-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WmUuCVqa8ZUaxnhhER1WcnlsmYvCC3lILaCfB35Y+6QkgLIMB3Sol+cBOKFh9ybQ l2AEeco8imEH2VSiMfVpRg== 0000912057-00-024968.txt : 20000517 0000912057-00-024968.hdr.sgml : 20000517 ACCESSION NUMBER: 0000912057-00-024968 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEOLOGISTICS CORP CENTRAL INDEX KEY: 0001015527 STANDARD INDUSTRIAL CLASSIFICATION: ARRANGEMENT OF TRANSPORTATION OF FREIGHT & CARGO [4731] IRS NUMBER: 223438013 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-42607 FILM NUMBER: 636346 BUSINESS ADDRESS: STREET 1: 13952 DENVER WEST PARKWAY STREET 2: STE 200 CITY: GOLDEN STATE: CO ZIP: 80401 BUSINESS PHONE: 3037044400 MAIL ADDRESS: STREET 1: 13952 DENVER WEST PARKWAY STREET 2: STE 200 CITY: GOLDEN STATE: CO ZIP: 80401 FORMER COMPANY: FORMER CONFORMED NAME: INTERNATIONAL LOGISTICS LTD DATE OF NAME CHANGE: 19971126 10-Q 1 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 Commission file number 333-42607 GEOLOGISTICS CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 22-3438013 - -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1251 East Dyer Road Santa Ana, California 92705 --------------------------- (Address of principal executive offices and Zip Code) Registrant's telephone number, including area code:(714) 513-3000 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- On May 11, 2000, the registrant had 2,122,460 outstanding shares of common stock, par value $.001 per share. GEOLOGISTICS CORPORATION TABLE OF CONTENTS
Part I. Financial Information Page ---- Item 1. Financial Statements: Condensed Consolidated Balance Sheets, March 31, 2000 (unaudited) and December 31, 1999 3 Condensed Consolidated Statements of Operations for the three months ended March 31, 2000 and 1999 (unaudited) 5 Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2000 and 1999 (unaudited) 6 Notes to the Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 16 Item 3. Information required for this item has been included in Management's Discussion and Analysis. Part II. Other Information Item 2. Changes in Securities 26 Item 4. Submission of Matters to a Vote of Security Holders 26 Item 6. Exhibits and Reports on Form 8-K 26
2 PART I. FINANCIAL INFORMATION GEOLOGISTICS CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
MARCH 31, DECEMBER 31, 2000 1999 -------------- ---------------- S> Current assets: Cash and cash equivalents $ 19,217 $ 2,628 Accounts receivable: Trade, net 243,451 245,492 Other 14,219 20,865 Deferred income taxes 564 361 Prepaid expenses and other 20,874 25,681 ------- -------- Total current assets 298,325 295,027 ------- ------- Property and equipment, at cost 95,544 98,631 Accumulated depreciation (24,209) (22,648) ------ -------- Net property and equipment 71,335 75,983 Notes receivable, less current portion 210 1,241 Deferred income taxes 671 547 Intangible assets, net 55,213 55,285 Other assets 19,534 19,573 -------- -------- $445,288 $447,656 ======= =======
See accompanying notes to the condensed consolidated financial statements. 3 GEOLOGISTICS CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT SHARE DATA)
MARCH 31, DECEMBER 31, 2000 1999 ----------- ----------- Current liabilities: Accounts payable $142,453 $160,914 Accrued expenses 126,846 116,676 Income taxes payable 2,345 2,475 Current portion of long-term debt 20,437 12,222 ------- -------- Total current liabilities 292,081 292,287 Long-term debt, less current portion 168,741 152,915 Other non-current liabilities 45,887 46,747 Minority interest 2,324 2,087 ------- -------- Total liabilities 509,033 494,036 Stockholders' deficit : Preferred stock 15,000 shares authorized, issued and outstanding 14,550 14,550 Common stock ($.001 par value, 5,000,000 shares authorized, 2,126,460 and 2,129,893 shares issued and outstanding) 2 2 Additional paid-in-capital 56,173 56,962 Accumulated deficit (135,697) (119,709) Accumulated other comprehensive income 1,227 1,815 -------- -------- Total stockholders' deficit (63,745) (46,380) -------- -------- $445,288 $447,656 ======== ========
See accompanying notes to the condensed consolidated financial statements. 4 GEOLOGISTICS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
THREE-MONTH PERIODS ENDED ------------------------------- MARCH 31, MARCH 31, 2000 1999 -------- ----------- Revenues $357,877 $365,329 Transportation and other direct costs 277,325 273,293 ------- ------- Net revenues 80,552 92,036 Selling, general and administrative expenses 84,904 94,708 Restructuring and other non-recurring charges 1,193 -- Depreciation and amortization 4,633 4,642 ------- ------- Operating loss (10,178) (7,314) Interest expense, net (4,637) (5,574) Other income (expense), net 12 (145) ------- ------- Loss before income taxes and minority interest (14,803) (13,033) Income tax provision (351) (1,800) ------- ------- Loss before minority interest (15,154) (14,833) Minority interest (309) (155) ------- ------- Net loss (15,463) (14,988) Preferred stock dividend (525) (525) ------- ------- Loss applicable to common stock $(15,988) $(15,513) ======== ======== Basic and diluted loss per common share $ (7.51) $ (7.30) ======== ======== Weighted average number of common and common equivalent shares outstanding 2,127,604 2,126,393 ========= =========
See accompanying notes to the condensed consolidated financial statements. 5 GEOLOGISTICS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
THREE-MONTH PERIODS ENDED -------------------------- MARCH 31, MARCH 31, 2000 1999 --------- --------- Cash flows from operating activities: Net loss $(15,463) $(14,988) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 4,318 4,642 Amortization of deferred items 315 589 Deferred income taxes (327) (170) Changes in current assets and liabilities, net 5,073 (3,408) Other, net 351 (227) --------- -------- Net cash used in operating activities (5,733) (13,562) Cash flows from investing activities: Purchases of property and equipment, net (1,837) (2,530) Proceeds from sale of assets 906 -- --------- -------- Net cash used in investing activities (931) (2,530) Cash flows from financing activities: Proceeds from revolving line of credit, net 34,438 5,607 Proceeds from long-term debt 5,920 9,332 Payments on long-term debt (16,316) (955) Proceeds from issuance of common stock -- 360 Other, net (789) -- --------- -------- Net cash from financing activities 23,253 14,344 --------- -------- Net increase (decrease) in cash and cash equivalents 16,589 (1,748) Cash and cash equivalents, beginning of period 2,628 15,152 --------- -------- Cash and cash equivalents, end of period $19,217 $13,404 ========= ======== Supplementary cash flow information: Interest paid $ 2,585 $ 2,086 Income taxes $ 480 $ 492 Noncash common stock transactions $ -- $ 360 New capital leases $ 275 $ 20
See accompanying notes to the condensed consolidated financial statements. 6 GEOLOGISTICS CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION: The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in GeoLogistics Corporation's ("Company") Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1999. The condensed consolidated financial information furnished herein reflects all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary for a fair presentation in accordance with generally accepted accounting principles of the condensed consolidated financial statements for the periods shown. Certain amounts for the prior year have been reclassified to conform with the current year financial statement presentation. Significant accounting policies followed by the Company are included in Note 2 to the audited consolidated financial statements in the Company's Form 10-K. Results of operations for the three months ended March 31, 2000 may not be indicative of the results to be expected for the full year. PRINCIPLES OF CONSOLIDATION: The accompanying condensed consolidated financial statements include the accounts of the Company and its majority owned subsidiaries. The Company records its investment in each unconsolidated affiliated company (20 to 50 percent ownership) using the equity method of accounting. Other investments (less than 20 percent ownership) are recorded at cost. Intercompany accounts and transactions have been eliminated. USE OF ESTIMATES: The financial statements have been prepared in conformity with generally accepted accounting principles and, as such, include amounts based on informed estimates and judgments of management. Actual results could differ from those estimates. Accounts affected by significant estimates include accounts receivable and accruals for transportation and other direct costs, tax contingencies, insurance claims, including cargo loss and damage claims. REVENUE RECOGNITION: The Company's policy is to recognize revenue when it has performed substantially all services required under the terms of its contracts, generally on the date shipment is completed. Revenue from export-forwarding services is recognized at the time the freight departs the terminal of origin. Customs brokerage revenue is recognized upon completing the documents necessary for customs clearance. Storage revenue is recognized as services are performed. Transportation and other direct costs are recognized concurrently with revenues. For both international and domestic revenues, the above methods of revenue recognition approximate recognizing revenues and expenses when a shipment is completed. EARNINGS PER SHARE: Basic earnings per common share is computed using the weighted average number of shares outstanding. Diluted earnings per common share is computed under the treasury stock method using the weighted average number of shares outstanding adjusted for the incremental shares attributed to outstanding warrants to purchase common stock. Incremental shares were not used in the calculation of diluted loss per common share due to their antidilutive effect. 7 GEOLOGISTICS CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 2. LONG-TERM DEBT In October 1997, the Company issued and sold $110.0 million in aggregate principal amount of its 9 3/4% senior notes (the "Notes") which are due October 15, 2007, and are general unsecured obligations of the Company. The Notes are fully and unconditionally guaranteed on a joint and several senior basis by all existing and future domestic Restricted Subsidiaries (as defined in the indenture relating to the Notes). Three of the Company's domestic subsidiaries hold as their sole assets all of the issued and outstanding equity interests of the Company's direct non-guarantor foreign subsidiaries. 8 GEOLOGISTICS CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 2. LONG-TERM DEBT (CONTINUED) The following is condensed combined financial information of guarantor and non-guarantor subsidiaries:
Balance Sheet as of March 31, 2000 ------------------------------------------------------------------- Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Eliminations Combined ------- ------------ ------------ ------------ --------- Cash and cash equivalents................... $ 1,750 $ (1,813) $ 19,280 $ -- $ 19,217 Accounts receivable trade, net.............. (1,996) 86,953 209,532 (51,038) 243,451 Property, net............................... 1,767 18,323 51,245 -- 71,335 Intangible assets, net...................... 6,812 45,229 4,117 (945) 55,213 Other assets................................ 199,303 17,131 303,107 (463,469) 56,072 -------- -------- -------- --------- -------- Total assets.............................. $207,636 $165,823 $587,281 $(515,452) $445,288 ======== ======== ======== ========= ======== Current liabilities......................... $ 11,573 $ 92,227 $233,658 $ (45,377) $292,081 Long-term debt, less current portion........ 110,146 41,754 16,841 -- 168,741 Other non-current liabilities............... 66,616 55,272 116,900 (190,577) 48,211 Stockholders' equity (deficit) ............. 19,301 (23,430) 219,882 (279,498) (63,745) -------- -------- -------- --------- -------- Total liabilities and stockholders' equity (deficit)......................... $207,636 $165,823 $587,281 $(515,452) $445,288 ======== ======== ======== ========= ========
Statement of Operations for the Three Months Ended March 31, 2000 ------------------------------------------------------------------- Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Eliminations Combined ------- ------------ ------------ ------------ -------- Revenues.................................... $ -- $120,496 $277,208 $(39,827) $357,877 Transportation and other direct costs....... -- 97,387 219,765 (39,827) 277,325 Operating expenses.......................... 2,749 30,993 55,795 -- 89,537 Restructuring and other non-recurring charges.................................. 661 213 319 -- 1,193 ------ ------- ------- -------- -------- Operating loss.............................. (3,410) (8,097) 1,329 -- 10,178 Interest and other, net..................... 737 (3,458) (1,904) -- (4,625) Income tax provision ....................... (21) -- (330) -- (351) Minority Interest........................... -- -- (309) -- (309) Preferred stock dividends................... (525) -- -- -- (525) ------ ------- ------- -------- -------- Loss applicable to common stock........... $ (3,219) $(11,555) $ (1,214) $ -- $(15,988) ======== ======== ======== ======== ========
9 GEOLOGISTICS CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Statement of Cash Flows for the Three Months Ended March 31, 2000 ------------------------------------------------------------------ Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Eliminations Combined ------- ------------ ------------- ------------ -------- Cash flows from: Operating activities....................... $ 39,251 $(39,228) $(5,756) $ -- $(5,733) Investing activities....................... (114) (1,107) 290 -- (931) Financing activities....................... (39,008) 40,887 21,374 -- 23,253 -------- ------- ------- -------- ------- Net increase (decrease) in cash and cash equivalents................................ 129 552 15,908 -- 16,589 Cash and cash equivalents, beginning of period..................................... 1,621 (2,365) 3,372 -- 2,628 -------- ------- ------- -------- ------- Cash and cash equivalents, end of period..... $ 1,750 $ (1,813) $19,280 $ -- $19,217 ========= ======= ======= ======== =======
Balance Sheet as of December 31, 1999 -------------------------------------- Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Eliminations Combined ------- ------------ ------------- ------------ -------- Cash and cash equivalents.................... $ 1,621 $ (2,365) $ 3,372 $ -- $ 2,628 Accounts receivables trade, net.............. (1,023) 81,466 209,285 (44,236) 245,492 Property, net................................ 1,766 19,427 54,790 -- 75,983 Intangible assets, net....................... 6,496 45,467 4,267 (945) 55,285 Other assets................................. 190,692 17,313 329,338 (469,075) 68,268 ------- --------- ------- ------- -------- Total assets................................ $199,552 $161,308 $601,052 $(514,256) $447,656 ======== ======== ======== ========= ======== Current liabilities.......................... $ 9,702 $ 89,704 $237,033 $ (44,152) $292,287 Long-term debt, less current portion....... 149,154 867 2,894 -- 152,915 Other non-current liabilities.............. 17,125 82,610 129,439 (180,340) 48,834 Stockholders' equity (deficit)............. 23,571 (11,873) 231,686 (289,764) (46,380) ------- --------- ------- ------- -------- Total liabilities and Stockholders'equity (deficit)....... $199,552 $161,308 $601,052 $(514,256) $447,656 ======== ======== ======== ========= ========
Statement of Operations for the Three Months Ended March 31, 1999 ------------------------------------------------------------------ Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Eliminations Combined ------- ------------ -------------- ------------ -------- Revenues..................................... $ -- $145,740 $255,963 $ (36,374) $365,329 Transportation and other direct costs........ -- 110,514 199,153 (36,374) 273,293 Operating expenses.......................... 4,053 39,242 56,055 -- 99,350 --------- -------- -------- ---------- -------- Operating profit (loss).................... (4,053) (4,016) 755 -- (7,314) Interest and other, net...................... 22 (4,132) (1,609) -- (5,719) Income tax provision......................... -- (1,213) (587) -- (1,800) Minority interest............................ -- -- (155) -- (155) Preferred Stock dividends.................... (525) -- -- -- (525) --------- -------- -------- ---------- -------- Loss applicable to Common Stock.......... $ (4,556) $ (9,361) $ (1,596) $ -- $(15,513) ========= ======== ========= ========== ========
Statement of Cash Flows for the Three Months Ended March 31, 1999 ------------------------------------------------------------------ Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Eliminations Combined ------- ------------ -------------- ------------ -------- Cash flows from: Operating activities....................... $ (5,128) $ (6,150) $ (2,284) $ -- $(13,562) Investing activities....................... 1,966 (3,634) (862) -- (2,530) Financing activities....................... 4,046 8,200 2,098 -- 14,344 --------- -------- -------- ---------- -------- Net increase (decrease) in cash and cash equivalents....................... 884 (1,584) (1,048) -- (1,748) Cash and cash equivalents, beginning of period.................................. 27 2,534 12,591 -- 15,152 --------- -------- -------- ---------- -------- Cash and cash equivalents, end of period..... $ 911 $ 950 $ 11,543 $ -- $ 13,404 ========= ======== ========= ========== ========
10 GEOLOGISTICS CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) On March 31, 2000, the Company borrowed against a new Loan and Security Agreement (the "New Revolver") with Congress Financial Corporation (Western), a subsidiary of First Union Bank (the "Lender"). The three-year New Revolver provides for maximum borrowings of $90,000 and is comprised of three separate agreements, one in each of the United States, Canada and the United Kingdom. This facility replaces the credit facility in place at December 31, 1999 by and among the Company and ING (U.S.) Capital Corporation and the lenders party thereto. The three agreements making up the New Revolver involve four borrowers in the United States and the operating companies in both the United Kingdom and Canada. The four borrowers in the United States are comprised of Bekins Worldwide Solutions, Bekins Van Lines, GeoLogistics Services and GeoLogistics Americas. The individual agreement credit levels are $50,000 in the United States, $15,000 in Canada and $25,000 in the United Kingdom. The maximum amount that can be borrowed is equal to 85% of eligible billed receivables plus 65% of eligible unbilled or accrued receivables as defined in the agreement plus 100% of the face amount of letters of credit provided by affiliates of stockholders. Collateral liens on accounts receivable as well as general and specific liens on other assets of the Company are provided to the Lender. Financial convenant tests are restricted to minimum net worth tests for GeoLogistics Corporation and the Borrower group taken as a whole. The facility has a letter of credit sub-limit of $30,000 and places certain restrictions on the Company and its borrower subsidiaries in the areas of asset sales, additional liens, additional indebtedness, investments, dividends and affiliate transactions. Management does not believe that these restrictions will impair the Company's ability to perform or reach performance goals. NOTE 3. SEGMENT INFORMATION The Company operates in a single business segment providing worldwide logistics solutions to meet customers' specific requirements for transportation and related services by arranging and monitoring all aspects of material flow activities utilizing advanced information technology systems. No customer accounted for ten percent or more of consolidated revenue. The Company manages its business primarily on a geographic basis. The Company's reportable geographic segments are comprised of North America, Europe and Asia. Each geographic segment provides products and services herein described. Accounting policies for each geographic segment are the same as those described in "Summary of Significant Accounting Policies" in Note 2 of the Notes to the Consolidated Financial Statements included in the Form 10-K filed for the year ended December 31, 1999. The 11 GEOLOGISTICS CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Company evaluates the performance of each geographic segment primarily based upon EBITDA and operating income. EBITDA represents earnings before interest, taxes, depreciation and amortization. Operating income represents earnings before interest and taxes. Corporate expenses are included in the North America geographic segment operating income. Corporate expenses are comprised primarily of marketing costs, incremental information technology costs and other general and administrative expenses. North America geographic segment assets include corporate assets. Corporate assets include cash and cash equivalents, certain capitalized software development costs and intangible assets. Information regarding the Company's operations by geographic region is summarized below.
THREE-MONTH PERIODS ENDED -------------------------------- MARCH 31, MARCH 31, 2000 1999 -------- -------- North America: Total revenues $144,632 $171,626 Transactions between regions 13,583 12,749 -------- -------- Revenues from customers 131,049 158,877 Net revenues 27,369 39,391 EBITDA (8,335) (4,478) Depreciation and amortization 3,260 3,366 Operating (loss) (11,595) (7,844) Interest expense, net 4,434 5,363 Europe: Total revenues $180,321 $172,955 Transactions between regions 22,391 24,862 -------- -------- Revenues from customers 157,930 148,093 Net revenues 36,408 38,604 EBITDA 907 337 Depreciation and amortization 883 848 Operating income (loss) 25 (511) Interest expense, net 106 86 Asia: Total revenues $89,582 $78,316 Transactions between regions 20,684 19,957 -------- -------- Revenues from customers 68,898 58,359 Net revenues 16,775 14,041 EBITDA 1,883 1,469 Depreciation and amortization 490 428 Operating income 1,392 1,041 Interest expense, net 97 125
12 GEOLOGISTICS CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Information regarding the Company's long lived assets by geographic region is summarized below as of March 31, 2000 and December 31, 1999 Long lived assets: North America $25,284 $26,820 Europe 39,405 42,255 Asia 6,646 6,908 ------- ------- $71,335 $75,983 ======= =======
A reconciliation of the Company's geographic segment revenues, net revenues, EBITDA, operating income (loss) and assets to the corresponding consolidated amounts for the three months ended March 31, 2000 and 1999 is as follows:
THREE-MONTH PERIODS ENDED -------------------------- MARCH 31, MARCH 31, 2000 1999 ---------- ---------- Revenues: North America $144,632 $171,626 Europe 180,321 172,955 Asia 89,582 78,316 Eliminations (56,658) (57,568) -------- -------- Consolidated $357,877 $365,329 ======== ======== Net revenues: North America $ 27,369 $ 39,391 Europe 36,408 38,604 Asia 16,775 14,041 -------- -------- Consolidated $ 80,552 $ 92,036 ======== ======== EBITDA North America $ (8,335) $ (4,478) Europe 907 337 Asia 1,883 1,469 -------- -------- Consolidated $ (5,545) $ (2,672) ======== ======== Operating income (loss): North America $(11,595) $ (7,844) Europe 25 (511) Asia 1,392 1,041 -------- -------- Consolidated $(10,178) $ (7,314) ======== ========
A reconciliation of the Company's geographic segment assets to the corresponding consolidated amounts as of March 31, 2000 and December 31, 1999 is as follows:
MARCH 31, DECEMBER 31, 2000 1999 ----------- ------------ Assets: North America $618,155 $604,665 Europe 244,306 256,876 Asia 96,526 100,792 Eliminations (513,699) (514,677) -------- -------- Consolidated $445,288 $447,656 ======= ========
13 GEOLOGISTICS CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Revenue from transfers between regions represents approximate amounts that would be charged if the service were provided by an unaffiliated company. Total regional revenue is reconciled with total consolidated revenue by eliminating inter-regional revenue. NOTE 4. OTHER COMPREHENSIVE LOSS Comprehensive income (loss) is comprised of all changes to stockholders' equity, including net income (loss), except those changes resulting from investments by owners and distributions to owners. Other comprehensive loss in the financial statements of the Company includes the change in foreign currency translation adjustments resulting from the conversion of foreign subsidiaries' financial statements from local currencies to U.S. dollars. Comprehensive loss for the three months ended March 31, 2000 and 1999 is as follows (in thousands):
THREE-MONTH PERIODS ENDED MARCH 31, MARCH 31, 2000 1999 ---------- -------- Cumulative translation adjustment $ (588) $ (67) Net loss (15,463) (14,988) -------- -------- Comprehensive loss $(16,051) $(15,055) ======== ========
NOTE 5. RESTRUCTURING AND OTHER NON-RECURRING CHARGES/ASSET IMPAIRMENT CHARGES On March 4, 1999 the Company announced the intended restructuring of its GeoLogistics Americas ("Americas") business as a result of a difficult domestic freight forwarding environment. Due to lower volumes in the European region, the Company initiated a process to reevaluate the operations of its other business units to determine what initiatives could be taken to reduce costs and streamline administrative operations. As part of this restructuring process, a new management team was put in place in an effort to improve global operating results. In connection with these efforts, the Company (a) exited the majority of its domestic freight forwarding portion of Americas business at the end of the third quarter of 1999, (b) is rationalizing personnel such that their numbers and skill sets are suited to the ongoing services and volumes of the business, (c) closed, or will close, facilities in the United States and Europe, (d) arranged for the settlement of remaining obligations to the selling shareholders of the project forwarding and international household goods relocation services business and integrated the project forwarding business into the Americas business and the international household goods 14 GEOLOGISTICS CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 5. RESTRUCTURING AND OTHER NON-RECURRING CHARGES/ASSET IMPAIRMENT CHARGES (CONTINUED) relocations services into Bekins and (e) revalued assets to reflect fair values. The aggregate charge for these actions is expected to be approximately $34,600 of which $1,193 was recorded in the first quarter of 2000, $30,885 was recorded in 1999 and the remaining balance of $2,522 is expected to be recorded in the second quarter of 2000. The first quarter charge of $1,193 consisted of severance for the termination of 6 administrative staff totaling $389, duplicative labor of $608, recruiting fees of $113 and moving expenses of $83. During the first quarter, the Company paid $4,760 for restructuring initiatives charged to operations in 1999. The $4,760 consisted of $3,980 in severance, $88 for leases, bad debt write-offs of $670, and $22 of other charges. As of March 31, 2000, accrued liabilities relating to the aforementioned restructuring consisted of $3,760 for severance, $493 for lease termination costs, $285 for allowance for bad debts and $472 for other. Such amounts are included in accrued expenses in the accompanying condensed consolidated balance sheets. In addition to actions for which immediate financial recognition is required, many additional actions have been taken including revised incentive plans for the sales and management staffs (including the employees who will continue to operate the international freight forwarding operations in the United States), expansion of logistics facilities in Thailand and expansion of facilities and logistics capabilities in China. 15 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY INCLUDED ELSEWHERE IN THIS REPORT. THIS QUARTERLY REPORT ON FORM 10-Q MAY CONTAIN "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. DISCUSSIONS CONTAINING SUCH FORWARD-LOOKING STATEMENTS MAY BE FOUND IN THE MATERIAL SET FORTH HEREIN, IN THE NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS WELL AS WITHIN THIS QUARTERLY REPORT GENERALLY. ALSO, DOCUMENTS SUBSEQUENTLY FILED BY THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION MAY CONTAIN FORWARD-LOOKING STATEMENTS. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTIONS IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF THE CHALLENGES AND UNCERTAINTIES INHERENT IN MEETING LIQUIDITY NEEDS FOR CONTINUED OPERATION, SUCCESSFULLY IMPLEMENTING THE CLOSURE OF THE COMPANY'S U.S. DOMESTIC FREIGHT FORWARDING BUSINESS, THE RESTRUCTURING OF THE COMPANY'S EUROPEAN AND OTHER BUSINESSES, OPERATING CHALLENGES FACING THE COMPANY'S REMAINING BUSINESSES, INFORMATION TECHNOLOGY AND COST REDUCTION STRATEGIES AND THE OTHER RISK FACTORS AND MATTERS IDENTIFIED HEREIN OR IN OTHER PUBLIC FILINGS BY THE COMPANY, INCLUDING BUT NOT LIMITED TO THE COMPANY'S REGISTRATION STATEMENT ON FORM S-4 (FILE NO. 333-42607) AND ANNUAL REPORT ON FORM 10-K (FILED ON April 13, 2000), SUCH AS RISKS RELATING TO THE COMPANY'S LEVERAGE AND ABILITY TO SERVICE ITS DEBT OBLIGATIONS, CHALLENGES PRESENTED BY INTEGRATION OF RECENT ACQUISITIONS AND IN THE AMERICAS 16 BUSINESS, RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS AND CURRENCY FLUCTUATIONS AND RISKS RELATED TO INFORMATION TECHNOLOGY IMPLEMENTATION AND INTEGRATION. GENERAL The Company commenced operations on May 2, 1996 in connection with its acquisition of The Bekins Company ("Bekins"). On October 31, 1996, the Company acquired GeoLogistics Americas ("Americas") and GeoLogistics Company ("Canada") and securities representing 33.3%, in the aggregate, of the common equity of LEP International Worldwide Limited ("LIW"). On November 7, 1996, the Company acquired GeoLogistics Services ("Services"). On September 30, 1997, the Company acquired an additional 41.9% of the common equity of LIW and on December 15, 1997, the Company completed the acquisition of all of the remaining equity securities of LIW. On July 13, 1998, the Company purchased substantially all of the operating assets and assumed certain of the liabilities ("Air Services Acquisition") of Caribbean Air Services, Inc. On September 10, 1999, the Company sold the assets purchased in the Air Services Acquisition and certain other assets ("GLAS Sale"). All acquisitions were accounted for by the purchase method of accounting, and accordingly, the book values of the assets and liabilities of the acquired companies were adjusted to reflect their fair values at the dates of acquisition. The portion of the Company's business that is focused on traditional transportation and logistics services normally earns a higher percentage of its revenues and operating income in the fourth calendar quarter as volumes increase for the holiday season. Conversely, the Company's domestic household goods relocation business earns approximately half of its revenue between June and September. In addition, the Americas has a significant project logistics business which is cyclical due to its dependence upon the timing of shipment volumes for large, one-time projects. On March 4, 1999 the Company announced the intended restructuring of its Americas business as a result of a difficult domestic freight forwarding environment. Due to lower volumes in the European region, the Company initiated a process to reevaluate the operations of its other business units to determine what initiatives could be taken to reduce costs and streamline administrative operations. As part of this restructuring process, a new management team was put in place in an effort to improve global operating results. In connection with these efforts, the Company (a) exited the majority of its domestic freight forwarding portion of Americas business at the end of the third quarter of 1999, (b) is rationalizing personnel such that their numbers and skill sets are suited to the ongoing services and volumes of the business, (c) closed, or will close, facilities in the United States and Europe, (d) arranged for the settlement of remaining obligations to the selling shareholders of the project forwarding and international household goods relocation services business and integrated the project forwarding business into the Americas business and the international household goods relocations services into Bekins and (e) revalued assets to reflect fair values. The aggregate charge for these actions is expected to be approximately $34.6 million of which $1.2 million was recorded in the first quarter of 2000, $30.9 million was recorded in 1999 and the remaining 17 balance of $2.5 million is expected to be recorded in the second quarter of 2000. The first quarter restructuring and non-recurring charge of $1.2 million consisted of severance for the termination of 6 administrative staff totaling $0.4 million, duplicative labor of $0.6 million, recruitng fees of $0.1 million and moving expenses of $0.1 million. During the first quarter, the Company paid $4.8 million for restructuring initiatives charged to operations in 1999. The $4.8 million consisted of $4.0 million in severance, $0.1 million for leases and bad debt write-offs of $0.7 million. As of March 31, 2000, accrued liabilities relating to the aforementioned restructuring consisted of $3.7 million for severance, $0.5 million for lease termination costs, $0.3 million for allowance for bad debts, and $0.5 million of other. Such amounts are included in accrued expenses in the accompanying condensed consolidated balance sheet. In addition to actions for which immediate financial recognition is required, many additional actions have been taken including revised incentive plans for the sales and management staffs (including the employees who will continue to operate the international freight forwarding operations in the United States), expansion of logistics facilities in Thailand and expansion of facilities and logistics capabilities in China. The aforementioned restructuring and other non-recurring charges along with the asset impairment charges are expected to provide savings of approximately $17.0 million in selling, general and administrative expenses and $1.5 million reduction in depreciation and amortization for the 2000 fiscal year. The summarized operating results for the three months ended March 31, 2000, compared with the adjusted operating results for March 31, 1999, after giving effect to the GLAS Sale and exiting the majority of its domestic business, follows:
THREE-MONTH PERIODS ENDED ----------------------------- MARCH 31, MARCH 31, 2000 1999 --------- ---------- (Adjusted) Revenues $357,877 $326,993 Transportation and other direct costs 277,325 245,945 -------- -------- Net revenues 80,552 81,048 -------- -------- Operating expenses 84,904 86,610 Restructuring and non-recurring charges 1,193 -- Depreciation and amortization 4,633 4,332 -------- -------- Total operating costs 90,730 90,942 -------- -------- Operating loss $(10,178) $ (9,894) ======== =========
18 The following discussion and analysis relates to the results of operations for the Company as reported for the three months ended March 31, 2000 and 1999, and should be read in conjunction with the condensed consolidated financial statements of the Company included elsewhere in this Form 10-Q.
THREE-MONTH PERIODS ENDED ------------------------------ MARCH 31, MARCH 31, 2000 1999 --------- --------- (In thousands) Statement of Operations Data: Revenues $357,877 $365,329 Net revenues 80,552 92,036 Selling, general and administrative expenses 84,904 94,708 Restructuring and other non-recurring charges 1,193 -- Depreciation and amortization 4,633 4,642 Operating loss (10,178) (7,314) Interest expense, net (4,637) (5,574) Other income (expense), net 12 (145) Income tax provision (351) (1,800) Minority interest (309) (155) Preferred stock dividend (525) (525) -------- -------- Net loss $(15,988) $(15,513) ======== ========
THREE MONTHS ENDED MARCH 31, 2000 VERSUS THREE MONTHS ENDED MARCH 31, 1999 REVENUES. The Company's revenues decreased approximately $7.5 million to $357.8 million for the three months ended March 31, 2000 from $365.3 million for the three months ended March 31, 1999. The primary reasons for the decrease were the exiting of the majority of domestic freight forwarding business ($15.2 million) and the disposition of the GLAS business ($23.1 million), offset by increased revenues in Europe, Asia and the remaining U.S. business. After giving effect of the GLAS Sale and the exiting of the majority of the domestic business, the revenues from ongoing business increased by $30.9 million, or 9.4%. The increases were generated in all geographic regions, but the largest increase was in Asia, which grew by $10.5 million, or 18.1%, over the comparable period in the prior year due to increased export volumes and new customers. The Americas business grew by $10.5 million, or 8.7%, after adjusting the domestic and GLAS business, as a result of increasing imports and strong export sales, principally from air freight. The adverse effects of the Asian economic slowdown appear to have ended. Europe's revenues increased $9.8 million, or 6.6%, as a result of higher volumes in all modes and a strengthening market throughout Europe. The household goods business grew modestly during this seasonally low volume period, while the high value products ("B2B") and business to consumer business ("B2C") grew by $1.2 million 19 or 4%. This was led by the Company's e-commerce delivery business - HomeDirectUSA. NET REVENUES. Net revenues, which represent gross profit after deducting transportation and other direct costs, decreased by approximately $11.5 million, or 12.5%, to $80.5 million for the three months ended March 31, 2000 from $92.0 million for the same period in 1999. The primary reasons for the decrease were the sale of the GLAS business which had net revenues of $7.0 million for the three months ended March 31, 1999 and the exiting of the majority of the domestic business. The effect of these dispositions was a reduction of net revenues of $11.0 million. After giving effect to these changes, the ongoing business' net revenue decreased by $0.5 million, or 0.6%. Net revenues, as a percentage of revenues, declined 2.7 percentage points, as lower margins were recorded in Europe, principally due to the overland business, and substantial increases in the full container load ocean business in the United States. Net revenues as a percentage of sales in the Americas declined as a result of the sale of GLAS, which in the prior year quarter realized a net revenue percentage of 30.3%. No such revenues were recorded during the quarter ended March 31, 2000. The high value products and logistics business, as well as the household goods business, had lower net revenues due to lower pricing and higher fuel costs. The Asia region contributed an increase of $2.7 million to net revenues on the strength of higher volumes. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses decreased by approximately $9.8 million, to $84.9 million for the three months ended March 31, 2000 from $94.7 million for the three months ended March 31, 1999. These expenses as a percentage of revenues decreased to 23.7% in 2000 from 25.9% for the same period in 1999. The principal reason for the decrease was the restructuring of the U.S. domestic operations, the sale of GLAS and restructuring efforts in Europe offset by increases in Asia. As a result of exiting the majority of the US domestic operation, the Americas business unit saved approximately $4,869 of SG&A, offset by increases in SG&A of $1,274 in order to support the growth of the remaining domestic and international business. Additional restructuring efforts within the Americas business unit yielded savings in SG&A of $1,865 for the quarter ended March 31, 2000 compared to the same prior-year period. The Americas business unit saved $3,228 in SG&A during the quarter ended March 31, 2000 compared to the same period in prior year because of the GLAS sale which occurred on September 10, 1999. The Europe region incurred SG&A costs of $35,180 during the three-month period ended March 31, 2000 compared to $38,267 during the same period in 1999. The decrese of $2,767 was mostly due to the restructuring efforts in Europe. Asia incurred SG&A of $14,893 and $12,572 during the quarters ended March 31, 2000 and 1999, respectively. The increase of $2,321 was incurred to support higher revenues. RESTRUCTURING, NON-RECURRING AND ASSET IMPAIRMENT CHARGES. As previously discussed, the Company implemented the majority of its restructuring and reorganization plans in the third and fourth quarter of 1999. The $1.2 million of restructuring and non-recurring charges recorded in the first quarter of 2000 primarily relate to the continued restructuring efforts in Europe and the streamlining of corporate and administrative functions in the U.S. No such items existed during the same period of the previous year. DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense was consistent in both periods primarily as the result of an increase in fixed assets related to information technology and lower depreciation and amortization as a result of asset impairment charges recorded in the third quarter of 1999. OPERATING LOSS. The Company recorded a $10.2 million operating loss for the three months ended March 31, 2000 compared to $7.3 million operating loss for the three months ended March 31,1999. The significant increase in operating loss is due primarily to the sale of the 20 GLAS business in the third quarter of 1999. During the three months ended March 31, 1999, the GLAS business earned $4.0 million of operating income. INTEREST EXPENSE, NET. Interest expense, net, decreased by approximately $0.9 million, to $4.7 million for the first quarter of 2000 from $5.6 million for the same period of 1999. The principal reason for the decrease was the reduction of debt from the prior year resulting from the GLAS sale. However, the cash restructuring charges and operating losses substantially reduced the benefit of the sale. INCOME TAXES. The income tax provision for the three months ended March 31, 2000 decreased $1.4 million to a $0.4 million provision versus a $1.8 million provision for the same period of 1999. This provision recognizes tax liabilities in tax-paying overseas subsidiaries while full valuation reserves have been established for tax benefits of all entities with net operating loss carryforwards. MINORITY INTERESTS. Interests held by minority shareholders in the earnings of certain foreign subsidiaries were $0.3 million and $0.2 million for the three months ended March 31, 2000 and 1999, respectively. NET LOSS. Net loss increased by $0.5 million to $16.0 million for the three months ended March 31, 2000 compared to $15.5 million for the same period of 1999. This increase is due primarily to the sale of the GLAS business which had net income of $2.0 million in the first quarter of 1999 and operating losses attributable to the Americas and Europe, as previously discussed. LIQUIDITY AND CAPITAL RESOURCES During the three months ended March 31, 2000, net cash used by operating activities was $5.7 million versus $13.6 million in the first three months of 1999. The improvement was primarily due to active management of the Company's working capital. Cash used in investing activities in 2000 were $0.9 million compared to $2.5 million in the first quarter of 1999. Capital spending consisted primarily of computer system development and enhancements. New borrowings were primarily used for repayment of an existing credit facility as well as the financing of working capital charges and operating losses. As a result of the disposition of GLAS in the third quarter of 1999, the Company, together with its guarantor subsidiaries, entered into an amendment to the revolving credit agreement. Among other changes, the amendment provides for (a) reductions in credit availability from $100.0 million to $50.5 million in the aggregate with a sublimit of $20.0 million in the United Kingdom, (b) reductions in the percentage of eligible accounts receivable that qualify for the U.S. and United Kingdom borrowing base which affect the Company's ability to incur debt under the revolving credit facility, (c) the elimination of the interest coverage ratio covenant, (d) the change in the maturity date to March 31, 2000, (e) the reduction of the Supplemental Commitment from $30.0 million to $15.0 million and (f) the amendment of the EBITDA and 21 certain other covenants. All borrowing related to the Supplemental Commitment and revolving credit facility were repaid with borrowings under the New Revolver described below. On March 31, 2000, the Company borrowed against a new credit facility (the "New Revolver") with Congress Financial Corporation (Western), a subsidiary of First Union Bank and its Canadian and United Kingdom affiliates (the "Lenders"). The three-year New Revolver provides for maximum borrowings of $90 million and is comprised of three separate agreements, one in each of the United States, Canada and the United Kingdom. This New Revolver replaces the credit facility that expired on March 31, 2000 with ING (U.S.) Capital Corporation and the lenders party thereto. The three agreements making up the New Revolver involve four borrowers in the United States and the operating companies in the United Kingdom and Canada. The four borrowers in the United States are comprised of Bekins Worldwide Solutions, Bekins Van Lines, GeoLogistics Services and GeoLogistics Americas. The Company has guaranteed each of the three separate agreements constituting the New Revolver. The individual agreement credit levels are $50 million in the United States, $15 million in Canada and $25 million in the United Kingdom. The United States and Canada agreements allow for a maximum increase or decrease of $5 million in the facility with a corresponding decrease or increase in the Canadian facility. Such adjustments are limited to once per quarter. The New Revolver has a letter of credit sub-limit of $30 million. The maximum amount that can be borrowed is dependent upon the amount of accounts receivable of the borrowers and letters of credit provided by certain stockholders and their affiliates. The amount that may be borrowed will be equal to 85% of eligible billed receivables plus 65% of eligible unbilled or accrued receivables as defined in the agreement, plus 100% of the face amount of the letters of credit provided by affiliates of stockholders. As of March 31, 2000, the aggregate of such letters of credit was $13 million, with additional commitments of up to $6 million, which amount may be reduced under certain circumstances. Interest rate spreads are set according to levels of the Company's EBITDA on a trailing twelve-month basis. These spreads will be set at 0.25% over prime for such borrowings and 2.75% over LIBOR for eurodollar borrowings until the first such test period which will be the twelve months ended September 30, 2000 and quarterly thereafter. Applicable spreads can range from 0% to 0.5% on prime borrowings and from 2.5% to 3.0% for Eurodollar borrowings. The six borrowers have provided their respective Lenders with liens on all accounts and all other of their assets. The four borrowers under the United States agreement have given the Canadian lender a guarantee secured by all their assets; the three agreements are not otherwise cross-collateralized. The Company has fully guaranteed each of the three agreements, and its guarantee of the United States agreement is secured by its assets (with certain exceptions). Finally, one other subsidiary of the Company has given a lien on certain of its assets to the United States lender. 22 Each of the three agreements constituting the New Revolver contains covenants restricting the activities of the respective borrowers. These restrictions include, among others, limitations on indebtedness, liens, the making of loans or investments, the making of acquisitions and the disposition of assets. Dividends, including to the Company, are prohibited, but the borrowers are permitted to lend money to the Company for the purpose of paying interest on the Company's senior notes, taxes and certain other expenses up to a specified amount. The borrowers are also permitted to lend to other borrowers and, if certain financial tests are met, other subsidiaries of the Company. These restrictions are not applicable to the Company. Events of Default under the New Revolver include, among others, the failure to pay, the failure to observe covenants, the failure to pay certain third party debt or judgements, bankruptcy and other insolvency events, any material adverse change, change of control with respect to the Company and the failure of the Company to maintain a specified level of net worth or the United States, Canadian and United Kingdom borrowers to maintain another specified level of net worth. An Event of Default under any one of the three agreements is automatically an Event of Default under the other two. The indenture relating to the Company's Senior Notes generally provides that, subject to certain exceptions, the Company not incur indebtedness unless on the date of such incurrence the consolidated coverage ratio of the Company exceeds 2.25 to 1.0 and that the restricted subsidiaries of the Company may not incur indebtedness unless on the date of such incurrence the consolidated coverage ratio of the Company exceeds 2.5 to 1.0. The indenture permits the Company to incur up to $115.0 million of total indebtedness (consisting of $100.0 million of bank debt and $15.0 million of other debt) notwithstanding the Company's inability to meet the consolidated coverage ratio test. As of March 31, 2000, the Company had incurred $71.2 million of indebtedness under its United States, Canada and United Kingdom bank credit facilities and, as of such date, the Company would have been able to incur an additional $28.8 million of indebtedness pursuant to the terms of such facilities. As of March 31, 2000, the Company had incurred $8.0 million of other debt and would have been able to incur an additional $7.0 million of other debt pursuant to the terms of the indenture. In addition, the indenture permits the Company to incur up to $30.0 million under its foreign credit facilities notwithstanding the Company's inability to meet the consolidated coverage ratio test. As of March 31, 2000, the Company had incurred $16.0 million of indebtedness under its foreign credit facilities and as of such date, would have been able to incur an additional $14.0 million of indebtedness under such facilities in compliance with the terms of the indenture. 23 The Company has utilized borrowings under its credit facilities to meet working capital requirements and to fund capital expenditures principally related to information technology. The Company may also be required to utilize borrowings under its credit facilities to finance other obligations including the payment of interest expense under the Senior Notes, and to fund remaining restructuring activities. As of April 28, 2000, the Company had $6.2 million of borrowing capacity under its New Revolver. The Company's ability to borrow funds under the New Revolver is subject to fluctuations in its borrowing base based on its accounts receivable and the Company's ability to borrow additional funds other than under the New Revolver is significantly restricted by the terms of the indenture and the New Revolver. If the Company is unable to generate sufficient cash flow to finance its operations and remaining restructuring charges and interest expense, it could be required to borrow under its existing credit facilities to fund such activities. If the Company's credit facilities are not sufficient to fund ongoing operations and remaining restructuring charges and interest expense, the Company could be required to adopt one or more alternatives, such as reducing or delaying planned expansion or capital expenditures, selling or leasing assets, restructuring debt or obtaining additional debt or equity capital. The Company will continue to investigate strategic alternatives to improve its financial position, including the sale of non-core assets. There can be no assurance that any of these alternatives could be effected on satisfactory terms or at all. YEAR 2000 The Company , its key customers and suppliers and agents were not materially impacted by the Year 2000 change. The Company completed a comprehensive project to upgrade its information technology including hardware and software to properly recognize the Year 2000 ("Year 2000 Plan"). As a provider of global logistics and transportation services, the Company is reliant on its computer systems and applications to conduct its business. In addition to these systems the Company is also reliant upon the system capabilities of its business partners. The Company also conducted a survey of its business partners to certify Year 2000 compliance. The Company also worked with major customers to gain Year 2000 certification with them in response to their inquiries and surveys. CONVERSION TO THE EURO CURRENCY In January 1999 certain member countries of the European Union established fixed conversion rates between their existing currencies and the European Union's common currency ("Euro"). The Company conducts business in member countries. The transition period for the introduction of the Euro is between January 1, 1999 and June 30, 2002. The Company is addressing the issues involved with the introduction of the Euro. The more important issues facing the Company include: converting information technology systems; reassessing currency risk; negotiating and amending contracts; and processing tax and accounting records. 24 Conversion to the Euro has not had a material effect on the Company's financial condition or results of operations. RISK MANAGEMENT AND MARKET RISK SENSITIVE INSTRUMENTS The Company is exposed to certain market risks, including changes in interest rates and currency exchange rates. In the normal course of business, the Company employs established policies and procedures to manage its exposure to changes in interest rates and fluctuations in the value of foreign currencies using a variety of financial instruments. In order to mitigate the impact on fluctuations in the general level of interest rates, the Company generally maintains a large portion of its debt as fixed rate in nature by borrowing on a long term basis. The Company's objectives in managing the exposure to foreign currency fluctuations is to reduce earnings and cash flow volatility associated with foreign exchange rate changes and allow management to focus its attention on its core business issues and challenges. Accordingly, the Company enters into various contracts which change in value as foreign exchange rates change to minimize the impact of currency movements on certain existing commitments and anticipated foreign earnings. The Company may use a combination of financial instruments to manage these risks, including forward contact or option related instruments. It is the Company's policy to enter into foreign currency transactions only to the extent considered necessary to meet its objectives as stated above. The Company does not enter into foreign currency transactions for speculative purposes. OTHER MATTERS In June 1998, the Financial Accounting Standards Board Issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"), which was originally required to be adopted in years beginning after June 15, 1999. This new accounting standard will require that all derivatives be recorded on the balance sheet at fair value. If the derivative is a hedge, depending on the nature of the hedge, changes in fair value of the derivatives will either be offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. Management is currently assessing the impact that the adoption of SFAS No. 133 will have on the Company's financial position, results of operations, and cash flows. The FASB recently issued Statement No. 137 which delays the effective date of this Statement until fiscal years beginning after June 15, 2000. In addition, the Statement requires that all derivatives that are expected to be hedges must be designated as such on the first day of the period in which the statement becomes effective. The Company, which utilizes fundamental derivatives to hedge changes in interest rates and foreign currencies, expects to adopt SFAS No. 133 effective January 1, 2001. 25 PART II. OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. On January 27, 2000, the stockholders of the Company beneficially owning at least 90% of the issued and outstanding shares of common stock of the Company entitled to vote approved certain amendments to the Company's Bylaws. On March 1, 2000, the stockholders of the Company beneficially owning not less than seventy-five (75%) of the issued and outstanding shares of common stock of the Company entitled to vote approved certain amendments to the Company's Certificate of Incorporation. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K None 25 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GEOLOGISTICS CORPORATION Date: May 15, 2000 By: /s/ Robert Arovas -------------- ---------------------------------------- Robert Arovas Chief Executive Officer and Director Date: May 15, 2000 By: /s/ Janet D. Helvey -------------- --------------------------------------- Janet D. Helvey Senior Vice President, Finance Date: May 15, 2000 By: /s/ James P. McCarthy -------------- --------------------------------------- James P. McCarthy Corporate Controller 26 EX-27 2 EXHIBIT 27
5 1,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 19,217 0 264,548 21,097 0 298,325 95,544 24,209 445,288 292,081 110,000 0 14,550 2 (78,297) 445,288 357,877 357,877 277,325 277,325 90,730 1,236 4,637 (14,803) 351 (15,154) 0 0 0 (15,988) (7.51) (7.51)
-----END PRIVACY-ENHANCED MESSAGE-----