SEC Filing | XPO Inc.

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xpo-20200630

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, 2020


☐			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

_______________________________________________________

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,

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 July 27, 2020, there were 91,325,643 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, 2020

Table of Contents


			Page No.
Part I—Financial Information
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets			1
Condensed Consolidated Statements of (Loss) Income			2
Condensed Consolidated Statements of Comprehensive (Loss) Income			3
Condensed Consolidated Statements of Cash Flows			4
Condensed Consolidated Statements of Changes in Equity			5
Notes to Condensed Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			20
Item 3. Quantitative and Qualitative Disclosures About Market Risk			33
Item 4. Controls and Procedures			33
Part II—Other Information
Item 1. Legal Proceedings			33
Item 1A. Risk Factors			34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			36
Item 3. Defaults Upon Senior Securities			36
Item 4. Mine Safety Disclosures			36
Item 5. Other Information			36
Item 6. Exhibits			38
Signatures			40

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)	2020		2019
ASSETS
Current assets
Cash and cash equivalents	$	2,285	$	377
Accounts receivable, net of allowances of $79 and $58, respectively	2,244		2,500
Other current assets	501		465
Total current assets	5,030		3,342
Long-term assets
Property and equipment, net of $2,291 and $2,054 in accumulated depreciation, respectively	2,597		2,704
Operating lease assets	2,226		2,245
Goodwill	4,422		4,450
Identifiable intangible assets, net of $864 and $850 in accumulated amortization, respectively	1,015		1,092
Other long-term assets	351		295
Total long-term assets	10,611		10,786
Total assets	$	15,641	$	14,128
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	840	$	1,157
Accrued expenses	1,673		1,414
Short-term borrowings and current maturities of long-term debt	198		84
Short-term operating lease liabilities	460		468
Other current liabilities	158		135
Total current liabilities	3,329		3,258
Long-term liabilities
Long-term debt	6,939		5,182
Deferred tax liability	507		495
Employee benefit obligations	155		157
Long-term operating lease liabilities	1,770		1,776
Other long-term liabilities	307		364
Total long-term liabilities	9,678		7,974
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, 2020 and December 31, 2019, respectively	41		41
Common stock, $0.001 par value; 300 shares authorized; 91 and 92 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively	—		—
Additional paid-in capital	1,963		2,061
Retained earnings	672		786
Accumulated other comprehensive loss	(192)		(145)
Total stockholders’ equity before noncontrolling interests	2,484		2,743
Noncontrolling interests	150		153
Total equity	2,634		2,896
Total liabilities and equity	$	15,641	$	14,128

See accompanying notes to condensed consolidated financial statements.

Table of Contents

XPO Logistics, Inc.

Condensed Consolidated Statements of (Loss) Income

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
(In millions, except per share data)	2020		2019		2020		2019
Revenue	$	3,502	$	4,238	$	7,366	$	8,358
Operating expenses
Cost of transportation and services	1,641		2,108		3,539		4,204
Direct operating expense	1,370		1,417		2,730		2,823
Sales, general and administrative expense	632		455		1,157		941
Total operating expenses	3,643		3,980		7,426		7,968
Operating (loss) income	(141)		258		(60)		390
Other expense (income)	(21)		(13)		(39)		(30)
Foreign currency loss (gain)	3		8		(5)		10
Debt extinguishment loss	—		—		—		5
Interest expense	82		72		154		143
(Loss) income before income tax (benefit) provision	(205)		191		(170)		262
Income tax (benefit) provision	(71)		46		(61)		65
Net (loss) income	(134)		145		(109)		197
Net loss (income) attributable to noncontrolling interests	3		(10)		1		(15)
Net (loss) income attributable to XPO	$	(131)	$	135	$	(108)	$	182

Earnings (loss) per share data
Net (loss) income attributable to common shareholders	$	(132)	$	122	$	(110)	$	165

Basic (loss) earnings per share	$	(1.45)	$	1.32	$	(1.20)	$	1.66
Diluted (loss) earnings per share	$	(1.45)	$	1.19	$	(1.20)	$	1.51

Weighted-average common shares outstanding
Basic weighted-average common shares outstanding	91		92		92		100
Diluted weighted-average common shares outstanding	91		102		92		110

See accompanying notes to condensed consolidated financial statements.

Table of Contents

XPO Logistics, Inc.

Condensed Consolidated Statements of Comprehensive (Loss) Income

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
(In millions)	2020		2019		2020		2019
Net (loss) income	$	(134)	$	145	$	(109)	$	197

Other comprehensive income (loss), net of tax
Foreign currency translation gain (loss), net of tax effect of $4, $—, $(7) and $(6)	$	21	$	(1)	$	(44)	$	(2)
Unrealized gain on financial assets/liabilities designated as hedging instruments, net of tax effect of $—, $(1), $— and $—	—		4		—		1
Defined benefit plans adjustments, net of tax effect of $—, $—, $2 and $—	—		—		(5)		—
Other comprehensive income (loss)	21		3		(49)		(1)
Comprehensive (loss) income	$	(113)	$	148	$	(158)	$	196
Less: Comprehensive income (loss) attributable to noncontrolling interests	—		13		(3)		13
Comprehensive (loss) income attributable to XPO	$	(113)	$	135	$	(155)	$	183

See accompanying notes to condensed consolidated financial statements.

Table of Contents

XPO Logistics, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Six Months Ended June 30,
(In millions)	2020		2019
Operating activities
Net (loss) income	$	(109)	$	197
Adjustments to reconcile net (loss) income to net cash from operating activities
Depreciation, amortization and net lease activity	379		360
Stock compensation expense	39		31
Accretion of debt	8		9
Deferred tax expense	3		12
Debt extinguishment loss	—		5
Unrealized (gain) loss on foreign currency option and forward contracts	(1)		9
Gains on sales of property and equipment	(39)		(40)
Other	42		23
Changes in assets and liabilities
Accounts receivable	186		(289)
Other assets	(84)		(23)
Accounts payable	(277)		(81)
Accrued expenses and other liabilities	247		(49)
Net cash provided by operating activities	394		164
Investing activities
Payment for purchases of property and equipment	(255)		(236)
Proceeds from sale of property and equipment	77		85
Cash collected on deferred purchase price receivable	—		137
Other	6		—
Net cash used in investing activities	(172)		(14)
Financing activities
Proceeds from issuance of debt	1,161		1,758
Proceeds from borrowings related to securitization program	109		—
Proceeds from borrowings on ABL facility	620		1,355
Repayment of borrowings on ABL facility	(20)		(1,355)
Repayment of debt and finance leases	(40)		(565)
Payment for debt issuance costs	(21)		(27)
Repurchase of common stock	(114)		(1,347)
Change in bank overdrafts	23		30
Payment for tax withholdings for restricted shares	(18)		(5)
Other	1		3
Net cash provided by (used in) financing activities	1,701		(153)
Effect of exchange rates on cash, cash equivalents and restricted cash	(15)		(2)
Net increase (decrease) in cash, cash equivalents and restricted cash	1,908		(5)
Cash, cash equivalents and restricted cash, beginning of period	387		514
Cash, cash equivalents and restricted cash, end of period	$	2,295	$	509
Supplemental disclosure of cash flow information
Leased assets obtained in exchange for new operating lease liabilities	$	371	$	327
Leased assets obtained in exchange for new finance lease liabilities	17		30
Cash paid for interest	149		125
Cash paid for income taxes	10		58

See accompanying notes to condensed consolidated financial statements.

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, 2020	72	$	41	91,044	$	—	$	1,943	$	804	$	(210)	$	2,578	$	150	$	2,728
Net loss	—	—		—	—		—		(131)		—		(131)		(3)		(134)
Other comprehensive income	—	—		—	—		—		—		18		18		3		21
Exercise and vesting of stock compensation awards	—	—		216	—		—		—		—		—		—		—
Tax withholdings related to vesting of stock compensation awards	—	—		—	—		(2)		—		—		(2)		—		(2)
Dividend declared	—	—		—	—		—		(1)		—		(1)		—		(1)
Stock compensation expense	—	—		—	—		20		—		—		20		—		20
Other	—	—		62	—		2		—		—		2		—		2
Balance as of June 30, 2020	72	$	41	91,322	$	—	$	1,963	$	672	$	(192)	$	2,484	$	150	$	2,634


	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	72	$	41	92,342	$	—	$	2,061	$	786	$	(145)	$	2,743	$	153	$	2,896
Net loss	—	—		—	—		—		(108)		—		(108)		(1)		(109)
Other comprehensive loss	—	—		—	—		—		—		(47)		(47)		(2)		(49)
Exercise and vesting of stock compensation awards	—	—		633	—		—		—		—		—		—		—
Tax withholdings related to vesting of stock compensation awards	—	—		—	—		(18)		—		—		(18)		—		(18)
Retirement of common stock	—	—		(1,715)	—		(114)		—		—		(114)		—		(114)
Dividend declared	—	—		—	—		—		(2)		—		(2)		—		(2)
Stock compensation expense	—	—		—	—		32		—		—		32		—		32
Adoption of new accounting standard and other	—	—		62	—		2		(4)		—		(2)		—		(2)
Balance as of June 30, 2020	72	$	41	91,322	$	—	$	1,963	$	672	$	(192)	$	2,484	$	150	$	2,634

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 March 31, 2019	72	$	41	93,207	$	—	$	2,122	$	428	$	(153)	$	2,438	$	395	$	2,833
Net income	—	—		—	—		—		135		—		135