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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________
Form 10-Q
___________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from____________to____________
Commission File Number: 001-32172
_______________________________________________________
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13037589&doc=16
XPO Logistics, Inc.
(Exact name of registrant as specified in its charter)
_______________________________________________________
Delaware
 
03-0450326
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
Five American Lane
 
 
Greenwich,
CT
 
06831
(Address of principal executive offices)
 
(Zip Code)
(855) 976-6951
(Registrant’s telephone number, including area code)
_______________________________________________________
Securities registered or to be registered pursuant to section 12(b) of the Act.
Title of each class
 
Trading symbol(s)
 
Name of each exchange on which registered
Common stock, par value $0.001 per share
 
XPO
 
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
 
Accelerated filer
 
 
Emerging growth company
 
 
 
 
 
 
 
 
 
 
Non-accelerated filer
 
 
Smaller reporting company
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of July 26, 2019, there were 92,181,297 shares of the registrant’s common stock, par value $0.001 per share, outstanding.



XPO Logistics, Inc.
Quarterly Report on Form 10-Q
For the Quarterly Period Ended June 30, 2019
Table of Contents
 
 
Page No.
 
 
 


Table of Contents

Part I—Financial Information
Item 1. Financial Statements.
XPO Logistics, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
 
 
June 30,
 
December 31,
(In millions, except per share data)
 
2019
 
2018
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
497

 
$
502

Accounts receivable, net of allowances of $57 and $52, respectively
 
2,723

 
2,596

Other current assets
 
570

 
590

Total current assets
 
3,790

 
3,688

Property and equipment, net of $1,855 and $1,585 in accumulated depreciation, respectively
 
2,551

 
2,605

Operating lease assets
 
2,074

 

Goodwill
 
4,451

 
4,467

Identifiable intangible assets, net of $775 and $706 in accumulated amortization, respectively
 
1,168

 
1,253

Other long-term assets
 
280

 
257

Total long-term assets
 
10,524

 
8,582

Total assets
 
$
14,314

 
$
12,270

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
1,176

 
$
1,258

Accrued expenses
 
1,491

 
1,480

Short-term borrowings and current maturities of long-term debt
 
340

 
367

Short-term operating lease liabilities
 
481

 

Other current liabilities
 
183

 
208

Total current liabilities
 
3,671

 
3,313

Long-term debt
 
5,134

 
3,902

Deferred tax liability
 
463

 
444

Employee benefit obligations
 
145

 
153

Operating lease liabilities
 
1,611

 

Other long-term liabilities
 
378

 
488

Total long-term liabilities
 
7,731

 
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 June 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 June 30, 2019 and December 31, 2018, respectively
 

 

Additional paid-in capital
 
2,054

 
3,311

Retained earnings
 
563

 
377

Accumulated other comprehensive loss
 
(153
)
 
(154
)
Total stockholders’ equity before noncontrolling interests
 
2,505

 
3,575

Noncontrolling interests
 
407

 
395

Total equity
 
2,912

 
3,970

Total liabilities and equity
 
$
14,314

 
$
12,270

See accompanying notes to condensed consolidated financial statements.


1

Table of Contents

XPO Logistics, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In millions, except per share data)
 
2019
 
2018
 
2019
 
2018
Revenue
 
$
4,238

 
$
4,363

 
$
8,358

 
$
8,555

Operating expenses
 
 
 
 
 
 
 
 
Cost of transportation and services
 
2,108

 
2,274

 
4,204

 
4,499

Direct operating expense
 
1,417

 
1,406

 
2,823

 
2,782

Sales, general and administrative expense
 
455

 
455

 
941

 
905

Total operating expenses
 
3,980

 
4,135

 
7,968

 
8,186

Operating income
 
258

 
228

 
390

 
369

Other expense (income)
 
(13
)
 
(30
)
 
(30
)
 
(49
)
Foreign currency loss (gain)
 
8

 
(10
)
 
10

 
2

Debt extinguishment loss
 

 

 
5

 
10

Interest expense
 
72

 
55

 
143

 
114

Income before income tax provision
 
191

 
213

 
262

 
292

Income tax provision
 
46

 
54

 
65

 
54

Net income
 
145

 
159

 
197

 
238

Net income attributable to noncontrolling interests
 
(10
)
 
(10
)
 
(15
)
 
(16
)
Net income attributable to XPO
 
$
135

 
$
149

 
$
182

 
$
222

 
 
 
 
 
 
 
 
 
Earnings per share data:
 
 
 
 
 
 
 
 
Net income attributable to common shareholders
 
$
122

 
$
138

 
$
165

 
$
205

 
 
 
 
 
 
 
 
 
Basic earnings per share
 
$
1.32

 
$
1.14

 
$
1.66

 
$
1.70

Diluted earnings per share
 
$
1.19

 
$
1.03

 
$
1.51

 
$
1.53

 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding
 
 
 
 
 
 
 
 
Basic weighted-average common shares outstanding
 
92

 
121

 
100

 
120

Diluted weighted-average common shares outstanding
 
102

 
134

 
110

 
134

See accompanying notes to condensed consolidated financial statements.


2

Table of Contents

XPO Logistics, Inc.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In millions)
 
2019
 
2018
 
2019
 
2018
Net income
 
$
145

 
$
159

 
$
197

 
$
238

 
 
 
 
 
 
 
 
 
Other comprehensive income (loss), net of tax
 
 
 
 
 
 
 
 
Foreign currency translation loss, net of tax effect of $-, $13, $(6) and $32
 
$
(1
)
 
$
(114
)
 
$
(2
)
 
$
(69
)
Unrealized gain (loss) on financial assets/liabilities designated as hedging instruments, net of tax effect of $(1), $3, $- and $(1)
 
4

 
(8
)
 
1

 
(8
)
Defined benefit plans adjustments, net of tax effect of $- in all periods
 

 
(1
)
 

 
(1
)
Other comprehensive income (loss)
 
3

 
(123
)
 
(1
)
 
(78
)
Comprehensive income
 
$
148

 
$
36

 
$
196

 
$
160

Less: Comprehensive income (loss) attributable to noncontrolling interests
 
13

 
(15
)
 
13

 
3

Comprehensive income attributable to XPO
 
$
135

 
$
51

 
$
183

 
$
157


See accompanying notes to condensed consolidated financial statements.


3

Table of Contents

XPO Logistics, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
 
Six Months Ended June 30,
(In millions)
 
2019
 
2018
Operating activities
 
 
 
 
Net income
 
$
197

 
$
238

Adjustments to reconcile net income to net cash from operating activities
 
 
 
 
Depreciation and amortization
 
360

 
348

Stock compensation expense
 
31

 
45

Accretion of debt
 
9

 
8

Deferred tax expense
 
12

 
8

Debt extinguishment loss
 
5

 
10

Unrealized loss (gain) on foreign currency option and forward contracts
 
9

 
(12
)
Gains on sale of property and equipment
 
(40
)
 
(2
)
Other
 
23

 
(42
)
Changes in assets and liabilities:
 
 
 
 
Accounts receivable
 
(289
)
 
(179
)
Other assets
 
(23
)
 
(103
)
Accounts payable
 
(81
)
 
(44
)
Accrued expenses and other liabilities
 
(49
)
 
(27
)
Net cash provided by operating activities
 
164

 
248

Investing activities
 
 
 
 
Payment for purchases of property and equipment
 
(236
)
 
(268
)
Proceeds from sale of property and equipment
 
85

 
62

Cash collected on deferred purchase price receivable
 
137

 

Other
 

 
10

Net cash used in investing activities
 
(14
)
 
(196
)
Financing activities
 
 
 
 
Proceeds from issuance of debt
 
1,758

 
894

Repurchase of debt
 

 
(812
)
Proceeds from borrowings on ABL facility
 
1,355

 
680

Repayment of borrowings on ABL facility
 
(1,355
)
 
(780
)
Repayment of debt and capital leases
 
(565
)
 
(59
)
Payment for debt issuance costs
 
(27
)
 
(6
)
Repurchase of common stock
 
(1,347
)
 

Change in bank overdrafts
 
30

 
8

Payment for tax withholdings for restricted shares
 
(5
)
 
(46
)
Dividends paid
 
(2
)
 
(2
)
Other
 
5

 
4

Net cash used in financing activities
 
(153
)
 
(119
)
Effect of exchange rates on cash, cash equivalents and restricted cash
 
(2
)
 
(7
)
Net decrease in cash, cash equivalents and restricted cash
 
(5
)
 
(74
)
Cash, cash equivalents and restricted cash, beginning of period
 
514

 
449

Cash, cash equivalents and restricted cash, end of period
 
$
509

 
$
375

Supplemental disclosure of cash flow information:
 
 
 
 
Cash paid for interest
 
$
125

 
$
125

Cash paid for income taxes
 
$
58

 
$
27

See accompanying notes to condensed consolidated financial statements.

4

Table of Contents

XPO Logistics, Inc.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
 
 
Series A Preferred Stock
 
Common Stock
 
 
 
 
 
 
 
 
 
 
 
 
(Shares in thousands, dollars in millions)
 
Shares
 
Amount
 
Shares
 
Amount
 
Additional Paid-In Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Loss
 
Total XPO Stockholders' Equity
 
Non-controlling Interests
 
Total Equity
Balance as of March 31, 2019
 
72

 
$
41

 
93,207

 
$

 
$
2,122

 
$
428

 
$
(153
)
 
$
2,438

 
$
395

 
$
2,833

Net income
 

 

 

 

 

 
135

 

 
135

 
10

 
145

Other comprehensive income
 

 

 

 

 

 

 

 

 
3

 
3

Exercise and vesting of stock compensation awards
 

 

 
87

 

 

 

 

 

 

 

Tax withholdings related to vesting of stock compensation awards
 

 

 

 

 
(2
)
 

 

 
(2
)
 

 
(2
)
Retirement of common stock
 

 

 
(1,362
)
 

 
(80
)
 

 

 
(80
)
 

 
(80
)
Dividend declared
 

 

 

 

 

 

 

 

 
(1
)
 
(1
)
Stock compensation expense
 

 

 

 

 
11

 

 

 
11

 

 
11

Other
 

 

 
60

 

 
3

 

 

 
3

 

 
3

Balance as of June 30, 2019
 
72

 
$
41

 
91,992

 
$

 
$
2,054

 
$
563

 
$
(153
)
 
$
2,505

 
$
407

 
$
2,912

 
 
Series A Preferred Stock
 
Common Stock
 
 
 
 
 
 
 
 
 
 
 
 

(Shares in thousands, dollars in millions)
 
Shares
 
Amount
 
Shares
 
Amount
 
Additional Paid-In Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Loss
 
Total XPO Stockholders' Equity
 
Non-controlling Interests
 
Total Equity
Balance as of December 31, 2018
 
72

 
$
41

 
115,683

 
$

 
$
3,311

 
$
377

 
$
(154
)
 
$
3,575

 
$
395

 
$
3,970

Net income
 

 

 

 

 

 
182

 

 
182

 
15

 
197

Other comprehensive income (loss)
 

 

 

 

 

 

 
1

 
1

 
(2
)
 
(1
)
Exercise and vesting of stock compensation awards
 

 

 
181

 

 

 

 

 

 

 

Tax withholdings related to vesting of stock compensation awards
 

 

 

 

 
(4
)
 

 

 
(4
)
 

 
(4
)
Retirement of common stock
 

 

 
(23,932
)
 

 
(1,275
)
 

 

 
(1,275
)
 

 
(1,275
)
Dividend declared ($10.00 per share)
 

 

 

 

 

 
(1
)
 

 
(1
)
 
(1
)
 
(2
)
Stock compensation expense
 

 

 

 

 
19

 

 

 
19

 

 
19

Adoption of new accounting standard
 

 

 

 

 

 
6

 

 
6

 

 
6

Other
 

 

 
60

 

 
3

 
(1
)
 

 
2

 

 
2

Balance as of June 30, 2019
 
72

 
$
41

 
91,992

 
$

 
$
2,054

 
$
563

 
$
(153
)
 
$
2,505

 
$
407

 
$
2,912



5

Table of Contents

XPO Logistics, Inc.
Condensed Consolidated Statements of Changes in Equity (continued)
(Unaudited)
 
 
Series A Preferred Stock
 
Common Stock
 
 
 
 
 
 
 
 
 
 
 
 
(Shares in thousands, dollars in millions)
 
Shares
 
Amount
 
Shares
 
Amount
 
Additional Paid-In Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Total XPO Stockholders' Equity
 
Non-controlling Interests
 
Total Equity
Balance as of March 31, 2018
 
72

 
$
41

 
120,598

 
$

 
$
3,558

 
$
33

 
$
49

 
$
3,681

 
$
424

 
$
4,105

Net income
 

 

 

 

 

 
149

 

 
149

 
10

 
159

Other comprehensive loss
 

 

 

 

 

 

 
(98
)
 
(98
)
 
(25
)
 
(123
)
Exercise and vesting of stock compensation awards
 

 

 
194

 

 

 

 

 

 

 

Tax withholdings related to vesting of stock compensation awards
 

 

 

 

 
(5
)
 

 

 
(5
)
 

 
(5
)
Dividend declared
 

 

 

 

 

 

 

 

 
(1
)
 
(1
)
Stock compensation expense
 

 

 

 

 
9

 

 

 
9

 

 
9

Other
 

 

 
57

 

 

 
(4
)
 

 
(4
)
 

 
(4
)
Balance as of June 30, 2018
 
72

 
$
41

 
120,849

 
$

 
$
3,562

 
$
178

 
$
(49
)
 
$
3,732

 
$
408

 
$
4,140

 
 
Series A Preferred Stock
 
Common Stock
 
 
 
 
 
 
 
 
 
 
 
 
(Shares in thousands, dollars in millions)
 
Shares
 
Amount
 
Shares
 
Amount
 
Additional Paid-In Capital
 
(Accumulated Deficit)/Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Total XPO Stockholders' Equity
 
Non-controlling Interests
 
Total Equity
Balance as of December 31, 2017
 
72

 
$
41

 
119,920

 
$

 
$
3,590

 
$
(43
)
 
$
16

 
$
3,604

 
$
406

 
$
4,010

Net income
 

 

 

 

 

 
222

 

 
222

 
16

 
238

Other comprehensive loss
 

 

 

 

 

 

 
(65
)
 
(65
)
 
(13
)
 
(78
)
Exercise and vesting of stock compensation awards
 

 

 
872

 

 
1

 

 

 
1

 

 
1

Tax withholdings related to vesting of stock compensation awards
 

 

 

 

 
(45
)
 

 

 
(45
)
 

 
(45
)
Dividend declared ($10.00 per share)
 

 

 

 

 

 
(1
)
 

 
(1
)
 
(1
)
 
(2
)
Stock compensation expense
 

 

 

 

 
16

 

 

 
16

 

 
16

Other
 

 

 
57

 

 

 

 

 

 

 

Balance as of June 30, 2018
 
72

 
$
41

 
120,849

 
$

 
$
3,562

 
$
178

 
$
(49
)
 
$
3,732

 
$
408

 
$
4,140


See accompanying notes to condensed consolidated financial statements.

6

Table of Contents

XPO Logistics, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Organization, Description of Business and Basis of Presentation
XPO Logistics, Inc., together with its subsidiaries (“XPO,” “XPO Logistics” or the “Company”), is a top ten global provider of cutting-edge supply chain solutions to the most successful companies in the world. XPO uses its integrated network of people, technology and physical assets to help customers manage their goods most efficiently throughout their supply chains.
The Company has two reportable segments: Transportation and Logistics. Within each segment, the Company has robust service offerings that are positioned to capitalize on fast-growing areas of customer demand. See Note 2—Segment Reporting for further information on the Company’s operations.
The Company has prepared the accompanying unaudited Condensed Consolidated Financial Statements in accordance with the accounting policies described in its annual report on Form 10-K for the year ended December 31, 2018 (the “2018 Form 10-K”), except as described herein, and the interim reporting requirements of Form 10-Q. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the 2018 Form 10-K.
In the opinion of management, all adjustments, consisting only of normal recurring adjustments that are necessary for a fair presentation of financial condition, operating results and cash flows for the interim periods presented, have been made. Interim results of operations are not necessarily indicative of full year results.
Restricted Cash
As of June 30, 2019, and December 31, 2018, the total amount of restricted cash included in Other long-term assets on the Condensed Consolidated Balance Sheets was $12 million, in both cases.
Receivables Securitization and Factoring
The Company uses trade accounts receivables securitization and factoring programs in the normal course of business to help manage its cash flows. The following table provides information related to the Company’s receivables securitization and factoring programs:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In millions)
 
2019
 
2018
 
2019
 
2018