THREE MONTHS ENDED MARCH 31, 2009 VS. THREE MONTHS ENDED MARCH 31, 2008
Reported 10Q May 7, 2009
For the quarter ended March 31, 2009, logistics and brokerage services revenue, before fuel surcharges, increased 6.6% to $8.6 million as compared to $8.1 million for the quarter ended March 31, 2008. The increase was primarily the result of an increase in the number of loads brokered during the first quarter of 2009 as compared to the first quarter of 2008.
Rent and purchased transportation increased from 88.6% of revenues, before fuel surcharges, during the first quarter of 2008 to 89.1% of revenues, before fuel surcharges during the first quarter of 2009. The increase relates to an increase in amounts charged by third party logistics and brokerage service providers.
The logistics and brokerage services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, decreased from 96.6% for the first quarter 2008 to 96.3% for the first quarter of 2009.
RESULTS OF OPERATIONS - COMBINED SERVICES
THREE MONTHS ENDED MARCH 31, 2009 VS. THREE MONTHS ENDED MARCH 31, 2008
Net loss for all divisions was approximately $3.3 million, or 5.6% of revenues, before fuel surcharge for the first quarter of 2009 as compared to net loss of $2.8 million or 3.3% of revenues, before fuel surcharge for the first quarter of 2008. The increase in loss resulted in an increase in diluted loss per share from $0.29 for the first quarter of 2008 to a diluted loss per share of $0.36 for the first quarter of 2009.
LIQUIDITY AND CAPITAL RESOURCES
The growth of our business has required, and will continue to require, a significant investment in new revenue equipment. Our primary sources of liquidity have been funds provided by operations, proceeds from the sales of revenue equipment, issuances of equity securities, borrowings under our line of credit, installment note agreements, and borrowings under our investment margin account.
During the first three months of 2009, we generated $6.0 million in cash from operating activities. Investing activities used $3.4 million in cash in the first three months of 2009. Financing activities used $3.0 million in cash in the first three months of 2009.
Our primary use of funds is for the purchase of revenue equipment. We typically use installment notes, our existing line of credit on an interim basis, proceeds from the sale or trade of equipment, and cash flows from operations, to finance capital expenditures and repay long-term debt.
Occasionally we finance the acquisition of revenue equipment through installment notes with fixed interest rates and terms ranging from 12 to 48 months. During the first three months of 2009, the Company's subsidiaries entered into installment obligations totaling approximately $6.7 million for the purpose of purchasing revenue equipment. These obligations are payable in 36 monthly installments at an interest rate of 5.45%.
During the remainder of 2009, we do not expect to purchase any new trucks or new trailers but will continue to sell or trade older equipment, which we expect will result in additional cash flow proceeds of approximately $5.0 million. Management believes we will be able to finance our near term needs for working capital over the next twelve months, as well as any planned capital expenditures during such period, with cash balances, cash flows from operations, and borrowings believed to be available from financing sources. We will continue to have significant capital requirements over the long-term, which may require us to incur debt or seek additional equity capital. The availability of additional capital will depend upon prevailing market conditions, the market price of our common stock and several other factors over which we have limited control, as well as our financial condition and results of operations. Nevertheless, based on our recent operating results, current cash position, anticipated future cash flows, and sources of financing that we expect will be available to us, we do not expect that we will experience any significant liquidity constraints in the foreseeable future.
During the first three months of 2009 we maintained a $30.0 million revolving line of credit. Amounts outstanding under the line of credit bear interest at LIBOR (determined as of the first day of each month) plus 1.25% (1.75% at March 31, 2009), are secured by our accounts receivable and mature on May 31, 2009; however, the Company has the intent and ability to extend the terms of this line of credit for an additional one year period until May 31, 2010. At March 31, 2009 outstanding advances on the line of credit were approximately $7.1 million, including $1.2 million in letters of credit, with availability to borrow $22.9 million.
Trade accounts receivable at March 31, 2009 decreased approximately $3.9 million as compared to December 31, 2008. The decrease relates to a general decrease in revenue, which flows through the accounts receivable account, during the first quarter of 2009 as compared to the revenues generated during the last quarter of 2008.
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Prepaid expenses and deposits at March 31, 2009 increased approximately $2.5 million as compared to December 31, 2008. The primary reason for the increase relates to prepayment of tractor and trailer license fees. During the first quarter of 2009, approximately $2.7 million of the 2009 license fees were paid in advance. These prepaid license fees are amortized to expense throughout the year.
Marketable equity securities at March 31, 2009 decreased approximately $2.0 million as compared to December 31, 2008. The decrease was primarily attributable to changes in the market value of the investments, net of other-than-temporary write-downs of approximately $1.0 million. These securities have a combined cost basis of approximately $10.6 million and a combined fair market value of approximately $10.5 million. The Company has developed a strategy to invest in securities from which it expects to receive dividends that qualify for favorable tax treatment, as well as appreciate in value. During the first three months of 2009, the Company had net unrealized pre-tax losses of approximately $980,000 and received dividends of approximately $105,000. The holding term of these securities depends largely on the general economic environment, the equity markets, borrowing rates and the Company's cash requirements.
Revenue equipment, which generally consists of trucks, trailers, and revenue equipment accessories such as Qualcomm� satellite tracking units, decreased approximately $7.3 million as compared to December 31, 2008. This decrease relates primarily to the completion of the process of turning in older trade tractors during the first quarter of 2009 for new tractors purchased in the December 2008. During the first quarter of 2009, the cost basis of revenue equipment either traded or sold was approximately $10.3 million. Partially offsetting the decrease related to trades or sales were first quarter 2009 purchases of auxiliary power units and the final group of replacement trailers related to the 2008 capital expenditures plan.
Accounts payable at March 31, 2009 decreased approximately $6.4 million as compared to December 31, 2008. The decrease was primarily related to $4.4 million of asset purchase accruals for assets purchased in December 2008 for which payment was not due until January 2009. The decrease also reflects a decrease of approximately $2.3 million in amounts reclassified to accounts payable as bank drafts outstanding at March 31, 2009 as compared to December 31, 2008.
Accrued expenses and other liabilities at March 31, 2009 decreased approximately $4.9 million as compared to December 31, 2008. The decrease is primarily related to the change in borrowings outstanding under the Company's margin account, which are secured by the Company's investments in marketable equity securities. During the first quarter of 2009 the Company repaid approximately $6.9 million of margin account borrowings which represented the entire December 31, 2008 ending balance. Partially offsetting the decrease was an increase in amounts accrued at March 31, 2009 for employee wages and benefits which can vary significantly throughout the year depending on many factors, including the timing of the actual date employees are paid in relation to the last day of the reporting period.
Long-term debt at March 31, 2009 increased approximately $5.3 million as compared to December 31, 2008. The increase is primarily related to the non-current portion of installment note borrowings of approximately $6.7 million during the first three months of 2009. Contributing to the increase was an increase of approximately $2.2 million in amounts payable on the Company's lines of credit as of March 31, 2009 when compared to amounts payable as of December 31, 2008.
