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TWST: What is Target Logistics?
Mr. Hettleman: Target Logistics is a leading US-based freight forwarder
with $138 million in operating revenue for our last reported fiscal
year, which ended in June 2005. We have a worldwide network that
includes 34 offices throughout the US and an international network of
agents, which give us the ability to provide the door-to-door movement
of goods anywhere in the world. Based on current results of $120 million
of operating revenues for the first nine months of our fiscal 2006, we
are on a run-rate to achieve $160 million for our 2006 fiscal year ended
June 2006. We have reported 14 consecutive profitable quarters. Our
year-on-year growth in operating income increased 115% from 2004 to 2005
and by 88% for the first nine months of 2006 versus 2005. As of March
31, 2006, we had over $15 million in cash and available credit to
support our future growth plans. Target competes in an industry that is
large and growing. According to Armstrong & Associates, a leading
consulting firm in the 3PL market, the US 3PL market for 2004 was $89.4
billion and has grown at a 14.2% compound annual growth rate since 1996.
Target competes successfully by providing time-sensitive and value-added
services, managing all aspects of the movement of freight. We don't own
any transportation assets such as trucks and planes, which gives us the
flexibility to meet our customers' requirements in the most effective
way and to adapt quickly to change. Also, we focus on shipments that are
larger than 50 pounds. Our average shipment size is approximately 1,400
pounds. At the core of our business model is leverage. We use our $160
million of freight volume to obtain discounts from our transportation
providers. This gets accomplished in two ways. On an annual basis, we
are able to negotiate discounted contract rates based on our large and
growing volumes from the previous year. On a daily basis, we consolidate
multiple shipments that are going between city pairs. For example, we
might have five shipments going from New York to Los Angeles and each
shipment weighs 1,400 pounds. We combine these and are tendering one
shipment of 7,000 pounds. We not only get a discount based on our
overall annual volume, but we get a lower rate on a daily basis as our
consolidated shipment size increases. Our business model takes advantage
of the growth in our freight volume to both increase our discounts by
moving the freight in a concentrated way, and to also increase the
consolidations that we have on a daily basis. We also leverage our SG&A.
We have seen steady decreases in SG&A as a percentage of revenue over
the past four years, going from 33% in fiscal 2003 to 31.7% in fiscal
2004 to 30.1% in our year ending June 2005. And for the first nine
months of fiscal 2006, it's down to 28.4%. The combination of these
leverages has allowed us to see strong year-on-year growth in operating
income.
Tickers included in this excerpt: TLG
For more information call (212) 952 7433. The
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not make stock recommendations.
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