01—Abstract
Summary
Summary of the 10-K filed February 26, 2014. Cited figures are marked; the original filing is the authoritative source.
XPO Logistics, Inc. reported a net loss of $48.5 milliona on revenue of $702.3 million for fiscal 2013, compared with a net loss of $20.3 million on revenue of $278.6 million in 2012.
Revenue rose 152.1% year over year, driven largely by six acquisitions in 2013 (including 3PD, NLM, Optima, Covered, Interide and East Coast Air Charter) and growth in Freight Brokerage cold-start locations. Gross margin dollars rose to $123.5 millionb (17.7% of revenue, up from 14.7%), but SG&A expense of $175.8 million (25.0% of revenue) drove an operating loss of $52.3 million, reflecting investment in sales force recruitment, new offices and corporate costs. The company's balance sheet expanded considerably, with total assets of $780.2 million and goodwill of $363.4 million at year-end.
Cash used in operations was $66.3 millionc in 2013, and investing activities used $470.3 million, mainly for acquisitions. Financing was supported by $239.5 million of net proceeds from an August 2013 stock offering and $73.3 million of revolver borrowings. Total long-term debt was $181.6 million, including $106.3 million of 4.50% convertible senior notes and $75.4 million of revolver and other long-term debt, and the company had a $125.0 million revolving credit facility with $75.0 million drawn.
Subsequent to year-end, XPO agreed on January 5, 2014 to acquire Pacer International, Inc. for $6.00d in cash plus a stock component, and closed a February 2014 common stock offering that netted $413.3 million. Jacobs Private Equity, controlled by Chairman and CEO Bradley S.
Jacobs, is the largest stockholder, and the company describes a number of risks including independent contractor classification, litigation with C.H. Robinson Worldwide, and dependence on acquisitions.
02—Key points
Key Highlights
- Revenue of $702.3 million in 2013, up from $278.6 million in 2012, driven largely by acquisitions and Freight Brokerage cold-start growth.
- Net loss of $48.5 million in 2013 versus a net loss of $20.3 million in 2012; loss per share was $(2.26) compared with $(1.49).
- Gross margin improved to 17.7% of revenue from 14.7%, but SG&A expense of 25.0% of revenue produced an operating loss of $52.3 million.
- Six acquisitions completed in 2013, including 3PD and NLM, with $458.8 million used in acquisitions; goodwill rose to $363.4 million.
- Raised $239.5 million net in an August 2013 stock offering and $413.3 million net in a February 2014 offering after year-end.
- Agreed on January 5, 2014 to acquire Pacer International, Inc., with consideration of $6.00 in cash plus a share component tied to XPO's VWAP.
- Total long-term debt of $181.6 million at year-end, including $106.3 million of 4.50% convertible senior notes due 2017 and $75.0 million drawn on a $125.0 million revolving credit facility.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2013, Xpo lost $0.07.
- Revenue$702.3M100.0%
- Cost of revenue−$578.8M82.4%
- Gross profit$123.5M17.6%
- Operating costs−$175.8M25.0%
- Operating income−$52.3M7.4%
- Interest, other & tax$3.8M0.5%
- Net income−$48.5M6.9%
04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 26, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $702.30M$278.60M | +152.1% |
| Gross Profit | $123.51M$40.83M | +202.5% |
| SG&A Expenses | $14.10M$1.30M | +984.6% |
| Operating Expenses | $754.60M$306.60M | +146.1% |
| Operating Income | -$52.30M-$28.00M | −86.8% |
| Interest Expense | $18.20M$3.20M | +468.8% |
| Net Income | -$48.50M-$20.30M | −138.9% |
| EPS (Basic) | $-2.26$-1.49 | −51.7% |
| EPS (Diluted) | $-2.26$-1.49 | −51.7% |
| Shares Outstanding (Basic) | 22.75M15.69M | +45.0% |
| Shares Outstanding (Diluted) | 22.80M15.70M | +45.2% |
05—Questions
Frequently Asked Questions
Why did XPO report a larger net loss in 2013 despite strong revenue growth?
The filing attributes the increase in net loss primarily to higher SG&A expenses tied to growth initiatives, including sales force recruitment, costs of new Freight Brokerage offices and an increase in Corporate costs. SG&A rose to $175.8 million from $68.8 million, and interest expense increased to $18.2 million from $3.2 million. The company also recorded accelerated amortization of the CGL trade name intangible assets.
How did XPO fund its 2013 acquisitions?
Investing activities used $470.3 million in 2013, including $458.8 million for acquisitions. Financing activities generated $305.8 million, mainly from $239.5 million of net proceeds from the August 2013 common stock offering and $73.3 million of net revolver borrowings. The company also issued restricted common stock as partial consideration for some acquisitions.
What is the Pacer International acquisition, and what consideration is involved?
On January 5, 2014, XPO entered into a merger agreement to acquire Pacer International, Inc., the third largest provider of intermodal services in North America. Each Pacer share would receive $6.00 in cash plus a fraction of an XPO share equal to $3.00 divided by XPO's 10-day VWAP, with the exchange ratio fixed at 0.1298 if the VWAP is $23.12 or less and at 0.0911 if it is $32.94 or more. Completion requires approval by a majority of Pacer's outstanding shares and is not subject to a financing condition.
Who controls XPO, and how could that affect other stockholders?
Chairman and CEO Bradley S. Jacobs is the managing member of Jacobs Private Equity, LLC, the company's largest stockholder. As of February 21, 2014, Jacobs beneficially owned approximately 28.5% of outstanding common stock on an as-converted and exercised basis and about 16.4% of votes eligible to be cast. The filing states this concentration may discourage a change of control and that investors may perceive disadvantages in owning stock of a company with a controlling stockholder.
What are the main legal and regulatory risks disclosed?
The filing discloses ongoing litigation with C.H. Robinson Worldwide in Minnesota, where CHR seeks injunctions and damages relating to XPO's hiring of former CHR employees, and states the outcome is uncertain and could have a material adverse effect. It also describes risks from potential reclassification of independent contractor drivers as employees, including exposure at its 3PD subsidiary, where the former owners agreed to indemnify XPO subject to certain limits.
06—Continue