FOR IMMEDIATE RELEASE
March 27, 2007
Western Express and Smithway Motor Xpress Announce Acquisition Agreement
Smithway Reports Fourth Quarter and Year-End Earnings
Nashville, Tennessee and Fort Dodge, Iowa — Western Express, Inc. and Smithway Motor Xpress Corp. (Nasdaq Capital Market: SMXC), two premier truckload carriers that haul diversified freight nationwide, announce agreement on a plan for Western to acquire Smithway. The acquisition terms have been approved by both companies’ Boards of Directors, and the transaction is expected to close in the summer of 2007, subject to approval by Smithway’s stockholders and other customary closing conditions.
The acquisition is expected to build upon Western’s established dry van operation by combining the dry van operations of both companies. Additionally, Smithway’s flatbed operation is expected to offer Western the market presence and reputation to make the combined flatbed operation a force in the industry. On a combined basis, the companies would operate approximately 1,600 tractors in dry van operations and 1,400 tractors in flatbed operations. Smithway’s experienced senior management team and employees are expected to remain at Smithway and play integral roles in delivering the companies’ combined services to the truckload market.
Wayne Wise, Chairman, President, and Chief Executive Officer of Western, said, “Western is very excited by the prospect of adding Smithway’s operations to our existing business. Western has a history of growing through strategic acquisitions, and the acquisition of Smithway would be the next chapter in Western’s growth story. The combination of the two companies would place us in the top 15 truckload carriers measured by revenue, creating more opportunity for our combined customer, employee, and driver bases. Besides the many obvious synergies between the two companies’ dry van and flatbed operations, the Smithway people were key to our interest in a transaction. We are always looking for strong performers, and we look forward to working with the existing management team as they continue to manage and grow their business from their existing locations.”
“Our Board of Directors is pleased with the terms of this transaction, which it believes provides great value to Smithway’s stockholders,” said G. Larry Owens, President and Chief Executive Officer of Smithway. “The addition of Smithway’s fleet and truckload transportation services brings tremendous value to Western, creating an even stronger company in the truckload market. By joining our complementary services, the combined company gives the Smithway business operations the right platform from which to achieve their full potential. In addition, our employees will benefit by being part of a larger, more diversified organization.”
When asked, Matt Neal, Director of Recruiting at Western Express, said he looks forward to the coming year. “It’s going to be a fun year!”
Under the acquisition agreement, approved by both Boards of Directors, the stockholders of Smithway will receive $10.63 in cash for each share of Smithway for a total equity value of approximately $54 million and a total enterprise value, including Smithway’s existing debt, of approximately $90 million. The transaction is structured as a merger, whereby Smithway will become a wholly-owned subsidiary of Western. The transaction is expected to close in the summer of 2007, subject to approval by Smithway’s stockholders and other customary closing conditions.
Morgan Keegan & Company, Inc. served as financial advisor, and Faegre & Benson LLP served as legal advisor to Smithway. Morpheus Capital Advisors LLC served as financial advisor and Scudder Law Firm, P.C., L.L.O. served as legal advisor to Western. JPMorgan Chase Bank has committed financing for the transaction, subject to customary conditions.
Smithway Fourth Quarter and 2006 Earnings
Smithway also announced its financial and operating results for the fourth quarter and year ended December 31, 2006.
For the quarter, Smithway experienced a net loss of $42,000 compared to net earnings of $775,000 for the same quarter in 2005. The fourth quarter included an expense of $1.5 million, or $948,000, net of the resulting tax benefit, for an uninsured loss plus legal expenses relating to the settlement of litigation. Excluding the expense for this uninsured loss, net earnings for the quarter were $906,000, an improvement of 20.0% as compared to the same quarter of 2005. For the year ended December 31, 2006, net earnings were $4.3 million compared $4.2 million in 2005. The year ended December 31, 2006 also included the $948,000 expense for an uninsured loss described above. Excluding the expense for this uninsured loss, net earnings for 2006 were $5.2 million, an improvement of 23.3% from 2005.
For the fourth quarter of 2006, operating revenue decreased approximately 11.7% to $51.2 million from $58.0 million for the corresponding quarter in 2005. Operating revenue, excluding fuel surcharge revenue of $7.3 million, decreased approximately 9.3% to $43.8 million from $48.3 million, excluding fuel surcharge revenue of $9.7 million, for the corresponding quarter in 2005. For the fourth quarter of 2006, net loss was $42,000 or $0.01 per basic share and diluted share, compared with net earnings of $775,000, or $0.15 per basic share and diluted share, for the same quarter in 2005. The net loss for the fourth quarter of 2006 included an expense of $948,000 for the uninsured loss described above. Without this expense, Smithway would have had net earnings for $906,000, or $0.18 per basic and diluted share.
For the year, operating revenue increased approximately 3.8% to $228.5 million from $220.4 million in 2005. Operating revenue, excluding fuel surcharge revenue of $36.1 million, increased approximately 0.9% to $192.7 million from $191.0 million, excluding fuel surcharge revenue of $29.4 million, in 2005. Net earnings were $4.3 million, or $0.86 per basic and $0.84 per diluted share, compared with net earnings for $4.2 million, or $0.86 per basic and $0.84 per diluted share, in 2005. Net earnings for 2006 included an expense of $948,000 for the uninsured loss described above. Without this expense, net earnings would have been $5.2 million, or $1.05 per basic share and $1.03 per diluted share.
Owens commented, “Our fourth quarter results were achieved in a difficult operating environment, including continued high fuel costs, increased labor costs and some softening of demand. Despite these conditions, as a result of careful expense control, our net earnings improved after adjusting for the one-time expense we experienced as a result of an uninsured loss associated with the settlement of a lawsuit. We are happy to have this lawsuit behind us and feel it is noteworthy that the associated uninsured loss is much lower than the $11.4 million default judgment originally entered against our subsidiary in this case.
“Our operating ration, excluding fuel surcharge revenue and the uninsured loss, for the quarter was 95.8% compared to 95.2% during the forth quarter of 2005. Our operating ratio for the entire year, excluding fuel surcharge revenue and the uninsured loss, improved to 94.3%, from 94.9% during 2005.
“Many of our operating statistics show improvement for the year, including revenue per mile and fleet size. We are one of the few companies providing an environment to increase our independent contractor fleet, which grew once again this year.
“Costs, on the other hand, continue to impact our business. During the quarter, average fuel prices decreased 6.2% to $2.44 per gallon compared to $2.60 per gallon in the fourth quarter of 2005, but remained at historically high levels. Fuel surcharge revenue per gallon decreased approximately 16% as a result of the decrease in fuel prices and a less favorable environment for passing fuel surcharges on to customers. During 2006, we increased driver wages in response to the market. We continually monitor controllable expenses, and our truck to non-driver employee ration remained at approximately 5.0 in the 2005 and 2006 quarters.
“We are proud of our fourth quarter and year-end results which were achieved during a time of challenging conditions in our industry. We continually work to contain costs and improve our operations so that we can positively impact future earnings. While we have experienced softness in our core truckload markets during January and February of 2007, we have witnessed improvement in March.”
Smithway is a truckload carrier that hauls diversified freight nationwide, concentrating primarily on the flatbed segment of the truckload market. Its Class A Common Stock is traded on the Nasdaq Capital Market under the symbol “SMXC.”
Western Express is a rapidly growing truckload carrier with a history of strategic acquisitions. The company has dry van terminals in Nashville, Tennessee; Decatur and Atmore, Alabama; Fontana, California; Wurtsboro, New York; Suffolk, Virginia; and Kansas City, Missouri.