Exclusive Interview With The CEO And Director: Janel World Trade Ltd. (JLWT.OB) - James Jannello
67 WALL STREET, New York - March 3, 2011 - The Wall Street Transcript has just published its Transportation & Logistics Report offering a timely review of the sector to serious investors and industry executives. This Special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: Shift to Intermodal and Air Freight - Regulatory Issues in the Trucking Industry - Improved Margins Among Freight Carriers - Technology Adoption and Infrastructure Investments
Companies include: IESI-BFC (BIN); ASUR (ASR); Air Transport Services Group (ATSG); Amazon.com (AMZN); Arkansas Best (ABFS); and many more.
In the following brief excerpt from the Transportation And Logistics Special Report, interviewees discuss the outlook for the sector and for investors.
James Jannello founded Janel International Forwarding Co., Inc. (later renamed The Janel Group), the predecessor to Janel World Trade Ltd., in 1974, and he has been the Chief Executive Officer and a Director of Janel World Trade Ltd. since June 2002. He has successfully guided the company through recent economic cycles, has delivered strong revenue growth, and has increased Janel's market presence through a network of company-owned locations in the U.S. and independent international agents in more than 52 countries worldwide. Mr. Jannello is a Licensed Customs Broker and has more than 40 years experience in the industry.
TWST: Please start with an overview of Janel World Trade and explain what a third-party logistics provider does.
Mr. Jannello: I started Janel in 1975 in New York as a customs and logistics broker. I saw that there was a need to provide quality import customs brokerage and related transportation services in what was an emerging market at the time. The startup of the business did not require me to make a huge investment in any transportation assets, like trucks or airplanes. Rather, the business we are in is non-asset based and we are a third-party logistics provider. We basically serve as an outsourced logistics department for our clients. We take care of all the moving parts necessary with any shipment around the world, from customs brokerage to shipment tracking and homeland security mandates. We utilized the services of direct, asset-based carriers and other transportation providers to handle the movement of our customers' shipments. We have been around a long time and we're ranked in the top 2%, by the way, of all logistics companies when it comes to customs brokerage services.
TWST: What factors do you weigh when selecting the best transportation solutions for your customers?
Mr. Jannello: There are basically two factors we consider when customizing a transportation solution for our customers, cost and reliability. Many vendors out there may offer a very attractive cost but without the reliability. So the true cost can be too high. Our customers use us because we have been out there for more than 35 years and know that we know which transportation provider to use, who will get the shipment there on time as promised and who will be able to meet our service standards for order tracking from where the shipment begins until the final delivery point or, in other words, from the factory to the door.
TWST: What are your advantages over asset carriers?
Mr. Jannello: The definition of an asset carrier is a logistics company that actually has a large fixed investment in transportation assets, and they use all of their assets in the movement of freight for the customer from the factory to the door. We, however, as a third-party carrier, don't make that big investment in airplanes, trucks and shipping fleets. With that investment, those asset carriers are boxed in with a fixed-cost infrastructure and must have all of their assets, and understandably so, in use in order to pay for the large investment they made.
As a non-asset-based logistics provider, our transportation cost is variable and we are able to purchase transportation services from multiple providers. So we wind up with a variable versus fixed cost. As an example, we are able to negotiate favorable pricing as we call upon multiple transportation providers when it comes to the movement of freight. There are times that a better price can be obtained from another carrier, as they may be very competitive with their pricing in order to utilize the assets they own. In others words, we can shop around for the best price and we're not restricted to using our own assets. We have no exclusive arrangements with any of the carriers we use. Our non-asset-based model provides us with a variable cost structure and allows for a high level of operating flexibility.
TWST: Who are your primary customers and what industries are they in?
Mr. Jannello: We have large well-known customers that everyone in your investor readership is familiar with, down to much smaller companies that are very regional. We have more than 1,700 accounts, which represent a very diverse cross section of industries, so we diversify our business risk. We aren't significantly impacted if a market structure or industry is going through a rough patch and business slows down. We're very conscious of maintaining that diversification.
TWST: Last year, you acquired the assets of Ferrara International Logistics. What was the rationale for the acquisition?
Mr. Jannello: We acquired the assets of Ferrara International Logistics on October 4, 2010, at the beginning of our new fiscal year; we are on a September 30 fiscal year. We expect approximately $7 million in annual revenue from this addition with some of the revenue coming in with very high gross profit margins of up to 35%. We're very proud of Janel and building the company to the point where we had revenues of more than $88 million in 2010. Now our focus has been expanded to include continued revenue growth and an increase in our bottom line. The Ferrara asset acquisition is a concrete step to enhancing our overall profitability and will contribute to good year-to-year net income growth. I'm not forecasting here, but that is our focus and we think we can break $100 million in revenue in 2011.
TWST: Are you open to more acquisitions in the future?
Mr. Jannello: Absolutely. Whenever we can discover a smaller logistics broker that has healthy gross profit margins and offers a good fit with their personnel and Janel's personnel, we will be interested in exploring other acquisitions. Obviously, there are many factors that come into play beyond just the cost, but if we can boost our bottom line and it is accretive to earnings, we are interested in talking. We have the best balance sheet we have had in years with cash on hand currently at $1.2 million, and $1.2 million available from our bank line of credit. With that financial flexibility, we have the capital to grow organically and through smart acquisitions, but we're not going to make any acquisition just for the sake of building our top line. It has to make sense to our net income.
