.3 million (13.6%) to $77.8 million. The higher internal operating
expense was due to increases in shipping volumes, higher advertising
and promotional expense and increased employee compensation.
NYFS03...:\16\12316\0001\7120\FRM32894.P9B
<PAGE>
<PAGE>
Operating income increased $6.6 million (26.8%) to $31.3 million in
1992 compared with 1991. This increase was attributable to the
increased number of shipments and weight of cargo shipped and a
decline in internal operating expense as a percentage of revenues to
28.4% in 1992 from 28.8% in 1991.
Net interest expense for the year ended December 31, 1992 declined
$0.4 million (14.9%) to $2.2 million compared with 1991. The decrease
reflected the conversion in April 1992 of the Company's 11.15%
Convertible Subordinated Notes due 1999 in the principal amount of
$20.0 million into 2,045,407 shares of Common Stock, which shares were
then repurchased by the Company.
The effective tax rate for 1992 was 37.6% compared to 39.9% for 1991.
The lower tax rate was due to higher levels of pre-tax income in 1992,
which reduced the impact of nondeductible expenses on the effective
tax rate and lower statutory tax rates in four countries where the
Company operates.
United States Operations:
------------------------
United States revenues increased $23.2 million (9.4%) to $270.6
million in 1992 compared with 1991. The increase in United States
revenues was attributable to a 4.0% increase in the number of
shipments and a 14.3% increase in the total weight of cargo shipped.
The increases in the number and total weight of shipments resulted in
an increase in operating income of $1.0 million (11.9%) to $9.0
million in 1992 compared with 1991.
Foreign Operations:
------------------
Foreign revenues increased $47.1 million (13.3%) to $401.7 million in
1992 compared with 1991. European revenues for 1992 increased $25.5
million (11.9%) to $241.0 million and Asia and other revenues
increased $21.6 million (15.5%) to $160.6 million. A 7.4% increase in
the number of shipments and a 18.1% increase in the total weight of
cargo shipped accounted for approximately $18.9 million (40.0%) of the
increase, while stronger European currencies accounted for
approximately $6.6 million (14.0%) of the increase when the Company's
European revenues were converted into U.S. dollars for financial
reporting purposes. The increase in the Asia and other revenues was
primarily due to a 6.4% increase in the number of shipments and a
20.4% increase in the total weight of cargo shipped.
Foreign operating income increased $5.6 million (34.0%) to $22.2
million in 1992 compared with 1991. The increase was due to a $3.5
million (34.1%) increase in European operating income and a $2.2
million (33.9%) increase in the Asia and other sector. All six of the
Company's wholly-owned subsidiaries in Europe (Belgium, France,
Germany, Holland, Ireland and the United Kingdom) reported improved
results for 1992. In particular, the Company's operations in the
United Kingdom and Holland accounted for approximately 53.9% of its
European revenue and 78.2% of its European operating income.
NYFS03...:\16\12316\0001\7120\FRM32894.P9B
<PAGE>
<PAGE>
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
The financial statements and supplementary data required by this Item
8 are included in the Company's Consolidated Financial Statements and
set forth at the pages indicated in Item 14(a) of this Annual Report.
Item 9. Changes in and Disagreements with Accountants
---------------------------------------------
on Accounting and Financial Disclosures
---------------------------------------
None.
Part III
--------
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
The Company's definitive Proxy Statement to be issued in conjunction
with the 1994 Annual Meeting of Shareholders is incorporated herein by
reference. The Company believes that, during 1993, its officers and
directors complied with all filing requirements under Section 16(a) of
The Securities Exchange Act of 1934, as amended.
Item 11. Executive Compensation
----------------------
The Company's definitive Proxy Statement to be issued in conjunction
with the 1994 Annual Meeting of Shareholders is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and
---------------------------------------------------
Management
----------
The Company's definitive Proxy Statement to be issued in conjunction
with the 1994 Annual Meeting of Shareholders is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
The Company's definitive Proxy Statement to be issued in conjunction
with the 1994 Annual Meeting of Shareholders is incorporated herein by
reference.
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<PAGE>
<PAGE>
Part IV
-------
Item 14. Exhibits, Financial Statement Schedules, and Reports
----------------------------------------------------
on Form 8-K
-----------
(a) The following documents are filed as a part of this report on Form
10-K.
(1) Financial Statements: Page
-------------------- ----
Report of Independent Public Accountants F-1
Consolidated Balance Sheets as of December 31, 1993 and 1992. F-2
Consolidated Statements of Operations for the years ended
December 31, 1993, 1992 and 1991. F-3
Consolidated Statements of Stockholders' Investment for the
years ended December 31, 1993, 1992 and 1991. F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 1993, 1992 and 1991. F-5
Notes to Consolidated Financial Statements F-6
(2) Financial Statement Schedules:
-----------------------------
Schedule VIII - Valuation and Qualifying Accounts. F-21
Schedule IX - Short-term Borrowings. F-22
All other financial statement schedules are omitted because they
are not applicable, not required, or because the required information
is included in the Company's Consolidated Financial Statements or
Notes thereto.
Separate financial statements of the Company have been omitted
since less than 25% of the net assets of its subsidiaries and equity
investments are formally restricted from being loaned, advanced or
distributed to the holding company.
NYFS03...:\16\12316\0001\7120\FRM32894.P9B
<PAGE>
<PAGE>
(3) Exhibits required to be filed by Item 601 of Regulation S-K.
3a. Certificate of Incorporation, as amended through July 24,
1993.
b. The Bylaws, as amended through March 22, 1992. (Incorporated
herein reference to Exhibit 3 to the Company's Current Report
on Form 8-K, filed March 22, 1992)
4a. Indenture, dated as of January 15, 1993, between the Company
and The Bank of New York, as Trustee. (Incorporated herein by
reference to Exhibit 1 to the Company's Current Report on Form
8-K, dated February 2, 1993)
b. Specimen Convertible Subordinated Debenture. (Incorporated by
reference to Exhibit 4(b) to the Company's Registration
Statement on Form S-3, dated December 22, 1992)
c. Specimen certificate representing the Common Stock.
(Incorporated herein by reference to Exhibit 4(c) to the
Company's Registration Statement on Form S-3, dated December
22, 1992)
10. Material Contracts:
a. Employment Agreement, effective January 1, 1986, between the
Company and Hendrik J. Hartong, Jr. (Incorporated herein by
reference to Exhibit 10(iii) to the Company's Current Report
on Form 8-K, filed March 22, 1992)
b. Employment Agreement, effective January 1, 1986, between the
Company and Guenter Rohrmann. (Incorporated herein by
reference to Exhibit 10(iv) to the Company's Current Report on
Form 8-K filed March 22, 1991)
c. Non-Qualified Stock Option Agreement, dated January 14, 1988,
between the Company and Mr. Hartong. (Incorporated herein by
reference to Exhibit 10(vi) to the Company's Current Report on
Form 8-K filed March 2, 1990)
d. Non-Qualified Stock Option Agreement, dated June 20, 1984,
between the Company and Mr. Rohrmann. (Incorporated herein by
reference to Exhibit 10(ii) to the Company's Report on Form 8-
K filed March 22, 1991)
e. Non-Qualified Stock Option Agreement, dated January 19, 1988,
between the Company and Mr. Rohrmann. (Incorporated by
reference herein to Exhibit 10(vii) the Company's Report on
Form 8-K filed March 2, 1990)
f. Air Express International Corporation Employees' 1981
Incentive Stock Option Plan, incorporated herein by reference
to Exhibit 10(i) to the Company's Report on Form 10-K, dated
April 12, 1985.
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<PAGE>
<PAGE>
g. Air Express International Corporation 1984 International
Employees' Stock Option Plan.
h. Loan Agreement, dated as of December 31, 1981, between the
Company and the Connecticut Development Authority, as amended.
(Incorporated by reference herein to Exhibit 10(i) to the
Company's Report on Form 8-K filed March 22, 1991)
i. Lease Agreement, entered into in June 1986, between the
Company and The Port Authority of New York and New Jersey for
Hangar 5, John F. Kennedy Airport.
j. Air Express International Corporation Employees' 1991
Incentive Stock Option Plan, approved by the Shareholders of
the Company on June 20, 1991. (Incorporated herein by
reference to the Company's Proxy Statement, dated May 17,
1991, furnished to the stockholders in connection with the
Annual Meeting of Stockholders held on June 20, 1991)
k. Credit Agreement, dated as of September 17, 1993, among the
Company, the Guarantors named therein and Pittsburgh National
Bank. (Incorporated herein by reference to Exhibit 4(e) of
the Company's Registration Statement on Form S-3, dated
December 22, 1992)
21. List of Subsidiaries of the Registrant. Exhibit 21.
23. Consent of Independent Public Accountants. Exhibit 23.
All other exhibits are omitted because they are not applicable,
not required or because the required information is included in
the Consolidated Financial Statements or Notes thereto.
(b) Reports on Form 8-K:
None.
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<PAGE>
<PAGE>
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.
AIR EXPRESS INTERNATIONAL CORPORATION
Registrant
By: /s/ Dennis M. Dolan
------------------------------------
Dennis M. Dolan
Vice President and
Chief Financial Officer
(Principal Financial Officer)
By: /s/ Walter L. McMaster
------------------------------------
Walter L. McMaster
Vice President and Controller
(Principal Accounting Officer)
Date: March 25, 1994
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<PAGE>
<PAGE>
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 and on the dates
indicated.
Signature Title Date
--------- ----- ----
/s/ John M. Fowler Director March 30, 1994
---------------------------
(John M. Fowler)
/s/ Hendrik J. Hartong, Jr. Chairman of the Board
--------------------------- of Directors March 30, 1994
(Hendrik J. Hartong, Jr.)
/s/ Leo T. Heessels Director March 30, 1994
---------------------------
(Leo T. Heessels)
/s/ Donald J. Keller Director March 30, 1994
---------------------------
(Donald J. Keller)
/s/ Andrew L. Lewis IV Director March 30, 1994
---------------------------
(Andrew L. Lewis IV)
/s/ Richard T. Niner Director March 30, 1994
---------------------------
(Richard T. Niner)
/s/ Guenter Rohrmann President, Chief
--------------------------- Executive Officer, andMarch 30, 1994
(Guenter Rohrmann) Director (Principal
Executive Officer)
NYFS03...:\16\12316\0001\7120\FRM32894.P9B
<PAGE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
Air Express International Corporation:
We have audited the accompanying consolidated balance sheets of Air
Express International Corporation (a Delaware corporation) and
subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of operations, stockholders' investment and
cash flows for each of the three years in the period ended December
31, 1993. These financial statements and the schedules referred to
below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
and schedules 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, the financial statements referred to above present
fairly, in all material respects, the financial position of Air
Express International Corporation and subsidiaries as of December 31,
1993 and 1992, and the results of their operations and their cash
flows for each of the three years in the period ended December 31,
1993 in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedules listed in
the index of financial statements are presented for purposes of
complying with the Securities and Exchange Commission's rules and are
not part of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, fairly state in all material
respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
New York, New York
March 25, 1994
F-
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<PAGE>
<PAGE>
<TABLE>
AIR EXPRESS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1993 AND 1992
<CAPTION>
(Dollars in thousands)
1993 1992
------- -------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $55,063 $14,113
Short-term investments 10,109 -
Accounts receivable (less allowance for
doubtful accounts of $2,846 and $1,759) 150,969 128,582
Other current assets 3,224 4,090
-------- --------
Total current assets 219,365 146,785
Investment in unconsolidated affiliates 7,595 7,431
Property, plant and equipment (less accumulated
depreciation and amortization of $34,096
and $30,122) 27,323 26,777
Deposits and other assets 4,604 3,323
Goodwill (less accumulated amortization
of $4,674 and $3,843) 37,331 25,420
-------- --------
Total assets $296,218 $209,736
======== ========
Liabilities and stockholders' investment
Current liabilities:
Current portion of long-term debt $ 1,509 $ 4,514
Revolving credit note - 5,000
Bank overdrafts payable 594 1,911
Transportation payables 69,640 59,361
Accounts payable 27,967 29,962
Accrued liabilities 28,250 25,482
Income taxes payable 10,587 9,648
-------- --------
Total current liabilities 138,547 135,878
Long-term debt 78,464 7,120
Deferred income taxes 1,088 1,361
-------- --------
Total liabilities 218,099 144,359
Stockholders' investment:
Capital stock -
Preferred (authorized 1,000,000 shares,
none outstanding) - -
Common, $.01 par value (authorized 40,000,000
shares, issued 13,711,333 and 13,654,702 shares) 137 137
Capital surplus 41,251 40,835
Cumulative translation adjustments (12,282) (10,759)
Retained earnings 88,657 73,453
-------- --------
117,763 103,666
Less: 2,167,773 and 2,099,835 shares of treasury
stock, at cost (39,644) (38,289)
-------- --------
Total stockholders' investment 78,119 65,377
-------- --------
Total liabilities and stockholders' investment $296,218 $209,736
======== ========
See Notes to Consolidated Financial Statements.
</TABLE>
F-
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<PAGE>
<PAGE>
<TABLE>
AIR EXPRESS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<CAPTION>
(Dollars in thousands, except per share data)
1993 1992 1991
-------- ------- -------
<S> <C> <C> <C>
Revenues $725,719 $672,287 $ 601,939
Operating expenses:
Transportation 496,459 450,004 404,205
Terminal 119,814 113,203 104,603
Selling, general and administrative 78,075 77,801 68,462
--------- -------- ---------
694,348 641,008 577,270
--------- -------- ---------
Operating income 31,371 31,279 24,669
Other income (expense)
Interest expense, net (3,698) (2,179) (2,560)
Other, net 308 783 843
--------- -------- ---------
(3,390) (1,396) (1,717)
--------- -------- ---------
Income before provision for income
taxes and extraordinary item 27,981 29,883 22,952
Provision for income taxes 10,641 11,250 9,167
--------- -------- ---------
Income before extraordinary item 17,340 18,633 13,785
Extraordinary item - tax effect
of utilization of net operating
loss carryforwards - - 151
--------- -------- ---------
Net income $ 17,340 $18,633 $ 13,936
========= ======== =========
Income per common share, primary:
Income before extraordinary item $ 1.48 $ 1.62 $ 1.20
Extraordinary item - - .01
--------- -------- ---------
Net income $ 1.48 $ 1.62 $ 1.21
========= ======== =========
Income per common share, fully diluted:
Income before extraordinary item $ 1.46 $ 1.62 $ 1.12
Extraordinary item - - .01
--------- -------- ---------
Net income $ 1.46 $ 1.62 $ 1.13
========= ======== =========
See Notes to Consolidated Financial Statements.
</TABLE>
F-
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<PAGE>
<PAGE>
<TABLE>
AIR EXPRESS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<CAPTION>
Cumulative
Common Stock Capital Translation Retained Treasury
Shares Amount Surplus Adjustments Earnings Stock Total
------ ------ ------- ----------- -------- ---------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1990 11,754,930 $ 118 $ 19,221 $ (7,472) $43,184 $ (2,626) $ 52,425
Exercise of common stock options 95,570 1 593 - - (22) 572
Retirement of treasury stock (583,790) (6) (2,642) - - 2,648 -
Translation of foreign currency
financial statements - - - (863) - - (863)
Dividends declared ($.12 per share) - - - - (800) - (800)
Net income for the year - - - - 13,936 - 13,936
----------- ------ --------- -------- -------- -------- ---------
Balance, December 31, 1991 11,266,710 113 17,172 (8,335) 56,320 - 65,270
Exercise of common stock options 342,585 4 3,683 - - (704) 2,983
Additional issue 2,045,407 20 19,980 - - - 20,000
Translation of foreign currency
financial statements - - - (2,424) - - (2,424)
Purchase of treasury shares - - - - - (37,585) (37,585)
Dividends declared ($.145 per share) - - - - (1,500) - (1,500)
Net income for the year - - - - 18,633 - 18,633
----------- ------ --------- -------- -------- -------- ---------
Balance, December 31, 1992 13,654,702 137 40,835 (10,759) 73,453 (38,289) 65,377
Exercise of common stock options 54,418 - 378 - - 378
Purchase of treasury stock - - - - - (1,355) (1,355)
Translation of foreign currency
financial statements - - - (1,523) - - (1,523)
Issuance of common stock for previous
year's stock bonus plan 2,213 - 38 - - - 38
Dividends declared ($.185 per share) - - - - (2,136) - (2,136)
Net income for the year - - - - 17,340 - 17,340
----------- ------ --------- -------- -------- -------- ---------
Balance, December 31, 1993 13,711,333 $ 137 $ 41,251 $(12,282) $88,657 $(39,644) $ 78,119
=========== ====== ========= ======== ======== ======== =========
See Notes to Consolidated Financial Statements.
</TABLE>
F-
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<PAGE>
<PAGE>
<TABLE>
AIR EXPRESS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<CAPTION>
(Dollars in thousands)
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $17,340 $18,633 $ 13,936
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 5,333 6,256 4,660
Amortization of goodwill 973 798 825
Deferred income taxes (18) (611) 172
Undistributed (earnings) losses of affiliates (140) 196 (24)
Gain on sales of assets, net (116) (46) (159)
Other, net (1,807) 1,115 674
Changes in assets and liabilities:
Decrease (increase) in accounts receivable, net (6,439) (8,649) (5,087)
Decrease (increase) in other current assets 1,415 (1,588) (659)
Increase (decrease) in transportation payables 2,005 6,947 (406)
Increase (decrease) in accounts payable (7,788) 3,806 72
Increase (decrease) in accrued liabilities 719 1,131 3,508
Increase (decrease) in income taxes payable 873 (280) 3,324
-------- -------- --------
Total adjustments (4,990) 9,075 6,900
-------- -------- --------
Net cash provided by operating activities 12,350 27,708 20,836
-------- -------- --------
Cash flows from investing activities:
Business acquisitions, net of cash acquired (12,825) - -
Purchase of short-term investments (10,109) - -
Gains (losses) from hedging activities 668 142 (538)
Proceeds from sales of assets 353 1,053 227
Capital expenditures (4,924) (15,189) (6,768)
Investment in affiliates (63) (424) (779)
-------- -------- --------
Net cash used in investing activities (26,900) (14,418) (7,858)
-------- -------- --------
Cash flows from financing activities:
Net borrowings (repayments) under revolving
credit agreement (5,000) 5,000 -
Net borrowings (repayments) in bank overdrafts
payable (1,454) 1,733 (810)
Additions to long-term debt 72,414 6,856 311
Payment of long-term debt (7,644) (23,969) (3,872)
Issuance of common stock 416 23,687 572
Payment of cash dividends (1,963) (1,395) (500)
Purchase of treasury stock (1,355) (38,289) -
-------- -------- --------
Net cash (used) provided in financing activities 55,414 (26,377) (4,299)
-------- -------- --------
Effect of foreign currency exchange rates on cash 86 (685) (683)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 40,950 (13,772) 7,996
Cash and cash equivalents at beginning of year 14,113 27,885 19,889
-------- -------- --------
Cash and cash equivalents at end of year $55,063 $14,113 $ 27,885
======== ======== ========
See Notes to Consolidated Financial Statements.
</TABLE>
F-
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<PAGE>
<PAGE>
AIR EXPRESS INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands,
except per share data)
(1) Summary of Significant Accounting Policies:
------------------------------------------
Principles of Consolidation -
---------------------------
The consolidated financial statements include the accounts of Air
Express International Corporation and its majority-owned subsidiaries
(the "Company"), all of which conduct operations in a single line of
business, freight forwarding. All significant intercompany accounts
and transactions have been eliminated. Investments in 20% to 50%
owned affiliates are accounted for using the equity method.
With the exception of entities operating in highly inflationary
economies, assets and liabilities of foreign subsidiaries are
translated at rates of exchange in effect at the close of the period.
Revenues and expenses are translated at average exchange rates in
effect during the year. The resulting translation adjustments are
recorded in a separate component of stockholders' investment,
"Cumulative Translation Adjustments." Translation gains or losses of
the Company's entities which operate in highly inflationary economies
are included as a component of other income.
Method of Revenue Recognition -
-----------------------------
International revenues for the transportation of international freight
are recognized at the time the freight has been exported from the
country of origin via commercial carrier. The corresponding
transportation costs charged by the commercial carriers are recognized
concurrently with the freight revenues. Destination delivery costs
are recognized as incurred and subsequently billed to consignees,
except door-to-door cargo movements which are accrued concurrently
with freight revenue recognition.
Domestic revenues for the transportation of freight within the U.S.
are recognized on the day freight departs the Company's terminal of
origin. Transportation costs and destination delivery costs are
recognized concurrently with freight revenues.
Property and Equipment -
----------------------
The Company provides depreciation and amortization on the straight-
line method over the estimated useful lives of the related assets.
Maintenance and repairs are charged to expense as incurred.
<TABLE>
<CAPTION>
Estimated Useful Life
-----------------------
<S> <C>
Buildings and improvements 25-40 years
Furniture and fixtures 3-10 years
Automotive equipment 3-5 years
Terminal and data processing equipment 3-10 years
Leasehold improvements Life of lease or estimated
useful life, if shorter
</TABLE>
F-
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<PAGE>
<PAGE>
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
Continued
Goodwill -
--------
Goodwill, which represents the excess of purchase price over the fair
value of net assets acquired, is being amortized on a straight-line
basis over a period of 40 years.
Cash and Cash Equivalents -
-------------------------
Cash and Cash equivalents include cash on hand, demand deposits, and
short-term investments with original maturities of three months or
less.
Short-Term Investments -
----------------------
Short-term investments consist of highly liquid U.S. Government
instruments with original maturities in excess of three months and are
carried at cost, which approximates market.
Reclassification and Restatement -
--------------------------------
Certain prior year amounts have been reclassified to conform with the
current year presentation. Additionally, all share and per share
information has been restated to reflect a three-for-two split of the
Company's common stock (See Note 2).
(2) Common Stock Split:
------------------
On June 25, 1992, the Company's Board of Directors declared a three-
for-two split of the Company's common stock, payable in the form of a
stock dividend. The additional shares were distributed on July 31,
1992 to shareholders of record on July 13, 1992. Accordingly, all
share and per share information throughout the consolidated financial
statements has been restated to reflect this split.
F-
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<PAGE>
<PAGE>
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
Continued
(3) Earnings Per Share:
------------------
Primary earnings per share are computed by dividing net income by the
weighted average common and common equivalent shares outstanding
during the year. In 1993 and 1991, fully diluted earnings per share
have been calculated assuming the conversion of the convertible
subordinated securities outstanding in those years, and the
elimination of interest expense, net after tax, which approximates
$2.7 million and $1.5 million, respectively.
The primary and fully diluted earnings per share and number of common
and common equivalent shares were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Earnings per share:
Primary $ 1.48 $ 1.62 $ 1.21
======= ======= =======
Fully diluted $ 1.46 $ 1.62 $ 1.13
======= ======= =======
Common and common share
equivalents (in thousands)
Weighted average shares outstanding 11,553 11,346 11,228
Common share equivalents 139 167 271
------- ------- -------
Primary 11,692 11,513 11,499
Shares issuable with respect to
subordinated convertible securities
and additional common share
equivalents 2,012 - 2,117
------- ------- -------
Fully diluted 13,704 11,513 13,616
======= ======= =======
</TABLE>
(4) Business Acquisitions:
---------------------
On July 1, 1993, the Company acquired Votainer, a Non-Vessel Operating
Common Carrier specializing in ocean freight consolidation, for a
purchase price of $11.3 million plus the assumption and payment of
certain indebtedness of approximately $3.3 million to the seller.
During the fourth quarter of 1993, for a total investment of
approximately $4.0 million, the Company acquired 100% of the
outstanding shares of its agent in Leeds, England, its joint venture
in Switzerland, and the operating assets and business of an
airfreight/trucking company in New Zealand. These acquisitions
completed in 1993 resulted in an increase in goodwill in the amount of
$13.9 million.
F-
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<PAGE>
<PAGE>
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
Continued
(5) Regional Operations:
-------------------
Revenues, operating income and identifiable assets are set forth below
by geographic area. Revenues for international shipments are recorded
in the country of origin. Certain prior year amounts have been
reclassified to conform with the current year presentation. Domestic
U.S.A. revenues represent airfreight forwarding only. International
revenues represent airfreight forwarding for 1992 and 1991.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Revenues:
U.S.A.
Domestic $ 35,051 $ 28,835 $ 25,914
International Exports 273,414 241,781 221,478
--------- --------- ---------
Total U.S.A. 308,465 270,616 247,392
--------- --------- ---------
Europe 237,242 241,035 215,495
Asia and others 180,012 160,636 139,052
--------- --------- ---------
Total foreign 417,254 401,671 354,547
--------- --------- ---------
Total revenues $ 725,719 $ 672,287 $601,939
========= ========= =========
Operating income:
U.S.A. $ 9,588 $ 9,040 $ 8,076
--------- --------- ---------
Europe 12,014 13,573 10,119
Asia and others 9,769 8,666 6,474
--------- --------- ---------
Total foreign 21,783 22,239 16,593
--------- --------- ---------
Total operating income $ 31,371 $ 31,279 $ 24,669
========= ========= =========
<CAPTION>
December 31,
-----------------------------------
1993 1992 1991
--------- --------- --------
<S> <C> <C> <C>
Identifiable assets:
U.S.A. $ 115,348 $ 59,007 $ 64,051
--------- --------- ---------
Europe 96,706 84,193 91,277
Asia and others 76,569 57,858 44,949
--------- --------- ---------
Total foreign 173,275 142,051 136,226
--------- --------- ---------
Investment in unconsolidated
affiliates 7,595 7,431 7,802
--------- --------- ---------
Total assets $ 296,218 $ 209,736 $208,079
========= ========= =========
</TABLE>
At December 31, 1993, net assets of foreign subsidiaries including
intercompany accounts deemed to be long-term investments amounted to
approximately $54.7 million.
F-
NYFS03...:\16\12316\0001\7120\FRM32894.P9B<PAGE>
<PAGE>
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
Continued
(6) Property, Plant and Equipment:
-----------------------------
A summary of property, plant and equipment, at cost, is as follows:
<TABLE>
<CAPTION>
December 31,
----------------------
1993 1992
------ ------
<S> <C> <C>
Buildings and improvements $13,543 $13,126
Leasehold improvements 6,144 6,557
Automotive equipment 4,328 3,291
Furniture and fixtures 10,121 8,853
Terminal and data processing equipment 22,252 19,964
-------- -------
56,388 51,791
Less accumulated depreciation and amortization 34,096 30,122
-------- -------
22,292 21,669
Land 5,031 5,108
-------- -------
Property, plant and equipment, net $27,323 $26,777
======== =======
</TABLE>
(7) Revolving Credit Loan Agreement and Other Short-term
----------------------------------------------------
Borrowing Facilities:
--------------------
The Company maintains a Revolving Credit Loan Agreement (the
"Agreement") with a U.S. bank which provides for maximum borrowings of
$20.0 million, or a defined borrowing base. The borrowing base is
comprised of certain United States eligible receivables, which had a
gross value of $31.0 million at December 31, 1993. The interest
charged on borrowings is the bank's prime rate, or London Interbank
Offered Rate (LIBOR) plus 2%. The commitment fee for the unused
portion of the credit facility is .375% per annum.
The Agreement contains restrictions and limitations relating to
working capital, dividends, investments, capital expenditures, and
other borrowings. The Agreement also contains affirmative covenants
relating to adjusted tangible net worth, ratio of non-subordinated
debt to adjusted tangible net worth, and a minimum required current
ratio of 1:1. The Company is in compliance with all the conditions of
the Agreement. Payments of cash dividends and the purchase of
treasury stock are limited to 50% of consolidated net income earned
after September 30, 1992. Accordingly, $6.9 million was available at
December 31, 1993 for payments of cash dividends, and purchase of
treasury stock. At December 31, 1993 there was no borrowing under
this revolving credit agreement.
In addition to the above, a number of the Company's foreign
subsidiaries have unsecured short-term overdraft facilities with
foreign banks which total $12.1 million at December 31, 1993. The
largest single facility, extended to the Company's German subsidiary,
was $3.7 million. Borrowings under these facilities generally bear
interest at .5% to 2.0% over the foreign banks' equivalent of the
prime rate. At December 31, 1993, outstanding borrowings from these
facilities were $.6 million.
F-
NYFS03...:\16\12316\0001\7120\FRM32894.P9B
<PAGE>
<PAGE>
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
Continued
(8) Long-Term Debt:
--------------
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
----------------------
1993 1992
------ -------
<S> <C> <C>
Senior Notes, bearing interest of 12.1%,
$3.2 million payable on December 31, 1993 $ - $ 3,200
Convertible Subordinated Debentures
due 2003, bearing interest at 6%, net of
unamortized discount of $2,121 72,629 -
Industrial Development Bonds, payable in
quarterly installments through 1995, at
an interest rate of 67.5% of prime 482 828
Mortgage Australia - principal of $110 paid
quarterly through 2002, bearing interest
at 10.2 % payable monthly 3,752 4,542
Mortgage Holland - principal of $49 paid
quarterly through 2002, bearing interest
at 8.51% 1,761 2,090
Other long-term debt 1,349 974
-------- --------
79,973 11,634
Less current portion (1,509) (4,514)
-------- --------
$78,464 $ 7,120
======== ========
</TABLE>
The maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Year Ending Principal
December 31, Amount
------------ --------
<S> <C>
1994 $ 1,509
1995 1,063
1996 913
1997 793
1998-2003 75,695
--------
$79,973
========
</TABLE>
The Industrial Development Bonds are secured by land and a building
with a net book value of $4.3 million at December 31, 1993. The
Company is in compliance with all the covenants and conditions of the
Industrial Development Bonds.
The Australia mortgage is secured by land and building with a net book
value of $6.2 million at December 31, 1993, used in the operations of
the Company's Australia subsidiary.
The Holland mortgage is secured by land and building in Venlo,
Holland, with a net book value of $2.5 million at December 31, 1993.
On January 28, 1993, the Company issued and sold $74.8 million
aggregate principal amount of its 6% Convertible Subordinated
Debentures due 2003 (the "Debentures") and received net
F-
NYFS03...:\16\12316\0001\7120\FRM32894.P9B
<PAGE>
<PAGE>
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
Continued
(8) Long-Term Debt - continued:
--------------------------
(after commissions and expenses) receipts from the sale of the
Debentures of $72.5 million (before deduction of expenses). The
Debentures are convertible into Common Stock of the Company through
maturity, unless previously redeemed, at $34.0625 per share, subject
to adjustment.
Interest on the Debentures is payable on January 15 and July 15,
commencing July 15, 1993.
The Debentures are not redeemable prior to January 15, 1996.
Thereafter, the Debentures will be redeemable on at least 30 days'
notice at the option of the Company, in whole or in part at any time,
initially at 104.2% and at decreasing prices thereafter to 100% at
maturity, in each case together with accrued interest. The Debentures
also may be redeemed at the option of the holder if there is a
Fundamental Change (as defined) at declining redemption prices,
subject to adjustment, together with accrued interest.
The net proceeds were used, in part, to repay outstanding revolving
credit balances, and for general corporate purposes, which may include
additions to working capital, enhancement of facilities and
operations, and possible acquisitions of other companies in the same
or related businesses.
At December 31, 1993, the fair value of the Company's long-term debt
amounted to $78.4 million compared to the carrying amount of $80
million. The difference was attributable to the Debentures. The fair
value was based upon quoted market prices.
Interest expense on long-term debt for the years ended December 31,
1993, 1992 and 1991 was $5.7 million, $2.4 million and $3.5 million,
respectively.
(9) Common Stock Option Plans:
-------------------------
The 1981 Employees' Incentive Stock Option Plan authorized the
granting of stock options to officers and employees at prices equal to
or greater than the fair market value of the common stock on the date
of the grant. There were 154,051 options outstanding, of which
129,158 were exercisable at December 31, 1993. There are no options
available for future grant under this plan.
The 1984 International Employees' Stock Option Plan ("International
Plan") authorizes the granting of stock options to officers and
employees at prices equal to or greater than the fair market value of
the common stock on the date of grant. There were 255,532 options
outstanding, of which 14,249 were exercisable at December 31, 1993.
Options for 69,947 shares were available for future grant at December
31, 1993, under this plan.
F-
NYFS03...:\16\12316\0001\7120\FRM32894.P9B
<PAGE>
<PAGE>
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
Continued
The 1991 Employees' Incentive Stock Option Plan, authorizes the
granting of stock options and or stock appreciation rights ("SAR'S")
to employees at prices equal to or greater than the fair market value
of the common stock on the date of the grant. There were 231,657
options outstanding, of which 10,657 were exercisable at December 31,
1993. Options for 513,375 shares were available for future grant at
December 31, 1993, under this plan. To date no SAR'S have been
granted.
At December 31, 1993, 1,224,562 shares of common stock were reserved
for issuance pursuant to the Company's option plans.
Option activity is summarized as follows:
<TABLE>
<CAPTION>
1993 1992
------- -------
<S> <C> <C>
Options outstanding, beginning of year 263,971 612,273
Options granted 448,000 12,750
Options exercised (54,418) (342,585)
Options canceled or expired (16,313) (18,467)
----- ------
Options outstanding, end of year 641,240 263,971
===== ======
Exercise price of options exercised $5.89 - $10.83 $2.67 - $10.83
Exercise price of options outstanding,
end of year $6.39 - $27.75 $5.89 - $23.00
</TABLE>
F-
NYFS03...:\16\12316\0001\7120\FRM32894.P9B
<PAGE>
<PAGE>
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
Continued
(10) Income Taxes:
------------
The Company and its domestic subsidiaries file a consolidated U.S.
Federal income tax return. Foreign subsidiaries file separate
corporate income tax returns in their respective countries.
The components of income before provision for income taxes and
extraordinary item, and the current and deferred components of the
provision for income taxes were as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1993 1992 1991
-------- -------- -------
<S> <C> <C> <C>
Income before provision for income
taxes and extraordinary item:
U.S. $ 7,702 $ 4,687 $ 4,641
Foreign 20,279 25,196 18,311
-------- -------- --------
$27,981 $29,883 $ 22,952
======== ======== ========
Current provision:
U.S. Federal $ 3,227 $ 1,477 $ 1,425
Foreign 7,041 8,900 7,396
State 688 529 306
-------- -------- --------
10,956 10,906 9,127
-------- -------- --------
Deferred provision:
U.S. Federal (337) 339 302
Foreign 80 5 (262)
State (58) - -
-------- -------- --------
(315) 344 40
-------- -------- --------
Total provision for income taxes $10,641 $11,250 $ 9,167
======== ======== ========
</TABLE>
The provision for income taxes includes deferred taxes resulting from
the recognition of certain revenues and expenses in different periods
for financial reporting purposes than for tax reporting purposes. The
components of the provision for deferred taxes were as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Net change in allowance for doubtful
accounts and other reserves $(574) $(725) $ 157
Undistributed earnings of unconsolidated
affiliates (34) 64 (12)
Accelerated depreciation 681 756 (303)
Net unrealized foreign exchange gains (388) 249 198
------ ------ ------
$(315) $ 344 $ 40
====== ====== ======
</TABLE>
F-
NYFS03...:\16\12316\0001\7120\FRM32894.P9B
<PAGE>
<PAGE>
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
Continued
(10) Income Taxes - continued:
------------------------
The difference between the actual provision and the amount computed at
the statutory U.S. Federal income tax rate of 35% for 1993 and 34% for
1992 and 1991 is attributable to the following:
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Income before provision for income
taxes and extraordinary item $27,981 $ 29,883 $ 22,952
======== ========= ========
Tax provision computed at statutory rate $ 9,793 $ 10,161 $ 7,804
Increases (reductions) in tax provision
due to:
Net operating losses for which no tax
benefit has been recognized 589 207 444
Goodwill amortization 271 288 237
Other nondeductible expenses 359 369 497
Foreign income taxed at different rates (781) (426) (302)
State income tax, net of Federal tax
benefit 630 529 306
Other, including effect of rate changes (220) 122 181
-------- --------- --------
Total provision for income taxes $10,641 $ 11,250 $ 9,167
======== ========= ========
</TABLE>
For tax reporting purposes, the Company and its subsidiaries had
available, dependent upon future taxable income, the following net
operating loss carryforwards and foreign tax credits as of December
31, 1993:
<TABLE>
<CAPTION>
Expiring In Net Operating Losses Foreign Tax Credit
----------- -------------------- ------------------
<S> <C> <C>
1995 $ - $ 303
1997 789 -
1998 631 -
1999 88 -
2000 61 -
2001 107 -
No Expiration 8,247 -
------- -------
$ 9,923 $ 303
======= =======
</TABLE>
The net operating losses consist of $4,564 incurred by the Pandair
companies prior to the December 23, 1987 acquisition and $1,735
incurred by Votainer companies prior to the July 1, 1993 acquisition.
Future utilization of Pandair and Votainer losses will be treated as a
reduction of goodwill. The use of any loss carryforwards or foreign
tax credits is dependent upon future taxable income in the applicable
taxing jurisdiction.
Tax returns for the years ended December 31, 1990, 1989 and 1988 are
currently under examination by the Internal Revenue Service.
F-
NYFS03...:\16\12316\0001\7120\FRM32894.P9B
<PAGE>
<PAGE>
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
Continued
(10) Income Taxes - continued:
------------------------
Accumulated unremitted earnings of foreign subsidiaries, which are
intended to be permanently reinvested for continued use in their
operations and for which no U.S. income taxes have been provided,
aggregated approximately $66.5 million at December 31, 1993.
During the first quarter of 1993, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes". The new standard requires that an asset and liability
approach be applied in accounting for income taxes.
The adoption of SFAS 109 had no effect on current or prior years net
income.
The primary effects of the adoption of SFAS 109 on the balance sheet
at December 31, 1992 was to create a deferred tax asset, net of a
valuation reserve (which is included in "Deposits and Other Assets")
and a deferred tax liability and current tax payable.
Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of the company's deferred tax assets
and liabilities were as follows:
<TABLE>
<CAPTION>
December 31,
------------------
1993 1992
------- -------
<S> <C> <C>
Deferred tax assets:
Reserve for doubtful accounts and
other operating reserves $ 566 $ 431
Realized foreign exchange gain or loss 298 3
Net operating losses 4,138 3,497
Foreign tax credits 303 944
Depreciation 432 1,130
Undistributed earnings of affiliates 13 -
-------- --------
Total deferred tax assets 5,750 6,005
-------- --------
Valuation allowance for deferred tax assets (4,441) (4,441)
-------- --------
Net deferred tax asset $ 1,309 $ 1,564
======== ========
Deferred tax liabilities:
Realized foreign exchange gain or loss $ - $ 136
Depreciation 17 29
Operating reserves 1,052 1,146
Undistributed earnings of affiliates - 30
Other 19 20
-------- --------
Total deferred tax liabilities 1,088 1,361
-------- --------
Net deferred tax (asset) $ (221) $ (203)
======== ========
</TABLE>
F-
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<PAGE>
<PAGE>
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
Continued
(11) Retirement Plans:
----------------
The Company maintains a 401 (k) Retirement Plan, covering
substantially all U.S. employees not participating in collective
bargaining agreements. The Company contributes 3% of salary for all
eligible participants. In addition, the Company matches, dollar for
dollar, employee contributions up to 3% of salary, subject to certain
limitations imposed by the Internal Revenue Code. The total expense
for Company contributions was $1.3 million in 1993, $1.2 million in
1992, and $1.1 million in 1991.
Pursuant to collective bargaining agreements with its labor unions,
the Company made payments to union sponsored, multi-employer pension
plans, based upon the hours worked by covered employees. Such
payments approximated $1.3 million, $1.3 million and $1.2 million for
the years ended December 31, 1993, 1992 and 1991, respectively. These
amounts were determined by the union contracts, and the Company does
not administer or control the funds in any way. In the event of plan
terminations or Company withdrawal from the plans, the Company may be
liable for a portion of the plans' unfunded vested benefits, if any.
The Company has been advised by the trustees of one multi-employer
pension plan to which the Company contributes that the present value
of the plan's vested benefits are significantly in excess of the
plan's assets. In February 1994, the trustees further advised that,
should the Company withdraw from this plan, the Company's estimated
withdrawal liability would be approximately $1.2 million effective of
February 1993. The Company continues to make contributions to this
plan in accordance with the collective bargaining agreement between
the Company and the union that sponsors the plan. If the Company
withdraws from this plan, pursuant to negotiations with the union and
the plan's trustees, the withdrawal liability will be determined as of
the date of withdrawal and may be greater or less than $1.2 million.
The Company has not made a determination to seek a negotiated
withdrawal from this plan.
One foreign subsidiary maintains a defined benefit pension plan (the
"Plan") which covers substantially all of its employees. The Plan
provides benefits based upon years of service and compensation which
are in addition to certain retirement benefits accruing to the
employees under government regulations. Participating employees
contribute 5% of their annual compensation to the Plan.
The net periodic cost for the years ended December 31, 1993, 1992 and
1991 for the Plan are as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Service cost $ 495 $ 713 $ 694
Interest cost 858 941 939
Actual return on assets - losses (gains) (3,820) (1,597) (1,646)
Net amortization and deferral of actuarial
gains (losses) 2,512 (57) 13
-------- ------- -------
Net periodic pension cost $ 45 $ -0- $ -0-
======== ======= =======
</TABLE>
F-
NYFS03...:\16\12316\0001\7120\FRM32894.P9B
<PAGE>
<PAGE>
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
Continued
(11) Retirement Plans - continued:
----------------------------
The funding of the Plan is actuarially determined. The Plan's assets
are invested primarily in equity securities, and no contributions were
made by the Company to the Plan in 1993, 1992 nor 1991. The funded
status of the Plan at December 31, 1993 and 1992 is summarized below:
<TABLE>
<CAPTION>
December 31,
------------------
1993 1992
------- --------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested and non vested benefits $ 5,732 $ 5,350
======== =========
Accumulated benefit obligation $ 5,732 $ 5,350
Effect of anticipated salary increases 5,025 4,263
-------- ---------
Projected benefit obligation 10,757 9,613
Plan assets at fair market value 15,241 11,819
-------- ---------
Unrecognized net gain $ 4,484 $ 2,206
======== =========
</TABLE>
The major assumptions used in determining the funded status of the
Plan are set forth below. The first two assumptions are used in
determining the Plan's funded status, whereas all three assumptions
are used in determining the net periodic cost. These assumptions
approximate the rates prevailing in the applicable foreign country.
<TABLE>
<CAPTION>
December 31,
----------------------------
1993 1992 1991
------- -------- --------
<S> <C> <C> <C>
Discount rate 9 % 10 % 10 %
Rate of increase in future compensation 6 % 10 % 10 %
Long-term investment return 9 % 11 % 11 %
</TABLE>
Many of the Company's other foreign subsidiaries maintain either
defined benefit or defined contribution plans covering substantially
all of their employees. The plan benefits are funded essentially
through insurance companies using deferred annuity contracts. The
cost is funded on an annual basis by the foreign subsidiary, and the
employee if the plan is contributory. For the years ended December
31, 1993, 1992 and 1991, pension expense for these plans approximated
$2.3 million, $1.8 million and $1.6 million, respectively.
The Company does not sponsor any material post-retirement benefits
other than pensions. Post- employment benefits are insignificant.
F-
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<PAGE>
<PAGE>
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
Continued
(12) Commitments and Contingencies:
-----------------------------
The Company is obligated under long-term operating lease agreements
for computer equipment, terminal facilities and automotive equipment.
At December 31, 1993, the minimum annual rentals under these long-term
leases were as follows:
<TABLE>
<CAPTION>
Year Ending
December 31, Amount
------------ ------
<S> <C>
1994 $ 14,615
1995 12,439
1996 8,788
1997 6,131
1998 and thereafter 14,075
</TABLE>
For the years ended December 31, 1993, 1992 and 1991, rental expense
for assets leased under long-term operating lease agreements
approximated $12.9 million, $12.5 million and $13.2 million,
respectively.
The Company is involved in various legal proceedings generally
incidental to its business. While the result of any litigation
contains an element of uncertainty, the Company presently believes
that the outcome of any known pending or threatened legal proceeding
or claim, or all of them combined, will not have a material adverse
effect on its results of operations or consolidated financial
position.
(13) Foreign Currency Translation:
----------------------------
With the exception of highly inflationary economies, net foreign
currency translation adjustments are not recognized in income for
financial reporting purposes until the investment which gives rise to
the translation adjustment is sold. From time to time, the Company
enters into forward exchange contracts to hedge against foreign
currency fluctuations. Included in cumulative translation adjustment
are net after tax gains of $.1 million and $.4 million for 1993 and
1992, respectively.
At December 31, 1993, the Company had forward hedge contracts maturing
throughout 1994 to sell $12.8 million in various foreign currencies.
During the years ended December 31, 1993, 1992 and 1991, the Company
recognized gains or losses from foreign currency transactions and from
certain translation adjustments which are included in other income
(See Note 14).
F-
NYFS03...:\16\12316\0001\7120\FRM32894.P9B
<PAGE>
<PAGE>
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
Continued
(14) Other Income (Expense):
----------------------
Other income (expense) consists of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1993 1992 1991
------ ------ -----
<S> <C> <C> <C>
Gain on sales of assets, net $ 116 $ 46 $ 159
Foreign exchange gains, net 192 660 745
Other, net - 77 (61)
----- ------ ------
$ 308 $ 783 $ 843
===== ====== ======
</TABLE>
(15) Statement of Cash Flows:
-----------------------
Interest and income taxes paid were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1993 1992 1991
------ ------ -----
<S> <C> <C> <C>
Interest $ 3,389 $ 3,142 $ 3,917
Income Taxes $ 10,716 $ 9,356 $ 5,312
</TABLE>
(16) Quarterly Revenues and Earnings (Unaudited):
-------------------------------------------
<TABLE>
<CAPTION>
Quarter
----------------------------------------
1st 2nd 3rd 4th
------- ------- ------- -------
Year Ended December 31, 1993
----------------------------
<S> <C> <C> <C> <C>
Revenues $ 153,344 $ 168,516 $ 192,071 $211,788
========= ========= ========= =========
Operating income $ 5,877 $ 9,496 $ 7,427 $ 8,571
========= ========= ========= =========
Net income $ 3,452 $ 5,351 $ 3,745 $ 4,792
========= ========= ========= =========
Income per common share:
Primary $ .29 $ .46 $ .32 $ .41
========= ========= ========= =========
Fully diluted $ .29 $ .44 $ .32 $ .40
========= ========= ========= =========
<CAPTION>
Year Ended December 31, 1992
----------------------------
<S> <C> <C> <C> <C>
Revenues $ 155,492 $ 170,479 $ 171,543 $174,773
========= ========= ========= =========
Operating income $ 5,696 $ 8,400 $ 8,848 $ 8,335
========= ========= ========= =========
Net income $ 3,229 $ 5,088 $ 5,303 $ 5,013
========= ========= ========= =========
Income per common share:
Primary $ .28 $ .44 $ .45 $ .43
========= ========= ========= =========
Fully diluted $ .27 $ .44 $ .45 $ .43
========= ========= ========= =========
</TABLE>
F-
NYFS03...:\16\12316\0001\7120\FRM32894.P9B<PAGE>
<PAGE>
AIR EXPRESS INTERNATIONAL CORPORATION AND SUBSIDIARIES
-------------------------------------------------------
<TABLE>
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
--------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
----------------------------------------------------
<CAPTION>
(In thousands)
Net
Balance at Write-offs Balance
Beginning Charges Charged to at End
of Period to Income Other(1) Reserves of Period
---------- --------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
----------------------------
Allowance for doubtful accounts $ 1,759 $ 1,180 $ 1,083 $ 1,176 $2,846
========= ========= ========= ======== =======
Year ended December 31, 1992:
----------------------------
Allowance for doubtful accounts $ 1,966 $ 1,577 $ - $ 1,784 $1,759
========= ========= ========= ======== =======
Year ended December 31, 1991:
----------------------------
Allowance for doubtful accounts $ 2,063 $ 1,189 $ - $ 1,286 $1,966
========= ========= ========= ======== =======
<FN>
(1) Addition to the allowance for doubtful accounts is attributable to business acquisitions which the
Company made during the year.
</TABLE>
F-
NYFS03...:\16\12316\0001\7120\FRM32894.P9B
<PAGE>
<PAGE>
AIR EXPRESS INTERNATIONAL CORPORATION AND SUBSIDIARIES
-------------------------------------------------------
<TABLE>
SCHEDULE IX -- SHORT-TERM BORROWINGS
------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
----------------------------------------------------
<CAPTION>
(In thousands)
Weighted Maximum Average Weighted
Average Amount Amount Average
Balance at Interest Rate Outstanding Outstanding Interest Rate
End of on Outstanding During the During the During the
AMOUNTS PAYABLE TO BANKS (3) Period Balance Period Period (1) Period (2)
------------------------ --------- ------------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
For the year ended December 31, 1993 $ - - $ 7,275 $ 4,847 5.5%
========= ========= ========= ========= =========
For the year ended December 31, 1992 $ 5,000 5.4% $ 8,525 $ 2,585 6.0%
========= ========= ========= ========= =========
For the year ended December 31, 1991 $ - - $ - $ - -
========= ========= ========= ========= =========
<FN>
NOTES:
(1) Average amount outstanding during the period is computed by dividing the total daily
outstanding principal balances by the actual number of days in the period.
(2) Weighted average interest rate during the period is computed by dividing the actual
short-term interest expense by the average short-term outstanding borrowings.
(3) The information is based on the borrowings of the United States only.
</TABLE>
F-
NYFS03...:\16\12316\0001\7120\FRM32894.P9B
<PAGE>
<PAGE>
EXHIBIT INDEX
--------------
Exhibit Sequential
No. Description Page No.
------- --------------------------------- ----------
21 List of Subsidiaries of Registrant 43
23 Consent of Independent Public
Accountants 44
NYFS03...:\16\12316\0001\7120\FRM32894.P9B
<PAGE>
EXHIBIT 21
AIR EXPRESS INTERNATIONAL CORPORATION
SUBSIDIARIES OF REGISTRANT AT DECEMBER 31, 1993
Percent
Jurisdiction of Shares
of Owned by
Name Incorporation Direct Parent
---- ------------- -------------
Air Express International USA, Inc. Delaware 100%
Surface Freight Corporation Florida 100%
Air Express International (Australia) Australia 100%
Air Express International (Belgium) Belgium 100%
N.V.
Air Express International do Brazil Brazil 100%
Ltda. S.C.
Air Express International (Canada) Canada 100%
Limited
AEI Pandair S.A. France 100%
Air Express International GmbH Germany 100%
Air Express International (Ireland) Ireland 100%
Limited
Air Express International Holding The 100%
B.V. Netherlands
Air Express International Limited New Zealand 100%
Air Express International (PNG) Pty. Papua New 100%
Limited Guinea
Air Express International Corporation Peru 100%
Del Peru S.A.
Air Express International Singapore Singapore 100%
(Pte.) Limited
Air Express International (S.A.) Pty. South Africa 100%
Limited
Air Express International (H.K.) Hong Kong 100%
Limited
AEIC Air Cargo, Inc. Taiwan 100%
Air Express International (U.K.) Ltd. United 100%
Kingdom
Air Express International Limited Switzerland 100%
Air Express International (Panama) Panama 100%
S.A.
Air Express International (Fiji) Fiji 100%
Limited
Votainer Japan Japan 60%
Votainer Philippines Philippines 60%
NYFS03...:\16\12316\0001\7120\EXH32894.T90
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report included in this Form 10-K, into the
Company's previously filed Registration Statement File Nos. 33-10674,
33-10799 and 33-56114.
ARTHUR ANDERSEN & CO.
New York, New York
March 25, 1994
NYFS03...:\16\12316\0001\7120\EXH32894.T40
