SEATTLE, Nov. 14 /PRNewswire-FirstCall/ -- Stonepath Group
(AMEX:STG), a global logistics services organization, today
reported financial results for the quarter and nine-month period
ended September 30, 2006. For the third quarter of 2006, Stonepath
reported revenues from continuing operations decreased 19% to $65.3
million, compared to $81.0 million in the same period a year ago.
Domestic Services segment revenues declined 36% to $18.9 million
for the quarter, while revenues from the International Services
segment revenues decreased 10% to $46.4 million. "Domestic Services
revenues were impacted by the loss of a major national retail
account during the second quarter of this year and reduced volume
from an additional account in the third quarter," stated Bob
Arovas, who was named Chief Executive Officer last month. "We have
taken steps to better align our operating expenses with the current
revenue levels, including reducing employee headcount, facility
costs and other administrative expenses. I expect that we will
continue to see further changes within our Domestic Services
segment in the near term." "We generated decent growth in our
non-China Asian operations, though revenues from our China-based
businesses declined," added Dennis Pelino, Chairman. "The freight
forwarding and logistics markets are more fragmented in Asia than
domestically, and therefore provide greater opportunities for us to
develop new business and generate better margins. Much of our
attention will be focused on our International Services segment as
we attempt to bring Stonepath to profitability." On October 19,
2006, Stonepath Group completed the sale of Stonepath Logistics
International Services, Inc. ("SLIS") and Stonepath Logistics
(Germany) GmbH subsidiaries to JTM Acquisition Corporation. The
total consideration was $18.0 million, including closing cash
payments of $12.3 million, which were used to reduce outstanding
debt, plus the assumption of certain liabilities associated with
SLIS. These operations are reported as discontinued operations,
with combined revenues and expenses reported on a net of tax basis.
Including a $1.4 million loss on the sale, Stonepath reported a
loss of $1.7 million from discontinued operations for the third
quarter of 2006. In the third quarter a year ago, Stonepath earned
$1.9 million from these operations. Net revenues from continuing
operations were $9.9 million in the third quarter of 2006, down 36%
from $15.5 million in the September 2005 quarter. In the third
quarter of 2006, the Domestic Services segment generated $6.4
million of net revenue, which is total revenue less transportation
and warehousing expenses, a decline of $5.0 million or 44% over the
same period last year. The International Services segment recorded
$3.5 million of net revenue in the third quarter of 2006, a decline
of $600,000, or 14% from the third quarter of 2005. "While the sale
of the U.S.-based portion of our International Services operation
makes comparing results to a year ago difficult, there were a
number of non-cash items that further complicate matters," state
Bob Christensen, Chief Financial Officer. "In the third quarter, we
recorded a total asset impairment charge of $20.1 million,
primarily to adjust for the likely non- recovery of goodwill from
an acquisition made in 2001. In addition, there was a $700,000
non-cash credit relating to the accounting for derivatives
contained in some of our financing agreements, and a $1.0 million
cash credit relating to the settlement of a lawsuit with a previous
technology service provider. In the third quarter of 2005, the
results included a charge for $700,000 related to the accounting
for derivatives." Stonepath reported a net loss from continuing
operations of $20.4 million, or $0.46 per basic share and diluted
share, compared to a net loss of $2.9 million, or $0.06 per share
in the same quarter last year. The net loss including discontinued
operations was $22.1 million, or $0.50 per basic and diluted share,
compared to a net loss of $1.0 million, or $0.02 per share for the
same period in 2005. Nine-Month Results For the first nine months
of 2006, Stonepath reported revenues from continuing operations of
$195.7 million, down 10% from $217.4 million in the same period
last year. Net revenues were $34.0 million, down 25% from $45.5
million a year ago. The net loss from continuing operations was
$24.3 million, or $0.56 per diluted share, compared to a net loss
from continuing operations of $12.3 million, or $0.29 per diluted
share in the first nine months of 2005. Including the discontinued
operations, the net loss was $25.3 million, or $0.58 per share
year-to-date 2006, compared to a loss of $8.9 million, or $0.29 per
diluted share in the first nine months of 2005. Last year,
Stonepath recorded restructuring reserves related to continuing
operations of $3.1 million, which was related to the closure of
certain facilities and personnel related costs. "Our operating
results are beyond disappointing and were the driving force behind
the sale of the US-based portion of our international business,"
Arovas said. "We utilized the proceeds to reduce our debt to a more
manageable level, but further immediate reductions are required. We
are looking at various strategic alternatives to further reduce
debt, address our liquidity issues, and enhance operating
capabilities both in the US and overseas. We are also focused on
revenue generation through increased sales activities, improved
incentive systems and alliances with others. However, none of these
efforts can generate positive results if we are incapable of
working out an improved financing arrangement with our US lender,
whose recent discretionary actions, as described more fully in our
Form 10-Q, may continue to result in limited further borrowing
ability under our credit facility. "When we sold SLIS, we stated
that we would ramp up our shareholder communications, including
instituting quarterly conference calls," Arovas continued. "At this
point, we have many uncertainties that require resolution before we
can adequately address the questions that our investors and
interested parties may have. Thus we will delay our conference call
until these uncertainties are resolved. "We appreciate the support
of our customers, vendors and employees as we proceed through this
very difficult period," Arovas added. "We have, and will continue
to provide our customers with the highest levels of service. This
will be the hallmark of our recovery." About Stonepath Group
(AMEX:STG) Stonepath (www.stonepath.com) is a global, third-party
logistics organization providing a full range of transportation and
distribution solutions to multinational and local businesses
including a diverse client mix of retail leaders, automotive and
technology concerns, government agencies, and defense contractors.
This Press Release includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended,
regarding future results, levels of activity, events, trends or
plans. We have based these forward- looking statements on our
current expectations and projections about such future results,
levels of activity, events, trends or plans. These forward- looking
statements are not guarantees and are subject to known and unknown
risks, uncertainties and assumptions about us that may cause our
actual results, levels of activity, events, trends or plans to be
materially different from any future results, levels of activity,
events, trends or plans expressed or implied by such
forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as "guidance,"
"may," "will," "should," "could," "would," "expect," "plan,"
"anticipate," "believe," "estimate," "continue" or the negative of
such terms or other similar expressions. Although it is impossible
to identify all of the factors that may cause our actual results,
levels of activity, events, trends or plans to differ materially
from those set forth in such forward-looking statements, such
factors include the inherent risks associated with: (i) our ability
to sustain an annual growth rate in revenue consistent with recent
results, (ii) our ability to achieve our targeted operating
margins, (iii) our ability to compute our restructuring efforts
within the costs we now expect, (iv) our ability to realize the
planned benefits from our restructuring efforts, (v) our dependence
on certain large customers, (vi) our dependence upon certain key
personnel, (vii) an unexpected adverse result in any legal
proceeding, (viii) competition in the freight forwarding, logistics
and supply chain management industry, (ix) the impact of current
and future laws affecting the Company's operations, (x) adverse
changes in general economic conditions as well as economic
conditions affecting the specific industries and customers we
serve, and (xi) regional disruptions in transportation. Other
factors that might cause or contribute to such a discrepancy
between expected and actual results include, but are not limited
to, those factors identified in our Securities and Exchange
Commission filings (including our Annual Report on Form 10-K for
2005), other public documents and recent press releases, which can
be found on our corporate web site, www.stonepath.com. Readers are
cautioned not to place undue reliance on forward-looking
statements, which speak only as of the date made. We undertake no
obligation to publicly release the result of any revision of these
forward-looking statements to reflect events or circumstances after
the date they are made or to reflect the occurrence of
unanticipated events. STONEPATH GROUP, INC. Consolidated Balance
Sheets (dollars in thousands) Assets September 30, December 31,
2006 2005 (UNAUDITED) Current assets: Cash and cash equivalents
$7,314 $4,601 Accounts receivable, net 40,247 69,836 Prepaid
expenses and other current assets 1,376 2,312 Assets held for sale
28,579 - Total current assets 77,516 76,749 Goodwill 13,728 43,762
Technology, furniture and equipment, net 2,833 6,856 Acquired
intangibles, net 2,691 5,212 Other assets 2,150 2,703 Total assets
$98,918 $135,282 Liabilities and Stockholders' Equity Current
liabilities: Short-term debt $20,197 $14,039 Accounts payable
30,926 50,054 Earn-outs payable 490 3,513 Accrued payroll and
related expenses 2,096 3,393 Accrued restructuring costs 232 1,485
Accrued expenses 6,163 7,516 Liabilities held for sale 16,090 -
Total current liabilities 76,194 80,000 Long-term debt 4,013 1,137
Long-term earn-outs payable - 2,255 Other long-term liabilities 223
4,210 Deferred tax liability 744 2,898 Total liabilities 81,174
90,500 Minority interest 4,057 6,478 Convertible preferred stock
1,804 1,804 Stockholders' equity: Common stock 44 44 Additional
paid-in capital 223,208 222,779 Accumulated deficit (211,716)
(186,581) Accumulated other comprehensive income 347 258 Total
stockholders' equity 11,883 36,500 Total liabilities and
stockholders' equity $98,918 $135,282 STONEPATH GROUP, INC.
Consolidated Statements of Operations (UNAUDITED) (In thousands,
except per share data) Three months ended Nine months ended
September 30, September 30, 2006 2005 2006 2005 Total revenue
$65,251 $80,973 $195,684 $217,432 Cost of transportation 55,337
65,502 161,641 171,928 Net revenue 9,914 15,471 34,043 45,504
Personnel costs 6,343 7,810 21,273 24,586 Other selling, general
and administrative costs 4,369 6,160 15,921 20,865 Depreciation and
amortization 915 1,056 2,592 3,136 Asset impairment 20,069 - 20,069
- Litigation settlement (1,038) - (1,038) - Restructuring charges -
- (735) 3,130 Income (loss) from operations (20,744) 445 (24,039)
(6,213) Other income (expense): Interest expense, net (2,185) (953)
(5,125) (2,086) Change in fair value of derivatives 661 (740) 3,967
(740) Loan refinancing costs - (912) - (912) Other income
(expense), net 4 1 5 3 Loss from continuing operations before
income tax expense and minority interest (22,264) (2,159) (25,192)
(9,948) Income tax benefit (expense) 1,791 (427) 1,257 (1,526) Loss
before minority interest (20,473) (2,586) (23,935) (11,474)
Minority interest 153 (297) (118) (902) Loss from continuing
operations (20,320) (2,883) (24,053) (12,376) Discontinued
operations: Income (loss) from operations, net of tax (325) 1,881
559 3,428 Loss on disposal of business segment, net of tax (1,371)
- (1,371) - Income (loss) from discontinued operations (1,696)
1,881 (812) 3,428 Net loss (22,016) (1,002) (24,865) (8,948)
Preferred stock dividends (90) - (270) - Net loss attributable to
common stockholders $(22,106) $(1,002) $(25,135) $(8,948) Basic and
diluted loss per common share: Continuing operations $(0.46)
$(0.06) $(0.56) $(0.29) Discontinued operations (0.04) 0.04 (0.02)
0.08 Loss per common share $(0.50) $(0.02) $(0.58) $(0.21)
DATASOURCE: Stonepath Group CONTACT: Jeff Meston of The Cereghino
Group, +1-206-802-3927 Web site: http://www.stonepath.com/
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