EGL, Inc. Announces 16% Growth in Gross Revenues and Diluted EPS of $0.14
EGL, Inc. (Nasdaq: EAGL) announced that it earned $6.5 million of net income for the three months ended June 30, 2003, compared to $938,000 in the second quarter of 2002. Diluted earnings per share for the quarter were $0.14 compared to diluted earnings per share of $0.02 in Q2-2002 and $0.06 in Q1-2003.
Financial Highlights
* Gross revenues improved on strong air and ocean volumes outside North
America and continued growth of North America ground activity.
* Net revenues increased 14% particularly on stronger margins in North
America.
* Operating income margin improved to 6.6% as compared to 2.9% for the
second quarter of 2002 with North America rebounding from an operating
loss in the second quarter of 2002 to an operating income margin of
4.4% for the second quarter of 2003.
Three Months Ended Six Months Ended
$ thousands (except EPS) 6/30/03 6/30/02 6/30/03 6/30/02
Gross revenues $ 526,863 $ 454,919 $1,010,513 $ 872,028
% change + 16% + 16%
Net revenues $ 185,530 $ 163,155 $ 353,096 $ 317,275
% change + 14% + 11%
Net revenue margin 35.2% 35.9% 34.9% 36.4%
Operating expenses $ 173,319 $158,430 $ 336,247 $ 311,014
Operating income $ 12,211 $ 4,725 $ 16,849 $ 6,261
Net income/(loss) $ 6,467 $ 938 $ 9,262 $ (2,979)
Diluted EPS $ 0.14 $ 0.02 $ 0.20 $ (0.06)
Gross revenues increased 16% from the second quarter of 2002 to $527 million with all products showing increases, especially ocean revenues (up 36% over the same quarter of last year) and increased North America ground volumes (deferred shipment counts up 18%). Net revenue margins of 35.2% were down slightly as deteriorations in ocean margins were only partially offset by higher margins in North America reflecting improved utilization of the air and ground networks.
EGL Chief Executive Officer, Jim Crane, commented, "We continue to see consistent steady progress despite a soft global economy. The 14% net revenue growth, as compared to the second quarter GDP of 2.4%, reflects our ability to leverage our product offerings and global infrastructure to outperform the economy. We expect our continued emphasis on Asia and the Middle East to add to our growth. The United States operations continue to improve on the growth of the deferred product and account penetration through logistics offerings. We were able to close several contracts in the energy sector and secure select project movements as we diversify our customer base. In addition, we continue to focus on internal efficiencies to improve operating margins. In the United States, we launched our new human resources and accounting systems in the second quarter. We are combining these systems with improved operating practices to increase personnel efficiencies."
North America gross revenues of $273 million increased 6%, while net revenues improved 11%, as the deferred shipment volumes continued to grow. The North America net revenue margin of 43.7% improved from 41.7% last year reflecting better utilization of our ground network and growth of the logistics business. The elimination of the dedicated air network last year allowed EGL to adjust quickly on the continued shift by our customers away from priority to deferred shipments. Operating income in North America increased $7.8 million from last year compared to $12.2 million increase in net revenues – an incremental profit of 64% from the additional net revenues. The operating leverage reflects better utilization of the North America ground and facilities network.
Gross revenues outside of North America increased 28% to $254 million. Net revenues increased 18% to $66 million reflecting strong growth in Europe and the Middle East. The net revenue margins were down from 28.3% last year to 26.1% in the second quarter of this year reflecting continued pricing pressures on the air and ocean markets. Operating income outside North America was down from $7.3 million in the second quarter of 2002 to $6.9 million in the second quarter of this year as a result of operating losses on two logistics projects in Europe. The performance on these projects improved significantly during the quarter so that by June the projects were operating near break-even levels. Operating income as a percent of net revenue was 10.4%, compared to 13.0% in the second quarter of last year – operating margins in Asia and South Pacific improved to 21.7% compared to 20.4% last year, South America improved to 14.6% from 4.0% last year while Europe, Africa, India and Middle East were down to 3.0% from 9.0% last year on the aforementioned logistics projects.
Operating income improved by $7.5 million to $12.2 million for the second quarter of 2003. Net income of $6.5 million for this quarter improved by $5.5 million from the second quarter of last year.
Third Quarter and Total Year 2003
EGL expects third quarter 2003 diluted earnings per share of between $0.18-$0.20, compared to $0.12 in the same quarter last year. For the year 2003, EGL expects diluted earnings per share between $0.65 – $0.75, compared to $0.20 per diluted share in 2002.
Earnings Conference Call
EGL, Inc. plans to host a conference call for shareholders and the investing community on August 12, 2003 at 11 a.m. Eastern time (8 a.m. Pacific) to review results for the quarter ended June 30, 2003. The call can be accessed by dialing (719) 457-2633, access code 497225 and is expected to last approximately 60 minutes. Callers are requested to dial in at least 5 minutes before the start of the call. The call will also be available through live webcast on the company's website, www.eaglegl.com, on the Investor Relations page. An audio replay will be available until Tuesday, August 26, 2003 at (719) 457-0820, access code 497225.
Second quarter 2003 product and geographic data and air freight statistics are available on EGL's website, www.eaglegl.com on the Investor Relations page.
Houston-based EGL, Inc. operates under the name EGL Eagle Global Logistics. EGL is a leading global transportation, supply chain management and information services company dedicated to providing superior flexibility and fewer shipping restrictions on a price competitive basis. With 2002 revenues exceeding $1.86 billion, EGL's services include air and ocean freight forwarding, customs brokerage, local pickup and delivery service, materials management, warehousing, trade facilitation and procurement, and integrated logistics and supply chain management services. The Company's shares are traded on the NASDAQ National Market under the symbol "EAGL".
CAUTIONARY STATEMENTS
The statements in this press release (and statements in the conference call referred to above) regarding projected profitability, adding to growth, improved margins, increased efficiencies, and initiatives in Asia, Europe and the Middle East, third quarter and total year results and diluted earnings per share, our ability to outperform the economy and other statements which are not historical facts, are forward looking statements. Such statements involve risks and uncertainties including, but not limited to, general economic conditions, the results of litigation, the timing and effects of any improvements in the regions and industry sectors in which the Company's customers operate, construction of new facilities and other infrastructure improvements, ability to manage and continue growth, competition and other factors detailed in the Company's 2002 Form 10-K, proxy statement/prospectus and other filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize (or the consequences of such a development worsen), or should underlying assumptions prove incorrect, actual outcomes may vary materially from those forecasted or expected. The Company disclaims any intention or obligation to update publicly or revise such statements, whether as a result of new information, future events or otherwise.
EGL, Inc.
Condensed Consolidated Statements Of Operations
(Unaudited)
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
Revenues $526,863 $454,919 $1,010,513 $872,028
Cost of transportation 341,333 291,764 657,417 554,753
Net revenues 185,530 163,155 353,096 317,275
Operating expenses:
Personnel costs 104,758 90,177 201,573 175,537
Other selling, general and
administrative expenses 68,561 68,253 134,674 135,477
Operating income 12,211 4,725 16,849 6,261
Nonoperating expense, net (1,809) (3,188) (1,951) (11,494)
Income (loss) before
provision (benefit) for
income taxes 10,402 1,537 14,898 (5,233)
Provision (benefit) for
income taxes 3,935 599 5,636 (2,041)
Income (loss) before
cumulative effect of change
in accounting for negative
goodwill 6,467 938 9,262 (3,192)
Cumulative effect of change
in accounting
for negative goodwill – – – 213
Net income (loss) $6,467 $938 $9,262 $(2,979)
Basic earnings (loss) per
share $0.14 $0.02 $0.20 $(0.06)
Diluted earnings (loss) per
share $0.14 $0.02 $0.20 $(0.06)
Basic weighted-average common
shares outstanding 47,154 47,895 47,110 47,901
Diluted weighted-averge
common shares outstanding 47,424 48,152 47,355 47,901
EGL, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands)
June 30, December 31,
2003 2002
ASSETS
Current assets:
Cash, cash equivalents, restricted
cash and short-term investments $93,636 $119,295
Trade accounts receivable, net of allowance 397,481 371,024
Other current assets 53,335 53,412
Total current assets 544,452 543,731
Property and equipment, net 155,014 157,403
Assets held for sale 539 644
Investments in unconsolidated affiliates 40,147 40,042
Goodwill, net 93,790 81,881
Other assets, net 34,056 18,414
Total assets $867,998 $842,115
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Current portion of long-term notes payable $10,637 $5,639
Trade payables and accrued transportation
costs 216,955 224,132
Accrued expenses 47,478 39,445
Other liabilities 65,511 73,004
Total current liabilities 340,581 342,220
Long-term notes payable 109,667 103,993
Other noncurrent liabilities 5,835 6,789
Deferred income taxes 13,562 3,720
Minority interest 5,935 8,852
Stockholders' equity 392,418 376,541
Total liabilities and stockholders' equity $867,998 $842,115
EGL, Inc.
Condensed Consolidated Statements Of Cash Flows
(unaudited)
(in thousands)
Six Months Ended
June 30,
Cash flows from operating activities: 2003 2002
Net income (loss) $9,262 $(2,979)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 15,377 14,869
Bad debt expense 4,457 4,821
Amortization of unearned
compensation – 317
Deferred income tax expense
(benefit) 2,808 (10,715)
Tax benefit of stock options
exercised 200 134
Equity in earnings of affiliates,
net of dividends received (105) (848)
Minority interests, net of
dividends paid 636 606
Transfer to restricted cash (3,286) (1,185)
Cumulative effect of change in
accounting for negative goodwill – (213)
Impairment of investment in an
unconsolidated affiliate – 6,653
Other (114) 766
Net effect of changes in working
capital, net of assets acquired (28,573) 34,537
Net cash provided by operating
activities 662 46,763
Cash flows from investing activities:
Capital expenditures (10,832) (9,813)
Proceeds from sales of other
assets 540 7,350
Proceeds from sale-lease back
transactions 1,158 2,462
Acquisitions of businesses, net of
cash acquired (21,084) –
Dividend paid to a minority
interest partner (93) –
Net cash used in investing activities (30,311) (1)
Cash flows from financing activities:
Issuance (repayment) of notes
payable 31 (1,528)
Issuance of common stock for
employee stock purchase plan 272 779
Proceeds from exercise of stock
options 1,247 330
Net cash provided by (used in)
financing activities 1,550 (419)
Effect of exchange rate changes on
cash (894) 970
Increase (decrease) in cash and cash
equivalents (28,993) 47,313
Cash and cash equivalents, beginning
of the period 111,477 77,440
Cash and cash equivalents, end of the
period $82,484 $124,753
Second quarter 2003 product and geographic data and air freight
statistics are available on EGL's website,
www.eaglegl.com on the Investor Relations page.
SOURCE EGL, Inc.
