d77575_10q.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 193 For the quarterly period ended: JUNE 30, 2009 |
| o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 For the transition period from __________to __________ |
Commission File Number: 001-11497
| AUTOINFO, INC. |
| (Exact name of Registrant as specified in its charter) |
| DELAWARE |
|
13-2867481 |
| (State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification number) |
| 6413 Congress Ave., Suite 260, Boca Raton, FL 33487 |
| (Address of principal executive office) |
| (561)988-9456 |
| (Registrant's 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 x 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).
YES o NO o
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 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
NON-ACCELERATED FILER o |
|
ACCELERATED FILER o
SMALLER REPORTING COMPANY x |
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES o NO x
The number of shares outstanding of the Registrant’s common stock as of August 11, 2009: 32,946,060 shares of common stock.
AUTOINFO, INC. AND SUBSIDIARIES
INDEX
|
Part I. Financial Information: |
|
| |
|
|
|
Item 1. |
Consolidated Financial Statements: |
Page |
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Item 2. |
|
|
| |
|
|
|
Item 3. |
|
|
| |
|
|
|
Item 4T. |
|
|
| |
|
|
|
Part II. Other Information |
|
| |
|
|
|
Item 6. |
|
|
| |
|
|
|
|
|
PART I - FINANCIAL INFORMATION
Item 1. CONSOLIDATED
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
| |
|
|
|
|
December 31,
2008 |
|
| |
|
Unaudited |
|
|
Audited |
|
|
ASSETS |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
817,000 |
|
|
$ |
390,000 |
|
|
Accounts receivable, net of allowance for doubtful
accounts of $369,000 and $370,000 as of June
30, 2009 and December 31, 2008, respectively |
|
|
30,816,000 |
|
|
|
29,863,000 |
|
|
Deferred income taxes (Note 2) |
|
|
746,000 |
|
|
|
1,100,000 |
|
|
Prepaid expenses |
|
|
562,000 |
|
|
|
560,000 |
|
|
Current portion of advances and other assets |
|
|
2,128,000 |
|
|
|
1,260,000 |
|
| |
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
35,069,000 |
|
|
|
33,173,000 |
|
| |
|
|
|
|
|
|
|
|
|
Fixed assets, net of accumulated depreciation |
|
|
570,000 |
|
|
|
590,000 |
|
| |
|
|
|
|
|
|
|
|
|
Deferred income taxes (Note 2) |
|
|
685,000 |
|
|
|
680,000 |
|
| |
|
|
|
|
|
|
|
|
|
Advances and other assets, net of current portion |
|
|
9,943,000 |
|
|
|
8,333,000 |
|
| |
|
|
|
|
|
|
|
|
| |
|
$ |
46,267,000 |
|
|
$ |
42,776,000 |
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
|
$ |
13,680,000 |
|
|
$ |
12,303,000 |
|
|
Loan payable |
|
|
15,600,000 |
|
|
|
14,164,000 |
|
| |
|
|
|
|
|
|
|
|
|
Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
Common stock - authorized 100,000,000 shares |
|
|
|
|
|
|
|
|
|
$.001 par value; issued and outstanding
32,946,000 shares as of June 30, 2009 and
December 31, 2008 |
|
|
33,000 |
|
|
|
|
|
| |
|
|
|
|
33,000 |
|
|
Additional paid-in capital |
|
|
19,974,000 |
|
|
|
19,904,000 |
|
|
Deficit |
|
|
(3,020,000 |
) |
|
|
(3,628,000 |
) |
|
Total stockholders’ equity |
|
|
16,987,000 |
|
|
|
16,309,000 |
|
| |
|
|
|
|
|
|
|
|
| |
|
$ |
46,267,000 |
|
|
$ |
42,776,000 |
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
| |
|
Six Months Ended
June 30, |
|
|
Three Months Ended
June 30, |
|
| |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross revenues |
|
$ |
78,858,000 |
|
|
$ |
81,796,000 |
|
|
$ |
43,803,000 |
|
|
$ |
45,234,000 |
|
|
Cost of transportation |
|
|
62,946,000 |
|
|
|
67,514,000 |
|
|
|
35,396,000 |
|
|
|
37,699,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
|
15,912,000 |
|
|
|
14,282,000 |
|
|
|
8,407,000 |
|
|
|
7,535,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions |
|
|
11,038,000 |
|
|
|
9,111,000 |
|
|
|
5,946,000 |
|
|
|
4,740,000 |
|
|
Operating expenses |
|
|
3,658,000 |
|
|
|
3,143,000 |
|
|
|
1,691,000 |
|
|
|
1,705,000 |
|
|
|
|
|
14,696,000 |
|
|
|
12,254,000 |
|
|
|
7,637,000 |
|
|
|
6,445,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
1,216,000 |
|
|
|
2,028,000 |
|
|
|
770,000 |
|
|
|
1,090,000 |
|
|
Interest expense |
|
|
199,000 |
|
|
|
211,000 |
|
|
|
125,000 |
|
|
|
108,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
1,017,000 |
|
|
|
1,817,000 |
|
|
|
645,000 |
|
|
|
982,000 |
|
|
Income taxes (Note 2) |
|
|
409,000 |
|
|
|
731,000 |
|
|
|
255,000 |
|
|
|
386,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
608,000 |
|
|
$ |
1,086,000 |
|
|
$ |
390,000 |
|
|
$ |
596,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
.02 |
|
|
$ |
.03 |
|
|
$ |
.01 |
|
|
$ |
.02 |
|
|
Diluted |
|
$ |
.02 |
|
|
$ |
.03 |
|
|
$ |
.01 |
|
|
$ |
.02 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
32,946,000 |
|
|
|
32,625,000 |
|
|
|
32,946,000 |
|
|
|
32,665,000 |
|
|
Diluted |
|
|
34,182,000 |
|
|
|
34,907,000 |
|
|
|
34,664,000 |
|
|
|
34,868,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| |
|
Six Months Ended
June 30, |
|
| |
|
2009 |
|
|
2008 |
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
Net income |
|
$ |
608,000 |
|
|
$ |
1,086,000 |
|
|
Adjustments to reconcile net income to net cash |
|
|
|
|
|
|
|
|
|
used in operating activities: |
|
|
|
|
|
|
|
|
|
Change in allowance for doubtful accounts |
|
|
(1,000 |
) |
|
|
99,000 |
|
|
Depreciation and amortization |
|
|
108,000 |
|
|
|
78,000 |
|
|
Stock-based compensation expense |
|
|
70,000 |
|
|
|
126,000 |
|
|
Deferred income taxes |
|
|
349,000 |
|
|
|
624,000 |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(951,000 |
) |
|
|
(7,953,000 |
) |
|
Advances and other assets |
|
|
(2,481,000 |
) |
|
|
(2,262,000 |
) |
|
Accounts payable and accrued liabilities |
|
|
1,377,000 |
|
|
|
4,819,000 |
|
| |
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(921,000 |
) |
|
|
(3,383,000 |
) |
| |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(88,000 |
) |
|
|
(173,000 |
) |
|
Net cash used in investing activities |
|
|
(88,000 |
) |
|
|
(173,000 |
) |
| |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
Exercise of stock options |
|
|
- |
|
|
|
36,000 |
|
|
Increase in loan payable, net |
|
|
1,436,000 |
|
|
|
3,406,000 |
|
|
Net cash provided by financing activities |
|
|
1,436,000 |
|
|
|
3,442,000 |
|
| |
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
|
427,000 |
|
|
|
(114,000 |
) |
|
Cash and cash equivalents, beginning of period |
|
|
390,000 |
|
|
|
270,000 |
|
| |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
817,000 |
|
|
$ |
156,000 |
|
The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
|
Forward Looking Statements |
Certain statements made in this Quarterly Report on Form 10-Q are “forward-looking statements regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual
results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Our plans and objectives are based, in part, on assumptions involving judgments with respect to, among other things, future economic, competitive and market conditions
and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that our assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements
included herein particularly in view of the current state of our operations, the inclusion of such information should not be regarded as a statement by us or any other person that our objectives and plans will be achieved. Factors that could cause actual results to differ materially from those expressed or implied by forward-looking statements include, but are not limited to,
the factors set forth under the headings “Business,” and “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2008 as filed with the United States Securities and Exchange Commission (“SEC”).
Note 1. - Business and Summary of Significant Accounting Policies
Business
AutoInfo, Inc., through its wholly-owned subsidiaries, Sunteck Transport Group, Inc., Inc. and Eleets Logistics, Inc. (collectively, the Company), is a non-asset based transportation services company. As a non-asset based provider of brokerage and contract carrier transportation services,
the Company does not own any equipment and its services are provided through its strategic alliances with less than truckload, truckload, air, rail, ocean common carriers and independent owner-operators to service customers’ needs. The Company’s brokerage and contract carrier services are provided through a network of independent sales agents throughout the United States and Canada. During its most recently completed fiscal year, the Company generated revenue, net revenue and net income of approximately
$180.2 million, $30.7 million and $2.2 million, respectively.
Economic Downturn
During the latter part of the fourth quarter of 2008, the general economic conditions in the United States and globally experienced a significant downturn, impacting the market segments in which the Company operates. This downturn, referred to by many economic experts as a world-wide recession, has continued into 2009.
Summary of Significant Accounting Policies
Basis of Presentation
The financial statements of the Company have been prepared using the accrual basis of accounting under accounting principles generally accepted in the United States of America (GAAP).
The consolidated financial statements, which are unaudited, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). In management’s opinion, these financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the
results of operations for the interim periods presented. The results of operations for the three and six months ended June 30, 2009 and 2008 are not necessarily indicative of results to be expected for the entire year. Pursuant to SEC rules and regulations, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted from these statements. The consolidated financial statements and notes thereto should be read in
conjunction with the financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2008.
Principles of Consolidation
The consolidated financial statements include the accounts of the AutoInfo, Inc., its wholly-owned subsidiaries, Sunteck Transport Group, Inc. and Eleets Logistics, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of these financial statements in conformity with GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets, liabilities and contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses
during the periods presented. The Company believes that all such assumptions are reasonable and that all estimates are adequate, however, actual results could differ from those estimates.
Revenue Recognition
As a third party transportation logistics provider, the Company acts as the shippers’ agent and arranges for a carrier to handle the freight. Gross revenues consist of the total dollar value of services purchased by shippers. Revenue is recognized upon delivery of freight, at which time the related transportation
cost, including commission, is also recognized. At that time, the Company’s obligations are completed and collection of receivables is reasonably assured.
Emerging Issues Task Force No. 99-19, “Reporting Revenues Gross as a Principal Versus Net as an Agent” (EITF 99-19), establishes criteria for recognizing revenues on a gross or net basis. The Company is the primary obligor in its transactions, has all credit risk, maintains substantially
all risk and rewards, has discretion in selecting the supplier, and has latitude in pricing decisions. Accordingly, the Company records all transactions at the gross amount, consistent with the provisions of EITF 99-19.
Cash and cash equivalents
Cash and cash equivalents consist of cash in banks.
Provision For Doubtful Accounts
The Company continuously monitors the creditworthiness of its customers and has established an allowance for amounts that may become uncollectible in the future based on current economic trends, its historical payment and bad debt write-off experience, and any specific customer related collection issues.
Fixed Assets
Fixed assets as of June 30, 2009 and December 31, 2008, consisting primarily of furniture, fixtures and equipment and computer system development costs, were carried at cost net of accumulated depreciation. Depreciation of fixed assets was provided on the straight-line method over the estimated useful lives of the related assets which
range from three to five years.
Income Per Share
Basic income per share is based on net income divided by the weighted average number of common shares outstanding. Common stock equivalents outstanding were 1,718,000 and 2,203,000, and 1,236,000 and 2,282,000, respectively, for the three and six month periods ended June 30, 2009 and 2008, respectively
Income Taxes
The Company utilizes the asset and liability method for accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases and future benefits to be recognized upon the utilization of certain operating loss carryforwards. 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 tax rates is recognized in income in the period that includes the enactment date.
Note 2- Income Taxes
For the three and six month periods ended June 30, 2009 and 2008, respectively, the provision for income taxes consisted of the following:
| |
|
Three Months Ended June 30, |
| |
|
2009 |
|
|
2008 |
|
| |
|
Current |
|
|
Deferred |
|
|
Current |
|
|
Deferred |
|
|
Tax expense before application of
operating loss carryforwards |
|
$ |
255,000 |
|
|
$ |
- |
|
|
$ |
386,000 |
|
|
$ |
- |
|
|
Tax expense (benefit) of operating
loss carryforwards |
|
|
(218,000 |
) |
|
|
218,000 |
|
|
|
(329,000 |
) |
|
|
329,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
$ |
37,000 |
|
|
$ |
218,000 |
|
|
$ |
57,000 |
|
|
$ |
329,000 |
|
| |
|
Six Months Ended June 30, |
| |
|
2009 |
|
|
2008 |
|
| |
|
Current |
|
|
Deferred |
|
|
Current |
|
|
Deferred |
|
|
Tax expense before application of
operating loss carryforwards |
|
$ |
409,000 |
|
|
$ |
- |
|
|
$ |
731,000 |
|
|
$ |
- |
|
|
Tax expense (benefit) of operating
loss carryforwards |
|
|
(349,000 |
) |
|
|
349,000 |
|
|
|
(624,000 |
) |
|
|
624,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
$ |
60,000 |
|
|
$ |
349,000 |
|
|
$ |
107,000 |
|
|
$ |
624,000 |
|
The deferred tax asset of $1,431,000 and $1,780,000 at June 30, 2009 and December 31, 2008, respectively, represents expected future tax savings resulting from the Company’s utilization of its net operating loss carryforwards. As of December 31, 2008, the Company has net operating loss
carryforwards of approximately $5.2 million for federal income tax purposes which expire through 2014. Utilization of this benefit is primarily subject to the extent of future earning of the Company, and may be limited by, among other things, stockholder changes, including the possible issuance by the Company of additional shares in one or more financing or acquisition transactions.
Based upon available objective evidence, including the Company’s post-merger history of profitability, management believes it is more likely than not that forecasted taxable income will be sufficient to utilize all of the net operating loss carryforwards before its expiration in 2014.
|
Item 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Cautionary statement identifying important factors that could cause our actual results to differ from those projected in forward looking statements.
Readers of this report are advised that this document contains both statements of historical facts and forward looking statements. Forward looking statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from those indicated by the forward looking statements. We
undertake no obligation to revise or update publicly any forward looking statements for any reason. Examples of forward looking statements include, but are not limited to (i) projections of revenues, income or loss, earnings per share, capital expenditures, dividends, capital structure and other financial items, (ii) statements of our plans and objectives with respect to business transactions and enhancement of shareholder value, (iii) statements of future economic performance, and (iv) statements
of assumptions underlying other statements and statements about our business prospects.
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our financial statements and the notes thereto appearing elsewhere in this report.
Overview
Through our wholly-owned subsidiaries, Sunteck Transport Group, Inc. and Eleets Logistics, Inc., we are a non-asset based transportation services company, providing transportation capacity and related transportation services to shippers throughout the United States, and to a lesser extent, Canada. As a non-asset based provider
of brokerage and contract carrier transportation services, we do not own any equipment and our services are provided through our strategic alliances with less than truckload, truckload, air, rail, ocean common carriers and independent owner-operators to service our customers’ needs. Our services include ground transportation coast to coast, local pick up and delivery, air freight and ocean freight. We have strategic alliances with less than truckload, truckload, air, rail and ocean common carriers
to service our customers’ needs. Our business services emphasize safety, information coordination and customer service and are delivered through a network of independent commissioned sales agents and third party capacity providers coordinated by us. The independent commissioned sales agents typically enter into exclusive contractual arrangements with Sunteck and are responsible for locating freight and coordinating the transportation of the freight with customers and capacity providers. The third
party capacity providers consist of independent contractors who provide truck capacity to us, including owner-operators who operate under our contract carrier license, air cargo carriers and railroads. Through this network of agents and capacity providers, Sunteck operates a non-asset based transportation services business with revenue, net revenue and net income of approximately $180.2 million, $30.7 million and $2.2 million, respectively, during our most recently completed fiscal year and approximately $78.9
million, $15.9 million and $608,000, respectively, during the six months ended June 30, 2009.
During previous interim as well as annual reporting periods, the increases in our gross and net revenues was measured to a significant degree by the increase in the number of transactions processed. However, during the six month period ended June 30, 2009, gross revenues decreased by 4% while net revenues increased by 11% over
the same prior year period. At the same time, the number of transactions increased by 23%, from 60,000 to 73,500 as compared to the same prior year period. This is the result of several factors including, the decrease in average revenue dollars per transaction due to the reduction of fuel prices resulting in lower fuel surcharges, the increase in less than truckload versus truckload freight, a trend by customers toward regional and local distribution points reducing mileage and the reduction
in per mile costs based upon the availability of carrier capacity. These factors resulted in a lower cost of transportation and had a corresponding positive impact on our net revenues and per load margins.
During the first six months of 2009, we incurred increased commission rates with a significant agent. Our agreement with this agent includes a reduction of commission rates based upon the attainment by the agent of certain
profitability benchmarks. These benchmarks, which would result in a reduction in commission rates, were not attained during the current period resulting in a higher than normal commission rateS.
During the next twelve months, we plan to continue to offer our brokerage and contract carrier transportation services and expand our agent network. We are presently profitable and have adequate available lines of credit to satisfy our working capital requirements during the next twelve months.
Economic Downturn
During the latter part of the fourth quarter of 2008, the general economic conditions in the United States and globally experienced a significant downturn, impacting the market segments in which we operate. This downturn, referred to by many economic experts as a world-wide recession, has continued into 2009. This
has resulted in a decrease in transportation revenues for the three and six month periods ended June 30, 2009 compared to the same prior year periods of approximately three (3%)and four (4%) percent, respectively.
Results of operations
For the three and six months ended June 30, 2009 and 2008
During the quarter ended June 30, 2009, we continued to implement our strategic growth business plan consisting primarily of the expansion of client services, the opening of regional operations centers in key geographical markets, and the addition of independent sales agents providing brokerage and contract carrier services. Our
net revenues (gross revenues less cost of transportation) are the primary indicator of our ability to source, add value and resell service that are provided by third parties and are considered to be the primary measurement of growth. Therefore, the discussion of the results of operations below focuses on the changes in our net revenues. The increases in net revenues and all related cost and expense categories are the direct result of our business expansion.
The following table represents certain statement of operation data as a percentage of net revenues:
| |
|
Three Months Ended |
|
|
Six Months Ended |
|
| |
|
June 30, |
|
|
June 30, |
|
| |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
|
100.0% |
|
|
|
100.0% |
|
|
|
100.0% |
|
|
|
100.0% |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions |
|
|
70.7% |
|
|
|
62.9% |
|
|
|
69.4% |
|
|
|
63.8% |
|
|
Operating expenses |
|
|
20.1% |
|
|
|
22.6% |
|
|
|
23.0% |
|
|
|
22.0% |
|
|
Interest expense |
|
|
1.5% |
|
|
|
1.5% |
|
|
|
1.2% |
|
|
|
1.5% |
|
|
Income taxes |
|
|
3.0% |
|
|
|
5.1% |
|
|
|
2.6% |
|
|
|
5.1% |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
4.7% |
|
|
|
7.9% |
|
|
|
3.8% |
|
|
|
7.6% |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
Gross revenues, consisting of freight fees and other related services revenue, totaled $43,803,000 for the three months ended June 30, 2009, as compared with $45,234,000 in the same prior year period, a decrease of approximately 3%. Net revenues were $8,407,000 for the three months ended June 30, 2009, as compared with $7,535,000 in the
same prior year period, an increase of approximately 12%. At the same time, the number of transactions increased by 30%, from 32,000 to 41,500 as compared to the same prior year period. This is the result of several factors including, the decrease in average revenue dollars per transaction due to the reduction of fuel prices resulting in lower fuel surcharges,
the increase in less than truckload versus truckload freight, a trend by customers toward regional and local distribution points reducing mileage and the reduction in per mile costs based upon the availability of carrier capacity. These factors resulted in a lower cost of transportation and had a corresponding positive impact on our net
revenues and per load margins.
Gross revenues, consisting of freight fees and other related services revenue, totaled $78,858,000 for the six months ended June 30, 2009, as compared with $81,796,000 in the same prior year period, a decrease of approximately 4%. Net revenues were $15,912,000 for the six months ended June 30, 2009, as compared with $14,282,000
in the same prior year period, an increase of approximately 11%. At the same time, the number of transactions increased by 23%, from 60,000 to 73,500 as compared to the same prior year period. This is the result of several factors including, the decrease in average revenue dollars per transaction due to the reduction of fuel prices resulting in lower fuel surcharges, the increase in less than truckload versus truckload freight, a trend by customers toward regional and local distribution
points reducing mileage and the reduction in per mile costs based upon the availability of carrier capacity. These factors resulted in a lower cost of transportation and had a corresponding positive impact on our net revenues and per load margins.
Costs and expenses
Commissions
Commissions totaled $5,946,000 for the three months ended June 30, 2009, as compared with $4,740,000 in the same prior year period, an increase of 25%. This increase is the result of the increase in net revenues as well as the increased commission rates with a significant agent which was in a start up period in 2008. As
a percentage of net revenues, commissions were 71% and 63% for the three months ended June 30, 2009 and 2008, respectively. This increase is the result of agent and revenue mix as well as the increased commission rates with a significant agent as compared to the same prior year period. Our agreement with this agent includes a reduction of commission rates based upon the attainment by the agent of certain profitability benchmarks. These benchmarks, which would result in a reduction in commission rates, were not
attained during the current period resulting in a higher than normal commission rates.
Commissions totaled $11,038,000 for the six months ended June 30, 2009, as compared with $9,111,000 in the same prior year period, an increase of 21%. This increase is the result of the increase in net revenues as well as the increased commission rates with a significant agent which was in a start up period in 2008. As
a percentage of net revenues, commissions were 69% and 64% for the six months ended June 30, 2009 and 2008, respectively. This increase is the result of agent and revenue mix as well as the increased commission rates with a significant agent as compared to the same prior year period. Our agreement with this agent includes a reduction of commission rates based upon the attainment by the agent of certain profitability benchmarks. These benchmarks, which would result in a reduction in commission rates, were not
attained during the current period resulting in a higher than normal commission rates.
Operating expenses
Operating expenses totaled $1,691,000 for the three months ended June 30, 2009, as compared with $1,705,000 in the same prior year period, a decrease of 1%. As a percentage of net revenues, operating expenses were 20% for the three months ended June 30, 2009, as compared with 23% in the same prior year period. The decrease is
the direct result of cost cutting measures implemented during the period. We presently have adequate facilities and management to handle the present and anticipated transaction volume in 2009 without a significant increase in overhead.
Operating expenses totaled $3,658,000 for the six months ended June 30, 2009, as compared with $3,143,000 in the same prior year period, an increase of 16%. As a percentage of net revenues, operating expenses were 23% for the six months ended June 30, 2009, as compared with 22% in the same prior year period. The increase is
the direct result of the increase in selling, general and administrative expenses in connection with our 2008 business expansion. We presently
have adequate facilities and management to handle the present and anticipated transaction volume in 2009 without a significant increase in overhead.
Interest expense
Interest expense was $125,000 for the three months ended June 30, 2009, as compared with $108,000 in the same prior year period. This increase is primarily the result of an increase in average borrowings offset by lower interest rates under our line of credit during the period.
Interest expense was $199,000 for the six months ended June 30, 2009, as compared with $211,000 in the same prior year period. This decrease is primarily due to lower interest rates under our line of credit.
Income tax
Income tax expense for the three months ended June 30, 2009 of $255,000 consisted of the utilization of the deferred tax benefit of $218,000 and state income taxes of $37,000 compared to $386,000 for the three months ended June 30, 2008 which consisted of the utilization of the deferred tax benefit of $329,000 and state income taxes of
$57,000. The decrease in income taxes is directly related to lower pre-tax income.
Income tax expense for the six months ended June 30, 2009 of $409,000 consisted of the utilization of the deferred tax benefit of $349,000 and state income taxes of $60,000 compared to $731,000 for the three months ended June 30, 2008 which consisted of the utilization of the deferred tax benefit of $624,000 and state income taxes of $107,000. The
decrease in income taxes is directly related to lower pre-tax income.
Trends and uncertainties
The transportation industry is highly competitive and highly fragmented. Our primary competitors are other non-asset based as well as asset based third party logistics companies, freight brokers, carriers offering logistics services and freight forwarders. We also compete with customers’ and shippers’
internal traffic and transportation departments as well as carriers internal sales and marketing departments directly seeking shippers’ freight. We anticipate that competition for our services will continue to increase. Many of our competitors have substantially greater capital resources, sales and marketing resources and experience. We cannot assure you that we will be able to effectively compete with our competitors in effecting our business expansion plans. The most significant
trend contributing to our growth during the past four years has been the expansion of our brokerage services agent network and expansion of our contract carrier agent and owner operator network. Sales agents are independent contractors and, as such, there are no assurances that we can either maintain our existing agent network or continue to expand this network.
For the six months ended June 30, 2009, our gross revenues decreased to $78.9 million from $81.8 million in the same prior year period. As of June 30, 2009, we had an accumulated deficit of $3.0 million. Factors that could adversely affect our operating results include:
|
· |
the success of Sunteck in expanding its business operations; and |
|
· |
general economic conditions. |
During the latter part of the fourth quarter of 2008, the general economic conditions in the United States and globally experienced a significant downturn impacting the business environment in general and market segments in which
we participate. This condition, referred to by many economic experts as a world-wide recession, has continued into 2009. While we do see some signs of improvement, there are no assurances that our future financial results will not continue to be impacted by the current economic climate.
During the three months ended June 30, 2009, we instituted a cost reduction program that included salary reductions of 10% to all supervisory and management personnel, reductions in employees benefit program costs as well as reductions in other operating expenses.
Liquidity and capital resources
During the past two years, our sources for cash have been the cash flow generated from operations and available borrowings under our line of credit.
At June 30, 2009, we had an outstanding balance of $15,600,000 under our line of credit. In March 2009, we entered into a new credit facility with Regions Bank which increased our line of credit from $20 million to $30 million and extended the maturity date from June 2009 to June 2012. The line of credit facility is at an interest
rate of LIBOR plus 1.5% with a floor of 3.0%, is subject to the maintenance of certain financial covenants, and is secured by accounts receivable and other operating assets. We believe that we have sufficient working capital to meet our short-term operating needs.
At June 30, 2009, we had liquid assets of approximately $817,000. Available cash is used to reduce borrowings on our line of credit.
The total amount of debt outstanding as of June 30, 2009 and 2008 was $15,600,000 and $12,176,000, respectively. The following table presents our debt instruments and their weighted average interest rates as of June 30, 2009 and 2008, respectively:
| |
|
Balance |
|
|
Weighted Average Rate |
|
|
Balance |
|
|
Weighted Average Rate |
|
| |
|
2009 |
|
|
2008 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Line of Credit |
|
|
15,600,000 |
|
|
|
3.00 |
% |
|
|
12,176,000 |
|
|
|
3.70 |
% |
Inflation had no material impact on our revenues or the results of operations for the period ended June 30, 2009.
Critical accounting policies
Preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Note
1 to the notes to the financial statements included in this report includes a summary of the significant accounting policies and methods used in the preparation of our financial statements. The most significant areas involving management estimates and assumptions are described below. Actual results could differ materially from management’s estimates under different assumptions or conditions.
Revenue Recognition
As a third party transportation logistics provider, we act as the shippers’ agent and arrange for a carrier to handle the freight. Gross revenues consist of the total dollar value of services purchased by shippers. Revenue is recognized upon the delivery of freight, at which time the related transportation cost,
including commission, is also recognized. At that time, our obligations are completed and collection of receivables is reasonably assured.
Emerging Issues Task Force No. 99-19, “Reporting Revenues Gross as a Principal Versus Net as an Agent” (EITF 99-19), establishes criteria for recognizing revenues on a gross or net basis. We are the primary obligor in our transactions, have all credit risk, maintain substantially all risk and rewards, have discretion
in selecting the supplier, and have latitude in pricing decisions. Accordingly, we record all transactions at the gross amount, consistent with the provisions of EITF 99-19.
Income Taxes
The deferred tax asset represents expected future tax savings resulting from our net operating loss carryforwards. As of December 31, 2008, we had net operating loss carryforwards of approximately $5.2 million for federal income tax purposes which expire through 2014. Utilization of this benefit is primarily subject
to the extent of our future earnings, and may be limited by, among other things, stockholder changes, including the possible issuance of additional shares in one or more financing or acquisition transactions. As of December 2006, we eliminated any valuation allowance for the future tax savings as management believes it is more likely than not that they will be realized by the end of the carryforward period.
Provision For Doubtful Accounts
We continuously monitor the creditworthiness of our customers and have established an allowance for amounts that may become uncollectible in the future based on current economic trends, our historical payment and bad debt write-off experience, and any specific customer related collection issues.
Off-balance sheet arrangements
We do not have any off-balance sheet arrangements.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company we are not required to provide the information required by this Item.
|
(a) |
Evaluation of Disclosure Controls and Procedures |
Our management, with the participation of our president and chief financial officer, carried out an evaluation of the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 (the “Exchange Act”) Rules 13a-15(e) and 15-d-15(e)) as of the end of the period covered
by this report (the “Evaluation Date”). Based upon that evaluation, the president and chief financial officer concluded that as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules
and forms and (ii) is accumulated and communicated to our management, including our president and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
(b) Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Part II - OTHER INFORMATION
|
*Filed as an exhibit hereto |
|
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
AUTOINFO,
INC.
| |
|
|
| |
|
|
| |
|
/s/ Harry Wachtel |
| |
|
Harry Wachtel |
| |
|
President and Chief Executive Officer |
| |
|
(Principal Executive Officer) |
| |
|
|
| |
|
|
| |
|
/s/ William Wunderlich |
| |
|
william Wunderlich |
| |
|
Chief Financial Officer |
| |
|
(Principal Financial Officer) |
Date: August 12, 2009
17