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10-Q
XPO LOGISTICS, INC. filed this Form 10-Q on 11/05/2018
Entire Document
 

losses in 2018 related to the refinancing of our Term Loan facility in the first quarter of 2018 and the partial debt redemption of our 6.50% senior notes due 2022 (“Senior Notes due 2022”) in the third quarter of 2018. Debt extinguishment losses in 2017 related to refinancing of our Term Loan facility in the first quarter of 2017 and redemption of our 7.25% senior notes due 2018 (“Senior Notes due 2018”) in the third quarter of 2017. See Liquidity and Capital Resources below for further information.
Interest expense decreased to $51.0 million in the third quarter of 2018 from $72.5 million in the third quarter of 2017. Interest expense decreased to $165.3 million in the first nine months of 2018 from $222.4 million in the first nine months of 2017. The decrease in interest expense in both the third quarter and nine-month periods reflects the reduction in average total indebtedness and the lower rates attributable to our 2018 refinancings.
Our effective income tax rates were 26.2% and 30.0% for the third quarter of 2018 and 2017, respectively, and 21.2% and 24.0% for the first nine months of 2018 and 2017, respectively. The effective tax rates for both the third quarter and nine-month periods of 2018 and 2017 were based on forecasted full year effective tax rates, adjusted for discrete items that occurred within the periods presented. The effective tax rates for both the third quarter and nine-month periods of 2018 reflect the enactment of the Tax Cuts and Jobs Act, which permanently reduced the U.S. corporate statutory rate from 35% to 21% effective January 1, 2018.
Transportation
Summary Financial Table
 
 
Three Months Ended September 30,
 
Percent of Revenue
 
Change
 
Nine Months Ended September 30,
 
Percent of Revenue
 
Change
(Dollars in millions)
 
2018 (1)
 
2017 (1)
 
2018
 
2017
 
2018 vs. 2017
 
2018 (1)
 
2017 (1)
 
2018
 
2017
 
2018 vs. 2017
Revenue
 
$
2,850.6

 
$
2,579.5

 
100.0
%
 
100.0
%
 
10.5
%
 
$
8,512.4

 
$
7,494.0

 
100.0
%
 
100.0
%
 
13.6
%
Operating income
 
195.2

 
145.2

 
6.8
%
 
5.6
%
 
34.4
%
 
539.6

 
415.5

 
6.3
%
 
5.5
%
 
29.9
%
(1)
Certain immaterial organizational changes were made in the first quarter of 2018 related to our managed transportation business. Managed Transportation previously had been included in the Logistics segment, and as of January 1, 2018, it is reflected in the Transportation segment. Prior period information was recast to conform to the current year presentation.
Note: Total depreciation and amortization for the Transportation segment included in Cost of transportation and services, Direct operating expense and SG&A was $117.4 million and $113.6 million for the three months ended September 30, 2018 and 2017, respectively, and $347.3 million and $335.1 million for the nine months ended September 30, 2018 and 2017, respectively.
Transportation
Revenue in our Transportation segment increased 10.5% to $2.9 billion for the third quarter of 2018, compared with $2.6 billion for the third quarter of 2017. For the nine-month period, revenue increased 13.6% to $8.5 billion for the first nine months of 2018, compared with $7.5 billion for the first nine months of 2017. The increase in both the third quarter and nine-month periods was led by increases in freight brokerage and last mile in North America, as well as dedicated truckload transportation in the United Kingdom and France. Foreign currency movement decreased revenue growth by approximately 0.3 percentage points in the third quarter of 2018 and contributed approximately 2.0 percentage points in the first nine months of 2018.
Operating income for the third quarter of 2018 increased to $195.2 million, or 6.8% of revenue, compared with $145.2 million, or 5.6% of revenue, for the same quarter in 2017. Operating income for the first nine months of 2018 increased to $539.6 million, or 6.3% of revenue, compared with $415.5 million, or 5.5% of revenue, for the same nine-month period in 2017. The increase in both the third quarter and nine-month periods was driven primarily by revenue growth, improved profitability in global freight brokerage, LTL operating margin improvement in North America, and growth in dedicated truckload in Europe.


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