XPO Logistics, Inc. - FORM 8-K - EX-99.2

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8-K - 8-K - XPO Logistics, Inc.	d764726d8k.htm
EX-99.1 - EX-99.1 - XPO Logistics, Inc.	d764726dex991.htm
EX-99.3 - EX-99.3 - XPO Logistics, Inc.	d764726dex993.htm

XPO to Acquire New Breed

Completes Acquisition of ACL

July 29, 2014

Exhibit 99.2

Forward-Looking Statements Disclaimer

This document 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. 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 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 the

acquisitions of New Breed and ACL, including the expected impact on XPO's results of operations; the ability to obtain the requisite

regulatory approvals and the satisfaction of other conditions to consummation of the New Breed transaction; the ability to realize

anticipated synergies and cost savings with respect to acquired companies; XPO’s ability to raise debt and equity capital; XPO’s

ability to attract and retain key employees to execute its growth strategy, including New Breed’s and ACL’s management teams;

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 companies’ largest customers; XPO’s ability to successfully

integrate New Breed, ACL and other acquired businesses; rail and other network changes; weather and other service disruptions;

and governmental regulation. All forward-looking statements set forth in this document 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.

One of the Largest 3PLs in North America

We facilitate over 31,000 deliveries per day

#4 freight brokerage firm and Top 50 logistics company

#3 provider of intermodal services

#1 provider of cross-border Mexico intermodal

#1 manager of expedited shipments

#1 provider of last-mile logistics for heavy goods

International and domestic freight forwarder

Growing presence in managed transportation and LTL

Sources for rankings: Transport Topics, Journal of Commerce and company data

Clearly Defined Strategy for Value Creation

Acquire companies that bring value and are highly scalable

Significantly scale up and optimize existing operations

Open cold-starts where sales recruitment can drive revenue

We are ahead of plan in transforming XPO Logistics into

a leading multi-modal supply chain provider

Completed 12 strategic acquisitions and established

23 cold-starts in less than three years

Created leading-edge recruiting and training programs

Introduced scalable IT platform

Added national operations centers for shared services, carrier

procurement and last-mile operations

Stratified customers, assigned a single point of contact to each

Created a culture of passionate on-time performance

Disciplined focus on operational excellence

Precise Execution of Growth Plan

Massive Commitment to Shipper Satisfaction

Integrated network with cross-company visibility

148 locations in the U.S., Canada, Mexico, Asia and Europe

Approximately 3,100 employees

Relationships with an additional 27,000 vetted carriers

Access to 60,000 miles of network rail routes

More than 3,600 owner-operator trucks under contract for drayage,

expedited and last mile subsidiaries

New Breed will add approximately 6,800 employees and

71 locations

Significant Growth Embedded in XPO’s Model

Strategic accounts:

market to large shippers

Cold-starts:

expand footprint in markets with best access

to sales talent

Scale and productivity:

recruit sales reps and provide state-

of-the-art training and IT

Supply chain offering:

build leadership positions in the

fastest-growing areas of logistics

Performance:

become the logistics partner of choice due to

our relentless focus on on-time pickup and delivery

M&A program:

focus on the top 100 pipeline prospects

Leading Positions in High-Growth Sectors

Sources: Armstrong & Associates, Norbridge, Inc., EVE Partners LLC, FTR Associates, SJ Consulting Group, Inc.,

Bureau of Economic Analysis, US Department of Commerce

Sector

Market

Size

($ billions)

Projected

Growth

(x GDP)

Growth Drivers

Truck brokerage

$50

2-3 times

Outsourcing and technology

Intermodal

$15

3-5 times

Long-haul rail efficiencies and

near-sourcing of

manufacturing in Mexico

Heavy goods,

last-mile

$13

5-6 times

Outsourcing and e-commerce

Major Coverage: U.S., Mexico and Canada

Source: Company data

Serving over

Manufacturing

Retail

Commercial

Life Sciences

Food and Beverage

Governmental

14,000 customers

Planned Acquisition of New Breed

Compelling reasons for the transaction

Will be transformational for XPO’s scale and value proposition

–

Combined company of approximately 10,000 employees and

over 200 locations

–

Most differentiated supply chain offering for end-to-end solutions

Capitalizes on trend toward outsourcing reverse logistics,

transportation management, lean manufacturing and aftermarket

support, and other contract logistics services

Will create significant cross-selling opportunities with XPO

strategic accounts, New Breed customers and their vendors

Source: XPO Logistics and New Breed company data

New Breed Is a Preeminent Provider

Leads the most desirable sector of contract logistics

Complex, highly engineered solutions for blue chip customers

–

Very stable relationships with low cyclicality

Focuses on high-growth industries

–

Technology, telecom, e-commerce, aerospace and defense,

medical equipment and select areas of manufacturing

16% revenue CAGR for the past 10 years

Sources: New Breed company data

Operations will continue to be led by Louis DeJoy, New Breed’s

visionary CEO

New Breed’s Attractive Financial Model

Lucrative non-asset based model in line with XPO’s strategy

19% adjusted EBITDA CAGR over the past 10 years

38% return on invested capital (FY 2013)

(1)

71% free cash flow conversion (FY 2013)

(2)

Approximately 99% contractual revenue renewal rate over the

past three years

Low capex requirements (4.2% of revenue in FY 2013) and

largely devoted to IT development

(1)

Free cash flow conversion equals EBITDA minus capex, divided by EBITDA.

(2)

Return on invested capital equals ongoing operations EBIT divided by the sum of net working capital and net PP&E.

Source: New Breed company data

Industry-defining Technology

Integration of proprietary IT will create strong differentiation

Combination of two robust managed transportation solutions

–

XPO NLM is the largest web-based manager of expedited

shipments in North America

–

New Breed’s transportation management system uses

sophisticated tools for dynamic freight optimization, routing

guide management and carrier selection

–

XPO will gain over 300 IT professionals from the combination,

doubling XPO’s IT workforce

Sources: XPO Logistics and New Breed company data

Details of the New Breed Transaction

$615 million cash purchase price

Adds approximately $597 million of revenue and $77 million of

adjusted EBITDA (trailing 12 months ended June 30, 2014)

Multiple of approximately 8.0 times trailing 12 months

adjusted EBITDA

XPO has obtained committed transaction financing from Credit

Suisse AG, Morgan Stanley Senior Funding, Inc., Citigroup Inc.

and Deutsche Bank AG for a total of up to $645 million in senior

secured term loan facilities

Transaction is expected to close in Q3 2014, subject to

satisfaction of customary closing conditions

Acquisition of Atlantic Central Logistics

Compelling reasons for the transaction

Non-asset, multi-regional, last mile logistics provider

Pipeline still active for last mile acquisitions

Moves high volumes of e-commerce purchases for

mega-companies

Adds approximately 160 employees, 14 locations and 650

contracted trucks to XPO

Complementary delivery schedules allow XPO Last Mile to

leverage combined capacity

Details of the ACL Transaction

$36.5 million cash purchase price

Multiple of approximately 5.9 times trailing 12 months

adjusted EBITDA

Adds approximately $63 million of revenue and $6.2 million of

adjusted EBITDA (trailing 12 months ended June 30, 2014)

Transaction completed July 28, 2014

Acquired Pacer in March 2014

Gained instant scale in North American intermodal

–

Third largest provider of intermodal services

–

#1 provider of cross-border Mexico intermodal, with

30 years’

experience

–

Access to 60,000 miles of network rail routes

–

Decades-deep relationships with the railroads

Added $980 million of revenue (FY 2013), 31 locations and

approximately 800 employees

Sources:

Consulting

Group,

Inc.,

Bureau

Economic

Analysis,

Department

Commerce

and

company

data

Major Intermodal Market Opportunity

$15 billion sector in North America

One of the fastest-growing areas of transportation logistics

Enables shippers to lower transportation costs for freight

traveling 600 miles or more

Sources: SJ Consulting Group, Inc., FTR Associates and company data

Growing at three to five times GDP

Rail is more fuel-efficient than truckload for long haul

Intermodal can lower shipper’s cost by up to 20%

Growing at three to five times GDP

High-Growth Cross-Border Mexico Sector

Mexico is fast becoming the manufacturers’

country of choice

for near-shoring

–

Competitively priced labor force

–

Faster speed-to-market than overseas locales

–

Can be more cost effective than cross-border truckload

–

Growth driven by billions of dollars invested by major

manufacturers, Mexican government and the rails

Large opportunity to covert to intermodal: an estimated

2.8 million trucks move cross-border each year

Sources: AlixPartners and company data

Integration of Intermodal Is Driving Results

XPO now manages approximately 10% of all domestic

intermodal loads in North America

Stronger value proposition as a large, single-source supply

chain partner with deep capacity

Energetically cross-selling intermodal to XPO customer base,

and selling full service range to intermodal customers

Q2: intermodal revenue up 11.7% and volume up 7.5% YOY

On track to realize $15 million of targeted synergies from

integration

Source: Company data

Rebranded as XPO Last Mile

Largest provider of last-mile logistics for heavy goods home

delivery in North America

Facilitates approximately 7 million last-mile deliveries per year

Leading, proprietary software for workflow and customer

experience management

Strong customer-centric culture built by experienced leaders

who now run the business for XPO

Acquired 3PD in August 2013

Source: Company data

XPO Last Mile serves one of the fastest-growing sectors of

non-asset, third party logistics

–

Heavy goods home delivery

growing at five to six times GDP

–

Strong tailwinds from e-commerce and outsourcing

$13 billion market for heavy goods home deliveries

–

Only 30% currently going through 3PLs

Highly fragmented with many small, regional providers

Last Mile’s Exciting Market Potential

Sources: Norbridge, Inc. and EVE Partners LLC

Capitalizing on major advantages of scale and growing

–

Cost efficiencies, productivity, access to trucks, rigorous

quality control systems, expertise

Acquired Optima Service Solutions in November 2013

–

Highly scalable supplier, leading arranger of last mile

installations of large appliances and electronics

Acquired Atlantic Central Logistics in July 2014

XPO Has a Strong Platform for Last Mile

Source: Company data

Rebranded as XPO NLM

#1 web-based expediter, made XPO the #1 manager of

expedited shipments in North America

Manages an annual run rate of more than three quarters of a

billion dollars of gross transportation spend

–

Online auction system proprietary to XPO

–

Carriers bid on loads that are awarded electronically

Benefits from trend toward just-in-time inventories, and

supply chain disruptions

Acquired NLM in December 2013

Focused Sales and Marketing Effort

Differentiate XPO by providing a passionate commitment to

customer satisfaction across a range of services

Single point of contact for each customer

–

Strategic accounts team marketing to largest 2,000 shippers

–

National accounts team focused on next largest

5,000 companies

–

Branch network expands our reach to hundreds of

thousands of small and medium-sized shippers

Capture more of the $32 billion less-than-truckload opportunity

Sources: SJ Consulting Group, Inc., company data

One common IT platform for freight brokerage in all cold-starts

and acquired companies

Proprietary freight optimizer tools for pricing and load-covering

put in place in 2012

Highly scalable load execution and tendering via automated

load-to-carrier matching

Total IT budget of more than $70 million for 2014

(1)

Increasing Productivity through Technology

(1) Includes full year IT budget for Pacer

23 cold-starts

–

11 in freight brokerage, including Kansas City opened

in March; 11 in freight forwarding; one in expedited

Freight brokerage cold-starts on an annual revenue run rate

of more than $220 million

–

Up from $90 million 12 months ago

Low capital investment can deliver outsized returns

Hire strong industry veterans as branch presidents

Position in prime recruitment areas and scale up

Growth through Cold-starts

Founded and led four highly successful companies,

including world-class public corporations

United Rentals:

Built world’s largest equipment rental company

United Waste:

Created 5th largest solid waste business in North America

Hamilton Resources:

Grew global oil trading company to ~$1 billion

Amerex Oil Associates:

Built one of world’s largest oil brokerage firms

United Rentals stock outperformed S&P 500 by 2.2x from 1997 to 2007

United Waste stock outperformed S&P 500 by 5.6x from 1992 to 1997

CEO Bradley S. Jacobs

Highly Skilled Management Team

Partial list

The full management team can be found on www.xpologistics.com

Troy Cooper

Chief Operating Officer

Paul Smith

President, Intermodal division

Karl Meyer

Chief Executive Officer, XPO Last Mile

Chris Healy

President, Expedited Transportation

John Hardig

Chief Financial Officer

Tom Connolly

Senior Vice President, Acquisitions

Dave Rowe

Chief Technology Officer

Mario Harik

Chief Information Officer

Julie Luna

Chief Commercial Officer

Scott Malat

Chief Strategy Officer

Gordon Devens

General Counsel

United Rentals, United Waste

Pacer International

Boyd Brothers, Caliber Logistics, Roberts Express

Stifel Nicolaus, Alex. Brown

EVE Partners

Echo Global Logistics

Oakleaf Waste Management

AutoNation, Skadden Arps

Goldman Sachs, UBS, JPMorgan Chase

Pacer International, Union Pacific

3PD, Inc., Home Depot

Deep Bench of Industry Experience Partial list

Lou Amo

Vice President, Operational Initiatives

Jake Schnell

Sr. Operational Process and Integration Manager

Jenna Sargent

Regional Sales and Operation Manager

Evan Laskaris

Director of Operations, Chicago

Bud Workmon

President, XPO Last Mile

Jim Commiskey

Strategic Accounts Manager

Greg Ritter

Senior Vice President, Strategic Accounts

Doug George

Branch President, Dallas

Will O’Shea

Chief Sales and Marketing Officer, XPO Last Mile

Andrew Armstrong

Sales and Operations Manager

Drew Wilkerson

Branch President, Charlotte

3PD, Inc., Cardinal Logistics

Electrolux, Union Pacific, Odyssey Logistics

C.H. Robinson

OHL, Schneider Logistics

AFN, CEVA Logistics, Menlo

Pacer International, UPS, Menlo

Knight Brokerage, C.H. Robinson

AFN, Ryder Integrated Logistics

Livingston International, Echo Global Logistics

C.H. Robinson

3PD, Inc., Ryder Integrated Logistics, Cardinal Logistics

Revenue trajectory

–

2011 revenue of $177 million

–

Currently at approximately

$2.3 billion annual revenue run rate

Q2 growth company-wide,

2014 vs. 2013

–

Organic growth up 49%

–

Gross revenue up 324%

–

Net revenue up 530%

Organic growth in freight

brokerage up 67%

Revenue and Margin Growth

Gross Revenue ($ millions)

+324%

$137

$581

Q2 '13

Q2 '14

Key Financial Statistics

Expedited Transportation

Freight Brokerage

Freight Forwarding

Q2 Revenue Growth by Business Unit, 2014 vs. 2013

Revenue ($ millions)

+417%

+37%

+180%

$95

$493

Q2 '13

Q2 '14

$26

$36

Q2 '13

Q2 '14

$19

$54

Q2 '13

Q2 '14

First 30 Months of Growth Strategy

2012

2013

2014

Revenue ($ millions)

$45

$55

$71

$109

$114

$137

$194

$257

$282

$581

Full year 2014

Annual revenue run rate of at least $3 billion by December

Annual EBITDA run rate of at least $150 million by December

Full year 2017

EBITDA of at least $425 million

Financial Targets

Incentivized XPO Management

Equity ownership aligns management team with shareholders

Management and directors own approx. 29% of the company

(1)

Based on SEC beneficial ownership calculation as of June 30, 2014

(2)

Dilutive effect of warrants calculated using treasury method (avg. closing price of $26.41 for the 3 months ending 6/30/14); total warrant

proceeds of $74.0 million

(3)

Assumes conversion in full of $120.7 million in aggregate principal amount of outstanding 4.50% convertible senior notes due 2017

(4)

Common Stock Equivalent Capitalization as of 6/30/14

Common Shares

52.6 million

Preferred Shares

10.5 million

Warrants (Strike Price $7 per share)

10.6 million (7.8 million dilutive)

(2)

Convertible Senior Notes

7.3 million shares

(3)

Stock Options and RSUs

1.2 million shares dilutive

(4)

Fully Diluted Shares Outstanding

79.4 million shares

Dilutive effect of outstanding RSUs and stock options calculated using treasury method (avg. closing price of $26.41 for the 3 months ending 6/30/14)

Significant growth embedded in XPO’s business model

Leading positions in fastest-growing areas of transportation

Compelling value proposition as a multi-modal, single-source

provider

Passionate culture of on-time performance and productivity

Top management talent with skills that uniquely fit XPO’s

growth strategy

Clear Path for Significant Value Creation

XPO Logistics, Inc. - FORM 8-K - EX-99.2 - July 29, 2014

Attached files

XPO Logistics, Inc. Reports