XPO Inc (XPO) 2008 Q4 法說會逐字稿

Greetings and welcome to the Express-1 Expedited Solutions fourth-quarter 2008 earnings call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mark Patterson, Chief Financial Officer for Express-1 Expedited Solutions. Thank you. Mr. Patterson, you may begin.

Thank you, Rob. Good morning, everyone, and thanks for joining us on our Express-1 Expedited Solutions fourth-quarter call today. We are always pleased to share information about our company. With me on the call this morning is our CEO, Mike Welch; Jeff Curry, President of Express-1; Gerry Post, President of Concert Group Logistics; and Tim Hindes, President of Bounce Logistics. Also on our call this morning is our Corporate Controller, John Welch, joining us from Buchanan.

Before I turn the call over to Mike and the rest of our team, I'd like to note that this conference call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act. The Company has based these forward-looking statements on its current expectations and projections as of today.

These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions that may cause the Company's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause or contribute to such a material difference include, but are not limited to, those discussed in our Form 10-K for the year ended December 31, 2007. So with that I'll now turn the call over to Mike.

Thanks, Mark, and good morning, everyone. I am pleased to share our fourth-quarter results with our shareholders. During the second half of 2008 we continued to experience weakened US economic conditions. Despite these difficult times revenue grew by 95% to $25 million and income from operations grew by 84% to $1.04 million when comparing with Q4 of 2007.

As we've stated over the last few years, our non-asset based business model continues to work even in these tough market conditions. While we're never totally satisfied, we believe our fourth-quarter performance was solid.

During the fourth quarter we continued to battle against increasing weakness in demand for freight services. The world financial crisis began to impact our customers across all markets. Many of our competitors began to falter. We found ourselves in the face of one of the worst transportation markets in modern memory.

In light of this we took some significant steps to preserve profitability and leverage our financial strength. We have and we will continue to scrutinize employment count in accordance with the declining US economy. Our CapEx expenditures will also lower over the next few quarters. All other expenses will be monitored carefully.

At the same time we hope to begin negotiations with several companies that might serve as a foundation for more acquisitive growth during 2009. The acquisition of First Class Expediting of Rochester Hills, Michigan was completed in early January with an investment of approximately $250,000. First Class is known for their high level of service in the regional expedite arena.

First Class was integrated into Express-1. All HR support, safety and off-hour operations will be handled by our Express-1 team in Buchanan, Michigan. This quick integration is made possible by the use of the same operational software platform, GPSNet Technologies. We believe that the next 12 to 18 months will be a time of rapid consolidation within our industry.

Express-1 has continued to acquire new customers and expanded service offerings into new areas to mitigate the impact of fuel costs and declines in the automotive sector. We've had recent success in the pharmaceutical industry and look forward to penetrating new markets. Express-1 has also built a strong platform which would serve well for other tuck-in acquisitions.

Concert Group Logistics continued to expand its station network and its international business volume. The existing CGL stations continue to expand and grow each of their own independent stations, even in the face of this difficult transportation market. Another bright spot for CGL is our wonderfully diverse mix of customers.

Our 2008 start-up, Bounce Logistics, continued to increase its revenue and achieve new levels of profitability during the fourth quarter. We are fast becoming the go to company for shippers in their premium brokerage needs.

As we announced during the fourth-quarter, Express-1 Dedicated located in Evansville, Indiana will discontinue operations February 28, 2009. While we are never happy to see one of our operations close, we are pleased that most of our staff have been offered employment opportunities with the new service provider. We also believe there will be minimal cost in the closing of our Evansville operation. Overall, we continue to succeed and position ourselves for strong growth and profitability.

Lastly, this is all achievable because of our great people. I believe we have some of the most talented and dedicated people in the transportation industry. Our people deserve all of the credit for our success. They truly make our non-asset model work. I'll now turn the call over to Mark for some commentary on our financial results. Mark?

Thanks, Mike. The fourth quarter of 2008 was both challenging and rewarding for our company. Each of our units faced unique challenges within their operations and each performed admirably in light of the weakening economy. Throughout our call today you will hear a recurring message, our non-asset model works in both good and bad economic times.

One note before we get into the numbers today. You will also have noted in our earnings release last evening end in our discussion today that our Express-1 Dedicated operations were discontinued during the fourth quarter of 2008. Within our results and discussions we will speak to our continuing operations which include Express-1, Concert Group Logistics or CGL, and Bounce Logistics.

As Mike mentioned, consolidated revenues from continuing operations increased by 95% and came in at $25 million during the quarter compared to $12.8 million during the same period of 2007. We experienced a rapid slowdown in overall demand within each of our business units as we entered the last portion of the fourth quarter.

We had approximately $14.6 million of growth from our new business unit, CGL and Bounce Logistics during the period. We experienced a decline in revenue from within our Express-1 unit with revenues declining approximately 17% compared to the same period of 2007. Fuel prices declined rapidly throughout the fourth quarter and the resulting fuel surcharge revenue was just approximately $15,000 less than fuel surcharge revenue during the fourth quarter of 2007.

Along with our rise in revenue from continuing operations came growth in our gross margin dollars of 34% or $1 million. Consolidated gross margin represented 16% of revenue during the fourth quarter of 2008 versus 23% of revenue during the fourth quarter of 2007.

As we've mentioned in our previous calls throughout 2008, our direct expenses and resulting gross margin percentage have changed in our operational model due to the acquisition of CGL into the start up of Bounce Logistics. Our gross margin target for the full year was approximately 17% of consolidated revenue and we came in just below this level in what can only be described as a historically weak transportation economy.

Our selling, general and administrative expenses rose approximately $600,000 during the fourth quarter of 2008 and came in at $3 million compared to $2.4 million during the fourth quarter of 2007. SG&A expenses represented 12% of revenue during Q4 of 2008 versus 19% of revenue during Q4 of 2007. We anticipated SG&A expense for the full year would approximate 12% of consolidated revenue and we're proud of the commitment our teams have made to contain SG&A cost.

During the fourth quarter we took specific measures to reduce and control our SG&A expense. These steps included reductions in headcount, hiring and wage freezes, reductions in executive and management bonus awards, restrictions in travel and entertainment activities and other measures targeted at controlling our expenses in this difficult period. We remain focused upon evaluating all areas of our business and taking all steps necessary to support our continued profitability during the recession.

Operating income from continuing operations increased by $475,000 or 84% during the fourth quarter when compared to the same period of 2007 and represented over $1 million during the recent period. Interest and other expenses remain in line with anticipated levels and represented $140,000 during the fourth quarter of 2008 while our weighted average borrowing rate during the period was approximately 1.6%.

We are in compliance with all of our bank covenants and currently have in excess of $7 million of unused borrowing capacity. Our bank line matures in May of 2010. Income from continuing operations rose by 36% and came in at $514,000 or $0.02 per fully diluted share during the fourth quarter of 2008 versus $369,000 or $0.01 per share during the same period in 2007. Income from discontinued operations represented $73,000 during the fourth quarter of 2008 versus $88,000 for the same period of 2007. These figures are net of income tax expense.

Our cash flow remains strong and, due to some very concerted collection efforts from each of our finance teams, we were able to reduce our debt by approximately $5 million during the fourth quarter of 2008. Currently our balance sheet is solid, as Mike mentioned, and we believe we're poised to take advantage of some consolidation opportunities we think will arise during the coming quarters.

Thanks once again for joining us, everyone. We look forward to continuing our momentum and reporting back to you next quarter. I'll now turn the call over to Jeff Curry, President of Express-1, to speak about our Express-1 business unit. Jeff?

Thank you, Mark. In my third-quarter report to shareholders I ended my statements with the following -- keeping a close eye on expenses, working hard to sustain the health of our owner operators and boosting our sales efforts are three important efforts that will keep us in position to take advantage of an eventual turnaround in the economy.

The strength of our asset light model may never shine as bright as it has in this poor freight environment. The loss of significant automotive business was overcome by the gains in sales from new and exciting business. We carried forward in the fourth quarter with these objectives in mind and saw an unprecedented drop in automotive freight of around 60%, which caused a drop in our fourth-quarter revenue over the 2007 quarter of about 17%.

Our flexible business model and cost structure did shine bright as cost of transportation dropped about 16% in the fourth quarter from the previous fourth quarter and our attention to G&A expenses resulted in a drop of about 13% in the quarter from the fourth quarter 2007. As a result Express-1 posted a profitable quarter that contributed greatly to XPO's fourth-quarter income.

We had a fleet size in the fourth quarter sufficient to handle the freight volumes that were present; we made several changes within our sales organization. We placed our top salesperson in charge of the northern region; moved our sales rep who has North Carolina ties to the Carolinas; hired and trained a new Ohio sales rep with strong ties to Ohio and Ohio State athletics; placed more emphasis on our house accounts but putting a rep in charge of that important book of business; rebuilt our inside sales effort with two experienced and aggressive customer service representatives; also we hired an 11-year veteran of the expedite industry to cover the state of Texas; and we repositioned our international staff so that we can allow that group to make more outside sales calls.

Our Mexico business for the fourth quarter increased about 11% over the fourth quarter in 2007. We began the transition of the CGL in-house sales support person to that of outside sales rep in the Chicago area, an area that has never been covered by a sales rep domiciled in that market.

CGL station owners continue to support the sales effort of Express-1 by introducing us to their customer base located throughout the country. Express-1 hauled over 1,000 loads called in by CGL stations in 2008. Our brokerage chain handled about a 40% increase in freight called in by other carriers during the fourth quarter and our brokerage revenue in the quarter grew by about 31% in the fourth quarter from the 2007 quarter.

In the quarter we greatly improved our brokerage capacity and saw refused runs drop by approximately 15% on much higher phone call volume. The improved brokerage capacity has resulted in growth in runs booked outside of the North and Midwest industrial belt. Outbound runs booked in states other than Michigan, Indiana, Ohio, Illinois, Kentucky, Tennessee and Wisconsin actually inched above the total booked in those states last year.

Also in the fourth quarter we began working with First Class Expediting Service of Rochester Hills Michigan to complete an acquisition of their business assets. We successfully closed on the sale in mid-January and have diligently worked on merging the Company's operations with that of Express-1. The merger of their business was simplified as they operated on the same industry software as Express-1.

First Class is a great tuck-in purchase for Express-1 as it services the regional expedited needs of Eastern Michigan and Northern Ohio. First Class also had an asset light model further strengthening the bond with Express-1. I believe that First Class could serve as a standard fare in our quest to add other regional expedited transportation companies. With Express-1 focused on national and international ground and air expedited shipments, regional carriers would help us provide a complete level of service to shippers.

Also in the quarter Express-1 became a SmartWay transport partner. Smartway is a collaboration between the EPA and the freight sector designed to improve energy efficiency. Companies who have participated in the SmartWay program are recognized for their social responsibility. Our SmartWay performance score is 1.25 which is the highest score available. Many of our customers and prospective customers consider our designation and participation in the program when deciding to do business with us. I will now turn the call over to Gerry Post, President of CGL.

Thank you, Jeff and good morning, everyone. I'm not the first person to mention that revenue in the fourth quarter declined and that business conditions were extremely tough in November and December especially. So with that on the table I'll focus on presenting the facts as we experience them at CGL.

Revenue in the quarter was $11.8 million, this was a decline of 17% from the previous quarter and just under 7% less for the same quarter in 2007 which was also our best quarter in 2007. For the year revenue was $51.1 million or 8.1% more than 2007. During the quarter internal growth from stations that have been in the network for more than one year declined by 15% from the same period in 2007 while new stations contributed 12.7% of the revenue. For the year internal growth was 4.1% and new stations added 12.5% of revenue.

We opened a new independent station in Louisville in October and they contributed significantly with a project shipment to Australia generating the single largest transaction revenue in CGL history of almost $250,000 and it went flawlessly. The network continues to uncover projects such as these which we are well-positioned to handle and that make important revenue and profit contributions to the Company.

Gross profit for the quarter was $1.1 million, only 8% less than the previous quarter. This is due primarily to several large projects handled during the quarter that generated better than average gross profit margins as well as our ongoing efforts to reduce cost of sales through better systems and communications.

Gross profit for the year increased by 2% over 2007, indicative of the competitive pressures and continuing shifting by clients to lower-cost transportation options. Our top 10 clients during the quarter generated 30% of our revenue which is consistent with prior quarters. For the year our top 10 clients represented 26% of our revenue. Active clients declined by 6% from the third quarter but are up 7% from the previous year. We remain committed to expanding our client base and offering more transportation options to our existing clients.

International air and ocean revenues remained a bright spot being 35% of revenue during the quarter before the year was just over 28% of our total revenue. International air revenue increased by 68% and ocean revenue by 142% over 2007, both results of our global positioning initiative taken earlier in the year.

Our general and administrative expenses for the year are 27% less than in 2007, however it is difficult to compare apples-to-apples due to our having operated as a private company in 2007. We continue to tightly control all of our SG&A expenses to ensure that we remain profitable under the current situation.

All in all 2008 was a successful first year for CGL and the Express-1 family. Thank you for your time and I'd like to pass the call on to Tim Hindes, President of Bounce Logistics. Tim?

Thank you, Gerry, and good morning, all. Q4 was a telling quarter for us at Bounce. If you recall, we made several adjustments to our model late in Q3. We certainly enjoyed the impact of those changes in Q4. A review of our key metrics for the entire year, our first revenue -- revenue in Q1 was $183,000; Q2 was $1.04 million; Q3 was $3.01 million and revenue in Q4 came in at $2.76 million.

Next to margin, gross profit margin as a percentage of revenue -- Q1 was 11%; Q2 was 13%; Q3 was 13% as well; and in Q4 the gross margin improved 5 basis points to 18.5%. The margin improvement was a result of several factors -- a change in buying strategies, modifications in fleet and sales commission models and, of course, better buying conditions in the market.

Last, EBIT. EBIT Q1 was a loss of $37,000; Q2's loss was $63,000; Q3 was a positive at just a couple thousand dollars; and Q4 EBIT improved to $188,000 or 6.7% of revenue. We will complete our first year of operation as a profitable enterprise and we continue to focus on growth while keeping an eye on our costs in a very unpredictable market. Thank you for time in interest. I'll now pass the call back to Mike. Mike?

Tim, I'll now pass the call over to the operator for questions. Rob?

(Operator Instructions). Rich Murphy, Cross River Partners.

Mike, I've got a couple of questions. One is on the debt. When I look at the numbers -- or this is maybe for Mark -- you lowered receivables by about $5 million. I come up about $2 million short. I was surprised at how low the debt got to $3.5 million. Where's that $2 million gap? Because if you take the $5 million accounts receivable and $800,000 that you got from cash, the decrease in cash --?

I'm not following your question, Rich. I understand our receivables went down from collections and we reduced our debt by about $5 million. What was the rest of the question?

I guess last quarter you had $11.1 million in debt, so I (inaudible) in there. And you got it down -- it's now down to $3.5 million. I'm trying to reconcile where that --?

Rich, you're ignoring the short-term portion of long-term debt. I think there's about $1.2 million there.

Okay, I thought I had that, okay. I'll maybe get that off-line.

(technical difficulty) 4.9 million of (technical difficulty).

Okay. And then the other thing, you had $109 million in revenues, but I get to $113 million. Is Evansville outside -- do you have to take Evansville revenue out?

Yes, we (multiple speakers) that into discontinued operations for the year, Rich.

Okay. So when I add that back I get to a bigger revenue?

Your number gets closer to $114 million, I believe (technical difficulty) yes.

Okay. And then on Bounce, just two questions on the business. Bounce, great margin improvement. What is the steady state for that business typically? I mean, the margin has been going up pretty dramatically. So I guess how much more SG&A can -- how much more growth can you get without any SG&A?

Tim, do you want to handle that?

Sure. It's a pretty good model really, Rich. We could probably handle about 40% more revenue than we have today without significantly adding much cost to the model.

Okay. All right. In just amongst all the businesses now that you have these somewhat multifaceted three different entities. Are you seeing synergies across customer bases? You've talked in the past about maybe some customers that just use international using you for expedited. Are you starting to see anything --?

Yes, Rich. Jeff mentioned a little bit earlier about the 1,000 shipments from CGL stations that we had this year. So that was obviously a big lift for intercompany business. Also I believe -- and Tim, you can correct me if I'm wrong -- Express-1 was Bounce's third-largest carrier --

That's correct.

-- this year and it's continuing to grow. We just left our CGL Express-1 -- it was our first joint sales conference, a lot of positives out of that, Rich. First of all, people really getting to know each other which I think is step one anytime you're trying to build some synergies. So just the networking between the different sales reps I think we're going to see some more positives as we go forward.

Right now when you look at the business models, both Bounce and Express-1 use the same operational software. All the back office is in Buchanan and we also have mentioned First Class which uses the same software and we were able to integrate there and hope to build synergies with their customer base also.

Okay. Is something like First Class -- will the details of that acquisition be in the Q? (inaudible) these tuck-in acquisitions, are you paying -- how are they structured?

We're purchasing basically the right to the trade name and the continuity of the revenue stream. And in the case of First Class we allowed the former owners of that corporation, they're still winding it down and collecting the receivables and trying to satisfy their debts.

So essentially what we're interested in is the revenue stream, the people, the ability to convert the business over to our platform in the case of First Class we used Express-1's operating authority, so it basically became a division of Express-1 on day one. So it allowed us to have kind of a rapid and also a very low cost approach to acquiring a business.

In the case of First Class, I think Mike mentioned on the call that the total consideration was about $250,000 and then I think we assumed some office equipment and stuff like that that may equate to about $50,000 over the next three years. It was very, very inexpensive for what we got.

And would their customer list be -- I mean is it 50 customers, 100 customers and is there any overlap between your current customer base and their customer base or is it all new customers?

I can't comment on that. I know you've been working with their customers, so --.

Okay.

You refer to me, Mike?

Yes.

Yes, there's some overlap but the point that I want to make is the service they provide, Rich, is different than the service that we provide at Express-1. Because it's regional their average length of haul may be 30 miles in a day, whereas ours -- it's 450, 500 miles. So the region they cover and the average length of haul is tremendously different. Although it's an expedite it's a regional expedite.

So the fact that there's some overlap is really immaterial. Because now we can go into that customer, in fact that's probably our first prospect, and we can go in together and we can say those runs that are 6 miles from one plant to the other that the big guys like us and some of the others have a hard time covering because our drivers won't do it, they don't make enough money doing it, the First Class drivers do.

And we can actually go in now and offer them a complete service and actually attack probably the most difficult load or freight opportunity for them to cover and that's the short one -- the Shorty, as we call them.

Okay.

We call them other things, too. But not any more, not any more because First Class does a really good job of covering that freight.

And what's interesting, Rich, is Express-1 has a lot of connections with some major 3pl's that have a lot of business that we can pass over to First Class where they really didn't have much of a sales team so we're going to be able to add a lot of our accounts, the Express-1 accounts back over to First Class. And we've seen quite a few big opportunities in a short period of time where we're getting up and running.

And we've already hauled some of First Class' national freight.

This is my last question, guys. Are you seeing these types of opportunities -- are they all over the place? When you said the expedited business is starting to consolidate --.

We're certainly getting inquiries a lot more than what we had in the past, Rich. They're coming fairly fast and furious, yes.

Okay. Well, great quarter, guys. Great job on the debt and managing to these tough times.

We appreciate it, thank you.

(Operator Instructions). David Campbell, Thompson Davis Company.

Hi, good morning, everybody. You usually make forecast of revenues. You didn't this time either for the quarter or for the year. Is that because of the economic situation or is that a new policy?

It's because of the situation we're in right now, David. I think it's best to say that we're just going to suspend guidance until we get a good handle on the economy.

But you must have ended the quarter, at least in First Class -- not First Class, the Express-1 unit with substantially more decreases in revenues than you did at the beginning, is that fair?

That's fair, yes. December was much slower than October, November was in between the two. But it is normal that December can be slow the last couple weeks. I think what we saw this year was early shutdown of plants because of the economy where the last two weeks a lot of -- not just automotive but all manufacturing in general we saw a lot of early shutdowns compared to prior years.

All right. The first quarter at Express-1 used to be seasonally stronger than the fourth, but I guess in this situation we can't assume that anymore?

Yes. Years ago the fourth was the strongest, but over the last few years it sort of disappeared that way and last year we had a very solid first quarter and really second quarter for that matter. Now it's almost you need a crystal ball with what's going to happen quarter to quarter.

What we're excited about is the ability to -- whether it is high demand or low demand, the model still can produce quite a bit of profitability. And when things are getting tough we have the consolidation opportunities, we're also seeing a lot of our competitors crumble a little bit from the inside. We carefully monitor those opportunities. We think that will help us grow even in spite of a possible continued down economy.

These potential acquisitions, are they similar to First Class in that they are regional?

Most of them would be, yes. And most of them we would, that we're looking at, would have the identical operating platform and the ability to integrate quickly. They're there. Down the line there may be some bigger opportunities, but right now we're seeing more of the smaller guys.

And you're actually negotiating with some of them now, you said?

Well, we always talk to people, we're not in negotiations. But we certainly have been answering and talking to more people than we ever have in most of the inquiries are coming inbound, which we feel is a fairly good thing.

You mentioned First Class at $4 million of 2008 revenues. Are they still running at that rate despite the economy?

They're running at a rate that we believe will equate to $4 million. But everything is dependent upon the economy. And Just like Express-1 had a soft December, First Class had a soft December. Fortunately we are kind of optimistically thinking maybe that December and January hopefully will be the trough. But it's too early to tell.

Yes, I see. And you decided to close down all of the dedicated operations in Evansville even though you had some business there besides Ford. That other stuff has been closed or will be closed too?

Yes. We had approximately $10,000 per month of extra business, which was basically piled onto our profitability. And without -- as a standalone it doesn't make any sense to run. So we're right now in process of transitioning that business to the new service provider.

All right, great.

(inaudible) stock there. And (inaudible) stock average is about $6,000 a month plus we did another $4,000 of ad hoc transportation.

Right, right, right, right, right. So on SG&A, I take it from your comments you're still pushing down on that from where it was in the fourth quarter?

Yes, we're actively reviewing plans from each of our operating units to continue to control cost just in anticipation that the economy may be slower to recover. So we're all completely focused on reductions in SG&A wherever possible. Hopefully the economy will start to rebound and those won't be necessary. But yes, we are looking at them.

But the reversal of the -- profit-sharing accruals I guess was a reversal of it. That was helpful in the quarter too. Do you have any -- can you disclose what that amount was?

A reversal of a profit-sharing accrual -- I'm not following your question.

Well, you mentioned somewhere in the conversation about not accruing for -- I forget what you said -- bonuses and so forth in the fourth quarter.

Our total bonus expense this year for the whole year is down probably $200,000 to $250,000 from 2007. And the fourth quarter certainly we didn't have much additional to accrue from an already reduced number. That was helpful in controlling our cost. It was painful, but helpful.

Right. Well, don't tell me about it. Anyway, so, really it's really up to us to come up with some revenue guesses. I guess that's the best way to describe it.

Yes, at this time, David, I think it is. We're going to review it after this quarter and we'll see where we're at. But again, we do feel overall that each operating unit certainly has the ability to grow in 2009.

Concert Group mentioned some very favorable -- two favorable accounts or was that Bounce? Does that mean that their gross profit margin is unsustainable in the -- that they reported?

No, as far as Concert Group we have a new station in Louisville that Gerry mentioned that works on big projects. And Bounce's changes are long-term. They've done a good job of -- Tim, you might want to talk a little bit exactly what you did to increase it by 5 percentage points.

Sure, they're long-term changes. We changed the compensation model for our fleet; we had some guarantees on there that dragged us down in Q3. We eliminated those and changed the model. We also took our sales compensation model and geared it more towards an eye on margin improvement and actual EBIT performance. And we're very, very happy with our inside sales team and outside sales that we're able to basically get some great, great pricing out there and negotiate a good sell rate. So we think that's going to continue.

And my last question, how does the international market look for Concert Group? That's certainly not done well in the industry the last couple of months. What do they see?

Gerry, do you want to handle that?

Yes. Actually for us the international still remains strong, that's because we're relatively new into entering into it, so we have -- even if it slowed down we still have great opportunity to grow. And we've put resources as far as training and working with our network. So there's still some pretty good excitement and -- not so much on the import side but primarily on the export side.

Right, primarily in export. Okay. Well, thanks. I appreciate your answers. Thank you very much.

Thank you, David.

(Operator Instructions). John Janick, National City Bank.

Good morning, guys. Listening to the recap, CGL had a great year, they've opened up some stations, Bounce has gained some momentum, Express-1 has absorbed the drop in automotive volume and diversified their revenue base -- all good things especially in today's environment.

One of the issues that's always been critical though for Express-1 has been fleet and driver owner operators. Can you share a little bit about what the Company is doing to maintain that group of owner operators? Because I'm sure that's tough in today's economy as well.

Jeff, do you want to handle that?

Yes, I'd love to.

(multiple speakers) question there, John.

That's a good question, John. That issue is probably foremost in my mind right now this month, last quarter and so forth. And in fact, I just wrote an article in our in-house newsletter to the group that there's an expediter online form out there that all expedite drivers go to and place their thoughts and it's like a blog.

One of our drivers, I don't even know who it was, had stated just recently to the other drivers out there in the expedite world that look at what Express wants done. They've not touched our rates. While the other carriers are out there adjusting their cost of transportation and the rates to the drivers Express-1 hasn't. His comment was that we've always been very conservative with our costs in the office so that we don't have to do anything funny with the rates that we pay to them.

He absolutely hit the nail right on the head. I am absolutely committed to controlling our costs and fighting through this economy through the costs that we have in our office and our G&A and not touch the drivers' pay if I absolutely have to and I won't. We see some competitors, major competitors most recently that have been advertising guaranteed rates, now have slipped and they are going to pay a percentage of the haul down to a floor. In fact, we received up to about 25 trucks from a major competitor just within the last two weeks because of the change they made in their pay rate to their drivers.

Also, and we make it clear -- I make it clear in my monthly newsletter to everybody here at Express-1 -- that the sales efforts we've put in place that I indicated in my script to everyone, that's in place -- drive our revenue up, but the drivers and the [VP], as we call them, will benefit from that and they've already begun to benefit from that.

So market is not growing, but market share we're able to go out and capture more of and that benefits our drivers. So we're paying very, very close attention to that and I think that our drivers appreciate that as is evidenced by the comment that we see on the expedite forms out there. That was a good question, John.

You guys have done a nice job.

Thanks, John.

David Campbell, Thompson Davis Company.

I forgot a couple other things. One is a $69,000 charge below the line in fourth quarter. What was that?

A what amount of charge?

$69,000.

Other income expense?

Yes.

Those are impairments, those are write-downs, there are some bank finance charges, stuff like that. John Welch, I think you probably know what the detail of that is. Do you have that in front of you?

Yes, I think you pretty much hit it on the head, Mark. I think you identified those pretty well.

But they're nonrecurring?

For the most part they're, nonrecurring. We have some bank charges from time to time. We have equipment that we abandon, maybe an old computer, something like that, from time to time, but those are not operating expenses.

Right, right. You mentioned in the comments that your blended interest cost is 1.6%. That would be -- on $5 million of debt that's less than $100,000 for the year, is that correct?

Yes, we did pretty good, didn't we?

You will be doing very well. Do you have -- you had $84,000 in the last quarter, right?

Correct. We are at a blended rate right now that's about LIBOR 30 plus, maybe about 1.3%. We benefited somewhat from the financial crisis in the cost of our debt. I think we would certainly give that up if the economy was stronger and our top lines growing a little bit more robustly.

But, (inaudible) $100,000 -- at the current level of debt it's $100,000 for the full year of '09, is that right?

That's about right and debt should start continuing to come down throughout the year as well.

Except you may make acquisitions. Hopefully you'll make some acquisitions to get the revenue going.

Correct.

We're looking.

That's certainly an important part of the equation. Another reason you can't estimate earnings or revenues, rather. Okay. Okay, thanks. I appreciate it.

Thank you, David.

Thank you, there are no further questions at this time. I would like to turn the floor back over to management for closing comments.

Again, I'd like to thank everybody for taking time out of your morning to listen a little bit about our success in the fourth quarter. We are looking favorably towards 2009; we see there are a lot of opportunities within the clouds and we're optimistic about where we can go from here. We appreciate your support over the years. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.