<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 June 30, 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 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 August 10, 1994 was
11,603,674. (Net of 2,183,208 Treasury Shares)
================================================================================
<PAGE>
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
June 30, 1994 and December 31, 1993...................... 2
Condensed Consolidated Statements of Operations -
three months and six months ended June 30, 1994
and 1993.................................................. 3
Consolidated Statements of Cash Flows -
six months ended June 30, 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
<PAGE>
Page 2
<TABLE>
<CAPTION>
AIR EXPRESS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
June 30, 1994 December 31, 1993
------------- -----------------
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 41,017 $ 55,063
Short-term investments 25,090 10,109
Accounts receivable, (less allowance for
doubtful accounts of $3,258 and $2,846) 161,083 150,969
Other current assets 3,674 3,224
---------- ----------
Total current assets 230,864 219,365
Investment in unconsolidated affiliates 8,081 7,595
Property, plant and equipment (less accumulated
depreciation and amortization of $36,434
and $34,096) 33,161 27,323
Deposits and other assets 5,349 4,604
Goodwill (less accumulated amortization
of $5,513 and $4,674) 42,000 37,331
---------- ----------
Total assets $ 319,455 $ 296,218
========== ==========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Current portion of long-term debt $ 1,610 $ 1,509
Bank overdrafts payable 1,705 594
Transportation payables 75,605 69,640
Accounts payable 27,090 27,967
Accrued liabilities 33,977 28,250
Income taxes payable 10,695 10,587
---------- ----------
Total current liabilities 150,682 138,547
Long-term debt 80,457 78,464
Deferred income taxes 1,334 1,088
---------- ----------
Total liabilities 232,473 218,099
Stockholders' Investment:
Capital stock - Preferred (authorized 1,000,000 shares,
none outstanding) - -
Common, $.01 par value (authorized 40,000,000
shares, issued 13,785,601 and 13,711,333 shares) 137 137
Capital surplus 41,742 41,251
Cumulative translation adjustments (11,934) (12,282)
Retained earnings 97,013 88,657
---------- ----------
126,958 117,763
Less: 2,183,208 and 2,167,773 shares of treasury
stock, at cost (39,976) (39,644)
---------- ----------
Total stockholders' investment 86,982 78,119
---------- ----------
Total liabilities and stockholders' investment $ 319,455 $ 296,218
========== ==========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>
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 Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $ 237,999 $ 168,516 $ 442,809 $ 321,860
Operating expenses:
Transportation 167,140 112,596 311,024 215,355
Terminal 36,667 28,387 70,129 55,410
Selling, general and administrative 23,975 18,037 45,383 35,722
---------- ---------- ---------- ----------
Operating income 10,217 9,496 16,273 15,373
Other income (expense):
Interest expense, net (793) (918) (1,712) (1,731)
Other, net 565 (83) 972 332
---------- ---------- ---------- ----------
(228) (1,001) (740) (1,399)
---------- ---------- ---------- ----------
Income before provision for income taxes 9,989 8,495 15,533 13,974
Provision for income taxes 3,840 3,144 5,902 5,171
---------- ---------- ---------- ----------
Net income $ 6,149 $ 5,351 $ 9,631 $ 8,803
========== ========== ========== ==========
Income per common share
Primary $ .53 $ .46 $ .82 $ .75
========== ========== ========== ==========
Fully diluted $ .49 $ .44 $ .80 $ .74
========== ========== ========== ==========
Weighted average number of common shares (000):
Primary 11,709 11,712 11,685 11,721
========== ========== ========== ==========
Fully diluted 13,909 13,906 13,894 13,550
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>
Page 4
<TABLE>
<CAPTION>
AIR EXPRESS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND 1993
(Unaudited)
(Dollars in thousands)
1994 1993
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 9,631 $ 8,803
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,811 2,563
Amortization of goodwill 605 571
Deferred income taxes (141) -
Undistributed (earnings) losses of affiliates (357) (35)
Gain on sales of assets, net (12) (155)
Other, net (2,830) 753
Changes in assets and liabilities:
Decrease (increase) in accounts receivable, net (5,197) 16,529
Decrease (increase) in other current assets (404) 663
Increase (decrease) in transportation payables 4,529 (3,965)
Increase (decrease) in accounts payable (3,082) (10,035)
Increase (decrease) in accrued liabilities 2,534 (5,338)
Increase (decrease) in income taxes payable 77 2,349
---------- ----------
Total adjustments (1,467) 3,900
---------- ----------
Net cash provided by operating activities 8,164 12,703
Cash flows from investing activities:
Business Acquisitions, net of cash acquired (3,946) -
Purchase of short-term investments (14,981) (59,221)
Gains (losses) from hedging activities (572) (91)
Proceeds from sales of assets 189 264
Capital expenditures (4,504) (2,541)
Investment in unconsolidated affiliates - (20)
---------- ----------
Net cash used in investing activities (23,814) (61,609)
Cash flows from financing activities:
Net borrowings (repayments) under revolving
credit agreement - (5,000)
Net borrowings (repayments) in bank overdrafts
payable 973 (1,911)
Additions to long-term debt 1,631 72,486
Payment of long-term debt (771) (566)
Issuance of common stock 491 255
Payment of cash dividends (1,156) (807)
Purchase of treasury stock (332) (1,355)
---------- ----------
Net cash (used) provided in financing activities 836 63,102
Effect of foreign currency exchange rates on cash 768 (1,408)
---------- ----------
Net increase (decrease) in cash and cash equivalents (14,046) 12,788
Cash and cash equivalents at beginning of period 55,063 14,113
---------- ----------
Cash and cash equivalents at end of period $ 41,017 $ 26,901
========== ==========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>
Page 5
AIR EXPRESS INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A. The consolidated balance sheet at June 30, 1994, the consolidated statements
of operations for the three-month and six-month periods ended June 30, 1994
and 1993, and the consolidated statements of cash flows for the six-month
periods ended June 30, 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 June 30, 1993
financial statements have been reclassified to conform to the classification
of June 30, 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 three and six month periods ended June 30, 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 profits of $361,000 and
$411,000, respectively, for the quarter and six months ended June 30, 1994,
compared with profits of $83,000 and $96,000, for the quarter and six months
ended June 30, 1993.
C. Interest expense, net is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1994 1993 1994 1993
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Interest expense $ (1,420) $ (1,616) $ (2,840) $ (2,904)
Interest income 627 698 1,128 1,173
---------- ---------- --------- ----------
Interest expense, net $ (793) $ (918) $ (1,712) $ (1,731)
========== ========== ========= ==========
</TABLE>
<PAGE>
Page 6
D. Other income (expense) is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1994 1993 1994 1993
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Foreign exchange gains, net $ 572 $ (218) $ 960 $ 177
Other, net (7) 135 12 155
---------- ---------- --------- ----------
$ 565 $ (83) $ 972 $ 332
========== ========== ========= ==========
</TABLE>
E. Statement of cash flows - interest and income taxes paid:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1994 1993 1994 1993
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Interest $ 155 $ 398 $ 2,572 $ 687
Income taxes 2,984 1,663 6,049 3,669
---------- ---------- --------- ----------
$ 3,139 $ 2,061 $ 8,621 $ 4,356
========== ========== ========= ==========
</TABLE>
F. Acquisitions:
During the second quarter of 1994, the Company acquired both Unimodal
Australia Pty. Ltd. (Unimodal), an ocean freight forwarder based in
Australia, and Banner International Ltd. (Banner), an airfreight forwarder
located in New Zealand, for approximately $6.5 million in cash. The
acquisitions have been accounted for as purchases; the cost of which has been
allocated on the basis of the estimated fair market value of the assets
acquired and the liabilities assumed. This allocation resulted in goodwill
of approximately $4.0 million. The results of operations for these companies
are included in the consolidated statement of income from the acquisition
dates forward.
G. Subsequent Event:
On July 15, 1994, the Company acquired Pace Express Pty. Ltd. (Pace), from
senior management. Pace is a leading airfreight forwarder in Australia with
offices in seven cities with 160 employees. Pace was profitable in 1993 with
gross revenues of approximately $25.0 million. The acquisition will be
accounted for as a purchase.
<PAGE>
Page 7
Item 2. Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations
-------------------------
Results of Operations
- - ---------------------
Included in the results of operations for the second quarter and six months
ended June 30, 1994 are the results from the ocean freight activities of
Votainer, which was acquired by the Company on July 1, 1993. The results of
the airfreight and ocean freight activities for the 1994 periods are:
<TABLE>
<CAPTION>
Six Months
Second Quarter 1994 Ended June 30, 1994
-------------------------------------------- --------------------------------------------
Air Ocean Air Ocean
Freight Freight Total Freight Freight Total
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 212,150 $ 25,849 $ 237,999 $ 394,806 $ 48,003 $ 442,809
Expense:
Transportation 147,171 19,969 167,140 274,143 36,881 311,024
Terminal 32,951 3,716 36,667 62,785 7,344 70,129
Selling, general
and administrative 21,296 2,679 23,975 40,252 5,131 45,383
--------- --------- --------- --------- --------- ---------
Operating income (loss) $ 10,732 $ (515) $ 10,217 $ 17,626 $ (1,353) $ 16,273
========= ========= ========= ========= ========= =========
</TABLE>
Votainer's $1.3 million loss was mainly attributable to a $1.4 loss in
Votainer's United States operations, which comprised approximately 33.0% of
Votainer's revenues.
Revenues for the second quarter and the six months ended June 30, 1994 increased
41.2% to $238.0 and 37.6% to $442.9, respectively, over the comparable periods
in 1993. Airfreight revenues for the second quarter and the six months
increased 25.9% to $212.2 and 22.7% to $394.8, respectively. The increase in
airfreight revenues for both the quarter and six months was due to increases in
shipments and the total weight of cargo shipped. For the quarter, shipments
increased 10.6% and the weight of cargo shipped 29.0% over the second quarter of
1993. For the six month period, shipments increased 10.3% and the weight of
cargo shipped increased 26.4% over the first six months of 1993.
Gross profit (revenues less transportation expense) from airfreight operations
for the second quarter of 1994 increased $9.0 million or 16.2% over the
comparable 1993 period to $64.9. For the six months, gross profit increased
$14.2 million or 13.3% over the comparable 1993 period to $120.7. The higher
gross profit for both the quarter and six month periods was attributable to
increases in both shipments and total weight of cargo shipped. The gross margin
(gross profit as a percent of revenues) decreased approximately 2.6% for the
quarter and six months when compared to the comparable periods in 1993. This
decrease is due to 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 $14.2 million or 30.6% for the quarter and $24.4 million or 26.8% for
the six month period from the comparable periods in 1993. These increases were
mainly attributable to the inclusion of the internal operating expenses for
Votainer and several smaller acquisitions which were acquired by the Company
subsequent to June 30,1993. As a percentage of revenues, internal operating
expenses were 25.5% for the quarter and 26.0% for the six months in 1994 as
compared to 27.5% and 28.3%, respectively, for the comparable periods in 1993.
The improvement in both periods resulted from the greater efficiencies
associated with the increase in shipments and shipment weights.
Interest expense for the second quarter and the first six months of 1994 was
marginally lower than the comparable periods in 1993.
The effective income tax rate for the quarter and six months ended June 30, 1994
was 38.4% and 38.0% respectively, an increase of 1.4% and 1.0% over the second
quarter and first six months of 1993. The higher effective tax rate was due to
losses incurred in certain of the Company's foreign subsidiaries where there was
no tax credit available and a 1.0% increase in the United States federal
statutory tax rate.
Liquidity and Capital Resources
- - -------------------------------
As of June 30, 1994, the Company's working capital decreased marginally to
$80.2 million from $80.8 million at December 31, 1993.
Capital expenditures for the six months ended June 30, 1994 were $4.5 million
compared to $2.5 million for the first six months of 1993. This increase is due
primarily to the 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 June 30, 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: August 11, 1994 /s/ Dennis M. Dolan
-------------------------------------
Dennis M. Dolan
Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: August 11, 1994 /s/ Walter L. McMaster
-------------------------------------
Walter L. McMaster
Vice President - Controller
(Principal Accounting Officer)
<PAGE>
<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 Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Primary:
Net income applicable to
common shares $ 6,149 $ 5,351 $ 9,631 $ 8,803
========== ========== ========== ==========
Weighted average of common
shares outstanding 11,584 11,568 11,571 11,569
Common shares issuable on
exercise of stock options 125 144 114 152
---------- ---------- ---------- ----------
Average common shares outstanding 11,709 11,712 11,685 11,721
========== ========== ========== ==========
Earnings per common share $ .53 $ .46 $ .82 $ .75
========== ========== ========== ==========
Fully diluted:
Weighted average of common
shares outstanding 11,584 11,568 11,571 11,569
Common shares issuable on
exercise of stock options 131 144 129 152
Common shares issuable upon
assumed conversion of subordinated debentures 2,194 2,194 2,194 1,829
---------- ---------- ---------- ----------
Average common shares outstanding 13,909 13,906 13,894 13,550
========== ========== ========== ==========
Earnings per common share $ .49 $ .44 $ .80 $ .74
========== ========== ========== ==========
<FN>
Primary earnings per share are computed by dividing net income by the weighted
average common and common equivalent shares outstanding during the period.
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. For the quarters ended June 30, 1994 and 1993, the
interest elimination was $.73 million and $.78 million, respectively. For
the six months ended June 30, 1994 and 1993, the interest elimination was
$1.46 million and $1.28 million, respectively.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> JUN-30-1994
<CASH> 41,017
<SECURITIES> 25,090
<RECEIVABLES> 164,341
<ALLOWANCES> 3,258
<INVENTORY> 0
<CURRENT-ASSETS> 230,864
<PP&E> 69,595
<DEPRECIATION> 36,434
<TOTAL-ASSETS> 319,455
<CURRENT-LIABILITIES> 150,682
<BONDS> 80,457
<COMMON> 137
0
0
<OTHER-SE> 86,845
<TOTAL-LIABILITY-AND-EQUITY> 319,455
<SALES> 0
<TOTAL-REVENUES> 442,809
<CGS> 0
<TOTAL-COSTS> 311,024
<OTHER-EXPENSES> 70,129
<LOSS-PROVISION> 490
<INTEREST-EXPENSE> 2,840
<INCOME-PRETAX> 15,533
<INCOME-TAX> 5,902
<INCOME-CONTINUING> 9,631
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,631
<EPS-PRIMARY> .82
<EPS-DILUTED> .80
</TABLE>
