What changed in this filing

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Item 1. Financial Statements

2020-11-06 compared with 2020-08-03 · 135 added, 132 removed, 528 unchanged (34% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

June 30, December 31,

September 30, December 31,

(In millions, except per share data) 2020 2019

30 unchanged sentences

10 shares authorized;

0.07 of Series A shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively

0.07 of Series A shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

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

91 and 92 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

Additional paid-in capital 1,971 2,061

7 unchanged sentences

XPO Logistics, Inc.

Condensed Consolidated Statements of (Loss) Income

Three Months Ended June 30, Six Months Ended June 30,

Condensed Consolidated Statements of Income (Loss)

Three Months Ended September 30, Nine Months Ended September 30,

(In millions, except per share data) 2020 2019 2020 2019

5 unchanged sentences

Total operating expenses 3,998 3,925 11,424 11,893

Operating (loss) income ( 141 ) 258 ( 60 ) 390

Other expense (income) ( 21 ) ( 13 ) ( 39 ) ( 30 )

Foreign currency loss (gain) 3 8 ( 5 ) 10

Operating income 223 229 163 619

Other income ( 20 ) ( 11 ) ( 59 ) ( 41 )

Foreign currency (gain) loss — ( 5 ) ( 5 ) 5

Debt extinguishment loss — — — 5

Interest expense 86 75 240 218

(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

Income (loss) before income tax provision (benefit) 157 170 ( 13 ) 432

Income tax provision (benefit) 59 34 ( 2 ) 99

Net income (loss) 98 136 ( 11 ) 333

Net income attributable to noncontrolling interests ( 5 ) ( 6 ) ( 4 ) ( 21 )

Net income (loss) attributable to XPO $ 93 $ 130 $ ( 15 ) $ 312

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

Net income (loss) attributable to common shareholders $ 84 $ 117 $ ( 17 ) $ 282

Basic earnings (loss) per share $ 0.93 $ 1.27 $ ( 0.18 ) $ 2.91

Diluted earnings (loss) per share $ 0.83 $ 1.14 $ ( 0.18 ) $ 2.63

Weighted-average common shares outstanding

3 unchanged sentences

XPO Logistics, Inc.

Condensed Consolidated Statements of Comprehensive (Loss) Income

Three Months Ended June 30, Six Months Ended June 30,

Condensed Consolidated Statements of Comprehensive Income

Three Months Ended September 30, Nine Months Ended September 30,

(In millions) 2020 2019 2020 2019

Net (loss) income $ ( 134 ) $ 145 $ ( 109 ) $ 197

Net income (loss) $ 98 $ 136 $ ( 11 ) $ 333

Other comprehensive income (loss), net of tax

1 unchanged sentence

$ 71 $ ( 66 ) $ 27 $ ( 68 )

Unrealized gain on financial assets/liabilities designated as hedging instruments, net of tax effect of $ — , $( 1 ), $ — and $ —

Unrealized gain (loss) on financial assets/liabilities designated as hedging instruments, net of tax effect of $ — , $ — , $ — and $ —

( 1 ) — ( 1 ) 1

Defined benefit plans adjustments, net of tax effect of $( 1 ), $ — , $ 1 and $ —

( 2 ) ( 1 ) ( 7 ) ( 1 )

Other comprehensive income (loss) 68 ( 67 ) 19 ( 68 )

Comprehensive (loss) income $ ( 113 ) $ 148 $ ( 158 ) $ 196

Comprehensive income $ 166 $ 69 $ 8 $ 265

Comprehensive income (loss) attributable to noncontrolling interests 10 ( 9 ) 7 4

Comprehensive (loss) income attributable to XPO $ ( 113 ) $ 135 $ ( 155 ) $ 183

Comprehensive income attributable to XPO $ 156 $ 78 $ 1 $ 261

See accompanying notes to condensed consolidated financial statements.

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Six Months Ended June 30,

Nine Months Ended September 30,

(In millions) 2020 2019

Operating activities

Net (loss) income $ ( 109 ) $ 197

Adjustments to reconcile net (loss) income to net cash from operating activities

Net income (loss) $ ( 11 ) $ 333

Adjustments to reconcile net income (loss) to net cash from operating activities

Depreciation, amortization and net lease activity 572 546

23 unchanged sentences

Payment for debt issuance costs ( 21 ) ( 28 )

Purchase of noncontrolling interests ( 21 ) —

Repurchase of common stock ( 114 ) ( 1,347 )

16 unchanged sentences

(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

— — — — — ( 131 ) — ( 131 ) ( 3 ) ( 134 )

Balance as of June 30, 2020 72 $ 41 91,322 $ — $ 1,963 $ 672 $ ( 192 ) $ 2,484 $ 150 $ 2,634

Net income — — — — — 93 — 93 5 98

Other comprehensive income

4 unchanged sentences

— — — — ( 3 ) — — ( 3 ) — ( 3 )

Purchase of noncontrolling interests — — — — ( 1 ) — — ( 1 ) ( 20 ) ( 21 )

Dividend declared

3 unchanged sentences

— — — — 2 1 — 3 — 3

Balance as of June 30, 2020 72 $ 41 91,322 $ — $ 1,963 $ 672 $ ( 192 ) $ 2,484 $ 150 $ 2,634

Balance as of September 30, 2020 72 $ 41 91,361 $ — $ 1,971 $ 766 $ ( 129 ) $ 2,649 $ 136 $ 2,785

Series A Preferred Stock Common Stock

1 unchanged sentence

Balance as of December 31, 2019 72 $ 41 92,342 $ — $ 2,061 $ 786 $ ( 145 ) $ 2,743 $ 153 $ 2,896

— — — — — ( 108 ) — ( 108 ) ( 1 ) ( 109 )

Other comprehensive loss

— — — — — — ( 47 ) ( 47 ) ( 2 ) ( 49 )

Net (income) loss — — — — — ( 15 ) — ( 15 ) 4 ( 11 )

Other comprehensive income — — — — — — 16 16 3 19

Exercise and vesting of stock compensation awards

2 unchanged sentences

— — — — ( 21 ) — — ( 21 ) — ( 21 )

Purchase of noncontrolling interests — — — — ( 1 ) — — ( 1 ) ( 20 ) ( 21 )

Retirement of common stock

6 unchanged sentences

— — 62 — 4 ( 3 ) — 1 — 1

Balance as of June 30, 2020 72 $ 41 91,322 $ — $ 1,963 $ 672 $ ( 192 ) $ 2,484 $ 150 $ 2,634

Balance as of September 30, 2020 72 $ 41 91,361 $ — $ 1,971 $ 766 $ ( 129 ) $ 2,649 $ 136 $ 2,785

XPO Logistics, Inc.

2 unchanged sentences

Balance as of March 31, 2019 72 $ 41 93,207 $ — $ 2,122 $ 428 $ ( 153 ) $ 2,438 $ 395 $ 2,833

Balance as of June 30, 2019 72 $ 41 91,992 $ — $ 2,054 $ 563 $ ( 153 ) $ 2,505 $ 407 $ 2,912

— — — — — 130 — 130 6 136

Other comprehensive income

Other comprehensive loss

— — — — — — ( 52 ) ( 52 ) ( 15 ) ( 67 )

3 unchanged sentences

— — — — ( 7 ) — — ( 7 ) — ( 7 )

Retirement of common stock — — ( 1,362 ) — ( 80 ) — — ( 80 ) — ( 80 )

Dividend declared

2 unchanged sentences

— — — — 8 — — 8 — 8

Other — — 60 — 3 — — 3 — 3

Balance as of June 30, 2019 72 $ 41 91,992 $ — $ 2,054 $ 563 $ ( 153 ) $ 2,505 $ 407 $ 2,912

— — — — 1 ( 12 ) — ( 11 ) ( 2 ) ( 13 )

Balance as of September 30, 2019 72 $ 41 92,234 $ — $ 2,056 $ 680 $ ( 205 ) $ 2,572 $ 393 $ 2,965

Series A Preferred Stock Common Stock

2 unchanged sentences

— — — — — 312 — 312 21 333

Other comprehensive income (loss)

Other comprehensive loss

— — — — — — ( 51 ) ( 51 ) ( 17 ) ( 68 )

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— — 60 — 4 ( 7 ) — ( 3 ) ( 2 ) ( 5 )

Balance as of June 30, 2019 72 $ 41 91,992 $ — $ 2,054 $ 563 $ ( 153 ) $ 2,505 $ 407 $ 2,912

Balance as of September 30, 2019 72 $ 41 92,234 $ — $ 2,056 $ 680 $ ( 205 ) $ 2,572 $ 393 $ 2,965

See accompanying notes to condensed consolidated financial statements.

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These Condensed Consolidated Financial Statements should be read in conjunction with the 2019 Form 10-K.

We have a controlling financial interest in entities generally when we own a majority of the voting interest.

The noncontrolling interests reflected in our consolidated financial statements primarily relate to a minority interest in XPO Logistics Europe SA (“XPO Logistics Europe”), formerly known as Norbert Dentressangle SA, a business we acquired in 2015.

In July 2020, we purchased a shareholder’s noncontrolling interest in XPO Logistics Europe for € 17 million (approximately $ 20 million).

Following this acquisition, the noncontrolling interest was reduced to approximately 4 % 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 financial condition, operating results and cash flows for the interim periods presented.

Operating results for the three and six months ended June 30, 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 strain of coronavirus, COVID-19, in the first quarter of 2020.

Operating results for the three and nine months ended September 30, 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 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.

1 unchanged sentence

Restricted Cash

As of June 30, 2020 and December 31, 2019, our restricted cash included in Other long-term assets on our Condensed Consolidated Balance Sheets was $ 10 million.

As of September 30, 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

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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 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”).

XPO Logistics Europe, one of our majority-owned subsidiaries, 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.

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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 € 98 million ($ 110 million) as of June 30, 2020.

These borrowings amounted to € 43 million ($ 50 million) as of September 30, 2020.

See Note 6—Debt for additional information on these borrowings.

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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 current securitization program is € 400 million (approximately $ 449 million as of June 30, 2020), and this amount includes any unsecured borrowings related to the program.

As of June 30, 2020, € 161 million (approximately $ 181 million) was available to us based on the level of receivables sold and outstanding as of that date.

The weighted average interest rate was 0.73 % as of June 30, 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 and six months ended June 30, 2020 and 2019.

The maximum amount of net cash proceeds available at any one time under the current securitization program is € 400 million (approximately $ 469 million as of September 30, 2020), and this amount includes any unsecured borrowings related to the program.

As of September 30, 2020, € 294 million (approximately $ 345 million) of capacity was utilized under the program and € 106 million (approximately $ 124 million) was available to us.

The weighted average interest rate was 0.64 % as of September 30, 2020.

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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In millions) 2020 2019 2020 2019

10 unchanged sentences

112 195 574 612

In addition to the cash considerations referenced above, we received $ 66 million and $ 137 million in the three and six months ended June 30, 2019, respectively, for the realization of cash on the deferred purchase price receivable for our prior securitization program.

In March 2020, XPO Logistics Europe announced that it has entered into a definitive agreement to acquire the majority of Kuehne + Nagel’s contract logistics operations in the United Kingdom.

The operations provide a range

of logistics services, including inbound and outbound distribution, reverse logistics management and inventory management, and generated annual revenues in 2019 of approximately £ 500 million ($ 639 million).

The transaction is subject to customary closing conditions, including regulatory approvals.

The transaction, which is expected to close in the second half of 2020, is not expected to be material to our 2020 operating results.

In addition to the cash considerations referenced above, we received $ 49 million and $ 186 million in the three and nine months ended September 30, 2019, respectively, for the realization of cash on the deferred purchase price receivable for our prior securitization program.

In March 2020, XPO Logistics Europe announced that it had entered into a definitive agreement to acquire the majority of Kuehne + Nagel’s contract logistics operations in the United Kingdom.

The operations provide a range of logistics services, including inbound and outbound distribution, reverse logistics management and inventory management, and generated annual revenues in 2019 of approximately £ 500 million ($ 639 million).

The transaction is subject to customary closing conditions and is currently being reviewed by the UK Competition and Markets Authority (the “CMA”).

The deadline for a phase 1 decision from the CMA is November 20, 2020.

The transaction is not expected to be material to our 2020 operating results.

Fair Value Measurements

7 unchanged sentences

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, 2020 and December 31, 2019 due to their short-term nature and/or being receivable or payable on demand.

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 September 30, 2020 and December 31, 2019 due to their short-term nature and/or being receivable or payable on demand.

The Level 1 cash equivalents included money market funds valued using quoted prices in active markets.

The Level 2 cash equivalents include short-term investments valued using published interest rates for instruments with similar terms and maturities.

The Level 2 cash equivalents included short-term investments valued using published interest rates for instruments with similar terms and maturities.

For information on the fair value hierarchy of our derivative instruments, see Note 5—Derivative Instruments and for information on financial liabilities, see Note 6—Debt.

1 unchanged sentence

(In millions) Carrying Value Fair Value Level 1 Level 2

June 30, 2020 $ 1,900 $ 1,900 $ 1,900 $ —

September 30, 2020 $ 1,657 $ 1,657 $ 1,657 $ —

December 31, 2019 144 144 127 17

Cash equivalents at June 30, 2020 include the majority of the net proceeds from the issuance of senior notes due 2025 (the “Senior Notes due 2025”) which were invested in money market funds.

Cash equivalents at September 30, 2020 include a portion of the net proceeds from the issuance of senior notes due 2025 (the “Senior Notes due 2025”) which were invested in money market funds.

For further information, see Note 6—Debt.

25 unchanged sentences

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;

less-than-truckload (“LTL”);

intermodal and drayage;

managed transportation;

and global forwarding.

Our transportation services include truck brokerage, less-than-truckload (“LTL”), truckload, expedite, 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.

Our services include value-added warehousing and distribution, e-commerce and omnichannel fulfillment, cold-chain logistics, packaging and labeling, factory support, aftermarket support, inventory management, order personalization and supply chain optimization, such as product flow management.

In addition, our Logistics segment provides reverse logistics, which is also called returns management.

Some of our operating units provide services to our other operating units outside of their reportable segment.

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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.

We do not provide asset information by segment to the CODM.

Selected financial data for our segments is as follows:

(In millions) Transportation Logistics Corporate Eliminations/Other Total

Three months ended June 30, 2020

Three months ended September 30, 2020

Revenue $ 2,675 $ 1,580 $ — $ ( 34 ) $ 4,221

Operating loss (1)

Operating income (loss) (1)

202 77 ( 56 ) — 223

Depreciation and amortization 114 76 3 — 193

Three months ended June 30, 2019

Three months ended September 30, 2019

Revenue $ 2,684 $ 1,510 $ — $ ( 40 ) $ 4,154

2 unchanged sentences

Depreciation and amortization 110 73 3 — 186

Six months ended June 30, 2020

Nine months ended September 30, 2020

Revenue $ 7,261 $ 4,421 $ — $ ( 95 ) $ 11,587

2 unchanged sentences

Depreciation and amortization 337 225 10 — 572

Six months ended June 30, 2019

Nine months ended September 30, 2019

Revenue $ 8,090 $ 4,530 $ — $ ( 108 ) $ 12,512

2 unchanged sentences

Depreciation and amortization 334 201 11 — 546

(1) Consolidated operating loss for the three months ended June 30, 2020 includes $ 50 million of restructuring expense and $ 46 million of transaction and integration costs.

(2) Consolidated operating income for the three months ended June 30, 2019 includes $ 4 million of restructuring expense and $ 1 million of transaction and integration costs.

(3) Consolidated operating loss for the six months ended June 30, 2020 includes $ 90 million of transaction and integration costs and $ 53 million of restructuring expense.

(4) Consolidated operating income for the six months ended June 30, 2019 includes $ 17 million of restructuring expense and $ 2 million of transaction and integration costs.

The transaction and integration costs for the second quarter and first six months of 2020 are primarily related to our previously announced exploration of strategic alternatives.

The review of strategic alternatives was terminated in March 2020, but certain of these costs continued into the second quarter of 2020.

(1) Consolidated operating income for the three months ended September 30, 2020 includes $ 3 million of transaction and integration costs.

(2) Consolidated operating income for the three months ended September 30, 2019 includes $ 11 million of restructuring expense.

(3) Consolidated operating income for the nine months ended September 30, 2020 includes $ 93 million of transaction and integration costs and $ 53 million of restructuring expense.

(4) Consolidated operating income for the nine months ended September 30, 2019 includes $ 2 million of transaction and integration costs and $ 28 million of restructuring expense.

The transaction and integration costs for the first nine months of 2020 are primarily related to our previously announced exploration of strategic alternatives.

The review of strategic alternatives was terminated in March 2020.

For further information on our restructuring actions, see Note 4—Restructuring Charges.

We also incurred in the second quarter and first six months of 2020, net incremental and direct costs as a result of the COVID-19 pandemic, including costs for personal protective equipment, site cleanings and enhanced employee benefits, such as appreciation pay.

We also incurred in the third quarter and first nine months of 2020, net incremental and direct costs as a result of the COVID-19 pandemic, including costs for personal protective equipment, site cleanings and enhanced employee benefits, such as appreciation pay.

Revenue Recognition

2 unchanged sentences

Our revenue disaggregated by geographical area, based on sales office location, was as follows:

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

(In millions) Transportation Logistics Eliminations Total

6 unchanged sentences

Total $ 2,675 $ 1,580 $ ( 34 ) $ 4,221

Three Months Ended June 30, 2019

Three Months Ended September 30, 2019

(In millions) Transportation Logistics Eliminations Total

6 unchanged sentences

Total $ 2,684 $ 1,510 $ ( 40 ) $ 4,154

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

(In millions) Transportation Logistics Eliminations Total

6 unchanged sentences

Total $ 7,261 $ 4,421 $ ( 95 ) $ 11,587

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2019

(In millions) Transportation Logistics Eliminations Total

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Our revenue disaggregated by service offering was as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In millions) 2020 2019 2020 2019

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(i) have original expected durations of one year or less or (ii) contain variable consideration.

On June 30, 2020, the fixed consideration component of our remaining performance obligation was approximately $ 1.6 billion, and we expect to recognize approximately 75 % of that amount over the next three years and the remainder thereafter.

On September 30, 2020, the fixed consideration component of our remaining performance obligation was approximately $ 1.7 billion, and we expect to recognize approximately 75 % 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.

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These actions generally include severance and facility-related costs, including impairment of right-of-use assets, and are intended to improve our efficiency and profitability.

Restructuring charges were recorded on our Condensed Consolidated Statements of (Loss) Income as follows:

Three Months Ended June 30, Six Months Ended June 30,

Restructuring charges were recorded on our Condensed Consolidated Statements of Income (Loss) as follows:

Three Months Ended September 30, Nine Months Ended September 30,

(In millions) 2020 2019 2020 2019

3 unchanged sentences

Total $ — $ 11 $ 53 $ 28

Our restructuring-related activity was as follows:

Six Months Ended June 30, 2020

(In millions) Reserve Balance as of December 31, 2019 Charges Incurred Payments Foreign Exchange and Other Reserve Balance as of June 30, 2020

Our restructuring activity was as follows:

Nine Months Ended September 30, 2020

(In millions) Reserve Balance as of December 31, 2019 Charges Incurred Payments Foreign Exchange and Other Reserve Balance as of September 30, 2020

Transportation $ 12 $ 17 $ ( 16 ) $ — $ 13

3 unchanged sentences

Transportation — 6 — ( 1 ) 5

Logistics — 1 — ( 1 ) —

Total facilities — 7 — ( 2 ) 5

Total $ 25 $ 53 $ ( 34 ) $ ( 2 ) $ 42

We expect to incur additional restructuring charges during the remainder of fiscal 2020 of approximately $ 15 million under previously approved restructuring actions.

We expect to incur additional restructuring charges during the fourth quarter of fiscal 2020 of approximately $ 10 million under previously approved restructuring actions.

We expect the majority of the cash outlays related to the charges incurred in 2020 will be complete within twelve months.

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Historically, we have not incurred, and do not expect to incur in the future, any losses as a result of counterparty default.

The fair value of our derivative instruments and the related notional amounts was as follows:

June 30, 2020

The fair value of our derivative instruments and the related notional amounts were as follows:

September 30, 2020

Derivative Assets Derivative Liabilities

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The derivatives are valued using inputs other than quoted prices such as foreign exchange rates and yield curves.

The effect of derivative and nonderivative instruments designated as hedges on our Condensed Consolidated Statements of (Loss) Income was as follows:

Amount of (Loss) Gain Recognized in Other Comprehensive Income on Derivatives Amount of Loss Reclassified from AOCI into Net (Loss) Income Amount of Gain Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing)

Three Months Ended June 30,

The effect of derivative and nonderivative instruments designated as hedges on our Condensed Consolidated Statements of Income (Loss) was as follows:

Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives Amount of Gain (Loss) Reclassified from AOCI into Net Income (Loss) Amount of Gain Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing)

Three Months Ended September 30,

(In millions) 2020 2019 2020 2019 2020 2019

5 unchanged sentences

Total $ ( 57 ) $ 63 $ ( 8 ) $ 9 $ 4 $ 6

Amount of Gain (Loss) Recognized in Other Comprehensive Loss on Derivatives Amount of Gain Reclassified from AOCI into Net (Loss) Income Amount of Gain Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing)

Six Months Ended June 30,

Amount of Gain (Loss) Recognized in Other Comprehensive Loss on Derivatives Amount of Gain (Loss) Reclassified from AOCI into Net Income (Loss) Amount of Gain Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing)

Nine Months Ended September 30,

(In millions) 2020 2019 2020 2019 2020 2019

5 unchanged sentences

Total $ ( 38 ) $ 95 $ ( 8 ) $ 11 $ 8 $ 11

The pre-tax gain (loss) recognized in earnings for foreign currency option and forward contracts not designated as hedging instruments was a loss of $ 2 million and a gain of $ 2 million for the three and six months ended June 30, 2020, respectively, and losses of $ 8 million and $ 10 million for the three and six months ended June 30, 2019, respectively.

These amounts are recorded in Foreign currency loss (gain) on our Condensed Consolidated Statements of (Loss) Income.

The pre-tax gain (loss) recognized in earnings for foreign currency option and forward contracts not designated as hedging instruments was a loss of $ 1 million and a gain of $ 1 million for the three and nine months ended September 30, 2020, respectively, and a gain of $ 5 million and a loss of $ 5 million for the three and nine months ended September 30, 2019, respectively.

These amounts are recorded in Foreign currency (gain) loss on our Condensed Consolidated Statements of Income (Loss).

Cross-Currency Swap Agreements

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Dollar (“USD”)-denominated debt, including the associated interest payments, to fixed-rate, euro (“EUR”)-denominated debt.

The risk management objective of

these transactions is to manage foreign currency risk relating to net investments in subsidiaries denominated in foreign currencies and reduce the variability in the functional currency equivalent cash flows of this debt.

The risk management objective of these transactions is to manage foreign currency risk relating to net investments in subsidiaries denominated in foreign currencies and reduce the variability in the functional currency equivalent cash flows of this debt.

During the term of the swap contracts, we will receive interest, either on a quarterly or semi-annual basis, from the counterparties based on USD fixed interest rates, and we will pay interest, also on a quarterly or semi-annual basis, to the counterparties based on EUR fixed interest rates.

9 unchanged sentences

We designated these cross-currency swaps as qualifying hedging instruments and account for them as cash flow hedges.

Gains and losses resulting from the change in the fair value of the cross-currency swaps are initially recognized in AOCI and reclassified to Foreign currency loss (gain) to offset the foreign exchange impact in earnings created by the intercompany loans.

Gains and losses resulting from the change in the fair value of the cross-currency swaps are initially recognized in AOCI and reclassified to Foreign currency (gain) loss to offset the foreign exchange impact in earnings created by the intercompany loans.

Cash flows related to these cash flow hedges are included in Operating activities on our Condensed Consolidated Statements of Cash Flows.

3 unchanged sentences

We designated the interest rate swaps as qualifying hedging instruments and account for these derivatives as cash flow hedges.

The interest rate swaps mature on various dates through 2020.

The interest rate swaps mature in the fourth quarter of 2020.

We record gains and losses resulting from fair value adjustments to the designated portion of interest rate swaps in AOCI and reclassify them to Interest expense on the dates that interest payments accrue.

3 unchanged sentences

Additionally, we use foreign currency forward contracts to mitigate exposure from intercompany loans that are not designated as permanent and can create volatility in earnings.

The foreign currency contracts (both option and forward contracts) were not designated as qualifying hedging instruments as of June 30, 2020.

The foreign currency contracts (both option and forward contracts) were not designated as qualifying hedging instruments as of September 30, 2020.

The contracts are used to manage our exposure to foreign currency exchange rate fluctuations and are not speculative.

The contracts generally expire in 12 months or less.

Gains or losses on the contracts are recorded in Foreign currency loss (gain) on our Condensed Consolidated Statements of (Loss) Income.

Gains or losses on the contracts are recorded in Foreign currency (gain) loss on our Condensed Consolidated Statements of Income (Loss).

Cash flows related to the foreign currency contracts are included in Investing activities on our Condensed Consolidated Statements of Cash Flows, consistent with the nature and purpose for which these derivatives were acquired.

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

(In millions) Principal Balance Carrying Value Principal Balance Carrying Value

ABL facility $ 200 $ 200 $ — $ —

Term loan facility 2,003 1,971 2,003 1,969

Term loan facilities 2,003 1,973 2,003 1,969

6.50 % Senior notes due 2022

15 unchanged sentences

(In millions) Fair Value Level 1 Level 2

June 30, 2020 $ 7,421 $ 4,354 $ 3,067

September 30, 2020 $ 6,989 $ 4,373 $ 2,616

December 31, 2019 5,580 3,190 2,390

2 unchanged sentences

The fair value of the asset financing arrangements approximates carrying value as the debt is primarily issued at a floating rate, the debt may be prepaid at any time at par without penalty, and the remaining life of the debt is short-term in nature.

As of June 30, 2020, we had a borrowing base of $ 969 million and availability under our revolving loan credit agreement (the “ABL Facility”) of $ 354 million after considering outstanding letters of credit on the ABL Facility of $ 15 million.

The average interest rate on outstanding borrowings as of June 30, 2020 was 1.44 %.

As of June 30, 2020, we were in compliance with the ABL Facility’s financial covenants.

As of September 30, 2020, we had a borrowing base of $ 1.1 billion and availability under our revolving loan credit agreement (the “ABL Facility”) of $ 884 million after considering outstanding letters of credit on the ABL Facility of $ 16 million.

The average interest rate on outstanding borrowings as of September 30, 2020 was 1.65 %.

As of September 30, 2020, we were in compliance with the ABL Facility’s financial covenants.

In April 2020, we entered into a Senior Secured Term Loan Credit Agreement, comprised of a $ 150 million committed secured term loan facility and a $ 200 million uncommitted secured evergreen letter of credit facility.

The term loan facility is available to be drawn upon, subject to customary conditions, in multiple borrowings within six months of the closing date.

The term loan facility is available to be drawn upon, subject to customary conditions, in multiple borrowings within nine months of the closing date.

Any term loans thereunder will bear interest at a rate equal to LIBOR or base rate, at our election, plus an applicable margin of 3.00 % to 4.50 %, for LIBOR loans, or 2.00 % to 3.50 %, for base rate loans, in each case depending upon the time elapsed since the closing date.

1 unchanged sentence

Letters of credit under the letter of credit facility shall expire within one year of issuance and may contain automatic one-year renewals until the letter of credit facility terminates.

As of June 30, 2020, we have issued $ 199 million in aggregate face amount of letters of credit, which replaced letters of credit outstanding under our ABL Facility, and have not drawn on the term loan commitments.

As of September 30, 2020, we have issued $ 199 million in aggregate face amount of letters of credit, and have not drawn on the term loan commitments.

The credit agreement governing the term loan and letter of credit facilities contains representations and warranties and affirmative and negative covenants customary for financings of this type as well as customary events of default.

Term Loan Facility

In March 2019, we entered into an amendment to our Term Loan Credit Agreement and borrowed an additional $ 500 million of incremental loans under a new tranche of term loans (the “Incremental Term Loan Facility”), increasing our total borrowing under the Term Loan Facility to $ 2.0 billion.

Term Loan Facilities

Proceeds from borrowings under the Incremental Term Loan Facility were used:

2 unchanged sentences

The incremental loans under the Incremental Term Loan Facility were issued at a price of 99.50 % of par.

The interest rates on the Term Loan Facility and the Incremental Term Loan Facility were 2.18 % and 2.69 %, respectively, as of June 30, 2020.

The interest rates on the term loan facility and the Incremental Term Loan Facility were 2.15 % and 2.65 %, respectively, as of September 30, 2020.

Senior Notes due 2025

3 unchanged sentences

$ 850 million of the notes were issued at par, and $ 300 million of the notes were issued subsequently at 101.75 % of face value.

Net proceeds from the notes have been invested in cash and cash equivalents.

The Senior Notes due 2025 are guaranteed by each of our direct and indirect wholly-owned restricted subsidiaries (other than some excluded subsidiaries) that are obligors under, or guarantee obligations under, our ABL Facility or existing term loan facility or guarantee certain of our other indebtedness.

Net proceeds from the notes were invested in cash and cash equivalents.

The Senior Notes due 2025 and the related guarantees are unsecured, unsubordinated indebtedness for us and our guarantors.

17 unchanged sentences

Information regarding our shares repurchased, based on settlement date, is as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In millions, except per share data) 2020 2019 2020 2019

2019 Program 2019 Program 2019 Program 2019 Program 2018 Program

Shares purchased and retired — — 2 25

11 unchanged sentences

The computations of basic and diluted earnings per share were as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In millions, except per share data) 2020 2019 2020 2019

Basic (loss) earnings per common share

Net (loss) income attributable to XPO $ ( 131 ) $ 135 $ ( 108 ) $ 182

Basic earnings (loss) per common share

Net income (loss) attributable to XPO $ 93 $ 130 $ ( 15 ) $ 312

Series A preferred stock dividends — ( 1 ) ( 2 ) ( 2 )

Non-cash allocation of undistributed loss (earnings) — ( 13 ) — ( 16 )

Net (loss) income attributable to common shares, basic $ ( 132 ) $ 122 $ ( 110 ) $ 165

Non-cash allocation of undistributed earnings ( 9 ) ( 12 ) — ( 28 )

Net income (loss) attributable to common shares, basic $ 84 $ 117 $ ( 17 ) $ 282

Basic weighted-average common shares 91 92 91 97

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

Diluted (loss) earnings per common share

Net (loss) income attributable to common shares, diluted $ ( 132 ) $ 122 $ ( 110 ) $ 165

Basic earnings (loss) per share $ 0.93 $ 1.27 $ ( 0.18 ) $ 2.91

Diluted earnings (loss) per common share

Net income (loss) attributable to common shares, diluted $ 84 $ 117 $ ( 17 ) $ 282

Basic weighted-average common shares 91 92 91 97

1 unchanged sentence

Diluted weighted-average common shares 102 102 91 107

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

Diluted earnings (loss) per share $ 0.83 $ 1.14 $ ( 0.18 ) $ 2.63

Potential common shares excluded 10 10 21 10

Certain shares were not included in the computation of Diluted (loss) earnings per share because the effect was anti-dilutive.

Certain shares were not included in the computation of Diluted earnings (loss) per share because the effect was anti-dilutive.

Legal and Regulatory Matters

1 unchanged sentence

These proceedings may include claims for property damage or personal injury incurred in connection with the transportation of freight, claims regarding anti-competitive practices, and employment-related claims, including claims involving asserted breaches of employee restrictive covenants.

These matters also include numerous putative class action, multi-plaintiff and individual lawsuits, and administrative proceedings that claim either that our owner-operators or contract carriers should be treated as employees, rather than independent contractors, or that some of our drivers were not paid for all compensable time or were not provided with required meal or rest breaks.

These lawsuits and proceedings may seek substantial monetary damages (including claims for unpaid wages, overtime, failure to provide meal and rest periods, unreimbursed business expenses and other items), injunctive relief, or both.

These matters also include numerous putative class action, multi-plaintiff and individual lawsuits, and administrative proceedings involving claims that our owner-operators or contract carriers should be treated as employees, rather than independent contractors (“misclassification claims”).

These lawsuits and proceedings may seek substantial monetary damages (including claims for unpaid wages, overtime, failure to provide meal and rest breaks, unreimbursed business expenses, penalties and other items), injunctive relief, or both.

We establish accruals for specific legal proceedings when it is considered probable that a loss has been incurred and the amount of the loss can be reasonably estimated.

11 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements