This ~~annual report~~Annual Report on Form 10-K is for the year ended December 31, ~~2010.~~2013. The Securities and Exchange Commission ~~(“SEC”~~(the “Commission”) allows us to ~~“incorporate~~incorporate by ~~reference”~~reference information that we file with the ~~SEC,~~Commission, which means that we can disclose important information to you by referring you directly to those documents. Information incorporated by reference is considered to be part of this ~~annual report.~~Annual Report. In addition, information that we file with the ~~SEC~~Commission in the future will automatically update and supersede information contained in this Annual Report.

PART I

ITEM 1.

BUSINESS

General

XPO Logistics, Inc. (“XPO” or the “Company”), a Delaware corporation, together with its subsidiaries, is a leading non-asset provider of transportation logistics services. We act as a middleman between shippers and carriers who outsource their transportation logistics to us as a third-party provider. As of December 31, 2013, we operated at 94 locations: 73 Company-owned branches and 21 agent-owned offices.

We offer our services through three business units. Our freight brokerage unit places shippers’ freight with qualified carriers, primarily trucking companies. Our expedited transportation unit facilitates urgent shipments via independent over-the-road contractors and air charter carriers. Our freight forwarding unit arranges domestic and international shipments using ground, air and ocean transport through a network of agent-owned and Company-owned locations.

In September of 2011, following the equity investment in the Company led by Jacobs Private Equity, LLC, we began to implement a strategy to leverage our strengths—including management expertise, operational scale and capital resources—with the goals of significant growth and value creation.

By executing our strategy, we have built leading positions in some of the fastest-growing sectors of transportation logistics. In North America, we are the fourth largest provider of freight brokerage service—a $50 billion sector which, driven by an outsourcing trend, is growing at two to three times the rate of Gross Domestic Product (“GDP”). Our acquisitions of 3PD Holding, Inc. (“3PD”) and Optima Service Solutions, LLC (“Optima”) in 2013 (further described below) made us the largest provider of heavy goods, last-mile logistics in North America—a $13 billion sector which, driven by outsourcing by big-box retailers and a rise in e-commerce, is growing at five to six times the rate of GDP. Our acquisition of National Logistics Management (“NLM”) in December of 2013 (further described below) gave us a foothold in managed transportation, and together with our other expedited logistics operations, makes us the largest manager of expedited shipments in North America—a sector where growth is being driven by a trend toward just-in-time inventories in manufacturing. Upon completion of the pending acquisition of Pacer International, Inc. (further described below), we will be the third largest provider of intermodal services in North America and the largest provider of cross-border Mexico intermodal services—a sector that, driven by the efficiencies of long-haul rail and a trend toward near-shoring of manufacturing in Mexico, is growing at three to five times the rate of GDP. We believe our broad service offering gives us a competitive advantage as many customers, particularly large shippers, focus their relationships on fewer, larger third party logistics providers with deep capacity across a wide range of services.

Our strategy has three main components:

•

Optimization of operations. We are continuing to optimize our existing operations by growing our sales force, implementing advanced information technology, cross-selling our services and leveraging our shared carrier capacity. We have a disciplined framework of processes in place for the recruiting, training and mentoring of newly hired employees. Our salespeople market our services to hundreds of thousands of small and medium-sized prospective customers. In addition, we have a strategic and national accounts team focused on developing business relationships with the largest shippers in North America. Our network is supported by our national operations centers in Charlotte, NC, Chicago, IL, and Atlanta, GA.; and by our information technology. We have a scalable IT platform in place across the Company, with sales, service, carrier and track-and-trace capabilities, as well as benchmarking and analysis. Most important to our growth strategy, we are developing a culture of passionate, world-class service for customers.

•

Acquisitions. We take a disciplined approach to acquisitions: we develop and maintain an active pipeline of targets by looking for companies that are highly scalable and are a good strategic fit

with our core competency. When we acquire a company, we seek to integrate it with our operations and scale it up by adding salespeople. We integrate the acquired operations with our technology platform, which connects them to our broader organization, and we give them access to our shared carrier pool. We gain more carriers, customers, lane histories and pricing histories with each acquisition, and in some cases an acquisition adds complementary services. We capitalize on these resources Company-wide to buy transportation more efficiently and to cross-sell a more complete supply chain solution to customers. In 2012, we completed the acquisition of four non-asset third party logistics companies. We acquired another six companies in 2013, including 3PD, the largest non-asset, third party provider of heavy goods, last-mile logistics in North America, and NLM, the largest provider of web-based expedited transportation management in North America. On January 5, 2014, we agreed to acquire Pacer International, Inc., a Tennessee corporation (“Pacer”), the third largest provider of intermodal transportation services in North America. We plan to continue to acquire quality companies that fit our strategy for growth.

•

Cold-starts. We believe that cold-starts can generate high returns on invested capital because of the relatively low investment required and the large component of variable-based incentive compensation. We are currently ramping up 23 cold-starts: 10 in Freight Brokerage, 12 in Freight Forwarding and one in Expedited Transportation. We seek to locate our Freight Brokerage cold-starts in prime areas for sales recruitment. We plan to continue to open cold-start locations where we see the potential for strong returns.

Our Business Units

We are a non-asset based transportation service provider, meaning that we do not own the trucks or other equipment used to transport freight. Instead, we utilize our relationships with subcontracted transportation providers—typically independent contract motor carriers, railroads and aircraft owners. We make a profit on the difference between what we charge our customers for the services we provide and what we pay to the transportation providers to transport our customers’ freight. Our success depends in large part on our ability to hire and train talented salespeople and deploy them under exceptional leaders, develop sophisticated information technology, and build relationships with the carriers in our network so that we can purchase the optimal transportation solutions for our customers.

As of December 31, 2013, our operations consisted of three business units: Freight Brokerage, Expedited Transportation and Freight Forwarding. Each of these business units is described more fully below. We provide financial information for our business units in Note 13 to our audited Consolidated Financial Statements.

Freight Brokerage

Through our Freight Brokerage business unit we arrange truckload, less-than-truckload (“LTL”), and intermodal brokerage, last-mile delivery logistics services for the delivery of heavy goods and related logistics and supply-chain services.

Our truckload, LTL and intermodal services typically are provided on a shipment-by-shipment basis. Customers offer loads to us via telephone, fax, email, electronic data interchange (EDI) and the Internet on a daily basis. Our employees utilize a proprietary operating system that helps our sales representatives price loads efficiently to initiate the transaction, and our carrier representatives select a suitable carrier based on equipment availability, service capability, rates and other relevant information. The prices for the majority of our services are determined on a transactional, or spot market, basis for both customers and carriers. We are responsible for collecting payment from the customer and paying the carrier. In some cases, we contractually agree to handle a significant portion of a customers’ freight at pre-determined rates for specific origin and destination parameters.

As is usual in the transportation industry, these volume contracts typically have a term of one year or less and no minimum volume commitment.

From January 2008 until the fourth quarter of 2011, we provided freight brokerage services solely through our Bounce Logistics, Inc. subsidiary. During the fourth quarter of 2011, we began to open sales offices to provide freight brokerage services under the name XPO Logistics. We have established and are currently ramping up 10 cold-start locations in Freight Brokerage. As of December 31, 2013, our Freight Brokerage business unit employed 1,753 full-time employees in the United States and Canada, compared with 594 full-time employees 12 months earlier.

On August 15, 2013, we acquired 3PD, the largest non-asset, third party provider of last-mile logistics for heavy goods in North America. Our 3PD operations serve a fast-growing sector of transportation logistics that includes blue chip retailers, e-commerce companies and smaller retailers. On November 15, 2013, we acquired Optima, a leading non-asset provider of last-mile logistics services for major retailers and manufacturers in the United States, which specializes in complex installations. Our acquisition of Optima enhanced our Company’s leadership position in the heavy goods, last-mile logistics space.

Expedited Transportation

Our Expedited Transportation unit, which operates as Express-1, is one of the largest ground expedited freight carriers in North America. Express-1 provides services to thousands of customers from its locations in Buchanan and Detroit, MI, and Birmingham, AL. On February 8, 2013, we acquired the operations of East Coast Air Charter, Inc. (“East Coast Air Charter”), a non-asset, third-party logistics business specializing in expedited air charter, which we now operate as XPO Air Charter. On December 28, 2013, we acquired NLM, the largest web-based manager of expedited shipments in North America, which we now operate as XPO NLM.

Expedited transportation services can be characterized as time-critical, time-sensitive or high priority freight shipments, many of which have special handling needs. These urgent needs typically arise due to tight supply chain tolerances, interruptions or changes in the supply chain, or the failure of another mode of transportation within the supply chain. Expedited shipments are predominantly direct transit movements offering door-to-door service within tightly prescribed time parameters. Vehicles used to transport expedited shipments range from cargo vans to semi-tractor trailer units. The dimensions for each shipment dictate the size of vehicle used to move the freight and the related revenue per mile. Customers request our services via telephone, fax, email, EDI or the Internet, typically on a per-load transaction basis, with only a small percentage of loads being scheduled for future delivery dates. We operate an ISO 9001:2008 certified 24-hour, seven-day-a-week call center that gives our customers on-demand communications and status updates relating to their shipments.

Our Expedited Transportation business is predominantly a non-asset based service provider, meaning that substantially all of the transportation equipment used in its operations is provided by third parties. These third-party vehicles are primarily provided by independent owner-operators who own one piece of equipment, or by independent owners of multiple pieces of equipment who employ multiple drivers, commonly referred to as fleet owners. We use these third party providers to move our customers’ urgent freight within the United States. We are focused on developing strong, long-term relationships with these fleet owners and incentivizing them to maintain their fleets on an exclusive basis with Express-1. In addition, we arrange transportation services for cross-border expedited shipments to and from Canada and Mexico, primarily for customers located in the United States. Cross-border Mexico expedited freight is an attractive vertical market for us, as are temperature-controlled freight and air charter. We are working to increase our presence in these verticals, as well as gain share in the broader expedited transportation market. As of December 31, 2013, we employed 268 full-time employees to support our Expedited Transportation operations.

Freight Forwarding

Our Freight Forwarding business unit, which operates as XPO Global Logistics (“XGL”; formerly Concert Group Logistics or “CGL”), is a non-asset based logistics provider for domestic and international shipments. XPO Global Logistics provides these services by using its relationships with ground, air and ocean carriers through a network of agent-owned and Company-owned locations. As of December 31, 2013, our Freight Forwarding business supported 18 independently-owned stations and 11 Company-owned branches with 78 full-time employees. We have established and are currently ramping up 12 cold-start branches in Freight Forwarding. Our freight forwarding capabilities are not restricted by size, weight, mode or location, and therefore are potentially attractive to a wide market base.

We provide three types of services through our Freight Forwarding business: Domestic—time-critical services, including just-in-time, air charter and expedited transportation; time-sensitive services, including next-day, second-day and third-day deliveries; and cost-sensitive services including deferred delivery, LTL and full truckload.International—time-critical services, including on-board courier and air charter; time-sensitive services, including direct transit and consolidation; and cost-sensitive services, including less-than-container loads, full-container loads and vessel charters.Other—value-added services, including documentation on international shipments and customs clearances; and customized services, including trade show shipment management, time-definite and customized product distributions, reverse logistics, on-site asset recovery projects, installation coordination, freight optimization and diversity compliance support.

Information Systems

Companies within the transportation logistics industry increasingly rely on information technology to find optimal solutions to shipper needs and provide visibility into the movement of freight.

In our Freight Brokerage business, we have developed proprietary software applications that are integrated with a packaged base software platform that we license from a third party. This proprietary IT solution provides our customers with cost effective, timely and reliable access to carrier capacity, which we believe gives us an advantage versus our competitors. By continuing to develop our technology solutions, we plan to improve our productivity through automation and process optimization, and to be in position to effectively integrate our anticipated acquisitions and leverage our scale across XPO. We launched the first phase of our scalable technology platform in March of 2012, with subsequent major enhancements. In 2012, the enhancements included new pricing tools and truck-finding capabilities and the introduction of our proprietary freight optimizer software. In 2013, the enhancements included advanced pricing algorithms, additional carrier ranking tools, LTL functionality, and new customer and carrier portals. In 2013, our acquisition of 3PD included proprietary technology that manages the customer experience for superior satisfaction ratings. This technology, while currently utilized by our last-mile operations, has potential applications throughout our Company.

In our Expedited Transportation business, we utilize satellite tracking and communication units on our independently-contracted vehicles to continually update the position of shipments we place. We have the ability to communicate to individual vehicles or to a broader fleet, based upon our needs. Information received through this satellite tracking and communication system automatically updates our internal software and provides our customers with real-time electronic updates.

In our Freight Forwarding business, we utilize an operating system software package purchased from a third party and customized for our network. Our capabilities include online shipment entry, quoting and track-and-trace for domestic and international shipments, and EDI messaging.

Technology represents one of our Company’s largest categories of investment within our annual ~~report.~~capital expenditure budget, reflecting our belief that the continual enhancement of our technology platforms is critical to our success.

Customers, Sales and Marketing

Our Company provides services to a variety of customers ranging in size from small, entrepreneurial organizations toFortune 500 companies. During 2013, our business units served more than 9,500 different customers, with no single customer accounting for more than 6% of our consolidated gross revenue.

Our customers are engaged in a wide range of industries, including manufacturing, industrial, retail, commercial, life sciences and government sectors. In addition, we serve third-party logistics providers, who themselves serve a multitude of customers and industries. Our third party logistics provider customers vary in size from small, independent, single-facility organizations to global logistics companies. Within our Expedited Transportation and Freight Brokerage business units, our services are marketed to the United States, Canada and Mexico. Our Freight Forwarding unit serves these same North American markets, as well as global markets.

To serve our customers, we maintain a significant staff of sales representatives and related support personnel within our Freight Brokerage, Expedited Transportation and Freight Forwarding business units. Within Freight Forwarding, in addition to our own sales staff and locations, our network of independent agents manage sales relationships within their exclusive markets.

Our sales strategy is twofold: we seek to establish long-term relationships with new accounts and to increase the amount of business generated from our existing customer base. These objectives are served by our position as one of the largest third party logistics providers in North America and by our ability to cross-sell a range of services. We believe that these attributes are competitive advantages in the transportation logistics industry. We are focused on raising our profile in front of every prospective customer in this ~~annual report, “Company,~~sector by deploying a highly experienced, dedicated team that sells to the 1,200 largest shippers, which we have identified as strategic accounts, and the next largest 5,000 shippers, identified as national accounts. Additionally, our branch sales teams pursue the hundreds of thousands of small to medium-sized shippers operating in North America. See Note 13 to the Consolidated Financial Statements for further geographic information.

Competition

The transportation logistics industry is intensely competitive with thousands of transportation companies competing in the domestic and international markets. Our competitors include local, regional, national and international companies with the same services that our business units provide. Due in part to the fragmented nature of the industry, our business units do not operate from a position of dominance, and therefore must strive daily to retain existing business relationships and forge new relationships.

We compete on service, reliability and price. Some competitors have larger customer bases, significantly more resources and more experience than we do. The health of the transportation logistics industry will continue to be a function of domestic and global economic growth. However, we believe we will benefit from a long-term outsourcing trend that should continue to enable certain sectors of transportation logistics, particularly the freight brokerage sector, to grow at rates that outpace growth in the macro-environment.

Regulation

Our operations are regulated and licensed by various governmental agencies in the United States. Such regulations impact us directly, including through our independent contractor fleet, and indirectly through the network of third party transportation providers we use to transport freight for our customers. We and such third parties must comply with the safety and fitness regulations of the U.S. Department of Transportation (“DOT”), including those relating to drug- and alcohol-testing and hours-of-service. Weight and equipment dimensions also are subject to government regulations. We also may become subject to new or more restrictive regulations relating to fuel emissions, independent contractor drivers’ hours-of-service, independent contractor eligibility requirements, on-board reporting of operations, air cargo security and other matters affecting safety or operating methods. Other agencies, such as the U.S. Environmental Protection Agency (“EPA”) and U.S. Department of Homeland Security (“DHS”), also regulate our equipment, operations and independent contractor drivers.

The DOT, through the Federal Motor Carrier Safety Administration (“FMCSA”), imposes safety and fitness regulations on us, our independent contractor drivers, and our network of third party transportation providers. The FMCSA recently issued a final driver hours-of-service rule that placed additional limits on the amount of time drivers may operate a commercial motor vehicle. The rule preserved the current 11-hour driving limitation and included new provisions that generally (i) require drivers to take 30 minutes off-duty after consecutively driving eight hours; (ii) reduce the total hours a driver may work in one week from 82 to 70 hours; (iii) modified the “off-duty time” definition to exclude time spent resting in a parked commercial motor vehicle; and (iv) redefined which hours-of-service rule violations are considered “egregious” and subject to maximum civil penalties. The new rule also addressed the “34-hour restart,” ~~“we,~~which generally occurs when a driver’s weekly hours-of-service resets after the driver refrains from working during a 34-hour period. Under the new rule, the 34-hour restart may only occur only once each week and only if the 34-hour period includes two periods between 1:00 a.m. and 5:00 a.m. The 34-hour restart provisions became effective on July 1, 2013. We are unable to predict the impact that the new hours-of-service rules may have, how a court may rule on challenges to such rules, and to what extent the FMCSA could revise the rules in the future. On the whole, however, we believe that the new rules could decrease productivity and cause some loss of efficiency. In the event that productivity and efficiency are adversely affected, drivers and shippers may need to be retrained, computer programming may require modifications, additional independent contractors may need to be recruited and engaged. Our independent contractors and network of other third party transportation providers may also experience a negative impact on their results and productivity and consequently could exit the market, have to pay more for drivers, and pass the additional expense on to us. We also are unable to predict the effect of any new rules that might be proposed if the current final rule is stricken by a court in the future, but we believe any such proposed rules could increase costs in our industry or decrease productivity.

The FMCSA’s Compliance Safety Accountability program (“CSA”) (formerly “Comprehensive Safety Analysis 2010”) introduces a new enforcement and compliance model that implements driver and vehicle safety and fitness standards in addition to the company standards currently in place. CSA ranks both fleets and individual drivers on seven categories of safety-related data, known as Behavioral Analysis and Safety Improvement Categories, or “BASICs,” ~~“us”~~which include Unsafe Driving, Hours-of-Service Compliance (formerly Fatigued Driving), Driver Fitness, Controlled Substances/Alcohol, Vehicle Maintenance, Hazardous Materials Compliance (formerly Cargo-Related) and ~~“our” refer~~Crash Indicator. Under the current CSA regulations, the methodology for determining a carrier’s DOT safety rating has been expanded to include the on-road safety performance of the carrier’s drivers, including independent contractor drivers. As a result, certain current and potential independent contractors may become ineligible to drive for us, our fleet could be ranked poorly as compared to our competitors, and our safety rating could be adversely impacted. Our network of third party transportation providers may experience a similar result. A reduction in eligible independent contractors or poor fleet safety and fitness ratings may result in difficulty attracting and retaining qualified independent contractors and could cause our customers to direct their business away from us and to carriers with more favorable CSA scores, which would adversely affect our results of operations.

The FMCSA also is considering revisions to the existing Safety Measurement System (“SMS”) under which the CSA scores of individual drivers and motor carriers are measured and evaluated by the DOT. In the past, the subsidiary through which we operate our Expedited Transportation business has exceeded the established intervention threshold in certain of the safety related standards, and we may exceed the threshold for other safety related standards in the future. Depending on our ratings, we may be prioritized for an intervention action or roadside inspection, either of which could adversely affect our results of operations. In addition, customers may be less likely to assign loads to us. Under the revised Safety Fitness Determination (“SFD”) rating system being considered by the FMCSA, the safety rating of our subsidiaries with operating authority would be evaluated more regularly, and our safety rating would reflect a more in-depth assessment of safety-based violations. We cannot predict the extent to which CSA requirements or safety and fitness ratings under SMS or SFD could adversely affect our business, operations or ability to retain compliant drivers, or those of our subsidiaries, independent contractors or third-party transportation providers.

The FMCSA proposed new rules that would require nearly all carriers, including us, to install and use electronic on-board recorders (“EOBRs,” also known as paperless logs) in their tractors. These rules were vacated by the Seventh Circuit Court of Appeals in August 2011. In July 2012, Congress passed a federal transportation bill that requires the promulgation of rules mandating EOBR use by July 2013, with full adoption for all trucking carriers no later than July 2015. EOBR installation will increase costs for, and may not be well-received by, independent contractors.

At this time, we transport only low-to-medium-risk hazardous materials, representing a very small percentage of our total shipments. The U.S. Transportation Security Administration (“TSA”) has adopted regulations that require a determination by the TSA that each driver who applies for or renews his or her license for carrying hazardous materials is not a security threat. This could reduce the pool of qualified independent contractors, which could require us to increase independent contractor compensation or limit the amount of hazardous materials freight we transport.

The State of California also recently adopted new regulations regarding the fuel emissions and efficiency of tractors and trailers. Diesel tractors operated in California are required to satisfy certain performance requirements by compliance target dates occurring between 2011 and 2023. In December 2008, California also adopted new regulations to improve the fuel efficiency of tractors that pull 53-foot or longer box-type trailers within the state. The tractors and trailers subject to these regulations must either be SmartWay-certified or equipped with low-rolling resistance tires and retrofitted with SmartWay-verified aerodynamic technologies (such as tractor fairings and trailer skirts) that have been shown to meet or exceed fuel savings percentages specified in the regulations. Beginning December 31, 2012, either pre-2011 model year trailers of this type must satisfy the same requirements applicable to 2011 model year and newer trailers or carriers must have submitted a size-based fleet compliance plan in order to phase-in compliance over time. Compliance with California’s regulations has increased new tractor costs, might increase the costs of new trailers operated in California, might require the retrofitting of pre-2011 model year trailers operated in California, and could diminish equipment productivity and increase operating expenses. Federal and state governments have also proposed environmental legislation that could, among other things, potentially limit carbon, exhaust and greenhouse gas emissions. If enacted, such legislation could also result in higher new tractor and trailer costs, reduced productivity and efficiency, and increased operating expenses, all of which could adversely affect our results of operations.

Tax and other regulatory authorities have in the past sought to assert that independent contractor drivers in the trucking industry are employees rather than independent contractors. Federal legislators have introduced legislation in the past to make it easier for tax and other authorities to reclassify independent contractors as employees, including legislation to increase the recordkeeping requirements for employers of independent contractors and to heighten the penalties of employers who misclassify their employees and are found to have violated employees’ overtime and/or wage requirements. Additionally, federal legislators have sought to abolish the current safe harbor allowing taxpayers meeting certain criteria to treat individuals as independent contractors if they are following a long-standing, recognized practice. Federal legislators also sought to expand the Fair Labor Standards Act to cover “non-employees” who perform labor or services for businesses, even if the “non-employees” are properly classified as independent contractors; require taxpayers to provide written notice to workers based upon their classification as either an “employee” or a “non-employee”; and impose penalties and fines for violations of the notice requirements or “employee” or “non-employee” misclassifications. Some states have put initiatives in place to increase their revenues from items such as unemployment, workers’ compensation and income taxes, and a reclassification of independent contractors as employees would help states with this initiative. Taxing and other regulatory authorities and courts apply a variety of standards in their determination of independent contractor status. If our independent contractor drivers are determined to be our employees, we would incur additional exposure under federal and state tax, workers’ compensation, unemployment benefits, labor, employment and tort laws, including for prior periods, as well as potential liability for employee benefits and tax withholdings.

For domestic business, carriers must generally obtain authority to carry general commodities and other types of cargo in intrastate commerce. If any of our independent contractors plans to operate in interstate commerce in a state where such carrier did not previously have intrastate authority, the independent contractor typically must apply for authority in any such state. The FMCSA has also licensed our XGL freight forwarding subsidiary as a property broker and our Express-1 expedited transportation subsidiary as a motor carrier and property broker. XGL and our XPO Air Charter, LLC (“XPO Air Charter”) subsidiary, through which we arrange expedited air charter transportation, are subject to regulation by the DOT regarding air cargo security for all loads, regardless of origin and destination. XGL and XPO Air Charter also are regulated as “indirect air carriers” by the DHS and TSA. These agencies provide requirements, guidance and, in some cases, administer licensing requirements and processes applicable to the freight forwarding industry. We actively monitor our compliance with such agency requirements to ensure that we have satisfactorily completed the security requirements and qualifications, adhered to the economic regulations, and implemented the required policies and procedures. These agencies generally require companies to fulfill these qualifications prior to transacting various types of business. Failure to do so could result in penalties and fines. The air cargo industry is also subject to regulatory and legislative actions that could affect the economic conditions within the industry by requiring changes in operating practices or influencing the demand for and the costs of providing services to clients. We cannot predict the extent to which any such regulatory or legislative actions could adversely affect our business and operations, but we strive to comply with and satisfy agency requirements applicable to our domestic business.

For our international operations, XGL is a member of the International Air Transportation Association (“IATA”), a voluntary association of airlines and forwarders that outlines operating procedures for freight forwarders acting as agents for its members. A substantial portion of our international air freight business is completed with other IATA members. For international oceanic freight forwarding business, we are registered as an Ocean Transportation Intermediary (“OTI”) by the U.S. Federal Maritime Commission (“FMC”), which establishes the qualifications, regulations and bonding requirements to operate as an OTI for businesses originating and terminating in the United States. XGL is also a licensed non-vessel operating common carrier (“NVOCC”) and ocean freight forwarder. Our international operations subject us to regulations of the U.S. Department of State, U.S. Department of Commerce and the U.S. Department of Treasury. Regulations cover matters such as what commodities may be shipped to what destination and to what end-user, unfair international trade practices, and limitations on entities with which we may conduct business.

We and our independent contractors are subject to various environmental laws and regulations dealing with the hauling, handling and disposal of hazardous materials, emissions from vehicles, engine-idling, fuel spillage and seepage, discharge and retention of storm water, and other environmental matters that involve inherent environmental risks. We have instituted programs to monitor and control environmental risks and maintain compliance with applicable environmental laws and regulations. We would be responsible for the cleanup of any spill or other release involving hazardous materials caused by our operations or business. In the past, we have been responsible for the costs of cleanup of diesel fuel spills caused by traffic accidents or other events, and none of these incidents materially affected our business or operations. We generally transport only hazardous materials rated as low-to-medium-risk, and a small percentage of our total shipments contain hazardous materials. We believe that our operations are in substantial compliance with current laws and regulations and do not know of any existing environmental condition that would reasonably be expected to have a material adverse effect on our business or operating results. If we are found to be in violation of applicable laws or regulations, we could be subject to costs and liabilities, including substantial fines or penalties or civil and criminal liability, any of which could have a material adverse effect on our business and operating results.

Risk Management and Insurance

We generally require carriers that we engage to have $1 million of automobile liability insurance and $100,000 of cargo insurance, or up to $250,000 in the case of our last-mile contract carriers. We require motor carriers we engage to enter into a written agreement with us and to meet our safety and performance qualification standards. We also require motor carriers to have workers compensation and other insurance as required by law in connection with the specific tasks they are undertaking.

In our Freight Brokerage operations, we generally are not liable for damage to our customers’ cargo or in connection with damage arising from the provision of transportation services. However, in some instances, we agree to assume cargo and other liability. While we endeavor to limit this exposure to matters arising due to our negligence or misconduct, or to cap our exposure at a stated maximum dollar amount, we are not always able to do so.

With respect to our Expedited ~~Solutions,~~Transportation and Freight Forwarding operations and the portion of our Freight Brokerage operations related to last-mile delivery logistics, we have primary liability to our customer for cargo loss and damage for certain liabilities caused by our independent contractors and the carriers to which we broker freight. Accordingly, liability claims may be asserted against us for the actions of transportation providers to which we broker freight and their employees or independent contractor drivers, or for our actions in retaining them. Claims against us may exceed the amount of our insurance coverage or may not be covered by insurance at all.

We maintain a contingent cargo liability insurance policy to protect us against losses that may not be recovered from the responsible contracted carrier. Our last-mile delivery logistics operations may involve installation of appliances in customers’ homes involving water, gas or electric connections. We maintain commercial general liability insurance coverage to protect from claims related to these services. We carry various liability insurance policies, including automobile, general liability and umbrella coverage, at levels we deem appropriate. However, we cannot provide assurance that our insurance coverage will effectively protect us in the event of claims made against us.

Seasonality

Our revenues and profitability have historically been subject to seasonal fluctuations. Our results of operations for the quarter ending in March are on average lower than the quarters ending in June, September and December. Typically, this pattern has been the result of factors such as inclement weather, national holidays, customer demand and economic conditions. It is not possible to predict whether the historical revenue and profitability trends will occur in future periods.

Employees

At December 31, 2013, we had 2,259 full-time employees, none of whom were covered by a collective bargaining agreement. Of this number, 1,753 were employed in Freight Brokerage, 268 were employed in Expedited Transportation, 78 were employed in Freight Forwarding and 160 were employed in our corporate office. We recognize our trained staff of employees as one of our most critical resources and acknowledge the recruitment, training and retention of qualified employees as essential to our ongoing success. We believe that we have good relations with our employees.

Executive Officers of the Registrant

We provide below information regarding each of our executive officers.


Name	Age		Position
Bradley S. Jacobs		57	Chairman of the Board and Chief Executive Officer
M. Sean Fernandez		50	Chief Operating Officer
John J. Hardig		49	Chief Financial Officer
Troy A. Cooper		44	Senior Vice President—Operations and Finance
Gordon E. Devens		45	Senior Vice President and General Counsel
Mario A. Harik		33	Chief Information Officer
Scott B. Malat		37	Chief Strategy Officer

Bradley Jacobs has served as our Chief Executive Officer and Chairman of the board of directors since September 2011. Mr. Jacobs is also the managing director of Jacobs Private Equity, LLC, which is our largest stockholder. He has led two public companies: United Rentals, Inc. (NYSE: URI), which he co-founded in 1997, and United Waste Systems, Inc., founded in 1989. Mr. Jacobs served as chairman and chief executive officer of United Rentals for its first six years and as executive chairman for an additional four years. He served eight years as chairman and chief executive officer of United Waste Systems. Previously, Mr. Jacobs founded Hamilton Resources (UK) Ltd. and served as its chairman and chief operating officer. This followed the co-founding of his first venture, Amerex Oil Associates, Inc., where he was chief executive officer. Mr. Jacobs is a member of the board of directors of the Beck Institute for Cognitive Behavior Therapy.

Sean Fernandez has served as our Chief Operating Officer since November 2011. Mr. Fernandez has more than 20 years of leadership experience with global companies in industries that include distribution, consumer goods, manufacturing, trucking and transportation. He most recently served as senior vice president and general manager—consumables for NCR Corporation, and earlier held positions as vice president—new growth platforms with Avery Dennison Corporation; chief operating officer with SIRVA, Inc.; group president with Esselte Corporation; chief operating officer—Asia Pac operations and divisional president with Arrow Electronics, Inc.; and senior engagement manager with McKinsey & Company, Inc. He holds a master of business administration degree from Harvard University and a bachelor’s degree in business administration from Boston College.

John Hardig has served as our Chief Financial Officer since February 2012. Mr. Hardig most recently served as managing director for the Transportation & Logistics investment banking group of Stifel Nicolaus Weisel since 2003. Prior to that, Mr. Hardig was an investment banker in the Transportation and Telecom groups at Alex. Brown & Sons (now Deutsche Bank). Mr. Hardig holds a master of business administration degree from the University of Michigan Business School and a bachelor’s degree from the U.S. Naval Academy.

Troy Cooper has served as our Senior Vice President—Operations and Finance since February 2014. Mr. Cooper joined our company in September 2011 as Vice President—Finance, and has held positions of increasing responsibility since then. Mr. Cooper is responsible for aligning the operational and financial performance of the company’s business units with strategic objectives. Mr. Cooper was most recently with United Rentals, Inc., where he served as vice president—group controller responsible for field finance functions. Previously, he held controller positions with United Waste Systems, Inc. and ~~its subsidiaries.~~

~~Customers offer loads to Express-1 via telephone, fax, e-mail or the Internet on a daily basis, with only a small percentage~~permanently. Many of these ~~loads being scheduled for future delivery dates. Contracts, as is common within~~risks are beyond our control, including the following:

equipment shortages in the transportation industry, ~~typically relate to terms and rates, but not committed business volumes. Customers are free to choose their expedite~~particularly among contracted truckload carriers;

interruptions in service or stoppages in transportation providers on an at-will basis, which underscores Express-1’s commitment to total customer satisfaction. Express-1 offers an ISO 9001:2008 certified, twenty-four hour, seven day-a-week call center allowing its customers immediate communication and status updates relating to their shipments. Express-1’s commitment to excellence was again recognized as Express-1 received the Nasstrac “Expedited Carrier of the Year Award” for the second straight year in 2009 in addition to being named as a ~~top 100 carrier by Inbound Logistics~~result of labor disputes;

changes in ~~2010.~~regulations impacting transportation; and

~~Express-1 is predominantly a non-asset based service provider, meaning the~~

changes in transportation equipment used in its operation is almost exclusively provided by third parties, with less than two percent of the vehicles being owned by the company. These third-party owned vehicles are driven by independent contract drivers and by drivers employed directly by independent owners of multiple pieces of equipment, commonly referred to as fleet owners.rates.

Express-1 serves its customers between points within the United States, in addition to Canada and Mexico. Express-1’s Canadian and Mexican transportation services are provided to customers who are located primarily in the Unites States. As of December 31, 2010, we employed 114 full-time associates to supportIn our ~~Express-1 operations.~~

~~Concert Group Logistics~~

Concert Group Logistics (CGL), headquartered in Downers Grove, Illinois, was founded in 2001 as a non-asset based freight forwarding company. The CGL operating model is designed to attract and reward independent owners of freight forwarding operations, from various domestic markets. These independent owners operate stations within exclusive geographical regions under long-term contracts with CGL. Management supports the belief that customers’ needs are best served when “owners deliver” the goods and services for customers. CGL’s independent network model allows greater flexibility and reliability than a majority of its competitors while lowering the total cost of services to customers. We believe the use of the independent station owner network provides competitive advantages in the domestic market place. As of December 31, 2010, CGL supported its 24 independently owned stations with 34 full-time associates which include employees at the Tampa and Miami branches acquired through the LRG International acquisition.

~~Through its network and the expertise of its~~we rely upon both independent station owners and ~~CGL International, CGL~~our employees to develop and manage customer relationships and to service the customers.

Our Freight Forwarding operations are provided through a network of independent stations that are owned and operated by independent contractors and through stations managed by our employees. These independent station owners and company employees develop and manage customer relationships, have discretion in establishing pricing, and service the customers through the various modes of transportation made available through our network of third party transportation providers. We cannot assure you that we will be able to maintain our relationships with these independent station owners or develop future relationships with additional independent station owners. Similarly, we cannot assure you that we will be able to retain or effectively motivate our key employees who manage our most significant customer relationships. Since these independent station owners and our employees maintain the relationships with the customers, some customers may decide to terminate their relationship with us if their independent station owner or contact leaves our network. Accordingly, our inability to maintain relationships with these independent station owners and our employees could have a material adverse effect on our results of operations.

In addition, since these independent station owners are independent contractors, we have limited control over their operations and the quality of service that they provide to customers. To the extent that an independent station owner provides poor customer service or otherwise does not meet a customer’s expectations, or we encounter a similar situation with our employees, this will reflect poorly on us, and the customer may not use us in the future, which may adversely affect our results of operations.

We derive a significant portion of our revenue from our largest customers, some of which are involved in highly cyclical industries; our relationships with our customers generally are terminable on short notice and generally do not provide minimum shipping commitments.

While individual customer rankings within our top customers change from time to time, we rely upon our relationships with these large accounts in the aggregate for a significant portion of our revenues. In addition, 3PD, which we acquired during the third quarter of 2013, derived approximately 30% of its revenues in 2012 from its largest customer, a blue chip home improvement retailer, and its top three customers accounted for approximately 65% of its revenues in 2012. Any interruption or decrease in the business volume awarded by these customers could have a material adverse impact on our revenues and resulting profitability.

Our most significant customers include certain of the large automotive manufacturers, as well as various automotive industry suppliers. These companies have been, and will continue to be, impacted by the changing landscape in the U.S. automotive market, which is highly competitive and historically has been subject to substantial cyclical variation characterized by periods of oversupply and weak demand. Negative trends in the ~~capability~~U.S. automotive market or a worsening in the financial condition of automotive manufacturers, or within the associated supplier base, could have a material adverse impact on our revenues, profitability and cash flows.

3PD’s most significant customers include many large home improvement retailers and other companies whose businesses are impacted by the residential real estate market in the United States, which is subject to significant volatility. An increase in the volatility of and/or deterioration in the residential real estate market may adversely affect these customers and, in turn, 3PD’s, and therefore our, revenues and results of operations.

Our contractual relationships with our customers generally are terminable at will by the customers (or us) on short notice. Moreover, our customers generally are not required to provide ~~logistics services~~any minimum shipping commitments. Failure to retain our existing customers or enter into relationships with new customers could have a material adverse impact on a global basis. CGL’s services are not restricted by size, weight, mode or location and can be tailored to meet the transportation requirements of its client base. The major domestic and international services provided by CGL are outlined below.

~~Domestic Offerings~~ — time critical services including as-soon-as possible, air charter and expedites; time sensitive services including next day, second day and third day deliveries; and cost sensitive services including deferred delivery, less than truckload (LTL) and full truck load (FTL).

~~International Offerings~~ — time critical services including on-board courier and air charters; time sensitive services including direct transit and consolidation; and cost sensitive services including less-than-container loads, full-container-loads and vessel charters.

~~Other Service Offerings~~ — value added services include: documentation on international shipments, customs clearance and banking; customized services including trade show shipment management, time definite and customized product distributions, reverse logistics and on site asset recovery projects, installation coordination, freight optimization and diversity compliance support.

~~Bounce Logistics~~

Bounce Logistics began operations in March 2008 and is headquartered in South Bend, Indiana. Led by an experienced management team, Bounce Logistics is a non-asset based transportation company operationally focused on providing premium freight brokerage services to customers in need of greater customer service levels than those typically offered in the market place. Bounce also services other customers in need of non-expedited premium transportation movements. As of December 31, 2010, Bounce Logistics employed 28 full-time associates within its operations.

~~Express-1 Dedicated — Discontinued Operations~~

~~The operations of~~ our Express-1 Dedicated business unit were classified as discontinued during the fourth quarter of 2008, due to the loss of a dedicated services contract with a domestic automotive company. As of the contract termination date, February 28, 2009, all operations ceased and all employees were released from service. The facility lease was transferred to a third party and all equipment was either sold or redeployed for use elsewhere within our operations without incurring any material impairments or losses. All revenues and ~~costs associated with this operation have been accounted for, net~~resulting profitability.

If our customers are able to improve their internal supply chain management systems or reduce their supply chain cost structures, our business and results of ~~taxes, in the line item labeled “Income from discontinued operations” for all years presented in the Consolidated Statements of Operations.~~

~~GROWTH STRATEGY~~

~~Organic Growth~~operations may be harmed. –

We believe that significant drivers for our customers to use third party logistics providers include the ~~opportunity~~quality and cost of internal supply chain management and personnel. Third party logistics service providers such as ourselves are generally able to provide high-quality service more efficiently than otherwise could be provided “in-house.” Historically, this has been the case in our target industries. If, however, a customer in any industry we target is able to improve the quality of its internal supply chain management system, renegotiate the terms of its labor contracts or otherwise reduce its total cost structure regarding its employees, we may not be able to provide such a customer with an attractive alternative for ~~organic~~its logistics needs and our business, results of operations and growth ~~will continue within each of our service offerings – expedite~~potential may be harmed.

Higher purchased transportation expenses may result in decreased net revenue margin.

Transportation providers can be expected to charge higher prices if market conditions warrant, or to cover higher operating expenses. Factors such as increases in freight ~~forwarding,~~demand, decreases in trucking capacity, higher driver wages, increased regulation and ~~premium truckload brokerage over the long term. Management spends significant time and resources~~increases in the ~~development~~prices of ~~new customers, promotion of existing brands, focus on market penetration,~~fuel, insurance, tractors, trailers and other ~~activities~~operating expenses can result in higher purchased transportation expenses to ~~stimulate organic growth. Express-1, Concert Group Logistics and Bounce have experienced historical growth rates exceeding 20%, and~~us. Our profitability may decrease if we ~~anticipate similar growth rates moving forward~~are unable to increase our pricing to our customers to cover higher expenses, or we may be forced to refuse certain business, which could affect our customer relationships.

Fluctuations in the ~~future.~~price or availability of fuel may change our operations structure and resulting profitability.

~~Acquisition Growth~~ ~~– We believe that~~

Fuel expense constitutes one of the ~~transportation and logistics industries within the US and international markets will continue~~greatest costs to consolidate. Acquisition opportunities continue to exist and we continue to search for appropriate acquisitions to complement our existing business platforms. In 2009, we successfully completed two acquisitions; Express-1 Metro Detroit, and CGL International, both of which have complemented our existing operations and bottom line. Our focus on acquisition candidates continues to include the following characteristics:

·	~~Non-asset based operations model;~~

·	~~Premium transportation service niche with potential for long term growth and strong gross margins; and~~

·	~~A reputation for exceptional customer service.~~

Management is not interested in transportation companies that feature commoditized freight services. We continue to be confident that we can access the proper financial backing given the right opportunity.

~~INFORMATION SYSTEMS~~

~~The transportation industry increasingly relies upon information technology to link the shipper with its inventory and as an analytical tool to optimize transportation solutions.~~

~~We utilize satellite tracking and communication units on~~ our fleet of ~~vehicles~~independent contractor drivers and third party transportation providers who complete the physical movement of freight we arrange. Fuel prices are highly volatile with the price and availability of all petroleum products subject to ~~continually update the position of equipment~~economic, political and other market forces beyond our control. As is customary in our ~~Express-1 fleet. We have~~industry, most of our customer contracts include fuel surcharge provisions to mitigate the effect of the fuel price increase over base amounts established in the contract. However, these fuel surcharge mechanisms usually do not capture the entire amount of the increase in fuel prices, and they also feature a lag between the payment for the fuel at the pump and collection of the surcharge revenue. Market pressures may limit our ability to ~~communicate~~assess fuel surcharges in the future. Significant increases in fuel prices would increase our need for working capital to ~~individual units~~fund payments to our independent contractor drivers and third party transportation providers. Significant changes in the price or availability of fuel in future periods or significant changes in our ability to mitigate fuel price increases through the use of fuel surcharges, could have a material adverse impact on our operations, fleet capacity and ability to generate both revenues and profits.

Increases in independent contractor driver compensation or other difficulties attracting and retaining qualified independent contractor drivers could adversely affect our profitability and ability to maintain or grow our independent contractor driver fleet.

Our Expedited Transportation segment operates through a fleet of exclusive-use vehicles that are owned and operated by independent contractors. These independent contractor drivers are responsible for maintaining their own equipment and paying their own fuel, insurance, licenses and other operating costs. Independent contractor drivers make up a relatively small portion of the pool of all professional drivers in the United States. Turnover and bankruptcy among independent contractor drivers often limit the pool of qualified independent contractor drivers and increase competition for their services. In addition, regulations such as the FMCSA Compliance Safety Accountability program may further reduce the pool of qualified independent contractor drivers. Thus, our continued reliance on independent contractor drivers could limit our ability to grow our ground transportation fleet.

We are currently experiencing, and expect to continue to experience from time to time in the future, difficulty in attracting and retaining sufficient numbers of qualified independent contractor drivers. Additionally, our agreements with independent contractor drivers are terminable by either party upon short notice and without penalty. Consequently, we regularly need to recruit qualified independent contractor drivers to replace those who have left our fleet. If we are unable to retain our existing independent contractor drivers or recruit new independent contractor drivers, our business and results of operations could be adversely affected.

The compensation we offer our independent contractor drivers is subject to market conditions and we may find it necessary to continue to increase independent contractor drivers’ compensation in future periods, which may be more likely to the extent economic conditions continue to improve. If we are unable to continue to attract and retain a sufficient number of independent contractor drivers, we could be required to increase our mileage rates and accessorial pay or operate with fewer trucks and face difficulty meeting shipper demands, all of which would adversely affect our profitability and ability to maintain our size or to pursue our growth strategy.

3PD’s warehouse lease costs are fixed for a ~~larger group~~certain period of ~~units, based upon~~time, even if customer demand for shipping services in the areas where these warehouse are located decreases.

3PD is subject to expenses that are fixed for varying lengths of time through a significant number of lease agreements for warehousing facilities. These leases expire at various dates through 2018. The fixed nature of 3PD’s lease expenses may limit our ~~specific needs. Information received through~~ability to react promptly to a decline in demand by its customers for shipping services in the areas where these warehouses are located. The inability to respond promptly to changes in customer demand may have an adverse effect on our ~~satellite tracking~~financial condition and ~~communication system automatically updates~~results of operations. In addition, we may be unable to terminate these leases or find suitable subleases in the event of a rapid reduction in market demand without a material adverse effect on our ~~internal software~~business, results of operations and ~~provides~~financial condition.

A determination by regulators or courts that our ~~customers~~independent contractor drivers are employees could expose us to various liabilities and additional costs and our business and results of operations could be adversely affected.

Legislative and other regulatory authorities have in the past sought to assert that independent contractor drivers in the trucking industry are employees rather than independent contractors. Many states have initiated enforcement programs to increase their revenues from items such as unemployment, workers’ compensation and income taxes and a reclassification of independent contractor drivers as employees would help states with ~~real-time electronic updates. Both Express-1~~these initiatives. Further, class actions and ~~Bounce use~~other lawsuits have arisen in our industry seeking to reclassify independent contractor drivers as employees for a variety of purposes, including workers’ compensation, wage-and-hour, and healthcare coverage. Proposed legislation would make it easier for tax and other authorities to reclassify independent contractor drivers as employees. If our independent contractor drivers are determined to be our employees in any future determinations by regulators or courts, such a determination could increase the ~~same web based operational software.~~

~~Within our Concert Group Logistics business unit~~likelihood that we ~~utilize a web-based freight forwarding software package with customization exclusive to our CGL network. We offer on-line shipment entry, quoting~~would be found liable under respondeat superior or other similar theories in personal injury or

other negligence causes of action, and ~~tracking~~we would incur additional exposure under federal, state and ~~tracing~~local tax, workers’ compensation, unemployment benefits, labor and employment laws, including for ~~domestic and international shipments;~~prior periods, as well as ~~EDI messaging.~~

Wepotential liability for penalties and interest, which could have ~~invested in what we believe are some~~a material adverse effect on our results of operations and financial condition and the ~~most advanced operational, support and management software systems available for each~~ongoing viability of our business ~~units,~~model.

Additionally, 3PD has been advised of audits by certain states regarding the classification of 3PD’s contract carriers and non-final reclassifications of 3PD’s contract carriers that 3PD is currently appealing. 3PD is also involved as a defendant in certain class action lawsuits which claim, in part, improper classification of 3PD’s contract carriers. If 3PD’s contract carrier drivers are determined to be its employees by regulators or courts in any of the actions involving 3PD or in any future determinations by regulators or courts, we would incur additional exposure under federal, state and local tax, workers’ compensation, unemployment benefits, labor and employment laws, including for prior periods, as well as potential liability for penalties and interest. Pursuant to the stock purchase agreement related to the acquisition of 3PD, the former stockholders, option holders and warrant holders of 3PD have agreed to indemnify us for certain liabilities, including claims related to 3PD’s relationships with ~~most~~its contract carriers, subject to certain limits. However, there can be no assurance that this indemnification will be sufficient to protect us against the full amount of such liabilities.

We may be subject to various claims and lawsuits that could result in significant expenditures.

The nature of our business exposes us to the potential for various claims and litigation related to labor and employment (including wage-and-hour litigation relating to independent contractor drivers, sales representatives, brokerage agents and other individuals), personal injury, property damage, business practices, environmental liability and other matters, including with respect to claims asserted under various theories of agency and employer liability notwithstanding our independent contractor relationships with our transportation providers. During 2013, we spent approximately $4.9 million in litigation-related legal costs. Any material litigation could have a material adverse effect on our business, results of operations, financial condition or cash flows. Businesses that we acquire also increase our exposure to litigation.

We are involved in litigation in the Fourth Judicial District Court of Hennepin County, Minnesota relating to our hiring of former employees of C.H. Robinson Worldwide, Inc. (“CHR”). In the litigation, CHR asserts claims for breach of contract, breach of fiduciary duty and duty of loyalty, tortious interference with contractual relationships and prospective contractual relationships, misappropriation of trade secrets, violation of the federal Computer Fraud and Abuse Act, inducing, aiding and abetting breaches and conspiracy. CHR seeks temporary, preliminary and permanent injunctions, as well as direct and consequential damages and attorneys’ fees. CHR has asserted that it may seek punitive damages as well. On January 17, 2013, following a hearing, the Court issued an Order Regarding Motion for Temporary Injunction (the “Order”). The Order (as amended on April 16, 2013) prohibits us from engaging in business with certain CHR customers (the “Restricted Customers”) within a specified radius of Phoenix, AZ, until July 1, 2014. On November 6, 2013, CHR moved to compel compliance with the Order, requesting discovery and expanded enforcement of the Order. On November 18, 2013, we opposed CHR’s motion and cross moved to modify the Order. On February 19, 2014, the Court denied the majority of CHR’s motion, granting only CHR’s request for a report of our remediation efforts under the Order. At the same time, the Court granted our motion and modified the Order to allow XPO to do business with Restricted Customers in the Phoenix area if: (a) XPO obtained that business as the result of a merger or acquisition; or (b) the business is part of a competitive bidding process with an entity seeking nationwide services. The Court also clarified that the business restrictions in the Order do not apply to XPO’s servicing of other independent third party logistics entities who might be working for the ultimate benefit of the Restricted Customers.

motion to dismiss and denied as moot the motion to stay discovery. On September 23, 2013, we filed our Answer to the First Amended Complaint and asserted counterclaims against CHR for violations of the Minnesota Antitrust, Unlawful Trade Practices, and Deceptive Trade Practices Act, as well as tortious interference with contractual relations and prospective contractual relations. CHR moved to dismiss our counterclaims on November 12, 2013, and we opposed that motion. A hearing on CHR’s motion to dismiss was held on February 10, 2013. The Court has not yet issued a ruling on CHR’s motion to dismiss. We intend to vigorously defend the action in court. The outcome of this ~~software being provided~~litigation is uncertain and could have a material adverse effect on our business and results of operations.

3PD is a defendant in a number of class action and individual lawsuits alleging improper classification of contract carriers as independent contractors rather than employees, among other claims, and seeking damages primarily under varying state laws for alleged improper deductions from wages. Pursuant to the stock purchase agreement by ~~third-party vendors. Our software systems~~which we acquired 3PD, the former owners of 3PD have ~~been designed~~agreed to ~~support the unique operational characteristics of each industry niche in which it is utilized. We have further customized these systems~~indemnify us for costs and liabilities related to ~~more readily facilitate the flow of information from outside sources into our operations centers for use by our personnel~~such class action and ~~customers. Investments in technology, including; satellite communications equipment, computer networks, software customization and related information technology continues~~individual lawsuits, subject to becertain limits. Additionally, we are a strategic focus for each of our Companies. Hardware typically represents one of our largest categories of investment within our annual capital expenditure budget, and we believe the continual enhancement of our technology platforms is critical to our continued success.

~~CUSTOMERS, SALES AND MARKETING~~

~~Our business units provide services~~party to a variety of customers ranging in size from small entrepreneurial organizations to Fortune 500 companies. Each year, we collectively serve thousands of different customers. Our customers are engaged within industries such as: major domestic and foreign automotive manufacturing, production of automotive components and supplies, commercial printing, durable goods manufacturing, pharmaceuticals, food and consumer products and the high tech sector. We have hazmat authority and transport lower risk hazardous materials such as automotive paint and batteries on occasion. In addition, we serve third-party logistics providers (3PL’s), who themselves serve a multitude of customers and industries. Our 3-PL customers vary in size from small, independent, single facility organizations to large, global logistics companies. Within our Express-1 and Bounce Logistics business units, our services are marketed within the United States, Canada and Mexico. In addition to offering services within these same markets, our Concert Group Logistics unit also provides international services byother legal actions, both ~~air and ocean as well as other value added services.~~

We maintain a staff of external sales representatives and related support staff within Express-1, CGL and Bounce Logistics. Within Concert Group Logistics, sales are also initiated by our network of independent station owners who manage the sales relationships within their exclusive markets. We believe our independent station ownership structure enables salespeople to better serve customers by developing a broad knowledge of logistics, local and regional market conditions, and specific logistics issues facing individual customers. Under the guidance of these experienced entrepreneurs, independent stations are given significant latitude to pursue opportunities and to commit resources to better serve customers.

We consistently seek to establish long-term relationships with new accounts and to increase the amount of business done with our existing customers. We are committed to providing our customers with a full range of logistics services. Our ability to offer multiple services through each of our business units represents a competitive advantage within the transportation industry. During 2010, no customer accounted for more than 6% of consolidated gross revenues. ~~As the domestic and world economies slowly recover, we recognize our ability to sustain premium rates may be compromised.~~

~~COMPETITION AND BUSINESS CONDITIONS~~

The transportation industry is intensely competitive with thousands of transportation companies competing in the domestic and international markets. Our competitors include local, regional, national, and international companies with the same specialties that our business segments provide. Our business segments do not operate from a position of dominance and therefore must operate daily to retain established business relationships and forge new relationships in this competitive framework.

We compete on service, delivery timeframes, flexibility, reliability and rates. We have historically focused on transportation niches that demand superior service, in return for premium rates. We believe that our rates are in-line with our competitors, and based upon our reputation, we may at times mitigate rate pressure that our competitors face. As the domestic and world economies slowly recover, we recognize our ability to sustain premium rates may be compromised.

~~REGULATION~~

The U.S. Department of Transportation (DOT) regulates the domestic transportation industry. This regulatory authority has broad powers, generally governing matters such as authority to engage in motor carrier operations, safety, hazardous materials transportation, certain mergers, consolidations and acquisitions and periodic financial reporting. The trucking industry is subject to regulatory and legislative changes, which can affect the economics of the industry. We are also regulated by various state agencies and, in Canada, by other regulatory authorities.

Our “satisfactory” safety rating is the highest rating given by the Federal Motor Carrier Safety Administration (FMCSA), a department within the DOT. There are three safety ratings assigned to motor carriers: “satisfactory”, “conditional”, meaning that there are deficiencies requiring correction but not so significant to warrant loss of carrier authority, and “unsatisfactory”, which is the result of acute deficiencies that may lead to the revocation of carrier authority.

Our operations are also subject to various federal, state and local environmental laws and regulations dealing with transportation, storage, presence, use, and the disposal and handling of hazardous material. The Code of Federal Regulations regarding the transportation of hazardous material groups these materials into different classes according to risk. These regulations also require us to maintain minimum levels of insurance. At this time, we transport only low to medium risk hazardous material, representing a very small percentage of our total shipments.

For domestic business, our Concert Group Logistics business unit is also subject to regulation by the DOT in regards to air cargo security for all business, regardless of origin and destination. CGL is regulated as an “indirect air carrier” by the Department of Homeland Security and Transportation Security Administration. These agencies provide requirements, guidance and in some cases licensing to the freight forwarding industry. This ensures that we have satisfactorily completed the security requirements and qualifications, adhered to the economic regulations, and implemented the required policies and procedures. These agencies require companies to fulfill these qualifications prior to transacting various types of business. Failure to do so could result in penalties and fines.

For our international operations, Concert Group Logistics is a member of the International Air Transportation Association (IATA), a voluntary association of airlines and forwarders, which outlines operating procedures for freight forwarders acting as agents for its members. A substantial portion of our international air freight business is completed with other IATA members. For international ocean business, we are registered as an Ocean Transportation Intermediary (OTI) by the Federal Maritime Commission (FMC), which establishes the qualifications, regulations and bonding requirements to operate as an OTI for businesses originating and terminating in the United States of America.

Our international services performed in foreign countries are provided through qualified local independent agents who hold the necessary authorities to operate and are subject to regulation and foreign jurisdiction in their respective countries.

~~SEASONALITY~~

The Company’s revenues and profitability have been historically subject to some minor seasonal fluctuations, however, with changes in both our mix of business between expedited, freight forwarding and brokering over the past 3 years in addition to changes in the mix of industries served within those modes of transportation, it is not possible to determine whether the historical revenue and profitability trends will occur.

~~EMPLOYEES AND INDEPENDENT CONTRACTORS~~

At December 31, 2010, we had 179 full-time employees, none of whom were covered by a collective bargaining agreement. Of this number, 114 were employed at Express-1, 34 were employed at Concert Group Logistics, 28 were employed at Bounce Logistics and 3 were employed in our corporate office. In addition to our full-time employees, we employed 11 part-time employees as of December 31, 2010. We recognize our trained staff of employees as one of our most critical resources, and acknowledge the recruitment, training and retention of qualified employees as essential to our ongoing success.

In addition to our employees, we support the capacity needs of our Express-1 business unit through the use of independent contractor drivers. These individuals operate one or more of their own vehicles and pay for all the operating expenses of their equipment, including: wages, benefits, fuel, fuel taxes, physical damage insurance, maintenance, highway use taxes, and other related equipment costs. By utilizing the services of independent contractors we have reduced the amount of capital required for our growth, which we feel has lessened our financial risk.

Within Concert Group Logistics, we provide freight forwarding services through a network of independently owned stations that are under contract with Concert Group Logistics. Each of these stations is independently owned and operated with the exception of our Tampa and Miami CGL International Company owned branches. These stations provide sales and operations including negotiating with and maintaining customer relationships, managing transportation services with third-party providers and providing support to the customers of the network. The Concert Group Logistics operating model is designed upon the premise that when owners deliver, superior attention to detail and performance result.

~~SEC FILINGS~~

~~We are classified~~ as a ~~“Smaller Reporting Company” for the purpose of filings with the Securities~~plaintiff and Exchange Commission. Certain Form 10-K report disclosures previously included that are not required under the disclosure requirements of a smaller reporting company have been omitted in this report.

~~Interested parties may access our public filing free of charge on the SEC’s EDGAR website located at www.sec.gov.~~

~~CORPORATE INFORMATION~~

Express-1 Expedited Solutions, Inc. is incorporated in Delaware. Our executive office is located at 3399 South Lakeshore Drive, Suite 225, Saint Joseph, Michigan 49085. Our telephone number is (269) 429-9761 and the Internet website address is www.xpocorporate.com. Our stock is listed on the NYSE AMEX Equities Exchange under the symbol “XPO”. The information on our website is not incorporated in this report as a ~~result of this reference.~~

~~ITEM 1B.~~ ~~UNRESOLVED STAFF COMMENTS~~

~~None~~

~~ITEM 2.~~ ~~PROPERTIES~~

Our executive offices are located within in an 880 square-foot leased office suite located at 3399 South Lakeshore Drive, Suite 225, Saint Joseph, Michigan 49085. Within this same office building are common areas to which we have access, including; board and meeting rooms, multimedia facilities and a lounge for visitors. In addition, the table below identifies other properties we maintain.

~~Business Unit~~	~~Location~~	~~Purpose~~	~~Square Feet~~	~~Owned or Leased~~

~~Express-1 Operations~~ ~~and Recruiting Center~~	~~429 Post Road~~ ~~Buchanan, MI 49107~~	~~Express-1 headquarters,~~ ~~call center &~~ ~~recruiting facility~~	~~23,000~~	~~Owned~~

~~Express-1/Metro~~ ~~Detroit~~	~~2399 Avon Industrial Drive~~ ~~Rochester Hills, MI 48309~~	~~Metro Detroit Regional~~ ~~expedite call center~~	~~10,500~~	~~Leased~~

~~Concert Group~~ ~~Logistics~~	~~1430 Branding Ave. Suite 150,~~ ~~Downers Grove, IL 60515~~	~~CGL headquarters~~ ~~and general office~~	~~5,000~~	~~Leased~~

~~Concert Group~~ ~~Logistics International~~	~~5845 Barry Road~~ ~~Tampa, FL 33634~~	~~International operations~~ ~~station~~	~~6,150~~	~~Leased~~

~~Concert Group~~ ~~Logistics International~~	~~7855 NW 12th Street Suite 210~~ ~~Miami, FL 33126~~	~~International operations~~ ~~station~~	~~760~~	~~Leased~~

~~Bounce Logistics~~	~~5838 W. Brick Road,~~ ~~South Bend, IN 46628~~	~~Bounce headquarters~~ ~~and general office~~	~~6,300~~	~~Leased~~

~~ITEM 3.~~ ~~LEGAL PROCEEDINGS~~

~~Our Company is involved in various claims and legal actions arising~~defendant, that arose in the ordinary course of ~~business.~~business, and may in the future become involved in other legal actions. We ~~maintain reserves for identified claims within~~do not currently expect any of these matters or these matters in the aggregate to have a material adverse effect on our results of operations, financial condition or cash flows. However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more of these matters, or our failure to recover, in full or in part, under the indemnity provisions noted above with the respect to 3PD, could have a material adverse effect on our financial ~~statements. We cannot~~condition, results of operations or cash flows.

Our operations are subject to varying liability standards that may result in claims being asserted against us.

With respect to our Expedited Transportation and Freight Forwarding operations, we have primary liability to the shipper for cargo loss and damage for certain liabilities caused by our independent contractor drivers. From time to time, our independent contractor drivers, and the drivers engaged by the transportation providers we contract with, are involved in accidents that may result in serious personal injuries or property damage. The resulting types and/or amounts of damages may be ~~assured that~~excluded by or exceed the ~~ultimate disposition~~amount of insurance coverage maintained by the contracted transportation provider. In our Freight Brokerage operations, we generally are not liable for damage to our customers’ cargo or in connection with damages arising in connection with the provision of transportation services. However, in our customer contracts, we may agree to assume cargo and other liability, such as for negligence and personal injury, including liability for the actions of transportation providers to which we broker freight and their employees or independent contractor drivers, or for our actions in retaining them. While we endeavor to limit this exposure to matters arising due to our negligence or misconduct, or to cap our exposure at a stated maximum dollar amount, we are not always able to do so. Claims against us may exceed the amount of our insurance coverage, or may not be covered by insurance at all. A material increase in the frequency or severity of accidents, liability claims, or workers’ compensation claims, or unfavorable resolutions of claims, could materially and adversely affect our operating results. In addition, significant increases in insurance costs or the inability to purchase insurance as a result of these claims could reduce our profitability.

We are subject to regulation beyond our control, which could negatively impact our business.

Our operations are regulated and licensed by various federal and state transportation agencies in the United States and similar governmental agencies in foreign countries in which we operate. These regulatory agencies have authority and oversight of domestic and international transportation services and related activities, licensure, motor carrier operations, safety and security and other matters. We must comply with various insurance and surety bond requirements to act in the capacities for which we are licensed. Our subsidiaries and independent contractors must also comply with applicable regulations and requirements of such agencies. The “Regulation” section of this Annual Report on Form 10-K under the caption entitled “Business” describes the various licenses obtained by us, Express-1, XGL and XPO Air Charter, as well as proposed, pending and adopted regulations that could significantly affect our business, operations, productivity, independent contractors and capital expenditures.

Through our subsidiaries and business units, we hold various licenses required to carry out our domestic and international services. These licenses permit us to provide services as a motor carrier, property broker, indirect air carrier, Ocean Transportation Intermediary, non-vessel operating common carrier, freight forwarder and ocean freight forwarder. We also are subject to regulations and requirements promulgated by, among others, the U.S. Department of Transportation and FMCSA, the U.S. Department of Homeland Security through the Bureau of U.S. Customs and Border Protection and the U.S. Transportation Security Administration, the U.S. Federal Maritime Commission, International Air Transportation Association, the Canada Border Services Agency and various other international, domestic, state, and local agencies and port authorities. Our failure to maintain our required licenses, or to comply with applicable regulations, could have a material adverse impact on our business and results of operations.

Future laws and regulations may be more stringent and require changes in our operating practices, influence the demand for transportation services or require us to incur significant additional costs. We are unable to predict the impact that recently enacted and future regulations may have on our businesses. Higher costs incurred by us, or incurred by our independent contractors or third party transportation providers who pass the increased costs on to us, as a result of future new regulations could adversely affect our results of operations to the extent we are unable to obtain a corresponding increase in price from our customers.

Seasonality affects our operations and profitability.

The transportation industry experiences seasonal fluctuations. Our results of operations are typically lower for the first quarter of the calendar year relative to our other quarters. We believe this is due in part to the post-holiday reduction in demand experienced by many of our customers, which leads to more capacity in the non-expedited and service-critical markets and, in turn, less demand for expedited and premium shipping services. In addition, the productivity of our independent contractors and transportation providers generally decreases during the winter season because inclement weather impedes operations.

Work stoppages, weather related issues, or other disruption beyond our transportation providers control could adversely affect our operating results.

Our transportation services are provided through a network of transportation providers. Hurricanes, flooding, and other severe weather conditions, as well as other calamities such as earthquakes, fires and acts of terrorism, can cause a disruption in service that can affect the flow of traffic over the entire network. In addition, our businesses can be adversely affected by labor disputes between railroads and their union employees, seaport strikes and labor renegotiations, foreign labor market disruptions, or by a work stoppage at railroads or local trucking companies servicing rail terminals, including work disruptions involving owner operators under contract with our local trucking operations. These network disruptions result in terminal embargoes, disruption to equipment and freight flows, depressed volumes and revenues, increased costs and other negative effects on our operations and financial results.

Terrorist attacks, anti-terrorism measures and war could have broad detrimental effects on our business operations.

As a result of the potential for terrorist attacks, federal, state and municipal authorities have implemented and continue to follow various security measures, including checkpoints and travel restrictions on large trucks. Such measures may reduce the productivity of our independent contractors and transportation providers or increase the costs associated with their operations, which we could be forced to bear. For example, security measures imposed at bridges, tunnels, border crossings and other points on key trucking routes may cause delays and increase the non-driving time of our independent contractors and transportation providers, which could have an adverse effect on our results of operations. Congress has mandated 100% security screening of air cargo traveling on passenger airlines. War, risk of war or a terrorist attack also may have an adverse effect on the economy. A decline in economic activity could adversely affect our revenues or restrict our future growth.

Instability in the financial markets as a result of terrorism or war also could impact our ability to raise capital. In addition, the insurance premiums charged for some or all of the coverage currently maintained by us could increase dramatically or such coverage could be unavailable in the future.

Our ability to raise capital in the future may be limited, and our failure to raise substantial additional capital when needed could prevent us from achieving our growth objectives.

We may in the future be required to raise capital through public or private financing or other arrangements. Such financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could harm our business. Future issuances of our Common Stock will dilute our stockholders’ ownership and our stock price may decline accordingly. Debt financing, if available, may involve restrictive covenants and could reduce our profitability. If we cannot raise funds on acceptable terms, we may not be able to grow our business or respond to competitive pressures.

Our outstanding Preferred Stock, Convertible Senior Notes and revolving credit agreement limit our operating and financial flexibility.

We are obligated to pay holders of our Series A Convertible Perpetual Preferred Stock quarterly cash dividends equal to the greater of (i) the “as-converted” dividends on the underlying Common Stock for the relevant quarter, if applicable, and (ii) 4% of the then-applicable liquidation preference per annum. Presently, the aggregate dividends due to holders of our Series A Preferred Stock are $2.9 million each year. Our Series A Preferred Stock has an initial liquidation preference of $1,000 per share, for an aggregate liquidation preference of $73.4 million, subject to adjustment in the event of accrued and unpaid dividends. Accordingly, holders of our Series A Preferred Stock have claim to a substantial portion of our cash flows from operations and liquidity, thereby reducing the availability of our cash flows to fund acquisitions, working capital, capital expenditures, our growth initiatives and other general corporate purposes.

We are obligated to pay holders of our 4.50% Convertible Senior Notes interest semiannually in arrears on April 1 and October 1 of each year, beginning on April 1, 2013. The Notes will mature on October 1, 2017 unless earlier converted or repurchased. The conversion rate was initially 60.8467 shares of Common Stock per $1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $16.43 per share of Common Stock) and is subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. We may acquire from time to time our 4.50% Convertible Senior Notes for cash or securities in market transactions, privately negotiated transactions or otherwise, depending on market and other conditions.

Our revolving credit agreement contains, and any future credit agreement would likely contain, certain operating and financial restrictive covenants. Such covenants include limits on management’s discretion in operating our business and may affect our ability, among other things, to: incur additional debt; pay dividends and make other distributions; prepay subordinated debt; make investments, acquisitions and other restricted payments; create liens; sell assets; and enter into transactions with affiliates. Failure to comply with the covenants under the loan commitment (if drawn) or any future credit agreement may have a material adverse impact on our operations. In addition, if we fail to comply with the covenants under any such credit agreement, and are unable to obtain a waiver or amendment, an event of default would result under the applicable credit agreement. We cannot assure you that we would have sufficient liquidity to repay or refinance borrowings if such borrowings were accelerated upon an event of default.

The price of our Common Stock historically has been volatile and this volatility may make it difficult for you to resell shares of Common Stock owned by you at times or may make it difficult for you to sell shares of Common Stock at prices you find attractive.

The trading price of our Common Stock may fluctuate widely as a result of a number of factors, many of which are outside our control. In addition, the stock market is subject to fluctuations in share prices and trading

volumes that affect the market prices of the shares of many companies. These broad market fluctuations have adversely affected, and may in the future adversely affect, the market price of our Common Stock. Among the factors that could affect our stock price are:

changes in financial estimates and buy/sell recommendations by securities analysts or our failure to meet analysts’ revenue or earnings estimates;

actual or anticipated variations in our operating results;

our earnings releases and financial performance;

market conditions in our industry and the general state of the securities markets;

fluctuations in the stock price and operating results of our competitors;

actions by institutional shareholders;

investor perception of us and the industry and markets in which we operate;

general economic conditions; and

other factors described in this “Risk Factors” section.

The trading price of our Common Stock has fluctuated widely in the past, and we expect that it will continue to fluctuate in the future.

Delaware law and our charter documents may impede or discourage a takeover, which could cause the market price of our Common Stock to decline.

We are a Delaware corporation, and the anti-takeover provisions of Delaware law impose various impediments to the ability of a third party to acquire control of us, even if a change in control would be beneficial to our existing stockholders. In addition, our board of directors or a committee thereof has the power, without stockholder approval, to designate the terms of one or more series of Preferred Stock and issue shares of Preferred Stock. The ability of our board of directors or a committee thereof to create and issue a new series of Preferred Stock, our stockholders rights plan and certain provisions of Delaware law and our certificate of incorporation and bylaws could impede a merger, takeover or other business combination involving us or discourage a potential acquirer from making a tender offer for our Common Stock, which, under certain circumstances, could reduce the market price of our Common Stock.

Sales or issuances of a substantial number of shares of our Common Stock may adversely affect the market price of our Common Stock.

We anticipate that we will fund future acquisitions (including the Pacer acquisition) or our capital requirements from time to time, in whole or part, through sales or issuances of our Common Stock or equity-based securities, subject to prevailing market conditions and our financing needs. Future equity financing will dilute the interests of our then-existing stockholders, and future sales or issuances of a substantial number of shares of our Common Stock or other equity-related securities may adversely affect the market price of our Common Stock.

We have securities outstanding presently that are convertible into or exercisable for a substantial number of shares of our Common Stock. As of February 21, 2014, there were (i) 48,747,390 shares of our Common Stock outstanding, (ii) 73,425 shares of Series A Convertible Perpetual Preferred Stock outstanding, which are convertible into an aggregate of 10,489,286 shares of our Common Stock (subject to customary anti-dilution adjustments), (iii) Warrants exercisable at any time until September 2, 2021, for an aggregate of 10,678,572 shares of our Common Stock, at an initial exercise price of $7.00 per share of Common Stock (subject to customary anti-dilution adjustments), (iv) 2,469,273 shares of our Common Stock reserved for issuance upon exercise of outstanding stock options or settlement of restricted stock units and (v) 7,341,824 shares reserved for issuance upon conversion of our 4.50% Convertible Senior Notes.

Our Chairman and Chief Executive Officer controls a large portion of our voting stock and has substantial control over us, which could limit other stockholders’ ability to influence the outcome of key transactions, including changes of control.

Our Chairman and Chief Executive Officer, Mr. Bradley S. Jacobs, is the managing member of Jacobs Private Equity, LLC (“JPE”), our largest stockholder, and beneficially owns as of February 21, 2014: (i) 67,500 shares of our Series A Convertible Perpetual Preferred Stock held by JPE, which are initially convertible into an aggregate of 9,642,857 shares of our Common Stock, (ii) Warrants held by JPE that are initially exercisable for an aggregate of 9,642,857 shares of our Common Stock at an exercise price of $7.00 per share, (iii) 56,826 shares of our Common Stock that are held directly by Mr. Jacobs and (iv) employee stock options exercisable for 100,000 shares of our Common Stock that have vested or will vest within 60 days. In total, as of February 21, 2014, Mr. Jacobs beneficially owns 19,442,540 shares of our Common Stock, which represents approximately 28.5% of our outstanding Common Stock, assuming conversion and exercise of his Series A Convertible Perpetual Preferred Stock, Warrants and vested stock options and restricted stock units (without reflecting any shares issuable upon conversion of our 4.50% Convertible Senior Notes due October 1, 2017). This significant concentration of beneficial share ownership may adversely affect the trading price for our Common Stock because investors may perceive disadvantages in owning stock in companies with controlling stockholders. Our Series A Preferred Stock votes together with our Common Stock on an “as-converted” basis on all matters, except as otherwise required by law, and separately as a class with respect to certain matters implicating the rights of holders of shares of the Series A Preferred Stock. In addition, pursuant to the Investment Agreement, dated as of June 13, 2011 (the “Investment Agreement”), by and among JPE, the other investors party thereto and us, Mr. Jacobs, as the managing member of JPE, will have the right to designate for nomination by our board of directors a majority of the members of our board of directors so long as JPE owns securities (including Preferred Stock convertible into, or Warrants exercisable for, securities) representing at least 33% of the voting power of our capital stock on a fully-diluted basis, and will have the right to designate for nomination by our board of directors 25% of the members of our board of directors so long as JPE owns securities (including Preferred Stock convertible into, or Warrants exercisable for, securities) representing at least 20% of the voting power of our capital stock on a fully-diluted basis. Under the terms of the Investment Agreement, Mr. Jacobs currently beneficially owns approximately 25.0% of the voting power of our capital stock on a fully-diluted basis, including his ownership of Series A Convertible Perpetual Preferred Stock and Warrants. Further, as of February 21, 2014, Mr. Jacobs’ beneficial ownership of our Common Stock and Series A Convertible Perpetual Preferred Stock entitled him to cast approximately 16.4% of the votes eligible to be cast on matters to be presented for consideration at a meeting of our stockholders (such as, for example, the election of directors). Accordingly, Mr. Jacobs can exert significant influence over our management and affairs and matters requiring stockholder approval, including the election of directors and the approval of significant corporate transactions, such as mergers, consolidations or the sale of substantially all of our assets. Consequently, this concentration of ownership and the related contractual rights may have the effect of delaying or preventing a change of control, including a merger, consolidation or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control, even if that change of control would benefit our other stockholders.

Our Common Stock is subordinate to our existing and future indebtedness and Series A Preferred Stock.

Shares of the Common Stock are equity interests in XPO and do not constitute indebtedness. As such, shares of our Common Stock rank junior to all indebtedness and other non-equity claims on XPO with respect to assets available to satisfy claims on XPO, including in a liquidation of XPO. Additionally, we have outstanding shares of Series A Preferred Stock with a liquidation preference of $73.4 million and an annual cash dividend of 4% of such liquidation preference. Holders of our Common Stock are subject to the prior dividend and liquidation rights of the holders of our Series A Preferred Stock.

We currently do not intend to pay dividends on our Common Stock.

We have never paid, and have no immediate plans to pay, cash dividends on our Common Stock. We currently plan to retain future earnings and cash flows for use in the development of our business and to enhance stockholder value through growth and continued focus on increasing profitability rather than pay dividends on our Common Stock. Accordingly, we do not anticipate paying any cash dividends on our Common Stock in the near future.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

None

ITEM 2.

PROPERTIES

We lease our current executive offices at Five Greenwich Office Park, Greenwich, Connecticut, as well as our national operations center in Charlotte, North Carolina. We own the facility at which we conduct a portion of our Expedited Transportation operations in Buchanan, Michigan. As of February 2014, we also lease numerous other facilities relating to our operations under each of our operating segments, generally ranging from 1,000 to approximately 100,000 square feet of space. These facilities are located in all 50 states, District of Columbia and three Canadian provinces: British Columbia, Ontario and Quebec. We believe that our facilities are sufficient for our current needs and are in good condition in all material respects.

ITEM 3.

LEGAL PROCEEDINGS

On February 7, 2013, CHR filed a First Amended Complaint against us and eight individual defendants who are current or former employees of XPO, including our Chief Operating Officer, Senior Vice President—Strategic Accounts and Vice President—Carrier Procurement and Operations. On April 11, 2013, we moved to dismiss the new claims asserted in that First Amended Complaint and moved to stay discovery pending the Court’s resolution of the motion to dismiss. On August 29, 2013, the Court granted in part and denied in part the motion to dismiss and denied as moot the motion to stay discovery. On September 23, 2013, we filed our Answer to the First Amended Complaint and asserted counterclaims against CHR for violations of the Minnesota Antitrust, Unlawful Trade Practices, and Deceptive Trade Practices Act, as well as tortious interference with contractual relations and prospective contractual relations. CHR moved to dismiss our counterclaims on November 12, 2013, and we opposed that motion. A hearing on CHR’s motion to dismiss was held on February 10, 2013. The Court has not yet issued a ruling on CHR’s motion to dismiss. We intend to vigorously defend the action in court. The outcome of this litigation is uncertain and could have a material adverse effect on our business and results of operations.

We are a party to a variety of other legal actions, both as a plaintiff and as a defendant that arose in the ordinary course of business, and may in the future become involved in other legal actions. We do not currently expect any of these matters or these matters in the aggregate to have a material adverse effect on our results of

operations, financial condition or cash flows. However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more of these matters could have a material adverse effect on our financial condition, results of operations or cash flows.

We carry liability and excess umbrella insurance policies that we deem sufficient to cover potential legal claims arising in the normal course of conducting our operations as a transportation company. In the event we are required to satisfy a legal claim in excess of the ~~reserves established. Additionally, we maintain liability and umbrella liability~~coverage provided by this insurance, ~~policies that provide protection against claims up to various limits of liability. These limits are intended to be sufficient to reasonably protect the Company against claims. In the opinion of~~ our ~~management, the ultimate disposition of all known matters will not have a materially adverse effect on our consolidated~~ financial ~~position,~~condition, results of operations ~~or liquidity.~~

and cash flows could be negatively impacted.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

~~ITEM 4.~~ ~~(REMOVED AND RESERVED)~~

PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

~~ITEM 5.~~Price Range of Common Stock ~~MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES~~

~~The Company’s~~

Our common stock is traded on ~~the~~ NYSE ~~AMEX Equities Exchange~~ under the symbol “XPO.” The table below sets forth the high and low closing sales prices for ~~the Company’s~~our common stock for the quarters included within ~~2009~~2012 and ~~2010~~2013 and ~~for the first few months of 2011.~~

High

Low

2009
1st quarter
$ 1.10 $ .67
2nd quarter
0.95 .77
3rd quarter
0.96 .81
4th quarter
1.29 .91
2010
1st quarter
$ 1.65 $ 1.22
2nd quarter
1.56 1.26
3rd quarter
1.88 1.24
4th quarter
2.82 1.99
2011
1st quarter (through March 18, 2011)
$ 3.03 $ 2.12

through February 21, 2014.


	High		Low
2012
1st quarter	$	18.34	$	11.35
2nd quarter		19.02		15.25
3rd quarter		16.50		11.93
4th quarter		17.38		11.60
2013
1st quarter	$	18.59	$	16.60
2nd quarter		18.25		15.82
3rd quarter		25.41		17.96
4th quarter		26.45		19.50
2014
1st quarter (through February 21, 2014)	$	30.31	$	23.90

As of ~~March 18, 2011,~~February 21, 2014, there were approximately ~~3,400~~382 record holders of ~~the Company’s~~our common stock, based upon data available to us from our ~~proxy solicitor,~~ transfer ~~agent~~agent. We have never paid, and ~~market maker for~~have no immediate plans to pay, cash dividends on our common stock. ~~The Company has never paid~~We currently plan to retain future earnings and cash flows for use in the development of our business and to enhance stockholder value through growth and continued focus on improving profitability rather than for paying dividends on our common stock. In addition, our current credit agreement imposes, and we expect that any future credit agreement we enter into will impose, restrictions on our ability to pay cash dividends on ~~its~~our common ~~stock and intends to keep future earnings, if any, to retire debt and finance the expansion of its business.~~stock. Accordingly, ~~the Company does~~we do not anticipate ~~that~~paying any cash dividends ~~will be paid~~on our common stock in the near future. Future payment of dividends on our common stock would depend on ~~the Company’s~~our earnings, capital requirements, expansion plans, financial condition and other relevant factors.

~~ITEM 6.~~ ~~SELECTED FINANCIAL DATA~~

~~Not Required~~

~~ITEM 7.~~ ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~This discussion is intended to further~~

The graph below compares the ~~reader’s understanding~~cumulative 5-year total return of holders of our ~~Company’s~~common stock with the cumulative total returns of the Russell 2000 Index, and the Dow Jones Transportation Average Index. The graph tracks the performance of a $100 investment in our common stock and in each index from December 31, 2008 to December 31, 2013.


	12/08		12/09		12/10		12/11		12/12		12/13
XPO Logistics, Inc.	$	100	$	111	$	223	$	268	$	378	$	572
Russell 2000	$	100	$	125	$	157	$	148	$	170	$	233
Dow Jones Transportation Average	$	100	$	116	$	144	$	142	$	150	$	209

Equity Compensation Plan

Certain information with respect to our equity compensation plans is set forth in Item 12 of this Annual Report on Form 10-K.

ITEM 6.

SELECTED FINANCIAL DATA

This table includes selected financial ~~condition and results of operations and~~data for the last five years. This financial data should be read together with our audited Consolidated Financial Statements and related notes, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and other financial data appearing elsewhere in this Annual Report.

XPO Logistics, Inc.

(In thousands)


	Year Ended December 31,
	2013			2012			2011			2010		2009
Consolidated Statements of Operations Data:
Revenue	$	702,303		$	278,591		$	177,076		$	157,987	$	100,136
Gross margin		123,507			40,826			29,778			27,400		16,740
(Loss) income from continuing operations		(48,530	)		(20,339	)		759			4,888		1,690
Income from discontinued operations		—			—			—			—		15
Preferred stock beneficial conversion charge		—			—			(44,211	)		—		—
Cumulative preferred dividends		(2,972	)		(2,993	)		(1,125	)		—		—
Net (loss) income available to common stockholders	$	(51,502	)	$	(23,332	)	$	(44,577	)	$	4,888	$	1,705
(Loss) Earnings per share
Basic	$	(2.26	)	$	(1.49	)	$	(5.41	)	$	0.61	$	0.21
Diluted		(2.26	)		(1.49	)		(5.41	)		0.59		0.21
Weighted average common shares outstanding
Basic		22,752			15,694			8,247			8,060		8,009
Diluted		22,752			15,694			8,247			8,279		8,042
Consolidated Balance Sheet Data:
Working capital	$	72,839		$	271,907		$	83,070		$	12,314	$	970
Total assets	$	780,241		$	413,208		$	127,641		$	56,672	$	49,039
Current maturities of long-term debt	$	2,028		$	491		$	1,675		$	1,680	$	7,745
Convertible senior notes	$	106,268		$	108,280		$	—		$	—	$	—
Revolving credit facility and other long-term debt, net of current maturities	$	75,373		$	676		$	454		$	4,832	$	213
Total long-term debt	$	181,641		$	108,956		$	454		$	4,832	$	213
Preferred stock	$	42,737		$	42,794		$	42,794		$	—	$	—
Stockholder’s equity	$	455,843		$	245,059		$	108,360		$	34,013	$	28,404

We effected a 4-for-1 reverse stock split on September 2, 2011. All share and per share amounts have been adjusted to reflect the reverse stock split. Results for the fiscal year ended December 31, 2011 reflect the beneficial conversion feature of $44.2 million on the Series A Preferred Stock that was recorded as a deemed distribution during the third quarter of 2011, as described in Item 7 below.

Item 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion in conjunction with Part I, including matters set forth under Item 1A, “Risk Factors”, of this Annual Report, and our ~~consolidated financial statements~~audited Consolidated Financial Statements and ~~related notes~~Notes thereto included elsewhere ~~herein. This~~in this Annual Report. The following discussion ~~also~~ contains forward-looking statements. You should refer to the “Cautionary Statement Regarding Forward-Looking Statements” set forth in Part I, Item 1A of this Annual Report.

Executive Summary

XPO Logistics, Inc., a Delaware corporation, together with its subsidiaries, is a leading non-asset provider of transportation logistics services. We act as a middleman between shippers and carriers who outsource their transportation logistics to us as a third-party provider. As of December 31, 2013, we operated at 94 locations: 73 Company-owned branches and 21 agent-owned offices.

We offer our services through three business segments. Our ~~actual results could differ materially~~freight brokerage segment places shippers’ freight with qualified carriers, primarily trucking companies. Our expedited transportation segment facilitates urgent shipments via independent over-the-road contractors and air charter carriers. Our freight forwarding segment arranges domestic and international shipments using ground, air and ocean transport through a network of agent-owned and Company-owned locations.

By executing our strategy, we have built leading positions in some of the fastest-growing sectors of transportation logistics. In North America, we are the fourth largest provider of freight brokerage services, which, driven by an outsourcing trend, is growing at two to three times the rate of GDP. Our acquisitions of 3PD Holding, Inc. (“3PD”) and Optima Service Solutions, LLC (“Optima”) in 2013 (further described below) made us the largest provider of heavy goods last-mile delivery logistics in North America, a $13 billion sector which, driven by outsourcing by big-box retailers and e-commerce, is growing at five to six times the rate of GDP. In part due to our acquisition of National Logistics Management (“NLM”) in December of 2013 (further described below), we now manage more expedited shipments than any other company in North America and have established a foothold in managed transportation. Expediting is growing due to a trend toward just-in-time inventories in manufacturing. Upon completion of the acquisition of Pacer International, Inc. (further described below), we will be the third largest provider of intermodal services in North America and the largest provider of cross-border Mexico intermodal services, a sector that, driven by the efficiencies of long-haul rail and the growth of near-shoring of manufacturing in Mexico, is growing at three to five times the rate of GDP. We believe our broad service offering gives us a competitive advantage as many customers, particularly large shippers, focus their relationships on fewer, larger third party logistics providers with deep capacity across a wide range of services.

Our strategy has three main components:

•

Optimization of operations. We are continuing to optimize our existing operations by growing our sales force, implementing advanced information technology, cross-selling our services and leveraging our shared carrier capacity. We have a disciplined framework of processes in place for the recruiting, training and mentoring of newly hired employees. Our salespeople market our services to hundreds of thousands of small and medium-sized prospective customers. In addition, we have a strategic and national accounts team focused on developing business relationships with the largest shippers in North America. Our network is supported by our national operations center in Charlotte, North Carolina, which we opened in March of 2012, and by our information technology. We have a scalable platform in place across the Company, with sales, service, carrier and track-and-trace capabilities, as well as benchmarking and analysis. Most important to our growth strategy, we are developing a culture of passionate, world-class service for customers.

•

Acquisitions. We take a disciplined approach to acquisitions: we look for companies that are highly scalable and are a good strategic fit with our core competency. When we acquire a company, we seek to integrate it with our operations and scale it up by adding salespeople. We integrate the acquired operations with our technology platform, which connects them to our broader organization, and we give them access to our shared carrier pool. We gain more carriers, customers, lane histories and pricing histories with each acquisition, and in some cases an acquisition adds complementary services.

We use these resources Company-wide to buy transportation more efficiently and to cross-sell a more complete supply chain solution to customers. Since the beginning of 2012, we have developed an active pipeline of targets. In 2012, we completed the acquisition of four non-asset third party logistics companies. We acquired another six companies in 2013, including 3PD, the largest non-asset, third party provider of heavy goods, last-mile logistics in North America, and NLM, the largest provider of web-based expedited transportation management in North America. On January 5, 2014, we agreed to acquire Pacer International, Inc., a Tennessee corporation (“Pacer”), the third largest provider of intermodal transportation services in North America. We plan to continue to acquire quality companies that fit our strategy for growth.

•

Pending Acquisition of Pacer International

On January 5, 2014, XPO entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”) with Pacer International, Inc., a Tennessee corporation (“Pacer”), and Acquisition Sub, Inc., a Tennessee corporation and a wholly owned subsidiary of XPO (“Merger Subsidiary”), providing for the acquisition of Pacer by XPO. Pursuant to the terms of Merger Agreement, Merger Subsidiary will be merged with and into Pacer (the “Merger”), with Pacer continuing as the surviving corporation and an indirect wholly owned subsidiary of XPO.

Pursuant to the terms of the Merger Agreement and subject to the conditions thereof, at the effective time of the Merger, each outstanding share of common stock of Pacer, par value $0.01 per share (the “Pacer Common Stock”), other than shares of Pacer Common Stock held by Pacer, XPO, Merger Subsidiary or their respective subsidiaries, will be converted into the right to receive (1) $6.00 in cash and (2) subject to the limitations in the following sentence, a fraction (the “Exchange Ratio”) of a share of XPO common stock, par value $0.001 per share (the “XPO Common Stock”), equal to $3.00 divided by the volume-weighted average price per share of XPO Common Stock for the last 10 trading days prior to the closing date (such average, the “VWAP,” and, such cash and stock consideration together, the “Merger Consideration”). For the purpose of calculating the Exchange Ratio, the VWAP may not be less than $23.12 per share or greater than $32.94 per share. If the VWAP for purposes of the Exchange Ratio calculation is less than or equal to $23.12 per share, then the Exchange Ratio will be fixed at 0.1298 of a share of XPO Common Stock. If the VWAP for purposes of the Exchange Ratio calculation is greater than or equal to $32.94 per share, then the Exchange Ratio will be fixed at 0.0911 of a share of XPO Common Stock.

The completion of the Merger is subject to customary closing conditions, including approval of the Merger by the holders of a majority of the outstanding shares of Pacer Common Stock. XPO’s and Merger Subsidiary’s obligations to consummate the Merger are not subject to any condition related to the availability of financing.

Revolving Loan Credit Agreement

On October 18, 2013, we and certain of our wholly-owned subsidiaries, as borrowers, entered into a $125.0 million multicurrency secured Revolving Loan Credit Agreement (the “Credit Agreement”) with the lender parties thereto and Morgan Stanley Senior Funding, Inc., as administrative agent for such lenders, with a maturity of five years.

The proceeds of the Credit Agreement may be used by us for ongoing working capital needs and other general corporate purposes, including strategic acquisitions. Borrowings under the Credit Agreement bear interest at a per annum rate equal to, at our option, the one, two, three or six month (or such other period less than one month or greater than six months as the lenders may agree) LIBOR rate plus a margin of 1.75% to 2.25%, or a base rate plus a margin of 0.75% to 1.25%. We are required to pay an undrawn commitment fee equal to 0.25% or 0.375% of the quarterly average undrawn portion of the commitments under the Credit Agreement, as well as customary letter of credit fees. The margin added to LIBOR, or base rate, will depend on the quarterly average availability of the commitments under the Credit Agreement.

All obligations under the Credit Agreement are secured by substantially all of our assets and are unconditionally guaranteed by certain of our subsidiaries, provided that no foreign subsidiary guarantees, and no assets of any foreign subsidiary secures, any obligations of any of our domestic borrower subsidiaries. The Credit Agreement contains representations, warranties and covenants that are customary for agreements of this type. Among other things, the covenants in the Credit Agreement limit our ability to, with certain exceptions: incur indebtedness; grant liens; engage in certain mergers, consolidations, acquisitions and dispositions; make certain investments and restricted payments; and enter into certain transactions with affiliates. In certain circumstances, the Credit Agreement also requires us to maintain certain minimum EBITDA or, at our election, maintain a Fixed Charge Coverage Ratio (as defined in the Credit Agreement) of not less than 1.00 to 1.00. If an event of default under the Credit Agreement shall occur and be continuing, the commitments thereunder may be terminated and the principal amount outstanding thereunder, together with all accrued unpaid interest and other amounts owed thereunder, may be declared immediately due and payable. Certain subsidiaries acquired by us in the future may be excluded from ~~those anticipated~~the restrictions contained in ~~these forward-looking statements~~certain of the foregoing covenants. We do not believe that the covenants contained in the Credit Agreement will impair our ability to execute our strategy. At December 31, 2013, we had borrowed $75.0 million under the terms of the Credit Agreement. We were in compliance, in all material respects, with all covenants related to the Credit Agreement as of December 31, 2013.

Common Stock Offerings

On February 5, 2014, we closed a registered underwritten public offering of 15,000,000 shares of common stock, and on February 11, 2014 we closed as part of the same public offering the sale of an additional 2,250,000 shares as a result of the ~~risks~~full exercise of the underwriters’ overallotment option, in each case at a price of $25.00 per share (together, the “February 2014 Offering”). We received $413.3 million in net proceeds from the February 2014 Offering after underwriting discounts and ~~uncertainties set forth elsewhere~~expenses.

On August 13, 2013, we closed a registered underwritten public offering of 9,694,027 shares of common stock, and on August 16, 2013 we closed as part of the same public offering the sale of an additional 1,454,104 shares as a result of the full exercise of the underwriters’ overallotment option, in each case at a price of $22.75 per share (together, the “August 2013 Offering”). We received $239.5 million in net proceeds from the August 2013 Offering after underwriting discounts and expenses.

On March 20, 2012, we closed a registered underwritten public offering of 9,200,000 shares of common stock (the “2012 Offering”), including 1,200,000 shares issued and sold as a result of the full exercise of the underwriters’ overallotment option, at a price of $15.75 per share. We received $137.0 million in net proceeds from the 2012 Offering after underwriting discounts and estimated expenses.

Convertible Debt Offering

On September 26, 2012, we completed a registered underwritten public offering of 4.50% Convertible Senior Notes due October 1, 2017 (the “Notes”), in an aggregate principal amount of $125.0 million. On October 17, 2012, the underwriters exercised the overallotment option to purchase $18.8 million additional principal amount of the Notes. We received $138.5 million in net proceeds after underwriting discounts,

commissions and expenses were paid. The Notes were allocated to long-term debt and equity in the amounts of $106.8 million and $31.7 million, respectively. These amounts are net of debt issuance costs of $4.1 million for debt and $1.2 million for equity. To date, we have entered into transactions pursuant to which we have issued an aggregate of 1,404,887 shares of our common stock to certain holders of the Notes in connection with the conversion of $23.1 million aggregate principal amount of the Notes. These transactions included induced conversions pursuant to which we paid the holder a market-based premium in cash. The negotiated market-based premiums, in addition to the difference between the current fair value and the book value of the Notes, will be reflected in interest expense. The number of shares of common stock issued in the foregoing transactions equals the number of shares of common stock presently issuable to holders of the Notes upon conversion under the original terms of the Notes.

We are obligated to pay holders of the Notes interest semiannually in arrears on April 1 and October 1 of each year which began on April 1, 2013. The notes will mature on October 1, 2017 unless earlier converted or repurchased. The conversion rate was initially 60.8467 shares of common stock per $1,000 principal amount of notes (equivalent to an initial conversion price of approximately $16.43 per share of common stock) and is subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest.

Equity Investment

In September 2011, pursuant to the Investment Agreement, we issued, for $75.0 million in cash: (i) an aggregate of 75,000 shares of our Series A Convertible Perpetual Preferred Stock (the “Series A Preferred Stock”), which are initially convertible into an aggregate of 10,714,286 shares of our common stock, and (ii) warrants initially exercisable for an aggregate of 10,714,286 shares of our common stock at an initial exercise price of $7.00 per common share (the “Warrants”). We refer to this investment as the “Equity Investment.” See Note 7 to our audited Consolidated Financial Statements in Item 8 of this Annual ~~Report and in our other SEC filings. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as~~Report.

The conversion feature of the ~~date hereof. We are not~~Series A Preferred Stock was determined to be a ~~party to any transactions that would be considered “off balance sheet” pursuant to disclosure requirements under ITEM 303(c).~~

~~CRITICAL ACCOUNTING POLICIES~~

~~Principles~~beneficial conversion feature (“BCF”) based on the effective initial conversion price and the market value of ~~Consolidation~~

The accompanying consolidated financial statements include the accounts of Express-1 Expedited Solutions, Inc. and all of its wholly-owned subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation. Our Company does not have any variable interest entities whose financial results are not included in the consolidated financial statements.

~~Revenue Recognition~~

~~Within the Company’s Express-1 and Bounce Logistics business units, revenue is recognized primarily~~our common stock at the ~~point in time delivery is completed on~~commitment date for the ~~freight shipments it handles; with related costs~~issuance of ~~delivery being accrued as incurred and expensed within~~ the same period in which the associated revenue is recognized. For these business units, the Company uses the following supporting criteria to determine that revenue has been earned and should be recognized:

·	~~Persuasive evidence that an arrangement exists;~~

·	~~Services have been rendered;~~

·	~~The sales price is fixed and determinable; and~~

·	~~Collectability is reasonably assured.~~

Within its Concert Group Logistics business unit, the Company utilizes an alternative point in time to recognize revenue. Concert Group Logistics revenue and associated operating expenses are recognized on the date the freight is picked up from the shipper. This alternative method of revenue recognition is not the preferred method of revenue recognition as prescribed within generallySeries A Preferred Stock. Generally accepted accounting principles in the United States ~~of America (US GAAP). This method recognizes revenue and associated expenses prior~~(“US GAAP”) require that we recognize the BCF related to the ~~point in time that all services are completed; however,~~Series A Preferred Stock as a discount on the ~~use of this method does not result in~~Series A Preferred Stock and amortize such amount as a ~~material difference.~~deemed distribution through the earliest conversion date. The ~~Company has evaluated the impact of this alternative method on its consolidated financial statements and concluded that the impact is not material to the financial statements.~~

~~The Company reports revenue on a gross basis in accordance with US GAAP principles. The following facts justify our position of reporting revenue on a gross basis:~~

~~The Company is the primary obligor and is responsible for providing the service desired by the customer.~~

~~The customer holds the Company responsible for fulfillment including the acceptability~~calculated value of the ~~service.~~

~~The Company has discretion~~BCF was in ~~setting sales prices and as a result, its earnings vary.~~

~~The Company has discretion to select its drivers, contractors or other transportation providers (collectively, “service providers”) from among thousands of alternatives, and~~

~~The Company bears credit risk for all of its receivables.~~

~~Purchase Price Allocation Process for Business Combinations~~

~~The Company determines and allocates the purchase price of an acquired company to the tangible and intangible assets acquired and liabilities assumed as~~excess of the business combination date in accordance with US GAAP for business combinations. The purchase price allocation process requires us to use significant estimates and assumptions, including fair value estimates, as of the business combination date. We utilize third-party valuation companies to help us determine certain fair value estimates used for assets and liabilities.

While we use our best estimates and assumptions as a part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the business combination date, our estimates and assumptions are inherently uncertain and subject to refinement. As a result, during the purchase price allocation period, which is generally one year from the business combination date, we record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. In addition, there are contingencies based on earnings ~~(commonly referred to as earnouts)~~ included in some of our purchase agreements. The earnout is recorded as it is earned over the contingency period, which is generally one to three years from the business combination date. With the exception of unresolved income tax matters or the earnout of contingent consideration, subsequent to the purchase price allocation period any adjustment to assets acquired or liabilities assumed is included in our operating results in the period in which the adjustment is determined.

In January 2009, the Company adopted new US GAAP for business combinations, which requires a number of changes, including changes in the way assets and liabilities are recognized as a result of business combinations. This new US GAAP requires that more assets and liabilities assumed be measured at fair value as of the acquisition date and that liabilities related to contingent consideration be re-measured at fair value in each subsequent reporting period. Additionally, certain earn-outs are now subject to fair value measurement. It also requires the capitalization of in-process research and development at fair value and requires the expensing of acquisition-related costs as incurred. The impact of the adoption of this new US GAAP for business combinations will depend on the nature of acquisitions completed after the date of adoption. For our acquisitions in 2009, the Company utilized a third-party valuation company to determine therelative fair value of the intangible assets, goodwill, and certain earn-outs. The estimates and assumptions used in the valuations at the acquisition date are subject to change, including the amounts recorded as liabilities related to certain earn-outs. Changes to these estimates may result in amounts that are materialnet proceeds allocated to the ~~financial statements going forward.~~

~~Carrying Values of Goodwill and Intangible Assets~~

Goodwill represents the excess of the aggregate consideration paid for an acquisition over the fair value of the net tangible and intangible assets acquired. Intangible assets represent the cost of trademarks, trade names, websites, customer lists, non-compete agreements, and proprietary processes and software obtained in connection with certain of these acquisitions. Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives, which range from 4 to 12 years. In accordance with US GAAP, goodwill and intangible assets determined to have indefinite lives are not subject to amortization but are tested for impairment annually, or more frequently if events or changes in circumstances indicate a potential impairment may have occurred. Circumstances that may indicate impairment include qualitative factors such as an adverse change in the business climate, loss of key personnel, and unanticipated competition. Additionally, management considers quantitative factors such as current estimates of the future profitability of the Company’s reporting units, the current stock price, and the Company’s market capitalization compared to its book value. In conducting its impairment test, the Company compares the fair value of each of its reporting units to the related book value. If the fair value of a reporting unit exceeds its net book value, long-lived assets are considered not to be impaired. If the net book value of a reporting unit exceeds it fair value, an impairment loss is measured and recognized. The Company conducts its impairment testSeries A Preferred Stock. Accordingly, during the third quarter of ~~each~~2011 we recorded a discount on the Series A Preferred Stock of $44.2 million with immediate recognition of this amount as a deemed distribution because the Series A Preferred Stock is convertible at any time.

Other Reporting Disclosures

This discussion and analysis also refers from time to time to our Freight Brokerage international operations. These brokered shipments may originate in either the United States or Canada and are largely attributable to our acquisition of Kelron Corporate Services, Inc. and certain related entities (collectively, “Kelron”) in August 2012. These services are provided to both U.S. and Canadian customers who primarily pay in their home currency.

This discussion and analysis refers from time to time to Expedited Transportation’s international operations. These operations involve the transportation of freight shipments that originate in or are delivered to either Canada or Mexico. These freight shipments either originate in or are delivered to the United States, and therefore only a portion of the freight movement actually takes place in Canada or Mexico. This service is provided to domestic customers who pay primarily in U.S. dollars. We discuss this freight separately because our Expedited Transportation segment has developed an expertise in cross-docking freight at the border through the utilization of Canadian and Mexican carriers.

This discussion and analysis also refers from time to time to our Freight Forwarding international operations. These freight movements also originate in or are delivered to the United States and are primarily paid for in U.S. dollars.

XPO Logistics, Inc.

Consolidated Statement of Operations

For the Year Ended December 31,

(In thousands)


									Percent of Revenue
	2013			2012			2011		2013			2012			2011
Revenue	$	702,303		$	278,591		$	177,076		100.0	%		100.0	%		100.0	%
Direct expense
Transportation services		567,805			224,035			133,007		80.8	%		80.4	%		75.1	%
Station commissions		7,168			9,321			11,098		1.0	%		3.3	%		6.3	%
Other direct expense		3,823			4,409			3,193		0.5	%		1.6	%		1.8	%

Total direct expense		578,796			237,765			147,298		82.3	%		85.3	%		83.2	%

Gross margin		123,507			40,826			29,778		17.7	%		14.7	%		16.8	%

SG&A expense
Salaries & benefits		100,633			39,278			16,338		14.3	%		14.1	%		9.2	%
Other SG&A expense		29,358			11,616			3,937		4.2	%		4.2	%		2.2	%
Purchased services		25,214			15,388			6,733		3.6	%		5.5	%		3.8	%
Depreciation and amortization		20,627			2,508			1,046		2.9	%		0.9	%		0.6	%

Total SG&A expense		175,832			68,790			28,054		25.0	%		24.7	%		15.8	%

Operating loss		(52,325	)		(27,964	)		1,724		-7.3	%		-10.0	%		1.0	%

Other expense		478			363			56		0.1	%		0.1	%		0.0	%
Interest expense		18,169			3,207			191		2.6	%		1.2	%		0.1	%

Loss before income tax		(70,972	)		(31,534	)		1,477		-10.0	%		-11.3	%		0.9	%
Income tax benefit		(22,442	)		(11,195	)		718		-3.2	%		-4.0	%		0.4	%

Net loss	$	(48,530	)	$	(20,339	)	$	759		-6.8	%		-7.3	%		0.5	%

Consolidated Results

Year Ended December 31, 2013 Compared to Year Ended December 31, 2012

Our consolidated revenue for 2013 increased 152.1% to $702.3 million from $278.6 million in 2012. This increase was driven largely by the acquisitions of Turbo Logistics, Inc. and Turbo Dedicated, Inc. (collectively, “Turbo”), 3PD, Covered Logistics, Inc. (“Covered”), Interide Logistics, LC (“Interide”), East Coast Air Charter, NLM, and Optima, as well as the revenue attributable to the growth of our Freight Brokerage cold-start locations.

Total gross margin dollars for 2013 increased 202.5% to $123.5 million from $40.8 million in 2012. As a percentage of revenue, gross margin was 17.7% in 2013 as compared to 14.7% in 2012. The increase in gross margin as a percentage of revenue is attributable to higher gross margins in Freight Brokerage and Freight Forwarding as described below.

Sales, general and administrative (“SG&A”) expense as a percentage of revenue was 25.0% in 2013, as compared to 24.7% in 2012. SG&A expense increased by $107.0 million in 2013 compared to 2012, due to significant growth initiatives, including six acquisitions, sales force recruitment, costs associated with our new Freight Brokerage offices, and an increase in Corporate SG&A.

Interest expense for 2013 increased 466.5% to $18.2 million from $3.2 million in 2012. The increase in interest expense is primarily attributable to the year ~~using balances~~over year increase in interest on the convertible senior notes and an undrawn debt commitment fee of $3.0 million related to our acquisition of 3PD.

Our effective income tax rates were (31.6%) and (35.5%) for 2013 and 2012, respectively. Both 2013 and 2012 included the recognition of a tax benefit due to the net operating losses incurred. The difference in the income tax rate for 2013 relates to the recording of tax expense in certain state and foreign jurisdictions, the non-deductible loss on convertible debt, and the change in the provision for uncertain tax positions.

The increase in net loss was due primarily to higher SG&A expenses associated with significant growth initiatives, including sales force recruitment, costs associated with our new Freight Brokerage offices, and an increase in Corporate costs. Additionally, the Company incurred higher interest expense and recorded the accelerated amortization of the CGL trade name indefinite-lived intangible assets.

Year Ended December 31, 2012 Compared to Year Ended December 31, 2011

Our consolidated revenue for 2012 increased 57.3% to $278.6 million from $177.1 million in 2011. This increase was driven largely by the increased revenues in Freight Brokerage due to the acquisitions of Turbo, BirdDog Logistics, Inc. (“BirdDog”), Kelron and Continental Freight Services, Inc. (“Continental”), as well as the revenue attributable to our Freight Brokerage cold-start locations opened since December 2011.

Direct expense is primarily attributable to the cost of procuring freight transportation services for our customers and commissions paid to independent station owners in our freight forwarding business. Our non-asset operating model provides transportation capacity through variable cost third-party transportation arrangements, therefore enabling us to be flexible to adapt to changes in economic or industry conditions. Our primary means of providing capacity are through our base of independent owner operators in Expedited Transportation and our network of independent ground, ocean and air carriers in Freight Forwarding and Freight Brokerage. We view this operating model as a strategic advantage due to its flexibility, particularly in uncertain economic conditions.

Total gross margin dollars for 2012 increased 37.1% to $40.8 million from $29.8 million in 2011. As a percentage of revenue, gross margin was 14.7% in 2012 as compared to 16.8% in 2011. The decrease in gross margin as a percentage of revenue is attributable primarily to increased revenues in our Freight Brokerage segment, which typically experiences lower margins than our other operations. Freight Brokerage’s gross margins also have been negatively impacted by our cold-start sales offices, which are still in the start-up phase.

SG&A expense as a percentage of revenue was 24.7% in 2012, as compared to 15.8% in 2011. SG&A expense increased by $40.7 million in 2012 compared to 2011, due to significant growth initiatives, including four acquisitions, sales force recruitment, costs associated with our new Freight Brokerage offices, and an increase in Corporate SG&A.

Our effective income tax rates in 2012 and 2011 were (35.5%) and 48.6%, respectively. The significant difference between the tax rates is due to prior period tax charges incurred in 2011.

The reduction in net income was due primarily to higher SG&A expenses associated with significant growth initiatives, including sales force recruitment, costs associated with our new Freight Brokerage offices, and an increase in Corporate SG&A.

Freight Brokerage

Statement of Operations Data

For the Year Ended December 31,

(In thousands)


									Percent of Revenue
	2013			2012			2011		2013			2012			2011
Revenue	$	541,389		$	125,121		$	29,186		100.0	%		100.0	%		100.0	%
Direct expense
Transportation services		444,719			108,507			24,434		82.1	%		86.7	%		83.7	%
Other direct expense		575			489			55		0.1	%		0.4	%		0.2	%

Total direct expense		445,294			108,996			24,489		82.2	%		87.1	%		83.9	%

Gross margin		96,095			16,125			4,697		17.8	%		12.9	%		16.1	%

SG&A expense
Salaries & benefits		64,873			15,171			2,484		12.0	%		12.1	%		8.5	%
Other SG&A expense		20,189			3,590			716		3.7	%		2.9	%		2.5	%
Purchased services		7,563			1,695			148		1.4	%		1.4	%		0.5	%
Depreciation and amortization		14,892			1,223			44		2.8	%		1.0	%		0.2	%

Total SG&A expense		107,517			21,679			3,392		19.9	%		17.4	%		11.7	%

Operating loss	$	(11,422	)	$	(5,554	)	$	1,305		-2.1	%		-4.5	%		4.4	%

Freight Brokerage

Year Ended December 31, 2013 Compared to Year Ended December 31, 2012

Revenue in our Freight Brokerage segment increased by 332.7% to $541.4 million in 2013 compared to $125.1 million in 2012. Revenue growth was primarily due to the acquisitions of Turbo, 3PD, Covered, Interide and Optima, as well as revenue growth from our Freight Brokerage cold-start sales locations.

Freight Brokerage’s gross margin dollars increased by 495.9% to $96.1 million in 2013 from $16.1 million in 2012. As a percentage of revenue, Freight Brokerage’s gross margin increased to 17.8% in 2013, compared to 12.9% in 2012 due to the acquisitions in Freight Brokerage as well as improvements in our existing business. Excluding the acquisitions of 3PD and Optima, which typically generate higher gross margin percentage than truckload brokerage, Freight Brokerage gross margin improved due to prior acquisitions and higher gross margin percentage at our cold starts.

SG&A expense increased by 395.9% to $107.5 million in 2013 from $21.7 million in 2012. As a percentage of revenue, SG&A expense increased to 19.9% in 2013 as compared to 17.4% in 2012. The increase in SG&A expense was due to acquisitions, sales force expansion, technology and training, as well as increased intangible asset amortization relating to the acquisition of 3PD.

Our Freight Brokerage operations generated an operating loss of $11.4 million in 2013 compared to an operating loss of $5.6 million in 2012. The increase in operating loss was attributable to the increase in SG&A expense as we continue to invest in sales and procurement personnel to support our growth initiatives.

Management’s growth strategy for Freight Brokerage is based on:

Selective acquisitions of non-asset based freight brokerage firms that would benefit from our scale and potential access to capital;

The opening of new freight brokerage sales offices;

Investment in an expanded sales and service workforce;

Technology investments to improve efficiency in sales, freight tracking and carrier procurement; and

The integration of industry best practices, with specific focus on better leveraging our scale and lowering administrative overhead.

Year Ended December 31, 2012 Compared to Year Ended December 31, 2011

Revenue in our Freight Brokerage segment increased by 328.7% to $125.1 million in 2012 compared to $29.2 million in fiscal year 2011. Revenue growth was primarily due to the acquisitions of Turbo, BirdDog, Kelron and Continental, as well as an increase in volumes at our cold-start sales offices during the year ended December 31, 2012. Year-over-year headcount increased by 560 sales and procurement personnel within Freight Brokerage.

Freight Brokerage’s gross margin dollars increased 243.3% to $16.1 million in 2012 from $4.7 million in 2011. As a percentage of revenue, Freight Brokerage’s gross margin was 12.9% in 2012, compared to 16.1% in 2011. The decrease in gross margin as a percentage of revenue was due primarily to our cold-start sales offices, which are still in the start-up phase.

SG&A expense increased 539.1% to $21.7 million in 2012 from $3.4 million in 2011. The increase in SG&A expense was associated with the addition of Turbo, Kelron, Continental and BirdDog, as well as investments in sales force recruitment and the opening of new offices.

Our Freight Brokerage operations generated an operating loss of $5.6 million in 2012 compared to operating income of $1.3 million in 2011. The reduction in operating income was attributable to the increase in SG&A expense and the lower gross margin percentage associated with our cold-start sales offices.

Expedited Transportation

Statement of Operations Data

For the Year Ended December 31,

(In thousands)


							Percent of Revenue
	2013		2012		2011		2013			2012			2011
Revenue	$	101,817	$	94,008	$	87,558		100.0	%		100.0	%		100.0	%
Direct expense
Transportation services		81,532		73,376		66,267		80.1	%		78.1	%		75.7	%
Other direct expense		3,111		3,738		2,998		3.1	%		4.0	%		3.4	%

Total direct expense		84,643		77,114		69,265		83.2	%		82.1	%		79.1	%

Gross margin		17,174		16,894		18,293		16.8	%		17.9	%		20.9	%

SG&A expense
Salaries & benefits		7,786		6,613		6,854		7.6	%		7.0	%		7.8	%
Other SG&A expense		2,047		2,121		1,411		2.0	%		2.3	%		1.6	%
Purchased services		955		1,015		1,426		0.9	%		1.1	%		1.6	%
Depreciation and amortization		1,182		320		403		1.2	%		0.3	%		0.5	%

Total SG&A expense		11,970		10,069		10,094		11.7	%		10.7	%		11.5	%

Operating income	$	5,204	$	6,825	$	8,199		5.1	%		7.2	%		9.4	%

Note: Total depreciation and amortization for the Expedited Transportation operating segment, included in both direct expense and SG&A, was $1.4 million, $0.5 million and $0.6 million, for the years ended December 31, 2013, 2012 and 2011, respectively.

Expedited Transportation

Year Ended December 31, 2013 Compared to Year Ended December 31, 2012

Revenue in our Expedited Transportation segment increased 8.3% to $101.8 million in 2013 from $94.0 million in 2012. This growth was driven by the acquisition of East Coast Air Charter on February 8, 2013 partially offset by a decline in the rest of our over-the-road expedited business.

Direct expenses consist primarily of payments to independent owner operators and contract carriers for ground transportation and air charter services, insurance and truck leasing expense. Expedited Transportation gross margin dollars increased 1.7% to $17.2 million in 2013 from $16.9 million in 2012. As a percentage of revenue, Expedited Transportation gross margin was 16.8% in 2013, compared to 17.9% in 2012. The decrease in gross margin as a percentage of revenue primarily reflects a soft expedited freight environment in the first half of the year as well as the addition of expedited air charter revenue from the 2013 acquisition of East Coast Air Charter; air charter services typically generate higher gross revenue but lower gross margin percentage than our over-the-road expedited business.

SG&A expense increased 18.9% to $12.0 million in 2013 from $10.1 million in 2012. The increase was due to the addition of East Coast Air Charter, particularly intangible amortization associated with the acquisition. As a percentage of revenue, SG&A expense increased to 11.7% in 2013 compared to 10.7% in 2012.

Operating income decreased to $5.2 million in 2013 compared to $6.8 million in 2012. The decrease in operating income was primarily related to the decrease in gross margin as a percent of revenue, as described above.

Management’s growth strategy for our Expedited Transportation segment is based on:

•

Targeted investments to expand the sales and service workforce, in order to capture key opportunities in specialized areas (e.g., cross-border, refrigeration and air charter);

An increased focus on carrier recruitment and retention, as well as improved utilization of the current carrier fleet;

Technology upgrades to improve efficiency in sales and carrier procurement;

Selective acquisitions of non-asset based expedited businesses that would benefit from our scale and potential access to capital; and

Cross-selling of expedited transportation services to customers of our other business segments.

Year Ended December 31, 2012 Compared to Year Ended December 31, 2011

Revenue in our Expedited Transportation segment increased 7.4% to $94.0 million in 2012 from $87.6 million in 2011. This growth was driven by an increase in temperature control and international revenue as well as an increase in air charter revenue related to a customer project completed in the first quarter of 2012.

Expedited Transportation gross margin dollars decreased 7.6% to $16.9 million in 2012 from $18.3 million in 2011. As a percentage of revenue, Expedited Transportation gross margin was 17.9% in 2012, compared to 20.9% in 2011. The decrease in gross margin as a percentage of revenue primarily reflects higher rates paid to independent fleet owners and owner-operators, effective March 1, 2012, and an increase in costs associated with fleet recruiting initiatives.

SG&A expense remained flat at $10.1 million in 2012 compared to 2011. As a percentage of revenue, SG&A expense decreased to 10.7% in 2012 compared to 11.5% in 2011.

Operating income decreased to $6.8 million in 2012 compared to $8.2 million in 2011. The decrease in operating income was primarily related to the decrease in gross margin as a percent of revenue and an increase in SG&A, as described above.

Freight Forwarding

Statement of Operations Data

For the Year Ended December 31,

(In thousands)


								Percent of Revenue
	2013			2012		2011		2013			2012			2011
Revenue	$	73,154		$	67,692	$	65,148		100.0	%		100.0	%		100.0	%
Direct expense
Transportation services		55,611			50,381		47,122		76.0	%		74.4	%		72.3	%
Station commissions		7,168			9,321		11,098		9.8	%		13.8	%		17.0	%
Other direct expense		137			182		140		0.2	%		0.3	%		0.2	%

Total direct expense		62,916			59,884		58,360		86.0	%		88.5	%		89.5	%

Gross margin		10,238			7,808		6,788		14.0	%		11.5	%		10.5	%

SG&A expense
Salaries & benefits		6,026			4,050		2,897		8.2	%		6.0	%		4.4	%
Other SG&A expense		1,386			1,479		1,339		1.9	%		2.2	%		2.1	%
Purchased services		344			597		432		0.5	%		0.9	%		0.7	%
Depreciation and amortization		3,477			574		575		4.8	%		0.8	%		0.9	%

Total SG&A expense		11,233			6,700		5,243		15.4	%		9.9	%		8.1	%

Operating (loss) income	$	(995	)	$	1,108	$	1,545		-1.4	%		1.6	%		2.4	%

Freight Forwarding

Year Ended December 31, 2013 Compared to Year Ended December 31, 2012

Revenue in our Freight Forwarding segment increased 8.1% to $73.2 million in 2013 from $67.7 million in 2012. The increase was primarily the result of the opening of new freight forwarding locations.

Direct expense consists primarily of payments for purchased transportation and commissions paid to Freight Forwarding’s independently-owned stations. Freight Forwarding’s gross margin dollars increased 31.1% to $10.2 million in 2013 from $7.8 million in 2012. As a percentage of revenue, Freight Forwarding gross margin increased to 14.0% in 2013 as compared to 11.5% in 2012. The increase in gross margin percentage was primarily driven by branch conversions from independent ownership to company ownership.

SG&A expense increased 67.7% to $11.2 million in 2013 from $6.7 million in 2012. As a percentage of revenue, SG&A expense increased to 15.4% in 2013 as compared to 9.9% in 2012. The increase in SG&A expense is mainly due to the accelerated amortization of $3.1 million in indefinite-lived intangible assets related to the CGL trade name based on the reduction in remaining useful life as a result of the name change of the business to XPO Global Logistics during the third quarter of 2013 as well as the investment associated with opening our company-owned branches in Orlando, FL, Montreal, Quebec, and Dallas, TX during the year.

Operating loss was $1.0 million in 2013 compared to income of $1.1 million in 2012. The decrease in operating income was primarily related to the accelerated amortization of the CGL trade name indefinite-lived intangible assets described above offset by an increase in gross margins driven by conversions of independently-owned stations to company-owned branches. Excluding the accelerated amortization of the CGL trade name, operating income increased reflecting a higher gross margin.

Management’s growth strategy for Freight Forwarding is based on:

Plans to open new offices in key U.S. markets, which will consist of both company-owned branches and independently-owned stations;

Growth of international shipments;

Technology upgrades to improve efficiency in sales and carrier procurement;

Selective acquisitions of complementary, non-asset based freight forwarding businesses; and

Cross-selling of freight forwarding services to customers of our other business segments.

Year Ended December 31, 2012 Compared to Year Ended December 31, 2011

Revenue in our Freight Forwarding segment increased 3.9% to $67.7 million in 2012 from $65.1 million in 2011. The increase was the result of higher revenues at our Company-owned branches.

Freight Forwarding’s gross margin dollars increased 15.0% to $7.8 million in 2012 from $6.8 million in 2011. As a percentage of revenue, Freight Forwarding gross margin increased to 11.5% in 2012 as compared to 10.5% in 2011. The increase is due to the increase in revenues at our Company-owned branches, which yield higher margins than our independently-owned stations as commission expense is not incurred as a direct cost for the Company-owned branches.

SG&A expense increased 27.8% to $6.7 million in 2012 from $5.2 million in 2011. As a percentage of revenue, SG&A expense increased to 9.9% in 2012 as compared to 8.1% in 2011. The increase in SG&A expense is mainly due to the investment associated with opening our Company-owned branches in Chicago, IL, Houston, TX, Los Angeles, CA, Minneapolis, MN, Charlotte, NC, and Atlanta, GA.

As of December 31, 2012, Freight Forwarding had 27 locations, consisting of 19 independently-owned stations and eight Company-owned branches. This compares to 25 locations as of ~~June 30.~~

December 31, 2011, consisting of 23 independently-owned stations and two Company-owned branches.

Operating income decreased to $1.1 million in 2012 compared to $1.5 million in 2011. The reduction in operating income was primarily related to the increase in SG&A expense, as described above.

XPO Corporate

Summary of Selling, General and Administrative Expense

For the Year Ended December 31,

(In thousands)


							Percent of Consolidated Revenue
	2013		2012		2011		2013			2012			2011

SG&A expense
Salaries & benefits		21,947		13,445		4,103		3.1	%		4.8	%		2.3	%
Other SG&A expense		5,737		4,425		471		0.8	%		1.6	%		0.3	%
Purchased services		16,353		12,082		4,727		2.3	%		4.3	%		2.7	%
Depreciation and amortization		1,075		391		24		0.2	%		0.1	%		0.0	%

Total SG&A expense	$	45,112	$	30,343	$	9,325		6.4	%		10.8	%		5.3	%

Corporate

Year Ended December 31, 2013 Compared to Year Ended December 31, 2012

Corporate SG&A expense in 2013 increased by $14.8 million compared to 2012. As a percentage of consolidated revenue, Corporate SG&A expense was 6.4% in 2013, compared with 10.8% in 2012 due to improved operating leverage as the Company ~~accounts~~executed its acquisition and organic growth strategies. Salaries and benefits increase was driven by a year-over-year increase in headcount in corporate shared services. Purchased services increased in 2013 due largely to $6.5 million of acquisition-related transaction costs. Corporate SG&A for ~~long-lived assets, including intangibles~~2013 also included $4.9 million of litigation-related legal costs and $4.7 million of non-cash share based compensation.

Year Ended December 31, 2012 Compared to Year Ended December 31, 2011

Corporate SG&A expense in 2012 increased by $21.0 million compared to 2011. As a percentage of consolidated revenue, Corporate SG&A expense was 10.8% in fiscal year 2012, compared with 5.3% in 2011. The increase was driven by a higher headcount in corporate shared services as well as higher purchased services and other SG&A expense. Included in the salaries and benefits increase is additional stock compensation expense of $3.2 million over prior year. Purchased services in 2012 included $2.9 million of acquisition-related transaction costs, $2.5 million of litigation-related legal costs, and $2.0 million for compliance costs. Other operating expense increased primarily due to increased travel costs and costs associated with our acquisitions strategy such as due diligence, accounting services and integration cost as well as facility costs that are ~~amortized,~~due to our increase in ~~accordance~~headcount.

Liquidity and Capital Resources

General

As of December 31, 2013, we had working capital of $72.8 million, including cash of $21.5 million and restricted cash of $2.1 million, compared to working capital of $271.9 million, including cash of $252.3 million, as of December 31, 2012. This decrease of $199.1 million in working capital during the year was mainly due to cash used for the acquisitions of East Coast Air Charter, Covered, Interide, 3PD, Optima and NLM, operations and capital expenditures.

We continually evaluate our liquidity requirements, capital needs and availability of capital resources based on our operating needs and our planned growth initiatives. In addition to our existing cash balances, in certain circumstances we may also use debt financings and issuances of equity or equity-related securities to fund our operating needs and growth initiatives. See discussion below under Common Stock Offering and Debt Facilities regarding our recent common stock offering and multicurrency secured revolving loan credit facility, respectively.

We believe that our existing cash balances and availability under our revolving credit facility will be sufficient for the next twelve months to finance our existing operations and growth initiatives.

Cash Flow

During 2013, $66.3 million was used in cash from operations compared to $24.3 million used for 2012 and $6.6 million generated for 2011. The primary use of cash for the period was payment of transportation services and various SG&A expenses.

Cash generated from revenue equaled $665.3 million for 2013 as compared to $264.8 million for 2012 and $178.7 million for 2011 and correlates directly with ~~US GAAP,~~the revenue increase between the periods. Cash flow increases are related primarily to volume increases between the periods ended December 31, 2013, 2012 and 2011.

Cash used for payment of transportation services for 2013 equaled $585.1 million as compared to $223.0 million for 2012 and $148.3 million for 2011. The increase in cash outflows between the periods also directly correlates to the increase in revenues between the periods ended December 31, 2013, 2012 and 2011.

Other operating uses of cash included SG&A items, which equaled $134.4 million, $67.2 million and $23.4 million for the years ended December 31, 2013, 2012 and 2011, respectively. Payroll represents the most significant SG&A item. For 2013, cash used for payroll equaled $74.9 million as compared to $31.3 million for 2012 and $13.6 million for 2011.

Investing activities used approximately $470.3 million for 2013 compared to a use of $64.2 million and $0.7 million from these activities for 2012 and 2011, respectively. During 2013, $458.8 million was used in acquisitions and $11.6 million was used to purchase fixed assets while $0.1 million was provided by other investing activities. During 2012, $57.2 million was used for acquisitions and $7.0 million was used to purchase fixed assets while during 2011 $0.7 million was used to purchase fixed assets.

Financing activities generated approximately $305.8 million for 2013 compared to $266.8 million and $67.6 million generated for 2012 and 2011, respectively. Our main sources of cash from financing activities during 2013 were the $239.5 million of net proceeds from the issuance of stock and the $73.3 million of net proceeds from borrowing on our revolving credit facility while our primary uses of cash were the dividends paid to preferred stockholders of $3.0 million and $4.1 million related to other financing activities. During 2012, our main sources of cash were $138.5 million of net proceeds from the issuance of convertible senior notes and $137.0 million of net proceeds from the issuance of common stock while our primary use of cash was the dividend paid to preferred stockholders of $3.0 million and $5.7 million related to other financing activities. During 2011, our main source of cash from financing activities was the $71.6 million of net proceeds from the issuance of the Preferred Stock and warrants while our primary uses of cash for 2011 were $0.4 million of dividends paid to preferred stockholders and $3.7 million of other financing activities.

Common Stock Offering

On February 5, 2014, we closed a registered underwritten public offering of 15,000,000 shares of common stock, and on February 11, 2014 we closed as part of the same public offering the sale of an additional 2,250,000 shares as a result of the full exercise of the underwriters’ overallotment option, in each case at a price of $25.00 per share (together, the “February 2014 Offering”). We received $413.3 million in net proceeds from the February 2014 Offering after underwriting discounts and expenses.

Debt Facilities

On October 18, 2013, we and certain of our wholly-owned subsidiaries, as borrowers, entered into a $125.0 million multicurrency secured Credit Agreement with the lender parties thereto and Morgan Stanley Senior Funding, Inc., as administrative agent for such lenders, with a maturity of five years.

thereunder, may be ~~reviewed for impairment whenever events or circumstances indicate~~declared immediately due and payable. Certain subsidiaries acquired by us in the future may be excluded from the restrictions contained in certain of the foregoing covenants. We do not believe that the ~~carrying~~covenants contained in the Credit Agreement will impair our ability to execute our strategy. At December 31, 2013, we had $75.0 million drawn under our Revolving Loan Credit Agreement. We were in compliance, in all material respects, with all covenants related to the Revolving Loan Credit Agreement as of December 31, 2013.

On September 26, 2012, we completed the registered underwritten public offering of 4.50% Convertible Senior Notes due October 1, 2017, in an aggregate principal amount of ~~an asset may not be recoverable. If indicators~~$125.0 million. The Notes were allocated to long-term debt and equity in the amounts of ~~impairment~~$92.8 million and $27.5 million, respectively. These amounts are ~~present, reviews are performed to determine whether the carrying value~~net of ~~an asset to be held~~debt issuance costs of $3.6 million for debt and ~~used is impaired. Such reviews involve a comparison~~$1.1 million for equity. On October 17, 2012, as part of the ~~carrying amount~~underwritten registered public offering on September 26, 2012 of ~~an asset~~the 4.50% convertible senior notes due October 1, 2017, the underwriters exercised the overallotment option to future net undiscounted cash flows expected to be generated by the asset over its remaining useful life. If the comparison indicates that there is impairment, the impaired asset is written down to its fair value. The impairment to be recognized as a non-cash charge to earnings is measured by the amount by which the carryingpurchase $18.8 million additional principal amount of the ~~asset exceeds~~Notes. We received approximately $18.2 million in net proceeds after underwriting discounts, commissions and expenses were paid. The overallotment option was allocated to long-term debt and equity in the amounts of $14.0 million and $4.2 million, respectively. These amounts are net of debt issuance costs of $0.5 million for debt and $0.1 million for equity. Interest is payable on the notes on April 1 and October 1 of each year, beginning on April 1, 2013.

To date, we have entered into transactions pursuant to which we have issued an aggregate of 1,404,887 shares of our common stock to certain holders of the Notes in connection with the conversion of $23.1 million aggregate principal amount of the Notes. These transactions included induced conversions pursuant to which we paid the holder a market-based premium in cash. The negotiated market-based premiums, in addition to the difference between the current fair value and the book value of the ~~asset. Assets~~Notes, will be reflected in interest expense. The number of shares of common stock issued in the foregoing transactions equals the number of shares of common stock presently issuable to holders of the Notes upon conversion under the original terms of the Notes.

Under certain circumstances at the election of the holder, the convertible senior notes may be converted until the close of business on the business day immediately preceding April 1, 2017, into cash, shares of the Company’s common stock, or a combination of cash and shares of common stock, at the Company’s election, at the initial conversion rate of approximately 60.8467 shares of common stock per $1,000 in principal amount, which is equivalent to an initial conversion price of approximately $16.43 per share. In addition, following certain corporate events that occur prior to the maturity date, the Company will increase the conversion rate for a holder who elects to convert its convertible senior notes in connection with such corporate event in certain circumstances. On or after April 1, 2017, until the close of business on the business day immediately preceding the maturity date, holders may convert their convertible senior notes at any time.

The convertible senior notes may be redeemed by the Company on or after October 1, 2015 if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption. The Company may redeem the convertible senior notes in whole but not in part, at a redemption price in cash equal to 100% of the principal amount to be ~~disposed are reported~~redeemed, plus accrued and unpaid interest, but excluding, the redemption date, plus a make-whole premium payment. The “make whole premium” payment or delivery will be made, as the case may be, in cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the ~~lower~~Company’s election, equal to the present values of the ~~carrying amount~~remaining scheduled payments of interest on the convertible senior notes to be redeemed through October 1, 2017 (excluding interest accrued to, but excluding, the redemption date), computed using a discount rate equal to 4.5%. The make-whole premium is paid to holders whether or ~~fair value, less cost~~not they convert the convertible senior notes following the Company’s issuance of a redemption notice.

In conjunction with the acquisition of Kelron on August 3, 2012, the Company assumed Kelron’s credit agreements with Royal Bank of Canada (“RBC”) dated April 21, 2011 and amended May 8, 2012 (the “Agreements”), which provided for a $5.0 million revolving demand facility (the “Revolving Demand Facility”) subject to ~~dispose.~~

~~Use~~certain borrowing limits. The Agreements were terminated on October 18, 2013 in conjunction with the execution of ~~Estimates~~

the Credit Agreement as discussed above.

Contractual Obligations

The following table reflects our contractual obligations as of December 31, 2013 (in thousands):


	Payments Due by Period
Contractual Obligations	Total		Less than 1 Year		1 to 3 Years		3 to 5 Years		More than 5 Years
Capital leases payable	$	196	$	48	$	110	$	38	$	—
Notes payable		2,205		1,981		224		—		—
Operating/real estate leases		43,875		8,988		16,856		10,941		7,089
Purchase commitments		2,344		670		1,674		—		—
Employment contracts		15,211		6,464		8,747		—		—
Revolving credit facility		75,000		—		—		75,000		—
Convertible senior notes		156,229		6,019		12,038		138,172		—

Total contractual cash obligations	$	295,060	$	24,169	$	39,649	$	224,151	$	7,089

The Company’s liability for uncertain tax positions of $0.8 million represents a contractual obligation; however, it is not reasonably possible to predict when the liability may be paid thus it has been excluded from the table above. We do not have any material commitments that have not been disclosed elsewhere.

CRITICAL ACCOUNTING ESTIMATES

We prepare our ~~consolidated financial statements~~audited Consolidated Financial Statements in conformity with ~~US GAAP.~~accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that ~~affect~~impact the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the ~~consolidated financial statements~~audited Consolidated Financial Statements and the reported amounts of revenues and expenses during the ~~periods. Our management reviews these~~reporting period. We review our estimates, including but not limited to: accrued revenue, purchased transportation, recoverability of long-lived assets, ~~recoverability~~accrual of ~~prepaid expenses, valuation of investments,~~acquisition earn-outs, estimated legal accruals, valuation allowances for deferred taxes, ~~legal costs and settlements, acquisition amounts,~~reserve for uncertain tax positions, and allowance for doubtful accounts, on a regular basis and makes adjustments based on historical experiences and existing and expected future conditions. These evaluations are performed and adjustments are made as information is available. ~~Our management~~Management believes that these estimates are reasonable and ~~have been~~has discussed them with the audit committee of our ~~audit committee; however,~~board of directors. However, actual results could differ from these estimates.

~~Concentration of Risk~~

Note 2 to our audited Consolidated Financial ~~instruments that potentially subject us to concentrations of credit risk include cash and account receivables.~~

Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits. The Company hasn’t experienced any losses related to these balances. AllStatements includes a summary of the ~~non-interest bearing cash balances were fully insured at December 31, 2010 due to a temporary federal program~~significant accounting policies and methods used in ~~effect from December 31, 2010 through December 31, 2012. Under~~ the ~~program, there is no limit to the amount~~preparation of insurance for eligible accounts. Beginning 2013, insurance coverage will revert to $250,000 per depositor at each financial institution, and the non-interest bearing cash balances may again exceed federally insured limits. At December 31, 2010, thereour audited Consolidated Financial Statements. There were no ~~amounts held in interest bearing accounts.~~

~~Concentration of credit risk with respect to trade receivables is limited due~~significant changes to our ~~large number of customers and wide range of industries and locations served. As of December 31, 2010, there was one customer that compromised approximately 5%~~critical accounting policies in 2013. The following is a brief discussion of our ~~consolidated accounts receivable balance.~~

~~Express-1 receives a significant portion~~critical accounting policies and estimates.

Revenue Recognition

We recognize revenue at the point in time when delivery is completed, with related costs of ~~its revenue from customers who operate~~delivery being accrued as incurred and expensed within the ~~U.S. domestic automotive industry. Accordingly, our accounts receivable are comprised~~same period in which the associated revenue is recognized. We use the following supporting criteria to determine that revenue has been earned and should be recognized:

Persuasive evidence of an arrangement exists;

Services have been rendered;

The sales price is fixed and determinable; and

Collectability is reasonably assured.

We generally report revenue on a concentration of accounts from within this industry. Although the U.S. automotive industry showed signs of recovery, during 2010, further financial erosion by any of the “Big Three” domestic automotive manufacturers, could have a materially adverse impact on our Company

~~We extend credit to various customers based on an evaluation of the customer’s financial condition and their ability to pay~~gross basis in accordance with ~~our payment terms.~~the Financial Accounting Standards Board’s (“FASB”) Accounting Standard Codification (“ASC”) Topic 605, “Reporting Revenue Gross as Principal Versus Net as an Agent”. We ~~provide~~believe presentation on a gross basis is appropriate under ASC Topic 605 in light of the following factors:

We are the primary obligor and are responsible for ~~estimated losses on accounts receivable considering a number of factors,~~providing the service desired by the customer.

The customer holds us responsible for fulfillment, including the ~~overall aging~~acceptability of ~~account receivables, customers payment history~~the service (requirements may include, for example, on-time delivery, handling freight loss and damage claims, establishing pick-up and delivery times, and tracing shipments in transit).

For Expedited Transportation and Freight Brokerage, we have complete discretion to select our drivers, contractors or other transportation providers (collectively, “service providers”). For Freight Forwarding, we enter into agreements with significant service providers that specify the ~~customer’s current ability~~cost of services, among other things, and has ultimate authority in providing approval for all service providers that can be used by Freight Forwarding’s independently-owned stations. Independently-owned stations may further negotiate the cost of services with Freight Forwarding-approved service providers for individual customer shipments.

Expedited Transportation and Freight Brokerage have complete discretion to ~~pay~~establish sales prices. Independently-owned stations within Freight Forwarding have the discretion to establish sales prices.

We bear credit risk for all receivables. In the case of Freight Forwarding, the independently-owned stations reimburse Freight Forwarding for a portion (typically 70-80%) of credit losses. Freight Forwarding retains the risk that the independent station owners will not meet this obligation.

For a subset of Expedited Transportation, revenue is recognized on a net basis in accordance with ASC Topic 605. The Company does not serve as the primary obligor, receives a fixed management fee for its ~~obligation. Based upon our managements’ review of accounts receivable~~services and ~~other receivables,~~does not assume credit risk for these transactions.

Valuations for Accounts Receivable

Our allowance for doubtful accounts is calculated based upon the aging of ~~approximately $136,000~~our receivables, our historical experience of uncollectible accounts, and ~~$225,000 are considered necessary~~any specific customer collection issues that we have identified. The allowance of $3.5 million as of December 31, ~~2010~~2013 increased compared to the allowance of $0.6 million as of December 31, 2012. We believe that the recorded allowance is sufficient and ~~2009, respectively. Although~~appropriate based on our customer aging trends, the exposures we ~~believe our account receivables are recorded at their net realizable value, a decline in~~have identified and our historical ~~collection rate could have a materially adverse effect~~loss experience.

Stock-Based Compensation

We account for share-based compensation based on ~~our operations~~the equity instrument’s grant date fair value in accordance with ASC Topic 718,“Compensation—Stock Compensation”. The fair value of each share-based payment award is established on the date of grant. For grants of restricted stock segments, including those subject

to service-based vesting conditions and ~~net income. We do not accrue interest~~those subject to service and performance-based vesting conditions, the fair value is established based on ~~past due receivables.~~

~~RESULTS OF OPERATIONS~~

~~For financial reporting purposes, we recognize three reportable segments which represent our 3 unique service modes. Each~~the market price on the date of the ~~following segments utilize~~grant. For grants of options, we use the Black-Scholes option pricing model to estimate the fair value of share-based payment awards. The determination of the fair value of share-based awards is affected by our stock price and a ~~non-asset based business model~~number of assumptions, including expected volatility, expected life, risk-free interest rate and ~~focus on premium transportation markets:~~

·	~~Express-1 offering ground expedite services,~~

·	~~Concert Group Logistics, offering freight forwarding services and~~

·	~~Bounce Logistics offering premium truckload brokerage services.~~

~~Additionally, we report corporate costs separately which primarily relate to costs associated with running a public company.~~

expected dividends.

The ~~operations~~weighted-average fair value of ~~Express-1 Dedicated ceased on February 28, 2009. For comparative purposes all reported financial activity of Express-1 Dedicated has been reflected net of taxes~~each stock option recorded in ~~the financial statements under the line item “Income from discontinued operations”.~~

Our Express-1 unit generates revenue through providing expedited transportation services to its customers. These services are typically time sensitive or require special handling, and therefore; require more resources on and off the road to provide the desired results. Express-1 transports most shipments through the use of its fleet of vehicles, of which approximately 98% are owned and operated by independent contract drivers. In addition, Express-1 will broker freight to certified carriers when owner operators aren’t available to take the run. Within the Express-1 operation, approximately 70% of its revenue was generated through its independent contractor fleet and 30% was generated through brokerage arrangementsexpense for the year ended December 31, ~~2010.~~

~~Throughout~~2013 was estimated on the date of grant using the Black-Scholes option pricing model and is amortized over the requisite service period of the option. We have used one grouping for the assumptions, as our ~~reports, we refer~~option grants have similar characteristics. The expected term of options granted has been derived based upon our history of actual exercise behavior and represents the period of time that options granted are expected to be outstanding. Historical data based on the population of employees and our historical vesting experience was also used to estimate option exercises and forfeiture rates. Estimated volatility is based upon our historical market price at consistent points in a period equal to the ~~impact~~expected life of ~~fuel~~the options. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant and the expected dividend yield is zero.

Income Taxes

Our annual effective tax rate is based on our ~~business. For purposes of these references,~~income, statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we ~~have considered the impact of fuel surcharge revenues,~~operate. Tax laws are complex and ~~the related fuel surcharge expenses only as they relate~~subject to our Express-1 business unit. The expediting transportation industry commonly negotiates both fuel surcharges charged to its customers as well as fuel surcharges paid to its carriers. Therefore, we feel that this approach, most readily conveys the impact of fuel revenues, costs and the resulting gross margin within this business unit. Our fuel surcharges are determined on a negotiated customer by customer basis and are primarily based on a fuel matrix drivendifferent interpretations by the ~~Department of Energy fuel price index. Fuel surcharge revenues are charged to~~taxpayer and respective governmental taxing authorities. Significant judgment is required in determining our ~~customers to provide for variable costs associated with changing fuel prices. These revenues~~tax expense and ~~associated cash flows are substantially paid through to~~in evaluating our ~~independent contractors~~tax positions, including evaluating uncertainties. We review our tax positions quarterly and ~~brokered carriers who are responsible for their own fuel costs. Because fuel surcharge revenues are substantially paid through to independent contractors and brokered carriers,~~adjust the ~~net impact~~balances as new information becomes available. Our income tax rate is affected by the tax rate on our gross margin dollars is not material; however, rising fuel costs and the associated rising fuel surcharge will result in a reduction of the gross margin percentage since these rising revenues don’t result in a material increase in gross margin dollars. Alternatively, falling fuel costs and the associated lower fuel surcharge will have a positive impact on the gross margin percentage as lower revenues will not result in material decrease in gross margin dollars.

Our Concert Group Logistics operation generates revenues by providing logistics services to its customers. These services fall under the broad category of freight forwarding, which include everything from the management of multi-modal shipments to logistics management for members of our customer base. The acquisition of LRG International (currently CGL International) in October 2009 has enabled CGL to offer a more comprehensive international freight forwarding service to its customers in addition to the other domestic CGL stations. CGL International is comprised of two company owned branches located in Tampa and Miami, FL. CGL also operates a network of 24 independently owned domestic freight forwarding stations. Each independent station is operated by a staff of logistics professionals who have specialized knowledge in providing transportation solutions within the geographic regions in which they operate.foreign operations. In addition to ~~domestic freight forwarding services many~~local country tax laws and regulations, this rate depends on the extent earnings are indefinitely reinvested outside the United States. Indefinite reinvestment is determined by management’s judgment about and intentions concerning the future operations of ~~these stations also provide international forwarding services either by themselves or through a revenue sharing arrangement with CGL International.~~the Company. In general, it is our practice and intention to reinvest the earnings of our non-U.S. subsidiaries in those operations. As of December 31, ~~2010, overall domestic revenues at CGL were approximately 52% while international revenues approximated 48%.~~

~~Bounce Logistics generates business volume~~2013, the Company has not made a provision for U.S. or additional foreign withholding taxes for financial reporting over the tax basis of investments in foreign subsidiaries that are essentially permanent in duration, if any exists. Generally, such amounts become subject to U.S. taxation upon the remittance of dividends and ~~resulting revenue~~under certain other circumstances. It is not practicable to estimate the amount of deferred tax liability related to investments in ~~much~~these foreign subsidiaries. Deferred income tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such assets arise because of temporary differences between the ~~same manner~~financial reporting and tax bases of assets and liabilities, as ~~our Express-1 business unit. Bounce accepts loads~~well as from ~~its customers~~net operating loss and ~~engages certified transportation carriers to handle~~tax credit carryforwards. We evaluate the ~~physical movement~~recoverability of these ~~loads as a freight brokerage.~~

~~Fuel prices impact~~future tax deductions and credits by assessing all available evidence, including the reversal of the deferred tax liabilities, carrybacks available and historical and projected pre-tax profits generated by our ~~business revenue, direct costs~~operations. We also considered tax planning strategies that are prudent and resulting margins. In periods when fuel prices are increasing, our revenue increases as do our direct costs. Conversely, during periods where fuel prices are declining, our revenue decreases as does our direct cost. Within our Express-1 business unit, the impact of fuel prices on revenue and fuel costs can be ~~separately identified~~reasonably implemented in our evaluation. These sources of income rely heavily on estimates. The reversal of deferred tax liabilities prior to expiration of the deferred tax assets was the most significant factor in our determination of the valuation allowance under the “more likely than not” criteria. To the extent we do not consider it more likely than not that a deferred tax asset will be recovered, a valuation allowance is established.

Goodwill and Intangible Assets with Indefinite Lives

Goodwill consists of the excess of cost over the fair value of net assets acquired in business combinations. Intangible assets with indefinite lives consist of the Express-1 trade name. We follow the provisions of ASC Topic 350, “Intangibles—Goodwill and Other”, which requires an annual impairment test for goodwill and intangible assets with indefinite lives. We perform the annual impairment testing during the third quarter unless events or circumstances indicate impairment of the goodwill may have occurred before that time. We determine fair values for each of the reporting units using an income approach. For purposes of the income approach, fair value is ~~disclosed within~~determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. We use our internal ~~reports. Within~~forecasts to estimate future cash flows and include an estimate of long-term future growth rates based on our most recent views of the long-term outlook for our business. Actual results may

differ from those assumed in our forecasts. We derive our discount rates using a capital asset pricing model and analyzing public company market data for our industry to estimate the weighted average cost of capital. We use discount rates that are commensurate with the risks and uncertainty inherent in the respective businesses and in our internally developed forecasts. Discount rates used in our reporting unit valuations approximated 11.0%. Required rates of return, along with uncertainty inherent in the forecasts of future cash flows, are reflected in the selection of the discount rate. For the periods presented, we did not recognize any goodwill impairment as the estimated fair value of our reporting units with goodwill exceeded the book value of these reporting units.

Estimating the fair value of reporting units requires the use of estimates and significant judgments that are based on a number of factors including actual operating results. If current conditions persist longer or deteriorate further than expected, it is reasonably possible that the judgments and estimates described above could change in future periods.

The fair value of purchased intangible assets with indefinite lives, the Express-1 trade name, is estimated and compared to its carrying value. We estimate the fair value of these intangible assets based on an income approach using the relief-from-royalty method. This methodology assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to exploit the related benefits of these types of assets. This approach is dependent on a number of factors, including estimates of future growth and trends, royalty rates for this category of intellectual property, discount rates and other variables. We base our fair value estimates on assumptions we believe to be reasonable, but which are unpredictable and inherently uncertain. Actual future results may differ from those estimates. The discount rate used in our analysis approximated 11.0%. We recognize an impairment loss when the estimated fair value of the intangible asset is less than the carrying value. For the periods presented, we did not recognize any impairment of intangible assets with indefinite lives as the estimated fair value of our intangible assets with indefinite lives exceeded the book value; however, during the third quarter of 2013, we rebranded our freight forwarding business to XPO Global Logistics from Concert Group ~~Logistics,~~Logistics. As a result of this action, we accelerated the amortization of $3.1 million in indefinite-lived intangible assets related to the CGL trade name based on the reduction in remaining useful life. The $3.1 million of accelerated amortization represented the full value of the CGL trade name intangible assets.

Identifiable Intangible Assets

We follow the provisions of ASC Topic 360, “Property, Plant and ~~Bounce Logistics business units,~~Equipment”, which establishes accounting standards for the ~~impact~~impairment of ~~fuel prices~~long-lived assets such as property, plant and equipment and intangible assets subject to amortization. We review long-lived assets to be held-and-used for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Fair value is determined based on the present value of estimated future cash flows of the asset, discounted at an appropriate risk-adjusted rate. We use our internal forecasts to estimate future cash flows and include an estimate of long-term future growth rates based on our ~~revenues~~most recent views of the long-term outlook for our business. Actual results may differ from those assumed in our forecasts. We derive our discount rates using a capital asset pricing model and analyzing public company market data for our industry to estimate the weighted average cost of ~~purchased transportation cannot be separately identified. CGL~~capital. We use discount rates that are commensurate with the risks and Bounce predominantly rely upon third parties to provide the physical movement of goods transported for our customers. As is common within the freight forwarding and freight brokerage industries, fuel is not separately negotiated with customers or the third-party transportation companies handling shipments. Rates are “all-inclusive” to include everythinguncertainty associated with the ~~transit~~recovery of the asset. Required rates of return, along with uncertainty inherent in ~~most cases. We believe this treatment is consistent with other transportation companies engaged~~the forecasts of future cash flows, are reflected in ~~businesses similar~~the selection of the discount rate. Determining whether an impairment loss has occurred requires comparing the carrying amount to ~~each~~the sum of ~~our business units.~~

~~Economic Impact~~

~~2010 proved~~undiscounted cash flows expected to be generated by the asset. If the sum of the undiscounted expected future cash flows over the remaining useful life of a ~~strong year for Express-1 Expedited Solutions, Inc. in all three business units. Although~~long-lived asset group is less than its carrying amount, the ~~economy continues~~asset is considered to show some mixed signals, it appears that the overall economy is slowly expanding and that the transportation sector in general is seeing positive signs. In addition to the improving economy, we believe other factors such as: the restocking of inventory after the recession and the shortage of trucks on the road both contributed to increased freight for the transportation companies that survived the recession. We continue to see signs of improvement looking forwardbe impaired. Impairment losses are measured as the ~~general~~amount by which the carrying amount of the asset group exceeds the fair value of the asset. During 2013, 2012 and 2011, there was no impairment of the identified intangible assets.

Our intangible assets subject to amortization consist of customer relationships, non-compete agreements, carrier relationships and other intangibles that are amortized either over the period of economic ~~conditions slowly improve creating more demand for products and~~benefit or on a straight-line basis over the estimated useful lives of the related ~~transportation services.~~

~~Although rising fuel prices naturally cause concern~~intangible asset. The estimated useful lives of the respective intangible assets range from four months to 14 years.

Off-balance Sheet Arrangements

We are not a party to any transactions that would be considered “off-balance sheet arrangements” under Item 303(a)(4) of Regulation S-K.

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussion about our market risk disclosures involves forward-looking statements. Actual results could differ materially from those projected in the ~~transportation industry, our Express-1 operation is somewhat shielded from this issue in that it is customary for expediters~~forward-looking statements. We are exposed to ~~charge a fuel surcharge based on a cost matrix that is adjusted on a weekly basis. As mentioned previously, this fuel surcharge revenue is substantially passed on~~market risk related to ~~our independent contractors to pay for their increased fuel costs.~~

~~Financial Tables~~

Within our discussion and analysis of our financial results, we have included tables which better reflect the results in each of our business units for the periods discussed. We believe these tables allow the readers to better visualize our results in a manner more consistent with management. Readers can quickly determine results within our major reporting classifications, and changes in ~~i) dollars, ii) percentage~~interest rates and iii) the percentage of consolidated revenue for the major captions within our financial reports. The tables are not intended to replace the financial statements, notes thereto or discussion by our management contained within this report. We encourage readers to review those items to gain a better understanding of our financial position and results of operations.

Express-1 Expedited Solutions, Inc.
Comparative Financial Table
For the Twelve Months Ended December 31,

Year to Year Change Percent of Revenue
2010 2009 In Dollars In Percentage 2010 2009
Revenues
Express-1 $ 76,644,000 $ 50,642,000 $ 26,002,000 51.3 % 48.5 % 50.6 %
Concert Group Logistics 65,222,000 41,162,000 24,060,000 58.5 % 41.3 % 41.1 %
Bounce Logistics 19,994,000 10,425,000 9,569,000 91.8 % 12.7 % 10.4 %
Intercompany Eliminations (3,873,000 ) (2,093,000 ) (1,780,000 ) -85.0 % -2.5 % -2.1 %
Total Revenues 157,987,000 100,136,000 57,851,000 57.8 % 100.0 % 100.0 %

Direct Expenses
Express-1 59,226,000 39,874,000 19,352,000 48.5 % 77.3 % 78.7 %
Concert Group Logistics 58,549,000 36,979,000 21,570,000 58.3 % 89.8 % 89.8 %
Bounce Logistics 16,685,000 8,636,000 8,049,000 93.2 % 83.5 % 82.8 %
Intercompany Eliminations (3,873,000 ) (2,093,000 ) (1,780,000 ) -85.0 % 100.0 % 100.0 %
Total Direct Expenses 130,587,000 83,396,000 47,191,000 56.6 % 82.7 % 83.3 %

Gross Margin
Express-1 17,418,000 10,768,000 6,650,000 61.8 % 22.7 % 21.3 %
Concert Group Logistics 6,673,000 4,183,000 2,490,000 59.5 % 10.2 % 10.2 %
Bounce Logistics 3,309,000 1,789,000 1,520,000 85.0 % 16.5 % 17.2 %
Total Gross Margin 27,400,000 16,740,000 10,660,000 63.7 % 17.3 % 16.7 %

Selling, General & Administrative
Express-1 9,812,000 7,322,000 2,490,000 34.0 % 12.8 % 14.5 %
Concert Group Logistics 4,791,000 3,062,000 1,729,000 56.5 % 7.3 % 7.4 %
Bounce Logistics 2,444,000 1,331,000 1,113,000 83.6 % 12.2 % 12.8 %
Corporate 1,907,000 1,854,000 53,000 2.9 % 1.2 % 1.9 %
Total Selling, General & Administrative 18,954,000 13,569,000 5,385,000 39.7 % 12.0 % 13.6 %

Express-1 7,606,000 3,446,000 4,160,000 120.7 % 9.9 % 6.8 %
Concert Group Logistics 1,882,000 1,121,000 761,000 67.9 % 2.9 % 2.7 %
Bounce Logistics 865,000 458,000 407,000 88.9 % 4.3 % 4.4 %
Corporate (1,907,000 ) (1,854,000 ) (53,000 ) -2.9 % -1.2 % -1.9 %
Operating Income from Continuing Operations 8,446,000 3,171,000 5,275,000 166.4 % 5.3 % 3.2 %

Interest Expense 205,000 105,000 100,000 95.2 % 0.1 % 0.1 %
Other Expense 140,000 51,000 89,000 174.5 % 0.1 % 0.1 %
Income from Continuing Opertations Before Tax 8,101,000 3,015,000 5,086,000 168.7 % 5.1 % 3.0 %

Tax Provision 3,213,000 1,325,000 1,888,000 142.5 % 2.0 % 1.3 %
Income from Continuing Operations 4,888,000 1,690,000 3,198,000 189.2 % 3.1 % 1.7 %

Income from Discontinued Operations, Net of Tax - 15,000 (15,000 ) -100.0 % 0.0 % 0.0 %
Net Income $ 4,888,000 $ 1,705,000 $ 3,183,000 186.7 % 3.1 % 1.7 %

Express-1 Expedited Solutions, Inc.
Summary of Selling, General & Administrative Expenses
For the Twelve Months Ended December 31,

Year to Date Year to Year Change
2010 2009 In Dollars In Percentage
Express-1, Inc.
  Salaries & benefits $ 7,061,000 $ 5,062,000 $ 1,999,000 39.5 %
  Purchased services 1,249,000 782,000 467,000 59.7 %
  Depreciation & amortization 494,000 521,000 (27,000 ) -5.2 %
  Other 1,008,000 957,000 51,000 5.3 %
    Total Express-1 SG&A expense 9,812,000 7,322,000 2,490,000 34.0 %

Concert Group Logistics
  Salaries & benefits 2,670,000 1,615,000 1,055,000 65.3 %
  Purchased services 228,000 129,000 99,000 76.7 %
  Depreciation & amortization 629,000 575,000 54,000 9.4 %
  Other 1,264,000 743,000 521,000 70.1 %
    Total CGL SG&A expense 4,791,000 3,062,000 1,729,000 56.5 %

Bounce
  Salaries & benefits 1,761,000 857,000 904,000 105.5 %
  Purchased services 98,000 64,000 34,000 53.1 %
  Depreciation & amortization 31,000 27,000 4,000 14.8 %
  Other 554,000 383,000 171,000 44.6 %
    Total Bounce SG&A expense 2,444,000 1,331,000 1,113,000 83.6 %

Corporate
  Salaries & benefits 547,000 437,000 110,000 25.2 %
  Purchased services 944,000 942,000 2,000 0.2 %
  Depreciation & amortization 19,000 - 19,000 100.0 %
  Other 397,000 475,000 (78,000 ) -16.4 %
    Total Corporate SG&A expense 1,907,000 1,854,000 53,000 2.9 %

Total SG&A expenses
  Total salaries & benefits 12,039,000 7,971,000 4,068,000 51.0 %
  Total purchased services 2,519,000 1,917,000 602,000 31.4 %
  Total depreciation & amortization 1,173,000 1,123,000 50,000 4.5 %
  Total other 3,223,000 2,558,000 665,000 26.0 %
     Total SG&A expenses $ 18,954,000 $ 13,569,000 $ 5,385,000 39.7 %

Express-1 Expedited Solutions, Inc.
Summary of Direct Expenses
For the Twelve Months Ended December 31,

Year to Date Year to Year Change
2010 2009 In Dollars In Percentage
Express-1, Inc.
  Transportation services $ 57,129,000 $ 37,728,000 $ 19,401,000 51.4 %
  Insurance 1,020,000 1,437,000 (417,000 ) -29.0 %
  Other 1,077,000 709,000 368,000 51.9 %
    Total Express-1 direct expense 59,226,000 39,874,000 19,352,000 48.5 %

Concert Group Logistics
  Transportation dervices 47,694,000 28,067,000 19,627,000 69.9 %
  Station commissions 10,724,000 8,798,000 1,926,000 21.9 %
  Insurance 131,000 114,000 17,000 14.9 %
  Other - - - 0.0 %
    Total CGL direct expense 58,549,000 36,979,000 21,570,000 58.3 %

Bounce
  Transportation services 16,675,000 8,582,000 8,093,000 94.3 %
  Insurance 10,000 17,000 (7,000 ) -41.2 %
  Other - 37,000 (37,000 ) -100.0 %
    Total Bounce direct expense 16,685,000 8,636,000 8,049,000 93.2 %

Total Direct expenses
  Transportation services 121,498,000 74,377,000 47,121,000 63.4 %
  Station commissions 10,724,000 8,798,000 1,926,000 21.9 %
  Insurance 1,161,000 1,568,000 (407,000 ) -26.0 %
  Other 1,077,000 746,000 331,000 44.4 %
  Intercompany eliminations (3,873,000 ) (2,093,000 ) (1,780,000 ) 85.0 %
     Total direct expenses $ 130,587,000 $ 83,396,000 $ 47,191,000 56.6 %

~~Consolidated Results~~

The actions taken in 2009 to minimize the negative impact of the economic downturn significantly helped boost the bottom line of Express-1 Expedited Solutions, Inc. for 2010. As the economic downturn subsided, all three operating units were well positioned to experience record breaking growth in 2010. Solid financial improvements were seen across the board and included improvements in: gross revenues, gross margin percentage, selling, general & administrative costs as a percentage to revenue and net income. Our gross margin percentage and SG&A percentage to revenue ratios returned to more historic levels during 2010 as the economy improved. We anticipate these improved ratios to continue in 2011 with slight incremental improvements due primarily to additional revenue growth.

Record revenues were set at all three business units during 2010. Overall consolidated revenues of $158 million represented an increase of 57.8% over fiscal year 2009. LRG International, acquired in October of 2009, contributed $12.1 million of the revenue growth for 2010, with remaining growth being achieved organically.

Our three business units have distinct but complimentary business models yielding different gross margins. In 2010, the consolidated gross margin percentage improved to 17.3% from 16.7% in 2009 as the result of significant margin improvements at Express-1 and an overall improvement in our mix of business.

~~Selling, general and administrative expenses as a percentage of revenue declined steadily throughout the year as revenues increased. SG&A costs which are more fixed in nature, grew at a slower pace.~~

~~Accordingly, net income also showed nice improvement for fiscal 2010 as net income of $4.9 million in 2010 represented a 187% increase over net income of $1.7 million in fiscal 2009.~~

Income from discontinued operations, net of tax totaled $0 in 2010 compared to $15,000 in 2009. Our Express-1 Dedicated business unit was discontinued during the fourth quarter of 2008 due to the loss of its dedicated contract. All operations were ceased effective February 28th, 2009, and all assets have either been sold or transferred to our other operations.

~~Express-1~~

During 2010 Express-1 generated record annual revenue of $76.6 million. Express-1’s 2010 revenue increased 51% when compared to 2009. For the year ended 2010, Express-1’s continued investment in sales diversification has paid off handsomely as it has expanded its presence into other markets. Also, the Company’s investment in its Mexico operations continues to exceed management’s expectations. Mexican operations generated 16% of the Company’s total revenue for the year ended 2010 as compared to 13% during the same period in 2009. This growth has contributed to our overall improvement in diversifying our customer base which historically has been more dependent on the automotive sector. In general, overall pricing remained stable in 2010 as compared to 2009; however, we believe that the improved freight environment will enable the Company to make modest price increases in the near future. Express-1 has historically rebounded quickly from recessions as the expediting industry in general is typically one of the first benefactors of a recovering economy. This proved to be true during 2010 as Express-1 experienced significant quarter over quarter growth as compared to 2009. We are optimistic for 2011 as trucking capacity tightens and the economy continues to improve.

Fuel prices have increased throughout the year resulting in a corresponding increase in fuel surcharge as a percentage of revenue. For the year ended December 31, 2010, fuel surcharge revenues represented 12.3% of our revenue as compared to 9.5% in the same period in 2009. Rising fuel prices tend to have a negative impact on our gross margin percentage since these revenues are substantially passed through to our owner operators and don’t tend to add any additional gross margin dollars to the Company.

Express-1’s direct expenses represent both fleet costs associated with their fleet of vehicles along with brokerage costs related to runs that are brokered to other carriers. Express-1’s gross margin percentage increased to 22.7% for the year ended December 31, 2010 compared to 21.3% for the same period in 2009. The primary factor resulting in the increased margin resulted from a favorable mix of business at Express-1. Variables which impact the mix of business include: the vehicle type utilized and our customer utilization mix. As noted in the Results Of Operation section on page 14 & 15, rises in fuel price negatively affect Express-1’s gross margin percentage, however, we believe that tightening truck capacity will put upward pressure on pricing that will offset any potential margin percentage losses due to fuel increases in 2011.

We are encouraged that as a percentage to total revenue our SG&A costs have dropped for the year ended December 31, 2010 to 12.8% as compared to 14.5% at year end 2009. Overall, selling, general and administrative (SG&A) expenses increased by $2.5 million in the period compared to the same period in 2009. Increased salaries and benefits accounted for $2.0 million of the increase in SG&A at Express-1. Approximately $815,000 of the salary and benefits increases have resulted from the reestablishment of incentive compensation and 401k match. An additional $270,000 of the increase resulted from increases to the Company’s health insurance plan. The remaining $1.1 million of increases are a combination of new employees and raises received by existing employees. The current percentage of 12.8% is consistent with historical trends and we believe this percentage is sustainable throughout 2011.

~~Concert Group Logistics~~

CGL’s year end revenue in 2010 reflected a healthy rebound from 2009. Revenues of $65.2 million compared favorably to revenues of $41.2 million in 2009 representing a 58.5% increase. The purchase of certain assets and liabilities of LRG International (CGL International) in October of 2009, contributed to the revenue increases during 2010 and 2009 of $12.1 million and $1.6 million, respectively.

Direct expenses consist primarily of payments for purchased transportation in addition to payments to CGL’s independent offices that control the overall operation of our customer’s shipments. As a percentage of CGL revenue, direct expenses represented 89.8% for the years ended December 31, 2010 and 2009. Management expected direct expenses to decrease as a percentage of CGL revenue for 2010 because of the acquisition of CGL International with its higher margins, however because of increasing fuel costs, most notably in the fourth quarter, direct expenses as a percentage of revenue stayed unchanged. The result left gross margin at a comparable percentage of 10.2% for the years ended December 31, 2010 and 2009. For 2010, CGL International’s direct expense represented $10.4 million or 21.5% of the total direct expense of CGL.

Selling, general and administrative (SG&A) expenses increased for the year ended 2010, by $1.7 million as compared to the same period in 2009 which related in large part to running CGL International as a Company owned branch. For the years ended December 31, 2010 and 2009, CGL International added approximately $1.3 million and $221,000 to selling, general and administrative expenses, respectively. Increased salaries and benefits were responsible for $1.1 million of the increase in SG&A. $673,000 of this increase related to a full year of CGL International payroll and benefits being absorbed by CGL, the remaining $427,000 resulted from the addition of 6 new employees in addition to incentive and other pay increases for all employees. Other costs have also increased by $521,000, approximately $196,000 of this increase is related to CGL International’s full year of costs while approximately $280,000 is related to bad debt and impairment charges from a former independent station owner, whose contract was terminated. As a percentage of revenue, SG&A costs decreased to 7.3% for the year ending December 31, 2010 compared to 7.4% for the year ended December 31, 2009.

For the year ended December 31, 2010, Concert Group Logistics generated income from operations before tax of $1.9 million representing an increase of 67.9% from fiscal 2009. Approximately $488,000 or 25.7% of CGL’s operating income was generated at CGL International. Management anticipates that CGL International will continue to be a significant source of operating income for CGL.

~~Concert Group Logistics continues to focus on the expansion of its independent office network, and is actively pursuing strategic opportunities.~~foreign currency exchange rates.

Interest Rate Risk. As of December 31, ~~2010~~2013, we held $21.5 million of cash in cash depository and ~~2009,~~money market funds held in depository accounts at ten financial institutions. The primary market risk associated with these investments is liquidity risk. We have exposure to changes in interest rates on our revolving credit facility. The interest rates on our revolving credit facility fluctuate based on LIBOR or a base rate plus an applicable margin. Assuming our $125.0 million revolving credit facility was fully drawn, a hypothetical 100-basis-point change in the ~~Company maintained~~interest rate would increase our annual interest expense by $1.3 million. We do not use derivative financial instruments to manage interest rate risk or to speculate on future changes in interest rates.

Foreign Currency Exchange Risk. As a ~~network~~result of ~~24 independent stations~~our acquisition of the freight brokerage operations of Kelron on August 3, 2012 and ~~2 Company owned branches.~~

~~Bounce Logistics~~

~~Bounce continues~~the acquisition of 3PD on August 15, 2013, our Canadian-based businesses and results of operations are exposed to ~~see significant growth~~movements in the U.S. dollar to Canadian dollar foreign currency exchange rate. A portion of our revenue is denominated in Canadian dollars. If the U.S. dollar strengthens against the Canadian dollar, our revenues reported in U.S. dollars would decline. With regard to operating expense, our primary exposure to foreign currency exchange risk relates to operating expense incurred in Canadian dollars. If the Canadian dollar strengthens, costs reported in U.S. dollars will increase. Movements in the U.S. dollar to Canadian dollar foreign currency exchange rate did not have a material effect on our revenue during 2013. A hypothetical ten percent change in average exchange rates versus the U.S. dollar would not have resulted in a material change to our earnings for 2013.

From time to time, we use foreign currency forward contracts to reduce part of the variability in certain forecasted Canadian dollar denominated cash flows. Generally, these instruments are for maturities of six months or less. We consider several factors when evaluating hedges of our forecasted foreign currency exposures, such as ~~its revenue~~significance of the exposure, offsetting economic exposures and potential costs of hedging. We do not enter into derivative transactions for ~~the year ending~~purposes other than hedging economic exposures. At December 31, ~~2010 increased by 91.8%~~2013, we had no outstanding forward contracts to ~~$20.0 million compared~~reduce the variability in our Canadian dollar denominated revenues and operating expenses.

Convertible Debt Outstanding. The fair market value of our outstanding issue of convertible senior notes is subject to ~~2009 annual revenues of $10.4 million. We believe this is reflective of an improving freight environment~~interest rate and ~~an aggressive growth strategy. We continue to be optimistic about growth potential during fiscal year 2011.~~

For the year ended December 31, 2010, Bounces’ direct transportation expenses increased to 83.5% as a percentage of revenue as compared to 82.8% in the comparable period in 2009. We believe this cost increase reflects a tightening of truck capacity in the marketplace. This decrease in margin has been more than offset by additional business that has generated an additional $1.5 million in gross margin for the year ended December 31, 2010 as compared to the same period in 2009. We continue to have confidence in Bounce’s ability to grow and access truck capacity in 2011.

Selling, general and administrative expenses increased by $1.1 million for the year ended December 31, 2010 compared to the same period in 2009. Increased salaries and benefits were responsible for $904,000 of the increase and resulted from 12 additional employees, increased volumes and the reestablishment of benefits that were eliminated in 2009market price risk due to the ~~recession. Overall, efficiencies~~convertible feature of ~~scale have improved based on revenue growth~~the notes and other factors. Generally the fair market value of fixed interest rate debt will increase as interest rates fall and decrease as interest rates rise. The fair market value of the notes may also increase as the ~~percentage~~market price of ~~S&A costs to revenue has decreased from 12.8% in 2009 to 12.2% in 2010. We anticipate that additional growth in 2011 will continue to reduce Bounce’s SG&A cost percentage to revenue.~~

~~The above items have resulted in Bounce generating operating income~~our stock rises and decrease as the market price of ~~$865,000 in~~our stock falls. Interest rate and market value changes affect the year ended December 31, 2010 compared to $458,000 for the year ended 2009. Management continues to be optimistic regarding the future growth and profitability potential of Bounce moving forward in 2011.

~~Corporate~~

~~Corporate costs for the year ended 2010 increased by $53,000 as compared to the same period in 2009. Increased salaries and benefits were responsible for $110,000~~fair market value of the ~~increase~~convertible senior notes, and ~~resulted from increased volumes~~may affect the prices at which we would be able to repurchase such convertible senior notes were we to do so. These changes do not impact our financial position, cash flows or results of operations. For additional information on the fair value of our outstanding convertible senior notes, see Note 2 to our Consolidated Financial Statements.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Consolidated Financial Statements and the reestablishment of benefits that were eliminated in 2009 due to the recession. As a percentage of revenue, corporate costs decreased from 1.9% at year ended December 31, 2009 to 1.2% in the same period in 2010. We anticipate corporate costs as a percentage of revenue to remain below 2% in 2011.

~~LIQUIDITY AND CAPITAL RESOURCES~~

~~General~~

As of December 31, 2010, we had $12.3 million of working capital with associated cash of $561,000 compared with working capital of $970,000 and cash of $495,000 as of December 31, 2009. This represents an increase of $11.3 million or 1168% in working capital during the twelve-month period. The Company renewed its credit facility with PNC Bank on March 31, 2010. The renewalsupplementary data of the ~~Company’s credit facility had a positive impact of approximately $4.9 million on its working capital~~Company required by converting the classification of both its term debt and line of credit to long term obligations based on the terms of the new agreement. The Company also had an increase of its account receivable of $6.7 million during the twelve-month period ended December 31, 2010. The Company doesn’t have any material commitments that haven’t been disclosed elsewhere.

~~Cash Flow~~

During the year ended December 31, 2010, $1.8 million was generated in cash from operations compared to the use of $99,000 for the prior year. The primary differences in operating cash flows between 2010 and 2009 related to a lower net income in 2009 in conjunction with a slowdown of customer payments during 2009; both related to the poor transportation environment in 2009.

~~The primary source of cash for the twelve month period was our trucking revenue while the primary use of cash for the same period was payment for transportation services.~~

Cash generated from revenue equaled $151.4 million for the year ended December 31, 2010 as compared to $94.7 million for the same period in 2009 and correlates directly with revenue increases between the two years. Cash inflows have lagged overall recognized revenue because of an increase in accounts receivable of $6.7 million also relating to the revenue growth in 2010. Our average days outstanding in accounts receivable have decreased by 8 days between the 12-month periods ended December 31, 2010 and December 31, 2009, respectively.

Cash used for payment of transportation services for the year ended December 31, 2010 equaled $128.2 million as compared to $81.4 million for the same period in 2009. The increase in cash outflows between the two years also directly correlates to the increase in business between the two years. Days outstanding in accounts payable and accrued expenses decreased by 12 days between 2010 and 2009 due in large part to the timing of cash disbursementsthis Item are included at ~~year end.~~

Other operating uses of cash included Selling, General and Administrative items which equaled $18.2 million and $13.6 million for fiscal, 2010 and 2009, respectively. Major items included under this heading include payroll and purchased services. For the year ended December 31, 2010, cash outlays lagged behind incurred expenses due to increased accounts payable of $2.0 million related to increased business volumes in addition to $800,000 of increased payroll incentive items being accrued during the year which will be paid in future periods. Additionally, we used $3.5 million during the 12-month period ended December 31, 2010 to satisfy projected tax liabilities compared to $396,000 during the same period in 2009.

Investing activities used approximately $809,000 during the year ended December 31, 2010 compared to our use of $3.5 million on these activities during the prior year. During this period, cash was used to purchase $811,000 in fixed assets. During the same period in 2009 the company used $3.5 million to fund investment activities relating to: 1) satisfying final earn-out payments of $1.1 million to the former owners of Concert Group Logistics, LLC (CGL) and, 2) purchasing $250,000 in net assets related to the purchase of First Class Expediting Service, LLC in January of 2009.

Financing activities used approximately $882,000 for the year ended December 31, 2010 compared to providing $3.0 million in 2009. Sources for cash for financing activities included $5.0 million of proceeds from term debt related to a new debt facility signed in March 2010 in addition to $564,000 in proceeds associated with the exercise of stock options during the period. Uses of cash for financing activities included payments on term debt of $2.7 million and net payments on the line of credit of $3.8 million. During the same period in 2009, financing activities generated approximately $3.0 million, which were derived primarily from net draws on the Company’s line of credit. Additionally, $1.3 million in payments on the Company’s term debt was made during the period. Moving forward into 2011, the Company expects to generate sufficient cash from operations to be used to pay down additional amounts on its line of credit.

~~Line of Credit and Term Note~~

To ensure adequate near-term liquidity, we renewed our credit facility with PNC Bank, on March 31, 2010. This $15.0 million facility provides for a receivables based line of credit of up to $10.0 million and a term loan of $5.0 million. The Company may draw upon the receivables based line of credit the lesser of $10.0 million or 80% of eligible accounts receivable, less amounts outstanding under letters of credit and 50% of the term loan balance. The proceeds of the line of credit will be used exclusively for working capital purposes. The proceeds of the term loan were used to:

·	~~Pay off the $1.1million balance of the previous term loan which was entered into on January 31, 2008,~~

·	~~Refinance $2.0 million utilized to acquire the assets of LRG International, in October of 2009; and~~

·	~~Reduce the balance on the previous line of credit initially established on January 31, 2008 by $1.9 million.~~

Substantially all the assets of our Company and wholly owned subsidiaries (Express-1, Inc., Concert Group Logistics, Inc., Bounce Logistics, Inc., and CGL International, Inc.) are pledged as collateral securing our performance under the credit facilities. The credit facility bears interest based upon LIBOR with an additional increment of 200 basis points for the line of credit and 225 basis points for the term loan. The term loan is payable over a thirty-six month period and requires monthly principal payments of $139,000 plus accrued interest.

The credit facilities carry certain covenants related to our Company’s financial performance. Included among the covenants are a fixed charge coverage ratio and a total funded debt to earnings before interest, taxes, depreciation and amortization ratio. As of December 31, 2010, the Company was in compliance with all terms under the credit facility and no events of default existed under the termspages 59-89 of this ~~agreement.~~

We had outstanding standby letters of credit at December 31, 2010 of $410,000 related to insurance policies either continuing in force or recently canceled. Amounts outstanding for letters of credit reduce the amount available under our line of credit, dollar-for-dollar.

~~Available capacity in excess of outstanding borrowings under the line was approximately $6.8 million as limited~~Annual Report on Form 10-K and are incorporated herein by 80% of eligible accounts receivable less amounts outstanding under letters of credit and 50% of the term loan balance as of December 31, 2010. The credit facility carries a maturity date of March 31, 2012. As of December 31, 2010 the line of credit balance was $2.7 million.

~~Stock Options~~

The following schedule represents those options that the Company has outstanding as of December 31, 2010. The schedule also segregates the options by expiration date and exercise price to better identify their potential for exercise. Additionally, the total approximate potential proceeds by year have been identified.

~~During 2010, 301,000 options expired unexercised.~~

Total Approximate
Exercise pricing Outstanding Potential
.50-.75 .76-1.00 1.01-1.25 1.26-1.50 1.51> Options Proceeds
Option Expiration Dates
2014 50,000 500,000 550,000 769,000
2015 500,000 200,000 700,000 603,000
2016 50,000 125,000 100,000 275,000 314,000
2017 50,000 320,000 370,000 514,000
2018 287,500 100,000 387,500 382,000
2019 25,000 75,000 25,000 125,000 111,000
2020 75,000 235,000 287,500 597,500 839,000
Total Options 525,000 462,500 575,000 1,155,000 287,500 3,005,000 $ 3,532,000

reference.

~~NEW ACCOUNTING PRONOUNCEMENTS~~

~~Pronouncements issued in the current year have no material effect on the presentation of Express-1 Expedited Solutions, Inc. consolidated financial statement.~~

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.

CONTROLS AND PROCEDURES

~~ITEM 7A.~~ ~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

~~Not Applicable.~~

~~ITEM 9.~~ ~~CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE~~

~~None~~

~~ITEM 9A.~~ ~~CONTROLS AND PROCEDURES~~

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

We carried out an evaluation, as required by paragraph (b) of Rule 13a-15 and 15d-15 of the Exchange Act under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules13a-15(e) and 15d-15(e) under the Exchange Act, as of December 31, ~~2010.~~2013. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, ~~2010.~~

2013.

Management’s Annual Report on Internal Control over Financial ~~Reporting.~~

Reporting

We are responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and Rule 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal ~~accounting and~~ financial officer), and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our directors; and

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Our internal control system was designed to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of our published financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of ~~the Company’s~~our internal control over financial reporting as of December 31, ~~2010.~~2013. In making this assessment, management used the criteria set forth in the Internal ~~Control —~~ Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on management’s assessment, we believe that, as of December 31, ~~2010,~~2013, our internal control over financial reporting is effective.

C~~hange in Internal Controls~~

~~During~~

We acquired the ~~quarter ended December 31, 2010, there were no changes in~~assets of East Coast Air Charter, Covered Logistics and Interide Logistics and the capital stock of 3PD, Optima Service Solutions and National Logistics Management (NLM) during 2013. Due to the proximity of certain acquisitions to year-end, we excluded from our assessment of the effectiveness of our internal control over financial reporting as of December 31, 2013, 3PD’s, Optima’s and NLM’s internal control over financial reporting associated with

total assets of $554,754,147 and total revenues of $140,001,400 included in the Consolidated Financial Statements of XPO Logistics, Inc. and subsidiaries as of and for the year ended December 31, 2013. For additional information on East Coast Air Charter, Covered Logistics, Interide Logistics, 3PD, Optima Service Solutions and NLM acquisitions, see Note 3 to our audited Consolidated Financial Statements.

KPMG LLP, the independent registered public accounting firm that audited the consolidated financial statements included in this Form 10-K, has issued a report on our internal control over financial reporting as of December 31, 2013. Such report is included on page 57 of this Form 10-K.

Changes in Internal Control Over Financial Reporting

Except as described below, there have not been any changes in the Company’s internal control over financial reporting during the quarter ended December 31, 2013 that have materially affected, or are reasonably likely to materially affect, ~~our~~its internal control over financial reporting.

~~ITEM 9B.~~ ~~OTHER INFORMATION~~

On November 13, 2013 and December 28, 2013, the Company completed its acquisitions of Optima and NLM, respectively, and is in the process of integrating the acquired businesses into the Company’s overall internal controls over financial reporting process. For additional information on the acquisitions of Optima and NLM, see Note 3 to Consolidated Financial Statements.

ITEM 9B.

OTHER INFORMATION

Not ~~Applicable~~

applicable.

PART III

~~ITEM 10.~~ ~~DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE~~

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by ~~this item, other~~Item 10 of Part III of Form 10-K (other than ascertain information required by Item 401 of Regulation S-K with respect to our executive officers, which is set forth ~~below, is incorporated by reference from the information~~ under ~~the captions “Executive Officers and Directors” and “Family Relationships” contained~~Item 1 of Part I of this Annual Report on Form 10-K) will be set forth in ~~the Company’s~~our Proxy Statement relating to ~~be filed with~~ the ~~Securities and Exchange Commission in connection with the solicitation of proxies for the Company’s 2011~~2014 Annual Meeting of Stockholders ~~(the “Proxy Statement”).~~

Item 405 of Regulation S-K calls for disclosure of any known late filing or failure by an insider to file a report required by Section 16(a) of the Exchange Act. This information is contained in the section titled “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement and is incorporated herein by reference.

~~The Company has a separately designated standing~~ ~~Audit Committee~~ established in accordance with Section 3(a) (58) (A) of the Securities Exchange Act of 1934. The members of the Audit Committee are Jennifer H. Dorris (Chairperson), John Affleck-Graves, and Jay Taylor. All of such members qualify as an “independent director” under applicable NYSE AMEX Equity Exchange standards and meet the standards established by The NYSE AMEX Equity Exchange for serving on an audit committee. The Company’s Board of Directors has determined that Ms. Dorris qualifies as an “audit committee financial expert” under the definition outlined by the Securities and Exchange Commission.

~~The Company has~~

We have adopted a ~~Code of Business Conduct and Ethics~~ ~~for all of its directors, officers and employees. The Company’s~~Senior Officer Code of Business Conduct and Ethics (the “Code”), which is applicable to our principal executive officer, principal financial officer, principal accounting officer and other senior officers. The Code is available on ~~the Company’s~~our website at ~~www.express-1.com.~~ ~~To date, there have been no waivers under~~www.xpologistics.com. In the ~~Company’s~~event that we amend or waive any of the provisions of the Code that relate to any element of ~~Business Conduct and Ethics. The Company will~~the code of ethics definition enumerated in Item 406(b) of Regulation S-K, we intend to disclose ~~future amendments to its Code of Business Conduct and Ethics and will post any waivers, if and when granted, under its Code of Business Conduct and Ethics~~the same on ~~the Company’s website at~~ ~~www.express-1.com~~.

~~ITEM 11.~~ ~~EXECUTIVE COMPENSATION~~

our website.

ITEM 11.

EXECUTIVE COMPENSATION

The information required by ~~this item~~Item 11 of Part III of Form 10-K will be set forth in our Proxy Statement relating to the 2014 Annual Meeting of Stockholders and is incorporated herein by ~~reference from~~reference.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by Item 12 of Part III of Form 10-K (other than certain information required by Item 201(d) of Regulation S-K with respect to equity compensation plans, which is set forth below) will be set forth in our Proxy Statement relating to the ~~information under the captions “Compensation~~2014 Annual Meeting of ~~Directors,”~~Stockholders and ~~“Executive Compensation” contained in the Proxy Statement.~~

~~ITEM 12.~~ ~~SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS~~

~~(a)~~ is incorporated herein by reference.

Equity Compensation Plan

The following table sets forth information, as of December 31, ~~2010,~~2013, with respect to the Company’s compensation plans under which equity securities are authorized for issuance.

Number of Securities
Remaining Available for
Number of Securities Weighted-Average Future Issuance under
to be Issued Upon Exercise Price of Equity Compensation
Exercise of Outstanding Plan (Excluding
Outstanding Options, Options, Warrants Securities Reflected in
Plan Category Warrants and Rights and Rights Column)
Equity compensation plan approved by security holders 3,005,000 $1.18 2,123,000


	Equity Compensation Plan Information
Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)

Equity compensation plans approved by security holders (1)		1,371,520	$	10.91		2,456,692

Equity compensation plans not approved by security holders (2)		50,000		14.09		—


Total		1,421,520	$	11.02		2,456,692

· (1)

~~Additionally, the Company has in place an ESOP plan in which 255,000 shares of the Company’s~~These securities include 1,371,520 stock ~~are held on behalf of qualifying participants.~~ options.

~~(b)~~ ~~Security Ownership~~

(2)	These securities were granted to our Chief Financial Officer in February 2012 outside the security holder-approved plan as an employment inducement grant. These securities include 50,000 stock options.

Additionally, the Company has in place an employee stock ownership plan in which 31,234 shares of the Company’s common stock are held on behalf of qualifying employees. The ~~information contained under the heading “Security Ownership of Certain Beneficial Owners and Management”~~Company is in the ~~Proxy Statement is incorporated in this Form 10-K by reference.~~

~~ITEM 13.~~ ~~CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE~~

process of terminating and liquidating the employee stock ownership plan, effective as of December 31, 2012.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by ~~this~~ Item 13 of Part III of Form 10-K will be set forth in our Proxy Statement relating to the 2014 Annual Meeting of Stockholders and is incorporated herein by ~~reference to the sections of our Definitive Proxy Statement under the heading “Related Party Transactions” and “Director Independence.”~~

~~ITEM 14.~~ ~~PRINCIPAL ACCOUNTANT FEES AND SERVICES~~

reference.

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by Item 14 of Part III of Form 10-K will be set forth in our Proxy Statement relating to the 2014 Annual Meeting of Stockholders and is incorporated herein by reference.

PART IV

Item 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Financial Statements and Financial Statement Schedules

The list of Consolidated Financial Statements set forth in the accompanying Index to Consolidated Financial Statements is incorporated herein by reference. Such Consolidated Financial Statements are filed as part of this ~~Item~~Annual Report on Form 10-K. All financial statement schedules are omitted because the required information is not applicable, or because the information required is included in the Consolidated Financial Statements and notes thereto.

Exhibits

The exhibits listed on the accompanying Exhibit Index on page 90 of this Annual Report on Form 10-K are filed or incorporated by reference as part of this Annual Report on Form 10-K and such Exhibit Index is incorporated herein by reference.

Certain of the agreements listed as exhibits to this Annual Report on Form 10-K (including the exhibits to such agreements), which have been filed to provide investors with information regarding their terms, contain various representations, warranties and covenants of XPO Logistics, Inc. and the other parties thereto. They are not intended to provide factual information about any of the parties thereto or any subsidiaries of the parties thereto. The assertions embodied in those representations, warranties and covenants were made for purposes of each of the agreements, solely for the benefit of the parties thereto. In addition, certain representations and warranties were made as of a specific date, may be subject to a contractual standard of materiality different from what a security holder might view as material, or may have been made for purposes of allocating contractual risk among the parties rather than establishing matters as facts. Investors should not view the representations, warranties, and covenants in the agreements (or any description thereof) as disclosures with respect to the ~~sections~~actual state of ~~our Definitive Proxy Statement under~~facts concerning the ~~heading “Principal Accountant Fees~~business, operations, or condition of any of the parties to the agreements (or their subsidiaries) and ~~Services.”~~

~~PART IV~~

~~ITEM 15.~~ ~~EXHIBITS AND FINANCIAL STATEMENT SCHEDULES~~

~~The Financial Statements required~~should not rely on them as such. In addition, information in any such representations, warranties or covenants may change after the dates covered by ~~this Item are included at~~such provisions, which subsequent information may or may not be fully reflected in the ~~end~~public disclosures of the parties. In any event, investors should read the agreements together with the other information concerning XPO Logistics, Inc. contained in reports and statements that we file with the Commission.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report ~~beginning~~to be signed on ~~Page F-1 as follows:~~

its behalf by the undersigned, thereunto duly authorized.

February 25, 2014


XPO LOGISTICS, INC.

By:		/s/ Bradley S. Jacobs
		~~Reports~~Bradley S. Jacobs
		(Chairman of the Board of Directors and Chief Executive Officer)

By:		/s/ John J. Hardig
		John J. Hardig
		(Chief Financial Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities on the dates indicated.


Signature	Title	Date

/s/ Bradley S. Jacobs Bradley S. Jacobs	Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer)	February 25, 2014

/s/ John J. Hardig John J. Hardig	Chief Financial Officer (Principal Financial Officer)	February 25, 2014

/s/ Kent R. Renner Kent R. Renner	Senior Vice President—Chief Accounting Officer (Principal Accounting Officer)	February 25, 2014

/s/ G. Chris Andersen G. Chris Andersen	Director	February 25, 2014

/s/ Michael G. Jesselson Michael G. Jesselson	Director	February 25, 2014

/s/ Adrian P. Kingshott Adrian P. Kingshott	Director	February 25, 2014

/s/ James J. Martell James J. Martell	Director	February 25, 2014

/s/ Jason D. Papastavrou Jason D. Papastavrou	Director	February 25, 2014

/s/ Oren G. Shaffer Oren G. Shaffer	Director	February 25, 2014

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


		Page No.
Report of Independent Registered Public Accounting ~~Firms~~Firm	~~F-1~~		57

Consolidated Balance Sheets As of December 31, ~~2010and 2009~~2013 and 2012	~~F-2~~		59

Consolidated Statements of Operations For ~~The~~the Years Ended December 31, ~~2010~~2013, 2012 and ~~2009~~2011	~~F-3~~		60

Consolidated Statements of Cash Flows For the Years Ended December 31, 2013, 2012 and 2011			61

Consolidated Statements of Stockholders’ Equity For ~~The~~the Years Ended December 31, ~~2010~~2013, 2012 and ~~2009~~2011	~~F-4~~		62
~~Consolidated Statements of Cash Flows For The Years Ended December 31, 2010 and 2009~~	~~F-5~~
Notes to Consolidated Financial Statements	~~F-6~~		63

¨
	~~For the Fiscal Year Ended December 31, 2010~~

OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Title of Each Class:		Name of Each Exchange on Which Registered:
Common Stock, par value $.001 per share	~~NYSE AMEX Equities~~	New York Stock Exchange

~~Business Unit~~	~~Primary Office Location~~	~~Premium Industry Niche~~	~~Initial Date(1)~~
~~Express-1~~	~~Buchanan, Michigan~~	~~Expedited Transportation~~	~~August-04~~
~~Concert Group Logistics~~	~~Downers Grove, Illinois~~	~~Freight Forwarding~~	~~January-08~~
~~Bounce Logistics~~	~~South Bend, Indiana~~	~~Premium Truckload Brokerage~~	~~March-08~~

Express-1 Expedited Solutions, Inc.
Consolidated Balance Sheets

	December 31,			December 31,
	2010			2009
Assets
Current assets:
Cash	$	561,000		$	495,000
Accounts receivable, net of allowances of $136,000 and $225,000, respectively		24,272,000			17,569,000
Prepaid expenses		257,000			158,000
Deferred tax asset, current		314,000			353,000
Income tax receivable		1,348,000			-
Other current assets		813,000			459,000
Total current assets		27,565,000			19,034,000

Property and equipment, net of $3,290,000 and $2,651,000 in accumulated depreciation, respectively		2,960,000			2,797,000
Goodwill		16,959,000			16,959,000
Identified intangible assets, net of $2,827,000 and $2,198,000 in accumulated amortization, respectively		8,546,000			9,175,000
Loans and advances		126,000			30,000
Other long-term assets		516,000			1,044,000
Total long-term assets		29,107,000			30,005,000
Total assets	$	56,672,000		$	49,039,000

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	8,756,000		$	6,769,000
Accrued salaries and wages		1,165,000			310,000
Accrued expenses, other		2,877,000			2,272,000
Line of credit		-			6,530,000
Current maturities of long-term debt		1,680,000			1,215,000
Other current liabilities		773,000			968,000
Total current liabilities		15,251,000			18,064,000

Line of credit		2,749,000			-
Notes payable and capital leases, net of current maturities		2,083,000			213,000
Deferred tax liability, long-term		2,032,000			1,156,000
Other long-term liabilities		544,000			1,202,000
Total long-term liabilities		7,408,000			2,571,000

Stockholders’ equity:
Preferred stock, $.001 par value; 10,000,000 shares, no shares issued or outstanding		-			-
Common stock, $.001 par value; 100,000,000 shares authorized; 32,687,522 and 32,215,218 shares issued, respectively; and 32,507,522 and 32,035,218 shares outstanding, respectively		33,000			32,000
Additional paid-in capital		27,208,000			26,488,000
Treasury stock, at cost, 180,000 shares held		(107,000	)		(107,000	)
Accumulated earnings		6,879,000			1,991,000
Total stockholders’ equity		34,013,000			28,404,000
Total liabilities and stockholders' equity	$	56,672,000		$	49,039,000

		~~Page No.~~

~~PART I~~
Page No.
~~Item 1~~	~~Business~~	4PART I
~~Item 1B~~	~~Unresolved Staff Comments~~		10
Item 21	~~Properties~~	10 Business
~~Item 3~~	~~Legal Proceedings~~	10
~~Item 4~~	~~(Removed and Reserved)~~	11
		2
~~PART II~~


Item 1A		Risk Factors		12

Item 1B		Unresolved Staff Comments		26

Item 2		Properties		26

Item 3		Legal Proceedings		26

Item 4		Mine Safety Disclosures		27

		PART II

Item 5		Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	11	28

Item 6		Selected Financial Data	11	30

Item 7		Management’s Discussion and Analysis of Financial Condition and Results of Operations	11	30

Item 7A		Quantitative and Qualitative ~~Disclosure~~Disclosures About Market Risk	23	49

Item 8		Financial Statements and Supplementary Data	~~F-1~~	49

Item 9		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	23
~~Item 9A~~	~~Controls and Procedures~~	23
~~Item 9B~~	~~Other Information~~	24
		50
~~PART III~~


Item 9A		Controls and Procedures		50

Item 9B		Other Information		51

		PART III

Item 10		Directors, Executive Officers and Corporate Governance	24	52
~~Item 11~~	~~Executive Compensation~~		24
Item 11		Executive Compensation		52

Item 12		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	24	52

Item 13		Certain Relationships and Related Transactions, and Director Independence	25	53

Item 14		Principal Accounting Fees and Services	25
		53
~~PART IV~~


		PART IV

Item 15		Exhibits, ~~and~~ Financial Statement Schedules	25	54

Signatures				55

Express-1 Expedited Solutions, Inc.
Segment Financial Data

	Year	Revenues		Operating Income		Total Assets
Continuing Operations
Express-1	2010	$	76,644,000	$	7,606,000	$	24,509,000
	2009		50,642,000		3,446,000		23,381,000

Concert Group Logistics	2010		65,222,000		1,882,000		25,106,000
	2009		41,162,000		1,121,000		23,509,000

Bounce Logistics	2010		19,994,000		865,000		4,836,000
	2009		10,425,000		458,000		2,150,000
Discontinued Operations
Express-1 Dedicated	2010		-		-		-
	2009	$	666,000	$	28,000	$	-

Express-1 Expedited Solutions, Inc.
Comparative Financial Table
For the Twelve Months Ended December 31,

							Year to Year Change						Percent of Revenue
	2010			2009			In Dollars			In Percentage			2010			2009
Revenues
Express-1	$	76,644,000		$	50,642,000		$	26,002,000			51.3	%		48.5	%		50.6	%
Concert Group Logistics		65,222,000			41,162,000			24,060,000			58.5	%		41.3	%		41.1	%
Bounce Logistics		19,994,000			10,425,000			9,569,000			91.8	%		12.7	%		10.4	%
Intercompany Eliminations		(3,873,000	)		(2,093,000	)		(1,780,000	)		-85.0	%		-2.5	%		-2.1	%
Total Revenues		157,987,000			100,136,000			57,851,000			57.8	%		100.0	%		100.0	%

Direct Expenses
Express-1		59,226,000			39,874,000			19,352,000			48.5	%		77.3	%		78.7	%
Concert Group Logistics		58,549,000			36,979,000			21,570,000			58.3	%		89.8	%		89.8	%
Bounce Logistics		16,685,000			8,636,000			8,049,000			93.2	%		83.5	%		82.8	%
Intercompany Eliminations		(3,873,000	)		(2,093,000	)		(1,780,000	)		-85.0	%		100.0	%		100.0	%
Total Direct Expenses		130,587,000			83,396,000			47,191,000			56.6	%		82.7	%		83.3	%

Gross Margin
Express-1		17,418,000			10,768,000			6,650,000			61.8	%		22.7	%		21.3	%
Concert Group Logistics		6,673,000			4,183,000			2,490,000			59.5	%		10.2	%		10.2	%
Bounce Logistics		3,309,000			1,789,000			1,520,000			85.0	%		16.5	%		17.2	%
Total Gross Margin		27,400,000			16,740,000			10,660,000			63.7	%		17.3	%		16.7	%

Selling, General & Administrative
Express-1		9,812,000			7,322,000			2,490,000			34.0	%		12.8	%		14.5	%
Concert Group Logistics		4,791,000			3,062,000			1,729,000			56.5	%		7.3	%		7.4	%
Bounce Logistics		2,444,000			1,331,000			1,113,000			83.6	%		12.2	%		12.8	%
Corporate		1,907,000			1,854,000			53,000			2.9	%		1.2	%		1.9	%
Total Selling, General & Administrative		18,954,000			13,569,000			5,385,000			39.7	%		12.0	%		13.6	%

Express-1		7,606,000			3,446,000			4,160,000			120.7	%		9.9	%		6.8	%
Concert Group Logistics		1,882,000			1,121,000			761,000			67.9	%		2.9	%		2.7	%
Bounce Logistics		865,000			458,000			407,000			88.9	%		4.3	%		4.4	%
Corporate		(1,907,000	)		(1,854,000	)		(53,000	)		-2.9	%		-1.2	%		-1.9	%
Operating Income from Continuing Operations		8,446,000			3,171,000			5,275,000			166.4	%		5.3	%		3.2	%

Interest Expense		205,000			105,000			100,000			95.2	%		0.1	%		0.1	%
Other Expense		140,000			51,000			89,000			174.5	%		0.1	%		0.1	%
Income from Continuing Opertations Before Tax		8,101,000			3,015,000			5,086,000			168.7	%		5.1	%		3.0	%

Tax Provision		3,213,000			1,325,000			1,888,000			142.5	%		2.0	%		1.3	%
Income from Continuing Operations		4,888,000			1,690,000			3,198,000			189.2	%		3.1	%		1.7	%

Income from Discontinued Operations, Net of Tax		-			15,000			(15,000	)		-100.0	%		0.0	%		0.0	%
Net Income	$	4,888,000		$	1,705,000		$	3,183,000			186.7	%		3.1	%		1.7	%

Express-1 Expedited Solutions, Inc.
Summary of Selling, General & Administrative Expenses
For the Twelve Months Ended December 31,


	Year to Date				Year to Year Change
	2010		2009		In Dollars			In Percentage
Express-1, Inc.
Salaries & benefits	$	7,061,000	$	5,062,000	$	1,999,000			39.5	%
Purchased services		1,249,000		782,000		467,000			59.7	%
Depreciation & amortization		494,000		521,000		(27,000	)		-5.2	%
Other		1,008,000		957,000		51,000			5.3	%
Total Express-1 SG&A expense		9,812,000		7,322,000		2,490,000			34.0	%

Concert Group Logistics
Salaries & benefits		2,670,000		1,615,000		1,055,000			65.3	%
Purchased services		228,000		129,000		99,000			76.7	%
Depreciation & amortization		629,000		575,000		54,000			9.4	%
Other		1,264,000		743,000		521,000			70.1	%
Total CGL SG&A expense		4,791,000		3,062,000		1,729,000			56.5	%

Bounce
Salaries & benefits		1,761,000		857,000		904,000			105.5	%
Purchased services		98,000		64,000		34,000			53.1	%
Depreciation & amortization		31,000		27,000		4,000			14.8	%
Other		554,000		383,000		171,000			44.6	%
Total Bounce SG&A expense		2,444,000		1,331,000		1,113,000			83.6	%

Corporate
Salaries & benefits		547,000		437,000		110,000			25.2	%
Purchased services		944,000		942,000		2,000			0.2	%
Depreciation & amortization		19,000		-		19,000			100.0	%
Other		397,000		475,000		(78,000	)		-16.4	%
Total Corporate SG&A expense		1,907,000		1,854,000		53,000			2.9	%

Total SG&A expenses
Total salaries & benefits		12,039,000		7,971,000		4,068,000			51.0	%
Total purchased services		2,519,000		1,917,000		602,000			31.4	%
Total depreciation & amortization		1,173,000		1,123,000		50,000			4.5	%
Total other		3,223,000		2,558,000		665,000			26.0	%
Total SG&A expenses	$	18,954,000	$	13,569,000	$	5,385,000			39.7	%

Express-1 Expedited Solutions, Inc.
Summary of Direct Expenses
For the Twelve Months Ended December 31,


	Year to Date						Year to Year Change
	2010			2009			In Dollars			In Percentage
Express-1, Inc.
Transportation services	$	57,129,000		$	37,728,000		$	19,401,000			51.4	%
Insurance		1,020,000			1,437,000			(417,000	)		-29.0	%
Other		1,077,000			709,000			368,000			51.9	%
Total Express-1 direct expense		59,226,000			39,874,000			19,352,000			48.5	%

Concert Group Logistics
Transportation dervices		47,694,000			28,067,000			19,627,000			69.9	%
Station commissions		10,724,000			8,798,000			1,926,000			21.9	%
Insurance		131,000			114,000			17,000			14.9	%
Other		-			-			-			0.0	%
Total CGL direct expense		58,549,000			36,979,000			21,570,000			58.3	%

Bounce
Transportation services		16,675,000			8,582,000			8,093,000			94.3	%
Insurance		10,000			17,000			(7,000	)		-41.2	%
Other		-			37,000			(37,000	)		-100.0	%
Total Bounce direct expense		16,685,000			8,636,000			8,049,000			93.2	%

Total Direct expenses
Transportation services		121,498,000			74,377,000			47,121,000			63.4	%
Station commissions		10,724,000			8,798,000			1,926,000			21.9	%
Insurance		1,161,000			1,568,000			(407,000	)		-26.0	%
Other		1,077,000			746,000			331,000			44.4	%
Intercompany eliminations		(3,873,000	)		(2,093,000	)		(1,780,000	)		85.0	%
Total direct expenses	$	130,587,000		$	83,396,000		$	47,191,000			56.6	%

										Total		Approximate
	Exercise pricing									Outstanding		Potential
	.50-.75		.76-1.00		1.01-1.25		1.26-1.50		1.51>	Options		Proceeds
Option Expiration Dates
2014				50,000				500,000			550,000		769,000
2015		500,000				200,000					700,000		603,000
2016				50,000		125,000		100,000			275,000		314,000
2017						50,000		320,000			370,000		514,000
2018				287,500		100,000					387,500		382,000
2019		25,000		75,000		25,000					125,000		111,000
2020						75,000		235,000	287,500		597,500		839,000
Total Options		525,000		462,500		575,000		1,155,000	287,500		3,005,000	$	3,532,000

			Number of Securities
			Remaining Available for
	Number of Securities	Weighted-Average	Future Issuance under
	to be Issued Upon	Exercise Price of	Equity Compensation
	Exercise of	Outstanding	Plan (Excluding
	Outstanding Options,	Options, Warrants	Securities Reflected in
Plan Category	Warrants and Rights	and Rights	Column)
Equity compensation plan approved by security holders	3,005,000	$1.18	2,123,000

Express-1 Expedited Solutions, Inc.
Consolidated Statements of Operations

	Twelve Months Ended
	December 31,		December 31,
	2010		2009
Revenues
Operating revenue	$	157,987,000	$	100,136,000
Expenses
Direct expense		130,587,000		83,396,000
Gross margin		27,400,000		16,740,000
Sales, general and administrative expense		18,954,000		13,569,000
Operating income from continuing operations		8,446,000		3,171,000
Other expense		140,000		51,000
Interest expense		205,000		105,000
Income from continuing operations before income tax		8,101,000		3,015,000
Income tax provision		3,213,000		1,325,000
Income from continuing operations		4,888,000		1,690,000
Income from discontinued operations, net of tax (1)		-		15,000
Net income	$	4,888,000	$	1,705,000

Basic income per share
Income from continuing operations	$	0.15	$	0.05
Income from discontinued operations		-		-
Net income		0.15		0.05

Diluted income per share
Income from continuing operations		0.15		0.05
Income from discontinued operations		-		-
Net income	$	0.15	$	0.05

Weighted average common shares outstanding
Basic weighted average common shares outstanding		32,241,383		32,035,218
Diluted weighted average common shares outstanding		33,115,981		32,167,447


	December 31, 2013			December 31, 2012
ASSETS
Current assets:
Cash and cash equivalents	$	21,524		$	252,293
Restricted cash		2,141			—
Accounts receivable, net of allowances of $3,539 and $603, respectively		134,227			61,245
Prepaid expenses		3,935			1,555
Deferred tax asset, current		3,041			1,406
Income tax receivable		1,504			2,569
Other current assets		5,800			1,866

Total current assets		172,172			320,934

Property and equipment, net of $11,803 and $5,323 in accumulated depreciation, respectively		56,571			13,090
Goodwill		363,448			55,947
Identifiable intangible assets, net of $15,411 and $4,592 in accumulated amortization, respectively		185,179			22,473
Deferred tax asset, long-term		72			—
Other long-term assets		2,799			764

Total long-term assets		608,069			92,274

Total assets	$	780,241		$	413,208

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	43,111		$	22,108
Accrued salaries and wages		11,741			3,516
Accrued expenses, other		37,769			21,123
Current maturities of long-term debt		2,028			491
Other current liabilities		4,684			1,789

Total current liabilities		99,333			49,027

Convertible senior notes		106,268			108,280
Revolving credit facility and other long-term debt, net of current maturities		75,373			676
Deferred tax liability, long term		15,200			6,781
Other long-term liabilities		28,224			3,385

Total long-term liabilities		225,065			119,122

Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.001 par value; 10,000,000 shares; 74,175 shares issued and outstanding		42,737			42,794
Common stock, $.001 par value; 150,000,000 shares authorized; 30,583,073 and 18,002,985 shares issued, respectively; and 30,538,073 and 17,957,985 shares outstanding, respectively		30			18
Additional paid-in capital		524,972			262,641
Treasury stock, at cost, 45,000 shares held		(107	)		(107	)
Accumulated deficit		(111,789	)		(60,287	)

Total stockholders’ equity		455,843			245,059

Total liabilities and stockholders’ equity	$	780,241		$	413,208

Express-1 Expedited Solutions, Inc.
Consolidated Statements of Cash Flows

	Year Ended December 31,
Operating activities	2010			2009
Net income applicable to stockholders	$	4,888,000		$	1,705,000
Adjustments to reconcile net income to net cash from operating activities
(Recovery) Provision for allowance for doubtful accounts		(84,000	)		92,000
Depreciation & amortization expense		1,290,000			1,191,000
Stock compensation expense		157,000			172,000
Loss (gain) on disposal of equipment		4,000			(29,000	)
Non-cash impairment of intangible assets		75,000			124,000
Changes in assets and liabilities, net of effect of acquisition:
Account receivable		(6,618,000	)		(5,459,000	)
Deferred taxes		900,000			713,000
Income Tax Receivable		(1,348,000	)		-
Other current assets		(355,000	)		104,000
Prepaid expenses		(99,000	)		214,000
Other long-term assets/advances		338,000			(93,000	)
Accounts payable		1,987,000			191,000
Accrued expenses and other current liabilities		1,280,000			1,529,000
Other long term liabilities		(658,000	)		(553,000	)
Cash flows provided (used) by operating activities		1,757,000			(99,000	)
Investing activities
Acquisition of business, net of cash acquired		-			(2,250,000	)
Payment of acquisition earn-out		-			(1,100,000	)
Payment of purchases of property and equipment		(811,000	)		(186,000	)
Proceeds from sale of assets		2,000			62,000
Cash flows used by investing activities		(809,000	)		(3,474,000	)
Financing activities
Credit line, net activity		(3,781,000	)		4,210,000
Proceeds from credit facility renewal		5,000,000			-
Payments of debt		(2,665,000	)		(1,249,000	)
Proceeds from exercise of options		564,000			-
Cash flows (used) provided by financing activities		(882,000	)		2,961,000
Net increase (decrease) in cash		66,000			(612,000	)
Cash, beginning of period		495,000			1,107,000
Cash, end of period	$	561,000		$	495,000
Supplemental disclosures of noncash activities:
Cash paid during the period for interest	$	124,000		$	105,000
Cash paid during the period for income taxes		3,521,000			396,000
Increase of goodwill due to accrual of acquisition earnout		-			687,000
Acquisition activity (First Class & LRG 2009)
Property and equipment	$	-		$	112,000
Intangible Assets		-			2,060,000
Goodwill		-			1,357,000
Liabilities assumed		-			(42,000	)
Net assets acquired		-			3,487,000
Installment consideration payable		-			(500,000	)
Fair value of estimated earnouts		-			(737,000	)
Net cash paid	$	-		$	2,250,000

Express-1 Expedited Solutions, Inc.
Consolidated Statements of Changes in Stockholders' Equity
For the Two Years Ended December 31, 2010 and 2009

											Additional
	Stock Common				Treasury Stock						Paid in		Accumulated
	Shares		Amount		Shares			Amount			Capital		Earnings		Total
Balance, January 1, 2009		32,215,218	$	32,000		(180,000	)	$	(107,000	)	$	26,316,000	$	286,000	$	26,527,000
Issuance of stock for exercise of options																-
Stock option expense												172,000				172,000
Issuance of common stock																-
AMEX issuance fees																-
Net income														1,705,000		1,705,000
Balance, December 31, 2009		32,215,218		32,000		(180,000	)		(107,000	)		26,488,000		1,991,000		28,404,000
Issuance of stock for exercise of options		472,304		1,000								563,000				564,000
Stock option expense												157,000				157,000
Issuance of common stock																-
Net income														4,888,000		4,888,000
Balance, December 31, 2010		32,687,522	$	33,000		(180,000	)	$	(107,000	)	$	27,208,000	$	6,879,000	$	34,013,000


	Preferred Stock						Common Stock				Treasury Stock						Paid-In Capital			Accumulated Deficit
	Shares			Amount			Shares		Amount		Shares			Amount			Paid-In Capital			Accumulated Deficit			Total
Balance, December 31, 2010		—			—			8,172	$	8		(45	)	$	(107	)	$	27,233		$	6,879		$	34,013

Net Income		—			—			—		—		—			—			—			759		$	759
Issuance of common stock for option exercise		—			—			237		—		—			—			704			—		$	704
Issuance of ESOP shares		—			—			1		—		—			—			—			—		$	—
Issuance of preferred stock and warrants, net of issuance costs		75			42,794			—		—		—			—			28,834			—		$	71,628
Deemed distribution for recognition of beneficial conversion feature on preferred stock		—			—			—		—		—			—			44,211			(44,211	)	$	—
Dividend paid		—			—			—		—		—			—			—			(375	)	$	(375	)
Stock compensation expense		—			—			—		—		—			—			1,180			—		$	1,180
Excess tax benefit from stock options		—			—			—		—		—			—			451			—		$	451

Balance, December 31, 2011		75			42,794			8,410		8		(45	)		(107	)		102,613			(36,948	)		108,360

Net loss		—			—			—		—		—			—			—			(20,339	)	$	(20,339	)
Issuance of common stock for exercises, net of withholdings		(1	)		—			393		—		—			—			(978	)		—		$	(978	)
Proceeds from common stock offering, net of issuance costs		—			—			9,200		10		—			—			136,952			—		$	136,962
Dividend paid		—			—			—		—		—			—			—			(3,000	)	$	(3,000	)
Stock compensation expense		—			—			—		—		—			—			4,398			—		$	4,398
Equity component of convertible debt offering, net of issuance costs and deferred taxes		—			—			—		—		—			—			19,656			—		$	19,656

Balance, December 31, 2012		74			42,794			18,003		18		(45	)		(107	)		262,641			(60,287	)		245,059

Net loss		—			—			—		—		—			—			—			(48,530	)	$	(48,530	)
Tax withholdings on restricted shares and other issuances of common stock		—			—			192		—		—			—			(1,751	)		—		$	(1,751	)
Conversion of preferred stock to common stock		—			(57	)		14		—		—			—			57			—		$	—
Proceeds from common stock offering, net of issuance costs		—			—			11,148		11		—			—			239,485			—		$	239,496
Issuance of common stock for acquisitions		—			—			617		1		—			—			10,445			—		$	10,446
Issuance of common stock upon conversion of senior notes, net of tax		—			—			609		—		—			—			9,373			—		$	9,373
Sale of business interest		—			—			—		—		—			—			(24	)		—		$	(24	)
Dividend paid		—			—			—		—		—			—			—			(2,972	)	$	(2,972	)
Stock compensation expense		—			—			—		—		—			—			4,746			—		$	4,746

Balance, December 31, 2013		74		$	42,737			30,583	$	30		(45	)	$	(107	)	$	524,972		$	(111,789	)	$	455,843

		~~Years~~
~~Land~~		0
~~Building and improvements~~		39
~~Revenue equipment~~		~~3-7~~
~~Office equipment~~		~~3-10~~
~~Warehouse equipment and shelving~~		~~3-7~~
~~Computer equipment and software~~		~~3-5~~
~~Leasehold improvements~~		~~Lease term~~


	December 31, 2013			December 31, 2012
Indefinite Lived Intangibles:
Trade name	$	3,346		$	6,416

Definite Lived Intangibles:
Customer lists and relationships		168,666			14,281
Carrier relationships		12,100			—
Trade name		8,041			1,246
Non-compete agreeements		6,265			3,050
Other intangible assets		2,172			2,072

		197,244			20,649
Less: acccumulated amortization		(15,411	)		(4,592	)

Intangible assets, net	$	181,833		$	16,057

Total Identifiable Intangibles	$	185,179		$	22,473


Classification		Estimated Useful Life
Leasehold improvements		Shorter of term of lease or 15 years
Buildings		39 years
Vehicles		5 years
Office equipment		5 to 7 years
Computer equipment		5 years
Computer software		3 to 5 years
Satellite equipment		3 to 5 years
Warehouse equipment		7 to 10 years


	December 31, 2013			December 31, 2012
Property and Equipment, at cost
Leasehold improvements		7,969			3,971
Buildings		1,115			1,115
Vehicles		2,723			991
Office equipment		6,636			3,265
Computer equipment		8,218			4,479
Computer software		39,709			3,035
Satellite equipment		1,496			1,450
Warehouse equipment		508			107

		68,374			18,413
Less: acccumulated depreciation		(11,803	)		(5,323	)

Property and Equipment, net	$	56,571		$	13,090


	As of December 31, 2013		As of December 31, 2012
Holdback for resolution of certain indemnifiable matters	$	22,500	$	—
Long term portion of deferred rent liability		4,387		2,292
Liability for uncertain tax positions		916		462
Acquisition lease liability		233		280
Long term portion of vacant rent liability		143		164
Other		45		187

Total Other Long Term Liabilities	$	28,224	$	3,385


	Fair Value Measurements as of December 31, 2013
	Total		Level 1		Level 2		Level 3
Assets:
Money market funds	$	1,577	$	1,577	$	—	$	—

Liabilities:
Contingent consideration obligations	$	—	$	—	$	—	$	—

	Fair Value Measurements as of December 31, 2012
	Total		Level 1		Level 2		Level 3
Assets:
Money market funds	$	239,443	$	239,443	$	—	$	—

Liabilities:
Contingent consideration obligations	$	392	$	—	$	—	$	392

	Twelve Months Ended December 31,
	2010	2009
Risk-free interest rate	2.5%	2.8%
Expected life	5.8 years	5.1 years
Expected volatility	35%	35%
Expected dividend yield	none	none
Grant date fair value	$0.53	$0.31


Consideration	$	364,329

Less: Net Assets Acquired		21,899
Intangibles Acquired:
Less: Fair value of Trademarks/Tradenames		5,900
Less: Fair value of Non-Compete Agreements		1,550
Less: Fair value of Customer Relationships		110,600
Less: Fair value of Carrier Relationships		12,100
Less: Fair value of Acquired Technology		18,000
Plus: Net deferred tax liability on fair value adjustments		(38,040	)

Goodwill	$	232,320


	Pro Forma Year Ended December 31, 2013			Pro Forma Year Ended December 31, 2012
Revenue	$	916,760		$	743,456
Operating Loss	$	(54,535	)	$	(49,755	)
Net Loss	$	(55,940	)	$	(38,606	)
Loss per common share
Basic	$	(1.87	)	$	(1.42	)
Diluted	$	(1.87	)	$	(1.42	)

	Years Ending December 31,
	2010			2009
Buildings	$	1,115,000		$	1,115,000
Leasehold improvement		345,000			241,000
Office equipment		586,000			435,000
Trucks and trailers		1,786,000			1,725,000
Warehouse equipment		117,000			117,000
Computer equipment		1,390,000			1,091,000
Computer software		911,000			724,000
		6,250,000			5,448,000
Less: accumulated depreciation		(3,290,000	)		(2,651,000	)
Total property and equipment	$	2,960,000		$	2,797,000

Balance at January 1, 2009	$	14,915,000
Contingent contractually earned payments (CGL)		687,000
LRG Purchase		1,357,000
Balance at December 31, 2009		16,959,000
		-
Balance at December 31, 2010	$	16,959,000

	Year Ending December 31,
	2010		2009
Intangible not subject to amortization:
Trade name	$	6,420,000	$	6,420,000
Intangibles subject to amortization:
Trade Name, net of accumulated amortization of $52,000 and $11,000, respectively		168,000		209,000
Employee Contracts, net of accumulated amortization of $270,000 and $235,000, respectively		-		35,000
Non-compete Agreements, net of accumulated amortization of $654,000 and $539,000, respectively		109,000		224,000
Independent Participant Network, net of accumulated amortization of $591,000 and $392,000 respectively		389,000		588,000
Customer relationships, net of accumulated amortization of $676,000 and $483,000		1,298,000		1,491,000
Other intangibles, net of accumulated amortization of $584,000 and $538,000, respectively		162,000		208,000
Total identifiable intangible assets	$	8,546,000	$	9,175,000

2011	$	491,000
2012		428,000
2013		232,000
2014		203,000
2015		129,000
Thereafter		643,000
Total future expected amortization expense	$	2,126,000

			Year Ending December 31,
	Interest rates	Term (months)	2010		2009
Capital leases for equipment	18%	24 - 60	$	13,000	$	28,000
Note payable	2.5%	36		3,750,000		1,400,000
Total note payable and capital leases				3,763,000		1,428,000
Less: current maturities of long-term debt				1,680,000		1,215,000
Non-current maturities of long term-debt			$	2,083,000	$	213,000

	Current Operations
For the years ended December 31,
2011	$	479,000
2012		282,000
2013 ��		83,000
2014		56,000
2015		44,000
Total	$	944,000


	Interest rates			Term (months)		As of December 31, 2013		As of December 31, 2012
Convertible senior notes		4.50	%		60	$	133,742	$	143,750
Revolving credit facility		3.63	%		60		75,000		—
Notes payable		N/A			N/A		2,205		863
Capital leases for equipment		14.02	%		59		196		154
Line of credit		5.00	%		N/A		—		150

Total debt							211,143		144,917
Less: unamortized bond discount and debt issuance costs							27,474		35,470
Less: current maturities of long-term debt							2,028		491	��

Total long-term debt, net of current maturities						$	181,641	$	108,956


	Expedited Transportation		Freight Forwarding		Freight Brokerage		Total
Goodwill at December 31, 2012	$	7,737	$	9,222		38,988	$	55,947
Acquisitions and other adjustments		50,675		—		256,826		307,501

Goodwill at December 31, 2013	$	58,412	$	9,222	$	295,814	$	363,448

	Warrants		Exercise	Weighted Average
	Options		Price Range	Exercise Price

Warrants & options outstanding a January 1, 2009	5,861,000		$.57 - 2.75	$1.52
Warrants cancelled/expiring	(2,252,000	)	1.50 - 2.20	2.05
Options granted	175,000		0.67 - 1.03	0.89
Options expired/cancelled	(641,000	)	.079 - 2.75	1.29
Options outstanding at December 31, 2009	3,143,000		.57 - 1.48	1.14
Options granted	635,000		1.25 -1.65	1.41
Options exercised	(472,000	)	.98 - 1.25	1.19
Options expired/cancelled	(301,000	)	.98 - 1.52	1.29
Options outstanding at December 31, 2010	3,005,000		$.57 - 1.65	$1.18

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company