01—Abstract
Summary
Summary of the 10-K filed February 12, 2021. Cited figures are marked; the original filing is the authoritative source.
XPO Logistics, Inc. (XPO) reported 2020 revenue of $16.25 billiona, down from $16.65 billion in 2019, as COVID-19 declines in demand weighed on both segments.
Operating income fell to $391 millionb from $821 million, and net income was $117 million versus $440 million a year earlier. Diluted earnings per share were $0.78, compared with $3.57 in 2019. Results were hit by $100 million of transaction and integration costs, $56 million of restructuring expense, and approximately $74 million of SG&A tied to the exploration of strategic alternatives.
Interest expense rose to $325 millionc from $292 million. The company announced in December 2020 that its Board unanimously approved a plan to spin off 100% of its Logistics segment as a separate publicly traded company, with completion currently expected in the second half of 2021, subject to conditions and no assurance of timing. Post-spin, XPO would focus on LTL and truck brokerage.
Cash and cash equivalents rose to $2.05 billiond at year-end 2020 from $377 million, largely reflecting a $1.15 billion Senior Notes due 2025 issuance, and the company stated that existing liquidity is sufficient for the next 12 months. In January 2021 it acquired the majority of Kuehne + Nagel's U.K. and Ireland contract logistics operations, with approximately $585 million of 2020 annual revenue.
Key risks disclosed include the uncertain course of the COVID-19 pandemic, driver and independent contractor classification litigation (including Alvarez and Arrellano cases scheduled for trial in September 2021 with no estimate of possible loss), securities class action litigation, spin-off tax qualification risk, and exposure to euro and pound sterling currency movements. Chairman and CEO Brad Jacobs beneficially owned approximately 17.6% of outstanding common stock as of December 31, 2020.
02—Key points
Key Highlights
- Revenue declined 2.4% to $16.25 billion in 2020 from $16.65 billion in 2019, driven primarily by COVID-19.
- Operating income fell to $391 million from $821 million; net income was $117 million versus $440 million in 2019.
- Diluted EPS was $0.78 in 2020 compared with $3.57 in 2019; the 2020 figure includes a $22 million preferred stock conversion charge affecting EPS.
- Transportation segment revenue was $10.20 billion (operating income $507 million); Logistics segment revenue was $6.18 billion (operating income $140 million).
- Planned spin-off of 100% of the Logistics segment is expected to be completed in the second half of 2021, subject to conditions; XPO would then focus on LTL and truck brokerage.
- Cash and cash equivalents reached $2.05 billion at December 31, 2020, up from $377 million, following the $1.15 billion Senior Notes due 2025 issuance.
- Total debt was $6.86 billion principal at year-end 2020, and the company stated that its existing liquidity is sufficient for the next 12 months.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Xpo kept $0.02.
- Revenue$6.17B100.0%
- Cost of revenue−$7.85B127.3%
- Gross profit−$1.68B27.3%
- Operating costs$1.78B28.9%
- Operating income$97.0M1.6%
- Interest, other & tax$13.0M0.2%
- Net income$110.0M1.8%
04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 12, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $6.17B$10.68B | −42.3% |
| Cost of Revenue | $7.85B$8.30B | −5.4% |
| Gross Profit | -$1.68B$2.38B | −170.8% |
| SG&A Expenses | $746.00M$1.07B | −30.1% |
| Operating Income | $97.00M$561.00M | −82.7% |
| Interest Expense | $308.00M$268.00M | +14.9% |
| Net Income | $110.00M$419.00M | −73.7% |
| EPS (Basic) | $0.87$3.95 | −78.0% |
| EPS (Diluted) | $0.87$3.57 | −75.6% |
| Shares Outstanding (Basic) | 92.00M96.00M | −4.2% |
| Shares Outstanding (Diluted) | 92.00M106.00M | −13.2% |
05—Questions
Frequently Asked Questions
How did XPO's profitability change in 2020?
Operating income fell to $391 million from $821 million, and net income fell to $117 million from $440 million. The filing attributes the decline primarily to COVID-19 demand declines, along with $100 million of transaction and integration costs, $56 million of restructuring expense, and higher interest expense of $325 million versus $292 million.
What is the status of the planned Logistics spin-off?
The Board unanimously approved a plan in December 2020 to pursue a spin-off of 100% of the Logistics segment as a separate public company. The transaction is currently expected to be completed in the second half of 2021, subject to Board final approval and various conditions, and there can be no assurance it will occur or on what terms or timing.
What major acquisition did XPO complete in early 2021?
In January 2021, XPO Logistics Europe acquired the majority of Kuehne + Nagel's contract logistics operations in the U.K. and Ireland, which generated approximately £450 million ($585 million) of annual revenue in 2020. The operations will be included in the Logistics segment.
What are the main legal risks investors should be aware of?
The Alvarez and Arrellano class actions in California contend that intermodal drayage contract carriers should be classified as employees; both are scheduled for trial in September 2021, and the company is unable to estimate the possible loss. Shareholder securities class action Labul remains pending, and the derivative suits are ongoing. XPO believes these suits are without merit and intends to defend them vigorously.
How concentrated is XPO's ownership and customer base?
Chairman and CEO Brad Jacobs beneficially owned approximately 17.6% of outstanding common stock as of December 31, 2020, which the filing notes could influence the outcome of key transactions. On the customer side, the top five customers accounted for approximately 8% of 2020 revenue, and the largest customer accounted for approximately 2%.
06—Continue