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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 AUGUST 31, 1996
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________ to __________
Commission file number 0-20548
FRITZ COMPANIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 94-3083515
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(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
706 Mission Street, Suite 900, San Francisco, California 94103
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 904-8360
Not applicable
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(Former name, former address and former fiscal year if changed from 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.[X] Yes [ ] No
As of August 31, 1996 there were 35,083,000 shares of common stock outstanding.
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FRITZ COMPANIES, INC. FORM 10-Q
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of August 31,
1996 and May 31, 1996 3
Condensed Consolidated Statements of Income for the three
months ended August 31, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows for the
three months ended August 31, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION 9
SIGNATURES 10
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FRITZ COMPANIES, INC. FORM 10-Q
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
AUGUST 31, MAY 31,
1996 1996
---- ----
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 75,589 $ 86,461
Accounts receivable, net of allowance for
doubtful accounts of $7,473 in August (May, $6,401) 411,866 397,747
Deferred income taxes 8,515 7,368
Prepaid expenses and other assets 23,645 28,368
--------- ---------
Total current assets 519,615 519,944
--------- ---------
PROPERTY AND EQUIPMENT - NET 113,629 111,399
--------- ---------
OTHER ASSETS:
Intangibles, net of accumulated amortization of $13,092
in August (May, $11,963) 107,993 88,790
Other assets 12,194 13,329
--------- ---------
Total other assets 120,187 102,119
--------- ---------
TOTAL ASSETS $ 753,431 $ 733,462
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term obligations and short-term
borrowings $ 36,284 $ 14,514
Accounts payable 302,997 322,018
Accrued liabilities 64,783 65,149
Income tax payable 9,660 6,496
--------- ---------
Total current liabilities 413,724 408,177
LONG-TERM OBLIGATIONS 93,644 89,505
DEFERRED INCOME TAXES 844 995
OTHER LIABILITIES 4,069 4,038
--------- ---------
TOTAL LIABILITIES 512,281 502,715
--------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock: par value $.01 per share;
60,000 shares authorized, 35,083 shares
issued and outstanding, (34,898 shares
issued and outstanding, May, 31, 1996) 351 349
Additional paid-in capital 121,278 118,485
Retained earnings 120,378 112,587
Cumulative foreign currency translation adjustments (857) (674)
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Total stockholders' equity 241,150 230,747
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 753,431 $ 733,462
========= =========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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FRITZ COMPANIES, INC. FORM 10-Q
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED AUGUST 31,
-----------------------------
1996 1995
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REVENUE $ 270,490 $ 266,366
FREIGHT CONSOLIDATION COSTS 140,773 150,662
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NET REVENUE 129,717 115,704
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OPERATING EXPENSES:
Salaries and related costs 71,634 61,632
General and administrative 45,720 35,173
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Total operating expenses 117,354 96,805
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INCOME FROM OPERATIONS 12,363 18,899
OTHER INCOME (EXPENSE)--NET (377) 479
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INCOME BEFORE TAXES ON INCOME 11,986 19,378
TAXES ON INCOME 4,195 6,782
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NET INCOME $ 7,791 $ 12,596
========= =========
Net income per share - primary $ 0.22 $ 0.36
========= =========
Weighted average shares outstanding - primary 35,734 35,154
========= =========
Net income per share - fully diluted $ 0.22 $ 0.36
========= =========
Weighted average shares outstanding - fully diluted 35,805 35,386
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SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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FRITZ COMPANIES, INC. FORM 10-Q
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended August 31,
-----------------------------
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,791 $ 12,596
Adjustments to reconcile net income to net cash
used by operating activities:
Depreciation and amortization 5,940 4,681
Deferred Income taxes (1,681) 322
Other - 202
Effect of changes in:
Receivables (14,119) (8,036)
Prepaid expenses and other current assets 4,723 4,532
Payables and accrued liabilities (15,879) (15,279)
Accrued merger costs (344) (4,755)
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Net cash used by operating activities (13,569) (5,737)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (9,490) (6,304)
Acquisitions, net of cash acquired (8,430) (8,222)
Other (712) (421)
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Net cash used by investing activities (18,632) (14,947)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Long term obligations issued 2,557 -
Long term obligations repaid (4,834) (3,442)
Net increase in short-term borrowings 21,000 17,250
Proceeds from stock options exercised 2,795 4,438
Other (6) (215)
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Net cash provided by financing activities 21,512 18,031
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Foreign currency translation adjustments (183) (1,329)
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DECREASE IN CASH AND EQUIVALENTS (10,872) (3,982)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 86,461 74,261
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CASH AND EQUIVALENTS AT END OF PERIOD $ 75,589 $ 70,279
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OTHER CASH FLOW INFORMATION:
Income taxes paid $ 349 $ 6,174
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Interest paid $ 1,152 $ 2,091
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Noncash investing and financing activities in
connection with acquisitions:
Liabilities assumed $ - $ 8,167
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SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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FRITZ COMPANIES, INC. FORM 10-Q
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. GENERAL
The accompanying condensed consolidated financial statements of Fritz
Companies, Inc. (the Company) for the three months ended August 31, 1996
and 1995 are unaudited and, in the opinion of management, contain all
adjustments, consisting only of normal and recurring adjustments, necessary
for a fair presentation of the results of such periods.
The significant accounting policies followed by the Company are
described in Note 1 to the audited consolidated financial statements for
the year ended May 31, 1996. In accordance with SEC regulations, certain
information and footnote disclosures normally included in the annual
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted for the purposes of
the condensed consolidated interim financial statements. The condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements, including the notes thereto, for the
year ended May 31, 1996 included in the Company's Form 10-K filed on August
28, 1996. The results of operations for the three months ended August 31,
1996 are not necessarily indicative of the results to be expected for the
full year.
2. COMMON STOCK
The increase in common stock issued and paid in capital was primarily
due to 74,731 shares of options exercised.
3. INCOME TAXES
Income tax expense for the three months ended August 31, 1996
consisted of approximately $5.9 million of current tax provision and $1.7
million of deferred tax benefit.
4. ACQUISITIONS
For the three months ended August 31, 1996, the Company acquired the
remaining interests in two freight forwarding companies for an aggregate
purchase price of approximately $8.0 million in cash. In addition, the
Company acquired minority interests in a company which was recorded under
the equity base method of accounting. Intangible assets of approximately
$7.7 million were recorded in connection with these acquisitions, which are
being amortized on a straight line basis over forty years. In addition, the
Company recorded approximately $8.6 million of additional purchase price
(consisting of cash of $1.4 million and obligations payable of $7.2
million) relating to achievement of specified net revenue or pre tax
income levels of certain prior acquisitions.
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FRITZ COMPANIES, INC. FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The following discussion is applicable to the Company's financial
condition and results of operations for the three months ended August 31,
1996 and 1995. See Note 1 to Notes to Condensed Consolidated Financial
Statements.
RESULTS OF OPERATIONS
The following table provides the revenue, and net revenue, in thousands
of dollars and percentages attributable to the Company's principal
logistics services during the periods indicated:
THREE MONTHS ENDED AUGUST 31,
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1996 % 1995 %
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REVENUE:
Customs brokerage $ 40,884 15.1 $ 36,556 13.7
Ocean freight forwarding 80,795 29.9 80,020 30.1
Airfreight forwarding 114,988 42.5 128,235 48.1
Warehousing and distribution 33,823 12.5 21,555 8.1
-------- ----- -------- -----
Total revenue $270,490 100.0 $266,366 100.0
======== ===== ======== =====
NET REVENUE:
Customs brokerage $ 40,884 31.5 $ 36,556 31.6
Ocean freight forwarding 28,149 21.7 28,541 24.7
Airfreight forwarding 34,137 26.3 34,193 29.5
Warehousing and distribution 26,547 20.5 16,414 14.2
-------- ----- -------- -----
Total net revenue $129,717 100.0 $115,704 100.0
======== ===== ======== =====
THREE MONTHS ENDED AUGUST 31, 1996 COMPARED WITH THREE MONTHS ENDED
AUGUST 31, 1995
Revenue and Net Revenue: For the first quarter of fiscal year 1997,
revenue increased 1.5% to $270.5 million from $266.4 million for the
comparable period and net revenue increased 12.1% to $129.7 million from
$115.7 million for the comparable period. The increased revenue was
primarily due to warehousing and distribution and, to a lesser extent,
customs brokerage which was offset by decreased revenue in airfreight. The
increased warehousing and distribution revenue resulted primarily from the
Company's continued expansion of overseas and domestic services, increased
demand from existing integrated logistics customers, acquisitions and the
Company's continued expansion of its warehouse facilities. In addition,
warehouse and distribution revenue and net revenue include the recognition
of approximately $3 million for logistics services provided to a customer
through an agent as discussed in the Company's Form 10-Q/A for the third
quarter of fiscal year 1996 in Note 5 Adjustment Related to Restatement.
The increased customs brokerage was primarily attributable to the growth in
the Company's existing customer base, new customers and acquisitions.
Airfreight revenue decreased as a result of the absence of charters for a
customer to Latin America and the loss of certain customers which was only
partially offset by the addition of new customers. However, the Company
continued to experience higher margins due to increased volumes from the
merger with Intertrans Corporation, acquisitions and lower destination
costs.
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FRITZ COMPANIES, INC. FORM 10-Q
The increase in net revenue was primarily due to warehousing and
distribution and customs brokerage. The increase in warehousing and
distribution and customs brokerage was due to the factors discussed above.
Operating Expenses: Operating expenses increased 21.2% for the first
quarter of fiscal year 1997 compared to the comparable period of fiscal
year 1996. Salaries and related costs increased primarily due to an
increase in the number of employees, higher salary levels and workers'
compensation insurance premium adjustments. General and administrative
expenses increased primarily due to expenditures to support the Company's
expansion, including warehouse-related expenses. In addition, there was an
increase in travel and professional services expenditures. The increased
travel cost was due primarily to the Company's biennial worldwide managers'
meeting and professional services costs increased primarily due to higher
legal expenses and consulting fees.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and equivalents decreased $10.9 million to $75.6
million at August 31, 1996 from $86.5 million at May 31, 1996. This
decrease was primarily due to cash used from operating activities and
investing activities in excess of the cash provided by financing
activities. The Company's investing activities for this period included
capital expenditures of approximately $9.5 million which primarily includes
expenditures for computer hardware, building and leasehold improvements and
equipment. The Company also made cash outlays totaling $8.0 million to
acquire the remaining interest in two companies during 1996. In addition,
the Company recorded approximately $8.6 million of additional purchase
price (consisting of cash of $1.4 million and obligations payable of $7.2
million) relating to achievement of specified net revenue or pre tax income
levels of certain prior acquisitions. The cash flow from operating
activities decreased primarily due to the increase in accounts receivables
and the decrease in accounts payable and accrued liabilities. The Company's
total available borrowing capacity under the syndicated multi-currency
credit facility as of August 31, 1996 was approximately $33.6 million.
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FRITZ COMPANIES, INC. FORM 10-Q
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) The Company filed the following reports on Form 8-K during the
quarter ended August 31, 1996 and through the date hereof:
(1) July 29, 1996
Item 5. Other Events
- Filed the Company's fourth quarter earnings release.
(2) July 29, 1996
Item 5. Other Events
- The Company disclosed that on July 29, 1996, a complaint
was filed in the Superior Court of the State of
California, County of San Francisco, against the Company
and certain of its directors and officers. The complaint,
which purports to be brought on behalf of a class of
purchasers of the Company's stock between August 28, 1995
and July 23, 1996, alleges various violations of
California law in connection with prior disclosures made
by the Company and seeks unspecified damages.
(3) July 31, 1996
Item 5. Other Events
- The Company disclosed that on July 31, 1996, a second
complaint was filed in the Superior Court of the State of
California, County of San Francisco, against the Company
and certain of its directors and officers containing
similar allegations as the first complaint filed on
July 29, 1996.
- The Company disclosed that on July 31, 1996, two
complaints were filed in the U.S. District Court for the
Northern District of California, against the Company and
certain of its directors and officers. The complaints,
which purport to be brought on behalf of a class of
purchasers of the Company's stock between August 28, 1995
and July 23, 1996, allege various violations of federal
securities law in connection with prior disclosures made
by the Company and seeks unspecified damages.
(4) August 13, 1996
Item 5. Other Events
- The Company disclosed that on August 13, 1996, a complaint
was filed in the U.S. District Court for the Northern
District of California, against the Company and certain of
its directors and officers. The complaint, which purports
to be brought on behalf of a class of purchasers of the
Company's stock between August 28, 1995 and July 23, 1996,
alleges various violations of federal securities law in
connection with prior disclosures made by the Company and
seeks unspecified damages.
(5) October 9, 1996
Item 5. Other Events
- On October 9, 1996, the Company issued a press release
relating to its earnings for the first quarter of fiscal
1997.
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FRITZ COMPANIES, INC. FORM 10-Q
S I G N A T U R E S
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.
FRITZ COMPANIES, INC.
Registrant
Dated: October 14, 1996
/s/ Lynn C. Fritz
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Lynn C. Fritz
Chairman and Chief Executive Officer
/s/ Dennis L. Pelino
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Dennis L. Pelino
President and Chief Operating Officer
/s/ Ronald W. Womack
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Ronald W. Womack
Vice President of Finance and
Principal Accounting Officer
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