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UNITED STATES
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
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to
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COMMISSION FILE NUMBER 0-27288
EGL, INC.
(Exact name of registrant as specified in its charter)
TEXAS 76-0094895
- -------------------------------------------------------------- ---------------------------------------
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification Number)
15350 VICKERY DRIVE, HOUSTON, TEXAS 77032
(281) 618-3100
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(Address of Principal Executive Offices, Including
Registrant's Zip Code, and Telephone Number, Including Area Code)
EAGLE USA AIRFREIGHT, INC.
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Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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The number of shares of the registrant's common stock as of May 8, 2000:
28,614,174 shares (net of 1,284,433 treasury shares).
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EGL, INC.
INDEX TO FORM 10-Q
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheet as of ........................................... 3
March 31, 2000 (unaudited) and September 30, 1999 (audited)
Condensed Consolidated Statement of Income and Comprehensive
Income for the Six Months ended March 31, 2000 and 1999 (unaudited) ................ 4
Condensed Consolidated Statement of Income and Comprehensive Income for the Three .... 5
Months ended March 31, 2000 and 1999 (unaudited)
Condensed Consolidated Statement of Cash Flows for ................................... 6
the Six Months ended March 31, 2000 and 1999 (unaudited)
Condensed Consolidated Statement of Shareholders' .................................... 7
Equity for the Six Months ended March 31, 2000 (unaudited)
Notes to Condensed Consolidated Financial Statements (unaudited) ..................... 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS ...............................................................10
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ...........................17
PART II. OTHER INFORMATION ...................................................................18
SIGNATURES ...................................................................................21
INDEX TO EXHIBITS ............................................................................22
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EGL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PAR VALUES)
March 31, September 30,
2000 1999
(unaudited) (audited)
------------- -------------
Assets
Current assets:
Cash and cash equivalents $ 30,916 $ 35,175
Short-term investments 17,213
Accounts receivable - trade, net 116,903 109,003
Prepaid expenses and other 5,683 3,712
Deferred income taxes 3,034 2,817
------------- -------------
Total current assets 156,536 167,920
Property and equipment, net 35,751 28,184
Goodwill, net 36,816 11,072
Other assets 3,870 1,815
------------- -------------
Total assets $ 232,973 $ 208,991
============= =============
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable - trade $ 20,426 $ 12,657
Accrued transportation costs 15,107 21,895
Accrued compensation and employee benefits 13,903 18,677
Other accrued liabilities 9,949 8,855
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Total current liabilities 59,385 62,084
Other long-term liabilities 3,321
Deferred income taxes 3,078 3,097
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Total liabilities 65,784 65,181
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Minority interest 299 183
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Shareholders' equity:
Preferred stock, $0.001 par value, 10,000 shares
authorized
Common stock, $0.001 par value, 100,000 shares
authorized, 29,884 and 29,453 shares issued 30 29
Additional paid-in capital 91,398 81,310
Unearned compensation (1,759)
Retained earnings 92,867 77,629
Accumulated other comprehensive income (loss) 323 (771)
Treasury stock, 1,067 shares, at cost (15,969) (14,570)
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166,890 143,627
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Commitments and contingencies (Note 7)
------------- -------------
Total liabilities and shareholders' equity $ 232,973 $ 208,991
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See notes to unaudited condensed consolidated financial statements.
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EGL, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
AND COMPREHENSIVE INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Six Months Ended
March 31,
-------------------------
2000 1999
---------- ----------
Revenues $ 376,116 $ 278,598
Cost of transportation 220,888 157,322
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Net revenues 155,228 121,276
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Operating expenses:
Personnel costs 82,774 61,943
Other selling, general and administrative expenses 48,606 38,802
---------- ----------
131,380 100,745
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Operating income 23,848 20,531
Interest and other income 1,276 1,183
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Income before provision for income taxes 25,124 21,714
Provision for income taxes 9,886 8,433
---------- ----------
Net income 15,238 13,281
Other comprehensive income:
Foreign currency translation 1,094 193
---------- ----------
Comprehensive income $ 16,332 $ 13,474
========== ==========
Basic earnings per share $ 0.53 $ 0.47
========== ==========
Basic weighted-average common shares outstanding 28,691 28,128
========== ==========
Diluted earnings per share $ 0.51 $ 0.46
========== ==========
Diluted weighted-average common and common equivalent
shares outstanding 29,979 28,779
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See notes to unaudited condensed consolidated financial statements.
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EGL, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
AND COMPREHENSIVE INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended
March 31,
-------------------------
2000 1999
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Revenues $ 188,751 $ 133,722
Cost of transportation 111,693 75,769
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Net revenues 77,058 57,953
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Operating expenses:
Personnel costs 42,653 30,714
Other selling, general and administrative expenses 26,230 18,878
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68,883 49,592
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Operating income 8,175 8,361
Interest and other income 621 651
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Income before provision for income taxes 8,796 9,012
Provision for income taxes 3,518 3,479
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Net income 5,278 5,533
Other comprehensive income:
Foreign currency translation 910 90
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Comprehensive income $ 6,188 $ 5,623
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Basic earnings per share $ 0.18 $ 0.20
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Basic weighted-average common shares outstanding 28,791 28,074
========== ==========
Diluted earnings per share $ 0.18 $ 0.19
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Diluted weighted-average common and common equivalent
shares outstanding 30,005 28,789
========== ==========
See notes to unaudited condensed consolidated financial statements.
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EGL, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Six Months Ended
March 31,
--------------------------
2000 1999
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Cash flows from operating activities $ 5,993 $ 14,912
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Cash flows from investing activities:
Acquisitions, net of cash (20,288)
Purchase of investments (4,806)
Maturity of investments 17,213 6,315
Acquisition of property and equipment, net (9,879) (5,779)
Payment of contingent consideration for acquisition (1,250) (1,500)
Other (136)
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Net cash used by investing activities (14,204) (5,906)
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Cash flows from financing activities:
Issuance of common stock 294 51
Proceeds from exercise of stock options 4,259 777
Purchase of treasury stock (1,695) (9,266)
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Net cash provided (used) by financing activities 2,858 (8,438)
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Effect of foreign currency translation on cash 1,094 317
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Net increase (decrease) in cash and cash equivalents (4,259) 885
Cash and cash equivalents, beginning of period 35,175 37,191
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Cash and cash equivalents, end of period $ 30,916 $ 38,076
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See notes to unaudited condensed consolidated financial statements.
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EGL, INC.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
(IN THOUSANDS)
ACCUMULATED
COMMON STOCK ADDITIONAL UNEARNED OTHER
--------------- PAID-IN COMPEN- RETAINED COMPREHENSIVE TREASURY
SHARES AMOUNT CAPITAL SATION EARNINGS INCOME(LOSS) STOCK TOTAL
------ ------- --------- --------- --------- -------------- ---------- ---------
Balance at September 30, 1999 29,453 $ 29 $ 81,310 $ 77,629 $ (771) $ (14,570) $ 143,627
Shares issued under stock option 431 1 6,163 $ (1,905) 4,259
plans and restricted stock awards
Purchase of treasury stock (1,695) (1,695)
Issuance of shares under stock
purchase plan (2) 296 294
Tax benefit from exercise of stock
options 3,927 3,927
Amortization of unearned
compensation 146 146
Net income 15,238 15,238
Foreign currency translation
adjustments 1,094 1,094
------ ------- --------- --------- --------- --------- ---------- ---------
Balance at March 31, 2000 29,884 $ 30 $ 91,398 $ (1,759) $ 92,867 $ 323 $ (15,969) $ 166,890
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See notes to unaudited condensed consolidated financial statements.
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EGL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The accompanying unaudited condensed consolidated financial
statements have been prepared by EGL, Inc. (the Company) in accordance with the
rules and regulations of the Securities and Exchange Commission (the SEC) for
interim financial statements and accordingly do not include all information and
footnotes required under generally accepted accounting principles for complete
financial statements. The financial statements have been prepared in conformity
with the accounting principles and practices disclosed in, and should be read in
conjunction with, the annual financial statements of the Company included in the
Company's Annual Report on Form 10-K (File No. 0-27288). In the opinion of
management, these interim financial statements contain all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the Company's financial position at March 31, 2000 and the
results of its operations for the six and three months ended March 31, 2000 and
1999. Results of operations for the six and three months ended March 31, 2000
are not necessarily indicative of the results that may be expected for the
fiscal year ending September 30, 2000.
NOTE 1 - ORGANIZATION, OPERATIONS, AND SIGNIFICANT ACCOUNTING POLICIES:
On February 21, 2000, the Company's shareholders approved a proposal
to change the Company's name to EGL, Inc. in recognition of the Company's
increasing globalization, broader spectrum of services and long-term growth
strategy.
EGL, Inc. is a worldwide logistics company. The Company maintains
operating facilities throughout the United States, Mexico, Canada, Hong Kong,
the United Kingdom, Argentina, Brazil, Chile and Peru as well as a worldwide
network of exclusive and nonexclusive agents.
The Company operates in one principal industry segment. During the
six and three months ended March 31, 2000 and 1999, no individual geographic
segment outside the United States exceeded more than 10% of the revenues, net
income or assets of the combined amounts for all geographic segments.
On July 12, 1999, the Board of Directors declared a three-for-two
stock split of the Company's common stock, effected in the form of a stock
dividend. All shares and per-share amounts have been restated retroactively to
reflect the stock split, which was distributed August 30, 1999 to shareholders
of record on August 23, 1999.
NOTE 2 - EARNINGS PER SHARE:
Basic earnings per share excludes dilution and is computed by
dividing income available to common shareholders by the weighted average number
of common shares outstanding for the period. Diluted earnings per share includes
potential dilution that could occur if securities to issue common stock were
exercised. Stock options are the only potentially dilutive share equivalents the
Company has outstanding for the periods presented. Incremental shares of 1.3
million and 651,000 were used in the calculation of diluted earnings per share
for the six months ended March 31, 2000 and 1999, respectively. Incremental
shares of 1.2 million and 715,000 were used in the calculation of diluted
earnings per share for the three months ended March 31, 2000 and 1999,
respectively.
NOTE 3 - NEW ACCOUNTING PRONOUNCEMENTS:
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 is effective for transactions
entered into after January 1, 2000. SFAS 133 requires that all derivative
instruments be recorded on the balance sheet at fair value. Changes in the fair
value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and the type of hedge transaction. The ineffective portion
of all hedges will be recognized in earnings. The Company does not believe the
impact of adopting SFAS 133 will be material to its results of operations and
financial position.
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EGL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition", to be effective the
first quarter of fiscal 2001. The Company is currently evaluating its revenue
recognition policies for compliance with SAB No. 101.
NOTE 4 - ACQUISITIONS:
On December 15, 1999, the Company completed the acquisition of Compass
Cargo Limitada, a privately held air freight forwarder in Chile with annual net
revenues of approximately $1.5 million for an aggregate purchase price of $1.2
million in cash at closing.
On January 7, 2000, the Company completed the acquisition of two
commonly-controlled freight forwarding companies operating in Canada for an
aggregate purchase price of approximately $21.3 million in cash at closing and a
total of approximately $4.9 million in cash payable in three equal, annual
installments. The agreement also contemplates additional consideration not to
exceed $7.8 million over the next three years payable in cash and Company common
stock if certain earnings-based growth goals are achieved.
Each of these acquisitions was accounted for as a purchase and the
results of operations for the acquired businesses are included in the
consolidated statement of income from the acquisition date forward.
NOTE 5 - SHAREHOLDERS' EQUITY:
In January 2000, the Company's Board of Directors authorized the
repurchase of up to one million shares of its outstanding Common Stock. In April
2000, the Company's Board of Directors increased the authorization to three
million shares. As of March 31, 2000, the Company had repurchased 57,500 shares
for a total of $1.7 million under this authorization. The Company repurchased an
additional 217,000 shares for $4.9 million subsequent to March 31, 2000.
Unearned compensation relates to awards of restricted stock and is
recorded at the date of award based on the market value of the shares and is
amortized to expense over the vesting period of three years.
NOTE 6 - REVOLVING CREDIT FACILITY:
On January 13, 2000, the Company entered into an agreement (the Credit
Agreement) with Bank of America, N.A. (the Bank) as administrative agent. The
Credit Agreement provides a $50 million revolving line of credit and includes a
$10 million sublimit for the issuance of letters of credit.
The revolving line of credit matures on January 11, 2001. For each
tranche of principal, the Company elects an interest rate calculation based on
either LIBOR (a LIBOR Tranche) or either the prime rate announced by the Bank or
the federal funds rate plus 50 basis points (a Prime Rate Tranche), plus an
applicable margin based on a ratio of consolidated debt to consolidated EBITDA
(earnings before interest, taxes, depreciation and amortization). The interest
for a LIBOR Tranche is due at periods of one, two, three or six months, as the
Company may select at the time it requests the funds. The interest for a Prime
Rate Tranche is due quarterly.
The revolving line of credit includes unused commitment fees and letter
of credit fees, each of which is calculated on the basis of a ratio of
consolidated debt to consolidated EBITDA. The Company is subject to certain
covenants under the terms of the Credit Agreement, including, but not limited
to, maintenance at the end of any fiscal quarter of (a) minimum specified
consolidated net worth, (b) a ratio of consolidated funded debt to total
capitalization of no greater than .50 to 1.00, (c) a ratio of consolidated
funded debt to consolidated EBITDA of no greater than 2.50 to 1.00 and (d) a
consolidated fixed charge coverage ratio of no less than 2.00 to 1.00.
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EGL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The Credit Agreement also restricts dividends or distributions with
respect to equity securities or interests in excess of 20% of consolidated net
income for any four fiscal quarters period. The Credit Agreement also places
restrictions on additional indebtedness, liens, investments, change of control
and other matters.
NOTE 7 - COMMITMENTS AND CONTINGENCIES:
In the third quarter of fiscal 2000, the Company received a Letter of
Determination and Conciliation Proposal from the Equal Employment Opportunity
Commission relating to a Commissioner's Charge issued in the first quarter of
fiscal 1998. See "Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Part II, Item 1. Legal Proceedings."
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors which have affected certain aspects of the Company's
financial position and operating results during the periods included in the
accompanying unaudited condensed consolidated financial statements. This
discussion should be read in conjunction with the discussion under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the annual financial statements included in the Company's Annual Report on Form
10-K (File No. 0-27288) and the accompanying unaudited condensed consolidated
financial statements.
OVERVIEW
On February 21, 2000, the Company's shareholders approved a proposal to
change the Company's name to EGL, Inc. in recognition of the Company's
increasing globalization, broader spectrum of services and long-term growth
strategy.
The Company's revenues have increased to $595.2 million in fiscal 1999
from $291.8 million in fiscal 1997, and its operating income has increased to
$45.0 million in fiscal 1999 from $25.7 million in fiscal 1997. Historically,
the Company has grown primarily through internal expansion, including developing
its terminal network, expanding its service offerings and sales force and
increasing its customer base. The Company has also made acquisitions on a
limited basis.
Since October 1, 1996, the Company has added 45 terminals, increasing
the total to 92 at March 31, 2000. The opening of a new terminal generally has
an initial short-term negative impact on profitability due to operating losses
of the new terminal. However, the opening of a new terminal generally does not
require significant capital expenditures. Additionally, personnel costs are
contained at the time of the opening of a new terminal because commissions are
generally not paid until salesmen achieve minimum sales levels and until
managers achieve terminal profitability.
Although future new terminals may be opened in cities smaller than
those in which the Company's more mature terminals are located, the Company
believes the results of new terminals should benefit from a ready base of
business provided by its existing customers.
The Company intends to continue to expand its international freight
forwarding business. International shipments typically generate higher gross
revenues and net revenue per shipment than domestic shipments. The Company
anticipates that the cost of transportation as a percentage of revenues will be
higher for international freight than for domestic freight. However, the Company
does not expect its operating expenses to increase in proportion to such
revenues. In April 1998, the Company expanded its international operations
through the acquisition of the operations of Eagle Transfer, Inc. and S.
Boardman (Air Services Limited). The Company commenced operations in Hong Kong
during September 1998, in Argentina, Brazil and Peru during the fourth quarter
of fiscal 1999 and in Chile during the first quarter of fiscal 2000.
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EGL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
On January 7, 2000, the Company completed the acquisition of Commercial
Transport International (Canada) Ltd. (CTI) and Fastair Cargo Systems Ltd.
(Fastair) for an aggregate purchase price of approximately $21.3 million in cash
at closing and a total of approximately $4.9 million in cash payable in three
equal annual installments. The acquisition agreement also contemplates
additional consideration not to exceed $7.8 million over the next three years
payable in cash and Company common stock if certain earnings-based growth goals
are achieved. Fastair is a leading forwarder in the intra-Canada freight
forwarding market. CTI, its sister company, primarily serves the international
freight forwarding market with offices coast-to-coast throughout Canada. CTI and
Fastair were privately-held, under common control and have eight locations in
Canada. Both companies are based in Toronto, Canada. The acquisitions were
accounted for as a purchase and the acquired operations were integrated with the
Company's existing Canadian operations.
As a result of recent industry consolidation, the Company plans to
accelerate its international expansion efforts beginning in the third quarter of
fiscal 2000 with the addition of seasoned international airfreight employees
worldwide. The new staff and related infrastructure costs are expected to
increase international operating expenses over the next two quarters by
approximately $4.0 to $5.0 million, or $0.08 to $0.10 cents per diluted share
(net of tax).
The Company also intends to continue the growth of its local pickup
and delivery operations. By providing local pickup and delivery services for its
freight forwarding shipments, the Company has been able to increase its gross
margin for these shipments because it captures margins that were previously paid
to third parties. However, the Company's local pickup and delivery services
provided to other non-forwarding customers generate a lower gross margin than
the Company's domestic forwarding operations due to their higher transportation
costs as a percentage of revenues.
Historically, the Company's operating results have been subject, to a
limited degree, to seasonal trends when measured on a quarterly basis. The
second quarter has traditionally been the weakest and the fourth quarter has
traditionally been the strongest.
RESULTS OF OPERATIONS
The following table presents certain statement of income data as a percentage of
revenues and operating data for the periods indicated.
Six Months Ended March 31, Three Months Ended March 31,
---------------------------- ---------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of transportation 58.7 56.5 59.2 56.7
----------- ----------- ----------- -----------
Net revenues 41.3 43.5 40.8 43.3
Personnel costs 22.0 22.2 22.6 23.0
Other selling, general and administrative expenses 12.9 13.9 13.9 14.1
----------- ----------- ----------- -----------
Operating expenses 34.9 36.1 36.5 37.1
----------- ----------- ----------- -----------
Operating income 6.4% 7.4% 4.3% 6.2%
=========== =========== =========== ===========
Net income 4.1% 4.8% 2.8% 4.1%
----------- ----------- ----------- -----------
Freight forwarding terminals at end of period 92 74 92 74
Local delivery locations at end of period 76 67 76 67
Freight forwarding shipments 1,027,536 643,763 589,033 324,399
Average weight (lbs.) per freight forwarding
shipment 621 651 555 634
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EGL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
SIX MONTHS ENDED MARCH 31, 2000 COMPARED TO SIX MONTHS ENDED MARCH 31, 1999
Revenues increased 35.0% to $376.1 million in the first six months of
fiscal 2000 from $278.6 million in the same period of fiscal 1999 primarily due
to increases in the number of shipments and the total weight of cargo shipped.
These increases resulted from an increase in the number of terminals open during
such period, an increase in penetration in existing airfreight and pickup and
delivery markets, the addition of significant national account customers and the
effect of acquisitions completed after the second quarter of fiscal 1999.
Domestic revenues for the second quarter of fiscal 2000 were adversely affected
by a temporary shift from overnight air shipments to lower-margin economy ground
shipments by the technology and manufacturing sectors as a result of the Year
2000 transition. This adjustment primarily impacted the seasonally weak months
of January and February 2000, when the Company recorded a 19.0% domestic revenue
growth rate over January and February 1999. The Company's domestic shipping mix
normalized by March 2000, when it recorded a 46.0% domestic revenue growth rate
over March 1999.
For those freight forwarding terminals opened prior to the beginning of
fiscal 1999 (71 terminals), revenues increased 33.6% to $336.3 million for the
six months ended March 31, 2000 from $251.8 million for the six months ended
March 31, 1999.
Revenues for the six months ended March 31, 2000 were comprised of
$350.5 million of forwarding revenues and $25.6 million of local pickup and
delivery revenues, as compared to $254.8 million and $23.8 million,
respectively, for the six months ended March 31, 1999. Of the Company's
forwarding revenues for the six months ended March 31, 2000, $82.4 million were
attributable to international shipments (defined as shipments that cross a
national border) compared to $46.3 million for the six months ended March 31,
1999. The acquisitions completed in Canada and Chile, as described in Note 4,
added approximately $16.7 million in international revenue during the six months
ended March 31, 2000.
The Company's total local pickup and delivery revenues for the six
months ended March 31, 2000 were $94.6 million. This amount includes $69.0
million of intercompany sales that were eliminated upon consolidation and $25.6
million in services to third-party (non-forwarding) customers.
Cost of transportation increased during the first six months of fiscal
2000 as a percentage of revenues to 58.7% from 56.5% in the comparable period in
fiscal 1999. The increase was primarily attributable to increased international
freight shipping volumes, which carry a higher cost of transportation per
shipment than domestic freight. Cost of transportation increased in absolute
terms by 40.4% to $220.9 million for the six months ended March 31, 2000 from
$157.3 million in the same period in fiscal 1999 as a result of increases in
freight shipped. Net revenue margin decreased to 41.3% in the first six months
of fiscal 2000 from 43.5% in the same period in fiscal 1999. The primary reason
for the margin decline was increased international freight shipping volumes
which carry a higher cost of transportation per shipment than domestic freight
and a temporary shift in January and February 2000 from overnight air shipments
to lower-margin economy ground shipments by the technology and manufacturing
sectors as a result of the Year 2000 transition. Net revenues increased 28.0% to
$155.2 million in the first six months of fiscal 2000 from $121.3 million in the
same period in fiscal 1999.
Operating expenses decreased as a percentage of revenues to 34.9% in
the first six months of fiscal 2000 from 36.1% for the same period in fiscal
1999. The $30.6 million increased costs in absolute terms was attributable
primarily to continued growth in the level of operations from additional
terminals and expansion of local delivery operations. Personnel costs decreased
as a percentage of revenues to 22.0% in the first six months of fiscal 2000 from
22.2% in the same period in fiscal 1999 and increased in absolute terms by 33.6%
to $82.8 million in the fiscal 2000 period from $61.9 million in the fiscal 1999
period. This increase was due to increased staffing needs associated with the
opening of new terminals and local delivery locations, the effect of
acquisitions, expanded operations at existing terminals and increased
commissions resulting from higher revenues and expanded corporate
infrastructure. Such personnel costs include all compensation expenses,
including those relating to sales commissions and salaries and to headquarters
employees and executive officers. The Company has added personnel to build
corporate infrastructure particularly in international operations, to keep pace
with its
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EGL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
recent significant growth, to deepen the staff at its terminals and to prepare
for expected growth during fiscal 2000. Other selling, general and
administrative expenses decreased as a percentage of revenues to 12.9% in the
first six months of fiscal 2000 from 13.9% in the first six months of fiscal
1999, and increased in absolute terms by 25.3% to $48.6 million in the fiscal
2000 period from $38.8 million in the fiscal 1999 period. In the first six
months of fiscal 2000, selling expenses as a percentage of revenues decreased by
0.1% and other general and administrative expenses as a percentage of revenues
decreased by 1.0% compared to the first six months of fiscal 1999. The absolute
increases in selling, general and administrative expenses were due to overall
increases in the level of the Company's activities in the fiscal 2000 period,
increased expenses attributable to the Company's acquisitions, the Company's
headquarters facility and a $1.1 million non-recurring charge for legal fees
recorded in the second quarter of fiscal 2000.
Operating income increased 16.2% to $23.8 million in the first six
months of fiscal 2000 from $20.5 million in the comparable period in fiscal
1999. Operating margin decreased to 6.4% for six months ended March 31, 2000
compared to 7.4% for the six months ended March 31, 1999. Interest and other
income increased to $1.3 million from $1.2 million as a result of rental income
of $353,000 from a sublease that began in May 1999, partially offset by a
decline in interest income from decreased levels of investments during the six
months ended March 31, 2000 compared to the six months ended March 31, 1999.
Income before provision for income taxes increased 15.7% to $25.1
million in the first six months of fiscal 2000 from $21.7 million in the
comparable period of fiscal 1999. Provision for income taxes increased 17.2% to
$9.9 million for the six months ended March 31, 2000 from $8.4 million for the
six months ended March 31, 1999. Net income increased 14.7% to $15.2 million in
the first six months of fiscal 2000 from net income of $13.3 million in the same
period in fiscal 1999. Diluted earnings per share increased 10.9% to $0.51 per
share for the six months ended March 31, 2000 from $0.46 in the same period in
fiscal 1999.
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
Revenues increased 41.2% to $188.8 million in the second quarter of
fiscal 2000 from $133.7 million in the same period of fiscal 1999 primarily due
to increases in the number of shipments and the total weight of cargo shipped.
These increases resulted from an increase in the number of terminals open during
such period, an increase in penetration in existing airfreight and pickup and
delivery markets, the addition of significant national account customers and the
effect of acquisitions completed after the second quarter of fiscal 1999.
Domestic revenues for the second quarter of fiscal 2000 were adversely affected
by a temporary shift from overnight air shipments to lower-margin economy ground
shipments by the technology and manufacturing sectors as a result of the Year
2000 transition. This adjustment primarily impacted the seasonally weak months
of January and February 2000, when the Company recorded a 19.0% domestic revenue
growth rate over January and February 1999. The Company's domestic shipping mix
normalized by March 2000, when it recorded a 46.0% domestic revenue growth rate
over March 1999.
For those freight forwarding terminals opened prior to the beginning of
fiscal 1999 (71 terminals), revenues increased 35.0% to $163.5 million for the
three months ended March 31, 2000 from $121.1 million for the three months ended
March 31, 1999.
Revenues for the three months ended March 31, 2000 were comprised of
$176.4 million of forwarding revenues and $12.4 million of local pickup and
delivery revenues, as compared to $121.5 million and $12.2 million,
respectively, for the three months ended March 31, 1999. Of the Company's
forwarding revenues for the second quarter of fiscal 2000, $46.6 million were
attributable to international shipments (defined as shipments that cross a
national border) compared to $20.5 million for the second quarter of fiscal
1999. The acquisitions completed in Canada and Chile, as described in Note 4,
added approximately $16.7 million in international revenue during the second
quarter of fiscal 2000.
The Company's total local pickup and delivery revenues for the second
quarter of fiscal 2000 were $45.5 million. This amount includes $33.1 million of
intercompany sales that were eliminated upon consolidation and $12.4 million in
services to third-party (non-forwarding) customers.
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14
EGL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
Cost of transportation increased during the second quarter of fiscal
2000 as a percentage of revenues to 59.2% from 56.7% in the comparable period in
fiscal 1999. The increase was primarily attributable to increased international
freight shipping volumes, which carry a higher cost of transportation per
shipment than domestic freight. Cost of transportation increased in absolute
terms by 47.4% to $111.7 million in the second quarter of fiscal 2000 from $75.8
million in the second quarter of fiscal 1999 as a result of increases in freight
shipped. Net revenue margin decreased to 40.8% in the second quarter of fiscal
2000 from 43.3% in the same period in fiscal 1999. The primary reason for the
margin decline was increased international freight shipping volumes which carry
a higher cost of transportation per shipment than domestic freight and a
temporary shift in January and February 2000 from overnight air shipments to
lower-margin economy ground shipments by the technology and manufacturing
sectors as a result of the Year 2000 transition. Net revenues increased 33.0%
to $77.1 million in the second quarter of fiscal 2000 from $58.0 million in
the same period in fiscal 1999.
Operating expenses decreased as a percentage of revenues to 36.5% in
the second quarter of fiscal 2000 from 37.1% for the same period in fiscal 1999.
The $19.3 million increased costs in absolute terms for the second quarter of
fiscal 2000 was attributable primarily to continued growth in the level of
operations from additional terminals and expansion of local delivery operations.
Personnel costs decreased as a percentage of revenues to 22.6% in the second
quarter of fiscal 2000 from 23.0% in the same period in fiscal 1999 and
increased in absolute terms by 38.9% to $42.7 million. This increase was due to
increased staffing needs associated with the opening of new terminals and local
delivery locations, the effect of acquisitions, expanded operations at existing
terminals and increased commissions resulting from higher revenues and expanded
corporate infrastructure. Such personnel costs include all compensation
expenses, including those relating to sales commissions and salaries and to
headquarters employees and executive officers. The Company has added personnel
to build corporate infrastructure particularly in international operations, to
keep pace with its recent significant growth, to deepen the staff at its
terminals and to prepare for expected growth during fiscal 2000. Other selling,
general and administrative expenses decreased as a percentage of revenues to
13.9% in the second quarter of fiscal 2000 from 14.1% in the second quarter of
fiscal 1999, and increased in absolute terms by 38.9% to $26.2 million in the
fiscal 2000 period from $18.9 million in the fiscal 1999 period. In the second
quarter of fiscal 2000, selling expenses as a percentage of revenues remained
constant at 1.3% and other general and administrative expenses as a percentage
of revenues decreased by 0.3% compared to the second quarter of fiscal 1999. The
absolute increases in selling, general and administrative expenses were due to
overall increases in the level of the Company's activities in the fiscal 2000
period, increased expenses attributable to the Company's acquisitions, the
Company's headquarters facility and a $1.1 million non-recurring charge for
legal fees recorded in the second quarter of fiscal 2000.
Operating income decreased 2.2% to $8.2 million in the second quarter
of fiscal 2000 from $8.4 million in the comparable period in fiscal 1999.
Operating margin decreased to 4.3% for the quarter ended March 31, 2000 from
6.2% for the quarter ended March 31, 1999. Interest and other income decreased
to $621,000 from $651,000 as a result of decreased levels of investments during
the quarter ended March 31, 2000 compared to the quarter ended March 31, 1999
offset by rental income of $193,000 from a sublease that began in May 1999.
Income before provision for income taxes decreased 2.4% to $8.8 million
in the second quarter of fiscal 2000 from $9.0 million in the comparable period
of fiscal 1999. Provision for income taxes remained constant at $3.5 million for
the three months ended March 31, 2000 and 1999. Net income decreased 4.6% to
$5.3 million in the second quarter of fiscal 2000 from net income of $5.5
million in the same period in fiscal 1999. Diluted earnings per share decreased
5.3% to $0.18 per share for the quarter ended March 31, 2000 from $0.19 in the
same period in fiscal 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and short-term investments decreased $21.5 million
to $30.9 million at March 31, 2000 from $52.4 million at September 30, 1999. At
March 31, 2000, the Company had working capital of $97.2 million and a current
ratio of 2.64 compared to working capital of $105.8 million and a current ratio
of 2.70 at September 30, 1999. The Company's working capital decreased during
this period primarily as a result of cash used for business acquisitions.
Capital expenditures for the six months ended March 31, 2000 were approximately
$9.9 million.
14
15
EGL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
Other than its public offerings, the Company's cash generated from
operations has been its primary source of liquidity, although it has from time
to time made limited use of bank borrowing and lease or purchase arrangements.
The Company does not anticipate paying any cash dividends on its Common Stock in
the foreseeable future.
On January 7, 2000, the Company completed the acquisition of CTI and
Fastair for an aggregate purchase price of approximately $21.3 million paid at
closing from cash and cash equivalents on hand. Additionally, a total of
approximately $4.9 million will be paid in cash over the next three years in
annual installments.
In January 2000, the Company's Board of Directors authorized the
repurchase of up to one million shares of its outstanding Common Stock. In April
2000, the Company's Board of Directors increased the authorization to three
million shares. As of March 31, 2000, the Company had repurchased 57,500 shares
for a total of $1.7 million under this authorization. The Company purchased an
additional 217,000 shares for $4.9 million subsequent to March 31, 2000. The
Company's current intention is that future repurchases will help to offset
increases in the number of shares outstanding resulting from previous and future
stock option exercises.
On January 13, 2000, the Company entered into the Credit Agreement with
Bank of America, N.A. (the Bank), as administrative agent. The Credit Agreement
provides a $50 million revolving line of credit and includes a $10 million
sublimit for the issuance of letters of credit.
The revolving line of credit matures on January 11, 2001. For each
tranche of principal, the Company elects an interest rate calculation based on
either LIBOR (a LIBOR Tranche) or either the prime rate announced by the Bank or
the federal funds rate plus 50 basis points (a Prime Rate Tranche), plus an
applicable margin based on a ratio of consolidated debt to consolidated EBITDA
(earnings before interest, taxes, depreciation and amortization). The interest
for a LIBOR Tranche is due at periods of one, two, three or six months, as the
Company may select at the time it requests the funds. The interest for a Prime
Rate Tranche is due quarterly.
The revolving line of credit includes unused commitment fees and
letters of credit fees, each of which is calculated on the basis of a ratio of
consolidated debt to consolidated EBITDA. The Company is subject to certain
covenants under the terms of the Credit Agreement, including, but not limited
to, maintenance at the end of any fiscal quarter of (a) minimum specified
consolidated net worth, (b) a ratio of consolidated funded debt to total
capitalization of no greater than .50 to 1.00, (c) a ratio of consolidated
funded debt to consolidated EBITDA of no greater than 2.50 to 1.00 and (d) a
consolidated fixed charge coverage ratio of no less than 2.00 to 1.00.
The Credit Agreement also restricts dividends or distributions with
respect to equity securities or interests in excess of 20% of consolidated net
income for any four fiscal quarters period. The Credit Agreement also places
certain restrictions on additional indebtedness, liens, investments, change of
control and other matters.
The Company's subsidiaries in the United Kingdom, Hong Kong and Mexico
maintain bank lines of credit for purposes of securing customs bonds and bank
letters of credit for purposes of guaranteeing some transportation expenses.
These credit lines and letters of credit are supported by standby letters of
credit issued by a United States bank or guarantees issued by the Company to the
foreign banks. At March 31, 2000, the Company was contingently liable for
approximately $2.6 million under outstanding letters of credit and guarantees
related to these obligations.
As of March 31, 2000, the Company had outstanding non-qualified stock
options to purchase an aggregate of 4,476,029 shares of common stock at exercise
prices ranging from $0.83 to $32.69, which equaled the fair market value of the
underlying common stock on the dates of grant. At the time a non-qualified stock
option is exercised, the Company will generally be entitled to a deduction for
federal and state income tax purposes equal to the difference between the fair
market value of the common stock on the date of exercise and the option price.
As a result of exercises for the six months ended March 31, 2000 of
non-qualified stock options to purchase an aggregate of 431,082 shares of common
stock, the Company is entitled to a federal income tax deduction of
approximately $10 million. The Company has recognized a reduction of its federal
and state income tax liability of approximately $3.9 million with respect to the
six months ended March 31, 2000.
15
16
EGL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
Accordingly, the Company recorded an increase in additional paid-in capital and
a reduction to current taxes payable pursuant to the provisions of SFAS No. 109,
"Accounting for Income Taxes." Any exercises of non-qualified stock options in
the future at exercise prices below the then fair market value of the common
stock may also result in tax deductions equal to the difference between those
amounts. There is uncertainty as to whether or not the exercises will occur, the
amount of any deductions or the Company's ability to fully utilize any
deductions.
On January 10, 1997, the Company entered into a five-year operating
lease agreement with two unrelated parties for financing the construction of its
Houston terminal, warehouse and headquarters facility (the Houston Facility).
The cost of the Houston Facility was approximately $8.5 million. Under the terms
of the lease agreement, average monthly lease payments are approximately
$59,000, which includes monthly interest costs based upon LIBOR rate plus 145
basis points, beginning on July 1, 1998 through October 2, 2002. A balloon
payment equal to the outstanding lease balance, which was initially equal to the
cost of the facility, is due on October 2, 2002. As of March 31, 2000, the lease
balance was approximately $8.3 million.
On April 3, 1998, the Company entered into a five-year $20 million
master operating lease agreement with two unrelated parties for financing the
construction of terminal and warehouse facilities throughout the United States
designated by the Company. Under the terms of the master operating lease
agreement, average monthly lease payments, including monthly interest costs
based upon LIBOR rate plus 145 basis points, begin upon the completion of the
construction of each financed facility. The monthly lease obligation will
continue for a term of 52 months. A balloon payment equal to the outstanding
lease balances, which were initially equal to the cost of each facility, is due
at the end of each lease term. Construction began during fiscal 1999 on five
terminal facilities. As of March 31, 2000, the aggregate lease balance was
approximately $14.6 million under the master operating lease agreement.
The operating lease agreements contain restrictive financial covenants
requiring the maintenance of a fixed charge coverage ratio of at least 1.5 to
1.0 and specified amounts of consolidated net worth and consolidated tangible
net worth. In addition, the master operating lease agreement restricts the
Company from incurring debt in an amount greater than $10 million, except
pursuant to a single credit facility involving a commitment of not more than $50
million.
The Company has an option, exercisable at anytime during the lease
term, and under particular circumstances may be obligated, to acquire the
Houston terminal and each of its other financed facilities for an amount equal
to the outstanding lease balance. If the Company does not exercise the purchase
option, and does not otherwise meet its obligations, it is subject to a
deficiency payment computed as the amount equal to the outstanding lease balance
minus the then current fair market value of each financed facility within
limits. The Company expects that the amount of any deficiency payment would be
expensed.
During fiscal 1999, the Company entered into commitments to construct
warehouse and terminal facilities for an aggregate cost of approximately $9.0
million. Payment for the construction of the facilities is being made from cash
balances. As of March 31, 2000, the Company had paid approximately $7.4 million
of the commitments. Construction of the facilities is estimated to be completed
during fiscal 2000.
COMMISSIONER'S CHARGE
As discussed in Part II, Item 1. Legal Proceedings, the Company has
received a Letter of Determination and Conciliation Proposal from the EEOC
relating to the Commissioner's Charge described in that section. In the second
quarter of fiscal 2000, the Company accrued a $1.1 million charge ($700,000
after-tax) for its estimated future litigation expenses to defend this matter.
There can be no assurance as to what will be the amount of time it will take to
resolve the Commissioner's Charge and related issues or the degree of any
adverse effect of these matters on the Company and its financial condition and
results of operations.
16
17
EGL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
RELATED PARTY TRANSACTIONS
In May 1999, the Company began subleasing a portion of its warehouse
space in Houston, Texas and London, England to a customer pursuant to a
five-year sublease. The customer is partially owned by James R. Crane, the
Company's Chairman and President. Rental income was approximately $353,000
during the first six months of fiscal 2000 and $143,000 during fiscal 1999. In
addition, the Company billed the customer approximately $1.0 million for freight
forwarding services during the first six months of fiscal 2000 and $356,000
during fiscal 1999. The Company believes the rental rates set forth in the
sublease agreement approximate market rates.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of March 31, 2000, Company did not have any outstanding short-term
or long-term debt instruments. Accordingly, the Company does not have market
risk related to interest rates. However, the Company's lease payments on certain
financed facilities are tied to market interest rates. At March 31, 2000, a 10%
rise in the base rate for these financing arrangements would not have a material
impact on operating income for fiscal 2000.
The Company's earnings are affected by fluctuations in the value of the
U.S. dollar as it relates to the earnings of its United Kingdom, Canada, Mexico,
Hong Kong and Latin America operations, as a result of transactions in foreign
markets. At March 31, 2000, the result of a uniform 10% strengthening in the
value of the dollar relative to the currencies in which these operations are
denominated would not have a material impact on operating income for fiscal
2000.
The Company has not purchased any futures contracts nor has it
purchased or held any derivative financial instruments for trading purposes
during the second quarter of fiscal 2000.
In the second quarter of fiscal 1999, the Company entered into
contracts for the purpose of hedging the costs of a portion of anticipated jet
fuel purchases for chartered aircraft during the following twelve months. These
contracts matured during the second quarter of fiscal 2000 and resulted in a
gain of $604,000 recorded as a reduction of costs of transportation.
In May 2000, the Company entered into two additional contracts to hedge
the cost of jet fuel purchases during the following twelve months. Such
contracts are nominally insignificant.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company is a party to various legal claims and
proceedings arising in the ordinary course of business. Except as described
below, the Company is not currently a party to any material litigation and is
not aware of any litigation threatened against it, which it believes would have
a material adverse effect on its business.
In December 1997, the U.S. Equal Employment Opportunity Commission
(EEOC) issued a Commissioner's Charge against the Company and certain of its
subsidiaries (the Commissioner's Charge) pursuant to Sections 706 and 707 of
Title VII of the Civil Rights Act of 1964, as amended (Title VII). The Company
continues to vigorously defend against allegations contained in the
Commissioner's Charge. In the Commissioner's Charge, the EEOC charged the
Company and certain of its subsidiaries with violations of Section 703 of Title
VII, as amended, the Age Discrimination in Employment Act of 1967, and the Equal
Pay Act of 1963, resulting from (i) engaging in unlawful discriminatory hiring,
recruiting and promotion practices and maintaining a hostile work environment,
based on one or more of race, national origin, age and gender, (ii) failures to
investigate, (iii) failures to maintain proper records and (iv) failures to file
accurate reports. The Commissioner's Charge states that the persons aggrieved
include all African-Americans, Hispanics, Asians and females who are, have been
or might be affected by the alleged unlawful practices.
Shortly before the filing of this Form 10-Q, the Houston District
Office of the EEOC provided to the Company its "Letter of Determination and
Conciliation Proposal" with respect to the investigation pertaining to the
Commissioner's Charge and made a final determination that there is a
sufficient evidentiary basis to sustain all allegations in the Commissioner's
Charge, except as to certain charges relating to Asian Americans.
The Conciliation Proposal "invites [the Company] to actively engage in
conciliation to resolve this matter," and proposes certain monetary and
non-monetary remedies to "serve to facilitate confidential discussions which,
hopefully, will eventuate in an appropriate settlement." That proposed relief
includes, the following: (i) backpay and benefits for a class of minorities in
the amount of $6,000,000 (this is a $950,000 reduction from the amount claimed
under the preliminary assessment); (ii) compensation for certain incumbent
minorities and women who were allegedly underpaid relative to white male
counterparts in the amount of $5,000,000; (iii) compensation for certain
minority and female employees who were allegedly not promoted at rates
comparable to their respective employment rates in the amount of $2,950,000; and
(iv) financial compensation for certain other employees as a result of alleged
"disparate discipline" in the amount of $745,000, all exclusive of interest,
compensatory and punitive damages and costs. The specific monetary relief as
outlined above is $950,000 less than that amount proposed in its preliminary
assessment. The Conciliation Proposal states, however, that "the EEOC agrees
that this claim can be resolved for $20,000,000. The EEOC also seeks
non-monetary relief, including hiring 244 minorities, certain upward adjustments
to salaries, reinstatement of up to 15 employees and required promotion of 30
employees. The Houston District Office also seeks (a) reformation of the
Company's policies and practices with respect to record keeping, recruiting,
hiring and placement, reinstatement, promotion and transfer, and corporate
governance, and (b) the institution of specified procedures and steps with
respect to such matters.
Certain individual employees have brought charges of this nature
against the Company in the ordinary course of business. The Company anticipates
that the claims of these individuals will have no material adverse impact on the
Company's financial condition.
The Company believes that the Houston District Office's preliminary
assessment of systemic discrimination is wrong and is the result of agency bias
against the Company and its Chief Executive Officer because of the Company's
vigorous defense of this matter. The Company does intend, however, to respond to
the EEOC's offer to conciliate this matter and intends to engage in good faith
discussions with the EEOC in an effort to resolve this matter. If the Company is
unable to effect what it considers to be a reasonable settlement of this matter
during the conciliation process, the Company will continue its vigorous defense
of this matter. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
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19
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
As described under "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Overview," the Company agreed to
issue shares of Company common stock as additional partial
consideration for the acquisition of CTI and Fastair if certain
earnings-based growth goals are achieved. Such transaction is exempt
from the registration requirements of the Securities Act by virtue of
Section 4(2) thereof as a transaction not involving any public
offering.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES, NONE
ITEM 4. SUBMISSION OF MATTERS OF A VOTE OF SECURITY-HOLDERS
(A) ANNUAL MEETING OF SHAREHOLDERS ON FEBRUARY 21, 2000
(B) ELECTION OF DIRECTORS
BROKER
FOR AGAINST WITHHELD ABSTAIN NONVOTES
--- ------- -------- ------- --------
James R. Crane 26,465,170 * 3,610 - *
Elijio V. Serrano 26,462,995 * 5,785 - *
William P. O'Connell 26,465,027 * 3,753 - *
Neil E. Kelley 26,465,170 * 3,610 - *
Frank J. Hevrdejs 26,465,170 * 3,610 - *
Norwood W. Knight-Richardson 26,465,170 * 3,610 - *
Rebecca A. McDonald 26,405,783 * 62,997 - *
(C) PROPOSALS
Proposal to Change the Company's
Name to EGL, Inc. 26,450,960 13,866 * 3,954 *
Approval of Appointment of 26,463,621 3,698 * 1,461 *
PricewaterhouseCoopers LLP as
Independent Accountants
*Not Applicable
ITEM 5. OTHER INFORMATION
FORWARDING LOOKING STATEMENTS
The statements contained in all parts of this document, including, but
not limited to, those relating to the Company's plans for international air
freight forwarding services; the future expansion and results of the Company's
terminal network; plans for local delivery services; expected growth; future
marketing; construction of new facilities; the results, timing, outcome or
effect of matters relating to the Commissioner's Charge or other litigation;
future operating expenses, including expected international operating expenses;
any seasonality of the Company's business; future margins; future dividend
plans; use of Revolver proceeds; fluctuations in currency valuations;
fluctuations in interest rates; future acquisitions and any effects, benefits,
results, terms or other aspects of such acquisitions; fluctuations in the price
of jet fuel; ability to continue growth and implement growth and business
strategy; the ability of expected sources of liquidity to support working
capital and capital expenditure requirements; the tax benefit of any stock
option exercises; and any other statements regarding future growth, cash needs,
terminals, operations, business plans and financial results and any other
statements which are not historical facts are forward-looking statements. When
used in this document, the words "anticipate, " "estimate," "expect," "may,"
"plans," " project," and similar expressions are intended to be among the
statements that identify forward-looking statements. Such statements involve
risks and uncertainties, including, but not limited to, those relating to the
Company's dependence on its ability to attract and retain skilled managers and
other personnel, including the attraction of new international staff; the
intense competition within the freight industry; the uncertainty of the
Company's ability to manage and continue its growth and implement its business
strategy; the Company's dependence on the availability of cargo space to serve
its customers; the potential for liabilities if certain independent
owner/operators that serve the Company are determined to be employees; effects
of regulation; results of litigation (including the results and outcome of the
Commissioner's Charge); the Company's vulnerability to general economic
conditions and dependence on its principal customers; the control by the
Company's principal shareholder; the Company's potential exposure to claims
involving its local pickup and delivery operations; risk of international
operations; risks relating to acquisitions; the Company's future financial and
operating results, cash needs and demand for its services; and the Company's
ability to maintain and comply with permits and licenses; as well as other
factors detailed in the Company's filings with the Securities and Exchange
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20
Commission. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual outcomes may vary
materially from those indicated. The Company undertakes no responsibility to
update for changes related to these or any other factors that may occur
subsequent to this filing.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(A) EXHIBITS.
3(i) Second Amended and Restated Articles of Incorporation of the Company, as amended.
*3(ii) Amended and Restated Bylaws of the Company, as amended (Exhibit 3.2 to the Company's
Registration Statement on Form S-1 (Registration No. 33-97606)).
*10(i) Credit Agreement dated January 13, 2000 among the Company, the financial institutions
named therein and Bank of America, N. A. (Exhibit 10(i) to the Company's Form 10-Q
for the fiscal quarter ended December 31, 1999).
27 Financial Data Schedule.
- ----------------------
* Incorporated by reference as indicated.
(B) REPORTS ON FORM 8-K.
The Company filed a Report on Form 8-K dated January 7, 2000
related to the acquisitions of Commercial Transport
International (Canada) Ltd. and Fastair Cargo Systems Ltd.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
EGL, INC.
--------------------------
(Registrant)
Date: May 10, 2000 BY: /s/ James R. Crane
------------------------------- --------------------------
James R. Crane
President
Date: May 10, 2000 BY: /s/ Elijio V. Serrano
------------------------------- --------------------------
Elijio V. Serrano
Chief Financial Officer
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INDEX TO EXHIBITS
EXHIBITS DESCRIPTION
- -------- -----------
3(i) Second Amended and Restated Articles of Incorporation of the Company, as amended.
*3(ii) Amended and Restated Bylaws of the Company, as amended (Exhibit 3.2 to the Company's Registration Statement on Form S-1
(Registration No. 33-97606)).
*10(i) Credit Agreement dated January 13, 2000 among the Company, the financial institutions named therein and Bank of America,
N. A. (Exhibit 10(i) to the Company's Form 10-Q for the fiscal quarter ended December 31, 1999).
27 Financial Data Schedule
- --------------------
*Incorporated by reference as indicated.
22