Exhibit 99.1
Velocity Express Announces Second Quarter Fiscal 2009 Results
WESTPORT, Conn. January 27, 2009 — Velocity Express Corporation (NASDAQ: VEXP), the nation’s largest provider of time definite regional delivery solutions, announced operating results for its quarter ended December 27, 2008.
Highlights:
| • | Third consecutive quarter of positive Adjusted EBITDA, despite economic downturn |
| • | Gross margin improved 420 basis points from last year |
| • | Successfully completed largest new customer start-up in company history. This new customer is now recommending Velocity to other retailers. |
Vincent A. Wasik, Velocity’s Chairman and Chief Executive Officer, stated, “We are pleased to have achieved our third consecutive quarter of positive Adjusted EBITDA despite the dramatic economic slowdown. Gross margin continued to improve from year to year and we continued to manage all other operating expenses in line with revenue.”
| Financial Summary for the quarter: |
Quarters Ended | |||||||||||
| ($ 000’s) | 12/27/08 | 9/27/08 | 12/29/07 | |||||||||
| Revenue |
$ | 65,749 | $ | 72,573 | $ | 86,101 | ||||||
| Gross Profit before depreciation |
18,468 | 19,711 | 20,608 | |||||||||
| Gross Margin % before depreciation |
28.1 | % | 27.2 | % | 23.9 | % | ||||||
| Operating Expenses included in Adjusted EBITDA * |
16,543 | 18,263 | 22,419 | |||||||||
| Adjusted EBITDA * |
$ | 1,925 | $ | 1,448 | $ | (1,811 | ) | |||||
| Depreciation, Amortization, Non-Cash Compensation and Non-recurring Expenses for Integration, Restructuring, Litigation, Global Alliance Strategic Transaction and Debt Restructuring |
1,958 | 1,764 | 2,087 | |||||||||
| Loss from Operations |
$ | (33 | ) | $ | (316 | ) | $ | (3,898 | ) | |||
* see Exhibit B
Revenue for the quarter ended December 27, 2008 was $65.7 million compared to $72.6 million in the September quarter of 2008 and $86.1 million in the December quarter of 2007. The Company reported gross profit before depreciation for the quarter of $18.5 million, or 28.1% of sales, compared to $19.7 million, or 27.2%, in the September quarter of 2008 and $20.6 million, or 23.9%, for the same quarter last year. Operating expenses included in Adjusted EBITDA were $16.5 million, or 25.2% of sales, compared to $18.3 million (25.2%) in the September quarter and $22.4 million (26.0%) in the same quarter last year. Adjusted EBITDA was $1.9 million compared to $1.4 million in the September 2008 quarter and a ($1.8 million) loss for the December quarter last year. The operating loss for the December quarter was $33 thousand, compared to a loss of $316 thousand in the September quarter and $3.9 million in the December 2007 quarter.
The Company’s calculation of Adjusted EBITDA for both the December and September quarters includes adjustments for expenses we are incurring for: (1) creation of the global alliance of domestic time-definite package delivery companies in other countries around the world, (2) certain non-recurring expenses associated with the May 2008 debt re-structuring and (3) our wrongful termination litigation against a former customer. There were no such expenses in the December quarter of 2007 although that quarter did include $1.0 million of CD&L merger integration and restructuring charges.
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Conference Call
Velocity will host a conference call to discuss the company’s second quarter results on Wednesday, February 11, 2009 at 9:00 a.m. ET after we file our Quarterly Report on Form 10-Q with the Securities and Exchange Commission. We will publish conference call information at a later date.
About Velocity Express
Velocity Express has one of the largest time definite nationwide delivery networks, providing a national footprint for customers desiring same day service throughout the United States. The Company’s services are supported by a customer-focused technology infrastructure, providing customers with the reliability and information they need to manage their transportation and logistics systems, including a proprietary package tracking system that enables customers to view the status of any package via a flexible web reporting system.
Forward Looking Statements
Certain statements in this press release, and other written or oral statements made by or on behalf of the Company, may constitute “forward-looking statements” within the meaning of the federal securities laws. Statements regarding future events and developments and the Company’s future performance that are not historical facts, as well as management’s expectations, beliefs, plans, objectives, assumptions and projections about future events or future performance, are forward looking statements within the meaning of these laws. Forward-looking statements include statements that are preceded by, followed by, or include words such as “believes,” “expects,” “anticipates,” “plans,” “estimates,” “intends,” or similar expressions and include statements about our ability to improve gross margins, and if so, our ability to continue as a going concern, our ability to obtain a waiver of covenant defaults and consent to our new credit facility from our bondholders and, thereafter, to replace our current revolving credit facility and our ability to provide high quality cost effective outsourcing solutions. These statements are based on beliefs and assumptions of the Company’s management, which in turn are based on currently available information. These assumptions could prove inaccurate.
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Forward-looking statements are also affected by known and unknown risks that may cause the actual results of the Company to differ materially from any future results expressed or implied by such forward-looking statements. Many of these risks are beyond the ability of the Company to control or predict. Such factors include, but are not limited to, the following: we may not be able to obtain a replacement senior secured loan facility with a new lender on satisfactory terms that is consented to by our bondholders; we may be unable to fund our future capital needs and we may need funds sooner than anticipated; we may be unable to maintain driver pay at acceptable levels or improve gross margins and if so, we may be unable to continue as a going concern; we may be unable to continue to provide high quality, cost effective outsourced solutions for our customers; we may be adversely affected by the recessionary economy and our large customers could reduce or discontinue using our services; we could be exposed to litigation stemming from the accidents or other activities of our drivers; we could be required to pay withholding taxes and extend employee benefits to our independent contractors; we could fail to comply with the covenants in our existing or new credit agreements, including those related to EBITDA and available cash or fail to obtain waivers with respect to existing non-compliance; we have a substantial amount of debt and preferred stock outstanding, and our ability to operate and financial flexibility are limited by the agreements governing our debt and preferred stock; we may be required to redeem our debt at a time when we do not have the funds to do so; and the other risks identified in the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K as amended for the year ended June 28, 2008. as well as in the other documents that the Company files from time to time with the Securities and Exchange Commission. Management believes that the forward-looking statements contained in this release are reasonable; however, undue reliance should not be placed on any forward-looking statements contained herein, which are based on current expectations. Further, forward-looking statements speak only as of the date they are made, and management undertakes no obligation to publicly update any of them in light of new information or future events.
Contact:
Velocity Express Corporation
Edward W. (Ted) Stone, CFO
203-349-4199
tstone@velocityexp.com
or
Institutional Marketing Services (IMS)
John G. Nesbett/Jennifer Belodeau
203-972-9200
jnesbett@institutionalms.com
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EXHIBIT A:
VELOCITY EXPRESS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands)
| December 27, 2008 |
June 28, 2008 |
|||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash |
$ | 3,511 | $ | 4,240 | ||||
| Accounts receivable, net of allowance of $1,116 and $1,724 at December 27, 2008 and June 28, 2008, respectively |
18,326 | 25,126 | ||||||
| Accounts receivable - other |
828 | 815 | ||||||
| Prepaid insurance |
1,886 | 1,635 | ||||||
| Other prepaid expenses and other current assets |
859 | 720 | ||||||
| Total current assets |
25,410 | 32,536 | ||||||
| Property and equipment, net |
6,221 | 6,981 | ||||||
| Goodwill |
35,138 | 35,138 | ||||||
| Intangible assets, net |
20,267 | 21,333 | ||||||
| Deferred financing costs, net |
1,958 | 2,164 | ||||||
| Other assets |
3,785 | 3,797 | ||||||
| Total assets |
$ | 92,779 | $ | 101,949 | ||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current liabilities: |
||||||||
| Trade accounts payable |
$ | 24,758 | $ | 26,533 | ||||
| Accrued wages and benefits |
3,765 | 4,078 | ||||||
| Accrued legal and claims |
2,209 | 4,102 | ||||||
| Accrued insurance and claims |
2,545 | 3,075 | ||||||
| Accrued interest |
8,325 | 5,708 | ||||||
| Related party liabilities |
84 | 52 | ||||||
| Other accrued liabilities |
1,346 | 1,705 | ||||||
| Revolving line of credit |
5,858 | 7,942 | ||||||
| Current portion of long-term debt |
1,060 | 1,152 | ||||||
| Total current liabilities |
49,950 | 54,347 | ||||||
| Long-term debt, less current portion |
61,756 | 46,498 | ||||||
| Accrued insurance and claims |
408 | 538 | ||||||
| Other long-term liabilities |
3,269 | 4,992 | ||||||
| Total liabilities |
115,383 | 106,375 | ||||||
| Commitments and contingencies |
||||||||
| Total shareholders’ deficit |
(22,604 | ) | (4,426 | ) | ||||
| Total liabilities and shareholders’ deficit |
$ | 92,779 | $ | 101,949 | ||||
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EXHIBIT A:
VELOCITY EXPRESS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 27, 2008, SEPTEMBER 27, 2008 & DECEMBER 29, 2007
AND SIX MONTH PERIODS ENDED DECEMBER 27, 2008 AND DECEMBER 29, 2007
(Unaudited)
(Amounts in thousands, except per share data)
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| December 27, 2008 |
September 27, 2008 |
December 29, 2007 |
December 27, 2008 |
December 29, 2007 |
||||||||||||||||
| Revenue |
$ | 65,749 | $ | 72,573 | $ | 86,101 | $ | 138,322 | $ | 179,408 | ||||||||||
| Cost of services |
47,281 | 52,862 | 65,493 | 100,143 | 135,660 | |||||||||||||||
| Depreciation |
460 | 495 | 300 | 955 | 601 | |||||||||||||||
| Gross profit |
18,008 | 19,216 | 20,308 | 37,224 | 43,147 | |||||||||||||||
| Operating expenses: |
||||||||||||||||||||
| Occupancy |
3,804 | 4,393 | 4,431 | 8,197 | 9,061 | |||||||||||||||
| Selling, general and administrative |
12,739 | 13,870 | 18,053 | 26,609 | 36,562 | |||||||||||||||
| 16,543 | 18,263 | 22,484 | 34,806 | 45,623 | ||||||||||||||||
| Non-recurring expenses for litigation, global alliance strategic transaction / debt restructuring |
683 | 443 | — | — | — | |||||||||||||||
| Integration and restructuring charges |
51 | — | 230 | 51 | 1,005 | |||||||||||||||
| Depreciation, amortization, asset impairment |
764 | 826 | 1,492 | 1,590 | 2,968 | |||||||||||||||
| Total operating expenses |
18,041 | 19,532 | 24,206 | 37,573 | 49,596 | |||||||||||||||
| Loss from operations |
(33 | ) | (316 | ) | (3,898 | ) | (349 | ) | (6,449 | ) | ||||||||||
| Other income (expense): |
||||||||||||||||||||
| Interest expense, net |
(9,048 | ) | (9,016 | ) | (4,941 | ) | (18,064 | ) | (9,813 | ) | ||||||||||
| Other |
— | (7 | ) | — | (7 | ) | 1 | |||||||||||||
| Loss before income taxes |
(9,081 | ) | (9,339 | ) | (8,839 | ) | (18,420 | ) | (16,261 | ) | ||||||||||
| Income taxes |
(8 | ) | — | 71 | (8 | ) | 171 | |||||||||||||
| Net loss |
$ | (9,073 | ) | $ | (9,339 | ) | $ | (8,910 | ) | $ | (18,412 | ) | $ | (16,432 | ) | |||||
| Net loss applicable to common shareholders |
$ | (11,315 | ) | $ | (11,278 | ) | $ | (10,737 | ) | $ | (22,593 | ) | $ | (21,881 | ) | |||||
| Basic and diluted net loss per share |
$ | (3.36 | ) | $ | (3.45 | ) | $ | (3.82 | ) | $ | (6.80 | ) | $ | (8.03 | ) | |||||
| Weighted average common stock shares outstanding used in the basic and diluted net loss per share calculation |
3,371 | 3,272 | 2,807 | 3,322 | 2,725 | |||||||||||||||
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EXHIBIT B: USE OF NON-GAAP FINANCIAL MEASURES
This press release includes disclosures regarding “Adjusted EBITDA”, which is a non-GAAP financial measure. Adjusted EBITDA, is comprised of historical EBITDA, as adjusted for certain non-cash and/or non-recurring expenses. EBITDA is defined as net earnings (loss) before interest expenses, income taxes, depreciation and amortization on an historical basis. We believe net income (loss) is the most directly comparable financial measure to EBITDA under GAAP.
We present Adjusted EBITDA for several reasons. Management believes Adjusted EBITDA is useful as a means to evaluate our ability to fund our estimated uses of cash, including the payment of interest on our debt. In addition, we have presented Adjusted EBITDA to investors in the past because it is frequently used by investors, securities analysts and other interested parties in the evaluation of companies in our industry, and management believes presenting it here provides a measure of consistency in our financial reporting. Adjusted EBITDA is also more closely correlated than other GAAP financial measures to the definition of Consolidated Cash Flow in our Indenture and the definition of EBITDA in our Revolving Credit Agreement as amended. These measures are components of the restrictive covenants and financial ratios contained in the agreement(s) governing our debt that require us to maintain compliance with these covenants and limit certain activities, such as our ability to incur additional debt and to pay dividends. As a result, management believes the presentation of Adjusted EBITDA provides important additional information to investors.
While we use Adjusted EBITDA in managing and analyzing our business and financial condition and believe it is useful to our management and investors for the reasons described above, it has certain shortcomings. In particular, Adjusted EBITDA does not represent the residual cash flows available for discretionary expenditures, since items such as debt repayment and interest payments are not deducted from such measure. Accordingly, it should not be construed as an alternative to net cash from operating or investing activities, cash flows from operations or net income (loss) as defined by GAAP and is not, on its own, necessarily indicative of cash available to fund our cash needs as determined in accordance with GAAP. In addition, not all companies use identical calculations of Adjusted EBITDA, and our calculation of Adjusted EBITDA may not be comparable to Adjusted EBITDA or other similarly titled measures of other companies.
A reconciliation of the differences between Adjusted EBITDA and the most directly comparable financial measure presented in accordance with GAAP is included in the table that follows.
Reconciliation of Non-GAAP Financial Measures
VELOCITY EXPRESS CORPORATION AND SUBSIDIARIES
FOR THE THREE MONTHS ENDED DECEMBER 27, 2008, SEPTEMBER 27, 2008 & DECEMBER 29, 2007
AND SIX MONTH PERIODS ENDED DECEMBER 27, 2008 AND DECEMBER 29, 2007
(Amounts in thousands)
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| December 27, 2008 |
September 27, 2008 |
December 29, 2007 |
December 27, 2008 |
December 29, 2007 |
||||||||||||||||
| Net loss |
$ | (9,073 | ) | $ | (9,339 | ) | $ | (8,910 | ) | $ | (18,412 | ) | $ | (16,432 | ) | |||||
| Interest expense, net |
9,048 | 9,016 | 4,941 | 18,064 | 9,813 | |||||||||||||||
| Income taxes |
(8 | ) | — | 71 | (8 | ) | 171 | |||||||||||||
| Depreciation |
691 | 773 | 1,021 | 1,463 | 2,117 | |||||||||||||||
| Amortization of intangible assets |
533 | 533 | 771 | 1,067 | 1,452 | |||||||||||||||
| Stock based compensation |
— | — | 65 | — | 151 | |||||||||||||||
| Other non-operating (income)/exp. |
— | — | — | — | (1 | ) | ||||||||||||||
| Asset impairments |
— | 15 | — | 15 | — | |||||||||||||||
| Loss on debt extinguishment |
— | 7 | — | 7 | — | |||||||||||||||
| Integration and restructuring costs |
51 | — | 230 | 51 | 1,005 | |||||||||||||||
| Non-recurring expenses for Litigation, Global Alliance Strategic Transaction / Debt Restructuring |
683 | 443 | — | 1,126 | — | |||||||||||||||
| Adjusted EBITDA |
$ | 1,925 | $ | 1,448 | $ | (1,811 | ) | $ | 3,373 | $ | (1,724 | ) | ||||||||
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