Greetings All, I compiled my DD into the report below. Feel free to share and lets make some big money!!
The Case for IFCR: Pure and Simple, this company is on the verge of completing a successful turnaround and the market correction will be surprisingly drastic.
Who is IFCR: Integrated Freight Corporation is a niche market freighter with over 43 years in business, 368 trailers, 105 power units and 313 employees. The parent company is made up of the niche motor carrier subsidiaries Morris Transportation, American Transportation Logistics, SC Trucking and Smith Systems. The company focuses on niche markets as there is a growing demand for niche carriers and because niche carriers are able to demand a higher price for their services. The Management team is composed of industry veterans with over 100 years of combined experience in the field.
The Long and Short: IFCR's fiscal turnaround is nearing completion. In 2012 the company was in debt $19.6M and operated with a net income of ($5.4M) and EBITDA of (638k). Despite a revenue of $20.7M the company was in dire straits and thus brought in turnaround specialist David Fuselier and Vice President of the American Trucking Associations Henry Hoffman as CEO and President/COO, respectively. Along with the other members of the board and the management, IFCR has eliminated all but roughly $6M of debt. After acquiring SC Trucking in February of this year, IFCR's run rate revenues are expected to exceed $25M and they will be EBITDA positive by $2M. Putting this in perspective the COO, Hank Hoffman, was quoted in a PR as saying, "When we began the company turnaround in early fiscal 2013, IFCR was deeply in debt and had never generated a profit in its entire operating history." CEO David Fuselier added, " It is important to note that our first profit was reported in FYE 2013 with IFCR reporting continued financial improvement. Our subsidiaries are growing and have acquired new fleet models of tractors and trailers that increase our overall efficiencies. We have no events of defaults and limited normal course litigation at the subsidiary level. In short, we believe the market has not rewarded the patience of our long-term investors, or our operating efforts, due to the effect of recent convertible debt. It will not always be this way." With a closing stock price of $0.15 cents on September 15, 2011, there is reason to believe that this now profitable company is due and the upside will be significant.
The Red Numbers: According to a previous press release, IFCR's debt was approximately $10M, of which $8.7M was judgment creditor claims. 57% of the debt was held by a single individual while 23% of the $8.7M was held by a fund, and IFCR management legacy note holders. The rest of the debt was split into current litigation that is in various forms of settlement and considered working litigation and fees or accounts payable. In addition to this debt, the company was recently made aware of a judgement claim against them in excess of $8M, however in their recent press release the company stated that they expect the litigation to be settled in terms between $75k and $200k. According to the most recent press release from IFCR, the parent company has "negotiated, in terms, the settlement or conversion of approximately $4,000,000 of its outstanding debt; much of the debt is related to legacy judgment creditors as noted in the Company's previous press releases." All in all, the company has made large strides towards the complete elimination of their debt and there is reason to believe that the debt will be eliminated in its entirety by the end of this financial year.
The Black Numbers: As stated previously, the current expected revenues for the company are to exceed $24M and the EBITDA is to be positive. As far as penny stocks go, revenues of this caliber are far and few between. Additionally, this the only penny stock on the market that has revenue in the millions and a positive EBITDA while trading at par value. Something has to give. The main reason why the stock price has been kept at a PE of 0.1 for this long when the industry average is 17x, is because the audits have yet to be filed. This is because IFCR had to switch to a new auditing company. They have since done so and audits are expected to be released imminently. The only problem with the revenues is that one of the companies, Smith Systems is looking to split from the parent company, dropping revenues into the $16M range. This has not been settled and IFCR is currently pursuing litigation so as to either keep Smith Systems or to be reimbursed by the company for leaving. Therefore, the upcoming audits were delayed so as to account for the possibility of Smith Systems leaving. While litigation is ongoing, it would appear (imo) that Smith Systems will stay with the company rather than pay a potentially hefty price for leaving. Overall, $16M is still incredible revenue for a penny stock and the company has stated that they intend to acquire two more niche motor carriers, both with revenues between $5M and $15M so as to further increase their balance sheet, potentially more than doubling it.
Upcoming Acquisitions and Niche Strategy: Looking at the overall economy, with oil prices currently depressed, operating costs for trucking and transport companies are inherently down. However, according to a PR from IFCR in November, "Overall freight has been down because of continued weakness in the domestic economy." But, according to CEO David Fuselier, "This weaker-than-expected demand has actually benefited Integrated Freight substantially. Our three niche carriers typically transport very little retail merchandise and as a result, we have experienced only a marginal drop in total freight demand. However, other motor carriers have been unable to fully utilize their drivers and are reporting continued driver retention problems. Integrated, on the other hand, has experienced solid driver recruiting and retention." The trucking industry is notorious for low retention rates and the American Trucking Associations has forcasted a worse than expected truck driver shortage in the US over the next several years. However, due to IFCRs driver recruiting and development, their retention is remarkably higher than the industry average and their above-industry numbers prove that their strategy is working. In regards to their pending acquisitions, it appears that IFCR has been doing their due diligence in regards to their potential buyouts. In March of this year, Integrated withdrew their offer to acquire a Newark based trucking company with $5M in revenues. According to President Hoffman, the practices and procedure at the target company were inconsistent with our core beliefs regarding public safety within our industry. Making the necessary changes would be expensive, time-consuming, and would create an exposure that management believes is inconsistent with the best interests of Integrated Freight and our shareholders." This rejection proves that IFCR is not simply looking to inflate their balance sheet, instead they acquire only the companies that have been successful in their respective niche market and will add value to the company and its shareholders.
Share Structure: On July 22, IFCR approved a share increase from 5B to 10B shares. This was absolutely necessary as they had issued 4.8B shares and had 566M shares reserved for issue under outstanding convertible debt, leaving a negative balance of 397M shares. By increasing the amount of shares authorized, IFCR was able to pay off their convertible debt. Additionally on June 1, IFCR approved a R/S of 1000-1. This split will be used to up the price of the stock considerably...(sorry had to get one joke in here). While the timing of the r/s is yet to be determined, the CEO has been in communication with the stockholders and stated that he has no wish to r/s unless necessary and it appears the objective is to wait till the market responds to the improved financials and forthcoming audits so that the R/S occurs at or above true market value, which will allow for an uplist.
LAST CALL: In addition to the upcoming audits, IFCR has discussed a pending announcement of their new CFO. Who this will be is unknown but if the new hire is anything like the rest of the board, they will have decades of experience in business and in the trucking industry. As a current shareholder, I have been waiting for the market correction to occur and have been patient with this company as my due diligence and correspondence with management allow me to know what I have. I just have to sit back and watch the fireworks. Yet, patience can be trying and for those of you out there who feel this more than me, I would like to refer you to the fact that today is Columbus Day. Columbus founded this new world but did so through adversity. He even had to suppress a potential mutiny on his own ship as the sailors lacked faith and so on Oct 10th he bargained with them to push on for three more days and on Oct 12th they found land. We gain nothing from turning the ship around now, let us keep the faith, press on and reap our rewards!
AI
