<PAGE>
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, 1995
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 May 10, 1995 was
17,496,548. (Net of 2,189,330 Treasury Shares)
<PAGE>
AIR EXPRESS INTERNATIONAL CORPORATION
March 1995 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, 1995 and December 31, 1994......................2
Condensed Consolidated Statements of Operations -
three months ended March 31, 1995 and 1994.................3
Consolidated Statements of Cash Flows -
three months ended March 31, 1995 and 1994.................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)
March 31, December 31,
1995 1994
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents ...................... $ 41,384 $ 44,168
Accounts receivable, (less allowance for
doubtful accounts of $3,161 and $3,290) ....... 207,586 206,012
Other current assets ........................... 3,724 2,938
Total current assets ........................ 252,694 253,118
Investment in unconsolidated affiliates .......... 10,031 9,370
Marketable securities ............................ 19,961 19,961
Property, plant and equipment (less
accumulated depreciation and amortization
of $39,737 and $37,057) ......................... 45,184 39,599
Deposits and other assets ........................ 6,783 6,957
Goodwill (less accumulated amortization
of $6,878 and $6,403) ......................... 54,239 51,929
Total assets ................................ $ 388,892 $ 380,934
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Current portion of long-term debt .............. $ 2,518 $ 2,029
Bank overdrafts payable ........................ 1,228 1,399
Transportation payables ........................ 98,051 101,657
Accounts payable ............................... 38,384 34,087
Accrued liabilities ............................ 42,261 43,988
Income taxes payable ........................... 11,696 10,991
Total current liabilities ................... 194,138 194,151
Long-term debt ................................. 86,278 83,992
Other liabilities .............................. 3,390 3,441
Total liabilities ........................... 283,806 281,584
Stockholders' Investment:
Capital stock-
Preferred (authorized 1,000,000 shares,
none outstanding) ............................. -- --
Common, $.01 par value (authorized
40,000,000 shares, issued 19,670,527
and 19,620,526 shares) ........................ 197 196
Capital surplus ................................ 42,431 41,998
Cumulative translation adjustments ............. (10,480) (11,442)
Retained earnings .............................. 113,013 108,600
145,161 139,352
Less: 2,187,833 and 2,184,208 shares
of treasury stock, at cost ..................... (40,075) (40,002)
Total stockholders' investment ................. 105,086 99,350
Total liabilities and stockholders'
investment .................................... $ 388,892 $ 380,934
</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
March 31,
1995 1994
<S> <C> <C>
Revenues ........................................... $ 284,073 $ 204,810
Operating expenses:
Transporation ..................................... 203,259 143,884
Terminal .......................................... 43,627 33,462
Selling, general and administrative ............... 28,602 21,408
Operating income ................................... 8,585 6,056
Other income (expense):
Interest expense, net ............................. (667) (919)
Other, net ...................................... 386 407
(281) (512)
Income before provision for income taxes ........... 8,304 5,544
Provision for income taxes ......................... 3,191 2,062
Net income ......................................... $ 5,113 $ 3,482
Income per common share:
Primary ......................................... $ .29 $ .20
Fully diluted ................................... $ .28 $ .20
Weighted average number of common shares (000):
Primary ......................................... 17,833 17,510
Fully diluted ................................... 21,204 20,834
</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 THREE MONTHS ENDED March 31, 1995 AND 1994
(Dollars in thousands)
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income ........................................... $ 5,113 $ 3,482
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ...................... 1,641 1,333
Amortization of goodwill ........................... 419 301
Deferred income taxes .............................. 30 (351)
Undistributed (earnings) losses of affiliates ...... 4 (50)
(Gains) losses on sales of assets, net ............. (69) (19)
Other, net ......................................... 522 380
Changes in assets and liabilities:
Decrease (increase) in accounts receivable, net .... 3,909 3,256
Decrease (increase) in other current assets ........ (611) (248)
Increase (decrease) in transportation payables ..... (6,256) (1,931)
Increase (decrease) in accounts payable ............ 695 (1,347)
Increase (decrease) in accrued liabilities ......... (3,704) 1,023
Increase (decrease) in income taxes payable ........ 582 (498)
Increase (decrease) in other liabilities ........... (117) --
Total adjustments ................................. (2,955) 1,849
Net cash provided by operating activities .......... 2,158 5,331
Cash flows from investing activities:
Business acquisitions, net of cash acquired .......... 22 --
Gains (losses) from hedging activities ............... (522) (105)
Proceeds from sales of assets ........................ 167 38
Capital expenditures ................................. (6,850) (2,328)
Investment in affiliates ............................. (196) --
Net cash used in investing activities .............. (7,379) (2,395)
Cash flows from financing activities:
Net borrowings (repayments) in bank overdrafts
payable ............................................. (340) 816
Additions to long-term debt .......................... 3,119 722
Payment of long-term debt ............................ (610) (312)
Issuance of common stock ............................. 434 242
Payment of cash dividends ............................ (698) (577)
Purchase of treasury stock ........................... (73) (217)
Net cash provided by financing activities .......... 1,832 674
Effect of foreign currency exchange rates on cash ...... 605 318
Net increase (decrease) in cash and cash equivalents ... (2,784) 3,928
Cash and cash equivalents at beginning of period ....... 44,168 55,063
Cash and cash equivalents at end of period ............. $ 41,384 $ 58,991
</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 March 31, 1995, the consolidated
statements of operations for the three-month periods ended March 31, 1995
and 1994, and the consolidated statements of cash flows for the three-month
periods ended March 31, 1995 and 1994 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, 1994 financial statements have been reclassified to conform to the
classification of March 31, 1995.
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,
1994. The results of operations for the period ended March 31, 1995 are not
necessarily indicative of the results of operations expected for the full
year ending December 31, 1995.
B. Investments in equity affiliates are recorded using the equity method.
Consolidated net income reflects joint venture profit of $124,000 for the
quarter ended March 31, 1995, compared with a profit of $50,000 for the
quarter ended March 31, 1994.
C. Interest expense, net is as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1995 1994
<S> <C> <C>
Interest expense ......................... $(1,450) $(1,420)
Interest income .......................... 783 501
Interest expense, net .................... $ (667) $ (919)
</TABLE>
<PAGE>
Page 6
D. Other income (expense) is as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1995 1994
<S> <C> <C>
Foreign exchange gains, net ...................... $317 $388
Other, net ....................................... 69 19
$386 $407
</TABLE>
E. Statement of cash flows - interest and income taxes paid:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1995 1994
<S> <C> <C>
Interest ................................. $2,437 $2,417
Income Taxes ............................. 2,856 3,065
$5,293 $5,482
</TABLE>
F. Subsequent Event:
On May 3, 1995, the Company signed an agreement for the acquisition of
Radix Group, Inc. ("Radix"). Radix is one of the leading companies in
providing customs brokerage services in the United States with a network of
23 U.S. offices. Additionally, it provides airfreight and ocean freight
forwarding services. For its fiscal year ended July 31, 1994, Radix's gross
revenues were approximately $65 million.
AEI will acquire 100% of the outstanding stock of Radix for a maximum of
one million shares of AEI common stock. This transaction will be accounted
for as a purchase. The closing of this acquisition is scheduled for on or
about June 10, 1995 pending Hart-Scott- Rodino clearance and approval of a
majority of Radix's shareholders.
<PAGE>
Page 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
The following table shows the consolidated revenues and gross profit
attributable to the Company's airfreight and ocean freight activities and the
Company's expenses for the quarters ended March 31, 1995 and 1994. Revenues from
customs brokerage and other related services are included in airfreight
revenues. Gross profit is determined by deducting transportation expenses from
revenues.
<TABLE>
<CAPTION>
Three Months Ended March 31,
1995 1994 Increase
<S> <C> <C> <C>
Revenues:
Airfreight ........................ $250,353 $182,656 $ 67,697
Ocean Freight ..................... 33,720 22,154 11,566
Total .......................... $284,073 $204,810 $ 79,263
Gross Profit:
Airfreight ........................ $ 72,503 $ 55,684 $ 16,819
Ocean Freight ..................... 8,311 5,242 3,069
Total .......................... $ 80,814 $ 60,926 $ 19,888
Expenses:
Terminal ....................... $ 43,627 $ 33,462 $ 10,165
Selling, general
and administrative ............ 28,602 21,408 7,194
Total .......................... $ 72,229 $ 54,870 $ 17,359
Operating Profit .................. $ 8,585 $ 6,056 $ 2,529
</TABLE>
Consolidated revenues for the first quarter of 1995 increased $79.3 million or
38.7% to $284.1 million when compared to the first quarter of 1994. Airfreight
revenues for the first quarter of 1995 increased $67.7 million or 37.1% to
$250.4 million when compared to the first quarter of 1994. The increase in
airfreight revenues was attributable to a 11.2% increase in shipments and a
33.0% increase in the total weight of cargo shipped. Revenues from ocean freight
operations for the first quarter of 1995 increased $11.6 million or 52.2% to
$33.7 million when compared to the first quarter of 1994, due to increased
shipping volumes. The higher shipping volumes were attributable to increased
economic activity and the inclusion of shipping volumes of companies acquired
subsequent to the first quarter of 1994.
Gross profit (revenues less transportation expense) for the first quarter of
1995 increased $19.9 million or 32.6% to $80.8 million when compared to the
first quarter of 1994. Gross margin (gross profit as a percentage of revenues)
decreased 1.3% to 28.4% in the first quarter of 1995 compared to 29.7% in the
first quarter of 1994. The decrease in gross margin was largely due to the
impact of greater weight per shipment which resulted in lower selling prices per
unit of weight, and competitive pricing pressures. Gross profit from airfreight
operations for the first quarter of 1995 increased $16.8 million or 30.2% to
$72.5 million when compared to the first quarter of 1994. Gross profit from
ocean freight operations for the first quarter of 1995 increased $3.1 million or
58.5% to $8.3 million when compared to the first quarter of 1994. The higher
gross profit for both airfreight and ocean freight operations was attributable
to increased shipping volumes.
<PAGE>
Page 8
Internal operating expenses (terminal, selling and general and administrative)
for the first quarter of 1995 increased $17.4 million or 31.6% over the first
quarter of 1994. This increase was due largely to additional expenses incurred
in connection with greater shipping volumes and to the inclusion of expenses of
companies acquired subsequent to the first quarter of 1994. As a percentage of
revenues, internal operating expenses for the first quarter of 1995 decreased to
25.4% compared to 26.8% for the first quarter of 1994. The decrease was largely
attributable to the greater efficiencies associated with the increased shipping
volumes.
Interest expense, net for the first quarter of 1995 decreased approximately $.3
million compared to the first quarter of 1994. The decrease was the result of
the higher rate of interest earned by the Company on its invested funds.
The effective income tax rate for the first quarter of 1995 was 38.5% compared
to 37.2% for the first quarter of 1994. The 1.3% increase was mainly due to the
losses incurred by certain foreign subsidiaries for which there were no tax
benefits available.
Liquidity and Capital Resources
At March 31, 1995, the Company's working capital decreased marginally to $58.6
million from $59.0 million at December 31, 1994.
Capital expenditures for the three months ended March 31, 1995 were $6.9 million
compared to $2.3 million for the first three months of 1994. This increase was
mainly due to the construction costs for the Company's new warehouse and
distribution facility in Singapore. This facility is scheduled for completion
during the second quarter of 1995. Capital expenditures for 1995 are anticipated
to be approximately $15.0 million.
At March 31, 1995, the Company had available for future borrowings approximately
$18.9 million of its $20.0 million revolving credit facility. The Company
utilized approximately $1.1 million under this facility for letters of credit
issued in connection with its insurance programs. Additionally, the Company's
foreign subsidiaries maintained approximately $13.5 million of overdraft
facilities with various foreign banks of which $1.3 million was utilized.
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
future business acquisitions.
<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.
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 11, 1995 /s/ Dennis M. Dolan
Dennis M. Dolan
Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: May 11, 1995 /s/ Walter L. McMaster
Walter L. McMaster
Vice President - Controller
(Principal Accounting Officer)
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11
AIR EXPRESS INTERNATIONAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(Unaudited)
(In thousands, except
per share amounts)
Three Months Ended
March 31,
1995 1994
<S> <C> <C>
Primary:
Net income applicable to
common shares $ 5,113 $ 3,482
Weighted average of common
shares outstanding 17,458 17,337
Common shares issuable on
exercise of stock options 375 173
Average common shares outstanding 17,833 17,510
Earnings per common share $ .29 $ .20
Fully diluted:
Weighted average of common
shares outstanding 17,458 17,337
Common shares issuable on
exercise of stock options 455 206
Common shares issuable upon assumed
conversion of subordinated debentures 3,291 3,291
Average common shares outstanding 21,204 20,834
Earnings per common share $ .28 $ .20
<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, 1995 and 1994, 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.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 41,384
<SECURITIES> 0
<RECEIVABLES> 210,747
<ALLOWANCES> 3,161
<INVENTORY> 0
<CURRENT-ASSETS> 252,694
<PP&E> 84,921
<DEPRECIATION> 39,737
<TOTAL-ASSETS> 388,892
<CURRENT-LIABILITIES> 194,138
<BONDS> 86,278
<COMMON> 197
0
0
<OTHER-SE> 155,444
<TOTAL-LIABILITY-AND-EQUITY> 388,892
<SALES> 0
<TOTAL-REVENUES> 284,073
<CGS> 0
<TOTAL-COSTS> 203,259
<OTHER-EXPENSES> 43,627
<LOSS-PROVISION> 193
<INTEREST-EXPENSE> 1,450
<INCOME-PRETAX> 8,304
<INCOME-TAX> 3,191
<INCOME-CONTINUING> 5,113
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,113
<EPS-PRIMARY> .29
<EPS-DILUTED> .28
</TABLE>
