UTi Worldwide Reports Fiscal 2013 Fourth Quarter Results

LONG BEACH, Calif., March 28, 2013 (GLOBE NEWSWIRE) -- UTi Worldwide Inc. (Nasdaq:UTIW) today reported financial results for its fiscal 2013 fourth quarter ended January 31, 2013.

Fiscal Fourth Quarter 2013 vs. 2012 Results:

• Revenues were $1,099.3 million, a decrease of 4.7 percent from $1,153.6 million.
• Net revenues (revenues minus purchased transportation costs) were $371.1 million, a decrease of 8.7 percent from $406.5 million.
• Net loss attributable to UTi Worldwide Inc. was $142.8 million, or $1.38 per diluted share, compared to net income of $12.4 million, or $0.12 per diluted share.
• Excluding the items described below, non-GAAP net loss attributable to UTi Worldwide Inc. was $13.4 million, or $0.13 per diluted share, compared to non-GAAP net income of $14.7 million, or $0.15 per diluted share.
• Adjustments to GAAP net loss in the fiscal 2013 fourth quarter included after-tax goodwill and intangible asset impairment charges and severance costs totaling $95.0 million, or $0.92 per diluted share. In addition, the company increased its valuation allowance on deferred tax assets by $34.5 million, or $0.33 per diluted share.
• Adjustments to GAAP net income in the fiscal 2012 fourth quarter were comprised of after-tax intangible asset impairment charges, severance and other costs totaling $7.9 million, or $0.08 per diluted share. The company also reduced its valuation allowance on deferred tax assets by $5.6 million, or $0.05 per diluted share.
• All references to adjusted items and organic items in this release refer to non-GAAP results. A reconciliation of GAAP to these non-GAAP results is provided in the supplemental financial information attached to this release.

Eric W. Kirchner, chief executive officer, said, "Results in our fiscal 2013 fourth quarter reflect ongoing weakness in the airfreight market and a challenging pricing environment in freight forwarding. In addition, the competitive dynamics in the industry remain the toughest seen in many years. In contract logistics and distribution, we experienced reduced activity at existing locations and made investments to prepare for newly won business. While we secured new business in both segments in the fourth quarter, declines in net revenue from existing accounts more than offset these wins. Clearly these results are not satisfactory. In response, we completed in January and February the previously announced actions necessary to reduce expenses, and we will continue to manage costs throughout fiscal 2014. We also have begun to take steps designed to improve our growth rates, including making changes to our sales organization."

Kirchner continued, "Our comprehensive business process transformation is gathering pace. We accomplished a great deal in fiscal 2013, and we plan to achieve even more this year. We expect to deploy our new freight forwarding operating system in 35 additional countries in fiscal 2014, with more than 70 percent of shipments on the new system by the end of this fiscal year. We believe that progress under our transformation activities should drive annualized gross cost savings of approximately $30-35 million in fiscal 2014 (including expense reductions that were previously announced) and approximately $45-50 million in fiscal 2015. These cost savings are expected to be partially offset by increased amortization and implementation expenses related to the new systems. The macroeconomic and freight environment has pressured margins and impacted profitability to a much greater degree than could have been anticipated at our June 2011 investor day. Because of this pressure, we now expect to reach our operating margin target run-rate later in fiscal 2015 than originally expected."  

Revenues and net revenues decreased 4.7 percent and 8.7 percent, respectively, in the fiscal 2013 fourth quarter compared to the same period last year, primarily due to lower pricing and currency translation. On an organic basis, revenues decreased 3.2 percent, while net revenues declined 6.9 percent in the fiscal 2013 fourth quarter, compared to the same period last year.

Goodwill and intangible asset impairment and severance costs in the fiscal 2013 fourth quarter totaled $99.8 million on a pre-tax basis ($95.0 million after taxes, or $0.92 per diluted share). The total includes two components. First, the company performed an analysis of the value of its goodwill and other intangible assets as of January 31, 2013 based on current business conditions and determined that an impairment of these assets had occurred. The company recorded a non-cash charge for this impairment of $94.7 million ($91.5 million after taxes, or $0.89 per diluted share). Second, the company recorded severance costs of $5.1 million ($3.5 million after taxes, or $0.03 per diluted share), primarily related to transformation activities. In addition, the company increased its valuation allowance on deferred tax assets of $34.5 million, or $0.33 per diluted share, to reflect the unprofitability of certain operations. The increase in allowance was recorded in provision for income taxes.

Intangible asset impairment charges, severance and other costs totaled $10.3 million in the fiscal 2012 fourth quarter on a pre-tax basis, comprising an intangible asset impairment charge of $5.2 million, severance and exit costs of $2.0 million, and an accrual of $3.1 million relating to a legal claim that was settled in fiscal 2013. The company also reduced its valuation allowance on deferred tax assets by $5.6 million.

Operating expenses less purchased transportation costs were $478.6 million in the fourth quarter of fiscal 2013. Excluding the impact of goodwill and intangible asset impairment charges, severance and other items described above, adjusted operating expenses less purchased transportation costs were $378.9 million, compared to $374.3 million in the same period last year. On an organic basis, adjusted operating expenses less purchased transportation costs increased 3.0 percent, compared to the same period last year.

Net cash provided by operating activities totaled $98.2 million in the fourth quarter of fiscal 2013, comparable to the $96.3 million in the same period last year. Working capital improved significantly in the fourth quarter, but this was largely offset by a decline in profitability in the period.

In January 2013, UTi issued $200 million in senior unsecured guaranteed notes (the 2013 Notes), which consist of $150 million of Senior Unsecured Guaranteed Notes, Series A, due February 1, 2022, and $50 million of Senior Unsecured Guaranteed Notes, Series B, due February 1, 2020. As a result, the company refinanced previously outstanding notes and eliminated scheduled principal payments of $18.3 million that otherwise would have come due in fiscal 2014. The refinancing also has the effect of extending debt maturities and eliminating any principal payments for the next five years.

In addition, a portion of the proceeds from the 2013 Notes was used to prepay another series of previously outstanding notes. The company recorded additional interest of $2.1 million related to the prepayment. More information on the 2013 Notes and the refinancing can be found in the company's Form 8-K filed with the Securities and Exchange Commission on January 31, 2013.

Kirchner concluded, "We have accomplished a great deal that is not reflected in our financial results. We launched our freight forwarding system in six countries and deployed Oracle financials in 15 countries. We have made further improvements to our operating processes, launched new products and deployed a new human resources information system globally, among other activities. The year ahead is even more important, with much work to be done. We have made positive changes to our organizational structure, including those to sales that are necessary to improve our growth. Our transformation is moving forward aggressively and expected to drive increased cost savings this year. We have built a plan that is expected to get us on a path to improved profitability in fiscal 2014. We are not anticipating help from the market, but we are executing on the things we can control – profitable growth, significant progress under our comprehensive business process transformation and cost management."

Investor Conference Call:

UTi management will host an investor conference call today, March 28, 2013, at 8:00 a.m. PDT (11:00 a.m. EDT) to review the company's financial results for the fiscal 2013 fourth quarter. Investment professionals are invited to participate in the live call by dialing 877-941-0843 (domestic) or 480-629-9866 (international) using conference ID 4607871. The call will be open to all interested investors through a live, listen-only audio Internet broadcast at www.go2uti.com and www.earnings.com. For those who are not available to listen to the live broadcast, the call will be archived for one year at both Web sites. A telephonic playback of the conference call also will be available from approximately 11:00 a.m. PDT, today, through March 31, 2013, by calling 800-406-7325 (domestic) or 303-590-3030 (international) and using replay passcode 4607871.

About UTi Worldwide:

UTi Worldwide Inc. is an international, non-asset-based supply chain services and solutions company providing air and ocean freight forwarding, contract logistics, customs brokerage, distribution, inbound logistics, truckload brokerage and other supply chain management services. The company serves a large and diverse base of global and local companies, including clients operating in industries with unique supply chain requirements such as the pharmaceutical, retail, apparel, chemical, automotive and technology industries. The company seeks to use its global network, proprietary information technology systems, relationships with transportation providers, and expertise in outsourced logistics services to deliver competitive advantage to each of its clients' supply chains.

Use of Non-GAAP Financial Information:

This press release includes "non-GAAP financial measures" within the meaning of the Securities and Exchange Commission rules. UTi believes that meaningful analysis of its financial performance requires an understanding of the factors underlying that performance and the company's judgments about the likelihood that particular factors will repeat. Short-term patterns and long-term trends may be obscured by the impact of certain items. For this reason, the company has included information in this press release relating to organic revenue and organic net revenue changes, which are adjusted to exclude the impact of currency fluctuations between comparable periods. The company also has referred to operating expenses less purchased transportation costs, and to adjusted operating expenses less purchased transportation costs, which are operating expenses less purchased transportation costs that are further adjusted to exclude goodwill and intangible asset impairment charges and other costs. The company has also included information relating to organic adjusted operating expenses less purchased transportation costs, which are adjusted operating expenses less purchased transportation costs that are further adjusted to exclude the impact of currency fluctuations between comparable periods. The company has further referred to adjusted net income, which is adjusted to exclude goodwill and intangible asset impairment charges and other costs and valuation allowances on deferred tax assets, as described above. This information is among the information the company uses as a basis for evaluating company performance on a comparable basis over time, allocating resources and planning and forecasting of future periods. The company has also provided this information because such adjustments make performance information more comparable to prior disclosures for investors, and may enhance the ability of investors to analyze the company's performance. This information is not intended to be considered in isolation or as a substitute for, or superior to, the relevant measures prepared and presented in accordance with U.S. GAAP. For more information on these non-GAAP financial measures, please see the tables at the end of this press release.

Safe Harbor Statement:

Certain statements in this news release may be deemed to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The company intends that all such statements be subject to the "safe-harbor" provisions contained in those sections. Such forward-looking statements may include, but are not limited to, statements about steps taken to improve growth rates and the potential impact thereof, the continuation of adverse macroeconomic and freight trends, the long-term outlook for the company and the industry, the status and timing of the company's freight forwarding operating system, including plans to launch in 35 additional countries with more than 70 percent of shipments on the new system by the end of fiscal 2014, the company's ability to achieve annualized gross cost savings of approximately $30-35 million in fiscal 2014 and approximately $45-50 million in fiscal 2015, the company's expectation of achieving its long-term operating margin target run-rate later in fiscal 2015 than originally expected, a plan that is expected to improve profitability in fiscal 2014, and any other statements not of an historical nature. Many important factors may cause the company's actual results to differ materially from those discussed in any such forward-looking statements, including but not limited to: volatility with respect to global trade, particularly as it relates to the global airfreight, ocean freight and contract logistics and distribution markets; global economic, political and market conditions, including those in Africa, Asia and EMENA; risks associated with the company's business transformation initiative, which include unanticipated difficulties, delays, additional costs and expenses; changes in interest and foreign exchange rates; risks that the company might be required to record additional impairment charges to goodwill or additional increases in its valuation allowance on deferred tax assets; volatile fuel costs; transportation capacity, pricing dynamics and the ability of the company to secure space on third party aircraft, ocean vessels and other modes of transportation; changes in foreign exchange rates; material interruptions in transportation services; risks of international operations; risks associated with, and the potential for penalties, fines, costs and expenses the company may incur as a result of the ongoing publicly announced governmental investigations into the international air freight and air cargo transportation industry and other related investigations and lawsuits; risks of adverse legal judgments and other liabilities not limited by contract or covered by insurance; the financial condition of the company's customers; disruptions caused by epidemics, natural disasters, conflicts, wars and terrorism; and the other risks and uncertainties described in "Risk Factors" and "Forward-looking Statements" in the company's Annual Report on Form 10-K/A for the fiscal year ended January 31, 2012, any subsequently filed Quarterly Reports on Form 10-Q and as described in the company's other filings with the Securities and Exchange Commission. In light of the significant uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by UTi or any other person that UTi's objectives or plans will be achieved in the timeframe anticipated or at all. Investors are cautioned not to place undue reliance on the company's forward-looking statements. UTi undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

(Tables Follow)

(1) During the three months ended January 31, 2013, the company recorded a pre-tax severance of $5,118 primarily related to transformation activities.

(2) During the three months ended January 31, 2012, the company recorded a pre-tax severance of $1,572 and facility exit costs of $467 primarily related to transformation activities. The company recorded a charge of $3,106 representing an estimated settlement value for all years under review relating to a dispute with the South African Revenue Service with respect to the company's use of "owner drivers" for the collection and delivery of cargo in South Africa.

(3) During the three months ended January 31, 2013, the company recorded a pre-tax goodwill impairment charge of $93,008, as a result of continued economic weakness in certain of the regions in which we operate.

(4) During the three months ended January 31, 2013, the company recorded a pre-tax intangible asset impairment charge of $1,643, relates to the recoverability of value assigned to certain client relationships within one of the company's pharmaceutical distribution business in South Africa. 

(5) During the three months ended January 31, 2012, the company recorded a pre-tax intangible asset impairment totaling $5,178, relating substantially to all of the unamortized valuation of the customer list from an acquisition in 2004. The intangible asset became impaired because of the non-renewal of one contract beginning July 2012, where the company was not prepared to lower its returns to retain the business.

(6) The provision for income tax adjustment related to the severance and other costs and intangible asset impairments and were calculated based on the prevailing tax rate in each jurisdiction. In addition, the adjustment for deferred tax asset valuation allowances includes changes in deferred tax assets associated with amalgamations of certain of the company's subsidiaries.

(7) During the fiscal year ended January 31, 2013, the company recorded a pre-tax severance of $12,826 primarily related to transformation activities and accrued pre-tax expenses of $5,213 relating to a legal judgment.

(8) During the fiscal year ended January 31, 2012, the company recorded a pre-tax severance of $9,645 and facility exit costs of $2,381 primarily related to transformation activities. The company recorded a charge of $3,106 representing an estimated settlement value for all years under review relating to a dispute with the South African Revenue Service with respect to the company's use of "owner drivers" for the collection and delivery of cargo in South Africa.

(9) During the fiscal year ended January 31, 2013, the company recorded a pre-tax goodwill impairment charge of $93,008, as a result of continued economic weakness in certain of the regions in which we operate.

(10) During the fiscal year ended January 31, 2013, the company recorded a pre-tax intangible asset impairment charge of $1,643, relates to the recoverability of value assigned to certain client relationships within one of the company's pharmaceutical distribution business in South Africa. 

(11) During the fiscal year ended January 31, 2012, the company recorded a pre-tax intangible asset impairment totaling $5,178, relating substantially to all of the unamortized valuation of the customer list from an acquisition in 2004. The intangible asset became impaired because of the non-renewal of one contract beginning July 2012, where the company was not prepared to lower its returns to retain the business.

(12) The provision for income tax adjustment related to the severance and other costs and intangible asset impairments and were calculated based on the prevailing tax rate in each jurisdiction. In addition, the adjustment for deferred tax asset valuation allowances includes changes in deferred tax assets associated with amalgamations of certain of the company's subsidiaries.

(13) Diluted per share amounts for the year ended January 31, 2013 are based upon diluted shares of 104,053,833. 

UTi Worldwide Inc.
Organic Growth Reconciliation
(Unaudited)

Set forth below is a reconciliation of the company's organic growth rates and the growth rates based on the company's GAAP reported results in the company's revenues, net revenues and operating expenses less purchased transportation costs for the three months and fiscal year ended January 31, 2013. Organic growth is a non-GAAP measure that excludes the impact of foreign currency translation.

(14) During the three months ended January 31, 2013, the company recorded a pre-tax severance of $5,118 primarily related to transformation activities.

(15) During the fiscal year ended January 31, 2013, the company recorded a pre-tax severance of $12,826 primarily related to transformation activities and accrued pre-tax expenses of $5,213 relating to a legal judgment.

(16) During the three months and fiscal year ended January 31, 2013, the company recorded pre-tax goodwill impairment charge of $93,008, as a result of continued economic weakness in certain of the regions in which we operate.

(17) During the three months and fiscal year ended January 31, 2013, the company recorded a pre-tax intangible asset impairment charge of $1,643, related to the recoverability of value assigned to certain client relationships within one of the company's pharmaceutical distribution business in South Africa.