June 05, 2014: UTi Worldwide Inc. today reported financial results for its fiscal 2015 first quarter ended April 30, 2014.
Revenues were $1,045.0 million, a decrease of 3.3 percent from $1,080.7 million. Net revenues (revenues minus purchased transportation costs) were $372.9 million, a decrease of 0.8 percent from $375.7 million.
On an organic basis, revenues decreased 0.3 percent and net revenues increased 3.8 percent versus the comparable prior year period. Net loss attributable to UTi Worldwide Inc. was $43.2 million in the fiscal 2015 first quarter. Net loss attributable to common shareholders after dividends on preferred stock was $0.43 per diluted common share.
Net loss attributable to UTi Worldwide Inc. in the fiscal 2014 first quarter was $12.4 million, or $0.12 per diluted common share. The GAAP net loss in the fiscal 2015 first quarter includes a loss on debt extinguishment of $21.8 million, or $0.21 per diluted share, related to the company's refinancing activities completed earlier in the year. In addition, UTi recorded additional tax expense exceeding its normalized tax rate of $13.0 million, or $0.12 per diluted common share.
Excluding the loss on debt extinguishment and the additional tax expense described above, non-GAAP net loss attributable to UTi Worldwide Inc. was $7.8 million. Non-GAAP net loss attributable to common shareholders after preferred stock dividends was $0.09 per diluted common share.
Earnings before interest expense, income taxes, depreciation and amortization, as adjusted for severance and other costs and stock compensation expense (adjusted EBITDA) totaled $26.2 million compared to $31.0 million.
All references to adjusted items, free cash flow (defined as cash flow from operations less capital expenditures) and organic items in this release refer to non-GAAP results.
Eric W. Kirchner, chief executive officer, said, "First quarter results were in line with our expectations. Adjusting for negative currency effects, net revenue rose 3.8 percent in the first quarter, primarily due to increased activity in both business segments and an improvement in freight forwarding yields. Freight forwarding volumes grew slightly compared to the first quarter of last year. Net revenue per unit of cargo increased as buy rates improved. Contract logistics and distribution recorded solid revenue growth on a constant-currency basis, due to gains in new and existing accounts in all regions. We continued to win new business in both business segments in the first quarter, which we expect will lead to revenue growth in the second half of this year.
"We made further progress in our transformation activities. We implemented our 1View operating system in five additional countries. This brings to 37 the total number of countries on the new system, representing approximately 77 percent of freight forwarding transactions. We expect to add 8-10 additional countries by September 1, 2014, which would bring us to approximately 85 percent of transactions. We continue to target completion of the system implementation by the end of the third quarter of fiscal 2015."
Kirchner continued, "We plan to achieve $95 million in annualized cost savings by the end of fiscal 2015, which represents the high end of the range of our prior estimates. As previously disclosed, we already took action in fiscal 2014 to remove approximately $50 million of this total. These cost reductions were in place in the first quarter, but we also incurred higher payroll-related expenses and transformation costs, as well as expenses associated with growth in contract logistics and distribution. These higher costs are part of our fiscal 2015 business plan, which also calls for revenue growth and productivity improvements that are independent of the transformation that are expected to fund these cost increases in the second half of the year. As a result, we expect adjusted EBITDA to improve significantly this year as we complete our cost reduction measures and begin to remove duplicative costs associated with the transformation."
Operating expenses less purchased transportation costs were $376.1 million in the first quarter of fiscal 2015. The company recorded $0.6 million in severance and other costs in the fiscal 2015 first quarter, compared to $2.8 million in the same period last year. Excluding these items, adjusted operating expenses less purchased transportation costs were $375.5 million, compared to $369.1 million.
The company recorded a tax provision of $9.0 million in the fiscal 2015 first quarter on a pretax loss of $33.8 million, due to increases in valuation allowances and the mix of taxable income across the company's tax jurisdictions.
Consistent with prior years, the company had significant negative free cash flow for the first quarter. Free cash flow was negative $130 million in the fiscal 2015 first quarter, primarily due to a $130 million increase in working capital. During the first quarter, accounts receivable increased $139 million (excluding the effects of currency), primarily due to seasonal factors, an increase in pass-through billings in contract logistics and distribution, and the impact of billing delays related to 1View system implementations.
Richard G. Rodick, chief financial officer, said, "While the increase in accounts receivable in the first quarter is significant, most of the higher balance can be attributed to seasonal effects we typically see in the first quarter. We have put in place a working capital plan that has already begun paying dividends in April and May, and as a result, the higher receivables balance associated with our system implementation is expected to abate in the second quarter of fiscal 2015. We continue to expect free cash flow to be positive for the full fiscal year, which implies an improvement of more than $130 million during the rest of fiscal 2015."