e10vq
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 June 30, 2010
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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
(State or other jurisdiction of
incorporation or organization)
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03-0450326
(I.R.S. Employer
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 has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
o Yes o No
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 32,382,522 shares of its common stock outstanding as of August 13, 2010.
Express-1 Expedited Solutions, Inc.
Form 10-Q
Three and Six Months Ended June 30, 2010 and 2009
(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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June 30, 2010 |
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December 31, 2009 |
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ASSETS |
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Current assets: |
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Cash |
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$ |
280,000 |
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$ |
495,000 |
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Accounts receivable, net of allowances of $225,000 and $225,000, respectively |
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23,314,000 |
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17,569,000 |
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Prepaid expenses |
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472,000 |
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158,000 |
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Deferred tax asset, current |
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129,000 |
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353,000 |
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Other current assets |
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459,000 |
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459,000 |
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Total current assets |
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24,654,000 |
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19,034,000 |
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Property and equipment, net of $2,956,000 and $2,651,000 in accumulated
depreciation, respectively |
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2,642,000 |
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2,797,000 |
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Goodwill |
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16,959,000 |
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16,959,000 |
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Identifiable intangible assets, net of $2,512,000 and $2,198,000 in accumulated
amortization, respectively |
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8,861,000 |
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9,175,000 |
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Loans and advances |
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173,000 |
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30,000 |
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Other long-term assets |
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820,000 |
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1,044,000 |
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Total long term assets |
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29,455,000 |
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30,005,000 |
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Total assets |
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$ |
54,109,000 |
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$ |
49,039,000 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
8,874,000 |
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$ |
6,769,000 |
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Accrued salaries and wages |
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869,000 |
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310,000 |
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Accrued expenses, other |
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3,590,000 |
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2,272,000 |
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Line of credit |
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6,530,000 |
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Current maturities of notes payable and capital leases |
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1,674,000 |
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1,215,000 |
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Other current liabilities |
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473,000 |
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968,000 |
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Total current liabilities |
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15,480,000 |
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18,064,000 |
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Line of credit |
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2,089,000 |
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Notes payable and capital leases, net of current maturities |
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2,929,000 |
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213,000 |
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Deferred tax liability, long-term |
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1,559,000 |
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1,156,000 |
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Other long-term liabilities |
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808,000 |
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1,202,000 |
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Total long-term liabilities |
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7,385,000 |
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2,571,000 |
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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, $.001 par value; 100,000,000 shares authorized; 32,541,884 and
32,215,218 shares issued,
respectively; and 32,361,884 and 32,035,218 shares outstanding, respectively |
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33,000 |
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32,000 |
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Additional paid-in capital |
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26,989,000 |
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26,488,000 |
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Treasury stock, at cost, 180,000 shares held |
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(107,000 |
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(107,000 |
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Accumulated earnings |
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4,329,000 |
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1,991,000 |
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Total stockholders equity |
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31,244,000 |
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28,404,000 |
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Total liabilities and stockholders equity |
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$ |
54,109,000 |
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$ |
49,039,000 |
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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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Six Months Ended |
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June 30, 2010 |
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June 30, 2009 |
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June 30, 2010 |
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June 30, 2009 |
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Revenues |
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Operating revenue |
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$ |
40,340,000 |
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$ |
22,243,000 |
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$ |
71,982,000 |
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$ |
42,315,000 |
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Expenses |
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Direct expense |
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33,101,000 |
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18,606,000 |
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59,144,000 |
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35,462,000 |
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Gross margin |
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7,239,000 |
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3,637,000 |
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12,838,000 |
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6,853,000 |
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Sales general and administrative expense |
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4,598,000 |
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3,006,000 |
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8,673,000 |
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6,249,000 |
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Operating income from continuing operations |
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2,641,000 |
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631,000 |
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4,165,000 |
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604,000 |
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Other expense |
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34,000 |
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19,000 |
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54,000 |
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9,000 |
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Interest expense |
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88,000 |
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26,000 |
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108,000 |
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48,000 |
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Income from continuing operations before income tax |
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2,519,000 |
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586,000 |
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4,003,000 |
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547,000 |
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Income tax provision |
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1,015,000 |
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273,000 |
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1,665,000 |
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259,000 |
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Income from continuing operations |
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1,504,000 |
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313,000 |
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2,338,000 |
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288,000 |
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Income (loss) from discontinued operations, net of tax |
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(25,000 |
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5,000 |
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Net income |
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$ |
1,504,000 |
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$ |
288,000 |
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$ |
2,338,000 |
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$ |
293,000 |
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Basic income per share |
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Income from continuing operations |
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$ |
0.05 |
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$ |
0.01 |
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$ |
0.07 |
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$ |
0.01 |
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Income from discontinued operations |
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Net income |
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0.05 |
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0.01 |
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0.07 |
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0.01 |
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Diluted income per share |
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Income from continuing operations |
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0.05 |
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0.01 |
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0.07 |
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0.01 |
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Income from discontinued operations |
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Net income |
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$ |
0.05 |
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$ |
0.01 |
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$ |
0.07 |
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$ |
0.01 |
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Weighted average common shares outstanding |
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Basic weighted average common shares outstanding |
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32,044,116 |
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32,035,218 |
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32,039,706 |
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32,035,218 |
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Diluted weighted average common shares outstanding |
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32,645,399 |
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32,147,648 |
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32,602,367 |
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32,139,842 |
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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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Six Months Ended June 30, |
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2010 |
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2009 |
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Operating activities |
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Net income |
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$ |
2,338,000 |
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$ |
293,000 |
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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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62,000 |
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Depreciation & amortization expense |
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701,000 |
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557,000 |
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Stock compensation expense |
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93,000 |
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92,000 |
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Gain on disposal of equipment |
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(1,000 |
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(29,000 |
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Changes in assets and liabilities, net of effects of acquisition |
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Account receivable |
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(5,745,000 |
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(200,000 |
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Deferred tax expense |
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627,000 |
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(165,000 |
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Other current assets |
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(1,000 |
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91,000 |
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Prepaid expenses |
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(314,000 |
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148,000 |
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Other Long-term assets and advances |
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1,000 |
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(80,000 |
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Accounts payable |
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2,105,000 |
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(1,095,000 |
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Accrued expenses |
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1,877,000 |
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496,000 |
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Other liabilities |
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(889,000 |
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(170,000 |
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Cash provided by operating activities |
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792,000 |
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Investing activities |
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Acquisition of businesses, net of cash acquired |
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(250,000 |
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Payment of acquisition earn-out |
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(1,100,000 |
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Payment for purchases of property and equipment |
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(151,000 |
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(47,000 |
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Proceeds from sale of property and equipment |
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1,000 |
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63,000 |
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Cash flows used by investing activities |
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(150,000 |
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(1,334,000 |
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Financing activities |
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Credit line, net activity |
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(4,441,000 |
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2,395,000 |
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Proceeds from credit facility renewal |
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5,000,000 |
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Payments of term debt |
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(1,825,000 |
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(642,000 |
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Proceeds from exercise of options |
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409,000 |
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Cash flows (used) provided by financing activities |
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(857,000 |
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1,753,000 |
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Net (decrease) increase in cash |
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(215,000 |
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419,000 |
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Cash, beginning of period |
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495,000 |
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1,107,000 |
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Cash, end of period |
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$ |
280,000 |
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$ |
1,526,000 |
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Supplemental disclosure of noncash activities: |
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Cash paid during the period for interest |
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$ |
120,000 |
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$ |
40,600 |
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Cash paid during the period for income taxes |
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1,488,000 |
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236,000 |
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Acquisition of assets and liabilities (First Class 2009) |
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Property and equipment |
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$ |
82,000 |
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Goodwill and other intangible assets |
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210,000 |
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Liabilities assumed |
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(42,000 |
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Total purchase price paid in cash |
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$ |
250,000 |
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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
Six Months Ended June 30, 2010
(Unaudited)
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Additional |
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Common Stock |
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Treasury Stock |
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Paid In |
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Accumulated |
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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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Earnings |
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Total |
Balance, December 31, 2009 |
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32,215,218 |
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$ |
32,000 |
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(180,000 |
) |
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$ |
(107,000 |
) |
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$ |
26,488,000 |
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$ |
1,991,000 |
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$ |
28,404,000 |
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Stock option expense |
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93,000 |
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93,000 |
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Issuance of common stock |
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326,666 |
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1,000 |
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408,000 |
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409,000 |
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Net income |
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2,338,000 |
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2,338,000 |
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Balance, June 30, 2010 |
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32,541,884 |
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$ |
33,000 |
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(180,000 |
) |
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$ |
(107,000 |
) |
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$ |
26,989,000 |
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$ |
4,329,000 |
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$ |
31,244,000 |
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|
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 Six Months Ended June 30, 2010 and 2009
(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 June 30, 2010
and December 31, 2009 and results of operations for the three and six month periods ended June 30,
2010 and 2009. 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, 2009 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 and Bounce Logistics business units, revenue is recognized at
the time of freight delivery; 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:
|
|
|
Persuasive evidence that an arrangement exists, |
|
|
|
|
Services have been rendered, |
|
|
|
|
The sales price is fixed and determinable, and |
|
|
|
|
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 method of revenue
recognition is not the preferred method of revenue recognition as prescribed within generally
accepted accounting principles in the United States of America (US GAAP). This method recognizes
revenue and associated expenses prior to the point in time that all services are completed;
however, the use of this method does not result in a material difference. The Company has evaluated
the impact of this alternative method on its consolidated financial statements and concluded that
the impact is not material to the financial statements.
The Company reports revenue on a gross basis in accordance with US GAAP principles. 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. |
7
|
|
|
The customer holds the Company responsible for fulfillment including the acceptability
of the service. |
|
|
|
|
The Company has discretion in setting sales prices and as a result, its earnings vary. |
|
|
|
|
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 on its receivables. |
Stock-Based Compensation
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 assist in recruiting and retaining these individuals. Under the plan, the Company may also
grant restricted stock awards, subject to the satisfaction by the recipient of certain conditions
specified in the 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 six-month period ended June 30, 2010, the Company
granted 450,000 options to purchase shares of its common stock while cancelling or retiring 152,000
options in the same period. As of June 30, 2010 the Company has 3,114,000 options outstanding and
an additional 2,486,000 options available for future grants under the existing plan.
The weighted-average fair value of each stock option recorded in expense for the six-month
period ended June 30, 2010 was estimated on the date of grant using the Black-Scholes option
pricing model and amortized over the requisite service 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 weighted average assumptions outlined in the table below were utilized in the
calculations of compensation expense from option grants in the reporting period reflected.
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
June 30, |
|
|
2010 |
|
2009 |
Risk-free interest rate |
|
|
2.7 |
% |
|
|
3.0 |
% |
Expected life |
|
5.8 |
Years |
|
5.8 |
Years |
Expected volatility |
|
|
35 |
% |
|
|
35 |
% |
Expected dividend yield |
|
none |
|
|
none |
|
Grant date fair value |
|
$ |
0.58 |
|
|
$ |
0.30 |
|
8
The following table summarizes the option activity for the six-month period ended June
30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
Weighted Average |
|
|
Options |
|
Exercise Price |
|
Remaining Life |
|
|
|
Outstanding at December 31, 2009 |
|
|
3,143,000 |
|
|
$ |
1.14 |
|
|
|
5.0 |
|
Granted |
|
|
450,000 |
|
|
|
1.47 |
|
|
|
|
|
Expired |
|
|
(152,000 |
) |
|
|
2.00 |
|
|
|
|
|
Exercised |
|
|
(327,000 |
) |
|
|
3.00 |
|
|
|
|
|
|
|
|
Outstanding at June 30, 2010 |
|
|
3,114,000 |
|
|
|
1.17 |
|
|
|
6.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding exercisable at June 30, 2010 |
|
|
2,381,000 |
|
|
$ |
1.14 |
|
|
|
5.2 |
|
|
|
|
For the six months ended June 30, 2010 and 2009, the Company recognized $93,000 and
$92,000, respectively, in stock based compensation.
As of June 30, 2010, the Company had approximately $305,000 of unrecognized compensation cost
related to non-vested share-based compensation that is anticipated to be recognized over a weighted
average period of approximately 1.2 years. Estimated remaining compensation expense related to
existing share-based plans is $79,000, $121,000, $82,000 and $23,000 for the years ended December
31, 2010, 2011, 2012, and 2013, respectively.
At June 30, 2010, the aggregate intrinsic value of options outstanding was $525,000 and the
aggregate intrinsic value of options exercisable was $441,000. The total fair value of options
vested during the six months ended June 30, 2010 and 2009 was $68,000 and $51,000, respectively.
327,000 options were exercised during the six-month period ended June 30, 2010 and zero
options were exercised during the six-month period ended June 30, 2009. Cash proceeds received
from the exercise of options for the six months ended June 30, 2010 and 2009 were $409,000 and $0,
respectively.
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: unbilled revenue, purchased
transportation, recoverability of long-lived assets, accrual of acquisition earn-outs,
recoverability of prepaid expenses, estimated legal accruals, valuation allowances for deferred
taxes, valuation of investments 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 have 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 2010 presentation. These reclassifications did not have any
effect on total assets, total liabilities, total stockholders equity or net income.
Income Taxes
Taxes on income are provided in accordance with US GAAP. 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.
9
The Company has evaluated its tax position and concluded no valuation allowance on its deferred tax
assets is required, as of June 30, 2010. The Company had previously generated a significant federal
net operating loss (NOL) deduction which had been utilized over the past several years. During 2009
the carryforward deduction was fully utilized and no further NOL carryforward will be available for
federal tax purposes during 2010. For state tax purposes an NOL still exists and as of June 30,
2010 the NOL carryfoward equals approximately $1,900,000.
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 US GAAP in its accounting of goodwill, which
requires an annual impairment test for goodwill and intangible assets with indefinite lives. 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 performs the annual impairment testing
during the third quarter unless events or circumstances indicate impairment of the goodwill may
have occurred before that time.
The Company added $687,000 of goodwill in the first quarter of 2009, as a result of the final
earnout settlement related to the acquisition of certain assets and liabilities of Concert Group
Logistics, LLC. For a more complete analysis of this item refer to Footnote 7 Related Party
Transactions.
Identified Intangible Assets
The Company follows the provisions of US GAAP in its accounting of identified intangible
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 six-month periods ended June 30, 2010, and 2009, there was no impairment of
intangible assets.
The Company added $210,000 of identified intangible assets in the first quarter of 2009, based
upon the acquisition of certain assets and liabilities from First Class Expediting Service, Inc
(FCES). FCES was a Rochester Hills, Michigan based company providing regional expedited
transportation in the Midwest. For financial reporting purposes, First Class is included in the
operating results of Express-1. The Company has amortized the intangible assets over a range of 2-5
years. For each of the six-month periods ended June 30, 2010 and 2009, the Company recorded $32,000
of amortization expense related to these assets.
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, 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.
10
Earnings per Share
Earnings per common share are computed in accordance with US GAAP which requires companies to
present basic earnings per share and diluted 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.
Diluted earnings per 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, 2010 |
|
|
June 30, 2009 |
|
|
June 30, 2010 |
|
|
June 30, 2009 |
|
|
Income from continuing operations |
|
$ |
1,504,000 |
|
|
$ |
313,000 |
|
|
$ |
2,338,000 |
|
|
$ |
288,000 |
|
(Loss) income from discontinued operations |
|
|
|
|
|
|
(25,000 |
) |
|
|
|
|
|
|
5,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,504,000 |
|
|
$ |
288,000 |
|
|
$ |
2,338,000 |
|
|
$ |
293,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted shares outstanding |
|
|
32,044,116 |
|
|
|
32,035,218 |
|
|
|
32,039,706 |
|
|
|
32,035,218 |
|
Diluted weighted shares outstanding |
|
|
32,645,399 |
|
|
|
32,147,648 |
|
|
|
32,602,367 |
|
|
|
32,139,842 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
0.05 |
|
|
$ |
0.01 |
|
|
$ |
0.07 |
|
|
$ |
0.01 |
|
Income from discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
0.05 |
|
|
|
0.01 |
|
|
|
0.07 |
|
|
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
0.05 |
|
|
|
0.01 |
|
|
|
0.07 |
|
|
|
0.01 |
|
Income from discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
0.05 |
|
|
$ |
0.01 |
|
|
$ |
0.07 |
|
|
$ |
0.01 |
|
2. Recent Accounting Pronouncements
The Companys management does not believe that recent codified pronouncements by the FASB will
have a material impact on the Companys current or future financial statements.
3. Acquisitions
First Class (Express-1, Metro Detroit) (Metro Detroit)
In January of 2009, the Company purchased certain assets and liabilities from First Class
Expediting Services Inc. (FCES). FCES was a Rochester Hills, Michigan based company providing
regional expedited transportation in the
Midwest. The Company paid the former owners of FCES $250,000 in cash and received
approximately $40,000 of net assets consisting primarily of fixed assets net of related debt. The
Company funded the transaction through cash available from working capital.
For financial reporting purposes, Metro Detroit is included within the operating results of
Express-1. The Company has recognized identifiable intangible assets of $210,000 amortizable over a
2-5 year period.
11
LRG (CGL International)
On October 1, 2009, CGL purchased certain assets and liabilities of Tampa, Florida based LRG
International, Inc., an international freight forwarder. The purchase complements and expands CGLs
ability to move international freight competitively. The transaction has an effective date of
October 1, 2009. For financial reporting purposes, CGL International is included within the
operating results of CGL.
At closing, the Company paid the former owners of LRG International, Inc. $2 million in cash.
The Company used its existing line of credit to finance the transaction. On the one year
anniversary of the purchase, the Company will pay the former owners $500,000. The transaction also
provides for two potential annual earn-out payments totaling $900,000 provided certain performance
criteria are met over a two year period. The Company recorded a liability of $737,000 based on the
estimated fair value for these earn-outs. The Company has the discretion of paying the additional
consideration in the form of cash, stock or any combination thereof.
The following table sets forth the components of identifiable intangible assets associated
with the acquisition of LRG International, Inc.:
|
|
|
|
|
|
|
|
|
|
|
Fair Value |
|
|
Useful Lives |
Trademark/name |
|
$ |
220,000 |
|
|
5 |
years |
Association memberships |
|
|
160,000 |
|
|
5 |
years |
Customer list |
|
|
1,410,000 |
|
|
12 |
years |
Non-compete agreements |
|
|
60,000 |
|
|
5 |
years |
|
|
|
|
|
|
|
|
Total identifiable intangible assets |
|
$ |
1,850,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
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 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.
12
The following table outlines the Companys debt obligations as of June 30, 2010 and December
31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rates |
|
|
Term (months) |
|
|
As of June 30, 2010 |
|
|
As of December 31, 2009 |
|
Term notes payable |
|
|
2.5 |
% |
|
|
36 |
|
|
$ |
4,583,000 |
|
|
$ |
1,400,000 |
|
Capital leases payable |
|
|
5% - 18 |
% |
|
|
12 - 36 |
|
|
|
20,000 |
|
|
|
28,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total notes payable and capital leases |
|
|
|
|
|
|
|
|
|
|
4,603,000 |
|
|
|
1,428,000 |
|
Less: current maturities of notes payable
and capital leases |
|
|
|
|
|
|
|
|
|
|
1,674,000 |
|
|
|
1,215,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current maturities of notes
payable and capital leases |
|
|
|
|
|
|
|
|
|
$ |
2,929,000 |
|
|
$ |
213,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company entered into a new $5.0 million dollar term note March 31, 2010. Commencing April
30, 2010, the term note is payable in 36 consecutive monthly installments consisting of $139,000 in
monthly principal payments plus the unpaid interest accrued on the note. Interest is payable at
the one-month LIBOR plus 2.25% (2.60% at June 30, 2010).
6. Revolving Credit Facilities
Line of Credit
On March 31, 2010, the Company entered a credit facility which provides for a receivables
based line of credit of up to $10.0 million. The Company may draw upon the receivables based line
of credit the lesser of $10.0 million or 80% of eligible accounts receivable, less amounts
outstanding under letters of credit and 50% of the above term loan balance. The proceeds of the
line of credit will be used exclusively for working capital purposes.
Substantially all the assets of the Company and wholly owned subsidiaries (Express-1, Inc.,
Concert Group Logistics, Inc., and Bounce Logistics, Inc.) are pledged as collateral securing the
Companys performance under the credit facility and in Note 5 above. The line of credit bears
interest based upon one-month LIBOR with an initial increment of 225 basis points.
The line of credit and the term note referenced in Note 5 above carry certain covenants
related to the Companys financial performance. Included among the covenants are a fixed charge
coverage ratio and a total funded debt to earnings before interest, taxes, depreciation and
amortization ratio. As of June 30, 2010, the Company was in compliance with all terms under the
line of credit and the above term note and no events of default existed under the terms of the
agreements.
The Company had outstanding standby letters of credit at June 30, 2010 of $410,000 related to
insurance policies either continuing in force or recently canceled. Amounts outstanding for letters
of credit reduce the amount available under the line of credit, dollar-for-dollar.
Available capacity in excess of outstanding borrowings under the line was approximately $7.5
million as limited by 80% of the Companys eligible receivables as of June 30, 2010. The line of
credit carries a maturity date of March 31, 2012.
7. Related Party Transactions
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 contained performance targets, whereby the former owners of Concert Group Logistics,
LLC could earn up to $2.0 Million of additional consideration. During March of 2009, the final
earnout settlement with CGL was completed for consideration totaling $1.2 million that included a
$1.1 million cash payment in addition to the forgiveness of an $87,000 debt. The settlement
included a general release between the Company and the former owners of Concert Group Logistics,
LLC. Subsequent to the release, the Company has no future obligations related to the earnout
provisions of the Concert Transaction. 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.
13
In April 2009, the Company contracted the services of Daniel Para to serve as the Director of
Business Development. Mr. Para will manage all Company activity related to mergers and
acquisitions. His remuneration for these services was $10,000 per month in 2009. For the six
months ended June 30, 2010, his remuneration was $53,000. Effective June 1, 2010 Dan Para, was
appointed the CEO of CGL and is no longer serving as the Director of Business Development.
In January 2008, in conjunction with the Concert Group Logistics acquisition, the Company
entered into a lease for 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 $101,000, $104,000 and $107,000 to be paid for
2010 and the two 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.
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 three reportable segments based on the type of service provided, to its
customers:
Express-1, Inc. (Express-1) provides time critical expedited transportation to its
customers. This typically involves dedicating one truck and driver to a load which has a specified
time delivery requirement. Most of the services provided are completed through a fleet of exclusive
use vehicles that are owned and operated by independent contract drivers. The use of non-owned
resources to provide transportation services minimizes the amount of capital investment required
and is often described with the terms non-asset or asset-light. In January of 2009, certain
assets and liabilities of First Class Expediting (Metro Detroit) were purchased to complement the
operations of Express-1. The financial reporting of this operation has been included with
Express-1.
Concert Group Logistics, Inc. (CGL) provides freight forwarding services through a chain of
independently owned stations located throughout the United States. These stations are responsible
for selling and operating freight forwarding transportation services within their geographic area
under the authority of CGL. In October of 2009, certain assets and liabilities of LRG International
(CGL International) were purchased to complement the operations of CGL. The financial reporting of
this operation has been included with CGL.
Bounce Logistics, Inc. (Bounce) provides premium truckload brokerage transportation
services to its customers throughout the Unites States.
Corporate 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 reportable segments are the same as those described in the
summary of significant accounting policies. Substantially all intercompany sales prices are market
based. The Company evaluates performance based on operating income of the respective business
segments.
14
The following schedule identifies select financial data for each of the business segments.
Express-1 Expedited Solutions, Inc
Segment Data
Three and Six Months Ended June 30, 2010 and 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
Discontinued |
|
|
|
|
|
|
Concert Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing |
|
Operations |
|
|
Express-1 |
|
Logistics |
|
Bounce |
|
Corporate |
|
Eliminations |
|
Operations |
|
E-1 Dedicated |
Three Months Ended June 30, 2010
|
Revenues |
|
$ |
20,557,000 |
|
|
$ |
16,074,000 |
|
|
$ |
4,675,000 |
|
|
$ |
|
|
|
$ |
(966,000 |
) |
|
$ |
40,340,000 |
|
|
$ |
|
|
Operating income (loss) from
continuing operations |
|
|
2,482,000 |
|
|
|
555,000 |
|
|
|
141,000 |
|
|
|
(537,000 |
) |
|
|
|
|
|
|
2,641,000 |
|
|
|
|
|
Depreciation and amortization |
|
|
167,000 |
|
|
|
137,000 |
|
|
|
8,000 |
|
|
|
5,000 |
|
|
|
|
|
|
|
317,000 |
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
79,000 |
|
|
|
8,000 |
|
|
|
1,000 |
|
|
|
|
|
|
|
88,000 |
|
|
|
|
|
Tax provision |
|
|
1,073,000 |
|
|
|
215,000 |
|
|
|
56,000 |
|
|
|
(329,000 |
) |
|
|
|
|
|
|
1,015,000 |
|
|
|
|
|
Goodwill |
|
|
7,737,000 |
|
|
|
9,222,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,959,000 |
|
|
|
|
|
Total assets |
|
|
24,828,000 |
|
|
|
24,984,000 |
|
|
|
3,372,000 |
|
|
|
22,614,000 |
|
|
|
(21,689,000 |
) |
|
|
54,109,000 |
|
|
|
|
|
Three Months Ended June 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
10,090,000 |
|
|
|
10,155,000 |
|
|
|
2,232,000 |
|
|
|
|
|
|
|
(234,000 |
) |
|
|
22,243,000 |
|
|
|
|
|
Operating income (loss) from
continuing operations |
|
|
697,000 |
|
|
|
351,000 |
|
|
|
86,000 |
|
|
|
(503,000 |
) |
|
|
|
|
|
|
631,000 |
|
|
|
(32,000 |
) |
Depreciation and amortization |
|
|
181,000 |
|
|
|
94,000 |
|
|
|
6,000 |
|
|
|
|
|
|
|
|
|
|
|
281,000 |
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
18,000 |
|
|
|
6,000 |
|
|
|
2,000 |
|
|
|
|
|
|
|
26,000 |
|
|
|
|
|
Tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
273,000 |
|
|
|
|
|
|
|
273,000 |
|
|
|
(7,000 |
) |
Goodwill |
|
|
7,737,000 |
|
|
|
7,865,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,602,000 |
|
|
|
|
|
Total assets |
|
|
21,939,000 |
|
|
|
18,855,000 |
|
|
|
1,545,000 |
|
|
|
14,453,000 |
|
|
|
(14,339,000 |
) |
|
|
42,453,000 |
|
|
|
|
|
Six Months Ended June 30, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
36,769,000 |
|
|
|
29,012,000 |
|
|
|
7,798,000 |
|
|
|
|
|
|
|
(1,597,000 |
) |
|
|
71,982,000 |
|
|
|
|
|
Operating income (loss) from
continuing operations |
|
|
4,131,000 |
|
|
|
811,000 |
|
|
|
238,000 |
|
|
|
(1,015,000 |
) |
|
|
|
|
|
|
4,165,000 |
|
|
|
|
|
Depreciation and amortization |
|
|
333,000 |
|
|
|
344,000 |
|
|
|
15,000 |
|
|
|
9,000 |
|
|
|
|
|
|
|
701,000 |
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
93,000 |
|
|
|
14,000 |
|
|
|
1,000 |
|
|
|
|
|
|
|
108,000 |
|
|
|
|
|
Tax provision |
|
|
1,761,000 |
|
|
|
317,000 |
|
|
|
95,000 |
|
|
|
(508,000 |
) |
|
|
|
|
|
|
1,665,000 |
|
|
|
|
|
Goodwill |
|
|
7,737,000 |
|
|
|
9,222,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,959,000 |
|
|
|
|
|
Total assets |
|
|
24,828,000 |
|
|
|
24,984,000 |
|
|
|
3,372,000 |
|
|
|
22,614,000 |
|
|
|
(21,689,000 |
) |
|
|
54,109,000 |
|
|
|
|
|
Six Months Ended June 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
18,978,000 |
|
|
|
19,794,000 |
|
|
|
4,012,000 |
|
|
|
|
|
|
|
(469,000 |
) |
|
|
42,315,000 |
|
|
|
666,000 |
|
Operating income (loss)
from continuing operations |
|
|
857,000 |
|
|
|
551,000 |
|
|
|
127,000 |
|
|
|
(931,000 |
) |
|
|
|
|
|
|
604,000 |
|
|
|
9,000 |
|
Depreciation and amortization |
|
|
361,000 |
|
|
|
182,000 |
|
|
|
13,000 |
|
|
|
|
|
|
|
|
|
|
|
556,000 |
|
|
|
1,000 |
|
Interest expense |
|
|
|
|
|
|
33,000 |
|
|
|
12,000 |
|
|
|
3,000 |
|
|
|
|
|
|
|
48,000 |
|
|
|
|
|
Tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
259,000 |
|
|
|
|
|
|
|
259,000 |
|
|
|
4,000 |
|
Goodwill |
|
|
7,737,000 |
|
|
|
7,865,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,602,000 |
|
|
|
|
|
Total assets |
|
$ |
21,939,000 |
|
|
$ |
18,855,000 |
|
|
$ |
1,545,000 |
|
|
$ |
14,453,000 |
|
|
$ |
(14,339,000 |
) |
|
$ |
42,453,000 |
|
|
$ |
|
|
9. Discontinued Operations
During the fourth quarter of 2008, the Company discontinued it Express-1 Dedicated business
unit. The Company had operated this unit under the terms of a dedicated contract to supply
transportation services to a domestic automotive manufacturer.
Substantially all of the assets of Express-1 Dedicated have been redeployed in other operating
units of the Company, and therefore, no impairment charges were recorded on the Companys financial
statements during 2009. Management does not anticipate recording any additional material activity
on its discontinued operations in future periods.
The following table reflects the revenue, operating expenses, gross margins, and net income of
the Companys discontinued Express-1 Dedicated business unit for the three and six-month period
ending June 30, 2009.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, 2009 |
|
|
June 30, 2009 |
|
Operating revenue |
|
$ |
|
|
|
$ |
666,000 |
|
Operating expense |
|
|
9,000 |
|
|
|
551,000 |
|
|
|
|
|
|
|
|
Gross (deficit) margin |
|
|
(9,000 |
) |
|
|
115,000 |
|
Sales, general, and administrative expenses |
|
|
23,000 |
|
|
|
106,000 |
|
|
|
|
|
|
|
|
(Loss) income from continuing operations
before tax provision |
|
|
(32,000 |
) |
|
|
9,000 |
|
Tax provision |
|
|
(7,000 |
) |
|
|
4,000 |
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(25,000 |
) |
|
$ |
5,000 |
|
|
|
|
|
|
|
|
15
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, 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, 2009, includes a summary of the
significant accounting policies and methods used in the preparation of our consolidated financial
statements. For the period ended June 30, 2010, there were no significant changes to our critical
accounting policies.
New Pronouncements
The Companys management does not believe that recent codified pronouncements by the FASB will
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 its non-asset based or asset-light operating units. The Companys operations are
provided through three distinct but complementary reporting units, each with its own President. Our
wholly owned subsidiaries include; Express-1, Inc. (Express-1), Concert Group Logistics, Inc.
(Concert Group Logistics or CGL) and Bounce Logistics, Inc. (Bounce Logistics, or Bounce).
These operating units are more fully outlined in the following table.
|
|
|
|
|
|
|
Business Unit |
|
Primary Office Location |
|
Premium Industry Niche |
|
Initial Date |
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 CGL were both existing companies acquired as part of two separate acquisitions.
Express-1, Inc. was formed in 1989, while CGL was formed in 2001. Bounce Logistics was a start-up
operation formed in March 2008.
16
Express-1, Inc. (Express-1) provides time critical expedited transportation to its
customers. This typically involves dedicating one truck and driver to a load which has a specified
time delivery requirement. Most of the services provided are completed through a fleet of exclusive
use vehicles that are owned and operated by independent contract drivers. The use of non-owned
resources to provide transportation services minimizes the amount of capital investment required
and is often described with the terms non-asset or asset-light. In January of 2009, certain
assets and liabilities of First Class Expediting (Metro Detroit) were purchased to complement the
operations of Express-1. The financial reporting of this operation has been included with
Express-1.
Concert Group Logistics, Inc. (CGL) provides freight forwarding services through a chain of
independently owned stations located throughout the United States. These stations are responsible
for selling and operating freight forwarding transportation services within their geographic area
under the authority of CGL. In October of 2009, certain assets and liabilities of LRG International
(CGL International) were purchased to complement the operations of CGL. The financial reporting of
this operation has been included with CGL.
Bounce Logistics, Inc. (Bounce) provides premium truckload brokerage transportation
services to its customers throughout the Unites States.
Other Reporting Disclosures
During the fourth quarter of 2008, the Company discontinued its Express-1 Dedicated business
unit. The Company had operated this unit under the terms of a dedicated contract to supply
transportation services to a domestic automotive manufacturer. The automotive manufacturer did not
renew the contract and Express-1 Dedicated ceased operations in February of 2009. The financial
results of this discontinued business unit for all reported periods are included as discontinued
operations for reporting purposes.
Throughout our reports, we refer to the impact of fuel on our business. For purposes of these
references, we have considered the impact of fuel surcharge revenues, and the related fuel
surcharge expenses only as they relate to our Express-1 business unit. The expediting
transportation industry commonly negotiates both fuel surcharges charged to its customers as well
as fuel surcharges paid to its carriers. Therefore, we feel that this approach, most readily
conveys the impact of fuel revenues, costs, and the resulting gross margin within this business
unit.
Alternatively, within our other two units, Concert Group Logistics and Bounce Logistics, fuel
charges to our customers are not commonly negotiated and identified separately from total revenue
and the associated cost of transportation. We therefore, have not included an analysis of fuel
surcharges for these two operating units. 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 items of the following
tables.
For the three months ended June 30, 2010 compared to the three months ended June 30, 2009
The following table is provided to allow users to visualize quarterly results within our major
reporting classifications. The table does not replace the financial statements, notes thereto, or
management discussion contained within this report on Form 10-Q. We encourage users to review these
items for a more complete understanding of our financial position and results of operations.
17
Express-1 Expedited Solutions, Inc.
Summary Financial Table
For the Three Months Ended June 30,
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of |
|
|
|
Quarter to Date |
|
|
Quarter to Quarter Change |
|
|
Business Unit Revenue |
|
|
|
2010 |
|
|
2009 |
|
|
In Dollars |
|
|
In Percentage |
|
|
2010 |
|
|
2009 |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Express-1 |
|
$ |
20,557,000 |
|
|
$ |
10,090,000 |
|
|
$ |
10,467,000 |
|
|
|
103.7 |
% |
|
|
51.0 |
% |
|
|
45.4 |
% |
Concert Group Logistics |
|
|
16,074,000 |
|
|
|
10,155,000 |
|
|
|
5,919,000 |
|
|
|
58.3 |
% |
|
|
39.8 |
% |
|
|
45.7 |
% |
Bounce Logistics |
|
|
4,675,000 |
|
|
|
2,232,000 |
|
|
|
2,443,000 |
|
|
|
109.5 |
% |
|
|
11.6 |
% |
|
|
10.0 |
% |
Intercompany eliminations |
|
|
(966,000 |
) |
|
|
(234,000 |
) |
|
|
(732,000 |
) |
|
|
-312.8 |
% |
|
|
-2.4 |
% |
|
|
-1.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
40,340,000 |
|
|
|
22,243,000 |
|
|
|
18,097,000 |
|
|
|
81.4 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Express-1 |
|
|
15,720,000 |
|
|
|
7,793,000 |
|
|
|
7,927,000 |
|
|
|
101.7 |
% |
|
|
76.5 |
% |
|
|
77.2 |
% |
Concert Group Logistics |
|
|
14,426,000 |
|
|
|
9,174,000 |
|
|
|
5,252,000 |
|
|
|
57.2 |
% |
|
|
89.7 |
% |
|
|
90.3 |
% |
Bounce Logistics |
|
|
3,921,000 |
|
|
|
1,873,000 |
|
|
|
2,048,000 |
|
|
|
109.3 |
% |
|
|
83.9 |
% |
|
|
83.9 |
% |
Intercompany eliminations |
|
|
(966,000 |
) |
|
|
(234,000 |
) |
|
|
(732,000 |
) |
|
|
-312.8 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total direct expenses |
|
|
33,101,000 |
|
|
|
18,606,000 |
|
|
|
14,495,000 |
|
|
|
77.9 |
% |
|
|
82.1 |
% |
|
|
83.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Express-1 |
|
|
4,837,000 |
|
|
|
2,297,000 |
|
|
|
2,540,000 |
|
|
|
110.6 |
% |
|
|
23.5 |
% |
|
|
22.8 |
% |
Concert Group Logistics |
|
|
1,648,000 |
|
|
|
981,000 |
|
|
|
667,000 |
|
|
|
68.0 |
% |
|
|
10.3 |
% |
|
|
9.7 |
% |
Bounce Logistics |
|
|
754,000 |
|
|
|
359,000 |
|
|
|
395,000 |
|
|
|
110.0 |
% |
|
|
16.1 |
% |
|
|
16.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross margin |
|
|
7,239,000 |
|
|
|
3,637,000 |
|
|
|
3,602,000 |
|
|
|
99.0 |
% |
|
|
17.9 |
% |
|
|
16.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general & administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Express-1 |
|
|
2,355,000 |
|
|
|
1,600,000 |
|
|
|
755,000 |
|
|
|
47.2 |
% |
|
|
11.5 |
% |
|
|
15.9 |
% |
Concert Group Logistics |
|
|
1,093,000 |
|
|
|
630,000 |
|
|
|
463,000 |
|
|
|
73.5 |
% |
|
|
6.8 |
% |
|
|
6.2 |
% |
Bounce Logistics |
|
|
613,000 |
|
|
|
273,000 |
|
|
|
340,000 |
|
|
|
124.5 |
% |
|
|
13.1 |
% |
|
|
12.2 |
% |
Corporate |
|
|
537,000 |
|
|
|
503,000 |
|
|
|
34,000 |
|
|
|
6.8 |
% |
|
|
1.3 |
% |
|
|
2.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total selling, general & administrative |
|
|
4,598,000 |
|
|
|
3,006,000 |
|
|
|
1,592,000 |
|
|
|
53.0 |
% |
|
|
11.4 |
% |
|
|
13.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income from continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Express-1 |
|
|
2,482,000 |
|
|
|
697,000 |
|
|
|
1,785,000 |
|
|
|
256.1 |
% |
|
|
12.1 |
% |
|
|
6.9 |
% |
Concert Group Logistics |
|
|
555,000 |
|
|
|
351,000 |
|
|
|
204,000 |
|
|
|
58.1 |
% |
|
|
3.5 |
% |
|
|
3.5 |
% |
Bounce Logistics |
|
|
141,000 |
|
|
|
86,000 |
|
|
|
55,000 |
|
|
|
64.0 |
% |
|
|
3.0 |
% |
|
|
3.9 |
% |
Corporate |
|
|
(537,000 |
) |
|
|
(503,000 |
) |
|
|
(34,000 |
) |
|
|
-6.8 |
% |
|
|
-1.3 |
% |
|
|
-2.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income from continuing operations |
|
|
2,641,000 |
|
|
|
631,000 |
|
|
|
2,010,000 |
|
|
|
318.5 |
% |
|
|
6.5 |
% |
|
|
2.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
88,000 |
|
|
|
26,000 |
|
|
|
62,000 |
|
|
|
238.5 |
% |
|
|
0.2 |
% |
|
|
0.1 |
% |
Other expense |
|
|
34,000 |
|
|
|
19,000 |
|
|
|
15,000 |
|
|
|
78.9 |
% |
|
|
0.1 |
% |
|
|
0.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before tax |
|
|
2,519,000 |
|
|
|
586,000 |
|
|
|
1,933,000 |
|
|
|
329.9 |
% |
|
|
6.2 |
% |
|
|
2.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax provision |
|
|
1,015,000 |
|
|
|
273,000 |
|
|
|
742,000 |
|
|
|
271.8 |
% |
|
|
2.5 |
% |
|
|
1.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
1,504,000 |
|
|
|
313,000 |
|
|
|
1,191,000 |
|
|
|
380.5 |
% |
|
|
3.7 |
% |
|
|
1.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of tax |
|
|
|
|
|
|
(25,000 |
) |
|
|
25,000 |
|
|
|
-100.0 |
% |
|
|
0.0 |
% |
|
|
-0.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,504,000 |
|
|
$ |
288,000 |
|
|
$ |
1,216,000 |
|
|
|
422.2 |
% |
|
|
3.7 |
% |
|
|
1.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Results
These outstanding quarterly results were accomplished through our recent strategic
initiatives. Our 2009 commitment and investment in our sales organization have paid big dividends
thus far in 2010. The sales team has produced an increasingly diverse customer base, and our
successful 2009 acquisitions of First Class and LRG International have been integrated and
continued to grow and prosper. Express-1 has experienced a solid overall revenue growth with its
international department becoming a major factor in Express-1s service offerings. Additionally,
CGL and Bounce are seeing strong organic growth as the freight environment continues to improve.
Based on the above, gross revenues increased to $40.3 million in the second quarter as compared to
$22.2 million in the same period in 2009, representing an 81% increase.
18
Direct expenses represent expenses attributable to freight transportation. During the second
quarter of 2010, these expenses continued to maintain a direct relationship to our operating
revenues. Our asset light operating model provides transportation capacity through variable cost
transportation alternatives, and therefore enables us to control our operating costs as our volumes
fluctuate. Our primary means of providing capacity are through our fleet of independent contractors
and brokerage relationships. We continue to view this operating model as a strategic advantage. Our
overall gross margin increased to 18% for the second quarter of 2010 as compared to 16% for the
second quarter of 2009 due in large part to improved margins at Express-1 and Concert Group
Logistics. We believe that this is also a positive sign for the economy as overall industry
capacity shortages coupled with economic improvements continue to put upward pressure on margins.
We are encouraged that as a percentage to total revenue our SG&A costs have dropped during the
second quarter of 2010 to 11% as compared to 14% in the comparable period in 2009. Overall,
selling, general, and administrative (SG&A) expenses increased by $1.64 million for the three
months ended June 30, 2010 compared to the same period in 2009. The current percentage of 11% is
consistent with historical trends and we believe this percentage is sustainable throughout the
remainder of the year as additional volumes have contributed to our efficiencies.
Net income for the quarter ended June 30, 2010 totaled $1.5 million compared to $288,000 for
the same quarter in 2009 representing an increase of 422%. This positive trend reflects the
overall improvement in the economy in addition to efficiencies garnered during the economic
downturn. This positive trend also reflects positive impacts due to acquisition activity over the
past two years.
Express-1
For the third consecutive quarter, Express-1 generated record quarterly revenues of $20.6 million
in the second quarter as revenue grew by 104% compared to the same period in 2009. Express-1s
continued investment in sales and sales diversification has paid off handsomely as it has expanded
its presence into other markets. Also, the Companys investment in its Mexico freight two years ago
has exceeded managements expectations by providing approximately 15% of Express-1s revenue for
the quarter. During the quarter, home appliance, and retail business sectors have also contributed
to the company surpassing previous years levels and have contributed to our overall improvement in
diversifying our customer base which historically has been more dependent on the automotive sector.
Additionally, our Detroit Metro office (formerly First Class Expedite Service) continued to provide
a boost to our business by serving as the key contact for certain large customer relationships. In
the quarter, the Detroit office tendered about 600 shipments with our main office, and handled
approximately 6000 shipments with their Detroit based fleet. Express-1 has historically rebounded
quickly from recessions as the expediting industry in general is typically one of the first
benefactors of a recovering economy.
Fuel prices have increased resulting in a corresponding increase in fuel surcharge as a
percentage of revenue in the second quarter of 2010. For the three month period ended June 30,
2010, fuel surcharge revenues represented 13% of our revenue as compared to 8% in the same period
in 2009. Rising fuel prices tend to have a negative impact on our gross margin since these revenues
are substantially passed through to our owner operators. We believe that any negative margin impact
from fuel will be offset by pricing adjustments allowed by the market due to tightening truck
capacity.
Express-1s gross margin percentage increased to 24% for the second quarter of 2010 compared
to 23% in the same quarter in 2009. We believe that margins will remain somewhat consistent moving
forward in 2010 as direct transportation cost pressures due to fuel increases and an overall lack
of capacity will offset any upside gains that the market might allow on the revenue side.
We are encouraged that as a percentage to total revenue our SG&A costs have dropped during the
second quarter to 12% as compared to 16% in the second quarter of 2009. Overall, selling, general
and administrative (SG&A) expenses increased by $755,000 in the second quarter of 2010 compared to
the same period in 2009. The current percentage of 12% is consistent with historical trends and we
believe this percentage is sustainable throughout the remainder of the year.
For the quarter ended June 30, 2010, Express-1 generated income from operations before tax of
$2,482,000 compared to $697,000 in the same quarter in 2009 representing an increase of 256%.
Management remains optimistic about the remainder of the year as the overall economy improves and
trucking capacity tightens.
19
Concert Group Logistics (CGL)
CGLs second quarter revenues in 2010 reflected a healthy rebound from 2009. Revenues of $16.1
million compared favorably to revenues of $10.2 in 2009 representing an increase of 58%. The
purchase of certain assets and liabilities of LRG International (CGL International) in October of
2009 contributed to the revenue increases during the second quarter as compared to the same period
in 2009.
Direct expenses consist primarily of payments for purchased transportation in addition to
payments to CGLs independent offices that control the overall operation of customer shipments. As
a percentage of CGL revenue, direct expenses represented 90% for the second quarter of 2010 as
compared to 90% for the same quarter in 2009. We believe that this margin will be sustainable for
the remainder of the year.
Selling, general and administrative expenses increased in the second quarter of 2010 by
$463,000 as compared to the same period in 2009. These cost increases relate primarily to
administrative costs associated with running CGL International as company owned branches. As a
percentage to revenue SG&A costs increased to 7% in the second quarter of 2010 from 6% in the
second quarter of 2009. We anticipate the current SG&A percentage of revenue being sustained for
the remainder of the year based on this slight change in our operating model.
For the quarter ended June 30, 2010, Concert Group Logistics generated income from operations
before tax of $555,000 representing an increase of 58% from the comparable period in 2009. Again,
this is due primarily to an improving freight environment and we continue to anticipate favorable
results for the remainder of the year as compared to 2009.
Management continues to focus on the expansion of its independent office network, and is
actively pursuing strategic opportunities. As of June 30, 2010 the Company maintained a network of
23 independent offices and 2 company owned branches as compared to 25 offices as of June 30, 2009.
Bounce Logistics
Bounce continues to see significant growth as its second quarter of 2010 revenues of $4.7
million represented a 110% increase over 2009 revenues in the comparable period. We believe this is
reflective of an improving economy and Bounces aggressive growth strategy. We continue to be very
optimistic about growth potential as economic conditions improve in 2010.
In the second quarter of 2010 Bounces direct transportation expenses remained at 84% as a
percentage of revenue as compared to 84% in the second quarter of 2009. We believe this margin is
sustainable for the remainder of 2010 as the economy continues to improve. We believe that price
increases associated with tightened capacity will be somewhat offset by higher costs also
associated with tightening brokerage capacity. These two factors will combine to hold our current
margin in place for the remainder of the year. We continue to have confidence in Bounces ability
to grow and access truck capacity in 2010.
Selling, general and administrative expenses increased by $340,000 in the second quarter of
2010 compared to the same period in 2009. The increase on a quarter to quarter basis has resulted
from costs associated with aggressive sales growth during the quarter. We anticipate that as a
percentage to revenue, SG&A costs will decrease from 13% in the second quarter of 2010 to 12% by
the end of the year.
The above items have resulted in Bounce generating operating income of $141,000 in the second
quarter of 2010 compared to $86,000 in the same period in 2009. Management continues to be
optimistic regarding the future growth and profitability potential of Bounce moving forward in
2010.
Corporate
Corporate costs for the second quarter of 2010 increased by $34,000 as compared to the same
quarter in 2009. As a percentage of revenue, corporate costs decreased from 2% in the second
quarter of 2009 to 1% in the same period in 2010. We anticipate holding these costs below 2009
levels as increased revenues have produced favorable efficiencies in scale.
For the six months ended June 30, 2010 compared to the six months ended June 30, 2009
The following table is provided to allow users to visualize quarterly results within our major
reporting classifications. The table does not replace the financial statements, notes thereto, or
management discussion contained within this report on Form 10-Q. We encourage users to review these
items for a more complete understanding of our financial position and results of operations.
20
Express-1 Expedited Solutions, Inc.
Summary Financial Table
For the Six Months Ended June 30,
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of |
|
|
|
Year to Date |
|
|
Year to Year Change |
|
|
Business Unit Revenue |
|
|
|
2010 |
|
|
2009 |
|
|
In Dollars |
|
|
In Percentage |
|
|
2010 |
|
|
2009 |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Express-1 |
|
$ |
36,769,000 |
|
|
$ |
18,978,000 |
|
|
$ |
17,791,000 |
|
|
|
93.7 |
% |
|
|
51.1 |
% |
|
|
44.8 |
% |
Concert Group Logistics |
|
|
29,012,000 |
|
|
|
19,794,000 |
|
|
|
9,218,000 |
|
|
|
46.6 |
% |
|
|
40.3 |
% |
|
|
46.8 |
% |
Bounce Logistics |
|
|
7,798,000 |
|
|
|
4,012,000 |
|
|
|
3,786,000 |
|
|
|
94.4 |
% |
|
|
10.8 |
% |
|
|
9.5 |
% |
Intercompany eliminations |
|
|
(1,597,000 |
) |
|
|
(469,000 |
) |
|
|
(1,128,000 |
) |
|
|
-240.5 |
% |
|
|
-2.2 |
% |
|
|
-1.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
71,982,000 |
|
|
|
42,315,000 |
|
|
|
29,667,000 |
|
|
|
70.1 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Express-1 |
|
|
28,262,000 |
|
|
|
14,669,000 |
|
|
|
13,593,000 |
|
|
|
92.7 |
% |
|
|
76.9 |
% |
|
|
77.3 |
% |
Concert Group Logistics |
|
|
25,954,000 |
|
|
|
17,926,000 |
|
|
|
8,028,000 |
|
|
|
44.8 |
% |
|
|
89.5 |
% |
|
|
90.6 |
% |
Bounce Logistics |
|
|
6,525,000 |
|
|
|
3,336,000 |
|
|
|
3,189,000 |
|
|
|
95.6 |
% |
|
|
83.7 |
% |
|
|
83.2 |
% |
Intercompany eliminations |
|
|
(1,597,000 |
) |
|
|
(469,000 |
) |
|
|
(1,128,000 |
) |
|
|
-240.5 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total direct expenses |
|
|
59,144,000 |
|
|
|
35,462,000 |
|
|
|
23,682,000 |
|
|
|
66.8 |
% |
|
|
82.2 |
% |
|
|
83.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Express-1 |
|
|
8,507,000 |
|
|
|
4,309,000 |
|
|
|
4,198,000 |
|
|
|
97.4 |
% |
|
|
23.1 |
% |
|
|
22.7 |
% |
Concert Group Logistics |
|
|
3,058,000 |
|
|
|
1,868,000 |
|
|
|
1,190,000 |
|
|
|
63.7 |
% |
|
|
10.5 |
% |
|
|
9.4 |
% |
Bounce Logistics |
|
|
1,273,000 |
|
|
|
676,000 |
|
|
|
597,000 |
|
|
|
88.3 |
% |
|
|
16.3 |
% |
|
|
16.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross margin |
|
|
12,838,000 |
|
|
|
6,853,000 |
|
|
|
5,985,000 |
|
|
|
87.3 |
% |
|
|
17.8 |
% |
|
|
16.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general & administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Express-1 |
|
|
4,376,000 |
|
|
|
3,452,000 |
|
|
|
924,000 |
|
|
|
26.8 |
% |
|
|
11.9 |
% |
|
|
18.2 |
% |
Concert Group Logistics |
|
|
2,247,000 |
|
|
|
1,317,000 |
|
|
|
930,000 |
|
|
|
70.6 |
% |
|
|
7.7 |
% |
|
|
6.7 |
% |
Bounce Logistics |
|
|
1,035,000 |
|
|
|
549,000 |
|
|
|
486,000 |
|
|
|
88.5 |
% |
|
|
13.3 |
% |
|
|
13.7 |
% |
Corporate |
|
|
1,015,000 |
|
|
|
931,000 |
|
|
|
84,000 |
|
|
|
9.0 |
% |
|
|
1.4 |
% |
|
|
2.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total selling, general & administrative |
|
|
8,673,000 |
|
|
|
6,249,000 |
|
|
|
2,424,000 |
|
|
|
38.8 |
% |
|
|
12.0 |
% |
|
|
14.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income from continuing
operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Express-1 |
|
|
4,131,000 |
|
|
|
857,000 |
|
|
|
3,274,000 |
|
|
|
382.0 |
% |
|
|
11.2 |
% |
|
|
4.5 |
% |
Concert Group Logistics |
|
|
811,000 |
|
|
|
551,000 |
|
|
|
260,000 |
|
|
|
47.2 |
% |
|
|
2.8 |
% |
|
|
2.8 |
% |
Bounce Logistics |
|
|
238,000 |
|
|
|
127,000 |
|
|
|
111,000 |
|
|
|
87.4 |
% |
|
|
3.1 |
% |
|
|
3.2 |
% |
Corporate |
|
|
(1,015,000 |
) |
|
|
(931,000 |
) |
|
|
(84,000 |
) |
|
|
-9.0 |
% |
|
|
-1.4 |
% |
|
|
-2.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income from continuing
operations |
|
|
4,165,000 |
|
|
|
604,000 |
|
|
|
3,561,000 |
|
|
|
589.6 |
% |
|
|
5.8 |
% |
|
|
1.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
108,000 |
|
|
|
48,000 |
|
|
|
60,000 |
|
|
|
125.0 |
% |
|
|
0.2 |
% |
|
|
0.1 |
% |
Other expense |
|
|
54,000 |
|
|
|
9,000 |
|
|
|
45,000 |
|
|
|
500.0 |
% |
|
|
0.1 |
% |
|
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
before tax |
|
|
4,003,000 |
|
|
|
547,000 |
|
|
|
3,456,000 |
|
|
|
631.8 |
% |
|
|
5.6 |
% |
|
|
1.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax provision |
|
|
1,665,000 |
|
|
|
259,000 |
|
|
|
1,406,000 |
|
|
|
542.9 |
% |
|
|
2.3 |
% |
|
|
0.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
2,338,000 |
|
|
|
288,000 |
|
|
|
2,050,000 |
|
|
|
711.8 |
% |
|
|
3.2 |
% |
|
|
0.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations,
net of tax |
|
|
|
|
|
|
5,000 |
|
|
|
(5,000 |
) |
|
|
-100.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
2,338,000 |
|
|
$ |
293,000 |
|
|
$ |
2,045,000 |
|
|
|
698.0 |
% |
|
|
3.2 |
% |
|
|
0.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Results
The six months ended June 30, 2010 represented a significant rebound from the same period in
2009 due to our recent sales initiatives and an improving freight environment. Revenues for each of
the business units saw significant increases as compared to 2009. In total, revenues of $72.0 for the first six months of 2010
represented a 70% increase as compared to the same period in 2009. We believe that our focus on
business diversity and investing resources in sales during 2009 has positioned the Company well as
the economy emerges from the recession. We continue to see improved revenues as compared to 2009
for the remainder of 2010.
21
Direct expenses represent expenses attributable to freight transportation. During the initial
six months of 2010, these expenses continued to maintain a direct relationship to our operating
revenues. Our asset light operating model provides transportation capacity through variable cost
transportation alternatives, and therefore enables us to control our operating costs as our volumes
fluctuate. Our primary means of providing capacity are through our fleet of independent contractors
and brokerage relationships. We continue to view this operating model as a strategic advantage. Our
overall gross margin increased to 18% for the initial six months of 2010 as compared to 16% in the
comparable period in 2009 due in large part to improved margins at Express-1 and Concert Group
Logistics. We believe that this is also a positive sign for the economy as overall industry
capacity shortages coupled with an improving freight environment continue to put upward pressure on
margins.
We are encouraged that as a percentage to total revenue our SG&A costs have dropped during the
first six months of 2010 to 12% as compared to 15% in the comparable period in 2009. Overall,
selling, general, and administrative (SG&A) expenses increased by $2.4 million for the initial six
months of 2010 compared to the same period in 2009. The current percentage of 12% is consistent
with historical trends and we believe this percentage is sustainable throughout the remainder of
the year as additional volumes have contributed to our efficiencies.
Net income for the six month period ended June 30, 2010 totaled $2.3 million compared to
$293,000 for the same period in 2009 representing an increase of 698%. This positive trend
reflects the overall improvement in the freight environment in addition to efficiencies garnered
during the economic downturn. This positive trend also reflects positive impacts due to acquisition
activity over the past two years.
Express-1
Express-1 generated record revenues of $36.8 million in the six month period ended June 30,
2010 as revenue grew by 94% compared to the same period in 2009. Express-1s continued investment
in sales and sales diversification has paid off handsomely as it has expanded its presence into
other markets. Also, the companys investment in its Mexico operations two years ago has exceeded
managements expectations. During the period, home appliance, and retail business sectors have also
contributed to the company surpassing previous years levels and have contributed to our overall
improvement in diversifying our customer base which historically has been more dependent on the
automotive sector. Express-1 has historically rebounded quickly from recessions as the expediting
industry in general is typically one of the first benefactors of a recovering economy. We continue
to be optimistic for the remainder of the year as capacity tightens and the economy improves.
Fuel prices have increased resulting in a corresponding increase in fuel surcharge as a
percentage of revenue during the first six months of 2010. For the six month period ended June 30,
2010 fuel surcharge revenues represented 12% of our revenue as compared to 8% in the same period in
2009. Rising fuel prices tend to have a negative impact on our gross margin since these revenues
are substantially passed through to our owner operators; however, we believe that any negative
margin impact from fuel will be offset by pricing adjustments allowed by the market due to
tightening truck capacity.
Express-1s gross margin percentage remained at 23% for the first six months of 2010 compared
to the same period in 2009. We believe that margins will remain somewhat consistent moving forward
as direct transportation cost pressures due to fuel increases and an overall lack of capacity will
offset any upside gains that the market might allow on the revenue side.
We are encouraged that as a percentage to total revenue our SG&A costs have dropped during the
first six months to 12% as compared to 18% in the second quarter of 2009. Overall, selling,
general, and administrative (SG&A) expenses increased by $924,000 in the period compared to the
same period in 2009. The current percentage of 12% is consistent with historical trends and we
believe this percentage is sustainable throughout the remainder of the year.
For the six month period ended June 30, 2010, Express-1 generated income from operations
before tax of $4,131,000 compared to $857,000 in the same period in 2009 representing an increase
of 382%. Management remains optimistic about the remainder of the year as the economy continues to
improve.
22
Concert Group Logistics (CGL)
CGLs initial six months of revenue in 2010 reflected a healthy rebound from 2009. Revenues of
$29 million compared favorably to revenues of $19.8 million in 2009 and are due in large part to
the purchase of certain assets and liabilities of LRG International (CGL International) in October
of 2009.
Direct expenses consist primarily of payments for purchased transportation in addition to
payments to CGLs independent offices that control the overall operation of our customers
shipments. As a percentage of CGL revenue, direct expenses represented 90% for the first two
quarters of 2010 compared to 91% for the same period in 2009. This overall gain in efficiency
resulted in CGLs gross margin percentage improving to 10% in the first two quarters of 2010 from
9% in the same period in 2009. We believe that the improved margin will be sustainable for the
remainder of the year and is partly due to running CGL International as a company owned station.
Selling, general and administrative expenses increased in the six month period ended June 30,
2010 by $930,000 as compared to the same period in 2009. These cost increases relate primarily to
write-offs associated with the transition of the Minneapolis office in addition to the
administrative costs associated with running CGL International as company owned branches. These
increased costs with CGL International are directly offset by decreases in direct expenses
resulting in a higher gross margin percentage. As a percentage of revenue, SG&A costs increased to
8% in the first two quarters of 2010 from 7% during the first two quarters of 2009. We anticipate
the current SG&A percentage of revenue being sustained for the remainder of the year based on this
change in our operating model.
For the six month period ended June 30, 2010, Concert Group Logistics generated income from
operations before tax of $811,000 representing an increase of 47% from the comparable period in
2009. Again, this is due primarily to the improved freight environment. We continue to anticipate
favorable results for the remainder of the year with an improved economy and increased revenues.
Management continues to focus on the expansion of its independent office network, and is
actively pursuing strategic opportunities. As of June 30, 2010 the Company maintained a network of
23 independent offices and 2 company owned branches as compared to 25 independent offices as of
June 30, 2009.
Bounce Logistics
Bounce continues to see significant growth as its revenue for the first six months of 2010
increased by 94% to $7.8 million compared to 2009 revenues of $4.0 million in the comparable
period. We believe this is reflective of an improving economy and an aggressive growth strategy. We
continue to be very optimistic about growth potential as Bounce progresses through 2010.
In the first six month period of 2010, Bounces direct transportation expenses increased to
84% as a percentage of revenue as compared to 83% in the comparable period in 2009. We believe
this cost increase reflects a tightening of truck capacity in the marketplace. This slight decrease
in margin has been more than offset by additional business that has generated an additional
$597,000 in gross margin through the first six months of 2010 as compared to the same period in
2009. We continue to have confidence in Bounces ability to grow and access truck capacity in 2010.
Selling, general and administrative expenses increased by $486,000 in the six month period
ended June 30, 2010 compared to the same period in 2009. The increase on a quarter to quarter basis
has resulted from costs associated with aggressive sales growth during the quarter. Overall
efficiencies of scale have improved based on revenue growth as the percentage of S&A costs to
revenue has decreased from 14% in 2009 to 13% in 2010. We are anticipating that additional growth
will continue to reduce Bounces SG&A percentage to revenue to 12% by year end.
The above items have resulted in Bounce generating operating income of $238,000 in the six
month period ended June 30, 2010 compared to $127,000 in the same period in 2009. Management
continues to be optimistic regarding the future growth and profitability potential of Bounce moving
forward in 2010.
23
Corporate
Corporate costs for the first six months of 2010 increased by $84,000 as compared to the same two
quarters in 2009. As a percentage of revenue, corporate costs decreased from 2% in the second
quarter of 2009 to 1% in the same period in 2010. We anticipate holding these costs below 2009
levels as increased revenues have produced favorable efficiencies in scale.
Liquidity and Capital Resources
General
As of June 30, 2010, we had $9.2 million of working capital with associated cash of $280,000
compared with working capital of $970,000 and cash of $495,000 as of December 31, 2009. This
represents an increase of $8.2 million or 846% in working capital during the six-month period. The
Company renewed its credit facility with PNC Bank formerly National City Bank on March 31, 2010.
The renewal of the Companys credit facility had a positive impact of approximately $4.9 million on
its working capital by converting the classification of both its term debt and line of credit to
long term obligations based on the terms of the new agreement. The Company also had an increase of
its account receivable of $5.7 million during the six-month period ended June 30, 2010.
Cash Flow
During the six months ended June 30, 2010, $792,000 in cash was generated from operations.
The primary source of cash for the six month period was net income of $2.3 million and an increase
of $2.1 million in accounts payable and $1.9 million in accrued expenses. The primary use of cash
for the quarter was an increase of $5.7 million of accounts receivable associated with our revenue
increase during the year. Additional uses of cash included $314,000 in prepaid expenses and a
decrease in other liabilities of $889,000. During the same period in 2009, cash generated and used
in operations netted to $0. The primary use of cash was a decrease in accounts payable of $1.1
million and a decrease in other liabilities of $170,000. The primary source of cash for the six
month period was an increase of $500,000 in accrued expenses.
Investing activities required cash usage of approximately $150,000 during the six months ended
June 30, 2010. During this period, cash was used to purchase $151,000 in fixed assets. During the
same period in 2009 we required cash usage of $1.3 million. During 2009 the cash was used to: 1)
satisfy earn-out payments of $1.1 million to the former owners of Concert Group Logistics, LLC and,
2) purchase $250,000 in net assets related to the purchase of First Class Expediting Service, LLC
in January of 2009.
Financing activities used approximately $857,000 for the six months ended June 30, 2010. Net
payments on the line of credit and term debt of $1.3 million resulted in the primary use of cash.
Proceeds from the exercise of stock options totaling $409,000 provided a source of funds due to
financing activities. During the same period in 2009, financing activities generated approximately
$1.8 million, which were derived primarily from net draws on the companys line of credit.
Additionally, $642,000 in payments on the companys debt was made during the period.
During 2009, the Company fully utilized its federal net operating loss which has resulted in
an additional use of funds in 2010 as compared to 2009. Through the first six months of 2010, cash
payments related to tax liabilities equaled $1.5 million as compared to tax related payments of
$236,000 in the same period of 2009.
Line of Credit and Term Note
To ensure adequate near-term liquidity, we renewed our credit facility with PNC Bank, on March
31, 2010. This $15.0 million facility provides for a receivables based line of credit of up to
$10.0 million and a term loan of $5.0 million. The Company may draw upon the receivables based line
of credit the lesser of $10.0 million or 80% of eligible accounts receivable, less amounts
outstanding under letters of credit and 50% of the term loan balance. The
proceeds of the line of credit will be used exclusively for working capital purposes. The
proceeds of the term loan were used to:
|
|
|
Pay off the $1.1million balance of the previous term loan which was entered into on
January 31, 2008, |
|
|
|
|
Refinance $2.0 million utilized to acquire the assets of LRG International, in
October of 2009; and |
|
|
|
|
Reduce the balance on the previous line of credit initially established on January
31, 2008 by $1.9 million. |
24
Substantially all the assets of our Company and wholly owned subsidiaries (Express-1, Inc.,
Concert Group Logistics, Inc., Bounce Logistics, Inc., and CGL International, Inc.) are pledged as
collateral securing our performance under the credit facilities. The credit facility bears interest
based upon LIBOR with an initial increment of 200 basis points for the line of credit and 225 basis
points for the term loan. The term loan is payable over a thirty-six month period and requires
monthly principal payments of $139,000 plus accrued interest.
The credit facilities carry certain covenants related to the Companys financial performance.
Included among the covenants are a fixed charge coverage ratio and a total funded debt to earnings
before interest, taxes, depreciation and amortization ratio. As of June 30, 2010, the Company was
in compliance with all terms under the credit facility and no events of default existed under the
terms of this agreement.
We had outstanding standby letters of credit at June 30, 2010 of $410,000 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.
Available capacity in excess of outstanding borrowings under the line was approximately $7.5
million as limited by 80% of the Companys eligible receivables as of June 30, 2010. The credit
facility carries a maturity date of March 31, 2012.
Options
The following schedule represents those options that the Company has outstanding as of June
30, 2010. The schedule also segregates the options by expiration date and exercise price to better
identify their potential for exercise. Additionally, the total approximate potential proceeds by
year have been identified.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
Approximate |
|
|
Options grouped by exercise price |
|
Outstanding |
|
Potential |
|
|
.50-.75 |
|
.76-1.00 |
|
1.01-1.25 |
|
1.26-1.50 |
|
1.51 > |
|
Options |
|
Proceeds |
|
|
|
Option Expiration Dates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
125,000 |
|
|
|
|
|
|
|
|
|
|
|
125,000 |
|
|
$ |
156,000 |
|
2011 |
|
|
|
|
|
|
|
|
|
|
125,000 |
|
|
|
|
|
|
|
|
|
|
|
125,000 |
|
|
|
130,000 |
|
2014 |
|
|
|
|
|
|
50,000 |
|
|
|
|
|
|
|
500,000 |
|
|
|
|
|
|
|
550,000 |
|
|
|
769,000 |
|
2015 |
|
|
500,000 |
|
|
|
|
|
|
|
200,000 |
|
|
|
|
|
|
|
|
|
|
|
700,000 |
|
|
|
603,000 |
|
2016 |
|
|
|
|
|
|
50,000 |
|
|
|
125,000 |
|
|
|
100,000 |
|
|
|
|
|
|
|
275,000 |
|
|
|
314,000 |
|
2017 |
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
323,000 |
|
|
|
|
|
|
|
373,000 |
|
|
|
518,000 |
|
2018 |
|
|
|
|
|
|
290,000 |
|
|
|
101,000 |
|
|
|
|
|
|
|
|
|
|
|
391,000 |
|
|
|
386,000 |
|
2019 |
|
|
25,000 |
|
|
|
75,000 |
|
|
|
25,000 |
|
|
|
|
|
|
|
|
|
|
|
125,000 |
|
|
|
112,000 |
|
2020 |
|
|
|
|
|
|
|
|
|
|
75,000 |
|
|
|
50,000 |
|
|
|
325,000 |
|
|
|
450,000 |
|
|
|
664,000 |
|
|
|
|
Totals |
|
|
525,000 |
|
|
|
465,000 |
|
|
|
826,000 |
|
|
|
973,000 |
|
|
|
325,000 |
|
|
|
3,114,000 |
|
|
$ |
3,652,000 |
|
|
|
|
Contractual Obligations
The following table reflects all contractual obligations of our Company as of June 30, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period |
|
|
|
|
|
|
|
Less than 1 |
|
|
1 to 3 |
|
|
3 to 5 |
|
|
More than 5 |
|
Contractual Obligations |
|
Total |
|
|
Year |
|
|
Years |
|
|
Years |
|
|
Years |
|
Term notes payable |
|
$ |
4,583,000 |
|
|
$ |
1,667,000 |
|
|
$ |
2,916,000 |
|
|
$ |
|
|
|
$ |
|
|
Capital leases payable |
|
|
20,000 |
|
|
|
7,000 |
|
|
|
13,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total note payable and capital leases |
|
|
4,603,000 |
|
|
|
1,674,000 |
|
|
|
2,929,000 |
|
|
|
|
|
|
|
|
|
Line of credit |
|
|
2,089,000 |
|
|
|
|
|
|
|
2,089,000 |
|
|
|
|
|
|
|
|
|
Operating/real estate leases |
|
|
900,000 |
|
|
|
450,000 |
|
|
|
432,000 |
|
|
|
18,000 |
|
|
|
|
|
Earnout obligation LRG* |
|
|
1,400,000 |
|
|
|
950,000 |
|
|
|
450,000 |
|
|
|
|
|
|
|
|
|
Employment contracts |
|
|
2,327,000 |
|
|
|
1,184,000 |
|
|
|
1,143,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual cash obligations |
|
$ |
11,319,000 |
|
|
$ |
4,258,000 |
|
|
$ |
7,043,000 |
|
|
$ |
18,000 |
|
|
$ |
|
|
|
|
|
|
|
|
* |
|
For additional information see Footnote 3-Acquisitions |
25
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not Required.
Item 4T. 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 June 30, 2010.
Item 1A. Risk Factors.
Not required
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
No unregistered equity securities were sold in the current reporting period.
Item 3. Defaults upon Senior Securities.
The Companys line of credit and a term note contain various covenants pertaining to the
maintenance of certain financial ratios. As of June 30, 2010, the Company was in compliance with
the ratios required under these agreements. No events of default exist on these agreements as of
the filing date.
Item 4. Removed and Reserved.
Item 5. Other Information.
Effective June 1, 2010 Dan Para, was appointed the CEO of CGL.
26
Item 6. Exhibits
|
|
|
Exhibit No. |
|
Description |
|
|
|
10.1
|
|
Second amendment to the Employment agreement between the Company and Michael R.
Welch, the Companys Chief Executive Officer, dated June 14, 2010. |
|
|
|
10.2
|
|
Employment agreement between the Company and Daniel Para, the Companys Chief
Executive Officer of Concert Group Logistics, Inc., effective June 1, 2010. |
|
|
|
10.3
|
|
Amendment to revolving and term loan agreement dated March 31, 2010, filed on Form
8-K on April 5, 2010 and incorporated herein by reference. |
|
|
|
10.4
|
|
Commercial term note obligation dated March 31, 2010 filed on Form 8-K on April 5,
2010 and incorporated herein by reference. |
|
|
|
31.1
|
|
Certification of the Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
|
|
|
31.2
|
|
Certification of the Interim Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
|
|
|
32.1
|
|
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.) |
|
|
|
32.2
|
|
Certification of the Interim Chief Financial 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.) |
27
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.
|
|
|
/s/ Michael R. Welch
|
|
|
Michael R. Welch |
|
|
Chief Executive Officer |
|
|
|
|
|
|
/s/ John D. Welch
|
|
|
John D. Welch |
|
|
Interim Chief Financial Officer |
|
|
Date: August 13, 2010
28
Exhibit Index
|
|
|
Exhibit No. |
|
Description |
|
|
|
10.1
|
|
Second amendment to the Employment agreement between the Company and Michael R.
Welch, the Companys Chief Executive Officer, dated June 14, 2010. |
|
|
|
10.2
|
|
Employment agreement between the Company and Daniel Para, the Companys Chief
Executive Officer of Concert Group Logistics, Inc., effective June 1, 2010. |
|
|
|
10.3
|
|
Amendment to revolving and term loan agreement dated March 31, 2010, filed on Form
8-K on April 5, 2010 and incorporated herein by reference. |
|
|
|
10.4
|
|
Commercial term note obligation dated March 31, 2010 filed on Form 8-K on April 5,
2010 and incorporated herein by reference. |
|
|
|
31.1
|
|
Certification of the Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
|
|
|
31.2
|
|
Certification of the Interim Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
|
|
|
32.1
|
|
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.) |
|
|
|
32.2
|
|
Certification of the Interim Chief Financial 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.) |
29
exv10w1
AMENDMENT #2
TO
EXECUTIVE EMPLOYMENT AGREEMENT
Reference is made to the Executive Employment Agreement, as amended (the Agreement) dated
July 1, 2005, by and among Segmentz, Inc., a Delaware corporation (currently known as Express-1
Expedited Solutions, Inc., the Company), and Mike Welch (the Executive). The Company and the
Executive are referred to collectively herein as the Parties. All capitalized terms not otherwise
defined herein shall have the meaning set forth in the Agreement.
1. Deferred Compensation. The Parties hereby agree that Section 5(d) of the Agreement
is hereby deleted in its entirety and replaced with the following:
d. In lieu of the deferred compensation originally provided for in this Agreement,
the Executive shall receive the following: (i) for the year ending December 31,
2010, the Executive shall receive a lump sum payment in the amount of $30,000, less
applicable
withholdings, as additional compensation; and (ii) commencing on January 1, 2011,
the Executives Base Salary shall be increased from $200,000 per year to $230,000
per year.
2. Sole Amendments. The Parties hereby agree that except as modified herein, the
Agreement shall remain in full force and effect.
3. Counterparts. This Amendment #2 to Executive Employment Agreement may be executed
in one or more counterparts, each of which shall be deemed an original but all of which together
will constitute one and the same instrument.
4. Governing Law. This Amendment #2 to Executive Employment Agreement shall be deemed
made and entered into in the State of Michigan and shall be governed and construed under and in
accordance with the laws of the State of Michigan.
IN
WITNESS WHEREOF, each of the parties hereto has caused this Amendment #2 to Executive
Employment Agreement to be executed as of June 14, 2010.
|
|
|
|
|
|
Express-1 Expedited Solutions, Inc.
|
|
|
By: |
/s/
Pete Whitehead |
|
|
|
Name: |
Pete Whitehead |
|
|
|
Title: |
Compensation Committee Chair |
|
|
|
|
|
|
/s/
Mike Welch
|
|
|
|
Mike Welch |
exv10w2
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the Agreement) is effective as of June 1, 2010 (the
Effective Date), between Concert Group Logistics, Inc., a Delaware corporation (the Company)
and Daniel Para (the Executive).
RECITALS
The Company is principally engaged in the time critical, time sensitive, and cost sensitive
domestic and international surface, air and ocean freight forwarding business (the Business).
The Executive has extensive experience in logistics operations and transportation management.
The Company desires to employ the Executive and the Executive desires to be employed by the
Company.
The parties agree that a covenant not to compete is essential to the growth and stability of
the Business of the Company.
NOW, THEREFORE, in consideration of the mutual agreements herein made, the Company and the
Executive do hereby agree as follows:
1. Recitals. The above recitals are true, correct, and are herein incorporated by
reference.
2. Employment. The Company hereby employs the Executive, and the Executive hereby
accepts employment, upon the terms and conditions hereinafter set forth.
3. Authority and Power During Employment Period.
a. Duties and Responsibilities. During the term of this Agreement, the
Executive shall serve as the Chief Executive Officer of the Company. The Executive shall
have general management authority over the business operations of the Company, subject to
the guidelines and direction of the Chief Executive Officer and Board of Directors of
Express-1 Expedited Solutions, Inc. (the Parent), to whom he shall directly report.
b. Time Devoted. Throughout the term of the Agreement, the Executive shall
devote all of the Executives business time and attention exclusively to the business and
affairs of the Company, consistent with the Executives position with the Company.
4. Term. The employment hereunder will commence on the Effective Date and will
continue for an initial term of three years thereafter, subject to an automatic two year renewal
unless either party provides the other party with written notice of non-renewal at least 60 days
prior to the end of the initial three year period (the Term).
5. Compensation and Benefits.
a. Salary. The Executive shall be paid a base salary (the Base Salary) at an
annual rate of $180,000. The Base Salary shall be reviewed annually throughout the Term by
the Parents Compensation Committee and may be raised in its sole discretion. At the first
annual review the Executive shall have the right to propose amendments to the terms of this
Agreement, but shall have no vested right any such proposed amendments unless and until such
amendments are approved and adopted by the Companys Compensation Committee.
b. Performance Based Bonus. As additional compensation, the Executive shall be
entitled to receive a bonus (Bonus) for each year during the Term of the Executives
employment by the Company based upon the Parents executive bonus plan as adopted and
amended from time-to-time by the Parents Board of Directors. The amount of any Bonus shall
be determined based upon performance targets set annually by the Parents Compensation
Committee.
c. Signing Bonus. In connection with the execution of this Agreement Parent
shall issue the Executive nonqualified Options under the Parents stock option plan
entitling the Executive to purchase 100,000 shares of Common Stock, on such terms as such
Options are typically issued by the Parent.
d. Executive Benefits. The Executive shall be entitled to participate in
benefit programs of the Company currently existing or hereafter including, but not limited
to, group life insurance, health insurance, dental, and 401 K.
e. Vacation. The Executive shall be entitled to four (4) weeks of paid time off
each year during the Term.
f. Business Expense Reimbursement. During the Term of employment, the Executive
shall be entitled to receive proper reimbursement for all reasonable, out-of-pocket expenses
incurred by the Executive (in accordance with the policies and procedures established by the
Company for its senior executive officers) in performing services hereunder, provided the
Executive properly accounts therefore.
6. Consequences of Termination of Employment.
a. Death. In the event of the death of the Executive during the Term, Base
Salary and any earned Bonus shall be paid to the Executives designated beneficiary, or, in
the absence of such designation, to the estate or other legal representative of the
Executive until the date of death. Other death benefits will be determined in accordance
with the terms of the Companys benefit programs and plans.
2
b. Disability.
(1) In the event of the Executives Disability, as hereinafter defined, the
Executive shall be entitled to compensation in accordance with the Companys
disability compensation practice for senior executives, including any separate
arrangement or policy covering the Executive, but in all events the Executive shall
continue to receive the Executives Base Salary for ninety (90) days from the date
on which the Disability has been deemed to occur. Any amounts provided for in this
Section 6(b) shall be offset by other long-term disability benefits provided to the
Executive by the Company.
(2) Disability, for the purposes of this Agreement, shall be deemed to have
occurred in the event (A) the Executive is unable by reason of sickness or accident
to perform the Executives duties under this Agreement for an aggregate of 30 days
in any twelve-month period or (B) the Executive has a guardian of the person or
estate appointed by a court of competent jurisdiction. Termination due to Disability
shall be deemed to have occurred upon the first day of the month following the
determination of Disability as defined in the preceding sentence.
Anything herein to the contrary notwithstanding, if, following a termination of
employment hereunder due to Disability as provided in the preceding paragraph, the Executive
becomes reemployed, whether as an Executive or a consultant to the Company, any salary,
annual incentive payments or other benefits earned by the Executive from such reemployment
shall offset any salary continuation due to the Executive hereunder commencing with the date
of re-employment.
c. Termination by the Company for Cause.
(1) Nothing herein shall prevent the Company from terminating the Executives
employment hereunder for Cause, as hereinafter defined. In the event of a
termination for Cause, the Executive shall receive Base Salary and benefits through
the date of termination only, together with any Bonus that has been earned as of
that date.
(2) Cause shall mean:
(A) Executives material violation of any of the provisions of this
Agreement, or the rules, policies, and/or procedures of the Company, or
commission of any material act of fraud, misappropriation, breach of
fiduciary duty or theft against or from the Company, if such violation is
not cured as soon as is reasonably practical, and in any event within thirty
(30) days after written notice from the Company, or if Executive commits the
same violation within twelve (12) months of receiving any such notice.
(B) Executives violation of any law, rule or regulation of a
governmental authority or regulatory body with jurisdiction over the
3
Company or Executive relative to the conduct of Executive in connection
with the Companys business or its securities, if such violation is not
cured as soon as is reasonably practical, and in any event within thirty
(30) days after written notice from the Company, or if Executive commits the
same violation within twelve (12) months of receiving any such notice.
(C) The conviction of Executive of a felony under the laws of the
United States of America or any state therein.
d. Termination by the Company Other than for Cause. The Company may terminate
the Executives employment in the Companys sole discretion at any time; provided, however,
that in the event such termination is not pursuant to Section 6(a), Section 6(b), or Section
6(c) hereof, the Company may terminate this Agreement upon three (3) months prior written
notice. During such three (3) month period the Executive shall continue to perform the
Executives duties pursuant to this Agreement and the Company shall continue to compensate
the Executive pursuant to this Agreement. In the event of a termination under this Section
6(d), the Executive shall receive any Bonus that has been earned as of the date of
termination, plus Base Salary only (i.e. no fringe benefits, additional Bonus, or other
compensation) for the one year period following termination.
e. Voluntary Termination. In the event the Executive terminates the Executives
employment on the Executives own volition (except as provided in Section 6(f)), the
Executive shall receive Base Salary and benefits through the date of termination only,
together with any Bonus that has been earned as of that date.
f. Change of Control. If, within one year after a Change in Control, the
Company terminates Executives employment with the Company under Section 6(d), OR Executive
voluntarily terminates such employment with Good Reason, the following provisions will
apply:
(1) An amount equal to the sum of (A) Executives aggregate Base Salary (at the
rate most recently determined) for a period equal to one year (the Severance
Period), and (B) an amount equal to the greater of (i) Executives Bonus
payments for the year preceding the date of termination, and (ii) the annual average
of Executives Bonus payments during the two (2) years immediately preceding the
date of termination, shall be paid to, or in trust for, Executive pursuant to
Section 6(f)(7) in a lump sum within 30 days after the date of termination.
(2) Executive shall receive any and all benefits accrued under any Incentive
Plans and Benefit Plans to the date of his termination. The amount, form and time of
payment of such benefits shall be determined by the terms of such Incentive Plans
and Benefit Plans, and for purposes of such plans, Executives employment shall be
deemed to have terminated by reason of retirement.
4
(3) The Company agrees that for purposes of all Incentive Plans and Benefit
Plans Executive shall be given service credit for all purposes for, and shall be
deemed to be an employee of the Company during, the Severance Period,
notwithstanding his inability to render services by reason of death or disability
during the Severance Period or the fact that he is not an employee of the Company
during the Severance Period; provided that, if the terms of any of such Incentive
Plan or Benefit Plan do not permit such credit or deemed employee treatment, the
Company will make identical payments and distributions outside of the Plans.
(4) During the Severance Period Executive and his dependents will continue to
be covered by all health, dental, disability, accident and life insurance plans or
arrangements made available by the Company in which he or his dependents were
participating immediately prior to the date of his termination as if he continued to
be an employee of the Company, provided that, if participation in any one or more of
such plans and arrangements is not possible under the terms thereof, the Company
will provide substantially identical benefits. Executives right to continuation of
coverage under the health insurance plan of employer pursuant to Section 4980B (or
any successor section) shall commence at the end of the Severance Period.
(5) No payments or benefits payable to or with respect to Executive during the
Severance Period pursuant to this Section 6(f) shall be reduced by any amount
Executive or his dependents, spouse or beneficiary may earn or receive from
employment with another employer or from any other source.
(6) Except as otherwise provided in Section 6(f)(7), upon the death of
Executive all amounts payable hereunder to Executive pursuant to this Section 6(f)
shall be paid to his devisee, legates or other designee, or in the absence of a
designee, to his estate.
(7) Amounts payable pursuant to Section 6(f)(1) shall be, at the election of
Executive set forth in a written instrument delivered to the Company within 15 days
after his termination of employment, be either paid to him in a lump sum or paid to
the trustee of a trust to be established by the Company for the benefit of
Executive, with a bank or trust company selected by Executive as trustee. If
Executive elects to have payments made to the trustee of such trust, the trust
agreement shall conform to the provisions of any applicable model trust set forth in
any Internal Revenue Service authority and shall contain terms and conditions
mutually satisfactory to Executive and the Company and that are not inconsistent
with the provisions of any such model trust.
(8) Treatment of Options.
(A) If upon termination of his employment pursuant to Section 6(f)(1)
Executive holds any options (the Options) with respect
5
to the
common stock (the Common Stock) of the Company, which are not then
exercisable, said Options shall immediately vest upon termination. All such
Options shall remain outstanding and exercisable for the remainder of the
full term thereof (i.e. the term of said Option shall not be shortened as a
result of any change in control provisions or other adjustment provisions
contained in the Option agreement or the plan under which the Options were
issued).
(B) If Executive holds Options and (i) the Company effects any merger
or consolidation of the Company with or into another person, (ii) the
Company effects any sale of all or substantially all of its assets in one or
a series of related transactions, (iii) any tender offer or exchange offer
(whether by the Company or another person) is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their shares for
other securities, cash or property or (iv) the Company effects any
reclassification of the Common Stock or any compulsory share exchange
pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property (each a Fundamental
Transaction), then, upon any subsequent exercise of the Options,
Executive shall have the right to receive, for each share of Common Stock
underlying the Option that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental Transaction, the
number of shares of Common Stock of the successor or acquiring corporation
or of the Company, if it is the surviving corporation, and any additional
consideration (the Alternate Consideration) receivable as a result
of such merger, consolidation or disposition of assets by a holder of the
number of shares of Common Stock for which the Option is exercisable
immediately prior to such event. If holders of Common Stock are given any
choice as to the securities, cash or property to be received in a
Fundamental Transaction, then Executive shall be given the same choice as to
the Alternate Consideration it receives upon any exercise of the Option
following such Fundamental Transaction. To the extent necessary to
effectuate the foregoing provisions, any successor to Company or surviving
entity in such Fundamental Transaction shall issue to Executive a new option
consistent with the foregoing provisions and evidencing Executives right to
exercise such Option into Alternate Consideration. The terms of any
agreement pursuant to which a Fundamental Transaction is effected shall
include terms requiring any such successor or surviving entity to comply
with the provisions of this Section 6(f)(8) and insuring that the Options
(or any such replacement security) will be similarly adjusted upon any
subsequent transaction analogous to a Fundamental Transaction.
(9) Expenses. The Company shall pay to Executive all out-of-pocket
expenses, including attorneys fees, incurred by Executive in connection with the
successful enforcement of this Section 6(f) by Executive.
6
(10) Definitions. For purposes of this Agreement:
(A) Benefit Plans shall mean any qualified or supplemental
defined benefit retirement plan or defined contribution retirement plan,
currently or hereafter made available by the Company to Executive in which
Executive is eligible to participate, or any private arrangement maintained
by the Company solely for executive.
(B) Change in Control shall be deemed to occur on the
earliest of any of the following events:
(i) The ownership by any entity, person, or group of beneficial
ownership, as that term is defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended, of more than 50% of the outstanding
capital stock of the Company entitled to vote for the election of
directors (Voting Stock);
(ii) The effective time of (a) a merger or consolidation of the
Company with one or more other corporations as a result of which the
holders of the outstanding Voting Stock of the Company immediately
prior to such merger hold less than 80% of the Voting Stock of the
surviving or resulting corporation, or (b) a transfer of all or
substantially all of the property of the Company other than to an
entity of which the Company owns at least 80% of the Voting Stock; or
(iii) The election to the Board of Directors of the Company,
without the recommendation or approval of the incumbent Board of
Directors of the Company, of the lesser of (a) three independent
directors or (b) directors constituting a majority of the number of
directors of the Company then in office.
(C) Good Reason shall exist if, without Executives express
written consent:
(i) The Company shall assign to Executive duties of a
non-executive nature or for which Executive is not reasonably
equipped by his skills and experience;
(ii) The Company shall reduce the salary of Executive, or
materially reduce the amount of paid vacations to which he is
entitled, or his fringe benefits and perquisites;
(iii) With respect to an Executive employed at the Companys
Downers Grove, IL office, the Company shall require
7
Executive to relocate his principal business office or his
principal place of residence outside of the greater Chicago
metropolitan area (the Area), or assign to Executive duties that
would reasonably require such relocation;
(iv) The Company shall require Executive, or assign duties to
Executive, which would reasonably require him to spend more than
sixty normal working days away from the Area during any consecutive
twelve month period;
(v) The Company shall fail to provide office facilities,
secretarial services, and other administrative services to Executive
which are substantially equivalent to the facilities and services
provided to Executive on the date hereof; or
(vi) The Company shall terminate Incentive Plans and Benefit
Plans or arrangements, or reduce or limit Executives participation
therein relative to the level of participation of other executives of
similar rank, to such an extent as to materially reduce the aggregate
value of Executives incentive compensation and benefits below their
aggregate value as of the date hereof.
(D) Incentive Plans shall mean any incentive, bonus, deferred
compensation or similar plan or arrangement currently or hereafter made
available by the Company in which Executive is eligible to participate.
7. Covenant Not to Compete.
a. Covenant Not to Compete. The Executive acknowledges and recognizes the
highly competitive nature of the Companys business and the goodwill, continued patronage,
and specifically the names and addresses of the Companys Clients (as hereinafter defined)
constitute a substantial asset of the Company having been acquired through considerable
time, money and effort. Accordingly, in consideration of the execution of this Agreement the
Executive agrees to the following:
(1) That during the Restricted Period (as hereinafter defined) and within the
Restricted Area (as hereinafter defined), the Executive will not, individually or in
conjunction with others, directly or indirectly, engage in any Business Activities
(as hereinafter defined), whether as an officer, director, proprietor, employer,
partner, independent contractor, investor (other than as a holder solely as an
investment of less than 1% of the outstanding capital stock of a publicly traded
corporation), consultant, advisor or agent.
(2) That during the Restricted Period and within the Restricted Area, the
Executive will not, directly or indirectly, solicit, induce or influence any of the
Companys Clients which have a business relationship with the Company at the
8
time during the Restricted Period to discontinue or reduce the extent of such
relationship with the Company.
b. Non-Disclosure of Information. Executive agrees that Executive will not use
or disclose any Proprietary Information of the Company for the Executives own purposes or
for the benefit of any entity engaged in Business Activities. As used herein, the term
Proprietary Information shall mean trade secrets or confidential proprietary information
of the Company which are material to the conduct of the business of the Company. No
information can be considered Proprietary Information unless the same is a unique process or
method material to the conduct of Companys Business, or is a customer list or similar list
of persons engaged in business activities with Company, or if the same is otherwise in the
public domain or is required to be disclosed by order of any court or by reason of any
statute, law, rule, regulation, ordinance or other governmental requirement. Executive
further agrees that in the event his employment is terminated for any reason all Documents
in his possession at the time of his termination shall be returned to the Company at the
Companys principal place of business. As used herein, the term Documents shall mean all
original written, recorded, or graphic matters whatsoever, and any and all copies thereof,
including, but not limited to: papers; books; records; tangible things; correspondence;
communications; telex messages; memoranda; work-papers; reports; affidavits; statements;
summaries; analyses; evaluations; client records and information; agreements; agendas;
advertisements; instructions; charges; manuals; brochures; publications; directories;
industry lists; schedules; price lists; client lists; statistical records; training manuals;
computer printouts; books of account, records and invoices reflecting business operations;
all things similar to any of the foregoing however denominated. In all cases where originals
are not available, the term Documents shall also mean identical copies of original
documents or non-identical copies thereof.
c. Companys Clients. The Companys Clients shall be deemed to be any
individuals, partnerships, corporations, professional associations or other business
organizations for whom the Company or its subsidiaries have performed Business Activities.
d. Restrictive Period. The Restrictive Period shall be deemed to commence on
the date of this Agreement, and end on the earliest to occur of the following:
(1) twelve (12) months after the termination of this Agreement under Section
6(b), Section 6(c), Section 6(e), or Section 6(f); or
(2) the date of the termination of this Agreement under Section 6(d); or
(3) the end of the Term (provided the Agreement wasnt earlier terminated under
one of the provisions of Section 6).
9
e. Competitive Business Activities. The term Business Activities as used
herein shall be deemed to mean the Business, as well as the business of expedited
transportation and third party logistics.
f. Restrictive Area. The term Restrictive Area shall be deemed to mean any
State in which the Company does business.
g. Covenants as Essential Elements of this Agreement. It is understood by and
between the parties hereto that the foregoing covenants contained in Section 7 are essential
elements of this Agreement, and that but for the agreement by the Executive to comply with
such covenants, the Company would not have agreed to enter into this Agreement. Such
covenants by the Executive shall be construed to be agreements independent of any other
provisions of this Agreement. The existence of any other claim or cause of action, whether
predicated on any other provision in this Agreement, or otherwise, as a result of the
relationship between the parties shall not constitute a defense to the enforcement of such
covenants against the Executive.
h. Survival After Termination of Agreement. Notwithstanding anything to the
contrary contained in this Agreement, the covenants in Section 7 shall survive the
termination of this Agreement and the Executives employment with the Company.
i. Revisions. The parties hereto acknowledge that (A) the restrictions
contained in Section 7 are fair and reasonable and are not the result of overreaching,
duress, or coercion of any kind, and (B) Executives full, uninhibited, and faithful
observance of each of the covenants contained in this Agreement will not cause Executive any
undue hardship, financial or otherwise. It is the intention of all parties to make the
covenants of Section 7 binding only to the extent that it may be lawfully done under
existing applicable laws. In the event that any part of any covenant of Section 7 is
determined by a court of law to be overly broad thereby making the covenant unenforceable,
the parties hereto agree, and it is their desire, that such court shall substitute a
reasonable, judicially enforceable limitation in place of the offensive part of the covenant
and as so modified the covenant shall be as fully enforceable as set forth herein by the
parties themselves in the modified form.
j. Remedies. The Executive acknowledges and agrees that the Companys remedy at
law for a breach or threatened breach of any of the provisions of Section 7 herein would be
inadequate and a breach thereof will cause irreparable harm to the Company. In recognition
of this fact, in the event of a breach by the Executive of any of the provisions of Section
7, the Executive agrees that, in addition to any remedy at law available to the Company,
including, but not limited to, monetary damages and all rights of the Executive to payment
or otherwise under this Agreement may be terminated, and the Company, without posting any
bond, shall be entitled to obtain, and the Executive agrees not to oppose the Companys
request for, equitable relief in the form of specific performance, temporary restraining
order, temporary or permanent injunction or any other equitable remedy which may then be
available to the Company.
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8. Indemnification. The Executive shall continue to be covered by the Certificate of
Incorporation and/or the Bylaws of the Company with respect to matters occurring on or prior to the
date of termination of the Executives employment with the Company, subject to all the provisions
of Delaware corporate law, Federal law and the Certificate of Incorporation and Bylaws of the
Company then in effect. Such reasonable expenses, including attorneys fees that may be covered by
the Certificate of Incorporation and/or Bylaws of the Company shall be paid by the Company on a
current basis in accordance with such provision, the Companys Certificate of Incorporation and
Delaware corporate law. To the extent that any such payments by the Company pursuant to the
Companys Certificate of Incorporation and/or Bylaws may be subject to repayment by the Executive
pursuant to the provisions of the Companys Certificate of Incorporation or Bylaws, or pursuant to
Delaware corporate law or Federal law, such repayment shall be due and payable by the Executive to
the Company within twelve (12) months after the termination of all proceedings, if any, which
relate to such repayment and to the Companys affairs for the period prior to the date of
termination of the Executives employment with the Company and as to which Executive has been
covered by such applicable provisions.
9. Withholding. Anything to the contrary notwithstanding, all payments required to be
made by the Company hereunder to the Executive or the Executives estate or beneficiaries shall be
subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as
the Company may reasonably determine it should withhold pursuant to any applicable law or
regulation. In lieu of withholding such amounts, the Company may accept other arrangements pursuant
to which it is satisfied that such tax and other payroll obligations will be satisfied in a manner
complying with applicable law or regulation.
10. Notices. Any notice required or permitted to be given under the terms of this
Agreement shall be sufficient if in writing and if sent postage prepaid by registered or certified
mail, return receipt requested; by overnight delivery; by courier; or by confirmed telecopy, in the
case of the Executive to the Executives last place of business or residence as shown on the
records of the Company, or in the case of the Company to its principal office as set forth in the
first paragraph of this Agreement, or at such other place as it may designate.
11. Waiver. Unless agreed in writing, the failure of either party, at any time, to
require performance by the other of any provisions hereunder shall not affect its right thereafter
to enforce the same, nor shall a waiver by either party of any breach of any provision hereof be
taken or held to be a waiver of any other preceding or succeeding breach of any term or provision
of this Agreement. No extension of time for the performance of any obligation or act shall be
deemed to be an extension of time for the performance of any other obligation or act hereunder.
12. Completeness and Modification. This Agreement constitutes the entire understanding
between the parties hereto superseding all prior and contemporaneous agreements or understandings
among the parties hereto concerning the employment of the Executive and the matters set forth
herein. This Agreement may be amended, modified, superseded or canceled, and any of the terms,
covenants, representations, warranties or conditions hereof may be waived, only by a written
instrument executed by the parties or, in the case of a waiver, by the party to be charged.
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13. Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute but one agreement.
14. Binding Effect/Assignment. This Agreement shall be binding upon the parties
hereto, their heirs, legal representatives, successors and assigns. This Agreement shall not be
assignable by the Executive but shall be assignable by the Company in connection with the sale,
transfer or other disposition of its business or to any of the Companys affiliates controlled by
or under common control with the Company.
15. Governing Law. This Agreement shall become valid when executed and accepted by
Company. The parties agree that it shall be deemed made and entered into in the State of Michigan
and shall be governed and construed under and in accordance with the laws of the State of Michigan.
Anything in this Agreement to the contrary notwithstanding, the Executive shall conduct the
Executives business in a lawful manner and faithfully comply with applicable laws or regulations
of the state, city or other political subdivision in which the Executive is located.
16. Further Assurances. All parties hereto shall execute and deliver such other
instruments and do such other acts as may be necessary to carry out the intent and purposes of this
Agreement.
17. Headings. The headings of the sections are for convenience only and shall not
control or affect the meaning or construction or limit the scope or intent of any of the provisions
of this Agreement.
18. Survival. Any termination of this Agreement shall not, however, affect the ongoing
provisions of this Agreement which shall survive such termination in accordance with their terms.
19. Severability. The invalidity or unenforceability, in whole or in part, of any
covenant, promise or undertaking, or any section, subsection, paragraph, sentence, clause, phrase
or word or of any provision of this Agreement shall not affect the validity or enforceability of
the remaining portions thereof.
20. Enforcement. Should it become necessary for any party to institute legal action to
enforce the terms and conditions of this Agreement, the successful party will be awarded reasonable
attorneys fees at all trial and appellate levels, expenses and costs.
21. Venue. Company and Employee acknowledge and agree that Berrien County, Michigan,
shall be the venue and exclusive proper forum in which to adjudicate any case or controversy
arising either, directly or indirectly, under or in connection with this Agreement and the parties
further agree that, in the event of litigation arising out of or in connection with this Agreement
in these courts, they will not contest or challenge the jurisdiction or venue of these courts.
12
22. Construction. This Agreement shall be construed within the fair meaning of each of
its terms and not against the party drafting the document.
23. Parent Company. Notwithstanding anything herein to the contrary, for purposes of
Sections 5, 6, 7, and 8 of this Agreement the term Company shall be deemed to mean Parent and its
subsidiaries.
THE EXECUTIVE ACKNOWLEDGES THAT HE HAS READ THIS ENTIRE AGREEMENT, HAS HAD THE OPPORTUNITY TO
DISCUSS THIS WITH HIS COUNSEL AND FURTHER ACKNOWLEDGES THAT HE UNDERSTANDS THE RESTRICTIONS, TERMS
AND CONDITIONS IMPOSED UPON THE EXECUTIVE BY THIS AGREEMENT AND UNDERSTANDS THAT THESE
RESTRICTIONS, TERMS AND CONDITIONS MAY BE BINDING UPON THE EXECUTIVE DURING AND AFTER TERMINATION
OF THE EMPLOYMENT OF THE EXECUTIVE.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of date set forth below.
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Concert Group Logistics, Inc.
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Signature: |
/s/ Daniel Para |
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Printed Name: |
Daniel Para |
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Title: |
Chief Executive Officer |
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For purposes of Section 23 hereof:
Express-1 Expedited Solutions, Inc.
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Signature: |
/s/
Michael Welch |
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Printed Name: |
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Michael Welch |
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Title: |
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Chief Executive Officer |
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exv31w1
EXHIBIT 31.1
I, Michael R. Welch, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Express-1 Expedited Solutions, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included
in this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the registrants internal control over
financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the audit
committee of the registrants board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrants internal control over financial reporting.
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/s/ Michael R. Welch
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Chief Executive Officer |
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Date: August 13, 2010
exv31w2
EXHIBIT 31.2
I, John D. Welch, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Express-1 Expedited Solutions, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included
in this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the registrants internal control over
financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the audit
committee of the registrants board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrants internal control over financial reporting.
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/s/ John D. Welch
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Interim Chief Financial Officer |
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Date: August 13, 2010
exv32w1
EXHIBIT 32.1
WRITTEN STATEMENT OF THE CHIEF EXECUTIVE OFFICER
Pursuant to 18 U.S.C. Section 1350
As adopted pursuant to section 906 of the Sarbanes-Oxley act of 2002
Solely for the purposes of complying with 18 U.S.C. s.1350 as adopted pursuant to section 906
of the Sarbanes-Oxley act of 2002, I, the undersigned Chief Executive Officer of Express-1
Expedited Solutions, Inc. (the Company), hereby certify, based on my knowledge, that the
Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2010, (the Report)
fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and
that information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
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By: |
/s/ Michael R. Welch
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Chief Executive Officer |
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Date: August 13, 2010
exv32w2
EXHIBIT 32.2
WRITTEN STATEMENT OF THE CHIEF FINANCIAL OFFICER
Pursuant to 18 U.S.C. Section 1350
As adopted pursuant to section 906 of the Sarbanes-Oxley act of 2002
Solely for the purposes of complying with 18 U.S.C. s.1350 as adopted pursuant to section 906
of the Sarbanes-Oxley act of 2002, I, the undersigned Chief Financial Officer of Express-1
Expedited Solutions, Inc. (the Company), hereby certify, based on my knowledge, that the
Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2010, (the Report)
fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and
that information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
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By: |
/s/ John D. Welch
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Interim Chief Financial Officer |
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Date: August 13, 2010