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xpo-20210630

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, 2021


☐			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,	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

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth 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 29, 2021, there were 114,626,250 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, 2021

Table of Contents


			Page No.
Part I—Financial Information
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets			1
Condensed Consolidated Statements of Income (Loss)			2
Condensed Consolidated Statements of Comprehensive Income (Loss)			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			22
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			34
Item 3. Defaults Upon Senior Securities			35
Item 4. Mine Safety Disclosures			35
Item 5. Other Information			35
Item 6. Exhibits			37
Signatures			38

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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)	2021		2020
ASSETS
Current assets
Cash and cash equivalents	$	801	$	2,054
Accounts receivable, net of allowances of $62 and $65, respectively	3,171		2,886
Other current assets	492		430
Total current assets	4,464		5,370
Long-term assets
Property and equipment, net of $2,783 and $2,568 in accumulated depreciation, respectively	2,627		2,661
Operating lease assets	2,601		2,278
Goodwill	4,572		4,599
Identifiable intangible assets, net of $981 and $909 in accumulated amortization, respectively	923		974
Other long-term assets	377		287
Total long-term assets	11,100		10,799
Total assets	$	15,564	$	16,169
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	1,293	$	1,255
Accrued expenses	2,117		1,814
Short-term borrowings and current maturities of long-term debt	92		1,338
Short-term operating lease liabilities	584		483
Other current liabilities	291		263
Total current liabilities	4,377		5,153
Long-term liabilities
Long-term debt	5,181		5,369
Deferred tax liability	380		371
Employee benefit obligations	167		192
Long-term operating lease liabilities	2,042		1,795
Other long-term liabilities	450		440
Total long-term liabilities	8,220		8,167
Stockholders’ equity
Convertible perpetual preferred stock, $0.001 par value; 10 shares authorized; — and 0.001 of Series A shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively	—		1
Common stock, $0.001 par value; 300 shares authorized; 112 and 102 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively	—		—
Additional paid-in capital	1,971		1,998
Retained earnings	1,139		868
Accumulated other comprehensive loss	(183)		(158)
Total stockholders’ equity before noncontrolling interests	2,927		2,709
Noncontrolling interests	40		140
Total equity	2,967		2,849
Total liabilities and equity	$	15,564	$	16,169

See accompanying notes to condensed consolidated financial statements.

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XPO Logistics, Inc.

Condensed Consolidated Statements of Income (Loss)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
(In millions, except per share data)	2021		2020		2021		2020
Revenue	$	5,036	$	3,502	$	9,810	$	7,366
Cost of transportation and services	2,514		1,641		4,842		3,539
Direct operating expense	1,682		1,370		3,338		2,730
Sales, general and administrative expense	594		632		1,182		1,157
Operating income (loss)	246		(141)		448		(60)
Other income	(24)		(21)		(50)		(39)
Foreign currency (gain) loss	3		3		1		(5)
Debt extinguishment loss	—		—		8		—
Interest expense	63		82		132		154
Income (loss) before income tax provision (benefit)	204		(205)		357		(170)
Income tax provision (benefit)	46		(71)		81		(61)
Net income (loss)	158		(134)		276		(109)
Net (income) loss attributable to noncontrolling interests	(2)		3		(5)		1
Net income (loss) attributable to XPO	$	156	$	(131)	$	271	$	(108)

Net income (loss) attributable to common shareholders	$	156	$	(132)	$	271	$	(110)

Earnings per share data
Basic earnings (loss) per share	$	1.39	$	(1.45)	$	2.48	$	(1.20)
Diluted earnings (loss) per share	$	1.38	$	(1.45)	$	2.40	$	(1.20)

Weighted-average common shares outstanding
Basic weighted-average common shares outstanding	112		91		109		92
Diluted weighted-average common shares outstanding	113		91		113		92

See accompanying notes to condensed consolidated financial statements.

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XPO Logistics, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
(In millions)	2021		2020		2021		2020
Net income (loss)	$	158	$	(134)	$	276	$	(109)

Other comprehensive income (loss), net of tax
Foreign currency translation gain (loss), net of tax effect of $3, $4, $(3) and $(7)	$	15	$	21	$	(27)	$	(44)

Defined benefit plans adjustments, net of tax effect of $—, $—, $— and $2	—		—		—		(5)
Other comprehensive income (loss)	15		21		(27)		(49)
Comprehensive income (loss)	$	173	$	(113)	$	249	$	(158)
Less: Comprehensive income (loss) attributable to noncontrolling interests	5		—		3		(3)
Comprehensive income (loss) attributable to XPO	$	168	$	(113)	$	246	$	(155)

See accompanying notes to condensed consolidated financial statements.

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XPO Logistics, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Six Months Ended June 30,
(In millions)	2021		2020
Operating activities
Net income (loss)	$	276	$	(109)
Adjustments to reconcile net income (loss) to net cash from operating activities
Depreciation, amortization and net lease activity	397		379
Stock compensation expense	25		39
Accretion of debt	10		8
Deferred tax (benefit) expense	(1)		3
Debt extinguishment loss	8		—
Unrealized (gain) loss on foreign currency option and forward contracts	1		(1)
Gains on sales of property and equipment	(31)		(39)
Other	5		42
Changes in assets and liabilities
Accounts receivable	(240)		186
Other assets	(77)		(84)
Accounts payable	(21)		(277)
Accrued expenses and other liabilities	187		247
Net cash provided by operating activities	539		394
Investing activities
Payment for purchases of property and equipment	(250)		(255)
Proceeds from sale of property and equipment	62		77
Other	34		6
Net cash used in investing activities	(154)		(172)
Financing activities
Proceeds from issuance of debt	—		1,161
Proceeds from (repayment of) borrowings related to securitization program	(49)		109
Repurchase of debt	(1,200)		—
Proceeds from borrowings on ABL facility	—		620
Repayment of borrowings on ABL facility	(200)		(20)
Repayment of debt and finance leases	(53)		(40)
Payment for debt issuance costs	(5)		(21)
Purchase of noncontrolling interests	(128)		—
Repurchase of common stock	—		(114)
Change in bank overdrafts	14		23
Payment for tax withholdings for restricted shares	(22)		(18)
Other	4		1
Net cash provided by (used in) financing activities	(1,639)		1,701
Effect of exchange rates on cash, cash equivalents and restricted cash	1		(15)
Net increase (decrease) in cash, cash equivalents and restricted cash	(1,253)		1,908
Cash, cash equivalents and restricted cash, beginning of period	2,065		387
Cash, cash equivalents and restricted cash, end of period	$	812	$	2,295
Supplemental disclosure of cash flow information
Leased assets obtained in exchange for new operating lease liabilities, including $281 related to an acquisition in 2021	$	711	$	371
Leased assets obtained in exchange for new finance lease liabilities	41		17
Cash paid for interest	136		149
Cash paid for income taxes	65		10

See accompanying notes to condensed consolidated financial statements.

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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, 2021	—	$	—	111,676	$	—	$	1,988	$	983	$	(195)	$	2,776	$	138	$	2,914
Net income	—	—		—	—		—		156		—		156		2		158
Other comprehensive income	—	—		—	—		—		—		12		12		3		15
Exercise and vesting of stock compensation awards	—	—		44	—		—		—		—		—		—		—
Tax withholdings related to vesting of stock compensation awards	—	—		—	—		(1)		—		—		(1)		—		(1)
Conversion of preferred stock to common stock	—	—		6	—		—		—		—		—		—		—
Purchase of noncontrolling interests	—	—		—	—		(34)		—		—		(34)		(100)		(134)
Dividend declared	—	—		—	—		—		—		—		—		(3)		(3)
Stock compensation expense	—	—		—	—		15		—		—		15		—		15
Other	—	—		—	—		3		—		—		3		—		3
Balance as of June 30, 2021	—	$	—	111,726	$	—	$	1,971	$	1,139	$	(183)	$	2,927	$	40	$	2,967


	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, 2020	1	$	1	102,052	$	—	$	1,998	$	868	$	(158)	$	2,709	$	140	$	2,849
Net income	—	—		—	—		—		271		—		271		5		276
Other comprehensive loss	—	—		—	—		—		—		(25)		(25)		(2)		(27)
Exercise and vesting of stock compensation awards	—	—		314	—		—		—		—		—		—		—
Tax withholdings related to vesting of stock compensation awards	—	—		—	—		(22)		—		—		(22)		—		(22)
Conversion of preferred stock to common stock	(1)	(1)		145	—		1		—		—		—		—		—
Purchase of noncontrolling interests	—	—		—	—		(34)		—		—		(34)		(100)		(134)
Dividend declared	—	—		—	—		—		—		—		—		(3)		(3)
Exercise of warrants	—	—		9,215	—		—		—		—		—		—		—
Stock compensation expense	—	—		—	—		25		—		—		25		—		25
Other	—	—		—	—		3		—		—		3		—		3
Balance as of June 30, 2021	—	$	—	111,726	$	—	$	1,971	$	1,139	$	(183)	$	2,927	$	40	$	2,967

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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, 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

See accompanying notes to condensed consolidated financial statements.

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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”), provides cutting-edge supply chain solutions to the most successful companies in the world. We use our extensive 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 3—Segment Reporting for additional information on our operations.

On August 2, 2021, we completed the previously announced spin-off of our Logistics segment in a transaction intended to qualify as tax-free to our stockholders for U.S. federal income tax purposes, which was accomplished by the distribution of 100% of the outstanding common stock of GXO Logistics, Inc. (“GXO”) to XPO stockholders. XPO stockholders received one share of GXO common stock for every share of XPO common stock held at the close of business on July 23, 2021, the record date for the distribution. XPO does not beneficially own any shares of GXO’s common stock following the spin-off. GXO, a global provider of contract logistics services, is an independent public company trading under the symbol “GXO” on the New York Stock Exchange. The historical results of operations and the financial position of GXO are included in these condensed consolidated financial statements. After the spin-off, we will no longer consolidate GXO, and all periods prior to the spin-off will reflect our Logistics segment as a discontinued operation.

In connection with the spin-off, we have entered into a separation and distribution agreement as well as various other agreements with GXO that provide a framework for the relationships between the parties going forward, including, among others, an employee matters agreement, a tax matters agreement, an intellectual property license agreement and a transition services agreement, through which XPO will continue to provide certain services to GXO following the spin-off. With the completion of the spin-off, XPO is a leading provider of transportation services, primarily less-than-truckload (“LTL”) transportation and truck brokerage services.

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, 2020 (the “2020 Form 10-K”). 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 2020 Form 10-K.

Our historical results reflect a noncontrolling interest in XPO Logistics Europe SA (“XPO Logistics Europe”), a business we acquired majority ownership of in 2015. In April 2021, we announced a buy-out offer to be followed by a squeeze-out for the remaining 3% of XPO Logistics Europe that we did not already own. The buy-out offer and squeeze-out were completed in the second quarter of 2021 at a cost of $128 million plus expenses. Following the squeeze-out, we own all of the outstanding shares of XPO Logistics Europe.

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 the financial condition, operating results and cash flows for the interim periods presented. Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

Restricted Cash

As of June 30, 2021 and December 31, 2020, our restricted cash included in Other long-term assets on our Condensed Consolidated Balance Sheets was $11 million.

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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.

XPO Logistics Europe participates in a trade receivables securitization program co-arranged by three European banks (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, our continuing involvement is limited to servicing the receivables and, in the case of the securitization arrangements, providing recourse in certain defined circumstances. 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. We had no such borrowings outstanding as of June 30, 2021 and had borrowings of €41 million ($50 million) as of December 31, 2020. See Note 7—Debt for additional information on these borrowings.

The maximum amount of net cash proceeds available at any one time under the securitization program, inclusive of any unsecured borrowings, is €400 million (approximately $474 million as of June 30, 2021). As of June 30, 2021, €59 million (approximately $70 million) was available to us, subject to having sufficient receivables available to sell to the Purchasers. The weighted average interest rate was 0.60% as of June 30, 2021. 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 and six months ended June 30, 2021 and 2020.

Information related to the trade receivables sold was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(In millions)	2021		2020		2021		2020
Securitization programs
Receivables sold in period	$	882	$	598	$	1,657	$	1,289
Cash consideration	882		598		1,657		1,289

Factoring programs
Receivables sold in period	113		199		229		463
Cash consideration	112		199		228		462

The trade receivables securitization program was amended in July 2021. See Note 11—Subsequent Events for more information.

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

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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.

We base our fair value estimates on market assumptions and available information. The carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and current maturities of long-term debt approximated their fair values as of June 30, 2021 and December 31, 2020 due to their short-term nature and/or being receivable or payable on demand. The Level 1 cash equivalents include money market funds valued using quoted prices in active markets. For information on the fair value hierarchy of our derivative instruments, see Note 6—Derivative Instruments and for information on financial liabilities, see Note 7—Debt.

The fair value hierarchy of cash equivalents was as follows:


(In millions)	Carrying Value		Fair Value		Level 1
June 30, 2021	$	535	$	535	$	535
December 31, 2020	1,738		1,738		1,738

The decrease in cash equivalents from December 31, 2020 was primarily due to the redemption of our senior notes due 2022 in January 2021 and the repayment of borrowings under our revolving loan credit agreement (the “ABL Facility”). For further information, see Note 7—Debt for further information.

Adoption of New Accounting Standard

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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