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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 September 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=13165930&doc=11
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)
______________________________________________________________________________________________________________
N/A
______________________________________________________________________________________________________________
Former name, former address and former fiscal year, if changed since last report
Securities 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 October 21, 2019, there were 92,300,242 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 September 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)
 
 
September 30,
 
December 31,
(In millions, except per share data)
 
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

See accompanying notes to condensed consolidated financial statements.


1

Table of Contents

XPO Logistics, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(In millions, except per share data)
 
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

 
 
 
 
 
 
 
 
 
Earnings per share data:
 
 
 
 
 
 
 
 
Net income attributable to common shareholders
 
$
117

 
$
101

 
$
282

 
$
306

 
 
 
 
 
 
 
 
 
Basic earnings per share
 
$
1.27

 
$
0.81

 
$
2.91

 
$
2.50

Diluted earnings per share
 
$
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

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 September 30,
 
Nine Months Ended September 30,
(In millions)
 
2019
 
2018
 
2019
 
2018
Net income
 
$
136

 
$
115

 
$
333

 
$
353

 
 
 
 
 
 
 
 
 
Other comprehensive loss, net of tax
 
 
 
 
 
 
 
 
Foreign currency translation loss, net of tax effect of $(11), $(1), $(17) and $1
 
$
(66
)
 
$
(12
)
 
$
(68
)
 
$
(81
)
Unrealized gain (loss) on financial assets/liabilities designated as hedging instruments, net of tax effect of $-, $-, $- and $(1)
 

 

 
1

 
(8
)
Defined benefit plans adjustments, net of tax effect of $- in all periods
 
(1
)
 

 
(1
)
 
(1
)
Other comprehensive loss
 
(67
)
 
(12
)
 
(68
)
 
(90
)
Comprehensive income
 
$
69

 
$
103

 
$
265

 
$
263

Less: Comprehensive (loss) income attributable to noncontrolling interests
 
(9
)
 
4

 
4

 
7

Comprehensive income attributable to XPO
 
$
78

 
$
99

 
$
261

 
$
256


See accompanying notes to condensed consolidated financial statements.


3

Table of Contents

XPO Logistics, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
 
Nine Months Ended September 30,
(In millions)
 
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

Supplemental disclosure of cash flow information:
 
 
 
 
Cash paid for interest
 
$
202

 
$
172

Cash paid for income taxes
 
$
89

 
$
46

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 June 30, 2019
 
72

 
$
41

 
91,992

 
$

 
$
2,054

 
$
563

 
$
(153
)
 
$
2,505

 
$
407

 
$
2,912

Net income
 

 

 

 

 

 
130

 

 
130

 
6

 
136

Other comprehensive loss
 

 

 

 

 

 

 
(52
)
 
(52
)
 
(15
)
 
(67
)
Exercise and vesting of stock compensation awards
 

 

 
242

 

 

 

 

 

 

 

Tax withholdings related to vesting of stock compensation awards
 

 

 

 

 
(7
)
 

 

 
(7
)
 

 
(7
)
Retirement of common stock
 

 

 

 

 

 

 

 

 

 

Dividend declared
 

 

 

 

 

 
(1
)
 

 
(1
)
 
(3
)
 
(4
)
Stock compensation expense
 

 

 

 

 
8

 

 

 
8

 

 
8

Adoption of new accounting standard and other
 

 

 

 

 
1

 
(12
)
 

 
(11
)
 
(2
)
 
(13
)
Balance as of September 30, 2019
 
72

 
$
41

 
92,234

 
$

 
$
2,056

 
$
680

 
$
(205
)
 
$
2,572

 
$
393

 
$
2,965

 
 
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
 

 

 

 

 

 
312

 

 
312

 
21

 
333

Other comprehensive loss
 

 

 

 

 

 

 
(51
)
 
(51
)
 
(17
)
 
(68
)
Exercise and vesting of stock compensation awards
 

 

 
423

 

 

 

 

 

 

 

Tax withholdings related to vesting of stock compensation awards
 

 

 

 

 
(11
)
 

 

 
(11
)
 

 
(11
)
Retirement of common stock
 

 

 
(23,932
)
 

 
(1,275
)
 

 

 
(1,275
)
 

 
(1,275
)
Dividend declared
 

 

 

 

 

 
(2
)
 

 
(2
)
 
(4
)
 
(6
)
Stock compensation expense
 

 

 

 

 
27

 

 

 
27

 

 
27

Adoption of new accounting standard and other
 

 

 
60

 

 
4

 
(7
)
 

 
(3
)
 
(2
)
 
(5
)
Balance as of September 30, 2019
 
72

 
$
41

 
92,234

 
$

 
$
2,056

 
$
680

 
$
(205
)
 
$
2,572

 
$
393

 
$
2,965


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 Loss
 
Total XPO Stockholders' Equity
 
Non-controlling Interests
 
Total Equity
Balance as of June 30, 2018
 
72

 
$
41

 
120,849

 
$

 
$
3,562

 
$
178

 
$
(49
)
 
$
3,732

 
$
408

 
$
4,140

Net income
 

 

 

 

 

 
109

 

 
109

 
6

 
115

Other comprehensive loss
 

 

 

 

 

 

 
(10
)
 
(10
)
 
(2
)
 
(12
)
Exercise and vesting of stock compensation awards
 

 

 
52

 

 

 

 

 

 

 

Tax withholdings related to vesting of stock compensation awards
 

 

 

 

 
(4
)
 

 

 
(4
)
 

 
(4
)
Issuance of common stock from forward sale settlement
 

 

 
6,000

 

 
349

 

 

 
349

 

 
349

Dividend declared
 

 

 

 

 

 
(1
)
 

 
(1
)
 
(4
)
 
(5
)
Stock compensation expense
 

 

 

 

 
7

 

 

 
7

 

 
7

Balance as of September 30, 2018
 
72

 
$
41

 
126,901

 
$

 
$
3,914

 
$
286

 
$
(59
)
 
$
4,182

 
$
408

 
$
4,590

 
 
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
 

 

 

 

 

 
331

 

 
331

 
22

 
353

Other comprehensive loss
 

 

 

 

 

 

 
(75
)
 
(75
)
 
(15
)
 
(90
)
Exercise and vesting of stock compensation awards
 

 

 
924

 

 
1

 

 

 
1

 

 
1

Tax withholdings related to vesting of stock compensation awards
 

 

 

 

 
(49
)
 

 

 
(49
)
 

 
(49
)
Issuance of common stock from forward sale settlement
 

 

 
6,000

 

 
349

 

 

 
349

 

 
349

Dividend declared
 

 

 

 

 

 
(2
)
 

 
(2
)
 
(5
)
 
(7
)
Stock compensation expense
 

 

 

 

 
23

 

 

 
23

 

 
23

Other
 

 

 
57

 

 

 

 

 

 

 

Balance as of September 30, 2018
 
72

 
$
41

 
126,901

 
$

 
$
3,914

 
$
286

 
$
(59
)
 
$
4,182

 
$
408

 
$
4,590


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 September 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 $10 million and $12 million, respectively.
Trade Receivables Securitization and Factoring Programs
The Company uses trade receivables securitization and factoring programs to help manage our cash flows and offset the impact of extended payment terms for certain customers.
In July 2019, XPO Logistics Europe SA (“XPO Logistics Europe”), in which the Company holds an 86.25% controlling interest, entered into a new, three