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XPO Logistics Announces First Quarter 2014 Results
Reports 51% organic growth company-wide
Raises estimate for cost synergies from Pacer integration to $15 million
Opens freight brokerage cold-start in Kansas City
Reaffirms full year 2014 guidance
GREENWICH, Conn. - May 1, 2014 - XPO Logistics, Inc. (NYSE: XPO) today announced financial results for the first quarter of 2014. Total gross revenue increased 147.7% year-over-year to $282.4 million. Net revenue increased 259.1% to $58.4 million.
The company reported a net loss of $28.1 million for the quarter, compared with a net loss of $14.5 million for the same period in 2013. The net loss available to common shareholders was $28.9 million, or a loss of $0.70 per diluted share, compared with a net loss of $15.3 million, or a loss of $0.85 per diluted share, for the same period in 2013. The company's first quarter 2014 results reflect: $10.8 million, or $7.5 million after-tax, of transaction and integration costs related to the acquisition of Pacer International, Inc.; $4.5 million, or $3.7 million after-tax, for a commitment fee related to an undrawn debt funding option for the Pacer transaction; and $2.3 million, before-tax and after-tax, related to conversions of the company's convertible senior notes.
Earnings (loss) before interest, taxes, depreciation and amortization ("EBITDA"), a non-GAAP financial measure, was a loss of $10.1 million for the quarter, compared with a loss of $9.8 million for the same period in 2013. EBITDA for the first quarter reflects $1.4 million and $1.1 million of non-cash share-based compensation for 2014 and 2013, respectively. Excluding $10.8 million of transaction and integration costs related to the Pacer acquisition, adjusted EBITDA for the first quarter of 2014 was $678,000. Reconciliations of EBITDA and adjusted EBITDA to net income are provided in the attached financial tables.
The company had approximately $157 million of cash, including $13 million of restricted cash, as of March 31, 2014, immediately following its acquisition of Pacer.
Reaffirms Full Year Financial Targets
The company reaffirmed its full year 2014 targets for an annual revenue run rate of at least $2.75 billion and an annual EBITDA run rate of at least $100 million by December 31. The company expects to acquire at least $400 million of historical annual revenue in 2014, excluding the Pacer acquisition.
Bradley Jacobs, chairman and chief executive officer of XPO Logistics, said, "In the first quarter, we increased our revenue to $282 million - significantly more than expected - including notable year-over-year organic growth of 51%. Our 11 brokerage cold-starts, including our newest branch in Kansas City, are on a combined revenue run rate of $190 million, nearly triple the rate of 12 months ago. Our employee productivity metrics are on the rise, and our strategic accounts team signed 33 new major accounts in the quarter.
"Our expedited business, which benefited from weather-related supply chain disruptions, increased first quarter profitability fivefold from a year ago. This included the impact of our online portal XPO NLM, which we purchased in December: XPO NLM managed over 130,000 expedited loads in the first quarter, a 47% increase in volume from a year ago. We increased freight forwarding revenue by more than 20% year-over-year, and improved our brokerage margin by 90 basis points, excluding the benefit of last-mile margin. We capped the quarter with our purchase of Pacer International on March 31.
"The integration of Pacer is going extremely well. We've already unified our sales force, and we have many large intermodal bids in the pipeline. We moved the former Pacer truck brokerage operation onto our proprietary Freight Optimizer technology, giving them access to our network of over 26,000 carriers. And we've made great progress at right-sizing costs in technology, real estate, sales and administrative functions. We acted quickly to reverse the losses in Pacer's logistics business by closing 10 underperforming locations and consolidating six duplicative offices in the U.S., Asia and Europe. The remaining locations have become part of our XPO Global Logistics freight forwarding network. We now expect to capture about $15 million of cost synergies - three times our original estimate - while expanding services to our customers."
Jacobs continued, "Excluding the costs associated with the acquisition of Pacer, this was our second straight quarter of positive EBITDA. We're on track to meet our target run rate of $100 million of EBITDA by year-end 2014, and approximately $425 million of EBITDA in 2017 on revenue of $7.5 billion."
First Quarter 2014 Results by Business Unit
Raises Estimate for Cost Synergies from Pacer Integration to $15 Million
The company increased its target for cost synergies related to the integration of Pacer International, Inc., acquired March 31, 2014. The company now expects to realize approximately $15 million of synergies.
Opens Freight Brokerage Cold-start in Kansas City
On March 31, 2014, the company opened a cold-start location in Kansas City, Mo., as part of a planned organic expansion of its freight brokerage footprint. The branch is the company's eleventh freight brokerage cold-start.
The company will hold a conference call on Friday, May 2, 2014, at 8:30 a.m. Eastern Time. Participants can call toll-free (from U.S./Canada) 1-800-708-4539; international callers dial +1-847-619-6396. A live webcast of the conference will be available on the investor relations area of the company's website, www.xpologistics.com/investors. The conference will be archived until June 1, 2014. 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 37094021.
About XPO Logistics, Inc.
XPO Logistics, Inc. (NYSE: XPO) is one of the fastest growing providers of transportation logistics services in North America: the fourth largest freight brokerage firm, the third largest provider of intermodal services, the largest provider of last-mile logistics for heavy goods, and the largest manager of expedited shipments, with growing positions in managed transportation, global freight forwarding and less-than-truckload brokerage. The company facilitates more than 25,000 deliveries a day throughout the U.S., Mexico and Canada.
XPO Logistics has 123 locations and approximately 3,000 employees. Its three business segments - freight brokerage, expedited transportation and freight forwarding - utilize relationships with ground, rail, sea and air carriers to serve over 14,000 customers in the manufacturing, industrial, retail, commercial, life sciences and government sectors. The company has more than 1,000 owner-operator trucks under contract to its drayage and expedited subsidiaries, and has access to additional capacity through its relationships with over 26,000 other carriers. For more information: www.xpologistics.com
Explanatory Note Regarding Impact of Pacer Acquisition
The company acquired Pacer International, Inc. on March 31, 2014. Accordingly, the company's financial statements for the first quarter of 2014 do not include any results of operations for Pacer. However, the balance sheet for Pacer is reflected in the company's consolidated balance sheets as of March 31.
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 (loss) before interest, taxes, depreciation and amortization ("EBITDA") and adjusted EBITDA for the quarters ended March 31, 2014 and 2013. 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. We believe that EBITDA and adjusted EBITDA improve 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, and, in the case of adjusted EBITDA, non-recurring costs related to the Pacer acquisition. In addition to its use by management, we believe that EBITDA and adjusted EBITDA are measures widely used by securities analysts, investors and others to evaluate the financial performance of companies in our industry. Other companies may calculate EBITDA and adjusted EBITDA differently, and therefore our measures may not be comparable to similarly titled measures of other companies. EBITDA and adjusted EBITDA are not measures 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 and adjusted EBITDA are significant and necessary components of the operations of our business, and, therefore, EBITDA and adjusted EBITDA should only be used as supplemental measures of our operating performance.
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, including the company's full year 2014 and full year 2017 financial targets and expected cost synergies from the Pacer integration. 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 XPO's filings with the SEC and the following: economic conditions generally; competition; XPO's ability to find suitable acquisition candidates and execute its acquisition strategy; the expected impact of acquisitions, including the expected impact on XPO's results of operations; XPO's ability to raise debt and equity capital; XPO's ability to attract and retain key employees to execute its growth strategy; litigation, including litigation related to alleged misclassification of independent contractors; the ability to develop and implement a suitable information technology system; the ability to maintain positive relationships with XPO's networks of third-party transportation providers; the ability to retain XPO's and acquired businesses' largest customers; XPO's ability to successfully integrate acquired businesses and realize anticipated synergies and cost savings; rail and other network changes; weather and other service disruptions; 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 will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, XPO or its businesses or operations. Forward-looking statements set forth in this document speak only as of the date hereof, and XPO undertakes no obligation to update forward-looking statements to reflect subsequent events or circumstances, changes in expectations or the occurrence of unanticipated events except to the extent required by law.
Note: Employee totals are as of period end, and primarily include the positions of shipper sales, carrier procurement and brokerage operations, and reflect the impact of recruitment and acquisitions.
Note: Total depreciation and amortization for the Expedited Transportation reportable segment included in both direct expense and SG&A, was $1,612,000 and $268,000 for the three-months ended March 31, 2014 and 2013, respectively.
Note: Intercompany eliminations included revenue of $2.6 million and $4.3 million for the three-months ended March 31, 2014 and 2013, respectively.
Note: Please refer to the "Non-GAAP Financial Measures" section of the press release.
Note: 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 periods presented. 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 $28.85 per share and $17.15 per share for the three months ended March 31, 2014 and 2013, respectively.
For informational purposes, the following table represents fully diluted shares as of March 31, 2014, 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 the warrants, options and RSUs in the table was calculated using the closing market price of common stock on March 31, 2014. A non-weighted basis for calculating fully diluted shares is a non-GAAP financial measure as defined under SEC rules.