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

Contract Balances and Costs
The Company does not have material contract assets, liabilities or costs associated with arrangements with its customers at September 30, 2018 or December 31, 2017. The Company did not recognize a material amount of revenue during the nine months ended September 30, 2018 that was deferred at December 31, 2017. The Company applies the practical expedient in Topic 606 that permits the recognition of incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. These costs are included in Direct operating expense.
Transaction Price Allocated to Remaining Performance Obligation
On September 30, 2018, the fixed consideration component of the Company’s remaining performance obligation was approximately $1.7 billion, of which the Company expects to recognize approximately 75% over the next three years and the remainder thereafter. Most of the remaining performance obligation relates to the Logistics reportable segment. The Company applies the disclosure exemption in Topic 606 that permits the omission of remaining performance obligations that either (i) have original expected durations of one year or less or (ii) contain variable consideration. The Company’s remaining performance obligations related to variable consideration will be satisfied over the remaining tenure of contracts based on the volume of services provided. Remaining performance obligation are estimates made at a point in time and actual amounts may differ from these estimates due to changes in foreign currency exchange rates and contract revisions and terminations.
4. Derivative Instruments
In the normal course of business, the Company is exposed to certain risks arising from business operations and economic factors, including fluctuations in interest rates and foreign currencies. To manage the volatility related to these exposures, the Company uses derivative instruments. The objective of these derivative instruments is to reduce fluctuations in the Company’s earnings and cash flows associated with changes in foreign currency exchange rates and interest rates. These financial instruments are not used for trading or other speculative purposes. The Company has not historically incurred, and does not expect to incur in the future, any losses as a result of counterparty default.
The Company formally documents all relationships between hedging instruments and hedged items, as well as the risk management objective and strategy for undertaking various hedge transactions. This process includes linking cash flow hedges to specific forecasted transactions or variability of cash flow to be paid. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the designated derivative instruments that are used in hedging transactions are highly effective in offsetting changes in the cash flows of the hedged items. When a derivative instrument is determined not to be highly effective as a hedge or the underlying hedged transaction is no longer probable, hedge accounting is discontinued prospectively.
The following table presents the account on the Condensed Consolidated Balance Sheets in which the Company’s derivative instruments have been recognized and the related notional amounts and fair values:
 
 
September 30, 2018
 
 
 
 
Derivative Assets
 
Derivative Liabilities
(In millions)
 
Notional Amount
 
Balance Sheet Caption
 
Fair Value
 
Balance Sheet Caption
 
Fair Value
Derivatives designated as hedges:
 
 
 
 
 
 
 
 
 
 
Cross-currency swap agreements
 
$
1,278.5

 
Other long-term assets
 
$

 
Other long-term liabilities
 
$
(113.9
)
Derivatives not designated as hedges:
 
 
 
 
 
 
 
 
 
 
Foreign currency option and forward contracts
 
223.2

 
Other current assets
 
0.3

 
Other current liabilities
 
(0.2
)
Total
 
 
 
 
 
$
0.3

 
 
 
$
(114.1
)


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