We believe that for the Freight Forwarding segment, net revenue (the term used by the company to describe revenue less purchased transportation costs) is a better measure of growth in our freight forwarding business than revenue because our revenue for our services as an indirect air and ocean carrier includes the carriers' charges to us for carriage of the shipment. Our revenues are also impacted by changes in fuel and similar surcharges, which have little relation to the volume or value of our services provided. When we act as an indirect air and ocean carrier, our net revenue is determined by the differential between the rates charged to us by the carrier and the rates we charge our customers plus the fees we receive for our ancillary services. Within our company, revenue derived from freight forwarding generally is shared between the points of origin and destination, based on a standard formula. Our revenue in our other capacities includes only commissions and fees earned by us and is substantially similar to net revenue for the Freight Forwarding segment in this respect. A significant portion of our expenses are variable and adjust to reflect the level of our business activities. Other than purchased transportation costs, staff costs are our single largest variable expense and are less flexible in the near term.
Contract Logistics and Distribution Segment. Our contract logistics services primarily relate to the value-added warehousing and subsequent distribution of goods and materials in order to meet clients' inventory needs and production or distribution schedules. Our services include receiving, deconsolidation and decontainerization, sorting, put away, consolidation, assembly, cargo loading and unloading, assembly of freight and protective packaging, storage and distribution. Our outsourced services include inspection services, quality centers and manufacturing support. Contract logistics revenues are recognized when the service has been completed in the ordinary course of business. We also provide a range of distribution and other supply chain management services, such as domestic ground transportation, warehousing services, consulting, order management, planning and optimization services, outsourced management services, developing specialized client-specific supply chain solutions, and customized distribution and inventory management services. We receive fees for the other supply chain management services that we perform. The Contract Logistics and Distribution Segment includes the distribution operation in the Africa region, which was previously reported under Freight Forwarding, as this operation has evolved from an air express to a road distribution business over the last few years.
In contrast to the Freight Forwarding segment, we believe revenue is a better measure of the growth in our contract logistics and distribution business because this segment does not incur carrier costs (and related fuel surcharges) in the same manner as freight forwarding, and purchased transportation costs under this segment primarily relate to the truck brokerage operation in the Americas region.
CLIENTasONE Strategy
In the first quarter of fiscal 2008, we began to communicate the goals of our five-year strategic operating plan, which we refer to as "CLIENTasONE." Under CLIENTasONE, we are undertaking various efforts to attempt to increase the number and size of our clients and our revenue, improve our operating performance, develop and implement new systems and global processes and continuously train and develop our employees. We face numerous challenges in trying to achieve our objectives under this strategic plan, including challenges involving attempts to leverage client relationships, integrate acquisitions and improve our systems. We also face challenges developing, training and recruiting personnel. This strategic operating plan requires that we successfully manage our operations and growth which we may not be able to do as well as we anticipate. Our industry is extremely competitive and our business is subject to numerous factors and risks beyond our control. If we are not able to successfully implement CLIENTasONE, our efforts associated with this strategic plan may not result in increased revenues or improved profitability. If we are not able to increase our revenue or improve our profitability in the future, our results of operations could be adversely affected.

As a central part of our CLIENTasONE strategy, we are continuing a technology-enabled, business transformation initiative, which we refer to as "4asONE." This program is aimed at establishing a single system and set of global processes for our freight forwarding business and global financial management. It is designed to increase efficiency through the adoption of shared services and enabling technologies. In order to achieve this goal, we intend to deploy enabling technologies to support enterprise master data management, financial management and freight forwarding operations management. We are currently assessing the current scope and deployment schedule as well as the anticipated costs and benefits of the overall program. As with any significant IT-enabled business transformation, we face various challenges and risks with regard to our 4asONE program, including risks associated with cost increases and changes to our scope, anticipated cost structure, technical difficulties and delays associated with the development and implementation of 4asONE. As a result of these and other issues, the anticipated costs, expected benefits, overall scope and/or deployment schedule may change, and these changes may be material. Fiscal 2010 Cost Reduction Plans
In March 2009, the company announced certain actions to reduce costs, some of which were implemented commencing in the fourth quarter of fiscal 2009. These actions included a salary freeze and a revision to the company's incentive structure for fiscal 2010, a reduction in headcount where appropriate in accordance with volume declines and further controlling of discretionary expenses such as travel. These actions are expected to reduce operating costs for fiscal 2010 by approximately $50.0 million from our annualized fourth-quarter fiscal 2009 levels, on an organic, constant currency basis. Fiscal 2009 Information Technology Cost Reduction Plan and Other Cost Reductions On December 3, 2008, the company's Executive Board approved an information technology restructuring plan designed to consolidate the company's information technology resources, eliminate redundancies, reduce costs and improve client services. The information technology restructuring plan included outsourcing certain information technology functions and support, which has ultimately resulted in a reduction in the company's global information technology workforce by approximately 240 employees.
During the six months ended July 31, 2009, the company incurred aggregate pre-tax restructuring charges of $1.2 million. There were no restructuring charges incurred during the six months ended July 31, 2008. As of July 31, 2009, the company completed the information technology restructuring plan. All costs associated with the plan were cash expenditures.
In addition to the restructuring charges described above, during the six months ended July 31, 2009, the company incurred approximately $5.0 million in advisory and ancillary costs associated with the plan.
Effect of Foreign Currency Translation on Comparison of Results Our reporting currency is the U.S. dollar. However, due to our global operations, we conduct and will continue to conduct business in currencies other than our reporting currency. The conversion of these currencies into our reporting currency for reporting purposes will be affected by movements in these currencies against the U.S. dollar. A depreciation of these currencies against the U.S. dollar would result in lower revenues reported; however, as applicable costs are also converted from these currencies, costs would also be lower. Similarly, the opposite effect will occur if these currencies appreciate against the U.S. dollar. Additionally, the assets and liabilities of our international operations are denominated in each country's local currency. As such, when the values of those assets and liabilities are translated into U.S. dollars, foreign currency exchange rates may adversely impact the net carrying value of our assets. We cannot predict the effects of foreign currency exchange rate fluctuations on our future operating results.

Acquisitions
Acquisitions affect the comparison of our results between periods prior to when acquisitions are made and to the comparable periods in subsequent years, depending on the date of acquisition (e.g., acquisitions made on February 1, the first day of the first quarter of our fiscal year, will only affect a comparison with the prior year's results and will not affect a comparison to the following year's results). The results of acquired operations are included in our consolidated financial statements from the dates of their respective acquisitions. We consider the operating results of an acquired company during the first twelve months following the date of its acquisition to be an "acquisition impact" or a "benefit from acquisitions." Thereafter, we consider the growth in an acquired company's results to be "organic growth." Acquisitions that we completed on or after February 1, 2008 affect the comparison of our operating results between the second quarter of fiscal 2010 versus the comparable prior-year period.
Effective February 4, 2009, the company acquired all of the issued and outstanding shares of Multi Purpose Logistics, Ltd. (MPL), for a purchase price of $1.2 million, net of cash received of $0.3 million. MPL is an Israeli company providing logistics services. As a result of this acquisition, the company has increased its range of services provided in Israel. The total cost of the acquisition has been allocated to the assets acquired and the liabilities assumed based upon their estimated fair values at the date of acquisition. The preliminary allocation resulted in an excess of the purchase price over the fair value of the acquired net assets, and accordingly, $2.9 million was allocated to goodwill, all of which is included within the company's Contract Logistics and Distribution segment.
The allocation of the purchase price as of the date of acquisition resulted in total assets acquired, liabilities assumed and noncontrolling interest of $22.0 million, $19.7 million and $0.8 million, respectively. Total assets acquired at estimated fair value comprised of current assets of $15.5 million, comprised primarily of trade receivables and inventory of $8.1 million and $3.9 million, respectively, and noncurrent assets of $6.5 million, of which $2.9 million and $1.5 million have been allocated to goodwill and intangible assets, respectively. The company determined that none of the goodwill is deductible for tax purposes. The amortization period of the client contracts and relationships acquired is seven years as of the date of acquisition. Total liabilities assumed at estimated fair value were comprised of current liabilities of $18.5 million, primarily related to trade payables and other accrued liabilities, and noncurrent liabilities of $1.3 million. The noncontrolling interest is associated with an indirect subsidiary held by MPL. The estimated purchase price allocation is preliminary and is subject to revision. A valuation of the assets acquired and liabilities assumed is being conducted and the final allocation will be made when completed. Seasonality
Historically, our operating results have been subject to seasonal trends when measured on a quarterly basis. Our first and fourth fiscal quarters are traditionally weaker compared with our other fiscal quarters. This trend is dependent on numerous factors, including the markets in which we operate, holiday seasons, climate, economic conditions and numerous other factors. A substantial portion of our revenue is derived from clients in industries whose shipping patterns are tied closely to consumer demand or are based on just-in-time production schedules. We cannot accurately predict the timing of these factors, nor can we accurately estimate the impact of any particular factor, and thus we can give no assurance that these historical seasonal patterns will continue in future periods.

Forward-Looking Statements, Uncertainties and Other Factors Except for historical information contained herein, this quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended, which involve certain risks and uncertainties. Forward-looking statements are included with respect to, among other things, the company's current business plan and strategy and strategic operating plan, anticipated changes in certain tax benefits, anticipated costs, benefits and timing associated with the 4asONE project, the anticipated outcome of litigation, the company's ability to meet its capital and liquidity requirements for the foreseeable future, expected trends in revenue, the anticipated impact of various cost reduction efforts and the expected timing and anticipated impact of the proposed information technology restructuring plan and the estimated costs, savings and benefits associated with the plan. These forward-looking statements are identified by the use of such terms and phrases as "intends," "intend," "intended," "goal," "estimate," "estimates," "expects," "expect," "expected," "project," "projected," "projections," "plans," "anticipates," "anticipated," "should," "could," "may," "will," "designed to," "foreseeable future," "believe," "believes," "scheduled" and other similar expressions which generally identify forward-looking statements. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results could differ materially from those set forth in, contemplated by, or underlying our forward-looking statements. Many important factors may cause the company's actual results to differ materially from those discussed in any such forward-looking statements, including but not limited to the recent global economic slowdown that is adversely affecting trade volumes and the financial condition of many of our customers; volatility and uncertainty in global capital and credit markets which may adversely impact our operations; planned or unplanned consequences of our business transformation efforts; our clients' demand for our services; including further declines in freight and logistics volumes across our service lines; the impact of cost reduction measures recently undertaken by the company and the amount and timing of the expected benefits from such measures; integration risks associated with acquisitions; the ability to retain clients and management of acquisition targets; increased competition; the impact of higher fuel costs; the effects of changes in foreign exchange rates; changes in the company's effective tax rates; industry consolidation making it more difficult to compete against larger companies; general economic, political and market conditions, including those in Africa, Asia and EMENA which is comprised of Europe, Middle East and North Africa; work stoppages or slowdowns or other material interruptions in transportation services; or material reductions in capacity by carriers; risks of international operations; risks associated with, and costs and expenses the company will incur as a result of, the ongoing publicly announced investigations by the U.S. Department of Justice, the European Commission and other governmental agencies into the pricing practices of the international freight forwarding and cargo transportation industry and other similar or related investigations and lawsuits; the success and effects of new strategies and of the realignment of the company's executive management structure; with respect to the information technology restructuring plan specifically, unexpected severance and employee termination costs, delays in the completion of the proposed restructuring, higher than expected outsourcing costs, factors impacting the functionality of our information technology systems resulting in increased costs and unexpected delays in the proposed information technology restructuring plan; disruptions caused by epidemics, conflicts, wars and terrorism; the other risks and uncertainties described herein and in our other filings with the Securities and Exchange Commission (SEC); and other factors outside our control. Although UTi believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, we cannot assure you that the results contemplated in forward-looking statements will be realized in the timeframe anticipated or at all. In light of the significant uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by UTi or any other person that UTi's objectives or plans will be achieved. Accordingly, investors are cautioned not to place undue reliance on our forward-looking statements. UTi undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

In addition to the risks, uncertainties and other factors discussed under Part II, Item 1A below and elsewhere in this Form 10-Q, the risks, uncertainties and other factors that could cause or contribute to actual results differing materially from those expressed or implied in any forward-looking statements include, without limitation, those set forth under Part I. Item 1A "Risk Factors" in the company's Annual Report on Form 10-K for the fiscal year ended January 31, 2009 filed with the SEC (together with any amendments thereto or additions and changes thereto contained in subsequent filings of quarterly reports on Form 10-Q, including this quarterly report), those contained in the company's other filings with the SEC, and those set forth above. For these forward-looking statements, we claim the protection of the safe harbor for forward-looking statements in Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Discussion of Results
The following discussion of our operating results explains material changes in our consolidated results for the second quarter and first half of fiscal 2010 compared to the second quarter and first half of fiscal 2009. The discussion should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this quarterly report and our audited consolidated financial statements and notes thereto for the year ended January 31, 2009, which are included in our Annual Report on Form 10-K for the year ended January 31, 2009, on file with the SEC. Our consolidated financial statements included in this report have been prepared in U.S. dollars and in accordance with accounting principles generally accepted in the United States (U.S. GAAP).
Segment Operating Results
The company's operations are principally managed by core business operations. As discussed above in Note 1 "Presentation of Financial Statements" of our Notes to the Consolidated Financial Statements, our operations are broken into the following reportable segments: Freight Forwarding and Contract Logistics and Distribution. Certain corporate costs are allocated to the operating segments directly. The remaining corporate costs are those that are not specifically attributable to operating segments and are presented separately. The factors for determining the reportable segments include the manner in which management evaluates the performance of the company combined with the nature of the individual business activities.

For segment reporting purposes by geographic region, airfreight and ocean freight forwarding revenues for the movement of goods is attributed to the country where the shipment originates. Revenues for all other services (including contract logistics and distribution services) are attributed to the country where the services are performed. For the purposes of management discussion and analysis, net revenue is the term management uses to describe revenues minus purchased transportation costs. Our revenues and operating income by operating segment for the three and six months ended July 31, 2009 and 2008, along with the dollar amount of the changes and the percentage changes between the time periods shown, are set forth in the following tables (in thousands):

                                                                                     Three months ended July 31,
                                                           2009                                                                      2008
                                                  Contract                                                                 Contract
                                                 Logistics                                                                Logistics
                              Freight               and                                                Freight               and
                             Forwarding         Distribution        Corporate          Total          Forwarding         Distribution         Corporate           Total

Revenues                    $    539,364       $      301,138       $        -       $ 840,502       $    876,136       $      378,951       $         -       $ 1,255,087


Purchased
transportation costs             390,259              110,877                -         501,136            681,855              157,251                 -           839,106
Staff costs                       85,397               97,637            3,629         186,663            102,889              117,563             2,279           222,731
Depreciation and
amortization                       3,722                6,664              105          10,491              3,903                7,029                84            11,016
Amortization of
intangible assets                    987                1,825                -           2,812                845                2,234                 -             3,079
Other operating
expenses                          38,313               71,403            7,276         116,992             47,702               83,079             4,763           135,544

Total operating
expenses                         518,678              288,406           11,010         818,094            837,194              367,156             7,126         1,211,476


Operating income/(loss)     $     20,686       $       12,732       $  (11,010 )     $  22,408       $     38,942       $       11,795       $    (7,126 )     $    43,611




                                                                            Change to three months ended July 31, 2009
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