SOURCE: CapSource Financial Inc.

November 21, 2007 12:12 ET

CapSource Announces 3rd Quarter 2007 Sales Up 29.3% to $14.2 Million; Nine Months 2007 Sales $35 Million vs. $20.8 Million in 2006; Reports First Operating Income

BOULDER, CO--(Marketwire - November 21, 2007) - CapSource Financial, Inc. (OTCBB: CPSO) announced that for the third quarter ended September 30, 2007, consolidated net sales increased by 29.3%, or $3.2 million, to $14.2 million compared to $11.0 million for the same period last year.

The growth in net sales was driven by the Company's continuing emphasis on expanding trailer and parts sales in its Mexican operations, which increased $2.7 million during the third quarter of 2007 compared to the same period of 2006. In addition, the Company's U.S. operations generated trailer/parts sales of $2.3 million in the third quarter of 2007, an increase of $0.5 million, or 28.4% over the same period of 2006.

Gross profit, which consists of net sales and rental income less cost of sales and operating leases, improved by $147,463, or 22.4%, to $806,159 in the third quarter of 2007 compared to $658,696 in the same period of 2006. This increase in gross profit was due, in part, to the increase in net sales, partially offset by a reduction in the average gross profit per unit sold in our U.S. operations. The decline in average gross profit per unit was the result of pricing pressures brought on by weakening demand for truck trailers in 2007. In order to stimulate sales concurrent with inventory cost increases, the Company refrained from passing on some of the cost increases to its customers.

Fred Boethling, President and CEO, said, "We are gratified with our sales increase and improvement in total gross profit, especially given the general slowdown in the market for trailers. However, we are concerned about the direction of the overall economy and what that may mean for trailer sales in the near-term."

Operating income (loss) consists of gross profit less selling, general and administrative expenses. In the third quarter of 2007, the Company recognized operating income of $29,660, compared to an operating loss of $101,771 for the same period of 2006, an improvement of $131,431. This improvement resulted from the gross profit increase, partially offset by a slight increase in selling, general and administrative expense.

Steven Kutcher, Vice President and CFO, pointed out, "This is the first time in the Company's history that we have been able to report positive operating income in any quarter. It is a milestone that we have worked hard to achieve."

For the nine months ended September 30, 2007, consolidated net sales improved by 68.6% to $35.0 million, compared to $20.8 million for the same period of 2006. This increase resulted from a 51.7% growth in sales volume in 2007, or $10.7 million, of which $7.3 million was due to increased sales volume in the Company's Mexican operations, as well as sales volume increase of $3.4 million in U.S. operations. In addition, price increases of approximately 6.3% and 10.8% in U.S. and Mexican operations, respectively, added $3.5 million to the total growth in consolidated net sales. These price increases were driven principally by the Company's need to raise prices to offset significant increases in the costs to acquire both new and used trailer inventory. The Company has continued to concentrate its working capital in trailer inventory and facilities.

For the nine months ended September 30, 2007, gross profit increased $0.7 million, or 47.6%, to $2.2 million, compared to $1.5 million for the same period of 2006. This improvement resulted from the increase in sales, partially offset by the decline in average gross profit per unit.

Selling, general and administrative expense for the nine months ended September 30, 2007 was $2.5 million compared to $2.8 million for the same period of 2006. In the first nine months of 2006, the Company recorded a one-time non-cash charge of $0.8 million related to the conversion of stockholder debt. Excluding the one-time charge in 2006, selling, general and administrative expense for the nine months ended September 30, 2007 increased by $0.5 million compared to $2.0 million for the same period of 2006. This increase was due in part to additional selling, general and administrative expense of $0.3 million in the Company's U.S. operations, as well as approximately $0.2 million additional expenses in the first nine months of 2007 related to the registration statement filed in conjunction with the Company's private placement that took place in 2006.

For the nine months ended September 30, 2007, the Company recognized an operating loss of $264,600, compared to $1.3 million for the same period of 2006. Excluding the one-time charge of $0.8 million in 2006, operating loss for the first nine months of 2007 was reduced by $242,491 compared to $507,091 for the same period of 2006. This improvement resulted from the gross profit increase, partially offset by the increase in selling, general and administrative expense.

For the nine months ended September 30, 2007, net interest expense was $713,292 compared to $249,735 for the same period of 2006. The increase of $463,557 resulted from additional debt in 2007 utilized to finance inventory growth.

The Company recognized a net loss for the nine months ended September 30, 2007 of $1.1 million, or $0.05 per diluted share, compared to a net loss of $1.6 million, or $0.10 per diluted share for the same period of 2006. This reduction in net loss of $0.5 million includes the improvement of operating income, offset by the increase in net interest expense. The net loss in 2006 includes the one-time charge of $0.8 million.

About CapSource Financial, Inc.

CapSource Financial, Inc. was incorporated in 1996 to take advantage of the North American Free Trade Agreement (NAFTA) and the increased economic activity that NAFTA triggered when the world's largest free trade area was created by linking 406 million people in Mexico, the U.S. and Canada producing more than $11 trillion worth of goods and services. Mexico is now the United States' second largest trading partner with an average of $650 million in goods crossing the border each day. U.S. trade with Mexico has increased nearly 500 percent -- from $48 billion to $239 billion since the passage of NAFTA. The vast majority of this trade moves by truck.

CapSource Financial, Inc., a U.S. corporation with its principal place of business in Boulder, Colorado, is a holding company that sells and leases dry van and refrigerated truck trailers and manages a lease/rental fleet of over-the-road truck trailers and related equipment through its wholly owned Mexican operating subsidiaries. The Company is the only authorized Hyundai dealer in Mexico. In addition, the Company sells dry van and refrigerated truck trailers in California and Texas through its subsidiary Capsource Equipment Co. d/b/a Prime Time Trailers. In both California and Texas the Company is the authorized Hyundai Trailer dealer. CapSource's common stock trades on the electronic bulletin board under the symbol CPSO.

Certain matters discussed within this press release may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although CapSource Financial, Inc. believes the expectation reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectation will be attained. Factors that could cause actual results to differ materially from our expectations include financial performance, changes in national economic conditions, economic conditions in Mexico, availability of financing, governmental approvals and other risks detailed from time to time in the company's SEC reports.

For Additional Information Contact: CapSource: Fred Boethling at (888) 574-6744

Visit the company's website: www.capsource-financial.com

Contact Information

  • Contact:
    CapSource
    Fred Boethling
    (888) 574-6744