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XPO Logistics Announces Second Quarter 2012 Results

Expands Operations with Acquisition of Kelron Logistics and Cold-starts

GREENWICH, Conn.--(BUSINESS WIRE)--Aug. 6, 2012-- XPO Logistics, Inc. (NYSE: XPO) today announced financial results for the second quarter of 2012. Total revenue was $54.5 million for the quarter, a 23.7% increase from the same period last year.

Net loss was $5.2 million for the quarter, compared with net income of $914,000 for the same period last year. The company reported a second quarter net loss available to common shareholders of $5.9 million, or a loss of $0.34 per diluted share, compared with earnings of $0.11 per diluted share, for the same period in 2011.

Adjusted earnings per share (“adjusted EPS”), a non-GAAP financial measure, was a loss of $0.17 for the quarter, excluding a non-cash charge of $3.0 million related to a valuation allowance for deferred tax assets. EPS and adjusted EPS include a loss of $0.04 per diluted share related to $750,000 in cumulative preferred dividends.

Earnings before interest, taxes, depreciation and amortization (“EBITDA”), a non-GAAP financial measure, was a loss of $3.7 million for the second quarter of 2012, compared with EBITDA of $1.9 million for the same period in 2011. EBITDA for the second quarter of 2012 includes $1.2 million in non-cash share-based compensation. A reconciliation of each non-GAAP measure to its most directly comparable GAAP measure is provided in the attached financial tables.

The company had $190.7 million of cash and no debt on June 30, 2012.

Acquires Kelron Logistics, Inc.

On August 3, 2012, XPO Logistics acquired the freight brokerage operations of Kelron Logistics, Inc., a non-asset, third party logistics business based in Canada. Founded in 1992, Kelron Logistics serves more than 1,000 customers through locations in Toronto, Ontario; Vancouver, British Columbia; Montreal, Quebec; and Cleveland, Ohio. Kelron Logistics generated trailing 12 months revenue of approximately $100 million as of June 30, 2012. The cash purchase price was $8 million, excluding any working capital adjustments.

CEO Comments

Bradley Jacobs, chairman and chief executive officer, said, “We improved our performance in several key areas in the second quarter. We increased total gross margin dollars by 18% compared with the second quarter last year, reversing a decline in the prior period. We turned a corner in freight forwarding with the first year-over-year revenue increase in five quarters. And we drove double-digit growth in the top line and the profitability of our expedited business. While our investments in infrastructure affect our earnings in the short-term, they are critical to our plan for growth. We’re transforming the company to create significant value over time.”

Jacobs continued, “Today, we’re either on track or ahead of schedule with the three core components of our plan: acquisitions, cold-starts and the optimization of operations. We’re pleased to have purchased Kelron Logistics as we continue to expand our brokerage operations. Kelron is a non-asset brokerage business with approximately $100 million in revenue and 20 years of industry relationships. Its 2,500 carriers should be a valuable addition to our network. We plan to drive efficiencies at all four Kelron locations by providing access to our centralized carrier capacity and by migrating them to our IT system. We’ve successfully implemented this model with Continental Freight Services, which we bought in May.

“Our cold-start program is also progressing well. We now have seven new brokerage branches in place, versus our initial target of five openings by year-end. Through a disciplined mix of acquisitions and cold-starts, we've now more than doubled our total brokerage revenue from a year ago. This growth is being supported by our national operations center in Charlotte, where we expect to have more than 100 people focused solely on carrier procurement by December. We remain comfortable with our projection for a $500 million annual revenue run rate by year-end.”

Second Quarter 2012 Results by Business Unit

Expedited transportation: The Express-1 business generated total revenue of $25.7 million for the quarter, an 11.6% improvement from the same period last year. The improvement in revenue was primarily due to increases in the number of transactions and revenue-per-load. The company saw growth in its domestic, international and temperature-controlled businesses. Gross margin percentage was 20.0%, compared with 19.5% in 2011. The improvement in gross margin percentage reflects an increase in high-margin domestic business and a decrease in insurance claims, partially offset by higher rates paid to owner operators. Operating income was $2.4 million for the quarter, a 17.9% increase from the same period last year. Freight forwarding: The Concert Group Logistics (CGL) business generated total revenue of $16.5 million for the quarter, a 4.7% increase from the same period last year. Gross margin percentage increased to 11.0% for the quarter, from 10.6% a year ago, primarily due to higher volume with company-owned branches versus lower-margin agent-owned stations. Operating income was $128,000 for the quarter, compared with $399,000 last year, reflecting higher SG&A costs associated with investments in company-owned cold-starts in Charlotte, N.C., Atlanta, Ga., and Los Angeles, Calif. Freight brokerage: The company's freight brokerage business generated total revenue of $13.9 million for the quarter, a 107.5% improvement from the same period last year. The acquisition of Continental Freight Services on May 8, 2012, had a positive revenue impact of $3.6 million for the quarter. Excluding the acquisition, growth was primarily driven by increased volume at the company’s brokerage cold-start locations and South Bend, Ind., operation. Gross margin percentage was 11.0% for the quarter, compared with 15.3% in 2011. The decline in gross margin was primarily due to lower-margin sales during the start-up phase of cold-start locations. Operating loss was $972,000 for the quarter, compared with operating income of $172,000 the prior year, reflecting cold-start costs partially offset by higher operating income from the South Bend operation.
Six Months 2012 Financial Results

For the six months ended June 30, 2012, the company reported total revenue of $99.1 million, a 15.8% increase from the first six months of 2011.

Net loss was $7.9 million for the first six months of 2012, compared with net income of $2.0 million for the same period last year. The company reported a six-month 2012 net loss available to common shareholders of $9.4 million, or a loss of $0.56 per diluted share, compared with net income available to common shareholders of $2.0 million, or earnings of $0.24 per diluted share, for the same period in 2011.

Adjusted EPS for the first six months of 2012 was a loss of $0.39, excluding a non-cash charge of $3.0 million related to a valuation allowance for deferred tax assets. EPS and adjusted EPS include $1.5 million, or $0.09 per share, in cumulative preferred dividends.

EBITDA for the first six months of 2012 includes a $540,000 expense ($336,000 after tax or $0.02 per diluted share) for compensation, severance and professional fees related to the composition of the company's executive team; a $480,000 expense ($307,000 after tax or $0.02 per diluted share) for consulting fees in connection with securing an agreement with the state of North Carolina for up to $3.2 million in future tax incentives; and $2.2 million in non-cash share-based compensation.

Adds Six Cold-starts in Truck Brokerage, Expedited and Freight Forwarding

The company announced four new truck brokerage locations in August:

Chicago, Ill., will be led by Abtin Hamidi. Mr. Hamidi has five years of industry experience with Echo Global Logistics, Inc., including positions as national sales manager, senior operations manager and senior account manager. Jacksonville, Fla., will be led by John “Kip” Douglass. Mr. Douglass has 14 years of industry experience, including positions with Landstar System, Inc., Coyote Logistics LLC and Crowley Maritime Corporation, where he most recently served as general manager, North America transportation, logistics division. Morris County, N.J., will be led by Michael Doumas. Mr. Doumas has 12 years of industry experience with Ultra Logistics, Inc., where he most recently served as executive vice president. Montgomery, Ala., will be led by Patrick Maguire. Mr. Maguire has nine years of industry experience with C.H. Robinson Worldwide, Inc., including five years as key account manager. He previously served as regional zone manager and logistics sales representative.
For its Express-1 expedited business, the company has opened a location in Birmingham, Ala. This office will operate as the Southeast regional hub for Express-1, to complement existing hubs in Buchanan and Detroit, Mich.

For its CGL freight forwarding business, the company opened a location in Los Angeles, Calif., in April to take advantage of international freight movements through the Ports of Los Angeles and Long Beach.

Recent Appointments

The company announced that Scott Malat has been appointed chief strategy officer, effective immediately. Mr. Malat most recently served as the company’s senior vice president–strategic planning. He will take an expanded role in strategic planning for operations, acquisitions and organic growth, and will continue to manage the company’s investor relations.

Additionally, the following appointments are now effective:

David Rowe, chief technology officer. Mr. Rowe has 23 years of senior technology experience, most recently as chief technology officer for Echo Global Logistics, Inc., where he led the design and development of Echo’s information systems for customer and carrier services, and integrated 11 acquisitions. Previously, Mr. Rowe served as chief information officer for Equis/United Group Limited (now UGL Limited), where he was responsible for all information services in North America. Earlier, he was chief information officer for USWeb Cornerstone. He will report to CIO Mario Harik. Angela Gibbons, vice president–human resources. Ms. Gibbons has 26 years of human resources experience, including senior positions as group global HR director for CIRCOR Flow Technologies Group; senior director, global HR for Polymer Group, Inc.; and global director of HR shared services for SPX Corporation. Earlier, Ms. Gibbons worked with Phillips Electronics North America and Digital Equipment Corp. (now Hewlett-Packard/Compaq). John Tuomala, vice president–talent management. Mr. Tuomala has more than 20 years of experience in managing the talent acquisition process, most recently as director of talent acquisition for Compass Group North America, where he led a team responsible for recruiting approximately 2,500 employees per year. He has also worked as a retained executive search consultant. Bryan Tumbleson, president, Bounce Logistics, Inc. Mr. Tumbleson has more than a decade of logistics experience with Express-1, the company’s expedited transportation business, including management positions in customer service, brokerage operations and load planning. He most recently served as Express-1’s vice president–operations.
Conference Call

The company will hold a conference call on Tuesday, August 7, 2012, at 8:30 a.m. Eastern Time. Participants can call toll-free (from U.S./Canada) 1-866-578-5784; international callers dial +1-617-213-8056. A live webcast of the conference will be available on the Investor Relations area of the company’s website, www.xpologistics.com. The conference will be archived until September 6, 2012. To access the replay by phone, call toll-free (from U.S./Canada) 1-888-286-8010; international callers dial +1-617-801-6888. Use participant passcode 16889960.

About XPO Logistics, Inc.

XPO Logistics, Inc. is a non-asset based, third-party logistics provider of freight transportation services that uses a network of relationships with more than 14,000 ground, sea and air carriers to find the best freight transportation solutions for its customers. The company offers its services through three distinct business units: expedited transportation (Express-1, Inc.); freight forwarding (Concert Group Logistics, Inc.); and freight brokerage. XPO Logistics serves more than 7,200 retail, commercial, manufacturing and industrial customers in North America through 25 branches and 25 agent locations. www.xpologistics.com