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 March 31, 2020
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
_______________________________________________________
(Exact name of registrant as specified in its charter)
_______________________________________________________
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||
(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 | ||
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.
☒ | 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 April 27, 2020, there were 91,126,364 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 March 31, 2020
Table of Contents
Page No. | |
Part I—Financial Information
Item 1. Financial Statements.
XPO Logistics, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
March 31, | December 31, | |||||||
(In millions, except per share data) | 2020 | 2019 | ||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Accounts receivable, net of allowances of $63 and $58, respectively | ||||||||
Other current assets | ||||||||
Total current assets | ||||||||
Property and equipment, net of $2,138 and $2,054 in accumulated depreciation, respectively | ||||||||
Operating lease assets | ||||||||
Goodwill | ||||||||
Identifiable intangible assets, net of $825 and $850 in accumulated amortization, respectively | ||||||||
Other long-term assets | ||||||||
Total long-term assets | ||||||||
Total assets | $ | $ | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | $ | ||||||
Accrued expenses | ||||||||
Short-term borrowings and current maturities of long-term debt | ||||||||
Short-term operating lease liabilities | ||||||||
Other current liabilities | ||||||||
Total current liabilities | ||||||||
Long-term debt | ||||||||
Deferred tax liability | ||||||||
Employee benefit obligations | ||||||||
Long-term operating lease liabilities | ||||||||
Other long-term liabilities | ||||||||
Total long-term liabilities | ||||||||
Stockholders’ equity: | ||||||||
Convertible perpetual preferred stock, $0.001 par value; 10 shares authorized; 0.07 of Series A shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively | ||||||||
Common stock, $0.001 par value; 300 shares authorized; 91 and 92 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively | ||||||||
Additional paid-in capital | ||||||||
Retained earnings | ||||||||
Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
Total stockholders’ equity before noncontrolling interests | ||||||||
Noncontrolling interests | ||||||||
Total equity | ||||||||
Total liabilities and equity | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
1
XPO Logistics, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended March 31, | ||||||||
(In millions, except per share data) | 2020 | 2019 | ||||||
Revenue | $ | $ | ||||||
Operating expenses | ||||||||
Cost of transportation and services | ||||||||
Direct operating expense | ||||||||
Sales, general and administrative expense | ||||||||
Total operating expenses | ||||||||
Operating income | ||||||||
Other expense (income) | ( | ) | ( | ) | ||||
Foreign currency (gain) loss | ( | ) | ||||||
Debt extinguishment loss | ||||||||
Interest expense | ||||||||
Income before income tax provision | ||||||||
Income tax provision | ||||||||
Net income | ||||||||
Net income attributable to noncontrolling interests | ( | ) | ( | ) | ||||
Net income attributable to XPO | $ | $ | ||||||
Earnings per share data: | ||||||||
Net income attributable to common shareholders | $ | $ | ||||||
Basic earnings per share | $ | $ | ||||||
Diluted earnings per share | $ | $ | ||||||
Weighted-average common shares outstanding | ||||||||
Basic weighted-average common shares outstanding | ||||||||
Diluted weighted-average common shares outstanding | ||||||||
See accompanying notes to condensed consolidated financial statements.
2
XPO Logistics, Inc.
Condensed Consolidated Statements of Comprehensive (Loss) Income
(Unaudited)
Three Months Ended March 31, | ||||||||
(In millions) | 2020 | 2019 | ||||||
Net income | $ | $ | ||||||
Other comprehensive loss, net of tax | ||||||||
Foreign currency translation loss, net of tax effect of $(11) and $(6) | $ | ( | ) | $ | ( | ) | ||
Unrealized loss on financial assets/liabilities designated as hedging instruments, net of tax effect of $— and $1 | ( | ) | ||||||
Defined benefit plans adjustments, net of tax effect of $2 and $— | ( | ) | ||||||
Other comprehensive loss | ( | ) | ( | ) | ||||
Comprehensive (loss) income | $ | ( | ) | $ | ||||
Less: Comprehensive loss attributable to noncontrolling interests | ( | ) | ||||||
Comprehensive (loss) income attributable to XPO | $ | ( | ) | $ | ||||
See accompanying notes to condensed consolidated financial statements.
3
XPO Logistics, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended March 31, | ||||||||
(In millions) | 2020 | 2019 | ||||||
Operating activities | ||||||||
Net income | $ | $ | ||||||
Adjustments to reconcile net income to net cash from operating activities | ||||||||
Depreciation, amortization and net lease activity | ||||||||
Stock compensation expense | ||||||||
Accretion of debt | ||||||||
Deferred tax benefit | ( | ) | ( | ) | ||||
Debt extinguishment loss | ||||||||
Unrealized (gain) loss on foreign currency option and forward contracts | ( | ) | ||||||
Gains on sales of property and equipment | ( | ) | ( | ) | ||||
Other | ||||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | ( | ) | ||||||
Other assets | ( | ) | ( | ) | ||||
Accounts payable | ( | ) | ( | ) | ||||
Accrued expenses and other liabilities | ( | ) | ||||||
Net cash provided by (used in) operating activities | ( | ) | ||||||
Investing activities | ||||||||
Payment for purchases of property and equipment | ( | ) | ( | ) | ||||
Proceeds from sale of property and equipment | ||||||||
Cash collected on deferred purchase price receivable | ||||||||
Other | ||||||||
Net cash used in investing activities | ( | ) | ||||||
Financing activities | ||||||||
Proceeds from borrowings related to securitization program | ||||||||
Proceeds from issuance of debt | ||||||||
Proceeds from borrowings on ABL facility | ||||||||
Repayment of borrowings on ABL facility | ( | ) | ( | ) | ||||
Repayment of debt and finance leases | ( | ) | ( | ) | ||||
Payment for debt issuance costs | ( | ) | ||||||
Repurchase of common stock | ( | ) | ( | ) | ||||
Change in bank overdrafts | ||||||||
Payment for tax withholdings for restricted shares | ( | ) | ( | ) | ||||
Other | ( | ) | ||||||
Net cash provided by (used in) financing activities | ( | ) | ||||||
Effect of exchange rates on cash, cash equivalents and restricted cash | ( | ) | ||||||
Net increase (decrease) in cash, cash equivalents and restricted cash | ( | ) | ||||||
Cash, cash equivalents and restricted cash, beginning of period | ||||||||
Cash, cash equivalents and restricted cash, end of period | $ | $ | ||||||
Supplemental disclosure of cash flow information: | ||||||||
Leased assets obtained in exchange for new operating lease liabilities | $ | $ | ||||||
Leased assets obtained in exchange for new finance lease liabilities | ||||||||
Cash paid for interest | ||||||||
Cash paid for income taxes | ||||||||
See accompanying notes to condensed consolidated financial statements.
4
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 December 31, 2019 | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
Exercise and vesting of stock compensation awards | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Tax withholdings related to vesting of stock compensation awards | — | — | — | — | ( | ) | — | — | ( | ) | — | ( | ) | |||||||||||||||||||||||||
Retirement of common stock | — | — | ( | ) | — | ( | ) | — | — | ( | ) | — | ( | ) | ||||||||||||||||||||||||
Dividend declared | — | — | — | — | — | ( | ) | — | ( | ) | — | ( | ) | |||||||||||||||||||||||||
Stock compensation expense | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Adoption of new accounting standard and other | — | — | — | — | — | ( | ) | — | ( | ) | — | ( | ) | |||||||||||||||||||||||||
Balance as of March 31, 2020 | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||||
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 | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||
Exercise and vesting of stock compensation awards | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Tax withholdings related to vesting of stock compensation awards | — | — | — | — | ( | ) | — | — | ( | ) | — | ( | ) | |||||||||||||||||||||||||
Retirement of common stock | — | — | ( | ) | — | ( | ) | — | — | ( | ) | — | ( | ) | ||||||||||||||||||||||||
Dividend declared | — | — | — | — | — | ( | ) | — | ( | ) | — | ( | ) | |||||||||||||||||||||||||
Stock compensation expense | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Adoption of new accounting standard and other | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Balance as of March 31, 2019 | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
5
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” or “we”), is a top ten global provider of cutting-edge supply chain solutions to the most successful companies in the world. We use our integrated network of people, technology and physical assets to help customers manage their goods most efficiently throughout their supply chains. Our customers are multinational, national, mid-size and small enterprises. We run our business on a global basis, with two reportable segments: Transportation and Logistics. See Note 2—Segment Reporting for further information on our operations.
We prepared our Condensed Consolidated Financial Statements in accordance with U.S. generally accepted accounting principles (“GAAP”) and on the same basis as the accounting policies described in our annual report on Form 10-K for the year ended December 31, 2019 (the “2019 Form 10-K”), except for the effects of adopting Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” as of January 1, 2020, as described below. The interim reporting requirements of Form 10-Q allow certain information and note disclosures normally included in annual consolidated financial statements to be condensed or omitted. These Condensed Consolidated Financial Statements should be read in conjunction with the 2019 Form 10-K.
The Condensed Consolidated Financial Statements are not audited but reflect all adjustments that are of a normal recurring nature and are necessary for a fair presentation of financial condition, operating results and cash flows for the interim periods presented. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2020, particularly in light of the outbreak of a new strain of coronavirus, COVID-19, in the first quarter of 2020. The rapid escalation of COVID-19 into a pandemic in the first quarter of 2020 has affected, and will continue to affect, economic activity broadly and customer sectors served by our industry. We expect that COVID-19 will have significant effects on economic activity, on demand for our services, and on our results of operations in 2020.
Restricted Cash
As of March 31, 2020 and December 31, 2019, our restricted cash included in Other long-term assets on our Condensed Consolidated Balance Sheets was $10 million.
Accounts Receivable and Allowance for Doubtful Accounts
We record accounts receivable at the contractual amount and we record an allowance for doubtful accounts for the amount we estimate we may not collect. In determining the allowance for doubtful accounts, we consider historical collection experience, the age of the accounts receivable balances, the credit quality and risk of our customers, any specific customer collection issues, current economic conditions, and other factors that may impact our customers’ ability to pay. Commencing in the first quarter of 2020 and in accordance with ASU 2016-13, we also consider reasonable and supportable forecasts of future economic conditions and their expected impact on customer collections in determining our allowance for doubtful accounts. We write off accounts receivable balances once the receivables are no longer deemed collectible.
Trade Receivables Securitization and Factoring Programs
We sell certain of our trade accounts receivable on a non-recourse basis to third-party financial institutions under factoring agreements. We account for these transactions as sales of receivables and present cash proceeds as cash provided by operating activities in the Condensed Consolidated Statements of Cash Flows. We also sell trade accounts receivable under a securitization program described below. We use trade receivables securitization and factoring programs to help manage our cash flows and offset the impact of extended payment terms for some of our customers.
6
XPO Logistics Europe SA (“XPO Logistics Europe”), one of our majority-owned subsidiaries, participates in a trade receivables securitization program co-arranged by Crédit Agricole, BNP Paribas and HSBC (the “Purchasers”). Under the program, a wholly-owned bankruptcy-remote special purpose entity of XPO Logistics Europe sells trade receivables that originate with wholly-owned subsidiaries of XPO Logistics Europe in the United Kingdom and France to unaffiliated entities managed by the Purchasers. The special purpose entity is a variable interest entity and is consolidated by XPO based on our control of the entity’s activities.
We account for transfers under our securitization and factoring arrangements as sales because we sell full title and ownership in the underlying receivables and control of the receivables is considered transferred. For these transfers, the receivables are removed from our Condensed Consolidated Balance Sheets at the date of transfer. In the securitization and factoring arrangements, any continuing involvement with the receivables is limited to servicing the receivables. The fair value of any servicing assets and liabilities is immaterial. Our trade receivables securitization program permits us to borrow, on an unsecured basis, cash collected in a servicing capacity on previously sold receivables, which we report within short-term debt on our Condensed Consolidated Balance Sheets. These borrowings amounted to €164 million ($181 million) as of March 31, 2020. See Note 6—Debt for additional information on these borrowings.
Under a securitization program that was terminated in July 2019, if transfers were accounted for as sales, the consideration received included a simultaneous cash payment and a deferred purchase price receivable. The deferred purchase price receivable was not a trade receivable and was recorded based on its fair value and reported within Other current assets on our Condensed Consolidated Balance Sheets. The cash payment which we received on the date of the transfer was reflected within Net cash provided by (used in) operating activities on our Condensed Consolidated Statements of Cash Flows. As we received cash payments on the deferred purchase price receivable, it was reflected as an investing activity. The new program does not include a deferred purchase price mechanism.
The maximum amount of net cash proceeds available at any one time under the program is €400 million (approximately $441 million as of March 31, 2020) and this amount includes any unsecured borrowings related to the program. As of March 31, 2020, €88 million (approximately $98 million) was available to us based on the level of receivables sold and outstanding as of that date. The weighted average interest rate was 0.80 % as of March 31, 2020. Charges for commitment fees, which are based on a percentage of available amounts, and charges for administrative fees were not material to our results of operations for the three months ended March 31, 2020 and 2019. The securitization program expires in July 2022 and contains financial covenants customary for this type of arrangement, including maintaining a defined average days sales outstanding ratio.
Information related to the trade receivables sold was as follows:
Three Months Ended March 31, | ||||||||
(In millions) | 2020 | 2019 | ||||||
Securitization programs | ||||||||
Receivables sold in period | $ | $ | ||||||
Cash consideration | ||||||||
Deferred purchase price | ||||||||
Factoring programs | ||||||||
Receivables sold in period | ||||||||
Cash consideration | ||||||||
In addition to the cash considerations referenced above, we received $71 million in the three months ended March 31, 2019, for the realization of cash on the deferred purchase price receivable for our prior securitization program.
7
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The levels of inputs used to measure fair value are:
• | Level 1—Quoted prices for identical instruments in active markets; |
• | Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets; and |
• | Level 3—Valuations based on inputs that are unobservable, generally utilizing pricing models or other valuation techniques that reflect management’s judgment and estimates. |
The fair value hierarchy of cash equivalents was as follows:
(In millions) | Carrying Value | Fair Value | Level 1 | Level 2 | ||||||||||||
March 31, 2020 | $ | $ | $ | $ | ||||||||||||
December 31, 2019 | ||||||||||||||||
Adoption of New Accounting Standards
In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The ASU, as subsequently modified, amends the current incurred losses impairment method with a method that reflects expected credit losses on certain types of financial instruments, including trade receivables. We adopted this standard on January 1, 2020 and recorded an immaterial adjustment to total equity for the cumulative impact of adoption.
In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” The ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Under the guidance, any capitalized implementation costs would be included in prepaid expenses, amortized over the term of the hosting arrangement on a straight-line basis and presented in the same line items in the Consolidated Statement of Income as the expense for fees of the associated hosting arrangements. We adopted this standard on January 1, 2020 on a prospective basis. The adoption did not have a material effect on our consolidated financial statements.
Accounting Pronouncements Issued but Not Yet Effective
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): “Simplifying the Accounting for Income Taxes.” The ASU is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The ASU also clarifies and amends existing guidance to enhance consistency and comparability among reporting entities. This ASU is effective for fiscal years beginning after December 15, 2020, including interim periods within that reporting period; however, early adoption is permitted. We are currently evaluating the impact of this standard on our consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference rate reform (Topic 848)—“Facilitation of the effects of reference rate reform on financial reporting.” The ASU provides optional expedients and exceptions for applying
8
GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform. The amendments apply only to contracts and hedging relationships that reference London Inter-bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. The amendments are elective and are effective upon issuance through December 31, 2022. We are currently evaluating the impact of the new guidance.
2. Segment Reporting
We are organized into two reportable segments: Transportation and Logistics. We evaluate our performance in large part based on the various financial measures of our two reporting segments.
In our Transportation segment, we provide multiple services to facilitate the movement of raw materials, parts and finished goods. We accomplish this by using our proprietary technology, third-party independent carriers and our transportation assets and service centers. Our transportation services include truck brokerage and expedite; truckload; less-than-truckload (“LTL”); last mile; intermodal and drayage; managed transportation; and global forwarding. Freight brokerage, last mile, global forwarding and managed transportation are non-asset or asset-light businesses while LTL and truckload are primarily asset-based operations.
In our Logistics segment, which we also refer to as supply chain or contract logistics, we provide a wide range of services differentiated by our proprietary technology and our ability to customize solutions for individual customers. Our services include value-added warehousing and distribution, e-commerce and omnichannel fulfillment, cold-chain solutions, reverse logistics, packaging and labeling, factory support, aftermarket support, inventory management, order personalization and supply chain optimization. In addition, our Logistics segment provides engineered solutions for supply chain optimization, such as production flow management.
Some of our operating units provide services to our other operating units outside of their reportable segment. Billings for such services are based on negotiated rates and are reflected as revenues of the billing segment. We adjust these rates from time to time based on market conditions. We eliminate intersegment revenues and expenses in our consolidated results.
Corporate includes corporate headquarters costs for executive officers and certain legal and financial functions, and other costs and credits not attributed to our reporting segments.
Our chief operating decision maker (“CODM”) regularly reviews financial information at the reporting segment level to allocate resources to the segments and to assess their performance. We include items directly attributable to a segment, and those that can be allocated on a reasonable basis, in segment results reported to the CODM. We do not provide asset information by segment to the CODM, as the majority of our assets are managed at the corporate level.
Selected financial data for our segments is as follows:
(In millions) | Transportation | Logistics | Corporate | Eliminations/Other | Total | |||||||||||||||
Three months ended March 31, 2020 | ||||||||||||||||||||
Revenue | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
Operating income (loss) | ( | ) | ||||||||||||||||||
Depreciation and amortization | ||||||||||||||||||||
Three months ended March 31, 2019 | ||||||||||||||||||||
Revenue | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
Operating income (loss) | ( | ) | ||||||||||||||||||
Depreciation and amortization | ||||||||||||||||||||
9
3. Revenue Recognition
Disaggregation of Revenues
We disaggregate our revenue by geographic area and service offering. Our revenue disaggregated by geographical area, based on sales office location, was as follows:
Three Months Ended March 31, 2020 | ||||||||||||||||
(In millions) | Transportation | Logistics | Eliminations | Total | ||||||||||||
Revenue | ||||||||||||||||
United States | $ | $ | $ | ( | ) | $ | ||||||||||
North America (excluding United States) | ||||||||||||||||
France | ( | ) | ||||||||||||||
United Kingdom | ( | ) | ||||||||||||||
Europe (excluding France and United Kingdom) | ( | ) | ||||||||||||||
Other | ( | ) | ||||||||||||||
Total | $ | $ | $ | ( | ) | $ | ||||||||||
Three Months Ended March 31, 2019 | ||||||||||||||||
(In millions) | Transportation | Logistics | Eliminations | Total | ||||||||||||
Revenue | ||||||||||||||||
United States | $ | $ | $ | ( | ) | $ | ||||||||||
North America (excluding United States) | ||||||||||||||||
France | ( | ) | ||||||||||||||
United Kingdom | ( | ) | ||||||||||||||
Europe (excluding France and United Kingdom) | ( | ) | ||||||||||||||
Other | ( | ) | ||||||||||||||
Total | $ | $ | $ | ( | ) | $ | ||||||||||
Our revenue disaggregated by service offering was as follows:
Three Months Ended March 31, | ||||||||
(In millions) | 2020 | 2019 | ||||||
Transportation segment: | ||||||||
Freight brokerage and truckload | $ | $ | ||||||
LTL | ||||||||
Last mile (1) | ||||||||
Managed transportation | ||||||||
Global forwarding | ||||||||
Transportation eliminations | ( | ) | ( | ) | ||||
Total Transportation segment revenue | ||||||||
Total Logistics segment revenue | ||||||||
Intersegment eliminations | ( | ) | ( | ) | ||||
Total revenue | $ | $ | ||||||
(1) | Comprised of our North American last mile operations. |
10
Performance Obligations
Remaining performance obligations represent firm contracts for which services have not been performed and future revenue recognition is expected. As permitted in determining the remaining performance obligation, we omit obligations that: (i) have original expected durations of one year or less or (ii) contain variable consideration. On March 31, 2020, the fixed consideration component of our remaining performance obligation was approximately $1.7 billion, and we expect to recognize approximately 70 % of that amount over the next three years and the remainder thereafter. The majority of the remaining performance obligation relates to our Logistics reportable segment. We estimate remaining performance obligations at a point in time and actual amounts may differ from these estimates due to changes in foreign currency exchange rates and contract revisions or terminations.
4. Restructuring Charges
We engage in restructuring actions as part of our ongoing efforts to best use our resources and infrastructure. These actions generally include severance and facility-related costs and are intended to improve our efficiency and profitability.
Restructuring charges were recorded on our Condensed Consolidated Statements of Income as follows:
Three Months Ended March 31, | ||||||||
(In millions) | 2020 | 2019 | ||||||
Cost of transportation and services | $ | $ | ||||||
Sales, general and administrative expense | ||||||||
Total | $ | $ | ||||||
Our restructuring-related activity was as follows:
Three Months Ended March 31, 2020 | ||||||||||||||||
(In millions) | Reserve Balance as of December 31, 2019 | Charges Incurred | Payments | Reserve Balance as of March 31, 2020 | ||||||||||||
Severance: | ||||||||||||||||
Transportation | $ | $ | $ | ( | ) | $ | ||||||||||
Logistics | ( | ) | ||||||||||||||
Corporate | ( | ) | ||||||||||||||
Total | $ | $ | $ | ( | ) | $ | ||||||||||
We expect the majority of the cash outlays related to the charges incurred in the first quarter of 2020 will be complete within twelve months.
5. Derivative Instruments
In the normal course of business, we are exposed to risks arising from business operations and economic factors, including fluctuations in interest rates and foreign currencies. We use derivative instruments to manage the volatility related to these exposures. The objective of these derivative instruments is to reduce fluctuations in our 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. Historically, we have not incurred, and do not expect to incur in the future, any losses as a result of counterparty default.
11
The fair value of our derivative instruments and the related notional amounts were as follows:
March 31, 2020 | ||||||||||||||||
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 | $ | Other current assets | $ | Other current liabilities | $ | ( | ) | |||||||||
Cross-currency swap agreements | Other long-term assets | Other long-term liabilities | ||||||||||||||
Derivatives not designated as hedges: | ||||||||||||||||
Foreign currency option contracts | Other current assets | Other current liabilities | ||||||||||||||
Total | $ | $ | ( | ) | ||||||||||||
December 31, 2019 | ||||||||||||||||
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 | $ | Other long-term assets | $ | Other long-term liabilities | $ | ( | ) | |||||||||
Interest rate swap | Other current assets | Other current liabilities | ( | ) | ||||||||||||
Derivatives not designated as hedges: | ||||||||||||||||
Foreign currency option contracts | Other current assets | Other current liabilities | ||||||||||||||
Total | $ | $ | ( | ) | ||||||||||||