01—Abstract
Summary
Summary of the 10-K filed February 23, 2015. Cited figures are marked; the original filing is the authoritative source.
XPO Logistics, Inc., a Delaware corporation, reports for the year ended December 31, 2014 as a leading asset-light third-party logistics provider.
Revenue rose to $2,356.6 milliona in 2014 from $702.3 million in 2013, driven largely by the acquisitions of Pacer, 3PD, New Breed and NLM, while net loss widened to $63.6 million from $48.5 million. Net loss available to common stockholders was $107.4 million, including a $40.9 million preferred stock beneficial conversion charge. Net revenue reached $654.8 million, with net revenue margin of 27.8% versus 17.6% in 2013, but SG&A rose to $422.5 million and the company recorded an operating loss of $40.9 million.
The company now operates two segments: Transportation, with 2014 operating income of $18.9 millionb, and Logistics, following the September 2, 2014 acquisition of New Breed, with operating income of $17.6 million. Cash flow from operations was negative at $21.3 million, and the company ended the year with cash of $644.1 million, working capital of $852.0 million and total long-term debt of $592.1 million, including $500.0 million of 7.875% Senior Notes due 2019. Subsequent to year-end, the company issued an additional $400.0 million of those notes and acquired UX Specialized Logistics for $59.0 million in cash.
The filing highlights significant litigation and labor-classification risk tied to owner-operator status, particularly the Pacer classification claims, where a reserve was established and the company says a loss may exceed it. It also flags dependence on independent contractors, rail partners, and the 2012 Union Pacific agreement, which contemplates the termination of the company's wholesale US-Mexico automotive role as of December 31, 2015. Management concluded that internal control over financial reporting was effective as of December 31, 2014, excluding ACL and New Breed from its assessment.
02—Key points
Key Highlights
- Revenue increased to $2,356.6 million in 2014 from $702.3 million in 2013, driven largely by the Pacer, 3PD, New Breed and NLM acquisitions.
- Net loss was $63.6 million in 2014 versus $48.5 million in 2013; net loss available to common stockholders was $107.4 million after a $40.9 million preferred stock beneficial conversion charge.
- Net revenue rose to $654.8 million, with net revenue margin of 27.8% compared with 17.6% in 2013.
- Operating loss was $40.9 million for 2014, with SG&A expense of $422.5 million, including $48.4 million of increased intangible amortization related to acquisitions.
- Two reportable segments: Transportation (operating income of $18.9 million) and Logistics, established with the New Breed acquisition (operating income of $17.6 million).
- Year-end cash and cash equivalents of $644.1 million and working capital of $852.0 million; the company had no amount drawn under its $415 million Amended Credit Agreement.
- Pacer owner-operator classification claims carry a reserve, but the company believes a loss may exceed it; the Union Pacific 2012 agreement contemplates the termination of the company's wholesale US-Mexico automotive role as of December 31, 2015.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 23, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $2.36B$702.30M | +235.6% |
| SG&A Expenses | $62.50M$14.10M | +343.3% |
| Operating Expenses | $2.40B$754.60M | +217.7% |
| Operating Income | -$40.90M-$52.30M | +21.8% |
| Interest Expense | $48.00M$18.20M | +163.7% |
| Net Income | -$63.60M-$48.50M | −31.1% |
| EPS (Basic) | $-2.00$-2.26 | +11.5% |
| EPS (Diluted) | $-2.00$-2.26 | +11.5% |
| Shares Outstanding (Basic) | 53.60M22.75M | +135.6% |
| Shares Outstanding (Diluted) | 53.60M22.80M | +135.1% |
05—Questions
Frequently Asked Questions
How did XPO's revenue and profitability change in 2014?
Revenue rose to $2,356.6 million from $702.3 million, largely due to acquisitions. Net loss widened to $63.6 million from $48.5 million, and net loss available to common stockholders was $107.4 million after a $40.9 million preferred stock beneficial conversion charge. Net revenue margin improved to 27.8% from 17.6%.
What drove the 2014 acquisitions and how were they funded?
The company acquired Pacer (March 31, 2014), Atlantic Central Logistics (July 28, 2014) and New Breed (September 2, 2014). Funding came from the February 2014 common stock offering ($413.2 million net), the September 2014 private placement of common and Series B preferred stock ($684.2 million net), and $500.0 million of 7.875% Senior Notes due 2019.
What is the main legal and regulatory risk disclosed?
The company faces numerous claims that its owner-operators and contract carriers should be treated as employees rather than independent contractors. For Pacer, the DLSE claims involve 153 owner operators, and a tentative decision would award $2.0 million to seven claimants. A reserve was established, but the company says a loss may exceed it and cannot estimate the possible range.
What was the company's liquidity position at year-end 2014?
Cash and cash equivalents were $644.1 million, and working capital was $852.0 million. Cash used in operations was $21.3 million, while financing activities provided $1,502.2 million. Total long-term debt was $592.1 million, and the company said its existing cash and revolver availability would be sufficient to finance existing operations.
What subsequent events occurred after year-end 2014?
On February 13, 2015, the company issued an additional $400.0 million of 7.875% Senior Notes due 2019. On February 9, 2015, it acquired substantially all assets of UX Specialized Logistics for $59.0 million in cash. Convertible notes with $30.6 million principal were converted into 1,859,231 shares in January and February 2015.
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