As some drivers predicted when Idleaire first came out, Idleaire is not becoming the profitable venture its backers envisioned. The company has enough cash to keep it going for a while, but the language of its 1Q, 2007 quarterly report brings the writing on the wall into focus.
"Management believes that the Company has sufficient resources to fund its open commitments on purchase orders and its operations during 2007; however, depending on the cash from operations over the remainder of 2007, the Company may be required to limit its site development in 2007 to assist in this regard. Additionally, the Company may be required to limit its site development and seek additional financing in 2008 and beyond to maintain liquidity and fund its operations. Any sale of additional equity or issuance of debt securities may result in dilution to stockholders, and there can be no assurance as to the availability or terms upon which additional funding sources may be available in the future, if at all."
Management holds out hope, saying, "We expect to incur net losses for the foreseeable future as we continue to deploy a critical mass network of locations, expand fleet sales efforts and grow operations. The goal is to increase our utilization and revenues to generate economies of scale which we believe, when combined with relatively flat operating expenses, will allow us to reach profitability."
Management also says, "Since inception, we have incurred losses every fiscal quarter through March 31, 2007. We expect to incur increasing operating expenses as we continue to construct new installation sites. We are currently experiencing negative operating margins and negative cash flows from operations as the cost of operating our ATE® system network exceeds the revenue generated from the usage of the ATE® system network. We cannot provide any assurance that we will achieve profitability, when we will become profitable, the sustainability of profitability should it occur, or the extent to which we will be profitable. Our ability to become profitable is dependent in part upon successful expansion of our ATE® systems nationwide, and achieving greater utilization of our ATE® systems."
Utilization of sites that have been open one year or more is 22.2% (one site used 24 hours per day would be used 100%). No one expects utilization to be 100% since most spots will always be open during the day when trucks are rolling.
Discounted fleet sales are Idleaire's primary revenue source. It seems that while utilization is up from year-ago levels, most of what they are selling is being sold at deep discounts. Government grant money helped get Idleaire started but that capital source will dry up if it has not already done so.
In my opinion, Idleaire has a problem that they must sell their way out of. But the problem with that is not enough truckers and trucking companies are willing to buy what Idleaire sells at the price Idleaire needs to achieve a positive cash flow. Generators being added to trucks and improved internet access from Idleaire alternatives compound Idleaire's problem.
Link to full report:
http://www.sec.gov/Archives/edgar/data/1162298/000095013307002349/w35028e10qsb.htm
The company may become viable in its second life; that is after its first owners are forced to dump it at a loss and it is purchased by its next owners at fire-sale prices. If not, I can't help but wonder who will get stuck with the burden of tearing the Idleaire eyesores out of truck stops and how long it will take.
