01—Abstract
Summary
Summary of the 10-K filed March 12, 2013. Cited figures are marked; the original filing is the authoritative source.
XPO Logistics, Inc., a Delaware corporation, describes itself as a non-asset based transportation services provider that acts as a third-party broker between shippers and carriers.
It operates three segments: Freight Brokerage (revenue of $125.1 milliona in 2012, up from $29.2 million), Expedited Transportation ($94.0 million, up 7.4%), and Freight Forwarding ($67.7 million, up 3.9%). Consolidated operating revenue rose 57.3% to $278.6 million, but the company posted a net loss of $20.3 million for 2012 (loss of $23.3 million to common shareholders, or $(1.49) per share), compared with net income of $0.8 million in 2011. Gross margin fell to 14.7% of revenue from 16.8%, while SG&A rose to $68.8 million, or 24.7% of revenue, reflecting growth initiatives, four acquisitions (Turbo, BirdDog, Kelron, Continental), and new cold-start sales offices.
The balance sheet strengthened substantially during 2012. Cash and cash equivalents were $252.3 millionb at year-end, working capital was $271.9 million, and the company raised $137.0 million from a common stock offering and $138.5 million net from 4.50% Convertible Senior Notes due 2017. Cash used in operations was $24.3 million in 2012.
Management states that existing cash balances will be sufficient for the next twelve months. Chairman and CEO Bradley S. Jacobs, through Jacobs Private Equity, LLC, beneficially owns approximately 52%c of the outstanding common stock on an as-converted and exercised basis, and the company is a controlled company under NYSE rules.
The filing also discloses material litigation with C.H. Robinson Worldwide, Inc. in Minnesota state court over the hiring of former CHR employees. A temporary injunction was granted in January 2013, with one provision stayed, and the company intends to vigorously defend the action, which it says could have a material adverse effect on its business.
02—Key points
Key Highlights
- Revenue reached $278.6 million in 2012, up 57.3% from $177.1 million in 2011, driven mainly by Freight Brokerage acquisitions and cold-start offices.
- Net loss of $20.3 million in 2012 versus net income of $0.8 million in 2011; loss per share was $(1.49).
- Gross margin declined to 14.7% of revenue from 16.8%, while SG&A increased to 24.7% of revenue from 15.8%.
- Freight Brokerage revenue rose to $125.1 million from $29.2 million and posted an operating loss of $5.6 million, due to cold-start start-up costs.
- Cash of $252.3 million and working capital of $271.9 million at December 31, 2012, supported by $137.0 million from a common stock offering and $138.5 million net from 4.50% Convertible Senior Notes due 2017.
- Chairman and CEO Bradley S. Jacobs beneficially owns approximately 52% of outstanding common stock on an as-converted and exercised basis, giving him significant control.
- Ongoing litigation with C.H. Robinson Worldwide, Inc. includes a temporary injunction and an amended complaint naming the company and eight individuals; the company intends to defend it vigorously.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2012, Xpo lost $0.07.
- Revenue$278.6M100.0%
- Cost of revenue−$237.8M85.3%
- Gross profit$40.8M14.7%
- Operating costs−$68.8M24.7%
- Operating income−$28.0M10.1%
- Interest, other & tax$7.7M2.8%
- Net income−$20.3M7.3%
04—Financials
Financial Highlights
Figures from 10-KFY2012filed March 12, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $278.60M$177.08M | +57.3% |
| Gross Profit | $40.83M$29.78M | +37.1% |
| SG&A Expenses | $1.30M— | — |
| Operating Expenses | $306.60M— | — |
| Operating Income | -$28.00M$1.72M | −1724.1% |
| Interest Expense | $3.20M$191K | +1575.4% |
| Net Income | -$20.30M$759K | −2774.6% |
| EPS (Basic) | $-1.49$-5.41 | +72.5% |
| EPS (Diluted) | $-1.49$-5.41 | +72.5% |
| Shares Outstanding (Basic) | 15.69M8.25M | +90.3% |
| Shares Outstanding (Diluted) | 15.70M8.25M | +90.4% |
05—Questions
Frequently Asked Questions
Why did XPO swing to a net loss in 2012?
The filing attributes the reduction in net income mainly to higher SG&A expenses tied to growth initiatives, including sales force recruitment, costs of new Freight Brokerage offices, and an increase in Corporate SG&A. Corporate SG&A rose to $30.3 million from $9.3 million, and the company also cited lower gross margin as a percentage of revenue from its lower-margin Freight Brokerage segment.
How is XPO funding its growth?
In 2012 the company received $137.0 million in net proceeds from a registered common stock offering closed March 20, 2012, and $138.5 million in net proceeds from its 4.50% Convertible Senior Notes due October 1, 2017. It used these funds for acquisitions totaling $57.2 million in cash, and it states that existing cash balances will be sufficient for the next twelve months.
What control does the largest stockholder have over the company?
Jacobs Private Equity, LLC, managed by Chairman and CEO Bradley S. Jacobs, is the largest stockholder. Mr. Jacobs beneficially owns approximately 52% of outstanding common stock on an as-converted and exercised basis, and under the Investment Agreement he can designate a majority of the board while JPE holds at least 33% of the voting power on a fully diluted basis. The company is therefore a controlled company under NYSE rules.
What is the status of the C.H. Robinson litigation?
C.H. Robinson Worldwide, Inc. sued the company in the Fourth Judicial District Court of Hennepin County, Minnesota, over hiring former CHR employees. On January 17, 2013, the court granted a temporary injunction against the company, and on January 22, 2013 it stayed one paragraph of the order pending a decision on reconsideration. On February 7, 2013, CHR filed an amended complaint naming the company and eight individuals. The company intends to vigorously defend the action, and the filing states the outcome is uncertain and could have a material adverse effect.
What is the company's business model?
XPO is a non-asset based transportation services provider that owns no trucks, airplanes or ships. It acts as a middleman between shippers and carriers through three segments: Freight Brokerage, Expedited Transportation (operating as Express-1), and Freight Forwarding (operating as Concert Group Logistics). Expedited Transportation relies on independent contractor drivers, and the company states that about 85% of shipments are still contracted directly between shippers and carriers.
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