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EXHIBIT 13.2
I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CIRCLE INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS
(unaudited, in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- --------------------------
2000 1999 2000 1999
Revenue $ 237,040 $ 195,215 $ 453,201 $ 378,068
Freight consolidation costs 145,896 113,764 277,413 220,451
------------ ----------- ------------ ----------
Net revenue 91,144 81,451 175,788 157,617
Other costs and expenses:
Salaries and related 47,720 42,516 95,584 84,773
Operating, selling and administrative 33,964 33,246 66,116 64,867
------------ ---------- ------------- ----------
Total other costs and expenses 81,684 75,762 161,700 149,640
------------ ---------- ------------- ----------
Income from operations 9,460 5,689 14,088 7,977
Other income (expense):
Interest income (expense), net (405) 98 (667) 173
Income from affiliates, net 758 1,202 1,144 1,706
Other, net 409 602 639 687
------------ ----------- ------------- ----------
Total other income, net 762 1,902 1,116 2,566
------------ ----------- ------------- -----------
Income before taxes 10,222 7,591 15,204 10,543
Taxes on income 3,700 2,771 5,504 3,848
------------ ------------ ------------- ------------
Net income $ 6,522 $ 4,820 $ 9,700 $ 6,695
============ ============ ============= ============
Net income per share
Basic $ 0.37 $ 0.28 $ 0.55 $ 0.39
============ ============ ============= =============
Diluted $ 0.37 $ 0.28 $ 0.55 $ 0.39
============ ============ ============= =============
Weighted average common shares outstanding:
Basic 17,646 17,148 17,574 17,130
============ ============ ============== =============
Diluted 17,790 17,269 17,741 17,218
============ ============ ============== =============
Dividends declared per share $ 0.135 $ 0.135 $ 0.135 $ 0.135
============ ============ ============== =============
See Notes to Condensed Consolidated Financial Statements
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CIRCLE INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except share amounts)
June 30, December 31,
2000 1999
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ASSETS
Current assets:
Cash and equivalents $ 52,490 $ 40,347
Short-term investments 11,260 14,366
Trade receivables, less allowance for doubtful
accounts of: 2000, $7,267; 1999, $7,835 292,369 284,504
Other receivables 9,204 10,415
Other current assets 7,334 8,402
---------------- ----------------
Total current assets 372,657 358,034
Property: 195,142 186,807
Less accumulated depreciation (89,381) (83,953)
---------------- ----------------
Property, net 105,761 102,854
Investments in unconsolidated affiliates 45,630 48,207
Goodwill, net 31,001 31,166
Other assets 6,540 5,131
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Total assets $ 561,589 $ 545,392
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 1,447 $ 7,801
Trade payables 196,146 187,724
Accrued salaries and related costs 15,938 17,008
Dividends payable 2,389 2,349
Income taxes payable 4,028 8,161
Other liabilities 26,999 27,350
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Total current liabilities 246,947 250,393
Minority interests 9,325 5,809
Deferred income taxes 12,820 12,602
Capital lease obligation 3,178 3,369
Long-term notes payable 40,257 32,244
Commitments and contingencies - -
Stockholders' equity:
Preferred stock, $1 par: shares authorized, 1,000,000;
none issued - -
Common stock, $1 par: shares authorized, 40,000,000;
shares issued and outstanding
2000, 17,679,890; 1999, 17,419,001 40,918 35,612
Retained earnings 227,737 220,437
Accumulated other comprehensive loss (19,593) (15,074)
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Total stockholders' equity 249,062 240,975
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Total liabilities and stockholders' equity $ 561,589 $ 545,392
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See Notes to Condensed Consolidated Financial Statements
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CIRCLE INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Six Months Ended
June 30,
2000 1999
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Operating activities:
Net income $ 9,700 $ 6,695
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 9,791 7,494
Provision for doubtful accounts 2,289 1,849
Deferred income taxes 311 420
Gains on sales of assets (797) (762)
Equity in earnings of affiliates,
net of dividends received (1,154) (639)
Net effect of changes in working capital 1,914 (15,524)
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Net cash provided by (used in) operating activities 22,054 (467)
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Investing activities:
Proceeds from sales of property 1,957 2,399
Proceeds from sales of marketable equity securities 7 500
Net proceeds from sales (purchases)
of short-term investments 4,285 (723)
Capital expenditures (14,861) (9,526)
Acquisitions of businesses (4,189) (1,878)
Cash from newly consolidated subsidiary 5,582 -
----------------- -----------------
Net cash used in investing activities (7,219) (9,228)
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Financing activities:
Issuance of long-term notes payable 7,834 5,950
Repayment of short-term notes payable (12,003) (4,682)
Dividends (2,360) (2,313)
Proceeds from issuance of stock 5,018 1,022
----------------- -----------------
Net cash used in financing activities (1,511) (23)
Effect of exchange rate changes on cash (1,181) (1,363)
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Increase (decrease) in cash and equivalents 12,143 (11,081)
Cash and equivalents at beginning of period 40,347 44,586
----------------- -----------------
Cash and equivalents at end of period $ 52,490 $ 33,505
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See Notes to Condensed Consolidated Financial Statements
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1 - General
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements include all adjustments (which include normal recurring
accruals) necessary to present fairly the financial position as of June 30,
2000 and the results of operations and cash flows for the periods presented in
conformity with generally accepted accounting principles generally accepted in
the United States of America. It is suggested that these unaudited condensed
consolidated financial statements be read in conjunction with the audited
consolidated financial statements and notes thereto included in the Circle
International Group, Inc.(Circle) 1999 Annual Report to Stockholders
incorporated by reference in Circle's 1999 Form 10-K, and Management's
Discussion and Analysis of Financial Condition and Results of Operations
included elsewhere in this Form 10-Q. Certain 1999 amounts have been
reclassified to conform to the 2000 presentation.
Note 2 - Comprehensive Income
Other comprehensive income represents foreign currency translation adjustments
and unrealized gains and losses on marketable securities classified as
available-for-sale incurred during the respective quarters.
Circle's total comprehensive income was as follows:
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- -----------------------------
2000 1999 2000 1999
(in thousands) (in thousands)
Net Income $ 6,522 $ 4,820 $ 9,700 $ 6,695
Other comprehensive income (loss):
Change in cumulative translation adjustments (2,521) (489) (4,522) (3,025)
Unrealized gains (losses) on marketable securities, net (2) (1) 2 39
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Comprehensive income $ 3,999 $ 4,330 $ 5,180 $ 3,709
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Note 3 - New Accounting Standards
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which defines
derivatives, requires that derivatives be carried at fair value and provides
for hedge accounting when certain conditions are met. This statement is
effective for Circle beginning in the year 2001. Circle believes adoption of
this statement will not have a material impact on its consolidated financial
statements.
Note 4 - New Staff Accounting Bulletin
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements," which provides the SEC staff's views on selected revenue
recognition issues. The guidance in SAB 101 must be adopted during the
Company's quarter ended December 31, 2000 and the effects, if any, are required
to be recorded through a retroactive, cumulative-effect adjustment as of the
beginning of the fiscal year, with a restatement of all prior interim quarters
in the year. Management has not completed its evaluation of the effects, if
any, that SAB 101 will have on the Company's income statement presentation,
operating results or financial position.
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Note 5 - Acquisitions
Effective January 1, 2000, the Company acquired an additional 1% interest in
Circle Freight International (Taiwan) Ltd. and began consolidating this
subsidiary, recognizing a 49% minority interest.
Note 6 - Subsequent Events
On July 2, 2000 the Company signed a definitive agreement to merge with EGL,
Inc. ("EGL"), a provider of air freight forwarding and other transportation and
logistics services. In conjunction with the agreement, each share of the
Company's common stock will be converted into one share of EGL common stock.
When complete, EGL shareholders will own approximately 63 percent and Circle
shareholders will own approximately 37 percent of the combined company's
outstanding shares. The business combination is expected to be accounted for as
a pooling of interests. Following the merger, Circle will be a wholly owned
subsidiary of EGL. Consummation of the merger is conditioned upon, among other
things, the approval of a majority of the Company and EGL's outstanding shares
and other customary conditions.
On July 28, 2000 the Federal Trade Commission and the Department of Justice
granted a request for early termination of the 15-day waiting period under the
Hart-Scott-Rodino Antitrust Improvement Acts in connection with the impending
merger.
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Note 7 - Business Segment Information
Circle's reportable segments are geographic segments that offer similar
products and services. They are managed separately because each segment
requires close customer contact and each segment is affected by similar
economic conditions. Certain information regarding Circle's operations by
region is summarized below.
(in thousands)
Europe & Asia & Elimi- Consoli-
Americas Middle East South Pacific Corporate nations dated
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Three months ended June 30, 2000
Total revenue $ 98,083 $ 54,102 $ 94,065 $ - $ (9,210) $ 237,040
Transfers between regions (3,502) (2,678) (3,030) - 9,210 -
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Revenues from customers $ 94,581 $ 51,424 $ 91,035 $ - $ - $ 237,040
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Net revenue $ 46,024 $ 24,333 $ 20,787 $ - $ - $ 91,144
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Income (loss) from operations $ 8,361 $ 5,243 $ 3,342 $ (7,486) $ - $ 9,460
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Three months ended June 30, 1999
Total revenue $ 90,328 $ 45,390 $ 65,391 $ - $ (5,894) $ 195,215
Transfers between regions (2,138) (1,307) (2,449) - 5,894 -
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Revenues from customers $ 88,190 $ 44,083 $ 62,942 $ - $ - $ 195,215
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Net revenue $ 41,646 $ 21,457 $ 18,348 $ - $ - $ 81,451
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Income (loss) from operations $ 6,112 $ 3,506 $ 3,869 $ (7,798) $ - $ 5,689
=========================================================================================
Six months ended June 30, 2000
Total revenue $ 190,687 $ 103,137 $ 176,110 $ - $ (16,733) $ 453,201
Transfers between regions (6,230) (4,895) (5,608) - 16,733 -
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Revenues from customers $ 184,457 $ 98,242 $ 170,502 $ - $ - $ 453,201
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Net revenue $ 89,619 $ 46,632 $ 39,537 $ - $ - $ 175,788
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Income (loss) from operations $ 13,275 $ 8,328 $ 5,951 $ (13,466) $ - $ 14,088
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Six months ended June 30, 1999
Total revenue $ 180,586 $ 86,603 $ 121,842 $ - $ (10,963) $ 378,068
Transfers between regions (3,351) (2,990) (4,622) - 10,963 -
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Revenues from customers $ 177,235 $ 83,613 $ 117,220 $ - $ - $ 378,068
=========================================================================================
Net revenue $ 80,738 $ 41,414 $ 35,465 $ - $ - $ 157,617
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Income (loss) from operations $ 11,157 $ 5,967 $ 6,710 $ (15,857) $ - $ 7,977
=========================================================================================
Revenue from transfers between regions represents approximate amounts that
would be charged if the services were provided by an unaffiliated company.
Total regional revenue is reconciled with total consolidated revenue by
eliminating inter-regional revenue.
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