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XPO LOGISTICS, INC. filed this Form 10-Q on 11/05/2018
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The interest rate margin applicable to the New Term Loans was reduced from 1.25% to 1.00%, in the case of base rate loans, and from 2.25% to 2.00%, in the case of London Interbank Offered Rate (“LIBOR”) loans (with the LIBOR floor remaining at 0.0%). The interest rate on the New Term Loans was 4.23% at September 30, 2018. The New Term Loans will mature on February 23, 2025. The refinancing resulted in a debt extinguishment charge of $10.3 million during the first quarter of 2018.
In the first quarter of 2017, the Company recorded a debt extinguishment charge of $9.0 million in connection with the refinancing of the Term Loan facility (Amendment No. 2 to Credit Agreement).
Redemption of Senior Notes due 2022
In July 2018, the Company redeemed $400 million of the then $1.6 billion outstanding Senior Notes due 2022 that were originally issued in 2015. The redemption price for the Senior Notes due 2022 was 103.25% of the principal amount of the notes, plus accrued and unpaid interest to, but excluding, the date of redemption. The redemption was primarily funded using proceeds from the forward sale settlement described below. The loss on debt extinguishment was $16.8 million during the third quarter of 2018.
Trade Securitization Program
In October 2017, XPO Logistics Europe SA (“XPO Logistics Europe”), in which the Company holds an 86.25% controlling interest, entered into a trade receivables securitization program for a term of three years co-arranged by Crédit Agricole and HSBC. In the first quarter of 2018, the aggregate maximum amount available under the program was increased to €350 million (approximately $406.3 million as of September 30, 2018). At September 30, 2018, the remaining borrowing capacity was €36.0 million (approximately $41.8 million) and the weighted-average interest rate was 1.11%.
6. Stockholders Equity
Forward Sale Agreements
In connection with a common stock offering in July 2017, the Company entered into separate forward sale agreements (the “Forward Sale Agreements”) with each of Morgan Stanley & Co. LLC and JPMorgan Chase Bank, National Association, London Branch (the “Forward Counterparties”) pursuant to which the Company agreed to sell, and each Forward Counterparty agreed to purchase, three million shares of the Company’s common stock (or six million shares of the Company’s common stock in the aggregate) subject to the terms and conditions of the Forward Sale Agreements, including the Company’s right to elect cash settlement or net share settlement. The initial forward price under each of the Forward Sale Agreements was $58.08 per share (which was the public offering price of the Company’s common stock for a primary offering of five million shares completed at that time, less the underwriting discount) and was subject to certain adjustments pursuant to the terms of the Forward Sale Agreements. Consistent with the Company’s strategy to grow its business in part through acquisitions, the Company entered into the Forward Sale Agreements to provide additional available cash for such acquisitions, among other general corporate purposes. In July 2018, the Company physically settled the forwards in full by delivering six million shares of common stock to the Forward Counterparties for net cash proceeds to the Company of approximately $349 million. As a part of its ordinary course treasury management activities, the Company has applied these net cash proceeds to the repayment of the Senior Notes due 2022 as described above thereby reducing the Company’s overall outstanding debt and interest expense.
The Series A Convertible Perpetual Preferred Stock pays quarterly cash dividends equal to the greater of (i) the “as-converted” dividends on the underlying Company common stock for the relevant quarter and (ii) 4% of the then-applicable liquidation preference per annum.
7. Income Taxes
The Company’s 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