01—Abstract
Summary
Summary of the 10-K filed March 29, 2007. Cited figures are marked; the original filing is the authoritative source.
Express-1 Expedited Solutions, Inc. reported its 2006 results as a return to profitability.
Operating revenue rose to $42.19 milliona from $39.85 million in 2005, a 5.9% increase, while net earnings were $3.90 million, or $0.15 per diluted share, compared with a net loss of $5.82 million in 2005. The improvement reflects the completion of the 2004-2005 restructuring, which exited unprofitable businesses and cut corporate and SG&A costs. Express-1 segment revenue grew 21.7% to $37.33 million, driven mainly by a roughly 23% increase in contractor fleet capacity, while the Evansville dedicated contract segment grew 8.9% to $4.86 million.
The company remains highly dependent on the automotive sector and a few large customers. The filing says about 50%b of revenue came from its twenty-five largest customers, and that the Big Three automakers and their suppliers generated approximately 35% of consolidated revenue. The Evansville contract, which accounts for about 10% of volume, runs through April 2007 and is expected to be renewed in the first half of 2007; the filing says non-renewal could trigger significant one-time shutdown costs.
Liquidity is tight: year-end cash was $79,000,c working capital was $2.08 million, and the company had about $3.7 million of available borrowing capacity under its asset-based credit line. Contingent acquisition earn-out payments of $1.96 million for 2007 and $2.21 million for 2008 also remain outstanding. The company pays no dividends and intends to retain earnings to fund growth.
Its stock trades on the American Stock Exchange under the symbol "XPO", and the filing notes approximately 600 holders of record. The filing also describes potential dilution from about 13.15 million outstanding options and warrants.
02—Key points
Key Highlights
- Operating revenue rose 5.9% to $42.19 million in 2006, up from $39.85 million in 2005.
- Net earnings were $3.90 million ($0.15 per diluted share), compared with a net loss of $5.82 million in 2005.
- Express-1 segment revenue increased 21.7% to $37.33 million, with fleet capacity growing about 23% during 2006.
- Evansville segment revenue rose 8.9% to $4.86 million, and its operating income turned positive at $230,000.
- Customer concentration is high: about 50% of revenue came from the twenty-five largest customers, and the Big Three automakers and their suppliers accounted for roughly 35% of consolidated revenue.
- Liquidity is thin, with cash of $79,000, working capital of $2.08 million, and about $3.7 million of available line-of-credit capacity.
- The Evansville contract expires in April 2007, with renewal expected in the first half of 2007; non-renewal could mean significant one-time shutdown costs.
03—Questions
Frequently Asked Questions
How did the company perform financially in 2006?
Operating revenue increased 5.9% to $42.19 million, and the company reported net earnings of $3.90 million, or $0.15 per diluted share, after a 2005 net loss of $5.82 million. Income from operations was $2.78 million, compared with a loss of $5.82 million in 2005, which the filing attributes largely to the completion of its restructuring.
What is driving growth in the business?
The filing attributes most growth to the Express-1 segment, where revenue rose 21.7% to $37.33 million. The company says fleet capacity grew about 23% during 2006 through independent contractors and partner carriers, which it describes as its asset-light model. Brokerage revenue, however, weakened in the second half of 2006 amid excess truckload capacity.
What are the main risks to investors?
The filing highlights heavy reliance on the U.S. automotive industry, with about 35% of consolidated revenue from the Big Three and their suppliers, and about 50% of revenue from the twenty-five largest customers. It also flags driver shortages, fuel price volatility, dependence on third-party equipment and contractors, and the need for additional financing, including $1.96 million of earn-out payments due in 2007 and $2.21 million due in 2008.
What is the status of the Evansville operation?
Evansville generated $4.86 million of revenue in 2006 and positive operating income of $230,000. Its primary dedicated contract runs through April 2007, and management expects to complete a renewal in the first half of 2007. The filing states that the board does not consider it strategic to continue the operation without renewal on more favorable terms.
Does the company pay dividends, and how is its stock traded?
The company has never paid cash dividends and says it intends to retain earnings to finance expansion. Its common stock trades on the American Stock Exchange under the symbol "XPO", and the filing reports approximately 600 holders of record.
04—Continue