What changed in this filing

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Item 1. Financial Statements

2022-08-03 compared with 2022-05-05 · 262 added, 117 removed, 317 unchanged (54% of the section changed)

2 unchanged sentences

Condensed Consolidated Statements of Operations

Three Months Ended March 31,

Three Months Ended Six Months Ended

June 30, June 30,

(Dollars in millions, shares in thousands, except per share amounts) 2022 2021 2022 2021

4 unchanged sentences

Transaction and integration costs 24 35 43 53

Restructuring costs and other 13 4

Restructuring costs (credits) and other 1 ( 1 ) 14 3

Operating income 59 22 96 52

Other income, net 16 1

Other income (expense), net 23 ( 1 ) 39 —

Interest expense, net ( 9 ) ( 6 ) ( 13 ) ( 11 )

13 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income (Loss)

Three Months Ended March 31,

Three Months Ended Six Months Ended

June 30, June 30,

(In millions) 2022 2021 2022 2021

Net income $ 52 $ 14 $ 90 $ 31

Other comprehensive loss, net of tax

Foreign currency translation loss, net of tax benefit of $ — and $ 3 , respectively

Other comprehensive income (loss), net of tax

Foreign currency translation gain (loss), net of tax (expense) benefit of $( 10 ), $( 1 ), $( 10 ), and $ 2 , respectively

( 75 ) 19 ( 120 ) ( 26 )

Unrealized gain (loss) on hedging instruments, net of tax expense of $ — and $( 1 ), respectively

Other comprehensive loss ( 45 ) ( 46 )

Comprehensive loss ( 7 ) ( 29 )

Comprehensive income attributable to noncontrolling interest — ( 1 )

Comprehensive loss attributable to GXO $ ( 7 ) $ ( 28 )

Unrealized gain (loss) on hedging instruments, net of tax (expense) benefit of $ — , $ — , $ — , and $( 1 ), respectively

Comprehensive income (loss) $ ( 23 ) $ 33 ( 30 ) 4

Comprehensive income (loss) attributable to noncontrolling interest — ( 1 ) — ( 2 )

Comprehensive income (loss) attributable to GXO $ ( 23 ) $ 34 $ ( 30 ) $ 6

See accompanying notes to condensed consolidated financial statements.

1 unchanged sentence

Condensed Consolidated Balance Sheets

March 31, December 31,

(Dollars in millions, shares in thousands, except per share amounts) 2022 2021

(Dollars in millions, shares in thousands, except per share amounts) June 30, 2022 December 31, 2021

Current assets

26 unchanged sentences

Stockholders’ Equity

Common Stock, $ 0.01 par value per share, 300,000 shares authorized, 114,840 and 114,659 shares issued and outstanding, as of March 31, 2022 and December 31, 2021, respectively

Preferred Stock, $ 0.01 par value per share, 10,000 shares authorized, 0 shares issued and outstanding, as of March 31, 2022 and December 31, 2021, respectively

Common Stock, $ 0.01 par value per share;

300,000 shares authorized, 118,610 and 114,659 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

Preferred Stock, $ 0.01 par value per share;

10,000 shares authorized, 0 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

Additional paid-in capital 2,561 2,354

7 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31,

Six Months Ended June 30,

(In millions) 2022 2021

20 unchanged sentences

Cash flows from financing activities

Proceeds from issuance of debt, net 898 —

Repayment of debt related to securitization transactions and other — ( 25 )

Repayment of debt and finance leases ( 15 ) ( 56 )

Purchase of noncontrolling interests — ( 128 )

Net transfers from XPO Logistics, Inc.

Taxes paid related to net share settlement of equity awards ( 12 ) —

Other ( 2 ) 15

4 unchanged sentences

Cash and cash equivalents, end of period

Supplemental disclosure of non-cash investing and financing activities:

Common stock issued for acquisition $ 203 $ —

See accompanying notes to condensed consolidated financial statements.

4 unchanged sentences

(Shares in thousands, dollars in millions) Shares Amount

Balance as of March 31, 2022 114,840 $ 1 $ — $ 2,349 $ 163 $ ( 172 ) $ 2,341 $ 34 $ 2,375

Net income — — — — 51 — 51 1 52

Other comprehensive (loss) — — — — — ( 74 ) ( 74 ) ( 1 ) ( 75 )

Stock-based compensation — — — 10 — — 10 — 10

Vesting of stock compensation awards 21 — — — — — — — —

Tax withholding on vesting of stock compensation awards — — — ( 1 ) — — ( 1 ) — ( 1 )

Common stock issued for acquisition 3,749 — — 203 — — 203 — 203

Dividends — — — — — — — ( 3 ) ( 3 )

Balance as of June 30, 2022 118,610 $ 1 $ — $ 2,561 $ 214 $ ( 246 ) $ 2,530 $ 31 $ 2,561

Common Stock XPO Logistics, Inc.

Investment Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Equity Before Noncontrolling Interests Noncontrolling Interests Total Equity

(Shares in thousands, dollars in millions) Shares Amount

Balance as of December 31, 2021 114,659 $ 1 $ — $ 2,354 $ 126 $ ( 130 ) $ 2,351 $ 39 $ 2,390

4 unchanged sentences

Tax withholding on vesting of stock compensation awards — — — ( 12 ) — — ( 12 ) — ( 12 )

Common stock issued for acquisition 3,749 — — 203 — — 203 — 203

Deconsolidation of variable interest entity — — — — — 2 2 ( 5 ) ( 3 )

Dividends — — — — — — — ( 3 ) ( 3 )

Balance as of June 30, 2022 118,610 $ 1 $ — $ 2,561 $ 214 $ ( 246 ) $ 2,530 $ 31 $ 2,561

GXO Logistics, Inc.

Condensed Consolidated Statements of Changes in Equity

Common Stock XPO Logistics, Inc.

Investment Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income Equity Before Noncontrolling Interests Noncontrolling Interests Total Equity

(Shares in thousands, dollars in millions) Shares Amount

Balance as of March 31, 2021 — $ — $ 2,903 $ — $ — $ 16 $ 2,919 $ 124 $ 3,043

Net income — — 11 — — — 11 3 14

Other comprehensive income (loss) — — — — — 23 23 ( 4 ) 19

Purchase of noncontrolling interest — — — — — — — ( 128 ) ( 128 )

Net transfers from (to) XPO Logistics, Inc.

— — ( 79 ) — — — ( 79 ) 40 ( 39 )

Other — — — — — — — 5 5

Balance as of June 30, 2021 — $ — $ 2,835 $ — $ — $ 39 $ 2,874 $ 40 $ 2,914

(Shares in thousands, dollars in millions) Common Stock XPO Logistics, Inc.

4 unchanged sentences

Other comprehensive loss — — — — — ( 19 ) ( 19 ) ( 8 ) ( 27 )

Purchase of noncontrolling interests — — — — — — — ( 128 ) ( 128 )

Net transfers from XPO Logistics, Inc.

— — 45 — — — 45 40 85

Balance as of March 31, 2021 — $ — $ 2,903 $ — $ — $ 16 $ 2,919 $ 124 $ 3,043

Other — — — — — — 5 5

Balance as of June 30, 2021 — $ — $ 2,835 $ — $ — $ 39 $ 2,874 $ 40 $ 2,914

See accompanying notes to condensed consolidated financial statements.

3 unchanged sentences

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company (“GXO” or the “Company”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and pursuant to the rules of the Securities and Exchange Commission (“SEC”).

The accompanying unaudited condensed consolidated financial statements of GXO Logistics, Inc.

(“GXO” or the “Company”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and pursuant to the rules of the Securities and Exchange Commission (“SEC”).

Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

These financial statements have been prepared on a basis that is substantially consistent with the accounting principles applied in our Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”).

The accompanying unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the 2021 Form 10-K.

The accompanying unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”).

In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included.

Operating results for the three months ended March 31, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

Operating results for the three and six months ended June 30, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

On August 2, 2021, the Company completed the separation from XPO Logistics, Inc.

4 unchanged sentences

Prior to the Separation, the Company’s historical assets and liabilities presented were wholly owned by XPO and were reflected on a historical cost basis.

In connection with the Separation, the Company’s assets and liabilities were transferred to the Company on a carry-over basis.

In connection with the Separation, the Company’s assets and liabilities were transferred to the Company on a carryover basis.

Prior to the Separation, the historical results of operations included allocations of XPO costs and expenses, including XPO’s corporate function, which incurred a variety of expenses including, but not limited to, information technology, human resources, accounting, sales and sales operations, procurement, executive services, legal, corporate finance and communications.

1 unchanged sentence

The charges reflected have been either specifically identified or allocated using drivers including proportional adjusted earnings before interest, taxes, depreciation and amortization, which include adjustments for transaction and integration costs, as well as restructuring costs and other adjustments, or headcount.

The majority of these allocated costs are recorded within Selling, general and administrative expense;

The majority of these allocated costs is recorded within Selling, general and administrative expense;

Depreciation and amortization expense;

and Transaction and integration costs in the Consolidated Statements of Operations.

The Company’s consolidated financial statements include the accounts of GXO Logistics, Inc.

and its majority-owned subsidiaries and variable interest entities where the Company is the primary beneficiary.

and Transaction and integration costs in the Condensed Consolidated Statements of Operations.

The Company’s consolidated financial statements include the accounts of GXO and its majority-owned subsidiaries and variable interest entities of which the Company is the primary beneficiary.

The Company has eliminated intercompany accounts and transactions.

3 unchanged sentences

2021-08, “Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with

Customers.” The ASU clarifies that an acquirer of a business should recognize and measure contract assets and contract liabilities in a business combination in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers.

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” The ASU clarifies that an acquirer of a business should recognize and measure contract assets and contract liabilities in a business combination in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers.

On January 1, 2022, the Company adopted the guidance.

5 unchanged sentences

The amendments are elective and are effective upon issuance through December 31, 2022.

The Company intends to apply this guidance when modifications of contracts that include LIBOR occur, which is not expected to have a material impact on the Company’s condensed consolidated financial statements.

The Company intends to apply this guidance when modifications of contracts that include LIBOR occur, which is not expected to have a material impact on the Company’s consolidated financial statements.

Revenue Recognition

Revenue disaggregated by geographical area was as follows:

Three Months Ended March 31,

Three Months Ended Six Months Ended

June 30, June 30,

(In millions) 2022 2021 2022 2021

8 unchanged sentences

Revenue disaggregated by industry sector was as follows:

Three Months Ended March 31,

Three Months Ended Six Months Ended

June 30, June 30,

(In millions) 2022 2021 2022 2021

6 unchanged sentences

Contract Balances

(In millions) March 31, 2022 December 31, 2021

(In millions) June 30, 2022 December 31, 2021

Contract assets (1)

2 unchanged sentences

(2) Contract liabilities are included within Other current liabilities and Other long-term liabilities in the Condensed Consolidated Balance Sheets.

Revenue included the following:

Three Months Ended March 31,

Revenue recognized included the following:

Three Months Ended Six Months Ended

June 30, June 30,

(In millions) 2022 2021 2022 2021

1 unchanged sentence

Remaining Performance Obligations

As of March 31, 2022, the fixed consideration component of the Company’s remaining performance obligation was approximately $ 2.6 billion, and the Company expects to recognize approximately 69 % of that amount over the next three years and the remainder thereafter.

As of June 30, 2022, the fixed consideration component of the Company’s remaining performance obligation was approximately $ 2.6 billion, and the Company expects to recognize approximately 71 % of that amount over the next three years and the remainder thereafter.

The Company estimates remaining performance obligations at a point in time, and actual amounts may differ from these estimates due to changes in foreign currency exchange rates and contract revisions or terminations.

Clipper Acquisition

On February 28, 2022, the Company and the board of directors of Clipper Logistics plc, a retail logistics company based in Leeds, England (“Clipper”), reached an agreement on the terms of a cash and share offer by the Company for the acquisition of the entire issued ordinary share capital of Clipper for approximately £ 1.0 billion (approximately $ 1.3 billion) (the “Clipper Acquisition”).

Under the terms of the agreement, Clipper shareholders will be entitled to receive 690 pence (approximately $ 9.06 as of March 31, 2022) in cash and 0.0359 of a share of GXO common stock per share.

In connection with the Clipper Acquisition, (i) the Company and Clipper entered into a Cooperation Agreement, (ii) the Company entered into a Bridge Term Loan Credit Agreement and (iii) the Company entered into a Term Loan Credit Agreement.

For additional information regarding the financing agreements entered in connection with the Clipper Acquisition, see Note 6.

Debt and Financing Arrangements.

In April 2022, the Clipper Acquisition was approved by Clippers’ shareholders.

On May 24, 2022, the Company completed the acquisition of Clipper Logistics plc (“Clipper”), an omnichannel retail logistics specialist based in Leeds, England (the “Clipper Acquisition”).

The Company acquired Clipper for $ 1,103 million, consisting of $ 900 million in cash and the issuance of 3,749,266 shares of GXO common stock having a value of $ 203 million.

The Competition and Markets Authority (the “CMA”) in the U.K.

is currently reviewing the Clipper Acquisition.

The Company estimates that the CMA’s review of the acquisition will be completed during the second half of 2022.

The Company incurred transaction and financing costs related to the Clipper Acquisition of $ 20 million and $ 34 million for the three and six months ended June 30, 2022, respectively, which are included in Transaction and integration costs in the Condensed Consolidated Statements of Operations.

In connection with the Clipper Acquisition, (i) the Company and Clipper entered into a Cooperation Agreement;

(ii) the Company entered into a Term Loan;

(iii) the Company entered into a Five-Year Term Loan;

and (iv) the Company terminated its Bridge Term Loan agreement.

For additional information regarding the financing agreements entered in connection with the Clipper Acquisition, see Note 6—Debt and Financing Arrangements.

Clipper’s results of operations are included in our consolidated financial statements from the date of acquisition.

The Company recorded $ 80 million and $ 1 million of revenue and income before income taxes for both the three and six months ended June 30, 2022, respectively.

The Company accounted for the acquisition as a business combination using the acquisition method of accounting.

The fair value of assets acquired and liabilities assumed was based on management’s estimate of the fair values of the assets acquired and liabilities assumed using valuation techniques including income, cost and market approaches.

The following table summarizes the estimated fair value of assets acquired and liabilities assumed at the acquisition date:

(In millions)

Current assets

Cash and cash equivalents $ 26

Accounts receivable 146

Other current assets 63

Total current assets 235

Long-term assets

Property and equipment 83

Operating lease assets 235

Intangible assets 340

Other long-term assets 25

Total long-term assets 683

Total assets $ 918

Current liabilities

Accounts payable $ 87

Accrued expenses 104

Short-term borrowings and obligations under finance leases 54

Current operating lease liabilities 37

Other current liabilities 45

Total current liabilities

Long-term liabilities

Long-term debt and obligations under finance leases 10

Long-term operating lease liabilities 221

Other long-term liabilities 105

Total long-term liabilities

Total liabilities $ 663

Net assets purchased $ 255

Cash paid $ 900

Common stock issued (1)

Purchase price paid $ 1,103

Goodwill recorded (2)

(1) Represents the fair value of the Company’s common stock on the acquisition date.

(2) Goodwill represents the excess of the purchase price over the fair value of identifiable assets acquired and liabilities assumed at the acquisition date.

Goodwill acquired was recorded in the European reporting unit and was primarily attributed to anticipated synergies.

The fair values of the assets acquired and liabilities assumed are considered preliminary and subject to adjustment as additional information is obtained and reviewed.

The final allocation of the purchase price may differ from the preliminary allocation based on completion of the valuation.

The Company expects to finalize purchase price allocation within the measurement period, which will not exceed one year from the acquisition date.

The primary areas of the purchase price allocation that are not yet finalized relate to lease assets and liabilities, intangible assets and goodwill.

The following unaudited pro forma information presents the Company’s results of operations as if the acquisition of Clipper occurred on January 1, 2021.

The pro forma results reflect the impact of incremental interest expense, net of hedging instruments, to finance the acquisition and amortization expense on acquired intangible assets.

Adjustments have also been made to remove transaction related costs.

The unaudited pro forma information is not necessarily indicative of what the results of operations of the combined company would have been had the acquisition been completed as of January 1, 2021.

Three Months Ended Six Months Ended

June 30, June 30,

(In millions) 2022 2021 2022 2021

Revenue $ 2,334 $ 2,146 $ 4,695 $ 4,236

Income before income taxes 91 15 154 40

Kuehne + Nagel Acquisition

In 2021, the Company acquired the majority of Kuehne + Nagel’s contract logistics operations in the U.K.

In January 2021, the Company acquired the majority of Kuehne + Nagel’s contract logistics operations in the U.K.

Kuehne + Nagel’s operations provide a range of logistics services, including inbound and outbound distribution, reverse logistics management and inventory management.

The Company recorded assets and liabilities at fair value.

Operating and finance lease assets and liabilities, goodwill, and intangible assets acquired were $ 300 million, $ 16 million and $ 26 million, respectively.

Operating and finance lease assets and liabilities, goodwill and intangible assets acquired were approximately $ 300 million, $ 16 million and $ 26 million, respectively.

Restructuring and Other

7 unchanged sentences

Payments ( 6 )

Balance as of March 31, 2022

The remaining restructuring liability at March 31, 2022, primarily relates to severance payments and is expected to be substantially paid within the next twelve months.

Balance as of June 30, 2022

The remaining restructuring liability at June 30, 2022 is primarily related to severance payments and is expected to be substantially paid within the next twelve months.

In the first quarter of 2022, the Company deconsolidated a 50 % owned joint venture.

The deconsolidation resulted in an $ 8 million charge recorded in the first quarter of 2022.

The Company has operating leases primarily for real estate, warehouse equipment, trucks, trailers, containers and material handling equipment.

In addition, the Company has finance leases for equipment.

The Company has operating and finance leases primarily for real estate, warehouse equipment, trucks, trailers, containers and material handling equipment.

The following amounts related to leases were recorded in the Condensed Consolidated Balance Sheets:

(In millions) March 31, 2022 December 31, 2021

(In millions) June 30, 2022 December 31, 2021

Operating leases:

9 unchanged sentences

The components of lease expense recorded in the Condensed Consolidated Statements of Operations were as follows:

Three Months Ended March 31,

Three Months Ended Six Months Ended

June 30, June 30,

(In millions) 2022 2021 2022 2021

10 unchanged sentences

Supplemental cash flow information was as follows:

Three Months Ended March 31,

Six Months Ended June 30,

(In millions) 2022 2021

Leased assets obtained in exchange for new operating lease liabilities $ 154 $ 412

Leased assets obtained in exchange for new finance lease liabilities 1 30

Leased assets obtained in exchange for new operating lease liabilities, including $ 249 and $ 281 from an acquisition in 2022 and 2021, respectively

Leased assets obtained in exchange for new finance lease liabilities, including $ 14 and $ 23 from an acquisition in 2022 and 2021, respectively

Debt and Financing Arrangements

The following table summarizes the carrying value of debt:

(In millions) March 31, 2022 December 31, 2021

(In millions) Rate (1)

June 30, 2022 December 31, 2021

1.65 % Unsecured notes due 2026 (2)

1.65 % $ 397 $ 397

2.65 % Unsecured notes due 2031 (3)

Finance leases and other 146 168

2.65 % 396 396

Two-Year Term Loan due 2024

Three-Year Term Loan due 2025 (4)

Five-Year Term Loan due 2027 (4)

Finance leases and other Various 194 168

Total debt and obligations under finance leases $ 1,885 $ 961

1 unchanged sentence

Total long-term debt and obligations under finance leases $ 1,801 $ 927

(1) The carrying value of the 1.65 % Unsecured Notes due 2026 is presented net of unamortized debt issuance cost and discount of $ 3 million and $ 3 million as of March 31, 2022, and December 31, 2021, respectively.

(2) The carrying value of the 2.65 % Unsecured Notes due 2031 is presented net of unamortized debt issuance cost and discount of $ 4 million and $ 4 million as of March 31, 2022, and December 31, 2021, respectively.

Term Loan Credit Agreement

On March 22, 2022, the Company entered into a Term Loan Credit Agreement that provides a £ 375 million ($ 493 million as of March 31, 2022) unsecured term loan facility, which will partially fund the Clipper Acquisition.

The Term Loan Credit Agreement consists of two delayed draw term loans of £ 187.5 million ($ 246 million as of March 31, 2022).

The loans may be borrowed in multiple draws beginning on the acquisition date.

The loans mature on the second and third anniversary following the funding date, respectively.

Loans under the Term Loan Credit Agreement bear interest at a fluctuating rate per annum equal to (a) with respect to borrowings in U.S.

dollars, at our option, the alternate base rate or the adjusted secured overnight financing rate and (b) with respect to borrowings in British Pounds Sterling, the daily simple Sterling Overnight Interbank Average rate (“SONIA”), in each case, plus an applicable margin based on the Company’s credit ratings.

The Term Loan Credit Agreement contains representations and warranties, affirmative and negative covenants and events of default customary for unsecured financings of this type, including negative covenants that, among other things, limit the ability of the Company and its subsidiaries to incur liens, limit the ability of the Company to make certain fundamental changes and limit the ability of certain of its subsidiaries to incur indebtedness, in each case subject to a number of important exceptions and qualifications.

In addition, the Term Loan Credit Agreement requires the Company, beginning with the last day of the first full fiscal quarter following the initial funding of loans under the Term Loan Credit Agreement, to maintain a consolidated leverage ratio less than or equal to a specified maximum consolidated leverage ratio.

Bridge Term Loan Credit Agreement

On February 28, 2022, the Company entered into a Bridge Term Loan Credit Agreement that provided a £ 745 million ($ 979 million as of March 31, 2022) unsecured term loan facility for the Clipper Acquisition.

The Bridge Term Loan Credit Agreement matures 364 days after an advance.

Loans under the Bridge Term Loan Credit Agreement bear interest at the daily simple SONIA rate plus an applicable margin calculated based on the Company’s credit ratings.

Interest will be paid in arrears, initially on the three-month anniversary of the acquisition closing date and thereafter on the date that is three months following the previous payment date.

Concurrently with the effectiveness of the Term Loan Credit Agreement, the Company reduced commitments under the Bridge Term Loan Credit Agreement by the aggregate amount of commitments under the Term Loan Credit Agreement.

(1) Interest rate as of June 30, 2022.

(2) Net of unamortized debt issuance costs and discount of $ 3 million as of June 30, 2022 and December 31, 2021.

(3) Net of unamortized debt issuance costs and discount of $ 4 million as of June 30, 2022 and December 31, 2021.

(4) Net of unamortized debt issuance costs of $ 1 million as of June 30, 2022.

Five-Year Term Loan

On May 25, 2022, the Company entered into a five-year unsecured Term Loan (the “ Five-Year Term Loan due 2027”) that provided a $ 500 million unsecured term loan facility to fund the Clipper Acquisition.

On May 26, 2022, the Company borrowed $ 500 million that will mature on May 26, 2027.

The loan bears interest at a fluctuating rate per annum equal to, at the Company’s option, the alternate base rate or the adjusted Secured Overnight Financing Rate (SOFR), plus an applicable margin based on the Company’s credit ratings.

Delayed Draw Term Loan

On March 22, 2022, the Company entered into an unsecured delayed draw Term Loan (the “Delayed Draw Term Loan”) that provided a £ 375 million ($ 457 million as of June 30, 2022) unsecured term loan facility to fund the Clipper Acquisition.

The loans were available to the Company in U.S.

dollars or British pounds sterling.

On May 26, 2022, the Company borrowed, in U.S.

dollars, a $ 165 million 2 -year term loan tranche (the “ Two-Year Term Loan due 2024”) and a $ 235 million 3 -year term loan tranche (the “ Three-Year Term Loan due 2025”) that will mature on May 26, 2024 and May 26, 2025, respectively.

Loans bear interest at a fluctuating rate per annum equal to, at the Company’s option, the alternate base rate or the adjusted SOFR, plus an applicable margin based on the Company’s credit ratings.

Bridge Term Loan

On February 28, 2022, the Company entered into an unsecured Bridge Term Loan (the “Bridge Term Loan”) that provided a £ 745 million ($ 907 million as of June 30, 2022) unsecured term loan facility to fund the Clipper Acquisition.

The commitments under the Bridge Term Loan were terminated with the effectiveness of the Five-Year Term Loan and the Delayed Draw Term Loan.

No amounts were drawn under the Bridge Term Loan credit agreement.

Revolving Credit Facility

1 unchanged sentence

The Revolving Credit Facility provides commitments of up to $ 800 million, of which $ 60 million is available for the issuance of letters of credit.

No amounts were outstanding under the Revolving Credit Facility as of March 31, 2022.

No amounts were outstanding under the Revolving Credit Facility as of June 30, 2022.

Sales of Certain Receivables

The Company sells certain of its trade accounts receivables on a non-recourse basis to third-party financial institutions under various factoring agreements.

The Company also sold certain European trade accounts receivable under a securitization program.

The Company also sold certain European trade accounts receivables under a securitization program.

In the first quarter of 2022, the Company terminated its securitization program.

The Company accounts for these transactions as sales of receivables and presents cash proceeds as cash provided by operating activities in the Consolidated Statements of Cash Flows.

The Company accounts for these transactions as sales of receivables and presents cash proceeds as cash provided by operating activities in the Condensed Consolidated Statements of Cash Flows.

The Company uses the sale of certain receivables to help manage its working capital.

Information related to the trade receivables sold was as follows:

Three Months Ended March 31,

Three Months Ended Six Months Ended

June 30, June 30,

(In millions) 2022 2021 2022 2021

6 unchanged sentences

Covenants and Compliance

As of March 31, 2022, the Company was in compliance with the covenants contained in its debt and financing arrangements.

The covenants in the Revolving Credit Facility, the Five-Year Term Loan and the Delayed Draw Term Loan, which are customary for financings of this type, limit the Company’s ability to incur indebtedness and grant liens, among other restrictions.

In addition, the facilities require the Company to maintain a consolidated leverage ratio below a specified maximum.

As of June 30, 2022, the Company was in compliance with the covenants contained in its debt and financing arrangements.

Fair Value Measurements and Financial Instruments

8 unchanged sentences

The Company bases its 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 March 31, 2022 and December 31, 2021, due to their short-term nature.

The carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and current maturities of long-term debt approximated their fair values as of June 30, 2022 and December 31, 2021, due to their short-term nature.

The fair value of debt was as follows:

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

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

3 unchanged sentences

2 312 396 394 396

Two-Year Term Loan due 2024

2 165 165 — —

Three-Year Term Loan due 2025

2 235 234 — —

Five-Year Term Loan due 2027

2 500 499 — —

Financial Instruments

1 unchanged sentence

The Company uses derivative instruments to manage the volatility related to these exposures.

The objective of these derivative instruments is to reduce fluctuations in earnings and cash flows associated with changes in foreign currency exchange rates.

The objective of these derivative instruments is to reduce fluctuations in earnings and cash flows associated with changes in foreign currency exchange rates and interest rates.

These financial instruments are not used for trading or other speculative purposes.

The Company does not expect to incur any losses as a result of counterparty default.

The fair value of the Company’s derivative instruments and the related notional amounts were as follows:

March 31, 2022

(In millions) Notional Amount Balance Sheet Caption Fair Value

Derivatives designated as hedges

Cross-currency swap agreements (1)

$ 487 Other long-term liabilities $ 13

Derivatives not designated as hedges

Foreign currency option contracts $ 315 Other current assets $ 16

(1) In the first quarter of 2022, the Company extended certain cross-currency swap agreements scheduled to mature in 2022.

The new maturity of these cross-currency swap agreements is 2027.

December 31, 2021

(In millions) Notional Amount Balance Sheet Caption Fair Value

Net Investment Hedges

The Company uses fixed-to-fixed or variable-to-variable cross-currency swap agreements to hedge its net investments in foreign operations against future volatility in the exchange rates between the U.S.

dollar and the associated foreign currencies.

The Company designated these cross-currency swap agreements as qualifying hedging instruments and accounts for them as net investment hedges.

In the first quarter of 2022, the Company extended certain fixed-to-fixed cross-currency swap agreements scheduled to mature between 2022 to 2027, with an aggregate notional amount of $ 322 million.

In the second quarter of 2022, the Company extended a fixed-to-fixed cross-currency swap agreement scheduled to mature in 2026 to 2027, with an aggregate notional amount of $ 165 million.

Additionally, in the second quarter of 2022, the Company entered into multiple cross-currency swap agreements with maturity dates ranging from 2023 to 2027, with an aggregate notional amount of $ 900 million, of which $ 250 million was amended during the quarter.

In connection with the extensions and amendments, the Company received cash of $ 2 million and $ 12 million representing the fair value of the swap and interest accrued through the date of termination for the three and the six months ended June 30, 2022, respectively.

Interest Rate Swap Agreements

The Company uses interest rate swap agreements to hedge the variability of cash flows resulting from floating interest rate borrowings.

The Company designated these interest rate swap agreements as qualifying hedging instruments and accounts for them as cash flow hedges.

When an interest rate swap agreement qualifies for hedge accounting as a cash flow hedge, the changes in the fair value are recorded in equity as a component of AOCI and are reclassified into Interest expense, net over the life of the underlying debt, as interest on the Company’s floating rate debt is accrued.

In the second quarter of 2022, the Company entered into multiple interest rate swap agreements with an aggregate notional amount of $ 250 million.

Foreign Currency Exchange Rate Risk

The Company is exposed to certain risks relating to its ongoing business operations including foreign currency exchange rate risk.

The Company uses foreign currency option contracts to mitigate the risk of a reduction in the value of earnings from its operations that use the Euro or British pound sterling as their functional currency.

Additionally, the Company uses foreign currency forward contracts to mitigate exposure from variability of cash flows related to the forecasted interest and principal payments on intercompany loans.

The foreign currency forward contracts generally expire within 12 months.

While these derivatives are hedging the fluctuations in foreign currencies, they do not meet the requirements to be accounted for as hedging instruments.

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

June 30, 2022 December 31, 2021

(In millions) Notional Amount Fair Value Notional Amount Fair Value Balance Sheet Caption

Derivatives designated as hedges

Cross-currency swap agreements $ 1,387 $ 28 $ — $ — Other long-term assets

Cross-currency swap agreements $ — $ — $ 328 $ 4 Other current liabilities

Cross-currency swap agreements — — 165 4 Other long-term liabilities

Interest rate swaps 250 1 — — Other long-term liabilities

Derivatives not designated as hedges

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Foreign currency option contracts — — 37 1 Other long-term assets

As of March 31, 2022 and December 31, 2021, the derivatives are classified as Level 2 within the fair value hierarchy.

Foreign currency forward contracts $ 15 $ — $ — $ — Other current liabilities

As of June 30, 2022, and December 31, 2021, the derivatives were classified as Level 2 within the fair value hierarchy.

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

The effect of net investment hedges on Accumulated Other Comprehensive Income (“AOCI”) and the Condensed Consolidated Statements of Operations was as follows:

Three Months Ended March 31, 2022

(In millions) Gain or (Loss) Recognized in Other Comprehensive Income Gain or (Loss) Reclassified from AOCI into Net Income (1)

Gain or (Loss) Recognized in Net Income on Derivative (Excluded from effectiveness testing) (1)

Derivatives designated as hedges

The effect of hedges on AOCI and in the Condensed Consolidated Statements of Operations was as follows:

Three Months Ended June 30, 2022 Six Months Ended June 30, 2022

(In millions) Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivative Gain or (Loss) Reclassified from AOCI into Net Income (1)

Gain or (Loss) Recognized in Net Income on Derivative (Excluded from effectiveness testing) (1)

Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivative Gain or (Loss) Reclassified from AOCI into Net Income (1)

Gain or (Loss) Recognized in Net Income on Derivative (Excluded from effectiveness testing) (1)

Derivatives designated as net investment hedges

Cross-currency swap agreements $ 43 $ 2 $ — $ 46 $ 2 $ 2

Total $ 3 $ — $ 2

(1) Amounts reclassified to net income are reported within Interest expense in the Condensed Consolidated Statements of Operations.

The gain recognized in earnings for foreign currency option contracts not designated as hedging instruments was $ 8 million for the three months ended March 31, 2022, of which $ 6 million was unrealized.

These amounts are recorded in Other income, net in the Condensed Consolidated Statements of Operations.

There were no derivative instruments in the condensed consolidated financial statements as of March 31, 2021.

Derivatives designated as cash flow hedges

Interest rate swaps $ ( 1 ) $ — $ — $ ( 1 ) $ — $ —

(1) Amounts reclassified to net income are reported within Interest expense, net in the Condensed Consolidated Statements of Operations.

There were no derivative instruments recorded in the consolidated financial statements on or before June 30, 2021.

Derivatives not designated as hedges

The gains recognized in earnings for foreign currency option and forward contracts were $ 16 million and $ 24 million, of which $ 9 million and $ 15 million were unrealized, for the three and six months ended June 30, 2022, respectively.

These amounts are recorded in Other income (expense), net in the Condensed Consolidated Statements of Operations.

Employee Benefit Plans

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Retirement Plan were as follows:

Three Months Ended March 31,

Three Months Ended Six Months Ended

June 30, June 30,

(In millions) 2022 2021 2022 2021

2 unchanged sentences

Net periodic benefit income (1)

(1) Net periodic benefit income is recorded within Other income, net in the Condensed Consolidated Statements of Operations.

The Company also maintains defined benefit pension plans for some of its foreign subsidiaries that are excluded from the disclosures due to their immateriality.

$ 9 $ — $ 18 $ —

(1) Net periodic benefit income is recorded within Other income (expense), net in the Condensed Consolidated Statements of Operations.

The Company also maintains defined benefit pension plans for other foreign subsidiaries that are excluded from the disclosures due to their immateriality.

Defined Contribution Plans

The Company’s costs for defined contribution plans were $ 4 million for the three months ended March 31, 2022 and 2021, and were primarily included within Direct operating expenses in the Condensed Consolidated Statements of Operations.

The Company’s costs for qualified defined contribution plans was $ 4 million for the three months ended June 30, 2022 and 2021, and $ 8 million for the six months ended June 30, 2022 and 2021.

Defined contribution costs were primarily recorded within Direct operating expenses in the Condensed Consolidated Statements of Operations.

Earnings per Share

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

Three Months Ended March 31,

Three Months Ended Six Months Ended

June 30, June 30,

(Dollars in millions, shares in thousands, except per share data) 2022 2021 (1)

2022 2021 (1)

Net income attributable to common shares $ 51 $ 11 $ 88 $ 25

Basic weighted-average common shares 116,131 114,626 115,435 114,626

114,731 114,626

Diluted effect of stock-based awards 838 —

Dilutive effect of stock-based awards 515 — 676 —

Diluted weighted-average common shares 116,646 114,626 116,111 114,626

115,569 114,626

Basic earnings per share $ 0.44 $ 0.10 $ 0.76 $ 0.22

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(1) On August 2, 2021, 114,626,250 shares of common stock of the Company were distributed and began regular-way trading.

This share amount is utilized for the calculation of basic and diluted earnings per share for the three months ended March 31, 2021.

For the three months ended March 31, 2022, approximately 1.4 million shares are excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.

This share amount is utilized for the calculation of basic and diluted earnings per share for the three and six months ended June 30, 2021.

For the three and the six months ended June 30, 2022, approximately 1.8 million and 1.6 million shares, respectively, were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.

Stockholders’ Equity

The following table summarizes the changes in AOCI by component:

(In millions) Foreign Currency Translation Adjustments Defined Benefit Plan Less:

(In millions) Foreign Currency Translation Adjustments Derivative Hedges Defined Benefit Plan Less:

AOCI attributable to noncontrolling interest AOCI attributable to GXO

As of March 31, 2022 $ ( 94 ) $ — $ ( 76 ) $ ( 2 ) $ ( 172 )

Unrealized gain (loss), net of tax ( 73 ) — — 1 ( 72 )

Amounts reclassified from AOCI to net income ( 2 ) — — — ( 2 )

Other comprehensive income (loss), net of tax ( 75 ) — — 1 ( 74 )

As of June 30, 2022 $ ( 169 ) $ — $ ( 76 ) $ ( 1 ) $ ( 246 )

(In millions) Foreign Currency Translation Adjustments Derivative Hedges Defined Benefit Plan Less:

AOCI attributable to noncontrolling interest AOCI attributable to GXO

As of December 31, 2021 $ ( 53 ) $ — $ ( 76 ) $ ( 1 ) $ ( 130 )

3 unchanged sentences

Deconsolidation of variable interest entity 4 — — ( 2 ) 2

As of June 30, 2022 $ ( 169 ) $ — $ ( 76 ) $ ( 1 ) $ ( 246 )

(In millions) Foreign Currency Translation Adjustments Derivative Hedges Defined Benefit Plan Less:

AOCI attributable to noncontrolling interest AOCI attributable to GXO

As of March 31, 2021 $ 16 $ ( 1 ) $ ( 1 ) $ 2 $ 16

(In millions) Foreign Currency Translation Adjustments Defined Benefit Plan Less:

Unrealized gain (loss), net of tax 26 — — ( 3 ) 23

Amounts reclassified from AOCI to net income — — — — —

Other comprehensive income (loss), net of tax 26 — — ( 3 ) 23

As of June 30, 2021 $ 42 $ ( 1 ) $ ( 1 ) $ ( 1 ) $ 39

(In millions) Foreign Currency Translation Adjustments Derivative Hedges Defined Benefit Plan Less:

AOCI attributable to noncontrolling interest AOCI attributable to GXO

3 unchanged sentences

Other comprehensive income (loss), net of tax ( 19 ) ( 1 ) — 1 ( 19 )

As of March 31, 2021 $ 15 $ ( 1 ) $ 2 $ 16

As of June 30, 2021 $ 42 $ ( 1 ) $ ( 1 ) $ ( 1 ) $ 39

Commitments and Contingencies

The Company is involved, and will continue to be involved, in numerous legal proceedings arising out of the conduct of its business.

These proceedings may include personal injury claims arising from the transportation and handling of goods, contractual disputes and employment-related claims, including alleged violations of wage and hour laws.

These proceedings may include personal injury claims arising from the handling and transportation of goods, contractual disputes and employment-related claims, including alleged violations of wage and hour laws.

The Company establishes 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.

8 unchanged sentences

The Company carries liability and excess umbrella insurance policies that are deemed sufficient to cover potential legal claims arising in the normal course of conducting its operations.

In the event the Company is required to satisfy

a legal claim outside the scope of the coverage provided by insurance, its financial condition, results of operations or cash flows could be negatively impacted.

In the event the Company is required to satisfy a legal claim outside the scope of the coverage provided by insurance, its financial condition, results of operations or cash flows could be negatively impacted.

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