01—Abstract
Summary
Summary of the 10-K filed February 10, 2020. Cited figures are marked; the original filing is the authoritative source.
XPO Logistics, Inc., together with its subsidiaries, is a top ten global provider of supply chain solutions with two reporting segments, Transportation and Logistics.
As of December 31, 2019, it had approximately 100,000 employees and 1,504 locations in 30 countries. Transportation contributed approximately 64% of 2019 consolidated revenue and Logistics approximately 36%. Consolidated revenue decreased 3.7% to $16.6 billiona in 2019 from $17.3 billion in 2018, primarily due to a reduction in business from the company's largest customer (about $570 million less revenue).
Operating income rose to $821 millionb from $704 million, and net income was $440 million compared with $444 million in 2018. Interest expense increased 34.6% to $292 million, reflecting higher average debt used to fund share purchases. In January 2020, the company announced a review of strategic alternatives, including the possible sale or spin-off of one or more business units, with no timetable set.
It stated it does not intend to sell or spin off its North American less-than-truckload unit. The filing notes that a sale or spin-off would leave a smaller, less diversified company. Cash flow from operations fell to $791 millionc from $1.10 billion, and the company repurchased $1.3 billion of common stock in 2019 under its 2018 and 2019 programs.
Total debt (excluding finance leases) was $5.07 billiond at year-end, with the Term Loan and Senior Notes due 2024 among the instruments. The filing also highlights ongoing legal exposure to independent contractor classification claims in the trucking and last mile businesses, a securities class action filed in December 2018, and KPMG's identification of self-insured claims liabilities and goodwill carrying value as critical audit matters. The company adopted the new lease standard (ASU 2016-02) on January 1, 2019, recognizing $2.1 billion of operating lease assets and liabilities.
02—Key points
Key Highlights
- Consolidated revenue of $16.6 billion in 2019, down 3.7% from $17.3 billion, mainly due to reduced business from the largest customer (approximately $570 million less revenue).
- Operating income increased to $821 million from $704 million, with the Transportation segment operating income rising to $752 million from $646 million, helped by $97 million higher gains on sales of property and equipment.
- Net income was $440 million in 2019 versus $444 million in 2018; diluted earnings per share were $3.57 compared with $2.88.
- Strategic review announced January 2020, including possible sale or spin-off of one or more business units; the North American LTL unit is not intended to be sold or spun off.
- Cash from operating activities declined to $791 million from $1.10 billion, and the company used $1.3 billion to repurchase common stock in 2019.
- Long-term debt (less current portion) increased to $5.18 billion from $3.90 billion, and interest expense rose 34.6% to $292 million.
- Ongoing litigation over independent contractor classification and a securities class action filed in December 2018 remain pending, with the company stating it does not expect material adverse effects from the general claims.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Xpo kept $0.04.
- Revenue$10.68B100.0%
- Cost of revenue−$8.30B77.7%
- Gross profit$2.38B22.3%
- Operating costs−$1.82B17.0%
- Operating income$561.0M5.3%
- Interest, other & tax−$142.0M1.3%
- Net income$419.0M3.9%
Where FY2019 revenue went
$10.68B- Cost of revenue: $8.30B, 78% of revenue
- Net income: $419.0M, 3.9% of revenue
- SG&A: $1.07B, 10.0% of revenue
- Other operating costs: $749.0M, 7.0% of revenue
- Interest, other & tax: $142.0M, 1.3% of revenue
Kept 3.9% as net incomeNet income $419.0M · 3.9%Interest, other & tax $142.0M · 1.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 10, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $10.68B$17.28B | −38.2% |
| Cost of Revenue | $8.30B$9.01B | −7.9% |
| Gross Profit | $2.38B$8.27B | −71.2% |
| SG&A Expenses | $1.07B$1.84B | −41.9% |
| Operating Expenses | $15.83B$16.57B | −4.5% |
| Operating Income | $561.00M$704.00M | −20.3% |
| Interest Expense | $268.00M$217.00M | +23.5% |
| Net Income | $419.00M$422.00M | −0.7% |
| EPS (Basic) | $3.95$3.17 | +24.6% |
| EPS (Diluted) | $3.57$2.88 | +24.0% |
| Shares Outstanding (Basic) | 96.00M123.00M | −22.0% |
| Shares Outstanding (Diluted) | 106.00M135.00M | −21.5% |
05—Questions
Frequently Asked Questions
Why did XPO's revenue decline in 2019?
Consolidated revenue fell 3.7% to $16.6 billion, primarily because of a reduction in business from the company's largest customer, which resulted in approximately $570 million less revenue. Foreign currency movement reduced revenue by approximately 2.0 percentage points.
What is XPO's strategic review about?
In January 2020 XPO began a review of strategic alternatives, including the possible sale or spin-off of one or more business units, to maximize shareholder value. No timetable has been set and no business units have been selected, though the company does not intend to sell or spin off its North American less-than-truckload unit.
How did XPO's profitability and cash flow change in 2019?
Operating income increased to $821 million from $704 million, but net income was roughly flat at $440 million versus $444 million. Net cash from operating activities decreased to $791 million from $1,102 million, reflecting higher cash usage from operating assets and liabilities and higher interest and tax payments.
How did XPO use capital in 2019?
XPO repurchased $1.3 billion of common stock, purchased $601 million of property and equipment, and bought a noncontrolling interest in XPO Logistics Europe SA for approximately $258 million. It also issued $1.0 billion of 6.75% Senior Notes due 2024 and drew on its term loan, which increased long-term debt.
What legal risks does XPO face?
XPO faces claims that independent contractor drivers and carriers should be classified as employees, including class actions in California and last mile matters, and a shareholder securities class action filed in December 2018. The company states that it does not believe the ultimate resolution of these matters will have a material adverse effect, but outcomes cannot be predicted with certainty.
06—Continue