-----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, IjY3Ww9MC/vtThAFQRyFynKX0IorfM8GU4pT2jxwFfytFC6joV13XaccuDulJ2p2 ZHhXXgUcB66KKTrdt97Pog== /in/edgar/work/20000811/0000912057-00-036668/0000912057-00-036668.txt : 20000921 0000912057-00-036668.hdr.sgml : 20000921 ACCESSION NUMBER: 0000912057-00-036668 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEOLOGISTICS CORP CENTRAL INDEX KEY: 0001015527 STANDARD INDUSTRIAL CLASSIFICATION: [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: 694805 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 a10-q.txt FORM 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 JUNE 30, 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 August 10, 2000, the registrant had 2,122,460 outstanding shares of common stock, par value $.001 per share. GEOLOGISTICS CORPORATION TABLE OF CONTENTS
PAGE ---- PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements: Condensed Consolidated Balance Sheets, June 30, 2000 (unaudited) and December 31, 1999 3 Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2000 and 1999 (unaudited) 5 Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 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 Matter 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)
June 30, December 31, 2000 1999 ----------- ----------- (Unaudited) Current assets: Cash and cash equivalents $ 13,555 $ 2,628 Accounts receivable: Trade, net 256,472 245,492 Other 13,667 20,865 Deferred income taxes 1,141 361 Prepaid expenses and other 22,913 25,681 -------- -------- Total current assets 307,748 295,027 -------- -------- Property and equipment, at cost 94,658 98,631 Accumulated depreciation (25,879) (22,648) -------- -------- Net property and equipment 68,779 75,983 Notes receivable, less current portion 297 1,241 Deferred income taxes 699 547 Intangible assets, net 55,495 55,285 Other assets 19,540 19,573 -------- -------- $452,558 $447,656 ======== ========
See accompanying notes to the condensed consolidated financial statements. 3 GEOLOGISTICS CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT SHARE DATA)
June 30, December 31, 2000 1999 ----------- ----------- (Unaudited) Current liabilities: Accounts payable $148,818 $160,914 Accrued expenses 126,581 116,676 Income taxes payable 1,644 2,475 Current portion of long-term debt 16,587 12,222 -------- -------- Total current liabilities 293,630 292,287 Long-term debt, less current portion 181,291 152,915 Other non-current liabilities 46,359 46,747 Minority interest 2,450 2,087 -------- -------- Total liabilities 523,730 494,036 Stockholders' deficit: Preferred stock 15,000 shares authorized, issued and outstanding 14,550 14,550 Common stock ($.001 par value, 5,000,000 shares authorized, 2,122,460 and 2,129,893 shares issued and outstanding) 2 2 Additional paid-in-capital 56,208 56,962 Accumulated deficit (145,088) (119,709) Accumulated other comprehensive income 3,156 1,815 -------- -------- Total stockholders' deficit (71,172) (46,380) -------- -------- $452,558 $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 Six month periods ended ended --------------------------------- --------------------------------- June 30, June 30, June 30, June 30, 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Revenues $ 373,034 $ 395,770 $ 730,911 $ 761,099 Transportation and other direct costs 287,159 301,004 564,484 574,297 ----------- ----------- ----------- ----------- Net revenues 85,875 94,766 166,427 186,802 Selling, general and administrative expenses 83,558 95,569 168,462 190,277 Restructuring and other non-recurring expenses 342 990 1,535 990 Depreciation and amortization 4,601 5,059 9,234 9,701 ----------- ----------- ----------- ----------- Operating loss (2,626) (6,852) (12,804) (14,166) Interest expense, net (5,637) (5,572) (10,274) (11,146) Other expense net (21) (305) (9) (450) ----------- ----------- ----------- ----------- Loss before income taxes and minority interest (8,284) (12,729) (23,087) (25,762) Income tax (provision) benefit (335) 769 (686) (1,031) ----------- ----------- ----------- ----------- Loss before minority interest (8,619) (11,960) (23,773) (26,793) Minority interest (248) (432) (557) (587) ----------- ----------- ----------- ----------- Net loss (8,867) (12,392) (24,330) (27,380) Preferred stock dividend (525) (525) (1,050) (1,050) ----------- ----------- ----------- ----------- Loss applicable to common stock $ (9,392) $ (12,917) $ (25,380) $ (28,430) =========== =========== =========== =========== Basic and diluted loss per common share $ (4.42) $ (6.10) $ (11.93) $ (13.39) =========== =========== =========== =========== Weighted average number of common and common equivalent shares outstanding 2,124,460 2,118,893 2,128,163 2,123,179 =========== =========== =========== ===========
See accompanying notes to the condensed consolidated financial statements. 5 GEOLOGISTICS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
Six-month Periods Ended --------------------------- June 30, June 30, 2000 1999 --------- --------- Cash flows from operating activities: Net loss $ (24,330) $ (27,380) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 9,234 9,701 Amortization of deferred items 540 899 Deferred income taxes (907) 51 Changes in current assets and liabilities, net (4,034) (19,905) Other, net 4,885 891 --------- --------- Net cash used in operating activities (14,612) (35,743) Cash flows from investing activities: Purchases of property and equipment, net (4,708) (6,125) Proceeds from sale of assets 906 -- --------- --------- Net cash used in investing activities (3,802) (6,125) Cash flows from financing activities: Proceeds from revolving line of credit, net 44,585 25,542 Proceeds from long-term debt 5,033 16,936 Payments on long-term debt (16,878) (2,814) Proceeds from issuance (repurchase) of common stock (755) 720 Debt issue costs (1,594) -- Preferred stock dividends (1,050) (1,050) --------- --------- Net cash provided by financing activities 29,341 39,334 --------- --------- Net increase (decrease) in cash and cash equivalents 10,927 (2,534) Cash and cash equivalents, beginning of period 2,628 15,152 --------- --------- Cash and cash equivalents, end of period $ 13,555 $ 12,618 ========= ========= Supplementary cash flow information: Interest paid $ 10,009 $ 10,084 Income taxes 1,516 1,341 Non-cash common stock transactions 128 720 New capital leases $ 856 $ 704
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 and six months ended June 30, 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. The following is condensed combined financial information of guarantor and non-guarantor subsidiaries:
Balance Sheet as of June 30, 2000 -------------------------------------------------------------------------------- Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Eliminations Combined ------------- ------------ ------------ ------------ ------------ (in thousands) Cash and cash equivalents.................... $ 1,273 $ 478 $ 11,804 $ - $ 13,555 Accounts receivable trade, net............... 4 102,705 219,121 (65,358) 256,472 Property, net................................ 1,802 18,006 48,971 - 68,779 Intangible assets, net....................... 7,043 44,938 4,459 (945) 55,495 Other assets................................. 154,518 17,016 308,297 (421,574) 58,257 ------------ ------------ ------------ ------------ ------------ Total assets............................... $ 164,640 $ 183,143 $ 592,652 $ (487,877) $ 452,558 ============ ============ ============ ============ ============ Current liabilities.......................... $ 8,742 $ 113,633 $ 235,088 $ (63,833) $ 293,630 Long-term debt, less current portion......... 110,103 50,536 20,652 - 181,291 Other non-current liabilities................ 26,905 49,162 120,500 (147,758) 48,809 Stockholder's equity (deficit)............... 18,890 (30,188) 216,412 (276,286) (71,172) ------------ ------------ ------------ ------------ ------------ Total liabilities and stockholders' equity (deficit)........................... $ 164,640 $ 183,143 $ 592,652 $ (487,877) $ 452,558 ============ ============ ============ ============ ============
Statement of Operations for the Six Months Ended June 30, 2000 -------------------------------------------------------------------------------- Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Eliminations Combined ------------- ------------ ------------ ------------ ------------ (in thousands) Revenues..................................... $ - $ 256,551 $ 556,381 $ (82,021) $ 730,911 Transportation and other direct costs........ - 204,936 441,569 (82,021) 564,484 Operating expenses........................... 5,443 61,820 110,433 - 177,696 Restructuring and other non-recurring charges.................................... 757 499 279 - 1,535 ------------ ------------ ------------ ------------ ------------ Operating income (loss)...................... (6,200) (10,704) 4,100 - (12,804) Interest and other, net...................... 3,606 (8,003) (5,886) - (10,283) Income tax provision......................... (21) (2) (663) - (686) Minority Interest............................ - - (557) - (557) ------------ ------------ ------------ ------------ ------------ Net loss................................... $ (2,615) $ (18,709) $ (3,006) $ - $ (24,330) ============ ============ ============ ============ ============
8 GEOLOGISTICS CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 2. LONG-TERM DEBT (CONTINUED)
Statement of Cash Flows for the Six Months Ended June 30, 2000 --------------------------------------------------------------------- Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Eliminations Combined ------------ ------------ ------------ ------------ ------------ (in thousands) Cash flows from: Operating activities..................... $ 39,959 $ (43,535) $ (11,036) $ -- $ (14,612) Investing activities..................... (270) (3,290) (242) -- (3,802) Financing activities..................... (40,037) 49,668 19,710 -- 29,341 ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents.............................. (348) 2,843 8,432 -- 10,927 Cash and cash equivalents, beginning of period................................... 1,621 (2,365) 3,372 -- 2,628 ------------ ------------ ------------ ------------ ------------ Cash and cash equivalents, end of period... $ 1,273 $ 478 $ 11,804 $ -- $ 13,555 ============ ============ ============ ============ ============
Balance Sheet as of December 31, 1999 --------------------------------------------------------------------- Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Eliminations Combined ------------ ------------ ------------ ------------ ------------ (in thousands) 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 Six Months Ended June 30, 1999 --------------------------------------------------------------------- Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Eliminations Combined ------------ ------------ ------------ ------------ ------------ (in thousands) Revenues................................... $ -- $ 304,327 $ 529,063 $ (72,291) $ 761,099 Transportation and other direct costs...... -- 231,792 414,796 (72,291) 574,297 Operating expenses........................ 7,748 79,630 112,600 -- 199,978 Restructuring and other non-recurring charges -- 990 -- -- 990 ------------ ------------ ------------ ------------ ------------ Operating income (loss).................. (7,748) (8,085) 1,667 -- (14,166) Interest and other, net.................... (2,083) (8,668) (845) (11,596) Income tax provision....................... (28) -- (1,003) -- (1,031) Minority interest.......................... -- -- (587) -- (587) ------------ ------------ ------------ ------------ ------------ Net loss .............................. $ (9,859) $ (16,753) $ (768) $ -- $ (27,380) ============ ============ ============ ============ ============
9 GEOLOGISTICS CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 2. LONG-TERM DEBT (CONTINUED)
Statement of Cash Flows for the Six Months Ended June 30, 1999 --------------------------------------------------------------------- Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Eliminations Combined ------------ ------------ ------------ ------------ ------------ (in thousands) Cash flows from: Operating activities..................... $ (13,750) $ (19,209) $ (3,375) $ 591 $ (35,743) Investing activities.................... 4,621 (7,663) (3,083) -- (6,125) Financing activities.................... 11,791 25,752 2,382 (591) 39,334 ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents..................... 2,662 (1,120) (4,076) -- (2,534) Cash and cash equivalents, beginning of period............................... 27 2,534 12,591 -- 15,152 ------------ ------------ ------------ ------------ ------------ Cash and cash equivalents, end of period $ 2,689 $ 1,414 $ 8,515 $ -- $ 12,618 ============ ============ ============ ============ ============
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 $90.0 million 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 $50.0 million in the United States, $15.0 million in Canada and $25.0 million 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 $30.0 million 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. 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. 10 GEOLOGISTICS CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 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 Six month periods ended ended -------------------------------- ------------------------------- June 30, June 30, June 30, June 30, 2000 1999 2000 1999 ----------- ----------- ----------- ----------- (in thousands) North America Total revenues $ 160,769 $ 187,062 $ 305,401 $ 358,688 Transactions between regions 13,538 14,955 27,121 27,704 Revenues from customers 147,231 172,107 278,280 330,984 Net revenues 32,795 41,945 60,165 81,336 EBITDA (2,419) (3,759) (10,754) (8,237) Depreciation and amortization 3,234 3,804 6,493 7,170 Operating loss (5,653) (7,563) (17,249) (15,407) Interest expense, net 5,417 4,000 9,851 7,449
11 GEOLOGISTICS CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Three month periods Six month periods ended ended -------------------------------- ------------------------------- June 30, June 30, June 30, June 30, 2000 1999 2000 1999 ----------- ----------- ----------- ----------- (in thousands) Europe: Total revenues $ 177,684 $ 177,529 $ 358,005 $ 350,484 Transactions between regions 23,874 19,614 46,266 44,476 Revenues from customers 153,810 157,915 311,739 306,008 Net revenues 35,498 36,935 71,905 75,539 EBITDA 1,573 (562) 2,480 (225) Depreciation and amortization 899 808 1,782 1,657 Operating income (loss) 674 (1,371) 699 (1,882) Interest income (expense), net 127 (94) 233 (180) Asia: Total revenues $ 93,281 $ 85,548 $ 182,863 $ 163,864 Transactions between regions 21,287 19,800 41,971 39,757 Revenues from customers 71,994 65,748 140,892 124,107 Net revenues 17,582 15,886 34,357 29,927 EBITDA 2,821 2,528 4,704 3,997 Depreciation and amortization 468 446 958 874 Operating income 2,353 2,082 3,746 3,123 Interest income (expense), net 92 5 189 (120)
Information regarding the Company's long lived assets by geographic region is summarized below as of June 30, 2000 and December 31, 1999.
June 30, December 31, 2000 1999 --------- --------- (in thousands) Long lived assets: North America $ 24,539 $ 26,820 Europe 37,965 42,255 Asia 6,275 6,908 --------- --------- $ 68,779 $ 75,983 ========= =========
12 GEOLOGISTICS CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) A reconciliation of the Company's geographic segment revenues, net revenues, EBITDA and operating income (loss) to the corresponding consolidated amounts for the three and six months ended June 30, 2000 and 1999 is as follows:
Three month periods Six month periods ended ended -------------------------------- ------------------------------- June 30, June 30, June 30, June 30, 2000 1999 2000 1999 ----------- ----------- ----------- ----------- (in thousads) Revenues: North America $ 160,769 $ 187,062 $ 305,401 $ 358,688 Europe 177,684 177,529 358,005 350,484 Asia 93,281 85,548 182,863 163,864 Eliminations (58,700) (54,369) (115,358) (111,937) ----------- ----------- ----------- ----------- Consolidated $ 373,034 $ 395,770 $ 730,911 $ 761,099 =========== =========== =========== =========== Net revenues: North America $ 32,795 $ 41,945 $ 60,165 $ 81,336 Europe 35,498 36,935 71,905 75,539 Asia 17,582 15,886 34,357 29,927 ----------- ----------- ----------- ----------- Consolidated $ 85,875 $ 94,766 $ 166,427 $ 186,802 =========== =========== =========== =========== EBITDA: North America $ (2,419) $ (3,759) $ (10,754) $ (8,237) Europe 1,573 (562) 2,480 (225) Asia 2,821 2,528 4,704 3,997 ----------- ----------- ----------- ----------- Consolidated $ 1,975 $ (1,793) $ (3,570) $ (4,465) =========== =========== =========== =========== Operating income (loss): North America $ (5,653) $ (7,563) $ (17,249) $ (15,407) Europe 674 (1,371) 699 (1,882) Asia 2,353 2,082 3,746 3,123 ----------- ----------- ----------- ----------- Consolidated $ (2,626) $ (6,852) $ (12,804) $ (14,166) =========== =========== =========== ===========
Corporate EBITDA and operating loss for the three month periods ended June 30, 2000 and 1999 were $(2,687), $(2,970) and $(3,705), $(3,851), respectively. Corporate EBITDA and operating loss for the six month periods ended June 30, 2000 and 1999 were $(5,695), $(6,264) and $(7,664), $(8,029), respectively. Such amounts are included in the North America geographic segment. 13 GEOLOGISTICS CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) A reconciliation of the Company's geographic segment assets to the corresponding consolidated amounts as of June 30, 2000 and December 31, 1999 is as follows:
June 30, December 31, 2000 1999 ------------ ------------ (in thousands) Assets: North America $ 575,353 $ 604,665 Europe 258,766 256,876 Asia 101,928 100,792 Eliminations (483,489) (514,677) --------- --------- Consolidated $ 452,558 $ 447,656 ========= =========
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 and six months ended June 30, 2000 and 1999 is as follows (in thousands):
Three month periods Six month periods ended ended ---------------------------- ---------------------------- June 30, June 30, June 30, June 30, 2000 1999 2000 1999 ---------- ---------- ---------- ---------- (in thousands) Cumulative translation adjustment $ 1,930 $ (742) $ 1,341 $ (675) Net loss (8,867) (12,392) (24,330) (27,380) ---------- ---------- ---------- ---------- Comprehensive loss $ (6,937) $(13,134) $(22,989) $(28,055) ========== ========== ========== ==========
14 GEOLOGISTICS CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 relocations services into Bekins and (e) revalued assets to reflect fair values. The aggregate charge for these actions was approximately $32,420 of which $342 was recorded in the second quarter of 2000, $1,193 was recorded in the first quarter of 2000 and $30,885 was recorded in 1999. The aggregate charge of $32,420 is $2,180 less than expected due to changes in estimates as well as the abandonment of certain initiatives. The second quarter charge of $342 consisted of lease termination costs of $100 and non- recruiting fees of $94 and moving expenses of $148. During the second quarter, the Company paid $1,995 for restructuring initiatives charged to operations in 1999. The $1,995 consisted of $1,752 in severance and $243 for leases. Restructuring and other non-recurring expenses for the six month period ended June 30, 2000 amounting to $1,535 consisted of severance for the termination of 6 administrative staff totaling $389, duplicative labor of $608, recruiting fees of $207, moving expenses of $231 and lease termination costs of $100. During the six month period ended June 30, 2000, the Company paid $6,755 for restructuring initiatives charged to operations in 1999. The $6,755 consisted of $5,732 in severance, $331 for leases, bad debt write-offs of $670 and $22 of other charges. As of June 30, 2000, accrued liabilities relating to the aforementioned restructuring consisted of $1,891 for severance, $350 for lease termination costs, $285 for allowance for bad debts and $831 for other. Such amounts are included in accrued expenses in the accompanying condensed consolidated balance sheets. The Company expects to pay the remaining obligations through March 2001. 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. 6. GLAS SALE On September 10, 1999, the Company sold substantially all of the assets of its GLAS business unit for aggregate cash consideration of approximately $116,000. The $68,920 gain on sale was reflected in the consolidated financial statements for the year ended December 31, 1999. For the six months ended June 30, 1999, revenues and operating income from the GLAS operations were approximately $45,505 and $7,963, respectively. 15 GEOLOGISTICS CORPORATION 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 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 16 GEOLOGISTICS CORPORATION 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 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 relocations services into Bekins and (e) revalued assets to reflect fair values. The aggregate charge for these actions was approximately $32.4 million of which $0.3 was recorded in the second quarter of 2000, $1.2 was recorded in the first quarter of 2000 and $30.9 million was recorded in 1999. The aggregate charge of $32.4 million is $2.2 million less than expected due to changes in estimates as well as the abandonment of certain initiatives. The second quarter charge of $0.3 million consisted of lease terminaton costs of $0.1 million, recruiting fees of $0.1 million and moving expenses of $0.1 million. During the second quarter, the Company paid $2.0 million for restructuring initiatives charged to operations in 1999. The $2.0 million consisted of $1.8 million in severance and $0.2 million for leases. Restructuring and other non-recurring expenses for the six month period ended June 30, 2000 amounting to $1.5 million consisted of severance for the termination of 6 administrative staff totaling $0.4 million, duplicative labor of $0.6 million, recruiting fees of $0.2 million, moving expenses of $0.2 million and lease termination costs of $0.1 million. During the six month period ended June 30, 2000, the Company paid $6.8 million for restructuring initiatives charged to operations in 1999. The $6.8 million consisted of $5.7 million in severance, $0.3 million for leases, bad debt write-offs of $0.7 million and $0.1 million of other charges. As of June 30, 2000, accrued liabilities relating to the aforementioned restructuring consisted of $1.9 million for severance, $0.4 million for lease termination costs, $0.3 million for allowance for bad debts and $0.8 million for other. Such amounts are included in accrued expenses in the accompanying condensed consolidated balance sheets. The Company expects to pay the remaining obligations through March 2001. 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. 17 GEOLOGISTICS CORPORATION Summarized actual operating results for the three and six months ended June 30, 2000, compared with the operating results for the three and six months ended June 30, 1999, adjusted to give effect to the sale of GLAS and exiting the majority of the Americas domestic business, follows:
Three month periods Six month periods ended ended ------------------------------- ------------------------------- June 30, June 30, June 30, June 30, 2000 1999 2000 1999 ------------ ------------ ------------ ------------ (Adjusted) (Adjusted) Revenues $ 373,034 $ 357,481 $ 730,911 $ 684,474 Transportation and other direct costs 287,159 274,979 564,484 521,443 ------------ ------------ ------------ ------------ Net revenues 85,875 82,502 166,427 163,031 Selling, general and administrative 83,558 86,747 168,462 173,357 expenses Restructuring and non-recurring charges 342 990 1,535 990 Depreciation and amortization 4,601 4,747 9,234 9,079 ------------ ------------ ------------ ------------ Total operating costs 88,501 92,484 179,231 183,426 ------------ ------------ ------------ ------------ Operating loss $ (2,626) $ (9,982) $ (12,804) $ (20,395) ============ ============ ============ ============
18 GEOLOGISTICS CORPORATION The following discussion and analysis relates to the results of operations for the Company as reported for the three and six months ended June 30, 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 Six month periods ended ended -------------------------------- -------------------------------- June 30, June 30, June 30, June 30, 2000 1999 2000 1999 ------------ ------------ ------------ ------------ (in thousands) Statement of Operations Data: Revenues $ 373,034 $ 395,770 $ 730,911 $ 761,099 Net revenues 85,875 94,766 166,427 186,802 Selling, general and administrative expenses 83,558 95,569 168,462 190,277 Restructuring and other non-recurring expenses 342 990 1,535 990 Depreciation and amortization 4,601 5,059 9,234 9,701 Operating loss (2,626) (6,852) (12,804) (14,166) Interest expense, net (5,390) (5,572) (10,274) (11,146) Other expense, net (268) (305) (9) (450) Income tax (provision) benefit (335) 769 (686) (1,031) Minority interest (248) (432) (557) (587) ------------ ------------ ------------ ------------ Net loss $ (8,867) $ (12,392) $ (24,330) $ (27,380) ============ ============ ============ ============
THREE MONTHS ENDED JUNE 30, 2000 VERSUS THREE MONTHS ENDED JUNE 30, 1999 REVENUES. The Company's revenues decreased approximately $22.8 million to $373.0 million for the three months ended June 30, 2000 from $395.8 million for the three months ended June 30, 1999. The primary reasons for the decrease were the exiting of the majority of domestic freight forwarding business ($15.9 million) and the disposition of the GLAS business ($22.4 million), offset by increased revenues in Bekins, Services, Asia and the remaining US business. After giving effect to the GLAS Sale and the exiting of the majority of the domestic business, the revenues from ongoing business increased by $15.5 million, or 4.3%. The increase in revenue, after giving effect to the GLAS Sale and exiting the majority of the US domestic business, occurred primarily in the remaining Americas business, Bekins, Services and Asia offset by decreased revenues in Europe. The Americas business grew by $5.6 million, or 10.9%, after adjusting for the exit of the majority of the US domestic business. Revenues from Bekins increased $3.8 million or 6.8% during the second quarter of 2000 compared to the comparable period in 1999. Revenues from Services increased $4.1 million or 26.8% from $15.3 million during the second quarter of 1999 to $19.4 million during the second quarter of 2000. Revenues in Asia increased $6.3 million or 9.6% from $65.7 million in the second quarter of 1999 to $72.0 million during the second quarter of 2000. Europe revenues decreased $4.1 million or 2.6% from $157.9 million in 1999 to $153.8 million in 2000. Canada revenues for the second quarter were consistent with the prior year. 19 GEOLOGISTICS CORPORATION NET REVENUES. Net revenues, which represent gross profit after deducting transportation and other direct costs, decreased by approximately $8.9 million, or 9.4.%, to $85.9 million for the three months ended June 30, 2000 from $94.8 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 $7.6 million for the three months ended June 30, 1999 and the exiting of the majority of the Americas domestic business. The effect of these dispositions was a reduction of net revenues of $12.3 million. After giving effect to these changes, the ongoing business' net revenue increased by $3.4 million, or 4.1%. Bekins net revenue increased $0.7 million or 6.6% from $9.9 million in the second quarter of 1999 to $10.6 million during the second quarter of 2000 due to higher volumes. Services net revenue remained flat as the increase in revenues of $4.0 million were largely offset by a decrease in the net revenue percentage from 24.5% in the second quarter of 1999 compared to 19.5% during the second quarter of 2000. The deterioration of Services' net revenue percentage relates to a change in the mix of business, particularly to a single large new customer for which the net revenue percentage is below historical ratios. Americas net revenue, after giving effect to the exiting of most of the domestic business, increased $2.9 million or 25.7% from $11.3 during the second quarter of 1999 to $14.2 million during the second quarter of 2000. Canada net revenues decreased $0.4 million or 8.5% to $4.3 million during the second quarter of 2000 when compared to the comparable prior year quarter due to a decrease in the net revenue percentage from 19.1% in 1999 to 17.4% in 2000. Europe net revenues decreased $1.4 million from $36.9 million during the second quarter of 1999 to $35.5 million during the second quarter of 2000. The decrease resulted from the impact of foreign currency translation as the value of most European currencies have depreciated relative to the US dollar. Net revenues in Asia increased $1.7 million or 10.7% from $15.9 million during the second quarter of 1999 to $17.6 million during the second quarter of 2000. The increase was due to higher volumes year over year. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses decreased by approximately $12.0 million or 12.6%, to $83.6 million for the three months ended June 30, 2000 from $95.6 million for the three months ended June 30, 1999. SG&A as a percentage of revenues decreased to 22.4% in 2000 from 24.2% for the same period in 1999. The decrease was caused by the GLAS sale and savings related to the aforementioned restructuring. As a result of exiting the majority of the U.S. domestic operation, the Americas business unit saved approximately $5.5 million of SG&A for the quarter ended June 30, 2000 compared to the same prior year period. Additional restructuring efforts within the Americas business unit yielded savings in SG&A of $0.6 million for the quarter ended June 30, 2000 compared to the same prior-year period. After giving effect to the exiting of the majority of the domestic US business, SG&A for the Americas business unit as a percentage of revenues were 30.0% during the second quarter of 2000 compared to 32.1% for the comparable prior-year period. Bekins SG&A increased $0.4 million or 5.1% from $7.8 million during the second quarter of 1999 to $8.2 million during the second quarter of 2000 primarily to support revenue growth. Services SG&A decreased $1.1 million or 27.5% from $4.0 million during the second quarter of 1999 to $2.9 million during the second quarter of 2000. The decrease in Services SG&A resulted from the aforementioned restructuring. Canada SG&A during the second quarter of 2000 was comparable to prior year amounts. Europe SG&A decreased $3.5 million or 9.3% from $37.5 million during the second quarter of 1999 compared to $34.0 million during the second quarter 20 GEOLOGISTICS CORPORATION of 2000. The decrease represents the impact of foreign currency translation and restructuring initiatives combined with lower incremental costs incurred to support lower revenues. SG&A in Asia increased $1.4 million or 10.4% from $13.4 million during the second quarter of 1999 to $14.8 million during the second quarter of 2000. The increase was incurred to support higher revenues. Corporate SG&A decreased approximately $1.1 million or 29.7% from $3.7 million during the second quarter of 1999 compared to $2.6 million during the second quarter of 2000. The decrease resulted from restructuring initiatives implemented during the fourth quarter of 1999. Finally, the GLAS Sale eliminated $3.3 million of SG&A incurred during the second quarter of 1999. RESTRUCTURING, NON-RECURRING AND ASSET IMPAIRMENT CHARGES. As previously discussed, the Company implemented its restructuring and reorganization plans in the third and fourth quarter of 1999. The $0.3 million of restructuring and non-recurring charges recorded in the second quarter of 2000 primarily relate to the continued restructuring efforts in the Americas business unit and the streamlining of corporate and administrative functions in the U.S. The second quarter of 1999 included restructuring charges of $1.0 million related to staff reductions in Americas business unit. DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense decreased $0.5 million or 9.8% from $5.1 million in the second quarter of 1999 to $4.6 million in the second quarter of 2000. The decrease resulted from asset impairment charges of $11.9 million recorded in the third and fourth quarters of 1999 offset by capital expenditures during the period from April 1999 through June 2000. OPERATING LOSS. The Company recorded a $2.6 million operating loss for the three months ended June 30, 2000 compared to $6.9 million operating loss for the three months ended June 30, 1999. Bekins operating income increased $0.3 million from $0.8 million during the second quarter of 1999 to $1.1 million during the second quarter of 2000. Higher net revenues of $0.7 million were partially offset by $0.4 million of higher operating expenses. Services operating income increased from a loss of $0.5 million during the second quarter of 1999 to income of $0.7 million during the second quarter of 2000. Most of the improvement in Services resulted from decreased operating expenses of $1.2 million during the second quarter of 2000 compared to the same prior year period. After giving effect to the exiting of the majority of the domestic US business, Americas operating loss decreased $3.1 million or 41.3% from a loss of $7.5 million during the second quarter of 1999 to a loss of $4.4 million during the second quarter of 2000. The improvement resulted from higher adjusted net revenues of $2.8 million, lower depreciation and amortization expense of $0.2 million, lower restructuring expenses of $0.7 million offset by higher operating expenses of $0.6 million incurred to support the increase in revenues for the remaining operation. Canada operating income decreased by $0.4 million from $0.3 million during the second quarter of 1999 to a loss of $0.1 million during the second quarter of 2000. The decrease was caused primarily by a deterioration of the net revenue percentage from 19.1% in 1999 to 17.4% during the second quarter of 2000. Europe operating income increased $2.0 million from a loss of $1.3 million during the second quarter of 1999 to income of $0.7 million during the second quarter of 2000. Lower net revenues of $1.4 million in Europe were offset by decreased costs of $3.4 million. Operating income in Asia increased $0.3 million from $2.1 million during the second quarter of 1999 to $2.4 million during the second quarter of 2000. Higher net revenues of $1.7 million were partially offset by increased costs of approximately $1.4 million. Operating loss at Corporate decreased $0.9 million or 22.9% due 21 GEOLOGISTICS CORPORATION primarily to restructuring of corporate and administrative functions during the fourth quarter of 1999. Operating income decreased by $4.0 million during the second quarter of 2000 compared to 1999 due to the sale of GLAS. INTEREST EXPENSE, NET. Interest expense, net, was $5.6 million during the quarters ended June 30, 2000 and 1999. The reduction of debt from the prior year resulting from the GLAS Sale was substantially eliminated by the cash restructuring charges and subsequent operating losses. INCOME TAXES. The income tax provision for the three months ended June 30, 2000 increased $1.1 million to a $0.3 million provision versus a $0.8 million benefit for the same period of 1999. This tax provision recognizes tax liabilities in tax-paying overseas subsidiaries while full valuation reserves have been established for tax benefits of most 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 $0.4 million for the three months ended June 30, 2000 and 1999, respectively. NET LOSS. Net loss decreased by $3.5 million to $8.9 million for the three months ended June 30, 2000 compared to $12.4 million for the same period of 1999. The decrease in net loss was due primarily to lower operating expenses, interest costs and minority interest of $13.1 million, $0.2 million and $0.1 million, respectively, offset by lower net revenues of $8.9 million and a higher tax provision of $1.1 million. Lower operating expenses result primarily from restructuring initiatives implemented during 1999 and the first quarter of 2000. Lower interest costs were realized as the payoff of debt resulting from the GLAS Sale during the third quarter of 1999 were largely offset by cash used to pay for restructuring initiatives, capital expenditures and to finance operating losses. Lower net revenues resulted primarily from the exit of the majority of the US domestic business and the sale of GLAS which provided approximately $5.5 million and $7.6 million, respectively, during the three month period ended June 30, 1999, offset by increases in all regions except Europe. The higher tax provision during the second quarter of 2000 compared to 1999 resulted from tax planning initiatives implemented during the second quarter of 1999 in anticipation of the gain on sale of GLAS. SIX MONTHS ENDED JUNE 30, 2000 VERSUS SIX MONTHS ENDED JUNE 30, 1999 REVENUES. The Company's revenues decreased by approximately $30.2 million to $730.9 million for the six months ended June 30, 2000 from $761.1 million for the six months ended June 30, 1999. The decrease in revenues from prior year was due to the GLAS Sale and the exit of the majority of the Americas domestic business offset by increased revenues in the remaining Americas business and all other business units. GLAS and the portion of the Americas domestic business that was shut down provided revenues of $45.5 million and $31.1 million, respectively, during the first six months of 1999. Excluding the impact of GLAS and the discontinued portion of the Americas domestic business, revenues increased $46.4 million or 6.8% to $730.9 million during the first six months of 2000 from $684.5 million during the first six months of 1999. 22 GEOLOGISTICS CORPORATION Bekins revenue for the six months ended June 30, 2000 increased $5.5 million or 5.5% compared to the same prior year period. Services revenue increased $9.4 million or 32.6% from $28.8 million during the six month period ended June 30, 1999 to $38.2 million during the same period in 2000. Americas revenue, after giving effect to the exit of the majority of the domestic business, increased $9.0 million from $103.1 million during the first six months of 1999 compared to $112.1 million during the first six months of 2000. Canada revenue increased $2.3 million or 5.0% to $48.6 million during the first six months of 2000 compared to $46.3 million during the comparable prior year period. Europe revenue increased $8.1 million or 2.5% from $329.9 million during the first six months of 1999 to $338.0 million during the first six months of 2000. Revenues in Asia increased $16.6 million or 10.9% to $169.6 million during the six months ended June 30, 2000 from $153.0 million during the comparable prior year period. NET REVENUES. Net revenues, which represent gross profit after deducting transportation and other direct costs, decreased by approximately $20.4 million or 10.9%, to $166.4 million for the six months ended June 30, 2000 from $186.8 million for the same period in 1999. Excluding GLAS and the discontinued portion of the Americas domestic business, net revenues as a percentage of revenues decreased by 1.0% to 22.8% during the first six months of 2000 from 23.8% during the first six months of 1999. Services experienced significant growth in revenues but the net revenue percentage decreased from 24.5% during the first six months of 1999 to 19.3% during the first six months of 2000. The deterioration of Services' net revenue percentage relates to a change in the mix of business, particularly to a single large new customer for which the net revenue percentage is below historical ratios. Bekins and Americas net revenue percentage remained flat for the six month period ended June 30, 2000 compared to the comparable prior year period. Canada net revenue percentage decreased 1.6% to 17.5% during the six months ended June 30, 2000 from 19.0% during the comparable prior year period. The decrease was caused by a change in mix of business to lower margin warehousing and customs services. Europe net revenue percentage decreased 1.63% to 21.3% during the six month period ended June 30, 2000 from 22.9% for the comparable prior year period caused by a change in the mix of business. Asia net revenue percentage increased 0.7% to 20.3% during the first six months of 2000 from 19.6% during the comparable prior year period. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses decreased by approximately $21.8 million or 11.5%, to $168.5 million for the six months ended June 30, 2000 from $190.3 million for the six months ended June 30, 1999. Excluding $16.9 million of SG&A incurred by GLAS and the discontinued portion of the Americas business, overall SG&A decreased $4.9 million during the first six months of 2000 compared to the same period in 1999. Bekins SG&A was flat during the first six months of 2000 versus the comparable prior year period. Services SG&A decreased $1.7 million or 22.4% to $5.9 million during the first six months of 2000 compared to $7.6 million during the comparable prior year period. The decrease results from restructuring initiatives implemented during the third quarter of 1999. Americas SG&A after adjusting for the exit of the majority of the domestic business increased $1.7 million or 5.1% to support the 8.8% increase in revenues. Canada SG&A increased $0.7 million or 9.5% from $7.4 million during the six month period ended June 30, 1999 to $8.1 million during the comparable period in 2000. The increase was incurred to support $2.3 million of additional revenues compared to 1999. Europe SG&A decreased $6.7 million or 8.8% to $69.1 million during the first six months of 2000 from $75.8 million during the comparable prior year period. The decrease was due primarily to restructuring 23 GEOLOGISTICS CORPORATION initiatives implemented during the fourth quarter of 1999. Asia SG&A increased $3.7 million or 14.4% during the six month period ended June 30, 2000 versus the comparable prior year period. The increase in costs were incurred to support additional revenues of $16.6 million. Corporate SG&A decreased $2.7 million or 35.1% from $7.7 million during the first six months of 1999 to $5.0 million during the first six months of 2000. The decrease was due to restructuring initiatives implemented during the fourth quarter of 1999. RESTRUCTURING, NON-RECURRING AND ASSET IMPAIRMENT CHARGES. As previously discussed, the Company implemented its restructuring and reorganization plans in the third and fourth quarter of 1999. The $1.5 million of restructuring and non-recurring charges recorded in the first six months of 2000 relate to restructuring efforts in Europe and the Americas business unit and the continued streamlining of corporate and administrative functions in the U.S. The first six months of 1999 included restructuring charges of $1.0 million related to staff reductions in Americas business unit. DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense decreased $0.5 million for the six months ended June 30, 2000 compared to the prior year period. The decrease resulted from asset impairment charges of $11.9 million recorded in the third and fourth quarters of 1999 offset by capital expenditures during the period from April 1999 through June 2000. OPERATING LOSS. The Company recorded a $12.8 million operating loss for the six months ended June 30, 2000 compared to $14.2 million operating loss for the six months ended June 30, 1999. Excluding the impact of GLAS and the discontinued portion of the Americas domestic business, operating loss for the six months ended June 30, 2000 decreased by $7.6 million or 37.3% to $12.8 million versus a loss of $20.4 million for the comparable prior year period. Bekins operating income for the first six months of 2000 were relatively flat compared to the comparable prior year period as higher net revenues of $0.6 million were offset by increased operating expenses. Services operating income increased $2.2 million from a loss of $1.3 million during the six month period ended June 30, 1999 to income of $0.9 million during the comparable period in 2000. The turnaround at Services resulted from restructuring initiatives implemented during the third quarter of 1999. Americas operating loss decreased $4.5 million or 27.8% from a loss of $16.2 million during the six month period ended June 30, 1999 to $11.7 million during the six month period ended June 30, 2000. Revenue growth contributed higher net revenues of $2.1 million and restructuring initiatives resulted in lower operating expenses of $2.4 million. Canada operating income decreased by $1.0 million to a loss of $0.3 million during the first six months of 2000 compared to income of $0.7 during the comparable prior year period. Higher revenues in Canada were more than offset by increases in direct costs and higher operating expenses to support such growth. Europe operating income improved by $2.6 million to $0.7 million during the six month period ended June 30, 2000 from a loss of $1.9 million for the comparable prior year period. The improvement resulted from lower net revenues of $3.6 million offset by a reduction in operating expenses of $6.2 million primarily as a result of restructuring initiatives implemented during the fourth quarter of 1999. Operating income in Asia increased $0.6 million or 19.4% from $3.1 million during the first six months of 1999 to $3.7 million during the first six months of 2000. Increased revenues of $16.6 million provided additional net revenue of $4.4 million which was partially offset by increased operating costs of $3.8 million. Operating loss for Corporate decreased by $1.8 million as a result of restructuring initiatives implemented during the last six months of 1999. 24 GEOLOGISTICS CORPORATION INTEREST EXPENSE, NET. Interest expense, net, decreased by $0.8 million, to $10.3 million for the six months ended June 30, 2000 from $11.1 million for the same period of 1999. The primary reason for the decrease was the reduction of debt from the prior year due to the sale of GLAS. However, the cash restructuring charges and subsequent operating losses have substantially eliminated the benefit of the sale. INCOME TAX PROVISION. The income tax provision for the six months ended June 30, 1999 decreased $0.3 million to $0.7 million versus $1.0 million for 1999. This provision recognizes tax liabilities in tax-paying overseas subsidiaries while full valuation reserves have been established for tax benefits of most entities with net operating loss carryforwards. MINORITY INTERESTS. Interests held by minority shareholders in the earnings of certain foreign subsidiaries were $0.6 million for the six months ended June 30, 2000 and 1999, respectively. NET LOSS. Net loss decreased by $3.1 million to $24.3 million for the six months ended June 30, 2000 compared to $27.4 million for the same period of 1999. The decrease in net loss resulted from lower revenues and net revenues of $30.2 million and $20.4 million, respectively, offset by lower SG&A of $21.8 million. Lower revenues and net revenues were primarily the result of the GLAS Sale and the shut down of the Americas domestic business offset by increased revenues from continuing operations. The reduction in SG&A was primarily due to restructuring initiatives implemented during the third and fourth quarter of 1999 partially offset by increased costs to support the growth of continuing operations. LIQUIDITY AND CAPITAL RESOURCES During the six months ended June 30, 2000, net cash used by operating activities was $14.6 million versus $35.7 million in the first six months of 1999. The improvement was primarily due to improved operating results and aggressive management of the Company's working capital. Cash used in investing activities in 2000 were $3.8 million compared to $6.1 million in the first six months 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. 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 25 GEOLOGISTICS CORPORATION 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 June 30, 2000, the aggregate of such letters of credit was $19 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. 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. 26 GEOLOGISTICS CORPORATION 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 June 30, 2000, the Company had incurred $80.5 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 $19.5 million of bank debt pursuant to the terms of the indenture. As of June 30, 2000, the Company had incurred $6.7 million of other debt and would have been able to incur an additional $8.3 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 June 30, 2000, the Company had incurred $2.4 million of indebtedness under its foreign credit facilities and as of such date, would have been able to incur an additional $27.6 million of indebtedness pursuant to the terms of the indenture. 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 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 August 9, 2000, the Company had $5.9 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 27 GEOLOGISTICS CORPORATION 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. 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 28 GEOLOGISTICS CORPORATION 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. In July 1999, the FASB 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. In June 2000, Statement No. 138 was issued, which amended the accounting and reporting of SFAS No. 133 for certain derivative instruments and hedging activities. 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. 29 PART II. OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K None 30 GEOLOGISTICS CORPORATION 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: AUGUST 10, 2000 By: /s/ ROBERT AROVAS --------------- ------------------------------------ Robert Arovas Chief Executive Officer and Director Date: AUGUST 10, 2000 By: /s/ JANET D. HELVEY --------------- ------------------------------------ Janet D. Helvey Senior Vice President, Finance Date: AUGUST 10, 2000 By: /s/ JAMES P. MCCARTHY --------------- ------------------------------------ James P. McCarthy Corporate Controller 31 EX-27 2 ex-27.txt EXHIBIT 27
5 0001015527 GEOLOGISTICS CORPORATION 1,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 13,555 0 274,437 17,965 0 307,748 94,658 25,879 452,558 293,630 110,000 0 14,550 2 (85,724) 452,558 730,911 730,911 564,484 564,484 179,231 2,373 10,274 (23,087) 686 (23,773) 0 0 0 (24,330) (11.93) (11.93)
-----END PRIVACY-ENHANCED MESSAGE-----