<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 September 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 November 9, 1994 was
13,802,978. (Net of 2,184,208 Treasury Shares)
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<PAGE>
AIR EXPRESS INTERNATIONAL CORPORATION
September 1994 Form 10-Q Quarterly Report
Table of Contents
Part I - Financial Information
Page
----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as at
September 30, 1994 and December 31, 1993.................. 2
Condensed Consolidated Statements of Operations -
three months and nine months ended September 30, 1994
and 1993.................................................. 3
Consolidated Statements of Cash Flows -
nine months ended September 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)
September 30, 1994 December 31, 1993
------------------ -----------------
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 32,507 $ 55,063
Short-term investments 30,070 10,109
Accounts receivable, (less allowance for
doubtful accounts of $3,178 and $2,846) 180,261 150,969
Other current assets 3,914 3,224
---------- ----------
Total current assets 246,752 219,365
Investment in unconsolidated affiliates 8,419 7,595
Property, plant and equipment (less accumulated
depreciation and amortization of $35,853
and $34,096) 36,462 27,323
Deposits and other assets 5,941 4,604
Goodwill (less accumulated amortization
of $5,971 and $4,674) 47,303 37,331
---------- ----------
Total assets $ 344,877 $ 296,218
========== ==========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Current portion of long-term debt $ 2,030 $ 1,509
Transportation payables 83,839 69,640
Accounts payable 31,759 28,561
Accrued liabilities 39,920 28,250
Income taxes payable 11,136 10,587
---------- ----------
Total current liabilities 168,684 138,547
Long-term debt 82,242 78,464
Deferred income taxes 1,422 1,088
---------- ----------
Total liabilities 252,348 218,099
Stockholders' Investment:
Capital stock-
Preferred (authorized 1,000,000 shares,
none outstanding) - -
Common, $.01 par value (authorized 40,000,000
shares, issued 13,791,912 and 13,711,333 shares) 137 137
Capital surplus 41,816 41,251
Cumulative translation adjustments (12,074) (12,282)
Retained earnings 102,626 88,657
---------- ----------
132,505 117,763
Less: 2,183,208 and 2,167,773 shares of treasury
stock, at cost (39,976) (39,644)
---------- ----------
Total stockholders' investment 92,529 78,119
---------- ----------
Total liabilities and stockholders' investment $ 344,877 $ 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 Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $ 258,175 $ 192,071 $ 700,984 $ 513,931
Operating expenses:
Transportation 183,079 133,101 494,103 348,456
Terminal 39,105 31,208 109,234 86,618
Selling, general and
administrative 25,255 20,335 70,638 56,057
---------- ---------- ---------- ----------
Operating income 10,736 7,427 27,009 22,800
Other income (expense):
Interest expense, net (772) (996) (2,484) (2,727)
Other, net 424 (66) 1,396 266
---------- ---------- ---------- ----------
(348) (1,062) (1,088) (2,461)
---------- ---------- ---------- ----------
Income before provision
for income taxes 10,388 6,365 25,921 20,339
Provision for income taxes 4,078 2,620 9,980 7,791
---------- ---------- ---------- ----------
Net income $ 6,310 $ 3,745 $ 15,941 $ 12,548
========== ========== ========== ==========
Income per common share
Primary $ .54 $ .32 $ 1.36 $ 1.07
========== ========== ========== ==========
Fully diluted $ .50 $ .32 $ 1.30 $ 1.06
========== ========== ========== ==========
Weighted average number
of common shares (000):
Primary 11,784 11,674 11,720 11,705
========== ========== ========== ==========
Fully diluted 14,003 13,872 13,976 13,656
========== ========== ========== ==========
</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 NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
(Unaudited)
(Dollars in thousands)
1994 1993
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 15,941 $ 12,548
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 4,126 3,747
Amortization of goodwill 974 819
Deferred income taxes (416) (524)
Undistributed (earnings) losses of affiliates (619) (238)
Gain on sales of assets, net (19) (86)
Other, net (1,415) (396)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable, net (13,154) 12,505
Decrease (increase) in other current assets (218) (753)
Increase (decrease) in transportation payables 9,575 (7,378)
Increase (decrease) in accounts payable (6,161) (9,310)
Increase (decrease) in accrued liabilities 6,680 986
Increase (decrease) in income taxes payable (130) 2,123
---------- ----------
Total adjustments (777) 1,495
---------- ----------
Net cash provided by operating activities 15,164 14,043
Cash flows from investing activities:
Business Acquisitions, net of cash acquired (10,345) (9,188)
Purchase of short-term investments (19,961) (44,208)
Gains (losses) from hedging activities (874) (343)
Proceeds from sales of assets 234 144
Capital expenditures (7,438) (3,275)
---------- ----------
Net cash used in investing activities (38,384) (56,870)
Cash flows from financing activities:
Net borrowings (repayments) under revolving
credit agreement - (5,000)
Additions to long-term debt 2,694 72,486
Payment of long-term debt (1,401) (4,168)
Issuance of common stock 565 330
Payment of cash dividends (1,852) (1,385)
Purchase of treasury stock (332) (1,355)
---------- ----------
Net cash (used) provided in financing activities (326) 60,908
Effect of foreign currency exchange rates on cash 990 (590)
---------- ----------
Net increase (decrease) in cash and cash equivalents (22,556) 17,491
Cash and cash equivalents at beginning of period 55,063 14,113
Cash and cash equivalents at end of period $ 32,507 $ 31,604
========== ==========
</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 September 30, 1994, the consolidated
statements of operations for the three-month and nine-month periods ended
September 30, 1994 and 1993, and the consolidated statements of cash flows
for the nine-month periods ended September 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 September 30, 1993 financial statements have been reclassified
to conform to the classification of September 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 nine month periods ended
September 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 $262,000 and
$673,000, respectively, for the quarter and nine months ended
September 30, 1994, compared with profits of $188,000 and $284,000, for the
quarter and nine months ended September 30, 1993.
C. Interest expense, net is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
1994 1993 1994 1993
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Interest expense $ (1,492) $ (1,539) $ (4,332) $ (4,443)
Interest income 720 543 1,848 1,716
---------- ---------- --------- ----------
Interest expense, net $ (772) $ (996) $ (2,484) $ (2,727)
========== ========== ========= ==========
</TABLE>
<PAGE>
Page 6
D. Other income (expense) is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- -------------------------
1994 1993 1994 1993
--------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Foreign exchange gains, net $ 417 $ 3 $ 1,377 $ 180
Other, net 7 (69) 19 86
---------- ---------- --------- ----------
$ 424 $ (66) $ 1,396 $ 266
========== ========== ========= ==========
</TABLE>
E. Statement of cash flows - interest and income taxes paid:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- -------------------------
1994 1993 1994 1993
--------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Interest $ 2,428 $ 2,315 $ 5,000 $ 3,002
Income taxes 3,338 3,423 9,387 7,092
---------- ---------- --------- ----------
$ 5,766 $ 5,738 $ 14,387 $ 10,094
========== ========== ========= ==========
</TABLE>
F. Acquisitions:
During the second and third quarters, the Company acquired Unimodal Australia
Pty. Ltd. (Unimodal), an ocean freight forwarder based in Australia, Banner
International Ltd. (Banner), an airfreight forwarder located in New Zealand,
and Pace Express Pty. Ltd. (Pace), an airfreight forwarder located in
Australia, for approximately $12.0 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
$9.0 million. The results of operations for these companies are included in
the consolidated statement of income from the acquisition dates forward.
G. Short-term Investments:
The Company has adopted statement of Financial Accounting Standards No. 115
"Accounting for Certain Investments in Debt and Equity Securities." As a
result, short-term investments are classified as available for sale and
recorded at cost, which approximates market. The investments consist of U.S.
Government instruments with original maturities in excess of three months.
<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 third quarter and nine months
ended September 30, 1994 are the results from the ocean freight activities which
include the activities of Votainer, which was acquired by the Company in the
third quarter of 1993. The results of the airfreight and ocean freight
activities for the 1994 periods are:
<TABLE>
<CAPTION>
Nine Months
Third Quarter 1994 Ended September 30, 1994
-------------------------------------------- --------------------------------------------
Air Ocean Air Ocean
Freight Freight Total Freight Freight Total
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 226,518 $ 31,657 $ 258,175 $ 621,324 $ 79,660 $ 700,984
Expense:
Transportation 159,963 23,116 183,079 434,106 59,997 494,103
Terminal 34,550 4,555 39,105 97,335 11,899 109,234
Selling, general
and administrative 22,322 2,933 25,255 62,574 8,064 70,638
--------- --------- --------- --------- --------- ---------
Operating income (loss) $ 9,683 $ 1,053 $ 10,736 $ 27,309 $ (300) $ 27,009
========= ========= ========= ========= ========= =========
</TABLE>
Revenues for the third quarter and the nine months ended September 30, 1994
increased 34.4% to $258.2 and 36.4% to $700.9, respectively, over the comparable
periods in 1993. Airfreight revenues for the third quarter and the nine months
increased 36.0% to $226.5 and 27.2% to $621.3, respectively. The increase in
airfreight revenues for both the quarter and nine months was due to increases in
shipments and the total weight of cargo shipped. For the quarter, shipments
increased 10.5% and the weight of cargo shipped increased 38.7% over the third
quarter of 1993. For the nine month period, shipments increased 10.5% and the
weight of cargo shipped increased 30.7% over the first nine months of 1993.
Gross profit (revenues less transportation expense) from airfreight operations
for the third quarter of 1994 increased $13.8 million or 26.1% over the
comparable 1993 period to $66.6. For the nine months, gross profit increased
$27.9 million or 17.5% over the comparable 1993 period to $187.2. The higher
gross profit for both the quarter and nine 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 2.3% for the
quarter and 2.5% for the nine 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 $12.8 million or 24.9% for the quarter and $37.2 million or 26.1% for
the nine 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 24.9% for the quarter and 25.7% for the nine months in 1994 as
compared to 26.8% and 27.8%, 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 third quarter and the first nine months of 1994 was
marginally lower than the comparable periods in 1993.
The effective income tax rates for the quarter and nine months ended
September 30, 1994 were 39.3% and 38.5%, respectively. For the quarter, the
effective rate decreased 1.8% from 41.1% for the 1993 quarter. The higher
effective rate in the 1993 quarter resulted mainly from the Company's
adjustment of its year-to-date effective tax rate to reflect the 1% increase in
the United States Federal statutory rate and losses incurred by various foreign
subsidiaries for which there were no tax credits available. For the first nine
months of 1994, the effective income tax rate was 38.5% which was marginally
higher than the 38.3% rate for the comparable 1993 period.
Liquidity and Capital Resources
- - -------------------------------
As of September 30, 1994, the Company's working capital decreased approximately
$2.7 million to $78.1 million from $80.8 million at December 31, 1993. The
decrease is mainly attributable to the business acquisitions (See Note F).
Capital expenditures for the nine months ended September 30, 1994 were $7.4
million compared to $3.3 million for the first nine 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 March, 1995 at a cost of approximately $10.0 million, which will
be partially financed by a $6.5 million mortgage loan.
At September 30, 1994, the Company had available for future borrowings $19.73
million of its $20.0 million revolving credit facility. Additionally, the
Company's foreign subsidiaries had approximately $11.2 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: November 10, 1994 /s/ Dennis M. Dolan
-------------------------------------
Dennis M. Dolan
Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: November 10, 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 Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
1994 1993 1994 1993
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Primary:
Net income applicable to
common shares $ 6,310 $ 3,745 $ 15,941 $ 12,548
========== ========== =========== ===========
Weighted average of common
shares outstanding 11,604 11,523 11,581 11,555
Common shares issuable on
exercise of stock options 180 151 139 150
---------- ---------- ----------- -----------
Average common shares outstanding 11,784 11,674 11,720 11,705
========== ========== =========== ===========
Earnings per common share $ .54 $ .32 $ 1.36 $ 1.07
========== ========== =========== ===========
Fully diluted:
Weighted average of common
shares outstanding 11,604 11,523 11,581 11,555
Common shares issuable on
exercise of stock options 205 155 201 150
Common shares issuable upon
assumed conversion of subordinated debentures 2,194 2,194 2,194 1,951
---------- ---------- ----------- -----------
Average common shares outstanding 14,003 13,872 13,976 13,656
========== ========== =========== ===========
Earnings per common share $ .50 $ .32 $ 1.30 $ 1.06
========== ========== =========== ===========
<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 September 30, 1994 and 1993, the interest elimination was $.73 million
and $.73 million, respectively. For the nine months ended September 30, 1994 and 1993,
the interest elimination was $2.19 million and $1.94 million, respectively.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 30,507
<SECURITIES> 30,070
<RECEIVABLES> 183,439
<ALLOWANCES> 3,178
<INVENTORY> 0
<CURRENT-ASSETS> 246,752
<PP&E> 72,315
<DEPRECIATION> 35,853
<TOTAL-ASSETS> 344,877
<CURRENT-LIABILITIES> 168,684
<BONDS> 82,242
<COMMON> 137
0
0
<OTHER-SE> 144,442
<TOTAL-LIABILITY-AND-EQUITY> 344,877
<SALES> 0
<TOTAL-REVENUES> 700,984
<CGS> 0
<TOTAL-COSTS> 494,103
<OTHER-EXPENSES> 109,234
<LOSS-PROVISION> 490
<INTEREST-EXPENSE> 4,332
<INCOME-PRETAX> 25,921
<INCOME-TAX> 9,980
<INCOME-CONTINUING> 15,941
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,941
<EPS-PRIMARY> 1.36
<EPS-DILUTED> 1.30
</TABLE>
