XPO Logistics Announces First Quarter 2012 Results

  • Acquires Continental Freight in South Carolina
  • Opens New Truck Brokerage Cold-starts in Michigan and Texas

XPO Logistics, Inc. (NYSE Amex: XPO) today announced financial results for the first quarter of 2012. Total revenue was $44.6 million for the quarter, a 7.4% increase from the same period last year.

Net loss was $2.7 million for the quarter, compared with net income of $1.1 million for the same period last year. The company reported a first quarter net loss available to common shareholders of $3.4 million, or a loss of $0.36 per diluted share, compared with net income available to common shareholders of $1.1 million, or earnings of $0.13 per diluted share, for the same period in 2011. First quarter 2012 results include a loss of $0.08 per diluted share relating to $750,000 in cumulative preferred dividends.

Earnings before interest, taxes, depreciation and amortization ("EBITDA"), a non-GAAP financial measure, was a loss of $4.6 million for first quarter of 2012, compared with EBITDA of $2.3 million for the same period in 2011. EBITDA for the first quarter of 2012 includes a $540,000 expense ($345,000 after tax or $0.04 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 $0.03 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 $1.0 million in non-cash share-based compensation. A reconciliation of EBITDA to net income is provided in the attached financial tables.

CEO Comments

Brad Jacobs, chairman and chief executive officer, said, "Our strategy is to scale up our operations through acquisitions, cold-starts and organic growth. Our first acquisition is Continental Freight Services, a 32-year-old company based in South Carolina with a loyal customer base and excellent employees. Continental is a good strategic fit because we can scale it up quickly by adding salespeople and carrier capacity."

Jacobs continued, "Our cold-start program is running ahead of plan: Ann Arbor opened in mid-April, and Dallas started operating last week. Phoenix, our first cold-start, has exceeded our expectations - it launched in December and quickly ramped up revenues to $760,000 in April. Given our cold-start performance and healthy backlog of acquisition candidates, we're comfortable with our target of a $500 million revenue run rate by year-end.

"At our new operations center in Charlotte, where our goal is 100 hires by year-end, we're already nearly 30% staffed. The new IT platform we rolled out in March is giving us greater internal visibility, and stronger tools for sales and service management. And we recently added two key leaders in carrier procurement and employee training. These roles are vital to our strategy, and we've brought top talent on board.

"While it was a very successful quarter in terms of executing our plan, the investments in new infrastructure impacted our earnings, as expected. We also experienced market softness for both expedited and freight forwarding services. However, our truck brokerage business delivered very strong growth, with same-store profitability more than doubling year-over-year. We're focused on optimizing our operations within each operating segment to position the company for substantial value creation in the coming years."

First Quarter 2012 Results by Business Unit

  • Expedited transportation: The Express-1 business generated total revenue of $22.4 million for the quarter, an 8.1% improvement from the same period last year. Revenue growth was driven by an increase in project-based air charter revenue and growth in cross-border-Mexico and temperature-controlled transactions. Gross margin percentage was 18.6%, compared with 22.0% in 2011. The decline in gross margin percentage was due to an increase in revenue from lower-margin air charter and international business, higher insurance claims, and a higher rate paid to owner operators. Express-1's operating income was $1.6 million for the quarter, a 16.9% decrease from the same period last year.
  • Freight forwarding: The Concert Group Logistics (CGL)business generated total revenue of $15.5 million for the quarter, a 1.8% decrease from the same period last year. Gross margin percentage declined to 10.3% for the quarter, from 11.0% in the same period a year ago, due primarily to a greater mix of lower-margin international business. Operating income was $162,000 for the quarter, compared with $472,000 last year, reflecting lower gross margins and higher SG&A costs associated with new company-owned locations in Charlotte, N.C., and Atlanta, Ga.
  • Freight brokerage: The company's freight brokeragebusiness generated total revenue of $7.9 million for the quarter, a 32.5% improvement from the same period last year. Revenue growth was largely driven by increased volume at the South Bend, Ind., office and the new Phoenix, Ariz., office. Gross margin percentage was 13.0%, compared with 15.5% in 2011. The decline in gross margin was primarily due to lower-margin sales to strategic customers during the start-up phase of the Phoenix sales office. Operating loss was $154,000 for the quarter, compared with operating income of $138,000 for the same period in 2011, reflecting costs associated with new facilities, partially offset by higher operating income from the South Bend operation.

Acquires Continental Freight Services, Inc.

On May 8, 2012, XPO Logistics acquired Continental Freight Services, Inc., a non-asset based, third party logistics company providing truck brokerage services. Founded in 1980, Continental Freight is headquartered in Columbia, S.C., with satellite offices in Texas, Florida and the Carolinas. Continental Freight generated trailing 12 months revenue of approximately $22 million as of March 31, 2012. The cash purchase price was $3.4 million, excluding any working capital adjustments and a potential earn-out of up to $0.3 million. The acquisition is expected to be accretive to earnings in 2012.

Adds Brokerage Cold-starts and Strategic Hires

Following the opening of its second truck brokerage cold-start in Ann Arbor, Mich., in April, the company opened its newest branch in Dallas, Texas, on May 1, 2012. Dallas branch president Doug George has 18 years of management and sales experience in transportation, including positions with AFN, Ryder Integrated Logistics, Inc. and Roadway Express, Inc.

To support the scaling up of its operations and workforce, the company has announced two key appointments: Louis Amo has been named vice president-carrier procurement and operations; and Marie Fields has been appointed director of training.

Mr. Amo has 15 years of transportation and carrier management experience, including positions with Union Pacific Corporation, Odyssey Logistics & Technology Corporation, and SABIC Innovative Plastics Holding BV (formerly GE Plastics). Ms. Fields has worked in the logistics industry for 15 years, initially with American Backhaulers, Inc. as a dispatcher and carrier sales representative, and then for 12 years with C.H. Robinson Worldwide, Inc., with responsibilities for training and on-boarding new hires, systems training and sales development.

New Website at xpologistics.com

On May 9, 2012, the company launched a comprehensive new website at http://www.xpologistics.com. Online functionality includes the ability to request a quote, track a load, register as a carrier, apply for employment, and access investor resources. The new site marks the first of several customer-facing web and mobile products planned for release this year, including self-service freight management tools for shippers.

Conference Call

The company will hold a conference call on Thursday, May 10, 2012, at 8:30 a.m. Eastern Time. Participants can call toll-free (from U.S./Canada) 1-800-573-4752; international callers dial +1-617-224-4324. A live webcast of the conference will be available on the investor relations area of the company's website, http://www.xpologistics.com. The conference will be archived until June 10, 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 82196287.

Non-GAAP Financial Measures

This press release contains certain non-GAAP financial measures as defined under Securities and Exchange Commission ("SEC") rules, such as earnings before interest, taxes, depreciation and amortization ("EBITDA") for the quarters ended March 31, 2012 and March 31, 2011. As required by SEC rules, we provide reconciliations of these measures to the most directly comparable measure (net income) under United States generally accepted accounting principles ("GAAP"), which are set forth in the attachments to this release. We believe that EBITDA is a useful measure of operating performance because it allows management, investors and others to evaluate and compare our core operating results from period to period by removing the impact of our capital structure (interest expense from our outstanding debt), asset base (depreciation and amortization) and tax consequences. In addition to its use by management, we believe EBITDA is a measure widely used by securities analysts, investors and others to evaluate the financial performance of companies in our industry. Other companies may calculate EBITDA differently, and therefore our EBITDA may not be comparable to similarly titled measures of other companies. EBITDA is not a measure of financial performance or liquidity under GAAP and should not be considered in isolation or as an alternative to net income, cash flows from operating activities and other measures determined in accordance with GAAP. Items excluded from EBITDA are significant and necessary components of the operations of our business, and, therefore, EBITDA should only be used as a supplemental measure of our operating performance.

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.
Consolidated Statements of Operations
For the Three Months Ended March 31,
(Unaudited)
(in thousands)
                   
                   
   

For the Three Months Ended
March 31,

          Change
      2012     2011   2012     2011     %
Revenues                  
Operating revenue   $ 44,560   $ 41,508   100.0 %   100.0 %   7.4 %
Direct expense                  
Transportation services     34,534     31,113   77.5 %   75.0 %   11.0 %
Station commissions     2,316     2,479   5.2 %   6.0 %   -6.6 %
Insurance     473     293   1.1 %   0.7 %   61.4 %
Other     464     416   1.0 %   1.0 %   11.5 %
Direct expense     37,787     34,301   84.8 %   82.6 %   10.2 %
Gross margin     6,773     7,207   15.2 %   17.4 %   -6.0 %
SG&A expense                  
Salaries & benefits     5,316     3,267   11.9 %   7.9 %   62.7 %
Purchased services     2,736     694   6.1 %   1.7 %   294.2 %
Depreciation & amortization     266     268   0.6 %   0.6 %   -0.7 %
Other     2,679     978   6.0 %   2.4 %   173.9 %
Total SG&A expense     10,997     5,207   24.7 %   12.5 %   111.2 %
Operating (expense) income     (4,224 )   2,000   -9.5 %   4.8 %   -311.2 %
Other (income) expense     (21 )   29   0.0 %   0.1 %   172.4 %
Interest expense     12     49   0.0 %   0.1 %   -75.5 %
(Loss) income before income tax     (4,215 )   1,922   -9.5 %   4.6 %   -319.3 %
Income tax (benefit) provision     (1,521 )   805   -3.4 %   1.9 %   288.9 %
Net (Loss) Income   $ (2,694 ) $ 1,117   -6.0 %   2.7 %   -341.2 %
Undeclared cumulative preferred dividends   $ (750 ) $ -   -1.7 %   0.0 %   N/A  
Net (Loss) Income available to common shareholders   $ (3,444 ) $ 1,117   -7.7 %   2.7 %   -408.3 %
                   
Basic earnings per common share                  
Net (loss) income available to common shareholders   $ (0.36 ) $ 0.14            
Diluted earnings per common share                  
Net (loss) income available to common shareholders   $ (0.36 ) $ 0.13            
Weighted average common shares outstanding                  
Basic weighted average common shares outstanding     9,501     8,176            
Diluted weighted average common shares outstanding     9,501     8,522            

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)
         
         
    March 31, 2012   December 31, 2011
ASSETS   (Unaudited)    
Current assets:        
Cash   $ 204,496     $ 74,007  
Accounts receivable, net of allowances of $409 and $356, respectively     24,350       22,425  
Prepaid expenses     885       426  
Deferred tax asset, current     1,305       955  
Income tax receivable     2,846       1,109  
Other current assets     1,544       219  
Total current assets     235,426       99,141  
         
Property and equipment, net of $4,118 and $3,937 in accumulated depreciation, respectively     4,315       2,979  
Goodwill     16,959       16,959  
Identifiable intangible assets, net of $3,427 and $3,356 in accumulated amortization, respectively     7,942       8,053  
Loans and advances     130       128  
Other long-term assets     474       381  
Total long-term assets     29,820       28,500  
Total assets   $ 265,246     $ 127,641  
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current liabilities:         -  
Accounts payable   $ 10,383     $ 8,565  
Accrued salaries and wages     2,281       2,234  
Accrued expenses, other     4,741       2,789  
Current maturities of long-term debt and capital leases     9       1,675  
Other current liabilities     774       808  
Total current liabilities     18,188       16,071  
         
         
Long-term debt and capital leases, net of current maturities     35       454  
Deferred tax liability, long-term     2,711       2,346  
Other long-term liabilities     978       410  
Total long-term liabilities     3,724       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; 17,659,483 and 8,410,353 shares issued,        
respectively; and 17,614,483 and 8,365,353 shares outstanding, respectively     17       8  
Additional paid-in capital     241,022       102,613  
Treasury stock, at cost, 45,000 shares held     (107 )     (107 )
Accumulated deficit     (40,392 )     (36,948 )
Total stockholders' equity     243,334       108,360  
Total liabilities and stockholders' equity   $ 265,246     $ 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 Statement of Cash Flow
(Unaudited)
(in thousands)
     
    Three Months Ended
    March 31, 2012   March 31, 2011
Operating activities        
Net (loss) income   $ (2,694 )   $ 1,117  
         
Adjustments to reconcile net income to net cash from operating activities        
Provisions for allowance for doubtful accounts     53       16  
Depreciation and amortization expense     317       316  
Stock compensation expense     1,033       39  
Changes in assets and liabilities        
Accounts receivable     (1,979 )     (388 )
Deferred tax expense     13       422  
Income tax receivable     (1,737 )     346  
Prepaid expenses and other current assets     (1,780 )     (87 )
Other long-term assets and advances     (102 )     (14 )
Accounts payable     1,818       (41 )
Accrued expenses and other liabilities     2,282       257  
Cash (used in) provided by operating activities     (2,776 )     1,983  
         
Investing activities        
Payment of acquisition earn-out     (450 )     (450 )
Payment for purchases of property and equipment     (836 )     (86 )
Cash flows used in investing activities     (1,286 )     (536 )
         
Financing activities        
Line of credit, net     -       (2,353 )
Payments of long-term debt and capital leases     (2,084 )     (429 )
Excess tax benefit from stock options     167       97  
Proceeds from exercise of options, net     233       727  
Proceeds from common stock offering, net of issuance costs     136,985       -  
Dividends paid to preferred stockholders     (750 )     -  
Cash flows provided by (used in) financing activities     134,551       (1,958 )
         
Net increase (decrease) in cash     130,489       (511 )
Cash, beginning of period     74,007       561  
Cash, end of period   $ 204,496     $ 50  
         
Supplemental disclosure of noncash activities:        
Cash paid during the period for interest     12       28  
Cash paid (received) during the period for income taxes, net     84       (75 )

 

                     
Expedited Transportation
(Express -1)
Summary Financial Table
(Unaudited)
(in thousands)
                     
                     
   

Three months ended
March 31,

  Percent of Revenue   Change
      2012     2011   2012     2011     %
Revenues                    
Operating revenue   $ 22,420   $ 20,742   100.0 %   100.0 %   8.1 %
Direct expense                    
Transportation services     17,362     15,512   77.4 %   74.8 %   11.9 %
Insurance     436     261   1.9 %   1.3 %   67.0 %
Other     463     416   2.1 %   2.0 %   11.3 %
Direct expense     18,261     16,189   81.4 %   78.0 %   12.8 %
Gross margin     4,159     4,553   18.6 %   22.0 %   -8.7 %
SG&A expense                    
Salaries & benefits     1,660     1,807   7.4 %   8.7 %   -8.1 %
Purchased services     197     385   0.9 %   1.9 %   -48.8 %
Depreciation & amortization     85     111   0.4 %   0.5 %   -23.4 %
Other     637     349   2.8 %   1.7 %   82.5 %
Total SG&A expense     2,579     2,652   11.5 %   12.8 %   -2.8 %
Operating income   $ 1,580   $ 1,901   7.0 %   9.2 %   -16.9 %

Note: Total depreciation and amortization for the Expedited Transportation operating segment included in both direct expense and SG&A, was $137,000 and $159,000 for the three-month periods ended March 31, 2012 and 2011, respectively.

                     
Freight Forwarding
(Concert Group Logistics)
Schedule of Operating Income
(Unaudited)
(in thousands)
                     
   

For the Three Months Ended
March 31,

  Percent of Revenue   Change
      2012     2011   2012     2011     %
Revenues                    
Operating revenue   $ 15,457   $ 15,739   100.0 %   100.0 %   -1.8 %
Direct expense                    
Transportation services     11,513     11,505   74.5 %   73.1 %   0.1 %
Station commissions     2,316     2,479   15.0 %   15.8 %   -6.6 %
Insurance     43     29   0.3 %   0.2 %   48.3 %
Direct expense     13,872     14,013   89.7 %   89.0 %   -1.0 %
Gross margin     1,585     1,726   10.3 %   11.0 %   -8.2 %
SG&A expense                    
Salaries & benefits     787     723   5.1 %   4.6 %   8.9 %
Purchased services     41     67   0.3 %   0.4 %   -38.8 %
Depreciation & amortization     144     142   0.9 %   0.9 %   1.4 %
Other     451     322   2.9 %   2.0 %   40.1 %
Total SG&A expense     1,423     1,254   9.2 %   8.0 %   13.5 %
Operating income   $ 162   $ 472   1.0 %   3.0 %   -65.7 %

 

                     
Freight Brokerage
(Bounce Logistics and XPO Logistics)
Schedule of Operating Income
(Unaudited)
(in thousands)
                     
                     
   

For the Three Months Ended
March 31,

  Percent of Revenue   Change
      2012       2011   2012     2011     %
Revenue                    
Operating revenue   $ 7,928     $ 5,983   100.0 %   100.0 %   32.5 %
Direct expense                    
Transportation services     6,905       5,052   87.1 %   84.4 %   36.7 %
Insurance     (6 )     3   -0.1 %   0.1 %   -300.0 %
Direct expense     6,899       5,055   87.0 %   84.5 %   36.5 %
Gross margin     1,029       928   13.0 %   15.5 %   10.9 %
SG&A expense                    
Salaries & benefits     859       526   10.8 %   8.8 %   63.3 %
Purchased services     62       43   0.8 %   0.7 %   44.2 %
Depreciation & amortization     20       10   0.3 %   0.2 %   100.0 %
Other     242       211   3.1 %   3.5 %   14.7 %
Total SG&A expense     1,183       790   14.9 %   13.2 %   49.7 %
Operating (loss) income   $ (154 )   $ 138   -1.9 %   2.3 %   -211.6 %

 

                     
XPO Corporate
Summary of Selling, General & Administrative Expense
(Unaudited)
(in thousands)
                     
   

For the Three Months Ended
March 31,

  Percent of Revenue   Change
      2012       2011   2012   2011     %
SG&A expense                    
Salaries & benefits   $ 2,010     $ 211   4.5 % 0.5 %   853 %
Purchased services     2,436       199   5.5 % 0.5 %   1124 %
Depreciation & amortization     17       5   0.0 % 0.0 %   240 %
Other     1,349       96   3.0 % 0.2 %   1305 %
Total SG&A expense   $ 5,812     $ 511   13.0 % 1.2 %   1037 %

 

             
XPO Logistics, Inc.
Consolidated Reconciliation of EBITDA to Net Income
(Unaudited)
(in thousands)
             
             
   

Three Months Ended
March 31,

  Change
      2012       2011   %
             
Net (loss) income available to common shareholders   $ (3,444 )   $ 1,117   -408.3 %
Interest expense     12       49   -75.5 %
Income tax (benefit) provision     (1,521 )     805   288.9 %
Depreciation and amortization     317       316   0.3 %
EBITDA   $ (4,636 )   $ 2,287   -302.7 %

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

First quarter 2012 EBITDA includes expenses of $1.0 million of stock compensation, $540,000 related to executive management changes and $480,000 for consulting fees in connection with a tax incentive agreement.

         
XPO Logistics, Inc.
Diluted Share Information
Weighted Average Diluted Shares for Three Months Ended
         
    March 31, 2012   March 31, 2011
Common Stock Outstanding   9,501,336   8,175,681
Dilutive effect of outstanding securities:        
Shares underlying the conversion of preferred stock to common stock   10,714,286   -
Shares underlying warrants to purchase common stock   5,411,309   -
Shares underlying stock options to purchase common stock   293,578   345,835
Shares underlying restricted stock units   97,894   -
Total   26,018,403   8,521,516

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 periods ended March 31, 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 market price of $14.14 per share for the first quarter 2012 and $10.04 per share for the first quarter 2011, respectively.

For informational purposes, the following table represents fully diluted shares as of March 31, 2012, calculated on a non-weighted basis without giving effect to the portion of any period in which the diluted shares were outstanding. The dilutive effect of warrants and options in the table was calculated using the average closing market price of common stock for the three-month period ended March 31, 2012. A non-weighted basis for calculating fully diluted shares is a non-GAAP financial measure as defined under SEC rules.

    Diluted Shares as of
    March 31, 2012
Common Stock Outstanding   17,614,483
Full dilution of preferred stock   10,714,286
Full dilution of warrants   5,411,309
Full dilution of outstanding stock options   293,578
Full dilution of restricted stock units   97,894
Total   34,131,550