<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended March 31, 1994
Commission file number: 1-8306
------
AIR EXPRESS INTERNATIONAL CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-2074327
- - ------------------------------------ ------------------------------------
(State or Other of Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
120 Tokeneke Road, Darien, Connecticut 06820 (203) 655-7900
- - --------------------------------------------------------------------------------
(Address of, Including Zip Code, and Telephone Number, Including Area Code, of
of Registrant's Principal Executive Offices)
NONE
- - --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 3 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 the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date (applicable only to corporate
registrants).
The number of shares of common stock outstanding as of May 10, 1994 was
13,765,583. (Net of 2,181,537 Treasury Shares)
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AIR EXPRESS INTERNATIONAL CORPORATION
March 1994 Form 10-Q Quarterly Report
Table of Contents
Part I - Financial Information
Page
----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as at
March 31, 1994 and December 31, 1993..................... 2
Condensed Consolidated Statements of Operations -
three months ended March 31, 1994 and 1993................ 3
Consolidated Statements of Cash Flows -
three months ended March 31, 1994 and 1993................ 4
Notes to Condensed Consolidated Financial
Statements................................................ 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 7
Part II - Other Information
Item 1. Legal Proceedings......................................... 9
Item 6. Exhibits and Reports on Form 8-K.......................... 9
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Page 2
<TABLE>
<CAPTION>
AIR EXPRESS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
March 31, 1994 December 31, 1993
-------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 58,991 $ 55,063
Short-term investments 10,109 10,109
Accounts receivable, (less allowance for
doubtful accounts of $2,832 and $2,846) 149,281 150,969
Other current assets 3,472 3,224
---------- ---------
Total current assets 221,853 219,365
Investment in unconsolidated affiliates 7,740 7,595
Property, plant and equipment (less accumulated
depreciation and amortization of $35,335 and $34,096) 28,722 27,323
Deposits and other current assets 4,632 4,604
Goodwill (less accumulated amortization
of $5,048 and $4,674) 37,300 37,331
---------- ----------
Total assets $ 300,247 $ 296,218
========== ==========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Current portion of long-term debt $ 1,526 $ 1,509
Bank overdrafts payable 1,471 594
Transportation payable 68,397 69,640
Accounts payable 27,737 27,967
Accrued liabilities 29,872 28,250
Income taxes payables 9,907 10,587
---------- ----------
Total current liabilities 138,910 138,547
Long-term debt 79,140 78,464
Deferred taxes payable 1,088 1,088
---------- ----------
Total liabilities 219,138 218,099
Stockholders' Investment:
Common stock- Preferred (authorized 1,000,000 shares,
none outstanding) - -
Common, $.01 par value (authorized 40,000,000
shares, issued 13,748,552 and 13,711,333 shares) 137 137
Capital surplus 41,493 41,251
Cumulative translation adjustments (12,220) (12,282)
Retained earnings 91,560 88,657
---------- ----------
120,970 117,763
Less: 2,178,003 and 2,163,773 shares of treasury
stock, at cost (39,861) (39,644)
---------- ----------
Total stockholders' investment 81,109 78,119
---------- ----------
Total liabilities and stockholders' investment $ 300,247 $ 296,218
========== ==========
</TABLE>
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Page 3
<TABLE>
<CAPTION>
AIR EXPRESS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three Months Ended
March 31,
-------------------------------
1994 1993
---------- ----------
<S> <C> <C>
Revenues $ 204,810 $ 153,344
Operational expenses:
Transportation 143,884 102,759
Terminal 33,462 27,023
Selling, general and administrative expenses 21,408 17,685
---------- ----------
Operating income 6,056 5,877
Other income (expense):
Interest expense, net (919) (813)
Other, net 407 415
---------- ----------
(512) (398)
---------- ----------
Income before provision for income taxes 5,544 5,479
Provision for income taxes 2,062 2,027
---------- ----------
Net income $ 3,482 $ 3,452
========== ==========
Income per common share
Primary $ .30 $ .29
========== ==========
Fully diluted $ .30 $ .29
========== ==========
Weighted average number of common shares (000):
Primary 11,673 11,733
========== ==========
Fully diluted 13,889 13,196
========== ==========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
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Page 4
<TABLE>
<CAPTION>
AIR EXPRESS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED March 31, 1994 AND 1993
(Dollars in thousands)
1994 1993
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,482 $ 3,452
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,333 1,183
Amortization of goodwill 301 204
Deferred income taxes (351) -
Undistributed (earnings) losses of affiliates (50) (13)
Gain on sales of assets, net (19) (5)
Other, net (786) (242)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable, net 1,688 19,235
Decrease (increase) in prepaid expense and other (248) 381
Increase (decrease) in transportation payables (1,243) (3,946)
Increase (decrease) in accounts payable (230) (7,074)
Increase (decrease) in accrued liabilities 1,620 (6,268)
Increase (decrease) in income taxes payable (498) 650
---------- ----------
Total adjustments 1,517 4,105
---------- ----------
Net cash provided by operating activities 4,999 7,557
Cash flows from investing activities:
Purchase of short-term investments - (33,807)
Gains (losses) from hedging activities (105) (450)
Proceeds from sales of assets 38 171
Capital expenditures (2,328) (1,387)
---------- ----------
Net cash used in investing activities (2,395) (35,473)
Cash flows from financing activities:
Net borrowings (repayments) under revolving
credit agreement - (5,000)
Net borrowings (repayments) in bank overdrafts
payable 877 (1,359)
Additions to long-term debt 948 72,481
Payment of long-term debt (312) -
Issuance of common stock 242 208
Payment of cash dividends (577) (406)
Purchase of treasury stock (217) -
---------- ----------
Net cash (used) provided in financing activities 961 65,924
Effect of foreign currency exchange rates on cash 363 (381)
---------- ----------
Net increase (decrease) in cash and cash equivalents 3,928 37,627
Cash and cash equivalents at beginning of period 55,063 14,113
---------- ----------
Cash and cash equivalents at end of period $ 58,991 $ 51,740
========== ==========
</TABLE>
<PAGE>
Page 5
AIR EXPRESS INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A. The consolidated balance sheet at March 31, 1994, the consolidated statements
of operations for the three-month periods ended March 31, 1994 and 1993, and
the consolidated statements of cash flows for the three-month periods ended
March 31, 1994 and 1993 have been prepared by the Company without audit. In
the opinion of management, all adjustments necessary to present fairly the
financial position, results of operations, and cash flows for the interim
periods have been made. Certain items in the March 31, 1993 financial
statements have been reclassified to conform to the classification of
March 31, 1994.
Certain information and footnote disclosures, normally included in financial
statements prepared in accordance with generally accepted accounting
principles, have been condensed or omitted. Accordingly, these condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
annual report to stockholders for the year ended December 31, 1993. The
results of operations for the period ended March 31, 1994 are not necessarily
indicative of the results of operations expected for the full year ending
December 31, 1994.
B. Investments in equity affiliates are recorded using the equity method.
Consolidated net income reflects joint venture profit of $50,000 for the
quarter ended March 31, 1994, compared with a profit of $13,000 for the
quarter ended March 31, 1993.
C. Interest expense, net is as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1994 1993
--------- ---------
<S> <C> <C>
Interest expense $ (1,420) $ (1,288)
Interest income 501 475
--------- ---------
Interest expense, net $ (919) $ (813)
========= =========
</TABLE>
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Page 6
D. Other income (expense) is as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1994 1993
--------- --------
<S> <C> <C>
Foreign exchange gains, net $ 388 $ 395
Other, net 19 20
--------- ---------
$ 407 $ 415
========= =========
</TABLE>
E. Statement of cash flows - interest and income taxes paid:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1994 1993
--------- ---------
<S> <C> <C>
Interest $ 2,417 $ 289
Income Taxes 3,065 2,006
--------- ---------
$ 5,482 $ 2,295
========= =========
</TABLE>
<PAGE>
Page 7
Item 2. Management's Discussion and Analysis of Financial Condition
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and Results of Operations
-------------------------
Results of Operations
- - ---------------------
Included in the results of operations for the first quarter are the results from
the ocean freight activities of Votainer, which was acquired by the Company on
July 1, 1993. The results of airfreight and ocean freight activities for the
quarter are:
<TABLE>
<CAPTION>
First Quarter 1994
--------------------------------------------
Air Ocean
Freight Freight Total
--------- --------- ---------
<S> <C> <C> <C>
Revenues $ 182,656 $ 22,154 $ 204,810
Expense:
Transportation 126,972 16,912 143,884
Terminal 29,834 3,628 33,462
Selling, general
and administrative 18,956 2,452 21,408
--------- --------- ---------
Operating income (loss) $ 6,894 $ (838) $ 6,056
========= ========= =========
</TABLE>
Votainer's $.8 million loss was mainly attributable to a $.7 million loss in
Votainer's United States operations, which comprised approximately 35.0% of
Votainer's revenues.
Revenues from airfreight operations for the first quarter 1994 increased $ 29.3
million or 19.1% compared to the first quarter of 1993 to $182.7 million. The
increase in airfreight revenues was attributable to a 10.3% increase in
shipments and a 26.0% increase in the total weight of cargo shipped.
Gross profit (revenue less transportation expense) from airfreight operations
for the first quarter of 1994 increased $5.1 million or 10.1% when compared to
the first quarter of 1993, to $55.7 million. The higher gross profit was
attributable to the increase in shipment and weight volumes. When compared to
the first quarter of 1993, airfreight gross margin (gross profit as a percent of
revenues) declined 2.5% to 30.5% in the first quarter of 1994 due to the effects
of the Company's customers shipping significantly more weight which resulted in
lower selling prices per unit of weight, and competitive pricing pressures.
<PAGE>
Page 8
Internal operating expenses (terminal, selling and general and administrative)
increased 10.2 million or 22.7% over the first quarter of 1993 due to the
inclusion of 6.1 million of expenses from the ocean freight operations of
Votainer and a 4.1 million or 9% increase in airfreight internal operating
expenses. Internal operating expenses attributable to airfreight operations as a
percentage of revenues for the first quarter 1994, were 26.7% compared to 29.2%
for the same period of 1993.
Operating income for the first quarter 1994, (inclusive of an $.8 million loss
from ocean operations), increased 3% to $6.1 million.
Interest expense for the first quarter of 1994 increased marginally over the
comparable period in 1993.
The effective income tax rate for the first quarter 1994 compared to the first
quarter 1993 was unchanged.
Liquidity and Capital Resources
- - -------------------------------
At March 31, 1994, the Company's working capital increased to $83 million from
$80.8 million at December 31, 1993. This increase was primarily provided by
operations.
Capital expenditures for the three months ended March 31, 1994 were $2.3 million
compared to $1.4 million for the first three months of 1993. This increase is
due to the initial construction costs for the Company's new warehouse and
distribution facility in Singapore. This facility is scheduled for completion
in December, 1994 at a cost of approximately $10.0 million, which will be
partially financed by a $6.5 million mortgage loan.
At March 31, 1994, the Company had available for future borrowings the full
amount of its $20.0 million revolving credit facility. Additionally, the
Company's foreign subsidiaries have approximately $10.5 million available under
various overdraft facilities with foreign banks.
<PAGE>
Page 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
The Company believes that there are no legal proceedings, other than ordinary
routine litigation incidental to the business of the Company, to which the
Company or any of its subsidiaries is a party. Management is of the opinion
that the ultimate outcome of existing legal proceedings, if adverse, would not
have a material effect on the Company's consolidated financial position.
Item 2. Changes in Securities.
----------------------
Not Applicable.
Item 3. Default Upon Senior Securities.
-------------------------------
Not Applicable.
Item 4. Submission of Matter to a Vote of Security Holders.
---------------------------------------------------
Not Applicable.
Item 5. Other Information.
------------------
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a) Computation of Earnings Per common Share - Exhibit 11
<PAGE>
Page 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Air Express International Corporation
-------------------------------------
(Registrant)
Date: May 10, 1994 /s/ Dennis M. Dolan
-------------------------------------
Dennis M. Dolan
Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: May 10, 1994 /s/ Walter L. McMaster
-------------------------------------
Walter L. McMaster
Vice President - Controller
(Principal Accounting Officer)
<PAGE>
Exhibit 11
<TABLE>
<CAPTION>
AIR EXPRESS INTERNATIONAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(Unaudited)
(In thousands, except
per share amounts)
Three Months Ended
March 31,
-------------------------
1994 1993
--------- ---------
<S> <C> <C>
Primary:
Net income applicable to
common shares $ 3,482 $ 3,452
========= =========
Weighted average of common
shares outstanding 11,558 11,573
Common shares issuable on
exercise of stock options 115 160
--------- ---------
* Average common shares outstanding
standing as adjusted 11,673 11,733
========= =========
Earnings per common share $ .30 $ .29
========= =========
Fully diluted:
Weighted average of common
shares outstanding 11,558 11,573
Common shares issuable on
exercise of stock options 137 160
Common shares issuable upon assumed
conversion of subordinated debentures 2,194 1,462
--------- ---------
* Average common shares out-
standing as adjusted 13,889 13,196
========= =========
Earnings per common share $ .30 $ .29
========= =========
<FN>
* Primary earnings per share are computed by dividing net income by the
weighted average common and common equivalent shares outstanding during the
period. For the quarters ended March 31, 1994 and 1993, fully diluted
earnings per share have been calculated assuming the conversion of the
subordinated debentures and the elimination of the associated interest
expense, net of tax, of approximately $.73 million and $.49 million,
respectively.
</TABLE>
