Acquisitions, technology help UTI track stock, earnings rise. (Corporate Focus).

A transportation company without trucks may sound like one of those far-fetched Internet-era ideas, but Rancho Dominguez-based UTI Worldwide Inc. has been traveling along just fine since the dot-com train got derailed.

While it doesn't own the trucks, UTI has prospered with the increasingly complex "supply chain" -- the system for moving raw materials and goods through the production process. UTI helps companies coordinate supplies using the system, making better use of new technologies that have been developed over the past several years.

"We are focusing on providing the full solution, not just an element of the supply chain," said Lawrence Samuels, UTI's chief financial officer.

While it's possible to track inventories all the way to the store shelf, and even the checkout stand, there's a shortage of people in traditional transportation roles who can put these new tools to use, said James Winchester, a senior vice president covering logistics at Lazard Freres & Co.

For some time, large companies have installed their own tracking tools and built fleets to move goods around. But that takes up managers' time and company resources, so the more recent trend has been to outsource these duties to companies like UTI and competitors such as Expeditors International Washington Inc. -- as well as a few large European and Japanese players.

These firms have formed a niche in the transportation industry, creating a "virtual" transportation system for their customers by buying capacity on trucks, railroads and ships, and marrying it with UTI-owned technology.

"If you're one company you don't have the efficiencies, the economies of scale;' said Winchester. "UTI provides highly customized systems for clients who don't want to do this on their own."

(Lazard recently co-managed a follow-on offering of 5 million shares in UTI, including 1 million being offered by a group of the company's founders.)

Track record

Since going public in November 2000, UTI has posted solid revenue and earnings growth, aided by several acquisitions.

For the third quarter ended Oct. 31, net income rose to $9.5 million, or 37 cents a diluted share, from $5.9 million (24 cents) in the like year-earlier period. Net revenues, after payment of freight-related fees, rose to $107.5 million from $79.6 million. The results for the latest quarter include the acquisition of Standard Corp., which gave UTI a bigger presence on the East Coast. (Standard, acquired on Oct. 1, accounted for nearly half of the quarter's revenue growth.)

UTI, incorporated in the British Virgin Islands, saw its stock rise 34.6 percent in 2002, one of the best performances among locally based issues. It traded last week at $26.65, representing a price-to-earnings ratio of about 26.

By comparison, its competitor, Expeditors, trades at about a 35 P/E ratio.

One strength of UTI is its ability to track the smallest of units anywhere in the system.

"These guys in particular have a focus on pharmaceuticals," said Brooks Dexter, senior managing partner at USBX Advisory Services in Santa Monica, an investment banking firm active in the logistics arena. "I'd certainly expect them to be a buyer (of other companies) going forward and a winner going forward," Dexter said.

UTI was formed between 1993 and 1995, with the combination of three freight forwarding companies. Its management group, which hails from South Africa, has worked together for more than 23 years, and retains a major shareholding in UTI after the recent stock sale.

The challenge for UTI is to keep up with the industry as it changes further. Its largest customers may each be using several dozen freight-forwarding companies and are now consolidating that number. This means UTI must win its fair share of the larger contracts, or lose business to others.

With more than 20 acquisitions over the last several years, UTI has the ability to handle worldwide contracts. To increase operating margins, it needs to add volume, Winchester said.

[GRAPH OMITTED]

[GRAPH OMITTED]

YEAR (Jan.31)                  2002    2001

Revenue (millions)           $304.6  $301.8
Total Expenses (millions)     274.9   277.6
Operating Income (millions)    29.7    24.2
Net Income (millions)          19.2    18.5
Earnings Per Share            $0.75   $0.87

SUMMARY

Business: Freight forwarding, logistics

Headquarters: Rancho Dominguez

CEO: Roger MacFarlane

Market Cap: $792.6 million

Dividend Yield: 0.3%

Total Liabilities: $305.3 million

P/E Ratio: 26.7

Long-Term Debt: $6.3 million

Anthony Palazzo can be reached at 323-549-5225, ext. 224, or at [e-mail].