Cannon Express hires CFOex as advisor

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Cannon Express Inc., Springdale, Ark., has engaged financial services company CFOex Inc. to assist in improving the carrier’s financial and operational position. The Knoxville, Tenn.-based CFOex (www.cfoex.com), composed principally of former chief financial officers and senior executives from major public and private trucking companies, provides financial services exclusively to the transportation industry.

For the nine months ended March 31, Cannon Express posted an operating loss of more than $4.9 million, almost $1.5 million more than the same period a year earlier. In its quarterly report filed in May, the company said it had a working capital deficit of $11.8 million at the end of March. The deterioration in financial results and other factors “raise substantial doubt about the ability of the company to continue as a going concern,” the carrier reported in the quarterly filing.

Necessary conditions
Cannon Express’ ability to continue as a going concern, the company reported, depends on significantly improving its operating ratios, generating sufficient cash flow to meet obligations and obtaining financing and the support of stockholders as necessary.

With the assistance of its consultants, Cannon Express drafted a plan it believes will significantly improve its financial position. The plan includes cost-cutting measures to cut out unnecessary overhead, including eliminating a maintenance shift and reducing non-driving administrative staff. Those moves are expected to save the company about $2.5 million a year.

The carrier’s plan also includes operational efficiencies such as reduction of deadhead miles by concentrating on lane optimization. Cannon Express also said in its quarterly report that it was being more selective in accepting new customers and that it was working to improve the rate per mile on each load. The company also now is trying to include fuel surcharges in new contracts.

Debt negotiations
Finally, Cannon Express said it was renegotiating the terms of debt payments due within a year. The largest creditors had indicated a willingness to extend debt terms, the carrier reported in May. The company secured a $6 million working capital line of credit using qualifying accounts receivable as collateral. The company will pay a monthly fee of 1 percent over prime rate, subject to a floor of 6 percent, for balances outstanding against this line. As of March 31, the outstanding balance on the LOC was $2.6 million.

Cannon Express, an irregular-route truckload carrier, operates approximately 775 trucks and 1,450 trailers throughout the continental United States.