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Earnings Watch: XPO Swings Into the Black, USA Reports Loss

Two trucking operations reported their second-quarter financials on Wednesday, with one reporting its first profit since purchasing LTL carrier Con-way last year, while the other reported a loss that was attributed to falling rates and freight volume.

by Staff
August 3, 2016
Earnings Watch: XPO Swings Into the Black, USA Reports Loss

 

5 min to read


Two trucking operations reported their second-quarter financials on Wednesday, with one reporting its first profit since purchasing less-than-truckload carrier Con-way last year, while the other reported a loss that was attributed to falling rates and freight volume.

XPO Sets Records as It Reports a Profit

Global trucking and logistics provider XPO Logistic Inc. (NYSE: XPO) announced net income of $42.6 million, or 35 cents per share, compared with a net loss of $75.1 million, or a loss of 89 per share, for the same period in 2015. Total revenue increased 202.9% year-over-year to $3.7 billion.

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“In the second quarter, we generated $355 million of adjusted EBITDA, $261 million of cash flow from operations, and $170 million of free cash flow, all records for our company,” said Bradley Jacobs, chairman and CEO. "Our strong performance in the quarter was led by our North American operations for last-mile and less-than-truckload, and by our European supply chain operations.”

He said that while market conditions were sluggish overall, e-commerce was a major tailwind, driving margin expansion in last-mile operations and resulting in major contract wins in contract logistics on both sides of the Atlantic.

“In LTL, we increased operating income by 66% from last year's second quarter, pre-acquisition," referring to XPO’s purchase of Con-Way Inc. nearly a year ago for $3 billion. XPO also purchased the French freight services provider Norbert Dentressangle earlier in 2015 for an even larger sum.

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XPO’s transportation segment generated total gross revenue of $2.4 billion for the quarter, a 180.9% increase from the same period in 2015. The year-over-year increase in revenue was primarily due to 2015 acquisitions, with contributions from growth in last-mile and truck brokerage, according to the Connecticut-based company.

Second-quarter operating income for the transportation segment increased to $153.2 million, compared with operating income of $23 million a year ago.

In the North American LTL business, XPO improved operating income to $115.5 million, a 66% increase from the same period a year ago, pre-acquisition. On an adjusted basis, LTL operating income increased 81%, excluding transaction-related costs and amortization related to the acquisition, according to the company. The increase in LTL operating income was primarily driven by yield improvement and overhead cost reductions.

The company's logistics segment generated gross revenue of $1.3 billion for the quarter, up 270.4% from $359.6 million for the same period in 2015. Operating income was $51.1 million, up from $4.3 million a year ago.

For the first six months of 2016, XPO had total revenue of $7.2 billion, a 276.7% increase from the same period in 2015 while net income improved to $22 million, or 19 cents per share, compared with a net loss of $90.3 million, or a loss of $1.11 per share, for the same period in 2015.

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In announcing the results, XPO raised its target for adjusted EBITDA to at least $1.265 billion, from $1.25 billion and increased its target for free cash flow to at least $150 million, from a range of $100 million to $150 million. The company has reaffirmed its full year 2018 target of approximately $1.7 billion of EBITDA.

USA Truck Reports Loss Following Profit a Year Earlier

Meantime, trucking and logistics provider USA Truck Inc. (NASDAQ:USAK) moved from a profit to a loss in the second quarter of the year.

The Arkansas-based company reported a net loss of $1.3 million, or 15 cents per share, compared to net income of $2.8 million or 26 cents per share a year earlier.

Total revenue fell to $109.9 million compared to $133.6 million for the prior-year period while base revenue, which excludes fuel surcharges, was $99.5 million, compared to $117.2 million.

“USA Truck’s results were negatively impacted by a rate environment that deteriorated markedly versus the prior year quarter [as] base revenue per loaded mile dropped by 17 cents or 9.1%, and by the lower volumes with certain dedicated customers,” said President and CEO Randy Rogers. “Despite the disappointing quarterly results, the company generated incremental progress from previously announced initiatives, and believes it can produce substantially improved results.”

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He said these actions include: accelerated disposal of high cost equipment; expanded focus on cost control, including a reduction in force in the second quarter; continued refinement of its network to build greater density, aided by a lower fleet size; and continued growth of USAT Logistics market share as demonstrated by increased load count in the quarter.

For the first half of the year, USA Truck reported a loss of $3.2 million versus a $4.4 million profit a year earlier as total revenue fell to $220.5 million from $266.5 million. Base revenue also declined, hitting $201.5 million compared to $232.7 million a year earlier.

Included in this was $6 million in after-tax money relating to restructuring, impairment and other costs, as well as the severance charges

During the second quarter, USA’s trucking business saw its average number of in-service tractors fall from 2,059 a year earlier to 1,834 with a decline by a similar margin in the first half of 2016 compared to the year before.

Trucking revenue fell from $75.4 million in the most recent quarter from $93.4 million a year earlier, resulting in an operating loss of $2.7 million versus a $2.6 million operating profit. For the first six months of this year, the operating loss totaled $7.1 million compared to an operating profit of $4.1 million a year earlier.

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On the logistics side, things didn’t improve, but were still in the black, with operating income of $2.2 million versus $3.3 million a year ago in the second quarter of 2016. Revenue during the period fell from $40.1 million a year ago to $34.4 million this past quarter, despite a load count that increased 12% while its gross margin was unchanged at 18.1% and increased slightly for the first half of the year from 2015.

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