Express-1 Expedited Solutions Reports Improved Profitability and Continued Revenue Growth in the Third Quarter of 2006

Express-1 Expedited Solutions, Inc. (Express-1, or the Company) (AMEX: XPO) today announced its financial results for the third quarter ended September 30, 2006.

For the third quarter of 2006, revenues increased to $10.9 million from $9.5 million in the third quarter of 2005. The Companys GAAP net income for the third quarter of 2006 was $905,000, or $0.03 per share. This compares with a GAAP net loss of $551,000, or $0.02 per share, for the third quarter last year, which includes $490,000 in restructuring charges. EBITDA for the third quarter of 2006 was $1.2 million, compared with $331,000 for the year-ago quarter. Please refer to Table 1 for a reconciliation of net income, as reported, to EBITDA.

Express-1 continued to outperform the expedite industry this quarter on the top line and in other key areas including growth in fleet size and loaded miles, said Michael Welch, the Companys president and chief executive officer. We continued to execute successfully on our strategy during the quarter, increasing our capacity by further expanding the size of our fleet, and growing our market share through new accounts and additional business from existing accounts. As a result, our Express-1 fleet size increased 30% from the third quarter of 2005, utilization remained strong, and our core Express-1 business generated a 19% increase in revenue. At the same time, our Evansville operation posted 10% revenue growth year-over-year.

The Companys Chief Financial Officer Mark Patterson said, Thanks to our lean cost structure and asset-light business model, our core business produced further improvements in gross margin and operating leverage this quarter. We continue to be cautious about adding employees and careful in our spending, and our reliance on independent owner operators supplemented by brokerage through third-party carriers maximizes our operational efficiency. Gross margin increased to 26.2% from 21.7% for the third quarter of 2005. In combination with the elimination of prior restructuring expenses and improved SG&A leverage, this enabled us to deliver substantial increases in EBITDA and net income for the quarter.

Additional Third-Quarter Financial Information

  • Operating expenses, which consist primarily of payment for owner-operator and partner trucking services, fuel, maintenance and insurance costs, increased to $8.0 million for the third quarter of 2006 from $7.5 million a year earlier.
  • Gross profit for the third quarter of 2006 improved to $2.9 million, or 26% of consolidated revenue, from $2.1 million, or 22% of consolidated revenue, for the third quarter of 2005.
  • Selling, general and administrative expenses (SG&A) were $1.9 million, down 26% from $2.6 million for the third quarter of 2005. Approximately $490,000 in restructuring charges were recorded in the third quarter of 2005 and are included in SG&A expenses for that period.
  • Operating ratio improved by 13.6% to 91.3% for the third quarter of 2006, from 105.6% for the year-earlier quarter.

Outlook and Financial Guidance

Looking ahead to the fourth quarter, we believe the momentum we have generated with owner operators and with our customers will drive further growth in our business, Welch said. Our goal is to create a solid and sustainable strategic direction for Express-1. As the Company announced last month, we were successful in recruiting John Affleck-Graves, executive vice president at Notre Dame, as the newest member of our board. John brings us experience we can deploy for exactly this purpose, and we are thrilled to have him serving in this capacity. We are confident in our business model and believe that, by remaining conservative and goal-focused in our approach, we will be able to continue delivering on our targets for growth and profitability.

Express-1 reiterated its previously announced guidance for full year 2006. The Company continues to expect that revenue for 2006 will be in the range of $39 million to $42 million, representing approximately 17% to 18% growth in the Companys remaining operations. The Company expects full-year net income in the range of $0.10 to $0.12 per share based on its current shares outstanding.

Conference Call/Webcast Information

Management will conduct a conference call this morning at 10:00 a.m. ET to discuss the Companys third-quarter financial results. Those interested in accessing a live or archived webcast of the call should visit the Companys website at www.express-1.com. Those wishing to take part in the live teleconference call can dial 201-689-8049 (international) or 877-407-9210. A playback will be available through midnight on November 10, 2006. To listen to the playback, please call 201-612-7415 (international) or 877-660-6853. Use account number 286 and conference ID number 216706.

Forward-Looking Statements

This press release contains forward-looking statements that may be subject to various risks and uncertainties. Such forward-looking statements are made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 and are made based on management's current expectations or beliefs as well as assumptions made by, and information currently available to, management. These forward-looking statements, which may include statements regarding our future financial performance or results of operations, including expected revenue growth, cash flow growth, future expenses, future operating margins and other future or expected performance, are subject to the following risks: that our recent reorganization fails to result in projected operating efficiencies; the acquisition of businesses or the launch of new lines of business, which could increase operating expenses and dilute operating margins; increased competition, which could lead to negative pressure on our pricing and the need for increased marketing; the inability to maintain, establish or renew relationships with customers, whether due to competition or other factors; the inability to comply with regulatory requirements governing our business operations; and to the general risks associated with our businesses.

In addition to the risks and uncertainties discussed above you can find additional information concerning risks and uncertainties that would cause actual results to differ materially from those projected or suggested in the forward-looking statements in the reports that we have filed with the Securities and Exchange Commission. The forward-looking statements contained in this press release represent our judgment as of the date of this release and you should not unduly rely on such statements. Unless otherwise required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this press release. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in the filing may not occur, and actual results could differ materially from those anticipated or implied in the forward-looking statements.

Use of GAAP and Non-GAAP Measures

In addition to results presented in accordance with generally accepted accounting principles (GAAP), the Company has included EBITDA, a non-GAAP financial measure. The Company defines EBITDA as earnings before interest, taxes, depreciation and amortization. In addition, the Company excludes from its EBITDA calculation the cumulative effect of a change in accounting principle, discontinued operations, and the impact of restructuring and certain other charges, and includes in the EBITDA calculation selected financial data related to various Company acquisitions. A reconciliation of EBITDA to the most directly comparable GAAP financial measure is set forth herein.

Management believes the use of non-GAAP financial measures provides useful information to investors to assist them in understanding the underlying operational performance of the Company. Specifically, management believes EBITDA is a useful measure of operating performance before the impact of investing and financing transactions, making comparisons between companies earnings power more meaningful and providing consistent period-over-period comparisons of the Companys performance. The Company uses these non-GAAP financial measures internally to measure its ongoing business performance and in reports to bankers to permit monitoring of the Companys ability to pay outstanding liabilities.


Express-1 Expedited Solutions, Inc.
EBITDA Reconciliation
                 
    Three Months Ended   Nine Months Ended
    September 30,   September 30,
      2006      2005      2006      2005 
                 
Net income (loss) as reported   $ 905,000    $ (551,000)   $ 2,310,000    $ (6,413,000)
Income tax (benefit) provision                
Interest expense     54,000      56,000      162,000      133,000 
Depreciation and amortization     236,000      336,000      749,000      1,176,000 
Restructuring, exit and consolidation expenses         490,000          4,448,000 
                 
EBITDA   $ 1,195,000    $ 331,000    $ 3,221,000    $ (656,000)

Express-1 Expedited Solutions, Inc.
Statements of Operations
(unaudited)
                               
        Three Months Ended     Nine Months Ended
                               
          September 30,     September 30,       September 30,     September 30,
          2006      2005        2006      2005 
                               
Revenues                          
  Operating revenue   $ 10,851,000    $ 9,512,000      $ 31,526,000    $ 30,150,000 
                               
Expenses:                          
  Direct expenses     8,005,000      7,448,000        23,391,000      23,898,000 
                               
    Gross profit     2,846,000      2,064,000        8,135,000      6,252,000 
                               
  Sales, general and administrative expense     1,861,000      2,069,000        5,505,000      8,084,000 
  Restructuring, exit and consolidation expense         490,000            4,448,000 
                               
    Total sales, general and administrative expense     1,861,000      2,559,000        5,505,000      12,532,000 
                               
Other expense     26,000            158,000     
Interest Expense     54,000      56,000        162,000      133,000 
                               
Income (loss) before income tax provision     905,000      (551,000)       2,310,000      (6,413,000)
                               
Income tax (benefit) provision                  
                               
Net income (loss)   $ 905,000    $ (551,000)     $ 2,310,000    $ (6,413,000)
                               
Basic income (loss) per common share     0.03      (0.02)       0.09      (0.24)
                               
Basic weighted average common shares outstanding     26,285,241      26,385,577        26,285,104      26,605,712 
                               
Diluted income (loss) per common share     0.03      (0.02)       0.09      (0.24)
                               
Diluted weighted average common shares outstanding     26,714,541      26,385,577        26,441,175      26,605,712 

Express-1 Expedited Solutions, Inc.

Balance Sheets

(unaudited)
             
      September 30,     December 31,
      2006      2005 
Assets            
Current assets:            
Cash and cash equivalents   $ 129,000    $ 386,000 
Accounts receivable, net of allowances of $573,000 and $732,000, respectively     5,662,000      4,434,000 
Prepaid expenses     229,000      326,000 
Other current assets     76,000      77,000 
Deferred tax asset, current     500,000      500,000 
Total current assets     6,596,000      5,723,000 
             
Property and equipment, net of accumulated depreciation     2,468,000      2,229,000 
             
Goodwill     3,567,000      3,567,000 
Identified intangible assets, net of accumulated amortization     4,305,000      4,629,000 
Loans and advances     153,000      439,000 
Deferred tax asset, long term     1,504,000      1,504,000 
Other long term assets     419,000      363,000 
    $ 19,012,000    $ 18,454,000 
             
Liabilities and Stockholders Equity            
Current liabilities:            
Accounts payable   $ 685,000    $ 924,000 
Accrued salaries and wages     422,000      397,000 
Accrued expenses, other     1,412,000      2,721,000 
Current maturities of long term debt     177,000      242,000 
Other current liabilities     191,000      97,000 
Total current liabilities     2,887,000      4,381,000 
             
Line of credit     2,265,000      1,764,000 
Notes payable and capital leases, net of current maturities     94,000      824,000 
Other long-term liabilities     91,000      199,000 
Total long-term liabilities     2,450,000      2,787,000 
             
Stockholders equity:            
Preferred stock, $.001 par value; 10,000,000 shares no shares issued or outstanding        
Common stock, $.001 par value; 100,000,000 shares authorized; 26,466,037 and 26,465,034 shares issued and 26,286,037 and 26,285,034 shares outstanding     26,000      26,000 
Additional paid-in capital     20,391,000      20,312,000 
Accumulated deficit     (6,635,000)     (8,945,000)
Treasury stock, at cost, 180,000 shares held     (107,000)     (107,000)
             
Total stockholders equity     13,675,000      11,286,000 
    $ 19,012,000    $ 18,454,000 

Selected Financial Data  
For the three months ended, September 30, 2006  
   
   

Express-1 Expedited

 

Evansville Dedicated

  Corporate  

Core Business

  Other  

Express-1 Expedited Solutions, Inc.

 
                           
                           
Operating Revenues   $ 9,589,000    $ 1,261,000    $   $ 10,850,000    $ 1,000    $ 10,851,000   
                           
Operating Expenses     6,987,000      984,000          7,971,000      34,000      8,005,000   
                           
Sales, general and administrative expenses (1)     1,556,000      148,000      377,000      2,081,000      (140,000)     1,941,000   
                           
Restructuring expenses                          
                           
Net income (loss) before provision (benefit) for taxes   $ 1,046,000    $ 129,000    $ (377,000)   $ 798,000    $

107,000 

  $ 905,000   
                           
Restructuring expenses   $   $   $   $   $

  $  
Depreciation and amortization     188,000      48,000          236,000          236,000   

Interest expense, net

            54,000      54,000          54,000   
Taxes                          
                           
EBITDA   $ 1,234,000    $ 177,000    $ (323,000)   $ 1,088,000    $

107,000 

  $ 1,195,000   
                           
                           

(1) For the purpose of calculating EBITDA, approximately $80,000 of "Interest and other income and expense" has been classified within the line item "Selling, general and administrative expenses."

 

Selected Financial Data  
For the three months ended, September 30, 2005  
   
   

Express-1 Expedited

 

Evansville


Dedicated

  Corporate  

Core Business

  Other  

Express-1 Expedited Solutions, Inc.

 
                           
                           
Operating Revenues   $ 8,087,000    $ 1,152,000    $   $ 9,239,000    $ 273,000    $ 9,512,000   
                           
Operating Expenses     6,081,000      989,000          7,070,000      378,000      7,448,000   
                           
Sales, general and administrative expenses (1)     1,365,000      122,000      541,000      2,028,000      97,000      2,125,000   
                           
Restructuring expenses             490,000      490,000          490,000   
                           
Net income (loss) before provision (benefit) for taxes   $ 641,000    $ 41,000    $ (1,031,000)   $ (349,000)   $ (202,000)   $ (551,000)  
                           
Restructuring expenses   $   $   $ 490,000    $ 490,000    $   $ 490,000   
Depreciation and amortization     193,000      97,000      49,000      339,000      (3,000)     336,000   

Interest expense, net

            56,000      56,000          56,000   
Taxes                          
                           
EBITDA   $ 834,000    $ 138,000    $ (436,000)   $ 536,000    $ (205,000)   $ 331,000   
                           

(1) For the purpose of calculating EBITDA, approximately $56,000 of "Interest and other income and expense" has been classified within the line item "Selling, general and administrative expenses."

 

Selected Financial Data  
For the nine months ended, September 30, 2006  
   
   

Express-1 Expedited

 

Evansville Dedicated

  Corporate  

Core Business

  Other  

Express-1 Expedited Solutions, Inc.

 
                           
                           
Operating Revenues   $ 27,833,000    $ 3,692,000    $   $ 31,525,000    $ 1,000    $ 31,526,000   
                           
Operating Expenses     20,345,000      2,964,000          23,309,000      82,000      23,391,000   
                           
Sales, general and administrative expenses (1)     4,425,000      471,000      1,087,000      5,983,000      (158,000)     5,825,000   
                           
Restructuring expenses                          
                           
Net income (loss) before provision (benefit) for taxes   $ 3,063,000    $ 257,000    $ (1,087,000)   $ 2,233,000    $ 77,000    $ 2,310,000   
                           
Restructuring expenses   $   $   $   $   $   $  
Depreciation and amortization     607,000      142,000          749,000          749,000   

Interest expense, net

            162,000      162,000          162,000   
Taxes                          
                           
EBITDA   $ 3,670,000    $ 399,000    $ (925,000)   $ 3,144,000    $ 77,000    $ 3,221,000   
                           
                           

(1) For the purpose of calculating EBITDA, approximately $320,000 of "Interest and other income and expense" has been classified within the line item "Selling, general and administrative expenses."

 

Selected Financial Data  
For the nine months ended, September 30, 2005  
   
   

Express-1 Expedited

 

Evansville Dedicated

 

Corporate

 

Core Business

  Other  

Express-1 Expedited Solutions, Inc.

 
                           
                           
Operating Revenues   $ 22,154,000    $ 3,281,000    $   $ 25,435,000    $ 4,715,000    $ 30,150,000   
                           
Operating Expenses     16,582,000      3,045,000          19,627,000      4,271,000      23,898,000   
                           
Sales, general and administrative expenses (1)     4,549,000      475,000      1,912,000      6,936,000      1,281,000      8,217,000   
                           
Restructuring expenses             4,448,000      4,448,000          4,448,000   
                           
Net income (loss) before provision (benefit) for taxes   $ 1,023,000    $ (239,000)   $ (6,360,000)   $ (5,576,000)   $ (837,000)   $ (6,413,000)  
                           
Restructuring expenses   $   $   $ 4,448,000    $ 4,448,000    $   $ 4,448,000   
Depreciation and amortization     578,000      311,000      200,000      1,089,000      87,000      1,176,000   

Interest expense, net

            133,000      133,000          133,000   
Taxes                          
                           
EBITDA   $ 1,601,000    $ 72,000    $ (1,579,000)   $ 94,000    $ (750,000)   $ (656,000)  
                           

(1) For the purpose of calculating EBITDA, approximately $133,000 of "Interest and other income and expense" has been classified within the line item "Selling, general and administrative expenses."

 

The selected financial data above represents reporting units within the Company. The subtotal entitled Core Business represents the operations remaining after the completion of the restructuring plan, and is intended only to give the reader the ability to view what are now our ongoing operations, exclusive of the closed operations. The column entitled Other represents services or location revenue and expenses that have primarily been eliminated based on the restructuring plan implemented in the fourth quarter of 2004. Remaining expense items reflected within this column include real estate leases, equipment termination costs and impairment charges associated with equipment and property no longer in use. None of our reporting units met the quantitative criteria required for segment reporting. For purposes of the selected financial tables above, we have included Interest Expense and Other Expense within the line item Sales, General and Administrative Expenses.