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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended NOVEMBER 30, 1997
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-20548
FRITZ COMPANIES, INC.
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(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
Delaware 94-3083515
<S> <C>
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(State or other jurisdiction of incorporation or organization) (IRS Employer Identification Number)
</TABLE>
706 Mission Street, Suite 900, San Francisco, California 94103
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 904-8360
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Not applicable
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(Former name, former address and former fiscal year if changed from last
report.)
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
As of November 30, 1997 there were 35,691,000 shares of common stock
outstanding.
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FORM 10-Q
FRITZ COMPANIES, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements:
Independent Accountants' Review Report 3
Condensed Consolidated Balance Sheets as of November 30,
1997 and May 31, 1997 4
Condensed Consolidated Statements of Operations for the three
months and six months ended November 30, 1997 and 1996 5
Condensed Consolidated Statements of Cash Flows for the six
months ended November 30, 1997 and 1996 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION 13
SIGNATURES 14
EXHIBIT INDEX 15
</TABLE>
2
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FRITZ COMPANIES, INC. FORM 10-Q
Independent Accountants' Review Report
Board of Directors and Stockholders
Fritz Companies, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of Fritz
Companies, Inc. and subsidiaries (the Company) as of November 30, 1997, and the
related condensed consolidated statements of operations and cash flows for the
six months then ended included in the Company's Form 10-Q. These condensed
consolidated financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Fritz Companies, Inc. and
subsidiaries as of May 31, 1997, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated July 16, 1997, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated balance
sheet as of May 31, 1997, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
/s/ KPMG Peat Marwick LLP
--------------------------
KPMG Peat Marwick LLP
San Francisco, California
December 19, 1997
3
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PART I. FINANCIAL INFORMATION FORM 10-Q
ITEM 1. FINANCIAL STATEMENTS:
FRITZ COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
(UNAUDITED)
<TABLE>
<CAPTION>
November 30, May 31,
1997 1997
------------ ---------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 46,477 $ 43,368
Accounts receivable, net of allowance for doubtful
accounts of $24,722 in November and $22,292 in May 450,313 414,550
Deferred income taxes 14,969 10,519
Prepaid expenses and other assets 24,259 27,978
--------- ---------
Total current assets 536,018 496,415
--------- ---------
PROPERTY AND EQUIPMENT, NET 95,729 100,879
--------- ---------
OTHER ASSETS:
Intangibles, net of accumulated amortization of $18,457
in November and $16,204 in May 111,630 110,691
Other assets 17,510 15,531
--------- ---------
Total other assets 129,140 126,222
--------- ---------
TOTAL ASSETS $ 760,887 $ 723,516
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term obligations and short-term
borrowings $ 27,415 $ 37,200
Accounts payable 293,566 276,228
Accrued liabilities 77,452 73,094
Income tax payable 15,038 7,148
--------- ---------
Total current liabilities 413,471 393,670
LONG-TERM OBLIGATIONS 94,500 84,884
DEFERRED INCOME TAXES 1,033 1,243
OTHER LIABILITIES 10,231 9,024
--------- ---------
TOTAL LIABILITIES 519,235 488,821
--------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock: par value $.01 per share;
60,000 shares authorized, 35,691 shares
issued and outstanding, (35,445 shares
issued and outstanding in May) 357 354
Additional paid-in capital 127,658 124,424
Retained earnings 123,586 112,895
Cumulative foreign currency translation adjustments (9,949) (2,978)
--------- ---------
Total stockholders' equity 241,652 234,695
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 760,887 $ 723,516
========= =========
</TABLE>
SEE ACCOMPANYING INDEPENDENT ACCOUNTANTS' REVIEW REPORT AND
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE> 5
FORM 10-Q
FRITZ COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended November 30, Six Months Ended November 30,
------------------------------- -----------------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
REVENUE $ 343,611 $ 306,464 $ 670,310 $ 576,954
FREIGHT CONSOLIDATION COSTS 198,447 175,687 385,907 316,460
--------- --------- --------- ---------
NET REVENUE 145,164 130,777 284,403 260,494
--------- --------- --------- ---------
OPERATING EXPENSES
Salaries and related costs 83,410 73,872 163,469 145,506
General and administrative 51,208 42,206 103,665 87,926
--------- --------- --------- ---------
Total operating expenses 134,618 116,078 267,134 233,432
--------- --------- --------- ---------
INCOME FROM OPERATIONS 10,546 14,699 17,269 27,062
OTHER (INCOME) EXPENSE (47) 460 821 837
--------- --------- --------- ---------
INCOME BEFORE TAX EXPENSE 10,593 14,239 16,448 26,225
INCOME TAX EXPENSE 3,708 4,984 5,757 9,179
--------- --------- --------- ---------
NET INCOME $ 6,885 $ 9,255 $ 10,691 $ 17,046
========= ========= ========= =========
Weighted average shares outstanding - primary 36,109 35,373 35,911 35,584
========= ========= ========= =========
Earnings per share - primary $ 0.19 $ 0.26 $ 0.30 $ 0.48
========= ========= ========= =========
Weighted average shares outstanding - fully 36,212 35,510 36,093 35,694
diluted
========= ========= ========= =========
Earnings per share - fully diluted $ 0.19 $ 0.26 $ 0.30 $ 0.48
========= ========= ========= =========
</TABLE>
SEE ACCOMPANYING INDEPENDENT ACCOUNTANTS' REVIEW REPORT AND
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
5
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FORM 10-Q
FRITZ COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
--------------------------------
November 30, November 30,
------------ ------------
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 10,691 $ 17,046
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 13,225 11,762
Deferred income taxes (5,321) (451)
Other -- 813
Effect of changes in:
Receivables (35,763) (20,296)
Prepaid expenses and other current assets 3,719 4,024
Payables and accrued liabilities 33,600 (7,353)
-------- --------
Net cash provided by (used in) operating activities 20,151 5,545
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (13,239) (22,063)
Acquisitions, new and contingent (2,641) (10,447)
Acquisitions, debt (5,350) (6,165)
Other 1,153 (523)
-------- --------
Net cash used in investing activities (20,077) (39,198)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term obligations 9,678 1,461
Current portion of long-term obligations repaid (1,996) (838)
Net (decrease) increase in short-term borrowings (4,695) 28,065
Proceeds from stock options exercised 211 3,757
Other 219 (13)
-------- --------
Net cash provided by financing activities 3,417 32,432
-------- --------
Foreign currency translation effect on cash (382) (552)
-------- --------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS 3,109 (1,773)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 43,368 86,461
-------- --------
CASH AND EQUIVALENTS AT END OF PERIOD $ 46,477 $ 84,688
======== ========
OTHER CASH FLOW INFORMATION:
Income taxes paid $ 3,738 $ 3,757
======== ========
Interest paid $ 3,917 $ 4,581
======== ========
Noncash investing and financing activities in
connection with acquisitions:
Liabilities assumed $ -- $ 2,189
======== ========
</TABLE>
SEE ACCOMPANYING INDEPENDENT ACCOUNTANTS' REVIEW REPORT AND
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
6
<PAGE> 7
FORM 10-Q
FRITZ COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
-----------------------------------------
1. GENERAL
The accompanying condensed consolidated financial statements of Fritz
Companies, Inc. and subsidiaries (the Company) for the three and six months
ended November 30, 1997 and 1996 are unaudited and, in the opinion of
management, contain all adjustments, consisting only of normal and recurring
adjustments, necessary for a fair presentation of the results of such periods.
Certain prior year amounts have been reclassified to conform to the current
year's financial statement presentation.
The significant accounting policies followed by the Company are described
in Note 1 to the audited consolidated financial statements for the year ended
May 31, 1997. In accordance with SEC regulations, certain information and
footnote disclosures normally included in the annual financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted for the purposes of the condensed consolidated interim
financial statements. The condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements, including the
notes thereto, for the year ended May 31, 1997 included in the Company's Form
10-K filed on July 31, 1997. The results of operations for the six months ended
November 30, 1997 are not necessarily indicative of the results to be expected
for the full year.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings Per Share (Statement 128).
The statement establishes standards for the computation, presentation, and
disclosure of earnings per share (EPS). It requires dual presentation of Basic
EPS and Diluted EPS. Basic EPS excludes all dilution while Diluted EPS reflects
potential dilution. Statement 128 is effective for financial statements for
periods ending after December 15, 1997. Earlier application is not permitted.
The Company does not expect adoption of this statement will have a material
impact to previously reported EPS amounts.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income," which
requires enterprises to report, by major component and in total, all changes in
equity from non-owner sources; and Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information,"
which establishes annual and interim reporting standards for a public company's
operating segments and related disclosures about its products, services,
geographic areas and major customers. Both standards are effective for the
Company's fiscal year 1999 with earlier application permitted. The effect of
adoption of these statements will be limited to the form and content of the
Company's disclosures and will not impact the Company's results of operations,
cash flow or financial position.
2. COMMON STOCK
The increase in common stock issued and paid in capital was primarily due
to shares issued upon exercise of options, restricted stock grants, and issuance
of shares under the employee stock purchase plan. The weighted average price
used to calculate the impact of common stock equivalents on primary and fully
diluted earnings per share for the six months ended November 1997 was lower than
the weighted average price for the same period in the prior year. The lower
average price resulted in fewer common stock equivalents for the six months
ended November 30, 1997, as compared to the same period in the prior year.
7
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FRITZ COMPANIES, INC. FORM 10-Q
3. INCOME TAXES
Income tax expense for the six months ended November 30, 1997 consisted of
approximately $11.1 million of current tax provision and $5.3 million of
deferred tax benefit.
4. ACQUISITIONS
The Company recorded approximately $5.1 million and $9.7 million for the
six months ended November 30, 1997 and 1996, respectively, of additional
purchase price relating to achievement of specified net revenue or pre-tax
income levels of certain prior acquisitions. At November 30, 1997, the remaining
maximum payments in connection with acquisitions providing a contingent purchase
price is approximately $5.1 million. There is no certainty these businesses will
achieve the revenue or profit levels to require these contingent payments.
Net obligations in relation to acquisitions decreased $3.1 million and $0.1
million for current and long-term obligations, respectively, as of November 30,
1997 and increased $0.9 million for long-term obligations for November 30, 1996.
5. 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 then
officers and directors, 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 seek unspecified damages.
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 under 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. On September 12, 1997, the
Company's motion to dismiss that consolidated case was argued before the federal
court. No ruling has yet been handed down.
The Company is unable to predict the ultimate outcome of these 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.
8
<PAGE> 9
FRITZ COMPANIES, INC. FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The following discussion is applicable to the Company's financial condition
and results of operations for the three months and six months ended November 30,
1997 and 1996. See Note 1 of Notes to Condensed Consolidated Financial
Statements.
RESULTS OF OPERATIONS
The following table provides the revenue, net revenue and percentages
attributable to the Company's principal logistics services during the periods
indicated (in thousands, except percent):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30,
--------------------------------------- ---------------------------------------
1997 % 1996 % 1997 % 1996 %
-------- ----- -------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE:
Customs brokerage $ 41,634 12.1 $ 37,790 12.3 $ 82,856 12.4 $ 78,674 13.6
Ocean freight forwarding 97,712 28.4 87,807 28.7 195,167 29.1 168,602 29.2
Airfreight forwarding 157,003 45.7 145,695 47.5 300,259 44.8 260,683 45.2
Warehousing and
distribution 47,262 13.8 35,172 11.5 92,028 13.7 68,995 12.0
-------- ---- -------- ---- -------- ----- -------- ----
Total revenue $343,611 100% $306,464 100% $670,310 100% $576,954 100%
-------- ---- -------- ---- -------- ----- -------- ----
NET REVENUE:
Customs brokerage $ 41,634 28.7 $ 37,790 28.9 82,856 29.1 $ 78,674 30.2
Ocean freight forwarding 31,641 21.8 25,600 19.6 61,862 21.8 53,749 20.6
Airfreight forwarding 41,546 28.6 40,748 31.1 79,638 28.0 74,885 28.8
Warehousing and
distribution 30,343 20.9 26,639 20.4 60,047 21.1 53,186 20.4
-------- ---- -------- ---- -------- ----- -------- ----
Total net revenue $145,164 100% $130,777 100% $284,403 100% $260,494 100%
======== ==== ======== ==== ======== ===== ======== ====
</TABLE>
THREE MONTHS ENDED NOVEMBER 30, 1997 COMPARED WITH THREE MONTHS ENDED NOVEMBER
30, 1996
Revenue and Net Revenue: For the three months ended November 30, 1997,
revenue increased 12.1% to $343.6 million from $306.5 million reported in the
prior year and net revenue increased 11.0% to $145.2 million from $130.8 million
reported in the prior year. All of the Company's principal service areas
reported revenue growth.
Customs brokerage revenue increased 10.1% to $41.6 million from $37.8
million reported in the prior year. The number of United States Customs entries
filed by the Company increased approximately 17% to 0.7 million from 0.6 million
for the same period in the prior year. Canadian border activity increased due to
expanded relationships with North American shippers and continued NAFTA
incentives. In certain portions of the Customs brokerage business, price
competition remained strong resulting in downward pressure on prices.
Ocean freight forwarding revenue and net revenue increased 11.3% and
23.4%, respectively, due to increased shipping volumes from existing and new
customers. Gross margin (net revenue as a percentage of revenue) increased to
32.3% from 29.2% reported in the prior year. Transpacific tradelane volume
increased, but increased carrier capacity resulted in a continuation of
competitive pricing. Non-vessel operating common carrier shipments as a
percentage of total shipments increased, which contributed to the growth in
revenue.
9
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FRITZ COMPANIES, INC. FORM 10-Q
Airfreight forwarding revenue and net revenue increased 7.8% and 2.0%,
respectively, due to increased shipments and total chargeable weight of cargo
shipped. The increase in the number of shipments was primarily due to an
increase in shipments by existing customers. Gross margin decreased to 26.4%
from 27.9% reported in the prior year. The lower gross margin was primarily due
to an increase in shipments at lower yields with customers in Asia and Central
America.
Warehousing and distribution revenue and net revenue increased 34.4% and
13.9%, respectively, due to further penetration of existing market niches. A
stable United States economy combined with an increase in ocean freight shipping
volume were the primary reasons for the increase in revenue and net revenue. The
Company continued to focus on evaluating its pricing structure and enhancing
services with existing customers.
Operating Expenses: Operating expenses increased 15.9% to $134.6 million
from $116.1 million reported in the prior year. Salaries and related costs
increased primarily due to an increase in the number of employees resulting from
continued expansion in North America, Europe, Asia and Latin America to support
greater shipping volumes. The growth in the number of employees supporting
shipping volumes was partially offset by a decrease in the number of employees
required for administrative support. Salaries and related costs as a percentage
of net revenue were 57.4% compared to 56.5% reported in the prior year.
General and administrative expenses increased 21.3% to $51.2 million from
$42.2 million reported in the prior year. The increase was mainly attributable
to supporting greater shipping volumes, higher occupancy capacity costs,
additional provision for doubtful accounts and an increase in information
systems costs. General and administrative expenses as a percentage of net
revenue were 35.3% compared to 32.3% reported in the prior year.
Other Income and Expense: Due to the strengthening of the U.S. Dollar,
currency gains were realized by certain international operations, where trade
receivables were denominated in U.S. Dollars.
Substantially all of the Company's services experienced some pressure on
prices and margins due to the competitive environment. The Company continues to
focus on improving productivity, efficiency and providing value added customer
service at competitive prices.
SIX MONTHS ENDED NOVEMBER 30, 1997 COMPARED WITH SIX MONTHS ENDED NOVEMBER 30,
1996
Revenue and Net Revenue: For the six months ended November 30, 1997,
revenue increased 16.2% to $670.3 million from $577.0 million reported in the
prior year and net revenue increased 9.2% to $284.4 million from $260.5 million
reported in the prior year. All of the Company's principal service areas
reported revenue growth.
Customs brokerage revenue increased 5.3% to $82.9 million from $78.7
million reported in the prior year. The number of United States Customs entries
filed by the Company increased approximately 18% to 1.3 million from 1.1 million
for the same period in the prior year. The increase in revenue and number of
United States Customs entries filed was caused by increased Canadian border
activity and expansion of business with existing customers. The UPS strike
caused certain shippers to use alternative courier services, which provided
increased Customs brokerage volume to the Company.
Ocean freight forwarding revenue and net revenue increased 15.8% and
15.3%, respectively, due to increased shipping volumes from existing and new
customers. Airline capacity was limited in certain tradelanes, which resulted in
an increase in ocean volumes. Gross margin decreased to 31.7% from 31.9%
reported in the prior year. Carrier capacity in certain tradelanes, in which the
Company has committed capacity, has increased at a faster rate than shipping
volumes, which has resulted in downward pressure on pricing levels.
10
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FRITZ COMPANIES, INC. FORM 10-Q
Airfreight forwarding revenue and net revenue increased 15.2% and 6.3%,
respectively, due to increased shipments and total chargeable weight of cargo
shipped. The increase in the number of shipments was primarily due to an
increase in shipments with existing customers. Gross margin decreased to 26.5%
from 28.7% reported in the prior year. The lower gross margin was primarily due
to higher transportation costs which could not be passed to customers.
Warehousing and distribution revenue and net revenue increased 33.3% and
12.8%, respectively, due to increased demand from existing integrated logistic
customers, continued expansion of overseas and domestic services and expansion
of warehouse facilities.
Operating Expenses: Operating expenses increased 14.4% to $267.1 million
from $233.4 million reported in the prior year. Salaries and related costs
increased primarily due to growth in the number of personnel to support the
Company's continued expansion of overseas and domestic services. Salaries and
related costs as a percentage of net revenue were 57.5% compared to 55.9%
reported in the prior year.
General and administrative expenses increased 18.0% to $103.7 million from
$87.9 million reported in the prior year. The increase was mainly attributable
to supporting greater shipping volumes, higher occupancy capacity costs,
additional provision for doubtful accounts and an increase in information
systems costs. General and administrative expenses as a percentage of net
revenue were 36.5% compared to 33.8% reported in the prior year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and equivalents increased $3.1 million to $46.5 million
at November 30, 1997 from $43.4 million at May 31, 1997. Positive operational
cash flow of $20.1 million was used to fund capital expenditures of $13.2
million resulting in free cash flow of $6.9 million. Capital expenditures
consisted mostly of expenditures for computer hardware, building and leasehold
improvements, and warehouse equipment. Free cash flow was supplemented by $9.7
million in long-term financing to make $2.6 million in contingent acquisition
payments and to reduce acquisition related and short-term debt by $12.0 million.
The Company paid cash of $8.0 million relating to acquisitions. These
payments consisted of reductions to existing debt totaling $5.4 million, and
additional payments totaling $2.6 million from achievement of specified net
revenue or pre-tax income levels. In addition, $2.4 million of acquisition
related contingent obligations were recorded as current portion of
long-term debt.
As of November 30, 1997, utilization of the syndicated multicurrency credit
facility (the Credit Facility) was $35.0 million, consisting of $18.0 million of
borrowings under the Credit Facility and $17.0 million for outstanding letters
of credit. Therefore, the Company's total available borrowing capacity under the
Credit Facility as of November 30, 1997 was approximately $25.0 million.
CURRENCY AND OTHER RISK FACTORS
The nature of the Company's worldwide operations involves a multitude of
currencies other than the U.S. Dollar. Accordingly, the Company is exposed to
the inherent risks of international currency markets and governmental
interference. The Company seeks to compensate for currency exposures by
accelerating international payment among the Company's offices and agents. The
Company's translation adjustment for the six months ended November 30, 1997
increased due to the strengthening of the U.S. dollar relative to certain
currencies of Asia, Europe and Latin America.
11
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FRITZ COMPANIES, INC. FORM 10-Q
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. However, changes in
space allotments available from carriers, governmental deregulation efforts,
the regulations governing the Company's products, and/or the international trade
and tariff environment could affect the Company's business in unpredictable
ways.
Management believes the Company's business has not been adversely affected
by inflation in the past. Historically, the Company has generally been
successful in passing cost increases to its customers by means of price
increases. However, due to the competitive marketplace, continued future cost
increases 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 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,
(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-Q or in the
Company's other filings with the Securities and Exchange
Commission.
SAFE HARBOR STATEMENT
Except for the historical information contained herein, the matters
discussed in this Form 10-Q contain forward looking statements that involve
risks and uncertainties. The Company's actual results could differ materially.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed herein, as well as those discussed elsewhere in the
Company's Securities and Exchange Commission filings.
12
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FRITZ COMPANIES, INC. FORM 10-Q
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
(a) The annual meeting of shareholders was held on October 7, 1997.
(b) The following directors were elected at the meeting:
Lynn C. Fritz
Dennis L. Pelino
James Gilleran
Preston Martin
The foregoing constitute all members of the Board of Directors of the
Company.
(c) Set forth below is a tabulation with respect to the matters voted on
at the meeting:
<TABLE>
<CAPTION>
AGAINST OR BROKER
FOR WITHHELD ABSTENTIONS NON-VOTES
--- -------- ----------- ---------
<S> <C> <C> <C> <C>
Election of Directors
Lynn C. Fritz 30,844,442 79,482 ---- ----
Dennis L. Pelino 30,843,583 80,341 ---- ----
James Gilleran 30,845,209 78,715 ---- ----
Preston Martin 30,845,049 78,875 ---- ----
</TABLE>
(d) Inapplicable.
ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
15 Letter regarding unaudited interim financial information
Edgar Filing Only.
27 Financial Data Schedule. Edgar Filing Only.
(b) Reports on Form 8-K
No Reports on Form 8-K were filed in the quarter ended November
30, 1997.
13
<PAGE> 14
FRITZ COMPANIES, INC. FORM 10-Q
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FRITZ COMPANIES, INC.
Registrant
Dated: December 19, 1997
/s/ Lynn C. Fritz
--------------------------------------
Lynn C. Fritz
Chairman and Chief Executive Officer
/s/ Dennis L. Pelino
--------------------------------------
Dennis L. Pelino
President and Chief Operating Officer
/s/ Robert Arovas
--------------------------------------
Robert Arovas
Executive Vice President and
Chief Financial Officer
/s/ Ronald W. Womack
--------------------------------------
Ronald W. Womack
Vice President of Finance and
Principal Accounting Officer
14
<PAGE> 15
FRITZ COMPANIES, INC. FORM 10-Q
EXHIBIT INDEX
EXHIBIT PAGE
15 Letter regarding unaudited interim financial information 16
27 Financial Data Schedule 17
15
<PAGE> 1
EXHIBIT 15
The Board of Directors and Stockholders
Fritz Companies, Inc.:
Re: Registration Statement No. 33-78472, 33-57238, 33-93070, 333-15921 and
333-07639
With respect to the subject registration statement, we acknowledge our awareness
of the use therein of our report dated December 19, 1997 related to our review
of interim financial information.
Pursuant to Rule 436 (c) under the Securities Act of 1933, such report is not
considered part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the meaning
of sections 7 and 11 of the Act.
/s/ KPMG Peat Marwick LLP
San Francisco, California
December 22, 1997
16
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> NOV-30-1997
<CASH> 46,477
<SECURITIES> 0
<RECEIVABLES> 475,035
<ALLOWANCES> 24,722
<INVENTORY> 0
<CURRENT-ASSETS> 536,018
<PP&E> 173,881
<DEPRECIATION> 78,152
<TOTAL-ASSETS> 760,887
<CURRENT-LIABILITIES> 413,471
<BONDS> 0
0
0
<COMMON> 357
<OTHER-SE> 241,652
<TOTAL-LIABILITY-AND-EQUITY> 760,887
<SALES> 0
<TOTAL-REVENUES> 343,611
<CGS> 0
<TOTAL-COSTS> 198,447
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,186
<INCOME-PRETAX> 10,593
<INCOME-TAX> 3,708
<INCOME-CONTINUING> 6,885
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,885
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
</TABLE>