In The News

XPO Logistics Announces Fourth Quarter and Full Year 2012 Results

Provides Full Year 2013 Outlook

Acquires Covered Logistics

GREENWICH, Conn. — February 27, 2013 — XPO Logistics, Inc. (NYSE: XPO) today announced financial results for the fourth quarter and full year 2012.

For the fourth quarter of 2012, total revenue was $108.5 million, a 146.1% increase from the same period the prior year. Gross margin dollars increased 118.4% year-over-year to $15.7 million, and gross margin percentage was 14.4%.

Consistent with the company's previously announced strategy, investments in long-term growth impacted fourth quarter results. The company reported a net loss of $9.3 million for the quarter, compared with a net loss of $1.5 million for the same period in 2011. The fourth quarter net loss available to common shareholders was $10.1 million, or a loss of $0.57 per diluted share, compared with a net loss available to common shareholders of $2.2 million, or a loss of $0.27 per diluted share, for the same period in 2011.

Earnings (loss) before interest, taxes, depreciation and amortization ("EBITDA"), a non-GAAP financial measure, was a loss of $9.9 million for the fourth quarter of 2012, compared with a loss of $2.1 million for the same period in 2011. EBITDA includes $913,000 and $882,000 of non-cash share-based compensation for the fourth quarters of 2012 and 2011, respectively. A reconciliation of EBITDA to net income is provided in the attached financial tables.

The company had $252.3 million of cash as of December 31, 2012.

2013 Outlook

The company provided the following outlook for full year 2013:

An annual revenue run rate of more than $1 billion as of December 31; At least $300 million of acquired historical annual revenue; Positive EBITDA for the fourth quarter; and At least three new freight brokerage cold-starts. Acquires Covered Logistics & Transportation LLC
On February 22, 2013, the company acquired substantially all of the operating assets of Covered Logistics & Transportation LLC, a non-asset, third party freight brokerage business with 2012 revenues of approximately $27 million. The purchase price was $8 million in cash and $3 million in XPO common stock, excluding any working capital adjustments, with no assumption of debt. The acquisition is expected to be immediately accretive to earnings.

Founded in 2005, Covered Logistics has over 4,000 carrier relationships and a strong track record of serving the manufacturing, postal, consumer, and oil and gas sectors. Its offices are located in Lake Forest, Ill., and Dallas, Texas. Co-founders Tuck Jasper, Paul Jasper and Patrick Gillihan will continue to lead the operations, which are being rebranded as XPO Logistics.

CEO Comments

Bradley Jacobs, chairman and chief executive officer, said, "The actions we're taking to scale up the business are continuing to drive results. Our fourth quarter revenue was up 146% year-over-year, and gross margin dollars increased by 118%. Our freight brokerage business generated 760% more revenue in the quarter, as compared to the prior year period. Our expedite business achieved top line growth of 8.7% for the quarter, and we have new initiatives in place to gain margin. Freight forwarding had a 62% increase in gross margin dollars versus fourth quarter 2011. While our investments in people and technology resulted in a loss, as expected, they are fundamentally important to value creation. We're currently on an annual revenue run rate of over $500 million, and we expect that rate to be more than a billion dollars by year-end."

Jacobs continued, "Our most recent acquisition, Covered Logistics, is a well-run freight brokerage operation that we plan to integrate and scale up quickly. The Covered team has deep roots in the industry and they share our passion for growth. This is our second acquisition of 2013 from a pipeline of solid prospects. We expect to add at least $300 million of acquired historical annual revenue in 2013.

"We remain focused on executing the three parts of our strategy: acquisitions, cold-starts and the optimization of our operations. In 14 months, we've acquired six companies and opened 17 cold-starts, eight in freight brokerage. Our footprint now stands at 60 locations. We've grown our headcount from 208 to more than 900 employees. We're steadily enhancing our proprietary technology, and implementing leading edge recruitment and training programs. Most importantly, we've created a driven culture that keeps us on track to grow XPO into a multi-billion dollar company."

Fourth Quarter 2012 Results by Business Unit

Freight brokerage: The company's freight brokerage business generated total revenue of $71.1 million for the quarter, a 760.3% increase from the same period the prior year. Year-over-year revenue growth was primarily due to the acquisitions of Turbo Logistics, Kelron Logistics, Continental Freight Services and BirdDog Logistics, as well as revenue growth from the company's eight brokerage cold-start locations. The acquisition of Turbo Logistics on October 24, 2012, had a positive revenue impact of $27.2 million for the quarter. Gross margin percentage for the freight brokerage business was 13.4% for the quarter, compared with 16.8% for the same period in 2011. The decline in gross margin percentage was primarily due to the addition of seven new cold-starts in 2012, which are still in the start-up phase. The fourth quarter operating loss was $2.5 million, compared with operating income of $496,000 the prior year. The decline in 2012 operating income primarily reflects a planned increase in SG&A expense associated with significant growth initiatives, including sales force recruitment. Expedited transportation: The company's expedited services business generated total revenue of $22.1 million for the quarter, an 8.7% increase from the same period the prior year. Revenue growth was primarily driven by an increase in average revenue-per-load and growth in the company's domestic, international and temperature-controlled services. Gross margin percentage was 16.5% for the quarter, compared with 20.9% for the same period in 2011. The decrease in gross margin percentage primarily reflects higher rates paid to independent fleet owners and owner-operators, effective March 1, 2012, and an increase in the volume of cross-border loads, which typically generate a lower margin. Fourth quarter operating income was $1.0 million, compared with $1.8 million the prior year, primarily reflecting the year-over-year decrease in gross margin. Freight forwarding: The company's freight forwarding business generated total revenue of $18.5 million for the quarter, a 10.1% increase from the same period the prior year. Gross margin percentage was 13.5% for the quarter, compared with 9.2% for the same period in 2011. The improvements in revenue and gross margin percentage reflect a revenue increase from company-owned branches. Fourth quarter operating income was $454,000, compared with $35,000 for the same period the prior year. The increase in operating income reflects a higher gross margin, partially offset by higher SG&A costs associated with new company-owned locations in Chicago, Houston, Los Angeles, Minneapolis, Charlotte and Atlanta. Corporate: Corporate SG&A expense for the fourth quarter of 2012 increased by $5.3 million, compared with the same period the prior year. The increase was driven by a higher headcount in corporate shared services and higher purchased services. Corporate SG&A expense for the fourth quarter of 2012 included approximately $1.4 million of litigation-related legal costs; $1.0 million of acquisition-related transaction costs; and $913,000 of non-cash share based compensation. Full Year 2012 Financial Results

For the full year 2012, total revenue was $278.6 million, a 57.3% increase from 2011. Gross margin dollars increased 37.1% year-over-year to $40.8 million, and gross margin percentage was 14.7%.

Consistent with the company's previously announced strategy, investments in long-term growth impacted full year results. The company reported a net loss of $20.3 million for the full year 2012, compared with net income of $759,000 for 2011. The net loss available to common shareholders was $23.3 million, or a loss of $1.49 per diluted share, compared with a net loss available to common shareholders of $44.6 million, or a loss of $5.41 per diluted share, for 2011. The full year 2012 loss includes a charge of $0.19 per diluted share related to $3.0 million in cumulative preferred dividends. The full year 2011 loss includes a non-cash charge of $44.2 million, or $5.36 per diluted share, related to the September 2011 equity investment in the company.

EBITDA was a loss of $25.8 million for the full year 2012, compared with $2.7 million of EBITDA generated in 2011. Full year 2012 EBITDA was impacted by a $2.9 million expense ($1.9 million after tax) for acquisition-related transaction costs; a $2.5 million expense ($1.6 million after tax) for litigation-related legal costs; a $540,000 expense ($344,000 after tax) for compensation, severance and professional fees related to the composition of the company's executive team; a $480,000 expense ($306,000 after tax) 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 $4.4 million of non-cash share-based compensation. A reconciliation of EBITDA to net income is provided in the attached financial tables.

About XPO Logistics, Inc.

XPO Logistics, Inc. (NYSE: XPO) is one of the fastest growing providers of non-asset, third-party freight transportation services in North America. The company uses its relationships with more than 22,000 ground, sea and air carriers to find the best transportation solutions for its customers. XPO Logistics offers its services through three business units: freight brokerage, expedited transportation and freight forwarding. The company serves more than 7,750 customers in the retail, commercial, manufacturing and industrial sectors through 60 locations, including 36 branches in the United States and Canada and 24 agent offices. www.xpologistics.com