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XPO Logistics Announces Second Quarter 2012 Results

Forward-Looking Statements

This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. In some cases, forward-looking statements can be identified by the use of forward-looking terms such as "anticipate," "estimate," "believe," "continue," "could," "intend," "may," "plan," "potential," "predict," "should," "will," "expect," "objective," "projection," "forecast," "goal," "guidance," "outlook," "effort," "target" or the negative of these terms or other comparable terms. However, the absence of these words does not mean that the statements are not forward-looking. These forward-looking statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances.

These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause or contribute to a material difference include, but are not limited to, those discussed in our filings with the SEC and the following: economic conditions generally; competition; our ability to find suitable acquisition candidates and execute our acquisition strategy; our ability to raise capital; our ability to attract and retain key employees to execute our growth strategy; our ability to develop and implement a suitable information technology system; our ability to maintain positive relationships with our network of third-party transportation providers; and governmental regulation. All forward-looking statements set forth in this press release are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to or effects on us or our business or operations. Forward-looking statements set forth in this press release speak only as of the date hereof and we do not undertake any obligation to update forward-looking statements to reflect subsequent events or circumstances, changes in expectations or the occurrence of unanticipated events.

 
XPO Logistics, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(in thousands, except per share amounts)
 
  Three Months Ended June 30,   Six Months Ended June 30,
2012   2011 2012   2011
Revenue
Operating revenue $ 54,540 $ 44,094 $ 99,100 $ 85,602
Expense
Direct expense   46,074     36,914   83,861     71,215
Gross margin 8,466 7,180 15,239 14,387
Selling, general and administrative expense   11,834     5,537   22,831     10,744
Operating (loss) income (3,368 ) 1,643 (7,592 ) 3,643
Other (income) expense 26 33 5 62
Interest expense   3     47   15     96
(Loss) income before income tax provision (3,397 ) 1,563 (7,612 ) 3,485
Income tax provision   1,780     649   259     1,454
Net (loss) income (5,177 ) 914 (7,871 ) 2,031
Undeclared cumulative preferred dividends   (750 )   -   (1,500 )   -
Net (loss) income available to common shareholders $ (5,927 ) $ 914 $ (9,371 ) $ 2,031
 
Basic earnings per common share
Net (loss) income $ (0.34 ) $ 0.11 $ (0.56 ) $ 0.25
Diluted earnings per common share
Net (loss) income $ (0.34 ) $ 0.11 $ (0.56 ) $ 0.24
Weighted average common shares outstanding
Basic weighted average common shares outstanding 17,637 8,253 16,629 8,214
Diluted weighted average common shares outstanding 17,637 8,583 16,629 8,553
 

Note: All share-related amounts in this press release and the financial tables reflect the 4-for-1 reverse stock split that was effected on September 2, 2011.

 
XPO Logistics, Inc.
Condensed Consolidated Balance Sheets
(in thousands except share data)
 
  June 30, 2012   December 31, 2011
ASSETS (Unaudited)
Current assets:
Cash $ 190,712 $ 74,007
Accounts receivable, net of allowances of $133 and $356, respectively 30,834 22,425
Prepaid expenses 732 426
Deferred tax asset, current 46 955
Income tax receivable 2,497 1,109
Other current assets   719     219  
Total current assets   225,540     99,141  
 
Property and equipment, net of $4,381 and $3,937 in accumulated depreciation, respectively 6,694 2,979
Goodwill 19,084 16,959
Identifiable intangible assets, net of $3,577 and $3,320 in accumulated amortization, respectively 8,902 8,053
Other long-term assets   511     509  
Total long-term assets   35,191     28,500  
Total assets $ 260,731   $ 127,641  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,329 $ 8,565
Accrued salaries and wages 1,177 2,234
Accrued expenses, other 6,196 2,789
Current maturities of long-term debt and capital leases 28 1,675
Other current liabilities   1,026     808  
Total current liabilities   16,756     16,071  
 
 
Long-term debt and capital leases, net of current maturities 103 454
Deferred tax liability, long-term 3,395 2,346
Other long-term liabilities   2,130     410  
Total long-term liabilities   5,628     3,210  
 
Stockholders' equity:
Preferred stock, $.001 par value; 10,000,000 shares; 75,000 shares issued and outstanding 42,794 42,794

Common stock, $.001 par value; 159,200,000 shares authorized; 17,696,366 and 8,410,353 shares issued, respectively; and 17,651,366 and 8,365,353 shares outstanding, respectively

17 8
Additional paid-in capital 241,962 102,613
Treasury stock, at cost, 45,000 shares held (107 ) (107 )
Accumulated deficit   (46,319 )   (36,948 )
Total stockholders' equity   238,347     108,360  
Total liabilities and stockholders' equity $ 260,731   $ 127,641  
 

Note: All share-related amounts in this press release and the financial tables reflect the 4-for-1 reverse stock split that was effected on September 2, 2011.

 
XPO Logistics, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
 
  Six Months Ended June 30,
2012   2011
Operating activities
Net (loss) income $ (7,871 ) $ 2,031
 
Adjustments to reconcile net income to net cash from operating activities
Provisions for allowance for doubtful accounts 84 1
Depreciation and amortization expense 741 639
Stock compensation expense 2,266 84
Changes in assets and liabilities
Accounts receivable (5,496 ) (263 )
Deferred tax expense 1,537 700
Income tax receivable (1,388 ) 489
Prepaid expenses and other current assets (495 ) 219
Other long-term assets and advances (18 ) 23
Accounts payable (1,313 ) 134
Accrued expenses and other liabilities   1,816     (491 )
Cash (used in) provided by operating activities   (10,137 )   3,566  
 
Investing activities

Acquisition of businesses, net of cash acquired

(3,713 ) -
Payment of acquisition earn-out (450 ) (450 )
Payment for purchases of property and equipment   (2,569 )   (260 )
Cash flows used in investing activities   (6,732 )   (710 )
 
Financing activities
Line of credit, net - (2,749 )
Payments of long-term debt and capital leases (2,018 ) (845 )
Excess tax benefit from stock options - 97
Proceeds from exercise of options, net 131 727
Proceeds from common stock offering, net of issuance costs 136,961 -
Dividends paid to preferred stockholders   (1,500 )   -  
Cash flows provided by (used in) financing activities   133,574     (2,770 )
 
Net increase in cash 116,705 86
Cash, beginning of period   74,007     561  
Cash, end of period $ 190,712   $ 647  
 
Supplemental disclosure of noncash activities:
Cash paid during the period for interest 15 75
Cash paid during the period for income taxes, net 159 99
 
Expedited Transportation
(Express -1)
Summary Financial Table
(Unaudited)
(in thousands)
 
  Three Months Ended June 30,   Six Months Ended June 30,
    $ Variance   Change     $ Variance   Change
2012   2011   % 2012   2011   %
Revenue
Operating revenue $ 25,731 $ 23,060 $ 2,671 11.6 % $ 48,151 $ 43,802 $ 4,349 9.9 %
Direct expense
Transportation services 19,830 17,742 (2,088 ) (11.8 %) 37,192

 

33,254 (3,938 ) (11.8 %)
Insurance 305 406 101 24.9 % 741 667 (74 ) (11.1 %)
Other   461   425   (36 ) (8.5 %)   924   841   (83 ) (9.9 %)
Total direct expense   20,596   18,573   (2,023 ) (10.9 %)   38,857   34,762   (4,095 ) (11.8 %)
Gross margin   5,135   4,487   648   14.4 %   9,294   9,040   254   2.8 %
SG&A expense
Salaries & benefits 1,665 1,670 5 0.3 % 3,325 3,477 152 4.4 %
Purchased services 251 316 65 20.6 % 448 701 253 36.1 %
Depreciation & amortization 79 113 34 30.1 % 164 224 60 26.8 %
Other   766   374   (392 ) (104.8 %)   1,403   723   (680 ) (94.1 %)
Total SG&A expense   2,761   2,473   (288 ) (11.6 %)   5,340   5,125   (215 ) (4.2 %)
Operating income $ 2,374 $ 2,014 $ 360   17.9 % $ 3,954 $ 3,915 $ 39   1.0 %
 

Note: Total depreciation and amortization for the Expedited Transportation operating segment included in both direct expense and SG&A, was $129 and $162 for the three-month periods, respectively, and $266 and $321 for the six-month periods, respectively, ended June 30, 2012 and 2011.

 
Freight Forwarding
(Concert Group Logistics)
Summary Financial Table
(Unaudited)
(in thousands)
 
  Three Months Ended June 30,   Six Months Ended June 30,
    $ Variance   Change     $ Variance   Change
2012   2011   % 2012   2011   %
Revenue
Operating revenue $ 16,468 $ 15,722 $ 746 4.7 % $ 31,925 $ 31,461 $ 464 1.5 %
Direct expense
Transportation services 12,150 10,907 (1,243 ) (11.4 %) 23,663 22,412 (1,251 ) (5.6 %)
Station commissions 2,457 3,110 653 21.0 % 4,773 5,589 816 14.6 %
Insurance 52 35 (17 ) (48.6 %) 95 64 (31 ) (48.4 %)
Other   -   (1 )   (1 ) 100.0 %   -   (1 )   (1 ) 100.0 %
Total direct expense   14,659   14,051     (608 ) (4.3 %)   28,531   28,064     (467 ) (1.7 %)
Gross margin   1,809   1,671     (138 ) (8.3 %)   3,394   3,397     3   0.1 %
SG&A expense
Salaries & benefits 924 704 (220 ) (31.3 %) 1,711 1,427 (284 ) (19.9 %)
Purchased services 146 120 (26 ) (21.7 %) 187 187 - 0.0 %
Depreciation & amortization 144 144 - 0.0 % 288 286 (2 ) (0.7 %)
Other   467   304     (163 ) (53.6 %)   918   626     (292 ) (46.6 %)
Total SG&A expense   1,681   1,272     (409 ) (32.2 %)   3,104   2,526     (578 ) (22.9 %)
Operating income $ 128 $ 399   $ (271 ) (67.9 %) $ 290 $ 871   $ (581 ) (66.7 %)
 
Freight Brokerage
(Bounce Logistics and XPO Logistics, LLC)
Summary Financial Table
(Unaudited)
(in thousands)
 
  Three Months Ended June 30,   Six Months Ended June 30,
    $ Variance   Change     $ Variance   Change
2012 2011   % 2012 2011   %
Revenue
Operating revenue $ 13,877 $ 6,687 $ 7,190 107.5 % $ 21,805 $ 12,670 $ 9,135 72.1 %
Direct expense
Transportation services 12,255 5,642 (6,613 ) (117.2 %) 19,160 10,694 (8,466 ) (79.2 %)
Insurance 7 22 15 68.2 % 1 25 24 96.0 %
Other   93     1   (92 ) (9,200.0 %)   93     1   (92 ) (9,200.0 %)
Total direct expense   12,355     5,665   (6,690 ) (118.1 %)   19,254     10,720   (8,534 ) (79.6 %)
Gross margin   1,522     1,022   500   48.9 %   2,551     1,950   601   30.8 %
SG&A expense
Salaries & benefits 1,572 572 (1,000 ) (174.8 %) 2,431 1,098 (1,333 ) (121.4 %)
Purchased services 266 32 (234 ) (731.3 %) 328 75 (253 ) (337.3 %)
Depreciation & amortization 77 11 (66 ) (600.0 %) 97 21 (76 ) (361.9 %)
Other   579     235   (344 ) (146.4 %)   821     446   (375 ) (84.1 %)
Total SG&A expense   2,494     850   (1,644 ) (193.4 %)   3,677     1,640   (2,037 ) (124.2 %)
Operating (loss) income $ (972 ) $ 172 $ (1,144 ) (665.1 %) $ (1,126 ) $ 310 $ (1,436 ) (463.2 %)
 
XPO Corporate
Summary of Selling, General and Administrative Expense
(Unaudited)
(in thousands)
 
  Three Months Ended June 30,   Six Months Ended June 30,
    $ Variance   Change     $ Variance   Change
2012 2011   % 2012 2011   %
SG&A expense
Salaries & benefits $ 1,869 $ 76 $ (1,793 ) (2,359.2 %) $ 3,879 $ 287 $ (3,592 ) (1,251.6 %)
Purchased services 1,207 754 (453 ) (60.1 %) 3,643 953 (2,690 ) (282.3 %)
Depreciation & amortization 73 6 (67 ) (1,116.7 %) 90 11 (79 ) (718.2 %)
Other   1,749   106   (1,643 ) (1,550.0 %)   3,098   202   (2,896 ) (1,433.7 %)
Total SG&A expense $ 4,898 $ 942 $ (3,956 ) (420.0 %) $ 10,710 $ 1,453 $ (9,257 ) (637.1 %)
 

The segment information above includes revenues of $1,536,000 and $1,375,000 for the quarters ended June 30, 2012 and 2011, respectively, as well as revenues of $2,781,000 and $2,331,000 for the year to date periods ended June 30, 2012 and 2011, respectively, that eliminate upon consolidation.

 
Reconciliation of Non-GAAP Measures
 
XPO Logistics, Inc.
Consolidated Reconciliation of EBITDA to Net Income
(Unaudited)
(in thousands)
 
  Three Months Ended June 30,   Change   Six Months Ended June 30,   Change
2012   2011 % 2012   2011 %
 
Net (loss) income available to common shareholders $ (5,927 ) $ 914 (748 %) $ (9,371 ) $ 2,031 (561 %)
Interest expense 3 47 (94 %) 15 96 (84 %)
Income tax provision 1,780 649 174 % 259 1,454 (82 %)
Depreciation and amortization   425     323 32 %   741     639 16 %
EBITDA $ (3,719 ) $ 1,933 (292 %) $ (8,356 ) $ 4,220 (298 %)
 

The six months ended June 30, 2012 EBITDA includes expenses of $540,000 related to executive management changes and $480,000 for consulting fees in connection with a tax incentive agreement.

XPO Logistics, Inc.
Consolidated Reconciliation of Adjusted EPS to Earnings per Common Shares - Diluted
(Unaudited)
(in thousands)
 
  Three Months Ended June 30,     Six Months Ended June 30,

 

2012   2011 2012   2011

 

Net (loss) income available to common shareholders $ (5,927 ) $ 914 $ (9,371 ) $ 2,031
Add back: Valuation Allowance   3,006     -   3,006     -
Adjusted Net Income $ (2,921 ) $ 914 $ (6,365 ) $ 2,031
Earnings per common share - diluted (0.34 ) 0.11 (0.56 ) 0.24
Add back: Valuation Allowance   0.17     -   0.17     -
Adjusted Earnings Per Share $ (0.17 ) $ 0.11 $ (0.39 ) $ 0.24
Weighted average number of common shares outstanding - diluted   17,637     8,583   16,629     8,553
 

Note: Please refer to the “Non-GAAP Financial Measures” section of the press release.

         
Three Months Ended Six Months Ended
June 30, 2012 June 30, 2011 June 30, 2012 June 30, 2011
Basic common stock outstanding 17,636,834 8,252,720 16,629,420 8,214,414
 
Potentially Dilutive Securities:
Shares underlying the conversion of preferred stock to common stock 10,714,286 330,694 10,714,286 338,466
Shares underlying warrants to purchase common stock 6,282,659 - 6,282,659 -
Shares underlying stock options to purchase common stock 401,793 - 348,682 -
Shares underlying restricted stock units 559,381 - 613,139 -
17,958,119 330,694 17,958,766 338,466
       
Diluted weighted shares outstanding 35,594,953 8,583,414 34,588,186 8,552,879
 

For dilution purposes, GAAP requires diluted shares to be reflected on a weighted average basis, which takes into account the portion of the period in which the diluted shares were outstanding. The table above reflects the weighted average diluted shares for the three-month and six-month periods ended June 30, 2012 and 2011, respectively. The impact of this dilution was not reflected in the earnings per share calculations on the Condensed Consolidated Statements of Operations because the impact was anti-dilutive. The treasury method was used to determine the shares underlying the warrants to purchase common stock with an average closing market price of common stock of $16.92 per share and $15.44 per share for the three-month and six- month periods ended June 30, 2012, respectively.

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