What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-02-16 compared with 2022-02-17 · 526 added, 536 removed, 632 unchanged (63% of the section changed)

2 unchanged sentences

Report of Independent Registered Public Accounting Firm

Consolidated State ments of Operations for the Years Ended December 31, 202 1 , 20 20 and 2 019

Consolidated Statements of Operations for the Years Ended December 31, 2022, 2021 and 2020

Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2022, 2021 and 2020

2 unchanged sentences

Consolidated Statements of Changes in Equity for the Years Ended December 31, 2022, 2021 and 2020

Notes to Co nsolidated Financial Statements

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

8 unchanged sentences

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

The Company acquired Clipper Logistics plc during 2022, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022, Clipper Logistics plc’s internal control over financial reporting associated with approximately 6% of total assets, excluding associated goodwill and intangible assets, and approximately 6% of total revenues included in the consolidated financial statements of the Company as of and for the year ended December 31, 2022.

Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Clipper Logistics plc.

Basis for Opinions

9 unchanged sentences

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

2 unchanged sentences

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and

directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

5 unchanged sentences

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Sufficiency of audit evidence over duplication of XPO’s IT systems and financial data

As discussed in Notes 1 and 2 to the consolidated financial statements, the Company completed its separation from XPO Logistics, Inc.

(XPO) on August 2, 2021.

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.

On the separation date, the assets and liabilities were transferred to the Company on a carry-over basis.

To affect the separation, the Company established its own Information Technology (IT) systems for financial reporting (new IT systems).

This included duplication of existing XPO programs and historical financial data as well as executing program development and access controls over the configurations and interfaces of key IT applications.

We identified the evaluation of the sufficiency of audit evidence over duplication of XPO’s Information Technology (IT) systems and historical financial data into the new IT systems to be used by the Company for financial reporting as a critical audit matter.

Evaluating the sufficiency of audit evidence obtained required a high degree of auditor judgment.

Specifically, the number of duplicated XPO programs and volume of historical financial data transferred, as well as the configurations and interfaces of key IT applications and access rights during and after the separation required complex auditor judgment and the involvement of IT professionals with specialized skills and knowledge.

Acquisition-date fair value of a certain customer relationship intangible asset

As discussed in Note 4 to the consolidated financial statements, on May 24, 2022, the Company acquired Clipper Logistics plc in a business combination for consideration of approximately $1,106 million.

As a result of the transaction, the Company acquired customer relationship intangible assets associated with the generation of future income from the acquirees’ existing customers.

The acquisition-date fair value of intangible assets recorded by the Company was $392 million, which included customer relationship intangible assets.

We identified the evaluation of the acquisition-date fair value of a certain customer relationship intangible asset as a critical audit matter.

There was a high degree of subjective auditor judgment in evaluating certain assumptions used to estimate the acquisition-date fair value of the customer relationship intangible asset.

Specifically, there was limited observable market information for the forecasted revenue and customer attrition assumptions, and evaluation of the discount rate assumption required specialized skills and knowledge.

Changes in these assumptions could have had a significant impact on the acquisition-date fair value of the intangible asset.

The following are the primary procedures we performed to address this critical audit matter.

We involved IT professionals with specialized skills and knowledge who assisted in determining the nature and extent of procedures to be performed and the testing of the Company’s IT program development and access controls through inquiry about and observation of these controls as well as inspection of supporting evidence to:

• obtain an understanding of the relevant IT systems and processes and testing IT general and application controls related to the duplication of XPO’s programs

• evaluate the configurations and interfaces of certain IT applications and access rights;

• assess the duplication and transfer of historical financial data existing at the date of separation.

In addition, we reconciled the historical net assets and liabilities recorded by the Company to the net assets and liabilities transferred from XPO at the date of the separation.

We evaluated the sufficiency of audit evidence obtained by assessing the results of procedures performed, including the appropriateness of the nature and extent of the audit effort.

We evaluated the design of certain internal controls related to the Company’s process to estimate the acquisition-date fair value of the customer relationship intangible asset.

This included controls over the determination of the forecasted revenue, customer attrition, and discount rate assumptions used in the Company’s model.

We evaluated the Company’s forecasted revenue of the acquired company by comparing it to (1) past performance of the acquired company, (2) actual and forecasted revenue trends of the acquirees’ peers, and (3) analyst reports of the acquiree.

We evaluated the Company’s customer attrition assumption by comparing it to historical attrition experienced by the acquired company.

We involved valuation professionals with specialized skills and

knowledge, who assisted in evaluating the Company’s discount rate used by comparing it against a discount rate that was developed using publicly available market data for comparable entities.

We have served as the Company’s auditor since 2021.

11 unchanged sentences

Transaction and integration costs 61 99 47

Restructuring costs 4 29 15

Restructuring costs and other

Operating income 242 151 16

Other income, net

Interest expense ( 21 ) ( 24 ) ( 33 )

Interest expense, net

( 29 ) ( 21 ) ( 24 )

Income (loss) before income taxes 264 153 ( 6 )

6 unchanged sentences

Earnings (loss) per share data

Basic earnings (loss) per share $ 1.33 $ ( 0.27 ) $ 0.52

Diluted earnings (loss) per share $ 1.32 $ ( 0.27 ) $ 0.52

$ 1.68 $ 1.33 $ ( 0.27 )

$ 1.67 $ 1.32 $ ( 0.27 )

Weighted-average common shares outstanding

Basic weighted-average common shares outstanding 114,632 114,626 114,626

Diluted weighted-average common shares outstanding 115,597 114,626 114,626

Basic 117,050 114,632 114,626

Diluted 117,616 115,597 114,626

See accompanying Notes to the Consolidated Financial Statements.

5 unchanged sentences

Other comprehensive income (loss), net of tax

Foreign currency translation gain (loss), net of tax expense (benefit) of $( 3 ), $( 3 ) and $ 3 , respectively

Foreign currency translation gain (loss), net of tax of $( 8 ), $( 3 ) and $( 3 ), respectively

( 98 ) ( 46 ) 129

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

Defined benefit plans adjustment, net of tax expense (benefit) of $( 2 ), $ — and $ — , respectively

Other comprehensive income (loss) ( 39 ) 132 ( 12 )

Unrealized gain on cash flow hedges, net of tax of $( 2 ), $ — and $ — , respectively

Unrealized gain (loss) on defined benefit plans, net of tax of $ 13 , $( 2 ) and $ — , respectively

Other comprehensive income (loss), net of tax ( 127 ) ( 39 ) 132

Comprehensive income

33 unchanged sentences

Stockholders’ equity

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

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

Common Stock, $ 0.01 par value per share, 300,000 shares authorized, 118,728 and 114,659 shares issued and outstanding, as of December 31, 2022 and 2021, respectively

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

Additional paid-in capital 2,575 2,354

Retained earnings 323 126

XPO investment — 2,765

Accumulated other comprehensive income (loss) ( 130 ) 58

Accumulated other comprehensive loss ( 254 ) ( 130 )

Total stockholders’ equity before noncontrolling interests 2,645 2,351

24 unchanged sentences

Proceeds from sale of property and equipment 40 11 12

Cash collected on deferred purchase price receivables — — 112

Purchase and sale of affiliate trade receivables, net — ( 40 ) ( 52 )

Acquisition of business, net of cash acquired ( 876 ) 32 ( 30 )

Net proceeds from cross-currency swap agreements 21 — —

Purchase and sale of affiliate trade receivables, net — — ( 40 )

Net cash used in investing activities ( 1,149 ) ( 207 ) ( 280 )

Cash flows from financing activities:

Proceeds from issuance of debt, net 794 — —

Repayment of debt and finance leases ( 72 ) ( 123 ) ( 376 )

Proceeds (repayment) related to trade securitization program ( 26 ) 24 —

Proceeds from debt, net 917 794 —

Repayments of debt and finance leases ( 115 ) ( 72 ) ( 123 )

Taxes paid related to net share settlement of equity awards ( 16 ) ( 1 ) —

Proceeds (repayments) related to trade securitization program — ( 26 ) 24

Purchase of noncontrolling interests — ( 128 ) ( 21 )

Net proceeds related to secured borrowing activity on prior securitization program — — 261

Net transfers (to) from XPO — ( 774 ) 168

5 unchanged sentences

Cash and cash equivalents, end of year $ 495 $ 333 $ 328

Supplemental disclosure of cash flow information:

Cash paid for interest $ 22 $ 32 $ 29

Cash paid for income taxes $ 75 $ 27 $ 40

Non-cash settlement of related party debt due to the Separation

Supplemental cash flow information:

Cash paid for interest, net

$ 34 $ 22 $ 32

Cash paid for income taxes, net

Noncash investing and financing activities:

Common stock issued for acquisition

Settlement of related party debt due to the Separation

See accompanying Notes to the Consolidated Financial Statements.

3 unchanged sentences

Retained Earnings

XPO Investment Accumulated Other Comprehensive Income (Loss) Total GXO Stockholders’ Equity

Accumulated Other Comprehensive Income (Loss) Equity Before Noncontrolling Interest

Noncontrolling Interests

2 unchanged sentences

— $ — $ 2,633 $ — $ — $ ( 66 ) $ 2,567 $ 130 $ 2,697

Net income — — — — 60 — 60 21 81

Other comprehensive income (loss) — — — — — ( 14 ) ( 14 ) 2 ( 12 )

Purchase of noncontrolling interest — — — — ( 3 ) — ( 3 ) ( 255 ) ( 258 )

Other — — — — ( 7 ) — ( 7 ) ( 2 ) ( 9 )

Net transfers from XPO — — — — 271 — 271 50 321

Balance as of December 31, 2019

— $ — $ — $ — $ 2,633 $ ( 66 ) $ 2,567 $ 130 $ 2,697

Net income (loss)

20 unchanged sentences

114,659 $ 1 $ — $ 2,354 $ 126 $ ( 130 ) $ 2,351 $ 39 $ 2,390

— — — — 197 — 197 3 200

Other comprehensive loss

— — — — — ( 126 ) ( 126 ) ( 1 ) ( 127 )

Stock-based compensation

— — — 33 — — 33 — 33

Vesting of stock compensation awards

557 — — — — — — — —

Tax withholding on vesting of stock compensation awards

( 246 ) — — ( 16 ) — — ( 16 ) — ( 16 )

Common stock issued for acquisition

3,758 — — 204 — — 204 — 204

— — — — — 2 2 ( 8 ) ( 6 )

Balance as of December 31, 2022

118,728 $ 1 $ — $ 2,575 $ 323 $ ( 254 ) $ 2,645 $ 33 $ 2,678

See accompanying Notes to the Consolidated Financial Statements.

3 unchanged sentences

GXO Logistics, Inc., together with its subsidiaries (“GXO” or the “Company”), is the largest pure-play contract logistics provider in the world and the foremost innovator in the logistics industry.

The Company provides high-value-add warehousing and distribution, order fulfillment and other supply chain services differentiated by its industry-leading ability to deliver technology-enabled, customized solutions.

In addition, the Company is a major provider of reverse logistics or returns management.

The Company serves a broad range of customers across a range of industries, such as e-commerce, omnichannel retail, consumer technology, food and beverage, industrial and manufacturing, and consumer packaged goods.

The Company provides its customers with high-value-add warehousing and distribution, order fulfillment, e-commerce, reverse logistics and other supply chain services differentiated by its ability to deliver technology-enabled, customized solutions at scale.

The Company serves a broad range of customers across a range of industries, such as e-commerce, omnichannel retail, technology and consumer electronics, food and beverage, industrial and manufacturing, and consumer packaged goods, among others.

The Company presents its operations in the consolidated financial statements as one reportable segment.

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

(“XPO”) (the “Separation”).

The Separation was accomplished by the distribution of 100 percent of the outstanding common stock of GXO to XPO stockholders as of the close of business on July 23, 2021, the record date for the distribution.

On August 2, 2021, the Company completed the separation (the “Separation”) from XPO, Inc.

The Separation was accomplished by the distribution of 100 % of the outstanding common stock of GXO to XPO stockholders as of the close of business on July 23, 2021, the record date for the distribution.

XPO stockholders received one share of GXO common stock for every share of XPO common stock held at the close of business on the record date.

GXO is now a standalone publicly-traded company.

On August 2, 2021, regular-way trading of GXO’s common stock commenced on the New York Stock Exchange under the ticker symbol “GXO.” GXO was incorporated as a Delaware corporation in February 2021.

The Separation was completed under a Separation and Distribution Agreement and various other agreements that govern aspects of the Company’s relationship with XPO.

See Note — 3 The Separation for additional information of the agreements executed in connection with the Separation.

On August 2, 2021, GXO became a standalone publicly-traded company and regular-way trading of GXO’s common stock commenced on the New York Stock Exchange under the ticker symbol “GXO.” GXO was incorporated as a Delaware corporation in February 2021.

Basis of Presentation and Significant Accounting Policies

8 unchanged sentences

An allocation of these expenses is included to burden all business units comprising XPO’s historical results of operations, including GXO.

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

The Company believes the assumptions regarding allocations of XPO corporate expenses are reasonable.

Nevertheless, the consolidated financial statements may not reflect the results of operations, financial position and cash flows had the Company been a standalone entity during

the periods presented.

The charges reflected have been either specifically identified or allocated using drivers including adjusted earnings before interest, taxes, depreciation and amortization, which includes 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;

1 unchanged sentence

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

All charges and allocations for facilities, functions and services performed by XPO organizations have been deemed settled in cash by GXO to XPO in the year in which the cost was recorded in the Consolidated Statements of Operations.

For the periods ended before the Separation, the Company was a member of the XPO consolidated group, and its U.S.

taxable income was included in XPO’s consolidated U.S.

federal income tax return as well as in the tax returns filed by XPO with certain state and local taxing jurisdictions.

For the periods ended after the Separation, the Company will file a consolidated U.S.

federal income tax return as well as state and local income tax returns.

The Company’s foreign income tax returns are filed on a full-year basis.

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

6 unchanged sentences

Actual results may vary from those estimates.

The COVID-19 pandemic has created and may continue to create significant uncertainty in macroeconomic conditions, which may cause further business slowdowns or shutdowns, depress demand for the logistics business, and adversely impact the Company’s estimates, particularly those that require consideration of forecasted financial information.

The business and economic uncertainty resulting from the COVID-19 pandemic has made calculating estimates and assumptions more difficult.

The COVID-19 pandemic and Russia’s invasion of Ukraine has created and may continue to create significant uncertainty in macroeconomic conditions, which may cause further business slowdowns or shutdowns, depress demand for the logistics business, and adversely impact the Company’s estimates, particularly those that require consideration of forecasted financial information.

The business and economic uncertainty resulting from the COVID-19 pandemic and Russia’s invasion of Ukraine has made calculating estimates and assumptions more difficult.

Significant Accounting Policies

Reclassifications

Certain amounts reported for prior years have been reclassified to conform to the current year’s presentation.

Cash and Cash Equivalents

1 unchanged sentence

Bank overdraft positions occur when total outstanding issued checks exceed available cash balances at a single financial institution.

The Company had no bank overdrafts as of December 31, 2021 and $ 27 million as of December 31, 2020, recorded within Other current liabilities in the Consolidated Balance Sheets.

Accounts Receivable and Allowance for Credit Losses

10 unchanged sentences

Ending balance $ 12 $ 13 $ 18

Trade Receivables Securitization and Factoring Programs

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

The Company also sells certain European trade accounts receivable under a securitization program that contains financial covenants customary for this type of arrangement, including maintaining a defined average days sales outstanding ratio.

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 transfers under its securitization and factoring arrangements as sales because the Company sells full title and ownership in the underlying receivables and control of the receivables is considered transferred.

For these transfers, the receivables are removed from the Consolidated Balance Sheets at the date of transfer.

Property and Equipment

2 unchanged sentences

For computer software developed, all costs incurred during the planning and evaluation stages are expensed as incurred.

Software development costs meet the criteria for capitalization once the preliminary project stage is complete and it is probable that the project will be completed and the software will be used to perform the function intended.

Software development costs are capitalized once the preliminary project stage is complete and it is probable that the project will be completed and the software will be used to perform the function intended.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets or the remaining lease term, whichever is shorter.

8 unchanged sentences

Lease Obligations

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

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

The Company determines if an arrangement is a lease at inception.

For leases with terms greater than 12 months, the Company recognizes lease assets and liabilities at the lease commencement date based on the estimated present value of the lease payments over the lease term.

Amounts received from a landlord are classified as a lease incentive and included as a reduction to the lease asset.

Lease incentives received are included within operating activities on the Consolidated Statement of Cash Flows.

For leases with terms greater than 12 months, the Company recognizes lease assets and liabilities at the lease commencement date based on the present value of the lease payments over the lease term.

For most of the Company’s leases, the implicit rate cannot be readily determined and, as a result, the Company uses the incremental borrowing rates at commencement date to determine the present value of future lease payments.

1 unchanged sentence

The Company excludes variable lease payments (such as payments based on an index) from its initial measurement of the lease liability.

The Company includes options to extend or terminate a lease in the lease term when the Company is reasonably certain to exercise such options.

Lease agreements may contain rent escalation clauses, renewal or termination options, rent holidays or certain landlord incentives, including tenant improvement allowances.

Amounts received from a landlord are included as a reduction to the lease asset and are included within operating activities on the Consolidated Statement of Cash Flows.

Segment Reporting

The Company is comprised of two operating segments based on the operating results regularly reviewed by the chief operating decision-maker (“CODM”) to make decisions about resource allocation and the performance of the business.

These two operating segments have been aggregated into a single reporting segment.

The Company is comprised of three operating segments based on the operating results regularly reviewed by the chief operating decision-maker (“CODM”) to make decisions about resource allocation and the performance of the business.

These three operating segments have been aggregated into a single reporting segment.

Goodwill and Intangible Assets

1 unchanged sentence

Goodwill is tested for impairment at the reporting unit level, which is an operating segment, or one level below.

The Company has two reporting units:

i) Americas, Asia and Pacific and ii) Europe.

The Company measures goodwill impairment, if any, as the amount by which the carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill.

The Company has three reporting units:

i) Americas and Asia-Pacific;

ii) United Kingdom and Ireland and iii) Continental Europe.

The Company measures goodwill impairment, if any, as the amount by which the carrying amount of the reporting unit exceeds its fair value, not to exceed the carrying amount of goodwill.

As a result of the change in our operating segments and reporting units, we elected to change our annual goodwill impairment test date from August 31 to November 1 to align with the Company’s budgeting process.

an annual goodwill impairment test on August 31, 2022 and on November 1, 2022.

For changes in reporting units, we reassign goodwill using a relative fair value allocation approach.

The review of goodwill impairment consists of either using a qualitative approach to determine whether it is more likely than not that the fair value of the assets is less than their respective carrying values or a one-step quantitative impairment test.

4 unchanged sentences

The Company uses the income approach and/or a market-based approach to determine the reporting units’ fair values, which are based on discounted cash flows.

The determination of discounted cash flows of the reporting units and assets and liabilities within the reporting units requires significant estimates and

These estimates and assumptions primarily include but are not limited to, the discount rate, terminal growth rates, earnings before depreciation and amortization, and capital expenditures forecasts.

The determination of discounted cash flows of the reporting units and assets and liabilities within the reporting units requires significant estimates and assumptions.

Due to the inherent uncertainty involved in making these estimates, actual results could differ from those estimates.

The Company evaluates the merits of each significant assumption, both individually and in the aggregate, used to determine the fair value of the reporting units, as well as the fair values of the corresponding assets and liabilities within the reporting units.

The Company’s intangible assets consist of customer relationships which are amortized on a straight-line basis or over their respective useful life using patterns that reflect the economic benefits of the assets are expected to be realized.

The Company reviews its customer relationships for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

The Company’s intangible assets consist of customer relationships and trade names which are amortized on a straight-line basis or over their respective useful life using patterns that reflect the economic benefits of the assets are expected to be realized.

The Company reviews its intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

Impairment of Long-lived assets

4 unchanged sentences

Insurance liabilities

The Company participates in a combination of self-insurance programs and purchased insurance to provide for the costs of medical, casualty, general liability, vehicular, cargo, cyber attack and workers’ compensation claims.

The Company estimates insurance liabilities using several factors, primarily based on independent third-party actuary determined amounts, historical claims experience, estimates of incurred but not reported claims, demographic factors and severity factors.

The Company participates in a combination of self-insurance programs and purchased insurance to provide for the costs of medical, casualty, property, general liability, vehicular, cargo, cyber-attacks and workers’ compensation claims.

Liabilities for the risks the Company retains, including estimates of claims incurred but not reported, are not discounted and are estimated, in part, by considering historical cost experience, demographic and severity factors, and judgments about current and expected levels of cost per claim and retention levels.

1 unchanged sentence

Revenue Recognition

The Company generates revenue by providing supply chain services for its customers, including warehousing and distribution, order fulfillment, reverse logistics, packaging and labeling, factory and aftermarket support, and inventory management contracts ranging from a few months to a few years.

Generally, the Company’s contracts provide the customer an integrated service that includes two or more services, including but not limited to facility and equipment costs, construction, repair and maintenance services and labor.

1 unchanged sentence

Accordingly, the Company generally identifies one performance obligation in its contracts, which is a series of distinct services that remain substantially the same over time and possess the same pattern of transfer.

Revenue is recognized using the series guidance over the period in which services are provided under the terms of the Company’s contractual relationships with its clients.

Revenue is recognized using the series guidance over the period in which services are provided under the terms of the Company’s contractual relationships with its customers.

The transaction price is based on the amount specified in the contract with the customer and contains fixed and variable consideration.

In general, the fixed consideration in a contract represents reimbursement for facility and equipment costs incurred to satisfy the performance obligation and is recognized on a straight-line basis over the term of the contract.

The variable consideration is comprised of cost reimbursement determined based on the costs

incurred, per-unit pricing is determined based on units provided, and time and materials pricing is determined based on the hours of services provided.

In general, the fixed consideration in a contract represents reimbursement for facility, technology and equipment costs incurred to satisfy the performance obligation and is recognized on a straight-line basis over the term of the contract.

The variable consideration is comprised of cost reimbursement based on the costs incurred, per-unit pricing is determined based on units provided, and time and materials pricing is based on the hours of services provided.

The variable consideration component is recognized over time based on the level of activity.

7 unchanged sentences

These costs are recognized as an asset if the Company expects to recover them.

Costs incurred to obtain a contract with an amortization period of one year or less are expensed as incurred.

Contract fulfillment costs are recognized consistent with the transfer of the underlying performance obligations to the customer based on the specific contracts to which they relate.

9 unchanged sentences

The Company accounts for stock-based compensation based on the equity instrument’s grant date fair value.

For grants of restricted stock units (“RSUs”) subject to service-based or performance-based vesting conditions only, the Company establishes the fair value based on the market price on the date of the grant.

For stock options, the Company determines the fair value based on its stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends.

The Company recognizes the grant date fair value of equity awards as compensation cost over the requisite service period.

Stock compensation expense is recognized using the straight-line method, based on the grant date fair value, over the requisite service period of the award, which is generally the vesting term.

For grants of restricted stock units (“RSUs”) subject to service-based or performance-based vesting conditions only, the Company establishes the fair

value based on the market price on the date of the grant.

For grants of RSUs subject to market-based vesting conditions (“PRSUs”) and stock options, the Company determines the fair value based on its stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends.

The Company accounts for forfeitures as they occur.

2 unchanged sentences

Assumptions include discount rates, expected long-term rate of return on plan assets, mortality rates and other factors.

The assumptions used in recording the projected benefit obligation and fair value of plan assets represent the Company’s best estimates based on available information regarding historical experience and factors

that may cause future expectations to differ.

The Company’s obligation and future expense amounts could be materially impacted by differences in experience or changes in assumptions.

4 unchanged sentences

The effective tax rate in any financial statement period may be materially impacted by changes in the blend and/or level of earnings by individual taxing jurisdictions.

If the Company considers that a tax position is more likely than not to be sustained upon audit, based solely on the technical merits of the position, presuming an examination by a taxing authority with full knowledge of all relevant information, the Company recognizes all or a portion of the benefit.

Valuation allowances are established when it is more likely than not that the Company’s deferred tax assets will not be realized based on all available evidence.

The Company records Global Intangible Low-Taxed Income tax as a period cost.

The Company uses judgments and estimates in evaluating its tax positions.

The Company’s tax returns are subject to examination by U.S.

Federal, state and foreign taxing jurisdictions.

Federal, state and local, foreign taxing jurisdictions.

The Company regularly assesses the potential outcomes of these examinations and any future examinations for the current or prior years.

The Company recognizes tax benefits from uncertain tax positions only if based on the technical merits of the position it is more likely than not that the tax positions will be sustained on examination by the tax authority.

The Company recognizes tax benefits from uncertain tax positions only if based on the technical merits of the position it is more likely than not that the tax positions will be sustained upon audit.

The Company adjusts these tax liabilities, including related interest and penalties, based on the current facts and circumstances.

6 unchanged sentences

Adoption of New Accounting Standards

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.” This guidance is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

The ASU also clarifies and amends existing guidance to enhance consistency and comparability among reporting entities.

The Company adopted this standard on January 1, 2021 on a prospective basis.

The adoption did not have a material effect on the consolidated financial statements.

Accounting Pronouncements Issued But Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, “Reference rate reform (Topic 848):

Facilitation of the effects of reference rate reform on financial reporting.” The ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform.

The amendments

apply only to contracts and hedging relationships that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform.

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 consolidated financial statements.

In October 2021, the FASB issued ASU No.

1 unchanged sentence

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.

This guidance will be effective for interim and annual periods beginning after December 15, 2022, with early adoption permitted.

The Company is currently evaluating the impact of the new guidance on the consolidated financial statements.

The Separation

The Separation was completed under a Separation and Distribution Agreement and various other agreements that govern aspects of the Company’s relationship with XPO, including, but not limited to a Transition Services Agreement (“TSA”), a Tax Matters Agreement (“TMA”), an Employee Matters Agreement (“EMA”) and an Intellectual Property License Agreement (“IPLA”).

The Separation and Distribution Agreement contains provisions that, among other things, relate to (i) assets, liabilities and contracts transferred, assumed and assigned to each of GXO and XPO as part of the Separation, (ii) cross-indemnities principally designed to place financial responsibility for the obligations and liabilities of GXO’s business with GXO and financial responsibility for the obligations and liabilities of XPO’s remaining business with XPO, (iii) the allocation among GXO and XPO of rights and obligations under existing insurance policies for occurrences before completion of the Separation and (iv) procedures governing the resolution of disputes, controversies or claims that may arise between GXO and XPO related to the Separation.

Under the TSA, (i) XPO provides GXO and certain of its affiliates, on an interim, transitional basis, various services, and (ii) GXO provides XPO and certain of its affiliates, on an interim, transitional basis, various services.

The services provided include treasury administration, employee benefits administration, information technology services, regulatory services, general administrative services and other support services.

The services generally commenced on the date of the Separation and will terminate no later than 12 months following the Separation.

XPO and GXO also entered into a TMA that governs the parties’ respective rights, responsibilities and obligations for tax matters;

including responsibility for taxes, entitlement to refunds, allocation of tax attributes, preparation of tax returns, control of tax contests and other tax matters.

GXO is generally responsible for federal, state and foreign income taxes (i) imposed on a separate return basis on GXO or any of its subsidiaries or (ii) imposed on a consolidated or combined return basis for audit or other adjustments attributable to GXO or any of its subsidiaries, in each case, for taxable periods, or portions thereof, that ended on or prior to the Separation.

The TMA provides special rules that allocate responsibility for tax liabilities arising from a failure of the Separation transactions to qualify for tax-free treatment based on the reasons for such failure.

The TMA also imposes restrictions on GXO during the two years following the Separation that are intended to prevent the Separation and certain related transactions from failing to qualify as transactions that are generally tax-free.

The EMA allocated assets, liabilities, and responsibilities relating to employee compensation and benefit plans and programs and other employee-related matters in connection with the Separation.

Under the EMA, the Company became the plan sponsor for its U.K.

defined benefit pension plan (the “U.K.

Retirement Plan”) and recognized net assets of $ 36 million, reflecting the plan assets and projected benefit obligation, and accumulated other comprehensive loss, net of tax of $ 82 million.

See Note — 14 Employee Benefit Plans for additional information.

The IPLA provides the parties with reciprocal, non-exclusive licenses under certain intellectual property rights transferred to GXO and certain intellectual property rights retained by XPO to provide the parties freedom to operate their respective businesses.

In connection with the Separation, related party debt between GXO and XPO was settled and is no longer reflected in the Consolidated Balance Sheet as of December 31, 2021.

In June 2021, the Company entered into a five-year , unsecured multi-currency revolving credit facility (the “Revolving Credit Facility”).

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

Additionally, in July 2021, the Company completed an offering of $ 800 million aggregate principal amount of notes, consisting of $ 400 million of notes due 2026 (the “2026 Notes”) and $ 400 million of notes due 2031 (the “2031 Notes,” and together with the 2026 Notes, the “Notes”).

The net proceeds from the Notes were used to fund a cash payment to XPO of $ 794 million in connection with the Separation.

See Note — 11 Debt and Financing Arrangements for additional information.

In July 2021, in connection with the Separation, XPO’s existing trade receivable securitization program was amended;

the previous € 400 million ($ 455 million) program is now comprised of two separate € 200 million ($ 227 million) programs, one of which remains with the Company and expires in July 2024.

See Note — 11 Debt and Financing Arrangements for additional information.

In August 2021, the Company amended certain legal entity structures and transferred assets under a legal entity restructuring plan.

In connection with the restructuring, the Company entered into certain agreements to license the right to use trademarks, trade names and other intellectual property related to the GXO brand to its non-U.S.

affiliates and recorded a positive income tax adjustment of $ 42 million along with a corresponding increase to deferred tax asset in the third quarter of 2021.

Also, in connection with the legal entity restructuring, the Company made a one-time income tax cash payment of $ 16 million in the fourth quarter of 2021.

European Acquisition

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

(the “K + N acquisition”).

For the year ended December 31, 2021, the K + N acquisition generated revenues of $ 604 million, primarily recorded in the food and beverage vertical, and operating income was not material.

The operations provide a range of logistics services, including inbound and outbound distribution, reverse logistics management and inventory management.

The Company recorded the fair value of assets and liabilities assumed, including approximately $ 300 million of operating and finance lease assets and liabilities.

The Company acquired intangibles of $ 26 million with a weighted-average amortization period of 9 years.

Goodwill acquired in connection with the acquisition was $ 16 million, recorded in the European reporting unit.

Pro forma results of operations for this acquisition have not been presented as it is not material to the consolidated financial statements.

GXO Logistics Europe Purchase

In 2020 and 2019, the Company purchased additional noncontrolling interest in GXO Logistics Europe of $ 21 million and $ 258 million, respectively.

In connection with the Separation, the portion of the noncontrolling interest not attributable to GXO was recorded as a transfer to the XPO investment account.

In 2021, the Company completed the purchase of the remaining noncontrolling interest at a cost of approximately $ 128 million and transferred $ 40 million to XPO.

Following this transaction, the Company owns all of the outstanding shares of GXO Logistics Europe SAS.

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

The adoption of this new standard did not have a material impact on the Company’s condensed consolidated financial statements.

Accounting Pronouncements Issued But Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, “Reference rate reform (Topic 848):

The amendments apply only to contracts and hedging relationships that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform.

In January 2021, the FASB issued ASU No.

2021-01, “Reference Rate Reform (Topic 848):

Scope” to expand the scope of this guidance to include derivatives.

In December 2022, the FASB issued ASU 2022-06, “Reference rate reform (Topic 848):

Deferral of the sunset date of Topic 848” which defers the expiration date for Topic 848 from December 31, 2022 until December 31, 2024.

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 consolidated financial statements.

Revenue Recognition

7 unchanged sentences

Spain 488 479 422

Italy 331 339 318

Other 592 634 566

Total $ 8,993 $ 7,940 $ 6,195

The Company’s revenue can also be disaggregated by various verticals, reflecting the customers’ principal industry sector.

Revenue disaggregated by industry sector was as follows:

The Company’s revenue can also be disaggregated by various verticals, reflecting the customers’ principal industry.

Revenue disaggregated by industry was as follows:

Year Ended December 31,

(In millions) 2022 2021 2020

E-commerce, omnichannel retail and consumer technology $ 4,191 $ 3,258 $ 3,007

Omnichannel retail $ 3,649 $ 3,116 $ 2,495

Technology and consumer electronics 1,337 1,075 763

Food and beverage 1,327 1,328 908

7 unchanged sentences

Contract liabilities (2)

(1) Contract assets are included in Other current assets and Other long-term assets.

(2) Contract liabilities are included in Other current liabilities and Other long-term liabilities.

For the year ended December 31, 2021, the Company recognized revenues of $ 68 million that were included in contract liabilities at December 31, 2020.

As of December 31, 2021, contract liabilities included $ 64 million related to the K + N acquisition.

Performance Obligations

(1) Contract assets are included in Other current assets and Other long-term assets in the Consolidated Balance Sheets.

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

Revenue recognized included the following:

Year Ended December 31,

(In millions) 2022 2021

Amounts included in the beginning of year contract liability balance $ 93 $ 68

Remaining Performance Obligations

The remaining performance obligations relate to firm customer contracts for which services have not been performed and future revenue recognition is expected.

As permitted in determining the remaining performance obligation, the Company omits obligations that have original expected durations of one year or less or contain variable consideration.

On December 31, 2021, the fixed consideration component of the Company’s remaining performance obligation was approximately $ 2.1 billion, and the Company expects to recognize approximately 69 % of that amount over the next three years and the remainder thereafter.

As of December 31, 2022, the fixed consideration component of the Company’s remaining performance obligations was approximately $ 3.1 billion, and the Company expects to recognize approximately 75 % 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.

Restructuring Charges

The Company engages in restructuring actions as part of its ongoing efforts to best use its resources and infrastructure, including actions in response to COVID-19.

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

The following is a rollforward of the Company’s restructuring liability, which is included in Other current liabilities in the Consolidated Balance Sheet:

Clipper Acquisition

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 $ 1,106 million, consisting of $ 902 million in cash and the issuance of 3,757,657 shares of GXO common stock having a value of $ 204 million.

The Clipper Acquisition was subject to review by the CMA.

On October 4, 2022, the CMA approved the Clipper Acquisition.

The Company incurred acquisition and integration costs related to the Clipper Acquisition of $ 46 million for the year ended December 31, 2022.

These costs are included within Transaction and integration costs in the 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 Delayed Draw Term Loan;

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

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

For additional information regarding the financing agreements entered into in connection with the Clipper Acquisition, see Note 9.

Debt and Financing Arrangements.

The Company included Clipper’s results of operations from the date of acquisition.

For the year ended December 31, 2022, the Company recorded $ 569 million and $ 4 million of revenue and income before income taxes, respectively.

The Company accounted for the Clipper 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 identifiable assets acquired and liabilities assumed at the acquisition date:

(In millions)

Balance as of December 31, 2019

Charges incurred (1)

Payments ( 16 )

Foreign exchange and other ( 4 )

Balance as of December 31, 2020

Charges incurred (1)

Payments ( 14 )

Foreign exchange and other ( 7 )

Balance as of December 31, 2021

(1) Charges incurred are net of adjustments to previously recognized liabilities.

The remaining restructuring liability at December 31, 2021 primarily relates to severance payments and is expected to be substantially paid within 12 months.

Current assets

Cash and cash equivalents $ 26

Accounts receivable 146

Other current assets 67

Total current assets 239

Long-term assets

Property and equipment 80

Operating lease assets 233

Intangible assets (1)

Other long-term assets 15

Total long-term assets 720

Total assets $ 959

Current liabilities

Accounts payable $ 84

Accrued expenses 96

Short-term borrowings and obligations under finance leases 56

Current operating lease liabilities 50

Other current liabilities 49

Total current liabilities

Long-term liabilities

Long-term debt and obligations under finance leases 10

Long-term operating lease liabilities 183

Other long-term liabilities 121

Total long-term liabilities

Total liabilities $ 649

Net assets purchased $ 310

Cash paid $ 902

Common stock issued (2)

Purchase price paid $ 1,106

Goodwill recorded (3)

(1) The Company acquired $ 392 million of intangible assets comprised of customer relationships and trade names, with weighted-average useful lives of 15 years.

(2) Represents the fair value of the Company’s common stock issued.

(3) 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 United Kingdom and Ireland 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 the 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, certain long term liabilities, income taxes and goodwill.

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

Year Ended December 31,

(In millions) 2022 2021

Revenue $ 9,449 $ 9,074

Income before income taxes 295 155

European Acquisition

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

(the “K + N Acquisition”).

For the year ended December 31, 2021, the K + N Acquisition generated revenues of $ 604 million, primarily recorded in the food and beverage vertical, and income before income taxes was not material.

The operations provide a range of logistics services, including inbound and outbound distribution, reverse logistics management and inventory management.

The Company recorded the fair value of assets and liabilities assumed, including $ 281 million of operating and finance lease assets and liabilities.

The Company acquired intangibles of $ 26 million with a weighted-average amortization period of 9 years.

Goodwill acquired in connection with the acquisition was $ 16 million, recorded in the European reporting unit.

Pro forma results of operations for this acquisition have not been presented as they are not material to the Consolidated Financial Statements.

The following tables present the changes in goodwill for the years ended December 31, 2022 and 2021.

(In millions)

Goodwill as of December 31, 2020

Acquisition (1)

Impact of foreign exchange translation ( 62 )

Goodwill as of December 31, 2021

Acquisition (1)

Impact of foreign exchange translation ( 85 )

Goodwill as of December 31, 2022

(1) Changes to goodwill amounts resulting from foreign currency translation after the acquisition date are presented as the impact of foreign exchange translation.

As of December 31, 2022 and 2021, there were no accumulated goodwill impairment losses.

Intangible Assets

The following table summarizes identifiable intangible assets:

December 31, 2022 December 31, 2021

(In millions) Gross Carrying Amount Accumulated Amortization Net Value Gross Carrying Amount Accumulated Amortization Net Value

Customer relationships $ 978 $ ( 451 ) $ 527 $ 664 $ ( 407 ) $ 257

Trade names 48 ( 5 ) 43 — — —

Total $ 1,026 $ ( 456 ) $ 570 $ 664 $ ( 407 ) $ 257

For the years ended December 31, 2022, 2021 and 2020, there were no intangible assets impairment losses.

Intangible asset amortization expense was $ 68 million, $ 61 million and $ 61 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Estimated amortization expense for each of the five succeeding fiscal years and thereafter is as follows.

(In millions) 2023 2024 2025 2026 2027 Thereafter

Estimated amortization expense $ 66 $ 63 $ 60 $ 57 $ 54 $ 270

Property and Equipment

The following table summarizes property and equipment:

8 unchanged sentences

(1) Includes internally developed software of $ 223 million and $ 214 million as of December 31, 2022 and 2021, respectively.

Depreciation and amortization of property and equipment was $ 274 million, $ 262 million and $ 236 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Depreciation of property and equipment was $ 261 million, $ 274 million and $ 262 million for the years ended December 31, 2022, 2021 and 2020, respectively.

As of December 31, 2022 and 2021, the Company held long-lived tangible assets outside the U.S.

8 unchanged sentences

Finance leases:

Property and equipment, gross $ 234 $ 199

Accumulated depreciation ( 79 ) ( 49 )

Property and equipment, net $ 123 $ 155

16 unchanged sentences

Variable lease cost 106 75 65

Total lease cost $ 812 $ 652 $ 622

Total operating lease cost $ 921 $ 812 $ 652

Finance leases:

1 unchanged sentence

Interest expense on lease liabilities 5 6 4

Total finance lease cost $ 35 $ 38 $ 28

Total lease cost $ 956 $ 850 $ 680

Total operating and finance lease cost $ 850 $ 680 $ 636

Supplemental cash flow information related to leases was as follows:

6 unchanged sentences

Leased assets obtained in exchange for new lease obligations:

Operating leases (1)

Operating leases, including $ 233 and $ 281 from an acquisition in 2022 and 2021, respectively

$ 1,154 $ 932 $ 392

Finance leases (2)

(1) Includes $ 281 million related to the K + N acquisition.

(2) Includes $ 23 million related to the K + N acquisition.

Finance leases, including $ 16 and $ 23 from an acquisition in 2022 and 2021, respectively

Maturities of lease liabilities as of December 31, 2022 were as follows:

6 unchanged sentences

As of December 31, 2022, the Company had additional operating leases that have not yet commenced with future undiscounted lease payments of approximately $ 15 million.

These operating leases will begin in 2022 and 2023, with initial lease terms ranging from 1 to 15 years.

The following tables present the changes in goodwill for the years ended December 31, 2021 and 2020.

(In millions)

Goodwill as of December 31, 2019

Impact of foreign exchange translation 79

Goodwill as of December 31, 2020

Acquisition 16

Impact of foreign exchange translation ( 62 )

Goodwill as of December 31, 2021

As of December 31, 2021 and 2020, there were no accumulated goodwill impairment losses.

Intangible Assets

The following table summarizes identifiable intangible assets:

December 31, 2021 December 31, 2020

(In millions) Gross Carrying Amount Accumulated Amortization Net Value Gross Carrying Amount Accumulated Amortization Net Value

Customer relationships $ 664 $ ( 407 ) $ 257 $ 672 $ ( 373 ) $ 299

For the years ended December 31, 2021, 2020 and 2019, there were no intangible assets impairment losses.

Intangible asset amortization expense was $ 61 million, $ 61 million and $ 65 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Estimated amortization expense for each of the five succeeding fiscal years and thereafter is as follows.

(In millions) 2022 2023 2024 2025 2026 Thereafter

Estimated amortization expense $ 48 $ 41 $ 39 $ 35 $ 32 $ 62

These operating leases will begin in 2023, with initial lease terms ranging from 5 to 6 years.

Debt and Financing Arrangements

The following table summarizes the carrying value of debt:

(In millions) 2021 2020

The following table summarizes the carrying value of our debt:

(In millions) Rate (1)

1.65 % Unsecured notes due 2026 (2)

1.65 % $ 397 $ 397

2.65 % Unsecured notes due 2031 (3)

Finance leases and other 168 161

Borrowings related to trade securitization program — 26

Related-party debt — 486

2.65 % 397 396

Two-Year Term Loan due 2024

Three-Year Term Loan due 2025 (4)

Five-Year Term Loan due 2027 (4)

Finance leases and other debt Various 164 168

Total debt and obligations under finance leases 1,806 961

1 unchanged sentence

Total long-term debt and obligations under finance leases $ 1,739 $ 927

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

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

(1) Interest rate as of December 31, 2022.

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

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

(4) Net of unamortized debt issuance costs of $ 1 million as of December 31, 2022.

Five-Year Term Loan

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

The loan was 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 two-year term loan tranche (the “ Two-Year Term Loan”) and a $ 235 million three-year term loan tranche (the “ Three-Year Term Loan”) that will mature on May 26, 2024 and May 26, 2025, respectively.

The Two-Year Term Loan and Three-Year Term Loan 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.

In December 2022, the Company repaid $ 50 million against the Two-Year Term Loan.

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 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.

Unsecured Notes

In July 2021, the Company completed an offering of $ 800 million aggregate principal amount of notes, consisting of the 2026 Notes and the 2031 Notes.

In July 2021, prior to the Separation, the Company completed an offering of $ 800 million aggregate principal amount of notes, consisting of $ 400 million of notes due 2026 (the “2026 Notes”) and $ 400 million of notes due 2031 (the “2031 Notes”).

The 2026 Notes bear interest at a rate of 1.65 % per annum payable semiannually in arrears on January 15 and July 15 of each year, beginning January 15, 2022, and maturing on July 15, 2026.

The 2031 Notes bear interest at a rate of 2.65 % per annum payable semiannually in arrears on January 15 and July 15 of each year, beginning January 15, 2022, and maturing on July 15, 2031.

The indentures governing the Notes contain covenants that are customary for financings of this type, including a limitation on liens.

At December 31, 2021, the Company was in compliance with the covenants of the indenture governing the Notes.

The Company recognized $ 6 million of debt discounts and $ 2 million of debt issuance costs that were recorded as a reduction to the related debt instrument and will be amortized to interest expense over the life of the Notes.

Revolving Credit Facility

In June 2021, prior to the Separation, the Company entered into a five-year unsecured multi-currency Revolving Credit Facility.

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

Loans under the Revolving Credit Facility will bear interest at a fluctuating rate equal to:

(i) with respect to borrowings in dollars, at the Company’s option, the alternate base rate or the reserve-adjusted LIBOR, (ii) with respect to borrowings in Canadian dollars, the reserve-adjusted Canadian Dollar Offered Rate, and (iii) with respect to borrowings in Euros, the reserve-adjusted Euro Interbank Offered Rate, in each case, plus an applicable margin calculated based on the Company’s credit ratings.

Revolving Credit Facilities

In June 2021, prior to the Separation, the Company entered into a five-year unsecured multi-currency Revolving Credit Facility (the “Revolving Credit Facility”).

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

Loans under the Revolving Credit Facility bear interest at a fluctuating rate equal to (i) with respect to borrowings in dollars, at the Company’s option, the alternate base rate or the reserve-adjusted LIBOR, (ii) with respect to borrowings in Canadian dollars, the reserve-adjusted Canadian Dollar Offered Rate, and (iii) with respect to borrowings in Euros, the reserve-adjusted Euro Interbank Offered Rate, in each case, plus an applicable margin calculated based on the Company’s credit ratings.

In addition, the Company is paying a commitment fee of 0.15 % per annum on the unused portion of the commitments under the Revolving Credit Facility.

The covenants in the Revolving Credit Facility, 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 Revolving Credit Facility requires the Company to maintain a consolidated leverage ratio below a specified maximum.

At December 31, 2021, the Company was in compliance with the covenants of the credit agreement governing its Revolving Credit Facility.

There were no amounts outstanding under the Revolving Credit Facility as of December 31, 2021.

Amounts drawn and repaid within three months are presented as net in the Consolidated Statement of Cash Flows.

Related-Party Debt

The following related-party debt agreements between GXO and XPO were settled pursuant to the Separation and are no longer reflected in the Consolidated Balance Sheet as of December 31, 2021.

• An unsecured loan bearing interest at a rate of 5.625 % with a principal amount not exceeding $ 391 million and maturing in June 2024.

As of December 31, 2020, the Company had an outstanding loan payable to XPO of $ 186 million.

• A € 20 million unsecured loan entered into in 2013, bearing interest at a variable rate of twelve-month Euribor plus 1 % and maturing in October 2026.

As of December 31, 2020, the Company had an outstanding loan payable to XPO of $ 23 million.

• A £ 82 million unsecured loan bearing interest at a variable rate of twelve-month LIBOR plus 1 % and maturing in October 2026.

As of December 31, 2020, the Company had an outstanding loan payable to XPO of $ 112 million.

• A € 335 million loan bearing interest at a fixed rate of 5.625 % and maturing in June 2024.

As of December 31, 2020, the Company had an outstanding loan payable to XPO of $ 165 million.

Trade Receivables Securitization and Factoring Programs

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

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

The trade receivables securitization program permits us to borrow, on an unsecured basis, cash collected in a servicing capacity on previously sold receivables.

The Company uses trade receivables securitization and factoring programs to help manage its cash flows.

Under the securitization program, the Company participates in a trade receivables securitization program co-arranged by two European banks (the “Purchasers”).

Under the program, a wholly-owned bankruptcy-remote special

purpose entity of the Company sells trade receivables that originate with wholly-owned subsidiaries to unaffiliated entities managed by the Purchasers.

The special purpose entity is a variable interest entity and has been presented within these consolidated financial statements based on the Company’s control of the entity’s activities.

In July 2021, in connection with the Separation, XPO’s existing trade receivable securitization program was amended;

the previous € 400 million ($ 455 million) program is now comprised of two separate € 200 million ($ 227 million) programs, one of which remains with the Company and expires in July 2024.

As of July 2021, the Company’s special purpose entity no longer purchases trade receivables from XPO.

As of December 31, 2020, Other current assets include trade receivables purchased from XPO in connection with the Company’s trade receivables securitization program of $ 105 million.

The weighted average interest rate was 0.75 % as of December 31, 2021.

Charges for commitment fees, which are based on a percentage of available amounts, and charges for administrative fees were not material to the Company’s results of operations for the years ended December 31, 2021, 2020 and 2019.

No amounts were outstanding under the Revolving Credit Facility as of December 31, 2022 or December 31, 2021.

In addition, pursuant to the Clipper Acquisition, the Company assumed a revolving credit facility agreement under which it may borrow up to approximately £ 45 million ($ 54 million as of December 31, 2022) in aggregate at any time, expiring in November 2023.

As of December 31, 2022, the Company had $ 18 million of borrowings outstanding under this agreement.

Amounts drawn and repaid in 90 days or less under the revolving credit facilities are presented net in the Consolidated Statement of Cash Flows.

Factoring Programs and Trade Receivables Securitization

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 receivables under a securitization program that was terminated in the first quarter of 2022.

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 because the Company sells full title and ownership in the underlying receivables and control of the receivables is considered transferred.

For these transfers, the receivables are removed from the Consolidated Balance Sheets at the date of transfer.

In the securitization and factoring arrangements, the Company’s continuing involvement is limited to servicing the receivables.

The fair value of any servicing assets and liabilities is immaterial.

The trade receivables securitization program permits us to borrow, on an unsecured basis, cash collected in a servicing capacity on previously sold receivables which are included in short-term borrowings and obligations under finance leases in the Consolidated Balance Sheets until they are repaid in the following month’s settlement.

In January 2022, the Company halted sales of European trade accounts receivable related to the securitization program with the intention to terminate the program in 2022.

Information related to trade receivables sold was as follows:

1 unchanged sentence

(In millions) 2022 2021 2020

Securitization programs

Factoring agreements

Receivables sold in period $ 992 $ 450 $ 612

Cash consideration 988 449 611

Deferred purchase price — — 80

Factoring programs

Securitization program

Receivables sold in period $ — $ 1,850 $ 1,491

Cash consideration — 1,850 1,491

Accrued Expenses

The components of accrued expenses are as follows:

(In millions) 2021 2020

Facility and transportation charges $ 387 $ 259

Salaries and wages 367 317

Value-added tax and other taxes 135 141

Total accrued expenses $ 998 $ 784

Deferred purchase price — — 80

Covenants and Compliance

The covenants in the Five-Year Term Loan, the Delayed Draw Term Loan, the Unsecured Notes, and the Revolving Credit Facilities, 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 December 31, 2022, the Company complied with the covenants contained in its debt and financing arrangements.

Fair Value Measurements and Financial Instruments

16 unchanged sentences

2 294 397 394 396

Related-party debt

Two-Year Term Loan due 2024

2 115 115 — —

Three-Year Term Loan due 2025

2 234 234 — —

Five-Year Term Loan due 2027

2 499 499 — —

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.

In connection with the Separation, XPO novated certain cross-currency swaps and options to the Company.

As a result, the Company recorded accumulated other comprehensive loss, net of tax of $ 28 million.

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.

Cross-Currency Swap Agreements

The Company enters into cross-currency swap agreements to manage the foreign currency exchange risk related to its international operations by effectively converting fixed-rate USD-denominated debt, including the associated interest payments, to fixed-rate, Euro-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.

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

semi-annual basis, to the counterparties based on Euro fixed interest rates.

At maturity, the Company will repay the original principal amount in EUR and receive the principal amount in USD.

These agreements expire at various dates through 2026.

The Company designated these cross-currency swaps as qualifying hedging instruments and account for them as net investment hedges.

The Company applies the critical terms match method of assessing the effectiveness of its net investment hedging relationships.

Under this method, for each reporting period, the change in the fair value of the cross-currency swaps is initially recognized in AOCI.

The change in the fair value due to foreign exchange remains in AOCI and the initial component excluded from effectiveness testing will initially remain in AOCI and then will be reclassified from AOCI to Interest expense each period in a systematic manner.

For net investment hedges that were de-designated prior to their maturity, the amounts in AOCI will remain in AOCI until the subsidiary is sold or substantially liquidated.

Cash flows related to the periodic exchange of interest payments for these net investment hedges are included in Operating activities in the Consolidated Statements of Cash Flows.

Foreign Currency Options

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

The foreign currency option contracts were not designated as qualifying hedging instruments as of December 31, 2021.

The contracts are used to manage the Company’s 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 Other income, net in the Consolidated Statements of Operations.

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

The Company presents the fair value of its derivative assets and liabilities on a gross basis.

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

December 31, 2021

(In millions) Notional Amount Balance Sheet Location 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 and $ 165 million were amended during the second and third quarters of 2022, respectively.

In the fourth quarter of 2022, the Company amended certain fixed-to-fixed cross-currency swap agreements scheduled to mature in 2027 to 2026, with aggregate notional amounts of $ 322 million, these amendments were not material to the Consolidated Financial Statements.

Concurrent with the $ 50 million Two-Year Term Loan repayment, $ 50 million of a variable-to-variable cross-currency swap agreement notional amount was reduced.

In connection with the extensions, amendments and reduction, the Company received net cash of $ 21 million representing the fair value of the swap plus interest accrued through the date of termination for the year ended December 31, 2022.

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 gross notional and fair value of derivative instruments were as follows:

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

Derivatives designated as hedges

Cross-currency swap agreements $ 1,222 $ 22 $ — $ — Other long-term assets

Interest rate swaps 250 9 — — Other long-term assets

Cross-currency swap agreements $ 115 $ 13 $ 328 $ 4 Other current liabilities

3 unchanged sentences

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

The derivatives are classified as Level 2 within the fair value hierarchy.

Foreign currency option contracts $ 354 $ 5 $ — $ — Other current liabilities

Foreign currency forward contracts 3 — — — Other current liabilities

As of December 31, 2022 and 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 derivative instruments designated as hedges in the Consolidated Statements of Operations was as follows:

Year Ended December 31, 2021

(In millions) Gain (loss) on

Recognized in OCI Gain (loss)

Reclassified from

AOCI into Net

Income (Loss) (1)

Recognized in Net

Income (Loss) on

Derivatives (Excluded from effectiveness testing)

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

Year Ended December 31, 2022 Year Ended December 31, 2021

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

Gain Recognized in Net Income on Derivatives (Excluded from effectiveness testing) (1)

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

Gain Recognized in Net Income on Derivatives (Excluded from effectiveness testing) (1)

Derivatives designated as net investment hedges

1 unchanged sentence

$ 36 $ 4 $ 3 $ ( 17 ) $ 1 $ 2

Total $ ( 17 ) $ 1 $ 2

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

The gain recognized in earnings for foreign currency options not designated as hedging instruments was $ 2 million for the year ended December 31, 2021, of which $ 1 million was unrealized.

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

There were no derivative instruments in the consolidated financial statements as of December 31, 2020.

Derivatives designated as cash flow hedges

Interest rate swaps $ 9 $ — $ — $ — $ — $ —

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

Derivatives not designated as hedges

Gains and losses recognized in Other income, net in the Consolidated Statements of Operations for foreign currency options and forward contracts were as follows:

Year Ended December 31,

(In millions) 2022 2021

Realized gain $ 29 $ 1

Unrealized gain (loss) ( 11 ) 1

Total gain recognized in net income $ 18 $ 2

Accrued Expenses

The components of accrued expenses were as follows:

(In millions) 2022 2021

Facility and transportation charges $ 360 $ 387

Salaries and wages 350 367

Value-added tax and other taxes 135 135

Other 150 109

Total accrued expenses $ 995 $ 998

Earnings per Share

Prior to the Separation, GXO employees participated in XPO’s equity incentive plan, pursuant to which they were granted restricted stock units, performance-based restricted stock units and non-qualified or incentive stock options.

All awards granted under these plans were related to XPO common shares.

In connection with the Separation, outstanding awards held by GXO employees were converted in accordance with the EMA.

Depending on whether the awards held on the Separation date were in an unvested or vested status, GXO employees either received converted awards solely in GXO based shares (unvested status) or a combination of GXO and XPO shares (vested status).

The conversion methodology used was calculated in accordance with the EMA and with the purpose of maintaining the aggregate intrinsic value of the award immediately after the Separation when compared to the aggregate intrinsic value immediately prior to the Separation.

On August 2, 2021, the date of the Separation, 114,626,250 shares of common stock of GXO were distributed to XPO stockholders of record as of the record date.

This share amount is utilized for the calculation of basic and

diluted earnings per share for all years presented prior to the Separation.

For years prior to the Separation, it is assumed that there are no dilutive equity instruments as there were no equity awards of GXO outstanding prior to the Separation.

Diluted earnings per share was computed by giving effect to all potentially dilutive stock awards that were outstanding.

The computation of diluted earnings per share excludes the effect of the potential exercise of stock-based awards when the effect of the potential exercise would be anti-dilutive.

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

Year Ended December 31,

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

2022 2021 2020

Net income (loss) attributable to common shares $ 197 $ 153 $ ( 31 )

Basic weighted-average common shares 117,050 114,632 114,626

Diluted effect of stock-based awards 566 965 —

Diluted weighted-average common shares 117,616 115,597 114,626

Basic earnings (loss) per share $ 1.68 $ 1.33 $ ( 0.27 )

Diluted earnings (loss) per share $ 1.67 $ 1.32 $ ( 0.27 )

Antidilutive shares excluded from diluted weighted-average common shares

Stockholders’ Equity

The following table summarizes the changes in AOCI by component:

(In millions) Foreign

Adjustments Cash

Hedges Defined

attributable to

noncontrolling

interest AOCI

As of December 31, 2020

$ 61 $ — $ ( 1 ) $ ( 2 ) $ 58

Foreign currency translation loss ( 47 ) — — 1 ( 46 )

Unrealized gain on defined benefit plans, net of tax — — 7 — 7

Amounts reclassified from AOCI to net income 1 — — — 1

Other comprehensive income (loss), net of tax ( 46 ) — 7 1 ( 38 )

Transfers from XPO, net of tax ( 68 ) — ( 82 ) — ( 150 )

As of December 31, 2021

$ ( 53 ) $ — $ ( 76 ) $ ( 1 ) $ ( 130 )

Foreign currency translation loss ( 120 ) — — 1 ( 119 )

Unrealized gain on hedges, net of tax 29 7 — — 36

Unrealized loss on defined benefit plans, net of tax — — ( 36 ) — ( 36 )

Amounts reclassified from AOCI to net income ( 7 ) — — — ( 7 )

Other comprehensive income (loss), net of tax ( 98 ) 7 ( 36 ) 1 ( 126 )

Other 2 — — — 2

As of December 31, 2022

$ ( 149 ) $ 7 $ ( 112 ) $ — $ ( 254 )

Stock-Based Compensation

All awards granted under these plans related to XPO common shares.

In connection with the Separation, and in accordance with the Employee Matters Agreement (“EMA”), the Company’s employees with outstanding former XPO stock-based awards received replacement stock-based awards under the Plan at Separation.

The value of the replaced stock-based awards was designed to preserve the aggregate intrinsic value of the award immediately after the Separation when compared to the aggregate intrinsic value of the award immediately prior to the Separation.

In 2021, the Company established the 2021 Omnibus Incentive Plan (the “2021 Incentive Plan”).

The 2021 Incentive Plan authorizes the issuance of up to 11.6 million shares of common stock as Awards.

Under the 2021 Incentive Plan, directors, officers and employees may be granted various types of stock-based compensation awards.

These awards include stock options, restricted stock, RSUs, performance-based units and cash incentive awards (collectively, “Awards”).

As of December 31, 2022, 8.2 million shares of common stock were available for the grant of Awards under the 2021 Incentive Plan.

Prior to the Separation, the stock-based compensation expense recorded by the Company included the expense associated with the employees historically attributable to the Company’s operations, as well as the expense associated with the allocation of equity-based compensation expense for corporate employees.

The amounts presented are not necessarily indicative of future awards and do not necessarily reflect the costs that the Company would have incurred as an independent company for the periods presented.

The following table summarizes stock-based compensation expense recorded in Selling, general and administrative expense in the Consolidated Statements of Income:

Year Ended December 31,

(In millions) 2022 2021 2020

Restricted stock and restricted stock units $ 21 $ 20 $ 23

Performance-based restricted stock units 7 5 2

Stock options 5 3 —

Total stock-based compensation expense $ 33 $ 28 $ 25

Tax expense (benefit) on stock-based compensation $ ( 1 ) $ 1 $ 1

Stock Options

The Company’s stock options vest over five years after the grant date, and have a 10-year contractual term with an exercise price equal to the stock price on the grant date.

For awards issued prior to the Separation, the exercise price was converted in accordance with the EMA.

The Black-Scholes option-pricing model was used to estimate the fair value of the share-based awards granted in 2021.

The Black-Scholes option-pricing model incorporates various subjective assumptions, including expected terms and expected volatility.

Assumptions used in the Black-Scholes option-pricing model for the estimated fair value were as follows:

weighted-average risk-free rate of interest of 1.2 %, expected volatility of 30 %, weighted-average expected award life of 6.7 years and weighted-average fair value of $ 22.66 .

No options were granted, exercised or forfeited during the year ended December 31, 2022.

Stock option awards as of December 31, 2022 and 2021, are presented in the following table:

Stock Options

Number of Stock Options

(in thousands) Weighted-Average

Exercise Price

(per share) Weighted-Average

Remaining Term (years)

Outstanding as of December 31, 2021

1,170 $ 64.72 9 years

Outstanding as of December 31, 2022

1,170 $ 64.72 8 years

Options exercisable as of December 31, 2022

123 $ 62.28 8 years

There was no intrinsic value for options outstanding and exercisable at December 31, 2022.

As of December 31, 2022, unrecognized compensation cost related to options of $ 18 million is anticipated to be recognized over a weighted-average period of approximately 3 years.

Restricted Stock Units and Performance-Based Restricted Stock Units

The Company grants RSUs and PRSUs to its key employees, officers and directors with various vesting requirements.

The holders of the RSUs and PRSUs do not have the rights of a stockholder and do not have voting rights until the shares are issued and delivered in settlement of the awards.

RSUs generally vest based on the passage of time (service conditions), typically four years , and PRSUs generally vest based on achieving certain predefined performance objectives.

For PRSUs the number of shares may be increased to the maximum or reduced to the minimum threshold based on the results of these performance metrics in accordance with the terms established at the time of the award.

In 2022, the Company granted PRSUs subject to market-based vesting conditions.

The Company determines the fair value of PRSUs subject to market-based vesting conditions using a Monte Carlo simulation lattice model that incorporates the probability of the performance conditions being met as of the grant date.

Assumptions used in the Monte Carlo simulation lattice model for the estimated fair value were as follows:

weighted-average risk free rate of interest of 2.5 % and expected volatility of the Company’s stock of 37 %.

A summary of RSU and PRSU award activity for the year ended December 31, 2022 is presented in the following table:

(In thousands, except per share) Number of

Weighted-Average

Grant Date Fair

Value Number of PRSUs Weighted-Average

Grant Date Fair

Outstanding as of December 31, 2021

1,263 $ 42.31 247 $ 53.91

Granted 481 67.32 120 80.75

( 441 ) 37.17 ( 116 ) 54.72

Forfeited and canceled ( 106 ) 51.09 ( 16 ) 41.98

Outstanding as of December 31, 2022

1,197 $ 53.46 235 $ 67.96

(1) The number of RSUs and PRSUs vested includes common stock shares that the Company withheld on behalf of its employees to satisfy the minimum tax withholding.

The total fair value of RSUs that vested during 2022 and 2021 was $ 30 million and $ 17 million, respectively.

The total fair value of PRSUs that vested during 2022 was $ 5 million and was immaterial for 2021.

As of December 31, 2022, unrecognized compensation cost related to RSUs and PRSUs of $ 58 million is anticipated to be recognized over a weighted-average period of approximately 3 years.

Employee Benefit Plans

3 unchanged sentences

In connection with the Separation, the Company became the plan sponsor for the U.K.

Retirement Plan, and the consolidated financial statements for the year ended December 31, 2021 include the funded status of the plan and periodic benefit costs.

Retirement Plan.

The majority of the plan assets transferred to the Company were fixed income securities including government bonds and debt instruments which are primarily classified as Level 2 in the fair value hierarchy.

5 unchanged sentences

Funded Status of Defined Benefit Plan

The change in the projected benefit obligation of the plan as of December 31, 2021 was as follows:

The change in the projected benefit obligation of the plan was as follows:

(In millions) 2022 2021

2 unchanged sentences

Interest cost 21 11

Actuarial loss 39

Benefits paid ( 27 )

Actuarial (gain) loss ( 442 ) 39

Foreign currency exchange rate changes ( 139 ) ( 31 )

Benefits paid ( 52 ) ( 27 )

Projected benefit obligation at end of year

(1) As of December 31, 2021, the accumulated benefit obligation was equal to the projected benefit obligation.

Actuarial losses were a result of assumption changes, including a decrease in the discount rate and an increase in the inflation assumptions.

The change in the fair value of the plan assets as of December 31, 2021 was as follows:

$ 788 $ 1,400

Actuarial gains were primarily a result of an increase in the discount rate.

The change in the fair value of the plan assets was as follows:

(In millions) 2022 2021

2 unchanged sentences

Actual return on plan assets ( 438 ) 75

Benefits paid ( 27 )

Foreign currency exchange rate changes ( 145 ) ( 32 )

Contributions by the employer 1 —

Benefits paid ( 52 ) ( 27 )

Fair value of plan assets at end of year $ 826 $ 1,460

The reconciliation of the funded status of the plan as of December 31, 2021 was as follows:

(In millions)

Fair value of plan assets

Projected benefit obligation

Funded status at the end of the year (1)

Funded status of the plan assets at end of year (1)

(1) Funded status is recorded within Other long-term assets.

The amounts included in AOCI that have not yet been recognized in net periodic benefit as of December 31, 2021 were as follows:

The amounts included in AOCI that have not yet been recognized in net periodic benefit were as follows:

(In millions) 2022 2021 (1)

3 unchanged sentences

(1) In connection with the Separation, $ 103 million of accumulated other comprehensive loss was transferred from XPO.

The components of net periodic benefit cost for the year ended December 31, 2021 were as follows:

The components of net benefit cost recognized were as follows:

Year Ended December 31,

(In millions) 2022 2021

Interest cost $ ( 11 )

Expected return on plan assets 30

Net periodic benefit income (1)

(1) Net periodic benefit income is recorded within Other income, net.

The amounts recognized in other comprehensive income for the year ended December 31, 2021 were as follows:

Interest cost component

$ ( 21 ) $ ( 11 )

Expected return on plan assets for the period

Net benefit cost recognized (1)

(1) Net benefit cost is recorded within Other income, net.

The amount recognized in other comprehensive income was as follows:

Year Ended December 31,

(In millions) 2022 2021

Actuarial gain $ 6

Actuarial gain (loss) $ ( 51 ) $ 6

Other comprehensive income $ ( 51 ) $ 6

The weighted-average assumptions used to determine the projected benefit obligation and the net periodic costs were as follows:

Year Ended December 31,

Weighted average assumptions used to determine benefit obligation at December 31:

Discount rate

5.03 % 1.82 %

Rate of compensation increase (1)

1 unchanged sentence

Discount rate

1.82 % 1.87 %

Rate of compensation increase (1)

Expected long-term rate of return on plan assets

4.13 % 4.25 %

(1) No rate of compensation increase was assumed as the plans are frozen to additional participant benefit accruals.

The Company’s U.K.

Retirement Plan’s assets are separated from its assets and invested by trustees, which include representatives of the Company, to meet the U.K.

Retirement Plan’s assets are separated from its assets and invested by a trustee, which include representatives of the Company, to meet the U.K.

Retirement Plan’s projected future pension liabilities.

The trustees’ investment objectives are to meet the performance target set in the deficit recovery plan of the U.K.

The trustee’s investment objectives are to meet the performance target set in the deficit recovery plan of the U.K.

Retirement Plan in a risk-controlled framework.

1 unchanged sentence

Retirement Plan consists of approximately 40 % matching assets (U.K.

gilts and cash) and approximately 60 % growth and income assets (consisting of a range of pooled funds investing in structured equities, investment grade and high yield bonds and asset-backed securities).

gilts and cash) and approximately 60 % growth and income assets (consisting of a range of pooled funds investing in structured equities, investment-grade and high-yield bonds

and asset-backed securities).

The target asset allocations of the U.K.

5 unchanged sentences

Retirement Plan Actuary’s Long Term funding basis, approximately 80 % of the liability interest rate sensitivity and 80 % of the liability inflation sensitivity were hedged as of December 31, 2022.

The fair values of investments held in the pension plans by major asset category as of December 31, 2021 and the percentage that each asset category comprises of total plan assets were as follows:

December 31, 2021

(In millions) Level 1 Level 2 Level 3 Not Subject

to Leveling (1)

Asset category

Cash and cash equivalents $ 60 $ — $ — $ — $ 60

Fixed income securities — 1,173 — 506 1,679

The fair values of investments held in the pension plans by major asset category were as follows:

(In millions) Level 2022 2021

Cash and cash equivalents Level 1 $ 59 $ 60

Government Securities Level 2 409 904

Corporate Bonds Level 2 163 269

Derivatives Level 2 ( 137 ) ( 381 )

Total assets in fair value hierarchy $ 494 $ 852

Commingled funds (1)

Derivatives (1)

Total plan assets $ 60 $ 792 $ — $ 608 $ 1,460

Investments, at fair value $ 826 $ 1,460

(1) Investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient are not classified in the fair value hierarchy.

The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented for the total defined benefit pension plan assets.

Expected benefit payments for the defined benefit pension plans are summarized below.

The expected benefit payments for the defined benefit pension plan are summarized below.

These estimates are based on assumptions about future events.

6 unchanged sentences

Defined Contribution Plans

The Company sponsors a defined contribution plan that is available to employees whose primary place of employment is the U.S.

The Company matches up to a 4 % of employees’ pre-tax contributions, after completing one year of service.

The Company’s costs for defined contribution plan were $ 16 million, $ 14 million and $ 14 million for the years ended December 31, 2021, 2020 and 2019, respectively, and were primarily included in Direct operating expenses.

Stockholders’ Equity

The following table summarizes the changes in AOCI by component:

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

AOCI attributable to noncontrolling interest AOCI attributable to GXO

As of December 31, 2019

$ ( 68 ) $ ( 2 ) $ ( 2 ) $ 6 $ ( 66 )

Unrealized gains (losses), net of tax 129 2 1 ( 8 ) 124

As of December 31, 2020

$ 61 $ — $ ( 1 ) $ ( 2 ) $ 58

Unrealized gains (losses), net of tax ( 47 ) — 7 1 ( 39 )

Amounts reclassified from AOCI to net income 1 — — — 1

Transfers from XPO, net of tax ( 68 ) — ( 82 ) — ( 150 )

Net other comprehensive income, net of tax $ ( 114 ) $ — $ ( 75 ) $ 1 $ ( 188 )

As of December 31, 2021

$ ( 53 ) $ — $ ( 76 ) $ ( 1 ) $ ( 130 )

Stock-Based Compensation

All awards granted under these plans related to XPO common shares.

In connection with the Separation, and in accordance with the EMA, the Company’s employees with outstanding former XPO stock-based awards received replacement stock-based awards under the Plan at Separation.

In August 2021, the Company established the 2021 Omnibus Incentive Plan (the “2021 Incentive Plan”).

The 2021 Incentive Plan authorizes the issuance of up to 11.6 million shares of common stock as Awards.

Under the 2021 Incentive Plan, directors, officers and employees may be granted various types of stock-based compensation awards.

These awards include stock options, restricted stock, RSUs, performance-based units and cash incentive awards (collectively, “Awards”).

As of December 31, 2021, 9.0 million shares of common stock were available for the grant of Awards under the 2021 Incentive Plan.

Prior to the Separation, the stock-based compensation expense recorded by the Company includes the expense associated with the employees historically attributable to the Company’s operations, as well as the expense associated with the allocation of equity-based compensation expense for corporate employees.

The following table summarizes stock-based compensation expense recorded in Selling, general and administrative expense in the Consolidated Statements of Income:

Year Ended December 31,

(In millions) 2021 2020 2019

Restricted stock and restricted stock units $ 20 $ 23 $ 17

Performance-based restricted stock units 5 2 6

Stock options 3 — —

Total stock-based compensation expense $ 28 $ 25 $ 23

Tax benefit on stock-based compensation $ 1 $ 1 $ —

Stock Options

The Company’s stock options vest over five years after the grant date, have a 10-year contractual term and an exercise price equal the stock price on the grant date.

For awards issued prior to the Separation, the exercise price was converted in accordance with the EMA.

A summary of stock option award activity for the year ended December 31, 2021 is presented in the following table:

Stock Options

Number of Stock Options

(in thousands) Weighted-Average

Exercise Price

(per share) Weighted-Average

Remaining Term (years) Aggregate Intrinsic value (1)

The Company sponsors a defined contribution plan that is available to employees whose primary place of employment is in the U.S.

The Company matches up to 4 % of employees’ pre-tax contributions, after completing one year of service.

The Company’s costs for the defined contribution plan were $ 17 million, $ 16 million and $ 14 million for the years ended December 31, 2022, 2021 and 2020, respectively, and were primarily included in Direct operating expenses.

The Company also has various defined contribution plans for its international employees.

The Company’s contributions to these benefit plans were $ 37 million, $ 29 million and $ 15 million for the years ended December 31, 2022, 2021 and 2020, respectively, and were primarily included in Direct operating expenses.

Restructuring Charges and Other

Restructuring

The Company engages in restructuring actions as part of its ongoing efforts to best use its resources and infrastructure.

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

The restructuring liability rollforward, which is included in Other current liabilities in the Consolidated Balance Sheets was as follows:

(In millions)

Outstanding as of December 31, 2020

— $ — 0 years

Converted from XPO 1,170 64.72

Exercised — —

Forfeited — —

Outstanding as of December 31, 2021

1,170 $ 64.72 9 years $ 31

Options exercisable as of December 31, 2021

6 $ 12.12 4 years $ —

(1) The intrinsic value is calculated as the difference between the market price of the Company’s common stock on the reporting date and the price paid by the options to exercise the option.

The Black-Scholes option-pricing model is used to estimate the fair value of share-based awards.

The Black-Scholes option-pricing model incorporates various and subjective assumptions, including expected term and expected volatility.

The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used:

Stock Option Plans

2021 2020 2019

Weighted-average risk free rate of interest 1.2 % — % — %

Expected volatility 30 % — % — %

Weighted-average expected award life 6.7 years 0 years 0 years

Dividend yield — % — % — %

Weighted-average fair value $ 22.66 $ — $ —

As of December 31, 2021, unrecognized compensation cost related to options of $ 23 million is anticipated to be recognized over a weighted-average period of approximately 4 years.

Restricted Stock, Restricted Stock Units and Performance-Based Restricted Stock Units

The Company grants RSUs and performance RSUs to its key employees, officers and directors with various vesting requirements.

RSUs generally vest based on the passage of time (service conditions), typically four years , and performance PRSUs generally vest based on the achievement of other financial conditions.

The holders of the RSUs and PRSUs do not have the rights of a stockholder and do not have voting rights until the shares are issued and delivered in settlement of the awards.

A summary of RSU and PRSU award activity for the year ended December 31, 2021 is presented in the following table:

(In thousands, except per share) Number of

Weighted-Average

Grant Date Fair

Value Number of PRSUs Weighted-Average

Grant Date Fair

Outstanding as of December 31, 2020

Converted from XPO 1,214 36.97 256 53.93

Granted 139 87.07 — —

( 45 ) 36.54 ( 7 ) 54.72

Forfeited and canceled ( 45 ) 42.39 ( 2 ) 54.72

Outstanding as of December 31, 2021

1,263 $ 42.31 247 $ 53.91

(1) The number of RSUs and PRSUs vested includes common stock shares that the Company withheld on behalf of its employees to satisfy the minimum tax withholding.

The total fair value of RSUs that vested during 2021 and 2020 was $ 17 million and $ 23 million, respectively.

The total fair value of PRSUs that vested during 2021 and 2020 was immaterial.

As of December 31, 2021, unrecognized compensation cost related to RSUs and PRSUs of $ 46 million is anticipated to be recognized over a weighted-average period of approximately 3 years.

Balance as of December 31, 2020

Charges incurred (1)

Payments ( 14 )

Foreign exchange and other ( 7 )

Balance as of December 31, 2021

Charges incurred 24

Payments ( 14 )

Balance as of December 31, 2022

(1) Charges incurred are net of adjustments to previously recognized liabilities.

The remaining restructuring liability at December 31, 2022 primarily relates to severance payments and is expected to be substantially paid within 12 months.

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

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

For the periods ended before the Separation, the Company was a member of the XPO consolidated group, and its U.S.

1 unchanged sentence

federal income tax return as well as in the tax returns filed by XPO with certain state and local taxing jurisdictions.

For the periods ended after the Separation, the Company will file a consolidated U.S.

For the periods ended after the Separation, the Company has filed and will file a consolidated U.S.

federal income tax return as well as state and local income tax returns.

20 unchanged sentences

The Company’s U.S.

federal statutory tax rate was 21 percent for 2021, 2020 and 2019.

federal statutory tax rate was 21% for 2022, 2021 and 2020.

A reconciliation of the expected U.S.

13 unchanged sentences

Intangible assets (2)

Transaction costs 5 — —

Other 3 1 ( 3 )

5 unchanged sentences

Components of the Net Deferred Tax Asset or Liability

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2021 and 2020 are presented in the following table:

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2022 and 2021 are presented in the following table:

Year Ended December 31,

3 unchanged sentences

Accrued expenses 54 45

Pension and other retirement obligations — 7

Gross deferred tax assets 140 135

14 unchanged sentences

Investments in Foreign Subsidiaries

Prior to December 31, 2017, U.S.

federal income taxes had not been provided on the undistributed earnings of certain non-U.S.

subsidiaries, to the extent that such earnings had been reinvested abroad for an indefinite period of time.

The Company no longer maintains the indefinite reinvestment assertion on the undistributed earnings of those non-U.S.

subsidiaries following the enactment of the Tax Cuts and Jobs Act of 2017.

As of December 31, 2022, the Company maintained a partial assertion for all post 2017 undistributed historical earnings and record a deferred tax liability for historical earnings that are not considered to be permanently reinvested.

The Company asserts indefinite reversal exception for not recording deferred taxes resulting from the Clipper Acquisition.

Operating Loss and Tax Credit Carryforwards

7 unchanged sentences

Various times starting in 2032 5 5

State tax credit carryforward

State tax credit carryforwards

Various times starting in 2023 6 6

11 unchanged sentences

2020 $ 56 17 — $ 73

(1) As a result of the Separation, a $ 29 million decrease in valuation allowances was recorded as the corresponding tax attributes reported by the Company on a combined basis were not transferred to the Company.

(1) In 2021, due to the Separation, $ 29 million decrease in valuation allowances was recorded as the corresponding tax attributes reported by the Company on a combined basis were not transferred to the Company.

Unrecognized Tax Benefits

10 unchanged sentences

Total unrecognized tax benefits that, if recognized, would impact the effective income tax rate as of the end of the year

The Company could reflect a reduction to unrecognized tax benefits of $ 3 million over the next 12 months due to the statute of limitations lapsing on positions or because tax positions are sustained on audit.

The Company could reflect a reduction to unrecognized tax benefits of approximately $ 3 million over the next 12 months due to statutes of limitations expirations or because tax positions are sustained on audit.

The Company is subject to taxation in the U.S.

and various states and in foreign jurisdictions.

As of December 31, 2021, the Company has no income tax years under examination by the IRS nor is the Company under examination by U.S.

state and local taxing authorities for income taxes.

As of December 31, 2022, the Company is not under examination by the IRS or U.S.

state and local taxing authorities.

Various non-U.S.

tax returns for years after 2009 are open under relevant statutes of limitations and are subject to audit.

Earnings per Share

All awards granted under these plans were related to XPO common shares.

In connection with the Separation, outstanding awards held by GXO employees were converted in accordance with the EMA.

On August 2, 2021, the date of the Separation, 114,626,250 shares of common stock of GXO were distributed to XPO stockholders of record as of the record date.

This share amount is utilized for the calculation of basic and diluted earnings per share for all years presented prior to the Separation.

For years prior to the Separation, it is assumed that there are no dilutive equity instruments as there were no equity awards of GXO outstanding prior to the Separation.

For the year ended December 31, 2021, diluted earnings per share is computed by giving effect to all potentially dilutive stock awards that are outstanding.

The computation of diluted earnings per share excludes the effect of the potential exercise of stock-based awards when the effect of the potential exercise would be anti-dilutive.

Approximately 88,000 shares are excluded from the calculation of diluted earnings per share for the year ended December 31, 2021, because their inclusion would have been anti-dilutive.

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

Year Ended December 31,

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

2021 2020 2019

Net income (loss) attributable to common shares $ 153 $ ( 31 ) $ 60

Basic weighted-average common shares 114,632 114,626 114,626

Diluted effect of stock-based awards 965 — —

Diluted weighted-average common shares 115,597 114,626 114,626

Basic earnings (loss) per share $ 1.33 $ ( 0.27 ) $ 0.52

Diluted earnings (loss) per share $ 1.32 $ ( 0.27 ) $ 0.52

Commitments and Contingencies

6 unchanged sentences

The determination as to whether a loss can reasonably be considered to be possible or probable is based on Management’s assessment, together with legal counsel, regarding the ultimate outcome of the matter.

Management of the Company believes that it has adequately accrued for the potential impact of loss contingencies that are probable and reasonably estimable.

Management of the Company does not believe that the ultimate resolution of any matters to which the Company is presently a party will have a material adverse effect on its results of operations, financial condition or cash flows.

Management believes that it has adequately accrued for the potential impact of loss contingencies that are probable and reasonably estimable.

Management does not believe that the ultimate resolution of any matters to which the Company is presently a party will have a material adverse effect on its results of operations, financial condition or cash flows.

However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more of these matters could have a material adverse effect on the Company financial condition, results of operations or cash flows.

2 unchanged sentences

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.

Related Party

Prior to the Separation, the Company did not operate as a standalone business and the consolidated financial statements were derived from the consolidated financial statements and accounting records of XPO.

Transactions between the Company and XPO, and other non-GXO subsidiaries of XPO, that occurred prior to the Separation have been classified as related-party transactions.

Transactions that originated with XPO prior to the Separation were cash settled or forgiven as of August 2, 2021.

For amounts that were forgiven, the amounts have been recorded as an adjustment to XPO Investment.

Allocation of General Corporate Expenses

The Consolidated Statements of Operations include expenses for certain centralized functions and other programs provided and/or administered by XPO that were charged directly to the Company prior to the Separation.

In addition, for purposes of preparing these consolidated financial statements, a portion of XPO’s total corporate expenses was allocated to the Company.

See Note — 2 Basis of Presentation and Significant Accounting Policies for a discussion of the methodology used to allocate such costs for purposes of preparing these consolidated financial statements.

Prior to the Separation, certain shared costs were allocated to the Company from XPO’s corporate overhead.

Costs of $ 185 million, $ 223 million and $ 166 million for the years ended December 31, 2021, 2020 and 2019, respectively, have been reflected in Selling, general and administrative expense;

Depreciation and amortization expense;

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

These amounts may not reflect the costs GXO would have incurred had the Company been a standalone entity during the years presented.

Transactions with XPO and its non-GXO Subsidiaries

Revenue and costs generated from XPO prior to the Separation were as follows:

Year Ended December 31,

(In millions) 2021 2020 2019

Revenue $ 8 $ 7 $ 10

Costs 80 115 148

Balances with XPO and its non-GXO Subsidiaries

In connection with the Separation, GXO related-party amounts in the Consolidated Balance Sheets were cash settled or forgiven as of August 2, 2021.

Assets and liabilities in the Consolidated Balance Sheets included the following related-party amounts:

(In millions) 2021 2020

Amounts due from XPO and its affiliates

Trade receivables (1)

Other current assets (2)

Other long-term assets (3)

Amounts due to XPO and its affiliates

Trade payables (4)

Other current liabilities (5)

Accrued expenses (6)

Loans payable (7)

(1) Primarily represents trade receivables generated from revenue with XPO.

(2) Primarily relates to interest receivable from loans receivable from XPO.

(3) Represents loans receivable from XPO.

(4) Represents trade payables due to XPO.

(5) Primarily relates to facility expense and taxes payable due to XPO.

(6) Represents accrued interest on loans due to XPO.

(7) Represents loans due to XPO.

See Note — 11 Debt and Financing Arrangements for further information.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosures.

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-K

Item 8. Financial Statements and Supplementary Data