Overview

Chesapeake Logistics, which on October 2, 2006, merged into Last Mile Logistics Group, Inc., has established itself as a premier third party logistics provider in the Mid-Atlantic market. The Company has focused on a fast-growing market segment, providing services for the “last mile” of transportation to the consumer: home delivery and related services for heavy consumer goods (furniture, televisions, appliances, bedding, medical equipment and exercise equipment). Services have been provided on merchandise from Pier 1 Imports, Crate & Barrel, Sony, The Sharper Image, Walmart.com, Panasonic, Brookstone, Golden Technologies, Herman Miller, Mitsubishi, LG, JC Penney, MasterBrand and others. The Company's vision is to professionalize the home delivery of heavy freight with a well-defined, tech-supported, service-focused business process offered to all companies that need reliable home delivery service in the Mid-Atlantic market, in an industry with few capable service providers.

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Investment Highlights

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Market Trends and Market Size

In an article published in the Fall 2003/Winter 2004 issue of Mercer on Travel and Transport, the authors estimated the U.S. market for the delivery of appliances and furniture at that time to be approximately $7 billion. Adding the home delivery of televisions and medical equipment to this value, and based on the growth in internet sales over the past two years, the Company has determined that $10 billion is a conservative estimate of the total market value of the heavy goods home delivery industry in the United States. With 10% of the US houses in this region per the US Census Bureau (Maryland, DC, Delaware, Virginia, Pennsylvania and West Virginia), that translates into a $1 billion market in this region alone. With a conservative estimate to capture 5% of the regional market for heavy goods home delivery, this goal translates into a $50 million business, even before the Company ventures into other markets.

Several converging trends are contributing to this market growth, including the following:

• Delivery and related services needed for retailers to differentiate and add value.
• Larger % of sales via internet: per Forrester Research, online sales will increase from $172 billion in 2005 to $329 billion in 2010.
• Continued trend to outsource logistics: In a 2005 Study conducted by Accenture and Northeastern University, CEO’s of the nation’s largest third party logistics (3PL) firms expect over 15% annual growth rates over the next five years. A 2006 3PL Study conducted by CapGemini, SAP, Georgia Tech and DHL concluded that North American companies expect logistics outsourcing to jump from 48% of logistics expense to 56% over the next few years.
• Growing presence of eBay and other online auctions are changing distribution patterns of products, and creating niche opportunities for distribution service providers.
• Emergence of “last-mile” providers: In an article by two of the most respected logistics experts, one of their 8 predictions for the 21st Century is that two types of carriers will emerge: long haul and “last mile”.
• Aging, retiring baby boomers will demand greater home delivery services of items ranging from home electronics to medical equipment.

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Acquisition Strategy

Benefits:

Acquiring other regional providers of heavy goods home delivery is an integral component of Chesapeake’s growth strategy. The benefits of this rollup strategy are as follows:

• Greater density in local market allows for greater efficiencies – savings on driver wages, fuel and vehicle costs
• Immediate gain in sales – contributes to financial growth, adding to the number of existing customers and reducing risk associated with any potential loss of one large customer
• Adds delivery crew personnel, reducing risk of loss of labor, reduces need and costs associated with recruiting as a percentage of sales
• Adds overall talent to organization with previous owners/managers – this facilitates opportunity to focus specific owner talents and interests – operations, business development, marketing and public relations
• Adds facilities to extend Company’s reach into outer markets, and allow for greater route efficiency within local market
• Enhances capability to handle larger regional business opportunities
• Greater facility throughput and potential to consolidate facilities
• Proof of strategy: Demonstrating the benefits of a rollup strategy in the local market will serve as a model to jumpstart a national organization.

Acquisition Target Identification

LMLG has already identified seven companies to date, all of whom provide delivery, storage and related services in the Mid-Atlantic market, as potential acquisition candidates. LMLG will continue to target additional organizations, and will initiate communication with the owners over the next few months.  Assuming the added revenue of acquired businesses of $2.0M in annual revenue per business acquired, with 5 acquisitions in total planned, three in 2008, two in 2009, the company plans to increase revenue over $10M in the next few years via acquisitions.

Acquisition Route Density Example

1) Take customer delivery route data for one day for 3 separate delivery companies (A, B & C)

2) Estimate pre-merger costs of routes based on miles, hours and resources

3) Assume merger of all three companies A, B & C, and using same route data, build new delivery routes of combined company

4) Analyze financial improvements

• Company A: 10 stops, 129.5 Miles, 7 Hrs 53 Min
• Company B: 10 Stops, 122.2 Miles, 7 Hrs 48 Min
• Company C: 10 Stops, 134.2 Miles, 8 Hrs 55 Min

5) Financials of 3 Pre-Merger Routes:

Total gross margin percentage was 32.9% with a Gross Margin value of $887 on operating costs of $1,813.

6) Post Merger Route Stats

• LMLG Route #1: 15 Stops, 119.4 Miles, 9 Hrs 45 Min
• LMLG Route #2: 15 Stops, 154.5 Miles, 10 Hrs 31 Min

7) The resulting geographic density of customer stops, by merging three delivery businesses, creates immediate economic benefits.

• Number of trucks required to deliver to 30 customers drops from 3 to 2, a 33% reduction
• Number of miles routed to deliver from LMLG location to 30 customers drops from 386 to 274, a 29% improvement
• Number of hours to deliver from LMLG location to 30 customers drops from 24.6 to 20.3, a 17% improvement

8) Financials of 2 Post Merger Routes:

Total gross margin percentage was 43.3% with a Gross Margin value of $1,169 on operating costs of $1,531.

9) Financial Improvement from Merger Density:

• The Company's gross margins improved from 32.9% to 43.3% after the route merger. Gross margins improved by $282 in this example.

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Recession Proof

Retailers need to cut costs during tough economic times - outsourced delivery to 3PL companies like LMLG increases as a result.

• LMLG 4th Quarter Revenue was 45% higher than 2006
• January 2008 to date is 48% higher than 2007 for LMLG
• In the last recession - 3PL Revenues increased

“Revenue of 3PLs increased 7.4% to a total of $60.8 billion in 2001, nearly double the revenues of 1996”.

Richard Armstrong
Modern Materials Handling Magazine
10/1/02

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How Companies Benefit from using LMLG

• Barcode scanning
• Vehicle Routing
• Resource Planning
• Delivery Crew Dispatch
• Online Ordering
• Real-time GPS tracking
• Electronic signature POD

LMLG's Technology Example:

1) Customer places order with retailer

2) Retailer transmits delivery order to Last Mile Logistics (fax, e-mail, Web site)

3) Last Mile Logistics contacts customer within 1 business day to establish a date and time window (4 hour)

4) Retail team designs route and assigns crew and equipment

5) Merchandise received or picked up by Last Mile Logistics

6) Customer notified 30 minutes prior to delivery

7) Last Mile Logistics arrives on time at customer location with the merchandise

8) Merchandise delivered to room of choice

9) Packaging removed

10) Items assembled

11) Satisfied customer accepts order with POD signature

12) Proof of Delivery - Name, Date, Time, Signature transmitted to retailer by fax or Web site

Recent News and Press Releases

Last Mile Logistics Group Awarded Distribution Services for Top 100 3PL
Marketwire (Wed, May 28)

 

LAST MILE LOGISTICS GROUP, INC. Financials
EDGAR Online Financials(Tue, Apr 15)

LAST MILE LOGISTICS GROUP, INC. Files SEC form 10KSB, Annual Report
EDGAR Online(Mon, Apr 7)

Last Mile Logistics Group (LMLG.OB) Improves Delivery, Partners With CXT Software
Marketwire(Mon, Mar 31)

Local 3PL Providers Like Last Mile Logistics (LMLG.OB) Part of Near-Sourcing Trend
Marketwire(Thu, Mar 20)

Local Supply Chain Logistics Reduces Carbon Footprint, Saves on Costs
Marketwire(Mon, Mar 17)

Last Mile Logistics Group, Inc. Announced as Winner in National Business Plan Competition
Marketwire(Mon, Mar 3)

Last Mile Logistics Group Initiates Services for Online Furniture Retailer
Marketwire(Thu, Feb 28)

Last Mile Logistics Group Announces Acquisition Strategy
Marketwire(Tue, Feb 19)

Last Mile Logistics Group Expands Services With Deliveries for Premier Cabinet Manufacturer
PrimeNewswire(Wed, Nov 14)

Last Mile Logistics Group Reports Record Revenue for Third Quarter
PrimeNewswire(Tue, Nov 13)

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Management

Regina Flood
Chairman/CEO of Chesapeake Logistics, Regina Flood has over 25 years of logistics and management experience. Her background includes extensive experience in operations management, customer service, strategy formulation, sales, contract negotiation, ERP integration, multi-year logistics systems projects and supply chain process reengineering. Prior to Chesapeake, Regina was with PriceWaterhouseCoopers, successfully leading large-scale business process and systems implementation projects in the areas of distribution, order management and manufacturing. Clients included Rhone Poulenc Rorer, Becton Dickinson, Fresenius Medical Care, W.R. Grace (NMC), Lucent Technologies and Royal Caribbean Cruise Lines. Prior to PWC she worked for Ryder, one of the top global logistics companies. Regina has an MBA in Operations Research from Loyola University of Chicago and a BS from the University of Notre Dame.

Brian Flood
President/COO of Chesapeake Logistics, Brian Flood has over 25 years of logistics and finance leadership. His background includes experience in transportation and financial management, financial planning, quality process implementation, business development, pricing and supply chain process reengineering. He developed a method for measuring the value of logistics improvements, trademarked by the USPTO as LVA, published in a leading logistics periodical. Prior to Chesapeake, Brian was Senior Vice-President/GM and CFO for TNT Logistics, the U.S. division of a $12 billion worldwide logistics organization. Prior to TNT, Brian worked for Ryder, Beatrice and Ernst & Young. A CPA, he has an MBA in Finance & Marketing from the University of Chicago and a BBA in Accounting from the University of Notre Dame.

Barry Utz
Vice President/Controller of Chesapeake Logistics, Barry Utz has over 20 years experience in both start-up and multi-billion dollar international companies specializing in supply chain management, distribution and manufacturing. Most recent experience was as a Vice President of Finance with a segment of Sylvan Learning Centers. Prior to that served as Vice President of Finance and Administration for Optinel Systems, a venture capital funded startup company developing systems for the cable industry. Barry has acquisition experience, and led preparation for investor presentations. A CPA, other executive financial positions were with Formica Corporation, Goldwell Cosmetics and TNT Logistics.

Lance Fitzhugh
Operations Manager of Chesapeake Logistics, Lance Fitzhugh has 18 years of experience in the transportation industry. Lance has been responsible for driver recruiting and oversight, route design and planning, driver safety programs, DOT reporting and all aspects associated with managing a warehouse and transportation company. Lance’s professional background includes working for Waste Management, Preston Trucking, Carolina Freight and Roadway Express.
 

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Contact

Last Mile Logistics
6675 Amberton Drive, Suite 12
Elkridge, MD 21075
E-Mail: IR@lastmilelogisticsgroup.com
Phone: 301.931.1771
Fax: 301.937.6810

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FORWARD LOOKING STATEMENTS

This report includes forward-looking statements that reflect Last Mile Logistics Group Inc. current expectations about its future results, performance, prospects and opportunities. Last Mile Logistics Group Inc. has tried to identify these forward-looking statements by using words and phrases such as "may," "will," "expects," "anticipates," "believes," "intends," "estimates," "plan," "should," "typical," "preliminary," "we are confident" or similar expressions. These forward-looking statements are based on information currently available and are subject to a number of risks, uncertainties and other factors that could cause Last Mile Logistics Group Inc.'s actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. These risks, uncertainties and other factors include, without limitation, the Company's growth expectations and ongoing funding requirements, and specifically, the Company's growth prospects with scalable customers, and those outlined above. Other risks include the Company's limited operating history, the Company's history of operating losses, consumers' acceptance, the Company's use of licensed technologies, risk of increased competition, the potential need for additional financing, the terms and conditions of any financing that is consummated, the limited trading market for the Company's securities, the possible volatility of the Company's stock price, the concentration of ownership, and the potential fluctuation in the Company's operating results.

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