Good day ladies and gentlemen, and welcome to the Second Quarter 2012 XPO Logistics Earnings Conference Call. My name is Ann, and I will be your coordinator for today’s call. As a reminder, this conference is being recorded for replay purposes. At this time, all participants are in listen-only mode. (Operator Instructions) We will be facilitating a question-and-answer session following the presentation. Before we begin the call, let me read a brief statement on behalf of the company regarding forward-looking statements, and the use of non-GAAP financial measures. During this call, the company will be making certain forward-looking statements within the meaning of applicable securities laws, which by their nature involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those projected in the forward-looking statements. A discussion of factors that could cause actual results to differ materially is contained in the company’s SEC filings. The forward-looking statements in the company’s earnings release or made on this call are made only as of today, and the company has no obligation to update any of these forward-looking statements. During this call the company also may refer to certain non-GAAP financial measures as defined under applicable SEC rules. Reconciliations of such non-GAAP financial measures to the most comparable GAAP measures are contained in the company’s earnings release and the related financial tables. You can find a copy of the company’s earnings release, which contains additional important information regarding forward-looking statements and non-GAAP financial measures in the Investors section on the company’s website at www.xpologistics.com. I would now like to turn the presentation over to your host for today’s call Mr. Brad Jacobs, Chairman and CEO. Please proceed sir.

Thank you, operator and good morning everybody. Welcome to our second quarter conference call. With me today are John Hardig, our Chief Financial Officer, and Scott Malat, our Chief Strategy Officer. We have lots of news to share with you this morning. First I’m happy to report that we’re either on track or ahead of schedule with each of the three core components of our plan; acquisitions, cold-starts, and optimization of operations. Starting with acquisitions, as you saw last night we purchased Kelron Logistics on Friday. Kelron is a $100 million revenue truck broker based in Canada with offices in Toronto, Vancouver, Montreal and Cleveland here in the States. We’ve met a large number of the Kelron employees, and they’re going to be a great addition to our team. I’m sure we have many of the Kelron people listening to the call, and I want to take this opportunity to welcome them to XPO. Kelron’s built up strong relationships in the industry over 20 years. They serve more than a 1,000 customers, with about 2,500 carriers. With the addition of Kelron’s relationships and lane history, there should be a positive effect on the whole XPO system, both in terms of pricing and in finding trucks. We’re giving the Kelron team access to our carrier capacity in Charlotte, and moving them onto our IT system. We expect this to create efficiencies that will pay off as we add sales people to each of their locations. This is the same model we implemented with Continental Freight Services, which we purchased in May. The Continental team has been a great addition to XPO. Continental has already integrated on to our IT and accesses our carrier capacity on a daily basis. This is working exactly like we anticipated. For example about a third of…

Thanks, Brad. I’ll start by giving some color on the performance of our three business units. Starting with expedited transportation, as Brad mentioned, we grew revenues at our Express-1 business by 12% and increased operating income by 18%. There are a couple of things that drove this growth. We’ve added more salespeople to the Express-1 team, which is having the intended impact of providing more miles to our owner operators. That makes driving for Express-1 more appealing, and we’re having considerable success in attracting more owner operators. In addition, we’re expanding our share in strategic vertical markets. Express-1 increased revenues from international and temperature control business by a combined 21% in the quarter. In our freight forwarding segment, we grew revenues by 5%, that’s substantial considering what continues to be a soft freight forwarding market, and it was a turnaround from four consecutive quarters of decline. We achieved this by growing both our company owned locations and new cold-starts. Our newest freight forwarding location in LA is the fourth this year after Charlotte, Atlanta and an agent owned station in Newark. The effect of these growth investments is reflected in the decline in operating income for the quarter in freight forwarding. In freight brokerage, we doubled revenues from a year ago to $13.9 million. $3.6 million of the increase was related to our May 8 acquisition of Continental Freight, the balance of the increase came from the three cold-starts that were added earlier in the year, and higher revenue at our South Bend location. Gross margin in brokerage decreased to 11% from 15% last year. The decline was due to a mix of factors; lower margin sales during the start up phase of our cold-start locations; an overall sluggish market environment; as well as the impact of seasonality in Phoenix.…

Thanks, John. I’ll review our three-part strategy, and how it ties to the financial picture. First on acquisitions, Kelron will be added to the company results as of August 3. Kelron has a strong top line, but we believe it can be operated much more efficiently. The goal is to empower Kelron employees with better technology to help them get their job done more efficiently. We’re also analyzing their customers and lanes and combining it with our technology tools to help make better pricing decisions. Charlotte will give them access to more capacity, and we’re introducing our training programs. At the same time, we will add more salespeople to all the four branches. This will increase SG&A in the short-term, but should drive longer term growth and profitability. With Continental, that was our first integration and it went very smoothly. We’re now moving our operation to a larger space in Columbia, and we’re adding sales people. On cold-starts, our success will largely be determined by attracting talented people, and enabling them with powerful technology and training. We’re happy to say, we’ve made a lot of progress in these areas. As you saw in the release, we added experienced branch managers to run our cold-starts. And we added Angela Gibbons as our VP of HR, and John Tuomala as our VP of Talent Management to our team. They are charged with developing a sales force of several thousand people over the next several years, which is something they’ve both done successfully for other companies. We’ve got some great hiring initiatives going like Super Saturdays and Power Thursdays across the country. These are more than job fairs, they connect us with prescreened candidates, and we’ve been able to increase our hit rate with top notch talent. Also we launched a new training…

Thank you (Operator Instructions) And our first question comes from the line of Justin Yagerman with Deutsche Bank. Please proceed. Justin Yagerman – Deutsche Bank Securities, Inc.: Hey good morning, guys.

Good morning, Justin. Justin Yagerman – Deutsche Bank Securities, Inc.: Wanted to ask a bit about the integration of Kelron, and how long you expect that to occur for – how long is it going to take to get them on to your IT platform? And how many employees are you on-boarding with that?

The integration started immediately. And we had our IT people and our operations people there starting this weekend. We had meetings yesterday in Montreal with a Canadian holiday outside of Quebec yesterday. So we have more town hall meetings today. And the IT system in general, our plan is to integrate onto our IT within 90 days, which is what we did with Continental. It may take a little bit longer than that, maybe not, but a little bit longer than that here, because you’ve got Canadian currency issues, and you’ve got French in Montreal, that adds a little bit more complexity to this issue, but not much longer than that in terms of integrating onto the IT. In terms of integration – in terms of training and recruiting and our policies and procedures and our payroll, all that kind of stuff, that’s fairly immediate. Justin Yagerman – Deutsche Bank Securities, Inc.: Okay.

And you asked how many people? Justin Yagerman – Deutsche Bank Securities, Inc.: Yeah.

Roughly 125 people. Justin Yagerman – Deutsche Bank Securities, Inc.: 125, great. And that 18,000 carrier number that you guys called out in your prepared remarks, does that includes the 2,500 from Kelron or is that exclusive of that?

15,000 including Kelron. Kelron brought on another about 2,500. Justin Yagerman – Deutsche Bank Securities, Inc.: Okay. So 17,500 all together?

No, 15,000 all together – I’m sorry. Justin Yagerman – Deutsche Bank Securities, Inc.: 15,000 I got.

Including the 2,500 that Kelron brought on. Justin Yagerman – Deutsche Bank Securities, Inc.: Okay, all right. I wanted to get a little bit of color around the cold-starts, if you could give us an update as you go through them of where they are from revenue run rate standpoint, I think that would be helpful. And then I think what you’ve talked about in the past on the cold-start offices is that, the expectation is for somewhere between $5 million to $10 million of annual run rate revenue by the end of the first 12 months, and then in the five year kind of outlook getting to $50 million to $100 million of revenue at each one of those. Is that something that holds true for both the freight forwarding and expedite or is that really only a truck brokerage forecast?

All right, Justin I think we spoiled you by giving you the cold-starts to Phoenix. We won’t probably do that going forward for breaking out each office, but when you put together the cold-starts in July, they had a greater than $13 million revenue run rate. And importantly, it was at a much higher margin as we went through the quarters, as John and Brad said, and it’s much higher in July than it was in the quarter. In terms of the $5 million to $10 million, that’s still unchanged in the cold-starts. It looks like we’re tracking to plan. On the freight forwarding, it does depend on market. But I would say they do a good amount less than the first year, maybe you can figure in the range of $2 million to $3 million in the first year for a freight forwarding location now LA is a bigger market and has the potential to get much larger, but $2 million to $3 million for freight forwarding office is roughly about right. On the expedite, it’s somewhere in that range as well. Justin Yagerman – Deutsche Bank Securities, Inc.: Okay. So, those are going to track a bit lower on average than the truck brokerage offices.

Yeah. They will. Justin Yagerman – Deutsche Bank Securities, Inc.: And sort of…

And you mentioned Justin that the $5 million to $10 million. We have kind of a healthy internal competition going on now between our seven Truck Brokerage cold-starts, and who is going to drive profitable growth the fastest. And we do have some of those branch presidents thinking about being not just a $50 million to $100 million branch, which in and of itself is a great accomplishment, but to be more of a super regional that it’s going to be hundreds of millions of dollars of revenue or so. We’ll see how that progresses. Justin Yagerman – Deutsche Bank Securities, Inc.: You had promised five to seven this year on the cold-starts. You’ve done seven. Are you done for the year or should be expect more to be opened?

All depends on the people we meet. If we find fantastic branch presidents like the seven we have found so far, we will open more, and if we don’t, then we won’t. We can certainly take it on in terms of internal capacity in the organization. But we don’t want to open a cold-start just for the sake of checking the box and we open a cold-start. We want to open cold-starts with people who have proven track records and have a high likelihood of succeeding. Justin Yagerman – Deutsche Bank Securities, Inc.: Makes lot of sense. Thanks a lot for the time, guys, I appreciate it.

Thank you.

And our next question comes from line of Bill Greene with Morgan Stanley. Please proceed. Bill Greene – Morgan Stanley & Co. LLC: Yeah, hi there. Good morning.

Good morning. Bill Greene – Morgan Stanley & Co. LLC: Hey, is there any detail you can share with us on Kelron in terms of EBITDA, just thinking of modeling this in the second half?

You should look at Kelron as a business that had a $100 million of trailing revenue that had gross margins in the low teen’s percentages, that on an adjusted EBITDA basis was barely breakeven. And, our plan for Kelron is to make it profitable to the extent that brokerage operations are normally profitable. And why did Kelron have sub optimal performance? They got caught, they got caught investing in growth and in infrastructure, and then the market turned against them with the less freight, less economy, less freight out there. Margins got squeezed, cost structure had gone up, and it just didn’t have the deep pockets to be able to fund negative free cash flow. We have an action plan in place that we’ve thought do very well, that the Kelron employee’s initial reaction is very receptive to grow Kelron, to take Kelron. And, here you’ve got a $100 million of revenue with over 1,000 really well – really well regarded clients that they are getting a small percentage of their transportation spend. And let’s go deeper into those accounts, let’s use the capacity that we’ve got in Charlotte in order to bid on more freight from those customer’s that they’ve had 20 year relationships with. And in terms of covering the loads, cover the loads with the types of carriers that we’re emphasizing in our system, which are mainly carriers who have anywhere between 10 and 100 trucks in their system and really appreciate the freight. Bill Greene – Morgan Stanley & Co. LLC: Yeah, okay, great. Now that makes a lot of sense. Another question I had was, just, we saw at C.H. Robinson that there gross margins were lower than almost they have ever been since their IPO, and I was curious if you thought that maybe some of the efforts that you’re taking on as well as some of your peers, are we starting to see more competition in this marketplace that’s starting to affect the sustainability of these gross margins? Do you think the long-term profitability targets that you’ve sort of set for yourself can be achieved if gross margins levels are 50 basis points or 100 basis points lower on average?

Okay. A few good points implicit in your questions. First of all, I think we’re a tiny, tiny little rounding error compared to C. H. Robinson, who’s a $10 billion company right now. So, I think it would be rather arrogant on our side and inaccurate to say that we are affecting their margins. The numbers just don’t – we just can’t have that big of effect on what they’re doing at this stage. Bill Greene – Morgan Stanley & Co. LLC: I almost meant more as a reaction in anticipation of you. Do you see changes at competitors, do you know what I mean?

I look at it differently. In terms of margins, margins have come down. They have compressed about 150 basis points to 175 basis points fairly across the board over the last year. We look at hundreds of brokerages and we get to see a lot of people’s numbers, and that’s basically the trend. You have seen margin compression of almost two full percentage points over last year. Why has that happened? There is two parts to the equation. The amount of freight out there, and the amount of competition chasing that freight, we differ a little bit from the tone that we’ve been hearing on the conference calls, and what we’ve been reading in research reports in the last month during the earning season, about the competition end of it. We, apart from XPO Logistics, I don’t think I can name another brokerage company that started in the last several years, so I don’t see a lot more competition coming in. To the contrary, you see a lot of small brokerages leaving the market. What we do see though is there is less freight out there. The economy is slow, and retail hasn’t come back, which is big part of the freight spend. And the asset-based trucking companies who are number one and number two in the route guide are pretty much taking almost all the loads that they are being tendered. So there is not a lot of supply disruptions, and service failures, and overflow into the spot market. So the much lower amount of freight that’s coming into the spot market is, even if it’s being competed for by the same number of brokers, is still more competitive in terms of supply demand. I think that’s the one issue, the less amount of freight in the spot market, that accounts for the decrease in the margins. Now whether it gets worse first or whether it gets better first, that’s for economists to figure out, we can’t figure that out. Eventually, ultimately, the economy will get better and there will be more freight, and more of that freight will be in the spot market, and brokers will have – it will be a good time to be broker again. Now we think a few years from now, companies who have great access to capacity like we’re positioning ourselves to have, will benefit from that and margins will be healthy. Bill Greene – Morgan Stanley & Co. LLC: Okay, that’s very helpful. Thank you for the time.

Thank you.

And our next question comes from the line of Mr. Peter Nesvold with Jefferies. Please proceed. Peter Nesvold – Jefferies & Co., Inc.: Good morning guys.

Good morning. Peter Nesvold – Jefferies & Co., Inc.: First a question on Kelron, and then a question on the cold-starts. So in Kelron, what do you think the timeframe is for Kelron to be a meaningful contributor to EBITDA? Or at least just more than a breakeven, sort of a point or two at least of EBITDA margin? And how would that differ from most the deals that you would expect to be doing over the next couple of years?

Kelron is a little bit different than our standard meat and potatoes acquisition, because it’s been underperforming financially. And that’s not typically the type of deal we’ll do. So don’t look for us to buy acquisitions at 8% of revenues on our next deal and the deal after that, that’s very unlikely to happen. Kelron was a real bargain when you’re looking at it as a percent of gross revenues. It was a bargain in terms of multiple of gross profit, because actually it was less than gross profit, we bought it for less than gross profit, which is very unusual. But as a multiple of profit, it was astronomical because there virtually was no profit. That’s going to change. It’s not going to change immediately, we’re not going to make wholesale huge changes to it, that are going to cause profitability, you’ll have a lot of one-time deal costs with the lawyers and the accountants and due diligence and all that, some severance costs. And we’ll actually put in some costs in terms of investing in sales people. But you will see, once we get through that initial tranche of activity, that the margins are going to come up, and the profit’s going to come up. And the components of that profit improvement plan are giving them access to the capacity in Charlotte, training the people on negotiating skills, sales skills, incentive – putting incentive compensation in there, so that people have a vested interest to price the freight right and to cover the loads most economically. And those kind of activities should start bearing fruits within two quarters. So, I would expect 2013, Kelron to be a nice contributor to our profits. Long-term, looking out several years from now, our vision for Kelron is to grow it, is…

Thanks Peter. On the cold-starts, it’s obviously what you think, as you grow cold-starts faster, and we roll them out faster, we’ve always said they lose money in the first year. So as we did the seven this year, they’ll be losing anywhere from a half to three quarters of million dollars each in EBITDA. Each cold-start, as we roll them up faster, it moves it down more. In the second year as your adding sales people to those cold starts at a very fast rate still, you’ll – you’ll be profitable, but you won’t be that profitable. And then you roll on the next cold-starts to it, they lose some money. So, if you roll out faster, the cold-starts that actually moves down your EBITDA, which we are happy to do. That, to us, is a great return on the cold-starts. The timing of when we turn profitable has a lot more to do with when and what acquisitions we make. Peter Nesvold – Jefferies & Co., Inc.: Okay great. Thanks guys.

Thank you.

And our next question comes from the line of Mr. John Larkin with Stifel, Nicolaus. Please proceed. John Larkin – Stifel, Nicolaus & Co., Inc.: Hey good morning, gentlemen. Thanks for taking my call.

Good morning, John. John Larkin – Stifel, Nicolaus & Co., Inc.: First question relates to the acquisition process itself. Congratulations on pulling in the Kelron deal. Do you now need to engage in a process where you provide guarantees to their key people in order to keep them from jumping ship? How do you ensure that the key people that you essentially bought stay with the company over the long-term?

Excellent question, because when you buy a non-asset company, you’re really buying the people and the relationships those people have with carriers, the relationship those people have with customers. And if all the people go what did you really buy? So keeping the people is critical. We bought Kelron because we like the people, we like what they’ve done over 20 years, they’ve got caught in a little downdraft here in the market in the last year, but overall they filled up a really nice company. So we absolutely want to keep the vast majority of the Kelron people. With Kelron as we do in most of our acquisitions, we do give stay bonuses to some of the key employees. We can’t give them to everybody because it becomes cost prohibitive, but some of the key employees we do give stay bonuses to. What we really try to do is we like to get right in with the employees right from the beginning, and introduce ourselves and start collaborating with them and getting their ideas and getting their input and together come up with a plan that people are actually excited about. That people actually want to come to work to execute on. So that it’s not a question of them leaving, it’s a question of us keeping them, it’s a question of them not wanting to leave. So if we can create together with the Kelron employees some really genuine excitement about what we’re trying to do with Kelron over the next few years, the chances that people will jump ship to go to a competitor is much lower. And I’m optimistic based on our initial interactions and communications with the Kelron people that we’re going to keep pretty much almost everybody. John Larkin – Stifel, Nicolaus & Co., Inc.: Thanks for that answer. Staying with Kelron for just a minute, could you give us a little color, I missed the first couple of minutes of the call, I had trouble dialing in. You may have already covered this, so just jump on to the next questioner, but did you give any color as to what percentage of the business is intra-Canada? What percentage is intra-U.S.? What percentage is cross border? And how you see that moving forward?

Yeah, John its John Hardig. Kelron today is about 40% intra-U.S. business. So, these are loads that originate and terminate in the U.S. About another – the next 40% of revenue is cross-border, that’s both U.S. to Canada, and come in the opposite direction. And then the rest is intra-Canada. So the company is primarily a U.S. operation. In terms of how we think that might change over time, I don’t know that it will, I mean it may. They have a very strong focus on the U.S. market, in addition to what’s going cross-border and within Canada. We are going to give them a lot of access to carriers through our Charlotte operation, which might drive a little more U.S. concentration over time. But I don’t think it will be a market change over time. John Larkin – Stifel, Nicolaus & Co., Inc.: Is Kerlon ahead of their own customs brokerage? And if so, does that make the transporter business potentially more profitable than the intra-Canada or intra-U.S. business?

They don’t, John. They do not have a customs brokerage operation. John Larkin – Stifel, Nicolaus & Co., Inc.: Is that something that you might consider adding to the mix here over time?

I think it’s certainly something that we would look at, but as of today, they really haven’t found it to be something that’s driving their business. For the most part, most shippers will – that are operating within the cross-border markets will deal with the customs brokerage piece separately. But it’s certainly something that we could add on over time if we saw value in that. John Larkin – Stifel, Nicolaus & Co., Inc.: And then are there any particular industry verticals where Kelron is strong presently, as that might provide some cross-fertilization capability for the rest of the offices?

It’s strong in consumables. And they’ve got some pretty blue chip customers in consumables. They are getting a very small share of wallet that we want to get more of. By the way, John, one thing that Kelron was doing that we didn’t buy was the warehousing business, just to want to get into the asset part of the business. The rest is basically brokerage. John Larkin – Stifel, Nicolaus & Co., Inc.: Okay. And then maybe one kind of longer-term question, and this is a point perhaps you made in the year-and-a-half, two-years ago, that over time you see the truck brokerage process becoming a little less people intensive, a little more systems intensive?

Right. John Larkin – Stifel, Nicolaus & Co., Inc.: Which could be the big differentiator between who ultimately is the winner in truck brokerage, and ultimately is the loser, having listened to what you said this morning, it sounds like its still pretty people intensive. Has anything changed now that you have dug yourself little deeper into the market?

I still believe what you and I discussed years ago about, the business long-term becoming more and more IT centric, and more and more technological. And things that are done by human, gradually more and more be done by computers. That’s not going to happen in the next year – if it’s going happen in the two years, that will be going to be a huge, big, in my opinion, change in how business the is done. But that’s for long-term trend. It’s a long- term trend in many different industries, not just truck brokerage, I think, that’s going to happen. Our emphasis on IT is really huge, and that’s for two reasons; one positive, and one avoiding a negative. IT empowers people to do their job more effectively and more quickly, and from a negative avoidance point of view IT or lack of good IT is the number one reason why high growth companies fail, and fail is not something we’re trying to do here. So investing in IT is something that’s a high priority for us. And we demonstrated that today as well by announcing a Chief Technology Officer reporting to CIO, Mario Harik, and in the form, Dave Rowe, I’m sure you know from Echo. And our goal in IT is to be on par with the top five or six IT savvy brokers in the United States, because we see a very big distinction between the IT capabilities of the top, top larger brokerage firms and all the rest. And in terms of doing the basic functions of brokerage i.e. pricing tools of how to price the freight and finding a truck, and doing those things as quickly as possible. And the larger companies who have slamming IT, do those things really well, and 90% plus of the brokers out there do that kind of seat of the pants, by the gut, which is not really on par with the efficiency of our industries. John Larkin – Stifel, Nicolaus & Co., Inc.: Very helpful. Thanks for the color. Just the hiring of the Dave Rowe suggest that perhaps XPO maybe moving in the direction of enterprise solutions, which should be more of kind of 3PL, 4PL rather than just great truck broker?

I wouldn’t read too much into that. I mean I think the hiring of Dave Rowe is, really we just thought this is guy who really is a good IT person, who knows technology as it applies to logistics, and has real long tooth in it, and got along really well with Mario, and it’s not so much for the enterprise. John Larkin – Stifel, Nicolaus & Co., Inc.: Got it. Thanks very much for the answers.

Thanks, John.

And our next question comes from the line of Kevin Sterling with BB&T Capital Markets. Please proceed. Kevin Sterling – BB&T Capital Markets: Thank you. Good morning Brad, John and Scott.

Good morning. Kevin Sterling – BB&T Capital Markets: Brad, you talked about lot about your cold-starts and the crush you are having here. Really if you could point your finger to, really what is driving your success and your cold-starts being above plan?

It’s really just people that we’ve through our recruiting efforts and Greg Ritters interviewed more than 200 people for branch presidents now, that’s quite a large number. And when we hired a real key hire, you’ll see in the press release, it was kind of long press release, it was kind of buried in there, a fellow by the name John Tuomala, who was VP of Talent Management at Compass Group, which is a British company that has a big U.S. operation based in Charlotte, where he led a team that recruited 2,500 people a year. Now we’re not going to recruit that number of people a year, but we’re going to recruit thousands over the next five years. And having someone as capable and strong as and as experienced as John Tuomala in the recruiting effort is a big plus. So, if we can find the right people, who add the right values, who share the same ethics, share the same work ethic, who are really ambitious, who really want to succeed, who want to do it in an honest way, have a good track record, we’ll take on more. Kevin Sterling – BB&T Capital Markets: Right, okay, great. And then, and then Brad, switching to acquisitions, you made two acquisitions and it looks like the pipeline is pretty full. Is the game plan here to bring in new customers, offer them a suite of services, and gain the largest share of the wallet, but also at the same time drive down purchase and transportation costs, as you expand your carrier network? So am I thinking about your acquisition game plan the right way?

Absolutely, I mean, I couldn’t have said it better. The part about, the last part is very important about being able to purchase transportation better. The key part of our strategy – we have lots of components to our strategy, but the key differentiating part of our strategy is Charlotte. In Charlotte, we’ve got 50 somewhat people now, 41 of whom are doing carrier procurement. We’re hiring 10 to 12 people a month in carrier procurement, we will be up to over 100 by the end of the year in carrier procurement alone in Charlotte. Several years from now, we’ll have several hundred people doing carrier procurement. That access to capacity is going to be an extremely valuable asset to XPO Logistics, when that part of the cycle comes, when the economy is back, and capacity is tight. And here we can find the truck is going to win, and we think we’re positioning ourselves to be in that position. Kevin Sterling – BB&T Capital Markets: So, if I hear you right, a lot of people, I think focus on the customer, but at the same time you’re putting as much focus maybe even more on your carriers, is that right?

I would say equal amount. We look at our carriers as our customers. Those are carrier customers, and they’re shipper customers. And we place equal value on both of them. We’re in the middle of, people who want to move freight and people who need some freight, so both of them are very, very critical to us. And in terms of the margins, the margins will be largely determined on how you purchase transportation, and how you price the freight to begin with. Kevin Sterling – BB&T Capital Markets: Right. Okay and one last question here. You opened the Birmingham office. Is your intend there to capture some near sourcing opportunities in Mexico? And how do you think about Mexico? Are you looking to capture some auto business, just like to hear your thoughts on the near sourcing opportunity?

Well as you know from the discussions that we’ve had offline we love Mexico, and we love being positioned for the continued increase in cross-border business. And we’re mostly capitalizing that in expedite, in our Express-1 division, where we’ve had a big emphasis since last September on continuing to penetrate that cross-border business. Now we don’t go into Mexico, we go right up to the border, typically around El Dorado, and then we have the Mexican partners that we work with that take loads from there. So, in terms of risk management, we tried to stay on U.S. soil. But Mexican destination freight is certainly on the increase in our view, as I think you share the same view, is going to increase over time, and we want to be positioned for that. Now, Birmingham is not as much Mexico, there will be some of that, and Mexico has really handled mostly out of Buchanan. But Birmingham is really to position ourselves for the trend – the migration of manufacturing to keep going south, which has been going on and is likely to continue going on. So, Birmingham will play more towards those manufacturers and distributors in the Southeast within that local region. Kevin Sterling – BB&T Capital Markets: Okay, great. That’s all I had, thanks so much your time this morning. And best of luck.

Thank you for that.

And our next question comes from the line of Scott Schneeberger with Oppenheimer. Please proceed. Scott Schneeberger – Oppenheimer Securities: Thanks. Good morning. First question is two-part, it looks like Continental, if I look half a quarter, that their gross revenue run rate would put you on pace faster than the announced annualized revenues. I’m curious is that seasonality better-than- expected synergy. And then the second part of the question is, what should we expect lot bigger acquisition with Kelron at $100 million, and you mentioned they were – they’ve been ramping aggressively recently, should we see any material change up or down to those revenues as you come out of the gate on that one? Thanks. Scott Malat – XPO Logistics, Inc.: Thanks, Scott. On Continental, you’re right, the trend has gone up. That is mostly due to incremental loads that they weren’t covering before, that are now being covered at Charlotte. So, from day one, we gave them access to our entire capacity in Charlotte, and that gave them access to lot more trucks. And that those loads that were being covered over in Charlotte were incremental.

And Scott, on Kelron, yeah, they have been on a nice ramp for the last couple of years in terms of growth. I think that our plan, as it is with all of our cold-starts is to invest in growth for the companies that we acquire. So, while we would plan to do the same thing, I think that there may be some calling of customers along the way just based on profitability as we kind of go through the customer base, but by and large, it will be offset by growth in terms of adding sales head count, adding our carriers out of our Charlotte operation, and being able to drive more growth over the customers that we wanted to serve there. Scott Schneeberger – Oppenheimer Securities: Thanks. And then, with regard to the acquisition pipeline, it sounds like it’s in great shape, but could – are you guys wanting to put a little bit of quantification to it, size, what’s the bell curve looks like – in maximum or basically the potential options you have out there? Thanks. Scott Malat – XPO Logistics, Inc.: We are right exactly on target on the acquisitions, not ahead, not behind. And we acquired about $122 million of revenue in August. We’ve been saying since last September that we wanted to get to $500 million revenue run rate by the end of this year, half of that coming from acquisitions. We are half way in the acquisition budget. Given the pipeline, and given our bandwidth, that $250 million of additional of total required revenue for the year-by-year end is right where we think we’re going to end up. Scott Schneeberger – Oppenheimer Securities: Thanks. And the pipeline itself, has it grown strong since we last spoke? How big is it in size, if you care to quantify? Scott Malat – XPO Logistics, Inc.: No, it really hasn’t grown, Scott. We have several hundred acquisition targets in our list, we rank them in different categories of priority, we shortened the As and Bs, and keep calling them out, and depending on what we are most interested in and what sellers are most interested in and takes two to tango on those. And I think that the companies that we will buy over the next five years, over 90% of them are on that list. So, we’re not really trying to expand the list, we’re just trying to use our time in ways that we’re focusing on the right acquisitions. Scott Schneeberger – Oppenheimer Securities: That’s great. Scott Malat – XPO Logistics, Inc.: Does that help you? Scott Schneeberger – Oppenheimer Securities: Yeah. It does a lot. And then finally, Brad, if I could sneak in, just from your personal perspective, I mean obviously there is a lot to be proud of and excited about what you’ve done so far, and then keeping you up at night any challenges that you hadn’t foreseen, that’s worth sharing? Thanks.

We weren’t expecting the economy to get worse before it got better, but I think we’re in good company on being surprised by that. That’s okay, that means the cycle – the business plan is a long-term business plan to create a company, that’s doing billions of dollars in revenue, hundreds of million dollars in EBITDA, and with the minimum amount of additional shares diluting us and the minimal amount of debt added onto the company. And that’s all the decisions we’re making are, okay, how do we best achieve that goal over a long period of time? And the model has been designed to be able to continue to create value in the up part of the cycle and the down part of the cycle. So now we’re in a sluggish part of the cycle. So acquisition activity is a little bit better, cold-start is a little bit better. We are able to improve operations, even though there is not a fantastic external operating environment. We won’t always have the ability to do that, because we always won’t be small. So there’s some advantages to being small, there’s some disadvantages to being small. The advantage of being small is you can keep growing even in a sluggish environment, and I think if you parse the results today, that’s what we’ve demonstrated. Scott Schneeberger – Oppenheimer Securities: Great. Thanks for all the color.

Thank you, Scott.

And our next question comes from the line of John Mims with FBR Capital Markets. Please proceed. John Mims – FBR Capital Markets: Thank you. Good morning.

Good morning. John Mims – FBR Capital Markets: So, Brad, going back to Kelron, one question I had, it’s, if you look at 2011, they’re three times larger than you were on a gross revenue basis. But they did that with kind of one-fifth of the capacity, if I’m looking at the 2,500 versus the 12,500 which would be implied in that 15,000 number. So you all have talked several times and answered several questions about one of the first steps to making them more profitable, to helping them grow, is to giving them better access to capacity, but is that really the issue there because they seem to be doing a lot more with less or is that 12,500 number inflated or is there just – am I looking at that balance wrong?

First of all that’s a great insight and what I hadn’t actually thought about. They were doing a large amount of revenue with less capacity. I don’t know if that’s a good thing, because what you want to be doing is, you want to be – once you booked a load then you need to cover it. You want to be canvassing as many carriers as possible in the shortest amount of time to find just the right match, to find the truck that’s just in the right place that values that freight more than somebody who’s farther away, and doesn’t necessarily need the load, and you’ve got three other loads tendering to them. So having more carriers is a good thing, not a bad thing. Second point is, who are the carriers? Anybody can pick the phone and call Werner, and Swift, and Knight, and Heartland and you can find a truck. These are companies that have hundreds of salespeople and covering the market really well, and are – have less – and have their own brokerage operations and have less of need for a 3PL. What you really want to do is, you want to be hooking up with carriers who want to outsource their freight procurement business. Who don’t have sales organizations, who want to keep their cost structure lower by not having salespeople and are happy to let us make $100, $200 a load, to go out and find them some freight, and good freight, and develop a relationship with mutual trust and really work with each other, really well to understand each other’s capabilities and needs. So, to be able to work with the vast majority of carriers that have 10, 20, 30, 40, 50 trucks as opposed to larger carriers, I think is a plus at least in our model. John Mims – FBR Capital Markets: Right. How many of the 15,000 fit that profile?

Most of them, over 90% of them. John Mims – FBR Capital Markets: And, how many are you working with?

And, that’s the focus of who we’re trying to add. We’re trying to add carriers that have good CFA scores that are safe, that are small, and have less than 100 trucks. John Mims – FBR Capital Markets: And, how many are active as far as that you’re actively tendering loads to?

Well, at any one point in time, that’s going to keep changing. But it’s in the few thousands. It’s not going to be 15,000 carriers that we’ve used in the last few months. We just aren’t moving that much amount of freight. But these are qualified carriers that we do business with. These are not just carriers that are taking from the DOT list that are – I mean anybody can get a list of 250,000 carriers, that’s not what we’re talking about. We’re talking about carriers that we have a relationship with. John Mims – FBR Capital Markets: Sure, now that makes sense. On the gross margin for the quarter, at 11%, I know you said in your comments that that improved sequentially. But it’s still pretty low relative to what the other public guys have reported. How does that balance with Kelron? Where has Kelron been historically? Should we be modeling some upswing because you’re adding so much with Kelron or should we expect Kelron’s margins to fall down or just kind of shake out in that 11%, 12% range?

There is three buckets to that. So, we have margins that are much higher than that in our grandfathered business, our legacy business down in South End. We have margins that are lower than that in our cold-starts, who are starting up, and now we’ve got Kelron. Kelron actually is right around there. Kelron has had a low-teens gross margin. We’d like to improve that gross margin. We’ve looked at their lanes, lane-by-lane-by-lane, long laborious process and stack ranked them in terms of ones where they’re making good money, where they’re making okay money, where they’re breaking even and when they’re losing money. And the ones where they’re losing money or just kind of breaking even, we’re going to collaboratively work on a plan to approach those customers and say, okay we’re taking your less-than-profitable loads, how about giving us some good loads too? We’re taking a lot of these lanes that aren’t the best lanes. And, hopefully, we’ll be able to get some of that business to bring the margins up. John Mims – FBR Capital Markets: Great, okay. A couple of small things, you talked about moving the Continental group into the new space. How much more capital have you put into that acquisition?

So far we’ve hired a new leader in the business. We haven’t moved into the new space yet. We’ve put in some new technology systems. This isn’t a big CapEx play though. The capital we’re going to be putting in is new people, and that will happen as we get into the new space.

You might recall, Continental had about $22 million in revenue, little under $1 million of adjusted EBITDA. We bought it for $3.6-ish-million. Our plan is to allocate up to another $1 million of capital, not necessarily immediately, and to move them into that larger facility in the next couple of months. Hire another 50 or so people, get it up to 75 or so people, get it up to $75 million in revenue and several million dollars of EBITDA. And what’s most encouraging – there is a lot of encouraging things about Continental, but the most encouraging thing from my perspective is the great cooperation that Continental has with Charlotte. And now Charlotte’s covering about a third of their loads for them and that will increase over time. So Charlotte, it’s down in Columbia, the Continental, they can focus more and more on getting the freight, and using their time for that, and passing it off to being on the same IT system right over to Charlotte. And then Charlotte’s job is to find the right carrier that needs that freight. John Mims – FBR Capital Markets: Right. So that, if it’s $3.6 million, you had an incremental $1 million, kind of a 28% increase. It also changes the multiple a lot, is that the way we should about all of the acquisitions that you’ve got this sort of, for round numbers, say 25% incremental spend that you’re going to put into play or is it…?

No. You got to look at each acquisition on a case-by-case basis. They’re all very, very different. I mean each one is unique, and each one has a certain business plan that makes sense for that specific acquisition. And we really can’t just take a general rule and say, we’re going to have X percent of additional capital. There could be a company that’s doing over a $100 million of revenue, and we won’t put in more than another $1 million or $2 million of capital into it. And there could be other ones, in case of continental where we’ve paid roughly four times EBITDA and round numbers, and to put in another $1 million of CapEx to get them up to significantly scale-up the EBITDA to several million dollars, that’s a great investment in capital, but I wouldn’t look at it as a percent. John Mims – FBR Capital Markets: Right. I got it, no that’s fair. One last one from me, you’ve talked, you said two comments in answering questions, that one, you didn’t anticipate the economy in the market – the brokerage market to get as tough as it has, and also Kelron was such a steal because they over invested going into a weak market. At what point does or how much worse of a leg-down do we need to take before you start to kind of re-evaluate the aggressiveness of your growth plan? Obviously, you have more capital than Kelron. There is a lot of things going for you, you’ve put a big team into place et cetera. But yeah it’s still is kind of a bigger version of that risk in the right environment. So, I guess where is the cut-off in your mind for that environment to switch enough for you to kind of pull back?

I didn’t say that Kelron was a steal. I think Kelron was a fair price, it’s a price that made sense to the sellers and to us and that we agreed on an arms length basis. I think as a percentage of revenue, yeah, if we can turn a $100 million of revenue into something that justifies an $8 million purchase price, we need to pack up and go home. But in terms of a multiple of profitability, as I said it was really profitable. So, there is some level of risk that we’ve absorbed on that. Now having said that you’re right that, the same macro factors that affects Kelron or for that matter any brokerage are affecting us too right now, so financial strength is important. We’ve got a $190 million of cash in the bank, we’ve got no debt. So, I think we’ve got quite a bit of financial stability in terms of continue to grow the company. We are absolutely committed to growing the company very significantly. The business plan that we have in our mind is so clear, and while it does have risk, the main risk is operational execution. That’s a kind of risk that we’re used to taking and we’re happy to take. So we’re going to continue to go full speed ahead with cold-starts, and full speed ahead with acquisitions. John Mims – FBR Capital Markets: Okay. When you’re talking about kind of branch competition and this help the internal competition to see who can grow the fastest, when does that owners, when does kind of the incentive structures switch from pure growth to actual profitability?

Well, we’re not trying to have them grow. Let’s be clear the competition is not just to growth the top line. Anybody can do that, anyone can buy business that’s not profitable. The idea is to grow businesses that are profitable, that have good healthy growing bottom line. So maybe a better way to look at the cold-start, instead of saying, these are companies that should get up to $50 million to $100 million after five years. These are cold-starts each of which should get up to, say $3 million to $6 million of EBITDA. So that’s really what the competition should be to, how fast can you get up to $3 million to $6 million of EBITDA. John Mims – FBR Capital Markets: Right. How fast is that?

I think that’s several years. I think to get in the first year, if you get up to $5 million to $10 million, and you are breaking even and making a little bit, you’ve done pretty well. I think by the second year, if you double that, and now you’re making good margins, then you’re on track. And then you keep leveraging up your growth, your infrastructure is more or less in place, and more and more is flowing to the bottom line. That’s a typical cold-start life cycle. John Mims – FBR Capital Markets: Sure, sure. All right, great. Thank you very much for the time.

Thank you.

And our next question comes from the line of Ryan Bouchard with Avondale Partners. Please proceed. Ryan Bouchard – Avondale Partners LLC: Good morning, guys.

Good morning, Ryan. Ryan Bouchard – Avondale Partners LLC: Hey, I was just wondering if you’re seeing any skittishness or more receptiveness in the M&A world, kind of going on – given what’s going on in the market right now, in the freight market. I know you kind of answered this in the past. But it was more kind of a hypothetical answer because we weren’t really seeing it yet, on the last conference call, but now that we are in that environment, can you talk about what you are seeing now?

Yes and no, on the one hand, you do see companies who were saying, look we like you guys, there’s good chemistry here. We’ve met a bunch a times. We think you take good care of our people. We think it would be a good place to – for the company in terms of the legacy. But we want to wait another year or two because the economy is great and our EBITDA is going up. You don’t see as much of that anymore because people aren’t sure that their EBITDA is going to go up next year and the following year. We don’t quite know where we are in the economic cycle. But at the same time, the vast majority of brokerage companies are debt-free, and they’re making money, and they’re making good livings, and they are not desperate to sell. They don’t have a gun to their head that they got to sell. They might be selling because they got some personal reasons that aren’t related to the business itself. So, we don’t see a lot of distressed forced sellers, that’s not the way the climate is right now. We see a lot of people who are making good money and if the price is right and if the chemistry is right, they will sell to us. Ryan Bouchard – Avondale Partners LLC: Okay. That’s helpful. And then because of the acquisitions later, or actually in the coming quarter that were just announced, it looked like corporate expenses were pretty low this quarter. I was wondering, I imagine they’re going to be a quite a bit higher in third quarter. I was wondering if you could give us kind of a sense of the magnitude. Scott Malat – XPO Logistics, Inc.: Yeah, Ryan, it’s Scott. They were a little bit lower, they will be moving up. We still kind of think about that mid-20s range for the year, that we’ve outlined before, that’s made up of, I would think of it almost in two big buckets, low-20s for the ongoing business, and then we do have M&A related cost, due diligence, legal, all different more of the M&A process that makes it a little more difficult to forecast, but in that mid-20s range is still a range that we’d look at for the year. Ryan Bouchard – Avondale Partners LLC: Okay, that’s all I have. Thanks, guys. Scott Malat – XPO Logistics, Inc.: Thank you, Ryan.

And our next question comes from the line of David Campbell with Thompson, Davis & Company. Please proceed. David Campbell – Thompson, Davis & Co.: Hi, Brad, Scott, John. Most of my questions have been answered. But you did mention earlier about the concern about capacity; that capacity is likely to tighten, particularly when – and if we get some demand growth in the economy. One of your competitors has decided yes, that’s true, and so we’re going to make sure we don’t have a problem we’re going to buy trucking companies with actual tractor and equipment assets, to make sure we have the assets when they need them. And what’s your reaction to that? Scott Malat – XPO Logistics, Inc.: A couple things. Capacity at the moment is pretty much balanced with demand. It’s actually a little bit looser than it was when we took over XPO last September. Last September, there were loads on the board that weren’t getting covered until the end of the day, and sometimes normal loads would turn into expedited loads and some loads were getting rolled over to the next day. Now, the board is pretty much cleaned up by lunch time, so, not in every case, not every day, but more often than not. So, I would say that capacity is a little bit looser than it was a year ago, and it’s more or less balanced. However, I do agree that over time because of the demographics, because of the regulations, because all the factors that everyone is familiar with, the driver shortage, that capacity is going to be tight, and the economy is going to come back, and you’re going to have a big imbalance between more freight than we’ve had in the past and less capacity than we’ve had…

I think when you look at it, May was our strongest month in the quarter. April was our weakest month in the quarter. David Campbell – Thompson, Davis & Co.: And how was July?

July started out slow and then picked up. David Campbell – Thompson, Davis & Co.: Okay. Thank you.

You’re welcome.

And our next question comes from the line of Tim Fronda with Sidoti. Please proceed. Tim Fronda – Sidoti & Co. LLC: Good morning, guys, thanks for taking my question.

Good morning, Tim. Tim Fronda – Sidoti & Co. LLC: With the acquisition of Kelron, did you see a greater opportunity in being in Canada over the U.S. or was Kelron just the best opportunity available at the time?

The latter more than the former, I mean we like Canada and Canada is great. But that’s not the reason that we bought, Kelron. We bought Kelron, because they’ve got a $100 million of revenue, 20 years of relationships with carriers and shippers, and it’s got a great team running it. And we see real big opportunity to grow and to make it a much more profitable organization. It happened to be in Canada. But as John said before 40% of their business is originating and destined in the United States, 40% of its cross-border and only 20% of it is intra-Canada. Tim Fronda – Sidoti & Co. LLC: And since you first started, has your strategy or approach in making acquisitions changed at all, given the current environment or pretty much stayed the course?

Very much stayed the course. The exact strategy that we’ve had not just in acquisitions, but in all phases of our business plan has changed very, very little from when we started out last September. Tim Fronda – Sidoti & Co. LLC: And final question, with the operation center in Charlotte, do you expect to grow that along with the cold-starts and other acquisitions, or do you want to stay off that more quickly and have that in place as these other acquisitions come on?

It’s done in tandem. We’re going as fast as we responsibly can in Charlotte, hiring about a dozen people a month, and that in terms of training people and keeping the quality right, that’s the tempo that Lou Amo’s group feels comfortable doing right now. And that’s sufficient to help the cold-start and the acquisitions. Most of the acquisitions have their own capacity access that we get with it as well. Tim Fronda – Sidoti & Co. LLC: Great. Thanks for your time. Good luck.

Thanks.

And our final question today comes from the line of Ryan Cieslak with KeyBanc. Please proceed. Ryan Cieslak – KeyBanc Capital Markets: Good morning guys. Thanks for taking my call.

Good morning, Ryan. Ryan Cieslak – KeyBanc Capital Markets: Most of my questions have been answered, but Brad the one question I did have is, excluding the external environment, I just was curious to hear what you think is, I guess the most important factor in improving the brokerage margin, maybe what’s driving it here into third quarter? Is it better purchasing at Charlotte or is it increased density? Just any comments on that would be great?

It’s a lot of individual components, but if I had to pick out just one most important component, it’s purchasing transportation more effectively. And we saw that in the cold-starts in this recent quarter where we weren’t necessarily pricing higher month – each month that we weren’t, but we were purchasing transportation more cheaply, more effectively each month, and that helped with the margins there. So, I would say that’s the one main factor. Ryan Cieslak – KeyBanc Capital Markets: Okay, great. And then my last question is just anything incremental from an IT investment or infrastructure standpoint we should be thinking about into the third or back-half of this year. And then, also how has been sort of the integration of some of your acquisitions, I guess the Continental acquisition has been, as you guys have integrated that acquisition in their ability to ramp-up on your IT platform?

The IT budget hasn’t changed. There has been some puts and takes, but it’s right on budget. Mario is an excellent manager on the P&L, in addition to be a great IT guy. On Continental, the integration has gone as – I mean if they all go like that, that will be great. It’s gone very, very well and haven’t been any bumps in the road. Ryan Cieslak – KeyBanc Capital Markets: Okay, great. Thanks guys.

Thank you. Okay. Well, we appreciate everybody participating in our conference call and we look forward to seeing you on the road at our next conference call in 90 days. Have a great day. Thank you.

Ladies and gentlemen, we thank you for your participation in today’s conference. This concludes the presentation. And you may now disconnect. Have a good day.