01—Abstract
Summary
Summary of the 10-K filed February 28, 2017. Cited figures are marked; the original filing is the authoritative source.
XPO Logistics, Inc. reported record annual revenue of $14,619.4 milliona for 2016, up from $7,623.2 million in 2015, driven largely by the 2015 acquisitions of Norbert Dentressangle SA (ND) and Con-way Inc. (Con-way), along with organic growth.
Operating income rose to $488.1 millionb from an operating loss of $28.6 million in 2015, and net income was $84.5 million compared with a net loss of $191.6 million. Diluted earnings per share were $0.53, versus a loss of $2.65 per share in 2015. The company operates two segments: Transportation (revenue of $9,457.3 million) and Logistics (revenue of $5,323.9 million), and describes itself as a top ten global provider of supply chain solutions with over 87,000 employees and 1,425 locations in 34 countries.
Balance sheet and cash flow reflect the leverage taken on for the 2015 acquisitions. Total debt principal was $5,044.2 millionc at December 31, 2016, against cash and equivalents of $373.4 million. Interest expense rose to $361.1 million from $216.7 million.
Cash from operations was $625.4 milliond, up from $90.8 million, while the company repurchased $1,889.2 million of debt during 2016, funded in part by $547.7 million of proceeds from the sale of its North American Truckload operations to TransForce Inc. and $1,377.8 million of new long-term debt issuance. Investors should weigh the improved profitability against risks the filing highlights, including exposure to independent contractor misclassification lawsuits, a voluntary disclosure to OFAC regarding transactions with sanctioned countries, the UK's expected exit from the EU, and the concentrated ownership of Chairman and CEO Bradley S. Jacobs, who beneficially owns approximately 15% of common stock.
02—Key points
Key Highlights
- Revenue of $14,619.4 million in 2016, up from $7,623.2 million in 2015, reflecting the Norbert Dentressangle and Con-way acquisitions and organic growth.
- Operating income of $488.1 million in 2016 versus an operating loss of $28.6 million in 2015; net income of $84.5 million versus a net loss of $191.6 million.
- Diluted earnings per share of $0.53 in 2016 compared with a loss of $2.65 per share in 2015.
- Transportation segment revenue of $9,457.3 million and Logistics segment revenue of $5,323.9 million in 2016.
- Interest expense increased to $361.1 million from $216.7 million, attributed to debt raised to fund the 2015 acquisitions; total debt principal was $5,044.2 million at year-end.
- Cash from operations of $625.4 million in 2016 versus $90.8 million in 2015; $1,889.2 million of debt was repurchased during the year.
- Ongoing risks include independent contractor classification lawsuits, an OFAC voluntary disclosure regarding sanctioned-country transactions, and Brexit-related exposure, with about 36% of 2016 revenue generated in Europe.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Xpo kept $0.00.
- Revenue$14.62B100.0%
- Cost of revenue−$7.89B54.0%
- Gross profit$6.73B46.0%
- Operating costs−$6.27B42.9%
- Operating income$464.0M3.2%
- Interest, other & tax−$395.0M2.7%
- Net income$69.0M0.5%
Where FY2016 revenue went
$14.62B- Cost of revenue: $7.89B, 54% of revenue
- Operating costs: $6.27B, 43% of revenue
- Net income: $69.0M, 0.5% of revenue
- Interest, other & tax: $395.0M, 2.7% of revenue
Kept 0.5% as net incomeNet income $69.0M · 0.5%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 28, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $14.62B$7.62B | +91.8% |
| Cost of Revenue | $7.89B— | — |
| Gross Profit | $6.73B— | — |
| Operating Expenses | $14.15B$7.65B | +85.0% |
| Operating Income | $464.00M-$28.60M | +1722.4% |
| Interest Expense | $361.00M$216.70M | +66.6% |
| Net Income | $69.00M-$191.10M | +136.1% |
| EPS (Basic) | $0.57$-2.65 | +121.5% |
| EPS (Diluted) | $0.53$-2.65 | +120.0% |
| Shares Outstanding (Basic) | 110.00M92.80M | +18.5% |
| Shares Outstanding (Diluted) | 123.00M92.80M | +32.5% |
05—Questions
Frequently Asked Questions
How did XPO's financial performance change in 2016 compared with 2015?
Revenue rose to $14,619.4 million from $7,623.2 million, and operating income improved to $488.1 million from an operating loss of $28.6 million. Net income was $84.5 million, compared with a net loss of $191.6 million in 2015. The filing attributes the revenue increase mainly to the 2015 acquisitions of Norbert Dentressangle SA and Con-way Inc., along with organic growth.
What is XPO's debt position at the end of 2016?
Total debt principal was $5,044.2 million at December 31, 2016, with long-term debt of $4,731.5 million on the balance sheet. During 2016 the company issued $535.0 million of 6.125% senior notes due 2023, refinanced its term loan, and repurchased $1,889.2 million of debt. Interest expense for the year was $361.1 million.
What did XPO do with its North American Truckload operations?
On October 27, 2016, XPO sold its North American Truckload operations, formerly known as Con-way Truckload, to a subsidiary of TransForce Inc. for approximately $558.0 million in cash, subject to adjustments. The company used the proceeds to repurchase $555.0 million of Term Loan debt at par on November 3, 2016.
What are the main legal and regulatory risks disclosed?
The filing discloses numerous lawsuits claiming that owner-operators and contract carriers should be classified as employees rather than independent contractors, with some adverse decisions rendered and some under appeal. It also reports a voluntary disclosure filed with OFAC in August 2016 regarding transactions involving sanctioned countries, which the company is still investigating. Management does not believe the ultimate resolution of pending matters will have a material adverse effect, but notes outcomes cannot be predicted with certainty.
Who controls XPO and how could that affect shareholders?
Chairman and Chief Executive Officer Bradley S. Jacobs beneficially owns approximately 15% of the outstanding common stock as of December 31, 2016. The filing states this concentration could allow him to exert substantial influence over elections of directors and significant corporate transactions, and could delay or prevent a change of control even if it would benefit other stockholders.
06—Continue