UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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for the fiscal
year ended January 31, 2010
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Or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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for the transition period from
to
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000-31869
(Commission File Number)
UTi Worldwide Inc.
(Exact Name of Registrant as
Specified in its Charter)
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British Virgin Islands
(State or Other Jurisdiction
of Incorporation or Organization)
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N/A
(IRS Employer Identification
Number)
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9 Columbus Centre, Pelican Drive
Road Town, Tortola
British Virgin Islands
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c/o UTi,
Services, Inc.
100 Oceangate, Suite 1500
Long Beach, CA 90802 USA
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(Addresses of Principal
Executive Offices and Zip Code)
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562.552.9400
(Registrants telephone
number, including area code)
Securities registered pursuant to Section 12(b) of the
Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Ordinary shares, no par value
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The NASDAQ Stock Market LLC
(NASDAQ Global Select Market)
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Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes þ No o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files. Yes o No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of the registrants 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. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
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Large
accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller
reporting
company o
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(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
The aggregate market value of the voting common equity held by
non-affiliates of the registrant as of the last business day of
the registrants most recently completed second fiscal
quarter, or July 31, 2009, was approximately
$1.0 billion computed by reference to the closing price of
the registrants ordinary shares on such date, as quoted on
The NASDAQ Global Select Market.
At March 26, 2010, the number of shares outstanding of the
registrants ordinary shares was 100,716,326.
DOCUMENTS
INCORPORATED BY REFERENCE
Certain portions of the registrants definitive Proxy
Statement for the 2010 Annual Meeting of Shareholders, which is
expected to be filed on or before May 17, 2010 are
incorporated by reference in Items 10, 11, 12, 13 and 14 of
Part III of this
Form 10-K.
UTi
Worldwide Inc.
Annual
Report on
Form 10-K
For the Fiscal Year Ended January 31, 2010
Table of Contents
i
Introduction
As used in this Annual Report on
Form 10-K,
the terms we, us, our and
the company refer to UTi Worldwide Inc. and its
subsidiaries as a combined entity, except where it is noted or
the context makes clear the reference is only to UTi Worldwide
Inc.
Forward-Looking
Statements
Except for historical information contained herein, this Annual
Report on
Form 10-K
contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, as
amended, which involve certain risks and uncertainties.
Forward-looking statements are included with respect to, among
other things the companys current business plan and
strategy and strategic operating plan, anticipated tax rates,
anticipated capital expenditures for environmental compliance
purposes, anticipated costs, benefits and timing associated with
our 4asONE technology-enabled, business transformation
initiative, the anticipated outcome of litigation, the
companys ability to meet its capital and liquidity
requirements for the foreseeable future, the anticipated impact
of various cost reduction efforts, and any other statements if
concerning future matters. These forward-looking statements are
identified by the use of such terms and phrases as
intends, intend, intended,
goal, estimate, estimates,
expects, expect, expected,
project, projected,
projections, plans,
anticipates, anticipated,
should, could, may,
will, designed to, foreseeable
future, believe, believes,
scheduled and other similar expressions which
generally identify forward-looking statements. Forward-looking
statements are inherently subject to risks and uncertainties,
some of which cannot be predicted or quantified. Future events
and actual results could differ materially from those set forth
in, contemplated by, or underlying our forward-looking
statements. Many important factors, risks and uncertainties may
cause the companys actual results to differ materially
from those discussed in any such forward-looking statements,
including but not limited economic volatility that has
materially impacted trade volumes, transportation capacity,
pricing dynamics and overall margins; the financial condition of
many of the companys customers; volatility and uncertainty
in global capital and credit markets which may adversely impact
our operations; the impact of sharply rising freight
transportation rates on the companys net revenue; planned
or unplanned consequences of our business transformation
efforts; our clients demand for our services; the impact
of cost reduction measures undertaken by the company and the
amount and timing of the expected benefits from such measures;
integration risks associated with acquisitions; the ability to
retain clients and management of acquisition targets; increased
competition; the impact of higher fuel costs; the effects of
changes in foreign exchange rates; changes in the companys
effective tax rates; industry consolidation making it more
difficult to compete against larger companies; general economic,
political and market conditions, including those in Africa, Asia
and EMENA which is comprised of Europe, Middle East and North
Africa; work stoppages or slowdowns or other material
interruptions in transportation services; or material reductions
in capacity by carriers; risks of international operations;
risks associated with, and costs and expenses the company will
incur as a result of the ongoing publicly announced
investigations by the U.S. Department of Justice, the
European Commission, the South African Competition Commission
and other governmental agencies into the pricing practices of
the international air freight forwarding and cargo
transportation industry and other similar or related
investigations and lawsuits; the success and effects of new
strategies and of the realignment of the companys
executive management structure; disruptions caused by epidemics,
conflicts, wars and terrorism; the other risks and uncertainties
described herein and in our other filings with the Securities
and Exchange Commission (SEC); and other factors outside our
control. Although UTi believes that the assumptions underlying
the forward-looking statements are reasonable, any of the
assumptions could prove inaccurate and, therefore, we cannot
assure you that the results contemplated in forward-looking
statements will be realized in the timeframe anticipated or at
all. In light of the significant uncertainties inherent in the
forward-looking information included herein, the inclusion of
such information should not be regarded as a representation by
UTi or any other person that UTis objectives or plans will
be achieved. Accordingly, investors are cautioned not to place
undue reliance on our forward-looking statements. UTi undertakes
no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future
events or otherwise, except as required by law.
In assessing forward-looking statements contained herein,
readers are urged to read carefully all cautionary statements
contained in this
Form 10-K,
including, without limitation, those contained under the
heading, Risk Factors, contained in Part I,
Item 1A of this
Form 10-K.
For these forward-looking statements, we claim the protection of
the safe harbor for forward-looking statements in
Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934.
1
PART I
History
and Development of the Company
We are an international, non-asset-based supply chain services
and solutions company that provides services through a network
of offices and contract logistics centers. We were incorporated
in the British Virgin Islands on January 30, 1995 under the
International Business Companies Act as an international
business company and operate under the British Virgin Islands
legislation governing corporations. The address and telephone
number of our registered office are 9 Columbus Centre, Pelican
Drive, Road Town, Tortola, British Virgin Islands and
(284) 494-4567,
respectively. Our registered agent is Midocean Management and
Trust Services (BVI) Limited, 9 Columbus Centre, Pelican
Drive, Road Town, Tortola, British Virgin Islands. We can also
be reached through UTi, Services, Inc., 100 Oceangate,
Suite 1500, Long Beach, CA 90802 U.S.A. Our website is
www.go2uti.com.
We formed our current business from a base of three freight
forwarders which we acquired between 1993 and 1995. Currently,
we operate a global network of freight forwarding offices and
contract logistics and distribution centers in a total of 63
countries. In addition, we serve our clients in 81 additional
countries through independent agent-owned offices. Our business
is managed from principal support offices located in Long Beach,
California, and several other locations worldwide.
Industry
The global supply chain services and solutions industry consists
of air and ocean freight forwarding, contract logistics,
domestic ground transportation, customs clearances,
distribution, inbound logistics, warehousing and supply chain
management. We believe that companies in our industry must be
able to provide their clients with supply chain services and
solutions. Among the factors that we believe are impacting our
industry are the outsourcing of supply chain activities,
increased global trade and sourcing, increased demand for time
definite delivery of goods, and the need for advanced
information technology systems that facilitate real-time access
to shipment data, client reporting and transaction analysis.
Furthermore, as supply chain management becomes more
complicated, we believe companies are increasingly seeking full
service solutions from a single or limited number of partners
that are familiar with their requirements, processes and
procedures and that can provide services globally. We believe it
is becoming increasingly difficult for smaller regional
competitors or providers with a more limited service or
information technology offering to compete, which we expect will
result in further industry consolidation.
We seek to use our global network, proprietary information
technology systems, relationships with transportation providers
and expertise in outsourced logistics services to improve our
clients visibility into their supply chains while reducing
their overall logistics costs.
Organizational
Structure
UTi Worldwide Inc. is a holding company and our operations are
conducted through subsidiaries. Our subsidiaries, along with
their countries of incorporation and our ownership interests,
are included in Exhibit 21, included with this report. The
proportion of voting power that we hold for each subsidiary is
equivalent to our percentage ownership.
Business
Overview
Our primary services include air and ocean freight forwarding,
contract logistics, customs brokerage, distribution, inbound
logistics, truckload brokerage and other supply chain management
services, including consulting, the coordination of purchase
orders and customized management services. Through our supply
chain planning and optimization services, we assist our clients
in designing and implementing solutions that improve the
predictability and visibility and reduce the overall costs of
their supply chains.
Freight Forwarding Segment. As a freight
forwarder, we conduct business as an indirect carrier for our
clients or occasionally as an authorized agent for airlines and
ocean carriers. We typically act as an indirect carrier
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with respect to shipments of freight unless the volume of
freight to be shipped over a particular route is not large
enough to warrant consolidating such freight with other
shipments. In such situations, we usually forward the freight as
an agent for the carrier.
We do not own or operate aircraft or vessels and consequently,
contract with commercial carriers to arrange for the shipment of
cargo. A majority of our freight forwarding business is
conducted through non-committed space allocations with carriers.
We arrange for, and in many cases provide,
pick-up and
delivery service between the carrier and the location of the
shipper or recipient.
When we act as an authorized agent for the airline or ocean
carrier, we arrange for the transportation of individual
shipments to the airline or ocean carrier. As compensation for
arranging for the shipments, the carriers pay us a commission.
If we provide the client with ancillary services, such as the
preparation of export documentation, we receive an additional
fee. Airfreight forwarding services accounted for approximately
33%, 36% and 36% of our consolidated revenues in our fiscal
years ended January 31, 2010, 2009 and 2008, (which we
refer to as fiscal 2010, 2009 and 2008, respectively). Ocean
freight forwarding services accounted for approximately 25%, 26%
and 25% of our consolidated revenues for fiscal 2010, 2009 and
2008, respectively.
As part of our freight forwarding services, we provide customs
brokerage services in the United States (U.S.) and most of the
other countries in which we operate. Within each country, the
rules and regulations vary, along with the level of expertise
that is required to perform the customs brokerage services. We
provide customs brokerage services in connection with a majority
of the shipments which we handle as both an air and ocean
freight forwarder. We also provide customs brokerage services in
connection with shipments forwarded by our competitors. In
addition, other companies may provide customs brokerage services
in connection with the shipments which we forward.
As part of our customs brokerage services, we prepare and file
formal documentation required for clearance through customs
agencies, obtain customs bonds, facilitate the payment of import
duties on behalf of the importer, arrange for payment of collect
freight charges, assist with determining and obtaining the best
commodity classifications for shipments and perform other
related services. We determine our fees for our customs
brokerage services based on the volume of business transactions
for a particular client, and the type, number and complexity of
services provided. Revenues from customs brokerage and related
services are recognized upon completion of the services. Customs
brokerage services accounted for approximately 3% of our
consolidated revenues in each of fiscal 2010, 2009 and 2008.
We believe that for the Freight Forwarding segment, net revenue
(the term used by the company to describe revenue less purchased
transportation costs) is a better measure of growth in our
freight forwarding business than revenue because our revenue for
our services as an indirect air and ocean carrier includes the
carriers charges to us for carriage of the shipment. Our
revenues are also impacted by changes in fuel and similar
surcharges, which have little relation to the volume or value of
our services provided. When we act as an indirect air and ocean
carrier, our net revenue is determined by the differential
between the rates charged to us by the carrier and the rates we
charge our clients, plus the fees we receive for our ancillary
services. Within our company, revenue derived from freight
forwarding generally is shared between the points of origin and
destination, based on a standard formula. Our revenue in our
other capacities includes only commissions and fees earned by us
and is substantially similar to net revenue for the Freight
Forwarding segment in this respect.
A significant portion of our expenses are variable and adjust to
reflect the level of our business activities. Other than
purchased transportation costs, staff costs are our single
largest variable expense and are less flexible than purchased
transportation costs in the near term.
Contract Logistics and Distribution
Segment. Our contract logistics services
primarily relate to value-added warehousing and the subsequent
distribution of goods and materials in order to meet
clients inventory needs and production or distribution
schedules. Our services include receiving, deconsolidation and
decontainerization, sorting, put away, consolidation, assembly,
cargo loading and unloading, assembly of freight and protective
packaging, storage and distribution. Our outsourced services
include inspection services, quality centers and manufacturing
support. Contract logistics revenues are recognized when the
service has been completed in the
3
ordinary course of business. Contract logistics services
accounted for approximately 18%, 15% and 14% of our consolidated
revenues in fiscal 2010, 2009 and 2008, respectively.
We also provide a range of distribution and other supply chain
management services, such as domestic ground transportation,
warehousing services, consulting, order management, planning and
optimization services, outsourced management services,
developing specialized client-specific supply chain solutions,
and customized distribution and inventory management services.
Distribution services accounted for approximately 12%, 12% and
14% of our consolidated revenues for the fiscal years ended
2010, 2009 and 2008, respectively. We receive fees for the other
supply chain management services that we perform. Other services
consisting predominately of supply chain management services
accounted for approximately 9%, 8% and 8% of our consolidated
revenues in fiscal 2010, 2009 and 2008, respectively.
The Contract Logistics and Distribution Segment includes the
distribution operation in the Africa region, which was
previously reported under Freight Forwarding, as this operation
has evolved from an air express to a road distribution business
over the last few years.
In contrast to the Freight Forwarding segment, we believe
revenue is a better measure of the growth in our contract
logistics and distribution business because this segment does
not incur carrier costs (and related fuel surcharges) in the
same manner as freight forwarding, and purchased transportation
costs under this segment primarily relate to the truck brokerage
operations in the Americas region.
Acquisitions
We have grown in the past, and may grow in the future, through
acquisitions. During fiscal 2010, we made three acquisitions.
These acquisitions, along with our other acquisitions over the
past five years, have had, and will have, a significant effect
on the comparability of our operating results over the
respective prior periods. Historically, we have financed
acquisitions with a combination of cash from operations and
borrowings. We may borrow additional money or issue ordinary
shares in the future to finance acquisitions. We regularly
evaluate acquisition opportunities. From
time-to-time
we enter into non-binding letters of intent with potential
acquisition targets and we are often in various stages of due
diligence and preliminary negotiations with respect to those
potential acquisition targets. Readers are urged to read
carefully all cautionary statements contained in this
Form 10-K
relating to acquisitions, including, without limitation, those
contained under the heading Risk Factors, contained
in Item 1A of this
Form 10-K.
Effective December 21, 2009, the company acquired the
remaining outstanding shares of an Israeli subsidiary, Excel
MPL-A.V.B.A., LP (EMA Israel), of which the company had already
held a 50% ownership interest that was acquired through its
acquisition of its parent company in the beginning of fiscal
2010. The purchase price totaled $6.5 million, including
the repayment of a $0.5 million loan and contingent
consideration of $0.3 million which is based on projected
net revenues from a particular customer for the next four years.
The contingent consideration was accrued as an obligation
through an increase to goodwill. The acquisition eliminated a
minority shareholder in Israel. The purchase price exceeded the
fair value of the noncontrolling interest received and net
assets acquired, and accordingly, $2.0 million was
allocated to goodwill, all of which is included with the
companys Contract Logistics and Distribution segment. The
company is currently determining whether the goodwill is
deductible for tax purposes. The estimated purchase price
allocation is preliminary and is subject to revision. A
valuation of the additional net assets acquired is being
conducted and the final allocation will be made when completed.
Effective February 4, 2009, the company acquired all of the
issued and outstanding shares of Multi Purpose Logistics, Ltd.,
which we have subsequently renamed to UTi M.P.L. Ltd. (MPL), for
a purchase price of $1.1 million, net of cash acquired of
$0.4 million. MPL is an Israeli company providing logistics
services and held a 50% ownership interest in EMA Israel at the
time of acquisition. As a result of this acquisition, the
company has increased its range of services provided in Israel.
The total cost of the acquisition has been allocated to the
assets acquired and liabilities assumed based upon their
estimated fair values at the date of the acquisition. Subsequent
to the acquisition date, the company conducted additional
valuation work on the customer relationships identified and
refined its estimates previously recorded during the year.
During the fourth quarter of fiscal 2010, the company finalized
the valuation of such intangible assets and the allocation of
the purchase price. The final allocation resulted in an excess
of the purchase price over the fair value of the acquired net
assets, and accordingly $2.5 million was
4
allocated to goodwill, all of which is included within the
companys Contract Logistics and Distribution segment. The
company determined that none of the goodwill is deductible for
tax purposes.
Effective October 16, 2009, the company acquired all of the
issued and outstanding shares of Tacisa Transitaria, S.L.
(Tacisa), a Spanish freight forwarder. An employee of one of the
companys Spanish subsidiaries held a majority ownership
interest in Tacisa prior to the companys acquisition. The
purchase price totaled $5.5 million, net of cash acquired
of $0.8 million, and including contingent consideration of
$4.7 million based on projected 2010 operating results of
Tacisa. The contingent consideration was accrued as an
obligation with a corresponding increase to goodwill. The
acquisition expanded the companys freight forwarding
coverage in Spain. The total cost of the acquisition has been
allocated to the assets acquired and the liabilities assumed
based on their estimated fair values at the date of acquisition.
The preliminary allocation resulted in an excess of the purchase
price over the fair value of the acquired net assets, and
accordingly, $2.5 million was allocated to goodwill, all of
which is included in the companys Freight Forwarding
segment.
Additional information regarding these and our other
acquisitions is set forth in Note 2,
Acquisitions, in our consolidated financial
statements included in this
Form 10-K
and in Part II, Item 7 of this
Form 10-K
appearing under the caption, Managements Discussion
and Analysis of Financial Condition and Results of
Operations, which are incorporated herein by reference.
Financial
Information about Services and Segments
As discussed in Note 21, Segment Reporting in
our consolidated financial statements included in this annual
report, the company changed its segment reporting in the first
quarter of fiscal 2009 to reflect the realignment of its
management structure around its core business operations. The
factors for determining the reportable segments include the
manner in which management evaluates the performance of the
company combined with the nature of the individual business
activities. As a result of this change, the companys
reportable business segments are (i) Freight Forwarding and
(ii) Contract Logistics and Distribution. The Freight
Forwarding segment includes airfreight forwarding, ocean freight
forwarding, customs brokerage and other related services. The
Contract Logistics and Distribution segment includes all
operations providing contract logistics, distribution and other
related services. Corporate office expenses, eliminations, and
various holding companies within the group structure are
presented separately. In conjunction with this change, certain
costs that were previously presented separately are now recorded
in the Freight Forwarding and Contract Logistics and
Distribution segments. These changes and reclassifications had
no effect on the companys reported earnings, or earnings
per basic and diluted share. In accordance with the Financial
Accounting Standards Board (FASB) Accounting Standards
Codification (FASB Codification or ASC) Topic 280, Segment
Reporting (ASC 280), all prior period segment information
was reclassified to conform to this new financial reporting
presentation.
Additional information regarding our operations by geographic
segment and revenue attributable to our principal services is
set forth in Note 21, Segment Reporting in our
consolidated financial statements included in this annual report
and in Part II, Item 7 of this report appearing under
the caption, Managements Discussion and Analysis of
Financial Condition and Results of Operations.
We conduct a majority of our business outside of the
U.S. and we anticipate revenue from foreign operations will
continue to account for a significant amount of our future
revenue. Our global operations are directly related to and are
dependent upon, the volume of international trade and are
subject to various factors, risks and uncertainties, including
those included in Part I, Item 1A of this annual
report appearing under the caption, Risk Factors.
Seasonality
Historically, our results for our operating segments have been
subject to seasonal trends when measured on a quarterly basis.
Our first and fourth fiscal quarters are traditionally weaker
compared with our other fiscal quarters. This trend is dependent
on numerous factors, including the markets in which we operate,
holiday seasons, climate, economic conditions and many other
factors. A substantial portion of our revenue is derived from
clients in industries whose shipping patterns are tied closely
to consumer demand or are based on
just-in-time
production schedules. We cannot accurately predict the timing of
these factors, nor can we accurately estimate the impact of
5
any particular factor, and thus we can give no assurance that
these historical seasonal patterns will continue in future
periods.
Environmental
In the U.S., the company is subject to Federal, state and local
provisions regulating the discharge of materials into the
environment or otherwise seeking to protect the environment.
Similar laws apply in many other jurisdictions in which the
company operates. Although current operations have not been
significantly affected by compliance with these environmental
laws, governments are becoming increasingly sensitive to
environmental issues, and the company cannot predict what impact
future environmental regulations may have on its business. The
company does not currently anticipate making any material
capital expenditures for environmental compliance purposes in
the reasonably foreseeable future.
Currency
Risk
The nature of the companys worldwide operations requires
the company to transact with a multitude of currencies other
than the U.S. dollar. This results in the company being
exposed to the inherent risks of the international currency
markets and governmental interference. Some of the countries
where the company maintains offices or agency relationships have
strict currency control regulations which influence the
companys ability to hedge foreign currency exposure. The
company attempts to compensate for these exposures by
facilitating international currency settlements among its
offices and agents.
Sales and
Marketing
We market our services through an organization consisting of
approximately 939 full-time salespersons who receive
assistance from our senior management and regional and local
managers. In connection with our sales process and in order to
serve the needs of our clients, some of which utilize only our
freight forwarding
and/or
contract logistics services and for others who utilize a wider
variety of our supply chain solutions services, our sales force
is divided into two specialized sales groups. One of these sales
groups focuses primarily on marketing our air and ocean freight
forwarding, contract logistics and customs brokerage services as
individual products; and the other group focuses on marketing a
combination of our services as comprehensive supply chain
solutions.
Our sales and marketing efforts are directed at both global and
local clients. Our smaller specialized global solutions sales
and marketing teams focus their efforts on obtaining and
developing large volume global accounts with multiple shipping
locations which require comprehensive solutions. These accounts
typically impose numerous requirements on their providers, such
as electronic data interchange, Internet-based tracking and
monitoring systems, proof of delivery capabilities, customized
shipping reports and a global network of offices. The
requirements imposed by our large volume global accounts often
limit the competition for these accounts to large freight
forwarders, third-party logistics providers and integrated
carriers with global operations. Our global solutions sales and
marketing teams also target companies operating in specific
industries with unique supply chain requirements, such as the
pharmaceutical, retail, apparel, chemical, automotive and high
technology electronics industries.
Our local sales and marketing teams focus on selling to and
servicing smaller- and medium-sized clients who are primarily
interested in selected services, such as freight forwarding,
contract logistics and customs brokerage. These two sales and
marketing teams may work together on larger accounts.
No single client accounted for more than 4% of our consolidated
revenues in fiscal 2010, 2009 or 2008.
Competition
Competition within the freight forwarding, contract logistics,
distribution, and supply chain management industries is intense.
There are a large number of companies that compete in one or
more segments of the industry. However, there are a limited
number of international firms that have the worldwide
capabilities to provide the breadth of services that we offer.
We also encounter competition from regional and local
third-party logistics providers, integrated transportation
companies that operate their own aircraft, cargo sales agents
and brokers,
6
surface freight forwarders and carriers, airlines, ocean
carriers, associations of shippers organized to consolidate
their members shipments to obtain lower freight rates, and
Internet-based freight exchanges. We believe it is becoming
increasingly difficult for smaller regional competitors or
providers with a more limited service or information technology
offerings to compete, which we expect will result in further
industry consolidation.
In the competitive and fragmented domestic ground transportation
services business in North America, we compete primarily with
truckload carriers, intermodal transportation service providers,
less-than-truckload
carriers, railroads and third party broker carriers. We compete
in this business primarily on the basis of service, efficiency
and freight rates.
We believe that the ability to develop and deliver innovative
solutions to meet our clients global supply chain needs is
a critical factor in the ongoing success of the company. We
achieve this through the appropriate use of technology and by
leveraging our industry experience across the globe. This
experience was obtained through strategic acquisitions and by
attracting, retaining, and motivating highly qualified personnel
with knowledge in the various segments of global logistics.
Generally, we believe that companies in our industry must be
able to provide their clients with integrated, global supply
chain solutions. Among the factors that we believe are impacting
our industry are the outsourcing of supply chain activities,
increased global trade and sourcing, and the need for advanced
information technology systems that facilitate real-time access
to shipment data, client reporting and transaction analysis.
Furthermore, as supply chain management becomes more
complicated, we believe companies are increasingly seeking full
service solutions from a single or limited number of partners
that are familiar with their requirements, processes and
procedures and that can provide services globally.
We seek to compete in our industry by using our global network,
proprietary information technology systems, relationships with
transportation providers, and expertise in contract logistics
services to improve our clients visibility into their
supply chains while reducing their logistics costs.
Information
Technology Systems
Our proprietary eMpower suite of supply chain technology systems
is based on an open architecture design. eMpower facilitates the
online operations of our supply chain activities, allows our
offices and agents to link to our supply chain visibility system
and offers our clients real-time, web-based access to detailed
levels of inventory product and shipment data, customized
reporting and analysis and easy integration with their
technology systems. eMpower provides our clients with a
customizable web portal, along with powerful supply chain
visibility tools for managing their integrated
end-to-end
supply chains, whether at rest or in motion, at the order, stock
keeping unit (SKU) or item level.
Within eMpower are various supply chain information systems,
including the following:
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uOp, which is used by our offices and agents as a local
operating system for air and ocean freight import and export
documentation, customs brokerage and accounting functions that
feed shipment and other client data into our global information
systems;
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uOrder, which assists our clients with order management;
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uTrac, which provides our clients with supply chain visibility,
enabling them to track shipments of goods and materials;
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uWarehouse, which enables our clients to track the location and
status of goods and materials within a warehouse and track the
location and status of goods and materials in transit;
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uClear, which provides visibility into customs clearance
transactions for our clients;
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uAnalyze, which assists us and our clients with isolating the
factors causing variability in supply chains;
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uReport, which provides clients with customized reports;
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uConnect, which enables the electronic transfer of data between
our systems and those of our clients and also integrates our
internal applications;
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7
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uPlan, which is used for strategic planning and optimization of
our clients supply chains;
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uDistribute, which enables tracking of goods and materials
within domestic distribution networks; and
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uShip, which enables clients to initiate shipping transactions
and alert these directly to our origin offices.
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Intellectual
Property
We have applied for federal trademark or service mark
registration of the marks UTi, Inzalo and our U
design. The mark UTi has been or is currently being registered
in selected foreign countries. The service marks
UTi, UTi plus design and our
U design have been granted to us on
November 21, 2006, December 5, 2006 and May 26,
2009, respectively, by the U.S. Patent and Trademark
Office. We also operate our businesses worldwide through various
other common-law trademarks and trade names. We have no patents
nor have we filed any patent applications. While we may seek
further trademarks or service marks and perhaps patents on
inventions or processes in the future, we believe our success
depends primarily on factors such as the skills and abilities of
our personnel rather than on any trademarks, patents or other
registrations we may obtain.
Government
Regulation
Our airfreight forwarding business in the U.S. is subject
to regulation, as an indirect air carrier, under the Federal
Aviation Act by the Department of Transportation, although
airfreight forwarders are exempted from most of this Acts
requirements by the applicable regulations. Our airfreight
forwarding business in the U.S. is also subject to
regulation by the Transportation Security Administration (TSA).
Our indirect air carrier security program is approved by and we
believe we are in compliance with the applicable TSA
regulations. Our foreign airfreight forwarding operations are
subject to similar regulation by the regulatory authorities of
the respective foreign jurisdictions. The airfreight forwarding
industry is subject to regulatory and legislative changes that
can affect the economics of the industry by requiring changes in
operating practices or influencing the demand for, and the costs
of providing, services to clients.
The Federal Maritime Commission regulates our ocean freight
forwarding and non-vessel operating common carrier operations to
and from the U.S. The Federal Maritime Commission licenses
intermediaries (combined ocean freight forwarders and non-vessel
operating common carrier operators). Indirect ocean carriers are
subject to Federal Maritime Commission regulation, under this
Commissions tariff publication and surety bond
requirements, and under the Shipping Act of 1984 and the Ocean
Reform Shipping Act of 1998, particularly those terms
prescribing rebating practices. For ocean shipments not
originating or terminating in the U.S., the applicable
regulations and licensing requirements typically are less
stringent than those that originate or terminate in the U.S.
We are licensed as a customs broker by the U.S. Customs and
Border Protection Agency of the Department of Homeland Security
(CBP) in the United States customs districts in which we
do business. All U.S. customs brokers are required to
maintain prescribed records and are subject to periodic audits
by the CBP. As a certified and validated party under the
self-policing Customs-Trade Partnership Against Terrorism
(C-TPAT), we are also subject to compliance with security
regulations within the trade environment that are enforced by
the CBP. We are also subject to regulations under the Container
Security Initiative, which is administered by the CBP. Since
February 1, 2003, we have been submitting manifests
automatically to U.S. Customs from foreign ports
24 hours in advance of vessel departure. Our foreign
customs brokerage operations are licensed in and subject to the
regulations of their respective countries.
We must comply with export regulations of the
U.S. Department of State, including the International
Traffic in Arms Regulations, the U.S. Department of
Commerce and the CBP regarding what commodities are shipped to
what destination, to what end-user and for what end-use, as well
as statistical reporting requirements.
Some portions of our warehouse operations require authorizations
and bonds by the U.S. Department of the Treasury and
approvals by the CBP. We are subject to various federal and
state environmental, work safety and hazardous materials
regulations at our owned and leased warehouse facilities. Our
foreign warehouse operations are subject to the regulations of
their respective countries.
8
Certain of our U.S. domestic ground transportation
operations are subject to regulation by the Federal Motor
Carrier Safety Administration (the FMCSA), which is an agency of
the U.S. Department of Transportation, and by various state
agencies. The FMCSA has broad regulatory powers with respect to
activities such as motor carrier operations, practices and
insurance. Interstate motor carrier operations are subject to
safety requirements prescribed by the FMCSA. Subject to federal
and state regulation, we may transport most types of freight to
and from any point in the U.S. The trucking industry is
subject to possible regulatory and legislative changes (such as
the possibility of more stringent environmental, safety or
security regulations or limits on vehicle weight and size) that
may affect the economics of the industry by requiring changes in
operating practices or the cost of providing truckload services.
We are subject to a broad range of foreign and domestic
environmental and workplace health and safety requirements,
including those governing discharges to air and water and the
handling and disposal of solid and hazardous wastes. In the
course of our operations, we may be asked to store, transport or
arrange for the storage or transportation of substances defined
as hazardous under applicable laws. If a release of hazardous
substances occurs on or from our facilities or while being
transported by us or our subcontracted carrier, we may be
required to participate in, or have liability for, the remedy of
such release. In such case, we also may be subject to claims for
personal injury and natural resource damages.
We believe that we are in substantial compliance with applicable
material regulations and that the costs of regulatory compliance
have not had a material adverse impact on our operations to
date. However, our failure to comply with the applicable
regulations or to maintain required permits or licenses could
result in substantial fines or revocation of our operating
permits or licenses. We cannot predict the degree or cost of
future regulations on our business. If we fail to comply with
applicable governmental regulations, we could be subject to
substantial fines or revocation of our permits and licenses.
Employees
At January 31, 2010, we employed a total of
19,514 persons. A breakdown of our employees by geographic
region is as follows:
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EMENA
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4,568
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Americas
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6,250
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Asia Pacific
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2,933
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Africa
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5,602
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Corporate
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161
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Total
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19,514
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Approximately 2,355 of our employees are subject to collective
bargaining arrangements in several countries, primarily in South
Africa, which are renegotiated annually. We believe our employee
relations to be generally good.
Executive
Officers and Other Senior Managers of Registrant
Our executive officers are as follows (ages and titles as of
March 26, 2010):
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Name
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Age
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Position
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Eric W. Kirchner
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51
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Chief Executive Officer and Director
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William T. Gates
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62
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Executive Vice President; President, Contract Logistics and
Distribution
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Gene T. Ochi
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60
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Executive Vice President; President, Client Growth
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Lawrence R. Samuels
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53
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Executive Vice President Finance and Chief Financial
Officer
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Lance E. DAmico
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41
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Senior Vice President Enterprise Support Services,
Global General Counsel and Secretary
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Ronald S. Glickman
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51
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Senior Vice President and Chief Information Officer
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9
Eric W. Kirchner was appointed Chief Executive Officer in
January 2009. Prior to joining the company, Mr. Kirchner
served as President of Freight Forwarding for United Parcel
Service, Inc. (UPS) from October 2007 to January 2009, where he
oversaw a global organization responsible for strategy,
financial performance and revenue for freight forwarding
services. He was also ultimately responsible for network
management, capacity planning and procurement for the freight
forwarding business. Prior thereto, Mr. Kirchner served as
President, North America Forwarding for UPS from October 2006 to
October 2007 and as President, Global Transportation, UPS Supply
Chain Solutions from December 2004 to October 2006. From October
2003 to December 2004, Mr. Kirchner served as Chief
Operating Officer of Menlo Worldwide Forwarding, Inc., a global
freight forwarder. Mr. Kirchner holds a bachelors
degree from Indiana University and has completed the Stanford
Executive Program at Stanford University.
William T. Gates was appointed as Executive Vice
President; President, Contract Logistics and Distribution, in
February 2008. Mr. Gates joined the company in October 2002
when we completed the acquisition of Standard Corporation, which
we have subsequently renamed UTi Integrated Logistics, Inc., and
has held positions of increasing responsibilities, including
General Manager, Vice President, President, Chief Operating
Officer and Chief Executive of UTi Integrated Logistics, Inc.,
before being promoted to President, Americas Contract Logistics
and Distribution, in April 2007, a role he held until February
2008. Prior to joining UTi Integrated Logistics, Inc.,
Mr. Gates served as General Manager of the Wal-Mart
Distribution center in Laurens, South Carolina. His experience
also includes service in the U.S. Marine Corps as a
Logistics Officer. Mr. Gates has been an active member of
the Warehousing Education and Research Council (WERC), the
Council of Supply Chain Management Professionals (formerly
Council of Logistics Management) and the International Warehouse
Logistics Association (IWLA). He is also a past President of
WERC. Mr. Gates received a Bachelor of Science (B.S.) from
California Polytechnic State University and an M.S. in logistics
systems management from the University of Southern California.
Gene T. Ochi was appointed as Executive Vice President;
President, Client Growth in May 2009. Prior to that time
Mr. Ochi served as Executive Vice President
Integrated Solutions for Strategic Clients since November 2008.
From 2006 to November 2008, Mr. Ochi served as Executive
VP & Chief Marketing Officer and Executive Vice
President Global Leader of Client Solutions
Development. From 1998 to 2006, Mr. Ochi served as our
Senior Vice President Marketing and Global Growth.
From 1993 to 1998, Mr. Ochi served as the Regional Vice
President, Western U.S.A., of UTi, United States, Inc., one of
our subsidiaries. From 1989 to 1992, Mr. Ochi served as the
Senior Vice President of Marketing of BAX Global. Mr. Ochi
received a B.S. degree from the University of Utah and a Masters
of Business Administration (M.B.A.) from the University of
Southern California.
Lawrence R. Samuels was appointed as Executive Vice
President Finance and Chief Financial Officer in
March 2007. Mr. Samuels has served as Chief Financial
Officer since May 2000. Prior to that, Mr. Samuels served
as Senior Vice President Finance and Secretary since
1996. Mr. Samuels also serves as our principal financial
officer and our principal accounting officer. From 1993 to 1995,
Mr. Samuels served as the Financial Director of, and from
1987 to 1993 as the Financial Manager of, Pyramid Freight
(Proprietary) Ltd., one of our subsidiaries in South Africa.
Mr. Samuels received a Bachelor of Commerce degree from the
University of the Witwatersrand and is a qualified chartered
accountant in South Africa.
Lance E. DAmico was appointed Senior Vice
President Enterprise Support Services and Secretary
in February 2008. Mr. DAmico continues to serve as
our Global General Counsel, a role he assumed when he joined the
company in August 2006, as well as our Secretary, a role he
assumed in March 2007. From April 2000 through August 2006, he
held several positions at Element K Corporation, an educational
software and publishing company, most recently serving as
Executive Vice President, Strategy and Operations. From 1994
through 2000, Mr. DAmico was an associate at Cravath,
Swaine & Moore LLP, specializing in
mergers & acquisitions, securities and corporate
finance. He holds a J.D. from The New York University School of
Law and a Bachelor of Arts (B.A.) from Dartmouth College.
Ronald S. Glickman was appointed as Senior Vice President
and Chief Information Officer in February 2007, when
Mr. Glickman joined the company. From 2004 to February
2007, he was responsible for the retail and hospitality vertical
at Cognizant Technology Solutions. From 1999 to 2004, he served
as Chief Information Officer
10
at DFS Group, a global luxury retailer for travelers.
Mr. Glickman holds a B.A. from National University and an
M.B.A from the University of Southern California.
Our other senior managers are as follows (ages and titles as of
March 26, 2010):
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Name
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Age
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Position
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Ronald W. Berger
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51
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Senior Vice President Global Operating Processes
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David Cheng
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65
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Co-President Greater China
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Christopher Dale
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50
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President Americas Freight Forwarding
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Brian R. J. Dangerfield
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51
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President Asia Pacific and Co-President
Greater China
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Carlos Escario Pascual
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48
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President EMENA
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Jochen Freese
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41
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Senior Vice President Market Verticals and Global
Marketing
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Gavin Rimmer
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50
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President Africa
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Available
Information
Our annual report on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K
and amendments to those reports are available without charge
through our website,
http://www.go2uti.com,
as soon as reasonably practicable after they are filed or
furnished electronically with the Securities and Exchange
Commission (SEC). We are providing the address to our Internet
site solely for the information of investors. We do not intend
the address to be an active link and the contents of our website
are not incorporated into this report.
Our business and operations are subject to a number of factors,
risks and uncertainties, and the following list should not be
considered to be a definitive list of all factors that may
affect our business, financial condition and future results of
operations and should be read in conjunction with the factors,
risks and uncertainties contained in our other filings with the
SEC. This Annual Report on
Form 10-K,
our annual report to our shareholders, any of our quarterly
reports on
Form 10-Q
or our current reports on
Form 8-K,
or any other oral or written statements which we may make in
connection with a news release or otherwise may contain
forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as
amended, which involve certain risks and uncertainties. These
forward-looking statements are often identified by the use of
terms or phrases such as intends,
intend, intended, goal,
estimate, estimates,
expects, expect, expected,
project, projected,
projections, plans, seeks,
anticipates, anticipated,
should, could, may,
will, designed to, foreseeable
future, believe, believes,
scheduled, and other similar expressions which
generally identify forward-looking statements. We caution
readers that any forward-looking statements made by us are made
with the intention of obtaining the benefits of the safe
harbor provisions of the Private Securities Litigation
Reform Act and that a number of factors, including but not
limited to those discussed below, could cause our actual results
and experiences to differ materially from the anticipated
results or expectations expressed in any forward-looking
statements. Except as required by law, we undertake no
obligation to publicly update or revise any forward-looking
statements, whether as the result of new information, future
events, or otherwise.
Recent
volatility in global trade and the global economic slowdown have
adversely impacted our results of operations and may continue to
do so in the foreseeable future. In addition, present world
economic conditions increase the number and likelihood of risks
which we normally face on a
day-to-day
basis in running our business.
Recent volatility in global trade and the global economic
slowdown have adversely impacted our revenues and results of
operations and our business is susceptible to those factors
which negatively impact international trade volumes. Recent
volatility in trade volumes has also had a material impact on
transportation capacity (in both the air and ocean modes),
freight transportation rates, client pricing and the
companys overall margins. As a result of the slowdown in
the economies of the United States, Europe and many other
countries and the recent volatility and
11
uncertainty in global trade and in the global capital and credit
markets, a number of the risks we normally face have increased.
These include:
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Reduced demand for the products our clients ship, notably in the
automotive, retail, apparel and hi-tech sectors, causing a
reduction in the demand for the services we provide;
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Increased price competition resulting in lower profitability and
cash flow;
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Deterioration in the financial condition of our clients from
decreased sales or our customers experiencing difficulty in
raising capital which may in turn adversely impact our ability
to collect our outstanding receivables, particularly in the
market segments and industries which have been severely impacted
by the economic slowdown and where we may have a concentration
of clients;
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Volatility in demand for services, especially with respect to
the transactional or spot freight services market,
which may result in volatility in freight rates which can
negatively impact our margins and profitability;
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Deterioration in the financial condition and possible failures
of transportation providers with which we have relationships,
which may limit our ability to secure sufficient equipment or
other transportation services to meet our commitments to our
customers; and
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Rapid and material fluctuations in foreign currency exchange
rates and/or
oil prices, each of which may have a material impact on our
financial condition, results of operations and cash flows.
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In addition, in fiscal 2010 and 2009, we undertook several cost
reduction measures designed to streamline our operations and
reduce our costs in response to worsening global economic
conditions. These measures resulted in us incurring
restructuring and impairment charges, which negatively impacted
our results of operations. There can be no assurance we will not
undertake in the future additional cost reduction measures, that
adversely affect our business, results of operations or
prospects or which otherwise result in financial charges.
The
global economic slowdown has increased the risk that the
carrying value of our assets will be impaired. As a result, we
may be required to record impairment charges to our goodwill,
and identifiable intangible assets and property, plant and
equipment, which would impact the results of our
operations.
Intangible assets with indefinite lives, including goodwill, are
assessed at least annually for impairment in accordance with
FASB Codification Topic 350, Intangibles Goodwill
and Other (ASC 350). We complete the required impairment
test annually in the second quarter, and also when evidence of
potential impairment exists. When it is determined that
impairment has occurred, a charge to operations is recorded.
Additionally, if facts and circumstances indicate that the
carrying amount of identifiable amortizable intangible assets
and property, plant and equipment may be impaired, we perform an
evaluation of recoverability in accordance with FASB
Codification Topic 360, Property, Plant and Equipment
(ASC 360). If an evaluation is required, we compare the
estimated future undiscounted cash flows associated with the
asset to the assets carrying amount to determine if a
reduction to the carrying amount is required. If a reduction is
required, the carrying amount of an impaired asset would be
reduced to fair value. Changes in business strategy, government
regulations, or economic or market conditions have resulted and
may result in further substantial impairment write-downs of our
intangible or other assets at any time in the future. In
addition, we have been and may be required in the future to
recognize increased depreciation and amortization charges if we
determine that the useful lives of our fixed assets are shorter
than we originally estimated. Over the last two fiscal years, we
have recorded various non-cash charges for the impairment of
goodwill and intangible assets. If global economic conditions
further deteriorate, the results of our operations may be
affected, and further impairment charges to our goodwill, or
impairment charges to our identifiable amortizable intangible
assets and property, plant and equipment, may be required. Such
additional charges could adversely impact our future results of
operations.
12
We
have substantial outstanding indebtedness and our outstanding
indebtedness could adversely impact our financial condition and
results of operations.
In July 2006, we issued $200.0 million of senior unsecured
guaranteed notes, which we refer to as the 2006 Senior Notes,
pursuant to a note purchase agreement (2006 Note Purchase
Agreement) and in July 2009 we issued $55.0 million of
senior unsecured guaranteed notes (which we refer to as the 2009
Senior Notes and, together with the 2006 Senior Notes, the
Senior Notes) pursuant to a note purchase agreement (2009 Note
Purchase Agreement, which agreement together with the 2006 Note
Purchase Agreement are referred to as the Note Purchase
Agreements). In addition, in July 2009 we and certain of our
direct and indirect subsidiaries entered into two letter of
credit facilities (Letter of Credit Agreements) and a South
African credit facility (South African Facilities Agreement). We
also have other credit, letter of credit and guarantee
facilities.
Our indebtedness could have important consequences to us and our
shareholders because we must dedicate funds to service our
outstanding debt which could limit our ability to use our
operating cash flows in other areas of our business or such
indebtedness may otherwise increase our vulnerability to general
adverse economic and industry conditions, including movements in
interest rates. As the interest rates payable pursuant to the
Letter of Credit Agreements and the South African Facilities
Agreement adjust, any such adjustments may increase our
vulnerability to movements in currencies as compared to the
U.S. dollar. Our indebtedness could also place us at a
competitive disadvantage as compared to our competitors that
have less debt as it could limit our ability to capitalize on
future business opportunities and to react to competitive
pressures or adverse changes.
We may
need additional financing to fund our operations, we will need
replacement financing for some of our indebtedness, and we may
not be able to obtain financing on terms acceptable to us or at
all.
We may need additional financing in the future to fund our
operations. In addition, when our various credit facilities
expire, we will need to obtain replacement financing. In certain
circumstances, we could be required to repay our outstanding
debt prior to the originally scheduled dates of maturity. For
example, if a Change of Control (as defined in the
Note Purchase Agreements, the Letter of Credit Agreements or the
South African Facilities Agreement) occurs or if we do not
comply with the covenants or other requirements in the Note
Purchase Agreements and our various credit facilities, our
outstanding indebtedness may be accelerated and we may not have
enough funds to satisfy all of our outstanding obligations under
the Senior Notes and such credit facilities.
Replacement or additional financing may involve incurring
additional debt or selling equity securities and may or may not
be available to us at such time on commercially reasonable terms
or otherwise. If we incur additional debt, the risks associated
with our business could increase. If we raise capital through
the sale of additional equity securities, the percentage
ownership of our shareholders will be diluted. In addition, any
new equity securities may have rights, preferences or privileges
senior to those of our ordinary shares. If we are unable to
timely secure replacement or additional financing when needed,
our financial condition and results of operations would likely
be adversely affected.
The
Letter of Credit Agreements, Note Purchase Agreements and South
African Facilities Agreement contain covenants imposing
operating and financial restrictions on us. Such covenants limit
our operating and financial flexibility and our failure to
comply with such covenants could result in an event of default
under these agreements.
The Letter of Credit Agreements and the Note Purchase Agreements
require that we maintain specified financial ratios and tests.
The South African Facilities Agreement contains financial
covenants applicable to the borrower group under that credit
facility. In addition, the Letter of Credit Agreements, Note
Purchase Agreements and South African Facilities Agreement
contain various other restrictions and covenants, including
covenants customary for these types of financings. These
covenants may restrict or may limit our ability to, among other
things:
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incur additional debt or pay dividends or make distributions on
our capital stock;
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create liens or negative pledges with respect to assets;
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make certain acquisitions, investments, loans or advances or
certain expenditures;
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13
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enter into agreements to lease real or personal property in
excess of certain thresholds or to enter into sale and leaseback
transactions;
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change the general nature of our business; or
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merge or consolidate with other companies or sell assets beyond
specified levels.
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The covenants, financial ratios and other restrictions in our
debt instruments may adversely impact our operations, our
ability to secure additional debt financing and our ability to
pursue available business opportunities, even if we believe such
actions would otherwise be advantageous. Our ability to comply
with these covenants, financial ratios and other restrictions
may be affected by events beyond our control, such as prevailing
trade volumes, adverse economic conditions and changes in the
competitive environment. We recently amended the financial
covenants in the Letter of Credit Agreements and in the 2009
Note Purchase Agreement and there can be no assurances that we
will be able to amend our debt instruments in the future. If we
do not comply with these covenants, financial ratios and other
restrictions and we are unable to obtain any necessary
amendments or waivers from the holders of our Senior Notes and
the lenders under any affected credit facility, the interest and
principal amounts outstanding under the Senior Notes and our
credit facilities may become immediately due and payable.
Furthermore, the Note Purchase Agreement, Letter of Credit
Agreements and the South African Facilities Agreement each
contain cross-default provisions with respect to other
indebtedness, giving the lenders under the Letter of Credit
Agreements and the South African Facilities Agreement and the
note holders under the Note Purchase Agreements the right to
declare a default if we default under other indebtedness in some
circumstances. Accordingly, defaults under debt agreements could
materially and adversely affect our financial condition and
results of operations.
Our
business transformation initiative, which we call 4asONE,
involves risks, could result in higher than expected costs or
otherwise adversely impact our operations and
profitability.
We are engaged in a multi-year technology-enabled, business
transformation initiative, which we refer to as 4asONE.
The goal of the 4asONE initiative is to establish a
single set of global processes for our freight forwarding
business and our global financial management. The scale and
anticipated future costs associated with the 4asONE
initiative are significant and we could incur significant
costs in excess of what we are planning to spend. Any technical
or other difficulties in developing or implementing this project
may result in delays, which in turn, may increase the costs of
the initiative. Currently, we operate numerous systems with
varying degrees of integration, which can lead to
inefficiencies, workarounds and rework. As such, delays in the
4asONE initiative will also delay cost savings and
efficiencies expected to result from the initiative. We may also
experience difficulties consolidating our current systems,
moving to a common set of operational processes and implementing
a successful change management process. These difficulties may
impact our clients and our ability to efficiently meet their
needs. Any such delays or difficulties may have a material and
adverse impact on our business, client relationships and
financial results.
We
conduct business throughout the world and our international
presence exposes us to potential difficulties and risks
associated with distant operations and to various global,
regional and local economic, regulatory, political and other
uncertainties and risks.
We conduct business throughout the world and a majority of our
business is conducted outside of the United States. We
anticipate that revenue from foreign operations will continue to
account for a significant amount of our future revenue. Our
international operations are directly related to and are
dependent on the volume of trade and the social, economic and
political conditions in various countries. For the fiscal year
ended January 31, 2010, approximately 69% of our revenues
were reported in our EMENA, Asia Pacific and Africa regions
combined and those regions accounted for approximately 66% of
our total assets as of January 31, 2010. Our international
operations and international commerce are influenced by many
factors, including:
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changes in a specific countrys or regions economic,
social and political conditions or governmental policies;
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natural disasters, epidemics, wars, acts of terrorism, civil
unrest and other disturbances;
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changes in international and domestic customs regulations;
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trade laws, tariffs, export quotas and other trade restrictions;
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difficulties in staffing, managing or overseeing diverse foreign
operations over large geographic distances, including the need
to implement appropriate systems, policies, benefits and
compliance programs;
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pricing restrictions and regulations imposed by foreign
governments;
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expropriation of our international assets or adverse changes in
tax laws and regulations;
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limitations on the repatriation of earnings or assets, including
cash;
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different liability standards and less developed legal systems
that may be less predictable than those in the United
States; and
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intellectual property laws of countries which do not protect our
intellectual property rights to the same extent as the laws of
the United States.
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The occurrence or consequences of any of these factors may
restrict our ability to operate in the affected region
and/or
decrease the profitability of our operations in that region.
Several
United States and other foreign governmental agencies are
investigating alleged anti-competitive behavior in the
international air cargo transportation industry, which includes
us, we have been named as a defendant in a federal antitrust
class action lawsuit that alleges that we engaged in various
forms of anti-competitive practices, and we may become subject
to other governmental investigations and may be named in
additional litigation, all of which have required, and could
continue to require, significant management time and attention
and could result in significant expenses as well as unfavorable
outcomes which could have a material adverse effect on our
business, financial condition, results of operations,
reputation, cash flow and prospects.
The United States Department of Justice (U.S. DOJ) and
several other governments, including the governments of Canada,
New Zealand, Switzerland, the United Kingdom and South Africa,
along with the European Union, have conducted inspections or
raids at local offices of global freight forwarders or have
issued subpoenas or requests for information in connection with
various investigations into alleged anti-competitive behavior in
the international air cargo transportation industry. In June
2007, we responded to a grand jury subpoena requesting documents
in connection with the U.S. DOJs investigation into
the pricing practices in the air cargo transportation industry
which had been served on us in June 2006. In October 2007, the
U.S. DOJ executed a search warrant on us at our offices in
Long Beach, California, and served one of our subsidiaries with
a grand jury subpoena requesting numerous documents and other
materials in connection with its investigation of the
international air cargo transportation industry. We believe that
we are a subject of the U.S. DOJ investigation.
In October 2007, we received a notice from the Canadian
Competition Bureau that the Bureau had commenced an
investigation with respect to alleged anti-competitive
activities of persons involved in the provision of international
freight forwarding services to and from Canada and requesting
that we preserve records relevant to such investigation. On
October 30, 2009, we received notice from the Canadian
Competition Bureau that it had closed its investigation and has
withdrawn its record preservation request. In October 2007, one
of our subsidiaries received a notice from the New Zealand
Commerce Commission that it was conducting an investigation in
relation to international freight forwarding services in New
Zealand and requesting that we provide documents and information
as they relate to New Zealand. In December 2007, our subsidiary
responded to this request. In June 2008 and February 2009, we
received requests for information issued by the European
Commission (EC) requesting information and records
relating to the ECs ongoing investigation of alleged
anti-competitive behavior relating to air freight forwarding
services in the European Union/European Economic Area. In July
2008 and March 2009, we responded to these requests. In May
2009, we learned that the Brazilian Ministry of Justice is
investigating possible alleged cartel activity in the
international air and ocean freight forwarding market and as of
the date of this filing, we have not been contacted by Brazilian
authorities regarding this matter. In November 2009, one of our
subsidiaries received a summons from the South African
Competition Commission requesting certain information and
records in connection with its ongoing investigation of alleged
anti-competitive behavior relating to the market
15
for air freight forwarding services in South Africa. In January
2010, we responded to this request. In February 2010, in
connection with the ECs investigation discussed above, the
EC sent a Statement of Objections to us and a number of other
freight forwarding and logistics providers. The Statement of
Objections alleges infringements of European Union competition
law with respect to various surcharges. We intend to present our
response to the ECs Statement of Objections in April 2010.
There can be no assurances that additional regulatory inquiries
or investigations will not be commenced by other U.S. or
foreign regulatory agencies. We do not know when or how the
above investigations or any future investigations will be
resolved or what, if any, actions the various governmental
agencies may require us
and/or any
of our current or former officers, directors and employees to
take as part of that resolution. We continue to receive
additional requests for information, documents and interviews
from various governmental agencies with respect to these
investigations and we have provided, and will provide in the
future, further responses as a result of such requests. A
conclusion by the U.S. DOJ, the EC or by another foreign
regulatory agency that we have engaged in anti-competitive
behavior or other unfavorable resolution of these investigations
could result in criminal sanctions
and/or fines
against us
and/or
certain of our current or former officers, directors and
employees. Dealing with investigations and regulatory inquiries
can be time consuming and distracting from the conduct of our
business. We have incurred, and expect to continue to incur,
significant legal fees and other costs in connection with these
governmental investigations.
In addition, we have been named, along with seven other large
European and North American-based global logistics providers, as
a defendant in a federal antitrust class action lawsuit filed in
January 2008. This lawsuit alleges that the defendants engaged
in various forms of anti-competitive practices and seeks an
unspecified amount of monetary damages and injunctive relief
under U.S. antitrust laws. There can be no assurance that
further lawsuits by parties who have allegedly suffered injury
in connection with these allegations will not be filed in the
future in the U.S. or in other jurisdictions or that
additional civil litigation will not result from the pending or
any future governmental investigations, including but not
limited to, shareholder class action lawsuits. There are
uncertainties associated with any litigation and the amount of
time necessary to resolve these current and potentially future
lawsuits is uncertain, and these matters could require
significant management and financial resources which could
otherwise be devoted to the operation of our business.
The resolution of the pending investigations by the
U.S. DOJ, the EC and other foreign governmental agencies,
the dealing with any future domestic or foreign governmental
investigations, the defense of our pending civil litigation, and
the defense of any additional litigation that may arise relating
to these matters could result in significant costs and expenses
and the diversion of the attention of key employees. If any of
the governmental investigations result in a determination
adverse to us
and/or our
current or former officers, directors and employees or if we do
not prevail in the civil litigation, we may be subject to
criminal prosecution and substantial fines and penalties and
liable for damages. Furthermore, any negative outcome or
publicity that may occur from these investigations and
litigation could impact our relationships with clients and our
ability to generate revenue. These or other negative
developments with respect to such governmental investigations or
civil litigation could harm our business, operating results,
cash flow, financial condition, reputation and prospects.
We
have grown in the past, and may grow in the future, through
acquisitions. Growth by acquisitions involves risks and we may
not be able to identify or acquire companies consistent with our
growth strategy or successfully integrate any acquired business
into our operations.
We have grown in the past and we may pursue future opportunities
to expand our business by acquiring other companies and business
operations.
Acquisitions involve risks, including those relating to:
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identification of appropriate acquisition candidates or
negotiation of acquisitions on favorable terms and valuations;
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integrating accounting management information, human resources
and other administrative systems to permit effective management;
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implementing or remediating controls, procedures and policies
appropriate for a larger public company at companies that prior
to the acquisition lacked these controls, procedures and
policies;
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possible write-offs or impairment charges resulting from
acquisitions;
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diversion of management attention;
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retention of senior managers, employees and clients; and
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unexpected or unanticipated costs, expenses and liabilities.
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Acquisitions may affect our short-term cash flow and net income
as we expend funds, increase indebtedness and incur additional
expenses in connection with pursuing acquisitions. We also may
issue our ordinary shares or other securities from time to time
as consideration for future acquisitions and investments. In the
event any such acquisition or investment is significant, the
number of our ordinary shares or other securities that we may
issue could in turn be significant. In addition, we may also
grant registration rights covering those ordinary shares or
other securities in connection with any such acquisitions and
investments. Acquisitions completed by us in the past have
included contingent earn-out arrangements which provide for
payments which may be made by us in cash which would reduce the
amount of cash available to us or could cause us to incur
additional indebtedness or cause us to issue additional shares
resulting in an increase in the number of our outstanding
shares. If we are not able to identify or acquire companies
consistent with our growth strategy or if we fail to
successfully integrate any acquired companies into our
operations, we may not achieve anticipated increases in revenue,
cost savings and economies of scale, and our operating results
may be adversely affected.
If we
fail to develop and integrate information technology systems or
we fail to upgrade or replace our information technology systems
to handle increased volumes and levels of complexity, meet the
demands of our clients and protect against disruptions of our
operations, our business could be seriously
harmed.
Increasingly, we compete for clients based upon the flexibility,
sophistication and security of the information technology
systems supporting our services. The failure of the hardware or
software that supports our information technology systems, the
loss of data contained in the systems, or the inability to
access or interact with our web site, could significantly
disrupt our operations, prevent clients from placing orders, or
cause us to lose inventory items, orders or clients. If our
information technology systems are unable to handle additional
volume for our operations as our business and scope of services
grow, our service levels, operating efficiency and future
transaction volumes will decline. In addition, we expect clients
to continue to demand more sophisticated, fully integrated
information technology systems from their supply chain services
providers. If we fail to hire qualified persons to implement,
maintain and protect our information technology systems or we
fail to upgrade or replace our information technology systems to
handle increased volumes and levels of complexity, meet the
demands of our clients and protect against disruptions of our
operations, we may lose inventory items, orders or clients,
which could seriously harm our business.
We are
dependent on key management personnel and the loss of any such
personnel could materially and adversely affect our
business.
Our future performance depends, in part, upon the continued
service of our key management personnel, including Eric W.
Kirchner (Chief Executive Officer and Director), William T.
Gates (Executive Vice President; President, Contract Logistics
and Distribution), Gene T. Ochi (Executive Vice President;
President, Client Growth), Lawrence R. Samuels (Executive Vice
President Finance and Chief Financial Officer),
Ronald S. Glickman (Senior Vice President and Chief Information
Officer), and Lance E. DAmico (Senior Vice
President Enterprise Support Services, Global
General Counsel and Secretary). The unplanned loss of the
services of one or more of these or other key personnel could
have a material adverse effect on our business, operating
results and financial condition. We must continue to develop and
retain a core group of management personnel and address issues
of succession planning if we are to realize our goal of growing
our business. We cannot assure that we will be successful in our
efforts.
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We are
dependent on our relationships with our agents, affiliates, key
employees and third-party carriers around the
world.
We conduct business in some countries using a local agent who
can provide knowledge of the local market conditions and
facilitate the acquisition of necessary licenses and permits. We
rely in part upon the services of these agents, as well as our
country-level executives, branch managers and other key
employees, to market our services, to act as intermediaries with
clients and to provide other services on our behalf. Our truck
brokerage operations also utilize the services of independent
agents and affiliated sales offices, and third-party carriers.
There can be no assurance that we will continue to be successful
in recruiting or maintaining our relationships with our agents,
affiliates or key employees in various foreign countries, or
that we will find qualified replacements for agents and key
employees who may terminate their relationships with us. Because
our agents and employees may occasionally have the primary
relationship with certain of our clients, we could lose some
clients if a particular agent or key employee were to terminate
his or her relationship with us. The loss of, or failure to
recruit, qualified agents or employees in a particular country
or region could result in the temporary or permanent cessation
of our operations
and/or the
failure to develop our business in that country or region and
adversely impact our business.
Foreign
currency fluctuations could result in currency translation
exchange gains or losses or could increase or decrease the book
value of our assets.
Our reporting currency is the U.S. dollar. For the fiscal
year ended January 31, 2010, we derived a substantial
portion of our revenue in currencies other than the
U.S. dollar and, due to the global nature of our
operations, we expect in the foreseeable future to continue to
conduct a significant amount of our business in currencies other
than our reporting currency. Appreciation or depreciation in the
value of other currencies as compared to our reporting currency
will result in currency translation exchange gains or losses
which, if the appreciation or depreciation is significant, could
be material. In those areas where our revenue is denominated in
a local currency rather than our reporting currency, a
depreciation of the local currency against the U.S. dollar
could adversely affect our reported U.S. dollar earnings,
as was the case in recent fiscal years. Additionally, the assets
and liabilities of our international operations are denominated
in each countrys local currency. As such, when the value
of those assets is translated into U.S. dollars, foreign
currency exchange rates may adversely affect the book value of
our assets. We cannot predict the effects of exchange rate
fluctuations on our future operating results.
Because
our freight forwarding and domestic ground transportation
operations are dependent on commercial airfreight carriers and
air charter operators, ocean freight carriers, major United
States railroads, other transportation companies, draymen and
longshoremen, changes in available cargo capacity and other
changes affecting such carriers, as well as interruptions in
service or work stoppages, may negatively impact our
business.
We rely on commercial airfreight carriers and air charter
operators, ocean freight carriers, trucking companies, major
United States railroads, other transportation companies, draymen
and longshoremen for the movement of our clients cargo.
Consequently, our ability to provide these services for our
clients could be adversely impacted by shortages in available
cargo capacity; changes by carriers and transportation companies
in policies and practices such as scheduling, pricing, payment
terms, routes of service and frequency of service or increases
in the cost of fuel, taxes and labor; and other factors not
within our control. Reductions in airfreight or ocean freight
capacity could negatively impact our yields if capacity is
adversely impacted and buying rates increase more rapidly than
the rates that we can pass on to our customers. Material
interruptions in service or stoppages in transportation, whether
caused by strike, work stoppage, lock-out, slowdown or
otherwise, could adversely impact our business, results of
operations and financial condition.
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Our
North American ground transportation businesses are subject to a
number of factors that are largely beyond our control, any of
which could have a material adverse effect on our results of
operations.
Our domestic ground transportation businesses could be
materially adversely affected by numerous risks beyond our
control including:
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potential liability to third parties and clients as a result of
accidents involving our employees, independent contractors or
third party carriers;
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increased insurance premiums, the unavailability of adequate
insurance coverage, or the solvency of our current insurance
providers;
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recruitment and retention of independent sales agents and
affiliates;
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interruptions in services or stoppages in transportation as a
result of labor disputes;
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changes in fuel costs and taxes;
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the ability to effectively pass through fuel cost increases to
our clients through commonly accepted fuel surcharges;
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the extremely competitive and fragmented nature of the trucking
and domestic ground transportation industry;
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changes in governmental regulations or legislation impacting the
transportation or trucking industry and unanticipated changes in
transportation rates; and
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potentially adverse effects from state and federal environmental
requirements, including, without limitation, new environmental
standards enacted by the California Air Resources Board, the
Port of Oakland, the Port of Los Angeles or the Port of Long
Beach.
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If any of these risks or others occur, then our business and
results of operations would be adversely impacted.
In addition, the trucking industry periodically experiences
difficulty in attracting and retaining qualified drivers,
including independent contractors and the shortage of qualified
drivers and independent contractors has been severe at times
during the past few years. If we are unable to continue
attracting an adequate number of drivers or contract with enough
independent contractors, we could be required to significantly
increase our driver compensation package or let trucks sit idle,
which could adversely affect our growth and profitability.
If we
are required to reclassify independent contractors as employees
in our trucking, truck brokerage or other carrier businesses, we
may incur additional costs and taxes which could have a material
adverse effect on our results of operations.
We use a significant number of independent contractors in our
trucking, truck brokerage and other carrier businesses.
Currently, there are a number of different tests used in
determining whether an individual is an employee or an
independent contractor and such tests generally take into
account multiple factors. There can be no assurance that
legislative, judicial, or regulatory (including tax) authorities
will not introduce proposals or assert interpretations of
existing rules and regulations that would change, or at least
challenge, the classification of our independent contractors.
Although we believe we have properly classified our independent
contractors, the U.S. Internal Revenue Service or other
U.S. federal or state authorities or similar authorities of
a foreign government may determine that we have misclassified
our independent contractors for employment tax or other purposes
and, as a result, seek additional taxes from us or attempt to
impose fines and penalties. In this regard, we are currently
involved in a dispute with the South African Revenue Service
which is attempting to claim that we are liable for
approximately $11.1 million, based on exchange rates as of
January 31, 2010, in employee taxes in respect of
owner drivers used for the collection and delivery
of cargo in that country. If we are required to change the
classification of our independent contractors, we may incur
additional costs and be required to pay additional taxes,
relating to past, present and future periods, which could have a
material adverse effect on our results of operations.
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Comparisons
of our operating results from period to period are not
necessarily meaningful and should not be relied upon as an
indicator of future performance.
Our operating results have fluctuated in the past and it is
likely that they will continue to fluctuate in the future
because of a variety of factors, many of which are beyond our
control. A substantial portion of our revenue is derived from
clients in industries whose shipping patterns are tied closely
to consumer demand. Therefore, historically, our operating
results have been subject to seasonal trends when measured on a
quarterly basis, excluding the impact of acquisitions and
foreign currency fluctuations. Our first and fourth fiscal
quarters are traditionally weaker compared with our second and
third fiscal quarters. Changes in our pricing policies and those
of our competitors and changes in the shipping patterns of our
clients may adversely impact our operating results. The
following additional factors, among others could also cause
fluctuations in our operating results:
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the recent global economic slowdown and the related impact on
global trade;
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personnel costs;
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costs relating to the expansion of operations;
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costs and revenue fluctuations due to acquisitions, dispositions
and the exiting of businesses;
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changes in accounting rules and tax rates;
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pricing and availability of cargo space on airlines, ships and
trucks which we utilize to transport freight;
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fluctuations in fuel prices and fuel and other surcharges;
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pricing pressures from our competitors;
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litigation and changes in government regulations;
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changes in our clients requirements for supply chain
services and solutions;
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restructuring charges and impairments to goodwill and other
intangible assets;
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client discounts and credits; and
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timing and magnitude of capital expenditures, including costs
associated with the 4asONE business transformation
initiative.
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Because our quarterly revenues and operating results vary
significantly, comparisons of our results from period to period
are not necessarily meaningful and should not be relied upon as
an indicator of future performance. Additionally, there can be
no assurance that our historic operating patterns will continue
in future periods as we cannot influence or forecast many of
these factors.
We may
not succeed with our long-term strategic operating plan, and as
a result, our revenue, results of operations and profitability
may be adversely impacted.
In connection with our five-year strategic operating plan, which
we refer to as CLIENTasONE, we
are undertaking various efforts to increase the number and size
of our clients and grow our revenue, improve our operational
performance, streamline our back-end operations, develop and
implement new systems and train and develop our employees. We
face numerous challenges in trying to achieve our objectives
under this strategic plan, including challenges involving
attempts to leverage client relationships, improve our systems
and implement effective change management programs. We also face
challenges developing, training and recruiting personnel. Our
industry is extremely competitive and our business is subject to
numerous factors and risks beyond our control. If we are not
able to successfully implement CLIENTasONE, our
efforts associated with this strategic plan may not result in
increased revenues or improved profitability. If we are not able
to increase our revenue or improve our profitability in the
future, our results of operations could be adversely affected.
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We
face intense competition in the freight forwarding, customs
brokerage, contract logistics, domestic ground transportation
and supply chain management industry.
The freight forwarding, customs brokerage, contract logistics,
domestic ground transportation and supply chain management
industry is intensely competitive and we expect it to remain so
for the foreseeable future. We face competition from a number of
companies, including many that have significantly greater
financial, technical and marketing resources. There are many
companies competing in one or more segments of the industry. We
also encounter competition from regional and local third-party
logistics providers, freight forwarders and integrated
transportation companies. In addition, clients increasingly are
turning to competitive bidding situations involving bids from a
number of competitors, including competitors that are larger
than us. We also face competition from air and ocean carriers,
computer information and consulting firms and contract
manufacturers, many of which are beginning to expand the scope
of their operations to include supply chain related services.
Increased competition could result in reduced revenues, reduced
margins or loss of market share, any of which would damage our
results of operations and the long-term or short-term prospects
of our business.
Our
effective income tax rate will impact our results of operations,
cash flow and profitability and the tax returns of some of our
subsidiaries are under review by various tax
authorities.
We have international operations and generate taxable income in
different countries throughout the world, with different
effective income tax rates. Our future effective income tax rate
will be impacted by a number of factors, including changes in
enacted statutory tax rates worldwide and the geographical
composition of our worldwide taxable income. Our effective tax
rate may be adversely impacted by minimum taxes in some
jurisdictions which are payable regardless of the level of our
pre-tax income in the jurisdiction. Additionally, we may not
fully realize tax benefits in certain of our jurisdictions where
our subsidiaries have incurred historical tax losses. From time
to time, our tax returns are audited by the Internal Revenue
Service (IRS) and the taxing authorities in other countries in
which we operate. If the tax laws of the countries in which we
operate are rescinded or changed or the United States or other
foreign tax authorities were to change applicable tax laws or
successfully challenge the manner or jurisdiction in which our
profits are recognized or our tax positions, our effective
income tax rate could increase or we could become obligated to
pay additional taxes, which would adversely impact our cash flow
and profitability.
Proposed
tax legislation in the United States and other jurisdictions in
which we operate could affect our ability to realize tax
benefits from operations in certain tax
jurisdictions.
We are incorporated in the British Virgin Islands and several of
our holding companies and operating companies are incorporated
in certain tax jurisdictions, including the British Virgin
Islands, the Netherlands Antilles, and Guernsey, Channel
Islands. In March 2009, U.S. Senator Carl Levin introduced
a bill that proposes to treat foreign corporations that are
publicly traded or have assets of $50.0 million or more and
the management and control of which occurs primarily in the
United States as U.S. domestic corporations for income tax
purposes. This could potentially subject us to additional United
States taxes, which would adversely impact our cash flow and
profitability. In addition, the bill proposes to treat all
U.S. dividend-based payments to
non-U.S. persons
as taxable income subject to withholding. The bill would also
significantly expand IRS reporting requirements for passive
foreign investment companies, although we are not currently a
passive foreign investment company and we do not anticipate
becoming a passive foreign investment company in the future (see
discussion in Item 5 below under the caption
Taxation-United
States Federal Income Tax Consequences below).
Because
we are a holding company, we are financially dependent on
receiving distributions from our subsidiaries and we could be
harmed if such distributions cannot be made in the
future.
We are a holding company and all of our operations are conducted
through subsidiaries. Consequently, we rely on dividends or
advances from our subsidiaries to meet our financial obligations
and to pay dividends on our ordinary shares. The ability of our
subsidiaries to pay dividends to us and our ability to receive
distributions on our investments in other entities is subject to
applicable local law and other restrictions including, but not
limited to, applicable tax laws and limitations contained in our
credit facilities. In general, our subsidiaries cannot pay
dividends to us in excess of their retained earnings and most
countries in which we conduct business require us to
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pay a distribution tax on all dividends paid. Such laws and
restrictions could limit the payment of dividends and
distributions to us which would restrict our ability to continue
operations.
Because
we manage our business on a localized basis in many countries
around the world, our operations and internal controls may be
materially adversely affected by inconsistent management
practices.
We manage our business in many countries around the world, with
local and regional management retaining responsibility for
day-to-day
operations, compliance issues, profitability and the growth of
the business. This operating approach can make it difficult for
us to implement strategic decisions and coordinated practices
and procedures throughout our global operations, including
implementing and maintaining effective internal controls
throughout our worldwide organization. In addition, some of our
subsidiaries operate with management, sales and support
personnel that may be insufficient to support their respective
businesses without regional oversight and global coordination.
Our decentralized operating approach could result in
inconsistent management practices and procedures and adversely
affect our overall profitability, and ultimately our business,
results of operations, financial condition and prospects.
There can be no assurances that we will be able to comply in
future years with the requirements and deadlines of
Section 404 of the Sarbanes-Oxley Act of 2002
(Section 404), particularly in light of our decentralized
management structure. A reported material weakness or the
failure to meet the reporting deadline of Section 404 could
result in an adverse reaction in the financial markets due to a
loss of confidence in the reliability of our financial
statements and this loss of confidence could cause a decline in
the market price of our stock.
If we
are not able to limit our liability for clients claims
through contract terms and limit our exposure through the
purchase of insurance, we could be required to pay large amounts
to our clients as compensation for their claims and our results
of operations could be materially adversely
affected.
In general, we seek to limit by contract
and/or
International Conventions and laws our liability to our clients
for loss or damage to their goods and losses arising from our
errors and omissions. However, these attempts are not always
successful. We have, from time to time, made payments to our
clients for claims related to our services and we expect to make
such payments in the future. Should we experience an increase in
the number or size of such claims or an increase in liability
pursuant to claims or unfavorable resolutions of claims, our
results could be adversely affected. There can be no assurance
that our insurance coverage will provide us with adequate
coverage for such claims or that the maximum amounts for which
we are liable in connection with our services will not change in
the future or exceed our insurance levels. As with every
insurance policy, our insurance policies contain limits,
exclusions and deductibles that apply and we could be subject to
claims for which insurance coverage may be inadequate or where
coverage is disputed, and these claims could adversely impact
our financial condition and results of operations. In addition,
significant increases in insurance costs could reduce our
profitability.
The
failure of our policies and procedures which are designed to
prevent the unlawful transportation or storage of hazardous,
explosive or illegal materials could subject us to large fines,
penalties or lawsuits.
We are subject to a broad range of foreign and domestic
(including state and local) environmental, health and safety and
criminal laws and regulations, including those governing
discharges into the air and water, the storage, handling and
disposal of solid and hazardous waste and the shipment of
explosive or illegal substances. In the course of our
operations, we may be asked to store, transport or arrange for
the storage or transportation of substances defined as hazardous
under applicable laws. If a release of hazardous substances
occurs on or from our facilities or equipment or from the
transporter, we may be required to participate in the remedy of,
or otherwise bear liability for, such release or be subject to
claims from third parties whose property or person are injured
by the release. In addition, if we store, transport or arrange
for the storage or transportation of hazardous, explosive or
illegal materials in violation of applicable laws or
regulations, we may face civil or criminal fines or penalties,
including bans on making future shipments in particular
geographic areas. In the event we are found to not be in
compliance with applicable environmental, health and safety laws
and regulations or there is a future finding that our policies
and procedures fail to satisfy requisite minimum safeguards or
otherwise do not comply with applicable laws or regulations, we
could be subject to large fines, penalties or lawsuits and face
criminal liability. In addition, if any damage or injury occurs
as a result of our storage or transportation of hazardous,
explosive or illegal materials, we
22
may be subject to claims from third parties, and bear liability,
for such damage or injury even if we were unaware of the
presence of the hazardous, explosive or illegal materials.
If we
fail to comply with applicable governmental regulations, we
could be subject to substantial fines or revocation of our
permits and licenses and we may experience increased costs as a
result of governmental regulation.
Our air transportation activities in the U.S. are subject
to regulation by the Department of Transportation as an indirect
air carrier and by the Federal Aviation Administration. We are
also subject to security measures and strict shipper and client
classifications by the Department of Homeland Security through
the TSA. Our overseas offices and agents are licensed as
airfreight forwarders in their respective countries of
operation, as necessary. We are accredited in each of our
offices by the International Air Transport Association (IATA) or
the Cargo Network Services Corporation, a subsidiary of IATA, as
a registered agent. Our indirect air carrier status is also
subject to the Indirect Air Carrier Standard Security Program
administered by the TSA. We are licensed as a customs broker by
the CBP in each United States customs district in which we do
business. All United States customs brokers are required to
maintain prescribed records and are subject to periodic audits
by the CBP. As a certified and validated party under the
self-policing C-TPAT, we are subject to compliance with security
regulations within the trade environment that are enforced by
the CBP. We are also subject to regulations under the Container
Security Initiative, or CSI, which is administered by the CBP.
Our foreign customs brokerage operations are licensed in and
subject to the regulations of their respective countries.
We are licensed as an ocean freight forwarder by and registered
as an ocean transportation intermediary with the Federal
Maritime Commission. The Federal Maritime Commission has
established qualifications for shipping agents, including surety
bonding requirements. The Federal Maritime Commission also is
responsible for the economic regulation of non-vessel operating
common carriers that contract for space and sell that space to
commercial shippers and other non-vessel operating common
carriers for freight originating or terminating in the
U.S. To comply with these economic regulations, vessel
operators and non-vessel operating common carriers are required
to publish tariffs that establish the rates to be charged for
the movement of specified commodities into and out of the
U.S. The Federal Maritime Commission has the power to
enforce these regulations by assessing penalties. For ocean
shipments not originating or terminating in the U.S., the
applicable regulations and licensing requirements typically are
less stringent than those that do originate or terminate in the
U.S.
As part of our contract logistics services, we operate owned and
leased warehouse facilities. Our operations at these facilities
include both warehousing and distribution services, and we are
subject to various national and state environmental, work safety
and hazardous materials regulations.
Certain of our U.S. trucking and truck brokerage operations
are subject to regulation by the FMCSA, which is an agency of
the U.S. Department of Transportation, and by various state
agencies. The FMCSA has broad regulatory powers with respect to
activities such as motor carrier operations, practices and
insurance. Interstate motor carrier operations are subject to
safety requirements prescribed by the FMCSA. Subject to federal
and state regulation, we may transport most types of freight to
and from any point in the U.S. The trucking industry is
subject to possible regulatory and legislative changes (such as
the possibility of more stringent environmental, safety or
security regulations or limits on vehicle weight and size) that
may affect the economics of the industry by requiring changes in
operating practices or the cost of providing truckload services.
We must comply with certain insurance and surety bond
requirements to act in this capacity. If we were found to be out
of compliance, our operations could be restricted or otherwise
adversely impacted.
We may experience an increase in operating costs, such as costs
for security, as a result of governmental regulations that have
been and will be adopted in response to terrorist activities and
potential terrorist activities. Compliance with changing
governmental regulations can be expensive. No assurance can be
given that we will be able to pass these increased costs on to
our clients in the form of rate increases or surcharges. We
cannot predict what impact future regulations may have on our
business. Our failure to maintain required permits or licenses,
or to comply with applicable regulations, could result in
substantial fines or the revocation of our operating permits and
licenses.
23
If we
are not able to sell container space that we commit to purchase
from ocean shipping lines, capacity that we purchase or that we
charter from our air carriers, and if we are not able to fully
utilize our truck capacity, we may not be able to recover our
out-of-pocket
costs and our profitability may suffer.
As an indirect ocean carrier or non-vessel operating common
carrier, we contract with ocean shipping lines to obtain
transportation for a fixed number of containers between various
points during a specified time period at fixed and variable
rates. As an airfreight forwarder, we contract with air carriers
to reserve space on a guaranteed basis and we also charter
aircraft capacity to meet peak season volume increases for our
clients, particularly in Hong Kong and other locations in Asia.
We then solicit freight from our clients to fill the ocean
containers and air charter capacity. When we contract with ocean
shipping lines to obtain containers and with air carriers to
obtain either reserved space or chartered aircraft capacity, we
may become obligated to pay for the container space or charter
aircraft capacity that we purchase, however, historically we
have not paid for space which remains unused. If we are not able
to sell all of our purchased container space or charter aircraft
capacity, we may not be able to recover our
out-of-pocket
costs for such purchase of container space or charter aircraft
capacity and our results would be adversely affected. We also
lease or own a number of trucks which are utilized in our
trucking business. If we are unable to efficiently utilize these
trucks, we will not be able to recover all of our expenses
associated with operating these trucks and our results would be
adversely affected.
If we
lose certain of our contract logistics clients or we cannot
maintain adequate levels of utilization in our shared
warehouses, then we may experience revenue losses and decreased
profitability.
As a contract logistics provider, we lease single-tenant
warehouses and distribution facilities from time to time under
leases with terms longer than the contract logistics services
contracts we have with our clients. We are required to pay rent
under these real property leases even if our clients decide not
to renew or otherwise terminate their agreements with us. As a
result, our earnings may be adversely affected if we are not
able to obtain new clients for these facilities. In addition, if
we experience a decline in demand for space in our shared
warehouses, then our revenues and earnings may decline as we
would continue to be obligated to pay the full amount of the
underlying leases.
If we
are not reimbursed for amounts which we advance for our clients,
our revenue and profitability may decrease.
We make significant disbursements on behalf of our clients for
transportation costs concerning collect freight and customs
duties and taxes and in connection with our performance of other
contract logistics services. The billings to our clients for
these disbursements may be several times larger than the amount
of revenue and fees we derive from these transactions. If we are
unable to recover a significant portion of these disbursements
or if our clients do not reimburse us for a substantial amount
of these disbursements in a timely manner, we may experience
revenue losses, decreased profitability and our cash flow may be
negatively impacted.
It may
be difficult for our shareholders to effect service of process
and enforce judgments obtained in United States courts against
us or our directors and senior managers who reside outside of
the United States.
We are incorporated in the British Virgin Islands. Some of our
directors and senior managers reside outside the United States,
and a majority of our assets are located outside the United
States. As a result, we have been advised by legal counsel in
the British Virgin Islands that it may be difficult or
impossible for our shareholders to effect service of process
upon, or to enforce judgments obtained in United States courts
against us or certain of our directors and senior managers,
including judgments predicated upon the civil liability
provisions of the federal securities laws of the United States.
24
Because
we are incorporated under the laws of the British Virgin
Islands, it may be more difficult for our shareholders to
protect their rights than it would be for a shareholder of a
corporation incorporated in another jurisdiction.
Our corporate affairs are governed by our Memorandum and
Articles of Association and by the BVI Companies Act, 2004
(No. 16 of 2004) of the British Virgin Islands.
Principles of law relating to such matters as the validity of
corporate procedures, the fiduciary duties of management and the
rights of our shareholders differ from those that would apply if
we were incorporated in the United States or another
jurisdiction. The rights of shareholders under British Virgin
Islands law are not as clearly established as are the rights of
shareholders in many other jurisdictions. Thus, shareholders may
have more difficulty protecting their interests in the face of
actions by our board of directors or shareholders than they
would have as shareholders of a corporation incorporated in
another jurisdiction.
Future
issuances of preference shares could adversely affect the
holders of our ordinary shares.
We are authorized to issue up to 100,000,000 preference shares,
of which 50,000,000 have been designated as Class A
preference shares and 50,000,000 have been designated as
Class B preference shares. Our board of directors may
determine the rights and preferences of the Class A and
Class B preference shares within the limits set forth in
our Memorandum and Articles of Association and applicable law.
Among other rights, our board of directors may determine,
without further vote or action by our shareholders, the
dividend, voting, conversion, redemption and liquidation rights
of our preference shares. Our board of directors may also amend
our Memorandum and Articles of Association to create from time
to time one or more classes of preference shares or to increase
the authorized number of preference shares. The issuance of any
preference shares could adversely affect the rights of the
holders of ordinary shares, and therefore reduce the value of
the ordinary shares. While currently no preference shares are
outstanding, no assurance can be made that we will not issue
preference shares in the future.
Our
Memorandum and Articles of Association contain anti-takeover
provisions which may discourage attempts by others to acquire or
merge with us and which could reduce the market value of our
ordinary shares.
Provisions of our Memorandum and Articles of Association may
discourage attempts by other companies to acquire or merge with
us, which could reduce the market value of our ordinary shares.
Provisions in our Memorandum and Articles of Association may
delay, deter or prevent other persons from attempting to acquire
control of us. These provisions include:
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the authorization of our board of directors to issue preference
shares with such rights and preferences determined by the board,
without the specific approval of the holders of ordinary shares;
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the division of our board of directors into three classes, each
of which is elected in a different year;
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the prohibition of action by the written consent of the
shareholders;
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the ability of our board of directors to amend our Memorandum
and Articles of Association without shareholder approval;
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the establishment of advance notice requirements for director
nominations and other proposals by shareholders for
consideration at shareholder meetings; and
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the requirement that the holders of two-thirds of the
outstanding shares entitled to vote at a meeting are required to
approve changes to specific provisions of our Memorandum and
Articles of Association (including those provisions described
above and others which are designed to discourage non-negotiated
takeover attempts); provided that as a prior condition to such
vote by the shareholders our board of directors has approved the
subject matter of the vote.
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In addition, our Articles of Association permit special meetings
of the shareholders to be called only by our board of directors
upon a resolution of the directors or by the directors upon the
written request of holders of more than 30% of our outstanding
voting shares. Our Articles of Association also contain a
provision limiting business combinations with any holder of 15%
or more of our shares unless the holder has held such shares for
three years or,
25
among other things, our board of directors has approved the
transaction. Provisions of British Virgin Islands law to which
we are subject could substantially impede the ability of our
shareholders to benefit from a merger, takeover or other
business combination involving us, discourage a potential
acquiror from making a tender offer or otherwise attempting to
obtain control of us, and impede the ability of our shareholders
to change our management and board of directors.
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ITEM 1B.
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Unresolved
Staff Comments
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None.
As of January 31, 2010, we leased, or in a limited number
of cases, owned, 551 facilities in 63 countries. These
facilities are generally comprised of office and warehouse
space. In most countries, these facilities typically are located
close to an airport, ocean port, or an important border
crossing. Leases for our principal properties generally have
terms ranging from three to ten years or more and often include
options to renew. While some of our leases are month-to- month
and others expire in the near term, we believe that our
facilities are adequate for our current needs and for the
foreseeable future.
As of January 31, 2010, we leased or owned the following
facilities in the geographic regions indicated:
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Contract
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Logistics
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Freight
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and
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Forwarding
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Distribution
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Facilities
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Centers
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Owned
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Leased
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Leased
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Total
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EMENA
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134
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43
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177
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Americas
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65
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67
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132
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Asia Pacific
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1
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103
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33
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137
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Africa
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6
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61
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38
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105
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Total
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7
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363
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181
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551
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Included in our leased facilities are single-client Contract
Logistics and Distribution facilities as well as shared
warehouses. In addition to the contract logistics centers
reported above, we also manage a further 53 contract logistics
centers which are located in the clients facilities.
Additional information regarding our lease commitments is set
forth in Note 16, Commitments in our
consolidated financial statements included in this annual
report, which is incorporated herein by reference.
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ITEM 3.
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Legal
Proceedings
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From time to time, claims are made against us or we may make
claims against others, including in the ordinary course of our
business, which could result in litigation. Claims and
associated litigation are subject to inherent uncertainties and
unfavorable outcomes could occur, such as monetary damages,
fines, penalties or injunctions prohibiting us from engaging in
certain activities. The occurrence of an unfavorable outcome in
any specific period could have a material adverse effect on our
results of operations for that period or future periods. As of
the date of this report, we are not a party to any material
litigation except as described below.
The company and one of its subsidiaries (along with sixteen
other global corporations) were named as defendants by a patent
holding company, in a patent infringement lawsuit filed on
May 7, 2009, in the United States District Court for the
Central District of California (Big Baboon, Inc. v. Dell
Inc., et. al.). The lawsuit alleges that the companys
eMpower software tools are infringing U.S. Patent Nos.
6,115,690 (the 690 patent) and 6,343,275
(the 275 patent). On July 20, 2009,
the company filed and served an amended answer and
counterclaims, in which the company answered the allegations in
the complaint, asserted various affirmative defenses thereto,
and asserted counterclaims against the plaintiff for a
declaratory judgment of non-infringement and invalidity of the
690 and 275
26
patents. The case is currently in its preliminary stages and no
amount of damages has been claimed by the plaintiff. It is not
currently believed that the infringement claims asserted will be
material to the company as a whole.
In June 2007, we responded to a grand jury subpoena requesting
documents in connection with the U.S. DOJs
investigation into the pricing practices in the international
freight forwarding and cargo transportation industry which had
been served on us in June 2006. On October 10, 2007, the
U.S. DOJ executed a search warrant on us at our offices in
Long Beach, California, and served one of our subsidiaries with
a subpoena requesting numerous documents and other materials in
connection with its investigation of the international freight
forwarding and cargo transportation industry. In addition to its
previous request for documents regarding air freight forwarding,
the U.S. DOJ also requested that we produce various
documents regarding ocean freight forwarding. We believe we are
a subject of the U.S. DOJ investigation.
On October 10, 2007, we also received a notice from the
Canadian Competition Bureau that the Bureau commenced an
investigation with respect to alleged anti-competitive
activities of persons involved in the provision of international
freight forwarding services to and from Canada and requesting
that we preserve records relevant to such investigation. On
October 30, 2009, we received notice from the Canadian
Competition Bureau that it had closed its investigation and has
withdrawn its record preservation request.
On October 25, 2007, one of our subsidiaries received a
notice from the New Zealand Commerce Commission that it was
conducting an investigation in relation to international freight
forwarding services in New Zealand and requesting that we
provide documents and information as it relates to New Zealand.
Our subsidiary responded to the request from the New Zealand
Commerce Commission on December 21, 2007.
In June 2008 and February 2009, we received requests for
information issued by the EC requesting information and records
relating to the ECs ongoing investigation of alleged
anti-competitive behavior relating to air freight forwarding
services in the European Union/European Economic Area. In July
2008 and March 2009, we submitted responses to these requests.
In May 2009, we learned that the Brazilian Ministry of Justice
is investigating possible alleged cartel activity in the
international air and ocean freight forwarding market and as of
the date of the filing of this report we have not been contacted
by Brazilian authorities regarding this matter.
In November 2009, one of our subsidiaries received a summons
from the South African Competition Commission requesting certain
information and records in connection with its ongoing
investigation of alleged anti-competitive behavior relating to
the market for freight forwarding services in South Africa. In
January 2010, we responded to this request.
In February 2010, in connection with the ECs investigation
discussed above, the EC sent a Statement of Objections to us and
a number of other freight forwarding and logistics providers.
The Statement of Objections alleges infringements of European
Union competition law with respect to various surcharges. We
intend to present our response to the ECs Statement of
Objections in April 2010.
We continue to receive additional requests for information,
documents and interviews from various governmental agencies with
respect to these investigations, and we have provided, and
expect to continue to provide in the future, further responses
as a result of such requests.
We (along with several other global logistics providers) have
been named as a defendant in a federal antitrust class action
lawsuit filed on January 3, 2008 in the United States
District Court of the Eastern District of New York (Precision
Associates, Inc., et. al. v. Panalpina World Transport
(Holding) Ltd., et. al.). This lawsuit alleges that the
defendants engaged in various forms of anti-competitive
practices and seeks an unspecified amount of treble monetary
damages and injunctive relief under U.S. antitrust laws.
We have incurred, and we expect to continue to incur,
significant legal fees and other costs in connection with these
governmental investigations and lawsuits. If the U.S. DOJ,
the EC, or any other regulatory body concludes that we have
engaged in anti-competitive behavior, we could incur significant
additional legal fees and other costs, which could include fines
and/or
penalties, which may be material to our consolidated financial
statements.
27
The company is involved in a dispute with the South African
Revenue Service where the company makes use of owner
drivers for the collection and delivery of cargo. The
South African Revenue Service is claiming that the company is
liable for employee taxes in respect of these owner drivers. The
company has strongly objected to this and together with its
expert legal and tax advisors, believes that the company is in
full compliance with the relevant sections of the income tax act
governing this situation and has no tax liability in respect of
these owner drivers. The amount claimed by the South African
Revenue Service is approximately $11.1 million based on
exchange rates as of January 31, 2010.
The company is involved in litigation in Italy (in various cases
filed in 2000 in the Court of Milan) and England (in a case
filed on April 13, 2000 in the High Court of Justice,
London) with the former ultimate owner of Per Transport SpA and
related entities, in connection with its April 1998 acquisition
of Per Transport SpA and its subsequent termination of the
employment services of the former ultimate owner as a
consultant. The suits seek monetary damages, including
compensation for termination of the former ultimate owners
consulting agreement. The company has brought counter-claims for
monetary damages in relation to warranty claims under the
purchase agreement. The total of all such actual and potential
claims, albeit duplicated in several proceedings, is
approximately $13.2 million, based on exchange rates as of
January 31, 2010. In connection with the Italian
litigation, legal proceedings have also been brought against a
former director and officer of the company and a current
employee of the company. The company has agreed to indemnify
these individuals in connection with these proceedings.
The company was previously engaged through various indirect
subsidiaries in the business of transportation and storage of
fine works of art. The company sold this business and the
related indirect subsidiaries during fiscal 2009. A client of
one of these subsidiaries has alleged that during several weeks
of June 2007 a malfunctioning climate-control unit at such
subsidiaries warehouses may have caused numerous works of
art to be exposed to humidity levels beyond what are considered
normal storage conditions. The company has received
communication from the client that several works of art may have
been affected by the humidity; however it is not known whether
the works have suffered any depreciation beyond normal
restoration costs. Although the company has sold this business,
the company has retained any liabilities associated with this
matter. The company believes that any ultimate liability it may
have as a result of a claim may be mitigated based on a number
of factors, including insurance policies in place; limitations
of liability imposed by the companys standard trading
conditions; as well as limitations of liability afforded by the
subsidiary relationship. If a claim does arise and the company
is unable to successfully mitigate its liability, the claim and
its related impact could be material to the companys
consolidated financial statements.
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PART II
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ITEM 5.
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Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
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Price
Range of our Ordinary Shares
Our ordinary shares trade on The Nasdaq Global Select Market
under the symbol UTIW. The high and low market prices for our
ordinary shares for each fiscal quarter during the last two
fiscal years are as follows:
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High
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Low
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Fiscal Year Ended January 31, 2010:
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4th Quarter
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$
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15.67
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$
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12.20
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3rd Quarter
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15.96
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11.94
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2nd Quarter
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14.34
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10.48
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1st Quarter
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14.08
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10.03
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Fiscal Year Ended January 31, 2009:
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4th Quarter
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$
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14.62
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$
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7.91
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3rd Quarter
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20.98
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8.67
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2nd Quarter
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24.35
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18.00
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1st Quarter
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22.27
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15.59
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As of March 26, 2010, the number of holders of record of
our ordinary shares was 239.
Dividend
Policy
During fiscal years 2010, 2009 and 2008, we paid an annual cash
dividend of $0.06 per ordinary share. In the past, our board of
directors has considered the declaration of dividends following
the completion of a fiscal year; however, in fiscal 2010 our
board of directors declared an annual dividend in September and
as of the filing date of this Annual Report, no determination
has been made with respect to fiscal 2011. Any future
determination to pay cash dividends to our shareholders will be
at the discretion of our board of directors and will depend upon
our financial condition, operating results, capital
requirements, restrictions contained in our agreements, legal
requirements and other factors which our board of directors
deems relevant. Our Articles of Association contain certain
limitations regarding the payment of dividends in accordance
with the laws of the British Virgin Islands. In addition, our
bank credit facilities contain limitations on our ability to pay
dividends. We intend to reinvest a substantial portion of our
earnings in the development of our business and no assurance can
be given that dividends will be paid to our shareholders at any
time in the future.
UTi is a holding company which relies on dividends or advances
from its subsidiaries to meet its financial obligations and to
pay dividends on its ordinary shares. The ability of UTis
subsidiaries to pay dividends to the company and UTis
ability to receive distributions is subject to applicable local
law and other restrictions including, but not limited to,
applicable tax laws and limitations contained in some of the
companys bank credit facilities and in the note purchase
agreements for the companys outstanding senior notes. Such
laws and restrictions could limit the payment of dividends and
distributions to the company which would restrict UTis
ability to continue operations. In general, UTis
subsidiaries cannot pay dividends in excess of their retained
earnings and most countries require that the subsidiaries pay a
distribution tax on all dividends paid. In addition, the amount
of dividends that UTis subsidiaries could declare may be
limited in certain countries by exchange controls. Total net
assets which may not be transferred to the company in the form
of loans, advances, or cash dividends by the companys
subsidiaries without the consent of a third party, were less
than 10% of the companys consolidated total net assets as
of the end of the most recent fiscal year.
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Performance
Graph
The following graph compares the cumulative total shareholder
return on the companys ordinary shares for the period
beginning January 31, 2005 through January 31, 2010
with the cumulative total return on (a) the NASDAQ
Composite Index and (b) the NASDAQ Transportation Index.
The graph assumes $100 was invested in the companys
ordinary shares and in each of the indices shown and assumes
that all of the dividends were reinvested.
The comparisons in this table are required by the SEC, and
therefore, are not intended to forecast or be indicative of
possible future performance of our ordinary shares.
COMPARISON
OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among
UTI Worldwide Inc., The NASDAQ Composite Index
And The NASDAQ Transportation Index
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* |
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$100 Invested on 1/31/05 in stock or index, including
reinvestment of dividends. Fiscal year ending January 31. |
This performance graph shall not be deemed filed for
purposes of Section 18 of the Securities Exchange Act of
1934, as amended, or the Exchange Act, and shall not be deemed
to be incorporated by reference into any filing of the company
under the Securities Act of 1933, as amended, or the Securities
Act.
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Transfer
Agent and Registrar
Our transfer agent and registrar is Computershare
Trust Company, 350 Indiana Street, Suite 800, Golden,
Colorado, 80401.
Exchange
Controls
There are currently no British Virgin Islands laws or
regulations restricting the import or export of capital or
affecting the payment of dividends or other distributions to
holders of our ordinary shares who are non-residents of the
British Virgin Islands.
Some of our subsidiaries may be subject from time to time to
exchange control laws and regulations that may limit or restrict
the payment of dividends or distributions or other transfers of
funds by those subsidiaries to our holding company.
Taxation
United
States Federal Income Tax Consequences
General
This section summarizes certain material United States Federal
income tax consequences to holders of our ordinary shares as of
the date of this report. The summary applies to you only if you
hold our ordinary shares as a capital asset for tax purposes
(that is, for investment purposes). The summary does not cover
state, local or foreign law. In addition, this summary does not
apply to you if you are a member of a class of holders subject
to special rules, such as:
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a dealer in securities or currencies;
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a trader in securities that elects to use a
mark-to-market
method of accounting for your securities holdings;
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a bank;
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a life insurance company;
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a real estate investment trust;
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a regulated investment company;
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a tax-exempt organization;
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a person that holds our ordinary shares as part of a straddle or
a hedging, integrated, constructive sale or conversion
transaction for tax purposes;
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a person whose functional currency for tax purposes is not the
U.S. dollar;
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a person liable for alternative minimum tax;
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a person that owns, or is treated as owning, 10% or more of any
class of our shares; or
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a person who is an expatriate of the United States.
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The discussion is based on current law as of the filing of this
annual report. Changes in the law may alter the tax treatment of
our ordinary shares, possibly on a retroactive basis. The
discussion also assumes that we will not be classified as a
controlled foreign corporation under U.S. law.
See Controlled Foreign Corporation below.
The discussion does not cover tax consequences that depend upon
your particular tax circumstances. We recommend that you consult
your tax advisor about the consequences of holding our ordinary
shares in your particular situation.
For purposes of the discussion below, you are a U.S. holder
if you are a beneficial owner of our ordinary shares who or
which is:
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an individual U.S. citizen or resident alien;
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31
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a corporation, or entity taxable as a corporation, that was
created, or treated as created, under U.S. law (federal or
state);
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an estate whose worldwide income is subject to U.S. Federal
income tax regardless of source; or
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a trust if (1) a U.S. court is able to exercise
primary supervision over its administration and (2) one or
more U.S. persons have authority to control all substantial
decisions of the trust.
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If you are not a U.S. holder, you are a
non-U.S. holder
and the discussion below titled Tax Consequences to
Non-U.S. Holders
will apply to you.
If a partnership holds our ordinary shares, the tax treatment of
a partner will generally depend upon the status of the partner
and upon the activities of the partnership. If you are a partner
of a partnership holding ordinary shares, you should consult
your tax advisor.
Tax
Consequences to U.S. Holders
Distributions
If we make any distributions on our ordinary shares, the gross
amount of any such distribution (other than in liquidation) that
you receive with respect to our ordinary shares generally will
be taxed to you as a dividend to the extent such distribution
does not exceed our current or accumulated earnings and profits,
as calculated for U.S. Federal income tax purposes. To the
extent any distribution exceeds our earnings and profits, as
calculated for U.S. Federal income tax purposes, the
distribution will first be treated as a tax-free return of
capital to the extent of your adjusted tax basis in our ordinary
shares and will be applied against and reduce such basis on a
dollar-for-dollar
basis (thereby increasing the amount of gain and decreasing the
amount of loss recognized on a subsequent disposition of such
common stock). To the extent that such distribution exceeds your
adjusted tax basis, the distribution will be taxed as gain
recognized on a sale or exchange of our ordinary shares. See
Sale or Other Disposition of our Ordinary Shares,
below. Dividends paid with respect to our ordinary shares will
generally be treated as foreign source passive
income. Because we are not a U.S. corporation,
dividends paid by us to corporations are not eligible for the
dividends-received deduction. A U.S. holder will not be
eligible to claim a foreign tax credit against its
U.S. Federal income tax liability for foreign taxes paid,
if any, by us unless it is a U.S. corporation owning 10% or
more of our voting stock.
Sale or
Other Disposition of our Ordinary Shares
In connection with the sale or other taxable disposition of our
ordinary shares:
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you will recognize a gain or loss equal to the difference (if
any) between the U.S. dollar value of the amount realized
on such sale or other taxable disposition, and your adjusted tax
basis in such ordinary shares;
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any gain or loss will be capital gain or loss and will be
long-term capital gain or loss if your holding period for our
ordinary shares is more than one year at the time of such sale
or other disposition;
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any gain or loss will be treated as having a United States
source for U.S. foreign tax credit purposes and as a result
of the foreign tax credit provisions of the Internal Revenue
Code of 1986. As a result, you may be unable to claim a foreign
tax credit for British Virgin Islands taxes, if any, imposed
upon the sale or disposition of ordinary shares; and
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your ability to deduct capital losses may be subject to
limitations.
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Passive
Foreign Investment company
We will be classified as a passive foreign investment company
for U.S. Federal income tax purposes if:
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75% or more of our gross income for the taxable year is passive
income; or
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on average for the taxable year, 50% or more of our assets by
value or under certain circumstances, by adjusted basis, produce
or are held for the production of passive income.
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32
We do not believe that we currently satisfy either of the
requirements for classification as a passive foreign investment
company. Because the determination of whether our ordinary
shares constitute shares of a passive foreign investment company
will be based upon the composition of our income and assets from
time to time, there can be no assurance that we will not be
considered a passive foreign investment company for any future
fiscal year.
If we are classified as a passive foreign investment company for
any taxable year, unless a qualified electing fund election is
made:
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any excess distributions (generally defined as the excess of the
amount received with respect to the shares in any taxable year
over 125% of the average received in the shorter of either the
three previous years or your holding period before the taxable
year) made by us during a taxable year must be allocated ratably
to each day of your holding period. The amounts allocated to the
current taxable year and to taxable years prior to the first
year in which we were classified as a passive foreign investment
company will be included as ordinary income in gross income for
that year. The amount allocated to each prior taxable year will
be taxed as ordinary income at the highest rate in effect for
the U.S. holder in that prior year and the tax is subject
to an interest charge at the rate applicable to deficiencies in
income taxes; and
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the entire amount of any gain realized upon the sale or other
disposition of ordinary shares will be treated as an excess
distribution made in the year of sale or other disposition and
as a consequence will be treated as ordinary income and to the
extent allocated to years prior to the year of sale or other
disposition, will be subject to the interest charge described
above.
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The passive foreign investment company rules will not apply if
the U.S. holder elects to treat us as a qualified electing
fund and we provide specific information required to make the
election. If we were classified as a passive foreign investment
company, we intend to notify U.S. holders and provide them
with that information as may be required to make the qualified
electing fund election effective. If the qualified election fund
election is made, a U.S. holder is taxed on its pro-rata
share of our ordinary earnings and net capital gain for each
taxable year of the company, regardless of whether the
distributions were received. The U.S. holders basis
in the ordinary shares will be increased to reflect taxed but
undistributed income. Distributions of income that had
previously been taxed will result in a corresponding reduction
in basis in the ordinary shares and will not be taxed again as a
distribution.
U.S. holders that own ordinary shares during any year in
which we are classified as a passive foreign investment company,
must file Form 8621. We urge you to consult your own
U.S. tax advisor regarding the U.S. Federal income tax
consequences of holding our shares while classified as a passive
foreign investment company.
Controlled
Foreign Corporation
If more than 50% of our shares (by vote or value) is owned,
directly or indirectly, by U.S. holders, each of whom owns,
or is deemed to own under certain attribution rules, 10% or more
of the total combined voting power of all classes of shares of
our company (for purposes of the following paragraph a 10%
Shareholder), we could be treated as a controlled
foreign corporation, or a CFC, under Subpart F of the
Code. It is unclear how controlling blocks of shares will be
valued for these purposes.
As of the date of this annual report, we do not believe that we
qualify as a CFC; however, no assurance can be given that we
will not become a CFC in the future if changes in our share
ownership occur. If we become a CFC, each 10% Shareholder would
be required to include in taxable income as a deemed dividend
its pro rata share of certain of our undistributed income and
certain investments by us in United States property, and all or
a portion of the gain from the sale or exchange of our ordinary
shares may be treated under Section 1248 of the Code as
dividend income. Neither us nor our advisors have the duty to or
will undertake to inform U.S. holders of changes in
circumstances that would cause us to become a CFC.
U.S. holders who may be 10% Shareholders should consult
their own tax advisors concerning our possible status as a CFC.
Information
Return and Backup Withholding
Distributions made by us with respect to our ordinary shares and
gross proceeds from the disposition of the shares may be subject
to information reporting requirements to the Internal Revenue
Service (IRS) and a 28%
33
backup withholding tax. However, the backup withholding tax will
generally not apply to a U.S. holder who furnishes a
correct taxpayer identification number and provides other
required information. If backup withholding applies, the amount
withheld is not an additional tax, but is credited against the
shareholders United States Federal income tax liability.
Accordingly, we urge you to contact your own tax advisor to
ascertain whether it is necessary for you to furnish any such
information to us or the Internal Revenue Service.
Tax
Consequences to
Non-U.S.
Holders
Distributions
If you are a
non-U.S. holder,
you generally will not be subject to U.S. Federal income
tax on distributions made on our ordinary shares unless:
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you conduct a trade or business in the United States; and
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the dividends are effectively connected with the conduct of that
trade or business (and, if an applicable income tax treaty so
requires as a condition for you to be subject to
U.S. Federal income tax on a net income basis in respect of
income from our ordinary shares, such dividends are attributable
to a permanent establishment that you maintain in the United
States).
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If you satisfy the two above-described requirements, you
generally will be subject to tax in respect of such dividends in
the same manner as a U.S. holder, as described above. In
addition, any effectively connected dividends received by a
non-U.S. corporation
may also, under some circumstances, be subject to an additional
branch profits tax at a 30% rate or such lower rate
as may be specified by an applicable income tax treaty.
Sale or
Other Disposition of our Ordinary Shares
If you are a
non-U.S. holder,
you will not be subject to U.S. Federal income tax,
including withholding tax, in respect of gain recognized on a
sale or other taxable disposition of our ordinary shares unless:
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your gain is effectively connected with a trade or business that
you conduct in the United States (and, if an applicable income
tax treaty so requires as a condition for you to be subject to
U.S. Federal income tax on a net income basis in respect of
gain from the sale or other disposition of our ordinary shares,
such gain is attributable to a permanent establishment
maintained by you in the United States); or
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you are an individual and are present in the United States for
at least 183 days in the taxable year of the sale or other
disposition, and either:
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your gain is attributable to an office or other fixed place of
business that you maintain in the United States; or
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you have a tax home in the United States.
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Effectively connected gains realized by a
non-U.S. corporation
may also, under some circumstances, be subject to an additional
branch profits tax at a rate of 30% or such lower
rate as may be specified by an applicable income tax treaty.
Backup
Withholding and Information Reporting
Payments (or other taxable distributions) in respect of our
ordinary shares that are made in the United States or by a
U.S. related financial intermediary will be subject to
U.S. information reporting rules. You will not be subject
to backup withholding of U.S. Federal income tax provided
that:
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you are a corporation or other exempt recipient; or
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you provide a social security number (which, in the case of an
individual, that is his or her taxpayer identification number)
and certify that no loss of exemption from backup withholding
has occurred.
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If you are a
non-U.S. holder,
you generally are not subject to information reporting and
backup withholding, but you may be required to provide a
certification of your
non-U.S. status
in order to establish that you are exempt.
34
Amounts withheld under the backup withholding rules may be
credited against your U.S. Federal income tax liability,
and you may obtain a refund of any excess amounts withheld under
the backup withholding rules by filing the appropriate claim for
refund with the Internal Revenue Service.
British
Virgin Islands Taxation
Under the BVI Business Companies Act, 2004 of the British Virgin
Islands as currently in effect, a holder of ordinary shares in a
BVI business company who is not a resident of the British Virgin
Islands is exempt from British Virgin Islands income tax on
dividends paid with respect to the ordinary shares and holders
of ordinary shares are not liable to the British Virgin Islands
for income tax on gains realized during that year on sale or
disposal of such shares; the British Virgin Islands does not
impose a withholding tax on dividends paid by a company
incorporated under the BVI Business Companies Act, 2004.
There are no capital gains, gift or inheritance taxes levied by
the British Virgin Islands on companies incorporated under the
BVI Business Companies Act, 2004. In addition, shares of
companies incorporated under the BVI Business Companies Act,
2004 are not subject to transfer taxes, stamp duties or similar
charges, except that a stamp duty may apply in respect of
certain transactions if such a company is a land owning company
(i.e. the company or any of its subsidiaries has an interest in
any land in the British Virgin Islands).
There is no income tax treaty or tax related convention
currently in effect between the United States and the British
Virgin Islands. The United States and British Virgin Islands do
have an agreement relating to mutual legal assistance for the
exchange of information relating to taxation between those
countries.
35
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ITEM 6.
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Selected
Financial Data
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The following selected consolidated financial data should be
read in conjunction with the consolidated financial statements
and related notes thereto and Part II, Item 7 of this
report appearing under the caption, Managements
Discussion and Analysis of Financial Condition and Results of
Operations and other financial data included elsewhere in
this report.
The selected consolidated balance sheet data as of
January 31, 2010 and 2009 and the selected consolidated
statement of operations data for each of the three years ended
January 31, 2010, have been derived from our audited
consolidated financial statements, which are included elsewhere
in this annual report. The selected consolidated balance sheet
data as of January 31, 2008, 2007 and 2006 and selected
consolidated statement of operations data for the years ended
January 31, 2007 and 2006, have been derived from our
audited consolidated financial statements not included in this
annual report.
The historical results are not necessarily indicative of the
operating results to be expected in the future. All financial
information presented has been prepared in U.S. dollars and
in accordance with accounting principles generally accepted in
the United States of America (U.S. GAAP).
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Year Ended January 31,
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2010
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2009
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2008
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2007
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2006
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(In thousands, except per share amounts)
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Note(5)
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Note(5)
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Note(5)
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STATEMENT OF OPERATIONS DATA:
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Revenues:(1)(2)(3)
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|
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Airfreight forwarding
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$
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1,187,880
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|
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$
|
1,621,602
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$
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1,553,551
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$
|
1,275,440
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$
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1,113,400
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Ocean freight forwarding
|
|
|
891,276
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|
|
|
1,203,643
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1,101,129
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|
|
|
937,559
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|
|
|
826,079
|
|
Customs brokerage
|
|
|
92,456
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|
|
|
109,436
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|
|
|
98,031
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|
|
|
86,144
|
|
|
|
80,845
|
|
Contract logistics(2)(3)
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|
650,739
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|
|
|
663,656
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|
|
|
618,599
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|
|
|
477,307
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|
|
|
408,851
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Distribution(3)
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|
414,920
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|
|
|
564,906
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|
|
|
624,399
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|
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548,499
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|
|
|
164,204
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|
Other(3)
|
|
|
330,251
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|
|
|
380,474
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|
|
|
370,545
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|
|
|
223,147
|
|
|
|
181,914
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
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Total revenues
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3,567,522
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|
|
|
4,543,717
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|
|
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4,366,254
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|
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|
3,548,096
|
|
|
|
2,775,293
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
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Purchased transportation costs:(1)
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|
|
|
|
|
|
|
|
|
Airfreight forwarding
|
|
|
904,179
|
|
|
|
1,275,569
|
|
|
|
1,235,010
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|
|
|
1,009,064
|
|
|
|
884,157
|
|
Ocean freight forwarding
|
|
|
717,093
|
|
|
|
1,001,275
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|
|
|
926,224
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|
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|
790,988
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|
|
|
707,733
|
|
Customs brokerage
|
|
|
5,712
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|
|
|
5,987
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|
|
|
3,668
|
|
|
|
2,263
|
|
|
|
2,451
|
|
Contract logistics
|
|
|
125,245
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|
|
|
94,963
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|
|
|
81,656
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|
|
|
66,666
|
|
|
|
62,631
|
|
Distribution
|
|
|
277,849
|
|
|
|
404,756
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|
|
|
416,059
|
|
|
|
335,557
|
|
|
|
52,720
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Other
|
|
|
176,443
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|
|
|
214,827
|
|
|
|
214,823
|
|
|
|
127,765
|
|
|
|
105,152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total purchased transportation costs
|
|
|
2,206,521
|
|
|
|
2,997,377
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|
|
|
2,877,440
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|
|
|
2,332,303
|
|
|
|
1,814,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Staff costs(4)
|
|
|
753,149
|
|
|
|
844,255
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|
|
|
800,891
|
|
|
|
639,209
|
|
|
|
543,969
|
|
Depreciation
|
|
|
43,994
|
|
|
|
41,753
|
|
|
|
39,306
|
|
|
|
33,060
|
|
|
|
22,709
|
|
Amortization of intangible assets
|
|
|
11,126
|
|
|
|
12,971
|
|
|
|
9,436
|
|
|
|
8,005
|
|
|
|
5,082
|
|
Restructuring charges(6)
|
|
|
1,231
|
|
|
|
8,903
|
|
|
|
8,395
|
|
|
|
|
|
|
|
|
|
Goodwill impairment(7)
|
|
|
1,562
|
|
|
|
98,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets impairment(8)
|
|
|
|
|
|
|
11,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating expenses
|
|
|
466,435
|
|
|
|
505,223
|
|
|
|
480,308
|
|
|
|
381,021
|
|
|
|
289,911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
83,504
|
|
|
|
23,294
|
|
|
|
150,478
|
|
|
|
154,498
|
|
|
|
98,778
|
|
Income from continuing operations
|
|
|
45,500
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|
|
|
(10,024
|
)
|
|
|
101,119
|
|
|
|
107,113
|
|
|
|
57,649
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
Note(5)
|
|
|
Note(5)
|
|
|
Note(5)
|
|
|
Net income/(loss) attributable to UTi Worldwide Inc.
|
|
$
|
41,114
|
|
|
$
|
(4,637
|
)
|
|
$
|
98,686
|
|
|
$
|
103,511
|
|
|
$
|
53,809
|
|
Basic earnings/(loss) per common share attributable to UTi
Worldwide Inc. common shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
0.41
|
|
|
$
|
(0.12
|
)
|
|
$
|
0.99
|
|
|
$
|
1.06
|
|
|
$
|
0.57
|
|
Discontinued operations
|
|
|
|
|
|
|
0.08
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.41
|
|
|
$
|
(0.04
|
)
|
|
$
|
1.00
|
|
|
$
|
1.06
|
|
|
$
|
0.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings/(loss) per common share attributable to UTi
Worldwide Inc. common shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
0.41
|
|
|
$
|
(0.12
|
)
|
|
$
|
0.99
|
|
|
$
|
1.04
|
|
|
$
|
0.55
|
|
Discontinued operations
|
|
|
|
|
|
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.41
|
|
|
$
|
(0.04
|
)
|
|
$
|
0.99
|
|
|
$
|
1.04
|
|
|
$
|
0.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid per common share
|
|
$
|
0.06
|
|
|
$
|
0.06
|
|
|
$
|
0.06
|
|
|
$
|
0.06
|
|
|
$
|
0.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of weighted average common shares outstanding used for
per share calculations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic shares
|
|
|
99,878
|
|
|
|
99,407
|
|
|
|
99,113
|
|
|
|
97,431
|
|
|
|
94,147
|
|
Diluted shares
|
|
|
101,458
|
|
|
|
99,407
|
|
|
|
100,172
|
|
|
|
99,562
|
|
|
|
98,042
|
|
BALANCE SHEET DATA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,937,046
|
|
|
$
|
1,648,686
|
|
|
$
|
2,074,676
|
|
|
$
|
1,660,078
|
|
|
$
|
1,222,305
|
|
Long-term liabilities(9)
|
|
$
|
190,363
|
|
|
$
|
190,106
|
|
|
$
|
270,331
|
|
|
$
|
287,834
|
|
|
$
|
55,125
|
|
|
|
|
(1) |
|
Refer to Note 1, Summary of Significant Accounting
Policies, to the consolidated financial statements
included in this annual report for revenue recognition policy. |
|
(2) |
|
We acquired Span America Holding Company, Inc. and Span
Manufacturing Limited, which we collectively refer to as Span,
in November 2006. Because of this acquisition and other
acquisitions, our contract logistics revenues increased from
fiscal year 2006 through fiscal year 2009 over the immediate
prior periods. Additional information regarding acquisitions and
the impact of acquisitions is included in Part II,
Item 7 of this report appearing under the caption,
Managements Discussion and Analysis of Financial
Condition and Results of Operations and in Note 2,
Acquisitions, in our consolidated financial
statements included in this annual report. |
|
(3) |
|
During the first quarter of fiscal 2008, as a result of the
increased proportions of distribution revenue, primarily due to
the acquisition of Market Transport Services in March 2006, the
company changed its disclosure of revenues by its principal
services. As a result, distribution revenues are now separately
reported. In previous periods, distribution revenues had been
combined with other revenues. Distribution revenues include our
North American ground transportation revenues. Additionally, in
connection with this change, certain related revenues previously
included in our contract logistics services have been
reclassified to distribution revenue. There were no changes in
airfreight forwarding, ocean freight forwarding, and customs
brokerage revenues. Additional information regarding our segment
reporting is included in Note 21, Segment
Reporting, in our consolidated financial statements
included in this annual report. |
|
|
|
|
|
(4) |
|
Included in total share-based compensation expense recognized
for the fiscal year ended January 31, 2007 was a credit of
$2.3 million, pre-tax. This included $7.7 million
related to stock options, $2.7 million related to
restricted share units and a credit of $12.6 million
related to our acquisition on January 25, 2002 of Grupo SLi |
37
|
|
|
|
|
and Union S.L., whereby a portion of the payments represents a
compensatory arrangement for the services of certain of the
selling shareholders of SLi, performed subsequent to the
acquisition date (SLi Share-based Compensation Arrangement) for
the year ended January 31, 2007. The total tax impact
recognized in the consolidated statements of operations for
share-based compensation for the year ended January 31,
2007 was a benefit of $2.1 million. Total share-based
compensation expense recognized for the year ended
January 31, 2006 was $37.6 million, pre-tax. This
included $5.2 million related to stock options and
restricted share units and $32.5 million related to the SLi
Share-based Compensation Arrangement for the year ended
January 31, 2006. The total tax impact recognized in the
consolidated statements of operations for share-based
compensation for the year ended January 31, 2006 was a
benefit of $0.9 million. |
|
(5) |
|
Effective July 31, 2008, the company sold substantially all
of its art packing, shipping and storing business, consisting of
the shares of three wholly-owned subsidiaries and one subsidiary
with 51% ownership interest, as well as the assets of a fine
arts department of another wholly-owned subsidiary. As of
January 31, 2009, the net proceeds of $8.7 million
resulted in a gain on sale of discontinued operations of
$7.4 million, net of tax. Refer to Note 20,
Discontinued Operations, in our consolidated
financial statements included in this annual report. As a result
of discontinued operations, fiscal years ended 2008, 2007 and
2006, respectively have been reclassified to conform to the
current year presentation. |
|
(6) |
|
Refer to Note 8, Restructuring and Impairments,
in our consolidated financial statements included in this annual
report. |
|
(7) |
|
During the fourth quarter ended January 31, 2009, the
company recorded a non-cash charge of $98.9 million, before
a related deferred tax benefit of $11.3 million, for
impairment of goodwill in the companys Contract Logistics
and Distribution segment. This charge was recorded as the result
of volatility and deterioration of the financial markets and
adverse changes in the global business climate, during the
second half of the fiscal year-ended January 31, 2009.
Refer to Note 7, Goodwill and Other Intangible
Assets, in our consolidated financial statements included
in this annual report. During the fourth quarter ended
January 31, 2010, the company recorded a non-cash charge of
$1.6 million for the impairment of goodwill in the
companys Contract Logistics and Distribution Segment in
accordance with FASB Codification Topic 250, Accounting for
Changes and Error Corrections (ASC 250) and the
correction of an error. Prior period amounts have not been
restated due to immateriality. There was no tax benefit as the
result of this charge. The additional impairment charge was
recorded in accordance with SEC Staff Accounting
Bulletin No. 108, Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in Current
Year Financial Statements (SAB 108). |
|
(8) |
|
During the fourth quarter ended January 31, 2009, the
company performed an evaluation of recoverability of its
long-lived assets and recorded non-cash charges of
$7.3 million, and $3.7 million for customer lists and
a trademark, respectively, in the companys Contract
Logistics and Distribution segment. These charges were before a
related combined deferred tax benefit of $3.9 million. |
|
(9) |
|
On July 9, 2009, we issued the $55.0 million 2009
Senior Notes. On July 13, 2006, we issued the
$200.0 million 2006 Senior Notes. Additional information
regarding the Senior Notes is discussed in Part II,
Item 7 of this report appearing under the caption,
Credit Facilities and Senior Notes, and in
Note 10, Borrowings, in our consolidated
financial statements included in this annual report. |
|
|
ITEM 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
Introduction
This managements discussion and analysis of financial
condition and results of operations is intended to provide
investors with an understanding of our financial condition,
changes in financial condition and results of operations.
We will discuss and provide our analysis in the following order:
|
|
|
|
|
Overview
|
|
|
|
Discussion of Operating Results
|
|
|
|
Liquidity and Capital Resources
|
38
|
|
|
|
|
Off-Balance Sheet Arrangements
|
|
|
|
Impact of Inflation
|
|
|
|
Critical Accounting Estimates
|
|
|
|
Recent Accounting Pronouncements
|
|
|
|
Reclassifications
|
Overview
We are an international, non-asset-based supply chain services
and solutions company that provides air and ocean freight
forwarding, contract logistics, customs clearances,
distribution, inbound logistics, truckload brokerage and other
supply chain management services. Our principal sources of
income include airfreight forwarding, ocean freight forwarding,
customs brokerage, contract logistics, distribution and other
supply chain management services.
The companys operations are principally managed by core
business operations. The factors for determining the reportable
segments include the manner in which management evaluates the
performance of the company combined with the nature of the
individual business activities. Our operations are aligned into
the following reportable segments: (i) Freight Forwarding
and (ii) Contract Logistics and Distribution. Corporate
office expenses, eliminations, and various holding companies
within the group structure are presented separately. In
conjunction with this change, certain costs that were previously
presented separately are now recorded in the Freight Forwarding
and Contract Logistics and Distribution segments. These changes
and reclassifications had no effect on the companys
reported earnings, or earnings per basic and diluted share. In
accordance with ASC 280, Segment Reporting, all prior
period segment information was reclassified to conform to this
new financial reporting presentation.
Freight Forwarding Segment. As a freight
forwarder, we conduct business as an indirect carrier for our
clients or occasionally as an authorized agent for airlines or
ocean carriers. We typically act as an indirect carrier with
respect to shipments of freight unless the volume of freight to
be shipped over a particular route is not large enough to
warrant consolidating such freight with other shipments. In such
situations, we usually forward the freight as an agent of the
client.
We do not own or operate aircraft or vessels, and consequently,
contract with commercial carriers to arrange for the shipment of
cargo. We arrange for, and in many cases provide,
pick-up and
delivery service between the carrier and the location of the
shipper or recipient.
When we act as an authorized agent for the client, we arrange
for the transportation of individual shipments to the airline or
ocean carrier. As compensation for arranging for the shipments,
the airline or ocean carrier pays us a commission. If we provide
the client with ancillary services, such as the preparation of
export documentation, we receive an additional fee.
As part of our freight forwarding services, we provide customs
brokerage services in the United States (U.S.) and most of the
other countries in which we operate. Within each country, the
rules and regulations vary, along with the level of expertise
that is required to perform the customs brokerage services. We
provide customs brokerage services in connection with a majority
of the shipments which we handle as both an air and ocean
freight forwarder. We also provide customs brokerage services in
connection with shipments forwarded by our competitors. In
addition, other companies may provide customs brokerage services
in connection with the shipments which we forward.
As part of our customs brokerage services, we prepare and file
formal documentation required for clearance through customs
agencies, obtain customs bonds, facilitate the payment of import
duties on behalf of the importer, arrange for payment of collect
freight charges, assist with determining and obtaining the best
commodity
39
classifications for shipments and perform other related
services. We determine our fees for our customs brokerage
services based on the volume of business transactions for a
particular client, and the type, number and complexity of
services provided. Revenues from customs brokerage and related
services are recognized upon completion of the services.
We believe that for our Freight Forwarding segment, net revenue
(the term used by us to describe revenue less purchased
transportation costs) is a better measure of growth in our
freight forwarding business than revenue because our revenue for
our services as an indirect air and ocean carrier includes the
carriers charges to us for carriage of the shipment. Our
revenues are also impacted by changes in fuel and similar
surcharges, which have little relation to the volume or value of
our services provided. When we act as an indirect air and ocean
carrier, our net revenue is determined by the differential
between the rates charged to us by the carrier and the rates we
charge our clients plus the fees we receive for our ancillary
services. Revenue derived from freight forwarding generally is
shared between the points of origin and destination, based on a
standard formula. Our revenue in our other capacities includes
only commissions and fees earned by us and is substantially
similar to net revenue for the Freight Forwarding segment in
this respect.
A significant portion of our expenses are variable and adjust to
reflect the level of our business activities. Other than
purchased transportation costs, staff costs are our single
largest variable expense and are less flexible in the near term
as we must staff to meet uncertain future demand.
Contract Logistics and Distribution
Segment. Our contract logistics services
primarily relate to value-added warehousing and the subsequent
distribution of goods and materials in order to meet our
clients inventory needs and production or distribution
schedules. Our services include receiving, deconsolidation and
decontainerization, sorting, put away, consolidation, assembly,
cargo loading and unloading, assembly of freight and protective
packaging, storage and distribution. Our outsourced services
include inspection services, quality centers and manufacturing
support. Contract logistics revenues are recognized when the
service has been completed in the ordinary course of business.
We also provide a range of distribution and other supply chain
management services, such as domestic ground transportation,
warehousing services, consulting, order management, planning and
optimization services, outsourced management services,
developing specialized client-specific supply chain solutions,
and customized distribution and inventory management services.
The Contract Logistics and Distribution segment includes the
distribution operations in the Africa region, previously
reported under Freight Forwarding, as this operation has evolved
from an air express to a road distribution business over the
last few years.
In contrast to the Freight Forwarding segment, we believe
revenue is a better measure of the growth in our contract
logistics and distribution business because this segment does
not incur carrier costs (and related fuel surcharges) in the
same manner as freight forwarding, and purchased transportation
costs under this segment primarily relate to the truck brokerage
operation in the Americas region.
A significant portion of our expenses are variable and adjust to
reflect the level of our business activities. Other than
purchased transportation costs, staff costs are our single
largest variable expense and are less flexible in the near term
as we must staff to meet uncertain future demand.
CLIENTasONE
Strategy
In connection with our five-year strategic operating plan, which
we refer to as CLIENTasONE, we
are undertaking various efforts to increase the number and size
of our clients and our revenue, improve our operational
performance, streamline our back-end operations, develop and
implement new systems and train and develop our employees. We
face numerous challenges in trying to achieve our objectives
under this strategic plan, including challenges involving
attempts to leverage client relationships, integrate
acquisitions, control costs, improve our systems and implement
effective change management processes. We also face challenges
developing, training and recruiting personnel. This strategic
operating plan requires that we successfully manage our
operations and growth which we may not be able to do as well as
we anticipate. Our industry is extremely competitive and our
business is subject to numerous factors and risks beyond our
control. If we are not able to successfully implement
40
CLIENTasONE, our efforts associated with this
strategic plan may not result in increased revenues or improved
profitability. If we are not able to increase our revenue or
improve our profitability in the future, our results of
operations could be adversely affected.
As a central part of our CLIENTasONE strategy, we
are continuing a technology-enabled, business transformation
initiative, which we refer to as 4asONE.
This program is aimed at establishing a single system and
set of global processes for our freight forwarding business and
global financial management. It is designed to increase
efficiency through the adoption of shared services and enabling
technologies. In order to achieve this goal, we intend to deploy
enabling technologies to support enterprise master data
management, financial management and freight forwarding
operations management. As with any significant IT-enabled
business transformation, we face various challenges and risks
with regard to our 4asONE program, including risks
associated with cost increases and changes to our scope,
anticipated cost structure, technical difficulties and delays
associated with the development and implementation of
4asONE. As a result of these and other issues, the
anticipated costs, expected benefits, overall scope
and/or
deployment schedule may change, and these changes may be
material.
Effect
of Foreign Currency Translation on Comparison of
Results
Our reporting currency is the U.S. dollar. However, due to
our global operations, we conduct and will continue to conduct
business in currencies other than our reporting currency. The
conversion of these currencies into our reporting currency for
reporting purposes will be affected by movements in these
currencies against the U.S. dollar. A depreciation of these
currencies against the U.S. dollar would result in lower
revenues reported; however, as applicable costs are also
converted from these currencies, costs would also be lower.
Similarly, the opposite effect will occur if these currencies
appreciate against the U.S. dollar. Additionally, the
assets and liabilities of our international operations are
denominated in each countrys local currency. As such, when
the values of those assets and liabilities are translated into
U.S. dollars, foreign currency exchange rates may adversely
impact the net carrying value of our assets. We cannot predict
the effects of foreign currency exchange rate fluctuations on
our future operating results.
Fiscal
2009 Information Technology Cost Reduction Plan and Other Cost
Reductions
On December 3, 2008, the companys Executive Board
approved an information technology restructuring plan designed
to consolidate the companys information technology
resources, eliminate redundancies, reduce costs and improve
client services. The information technology restructuring plan
included outsourcing certain information technology functions
and support, which has ultimately resulted in a reduction in the
companys global information technology workforce by
approximately 240 employees.
In connection with the information technology restructuring
plan, we incurred aggregate pre-tax restructuring charges of
$2.3 million in fiscal 2009. During the year ended
January 31, 2010, the company incurred aggregate pre-tax
restructuring charges of $1.2 million associated with the
information technology restructuring plan. As of
January 31, 2010, the company has completed the information
technology restructuring plan. All costs associated with the
plan were cash expenditures.
In addition to the restructuring charges described above, during
the year ended January 31, 2010 and 2009, the company
incurred $5.0 million and $1.1 million, respectively
in advisory and ancillary costs associated with the information
technology restructuring plan.
Fiscal
2008 Cost Reduction Measures
On January 31, 2008, we undertook several cost reduction
measures designed to streamline our operations and reduce our
costs. These measures, which we refer to collectively as the
2008 Cost Reduction Measures, were undertaken by us in response
to slowing growth in our net revenue, which is the term we use
to describe revenue less purchased transportation costs,
resulting from yield (computed as net revenues divided by
revenues) compression
41
and a slowing economy, as well as deterioration in the
performance of some of our under-performing operations. The 2008
Cost Reduction Measures included the following:
|
|
|
|
|
Exiting our retail distribution business in Africa, the surface
distribution operation of our integrated logistics business in
the Americas, and other selected non-performing operations;
|
|
|
|
Cancelling various long-term initiatives, such as the
development of certain industry verticals;
|
|
|
|
Reducing the number of aircraft which we charter, primarily on
the routes from Asia;
|
|
|
|
Exiting an unprofitable contract arrangement in connection with
a contract logistics site in the Americas; and
|
|
|
|
Realigning corporate and regional functions in an effort to
reduce our overhead costs.
|
As a result of the 2008 Cost Reduction Measures, we reduced our
global workforce by approximately 6% at the end of the second
fiscal quarter in fiscal 2009. We estimate that the 2008 Cost
Reduction Measures reduced annualized expenses by approximately
$109.0 million and resulted in annualized net revenue
reductions of $68.9 million.
In connection with the 2008 Cost Reduction Measures, the pre-tax
restructuring charges and costs included:
|
|
|
|
|
Employee severance and termination costs of $2.5 million
and $3.2 million were incurred during the fourth quarter of
fiscal 2008, and first quarter of fiscal 2009, respectively.
|
|
|
|
Asset impairment charges of $3.5 million were incurred
during the fourth quarter of fiscal 2008. No asset impairment
charges were incurred during fiscal 2009.
|
|
|
|
Contract termination and other costs of $2.4 million, and
$2.6 million were incurred during the fourth quarter of
fiscal 2008, and first quarter of fiscal 2009, respectively.
|
Discontinued
Operations
Effective July 31, 2008, the company sold substantially all
of its art packing, shipping and storing business, consisting of
the shares of three wholly-owned subsidiaries and one subsidiary
with 51% ownership interest, as well as the assets of a fine
arts department of another wholly-owned subsidiary. The net
proceeds of $8.7 million resulted in a gain on sale of
discontinued operations of $7.4 million, net of tax.
Goodwill
and Intangible Assets Impairment
Goodwill is the difference between the purchase price of a
company and the fair market value of the acquired companys
net assets. Other intangible assets with finite lives are being
amortized using the straight-line method over their estimated
lives.
Intangible assets with indefinite lives, including goodwill are
assessed at least annually for impairment in accordance with ASC
350, Intangibles Goodwill and Other. We
complete the required impairment test annually in the second
quarter, and also when evidence of potential impairment exists.
When it is determined that impairment has occurred, a charge to
operations is recorded. In order to test for potential
impairment, the company utilizes a discounted cash flow
analysis, corroborated by comparative market multiples where
appropriate.
The principal factors used in the discounted cash flow analysis
requiring judgment are the projected results of operations,
weighted average cost of capital (WACC), and terminal value
assumptions. The WACC takes into account the relative weight of
each component of the companys consolidated capital
structure (equity and debt) and represents the expected cost of
new capital adjusted as appropriate to consider risk profiles
specific to the company. The terminal value assumptions are
applied to the final year of the discounted cash flow model. Due
to the many variables inherent in the estimation of fair value
and the relative size of the companys recorded goodwill,
differences in assumptions may have a material effect on the
results of the impairment analysis.
We identified seven goodwill reporting units for the required
impairment test conducted in the second quarter of fiscal 2010,
and based on our results of the Step 1 testing, no impairment
charge resulted from such analysis. However, for two of the
companys reporting units, EMENA Contract Logistics and
Americas Distribution, the fair
42
values of the reporting unit assets exceeded the carrying values
by less than five percent. Due to the narrow margin of passing
the Step 1 goodwill impairment testing conducted in second
quarter of fiscal 2010, if the projected operational results are
not achieved, there is the potential for a partial or full
impairment of the goodwill value in fiscal 2011 or in future
years, particularly with respect to these two reporting units.
Several of the key assumptions for achieving the projected
operational results include certain revenue growth and operating
cost assumptions. As of January 31, 2010, the goodwill
carrying values for the EMENA Contract Logistics and Americas
Distribution reporting units were $5.4 million and
$79.9 million, respectively.
During the fourth quarter ended January 31, 2009, we
recorded a non-cash charge of $98.9 million, before a
related deferred tax benefit of $11.3 million, for
impairment of goodwill in our Contract Logistics and
Distribution segment. This charge was recorded as the result of
volatility and deterioration of the financial markets and
adverse changes in the global business climate, during the
second half of the fiscal year-ended January 31, 2009.
During the fourth quarter ended January 31, 2010, the
company recorded a non-cash charge of $1.6 million, for the
impairment of goodwill in the companys Contract Logistics
and Distribution Segment in accordance with ASC 250,
Accounting for Changes and Error Corrections and the
correction of an error. Prior period amounts have not been
restated due to immateriality. There was no tax benefit as the
result of this charge. The additional impairment charge was
recorded in accordance with SAB 108, Considering the
Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements.
Impairment
of Long-Lived Assets
If facts and circumstances indicate that the carrying amount of
identifiable amortizable intangibles and property, plant and
equipment may be impaired, we would perform an evaluation of
recoverability in accordance with ASC 360, Property, Plant
and Equipment. If an evaluation were required, we would
compare the estimated future undiscounted cash flows associated
with the asset to the assets carrying amount to determine
if a reduction to the carrying amount is required. If a
reduction is required, the carrying amount of an impaired asset
would be reduced to fair value.
During the fourth quarter ended January 31, 2009, the
company performed an evaluation of recoverability of its
long-lived assets and recorded non-cash charges of
$7.3 million and $3.7 million for customer lists and a
trademark, respectively, in the companys Contract
Logistics and Distribution Segment. These charges were before a
related combined deferred tax benefit of $3.9 million. No
evaluation was required in fiscal 2010.
Acquisitions
We have grown in the past and may grow, in the future, through
acquisitions. We completed three acquisitions during fiscal
2010. These acquisitions, along with our other acquisitions over
the past five years, have had, and will have, a significant
effect on the comparability of our operating results, increasing
revenues and expenses, over the respective prior periods and to
subsequent years, depending on the date of acquisition (i.e.,
acquisitions made on February 1, the first day of our
fiscal year, will only affect a comparison with the prior
years results). The results of acquired businesses are
included in our consolidated financial statements from the
effective dates of their respective acquisitions. We consider
the operating results of an acquired company during the year
following the date of its acquisition to be an acquisition
impact or a benefit from acquisitions.
Thereafter, we consider the growth in an acquired companys
results to be organic growth. Historically, we have financed
acquisitions with a combination of cash from operations and
borrowed money. We may borrow additional money or issue ordinary
shares in the future to finance acquisitions. From
time-to-time
we enter into non-binding letters of intent with potential
acquisition targets and we are often in various stages of due
diligence and preliminary negotiations with respect to potential
acquisition targets.
We cannot assure you that we will be able to consummate
acquisitions in the future on terms acceptable to us, or at all,
in which case our rate of growth may be negatively impacted. We
may not be successful in integrating the companies we have
acquired, or those we may acquire in the future, and we may not
achieve the expected financial results, including cost savings
in the anticipated timeframes, if at all. Future acquisitions
are accompanied by the risk that the liabilities of any such
acquired company may not be adequately reflected in the
historical financial
43
statements of such company and the risk that such historical
financial statements may be based on assumptions that are
incorrect or inconsistent with our assumptions. To the extent we
make additional acquisitions in the future, the risks associated
with our acquisition strategy will be exacerbated. Readers are
urged to carefully read all cautionary statements contained in
this
Form 10-K
relating to acquisitions, including, without limitation, those
contained under the heading Risk Factors, contained
in Item 1A of this
Form 10-K.
Effective December 21, 2009, the company acquired the
remaining outstanding shares of an Israeli subsidiary EMA
Israel, of which the company had already held a 50% ownership
interest that was acquired through its acquisition of its parent
company in the beginning of fiscal 2010. The purchase price
totaled $6.5 million, including the repayment of a
$0.5 million loan and contingent consideration of
$0.3 million which is based on projected net revenues from
a particular customer for the next four years. The contract
consideration was accrued as an obligation through an increase
to goodwill. The acquisition eliminated a minority shareholder
in Israel. The purchase price exceeded the fair value of the
noncontrolling interest received and net assets acquired, and
accordingly, $2.0 million was allocated to goodwill, all of
which is included with the companys Contract Logistics and
Distribution segment. The company is currently determining
whether the goodwill is deductible for tax purposes. The
estimated purchase price allocation is preliminary and is
subject to revision. A valuation of the additional net assets
acquired is being conducted and the final allocation will be
made when completed.
Effective February 4, 2009, the company acquired all of the
issued and outstanding shares of Multi Purpose Logistics, Ltd.,
which we have subsequently renamed to UTi M.P.L. Ltd. (MPL), for
a purchase price of $1.1 million, net of cash acquired of
$0.4 million. MPL is an Israeli company providing logistics
services and held a 50% ownership interest in EMA Israel at the
time of acquisition. As a result of this acquisition, the
company has increased its range of services provided in Israel.
The total cost of the acquisition has been allocated to the
assets acquired and liabilities assumed based upon their
estimated fair values at the date of the acquisition. Subsequent
to the acquisition date, the company conducted additional
valuation work on the customer relationships identified and
refined its estimates previously recorded during the year.
During the fourth quarter of fiscal 2010, the company finalized
the valuation of such intangible assets and the allocation of
the purchase price. The final allocation resulted in an excess
of the purchase price over the fair value of the acquired net
assets, and accordingly $2.5 million was allocated to
goodwill, all of which is included within the companys
Contract Logistics and Distribution segment. The company
determined that none of the goodwill is deductible for tax
purposes.
Effective October 16, 2009, the company acquired all of the
issued and outstanding shares of Tacisa Transitaria, S.L.
(Tacisa), a Spanish freight forwarder. An employee of one of the
companys Spanish subsidiaries held a majority ownership
interest in Tacisa prior to the companys acquisition. The
purchase price totaled $5.5 million, net of cash acquired
of $0.8 million, and including contingent consideration of
$4.7 million based on projected 2010 operating results of
Tacisa. The contingent consideration was accrued as an
obligation with a corresponding increase to goodwill. The
acquisition expanded the companys freight forwarding
coverage in Spain. The total cost of the acquisition has been
allocated to the assets acquired and the liabilities assumed
based on their estimated fair values at the date of acquisition.
The preliminary allocation resulted in an excess of the purchase
price over the fair value of the acquired net assets, and
accordingly, $2.5 million was allocated to goodwill, all of
which is included in the companys Freight Forwarding
segment.
Effective September 20, 2007, the company acquired 50% of
the issued and outstanding shares of Newlog Ltd., which we refer
to as Newlog, an Israeli company involved in freight forwarding
and customs brokerage, for a purchase price of approximately
$6.5 million in cash. Effective October 8, 2007, the
company completed a merger agreement to which Newlog merged with
and into a wholly-owned Israeli indirect subsidiary of the
company. We refer to the merger transaction with Newlog as the
Newlog Merger. As a result of these transactions, the company
owns 75% of the shares of the surviving corporation. The company
has accounted for these transactions in accordance with ASC 850,
Business Combinations. Accordingly, a gain of
$3.2 million was recorded in the consolidated statements of
operations for the year ended January 31, 2008. This gain
represents the excess of the fair value received pursuant to the
Newlog Merger over the carrying amount of the wholly owned
Israeli indirect subsidiary contributed.
Effective October 16, 2007, the company acquired certain
assets and liabilities of Transclal Trade Ltd., an Israeli
company, which we refer to as Transclal, involved in freight
forwarding and customs brokerage, for a
44
purchase price of approximately $36.9 million in cash. We
refer to the Newlog Merger and the acquisition of certain assets
and liabilities of Transclal Trade Ltd. as the Israel
Acquisition. The total cost of the acquisition has been
allocated to the assets acquired and the liabilities assumed
based upon their estimated fair value at the date of the
acquisition. Subsequent to the acquisition date, the company
conducted additional valuation work on the customer
relationships identified and refined its estimates previously
recorded in fiscal 2008. The final allocation resulted in an
excess of the purchase price over the fair value of identified
net tangible and intangible assets, and accordingly,
$30.8 million was allocated to goodwill.
Effective September 6, 2007, we acquired 100% of the issued
and outstanding shares of Chronic Solutions Company
(Proprietary) Limited and its subsidiaries, which we
collectively refer to as CSC, for an initial cash payment of
approximately $5.2 million, net of cash received. CSC is a
distributor of specialized and chronic pharmaceuticals located
in Johannesburg, South Africa. As a result of this acquisition,
the company increased its range of services to the
pharmaceutical industry in South Africa. In addition to the
initial payment and subject to certain regulations coming into
effect within three to five years from the effective date of the
acquisition, the terms of the acquisition agreement provide for
an additional payment of up to a maximum of approximately
$8.0 million, based on a recalculation of CSCs
earnings from September 1, 2006 through the effective date
of the acquisition.
The initial cost of the CSC acquisition has been allocated to
the assets acquired and the liabilities assumed based upon their
estimated fair value at the date of the acquisition. Subsequent
to the acquisition date, the company conducted additional
valuation work on the customer relationships and other
intangible assets identified and refined its estimates recorded
previously in fiscal 2008. The final allocation resulted in an
excess of the purchase price over the fair value of identified
net tangible and intangible assets, and accordingly,
$2.7 million was allocated to goodwill.
Effective August 17, 2007, we acquired the remaining
outstanding shares of our South African subsidiary, Co-ordinated
Investment Holdings (Pty) Ltd and its subsidiaries Co-ordinated
Materials Handling (Pty) Ltd. and UTi CMH Sub Assembly (Pty)
Ltd., of which we had already owned 50%, for a total
consideration of approximately $12.7 million.
Discussion
of Operating Results
The following discussion of our operating results explains
material changes in our consolidated results of operations for
fiscal 2010 and fiscal 2009 compared to the respective prior
years. The discussion should be read in conjunction with the
consolidated financial statements and related notes included
elsewhere in this report. This discussion contains
forward-looking statements, the accuracy of which involves risks
and uncertainties, and our actual results could differ
materially from those anticipated in the forward-looking
statements for many reasons, including, but not limited to,
those factors described in Part I, Item 1A under the
heading, Risk Factors, and elsewhere in this report.
We disclaim any obligation to update information contained in
any forward-looking statement. Our consolidated financial
statements attached to this report have been prepared in
U.S. dollars and in accordance with U.S. GAAP.
Segment
Operating Results
The company changed its segment reporting in the fiscal 2009
first quarter to reflect the realignment of its management
structure around its core business operations. The factors for
determining the reportable segments include the manner in which
management evaluates the performance of the company combined
with the nature of the individual business activities. As a
result of this change, the companys reportable business
segments are (i) Freight Forwarding and (ii) Contract
Logistics and Distribution. The Freight Forwarding segment
includes airfreight forwarding, ocean freight forwarding,
customs brokerage and other related services. The Contract
Logistics and Distribution segment includes all operations
providing contract logistics, distribution and other related
services. Corporate office expenses, eliminations, and various
holding companies within the group structure have been presented
separately. In conjunction with this change, certain costs that
were previously presented separately are now recorded in the
Freight Forwarding and Contract Logistics and Distribution
segments. These changes and reclassifications had no effect on
the companys reported earnings, or earnings per basic and
diluted
45
share. In accordance with Statement ASC 280, Segment
Reporting, all prior period segment information was
reclassified to conform to this new financial reporting
presentation.
For segment reporting purposes by geographic region, airfreight
and ocean freight forwarding revenues for the movement of goods
is attributed to the country where the shipment originates.
Revenues for all other services (including contract logistics
and distribution services) are attributed to the country where
the services are performed. All comparative figures have been
re-classified to reflect the above changes. Our revenues and
operating income by operating segment for the years ended
January 31, 2010, 2009 and 2008, along with the dollar
amount of the changes and the percentage changes between the
time periods shown, are set forth in the following tables (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
Contract
|
|
|
|
|
|
|
|
|
|
|
|
Contract
|
|
|
|
|
|
|
|
|
|
|
|
|
Logistics
|
|
|
|
|
|
|
|
|
|
|
|
Logistics
|
|
|
|
|
|
|
|
|
|
Freight
|
|
|
and
|
|
|
|
|
|
|
|
|
Freight
|
|
|
and
|
|
|
|
|
|
|
|
|
|
Forwarding
|
|
|
Distribution
|
|
|
Corporate
|
|
|
Total
|
|
|
Forwarding
|
|
|
Distribution
|
|
|
Corporate
|
|
|
Total
|
|
|
Revenues
|
|
$
|
2,351,093
|
|
|
$
|
1,216,429
|
|
|
$
|
|
|
|
$
|
3,567,522
|
|
|
$
|
3,156,039
|
|
|
$
|
1,387,678
|
|
|
$
|
|
|
|
$
|
4,543,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased transportation costs
|
|
|
1,755,435
|
|
|
|
451,086
|
|
|
|
|
|
|
|
2,206,521
|
|
|
|
2,438,756
|
|
|
|
558,621
|
|
|
|
|
|
|
|
2,997,377
|
|
Staff costs
|
|
|
346,087
|
|
|
|
392,307
|
|
|
|
14,755
|
|
|
|
753,149
|
|
|
|
396,019
|
|
|
|
439,569
|
|
|
|
8,667
|
|
|
|
844,255
|
|
Depreciation
|
|
|
15,410
|
|
|
|
27,835
|
|
|
|
749
|
|
|
|
43,994
|
|
|
|
15,605
|
|
|
|
25,924
|
|
|
|
224
|
|
|
|
41,753
|
|
Amortization of intangible assets
|
|
|
3,850
|
|
|
|
7,276
|
|
|
|
|
|
|
|
11,126
|
|
|
|
3,896
|
|
|
|
9,075
|
|
|
|
|
|
|
|
12,971
|
|
Restructuring charges
|
|
|
|
|
|
|
|
|
|
|
1,231
|
|
|
|
1,231
|
|
|
|
2,731
|
|
|
|
3,863
|
|
|
|
2,309
|
|
|
|
8,903
|
|
Goodwill impairment
|
|
|
|
|
|
|
1,562
|
|
|
|
|
|
|
|
1,562
|
|
|
|
|
|
|
|
98,932
|
|
|
|
|
|
|
|
98,932
|
|
Intangible assets impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,009
|
|
|
|
|
|
|
|
11,009
|
|
Other operating expenses
|
|
|
163,438
|
|
|
|
284,923
|
|
|
|
18,074
|
|
|
|
466,435
|
|
|
|
172,505
|
|
|
|
314,146
|
|
|
|
18,572
|
|
|
|
505,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
2,284,220
|
|
|
|
1,164,989
|
|
|
|
34,809
|
|
|
|
3,484,018
|
|
|
|
3,029,512
|
|
|
|
1,461,139
|
|
|
|
29,772
|
|
|
|
4,520,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income/(loss)
|
|
$
|
66,873
|
|
|
$
|
51,440
|
|
|
$
|
(34,809
|
)
|
|
$
|
83,504
|
|
|
$
|
126,527
|
|
|
$
|
(73,461
|
)
|
|
$
|
(29,772
|
)
|
|
$
|
23,294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change to Year Ended January 31, 2010
|
|
|
|
from Year Ended January 31, 2009
|
|
|
|
Amount
|
|
|
Percentage
|
|
|
|
|
|
|
Contract
|
|
|
|
|
|
|
|
|
|
|
|
Contract
|
|
|
|
|
|
|
|
|
|
|
|
|
Logistics
|
|
|
|
|
|
|
|
|
|
|
|
Logistics
|
|
|
|
|
|
|
|
|
|
Freight
|
|
|
and
|
|
|
|
|
|
|
|
|
Freight
|
|
|
and
|
|
|
|
|
|
|
|
|
|
Forwarding
|
|
|
Distribution
|
|
|
Corporate
|
|
|
Total
|
|
|
Forwarding
|
|
|
Distribution
|
|
|
Corporate
|
|
|
Total
|
|
|
Revenues
|
|
$
|
(804,946
|
)
|
|
$
|
(171,249
|
)
|
|
$
|
|
|
|
$
|
(976,195
|
)
|
|
|
(26
|
)%
|
|
|
(12
|
)%
|
|
|
|
%
|
|
|
(21
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased transportation costs
|
|
|
(683,321
|
)
|
|
|
(107,535
|
)
|
|
|
|
|
|
|
(790,856
|
)
|
|
|
(28
|
)
|
|
|
(19
|
)
|
|
|
|
|
|
|
(26
|
)
|
Staff costs
|
|
|
(49,932
|
)
|
|
|
(47,262
|
)
|
|
|
6,088
|
|
|
|
(91,106
|
)
|
|
|
(13
|
)
|
|
|
(11
|
)
|
|
|
70
|
|
|
|
(11
|
)
|
Depreciation
|
|
|
(195
|
)
|
|
|
1,911
|
|
|
|
525
|
|
|
|
2,241
|
|
|
|
(1
|
)
|
|
|
7
|
|
|
|
234
|
|
|
|
5
|
|
Amortization of intangible assets
|
|
|
(46
|
)
|
|
|
(1,799
|
)
|
|
|
|
|
|
|
(1,845
|
)
|
|
|
(1
|
)
|
|
|
(20
|
)
|
|
|
|
|
|
|
(14
|
)
|
Restructuring charges
|
|
|
(2,731
|
)
|
|
|
(3,863
|
)
|
|
|
(1,078
|
)
|
|
|
(7,672
|
)
|
|
|
(100
|
)
|
|
|
(100
|
)
|
|
|
(47
|
)
|
|
|
(86
|
)
|
Goodwill impairment
|
|
|
|
|
|
|
(97,370
|
)
|
|
|
|
|
|
|
(97,370
|
)
|
|
|
|
|
|
|
(98
|
)
|
|
|
|
|
|
|
(98
|
)
|
Intangible assets impairment
|
|
|
|
|
|
|
(11,009
|
)
|
|
|
|
|
|
|
(11,009
|
)
|
|
|
|
|
|
|
(100
|
)
|
|
|
|
|
|
|
(100
|
)
|
Other operating expenses
|
|
|
(9,067
|
)
|
|
|
(29,223
|
)
|
|
|
(498
|
)
|
|
|
(38,788
|
)
|
|
|
(5
|
)
|
|
|
(9
|
)
|
|
|
(3
|
)
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
(745,292
|
)
|
|
|
(296,150
|
)
|
|
|
5,037
|
|
|
|
(1,036,405
|
)
|
|
|
(25
|
)
|
|
|
(20
|
)
|
|
|
17
|
|
|
|
(23
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss)/income
|
|
$
|
(59,654
|
)
|
|
$
|
124,901
|
|
|
$
|
(5,037
|
)
|
|
$
|
60,210
|
|
|
|
(47
|
)%
|
|
|
(170
|
)%
|
|
|
17
|
%
|
|
|
258
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
Contract
|
|
|
|
|
|
|
|
|
|
|
|
Contract
|
|
|
|
|
|
|
|
|
|
|
|
|
Logistics
|
|
|
|
|
|
|
|
|
|
|
|
Logistics
|
|
|
|
|
|
|
|
|
|
Freight
|
|
|
and
|
|
|
|
|
|
|
|
|
Freight
|
|
|
and
|
|
|
|
|
|
|
|
|
|
Forwarding
|
|
|
Distribution
|
|
|
Corporate
|
|
|
Total
|
|
|
Forwarding
|
|
|
Distribution
|
|
|
Corporate
|
|
|
Total
|
|
|
Revenues
|
|
$
|
3,156,039
|
|
|
$
|
1,387,678
|
|
|
$
|
|
|
|
$
|
4,543,717
|
|
|
$
|
2,927,535
|
|
|
$
|
1,438,719
|
|
|
$
|
|
|
|
$
|
4,366,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased transportation costs
|
|
|
2,438,756
|
|
|
|
558,621
|
|
|
|
|
|
|
|
2,997,377
|
|
|
|
2,293,861
|
|
|
|
583,579
|
|
|
|
|
|
|
|
2,877,440
|
|
Staff costs
|
|
|
396,019
|
|
|
|
439,569
|
|
|
|
8,667
|
|
|
|
844,255
|
|
|
|
337,756
|
|
|
|
451,123
|
|
|
|
12,012
|
|
|
|
800,891
|
|
Depreciation
|
|
|
15,605
|
|
|
|
25,924
|
|
|
|
224
|
|
|
|
41,753
|
|
|
|
13,661
|
|
|
|
25,352
|
|
|
|
293
|
|
|
|
39,306
|
|
Amortization of intangible assets
|
|
|
3,896
|
|
|
|
9,075
|
|
|
|
|
|
|
|
12,971
|
|
|
|
863
|
|
|
|
8,573
|
|
|
|
|
|
|
|
9,436
|
|
Restructuring charges
|
|
|
2,731
|
|
|
|
3,863
|
|
|
|
2,309
|
|
|
|
8,903
|
|
|
|
912
|
|
|
|
5,800
|
|
|
|
1,683
|
|
|
|
8,935
|
|
Goodwill impairment
|
|
|
|
|
|
|
98,932
|
|
|
|
|
|
|
|
98,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets impairment
|
|
|
|
|
|
|
11,009
|
|
|
|
|
|
|
|
11,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating expenses
|
|
|
172,505
|
|
|
|
314,146
|
|
|
|
18,572
|
|
|
|
505,223
|
|
|
|
149,977
|
|
|
|
316,839
|
|
|
|
13,492
|
|
|
|
480,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
3,029,512
|
|
|
|
1,461,139
|
|
|
|
29,772
|
|
|
|
4,520,423
|
|
|
|
2,797,030
|
|
|
|
1,391,266
|
|
|
|
27,480
|
|
|
|
4,215,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income/(loss)
|
|
$
|
126,527
|
|
|
$
|
(73,461
|
)
|
|
$
|
(29,772
|
)
|
|
$
|
23,294
|
|
|
$
|
130,505
|
|
|
$
|
47,453
|
|
|
$
|
(27,480
|
)
|
|
$
|
150.478
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change to Year Ended January 31, 2009
|
|
|
|
from Year Ended January 31, 2008
|
|
|
|
Amount
|
|
|
Percentage
|
|
|
|
|
|
|
Contract
|
|
|
|
|
|
|
|
|
|
|
|
Contract
|
|
|
|
|
|
|
|
|
|
|
|
|
Logistics
|
|
|
|
|
|
|
|
|
|
|
|
Logistics
|
|
|
|
|
|
|
|
|
|
Freight
|
|
|
and
|
|
|
|
|
|
|
|
|
Freight
|
|
|
and
|
|
|
|
|
|
|
|
|
|
Forwarding
|
|
|
Distribution
|
|
|
Corporate
|
|
|
Total
|
|
|
Forwarding
|
|
|
Distribution
|
|
|
Corporate
|
|
|
Total
|
|
|
Revenues
|
|
$
|
228,504
|
|
|
$
|
(51,041
|
)
|
|
$
|
|
|
|
$
|
177,463
|
|
|
|
8
|
%
|
|
|
(4
|
)%
|
|
|
|
%
|
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased transportation costs
|
|
|
144,895
|
|
|
|
(24,958
|
)
|
|
|
|
|
|
|
119,937
|
|
|
|
6
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
4
|
|
Staff costs
|
|
|
58,263
|
|
|
|
(11,554
|
)
|
|
|
(3,345
|
)
|
|
|
43,364
|
|
|
|
17
|
|
|
|
(3
|
)
|
|
|
(28
|
)
|
|
|
5
|
|
Depreciation
|
|
|
1,944
|
|
|
|
572
|
|
|
|
(69
|
)
|
|
|
2,447
|
|
|
|
14
|
|
|
|
2
|
|
|
|
(24
|
)
|
|
|
6
|
|
Amortization of intangible assets
|
|
|
3,033
|
|
|
|
502
|
|
|
|
|
|
|
|
3,535
|
|
|
|
351
|
|
|
|
6
|
|
|
|
|
|
|
|
37
|
|
Restructuring charges
|
|
|
1,819
|
|
|
|
(1,937
|
)
|
|
|
626
|
|
|
|
508
|
|
|
|
199
|
|
|
|
33
|
|
|
|
37
|
|
|
|
6
|
|
Goodwill impairment
|
|
|
|
|
|
|
98,932
|
|
|
|
|
|
|
|
98,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets impairment
|
|
|
|
|
|
|
11,009
|
|
|
|
|
|
|
|
11,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating expenses
|
|
|
22,528
|
|
|
|
(2,693
|
)
|
|
|
5,080
|
|
|
|
24,915
|
|
|
|
15
|
|
|
|
(1
|
)
|
|
|
38
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
232,482
|
|
|
|
69,873
|
|
|
|
2,292
|
|
|
|
304,647
|
|
|
|
8
|
|
|
|
5
|
|
|
|
8
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss)/income
|
|
$
|
(3,978
|
)
|
|
$
|
(120,914
|
)
|
|
$
|
(2,292
|
)
|
|
$
|
(127,184
|
)
|
|
|
(3
|
)%
|
|
|
(255
|
)%
|
|
|
8
|
%
|
|
|
(85
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
Contract
|
|
|
|
|
|
|
|
|
Contract
|
|
|
|
|
|
|
|
|
Contract
|
|
|
|
|
|
|
|
|
|
Logistics
|
|
|
|
|
|
|
|
|
Logistics
|
|
|
|
|
|
|
|
|
Logistics
|
|
|
|
|
|
|
Freight
|
|
|
and
|
|
|
|
|
|
Freight
|
|
|
and
|
|
|
|
|
|
Freight
|
|
|
and
|
|
|
|
|
|
|
Forwarding
|
|
|
Distribution
|
|
|
|
|
|
Forwarding
|
|
|
Distribution
|
|
|
|
|
|
Forwarding
|
|
|
Distribution
|
|
|
|
|
|
|
Revenue
|
|
|
Revenue
|
|
|
Total
|
|
|
Revenue
|
|
|
Revenue
|
|
|
Total
|
|
|
Revenue
|
|
|
Revenue
|
|
|
Total
|
|
|
EMENA
|
|
$
|
827,823
|
|
|
$
|
248,601
|
|
|
$
|
1,076,424
|
|
|
|
1,091,758
|
|
|
$
|
256,529
|
|
|
$
|
1,348,287
|
|
|
$
|
867,768
|
|
|
$
|
248,602
|
|
|
$
|
1,116,370
|
|
Americas
|
|
|
480,890
|
|
|
|
642,840
|
|
|
|
1,123,730
|
|
|
|
627,824
|
|
|
|
807,144
|
|
|
|
1,434,968
|
|
|
|
595,499
|
|
|
|
864,353
|
|
|
|
1,459,852
|
|
Asia Pacific
|
|
|
758,408
|
|
|
|
34,985
|
|
|
|
793,393
|
|
|
|
1,065,565
|
|
|
|
35,079
|
|
|
|
1,100,644
|
|
|
|
1,100,219
|
|
|
|
32,274
|
|
|
|
1,132,493
|
|
Africa
|
|
|
283,972
|
|
|
|
290,003
|
|
|
|
573,975
|
|
|
|
370,892
|
|
|
|
288,926
|
|
|
|
659,818
|
|
|
|
364,049
|
|
|
|
293,490
|
|
|
|
657,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,351,093
|
|
|
$
|
1,216,429
|
|
|
$
|
3,567,522
|
|
|
$
|
3,156,039
|
|
|
$
|
1,387,678
|
|
|
$
|
4,543,717
|
|
|
$
|
2,927,535
|
|
|
$
|
1,438,719
|
|
|
$
|
4,366,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
Contract
|
|
|
|
|
|
|
|
|
Contract
|
|
|
|
|
|
|
|
|
Contract
|
|
|
|
|
|
|
|
|
|
Logistics
|
|
|
|
|
|
|
|
|
Logistics
|
|
|
|
|
|
|
|
|
Logistics
|
|
|
|
|
|
|
Freight
|
|
|
and
|
|
|
|
|
|
Freight
|
|
|
and
|
|
|
|
|
|
Freight
|
|
|
and
|
|
|
|
|
|
|
Forwarding
|
|
|
Distribution
|
|
|
|
|
|
Forwarding
|
|
|
Distribution
|
|
|
|
|
|
Forwarding
|
|
|
Distribution
|
|
|
|
|
|
|
Net
|
|
|
Net
|
|
|
|
|
|
Net
|
|
|
Net
|
|
|
|
|
|
Net
|
|
|
Net
|
|
|
|
|
|
|
Revenue
|
|
|
Revenue
|
|
|
Total
|
|
|
Revenue
|
|
|
Revenue
|
|
|
Total
|
|
|
Revenue
|
|
|
Revenue
|
|
|
Total
|
|
|
EMENA
|
|
$
|
229,561
|
|
|
$
|
159,588
|
|
|
$
|
389,149
|
|
|
$
|
285,786
|
|
|
$
|
165,441
|
|
|
$
|
451,227
|
|
|
$
|
220,652
|
|
|
$
|
128,887
|
|
|
$
|
349,539
|
|
Americas
|
|
|
142,697
|
|
|
|
357,606
|
|
|
|
500,303
|
|
|
|
166,525
|
|
|
|
432,058
|
|
|
|
598,583
|
|
|
|
162,262
|
|
|
|
493,291
|
|
|
|
655,553
|
|
Asia Pacific
|
|
|
145,795
|
|
|
|
24,218
|
|
|
|
170,013
|
|
|
|
172,883
|
|
|
|
22,451
|
|
|
|
195,334
|
|
|
|
158,722
|
|
|
|
22,426
|
|
|
|
181,148
|
|
Africa
|
|
|
77,605
|
|
|
|
223,931
|
|
|
|
301,536
|
|
|
|
92,089
|
|
|
|
209,107
|
|
|
|
301,196
|
|
|
|
92,038
|
|
|
|
210,536
|
|
|
|
302,574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
595,658
|
|
|
$
|
765,343
|
|
|
$
|
1,361,001
|
|
|
$
|
717,283
|
|
|
$
|
829,057
|
|
|
$
|
1,546,340
|
|
|
$
|
633,674
|
|
|
$
|
855,140
|
|
|
$
|
1,488,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Airfreight forwarding
|
|
$
|
1,187,880
|
|
|
$
|
1,621,602
|
|
|
$
|
1,553,551
|
|
Ocean freight forwarding
|
|
|
891,276
|
|
|
|
1,203,643
|
|
|
|
1,101,129
|
|
Customs brokerage
|
|
|
92,456
|
|
|
|
109,436
|
|
|
|
98,031
|
|
Contract logistics
|
|
|
650,739
|
|
|
|
663,656
|
|
|
|
618,599
|
|
Distribution
|
|
|
414,920
|
|
|
|
564,906
|
|
|
|
624,399
|
|
Other
|
|
|
330,251
|
|
|
|
380,474
|
|
|
|
370,545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,567,522
|
|
|
$
|
4,543,717
|
|
|
$
|
4,366,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased transportation costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
Airfreight forwarding
|
|
$
|
904,179
|
|
|
$
|
1,275,569
|
|
|
$
|
1,235,010
|
|
Ocean freight forwarding
|
|
|
717,093
|
|
|
|
1,001,275
|
|
|
|
926,224
|
|
Customs brokerage
|
|
|
5,712
|
|
|
|
5,987
|
|
|
|
3,668
|
|
Contract logistics
|
|
|
125,245
|
|
|
|
94,963
|
|
|
|
81,656
|
|
Distribution
|
|
|
277,849
|
|
|
|
404,756
|
|
|
|
416,059
|
|
Other
|
|
|
176,443
|
|
|
|
214,827
|
|
|
|
214,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,206,521
|
|
|
$
|
2,997,377
|
|
|
$
|
2,877,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48
The following table shows the relative portion of our revenues
by service line, as well as our operating and other income and
expenses for the periods presented, expressed as a percentage of
total revenues.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Airfreight forwarding
|
|
|
33
|
%
|
|
|
36
|
%
|
|
|
36
|
%
|
Ocean freight forwarding
|
|
|
25
|
|
|
|
27
|
|
|
|
25
|
|
Customs brokerage
|
|
|
3
|
|
|
|
2
|
|
|
|
2
|
|
Contract logistics
|
|
|
18
|
|
|
|
15
|
|
|
|
14
|
|
Distribution
|
|
|
12
|
|
|
|
12
|
|
|
|
14
|
|
Other
|
|
|
9
|
|
|
|
8
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
100
|
|
|
|
100
|
|
|
|
100
|
|
Purchased transportation costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
Airfreight forwarding
|
|
|
25
|
%
|
|
|
28
|
%
|
|
|
28
|
%
|
Ocean freight forwarding
|
|
|
20
|
|
|
|
22
|
|
|
|
21
|
|
Customs brokerage
|
|
|
*
|
|
|
|
*
|
|
|
|
*
|
|
Contract logistics
|
|
|
4
|
|
|
|
2
|
|
|
|
2
|
|
Distribution
|
|
|
8
|
|
|
|
9
|
|
|
|
10
|
|
Other
|
|
|
5
|
|
|
|
5
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total purchased transportation costs
|
|
|
62
|
|
|
|
66
|
|
|
|
66
|
|
Staff costs
|
|
|
21
|
|
|
|
19
|
|
|
|
18
|
|
Depreciation
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
Amortization of intangible assets
|
|
|
*
|
|
|
|
*
|
|
|
|
*
|
|
Restructuring charges
|
|
|
*
|
|
|
|
*
|
|
|
|
*
|
|
Goodwill impairment
|
|
|
*
|
|
|
|
2
|
|
|
|
*
|
|
Intangible assets impairment
|
|
|
*
|
|
|
|
*
|
|
|
|
*
|
|
Other operating expenses
|
|
|
13
|
|
|
|
11
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
97
|
|
|
|
99
|
|
|
|
97
|
|
Operating income, net
|
|
|
3
|
|
|
|
1
|
|
|
|
3
|
|
Interest income
|
|
|
*
|
|
|
|
*
|
|
|
|
*
|
|
Interest expense
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Other income, net
|
|
|
*
|
|
|
|
*
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax income
|
|
|
2
|
|
|
|
*
|
|
|
|
3
|
|
Provision for income taxes
|
|
|
1
|
|
|
|
*
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of tax
|
|
|
1
|
|
|
|
*
|
|
|
|
2
|
|
Discontinued operations, net of tax
|
|
|
*
|
|
|
|
*
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
1
|
|
|
|
*
|
|
|
|
2
|
|
Net income attributable to noncontrolling interests
|
|
|
*
|
|
|
|
*
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to UTi Worldwide Inc.
|
|
|
1
|
%
|
|
|
*
|
%
|
|
|
2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49
Year
Ended January 31, 2010 Compared to Year Ended
January 31, 2009
Revenues
Total revenues decreased $976.2 million, or 21%, to
$3,567.5 million for fiscal 2010, compared to total
revenues of $4,543.7 million for fiscal 2009. The decrease
in revenues when compared to the prior fiscal year was primarily
the result of significant declines in freight volume, declines
in fuel surcharges relating to air freight, and foreign currency
fluctuations. Volumes declined across all of our significant
service lines in fiscal 2010 when compared to the prior fiscal
year, as a result of the global economic downturn which began
during the second half of our fiscal 2009.
Freight forwarding revenues in total decreased
$804.9 million, or 26%, to $2,351.1 million for fiscal
2010, compared to $3,156.0 million for fiscal 2009. The
decrease was primarily the result of foreign currency
fluctuations and decreased airfreight and ocean freight
forwarding volume as well as a reduction in fuel surcharges
related to airfreight when compared to the respective prior
period. We believe that for the freight forwarding segment, net
revenue (the term used by us to describe revenue less purchased
transportation costs) is a better measure of growth in our
freight forwarding business than revenue because our revenue for
our services as an indirect air and ocean carrier includes the
carriers charges to us for carriage of the shipment. Our
revenues are also impacted by changes in fuel and similar
surcharges, which have little relation to the volume or value of
our services provided. Accordingly reference is made to our
discussion regarding net revenues below.
Airfreight forwarding revenues decreased $433.7 million, or
27%, to $1,187.9 million for fiscal 2010, compared to
$1,621.6 million for the prior fiscal year. Fuel surcharges
decreased approximately $199.8 million in fiscal 2010 when
compared to fiscal 2009 as a result of a significant decline in
aviation fuel prices. Movements in fuel surcharges impact
revenues but generally do not have a material impact on net
revenues. Airfreight volumes decreased 13% for fiscal 2010 when
compared to fiscal 2009, reflecting the deterioration in market
conditions during fiscal 2010, however, late during the fiscal
year this trend began to reverse, with airfreight volumes
increasing 31% during the fourth quarter of fiscal 2010 compared
to the corresponding prior year period. Foreign currency
fluctuations also contributed to the decrease.
Ocean freight forwarding revenues decreased $312.4 million,
or 26%, to $891.3 million for fiscal 2010, compared to
$1,203.6 million for fiscal 2009. This decrease was
primarily due to an approximately 8% decrease in ocean freight
volumes, as expressed in twenty-foot equivalent units (TEUs)
during fiscal 2010, compared to fiscal 2009, as well as
reductions in bunker fuel costs, which impacted revenues but
generally did not have a material impact on net revenues.
Foreign currency fluctuations also contributed to the decrease.
However, as with airfreight, ocean freight volume trends began
to improve late in fiscal 2010 as ocean freight volumes
increased 18% during the fourth quarter of fiscal 2010 compared
to the corresponding prior year period.
Customs brokerage revenues decreased $17.0 million, or 16%,
to $92.5 million for fiscal 2010, compared to
$109.4 million for fiscal 2009. The decrease in customs
brokerage revenues was primarily due to a 19% decline in the
number of clearances as a result of the decrease in
international air and ocean volumes during fiscal 2010 compared
to fiscal 2009. Foreign currency fluctuations also contributed
to the decrease.
Other freight forwarding related revenues decreased
$41.9 million, or 19%, to $179.5 million for fiscal
2010, compared to $221.4 million for fiscal 2009, primarily
due to decreases in road freight and other distribution volumes
in fiscal 2010. Foreign currency fluctuations also contributed
to the decrease.
Contract logistics and distribution revenues in total decreased
$171.2 million, or 12%, to $1,216.4 million for fiscal
2010, compared to $1,387.7 million for fiscal 2009. The
decrease was primarily due to the decline in logistics activity,
volumes and associated reductions in distribution requirements
of our clients primarily as a result of the weak economic
environment particularly in the United States.
Contract logistics revenues decreased $12.9 million, or 2%,
to $650.7 million for fiscal 2010, compared to
$663.7 million for fiscal 2009. The decrease was primarily
due to reduced contract logistics volumes and foreign currency
fluctuations. Distribution revenues decreased
$150.0 million, or 27%, to $414.9 million for fiscal
2010, compared to $564.9 million for fiscal 2009. Freight
volumes in our North American distribution operations remained
weak throughout fiscal 2010.
50
Other contract logistics and distribution related revenues
decreased $8.3 million, or 5%, to $150.8 million for
fiscal 2010, compared to $159.1 million for the
corresponding prior year period, primarily due to the general
decline in volumes as a result of the global economic slowdown.
Net
revenues
Total net revenues decreased $185.3 million, or 12%, to
$1,361.0 million for fiscal 2010, compared to total net
revenues of $1,546.3 million for fiscal 2009. The decrease
in net revenues was primarily the result of significant declines
in freight volume across our service lines during fiscal 2010
when compared to fiscal 2009. The decrease in net revenues was
partially offset by an improvement in our freight forwarding
yields during the first three quarters of the year when compared
to last year. Foreign currency fluctuations also contributed to
the decrease as described below. In the fourth quarter of fiscal
2010, our yields (computed as net revenues divided by revenues)
were adversely impacted by sharply higher purchased
transportation costs during the period.
Freight forwarding net revenues decreased $121.6 million,
or 17%, to $595.7 million for fiscal 2010, compared to
$717.3 million for fiscal 2009. Net revenues are primarily
a function of volume movements and the expansion or contraction
in yields as described below.
Airfreight forwarding net revenues decreased $62.3 million,
or 18%, to $283.7 million for fiscal 2010 compared to
$346.0 million for fiscal 2009. Foreign currency
fluctuations contributed approximately $10.6 million of the
decrease. The remaining decrease in airfreight forwarding net
revenues for fiscal 2010 was primarily due to a 6% decrease in
net revenues per kilogram and a 13% decline in airfreight
tonnage during fiscal 2010 compared to fiscal 2009. Although
airfreight forwarding net revenues decreased 18% for fiscal
2010, airfreight forwarding yields were 23.9%, an increase of
approximately 260 basis points compared to 21.3% for fiscal
2009, causing airfreight forwarding net revenues to decrease to
a lesser degree compared to the decrease in airfreight
forwarding revenues.
However when compared on a sequential basis to the third quarter
of fiscal 2010, during the fourth quarter of fiscal 2010,
airfreight trends shifted. Yields during the fourth quarter of
fiscal 2010 decreased approximately 160 basis points, to
21.0% compared to the third quarter of fiscal 2010. This yield
compression in the fourth quarter of fiscal 2010 was primarily
caused by less favorable airfreight pricing environments,
particularly in our Asia Pacific region, as the marketplace
began experiencing capacity shortages compared to earlier in the
year, that caused buying rates to increase more rapidly than the
rates which could be passed onto clients. Airfreight tonnage
increased significantly in the fourth quarter, increasing 29%
compared to the fourth quarter of fiscal 2009. Tonnage levels
peaked in the month of October, but remained strong each month
in the fourth quarter. In the fourth quarter of fiscal 2010,
airfreight net revenue per kilogram declined 23% compared to the
same period last year, versus a 13% year over year decline in
the third quarter.
Ocean freight forwarding net revenues decreased
$28.2 million, or 14%, to $174.2 million for fiscal
2010, compared to $202.4 million for fiscal 2009. Foreign
currency fluctuations contributed approximately
$6.7 million of the decrease. The remaining decrease in
ocean freight forwarding net revenues for fiscal 2010 was
primarily due to an approximately 6% decrease in net revenues
realized per TEU and an approximately 8% decline in TEUs
compared to fiscal 2009. Yields expanded for fiscal 2010,
compared to fiscal 2009, causing ocean freight net revenues to
decline to a lesser degree than the decline in revenues. For
fiscal 2010, ocean freight yields expanded approximately
270 basis points to 19.5%, from 16.8% for fiscal 2009.
As with airfreight, ocean freight trends shifted in the fourth
quarter of fiscal 2010. When compared on a sequential basis to
the third quarter of fiscal 2010, ocean freight yields during
the fourth quarter of fiscal 2010 decreased approximately
210 basis points to 17.6%. Our TEUs peaked in the month of
December 2009, and declined 11% sequentially in January 2010.
While the sequential monthly declines are consistent with
reasonable seasonality patterns in ocean shipping, volumes were
still much higher in the fourth quarter of fiscal 2010 compared
to the fourth quarter of fiscal 2009. While there was an
over-supply of capacity in the ocean freight market for much of
fiscal 2010, available capacity was constrained in the fourth
quarter of fiscal 2010 as carriers did not reintroduce idle
capacity as volumes increased.
51
Customs brokerage net revenues decreased $16.7 million, or
16%, to $86.7 million for fiscal 2010, compared to
$103.4 million for fiscal 2009. Foreign currency
fluctuations contributed approximately $2.8 million of the
decrease. The decrease in customs brokerage net revenues was
primarily due to a 19% decline in the number of clearances,
although this decline was partially offset by a 4% increase in
net revenues per clearance.
Other freight forwarding related net revenues decreased
$14.4 million, or 22%, to $51.0 million for fiscal
2010, compared to $65.4 million for fiscal 2009, primarily
due to decreases in road freight and other distribution volumes
as a result of the global economic downturn.
Contract logistics and distribution net revenues in total
decreased $63.7 million, or 8%, to $765.3 million in
fiscal 2010, compared to $829.1 million for fiscal 2009.
The decrease was due to the decline in logistics activity,
volumes and associated reductions in distribution requirements
of our clients primarily as a result of the weak economic
environment particularly in the United States.
Contract logistics net revenues decreased $43.2 million, or
8% to $525.5 million for fiscal 2010, compared to $568.7
for fiscal 2009. The decrease was a result of reduced activity
due to the global economic downturn although the level of
decline was partially offset by new business wins since fiscal
2009.
Distribution net revenues decreased $23.0 million, or 14%,
to $137.1 million for fiscal 2010, compared to
$160.1 million for fiscal 2009. The decrease in
distribution net revenues was primarily the result of reduced
shipment volumes over the comparative full year period,
particularly in the United States.
Other contract logistics and distribution related net revenues
increased $2.6 million, or 3%, to $102.8 million for
fiscal 2010, compared to $100.2 million for fiscal 2009,
primarily due to the general increase in volumes in our
transportation management services.
Staff
costs
Staff costs in our freight forwarding segment decreased
$49.9 million, or 13%, to $346.1 million for fiscal
2010, compared to $396.0 million for fiscal 2009. Foreign
currency fluctuations contributed approximately
$13.1 million of the decrease. As a percentage of freight
forwarding segment revenues, staff costs in the freight
forwarding segment were approximately 15% and 13% for fiscal
2010 and 2009, respectively. Staff costs in our freight
forwarding segment are largely driven by total shipment counts
rather than volumes stated in kilograms or TEUs. As shipment
counts for air and ocean freight fell at lesser rates than
shipment volumes during fiscal 2010, headcount reductions were
more aligned with the reduction in shipment counts than volume
declines.
Staff costs in our contract logistics and distribution segment
decreased $47.3 million, or 11%, to $392.3 million for
fiscal 2010, as compared to $439.6 million for fiscal 2009.
Foreign currency fluctuations contributed approximately
$5.3 million of the decrease. The remaining decrease in
staff costs in our contract logistics and distribution segment
is primarily due to headcount reductions and other actions taken
in light of the decreased logistics volumes. We incurred staff
costs in our contract logistics and distribution segment related
to the exit of certain facilities and operations of
$4.6 million and $5.5 million for the fiscal years
ended January 31, 2010 and 2009, respectively.
Staff costs at corporate were $14.8 million for fiscal
2010, compared to $8.7 million incurred during fiscal 2009.
The increase in staff costs at corporate is primarily related to
the re-alignment and additional resources with respect to the
transformation of the company into more of a single global
enterprise rather than being operated on a decentralized
regional basis.
Depreciation
Total depreciation expense for all segments was
$44.0 million for fiscal 2010, compared to
$41.8 million for fiscal 2009. When expressed as a
percentage of revenue, depreciation expense remained constant at
approximately 1% of revenue for fiscal 2010 compared to the
prior fiscal year.
52
Amortization
of intangible assets
Amortization of intangible assets was $11.1 million for
fiscal 2010, compared to $13.0 million for fiscal 2009.
Acquisitions completed since the fourth quarter of fiscal 2009
did not have a material impact on amortization of intangibles
assets for fiscal 2010 compared to the prior fiscal year.
Restructuring
charges
Total restructuring charges were $1.2 million for fiscal
2010, compared to $8.9 million for the corresponding prior
year period. During the fourth quarter of fiscal 2009, the
company initiated several changes to its global information
technology operations and incurred related restructuring
charges. During the fourth quarter of fiscal 2009, the company
incurred $8.9 million of restructuring charges associated
with its changes to its global information technology
operations. Amounts charged for employee severance benefits and
other exit costs under this plan during the first quarter of
fiscal 2010 were $1.2 million. The company completed its
exit activities under this plan during fiscal 2010.
Goodwill
and intangible assets impairment
During the fourth quarter ended January 31, 2009, the
company recorded a non-cash charge of $109.9 million,
before related deferred tax benefit of $15.3 million, for
the impairment of goodwill and intangible assets in the
companys Contract Logistics and Distribution segment. The
non-cash charge was primarily comprised of a charge for the
impairment of goodwill of $98.9 million, before related
deferred tax benefit of $11.3 million. This charge was
recorded as the result of volatility and deterioration of the
financial markets and adverse changes in the global business
climate, during the second half of the fiscal year-ended
January 31, 2009. Additionally during the fourth quarter
ended January 31, 2009, the company performed an evaluation
of recoverability of its long-lived assets and recorded non-cash
charges of $7.3 million and $3.7 million for customer
lists and a trademark, respectively, in the companys
Contract Logistics and Distribution Segment. These charges were
before a related combined deferred tax benefit of
$3.9 million.
During the fourth quarter ended January 31, 2010, the
company recorded a non-cash charge of $1.6 million for the
impairment of goodwill in the companys Contract Logistics
and Distribution Segment in accordance with ASC 250,
Accounting for Changes and Error Corrections and the
correction of an error. Prior period amounts have not been
restated due to immateriality. There was no tax benefit as a
result of this charge. This charge was recorded as the result of
a correction of the impairment of goodwill in the companys
Contract Logistics and Distribution segment during the fourth
quarter ended January 31, 2009. The additional impairment
charge was recorded in accordance with SAB 108,
Considering the Effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year Financial
Statements.
Other
operating expenses
Other operating costs in the freight forwarding segment
decreased $9.1 million, or 5%, to $163.4 million for
fiscal 2010, compared to $172.5 million for fiscal 2009.
Foreign currency fluctuations contributed approximately
$5.7 million of the decrease. The remaining decrease in
other operating costs in our freight forwarding segment was
primarily due to actions taken to better align our costs with
the decline in freight forwarding volume.
Other operating costs in the contract logistics and distribution
segment decreased by $29.2 million, or 9%, to
$284.9 million for fiscal 2010, compared to
$314.1 million for fiscal 2009. Foreign currency
fluctuations contributed approximately $5.5 million of the
decrease. The remaining decrease in other operating costs in our
contract logistics and distribution segment was primarily due to
headcount reductions and other actions taken in light of the
decline in revenues as a result of the global economic slowdown.
Other operating expenses at corporate were $18.1 million
for fiscal 2010, compared to $18.6 million incurred during
the prior fiscal year.
53
Interest
expense, net
Interest income relates primarily to interest earned on our cash
deposits, while interest expense consists primarily of interest
on our credit facilities; our senior unsecured guaranteed notes,
of which $155.1 million of principle was outstanding as of
January 31, 2010; and capital lease obligations. Interest
income and interest expense decreased $3.1 million or 23%,
and $7.6 million, or 25%, respectively, for fiscal 2010,
compared to fiscal 2009. The decrease in interest income and in
interest expense is primarily due to a decrease in total net
cash deposits and borrowings outstanding during the comparative
periods.
Other
income and expenses, net
Other income and expenses primarily relates to foreign currency
gains and losses on certain of our intercompany loans,
withholding taxes and various other items. Other expenses, net
of income, was $0.8 million for fiscal 2010. Other income,
net of expenses was $1.4 million for the prior fiscal year
period.
Provision
for income taxes
Our effective income tax rate for fiscal 2010 was 35%, resulting
in a provision for income taxes of $24.4 million compared
to pretax income of $69.9 million. Compared to our
historical effective income tax rates, our effective income tax
rate for fiscal 2010 was adversely impacted by several items,
some of which were particularly noticeable during the fourth
quarter of the fiscal year. Our tax rate during fiscal 2010 was
adversely affected by valuation allowances which increased our
tax expense by approximately $6.5 million in certain of our
loss-making jurisdictions, minimum taxes of approximately
$1.4 million, and tax-rate change adjustments of
approximately $1.0 million. Minimum taxes are payable
regardless of the amount of our pre-tax income in the relevant
jurisdiction. For the full fiscal year, these increases were
partially offset by a favorable tax rates from the sale of
property, plant and equipment, of which the company realized a
benefit of approximately $2.1 million when compared to
statutory income tax rates.
During the fourth quarter of our fiscal 2010, certain of these
adverse tax items were particularly impactful in light of the
amount of our pre-tax income for the quarter which had the
effect of increasing our effective tax rate. Items specifically
attributable to the fourth quarter include valuation allowances
of approximately $1.3 million, tax-rate adjustments of
approximately $1.0 million, adverse tax effects of the
adjustment to goodwill impairment of approximately
$0.7 million, and minimum taxes of approximately
$0.5 million.
Changes in our effective tax rates are primarily attributable to
the mix of taxable income across geographic regions. The company
expects our effective tax rate for fiscal 2011 to be
approximately 28% to 32%, however, the actual effective tax rate
will depend on a variety of factors, including but not limited
to, the geographic mix of our business as well as the overall
level of pre-tax income compared to minimum taxes which are
payable in certain of our jurisdictions.
Discontinued
operations, net of tax
Discontinued operations for fiscal 2009 include the operations
of the companys art packing businesses in our EMENA region
as part of the companys ongoing effort to focus on its
core businesses.
Net
income attributable to noncontrolling interests
Net income attributable to noncontrolling interests increased
$2.3 million, to $4.4 million for fiscal 2010,
compared to $2.1 million for fiscal 2009. The changes in
noncontrolling interests are dependent upon the mix of income
among the various operations which have noncontrolling interests.
Year
Ended January 31, 2009 Compared to Year Ended
January 31, 2008
Revenues
Total revenues increased $177.5 million, or 4%, to
$4,543.7 million for fiscal 2009, compared to total
revenues of $4,366.3 million for fiscal 2008. The increase
in revenues resulted from contributions of $79.7 million
from
54
acquisitions made after August 2007 and from organic growth of
$158.4 million in all services except our distribution
services where revenues reduced by $60.6 million.
Freight forwarding revenues increased $228.5 million, or
8%, to $3,156.0 million for fiscal 2009, compared to
$2,927.5 million for fiscal 2008. Approximately
$74.5 million of this increase was due to our Israel
Acquisition which occurred during fiscal 2008. The remaining
increase was primarily due to the following factors:
(a) increases in airfreight forwarding revenues in our
EMENA, Americas, and Asia Pacific regions, partially offset by
decreases in our Greater China and Africa regions;
(b) increases in ocean freight forwarding revenues in our
EMENA, Americas, Asia Pacific, and Africa regions, offset by
decreases in our Greater China region; and (c) customs
brokerage revenues increased in our EMENA, Asia Pacific, Greater
China, and Africa regions, offset by decreases in our Americas
region. We believe that for the Freight Forwarding segment, net
revenue (the term used by the company to describe revenue less
purchased transportation costs) is a better measure of growth in
our freight forwarding business than revenue because our revenue
for our services as an indirect air and ocean carrier includes
the carriers charges to us for carriage of the shipment.
Our revenues are also impacted by changes in fuel and similar
surcharges, which have little relation to the volume or value of
our services provided. Accordingly reference is made to our
discussion regarding net revenues below.
Airfreight forwarding revenues increased $68.0 million, or
4%, to $1,621.6 million for fiscal 2009, compared to
$1,553.6 million for fiscal 2008. Our Israel Acquisition,
which occurred during fiscal 2008, contributed approximately
$22.6 million of this increase.
Although airfreight forwarding revenues increased for fiscal
2009, as compared to fiscal 2008, the second half of the year
was characterized by slowing growth in international trade
compared to the second-half of fiscal 2008, and particularly
during the fourth quarter of fiscal 2009. Airfreight forwarding
revenues decreased 34% in the fiscal 2009 fourth quarter when
compared to fiscal 2008 fourth quarter, while net revenues
decreased 15% for the same comparative period. Airfreight
tonnage decreased 25% in the fourth quarter of fiscal 2009
compared to the same period in the previous year, which
reflected the substantial market disruption in the fourth
quarter of fiscal 2009.
Ocean freight forwarding revenues increased $102.5 million,
or 9%, to $1,203.6 million for fiscal 2009, compared to
$1,101.1 million for fiscal 2008. Our Israel Acquisition,
which occurred during fiscal 2008, contributed approximately
$36.7 million of this increase.
As with airfreight, the operating environment in ocean freight
deteriorated very rapidly during fiscal 2009. The second half of
fiscal 2009 was characterized by slowing growth in international
trade during fiscal 2009, as compared to fiscal 2008, and
particularly during the fourth quarter of fiscal 2009. Ocean
freight forwarding revenues in the fourth quarter of fiscal 2009
decreased 18% over the corresponding period in fiscal 2008,
while net revenues decreased 4% over the comparable period.
Ocean freight twenty-foot equivalent units (TEUs) decreased 17%
in the fourth quarter of fiscal 2009 compared to the comparable
period a year ago.
Customs brokerage revenues increased $11.4 million, or 12%,
to $109.4 million for fiscal 2009, compared to
$98.0 million for fiscal 2008. The increase was primarily
due to our Israel Acquisition, which occurred during fiscal
2008. Excluding the effects of our Israel Acquisition, customs
brokerage revenues were generally consistent compared to the
previous year.
Other freight forwarding related revenues increased
$46.6 million, or 27%, to $221.4 million for fiscal
2009, compared to $174.8 million for fiscal 2008, primarily
due to an increase in road freight volumes in the EMENA and
Americas regions.
Contract logistics and distribution revenues decreased
$51.0 million, or 4%, to $1,387.7 million for fiscal
2009, compared to $1,438.7 million for fiscal 2008. The
decrease was primarily attributable to the exit of certain
businesses, as well as the loss of the Wal*Mart contract, and
decreases in distribution revenues over the comparative periods,
partially offset by increases in contract logistics revenues
through the addition of new contracts.
Contract logistics revenues increased $45.1 million, or 7%,
to $663.7 million for fiscal 2009, compared to
$618.6 million for fiscal 2008. The increase was primarily
due to organic growth within our EMENA, Asia Pacific and Africa
regions from new and existing clients. This growth was partially
offset by the loss of our Wal*Mart
55
contract on March 1, 2008, our exit of an underperforming
contract in our Americas region in July 2008, and the
corresponding loss of such revenues.
Distribution revenues decreased $59.5 million, or 10%, to
$564.9 million for fiscal 2009, compared to
$624.4 million for fiscal 2008. The decrease was primarily
attributable to the closures of certain distribution businesses
in our Africa region and a niche trucking business in the
Americas region in connection with the 2008 Cost Reduction
Measures. The decline was primarily attributed to the closures
of the above-mentioned businesses. In addition, there has been
continued softness in the U.S. domestic trucking
environment.
Other contract logistics and distribution related revenues
decreased $36.6 million, or 19%, to $159.1 million for
fiscal 2009, compared to $195.7 million for fiscal 2008,
primarily due to the closures of the distribution businesses
mentioned above.
Net
revenues
Total net revenues increased $57.5 million, or 4%, to
$1,546.3 million for fiscal 2009, compared to total net
revenues of $1,488.8 million for fiscal 2008, in part due
to acquisitions and yield expansions noted below.
Freight forwarding net revenues, which is comprised of revenues
minus freight consolidation costs, increased $83.6 million,
or 13%, to $717.3 million for fiscal 2009, compared to
$633.7 million for fiscal 2008. Net revenues is a function
of gross revenues movements and expansions or contractions in
yields as described above.
Airfreight forwarding net revenues increased $27.5 million,
or 9%, to $346.0 million for fiscal 2009 compared to
$318.5 million for fiscal 2008. Approximately
$9.2 million of the increase was due to our Israel
Acquisition in fiscal 2008. The remaining increase for the year
was due to organic growth in the EMENA and Americas region,
partially offset by decreases in our Asia Pacific, Greater China
and Africa regions. Airfreight yields (airfreight net revenues
as a percentage of airfreight revenues) increased in fiscal 2009
to 21.3% as compared to 20.5% for fiscal 2008 due to several
factors, including a more favorable airfreight pricing
environment, our airfreight purchasing initiatives, elimination
of low-yielding business, and the lack of a peak season during
the third quarter of fiscal 2009. Additionally, our efforts to
capitalize on opportunities to leverage spot-pricing led to
lower purchased transportation costs and yield expansion in
fiscal 2009.
Ocean freight forwarding net revenues increased
$27.5 million, or 16%, to $202.4 million for fiscal
2009, as compared to $174.9 million for fiscal 2008.
Approximately $7.0 million of the increase was due to our
Israel Acquisition in fiscal 2008. The remaining increase was
due to organic growth in the EMENA, Americas, Asia Pacific and
Greater China regions. For fiscal 2009, ocean freight yields
(ocean freight net revenues as a percentage of ocean freight
revenues) increased to 16.8% from 15.9% for fiscal 2008, for the
reasons described below.
Customs brokerage net revenues increased $9.0 million, or
10%, to $103.4 million for fiscal 2009 compared to
$94.4 million for fiscal 2008. Other freight forwarding
related net revenues increased $19.6 million, or 43%, to
$65.4 million for fiscal 2009, compared to
$45.9 million for fiscal 2008.
Contract logistics and distribution net revenues decreased
$26.1 million, or 3%, to $829.1 million for fiscal
2009, compared to $855.1 million for fiscal 2008. The
decrease was primarily attributable to the exit of certain
businesses, as well as the loss of the Wal*Mart contract, and
decreases in distribution revenues over the comparative periods,
partially offset by increases in contract logistics revenues
through the addition of new contracts.
Contract logistics net revenues increased $31.8 million, or
6%, to $568.7 million for fiscal 2009, compared to
$536.9 million for fiscal 2008. The increase was primarily
due to organic growth within our EMENA, Asia Pacific and Africa
regions from new and existing clients. This growth was partially
offset by the loss of our Wal*Mart contract on March 1,
2008, our exit of an underperforming contract in our Americas
region in July 2008, and the corresponding loss of such revenues.
Distribution net revenues decreased $48.2 million, or 23%,
to $160.1 million for fiscal 2009, compared to
$208.3 million for fiscal 2008. The decrease was primarily
attributable to the closures of certain distribution businesses
in our Africa region and a niche trucking business in the
Americas region in connection with the 2008 Cost Reduction
Measures.
56
Other contract logistics and distribution related net revenues
increased $9.6 million, or 9%, to $100.2 million for
fiscal 2009, compared to $109.9 million for fiscal 2008.
Staff
costs
Staff costs in our freight forwarding segment increased
$58.2 million, or 17%, to $396.0 million for fiscal
2009, compared to $337.8 million for fiscal 2008. As a
percentage of freight forwarding segment revenues, staff costs
in the freight forwarding segment were approximately 13% and 12%
for fiscal 2009 and 2008, respectively.
Staff costs in the contract logistics and distribution segment
decreased $11.5 million, or 3%, to $439.6 million for
fiscal 2009, as compared to $451.1 million for fiscal 2008,
due to reductions in personnel previously with operations closed
or lost since February 2008. These declines were partially
offset by increases in staff costs within the EMENA region.
Staff costs at corporate were $8.7 million for fiscal 2009,
compared to $12.0 million incurred during the corresponding
prior fiscal year.
Depreciation
and amortization of intangible assets.
Total depreciation and amortization expense for all segments
increased $6.0 million, or 12%, to $54.7 million for
fiscal 2009, as compared to $48.7 million for fiscal 2008
due to additional depreciation expense associated with a new
facility in the Asia Pacific region. Amortization of intangible
assets increased due to assets acquired in our Israel and CSC
acquisitions in fiscal 2008. Acquisitions completed since the
fourth quarter of the preceding year contributed to the increase
of amortization of intangibles assets for fiscal 2009 compared
to the corresponding prior fiscal year.
Restructuring
charges
Total restructuring charges increased $0.5 million, or 6%,
to $8.9 million for fiscal 2009, compared to
$8.4 million for fiscal 2008. During the fourth quarter of
fiscal 2009, the company initiated several changes to its global
information technology operations and incurred related
restructuring charges. Amounts charged for employee severance
benefits and other exit costs under this plan were
$2.9 million. Additionally, during the fourth quarter of
fiscal 2008, the company initiated several changes in operations
and incurred related restructuring charges. Charges associated
with this plan included $6.0 million incurred during the
first quarter of fiscal 2009 and $8.4 million incurred
during the fourth quarter of fiscal 2008.
Goodwill
and intangible assets impairment
During the fourth quarter ended January 31, 2009, the
company recorded a non-cash charge of $109.9 million,
before related deferred tax benefit of $15.3 million, for
the impairment of goodwill and intangible assets in the
companys Contract Logistics and Distribution segment. The
non-cash charge was primarily comprised of a charge for the
impairment of goodwill of $98.9 million, before related
deferred tax benefit of $11.3 million. This charge was
recorded as the result of volatility and deterioration of the
financial markets and adverse changes in the global business
climate, during the second half of the fiscal year-ended
January 31, 2009. Additionally during the fourth quarter
ended January 31, 2009, the company performed an evaluation
of recoverability of its long-lived assets and recorded non-cash
charges of $7.3 million and $3.7 million for customer
lists and a trademark, respectively, in the companys
Contract Logistics and Distribution Segment. These charges were
before a related combined deferred tax benefit of
$3.9 million.
Other
operating expenses
Other operating costs in the freight forwarding segment
increased $22.5 million, or 15%, to $172.5 million in
fiscal 2009, compared to $150.0 million for fiscal 2008.
These increases were partially due to our Israel Acquisition.
Other operating costs in the contract logistics and distribution
segment decreased by $2.7 million, or 1%, to
$314.1 million for fiscal 2009, compared to
$316.8 million for the corresponding prior fiscal year.
57
Other operating expenses at corporate included approximately
$5.0 million of legal fees and other related expenses
incurred by us as a result of the publicly announced
investigations by the U.S. DOJ, the EC and other regulatory
agencies into the pricing practices of the international freight
forwarding and cargo transportation industry and other related
investigations and lawsuits. We expect that we will continue to
incur substantial legal costs and related expenses until the
pending investigations by the U.S. DOJ and other foreign
governmental agencies, and any civil litigation relating to
these matters, are resolved. If the governmental investigations
or litigation result in a determination adverse to us
and/or our
current or former officers, directors or employees, the company
could incur substantial costs, fines
and/or
penalties, which could have a material adverse impact on our
financial condition, results of operations and cash flows.
Interest
expense, net
Our interest income relates primarily to interest earned on our
cash deposits, while our interest expense consists primarily of
interest on our credit facilities, our senior unsecured
guaranteed notes (Senior Notes), of which $166.7 million of
principle remained outstanding as of January 31, 2009, and
capital lease obligations. Interest income and interest expense
increased $2.4 million or 22%, and $3.8 million, or
14%, respectively, compared to fiscal 2008.
Other
income and expenses, net
Other income and expenses primarily relates to foreign currency
gains and losses on certain of our intercompany loans, offset by
withholding taxes and various other taxes not related to income
taxes. Other income, net of expenses, was $1.4 million for
fiscal 2009, compared to $1.6 million for fiscal 2008.
Provision
for income taxes
Provision for income taxes was $17.5 million for fiscal
2009, compared to pretax income of $7.5 million. The
effective income tax rate for the year was adversely impacted by
the non-cash charge for impairment of goodwill and other
intangible assets of $109.9 million, the majority of which
did not provide a tax benefit. The companys provision for
income taxes for the prior fiscal year ended January 31,
2008 was $38.1 million, as compared to pretax income of
$139.3 million, resulting in an effective income tax rate
of 27%, which was comparable to historical rates.
Discontinued
operations, net of tax
Discontinued operations include the operations of the
companys art packing businesses in our EMENA region, the
majority of which was sold on July 31, 2008 as part of the
companys ongoing effort to focus on its core businesses.
The remaining portion of the art packing business was sold on
August 1, 2008. The company recorded a gain on the sale,
net of tax, of $7.4 million during the fiscal year-ended
January 31, 2009. Discontinued operating activities
included net operating income, after taxes, of $0.1 million
and $0.5 million, for the fiscal years ended 2009 and 2008,
respectively.
Net
income attributable to noncontrolling interests
Net income attributable to noncontrolling interests decreased
$0.7 million, to $2.2 million from $2.9 million
for fiscal 2009, compared to fiscal 2008. The changes in
noncontrolling interests are dependent upon the mix of income
among the various operations which have noncontrolling interests.
Liquidity
and Capital Resources
As of January 31, 2010, our cash and cash equivalents
totaled $350.8 million, representing an increase of
$93.9 million from January 31, 2009, resulting from
$55.4 million of net cash provided by our operating,
investing and financing activities and an increase of
$38.5 million related to the effect of foreign exchange
rate changes on our cash balances.
During fiscal 2010, we generated approximately
$120.0 million in net cash from operating activities. This
resulted from net income attributable to UTi Worldwide Inc. of
$45.5 million plus depreciation and amortization of
intangible assets totaling $55.1 million, deferred income
taxes of $6.1 million, goodwill impairment of
$1.6 million, provision for doubtful accounts of
$3.5 million, an increase in trade payables and other
current liabilities of
58
$8.8 million, and an increase in trade receivables and
other current assets of $5.4 million, and a decrease in
other items totaling $4.8 million.
The companys primary source of liquidity is the cash
generated from operating activities, which is subject to
seasonal fluctuations, particularly in our freight forwarding
segment. The company experiences increased activity associated
with peak season, generally during the second and third fiscal
quarters, requiring significant customer disbursements. During
the second quarter and the first half of the third quarter, this
seasonal growth in customer receivables tends to consume
available cash. Historically the second half of the third
quarter and the fourth quarter tend to generate significant cash
as cash collections usually exceed cash customer disbursements.
Cash disbursements in the first quarter of the fiscal year
typically exceed cash collections and, as a result, our first
fiscal quarter historically results in the usage of available
cash.
In addition to cash generated from the companys income
generating activities, when the company acts as a customs
broker, we make significant cash advances on behalf of our
clients to the various customs authorities around the world,
predominantly in countries where our clients are importers of
goods such as South Africa and Israel. These customs duties and
taxes, in addition to certain other pass-through items, are not
included as components of revenues and expenses. However, these
advances temporarily consume cash as these items are typically
paid to third parties in advance of reimbursement from our
clients. Accordingly, on a comparative basis, operating cash
flows are typically stronger in periods of declining logistics
activity and are comparably weaker in periods of volume growth
as the company must disburse cash in advance of collections from
customers.
During fiscal 2010, advances for customs duties and taxes were
approximately $3,403.3 million, a decrease of
$923.9 million when compared to approximately
$4,327.1 million for fiscal 2009. This decrease of customs
duties and taxes was primarily attributable to the decrease in
the value of goods moving internationally as a result of the
significant decline in freight volumes experienced in fiscal
2010. The decrease in these advances and subsequent collection
activity related to customs duties and taxes had a favorable
impact on our net cash generated from operating activities.
On a comparative basis, during fiscal 2010, net cash generated
from operating activities was $120.0 million, which
exceeded net income attributable to the company of
$45.5 million for the same period. During fiscal 2009, net
cash generated from operating activities was
$150.5 million. The weak economic conditions experienced in
the fourth quarter of fiscal 2009 continued through fiscal 2010
and, as a result, the company did not experience the normal
seasonal volume fluctuations to the usual degree in fiscal 2010
when compared to prior years. Reduced cash disbursements in the
fourth quarter of fiscal 2009 and throughout fiscal 2010
combined with cash collections related to pre-existing customer
receivables resulted in favorable cash flows from operations in
fiscal 2010 compared to net income for the fiscal year. The
seasonal decline in customer activity in the fourth quarter,
generated significant cash in the fourth quarter of fiscal 2010.
Cash used for investing activities for fiscal years ended
January 31, 2010 and 2009 was $24.6 million and
$62.1 million, respectively. During fiscal 2010, cash used
for capital expenditures was approximately $29.0 million,
consisting primarily of computer hardware and software and
furniture, fixtures and equipment. During the normal course of
operations, the company has a need to acquire technology, office
furniture and equipment to facilitate the handling of our client
freight and logistics volumes. The company spent
$7.9 million for normal or routine capital expenditures in
the fourth quarter of fiscal 2010 resulting in total capital
expenditures of $29.0 million for fiscal 2010. Included in
cash used in investing activities were proceeds of
$13.6 million for the disposal of property, plant and
equipment, including $8.1 million for our disposal of
property in South Africa. During fiscal 2010, we used an
aggregate of $9.2 million of cash for acquisitions and
earn-out payments.
The following outlines certain of our recently paid and future
potential contingent earn-out payments related to prior
acquisitions.
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Our last remaining contingent earn-out payment relating to the
acquisition of Perfect Logistics was based on the acquired
operations earnings over the twelve-month period ended
May 31, 2009. We were not required to make the final
payment in regard to this contingent earn-out.
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59
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We currently anticipate making the final contingent earn-out
payment of $4.2 million during the first half of fiscal
2011 related to our acquisition of Concentrek, which was
calculated based on a multiple of Concentreks earnings for
the twelve-month period ended January 31, 2010.
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We currently do not expect to make the final contingent earn-out
payment related to our acquisition of Logica GmbH, based upon
the entitys performance during fiscal 2010.
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We currently do not expect to make a contingent earn-out payment
in regard to our acquisition of Cargoforte based upon the
entitys performance during fiscal 2010. One remaining
contingent earn-out payment remains, subject to a maximum of
$19.6 million in the aggregate, which payment will be
offset against the initial purchase price of $1.0 million
and will be calculated based on a multiple of the acquired
operations future earnings for the twelve month period
ending January 31, 2011. We made a payment of
$0.9 million in June 2009 relating to the twelve month
period ended January 31, 2009.
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We currently do not expect to make a contingent earn-out payment
in regard to our acquisition of UTi Pharma Slovakia, s.r.o.
based upon the entitys performance during fiscal 2010. One
contingent earn-out payment remains and is subject to a maximum
of $3.0 million in the aggregate and is to be calculated
based on a multiple of the acquired operations earnings
for the year ended January 31, 2012.
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In connection with our acquisition of the remaining ownership
interest in EMA Israel, based on net revenue earned from a
potential customer for each of the next four fiscal years ending
January 31, 2011, 2012, 2013 and 2014, we currently
anticipate making contingent earn-out payments in the quarter
following each of the twelve month periods above. The
companys aggregate obligation with respect to these
contingent earn-out payments has been estimated to be
$0.3 million as of January 31, 2010.
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We anticipate making one contingent earn-out payment of
$4.7 million related to our acquisition of Tacisa during to
April 2010. The payment will be calculated based on a multiple
of the acquired operations earnings for the twelve months
ended January 31, 2010.
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In connection with the formation of the Sisonke Partnership, the
partnership in South Africa that holds the shares of
International Healthcare Distributors (Pty), Ltd., the company
granted a put option to the minority partner providing the
partner with a right to put their 25.1% share of the partnership
to the company. The put option becomes exercisable upon the
later of several events which are not time-definite, however the
company believes the put option will become exercisable during
the first half of fiscal 2011. The liability at January 31,
2010 was determined to be zero, as measured at fair value. The
amount included in other non-current liabilities was
$1.0 million at January 31, 2009. The company
estimates the redemption value of the put option to be
approximately $8.4 million, which the company believes to
be substantially less than the fair value of the minority
partners interest in the partnership.
Our financing activities during fiscal 2010 used
$40.0 million of cash, primarily due to net payments of
$4.6 million for bank lines of credit, offset by net
borrowings of $0.8 million from short term borrowings,
$70.5 million for repayments of long term bank borrowings,
debt issuance costs of $6.5 million and $22.8 million
for the repayment of capital lease obligations with an offset of
$56.5 million from proceeds from the issuance of long term
borrowings. In October 2009 we paid $6.0 million of cash in
connection with the cash dividend of $0.06 cents per outstanding
ordinary share declared by our board of directors on
September 15, 2009.
Many of our businesses operate in functional currencies other
than the U.S. dollar. The net assets of these divisions are
exposed to foreign currency translation gains and losses, which
are included as a component of accumulated other comprehensive
loss in shareholders equity. The company has historically
not attempted to hedge this equity risk. Other comprehensive
income as a result of foreign currency translation adjustments,
net of tax, was $64.2 million for the year ended
January 31, 2010. Other comprehensive loss as a result of
foreign currency translation adjustments, net of tax, was
$98.5 million for the year ended January 31, 2009. The
movement during both periods was caused primarily by
depreciation of the U.S. dollar against the Euro and South
African rand, which together had the most significant impact on
the companys translation adjustment.
60
Credit
Facilities and Senior Notes
At January 31, 2010, the aggregate amount available for
borrowing under all facilities totaled approximately
$292.2 million. As of January 31, 2010, loans
outstanding under these facilities totaled approximately
$43.8 million and letters of credit and guarantees
outstanding under these facilities totaled approximately
$158.2 million, excluding letters of credit (or the portion
thereof) used to support loans outstanding. At January 31,
2010, the Company had approximately $90.1 million of
available, unused capacity under these facilities, approximately
$73.7 million of which was available for cash draw.
Bank
Lines of Credit
A significant number of our subsidiaries participate in a cash
pooling arrangement administered by Bank Mendes Gans NV, which
is used to fund short-term liquidity needs. The cash pooling
arrangement has no stated maturity date and yields and bears
interest at varying rates based on a base rate plus 0.5% for
withdrawals and minus 0.5% for deposits. The facility does not
permit cash withdrawals in excess of cash deposits on a global
basis. At January 31, 2010, cash deposits were equivalent
to cash withdrawals. Cash withdrawals of $70.2 million and
$11.6 million are included in bank lines of credit at
January 31, 2010 and 2009, respectively.
The company has various credit, letter of credit and guarantee
facilities. The companys primary facilities and borrowings
include: the ABN/RBS Letter of Credit Agreement and Nedbank
Letter of Credit Agreement; the South African Facilities
Agreement; and the 2009 Note Purchase Agreement and 2006 Note
Purchase Agreement; all described in more detail below. The
purpose of the companys facilities is to provide the
company with working capital, customs and other guarantees,
letters of credit, and funds for general corporate purposes. Due
to the global nature of the companys business, a number of
financial institutions are utilized to provide the company with
credit facilities.
ABN/RBS
Letter of Credit Agreement
On July 9, 2009, the company and certain of its
subsidiaries entered into a letter of credit facility pursuant
to an agreement with ABN AMRO N.V. (ABN) and The Royal Bank of
Scotland plc. (the ABN/RBS Letter of Credit
Agreement). The ABN/RBS Letter of Credit Agreement
provided for an aggregate availability of up to
$50.0 million in letters of credit as of January 31,
2010. The ABN/RBS Letter of Credit Agreement originally provided
for two separate letter of credit facilities, which we refer to
as the ABN Letter of Credit Facility and the RBS Letter of
Credit Facility. As of January 31, 2010, the letters of
credit outstanding under the ABN Letter of Credit Facility
totaled approximately $33.8 million and the amount of
available, unused capacity was $16.2 million. The ABN
Letter of Credit Facility matures on July 9, 2011. The RBS
Letter of Credit Facility matured on December 31, 2009 and
prior to maturity the company either obtained the release of the
remaining letters of credit issued pursuant to this facility or
provided for alternative arrangements for the underlying
obligations. The companys obligations under the ABN/RBS
Letter of Credit Agreement are guaranteed by the company and
selected subsidiaries.
Nedbank
Letter of Credit Agreement
On July 9, 2009, the company and certain of its
subsidiaries also entered into a letter of credit facility
pursuant to an agreement (the Nedbank Letter of Credit
Agreement) with Nedbank Limited, acting through its London
Branch. The Nedbank Letter of Credit Agreement provided for an
aggregate initial availability of up to $36.0 million in
letters of credit. On January 8, 2010, the company and
certain of its subsidiaries entered into an amendment to this
agreement (the Nedbank Amendment) which temporarily
increased the aggregate availability under the facility to
$46.0 million in letters of credit. The Nedbank Amendment
expired on March 1, 2010, afterwhich the aggregate
availability under the Nedbank Letter or Credit Agreement
reverted to the original availability of $36.0 million in
letters of credit. As of January 31, 2010, the letters of
credit outstanding under the Nedbank Letter of Credit Agreement
totaled approximately $6.2 million and loans outstanding
totaled $23.3 million, which is included in bank lines of
credit in the consolidated balance sheet. As of January 31,
2010, the amount of available, unused capacity was
$16.6 million under this facility. The Nedbank Letter of
Credit
61
Agreement matures on July 9, 2011. The companys
obligations under the Nedbank Letter of Credit Agreement are
guaranteed by the company and selected subsidiaries.
Together, the company refers to the ABN/RBS Letter of Credit
Agreement and the Nedbank Letter of Credit Agreement as the
Letter of Credit Agreements. Pursuant to the terms
of the Letter of Credit Agreements, the company is charged fees
relating to, among other things, the issuance of letters of
credit, the aggregate amount of letters of credit outstanding,
and the unused portions of these facilities, all at the rates
specified in the applicable agreement.
South
African Facilities Agreement
On July 9, 2009, certain of the companys subsidiaries
operating in South Africa entered into a South African credit
facility pursuant to an agreement (the South African
Facilities Agreement) with Nedbank Limited, acting through
its Corporate Banking Division. The South African Facilities
Agreement provides for a 650.0 million South African rand
revolving credit facility, which is comprised of a
400.0 million South African rand working capital facility
and a 250.0 million South African rand letter of credit,
guarantee and forward exchange contract facility. At
January 31, 2010, based on current exchange rates, the
revolving credit facility provided for an aggregate availability
of $84.7 million. As of January 31, 2010, the
borrowings, letters of credit, and guarantees under the South
African Facilities Agreement totaled approximately
$31.0 million, represented by outstanding letters of credit
and guarantees of $31.0 million and borrowings of
$0.1 million, which is included in the bank lines of credit
in the consolidated balance sheet. As of January 31, 2010,
the amount of available, unused capacity was $53.7 million
under this facility. The South African Facilities Agreement also
provides the companys South African operations with a
150.0 million South African rand revolving asset-based
finance facility, which includes, among other things, a capital
lease line. The obligations of the companys subsidiaries
under the South African Facilities Agreement are guaranteed by
selected subsidiaries registered in South Africa. In addition,
certain of the companys operating assets in South Africa,
and the rights and interests of the South African branch of one
of our subsidiaries in various intercompany loans made to a
South African subsidiary and to a South African partnership, are
pledged as collateral under the South African Facilities
Agreement.
Overdrafts under the South African working capital facility bear
interest at a rate per annum equal to Nedbanks publicly
quoted prime rate minus 1%. The per annum interest rate payable
in respect of foreign currency accounts is generally at the
London Interbank Offered Rate (LIBOR), or with respect to a
foreign currency account in euro, the Euro Interbank Offered
Rate (EURIBOR), plus the lenders cost of funds (to the
extent greater than LIBOR or EURIBOR, as applicable), plus 3%.
Instruments issued under the letter of credit, guarantee and
forward exchange contract facility bear interest at a rate to be
agreed upon in writing by the companys subsidiaries party
to the South African Facilities Agreement and Nedbank.
Bank
Borrowings
2009 Note
Purchase Agreement
On July 9, 2009, the company issued $55.0 million of
senior unsecured guaranteed notes (the 2009 Senior
Notes) under a note purchase agreement (the 2009
Note Purchase Agreement), entered into among UTi, certain
of its subsidiaries as guarantors and the purchasers named
therein. The 2009 Senior Notes mature on August 9, 2014.
The 2009 Senior Notes bear interest at a rate of 8.06% per
annum, payable semi-annually, on the 9th day of February
and August. The company is required to repay approximately
$9.2 million, or such lesser principal amount as shall then
be outstanding, on February 9, 2012 and each
February 9th and August 9th thereafter up to
and including August 9, 2014. The companys
obligations under the 2009 Senior Notes and the 2009 Note
Purchase Agreement are guaranteed by the company and selected
subsidiaries. As of January 31, 2010, the principal amount
outstanding under the 2009 Senior Notes was $55.0 million,
and is included in long-term bank borrowings in the consolidated
balance sheet.
62
2006 Note
Purchase Agreement
On July 13, 2006, the company issued $200.0 million of
senior unsecured guaranteed notes (the 2006 Senior
Notes and, together with the 2009 Senior Notes, the
Senior Notes) under a note purchase agreement (the
2006 Note Purchase Agreement, and together with the
2009 Note Purchase Agreement, the Note Purchase
Agreements), entered into among UTi, certain of its
subsidiaries as guarantors and the purchasers named therein. The
2006 Senior Notes mature on July 13, 2011. The 2006 Senior
Notes bear interest at a rate of 6.31% per annum, payable
semi-annually, on the 13th day of each January and July.
The company is required to repay approximately
$33.3 million, or such lesser principal amount as shall
then be outstanding, on each January 13th and
July 13th up to and including July 13, 2011. The
companys obligations under the 2006 Senior Notes and the
2006 Note Purchase Agreement are guaranteed by the company and
selected subsidiaries. As of January 31, 2010 and 2009, the
principal amount outstanding under the 2006 Senior Notes was
approximately $100.0 million and $166.7 million,
respectively, and is included in long-term bank borrowings in
the consolidated balance sheets.
The company also has a number of bank borrowings issued by
various financial institutions, not covered under the facilities
listed above. The total of such bank borrowings at
January 31, 2010 was approximately $8.6 million,
included in short-term and long-term bank borrowings in the
consolidated balance sheet.
The Letter of Credit Agreements, the South African Facilities
Agreement and the 2009 Senior Notes, referred to above replaced
the companys former $250.0 million credit facility
agreement (the 2006 Facility Agreement) with ABN and
various other financial institutions party thereto. All loans
previously outstanding under the 2006 Facility Agreement were
refinanced or paid and all letters of credit previously issued
under the 2006 Facility Agreement were terminated or supported
with new letters of credit in connection with the execution of
the Letter of Credit Agreements, the South African Facilities
Agreement and the issuance of the 2009 Senior Notes. No early
termination penalties were incurred in connection with the
termination of the 2006 Facility Agreement.
The Letter of Credit Agreements, the South African Facilities
Agreement, and the Note Purchase Agreements require the company
to comply with financial and other covenants and certain change
of control provisions. In March 2010, we amended the financial
covenants in the Letter of Credit Agreements and in the 2009
Note Purchase Agreement. Some of the covenants include
maintaining a specified net worth, maintaining a specified ratio
of total debt to consolidated earnings before interest, taxes,
depreciation and amortization (EBITDA) and minimum interest
charge coverage requirements, among others. Should the company
fail to comply with these covenants and be unable to obtain any
necessary amendments or waivers, all or a portion of the
obligations under the Senior Notes, the Letter of Credit
Agreements and the South African Facilities Agreement could
become immediately due and payable and the Letter of Credit
Agreements and the South African Facilities Agreement could be
terminated and the credit, letter of credit, and guarantee
facilities provided thereunder would no longer be available. The
company was in compliance with all the covenants set forth in
the Note Purchase Agreements, the Letter of Credit Agreements
and the South African Facilities Agreement as of
January 31, 2010.
Furthermore, the Letter of Credit Agreements, the South African
Facilities Agreement, and the Note Purchase Agreements each
contain cross-default provisions with respect to other
indebtedness, giving the lenders under the Letter of Credit
Agreements and the South African Facilities Agreement and the
note holders under the Note Purchase Agreements the right to
declare a default if the company defaults under other
indebtedness in certain circumstances.
Pursuant to the terms of the Letter of Credit Agreements, the
South African Facilities Agreement, and the Note Purchase
Agreements, the company is required to indemnify the lenders and
others with respect to certain losses, liabilities and costs,
those relating to income and other taxes, increased costs
suffered as a result of, among other things, changes in laws or
regulations, or other requirements which may be imposed by
regulatory authorities from time to time, and increased costs
suffered as a result of a default under the agreements. The
indemnification obligations created by each respective agreement
arose at the time such agreement was entered into and will
continue in accordance with the terms of such agreement. The
company cannot currently estimate the maximum potential amount
which could be payable pursuant to its indemnification
obligations under these agreements. Liabilities for these
indemnification obligations were not material to the company as
a whole as of the dates that each of the respective agreements
was entered into. The Company has not recorded any liabilities
related to the indemnification obligations as of
January 31, 2010.
63
In addition to the credit, letter of credit, and guarantee
facilities provided under the Letter of Credit Agreements and
the South African Facilities Agreement, the company utilizes a
number of other financial institutions to provide it with
incremental letter of credit, guarantee and working capital
capacity, certain of which are working capital and credit
facilities, and certain of which are customs bonds and
guarantees which are issued by various financial institutions.
In many cases, the use of these particular letter of credit,
guarantee, and working capital facilities are restricted to the
country in which they originated although this is not always the
case. These particular letter of credit, guarantee, and working
capital facilities may restrict distributions by the subsidiary
operating in the country. At January 31, 2010, the
aggregate amount available for borrowing under these other
facilities totaled approximately $111.5 million, including
customs bonds and other guarantees of approximately
$87.3 million and borrowings of approximately
$20.5 million, which is included in both bank lines of
credit and long-term borrowings in the consolidated balance
sheet. At January 31, 2010, the total available, unused
cash borrowing capacity under these other facilities was
approximately $3.7 million.
Contractual
Obligations
At January 31, 2010, we had the following contractual
obligations (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
Less Than
|
|
|
1-3
|
|
|
4-5
|
|
|
After 5
|
|
|
|
Total
|
|
|
1 Year
|
|
|
Years
|
|
|
Years
|
|
|
Years
|
|
|
Bank borrowings(1)
|
|
$
|
186,457
|
|
|
$
|
186,457
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Long-term borrowings(2)
|
|
|
105,618
|
|
|
|
|
|
|
|
86,014
|
|
|
|
19,604
|
|
|
|
|
|
Capital lease obligations(2)
|
|
|
44,244
|
|
|
|
18,278
|
|
|
|
21,025
|
|
|
|
4,906
|
|
|
|
35
|
|
Pension funding obligations(3)
|
|
|
11,728
|
|
|
|
1,181
|
|
|
|
2,402
|
|
|
|
2,085
|
|
|
|
6,060
|
|
Operating lease obligations
|
|
|
383,973
|
|
|
|
114,680
|
|
|
|
136,794
|
|
|
|
70,459
|
|
|
|
62,040
|
|
Unconditional purchase obligations and other(4)
|
|
|
3,502
|
|
|
|
3,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
735,522
|
|
|
$
|
324,098
|
|
|
$
|
246,235
|
|
|
$
|
97,054
|
|
|
$
|
68,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes estimated interest expense based on the variable
interest rates on these obligations as well the current portion
of long-term borrowings. |
|
(2) |
|
Includes interest expense due to the fixed nature of interest
rates on these obligations. |
|
(3) |
|
Pension funding obligation amounts include estimated defined
benefit pension funding obligations through the year ending 2020. |
|
(4) |
|
The company typically enters into various types of short-term
contracts to reserve transportation capacity on a guaranteed
basis. These contracts include minimum quantity commitments with
ocean carriers, and blocked space agreements with
air carriers. Additionally, the company occasionally charters
aircraft capacity with air carriers. The pricing of these
contracts is dependent upon current market conditions. The
company typically does not pay for space which remains unused.
The total committed obligation for these contracts as of
January 31, 2010 was $1.7 million. The remaining
amount represents commitments to purchase capital equipment. |
Certain of our acquisitions include contingent consideration
arrangements. Amounts due to selling shareholders under such
arrangements generally are based on the operating results of the
acquired entity, for a period subsequent to its acquisition. In
certain instances, these agreements have contractual limits on
the amounts that may be payable under the earn-out arrangement.
The above table does not include potential contingent earn-out
payments that may be paid pursuant to any such arrangements,
including the approximately $8.9 million we expect to pay
in fiscal 2011 in connection with the earn-out arrangements
relating to the acquired businesses, as disclosed above. See the
discussion with the caption Liquidity and Capital
Resources.
The above table does not include amounts potentially payable to
taxing authorities for uncertain tax positions taken on tax
returns as we are unable to estimate the timing of such payments
within individual years. As of
64
January 31, 2010, the company has accrued
$10.3 million related to uncertain tax positions. Refer to
Note 4, Uncertain Tax Positions in the
consolidated financial statements.
We believe that with our current cash position, various bank
credit facilities and operating cash flows, we have sufficient
means to meet our working capital and liquidity requirements for
at least the next 12 months as our operations are currently
conducted.
The nature of our operations necessitates dealing in many
foreign currencies and our results are subject to fluctuations
due to changes in exchange rates. See Item 7A.
Quantitative and Qualitative Disclosures about Market Risk.
Call
and Put Options
In connection with the companys merger with Newlog, Ltd.
during fiscal 2008, the company obtained an option providing it
with the right to call the minority partners shares of the
subsidiary under certain circumstances, including a change in
control of the minority partner. The company recorded an asset
related to this call option in other non-current assets. The
amount recorded represents the differences between the estimated
strike price and the estimated fair value of the subsidiary
equity held by the minority partner, if the call option becomes
exercisable. The amounts included in other non-current assets
were $0.5 million and $0.8 million at January 31,
2010 and 2009, respectively.
Additionally, the company granted an option providing the
minority partner with the right to call the companys
shares of the subsidiary in the event the company does not
exercise its right, under specific circumstances, to call the
minority partners shares. The company has recorded a
liability related to this option in other non-current
liabilities. The amounts included in other non-current
liabilities were $0.8 million and $0.9 million at
January 31, 2010 and 2009, respectively.
In connection with the formation of a joint venture subsidiary,
which provides inventory management and other services in the
United States, the company granted an option providing the
minority partner with the right to call the companys
shares of the subsidiary in the event the company does not
exercise its right, under specific circumstances, to call the
minority partners shares. In December 2009, at the time
the company acquired the remaining outstanding shares held by
the minority partner in an Israeli subsidiary, the joint venture
agreement with the minority shareholder, along with the call
option, was terminated, thereby reducing the companys
liability related to this option to zero. For further
information, see Note 2, Acquisitions. At
January 31, 2009, the liability related to this option of
$0.2 million was recorded in other non-current liabilities.
Additionally, in connection with the formation of a partnership
in South Africa that holds the shares of a subsidiary that
distributes pharmaceutical supplies and equipment, the company
granted a put option to the minority partner providing the
partner with a right to put their 25.1% share of the partnership
to the company in fiscal 2011. The liability at January 31,
2010 was determined to be zero. The amount included in other
non-current liabilities was $1.0 million at
January 31, 2009. The company estimates the redemption
value of the put option to be approximately $8.4 million,
which the company believes to be substantially less than the
fair value of the minority partners interest in the
partnership. The liability recorded represents the difference
between the estimated strike price and the estimate fair value
of the partnership held by the minority partner when the put
option becomes exercisable.
Off-Balance
Sheet Arrangements
We have no material off-balance sheet arrangements.
Impact of
Inflation
To date, our business has not been significantly or adversely
affected by inflation. Historically, we have been generally
successful in passing carrier rate increases and surcharges on
to our clients by means of price increases and surcharges.
Direct carrier rate increases could occur over the short- to
medium-term. Due to the high degree of competition in the
marketplace, these rate increases might lead to an erosion of
our profit margins.
65
Critical
Accounting Estimates
Our discussion of our operating and financial review and
prospects is based on our consolidated financial statements,
prepared in accordance with U.S. GAAP and contained within
this report. Certain amounts included in, or affecting, our
consolidated financial statements and related disclosure must be
estimated, requiring us to make certain assumptions with respect
to values or conditions which cannot be known with certainty at
the time the consolidated financial statements are prepared.
Therefore, the reported amounts of our assets and liabilities,
revenues and expenses and associated disclosures with respect to
contingent obligations are necessarily affected by these
estimates. In preparing our financial statements and related
disclosures, we must use estimates in determining the economic
useful lives of our assets, obligations under our employee
benefit plans, provisions for uncollectible accounts receivable
and various other recorded and disclosed amounts. Actual results
could differ from these estimates. We evaluate these estimates
on an ongoing basis.
Our significant accounting policies are included in Note 1,
Summary of Significant Accounting Policies, to the
consolidated financial statements included in this report;
however, we believe that certain accounting policies are more
critical to our financial statement preparation process than
others. These include our policies on revenue recognition,
income taxes, allowance for doubtful receivables, business
combinations, goodwill and other intangible assets, share based
compensation, contingencies and call and put options.
Revenue
Recognition
Revenue represents billings on exports to clients, plus net
revenue on imports, net of any billings for value added taxes,
custom duties and freight insurance premiums whereby the company
acts as an agent. The company recognizes revenue in accordance
with FASB Codification Topic 605, Revenue Recognition,
(ASC 605). Accordingly, revenue and purchased transportation
costs for airfreight and ocean freight forwarding services,
including commissions earned from the companys services as
an authorized agent for airline and ocean carriers and
third-party freight insurers are recognized at the time the
freight departs the terminal of origin which is when the client
is billed. This method generally results in recognition of
revenues and purchased transportation costs earlier than methods
that do not recognize revenues until a proof of delivery is
received or that recognize revenues as progress on the transit
is made. The companys method of revenue and cost
recognition does not result in a material difference from
amounts that would be reported under such other methods.
Customs brokerage revenue, contract logistics revenue and
distribution and other revenues are recognized when the client
is billed, which for customs brokerage, is when the necessary
documentation for customs clearance has been completed, and for
contract logistics and other revenues, is when the service has
been provided to third parties in the ordinary course of
business. Purchased transportation costs are recognized at the
time the freight departs the terminal of origin.
Significant components of estimation related to revenue
recognition include valuation of accounts receivable and the
accrual of certain costs, related primarily to ancillary
services, which are estimated and accrued at the time the
services are provided, and adjusted upon receipt of the
suppliers final invoices.
Income
Taxes
Our overall effective income tax rate is determined by the
geographic composition of our worldwide taxable income, with
some of our operations in countries with low effective income
tax rates. Consequently our provision for tax expense on an
interim basis is based on an estimate of our overall effective
tax rate for the related annual period.
Deferred income taxes are accounted for using the liability
method in respect of temporary differences arising from
differences between the carrying amount of assets and
liabilities in the financial statements and the corresponding
tax basis used in the computation of taxable income. Deferred
income tax assets and liabilities are recognized for all taxable
temporary differences. Deferred income taxes are calculated at
the tax rates that are expected to apply to the period when the
asset is realized or the liability is settled. Deferred income
taxes are charged or credited to the consolidated statements of
operations.
66
Deferred income tax assets are offset by valuation allowances so
that the assets are recognized only to the extent that it is
more likely than not that taxable income will be available
against which deductible temporary differences can be utilized.
We consider our historical performance, forecasted taxable
income and other factors when we determine the sufficiency of
our valuation allowances. We believe the estimates and
assumptions used to determine future taxable income to be
reasonable, although they are inherently uncertain and actual
results may differ from these estimates.
Allowance
for Doubtful Accounts
We maintain an allowance for doubtful accounts based on a
variety of factors and estimates. These factors include
historical client trends, current receivables aging, general and
specific economic conditions and local market conditions. We
review the allowance for doubtful accounts on a monthly basis.
Past due balances over 90 days and over a specified amount
are reviewed individually for collectability. All other balances
are reviewed on a pooled basis. Account balances are charged off
against the allowance after all means of collection have been
exhausted and the potential for recovery is remote. We do not
have any off-balance-sheet credit exposure related to our
customers. We believe our estimate for doubtful accounts is
based on reasonable assumptions and estimates, although they are
inherently uncertain and actual results may differ from these
estimates.
Business
Combinations
The total cost of our acquisitions is allocated to the assets
acquired and the liabilities assumed based upon their estimated
fair values at the date of acquisition. The terms of our
acquisitions often include contingent consideration or earn-out
arrangements based upon the performance of the acquired
business, subsequent to acquisition. Accordingly, we are
required to make a determination as to what portion of the
contingent consideration represents a cost of the acquisition
and what portion, if any, represents a compensatory arrangement,
based upon the terms of the arrangement. The determination of
the compensatory element, if any, requires judgment and impacts
the amount of compensation expense recorded as Staff Costs. In
accordance with FASB Codification Topic 805, Business
Combinations, liabilities for contingent earn-out payments
are initially recognized at their estimated fair values at the
date of acquisition and subsequent changes in fair value of the
liability are recognized in earnings.
Goodwill
and Other Intangible Assets
Goodwill is the difference between the purchase price of a
company and the fair market value of the acquired companys
net assets at the date of acquisition. Other intangible assets
with finite lives are being amortized using the straight-line
method over their estimated lives.
Intangible assets with indefinite lives, including goodwill are
assessed at least annually for impairment in accordance with ASC
350, Intangibles Goodwill and Other. We
complete the required impairment test annually in the second
quarter, and also when evidence of potential impairment exists.
When it is determined that impairment has occurred, a charge to
operations is recorded. In order to test for potential
impairment, the company uses a discounted cash flow analysis,
corroborated by comparative market multiples where appropriate.
The principal factors used in the discounted cash flow analysis
requiring judgment are the projected results of operations,
weighted average cost of capital (WACC), and terminal value
assumptions. The WACC takes into account the relative weight of
each component of the companys consolidated capital
structure (equity and debt) and represents the expected cost of
new capital adjusted as appropriate to consider risk profiles
specific to the company. The terminal value assumptions are
applied to the final year of the discounted cash flow model. Due
to the number of variables inherent in the estimation of fair
value and the relative size of the companys recorded
goodwill, differences in assumptions may have a material effect
on the results of the impairment analysis.
We identified seven goodwill reporting units for the required
impairment test conducted in the second quarter of fiscal 2010,
and based on our results of the Step 1 testing, no impairment
charge resulted from such analysis. However, for two of the
companys reporting units, EMENA Contract Logistics and
Americas Distribution, the fair values of the reporting unit
assets exceeded the carrying values by less than five percent.
Due to the narrow margin of passing the Step 1 goodwill
impairment testing conducted in the second quarter of fiscal
2010, if the projected operational results are not achieved,
there is the potential for a partial or full impairment of the
goodwill value in
67
fiscal 2011 or in future years, particularly with respect to
these two reporting units. Several of the key assumptions for
achieving the projected operational results include certain
revenue growth and operating cost assumptions. As of
January 31, 2010, the goodwill carrying values for the
EMENA Contract Logistics and Americas Distribution reporting
units were $5.4 million and $79.9 million,
respectively.
During the fourth quarter ended January 31, 2009, the
company recorded a non-cash charge of $109.9 million,
before a related deferred tax benefit of $15.3 million, for
impairment of goodwill and intangible assets in the
companys Contract Logistics and Distribution segment. This
charge was recorded as the result of volatility and
deterioration of the financial markets and adverse changes in
the global business climate, during the second half of the
fiscal year-ended January 31, 2009.
During the fourth quarter ended January 31, 2010, the
company recorded a non-cash charge of $1.6 million, for the
impairment of goodwill in the companys Contract Logistics
and Distribution Segment in accordance with ASC 250,
Accounting for Changes and Error Corrections and the
correction of an error. Prior period amounts have not been
restated due to immateriality. There was no tax benefit as the
result of this charge. This charge was recorded as the result of
a correction of the impairment of goodwill in the companys
Contract Logistics and Distribution segment during the fourth
quarter ended January 31, 2009. The additional impairment
charge was recorded in accordance with SAB 108,
Considering the Effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year Financial
Statements.
Share-Based
Compensation
The company has elected the fair value recognition provisions of
FASB Codification Topic 718, Compensation Stock
Compensation, (ASC 718), using the modified prospective
transition method. Under this method, the company recognizes
compensation expense for all share-based payments granted after
January 31, 2007, as well as all share-based payments
granted prior to, but not yet vested, as of January 31,
2007, in accordance with ASC 718. Under the fair value
recognition provisions of ASC 718, the company recognizes
share-based compensation expense, net of an estimated forfeiture
rate, over the requisite service period of the award.
Shares of newly issued common stock will be issued upon exercise
of stock options or vesting of restricted share units.
Contingencies
We are subject to a range of claims, lawsuits and administrative
proceedings that arise in the ordinary course of business.
Estimating liabilities and costs associated with these matters
requires judgment and assessment based upon professional
knowledge and experience of management and its legal counsel.
Where the company is self-insured in relation to freight related
exposures or employee benefits, adequate liabilities are
estimated and recorded for the portion for which we are
self-insured. When estimates of our exposure from claims or
pending or threatened litigation matters meet the recognition
criteria of FASB Codification Topic 450, Contingencies, (ASC
450), amounts are recorded as charges to earnings. The ultimate
resolution of any exposure to us may change as further facts and
circumstances become known. For further information regarding
legal proceedings, see Note 17, Contingencies.
Call
and Put Options
In connection with certain of the companys acquisitions
and formations of certain partnerships, the company has acquired
or has issued various options for either the company or its
minority partners to put or call shares in the partnerships. We
record assets and liabilities associated with these instruments
based on the differences between the estimated strike price and
the estimated fair value of the instruments, based on when the
call and put options are expected to become exercisable.
FASB
Codification
In June 2009, the FASB issued the FASB Codification as the
single source of authoritative nongovernmental U.S. GAAP.
This guidance identifies the sources of accounting principles
and the framework for selecting the
68
principles used in the preparation of financial statements in
conformity with U.S. GAAP. The FASB Codification became
effective for the company in the third quarter of fiscal 2010
and where possible, previously disclosed FASB references have
been replaced with FASB Codification references.
Recent
Accounting Pronouncements
In October 2009, the FASB issued Accounting Standards Update
(ASU) 2009-13, Multiple-Deliverable Revenue Arrangements
(ASU
2009-13),
which amends Codification Topic 605, Revenue
Recognition. This update provides amendments to the criteria
for separating deliverables, measuring and allocating
arrangement consideration to one or more units of accounting.
This update also establishes a selling price hierarchy for
determining the selling price of a deliverable. ASU 2009-13 is
effective for revenue arrangements entered into or materially
modified in fiscal years beginning on or after June 15,
2010. The company is currently evaluating the impact the
adoption of the update may have on its consolidated results of
operations and financial position.
In June 2009, an update was made to FASB Codification Topic 810,
Consolidation, (ASC 810). This update amends previous
guidance to require the company to perform an analysis to
determine whether its variable interests give it a controlling
financial interest in a variable interest entity. The update is
effective for annual periods beginning after November 15,
2009, for interim periods within that first annual reporting
period, and for interim and annual reporting periods thereafter.
The company is currently evaluating the impact the adoption of
the update may have on its consolidated results of operations
and financial position.
In May 2009, the FASB issued guidance which is included in FASB
Codification Topic 855, Subsequent Events, (ASC 855). ASC
855 establishes general standards of accounting for and
disclosure of events that occur after the balance sheet date but
before financial statements are issued. The company has
evaluated subsequent events through March 29, 2010 for
appropriate accounting and disclosure in accordance with this
standard.
In December 2007, the FASB issued guidance which is included in
FASB Codification Topic 805, Business Combinations, (ASC
805). ASC 805 applies the same method of accounting (the
acquisition method) to all transactions and other events in
which one entity obtains control over one or more other
businesses. This standard applies prospectively to business
combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or
after December 15, 2008. The company is applying the
guidance of ASC 805 to business combinations completed on or
after February 1, 2009.
In September 2006, the FASB issued guidance which is included in
FASB Codification Topic 820, Fair Value Measurements and
Disclosures, (ASC 820). ASC 820 defines fair value, sets out
a framework for measuring fair value in U.S. GAAP, and
expands disclosures about fair value measurements of assets and
liabilities. The company implemented the provisions of ASC 820
beginning in the first quarter of fiscal 2009, except for
certain nonfinancial assets and liabilities for which it adopted
the provisions of ASC 820 in the first quarter of fiscal 2010.
For further information, see Note 19, Fair Value
Disclosures.
Reclassifications
Certain amounts in the prior years consolidated financial
statements have been reclassified to conform to the current year
presentation. In accordance with ASC 280, all prior
period segment information has been reclassified to conform to
the current presentation.
|
|
ITEM 7A.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
Quantitative
Information about Market Risk
Foreign
Currency Exchange Rate Sensitivity
Our use of derivative financial instruments is limited to
forward foreign exchange contracts. At January 31, 2010,
the notional value of all of our open forward foreign exchange
contracts was $28.0 million related to transactions
denominated in various currencies, but predominantly in
U.S. dollars, Euros and British pounds sterling. These
contracts are generally entered into at the time the foreign
currency exposure is incurred and do not exceed 60 days.
69
The following tables provide comparable information about our
non-functional currency components of balance sheet items by
currency, and present such information in U.S. dollar
equivalents at January 31, 2010 and 2009. These tables
summarize information on transactions that are sensitive to
foreign currency exchange rates, including non-functional
currency denominated receivables and payables. The net amount
that is exposed in foreign currency is then subjected to a 10%
change in the value of the functional currency versus the
non-functional currency.
Non-functional currency exposure in U.S. dollar equivalents
was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Exchange
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain/(loss)
|
|
|
|
|
|
|
|
|
|
Net
|
|
|
if Functional Currency
|
|
|
|
|
|
|
|
|
|
Exposure
|
|
|
Appreciates
|
|
|
Depreciates
|
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Long/(Short)
|
|
|
by 10%
|
|
|
by 10%
|
|
|
At January 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. dollars
|
|
$
|
96,722
|
|
|
$
|
39,230
|
|
|
$
|
57,491
|
|
|
$
|
5,749
|
|
|
$
|
(5,749
|
)
|
Euros
|
|
|
6,541
|
|
|
|
15,267
|
|
|
|
(8,725
|
)
|
|
|
(873
|
)
|
|
|
873
|
|
British pounds sterling
|
|
|
3,087
|
|
|
|
3,477
|
|
|
|
(390
|
)
|
|
|
(39
|
)
|
|
|
39
|
|
Hong Kong dollars
|
|
|
517
|
|
|
|
1,441
|
|
|
|
(924
|
)
|
|
|
(92
|
)
|
|
|
92
|
|
Other
|
|
|
2,402
|
|
|
|
7,459
|
|
|
|
(5,057
|
)
|
|
|
(506
|
)
|
|
|
506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
109,269
|
|
|
$
|
66,874
|
|
|
$
|
42,395
|
|
|
$
|
4,239
|
|
|
$
|
(4,239
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At January 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. dollars
|
|
$
|
76,727
|
|
|
$
|
69,246
|
|
|
$
|
7,481
|
|
|
$
|
748
|
|
|
$
|
(748
|
)
|
Euros
|
|
|
5,594
|
|
|
|
14,866
|
|
|
|
(9,272
|
)
|
|
|
(927
|
)
|
|
|
927
|
|
British pounds sterling
|
|
|
2,068
|
|
|
|
2,435
|
|
|
|
(367
|
)
|
|
|
(37
|
)
|
|
|
37
|
|
Hong Kong dollars
|
|
|
859
|
|
|
|
864
|
|
|
|
(5
|
)
|
|
|
(1
|
)
|
|
|
1
|
|
Other
|
|
|
1,801
|
|
|
|
28,474
|
|
|
|
(26,673
|
)
|
|
|
(2,667
|
)
|
|
|
2,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
87,049
|
|
|
$
|
115,885
|
|
|
$
|
(28,836
|
)
|
|
$
|
(2,884
|
)
|
|
$
|
2,884
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualitative
Information about Market Risk
Foreign
Exchange Risk
The nature of our operations necessitates dealing in many
foreign currencies. Our results are subject to fluctuations due
to changes in exchange rates. We attempt to limit our exposure
to changing foreign exchange rates through both operational and
financial market actions. We provide services to clients in
locations throughout the world and, as a result, operate with
many currencies including the key currencies of North America,
Latin America, Africa, Asia Pacific and EMENA.
Our short-term exposures to fluctuating foreign currency
exchange rates are related primarily to intercompany
transactions. The duration of these exposures is minimized
through our use of an intercompany netting and settlement system
that settles all of our intercompany trading obligations once
per month. In addition, selected exposures are managed by
financial market transactions in the form of forward foreign
exchange contracts (typically with maturities at the end of the
month following the purchase of the contract). Forward foreign
exchange contracts are primarily denominated in the currencies
of our principal markets. We will normally generate foreign
exchange gains and losses through normal trading operations. We
do not enter into derivative contracts for trading or
speculative purposes.
We do not, and cannot, hedge our foreign currency exposure in a
manner that would entirely eliminate the effects of changes in
foreign exchange rates on our consolidated net income.
Many of our operations operate in functional currencies other
than the U.S. dollar. The net assets of these divisions are
exposed to foreign currency translation gains and losses, which
are included as a component of
70
accumulated other comprehensive loss in shareholders
equity. Such translation resulted in unrealized gains of
$64.2 million in fiscal 2010. The company has historically
not attempted to hedge this equity risk.
Interest
Rate Risk
As a result of our normal borrowing and leasing activities, our
operating results are exposed to fluctuations in interest rates,
which we manage primarily through our regular financing
activities. We have short-term and long-term debt with both
fixed and variable interest rates. Short-term debt is primarily
comprised of bank lines of credit used to finance working
capital requirements. Generally, our short-term debt is at
variable interest rates, while our long-term debt is at fixed
interest rates. As of January 31, 2010 and 2009, the fair
value of the companys 6.31% senior unsecured
guaranteed notes was $154.6 million and
$168.4 million, respectively, compared to book value of
$100.0 million and $166.7 million for fiscal 2010 and
2009, respectively. As discussed further at Note 10,
Borrowings on July 9, 2009, the company issued
$55.0 of senior unsecured guaranteed notes bearing an interest
rate of 8.06%. The carrying value of these notes approximates
fair value. Interest rate risk was estimated as the potential
decrease in fair value resulting from a hypothetical 10%
increase in interest rates and was not considered material at
either year-end. We believe a 1% change in interest rates would
not have a material impact on our future investment earnings due
to the short-term nature of our investments.
We do not undertake any specific actions to cover our exposure
to interest rate risk and we are not a party to any interest
rate risk management transactions. We do not purchase or hold
any derivative financial instruments for trading or speculative
purposes.
|
|
ITEM 8.
|
Financial
Statements and Supplementary Data
|
Consolidated
Statements and Other Financial Information
Our consolidated financial statements, along with the report of
our independent registered public accounting firm thereon, are
attached to this report beginning on
page F-3
and are incorporated herein by reference.
|
|
ITEM 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
|
None.
|
|
ITEM 9A.
|
Controls
and Procedures
|
Managements
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in
Rules 13a-15(e)
and
15d-15(e) of
the Exchange Act) are the controls and other procedures of an
issuer that are designed to ensure that information required to
be disclosed by the issuer in the reports filed or submitted by
it under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities
and Exchange Commissions rules and forms. Disclosure
controls and procedures include, without limitation,
controls and procedures designed to ensure that information
required to be disclosed by an issuer in its Exchange Act
reports is accumulated and communicated to the issuers
management, including its principal executive and financial
officers, as appropriate to allow timely decisions regarding
required disclosure.
Our management, under the direction and with the participation
of our Chief Executive Officer and Chief Financial Officer, has
evaluated our disclosure controls and procedures as of
January 31, 2010. Based upon this evaluation, management,
including our Chief Executive Officer and Chief Financial
Officer, has concluded that our disclosure controls and
procedures were effective as of January 31, 2010. See
Managements Report on Internal Control over
Financial Reporting and Report of Independent
Registered Public Accounting Firm attached to this report
on pages F-2 and F-3 and incorporated herein by reference.
Internal control over financial reporting (as
defined in
Rules 13a-15(f)
and
15d-15(f) of
the Exchange Act) is a process designed by, or under the
supervision of, the issuers principal executive and
financial officers, and effected by the issuers board of
directors, management, and other personnel, to provide
reasonable assurance
71
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles and
includes those policies and procedures that:
(1) Pertain to the maintenance of records that in
reasonable detail accurately and fairly reflect the transactions
and dispositions of the assets of the issuer;
(2) Provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the issuer are
being made only in accordance with authorizations of management
and directors of the issuer; and
(3) Provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition
of the issuers assets that could have a material effect on
the financial statements.
The companys management, including the Chief Executive
Officer and Chief Financial Officer, concluded there were no
changes to our internal controls over financial reporting during
the year ended January 31, 2010 that have materially
affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
|
|
ITEM 9B.
|
Other
Information
|
In late fiscal 2010, the Companys Compensation Committee
undertook a review of the employment agreements with our
executive officers with the goals of clarifying the
executives rights and the companys obligations in
the event of terminations, updating tax provisions and
addressing differences among the terms of the different
agreements. As a result of this review, on March 25, 2010,
UTi, Services, Inc., an indirect subsidiary of the company
(UTi Services), amended and restated the following
employment agreements between UTi Services and certain of the
companys named executive officers (collectively, the
Existing Employment Agreements): the Employment
Agreement of Eric Kirchner, dated as of January 1, 2009;
the Amended and Restated Employment Agreement of Gene Ochi,
dated as of May 1, 2008; the Amended and Restated
Employment Agreement of Lawrence Samuels, dated as of
October 1, 2008; and the Amended and Restated Employment
Agreement of William Gates, dated as of October 1, 2008.
The amended and restated employment agreements (collectively,
the Amended and Restated Employment Agreements)
revise the Existing Employment Agreements by, among other
things, amending the provisions requiring the executives to
execute general releases as a condition precedent to receiving
payments after a termination and clarifying the provisions
relating to Sections 280G and 409A of the Internal Revenue
Code of 1986, as amended. The Amended and Restated Employment
Agreements also modify the procedure in the agreements for
termination in the event of the executives disability to
provide that such termination shall be at the discretion of UTi
Services instead of being automatic as provided in the Existing
Employment Agreements and provide for the payment of a prorated
portion of the target amount of the executives
performance bonus in the event of certain terminations within
12 months following a change of control. The Amended and
Restated Employment Agreements do not increase the salaries
payable to the executives, or change the positions or duties of
the executives.
The amendments to the Existing Employment Agreements are
reflected in the revised form of Employment Agreement for
Executive Officers, as well as the Amended and Restated
Employment Agreements for Messrs. Kirchner, Ochi, Samuels
and Gates, which have been filed as exhibits 10.11, 10.12,
10.7, 10.8 and 10.9, respectively, to this Annual Report on
Form 10-K
and which are incorporated herein by reference.
Additionally, on March 25, 2010, the company and certain of
its subsidiaries as guarantors (collectively with the company,
the Obligors) entered into: (i) a Second
Amendment to Letter of Credit Agreement with Nedbank Limited
(Nedbank), acting through its London Branch,
(ii) a First Amendment to Letter of Credit Agreement with
ABN Amro Bank N.V. (ABN), and (iii) a First
Amendment to Note Purchase Agreement with the purchasers party
thereto, (collectively, the Amendments). The
Amendments amend the fixed charge coverage ratios provided for
under the Letter of Credit Agreement, dated as of July 9,
2009, with Nedbank, acting through its London Branch, (the
Nedbank Agreement), the Letter of Credit Agreement,
dated as of July 9, 2009, with ABN (the ABN
Agreement) and the Note Purchase Agreement, dated as of
July 9, 2009, with the purchasers party thereto, (the
Note Purchase Agreement), respectively, for future
periods.
72
On January 8, 2010, the Obligors also entered into a First
Amendment to Letter of Credit Agreement (the Previous
Amendment) with Nedbank, which among other things,
increased the Maximum Draw Amount (as such term is
defined in the Nedbank Agreement) under the Nedbank Agreement
during the period from January 8, 2010 through and
including March 1, 2010 by $10 million, from
$36 million to $46 million.
The foregoing descriptions of the Previous Amendment and the
Amendments are qualified in their entirety by the full texts of
the Previous Amendment and the Amendments, which have been filed
as exhibits 10.44, 10.45, 10.46 and 10.47, respectively, to
this Annual Report on
Form 10-K
and which are incorporated herein by reference. Except as
specifically amended by the Previous Amendment and the
Amendments, the Nedbank Agreement, the ABN Agreement and the
Note Purchase Agreement remain in full force and effect.
In addition to acting as the issuing bank under the Nedbank
Agreement, Nedbank is the arranger and facility agent under a
facilities agreement, dated as of July 9, 2009, among
certain of the companys subsidiaries with operations in
South Africa and Nedbank.
PART III
|
|
ITEM 10.
|
Directors
and Executive Officers and Corporate Governance
|
The information required by this Item with respect to directors,
the Audit Committee and Section 16(a) compliance is
incorporated by reference under the captions, Election of
Directors, Information about the Board of Directors
and Committees of the Board and Section 16(a)
Beneficial Ownership Reporting Compliance, respectively,
from our definitive Proxy Statement for our 2010 Annual Meeting
of Shareholders, which we refer to as the 2010 Proxy Statement,
which will be filed within 120 days of January 31,
2010 pursuant to Regulation 14A.
Information regarding our executive officers is included in
Part I, Item 1 of this report appearing under the
caption, Executive Officers and Other Senior Managers of
Registrant.
We have adopted a Code of Conduct and Ethics that applies to our
executive officers, including the Chief Executive Officer and
the Chief Financial Officer. The full text of the code is
published on our website at www.go2uti.com in the
Corporate Governance section and a copy of the code
will be provided to any person without charge, upon written
request addressed through UTi, Services, Inc., 100 Oceangate,
Suite 1500, Long Beach, CA 90802, U.S.A., attention:
Investor Relations. In the event that we make any amendments to,
or grant any waivers of, a provision of the Code of Ethics
applicable to our principal executive officer, principal
financial officer or principal accounting officer, we intend to
disclose such amendment or waiver on our website. Information on
our website, however, does not form a part of this annual report
on
Form 10-K.
|
|
ITEM 11.
|
Executive
Compensation
|
The information required by this Item is incorporated by
reference under the captions Information about the Board
of Directors and Committees of the Board
Compensation of Directors and Compensation of
Executive Officers from our 2010 Proxy Statement.
|
|
ITEM 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
The information required by this Item with regard to the
security ownership of certain beneficial owners and management
is incorporated by reference under the captions Security
Ownership of Certain Beneficial Owners and Management from
our 2010 Proxy Statement.
73
Securities
Authorized for Issuance under Equity Compensation
Plans
The following table sets forth information as of
January 31, 2010 regarding the number of our ordinary
shares that may be issued pursuant to our equity compensation
plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
|
|
|
(c)
|
|
|
|
Number of
|
|
|
|
|
|
Number of Securities
|
|
|
|
Securities to be
|
|
|
(b)
|
|
|
Remaining Available
|
|
|
|
Issued upon
|
|
|
Weighted-Average
|
|
|
for Future Issuance
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
under Equity
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
Compensation Plans
|
|
|
|
Options, Warrants
|
|
|
Options, Warrants,
|
|
|
(Excluding Securities
|
|
|
|
and Rights
|
|
|
and Rights
|
|
|
Reflected in Column (a))
|
|
|
Plan category
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans approved by security holders
|
|
|
4,893,811
|
(1)(2)
|
|
$
|
16.30
|
|
|
|
6,712,834
|
(3)
|
Equity compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
4,893,811
|
|
|
$
|
16.30
|
|
|
|
6,712,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Of these shares, 30,457 are restricted share units granted
pursuant to the 2004 Non-Employee Directors Share Incentive
Plan. In addition, 1,841,127 are restricted share units granted
as retention awards under our 2009 and 2004 Long-Term Incentive
Plans. The Retention Awards consist of restricted share units,
which entitle the holder to have shares issued to him or her
upon the passage of time. Under the Retention Awards, a portion
of the award may vest annually over time or, alternatively, the
award will vest in full at the end of the required retention
period. Restricted share units granted under the 2004
Non-Employee Directors Share Incentive Plan generally vest and
become non-forfeitable on the date immediately preceding the
annual meeting of shareholders which follows the grant date of
the restricted share units, provided that the director receiving
such restricted share units is then serving as a director on
such date. Receipt of such shares may be deferred under the
terms of the plan. |
|
(2) |
|
Of these shares, 1,661,827 shares are subject to options
pursuant to which the exercise price was above the closing
market price of our ordinary shares as of January 31, 2010. |
|
(3) |
|
The restricted share units identified in Footnote 1 are not
included in column (c). |
|
|
ITEM 13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
The information required by this Item is incorporated by
reference under the captions Information About the Board
of Directors and Committees of the Board and
Transactions with Management and Others from our
2010 Proxy Statement.
|
|
ITEM 14.
|
Principal
Accountant Fees and Services
|
The information required by this Item is incorporated by
reference under the caption Independent Registered Public
Accountants from our 2010 Proxy Statement.
74
PART IV
|
|
ITEM 15.
|
Exhibits
and Financial Statement Schedules
|
1. Financial Statements and Financial Statement Schedule
Our consolidated financial statements are attached to this
report and begin on
page F-1.
2. Exhibits
The following documents are filed herewith or incorporated
herein by reference to the location indicated.
|
|
|
|
|
Exhibit
|
|
Description
|
|
|
3
|
.1
|
|
Memorandum of Association of the company, as amended
(incorporated by reference to Exhibit 3.1 to the
companys Current Report on
Form 8-K,
filed July 31, 2007)
|
|
3
|
.2
|
|
Articles of Association of the company, as amended (incorporated
by reference to Exhibit 3.1 to the companys Current
Report on
Form 8-K,
filed July 31, 2007)
|
|
10
|
.1
|
|
Sale of Shares Agreement, entered into December 6,
2004, between Pyramid Freight (Proprietary) Limited and The
Trustees For the Time Being of the UTi Empowerment Trust
(incorporated by reference to Exhibit 10.4 to the
companys Quarterly Report on
Form 10-Q,
filed December 8, 2004)
|
|
10
|
.2
|
|
Loan Agreement, entered into December 6, 2004, between
Pyramid Freight (Proprietary) Limited and UTi South Africa
(Proprietary) Limited (incorporated by reference to
Exhibit 10.5 to the companys Quarterly Report on
Form 10-Q,
filed December 8, 2004)
|
|
10
|
.3
|
|
Shareholders Agreement, entered into December 6,
2004, among Pyramid Freight (Proprietary) Limited, the Trustees
for the Time Being of the UTi Empowerment Trust and UTi South
Africa (Proprietary) Limited (incorporated by reference to
Exhibit 10.6 to the companys Quarterly Report on
Form 10-Q,
filed December 8, 2004)
|
|
10
|
.4
|
|
Sale of Business Agreement, entered into December 6, 2004,
between Pyramid Freight Proprietary) Limited and UTi South
Africa (Proprietary) Limited (incorporated by reference to
Exhibit 10.7 to the companys Quarterly Report on
Form 10-Q,
filed December 8, 2004)
|
|
10
|
.5+
|
|
Amended and Restated Employment Agreement of Mr. John
Hextall, dated as of October 1, 2008 (incorporated by
reference to Exhibit 10.2 to the companys Quarterly
Report on
Form 10-Q,
filed December 10, 2008)
|
|
10
|
.6+
|
|
Separation Agreement and General Release of Mr. John
Hextall, dated as of July 28, 2009 (incorporated by
reference to Exhibit 99.1 to the companys Current
Report on
Form 8-K,
filed July 29, 2009)
|
|
10
|
.7+
|
|
Amended and Restated Employment Agreement of Mr. Gene Ochi,
dated as of March 25, 2010
|
|
10
|
.8+
|
|
Amended and Restated Employment Agreement of Mr. Lawrence
Samuels, dated as of March 25, 2010
|
|
10
|
.9+
|
|
Amended and Restated Employment Agreement of Mr. William
Gates, dated as of March 25, 2010
|
|
10
|
.10+
|
|
Letter Agreement between Mr. William Gates and the company,
dated as of October 1, 2008 (incorporated by reference to
Exhibit 10.14 to the companys Annual Report on
Form 10-K,
filed April 1, 2009)
|
|
10
|
.11+
|
|
Form of Employment Agreement for Executive Officers
|
|
10
|
.12+
|
|
Amended and Restated Employment Agreement of Mr. Eric
Kirchner, dated as
|
|
|
|
|
of March 25, 2010
|
|
10
|
.13+
|
|
Amended and Restated Employment Agreement of Mr. Lance
DAmico, dated as of March 25, 2010
|
|
10
|
.14+
|
|
Non-Employee Directors Share Option Plan, as amended,
(incorporated by reference to Exhibit 10.1 to the
companys Quarterly Report on
Form 10-Q,
filed June 9, 2006)
|
|
10
|
.15+
|
|
2000 Employee Share Purchase Plan, as amended (incorporated by
reference to Exhibit 10.1 to the companys Quarterly
Report on
Form 10-Q,
filed September 10, 2007)
|
|
10
|
.16+
|
|
2000 Stock Option Plan, as amended (incorporated by reference to
Exhibit 10.3 to the companys Quarterly Report on
Form 10-Q,
filed June 9, 2006)
|
|
10
|
.17+
|
|
2004 Long-Term Incentive Plan, as amended and restated
(incorporated by reference to Exhibit 10.4 to the
companys Quarterly Report on
Form 10-Q,
filed June 9, 2006)
|
|
10
|
.18+
|
|
Uniserv Executive Provident Fund, as amended (incorporated by
reference to Exhibit 10.6 to the companys Quarterly
Report on
Form 10-Q,
filed June 9, 2006)
|
75
|
|
|
|
|
Exhibit
|
|
Description
|
|
|
10
|
.19+
|
|
Uniserv Pension Fund, as amended (incorporated by reference to
Exhibit 10.7 to the companys Quarterly Report on
Form 10-Q,
filed June 9, 2006)
|
|
10
|
.20+
|
|
WTC Provident Fund, as amended (incorporated by reference to
Exhibit 10.8 to the companys Quarterly Report on
Form 10-Q,
filed June 9, 2006)
|
|
10
|
.21+
|
|
Norwich Union Cash Plus Individual Pension Plan Policy for
Mr. John Hextall (incorporated by reference to
Exhibit 10.10 to the companys Quarterly Report on
Form 10-Q,
filed June 9, 2006)
|
|
10
|
.22+
|
|
Non-Employee Director Compensation Policy
|
|
10
|
.23+
|
|
UTi Worldwide Inc. Supplemental Benefits Allowance Program
(incorporated by reference to Exhibit 10.1 to the
companys Current Report on
Form 8-K,
filed June 11, 2009)
|
|
10
|
.24
|
|
Note Purchase Agreement, dated as of July 13, 2006, by and
among UTi Worldwide Inc. and certain of its subsidiaries party
thereto and the purchasers party thereto (incorporated by
reference to Exhibit 10.1 to the companys Current
Report on
Form 8-K,
filed July 19, 2006)
|
|
10
|
.25+
|
|
2004 Non-Employee Directors Share Incentive Plan, as amended and
restated
|
|
10
|
.26+
|
|
Form of UTi Worldwide Inc. 2004 Non-Employee Directors Share
Incentive Plan Restricted Shares Award
Agreement and Section 83(b) Election Form, as amended
(incorporated by reference to Exhibit 10.8 to the
companys Quarterly Report on
Form 10-Q,
field June 9, 2008)
|
|
10
|
.27+
|
|
Form of UTi Worldwide Inc. 2004 Non-Employee Directors Share
Incentive Plan Restricted Share Unit Award Agreement
and Section 83(b) Election Form, as amended (incorporated
by reference to Exhibit 10.9 to the companys
Quarterly Report on
Form 10-Q,
filed June 9, 2008)
|
|
10
|
.28+
|
|
Form of UTi Worldwide Inc. 2004 Non-Employee Directors Share
Incentive Plan Deferral and Distribution Election
Form for Restricted Share Units and Restricted Shares, as
amended (incorporated by reference to Exhibit 10.10 to the
companys Quarterly Report on
Form 10-Q,
filed June 9, 2008)
|
|
10
|
.29+
|
|
Form of UTi Worldwide Inc. 2004 Non-Employee Directors Share
Incentive Plan Combined Elective Grant and Deferral
Election Agreement, as amended (incorporated by reference to
Exhibit 10.11 to the companys Quarterly Report on
Form 10-Q,
filed June 9, 2008)
|
|
10
|
.30+
|
|
UTi Worldwide Inc. 2009 Long-Term Incentive Plan (incorporated
by reference to Exhibit 4.1 to the companys
Registration Statement on
Form S-8
(File
No. 333-160665)
filed July 17, 2009)
|
|
10
|
.31+
|
|
Form of UTi Worldwide Inc. 2009 Long-Term Incentive
Plan Stock Option Award Agreement (for U.S.
residents/taxpayers) (incorporated by reference to
Exhibit 4.2 to the companys Registration Statement on
Form S-8
(File
No. 333-160665)
filed July 17, 2009)
|
|
10
|
.32+
|
|
Form of UTi Worldwide Inc. 2009 Long-Term Incentive
Plan Stock Option Award Agreement (for
non-U.S.
residents/taxpayers) (incorporated by reference to
Exhibit 4.3 to the companys Registration Statement on
Form S-8
(File
No. 333-160665)
filed July 17, 2009)
|
|
10
|
.33+
|
|
Form of UTi Worldwide Inc. 2009 Long-Term Incentive
Plan Restricted Share Unit Award Agreement (for U.S.
residents/taxpayers) (incorporated by reference to
Exhibit 4.4 to the companys Registration Statement on
Form S-8
(File
No. 333-160665)
filed July 17, 2009)
|
|
10
|
.34+
|
|
Form of UTi Worldwide Inc. 2009 Long-Term Incentive
Plan Restricted Share Unit Award Agreement (for
non-U.S.
residents/taxpayers) (incorporated by reference to
Exhibit 4.5 to the companys Registration Statement on
Form S-8
(File
No. 333-160665)
filed July 17, 2009)
|
|
10
|
.35+
|
|
UTi Worldwide Inc. Executive Incentive Plan (incorporated by
reference to Appendix B to the companys proxy
statement filed May 14, 2009)
|
|
10
|
.36+
|
|
Form of Indemnification Agreement (incorporated by reference to
Exhibit 10.1 to the companys Current Report on
Form 8-K,
filed January 16, 2007)
|
|
10
|
.37+
|
|
Form of Change of Control Agreement (incorporated by reference
to Exhibit 10.39 to the companys Annual Report on
Form 10-K,
filed April 14, 2008)
|
|
10
|
.38
|
|
Amendment to Note Purchase Agreement, dated as of
October 11, 2006, by and among UTi Worldwide Inc. and
certain of its subsidiaries party thereto and the purchasers
party thereto (incorporated by reference to Exhibit 10.40
to the companys Annual Report on
Form 10-K,
filed April 14, 2008)
|
76
|
|
|
|
|
Exhibit
|
|
Description
|
|
|
10
|
.39
|
|
Amendment to Note Purchase Agreement, dated as of
December 12, 2007, by and among UTi Worldwide Inc. and
certain of its subsidiaries party thereto and the purchasers
party thereto (incorporated by reference to Exhibit 10.42
to the companys Annual Report on
Form 10-K,
filed April 14, 2008)
|
|
10
|
.40
|
|
Note Purchase Agreement, dated as of July 9, 2009, by and
among UTi Worldwide Inc. and certain of its subsidiaries party
thereto and the purchasers party thereto (incorporated by
reference to Exhibit 10.1 to the companys Current
Report on
Form 8-K,
filed July 14, 2009)
|
|
10
|
.41
|
|
Letter of Credit Agreement, dated as of July 9, 2009, by
and among UTi Worldwide Inc. and certain of its subsidiaries
party hereto and ABN AMRO Bank N.V. (ABN) and The Royal Bank of
Scotland plc (incorporated by reference to Exhibit 10.2 to
the companys Current Report on
Form 8-K,
filed July 14, 2009)
|
|
10
|
.42
|
|
Letter of Credit Agreement, dated as of July 9, 2009, by
and among UTi Worldwide Inc. and certain of its subsidiaries
party thereto and Nedbank Limited, acting through its London
Branch (incorporated by reference to Exhibit 10.3 to the
companys Current Report on
Form 8-K,
filed July 14, 2009)
|
|
10
|
.43
|
|
Facilities Agreement, dated as of July 9, 2009, by and
among certain subsidiaries of UTi Worldwide Inc. and Nedbank
Limited (incorporated by reference to Exhibit 10.4 to the
companys Current Report on
Form 8-K,
filed July 14, 2009)
|
|
10
|
.44
|
|
First Amendment to Letter of Credit Agreement, dated as of
January 8, 2010, by and among UTi Worldwide Inc. and
certain of its subsidiaries party thereto and Nedbank Limited,
acting through its London Branch
|
|
10
|
.45
|
|
Second Amendment to Letter of Credit Agreement, dated as of
March 25, 2010, by and among UTi Worldwide Inc. and certain
of its subsidiaries party thereto and Nedbank Limited, acting
through its London Branch
|
|
10
|
.46
|
|
First Amendment to Letter of Credit Agreement, dated as of
March 25, 2010, by and among UTi Worldwide Inc. and certain
of its subsidiaries party thereto and ABN Amro Bank N.V., as
Performance-Based LC Issuing Bank and The Royal Bank of Scotland
plc, in its capacity as Financial LC Issuing Bank
|
|
10
|
.47
|
|
First Amendment Agreement to Note Purchase Agreement dated
July 9, 2009, dated March 25, 2010, by and among UTi
Worldwide Inc. and certain of its subsidiaries party thereto and
the purchasers party thereto
|
|
12
|
.1
|
|
Statement regarding computation of ratio of earnings to fixed
charges
|
|
21
|
|
|
Subsidiaries of the Company
|
|
23
|
|
|
Consent of Independent Registered Public Accounting Firm
|
|
31
|
.1
|
|
Certification of Chief Executive Officer pursuant to Securities
Exchange Act
Rules 13a-14(a)
and
15d-14(a) as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002
|
|
31
|
.2
|
|
Certification of Chief Financial Officer pursuant to Securities
Exchange Act
Rules 13a-14(a)
and
15d-14(a) as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002
|
|
32
|
.1
|
|
Certification of Chief Executive Officer pursuant to
Section 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
32
|
.2
|
|
Certification of Chief Financial Officer pursuant to
Section 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
* |
|
Certain confidential portions of this exhibit have been omitted
pursuant to a request for confidential treatment. Omitted
portions have been filed separately with the Securities and
Exchange Commission. |
|
+ |
|
Management contract or compensatory arrangement. |
77
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.
UTi Worldwide Inc.
Eric W. Kirchner
Chief Executive Officer
Date: March 29, 2010
78
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
UTi Worldwide Inc.
|
|
|
Date: March 29, 2010
|
|
By: /s/ Eric
W.
Kirchner Eric
W. Kirchner
Chief Executive Officer
|
|
|
|
Date: March 29, 2010
|
|
By: /s/ Lawrence
R. Samuels
Lawrence
R. Samuels
Executive Vice President Finance and Chief
Financial Officer (Principal Financial Officer and Principal
Accounting Officer)
|
|
|
|
Date: March 29, 2010
|
|
By:
/s/ Roger
I.
MacFarlane Roger
I. MacFarlane
Chairman of the Board of Directors
|
|
|
|
Date: March 29, 2010
|
|
By: /s/ Matthys
J.
Wessels Matthys
J. Wessels
Director
|
|
|
|
Date: March 29, 2010
|
|
By: /s/ Brian
D.
Belchers Brian
D. Belchers
Director
|
|
|
|
Date: March 29, 2010
|
|
By: /s/ C.
John Langley,
Jr. C.
John Langley, Jr.
Director
|
|
|
|
Date: March 29, 2010
|
|
By:
/s/ Leon
J.
Level Leon
J. Level
Director
|
|
|
|
Date: March 29, 2010
|
|
By: /s/ Allan
M.
Rosenzweig Allan
M. Rosenzweig
Director
|
|
|
|
Date: March 29, 2010
|
|
By: /s/ Donald
W.
Slager Donald
W. Slager
Director
|
79
UTi
WORLDWIDE INC.
|
|
|
|
|
|
|
Page
|
|
|
|
|
F-2
|
|
|
|
|
F-3
|
|
|
|
|
F-5
|
|
|
|
|
F-6
|
|
|
|
|
F-7
|
|
|
|
|
F-8
|
|
|
|
|
F-9
|
|
|
|
|
F-60
|
|
F-1
MANAGEMENTS
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our Companys management is responsible for establishing
and maintaining adequate internal control over financial
reporting, as such term is defined under
Rule 13a 15(f) promulgated under the Securities
Exchange Act of 1934. Our system of internal control was
designed to provide reasonable assurance to UTis
management and Board of Directors regarding the preparation and
fair presentation of published financial statements.
All internal control systems, no matter how well designed, have
inherent limitations. Therefore, even those systems determined
to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with policies or procedures may deteriorate.
Management assessed the effectiveness of the Companys
internal control over financial reporting as of January 31,
2010. In making this assessment, management used the criteria
set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control
Integrated Framework. Based on its assessment, management
has concluded that the Companys internal control over
financial reporting was effective as of January 31, 2010.
The Companys internal control over financial reporting as
of January 31, 2010, has been audited by
Deloitte & Touche LLP, an independent registered
public accounting firm, as stated in their report which is
included herein.
/s/ Eric W. Kirchner
Eric W. Kirchner
Chief Executive Officer
March 29, 2010
/s/ Lawrence R. Samuels
Lawrence R. Samuels
Executive Vice President Finance, Chief Financial
Officer
March 29, 2010
F-2
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of UTi Worldwide
Inc.
Long Beach, California
We have audited the internal control over financial reporting of
UTi Worldwide Inc. and subsidiaries (the Company) as
of January 31, 2010, based on criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission. The Companys management is responsible for
maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control
over financial reporting, included in the accompanying
Managements Report on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on the
Companys internal control over financial reporting based
on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed by, or under the supervision of, the
companys principal executive and principal financial
officers, or persons performing similar functions, and effected
by the companys board of directors, management, and other
personnel to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of the inherent limitations of internal control over
financial reporting, including the possibility of collusion or
improper management override of controls, material misstatements
due to error or fraud may not be prevented or detected on a
timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting
to future periods are subject to the risk that the controls may
become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as
of January 31, 2010, based on the criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated financial statements and the financial statement
schedule as of and for the year ended January 31, 2010, of
the Company and our report dated March 29, 2010 expressed
an unqualified opinion on those financial statements and the
financial statement schedules and included an explanatory
paragraph relating to the Companys adoption of Statement
of Financial Accounting Standards No. 160,
Noncontrolling Interests in Consolidated Financial
Statements an amendment of ARB No. 51
(included in FASB ASC Topic 810, Consolidation).
/s/ Deloitte &
Touche LLP
Los Angeles, California
March 29, 2010
F-3
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of UTi Worldwide Inc.
Long Beach, California
We have audited the accompanying consolidated balance sheets of
UTi Worldwide Inc. and subsidiaries (the Company) as
of January 31, 2010 and 2009, and the related consolidated
statements of operations, shareholders equity and
comprehensive income, and cash flows for each of the three years
in the period ended January 31, 2010. Our audits also
included the financial statement schedule listed in the Index on
page F-1.
These financial statements and financial statement schedule are
the responsibility of the Companys management. Our
responsibility is to express an opinion on the financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). 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 present
fairly, in all material respects, the financial position of UTi
Worldwide Inc. and subsidiaries at January 31, 2010 and
2009, and the results of their operations and their cash flows
for each of the three years in the period ended January 31,
2010, in conformity with accounting principles generally
accepted in the United States of America. Also, in our opinion,
such 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.
As discussed in Note 1 of the Notes to the Consolidated
Financial Statements, the Company changed its accounting policy
for minority interest as required by Statement of Financial
Accounting Standards No. 160, Noncontrolling Interests
in Consolidated Financial Statements an amendment of
ARB No. 51 (included in FASB ASC Topic 810,
Consolidation), effective as of February 1, 2009.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
Companys internal control over financial reporting as of
January 31, 2010, based on the criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated March 29, 2010 expressed an
unqualified opinion on the Companys internal control over
financial reporting.
/s/ Deloitte &
Touche LLP
Los Angeles, California
March 29, 2010
F-4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands, except share and
|
|
|
|
per share amounts)
|
|
|
Revenues
|
|
$
|
3,567,522
|
|
|
$
|
4,543,717
|
|
|
$
|
4,366,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased transportation costs
|
|
|
2,206,521
|
|
|
|
2,997,377
|
|
|
|
2,877,440
|
|
Staff costs
|
|
|
753,149
|
|
|
|
844,255
|
|
|
|
800,891
|
|
Depreciation
|
|
|
43,994
|
|
|
|
41,753
|
|
|
|
39,306
|
|
Amortization of intangible assets
|
|
|
11,126
|
|
|
|
12,971
|
|
|
|
9,436
|
|
Restructuring charges
|
|
|
1,231
|
|
|
|
8,903
|
|
|
|
8,395
|
|
Goodwill impairment
|
|
|
1,562
|
|
|
|
98,932
|
|
|
|
|
|
Intangible assets impairment
|
|
|
|
|
|
|
11,009
|
|
|
|
|
|
Other operating expenses
|
|
|
466,435
|
|
|
|
505,223
|
|
|
|
480,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
83,504
|
|
|
|
23,294
|
|
|
|
150,478
|
|
Interest income
|
|
|
10,221
|
|
|
|
13,316
|
|
|
|
10,880
|
|
Interest expense
|
|
|
(22,942
|
)
|
|
|
(30,559
|
)
|
|
|
(26,804
|
)
|
Other (expense)/income, net
|
|
|
(855
|
)
|
|
|
1,437
|
|
|
|
4,726
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax income
|
|
|
69,928
|
|
|
|
7,488
|
|
|
|
139,280
|
|
Provision for income taxes
|
|
|
24,428
|
|
|
|
17,512
|
|
|
|
38,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) from continuing operations, net of tax
|
|
|
45,500
|
|
|
|
(10,024
|
)
|
|
|
101,119
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income, net of tax
|
|
|
|
|
|
|
100
|
|
|
|
528
|
|
Gain on sale, net of tax
|
|
|
|
|
|
|
7,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
|
|
45,500
|
|
|
|
(2,520
|
)
|
|
|
101,647
|
|
Net income attributable to noncontrolling interests
|
|
|
4,386
|
|
|
|
2,117
|
|
|
|
2,961
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) attributable to UTi Worldwide Inc.
|
|
$
|
41,114
|
|
|
$
|
(4,637
|
)
|
|
$
|
98,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings/(loss) per common share attributable to UTi
Worldwide Inc. common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
0.41
|
|
|
$
|
(0.12
|
)
|
|
$
|
0.99
|
|
Discontinued operations
|
|
|
|
|
|
|
0.08
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.41
|
|
|
$
|
(0.04
|
)
|
|
$
|
1.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings/(loss) per common share attributable to UTi
Worldwide Inc. common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
0.41
|
|
|
$
|
(0.12
|
)
|
|
$
|
0.99
|
|
Discontinued operations
|
|
|
|
|
|
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.41
|
|
|
$
|
(0.04
|
)
|
|
$
|
0.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of weighted-average common shares outstanding used for
per share calculations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic shares
|
|
|
99,878,211
|
|
|
|
99,406,664
|
|
|
|
99,112,752
|
|
Diluted shares
|
|
|
101,458,179
|
|
|
|
99,406,664
|
|
|
|
100,171,805
|
|
See accompanying notes to the consolidated financial
statements.
F-5
|
|
|
|
|
|
|
|
|
|
|
January 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands, except
|
|
|
|
share amounts)
|
|
|
ASSETS
|
Cash and cash equivalents
|
|
$
|
350,784
|
|
|
$
|
256,869
|
|
Trade receivables (net of allowance for doubtful accounts of
$13,686 and $15,118 as of January 31, 2010 and 2009,
respectively)
|
|
|
727,413
|
|
|
|
645,275
|
|
Deferred income taxes
|
|
|
16,917
|
|
|
|
19,192
|
|
Other current assets
|
|
|
111,575
|
|
|
|
79,869
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,206,689
|
|
|
|
1,001,205
|
|
Property, plant and equipment, net
|
|
|
180,422
|
|
|
|
163,441
|
|
Goodwill
|
|
|
414,791
|
|
|
|
372,850
|
|
Other intangible assets, net
|
|
|
72,182
|
|
|
|
69,841
|
|
Investments
|
|
|
1,717
|
|
|
|
2,940
|
|
Deferred income taxes
|
|
|
31,815
|
|
|
|
23,831
|
|
Other non-current assets
|
|
|
29,430
|
|
|
|
14,578
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,937,046
|
|
|
$
|
1,648,686
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES & EQUITY
|
Bank lines of credit
|
|
$
|
100,653
|
|
|
$
|
69,978
|
|
Short-term bank borrowings
|
|
|
8,032
|
|
|
|
6,899
|
|
Current portion of long-term borrowings
|
|
|
69,934
|
|
|
|
66,666
|
|
Current portion of capital lease obligations
|
|
|
16,832
|
|
|
|
15,878
|
|
Trade payables and other accrued liabilities
|
|
|
731,518
|
|
|
|
593,271
|
|
Income taxes payable
|
|
|
1,929
|
|
|
|
10,425
|
|
Deferred income taxes
|
|
|
3,503
|
|
|
|
2,493
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
932,401
|
|
|
|
765,610
|
|
Long-term borrowings, excluding current portion
|
|
|
99,097
|
|
|
|
115,747
|
|
Capital lease obligations, excluding current portion
|
|
|
23,892
|
|
|
|
20,754
|
|
Deferred income taxes
|
|
|
32,874
|
|
|
|
27,542
|
|
Retirement fund obligations
|
|
|
8,123
|
|
|
|
6,947
|
|
Other non-current liabilities
|
|
|
26,377
|
|
|
|
19,116
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
UTi Worldwide Inc. shareholders equity:
|
|
|
|
|
|
|
|
|
Non-voting variable rate participating cumulative convertible
preference shares of no par value:
|
|
|
|
|
|
|
|
|
Class A authorized 50,000,000; none issued
|
|
|
|
|
|
|
|
|
Class B authorized 50,000,000; none issued
|
|
|
|
|
|
|
|
|
Common stock authorized 500,000,000 ordinary shares
of no par value; issued and outstanding 100,900,556 and
99,901,907 shares as of January 31, 2010 and 2009,
respectively
|
|
|
464,731
|
|
|
|
450,553
|
|
Retained earnings
|
|
|
373,548
|
|
|
|
338,461
|
|
Accumulated other comprehensive loss
|
|
|
(46,904
|
)
|
|
|
(112,268
|
)
|
|
|
|
|
|
|
|
|
|
Total UTi Worldwide Inc. shareholders equity
|
|
|
791,375
|
|
|
|
676,746
|
|
Noncontrolling interests
|
|
|
22,907
|
|
|
|
16,224
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
814,282
|
|
|
|
692,970
|
|
Total liabilities and equity
|
|
$
|
1,937,046
|
|
|
$
|
1,648,686
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated financial
statements.
F-6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Noncontrolling
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Earnings
|
|
|
Loss
|
|
|
Interests
|
|
|
Total
|
|
|
|
(In thousands, except share data)
|
|
|
Balance at January 31, 2007
|
|
|
98,633,178
|
|
|
$
|
419,111
|
|
|
$
|
258,745
|
|
|
$
|
(47,973
|
)
|
|
$
|
18,844
|
|
|
$
|
648,727
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
98,686
|
|
|
|
|
|
|
|
2,961
|
|
|
|
101,647
|
|
Minimum pension liability adjustment (net of tax of $2,522)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,491
|
|
|
|
|
|
|
|
4,491
|
|
Foreign currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,090
|
|
|
|
517
|
|
|
|
33,607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
139,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued
|
|
|
327,929
|
|
|
|
1,631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,631
|
|
Stock options exercised
|
|
|
453,856
|
|
|
|
4,084
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,084
|
|
Share-based compensation costs
|
|
|
|
|
|
|
9,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,758
|
|
Excess tax benefits from share-based compensation
|
|
|
|
|
|
|
771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
771
|
|
Cumulative effect adoption of ASC 740
|
|
|
|
|
|
|
|
|
|
|
(2,112
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,112
|
)
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
(6,082
|
)
|
|
|
|
|
|
|
|
|
|
|
(6,082
|
)
|
Distribution to noncontrolling interests and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,033
|
)
|
|
|
(1,033
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 31, 2008
|
|
|
99,414,963
|
|
|
$
|
435,355
|
|
|
$
|
349,237
|
|
|
$
|
(10,392
|
)
|
|
$
|
21,289
|
|
|
$
|
795,489
|
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)/income
|
|
|
|
|
|
|
|
|
|
|
(4,637
|
)
|
|
|
|
|
|
|
2,117
|
|
|
|
(2,520
|
)
|
Changes in unamortized benefit plan costs (net of tax of $2,305)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,355
|
)
|
|
|
|
|
|
|
(3,355
|
)
|
Foreign currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(98,521
|
)
|
|
|
(5,740
|
)
|
|
|
(104,261
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(110,136
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued
|
|
|
109,501
|
|
|
|
1,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,093
|
|
Stock options exercised
|
|
|
377,443
|
|
|
|
3,617
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,617
|
|
Share-based compensation costs
|
|
|
|
|
|
|
10,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,024
|
|
Excess tax benefits from share-based compensation
|
|
|
|
|
|
|
464
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
464
|
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
(6,139
|
)
|
|
|
|
|
|
|
|
|
|
|
(6,139
|
)
|
Distribution to noncontrolling interests and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,442
|
)
|
|
|
(1,442
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 31, 2009
|
|
|
99,901,907
|
|
|
$
|
450,553
|
|
|
$
|
338,461
|
|
|
$
|
(112,268
|
)
|
|
$
|
16,224
|
|
|
$
|
692,970
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
41,114
|
|
|
|
|
|
|
|
4,386
|
|
|
|
45,500
|
|
Changes in unamortized benefit plan costs (net of tax of $1,558)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,115
|
|
|
|
|
|
|
|
1,115
|
|
Foreign currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,249
|
|
|
|
4,317
|
|
|
|
68,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115,181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued
|
|
|
394,295
|
|
|
|
975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
975
|
|
Stock options exercised
|
|
|
604,354
|
|
|
|
3,195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,195
|
|
Share-based compensation costs
|
|
|
|
|
|
|
8,274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,274
|
|
Excess tax benefits from share-based compensation
|
|
|
|
|
|
|
1,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,734
|
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
(6,027
|
)
|
|
|
|
|
|
|
|
|
|
|
(6,027
|
)
|
Distribution to noncontrolling interests and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,020
|
)
|
|
|
(2,020
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 31, 2010
|
|
|
100,900,556
|
|
|
$
|
464,731
|
|
|
$
|
373,548
|
|
|
$
|
(46,904
|
)
|
|
$
|
22,907
|
|
|
$
|
814,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated financial
statements.
F-7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
|
$
|
45,500
|
|
|
$
|
(2,520
|
)
|
|
$
|
101,647
|
|
Adjustments to reconcile net income/(loss) to net cash provided
by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation costs, net
|
|
|
8,274
|
|
|
|
10,024
|
|
|
|
9,758
|
|
Depreciation
|
|
|
43,994
|
|
|
|
41,979
|
|
|
|
39,687
|
|
Amortization of intangible assets
|
|
|
11,126
|
|
|
|
12,971
|
|
|
|
9,436
|
|
Amortization of debt issuance costs
|
|
|
1,537
|
|
|
|
|
|
|
|
|
|
Restructuring charges
|
|
|
|
|
|
|
2,867
|
|
|
|
8,395
|
|
Goodwill and intangible assets impairment
|
|
|
1,562
|
|
|
|
109,941
|
|
|
|
|
|
Deferred income taxes
|
|
|
6,128
|
|
|
|
(16,081
|
)
|
|
|
(1,703
|
)
|
Uncertain tax positions
|
|
|
629
|
|
|
|
(1,761
|
)
|
|
|
401
|
|
Gain on sales of subsidiaries and subsidiary shares
|
|
|
|
|
|
|
(7,404
|
)
|
|
|
(3,156
|
)
|
Excess tax benefits from share-based compensation
|
|
|
(1,734
|
)
|
|
|
(464
|
)
|
|
|
(771
|
)
|
Gain on disposal of property, plant and equipment
|
|
|
(5,915
|
)
|
|
|
(1,393
|
)
|
|
|
(63
|
)
|
Provision for doubtful accounts
|
|
|
3,507
|
|
|
|
8,625
|
|
|
|
2,831
|
|
Other
|
|
|
1,964
|
|
|
|
1,685
|
|
|
|
(2,468
|
)
|
Changes in operating assets and liabilities, net of acquisitions
Decrease/(increase) in trade receivables
|
|
|
4,034
|
|
|
|
70,662
|
|
|
|
(160,392
|
)
|
Increase in other current assets
|
|
|
(9,441
|
)
|
|
|
(12,055
|
)
|
|
|
(7,045
|
)
|
Increase/(decrease) in trade payables
|
|
|
24,589
|
|
|
|
(64,074
|
)
|
|
|
79,116
|
|
(Decrease)/increase in accrued liabilities and other
|
|
|
(15,780
|
)
|
|
|
(2,546
|
)
|
|
|
31,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
119,974
|
|
|
|
150,456
|
|
|
|
106,718
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
|
(28,989
|
)
|
|
|
(46,422
|
)
|
|
|
(31,704
|
)
|
Proceeds from disposal of property, plant and equipment
|
|
|
13,649
|
|
|
|
4,519
|
|
|
|
3,863
|
|
Proceeds from sale of subsidiary, net
|
|
|
|
|
|
|
8,707
|
|
|
|
|
|
Decrease/(increase) in other non-current assets
|
|
|
1,383
|
|
|
|
2,937
|
|
|
|
(13,059
|
)
|
Acquisitions and contingent earn-out payments
|
|
|
(9,248
|
)
|
|
|
(30,870
|
)
|
|
|
(67,566
|
)
|
Other
|
|
|
(1,417
|
)
|
|
|
(1,009
|
)
|
|
|
(1,577
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(24,622
|
)
|
|
|
(62,138
|
)
|
|
|
(110,043
|
)
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase/(decrease) in borrowings under bank lines of credit
|
|
|
4,575
|
|
|
|
(25,003
|
)
|
|
|
25,506
|
|
Increase in short-term borrowings
|
|
|
831
|
|
|
|
1,777
|
|
|
|
1,577
|
|
Proceeds from issuance of long-term borrowings
|
|
|
56,498
|
|
|
|
5,667
|
|
|
|
|
|
Repayment of long-term borrowings
|
|
|
(70,465
|
)
|
|
|
(34,143
|
)
|
|
|
(1,064
|
)
|
Debt issuance costs
|
|
|
(6,528
|
)
|
|
|
|
|
|
|
|
|
Repayment of capital lease obligations
|
|
|
(22,754
|
)
|
|
|
(23,388
|
)
|
|
|
(19,907
|
)
|
Dividends paid to non-controlling interests
|
|
|
(2,020
|
)
|
|
|
(567
|
)
|
|
|
|
|
Net proceeds from the issuance of ordinary shares
|
|
|
4,170
|
|
|
|
4,709
|
|
|
|
5,715
|
|
Excess tax benefits from share-based compensation
|
|
|
1,734
|
|
|
|
464
|
|
|
|
771
|
|
Dividends paid
|
|
|
(6,027
|
)
|
|
|
(6,139
|
)
|
|
|
(5,969
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in)/provided by financing activities
|
|
|
(39,986
|
)
|
|
|
(76,623
|
)
|
|
|
6,629
|
|
Effect of foreign exchange rate changes on cash and cash
equivalents
|
|
|
38,549
|
|
|
|
(43,967
|
)
|
|
|
7,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents
|
|
|
93,915
|
|
|
|
(32,272
|
)
|
|
|
10,733
|
|
Cash and cash equivalents at beginning of year
|
|
|
256,869
|
|
|
|
289,141
|
|
|
|
278,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of the year
|
|
$
|
350,784
|
|
|
$
|
256,869
|
|
|
$
|
289,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The consolidated statements of cash flows include the
activities of discontinued operations.
See accompanying notes to the consolidated financial
statements.
F-8
UTi
WORLDWIDE INC.
For the
years ended January 31, 2010, 2009 and 2008
|
|
1.
|
Summary
of Significant Accounting Policies
|
Basis
of Presentation
UTi Worldwide Inc. (the Company, we, us, our or UTi), is an
international, non-asset-based supply chain services and
solutions company that provides air and ocean freight
forwarding, contract logistics, customs clearance, distribution,
inbound logistics, truckload brokerage and other supply chain
management services. The Company serves its clients through a
worldwide network of freight forwarding offices in over 144
countries, including independent agents, and over 181 contract
logistics and distribution centers under management.
The accompanying consolidated financial statements include the
accounts of UTi and all subsidiaries controlled by the Company
(generally more than 50% ownership). Control is achieved where
the Company has the power to govern the financial and operating
policies of a subsidiary company so as to obtain benefits from
its activities. The results of subsidiaries acquired during the
year are included in the consolidated financial statements from
the effective dates of acquisition. All significant intercompany
transactions and balances have been eliminated upon
consolidation.
All amounts in the notes to the consolidated financial
statements are presented in thousands except for share and per
share data.
Use of
Estimates
The preparation of the consolidated financial statements, in
accordance with accounting principles generally accepted in the
United States of America (U.S. GAAP), requires management
to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and
accompanying notes. Significant items subject to such estimates
and assumptions include but are not limited to the useful lives
of fixed assets and definite lived intangible assets, certain
revenue estimations, allowances for doubtful accounts, the
valuation of call and put options and certain derivatives, the
valuation of deferred tax assets, the initial and recurring
valuation of certain assets acquired and liabilities assumed
through business combinations (including goodwill and indefinite
lived intangible assets, and contingent earn-out payments),
investments, certain self insurance liabilities and share-based
compensation, reserves for employee benefit obligations, income
tax uncertainties and other contingencies. Actual results could
differ from those estimates.
Foreign
Currency Translation
Local currencies are generally considered the functional
currencies outside of the United States of America. Assets and
liabilities are translated at year-end exchange rates for
operations in local currency environments. Income and expense
items are translated at average rates of exchange prevailing
during the year. Gains and losses on translation, net of taxes,
are recorded as a separate component of shareholders
equity under accumulated other comprehensive income or loss.
Transactions in foreign currencies during the year are
re-measured at rates of exchange ruling on the dates of the
transactions. Gains and losses related to re-measurement of
items arising through operating activities are accounted for in
the consolidated statements of operations and included in
purchased transportation costs. These amounts in purchased
transportation costs were gains of $4,721, $14,639, and $3,013
for the years ended January 31, 2010, 2009 and 2008,
respectively. Exchange differences arising on the translation of
permanently invested long-term loans to subsidiary companies are
recorded as a separate component of shareholders equity
under accumulated other comprehensive income or loss. Exchange
differences arising on the translation of long-term loans to
subsidiary companies that are not permanent in nature are
recorded as other (expense)/income, net in the consolidated
statements of operations. These amounts were foreign exchange
gains of $226, $1,437 and $1,570 for the years ended
January 31, 2010, 2009 and 2008, respectively.
F-9
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
Revenue
Recognition
Freight forwarding revenue represents billings on exports to
clients, plus net revenue on imports, net of any billings for
value added taxes, custom duties and freight insurance premiums
whereby the Company acts as an agent. The Company recognizes
revenue in accordance with the Financial Accounting Standards
Board (FASB) Accounting Standards Codification (FASB
Codification or ASC) Topic 605, Revenue Recognition, (ASC
605). Accordingly, revenue and purchased transportation costs
for airfreight and ocean freight forwarding services, including
commissions earned from the Companys services as an
authorized agent for airline and ocean carriers and third-party
freight insurers, are recognized at the time the freight departs
the terminal of origin which is when the client is billed. This
method generally results in recognition of revenues and
purchased transportation costs earlier than methods that do not
recognize revenues until a proof of delivery is received or that
recognize revenues as progress on the transit is made. The
Companys method of revenue and cost recognition does not
result in a material difference from amounts that would be
reported under such other methods.
In accordance with ASC 605, Revenue Recognition, certain
billings such as customs, duties and freight insurance premiums
whereby the Company acts as an agent, have not been included in
revenue.
Customs brokerage revenue, contract logistics and distribution
revenue, and other revenues are recognized when the client is
billed, which for customs brokerage is when the necessary
documentation for customs clearance has been completed and, for
contract logistics and other revenues, is when the service has
been provided to third parties in the ordinary course of
business. Purchased transportation costs are recognized at the
time the freight departs the terminal of origin. Certain costs,
related primarily to ancillary services, are estimated and
accrued at the time the services are provided, and adjusted upon
receipt of the suppliers final invoices.
Income
Taxes
Federal, state and foreign income taxes are computed at current
tax rates, less tax credits. Provisions for income taxes include
amounts that are currently payable, plus changes in deferred
income tax assets and liabilities. Income taxes are accounted
for under the asset and liability method. Deferred tax assets
and liabilities are recognized for the expected future tax
consequences attributable to temporary differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss
and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the
enactment date. Deferred tax assets are reduced by a valuation
allowance so that the assets are recognized only to the extent
that when, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax assets will be
realized.
The Company records a provision for estimated additional tax and
interest that may result from tax authorities disputing
uncertain tax positions taken at the largest amount that is
greater than 50% likely of being realized. For further
information, see Note 4, Uncertain Tax
Positions.
No provision is made for additional taxes, which would arise if
the retained earnings of subsidiaries were distributed, on the
basis that it is not anticipated that such distribution will be
made.
Segment
Reporting
The Company changed its segment reporting in the first quarter
of fiscal 2009 to reflect the realignment of its management
structure around its core business operations. The factors for
determining the reportable segments include the manner in which
management evaluates the performance of the Company combined
with the nature of the individual business activities. The
Companys reportable business segments are Freight
Forwarding and Contract Logistics and Distribution. The Freight
Forwarding segment includes airfreight forwarding, ocean freight
F-10
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
forwarding, customs brokerage and other related services. The
Contract Logistics and Distribution segment includes all
operations providing contract logistics, distribution and other
related services. Corporate office expenses, eliminations, and
various holding companies within the group structure have been
presented separately. In conjunction with this change, certain
costs that were previously presented separately are now recorded
in the Freight Forwarding and Contract Logistics and
Distribution segments. These changes and reclassifications had
no effect on the Companys reported earnings, or earnings
per basic and diluted share. In accordance with FASB
Codification Topic 280, Segment Reporting (ASC 280), all
prior period segment information was reclassified to conform to
this new financial reporting presentation.
Share-Based
Compensation
The Company recognizes compensation expense for all share-based
payments, in accordance with FASB Codification Topic 718,
Compensation Stock Compensation, (ASC 718).
Under the fair value recognition provisions of ASC 718, the
Company recognizes share-based compensation expense, net of an
estimated forfeiture rate, over the requisite service period of
the award.
Shares of newly issued common stock will be issued upon exercise
of stock options or vesting of restricted share units.
Cash
and Cash Equivalents
The Company considers all highly liquid instruments with a
maturity of three months or less when purchased to be cash
equivalents. Cash and cash equivalents include demand deposits
and investments with an initial term of three months or less.
Concentration
of Risks
The Company maintains its primary cash accounts with established
banking institutions around the world. The Company estimates
that approximately $325,710 of these deposits were not insured
by the Federal Deposit Insurance Corporation or similar entities
outside of the United States as of January 31, 2010.
Trade
Receivables
In addition to billings related to transportation costs, trade
receivables include disbursements made on behalf of clients for
value added taxes, customs duties, other amounts remitted to
governmental authorities on behalf of clients, and freight
insurance. The billings to clients for these disbursements are
not recorded as revenue and purchased transportation costs in
the consolidated statements of operations. Management
establishes reserves based on the expected ultimate
collectability of these receivables.
Allowance
for Doubtful Accounts
The Company maintains an allowance for doubtful accounts for
estimated losses inherent in its trade receivable portfolio. In
establishing the required allowance, management considers
historical losses, current receivables aging, general and
specific economic conditions, and local market conditions. The
Company reviews its allowance for doubtful accounts monthly.
Past due balances over 90 days and over a specified amount
are reviewed individually for collectability. All other balances
are reviewed on a pooled basis. Account balances are charged off
against the allowance after all means of collection have been
exhausted and the potential for recovery is considered remote.
Amounts charged against the allowance for doubtful accounts to
the Companys consolidated statements of operations were
$3,507, $8,625, and $2,831 for the years ended January 31,
2010, 2009 and 2008, respectively. The Company does not have any
off-balance-sheet credit exposure related to its customers.
F-11
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
Property,
Plant and Equipment
Property, plant and equipment are stated at cost, net of
accumulated depreciation. Depreciation is calculated using the
straight-line method over the estimated useful lives of the
assets, as follows:
|
|
|
|
|
|
|
Years
|
|
|
Buildings and leasehold improvements
|
|
|
10-40
|
|
Computer equipment and software
|
|
|
3-5
|
|
Furniture, fixtures and equipment
|
|
|
3-10
|
|
Vehicles
|
|
|
3-10
|
|
The Company capitalizes software costs in accordance with FASB
Codification Topic
350-40,
Intangibles Goodwill and Other
Internal Use Software.
Assets held under capital leases are depreciated over their
expected useful lives on the same basis as owned assets, or if
there is not reasonable certainty that the Company will obtain
ownership by the end of the lease term, the asset is depreciated
over the shorter of the lease term or its estimated useful life.
Leasehold improvements are depreciated over the estimated useful
life of the related asset, or over the term of the lease,
whichever is shorter.
Long-Lived
Assets
Long-lived assets, such as property, plant, and equipment, and
acquired intangible assets subject to amortization, are reviewed
for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable. If circumstances require a long-lived asset be
tested for possible impairment, the Company first compares
undiscounted cash flows expected to be generated by an asset to
the carrying value of the asset, in accordance with FASB
Codification Topic 360, Property, Plant and Equipment
(ASC 360). If the carrying value of the long-lived asset is
not recoverable on an undiscounted cash flow basis, impairment
is recognized to the extent that the carrying value exceeds its
fair value. Fair value is determined through various valuation
techniques including discounted cash flow models, quoted market
values and third-party appraisals, as considered necessary.
Goodwill
and Other Intangible Assets
Goodwill represents the excess of the aggregate purchase price
over the fair market value of the net assets acquired in a
purchase business combination. Intangible assets with finite
lives are amortized using the straight-line method over their
estimated useful lives.
Goodwill, including other intangible assets with indefinite
lives, is assessed for impairment at least annually and whenever
events or circumstances change that would make it more likely
than not that an impairment may have occurred. If the carrying
value of goodwill or an indefinite-lived intangible asset
exceeds its fair value, an impairment loss is recognized. The
evaluation of impairment involves comparing the current fair
value of each of the Companys reporting units to their
recorded value, including goodwill. The Company uses a
discounted cash flow (DCF) model, corroborated by comparative
market multiples where appropriate, to determine the current
fair value of its reporting units. A number of significant
assumptions and estimates are involved in the application of the
DCF model to forecast operating cash flows, including the
weighted average cost of capital (WACC) and terminal value
assumptions. The WACC takes into account the relative weights of
each component of the Companys consolidated capital
structure (debt and equity) and represents the expected cost of
new capital adjusted as appropriate to consider risk profiles
specific to the Company. Terminal value assumptions are applied
to the final year of the DCF model.
F-12
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
Investments
Investments in affiliated companies are accounted for using the
equity method, where the Company has the ability to exercise
significant influence over the operating and financial policies
(generally an investment of 20 50%) of the
companies voting interests. Consolidated net income or
loss includes the Companys proportionate share of the net
income or net loss of these companies.
Call
and Put Options
In connection with the Companys merger of one of its
subsidiaries with Newlog, Ltd. during fiscal 2008, the Company
obtained an option providing it with the right to call the
minority partners shares of the subsidiary under certain
circumstances, including a change in control of the minority
partner. The Company recorded an asset related to this call
option in other non-current assets. The amount recorded
represents the differences between the estimated strike price
and the estimated fair value of the subsidiary equity held by
the minority partner, if the call option becomes exercisable.
The amounts included in other non-current assets were $476 and
$756 at January 31, 2010 and 2009, respectively.
Additionally, the Company granted an option providing the
minority partner with the right to call the Companys
shares of the subsidiary in the event the Company does not
exercise its right, under specific circumstances, to call the
minority partners shares. The Company has recorded a
liability related to this option in other non-current
liabilities. The amounts included in other non-current
liabilities were $811 and $907 at January 31, 2010 and
2009, respectively.
In connection with the formation of a joint venture subsidiary,
which provides inventory management and other services in the
United States, the Company granted an option providing the
minority partner with the right to call the Companys
shares of the subsidiary in the event the Company does not
exercise its right, under specific circumstances, to call the
minority partners shares. In December 2009, at the time of
the Companys acquisition of the remaining shares held by
the minority partner in one of its Israel subsidiaries, the
joint venture agreement with the minority shareholder, along
with the call option, was terminated, thereby reducing the
Companys liability related to this option to zero. For
further information, see Note 2, Acquisitions.
At January 31, 2009, the liability related to this option
of $216 was recorded in other non-current liabilities.
Additionally, in connection with the formation of a partnership
in South Africa that holds the shares of a subsidiary that
distributes pharmaceutical supplies and equipment, the Company
granted a put option to the minority partner providing the
partner with a right to put their 25.1% share of the partnership
to the Company in fiscal 2011. The liability at January 31,
2010 was determined to be zero. The amount included in other
non-current liabilities was $990 at January 31, 2009. The
Company estimates the redemption value of the put option to be
approximately $8,415, which the Company believes to be
substantially less than the fair value of the minority
partners interest in the partnership. The liability
recorded represents the difference between the estimated strike
price and the estimate fair value of the partnership held by the
minority partner when the put option becomes exercisable.
Employee
Benefit Plans
Contributions to defined contribution plans are expensed as
incurred. For defined benefit pension plans, the Company adjusts
prepaid benefit costs or retirement fund obligations to the
difference between the projected benefit obligations and the
plan assets at fair value on a
plan-by-plan
basis. The offset to the adjustments are recorded directly in
shareholders equity, net of taxes, to the extent that
those changes are not included in net periodic pension cost for
the period. The amounts in shareholders equity represent
the after-tax unamortized gains or losses and unamortized prior
service cost or credit.
F-13
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
Fair
Value Measurements
In August 2009, an update was made to Fair Value Measurements
and Disclosures Measuring Liabilities at Fair
Value. This update permits entities to measure the
fair value of liabilities, in circumstances in which a quoted
price in an active market for an identical liability is not
available, using a valuation technique that uses a quoted price
of an identical liability when traded as an asset, quoted prices
for similar liabilities or similar liabilities when traded as
assets or the income or market approach that is consistent with
the principles of Fair Value Measurements and
Disclosures. Effective upon issuance, the Company has
adopted this guidance with no material impact to the
Companys consolidated financial statements.
The estimated fair value of financial instruments has been
determined using available market information or other
appropriate valuation methodologies. However, considerable
judgment is required in interpreting market data to develop
estimates of fair value; therefore, the estimates are not
necessarily indicative of the amounts that could be realized or
would be paid in a current market exchange. The effect of using
different market assumptions and estimation methodologies may be
material to the estimated fair value amounts.
The Companys principal financial instruments are cash and
cash equivalents, trade receivables, bank lines of credit,
short-term bank borrowings, trade payables and other accrued
liabilities, long-term bank borrowings, call and put options,
and forward contracts and other derivative instruments. With the
exception of the Companys senior unsecured guaranteed
notes and the call and put options, the carrying value of these
financial instruments approximate fair values either because of
the short maturities of these instruments, or because the
interest rates are based upon variable reference rates. As of
January 31, 2010 and 2009, the fair value of the
Companys 6.31% senior unsecured guaranteed notes was
$99,569 and $168,373, respectively, compared to book value of
$100,000 and $166,667 for fiscal 2010 and 2009, respectively. As
discussed further at Note 10, Borrowings on
July 9, 2009, the Company issued $55,000 of senior
unsecured guaranteed notes bearing an interest rate of 8.06%.
The carrying value of these notes approximates fair value. The
call and put options are recorded at their estimated fair value.
For further information, see Note 1, Call and Put
Options.
Interest-bearing bank loans and bank lines of credit are
recorded at the proceeds received. Interest expense, including
premiums payable on settlement or redemption, is accounted for
on an accrual basis. Equity instruments are recorded at the
proceeds received, net of direct issue costs.
Certain non-financial assets and liabilities are measured at
fair value on a non-recurring basis, including property, plant,
and equipment, goodwill, and intangibles assets. These assets
are not measured at fair value on a recurring basis, however,
they are subject to fair value adjustments in certain
circumstances, such as when there is evidence of impairment. A
general description of the valuation methodologies used for
assets and liabilities measured at fair value, including the
general classification of such assets and liabilities pursuant
to the valuation hierarchy is included in each footnote with
fair value measurement present.
No other accounting pronouncement issued or effective during the
fiscal year has had or is expected to have a material impact on
the consolidated financial statements.
Gain
on Sale of Subsidiary Stock
The Company accounts for sales of stock by a subsidiary under
FASB Codification Topic 810, Consolidation (ASC 810).
Prior to the adoption of ASC 810, Consolidation, the
Company records the difference between the carrying amount of
the Companys investment in a subsidiary and the underlying
net book value of the subsidiary after the issuance of stock by
the subsidiary as either a gain or loss in the consolidated
statements of operations. These gains or losses are reflected in
other income, net. During the year ended January 31, 2008,
the Company recorded a pre-tax gain of $3,156 from the issuance
of stock by a majority-owned indirect subsidiary in connection
with the Companys merger of one of its subsidiaries with
Newlog, Ltd. Gains or losses from future sales of stock by a
subsidiary will be recorded as a component of equity.
F-14
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
Risk
Management
The Companys credit risk is primarily attributable to its
trade receivables. The amounts presented in the accompanying
consolidated balance sheets are net of allowances for doubtful
accounts, estimated by the Companys management based on
prior experience and the current economic environment. The
Company has no significant concentration of credit risk, with
exposure spread over a large number of clients.
The credit risk on liquid funds and derivative financial
instruments is limited because the counter parties are banks
with high credit ratings assigned by international credit rating
agencies.
In order to manage its exposure to foreign exchange risks, the
Company enters into forward exchange contracts. At the end of
each accounting period, the forward exchange contracts are
marked to fair value and the resulting gains and losses are
recorded in the consolidated statements of operations as part of
purchased transportation costs.
Contingencies
The Company is subject to a range of claims, lawsuits and
administrative proceedings that arise in the ordinary course of
business. The Company accrues a liability and charges operations
for such matters when it is probable that a liability has been
incurred and the amount can be reasonably estimated, in
accordance with the recognition criteria of FASB Codification
Topic 450, Contingencies (ASC 450). Estimating
liabilities and costs associated with these matters requires
significant judgment and assessment based upon the professional
knowledge and experience of management and its legal counsel.
Where the Company is self-insured in relation to freight-related
and employee benefit-related exposures, adequate liabilities are
estimated and recorded, in accordance with ASC 450,
Contingencies, for the portion for which the Company is
self-insured. The ultimate resolution of any exposure to us may
change as further facts and circumstances become known.
Accounting
for Noncontrolling Interests
In December 2007, the FASB issued a new accounting and reporting
standard, which is included in ASC 810, Consolidation,
for the noncontrolling interest (previously referred to as
minority interest) in a subsidiary and the accounting for the
deconsolidation of a subsidiary. The standard clarifies that
changes in a parents ownership interest in a subsidiary
that do not result in deconsolidation are equity transactions if
the parent retains its controlling financial interest and
requires that a parent recognize a gain or loss in net income
when a subsidiary is deconsolidated. The gain or loss will be
measured using the fair value of the noncontrolling equity
investment on the deconsolidation date. In addition, the
standard also includes expanded disclosure requiring the
ownership interest in subsidiaries held by parties other than
the parent be clearly identified and presented in the
consolidated balance sheets and consolidated statements of
operations and shareholders equity and comprehensive
income. The Company has adopted this standard effective
February 1, 2009, and pursuant to the transition provisions
of the standard, the retrospective presentation and disclosure
requirements outlined by this standard have been incorporated
into this Annual Report on
Form 10-K.
In accordance with the new standard on noncontrolling interests,
the Company revised all previous references to minority
interests in the consolidated financial statements and
notes to noncontrolling interests and made the
following changes:
|
|
|
|
|
The consolidated balance sheets now present noncontrolling
interests as a component of the total equity of the
Company, rather than a non-current liability as it was
previously presented.
|
F-15
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
|
|
|
|
|
The consolidated statements of operations now present net
income/(loss) in further detail by presenting amounts
attributable to UTi Worldwide Inc. and to noncontrolling
interests. No changes were required to the presentation of
earnings per share.
|
|
|
|
The consolidated statements of shareholders equity and
comprehensive income now includes a section that presents the
activity in noncontrolling interests during the reporting period
and presents separately the amount of comprehensive income
generated by the noncontrolling interests.
|
The Company will apply the required accounting and reporting
upon deconsolidation of a subsidiary, as applicable, to
transactions in the future.
Recent
Accounting Pronouncements
In October 2009, the FASB issued Accounting Standards Update
(ASU) 2009-13, Multiple-Deliverable Revenue Arrangement
(ASU
2009-13),
which amends Codification Topic 605, Revenue
Recognition. This update provides amendments to the criteria
for separating deliverables, measuring and allocating
arrangement consideration to one or more units of accounting.
This update also establishes a selling price hierarchy for
determining the selling price of a deliverable. ASU 2009-13 is
effective for revenue arrangements entered into or materially
modified in fiscal years beginning on or after June 15,
2010. The Company is currently evaluating the impact the
adoption of the update may have on its consolidated results of
operations and financial position.
In June 2009, the FASB issued ASU No. 2009-1 to FASB
Codification Topic 105, Generally Accepted Accounting
Principles, based on SFAS No. 168, FASB
Accounting Guidance Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles a
replacement of SFAS No. 162. This statement
establishes that the FASB Codification becomes the single
official source of authoritative U.S. GAAP superseding all
non-SEC accounting and reporting standards and literature. Only
one level of authoritative U.S. GAAP will exist and all
other literature will be considered non-authoritative. The FASB
Codification became effective for interim and annual periods
ending on or after September 15, 2009. The Company adopted
the FASB Codification beginning in the third quarter of fiscal
2010. Given that the FASB Codification does not change
U.S. GAAP, this statement had no impact on the
Companys consolidated financial condition or results of
operations. Where possible, previously disclosed FASB references
have been replaced with FASB Codification references.
In June 2009, an update was made to ASC 810,
Consolidation. This update amends previous guidance to
require the Company to perform an analysis to determine whether
its variable interests give it a controlling financial interest
in a variable interest entity. The update is effective for
annual periods beginning after November 15, 2009, for
interim periods within that first annual reporting period, and
for interim and annual reporting periods thereafter. The Company
is currently evaluating the impact the adoption of the update
may have on its consolidated results of operations and financial
position.
In May 2009, the FASB issued guidance which is included in FASB
Codification Topic 855, Subsequent Events, (ASC 855). ASC
855 establishes general standards of accounting for and
disclosure of events that occur after the balance sheet date but
before financial statements are issued. The Company has
evaluated subsequent events through March 29, 2010 for
appropriate accounting and disclosure in accordance with this
standard.
In April 2009, the FASB issued guidance which is included in
FASB Codification Topic 320, Investments Debt and
Equity Securities, (ASC 320). ASC 320 amended the
other-than-temporary
impairment guidance for debt securities to make the guidance
more operational and to improve the presentation and disclosure
of
other-than-temporary
impairments on debt and equity securities. The Companys
implementation of this standard on May 1, 2009 did not have
a significant impact on its consolidated statements of
operations and financial position.
In December 2008, the FASB issued guidance which is included in
FASB Codification Topic 715, Compensation
Retirement Benefits, (ASC 715). ASC 715 requires new
disclosures on investment policies
F-16
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
and strategies, categories of plan assets, fair value
measurements of plan assets, and significant concentrations of
risk, and is effective for fiscal years ending after
December 15, 2009, with earlier application permitted. The
Company has included the required disclosures in the
Companys Annual Report on
Form 10-K
for the annual period ending January 31, 2010.
In November 2008, the FASB issued guidance which is included in
FASB Codification Topic 323, Investments Equity
Method and Joint Ventures, (ASC 323). ASC 323 concludes that
the cost basis of a new equity-method investment would be
determined using a cost-accumulation model, which would continue
the practice of including transaction costs in the cost of
investment and would exclude the value of contingent
consideration. Equity-method investments should be subject to
other-than-temporary
impairment analysis. It also requires that a gain or loss be
recognized on the portion of the investors ownership sold.
The Companys implementation of this standard on
February 1, 2009 did not have a significant impact on its
consolidated statements of operations and financial position.
In June 2008, the FASB issued guidance which is included in FASB
Codification Topic 840, Leases, (ASC 840). ASC 840
provides guidance for accounting for nonrefundable maintenance
deposits paid by a lessee to a lessor. The Companys
implementation of this standard on February 1, 2009 did not
have a significant impact on its consolidated statements of
operations and financial position.
In March 2008, the FASB issued guidance which is included in
FASB Codification Topic 815, Derivatives and Hedging,
(ASC 815). ASC 815 requires that objectives for using derivative
instruments be disclosed in terms of underlying risk and
accounting designation. The Company implemented the disclosure
requirements of ASC 815 on February 1, 2009. For further
information, see Note 15, Derivative Financial
Instruments.
In December 2007, the FASB issued guidance which is included in
ASC 805, Business Combinations. ASC 805 applies the same
method of accounting (the acquisition method) to all
transactions and other events in which one entity obtains
control over one or more other businesses. This standard applies
prospectively to business combinations for which the acquisition
date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. The Company
is applying the guidance of ASC 805 to business combinations
completed on or after February 1, 2009.
In September 2006, the FASB issued guidance which is included in
FASB Codification Topic 820, Fair Value Measurements and
Disclosures, (ASC 820). ASC 820 defines fair value, sets out
a framework for measuring fair value in U.S. GAAP, and
expands disclosures about fair value measurements of assets and
liabilities. The Company implemented the provisions of ASC 820
beginning in the first quarter of fiscal 2009, except for
certain nonfinancial assets and liabilities for which it adopted
the provisions of ASC 820 in the first quarter of fiscal 2010.
Reclassifications
Certain amounts in previous years consolidated financial
statements have been reclassified to conform to the current year
presentation. Operating income from discontinued operations, net
of taxes, for previous years consolidated financial
statements have been reclassified to conform to the current
presentation.
All acquired businesses are primarily engaged in providing
logistics management, including international air and ocean
freight forwarding, customs brokerage, contract logistics
services and transportation management services. The results of
acquired businesses have been included in the Companys
consolidated financial statements from the effective dates of
acquisition.
F-17
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
For
the year ended January 31, 2010
Effective December 21, 2009, the Company acquired the
remaining outstanding shares of an Israeli subsidiary, Excel MPL
A.V.B.A., LP (EMA Israel), of which the Company had already held
a 50% ownership interest that was acquired through the
Companys acquisition of the Israeli subsidiarys
parent company in the beginning of fiscal 2010. The purchase
price totaled $6,500, including the repayment of a $537 loan and
contingent consideration of $300 which is based on projected net
revenues from a particular customer for the next four years. The
contingent consideration was accrued as an obligation through an
increase to goodwill. The acquisition eliminated a minority
shareholder in Israel. The purchase price exceeded the fair
value of the noncontrolling interest received and net assets
acquired, including acquired intangible assets with an estimated
fair value of $3,136, and accordingly, $2,035 was allocated to
goodwill, all of which is included within the Companys
Contract Logistics and Distribution segment. The Company is
currently determining whether the goodwill is deductible for tax
purposes. The estimated purchase price allocation is preliminary
and is subject to revision. A valuation of the additional net
assets acquired is being conducted and the final allocation will
be made when completed.
Effective February 4, 2009, the Company acquired all of the
issued and outstanding shares of Multi Purpose Logistics, Ltd.,
which we have subsequently renamed UTi M.P.L. Ltd. (MPL), for a
purchase price of $1,120, net of cash acquired of $380. MPL is
an Israeli company providing logistics services and held a 50%
ownership interest in EMA Israel at the time of acquisition. As
a result of this acquisition, the Company has increased its
range of services provided in Israel. The total cost of the
acquisition has been allocated to the assets acquired and
liabilities assumed based upon their estimated fair values at
the date of the acquisition.
Subsequent to the acquisition date, the Company conducted
additional valuation work on the customer relationships
identified and refined its estimates previously recorded during
the year. During the fourth quarter of 2010, the Company
finalized the valuation of such intangible assets and the
allocation of the purchase price. The final allocation resulted
in an excess of the purchase price over the fair value of the
acquired net assets, and accordingly, $2,453 was allocated to
goodwill, all of which is included within the Companys
Contract Logistics and Distribution segment. The Company
determined that none of the goodwill is deductible for tax
purposes. The amortization period of the customer relationships
acquired was estimated to be seven years as of the date of
acquisition. The following table summarizes the estimated fair
value of the assets acquired and liabilities assumed at the date
of acquisition and the final purchase price allocation recorded
for the MPL acquisition.
|
|
|
|
|
Current assets
|
|
$
|
15,830
|
|
Goodwill
|
|
|
2,453
|
|
Customer relationships
|
|
|
1,500
|
|
Other non-current assets
|
|
|
1,965
|
|
|
|
|
|
|
Total assets acquired
|
|
|
21,748
|
|
Liabilities assumed
|
|
|
(19,072
|
)
|
Deferred income taxes
|
|
|
(375
|
)
|
Noncontrolling interest
|
|
|
(801
|
)
|
|
|
|
|
|
Net assets acquired
|
|
$
|
1,500
|
|
|
|
|
|
|
Effective October 16, 2009, the Company acquired all of the
issued and outstanding shares of Tacisa Transitaria, S.L.
(Tacisa), a Spanish freight forwarder. An employee of one of the
Companys Spanish subsidiaries held a majority ownership
interest in Tacisa prior to the Companys acquisition. The
purchase price totaled $5,463, net of cash acquired of $750, and
including contingent consideration of $4,734 based on projected
fiscal 2010 operating results of Tacisa. The contingent
consideration was accrued as an obligation with a corresponding
increase to goodwill. The acquisition expanded the
Companys freight forwarding coverage in Spain. The total
cost of the acquisition has been allocated to the assets
acquired and the liabilities assumed based on their estimated
fair
F-18
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
values at the date of acquisition. The preliminary allocation
resulted in an excess of the purchase price over the fair value
of the acquired net assets, and accordingly, $2,536 was
allocated to goodwill, all of which is included in the
Companys Freight Forwarding segment. The Company is
currently determining whether the goodwill is deductible for tax
purposes.
The following table summarizes the estimated fair value of the
assets acquired and liabilities assumed at the date of
acquisition and the preliminary purchase price allocation that
was recorded for Tacisa, which is subject to revision. A
valuation of the assets acquired and liabilities assumed is
being conducted and the final allocation will be made when
completed.
|
|
|
|
|
Current assets
|
|
$
|
3,237
|
|
Goodwill
|
|
|
2,536
|
|
Acquired intangible assets
|
|
|
3,476
|
|
Other non-current assets
|
|
|
54
|
|
|
|
|
|
|
Total assets acquired
|
|
|
9,303
|
|
Liabilities assumed
|
|
|
(2,047
|
)
|
Deferred income taxes
|
|
|
(1,043
|
)
|
|
|
|
|
|
Net assets acquired
|
|
$
|
6,213
|
|
|
|
|
|
|
Revenues and net income attributable to UTi Worldwide Inc. as a
result of the acquisitions of EMA Israel, Tacisa and MPL totaled
$44,565 and $1,191, respectively, for the year ended
January 31, 2010. The following supplemental pro forma
information summarizes the results of operations of EMA Israel,
Tacisa and MPL for the years ended January 31, 2010 and
2009, as if the acquisitions had occurred at the beginning of
the periods presented. The pro forma information gives effect to
actual operating results prior to the acquisitions. These pro
forma amounts do not purport to be indicative of the results
that would have actually been obtained if the acquisitions had
occurred at the beginning of the periods presented or that may
be obtained in the future.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
|
|
|
|
|
Net Income/(Loss)
|
|
|
|
|
|
|
|
|
|
Attributable to
|
|
|
|
|
|
|
|
|
|
UTi Worldwide
|
|
|
Diluted Earnings
|
|
|
|
Revenue
|
|
|
Inc.
|
|
|
per Share*
|
|
|
2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
$
|
3,567,522
|
|
|
$
|
41,114
|
|
|
$
|
0.41
|
|
Acquisitions
|
|
|
7,482
|
|
|
|
605
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,575,004
|
|
|
$
|
41,719
|
|
|
$
|
0.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
$
|
4,543,717
|
|
|
$
|
(4,637
|
)
|
|
$
|
(0.04
|
)
|
Acquisitions
|
|
|
54,645
|
|
|
|
108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,598,362
|
|
|
$
|
(4,529
|
)
|
|
$
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Diluted pro forma earnings per share were calculated using
101,458,179 and 99,406,664 diluted ordinary shares for the years
ended January 31, 2010 and 2009, respectively. |
F-19
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
For
the year ended January 31, 2009
The Company did not complete any material acquisitions during
the fiscal year ended January 31, 2009. During the fiscal
year ended January 31, 2009, the Company made several
earn-out payments relating to previously announced acquisitions
totaling $30,870 in cash, all of which were recognized as
goodwill.
For
the year ended January 31, 2008
In September 2007, the Company acquired 50% of the issued and
outstanding shares of Newlog, Ltd. (Newlog), an Israeli company
involved in freight forwarding and customs brokerage, for a
purchase price of approximately $6,500 in cash. In October 2007,
the Company completed a merger agreement to which Newlog merged
with and into a wholly-owned Israeli indirect subsidiary of the
Company We refer to the merger transaction with Newlog as the
Newlog Merger. As a result of these transactions, the Company
owns 75% of the shares of the surviving corporation. The Company
has accounted for these transactions in accordance with ASC 805,
Business Combinations. Accordingly, a gain of $3,156 was
recorded in the consolidated statement of operations for the
year ended January 31, 2008. This gain represents the
excess of the fair value received pursuant to the Newlog Merger
over the carrying amount of the wholly-owned Israeli indirect
subsidiary contributed.
Additionally, in October 2007, the Company acquired certain
assets and liabilities of Transclal Trade, Ltd. (Transclal), an
Israeli company involved in freight forwarding and customs
brokerage, for a purchase price of approximately $36,940 in
cash. We refer to the Newlog Merger and the acquisition of
certain assets and liabilities of Transclal as the Israeli
Acquisition. The total cost of the acquisition has been
allocated to the assets acquired and liabilities assumed based
upon their estimated fair values at the date of the acquisition.
The preliminary allocation resulted in an excess of the purchase
price over the fair value of the acquired net assets, and
accordingly, $44,542 was allocated to goodwill, all of which is
included within the Companys Freight Forwarding segment.
The Company determined that approximately $33,021 of goodwill,
as of the acquisition date, is deductible for tax purposes.
During 2009, the Company refined estimates recorded in 2008 of
acquisition-related intangible assets related to the Israeli
Acquisition and finalized the valuation of such intangible
assets. The final purchase price allocation for the Israeli
Acquisition, as revised, is as follows:
|
|
|
|
|
Current assets
|
|
$
|
8,704
|
|
Deferred income taxes
|
|
|
5,988
|
|
Property, plant and equipment
|
|
|
2,314
|
|
Goodwill
|
|
|
30,849
|
|
Customer relationships
|
|
|
32,120
|
|
|
|
|
|
|
Total assets acquired
|
|
|
79,975
|
|
Liabilities assumed
|
|
|
(24,241
|
)
|
Deferred income taxes
|
|
|
(9,138
|
)
|
|
|
|
|
|
Net assets acquired
|
|
$
|
46,596
|
|
|
|
|
|
|
The weighted average amortization periods of the customer
relationships acquired from the Israeli Acquisition is
approximately 9.2 years as of the acquisition date.
In September 2007, the Company acquired 100% of the issued and
outstanding shares of Chronic Solutions Company (Proprietary),
Ltd. and its subsidiaries (collectively referred to as CSC), for
an initial cash payment of approximately $5,177, net of cash
acquired. CSC is a distributor of specialized and chronic
pharmaceuticals located in Johannesburg, South Africa. As a
result of this acquisition, the Company has increased its range
of services to the pharmaceutical industry in South Africa. In
addition to the initial payment and subject to certain
regulations coming
F-20
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
into effect within three to five years from the effective date
of the acquisition, the terms of the acquisition agreement
provide for an additional payment of up to a maximum of
approximately $8,000, based on a recalculation of CSCs
earnings from September 1, 2006 through the effective date
of the acquisition. The initial cost of the acquisition has been
allocated to the assets acquired and liabilities assumed based
upon their estimated fair values at the date of the acquisition.
The preliminary allocation resulted in an excess of the purchase
price over the fair value of the acquired net assets, and
accordingly, $3,130 was allocated to goodwill, all of which is
included within the Companys Contract Logistics and
Distribution segment. The Company determined that none of the
goodwill is deductible for tax purposes.
During 2009, the Company refined estimates recorded in 2008 of
acquisition-related intangible assets related to the acquisition
of CSC and finalized the valuation of such intangible assets.
The final purchase price allocation for CSC, as revised, is as
follows:
|
|
|
|
|
Current assets
|
|
$
|
12,761
|
|
Property, plant and equipment
|
|
|
645
|
|
Goodwill
|
|
|
2,723
|
|
Customer relationships
|
|
|
7,210
|
|
Other intangible assets
|
|
|
1,820
|
|
|
|
|
|
|
Total assets acquired
|
|
|
25,159
|
|
Liabilities assumed
|
|
|
(17,666
|
)
|
Deferred income taxes
|
|
|
(2,316
|
)
|
|
|
|
|
|
Net assets acquired
|
|
$
|
5,177
|
|
|
|
|
|
|
The weighted average amortization periods of the customer
relationships and other intangible assets acquired from CSC is
approximately 11.2 years as of the acquisition date.
In August 2007, the Company acquired the remaining outstanding
shares of our South Africa subsidiary, Co-Ordinated Investment
Holdings (Pty), Ltd. and its subsidiaries, of which the Company
had already held 50% of the ownership interest, for a total
consideration of approximately $12,728, of which $11,083 was
allocated to goodwill.
F-21
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
The provision for taxes on income from continuing operations
consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
State
|
|
|
Foreign
|
|
|
Total
|
|
|
Year ended January 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
(1,797
|
)
|
|
$
|
(179
|
)
|
|
$
|
29,252
|
|
|
$
|
27,276
|
|
Deferred
|
|
|
3,726
|
|
|
|
565
|
|
|
|
(7,139
|
)
|
|
|
(2,848
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,929
|
|
|
$
|
386
|
|
|
$
|
22,113
|
|
|
$
|
24,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended January 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
19,734
|
|
|
$
|
2,457
|
|
|
$
|
8,148
|
|
|
$
|
30,339
|
|
Deferred
|
|
|
(13,157
|
)
|
|
|
(1,517
|
)
|
|
|
1,847
|
|
|
|
(12,827
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,577
|
|
|
$
|
940
|
|
|
$
|
9,995
|
|
|
$
|
17,512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended January 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
7,033
|
|
|
$
|
216
|
|
|
$
|
36,804
|
|
|
$
|
44,053
|
|
Deferred
|
|
|
906
|
|
|
|
610
|
|
|
|
(7,408
|
)
|
|
|
(5,892
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,939
|
|
|
$
|
826
|
|
|
$
|
29,396
|
|
|
$
|
38,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of the Companys statutory tax rate to the
effective tax rate is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Pre-tax income from continuing operations
|
|
$
|
69,928
|
|
|
$
|
7,488
|
|
|
$
|
139,280
|
|
Statutory income tax rate for the Company(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign income tax differential
|
|
|
17,750
|
|
|
|
(10,723
|
)
|
|
|
35,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill and intangible assets impairment
|
|
|
672
|
|
|
|
24,530
|
|
|
|
|
|
Deferred tax rate change adjustment
|
|
|
949
|
|
|
|
153
|
|
|
|
|
|
Non-deductible expenses
|
|
|
2,418
|
|
|
|
3,295
|
|
|
|
1,400
|
|
Change in valuation allowance
|
|
|
6,542
|
|
|
|
(1,242
|
)
|
|
|
6,299
|
|
Capital property sale differential
|
|
|
(2,146
|
)
|
|
|
|
|
|
|
|
|
Other
|
|
|
(1,757
|
)
|
|
|
1,499
|
|
|
|
(5,180
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
$
|
24,428
|
|
|
$
|
17,512
|
|
|
$
|
38,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Statutory income tax rate for the Company(1)
|
|
|
|
%
|
|
|
|
%
|
|
|
|
%
|
Increase/(decrease) in rate resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign income tax differential
|
|
|
25.4
|
|
|
|
(143.2
|
)
|
|
|
25.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill and intangible assets impairment
|
|
|
1.0
|
|
|
|
327.6
|
|
|
|
|
|
Deferred tax rate change adjustment
|
|
|
1.4
|
|
|
|
2.0
|
|
|
|
|
|
Non-deductible expenses
|
|
|
3.5
|
|
|
|
44.0
|
|
|
|
1.0
|
|
Change in valuation allowance
|
|
|
9.4
|
|
|
|
(16.6
|
)
|
|
|
4.5
|
|
Capital property sale differential
|
|
|
(3.1
|
)
|
|
|
|
|
|
|
|
|
Other
|
|
|
(2.7
|
)
|
|
|
20.1
|
|
|
|
(3.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
|
|
34.9
|
%
|
|
|
233.9
|
%
|
|
|
27.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-22
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
|
|
|
(1) |
|
The statutory income tax rate in the British Virgin Islands,
where the Company is incorporated, is nil. |
The Companys provision for income taxes from discontinued
operations was not material for the years ended January 31,
2010, 2009 and 2008, respectively.
Deferred tax benefits recognized in income tax expense resulting
from operating loss carryforwards were $2,124 and $1,577, for
the years ended January 31, 2010 and 2009, respectively,
and were not material for the year ended January 31, 2008.
Deferred tax expense attributable to statutory rate change
adjustments was approximately $949 and $893 for the years ended
January 31, 2010 and 2009, respectively, and was not
material for the year ended January 31, 2008.
The deferred income tax assets and deferred income tax
liabilities at January 31, 2010 and 2009 resulted from
temporary differences associated with the following:
|
|
|
|
|
|
|
|
|
|
|
As of January 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Gross deferred income tax assets:
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
1,958
|
|
|
$
|
3,326
|
|
Provisions not currently deductible
|
|
|
18,184
|
|
|
|
15,651
|
|
Property, plant and equipment
|
|
|
1,517
|
|
|
|
388
|
|
Net operating loss carryforwards
|
|
|
29,407
|
|
|
|
21,313
|
|
Retirement benefits
|
|
|
3,392
|
|
|
|
5,423
|
|
Goodwill and intangible assets
|
|
|
5,367
|
|
|
|
5,790
|
|
Other
|
|
|
6,235
|
|
|
|
7,759
|
|
|
|
|
|
|
|
|
|
|
Total gross deferred income tax assets
|
|
|
66,060
|
|
|
|
59,650
|
|
Gross deferred income tax liabilities:
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
(4,860
|
)
|
|
|
(5,786
|
)
|
Goodwill and intangible assets
|
|
|
(27,959
|
)
|
|
|
(24,598
|
)
|
Other
|
|
|
(3,563
|
)
|
|
|
(5,497
|
)
|
|
|
|
|
|
|
|
|
|
Total gross deferred income tax liabilities
|
|
|
(36,382
|
)
|
|
|
(35,881
|
)
|
Valuation allowance
|
|
|
(17,323
|
)
|
|
|
(10,781
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred income tax asset/(liabilities)
|
|
$
|
12,355
|
|
|
$
|
12,988
|
|
|
|
|
|
|
|
|
|
|
The valuation allowance for deferred tax assets as of
February 1, 2009 and 2008 was $10,781 and $12,023,
respectively. The net change in the total valuation allowance
was an increase of $6,542 and a decrease of $1,242 for the
fiscal years ended 2010 and 2009, respectively. In assessing the
realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of
the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which
those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities
(including the impact of available carryback and carryforward
periods), projected future taxable income, and tax-planning
strategies in making this assessment. Based upon the level of
historical taxable income and projections for future taxable
income over the periods in which the deferred tax assets are
deductible, management believes that it is more likely than not
that the Company will realize the benefits of these deductible
differences, net of the existing valuation allowances at
January 31, 2010. The amount of the deferred tax asset
considered realizable, however, could be reduced in the near
term if estimates of future taxable income during the
carryforward period are reduced.
F-23
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
As of January 31, 2010, the Company had approximately
$48,079 of net operating loss carryforwards in various
countries, which includes amounts obtained through acquisitions.
These net operating loss carryforwards expire at various dates
with certain locations having indefinite time periods in which
to use their net operating loss carryforwards. Approximately
$42,794 of net operating loss carryforwards in various locations
do not expire. Approximately $1,043 of net operating loss
carryforwards in Slovakia will expire between 2014 and 2015.
Approximately $843 of net operating loss carryforwards in Spain
will expire between 2023 and 2024. The remaining $3,399 of net
operating losses, associated with a variety of locations, will
expire between 2014 and 2021.
No income tax provision has been made for the portion of
undistributed earnings of foreign subsidiaries deemed
permanently reinvested that amounted to approximately $124,796
and $118,139 at January 31, 2010 and 2009, respectively.
|
|
4.
|
Uncertain
Tax Positions
|
A reconciliation of the beginning and ending amounts of total
unrecognized tax positions and interest recognized in other
non-current liabilities is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
January 31, 2010
|
|
|
January 31, 2009
|
|
|
January 31, 2008
|
|
|
|
Uncertain
|
|
|
|
|
|
Uncertain
|
|
|
|
|
|
Uncertain
|
|
|
|
|
|
|
Tax
|
|
|
|
|
|
Tax
|
|
|
|
|
|
Tax
|
|
|
|
|
|
|
Position
|
|
|
Interest
|
|
|
Position
|
|
|
Interest
|
|
|
Position
|
|
|
Interest
|
|
|
Balance at beginning of the year
|
|
$
|
7,083
|
|
|
$
|
1,446
|
|
|
$
|
9,944
|
|
|
$
|
1,194
|
|
|
$
|
|
|
|
$
|
|
|
Reclassification at adoption of amounts for tax positions taken
during prior periods and included in current liabilities
pursuant to ASC 450, Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,058
|
|
|
|
906
|
|
Increase at adoption for amounts for tax positions taken during
prior years(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,158
|
|
|
|
248
|
|
Increase for tax positions taken during the current year
|
|
|
1,282
|
|
|
|
|
|
|
|
333
|
|
|
|
|
|
|
|
2,023
|
|
|
|
|
|
Decrease for changes in tax positions taken in a prior period
|
|
|
|
|
|
|
|
|
|
|
(339
|
)
|
|
|
|
|
|
|
(295
|
)
|
|
|
(96
|
)
|
Lapses and settlements
|
|
|
(653
|
)
|
|
|
(191
|
)
|
|
|
(2,034
|
)
|
|
|
(347
|
)
|
|
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
|
697
|
|
|
|
|
|
|
|
696
|
|
|
|
|
|
|
|
136
|
|
Foreign currency translation
|
|
|
522
|
|
|
|
136
|
|
|
|
(821
|
)
|
|
|
(97
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the end of the year
|
|
$
|
8,234
|
|
|
$
|
2,088
|
|
|
$
|
7,083
|
|
|
$
|
1,446
|
|
|
$
|
9,944
|
|
|
$
|
1,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The increase at adoption includes an increase to other current
receivables of $1,031 for amounts due to the Company through
acquisition-related indemnification of such matters which was
accounted for as an increase to the February 1, 2007
balance of retained earnings. |
The Company recognizes interest and penalties related to
uncertain tax positions as interest and other expense,
respectively. The total amount of unrecognized tax benefits that
would favorably affect the Companys effective tax rate if
recognized was $6,700 and $5,440 as of January 31, 2010 and
2009, respectively. The tax years 2006 through 2010 remain open
to examination by the major taxing jurisdictions in which we
operate.
F-24
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
Earnings per share are calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Amounts attributable to UTi Worldwide Inc. common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) from continuing operations, net of tax
|
|
$
|
41,114
|
|
|
$
|
(12,141
|
)
|
|
$
|
98,158
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income, net of tax
|
|
|
|
|
|
|
100
|
|
|
|
528
|
|
Gain on sale, net of tax
|
|
|
|
|
|
|
7,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) attributable to UTi Worldwide Inc. common
shareholders
|
|
$
|
41,114
|
|
|
$
|
(4,637
|
)
|
|
$
|
98,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares
|
|
|
99,878,211
|
|
|
|
99,406,664
|
|
|
|
99,112,752
|
|
Incremental shares required for diluted earnings per share
related to stock options/restricted share units
|
|
|
1,579,968
|
|
|
|
|
|
|
|
1,059,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average number of ordinary shares
|
|
|
101,458,179
|
|
|
|
99,406,664
|
|
|
|
100,171,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings/(loss) per common share attributable to UTi
Worldwide Inc. common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
0.41
|
|
|
$
|
(0.12
|
)
|
|
$
|
0.99
|
|
Discontinued operations
|
|
|
|
|
|
|
0.08
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.41
|
|
|
$
|
(0.04
|
)
|
|
$
|
1.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings/(loss) per common share attributable to UTi
Worldwide Inc. common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
0.41
|
|
|
$
|
(0.12
|
)
|
|
$
|
0.99
|
|
Discontinued operations
|
|
|
|
|
|
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.41
|
|
|
$
|
(0.04
|
)
|
|
$
|
0.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average diluted shares outstanding for the year ended
January 31, 2010 exclude stock options to purchase
1,828,663 shares because such options have an exercise
price in excess of the average market price of the
companys common stock during the year, and were therefore
anti-dilutive. For the year ended January 31, 2009, no
potential common shares were included in the computation of
dilutive earnings/(loss) per share, as the Company had a loss
from continuing operations. For the year ended January 31,
2008, weighted-average diluted shares outstanding excluded
anti-dilutive options to purchase 343,061 shares.
F-25
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
|
|
6.
|
Property,
Plant and Equipment
|
At January 31, 2010 and 2009, property, plant and equipment
at cost and accumulated depreciation were:
|
|
|
|
|
|
|
|
|
|
|
January 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Land
|
|
$
|
7,840
|
|
|
$
|
8,508
|
|
Buildings and leasehold improvements
|
|
|
65,484
|
|
|
|
56,203
|
|
Computer equipment and software
|
|
|
146,798
|
|
|
|
117,303
|
|
Furniture, fixtures and equipment
|
|
|
86,197
|
|
|
|
62,588
|
|
Vehicles
|
|
|
46,075
|
|
|
|
39,744
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, gross
|
|
|
352,394
|
|
|
|
284,346
|
|
Accumulated depreciation
|
|
|
(171,972
|
)
|
|
|
(120,905
|
)
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
180,422
|
|
|
$
|
163,441
|
|
|
|
|
|
|
|
|
|
|
The components of property, plant and equipment at cost and
accumulated depreciation recorded under capital leases were:
|
|
|
|
|
|
|
|
|
|
|
January 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Land
|
|
$
|
|
|
|
$
|
794
|
|
Buildings and leasehold improvements
|
|
|
5,850
|
|
|
|
6,575
|
|
Computer equipment and software
|
|
|
23,772
|
|
|
|
20,485
|
|
Furniture, fixtures and equipment
|
|
|
29,230
|
|
|
|
23,890
|
|
Vehicles
|
|
|
16,032
|
|
|
|
13,161
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, gross
|
|
|
74,884
|
|
|
|
64,905
|
|
Accumulated depreciation
|
|
|
(27,253
|
)
|
|
|
(21,901
|
)
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
47,631
|
|
|
$
|
43,004
|
|
|
|
|
|
|
|
|
|
|
F-26
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
|
|
7.
|
Goodwill
and Other Intangible Assets
|
Goodwill
The changes in the carrying amount of goodwill by reportable
segment for the years ended January 31, 2010 and 2009 are
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract
|
|
|
|
|
|
|
Freight
|
|
|
Logistics and
|
|
|
|
|
|
|
Forwarding
|
|
|
Distribution
|
|
|
Total
|
|
|
Balance at January 31, 2008
|
|
$
|
188,691
|
|
|
$
|
348,738
|
|
|
$
|
537,429
|
|
Acquisitions and contingent earn-out payments
|
|
|
1,382
|
|
|
|
599
|
|
|
|
1,981
|
|
Purchase price allocation and other adjustments
|
|
|
(15,154
|
)
|
|
|
(809
|
)
|
|
|
(15,963
|
)
|
Disposals
|
|
|
|
|
|
|
(1,473
|
)
|
|
|
(1,473
|
)
|
Impairment
|
|
|
|
|
|
|
(98,932
|
)
|
|
|
(98,932
|
)
|
Foreign currency translation
|
|
|
(19,479
|
)
|
|
|
(30,713
|
)
|
|
|
(50,192
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 31, 2009
|
|
|
155,440
|
|
|
|
217,410
|
|
|
|
372,850
|
|
Acquisitions and contingent earn-out payments
|
|
|
2,622
|
|
|
|
9,125
|
|
|
|
11,747
|
|
Purchase price allocation and other adjustments
|
|
|
(20
|
)
|
|
|
1,562
|
|
|
|
1,542
|
|
Impairment
|
|
|
|
|
|
|
(1,562
|
)
|
|
|
(1,562
|
)
|
Foreign currency translation
|
|
|
11,992
|
|
|
|
18,222
|
|
|
|
30,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 31, 2010
|
|
$
|
170,034
|
|
|
$
|
244,757
|
|
|
$
|
414,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In accordance with ASC 350, Intangibles Goodwill
and Other, the Company reviews goodwill and other intangible
assets for impairment annually at the end of the second quarter
of each fiscal year, or more often if events or circumstances
indicate that impairment may have occurred. In addition to the
testing above, which is done on an annual basis, management
considers whether certain impairment indicators are present in
assessing whether the carrying value of goodwill and other
intangible assets may be impaired. No impairment was recognized
in 2010 based on the results of the annual goodwill impairment
test performed as of July 31, 2009.
As a result of the volatility and deterioration of the financial
markets and adverse changes in the global business climate, the
Company performed an interim goodwill impairment test during the
fourth quarter of fiscal 2009 and determined that goodwill was
impaired. The Companys testing approach utilized a
discounted cash flow analysis and comparative market multiples
to determine each reporting units fair value for
comparison to its carrying value. As the Companys carrying
value exceeded its estimated fair value as of January 31,
2009, the Company applied the approach prescribed in ASC
350-20 for
determining the impairment amount. As a result of the
Companys interim test, a goodwill impairment charge of
$98,932, before a related deferred tax benefit of $11,311, was
recorded in the Companys consolidated statement of
operations as of January 31, 2009 in the Companys
Contract Logistics and Distribution segment.
During the fourth quarter ended January 31, 2010, the
Company recorded an impairment charge of $1,562 in the
Companys Contract Logistics and Distribution segment in
accordance with FASB Codification Topic 250, Accounting
for Changes and Error Corrections (ASC 250) and
the correction of an error. Prior period amounts have not been
restated due to immateriality. There was no tax benefit as the
result of this charge. The additional impairment charge was
recorded in accordance with SEC Staff Accounting
Bulletin No. 108, Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in Current
Year Financial Statements. The Companys accumulated
goodwill impairment charge since its adoption of ASC 350
was $100,494 and $98,932 at January 31, 2010 and 2009,
respectively.
F-27
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
Prior to determining the goodwill impairment charges in fiscal
2009, the Company evaluated acquired intangible assets and other
long-lived assets for impairment. Due to the volatility and
deterioration of the financial markets and adverse changes in
the global business climate, earnings forecasts were revised,
and the Company determined the carrying value of the assets
within the Contract Logistics and Distribution segment were
impaired. The Company recorded impairment charges of $7,300 and
$3,709 for customer relationships and a trademark, respectively,
in the Companys Contract Logistics and Distribution
segment. These charges were before a related deferred tax
benefit of $3,939. No impairment was recognized in fiscal 2010
based on the Companys evaluation of acquired intangible
assets and other long-lived assets as of January 31, 2010.
The fair values of the impaired segments were determined using
unobservable inputs (Level 3).
Other
Intangible Assets
Amortizable intangible assets as of January 31, 2010 and
2009 relate primarily to the estimated fair value of customer
relationships acquired with respect to certain acquisitions. The
carrying values of amortizable intangible assets as of
January 31, 2010 and 2009 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
Gross
|
|
|
Accumulated
|
|
|
Net Carrying
|
|
|
Average Life
|
|
|
|
Carrying Value
|
|
|
Amortization
|
|
|
Value
|
|
|
(Years)
|
|
|
As of January 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
$
|
105,320
|
|
|
$
|
(36,586
|
)
|
|
$
|
68,734
|
|
|
|
9.6
|
|
Non-compete agreements
|
|
|
3,048
|
|
|
|
(2,797
|
)
|
|
|
251
|
|
|
|
3.1
|
|
Other
|
|
|
4,473
|
|
|
|
(2,270
|
)
|
|
|
2,203
|
|
|
|
3.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
112,841
|
|
|
$
|
(41,653
|
)
|
|
$
|
71,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
$
|
92,669
|
|
|
$
|
(26,675
|
)
|
|
$
|
65,994
|
|
|
|
10.2
|
|
Non-compete agreements
|
|
|
2,822
|
|
|
|
(2,444
|
)
|
|
|
378
|
|
|
|
3.1
|
|
Other
|
|
|
2,608
|
|
|
|
(1,408
|
)
|
|
|
1,200
|
|
|
|
4.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
98,099
|
|
|
$
|
(30,527
|
)
|
|
$
|
67,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense totaled $11,126, $12,971 and $9,436 for the
years ended January 31, 2010, 2009 and 2008, respectively.
The following table shows the expected amortization expense for
these intangible assets for each of the next five fiscal years
ended January 31:
|
|
|
|
|
2011
|
|
$
|
12,334
|
|
2012
|
|
|
11,413
|
|
2013
|
|
|
10,906
|
|
2014
|
|
|
10,312
|
|
2015
|
|
|
8,895
|
|
In addition to the amortizable intangible assets, the Company
also had $994 and $2,269 of intangible assets not subject to
amortization as of January 31, 2010 and 2009, respectively,
related primarily to acquire trade names. The Companys
accumulated impairment charge related to indefinite-life
intangible assets was $3,709 at January 31, 2010. The fair
values of the impaired assets were determined using unobservable
inputs (Level 3).
F-28
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
|
|
8.
|
Restructuring
and Impairments
|
Fiscal
2009 Information Technology Cost Reduction Plan
During the fourth quarter of fiscal 2009, the Company initiated
several changes to its global information technology operations
and incurred related restructuring charges. For the year ended
January 31, 2009, amounts charged for employee severance
benefits and other exit costs were $803 and $1,506, respectively.
For the year ended January 31, 2010 amounts charged for
employee severance benefits and other exit costs were $887 and
$344, respectively. As of January 31, 2010, the Company has
completed the information technology restructuring plan. All
costs associated with the plan were cash expenditures.
Employee
severance benefits
Amounts included in the provision for employee severance
benefits for the twelve months ended January 31, 2010 are
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts
|
|
|
|
|
|
|
|
|
|
Liability at
|
|
|
Charged to
|
|
|
Settlements
|
|
|
Liability at
|
|
|
|
January 31, 2009
|
|
|
Expense
|
|
|
and Other
|
|
|
January 31, 2010
|
|
|
Freight Forwarding
|
|
$
|
187
|
|
|
$
|
|
|
|
$
|
(187
|
)
|
|
$
|
|
|
Contract Logistics and Distribution
|
|
|
91
|
|
|
|
|
|
|
|
(91
|
)
|
|
|
|
|
Corporate
|
|
|
525
|
|
|
|
887
|
|
|
|
(1,412
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
803
|
|
|
$
|
887
|
|
|
$
|
(1,690
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee severance benefits are primarily related to the
realignment of corporate and regional information technology
functions to reduce overhead costs. Under the plan, the
Companys global IT workforce has been reduced by
approximately 240 employees.
Other
exit costs
Amounts charged for other exit costs for the years ended
January 31, 2010 and 2009 for corporate were $344 and
$1,506, respectively. There were no charges for Freight
Forwarding and Contract Logistics and Distribution for the years
ended January 31, 2010 and 2009, respectively. Other exit
costs primarily relate to consulting fees incurred in connection
with the implementation of the information technology
restructuring plan. These amounts were expensed as incurred.
Fiscal
2008 Cost Reduction Measures
During the fourth quarter of fiscal 2008, the Company initiated
several changes in operations and incurred related restructuring
and impairment charges. For the year ended January 31,
2008, the charges included in the provision for asset
impairments, employee severance benefits, and other exit costs
were $3,485, $2,482, and $2,428, respectively. For the year
ended January 31, 2009, charges included for asset
impairment, employee severance and termination costs and
contract termination and other costs for the 2008 cost reduction
measures were $293, $3,164, and $2,579, respectively. As of
January 31, 2009, the Company had completed all activities
under this plan.
Asset
impairments
Amounts charged for asset impairments during the year ended
January 31, 2009 were $293 for Contract Logistics and
Distribution. There were no amounts charged for asset
impairments to Freight Forwarding or corporate for the year
ended January 31, 2009. Asset impairments primarily related
to the cancellation of various long-term initiatives, such as
the development of certain industry verticals and information
technology costs.
F-29
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
Employee
severance benefits
A summary of employee severance benefits expense as of
January 31, 2009 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability at
|
|
|
Amounts
|
|
|
Settlements
|
|
|
Liability at
|
|
|
|
January 31,
|
|
|
Charged to
|
|
|
and
|
|
|
January 31,
|
|
|
|
2008
|
|
|
Expense
|
|
|
Other
|
|
|
2009
|
|
|
Freight Forwarding
|
|
$
|
843
|
|
|
$
|
2,375
|
|
|
$
|
(3,218
|
)
|
|
$
|
|
|
Contract Logistics and Distribution
|
|
|
997
|
|
|
|
789
|
|
|
|
(1,786
|
)
|
|
|
|
|
Corporate
|
|
|
642
|
|
|
|
|
|
|
|
(642
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,482
|
|
|
$
|
3,164
|
|
|
$
|
(5,646
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee severance benefits are primarily related to the
realignment of corporate and regional functions to reduce
overhead costs. As of January 31, 2009, a total of
1,247 employees had been terminated during the year. These
staff reductions are primarily the result of the exit of the
Companys retail distribution business in the Africa
region, the surface distribution operation of the Companys
Integrated Logistics business in the Americas region and
streamlining operations and other selected non-core
underperforming operations.
Other
exit costs
Amounts charged for other exit costs for the year ended
January 31, 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability at
|
|
|
Amounts
|
|
|
Settlements
|
|
|
Liability at
|
|
|
|
January 31,
|
|
|
Charged to
|
|
|
and
|
|
|
January 31,
|
|
|
|
2008
|
|
|
Expense
|
|
|
Other
|
|
|
2009
|
|
|
Freight Forwarding
|
|
$
|
158
|
|
|
$
|
6
|
|
|
$
|
(164
|
)
|
|
$
|
|
|
Contract Logistics and Distribution
|
|
|
2,270
|
|
|
|
2,572
|
|
|
|
(4,842
|
)
|
|
|
|
|
Corporate
|
|
|
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,428
|
|
|
$
|
2,579
|
|
|
$
|
(5,007
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other exit costs are primarily related to exiting a contract
logistics agreement in the Americas region, as well as certain
exit costs related to the exit of the Companys retail
distribution business in the Africa region and the surface
distribution operation of the Companys Integrated
Logistics business in the Americas region.
|
|
9.
|
Trade
Payables and Other Accrued Liabilities
|
At January 31, 2010 and 2009, trade payables and other
accrued liabilities were comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
January 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Trade payables:
|
|
|
|
|
|
|
|
|
Due to agents
|
|
$
|
3,920
|
|
|
$
|
4,060
|
|
Other trade payables
|
|
|
541,137
|
|
|
|
430,777
|
|
|
|
|
|
|
|
|
|
|
Trade payables
|
|
|
545,057
|
|
|
|
434,837
|
|
Interest payable
|
|
|
5,020
|
|
|
|
2,263
|
|
Staff cost related accruals
|
|
|
56,437
|
|
|
|
65,734
|
|
Earn-out liabilities
|
|
|
8,932
|
|
|
|
700
|
|
Other payables and accruals
|
|
|
116,072
|
|
|
|
89,737
|
|
|
|
|
|
|
|
|
|
|
Total trade payables and other accrued liabilities
|
|
$
|
731,518
|
|
|
$
|
593,271
|
|
|
|
|
|
|
|
|
|
|
F-30
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
At January 31, 2010 and 2009, borrowings were comprised of
the following:
|
|
|
|
|
|
|
|
|
|
|
January 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Bank lines of credit
|
|
$
|
100,653
|
|
|
$
|
69,978
|
|
Short-term bank borrowings
|
|
|
8,032
|
|
|
|
6,899
|
|
Current portion of long-term bank borrowings
|
|
|
69,934
|
|
|
|
66,666
|
|
Long-term bank borrowings, excluding current portion
|
|
|
99,097
|
|
|
|
115,747
|
|
|
|
|
|
|
|
|
|
|
Total borrowings
|
|
$
|
277,716
|
|
|
$
|
259,290
|
|
|
|
|
|
|
|
|
|
|
The amounts due under long-term borrowings as of
January 31, 2010 are repayable in the following fiscal
years:
|
|
|
|
|
2011
|
|
$
|
69,934
|
|
2012
|
|
|
37,568
|
|
2013
|
|
|
22,737
|
|
2014
|
|
|
20,458
|
|
2015
|
|
|
18,334
|
|
|
|
|
|
|
Total
|
|
$
|
169,031
|
|
|
|
|
|
|
Borrowings are denominated primarily in U.S. dollars,
Australian dollars, Chinese Yuan, Euro, Japanese Yen, Polish
Zloty and other currencies.
As of January 31, 2010 and 2009, the weighted average
interest rate on the Companys outstanding debt was 4.1%
and 5.6%, respectively. The weighted average interest rate on
the bank lines of credit was 2.2% and 4.1% as of
January 31, 2010 and 2009, the average borrowings were
$73,000 and $119,483 respectively. The weighted average interest
rate on the short-term bank borrowings was 5.5% and 5.9% as of
January 31, 2010 and 2009, the average borrowings were
$9,476 and $6,150 respectively.
At January 31, 2010, the aggregate amount available for
borrowing under all facilities totaled approximately $292,211.
As of January 31, 2010, loans outstanding under these
facilities totaled approximately $43,846 and letters of credit
and guarantees outstanding under these facilities totaled
approximately $158,225, excluding letters of credit (or the
portion thereof) used to support loans outstanding. At
January 31, 2010, the Company had approximately $90,140 of
available, unused capacity under these facilities, approximately
$73,730 of which was available for cash draw.
Bank
Lines of Credit
A significant number of our subsidiaries participate in a cash
pooling arrangement administered by Bank Mendes Gans NV, which
is used to fund short-term liquidity needs. The cash pooling
arrangement has no stated maturity date and yields and bears
interest at varying rates based on a base rate plus 0.5% for
withdrawals and minus 0.5% for deposits. The facility does not
permit cash withdrawals in excess of cash deposits on a global
basis. At January 31, 2010, cash deposits were equivalent
to cash withdrawals. Cash withdrawals of $70,231 and $11,564 are
included in bank lines of credit at January 31, 2010 and
2009, respectively.
The Company has various credit, letter of credit and guarantee
facilities. The Companys primary facilities and borrowings
include: the ABN/RBS Letter of Credit Agreement and Nedbank
Letter of Credit Agreement; the South African Facilities
Agreement; and the 2009 and 2006 note purchase agreements; all
described in more detail below.
F-31
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
The purpose of the Companys facilities is to provide the
Company with working capital, customs and other guarantees,
letters of credit, and funds for general corporate purposes. Due
to the global nature of the Companys business, a number of
financial institutions are utilized to provide the Company with
credit facilities.
ABN/RBS
Letter of Credit Agreement
On July 9, 2009, the Company and certain of its
subsidiaries entered into a letter of credit facility pursuant
to an agreement with ABN AMRO N.V. (ABN) and The Royal Bank of
Scotland plc. (the ABN/RBS Letter of Credit
Agreement). The ABN/RBS Letter of Credit Agreement
provides for an aggregate availability of up to $50,000 in
letters of credit as of January 31, 2010. The ABN/RBS
Letter of Credit Agreement provided for two separate letter of
credit facilities, which are referred to as the ABN Letter of
Credit Facility and the RBS Letter of Credit Facility. As of
January 31, 2010, the letters of credit outstanding under
the ABN Letter of Credit Facility totaled approximately $33,807
and the amount of available, unused capacity was $16,193. The
ABN Letter of Credit Facility matures on July 9, 2011. The
RBS Letter of Credit Facility matured on December 31, 2009
and prior to maturity the company either obtained the release of
the remaining letters of credit issued pursuant to this facility
or provided for alternative arrangements for the underlying
obligations. The Companys obligations under the ABN/RBS
Letter of Credit Agreement are guaranteed by the Company and
selected subsidiaries.
Nedbank
Letter of Credit Agreement
On July 9, 2009, the company and certain of its
subsidiaries also entered into a letter of credit facility
pursuant to an agreement (the Nedbank Letter of Credit
Agreement) with Nedbank Limited, acting through its London
Branch. The Nedbank Letter of Credit Agreement provided for an
aggregate initial availability of up to $36,000 in letters of
credit. On January 8, 2010, the company and certain of its
subsidiaries entered into an amendment to this agreement (the
Nedbank Amendment) which temporarily increased the
aggregate availability under the facility to $46,000 in letters
of credit. The Nedbank Amendment expired on March 1, 2010,
afterwhich the aggregate availability under the Nedbank Letter
or Credit Agreement reverted to the original availability of
$36,000 in letters of credit. As of January 31, 2010, the
letters of credit outstanding under the Nedbank Letter of Credit
Agreement totaled approximately $6,175 and loans outstanding
totaled $23,277, which is included in bank lines of credit in
the consolidated balance sheet. As of January 31, 2010, the
amount of available, unused capacity was $16,548 under this
facility. The Nedbank Letter of Credit Agreement matures on
July 9, 2011. The Companys obligations under the
Nedbank Letter of Credit Agreement are guaranteed by the company
and selected subsidiaries.
Together, the Company refers to the ABN/RBS Letter of Credit
Agreement and the Nedbank Letter of Credit Agreement as the
Letter of Credit Agreements. Pursuant to the terms
of the Letter of Credit Agreements, the Company is charged fees
relating to, among other things, the issuance of letters of
credit, the aggregate amount of letters of credit outstanding,
and the unused portions of these facilities, all at the rates
specified in the applicable agreement.
South
African Facilities Agreement
On July 9, 2009, certain of the Companys subsidiaries
operating in South Africa entered into a South African credit
facility pursuant to an agreement (the South African
Facilities Agreement) with Nedbank Limited, acting through
its Corporate Banking Division. The South African Facilities
Agreement provides for a 650,000 South African rand revolving
credit facility, which is comprised of a 400,000 South African
rand working capital facility and a 250,000 South African rand
letter of credit, guarantee and forward exchange contract
facility. At January 31, 2010, based on current exchange
rates, the revolving credit facility provided for an aggregate
availability of $84,680. As of January 31, 2010, the
borrowings, letters of credit, and guarantees under the South
African Facilities Agreement totaled approximately $31,023,
represented by outstanding letters of credit and guarantees of
$30,972 and borrowings of $51, which is included in bank lines
of credit in the consolidated balance sheet. As of
January 31,
F-32
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
2010, the amount of available, unused capacity was $53,657 under
this facility. The South African Facilities Agreement also
provides the companys South African operations with a
150,000 South African rand revolving asset-based finance
facility, which includes, among other things, a capital lease
line. The obligations of the companys subsidiaries under
the South African Facilities Agreement are guaranteed by
selected subsidiaries registered in South Africa. In addition,
certain of the Companys operating assets in South Africa,
and the rights and interests of the South African branch of one
of our subsidiaries in various intercompany loans made to a
South African subsidiary and to a South African partnership, are
pledged as collateral under the South African Facilities
Agreement.
Overdrafts under the new South African working capital facility
bear interest at a rate per annum equal to Nedbanks
publicly quoted prime rate minus 1%. The per annum interest rate
payable in respect of foreign currency accounts is generally at
the London Interbank Offered Rate (LIBOR), or with respect to a
foreign currency account in euro, the Euro Interbank Offered
Rate (EURIBOR), plus the lenders cost of funds (to the
extent greater than LIBOR or EURIBOR, as applicable), plus 3%.
Instruments issued under the letter of credit, guarantee and
forward exchange contract facility bear interest at a rate to be
agreed upon in writing by the Companys subsidiaries party
to the South African Facilities Agreement and Nedbank.
Bank
Borrowings
2009 Note
Purchase Agreement
On July 9, 2009, the Company issued $55,000 of senior
unsecured guaranteed notes (the 2009 Senior Notes)
under a note purchase agreement (the 2009 Note Purchase
Agreement), entered into among UTi, certain of its
subsidiaries as guarantors and the purchasers named therein. The
2009 Senior Notes mature on August 9, 2014. The 2009 Senior
Notes bear interest at a rate of 8.06% per annum, payable
semi-annually, on the 9th day of February and August. The
Company is required to repay approximately $9,167, or such
lesser principal amount as shall then be outstanding, on
February 9, 2012 and each February 9th and
August 9th thereafter up to and including
August 9, 2014. The Companys obligations under the
2009 Senior Notes and the 2009 Note Purchase Agreement are
guaranteed by the Company and selected subsidiaries. As of
January 31, 2010, the principal amount outstanding under
the 2009 Senior Notes was $55,000 and is included in long-term
bank borrowings in the consolidated balance sheet.
2006 Note
Purchase Agreement
On July 13, 2006, the Company issued $200,000 of senior
unsecured guaranteed notes (the 2006 Senior Notes
and, together with the 2009 Senior Notes, the Senior
Notes) under a note purchase agreement (the 2006
Note Purchase Agreement, and together with the 2009 Note
Purchase Agreement, the Note Purchase Agreements),
entered into among UTi, certain of its subsidiaries as
guarantors and the purchasers named therein. The 2006 Senior
Notes mature on July 13, 2011. The 2006 Senior Notes bear
interest at a rate of 6.31% per annum, payable semi-annually, on
the 13th day of each January and July. The Company is
required to repay approximately $33,333, or such lesser
principal amount as shall then be outstanding, on each
January 13th and July 13th up to and
including July 13, 2011. The Companys obligations
under the 2006 Senior Notes and the 2006 Note Purchase Agreement
are guaranteed by the Company and selected subsidiaries. As of
January 31, 2010 and 2009, the principal amount outstanding
under the 2006 Senior Notes was approximately $100,000 and
$166,667, respectively, and is included in long-term bank
borrowings in the consolidated balance sheets.
The Company also has a number of bank borrowings issued by
various financial institutions, not covered under the facilities
listed above. The total of such bank borrowings at
January 31, 2010 was approximately $8,639, included in
short-term and long-term bank borrowings in the consolidated
balance sheet.
F-33
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
The Letter of Credit Agreements, the South African Facilities
Agreement and the 2009 Senior Notes, referred to above replaced
the Companys former $250,000 credit facility agreement
(the 2006 Facility Agreement) with ABN and various
other financial institutions party thereto. All loans previously
outstanding under the 2006 Facility Agreement were refinanced or
paid and all letters of credit previously issued under the 2006
Facility Agreement were terminated or supported with new letters
of credit in connection with the execution of the Letter of
Credit Agreements, the South African Facilities Agreement and
the issuance of the 2009 Senior Notes. No early termination
penalties were incurred in connection with the termination of
the 2006 Facility Agreement.
The Letter of Credit Agreements, the South African Facilities
Agreement, and the Note Purchase Agreements require the Company
to comply with financial and other covenants and certain change
of control provisions. In March 2010, we amended the financial
covenants in the Letter of Credit Agreements and in the 2009
Note Purchase Agreement. Some of the covenants include
maintaining a specified net worth, maintaining a specified ratio
of total debt to consolidated earnings before interest, taxes,
depreciation and amortization (EBITDA) and minimum interest
charge coverage requirements, among others. Should the Company
fail to comply with these covenants and be unable to obtain any
necessary amendments or waivers, all or a portion of the
obligations under the Senior Notes, the Letter of Credit
Agreements and the South African Facilities Agreement could
become immediately due and payable and the Letter of Credit
Agreements and the South African Facilities Agreement could be
terminated and the credit, letter of credit, and guarantee
facilities provided thereunder would no longer be available. The
Company was in compliance with all the covenants set forth in
the Note Purchase Agreements, the Letter of Credit Agreements
and the South African Facilities Agreement as of
January 31, 2010.
Furthermore, the Letter of Credit Agreements, the South African
Facilities Agreement, and the Note Purchase Agreements each
contain cross-default provisions with respect to other
indebtedness, giving the lenders under the Letter of Credit
Agreements and the South African Facilities Agreement and the
note holders under the Note Purchase Agreements the right to
declare a default if the Company defaults under other
indebtedness in certain circumstances. Should the Company fail
to comply with these provisions and be unable to obtain any
necessary amendments or waivers, all or a portion of the
obligations under the Senior Notes, the Letter of Credit
Agreements and the South African Facilities Agreement could
become immediately due and payable and the Letter of Credit
Agreements and the South African Facilities Agreement could be
terminated and the credit, letter of credit, and guarantee
facilities provided thereunder would no longer be available.
Pursuant to the terms of the Letter of Credit Agreements, the
South African Facilities Agreement, and the Note Purchase
Agreements, the Company is required to indemnify the lenders and
others with respect to certain losses, liabilities and costs,
those relating to income and other taxes, increased costs
suffered as a result of, among other things, changes in laws or
regulations, or other requirements which may be imposed by
regulatory authorities from time to time, and increased costs
suffered as a result of a default under the agreements. The
indemnification obligations created by each respective agreement
arose at the time such agreement was entered into and will
continue in accordance with the terms of such agreement. The
Company cannot currently estimate the maximum potential amount
which could be payable pursuant to its indemnification
obligations under these agreements. Liabilities for these
indemnification obligations were not material to the Company as
a whole as of the dates that each of the respective agreements
was entered into. The Company has not recorded any liabilities
related to the indemnification obligations as of
January 31, 2010.
In addition to the credit, letter of credit, and guarantee
facilities provided under the Letter of Credit Agreements and
the South African Facilities Agreement, the Company utilizes a
number of other financial institutions to provide it with
incremental letter of credit, guarantee and working capital
capacity, certain of which are working capital and credit
facilities, and certain of which are customs bonds and
guarantees which are issued by various financial institutions.
In many cases, the use of these particular letter of credit,
guarantee, and working capital facilities are restricted to the
country in which they originated although this is not always the
case. These particular letter of credit, guarantee, and working
capital facilities may restrict distributions by the subsidiary
F-34
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
operating in the country. At January 31, 2010, the
aggregate amount available for borrowing under these other
facilities totaled approximately $111,531, including customs
bonds and other guarantees of approximately $87,270 and
borrowings of approximately $20,518, which is included in both
bank lines of credit and long-term borrowings in the
consolidated balance sheet. At January 31, 2010, the total
available, unused cash borrowing capacity under these other
facilities was approximately $3,743.
|
|
11.
|
Supplemental
Financial Information
|
Other
Operating Expenses
The following table shows a summary of other operating expenses
as of January 31, 2010, 2009 and 2008. The balance of other
operating expenses is comprised of selling, general and
administrative costs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
|
2010
|
|
2009
|
|
2008
|
|
Advertising costs
|
|
$
|
2,500
|
|
|
$
|
2,757
|
|
|
$
|
3,087
|
|
Facilities and communication
|
|
|
173,727
|
|
|
|
180,334
|
|
|
|
158,950
|
|
Supplemental
Cash Flow Information
The following table shows the supplemental cash flow information
and supplemental non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Net cash paid for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest(*)
|
|
$
|
23,100
|
|
|
$
|
30,666
|
|
|
$
|
26,684
|
|
Income taxes
|
|
|
41,296
|
|
|
|
31,807
|
|
|
|
52,357
|
|
Non-cash activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital lease obligations incurred to acquire assets and other
|
|
|
20,189
|
|
|
|
18,617
|
|
|
|
33,904
|
|
Liability incurred for acquisition earn-out payment
|
|
|
4,224
|
|
|
|
700
|
|
|
|
29,303
|
|
Adjustment to initially adopt ASC 740, Uncertain Tax
Positions
|
|
|
|
|
|
|
|
|
|
|
9,370
|
|
|
|
|
* |
|
Net cash paid for interest is inclusive of capitalized interest
of $1,379, $1,558 and $0 for the fiscal years ended 2010, 2009
and 2008, respectively and excludes cash paid for debt issuance
costs. |
UTi is a holding company which relies on dividends or advances
from its subsidiaries to meet its financial obligations and to
pay dividends on its ordinary shares. The ability of UTis
subsidiaries to pay dividends to the Company and UTis
ability to receive distributions is subject to applicable local
law and other restrictions including, but not limited to,
applicable tax laws and limitations contained in some of the
Companys bank credit facilities and in the note purchase
agreements for the Companys outstanding senior notes. Such
laws and restrictions could limit the payment of dividends and
distributions to the Company which would restrict UTis
ability to continue operations. In general, UTis
subsidiaries cannot pay dividends in excess of their retained
earnings and most countries require that the subsidiaries pay a
distribution tax on all dividends paid. In addition, the amount
of dividends that UTis subsidiaries could declare may be
limited in certain countries by exchange controls. Total net
assets which may not be transferred to the Company in the form
of loans, advances, or cash dividends by the Companys
subsidiaries without the consent of a third party, were less
than 10% of the Companys consolidated total net assets as
of the end of the most recent fiscal year.
F-35
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
|
|
12.
|
Retirement
Benefit Plans
|
Defined
Contribution Plans
In certain countries, the Company sponsors defined contribution
plans for all eligible employees. The assets of the plans are
held separately from those of the Company in an employee benefit
trust. The Company is required to contribute a specified
percentage of payroll costs to the plan to fund the benefits, as
specified in the respective plan documents. The only obligation
of the Company with respect to these plans is to make the
required contributions. For the years ended January 31,
2010, 2009 and 2008, the Companys contributions to these
plans were $10,866, $9,389 and $13,897, respectively.
Defined
Benefit Plans
The Company sponsors defined benefit plans for eligible
employees in certain countries. Under these plans, employees are
entitled to retirement benefits based on years of service and
the employees final average salary on attainment of
qualifying retirement age. The Company uses a January 31
measurement date for its defined benefit plans.
The following table summarizes the changes in benefit
obligations and fair value of plan assets, funded status and
amounts recognized in the accompanying consolidated balance
sheets at January 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Change in benefit obligations:
|
|
|
|
|
|
|
|
|
Benefit obligations at beginning of year
|
|
$
|
24,060
|
|
|
$
|
33,555
|
|
Service cost
|
|
|
497
|
|
|
|
538
|
|
Interest cost
|
|
|
1,620
|
|
|
|
2,183
|
|
Plan participants contributions
|
|
|
294
|
|
|
|
191
|
|
Plan amendments
|
|
|
257
|
|
|
|
|
|
Actuarial gain
|
|
|
(236
|
)
|
|
|
(1,300
|
)
|
Benefits paid
|
|
|
(2,898
|
)
|
|
|
(3,865
|
)
|
Curtailment/termination
|
|
|
(2,252
|
)
|
|
|
(831
|
)
|
Translation adjustment
|
|
|
4,316
|
|
|
|
(6,411
|
)
|
|
|
|
|
|
|
|
|
|
Benefit obligations at end of year
|
|
$
|
25,658
|
|
|
$
|
24,060
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year
|
|
$
|
17,643
|
|
|
$
|
30,887
|
|
Actual return on plan assets
|
|
|
1,473
|
|
|
|
958
|
|
Employer contributions
|
|
|
876
|
|
|
|
1,359
|
|
Plan participants contributions
|
|
|
294
|
|
|
|
152
|
|
Benefits paid
|
|
|
(2,831
|
)
|
|
|
(3,798
|
)
|
Realized gain/(loss) on assets
|
|
|
891
|
|
|
|
(6,123
|
)
|
Administrative expenses
|
|
|
(78
|
)
|
|
|
(107
|
)
|
Curtailment/termination
|
|
|
(2,252
|
)
|
|
|
(622
|
)
|
Translation adjustment
|
|
|
3,578
|
|
|
|
(5,063
|
)
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of year
|
|
$
|
19,594
|
|
|
$
|
17,643
|
|
|
|
|
|
|
|
|
|
|
Funded status
|
|
$
|
(6,064
|
)
|
|
$
|
(6,417
|
)
|
|
|
|
|
|
|
|
|
|
F-36
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
The accumulated benefit obligation for all defined benefit plans
was $22,310 and $20,152 at January 31, 2010 and 2009,
respectively. The following table represents information for
defined benefit plans with an accumulated benefit obligation in
excess of plan assets at January 31:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
Projected benefit obligation
|
|
$
|
19,991
|
|
|
$
|
16,342
|
|
Accumulated benefit obligation
|
|
|
17,853
|
|
|
|
11,151
|
|
Fair value of plan assets
|
|
|
12,732
|
|
|
|
8,468
|
|
Weighted-average assumptions used to determine benefit
obligations at January 31, 2010 and 2009 were as follows:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
Discount rate
|
|
|
7
|
%
|
|
|
7
|
%
|
Rate of compensation increase
|
|
|
3
|
%
|
|
|
3
|
%
|
Amounts recognized in consolidated accumulated other
comprehensive loss at January 31, 2010 and 2009 consists of:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Accumulated other comprehensive loss:
|
|
|
|
|
|
|
|
|
Unrecognized net actuarial loss
|
|
$
|
4,114
|
|
|
$
|
5,402
|
|
Unrecognized net transition obligation
|
|
|
16
|
|
|
|
18
|
|
Unrecognized prior service cost/(benefit)
|
|
|
136
|
|
|
|
(39
|
)
|
|
|
|
|
|
|
|
|
|
Net amount recognized in accumulated other comprehensive loss
|
|
$
|
4,266
|
|
|
$
|
5,381
|
|
|
|
|
|
|
|
|
|
|
The changes in consolidated accumulated other comprehensive
income at the beginning and end of the year are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net of
|
|
|
|
Gross
|
|
|
Tax Effect
|
|
|
Amounts recognized at beginning of year
|
|
$
|
7,687
|
|
|
$
|
5,381
|
|
Net actuarial gain
|
|
|
(2,094
|
)
|
|
|
(1,547
|
)
|
Amortization of net transition asset
|
|
|
(2
|
)
|
|
|
(1
|
)
|
Amortization of prior service cost
|
|
|
238
|
|
|
|
176
|
|
Translation adjustment
|
|
|
(4
|
)
|
|
|
257
|
|
|
|
|
|
|
|
|
|
|
Amount recognized at end of year
|
|
$
|
5,825
|
|
|
$
|
4,266
|
|
|
|
|
|
|
|
|
|
|
The Company estimates that $1,863 will be amortized from
accumulated other comprehensive income into net periodic benefit
cost during the year ending January 31, 2011 resulting from
changes in plan experience and actuarial assumptions.
F-37
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
The components of net periodic benefit cost as of
January 31, 2010 and 2009 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Service cost
|
|
$
|
497
|
|
|
$
|
538
|
|
|
$
|
883
|
|
Interest cost
|
|
|
1,620
|
|
|
|
2,183
|
|
|
|
2,451
|
|
Expected return on assets
|
|
|
(971
|
)
|
|
|
(1,721
|
)
|
|
|
(2,216
|
)
|
Amortization of net actuarial loss
|
|
|
320
|
|
|
|
552
|
|
|
|
306
|
|
Amortization of net transition obligation
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
Amortization of prior service cost/(benefit)
|
|
|
20
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost before costs of curtailment/termination
|
|
|
1,488
|
|
|
|
1,544
|
|
|
|
1,424
|
|
Curtailment/termination costs
|
|
|
217
|
|
|
|
209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
1,705
|
|
|
$
|
1,753
|
|
|
$
|
1,424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average assumptions used to determine net periodic
benefit cost for the years ended January 31, 2010 and 2009
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
Discount rate
|
|
|
7
|
%
|
|
|
7
|
%
|
|
|
7
|
%
|
Rate of increase in future compensation levels
|
|
|
3
|
%
|
|
|
3
|
%
|
|
|
4
|
%
|
Expected long-term rate of return on assets
|
|
|
7
|
%
|
|
|
6
|
%
|
|
|
7
|
%
|
The expected long-term return on plan assets assumption is based
on an estimated weighted-average of the expected long-term
returns of major asset categories. In determining the expected
asset category returns, the Company takes into account long-term
returns of comparable assets, historical performance of plan
assets and related valued-added of active asset management, as
well as the current interest rate environment.
The Companys overall investment strategy is to ensure the
future benefit payments to participants by maximizing investment
returns while managing market risk by adhering to specific risk
management policies. Its risk management policies permit
investments in mutual funds, government securities and
guaranteed insurance contracts, while prohibiting direct
investments in debt and equity securities and derivative
financial instruments. The Company addresses diversification by
the use of mutual fund investments whose underlying investments
are in domestic and international fixed income securities and
domestic and international equity securities. The investments
overall are readily marketable and can be sold to fund benefit
payment obligations as they become payable. For participants
that are covered by guaranteed insurance contracts, future
benefit payments are guaranteed as the insurance contracts
remain in force. Target allocation percentages differ by each
individual plan, however, are relatively consistent with the
actual allocation percentages shown in the table below.
F-38
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
The following table presents information about the
Companys plan assets measured at fair value on a recurring
basis at January 31, 2010 and indicates the fair value
hierarchy of the valuation techniques utilized to determine such
fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement at Reporting Date Using
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
Significant
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
Active Markets for
|
|
|
Observable
|
|
|
Unobservable
|
|
|
Asset
|
|
|
|
|
|
|
Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
Allocation
|
|
|
|
Total
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Percentages
|
|
|
Asset categories:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
3,794
|
|
|
$
|
3,794
|
|
|
$
|
|
|
|
$
|
|
|
|
|
19
|
%
|
Equity securities(a)
|
|
|
1,795
|
|
|
|
1,795
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guaranteed insurance contracts
|
|
|
5,008
|
|
|
|
|
|
|
|
5,008
|
|
|
|
|
|
|
|
26
|
|
Corporate bonds(b)
|
|
|
526
|
|
|
|
|
|
|
|
526
|
|
|
|
|
|
|
|
3
|
|
Government securities(c)
|
|
|
566
|
|
|
|
543
|
|
|
|
23
|
|
|
|
|
|
|
|
3
|
|
Mutual Funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities(d)
|
|
|
3,714
|
|
|
|
|
|
|
|
3,714
|
|
|
|
|
|
|
|
19
|
|
Fixed-income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market fund
|
|
|
971
|
|
|
|
|
|
|
|
971
|
|
|
|
|
|
|
|
5
|
|
Corporate(e)
|
|
|
1,219
|
|
|
|
|
|
|
|
1,219
|
|
|
|
|
|
|
|
6
|
|
Government(f)
|
|
|
1,204
|
|
|
|
|
|
|
|
1,204
|
|
|
|
|
|
|
|
6
|
|
Mixed securities(g)
|
|
|
32
|
|
|
|
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
Hedge funds(h)
|
|
|
765
|
|
|
|
|
|
|
|
|
|
|
|
765
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
19,594
|
|
|
$
|
6,132
|
|
|
$
|
12,697
|
|
|
$
|
765
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
This category comprises of investments in domestic and
international equity securities. |
|
(b) |
|
This category comprises of investments in domestic and
international bond securities. |
|
(c) |
|
This category comprises of investments in
non-U.S.
government treasury securities and bonds. |
|
(d) |
|
This category comprises of investments in mutual funds whose
underlying investments are in domestic and international equity
securities. |
|
(e) |
|
This category comprises of investments in mutual funds whose
underlying investments are in domestic and international fixed
income securities, such as corporate bonds. |
|
(f) |
|
This category comprises of investments in mutual funds whose
underlying investments are in
non-U.S.
government treasury securities and bonds. |
|
(g) |
|
This category comprises of investments in mutual funds whose
underlying investments are in both domestic and international
equity and fixed income securities. |
|
(h) |
|
This category comprises of investments in mutual funds whose
underlying investments are in South African hedge funds, which
invests in a wide range of investment strategies and underlying
managers. |
For plan assets classified as Level 1 (measured using
quoted prices in active markets), the total fair value is either
the price of the most recent trade at the time of the market
close or the official close price, as defined by the exchange on
which the asset is most actively traded on the last trading day
of the period, multiplied by the number of units held without
consideration of transaction costs.
F-39
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
For plan assets classified as Level 2, the fair value is
based on the price a dealer would pay for the security or
similar securities, adjusted for any terms specific to that
asset or liability. Market inputs are obtained from well
established and recognized vendors of market data and subjected
to tolerance/quality checks. For plan assets for which
observable inputs are used, fair value is derived through the
use of fair value models, such as a discounted cash flow model
or other standard pricing models.
For plan assets classified as Level 3, the total fair value
is based on significant unobservable inputs including
assumptions where there is little, if any, market activity for
the investment. Investment managers or fund managers provide
valuations of the investment on a monthly or quarterly basis.
These valuations are reviewed for reasonableness based on
applicable sector, benchmark and company performance.
Adjustments to valuations are made where appropriate. Where
available, audited financial statements are obtained and
reviewed for the investments as support for the managers
investment valuation.
The following table presents the changes in Level 3
category assets on a recurring basis for the year ended
January 31, 2010:
|
|
|
|
|
|
|
Fair Value Measurements
|
|
|
|
Using Significant
|
|
|
|
Unobservable Inputs
|
|
|
|
(Level 3)
|
|
|
Balance at February 1, 2009
|
|
$
|
825
|
|
Actual return on plan assets
|
|
|
159
|
|
Purchases, sales and settlements
|
|
|
(457
|
)
|
Transfers in/(out) of Level 3
|
|
|
|
|
Translation adjustment
|
|
|
238
|
|
|
|
|
|
|
Balance at January 31, 2010
|
|
$
|
765
|
|
|
|
|
|
|
For the year ended January 31, 2010, the Company
contributed $1,293 to its defined benefit plans. The Company
currently anticipates contributing $966 to fund its defined
benefit plans during the year ending January 31, 2011.
The following table shows the estimated future benefit payments
for each of the next five fiscal years ending January 31 and
thereafter:
|
|
|
|
|
2011
|
|
$
|
1,181
|
|
2012
|
|
|
639
|
|
2013
|
|
|
1,763
|
|
2014
|
|
|
481
|
|
2015
|
|
|
1,604
|
|
2016-2020
|
|
|
6,060
|
|
During each of the years ended January 31, 2010, 2009 and
2008, the Companys Board of Directors (the Board) declared
a dividend on the Companys outstanding ordinary shares of
$0.06 per share, totaling $6,027, $6,139 and $6,082,
respectively.
F-40
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
|
|
14.
|
Share-Based
Compensation
|
Share-Based
Compensation Plans
On June 8, 2009, the Companys shareholders approved
the 2009 Long Term Incentive Plan (2009 LTIP). The plan provides
for the issuance of a variety awards, including stock options,
share appreciation rights (sometimes referred to as SARs),
restricted shares, restricted share units (RSUs), deferred share
units and performance awards. A total of 6,250,000 shares
were originally reserved for issuance under the 2009 LTIP,
subject to adjustments as provided for in the plan.
In addition to the 2009 LTIP, at January 31, 2010, the
Company had stock based compensation awards outstanding under
the following plans: the 2004 Long Term Incentive Plan (2004
LTIP), the 2000 Stock Option Plan, the 2000 Employee Share
Purchase Plan, the 2004 Non-Employee Directors Share Incentive
Plan (2004 Directors Incentive Plan) and the Non-Employee
Directors Share Option Plan (Directors Option Plan).
2000
Employee Share Purchase Plan
The 2000 Employee Share Purchase Plan provides the
Companys employees (including employees of selected
subsidiaries where permitted under local law) the opportunity to
purchase ordinary shares through accumulated payroll deductions.
A total of 1,200,000 ordinary shares were originally reserved
for issuance under this plan, subject to adjustments as provided
for in the plan. During the year ended January 31, 2010,
the Company issued 99,169 ordinary shares under the plan.
Employees in selected subsidiaries who have worked for the
Company for one year or more are eligible to participate in the
plan. Eligible employees become plan participants by completing
subscription agreements authorizing payroll deductions which are
used to purchase the ordinary shares. The plan is administered
in quarterly offering periods and the first offering period
commenced May 1, 2001. The purchase price under the plan is
set at 85% of the fair market value of the Companys
ordinary shares on the first day of each offering period.
Employee payroll deductions cannot exceed 10% of a
participants current compensation and are subject to an
annual maximum of $25.
2009
Long-Term Incentive Plan
The Companys 2009 LTIP provides for the issuance of a
variety awards, including incentive and non-qualified stock
options, share appreciation rights (sometimes referred to as
SARs), restricted shares, restricted share units (RSUs),
deferred share units and performance awards. A total of
6,250,000 shares were originally reserved for issuance
under the 2009 LTIP, subject to adjustments as provided for in
the plan.
Options granted under the 2009 LTIP would generally vest over a
period of three to five year years beginning on the first
anniversary of the grant date. Incentive options vest only as
long as participants remain employees of the Company. Deferred
share units are 100% vested at all times. The maximum
contractual term of options granted in this plan is
10 years. RSUs vest and convert into ordinary shares of the
Company generally over a period between three and five years,
however the term of vesting may differ when it is established at
the time of grant. Granted but unvested RSUs are generally
forfeited upon termination of employment. Performance based
awards generally vest and convert into ordinary shares of the
Company at the end of the performance period should the
performance criteria be met. At January 31, 2010, there
were 6,203,768 shares, respectively, available for grant
under the plan.
2004
Long-Term Incentive Plan
The Companys 2004 LTIP provided for the issuance of a
variety of awards, including incentive and non-qualified stock
options, SARs, restricted shares, RSUs, deferred share units,
and performance based awards. With the adoption of the 2009 LTIP
in June 2009, the Company no longer issues awards pursuant to
the 2004 LTIP.
F-41
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
Options granted under the 2004 LTIP generally vest over a period
of three to five years beginning on the first anniversary of the
grant date. Incentive options vest only as long as participants
remain employees of the Company. Deferred share units are 100%
vested at all times. The maximum contractual term of options
granted in this plan is 10 years. RSUs vest and convert
into ordinary shares of the Company generally over a period
between three and five years, however the term of vesting may
differ when it is established at the time of grant. Granted but
unvested RSUs are generally forfeited upon termination of
employment. Performance based awards vest and convert into
ordinary shares of the Company at the end of the performance
period should the performance criteria be met. At
January 31, 2010, 2009 and 2008 there were 1,174,277,
1,094,502 and 675,643 options, respectively, which were
exercisable.
2000
Stock Option Plan
The 2000 Stock Option Plan provided for the issuance of
incentive and non-qualified stock options to the Companys
directors, executives, employees and consultants. With the
adoption of the 2004 LTIP in February 2004, the Company no
longer issues options pursuant to the 2000 Stock Option Plan. In
addition, any options outstanding under the 2000 Stock Option
Plan which are forfeited or otherwise cancelled will not be made
available for reissuance under the plan.
Options granted under the 2000 Stock Option Plan generally vest
in four annual increments of 25% beginning on the first
anniversary of the grant date. Incentive options vest only as
long as participants remain employees of the Company. The
maximum contractual term of options granted under the plan is
10 years. At January 31, 2010, 2009, and 2008, there
were 1,113,564, 1,731,043 and 1,993,914 options, respectively,
which were exercisable.
2004
Non-Employee Directors Share Incentive Plan
The 2004 Directors Incentive Plan was approved by the
shareholders on June 25, 2004, and provides for the
issuance of restricted shares, RSUs, elective grants and
deferred share units to the Companys non-employee
directors. A total of 600,000 shares were originally
reserved for issuance under this plan, subject to adjustments as
provided for in the plan. The 2004 Directors Incentive Plan
terminates on June 25, 2014.
RSUs vest and convert into the right to receive ordinary shares
of the Company on the date immediately preceding the annual
meeting which follows the award. Granted but unvested units are
forfeited upon termination of office, subject to the
directors rights to defer receipt of any restricted shares.
Non-Employee
Directors Share Option Plan
The Directors Option Plan provided for the issuance of options
to purchase ordinary shares to each of the Companys
non-employee directors. With the adoption of the
2004 Directors Incentive Plan in June 2004, the Company no
longer issues options pursuant to the Directors Option Plan.
Under the Directors Option Plan, non-executive directors
received an initial grant to purchase 45,000 ordinary shares on
the day they joined our Board. The plan also provided that each
non-employee director receive options to purchase 9,000 ordinary
shares on the date of each of the Companys annual
meetings, excluding the annual meeting in the year the director
joined the Board. The option exercise price was equal to the
fair market value of the underlying ordinary shares as of the
grant date. As of January 31, 2010, options to acquire an
aggregate of 279,000 ordinary shares had been granted, with
exercise prices ranging from $5.31 to $11.93 per share.
Options granted under Directors Option Plan vest in three annual
increments, beginning one year from the grant date. As of
January 31, 2010 and 2009 there were 81,000 options which
were exercisable under this plan. As of January 31, 2008
there were 108,000 options which were exercisable under this
plan. Options granted under this plan expire ten years from the
grant date unless terminated earlier as provided for in this
plan.
F-42
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
The Company recognizes compensation expense for all share-based
payments in accordance with ASC 718, Compensation
Stock Compensation. Under the fair value recognition
provisions of ASC 718, the Company recognizes share-based
compensation expense, net of an estimated forfeiture rate, over
the requisite service period of the award.
For equity classified awards, the Company recognizes
compensation expense using the straight-line attribution method,
net of estimated forfeiture rates, over the requisite service
periods of the awards. The requisite service period is typically
consistent with the vesting period. The Company recognizes
compensation expense for liability-based awards using an
accelerated attribution method. Under this method, the
awards fair value is re-measured at each reporting date
until the date of settlement.
Fair value associated with stock options is determined using the
Black-Scholes Model (BSM). The fair value of restricted stock
awards equals the market price of the Companys common
stock on the grant date of the awards. As ASC 718 requires that
share-based compensation expense be based on awards that are
ultimately expected to vest, share-based compensation expense
has been reduced for estimated forfeitures. The Company is
required to estimate forfeitures at the time of grant and revise
those estimates in subsequent periods if actual forfeitures
differ from those estimates. When estimating forfeitures, the
Company considers voluntary termination behaviors as well as
historical trends of options forfeitures.
The determination of the fair value of option awards is
determined on the date of grant and is affected by our stock
price as well as assumptions regarding a number of subjective
variables. These variables include our expected stock price
volatility over the term of the awards, actual and projected
employee stock option exercise behaviors, risk-free rate of
return and expected dividends.
Share-Based
Compensation Expense
Valuation
Assumptions
The foregoing impact of stock option compensation costs was
determined under the BSM, using the following weighted average
assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Risk free rate of return, annual
|
|
|
3
|
%
|
|
|
4
|
%
|
|
|
5
|
%
|
Expected term
|
|
|
7.0 years
|
|
|
|
7.0 years
|
|
|
|
7.5 years
|
|
Expected volatility
|
|
|
44
|
%
|
|
|
40
|
%
|
|
|
38
|
%
|
Dividend yield
|
|
|
0.4
|
%
|
|
|
0.4
|
%
|
|
|
0.2
|
%
|
The Companys computation of expected volatility is partly
based on the historical volatility of our stock. The
Companys computation of expected term is determined based
on historical experience of similar awards, giving consideration
to the contractual terms of the share-based awards, vesting
schedules and expectations of future employee behavior. The risk
free rate of return for the expected term of the award is based
on the U.S. Treasury yield curve in effect at the time of
grant.
F-43
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
Share-Based
Compensation Activity
The following table summarizes activity under the 2009 LTIP for
nonvested RSUs for the year ended January 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 LTIP (RSUs)
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
Restricted
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Share
|
|
|
Grant Fair
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Units
|
|
|
Value
|
|
|
Term (Years)
|
|
|
Value
|
|
|
Outstanding balance at January 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units granted
|
|
|
46,232
|
|
|
$
|
13.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding balance at January 31, 2010
|
|
|
46,232
|
|
|
$
|
13.05
|
|
|
|
3.1 years
|
|
|
$
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At January 31, 2010 there were 46,232 RSUs which were
granted to employees and officers of the Company as retention
based awards with a weighted average grant-date fair value of
approximately $13.05 per unit. The RSUs vest and convert into
ordinary shares of the Company over a period of five years.
Granted but unvested RSUs are forfeited upon termination of
employment. No RSUs vested under the 2009 LTIP during the year
ended January 31, 2010.
A summary of 2004 LTIP option activity is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 LTIP (Options)
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Shares
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
Subject to
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Stock
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Options
|
|
|
Price
|
|
|
Term (Years)
|
|
|
Value
|
|
|
Outstanding balance at January 31, 2007
|
|
|
2,010,731
|
|
|
$
|
20.86
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
11,295
|
|
|
|
25.23
|
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
(80,525
|
)
|
|
|
16.47
|
|
|
|
|
|
|
|
|
|
Options cancelled/forfeited
|
|
|
(24,712
|
)
|
|
|
21.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding balance at January 31, 2008
|
|
|
1,916,789
|
|
|
|
21.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
79,390
|
|
|
|
19.70
|
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
(107,198
|
)
|
|
|
16.44
|
|
|
|
|
|
|
|
|
|
Options cancelled/forfeited
|
|
|
(113,461
|
)
|
|
|
23.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding balance at January 31, 2009
|
|
|
1,775,520
|
|
|
|
21.11
|
|
|
|
6.2 years
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
166,836
|
|
|
|
13.51
|
|
|
|
|
|
|
|
|
|
Options cancelled/forfeited
|
|
|
(114,693
|
)
|
|
|
22.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding balance at January 31, 2010
|
|
|
1,827,663
|
|
|
$
|
20.32
|
|
|
|
5.5 years
|
|
|
$
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable balance at January 31, 2010
|
|
|
1,174,277
|
|
|
$
|
19.28
|
|
|
|
5.0 years
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value in the table above represents the
total pretax intrinsic value (the difference between the
exercise price and the Companys closing stock price on the
last trading day of fiscal 2010, multiplied by the number of
in-the-money
options) that would have been received by the option holders if
the options had been exercised on January 31, 2010. At
January 31, 2010, there were 166,836
in-the-money
options under the 2004 LTIP. The weighted average grant-date
fair value of options granted during the fiscal years ended
January 31, 2010, 2009, and 2008 was $10.31, $8.99 and
$17.58, respectively. The total intrinsic value of options
exercised during the fiscal
F-44
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
years ended January 31, 2010, 2009, and 2008 was $518, $467
and $761, respectively, with intrinsic value being the
difference between the grant date price and the market price on
the date of exercise. At January 31, 2010, the Company
expects approximately 1,609,223 options under the 2004 LTIP to
vest. At January 31, 2010, these options have no aggregate
intrinsic value, a weighted average remaining contractual term
of 5.5 years and a weighted average exercise price of
$20.32.
A summary of stock options outstanding and exercisable pursuant
to the 2004 LTIP as of January 31, 2010 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
Number of
|
|
|
Average
|
|
|
Average
|
|
|
Number
|
|
|
Average
|
|
|
|
Shares
|
|
|
Remaining
|
|
|
Exercise
|
|
|
of Shares
|
|
|
Exercise
|
|
Range of Exercise Prices
|
|
Outstanding
|
|
|
Life (Years)
|
|
|
Price
|
|
|
Exercisable
|
|
|
Price
|
|
|
$13.51 - $16.64
|
|
|
747,449
|
|
|
|
5.1
|
|
|
$
|
15.28
|
|
|
|
550,613
|
|
|
$
|
15.74
|
|
$18.13 - $22.88
|
|
|
768,100
|
|
|
|
5.2
|
|
|
|
21.55
|
|
|
|
536,472
|
|
|
|
21.28
|
|
$23.58 - $25.95
|
|
|
69,736
|
|
|
|
6.2
|
|
|
|
25.47
|
|
|
|
36,000
|
|
|
|
25.53
|
|
$28.03 - $36.08
|
|
|
242,378
|
|
|
|
6.0
|
|
|
|
30.51
|
|
|
|
51,192
|
|
|
|
31.42
|
|
The following table summarizes activity under the 2004 LTIP for
nonvested RSUs for the year ended January 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 LTIP (RSUs)
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
Restricted
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Share
|
|
|
Grant Date
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Units
|
|
|
Fair Value
|
|
|
Term (Years)
|
|
|
Value
|
|
|
Outstanding balance at January 31, 2007
|
|
|
700,795
|
|
|
$
|
21.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units granted
|
|
|
562,410
|
|
|
|
24.89
|
|
|
|
|
|
|
|
|
|
Units vested
|
|
|
(251,270
|
)
|
|
|
18.29
|
|
|
|
|
|
|
|
|
|
Units cancelled/forfeited
|
|
|
(258,364
|
)
|
|
|
25.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding balance at January 31, 2008
|
|
|
753,571
|
|
|
|
23.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units granted
|
|
|
717,368
|
|
|
|
19.69
|
|
|
|
|
|
|
|
|
|
Units vested
|
|
|
(25,781
|
)
|
|
|
19.91
|
|
|
|
|
|
|
|
|
|
Units cancelled/forfeited
|
|
|
(144,874
|
)
|
|
|
20.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding balance at January 31, 2009
|
|
|
1,300,284
|
|
|
|
21.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units granted
|
|
|
994,275
|
|
|
|
13.51
|
|
|
|
|
|
|
|
|
|
Units vested
|
|
|
(327,687
|
)
|
|
|
18.71
|
|
|
|
|
|
|
|
|
|
Units cancelled/forfeited
|
|
|
(171,977
|
)
|
|
|
18.49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding balance at January 31, 2010
|
|
|
1,794,895
|
|
|
$
|
18.00
|
|
|
|
2.7 years
|
|
|
$
|
206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At January 31, 2010 and 2009, there were 1,794,895 and
1,300,284 RSUs, respectively, which were granted to employees
and officers of the Company as retention based awards with a
weighted average grant-date fair value of approximately $18.00
and $21.69 per unit, respectively. During the year ended
January 31, 2010 the Company granted 994,275
retention-based RSUs, which have a weighted average grant-date
fair value of approximately $13.51. The RSUs vest and convert
into ordinary shares of the Company over a period between four
and five years. Granted but unvested RSUs are forfeited upon
termination of employment. During the year ended
January 31, 2010,
F-45
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
327,687 RSUs vested. There were no performance based RSUs
granted to employees or officers of the Company during the year
ended January 31, 2010.
The total fair value of shares vested during the years ended
January 31, 2010, 2009, and 2008 was $6,131, $513 and
$4,596, respectively.
A summary of the 2000 Stock Option Plan option activity is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2000 Stock Option Plan
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Shares
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
Subject to
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Stock
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Options
|
|
|
Price
|
|
|
Term (Years)
|
|
|
Value
|
|
|
Outstanding balance at January 31, 2007
|
|
|
2,358,245
|
|
|
$
|
6.85
|
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
(364,331
|
)
|
|
|
7.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding balance at January 31, 2008
|
|
|
1,993,914
|
|
|
|
6.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
(252,071
|
)
|
|
|
6.93
|
|
|
|
|
|
|
|
|
|
Options cancelled/forfeited
|
|
|
(10,800
|
)
|
|
|
8.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding balance at January 31, 2009
|
|
|
1,731,043
|
|
|
|
6.72
|
|
|
|
2.8 years
|
|
|
$
|
7,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
(604,354
|
)
|
|
|
5.29
|
|
|
|
|
|
|
|
|
|
Options cancelled/forfeited
|
|
|
(13,125
|
)
|
|
|
11.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding balance at January 31, 2010
|
|
|
1,113,564
|
|
|
$
|
7.44
|
|
|
|
2.4 years
|
|
|
$
|
7,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable balance at January 31, 2010
|
|
|
1,113,564
|
|
|
$
|
7.44
|
|
|
|
2.4 years
|
|
|
$
|
7,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value in the table above represents the
total pretax intrinsic value that would have been received by
the option holders if the options had been exercised on
January 31, 2010. At January 31, 2010, there were
1,113,564
in-the-money
options under the 2000 Stock Option Plan. The total intrinsic
value of options exercised during the fiscal years ended
January 31, 2010, 2009, and 2008 was $5,068, $3,112 and
$6,286, respectively, determined as of the date of exercise.
A summary of stock options outstanding and exercisable pursuant
to the 2000 Stock Option Plan as of January 31, 2010 is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
Number of
|
|
|
Average
|
|
|
Average
|
|
|
Number of
|
|
|
Average
|
|
|
|
Shares
|
|
|
Remaining
|
|
|
Exercise
|
|
|
Shares
|
|
|
Exercise
|
|
Range of Exercise Prices
|
|
Outstanding
|
|
|
Life (Years)
|
|
|
Price
|
|
|
Exercisable
|
|
|
Price
|
|
|
$4.16 - $5.00
|
|
|
154,443
|
|
|
|
0.2
|
|
|
$
|
4.36
|
|
|
|
154,443
|
|
|
$
|
4.36
|
|
$5.33 - $6.18
|
|
|
46,046
|
|
|
|
1.4
|
|
|
|
5.53
|
|
|
|
46,046
|
|
|
|
5.53
|
|
$6.33 - $8.26
|
|
|
642,325
|
|
|
|
2.5
|
|
|
|
6.77
|
|
|
|
642,325
|
|
|
|
6.77
|
|
$10.18 - $11.24
|
|
|
270,750
|
|
|
|
3.5
|
|
|
|
11.12
|
|
|
|
270,750
|
|
|
|
11.12
|
|
F-46
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
The following table summarizes the activity under the
2004 Directors Incentive Plan for the nonvested restricted
share units or restricted shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 Directors Incentive Plan (RSUs)
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
Restricted
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Share
|
|
|
Grant Date
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Units
|
|
|
Fair Value
|
|
|
Term (Years)
|
|
|
Value
|
|
|
Outstanding balance at January 31, 2007
|
|
|
12,800
|
|
|
$
|
26.33
|
|
|
|
|
|
|
|
|
|
Restricted shares/units granted
|
|
|
13,968
|
|
|
|
27.71
|
|
|
|
|
|
|
|
|
|
Units vested
|
|
|
(12,800
|
)
|
|
|
26.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding balance at January 31, 2008
|
|
|
13,968
|
|
|
|
27.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted shares/units granted
|
|
|
13,180
|
|
|
|
22.76
|
|
|
|
|
|
|
|
|
|
Units vested
|
|
|
(13,968
|
)
|
|
|
27.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding balance at January 31, 2009
|
|
|
13,180
|
|
|
|
22.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted shares/units granted
|
|
|
30,457
|
|
|
|
12.36
|
|
|
|
|
|
|
|
|
|
Units vested
|
|
|
(13,180
|
)
|
|
|
22.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding balance at January 31, 2010
|
|
|
30,457
|
|
|
$
|
12.36
|
|
|
|
0.4 years
|
|
|
$
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the years ended January 31, 2010, 2009 and 2008 the
aggregate intrinsic value of RSUs under the 2004 Directors
Incentive Plan was $46, $0 and $355, respectively. At
January 31, 2010, the Company expects 30,457 RSUs to vest
under the plan. The total fair value of shares vested during the
years ended January 31, 2010, 2009, and 2008 was $297, $387
and $337, respectively.
A summary of Directors Option Plan activity is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors Option Plan
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Shares
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
Subject to
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Stock
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Options
|
|
|
Price
|
|
|
Term (Years)
|
|
|
Value
|
|
|
Outstanding balance at January 31, 2007
|
|
|
117,000
|
|
|
$
|
9.27
|
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
(9,000
|
)
|
|
|
5.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding balance at January 31, 2008
|
|
|
108,000
|
|
|
|
9.59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
(27,000
|
)
|
|
|
7.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding balance at January 31, 2009
|
|
|
81,000
|
|
|
|
10.33
|
|
|
|
4.4 years
|
|
|
$
|
95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding balance at January 31, 2010
|
|
|
81,000
|
|
|
|
10.33
|
|
|
|
3.4 years
|
|
|
$
|
276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable balance at January 31, 2010
|
|
|
81,000
|
|
|
$
|
10.33
|
|
|
|
3.4 years
|
|
|
$
|
276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value in the table above represents the
total pretax intrinsic value that would have been received by
the option holders if the options had been exercised on
January 31, 2010. At January 31, 2010, there were
81,000
in-the-money
options under the Directors Option Plan. The total intrinsic
value of options exercised during the fiscal years ended
January 31, 2010, 2009, and 2008 was $0, $161 and $157,
respectively, determined as of the date of exercise. There were
no options granted under this plan during the years ended
January 31, 2010, 2009 and 2008.
F-47
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
A summary of stock options outstanding and exercisable pursuant
to the Directors Option Plan as of January 31, 2010 is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
Number of
|
|
|
Average
|
|
|
Average
|
|
|
Number of
|
|
|
Average
|
|
|
|
Shares
|
|
|
Remaining
|
|
|
Exercise
|
|
|
Shares
|
|
|
Exercise
|
|
Range of Exercise Prices
|
|
Outstanding
|
|
|
Life (Years)
|
|
|
Price
|
|
|
Exercisable
|
|
|
Price
|
|
|
$5.31 - $6.57
|
|
|
18,000
|
|
|
|
2.3
|
|
|
$
|
6.36
|
|
|
|
18,000
|
|
|
$
|
6.36
|
|
$10.28 - $11.93
|
|
|
63,000
|
|
|
|
3.7
|
|
|
|
11.46
|
|
|
|
63,000
|
|
|
|
11.46
|
|
As of January 31, 2010, there was approximately $19,647 of
total unrecognized compensation cost related to all the unvested
share-based compensation arrangements granted under all the
Companys share-based compensation plans. That cost is
expected to be recognized over a weighted-average period of
3.8 years.
|
|
15.
|
Derivative
Financial Instruments
|
The Company generally utilizes forward exchange contracts to
reduce its exposure to foreign currency denominated liabilities.
Foreign exchange contracts purchased are primarily denominated
in the currencies of the Companys principal markets. The
Company does not enter into derivative contracts for speculative
purposes.
As of January 31, 2010, the Company had contracted to sell
the following amounts under forward exchange contracts which all
mature within 60 days of January 31, 2010: $5,021 in
Euros; $20,229 in U.S. dollars; $1,001 in British pounds
sterling; and, $1,766 in other currencies.
The Company does not designate foreign currency derivatives as
hedges. Foreign currency derivative assets included in trade
receivables were $273 and $257 at January 31, 2010 and
January 31, 2009, respectively. Foreign currency liability
derivatives included in trade payables and other accrued
liabilities were $294 and $82 at January 31, 2010 and
January 31, 2009, respectively. Changes in the fair value
of forward exchange contracts are recorded in the consolidated
statements of operations, which was a loss of $21 and gains of
$154 and $134 for the years ended January 31, 2010, 2009
and 2008, respectively.
Future minimum lease payments under capital leases and under
non-cancelable operating leases (with initial or remaining lease
terms in excess of one year) as of January 31, 2010, are:
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
Operating
|
|
|
|
Leases
|
|
|
Leases
|
|
|
2011
|
|
$
|
18,278
|
|
|
$
|
114,680
|
|
2012
|
|
|
13,228
|
|
|
|
80,081
|
|
2013
|
|
|
7,797
|
|
|
|
56,713
|
|
2014
|
|
|
3,747
|
|
|
|
38,938
|
|
2015
|
|
|
1,159
|
|
|
|
31,521
|
|
2016 and thereafter
|
|
|
35
|
|
|
|
62,040
|
|
|
|
|
|
|
|
|
|
|
Total lease payments
|
|
|
44,244
|
|
|
$
|
383,973
|
|
|
|
|
|
|
|
|
|
|
Less amount representing interest
|
|
|
(3,520
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present value of minimum capital lease payments
|
|
|
40,724
|
|
|
|
|
|
Less current portion of capital lease obligations
|
|
|
(16,832
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital lease obligations, excluding current portion
|
|
$
|
23,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-48
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
The Company has obligations under various operating lease
agreements ranging from one to ten years. The leases are for
property, plant and equipment, and motor vehicles. These leases
require minimum annual payments, which are expensed as incurred.
Total rent expense for the years ended January 31, 2010,
2009 and 2008 was $138,792, $140,509 and $123,441, respectively.
It is the Companys policy to lease certain of its
property, plant and equipment under capital leases. The normal
lease term for furniture, fixtures and equipment is two to five
years and the normal lease term for buildings varies between
three and ten years. For the year ended January 31, 2010,
the weighted average effective borrowing rate for property,
plant and equipment under capital leases was 6.4%. Interest
rates usually vary during the contract period.
The Company enters into short-term agreements with carriers to
reserve space on a guaranteed basis. The pricing of these
obligations is dependent upon current market conditions. The
Company typically does not pay for space which remains unused.
The total committed obligation for these contracts as of
January 31, 2010 was $1,670.
Capital commitments contracted for, but not provided in the
accompanying consolidated balance sheets as of January 31,
2010 totaled $1,832.
From time to time, claims are made against us or we may make
claims against others, including in the ordinary course of our
business, which could result in litigation. Claims and
associated litigation are subject to inherent uncertainties and
unfavorable outcomes could occur, such as monetary damages,
fines, penalties or injunctions prohibiting us from engaging in
certain activities. The occurrence of an unfavorable outcome in
any specific period could have a material adverse affect on our
consolidated results of operations for that period or future
periods. As of the date of these consolidated financial
statements, we are not a party to any material litigation except
as described below.
The company and one of its subsidiaries (along with sixteen
other global corporations) were named as defendants by a patent
holding company, in a patent infringement lawsuit filed on
May 7, 2009, in the United States District Court for the
Central District of California (Big Baboon, Inc. v. Dell
Inc., et. al.). The lawsuit alleges that the companys
eMpower software tools are infringing U.S. Patent Nos.
6,115,690 (the 690 patent) and 6,343,275 (the
275 patent). On July 20, 2009, the
company filed and served an amended answer and counterclaims, in
which the company answered the allegations in the complaint,
asserted various affirmative defenses thereto, and asserted
counterclaims against the plaintiff for a declaratory judgment
of non-infringement and invalidity of the 690 and
275 patents. The case is currently in its preliminary
stages and no amount of damages has been claimed by the
plaintiff. It is not currently believed that the infringement
claims asserted will be material to the company as a whole.
In June 2007, we responded to a grand jury subpoena requesting
documents in connection with the U.S. DOJs
investigation into the pricing practices in the international
freight forwarding and cargo transportation industry which had
been served on us in June 2006. On October 10, 2007, the
U.S. DOJ executed a search warrant on us at our offices in
Long Beach, California, and served one of our subsidiaries with
a subpoena requesting numerous documents and other materials in
connection with its investigation of the international freight
forwarding and cargo transportation industry. In addition to its
previous request for documents regarding air freight forwarding,
the U.S. DOJ recently requested that we produce various
documents regarding ocean freight forwarding. We believe we are
a subject of the U.S. DOJ investigation.
On October 10, 2007, we also received a notice from the
Canadian Competition Bureau that the Bureau commenced an
investigation with respect to alleged anti-competitive
activities of persons involved in the provision of international
freight forwarding services to and from Canada and requesting
that we preserve records relevant to such investigation. On
October 30, 2009, we received notice from the Canadian
Competition Bureau that it had closed its investigation and has
withdrawn its record preservation request.
F-49
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
On October 25, 2007, one of our subsidiaries received a
notice from the New Zealand Commerce Commission that it was
conducting an investigation in relation to international freight
forwarding services in New Zealand and requesting that we
provide documents and information as it relates to New Zealand.
Our subsidiary responded to the request from the New Zealand
Commerce Commission on December 21, 2007.
In June 2008 and February 2009, we received a request for
information issued by the EC requesting information and records
relating to the ECs ongoing investigation of alleged
anti-competitive behavior relating to freight forwarding
services in the European Union/European Economic Area. In July
2008 and March 2009, we submitted responses to these requests.
In May 2009, we learned that the Brazilian Ministry of Justice
is investigating possible alleged cartel activity in the
international air and ocean freight forwarding market and as of
the date of the filing of this report, we have not been
contacted by Brazilian authorities regarding this matter.
In November 2009, one of our subsidiaries received a summons
from the South African Competition Commission requesting certain
information and records in connection with its ongoing
investigation of alleged anti-competitive behavior relating to
the market for air freight forwarding services in South Africa.
In January 2010, we responded to this request.
In February 2010, in connection with the ECs investigation
discussed above, the EC sent a Statement of Objections to us and
a number of other freight forwarding and logistics providers.
The Statement of Objections alleges infringements of European
Union competition law with respect to various surcharges. We
intend to present our response to the ECs Statement of
Objections in April 2010.
We continue to receive additional requests for information,
documents and interviews from various governmental agencies with
respect to these investigations, and we have provided, and
expect to continue to provide in the future, further responses
as a result of such requests.
We (along with several other global logistics providers) have
been named as a defendant in a federal antitrust class action
lawsuit filed on January 3, 2008 in the United States
District Court of the Eastern District of New York (Precision
Associates, Inc., et. al. v. Panalpina World Transport (Holding)
Ltd., et. al.). This lawsuit alleges that the defendants engaged
in various forms of anti-competitive practices and seeks an
unspecified amount of treble monetary damages and injunctive
relief under U.S. antitrust laws.
We have incurred, and we expect to continue to incur,
significant legal fees and other costs in connection with these
governmental investigations and lawsuits. If the U.S. DOJ,
the EC, or any other regulatory body concludes that we have
engaged in anti-competitive behavior, we could incur significant
additional legal fees and other costs, which could include fines
and/or
penalties, which may be material to our consolidated financial
statements.
The company is involved in a dispute with the South African
Revenue Service where the company makes use of owner
drivers for the collection and delivery of cargo. The
South African Revenue Service is claiming that the company is
liable for employee taxes in respect of these owner drivers. The
company has strongly objected to this and together with its
expert legal and tax advisors, believes that the company is in
full compliance with the relevant sections of the income tax act
governing this situation and has no tax liability in respect of
these owner drivers. The amount claimed by the South African
Revenue Service is approximately $11,113 based on exchange rates
as of January 31, 2010.
The company is involved in litigation in Italy (in various cases
filed in 2000 in the Court of Milan) and England (in a case
filed on April 13, 2000 in the High Court of Justice,
London) with the former ultimate owner of Per Transport SpA and
related entities, in connection with its April 1998 acquisition
of Per Transport SpA and its subsequent termination of the
employment services of the former ultimate owner as a
consultant. The suits seek monetary damages, including
compensation for termination of the former ultimate owners
consulting agreement. The company has brought counter-claims for
monetary damages in relation to warranty claims under the
purchase
F-50
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
agreement. The total of all such actual and potential claims,
albeit duplicated in several proceedings, is approximately
$13,150 based on exchange rates as of January 31, 2010. In
connection with the Italian litigation, legal proceedings have
also been brought against a former director and officer of the
Company and a current employee of the company. The Company has
agreed to indemnify these individuals in connection with these
proceedings.
The company was previously engaged through various indirect
subsidiaries in the business of transportation and storage of
fine works of art. The company sold this business and the
related indirect subsidiaries during fiscal 2009. A client of
one of these subsidiaries has alleged that during several weeks
of June 2007 a malfunctioning climate-control unit at such
subsidiaries warehouses may have caused numerous works of
art to be exposed to humidity levels beyond what are considered
normal storage conditions. The company has received
communication from the client that several works of art may have
been affected by the humidity; however it is not known whether
the works have suffered any depreciation beyond normal
restoration costs. Although the company has sold this business,
the company has retained any liabilities associated with this
matter. The company believes that any ultimate liability it may
have as a result of a claim may be mitigated based on a number
of factors, including insurance policies in place; limitations
of liability imposed by the companys standard trading
conditions; as well as limitations of liability afforded by the
subsidiary relationship. If a claim does arise and the company
is unable to successfully mitigate its liability, the claim and
its related impact could be material to the companys
consolidated financial statements.
In connection with ASC 450, Contingencies, the Company
has not accrued for a loss contingency relating to any of the
disclosed investigations and legal proceedings because we
believe that, although unfavorable outcomes in the
investigations or proceedings may be reasonably possible, they
are not considered by our management to be probable or
reasonably estimable.
|
|
18.
|
Related
Party Transactions
|
UTi Logistics Israel Ltd. has a service agreement with a
shipping services company which owns 25% of this subsidiary. In
addition, UTi Logistics Israel Ltd. has arms length
commercial transactions with the shipping services company, as
well as a loan of approximately $4,025, $3,688 and $4,152,
January 31, 2010, 2009 and 2008, respectively.
One of the Companys subsidiaries in Hong Kong is party to
a service agreement pursuant to which a company owned by the
Co-President Greater China and members of his family
provides management consultant services and commercial advisory
services. During the years ended January 31, 2010, 2009 and
2008, the Companys Hong Kong subsidiary paid the related
party company approximately $412, $431 and $615, respectively,
under this service agreement.
One of the Companys Polish operating subsidiaries is party
to a service agreement pursuant to which the subsidiary provides
freight services at arms-length, to a client which is
owned wholly by one of the subsidiaries directors. During
the years ended January 31, 2010, 2009 and 2008, this
client paid the Companys Polish subsidiary approximately
$1,449, $2,118, and $1,784, respectively, for these services.
|
|
19.
|
Fair
Value Disclosures
|
The Company measures the fair value of certain assets and
liabilities on a recurring basis based upon a fair value
hierarchy in accordance with ASC 820, Fair Value Measurements
and Disclosures, as follows:
|
|
|
|
|
Level 1 Quoted prices in active markets for
identical assets or liabilities;
|
|
|
|
Level 2 Observable market data, including
quoted prices for similar assets and liabilities, and inputs
other than quoted prices that are observable, such as interest
rates and yield curves; and
|
F-51
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
|
|
|
|
|
Level 3 Unobservable data reflecting the
Companys own assumptions, where there is little or no
market activity for the asset or liability.
|
The following table presents information about the
Companys financial assets and liabilities measured at fair
value on a recurring basis as of January 31, 2010, and
indicates the fair value hierarchy of the valuation techniques
utilized to determine such fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement at Reporting Date Using:
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
Significant Other
|
|
|
Significant
|
|
|
|
Balance at
|
|
|
Active Markets for
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
January 31,
|
|
|
Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
2010
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
350,784
|
|
|
$
|
350,784
|
|
|
$
|
|
|
|
$
|
|
|
Forward exchange contracts
|
|
|
273
|
|
|
|
|
|
|
|
273
|
|
|
|
|
|
Other
|
|
|
476
|
|
|
|
|
|
|
|
|
|
|
|
476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
351,533
|
|
|
$
|
350,784
|
|
|
$
|
273
|
|
|
$
|
476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward exchange contracts
|
|
$
|
294
|
|
|
$
|
|
|
|
$
|
294
|
|
|
$
|
|
|
Other
|
|
|
811
|
|
|
|
|
|
|
|
|
|
|
|
811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,105
|
|
|
$
|
|
|
|
$
|
294
|
|
|
$
|
811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following methods were used to measure the fair value of
assets and liabilities:
Forward Exchange Contracts The Companys
forward exchange contracts are
over-the-counter
derivatives, which are valued using pricing models that rely on
currency exchange rates, and therefore are classified as
Level 2.
Other Other financial assets and liabilities
utilizing Level 3 inputs include minority call and put
options granted to the Company and certain of the Companys
minority partners. These call and put options do not have any
quoted prices, nor can they be valued using inputs based on
observable market data. These investments are valued internally,
based on the difference between the estimated strike price, and
the estimated fair value of the minority partner equity, when
the call and put options become exercisable.
The following table presents the changes in Level 3
instruments measured on a recurring basis for the twelve months
ended January 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Beginning balance at February 1, 2009
|
|
$
|
756
|
|
|
$
|
2,114
|
|
Deletions
|
|
|
|
|
|
|
(1,784
|
)
|
Net change in fair value included in earnings
|
|
|
(291
|
)
|
|
|
118
|
|
Translation adjustment
|
|
|
11
|
|
|
|
363
|
|
|
|
|
|
|
|
|
|
|
Ending balance at January 31, 2010
|
|
$
|
476
|
|
|
$
|
811
|
|
|
|
|
|
|
|
|
|
|
|
|
20.
|
Discontinued
Operations
|
Effective July 31, 2008, the Company entered into an
agreement to sell substantially all of its art packing, shipping
and storing business, consisting of the shares of three
wholly-owned subsidiaries and one subsidiary with 51% ownership
interest, as well as the assets of a fine arts department of
another wholly-owned subsidiary. The net proceeds of $6,696
resulted in a gain on sale of discontinued operations of $5,316.
F-52
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
Effective August 1, 2008, the Company entered into an
agreement to sell substantially all of the assets of its
remaining art packing, shipping and storing business. The net
proceeds of $2,011 resulted in a gain of $2,088, including
realized foreign currency translation adjustment, net of tax. As
described in Note 17, Contingencies, the
Company has retained certain liabilities related to this
business.
Revenues and net income from the discontinued operations were as
follows:
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended January 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Revenues
|
|
$
|
6,839
|
|
|
$
|
12,757
|
|
|
|
|
|
|
|
|
|
|
Pre-tax operating income from discontinued operations
|
|
|
128
|
|
|
|
689
|
|
Provision for income taxes
|
|
|
28
|
|
|
|
161
|
|
Gain on sale, net of tax
|
|
|
7,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from discontinued operations
|
|
$
|
7,504
|
|
|
$
|
528
|
|
|
|
|
|
|
|
|
|
|
For segment reporting purposes by geographic region, airfreight
and ocean freight forwarding revenues for the movement of goods
is attributed to the country where the shipment originates.
Revenues for all other services are attributed to the country
where the services are performed. Net revenues for airfreight
and ocean freight forwarding related to the movement of the
goods are prorated between the country of origin and the
destination country, based on a standard formula. Intercompany
transactions are priced at cost.
F-53
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
Certain information regarding the Companys operations by
segment is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31, 2010
|
|
|
|
|
|
|
Contract
|
|
|
|
|
|
|
|
|
|
|
|
|
Logistics
|
|
|
|
|
|
|
|
|
|
Freight
|
|
|
and
|
|
|
|
|
|
|
|
|
|
Forwarding
|
|
|
Distribution
|
|
|
Corporate
|
|
|
Total
|
|
|
Revenues
|
|
$
|
2,351,093
|
|
|
$
|
1,216,429
|
|
|
$
|
|
|
|
$
|
3,567,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased transportation costs
|
|
|
1,755,435
|
|
|
|
451,086
|
|
|
|
|
|
|
|
2,206,521
|
|
Staff costs
|
|
|
346,087
|
|
|
|
392,307
|
|
|
|
14,755
|
|
|
|
753,149
|
|
Depreciation
|
|
|
15,410
|
|
|
|
27,835
|
|
|
|
749
|
|
|
|
43,994
|
|
Amortization of intangible assets
|
|
|
3,850
|
|
|
|
7,276
|
|
|
|
|
|
|
|
11,126
|
|
Restructuring charges
|
|
|
|
|
|
|
|
|
|
|
1,231
|
|
|
|
1,231
|
|
Goodwill impairment
|
|
|
|
|
|
|
1,562
|
|
|
|
|
|
|
|
1,562
|
|
Other operating expenses
|
|
|
163,438
|
|
|
|
284,923
|
|
|
|
18,074
|
|
|
|
466,435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
2,284,220
|
|
|
|
1,164,989
|
|
|
|
34,809
|
|
|
|
3,484,018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income/(loss)
|
|
$
|
66,873
|
|
|
$
|
51,440
|
|
|
$
|
(34,809
|
)
|
|
|
83,504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,221
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22,942
|
)
|
Other expense, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(855
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69,928
|
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,500
|
|
Net income attributable to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to UTi Worldwide Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
41,114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
$
|
14,114
|
|
|
$
|
25,361
|
|
|
$
|
9,862
|
|
|
$
|
49,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets
|
|
$
|
1,118,580
|
|
|
$
|
710,447
|
|
|
$
|
108,019
|
|
|
$
|
1,937,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-54
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31, 2009
|
|
|
|
|
|
|
Contract
|
|
|
|
|
|
|
|
|
|
|
|
|
Logistics
|
|
|
|
|
|
|
|
|
|
Freight
|
|
|
and
|
|
|
|
|
|
|
|
|
|
Forwarding
|
|
|
Distribution
|
|
|
Corporate
|
|
|
Total
|
|
|
Revenues
|
|
$
|
3,156,039
|
|
|
$
|
1,387,678
|
|
|
$
|
|
|
|
$
|
4,543,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased transportation costs
|
|
|
2,438,756
|
|
|
|
558,621
|
|
|
|
|
|
|
|
2,997,377
|
|
Staff costs
|
|
|
396,019
|
|
|
|
439,569
|
|
|
|
8,667
|
|
|
|
844,255
|
|
Depreciation
|
|
|
15,605
|
|
|
|
25,924
|
|
|
|
224
|
|
|
|
41,753
|
|
Amortization of intangible assets
|
|
|
3,896
|
|
|
|
9,075
|
|
|
|
|
|
|
|
12,971
|
|
Restructuring charges
|
|
|
2,731
|
|
|
|
3,863
|
|
|
|
2,309
|
|
|
|
8,903
|
|
Goodwill impairment
|
|
|
|
|
|
|
98,932
|
|
|
|
|
|
|
|
98,932
|
|
Intangible assets impairment
|
|
|
|
|
|
|
11,009
|
|
|
|
|
|
|
|
11,009
|
|
Other operating expenses
|
|
|
172,505
|
|
|
|
314,146
|
|
|
|
18,572
|
|
|
|
505,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
3,029,512
|
|
|
|
1,461,139
|
|
|
|
29,772
|
|
|
|
4,520,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income/(loss)
|
|
$
|
126,527
|
|
|
$
|
(73,461
|
)
|
|
$
|
(29,772
|
)
|
|
|
23,294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,316
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(30,559
|
)
|
Other income, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,488
|
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,024
|
)
|
Discontinued operations, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
|
|
Gain on sale, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,520
|
)
|
Net income attributable to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to UTi Worldwide Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(4,637
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
$
|
25,726
|
|
|
$
|
24,600
|
|
|
$
|
11,327
|
|
|
$
|
61,653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets
|
|
$
|
961,421
|
|
|
$
|
631,200
|
|
|
$
|
56,065
|
|
|
$
|
1,648,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-55
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31, 2008
|
|
|
|
|
|
|
Contract
|
|
|
|
|
|
|
|
|
|
|
|
|
Logistics
|
|
|
|
|
|
|
|
|
|
Freight
|
|
|
and
|
|
|
|
|
|
|
|
|
|
Forwarding
|
|
|
Distribution
|
|
|
Corporate
|
|
|
Total
|
|
|
Revenues
|
|
$
|
2,927,535
|
|
|
$
|
1,438,719
|
|
|
$
|
|
|
|
$
|
4,366,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased transportation costs
|
|
|
2,293,861
|
|
|
|
583,579
|
|
|
|
|
|
|
|
2,877,440
|
|
Staff costs
|
|
|
337,756
|
|
|
|
451,123
|
|
|
|
12,012
|
|
|
|
800,891
|
|
Depreciation
|
|
|
13,661
|
|
|
|
25,352
|
|
|
|
293
|
|
|
|
39,306
|
|
Amortization of intangible assets
|
|
|
863
|
|
|
|
8,573
|
|
|
|
|
|
|
|
9,436
|
|
Restructuring charges
|
|
|
912
|
|
|
|
5,800
|
|
|
|
1,683
|
|
|
|
8,395
|
|
Other operating expenses
|
|
|
149,977
|
|
|
|
316,839
|
|
|
|
13,492
|
|
|
|
480,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
2,797,030
|
|
|
|
1,391,266
|
|
|
|
27,480
|
|
|
|
4,215,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income/(loss)
|
|
$
|
130,505
|
|
|
$
|
47,453
|
|
|
$
|
(27,480
|
)
|
|
|
150,478
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,880
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(26,804
|
)
|
Other income, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,726
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
139,280
|
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101,119
|
|
Discontinued operations, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101,647
|
|
Net income attributable to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,961
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to UTi Worldwide Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
98,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
$
|
27,468
|
|
|
$
|
26,877
|
|
|
$
|
11,263
|
|
|
$
|
65,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets
|
|
$
|
1,190,405
|
|
|
$
|
845,405
|
|
|
$
|
38,807
|
|
|
$
|
2,074,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues attributable to the Companys geographic regions
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
Contract
|
|
|
|
|
|
|
|
|
Contract
|
|
|
|
|
|
|
|
|
Contract
|
|
|
|
|
|
|
|
|
|
Logistics
|
|
|
|
|
|
|
|
|
Logistics
|
|
|
|
|
|
|
|
|
Logistics
|
|
|
|
|
|
|
Freight
|
|
|
and
|
|
|
|
|
|
Freight
|
|
|
and
|
|
|
|
|
|
Freight
|
|
|
and
|
|
|
|
|
|
|
Forwarding
|
|
|
Distribution
|
|
|
|
|
|
Forwarding
|
|
|
Distribution
|
|
|
|
|
|
Forwarding
|
|
|
Distribution
|
|
|
|
|
|
|
Revenue
|
|
|
Revenue
|
|
|
Total
|
|
|
Revenue
|
|
|
Revenue
|
|
|
Total
|
|
|
Revenue
|
|
|
Revenue
|
|
|
Total
|
|
|
EMENA(1)
|
|
$
|
827,823
|
|
|
$
|
248,601
|
|
|
$
|
1,076,424
|
|
|
$
|
1,091,758
|
|
|
$
|
256,529
|
|
|
$
|
1,348,287
|
|
|
$
|
867,768
|
|
|
$
|
248,602
|
|
|
$
|
1,116,370
|
|
Americas
|
|
|
480,890
|
|
|
|
642,840
|
|
|
|
1,123,730
|
|
|
|
627,824
|
|
|
|
807,144
|
|
|
|
1,434,968
|
|
|
|
595,499
|
|
|
|
864,353
|
|
|
|
1,459,852
|
|
Asia Pacific
|
|
|
758,408
|
|
|
|
34,985
|
|
|
|
793,393
|
|
|
|
1,065,565
|
|
|
|
35,079
|
|
|
|
1,100,644
|
|
|
|
1,100,219
|
|
|
|
32,274
|
|
|
|
1,132,493
|
|
Africa
|
|
|
283,972
|
|
|
|
290,003
|
|
|
|
573,975
|
|
|
|
370,892
|
|
|
|
288,926
|
|
|
|
659,818
|
|
|
|
364,049
|
|
|
|
293,490
|
|
|
|
657,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,351,093
|
|
|
$
|
1,216,429
|
|
|
$
|
3,567,522
|
|
|
$
|
3,156,039
|
|
|
$
|
1,387,678
|
|
|
$
|
4,543,717
|
|
|
$
|
2,927,535
|
|
|
$
|
1,438,719
|
|
|
$
|
4,366,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
EMENA which is comprised of Europe, Middle East and North Africa |
F-56
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
The following table shows Long-lived assets attributable to the
Companys geographic regions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
EMENA
|
|
$
|
35,039
|
|
|
$
|
33,179
|
|
|
$
|
35,067
|
|
Americas
|
|
|
42,738
|
|
|
|
49,983
|
|
|
|
54,307
|
|
Asia Pacific
|
|
|
24,121
|
|
|
|
27,615
|
|
|
|
12,544
|
|
Africa
|
|
|
45,749
|
|
|
|
35,764
|
|
|
|
43,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
147,647
|
|
|
$
|
146,541
|
|
|
$
|
145,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows Long-lived assets attributable to
specific countries:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
United States
|
|
$
|
34,579
|
|
|
$
|
37,495
|
|
|
$
|
42,222
|
|
South Africa
|
|
|
43,539
|
|
|
|
34,061
|
|
|
|
41,918
|
|
China
|
|
|
16,003
|
|
|
|
18,530
|
|
|
|
3,626
|
|
Spain
|
|
|
13,874
|
|
|
|
12,199
|
|
|
|
12,368
|
|
All Others
|
|
|
39,652
|
|
|
|
44,256
|
|
|
|
44,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
147,647
|
|
|
$
|
146,541
|
|
|
$
|
145,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows revenues from external clients
attributable to all foreign clients in total from which the
Company derives revenues. The Company attributes revenues from
external clients to individual countries based on geography:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
United States
|
|
$
|
950,314
|
|
|
$
|
1,216,076
|
|
|
$
|
1,236,083
|
|
South Africa
|
|
|
559,298
|
|
|
|
635,761
|
|
|
|
669,295
|
|
China
|
|
|
352,396
|
|
|
|
517,727
|
|
|
|
593,181
|
|
Spain
|
|
|
163,754
|
|
|
|
195,751
|
|
|
|
170,029
|
|
All Others
|
|
|
1,541,760
|
|
|
|
1,978,402
|
|
|
|
1,727,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,567,522
|
|
|
$
|
4,543,717
|
|
|
$
|
4,366,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-57
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
The following table shows the revenue attributable to the
Companys principal services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Airfreight forwarding
|
|
$
|
1,187,880
|
|
|
$
|
1,621,602
|
|
|
$
|
1,553,551
|
|
Ocean freight forwarding
|
|
|
891,276
|
|
|
|
1,203,643
|
|
|
|
1,101,129
|
|
Customs brokerage
|
|
|
92,456
|
|
|
|
109,436
|
|
|
|
98,031
|
|
Contract logistics
|
|
|
650,739
|
|
|
|
663,656
|
|
|
|
618,599
|
|
Distribution
|
|
|
414,920
|
|
|
|
564,906
|
|
|
|
624,399
|
|
Other
|
|
|
330,251
|
|
|
|
380,474
|
|
|
|
370,545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
3,567,522
|
|
|
$
|
4,543,717
|
|
|
$
|
4,366,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased transportation costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
Airfreight forwarding
|
|
$
|
904,179
|
|
|
$
|
1,275,569
|
|
|
$
|
1,235,010
|
|
Ocean freight forwarding
|
|
|
717,093
|
|
|
|
1,001,275
|
|
|
|
926,224
|
|
Customs brokerage
|
|
|
5,712
|
|
|
|
5,987
|
|
|
|
3,668
|
|
Contract logistics
|
|
|
125,245
|
|
|
|
94,963
|
|
|
|
81,656
|
|
Distribution
|
|
|
277,849
|
|
|
|
404,756
|
|
|
|
416,059
|
|
Other
|
|
|
176,443
|
|
|
|
214,827
|
|
|
|
214,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total purchased transportation costs
|
|
$
|
2,206,521
|
|
|
$
|
2,997,377
|
|
|
$
|
2,877,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-58
UTi
WORLDWIDE INC.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the
years ended January 31, 2010, 2009 and 2008
|
|
22.
|
Selected
Quarterly Financial Data (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended January 31,
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Total
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
$
|
768,356
|
|
|
$
|
840,502
|
|
|
$
|
967,198
|
|
|
$
|
991,466
|
|
|
$
|
3,567,522
|
|
2009
|
|
|
1,184,450
|
|
|
|
1,255,087
|
|
|
|
1,210,107
|
|
|
|
894,073
|
|
|
|
4,543,717
|
|
Purchased transportation costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
458,849
|
|
|
|
501,136
|
|
|
|
605,663
|
|
|
|
640,873
|
|
|
|
2,206,521
|
|
2009
|
|
|
794,947
|
|
|
|
839,106
|
|
|
|
801,945
|
|
|
|
561,379
|
|
|
|
2,997,377
|
|
Operating income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
17,852
|
|
|
|
22,408
|
|
|
|
31,416
|
|
|
|
11,828
|
|
|
|
83,504
|
|
2009(1)
|
|
|
23,670
|
|
|
|
43,611
|
|
|
|
53,844
|
|
|
|
(97,831
|
)
|
|
|
23,294
|
|
Provision for income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
4,317
|
|
|
|
5,907
|
|
|
|
7,537
|
|
|
|
6,667
|
|
|
|
24,428
|
|
2009
|
|
|
5,421
|
|
|
|
10,034
|
|
|
|
14,237
|
|
|
|
(12,180
|
)
|
|
|
17,512
|
|
Net income attributable to UTi Worldwide Inc.:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
9,845
|
|
|
|
11,755
|
|
|
|
17,967
|
|
|
|
1,547
|
|
|
|
41,114
|
|
2009(1)
|
|
|
13,542
|
|
|
|
33,746
|
|
|
|
37,881
|
|
|
|
(89,806
|
)
|
|
|
(4,637
|
)
|
Basic earnings/(loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 Continuing operations
|
|
|
0.10
|
|
|
|
0.12
|
|
|
|
0.18
|
|
|
|
0.02
|
|
|
|
0.41
|
|
2010 Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.10
|
|
|
|
0.12
|
|
|
|
0.18
|
|
|
|
0.02
|
|
|
|
0.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 Continuing operations
|
|
|
0.13
|
|
|
|
0.29
|
|
|
|
0.36
|
|
|
|
(0.90
|
)
|
|
|
(0.12
|
)
|
2009 Discontinued operations(3)
|
|
|
|
|
|
|
0.05
|
|
|
|
0.02
|
|
|
|
|
|
|
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.13
|
|
|
|
0.34
|
|
|
|
0.38
|
|
|
|
(0.90
|
)
|
|
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings/(loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 Continuing operations(2)
|
|
|
0.10
|
|
|
|
0.12
|
|
|
|
0.18
|
|
|
|
0.02
|
|
|
|
0.41
|
|
2010 Discontinued operations(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.10
|
|
|
|
0.12
|
|
|
|
0.18
|
|
|
|
0.02
|
|
|
|
0.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 Continuing operations
|
|
|
0.13
|
|
|
|
0.28
|
|
|
|
0.36
|
|
|
|
(0.89
|
)
|
|
|
(0.12
|
)
|
2009 Discontinued operations(2)
|
|
|
|
|
|
|
0.05
|
|
|
|
0.02
|
|
|
|
|
|
|
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.13
|
|
|
|
0.33
|
|
|
|
0.38
|
|
|
|
(0.89
|
)
|
|
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income/(loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
24,494
|
|
|
|
35,343
|
|
|
|
14,952
|
|
|
|
(9,425
|
)
|
|
|
65,364
|
|
2009
|
|
|
8,335
|
|
|
|
2,397
|
|
|
|
(99,884
|
)
|
|
|
(12,724
|
)
|
|
|
(101,876
|
)
|
|
|
|
(1) |
|
Amounts in the fourth quarter of fiscal 2009 include
restructuring and impairment charges for employee severance and
benefits, asset impairments, other exist costs, and goodwill and
intangible assets impairment. |
|
(2) |
|
The diluted earnings per share amounts for the quarters do not
add to the total year ended January 31, 2010 amount due to
the effects of rounding. |
|
(3) |
|
The basic earnings per share amounts for the quarters do not add
to the total year ended January 31, 2010 and
January 31, 2009 amount due to the effects of rounding. |
F-59
UTi
Worldwide Inc.
Schedule II
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
Amounts
|
|
|
Charges
|
|
|
|
|
|
Foreign
|
|
|
|
|
|
|
Beginning
|
|
|
Charged
|
|
|
Against the
|
|
|
|
|
|
Currency
|
|
|
Balance at
|
|
Year Ended January 31,
|
|
of Year
|
|
|
to Expense
|
|
|
Allowance
|
|
|
Other
|
|
|
Translation
|
|
|
End of Year
|
|
|
|
(In thousands)
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Doubtful Accounts
|
|
$
|
15,118
|
|
|
$
|
3,507
|
|
|
$
|
(6,943
|
)
|
|
$
|
|
|
|
$
|
2,005
|
|
|
$
|
13,686
|
|
Deferred Tax Asset Valuation Allowance
|
|
|
10,781
|
|
|
|
5,865
|
|
|
|
(424
|
)
|
|
|
|
|
|
|
1,101
|
|
|
|
17,323
|
|
Restructuring Related Provisions
|
|
|
803
|
|
|
|
1,231
|
|
|
|
(2,034
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Doubtful Accounts
|
|
|
16,356
|
|
|
|
8,625
|
|
|
|
(5,451
|
)
|
|
|
(94
|
)
|
|
|
(4,302
|
)
|
|
|
15,118
|
|
Deferred Tax Asset Valuation Allowance
|
|
|
12,023
|
|
|
|
430
|
|
|
|
(1,672
|
)
|
|
|
|
|
|
|
|
|
|
|
10,781
|
|
Restructuring Related Provisions
|
|
|
8,395
|
|
|
|
8,345
|
|
|
|
(15,937
|
)
|
|
|
|
|
|
|
|
|
|
|
803
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Doubtful Accounts
|
|
|
14,719
|
|
|
|
2,831
|
|
|
|
(2,313
|
)
|
|
|
180
|
|
|
|
939
|
|
|
|
16,356
|
|
Deferred Tax Asset Valuation Allowance
|
|
|
5,712
|
|
|
|
6,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,023
|
|
Restructuring Related Provisions
|
|
|
|
|
|
|
8,395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,395
|
|
Schedules not listed above have been omitted because the
information required to be described in the schedules is not
applicable or is shown in our financial statements.
F-60
INDEX TO
EXHIBITS
|
|
|
|
|
Exhibit
|
|
Description
|
|
|
3
|
.1
|
|
Memorandum of Association of the company, as amended
(incorporated by reference to Exhibit 3.1 to the
companys Current Report on
Form 8-K,
filed July 31, 2007)
|
|
3
|
.2
|
|
Articles of Association of the company, as amended (incorporated
by reference to Exhibit 3.1 to the companys Current
Report on
Form 8-K,
filed July 31, 2007)
|
|
10
|
.1
|
|
Sale of Shares Agreement, entered into December 6,
2004, between Pyramid Freight (Proprietary) Limited and The
Trustees For the Time Being of the UTi Empowerment Trust
(incorporated by reference to Exhibit 10.4 to the
companys Quarterly Report on
Form 10-Q,
filed December 8, 2004)
|
|
10
|
.2
|
|
Loan Agreement, entered into December 6, 2004, between
Pyramid Freight (Proprietary) Limited and UTi South Africa
(Proprietary) Limited (incorporated by reference to
Exhibit 10.5 to the companys Quarterly Report on
Form 10-Q,
filed December 8, 2004)
|
|
10
|
.3
|
|
Shareholders Agreement, entered into December 6,
2004, among Pyramid Freight (Proprietary) Limited, the Trustees
for the Time Being of the UTi Empowerment Trust and UTi South
Africa (Proprietary) Limited (incorporated by reference to
Exhibit 10.6 to the companys Quarterly Report on
Form 10-Q,
filed December 8, 2004)
|
|
10
|
.4
|
|
Sale of Business Agreement, entered into December 6, 2004,
between Pyramid Freight Proprietary) Limited and UTi South
Africa (Proprietary) Limited (incorporated by reference to
Exhibit 10.7 to the companys Quarterly Report on
Form 10-Q,
filed December 8, 2004)
|
|
10
|
.5+
|
|
Amended and Restated Employment Agreement of Mr. John
Hextall, dated as of October 1, 2008 (incorporated by
reference to Exhibit 10.2 to the companys Quarterly
Report on
Form 10-Q,
filed December 10, 2008)
|
|
10
|
.6+
|
|
Separation Agreement and General Release of Mr. John
Hextall, dated as of July 28, 2009 (incorporated by
reference to Exhibit 99.1 to the companys Current
Report on
Form 8-K,
filed July 29, 2009)
|
|
10
|
.7+
|
|
Amended and Restated Employment Agreement of Mr. Gene Ochi,
dated as of March 25, 2010
|
|
10
|
.8+
|
|
Amended and Restated Employment Agreement of Mr. Lawrence
Samuels, dated as of March 25, 2010
|
|
10
|
.9+
|
|
Amended and Restated Employment Agreement of Mr. William
Gates, dated as of March 25, 2010
|
|
10
|
.10+
|
|
Letter Agreement between Mr. William Gates and the company,
dated as of October 1, 2008 (incorporated by reference to
Exhibit 10.14 to the companys Annual Report on
Form 10-K,
filed April 1, 2009)
|
|
10
|
.11+
|
|
Form of Employment Agreement for Executive Officers
|
|
10
|
.12+
|
|
Amended and Restated Employment Agreement of Mr. Eric
Kirchner, dated as of March 25, 2010
|
|
10
|
.13+
|
|
Amended and Restated Employment Agreement of Mr. Lance
DAmico, dated as of March 25, 2010
|
|
10
|
.14+
|
|
Non-Employee Directors Share Option Plan, as amended,
(incorporated by reference to Exhibit 10.1 to the
companys Quarterly Report on
Form 10-Q,
filed June 9, 2006)
|
|
10
|
.15+
|
|
2000 Employee Share Purchase Plan, as amended (incorporated by
reference to Exhibit 10.1 to the companys Quarterly
Report on
Form 10-Q,
filed September 10, 2007)
|
|
10
|
.16+
|
|
2000 Stock Option Plan, as amended (incorporated by reference to
Exhibit 10.3 to the companys Quarterly Report on
Form 10-Q,
filed June 9, 2006)
|
|
10
|
.17+
|
|
2004 Long-Term Incentive Plan, as amended and restated
(incorporated by reference to Exhibit 10.4 to the
companys Quarterly Report on
Form 10-Q,
filed June 9, 2006)
|
|
10
|
.18+
|
|
Uniserv Executive Provident Fund, as amended (incorporated by
reference to Exhibit 10.6 to the companys Quarterly
Report on
Form 10-Q,
filed June 9, 2006)
|
|
10
|
.19+
|
|
Uniserv Pension Fund, as amended (incorporated by reference to
Exhibit 10.7 to the companys Quarterly Report on
Form 10-Q,
filed June 9, 2006)
|
|
10
|
.20+
|
|
WTC Provident Fund, as amended (incorporated by reference to
Exhibit 10.8 to the companys Quarterly Report on
Form 10-Q,
filed June 9, 2006)
|
|
10
|
.21+
|
|
Norwich Union Cash Plus Individual Pension Plan Policy for
Mr. John Hextall (incorporated by reference to
Exhibit 10.10 to the companys Quarterly Report on
Form 10-Q,
filed June 9, 2006)
|
|
10
|
.22+
|
|
Non-Employee Director Compensation Policy
|
|
10
|
.23+
|
|
UTi Worldwide Inc. Supplemental Benefits Allowance Program
(incorporated by reference to Exhibit 10.1 to the
companys Current Report on
Form 8-K,
filed June 11, 2009)
|
|
|
|
|
|
Exhibit
|
|
Description
|
|
|
10
|
.24
|
|
Note Purchase Agreement, dated as of July 13, 2006, by and
among UTi Worldwide Inc. and certain of its subsidiaries party
thereto and the purchasers party thereto (incorporated by
reference to Exhibit 10.1 to the companys Current
Report on
Form 8-K,
filed July 19, 2006)
|
|
10
|
.25+
|
|
2004 Non-Employee Directors Share Incentive Plan, as amended and
restated
|
|
10
|
.26+
|
|
Form of UTi Worldwide Inc. 2004 Non-Employee Directors Share
Incentive Plan Restricted Shares Award
Agreement and Section 83(b) Election Form, as amended
(incorporated by reference to Exhibit 10.8 to the
companys Quarterly Report on
Form 10-Q,
field June 9, 2008)
|
|
10
|
.27+
|
|
Form of UTi Worldwide Inc. 2004 Non-Employee Directors Share
Incentive Plan Restricted Share Unit Award Agreement
and Section 83(b) Election Form, as amended (incorporated
by reference to Exhibit 10.9 to the companys
Quarterly Report on
Form 10-Q,
filed June 9, 2008)
|
|
10
|
.28+
|
|
Form of UTi Worldwide Inc. 2004 Non-Employee Directors Share
Incentive Plan Deferral and Distribution Election
Form for Restricted Share Units and Restricted Shares, as
amended (incorporated by reference to Exhibit 10.10 to the
companys Quarterly Report on
Form 10-Q,
filed June 9, 2008)
|
|
10
|
.29+
|
|
Form of UTi Worldwide Inc. 2004 Non-Employee Directors Share
Incentive Plan Combined Elective Grant and Deferral
Election Agreement, as amended (incorporated by reference to
Exhibit 10.11 to the companys Quarterly Report on
Form 10-Q,
filed June 9, 2008)
|
|
10
|
.30+
|
|
UTi Worldwide Inc. 2009 Long-Term Incentive Plan (incorporated
by reference to Exhibit 4.1 to the companys
Registration Statement on
Form S-8
(File
No. 333-160665)
filed July 17, 2009)
|
|
10
|
.31+
|
|
Form of UTi Worldwide Inc. 2009 Long-Term Incentive
Plan Stock Option Award Agreement (for U.S.
residents/taxpayers) (incorporated by reference to
Exhibit 4.2 to the companys Registration Statement on
Form S-8
(File
No. 333-160665)
filed July 17, 2009)
|
|
10
|
.32+
|
|
Form of UTi Worldwide Inc. 2009 Long-Term Incentive
Plan Stock Option Award Agreement (for
non-U.S.
residents/taxpayers) (incorporated by reference to
Exhibit 4.3 to the companys Registration Statement on
Form S-8
(File
No. 333-160665)
filed July 17, 2009)
|
|
10
|
.33+
|
|
Form of UTi Worldwide Inc. 2009 Long-Term Incentive
Plan Restricted Share Unit Award Agreement (for U.S.
residents/taxpayers) (incorporated by reference to
Exhibit 4.4 to the companys Registration Statement on
Form S-8
(File
No. 333-160665)
filed July 17, 2009)
|
|
10
|
.34+
|
|
Form of UTi Worldwide Inc. 2009 Long-Term Incentive
Plan Restricted Share Unit Award Agreement (for
non-U.S.
residents/taxpayers) (incorporated by reference to
Exhibit 4.5 to the companys Registration Statement on
Form S-8
(File
No. 333-160665)
filed July 17, 2009)
|
|
10
|
.35+
|
|
UTi Worldwide Inc. Executive Incentive Plan (incorporated by
reference to Appendix B to the companys proxy
statement filed May 14, 2009)
|
|
10
|
.36+
|
|
Form of Indemnification Agreement (incorporated by reference to
Exhibit 10.1 to the companys Current Report on
Form 8-K,
filed January 16, 2007)
|
|
10
|
.37+
|
|
Form of Change of Control Agreement (incorporated by reference
to Exhibit 10.39 to the companys Annual Report on
Form 10-K,
filed April 14, 2008)
|
|
10
|
.38
|
|
Amendment to Note Purchase Agreement, dated as of
October 11, 2006, by and among UTi Worldwide Inc. and
certain of its subsidiaries party thereto and the purchasers
party thereto (incorporated by reference to Exhibit 10.40
to the companys Annual Report on
Form 10-K,
filed April 14, 2008)
|
|
10
|
.39
|
|
Amendment to Note Purchase Agreement, dated as of
December 12, 2007, by and among UTi Worldwide Inc. and
certain of its subsidiaries party thereto and the purchasers
party thereto (incorporated by reference to Exhibit 10.42
to the companys Annual Report on
Form 10-K,
filed April 14, 2008)
|
|
10
|
.40
|
|
Note Purchase Agreement, dated as of July 9, 2009, by and
among UTi Worldwide Inc. and certain of its subsidiaries party
thereto and the purchasers party thereto (incorporated by
reference to Exhibit 10.1 to the companys Current
Report on
Form 8-K,
filed July 14, 2009)
|
|
10
|
.41
|
|
Letter of Credit Agreement, dated as of July 9, 2009, by
and among UTi Worldwide Inc. and certain of its subsidiaries
party hereto and ABN AMRO Bank N.V. (ABN) and The Royal Bank of
Scotland plc (incorporated by reference to Exhibit 10.2 to
the companys Current Report on
Form 8-K,
filed July 14, 2009)
|
|
10
|
.42
|
|
Letter of Credit Agreement, dated as of July 9, 2009, by
and among UTi Worldwide Inc. and certain of its subsidiaries
party thereto and Nedbank Limited, acting through its London
Branch (incorporated by reference to Exhibit 10.3 to the
companys Current Report on
Form 8-K,
filed July 14, 2009)
|
|
|
|
|
|
Exhibit
|
|
Description
|
|
|
10
|
.43
|
|
Facilities Agreement, dated as of July 9, 2009, by and
among certain subsidiaries of UTi Worldwide Inc. and Nedbank
Limited (incorporated by reference to Exhibit 10.4 to the
companys Current Report on
Form 8-K,
filed July 14, 2009)
|
|
10
|
.44
|
|
First Amendment to Letter of Credit Agreement, dated as of
January 8, 2010, by and among UTi Worldwide Inc. and
certain of its subsidiaries party thereto and Nedbank Limited,
acting through its London Branch
|
|
10
|
.45
|
|
Second Amendment to Letter of Credit Agreement, dated as of
March 25, 2010, by and among UTi Worldwide Inc. and
certain of its subsidiaries party thereto and Nedbank Limited,
acting through its London Branch
|
|
10
|
.46
|
|
First Amendment to Letter of Credit Agreement, dated as of
March 25, 2010, by and among UTi Worldwide Inc. and
certain of its subsidiaries party thereto and ABN Amro Bank
N.V., as Performance-Based LC Issuing Bank and The Royal Bank of
Scotland plc, in its capacity as Financial LC Issuing Bank
|
|
10
|
.47
|
|
First Amendment Agreement to Note Purchase Agreement dated
July 9, 2009, dated March 25, 2010, by and among UTi
Worldwide Inc. and certain of its subsidiaries party thereto and
the purchasers party thereto
|
|
12
|
.1
|
|
Statement regarding computation of ratio of earnings to fixed
charges
|
|
21
|
|
|
Subsidiaries of the Company
|
|
23
|
|
|
Consent of Independent Registered Public Accounting Firm
|
|
31
|
.1
|
|
Certification of Chief Executive Officer pursuant to Securities
Exchange Act
Rules 13a-14(a)
and
15d-14(a) as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002
|
|
31
|
.2
|
|
Certification of Chief Financial Officer pursuant to Securities
Exchange Act
Rules 13a-14(a)
and
15d-14(a) as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002
|
|
32
|
.1
|
|
Certification of Chief Executive Officer pursuant to
Section 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
32
|
.2
|
|
Certification of Chief Financial Officer pursuant to
Section 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
* |
|
Certain confidential portions of this exhibit have been omitted
pursuant to a request for confidential treatment. Omitted
portions have been filed separately with the Securities and
Exchange Commission. |
|
+ |
|
Management contract or compensatory arrangement. |