XPO Logistics Announces Third Quarter 2012 Results

  • Adds Three New Cold-starts

XPO Logistics, Inc. (NYSE: XPO) today announced financial results for the third quarter of 2012. Total revenue was $71.0 million for the quarter, a 49.8% increase from the same period last year.

Net loss was $3.1 million for the quarter, compared with net income of $190,000 for the same period last year. The company reported a third quarter net loss available to common shareholders of $3.9 million, or a loss of $0.22 per diluted share, compared with a net loss available to common shareholders of $44.4 million, or a loss of $5.38 per diluted share, for the same period in 2011. The third quarter 2011 results reflected a $44.6 million non-cash accounting charge related to the September 2011 equity investment in the company.

Adjusted earnings per share ("adjusted EPS"), a non-GAAP financial measure, was a loss of $0.38 for the third quarter 2012, excluding a benefit of $2.8 million, or $0.16 per diluted share, related to the reversal of a valuation allowance for deferred tax assets recorded in the second quarter of 2012. EPS and adjusted EPS include a charge 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 $8.9 million for the third quarter of 2012, compared with EBITDA of $775,000 for the same period in 2011. EBITDA for the third quarter of 2012 includes $1.2 million in non-cash share-based compensation expense. A reconciliation of each non-GAAP measure to its most directly comparable GAAP measure is provided in the attached financial tables.

The company had approximately $265 million of cash as of October 31, 2012.

CEO Comments

Brad Jacobs, chairman and chief executive officer, said, "We are on point with our plan, gaining scale through acquisitions, cold-starts and the rapid expansion of our salesforce. Our revenues were up 50% in the quarter, with a 21% increase in gross margin dollars. In our freight brokerage business, gross margin dollars almost tripled from 2011. While our expedite and freight forwarding businesses faced soft market conditions, we're positioning these operations for long-term growth. For all three of our business units, we're executing a very specific strategy - making investments that restrain earnings in the near-term, but should create significant shareholder value over time."

Jacobs continued, "In October, we achieved an important milestone with our acquisition of Turbo Logistics. We also acquired a small freight brokerage business, BirdDog Logistics, which we tucked into our new Charlotte cold-start. We now have four acquisitions under our belt and 15 cold-starts, including eight in freight brokerage. We added 119 salespeople in the third quarter, and we're putting our recruits through an intensive training program. In addition, we're beta-testing new technology to empower our salespeople with proprietary pricing tools and truck-finding capabilities. We're now fast approaching a $500 million annual revenue run rate."

Third Quarter 2012 Results by Business Unit

  • Freight brokerage: The company's freight brokerage business generated revenue of $32.2 million for the quarter, a 290% improvement from the same period last year. Revenue growth was primarily due to the impact of acquisitions and the performance of the company's eight cold-start locations. The acquisition of Kelron Logistics on August 3, 2012, had a positive revenue impact of $13.5 million. Gross margin was 12.6% for the quarter, compared with 16.5% 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 $2.4 million for the quarter, compared with operating income of $499,000 in the prior year's period, reflecting a planned increase in SG&A expense. The increase in SG&A expense was primarily due to the expansion of the company's cold-start branches and national operations center in Charlotte, as well as the acquisition of Kelron.
  • Expedited transportation: The company's Express-1 business generated total revenue of $23.8 million for the quarter, a 1.4% improvement from the same period last year. The improvement was primarily due to an increase in revenues from temperature control shipments. Gross margin percentage for the quarter was 16.6%, compared with 21.4% in 2011. The decrease in gross margin percentage reflects a soft market for expedite freight, as well as higher rates paid to independent fleet owners that went into effect on March 1, 2012. Operating income was $1.2 million for the quarter, a 50.4% decrease from the same period last year, primarily due to lower gross margins and an increase in SG&A expense. The increase in SG&A expense was primarily due to increased headcount and expanded recruitment efforts for independent fleet owners, partially offset by lower incentive compensation.
  • Freight forwarding: The company's Concert Group Logistics (CGL) business generated total revenue of $17.3 million for the quarter, a 2.3% increase from the same period last year. The increase is primarily related to higher revenues generated by company-owned branches, partially offset by a decrease in revenues at independent agent stations. Gross margin for the quarter was essentially flat at 11.1%, compared with 11.0% a year ago. Operating income was $97,000 for the quarter, compared with $639,000 last year, primarily reflecting higher SG&A costs associated with investments in cold-starts in Charlotte, N.C., Atlanta, Ga., Los Angeles, Calif., and Houston, Texas.
  • Corporate: The company's corporate SG&A expense in the third quarter of 2012 was $8.2 million, an increase of $5.1 million compared with the same period in 2011. The increase reflects a $2.0 million increase in salaries and benefits related to executive appointments and headcount additions in corporate shared services, $1.4 million of litigation-related legal costs, $1.1 million of M&A transaction costs and a $1.0 million increase in non-cash share-based compensation expense. 

Nine Months 2012 Financial Results

For the nine months ended September 30, 2012, the company reported total revenue of $170.1 million, a 27.9% increase from the first nine months of 2011.

Net loss was $11.0 million, compared with net income of $2.2 million for the same period last year. The company reported a nine-month 2012 net loss available to common shareholders of $13.3 million, or a loss of $0.89 per diluted share, compared with a net loss available to common shareholders of $42.4 million, or a loss of $5.15 per diluted share, for the same period last year. The results from the first nine months of 2011 reflected a $44.6 million non-cash accounting charge related to the September 2011 equity investment in the company. EPS includes a charge of $0.15 per diluted share related to $2.3 million in cumulative preferred dividends.

EBITDA was a loss of $15.7 million for the first nine months of 2012, compared with EBITDA of $5.0 million for the same period in 2011. EBITDA for the first nine months of 2012 includes $5.6 million, or $0.37 per diluted share, of salaries and benefits expense related to the executive team appointments and headcount additions for corporate shared services; $1.9 million, or $0.13 per diluted share, of M&A transaction costs; and $1.4 million, or $0.09 per diluted share, of litigation-related legal costs.

Adds Three Cold-starts and Tuck-in Acquisition

The company announced the opening of three new cold-starts in the third quarter: one in freight brokerage and two in freight forwarding. The new freight brokerage branch in Charlotte, N.C., will be led by Drew Wilkerson. Mr. Wilkerson most recently led the Columbia, S.C., branch that the company acquired through the Continental Freight Services transaction in May. The new freight forwarding locations are in Houston, Texas, and Kansas City, Mo. In addition, freight forwarding agent-owned locations in Chicago, Ill., and Minneapolis, Minn., were transitioned to company-owned branches.

On October 1, 2012, the company acquired certain assets of BirdDog Logistics, LLC, a freight brokerage operation with approximately $7 million of revenue, located in Charlotte, N.C. BirdDog's salesforce and customer and lane histories were merged with the company's cold-start in Charlotte.

Conference Call

The company will hold a conference call on Tuesday, November 6, 2012, at 8:30 a.m. Eastern Time. Participants can call toll-free (from U.S./Canada) 1-800-446-1671; international callers dial +1-847-413-3362. 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 December 6, 2012. To access the replay by phone, call toll-free (from U.S./Canada) 1-888-843-7419; international callers dial +1-630-652-3042. Use participant passcode 33535681.

Non-GAAP Financial Measures

This press release contains certain non-GAAP financial measures as defined under Securities and Exchange Commission ("SEC") rules, such as adjusted earnings per share ("adjusted EPS") and earnings before interest, taxes, depreciation and amortization ("EBITDA") for the three- and nine-month periods ended September 30, 2012 and September 30, 2011. As required by SEC rules, we provide reconciliations of these measures to the most directly comparable measure under United States generally accepted accounting principles ("GAAP"), which are set forth in the attachments to this release. As shown in such attachments, we present adjusted EPS to eliminate the impact of a benefit of $2.8 million related to the reversal of a valuation allowance for deferred tax assets that was recorded in the second quarter of 2012. We believe that it is appropriate for investors to consider adjusted EPS in addition to results in accordance with GAAP. We believe this measure provides a picture of our results that is more comparable among periods since it excludes the impact of special items, which may recur, but tend to be irregular as to timing, thereby making comparisons between periods more difficult.  We believe that EBITDA improves comparability 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 that 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; litigation; 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 Statement of Operations
(Unaudited)
(in thousands, except per share amounts)
                       
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2012   2011   2012   2011
Revenues                      
  Operating revenue $ 70,988   $ 47,389   $ 170,088   $ 132,991
Expenses                      
  Direct expense   61,064     39,169     144,925     110,384
    Gross margin   9,924     8,220     25,163     22,607
  Sales general and administrative expense   19,204     7,750     42,035     18,494
Operating (loss) income   (9,280)     470     (16,872)     4,113
  Other (income) expense   314     0     319     62
  Interest expense   15     49     30     145
(Loss) income before income tax provision   (9,609)     421     (17,221)     3,906
  Income tax provision   (6,460)     231     (6,201)     1,685
Net (loss) income   (3,149)     190     (11,020)     2,221
  Preferred stock beneficial conversion charge and dividends   0     (44,586)     0     (44,586)
  Cumulative preferred dividends   (750)     0     (2,250)     0
Net (loss) income available to common shareholders $ (3,899)   $ (44,396)   $ (13,270)   $ (42,365)
                       
Basic income per share                      
  Net (loss) income $ (0.22)   $ (5.38)   $ (0.89)   $ (5.15)
Diluted income per share                      
  Net (loss) income $ (0.22)   $ (5.38)   $ (0.89)   $ (5.15)
Weighted average common shares outstanding                      
  Basic weighted average common shares outstanding   17,663     8,253     14,952     8,227
  Diluted weighted average common shares outstanding   17,663     8,253     14,952     8,227



XPO Logistics, Inc.
Condensed Consolidated Balance Sheets
(in thousands except share data)
           
           
           
  September 30,   December 31,
  2012   2011
ASSETS    (Unaudited)      
Current assets:          
  Cash and cash equivalents $ 296,503   $ 74,007
  Accounts receivable, net of allowances of $420 and $356, respectively   42,881     22,425
  Prepaid expenses   1,174     426
  Deferred tax asset, current   1,484     955
  Income tax receivable   2,790     1,109
  Other current assets   1,376     219
    Total current assets   346,208     99,141
           
  Property and equipment, net of $4,769 and $3,937
 in accumulated depreciation, respectively
  8,083     2,979
  Goodwill   22,521     16,959
  Identifiable intangible assets, net of  $3,902 and $3,320
 in accumulated amortization, respectively
  10,487     8,053
  Other long-term assets   472     509
   Total long-term assets   41,563     28,500
    Total assets $ 387,771   $ 127,641
           
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
Current liabilities:          
  Accounts payable $ 12,286   $ 8,565
  Accrued salaries and wages   2,745     2,234
  Accrued expenses, other   11,913     2,789
  Current maturities of notes payable and capital leases   359     1,675
  Other current liabilities   1,395     808
    Total current liabilities   28,698     16,071
           
  Convertible senior notes   92,757     0
  Notes payable and capital leases, net of current maturities   734     454
  Deferred tax liability, long term   9,761     2,346
  Other long-term liabilities   3,083     410
    Total long-term liabilities   106,335     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; 150,000,000 shares authorized; 17,863,223 and 8,410,353
 shares issued, respectively; and 17,818,223 and 8,365,353 shares outstanding, respectively
  17     8
  Additional paid-in capital   260,252     102,613
  Treasury stock, at cost, 45,000 shares held   (107)     (107)
  Accumulated deficit   (50,218)     (36,948)
    Total stockholders' equity   252,738     108,360
      Total liabilities and stockholders' equity $ 387,771   $ 127,641



XPO Logistics, Inc.
Condensed Consolidated Statement of Cash Flows
(Unaudited)
(in thousands, except per share amounts)
             
    Nine Months Ended September 30,
      2012     2011
Operating activities          
 Net income $ (11,020)   $ 2,221
Adjustments to reconcile net income to net cash from operating activities          
  Provisions for allowance for doubtful accounts   645     (23)
  Depreciation & amortization expense   1,463     944
  Stock compensation expense   3,485     297
  Other   1     (9)
Changes in assets and liabilities, net of effects of acquisitions:          
  Account receivable   (8,078)     (2,037)
  Deferred tax expense   (4,276)     788
  Income tax receivable   (1,824)     479
  Other current assets   (14)     568
  Prepaid expenses   (422)     (351)
  Other long-term assets and advances   12     101
  Accounts payable   (3,136)     (1,625)
  Accrued expenses   6,232     1,653
  Other liabilities   23     301
             
Cash provided (used) by operating activities   (16,909)     3,307
Investing activities          
  Acquisition of businesses, net of cash acquired   (7,011)     0
  Payment of acquisition earn-out   (450)     (450)
  Payment for purchases of property and equipment   (3,986)     (442)
  Proceeds from sale of assets   0     9
Cash Flows used by investing activities   (11,447)     (883)
Financing Activities          
  Credit line, net activity   (2,178)     (2,749)
  Proceeds from issuance of preferred stock, net of issuance costs   0     71,628
  Proceeds from issuance of convertible senior notes, net   120,287     0
  Payments of notes payable and capital leases   (2,089)     (1,215)
  Excess tax benefit from stock options   0     97
  Proceeds from stock offering   136,961     0
  Proceeds from exercise of options, net   131     727
  Dividends paid to preferred stockholders   (2,250)     0
Cash flows provided  by Financing Activities   250,862     68,488
Effect of exchange rate changes on cash   (10)     0
Net increase  in cash   222,496     70,912
 Cash, beginning of period   74,007     561
 Cash, end of period of period  $ 296,503   $ 71,473
             
             
Supplemental disclosure of noncash activities:          
             
  Cash paid during the period for interest   29     166
  Cash paid during the period for income taxes   244     201



Freight Brokerage
Summary Financial Table
(Unaudited)
(in thousands)
                                           
    Three Months Ended September 30,     Nine Months Ended September 30,
              $ Variance   Change               $ Variance   Change
  2012   2011         %     2012   2011         %
Revenue                                          
  Operating revenue $ 32,169   $ 8,246   $ 23,923   290.1%   $ 53,974   $ 20,916   $ 33,058   158.1%
Direct expense                                   -                 -            
  Transportation services      27,959          6,868        21,091   307.1%        47,119        17,562        29,557   168.3%
  Insurance            13              20               (7)   -35.0%              14              45             (31)   -68.9%
  Other          146               -              146                239                1            238   23800.0%
Total direct expense      28,118          6,888        21,230   308.2%        47,372        17,608        29,764   169.0%
    Gross margin        4,051          1,358          2,693   198.3%          6,602          3,308          3,294   99.6%
SG&A expense                                   -                 -            
  Salaries & benefits        3,961            681          3,280   481.6%          6,392          1,779          4,613   259.3%
  Purchased services          694              38            656   1726.3%          1,022            113            909   804.4%
  Depreciation & amortization          316              11            305   2772.7%            413              32            381   1190.6%
  Other        1,434            129          1,305   1011.6%          2,255            575          1,680   292.2%
Total SG&A expense        6,405            859          5,546   645.6%        10,082          2,499          7,583   303.4%
Operating (loss) income $ (2,354)   $ 499   $ (2,853)   -571.7%   $ (3,480)   $ 809   $ (4,289)   -530.2%



Expedited Transportation
Summary Financial Table
(Unaudited)
(in thousands)
                                           
    Three Months Ended September 30,       Nine Months Ended September 30,    
                $ Variance   Change                 $ Variance   Change
  2012   2011         %   2012   2011         %
Revenue                                          
 Operating revenue $ 23,755   $ 23,419   $ 336   1.4%   $ 71,906   $ 67,221   $ 4,685   7.0%
Direct expense                                          
 Transportation services      18,803        17,634          1,169   6.6%        55,995        50,888          5,107   10.0%
 Insurance          465            371              94   25.3%          1,206          1,038            168   16.2%
 Other          543            406            137   33.7%          1,467          1,247            220   17.6%
Total direct expense      19,811        18,411          1,400   7.6%        58,668        53,173          5,495   10.3%
    Gross margin        3,944          5,008         (1,064)   -21.2%        13,238        14,048           (810)   -5.8%
SG&A expense                                          
 Salaries & benefits        1,615          1,732           (117)   -6.8%          4,940          5,209           (269)   -5.2%
 Purchased services          259            365           (106)   -29.0%            707          1,066           (359)   -33.7%
 Depreciation & amortization            77              93             (16)   -17.2%            241            317             (76)   -24.0%
 Other          776            365            411   112.6%          2,179          1,088          1,091   100.3%
Total SG&A expense        2,727          2,555            172   6.7%          8,067          7,680            387   5.0%
Operating income $ 1,217   $ 2,453   $ (1,236)   -50.4%   $ 5,171   $ 6,368   $ (1,197)   -18.8%

Note: Total depreciation and amortization for the Expedited Transportation operating segment included in both direct expense and SG&A, was $127 and $144 for the three-month periods, respectively, and $393 and $465 for the nine-month periods, respectively, ended September 30, 2012 and 2011

Freight Forwarding
Summary Financial Table
(Unaudited)
(in thousands)
                       
  Three Months Ended September 30,   Nine Months Ended September 30,
              $ Variance   Change               $ Variance   Change
  2012   2011         %     2012     2011         %
Revenue                                          
 Operating revenue $ 17,304   $ 16,918   $ 386   2.3%   $ 49,229   $ 48,379   $ 850   1.8%
Direct expense                                          
 Transportation services   12,914     12,231     683   5.6%     36,577     34,643     1,934   5.6%
 Station commissions   2,428     2,798     (370)   -13.2%     7,201     8,387     (1,186)   -14.1%
 Insurance   33     35     (2)   -5.7%     128     99     29   29.3%
 Other   0     0     0         0     (1)     1   -100.0%
Total direct expense   15,375     15,064     311   2.1%     43,906     43,128     778   1.8%
   Gross margin   1,929     1,854     75   4.0%     5,323     5,251     72   1.4%
SG&A expense                                          
 Salaries & benefits   1,059     696     363   52.2%     2,770     2,123     647   30.5%
 Purchased services   207     123     84   68.3%     394     310     84   27.1%
 Depreciation & amortization   145     144     1   0.7%     433     430     3   0.7%
 Other   421     252     169   67.1%     1,339     878     461   52.5%
Total SG&A expense   1,832     1,215     617   50.8%     4,936     3,741     1,195   31.9%
Operating income $ 97   $ 639   $ (542)   -84.8%   $ 387   $ 1,510   $ (1,123)   -74.4%



XPO Corporate
Summary of Selling, General & Administrative Expense
(Unaudited)
(in thousands)
                                           
  Three Months Ended September 30,   Nine Months Ended September 30,
              $ Variance   Change               $ Variance   Change
  2012   2011         %     2012   2011         %
SG&A expense                                          
 Salaries & benefits $ 2,301   $ 311   $ 1,990   639.9%   $ 6,180   $ 598   $ 5,582   933.4%
 Purchased services   4,017     2,470     1,547   62.6%     7,660     3,423     4,237   123.8%
 Depreciation &
amortization
  133     5     128   2560.0%     223     16     207   1293.8%
 Other   1,792     335     1,457   434.9%     4,890     537     4,353   810.6%
Total SG&A expense $ 8,243   $ 3,121   $ 5,122   164.1%   $ 18,953   $ 4,574   $ 14,379   314.4%

Intercompany eliminations included revenues of $2.2 million and $1.2 million for the quarters ended September 30, 2012 and 2011, respectively, as well as revenues of $5.0 million and $3.5 million for the year to date periods ended September 30, 2012 and 2011, respectively.

XPO Logistics, Inc.
Reconciliation of Adjusted EPS to Earnings per Common Shares Diluted
(Unaudited)
(in thousands)
                       
                       
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
    2012     2011     2012     2011
                       
Net (loss) income available to common shareholders $ (3,899)   $ (44,396)   $ (13,270)   $ (42,365)
Add back: Out of Period Valuation Allowance Released   (2,824)     0     0     0
Adjusted Net Loss $ (6,723)   $ (44,396)   $ (13,270)   $ (42,365)
Earnings per common share - diluted   (0.22)     (5.38)     (0.89)     (5.15)
Add back: Valuation Allowance   (0.16)     0.00     0.00     0.00
Adjusted Earnings Per Share $ (0.38)   $ (5.38)   $ (0.89)   $ (5.15)
Weighted average number of common shares outstanding - diluted   17,663     8,253     14,952     8,227

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

Reconciliation of Non-GAAP Measures
XPO Logistics, Inc.
Consolidated Reconciliation of EBITDA to Net Income
(Unaudited)
(in thousands)
                               
                               
  Three Months Ended
September 30,
Change   Nine Months Ended
September 30,
  Change
    2012     2011   %     2012     2011   %
                               
Net (loss) income available to common shareholders $ (3,899)   $ (44,396)   91.2%   $ (13,270)   $ (42,365)   68.7%
Dividends and preferred shares conversion charge   (750)     (44,586)   98.3%     (2,250)     (44,586)   95.0%
Net (loss) income   (3,149)     190   1757.4%     (11,020)     2,221   596.2%
Interest expense   15     49   -69.4%     30     145   -79.3%
Income tax provision   (6,460)     231   -2896.5%     (6,201)     1,685   -468.0%
Depreciation and amortization   722     305   136.7%     1,463     944   55.0%
EBITDA $ (8,872)   $ 775   1244.8%   $ (15,728)   $ 4,995   414.9%

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

XPO Logistics, Inc.
Consolidated Calculation of Diluted Weighted Shares Outstanding
(Unaudited)
               
  Three Months Ended   Nine Months Ended
  September 30,
2012
  September 30,
2011
  September 30,
2012
  September 30,
2011
Basic common stock outstanding 17,663,403   8,252,891   14,952,059   8,227,375
               
Potentially Dilutive Securities:              
Shares underlying the conversion of preferred stock to common stock 10,714,286   3,260,870   10,714,286   1,098,901
Shares underlying the conversion of the convertible senior notes 330,784   0   111,066   0
Shares underlying  warrants to purchase common stock 5,516,551   4,564,224   5,770,577   3,634,139
Shares underlying  stock options to purchase common stock 507,425   402,819   549,084   361,707
Shares underlying  restricted stock units 138,921   682   158,308   0
  17,207,966   8,228,595   17,303,320   5,094,746
               
Diluted weighted shares outstanding 34,871,369   16,481,486   32,255,379   13,322,121

 

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 nine-month periods ended September 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 $14.43 per share and $15.17 per share for the three-month and nine- month periods ended September 30, 2012, respectively.