Presentation of Financial Statements

3 Months Ended

Apr. 30, 2011

Presentation of Financial Statements [Abstract]

Presentation of Financial Statements

NOTE 1. Presentation of Financial Statements

Basis of Presentation. In the opinion of management, the accompanying unaudited consolidated financial statements of UTi Worldwide Inc. and its subsidiaries (the Company, we, us, or UTi) contain all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the consolidated balance sheets as of April 30, 2011 and January 31, 2011, the consolidated statements of income for the three months ended April 30, 2011 and 2010 and the consolidated statements of cash flows for the three months ended April 30, 2011 and 2010. These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and the instructions to Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (SEC). Accordingly, they have been condensed and do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The results of operations for the three months ended April 30, 2011 are not necessarily indicative of the results of operations that may be expected for the fiscal year ending January 31, 2012 or any other future periods. These consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2011.

All amounts in the notes to the consolidated financial statements are presented in thousands except for share and per share data.

Income Taxes. Under the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 270, Interim Reporting, and ASC 740, Income Taxes, the Company is required to adjust its effective tax rate for each quarter to be consistent with its estimated annual effective tax rate. Jurisdictions with a projected loss where no tax benefit can be recognized are excluded from the calculation of the estimated annual effective tax rate. Applying the provisions of ASC 270 and ASC 740 could result in a higher or lower effective tax rate during a particular quarter, based upon the mix and timing of actual earnings versus annual projections.

The Company records a provision for estimated additional tax and interest and penalties that may result from tax authorities disputing uncertain tax positions taken at the largest amount that is greater than 50% likely of being realized. The Company recognizes accrued interest and penalties related to uncertain tax positions in interest and other expense, respectively. For further information, see Note 12, “Uncertain Tax Positions.”

Segment Reporting. The Company’s reportable business segments are (i) Freight Forwarding and (ii) Contract Logistics and Distribution. The Freight Forwarding segment includes airfreight forwarding, ocean freight forwarding, customs brokerage and other related services. The Contract Logistics and Distribution segment includes all operations providing contract logistics, distribution and other related services. Certain corporate costs, enterprise-led costs, and various holding company expenses within the group structure are presented separately.

Foreign Currency Translation. Included in other income, net, are net gains on foreign exchange of $176 and $1,033, for the three months ended April 30, 2011 and 2010, respectively.

Concentration of Credit Risks and Other. The Company maintains its primary cash accounts with established banking institutions around the world. The Company estimates that approximately $274,152 of these deposits were not insured by the Federal Deposit Insurance Corporation (FDIC) or similar entities outside of the United States (U.S.) as of April 30, 2011.

Call and Put Options. In connection with the Company’s activities in Israel, options were granted providing the Company with the right to call the minority partner’s shares of a subsidiary under certain circumstances, and also providing the minority partner with the right to call the Company’s shares of the subsidiary in the event the Company does not exercise its right, under certain circumstances, to call the minority partner’s shares. The Company records assets and liabilities which represent the difference between the estimated strike price and the estimated fair value of the attributable subsidiary equity, if the call options become exercisable. The amounts included in other non-current assets were $98 and $388 and the amounts included in other non-current liabilities were $128 and $649 at April 30, 2011 and January 31, 2011, respectively.

In connection with the Company’s activities in Indonesia, options were granted providing the Company with the right to call a minority partner’s shares of a subsidiary under certain circumstances. The Company records assets and liabilities which represent the difference between the estimated strike price and estimated fair value of the attributable subsidiary equity. The amounts included in other non-current assets were $1,780 at April 30, 2011. This amount was not material at January 31, 2011.

Pharma Property Development Agreements. During the first quarter of fiscal 2012, the Company entered into various agreements providing for the development of a logistics facility to be used in the Company’s pharmaceutical distribution business in South Africa. In addition to a property development agreement, the Company signed an agreement to purchase the property at the conclusion of the development at the project’s total cost, which cost includes interest on the financing for the project, subject to certain conditions being met, including among other items, the property having been registerable for transfer and having been ready for beneficial occupation as described under the development agreement. In addition to the other documents for the transaction, the Company also entered into a lease agreement for the property and facility following the conclusion of its development, should the property not be saleable to the Company at that time. Together these agreements are referred to as the Pharma Property Development Agreements. As of April 30, 2011, included in both property, plant and equipment, and long-term borrowings, is $20,619 under this arrangement. The amount included in long-term borrowings represents an obligation to the developer under the agreement. The Company currently estimates that its total capital commitments under this arrangement will be approximately $45,000, excluding warehouse-related equipment, and that the property development activities will be conducted over a several year period.

Fair Values of Financial Instruments. The estimated fair value of financial instruments has been determined using available market information and other appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Therefore, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange. The effect of using different market assumptions and estimation methodologies may be material to the estimated fair value amounts.

The Company’s principal financial instruments are cash and cash equivalents, trade receivables, bank lines of credit, short-term borrowings, trade payables and other accrued liabilities, long-term borrowings, call and put options, forward contracts and other derivative instruments. With the exception of the Company’s senior unsecured guaranteed notes and the call and put options, the carrying values of these financial instruments approximate fair values either because of the short maturities of these instruments, or because the interest rates are based upon variable reference rates. As of April 30, 2011 and January 31, 2011, the fair value of the Company’s 6.31% senior unsecured guaranteed notes was $33,607 and $33,971, respectively, compared to a book value of $33,335, respectively, for each of these periods. As discussed further in Note 11, “Borrowings” on July 9, 2009, the Company issued $55,000 of senior unsecured guaranteed notes bearing an interest rate of 8.06%. As of April 30, 2011 and January 31, 2011, the fair value of these notes was $60,078 and $60,721, respectively, compared to a book value of $55,000 for each of these periods. The call and put options are recorded at their estimated fair value. For further information, see Note 1, “Call and Put Options.”

Recent Accounting Pronouncements

Adoption of New Accounting Standards. In October 2009, the FASB issued Accounting Standards Update (ASU) 2009-13, Multiple-Deliverable Revenue Arrangements (ASU 2009-13), which amends Codification Topic 605, Revenue Recognition. This update provides amendments to the criteria for separating deliverables, measuring and allocating arrangement consideration to one or more units of accounting. This update also establishes a selling price hierarchy for determining the selling price of a deliverable. ASU 2009-13 is effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. The Company’s current implementation of this standard on February 1, 2011 did not have a significant impact on its consolidated statements of operations and financial position.

Standards Issued But Not Yet Effective. Other new pronouncements issued but not effective until after April 30, 2011 are not expected to have a material impact on the Company’s consolidated financial statements.

Proposed Amendments to Current Accounting Standards. Updates to existing accounting standards and exposure drafts, such as exposure drafts related to revenue recognition, lease accounting, loss contingencies, comprehensive income and fair value measurements, that have been issued or proposed by FASB or other standards setting bodies that do not require adoption until a future date, are being evaluated by the Company to determine whether adoption will have a material impact on the Company’s consolidated financial statements.

Reclassifications

In the consolidated statements of cash flows, the Company has presented the purchases of software and other intangible assets as a separate line item within cash flow from investing activities for the three months ended April 30, 2011 and 2010. Historically, these amounts were included within the purchases of property, plant and equipment line item within investing activities. These changes did not impact cash flows from operating activities, investing activities or any other financial statement information.