DC Velocity - March 2016

NAA-1078 ISS: 1/16

Imagine the Possibilities

Another Sign You Need Apex | #TrueStory

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In the interview, Jacobs said XPO should benefit from a subpar macro environment to obtain attractive pricing for the products and services it needs. The increased clout that comes with being a $15 billion-a-year company should also prove a tailwind for its procurement activities, he added.

BIG GAINS—AT LEAST ON PAPER

Jacobs’ comments came as XPO released its fourth-quarter and full-year 2015 results. Fourth-quarter gross revenue for its transportation operations hit $2.1 billion, up 216.8 percent from the year-earlier quarter. Fourth-quarter gross revenue for the logistics division came in at $1.1 billion, up from $166 million in the prior year.

The outsized year-over-year gains were skewed by the acquisitions of Dentressangle and Con-way, as well as drayage company Bridge Terminal Transport and last-mile– delivery provider UX Specialized Logistics. Jacobs noted, however, that year-over-year “organic” revenue, which excludes the impact of the revenue from the four 2015 acquisitions, rose 8. 4 percent, while organic earnings before interest, taxes, depreciation, and amortization (EBITDA)—which Jacobs said is the best way to measure XPO’s day-to-day performance because it factors out noncash, one-time charges related to acquisitions—increased 33 percent. Jacobs said the strong organic results demonstrate growing customer demand for XPO’s service portfolio, which he has been assembling since 2011.

John G. Larkin, analyst for investment firm Stifel, said the results represent the “most vanilla earnings report” XPO has yet released, due to the absence of any large-scale acquisition. As a result, analysts and investors will focus on “progress updates from existing operations versus the more hypothetical questions” surrounding potential acquisitions, Larkin wrote. Jacobs said last year that XPO is unlikely to make large-scale purchases in 2016, saying it will focus on improving its integrated businesses.

Larkin said XPO is a year or two away from “settling in to a more mature and developed state” where earnings estimates will reflect actual operating performance and not the impact of acquisition-related expenses in a given quarter.

Industrial automation giant Rockwell Automation Inc. will acquire MagneMotion Inc., a Devens, Mass., manufacturer of intelligent conveying systems, the companies announced last month. Terms of the deal were not disclosed.

With customers in the material handling, automotive, and packaging sectors, MagneMotion creates process automation and transportation solutions based on a magnetic levitation (maglev) system that the company describes as an efficient alternative to mechanical factory automation designs such as belt and chain conveyor systems, hydraulic actuators, and lead screw drives.

Milwaukee-based Rockwell said the acquisition would complement the technology it obtained when it acquired Jacobs Automation Inc. in 2013. Jacobs’ iTrak Motion Solution is a magnetically propelled motion-control suite for packaging, material handling, and other industrial applications.

Together, the combined stable of products will create a broad portfolio of independent cart solutions, Rockwell said.

“We see a future where the transportation of products within the factory, whether inside of a particular machine or between machines, will be fully controlled to optimize the productivity and flexibility of the entire process,” Marco Wishart, vice president and general manager of Rockwell Automation’s motion-control business, said in a statement.