UTi Worldwide Reports Fiscal 2010 Fourth Quarter Results

LONG BEACH, Calif., March 25, 2010 (GLOBE NEWSWIRE) -- UTi Worldwide Inc. (Nasdaq:UTIW) today reported financial results for its fiscal 2010 fourth quarter ended January 31, 2010.

Fiscal Fourth Quarter 2010 vs. 2009 Results:

• Revenues were $991.5 million, an increase of 11 percent from $894.1 million.
• Net revenues (revenues minus purchased transportation costs) were $350.6 million, an increase of five percent from $332.7 million.
• Net income attributable to UTi Worldwide Inc. was $1.5 million, or $0.02 per diluted share, compared to a net loss of $89.8 million, or $0.90 per diluted share.
• Adjusting for goodwill impairment and other charges and a higher tax rate than historical levels, adjusted net income attributable to UTi Worldwide Inc. for the fiscal 2010 fourth quarter was $10.9 million, or $0.11 per diluted share.
• Excluding goodwill impairment and other charges, adjusted net income attributable to UTi Worldwide Inc. in the fiscal 2009 fourth quarter was $15.3 million, or $0.15 per diluted share.
• Net cash provided by operating activities was $68.3 million, compared to $77.6 million. Net cash provided by operating activities for fiscal 2010 was $120.0 million, compared to $150.5 million in fiscal 2009.

A reconciliation of GAAP to non-GAAP results is provided in the supplemental financial information attached to this release.

Eric W. Kirchner, chief executive officer, said, "Financial results in the fourth quarter were severely affected by sharply higher transportation costs and the associated reduction in yields, which more than offset a significant increase in volumes. The industry experienced a longer and more pronounced peak season than we have seen in several years, leading to an unanticipated surge in volumes in a market with limited capacity. As a result, transportation rates continued to climb throughout the fourth quarter. Yield compression was particularly acute in January, as volumes remained strong and carrier rates moved higher. Because of the lag inherent in passing these rising costs onto clients, we have not yet seen meaningful yield improvement in the first quarter of fiscal 2011. The circumstances leading to the industry-wide yield contraction are expected to stabilize over time and this will allow us to pass through higher prevailing transportation rates to clients.

"On the positive side, we achieved our steady-state $50 million currency-adjusted cost reduction target for fiscal 2010, which is encouraging. We have held onto these cost savings even as freight forwarding volumes increased in the fourth quarter. The volatile environment the industry experienced in fiscal 2010 underscores the need to transform our business in order to achieve lasting margin improvement. We have made considerable progress over the past six months with the foundational elements of our transformation plan required to support more efficient common global processes, and to drive long-term profitability. We will continue to move forward aggressively with these activities to achieve our goal of full deployment by the beginning of fiscal 2014."

Revenues increased by 11 percent in the 2010 fiscal fourth quarter compared to the prior-year fourth quarter primarily due to the higher airfreight and ocean freight volumes, somewhat offset by reduced fuel surcharges. Net revenue increased five percent, less than the percentage increase in revenue, principally because of yield pressure. Currency fluctuations also benefited both revenue and net revenue growth in the quarter. On an organic, constant currency basis, adjusted net revenue decreased six percent compared to the fourth quarter a year ago.

Goodwill impairment and other charges totaled $6.7 million in the fiscal 2010 fourth quarter on a pre-tax basis, which included goodwill impairment charges of $1.6 million, severance charges of $2.9 million and $2.2 million in other costs primarily associated with the exit of certain operations in smaller European countries.

Goodwill impairment and other charges in the fiscal 2009 fourth quarter totaled $124.5 million on a pre-tax basis and included impairment charges related to goodwill and other intangible assets of $109.9 million, restructuring charges of $2.9 million, and severance and related costs of $11.7 million.

Operating expenses in the fourth quarter of fiscal 2010, excluding purchased transportation costs, were $338.8 million. Excluding goodwill impairment and other charges described above, adjusted operating expenses were $332.0 million, representing an increase of nine percent compared to adjusted operating expenses of $306.0 million in the same period last year. The increase primarily reflects currency fluctuations and new business, somewhat offset by benefits achieved through the company's cost reduction efforts. The impact from currency fluctuations alone increased operating expenses by $33.2 million. On an organic, constant currency basis, adjusted operating expenses in the fiscal 2010 fourth quarter were four percent lower than the same period last year.

The company reported operating income in the fiscal 2010 fourth quarter of $11.8 million. Excluding goodwill impairment and other charges described above, adjusted operating income in the fiscal 2010 fourth quarter was $18.6 million, which represented 5.3 percent of net revenues. This compares to adjusted operating income in the year-ago fourth quarter of $26.7 million, or 8.0 percent of net revenues.

The company recorded an effective tax rate of 79 percent in the fiscal 2010 fourth quarter, and 35 percent for the fiscal year, both higher than its historical tax rate of approximately 30 percent. The increased effective rate was primarily due to valuation allowances, a reduction of a deferred tax asset as a result of a statutory tax rate reduction at one of the company's subsidiaries, and to minimum taxes in certain jurisdictions.

Investor Conference Call:

UTi management will host an investor conference call today, March 25, 2010, at 8:00 a.m. PDT (11:00 a.m. EDT) to review the company's financials and operations for the fiscal 2010 fourth quarter. Investment professionals are invited to participate in the live call by dialing 877-312-2124 (domestic) or 702-696-4824 (international) using conference ID 62224518. 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 28, 2010, by calling 800-642-1687 (domestic) or 706-645-9291 (international) and using replay passcode 62224518.

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 referred to revenue and net revenue growth adjusted to exclude the impact of dispositions and acquisitions made since the beginning of the comparative period and the impact of currency fluctuations between comparable periods; to operating expenses adjusted to exclude purchased transportation costs, and by further excluding goodwill impairment and other charges, including restructuring, severance and other expenses and the impact of currency fluctuations between comparable periods; and to operating income (loss), net income (loss) and diluted earnings (loss) per share adjusted to exclude goodwill impairment and other charges, including restructuring, severance and other expenses and adjusted for income taxes at rates higher than the company's historical rate. 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, the company's discussion of the macroeconomic environment, including the circumstances leading to the industry-wide yield contraction which are expected to stabilize over time and which should allow the company to pass through higher prevailing transportation rates to clients, its efforts to implement pricing adjustments and the anticipated impact thereof, yield expectations, efforts to transform the business and the expected margin impact and long-term profitability and timing thereof, including the goal of full deployment by fiscal 2013, and the outlook for the future and 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 the economic volatility that has materially impacted trade volumes, transportation capacity, pricing dynamics and overall margins; the financial condition of many of the company's customers; the impact of sharply rising freight transportation rates on the company's net revenue; planned or unplanned consequences of the company's sales initiatives, procurement initiatives and business transformation efforts; the demand for the company's services; the impact of cost reduction measures undertaken by the company; integration risks associated with acquisitions; increased competition; the impact of volatile fuel costs and changes in foreign exchange rates; changes in the company's effective tax rates; industry consolidation making it more difficult to compete against larger companies; general economic, political and market conditions, including those in Africa, Asia and EMENA; work stoppages or slowdowns or other material interruptions in transportation services; risks of international operations; risks associated with, and costs and expenses the company will incur as a result of, the ongoing publicly announced U.S. Department of Justice and other governmental investigations into the pricing practices of the air cargo transportation industry and other similar or related investigations and lawsuits; the success and effects of new strategies and of the realignment of the company's executive management structure; disruptions caused by epidemics, conflicts, wars and terrorism; and the other risks and uncertainties described in the company's filings with the Securities and Exchange Commission. Although UTi believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, the company cannot assure the reader that the results contemplated in forward-looking statements will be realized in the timeframe anticipated or at all. 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. Accordingly, 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)   In connection with activities associated with the exit of certain operations in our EMENA region, the Company incurred staff costs and other operating expenses totaling $5,184.  During the fourth quarter ended January 31, 2010, the Company recorded a non-cash charge of $1,562 for the impairment of goodwill in the Company's Contract Logistics and Distribution Segment.  There was no tax benefit as the result of this charge.  This charge was recorded as the result of a correction of the impairment of goodwill in the Company's Contract Logistics and Distribution segment during the fourth quarter ended January 31, 2009.  The effects of these charges combined with tax valuation allowances and additional adjustments for income taxes at rates higher than our historical tax rates, was $9,354.   

(2)   In connection with the impairment of goodwill and intangible assets, our information technology restructuring plan, and other severances and related activities, net income for the three months ended January 31, 2009 was decreased by staff costs, restructuring charges, goodwill and intangible assets impairment, and other operating expenses totaling $105,096, net of tax.

(3)   In connection with activities associated with the exit of certain operations in our EMENA region, the Company incurred staff costs and other operating expenses totaling $15,552.  Offsetting these amounts was a gain of $6,271 on the disposal of a property during the year.  During the first quarter ended April 30, 2009, the Company recorded restructuring charges of $1,231 in connection with the Company's 2009 Information Technology Cost Reduction Plan. During the fourth quarter ended January 31, 2010, the Company recorded a non-cash charge of $1,562 for the impairment of goodwill in the Company's Contract Logistics and Distribution Segment.  The effects of these charges combined with tax valuation allowances and additional adjustments for income taxes at rates higher than our historical tax rates, was $13,083.   

(4)   In connection with the impairment of goodwill and intangible assets, our information technology restructuring plan, and other severances and related activities, net income for the year ended January 31, 2009 was decreased by staff costs, restructuring charges, goodwill and intangible assets impairment, and other operating expenses totaling $109,461, net of tax.

(5)   Relates to revenues in the current period for businesses acquired from November 2008.

(6)   Represents the fluctuations in foreign currency exchange rates when balances are translated into U.S. dollars. The company makes constant currency computations using actual results computed at the foreign currency exchange rates for the comparative prior period.

(7)    Relates to revenues in the current period for businesses acquired from February 2008.

(8)    Relates to revenues in the corresponding prior period for businesses exited through the Company's previously announced cost reduction plans.   

(9)    Represents the fluctuations in foreign currency exchange rates when balances are translated into U.S. dollars. The company makes constant currency computations using actual results computed at the foreign currency exchange rates for the comparative prior period.

(10)    This amount represents the adjusted operating expenses for the three months ended January 31, 2009, applied over a twelve month period.