HOUSTON, Aug. 7 /PRNewswire-FirstCall/ -- EGL, Inc. today reported net income for the second quarter of 2006 of $14.8 million, a 17% increase, compared with net income of $12.7 million in the same quarter of 2005. Operating income for the second quarter of 2006 was $26.5 million, a 26% increase, compared with operating income of $21.0 million in the same quarter of 2005. Diluted earnings per share for the second quarter of 2006 were $0.36 compared with $0.25 in the second quarter of 2005.
Net income for the six months ended June 30, 2006 was $25.9 million, a 30% increase, compared with net income of $19.9 million in the same period of 2005. Operating income for the six months ended June 30, 2006 was $48.4 million, a 39% increase, compared with operating income of $34.7 million in the same period of 2005. Diluted earnings per share for the six months ended June 30, 2006 were $0.64 compared with $0.38 in the same period of 2005.
Q2 and Six Month Financial Highlights:
* Operating income increased 26% to $26.5 million compared with $21.0
million in the second quarter of 2005;
* Net revenue margin improved to 32.4% compared with 30.3% in the second
quarter of 2005;
* Net revenues increased 6% to $249.7 million compared with $236.5
million in the second quarter of 2005;
* Operating income increased 39% to $48.4 million compared with $34.7
million for the first six months of 2005;
* Net revenue margin improved to 32.0% compared with 30.4% for the first
six months of 2005;
* Net revenues for the first six months of 2006 increased 8%;
Three Months Ended Six Months Ended
$ millions 6/30/06 6/30/05 6/30/06 6/30/05
(except EPS)
Gross revenues $771.3 $781.3 $1,523.7 $1,481.9
% change -1% +3%
Net revenues $249.7 $236.5 $486.9 $449.9
% change +6% +8%
Net revenue margin 32.4% 30.3% 32.0% 30.4%
Operating expenses $223.2 $215.5 $438.5 $415.2
Operating income $26.5 $21.0 $48.4 $34.7
Net income $14.8 $12.7 $25.9 $19.9
Diluted EPS $0.36 $0.25 $0.64 $0.38
EGL Chief Executive Officer Jim Crane commented, "Our operating income growth and improved operating margins for the second quarter reflect increased net revenues and continued emphasis on controlling all operating expenses. We continue to focus the organization on profitable revenue growth across all product lines and increasing operating income in all geographic locations."
Gross revenues of $771 million in the second quarter of 2006 decreased 1% from the same quarter last year, with declines in airfreight of 1%, ocean freight of 2%, and customs brokerage and other of 2%. The gross revenue decline relates to the company's decision last year to re-evaluate and aggressively address specific business that did not generate acceptable levels of operating income. Additionally, ocean gross revenues were impacted by price declines as additional container ship capacity was introduced into certain ocean trade lanes.
While the gross revenue decline is expected to be temporary, the company continues to focus on adding new revenue, increasing net revenue margins and improving operating income. This strategy generated positive results as the company's second quarter net revenue margin increased to 32.4% compared with 30.3% in the same quarter last year.
Net revenues of $250 million in the second quarter of 2006 increased 6% from the same quarter last year driven by a 19% increase in ocean freight forwarding, an 11% increase in customs brokerage and other and a 1% increase in airfreight forwarding.
Operating income increased 26% to $26.5 million, as compared with the second quarter of 2005 due to the 6% increase in net revenues while operating expenses increased only 4%. Operating expenses included $2.7 million pre-tax of costs related to stock compensation expense in the second quarter of 2006. Second quarter operating income as a percent of net revenues improved to 10.6% from 8.9% in the same quarter last year.
Non-operating expense in the second quarter of 2006 was $2.6 million as compared to non-operating income of $2.3 million in the same quarter last year. The change was due to an increase in interest expense of $2.0 million resulting from increased borrowings used to finance the modified "Dutch Auction" self-tender in October 2005 and second quarter 2006 foreign exchange losses of $1.0 million compared to $1.5 million of foreign exchange gains in the same quarter last year.
Cash Position
EGL closed the quarter with $146 million in cash, restricted cash and short-term investments and total debt of $193 million. For the first six months of 2006, cash flow from operations was $51.2 million compared to $48.4 million of operating income for the same period. Capital expenditures for the first six months of 2006 were $17.8 million.
Outlook
For 2006, EGL expects full year diluted earnings per share in the range of $1.50 to $1.60, including an estimated $0.14 of stock compensation expense as a result of the company's adoption of SFAS 123(R) "Share-Based Payment," effective January 1, 2006.
Earnings Conference Call
EGL, Inc. will host a conference call for shareholders and the investing community on August 8, 2006 at 11 a.m. Eastern time (8 a.m. Pacific) to review results for the second quarter ended June 30, 2006. The call can be accessed by dialing (719) 457-2637, access code 2406905 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 web cast on the company's website, http://www.eaglegl.com/ , on the Investor Relations page. An audio replay will be available until Tuesday, August 22, 2006 at (719) 457-0820, access code 2406905.
Founded in 1984, 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 2005 revenues of $3.1 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 revenue growth, profitability and earnings per share (including guidance), capital expenditure levels, growth opportunities, yield improvement, increased efficiencies, improvements in operating and financial systems, effective tax rates, our ability to pass- through fuel costs, expected insurance recoveries, stock repurchases, the results of government investigations and other statements that are not historical facts, are forward looking statements. These statements involve risks and uncertainties including, but not limited to, our ability to manage and continue growth, risks associated with operating in international markets, events impacting the volume of international trade, our ability to comply with rules relating to the performance of U.S. government contracts, fuel shortages and price volatility of fuel, seasonal trends in our business, currency devaluations and fluctuations in foreign markets, our effective income tax rate, our ability to upgrade our information technology systems, protecting our intellectual property rights, heightened global security measures, availability of cargo space, increases in the prices charged by our suppliers, competition in the freight industry and our ability to maintain market share, material weaknesses within our internal controls, control by and dependence on our founder, liability for loss or damage to goods, the results of litigation, exposure to fines and penalties if our owner/operators are deemed to be employees, failure to comply with environmental, health and safety, and criminal laws and regulations and governmental permit and licensing requirements, laws and regulations that decrease our ability to change our charter and bylaws, the impact of goodwill impairments, the successful deployment of our global IT infrastructure and other factors detailed in the company's Annual Reports on Form 10-K 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 INCOME
(unaudited)
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
Revenues $771,293 $781,254 $1,523,656 $1,481,920
Cost of transportation 521,620 544,758 1,036,782 1,031,992
Net revenues 249,673 236,496 486,874 449,928
Operating expenses:
Personnel costs 140,363 135,922 274,959 261,124
Other selling, general
and administrative
expenses 82,792 79,571 163,516 160,053
EEOC legal settlement --- --- --- (5,975)
Operating income 26,518 21,003 48,399 34,726
Nonoperating income
(expense), net (2,618) 2,265 (6,100) 1,862
Income before provision for
income taxes 23,900 23,268 42,299 36,588
Provision for income taxes 9,094 10,566 16,389 16,721
Net income $14,806 $12,702 $25,910 $19,867
Basic earnings per share $0.37 $0.25 $0.64 $0.39
Diluted earnings per share $0.36 $0.25 $0.64 $0.38
Basic weighted-average
common shares outstanding 40,496 50,614 40,297 51,328
Diluted weighted-average
common shares outstanding 40,936 50,863 40,802 51,692
EGL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
June 30, December 31,
2006 2005
ASSETS
Current assets:
Cash, cash equivalents, restricted
cash and short-term investments $145,960 $123,254
Trade accounts receivable, net of
allowance 545,726 560,954
Other current assets 76,062 70,230
Total current assets 767,748 754,438
Property and equipment, net 176,057 185,906
Investments in unconsolidated
affiliates 392 534
Goodwill, net 115,493 113,048
Other assets, net 53,454 35,315
Total assets $1,113,144 $1,089,241
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $9,492 $15,967
Trade payables and accrued
transportation costs 333,401 342,351
Accrued expenses and other
liabilities 154,167 150,166
Total current liabilities 497,060 508,484
Long-term debt 183,979 214,555
Other noncurrent liabilities 42,510 42,858
Minority interest 2,005 1,616
Stockholders' equity 387,590 321,728
Total liabilities and stockholders'
equity $1,113,144 $1,089,241
EGL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Six Months Ended
June 30,
2006 2005
Cash flows from operating activities:
Net income $25,910 $19,867
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 16,569 17,783
Bad debt expense 1,627 3,306
Other 8,824 (415)
Net effect of changes in working
capital, net of assets acquired (1,751) 44,670
Net cash provided by operating
activities 51,179 85,211
Cash flows from investing activities:
Capital expenditures (17,830) (25,569)
Decrease in restricted cash 593 7,585
Proceeds from sales of other
assets 3,303 1,025
Proceeds from property insurance 517 ---
Acquisitions of businesses, net of
cash acquired (1,444) ---
Earnout payments --- (4,186)
Cash received from disposal of
affiliates 1,254 ---
Other 296 1,423
Net cash used in investing activities (13,311) (19,722)
Cash flows from financing activities:
Proceeds from issuance of debt 197,098 83,402
Repayment of debt (232,541) (52,641)
Issuance (repayment) of short-term
debt with maturities of less than
three months, net (2,513) 1,773
Repayment of financed insurance
premiums and software, net (2,603) (1,516)
Payments on capital lease
obligations (1,123) (863)
Repurchases of common stock --- (93,588)
Payment of financing fees (90) (15)
Issuance of common stock for
employee stock purchase plan 613 535
Proceeds from exercise of stock
options 14,251 5,497
Excess tax benefit of employee
stock plans 5,023 ---
Other (186) 453
Net cash used in financing activities (22,071) (56,963)
Effect of exchange rate changes on
cash 7,472 2,839
Increase in cash and cash equivalents 23,269 11,365
Cash and cash equivalents, beginning
of the period 111,507 92,918
Cash and cash equivalents, end of the
period $134,776 $104,283
Second quarter 2006 product and geographic data and air freight statistics are
available on EGL's website, http://www.eaglegl.com/ on the Investor Relations
page.
