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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 MAY 31, 1997
[FEE REQUIRED]
FOR THE FISCAL YEAR ENDED MAY 31, 1997 COMMISSION FILE NUMBER 0-20548
FRITZ COMPANIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 94-3083515
(STATE OF OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
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706 MISSION STREET, SUITE 900, SAN FRANCISCO,CALIFORNIA 94103
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (415) 904-8360
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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TITLE OF EACH CLASS NAME ON EACH EXCHANGE ON WHICH REGISTERED
None None
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE
------------------------------------
(TITLE OF CLASS)
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. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (S 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
At June 30, 1997, the aggregate market value of the registrant's Common
Stock held by non-affiliates of the registrant was approximately $211 million.
At June 30, 1997, the number of shares outstanding of registrant's Common
Stock was 35,445,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement relating to the 1997 annual meeting of
shareholders have been incorporated by reference -- Part III of the Form 10-K
(Items 10, 11, 12 and 13)
The Exhibit Index is located on page F-22 hereof.
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PART I
ITEM 1 -- BUSINESS
GENERAL
Fritz Companies, Inc. (the Company) is a leader in providing global
logistics services and related information services for importers and exporters
worldwide. The Company is primarily engaged in providing logistics management,
international air and ocean freight forwarding, customs brokerage, and
warehousing and distribution services. The Company also provides value-added
services for logistics information and the international and domestic movement
of goods in addition to those customarily provided by traditional freight
forwarders and customs brokers. These services are designed to provide
integrated global logistics solutions for customers to streamline their
operations, improve logistics information, enhance their profitability and
provide them with more efficient and effective international transportation
strategies.
The Company was incorporated in Delaware in August 1988 and is a successor
to a company incorporated in California in 1933. Internationally, the Company
operates a number of subsidiaries under the names "Fritz Transportation
International," "Fritz Air Freight," "Fritz Starber," "Fritz Fliway," "Fritz
Logistics," and "Fritz Companies," among others. Unless the context otherwise
requires, references in this Form 10-K to the Company include Fritz Companies,
Inc., its subsidiaries and its predecessor companies. Although the Company's
executive office is located in the United States at 706 Mission Street, Suite
900, San Francisco, California 94103, its network is global. The Company has
offices throughout North America, Asia, Europe, Latin America, and the Middle
East.
See Management's Discussion and Analysis of Financial Condition and Results
of Operations and the Company's Consolidated Financial Statements, including the
Notes thereto, for data related to the Company's revenues, operating profit and
identifiable assets by geographic regions.
Effective May 31, 1995, the Company approved the change from a fiscal
year-end of December 31 to a fiscal year-end of May 31. The period January 1,
1995 through May 31, 1995 is referenced herein as the "Transition Period."
The following table shows revenue and net revenue, in thousands of dollars
and as a percentage of total revenue or net revenue, as the case may be,
attributable to the Company's principal logistics services:
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TWELVE
TWELVE MONTHS ENDED MAY 31, TWELVE MONTHS FIVE MONTHS MONTHS ENDED
--------------------------------------- ENDED MAY 31, ENDED MAY 31, DECEMBER 31,
1997 1996 1995(a) 1995 1994
------------------ ------------------ ---------------- ---------------- ----------------
AMOUNT % AMOUNT % AMOUNT % AMOUNT % AMOUNT %
---------- ----- ---------- ----- -------- ----- -------- ----- -------- -----
(UNAUDITED)
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Revenue
Customs Brokerage.............. $ 152,257 13.2 $ 142,606 13.7 $123,653 14.2 $ 54,252 13.6 $113,146 14.6
Ocean Freight Forwarding....... 334,701 28.9 315,037 30.2 243,497 28.0 115,021 28.7 227,870 29.5
Airfreight Forwarding.......... 531,100 45.9 491,938 47.1 448,043 51.4 204,294 51.0 384,385 49.7
Warehouse & Distribution....... 138,712 12.0 94,277 9.0 55,710 6.4 26,679 6.7 47,988 6.2
---------- ----- ---------- ----- -------- ----- -------- ----- -------- -----
Total........................ $1,156,770 100.0 $1,043,858 100.0 $870,903 100.0 $400,246 100.0 $773,389 100.0
========== ===== ========== ===== ======== ===== ======== ===== ======== =====
Net Revenue
Customs Brokerage.............. $ 152,257 29.9 $ 142,606 31.2 $123,653 33.7 $ 54,252 32.8 $113,146 34.0
Ocean Freight Forwarding....... 107,480 21.1 100,780 22.0 82,030 22.4 38,149 23.0 77,041 23.2
Airfreight Forwarding.......... 149,333 29.3 143,903 31.4 116,351 31.8 52,673 31.8 104,005 31.3
Warehouse & Distribution....... 100,301 19.7 70,279 15.4 44,453 12.1 20,608 12.4 38,391 11.5
---------- ----- ---------- ----- -------- ----- -------- ----- -------- -----
Total........................ $ 509,371 100.0 $ 457,568 100.0 $366,487 100.0 $165,682 100.0 $332,583 100.0
========== ===== ========== ===== ======== ===== ======== ===== ======== =====
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(a) The unaudited twelve months ended May 31, 1995 is provided for comparative
purposes. As discussed in Note 1 of Notes to Consolidated Financial
Statements, effective May 31, 1995 the Company changed its fiscal year-end
of December 31 to a fiscal year-end of May 31. The May 31, 1995 period
represents combined operating results reported for Fritz Companies, Inc. and
Intertrans Corporation (Intertrans)
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for the twelve months ended March 31, 1995 and April 30, 1995, respectively,
accounted as a pooling of interests.
RECENT DEVELOPMENTS AND ACQUISITIONS
The Company's net revenue increased 11.3% to $509.4 million in 1997 from
$457.6 million in 1996. Management attributes this growth principally to its
continued implementation of integrated logistics programs for new and existing
customers worldwide and continued expansion of the Company's global network and
product services through internal developments and strategic acquisitions.
The Company's strategy continues to focus on the following elements:
emphasize integrated transportation logistics, expand and enhance the Company's
global network and information systems, pursue strategic acquisitions and
provide attention to cost control.
On May 30, 1995, the Company and Intertrans Corporation (Intertrans)
completed the merger of the two companies. In the merger, each outstanding share
of Intertrans common stock was converted into the right to receive 0.365 of a
share of Fritz Companies common stock. The Intertrans business is now operated
under the name "Fritz Air Freight."
This merger transaction was accounted as a pooling of interests.
Accordingly, the Company's consolidated financial statements have been restated
for those periods prior to the merger, to include the results of operations,
financial position and cash flows of Intertrans. In addition, all information in
this Form 10-K incorporates both the Company and Intertrans.
NARRATIVE DESCRIPTION OF BUSINESS
International Airfreight and Ocean Freight Forwarding: The Company
believes it is among the largest forwarders of international airfreight and
ocean freight in the United States.
The Company's revenue from international ocean freight forwarding is
derived from logistics services both as an indirect ocean carrier (a "Non-Vessel
Operating Common Carrier" or NVOCC), as an authorized agent for shippers and
importers, and as an agent for steamship companies. The Company's revenue from
international airfreight forwarding is derived from logistics services both as
an indirect air carrier and as an authorized cargo sales agent of various
airlines.
The Company also provides logistics services, including inland
transportation of freight from point of origin to a distribution center or the
carrier's cargo terminal, warehousing, protective packing, cargo consolidation,
document preparation and electronic transmittal, electronic purchase
order/shipment tracking, inventory management, expedited document delivery for
customs clearance and priority notification to consignee of cargo arrival.
The Company serves a broad range of freight forwarding customers. The
Company's ocean freight forwarding customers include retailers and industrial
companies shipping automotive parts, heavy equipment, steel, chemicals, forest
products, clothing, and produce. In general, airfreight has a high value
relative to its weight and the cost of shipment is usually a small portion of
its value. The principal customers for airfreight are shippers of medical
equipment and parts, drugs and pharmaceuticals, computer and high technology
equipment and parts, aircraft and automotive parts, electrical equipment,
machinery and machine parts, chemicals, fashion apparel and measuring and
testing instruments.
As an indirect ocean carrier (NVOCC) and an indirect air carrier, the
Company procures customer shipments, consolidates shipments bound for a
particular destination, determines the routing for the consolidated shipments,
selects the direct carrier or charters a ship or aircraft and tenders each
consolidated lot as a single shipment to the direct carrier for transportation
to a distribution point.
The Company's rates are based on the shipment weight and/or volume. Rates
charged by the Company are ordinarily less than the rate the shipper would be
charged by a steamship line or an airline. The consolidation of customers'
shipments allows the Company to obtain lower rates from steamship lines or
airlines than the rates the Company charges to its customers for individual
shipments. In addition, in certain
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tradelanes the Company controls a high volume of freight and, accordingly, is
able to obtain lower contracted rates from certain carriers or charter
operators. This rate differential is the primary source of the Company's net
ocean and airfreight forwarding revenue as an indirect carrier.
By accepting goods for ocean or air shipment as an indirect carrier, the
Company assumes the role of a carrier and becomes responsible to the shipper for
the safe delivery of the shipments, subject to a legal limitation on liability
of $500 per ordinary shipping unit of ocean freight and $20 per kilogram of
airfreight. Because the Company's relationship with the steamship line or
airline is as a shipper, the steamship line or airline generally assumes the
same responsibility to the Company as the Company assumes with its clients.
As an authorized agent for shippers and importers, and as an authorized
cargo agent of various airlines and steamship companies, the Company arranges
the transportation of individual shipments and receives a commission from the
direct carrier for arranging the shipments. When acting as such an agent, the
Company does not consolidate shipments and does not have responsibility for
shipments once they have been accepted by the direct carrier.
As part of the Company's freight forwarding activities, the Company
provides project forwarding and logistics services involving governmental and
commercial projects, including foreign military sales, power plant construction,
shipbuilding, construction of manufacturing assembly facilities, civil
infrastructures and other large scale installations. The Company's project
forwarding services provide integrated logistics for conveying heavy materials
and equipment from multiple origins to project sites. Such services include
managing the customer's transportation, customs clearance and warehousing and
distribution. Most of these shipments are transported by ocean carrier. The
government portion of the Company's project forwarding business requires a
United States Government security clearance of the Company's management team and
those employees assigned to the project. The warehouses receiving and storing
the cargo must have a security clearance.
In addition to ocean and airfreight forwarding services, the Company
provides forwarding services and cross marketing in the United States for a
number of its foreign agents. The Company is compensated by sharing in the
agents' profits on their consolidation shipments.
The Company is licensed by the Federal Maritime Commission of the United
States and is a member of the International Air Transport Association.
Customs Brokerage: The Company is the largest customs broker in the United
States according to the United States Customs Service. The Company's customs
brokerage operations for air and ocean imports cover over 400 ports of entry in
the United States. The Company believes its customs brokerage operation is among
the most sophisticated in the United States as a result of its size, technology
and integration with other transportation logistics services provided to
customers by the Company. In addition, the Company provides customs brokerage
services overseas - such as Australia, Canada and the United Kingdom.
As a customs broker in the United States, the Company is engaged by
importers for the purpose of preparing or assimilating the documentation
required for entry of merchandise into the United States. In this capacity, the
Company is responsible for coordinating all events and communicating the status
of shipments from the time of shipment arrival through customs clearance. The
Company receives commercial and transportation documentation, reviews it for
completeness and accuracy, prepares and files documents necessary to clear
customs, obtains customs bonds, assists the importer in obtaining the
appropriate commodity classification and arranges for payment of collect freight
charges. In most cases, the Company also deposits import duties with the United
States Customs Service on behalf of the importer. In addition, the Company
provides ancillary customs brokerage services to its customers, including
placement of surety bonds, duty reduction programs and duty-drawback (recovery
of duties paid when imported merchandise is re-exported). The Company also
provides bonded warehouse services which enable importers to defer payment of
customs duties until release of the cargo in conjunction with their production
or distribution schedules. See "Warehousing and Distribution Services."
In providing customs brokerage services, the Company has access to
information concerning a shipment's origin and value, destination and mode of
transportation. As a result, the Company has been able to obtain additional
business by identifying opportunities to improve customer service or reduce
their expenses through
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expanded utilization of the Company's other services, including cost-effective
cargo consolidations, routing from overseas origin to ports of entry, cargo
insurance, container unloading, inventory warehousing and arranging delivery of
cleared cargo to its final destination.
The Company believes it has been a leader in the use of computer technology
for customs brokerage activities on behalf of its clients. The Company was one
of the first customs brokerage operations to link with the United States Customs
Service through the Automated Broker Interface information system and to develop
a comprehensive, proprietary, on-line, interactive customs brokerage system
which permits customers to monitor the status of a shipment as it passes through
the government clearance process. The Company's information systems enable the
Company to electronically prepare documents, transmit information necessary for
cargo pre-clearance through customs, expedite cargo release and provide
nationwide control of customs clearance at multiple ports of entry for its
customers. See "Information Systems."
The Company's customs brokerage services are provided by the Company's
licensed customs brokers and support staff who have substantial knowledge of the
complex tariff and government regulations with respect to the payment of customs
duties and other fees, commodity classifications, valuation and import
restrictions. In addition, the Company developed substantial customs brokerage
expertise within particular client industries. The Company believes its industry
specialization is unique among competitors and enables the Company to provide
high levels of service to customers in these industries. The Company provides
ongoing training programs, which include preparation for the United States
customs broker license examination, to employees as well as to customers.
The following table sets forth the number of United States Customs entries
filed by the Company (in thousands):
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TWELVE MONTHS ENDED
MAY 31, FIVE MONTHS ENDED TWELVE MONTHS
------------------------- MAY 31, DECEMBER 31,
1997 1996 1995 1995 1994
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Number of Entries Filed........ 2,204 1,820 1,640 690 1,660
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As a customs broker operating in the United States, the Company is licensed
by the United States Department of the Treasury and regulated by the United
States Customs Service. The Company's fees for customs brokerage services are
not regulated and the Company does not have a fixed fee schedule for such
services. Instead, customs brokerage fees are based on the complexity of the
transaction and the type of services required and are generally not related to
the value of the customers' goods. In addition to its fees, the Company bills
the importer for amounts which the Company pays on the importer's behalf,
including duties, taxes, collect freight charges and similar payments.
The Company offers its customs brokerage services to all shippers, not
exclusively to its ocean or airfreight forwarding customers. The Company's
largest customs brokerage customer in 1997 accounted for 17.6% of the Company's
custom brokerage revenue and 2.3% of the Company's total revenue. The Company
believes the loss of this customer would not have a material adverse effect on
its customs brokerage business.
Warehousing and Distribution Services: As part of its integrated global
logistics services, the Company provides an array of warehousing and
distribution services to its customers.
Warehousing services are available for the Company's customers in certain
of its facilities, as well as in space leased from others. The Company maintains
approximately 6.3 million square feet of its owned and leased warehouse space.
The Company's warehousing services include receiving, deconsolidation and
decontainerization, and cargo loading and unloading, assembly of freight,
customer inventory management, protective packing and storage. For import
shipments, the Company provides bonded warehouse services to importers so they
can defer payment of customs duties until cargo releases are required to meet
customers' production or distribution schedules. The goods stored in bonded
warehouses are supervised by customs officials until the importer is ready to
withdraw or re-export them. The Company is paid storage charges for use of its
warehouses and fees for other services.
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The Company provides surface transportation and domestic distribution
services involving the movement of shipments for local and long-haul delivery to
and from customers' doors. In this capacity, the Company procures shipments from
its customers, consolidates less than truckload quantities, determines the
routing, selects the carrier and tenders each shipment to such carrier for
transportation. The Company provides this service as an indirect carrier and as
an agent. The Company also provides logistics services by coordinating the most
efficient and cost-effective mode of long-haul surface transportation to its
customers.
No single customer accounted for ten percent or more of total consolidated
revenue.
Information Systems: The Company invests a substantial amount of resources
in its information systems to accomplish the corporate objective of developing
and maintaining an integrated logistics system. The information system strategy
is to provide accurate, reliable and timely access to information regarding
logistics and internal operations through responsive and cost-effective
information systems technologies.
The Company released the first modules of Fritz Logistics Expediting System
(FLEX) in late 1991 to permit customers to track the flow of goods throughout
the transportation process. Customers can complete queries to receive the
current status of shipments. Most customers utilizing FLEX are multi-national
corporations with a large number of foreign suppliers. Customers can use FLEX to
generate special reports on supplier compliance with purchase order requirements
to enhance the effectiveness of their merchandising programs. Development and
enhancements to the FLEX system have continued since 1991 and include linking an
automated customs brokerage systems to FLEX to monitor the status of shipments
as they pass through the customs clearance process. The Company's on-line,
interactive, nationwide customs brokerage system was one of the first to link
with the United States Customs Service's information systems.
An important part of the Company's business strategy is to expand the use
of the FLEX system. This will be accomplished by building upon FLEX and
replacing several domestic and international systems with one, global,
integrated system referred to as FLEX II. This system is expected to be among
the most sophisticated, integrated systems in the industry and also expected to
provide significant productivity gains and increased customer satisfaction.
The Company has recently completed the development of the first phase of
its new ocean export system which is expected to be implemented during 1998.
This system is a replacement for an existing system and will provide all the
existing features plus several additional features, including enhanced customer
profiles, more effective management reports and on-line data. The new ocean
export system will provide user-friendly, Graphical User Interface (GUI) based
screens, including pop-up tables and on-line help, which is expected to reduce
training time for new users. Other expected benefits of this new system include
improved customer service, accounting-related enhancements, improved
marketability of the ocean product and overall increased employee productivity.
The Company is also developing Web-based software which will provide
visibility to shipping information and customs entry activity for any customer
with access to the Internet.
Marketing: An important part of the Company's business strategy is its
customer-oriented marketing approach. The Company's marketing efforts focus on
senior transportation executives, financial officers and purchasing directors of
large complex users of international transportation logistics services. In
connection with the Company's emphasis on developing and maintaining long-term
relationships with such customers, the Company has developed several special
marketing programs, including the Customer Response Teams, Global Accounts
Program, Global Logistics Council and the Global Advisory Board.
The National Accounts Program was established in 1971 to increase the
visibility of the Company's services to large complex users of international
transportation logistics services. In 1996, the program was renamed Global
Accounts Program to more accurately reflect its worldwide focus. The Company's
Senior Director of Sales supervises the marketing efforts of a team of global
account sales executives that are responsible for securing new business from
major companies and assisting in maintaining customer relationships with such
companies.
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The Shippers' Council program was formed by the Company in 1984 as a forum
for major importers and exporters, some of which are not currently customers of
the Company, to discuss their transportation logistics requirements, views of
global trade and other related topics. In 1996, the program was renamed Global
Logistics Council to more accurately reflect its worldwide focus. Global
Logistics Council meetings are generally held twice a year, and representatives
of approximately 40 companies participate in each meeting. Participants in the
Global Logistics Council are invited to participate on an ongoing basis in the
Company's Global Advisory Board. The Global Advisory Board assists the Company
in formulating strategies designed to better serve the needs of the Company's
customers. The Global Logistics Council and the Global Advisory Board help the
Company maintain close contact with its customers and the global trade community
on a continuing basis.
The Customer Response Team (CRT) concept was created in 1996 to initiate
the evolution of traditional forwarder sales functions into highly automated,
team-focused, regional client service organizations. Through its inside and
outside members, CRT's focus on cross-selling to existing clients and bringing
new clients to the Company. Covering specified geographic zones, CRT's take
advantage of telemarketing techniques and information technology to contact
clients and develop service programs.
Competition and Business Conditions: The Company's principal businesses
are directly related to the volume of international trade, particularly trade
between the United States and foreign nations, which is influenced by many
factors. These influences include economic and political conditions in the
United States and abroad, major work stoppages, exchange controls, currency
fluctuations, wars and other armed conflicts and United States and foreign laws
relating to tariffs, trade restrictions, foreign investments and taxation. The
global logistics services industry is intensively competitive and expected to
remain so for the foreseeable future. The Company encounters competition from a
large number of firms. Much of this competition is from local or regional firms
which have only one or a small number of offices and do not offer the breadth of
services and integrated approach offered by the Company. However, some of the
competition is from major United States and foreign-owned firms which have
networks of offices and offer a wide variety of services. The Company believes
quality of service, including information systems capability, global network
capacity, reliability, responsiveness, expertise, convenience, scope of
operations, customized program design and implementation and price are important
competitive factors in its industry.
The Company encounters strong competition in each of its products,
including customs brokerage, air and ocean freight forwarding and warehouse and
distribution. The Company has customs brokerage offices in most major ports in
the United States, Canada, Europe and other selected foreign ports. Although the
Company competes with several large United States and foreign firms in virtually
all of the ports it is located, the principal competition is exerted by local
and regional firms.
As an ocean freight forwarder, the competition includes steamship
companies, large forwarders with multiple offices and local and regional
forwarders with one or a small number of offices. As an airfreight forwarder,
the competition is represented by other airfreight forwarders in the United
States and overseas. As a warehouse and distribution service provider, the
competition includes local, regional, national and international providers of
the same or similar services.
Regulation: As a customs broker operating in the United States, the
Company is licensed by the United States Department of the Treasury and
regulated by the United States Customs Service. The Company's fees as a customs
broker are not regulated. The Company's airfreight forwarding business is
subject to regulation, as an indirect air cargo carrier, under the Federal
Aviation Act by the Department of Transportation (DOT), the successor to the
Civil Aeronautics Board, although Part 296 of the DOT's Economic Aviation
Regulations exempts airfreight forwarders from most of the act's requirements.
In its ocean freight forwarding business, the Company is licensed as an ocean
freight forwarder by the Federal Maritime Commission (FMC). The FMC does not
regulate the Company's fees in any material respect. The Company's ocean freight
NVOCC business is subject to regulation, as an indirect ocean cargo carrier,
under the FMC tariff filing and surety bond requirements, and under the Shipping
Act of 1984, particularly those terms prescribing rebating practices. The
Company is regulated as a direct and as an indirect truck cargo carrier by the
National Transportation Safety Board (NTSB) previously the Interstate Commerce
Commission, by which the Company is licensed as both a
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common carrier and a property broker. For dispatch purposes, the Company also
holds an FCC Radio License. The Company's marine cargo insurance brokerage
business is licensed by the California Department of Insurance.
The Company's offshore operations are subject to similar regulation by the
regulatory authorities of the respective foreign jurisdictions. Some of the
Company's warehouse operations are licensed as container freight stations,
and/or cargo examination stations and/or Class III bonded warehouses with United
States Customs.
Trademarks: The Company holds registered trademarks in the United States
and numerous foreign countries for "Fritz Companies" and certain related names
and the Company's logo.
Employees: As of May 31, 1997, the Company had approximately 9,200
employees. The Company considers its relationship with its employees to be
satisfactory.
Management: The Company's executive officers are as follows:
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NAME AGE
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Lynn C. Fritz.................... 54 Chairman of the Board, Chief Executive Officer
Dennis L. Pelino................. 49 President and Chief Operating Officer
Robert Arovas.................... 54 Executive Vice President and Chief Financial Officer
Jan H. Raymond................... 48 Senior Vice President, Secretary and General Counsel
Ronald W. Womack................. 50 Vice President of Finance and Principal Accounting Officer
Janet Helvey..................... 45 Vice President -- Accounts Receivable
</TABLE>
Lynn C. Fritz became Chief Executive Officer of the Company in 1986 after
serving in numerous positions since joining the Company on a full-time basis in
1965. Mr. Fritz received his B.A. degree from Georgetown University and his J.D.
degree from Lincoln University School of Law. Mr. Fritz was honored with the
"Marketing Executive of the Year -- 1991" award by the National Account
Marketing Association.
Dennis L. Pelino joined the Company in 1986 as Director of Sales and
Marketing, became a Director of the Company in 1991 and was appointed Chief
Operating Officer in October of 1993. He was promoted to Executive Vice
President in May 1995 and President in August 1996. Since 1988, Mr. Pelino has
been responsible for the Company's international operations, as well as the
Company's transportation services as an indirect carrier and key warehousing and
distribution services. Mr. Pelino is also responsible for the Company's
independent agent network and national account marketing and sales programs.
Robert Arovas joined the Company in January 1997 as the Executive Vice
President and Chief Financial Officer. Prior to joining the Company, he was the
Senior Vice President and Chief Financial Officer of Burlington Air Express,
Inc. for the past nine years and was previously a Vice President of the Pittston
Company (the parent company of Burlington Air Express, Inc.). Mr. Arovas is a
graduate of Syracuse University with a B.S. degree in accounting.
Jan H. Raymond has been General Counsel of the Company since 1985,
Secretary since 1991 and Senior Vice President since 1993. Prior to joining the
Company, Mr. Raymond was an associate with the law firm of Brobeck, Phleger &
Harrison. Mr. Raymond, who is a licensed customs broker, holds a B.S. degree
from Cornell University with a J.D. degree from the University of California at
Berkeley's Boalt Hall School of Law.
Ronald W. Womack has been Vice President of Finance of the Company since
August 1996, and has served as Corporate Controller and Principal Accounting
Officer since May 1996. Previously, Mr. Womack served as Regional Controller and
Director of Treasury Services. Prior to rejoining the Company in 1995, he was
the Chief Financial Officer for HEAD Sports, Inc., a sporting equipment
distribution company. From August 1990 to October 1992 he was the Director of
Internal Audit with Sanifill, Inc., a landfill and waste management company.
Janet Helvey joined the Company in March, 1997 as the Vice President of
Accounts Receivable. Prior to joining the Company, she was the
Controller -- Accounts Receivable of Burlington Air Express, Inc.
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ITEM 2 -- PROPERTIES
As of May 31, 1997, the Company operated approximately 330 offices and
logistics centers worldwide, including its headquarters in San Francisco. The
Company also operated approximately 86 warehousing and distribution centers,
which range in size from approximately 1,000 square feet to approximately
595,000 square feet. The warehousing and distribution centers totaled
approximately 6.3 million square feet as of May 31, 1997 of which the Company
owns approximately 792,000 square feet and leases the balance. The leases for
the Company's principal properties generally have terms of three years or more
and often include options to renew. While some of the Company's leases are
month-to-month and others expire in the near term, the Company does not believe
the expiration of any of its leases will have a material adverse effect on its
operations. See Note 6 of Notes to Consolidated Financial Statements.
ITEM 3 -- LEGAL PROCEEDINGS
The Company is a party to routine litigation incident to its business,
primarily claims for goods lost or damaged in transit or improperly shipped.
Most of the lawsuits involving the Company as a defendant are covered by
insurance and are being defended by the Company's insurance carriers. The
Company has established reserves for customer claims which management believes
are adequate to cover litigation losses which may occur.
On July 31, 1996, a complaint was filed in the United States District Court
for the Northern District of California, against the Company and certain of its
directors and officers under the caption "Polk v. Lynn C. Fritz, John Johung,
Stephen M. Mattessich, Carsten S. Andersen and Fritz Companies, Inc." The
complaint, which purports to be brought on behalf of the class of purchasers of
the Company's stock between August 28, 1995 and July 23, 1996 alleges various
violations of federal securities laws in connection with prior disclosures made
by the Company and seeks unspecified damages. On July 31, 1996, a second
complaint containing substantially similar allegations was filed in the same
court under the caption "Weiss v. Lynn C. Fritz, John H. Johung, Stephen M.
Mattessich, Carsten S. Andersen and Fritz Companies, Inc." On August 13, 1996, a
third complaint containing substantially similar allegations was filed in the
same court under the caption "E.M. Lawrence Limited Frozen Retirement Trust
Dated September 1, 1992 v. Fritz Companies, Inc., Lynn C. Fritz, Carsten S.
Andersen, John H. Johung and Stephen M. Mattessich." The three class action
suits filed against the Company in state court were dismissed with prejudice by
the Superior Court of California for the County of San Francisco on grounds the
claims asserted the California Corporate Securities law and common law fraud
were not legally tenable. One of the cases dismissed is being appealed. On April
25, 1997, the three remaining complaints were consolidated into one consolidated
amended complaint which is pending.
The Company is unable to predict the ultimate outcome of the suits and it
is possible the outcome could have a significant adverse impact on the Company's
future consolidated results of operations. However, the Company believes the
ultimate outcome of these matters will not have a significant adverse impact on
the Company's consolidated financial position.
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
9
<PAGE> 10
PART II
ITEM 5 -- MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The Company's common stock is traded on the NASDAQ national market system
under the symbol FRTZ.
The following table sets forth the high and low sales price in the NASDAQ
national market system for the Company's common stock for the period from
January 1, 1994 to May 31, 1997.
<TABLE>
<CAPTION>
PRICE RANGE
----------------
HIGH LOW
------- -------
<S> <C> <C>
FISCAL PERIOD 1997
First Quarter.............................................. 35.250 11.875
Second Quarter............................................. 16.750 14.250
Third Quarter.............................................. 15.750 10.062
Fourth Quarter............................................. 10.875 8.000
FISCAL PERIOD 1996
First Quarter.............................................. 35.625 23.438
Second Quarter............................................. 43.000 35.000
Third Quarter.............................................. 42.750 32.000
Fourth Quarter............................................. 40.625 33.500
TRANSITION PERIOD 1995
First Quarter.............................................. 32.750 22.875
Two Months Ended May 31.................................... 32.750 25.625
FISCAL PERIOD 1994
First Quarter.............................................. 15.938 13.000
Second Quarter............................................. 15.750 14.125
Third Quarter.............................................. 17.750 15.250
Fourth Quarter............................................. 23.500 17.500
</TABLE>
There were approximately 640 stockholders of record as of May 31, 1997. No
cash dividends were paid to the stockholders during 1997. In October 1995, the
Company's Board of Directors declared a two-for-one stock split effected in the
form of a 100% stock dividend. The stock prices above have been adjusted to give
effect to the stock split.
The Company intends to retain its future earnings for use in its business
and, accordingly, anticipates no cash dividends will be paid to holders of
shares of common stock in the foreseeable future.
10
<PAGE> 11
ITEM 6 -- SELECTED FINANCIAL DATA(a)(e)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
TWELVE MONTHS
TWELVE MONTHS ENDED MAY 31, FIVE MONTHS ENDED DECEMBER 31,
------------------------------------- ENDED MAY 31, ----------------------
1997 1996 1995 1995 1994 1993
----------- ----------- ----------- ------------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenue........................ $ 1,156,770 $ 1,043,858 $ 870,903 $ 400,426 $773,389 $ 549,026
Net revenue.................... 509,371 457,568 366,487 165,682 332,583 243,042
Merger and related costs....... -- 14,555 -- 29,995 -- --
Income (loss) from
operations(b)................ 2,858 38,659 50,645 (12,368) 46,209 33,446
Net income (loss).............. 308 25,001 32,310 (8,319) 30,133 22,714
Net income (loss) per share
-- primary................... .01 .70 1.00 (.25) .96 .75
Net income (loss) per share
-- fully diluted............. .01 .70 .99 (.25) .94 .75
Total assets................... 723,516 733,462 576,698(c) 576,698 530,810 297,974
Long-term obligations, net of
current portion.............. 84,884 89,505 33,567(c) 33,567 33,048 2,220
Stockholders' equity........... 234,695 230,747 174,215(c) 174,215 177,917(d) 96,054
</TABLE>
- ---------------
(a) On May 30, 1995, the Company completed its merger with Intertrans, which was
accounted as a pooling of interests. Accordingly, the Company's financial
statements have been restated for all periods prior to the merger, to
include the results of operations, financial position and cash flows of
Intertrans. The May 31, 1995 period represents combined operating results
reported for Fritz Companies, Inc. and Intertrans Corporation (Intertrans)
for the twelve months ended March 31, 1995 and April 30, 1995, respectively.
In 1996, the Company recorded additional merger and related costs associated
with the merger with Intertrans of $14.6 million. In May 1995 the Company
recorded merger and related costs in connection with the merger with
Intertrans of approximately $30.0 million. For further discussion see Note 7
of Notes to Consolidated Financial Statements. Excluding these merger and
related costs, the income from operations for the five months ended May 31,
1995 would have been $17.6 million.
(b) The results in 1997 include a third quarter increase to the Allowance for
Doubtful Accounts of approximately $17 million due to less than satisfactory
collection performance.
(c) Amounts are as of May 31, 1995.
(d) In 1994 the Company received approximately $42.2 million of net proceeds
from a public offering of its common stock.
(e) See Management Discussion and Analysis of Financial Condition and Result of
Operations and Notes to Consolidated Financial Statements for further
discussion of the Company's financial condition and results of operations.
ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto.
General: For comparative purposes, the following table is provided for the
results of operations for the twelve months ended May 31, 1997, 1996, unaudited
1995 and the Transition Period compared to the respective comparable unaudited
prior period for 1994 (in thousands).
11
<PAGE> 12
<TABLE>
<CAPTION>
FIVE MONTHS ENDED
TWELVE MONTHS ENDED MAY 31, MAY 31,
--------------------------------------- -----------------------
1997 1996 1995(a) 1995 1994
---------- ---------- ----------- -------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue
Customs Brokerage........................ $ 152,257 $ 142,606 $ 123,653 $ 54,252 $ 39,864
Ocean Freight Forwarding................. 334,701 315,037 243,497 115,021 82,719
Airfreight Forwarding.................... 531,100 491,938 448,043 204,294 137,178
Warehouse and Distribution............... 138,712 94,277 55,710 26,679 13,703
---------- ---------- ----------- -------- -----------
Total Revenue............................ $1,156,770 $1,043,858 $ 870,903 $400,246 $ 273,464
========== ========== =========== ========= ===========
Net Revenue
Customs Brokerage........................ $ 152,257 $ 142,606 $ 123,653 $ 54,252 $ 39,864
Ocean Freight Forwarding................. 107,480 100,780 82,030 38,149 27,905
Airfreight Forwarding.................... 149,333 143,903 116,351 52,673 37,552
Warehouse and Distribution............... 100,301 70,279 44,453 20,608 10,642
---------- ---------- ----------- -------- -----------
Total Net Revenue........................ $ 509,371 $ 457,568 $ 366,487 $165,682 $ 115,963
========== ========== =========== ========= ===========
Operating Expenses......................... $ 506,513 $ 418,909 $ 315,842 $178,050 $ 103,933
---------- ---------- ----------- -------- -----------
Income (Loss) From Operations.............. $ 2,858 $ 38,659 $ 50,645 $(12,368) $ 12,030
---------- ---------- ----------- -------- -----------
Net Income (Loss).......................... $ 308 $ 25,001 $ 32,310 $ (8,319) $ 8,044
========== ========== =========== ========= ===========
</TABLE>
- ---------------
(a) Effective May 31, 1995, the Company changed its fiscal year-end of December
31 to a fiscal year-end of May 31. See Note 1 of Notes to Consolidated
Financial Statements for further discussion. The May 31, 1995 period
represents combined operating results reported for Fritz Companies, Inc. and
Intertrans Corporation (Intertrans) for the twelve months ended March 31,
1995 and April 30, 1995, respectively, accounted as a pooling of interests.
During the period 1995 through 1997, the Company's revenue increased 32.8%
to $1,156.8 million in 1997 from $870.9 million in 1995, and net revenue
increased by 39.0% to $509.4 million in 1997 from $366.5 million in 1995.
This growth principally resulted from the following: (i) expansion of the
Company's global network and its product line of services through internal
development and strategic acquisitions, and (ii) continued growth of the
Company's integrated logistics programs. The Company added a significant number
of multi-national corporations to its customer base and broadened the range of
services offered to its customers.
Effective May 31, 1995, the Company approved the change from a fiscal
year-end of December 31 to a fiscal year-end of May 31. The following discussion
is applicable to the Company's financial condition and results of operations for
the fiscal years ended May 31, 1997 and 1996, and the five months ended May 31,
1995 (the Transition Period). For discussion purposes, the fiscal year ended May
31, 1996 is compared to the unaudited fiscal year ended May 31, 1995; and the
Transition Period is compared to the unaudited period from January 1, 1994 to
May 31, 1994 (the Comparable Period). For further discussion see Notes to
Consolidated Financial Statements.
The Company completed its merger with Intertrans on May 30, 1995 which was
accounted as a pooling of interests. Accordingly, the Company's consolidated
financial statements have been restated for all periods prior to the merger, to
include the results of operations, financial position and cash flows of
Intertrans.
Results of Operations: The Company's principal services are customs
brokerage, international airfreight and ocean freight forwarding and warehousing
and distribution. Revenue for international ocean and airfreight forwarding and
surface transportation consolidation as an indirect carrier includes the
consolidation and transportation costs (e.g., ocean freight costs). Revenue for
customs brokerage, international ocean and airfreight forwarding and surface
transportation as an agent includes only the fees and commissions related to
such shipments.
12
<PAGE> 13
The Company believes its results of future operations could be adversely
affected by a number of factors, including:
(i) Continuing intense price competition in its traditional lines of
business,
(ii) Inability to implement the Company's program to improve operating
results and cash flow,
(iii) The requirement to make substantial investments in connection
with the Company's development of supply chain global management as a
product,
(iv) Substantially increased legal expenses and other costs in
connection with an ultimate resolution of securities litigation pending
against the Company, and
(v) Increased investment requirements associated with information
systems development and implementation of a worldwide information system.
FISCAL YEAR ENDED MAY 31, 1997 COMPARED TO FISCAL YEAR ENDED MAY 31, 1996
Certain prior year amounts have been reclassified to conform with the 1997
presentation.
Revenue: Revenue increased 10.8% to $1,156.8 million in 1997 from $1,043.9
million in 1996. All of the Company's principal service areas reported revenue
increases. Warehouse and Distribution revenue increased by $44.4 million, or
47.1%, from the prior year. Air and ocean transportation shipments provided
combined transportation revenue growth of $58.8 million, an increase of 7.3%
over the previous year. Customs brokerage revenues increased $9.7 million, or
6.8%, over the previous year. Revenue attributed to current year acquisitions
and the incremental revenue from prior year acquisitions was $76.4 million, or
67.7% of total revenue growth in 1997. The balance of the revenue growth,
totaling $36.5 million, was derived from additional volumes from existing
customers and new customers added during the year. Price competition in the
Company's traditional transportation and brokerage services remained intense all
year with resultant downward pressure on prices. During the year fuel surcharges
were placed on the Company's airfreight business as a result of increases in
fuel cost. To a great extent, these price increases levied by most carriers were
passed onto customers.
Net Revenue increased 11.3% to $509.4 million in 1997 from $457.6 million
in 1996. Warehouse and Distribution provided an increase of $30.0 million in net
revenue, a 42.7% gain over the prior year, as the Company continued to rapidly
expand its logistics and supply chain management businesses. In percentage
terms, this segment has been the fastest growing segment of the business.
Customs brokerage provided approximately $9.7 million growth in net revenue, up
6.8% versus last year. Existing customers and expansion of operations along the
USA and Canadian border accounted for much of the gain. Further growth in
customs brokerage was provided from operations in the United Kingdom. Air export
net revenue totaling $149.3 million increased by $5.4 million or 3.8%. This
modest increase reflects continued pressure on pricing with continuing increases
in transactions and tonnage. Ocean net revenues increased by $6.7 million, or
6.6% as the Company continued to see much faster growth in NVOCC revenues
compared with ocean freight forwarding revenues.
Operating Expenses for the year increased 20.9% to $506.5 million in 1997
from $418.9 million in 1996. This annual increase was affected substantially by
the third quarter increase of 45.2% primarily due to a $17 million increase in
allowance for doubtful accounts due to less than satisfactory collection
performance.
Salaries and related costs increased in 1997 by $53.3 million, a 21.4%
increase from the $249.2 million incurred during the prior year. The increase is
the result of growth in the number of full time equivalent employees caused by
acquisitions, new locations and expanding operations at existing locations. The
increase in salaries and related costs from additional personnel, representing
approximately a 13.6% increase in the number of employees, was partially
mitigated by a slight decrease in the average payroll cost per employee.
The increase in general and administrative expenses was primarily due to
expenditures to support the Company's expansion, including data processing
costs, communications and occupancy related costs which include warehouse
related expenses. The general and administrative expense increase, excluding the
$17
13
<PAGE> 14
million charge for doubtful accounts and salaries and related costs, was $17.3
million, representing a 10.2% increase.
Other Income (Expense) -- Net: Other expense was $2.4 million in 1997
compared to $.2 million for the prior period. The increase occurred primarily
from an increase in interest expense, which is a function of the increase in
short-term borrowings and long-term obligations. For further discussion of
borrowings and obligations see Note 3 of Notes to Consolidated Financial
Statements.
Income Taxes: Taxes on income for 1997 were $.2 million compared to $13.5
million for 1996. The effective tax rates for 1997 and 1996 were 35%. The
Company's effective tax rate may fluctuate due to changes in local tax rates and
regulations in the countries in which the Company operates and the level of
pre-tax profit earned in these countries.
FISCAL YEAR ENDED MAY 31, 1996 COMPARED TO THE UNAUDITED FISCAL YEAR ENDED MAY
31, 1995
Revenue: Revenue increased 19.9% to $1,043.9 million in 1996 from $870.9
million in 1995. All of the Company's principal service areas reported revenue
increases. The increase in revenue was primarily due to ocean freight, warehouse
and distribution and airfreight forwarding. The increase in ocean freight can be
attributed to expansion of NVOCC and ocean export activities in Europe and Asia.
The warehouse and distribution revenue increase reflects the Company's expansion
of domestic services from existing integrated logistics customers on inbound
shipments from Asia and Europe to the United States and strategic acquisitions.
The Company's expansion of its operations in Latin America, Europe and Asia
provided the increase in airfreight revenue.
Net Revenue increased 24.9% to $457.6 million in 1996 from $366.5 million
in 1995, reflecting increases in all of the Company's principal services. The
net revenue increase was primarily due to warehousing and distribution, customs
brokerage and ocean freight forwarding services. The warehouse and distribution
net revenue increase can be attributed to the Company's continued expansion of
domestic services from existing integrated logistics customers on inbound
shipments from Asia and Europe to the United States and strategic acquisitions.
The combined volume subsequent to the merger allowed the Company to negotiate
better rates with air carriers, which contributed to improved yield to
airfreight.
The increase in customs brokerage net revenue can be attributed to growth
in the Company's existing customer base, new clients and acquisitions. Expansion
of NVOCC and ocean export activities in Europe and Asia provided the ocean
freight forwarding net revenue increase, but was partially offset by higher
ocean carrier costs.
Operating Expenses: Operating expenses increased 32.6% to $418.9 million
in 1996 from $315.8 million in 1995. The increase includes additional merger and
related costs of approximately $14.6 million in 1996. Operating expenses,
excluding the merger and related costs in 1996 were 88.4% and 86.2% as a
percentage of net revenue in 1996 and 1995, respectively. Salaries and related
costs increased 24.3% as a result of an increase in the number of employees.
Salaries and related costs as a percentage of net revenue was comparable to the
prior period. See Note 7 of Notes to Consolidated Financial Statements for
further discussion. The increase in general and administrative expenses was
primarily due to expenditures to support the Company's expansion, including
product development, acquisitions, information systems development, supply chain
management development and warehouse related expenses.
Other Income (Expense) -- Net: Other expense was $.2 million compared to
$1.4 million of other expense for the prior period. The decrease was primarily
due to the result of higher net foreign exchange gains which was offset by an
increase in interest expense. Interest expense was higher due to the increase in
long-term obligations. For further discussion of long-term obligations see Note
3 of Notes to Consolidated Financial Statements.
Income Taxes: Taxes on income for 1996 were $13.5 million compared to
$16.9 million for 1995. The effective tax rates for 1996 and 1995 were 35% and
34.4%, respectively. The Company's effective tax rate may fluctuate due to
changes in local tax rates and regulations in the countries in which the Company
operates and the level of pre-tax profit earned in these countries.
14
<PAGE> 15
TRANSITION PERIOD ENDED MAY 31, 1995 COMPARED TO THE UNAUDITED FIVE MONTH PERIOD
ENDED MAY 31, 1994
Revenue and Net Revenue: Revenue increased 46.4% to $400.2 million in the
Transition Period from $273.5 million for the Comparable Period, and net revenue
increased 42.9% to $165.7 million in the Transition Period from $116.0 million
for the Comparable Period. All of the Company's principal service areas reported
revenue and net revenue increases, as the Company continued to focus on
integrated transportation logistics services for existing and new customers,
geographic expansion and strategic acquisitions. See Note 7 of Notes to
Consolidated Financial Statements for further discussion of the merger and
acquisitions.
The increases in revenue were mostly due to increases in airfreight of
$67.1 million and ocean freight forwarding of $32.3 million revenue, primarily
caused by the Company's continued expansion of its operations in Asia, Europe
and Latin America.
Operating Expenses: Salaries and related costs increased 36.8% to $93.1
million in the Transition Period from $68.1 million in the Comparable Period.
General and administrative expenses increased 53.2% to $55.0 million in the
Transition Period from $35.9 million in the Comparable Period. The increase in
salaries and related costs and general and administrative expenses was due
primarily to expenditures necessary to support the Company's expansion and new
business.
In connection with the merger with Intertrans, the Company recorded merger
and related costs of $30.0 million in May 1995. For additional discussion, see
Note 7 of Notes to Consolidated Financial Statements.
Income Before Tax Expense (Benefit): For the Transition Period, the
Company's pre-tax income, excluding merger and related costs, would have been
$17.6 million, compared to $12.1 million in the Comparable Period, or an
increase of 45.5%. As reported, by including merger and related costs of $30.0
million, the loss from operations is $(12.4) in the Transition Period compared
to $12.1 million pre-tax income in the Comparable Period.
Income Taxes: The Company recorded a tax benefit of $4.1 million (33.2%
rate) during the Transition Period due to the loss from operations. In the
Comparable Period, the Company had a tax expense of $4.1 million (33.7% rate) on
income before taxes.
Subsequent Event: On June 18, 1997, the Company entered into a term loan
facility agreement totaling $13,900 (converted from Singapore dollars) with
Standard Chartered Bank (the Bank) to finance its new logistics center in
Singapore. The loan matures five years from the date of the agreement, has eight
scheduled quarterly payments beginning thirty-nine months from the date of the
agreement, bears an interest rate equivalent to the Singapore Interbank Offer
Rate (SIBOR) plus 50 to 75 basis points depending on the amount borrowed, and is
collateralized by certain property owned by the Company. The proceeds from this
loan will be used principally to reduce short-term borrowings in connection with
the construction of the facility. The agreement includes a provision which
allows the Bank to accelerate the maturity of any balance then outstanding if
the Bank determines their position has been adversely affected by changes in the
Company's financial position or global economy.
Liquidity and Capital Resources: Cash and equivalents were $43.4 million
at May 31, 1997, representing a decrease from $86.5 million at May 31, 1996. The
cash decrease was primarily caused by a change in certain international
operations, whereby duty and taxes were paid on the last day of May 1997 rather
than the first day of the succeeding month as was done in the prior year.
The Company increased total borrowings and obligations by $18.1 million
during the year to partially fund acquisitions of businesses aggregating $24
million and capital spending, net of reductions resulting from the sale and
leaseback of certain facilities, aggregating $30.7 million. As a result of the
facilities transaction, the credit capacity under the revolving credit agreement
was reduced from $80.0 million to $60.0 million. At May 31, 1997, borrowings
under the Company's credit facility were $20.5 million and letters of credit
were $16.2 million. As of May 31, 1997, the Company's total available borrowing
capacity under the syndicated multicurrency credit facility was approximately
$23.3 million and management believes the facility will provide adequate
borrowing capacity through its remaining life.
15
<PAGE> 16
The Company's investing activities for May 31, 1997 fiscal year included
capital expenditures of approximately $42.5 million which includes expenditures
for computer and communication equipment, leasehold improvements and software.
In the fourth quarter, the Company sold and leased back certain of its North
American warehousing facilities. Net proceeds from the sale were approximately
$30.7 million and the gain on the transaction was minimal. The Company made cash
outlays of approximately $8.1 million related to acquisitions made during fiscal
1997. In addition, the Company paid approximately $16.0 million of additional
purchase price relating to recorded obligations and acquired entities achieving
specified net revenue and/or pre-tax income levels. At May 31, 1997 the
remaining maximum payments in connection with acquisitions providing a
contingent purchase price is approximately $14.1 million. There is no certainty
as to the ability of these businesses to achieve the profit levels required to
trigger these contingent payments. When payments are made, they are recorded as
goodwill.
The Company makes significant disbursements on behalf of its customers for
items such as customs duty. Billings to customers for these disbursements, which
can be several times the amount of revenue derived from these transactions, are
not recorded as revenue and expenses in the Company's income statement. These
obligations, which greatly exceed reported revenues, are recorded as amounts due
from customers and trade accounts payable.
Currency and Other Risk Factors: The nature of the Company's worldwide
operations involves different currencies. Thus, the Company is exposed to the
inherent risks of international currency markets and governmental intervention.
The Company seeks to compensate for currency exposures by accelerating
international payment among the Company's offices and agents.
In addition, the Company's ability to provide service to its customers is
highly dependent on good working relationships with a variety of entities such
as airlines, steamship carriers and governmental agencies. Accordingly, changes
in space allotments available from carriers, governmental deregulation efforts,
"modernization" of the regulations governing customs clearance, and/or changes
in the international trade and tariff environment could affect the Company's
business in unpredictable ways.
There are also risks and uncertainties associated with acquisitions, such
as the complexities of integrating systems and operations of the acquired
company.
Management believes the Company's business has not been adversely affected
by inflation and has generally been successful in passing cost increases to its
customers. However, pressures exerted from the competitive marketplace could
require future cost increases which could erode the Company's margin.
Additional risks and uncertainties include:
(i) The Company's ability to implement its program to improve
operating results and cash flow,
(ii) Dependence of the Company on growth in international trade and
worldwide economic conditions,
(iii) Dependence of the Company on the continued services of key
executives and managers,
(iv) Risks associated with the Company's acquisition strategy,
including:
(a) Diversion of management's attention to the assimilation of the
operations and personnel of acquired companies,
(b) Potential adverse short-term effects of acquisitions on the
Company's operating results, and
(c) Integration of financial reporting systems and acquired assets.
(v) The possible inability of the Company's information systems to
keep pace with the increasing complexity and growth of the Company's
business,
16
<PAGE> 17
(vi) The increasing level of investment required by the transition of
the Company from prior predominance of customs brokerage revenue to its
increasing emphasis on integrated logistics and providing a full range of
international transportation and supply chain management services,
(vii) Diversion of management focus and resources as a result of
pending litigation,
(viii) Other risks disclosed elsewhere in this Form 10-K or in the
Company's other filings with the Securities and Exchange Commission.
The risks and uncertainties described above could cause actual results to
differ materially from those set forth in or implied by forward-looking
statements contained in this Form 10-K. The description of risks and
uncertainties is intended to qualify such forward-looking statements and invoke
the "safe harbor" provided by the Private Securities Reform Litigation Act of
1995.
The Company is undertaking a comprehensive review of its pricing structure
of its various services and customer credit terms. As a result of the increases
in operating expenses, in particular salaries and related costs, the Company is
reviewing its expenses to improve the quality and efficiencies of the Company's
processes within the operating and supporting departments. Benefits from
expected changes are anticipated to occur in fiscal year 1998.
ITEM 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is set forth at the pages indicated
in Item 14(a) of this 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
The information required by this item is incorporated by reference from the
section entitled "Election of Directors" and "Section 16(a) Beneficial Ownership
Reporting Compliance" of the Proxy Statement for the Company's Annual Meeting of
Stockholders to be filed with the Securities and Exchange Commission (the "Proxy
Statement"). See also Item 1 above.
ITEM 11 -- EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from the
sections entitled "Compensation of Executive Officers," "Options Granted to
Executive Officers" and "Employment Agreements" of the Proxy Statement.
ITEM 12 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference from the
section entitled "Ownership of Management and Principal Stockholders" of the
Proxy Statement.
ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference from the
section entitled "Transactions with the Company" of the Proxy Statement.
17
<PAGE> 18
PART IV
ITEM 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
<TABLE>
<CAPTION>
PAGE
NO.
-----
<S> <C> <C>
(1) Consolidated Financial Statements of the Company:
Consolidated Balance Sheets...............................................
Consolidated Statements of Operations.....................................
Consolidated Statements of Cash Flows.....................................
Consolidated Statements of Stockholders' Equity...........................
Notes to Consolidated Financial Statements................................
Independent Auditors' Report..............................................
(2) Financial Statement Schedules:
Schedule II -- Valuation and Qualifying Accounts..........................
All other schedules are omitted because of the absence of conditions under
which they are required or because the required information is included in
the consolidated financial statements or notes thereto.
(3) Exhibits:
See attached Exhibit Index................................................
</TABLE>
(b) The Company did not file any reports on Form 8-K from March 1, 1997
through the date hereof in 1997.
18
<PAGE> 19
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.
Date: July 30, 1997
FRITZ COMPANIES, INC.
By /s/ LYNN C. FRITZ
------------------------------------
Lynn C. Fritz
Chairman of the Board
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 indicated on July 30, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- ----------------------------------------- --------------
<C> <S> <C>
/s/ LYNN C. FRITZ Chairman of the Board and Chief Executive July 30, 1997
- ----------------------------------- Officer (Principal Executive Officer)
Lynn C. Fritz
/s/ DENNIS L. PELINO President, Chief Operating Officer and July 30, 1997
- ----------------------------------- Director
Dennis L. Pelino
/s/ ROBERT AROVAS Executive Vice President and Chief July 30, 1997
- ----------------------------------- Financial Officer and Principal Financial
Robert Arovas Officer
/s/ RONALD W. WOMACK Vice President of Finance and Principal July 30, 1997
- ----------------------------------- Accounting Officer
Ronald W. Womack
/s/ JAMES E. GILLERAN Director July 30, 1997
- -----------------------------------
James E. Gilleran
/s/ PRESTON MARTIN Director July 30, 1997
- -----------------------------------
Preston Martin
</TABLE>
19
<PAGE> 20
FRITZ COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MAY 31,
---------------------
1997 1996
-------- --------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents................................................... $ 43,368 $ 86,461
Accounts receivable, net of allowance for doubtful accounts of $22,292
in 1997 ($6,401 in 1996)............................................. 414,550 397,747
Deferred income taxes.................................................. 10,519 7,368
Prepaid expenses and other current assets.............................. 27,978 28,368
-------- --------
Total current assets......................................... 496,415 519,944
-------- --------
PROPERTY AND EQUIPMENT -- NET.......................................... 100,879 111,399
INTANGIBLES, NET OF ACCUMULATED AMORTIZATION OF $16,204 IN 1997,
($11,963 IN 1996).................................................... 110,691 88,790
OTHER ASSETS........................................................... 15,531 13,329
-------- --------
TOTAL ASSETS................................................. $723,516 $733,462
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings and current portion of long-term obligations..... $ 37,200 $ 14,514
Accounts payable....................................................... 276,228 322,018
Accrued liabilities.................................................... 73,094 65,149
Income tax payable..................................................... 7,148 6,496
-------- --------
Total current liabilities.................................... 393,670 408,177
-------- --------
LONG-TERM OBLIGATIONS.................................................. 84,884 89,505
DEFERRED INCOME TAXES.................................................. 1,243 995
OTHER LIABILITIES...................................................... 9,024 4,038
-------- --------
TOTAL LIABILITIES............................................ 488,821 502,715
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock: par value $.01 per share; 60,000 shares authorized,
35,445 issued and outstanding in 1997, (34,898 shares in 1996)....... 354 349
Additional paid-in capital............................................. 124,424 118,485
Retained earnings...................................................... 112,895 112,587
Cumulative foreign currency translation adjustment..................... (2,978) (674)
-------- --------
Total stockholders' equity................................... 234,695 230,747
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................... $723,516 $733,462
======== ========
</TABLE>
See notes to consolidated financial statements.
F-1
<PAGE> 21
FRITZ COMPANIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED MAY 31, FIVE MONTHS TWELVE MONTHS
----------------------- ENDED MAY 31, ENDED DECEMBER 31,
1997 1996 1995 1994
---------- ---------- ------------- ------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
REVENUE.................................. $1,156,770 $1,043,858 $ 400,246 $773,389
FREIGHT CONSOLIDATION COSTS.............. 647,399 586,290 234,564 440,806
---------- ---------- -------- --------
NET REVENUE.............................. 509,371 457,568 165,682 332,583
---------- ---------- -------- --------
OPERATING EXPENSES:
Salaries and related costs............... 302,555 249,243 93,055 183,354
General and administrative............... 203,958 155,111 55,000 103,020
Merger and related costs................. -- 14,555 29,995 --
---------- ---------- -------- --------
Total operating expenses....... 506,513 418,909 178,050 286,374
---------- ---------- -------- --------
INCOME (LOSS) FROM OPERATIONS............ 2,858 38,659 (12,368) 46,209
OTHER EXPENSE............................ (2,384) (196) (89) (687)
---------- ---------- -------- --------
INCOME (LOSS) BEFORE TAX EXPENSE
(BENEFIT).............................. 474 38,463 (12,457) 45,522
INCOME TAX EXPENSE (BENEFIT)............. 166 13,462 (4,138) 15,389
---------- ---------- -------- --------
NET INCOME (LOSS)........................ $ 308 $ 25,001 $ (8,319) $ 30,133
========== ========== ======== ========
Net income (loss) per share -- primary... $ 0.01 $ 0.70 $ (0.25) $ 0.96
========== ========== ======== ========
Weighted average shares outstanding --
primary................................ 35,522 35,747 32,876 31,552
========== ========== ======== ========
Net income (loss) per share -- fully
diluted................................ $ 0.01 $ 0.70 $ (0.25) $ 0.94
========== ========== ======== ========
Weighted average shares
outstanding -- fully diluted........... 35,526 35,796 32,876 31,948
========== ========== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE> 22
FRITZ COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED MAY 31, FIVE MONTHS TWELVE MONTHS
---------------------- ENDED MAY 31, ENDED DECEMBER 31,
1997 1996 1995 1994
-------- -------- ------------- ------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................... $ 308 $ 25,001 $ (8,319) $ 30,133
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization....................... 24,600 20,162 6,545 12,514
Noncash merger costs................................ -- -- 14,681 --
Customer deposits refunded -- net................... -- (1,984) (202) (465)
Deferred income taxes............................... (5,005) (114) (8,299) 459
Other............................................... 740 899 957 (181)
Effect of changes in:
Receivables....................................... (15,314) (41,990) 604 (61,554)
Prepaid expenses and other current assets......... 391 4,183 2,802 (3,788)
Payables and accrued liabilities.................. (36,231) 13,924 12,125 39,748
Accrued merger and related costs.................. -- (10,019) 12,730 --
-------- -------- -------- --------
Net cash (used in) provided by operating
activities........................................ (30,511) 10,062 33,624 16,866
-------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................ (42,481) (42,569) (13,067) (42,103)
Investments in and advances to affiliates........... -- 886 351 (653)
Acquisitions, net of cash acquired.................. (24,110) (25,564) (2,998) 2,554
Disposal of fixed assets............................ 33,747 5,082 -- --
Other............................................... (1,093) (279) 706 3,056
-------- -------- -------- --------
Net cash used in investing activities............... (33,937) (62,444) (15,008) (37,146)
-------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in short-term borrowings............... 22,833 2,000 -- --
Proceeds from common stock issued................... -- -- -- 42,160
Long-term obligations issued........................ 8,016 81,911 1,363 18,500
Long-term obligations repaid........................ (11,513) (34,917) (3,332) (4,453)
Proceeds from exercise of stock options............. 5,161 17,359 3,027 6,159
Dividends paid...................................... -- -- (1,141) (2,252)
Repurchase of common stock.......................... -- -- (689) (688)
Employee stock purchases............................ 431 -- -- --
Other............................................... (1,269) 147 1,723 (1,460)
-------- -------- -------- --------
Net cash provided by financing activities........... 23,659 66,500 951 57,966
-------- -------- -------- --------
Foreign currency translation gain (loss)............ (2,304) (1,918) (9) 1,759
-------- -------- -------- --------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS......... (43,093) 12,200 19,558 39,445
ADJUSTMENT DUE TO CHANGE IN YEAR-END OF
INTERTRANS........................................ -- -- -- (3,797)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD......... 86,461 74,261 54,703 19,055
-------- -------- -------- --------
CASH AND EQUIVALENTS AT END OF PERIOD............... $ 43,368 $ 86,461 $ 74,261 $ 54,703
======== ======== ======== ========
OTHER CASH FLOW INFORMATION:
Income taxes paid................................... $ 8,185 $ 13,282 $ 5,760 $ 11,990
======== ======== ======== ========
Interest paid....................................... $ 8,622 $ 4,892 $ 766 $ 1,740
======== ======== ======== ========
Noncash investing and financing activities in
connection with acquisitions:
Liabilities assumed............................. $ 2,189 $ 36,600 $ 18,300 $ 80,966
======== ======== ======== ========
Common stock issued or subscribed............... $ 350 $ 3,150 $ 3,400 $ 3,000
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 23
FRITZ COMPANIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
ADDITIONAL COMMON TREASURY STOCK CURRENCY TOTAL
PAID-IN STOCK RETAINED ------------------ TRANSLATION STOCKHOLDERS'
SHARES AMOUNT CAPITAL SUBSCRIBED EARNINGS SHARES AMOUNT ADJUSTMENTS EQUITY
------- ------ ---------- ---------- -------- ------- -------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1993.................. 29,955 $ 299 $ 60,497 3,333 $67,431 15,300 $(35,000) $ (506) $ 96,054
Net income.............. 30,133 30,133
Foreign currency
translation
adjustment............ 1,759 1,759
Stock issued for
services performed.... 6 1 203 204
Common stock issued in
public offering....... 1,150 12 42,148 42,160
Common stock issued in
acquisition of
companies............. 219 2 6,333 6,335
Stock options
exercised............. 315 3 5,486 5,489
Repurchase of common
stock................. (18) (688) (688)
Common stock
subscribed............ (3,333) (3,333)
Restricted stock grants
and options........... 20 322 322
Dividends............... (2,252) (2,252)
Adjustment due to change
in year end of
Intertrans............ 1,719 1,719
Valuation reserve on
noncurrent marketable
equity securities..... 15 15
------ ----- -------- ------ -------- ------- -------- ------- --------
Balance, December 31,
1994.................. 31,647 317 114,301 -- 97,046 15,300 (35,000) 1,253 177,917
Net loss................ (8,319) (8,319)
Foreign currency
translation
adjustment............ (9) (9)
Stock issued for
services performed.... 1 29 29
Common stock issued in
acquisition of
companies............. 58 3,400 3,400
Stock options
exercised............. 147 2 3,025 3,027
Repurchase of common
stock................. (19) (689) (689)
Restricted stock grants
and options........... 24 0
Dividends............... (1,141) (1,141)
------ ----- -------- ------ -------- ------- -------- ------- --------
Balance, May 31, 1995... 31,858 319 120,066 0 87,586 15,300 (35,000) 1,244 174,215
Net income.............. 25,001 25,001
Foreign currency
translation
adjustment............ (1,918) (1,918)
Stock issued for
services performed.... 1 37 37
Common stock issued in
acquisition of
companies............. 81 1 3,149 3,150
Stock split............. 17,220 172 (172) 0
Stock options
exercised............. 950 10 17,349 17,359
Tax benefit from
exercise of stock
options............... 12,903 12,903
Retirement of treasury
stock................. (15,300) (153) (34,847) (15,300) 35,000 0
Restricted stock grants
and options........... 88 0
------ ----- -------- ------ -------- ------- -------- ------- --------
Balance, May 31, 1996... 34,898 349 118,485 0 112,587 0 0 (674) 230,747
Net income.............. 308 308
Foreign currency
translation
adjustment............ (2,304) (2,304)
Common stock issued in
acquisition of
companies............. 215 2 350 352
Stock options
exercised............. 292 3 5,158 5,161
Employee Stock Purchase
Plan.................. 40 431 431
------ ----- -------- ------ -------- ------- -------- ------- --------
Balance, May 31, 1997... 35,445 $ 354 $124,424 0 $112,895 0 $ 0 $ (2,978) $234,695
====== ===== ======== ====== ======== ======= ======== ======= ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 24
FRITZ COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The consolidated financial statements include the
accounts of Fritz Companies, Inc. (the Company) and all significant domestic and
international companies wherein the Company has more than a 50% equity ownership
or otherwise exercises control. The Company's interest in 20% to 50% owned
companies are carried on the equity method. All significant intercompany
balances and transactions have been eliminated in consolidation. Certain prior
year amounts have been reclassified to conform to the current year's financial
statement presentation.
The Company's consolidated financial statements reflect certain estimates
and assumptions which affect amounts reported and disclosed in these financial
statements and related notes in accordance with generally accepted accounting
principles. Actual results could differ from those estimates.
The Company changed its fiscal year-end of December 31 to a fiscal year-end
of May 31, beginning with the five-month period ended May 31, 1995 (herein
referenced as the "Transition Period").
Cash and Equivalents: Cash and equivalents include demand deposits and
short-term investments with original maturities of three months or less.
Property and Equipment: Property and equipment are stated at cost.
Depreciation and amortization are computed principally using the straight-line
method at rates based on the estimated useful lives of assets as follows: (not
in thousands)
<TABLE>
<S> <C>
Buildings 40 years
Furniture and equipment 5 - 10 years
Computer hardware and software 5 years
</TABLE>
Leasehold improvements are amortized over their estimated useful lives or
the terms of the related lease, whichever is shorter. Certain costs related to
internally developed software projects are capitalized and amortized over the
expected useful life on a straight-line basis not to exceed five years,
commencing when the asset is placed in service. Maintenance and repair
expenditures are charged to expense when incurred.
Intangibles: Intangibles, which include goodwill and covenants not to
compete, resulted from business acquisitions and are amortized on a
straight-line basis over estimated useful lives ranging from two years to forty
years. The Company annually reviews its long-lived assets, including goodwill,
to determine whether events and circumstances would revise estimates of asset
value or usefulness. Potential impairment is evaluated on the basis of whether
the asset is fully recoverable from projected, undiscounted net cash flows of
the related business unit, in accordance with Statement of Financial Accounting
Standards No. 121. Impairment would be recognized in operating results if a
permanent diminution in value were to occur.
Foreign Currency Translation Adjustment: Foreign assets and liabilities
have been translated at current exchange rates and related revenues and expenses
have been translated at average rates of exchange in effect during the year. The
impact of exchange rate changes is shown as "Cumulative Foreign Currency
Translation Adjustments" in stockholders' equity. Transaction gains and losses
from foreign exchange transactions are included in results of operations.
Off-Balance Sheet Risk and Concentration of Credit Risk: Financial
instruments which potentially subject the Company to concentrations of credit
risk are principally represented by temporary cash investments and accounts
receivable. The Company places its temporary cash investments with high credit
quality financial institutions or the U.S. Government and thereby limits its
risk of loss.
The Company's customer base is representative of a wide range of industries
and includes customers located throughout the world. The Company had no
significant concentrations of credit risk as of May 31,
F-5
<PAGE> 25
FRITZ COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1997 and 1996. See Notes 3 and 8 of Notes to Consolidated Financial Statements
for discussion of the Company's off-balance sheet risks.
Revenue Recognition: Revenues and expenses related to the transportation of
freight are recognized at the time the freight departs the terminal of origin.
This method approximates recognizing revenues and expenses when the shipment is
completed. Custom brokerage revenues are recognized upon completing documents
necessary for customs entry purposes. Warehouse and distribution revenue is
recognized upon execution of the service provided.
Revenue realized by the Company as an indirect carrier includes the direct
carrier's charges to the Company for transporting the shipment. Revenue realized
in other capacities includes only the commissions and fees charged for
applicable services rendered.
Net Revenue for air and ocean freight forwarding and the consolidation of
surface transportation as an indirect carrier is determined by deducting freight
consolidation and transportation costs from such revenue.
Net Income (Loss) Per Share: Net income per common share is computed by
dividing the net income by the weighted average number of common shares
outstanding and common stock equivalents. Common stock equivalents are a result
of outstanding stock options. For the five months ended May 31, 1995, net loss
per share was based on the weighted average number of common shares outstanding
(common stock equivalents of approximately 863 shares were excluded from the per
share calculation because their inclusion would be anti-dilutive).
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 Earnings Per Share (FAS No. 128). FAS
No. 128 specifies the computation, presentation and disclosure requirements for
earnings per share for entities with publicly held common stock or potential
common stock. FAS 128 simplifies the computation of earnings per share and is
required to be adopted by the Company in the year ended May 31, 1998. The
Company has not yet evaluated the effects of adopting this Statement.
Income Taxes: The Company uses the liability method. Under this method the
net deferred tax asset or liability is determined based on the tax effects of
the differences between book and tax basis of various balance sheet assets and
liabilities and gives current recognition to the effect of any change in tax
rates and laws.
Stock Options: In fiscal 1997, the Company adopted Statement of Financial
Accounting Standards No. 123, Accounting for Stock Based Compensation (FAS 123).
This statement establishes financial accounting and reporting standards for
stock-based employee compensation plans and allows entities to continue
measuring compensation costs for those plans using the intrinsic value based
method of accounting. The Company has elected to continue to account for its
stock compensation plans using the intrinsic method; therefore, no costs are
reflected in the consolidated statements of operations when stock options are
granted or exercised, except for options which were granted at 90% of fair value
at date of grant. The Company realizes an income tax benefit from the exercise
or early disposition of certain stock options. This benefit reduces current
income taxes payable and increases additional paid in capital. See Note 10 of
Notes to Consolidated Financial Statements.
F-6
<PAGE> 26
FRITZ COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
MAY 31,
---------------------
1997 1996
-------- --------
<S> <C> <C>
Land................................................... $ 1,162 $ 9,677
Building and leasehold improvements.................... 41,979 48,662
Furniture and equipment................................ 60,786 60,098
Computer hardware and software......................... 61,857 50,089
Software development in progress....................... 5,712 3,858
-------- --------
Total........................................ 171,496 172,384
Less accumulated depreciation and amortization......... (70,617) (60,985)
-------- --------
Total........................................ $100,879 $111,399
======== ========
</TABLE>
Depreciation and amortization of property and equipment amounted to $19,639
in 1997, $16,114 in 1996, $5,166 in the Transition Period and $9,967 in 1994.
Software development in progress includes internal and external costs incurred
to develop software which has not been completed as of balance sheet date.
During the years ended May 1997 and 1996, $2,339 and $885, respectively,
represented software development project costs completed and transferred to
"Computer hardware and software." The amortization expense for completed
projects was approximately $1,400; $1,200; $400 and $1,000 in 1997, 1996, the
Transition Period, and 1994, respectively.
In April 1997, the Company sold and leased back certain warehouse
facilities located in North America. Net proceeds from the sale were
approximately $30,700 and provided a minimal gain from the sale. The net
proceeds were used to reduce short-term borrowings. See Note 3 of Notes to
Consolidated Financial Statements for discussion of the Company's borrowings and
obligations.
F-7
<PAGE> 27
FRITZ COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. OBLIGATIONS AND BORROWINGS
Short-term borrowings and long-term obligations consist of the following:
<TABLE>
<CAPTION>
MAY 31,
---------------------
1997 1996
-------- --------
<S> <C> <C>
Short-term Borrowings.................................. $ 25,131 $ 2,000
======== ========
Long-term Obligations:
6.43% Senior Notes due on April 15, 2003............. $ 75,000 $ 75,000
Installment obligations related to acquisitions,
non-interest bearing, due 1996-2002 (less
unamortized discount, based on imputed interest
rates of 7% and 8.5% -- approximately $500 and
$1,100 in 1997 and 1996, respectively)............ 15,403 18,768
Term note payable due in installments through
2005, non-interest bearing...................... 2,379 2,761
Bank obligation, bearing interest at prime rate plus
1.5%, payable in monthly installments of $83
through November 1997 and March 1998.............. -- 1,145
Note payable from bank due in installments, bearing
interest rate at 6.5% through 2010................ 794 785
Other obligations.................................... $ 3,377 $ 3,560
-------- --------
Total long-term obligations....................... 96,953 102,019
Less current portion............................ (12,069) (12,514)
-------- --------
Net long-term obligations......................... $ 84,884 $ 89,505
======== ========
</TABLE>
At May 31, 1997, the Company's aggregate amounts of maturing long-term
obligations and borrowings for the years 1998 through 2002 were $12,100; $5,700;
$2,000; $600 and $600, respectively and $75,900 thereafter. The carrying value
of the Company's long-term obligations approximates their fair value.
The Company has a $60,000 unsecured multicurrency credit facility (the
Credit Facility) maturing December 1998. As of May 31, 1997, the balance
outstanding under the Credit Facility was $20,500 and the weighted average of
the floating interest rates as of that date were 6.5%. At May 31, 1997 and 1996,
the Company was contingently liable for letters of credit of $16,200 and
$34,000, respectively; thereby reducing the Company's borrowing capacity under
the Credit Facility.
In April 1997, the Company sold and leased back certain warehouse
facilities. Net proceeds from the sale were used to reduce the Credit Facility
balance. Concurrently, the Credit Facility was amended to adjust certain
financial covenants and the total amount of the Credit Facility was reduced from
$80,000 to $60,000.
The Company is required to comply with certain financial covenants
regarding leverage, fixed charge coverage and current ratios among other
covenants and restrictions, all of which include cross default provisions.
Information regarding the Company's bank lines is as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED MAY 31, FIVE MONTHS TWELVE MONTHS
----------------- ENDED MAY 31, ENDED DECEMBER 31,
1997 1996 1995 1994
------- ------- ------------- ------------------
<S> <C> <C> <C> <C>
Maximum amount outstanding during period..... $55,120 $60,000 $ 3,000 $ 30,250
Average amount outstanding during period..... $29,669 $23,282 $ 172 $ 10,314
Weighted average interest rate during
period..................................... 5.8% 6.1% 6.5% 5.6%
</TABLE>
F-8
<PAGE> 28
FRITZ COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. INCOME TAXES
The current and deferred components of income tax expense (benefit) are as
follows:
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED MAY 31, FIVE MONTHS TWELVE MONTHS
----------------- ENDED MAY 31, ENDED DECEMBER 31,
1997 1996 1995 1994
------- ------- ------------- ------------------
<S> <C> <C> <C> <C>
Current
Federal.................................... $(5,674) $ 3,442 $ 1,100 $ 8,628
State...................................... (338) 509 351 1,481
Foreign.................................... 11,183 9,625 2,710 4,821
------- ------- ------- -------
Total current...................... 5,171 13,576 4,161 14,930
------- ------- ------- -------
Deferred
Federal.................................... (5,446) 1,466 (7,387) (456)
State...................................... (363) 313 (1,049) 113
Foreign.................................... 804 (1,893) 137 802
------- ------- ------- -------
Total deferred..................... (5,005) (114) (8,299) 459
------- ------- ------- -------
Total........................................ $ 166 $13,462 $(4,138) $ 15,389
======= ======= ======= =======
</TABLE>
Sources of income (loss) before income taxes are as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED MAY 31, FIVE MONTHS TWELVE MONTHS
------------------ ENDED MAY 31, ENDED DECEMBER 31,
1997 1996 1995 1994
-------- ------- ------------- ------------------
<S> <C> <C> <C> <C>
Domestic.................................... $(33,768) $12,617 $ (20,341) $ 24,221
Foreign..................................... 34,242 25,846 7,884 21,301
------- ------- ------- -------
Total....................................... $ 474 $38,463 $ (12,457) $ 45,522
======= ======= ======= =======
</TABLE>
The following provides a reconciliation of the statutory federal income tax
rate and provision (benefit) to the effective income tax rate and provision
(benefit):
<TABLE>
<CAPTION>
TWELVE MONTHS
FIVE MONTHS ENDED
TWELVE MONTHS ENDED MAY 31 ENDED MAY 31, DECEMBER 31,
----------------------------------- ---------------- ---------------
1997 % 1996 % 1995 % 1994 %
------- ------- ------- ----- ------- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statutory federal income tax
expense (benefit).......... $(2,534) (534.6) $13,462 35.0 $(4,236) (34.0) $15,478 34.0
Increases (decreases)
resulted from:
Foreign taxes lower than
federal rate............ 3,241 683.8 (1,314) (3.4) (235) (1.9) (1,866) (4.2)
State taxes on income, net
of federal income tax
effect.................. 168 35.4 745 1.9 (979) (7.9) 1,048 2.3
Change in valuation
allowance............... -- -- (80) (.2) 570 4.6 223 .5
Other...................... (709) (149.6) 649 1.7 742 6.0 506 1.1
------- ------ ------- ---- ------- ----- ------- ----
Total........................ $ 166 35.0 $13,462 35.0 $(4,138) (33.2) $15,389 33.7
======= ====== ======= ==== ======= ===== ======= ====
</TABLE>
F-9
<PAGE> 29
FRITZ COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The significant components of net deferred income tax assets are as
follows:
<TABLE>
<CAPTION>
MAY 31,
------------------
1997 1996
------- ------
<S> <C> <C>
Deferred income tax assets:
Current:
Compensated absences.................................... $ 1,650 $1,849
Net operating loss carryforward......................... 919 --
Capital loss carryforward............................... 600 713
Allowance for doubtful accounts......................... 5,578 2,150
Elimination of duplicate information systems and
facilities........................................... 484 1,630
Other reserves and accruals............................. 1,888 1,739
------- ------
Subtotal................................................ 11,119 8,081
Less: valuation allowance................................. (600) (713)
------- ------
Total current deferred income tax assets........ 10,519 7,368
------- ------
Noncurrent:
Deferred compensation................................... 1,529 1,064
Other reserves and accruals............................. 2,299 663
------- ------
Subtotal........................................ 3,828 1,727
------- ------
Total deferred income tax assets................ 14,347 9,095
------- ------
Deferred income tax liabilities:
Depreciation and amortization........................... (1,243) (995)
------- ------
Net deferred income tax assets.......................... $13,104 $8,100
======= ======
</TABLE>
The valuation allowance for current deferred income tax assets as of May
31, 1997 and 1996 results from capital loss carryforwards. The Company has
evaluated the long-term deferred tax assets and determined no valuation
allowance is required as management believes it is more likely than not the
long-term deferred income tax assets will be realized in the future.
At May 31, 1997 and 1996, the Company's general practice has been to
reinvest the earnings of its foreign subsidiaries and to repatriate those
earnings when it proves advantageous to do so. Such earnings totaled $102,000
and taxes that would be paid on those earnings are approximately $16,000 at May
31, 1997.
NOTE 5. RELATED PARTY TRANSACTIONS
The Company leases office space from a major stockholder of the Company.
Rental expense applicable to these leases was $263; $758; $284 and $550 for the
years ended May 31, 1997 and 1996, the Transition Period and the year ended
December 31, 1994, respectively. No minimum future rental payments are
applicable under these leases as of May 31, 1997.
In connection with the Company's U.S. customs brokerage operations,
customers are required to obtain surety bonds. The Company places such customs
bonds with Intercargo Corporation (Intercargo) and other underwriters of customs
bonds. The Company's Chairman and Chief Executive Officer owns approximately
3.5% of the outstanding common stock of Intercargo. In 1997, 1996, the
Transition Period and 1994 the Company placed approximately $4,400; $2,800; $271
and $598, respectively, of insurance business with Intercargo and received
approximately $373; $251; $43 and $72, respectively, in insurance commissions
and fees from Intercargo. The Company believes the amounts paid and received are
substantially the same as the Company would have incurred and realized from
other third parties.
F-10
<PAGE> 30
FRITZ COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company paid premiums until 1992 on life insurance policies on the
Company's Chief Executive Officer, though the Company is not the beneficiary.
Such cumulative premium payments, which approximate surrender value, of $1,400
at May 31, 1997 and 1996, are included in other assets. The premiums will be
refunded by the beneficiary upon death of the insured or cancellation of the
policies, whichever comes first. The Company has no future obligation to pay
premiums on these policies.
NOTE 6. COMMITMENTS
The Company leases office and warehouse space and computer and other office
equipment from third parties, including certain operating leases financed by
special purpose entities, under operating leases expiring through 2007. Minimum
future rental payments by the Company as of May 31, 1997 are as follows:
<TABLE>
<CAPTION>
RENTAL SUBLEASE NET RENTAL
YEAR ENDING MAY 31, PAYMENTS INCOME PAYMENTS
------------------- -------- -------- -----------
<S> <C> <C> <C>
1998........................................ $ 34,377 $1,443 $ 32,934
1999........................................ 25,216 1,093 24,123
2000........................................ 19,526 433 19,093
2001........................................ 15,388 283 15,105
2002 and thereafter......................... 48,645 592 48,053
-------- ------ --------
Total............................. $143,152 $3,844 $ 139,308
======== ====== ========
</TABLE>
Net rental expense from these leases was as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED MAY 31, FIVE MONTHS TWELVE MONTHS
----------------- ENDED MAY 31, ENDED DECEMBER 31,
1997 1996 1995 1994
------- ------- ------------- ------------------
<S> <C> <C> <C> <C>
Gross rental expense.......... $42,834 $37,547 $11,548 $ 21,724
Less sublease rental income... (2,336) (1,630) (1,014) (1,567)
------- ------- ------- -------
Net rental expense............ $40,498 $35,917 $10,534 $ 20,157
======= ======= ======= =======
</TABLE>
NOTE 7. ACQUISITIONS
Purchases: In 1997, the Company acquired assets and the remaining
interests in several freight forwarding companies for an aggregate purchase
price of approximately $10,000 consisting of cash of $8,600 and payable
obligations of $1,400. Relative to total current year acquisitions, the Company
acquired current assets of approximately $2,300; fixed assets of approximately
$1,300 and assumed liabilities, which are primarily current in nature, of
approximately $2,200. Intangible assets of approximately $8,200 were recorded in
connection with those acquisitions which are amortized on a straight line basis.
The remainder was recorded to eliminate the Company's minority interest payable.
In 1996, the Company acquired 16 (not in thousands) freight
forwarding/customs brokers, and purchased interests in 13 (not in thousands)
companies for an aggregate purchase price of $37,100 consisting of cash of
approximately $27,100 and net obligations payable of approximately $10,000.
Relative to these acquisitions, the Company acquired current assets of
approximately $33,900, fixed assets of approximately $10,900; non-current assets
of approximately $4,700; current liabilities of approximately $31,700 and non-
current liabilities of approximately $4,900.
The Company entered into certain acquisition agreements which have
provisions regarding contingent future payments. As of May 31, 1997,
approximately $14,100 of such future contingent payments exist which have not
been recorded by the Company and are dependent upon full achievement of
specified net revenue or pretax income levels.
F-11
<PAGE> 31
FRITZ COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Intangible assets, including goodwill and covenants not to compete,
totaling approximately $24,600 and $24,200 were recorded in 1997 and 1996,
respectively, in connection with current and previous acquisitions. Cash
payments made during 1997 of $24,100 represent acquisitions made during the
year, net of cash received; payments to reduce acquisition debt payable; and
payments related to contingent purchase price. Amortization expense for
intangible assets was approximately $4,700; $4,000; $1,400 and $2,700 in 1997,
1996, the Transition Period, and 1994, respectively.
The purchase method of accounting was used for all acquisitions, except the
merger with Intertrans as discussed below. The operations of acquired companies
are reflected in the Company's consolidated financial statements from the
respective dates of acquisition.
Pooling of Interests: On May 30, 1995, the Company merged with Intertrans
Corporation (Intertrans), a provider of international air freight and ocean
freight forwarding, customs brokerage, and other consulting and transportation
services. The majority of Intertrans' business related to freight forwarding
from the United States to overseas destinations. In the merger, each outstanding
share of Intertrans common stock was converted to a right to receive .365 of a
share of the Company's common stock. This merger was accounted as a pooling of
interests. Accordingly, consolidated financial statements for periods prior to
the business combination have been restated to include the results of
operations, financial position and cash flows of Intertrans.
Results of operations for the separate companies and the combined amounts
presented in the accompanying consolidated financial statements are as follows:
<TABLE>
<CAPTION>
FIVE MONTHS
ENDED MAY 31, TWELVE MONTHS
------------------------ ENDED DECEMBER 31,
1995 1994
-------- 1994 ------------------
-----------
(UNAUDITED)
<S> <C> <C> <C>
Gross Revenue:
Fritz Companies, Inc............ $260,449 $ 166,297 $ 515,969
Intertrans Corporation.......... 139,797 192,658 452,156
Adjustments..................... -- (85,491) (194,736)
-------- -------- --------
Combined........................ $400,246 $ 273,464 $ 773,389
======== ======== ========
Net Revenue:
Fritz Companies, Inc............ $124,120 $ 80,551 $ 245,448
Intertrans Corporation.......... 41,562 107,167 257,420
Adjustments..................... -- (71,755) (170,285)
-------- -------- --------
Combined........................ $165,682 $ 115,963 $ 332,583
======== ======== ========
Net Income (Loss):
Fritz Companies, Inc............ $ (1,568) $ 4,027 $ 19,571
Intertrans Corporation.......... (6,751) 4,017 10,562
-------- -------- --------
Combined........................ $ (8,319) $ 8,044 $ 30,133
======== ======== ========
</TABLE>
Prior to the merger, the Company's fiscal year ended on December 31.
Intertrans' financial statements for the five months ended May 31, 1995 and
twelve months ended October 31, 1994 were combined with the Company's financial
statements for the five months ended May 31, 1995 and the twelve months ended
December 31, 1994.
F-12
<PAGE> 32
FRITZ COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
There were no significant transactions between the Company and Intertrans
prior to the merger which required elimination. To conform with accounting
policies of the Company, revenue and freight consolidation costs of Intertrans
were reduced so pass-through amounts paid as an agent for ocean freight, foreign
collect freight, customs duty, and other similar services were not included in
the Consolidated Statements of Operations.
Retained earnings, cash and cash equivalents and certain balance sheet
accounts were adjusted for the year ended December 31, 1994 to include
Intertrans' results of operations, financial position and cash flows for the two
months ended December 31, 1994. The Intertrans' activity for the two months
ended December 31, 1994 included:
<TABLE>
<S> <C>
Gross revenues..................................................... $50,000
Net revenues....................................................... 14,600
Net income before extraordinary items.............................. 1,700
Net income......................................................... 1,700
</TABLE>
In connection with this merger, the Company recorded merger and related
costs in May 1995, which included transaction costs of $3,300 and $26,700 of
various costs related to combining the operations. The transaction costs consist
of fees for investment bankers, attorneys, accountants, financial printing and
other related charges. Costs of combining the operations included elimination of
duplicate information systems and facilities (including cancellation of leases),
severance and outplacement of approximately .18 terminated employees, effect of
certain contractual obligations, and other costs related to the merger. At May
31, 1995, the balance remaining in accrued liabilities was approximately
$12,500.
In 1996, the Company recorded additional merger and related costs of
$14,600 associated with the Intertrans merger including approximately $2,800
representing additional severance payments as a result of the Company's decision
to eliminate approximately .2 additional employees at all levels in the Company.
As of May 31, 1997, the total severance has been paid. The merger and related
costs also included the elimination of duplicate facilities, integration of
information systems, cancellations of certain contractual obligations and the
write-off of certain pre-merger receivables. As of May 31, 1997 and 1996,
approximately $1,400 and $2,700, respectively, was included in accrued
liabilities for merger and related costs.
The number of shares of common stock issued by the Company in connection
with acquisitions are as follows:
<TABLE>
<S> <C>
1997............................................. 215 shares
1996............................................. 81 shares
Transition Period................................ 43 shares
1994............................................. 219 shares
</TABLE>
NOTE 8. CONTINGENCIES
The Company is party to routine litigation incident to its business,
primarily claims for goods lost or damaged in transit or improperly shipped.
Most of the lawsuits in which the Company is the defendant are covered by
insurance and are being defended by the Company's insurance carriers.
In 1996, a total of six complaints were filed (three in federal court and
three in state court of California) against the Company and certain of its
directors and officers, purporting to be brought on behalf of a class of
purchasers of the Company's stock between August 28, 1995 and July 23, 1996. The
complaints allege various violations of Federal Securities law and California
Corporate Securities law in connection with prior disclosures made by the
Company and seeks unspecified damages.
F-13
<PAGE> 33
FRITZ COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Three of the class action suits filed against the Company in state court
were dismissed with prejudice by the Superior Court of California for the County
of San Francisco on grounds the claims asserted the California Corporate
Securities law and common law fraud were not legally tenable. One of the cases
dismissed is being appealed. The three cases filed in federal court, now
consolidated to a single case, remain pending.
The Company is unable to predict the ultimate outcome of the suits and it
is possible the outcome could have a significant adverse impact on the Company's
future consolidated results of operations. However, the Company believes the
ultimate outcome of these matters will not have a significant adverse impact on
the Company's consolidated financial position.
NOTE 9. BUSINESS SEGMENT INFORMATION
The Company operates in the international freight forwarding industry,
which encompasses customs brokerage, airfreight and ocean freight forwarding,
and warehousing and distribution. No single customer accounted for 10 percent or
more of consolidated revenue.
Certain information regarding the Company's operations by geographic areas
is summarized below:
<TABLE>
<CAPTION>
OTHER
NORTH AMERICA FAR EAST EUROPE AREAS TOTAL WORLDWIDE
------------- -------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Revenues:
1997............................... $ 642,612 $300,395 $180,490 $ 33,273 $ 1,156,770
1996............................... 613,729 264,394 145,440 20,295 1,043,858
1995(a)............................ 269,744 63,405 60,270 6,827 400,246
1994............................... 527,699 140,411 95,750 9,529 773,389
Income (Loss) from Operations:
1997............................... $ (20,381) $ 16,131 $ 7,068 $ 40 $ 2,858
1996(b)............................ 15,922 11,489 8,621 2,627 38,659
1995(a), (b)....................... (18,905) 3,773 2,504 260 (12,368)
1994............................... 26,777 13,422 4,394 1,616 46,209
Identifiable Assets:
1997............................... $ 456,075 $123,576 $119,829 $ 24,036 $ 723,516
1996............................... 490,139 98,431 110,026 34,866 733,462
1995(a)............................ 427,713 63,256 58,749 26,980 576,698
1994............................... 410,459 54,764 22,314 43,273 530,810
</TABLE>
- ---------------
(a) As of and for the five months ended May 31, 1995.
(b) Includes approximately $14,600 and $30,000 in 1996 and 1995, respectively,
of merger and related costs as discussed in Note 7 of Notes to Consolidated
Financial Statements.
NOTE 10. COMMON STOCK
In October 1992, the Company established the 1992 Omnibus Equity Incentive
Plan ("1992 Plan"), pursuant to which an aggregate of 1,520 shares of common
stock was reserved for issuance to key employees of the Company. The 1992 Plan
was amended to increase the number of shares available for award by an
additional 1,520 and 1,500 shares of common stock in May 1994 and October 1996,
respectively. The 1992 Plan permits awards of non-qualified stock options and
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code, as well as stock appreciation rights, restricted stock, and
performance awards entitling the recipient to receive cash or common stock in
the future following attainment of performance goals determined by the committee
administering the 1992 Plan.
F-14
<PAGE> 34
FRITZ COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The majority of options granted under the Company's 1992 Plan are
exercisable one-third each on the day after the first, second and third
anniversary of the original grant. The majority of restricted stock vests 100%
on the day after the fifth or seventh anniversary of the original grant. Both
options and stock were granted at a price equal to fair market value on the
respective dates of grant except for 240 shares of options which were granted at
90% of fair market value at date of grant. Total stock-based compensation
expense of approximately $3,300; $917; $67 and $160 was recorded in 1997, 1996,
the Transition Period and 1994, respectively.
Each employee stock option assumed by the Company under the Intertrans
merger agreement will continue to have and be subject to, the same terms and
conditions set forth in the relevant Intertrans stock option plans. The
Intertrans plans required stock options granted to key employees be at a price
not less than the stock's fair market value on the respective dates of grant.
The majority of options granted are exercisable one-third after first
anniversary date of the grant, two-thirds after two years and are fully
exercisable three years from date of grant. No options have been granted under
this plan since the merger on May 30, 1995.
Effective February 1993, the Company adopted the Non-Employee Director
Restricted Stock Plan (Director Plan) with an aggregate of 50 shares of common
stock for issuance to outside directors as a portion of their annual
compensation, which vest six months from date of grant. Shares issued to outside
directors under the Director Plan were approximately 2.5 and none during 1997
and 1996, respectively. Separately, approximately 1.2 restricted shares were
granted in 1996 to non-employee directors under the 1992 Plan and vest three
years from date of grant.
The Company adopted FAS 123 and exercised the election to continue to apply
the provisions of APB 25 to its stock option plans. Accordingly, compensation
expense has only been recognized in the Consolidated Statements of Operations in
connection with the shares related to options granted at 90% of fair market
value on the respective dates of grant. Compensation expense was $161; $161;
$67; and $160 in 1997, 1996, the Transition Period and 1994, respectively. Had
compensation expense of the Company's stock-based compensation plans been
determined using the fair value based method described in FAS 123 in 1997 and
1996, the Company's pro forma net income and earnings per share would have been:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
-----------------
1997 1996
----- -------
<S> <C> <C>
Net Income (loss):
As reported............................................. $ 308 $25,001
Pro forma(1)............................................ $(192) $24,614
----- -------
Net income (loss) per share:
Primary and fully diluted
As reported.......................................... $ .01 $ .70
Pro forma(1)......................................... $(.01) $ .69
----- -------
</TABLE>
- ---------------
(1) The pro forma amounts noted above only reflect the effects of stock-based
compensation grants made in fiscal year 1997 and 1996. Because stock options
are granted each year and generally vest over three years, these pro forma
amounts may not reflect the full effect of applying the fair value method
established by FAS 123 if all outstanding stock option grants were evaluated
under this method. Accordingly, the disclosure is not likely to be
representative of the effects on pro forma net income or earnings per share
for future years.
F-15
<PAGE> 35
FRITZ COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The fair value of each option grant is estimated based on the date of grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions:
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED MAY 31,
---------------
1997 1996
----- -----
<S> <C> <C>
Expected volatility.......................................... 40.00% 40.00%
Risk-free interest rates for terms of:
2 years.................................................... 6.45% 5.84%
3 years.................................................... 6.60% 5.95%
4 years.................................................... 6.66% 6.01%
Dividend yield............................................... 0 0
Expected option life in years (not thousands)................ 1 1
</TABLE>
Stock option activity for 1997, 1996, Transition Period and 1994 was as
follows:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
MAY 31, FIVE MONTHS TWELVE MONTHS
------------------- ENDED MAY 31, ENDED DECEMBER 31,
1997 1996 1995 1994
------ ------ ------------- ------------------
<S> <C> <C> <C> <C>
Outstanding, beginning of period.... 2,135 1,680 1,654 1,437
Stock split......................... -- 1,119 -- --
Granted............................. 300 327 199 575
Canceled............................ (761) (64) (26) (43)
Exercised........................... (165) (927) (147) (315)
------ ------ ----- -----
Outstanding, end of period.......... 1,509 2,135 1,680 1,654
====== ====== ===== =====
Options exercisable................. 1,137 1,228
====== ======
Restricted stock activity:
Outstanding, beginning of period.... 320 56 32 12
Stock split......................... -- 55 -- --
Granted............................. 69 212 24 20
Canceled............................ (17) (3) -- --
------ ------ ----- -----
Outstanding, end of period.......... 372 320 56 32
====== ====== ===== =====
Restricted stock exercisable........ 67 3
====== ======
Weighted Average Exercise Price:
Outstanding, beginning of period.... $16.96 $14.04 $ 11.68 $ 9.98
Granted............................. 8.86 25.42 28.36 14.08
Canceled............................ 21.68 18.80 13.90 13.18
Exercised........................... 14.21 11.54 8.49 8.03
Outstanding, end of period.......... 13.25 16.96 14.04 11.68
Weighted average fair value of
options granted................... $ 3.17 $ 9.80
====== ======
</TABLE>
F-16
<PAGE> 36
FRITZ COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The relevant information regarding stock options outstanding at May 31,
1997:
<TABLE>
<CAPTION>
OPTIONS
OPTIONS OUTSTANDING EXERCISABLE
------------------------------------------------------ ------------------------------
NUMBER WEIGHTED AVERAGE NUMBER
RANGE OF OUTSTANDING REMAINING WEIGHTED AVERAGE EXERCISABLE WEIGHTED AVG.
EXERCISE PRICE MAY 31, 1997 CONTRACTUAL LIFE EXERCISE PRICE MAY 31, 1997 EXERCISE PRICE
- ---------------- ------------ ---------------- ---------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
$ 6.85 to 8.05 244 5.3 years $ 7.49 241 $ 7.48
8.12 to 11.88 312 9.3 years 8.67 43 10.40
12.04 to 13.50 420 6.6 years 12.04 420 12.04
13.63 to 15.00 282 6.8 years 14.78 271 14.78
15.07 to 26.38 112 7.4 years 20.24 60 18.84
28.63 to 36.12 139 7.8 years 28.64 102 28.65
----- -------
$ 6.85 to 36.12 1,509 7.1 years $13.25 1,137 $ 13.51
================ ===== ========= ====== ======= =======
</TABLE>
The number of shares available for issuance under the 1992 Plan as of May
31, 1997 was 1,800 shares.
On April 25, 1997, the Company conducted a discretionary repricing exchange
program for all options issued under the 1992 Omnibus Equity Incentive Plan,
other than those issued to certain senior officers. Options issued under
Intertrans stock option plans were not eligible for repricing. Under the terms
of the program, option holders could elect to exchange outstanding options for
half of that number of options at an option price equal to fair market value on
April 25, 1997. Fair market value as of that date was $8.13 per share. A total
of 482 previously issued options were exchanged for 241 new options issued in
connection with the program.
The Company initiated a three-year stock retention program whereby selected
managers and administrative personnel were awarded a total of 33 shares
effective September 1, 1996, at no cost to the employee. The employees receiving
the stock award would be entitled to additional annual stock grants in 1997 and
1998, provided they maintain employee status as of July 31, 1997 and 1998.
Under FAS 123 compensation expense is recognized at the fair value of the
employees' awards, which was estimated using the Black-Scholes option-pricing
model with the following assumptions: expected volatility -- 40%; weighted
average risk-free interest rate -- 5.60%; dividend yield -- zero; and purchase
term -- zero years from the vest date. The difference between the compensation
expense under FAS 123 and actual compensation expense recorded is included in
the calculation of the pro forma net income and earnings per share provided
above.
Effective July 1, 1996 the Company adopted an Employee Stock Purchase Plan
(ESPP). A maximum of 200 shares of common stock shall be available for issuance
pursuant to the ESPP. To be eligible to participate in the Plan an employee must
have completed one year of service and have been scheduled to work more than
twenty hours per week. Certain highly compensated employees may be excluded from
participation at the discretion of the Audit and Compensation Committee of the
Board of Directors.
The ESPP provides the stock price be the lower of 100% of market value on
the business day preceding the first day of the quarter in which the stock is
purchased or 90% of the average closing price on the pre-set, quarterly purchase
date. Approximately 8.2% of eligible employees have participated in the Plan
since its inception. During 1997 the Company sold 40 shares at a weighted
average issue price of $11.06.
Under FAS 123, compensation expense is recognized for the fair value of the
employees' purchase rights if the discount from market price is greater than 5%.
This was estimated using the Black-Scholes option-pricing model with the
following assumptions for 1997: expected volatility -- 40%; weighted average
risk-free interest rate -- 6%; dividend yield -- zero; and purchase term -- 3
months. The weighted average fair value of
F-17
<PAGE> 37
FRITZ COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
those purchase rights granted in 1997 was $88. This compensation cost has been
included in calculating the pro forma net income and earnings per share provided
above.
NOTE 11. TRANSITION PERIOD
During 1995, the Company changed its fiscal year-end from December 31 to
May 31, beginning with the five month period ended May 31, 1995. The results of
operations for the unaudited comparable five month period ended May 31, 1994
were:
<TABLE>
<S> <C>
Revenue $273,500
Net revenue 116,000
Income from operations 12,000
Income taxes 4,100
Net income 8,000
Net income per share $ 0.26
</TABLE>
Weighted average shares outstanding were 30,600 shares.
NOTE 12. RETIREMENT PLAN
The Company has a 401(k) retirement plan covering substantially all U.S.
employees. The Company has recorded matching contributions in the amount of
$594; $540; $218 and $449 in 1997, 1996, Transition Period and 1994,
respectively.
NOTE 13. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table sets forth selected quarterly financial data for the
twelve months ended May 31, 1997 and 1996:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------
AUGUST 31, NOVEMBER 30, FEBRUARY 28, MAY 31,
1996 1996 1997 1997
---------- ------------ ------------ --------
<S> <C> <C> <C> <C>
Revenue............................ $ 270,490 $306,464 $270,341 $309,475
Net revenue........................ 129,717 130,777 117,971 130,906
Income (loss) from operations...... 12,363 14,699 (24,728) 524
Net income (loss).................. 7,791 9,255 (16,831) 93
Net income (loss) per share --
primary.......................... .22 .26 (.48) --
Net income (loss) per share
-- fully diluted................. .22 .26 (.48) --
</TABLE>
F-18
<PAGE> 38
FRITZ COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------
AUGUST 31, NOVEMBER 30, FEBRUARY 29, MAY 31,
1995 1995 1996(A) 1996(B)
---------- ------------ ------------ --------
<S> <C> <C> <C> <C>
Revenue............................ $ 266,366 $276,102 $241,096 $260,294
Net revenue........................ 115,704 118,995 103,811 119,058
Income (loss) from operations...... 18,899 19,422 5,567 (5,229)
Net income (loss).................. 12,596 12,672 3,154 (3,421)
Net income (loss) per share --
primary.......................... 0.36 0.36 0.09 (.10)
Net income (loss) per share
-- fully diluted................. 0.36 0.36 0.09 (.10)
</TABLE>
- ---------------
(a) Revenue, net revenue, operating expenses and net income for the third
quarter of 1996 are presented net of adjustments to the previously reported
figures. The adjustments were to decrease revenue, net revenue and net
income by approximately $33,200; $14,900 and $7,100 , respectively. Included
in the adjustments were approximately $4,600 of additional merger and
related costs. See Note 7 of Notes to Consolidated Financial Statements for
additional discussion.
(b) The fourth quarter reflects additional charges relating to merger and
related costs for approximately $10,000. See Note 7 of Notes to Consolidated
Financial Statements for additional discussion.
NOTE 14. SUBSEQUENT EVENT
On June 18, 1997, the Company entered into a term loan facility agreement
totaling $13,900 (converted from Singapore dollars) with Standard Chartered Bank
(the Bank) to finance its new logistics center in Singapore. The loan matures
five years from the date of the agreement, has eight scheduled quarterly
payments beginning thirty-nine months from the date of the agreement, bears an
interest rate equivalent to the Singapore Interbank Offer Rate (SIBOR) plus 50
to 75 basis points depending on the amount borrowed, and is collateralized by
certain property owned by the Company. The proceeds from this loan will be used
principally to reduce short-term borrowings which were incurred in connection
with the construction of the facility. The agreement includes certain provisions
which allow the Bank to accelerate the maturity of any balance outstanding if
the Bank determines its position has been adversely affected by changes in the
Company's financial position or global economy.
F-19
<PAGE> 39
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Fritz Companies, Inc.:
We have audited the accompanying consolidated balance sheets of Fritz
Companies, Inc. and subsidiaries as of May 31, 1997 and May 31, 1996, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the years ended May 31, 1997 and 1996, the five months ended May 31,
1995 and the year ended December 31, 1994. In connection with our audits of the
consolidated financial statements, we also audited the related consolidated
Financial Statement Schedule II as of and for the years ended May 31, 1997 and
1996, the five months ended May 31, 1995 and the year ended December 31, 1994.
These consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Fritz
Companies, Inc. and subsidiaries as of May 31, 1997 and 1996, and the results of
their operations and their cash flows for the years ended May 31, 1997 and 1996,
the five months ended May 31, 1995 and the year ended December 31, 1994, in
conformity with generally accepted accounting principles. Also in our opinion,
the related financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
San Francisco, California
July 16, 1997
F-20
<PAGE> 40
FRITZ COMPANIES, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED MAY 31, 1997 AND 1996, THE FIVE MONTHS
ENDED MAY 31, 1995 AND FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
BALANCE NET WRITE-OFFS BALANCE AT
BEGINNING CHARGES CHARGED TO RESERVES END
OF PERIOD TO INCOME AND OTHER OF PERIOD
--------- --------- ------------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
For the Year Ended May 31, 1997
Allowance for doubtful accounts............ $ 6,401 $23,786 $(7,895) $ 22,292
====== ======= ======= =======
For the Year Ended May 31, 1996
Allowance for doubtful accounts............ $ 4,512 $ 5,583 $(3,694) $ 6,401
====== ======= ======= =======
For the Five Months Ended May 31, 1995
Allowance for doubtful accounts............ $ 3,674 $ 1,895 $(1,057) $ 4,512
====== ======= ======= =======
For the Year Ended December 31, 1994
Allowance for doubtful accounts............ $ 2,170 $ 2,210 $ (706) $ 3,674
====== ======= ======= =======
</TABLE>
F-21
<PAGE> 41
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
------- -----
<S> <C> <C>
2.1 Agreement and Plan of Reorganization entered by and among the Registrant,
Fritz Air Freight and Intertrans Corporation and Amendment No. 1 thereto
dated as of April 12, 1995. (Incorporated by reference to Exhibit 2.1 to
Form 8-K dated February 14, 1995 filed on or about February 21, 1995 and to
Appendix A to the Joint Proxy Statement/Prospectus filed on or about April
13, 1995, respectively.)....................................................
3.1 Registrant's Restated Certificate of Incorporation. (Incorporated by
reference to Exhibit 3.1 to Registration Statement No. 33-50808, filed on
August 17, 1992.)...........................................................
3.2 Registrant's Bylaws, as heretofore amended. (Incorporated by reference to
Exhibit 3.2 to Registration Statement No. 33-50808, filed on August 17,
1992.)......................................................................
3.2.1 Amendment to Article II, Section 1(b) of Registrant's By Laws. (Incorporated
by reference to Exhibit 3.2.1 to Registration Statement No. 33-50808, filed
on August 17, 1992.)........................................................
4.1 Specimen certificate of Registrant's Common Stock. (Incorporated by
reference to Exhibit 4.1 to Registration Statement No. 33-50808, filed on
August 17, 1992.)...........................................................
10.1 Multicurrency Credit Agreement among the Registrant, several financial
Institutions which are from time to time parties to this Agreement
(collectively, the "Banks"; individually, a "bank"), and Bank of America
National Trust and Savings Association, as letter of credit issuing bank,
swingline bank, and agent for the Banks dated as of December 15, 1995.
(Incorporated by reference to Exhibit 10.1 to Registrant's Form 10-Q for the
quarter ended February 29, 1996)............................................
10.1.1 First Amendment to First Amended and Restated Credit Agreement between
Registrant and Bank of America National Trust and Savings Association dated
as of September 23, 1994. (Incorporated by reference to Exhibit 10.1.1 to
Form 10-Q for the quarter ended September 30, 1994.)........................
10.1.2 Third Amendment to First Amended and Restated Credit Agreement between
Registrant and Bank of America National Trust and Savings Association dated
as of August 30, 1995. (Incorporated by reference to Exhibit 10.1.2 to Form
10-Q for the quarter ended August 31, 1995.)................................
10.1.3 Fourth Amendment to First Amended and Restated Credit Agreement between
Registrant and Bank of America National Trust and Savings Association dated
as of September 14, 1995. (Incorporated by reference to Exhibit 10.1.3 to
Form 10-Q for the quarter ended August 31, 1995.)...........................
10.1.4 Third Amendment to Multicurrency Credit Agreement between Registrant and
Bank of America National Trust and Savings Association dated as of February
28, 1997. (Incorporated by reference to Exhibit 10.1 to Form 10-Q for the
quarter ended February 28, 1997.)...........................................
10.2 Credit Agreement between Registrant and Bank of America National Trust and
Savings Association dated as of December 15, 1995. (Incorporated by
reference to Exhibit 10.1 to Registrant's Form 10-Q for the quarter ended
February 29, 1996)..........................................................
10.3 First Amendment to Credit Agreement between Registrant and Bank of America
National Trust and Savings Association dated as of February 28, 1996.
(Incorporated by reference to Exhibit 10.1 to Registrant's Form 10-Q for the
quarter ended February 29, 1996)............................................
10.4 Service Agreement dated February 25, 1992 between Federal Express
Corporation and the Registrant. (Incorporated by reference to Exhibit 10.4
to Registration Statement No. 33-50808, filed on August 17, 1992.)..........
10.5 Customs Brokerage Service Agreement dated February 28, 1992 between Federal
Express Corporation and the Registrant. (Incorporated by reference to
Exhibit 10.5 to Registration Statement No. 33-70674, filed October 22,
1993.)*.....................................................................
10.6 Subchapter S Termination Agreement between Registrant and Lynn C. Fritz.
(Incorporated by reference to Exhibit 10.6 to Registration Statement No.
33-50808, filed on August 17, 1992.)........................................
10.7 Form of Indemnification Agreement between Registrant and Lynn C. Fritz.
(Incorporated by reference to Exhibit 10.7 to Registration Statement No.
33-50808, filed on August 17, 1992.)........................................
</TABLE>
F-22
<PAGE> 42
<TABLE>
<CAPTION>
EXHIBIT PAGE
------- -----
<S> <C> <C>
10.8 Fritz Companies, Inc. Salary Investment and Retirement Plan, and amendments
thereto. (Incorporated by reference to Exhibit 10.8 to Registration
Statement No. 33-50808, filed on August 17, 1992.)*.........................
10.9 1992 Omnibus Equity Incentive Plan, as amended. (Incorporated by reference
to Exhibit 10.9 to Registration Statement No. 33-50808, filed on August 17,
1992).*.....................................................................
10.10 Contract of Sale between the Registrant and Sanjaylyn Company dated as of
March 1, 1985. (Incorporated by reference to Exhibit 10.10 to Registration
Statement No. 33-50808, filed on August 17, 1992.)..........................
10.11 Employment and Deferred Compensation Agreement between the Registrant and
Arthur J. Fritz, Sr. dated as of January 1, 1983, and amendment thereto
dated as of July 31, 1989. (Incorporated by reference to Exhibit 10.11 to
Registration Statement No. 33- 50808, filed on August 17, 1992.)............
10.12 Lease Agreement between the Registrant and Sanjaylyn Company, dated June 14,
1991, and Addendum to Lease Agreement dated December 1, 1991. (Incorporated
by reference to Exhibit 10.12 to Registration Statement No. 33-50808, filed
August 17, 1992.)...........................................................
10.13 Lease Agreement between the Registrant and Sanjaylyn Company, dated July 2,
1991. (Incorporated by reference to Exhibit 10.13 to Registration Statement
No. 33-50808, filed on August 17, 1992.)....................................
10.14 Memorandum Lease between Registrant and Sanjaylyn Company, effective April
1, 1979, and Addendum to Lease Agreement, dated February 14, 1990.
(Incorporated by reference to Exhibit 10.14 to Registration Statement No.
33-50808, filed on August 17, 1992.)........................................
10.15 Lease Agreement between Registrant and Sanjaylyn Company, dated February 22,
1991. (Incorporated by reference to Exhibit 10.15 to Registration Statement
No. 33-50808, filed on August 17, 1992.)....................................
10.16 Nonemployee Director Restricted Stock Plan. (Incorporated by reference to
Exhibit A to the definitive proxy materials of Registrant, filed on or about
April 10, 1993.)*...........................................................
10.17 Lease Agreement between Registrant and Lynn C. Fritz, dated September 1,
1993. (Incorporated by reference to Exhibit 10.17 to Registration Statement
No. 33-70674, filed on October 22, 1993.)...................................
10.18 Lease Agreement between Registrant and Lynn C. Fritz, dated October 4, 1993.
(Incorporated by reference to Exhibit 10.18 to Form 10-K for the year ended
December 31, 1993.).........................................................
10.19 Withdrawal Agreement between Arthur J. Fritz, Jr. and Sandra F. Davis, Lynn
C. Fritz and Sanjaylyn Company, dated March 31, 1993. (Incorporated by
reference to Exhibit 10.18 to Registration Statement No. 33-70674, filed on
October 22, 1993.)..........................................................
10.20 Customs Service Agreement dated February 28, 1994 between Federal Express
Corporation and the Registrant. (Incorporated by reference to Exhibit 10.20
to Form 10-K for the year ended December 31, 1993.).........................
10.21 Employment Agreement between Registrant and Dennis Pelino dated June 1,
1995. (Incorporated by reference to Exhibit 10.21 to Form 10-Q for the
quarter ended August 31, 1995.).............................................
10.22 Purchase Agreement between Registrant and Gestion J.L.G., Inc. dated as of
April 29, 1994. (Incorporated by reference to Exhibit 1.2 to Form 8-K dated
May 2, 1994 filed on or about May 16, 1994.)................................
10.23 Addendum to the purchase agreements between the Registrant and Gestion
J.L.G., Inc. dated as of April 26, 1994. (Incorporated by reference to
Exhibit 10.23 to Form 10-Q for the quarter ended September 30, 1994.).......
10.24 Note Purchase Agreement between the Registrant and various other parties
dated April 15, 1996 for $75,000,000 of 6.43% notes due April 15, 2003.
(Incorporated by reference to Exhibit 10.24 to Form 10-K for the year ended
May 31, 1996.)..............................................................
</TABLE>
F-23
<PAGE> 43
<TABLE>
<CAPTION>
EXHIBIT PAGE
------- -----
<S> <C> <C>
10.25 First Amendment dated as of July 3, 1996 among the Registrant, the several
financial institutions (collectively, the "Banks"; individually, a "Bank")
party to the Multicurrency Credit Agreement, dated as of December 15, 1995,
among the Registrant, the Banks, and BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as agent for the Banks. (Incorporated by reference to
Exhibit 10.25 to From 10-K for the year ended May 31, 1996.)................
10.26 Second Amendment Agreement, dated as of May 31, 1996 among the Registrant,
the several financial institutions (collectively, the "Banks"; individually,
a "Bank") party to the Multicurrency Credit Agreement, dated as of December
15, 1995, as amended, among the Registrant, the Banks, and BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, as agent for the Banks.
(Incorporated by reference to Exhibit 10.26 to Form 10-K for the year ended
May 31, 1996)...............................................................
10.27 Fritz Companies, Inc. Employee Stock Purchase Plan. (Incorporated by
Reference to Exhibit 10.26 to the Registration Statement on Form S-8 No.
33-07639) filed on July 3, 1996.............................................
10.28 Employment and Performance Based Retention Plan between the Registrant and
Dennis L. Pelino dated as of October 31, 1996. (Incorporated by reference to
Exhibit 10.28 to Form 10-Q for the quarter ended November 30, 1996.)**......
10.29 Employment between the Registrant and Ronald W. Womack dated as of October
2, 1996. (Incorporated by reference to Exhibit 10.29 to Form 10-Q for the
quarter ended November 30, 1996.)...........................................
10.30 Term Loan Facility agreement dated June 18, 1997 between Standard Chartered
Bank and the Registrant totaling $13.9 million (denominated in Singapore
dollars), maturity is five years from date of agreement, payments are
scheduled quarterly beginning thirty-nine months from the date of the
agreement, interest rate equivalent to the Singapore Interbank Offer Rate
(SIBOR) plus 50 to 70 basis points depending on the amount borrowed, and is
collateralized by certain property owned by the Company.....................
11.1 Statement regarding computation of per share earnings.......................
22.1 Subsidiaries of the Registrant..............................................
23.1 Consent of KPMG Peat Marwick LLP on Form S-8 Registration Statement No.
33-57238, 33-78472, 33-93070, 333-15921 and 333-07639, and on Form S-4
Registration Statement No. 33-70674.........................................
27 Financial Data Schedule.....................................................
</TABLE>
- ---------------
* Indicates, as required by Item 14(a)(3), a management contract of
compensatory plan required to be filed as an exhibit to this Form 10-K.
** Confidential Treatment is being requested for portions of this Exhibit.
F-24
<PAGE> 1
EXHIBIT 10.30
DATED THIS 18th DAY OF JUNE 1997
BETWEEN
FRITZ LOGISTICS (S) PTE LTD
AND
STANDARD CHARTERED BANK, SINGAPORE BRANCH
===================================
LOAN AGREEMENT
RELATING TO
S$19,500,000 TERM LOAN FACILITY
===================================
<PAGE> 2
RAJAH & TANN
SINGAPORE
<PAGE> 3
C O N T E N T S
<TABLE>
<CAPTION>
CLAUSE HEADING PAGE
<S> <C> <C>
1. INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. THE FACILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . 8
4. DRAWINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5. INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6. REPAYMENT, PREPAYMENT AND CANCELLATION . . . . . . . . . . . . . . . 13
7. MARKET DISRUPTION . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8. CHANGE OF LAW OR CIRCUMSTANCES . . . . . . . . . . . . . . . . . . . 15
9. TAXES AND OTHER DEDUCTIONS . . . . . . . . . . . . . . . . . . . . . 16
10. FEES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . 17
11. ADVERSE MARKET CHANGE . . . . . . . . . . . . . . . . . . . . . . . . 18
12. PAYMENTS AND EVIDENCE OF DEBT . . . . . . . . . . . . . . . . . . . . 18
13. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . 19
14. UNDERTAKINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
15. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . 29
16. DEFAULT INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . 32
17. INDEMNITIES AND SET-OFF . . . . . . . . . . . . . . . . . . . . . . . 32
18. AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
19. WAIVER AND SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . 33
20. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
21. ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
22. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
23. GOVERNING LAW AND JURISDICTION . . . . . . . . . . . . . . . . . . . 36
SCHEDULE 1 FORM OF NOTICE OF DRAWING . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
<PAGE> 4
THIS AGREEMENT is made on the 18th day of June 1997
BETWEEN :-
(1) FRITZ LOGISTICS (S) PTE LTD, a company incorporated under the
laws of the Republic of Singapore with its registered office at
6 Changi South Lane Singapore 486400 as borrower ("THE
BORROWER"); and
(2) STANDARD CHARTERED BANK, a corporation established in England by
Royal Charter and having a place of business in Singapore at No.
6, Battery Road, Singapore 049908, as lender ("THE LENDER").
IT IS HEREBY AGREED as follows :-
1. INTERPRETATION
1.1 Definitions. In this Agreement, unless the context requires
otherwise :-
"ADVANCE" means the principal amount advanced to the Borrower on the occasion
of each Drawing;
"ASSIGNMENT OF PROPERTY" means the Deed of Assignment in the agreed form
executed or to be executed by the Borrower in respect of all the estate rights
title and interests of the Borrower in under or arising out of the Building
Agreement and in the Property and includes any amendments and variations
thereto or any further deed of assignment or any deed executed in substitution
for or in addition to the Assignment of Property;
"AVAILABILITY PERIOD" means the period commencing on the date of this Agreement
and ending on the earlier of (i) the date one (1) year after the date of this
Agreement; and (ii) the date on which the Facility is fully drawn, cancelled or
terminated under the provisions of this Agreement;
<PAGE> 5
- 2 -
"BANKING DAY" means a day (excluding Saturday and Sunday) on which banks are
open for business in Singapore;
"BUILDING AGREEMENT" means the Building Agreement dated 23 August 1996 and made
between the Lessor of the one part and the Borrower of the other part in which
the Lessor has agreed to grant to the Borrower a licence in relation to the
Property for a term of two (2) years from 1 January 1995 and thereafter, a
lease of the Property for a term of thirty (30) years from 1 January 1995 on
the terms and conditions contained therein and includes any amendments and
variations thereto or any further or supplemental agreement or deed executed in
substitution for or in addition to the Building Agreement;
"CHARGE" means :-
(a) any mortgage, charge, pledge, lien, encumbrance, hypothecation or
other security interest or security arrangement of any kind;
(b) any arrangement whereby any rights of one party are subordinated
to any rights of any third party;
(c) any contractual right of set-off; and
(d) any title retention, sale and leaseback and sale and repurchase
other than those created in the ordinary course of business;
"COST OF FUNDS" means in relation to any relevant sum and any relevant period
the costs incurred or to be incurred by the Lender in making available sums
under the Facility to the Borrower, expressed either as the Swap Rate or SIBOR
together with statutory reserve costs (as determined by the Lender) at the
Borrower's option;
"DRAWING" means a drawing under the Facility pursuant to Clause 4;
"EVENT OF DEFAULT" means any event or circumstance specified as such in Clause
15; and "PROSPECTIVE EVENT OF DEFAULT" means any event or circumstance which
with the giving of notice and/or the passage of time would be an Event of
Default, and which event or circumstance is not remedied by the Borrower to the
Lender's satisfaction by the end of each Fiscal Quarter;
"FACILITY" means the term loan facility of up to S$19,500,000 to be made
available under this Agreement;
<PAGE> 6
- 3 -
"FISCAL QUARTER" means each three (3) month period in a financial year of the
Borrower, the first such period beginning at the commencement of the financial
year of the Borrower;
"FRITZ GROUP OF COMPANIES" means Fritz Companies Inc. and its subsidiaries;
"GUARANTEE" means the guarantee in the agreed form executed or to be executed
by the Guarantor to secure the obligations of the Borrower under this Agreement
and includes any amendments and variations thereto or any further deed of
guarantee or any deed executed in substitution for or in addition to the
Guarantee;
"GUARANTOR" means Fritz Companies, Inc, a company incorporated under the laws
of the State of Delaware, United States of America, with its registered office
at 706, Mission Street, Suite 600, San Francisco, CA 94103;
"INSURANCES" means the insurances to be effected in accordance with Clause
14.1.8;
"INTEREST PAYMENT DATE" means the last day of an Interest Period;
"INTEREST PERIOD" means an interest period ascertained in accordance with
Clause 5;
"LEASE" means the lease for a term of thirty (30) years from the 1st January
1995 granted or to be granted by the Lessor to the Borrower pursuant to the
terms and conditions of the Building Agreement and includes any amendments and
variations and any supplemental lease thereto;
"LESSOR" means Jurong Town Corporation;
"LOAN" means the aggregate principal amount drawn and for the time being
outstanding under the Facility;
"MATURITY DATE" means the date five (5) years from the date of this Agreement;
"MARGIN" in relation to each Interest Period means :-
(a) where the total of the Loan(s) is an aggregate of S$15,000,000
or more and the Guarantor's Cash Flow Leverage Ratio (as defined
in the Multicurrency Agreement) is equal to or greater than 2.0,
three quarters of one percent (0.75%);
(b) where the total of the Loan(s) is an aggregate of S$15,000,000
or more and the Guarantor's Cash Flow Leverage Ratio is less
than 2.0, six tenths of one percent (0.60%) ;
<PAGE> 7
- 4 -
(c) where the total of the Loan(s) is less than an aggregate of
S$15,000,000 and the Guarantor's Cash Flow Leverage Ratio is
equal to or greater than 2.0, six tenths of one percent (0.60%);
and
(d) where the total of the Loan(s) is less than an aggregate of
S$15,000,000 and the Guarantor's Cash Flow Leverage Ratio is
less than 2.0, one half of one percent (0.50%);
"MORTGAGE" means the mortgage in the agreed form executed or to be executed by
the Borrower in respect of the Property pursuant to the Assignment of Property
and includes any amendments and variations thereto or any further mortgage or
any mortgage executed in substitution for or in addition to the Mortgage;
"MULTICURRENCY AGREEMENT" means the Multicurrency Credit Agreement dated 15
December 1995 made between the Guarantor, Bank of America National Trust &
Savings Association as agent and the other financial institutions party thereto
and includes any amendments and variations thereto;
"NOTICE OF DRAWING" means a notice in or in substantially the form set out in
Schedule 2;
"PROPERTY" means the property known as Private Lot A11920 and comprised in Lot
403 and part of Lots 401, 402, 404, 405, 406, 393, 394, 395, 396 and 7895 of
Mukim 27 more particularly described in the First Schedule of and delineated
on the plan annexed to the Building Agreement together with the building and
all other appurtenances erected or to be erected thereon (excluding the
automated storage and retrieval system to be acquired by the Borrower on
hire-purchase) known as 6 Changi South Lane, Singapore 486400;
"REFERENCE BANKS" means the principal offices of Bank of America and Citibank
NA or any substitute reference bank(s) appointed by the Lender and agreed by
the Borrower;
"REPAYMENT DATE" means the date(s) on which the Loan is to be repaid in
accordance with Clause 6;
"SECURITY DOCUMENTS" means the Guarantee, the Mortgage, the Assignment of
Property and any other document executed from time to time by whatever person
as a further guarantee of or security for the Borrower's obligations hereunder;
"SECURITY PARTY" means the Guarantor, and where the context permits, any person
other than the Borrower which has provided or subsequently provides a guarantee
of or security for the Borrower's obligations under this Agreement;
<PAGE> 8
- 5 -
"SIBOR" means, in relation to any relevant sum and any relevant period, the
rate determined by the Lender to be :-
(a) the rate shown on the Telerate Monitor Screen as being the rate
per annum at which Singapore Dollar deposits are offered for a
period equal or comparable to such period at or about 11:00 a.m.
(Singapore time) on the second Banking Day before the first day
of such period; for this purpose "Telerate Monitor Screen" means
the display designated as page "7310" on the Telerate Monitor
system or such other page as may replace page "7310" on that
system for the purpose of displaying offered rates for Singapore
Dollar deposits; or
(b) if at or about such time on any relevant day no such rate
appears on the Telerate Monitor Screen, the rate determined by
the Lender to be the arithmetic mean (rounded up if necessary to
the nearest integral multiple of 1/16%) of the respective rates
notified to the Lender by each Reference Bank as being the rate
per annum at which Singapore Dollar deposits in an amount
comparable to such sum are offered to that Reference Bank for
such period by prime banks in the Singapore interbank market at
or about 11:00 a.m. (Singapore time) on the second Banking Day
before the first day of such period provided that if any
Reference Bank does not notify such a rate to the Lender for any
relevant period SIBOR for such period shall be determined on the
basis of the rates notified by the other Reference Banks;
"SINGAPORE DOLLARS" and the sign "S$" mean the lawful currency for the time
being of Singapore;
"SUBSIDIARY" in relation to any company mean any other company or other entity
directly or indirectly under the control of the first-mentioned company, for
this purpose "control" means ownership of more than fifty per cent (50%) of the
voting share capital or equivalent right of ownership of such company or
entity, or power to direct its policies and management whether by contract or
otherwise;
"SWAP RATE" means, in relation to an Advance or overdue sum, the rate per annum
(expressed as a percentage) determined by the Lender to be equal to Y (which
shall be calculated to the nearest four decimal places) calculated in
accordance with the following formula :-
Y = (R x 365) + (F x 36500) + (F x R x 365)
360 S N S 360
where :-
<PAGE> 9
- 6 -
F = the premium (being a positive number) or the
discount (being a negative number), as the case
may be, which would have been received or paid by
the Lender in offering to sell US Dollars forward
in exchange for Singapore Dollars on the last day
of the term of such Advance or, as the case may
be, the last day of such Interest Period relating
to such overdue sum in the Singapore inter-bank
market at or about 11:00 a.m. (Singapore time) on
the second (2nd) Banking Day before the first
(1st) day of the term of such Advance or, as the
case may be, the first (1st) day of such Interest
Period relating to such overdue sum;
S = the exchange rate at which the Lender sells US
Dollars spot in exchange for Singapore Dollars in
the Singapore foreign exchange market as quoted
by the Lender at or about 11:00 a.m. (Singapore
time) on the second (2nd) Banking Day before the
first (1st) day of the term of such Advance or,
as the case may be, the first (1st) day of such
Interest Period relating to such overdue sum;
R = the rate at which the Lender is offering US
Dollar deposits for the term of such Advance or,
as the case may be, such Interest Period relating
to such overdue sum in an amount comparable to
the US Dollar equivalent of such Advance or, as
the case may be, such overdue sum (such US Dollar
equivalent to be determined by that Reference
Bank at such rate or rates as that Reference Bank
determines to be most appropriate) to prime banks
in the Singapore inter-bank market at or about
11:00 a.m. (Singapore time) on the second (2nd)
Banking Day before the first (1st) day of the
term of such Advance or, as the case may be, the
first (1st) day of such Interest Period relating
to such overdue sum; and
N = the actual number of days in the term of such
Advance or, as the case may be, such Interest
Period relating to such overdue sum.
"UNITED STATES DOLLARS" and the sign "US$" mean the lawful currency for the
time being of the United States of America;
1.2 Construction. In this Agreement, unless the context requires
otherwise, any reference to :-
<PAGE> 10
- 7 -
an "AUTHORISATION" includes any approvals, consents, licences, permits,
franchises, permissions, registrations, resolutions, directions, declarations
and exemptions;
"INDEBTEDNESS" includes any obligation of any person for the payment or
repayment of money, whether present or future, actual or contingent, including
but not limited to, any such obligation :-
(a) under or in respect of any acceptance, bill, bond, debenture,
note or similar instrument;
(b) under or in respect of any guarantee, indemnity,
counter-security or other assurance against financial loss;
(c) in respect of the purchase, or capital lease of any asset or
service, other than in respect of the automated storage and
retrieval system to be acquired by the Borrower on
hire-purchase; or
(d) in respect of any indebtedness of any other person whether or
not secured by or benefiting from a Charge on any property or
asset of such person;
"LAW" and/or "REGULATION" includes any constitutional provisions, treaties,
conventions, statutes, acts, laws, decrees, ordinances, subsidiary and
subordinate legislation, orders, rules and regulations having the force of law
and rules of civil and common law and equity;
an "ORDER" includes any judgment, injunction, decree, determination or award of
any court, arbitration or administrative tribunal;
a "PERSON" includes any individual, company, body corporate or unincorporate or
other juridical person, partnership, firm, joint venture or trust or any
federation, state or subdivision thereof or any government or agency thereof;
and
"TAX" includes any tax, levy, duty, charge, impost, fee, deduction or
withholding of any nature now or hereafter imposed, levied, collected, withheld
or assessed by any taxing or other authority and includes any interest, penalty
or other charge payable or claimed in respect thereof and "TAXATION" shall be
construed accordingly.
1.3 Successors and Assigns. The expressions "BORROWER" and "LENDER"
shall, where the context permits, include their respective successors and
permitted assigns and any persons deriving title under them.
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1.4 Miscellaneous. In this Agreement, unless the context requires
otherwise, references to statutory provisions shall be construed as references
to those provisions as replaced, amended, modified or re-enacted from time to
time; words importing the singular include the plural and vice versa and words
importing a gender include every gender; references to this Agreement or any
Security Document shall be construed as references to such document as the same
may be amended, supplemented or novated from time to time; unless otherwise
stated, references to Clauses, Schedules and Appendices are to clauses of, and
schedules and appendices to this Agreement and references to this Agreement
include its Schedules and Appendices. Clause headings are inserted for
reference only and shall be ignored in construing this Agreement.
2. THE FACILITY
2.1 Amount. Subject to the provisions of this Agreement the Lender
will make available to the Borrower the Facility in aggregate of up to
S$19,500,000 in accordance with the terms of this Agreement.
2.2 Purpose. The proceeds of the Facility shall be used by the
Borrower to finance the development costs of the Property. The Lender shall
have no responsibility to see to the application of the proceeds of the
Facility by the Borrower.
3. CONDITIONS PRECEDENT
3.1 Conditions. The Lender shall not be obliged to make any Advance
to the Borrower unless the Lender shall have received not less than ten (10)
Banking Days from the proposed date of the first Drawing :-
Facility Agreement
3.1.1 this Agreement duly executed by all the parties;
Corporate Documents
3.1.2 in relation to the Borrower, certified true copies of :-
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(i) its Certificate of Incorporation and Memorandum and
Articles of Association;
(ii) a list of its current directors and officers with their
specimen signatures;
(iii) resolutions of its board of directors approving the
borrowing and the giving of security on the terms of this
Agreement and the Security Documents to which it is a
party and authorising the relevant person or persons to
execute this Agreement, the relevant Security Documents,
all Notices of Drawing and other documents required in
connection herewith, and the specimen signature(s) of
such person(s); and
(iv) the FY1996 audited financial statements of the Borrower.
3.1.3 in relation to the Guarantor certified true copies of :-
(i) its certificate of incorporation and memorandum and
articles of association;
(ii) its current business registration certificate and all
other necessary authorisations for the operation of its
business, if any;
(iii) a list of its current directors and officers; and
(iv) resolutions of its board of directors (and, where
relevant, its shareholders) approving the execution of
the relevant Security Documents to which it is a party
and authorising the relevant person or persons to execute
such Security Documents and any other notices and
documents required in connection therewith, and the
specimen signature(s) of such person(s);
Security and other Documents
3.1.4 the Guarantee duly executed by the Guarantor;
3.1.5 the Assignment of Property to the Lender duly executed by the
Borrower and all documents required pursuant thereto;
3.1.6 the Mortgage duly executed by the Borrower and registered with
the relevant authorities and all documents required pursuant
thereto;
Miscellaneous
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3.1.7 certified true copy of a satisfactory valuation report on the
Property by a valuer acceptable to the Lender and on a basis
approved by the Lender;
3.1.8 the originals of the policies of insurance referred to in Clause
14.1.8 in relation to the Property arranged with such insurer as
the Lender may agree;
3.1.9 evidence that all necessary filings, registrations and other
formalities have been or will be completed in order to ensure
that this Agreement and the Security Documents are valid and
enforceable (certified copies of official receipts to be
sufficient evidence of such filings or registration);
3.1.10 the Borrower's financial projections (incorporating projected
profits) for each of the five (5) years beginning from the date
of this Agreement; and
3.1.11 such other documents as the Lender may reasonably request and
which are agreed to by the Borrower in connection with the
Facility.
3.2 Lender's Approval. All the documents and evidence referred to
in Clause 3.1 shall be in form and substance satisfactory to the Lender, and
shall be received not later than ten (10) days before the first Drawing under
the Facility. Copies required to be certified shall be certified in a manner
satisfactory to the Lender by a director of the Borrower.
4. DRAWINGS
4.1 Drawings. Subject to the provisions of Clause 4.2 and the other
terms and conditions of this Agreement, the Borrower may from time to time on
any Banking Day during the Availability Period make Drawings under the Facility
for the purpose set out in Clause 2.2 provided that :-
4.1.1 the amount of each Drawing shall be at least S$1,000,000, and in
integral multiples of S$100,000; and
4.1.2 the aggregate principal amount of all Drawings under Clause
4.1.1 shall not exceed the aggregate principal amount of the
Facility available for drawing under the Facility.
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4.2 Other Conditions applicable to Drawings. The making of each
Drawing is also subject to the conditions that :-
4.2.1 the requirements of Clause 3 shall have been satisfied before
the first Notice of Drawing is given;
4.2.2 the Lender shall have received not later than 12:00 noon
(Singapore time) on the third (3rd) Banking Day before the date
on which the Drawing is to be made a duly completed and signed
original Notice of Drawing; and
4.2.3 no Event of Default or Prospective Event of Default shall have
occurred (or would be likely to occur as a result of the Drawing
being made) and all representations and warranties made by the
Borrower in or in connection with this Agreement shall be true
and correct as at the date such Drawing is to be made with
reference to the facts and circumstances then subsisting.
4.3 Notice of Drawings Irrevocable. A Notice of Drawing once given
shall be irrevocable and the Borrower shall be bound to make a Drawing in
accordance therewith, except as otherwise provided in this Agreement. If for
any reason a Drawing is not made in accordance with a Notice of Drawing, the
Borrower shall on demand pay to the Lender such amount (if any) as the Lender
may certify to be necessary to compensate it for any loss or expense reasonably
incurred in liquidating or redeploying funds arranged for the purpose of the
proposed Drawing or otherwise as a consequence of the proposed Drawing not
having been made in accordance with the Notice of Drawing.
4.4 Cancellation. Any part of the Facility that is undrawn at the
end of the Availability Period shall be deemed to be cancelled pursuant to
Clause 6.5.
5. INTEREST
5.1 Interest. The Borrower shall pay interest on the Loan on each
Interest Payment Date in accordance with the provisions of this Clause. In the
case of an Interest Period of six (6) months' duration, the interest accrued
during the first three (3) months shall be paid on the last day of that three
(3) month period and the interest accrued during the next three (3) months
shall be paid on the last day of that Interest Period.
5.2 Interest Periods. Interest shall be calculated on each advance
by reference to successive Interest Periods. The Interest Periods applicable
to the Loan and each Advance shall
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be one (1), two (2), three (3) or six (6) months as selected by the Borrower in
accordance with Clause 5.3 provided that :-
5.2.1 the first Interest Period shall commence on the date on which
the first Advance is made and end on the date falling one (1),
two (2), three (3) or six (6) months after the date of the
Advance;
5.2.2 in relation to each Advance after the first Advance, the first
Interest Period shall end on the last day of the Interest Period
then running in respect of the Loan so that all existing
Advances shall be consolidated upon the expiry of each Interest
Period (to the extent not already consolidated in accordance
with this Clause);
5.2.3 each Interest Period (except the first Interest Period in
relation to each Advance) shall commence on the last day of the
preceding Interest Period;
5.2.4 any Interest Period which would otherwise end on a non-Banking
Day shall instead end on the next following Banking Day or, if
that Banking Day is in another calendar month, on the
immediately preceding Banking Day;
5.2.5 if any Interest Period commences on the last Banking Day of a
calendar month or on a day for which there is no numerically
corresponding day in the calendar month one (1), two (2), three
(3) or six (6) months thereafter, that Interest Period shall,
subject to Clauses 5.2.2 and 5.2.6, end on the last Banking Day
of such later calendar month; and
5.2.6 if any Interest Period would otherwise extend beyond a repayment
date under Clause 6.1, then, subject to adjustment in accordance
with Clause 12.3, such Interest Period shall end on that date.
5.3 Selection. Subject to Clause 5.2, the Borrower may select the
length of an Interest Period, and the determination of the Cost of Funds by
reference either to the Swap Rate or SIBOR, by written notice to be received by
the Lender not later than 12:00 noon (Singapore time) on the fifth (5th)
Banking Day before the start of that Interest Period, and if the Borrower does
not give such a notice it shall be deemed to have selected a three (3) month
Interest Period and the determination of the Cost of Funds by SIBOR.
5.4 Rate and Calculation. The rate of interest applicable to the
Loan or the relevant part thereof for each Interest Period shall be the rate
per annum computed by the Lender to be the aggregate of the Cost of Funds for
that Interest Period and the Margin. Interest shall accrue from day to day,
shall be calculated on the basis of the actual number of days elapsed on a 360
day
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year, including the first day of the period during which it accrues but
excluding the last, and shall be paid (subject to Clause 5.1) in arrears on the
last day of each Interest Period applicable to the amount in respect of which
interest is payable. The Lender shall notify the Borrower in writing of each
interest rate determined under this Clause within three (3) working days after
value date of drawdown.
6. REPAYMENT, PREPAYMENT AND CANCELLATION
6.1 Repayment. The Borrower shall repay the Loan by eight (8)
successive quarterly instalments in the sum of S$250,000 for the first seven
(7) instalments and the full balance of unpaid principal for the final
instalment, the first instalment to be paid on the date falling thirty-nine
(39) months after the date of this Agreement. Any prepayment pursuant to Clause
6.2 shall reduce the amount of the repayment instalments calculated as
aforesaid in inverse order of maturity.
6.2 Voluntary Prepayment. The Borrower may prepay all or part of
the Loan on any Interest Payment Date, provided that :-
6.2.1 the Borrower shall have given to the Lender not less thirty (30)
days' prior written notice specifying the amount and date of
prepayment; and
6.2.2 all other sums then due and payable under this Agreement shall
have been paid.
6.3 Provisions applicable to Prepayments. Any notice of prepayment
given by the Borrower under any provision of this Agreement shall be
irrevocable and the Borrower shall be bound to make a prepayment in accordance
therewith. The Borrower may not prepay the Loan or any part thereof except in
accordance with the express terms of this Agreement. Amounts prepaid may not
be reborrowed under this Agreement. All prepayments shall comprise the stated
amount of principal and interest accrued and unpaid.
6.4 Other Amounts. If the Loan or any part thereof is prepaid under
any provision of this Agreement except Clause 6.2, the Borrower shall (unless
otherwise expressly provided for in this Agreement) also pay to the Lender :-
6.4.1 at the time of prepayment, interest accrued up to the date of
prepayment and all other sums payable by the Borrower under this
Agreement; and
6.4.2 on demand, such amount as is reasonably necessary to compensate
it for any loss or expense incurred as a consequence of such
prepayment (including any breakage
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cost, make-whole premium or any loss reasonably and properly
incurred in liquidating or redeploying funds acquired to
maintain the Loan), as certified in writing by the Lender.
6.5 Voluntary Cancellation. The Borrower may cancel all or part of
the undrawn Facility by giving to the Lender not less than thirty (30) days'
prior written notice, provided that any cancellation shall only be made on the
expiry of each Interest Period.
Any partial cancellation pursuant to this Clause shall reduce the undrawn part
of the Facility accordingly.
6.6 Final Repayment. The balance (if any) of the Loan together with
all accrued interest and other monies outstanding in connection with the
Facility shall be repaid on the Maturity Date.
7. MARKET DISRUPTION
7.1 Market Disruption. If in relation to any Interest Period :-
7.1.1 The Lender determines (which determination shall be conclusive
and binding) that by reason of circumstances affecting the
Singapore interbank market generally, adequate and fair means do
not exist for ascertaining SIBOR or Swap Rate for that Interest
Period; or
7.1.2 no rate appears on the Telerate Monitor Screen for that Interest
Period and less than two (2) Reference Banks notify the Lender
of a rate for the purpose of determining SIBOR for that Interest
Period,
the Lender shall promptly notify the Borrower and no Advance or further Advance
(as the case may be) shall be made unless and until an alternative basis is
agreed in accordance with Clause 7.2.
7.2 Alternative Basis by Agreement. Immediately following such
notification, the Borrower and the Lender shall negotiate in good faith with a
view to agreeing upon an alternative basis for funding the Loan and determining
the applicable interest rate, interest periods and interest payment dates. If
an alternative basis is agreed in writing within a period of thirty (30) days
after such notification or such longer period for discussion as the Borrower
and the Lender may agree, the alternative basis shall take effect in accordance
with its terms.
<PAGE> 18
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7.3 Alternative Basis Determined by Lender for Outstanding Advances.
If an alternative basis is not so agreed and one or more Advances have been
made, the Borrower shall pay interest to the Lender for the relevant Interest
Period at the rate per annum equal to the aggregate of (i) the Margin and (ii)
the cost (expressed as an annual interest rate) to the Lender of funding the
Loan during the relevant Interest Period as certified in writing by the Lender.
7.4 Cancellation and Prepayment. If an alternative basis is not so
agreed pursuant to Clause 7.2 and :-
7.4.1 if no Advance has been made, the Facility shall be cancelled and
all sums outstanding under this Agreement shall be paid to the
Lender at the end of the period for negotiation ascertained in
accordance with Clause 7.2; or
7.4.2 if one or more Advances have been made, the Borrower may request
to, or the Lender may require the Borrower to, prepay the Loan
(in either case without any prepayment penalty), by way of
giving written notice to the other party specifying a prepayment
date which is not less than ninety (90) days after such notice
is given. On the specified date the Facility shall be cancelled
and the Borrower shall prepay the Loan in full together with
interest thereon from the beginning of the relevant Interest
Period to the date of prepayment. For this purpose, the
interest rate from time to time applicable to the Lender shall
be the rate ascertained in accordance with Clause 7.3 in
relation to the relevant period.
8. CHANGE OF LAW OR CIRCUMSTANCES
8.1 Unlawfulness. If it becomes unlawful for the Lender to give
effect to its obligations hereunder, the Lender shall so notify the Borrower,
whereupon the Lender's obligations under the Facility shall cease. The
Borrower shall forthwith after such notification, or within such longer period
as the Lender may certify as being permitted by the relevant law, prepay
(without any prepayment penalty being payable) the Loan in full together with
interest accrued thereon to the date of prepayment and any other monies owing
hereunder to the Lender. The Lender shall notify the Borrower as soon as
practicable if it receives notice that there will be any change in law as
aforesaid.
8.2 Increased Cost. If the Lender determines that any change in any
applicable law or regulation or in the interpretation or application thereof or
compliance by the Lender with any applicable direction, request or requirement
(whether or not having the force of law) of any competent governmental or other
authority does or will :-
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8.2.1 subject the Lender to any tax or other payment with reference to
sums payable by the Borrower under this Agreement; or
8.2.2 impose on the Lender any other condition the effect of which is
to (i) increase the cost to the Lender of funding under the
Facility or (ii) reduce the amount of any payment receivable by,
or the effective return to, the Lender in respect of the
Facility or (iii) impose a cost on the Lender resulting from its
funding under the Facility;
the Lender may notify the Borrower, and the Borrower shall from time to time
upon demand pay to the Lender such amounts as are necessary to compensate it
for such tax, payment, increased cost or reduction (each an "increased cost").
So long as the circumstances giving rise to such increased cost continue, the
Borrower may, after giving the Lender not less than thirty (30) days' prior
written notice, prepay (without any prepayment penalty being payable) all (but
not only part of) the Loan, and upon the giving of such notice the Lender's
obligation under the Facility shall cease. The Borrower shall in such event on
the applicable date of prepayment prepay the Loan, interest accrued up to the
date of prepayment and all other sums payable by the Borrower under this
Agreement. Clause 6.3 shall apply to any such prepayment. In any case where
the cost to the Lender of funding the Facility is increased, the Lender shall
in any notification to the Borrower provide a certified schedule explaining how
the increased cost applies to the Facility.
9. TAXES AND OTHER DEDUCTIONS
9.1 No Deductions or Withholdings. All sums payable by the Borrower
under this Agreement shall be paid in full without set-off or counterclaim or
any restriction or condition and free and clear of any tax or other deductions
or withholdings of any nature. If the Borrower or any other person is required
by any law or regulation to make any deduction or withholding (on account of
tax or otherwise) from any payment for the account of the Lender, the Borrower
shall, together with such payment, pay such additional amount as will ensure
that the Lender receives (free and clear of any tax or other deductions or
withholdings other than those for which the Lender would otherwise have been
liable) the full amount which it would have received if no such deduction or
withholding had been required. The Borrower shall promptly forward to the
Lender copies of official receipts or other evidence showing that the full
amount of any such deduction or withholding has been paid over to the relevant
taxation or other authority.
<PAGE> 20
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9.2 Advance Notification. If at any time the Borrower becomes aware
that any such deduction, withholding or payment contemplated by Clause 9.1 is
or will be required, it shall immediately notify the Lender and supply all
available details thereof.
9.3 Tax Credits. In the event that the Lender actually receives the
benefit of a tax credit or allowance resulting solely and directly from a
payment by the Borrower under Clause 9.1 then the Lender shall pay to the
Borrower such part of that benefit as in the opinion of the Lender will leave
it (after such payments) in the same position that it would have been if the
Borrower had not been required under Clause 9.1 to make payment on account of
any deduction or withholding as referred to in Clause 9.1. Provided Always
That the Lender shall :-
9.3.1 determine the amount of any such benefit in consultation with
the Borrower;
9.3.2 have an absolute discretion as to the order and manner in which
it employs or claims tax credits and allowances available to it;
and
9.3.3 not be obliged to disclose to the Borrower any information
regarding its tax affairs or tax compensations.
10. FEES AND EXPENSES
10.1 Front-end Fee. The Borrower shall within fourteen (14) days
from the date of this Agreement pay to the Los Angeles branch of the Lender a
front-end fee of US$35,000.
10.2 Expenses. The Borrower shall forthwith on demand and whether or
not any Advance is made pay to or reimburse the Lender for its own account for
all costs, charges and expenses (including legal and other fees on a full
indemnity basis and printing, translation, communication, advertisement, travel
and all other out-of-pocket expenses properly and reasonably incurred by it in
connection with the negotiation, preparation, execution and (where relevant)
registration of this Agreement, the Security Documents and any other
documentation required hereunder or thereunder and any amendment hereto or to
any Security Document and any inspection, calculation, approval, consent or
waiver to be conducted, made or given by the Lender pursuant to any provision
of this Agreement or any Security Document, subject to a maximum sum of
S$25,000.00.
10.3 Enforcement Costs. The Borrower shall from time to time
forthwith on demand pay to or reimburse the Lender for all costs, charges and
expenses (including legal and other fees on a full indemnity basis and all
other out-of-pocket expenses including valuation costs) certified by the
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Lender as being properly and reasonably incurred by it in exercising any of its
rights or powers under this Agreement or any Security Document or in suing for
or seeking to recover any sums due under this Agreement or any Security
Document or otherwise preserving or enforcing its rights under this Agreement
or any Security Document or in defending any claims brought against it by any
third party in respect of this Agreement or any Security Document or in
releasing or re-assigning any Security Document.
10.4 Duties. The Borrower shall pay all present and future stamp and
other like duties and taxes and all notarial, registration, recording and other
like fees certified by the Lender as being payable in respect of this Agreement
or any Security Document and shall indemnify the Lender and the Security Agent
against all liabilities, costs and expenses which may result from any default
by the Borrower in paying such duties, taxes or fees.
11. ADVERSE MARKET CHANGE
Notwithstanding anything herein contained, if after the
execution of this Agreement there shall come to the attention of the Lender
such a change in national or international monetary, financial, political,
economic or stock market conditions or currency exchange or interest rates or
exchange controls as would, in the reasonable opinion of the Lender, be likely
to prejudice materially the success of the Facility, the Lender may terminate
this Agreement and upon such notice being given the parties hereto shall
(except as otherwise specifically provided herein) be released and discharged
from their respective obligations under this Agreement.
12. PAYMENTS AND EVIDENCE OF DEBT
12.1 Advances. The Lender shall make available to the Borrower all
Advances by payment in Singapore Dollars and in immediately available and
transferable funds to such account in Singapore as the Borrower shall have
previously agreed with the Lender.
12.2 Payments by Borrower. All payments by the Borrower under this
Agreement shall be made to the Lender not later than 10:00 a.m. (Singapore
time) on the relevant due date by payment in Singapore Dollars and in
immediately available and transferable funds to such account of the Lender with
such bank in Singapore as the Lender shall have designated for that purpose.
12.3 Banking Days. If any sum would otherwise become due for payment
on a non-Banking Day that sum shall become due on the next following Banking
Day and interest shall be
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adjusted accordingly, except that if any repayment due under Clause 6.1 would
then become due in another calendar month such repayment shall become due on
the immediately preceding Banking Day.
12.4 Evidence of Debt. The Lender shall maintain in its books in
accordance with its usual practice a set of accounts recording the amounts from
time to time owing by the Borrower hereunder. In any legal proceeding and
otherwise for the purposes of this Agreement the entries made in such accounts
shall, in the absence of manifest error, be conclusive as to the existence and
amounts of the obligations of the Borrower recorded therein.
12.5 Certificate Conclusive and Binding. Where any provision of this
Agreement provides that the Lender may certify or determine an amount or rate
payable by the Borrower, a certificate by the Lender (signed by any of its
officers) as to such amount or rate shall be conclusive and binding on the
Borrower in the absence of manifest error.
13. REPRESENTATIONS AND WARRANTIES
13.1 Representations and Warranties. The Borrower represents and
warrants to the Lender that :-
13.1.1 each of the Borrower and the Security Parties is a company duly
incorporated and validly existing under the laws of its country
of incorporation and has full power, authority and legal right
to own its property and assets and to carry on its business;
13.1.2 each of the Borrower and the Security Parties has the power to
enter into, exercise its rights and perform and comply with its
obligations under this Agreement and the Security Documents to
which it is a party;
13.1.3 all actions, conditions and things required to be taken,
fulfilled and done (including the obtaining of any necessary
authorisation) in order to enable each of the Borrower and the
Security Parties (i) to lawfully enter into, exercise its rights
and perform and comply with its obligations under this Agreement
and the Security Documents to which it is a party and (ii) to
ensure that those obligations are valid, legally binding and
enforceable have been taken, fulfilled and done;
13.1.4 the obligations of each of the Borrower and the Security Parties
under this Agreement and the Security Documents to which it is a
party are valid, binding and enforceable;
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13.1.5 neither the execution of this Agreement or the Security
Documents to which the Borrower or any Security Party is a party
nor the performance by the Borrower or any Security Party of any
of its obligations or the exercise of any of its rights
hereunder or thereunder will conflict with or result in a breach
of any law, regulation, judgment, order, authorisation,
agreement or obligation applicable to it or cause any limitation
placed on it or the powers of its directors to be exceeded or
result in the creation of or oblige the Borrower or any Security
Party to create a Charge in respect of any of its property or
assets except in favour of the Lender under or pursuant to the
Security Documents to which it is a party;
13.1.6 except for the registration of the Assignment of Property and
the Mortgage with the Land Titles Registry in Singapore and the
lodging with the Registry of Companies and Businesses of
particulars of the charges created pursuant to the Security
Documents, it is not necessary in order to ensure the validity,
enforceability or admissibility in evidence in proceedings of
this Agreement or any of the Security Documents in Singapore or
any other relevant jurisdiction that it or any other document be
filed or registered with any authority in Singapore, or
elsewhere or that any tax be paid in respect thereof;
13.1.7 no material litigation, arbitration or administrative proceeding
is currently taking place or pending or threatened against the
Borrower or any Security Party or its assets or revenues which
has or would have a material effect on its ability to perform
its obligations hereunder or under any Security Document to
which it is a party, with the exception of the current class
action law suits against the Guarantor, full details of which
have been furnished to the Lender;
13.1.8 neither the Borrower nor any Security Party is in default under
any law, regulation, judgment, order, authorisation, agreement
or obligation applicable to it or its assets or revenues, the
consequences of which default could materially affect its
ability to perform its obligations under this Agreement or any
of the Security Documents to which it is a party and no Event of
Default has occurred;
13.1.9 no Charge exists over all or any part of the assets or revenues
of the Borrower (save in respect of the Borrower's automated
storage and retrieval system) except as created by the Security
Documents or liens arising by operation of law in the ordinary
course of business or as previously disclosed in writing to and
agreed by the Lender;
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13.1.10 the Borrower has no indebtedness to any party except
indebtedness arising in the ordinary course of its business or
as previously disclosed in writing to and agreed by the Lender;
13.1.11 the most recent audited financial statements of the Borrower for
the time being (including the audited profit and loss account
and balance sheet) were prepared in accordance with applicable
laws and regulations of Singapore and generally accepted
accounting principles and policies in Singapore consistently
applied (except for changes in such principles and policies
required for the business expediency of the Borrower) and show a
true and fair view of the financial position of the Borrower as
at the end of, and the results of its operations for, the
financial period to which they relate, and there has been no
material adverse change in the business or financial condition
of the Borrower since the date of such financial statements;
13.1.12 no meeting has been convened for the winding-up of the Borrower
or any Security Party or for the appointment of a receiver,
trustee, judicial manager or similar officer of it, its assets
or any of them, no such step is intended by it and, so far as it
is aware, no petition, application or the like is outstanding
for its winding-up or for the appointment of a receiver,
trustee, judicial manager or similar officer of it, its assets
or any of them;
13.1.13 neither the Borrower nor any of its assets is entitled to
immunity from suit, execution, attachment or other legal
process, and its entry into this Agreement and each of the
Security Documents to which it is a party constitutes, and the
exercise of its rights and performance of and compliance with
its obligations under this Agreement and each of the Security
Documents to which it is a party will constitute, private and
commercial acts done and performed for private and commercial
purposes;
13.1.14 no information, exhibit or report furnished in writing by the
Borrower or any Security Party to the Lender in connection with
the negotiation of this Agreement or the Security Documents
contained any misstatement of fact as at the date of such
exhibit or report or as at the date when such information was
given which was material in the context of this Agreement or the
Security Documents or omitted to state a fact as at such date
which in any such case would be materially adverse to the
interests of the Lender under this Agreement or the Security
Documents;
13.1.15 the Borrower is the legal and beneficial owner of all rights of
the Lessee (as defined in the Building Agreement) under the
Building Agreement, the Lease and the estate and right in the
Property thereunder and the Property is free from any lien,
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mortgage, charge or encumbrance other than the Lessor's rights
and entitlement under the terms of the Building Agreement and
the Lease and the Assignment of Property and the Mortgage;
13.1.16 the accounting year of the Borrower ends on 31 May of each year;
13.1.17 the Borrower's paid up capital (including retained earnings) is
not less than S$1,000,000; and
13.1.18 the Facility shall at all times be used exclusively for the
purpose set out in Clause 2.2.
13.2 Continuing Representation and Warranty. The Borrower also
represents and warrants to and undertakes with the Lender that the foregoing
representations and warranties will be true and accurate throughout the
continuance of this Agreement with reference to the facts and circumstances
subsisting from time to time.
13.3 Acknowledgement of Reliance. The Borrower acknowledges that the
Lender has entered into this Agreement in reliance upon the representations and
warranties contained in this Clause.
14. UNDERTAKINGS
14.1 Affirmative undertakings. The Borrower undertakes and agrees
with the Lender throughout the continuance of this Agreement and so long as any
sum remains owing hereunder that the Borrower will, unless the Lender otherwise
agrees in writing :-
14.1.1 supply to the Lender (via Standard Chartered Bank Los Angeles or
Standard Chartered Bank Singapore):-
(i) as soon as they are available, but in any event within
ninety (90) days after the end of each accounting year of
the Borrower and the Guarantor, copies of their
respective financial statements in respect of such
accounting year (including a profit and loss account and
balance sheet) together with the auditor's clearance
letter with the final audited statutory accounts to be
provided not later than one hundred and eighty (180) days
after the end of each accounting year, such financial
statements to be audited by an auditor acceptable to the
Lender;
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(ii) as soon as they are available, but in any event within
ninety (90) days after the end of each quarter of each
accounting year of the Borrower and the Guarantor, copies
of their respective unaudited financial statements
(including a profit and loss account and balance sheet)
prepared on a basis consistent with the audited financial
statements of the Borrower and the Guarantor together
with certificates signed by a director of the Borrower
and the Guarantor (as applicable) to the effect that such
financial statements are, in the opinion of such officer,
true in all material respects and present fairly the
financial position of the Borrower and the Guarantor (as
the case may be) as at the end of, and the results of its
operations for, such half-year period;
(iii) as soon as practicable, copies of all financial
statements and related financial information issued by
the Borrower and the Guarantor to their respective
creditors in general; and
(iv) promptly on request, such additional financial or other
information (including, but not limited to, cash flows
and profit and loss projections) relating to the Borrower
and the Guarantor, and any Security Party and use its
best endeavours to supply the same in respect of any
Security Party, as the Lender may from time to time
reasonably request;
14.1.2 keep proper records and books of account in respect of its
business and permit the Lender and/or any professional
consultants appointed by the Lender at all reasonable times to
inspect and examine the records and books of account of the
Borrower and the Guarantor;
14.1.3 promptly inform the Lender in writing upon becoming aware of :-
(i) any Event of Default or Prospective Event of Default (and
of any action taken or proposed to be taken to remedy it)
promptly after becoming aware of it;
(ii) any litigation, arbitration or administrative proceeding
as referred to in Clause 13.1.7; and
(iii) any event coming to the knowledge of the Borrower which
might have a material and adverse effect on the ability
of the Borrower to perform its obligations hereunder;
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14.1.4 maintain its corporate existence and conduct its business in a
proper and efficient manner and in compliance with all laws,
regulations, authorisations, agreements and obligations
applicable to it and pay all taxes imposed on it when due
(except those being contested in good faith);
14.1.5 procure that there is no change in its shareholdings without the
prior written consent of the Lender, such consent not to be
unreasonably withheld;
14.1.6 procure that no material amendment or supplement is made to the
memorandum or articles of association of the Borrower, which has
or may have a material effect on the ability of the Borrower to
perform any of its obligations under this Agreement;
14.1.7 maintain in full force and effect all such authorisations as are
referred to in Clause 13.1.3, and take steps to obtain and
thereafter maintain in full force and effect any such
authorisations which may become necessary or advisable for the
purposes stated therein and comply with all conditions attached
to all authorisations obtained;
14.1.8 (i) keep itself and all its insurable assets (including the
Property) adequately insured with such insurance
companies acceptable to the Lender against loss or
destruction by fire, theft or flood and in amounts and on
terms usual or current for insurances of property similar
to the Property, including but not limited to
construction all risks insurance and/or property all
risks insurance covering the replacement value of the
Property and in any event in an amount not less than one
hundred percent (100%) of the Loan and punctually pay all
premiums and deliver copies of receipts therefor to the
Lender;
(ii) assign absolutely the benefit of the said policies except
third party liability insurance to the Lender; and
(iii) procure that the interest of the Lender is noted on the
said policies in a manner satisfactory to the Lender and
that the proceeds thereof shall be payable directly to
the Lender if the Lender has not otherwise been repaid;
14.1.9 use the Facility exclusively for the purposes specified in
Clause 2.2;
14.1.10 punctually pay all sums due from it and otherwise comply with
its obligations under this Agreement and all the Security
Documents to which it is a party; and
<PAGE> 28
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14.1.11 at all times fully comply with all the terms, conditions,
stipulations in the Building Agreement and the Lease and any
valid order or notice made or served on the Borrower by any
relevant authorities with respect to the Property;
14.1.12 not do or suffer to be done or omitted any act matter or thing
in or in respect of the Property or any part thereof which shall
contravene the provisions of law, rule or regulations now or
hereafter affecting the Property;
14.1.13 it will from time to time on request by the Lender do or procure
the doing of all such acts and will execute or procure the
execution of all such documents as the Lender may reasonably
consider necessary for giving full effect to this Agreement and
the Security Documents or securing to the Lender the full
benefits of all rights, powers and remedies conferred upon the
Lender in this Agreement and the Security Documents; and
14.1.14 ensure and procure that all covenants set out in the
Multicurrency Agreement to be observed by the Guarantor are duly
observed and/or complied with by the Guarantor. Notwithstanding
any termination or cancellation of said agreement, all such
covenants shall be incorporated by reference hereto and shall
remain in effect until this loan agreement is terminated
subject to the terms and conditions herein.
14.2 Negative undertakings. The Borrower undertakes and agrees with
the Lender throughout the continuance of this Agreement and so long as any sum
remains owing hereunder that the Borrower will not, unless the Lender otherwise
agrees in writing:-
14.2.1 merge or consolidate with any other entity or take any step with
a view to dissolution, liquidation or winding-up except for
mergers and consolidations between the Fritz Group of Companies;
14.2.2 invest in any other entity or provide financing to any person
(save to companies within the Fritz Group of Companies) except
by way of trade credit in the ordinary course of its business;
14.2.3 materially change the nature of its business or engage in any
other activities other than those relating to freight
forwarding, transport, distribution, customs broking,
warehousing, commission, shipping, booking and chartering, save
for involvement in the provision of financial services to the
Fritz Group of Companies;
<PAGE> 29
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14.2.4 (whether by a single transaction or a number of related or
unrelated transactions and whether at one time or over a period
of time) sell, transfer, lease out, lend or otherwise dispose of
(whether outright, by a sale-and-repurchase or
sale-and-leaseback arrangement, or otherwise) all or
substantially all of its assets nor of any part of its assets
which, either alone or when aggregated with all other disposals
required to be taken into account under this paragraph, is
substantial in relation to its assets, taken as a whole or the
disposal of which (either alone or when so aggregated) could
have a material adverse effect on it except for :-
(i) disposals in the ordinary course of trading; and
(ii) any disposal which the Lender shall have agreed shall not
be taken into account;
14.2.5 make or grant any loan or advance or guarantee or in any other
manner be or become directly or indirectly or contingently
liable for any indebtedness or other obligation of any other
person, except as may be necessary in the ordinary course of its
business;
14.2.6 create or attempt to create, and shall not suffer or permit any
of its subsidiaries to, directly or indirectly, make, create,
incur, assume or suffer to exist any Charge upon or with respect
to any part of its property, whether now owned or hereafter
acquired, other than the following :-
(i) any Charge created by the Security Documents or
previously disclosed in writing to and agreed by the
Lender as of the date of this Agreement;
(ii) Charges for taxes, fees, assessments or other
governmental charges which are not overdue or remain
payable without penalty;
(iii) carrier's, warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar liens arising
in the ordinary course of business which are not overdue
or remain payable without penalty or which are being
contested in good faith and by appropriate proceedings,
which proceedings have the effect of preventing the
forfeiture or sale of the property subject thereto;
(iv) Charges on the property of the Borrower or any of its
subsidiaries securing the non-overdue performance of
bids, trade contracts (other than for borrowed money),
leases or statutory obligations, contingent obligations
or
<PAGE> 30
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surety and appeal bonds and other non-delinquent
obligations of a like nature, in each case, incurred in
the ordinary course of business; provided that all such
Charges in the aggregate would not (even if enforced)
cause a material adverse effect on the ability of the
Borrower to perform its obligations hereunder and that
none of such Charges secure any indebtedness;
(v) liens consisting of judgment or judicial attachment
liens, provided that the enforcement of such liens is
effectively stayed and all such liens in the aggregate at
any time outstanding for the Borrower and its
subsidiaries do not exceed S$1,000,000;
(vi) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business
which, in the aggregate, are not substantial in amount,
and which do not in any case materially detract from the
value of the property subject thereto or interfere with
the ordinary conduct of the businesses of the Borrower
and its subsidiaries;
(vii) Charges on assets of corporations which become the
Borrower's subsidiaries after the date of this Agreement;
provided that such Charges existed at the time the
respective corporations became subsidiaries and were not
created in anticipation thereof; provided that any
indebtedness secured by such Charges shall not exceed
twenty percent (20%) of the Borrower's total assets on an
unconsolidated basis;
(viii) purchase money security interests on any property
acquired or held by the Borrower or any of its
subsidiaries in the ordinary course of business, securing
indebtedness incurred or assumed for the purpose of
financing all or any part of the cost of acquiring such
property; provided that (a) any such Charge attaches to
such property concurrently with or within twenty (20)
days after the acquisition thereof (or in the case of the
construction of improvements on real property, twenty
(20) days after substantial completion thereof), (b) such
Charge attaches solely to the property so acquired in
such transaction, (c) the principal amount of the debt
secured thereby and does not exceed one hundred percent
(100%) of the cost of such property, (d) the principal
amount of the indebtedness secured by any and all such
purchase money security interests shall not at any time
exceed twenty percent (20%) of the Borrower's total
assets on an unconsolidated basis and (e) no such Charge
which attaches after the date of this Agreement is on any
software or data (including data pertaining to accounts
receivable) used in connection
<PAGE> 31
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with the accounting or other management information
systems of the Borrower or any of its subsidiaries;
(ix) liens securing obligations in respect of capital leases
on assets subject to such leases; provided that such
capital leases are otherwise permitted hereunder and that
the indebtedness secured by such liens shall not exceed
twenty percent (20%) of the Borrower's total assets on an
unconsolidated basis and no such Charge which attaches
after the date of this Agreement is on any software or
data (including data pertaining to accounts receivable)
used in connection with the accounting or other
management information systems of the Borrower or any of
its subsidiaries; and
(x) liens arising solely by virtue of any statutory or common
law provision relating to banker's liens, rights of
set-off or similar rights and remedies as to deposit
accounts or other funds maintained with a creditor
depository institution; provided that (a) such deposit
account is not a dedicated cash collateral account and is
not subject to restrictions against access by the
Borrower, and (b) such deposit account is not intended by
the Borrower or any subsidiary to provide collateral to
the depository institution;
14.2.7 borrow or raise credit save and except :-
(i) from the Lender pursuant to this Agreement;
(ii) from other banks or financial institutions for the
purpose of satisfying the Borrower's working capital
requirements, provided that such parties' rights in
respect of such borrowing or raising of credit is
subordinated (in such manner as may be required by the
Lender) to the Lender's rights under the Facility;
(iii) indebtedness existing on the date of this Agreement and
disclosed to the Lender;
(iv) indebtedness incurred in the ordinary course of its
business; or
(v) indebtedness secured by Charges permitted by Clause
14.2.6(vii), (viii) and (ix) in an aggregate amount
outstanding not to exceed twenty percent (20%) of the
Borrower's total assets on an unconsolidated basis;
<PAGE> 32
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without the prior written consent of the Lender;
14.2.8 enter into any agreement or obligation which might materially an
adversely affect its financial or other condition;
14.2.9 it will not, without the prior consent in writing of the Lender,
sell or otherwise dispose or part with possession of, or agree,
conditionally or unconditionally, to sell or otherwise dispose
or part with possession of, any of its interest in the Property
or the building(s) thereon;
15. EVENTS OF DEFAULT
15.1 Events of Default. Each of the following events and
circumstances shall be an Event of Default :-
15.1.1 the Borrower fails to pay any sum payable under this Agreement
or any Security Document to which it is a party within ten (10)
Banking Days of such sum becoming due;
15.1.2 the Borrower or any Security Party fails duly and punctually to
perform or comply with any of its respective obligations,
representations, warranties or undertakings hereunder or under
any Security Document to which it is a party and in respect only
of a failure which is capable of remedy and which is not a
failure to pay money, does not remedy such failure to the
Lender's satisfaction within thirty (30) days (or such longer
period as the Lender may approve) after receipt of written
notice from the Lender requiring it to do so;
15.1.3 any representation or warranty made or deemed to be made or
repeated by the Borrower or any Security Party in or in
connection with this Agreement or any Security Document proves
to have been incorrect or misleading in any material respect;
15.1.4 the Borrower or any Security Party defaults or receives notice
of default of performance or compliance with any term or
condition under any agreement or obligation relating to
borrowing (including, without limitation, the Guarantor under
the Multicurrency Agreement) or any indebtedness of the Borrower
or any Security Party in an aggregate amount of the Singapore
Dollar equivalent of US$2,500,000 becomes payable or capable of
being declared payable before its stated maturity or
<PAGE> 33
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is not paid within seven (7) days of such payment becoming due
or any Charge, guarantee or other security now or hereafter
created by the Borrower or any Security Party becomes
enforceable;
15.1.5 any of the consents, approvals or authorisations referred to in
Clause 14.1.7 is not granted or ceases to be in full force and
effect or is modified in a manner which, in the opinion of the
Lender, would materially and adversely affect the operations,
business or financial condition of the Borrower or the ability
of the Borrower to perform its obligations under this Agreement
or any Security Document to which it is a party, or if any law,
regulation, judgment or order suspends, varies, terminates or
excuses performance by the Borrower of any of its obligations
under this Agreement or any Security Document to which it is a
party or purports to do any of the same;
15.1.6 a creditor takes possession of all or a material part of the
business or assets of the Borrower or any execution or other
legal process is enforced against the business or any material
asset of the Borrower and is not discharged within thirty (30)
days;
15.1.7 a petition is presented or a proceeding is commenced or an order
is made or an effective resolution is passed or any other step
is taken by any person for the winding-up, insolvency, judicial
management, administration, reorganisation, reconstruction,
dissolution or bankruptcy of the Borrower or for the appointment
of a liquidator, receiver, judicial manager, administrator,
trustee or similar officer of the Borrower or of all or any part
of its business or assets and such petition, proceeding, order
or resolution is not discharged or nullified within thirty (30)
days of its occurrence;
15.1.8 the Borrower stops or suspends payments to its creditors
generally or is unable or admits its inability to pay its debts
as they fall due or seeks to enter into any composition or other
arrangement with its creditors or is declared or becomes
insolvent;
15.1.9 any event occurs which has an effect analogous to the matters
set out in Clauses 15.1.6, 15.1.7 and 15.1.8 above in any
jurisdiction in which the Borrower carries on business;
15.1.10 the Borrower ceases to carry on its business or any substantial
part thereof or changes the nature or scope of its business or
the Borrower disposes of or any governmental or other authority
expropriates all or any substantial part of its business or
assets;
<PAGE> 34
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15.1.11 any event which has an effect equivalent or similar to any of
the events described in Clauses 15.1.6., 15.1.7, 15.1.8 or
15.1.10 above occurs, mutatis mutandis, in relation to any
Security Party;
15.1.12 this Agreement, any Security Document, or any provision hereof
or thereof ceases for any reason to be in full force and effect
or is terminated or becomes invalid or unenforceable or if there
is any dispute regarding the validity or enforceability of the
same which is not resolved within thirty (30) days from the date
of the dispute having arisen or if there is any purported
termination otherwise than in accordance with its terms or
repudiation of the same or it becomes impossible or unlawful for
the Borrower or any other party thereto to perform any of its
respective obligations hereunder or thereunder or for the Lender
to exercise all or any of its rights, powers and remedies
hereunder or thereunder;
15.1.13 the whole or a substantial part of the Property or any material
part thereof is seized, expropriated or subject to any
compulsory acquisition or requisition for use or is wholly
destroyed, or any material damage occurs in respect of the
buildings on the Property, whether insured or not;
15.1.14 any situation occurs which in the opinion of the Lender gives
reasonable grounds to believe that a material adverse change in
the business or financial condition or prospects of the Borrower
or any Security Party has occurred which cannot be reversed
within thirty (30) days and that as a result the ability of the
Borrower or any such other party to perform its respective
obligations hereunder or under any Security Document to which it
is a party has been or will be materially and adversely
affected.
15.2 Declarations. If an Event of Default has occurred and is
continuing the Lender may, by written notice to the Borrower :-
15.2.1 declare the Loan, accrued interest and all other sums payable
hereunder to be, whereupon they shall become, immediately due
and payable without further demand, notice or other legal
formality of any kind, and/or
15.2.2 declare the Facility terminated whereupon the obligation of the
Lender to make further Advances hereunder shall immediately
cease.
<PAGE> 35
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16. DEFAULT INTEREST
16.1 Rate of Default Interest. If the Borrower fails to pay any sum
payable under this Agreement when due, the Borrower shall pay interest on such
sum from and including the due date to the date of actual payment (as well
after as before judgment) at the rate per annum computed by the Lender to be
the higher of :-
16.1.1 the rate of interest (if any) payable in respect of such sum
immediately before the due date; or
16.1.2 the aggregate of (i) five percent (5%), (ii) the Margin and
(iii) SIBOR calculated with reference to such periods and such
amounts as the Lender may reasonably consider appropriate or, if
Clause 7.1 applies, the rate from time to time certified by the
Lender to be the rate representing the cost to it of funding the
unpaid sum. For these purposes, SIBOR shall be determined by
the Lender on such date or dates on or after the due date for
payment as the Lender may reasonably select.
16.2 Calculation of Default Interest. Interest at the rate or rates
determined from time to time as aforesaid shall accrue from day to day, shall
be calculated on the basis of the actual number of days elapsed and a 360 day
year shall be compounded at the end of each successive funding period which may
reasonably be considered appropriate by the Lender for the purposes of this
Clause and shall be payable from time to time on demand. The Lender shall
notify the Borrower of the duration of each funding period and each interest
rate determined under this Clause.
17. INDEMNITIES AND SET-OFF
17.1 General Indemnity. The Borrower shall indemnify the Lender
against all losses, liabilities, damages, costs and expenses (including loss of
profit) which the Lender may reasonably incur as a consequence of any Event of
Default or any other breach by the Borrower of any of its obligations under
this Agreement or any failure to borrow in accordance with a Notice of Drawing
or any prepayment under this Agreement (except under Clause 6.2, and Clause
9.2) or otherwise in connection with this Agreement (including any loss or
expense incurred in liquidating or redeploying funds acquired to maintain the
Loan or arranged for the purpose of a proposed Advance (as the case may be) and
any interest or fees incurred in funding any unpaid sum, but taking into
account any interest paid by the Borrower in respect of such unpaid sum under
Clause 16.
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17.2 Currency Indemnity. Singapore Dollars shall be the currency of
account and of payment in respect of sums payable under this Agreement. If an
amount is received in another currency, pursuant to a judgment or order or in
the liquidation of the Borrower or otherwise, the Borrower's obligations under
this Agreement shall be discharged only to the extent that the Lender may
purchase Singapore Dollars with such other currency in accordance with normal
banking procedures upon receipt of such amount. If the amount in Singapore
Dollars which may be so purchased, after deducting any costs of exchange and
any other related costs, is less than the relevant sum payable under this
Agreement, the Borrower shall indemnify the Lender and the Security Agent
against the shortfall. This indemnity shall be an obligation of the Borrower
independent of and in addition to its other obligations under this Agreement
and shall take effect notwithstanding any time or other concession granted to
the Borrower or any judgment or order being obtained or the filing of any claim
in the liquidation, dissolution or bankruptcy (or analogous process) of the
Borrower.
17.3 Set-Off. If an Event of Default has occurred, the Lender shall
(without prejudice to any general or banker's lien, right of set-off or any
other right to which it may be entitled) have the right, upon notice to the
Borrower, to set off and apply any credit balance on any account (whether
subject to notice or not and whether matured or not and in whatever currency)
of the Borrower with the Lender and any other indebtedness owing by the Lender
(as the case may be) to the Borrower, against the liabilities of the Borrower
under this Agreement, the Lender is authorised to purchase with the monies
standing to the credit of any such account such other currencies as may be
necessary for this purpose.
18. AMENDMENTS
Any amendment or waiver of any provision of this Agreement and
any waiver of any default under this Agreement shall only be effective if made
in writing and signed by or on behalf of the Borrower and the Lender.
19. WAIVER AND SEVERABILITY
Time is of the essence of this Agreement but no failure or delay
by the Lender in exercising any right, power or remedy hereunder shall impair
such right, power or remedy or operate as a waiver thereof, nor shall any
single or partial exercise of the same preclude any further exercise thereof or
the exercise of any other right, power or remedy. The rights, powers and
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remedies herein provided are cumulative and do not exclude any other rights,
powers and remedies provided by law. If at any time any provision of this
Agreement is or becomes illegal, invalid or unenforceable in any respect under
the law of any jurisdiction, the legality, validity and enforceability of such
provision under the law of any other jurisdiction, and of the remaining
provisions of this Agreement, shall not be affected or impaired thereby.
20. MISCELLANEOUS
20.1 Entire Agreement. This Agreement and the documents referred to
herein constitute the entire obligation of the Lender and supersede any
previous expressions of intent or understandings in respect of this
transaction.
20.2 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts which when taken
together shall be deemed to constitute one agreement.
21. ASSIGNMENT
21.1 The Borrower. This Agreement shall be binding on and inure to
the benefit of the Borrower and its successors, but the Borrower shall not
assign any of its rights hereunder.
21.2 The Lender. This Agreement shall be binding on and inure to the
benefit of the Lender and its successors and permitted assigns. The Lender may
at any time, subject to giving prior notice to the Borrower, assign to any one
or more banks or other third party (an "assignee lender") all (but not only
part of) its rights, benefits and obligations of the Lender under or arising
out of this Agreement and the Security Documents.
21.3 Disclosure. The Lender may disclose to any assignee, transferee
or participant or potential assignee, transferee or participant on a
confidential basis such public information about the Borrower as the Lender
shall consider appropriate. The Lender and any person to whom disclosure has
been made pursuant to this Clause may also make such disclosures as may be
required by any applicable law or regulation of the United States of America or
elsewhere. All information concerning the Borrower of a non-public nature may
only be disclosed with the prior consent of the Borrower.
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21.4 Reference Banks. The Lender may, at any time, replace any
Reference Bank at any time with such other reputable bank as the Lender shall
designate and the Lender shall give notice of any such replacement to the
Borrower.
22. NOTICES
22.1 Delivery. Each notice, demand or other communication to be
given or made under this Agreement shall be in writing and delivered or sent to
the relevant party at its address or fax number set out below (or such other
address or fax number as the addressee has by five (5) days' prior written
notice specified to the other parties) :-
To the Borrower: Fritz Logistics (S) Pte Ltd
6 Changi South Lane
Singapore 486400
Fax Number : 546 4748
Attention : Mr Ong Chong Hock
With copies to: Fritz Companies, Inc.
706 Mission Street, Suite 600
San Francisco, CA 94103
United States of America
Fax Number : 1 (415) 904 8326/904 8772
Attention : General Counsel / Treasurer
To the Lender: Standard Chartered Bank
6 Battery Road #07-00
Singapore 049909
Fax Number : 538 9363
Attention : Ms Agatha Lee
22.2 Deemed Delivery. Any notice, demand or other communication so
addressed to the relevant party shall be deemed to have been delivered (a) if
given or made by letter, when actually delivered to the relevant address, and
(b) if given or made by fax, when despatched, provided that, if such day is not
a working day in the place to which it is sent, such notice, demand or other
communication shall be deemed delivered on the next following working day at
such place.
<PAGE> 39
- 36 -
22.3 Language. Each notice, demand or other communication hereunder
and any other documents required to be delivered hereunder shall be either in
English or accompanied by a certified translation thereof into the English
language.
23. GOVERNING LAW AND JURISDICTION
23.1 Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by and construed in accordance with the
laws of Singapore.
23.2 Jurisdiction. The Borrower agrees that any legal action or
proceeding arising out of or relating to this Agreement may be brought in the
courts of Singapore and irrevocably submits to the non-exclusive jurisdiction
of such courts.
23.3 No Limitation on Right of Action. Nothing herein shall limit
the right of the Lender to commence any legal action against the Borrower
and/or its property in any other jurisdiction or to serve process in any manner
permitted by law, and the taking of proceedings in any jurisdiction shall not
preclude the taking of proceedings in any other jurisdiction whether
concurrently or not.
23.4 Waiver, Final Judgement Conclusive. The Borrower hereby
irrevocably and unconditionally waives any objection which it may now or
hereafter have to the choice of Singapore as the venue of any legal action
arising out of or relating to this Agreement. The Borrower also agrees that a
final judgment against it in any such legal action shall be final and
conclusive and may be enforced in any other jurisdiction, and that a certified
or otherwise duly authenticated copy of the judgment shall be conclusive
evidence of the fact and amount of its indebtedness.
<PAGE> 40
- 37 -
IN WITNESS WHEREOF this Agreement has been executed by the
parties hereto on the day and year first above written.
THE BORROWER
SIGNED for and on behalf of )
)
FRITZ LOGISTICS (S) PTE LTD )
)
by :- David Hampton )
by :- K. C. Ong
THE LENDER
SIGNED for and on behalf of )
)
STANDARD CHARTERED BANK )
)
by :- Andrew P. Charlton )
by :- Mary J. Machado-Schammel
THE GUARANTOR
SIGNED for and on behalf of )
)
FRITZ COMPANIES, INC. )
)
by :- Robert Arovas
by :- Ronald W. Womack )
<PAGE> 41
- 38 -
SCHEDULE 1
FORM OF NOTICE OF DRAWING
From : Fritz Logistics (S) Pte Ltd
To : Standard Chartered Bank
n 1997
Dear Sirs,
S$19,500,000 LOAN FACILITY:
LOAN AGREEMENT DATED n
We refer to the above Loan Agreement, and hereby give notice that we wish to
make a Drawing under the Facility on n 199n in the amount of S$n.
The proceeds of the Drawing are to be used exclusively for the purposes
specified in the Loan Agreement.
The proceeds of the Drawing should be disbursed to [specify account details or
the ways of disbursed].
The First Interest Period in relation to the Advance shall be n month (subject
as provided in Clause 5.2 of the Loan Agreement).
The Cost of Funds shall be calculated with reference to the [Swap Rate/SIBOR]*.
We confirm that :-
<PAGE> 42
- 39 -
(a) the representations and warranties set out in Clause 13.1 of the Loan
Agreement, repeated with reference to the facts and circumstances subsisting at
the date of this notice, remain true and correct; and
* Please delete where appropriate
(b) no Event of Default or Prospective Event of Default has occurred which
remains unwaived or unremedied or would result from the making of the Drawing.
Terms defined in the Loan Agreement have the same meanings when used in this
notice.
For and on behalf of
Fritz Logistics (S) Pte Ltd
<PAGE> 1
EXHIBIT 11.1
FRITZ COMPANIES, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
<TABLE>
<CAPTION>
Five Months Twelve Months
Twelve Months Ended May 31, Ended May 31, Ended December 31,
1997 1996 1995(a) 1994
-------------------------- --------------------------------
<S> <C> <C> <C> <C>
PRIMARY
Average common shares outstanding 35,128 34,239 32,876 30,392
Net effect of dilutive stock options
- based on the treasury stock method
using the average market price 394 1,508 0 1,160
-------- -------- -------- --------
Total 35,522 35,747 32,876 31,552
======== ======== ======== ========
Net income (loss) $ 308 $ 25,001 $ (8,319) $ 30,133
======== ======== ======== ========
Net income (loss) per common share $ 0.01 $ 0.70 $ (0.25) $ 0.96
======== ======== ======== ========
FULLY DILUTED
Average common shares outstanding 35,128 34,239 32,876 30,392
Net effect of dilutive stock options
- based on the treasury stock method
using the year-end market price,
if higher than average market price 398 1,557 0 1,556
-------- -------- -------- --------
Total 35,526 35,796 32,876 31,948
======== ======== ======== ========
Net income (loss) $ 308 $ 25,001 $ (8,319) $ 30,133
======== ======== ======== ========
Net income (loss) per common share $ 0.01 $ 0.70 $ (0.25) $ 0.94
======== ======== ======== ========
</TABLE>
(a) Stock options for five months ended May 31, 1995 are anti-dilutive.
<PAGE> 1
EXHIBIT 22.1
DOMESTIC STATE OF INCORPORATION
- --------------------------------------------------------------------------------
FAF Domestic Air Freight Services California
FNC International, Inc. California
Fritz International Insurance Broker California
Fritz Transportation International California
Frontier Container Line, Inc. California
Arthur J. Fritz & Co. Delaware
Fritz Companies, Inc. Delaware
Frontier Freight Forwarders, Inc. Florida
Unlimited National, Inc. Illinois
Unlimited Warehousing, Inc. Illinois
Logistics Service (U.S.A.) Co. Inc. New Jersey
M.D.S. (Atlantic), Inc. New Jersey
Wall Shipping Co., Inc. New Jersey
FCI Logistics, Inc. Oklahoma
Air Compak International, Inc. Pennsylvania
Fritz Air Freight,Inc. Texas
Fritz Export Packing, Inc. Texas
TG International, Inc. Texas
Trucat International, Ltd. Texas
<PAGE> 2
EUROPE COUNTRY OF INCORPORATION
- --------------------------------------------------------------------------------
Fritz Companies (Austria) GmbH Austria
Fritz Companies Belgium N.V. Belgium
Fritz Companies (Czech) S.R.O. Czech Republic
Oy Nielsen Global Freight AB Finland
Fritz Companies France S.A. France
Fritz Companies (Deutschland) GMBH Germany
Fritz Companies (Ireland) Limited Ireland
Fritz Companies C.B. Ltd. Israel
Fritz Companies Israel T. Ltd. Israel
Fritz Companies (Italy) S.R.L. Italy
Globe Financial S.A. Luxembourg
Airtex International B.V. Netherlands
FCI Holdings International B.V. Netherlands
Fritz Companies Nederlands B.V. Netherlands
Fritz Companies Norway AS Norway
Fritz Companies (C.I.S.) Russia
Wal-Rus, Ltd. Russia
Trucat Intl. Jet Air AB Sweden
Jet Air Travel Service AB Sweden
Fritz Companies (Switzerland) AG Switzerland
Fritz International Transport Trade Ltd. Turkey
Fritz Companies Ukraina Ukraine
Air Compak International (U.K.) Ltd. United Kingdom
Fritz Companies (UK) Limited United Kingdom
<PAGE> 3
AMERICAS COUNTRY OF INCORPORATION
- --------------------------------------------------------------------------------
Fritz De Argentina S.A. Argentina
Laugus Cargo S.A. Argentina
Fritz Do Brasil Transportes Internacionais Ltda. Brazil
Fritz Trans-Shoes Agenciamento De Transportes
Nacionais E Internacionais, Ltda. Brazil
Rodo Export Transportes Nacionais E
Internacionais Ltda. Brazil
Air Compak International (Canada) Inc. Canada
Amstel Inc. Canada(Federal)100%
Denpha Customs Brokers Inc. Canada(Federal)100%
243393 Ontario Limited Canada(Ontario)100%
Fritz Companies Canada Inc. Canada (N.B.)
Fritz Starber Inc. Canada(Ontario)
Secomat Inc. Canada (Quebec)
Fritz Chile S.A. Chile
Fritz Internacional S.A. Costa Rica
Fritz De Santo Domingo S.A. Dominican Rep.
Transportadora Maritima De Carga S.A. Dominican Rep.
Fritz El Salvador S.A. de C.V. El Salvador
Fritz Guatemala S.A. Guatemala
FCI Companies De Mexico S.A. de C.V. Mexico
Fritz Companies de Mexico S.A. de C.V. Mexico
Trade and Service I.D.M. S.A. de C.V. Mexico
Fritz Companies (Panama) Inc. Panama
Fritz Container Line Inc. Panama
Mirabel International Transport S.A. Panama
Fritz del Peru S.A. Peru
Fritz Companies Peru S.A. Peru
Fritz Companies Puerto Rico, Inc. Puerto Rico
Fritz Almacenes Generales C.A. Venezuela .
Fritz Customs Brokers S.A. Venezuela
Fritz Venezuela S.A. Venezuela
<PAGE> 4
ASIA COUNTRY OF INCORPORATION
- --------------------------------------------------------------------------------
Fritz Air Freight (Bangladesh) Ltd. Bangladesh
Fritz Ocean Freight (Bangladesh) Ltd. Bangladesh
Amel Express Limited Hong Kong
Fritz Air Freight Beijing (H.K.) Limited Hong Kong
Fritz Air Freight (H.K.) Limited Hong Kong
Fritz Air Freight Shanghai (H.K.) Limited Hong Kong
Fritz China Services (H.K.) Limited Hong Kong
Fritz Companies India (H.K.) Ltd. Hong Kong
Fritz Transportation International (H.K.) Limited Hong Kong
Fritz Transportation International
Xiamen (H.K.) Limited Hong Kong
Intertrans Cargo Services (H.K.) Ltd. Hong Kong
Intertrans Consulting Services Ltd. Hong Kong
J.F.T. Sea-Air Consolidation, Ltd. Hong Kong
Logistics Air Service Ltd. Hong Kong
Logistics Euro-Freight Ltd. Hong Kong
Logistics Far East Co. Ltd. Hong Kong
Logistics (Holdings) Ltd. Hong Kong
Logistics Services (H.K.) Co. Ltd. Hong Kong
Logistics Terminal Limited Hong Kong
United Great Shipping Ltd. Hong Kong
Fritz Freight Forwarding India Private Ltd. India
P.T. Fritz Ritra International
Transportation Services Indonesia
Fritz Air Freight (Korea) Co. Ltd. Korea
Fritz Transportation International(Korea)Co.Ltd. Korea
Fritz Logistics Services (M) SDN. BHD. Malaysia
FIT Forwarding SDN. BHD Malaysia
FIT Logistics SDN. BHD Malaysia
Fritz Logistics SDN. BHD. Malaysia
Fritz Transportation International
(Malaysia)SDN BHD Malaysia
Fritz Air Freight Nepal (Private) Limited Nepal
Fritz Companies Pakistan (Private) Limited Pakistan
Logistics Service (Tianjin) Co. Ltd. PRC
Shanghai Outer GAO QIAO Fritz Co., Ltd. PRC
FAF Airfreight Phils., Inc. Philippines
FTI (Philippines) Inc. Philippines
Philippine Logistics Services, Inc. Philippines
FAF-Fritz PTE Ltd. Singapore
Fritz Logistics (s) Pte. Ltd. Singapore
FTI-Fritz PTE Ltd. Singapore
Logistics Transport (s) Pte. Ltd. Singapore
Masters Airfreight Pte. Ltd. Singapore
Fritz Air Freight (Private) Limited Sri Lanka
Fritz Transportation International
(Private) Limited Sri Lanka
Union Transport (Private) Limited Sri Lanka
Fong Ching Airfreight Co. Ltd./
Fritz Air Freight (Taiwan) Co., Ltd. Taiwan
Fritz Transportation International
(Taiwan) Co., Ltd. Taiwan
Logistics Service (Taiwan) Co. Ltd. Taiwan
FAF-Fritz (Thailand) Limited Thailand
Fritz Transportation International
(Thailand) Limited Thailand
<PAGE> 5
MISCELLANEOUS COUNTRY OF INCORPORATION
- --------------------------------------------------------------------------------
Air Compak International
(Australia) Pty. Ltd. Australia
AFA AirFreight Pty. Ltd. Australia
Arthur J. Fritz & Co. Pty. Ltd. Australia
Expediters Pty. Ltd. Australia
Fritz-Fliway Pty. Ltd. Australia
Global Sky Express (Aust.) Pty. Ltd. Australia
Hargrave Edwards, Co. Pty. Ltd. Australia
Intertrans Australia Pty. Ltd. Australia
Mavin (Aust.) Pty. Ltd. Australia
Park Freight International Pty.Ltd. Australia
QAFCO Pty. Ltd. Australia
Trade Management Australia Pty. Ltd. Australia
Fritz Companies South Africa
(Proprietary) Ltd. South Africa
<PAGE> 1
EXHIBIT 23.1
ACCOUNTANTS' CONSENT
The Board of Directors and Stockholders
Fritz Companies, Inc.:
We consent to incorporation by reference in the registration statements
(No. 33-78472), (No. 33-57238), (No. 33-93070), (No. 333-15921) and (No.
333-07639) on Forms S-8 and (No. 33-70674) on Form S-4 of Fritz Companies, Inc.
of our report dated July 16, 1997 relating to the consolidated balance sheets of
Fritz Companies, Inc. and subsidiaries as of May 31, 1997 and 1996, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the years ended May 31, 1997 and 1996, the five months ended May 31,
1995, and for the year ended December 31, 1994, and the related schedule, which
report appears in the May 31, 1997 annual report on Form 10-K of Fritz
Companies, Inc.
KPMG Peat Marwick LLP
San Francisco, California
July 30, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> MAY-31-1997
<CASH> 43,368
<SECURITIES> 0
<RECEIVABLES> 436,842
<ALLOWANCES> 22,292
<INVENTORY> 0
<CURRENT-ASSETS> 496,415
<PP&E> 171,496
<DEPRECIATION> 70,617
<TOTAL-ASSETS> 723,516
<CURRENT-LIABILITIES> 393,670
<BONDS> 0
0
0
<COMMON> 354
<OTHER-SE> 234,341
<TOTAL-LIABILITY-AND-EQUITY> 723,516
<SALES> 0
<TOTAL-REVENUES> 1,156,770
<CGS> 0
<TOTAL-COSTS> 647,399
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,290
<INCOME-PRETAX> 474
<INCOME-TAX> 166
<INCOME-CONTINUING> 308
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 308
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
