XPO, Inc. [XPO] Filings

10-Q 1 xpo-20220930.htm 10-Q xpo-20220930

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 September 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 October 26, 2022, there were 115,162,555 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 September 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 (Loss)			2
Condensed Consolidated Statements of Comprehensive Income (Loss)			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			24
Item 3. Quantitative and Qualitative Disclosures About Market Risk			36
Item 4. Controls and Procedures			36
Part II—Other Information
Item 1. Legal Proceedings			36
Item 1A. Risk Factors			36
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			37
Signatures			38

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Part I—Financial Information

Item 1. Financial Statements.

XPO Logistics, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)


	September 30,		December 31,
(In millions, except per share data)	2022		2021
ASSETS
Current assets
Cash and cash equivalents	$	544	$	260
Accounts receivable, net of allowances of $51 and $47, respectively	2,013		2,105
Other current assets	257		286
Current assets of discontinued operations	17		26
Total current assets	2,831		2,677
Long-term assets
Property and equipment, net of $1,848 and $1,828 in accumulated depreciation, respectively	1,828		1,808
Operating lease assets	816		908
Goodwill	2,229		2,479
Identifiable intangible assets, net of $598 and $612 in accumulated amortization, respectively	496		580
Other long-term assets	303		255

Total long-term assets	5,672		6,030
Total assets	$	8,503	$	8,707
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	1,022	$	1,110
Accrued expenses	1,087		1,107
Short-term borrowings and current maturities of long-term debt	60		58
Short-term operating lease liabilities	145		170
Other current liabilities	111		69
Current liabilities of discontinued operations	17		24
Total current liabilities	2,442		2,538
Long-term liabilities
Long-term debt	2,848		3,514
Deferred tax liability	334		316
Employee benefit obligations	116		122
Long-term operating lease liabilities	671		752
Other long-term liabilities	306		327

Total long-term liabilities	4,275		5,031
Stockholders’ equity

Common stock, $0.001 par value; 300 shares authorized; 115 shares issued and outstanding as of September 30, 2022 and December 31, 2021	—		—
Additional paid-in capital	1,195		1,179
Retained earnings	803		43
Accumulated other comprehensive loss	(212)		(84)


Total equity	1,786		1,138
Total liabilities and equity	$	8,503	$	8,707

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 September 30,				Nine Months Ended September 30,
(In millions, except per share data)	2022		2021		2022		2021
Revenue	$	3,042	$	3,270	$	9,747	$	9,445
Cost of transportation and services (exclusive of depreciation and amortization)	2,044		2,306		6,634		6,545
Direct operating expense (exclusive of depreciation and amortization)	363		366		1,113		1,058
Sales, general and administrative expense	298		339		966		1,001
Depreciation and amortization expense	118		118		349		357
Gain on sale of business	—		—		(434)		—
Transaction and integration costs	25		15		60		26
Restructuring costs	9		14		19		16
Operating income	185		112		1,040		442
Other income	(15)		(19)		(44)		(45)
Debt extinguishment loss	—		46		26		54
Interest expense	35		53		103		176
Income from continuing operations before income tax provision	165		32		955		257
Income tax provision	34		11		194		60
Income from continuing operations	131		21		761		197
Income (loss) from discontinued operations, net of taxes	—		(78)		(1)		22
Net income (loss)	131		(57)		760		219

Net income from discontinued operations attributable to noncontrolling interests	—		—		—		(5)
Net income (loss) attributable to XPO	$	131	$	(57)	$	760	$	214

Net income (loss) attributable to common shareholders
Continuing operations	$	131	$	21	$	761	$	197
Discontinued operations	—		(78)		(1)		17
Net income (loss) attributable to common shareholders	$	131	$	(57)	$	760	$	214

Earnings (loss) per share data
Basic earnings per share from continuing operations	$	1.14	$	0.19	$	6.62	$	1.78
Basic earnings (loss) per share from discontinued operations	—		(0.69)		(0.01)		0.15
Basic earnings (loss) per share attributable to common shareholders	$	1.14	$	(0.50)	$	6.61	$	1.93
Diluted earnings per share from continuing operations	$	1.13	$	0.19	$	6.58	$	1.73
Diluted earnings (loss) per share from discontinued operations	—		(0.68)		(0.01)		0.14
Diluted earnings (loss) per share attributable to common shareholders	$	1.13	$	(0.49)	$	6.57	$	1.87

Weighted-average common shares outstanding
Basic weighted-average common shares outstanding	115		115		115		111
Diluted weighted-average common shares outstanding	116		116		116		114

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 September 30,				Nine Months Ended September 30,
(In millions)	2022		2021		2022		2021
Net income (loss)	$	131	$	(57)	$	760	$	219

Other comprehensive loss, net of tax
Foreign currency translation loss, net of tax effect of $(7), $7, $(18) and $4	$	(60)	$	(47)	$	(132)	$	(74)
Unrealized gain (loss) on financial assets/liabilities designated as hedging instruments, net of tax effect of $—, $1, $(1) and $1	—		(3)		4		(3)
Defined benefit plans adjustments, net of tax effect of $—, $(9), $— and $(9)	—		28		—		28
Other comprehensive loss	(60)		(22)		(128)		(49)
Comprehensive income (loss)	$	71	$	(79)	$	632	$	170
Less: Comprehensive income attributable to noncontrolling interests	—		—		—		3
Comprehensive income (loss) attributable to XPO	$	71	$	(79)	$	632	$	167

See accompanying notes to condensed consolidated financial statements.

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XPO Logistics, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended September 30,
(In millions)	2022		2021
Cash flows from operating activities of continuing operations
Net income	$	760	$	219
Income (loss) from discontinued operations, net of taxes	(1)		22
Income from continuing operations	761		197
Adjustments to reconcile income from continuing operations to net cash from operating activities
Depreciation, amortization and net lease activity	349		357
Stock compensation expense	26		29
Accretion of debt	12		15
Deferred tax expense	10		5
Debt extinguishment loss	26		54
Gain on sale of business	(434)		—
Gains on sales of property and equipment	(4)		(36)
Other	29		5
Changes in assets and liabilities
Accounts receivable	(245)		(371)
Other assets	30		(1)
Accounts payable	76		133
Accrued expenses and other liabilities	28		171
Net cash provided by operating activities from continuing operations	664		558
Cash flows from investing activities of continuing operations
Proceeds from sale of business	705		—
Payment for purchases of property and equipment	(394)		(212)
Proceeds from sale of property and equipment	11		72
Proceeds from settlement of cross currency swaps	29		—
Other	—		(3)
Net cash provided by (used in) investing activities from continuing operations	351		(143)
Cash flows from financing activities of continuing operations

Repayment of borrowings related to securitization program	—		(24)
Repurchase of debt	(651)		(2,769)
Proceeds from borrowings on ABL facility	275		—
Repayment of borrowings on ABL facility	(275)		(200)
Repayment of debt and finance leases	(47)		(63)
Payment for debt issuance costs	—		(5)

Issuance of common stock	—		384
Change in bank overdrafts	6		33
Payment for tax withholdings for restricted shares	(13)		(25)
Distribution from GXO	—		794
Other	(1)		(5)
Net cash used in financing activities from continuing operations	(706)		(1,880)

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	Nine Months Ended September 30,
(In millions)	2022		2021
Cash flows from discontinued operations
Operating activities of discontinued operations	(5)		68
Investing activities of discontinued operations	2		(95)
Financing activities of discontinued operations	—		(302)
Net cash used in discontinued operations	(3)		(329)
Effect of exchange rates on cash, cash equivalents and restricted cash	(25)		(7)
Net increase (decrease) in cash, cash equivalents and restricted cash	281		(1,801)
Cash, cash equivalents and restricted cash, beginning of period	273		2,065
Cash, cash equivalents and restricted cash, end of period	554		264
Less: Cash, cash equivalents and restricted cash of discontinued operations, end of period	—		—
Cash, cash equivalents and restricted cash of continued operations, end of period	$	554	$	264
Supplemental disclosure of cash flow information

Leased assets obtained in exchange for new operating lease liabilities	$	165	$	140
Leased assets obtained in exchange for new finance lease liabilities	19		54
Cash paid for interest	94		195
Cash paid for income taxes	131		74

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 June 30, 2022	—	$	—	115,033	$	—	$	1,187	$	672	$	(152)	$	1,707	$	—	$	1,707
Net income	—	—		—	—		—		131		—		131		—		131
Other comprehensive loss	—	—		—	—		—		—		(60)		(60)		—		(60)

Exercise and vesting of stock compensation awards	—	—		19	—		—		—		—		—		—		—




Stock compensation expense	—	—		—	—		8		—		—		8		—		8

Balance as of September 30, 2022	—	$	—	115,052	$	—	$	1,195	$	803	$	(212)	$	1,786	$	—	$	1,786


	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	—	—		—	—		—		760		—		760		—		760
Other comprehensive loss	—	—		—	—		—		—		(128)		(128)		—		(128)

Exercise and vesting of stock compensation awards	—	—		315	—		—		—		—		—		—		—
Tax withholdings related to vesting of stock compensation awards	—	—		—	—		(13)		—		—		(13)		—		(13)





Stock compensation expense	—	—		—	—		26		—		—		26		—		26
Other	—	—		—	—		3		—		—		3		—		3
Balance as of September 30, 2022	—	$	—	115,052	$	—	$	1,195	$	803	$	(212)	$	1,786	$	—	$	1,786

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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 Deficit)		Accumulated Other Comprehensive Loss		Total XPO Stockholders' Equity		Non-controlling Interests		Total Equity
Balance as of June 30, 2021	—	$	—	111,726	$	—	$	1,971	$	1,139	$	(183)	$	2,927	$	40	$	2,967
Net loss	—	—		—	—		—		(57)		—		(57)		—		(57)
Other comprehensive loss	—	—		—	—		—		—		(22)		(22)		—		(22)
Spin-off of GXO	—	—		—	—		(1,199)		(1,161)		126		(2,234)		(40)		(2,274)
Exercise and vesting of stock compensation awards	—	—		72	—		2		—		—		2		—		2
Tax withholdings related to vesting of stock compensation awards	—	—		—	—		(3)		—		—		(3)		—		(3)
Issuance of common stock	—	—		2,875	—		384		—		—		384		—		384


Stock compensation expense	—	—		—	—		19		—		—		19		—		19

Balance as of September 30, 2021	—	$	—	114,673	$	—	$	1,174	$	(79)	$	(79)	$	1,016	$	—	$	1,016


	Series A Preferred Stock			Common Stock
(Shares in thousands, dollars in millions)	Shares	Amount		Shares	Amount		Additional Paid-In Capital		Retained Earnings (Accumulated Deficit)		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	—	—		—	—		—		214		—		214		5		219
Other comprehensive loss	—	—		—	—		—		—		(47)		(47)		(2)		(49)
Spin-off of GXO	—	—		—	—		(1,199)		(1,161)		126		(2,234)		(40)		(2,274)
Exercise and vesting of stock compensation awards	—	—		386	—		2		—		—		2		—		2
Tax withholdings related to vesting of stock compensation awards	—	—		—	—		(25)		—		—		(25)		—		(25)
Issuance of common stock	—	—		2,875	—		384		—		—		384		—		384
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	—	—		—	—		44		—		—		44		—		44
Other	—	—		—	—		3		—		—		3		—		3
Balance as of September 30, 2021	—	$	—	114,673	$	—	$	1,174	$	(79)	$	(79)	$	1,016	$	—	$	1,016

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; in North America, we achieved this primarily by providing less-than-truckload (“LTL”) and truck brokerage services. See Note 4—Segment Reporting for additional information on our operations.

2022 Strategic Plan

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 as a publicly traded company, which we completed in November 2022. In addition, our Board of Directors authorized the planned divestitures of our North American intermodal operation, which we sold in March 2022, and our European business, which we intend to divest. For further information on the sale of intermodal, see Note 3—Divestiture. There can be no assurance that the divestiture of our European business will occur, or of the terms or timing of a transaction.

RXO Spin-Off

We completed the spin-off of our tech-enabled brokered transportation platform on November 1, 2022, which created a new public company, RXO, Inc. (“RXO”), comprised of our former services for truck brokerage, managed transportation, last mile and freight forwarding. The transaction is intended to be tax-free to XPO and our shareholders for U.S. federal income tax purposes. The spin-off was accomplished by the distribution of 100% of the outstanding common stock of RXO to XPO shareholders, creating a new, independent public company that began trading under the symbol “RXO” on the New York Stock Exchange. XPO shareholders received one share of RXO common stock for every share of XPO common stock held at the close of business on October 20, 2022, the record date for the distribution. XPO does not beneficially own any shares of RXO’s common stock following the spin-off. The historical results of operations and the financial position of RXO are included in the condensed consolidated financial statements in this Form 10-Q. The RXO businesses will not be consolidated in our reporting from November 1, 2022 forward, and such businesses will be reflected as discontinued operations in all periods prior to the spin-off.

In connection with the spin-off, we have entered into a separation and distribution agreement as well as various other agreements with RXO 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 provide certain services to RXO.

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 nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

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Restricted Cash

As of September 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 $196 million as of September 30, 2022). As of September 30, 2022, €6 million (approximately $6 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 1.16% as of September 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 nine months ended September 30, 2022 and 2021.

Information related to the trade receivables sold was as follows:


	Three Months Ended September 30,		Nine Months Ended September 30,
(In millions)	2022	2021	2022	2021
Securitization programs
Receivables sold in period	$