FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly period ended September 30, 2008
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o |
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TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT |
For the transition period from to
Commission file number 001-32172
Express-1 Expedited Solutions, Inc.
(Exact name of small business issuer as specified in its charter)
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Delaware
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03-0450326 |
(State or other jurisdiction of
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(I.R.S. Employer |
incorporation or organization)
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Identification No.) |
3399 South Lakeshore Drive, Suite 225
Saint Joseph, MI 49085
(Address of Principal Executive Offices)(Zip Code)
(269) 429-9761
(Issuers Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company þ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
The Registrant has 32,035,218 shares of its common stock outstanding as of November
12th, 2008.
Express-1 Expedited Solutions, Inc.
Form 10-Q
Three and Nine Months Ended September 30, 2008 and 2007
(Unaudited)
2
Part I Financial Information
Item 1 Financial Statements
Express-1 Expedited Solutions, Inc.
Consolidated Balance Sheets
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(Unaudited) |
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September 30, |
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December 31, |
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2008 |
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2007 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
1,868,000 |
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$ |
800,000 |
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Accounts receivable, net of allowances of $212,000 and $77,000, respectively |
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17,119,000 |
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5,663,000 |
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Prepaid expenses |
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238,000 |
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492,000 |
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Other current assets |
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887,000 |
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149,000 |
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Deferred tax asset, current |
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594,000 |
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1,549,000 |
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Total current assets |
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20,706,000 |
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8,653,000 |
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Property and equipment, net of $2,202,000 and $1,734,000 in accumulated depreciation, respectively |
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3,226,000 |
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2,312,000 |
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Goodwill |
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16,040,000 |
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7,737,000 |
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Identified intangible assets, net of $1,586,000 and $1,279,000 in accumulated amortization, |
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6,647,000 |
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3,950,000 |
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Loans and advances |
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73,000 |
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104,000 |
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Deferred tax asset, long term |
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377,000 |
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Other long term assets |
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1,212,000 |
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591,000 |
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Long term assets |
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27,198,000 |
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15,071,000 |
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Total assets |
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$ |
47,904,000 |
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$ |
23,724,000 |
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Liabilities and Stockholders Equity |
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Current liabilities: |
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Accounts payable |
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$ |
6,176,000 |
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$ |
892,000 |
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Accrued salaries and wages |
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598,000 |
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660,000 |
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Accrued acquisition earnouts |
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2,210,000 |
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Accrued expenses, other |
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2,225,000 |
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861,000 |
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Current maturities of long term debt |
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1,247,000 |
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50,000 |
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Other current liabilities |
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1,005,000 |
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199,000 |
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Total current liabilities |
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11,251,000 |
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4,872,000 |
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Line of credit |
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8,254,000 |
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Notes payable and capital leases, net of current maturities |
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1,700,000 |
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34,000 |
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Deferred tax liability, long term |
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250,000 |
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Other long-term liabilities |
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527,000 |
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616,000 |
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Total long-term liabilities |
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10,731,000 |
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650,000 |
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Stockholders equity: |
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Preferred stock, $.001 par value; 10,000,000 shares no shares issued or outstanding |
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Common stock, $.001 par value; 100,000,000 shares
authorized; 32,215,218 and 27,008,768 shares issued
and 32,035,218 and 26,828,768 shares outstanding |
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32,000 |
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27,000 |
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Additional paid-in capital |
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26,298,000 |
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21,152,000 |
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Accumulated deficit |
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(301,000 |
) |
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(2,870,000 |
) |
Treasury stock, at cost, 180,000 shares held |
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(107,000 |
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(107,000 |
) |
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Total stockholders equity |
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25,922,000 |
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18,202,000 |
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Total liabilities and stockholders equity |
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$ |
47,904,000 |
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$ |
23,724,000 |
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The accompanying notes are an integral part of the consolidated financial statements.
3
Express-1 Expedited Solutions, Inc.
Consolidated Statements of Operations
(Unaudited)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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September 30, |
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September 30, |
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2008 |
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2007 |
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2008 |
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2007 |
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Revenues |
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Operating revenue |
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$ |
32,438,000 |
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$ |
13,359,000 |
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$ |
88,369,000 |
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$ |
38,694,000 |
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Expenses |
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Operating expenses |
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27,136,000 |
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10,310,000 |
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73,701,000 |
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29,111,000 |
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Gross margin |
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5,302,000 |
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3,049,000 |
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14,668,000 |
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9,583,000 |
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Sales, general and administrative expense |
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3,276,000 |
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2,271,000 |
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10,080,000 |
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6,763,000 |
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Income from operations |
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2,026,000 |
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778,000 |
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4,588,000 |
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2,820,000 |
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Other expense |
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21,000 |
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(33,000 |
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36,000 |
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1,000 |
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Interest expense |
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94,000 |
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13,000 |
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273,000 |
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71,000 |
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Income before income tax provision |
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1,911,000 |
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798,000 |
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4,279,000 |
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2,748,000 |
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Income tax provision |
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759,000 |
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299,000 |
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1,710,000 |
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1,034,000 |
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Net income |
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$ |
1,152,000 |
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$ |
499,000 |
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$ |
2,569,000 |
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$ |
1,714,000 |
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Earnings per common share |
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Basic income per common share |
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0.04 |
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0.02 |
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0.08 |
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0.06 |
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Diluted income per common share |
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0.04 |
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0.02 |
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0.08 |
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0.06 |
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Weighted average common shares outstanding |
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Basic weighted average common shares outstanding |
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31,949,262 |
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26,737,547 |
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31,241,644 |
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26,629,119 |
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Diluted weighted average common shares outstanding |
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32,318,995 |
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27,321,640 |
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31,540,687 |
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27,349,458 |
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The accompanying notes are an integral part of the consolidated financial statements.
4
Express-1 Expedited Solutions, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
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Nine Months Ended September 30, |
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2008 |
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2007 |
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Operating activities |
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Net Income |
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$ |
2,569,000 |
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$ |
1,714,000 |
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Adjustments to reconcile net income to net cash from operating activities |
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Provisions for allowance for doubtful accounts |
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12,000 |
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(14,000 |
) |
Depreciation & amortization expense |
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847,000 |
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649,000 |
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Stock compensation expense |
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135,000 |
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130,000 |
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Loss on disposal of equipment |
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(11,000 |
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Common stock issued for ESOP |
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123,000 |
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Changes in assets and liabilities, net of effects of acquisition: |
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Account receivable |
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(5,227,000 |
) |
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(883,000 |
) |
Other current assets |
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568,000 |
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(84,000 |
) |
Prepaid expenses |
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346,000 |
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64,000 |
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Other assets |
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374,000 |
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776,000 |
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Accounts payable |
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(152,000 |
) |
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(320,000 |
) |
Accrued expenses |
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704,000 |
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792,000 |
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Accrued salary and wages |
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(85,000 |
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Other liabilities |
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1,307,000 |
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330,000 |
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(1,086,000 |
) |
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1,467,000 |
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Cash provided by operating activities |
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1,483,000 |
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3,181,000 |
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Investing activities |
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Acquisition of business, net of cash acquired |
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(8,489,000 |
) |
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Payment of acquisition earn-out |
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(2,210,000 |
) |
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(1,960,000 |
) |
Payment for purchases of property and equipment |
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(1,010,000 |
) |
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(408,000 |
) |
Proceeds from sale of assets |
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8,000 |
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84,000 |
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Proceeds from notes receivable |
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18,000 |
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Cash flows used by investing activities |
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(11,701,000 |
) |
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(2,266,000 |
) |
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Financing activities |
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Credit line, net activity |
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8,254,000 |
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(1,056,000 |
) |
Proceeds from debt for acquisition |
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3,600,000 |
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Payments of debt |
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(736,000 |
) |
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(121,000 |
) |
Proceeds from issuance of equity, net |
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168,000 |
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291,000 |
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Cash flows provided (used) by financing activities |
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11,286,000 |
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(886,000 |
) |
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Net increase in cash and cash equivalents |
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1,068,000 |
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29,000 |
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Cash and cash equivalents, beginning of period |
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800,000 |
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79,000 |
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Cash and cash equivalents, end of period of period |
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$ |
1,868,000 |
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$ |
108,000 |
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Supplemental disclosure of noncash activities: |
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Cash paid during the period for interest |
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$ |
238,000 |
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$ |
79,000 |
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Cash paid during the period for income taxes |
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267,000 |
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49,000 |
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Acquisition of assets and liabilities of Concert Group Logistics: |
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Cash |
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671,000 |
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Accounts receivable purchased |
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5,856,000 |
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Prepaid expenses |
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|
95,000 |
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Property and equipment |
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415,000 |
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Other assets |
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872,000 |
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Goodwill and other identified intangibles |
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|
11,303,000 |
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Liabilities assumed |
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(4,704,000 |
) |
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Total purchased price |
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14,508,000 |
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Less equity issued |
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(4,848,000 |
) |
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Less payable issued |
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(500,000 |
) |
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Less cash acquired |
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(671,000 |
) |
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Net cash paid |
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$ |
8,489,000 |
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|
The accompanying notes are an integral part of the consolidated financial statements.
5
Express-1 Expedited Solutions, Inc.
Consolidated Statement of Changes in Stockholders Equity
Nine Months Ended September 30, 2008
(Unaudited)
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Additional |
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Accumulated |
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Common Stock |
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Treasury Stock |
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Paid In |
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Earnings |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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(Deficit) |
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Total |
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|
|
Balance December 31, 2007 |
|
|
27,008,768 |
|
|
$ |
27,000 |
|
|
|
(180,000 |
) |
|
$ |
(107,000 |
) |
|
$ |
21,152,000 |
|
|
$ |
(2,870,000 |
) |
|
$ |
18,202,000 |
|
Issuance of stock for exercise
of warrants |
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|
406,450 |
|
|
|
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|
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|
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|
168,000 |
|
|
|
|
|
|
|
168,000 |
|
Issuance of common stock |
|
|
4,800,000 |
|
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|
5,000 |
|
|
|
|
|
|
|
|
|
|
|
4,843,000 |
|
|
|
|
|
|
|
4,848,000 |
|
Stock option expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
135,000 |
|
|
|
|
|
|
|
135,000 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,569,000 |
|
|
|
2,569,000 |
|
|
|
|
Balance September 30, 2008 |
|
|
32,215,218 |
|
|
$ |
32,000 |
|
|
|
(180,000 |
) |
|
$ |
(107,000 |
) |
|
$ |
26,298,000 |
|
|
$ |
(301,000 |
) |
|
$ |
25,922,000 |
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
6
Express-1 Expedited Solutions, Inc.
Notes to Consolidated Financial Statements
Three and Nine Months Ended September 30, 2008 and 2007
(Unaudited)
1. Significant Accounting Principles
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Express-1 Expedited
Solutions, Inc. (we, us, our or the Company) have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission (SEC) and in accordance with the
instructions to Form 10-Q. Certain information and footnote disclosures normally included in annual
financial statements have been condensed or omitted pursuant to those rules and regulations.
However, we believe that the disclosures contained herein are adequate to make the information
presented not misleading.
The financial statements reflect, in our opinion, all material adjustments (which include only
normal recurring adjustments) necessary to fairly present our financial position at September 30,
2008 and December 31, 2007 and results of operations for the three and nine-month periods ended
September 30, 2008 and 2007. The preparation of the financial statements requires management to
make estimates and judgments that affect the reported amounts of assets and liabilities and the
disclosure of contingencies at the date of the financial statements as well as the reported amounts
of revenues and expenses during the reporting period. Estimates have been prepared on the basis of
the most current and best available information and actual results could differ materially from
those estimates.
These unaudited condensed consolidated financial statements and notes thereto should be read
in conjunction with the audited financial statements and notes thereto for the fiscal year ended
December 31, 2007 included in our Annual Report on Form 10-K as filed with the SEC and available on
the SECs website (www.sec.gov). Results of operations in interim periods are not necessarily
indicative of results to be expected for a full year.
Revenue Recognition
Within the Companys Express-1, Express-1 Dedicated and Bounce Logistics business units,
revenue is recognized primarily at the point in time delivery is completed on the freight shipments
it handles; with related costs of delivery being accrued as incurred and expensed within the same
period in which the associated revenue is recognized. For these business units, the Company uses
the following supporting criteria to determine revenue has been earned and should be recognized: i)
persuasive evidence that an arrangement exists, ii) services have been rendered, iii) the sales
price is fixed and determinable and iv) collectability is reasonably assured.
Within its Concert Group Logistics business unit, the Company utilizes an alternative point in
time to recognize revenue. Concert Group Logistics revenue and associated operating expenses are
recognized on the date the freight is picked up from the shipper. This alternative method of
revenue recognition is not the preferred method of revenue recognition as prescribed within
Financial Accounting Standards Board (FASB) Emerging Issues Task Force Issue No. 91-9 Revenue and
Expense Recognition for Freight Services in Progress (EITF N. 91-9). This alternative method
recognizes revenue and associated expenses prior to the point in time that all services are
completed. The use of this method does not result in a material difference from one of the more
preferred methods as identified in EITF No. 91-9. The Company has evaluated the impact of this
alternative method on its consolidated financial statements and concluded that the impact is
immaterial to the financial statements.
Revenue is reported by the Company on a gross basis in accordance with release 99-19 from the
Emerging Issues Task Force (EITF) of the Financial Accounting Standards Board (FASB), Reporting
Revenue Costs as a Principal versus Net as an Agent. The following facts justify our position of
reporting revenue on a gross basis:
|
|
|
The Company is the primary obligor and is responsible for providing the service
desired by the customer. |
|
|
|
|
The customer holds the Company responsible for fulfillment including the
acceptability of the service (Requirements may include, for example, on-time delivery,
handling freight loss and damage claims, establishing pick-up and delivery times, and
tracing shipments in transit. ). |
|
|
|
|
The Company has discretion in setting sales prices and as a result, its earnings
vary. |
7
|
|
|
The Company has discretion to select its drivers, contractors or other
transportation providers (collectively, service providers) from among thousands of
alternatives, and |
|
|
|
|
The Company bears credit risk for all of its receivables. |
We believe that these factors support our position of reporting revenue on a gross basis.
Stock-Based Compensation
The Company accounts for share-based compensation in accordance with Statement of Financial
Accounting Standard (SFAS) Number 123R, Share-Based Payment, which was adopted January 1, 2006,
utilizing the modified prospective method.
The Company has in place a stock option plan approved by the shareholders for 5,600,000 shares
of its common stock. Through the plan, the Company offers stock options to employees and directors
which assists in the recruitment of these individuals. Under the plan, the Company may also grant
restricted stock awards, subject to the satisfaction by the recipient of certain conditions and
enumerated in the specific restricted stock grant.
Options generally become fully vested three to five years from the date of grant and expire
five to ten years from the grant date. During the nine-month period ended September 30, 2008, the
Company granted 385,000 options to purchase shares of its common stock pursuant to its stock option
plan as amended, respectively. As of September 30, 2008, the Company had 2,248,000 shares available
for future stock option grants under its existing plan.
The weighted-average fair value of each stock option recorded in expense for the three and
nine-month periods ended September 30, 2008 and 2007 was estimated on the date of grant using the
Black-Scholes option pricing model and amortized over the vesting period of the underlying options.
The Company has used one grouping for the assumptions, as its option grants are primarily basic
with similar characteristics. The expected term of options granted has been derived based upon the
Companys history of actual exercise behavior and represents the period of time that options
granted are expected to be outstanding. Historical data was also used to estimate option exercises
and employee terminations. Estimated volatility is based upon the Companys historical market price
at consistent points in a period equal to the expected life of the options. The risk-free interest
rate is based on the U.S. Treasury yield curve in effect at the time of grant and the dividend
yield is zero. The assumptions outlined in the table below were utilized in the calculations of
compensation expense from option grants in the reporting periods reflected.
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
September 30, |
|
|
2008 |
|
2007 |
Risk-free interest rate |
|
|
2.00% |
|
|
|
5.00% |
|
Expected life |
|
6.0 Years |
|
6.0 Years |
Expected volatility |
|
|
35% |
|
|
|
35% |
|
Expected dividend yield |
|
none |
|
none |
Grant date fair value |
|
|
$0.38 |
|
|
|
$0.62 |
|
8
The following table summarizes the stock option activity for the nine-month period ended
September 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options |
|
|
Weighted |
|
|
Weighted |
|
|
|
and |
|
|
Average |
|
|
Average |
|
|
|
Warrants |
|
|
Exercise |
|
|
Remaining |
|
|
|
Outstanding |
|
|
Price |
|
|
Contractual Life |
|
|
Outstanding at December 31, 2007 |
|
|
11,768,886 |
|
|
$ |
1.47 |
|
|
2.2 Years |
Warrants granted |
|
|
31,540 |
|
|
|
1.25 |
|
|
|
|
|
Warrants expired/cancelled |
|
|
(4,318,739 |
) |
|
|
1.44 |
|
|
|
|
|
Warrants exercised |
|
|
(1,007,997 |
) |
|
|
1.04 |
|
|
|
|
|
Options granted |
|
|
385,000 |
|
|
|
1.07 |
|
|
|
|
|
Options expired/cancelled |
|
|
|
|
|
|
|
|
|
|
|
|
Options exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2008 |
|
|
6,858,690 |
|
|
$ |
1.53 |
|
|
3.4 Years |
Outstanding exercisable at September 30, 2008 |
|
|
6,121,405 |
|
|
$ |
1.56 |
|
|
2.8 Years |
Of the 1,007,997 warrants exercised during the nine-month period ended September 30, 2008,
759,300 warrants were exercised cashlessly by the warrant holder, per the terms of the original
warrant issued. These warrants had an exercise price of $1.00 per share, and the Company issued
179,682 shares of its common stock in return for the warrants
As of September 30, 2008, the Company had approximately $264,000 of unrecognized compensation
cost related to non-vested share-based compensation that is anticipated to be recognized over a
weighted average period of approximately 1.0 years. Estimated remaining compensation expense
related to existing share-based plans is $55,000, $155,000, $46,000 and $8,000 for the years ended
December 31, 2008, 2009, 2010, 2011 and thereafter, respectively.
At September 30, 2008, the aggregate intrinsic value of warrants and options outstanding was
$10,495,000 and the aggregate intrinsic value of options exercisable was $9,577,000. Holders of
warrants in the Companys stock exercised 1,007,997 warrants during the nine months ended September
30, 2008 and the Company received approximately $168,000 in cash from these transactions. The total
fair value of options vested during the same three month period was
approximately $62,000.
Use of Estimates
The Company prepares its consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America. These principles require management
to make estimates and assumptions that impact the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the reporting period. The
Company reviews its estimates, including but not limited to, purchased transportation, outstanding
insurance claims, other accrued expenses, recoverability of long-lived assets, recoverability of
prepaid expenses, and allowance for doubtful accounts, on a regular basis and makes adjustments
based on historical experiences and existing and expected future conditions. These evaluations are
performed and adjustments are made as information is available. Management believes that these
estimates are reasonable and each has been discussed with the audit committee; however, actual
results could differ from these estimates.
Reclassifications
Certain prior year amounts shown in the accompanying consolidated financial statements have
been reclassified to conform to the 2008 presentation. These reclassifications did not have any
effect on total assets, total liabilities, total stockholders equity or net income.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and, on occasion, short term investments. The
Company considers all highly liquid instruments purchased with a remaining maturity of less than
three months at the time of purchase as cash equivalents.
9
Income Taxes
Taxes on income are provided in accordance with SFAS No. 109, Accounting for Income Taxes.
Deferred income tax assets and liabilities are recognized for the expected future tax consequences
of events that have been reflected in the consolidated financial statements. Deferred tax assets
and liabilities are determined based on the differences between the book values and the tax basis
of particular assets and liabilities, and the tax effects of net operating loss and capital loss
carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a change in the tax rate
is recognized as income or expense in the period that included the enactment date. A valuation
allowance is provided to offset the net deferred tax assets if, based upon the available evidence,
it is more likely than not that some or all of the deferred tax assets will not be realized. The
Company has evaluated its tax position and concluded no valuation allowance on its deferred tax
assets is required, as of September 30, 2008. The Company had gross federal net operating loss
carry forwards of approximately $5,400,000 as of December 31, 2007. Based upon the pre-tax income
reported in the first nine months of 2008, the Company estimates these loss carry forwards have
been reduced to approximately $1,500,000 through September 30, 2008.
Effective January 01, 2007, the Company adopted Financial Accounting Standards Board (FASB)
Interpretation Number 48 (FIN 48), Accounting for Uncertainty in Income Taxes an
Interpretation of FASB statement number 109. The company recognized no adjustments in its tax
liability as a result of the adoption of FIN 48.
Goodwill
Goodwill consists of the excess of cost over the fair value of net assets acquired in business
combinations. The Company follows the provisions of Statement of Financial Accounting Standards
(SFAS) No. 142, Goodwill and Other Intangible Assets. SFAS No. 142 requires an annual impairment
test for goodwill and intangible assets with indefinite lives. Under the provisions of SFAS No.
142, the first step of the impairment test requires that the Company determine the fair value of
each reporting unit, and compare the fair value to the reporting units carrying amount. To the
extent a reporting units carrying amount exceeds its fair value, an indication exists that the
reporting units goodwill may be impaired and the Company must perform a second more detailed
impairment assessment. The second impairment assessment involves allocating the reporting units
fair value to all of its recognized and unrecognized assets and liabilities in order to determine
the implied fair value of the reporting units goodwill as of the assessment date. The implied fair
value of the reporting units goodwill is then compared to the carrying amount of goodwill to
quantify an impairment charge as of the assessment date. The Company performed impairment testing
during the third quarter and determined that no impairment existed as of September 30 , 2008. In
the future, the Company will perform the annual test during its fiscal third quarter unless events
or circumstances indicate impairment of the goodwill may have occurred before that time.
The Company added $8,303,000 of goodwill during the nine months ended September 30, 2008, as a
result of the acquisition of certain assets from Concert Group Logistics, LLC. The Company expects
to finalize the valuation of these purchased assets in the fourth quarter of 2008. Any change in
the allocation of goodwill and intangible assets would be measured in the fourth quarter of 2008.
Identified Intangible Assets
The Company follows the provisions of SFAS No. 144, Accounting for the Impairment or Disposal
of Long-Lived Assets, which establishes accounting standards for the impairment of long-lived
assets such as property, plant and equipment and intangible assets
subject to amortization. The Company reviews long-lived assets to be held-and-used for
impairment whenever events or changes in circumstances indicate that the carrying amount of the
assets may not be recoverable. If the sum of the undiscounted expected future cash flows over the
remaining useful life of a long-lived asset is less than its carrying amount, the asset is
considered to be impaired. Impairment losses are measured as the amount by which the carrying
amount of the asset exceeds the fair value of the asset. When fair values are not available, the
Company estimates fair value using the expected future cash flows discounted at a rate commensurate
with the risks associated with the recovery of the asset. During the three and nine-month periods
ended September 30, 2008, there was no impairment of intangible assets.
The Company added $3,000,000 of identified intangible assets during the nine months ended
September 30, 2008, based upon the acquisition of certain assets from Concert Group Logistics, LLC.
The Company expects to finalize the valuation of these purchased
10
assets in the fourth quarter of
2008. Any change in the amount of identified intangible assets will be measured in the fourth
quarter of 2008. Pending the completion of the valuation by the Company in the fourth quarter of
2008, the Company has amortized the intangible assets over a range of lives ranging from 3-15
years. In the quarter ended September 30, 2008, the Company recorded $53,000 of amortization
expense related to these assets. The amortization expense for fiscal 2008 through September 30,
2008 for these purchased assets equals $153,000.
Other Long-Term Assets
Other long-term assets primarily consist of balances representing various deposits, and the
long-term portion of the Companys non-qualified deferred compensation plan. Also included within
this account classification are incentive payments to independent station owners within the Concert
Group Logistics network. These payments are made by Concert Group Logistics to certain station
owners as an incentive to join the network. These amounts are amortized over the life of each
independent station contract and the unamortized portion is recoverable in the event of default
under the terms of the agreements.
Estimated Fair Value of Financial Instruments
The aggregated net fair value estimates discussed herein are based upon certain market
assumptions and pertinent information available to management. The respective carrying value of
certain on-balance-sheet financial instruments approximated their fair values. These financial
instruments include cash and cash equivalents, receivables, payables, accrued expenses and
short-term borrowings. Fair values were assumed to approximate carrying values for these financial
instruments since they are short-term in nature and their carrying amounts approximate fair values
or they are receivable or payable on demand. The fair value of the Companys debt is estimated
based upon the quoted market prices for the same or similar issues or on the current rates offered
to the Company for debt of similar maturities.
Earnings Per Share
Earnings per common share are computed in accordance with SFAS No. 128, Earnings Per Share,
which requires companies to present basic earnings per share and diluted earnings per share.
Basic Earnings per Share Basic earnings per share are computed by dividing net income by
the weighted average number of shares of common stock outstanding during the period. The
numerators, denominators and basic earnings per share are outlined in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months |
|
For the Nine Months |
|
|
Ended September 30, |
|
Ended September 30, |
|
|
2008 |
|
2007 |
|
2008 |
|
2007 |
Net income |
|
$ |
1,152,000 |
|
|
$ |
499,000 |
|
|
$ |
2,569,000 |
|
|
$ |
1,714,000 |
|
Basic weighted shares outstanding |
|
|
31,949,262 |
|
|
|
26,737,547 |
|
|
|
31,241,644 |
|
|
|
26,629,119 |
|
Basic earnings per share |
|
$ |
0.04 |
|
|
$ |
0.02 |
|
|
$ |
0.08 |
|
|
$ |
0.06 |
|
Diluted Earnings per Share Diluted earnings per common share are computed by dividing net
income by the combined weighted average number of shares of common stock outstanding and dilutive
options outstanding during the period. The numerators, denominators and diluted earnings per share
are outlined in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months |
|
For the Nine Months |
|
|
Ended September 30, |
|
Ended September 30, |
|
|
2008 |
|
2007 |
|
2008 |
|
2007 |
Net income |
|
$ |
1,152,000 |
|
|
$ |
499,000 |
|
|
$ |
2,569,000 |
|
|
$ |
1,714,000 |
|
Basic weighted shares outstanding |
|
|
31,949,262 |
|
|
|
26,737,547 |
|
|
|
31,241,644 |
|
|
|
26,629,119 |
|
Dilutive options and warrants |
|
|
369,733 |
|
|
|
584,093 |
|
|
|
299,043 |
|
|
|
720,339 |
|
|
|
|
|
|
Diluted weighted shares outstanding |
|
|
32,318,995 |
|
|
|
27,321,640 |
|
|
|
31,540,687 |
|
|
|
27,349,458 |
|
Diluted earnings per share |
|
$ |
0.04 |
|
|
$ |
0.02 |
|
|
$ |
0.08 |
|
|
$ |
0.06 |
|
Stock and Warrants Granted During the nine-month period ended September 30, 2008, the
Company issued 5,206,450 shares of its common stock, granted 31,540 warrants to the holders of
convertible securities originally issued during 2003, and issued 385,000 options to purchase stock
to members of management and its Board of Directors. Of the stock issued, 4,800,000 shares were
11
issued in conjunction with the purchase of Concert Group Logistics, and 406,450 shares were issued
in conjunction with the exercise of warrants for the Companys common stock. The 31,540 warrants
issued carried a weighted average exercise price of $1.25 per share and a maturity date of July
2008. Various holders of warrants to purchase the Companys common stock tendered those warrants to
the Company together with cash of $168,000 in exchange for the warrant conversions. One holder of
759,300 warrants to purchase the Companys common stock, exercised those warrants in a cashless
conversion and received 179,682 new shares of the Companys common stock in this exchange.
2. Recent Accounting Pronouncements
In December 2007, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 141
(revised 2007), Business Combinations (SFAS No. 141 (R)). SFAS No. 141(R) retains the
fundamental requirements in SFAS No. 141 that the acquisition method of accounting (which SFAS No.
141 called the purchase method) be used for all business combinations and for an acquirer to be
indentified for each business combination. In general, the statement 1) broadens the guidance of
SFAS No. 141, extending its applicability to all events where one entity obtains control over one
or more other businesses, 2) broadens the use of fair value measurements used to recognize the
assets acquired and liabilities assumed, 3) changes the accounting for acquisition related fees and
restructuring costs incurred in connection with an acquisition, and 4) increased required
disclosures. The Company is required to apply SFAS No. 141(R) prospectively to business
combinations for which the acquisition date is on or after January 1, 2009. Earlier application is
not permitted.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets
and Financial Liabilities Including an amendment of FASB Statement No. 115. SFAS No. 159
permits entities to choose to measure eligible items at fair value at specified election dates and
report unrealized gains or losses on items for which the fair value option has been elected in
earnings at each subsequent reporting date. SFAS No. 159 is effective for fiscal years beginning
after November 15, 2007. The Company did not record an adjustment within its financial statements
as a result of adopting the provisions of SFAS No. 159, as of September 30, 2008 and does not
currently anticipate a material impact upon its financial statements in future periods as a result
of this pronouncement.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurement, which defines fair
value, establishes a framework for consistently measuring fair value under generally accepted
accounting principles, and expands disclosures about fair value measurements. This Statement
applies under other accounting pronouncements that require or permit fair value measurements and is
effective for fiscal years beginning after November 15, 2007. The Company did not record an
adjustment within its financial statements as a result of adopting the provisions of SFAS No. 157
as of September 30, 2008 and does not currently anticipate a material impact upon its financial
statements in future periods as a result of this pronouncement.
Other recent accounting pronouncements issued by the FASB (including its EITF), the AICPA and
the SEC did not or are not believed by the Companys management to have a material impact on the
Companys current or future financial statements.
3. Acquisitions
On January 31, 2008, the Company completed the purchase of substantially all assets and
certain liabilities of Downers Grove, Illinois based Concert Group Logistics, LLC. (Concert LLC).
The transaction had an effective date of January 1, 2008 and the Company completed the purchase
through a newly formed wholly owned subsidiary Concert Group Logistics, Inc.
At closing the Company paid the former owners of Concert Group Logistics, LLC total
consideration that included $9.0 million in cash and 4.8 million shares of the Companys common
stock. The Company received $3.2 million of assets consisting of cash, receivables, office
equipment and other current assets, net of liabilities acquired in the transaction. The transaction
was financed through the Companys new line of credit, a new term note payable and cash available
from working capital.
The transaction provides for additional consideration of up to $2.0 million to be paid at the
end of 2008, provided certain performance criteria are met within the Companys new subsidiary. Of
this amount, $500,000 is guaranteed by the Company to the former owners of Concert Group Logistics,
LLC, subject to the right of offset by the Company for certain balance sheet and unrecorded
liability provisions contained within the agreement. This $500,000 guaranteed amount has been
included within the Companys current liabilities within the consolidated balance sheet as of
September 30, 2008. In the event the remaining $1.5 million is not earned in 2008, the balance of
additional consideration will be payable at the end of 2009, provided the new subsidiary meets
certain cumulative performance provisions for the years of 2008 and 2009.
12
The company accounted for the acquisition as a purchase and the results of operations of the
acquired businesses have been included within the Companys consolidated financial statements from
January 1, 2008 forward.
The following unaudited information presents the estimated fair value of the assets acquired
and liabilities assumed at the date of the acquisition. The Company expects to finalize its
valuation of the purchase and based upon the final results of the valuation; these preliminary
allocations are subject to change. The Company expects to complete its valuation in the fourth
quarter of 2008:
|
|
|
|
|
Current assets |
|
$ |
6,622,000 |
|
Fixed assets |
|
|
415,000 |
|
Other long-term assets |
|
|
872,000 |
|
Identified intangible assets |
|
|
3,000,000 |
|
Goodwill |
|
|
8,303,000 |
|
|
|
|
|
Total assets acquired |
|
|
19,212,000 |
|
Current liabilities assumed |
|
|
4,704,000 |
|
|
|
|
|
Net assets acquired |
|
$ |
14,508,000 |
|
|
|
|
|
Preliminary analysis of the identifiable intangible assets acquired include: Employment contracts
of $500,000, Concert Group Logistics station network $1,500,000, and Concert Group Logistics trade
name $1,000,000.
The following unaudited proforma consolidated financial information is presented as if the
acquisition of Concert Group Logistics occurred on January 1, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
NineMonths Ended |
|
|
|
|
|
|
September 30, |
|
|
|
|
|
September 30, |
|
|
September 30, |
|
2007 |
|
September 30, |
|
2007 |
|
|
2008 |
|
(Pro forma) |
|
2008 |
|
(Pro forma) |
Operating revenues |
|
$ |
32,438,000 |
|
|
$ |
25,537,000 |
|
|
$ |
88,369,000 |
|
|
$ |
73,287,000 |
|
Operating expenses |
|
|
27,136,000 |
|
|
|
21,275,000 |
|
|
|
73,701,000 |
|
|
|
60,414,000 |
|
Gross margin |
|
|
5,302,000 |
|
|
|
4,262,000 |
|
|
|
14,668,000 |
|
|
|
12,873,000 |
|
Selling, general and administrative expenses |
|
|
3,276,000 |
|
|
|
3,017,000 |
|
|
|
10,080,000 |
|
|
|
8,981,000 |
|
Net Income applicable to common stock |
|
|
1,152,000 |
|
|
|
917,000 |
|
|
|
2,569,000 |
|
|
|
2,662,000 |
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
0.04 |
|
|
|
0.03 |
|
|
|
0.08 |
|
|
|
0.08 |
|
Diluted |
|
|
0.04 |
|
|
|
0.03 |
|
|
|
0.08 |
|
|
|
0.08 |
|
|
Weighted Average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average common shares outstanding |
|
|
31,949,262 |
|
|
|
31,537,547 |
|
|
|
31,241,644 |
|
|
|
31,429,119 |
|
Diluted weighted average common shares outstanding |
|
|
32,318,995 |
|
|
|
32,121,640 |
|
|
|
31,540,687 |
|
|
|
32,149,458 |
|
4. Commitments and Contingencies
Litigation
In the ordinary course of business, the Company may be a party to a variety of legal actions.
The Company does not currently anticipate any of these matters or any matters in the aggregate to
have a materially adverse effect on the Companys business or its financial position or results of
operations.
Regulatory Compliance
The Companys activities are regulated by state and federal agencies under requirements that
are subject to broad interpretations. Among these regulations are limitations on the hours-of-service that can be performed by the Companys drivers, limitations on the
13
types of
commodities that can be hauled, limitations on the gross vehicle weight for each class of vehicle
utilized by the Company and limitations on the transit authorities within certain regions. The
Company cannot predict future changes to be adopted by the regulatory bodies that could require
changes to the manner in which the Company operates.
Contingent Commitment
The Company has entered into an agreement with a third-party transportation equipment leasing
company which results in a contingent liability. The Company has accounted for this contingency
based upon the guidelines contained within FIN Number 45 and in SFAS Number 5. Accordingly, the
Company has estimated the maximum amount of the contingent liability to be $51,000 as of September
30, 2008, and has recorded this amount as a reserve within its balance sheet and as an expense
within its statement of earnings. The Company periodically evaluates the contingency amount and
adjusts the liability based upon the results of those periodic evaluations. Based upon its
analysis, the Company estimates that the range in liability that could be realized is between
$25,000 and $51,000, as of September 30, 2008.
In conjunction with the purchase of Concert Group Logistics, the Company entered into a
contingent agreement whereby the Company could be required to remit up to $1.5 million to the
former owners of CGL, provided certain performance measures are obtained within the CGL operations
during 2008 and 2009. For more discussion on the CGL transaction and this contingent commitment,
please refer to footnote numbers 3 and 7.
5. Debt
Notes Payable and Capital Leases
The Company enters into notes payable and capital leases with various third parties from time
to time to finance certain operational equipment, real property and other assets used in its
business operations. Generally these loans and capital leases bear interest at market rates, and
are collateralized with equipment and certain assets of the Company.
The table below outlines the Companys notes payable and capital lease obligations as of
September 30, 2008 and December 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rates |
|
|
Term (months) |
|
|
As of September 30, 2008 |
|
|
As of December 31, 2007 |
|
Notes payable |
|
|
4 |
% |
|
|
36 |
|
|
$ |
2,900,000 |
|
|
$ |
|
|
Capital leases for equipment |
|
|
18 |
% |
|
|
24 - 60 |
|
|
|
47,000 |
|
|
|
84,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total notes payable and capital leases |
|
|
|
|
|
|
|
|
|
|
2,947,000 |
|
|
|
84,000 |
|
Less: current maturities of long-term debt |
|
|
|
|
|
|
|
|
|
|
1,247,000 |
|
|
|
50,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current maturities of long term-debt |
|
|
|
|
|
|
|
|
|
$ |
1,700,000 |
|
|
$ |
34,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company recorded interest expense associated with the above debt of $31,000 for the third
quarter ended September 30, 2008 and a year to date expense of $96,000. For these same periods, the
Company recorded gross payments for the debt of and $344,000 and $832,000 respectively.
6. Revolving Credit Facilities
The Company entered into a new credit facility with National City Bank in January, 2008. This
facility provides for a receivables based line of credit of up to $11.0 million and a term note of
$3.6 million. The Company may draw upon the receivables based line of credit the lessor of $11.0
million or 80% of eligible accounts receivables, less amounts outstanding under letters of credit.
To fund the purchase of Concert Group Logistics, LLC, the Company drew $3.6 million on the term
facility and $5.4 million on the receivables based line of credit. Substantially all the assets of
the Company and its wholly owned subsidiaries (Express-1, Inc., Express-1 Dedicated, Inc., Concert
Group Logistics, Inc. and Bounce Logistics, Inc.) are pledged as collateral securing performance
under the terms of the commitment. The line bears interest based upon a spread above thirty-day
LIBOR with an initial increment of 125 basis points above thirty-day LIBOR for the receivables line
and 150 basis point above thirty-day LIBOR for the term note. Amortizing over a thirty-six month
period, the term note requires monthly principal payments of $100,000 together with accrued
interest be paid until retired. The weighted average rate of interest on the credit facility for
the quarter was approximately 3.8%. As of September 30,
14
2008 our weighted average interest note on
our credit facilities was 4.9%. Available capacity under the facility was approximately $2.4
million as of September 30, 2008, and the facility carried an initial maturity date of June 30,
2009. The credit facility has been subsequently extended with a revised maturity date of May 31,
2010.
7. Related Party Transaction
In January 2008, in conjunction with the Companys purchase of substantially all assets of
Concert Group Logistics, LLC (Concert Transaction), Daniel Para, was appointed to the Board of
Directors of the Company. Prior to the completion of the Concert Transaction, Mr. Para served as
the Chief Executive Officer of Concert Group Logistics, LLC, and was its largest stockholder. The
Company purchased substantially all the assets of Concert Group Logistics, LLC for $9.0 million in
cash, 4,800,000 shares of the Companys common stock and the assumption of certain liabilities. The
transaction contains performance targets, whereby the former owners of Concert Group Logistics, LLC
can earn up to $2,000,000 of additional consideration ($500,000 is guaranteed, subject to certain
rights of set-off), based upon results. For a more detailed discussion of the contingent earn-out
provisions, please refer to footnote number 3, elsewhere within this report. As the largest
shareholder of Concert Group Logistics, LLC, Mr. Para received, either directly or through his
family trusts and partnerships, approximately 85% of the proceeds transferred in the transaction.
Immediately after the transaction, Mr. Para became the largest shareholder of the Company, through
holdings attributable to himself and Dan Para Investments, LLC.
In January 2008, in conjunction with the Concert Group Logistics acquisition, the Company
entered into a lease on approximately 6,000 square feet of office space located within an office
complex at 1430 Branding Avenue, Downers Grove, Illinois 60515. The lease calls for, among other
general provisions, rent payments in the amount of $95,000, $98,000, $101,000, $104,000 and
$107,000 to be paid for 2008 and the four subsequent years thereafter. The building is owned by an
Illinois Limited Liability Company, which
has within its ownership group, Daniel Para, the former CEO of Concert Group Logistics, LLC.
Mr. Para was appointed to the Board of Express-1 Expedited Solutions, Inc. in January 2008.
In August of 2004, the Company acquired Express-1, Inc. and contractually agreed to provide
contingent earn-out payments to the former owners of Express-1, provided certain performance goals
were achieved. Among the goals were specified revenue growth rates and gross margin requirements.
Michael R. Welch and James M. Welch, both Named Executive Officers, were principles in the
ownership group of Express-1, Inc. For the years ended December 31, 2005 and 2006, the Company paid
$1,500,000 and $1,750,000 respectively to the former owners of Express-1, Inc. under the provisions
of the purchase agreement. In each of these periods, the Company accrued the payment within its
December 31 balance sheet and made the payment in the subsequent year per the terms of the purchase
agreement. For 2007, the Company accrued within its December 31, 2007 balance sheet, $2,000,000 to
satisfy the final remaining earn out payment related to the Express-1, Inc. acquisition and
subsequently satisfied this obligation through a cash payment during March of 2008.
The above transactions are not necessarily indicative of amounts, terms and conditions that
the Company may have received in transactions with unrelated third parties.
8. Operating Segments
The Company has four reportable segments, or business units, based on the types of services it
provides, to its customers: Express-1 Dedicated, which provides dedicated expedite services,
Express-1, which provides expedited transportation services throughout North America, Concert Group
Logistics, which provides domestic and international freight forwarding services through a network
of independently owned stations, and Bounce Logistics which provides premium freight brokerage
services for truckload shipments needing a high degree of customer service. Concert Group Logistics
and Bounce Logistics became part of the Companys operation during the first quarter of 2008 and
will be reflected within the statements and operating results on a prospective basis.
The costs of the Companys Board of Directors, executive team and certain corporate costs
associated with operating as a public company are referred to as corporate charges. In addition
to the aforementioned items, the Company also commonly records items such as its income tax
provision and other charges that are reported on a consolidated basis within the corporate
classification item.
The accounting policies of the units are the same as those described in the summary of
significant accounting policies. Substantially all intersegment sales prices are market based. The
Company evaluates performance based on operating income of the respective business units.
15
The schedule below identifies select financial data for each of the business units.
Express-1 Expedited Solutions, Inc
Segment Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Express-1 |
|
Concert Group |
|
Bounce |
|
Corporate and |
|
|
|
|
|
|
Express-1 |
|
Dedicated |
|
Logistics |
|
Logistics |
|
Other |
|
Eliminations |
|
Consolidated |
Three Months Ended September
30, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
14,187,000 |
|
|
$ |
1,321,000 |
|
|
$ |
14,341,000 |
|
|
$ |
3,013,000 |
|
|
$ |
|
|
|
$ |
(424,000 |
) |
|
$ |
32,438,000 |
|
Operating income (loss) |
|
|
1,737,000 |
|
|
|
221,000 |
|
|
|
500,000 |
|
|
|
2000 |
|
|
|
(434,000 |
) |
|
|
|
|
|
|
2,026,000 |
|
Depreciation and amortization |
|
|
180,000 |
|
|
|
16,000 |
|
|
|
87,000 |
|
|
|
5,000 |
|
|
|
|
|
|
|
|
|
|
|
288,000 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
87,000 |
|
|
|
|
|
|
|
7,000 |
|
|
|
|
|
|
|
94,000 |
|
Tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
759,000 |
|
|
|
|
|
|
|
759,000 |
|
Goodwill |
|
|
7,737,000 |
|
|
|
|
|
|
|
8,303,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,040,000 |
|
Total Assets |
|
|
23,659,000 |
|
|
|
745,000 |
|
|
|
20,655,000 |
|
|
|
1,949,000 |
|
|
|
1,053,000 |
|
|
|
(157,000 |
) |
|
|
47,904,000 |
|
Three Months Ended September
30, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
12,052,000 |
|
|
|
1,307,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,359,000 |
|
Operating income (loss) |
|
|
964,000 |
|
|
|
178,000 |
|
|
|
|
|
|
|
|
|
|
|
(364,000 |
) |
|
|
|
|
|
|
778,000 |
|
Depreciation and amortization |
|
|
170,000 |
|
|
|
28,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
198,000 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,000 |
|
|
|
|
|
|
|
13,000 |
|
Tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
299,000 |
|
|
|
|
|
|
|
299,000 |
|
Goodwill |
|
|
5,527,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,527,000 |
|
Total Assets |
|
|
17,775,000 |
|
|
|
847,000 |
|
|
|
|
|
|
|
|
|
|
|
2,825,000 |
|
|
|
|
|
|
|
21,447,000 |
|
Nine Months Ended September 30,
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
41,964,000 |
|
|
|
3,861,000 |
|
|
|
39,304,000 |
|
|
|
4,241,000 |
|
|
|
|
|
|
|
(1,001,000 |
) |
|
|
88,369,000 |
|
Operating income (loss) |
|
|
4,431,000 |
|
|
|
462,000 |
|
|
|
1,139,000 |
|
|
|
(191,000 |
) |
|
|
(1,253,000 |
) |
|
|
|
|
|
|
4,588,000 |
|
Depreciation and amortization |
|
|
525,000 |
|
|
|
63,000 |
|
|
|
252,000 |
|
|
|
7,000 |
|
|
|
|
|
|
|
|
|
|
|
847,000 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
255,000 |
|
|
|
|
|
|
|
18,000 |
|
|
|
|
|
|
|
273,000 |
|
Tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,710,000 |
|
|
|
|
|
|
|
1,710,000 |
|
Goodwill |
|
|
7,737,000 |
|
|
|
|
|
|
|
8,303,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,040,000 |
|
Total Assets |
|
|
23,659,000 |
|
|
|
745,000 |
|
|
|
20,655,000 |
|
|
|
1,949,000 |
|
|
|
1,053,000 |
|
|
|
(157,000 |
) |
|
|
47,904,000 |
|
Nine Months Ended September 30,
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
34,902,000 |
|
|
|
3,792,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,694,000 |
|
Operating income (loss) |
|
|
3,516,000 |
|
|
|
430,000 |
|
|
|
|
|
|
|
|
|
|
|
(1,126,000 |
) |
|
|
|
|
|
|
2,820,000 |
|
Depreciation and amortization |
|
|
546,000 |
|
|
|
103,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
649,000 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71,000 |
|
|
|
|
|
|
|
71,000 |
|
Tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,034,000 |
|
|
|
|
|
|
|
1,034,000 |
|
Goodwill |
|
|
5,527,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,527,000 |
|
Total Assets |
|
$ |
17,775,000 |
|
|
$ |
847,000 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
2,825,000 |
|
|
|
|
|
|
$ |
21,447,000 |
|
9. Subsequent Events
During November 2008, the Company received a letter from the manager of its dedicated contract
logistics account, giving the Company notice of its intent to exercise its 120 day notice of
cancellation and cease the contract business with the Company in early March, 2009. Based upon the
timing of receipt of this letter, the Company is in the early stages of planning for the cessation
of this
business. This dedicated contract represents approximately 90% of the revenue and business
volume the Company conducts through its Express-1 Dedicated business unit. The Company is hopeful
that its employees will be extended positions of employment with the new service provider, and has
received past assurances that the new service provider will assume the operating lease for the
building used for these services. As of September 30, 2008, the Company employed 35 full-time
and 3 part-time employees in the business unit.
16
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements. This Form 10-Q includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. All statements, other than statements of historical facts,
included or incorporated by reference in this Form 10-Q which address activities, events or
developments that the Company expects or anticipates will or may occur in the future, including
such things as future capital expenditures (including the amount and nature thereof), finding
suitable merger or acquisition candidates, expansion and growth of the Companys business and
operations, and other such matters are forward-looking statements. These statements are based on
certain assumptions and analyses made by the Company in light of its experience and its perception
of historical trends, current conditions and expected future developments as well as other factors
it believes are appropriate in the circumstances.
Investors are cautioned that any such forward-looking statements are not guarantees of future
performance and involve significant risks and uncertainties, and that actual results may differ
materially from those projected in the forward-looking statements. Factors that could adversely
affect actual results and performance include, among others, the Companys limited operating
history, potential fluctuations in quarterly operating results and expenses, government regulation,
technology change and competition. Consequently, all of the forward-looking statements made in this
Form 10-Q are qualified by these cautionary statements and there can be no assurance that the
actual results or developments anticipated by the Company will be realized or, even if
substantially realized, that they will have the expected consequence to or effects on the Company
or its business or operations. The Company assumes no obligations to update any such
forward-looking statements.
Critical Accounting Policies
The preparation of financial statements in conformity with U.S. generally accepted accounting
principles requires management to make estimates and assumptions. In certain circumstances, those
estimates and assumptions can affect amounts reported in the accompanying consolidated financial
statements. We have made our best estimates and judgments of certain amounts included in the
financial statements, giving due consideration to materiality. We do not believe there is a great
likelihood that materially different amounts will be reported related to the accounting policies
described below. However, application of these accounting policies involves the exercise of
judgment and use of assumptions as to future uncertainties and, as a result, actual results could
differ from these estimates. Note 1 of the Notes to Consolidated Financial Statements in our
Annual Report on Form 10-K for the year ended December 31, 2007, includes a summary of the
significant accounting policies and methods used in the preparation of our consolidated financial
statements. Following is a brief discussion of the changes that occurred during 2008 to the
significant accounting policies and estimates disclosed in Note 1 of the Notes to Consolidated
Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2007.
Revenue Recognition
We primarily recognize revenue at the time of delivery based upon the following criteria: i)
persuasive evidence of an arrangement exists, ii) services have been rendered, iii) the sales price
is fixed and determinable and iv) collectability is reasonably assured. We report revenue on a
gross basis in accordance with EITF 99-19, Reporting Revenue Costs as a Principal versus Net as an
Agent. We are the primary obligor and are responsible for providing the service desired by the
customer and we are responsible for fulfillment including the acceptability of the service. We have
discretion in setting sales prices and as a result, our earnings vary. In addition we have
discretion to select our drivers, contractors or other transportation providers (collectively,
service providers) from among thousands of alternatives. Finally, we have credit risk for our
receivables. These three factors, discretion in setting sales prices, discretion in selecting
service provider and credit risk further support reporting revenue on the gross basis.
Within one of our units, Concert Group Logistics, we utilize an alternative point in time to
recognize revenue. Within this unit, revenue is recognized and associated direct operating expenses
are recognized on the date the freight is picked up from the shipper. Recognition of revenue prior
to the completion of services is not a preferred method of revenue recognition as prescribed in
Financial
Accounting Standards Board (FASB) Emerging Issues Task Force Issue No. 91-9 Revenue and
Expense Recognition for Freight Services in Progress (EITF No. 91-9). We believe this practice is
common within the freight forwarding industry as well as within other areas of the transportation
industry. We have analyzed the impact of this alternative method on the financial statements taken
as a whole and determined the difference is immaterial.
17
New Pronouncements
In December 2007, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 141
(revised 2007), Business Combinations (SFAS No. 141 (R)). SFAS No. 141(R) retains the
fundamental requirements in SFAS No. 141 that the acquisition method of accounting (which SFAS No.
141 called the purchase method) be used for all business combinations and for an acquirer to be
identified for each business combination. In general, the statement 1) broadens the guidance of
SFAS No. 141, extending its applicability to all events where one entity obtains control over one
or more businesses, 2) broadens the use of fair value measurements used to recognize the assets
acquired and liabilities assumed, 3) changes the accounting for acquisition related fees and
restructuring costs incurred in connection with an acquisition, and 4) increased required
disclosures. The Company is required to apply SFAS No. 141(R) prospectively to business
combinations for which the acquisition date is on or after January 1, 2009. Earlier application is
not permitted.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets
and Financial Liabilities Including an amendment of FASB Statement No. 115. SFAS No. 159
permits entities to choose to measure eligible items at fair value at specified election dates and
report unrealized gains or losses on items for which the fair value option has been elected in
earnings at each subsequent reporting date. SFAS No. 159 is effective for fiscal years beginning
after November 15, 2007. The Company did not record an adjustment within its financial statements
as a result of adopting the provisions of SFAS No. 159, as of September 30, 2008 and does not
currently anticipate a material impact upon its financial statements in future periods as a result
of this pronouncement.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurement, which defines fair
value, establishes a framework for consistently measuring fair value under generally accepted
accounting principles, and expands disclosures about fair value measurements. This Statement
applies under other accounting pronouncements that require or permit fair value measurements and is
effective for fiscal years beginning after November 15, 2007. The Company did not record an
adjustment within its financial statements as a result of adopting the provisions of SFAS No. 157
as of September 30, 2008 and does not currently anticipate a material impact upon its financial
statements in future periods as a result of this pronouncement.
Other recent accounting pronouncements issued by the FASB (including its EITF), the AICPA and
the SEC did not or are not believed by the Companys management to have a material impact on the
Companys current or future financial statements.
Executive Summary
Express-1 Expedited Solutions, Inc. (the Company, we, our and us), a Delaware
corporation, is a transportation services organization focused upon premium logistics solutions
provided through one of its non-asset based or asset-light operating units. The Companys
operations are provided through four distinct but complementary reporting units, each with its own
business unit leader President. Our wholly owned subsidiaries include, Express-1, Inc.
(Express-1), Express-1 Dedicated, Inc. (Express-1 Dedicated or Evansville), Concert Group
Logistics, Inc. (Concert Group Logistics or CGL) and Bounce Logistics, Inc. (Bounce
Logistics, or Bounce). These unit operations are more fully outlined in the table below, which
reflects the business unit; location of the business unit headquarters office; premium
transportation niche served by the unit; and initial date the unit began business within our
consolidated company.
In November 2008, the Company received notice that the primary contract
customer within its Express-1 Dedicated operations is planning to change its vendor effective the
first of March, 2009. The Company is in the preliminary stages of discussion with this vendor and
cannot reasonably estimate the entire impact of this loss on its operations at this time, but
anticipates a complete analysis will be completed within the fourth quarter of 2008.
|
|
|
|
|
|
|
Business Unit |
|
Primary Office Location |
|
Premium Industry Niche |
|
Initial Date(1) |
Express-1 Dedicated
|
|
Evansville, Indiana
|
|
Dedicated Expedite Movements
|
|
April 2003 |
Express-1
|
|
Buchanan, Michigan
|
|
Expedited Transportation
|
|
August 2004 |
Concert Group Logistics
|
|
Downers Grove, Illinois
|
|
Freight Forwarding
|
|
January 2008 |
Bounce Logistics
|
|
South Bend, Indiana
|
|
Premium Truckload Brokerage
|
|
March 2008 |
Express-1 and Concert Group Logistics were both existing companies acquired as part of two
separate acquisitions. Express-1, Inc. was formed in 1989, while Concert Group Logistics, LLC was
formed in 2001. Express-1 Dedicated and Bounce Logistics were both start-up operations and formed
in the years denoted in the column labeled initial date.
18
Our business units serve a diverse client base within North America. Our Concert Group
Logistics business unit also provides international freight forwarding services to customers within
other regions of the world. Our premium services are focused on the needs of shippers for reliable
same-day, time-critical, special handling, premium truckload brokerage or customized logistics
solutions. We also provide aircraft charter services through third-party providers, in support of
our customers critical shipments.
Background
Our operational model generates revenue growth through two primary means. Growth attributable
to business volume expansion within our existing operating units is referred to as organic
growth. We include within our organic classification only growth from our operations that were part
of our consolidated company prior to the start of the current year. For this report, the revenue
growth of our Express-1 and Express-1 Dedicated operations are classified as organic. We classify
growth from mergers, acquisitions and start-up activities as acquisition growth. For growth
classification purposes we refer to investments in new businesses and business operations in a
similar manner since both activities require some economic investment on the part of the Company.
Within this report, the revenue growth from our Concert Group Logistics and Bounce Logistics
operations are classified as acquisition growth.
Throughout our reports, we refer to the impact of fuel on our business. For purposes of these
references, we have only considered the impact of fuel surcharge revenues, fuel surcharge payments
to contractors and fuel costs associated with two of our business units, Express-1 and Express-1
Dedicated. We feel that this approach, most readily conveys the impact of fuel on the revenues,
operating costs and resulting gross margin within our two business units that are most directly
impacted by changes in the price of fuel. Within our other two units, Concert Group Logistics and
Bounce Logistics, fuel charges to our customers are not commonly negotiated and identified separate
and apart from total revenue and the associated cost of transportation resulting from each
shipment. We believe this is a common practice within the freight forwarding and freight brokerage
business sectors.
We often refer to the costs of our Board of Directors, our executive team and certain
operating costs associated with operating as a public company as corporate charges. In addition
to the aforementioned items, we also record items such as our income tax provision and other
charges that are reported on a consolidated basis within the corporate line item.
For the three months ended September 30, 2008 compared to the three months ended September 30,
2007
The table below is provided to allow users of our reports a means to quickly visualize
quarterly results within some of our major reporting classifications, and quarter-to-quarter
changes i) in dollars, ii) in percentage and iii) the percentage of consolidated revenue for some
of the major captions within our financial reports. The table is not intended to replace the
financial statements, notes thereto or discussion by our management contained within this report on
Form 10-Q and users are encouraged to review those items to gain a better understanding of our
financial position and results of operations.
19
Express-1 Expedited Solutions, Inc.
Summary Financial Table
For the Three Months Ended September 30,
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter to Date |
|
Quarter to Quarter Change |
|
Percent of Revenue |
|
|
2008 |
|
2007 |
|
In Dollars |
|
In Percentage |
|
2008 |
|
2007 |
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Express-1 |
|
$ |
14,187,000 |
|
|
$ |
12,052,000 |
|
|
$ |
2,135,000 |
|
|
|
17.7 |
% |
|
|
43.7 |
% |
|
|
90.2 |
% |
Express-1 Dedicated |
|
|
1,321,000 |
|
|
|
1,307,000 |
|
|
|
14,000 |
|
|
|
1.1 |
% |
|
|
4.1 |
% |
|
|
9.8 |
% |
Concert Group Logistics |
|
|
14,341,000 |
|
|
|
|
|
|
|
14,341,000 |
|
|
|
|
|
|
|
44.2 |
% |
|
|
|
|
Bounce Logistics |
|
|
3,013,000 |
|
|
|
|
|
|
|
3,013,000 |
|
|
|
|
|
|
|
9.3 |
% |
|
|
|
|
Intercompany Eliminations |
|
|
(424,000 |
) |
|
|
|
|
|
|
(424,000 |
) |
|
|
|
|
|
|
-1.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
Total Revenues |
|
|
32,438,000 |
|
|
|
13,359,000 |
|
|
|
19,079,000 |
|
|
|
142.8 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Express-1 |
|
|
10,840,000 |
|
|
|
9,298,000 |
|
|
|
1,542,000 |
|
|
|
16.6 |
% |
|
|
33.4 |
% |
|
|
69.6 |
% |
Express-1 Dedicated |
|
|
972,000 |
|
|
|
1,012,000 |
|
|
|
(40,000 |
) |
|
|
-4.0 |
% |
|
|
3.0 |
% |
|
|
7.6 |
% |
Concert Group Logistics |
|
|
13,127,000 |
|
|
|
|
|
|
|
13,127,000 |
|
|
|
|
|
|
|
40.5 |
% |
|
|
|
|
Bounce Logistics |
|
|
2,621,000 |
|
|
|
|
|
|
|
2,621,000 |
|
|
|
|
|
|
|
8.1 |
% |
|
|
|
|
Intercompany Eliminations |
|
|
(424,000 |
) |
|
|
|
|
|
|
(424,000 |
) |
|
|
|
|
|
|
-1.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
Total
Operating Expenses |
|
|
27,136,000 |
|
|
|
10,310,000 |
|
|
|
16,826,000 |
|
|
|
163.2 |
% |
|
|
83.7 |
% |
|
|
77.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Express-1 |
|
|
3,347,000 |
|
|
|
2,754,000 |
|
|
|
593,000 |
|
|
|
21.5 |
% |
|
|
10.3 |
% |
|
|
20.6 |
% |
Express-1 Dedicated |
|
|
349,000 |
|
|
|
295,000 |
|
|
|
54,000 |
|
|
|
18.3 |
% |
|
|
1.1 |
% |
|
|
2.2 |
% |
Concert Group Logistics |
|
|
1,214,000 |
|
|
|
|
|
|
|
1,214,000 |
|
|
|
|
|
|
|
3.7 |
% |
|
|
|
|
Bounce Logistics |
|
|
392,000 |
|
|
|
|
|
|
|
392,000 |
|
|
|
|
|
|
|
1.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
Total Gross Margin |
|
|
5,302,000 |
|
|
|
3,049,000 |
|
|
|
2,253,000 |
|
|
|
73.9 |
% |
|
|
16.3 |
% |
|
|
22.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, General & Administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Express-1 |
|
|
1,610,000 |
|
|
|
1,790,000 |
|
|
|
(180,000 |
) |
|
|
-10.1 |
% |
|
|
5.0 |
% |
|
|
13.4 |
% |
Express-1 Dedicated |
|
|
128,000 |
|
|
|
117,000 |
|
|
|
11,000 |
|
|
|
9.4 |
% |
|
|
0.4 |
% |
|
|
0.9 |
% |
Concert Group Logistics |
|
|
714,000 |
|
|
|
|
|
|
|
714,000 |
|
|
|
|
|
|
|
2.2 |
% |
|
|
|
|
Bounce Logistics |
|
|
390,000 |
|
|
|
|
|
|
|
390,000 |
|
|
|
|
|
|
|
1.2 |
% |
|
|
|
|
Corporate |
|
|
434,000 |
|
|
|
364,000 |
|
|
|
70,000 |
|
|
|
19.2 |
% |
|
|
1.3 |
% |
|
|
2.7 |
% |
|
|
|
|
|
|
|
Total Selling, General & Administrative |
|
|
3,276,000 |
|
|
|
2,271,000 |
|
|
|
1,005,000 |
|
|
|
44.3 |
% |
|
|
10.1 |
% |
|
|
17.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income From Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Express-1 |
|
|
1,737,000 |
|
|
|
964,000 |
|
|
|
773,000 |
|
|
|
80.2 |
% |
|
|
5.4 |
% |
|
|
7.2 |
% |
Express-1 Dedicated |
|
|
221,000 |
|
|
|
178,000 |
|
|
|
43,000 |
|
|
|
24.2 |
% |
|
|
0.7 |
% |
|
|
1.3 |
% |
Concert Group Logistics |
|
|
500,000 |
|
|
|
|
|
|
|
500,000 |
|
|
|
|
|
|
|
1.5 |
% |
|
|
|
|
Bounce Logistics |
|
|
2,000 |
|
|
|
|
|
|
|
2,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
|
(434,000 |
) |
|
|
(364,000 |
) |
|
|
(70,000 |
) |
|
|
-19.2 |
% |
|
|
-1.3 |
% |
|
|
-2.7 |
% |
|
|
|
|
|
|
|
Total Income From Operations |
|
|
2,026,000 |
|
|
|
778,000 |
|
|
|
1,248,000 |
|
|
|
160.4 |
% |
|
|
6.2 |
% |
|
|
5.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense |
|
|
94,000 |
|
|
|
13,000 |
|
|
|
81,000 |
|
|
|
623.1 |
% |
|
|
0.3 |
% |
|
|
0.1 |
% |
Other Expense |
|
|
21,000 |
|
|
|
(33,000 |
) |
|
|
54,000 |
|
|
|
163.6 |
% |
|
|
0.1 |
% |
|
|
-0.2 |
% |
|
|
|
|
|
|
|
Income Before Income Tax Provision |
|
|
1,911,000 |
|
|
|
798,000 |
|
|
|
1,113,000 |
|
|
|
139.5 |
% |
|
|
5.9 |
% |
|
|
6.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Provision |
|
|
759,000 |
|
|
|
299,000 |
|
|
|
460,000 |
|
|
|
153.8 |
% |
|
|
2.3 |
% |
|
|
2.2 |
% |
|
|
|
|
|
|
|
Total Net Income |
|
$ |
1,152,000 |
|
|
$ |
499,000 |
|
|
$ |
653,000 |
|
|
|
130.9 |
% |
|
|
3.6 |
% |
|
|
3.7 |
% |
|
|
|
|
|
|
|
20
Consolidated Results
The composition of our consolidated results continued to change during the third quarter of
2008 compared to the same period in 2007. The impacts of our CGL acquisition and Bounce start-up
are the primary catalysts behind this evolution that started at the beginning of 2008. We
anticipate our Express-1, CGL and Bounce operations to grow significantly in future periods, which
will continue to change the historical relationship between operating revenue, direct expenses,
gross margin and selling, general and administrative expenses, based upon the mix of business
generated from each of our business units on a prospective basis.
Approximately 89% of our increase in consolidated revenue during the third quarter of 2008 was
due to acquisition growth stemming from our CGL and Bounce operations. Our Express-1 operations
contributed 11% to our increase in consolidated revenue during the period, while our Express-1
Dedicated operations experienced a very slight increase in revenue. Charges related to
cross-selling between each of our units accounted for $0.424 million of revenue for the period and
were eliminated from the consolidated revenue growth numbers. Cross-selling most commonly arises
when Express-1 or Bounce accepts a load on behalf of one of our other business units, thereby
becoming a provider of services to its affiliate.
Operating costs within each of our business units continued to be impacted during the third
quarter of 2008 by general rate compression from within the domestic transportation markets
compared to the same period in 2007. Decreases in rates charged to some of our customer accounts
were not completely passed on to our providers of purchased transportation and to our fleet of
independent contractors. In addition to this rate compression and its impact on our businesses, the
relative percentage of our revenues derived from fuel surcharges increased. Since most of the
revenue we receive as fuel surcharges is passed along as payments to providers of transportation
services including our fleet of independent contractors, changes in the proportion of our revenue
derived from fuel has the impact of increasing our direct costs as a percentage of revenue.
With the acquisition of CGL and the start-up of Bounce, our historical relationship between
operating costs and associated revenue has changed. Both CGL and Bounce have slightly different,
but complementary, business models from our traditional reporting units, Express-1 and Express-1
Dedicated. As a result, our operational cost is anticipated to range between 80% and 85% of
associated revenue on a prospective basis. During the third quarter of 2008, our operating costs
represented 84% of consolidated revenue, which is in line with our anticipated shift in the ratio
of these costs to our revenue.
We anticipate gross margin will range between 15% and 20% for the full-year of 2008, based
upon the proportion of consolidated revenue derived from each of our operating units throughout the
year. Changes in the mix of business volume and associated costs derived from each of our business
units could impact this range of estimated gross margin. During the third quarter of 2008, gross
margin represented 16% of our consolidated revenues, which is also in line with our anticipated
shift in the ratio of gross margin as a percentage of revenue.
Selling, general and administrative expenses increased primarily due to the acquisition of CGL
and the start-up of Bounce Logistics, with the preponderance of the increase in SG&A during the
third quarter of 2008 being derived from these two business units. Within our Express-1 and
Express-1 Dedicated business units and within our Corporate classification, the combined SG&A
expense decreased by 4% compared to the prior year. Our non-asset business model typically allows
us to hold SG&A expenses, the largest of which are wages and associated costs, to a slower rate of
growth than that of our revenue. Within the third quarter of 2008, SG&A expenses increased by 44%
from levels of the third quarter of 2007. This rate of increase is significantly slower than the
143% rate of growth within revenue and contributes to the operating leverage within our business
model.
Our consolidated income from operations improved in the third quarter of 2008 due to strong
growth in the rate of income within our Express-1 and Express-1 Dedicated units and the inclusion
of CGL in the current period. Our Bounce unit continued to experience some costs associated with
developing the business model, which we believe will be eliminated in future periods. These costs
were related to the development of a small fleet of semis working within Bounce and the
development of a profit sharing model for the employees within the organization. Development costs
within the Bounce operation are not anticipated to continue during future periods.
The rate of increase within our net income was lower than the rate of increase within our
operating income, due in part to our interest expense and also to increases within our effective
income tax rates. Our interest charges have increased primarily due to the borrowings created to
fund the CGL transaction. The weighted average rate of interest charged on our debt obligations was
approximately 4% during the third quarter of 2008 and our management team anticipates retiring
debt at a slightly more rapid pace
21
during the balance of 2008. We plan to continue using our tax
net operating loss carry forwards to reduce the amount of taxes paid in cash. We paid $67,000 in
estimated taxes in the third quarter.
Express-1
Our Express-1 unit experienced an 18% increase in revenue, primarily due to the increase in
fuel surcharge revenues charged to its customers during the third quarter of 2008 compared to the
third quarter of 2007. To a lesser extent, revenue within Express-1 increased due to some expansion
within its fleet of independent contract drivers and an increase in the number of team units
(double occupancy) in its fleet, which increased during the third quarter of 2008 versus the same
period in 2007. The positive impact of fleet expansion was mitigated by decreases within the rates
of revenue charged for expedited services and rates of equipment utilization, as measured in miles
per unit per week. Express-1 continued to experience weakness within the automotive portion of its
business during the third quarter of 2008. Offsetting this decline in its automotive business was
the continued expansion of new accounts from within less traditional sources of expedites, such as
international business and partnerships with Less-Than-Truckload (LTL) transportation companies. In
spite of continued softness in rates, margin expanded by approximately 1% during the current period
versus the same period in the prior year, primarily due to some enhanced ability to increase
margins associated with expedite loads brokered to third party transportation companies. Gross
margin dollars increased during the period, which is attributable to the overall increase in
revenue and improvement in gross margin rates. Express-1 successfully decreased its SG&A expense by
strictly enforcing cost controls during the third quarter of 2008, versus the same period in 2007.
Operating income increased during the third quarter of 2008 versus the third quarter of 2007, due
primarily to the aforementioned improvement in gross margin and the reduction in SG&A costs. Fuel
surcharge revenue within Express-1 was $2,835,000 during the third quarter of 2008 versus
$1,162,000 in the third quarter of 2007.
Express-1 Dedicated
Express-1 Dedicated revenues increased slightly during the third quarter of 2008 compared to
the same period of the prior year. This primarily resulted from an increase in fuel surcharge
revenue during the period. The number of routes managed for the largest customer of Express-1
Dedicated was reduced in the third quarter of 2008, versus the same three-months of 2007. The route
reduction occurred earlier during 2008 and was completed in cooperation with the customer in an
attempt to reduce the overall cost of managing the contract. Fuel surcharge revenue increased by
50% during the period and mitigated the impact of this reduction in dedicated routes. Operating
expenses decreased slightly due to reductions in the cost of maintaining and operating equipment,
which was partially influenced by a reduction in the number of routes serviced. Due to the lack of
a long term agreement with the contract customer, the management of Express-1 Dedicated has shifted
to the use of shorter term rental equipment to mitigate some risk associated with the continuity of
service. The management team remains focused on controlling its SG&A expenses in the face of an
inflationary economy, which is anticipated to help Express-1 Dedicated remain profitable even with
some reduction in overall services. While SG&A has increased within the quarter, it has been
relatively flat for the full year and is not expected to continue to rise significantly throughout
the balance of 2008. Fuel surcharges accounted for $227,000 of Express-1 Dedicated revenues in the
third quarter of 2008 compared to $150,000 in the third quarter of 2007. Based upon the November
2008 notification from its primary contract customer that the dedicated contract within Express-1
Dedicated will cease in March 2009, the Company is evaluating the impact of this loss on the
on-going operations within Express-1 Dedicated. It is not certain that the Express-1 Dedicated
operations will continue, after the loss of this contract, since the dedicated contract accounts
for approximately 90% of the revenue for the business unit. The Company plans to work with the
contract customer and the new service provider to evaluate its alternatives and accordingly will
test for any impairments, during the fourth quarter of 2008.
Concert Group Logistics
Comparisons of quarter-over-quarter results within our Concert Group Logistics unit are
difficult, due to the purchase of CGL during the first quarter of 2008 and the previous operation
of CGL as a private company. Specific pro-forma results of Concert Group Logistics are provided
elsewhere in this report, and should be considered together with these comments.
Concert Group Logistics revenue was $14.3 million during the third quarter of 2008 and
accounted for 44% of our consolidated revenue for the period. CGL successfully increased its
penetration of the international freight forwarding market and the portion of revenue derived from
international shipments more than doubled to just over 26% of total revenue during the third
quarter of 2008. Operating costs, which consists primarily of payments for purchased transportation
used to complete the CGL network shipments and payments to independent station owners for
commissions (gross profit sharing or splits), represented 91% of CGL revenues, which is
in line with the historic performance of this business. The resulting gross margin level of 9%
of revenue is also in the range of
22
historical levels for this operation. Selling, general and
administrative expenses represented 5% of CGL revenue during the period, which is slightly lower
than the level we anticipate on a prospective basis. Our management anticipates the income from
operations within CGL to continue to increase on a prospective basis, as the operating leverage
associated with operating their national network is absorbed over an increasingly larger base or
business volume.
Bounce Logistics
Comparisons of year-over-year results within our new Bounce Logistics unit are not possible,
since the business originated from conceptual discussion to an operating business during the first
quarter of 2008. We continued to absorb some development costs during the third quarter of 2008, in
the form of fleet expenses and commission payments to the internal sales staff of Bounce Logistics.
Based upon some adjustments made in the operational model early in the fourth quarter, we
anticipate the profitability of Bounce to be greatly enhanced in subsequent quarters. The Bounce
management team has continued to be successful in expanding its operational footprint and
developing customer accounts that have resulted in higher rates of revenue and improving margins.
The Bounce start-up is viewed by our management team as an investment for future results. We
anticipate Bounce results will be much greater beyond 2008 than during this initial year.
Three months ended September 30, 2008 compared to the proforma three months ended September
30, 2007
The information presented below is intended only to reflect the proforma results of our
Company on a consolidated basis as if the transaction with Concert Group Logistics occurred on
January 1, 2007. It should be used in conjunction with the financial statements and footnotes
thereto contained elsewhere within this report.
Proforma adjustments are limited to only those adjustments that are: i) directly attributable
to the transaction, ii) factually supportable, iii) expected to have a continuing impact on the
Companys financial results. Adjustments that relate to improvements in operations, cross-selling
opportunities and other potential beneficial adjustments have been omitted, based upon the
aforementioned criteria for proforma adjustments.
Proforma Consolidated Results
On a pro-forma basis, consolidated revenues increased by $6.9 million or 27% during the third
quarter of 2008 compared to the third quarter of 2007. Much of this increase was due to the strong
rate of organic growth within our business units, led by growth rates of approximately 18% within
both the Express-1 and CGL operations. Our start-up operation, Bounce Logistics contributed $3.0
million in new revenue or 43% of the total revenue increase on a proforma basis. Operating costs
increased by $5.9 million or 28% during the period. Operating costs consist of payments for
purchased transportation, commissions to our independent station network and other costs associated
with the generation of our revenues. Operating costs are primarily variable and fluctuate in
accordance with changes in our revenues. During the third quarter of 2008, general transportation
rates within our transportation markets continued to be down slightly over the prior year. The
result of this reduction in rates charged for our transportation services was a compression in our
gross margin as a percentage of revenue. We are not able to generate margins on fuel that are
equivalent to those we receive on our general transportation revenue. Consequently, our revenue
increase, which was largely comprised of fuel surcharge revenue, did not generate margins similar
to those from the prior year. Selling, general and administrative expenses increased by $259,000 or
9% during the third quarter of 2008 versus the same period in 2007. Most of the increase was
associated with increases within our Bounce business unit. Within our other business units, the
combined SG&A expenses were down for the period. We continue to be focused on maintaining a slower
rate of growth within our SG&A expenses than those within our revenues. Pre-tax income increased by
$695,000 or 57% during the period. Net income increased by $235,000 or 26% during the quarter. The
differential between the rate of increase in pre-tax earnings and after-tax earnings is principally
due to the fact the CGL did not record a tax provision in 2007, as it was operated as a
pass-through entity for income tax reporting purposes.
Proforma Concert Group Logistics
On a proforma basis, our Concert Group Logistics unit increased revenues by $2.2 million or
18% during the third quarter of 2008 compared to the same period in 2007. It is important to note
that Concert Group Logistics reduced the size of its network by four stations in December 2007.
With this shrinking from 25 stations to 21 just prior to the completion of the purchase
transaction, revenue growth has been negatively impacted on a comparative basis. These four closed
stations accounted for approximately $5.0 million or
approximately 11% of CGLs revenue during the 2007 period. We have not adjusted the historical
proforma numbers to eliminate the
23
prior year revenues associated with these former stations, as we
believe such adjustment would not be in keeping with the guidelines for proforma adjustments. CGL
has successfully increased its international freight forwarding presence with international
business accounting for over 26% of its revenue in the third quarter of 2008, versus approximately
10% in the third quarter of 2007. Concert Group Logistics operating costs increased by $2.2 million
or 20% during the third quarter of 2008, resulting in gross margin dollars that were level with the
2007 period. Selling, general and administrative expenses decreased by $32,000 or 4%, principally
as a result of concentrated efforts by the entire CGL staff to reduce costs. Operating income
increased by 7% or $33,000 during the third quarter of 2008 compared to the same period in 2007.
For the nine months ended September 30, 2008 compared to the nine months ended September 30,
2007
The table below is provided to allow users of our reports a means to quickly visualize
quarterly actual results within some of our major reporting classifications, and quarter-to-quarter
changes i) in dollars, ii) in percentage and iii) the percentage of consolidated revenue for some
of the major captions within our financial reports. The table is not intended to replace the
financial statements, notes thereto or discussion by our management contained within this report on
Form 10-Q and users are encouraged to review those items to gain a better understanding of our
financial position and results of operations.
24
Express-1 Expedited Solutions, Inc.
Summary Financial Table
For the Nine Months Ended September 30,
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
to Date September |
|
Year to Year Change |
|
Percent of Revenue |
|
|
2008 |
|
2007 |
|
In Dollars |
|
In Percentage |
|
2008 |
|
2007 |
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Express-1 |
|
$ |
41,964,000 |
|
|
$ |
34,902,000 |
|
|
$ |
7,062,000 |
|
|
|
20.2 |
% |
|
|
47.5 |
% |
|
|
90.2 |
% |
Express-1 Dedicated |
|
|
3,861,000 |
|
|
|
3,792,000 |
|
|
|
69,000 |
|
|
|
1.8 |
% |
|
|
4.4 |
% |
|
|
9.8 |
% |
Concert Group Logistics |
|
|
39,304,000 |
|
|
|
|
|
|
|
39,304,000 |
|
|
|
|
|
|
|
44.5 |
% |
|
|
|
|
Bounce Logistics |
|
|
4,241,000 |
|
|
|
|
|
|
|
4,241,000 |
|
|
|
|
|
|
|
4.8 |
% |
|
|
|
|
Intercompany Eliminations |
|
|
(1,001,000 |
) |
|
|
|
|
|
|
(1,001,000 |
) |
|
|
|
|
|
|
-1.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
Total Revenues |
|
|
88,369,000 |
|
|
|
38,694,000 |
|
|
|
49,675,000 |
|
|
|
128.4 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Express-1 |
|
|
32,145,000 |
|
|
|
26,138,000 |
|
|
|
6,007,000 |
|
|
|
23.0 |
% |
|
|
36.4 |
% |
|
|
67.6 |
% |
Express-1 Dedicated |
|
|
3,006,000 |
|
|
|
2,973,000 |
|
|
|
33,000 |
|
|
|
1.1 |
% |
|
|
3.4 |
% |
|
|
7.7 |
% |
Concert Group Logistics |
|
|
35,843,000 |
|
|
|
|
|
|
|
35,843,000 |
|
|
|
|
|
|
|
40.6 |
% |
|
|
|
|
Bounce Logistics |
|
|
3,708,000 |
|
|
|
|
|
|
|
3,708,000 |
|
|
|
|
|
|
|
4.2 |
% |
|
|
|
|
Intercompany Eliminations |
|
|
(1,001,000 |
) |
|
|
|
|
|
|
(1,001,000 |
) |
|
|
|
|
|
|
-1.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses |
|
|
73,701,000 |
|
|
|
29,111,000 |
|
|
|
44,590,000 |
|
|
|
153.2 |
% |
|
|
83.4 |
% |
|
|
75.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Express-1 |
|
|
9,819,000 |
|
|
|
8,764,000 |
|
|
|
1,055,000 |
|
|
|
12.0 |
% |
|
|
11.1 |
% |
|
|
22.6 |
% |
Express-1 Dedicated |
|
|
855,000 |
|
|
|
819,000 |
|
|
|
36,000 |
|
|
|
4.4 |
% |
|
|
1.0 |
% |
|
|
2.1 |
% |
Concert Group Logistics |
|
|
3,461,000 |
|
|
|
|
|
|
|
3,461,000 |
|
|
|
|
|
|
|
3.9 |
% |
|
|
|
|
Bounce Logistics |
|
|
533,000 |
|
|
|
|
|
|
|
533,000 |
|
|
|
|
|
|
|
0.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
Total Gross Margin |
|
|
14,668,000 |
|
|
|
9,583,000 |
|
|
|
5,085,000 |
|
|
|
53.1 |
% |
|
|
16.6 |
% |
|
|
24.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, General & Administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Express-1 |
|
|
5,388,000 |
|
|
|
5,248,000 |
|
|
|
140,000 |
|
|
|
2.7 |
% |
|
|
6.1 |
% |
|
|
13.6 |
% |
Express-1 Dedicated |
|
|
393,000 |
|
|
|
389,000 |
|
|
|
4,000 |
|
|
|
1.0 |
% |
|
|
0.4 |
% |
|
|
1.0 |
% |
Concert Group Logistics |
|
|
2,322,000 |
|
|
|
|
|
|
|
2,322,000 |
|
|
|
|
|
|
|
2.6 |
% |
|
|
|
|
Bounce Logistics |
|
|
724,000 |
|
|
|
|
|
|
|
724,000 |
|
|
|
|
|
|
|
0.8 |
% |
|
|
|
|
Corporate |
|
|
1,253,000 |
|
|
|
1,126,000 |
|
|
|
127,000 |
|
|
|
11.3 |
% |
|
|
1.4 |
% |
|
|
2.9 |
% |
|
|
|
|
|
|
|
Total Selling, General & Administrative |
|
|
10,080,000 |
|
|
|
6,763,000 |
|
|
|
3,317,000 |
|
|
|
49.0 |
% |
|
|
11.4 |
% |
|
|
17.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income From Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Express-1 |
|
|
4,431,000 |
|
|
|
3,516,000 |
|
|
|
915,000 |
|
|
|
26.0 |
% |
|
|
5.0 |
% |
|
|
9.1 |
% |
Express-1 Dedicated |
|
|
462,000 |
|
|
|
430,000 |
|
|
|
32,000 |
|
|
|
7.4 |
% |
|
|
0.5 |
% |
|
|
1.1 |
% |
Concert Group Logistics |
|
|
1,139,000 |
|
|
|
|
|
|
|
1,139,000 |
|
|
|
|
|
|
|
1.3 |
% |
|
|
|
|
Bounce Logistics |
|
|
(191,000 |
) |
|
|
|
|
|
|
(191,000 |
) |
|
|
|
|
|
|
-0.2 |
% |
|
|
|
|
Corporate |
|
|
(1,253,000 |
) |
|
|
(1,126,000 |
) |
|
|
(127,000 |
) |
|
|
-11.3 |
% |
|
|
-1.4 |
% |
|
|
-2.9 |
% |
|
|
|
|
|
|
|
Total Income From Operations |
|
|
4,588,000 |
|
|
|
2,820,000 |
|
|
|
1,768,000 |
|
|
|
62.7 |
% |
|
|
5.2 |
% |
|
|
7.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense |
|
|
273,000 |
|
|
|
71,000 |
|
|
|
202,000 |
|
|
|
284.5 |
% |
|
|
0.3 |
% |
|
|
0.2 |
% |
Other Expense |
|
|
36,000 |
|
|
|
1,000 |
|
|
|
35,000 |
|
|
|
3500.0 |
% |
|
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Tax Provision |
|
|
4,279,000 |
|
|
|
2,748,000 |
|
|
|
1,531,000 |
|
|
|
55.7 |
% |
|
|
4.8 |
% |
|
|
7.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Provision |
|
|
1,710,000 |
|
|
|
1,034,000 |
|
|
|
676,000 |
|
|
|
65.4 |
% |
|
|
1.9 |
% |
|
|
2.7 |
% |
|
|
|
|
|
|
|
Total Net Income |
|
$ |
2,569,000 |
|
|
$ |
1,714,000 |
|
|
$ |
855,000 |
|
|
|
49.9 |
% |
|
|
2.9 |
% |
|
|
4.4 |
% |
|
|
|
|
|
|
|
25
Consolidated Results
Approximately 86% of our increase in consolidated revenue during the first nine months of 2008
was due to acquisition growth stemming from our CGL and Bounce operations. Our Express-1 operations
contributed 14% to our increase in consolidated revenue during the period, while our Express-1
Dedicated operations grew slightly and contributed less than 1% to consolidated revenue growth.
Charges related to cross-selling between each of our units accounted for just over 2% of total
revenue growth for the period and were eliminated from the consolidated revenue growth numbers.
Operating costs within each of our business units was negatively impacted during the first
nine months of 2008 by general rate compression from within the domestic transportation markets
compared to the same period in 2007. In addition to this rate compression and its impact on our
businesses, the relative percentage of our revenues derived from fuel surcharges increased, during
the first nine months of 2008 versus the same period in 2007. During the first nine months of 2008,
our operating costs represented 83% of consolidated revenue, which is in line with our anticipated
shift in the ratio of these costs to our revenue, due to the addition of Concert Group Logistics
and Bounce Logistics to our operational model.
We anticipate gross margin will range between 15% and 20% in subsequent periods, based upon
the proportion of consolidated revenue derived from each of our operating units in those periods.
During the first nine months of 2008, gross margin represented 17% of our consolidated revenues,
which is also in line with our anticipated shift in the ratio of gross margin as a percentage of
revenue, based upon the addition of Concert Group Logistics and Bounce Logistics to our Company.
Selling, general and administrative expenses increased primarily due to the acquisition of CGL
and the start-up of Bounce Logistics, with 92% of the increase in SG&A during the first nine months
of 2008 being derived from these two business units. Within our Express-1 and Express-1 Dedicated
business units and within our Corporate classification, the combined SG&A increase accounted for 8%
of the increase within our consolidated SG&A. Our non-asset business model typically allows us to
hold SG&A expenses, the largest of which are wages and associated costs, to a slower rate of growth
than that of our revenue. Within the first nine months of 2008, SG&A expenses increased by 49% from
levels of first nine months of 2007. This rate of increase is significantly slower than the 128%
rate of growth within revenue and contributes to the operating leverage within our business model.
Our Corporate expenses increased by 11% during the first nine months of 2008, primarily due to
increases in the amount of professional fees and travel associated with the CGL and Bounce
additions.
Our consolidated income from operations improved in the first nine months of 2008 due to the
inclusion of CGL and the significant increase in income from operations within our Express-1 unit.
Within our Express-1 Dedicated business unit, income from operations increased by less than 1%. We
experienced a loss within our Bounce Logistics business unit, associated with the start-up of those
operations earlier within 2008.
The rate of increase within our net income was lower than the rate of increase within our
operating income, due in part to our interest expense and also to increases within our effective
income tax rates. Our interest charges have increased primarily due to the borrowings created to
fund the CGL transaction, and our management team anticipates retiring debt at a slightly more
rapid pace during the balance of 2008. We plan to continue using our tax net operating loss carry
forwards to reduce the amount of taxes paid in cash. We paid $267,000 in estimated taxes during the
first nine months of 2008.
Express-1
Our Express-1 unit experienced a 20% increase in revenue, due in-part to the increase in fuel
surcharge revenues charged to its customers during the first nine months 2008 versus the same
period within 2007. Fuel surcharge revenue increased by approximately 133% during the period.
Revenue growth also came from expansion within the Express-1 fleet of independent contract drivers
and due to ashift in the fleet composition towards more team operated units, which increased by 15%
during the first nine months of 2008 over the same period in 2007. Express-1 experienced weakness
within the automotive portion of its business during the first nine months of 2008, compounded by
an extended strike at one domestic automotive supplier that resulted in multiple automotive plant
closings during the earlier part of the year. Recently, Express-1 has experienced continued erosion
within the automotive sector of its operations, due to weakness within the U.S. economy and the
lack of consumer credit availability due to the U.S. credit crisis. Mitigating this automotive
sector erosion, were strong increases from within Express-1s international business and expansion
of Express-1 services into some alternative business sectors, such as agricultural products and in
support of third-party logistics companies. Due primarily to the continued softness in rates
charged to its customers, gross margin declined by about two percentage
26
points of revenue within the first nine months of 2008 versus the same period in 2007.
Overall, gross margin dollars increased during the same period, which is attributable to the
overall increase in revenue. Express-1 experienced an increase within its SG&A expense due to
expansion within its headcount and associated wages during the first nine months of 2008, versus
the same period in 2007. Headcount, which represents the largest component of SG&A within
Express-1, increased by approximately 7% on a sequential basis during the first nine months of 2007
compared to headcount at December 31, 2007. Operating income increased during the first nine months
of 2008 versus the same period in 2007, due to the growth in gross margin dollars and the ability
to limit SG&A expenses to a lower rate of growth than that of it revenues. Fuel surcharge revenue
within Express-1 was $7,427,000 during the first nine months of 2008 versus $3,184,000 for the same
period in 2007.
Express-1 Dedicated
Express-1 Dedicated revenues increased slightly during the first nine months of 2008 compared
to the same period of the prior year. This increase resulted from a rise of 44% in fuel surcharge
revenue during the period. The number of routes serviced by Express-1 Dedicated decreased during
the first nine months of 2008 compared to the same period in 2007. Routes were reduced in
cooperation with the customer, in an attempt to reduce overall cost of managing the contract.
Direct expenses increased during the first nine months of 2008 due to increases within the cost of
rental equipment and fuel costs associated with operating the fleet. Express-1 Dedicated has
shifted to the use of shorter term rental equipment to mitigate some of the risk associated with
continuity of service. Our management team remains focused on controlling its SG&A expenses in the
face of a weak economy, and the rate of SG&A increase was held to 1% during the first nine months
of 2008 compared to the first nine months of 2007. Fuel surcharge revenue accounted for $620,000 of
Express-1 Dedicated revenues in the first half of 2008 compared to $431,000 for the same period in
2007. Based upon the November 2008 notification from its primary contract customer that the
dedicated contract within Express-1 Dedicated will cease in March 2009, the Company is evaluating
the impact of this loss on the on-going operations within Express-1 Dedicated. It is not certain
that the Express-1 Dedicated operations will continue, after the loss of this contract, since the
dedicated contract accounts for approximately 90% of the revenue for the business unit. The Company
plans to work with the contract customer and the new service provider to evaluate its alternatives
and accordingly will test for any impairments, during the fourth quarter of 2008.
Concert Group Logistics
Comparisons of year-to-date results within our new Concert Group Logistics unit are somewhat
difficult, due to the purchase of CGL during the first quarter of 2008 and the previous operation
of CGL as a private company during 2007. Specific pro-forma results of Concert Group are provided
elsewhere in this report, and should be considered together with these comments.
Concert Group Logistics revenue was $39.3 million during the first nine months of 2008 and
accounted for 44% of our consolidated revenue for the period. Operating costs, which consists
primarily of payments for purchased transportation used to complete the CGL network shipments and
payments to independent station owners for commissions (gross profit sharing or splits),
represented 91% of CGL revenues, which is in line with the historic performance of this business.
The resulting gross margin level of 9% of revenue is also in the range of historical levels for
this operation. Selling, general and administrative expenses represented 6% of CGL revenue during
the period, which is close to the levels we anticipate on a prospective basis. CGL typically incurs
some large expenses within the first half of each year that are not duplicated during the latter
half of each year. Included among these are charges associated with an annual customer appreciation
meeting and charges related to the annual CGL station owners meeting. Also included within the
first nine months of 2008, were charges associated with the completion of the CGL purchase
transaction. Our management anticipates the income from operations within CGL will continue to
increase as new stations are added to the network without a corresponding level of increase within
its SG&A costs.
Bounce Logistics
Comparisons of year-over-year results within our new Bounce Logistics unit are not possible,
since the business originated from conceptual discussion to an operating business during the first
quarter of 2008. We absorbed approximately $300,000 of start-up costs associated with staffing and
building our Bounce operation, during the first nine months of 2008. The Bounce management team has
been successful in expanding its operational footprint and developing customer accounts that have
resulted in higher rates of revenue than initially anticipated. On a prospective basis, we believe
Bounce will become increasingly profitable within the last quarter of 2008, as many of the
development costs associated with staffing and ramping up the business volume within Bounce will
not be duplicated in future periods.
27
Nine months ended September 30, 2008 compared to the proforma nine months ended September 30,
2007
The information presented below is intended only to reflect the proforma results of our
Company on a consolidated basis as if the transaction with Concert Group Logistics occurred on
January 1, 2007. It should be used in conjunction with the financial statements and footnotes
thereto contained elsewhere within this report.
Proforma adjustments are limited to only those adjustments that are: i) directly attributable
to the transaction, ii) factually supportable, iii) expected to have a continuing impact on the
Companys financial results. Adjustments that relate to improvements in operations, cross-selling
opportunities and other potential beneficial adjustments have been omitted, based upon the
aforementioned criteria for pro-forma adjustments.
Proforma Consolidated Results
On a pro-forma basis, consolidated revenues increased by $15.1 million or 21% during the first
nine months of 2008 compared to the same period in 2007. Most of this increase was due to the
strong rate of organic growth within our business units, led by growth rates of approximately 20%
within Express-1 and 14% within our CGL operations. Operating costs increased by $13.3 million or
22% during the period. Operating costs consist of payments for purchased transportation,
commissions to our independent station network and other costs associated with the generation of
our revenues. Operating costs are primarily variable and fluctuate in accordance with changes in
our revenues. During the first nine months of 2008, rates within our transportation markets were
down slightly over the prior year. The result of this reduction in rates was a continued
compression of our gross margin. During the first nine months of 2008, much of our revenue
increases came as a result of rising fuel prices, which are generally passed along to our customers
in the form of fuel surcharges or higher overall rates. Margins on fuel surcharges are much lower
than those on our other revenue sources, as these are typically passed along to the providers of
our transportation services, including our fleet of contract drivers and third party providers of
purchased transportation. Selling, general and administrative expenses increased by $1.1 million or
12% during the first nine months of 2008 versus the same period in 2007. Most of the increase was
associated with increases within our Express-1, CGL and Bounce business units. Expenses related to
our Corporate office were up $170,000 during the first nine months of 2008 versus the same period
in 2007, primarily related to travel, professional fees and services associated with the CGL
transaction. Within our Express-1 Dedicated unit, SG&A costs were essentially flat during the first
nine months of 2008 compared to the same period in the prior. Pre-tax income increased by $583,000
or 16% during the period. Net income decreased by $93,000 or 4% during the first nine months of
2008 primarily due to the lack of recording an income tax provision within the CGL operations
during the 2007 period, as it was privately owned during the prior year and operated as a
pass-through entity for income tax reporting purposes.
Proforma Concert Group Logistics
On a proforma basis, our Concert Group Logistics unit increased revenues by $4.7 million or
14% during the first nine months of 2008 compared to the same period in 2007. Concert Group
Logistics operating costs increased by $4.5 million or 15% during the first nine months of 2008,
resulting in an increase in gross margin of $171,000 or 5% for the period. Selling, general and
administrative expenses increased by $104,000 or 5%, principally as a
result of the change from
operating the business as a private company to operating it as a subsidiary of our consolidated company. Operating
income increased by 6% or $67,000 during the first nine months of 2008 compared to the same period
in 2007.
Liquidity and Capital Resources
General
In January 2008, we completed the purchase of substantially all assets and certain liabilities
of Concert Group Logistics, LLC. Total consideration given in the transaction included $9.0 million
in cash and the issuance of 4.8 million shares of Express-1 Expedited Solutions, Inc. common stock.
This acquisition was financed with proceeds from a new line of credit and term note facility. Our
liquidity position changed significantly upon the completion of this purchase transaction. Any
analysis of our liquidity and capital resources should take into consideration the impact of this
transaction upon our overall cash flows and financial position.
28
Cash Flow
As of September 30, 2008, we had $9.5 million of working capital with associated cash and cash
equivalents of $1.9 million compared with working capital of $3.8 million and cash of $0.8 million
at December 31, 2007. This represents an increase of 150% in working capital during the nine-month
period.
During the nine months ended September 30, 2008, we generated $1.5 million in cash from
operations. The primary uses of cash included an increase of $5.2 million in accounts receivable.
The primary sources of cash during the nine month period included an (i) increase of $1.3 million
in other current assets, prepaid expenses, and other assets, and (ii) the decrease of $2.0 million
in accrued expenses and other liabilities, and (iii) net income of $2.6 million.
Investing activities required approximately $11.7 million during the nine months ended
September 30, 2008. During the current year, cash was used to i) satisfy earn-out payments to the
former owners of Express-1, Inc. and Dasher Express, Inc. in the amount of $2.2 million, ii)
purchase $8.5 million in assets related to the purchase of CGL during January 2008, iii) and
purchase $1.0 million of property and equipment used in our operations. During the same period in
2007, we i) satisfied an earn out payment related to the Express-1 and Dasher Express acquisitions
in the amount of $2.0 million, ii) purchased $0.4 million of property and equipment to be used in
our operations, and iii) received a small amount of cash from notes from the sale of miscellaneous
fixed assets.
Financing activities generated approximately $11.3 million for the nine-months ended September
30, 2008. During this period, i) cash in the amount of $8.2 million was received from loans and
advances on our line of credit, and $3.6 million was received from a term note related to the
purchase of CGL, ii) cash in the amount of $0.7 million was used to reduce borrowings on our term
facility, and iii) we received $0.2 million, net of expenses, related to the exercise of warrants
for our common stock. During the same nine months of 2007, we used cash of approximately $1.1
million related to borrowings under our credit facility and received proceeds of $0.3 million from
the exercise of warrants issued in conjunction with a private placement originally completed in
2003.
Line of Credit
To ensure that our Company has adequate near-term liquidity, we entered into a new credit
facility with National City Bank in January, 2008. This $14.6 million facility provides for a
receivables based line of credit of up to $11.0 million and a term debt component of $3.6 million.
The Company may draw upon the receivables based line of credit the lesser of $11.0 million or 80%
of eligible accounts receivable, less amounts outstanding under letters of credit. To fund the
Concert Group Logistics, LLC purchase, the Company drew $3.6 million on the term facility and $5.4
million on the receivables based line of credit. Substantially all the assets of our Company and
wholly owned subsidiaries (Express-1, Inc., Express-1 Dedicated, Inc., Concert Group Logistics,
Inc. and Bounce Logistics, Inc.) are pledged as collateral securing our performance under the line.
The credit facility bears interest based upon a spread above thirty-day LIBOR with an initial
increment of 125 basis points above thirty-day LIBOR for the receivables line and 150 basis point
above thirty-day LIBOR for the term portion. The term loan is payable over a thirty-six month
period and requires that monthly principal payments of $100,000 together with accrued interest be
paid until retired. As of September 30, 2008, the weighted average rate of interest on the credit
facility was approximately 4.9% and rates are adjusted daily. Available capacity under the line was
approximately $2.4 million as of September 30, 2008. The credit facility carried an initial
maturity date of June 30, 2009, and has been amended to extend the maturity date until May 31,
2010.
We believe that the new credit facility provides adequate capacity to fund our operations,
when combined with our anticipated cash generated from operations for the foreseeable future. In
the event our operating performance deteriorates, we might find it necessary to seek additional
funding sources in the future.
We had outstanding standby letters of credit at September 30, 2008 of $325,000, related to
insurance policies either continuing in force or recently canceled. Amounts outstanding for letters
of credit reduce the amount available under our line of credit, dollar-for-dollar.
29
Options and Warrants
We may receive proceeds in the future from the exercise of warrants and options outstanding as
of September 30, 2008, in accordance with the following schedule:
|
|
|
|
|
|
|
|
|
|
|
Approximate |
|
|
|
|
|
|
Number of |
|
|
Approximate |
|
|
|
Shares |
|
|
Proceeds |
|
|
Options granted within Stock Compensation Plan |
|
|
3,352,000 |
|
|
$ |
4,034,000 |
|
Warrants issued |
|
|
3,507,000 |
|
|
|
6,461,000 |
|
|
|
|
|
|
|
|
Total Outstanding as of September 30, 2008: |
|
|
6,859,000 |
|
|
$ |
10,495,000 |
|
|
|
|
|
|
|
|
The following table is provided to allow the users of the financial statements more insight
into different groupings of warrants and options. The warrants and options reflected within this
table are the same as those presented above. The table is designed to reflect the expiration date
of each tranche of options in the rows reflected and ranges of exercise prices in columns.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.00-$1.25 |
|
|
$1.26 - $1.50 |
|
|
$1.51-$1.75 |
|
|
$1.76-$2.00 |
|
|
>$2.00 |
|
|
Total |
|
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q4 2008 |
|
|
8,000 |
|
|
|
1,248,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,256,000 |
|
Q1 2009 |
|
|
25,000 |
|
|
|
440,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
465,000 |
|
Q2 2009 |
|
|
|
|
|
|
1,786,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,786,000 |
|
|
|
|
|
|
|
33,000 |
|
|
|
3,474,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,507,000 |
|
Options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q4 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000 |
|
|
|
|
|
|
|
10,000 |
|
Q1 2009 |
|
|
|
|
|
|
220,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
220,000 |
|
Q2 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000 |
|
|
|
6,000 |
|
Q3 2009 |
|
|
|
|
|
|
|
|
|
|
75,000 |
|
|
|
|
|
|
|
|
|
|
|
75,000 |
|
Q4 2009 |
|
|
|
|
|
|
|
|
|
|
30,000 |
|
|
|
|
|
|
|
|
|
|
|
30,000 |
|
Thereafter |
|
|
2,046,000 |
|
|
|
965,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,011,000 |
|
|
|
|
|
|
|
2,046,000 |
|
|
|
1,185,000 |
|
|
|
105,000 |
|
|
|
10,000 |
|
|
|
6,000 |
|
|
|
3,352,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
2,079,000 |
|
|
|
4,659,000 |
|
|
|
105,000 |
|
|
|
10,000 |
|
|
|
6,000 |
|
|
|
6,859,000 |
|
|
|
|
Contractual Obligations
The table below reflects all contractual obligations of our Company as of September 30, 2008.
Included within this table is an earn out amount due to the former ownership group of Concert Group
Logistics, LLC in amount of $2,000,000. Of this amount $500,000 is guaranteed, subject to certain
rights of set-off by our Company, and is accrued within our consolidated balance sheet. For further
discussion of the contingent earn out payment related to the CGL transaction, please refer to
footnote 3 contained elsewhere in this report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period |
|
|
|
|
|
|
|
Less than 1 |
|
|
1 to 3 |
|
|
3 to 5 |
|
|
More than 5 |
|
Contractual Obligations |
|
Total |
|
|
Year |
|
|
Years |
|
|
Years |
|
|
Years |
|
Notes payable |
|
$ |
2,900,000 |
|
|
$ |
1,200,000 |
|
|
$ |
1,700,000 |
|
|
$ |
|
|
|
$ |
|
|
Capital lease for equipment |
|
|
47,000 |
|
|
|
47,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total notes payable and capital leases |
|
|
2,947,000 |
|
|
|
1,247,000 |
|
|
|
1,700,000 |
|
|
|
|
|
|
|
|
|
Line of credit |
|
|
8,254,000 |
|
|
|
|
|
|
|
8,254,000 |
|
|
|
|
|
|
|
|
|
Operating leases |
|
|
36,000 |
|
|
|
36,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate commitments |
|
|
921,000 |
|
|
|
263,000 |
|
|
|
475,000 |
|
|
|
183,000 |
|
|
|
|
|
CGL earn-out obligations |
|
|
2,000,000 |
|
|
|
2,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual cash obligations |
|
$ |
14,158,000 |
|
|
$ |
3,546,000 |
|
|
$ |
10,429,000 |
|
|
$ |
183,000 |
|
|
$ |
|
|
|
|
|
30
Acquisition of Concert Group Logistics
In January 2008, in conjunction with the purchase of the assets of Concert Group Logistics,
LLC, the Company entered in a commitment to pay the former owners of that company up to $2,000,000
in additional consideration, provided the Companys newly formed subsidiary, Concert Group
Logistics, Inc. meets certain performance targets during 2008 and 2009. This contingent payment has
been included in the above table, which discloses our contractual obligations. Of this $2,000,000
earn out for CGL, $500,000 is not contingent upon CGLs performance and has been included within
the Companys balance sheet within other current liabilities. The Concert transaction also
contained a new operating lease for real estate commitments which has been disclosed in the above
table.
We may have to secure additional sources of capital to fund some portion of the contingent
consideration payment as it becomes due. This presents us with certain business risks relative to
the availability and pricing of future fund raising, as well as the potential dilution to our
stockholders if the fund raising involves the sale of equity.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Market risk generally represents the risk of loss that may result from the potential change in
value of a financial instrument as a result of fluctuations in interest rates and market prices. We
do not currently have any trading derivatives nor do we expect to have any in the future. We have
established policies and internal processes related to the management of market risks, which we use
in the normal course of our business operations.
Interest Rate Risk
We have interest rate risk, as borrowings under our credit facility are based on variable
market interest rates. As of September 30, 2008, we had $11.2 million of variable rate debt
outstanding under our credit facility. As of this date, the weighted average variable interest rate
on these obligations was 4.9%. A hypothetical 10% increase in our credit facilitys
weighted-average interest rate for the three months ended September 30, 2008, would correspondingly
decrease our earnings and operating cash flows by approximately $14,000 in the period or $55,000
annually.
Intangible Asset Risk
We have a substantial amount of intangible assets and are required to perform goodwill
impairment tests annually or whenever events or circumstances indicate that the carrying value may
not be recoverable from estimated future cash flows. As a result of our
periodic evaluations, we may determine that the intangible asset values need to be written
down to their fair values, which could result in material charges that could be adverse to our
operating results and financial position. Although at September 30, 2008, we believed our
intangible assets were recoverable, changes in the economy, the business in which we operate and
our own relative performance could change the assumptions used to evaluate intangible asset
recoverability. We continue to monitor those assumptions and their effect on the estimated
recoverability of our intangible assets.
As of September 30, 2008, we had engaged an unrelated outside independent accounting firm to
assist in the preparation of a valuation analysis of the assets acquired in the Concert Group
Logistics transaction. We intend to consider this firms analysis, together with our own judgment,
in completing our valuation of the assets acquired. Its possible, based upon these analyses, that
the assigned values will change. We anticipate the completion of our analysis during the fourth
quarter of 2008.
Equity Price Risk
We do not own any equity investments other than in our subsidiaries. As a result, we do not
currently have any direct equity price risk.
Commodity Price Risk
We do not enter into contracts for the purchase or sale of commodities. As a result, we do not
currently have any direct commodity price risk.
31
Item 4. Controls and Procedures.
Evaluation of disclosure controls and procedures. Under the supervision and with the
participation of the Companys management, including the Companys principal executive officer and
principal financial officer, the Company conducted an evaluation of the effectiveness of the design
and operations of its disclosure controls and procedures, as such term is defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act),
as of the end of the period covered by this report. Based on their evaluation, our principal
executive officer and principal financial officer concluded that our disclosure controls and
procedures were effective such that the material information required to be included in our
Securities and Exchange Commission (SEC) reports is recorded, processed, summarized and reported
within the time periods specified in SEC rules and forms relating to Express-1 Expedited Solutions,
Inc., including our consolidated subsidiaries, and was made known to them by others within those
entities, particularly during the period when this report was being prepared.
Changes in internal controls. There were no changes in our internal controls over financial
reporting during the last fiscal quarter that have materially affected, or are reasonably likely to
materially affect, our internal controls over financial reporting.
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
From time-to-time, the Company is involved in various civil actions as part of its normal
course of business. The Company is not a party to any litigation that is material to ongoing
operations as defined in Item 103 of Regulation S-K as of the period ended September 30, 2008.
Item 1A. Risk Factors.
Refer to Item 1A of our annual report (Form 10K) for the year ended December 31, 2007, under
the caption RISK FACTORS for specific details on factors and events that are not within our
control and could affect our financial results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
At various times from January 1, 2008 until September 30, 2008, the Company issued 5,206,450
shares of its common stock, granted 31,540 warrants to the holders of convertible securities
originally issued during 2003, and issued 385,000 options to purchase stock to members of
management and its Board of Directors. Of the stock issued, 4,800,000 shares were issued in
conjunction with the
purchase of Concert Group Logistics, and 406,450 shares were issued in conjunction with the
exercise of warrants for the Companys common stock. The 31,540 warrants issued carried a weighted
average exercise price of $1.25 per share and a maturity date of July 2008. Various holders of
warrants to purchase the Companys common stock tendered those warrants to the Company together
with cash of $168,000 in exchange for the warrant conversions. One holder of 759,300 warrants to
purchase the Companys common stock, exercised those warrants in a cashless conversion and received
179,682 new shares of the Companys common stock in this exchange.
All of the foregoing securities were issued by the Company in reliance on the exemptions from
registration provided by Section 4(2) of the Securities Act of 1933, as amended (the Securities
Act) or Rule 506 of Regulation D as promulgated under the Securities Act of 1933. Each of the
recipients of the Companys securities represented to the Company that they were an accredited or
sophisticated investor, had sufficient liquid assets to sustain a loss of their investment in the
Company, had consulted with such independent legal counsel or other advisers as they deemed
appropriate to evaluate their investment in the Company, had been afforded the right to ask
questions of the Company, and were acquiring the Companys securities solely for their own account
as a personal investment.
Item 3. Defaults upon Senior Securities.
The Companys line of credit contains various covenants pertaining to the maintenance of
certain financial ratios. As of September 30, 2008, the Company was in compliance with the ratios
required under its revolving credit agreement. No events of default exist on the credit facility as
of the filing date.
32
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
During November 2008, the Company received a letter from the manager of its dedicated contract
logistics account, giving the Company notice of its intent to exercise its 120 day notice of
cancellation and cease the contract business with the Company in early March, 2009. Based upon the
timing of receipt of this letter, the Company is in the early stages of planning for the cessation
of this
business. This dedicated contract represents approximately 90% of the revenue and business
volume the Company conducts through its Express-1 Dedicated business unit. The Company is hopeful
that its employees will be extended positions of employment with the new service provider, and has
received past assurances that the new service provider will assume the operating lease for the
building used for these services. As of September 30, 2008, the Company employed 35 full-time
and 3 part-time employees in the business unit.
Item 6. Exhibits
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Exhibit No. |
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Description |
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31.1 |
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Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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31.2 |
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Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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32.1 |
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Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. (This exhibit shall not be deemed filed for the purposes of Section 18 of the Securities
Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further,
this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.) |
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32.2 |
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Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. (This exhibit shall not be deemed filed for purposes of Section 18 of the Securities Exchange
Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit
shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933,
as amended, or the Securities Exchange Act of 1934, as amended.) |
33
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Express-1 Expedited Solutions, Inc.
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/s/ Michael R. Welch
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Michael R. Welch |
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Chief Executive Officer |
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/s/ Mark K. Patterson
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Mark K. Patterson |
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Chief Financial Officer |
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Date:
November 14, 2008
34
Exhibit Index
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Exhibit No. |
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Description |
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31.1 |
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Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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31.2 |
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Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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32.1 |
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Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. (This exhibit shall not be deemed filed for the purposes of Section 18 of the Securities
Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further,
this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.) |
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32.2 |
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Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. (This exhibit shall not be deemed filed for purposes of Section 18 of the Securities Exchange
Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit
shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933,
as amended, or the Securities Exchange Act of 1934, as amended.) |
35