DUTY FREE INTERNATIONAL INC, 10-K405, 1995-05-01

DUTY FREE INTERNATIONAL INC
10-K405, 1995-05-01
VARIETY STORES

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

For the fiscal year ended January 29, 1995

[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

For the transition period from to .
--------- -------

Commission File Number 34-1-10952

DUTY FREE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)

MARYLAND 52-1292246
- - ------------------------------- --------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification
No.
63 Copps Hill Road
Ridgefield, Connecticut 06877
- - ------------------------------ --------------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (203) 431-6057
Securities registered pursuant to Section 12(b) of the Act:
Title of class: Common Stock, $.01 par value per share
Name of exchange on which registered: New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in a definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. X
The aggregate market value of the voting stock held by non-affiliates of
the registrant based upon the closing price of $7.375 per share for the
registrant's common stock as reported by the New York Stock Exchange as
of March 31, 1995 was approximately $151,575,000.

Number of shares Common Stock of the registrant outstanding as of March
31, 1995: 27,243,550 shares.

Exhibit Index begins on Page
Page 1 of

<PAGE>

DOCUMENTS INCORPORATED BY REFERENCE Part

1995 ANNUAL REPORT TO STOCKHOLDERS I, II, IV

PROXY STATEMENT FOR THE 1995 ANNUAL
MEETING OF STOCKHOLDERS I, III

<PAGE>

PART I

ITEM 1. BUSINESS

General

The duty free industry is a multi-billion dollar world-wide
industry. Duty free merchandise generally consists of well-known brands of
luxury goods, such as liquor, perfumes and cosmetics, tobacco products,
gifts and other items which are often subject to high rates of taxation
when sold in domestic markets for domestic consumption. Duty free
merchandise sold in the United States includes imported liquor, tobacco
products and luxury goods, as well as domestic products, sold free of
federal duties, excise taxes and state and local sales taxes. Such
merchandise is also generally exempt, within certain allowances, from
import duties and taxes at the traveler's destination.

The duty free industry developed in the United States after World
War II as international travel increased. This increase encouraged the
development of a system which allows a traveler to buy merchandise free of
all duties and sales and excise taxes imposed on domestically consumed
goods. In general, travelers can save 20% to 60% on the purchase of duty
free merchandise in the United States, compared to the retail price of the
same merchandise in the country of their destination. Most countries have
allowances on the import of duty free goods. Changes in the duty free
allowances of foreign countries or in the eligibility requirements for duty
free purchases, as well as changes in tax and duty rates imposed by foreign
jurisdictions, affect sales of duty free merchandise in United States duty
free shops. As a result of the generally high taxes and duties imposed in
certain foreign countries, it may be more economical for some travelers to
exceed these allowances and pay the import duties imposed by the country of
their destination.

Sales to the diplomatic community are based on reciprocal
agreements between countries, under which duty free purchasing privileges
are given to foreign diplomats serving in the host country. In the United
States, all orders placed by foreign diplomats for duty free merchandise
must be approved by both the Treasury and State Departments to confirm the
diplomat's eligibility for such purchases.

Duty Free International, Inc. (the "Company") operates in several
distinct markets of the duty free industry. The Company is the leading
operator of duty free stores along the United States/Canada and United
States/Mexico borders, one of the leading operators of duty free and retail
stores in international airports in the United States and Puerto Rico, and
is a prime concessionaire and supplier of merchandise to international
airlines' inflight duty free shops. The Company is also the largest
supplier of duty free merchandise to foreign diplomats in the United States
and is a major supplier of merchandise to merchant and cruise ships from
ports in the Northeast United States and Miami, Florida.

Organization and Operations

The Company was formed as a Maryland corporation in 1983 to acquire
19 border stores and one airport store. Since its founding, the Company
has grown to be one of the world's largest chains of duty free stores
operating 160 stores and employing over 2,000 people serving locations in
the United States, Puerto Rico, the Caribbean and on international
airlines' inflight duty free shops. The Company has grown by expanding
into additional airport and United States border locations and by business
acquisitions.

On April 24, 1992, the Company acquired by merger UETA, Inc. ("UETA
Merger") which is the leading operator of duty free stores on the United
States side of the United States/Mexico border. The 30 UETA duty free
stores give the Company a presence at 14 border crossings in the states of
Texas, Arizona and California. The UETA Merger included three duty free
stores at two Texas airports (San Antonio and McAllen) and off-airport duty
free locations in Orlando and Miami, Florida. UETA also serves cruise and
<PAGE>

merchant ships in Miami, and serves diplomatic and wholesale markets from a
location in Miami. The acquisition was accounted for as a pooling of
interests with new shares of the Company's common stock being exchanged
for a 100% interest in UETA.

On May 1, 1994, the Company purchased Inflight Sales Group Limited
("Inflight"), and certain non-competition rights, for approximately
$73,300,000. Inflight is the leading concessionaire and supplier of on-
board duty free merchandise to international airlines and is a leading
supplier of amenity kits to international airlines for distribution to
first class and premium class travelers. Inflight currently operates the
on-board duty free concessions for over 20 international airlines,
including Delta and Northwest Airlines, and secured the rights to operate
the on-board duty free concessions for United Airlines as of April 15,
1994. In addition, through its exclusive arrangements with certain
suppliers, Inflight sells duty free merchandise to numerous other
international airlines. Inflight has warehouse, distribution and
administrative facilities in Miami, New York, Singapore, Hong Kong and the
United Kingdom. The Inflight operations comprise the Company's fourth
operating division.

In November 1994, the Company announced a restructuring plan to
improve the Company's profitability. The implementation of the plan is
expected to reduce the Company's workforce by at least 210, and lower
direct operating costs by approximately $7,400,000 per year. A total of 23
stores and business locations, which had been generating approximately
$14,500,000 in annual sales, will be closed. A pre-tax charge to earnings
of $7,571,000 was taken during the year ended January 29, 1995 as a result
of restructuring. As of January 29, 1995, the Company had closed 14
Northern Border Division locations and will close the remaining seven
Airport Division stores and two Diplomatic and Wholesale Division locations
in the spring of 1995.

In the third quarter of fiscal 1995, the Company changed its method
of evaluating the recoverability of intangible assets. Under the new
method, fair values of intangible assets are determined based on the
discounted future operating cash flows of the related acquired operations
over the useful life of each intangible asset. Previously, impairment was
measured using undiscounted cash flows. Had the previous policy remained
in effect, there would have been no significant impairment as of January
29, 1995. The change in accounting for intangible assets resulted in a
write-down of asset value, and a one-time, pre-tax charge to earnings of
$46,002,000 during the year ended January 29, 1995. The fiscal year 1996
pre-tax amortization charge associated with the assets written down would
have been $3,500,000. Although the write-down has no impact on the
Company's cash position, it does result in a more appropriate balance sheet
valuation of the remaining goodwill and other intangible assets.

The Company took a $38,935,000 ($1.43 per share) after-tax charge
to earnings during the year ended January 29, 1995 encompassing all costs
associated with both the revaluation of its intangible assets, the store
and business closures, and workforce reductions.

The company is organized into four operating divisions: the Border
Division, the Airport Division, the Diplomatic and Wholesale Division and
the Inflight Division.

Border Division

The Border Division operates the largest chain of duty free stores
along the United States/Canada and United States/Mexico borders. The
Division operates a total of 80 stores at 46 border crossings.

UETA, Inc. ("UETA" or the "Southern Border Division") operates 30
duty free stores along the Mexican border in the states of Texas, Arizona
and California. During fiscal 1995, UETA continued to work aggressively to
reduce expenses, improve operating efficiencies, and develop a consistency
of merchandise and sales execution to improve the profitability of the
Southern Border Division. UETA intends to continue to increase customer
awareness through marketing and advertising, and to adjust product
assortment in order to meet the preferences of duty free shoppers. UETA is
<PAGE>
the exclusive duty free distributor on the United States side of the
Mexican border for liquor brands produced by United Distillers Group (Duty
Free) Ltd. Economic factors, such as the value of the Mexican peso versus
the U.S. dollar and the Mexican economy have had and will continue to have
a significant effect on the UETA's net sales and earnings. (See
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Fiscal 1996 Outlook in the Company's 1995 Annual Report to
Stockholders which is incorporated by reference to this document.)

AMMEX Tax and Duty Free Shops, Inc. and AMMEX Tax and Duty Free
Shops West, Inc. (collectively, "AMMEX" or the "Northern Border Division")
operate 50 duty free and retail stores along the Canadian border in the
states of New York, Vermont, Maine, Washington, Idaho, Montana, North
Dakota and Minnesota. The duty free stores sell a wide variety of quality,
brand-name merchandise to individuals traveling from the United States to
Canada, a majority of whom are Canadians returning home. Retail locations
carry groceries, snacks, souvenirs and gift items. The Company also
operates currency exchanges and gas stations at several high volume border
locations. Economic factors, such as the continuing economic recession in
Canada, Canadian domestic taxes, and the reduced value of the Canadian
dollar versus the U.S. dollar can have and have had a significant effect
upon the Northern Border Division's net sales and earnings. AMMEX's
objectives have been to attract a greater percentage of the eligible
travelers crossing the border into Canada and to sell more goods to each
customer by remodelling and expanding stores and through sales training,
merchandising, advertising and promotion.

Airport Division

Fenton Hill American, Limited (the "Airport Division") operates 80
duty free and retail stores in 14 international airports, and in the
Caribbean and South Florida markets. The Airport Division's retail mix
currently includes duty free shops, which sell premium merchandise such as
top-quality liquor and tobacco products and exclusive fragrances and
cosmetics, and specialty stores such as The Athlete's Foot (branded
athletic-wear), Bodyography (natural personal care products), The Sports
Section (regional sports-theme shops), standard news and gift shops, and
bookstores. Additionally, through a number of equity partnerships and
strategic alliances, the Airport Division is able to participate in duty
free and retail concessions in a number of international airports. Chicago
Aviation Partners, our joint venture with McDonald's Corporation, last year
developed and now manages all the concession space at the new international
terminal at Chicago's O'Hare Airport. In affiliation with another venture
partner we've designed and stocked 12 stores which opened in February 1995
in the new Denver International Airport. And, in March 1995, we, and our
venture partners, opened two new duty free shops in Boston's Logan
International Airport, with a third store scheduled to open later in fiscal
1996.

The Airport Division also operates a number of stores not located
in airports. It serves cruise ship passengers and airport bound customers
through 12 shops located in Miami and Orlando, Florida. In Washington,
D.C., the Airport Division operates two retail luxury gift stores, one of
which exclusively serves the diplomatic community. In May 1993, the
Company purchased a 75% interest in Bared Jewelers of the Virgin Islands,
Inc. ("Bared Jewelers"), which operates three stores in the primary
shopping district of St. Thomas, U.S. Virgin Islands serving cruise ship
passengers and air travelers to St. Thomas. The Company has also opened
ten new retail stores on the Caribbean islands of Aruba, Bonaire, Curacao
and St. Maarten during fiscal 1994 and fiscal 1995.

During the past several years, the Airport Division has grown
through acquisitions, obtaining new airport concessions and expanding
existing locations. With the potential for expansion of the Company's
current airport stores, as well as for development of other new specialty
retailing concepts, the Company believes that it will continue to find
opportunities for new airport locations and other airport retail and duty
free businesses. The Airport Division's sales volume and its overall
results of operations can be affected by factors relating to the airline
industry over which the Company has no control, including which airlines
<PAGE>
operate at particular terminals, which routes are serviced by those
airlines, levels of airline passenger traffic, and economic and other
conditions affecting the airline industry in general.

Diplomatic and Wholesale Division

The Diplomatic and Wholesale Division is the leading domestic
supplier of duty free merchandise to the foreign diplomatic community in
the United States, principally embassies, consulates and United Nations
missions in Washington, D.C. and New York City. Foreign diplomats with
official status and foreign military personnel in training throughout the
United States can order duty free merchandise directly from the Division's
salespersons or from its catalog. The Diplomatic and Wholesale Division is
also a supplier of merchandise to merchant and cruise ships from ports in
the northeastern United States and Miami.

The Company owns and operates a 110,000 square foot
warehouse/distribution center in Glen Burnie, Maryland, and a new 100,000
square foot warehouse/distribution center in South Miami, Florida. The new
warehouse and distribution center is well-situated to serve cruise ship
requirements from the port of Miami, as well as supporting the Company's
supply needs for its locations in the Caribbean. The Company also operates
warehouses in Texas, Arizona and Washington. The Diplomatic and Wholesale
Division's domestic warehouse capacity allows it to serve as importer,
warehouser and ultimate distributor for many large international companies
which supply products to the United States duty free industry.

Inflight Division

The Inflight Division is a leading concessionaire, operator and
supplier of on-board duty free merchandise to international airlines
through on-board concessions and a wholesale program, and is a major
supplier of international airlines' first class and premium class amenity
kits. Inflight's three business areas contribute significantly to the
Division's performance. Thirty percent of the Division's sales derive from
the manufacture and marketing of amenity kits for international airlines'
first class and premium class passengers. Another 20 to 30 percent of
sales are obtained from the Division's wholesale program which provides
merchandise for duty free programs which airlines run on their
international flights. The carrier runs all promotions, manages the
program and owns the inventory which is bought from Inflight. The
remaining 30 to 50 percent of sales comes from the Division's concession
program through which Inflight fully operates airlines' on-board duty free
concession. The Company purchases products and manages every aspect of duty
free sales service on the airlines' flights, including magazine and
videotape promotions. With a percentage of total sales paid in royalties
to the airline, this program provides airlines with a risk-free means of
incrementally increasing their earnings. Inflight has exclusive
distribution agreements for various parts of the world with many well-
recognized names in the luxury products industry, including Chanel,
Christian Dior, Hermes, Mont Blanc, Yves Saint Laurent, Elizabeth Arden and
Lancaster. Additionally, it maintains warehouse and station locations
throughout the U.S., Pacific Rim, Europe and South America. The Company
believes Inflight will be a significant contributor to its growth as air
travel and airline competition grows, and as it is more thoroughly absorbed
in the Company's operations.

The Inflight Division's sales volume and results of operations can
be affected by factors relating to the airline industry over which the
Company has no control, including levels of international airline passenger
traffic, economic and other conditions affecting the airline industry in
general, and the value of foreign currencies versus the U.S. dollar.

Regulation

Duty free stores and operations are specifically authorized and
recognized as a separate class of bonded warehouse by the Duty Free Sales
Enterprises Act of 1988, which was enacted by the United States Congress as
part of the Omnibus Trade and Competitiveness Act of 1988.
<PAGE>
Duty free merchandise is shipped by domestic and foreign suppliers
"in bond" (without taxes or duties) to bonded warehouses in the United
States. Bonded warehouses are subject to supervision by the United States
Customs Service ("Customs Service") and may only be used to store
merchandise which has not entered the domestic market. Because the United
States collects no taxes or duties on merchandise sold by duty free stores
and other duty free operations, all merchandise shipped from a bonded
warehouse to a duty free store or other duty free location remains "under
bond" and therefore subject to a high degree of regulation by the Customs
Service and by the Bureau of Alcohol, Tobacco and Firearms (the "Bureau"),
each of which are agencies of the United States Department of the Treasury.

The Bureau also requires corporations to which it issues permits to
notify it in the event of a change in the officers or directors of the
corporate operator or if there is a change in the corporate operator's
ownership. The Bureau requires certain background information on any
stockholder who acquires 10% or more of the common stock of a corporate
operator and will not permit ownership by any such stockholder it deems
unacceptable. The Company therefore has established the right to require
the redemption or the prompt disposition, under certain circumstances, of
all or any portion of the shares of Common Stock owned by a stockholder
which totals to more than 9% of the outstanding Common Stock.

Suppliers, Distribution and Inventory Control

The Company purchases products from numerous vendors, including
manufacturers and distributors. As is typical throughout the duty free
industry, the Company does not have any significant long-term or exclusive
purchase commitments. Management believes that alternative sources of
supply are available for each category of merchandise purchased by the
Company.

Merchandise is generally shipped directly from vendors to the
bonded warehouses and distribution centers located in Glen Burnie,
Maryland, Laredo, Texas and Miami, Florida. However, certain merchandise
is shipped directly to the Company's regional bonded warehouses and store
locations. To control inventory levels, managers order several weeks in
advance, based on forecasted inventory needs and present sales conditions.
Frequent shipments are then made to the Border, Airport, and Inflight
Divisions' warehouses or stores to assure fully stocked displays and
stockrooms. Merchandise is delivered daily by truck to the diplomatic
communities in Washington, D.C. and New York City. The Company's trucks
are also used to supply duty free merchandise to merchant and passenger
ships.

Duty free inventory is strictly controlled to comply with Customs
Service regulations. The Company must keep detailed records documenting
the receipt and sale of all duty free merchandise. Failure to maintain
such records may result in penalties as well as payment of all taxes and
duties which would have been imposed on the domestic sale of such
merchandise. The Company's computerized inventory control system allows it
to identify product needs, to arrange for prompt reorders from vendors, and
to support compliance with Customs Service record-keeping requirements.
Slow moving products also can be identified and more appropriate product
mixes maintained. Historically, inventory shrinkage has been minimal due to
the Company's inventory system and procedures. The Company rarely
experiences problems with obsolescence, because most inventory turns
frequently and most products have a relatively long shelf-life.

The Company's suppliers provide significant sales support in a
variety of ways, including in-store displays, gift-with-purchase items,
advertisements, brochures, printed shopping bags, staff training, signs and
sales personnel. In addition, some distributors and manufacturers rent
space in certain duty free stores for the display of transparencies
containing brand-name advertisements. Many suppliers also purchase
advertising space in the catalogs produced by the various divisions. Some
suppliers also rent space in the Company's warehouses and pay a fee for
processing shipments of their merchandise.

<PAGE>
Economic Conditions and Exchange Rates

The principal customers of the Company are residents of foreign
countries whose purchases of duty free merchandise may be affected by
trends in the economies of foreign countries and changes in the value of
the U.S. dollar relative to their own currencies. Any significant increase
in the value of the U.S. dollar relative to the currencies of foreign
countries, particularly Canada, Mexico and Japan, could have an adverse
impact on the number of travelers visiting the United States and the dollar
amount of duty free purchases made by them from the Company. A significant
increase in gasoline prices or a shortage of fuel may also reduce the
number of international travelers and thereby adversely affect the
Company's sales. In addition, the Company imports a significant portion of
its products from Western Europe and Canada at prices negotiated either in
U.S. dollars or foreign currencies. As a result, the Company's costs are
affected by fluctuations in the value of the U.S. dollar in relation to
major Western European and Canadian currencies. A decrease in the
purchasing power of the U.S. dollar relative to other currencies causes a
corresponding increase in the purchase price of products. The Company
enters into foreign exchange forward contracts as a hedge against a portion
of its exposure to currency fluctuations on commitments to purchase
merchandise.

Competition

The Airport and Northern Border Divisions experience significant
competition primarily when negotiating or bidding for new concession leases
or renewal of existing leases in those locations where the operating
authority requires such negotiating or bidding. Because only one duty free
concession controlled by an authority exists for most Canadian border
crossings or airport terminals, competitors bid for the exclusive right to
operate at particular border crossings or in a particular airport or, in
the case of some larger airports, in a particular airport terminal
servicing one or more airlines. The Company's lease and concession
agreements for duty free stores at the New York City airports are
consistent with airport leases in the region in that they are terminable by
the lessor upon 30 days notice, and also may be subject to re-bid at the
end of the operator's lease at which time sealed bids are submitted by
prospective operators or negotiations are undertaken with the authority.
Most of Inflight's concession contracts are subject to 30 or 60 day
cancellation clauses. Currently, Inflight does not experience significant
competition when renewing existing concession contracts.

Approximately five other companies operate duty free stores in the
United States along the Canadian border, most of which have historically
remained within specific areas outside of the Company's geographic regions.
A small number of regional duty free companies operate along the Mexican
border and compete with the Company. Large discount chains that are not
duty free operators, such as Price Club and Sam's Club, compete with the
Company for customers crossing the United States/Mexico border.
Approximately 15 companies operate duty free stores at airports in the
United States. The largest such company is Duty Free Shoppers Group,
Ltd., a privately held company, which is the largest duty free operator in
the world. There are no significant competitors operating international
airlines' on-board duty free concessions. The majority of international
airlines operate their own on-board duty free concessions. There are a
large number of competitors offering wholesale merchandise to international
airlines. The principal competition for diplomatic sales consists of
purchases made directly from European suppliers. There are no material
competitors currently operating in the principal ports serviced by the
Diplomatic and Wholesale Division except for Miami, Florida. There are
significant competitors which can make sales to the Company's passenger and
merchant vessel customers when those customers visit ports not serviced by
the Company.

ITEM 2. PROPERTIES

The Border Division operates 80 duty free and retail gift stores at
46 border crossings. Four of the stores are owned and operated by agents
who receive commissions based on sales. The Company owns 52 of its border
stores and leases 24 border stores. The Airport Division leases 80 store
locations with lease expiration dates ranging from month-to-month to 2005.
<PAGE>
The Company's leases for its stores at the New York City airports are
terminable by the lessor upon 30 days notice. The leases at certain border
and most airport locations provide for base monthly rentals and typically
require payment of additional rent based on a percentage of sales.
Inflight has relatively smaller warehouse, distribution and administrative
facilities in Miami, New York, Singapore, Hong Kong and the United Kingdom.

The Company owns a 110,000 square foot office/distribution center
near the Baltimore/Washington International Airport in Glen Burnie,
Maryland and leases a 145,000 square foot distribution center in Laredo,
Texas of which 70,000 square feet is subleased. The Company also owns or
leases other smaller regional warehouse facilities. The Company owns its
33,000 square foot headquarters in Ridgefield, Connecticut which is
partially subleased. In fiscal 1995, the Company opened a 100,000 square
foot administrative, warehouse and distribution facility in South Miami,
Florida. The new facility will reduce the Company's rental requirements,
permit consolidated administrative operations and increase its stock
capacity, thus improving buying power. The facility is well-situated to
serve cruise ship requirements from the port of Miami, as well as
supporting the Company's supply needs for its locations in the Caribbean.
The Company believes its facilities are adequate for current operations.

ITEM 3. LEGAL PROCEEDINGS

The United States Customs Service is investigating the
operations of a subsidiary's bonded warehouse in Seattle, Washington. The
Customs Service has thus far issued 16 notices of liquidated damages in the
aggregate amount of $712,000 relating to alleged violations of customs
rules governing the handling and sale of bonded merchandise.

Certain former stockholders of UETA, Inc. and certain
stockholders of Overseas Trading Corporation (1987) Limited, an affiliate
of UETA, Inc., commenced an action against the Company, certain of its
directors and officers and Goldman, Sachs & Co., which was the financial
advisor to UETA, in the Superior Court, New Castle County, Delaware. In
their complaint which was filed on or about December 19, 1994, plaintiffs
allege that the Company and its officers and directors made false and
misleading statements and omissions in connection with the Company's
issuance of its common stock in connection with its acquisition in April
1992 of UETA, Inc. and of certain assets of Overseas Trading Corporation
(1987) Limited, all in violation of state statutory and common law. The
relief sought includes unspecified amounts of actual and punitive damages.
The Company and its officers and directors intend to defend this action
vigorously. Certain of the plaintiffs in this action had filed a similar
complaint (on or about May 30, 1994) against the same defendants in the
Superior Court of the State of Arizona, Pima County. This action was
dismissed by court order on November 17, 1994, pursuant to stipulation of
the parties, without prejudice to the commencement by those plaintiffs of
an action in the courts of the State of Delaware.

Certain other former stockholders of UETA, Inc. commenced an
action against the Company and Goldman, Sachs & Co. in the District Court,
285th Judicial District, Bexar County, Texas. In their complaint which was
filed on or about June 14, 1994, these plaintiffs also allege that the
Company made false and misleading statements and omissions in connection
with the Company's acquisition of UETA, Inc. and the Company's issuance of
its common stock in connection therewith to these plaintiffs. The relief
sought includes unspecified amounts of actual and punitive damages and
rescission of the transaction and/or rescissionary damages in an
unspecified amount. After a hearing on November 17, 1994 on the
defendants' motion to dismiss the action, the District Court abated and
stayed this action pending the final determination of the plaintiffs'
claims against the defendants in Delaware. On March 1, 1995, the Texas
Court of Appeals, Fourth District (San Antonio) denied the plaintiffs leave
to file a petition for a writ of mandamus seeking relief from the District
Court's order, and on April 5, 1995, plaintiffs sought leave to file a
similar petition with the Texas Supreme Court. In the meanwhile, the
plaintiffs commenced an action in the Superior Court, New Castle County,
Delaware against the Company, each of its directors and officers who were
named as defendants in the aforementioned Delaware action and Goldman,
<PAGE>

Sachs & Co. In their complaint, which was filed on or about April 3, 1995,
the plaintiffs allege against the Company and its officers and directors
essentially the same claims under state statutory and common law as they
have alleged in their Texas action. The relief sought in this action
includes unspecified amounts of damages, including actual and/or
recessionary damages and punitive damages. Additionally, these plaintiffs
have filed another similar complaint, on or about April 20, 1995, in the
District Court, 285th Judicial District, Bexar County, Texas, naming as
defendants the same directors and officers of the Company and, as well, a
former subsidiary of the Company. The relief sought is the same as that
sought in these plaintiffs' Delaware action. The Company and its officers
and directors intend to defend all these actions vigorously.

On July 8, 1994, the Company commenced an action against each
of the plaintiffs in the foregoing Arizona and Texas actions in the Court
of Chancery, New Castle County, Delaware for injunctive and declaratory
relief as well as damages based upon their commencement of the above-
referenced actions in the Arizona and Texas state courts, rather than in
the courts of the state of Delaware as stipulated in the agreements
executed in connection with the acquisition of UETA, Inc. The relief
sought by the Company in its complaint also includes a request for an order
enjoining each of the plaintiffs in the foregoing actions from litigating
any claims arising from the acquisition of UETA, Inc. in any forum other
than the courts of the state of Delaware. Motions to dismiss the Company's
complaint have been made by all the defendants named in this action.

The legal proceedings described above currently are not
expected to have a material effect on the Company's financial condition,
results of operations, liquidity or cash flows.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None
PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

Incorporated by reference to the 1995 Annual Report to Stockholders, page
14.

ITEM 6. SELECTED FINANCIAL DATA

Incorporated by reference to the 1995 Annual Report to Stockholders, inside
front cover.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Incorporated by reference to the 1995 Annual Report to Stockholders, pages
10-14.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Incorporated by reference to the 1995 Annual Report to Stockholders as set
forth in Part IV Item 14, and the supplementary data on the inside of front
cover of such annual report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None
PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Incorporated by reference to the Company's Proxy Statement with respect to
its 1995 Annual Meeting of Stockholders filed on April 20, 1995, pages 3-5.

<PAGE>
ITEM 11. EXECUTIVE COMPENSATION

Incorporated by reference to the Company's Proxy Statement with respect to
its 1995 Annual Meeting of Stockholders filed on April 20, 1995, pages 6-
10.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Incorporated by reference to the Company's Proxy Statement with respect to
its 1995 Annual Meeting of Stockholders filed on April 20, 1995, pages 12
and 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Incorporated by reference to the Company's Proxy Statement with respect to
its 1995 Annual Meeting of Stockholders filed on April 20, 1995, page 8.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)

1. Financial Statements (Incorporated by reference to the 1995 Annual
Report to Stockholders, pages 15-24 and 9):

- Consolidated Balance Sheets as of January 29, 1995 and January
31, 1994.

- Consolidated Statements of Operations, Stockholders' Equity,
and Cash Flows for each of the years in the three-year period
ended January 29, 1995.

- Notes to the Consolidated Financial Statements.

- Independent Auditors' Report.

2. Financial Statement Schedules filed as part of this report:

- Independent Auditors' Report.

- Schedule II - Valuation and Qualifying Accounts for each of the
years in the three-year period ended January 29, 1995.

- All other schedules have been omitted because the required
information is not significant or is not applicable.

3. Exhibits:

2.1 - Second Consent and Amendment, dated as of December 15, 1994, among
Duty Free International, Inc., the Sellers named therein and the
Additional Recipients named therein, amending the Stock Purchase
Agreement, dated as of March 24, 1994, as amended by the Consent
and Amendment, dated as of May 1, 1994, which were both filed as
Exhibits 2.1 and 2.2, respectively, to the Company's Current
Report on Form 8-K dated May 1, 1994. (5)

3.1 - Charter of the Company.(4)

3.2 - By-Laws of the Company as amended to October 18, 1993. (9)

4.1 - Senior Indenture between Duty Free International, Inc. and The
Chase Manhattan Bank, N.A., as trustee, dated as of January 15,
1994. (8)

4.2 - Form of 7% Note Due 2004. (8)

9.1 - Amended and Restated Voting Trust Agreement (Bernstein Family
Voting Trust Agreement) dated August 17, 1987 by and between
Patricia B. Bernstein, David H. Bernstein and Patricia B.
Bernstein, Trustees U/D by Laurel Beth Bernstein dated 1/7/88,
David H. Bernstein and Patricia B. Bernstein, Trustees U/D by
Carolyn Bernstein dated 1/7/88, David H. Bernstein, Custodian for
Jeffrey A. Bernstein, Patricia B. Bernstein, Custodian for Jeffrey
A. Bernstein, and David H. Bernstein, Trustee; as amended by the
First Amendment to Amended and Restated Voting Trust Agreement
dated January 15, 1988 by and between the same individuals.(1); as
<PAGE>

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

further amended by the Second Amendment to Amended and Restated
Voting Trust Agreement dated November 27, 1991 by and between the
same individuals.(7)

9.2 - Voting Trust Agreement (Couri Voting Trust Agreement), dated
January 15, 1988 by and between John A. Couri and Elaine C. Couri,
Trustees of the Christopher J. Couri Irrevocable Trust dated June
15, 1987, and Carl Reimerdes, Trustee.(1)

9.3 - Voting Trust (Jeffrey A. Bernstein Voting Trust Agreement) dated
January 15, 1988 by and between Shale D. Stiller and Max E.
Blumenthal, Trustees U/D dated 1/7/88 by David H. Bernstein F/B/O
Jeffrey A. Bernstein, and John A. Couri, Trustee.(1)

9.4 - Voting Trust Agreement (Reimerdes Voting Trust Agreement) dated
January 15, 1988 by and between Carl Reimerdes, Life Tenant U/A/D
1/13/88, and John Tilson, Trustee, U/D dated 8/14/87 by Carl H.
Reimerdes F/B/O Shawn Reimerdes, Remainderman, and Carl Reimerdes,
Life Tenant U/A/D 1/13/88, and John Tilson, Trustee U/D dated
8/14/87 by Carl H. Reimerdes F/B/O Erika Reimerdes, Remainderman,
and Carl Reimerdes, Trustee.(1)

9.5 - Voting Trust Agreement (Yaffe Voting Trust Agreement) dated
January 15, 1988 by and between Linda Yaffe and Seymour S. Yaffe,
Trustee.(1)

10.1 - Note Agreements with Massachusetts Mutual Life Insurance Company
and Mass Mutual Participation Investors relating to the 10.42%
Unsecured Senior Notes due 1996 in the aggregate principal amount
of $10,000,000, as amended by the First Amendment to Note
Agreement by and between Duty Free International, Inc. and Mass
Mutual Participation Investors and the First Amendment to the Note
Agreement by and between Duty Free International, Inc. and
Massachusetts Mutual Life Insurance Company, both dated August 25,
1989, effective as of March 23, 1989(2), as further amended by a
Note Agreement for $2,500,000, Amended and Restated December 29,
1989, effective as of March 23, 1989.(3)

10.2 - Note Agreement for $7,500,000 10.42% Senior Notes due 1996 from
Fenton Hill American Limited to Massachusetts Mutual Life
Insurance Company, dated August 25, 1989, effective as of March
23, 1989(2), as amended by a Note Agreement for $7,500,000 Amended
and Restated December 29, 1989, effective as of March 23, 1989.(3)

10.3 - Agreement by and between United Distillers Group (Duty Free) Ltd.
and Overseas Trading Corporation.(10)

10.4 - Agreement dated January 1, 1989 by and between United Distillers
Group (Duty Free) Ltd. and Samuel Meisel and Company, Inc.(1)

10.5 - Amended and Restated 1991 Principal Stockholders' Agreement
effective as of April 1, 1991 by and among IDF Services, Inc.,
Gebr. Heinemann, David H. Bernstein, Patricia B. Bernstein, David
H. Bernstein and Patricia B. Bernstein, Trustees U/D by Laurel
Beth Bernstein dated 1/7/88, David H. Bernstein and Patricia B.
Bernstein, Trustees U/D by Carolyn Bernstein dated 1/7/88, David
H. Bernstein, Custodian for Jeffrey A. Bernstein, Patricia B.
Bernstein, Custodian for Jeffrey A. Bernstein, Shale D. Stiller,
Trustee U/D dated 1/7/88 by David H. Bernstein F/B/O Jeffrey A.
Bernstein, and Heribert Diehl.(7)

10.6 - 1989 Stock Option Plan for Duty Free International, Inc., and
related form of stock option agreement as amended and restated
effective February 11, 1993 (10) and May 20, 1994 (5)
(compensatory plan).

10.7 - Incentive Compensation Plan (1) (compensatory plan).

10.8 - Indemnity Agreement by and between Duty Free International, Inc.
and Jack Africk.(1)

10.9 - Stockholders Agreement dated as of April 24, 1992 among Duty Free
International, Inc., DFI Group Acquisition Corp., UETA, Inc.,
Overseas Trading Corporation (1987) Limited, and each of the
persons and entities listed in Exhibit A thereto. (6)
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

10.10 - Escrow Agreement dated as of April 24, 1992 among Duty Free
International, Inc., the persons and entities listed in Exhibit
A thereto and The First National Bank of Maryland, as escrow
agent. (6)

10.11 - Agreement and Plans of Merger and Reorganization dated as of
March 16, 1992 by and among UETA, Inc., Overseas Trading
Corporation (1987) Limited, Capin's Duty-Free Warehouse, Inc.,
Duty Free International, Inc. and DFI Group Acquisition Corp.
(6)

12.1 - Ratios of Earnings to Fixed Charges. (5)

13.1 - 1995 Annual Report to Stockholders.(5)

18.1 - Preferability letter regarding change in accounting principle.
(11)

21.1 - Subsidiaries.(5)

23.1 - Consent of KPMG Peat Marwick LLP.(5)

24.1 - Powers of Attorney for Jack Africk, David H. Bernstein, John A.
Couri, Heribert Diehl, Morris W. Offit, Carl Reimerdes and Susan
H. Stackhouse. (5)

27.1 - Financial Data Schedule.(5)

Notes: (1) Previously filed as an Exhibit to the Registration
Statement of the Company on Form S-1, File No. 33-27842
declared effective May 11, 1989.

(2) Previously filed as an Exhibit to the Registration
Statement of the Company on Form S-1, File No. 33-32392
declared effective December 19, 1989.

(3) Previously filed as an Exhibit to the Company's Annual
Report on Form 10-K dated April 30, 1990.

(4) Previously filed as an Exhibit to the Company's
Registration Statement on Form S-1, File No. 33-43071,
declared effective November 29, 1991.

(5) Filed herewith.

(6) Previously filed as an Exhibit to the Company's Current
Report on Form 8-K dated April 24, 1992.

(7) Previously filed as an Exhibit to the Company's Annual
Report on Form 10-K dated April 20, 1992.

(8) Previously filed as an Exhibit to the Company's Current
Report on Form 8-K dated January 15, 1994.

(9) Previously filed as an Exhibit to the Company's Current
Report on Form 8-K dated December 27, 1993.

(10) Previously filed as an Exhibit to the Company's Annual
Report on Form 10-K dated April 27, 1993.

(11) Previously filed as an Exhibit to the Company's Quarterly
Report on Form 10-Q for the quarter ended October 31,
1994.

(b) Reports on Form 8-K:

(i) A Current Report on Form 8-K dated November 2, 1994 was filed
relating to the Company's restructuring plan.
<PAGE>

SIGNATURES
-----------
Pursuant to the requirements of Section 13 or 15(d) 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, this
20th day of April, 1995.

DUTY FREE INTERNATIONAL, INC.

By: /s/ Alfred Carfora
----------------------------
Alfred Carfora
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

Signature Title Date

*
- - -----------------------
Jack Africk Director April 20, 1995

*
- - -----------------------
David H. Bernstein Director, Chairman of
the Executive Committee April 20, 1995

/s/ Alfred Carfora
- - -----------------------
Alfred Carfora Director, President and
Chief Executive Officer April 20, 1995
*
- - -----------------------
Heribert Diehl Director April 20, 1995

*
- - ----------------------
John A. Couri Director April 20, 1995

/s/ Gerald F. Egan
- - ----------------------
Gerald F. Egan Vice President of
Finance, Treasurer,
Secretary and Chief
Financial Officer** April 20, 1995

*
- - ----------------------
Morris W. Offit Director April 20, 1995

*
- - -----------------------

Carl Reimerdes Director, Vice President April 20, 1995

*
- - ----------------------
Susan H. Stackhouse Director April 20, 1995

*By: /s/ Alfred Carfora
-------------------
Alfred Carfora
Attorney-in-fact

**Principal Financial and Accounting
Officer

<PAGE>
DUTY FREE INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENT SCHEDULES

Page
----

Independent Auditors' Report

Schedule II - Valuation and Qualifying Accounts for the three-year
period ended January 29, 1995.

All other schedules are omitted because they are not applicable, or not
required, or because the required information is included in the
consolidated financial statements or notes thereto.

<PAGE>

INDEPENDENT AUDITORS' REPORT
----------------------------

The Board of Directors
Duty Free International, Inc.:

Under date of February 27, 1995, we reported on the consolidated balance
sheets of Duty Free International, Inc. and subsidiaries as of January 29,
1995 and January 31, 1994, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the years in
the three-year period ended January 29, 1995. In connection with our
audits of the aforementioned consolidated financial statements, we have
also audited the related financial statement schedule "Schedule II -
Valuation and Qualifying Accounts". The financial statement schedule is the
responsibility of the Company's management. Our responsibility is to
express an opinion on this financial statement schedule based on our
audits.

In our opinion, the financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth
therein.

KPMG PEAT MARWICK LLP

Baltimore, Maryland
February 27, 1995

<PAGE>

<TABLE>
<CAPTION>
DUTY FREE INTERNATIONAL, INC. AND SUBSIDIARIES

Schedule II - Valuation and Qualifying Accounts

Additions
-----------------------------------------------
Balance at Charged to Charged to Balance at
beginning costs and other accounts- end of
Description of period expenses describe Deductions period
- - ------------------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Year ended
January 29, 1995:
Allowance for
doubtful acco $ 740,000 $ 462,000 $ 280,000 (2)$ (687,000) $ 795,000
---------- ---------- ---------- ----------- ----------
---------- ---------- ---------- ----------- ----------
Year ended
January 31, 1994:
Allowance for
doubtful acco $ 941,000 $ 240,000 $ - - $ (441,000) $ 740,000
---------- ---------- ---------- ----------- ----------
---------- ---------- ---------- ----------- ----------
Year ended
January 31, 1993:
Allowance for
doubtful acco $ 805,000 $ 292,000 $ - - $ (156,000) $ 941,000
---------- ---------- ---------- ----------- ----------
---------- ---------- ---------- ----------- ----------

(1) Uncollectible accounts written off, net of recoveries.

(2) Allowance for doubtful accounts recorded in connection with the acquistion of Inflight Sales Group Limited on May 1, 1994.
</TABLE>

DUTY FREE INTERNATIONAL, INC. AND SUBSIDIARIES
EXHIBIT INDEX

Exhibit
No. Description of Exhibit
- - ------- ----------------------
2.1 - Second Consent and Amendment, dated as of December 15, 1994,
among Duty Free International, Inc., the Sellers named therein
and the Additional Recipients named therein, amending the Stock
Purchase Agreement, dated as of March 24, 1994, as amended by
the Consent and Amendment, dated as of May 1, 1994, which were
both filed as Exhibits 2.1 and 2.2, respectively, to the
Company's Current Report on Form 8-K dated May 1, 1994. (5)

3.1 - Charter of the Company.(4)

3.2 - By-Laws of the Company as amended to October 18, 1993. (9)

4.1 - Senior Indenture between Duty Free International, Inc. and The
Chase Manhattan Bank, N.A., as trustee, dated as of January 15,
1994. (8)

4.2 - Form of 7% Note Due 2004. (8)

9.1 - Amended and Restated Voting Trust Agreement (Bernstein Family
Voting Trust Agreement) dated August 17, 1987 by and between
Patricia B. Bernstein, David H. Bernstein and Patricia B.
Bernstein, Trustees U/D by Laurel Beth Bernstein dated 1/7/88,
David H. Bernstein and Patricia B. Bernstein, Trustees U/D by
Carolyn Bernstein dated 1/7/88, David H. Bernstein, Custodian
for Jeffrey A. Bernstein, Patricia B. Bernstein, Custodian for
Jeffrey A. Bernstein, and David H. Bernstein, Trustee; as
amended by the First Amendment to Amended and Restated Voting
Trust Agreement dated January 15, 1988 by and between the same
individuals.(1); as further amended by the Second Amendment to
Amended and Restated Voting Trust Agreement dated November 27,
1991 by and between the same individuals.(7)

9.2 - Voting Trust Agreement (Couri Voting Trust Agreement), dated
January 15, 1988 by and between John A. Couri and Elaine C.
Couri, Trustees of the Christopher J. Couri Irrevocable Trust
dated June 15, 1987, and Carl Reimerdes, Trustee.(1)

9.3 - Voting Trust (Jeffrey A. Bernstein Voting Trust Agreement)
dated January 15, 1988 by and between Shale D. Stiller and Max
E. Blumenthal, Trustees U/D dated 1/7/88 by David H. Bernstein
F/B/O Jeffrey A. Bernstein, and John A. Couri, Trustee.(1)

9.4 - Voting Trust Agreement (Reimerdes Voting Trust Agreement) dated
January 15, 1988 by and between Carl Reimerdes, Life Tenant
U/A/D 1/13/88, and John Tilson, Trustee, U/D dated 8/14/87 by
Carl H. Reimerdes F/B/O Shawn Reimerdes, Remainderman, and Carl
Reimerdes, Life Tenant U/A/D 1/13/88, and John Tilson, Trustee
U/D dated 8/14/87 by Carl H. Reimerdes F/B/O Erika Reimerdes,
Remainderman, and Carl Reimerdes, Trustee.(1)

9.5 - Voting Trust Agreement (Yaffe Voting Trust Agreement) dated
January 15, 1988 by and between Linda Yaffe and Seymour S.
Yaffe, Trustee.(1)

10.1 - Note Agreements with Massachusetts Mutual Life Insurance
Company and Mass Mutual Participation Investors relating to the
10.42% Unsecured Senior Notes due 1996 in the aggregate
principal amount of $10,000,000, as amended by the First
Amendment to Note Agreement by and between Duty Free
International, Inc. and Mass Mutual Participation Investors and
the First Amendment to the Note Agreement by and between Duty
Free International, Inc. and Massachusetts Mutual Life
Insurance Company, both dated August 25, 1989, effective as of
March 23, 1989(2), as further amended by a Note Agreement for
$2,500,000, Amended and Restated December 29, 1989, effective
as of March 23, 1989.(3)

<PAGE>

10.2 - Note Agreement for $7,500,000 10.42% Senior Notes due 1996
from Fenton Hill American Limited to Massachusetts Mutual Life
Insurance Company, dated August 25, 1989, effective as of March
23, 1989(2), as amended by a Note Agreement for $7,500,000
Amended and Restated December 29, 1989, effective as of March
23, 1989.(3)

10.3 - Agreement by and between United Distillers Group (Duty Free)
Ltd. and Overseas Trading Corporation.(10)

10.4 - Agreement dated January 1, 1989 by and between United
Distillers Group (Duty Free) Ltd. and Samuel Meisel and
Company, Inc.(1)

10.5 - Amended and Restated 1991 Principal Stockholders' Agreement
effective as of April 1, 1991 by and among IDF Services, Inc.,
Gebr. Heinemann, David H. Bernstein, Patricia B. Bernstein,
David H. Bernstein and Patricia B. Bernstein, Trustees U/D by
Laurel Beth Bernstein dated 1/7/88, David H. Bernstein and
Patricia B. Bernstein, Trustees U/D by Carolyn Bernstein dated
1/7/88, David H. Bernstein, Custodian for Jeffrey A. Bernstein,
Patricia B. Bernstein, Custodian for Jeffrey A. Bernstein,
Shale D. Stiller, Trustee U/D dated 1/7/88 by David H.
Bernstein F/B/O Jeffrey A. Bernstein, and Heribert Diehl.(7)

10.7 - Incentive Compensation Plan (1) (compensatory plan).

10.8 - Indemnity Agreement by and between Duty Free International,
Inc. and Jack Africk.(1)

10.9 - Stockholders Agreement dated as of April 24, 1992 among Duty
Free International, Inc., DFI Group Acquisition Corp., UETA,
Inc., Overseas Trading Corporation (1987) Limited, and each of
the persons and entities listed in Exhibit A thereto. (6)

12.1 - Ratios of Earnings to Fixed Charges. (5)

13.1 - 1995 Annual Report to Stockholders.(5)

18.1 - Preferability letter regarding change in accounting principle.
(11)
21.1 - Subsidiaries.(5)

23.1 - Consent of KPMG Peat Marwick LLP.(5)

24.1 - Powers of Attorney for Jack Africk, David H. Bernstein, John A.
Couri, Heribert Diehl, Morris W. Offit, Carl Reimerdes and
Susan H. Stackhouse. (5)

27.1 - Financial Data Schedule.(5)

Notes:

(1) Previously filed as an Exhibit to the Registration Statement of
the Company on Form S-1, File No. 33-27842 declared effective
May 11, 1989.

(2) Previously filed as an Exhibit to the Registration
Statement of the Company on Form S-1, File No. 33-32392
declared effective December 19, 1989.

(3) Previously filed as an Exhibit to the Company's Annual Report
on Form 10-K dated April 30, 1990.

(4) Previously filed as an Exhibit to the Company's
Registration Statement on Form S-1, File No. 33-43071,
declared effective November 29, 1991.
<PAGE>

(5) Filed herewith.

(6) Previously filed as an Exhibit to the Company's Current Report
on Form 8-K dated April 24, 1992.

(7) Previously filed as an Exhibit to the Company's Annual Report
on Form 10-K dated April 20, 1992.

(8) Previously filed as an Exhibit to the Company's Current Report
on Form 8-K dated January 15, 1994.

(9) Previously filed as an Exhibit to the Company's Current Report
on Form 8-K dated December 27, 1993.

(10) Previously filed as an Exhibit to the Company's Annual Report
on Form 10-K dated April 27, 1993.

(11) Previously filed as an Exhibit to the Company's Quarterly
Report on Form 10-Q for the quarter ended October 31, 1994.

SECOND CONSENT AND AMENDMENT
----------------------------

SECOND CONSENT AND AMENDMENT, dated as of December 15, 1994,
among Philippe Touret, Jean-Marcel Rouff, Thomas G. Gentithes, Brian
Fiderer and Julia Ng (individually a "Seller" and collectively, the
"Sellers"), Colleen May ("May") and Anthony Rodriguez (together with
May, the "Additional Recipients"), and Duty Free International, Inc., a
Maryland corporation (the "Purchaser").
W I T N E S E T H:
- - - - - - - - -
WHEREAS, the Sellers, Inflight Sales Group Ltd., a Bermuda
company (the "Company") and the Purchaser entered into a Stock Purchase
Agreement dated as of March 29, 1994, as amended (the "Stock Purchase
Agreement");
WHEREAS, the Company has been liquidated; and
WHEREAS, the Stock Purchase Agreement required the Purchaser
to make certain additional payments to the Sellers and the Additional
Recipients, including payments to be made by the Purchaser pursuant to
the Notes (as defined in the Stock Purchase Agreement) that were secured
by irrevocable bank letters of credit (the "Letters of Credit")
delivered to each Seller and each Additional Recipient and further
payments to be made by the Purchaser to certain of the Sellers and May.
WHEREAS, the Purchaser asserted claims (the "Claims"), which
the Majority Sellers have disputed, in connection with the Stock
Purchase Agreement in two letters each dated September 12, 1994, which
were delivered to the Majority Sellers on September 13, 1994; and
<PAGE>

WHEREAS, the Purchaser and the Sellers desire to (i) satisfy
any and all of the obligations of the Purchaser to make additional and
further payments to the Sellers and the Additional Recipients under the
Stock Purchase Agreement, except as set forth in Section 2(a) of this
Agreement, (ii) settle their dispute with respect to the Claims, (iii)
amend the Stock Purchase Agreement as set forth herein, and (iv) amend
the Majority Seller Purchaser Options, the Employment Agreement and the
Consulting Agreements in certain respects;
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and subject to and on the terms and
conditions herein set forth, the parties hereto agree as follows:
1. Definitions. Capitalized terms used herein and
not otherwise defined have the respective meanings given such terms in
the Stock Purchase Agreement.
2. Satisfaction of Payment Obligations and Claims.
Effective from and after the Closing hereunder:
(a) the Purchaser shall have no further obligation to pay
any Seller or any Additional Recipient any additional or further amount
pursuant to t he Stock Purchase Agreement (except as provided in Section
3.6(g) and (h) thereof), provided, however, that (x) the Purchaser's
obligations to make a payment under Section 1.2(a)(iv) to each of Julia
Ng and Colleen J. May shall continue in full force and effect as to, in
each case, the percentage set forth in column 6 of Exhibit B to the
Stock Purchase Agreement opposite such person's name, if such person is
employed by the Purchaser or one of its subsidiaries or affiliates at
the time such payment becomes due and (y) the Purchaser hereby
undertakes and agrees, for the sole benefit of Judi Bishop, to pay to
Judi Bishop an amount equal to the amount payable under Section
<PAGE>
1.2(a)(iv) to Julia Ng and to Colleen J. May as aforesaid (that is, to
each of said three persons 4% of five times the amount, if any, by which
the arithmetical average of the Earnings of the Company for each of the
fiscal years ending January 31, 1996, 1997 and 1998 exceeds
$10,900,000); and provided, further, that such payments to Julia Ng,
Colleen J. May and Judi Bishop shall not, notwithstanding Section
1.2(a)(iv) ofthe Stock Purchase Agreement, be subject to set-off as
provided in such Section 1.2(a)(iv) or be reduced by any amount for
payment to Walden Partners Ltd., nor shall any liquidated payment under
Section 1.5 of the Stock Purchase Agreement become payable to any of
them at any time or upon the occurrence of any event.
(b) the Claims shall be deemed settled in full and no
Seller or Additional Recipient shall have any further obligation in
respect there of to the Purchaser;
(c) the Stock Purchase Agreement shall be amended as
hereinafter provided;
(d) the amendments to the Majority Seller Purchaser
Options, the Employment Agreement and the Consulting Agreements, in the
forms of Exhibits 1, 2, 3, 4, 5 and 6 hereto, shall become effective;
and
(e) Thomas G. Gentithes shall have an option to purchase
40,000 shares of Common Stock.
3. Closing. (a) The closing of the transactions
contemplated hereby (the "Closing") shall commence at 10:00 a.m. at the
offices of Morgan, Lewis & Bockius, 101 Park Avenue, New York, New York
10178 on December 15, 1994, or at such other time on such other day or
place as shall be mutually agreed upon in writing by the Purchaser and
the Majority Sellers (the "Closing Date").
<PAGE>
(b) At the Closing:
(i) the Purchaser shall pay, against receipt of the
documents specified in subsections (ii), (iii)
and (v) below, in cash, by wire transfers as
directed by the Majority Sellers, to (x) each
Seller and each Additional Recipient, in full
and complete satisfaction of all amounts due him
or her under the Stock Purchase Agreement at any
time, except as set forth in Section 3.6(g) and
(h) of the Stock Purchase Agreement with respect
to the Sellers and in Section 2(a) of this
Second Consent and Amendment with respect to
Julia Ng and Colleen May, without any right of
set-off, the total amounts set forth in the
fourth and ninth columns on the first page of
Exhibit 7 opposite such Seller's or Additional
Recipient's name, and (y) Walden Partners Ltd.
the amount of $35,000, for an aggregate payment
of $12,700,000, and shall deliver to each Seller
and each Additional Recipient a fully completed
and executed release in the form of Exhibit 8
and to Walden Partners Ltd. a fully completed
and executed release in the form of Exhibit 13;
(ii) each Seller and each Additional Recipient shall
deliver to the Purchaser, against receipt:
(A) the Note (marked "Cancelled - Paid in
Full") and each Letter of Credit issued by
the Purchaser to him or her at the Closing
under the Stock Purchase Agreement;
<PAGE>
(B) a fully completed and executed
Cancellation Notice in the form of Exhibit
9 hereto, with respect to each Letter of
Credit to be delivered to the Purchaser by
such Seller or Additional Recipient; and
(C) a fully completed and executed release in
the form of Exhibit 10.
(iii) the Purchaser and each of Thomas G. Gentithes, Jean-
Marcel Rouff and Philippe Touret shall execute and
deliver an Amendment to his Employment Agreement or
his Consulting Agreement, in the appropriate form
attached as Exhibit 4, 5 or 6 hereto and their
respective resignations in the form attached as
Exhibit 14, 15 or 16;
(iv) the Purchaser shall (x) issue to Thomas G. Gentithes a
non-qualified stock option to purchase 40,000 shares
of common stock, par value $.01 per share, of the
Purchaser, exercisable at a per share price equal to
the last reported sale price of the Purchaser Common
Stock on the New York Stock Exchange Composite Tape on
December 14, 1994 in accordance with, and execute and
deliver to him, an Option Agreement in the form of
Exhibit 11 hereto and pay him the sum of $200,000
(less appropriate withholding as provided in Section
7.10 of his Employment Agreement), (y) pay on behalf
of Glorient Trading, Ltd. to Philippe Touret the sum
of $80,000 in accordance with the Amendment to his
Consulting Agreement and (z) pay, on behalf of
<PAGE>
Glorient Trading, Ltd., to Jean-Marcel Rouff the sum
of $16,666.64 in accordance with the Amendment to his
Consulting Agreement; and
(v) the Sellers shall deliver to the Purchaser the release
of Walden Partners Ltd. in the form of Exhibit 12.
4. Amounts Payable by the Purchaser. (a) The total
amount payable pursuant to Section 3(b)(i) of this Agreement to each
Seller and each Additional Recipient represents: (i) a prepayment of the
amount due him or her on May 2, 1995 and May 2, 1996 as the first and
second installments of principal due on the Note delivered to him or her
at the Closing under the Stock Purchase Agreement, less the amount
agreed upon by the Purchaser and the Sellers and the Additional
Recipients as a set-off against the first installment of principal in
respect of and in full settlement of the Claims, together with interest
accrued on the amount prepaid; (ii) a payment in full satisfaction of
his or her share of the amount (if any) payable under Section
1.2(a)(iii) of the Stock Purchase Agreement, including interest on the
amount being so paid; and (iii) the statutory withholding amount, if
any, being withheld with respect to the payments to him or her. The
aggregate of the respective amounts referred to in clauses (i) through
(iii) of the preceding sentence (reduced by a proportionate share of the
amount payable to Walden Partners Ltd. as set forth above) are set forth
opposite the name of each Seller and each Additional Recipient in the
fourth and ninth columns on the first page of Exhibit 7.
(b) The provisions of Section 1.2(f) of the Stock Purchase
Agreement shall be applicable to the payments to be made to the Sellers,
the Additional Recipients and to Judi Bishop pursuant to this Agreement
to the extent appropriate.
<PAGE>

(c) Each of Jean-Marcel Rouff and Philippe Touret severally
represents and warrants, as to himself, that he is not, and, at all
times hereafter and through December 31, 1994, he will not be, a "10-
percent shareholder" of Purchaser within the meaning of Section
871(h)(3) of the Code.
(d) Each Seller and each Additional Recipient severally
represents and warrants, as to himself or herself, that the information
provided in his or her respective Forms W-8 and W-9 submitted to
Purchaser on the Closing Date under the Stock Purchase Agreement is true
and correct on the date hereof.
5. Amendments to Stock Purchase Agreement. The
Stock Purchase Agreement is amended as of the Closing Date as follows:
(a) Sections 1.2(a)(ii) and (iii); and 1.2(a) (iv), (b),
(c), (d) and (e) (except as they apply to Julia Ng, Colleen May and Judi
Bishop); 1.5, 3.6(d) and (f) (except for the first sentence thereof);
3.9 and Article V (except insofar as the provisions thereof are
applicable to claims by Sellers under Section 3.6(g) and (h)) are hereby
deleted in their entireties; and
(b) all representations and warranties of the Sellers and
the Purchaser shall expire upon consummation of the Closing, including
with respect to any breaches and violations heretofore or theretofore
specified by the Purchaser with respect to any of the Sellers or the
Company or by any of the Sellers with respect to the Purchaser.
6. No Further Claims. From and after the date hereof
none of the Purchaser, the Sellers or the Additional Recipients shall be
entitled to make (x) any further claim for breach or violation (known or
unknown) of any representation, warranty or covenant in, or for
indemnification, damages or other payment under any provision of, the
Stock Purchase Agreement (except for claims under Section 3.6(g) and
<PAGE>
(h)), (y) any claim under applicable federal or state common law or
statutory laws, including the securities laws, or (z) any claim with
respect to the letter dated as of May 1, 1994, from the Purchaser to the
Sellers, confirmed by the Sellers, with respect to the allocation of
responsibility for any damages that might be incurred by the Company or
the Purchaser in connection with the resolution of any claims asserted
by Northwest Airlines that it is owed monies under the guarantee
referred to in Item (j)10 of the Disclosure Letter. Upon completion of
the Closing hereunder, all such claims, whether known or unknown,
whether or not heretofore or theretofore asserted (including without
limitation, the Claims), shall be deemed satisfied in full.
7. Confidentiality. Each of the Sellers and each of the
Additional Recipients agree that he or she shall keep in confidence, and
not disclose to any person (other than his or her personal advisors or
appropriate government representatives, or as required by judicial
process), the terms of this Agreement and the transactions contemplated
hereby.
8. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original
but all of which together shall constitute one and the same instrument.
9. Stock Purchase Agreement. The Stock Purchase
Agreement, except as otherwise set forth herein, shall remain in full
force and effect in all other respects.
10. Governing Law. This Agreement shall be deemed to be
made in and in all respects shall be interpreted, construed and governed
by and in accordance with the law of the State of New York.

<PAGE>
11. Expenses. The parties shall bear their own respective
expenses (including, but not limited to, all compensation and expenses
of counsel, financial advisors, consultants and independent accountants)
incurred in connection with the preparation and execution of this
Agreement and consummation of the transactions contemplated hereby.
12. Miscellaneous. This Agreement and the documents (in
the forms of the Exhibits attached hereto) executed in connection
herewith constitute the entire agreement among the parties hereto and
supersede all prior agreements and understandings, both written and
oral, among the parties, with respect to the subject matter hereof. The
terms of this Agreement may be modified only in a writing signed by all
of the parties hereto.
13. Section Headings. The section and paragraph headings
contained in this Agreement are for reference purposes only and shall
not in any way affect the meaning or interpretation of this Agreement.
14. United States Dollars. Any and all dollar amounts
specified in this Agreement or the Exhibits hereto shall be deemed to be
United States Dollars, and any and all computations and payments to be
made pursuant to this Agreement shall be made in lawful currency of the
United States.
15. No Admission or Representations. This Agreement is in
compromise and settlement of disputed claims and shall never at any time
for any purpose be considered as an admission of liability, fault or
responsibility on the part of any party hereto. In entering into this
Agreement, no party has relied on any representation made by or on
behalf of any other party hereto, except as expressly stated herein.

<PAGE>

16. Third Party Beneficiary. Purchaser agrees that Judi
Bishop shall be entitled solely to enforce the provisions of Section
2(a) hereof with respect to the payments to be made to her as provided
therein. Her consent shall not be required to amend any provision of
this Agreement which does not affect any such payment to her.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
<PAGE>

DUTY FREE INTERNATIONAL, INC.,
on be half of itself and INFLIGHT
SALES GROUP LTD. /s/ Philippe Touret
-------------------
Philippe Touret

By:/s/ John A. Couri
- - --------------------
Name: John A. Couri
Chairman of the Board /s/ Jean-Marcel Rouff
---------------------
Jean-Marcel Rouff

/s/ Thomas G. Gentithes
----------------------
Thomas G. Gentithes

/s/ Brian Fiderer
-----------------------
Brian Fiderer

/s/ Julia Ng
------------------------
Julia Ng

/s/ Colleen J. May
------------------------
Colleen J. May

/s/ Anthony Rodriquez
-------------------------
Anthony Rodriguez
<PAGE>

Exhibit Index

Exhibits

Exhibit 1 Amendment to T. Gentithes Majority Seller Option Agreement

Exhibit 2 Amendment to J-M. Rouff Majority Seller Option Agreement

Exhibit 3 Amendment to P. Touret Majority Seller Option Agreement

Exhibit 4 Amendment to T. Gentithes Employment Agreement

Exhibit 5 Amendment to P. Touret Consulting Agreement

Exhibit 6 Amendment to J-M. Rouff Consulting Agreement

Exhibit 7 Payment Allocations

Exhibit 8 Form of Release from Duty Free International, Inc. ("DFI")

Exhibit 9 Form of Cancellation Notice

Exhibit 10 Form of Release from Sellers and Additional Recipients

Exhibit 11 Form of T. Gentithes Option Agreement

Exhibit 12 Form of Release from Walden Partners Ltd.

Exhibit 13 Form of Release from DFI to Walden Partners Ltd.

Exhibit 14 Resignation of T. Gentithes

Exhibit 15 Resignation of P. Touret

Exhibit 16 Resignation of J-M. Rouff

Exhibit A

DUTY FREE INTERNATIONAL, INC.

AMENDMENT

to the

1989 STOCK OPTION PLAN, AS AMENDED AND RESTATED

Pursuant to Section 7 of the 1989 Stock Option Plan, as
amended and restated (the "Plan"), of Duty Free International, Inc. (the
"Company"), the Board of Directors of the Company hereby amends the Plan
as follows:

(1) Section 2 of the Plan is hereby amended by deleting
the words "One Million Six Hundred Thousand (1,600,000) shares (which
amount reflects adjustments through February 11, 1993)" in the first
sentence of the third paragraph thereof and inserting in their stead the
words "Two Million Six Hundred Thousand (2,600,000) shares (which amount
reflects adjustments through May 20, 1994)."

(2) Section 2 of the Plan is hereby amended by adding the
following as a new sentence at the end of the third paragraph thereof:
Other provisions of the Plan notwithstanding, the maximum number
of shares with respect to which Employee Options may be granted to
any one person during any fiscal year of the Company shall be
250,000.

(3) Section 5 of the Plan is hereby amended by adding the
following as a new subsection at the end of the existing text:

5.5. ADDITIONAL POST-TERMINATION EXERCISE PROVISIONS.
The provisions of Sections 5.1, 5.2, and 5.3 notwithstanding, the
Committee may specify as a term of any Employee Option (i) that,
upon termination of employment of the Optionee for any reason that
the Committee may specify, death, or disability, such Employee
Option to the extent not theretofore exercised may be exercised at
any time within a period of three (3) years (or such lesser period
as the Committee may specify) after such termination, death, or
disability (but in no event shall such Option be exercisable after
its stated expiration date), and (ii) that, during such period
following termination, death, or disability, such Employee Option
either shall be exercisable only to the extent it was exercisable
on the date of termination, death, or disability, shall continue
to vest and become exercisable in accordance with Section 3.3
hereof, or shall be fully exercisable as of the date of
termination, death, or disability, the provisions of Section 3.3
notwithstanding. No Option granted under the Plan may be
exercised by an Optionee who is not then employed by the Company
or serving as a director except within a period specified in or
under Sections 5.1, 5.2, 5.3, or 5.5 hereof.

<PAGE>
(4) Section 10 of the Plan is hereby amended by deleting
the existing first sentence thereof and inserting in its stead the
following:
The total number of shares of Common Stock which may be purchased
on exercise of Options granted under the Plan, the total number of
shares of Common Stock for which Options may be granted under the
Plan, the maximum number of shares with respect to which Employee
Options may be granted to any one person during any fiscal year,
the number of shares to be subject to Non-Employee Director
Options granted automatically under Section 4 hereof, and other
rights relating to Options (both as to the number of shares of
Common Stock and the Option Price) shall be appropriately adjusted
by the Committee for any increase or decrease in the number of
outstanding shares of Common Stock resulting from a stock
dividend, stock split or combination of shares or
reclassification.

(5) Section 14 of the Plan is hereby amended by adding the
following at the end of the existing text:
The amendments to the Plan adopted as of April 12, 1994 shall be
submitted to a vote of stockholders of the Company at the 1994
Annual Meeting of Stockholders of the Company, and shall become
effective only upon approval thereof by the affirmative votes of
the holders of a majority of voting securities present in person
or represented by proxy and entitled to vote at such Meeting, or
any adjournment thereof.

<TABLE>
<CAPTION>
DUTY FREE INTERNATIONAL, INC. AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(in thousands, except ratios)

Year Ended
January 29, Year Ended January 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Earnings (loss) before income taxes ($31,149) $43,082 $49,786 $48,765 $32,542

Adjustments:
Interest expense on borrowed funds 8,878 1,495 1,044 5,657 3,323
Interest portion of rental expense
(deemed to be one-third of rental expense) 8,620 7,990 7,842 7,201 5,662
Amortization of deferred financing costs 185 31 25 153 25
Undistributed earnings of less than
50% owned investees (100) (214) (170) (89) (52)

Earnings available for fixed charges/(Deficit) (13,566) 52,384 58,527 61,687 41,500

Fixed Charges:
Interest expense on borrowed funds 8,878 1,495 1,044 5,657 3,323
Interest capitalized 309 - - - 174
Interest portion of rental expense 8,620 7,990 7,842 7,201 5,662
Amortization of deferred financing costs 185 31 25 153 25

17,992 9,516 8,911 13,011 9,184

Earnings to cover fixed charges/(Deficit) ($31,558) $42,868 $49,616 $48,676 $32,316

Ratio of earnings to fixed charges N/A (1) 5.50 6.57 4.74 4.52

(1) Earnings available for fixed charges needed to bring the ratio to 1.00 is
$17,992.
</TABLE>

<TABLE>
<CAPTION>
DUTY FREE INTERNATIONAL,INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA-9 YEARS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND PERCENTAGES)

1995 (1) 1994 1993 (2) 1992 (3) 1991 1990 1989 1988 (4) 1987 (4)
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EARNINGS STATEMENT DATA:
NET SALES $501,761 $376,436 $361,823 $346,635 $262,962 $258,944 $229,687 $141,978 $29,925
NET SALES INCREASE PERCENTAGE 33.3% 4.0% 4.4% 31.8% 1.6% 12.7% 61.8% N/A N/A
GROSS PROFIT 200,374 147,740 146,425 138,749 93,820 83,512 62,788 39,706 14,146
GROSS PROFIT - % OF NET SALES 39.9% 39.2% 40.5% 40.0% 35.7% 32.3% 27.3% 28.0% 47.3%
SELLING,GENERAL AND
ADMINISTRATIVE EXPENSES 177,895 113,365 101,401 95,406 67,194 59,985 45,121 31,492 11,053
SELLING,GENERAL AND
ADMINISTRATIVE EXPENSES -
% OF NET SALES 35.5% 30.1% 28.0% 27.5% 25.6% 23.2% 19.6% 22.2% 36.9%
RESTRUCTURING EXPENSES 7,571 ------- ------- ------- ------- ------- ------- ------- -------
REVALUATION OF INTANGIBLE ASSETS 46,002 ------- ------- ------- ------- ------- ------- ------- -------
OPERATING INCOME (LOSS) (26,722) 39,535 49,647 47,577 29,715 26,221 19,984 9,528 3,748
OPERATING INCOME (LOSS)-
% OF NET SALES -5.3% 10.5% 13.7% 13.7% 11.3% 10.1% 8.7% 6.7% 12.5%
OPERATING INCOME (LOSS)
PERCENTAGE CHANGE N/A -20.4% 4.4% 60.1% 13.3% 31.2% 109.7% N/A N/A
EARNINGS ( LOSS) BEFORE
INCOME TAXES (31,149) 43,082 49,786 48,765 32,542 26,200 19,301 8,815 3,362
EFFECTIVE INCOME TAX RATE -20.4% 36.4% 39.0% 35.7% 31.6% 33.3% 32.1% 43.3% 47.6%
NET EARNINGS (LOSS) (24,802) 27,393 30,373 31,364 22,268 17,483 13,101 5,001 1,762
NET EARNINGS (LOSS) -- % OF NET SALE -4.9% 7.3% 8.4% 9.0% 8.5% 6.8% 5.7% 3.5% 5.9%
EARNINGS (LOSS) PER SHARE ($0.91) $1.01 $1.08 $1.19 $0.85 $0.78 $0.71 $0.30 $0.17
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 27,224 27,204 28,142 26,462 26,314 22,385 18,562 16,556 10,126
DIVIDENDS PER COMMON SHARE $0.20 $0.20 $0.15 ------- ------- ------- $0.025 ------- -------
RETURN ON STOCKHOLDERS' EQUITY -11.5% 12.5% 14.3% 17.7% 17.6% 22.3% 37.5% 28.0% 31.4%

1995 1994 1993 1992 1991 1990 1989 1988 1987
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WORKING CAPITAL $113,996 $204,118 $90,630 $119,353 $103,209 $98,844 $29,348 $21,121 $5,647
CURRENT RATIO 2.7 7.0 3.3 3.9 3.1 3.3 1.5 1.4 2.3
TOTAL ASSETS 387,142 387,600 255,819 269,911 200,557 173,153 103,867 83,689 21,616
LONG-TERM OBLIGATIONS 118,891 121,821 9,629 11,797 14,054 14,253 8,379 7,257 10,443
STOCKHOLDERS' EQUITY 201,151 231,861 207,343 216,447 137,875 115,830 41,183 28,737 6,954
NUMBER OF SHARES OUTSTANDING 27,244 27,238 27,122 28,429 26,269 26,262 18,512 18,512 12,000
PERCENT OF TOTAL DEBT
TO TOTAL CAPITALIZATION 37.1% 34.2% 4.1% 5.2% 13.7% 15.7% 23.8% 35.8% 57.0%
BOOK VALUE PER SHARE $7.38 $8.51 $7.64 $7.61 $5.25 $4.41 $2.22 $1.55 $0.58

(1) INFLIGHT SALES GROUP LIMITED WAS PURCHASED ON MAY 1, 1994.
(2) EXPENSES INCURRED IN EFFECTING THE MERGER OF UETA, INC.
AND DUTY FREE INTERNATIONAL WERE $4,389,000, OR $0.16 PER SHARE,
WHICH WERE CHARGED TO THE FINANCIAL RESULTS IN THE FIRST
QUARTER OF FISCAL 1993.
(3) THE COMPANY ACQUIRED 16 DUTY FREE STORES AND RELATED
BUSINESSES ALONG THE WESTERN UNITED STATES/CANADA BORDER ON
FEBRUARY 1, 1991.
(4) UETA WAS FORMED IN MAY 1987. THE FINANCIAL INFORMATION FOR
FISCAL 1988 INCLUDES PARTIAL YEAR RESULTS FOR UETA
AND FISCAL 1987 DOES NOT INCLUDE UETA.
</TABLE>
<TABLE>
<CAPTION>
DUTY FREE INTERNATIONAL,INC. AND SUBSIDIARIES
QUARTERLY FINANCIAL DATA (UNAUDITED)
(IN THOUSANDS,EXCEPT PER SHARE AMOUNTS)

FIRST SECOND THIRD FOURTH YEAR
<S> <C> <C> <C> <C> <C>
FISCAL 1995:
NET SALES $83,243 $137,241 $144,856 $136,421 $501,761
GROSS PROFIT 30,448 55,872 58,747 55,307 200,374
RESTRUCTURING EXPEN 7,571 7,571
REVAULATION OF INTA 46,002 46,002
NET EARNINGS (LOSS) 2,170 4,053 (34,538) 3,513 (24,802)
EARNINGS (LOSS) PER $0.08 $0.15 ($1.27) $0.13 ($0.91)

<S>
FISCAL 1994: $77,914 $99,252 $104,605 $94,665 $376,436
NET SALES 30,205 40,093 41,568 35,874 147,740
GROSS PROFIT -------
RESTRUCTURING EXPEN -------
REVAULATION OF INTA 5,082 7,955 8,095 6,261 27,393
NET EARNINGS $0.19 $0.29 $0.30 $0.23 $1.01
EARNINGS PER SHARE
</TABLE>

<PAGE>
DFI DUTY FREE INTERNATIONAL AT-A-GLANCE

[MAP]

INTERNATIONAL LOCATIONS
Caribbean
Hong Kong
Puerto Rico
Singapore
United Kingdom

COMPANY PROFILE

Founded in 1983, Duty Free International, Inc. is the leading operator of duty
free and retail stores along the United States' Canadian and Mexican borders
and in international airports throughout the United States. We are also a
prime
concessionaire and supplier of merchandise to international airlines' inflight
duty free shops. Additionally, DFI is the largest supplier of duty free
merchandise to U.S.-based foreign diplomats and a major supplier to merchant
and cruise ships from ports in the Northeast United States and Miami.

We sell quality brand-name merchandise such as liquor, tobacco products,
cosmetics, fragrances and luxury items at prices 20 to 60 percent below retail
prices for the same merchandise found in our travel and expatriate customers'
destination countries.

Through our AIRPORT, BORDER, DIPLOMATIC and WHOLESALE, and INFLIGHT
operating
divisions, DFI currently serves travelers at 160 duty free shops and retail
operations in locations throughout the United States, Puerto Rico, the U.S.
Virgin Islands, Aruba, St. Maarten, Bonaire and Curacao. Our standard and
specialty retail businesses include shops featuring American-made merchandise;
natural personal care products boutiques; regional sports-theme shops; branded
athletic footwear and apparel shops; gourmet food and confection shops;
convenience stores; news and gift shops; book stores; currency exchanges and
gas stations.

Headquartered in Ridgefield, Connecticut, Duty Free International employs more
than 2,000 people and has been publicly-held since 1989.

<PAGE>
LETTER TO SHAREHOLDERS

[PHOTO]

DEAR FELLOW SHAREHOLDERS:

During fiscal 1995, Duty Free International once again achieved substantial
sales growth. These results were achieved despite the continued presence of
adverse economic factors impacting Northern border sales and earnings. We
undertook a number of management initiatives to offset regional and divisional
weaknesses going forward which clearly demonstrate our continued commitment to
diversification and maximizing value. These included continued expansion in
our
Airport division, the addition of our new Inflight division, de-emphasis of
the
wholesale aspect of our Diplomatic and Wholesale division, and an overall
comprehensive restructuring effort designed to maximize profitability. We also
changed the method of evaluating the recoverability of intangible assets.

OPERATING RESULTS

For the fiscal year ended January 29, 1995, net sales totaled
$501,761,000,
a 33 percent increase over the prior year's sales of $376,436,000. Net
earnings for the fiscal year, excluding the after-tax effects of our
restructuring plan and the intangible assets revaluations, were $14,133,000,
or
$.52 per share, compared with $27,393,000 or $1.01 per share for the prior
year.

For the fourth quarter ended January 29, 1995, net sales were
$136,421,000,
up 44 percent from $94,665,000 for the same period in 1994. Net earnings for
the quarter decreased to $3,513,000 or $.13 per share, from $6,261,000 or $.23
per share for the same period a year ago.

As of January 29, 1995, total assets were $387,142,000, working capital
totaled $113,996,000, and total stockholders' equity was $201,151,000. Total
debt to total capitalization at fiscal year-end was 37.1 percent.

THE YEAR IN REVIEW

In the second quarter, we completed our purchase of Inflight Services
Group Limited, a leading concessionaire, operator and supplier of onboard duty
free merchandise to international airlines through its wholesale program and
onboard concessions. Inflight is also a major supplier of international
airlines' first class and premium class amenity kits.

The new division has already proven profitable, and was almost entirely
responsible for DFI's net sales growth during the past year. As additional
consolidation, economies of scale and synergies are realized, we expect this
division to continue to strongly impact DFI's profitability going forward.

During the third quarter, we instituted a series of management initiatives
designed to improve DFI's profitability. Following a comprehensive assessment
of each of DFI's operating businesses and their administrative functions, we
began a program of store and business closures, and workforce reductions
expected to be completed in early fiscal 1996.

When fully implemented, 23 stores and business locations, which had been
generating approximately $14,500,000 in sales annually, will be closed. These
include seven Airport, 14 Northern Border and two Diplomatic and Wholesale
division operations. These closings are expected to reduce our workforce, and
lower direct operating costs by approximately $7,400,000 annually. A pre-tax
charge to earnings of $7,571,000 was taken during the third quarter ended
October 31, 1994 as a result of these actions.

We believe this restructuring, when completed, will bring DFI near-term
improvements in profitability and enable us to focus DFI's considerable
resources on those markets which we believe offer prospects for growth and
financial returns in line with our requirements. We will continue to monitor
DFI's operating costs and seek out expense savings opportunities as we
endeavor
to make DFI a more efficient company. Among these efforts was a recently
completed warehousing consolidation arising from the Inflight acquisition
which
will, along with other expense reductions in our Inflight Division, yield
approximately $1,000,000 of annual savings as compared with the current
existing cost base.

Additionally, we adopted a discounted cash flow method of evaluating the
recoverability of intangible assets at the same time recognizing that the
projected profit and cash flow from certain acquired businesses will

<PAGE>
be below expectations set by DFI management at the time of the acquisitions.
The result was a write-down of asset value and a one-time, pre-tax charge to
earnings of $46,002,000 which was taken during the third quarter. The fiscal
year 1996 pre-tax amortization charge associated with the assets written down
would have been $3,500,000. While not impacting DFI's cash position, the
write-down will create a more appropriate and conservative balance sheet
valuation of remaining goodwill and other intangible assets.

A total pre-tax charge against earnings of $53,573,000 ($38,935,000
after-tax), resulting from the closures and new accounting method for valuing
intangible assets, was taken during DFI's third quarter.

LOOKING AHEAD

We believe the management initiatives described above and our plans to
capitalize on these and other efforts give us ample reason to be excited and
confident in our ability to continue to grow and enhance shareholder value.

At the airports we'll continue to increase our presence through strategic
alliances with major companies and expand our existing portfolio of retail
formats to maintain and broaden our appeal to airport authorities. Together
with one of our equity partners, we were the successful bidder for the lease
to operate the duty free shops at Logan International Airport in Boston,
Massachusetts. Two duty free shops were opened on March 1, 1995 and a third
shop is planned to open later in 1995. Through another of our equity
partnerships, we've designed and stocked 12 stores in the new Denver
International Airport in Colorado, which opened on February 28, 1995.

In our Border division, we are well-positioned for a rebound in the
Canadian economy, and improvement in the value of the Canadian dollar, with
leaner, financially stronger stores on the Northern border. Along the Southern
border, we have revamped stores and products to meet anticipated growth in the
numbers of customers and greater demographic mix resulting from the North
American Free Trade Agreement (NAFTA). We have also responded to the late
1994,
and continuing devaluation of the Mexican peso and resulting reduction in
sales
volumes with significant expense and working capital reduction programs
designed to lessen the adverse effect on our profits and cash flow.

Our newly-completed 100,000 square foot distribution center in Miami
enables us to more aggressively pursue additional cruise business and build on
our 10 retail store presence on the passenger piers in the port of Miami.
We're
focused on increasing our market share of duty free supply to cruise lines,
particularly those serving Caribbean routes, and seeking opportunities at
additional ports as cruise markets expand.

Additionally, we have begun a marketing campaign to educate Americans and
foreign visitors of the value of duty free shopping -- especially in these
economically-trying times. Increased awareness of the cost savings associated
with duty free shopping will help us achieve our goal of attracting customers
of all economic levels and encourage the highest possible average transaction
spend at each of our many and varied locations. Most importantly, we'll
continue to foster a corporate environment that encourages creativity and
risk-taking, which we believe yields improved financial performance.

Our intention is to maintain and further our position in the travel
industry to be recognized by customers and competitors alike as the leader in
duty free and travel retailing. Our goal is as simple as ever: to be a billion
dollar company that consistently achieves superior financial returns. Our
confidence in achieving this goal is matched only by our gratitude to our
shareholders, employees, customers and vendors for your continued support. Our
unwavering commitment to you is to merit this loyalty and reward it with
consistent, strong performance in the years ahead.

Sincerely,

Alfred Carfora
President and Chief Executive Officer
March 15, 1995
3

<PAGE>
AIRPORT DIVISION: FENTON HILL AMERICAN LTD.

HQ: British Airways Building/
John F. Kennedy International Airport, New York

LOCATIONS: 80 duty free and retail stores

MARKETS: 14 international airports,
the Caribbean and South Florida

As in years past, the Airport division, operating under the name Fenton Hill
American Limited, continued its record of solid sales growth and expansion,
and
contributed substantially to our fiscal 1995 sales. With total sales of $92.9
million -- a 21 percent increase over fiscal 1994 sales -- Fenton Hill
accounted for 18 percent of overall sales. During the past year we recognized
strong sales input from our late 1993 and early 1994 acquisition of 10
Caribbean locations.

Fenton Hill's fine results stem directly from our commitment to focused
diversification which is successfully implemented through our portfolio
approach to airport retailing. The portfolio approach combines a wide variety
of retailing concepts in an attractive manner which is especially appealing to
airport management and domestic and foreign travelers.

Our retail mix currently includes duty free shops, specialty stores such
as
The Athlete's Foot (branded athletic-wear), Bodyography (natural personal care
products) and The Sports Section (regional sports-theme shops), standard news
and gift shops and bookstores.

Additionally, through a number of equity partnerships and strategic
alliances, we are able to participate in duty free and retail concessions in a
number of other international airports. Chicago Aviation Partners, our joint
venture with McDonald's Corporation, last year developed and now manages all
the concession space at the new international terminal at Chicago's O'Hare
Airport. In affiliation with another venture partner we've designed and
stocked
12 stores which opened in February 1995 in the new Denver International
Airport. And, in March 1995, we, and our venture partners, opened two new duty
free shops in Boston's Logan International Airport, with a third store
scheduled to open later in fiscal 1996. Given the success of relationships
like these, we'll continue to explore new opportunities with existing partners
and other innovative approaches.

Percent of Fiscal 1995
Consolidated Net Sales
18%

<PAGE>
INFLIGHT DIVISION: INFLIGHT DUTY FREE SHOP, INC.

HQ: New York, New York

LOCATIONS: 64 international
airline fleets

MARKETS: 21 onboard duty free concessions; 14 wholesale accounts from 48
operations bases in Europe, the United States, Asia/Pacific and Latin America
and the Caribbean; 29 amenity kit supplier accounts.

During the second quarter of fiscal 1995, we acquired Inflight Sales Group
Limited. A fitting complement to our existing businesses, Inflight is a
leading
concessionaire, operator and supplier of onboard duty free merchandise to
international airlines through onboard concessions and a wholesale program,
and
a major supplier of international airlines' first class and premium class
amenity kits.

We believe Inflight's purchase price -- $60 million in cash, $10 million
in
notes and additional payments as earnings goals are achieved -- has already
been more than justified. The new division was profitable as soon as the
acquisition was completed, and with just three quarters of sales, it
contributed a substantial $121.9 million or 24 percent of consolidated fiscal
1995 sales and was almost entirely responsible for total company net sales
growth during the past year.

Inflight's three business areas contribute significantly to the division's
performance. Thirty percent of the division's sales derive from the
manufacture
and marketing of amenity kits for international airlines' first class and
premium class passengers.

Another 20 to 30 percent of sales are obtained from the division's
wholesale program which provides merchandise for duty free programs which
airlines run on their international flights. The carrier runs all promotions,
manages the program and even owns the inventory which is bought from Inflight.

The remaining 30 to 50 percent of sales come from the division's
concession program through which Inflight fully operates airlines' on-board
duty free concession. We purchase products and manage every aspect of duty
free sales service on the airlines' flights, including magazine and videotape
promotions. With a percentage of total sales paid in royalties to the
airline, this program provides airlines with a risk-free means of
incrementally
increasing their earnings.

Inflight has exclusive distribution agreements for various parts of the
world with many well-recognized names in the luxury products industry,
including Chanel, Christian Dior, Hermes, Mont Blanc, Yves Saint Laurent,
Elizabeth Arden and Lancaster. Additionally, it maintains warehouse and
station
locations throughout the U.S., Pacific Rim, Europe and South America.

We're confident that Inflight will continue to contribute handsomely to
our
overall business as air travel and airline competition grows, and as it is
more
thoroughly absorbed into our operations.

Percent of Fiscal 1995
Consolidated Net Sales
24%
5

<PAGE>
BORDER SOUTH DIVISION: UETA, INC.

HQ: San Antonio, Texas

LOCATIONS: 30 duty free stores

MARKETS: 14 border crossings in Arizona, California and Texas

During the past year, UETA once again delivered on the promise we perceived
when we purchased it two years ago, contributing a whopping 29 percent of
consolidated sales. UETA's total sales were $144.6 million, an increase of 14
percent over fiscal 1994 performance -- despite a fall-off in sales toward
year-end as a result of the devaluation in the peso.

To ensure its continued solid contribution, we maintained a number of
strategies introduced during fiscal 1994 which were found to be successful. We
continued our marketing and advertising programs targeted to Mexicans working
in U.S./Mexican border plants. To better meet the purchase needs of a broader
demographic mix, we've adjusted inventories and created an enhanced value line
of products which include private label liquor and five-pack cigarette
cartons.
Our store upgrade program, now completed, has given a consistent visual image
to all UETA stores.

Going forward, our intention is to meet the impact of the devalued peso
head-on. Marketing and promotion programs have been adjusted, and expense
reductions of approximately $3,800,000 annually have been effected. We'll
apply
the important lessons we've learned from the ond belief.

\s\ Spring M. Ciccarello
-----------------------------
Notary Public

My Commission Expires: 3/9/97

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