EGL, Inc.

views updated

EGL, Inc.

Intercontinental Airport
15350 Vickery Drive
Houston, Texas 77032
U.S.A.
Telephone: (281) 618-3100
Toll Free: (800) 888-4949
Fax: (281) 618-3399
Web site: http://www.eaglegl.com

Public Company
Incorporated: 1984 as Eagle USA Airfreight
Employees: 8,700
Sales: $1.87 billion (2002)
Stock Exchanges: NASDAQ NMS
Ticker Symbol: EAGL
NAIC: 488510 Freight Transportation Arrangement

EGL, Inc. (doing business as EGL Eagle Global Logistics) is a leader in the international freight forwarding and logistics services market. The company has 400 facilities in 100 countries. EGL focuses on shipments larger than those sought by shipping companies and cargo airlines (more than 50 pounds). EGL keeps its costs low and investors happy by owning as few transportation assets as possible.

Air freight forwarding accounts for most of EGL's business; the company also books freight shipments on ships and trucks, and offers logistics and distribution services and customs brokering. Real time shipping data provides essential value for customers in a competitive business. EGL is one of the largest players in a highly fragmented industry. The company merged with Circle International in 2000, adding a huge international presence to one of the largest freight forwarders in the United States.

Founding of EGL: 1984

Company founder James R. Crane, who had been a baseball pitcher in college, earned a degree in industrial safety from Central Missouri State University in 1976. This led to a job evaluating commercial property for an insurance company, according to Lloyd's List. A high school friend then encouraged him to enter the freight forwarding business. Crane moved to Houston, where he worked for Northern Airfreight for a while before he was hired away by Ranger Airfreight.

Crane then founded Eagle USA Airfreight in Houston in March 1984 at the relatively young age of 30, with $10,000 borrowed from his sister. Crane told Lloyd's List Eagle made money in its first month; the start-up employed a sole receptionist, with Crane handling the loading and trucking himself. Crane would credit part of his success to an incentive-based pay structure for management. Constant monitoring of financial and operational data was also important, as was an aversion to debt.

Freight forwarders find space on commercial passenger and cargo airlines for their client's goods. Eagle specialized in loads weighing more than 70 pounds, diverting direct competition with Federal Express and United Parcel Service Inc. Eagle's average shipment weighed about 600 pounds, reported the Journal of Commerce. The Japanese-style zero inventory theories being popularized in U.S. manufacturing circles relied on efficient shipping and were a boon to the forwarding business.

According to one estimate, there were between 1,600 and 3,000 freight forwarders in the United States in the early 1990s. Eagle had five freight terminals by this time, expanding from Houston to Dallas, St. Louis, Atlanta, and Los Angeles. Revenues were $17.8 million in 1991.

According to the Houston Chronicle, the company landed its first Fortune 500 account, Compaq Computer Corp., in 1992. Other large customers were also computer makers, such as IBM and Packard Bell Electronics; retailer CompUSA was also a big client. Sales reached $47 million in fiscal 1993. The company grew very fast in the mid-1990s, and would triple revenues in just three years.

Going Public: 1995

Eagle went public on the NASDAQ in November 1995 (ticker symbol EUSA), raising $30 million. Proceeds were earmarked for building a new $4.5 million headquarters and distribution center and funding expansion. Founder James Crane owned two-thirds of the shares after the initial public offering.

Investors liked freight forwarders such as Eagle USA because, unlike transport companies, forwarders were not saddled with expensive assets to maintain and replace. Revenues were about $185 million in fiscal 1996, when the company had 1,000 employees. It operated at 50 terminals around the country, and was beginning to expand internationally. Eagle was also introducing its delivery trucks in more markets.

Computer manufacturers accounted for one-fifth of revenues, but the automotive industry was beginning to provide a significant amount of business. Eagle profited as Houston Intercontinental Airport challenged rival Miami as a Latin American gateway.

Eagle USA acquired S. Boardman, a London-based company, in 1998, thereby entering the international freight forwarding market. Eagle USA Airfreight acquired Eagle Transfer Inc., a similarly named but unrelated forwarder, later in the year. Eagle Transfer, which did business as Eagle Cos., had revenues of $19 million a year and 70 employees; it specialized in shipping to South America from its Miami base as well as Los Angeles. The acquisition gave Eagle USA a presence in Argentina, Brazil, and Chile for the first time. Eagle USA opened offices in Asia later in 1998.

In late 1999, Eagle USA acquired a couple of Canadian freight forwarders, Fastair Cargo Systems and CTI Canada, both privately owned and based in Toronto. EGL's revenues reached $638 million in 1999, when it handled 1.4 million shipments.

In October 1999, Eagle's USA Airfreight began doing business as EGL Eagle Global Logistics. The company's name was officially changed to EGL Inc. in February 2000. By this time, the company was leasing a dozen jet freighters of its own.

Acquisition of Circle International: 2000

EGL acquired Circle International Group Inc. in July 2000 in a $543 million stock swap. EGL shareholders owned 63 percent of shares after the deal; Circle shareholders owned 37 percent. There were a number of large mergers among forwarding and logistics businesses as consolidation swept the very fragmented industry. Mergers like that of EGL and Circle, which could provide customers with more global reach, were considered especially auspicious.

The combined companies had 1999 revenues of $1.4 billion and together employed 8,300 people in 400 facilities (300 of them from Circle) around the world. EGL, under CEO James Crane, had been aiming to increase its share of the growing international market for heavyweight cargo, reported the Journal of Commerce. Circle was much stronger internationally than EGL, which had served eight countries outside the United States. Circle operated in more than 100 countries, while EGL had become the largest American freight forwarder. Circle had few customers in common with EGL. Its main clients included Xerox Corp. and pharmaceutical giants Merck & Co. and SmithKline Beecham.

Circle had had trouble keeping its CEO position filled in the two years prior to the merger. James Crane filled the role at the merged company. EGL was considered to have better information systems at the time and a stronger, more entrepreneurial sales culture. After the merger closed on October 2, 2000, the Circle International name was phased out. Circle's San Francisco headquarters was closed; some of its employees there were transferred to Houston.

History of Circle International: 1898–2000

Circle International's origins can be traced back to 1898, when Fred Harper founded a customs brokerage in San Francisco. Its first business was importing art goods from the Orient. The Robinson family became involved in the business when their patriarch took an office job there after moving west from Kentucky.

The Robinsons acquired the firm for less than $15,000 in the early 1940s, reported Forbes, and the business was dubbed Harper, Robinson & Co. The firm had less than a dozen employees. As an agent for Pan American, the company expanded quickly in the Far East with the growth of the air freight business in the 1950s.

Company Perspectives:

EGL, Inc. (EGL Eagle Global Logistics) has emerged as a leading global provider of supply chain solutions, demonstrating core competencies in transportation services, logistics management and information technology. Believing that these primary service components impact every stage of the supply chain, EGL utilizes its expertise and global infrastructure of approximately 400 offices and agents in more than 100 countries to establish a competitive advantage for the Company.

The framework of EGL's premiere non-asset-based business model consists of its international air and ocean freight forwarding, customs brokerage and related import/export services, North America expedited freight network, logistics and warehousing (including value-added distribution) and advanced information technology capabilities. Historically, transportation costs control a large percentage of the overall cost of supply chain expenses, and EGL's non-asset-based model combines the flexibility of traditional freight forwarding with multi-modal transportation without the fixed costs of owning and operating dedicated aircraft, truck fleets and ocean liners. Instead, the Company has cultivated dependable, cost-effective partnerships with suppliers that offer volume contracts to complement EGL's broad range of services.

Committed to operational excellence and superior customer service, EGL's network of global professionals remain focused on streamlining processes, improving information and providing supply and demand strategies that result in profitability for our large base of local, regional and multi-national customers. EGL maintains its loyal customer base by leveraging the collective knowledge and performance of each and every employee whose dedicated efforts result in total customer satisfaction.

John Robinson succeeded his father as chairman of the company in 1963. Harper acquired New York-based Circle Air-freight Corp. during the year. The Harper Group came to be best known for this business. The 1960s marked the beginning of a period of international expansion. The company also expanded its diversity of services. In the 1980s, it maintained warehouses in Asia on behalf of Woolworth's.

Revenues were $40 million a year in 1976, producing profits of $3 million, reported Forbes. In June 1977, Harper Group became a public company. By the end of the 1980s, Harper was doing $400 million a year in business, and profits were up to $15 million. Harper employed 3,150 people in 280 offices in 42 countries around the world.

In 1988, Harper acquired Bowater Industries' freight forwarding unit for $9 million. Its 50 European branches had revenues of $85 million a year. Another significant acquisition of the late 1980s was Challenge Freight Services, a New Zealand-based specialist in perishables.

By 1993, the Harper Group was one of the top international freight forwarders in the United States, with 380 offices in 44 countries. The company developed a reputation for having the best information systems in the business.

Harper Group had 40 subsidiaries in the early 1990s, most trading under their original names. These included Max Gruenhut International, Inc. and Darrell J. Sekin and Co. (acquired in 1991). In January 1994, Gruenhut and the Circle Airfreight Corporation, Inc. were merged into Harper Robinson & Co., Inc., which was renamed Circle International, Inc. This merged with EGL, Inc. in 2000.

Beyond 2000

EGL acquired a 24.5 percent stake in charter operator Miami Air in the summer of 2000. Miami Air was converting its old fleet of eight Boeing 727s to freighters, while leasing Boeing 737s to carry passengers. It had revenues of $85.7 million in 1999. EGL leased a few of the freighters. EGL announced its first strategic alliance in November 2000, teaming with leading South American airline LanChile S.A.

EGL laid off 300 workers in January 2001, owing to a softer economy and disappointing earnings. The company also returned a couple of its leased aircraft. About 1,700 management employees took a week-long furlough in March, and another 400 layoffs were announced the next month.

EGL acquired Miami International Forwarders (MIF) in the spring of 2003. MIF had been founded in 1950 and specialized in serving the apparel industry in the Caribbean and Latin America. It had 275 employees and revenues of $23.6 million in 2002.

The U.S. occupation of Iraq kept EGL busy. The company chartered Ukrainian-made Antonov-124 freighters to keep up with demand, in addition to leasing space on two Air France 747 cargo flights a week on a Houston-Paris-Kuwait route. The rebuilding of Iraq was expected to create a demand for air freight at least until 2007.

Key Dates:

1898:: Fred Harper launches customs brokerage in San Francisco.
1963:: Harper acquires Circle Airfreight.
1977:: Harper Group goes public.
1984:: James R. Crane founds Eagle USA Airfreight.
1989:: Harper's revenues are $400 million a year.
1995:: Eagle goes public.
2000:: Eagle acquires Circle International, changes name to EGL Inc.

Principal Subsidiaries

Circle International, Inc.

Principal Operating Units

Air Freight Forwarding Services; Domestic Local Delivery Services; Domestic Truck Brokerage Services; International Ocean Freight Forwarding and Consolidation; Customs Brokerage; Logistics and Other Services.