XPO Logistics, Inc. [XPO] Filings

10-Q 1 xpo-20220630.htm 10-Q xpo-20220630

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, 2022


☐			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 August 2, 2022, there were 115,039,684 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, 2022

Table of Contents


			Page No.
Part I—Financial Information
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets			1
Condensed Consolidated Statements of Income			2
Condensed Consolidated Statements of Comprehensive Income			3
Condensed Consolidated Statements of Cash Flows			4
Condensed Consolidated Statements of Changes in Equity			6
Notes to Condensed Consolidated Financial Statements			8
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			33
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			33
Item 3. Defaults Upon Senior Securities			33
Item 4. Mine Safety Disclosures			33
Item 5. Other Information			33
Item 6. Exhibits			34
Signatures			35

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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)	2022		2021
ASSETS
Current assets
Cash and cash equivalents	$	436	$	260
Accounts receivable, net of allowances of $47 and $47, respectively	2,190		2,105
Other current assets	271		286
Current assets of discontinued operations	19		26
Total current assets	2,916		2,677
Long-term assets
Property and equipment, net of $1,823 and $1,828 in accumulated depreciation, respectively	1,799		1,808
Operating lease assets	832		908
Goodwill	2,284		2,479
Identifiable intangible assets, net of $589 and $612 in accumulated amortization, respectively	522		580
Other long-term assets	287		255

Total long-term assets	5,724		6,030
Total assets	$	8,640	$	8,707
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	1,153	$	1,110
Accrued expenses	1,106		1,107
Short-term borrowings and current maturities of long-term debt	55		58
Short-term operating lease liabilities	142		170
Other current liabilities	159		69
Current liabilities of discontinued operations	19		24
Total current liabilities	2,634		2,538
Long-term liabilities
Long-term debt	2,857		3,514
Deferred tax liability	325		316
Employee benefit obligations	118		122
Long-term operating lease liabilities	689		752
Other long-term liabilities	310		327

Total long-term liabilities	4,299		5,031
Stockholders’ equity

Common stock, $0.001 par value; 300 shares authorized; 115 shares issued and outstanding as of June 30, 2022 and December 31, 2021	—		—
Additional paid-in capital	1,187		1,179
Retained earnings	672		43
Accumulated other comprehensive loss	(152)		(84)


Total equity	1,707		1,138
Total liabilities and equity	$	8,640	$	8,707

See accompanying notes to condensed consolidated financial statements.

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XPO Logistics, Inc.

Condensed Consolidated Statements of Income

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
(In millions, except per share data)	2022		2021		2022		2021
Revenue	$	3,232	$	3,186	$	6,705	$	6,175
Cost of transportation and services (exclusive of depreciation and amortization)	2,153		2,186		4,590		4,239
Direct operating expense (exclusive of depreciation and amortization)	365		358		750		692
Sales, general and administrative expense	324		324		668		662
Depreciation and amortization expense	115		120		231		239
(Gain) loss on sale of business	16		—		(434)		—
Transaction and integration costs	25		6		35		11
Restructuring costs	4		1		10		2
Operating income	230		191		855		330
Other income	(15)		(10)		(29)		(26)
Debt extinguishment loss	26		—		26		8
Interest expense	31		58		68		123
Income from continuing operations before income tax provision	188		143		790		225
Income tax provision	47		30		160		49
Income from continuing operations	141		113		630		176
Income (loss) from discontinued operations, net of taxes	—		45		(1)		100
Net income	141		158		629		276

Net income from discontinued operations attributable to noncontrolling interests	—		(2)		—		(5)
Net income attributable to XPO	$	141	$	156	$	629	$	271

Net income (loss) attributable to common shareholders
Continuing operations	$	141	$	113	$	630	$	176
Discontinued operations	—		43		(1)		95
Net income attributable to common shareholders	$	141	$	156	$	629	$	271

Earnings (loss) per share data
Basic earnings per share from continuing operations	$	1.23	$	1.01	$	5.49	$	1.61
Basic earnings (loss) per share from discontinued operations	—		0.38		(0.01)		0.87
Basic earnings per share attributable to common shareholders	$	1.23	$	1.39	$	5.48	$	2.48
Diluted earnings per share from continuing operations	$	1.22	$	1.00	$	5.45	$	1.56
Diluted earnings (loss) per share from discontinued operations	—		0.38		(0.01)		0.84
Diluted earnings per share attributable to common shareholders	$	1.22	$	1.38	$	5.44	$	2.40

Weighted-average common shares outstanding
Basic weighted-average common shares outstanding	115		112		115		109
Diluted weighted-average common shares outstanding	116		113		116		113

See accompanying notes to condensed consolidated financial statements.

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XPO Logistics, Inc.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
(In millions)	2022		2021		2022		2021
Net income	$	141	$	158	$	629	$	276

Other comprehensive income (loss), net of tax
Foreign currency translation gain (loss), net of tax effect of $(9), $3, $(11) and $(3)	$	(46)	$	15	$	(72)	$	(27)
Unrealized gain on financial assets/liabilities designated as hedging instruments, net of tax effect of $(1), $—, $(1) and $—	3		—		4		—

Other comprehensive income (loss)	(43)		15		(68)		(27)
Comprehensive income	$	98	$	173	$	561	$	249
Less: Comprehensive income attributable to noncontrolling interests	—		5		—		3
Comprehensive income attributable to XPO	$	98	$	168	$	561	$	246

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)	2022		2021
Cash flows from operating activities of continuing operations
Net income	$	629	$	276
Income (loss) from discontinued operations, net of taxes	(1)		100
Income from continuing operations	630		176
Adjustments to reconcile income from continuing operations to net cash from operating activities
Depreciation, amortization and net lease activity	231		239
Stock compensation expense	18		13
Accretion of debt	8		10
Deferred tax expense	6		10
Debt extinguishment loss	26		8
Gain on sale of business	(434)		—
Gains on sales of property and equipment	(2)		(30)
Other	17		11
Changes in assets and liabilities
Accounts receivable	(382)		(223)
Other assets	57		(45)
Accounts payable	203		19
Accrued expenses and other liabilities	21		120
Net cash provided by operating activities from continuing operations	399		308
Cash flows from investing activities of continuing operations
Proceeds from sale of business	705		—
Payment for purchases of property and equipment	(267)		(135)
Proceeds from sale of property and equipment	7		60

Proceeds from settlement of cross currency swaps	19		—
Net cash provided by (used in) investing activities from continuing operations	464		(75)
Cash flows from financing activities of continuing operations

Repayment of borrowings related to securitization program	—		(24)
Repurchase of debt	(651)		(1,200)
Proceeds from borrowings on ABL facility	275		—
Repayment of borrowings on ABL facility	(275)		(200)
Repayment of debt and finance leases	(32)		(43)
Payment for debt issuance costs	—		(5)


Change in bank overdrafts	25		—
Payment for tax withholdings for restricted shares	(13)		(22)

Other	(2)		5
Net cash used in financing activities from continuing operations	(673)		(1,489)

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	Six Months Ended June 30,
(In millions)	2022		2021
Cash flows from discontinued operations
Operating activities of discontinued operations	(3)		231
Investing activities of discontinued operations	—		(70)
Financing activities of discontinued operations	—		(159)
Net cash provided by (used in) discontinued operations	(3)		2
Effect of exchange rates on cash, cash equivalents and restricted cash	(14)		1
Net increase (decrease) in cash, cash equivalents and restricted cash	173		(1,253)
Cash, cash equivalents and restricted cash, beginning of period	273		2,065
Cash, cash equivalents and restricted cash, end of period	446		812
Less: Cash, cash equivalents and restricted cash of discontinued operations, end of period	—		318
Cash, cash equivalents and restricted cash of continued operations, end of period	$	446	$	494
Supplemental disclosure of cash flow information

Leased assets obtained in exchange for new operating lease liabilities	$	114	$	111
Leased assets obtained in exchange for new finance lease liabilities	10		31
Cash paid for interest	73		133
Cash paid for income taxes	74		43

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, 2022	—	$	—	114,982	$	—	$	1,176	$	531	$	(109)	$	1,598	$	—	$	1,598
Net income	—	—		—	—		—		141		—		141		—		141
Other comprehensive loss	—	—		—	—		—		—		(43)		(43)		—		(43)

Exercise and vesting of stock compensation awards	—	—		51	—		—		—		—		—		—		—
Tax withholdings related to vesting of stock compensation awards	—	—		—	—		(1)		—		—		(1)		—		(1)



Stock compensation expense	—	—		—	—		10		—		—		10		—		10
Other	—	—		—	—		2		—		—		2		—		2
Balance as of June 30, 2022	—	$	—	115,033	$	—	$	1,187	$	672	$	(152)	$	1,707	$	—	$	1,707


	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, 2021	—	$	—	114,737	$	—	$	1,179	$	43	$	(84)	$	1,138	$	—	$	1,138
Net income	—	—		—	—		—		629		—		629		—		629
Other comprehensive loss	—	—		—	—		—		—		(68)		(68)		—		(68)

Exercise and vesting of stock compensation awards	—	—		296	—		—		—		—		—		—		—
Tax withholdings related to vesting of stock compensation awards	—	—		—	—		(13)		—		—		(13)		—		(13)





Stock compensation expense	—	—		—	—		18		—		—		18		—		18
Other	—	—		—	—		3		—		—		3		—		3
Balance as of June 30, 2022	—	$	—	115,033	$	—	$	1,187	$	672	$	(152)	$	1,707	$	—	$	1,707

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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, 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

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”), is a leading provider of freight transportation services. We use our proprietary technology to move goods efficiently through our customers’ supply chains, primarily by providing less-than-truckload (“LTL”) and truck brokerage services. See Note 4—Segment Reporting for additional information on our operations.

2022 Planned RXO Spin-Off

On March 8, 2022, we announced that our Board of Directors approved a strategic plan to pursue the spin-off of our tech-enabled brokered transportation platform in North America as a publicly traded company. In addition, the Board of Directors authorized two divestitures: our North American intermodal operation, which we sold in March 2022, and the divestiture of our European business. For further information on the sale of our intermodal operation, see Note 3—Divestiture.

The spin-off to XPO shareholders, if completed as planned, will result in two independent, publicly traded companies. The spin-off company will be RXO, Inc. (“RXO”) and will be comprised of our asset-light core truck brokerage business and complementary brokered services for managed transportation, last mile logistics and global forwarding. The remaining company, XPO, will be a pure-play provider of asset-based LTL service in North America. The planned spin-off transaction, which is intended to be tax-free to XPO and our shareholders for U.S. federal income tax purposes, will result in XPO shareholders owning stock in both XPO and RXO. In connection with the transaction, it is anticipated that a portion of XPO’s outstanding debt will be repaid using proceeds from debt incurred by RXO.

We currently expect to complete the RXO spin-off transaction in the fourth quarter of 2022, subject to various conditions, including the effectiveness of a Form 10 registration statement, receipt of a tax opinion from counsel, the refinancing of XPO’s debt on terms satisfactory to our Board of Directors, and final approval by the Board of Directors, among other requirements.

There can be no assurance that any strategic transaction will occur, or if one or more do occur, of the terms or timing.

2021 Spin-Off of the Logistics Segment

On August 2, 2021, we completed the spin-off of our logistics segment as GXO Logistics, Inc. (“GXO”). The historical results of our logistics segment are presented as discontinued operations in our Condensed Consolidated Financial Statements. For information on our discontinued operations, see Note 2—Discontinued Operations.

Basis of Presentation

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, 2021 (the “2021 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 2021 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 the financial condition, operating results and cash flows for the interim periods presented. Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

We have recast prior period amounts to conform to the current period’s presentation.

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Restricted Cash

As of June 30, 2022 and December 31, 2021, our restricted cash included in Other long-term assets on our Condensed Consolidated Balance Sheets was $10 million.

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 also sell trade accounts receivable under our securitization program. 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.

The maximum amount of net cash proceeds available at any one time under our securitization program, inclusive of any unsecured borrowings, is €200 million (approximately $210 million as of June 30, 2022). As of June 30, 2022, less than €1 million (less than $1 million) was available under the program, subject to having sufficient receivables available to sell and with consideration to amounts previously sold. The weighted average interest rate was 0.78% as of June 30, 2022. 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, 2022 and 2021.

Information related to the trade receivables sold was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(In millions)	2022		2021 (1)		2022		2021 (1)
Securitization programs
Receivables sold in period	$	458	$	408	$	905	$	755
Cash consideration	458		408		905		755

Factoring programs
Receivables sold in period	33		13		60		29
Cash consideration	33		13		60		29

(1) Information for the three and six months ended June 30, 2021 exclude the logistics segment.

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.

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, 2022 and December 31, 2021 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 and a cash deposit for the securitization program. Our derivative instruments are classified as Level 2 and are valued using inputs other than quoted prices, such as foreign exchange rates and yield curves. For information on the fair value hierarchy of our derivative instruments, see Note 7—Derivative Instruments; and for further information on financial liabilities, see Note 8—Debt.

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The fair value hierarchy of cash equivalents was as follows:

(In millions)

Carryin