XPO Logistics Announces Third Quarter 2019 Results

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XPO Logistics Announces Third Quarter 2019 Results

GREENWICH, Conn., Oct. 28, 2019 (GLOBE NEWSWIRE) --  XPO Logistics, Inc. (NYSE: XPO) today announced financial results for the third quarter 2019. Revenue was $4.15 billion for the quarter, compared with $4.34 billion for the same period in 2018. Net income attributable to common shareholders was $117 million for the quarter, compared with $101 million for the same period in 2018. Operating income was $229 million for the quarter, compared with $209 million for the same period in 2018. Diluted earnings per share was $1.14 for the quarter, compared with $0.74 for the same period in 2018. 

Adjusted net income attributable to common shareholders, a non-GAAP financial measure, was $121 million for the third quarter 2019, unchanged from the same period a year ago. Adjusted diluted earnings per share, a non-GAAP financial measure, was $1.18 for the quarter, compared with $0.89 for the same period in 2018.

Adjusted net income attributable to common shareholders and adjusted diluted earnings per share for the third quarter 2019 exclude: $11 million, or $8 million after-tax, of restructuring costs, primarily severance; and a benefit of $4 million, or $3 million after-tax, of non-cash unrealized gains on foreign currency contracts.

Adjusted earnings before interest, taxes, depreciation and amortization ("adjusted EBITDA"), a non-GAAP financial measure, increased to $438 million for the third quarter 2019, compared with $415 million for the same period in 2018. Adjusted EBITDA for the third quarter 2019 excludes $11 million of restructuring costs, primarily severance.

For the third quarter 2019, the company generated $278 million of cash flow from operations and $257 million of free cash flow, a non-GAAP financial measure. Reconciliations of non-GAAP financial measures used in this release are provided in the attached financial tables.  

Updates 2019 Financial Targets

The company updated its full-year 2019 targets for revenue, depreciation and amortization, effective tax rate and cash taxes, and reaffirmed its targets for adjusted EBITDA, free cash flow and net capital expenditures, as follows:

  • Revenue of (2.5%) to (4.0%) year-over-year, from (1%) to 1% previously; which translates to organic revenue growth, a non-GAAP financial measure, of flat to 1.0%, from 2.5% to 4.5% previously. The update to revenue reflects the company’s expectation for continued softness in the macro environment;
  • Adjusted EBITDA in the range of $1.675 billion to $1.725 billion, or year-over-year growth of 7% to 10%, unchanged from prior guidance; 
  • Free cash flow in the range of $575 million to $675 million, unchanged;
  • Net capital expenditures in the range of $400 million to $450 million, unchanged;
  • Depreciation and amortization in the range of $745 million to $765 million, from $765 million to $785 million previously;
  • Effective tax rate in the range of 23% to 25%, from 25% to 28% previously; and
  • Cash taxes in the range of $110 million to $130 million, from $130 million to $150 million previously.

The company’s 2019 targets for free cash flow and cash taxes assume cash interest expense of $275 million to $290 million. The company continues to expect an incremental benefit to free cash flow of $125 million to $150 million from trade receivables programs in 2019.

CEO Comments

Bradley Jacobs, chairman and chief executive officer of XPO Logistics, said, “In the third quarter, we grew EPS by 54% and adjusted EPS by 33% year-over-year. We also delivered a solid beat on adjusted EBITDA, outpacing the macro through cost control and margin discipline. In less-than-truckload, our adjusted operating ratio was a third quarter record. We remain firmly on track to generate at least $1 billion of EBITDA from LTL in 2021.”

Jacobs continued, “Our significant investments in technology are creating tailwinds across our operations. We’re executing on 10 initiatives that represent a pool of $700 million to $1 billion of potential profit improvement over the next several years. One large opportunity is to apply our XPO Smart productivity tools to the $5 billion of annual costs related to our variable labor spend. All 10 initiatives are specific to XPO and largely independent of the operating environment. We’re very focused on the size of the prize and the meaningful potential uplift to our profitability.”

Third Quarter 2019 Results by Segment

  • Transportation: The company's transportation segment generated revenue of $2.68 billion for the third quarter 2019, compared with $2.85 billion for the same period in 2018. The reduction in segment revenue primarily reflects a decrease in freight brokerage and direct postal injection revenue from the company's largest customer, lower rates in truck brokerage and unfavorable foreign currency exchange, partially offset by growth in managed transportation.

    Operating income for the transportation segment was $208 million for the third quarter 2019, compared with $196 million for the same period in 2018. Adjusted EBITDA for the segment was $333 million for the quarter, compared with $326 million for the same period in 2018.

    In North American LTL, yield, excluding fuel, improved by 2.9% year-over-year for the third quarter 2019. The third quarter operating ratio for LTL was 82.3%. Adjusted operating ratio, a non-GAAP financial measure, was a third quarter record at 80.8%, a 460 basis point improvement year-over-year. 
  • Logistics: The company's logistics segment generated revenue of $1.51 billion for the third quarter 2019, compared with $1.52 billion for the same period in 2018. Organic revenue growth was 2.4%, led by consumer packaged goods, food and beverage and aerospace in North America, and by e-commerce in Europe, largely offset by a reduction in business from the company's largest customer.

    Operating income was $61 million for the third quarter 2019, compared with $59 million for the same period in 2018. Adjusted EBITDA for the segment was $142 million for the quarter, compared with $128 million from the same period in 2018. The increase in adjusted EBITDA primarily reflects growth from existing customers and from new business startups in recent quarters, offset in part by a reduction in business from the company's largest customer and unfavorable foreign currency exchange.
  • Corporate: Corporate SG&A expense was $40 million for the third quarter 2019, compared with $46 million for the same period in 2018.

Nine Months 2019 Financial Results

For the nine months ended September 30, 2019, the company reported total revenue of $12.51 billion, compared with $12.89 billion for the same period in 2018. Net income attributable to common shareholders was $282 million for the first nine months of 2019, compared with $306 million for the same period in 2018. Operating income was $619 million for the first nine months of 2019, compared with $578 million for the same period in 2018. Earnings per diluted share was $2.63 for the first nine months of 2019, compared with $2.26 for the same period in 2018.

Adjusted net income attributable to common shareholders was $312 million for the first nine months of 2019, compared with $334 million for the same period in 2018. Adjusted earnings per diluted share was $2.91 for the first nine months of 2019, compared with $2.48 for the same period in 2018. Adjusted net income attributable to common shareholders and adjusted earnings per diluted share for the first nine months of 2019 exclude: $28 million, or $20 million after-tax, of restructuring costs, primarily severance; a non-cash charge of $6 million, or $4 million after-tax, related to the impairment of customer relationship intangibles; $5 million, or $4 million after-tax, of non-cash unrealized losses on foreign currency contracts; $5 million, or $4 million after-tax, of debt extinguishment costs; and $2 million, or $2 million after-tax, of transaction, integration and rebranding costs.

Adjusted EBITDA for the first nine months of 2019 increased to $1.24 billion, compared with $1.18 billion for the same period in 2018. Adjusted EBITDA for the first nine months of 2019 excludes: $28 million of restructuring costs, primarily severance; and $2 million of transaction, integration and rebranding costs.

Conference Call  

The company will hold a conference call on Tuesday, October 29, 2019, at 8:30 a.m. Eastern Time. Participants can call toll-free (from US/Canada) 1-877-269-7756; international callers dial +1-201-689-7817. A live webcast of the conference will be available on the investor relations area of the company’s website, xpo.com/investors. The conference will be archived until November 29, 2019. To access the replay by phone, call toll-free (from US/Canada) 1-877-660-6853; international callers dial +1-201-612-7415. Use participant passcode 13695126.

About XPO Logistics

XPO Logistics, Inc. (NYSE: XPO) is a top ten global logistics provider of cutting-edge supply chain solutions to the most successful companies in the world. The company operates as a highly integrated network of people, technology and physical assets in 30 countries, with 1,531 locations and approximately 100,000 employees. XPO uses its network to help more than 50,000 customers manage their goods most efficiently throughout their supply chains. XPO's corporate headquarters are in Greenwich, Conn., USA, and its European headquarters are in Lyon, France. xpo.com

Non-GAAP Financial Measures

As required by the rules of the Securities and Exchange Commission ("SEC"), we provide reconciliations of the non-GAAP financial measures contained in this press release to the most directly comparable measure under GAAP, which are set forth in the financial tables attached to this release.

XPO’s non-GAAP financial measures for the three and nine months ended September 30, 2019 used in this release include: earnings before interest, taxes, depreciation and amortization ("EBITDA") and adjusted EBITDA on a consolidated basis and for our transportation and logistics segments; free cash flow; adjusted net income attributable to common shareholders and adjusted earnings per share (basic and diluted) ("adjusted EPS"); net revenue for our transportation and logistics segments and intersegment eliminations; adjusted operating income and adjusted operating ratio for our North American less-than-truckload business; and organic revenue and organic revenue growth on a consolidated basis and for our logistics business.

We believe that the above adjusted financial measures facilitate analysis of our ongoing business operations because they exclude items that may not be reflective of, or are unrelated to, XPO and its business segments' core operating performance, and may assist investors with comparisons to prior periods and assessing trends in our underlying businesses. Other companies may calculate these non-GAAP financial measures differently, and therefore our measures may not be comparable to similarly titled measures of other companies. These non-GAAP financial measures should only be used as supplemental measures of our operating performance.

Adjusted EBITDA, adjusted net income attributable to common shareholders and adjusted EPS include adjustments for transaction, integration and rebranding costs as well as adjustments for restructuring costs. Transaction and integration adjustments are generally incremental costs that result from an actual or planned acquisition and include transaction costs, acquisition and integration consulting fees, internal salaries and wages (to the extent the individuals are assigned full-time to integration and transformation activities) and certain costs related to integrating and converging IT systems. Rebranding adjustments primarily relate to the rebranding of the XPO Logistics name on our truck fleet and buildings. Restructuring costs primarily relate to severance costs associated with business optimization initiatives. Management uses these non-GAAP financial measures in making financial, operating and planning decisions and evaluating XPO's and each business segment's ongoing performance.

We believe that free cash flow is an important measure of our ability to repay maturing debt or fund other uses of capital that we believe will enhance stockholder value. We calculate free cash flow as adjusted net cash provided by operating activities, less payment for purchases of property and equipment plus proceeds from sale of property and equipment, with adjusted net cash
provided by operating activities defined as net cash provided by operating activities plus cash collected on deferred purchase price receivables. We believe that EBITDA and adjusted EBITDA improve comparability from period to period by removing the impact of our capital structure (interest and financing expenses), asset base (depreciation and amortization), tax impacts and other adjustments as set out in the attached tables that management has determined are not reflective of core operating activities and thereby assist investors with assessing trends in our underlying businesses. We believe that adjusted net income attributable to common shareholders and adjusted EPS improve the comparability of our operating results from period to period by removing the impact of certain costs and gains that management has determined are not reflective of our core operating activities. We believe that net revenue improves the comparability of our operating results from period to period by removing the cost of transportation and services, in particular the cost of fuel, incurred in the reporting period as set out in the attached tables. We believe that adjusted operating income and adjusted operating ratio for our North American less-than-truckload business improve the comparability of our operating results from period to period by (i) removing the impact of certain restructuring costs and amortization expenses and, (ii) including the impact of pension income incurred in the reporting period as set out in the attached tables. We believe that organic revenue is an important measure because it excludes the following items: foreign currency exchange rate fluctuations, fuel surcharges and revenue associated with our direct postal injection service in last mile.

With respect to our 2019 financial targets for adjusted EBITDA, free cash flow and organic revenue, as well as our 2021 target for EBITDA in our North American less-than-truckload business, each of which is a non-GAAP measure, a reconciliation of the non-GAAP measure to the corresponding GAAP measure is not available without unreasonable effort due to the variability and complexity of the reconciling items described below that we exclude from the non-GAAP target measure. The variability of these items may have a significant impact on our future GAAP financial results and, as a result, we are unable to prepare the forward-looking balance sheet, statement of income and statement of cash flow, prepared in accordance with GAAP that would be required to produce such a reconciliation.   

Forward-looking Statements

This release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including our 2019 financial targets for our consolidated revenue and organic revenue, adjusted EBITDA, free cash flow, net capital expenditures, depreciation and amortization, effective tax rate, cash taxes and the free cash flow benefit from our trade receivables programs, as well as our 2021 target for EBITDA in our North American less-than-truckload business and our potential profit growth opportunity by 2022. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. In some cases, forward-looking statements can be identified by the use of forward-looking terms such as "anticipate," "estimate," "believe," "continue," "could," "intend," "may," "plan," "potential," "predict," "should," "will," "expect," "objective," "projection," "forecast," "goal," "guidance," "outlook," "effort," "target," "trajectory" or the negative of these terms or other comparable terms. However, the absence of these words does not mean that the statements are not forward-looking. These forward-looking statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances.

These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause or contribute to a material difference include the risks discussed in our filings with the SEC and the following: economic conditions generally; competition and pricing pressures; our ability to align our investments in capital assets, including equipment, service centers and warehouses, to our customers' demands; our ability to successfully integrate and realize anticipated synergies, cost savings and profit improvement opportunities with respect to acquired companies; our ability to develop and implement suitable information technology systems and prevent failures in or breaches of such systems; our substantial indebtedness; our ability to raise debt and equity capital; our ability to maintain positive relationships with our network of third-party transportation providers; our ability to attract and retain qualified drivers; litigation, including litigation related to alleged misclassification of independent contractors and securities class actions; labor matters, including our ability to manage our subcontractors, and risks associated with labor disputes at our customers and efforts by labor organizations to organize our employees; risks associated with our self-insured claims; risks associated with defined benefit plans for our current and former employees; fluctuations in currency exchange rates; fluctuations in fixed and floating interest rates; fuel price and fuel surcharge changes; issues related to our intellectual property rights; governmental regulation, including trade compliance laws; and governmental or political actions, including the United Kingdom's likely exit from the European Union. All forward-looking statements set forth in this release are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to or effects on us or our business or operations. Forward-looking statements set forth in this release speak only as of the date hereof, and we do not undertake any obligation to update forward-looking statements to reflect subsequent events or circumstances, changes in expectations or the occurrence of unanticipated events, except to the extent required by law.

Investor Contact
XPO Logistics, Inc.
Tavio Headley
+1-203-930-1602
tavio.headley@xpo.com

Media Contact
XPO Logistics, Inc.
Erin Kurtz
+1-203-489-1586
erin.kurtz@xpo.com


XPO Logistics, Inc.  
Condensed Consolidated Statements of Income  
(Unaudited)  
(In millions, except per share data)  
                         
                         
  Three Months Ended   Nine Months Ended  
  September 30,   September 30,  
    2019     2018     2019     2018  
                         
Revenue $   4,154   $   4,335   $   12,512   $   12,890  
Operating expenses                        
Cost of transportation and services     2,068       2,249        6,272       6,748  
Direct operating expense     1,401       1,431       4,224       4,213  
Sales, general and administrative expense     456       446       1,397       1,351  
Total operating expenses     3,925       4,126       11,893       12,312  
Operating income     229       209        619       578  
Other expense (income)     (11)       (18)       (41)       (67)  
Foreign currency (gain) loss     (5)       3        5       5  
Debt extinguishment loss     -        17       5       27  
Interest expense     75       51        218       165  
Income before income tax provision     170       156       432       448  
Income tax provision     34       41       99       95  
Net income     136       115       333       353  
Net income attributable to noncontrolling interests     (6)       (6)       (21)       (22)  
Net income attributable to XPO $   130   $   109   $    312   $   331  
                         
Net income attributable to common shareholders (1) (2) $   117   $   101   $   282   $   306  
                         
Basic earnings per share (2) $   1.27   $   0.81   $   2.91   $   2.50  
Diluted earnings per share (2) $   1.14   $   0.74   $   2.63   $    2.26  
                         
Weighted-average common shares outstanding                        
Basic weighted-average common shares outstanding     92       125       97       122  
Diluted weighted-average common shares outstanding     102       137       107       135  
                         
(1) Net income attributable to common shareholders reflects the following items:                        
Non-cash allocation of undistributed earnings $   12   $   7   $   28   $   23  
Preferred dividends     1       1       2       2  
                         
(2) The sum of quarterly net income attributable to common shareholders and earnings per share may not equal year-to-date amounts due to differences in the weighted-average number of shares outstanding during the respective periods and the impact of the two-class method of calculating earnings per share.  
 


XPO Logistics, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In millions, except per share data)
  September 30,   December 31,
  2019   2018
ASSETS        
Current assets:          
Cash and cash equivalents $   425   $   502
Accounts receivable, net of allowances of $60 and $52, respectively     2,577       2,596
Other current assets     424       590
Total current assets     3,426       3,688
           
Property and equipment, net of $1,905 and $1,585 in accumulated depreciation, respectively     2,589       2,605
Operating lease assets     2,110       - 
Goodwill     4,374        4,467
Identifiable intangible assets, net of $802 and $706 in accumulated amortization, respectively     1,114       1,253
Other long-term assets     303        257
Total long-term assets     10,490       8,582
Total assets $   13,916   $   12,270
           
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities:          
Accounts payable $   1,132   $   1,258
Accrued expenses     1,417       1,480
Short-term borrowings and current maturities of long-term debt     64       367
Short-term operating lease liabilities     454       - 
Other current liabilities      140       208
Total current liabilities     3,207       3,313
           
Long-term debt     5,121       3,902
Deferred tax liability      483       444
Employee benefit obligations     141       153
Operating lease liabilities     1,671       - 
Other long-term liabilities     328       488
Total long-term liabilities     7,744       4,987
           
Stockholders’ equity:          
Convertible perpetual preferred stock, $0.001 par value; 10 shares authorized; 0.07 of Series A          
shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively     41       41
Common stock, $0.001 par value; 300 shares authorized; 92 and 116 shares issued and          
outstanding as of September 30, 2019 and December 31, 2018, respectively     -        - 
Additional paid-in capital     2,056       3,311
Retained earnings     680       377
Accumulated other comprehensive loss     (205)        (154)
Total stockholders’ equity before noncontrolling interests     2,572       3,575
Noncontrolling interests     393       395
Total equity     2,965       3,970
Total liabilities and equity $   13,916   $   12,270


XPO Logistics, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In millions)
             
    Nine Months Ended
    September 30,
      2019     2018
Operating activities          
Net income $   333   $   353
Adjustments to reconcile net income to net cash from operating activities          
  Depreciation and amortization     546       528
  Stock compensation expense     48       64
  Accretion of debt     16       11
  Deferred tax expense     26       14
  Debt extinguishment loss     5       27
  Unrealized loss (gain) on foreign currency option and forward contracts     5       (13)
  Gains on sale of property and equipment     (73)       (3)
  Other     17        7
Changes in assets and liabilities:          
  Accounts receivable     (190)       (262)
  Other assets     (12)       (99)
  Accounts payable     (153)        (4)
  Accrued expenses and other liabilities     (126)       (87)
Net cash provided by operating activities     442       536
Investing activities          
  Payment for purchases of property and equipment     (413)       (413)
  Proceeds from sale of property and equipment     192       92
  Cash collected on deferred purchase price receivable      186       - 
  Other     -        (13)
Net cash used in investing activities     (35)       (334)
Financing activities          
  Proceeds from issuance of debt     1,751       896
  Repurchase of debt     -        (1,225)
  Proceeds from borrowings on ABL facility     1,690       925
  Repayment of borrowings on ABL facility     (1,690)       (1,025)
  Repayment of debt and finance leases     (850)       (85)
  Payment for debt issuance costs     (28)        (6)
  Proceeds from forward sale settlement     -        349
  Repurchase of common stock     (1,347)       - 
  Change in bank overdrafts     2       18
  Payment for tax withholdings for restricted shares     (11)       (49)
  Dividends paid     (3)       (4)
  Other     7       5
Net cash used in financing activities     (479)       (201)
Effect of exchange rates on cash, cash equivalents and restricted cash     (7)       (10)
Net decrease in cash, cash equivalents and restricted cash     (79)       (9)
Cash, cash equivalents and restricted cash, beginning of period     514       449
Cash, cash equivalents and restricted cash, end of period $   435   $   440


Transportation  
Summary Financial Table  
(Unaudited)  
(In millions)  
                                             
  Three Months Ended September 30,   Nine Months Ended September 30,  
  2019   2018   $ Variance   Change %   2019   2018   $ Variance   Change %  
                                             
Revenue $   2,684   $   2,850   $   (166)   -5.8%   $   8,090   $   8,512   $   (422)   -5.0%  
Cost of transportation and services     1,889        2,055       (166)   -8.1%       5,714       6,150       (436)   -7.1%  
Net revenue (1)     795       795       -    0.0%       2,376       2,362       14   0.6%  
Direct operating expense     310       335       (25)   -7.5%       947       1,011       (64)   -6.3%  
Sales, general and administrative expense                                            
Salaries and benefits     156       148       8   5.4%       489       456       33   7.2%  
Other sales, general and administrative expense     43       36        7   19.4%       127       119       8   6.7%  
Purchased services     32       32       -    0.0%       92       101       (9)   -8.9%  
Depreciation and amortization     46       48       (2)   -4.2%       142       135       7   5.2%  
Total sales, general and administrative expense     277       264        13   4.9%       850       811       39   4.8%  
Operating income $   208   $   196   $   12   6.1%   $   579   $   540   $   39   7.2%  
Other income (expense) (2)     8       10       (2)   -20.0%       24       31       (7)   -22.6%  
Total depreciation and amortization     110       117        (7)   -6.0%       334       347       (13)   -3.7%  
EBITDA (1) $   326   $   323   $   3   0.9%   $   937   $   918   $   19   2.1%  
Transaction, integration and rebranding costs     -        2       (2)   -100.0%       1       8       (7)   -87.5%  
Restructuring costs     7       1        6   600.0%       21       1       20   2000.0%  
Adjusted EBITDA (1) (3) $   333   $   326   $   7   2.1%   $   959   $   927   $   32   3.5%  
                                             
(1) See the “Non-GAAP Financial Measures” section of the Press Release.  
 
(2) Other income (expense) consists of pension income and is included in Other expense (income) on the Condensed Consolidated Statement of Income.  
 
(3) For purposes of the summary financial table, adjusted EBITDA is reconciled to operating income in the Condensed Consolidated Statements of Income.  


Transportation  
Key Data by Service Offering  
(Unaudited)  
(In millions)  
                         
  Three Months Ended September 30,   Nine Months Ended September 30,  
  2019   2018   2019   2018  
Revenue                        
North America                        
Freight Brokerage (1) $   633   $   739   $   1,876   $   2,178  
Less-Than-Truckload     987       981       2,925       2,890  
Last Mile     219       271       655        778  
Managed Transport     134       110       400       361  
Total North America     1,973       2,101       5,856        6,207  
Europe                        
Freight Brokerage and Truckload     450       457       1,393       1,408  
Less-Than-Truckload     240       246       742       757  
Total Europe     690       703       2,135       2,165  
Global Forwarding     74       84        229       251  
Eliminations     (53)       (38)       (130)       (111)  
Total Revenue $   2,684   $   2,850   $    8,090   $   8,512  
                         
Net Revenue                        
North America                        
Freight Brokerage $   114   $   138   $   368   $   376  
Less-Than-Truckload     412       393       1,183       1,158  
Last Mile     74       77       214       227  
Managed Transport     23       23       78       75  
Total North America     623       631       1,843       1,836  
Europe     154       150       486       483  
Global Forwarding     18       14       47       43  
Total Net Revenue (2) $   795   $   795   $   2,376   $   2,362  
                         
Net Revenue %                        
North America                        
Freight Brokerage   18.1%     18.7%     19.6%     17.3%  
Less-Than-Truckload   41.8%     40.0%     40.4%     40.0%  
Last Mile   33.5%     28.2%     32.6%     29.1%  
Managed Transport   17.0%     21.6%     19.4%     20.9%  
Total North America   31.6%     30.0%     31.5%     29.6%  
Europe   22.4%     21.4%     22.8%     22.3%  
Global Forwarding   24.9%     17.2%     20.9%     17.3%  
Overall Net Revenue %   29.6%     27.9%     29.4%     27.8%  
                         
Direct Operating Expense                        
North America                        
Freight Brokerage $   23   $   23    $   69   $   69  
Less-Than-Truckload     151       168       463       506  
Last Mile     24       23       67       64  
Managed Transport     12       16       46       54  
Total North America     210        230       645       693  
Europe     97       102       293       308  
Global Forwarding     3        3       9       10  
Total Direct Operating Expense $   310   $   335    $   947   $   1,011  
                         
                         
(1) Freight Brokerage revenue declined 14% year-over-year for the third quarter and the first nine months of 2019, with loss of business from the Company’s largest customer accounting for 11% and 10% of the decline in each of the two periods, respectively.  
(2) See the “Non-GAAP Financial Measures” section of the Press Release.  
 
Less-Than-Truckload revenue is before intercompany eliminations and includes revenue from the Company's trailer manufacturing business.  


XPO Logistics North American Less-Than-Truckload  
Summary Data Table  
(Unaudited)  
             
  Three Months Ended September 30,  
  2019   2018  
             
Number of Working Days   63.5     63.0  
             
Lbs. per Day (Thousands)   73,055     75,385  
             
% Change in Lbs. per Day (1)   -3.1%     -1.5%  
             
Shipments per Day   53,075     52,769  
             
% Change in Shipments per Day (1)   0.6%     -5.4%  
             
Avg. Weight per Shipment (in pounds)      1,376       1,429  
             
% Change in Weight per Shipment (1)   -3.7%     4.2%  
             
Gross Revenue per Shipment $ 295.79    $ 300.76  
             
Gross Revenue per Hundred Weight (including fuel surcharges) $ 21.49    $ 21.05  
             
Gross Revenue per Hundred Weight (excluding fuel surcharges) $ 18.58    $ 18.05  
             
% Change in Gross Revenue per Hundred Weight (1)            
Including fuel surcharges   2.1%     4.6%  
Excluding fuel surcharges   2.9%     1.9%  
             
Average Length of Haul (in Miles)   817.5     805.5  
             
Total Average Load Factor (2)     23,700       22,342  
             
Average Age of Tractor Fleet (Years)   5.06     5.71  
             
(1) Compared with the same quarter of the previous year.  
 
(2) Total Average Load Factor equals freight pound miles divided by total linehaul miles.  


XPO Logistics North American Less-Than-Truckload
Adjusted Operating Ratio
(Unaudited)
(In millions)
                                           
  Three Months Ended September 30,   Nine Months Ended September 30,
  2019   2018   $ Variance   Change %   2019   2018   $ Variance   Change %
                                           
Revenue (excluding fuel surcharge revenue) $   839   $   826   $   13   1.6%   $   2,482   $   2,439   $   43   1.8%
Fuel surcharge revenue     135       143       (8)   -5.6%       404       414       (10)   -2.4%
Revenue     974       969       5   0.5%       2,886       2,853       33   1.2%
Salaries, wages and employee benefits     454       442       12   2.7%       1,350       1,312       38   2.9%
Purchased transportation     97       104       (7)   -6.7%       305       300       5   1.7%
Fuel and fuel-related taxes     65       75       (10)   -13.3%       205       218       (13)   -6.0%
Other operating expenses     90        121       (31)   -25.6%       285       363       (78)   -21.5%
Depreciation and amortization     57       62       (5)   -8.1%       169       183        (14)   -7.7%
Maintenance     26       26       -    0.0%       80       77       3   3.9%
Rents and leases     12       11       1   9.1%        36       33       3   9.1%
Purchased labor     1       3       (2)   -66.7%       5       9       (4)   -44.4%
Operating income     172       125       47   37.6%       451       358       93   26.0%
Operating ratio (1)   82.3%     87.0%               84.4%     87.4%          
Restructuring costs     1       -         1   100.0%       3       -        3   100.0%
Amortization expense     8       8       -    0.0%       25       25       -    0.0%
Other income (2)     6       8       (2)   -25.0%       17       22       (5)   -22.7%
Adjusted operating income (3) $   187   $   141   $   46   32.6%   $   496   $   405   $   91   22.5%
Adjusted operating ratio (4) (5)   80.8%     85.4%               82.8%     85.8%          
                                           
(1) Operating ratio is calculated as (1 - (Operating income divided by Revenue)).
(2) Other income primarily consists of pension income and is included in Other expense (income) on the Condensed Consolidated Statement of Income.
(3) See the “Non-GAAP Financial Measures” section of the Press Release.
(4) Adjusted operating ratio is calculated as (1 - (Adjusted operating income divided by Revenue)).
(5) Less-Than-Truckload adjusted operating ratio improved year-over-year by 460 basis points for the third quarter and 300 basis points for the first nine months of 2019, with sales of real estate accounting for 270 basis points and 200 basis points, respectively.


Logistics  
Summary Financial Table  
(Unaudited)  
(In millions)  
                                             
  Three Months Ended September 30,   Nine Months Ended September 30,  
  2019   2018   $ Variance   Change %   2019   2018   $ Variance   Change %  
                                             
Revenue $   1,510   $    1,517   $   (7)   -0.5%   $   4,530   $   4,473   $   57   1.3%  
Cost of transportation and services     217       226       (9)   -4.0%       658       693        (35)   -5.1%  
Net revenue (1)     1,293       1,291       2   0.2%       3,872       3,780       92   2.4%  
Direct operating expense     1,091       1,095       (4)   -0.4%       3,278       3,202       76   2.4%  
Sales, general and administrative expense                                            
Salaries and benefits     80       67       13   19.4%       249       217        32   14.7%  
Other sales, general and administrative expense     18       30       (12)   -40.0%       50       67       (17)   -25.4%  
Purchased services     20        20       -    0.0%       60       61       (1)   -1.6%  
Depreciation and amortization     23       20       3   15.0%       67       59        8   13.6%  
Total sales, general and administrative expense     141       137       4   2.9%       426       404       22   5.4%  
Operating income $   61   $   59   $   2   3.4%   $   168   $   174   $   (6)   -3.4%  
Other income (expense) (2)     5       8       (3)   -37.5%       17       24        (7)   -29.2%  
Total depreciation and amortization     73       59       14   23.7%       201       172       29   16.9%  
EBITDA (1) $   139   $   126   $   13   10.3%   $   386   $   370   $   16   4.3%  
Transaction, integration and rebranding costs     -        1       (1)   -100.0%       -        3       (3)   -100.0%  
Restructuring costs     3       1       2   200.0%       5       1       4   400.0%  
Adjusted EBITDA (1) (3) $   142   $   128   $    14   10.9%   $   391   $   374   $   17   4.5%  
                                             
(1) See the “Non-GAAP Financial Measures” section of the Press Release.  
 
(2) Other income (expense) consists of pension income and is included in Other expense (income) on the Condensed Consolidated Statement of Income.  
 
(3) For purposes of the summary financial table, adjusted EBITDA is reconciled to operating income in the Condensed Consolidated Statements of Income.  


Logistics
Key Data by Geography
(Unaudited)
(In millions)
                       
  Three Months Ended September 30,   Nine Months Ended September 30,
  2019   2018   2019   2018
Revenue                      
North America $   622   $   597   $   1,828   $   1,713
Europe     888       920       2,702       2,760
Total Revenue $   1,510   $   1,517   $   4,530   $   4,473
                       
Net Revenue                      
North America $   594   $   573   $   1,751   $   1,635
Europe     699       718       2,121       2,145
Total Net Revenue (1) $   1,293   $   1,291   $   3,872   $   3,780
                       
Direct Operating Expense                      
North America $   534   $   506   $   1,580   $   1,456
Europe     557       589       1,698       1,746
Total Direct Operating Expense $   1,091   $   1,095   $   3,278   $   3,202
                       
Gross Margin                      
North America $   60   $   67   $   171   $   179
Europe      142       129       423       399
Total Gross Margin $   202   $   196   $   594   $   578
                       
Gross Margin %                      
North America   9.7%     11.2%     9.4%     10.5%
Europe   16.0%     14.1%     15.6%     14.5%
Total Gross Margin %   13.4%     12.9%     13.1%     12.9%
                       
(1) See the “Non-GAAP Financial Measures” section of the Press Release.


XPO Corporate
Summary of Sales, General and Administrative Expense
(Unaudited)
(In millions)
                                           
  Three Months Ended September 30,   Nine Months Ended September 30,
  2019   2018   $ Variance   Change %   2019   2018   $ Variance   Change %
Sales, general and administrative expense                                          
Salaries and benefits $   23   $   26   $   (3)   -11.5%   $   75    $   78    $   (3)   -3.8%
Other sales, general and administrative expense     3        6       (3)   -50.0%       9       8       1   12.5%
Purchased services     11       11       -    0.0%       33       42        (9)   -21.4%
Depreciation and amortization     3       3       -    0.0%       11       8       3   37.5%
Total sales, general and administrative expense $   40   $   46   $   (6)   -13.0%   $   128    $   136    $   (8)   -5.9%


Intersegment Eliminations  
Summary Financial Table  
(Unaudited)  
(In millions)  
                                             
  Three Months Ended September 30,   Nine Months Ended September 30,  
  2019   2018   $ Variance   Change %   2019   2018   $ Variance   Change %  
                                             
Revenue $   (40)   $   (32)   $   (8)   25.0%   $   (108)   $   (95)   $   (13)   13.7%  
Cost of transportation and services     (38)       (32)       (6)   18.8%       (100)       (95)       (5)   5.3%  
Net revenue (1)     (2)       -        (2)   100.0%       (8)       -        (8)   100.0%  
Direct operating expense     -        -        -    0.0%       (1)       (1)       -    0.0%  
Sales, general and administrative expense                                            
Salaries and benefits     (1)       -        (1)   100.0%       (4)       -        (4)   100.0%  
Other sales, general and administrative expense     (1)       -        (1)   100.0%       (2)       (1)       (1)   100.0%  
Purchased services     -        -         -    0.0%       (1)       2       (3)   -150.0%  
Depreciation and amortization     -        -        -    0.0%       -        -        -    0.0%  
Total sales, general and administrative expense     (2)       -        (2)   100.0%       (7)       1       (8)   -800.0%  
Operating income $   -    $    -    $   -      -    $   -    $   -    $   -      -   
                                             
Note: Intersegment Eliminations represent intercompany activity between the Company's reportable segments that is eliminated upon consolidation. The difference between operating income component line items in the Condensed Consolidated Statements of Income and the sum of the respective line items from the Transportation and Logistics Summary Financial Tables and Corporate Summary of Sales, General and Administrative Expense above represents intercompany eliminations between our reportable segments. The table above summarizes the intersegment eliminations by line item.  
 
 
 
(1) See the “Non-GAAP Financial Measures” section of the Press Release.  


Reconciliation of Non-GAAP Measures  
XPO Logistics, Inc.  
Consolidated Reconciliation of Net Income to Adjusted EBITDA  
(Unaudited)  
(In millions)  
                                             
  Three Months Ended September 30,   Nine Months Ended September 30,  
  2019   2018   $ Variance   Change %   2019   2018   $ Variance   Change %  
                                             
Net income attributable to common shareholders (1) $   117   $   101   $   16   15.8%   $   282   $   306   $   (24)   -7.8%  
Distributed and undistributed net income (1)     13       8       5   62.5%       30       25       5   20.0%  
Net income attributable to noncontrolling interests     6        6       -    0.0%       21       22       (1)   -4.5%  
Net income     136       115       21   18.3%       333       353       (20)   -5.7%  
Debt extinguishment loss     -        17       (17)   -100.0%       5       27       (22)   -81.5%  
Interest expense     75       51       24   47.1%       218       165       53   32.1%  
Income tax provision     34       41       (7)   -17.1%       99       95       4   4.2%  
Depreciation and amortization expense     186       180       6   3.3%       546       528       18   3.4%  
Unrealized (gain) loss on foreign currency option and forward contracts     (4)       (1)       (3)   300.0%       5       (13)       18   -138.5%  
EBITDA (2) $   427   $   403   $   24   6.0%   $   1,206   $   1,155   $   51   4.4%  
Transaction, integration and rebranding costs     -        10       (10)   -100.0%       2        25       (23)   -92.0%  
Restructuring costs     11       2       9   450.0%       28       2       26   1300.0%  
Adjusted EBITDA (2) $   438   $   415   $   23   5.5%   $   1,236   $   1,182   $   54   4.6%  
                                             
(1) The sum of quarterly net income attributable to common shareholders and distributed and undistributed net income may not equal year-to-date amounts due to the impact of the two-class method of calculating earnings per share.  
 
   
(2) See the “Non-GAAP Financial Measures” section of the Press Release. Adjusted EBITDA was prepared assuming 100% ownership of XPO Logistics Europe.  
 


Reconciliation of Non-GAAP Measures
XPO Logistics, Inc.
Consolidated Reconciliation of GAAP Net Income and Net Income Per Share to
 Adjusted Net Income and Adjusted Net Income Per Share
(Unaudited)
(In millions, except per share data)
                         
    Three Months Ended   Nine Months Ended
    September 30,   September 30,
    2019   2018   2019   2018
                         
GAAP net income attributable to common shareholders $   117    $   101    $   282    $   306
  Debt extinguishment loss     -        17       5       27
  Unrealized (gain) loss on foreign currency option and forward contracts     (4)       (1)       5       (13)
  Impairment of customer relationship intangibles     -        -         6       - 
  Transaction, integration and rebranding costs     -        10       2       25
  Restructuring costs     11       2       28        2
  Income tax associated with the adjustments above (1)     (2)       (5)       (12)       (9)
  Impact of noncontrolling interests on above adjustments     -        (1)        (1)       (1)
  Allocation of undistributed earnings     (1)       (2)       (3)       (3)
Adjusted net income attributable to common shareholders (2) $   121    $   121    $   312    $   334
                         
Adjusted basic earnings per share (2) $   1.31   $   0.97   $   3.21   $    2.74
Adjusted diluted earnings per share (2) $   1.18   $   0.89   $   2.91   $   2.48
                         
Weighted-average common shares outstanding                      
  Basic weighted-average common shares outstanding     92       125       97       122
  Diluted weighted-average common shares outstanding     102       137       107       135
                         
(1) This line item reflects the aggregate tax benefit (provision) of all non-tax related adjustments reflected in the table above. The detail by line item is as follows:
  Debt extinguishment loss $   -    $    4   $   1   $   7
  Unrealized (gain) loss on foreign currency option and forward contracts     (1)       -        1       (3)
  Impairment of customer relationship intangibles     -        -        2       - 
  Transaction, integration and rebranding costs     -        -        -         4
  Restructuring costs     3       1       8       1
    $   2   $   5   $   12   $   9
                         
(2) See the “Non-GAAP Financial Measures” section of the Press Release.


Reconciliation of Non-GAAP Measures
XPO Logistics, Inc.
Reconciliation of Cash Flows from Operating Activities to Free Cash Flow
(Unaudited)
(In millions)
 
  Three Months Ended   Nine Months Ended
  September 30,   September 30,
  2019   2018   2019   2018
                       
Net cash provided by operating activities $   278   $   288   $   442   $   536
Cash collected on deferred purchase price receivable     49       -        186       - 
Adjusted net cash provided by operating activities     327       288       628        536
Payment for purchases of property and equipment     (177)       (145)       (413)       (413)
Proceeds from sale of property and equipment     107       30       192       92
Free Cash Flow (1) $   257   $   173   $   407   $   215
                       
(1) See the “Non-GAAP Financial Measures” section of the Press Release.


Reconciliation of Non-GAAP Measures  
XPO Logistics, Inc.  
Reconciliation of GAAP Revenue to Organic Revenue  
(Unaudited)  
(In millions)  
                         
  Logistics   Consolidated  
  Three Months Ended September 30,  
  2019   2018   2019   2018  
Revenue $   1,510   $   1,517   $   4,154   $   4,335  
Fuel      -        -        (428)       (452)  
Direct postal injection revenue     -        -         -        (59)  
Foreign exchange rates     43       -        78       -   
Organic Revenue $    1,553   $   1,517   $   3,804   $   3,824  
Organic Revenue Growth (1)   2.4%           -0.5%        
                         
(1) Organic revenue growth is calculated as the relative change in year-over-year organic revenue, expressed as a percentage of 2018 organic revenue. See the “Non-GAAP Financial Measures” section of the Press Release.  
 

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Source: XPO Logistics, Inc.