XPO, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Cautionary Statement Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q and other written reports and oral statements we make from time to time contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. In some cases, forward-looking statements can be identified by the use of forward-looking terms such as “anticipate,” “estimate,” “believe,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “will,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target,” “trajectory” or the negative of these terms or other comparable terms. However, the absence of these words does not mean that the statements are not forward-looking. These forward-looking statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause or contribute to a material difference include those discussed below and the risks discussed in the Company’s other filings with the Securities and Exchange Commission (the “SEC”). All forward-looking statements set forth in this Quarterly Report are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations. The following discussion should be read in conjunction with the Company’s unaudited Condensed Consolidated Financial Statements and related notes thereto included elsewhere in this Quarterly Report, and with the audited consolidated financial statements and related notes thereto included in the 2020 Annual Report on Form 10-K. Forward-looking statements set forth in this Quarterly Report speak only as of the date hereof, and we do not undertake any obligation to update forward-looking statements to reflect subsequent events or circumstances, changes in expectations or the occurrence of unanticipated events, except to the extent required by law. Executive Summary XPO Logistics, Inc., a Delaware corporation, together with its subsidiaries (“XPO,” or “we”), provides cutting-edge supply chain solutions to the most successful companies in the world. We have two reporting segments: Transportation and Logistics, each with robust service offerings, leadership positions and growth prospects. In 2020, approximately 62% of our revenue came from Transportation, and the remaining 38% came from Logistics. Within each segment, we are positioned to capitalize on fast-growing areas of demand. In December 2020, we announced that our Board of Directors unanimously approved a plan to pursue a spin-off of 100% of our Logistics segment as a separate publicly traded company. We intend to structure the spin-off as a distribution that is generally tax-free for U.S. federal income tax purposes to XPO shareholders (except with respect to any cash received in lieu of fractional shares) and would result in XPO shareholders owning stock in both companies. If completed, the spin-off will result in separate public companies with clearly delineated service offerings. XPO will be a global provider of primarily less-than-truckload (“LTL”) transportation and truck brokerage services, and GXO Logistics, Inc. (“GXO”), the planned spin-off, will be the second largest contract logistics provider in the world. Both companies’ stocks are expected to trade on the New York Stock Exchange, and we plan to consider a dual listing on the London Stock Exchange for GXO in due course. The transaction is currently expected to be completed in the second half of 2021, subject to various conditions, including the approval of XPO’s board of directors. There can be no assurance that the spin-off will occur or, if it does occur, of its terms or timing. Separately, we acquired the majority of Kuehne + Nagel’s contract logistics operations in the United Kingdom and Ireland in January 2021. The operations, which include roughly 5,700 employees and provide a range of logistics 18 Table of Contents services, including inbound and outbound distribution, reverse logistics management and inventory management, are included in our Logistics segment. As of March 31, 2021, we had approximately 140,000 team members (comprised of approximately 108,000 full-time and part-time employees and 32,000 third-party, temporary workers), and 1,621 locations in 30 countries. Substantially all of our services operate under the single brand of XPO Logistics. We use our highly integrated network to help more than 50,000 customers operate their supply chains most efficiently. Maintaining strong liquidity has been and will continue to be a top priority for XPO, and is consistent with our pursuit of investment-grade ratings for both XPO and GXO. As discussed in greater detail below, as of March 31, 2021, we had $1.7 billion of available liquidity, including $629 million of cash and cash equivalents. Transportation Segment Our Transportation segment facilitates the movement of raw materials, parts and finished goods. Our largest service offering within the Transportation segment is LTL, which contributed 43% of 2020 segment revenue. We are a top three provider of LTL services in North America, and we have one of the largest LTL networks in Western Europe. Our other primary service offering within the Transportation segment is truck brokerage. We are the second largest brokerage provider globally and the third largest brokerage provider in North America. As of March 31, 2021, we had truck brokerage relationships with approximately 81,000 independent carriers representing over 1,000,000 trucks. The results of our truck brokerage operations are included as part of our freight brokerage services, which include additional, asset-light services for expedite, intermodal and drayage. The owned capacity of our transportation model includes approximately 13,000 tractors and 35,000 trailers operated by professional drivers employed by XPO. This equipment is related primarily to our LTL operations in North America. Our fleet also supports our brokerage operations as needed. Logistics Segment Our Logistics segment, which we sometimes refer to as supply chain, provides order fulfillment and other distribution services differentiated by our ability to deliver technology-enabled, customized solutions. XPO is the second largest provider of contract logistics globally, with one of the largest outsourced e-fulfillment platforms. Our logistics services include high-value-add warehousing and distribution, order fulfillment and personalization, cold-chain logistics, packaging and labeling, aftermarket support, inventory management and supply chain optimization. In addition, many of our e-commerce facilities manage merchandise returns, also known as reverse logistics. Depending on the merchandise being returned, this fast-growing area of logistics can include inspection, testing, repackaging, refurbishment, resale or product disposal, as well as refunding and warranty management. Reverse logistics services are mission-critical for companies with consumer end-markets, as shoppers increasingly “test-drive” the merchandise they buy online. As of March 31, 2021, we operated 210 million square feet (20 million square meters) of logistics warehouse space worldwide. Approximately 99 million square feet (9 million square meters) was located in North America; 104 million square feet (10 million square meters) was located in Europe; and 7 million square feet (1 million square meters) was located in Asia. Our logistics customers primarily operate in industries with high-growth outsourcing opportunities, including e-commerce and retail, food and beverage, consumer packaged goods, technology, aerospace, telecommunications, industrial and manufacturing, chemicals, agribusiness, life sciences and healthcare. Operating Philosophy We believe that our rapid pace of innovation differentiates our services, enables us to better utilize our assets and makes the most of the talent within our organization. Our proprietary technology strengthens our relationships with customers by addressing their immediate supply chain needs in ways that accommodate their strategic plans, such as entry into new markets. Technology allows us to be a true partner to our customers by helping them meet their objectives for efficiency, safety, customer service and growth. 19 Table of Contents When developing our technology, we concentrate our efforts in four areas that can create value for our shareholders and our customers, primarily by creating “smart” supply chains: our digital freight marketplace, automation and intelligent machines, dynamic data science, and visibility, particularly as it affects customer service in the e-commerce supply chain. Environmental sustainability is a significant priority for us. In the U.S., XPO has been named a Top 75 Green Supply Chain Partner by Inbound Logistics for five consecutive years. In France, we have renewed our commitment to the CO2 Charter for another three years. In Spain, all of our sites meet Leadership in Energy and Environmental Design (“LEED”) energy certification standards for 100% consumption of renewable energy. In the U.K., the Digital Distribution Warehouse of the Future we created with Nestlé operates with environmentally friendly ammonia refrigeration systems, energy-saving lighting, air-source heat pumps for administration areas and rainwater harvesting. More broadly in our Logistics segment, a number of our facilities are ISO 14001-certified, which ensures environmental and other regulatory compliances. We monitor fuel emissions from forklifts, with protocols in place to take immediate corrective action if needed. Our packaging engineers ensure that the optimal carton size is used for each product slated for distribution, and when feasible, we purchase recycled packaging. As a byproduct of managing returned merchandise, we recycle millions of electronic components and batteries each year. In our Transportation segment, we have made substantial investments in fuel-efficient tractors that use Environmental Protection Agency 2013-compliant and Greenhouse Gas 2014- compliant Selective Catalytic Reduction technology for our LTL business in North America. Our LTL drivers operate from terminals that have energy-saving policies in place and are implementing a phased upgrade to LED lighting. In Europe, our modern road fleet is 98% compliant with Euro V, EEV and Euro VI standards. We also own a large alternative-fuel road fleet that operates in France, the U.K., Spain and Portugal, including more than 250 natural gas vehicles. In Spain, we own government-approved mega-trucks to transport freight with fewer trips, and our last mile operations in Europe use electric vehicles for deliveries in certain urban areas, reducing those emissions to zero. Impacts of COVID-19 As a global provider of supply chain solutions, our business can be impacted to varying degrees by factors beyond our control. The rapid escalation of COVID-19 into a pandemic in 2020 affected, and will continue to affect, economic activity broadly and customer sectors served by our industry. We believe the COVID-19 pandemic and associated impacts on economic activity had an adverse effect on our results of operations and financial condition for the three months ended March 31, 2021 and 2020, as discussed below. Due to the evolving nature of the pandemic, it remains difficult to predict the extent of the impact on our industry generally and our business in particular. Furthermore, the extent and pace of a recovery remains uncertain and may differ significantly among the countries in which we operate. We expect that our results of operations will continue to be impacted by the pandemic throughout 2021. We have incurred net incremental and direct costs related to COVID-19 to ensure that we meet the needs of our employees and customers; these include costs for personal protective equipment (“PPE”), site cleanings and enhanced employee benefits. The majority of our cost base is variable, and while we expect to continue to incur additional costs related to the pandemic, we also have the ability to continue to adjust our expenses to address significant changes in demand for our services, if necessary, as we did in 2020. These actions include reduced use of contractors, reduced employee hours, furloughs, layoffs and required use of paid time off, consistent with applicable regulations. The totality of the actions we have taken during the pandemic, and continue to take, combined with the variable components of our cost structure, have mitigated the impact on our profitability relative to the impact on our revenue and volumes, while our strong liquidity and disciplined capital management enable us to continue to invest in key growth initiatives. 20 Table of Contents Consolidated Summary Financial Table Three Months Ended March 31, Percent of Revenue Change (Dollars in millions) 2021 (1) 2020 (2) 2021 2020 2021 vs. 2020 Revenue $ 4,774 $ 3,864 100.0 % 100.0 % 23.6 % Cost of transportation and services 2,328 1,898 48.8 % 49.1 % 22.7 % Direct operating expense 1,656 1,360 34.7 % 35.2 % 21.8 % Sales, general and administrative expense 588 525 12.3 % 13.6 % 12.0 % Operating income 202 81 4.2 % 2.1 % 149.4 % Other income (26) (18) (0.5) % (0.5) % 44.4 % Foreign currency gain (2) (8) — % (0.2) % (75.0) % Debt extinguishment loss 8 — 0.2 % — % NM Interest expense 69 72 1.4 % 1.9 % (4.2) % Income before income tax provision 153 35 3.2 % 0.9 % 337.1 % Income tax provision 35 10 0.7 % 0.3 % 250.0 % Net income $ 118 $ 25 2.5 % 0.6 % 372.0 % NM - Not meaningful (1) Consolidated operating income for the three months ended March 31, 2021 includes $18 million of transaction and integration costs and $4 million of restructuring expense. $1 million of the transaction and integration costs relate to our Transportation segment, $5 million relate to our Logistics segment and $12 million relate to Corporate. (2) Consolidated operating income for the three months ended March 31, 2020 includes $44 million of transaction and integration costs and $3 million of restructuring expense. $7 million of the transaction and integration costs relate to our Transportation segment, $7 million relate to our Logistics segment and $30 million relate to Corporate. The transaction and integration costs for the first three months of 2021 are primarily related to the planned spin-off of the Logistics segment and our acquisition of the Kuehne + Nagel business. The transaction and integration costs for the first three months of 2020 are primarily related to our previously announced exploration of strategic alternatives that was terminated in March 2020. For further information on our restructuring actions, see Note 5—Restructuring Charges to the Condensed Consolidated Financial Statements. We also incurred in the first three months of 2021 and 2020, net incremental and direct costs as a result of the COVID-19 pandemic. Three Months Ended March 31, 2021 Compared with Three Months Ended March 31, 2020 Revenue for the first quarter of 2021 increased 23.6% to $4.8 billion, compared with the same period in 2020. The increase in revenue in the first three months of 2021 compared to the same period in 2020 reflects strong growth in both our transportation and logistics businesses, including the impact of the acquired Kuehne + Nagel business in January 2021, which contributed approximately 3.1 percentage points to revenue growth. Additionally, foreign currency movement increased revenue by approximately 3.2 percentage points in the first quarter of 2021. Cost of transportation and services includes the cost of providing or procuring freight transportation for XPO customers and salaries paid to employee drivers in our LTL and truckload businesses. Cost of transportation and services for the first quarter of 2021 was $2.3 billion, or 48.8% of revenue, compared with $1.9 billion, or 49.1% of revenue, for the same period in 2020. The year-over-year decrease as a percentage of revenue for the first three months of 2021 was primarily driven by a higher mix of logistics revenue, partially offset by increased third-party transportation costs in our transportation segment. Direct operating expenses are comprised of both fixed and variable expenses and consist of operating costs related to our warehousing facilities and LTL service centers. Direct operating expenses consist mainly of personnel costs, facility and equipment expenses, such as rent, utilities, equipment maintenance and repair, costs of materials and supplies, information technology expenses, depreciation expense, and gains and losses on sales of property and equipment. 21 Table of Contents Direct operating expense for the first three months of 2021 was $1.7 billion, or 34.7% of revenue, compared with $1.4 billion, or 35.2% of revenue, for the same period in 2020. The year-over-year decrease as a percentage of revenue was primarily driven by lower personnel and facilities costs as a percentage of revenue as we leveraged our fixed costs across increased revenues this quarter, partially offset by a higher mix of logistics revenue. Additionally, the first quarters of 2021 and 2020 included $24 million and $27 million, respectively, from gains on sales of property and equipment. Sales, general and administrative expense (“SG&A”) primarily consists of salaries and commissions for the sales function, salary and benefit costs for executive and certain administration functions, depreciation and amortization expense, professional fees, facility costs, bad debt expense and legal costs. SG&A for the first quarter of 2021 was $588 million, or 12.3% of revenue, compared with $525 million, or 13.6% of revenue, for the same period in 2020. SG&A for the first three months of 2021 included approximately $13 million of expenses related to the planned spin-off of our Logistics segment, including professional service fees. In comparison, SG&A for the first three months of 2020 included approximately $40 million of expenses related to our exploration of strategic alternatives that was terminated in March 2020, including professional service fees and employee retention costs. Other income primarily consists of pension income. Other income for the first quarter of 2021 was $26 million of income, compared with $18 million of income for the same period in 2020. The year-over-year increase primarily reflects higher net periodic pension income in the first quarter of 2021, compared with the same period in 2020. Foreign currency gain was a $2 million gain for the first quarter of 2021, compared with an $8 million gain for the same period in 2020. Foreign currency gain in the first quarter of 2021 primarily reflected foreign currency transaction and measurement gains. Foreign currency gain in the first quarter of 2020 primarily reflected realized and unrealized gains on foreign currency option and forward contracts and other derivative contracts, including a gain on a terminated net investment hedge. For additional information on our foreign currency option and forward contracts, see Note 6—Derivative Instruments to our Condensed Consolidated Financial Statements. Debt extinguishment loss was $8 million for the first three months of 2021 and related to the write-off of debt issuance costs for the redemption of our outstanding senior notes due 2022, as well as costs related to the amendment of our term loan credit agreement. There were no debt extinguishment losses in the first quarter of 2020. Interest expense decreased to $69 million for the first quarter of 2021 from $72 million for the first quarter of 2020. Interest expense reflected the issuance of the senior notes due 2025 in the second quarter of 2020, partially offset by the redemption of the senior notes due 2022 in the first quarter of 2021. Our effective income tax rates were 22.8% and 30.2% for the first three months of 2021 and 2020, respectively. The effective tax rates for the first quarter of 2021 and 2020 were based on forecasted full-year effective tax rates, adjusted for discrete items that occurred within the periods presented. The change in our effective tax rate for the first quarter of 2021 compared to the same quarter in 2020 was primarily driven by higher pre-tax book income which diluted the impact of contribution- and margin-based taxes. The primary discrete item impacting the effective tax rate for the first quarter of 2021 was a tax benefit of $4 million from stock-based compensation. There were no material discrete items impacting the effective tax rate for the first quarter of 2020. Restructuring Charges We engage in restructuring actions as part of our ongoing efforts to best use our resources and infrastructure. We recorded restructuring charges of $4 million and $3 million in Sales, general and administrative expense on our Condensed Consolidated Statements of Income for the first three months of 2021 and 2020, respectively. For more information, see Note 5—Restructuring Charges to the Condensed Consolidated Financial Statements. We may incur incremental restructuring costs in 2021 in connection with the planned spin-off of our Logistics segment or for other reasons; however, we are currently unable to reasonably estimate these costs. 22 Table of Contents Transportation Segment Three Months Ended March 31, Percent of Revenue Change (Dollars in millions) 2021 2020 2021 2020 2021 vs. 2020 Revenue $ 2,989 $ 2,459 100.0 % 100.0 % 21.6 % Operating income 209 120 7.0 % 4.9 % 74.2 % Depreciation and amortization 115 110 4.5 % Revenue in our Transportation segment increased 21.6% to $3.0 billion for the first quarter of 2021, compared with $2.5 billion for the same period in 2020. The increase in revenue in the first quarter of 2021 reflected strong growth in freight brokerage and LTL revenues. Additionally, foreign currency movement increased revenue by approximately 2.5 percentage points in the first quarter of 2021. Operating income in our Transportation segment was $209 million, or 7.0% of revenue, for the first quarter of 2021, compared with $120 million, or 4.9% of revenue, for the same period in 2020. The increase in operating income in the first three months of 2021 was primarily driven by higher revenue, partially offset by higher third-party transportation and personnel costs. Additionally, the first quarter of 2020 included approximately $7 million of expenses related to our exploration of strategic alternatives. Logistics Segment Three Months Ended March 31, Percent of Revenue Change (Dollars in millions) 2021 2020 2021 2020 2021 vs. 2020 Revenue $ 1,818 $ 1,437 100.0 % 100.0 % 26.5 % Operating income 68 38 3.7 % 2.6 % 78.9 % Depreciation and amortization 74 69 7.2 % Revenue in our Logistics segment increased 26.5% to $1.8 billion for the first quarter of 2021, compared with $1.4 billion for the same period in 2020. The increase in revenue in the first quarter of 2021 compared to the same period in 2020 reflects strong growth in our European business, including the impact of the acquired Kuehne + Nagel business in January 2021, which contributed approximately 8.2 percentage points to segment revenue growth. Additionally, foreign currency movement increased revenue by approximately 5.5 percentage points in the first quarter of 2021. Operating income in our Logistics segment was $68 million, or 3.7% of revenue, for the first quarter of 2021, compared with operating income of $38 million, or 2.6% of revenue, for the same period in 2020. The increase was primarily driven by higher revenue, partially offset by higher personnel and facilities costs. 23 Table of Contents Liquidity and Capital Resources As of March 31, 2021, we had cash and cash equivalents of $629 million. Our principal existing sources of cash are (i) cash generated from operations; (ii) borrowings available under our Second Amended and Restated Revolving Loan Credit Agreement, as amended (the “ABL Facility”); and (iii) proceeds from the issuance of other debt. As of March 31, 2021, we have $1.084 billion available to draw under our ABL Facility, based on a borrowing base of $1.1 billion and outstanding letters of credit of $16 million. Additionally, under our Senior Secured Term Loan Credit Agreement, we have a $200 million uncommitted secured evergreen letter of credit facility, under which we have issued $198 million in aggregate face amount of letters of credit as of March 31, 2021. We continually evaluate our liquidity requirements in light of our operating needs, growth initiatives and capital resources. We believe that our existing liquidity and sources of capital are sufficient to support our operations over the next 12 months. 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 SA (“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. 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. 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 March 31, 2021 and €41 million ($50 million) as of December 31, 2020. 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 $469 million as of March 31, 2021). As of March 31, 2021, €82 million (approximately $96 million) was available to us, subject to having sufficient receivables available to sell to the Purchasers. Under the program, we service the receivables we sell on behalf of the Purchasers, which gives us visibility into the timing of customer payments. The benefit to our cash flow includes the difference between the cash consideration in the table below and the amount we collected as a servicer on behalf of the Purchasers. In the first quarter of 2021 and 2020, we collected cash as servicer of $770 million and $690 million, respectively. 24 Table of Contents Information related to the trade receivables sold was as follows: Three Months Ended March 31, (In millions) 2021 2020 Securitization programs Receivables sold in period $ 775 $ 691 Cash consideration 775 691 Factoring programs Receivables sold in period $ 116 $ 264 Cash consideration 116 263 Term Loan Facilities In the first quarter of 2021, we amended the Term Loan Credit Agreement to consolidate our tranches and lower the interest rate. The applicable terms of the Term Loan Credit Agreement are as follows: December 31, 2020 (In millions) March 31, 2021 First Tranche Second Tranche Principal balance $ 2,003 $ 1,503 $ 500 Interest spread: Base rate loans 0.75 % 1.00 % 1.50 % LIBOR loans 1.75 % 2.00 % 2.50 % Maturity date February 2025 February 2025 February 2025 We recorded a debt extinguishment loss of $3 million in the first quarter of 2021 due to this amendment. Senior Notes due 2022 In January 2021, we redeemed our outstanding 6.50% senior notes due 2022. The redemption price for the notes was 100.0% of the principal amount, plus accrued and unpaid interest. We paid for the redemption with available cash. We recorded a debt extinguishment loss of $5 million in our first quarter 2021 results of operations due to this redemption. Preferred Stock and Warrant Exchanges In December 2020, some holders of our convertible preferred stock exchanged their holdings for a combination of our common stock, based on the stated conversion price, and a lump-sum payment that represents an approximation of the net present value of the future dividends payable on the preferred stock. Additionally, some holders of our warrants exchanged (or committed to exchange subject to the satisfaction of certain customary closing conditions) their holdings, including Jacobs Private Equity, LLC, an entity controlled by the Company’s chairman and chief executive officer, for a number of shares of our common stock equal to the number of shares of common stock that such holder would be entitled to receive upon an exercise of the warrants less the number of shares of common stock that have an approximate value equal to the exercise price of the warrants. With respect to the preferred stock, through December 31, 2020, 69,445 shares were exchanged, and we issued 9.9 million shares of common stock and paid $22 million of cash. With respect to the warrants, through December 31, 2020, 0.3 million warrants were exchanged, and we issued 0.3 million shares of common stock. In the first quarter of 2021, 975 preferred shares were exchanged, and we issued 0.1 million shares of common stock. With respect to the warrants, in the first quarter of 2021, 9.8 million warrants were exchanged, and we issued 9.2 million shares of common stock. These exchanges are intended to simplify our equity capital structure, including in contemplation of our previously announced plan to pursue a spin-off of our Logistics segment. 25 Table of Contents Share Repurchases In February 2019, our Board of Directors authorized additional repurchases of up to $1.5 billion of our common stock. Our share repurchase authorization permits us to purchase shares in both the open market and in private transactions, with the timing and number of shares dependent on a variety of factors, including price, general business conditions, market conditions, alternative investment opportunities and funding considerations. We are not obligated to repurchase any specific number of shares and may suspend or discontinue the program at any time. In the first quarter of 2020, we purchased and retired 2 million shares at an aggregate value of $114 million. The share purchases were funded by our available cash and proceeds from our 2019 debt offerings. There were no share purchases in the first quarter of 2021. Our remaining share repurchase authorization was $503 million as of March 31, 2021. Loan Covenants and Compliance As of March 31, 2021, we were in compliance with the covenants and other provisions of our debt agreements. Any failure to comply with any material provision or covenant of these agreements could have a material adverse effect on our liquidity and operations. Sources and Uses of Cash Three Months Ended March 31, (In millions) 2021 2020 Net cash provided by operating activities $ 173 $ 180 Net cash used in investing activities (95) (79) Net cash provided by (used in) financing activities (1,501) 668 Effect of exchange rates on cash, cash equivalents and restricted cash (2) (19) Net increase (decrease) in cash, cash equivalents and restricted cash $ (1,425) $ 750 During the three months ended March 31, 2021, we: (i) generated cash from operating activities of $173 million and (ii) generated proceeds from sales of property and equipment of $36 million. We used cash during this period primarily to: (i) purchase property and equipment of $140 million; (ii) redeem our senior notes due 2022 for $1.2 billion; (iii) repay our ABL Facility borrowings of $200 million; and (iv) repay borrowings related to our securitization program of $49 million. During the three months ended March 31, 2020, we: (i) generated cash from operating activities of $180 million; (ii) received net proceeds of $782 million from our issuances of debt and short-term borrowings and (iii) generated proceeds from sales of property and equipment (primarily real estate) of $54 million. We used cash during this period primarily to: (i) purchase property and equipment of $139 million and (ii) repurchase common stock of $114 million. Cash flows from operating activities for the three months ended March 31, 2021 decreased by $7 million, compared with the same period in 2020. Accounts receivable were a use of cash for the three months ended March 31, 2021, as compared to a source of cash in the prior period, reflecting higher revenues in the current period and a year-over-year decrease in proceeds from factoring. Partially offsetting the impact of accounts receivable was higher net income of $93 million for the three months ended March 31, 2021, compared with the same period in 2020. Investing activities used $95 million and $79 million of cash in the three months ended March 31, 2021 and 2020, respectively. During the three months ended March 31, 2021, we used $140 million of cash to purchase property and equipment and received $36 million from sales of property and equipment. During the three months ended March 31, 2020, we used $139 million of cash to purchase property and equipment and received $54 million from sales of property and equipment. Financing activities used $1.5 billion of cash in the three months ended March 31, 2021 and provided $668 million of cash in the three months ended March 31, 2020. The primary uses of cash from financing activities during the first three months of 2021 were $1.2 billion used to redeem the senior notes due 2022, $200 million used to repay borrowings under our ABL Facility and $49 million used to repay our borrowings related to our securitization 26 Table of Contents program. The primary sources and uses of cash from financing activities during the three months ended March 31, 2020 were $600 million of proceeds from borrowings on our ABL Facility, net of payments and $182 million of net proceeds from borrowings related to our securitization program, partially offset by $114 million used to purchase XPO common stock. Contractual Obligations During the three months ended March 31, 2021, there were no material changes to our December 31, 2020 contractual obligations. We anticipate net capital expenditures to be between $500 million and $550 million in 2021 (without giving effect to the planned spin-off of our Logistics segment), which reflects an increase of approximately $25 million from the estimate provided in our 2020 Form 10-K. New Accounting Standards Information related to new accounting standards is included in Note 1—Organization, Description of Business and Basis of Presentation to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.