Exhibit 99.1
Express-1 Expedited Solutions, Inc.
Unaudited Pro Forma Condensed
Consolidated Financial Information
Unaudited Pro Forma Condensed
Consolidated Financial Information
Basis of Presentation
The accompanying unaudited pro forma condensed balance sheet as of December 31, 2007 gives effect to the acquisition of substantially all assets of Concert Group Logistics, LLC by Express-1 Expedited Solutions, Inc. (the “Company”) as if the acquisition occurred on that date. The accompanying unaudited pro forma condensed statements of operations for the years ended December 31, 2007 and 2006, give effect to the acquisition as if it occurred on the first day of each period presented.
Pro forma adjustments have been limited to only those adjustments that are: directly attributable to the transaction, factually supportable, and in the case of pro forma income statement adjustments, expected to have a continuing impact on the Company’s financial results.
The unaudited pro forma condensed financial information is provided for information purposes only and is not necessarily indicative of the results that would have occurred if the acquisition had occurred on the first day of each period presented. The unaudited pro forma financial statements should not be construed as being representative of future operating results or financial position of the Company and should be read in conjunction with the:
o Accompanying Notes to the Unaudited Pro Forma Condensed Financial Statements;
o The Company’s historical audited consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2007, as filed with the Securities and Exchange Commission on March 27, 2008;
o Concert Group Logistics, LLC historical audited financial statements and notes for the fiscal year ended December 31, 2007 and 2006 (included as Item 9.01 (a) within the 8-K filed with the Securities and Exchange Commission on behalf of Express-1 Expedited Solutions, Inc. on January 31, 2008); and
o Form 8-K filed with the Securities and Exchange Commission by the Company on January 31, 2008 and the exhibits attached thereto.
Express-1 Expedited Solutions, Inc.
Unaudited Pro Forma Consolidated Balance Sheet
Unaudited Pro Forma Consolidated Balance Sheet
Pro Forma | ||||||||||||||||||||
Consolidated | ||||||||||||||||||||
Express-1 Expedited | Concert Group | Express-1 Expedited | ||||||||||||||||||
Solutions, Inc. | Logistics, LLC | Pro Forma | Solutions, Inc. | |||||||||||||||||
As of | As of | Transaction | As of | |||||||||||||||||
December 31, 2007 | December 31, 2007 | Adjustments | Note | December 31, 2007 | ||||||||||||||||
Assets | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 800,000 | $ | 258,000 | $ | — | $ | 1,058,000 | ||||||||||||
Accounts receivable, net of allowances for doubtful accounts (Note A) | 5,663,000 | 6,294,000 | — | 11,957,000 | ||||||||||||||||
Prepaid expenses | 492,000 | 91,000 | — | 583,000 | ||||||||||||||||
Other current assets | 149,000 | 750,000 | (502,000 | ) | E | 397,000 | ||||||||||||||
Deferred tax asset, current | 1,549,000 | — | — | 1,549,000 | ||||||||||||||||
Total current assets | 8,653,000 | 7,393,000 | (502,000 | ) | 15,544,000 | |||||||||||||||
Property and equipment, net of accumulated depreciation (Note B) | 2,312,000 | 458,000 | (14,000 | ) | F | 2,756,000 | ||||||||||||||
Goodwill | 7,737,000 | — | 8,875,000 | G | 16,612,000 | |||||||||||||||
Identified intangible assets, net of accumulated amortization (Note C) | 3,950,000 | — | 3,000,000 | H | 6,950,000 | |||||||||||||||
Loans and advances | 104,000 | 263,000 | — | 367,000 | ||||||||||||||||
Deferred tax asset, long term | 377,000 | — | — | 377,000 | ||||||||||||||||
Other long term assets | 591,000 | 416,000 | — | 1,007,000 | ||||||||||||||||
$ | 23,724,000 | $ | 8,530,000 | $ | 11,359,000 | $ | 43,613,000 | |||||||||||||
Liabilities and Stockholders’ Equity | ||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||
Accounts payable | $ | 892,000 | $ | 5,450,000 | $ | — | $ | 6,342,000 | ||||||||||||
Accrued salaries and wages | 660,000 | — | — | 660,000 | ||||||||||||||||
Accrued acquisition earnouts | 2,210,000 | — | — | 2,210,000 | ||||||||||||||||
Accrued expenses, other | 861,000 | 133,000 | — | 994,000 | ||||||||||||||||
Current maturities of long term debt | 50,000 | 2,356,000 | (1,156,000 | ) | I | 1,250,000 | ||||||||||||||
Other current liabilities | 199,000 | 446,000 | — | 645,000 | ||||||||||||||||
Total current liabilities | 4,872,000 | 8,385,000 | (1,156,000 | ) | 12,101,000 | |||||||||||||||
Line of credit | — | — | — | — | ||||||||||||||||
Notes payable and capital leases, net of current maturities | 34,000 | 60,000 | 7,740,000 | J | 7,834,000 | |||||||||||||||
Other long-term liabilities | 616,000 | 12,000 | — | 628,000 | ||||||||||||||||
Total long-term liabilities | 650,000 | 72,000 | 7,740,000 | 8,462,000 | ||||||||||||||||
Stockholders’ equity: | ||||||||||||||||||||
Preferred stock, (Note D) | — | — | — | — | ||||||||||||||||
Common stock (Note D) | 27,000 | — | 5,000 | K | 32,000 | |||||||||||||||
Additional paid-in capital | 21,152,000 | — | 4,843,000 | K | 25,995,000 | |||||||||||||||
Accumulated deficit | (2,870,000 | ) | 73,000 | (73,000 | ) | L | (2,870,000 | ) | ||||||||||||
Treasury stock, at cost (Note D) | (107,000 | ) | — | — | (107,000 | ) | ||||||||||||||
Total stockholders’ equity | 18,202,000 | 73,000 | 4,775,000 | 23,050,000 | ||||||||||||||||
$ | 23,724,000 | $ | 8,530,000 | $ | 11,359,000 | $ | 43,613,000 | |||||||||||||
Express-1 Expedited Solutions, Inc.
Unaudited Pro Forma Consolidated Statements of Operations
Unaudited Pro Forma Consolidated Statements of Operations
For the year ended December 31, 2007 | ||||||||||||||||||||
Pro Forma | ||||||||||||||||||||
Pro Forma | Consolidated | |||||||||||||||||||
Express-1 Expedited | Concert Group | Transaction | Express-1 Expedited | |||||||||||||||||
Solutions, Inc. | Logistics, LLC | Adjustments | Notes | Solutions, Inc. | ||||||||||||||||
Revenues | ||||||||||||||||||||
Operating revenue | $ | 52,789,000 | $ | 47,215,000 | $ | (19,000 | ) | M | $ | 99,985,000 | ||||||||||
Expenses | ||||||||||||||||||||
Direct expenses | 39,911,000 | 42,743,000 | (19,000 | ) | M | 82,635,000 | ||||||||||||||
Gross margin | 12,878,000 | 4,472,000 | — | 17,350,000 | ||||||||||||||||
Sales, general and administrative expense | 9,342,000 | 3,945,000 | (959,000 | ) | N | 12,328,000 | ||||||||||||||
Other expense | — | 43,000 | — | 43,000 | ||||||||||||||||
Interest expense | 65,000 | 162,000 | 138,000 | O | 365,000 | |||||||||||||||
Income before income tax provision | 3,471,000 | 322,000 | 821,000 | 4,614,000 | ||||||||||||||||
Income tax provision | 1,300,000 | — | 320,000 | P | 1,620,000 | |||||||||||||||
Net income | $ | 2,171,000 | $ | 322,000 | $ | 821,000 | $ | 2,994,000 | ||||||||||||
Earnings per common share | ||||||||||||||||||||
Basic income per common share | 0.08 | 0.10 | ||||||||||||||||||
Diluted income per common share | 0.08 | 0.09 | ||||||||||||||||||
Weighted average common shares outstanding | ||||||||||||||||||||
Basic weighted average common shares outstanding | 26,690,382 | 4,800,000 | K | 31,490,382 | ||||||||||||||||
Diluted weighted average common shares outstanding | 27,326,729 | 4,800,000 | K | 32,126,729 |
Express-1 Expedited Solutions, Inc.
Unaudited Pro Forma Consolidated Statements of Operations
Unaudited Pro Forma Consolidated Statements of Operations
For the year ended December 31, 2006 | ||||||||||||||||||||
Pro Forma | ||||||||||||||||||||
Pro Forma | Consolidated | |||||||||||||||||||
Express-1 Expedited | Concert Group | Transaction | Express-1 Expedited | |||||||||||||||||
Solutions, Inc. | Logistics, LLC | Adjustments | Notes | Solutions, Inc. | ||||||||||||||||
Revenues | ||||||||||||||||||||
Operating revenue | $ | 42,191,000 | $ | 36,644,000 | $ | (37,000 | ) | N | $ | 78,798,000 | ||||||||||
Expenses | ||||||||||||||||||||
Direct expenses | 31,396,000 | 32,928,000 | (37,000 | ) | N | 64,287,000 | ||||||||||||||
Gross margin | 10,795,000 | 3,716,000 | — | 14,511,000 | ||||||||||||||||
Sales, general and administrative expense | 7,608,000 | 3,271,000 | (810,000 | ) | O | 10,069,000 | ||||||||||||||
Other expense | 206,000 | 17,000 | — | 223,000 | ||||||||||||||||
Interest expense | 205,000 | 121,000 | 179,000 | P | 505,000 | |||||||||||||||
Income before income tax provision | 2,776,000 | 307,000 | 631,000 | 3,714,000 | ||||||||||||||||
Income tax benefit | (1,128,000 | ) | — | — | (1,128,000 | ) | ||||||||||||||
Net income | $ | 3,904,000 | $ | 307,000 | $ | 631,000 | $ | 4,842,000 | ||||||||||||
Earnings per common share | ||||||||||||||||||||
Basic income per common share | 0.15 | 0.16 | ||||||||||||||||||
Diluted income per common share | 0.15 | 0.15 | ||||||||||||||||||
Weighted average common shares outstanding | ||||||||||||||||||||
Basic weighted average common shares outstanding | 26,297,120 | 4,800,000 | K | 31,097,120 | ||||||||||||||||
Diluted weighted average common shares outstanding | 26,641,012 | 4,800,000 | K | 31,441,012 |
Express-1 Expedited Solutions, Inc.
Notes to the Unaudited Pro Forma Financial Statements
Notes to the Unaudited Pro Forma Financial Statements
A. | Accounts receivable, net of allowances for doubtful accounts as of December 31, 2007 of $77,000 and $71,000 for Express-1 Expedited Solutions, Inc. and Concert Group Logistics, LLC, respectively. | |
B. | Property and equipment, net of accumulated depreciation of December 31, 2007 of $1,734,000 and $546,000 for Express-1 Expedited Solutions, Inc. and Concert Group Logistics, LLC, respectively. | |
C. | Identified intangible assets, net of accumulated amortization as of December 31, 2007 of $1,279,000 for the Company. | |
D. | Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding as of December 31, 2007 for the Company; | |
Common stock, $.001 par value; 100,000,000 shares authorized; 27,008,768 shares issued and 26,828,768 shares outstanding as of December 31, 2007 for the Company; | ||
Treasury stock, at cost, 180,000 shares held as of December 31, 2007 for the Company. | ||
E. | Notes receivable of $502,000 due from the Concert Group ownership members to Concert Group Logistics, LLC were excluded from the transaction. | |
F. | Property and equipment with a net book value of $14,000 was excluded from the transaction. | |
G. | Goodwill of $8,875,000 was created in the transaction. The Company is currently in the process of completing an independent valuation of the assets acquired from the transaction and anticipates completion of that valuation within the second quarter of 2008. Based upon the results of that independent valuation, the Company anticipates that the amount of goodwill and intangibles created from the transaction as reported within the Company’s financial statements on a prospective basis could differ from the amounts recorded within these pro forma financial statements. | |
H. | Intangibles created within the transaction include: employment contracts with embedded non-compete provisions, Concert Group Logistics trade name, and the value of the Concert Group Logistics independent station network. Based upon the valuation mentioned in footnote H, the Company anticipates that the value placed upon these intangibles could change. |
Estimated | ||||||||
Intangible | Value | Life | ||||||
Employment contracts | $ | 500,000 | 4 years | |||||
CGL Station Network | $ | 1,500,000 | 15 Years | |||||
CGL Trade Name | $ | 1,000,000 | 20 Years |
I. | The amount reflected represents the net amount after reduction for the Concert Group Logistics, LLC debt and increase for the $1.2 million current portion of the $3.6 million term debt used by the Company to finance the transaction. | |
J. | The Company borrowed $9.0 million to finance the Concert Group Logistics, LLC transaction. This consisted of a $3.6 million term note, $1.2 million of which was classified as current, and $5.4 million on a receivables based line of credit. The $60,000 of long term notes on the Concert Group Logistics, LLC balance sheet were satisfied by the sellers with proceeds from the transaction. |
K. | The Company issued 4.8 million of common stock with a par value of $0.001 per share and a market value of $1.01 on the date of closing. | |
L. | Elimination of the Concert Group Logistics, LLC accumulated deficit in this asset purchase transaction. | |
M. | Express-1 Expedited Solutions, Inc. performed approximately $19,000 and $37,000 of services for Concert Group Logistics, LLC during 2007 and 2006, respectively. These amounts have been eliminated from the revenue and expenses for the purposes of consolidation. | |
N. | Elimination of excess seller’s compensation and non-recurring expenses attributable to employees and costs not transferred to the Company in the transaction. These amounts resulted from the completion of the transaction, were factually supportable and were determined to have an on-going impact on the operations of the Company, in the opinion of management. Also included within this line item was $275,000 of amortization of intangibles in each of the years presented. | |
O. | Interest expense on both the term portion and revolving portions of long-term debt from the acquisition. | |
P. | Income tax provision for 2007 at an approximate rate of 39% of pre-tax earnings. During 2006, the Company did not record a current tax provision, due to the existence of a large deferred tax valuation allowance. |