<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, 1996
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, 1996 was
19,360,094 (Net of 25,807 Treasury Shares).
<PAGE>
AIR EXPRESS INTERNATIONAL CORPORATION
March 1996 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, 1996 and December 31, 1995............................ 2
Condensed Consolidated Statements of Operations -
three months ended March 31, 1996 and 1995...................... 3
Consolidated Statements of Cash Flows -
three months ended March 31, 1996 and 1995...................... 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)
Mar 31, 1996 Dec 31, 1995
(Unaudited)
Assets
Current Assets:
<S> <C> <C>
Cash and cash equivalents .........................$ 49,869 $ 54,463
Accounts receivable, (less allowance for
doubtful accounts of $4,719 and $4,695) .......... 267,092 268,289
Other current assets .............................. 4,347 4,754
Total current assets ....................... 321,308 327,506
Investment in unconsolidated affiliates .............. 13,470 13,228
Property, plant and equipment (less accumulated
depreciation and amortization of $45,726
and $43,242) ...................................... 53,936 54,149
Deposits and other assets ............................ 12,664 12,999
Goodwill (less accumulated amortization
of $8,755 and $8,269) ............................ 79,547 78,961
Total assets ...............................$ 480,925 $ 486,843
Liabilities and stockholders' investment
Current Liabilities:
Current portion of long-term debt .................$ 2,965 $ 2,690
Bank overdrafts payable ........................... 683 620
Transportation payables ........................... 132,832 149,536
Accounts payable .................................. 46,303 41,625
Accrued liabilities ............................... 47,054 45,556
Income taxes payable .............................. 10,705 10,581
Total current liabilities .................. 240,542 250,608
Long-term debt .................................... 82,826 82,762
Other liabilities ................................. 5,915 5,907
Total liabilities .......................... 329,283 339,277
Stockholders' Investment:
Capital stock-
Preferred (authorized 1,000,000 shares,
none outstanding) ................................ -- --
Common, $.01 par value (authorized 40,000,000
shares, issued 18,608,012 and 18,577,880 shares) . 186 186
Capital surplus ................................... 60,596 60,164
Cumulative translation adjustments ................ (14,098) (12,539)
Retained earnings ................................. 105,589 100,372
152,273 148,183
Less: 25,807 and 25,279 shares of treasury
stock, at cost .................................... (631) (617)
Total stockholders' investment .................... 151,642 147,566
Total liabilities and stockholders' investment ....$ 480,925 $ 486,843
</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,
1996 1995
<S> <C> <C>
Revenues $ 294,787 $ 279,962
Operating expenses:
Transportation 201,645 199,148
Terminal 52,662 43,627
Selling, general and administrative 29,812 28,602
Operating profit 10,668 8,585
Other income (expense):
Interest expense, net (987) (667)
Other, net 396 386
(591) (281)
Income before provision for income taxes 10,077 8,304
Provision for income taxes 3,930 3,191
Net income $ 6,147 $ 5,113
Income per common share:
Primary $ .33 $ .29
Fully diluted $ .31 $ .28
Weighted average number of common shares (000's):
Primary 18,863 17,833
Fully diluted 22,239 21,204
</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, 1996 AND 1995
(Dollars in thousands)
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................. $ 6,147 $ 5,113
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ...................... 2,229 1,641
Amortization of goodwill ........................... 547 419
Amortization of bond discount ...................... 57 57
Deferred income taxes .............................. 647 30
Undistributed (earnings) losses of affiliates ...... (565) 4
(Gains) on sales of assets, net ..................... (23) (69)
Changes in assets and liabilities, net of
business acquisitions:
Decrease in accounts receivable, net ............... 11,265 3,909
(Increase) in other current assets .................. (729) (611)
(Increase) decrease in other assets ................. (288) 465
(Decrease) in transportation payables ............... (16,408) (6,256)
(Decrease) increase in accounts payable ............. (4,863) 695
Increase (decrease) in accrued liabilities ......... 598 (3,704)
Increase in income taxes payable ................... 613 582
Increase (decrease) in other liabilities ........... 6 (117)
Total adjustments ............................. (6,914) (2,955)
Net cash (used) provided by operating activities ... (767) 2,158
Cash flows from investing activities:
Business acquisitions, net of cash acquired ............ (1,259) 22
Gains (losses) from hedging activities ................. 170 (522)
Proceeds from sales of assets .......................... 89 167
Capital expenditures ................................... (2,009) (6,850)
Investment in unconsolidated affiliates ................ -- (196)
Net cash used in investing activities .............. (3,009) (7,379)
Cash flows from financing activities:
Net borrowings (repayments) in bank overdrafts payable . 81 (340)
Additions to long-term debt ............................ -- 3,119
Payment of long-term debt .............................. (214) (610)
Issuance of common stock ............................... 432 434
Payment of cash dividends .............................. (929) (698)
Purchase of treasury stock ............................. (14) (73)
Net cash (used) provided by financing activities ... (644) 1,832
Effect of foreign currency exchange rates on cash .......... (174) 605
Net (decrease) in cash and cash equivalents ................ (4,594) (2,784)
Cash and cash equivalents at beginning of period ........... 54,463 44,168
Cash and cash equivalents at end of period ................. $ 49,869 $ 41,384
</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, 1996, the consolidated
statements of operations for the three-month periods ended March 31, 1996
and 1995, and the consolidated statements of cash flows for the three-month
periods ended March 31, 1996 and 1995 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, 1995 financial statements have been reclassified to conform to the
classification of March 31, 1996.
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,
1995. The results of operations for the period ended March 31, 1996 are not
necessarily indicative of the results of operations expected for the full
year ending December 31, 1996.
B. Investments in equity affiliates are recorded using the equity method.
Consolidated net income reflects joint venture profit of $565,000 for the
quarter ended March 31, 1996, compared with a profit of $124,000 for the
quarter ended March 31, 1995.
C. Interest expense, net is as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Interest expense ............................. $(1,509) $(1,450)
Interest income .............................. 522 783
Interest expense, net ........................ $ (987) $ (667)
</TABLE>
<PAGE>
Page 6
D. Other income (expense) is as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Foreign exchange gains, net .............. $373 $317
Other, net ............................... 23 69
$396 $386
</TABLE>
E. Statement of cash flows - interest and income taxes paid:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Interest ................................. $2,384 $2,437
Income Taxes ............................. 2,523 2,856
$4,907 $5,293
</TABLE>
<PAGE>
Page 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
The following table sets forth the gross revenues and net revenues (gross
revenues minus transportation expenses) for each of the Company's three service
categories: airfreight forwarding, ocean freight forwarding and customs
brokerage and other services, as well as the Company's internal operating
expenses (terminal, selling, general and administrative expenses) and operating
profit:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
($ in millions)
<S> <C> <C>
Gross Revenues:
Airfreight ........................................... $232.8 $229.7
Ocean Freight ........................................ 40.2 33.7
Customs Brokerage and Other .......................... 21.8 16.6
Total Gross Revenues ............................... $294.8 $280.0
Net Revenues:
Airfreight ........................................... $ 63.2 $ 56.1
Ocean Freight ........................................ 10.3 8.3
Customs Brokerage and Other .......................... 19.6 16.4
Total Net Revenues ................................. $ 93.1 $ 80.8
Internal Operating Expenses:
Terminal ............................................. $ 52.7 $ 43.6
Selling, general
and administrative .................................. 29.7 28.6
Total Internal Operating Expenses .................. $ 82.4 $ 72.2
Operating Profit ....................................... $ 10.7 $ 8.6
</TABLE>
Gross revenues for the first quarter of 1996 increased $14.8 million (5.3%)
over the first quarter of 1995. The increase was composed of a $3.1 million
(1.3%) increase in airfreight revenues, a $6.5 million (19.3%) increase in ocean
freight revenues, and a $5.2 million (31.3%) increase in customs brokerage and
other revenues. Additionally, included in the increase in gross revenues was the
negative effect of approximately $2.5 million resulting from a stronger U.S.
dollar when converting foreign currency revenues into U.S. dollars for financial
reporting purposes. Net revenues (gross revenues minus transportation expenses)
increased $12.3 million (15.2%) over the comparable 1995 period. Reflected in
this increase was a $7.1 million (12.7%) increase in airfreight net revenues, a
$2.0 million (24.1%) increase in ocean freight net revenues, and a $3.2 million
(19.5%) increase in customs brokerage and other net revenues. The increases in
gross and net revenues from airfreight services were attributable to an increase
of 4.2% in the number of shipments and an increase of 1.0% in the total weight
of cargo shipped. Despite the marginal increase in airfreight gross revenues,
lower transportation costs, mainly due to reduced airline rates in certain
markets, resulted in the 12.7% increase in airfreight net revenues. The
increases in gross and net revenues from ocean freight services were
attributable to greater shipping volumes from existing customers and to the
inclusion of business from acquisitions made subsequent to the first quarter of
1995. The increases in gross and net revenues from customs brokerage and other
services were primarily due to the acquisition of Radix in June 1995.
<PAGE>
Page 8
The Company's internal operating expenses (terminal, selling, general and
administrative expenses) increased $10.2 (14.1%) over the first quarter of 1995.
The increase was primarily attributable to the additional expenses incurred in
connection with greater shipping volumes and to the additional expenses of
companies acquired subsequent to the first quarter of 1995. As a percentage of
gross revenues, internal operating expenses increased to 28.0% for the first
quarter of 1996 compared to 25.8% for the first quarter of 1995. The increase
was mainly attributable to acquisitions which the Company made subsequent to the
first quarter of 1995. However, due to a slowdown in economic activity in
Europe, the Company has experienced a weakening in its airfreight shipping
volumes (over prior year comparable periods) which resulted in approximately
zero growth since the third quarter of 1995. The Company has implemented
operating cost reductions in certain European countries to minimize the impact
of the weaker shipping volumes. These cost reductions implemented in Europe have
resulted in first quarter 1996 internal operating expenses declining
approximately $3.0 million or 3.5% from the fourth quarter of 1995.
Operating profit for the first quarter of 1996 increased $2.1 million
(24.4%) over the first quarter of 1995. The increase reflects increases in
operating profit in the Company's U.S. and Far East operations offset by a $.4
million decrease in its European operations.
Interest expense, net was approximately $.3 million higher for the first
quarter of 1996 compared to the first quarter of 1995. The increase resulted
from lower interest income due to a reduction in the amount of funds the Company
had invested during the quarter and a reduction in the interest rate earned on
those funds.
The effective income tax rate for the first quarter of 1996 was 39.0%
compared to 38.4% for the first quarter of 1995. The .6% increase in the
effective rate was primarily due to losses in countries where no tax credit is
available and an increase in the amount of nondeductible expenses.
Liquidity and Capital Resources
At March 31, 1996, the Company's working capital increased approximately
$3.9 million to $80.8 million from $76.9 million at December 31, 1995. The
increase was mainly attributable to the increase in profits.
Capital expenditures decreased $4.9 million from $6.9 million in the first
quarter of 1995 to $2.0 million in the first quarter of 1996. The decrease was
primarily due to expenditures incurred during the first quarter of 1995 for the
Company's new warehouse and distribution facility in Singapore which was
completed during the third quarter of 1995. The $2.0 million for capital
expenditures was primarily for facility improvements and management information
systems.
At March 31, 1996, various of the Company's foreign subsidiaries maintained
overdraft facilities with foreign banks, aggregating approximately $14.1
million, of which approximately $.6 million was outstanding. In April 1996, the
Company signed a commitment letter for a syndicated unsecured revolving credit
facility for approximately $75.0 million and anticipates securing this facility
during the second quarter of 1996.
<PAGE>
Page 9
Management believes that the Company's available cash and sources of
credit, together with expected future sources of credit and cash generated from
operations, will be sufficient to satisfy its anticipated needs for working
capital, capital expenditures and dividends.
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 6. - Exhibits and Reports on Form 8-K
a) Exhibits:
Exhibit 11 - Computation of Earnings Per Common Share.
Exhibit 27 - Financial Data Schedule.
b) Reports on Form 8-K:
None.
<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 14, 1996 /s/ Dennis M. Dolan
Dennis M. Dolan
Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: May 14, 1996 /s/ Walter L. McMaster
Walter L. McMaster
Vice President - Controller
(Principal Accounting Officer)
<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,
1996 1995
Primary:
<S> <C> <C>
Net income applicable to
common shares ................................... $ 6,147 $ 5,113
Weighted average of common
shares outstanding .............................. 18,564 17,458
Common share equivalents .......................... 299 375
Average common shares outstanding ................. 18,863 17,833
Earnings per common share ......................... $ .33 $ .29
Fully diluted:
Weighted average of common
shares outstanding ............................... 18,564 17,458
Common share equivalents .......................... 384 455
Common shares issuable upon assumed
conversion of subordinated debentures ............ 3,291 3,291
Average common shares outstanding ................. 22,239 21,204
Earnings per common share ......................... $ .31 $ .28
<FN>
Primary earnings per share is computed by dividing net income by the
weighted average common and common share equivalents outstanding during the
period. For the quarters ended March 31, 1996 and 1995, fully diluted
earnings per share is 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-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 49,869
<SECURITIES> 0
<RECEIVABLES> 271,811
<ALLOWANCES> 4,719
<INVENTORY> 0
<CURRENT-ASSETS> 321,308
<PP&E> 99,662
<DEPRECIATION> 45,726
<TOTAL-ASSETS> 480,925
<CURRENT-LIABILITIES> 240,542
<BONDS> 82,826
<COMMON> 186
0
0
<OTHER-SE> 166,185
<TOTAL-LIABILITY-AND-EQUITY> 480,925
<SALES> 0
<TOTAL-REVENUES> 294,787
<CGS> 0
<TOTAL-COSTS> 201,645
<OTHER-EXPENSES> 52,662
<LOSS-PROVISION> 290
<INTEREST-EXPENSE> 1,509
<INCOME-PRETAX> 10,077
<INCOME-TAX> 3,930
<INCOME-CONTINUING> 6,147
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,147
<EPS-PRIMARY> .33
<EPS-DILUTED> .31
</TABLE>
