What changed in this filing

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Item 1. Financial Statements

2023-05-10 compared with 2022-11-09 · 255 added, 382 removed, 225 unchanged (74% of the section changed)

2 unchanged sentences

Condensed Consolidated Statements of Operations

Three Months Ended Nine Months Ended

September 30, September 30,

Three Months Ended March 31,

(Dollars in millions, shares in thousands, except per share amounts) 2023 2022

9 unchanged sentences

Income before income taxes 29 49

Income tax (expense) benefit ( 19 ) 31 ( 51 ) 21

Income tax expense ( 3 ) ( 11 )

Net income 26 38

Net income attributable to noncontrolling interest ( 1 ) ( 1 ) ( 3 ) ( 7 )

Net income attributable to noncontrolling interests ( 1 ) ( 1 )

Net income attributable to GXO $ 25 $ 37

7 unchanged sentences

GXO Logistics, Inc.

Condensed Consolidated Statements of Comprehensive Income

Three Months Ended Nine Months Ended

September 30, September 30,

Condensed Consolidated Statements of Comprehensive Income (Loss)

Three Months Ended March 31,

(In millions) 2023 2022

Net income $ 26 $ 38

Other comprehensive loss, net of tax

Foreign currency translation loss, net of tax (expense) benefit of $( 22 ), $( 4 ), $( 32 ) and $( 2 ), respectively

$ ( 43 ) $ ( 12 ) $ ( 163 ) $ ( 30 )

Unrealized gain (loss) on cash flow hedges, net of tax (expense) benefit of $( 2 ), $ — , $( 2 ) and $( 1 ), respectively

Other comprehensive loss, net of tax $ ( 34 ) $ ( 12 ) $ ( 154 ) $ ( 31 )

Comprehensive income $ 30 $ 61 $ — $ 73

Comprehensive income (loss) attributable to noncontrolling interest ( 1 ) 1 ( 1 ) 7

Comprehensive income attributable to GXO $ 31 $ 60 $ 1 $ 66

Other comprehensive income (loss), net of tax

Foreign currency translation gain (loss), net of tax of $ 3 and $ 0

Unrealized loss on cash flow hedges, net of tax of $ 1 and $ 0

Other comprehensive income (loss), net of tax 10 ( 45 )

Comprehensive income (loss) 36 ( 7 )

Comprehensive income attributable to noncontrolling interest 1 —

Comprehensive income (loss) attributable to GXO $ 35 $ ( 7 )

See accompanying Notes to Condensed Consolidated Financial Statements.

1 unchanged sentence

Condensed Consolidated Balance Sheets

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

March 31, December 31,

(Dollars in millions, shares in thousands, except per share amounts) 2023 2022

Current assets

Cash and cash equivalents $ 426 $ 495

Accounts receivable, net of allowances of $ 9 and $ 13 , respectively

Accounts receivable, net of allowance of $ 11 and $ 12

Other current assets 280 286

1 unchanged sentence

Long-term assets

Property and equipment, net of $ 1,196 and $ 1,128 in accumulated depreciation, respectively

Property and equipment, net of accumulated depreciation of $ 1,361 and $ 1,297

Operating lease assets 2,168 2,227

Goodwill 2,765 2,728

Intangible assets, net of $ 418 and $ 407 in accumulated amortization, respectively

Intangible assets, net of accumulated amortization of $ 477 and $ 456

Other long-term assets 327 306

5 unchanged sentences

Accrued expenses 908 995

Short-term borrowings and obligations under finance leases 94 34

Current debt 84 67

Current operating lease liabilities 568 560

2 unchanged sentences

Long-term liabilities

Long-term debt and obligations under finance leases 1,789 927

Long-term debt 1,697 1,739

Long-term operating lease liabilities 1,800 1,853

4 unchanged sentences

Common Stock, $ 0.01 par value per share;

300,000 shares authorized, 118,629 and 114,659 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

300,000 shares authorized, 118,889 and 118,728 issued and outstanding

Preferred Stock, $ 0.01 par value per share;

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

10,000 shares authorized, none issued and outstanding

Additional paid-in capital 2,580 2,575

1 unchanged sentence

Accumulated other comprehensive loss ( 244 ) ( 254 )

Total stockholders’ equity before noncontrolling interest 2,569 2,351

Noncontrolling interest 30 39

Total stockholders’ equity before noncontrolling interests 2,685 2,645

Noncontrolling interests 34 33

Total equity 2,719 2,678

Total liabilities and equity $ 9,090 $ 9,219

2 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Nine Months Ended September 30,

Three Months Ended March 31,

(In millions) 2023 2022

4 unchanged sentences

Stock-based compensation expense 9 6

Deferred tax benefit

Other ( 4 ) ( 11 )

Deferred tax expense (benefit)

Changes in operating assets and liabilities

7 unchanged sentences

Proceeds from sales of property and equipment 9 3

Acquisition of businesses, net of cash acquired ( 874 ) 34

Proceeds from cross-currency swap agreements 26 —

Other 9 ( 2 )

Net cash used in investing activities ( 82 ) ( 44 )

( 1,056 ) ( 140 )

Cash flows from financing activities:

Proceeds from issuance of debt, net 898 794

Repayment of debt related to securitization transactions and other — ( 21 )

Repayment of debt and finance leases ( 23 ) ( 64 )

Purchase of noncontrolling interest — ( 128 )

Net transfers to XPO Logistics, Inc.

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

Net cash provided by (used in) financing activities

Repayments of debt, net ( 21 ) —

Repayments of finance lease obligations ( 8 ) ( 9 )

Taxes paid related to stock-based compensation awards ( 4 ) ( 11 )

Net cash used in financing activities ( 29 ) ( 18 )

Effect of exchange rates on cash and cash equivalents 3 ( 5 )

Net increase (decrease) in cash and cash equivalents 101 ( 53 )

Net decrease in cash and cash equivalents ( 69 ) ( 21 )

Cash and cash equivalents, beginning of period 495 333

Cash and cash equivalents, end of period

Supplemental disclosure of non-cash investing and financing activities:

Common stock issued for acquisition $ 203 $ —

See accompanying Notes to Condensed Consolidated Financial Statements.

1 unchanged sentence

Condensed Consolidated Statements of Changes in Equity

Common Stock XPO Logistics, Inc.

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

(Shares in thousands, dollars in millions) Shares Amount

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

Net income — — — — 63 — 63 1 64

Other comprehensive loss — — — — — ( 32 ) ( 32 ) ( 2 ) ( 34 )

Stock-based compensation — — — 8 — — 8 — 8

Vesting of stock compensation awards 19 — — — — — — — —

Balance as of September 30, 2022 118,629 $ 1 $ — $ 2,569 $ 277 $ ( 278 ) $ 2,569 $ 30 $ 2,599

Common Stock XPO Logistics, Inc.

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

(Shares in thousands, dollars in millions) Shares Amount

Common Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Loss Equity Before

Noncontrolling

Interests Noncontrolling

Interests Total

(Shares in thousands,

dollars in millions) Shares Amount

Balance as of December 31, 2022 118,728 $ 1 $ 2,575 $ 323 $ ( 254 ) $ 2,645 $ 33 $ 2,678

Net income — — — 25 — 25 1 26

Other comprehensive loss — — — — — ( 150 ) ( 150 ) ( 4 ) ( 154 )

Stock-based compensation — — — 24 — — 24 — 24

Vesting of stock compensation awards 221 — — — — — — — —

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

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

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

Dividends — — — — — — — ( 3 ) ( 3 )

Balance as of September 30, 2022 118,629 $ 1 $ — $ 2,569 $ 277 $ ( 278 ) $ 2,569 $ 30 $ 2,599

GXO Logistics, Inc.

Condensed Consolidated Statements of Changes in Equity

Common Stock XPO Logistics, Inc.

Investment Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Equity Before Noncontrolling Interest Noncontrolling Interest Total Equity

(Shares in thousands, dollars in millions) Shares Amount

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

Net income — — 2 — 70 — 72 1 73

Other comprehensive loss — — — — — ( 12 ) ( 12 ) — ( 12 )

Other comprehensive income — — — — 10 10 — 10

Stock-based compensation — — 9 — — 9 — 9

Vesting of stock compensation awards 10 — — — — — — — —

Net transfers (to) from XPO, including separation adjustments — — ( 492 ) — — ( 150 ) ( 642 ) — ( 642 )

Issuance of common stock and reclassification of XPO investment 114,626 1 ( 2,345 ) 2,344 — — — — —

Balance as of September 30, 2021 114,636 $ 1 $ — $ 2,348 $ 70 $ ( 123 ) $ 2,296 $ 41 $ 2,337

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

Investment Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Equity Before Noncontrolling Interest Noncontrolling Interest Total Equity

Vesting of stock-based compensation awards 265 — — — — — — —

Tax withholding on vesting of stock-based compensation awards ( 104 ) — ( 4 ) — — ( 4 ) — ( 4 )

Balance as of March 31, 2023 118,889 $ 1 $ 2,580 $ 348 $ ( 244 ) $ 2,685 $ 34 $ 2,719

(Shares in thousands,

dollars in millions) Common Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Loss Equity Before

Noncontrolling

Interests Noncontrolling

Interests Total

Shares Amount

3 unchanged sentences

Stock-based compensation — — 6 — — 6 — 6

Vesting of stock compensation awards 10 — — — — — — — —

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

Net transfers (to) from XPO, including separation adjustments — — ( 447 ) — — ( 150 ) ( 597 ) 40 ( 557 )

Issuance of common stock and reclassification of XPO investment 114,626 1 ( 2,345 ) 2,344 — — — — —

Other — — — — — — — ( 3 ) ( 3 )

Balance as of September 30, 2021 114,636 $ 1 $ — $ 2,348 $ 70 $ ( 123 ) $ 2,296 $ 41 $ 2,337

Vesting of stock-based compensation awards 318 — — — — — — —

Tax withholding on vesting of stock-based compensation awards ( 137 ) — ( 11 ) — — ( 11 ) — ( 11 )

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

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

See accompanying Notes to Condensed Consolidated Financial Statements.

5 unchanged sentences

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

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

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

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

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

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

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

(“XPO”) (the “Separation”).

Prior to the Separation, the Company’s financial statements were prepared on a standalone combined basis and were derived from the consolidated financial statements and accounting records of XPO.

On August 2, 2021, the Company became a standalone publicly traded company, and its financial statements post-Separation are prepared on a consolidated basis.

The combined consolidated financial statements for all periods presented prior to the Separation are now also referred to as “Condensed Consolidated Financial Statements” and have been prepared under GAAP.

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

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

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

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 proportional adjusted earnings before interest, taxes, depreciation and amortization, which include adjustments for transaction and integration costs, as well as restructuring costs and other adjustments, or headcount.

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

Depreciation and amortization expense;

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

Operating results for the three months ended March 31, 2023, are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

The Company’s Condensed Consolidated Financial Statements include the accounts of GXO and its majority-owned subsidiaries and variable interest entities of which the Company is the primary beneficiary.

The Company has eliminated intercompany accounts and transactions.

The accompanying unaudited Condensed Consolidated Financial Statements and Notes thereto should be read in conjunction with the Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”).

The Company presents its operations as one reportable segment.

Recently Adopted Accounting Pronouncements

In October 2021, the Financial Accounting Standards Board (“FASB”) issued ASU No.

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

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

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 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 Company’s Condensed Consolidated Financial Statements.

In 2020, the Financial Accounting Standards Board (“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 if certain criteria are met.

The ASU applies 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 2021, the FASB expanded the scope of the guidance to include derivatives.

In 2022, the FASB deferred the expiration date for Topic 848 from December 31, 2022, until December 31, 2024.

On March 9, 2023, the Company entered into Amendment No.

1 to its revolving credit facility replacing LIBOR-based benchmark rates with SOFR-based benchmark rates and other conforming changes (the “Revolving Credit Facility”).

The Company has transitioned its existing contracts to a replacement index.

ASU 2020-04 and its amendments did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

Revenue Recognition

Revenue disaggregated by geographical area was as follows:

Three Months Ended Nine Months Ended

September 30, September 30,

Three Months Ended March 31,

(In millions) 2023 2022

6 unchanged sentences

Total $ 2,323 $ 2,083

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

Revenue disaggregated by industries was as follows:

Three Months Ended Nine Months Ended

September 30, September 30,

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

Revenue disaggregated by industry was as follows:

Three Months Ended March 31,

(In millions) 2023 2022

Omnichannel retail $ 968 $ 825

Food and beverage 335 361 1,009 972

Technology and consumer electronics 366 305

Food and beverage 307 338

Industrial and manufacturing 272 263

2 unchanged sentences

Total $ 2,323 $ 2,083

Contract Balances

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

Contract assets (1)

Contract liabilities (2)

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

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

Revenue recognized included the following:

Three Months Ended Nine Months Ended

September 30, September 30,

(In millions) 2022 2021 2022 2021

Amounts included in the beginning of year contract liability balance $ 12 $ 3 $ 83 $ 68

Remaining Performance Obligations

As of September 30, 2022, the fixed consideration component of the Company’s remaining performance obligations was approximately $ 3.0 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.

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

The Clipper Acquisition was subject to review by the Competition and Markets Authority in the United Kingdom (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 $ 7 million and $ 41 million for the three and nine months ended September 30, 2022, respectively.

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

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

(ii) the Company entered into a 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 7.

Debt and Financing Arrangements.

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

For the three and nine months ended September 30, 2022, the Company recorded $ 239 million and $ 319 million of revenue, respectively, and $ — million and $ 1 million of 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)

Current assets

Cash and cash equivalents $ 26

Accounts receivable 146

Contract Assets and Liabilities

Contract assets consist of two components, customer acquisition costs and costs to fulfill a contract.

Contract assets are primarily amortized to Direct operating expense in the Condensed Consolidated Statements of Operations over the contract term.

Contract liabilities represent the Company’s obligation to transfer services to a customer for which the Company has received consideration or the amount is due from the customer.

The contract asset and contract liability balances from contracts with customers were as follows:

(In millions) March 31, 2023 December 31, 2022

Contract assets included in:

Other current assets $ 13 $ 25

Total current assets 235

Long-term assets

Property and equipment 83

Operating lease assets 214

Intangible assets (1)

Other long-term assets 163 165

Total long-term assets 709

Total assets $ 944

Current liabilities

Accounts payable $ 87

Accrued expenses 104

Short-term borrowings and obligations under finance leases 54

Current operating lease liabilities 37

Total contract assets $ 176 $ 190

Contract liabilities included in:

Other current liabilities $ 169 $ 154

Total current liabilities

Long-term liabilities

Long-term debt and obligations under finance leases 10

Long-term operating lease liabilities 170

Other long-term liabilities 126 134

Total long-term liabilities

Total liabilities $ 625

Net assets purchased $ 319

Cash paid $ 900

Common stock issued (2)

Purchase price paid $ 1,103

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 on the acquisition date.

(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 European reporting unit and was primarily attributed to anticipated synergies.

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

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

The Company expects to finalize 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, intangible assets 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 as of January 1, 2021.

Three Months Ended Nine Months Ended

September 30, September 30,

(In millions) 2022 2021 2022 2021

Revenue $ 2,287 $ 2,253 $ 6,982 $ 6,489

Income before income taxes 83 42 236 80

Kuehne + Nagel Acquisition

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

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

The Company recorded assets and liabilities at fair value.

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

Restructuring 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 and are intended to improve efficiency and profitability.

The restructuring liability rollforward was as follows:

Total contract liabilities $ 295 $ 288

Revenue included the following:

Three Months Ended March 31,

(In millions) 2023 2022

Balance as of December 31, 2021

Charges incurred 6

Payments ( 7 )

Balance as of September 30, 2022

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

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

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

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

Amounts included in the beginning-of-year contract liability balance

Remaining Performance Obligations

As of March 31, 2023, the fixed consideration component of the Company’s remaining performance obligation was approximately $ 3.3 billion, and the Company expects to recognize approximately 73 % of that amount over the next three years and the remainder thereafter.

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

In addition, the Company has finance leases for equipment.

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

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

(In millions) March 31, 2023 December 31, 2022

Operating leases:

5 unchanged sentences

Property and equipment, net $ 125 $ 123

Short-term obligations under finance leases $ 35 $ 34

Long-term obligations under finance leases 98 133

Current debt $ 38 $ 35

Long-term debt 90 97

Total finance lease liabilities $ 128 $ 132

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

Three Months Ended Nine Months Ended

September 30, September 30,

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

Three Months Ended March 31,

(In millions) 2023 2022

5 unchanged sentences

Finance leases:

Amortization of leased assets $ 5 $ 8 $ 23 $ 25

Amortization of leases $ 7 $ 7

Interest expense on lease liabilities 1 1

1 unchanged sentence

Total operating and finance lease cost $ 280 $ 219

(1) Operating lease cost is primarily included in Direct operating expenses in the Condensed Consolidated Statements of Operations.

Supplemental cash flow information was as follows:

Nine Months Ended September 30,

(In millions) 2022 2021

Leased assets obtained in exchange for new operating lease liabilities, including $ 207 and $ 281 from an acquisition in 2022 and 2021, respectively

Leased assets obtained in exchange for new finance lease liabilities, including $ 16 and $ 23 from an acquisition in 2022 and 2021, respectively

The following table presents the changes in goodwill for the period:

Three Months Ended March 31,

(In millions) 2023 2022

Balance as of December 31, 2021 $ 2,017

Acquisition (1)

Foreign exchange translation ( 198 )

Balance as of September 30, 2022 $ 2,603

(1) Any change in the goodwill amounts resulting from foreign currency translations are presented as “Foreign exchange translation.”

Leased assets obtained in exchange for new operating lease liabilities $ 73 $ 154

Leased assets obtained in exchange for new finance lease liabilities 3 1

Debt and Financing Arrangements

The following table summarizes the carrying value of our debt:

The following table summarizes the carrying value of debt:

(In millions) Rate (1)

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

1.65 % Unsecured notes due 2026 (2)

3 unchanged sentences

Two-Year Term Loan due 2024 (3)

6.02 % 115 115

Three-Year Term Loan due 2025 (4)

6.02 % 234 234

Five-Year Term Loan due 2027 (4)

6.14 % 499 499

Finance leases and other Various 139 164

Total debt and obligations under finance leases $ 1,883 $ 961

Short-term borrowings and obligations under finance leases 94 34

Total long-term debt and obligations under finance leases $ 1,789 $ 927

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

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

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

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

Five-Year Term Loan

On May 25, 2022, the Company entered into a five-year unsecured Term Loan (the “ Five-Year Term Loan”) 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 2 -year term loan tranche (the “ Two-Year Term Loan”) and a $ 235 million 3 -year term loan tranche (the “ Three-Year Term Loan”) that will mature on May 26, 2024 and May 26, 2025, respectively.

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

Bridge Term Loan

On February 28, 2022, the Company entered into an unsecured Bridge Term Loan (the “Bridge Term Loan”) that provided a £ 745 million 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.

Revolving Credit Facility

In 2021, 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 is available for the issuance of letters of credit.

No amounts were outstanding under the Revolving Credit Facility as of September 30, 2022 or December 31, 2021.

Sales of Certain Receivables

Total debt $ 1,781 $ 1,806

Current debt 84 67

Total Long-term debt $ 1,697 $ 1,739

(1) Interest rate as of March 31, 2023.

(2) Net of unamortized debt issuance costs of $ 3 million as of March 31, 2023 and December 31, 2022.

(3) As of March 31, 2023, $ 35 million is classified as current debt as it was repaid on April 7, 2023.

(4) Net of unamortized debt issuance costs of $ 1 million as of March 31, 2023 and December 31, 2022.

Factoring Programs

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.

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

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

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

Information related to the trade receivables sold was as follows:

Three Months Ended Nine Months Ended

September 30, September 30,

Three Months Ended March 31,

(In millions) 2023 2022

Factoring agreements

Receivables sold in period $ 263 $ 229

Cash consideration 261 228

Securitization program

Receivables sold in period $ — $ 418 $ — $ 1,320

Cash consideration — 418 — 1,320

Net cash provided in operating cash flows (1)

(1) The three months ended March 31, 2022 includes $ 124 million of cash provided by factoring programs, reduced by $ 118 million used in the securitization program that was terminated in the first quarter of 2022.

Covenants and Compliance

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

The covenants in the unsecured notes, term loans and 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 September 30, 2022, the Company was in compliance with the covenants contained in its debt and financing arrangements.

As of March 31, 2023, the Company was in compliance with the covenants contained in its debt and financing arrangements.

Fair Value Measurements and Financial Instruments

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The Company bases its fair value estimates on market assumptions and available information.

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

The carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and current maturities of long-term debt approximated their fair values as of March 31, 2023, and December 31, 2022, due to their short-term nature.

The fair value of debt was as follows:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

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

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The Company directly manages its exposure to risks arising from business operations and economic factors, including fluctuations in interest rates and foreign currencies.

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

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 and interest rates.

1 unchanged sentence

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

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 connection with the extensions and amendments, the Company received cash of $ 16 million and $ 28 million representing the fair value of the swap plus interest accrued through the date of termination for the three and nine months ended September 30, 2022, respectively.

In November 2022, the Company amended certain fixed-to-fixed cross-currency swap agreements scheduled to mature in 2027 to 2026, with an

aggregate notional amount of $ 322 million, the amendments were not material to the Condensed Consolidated Financial Statements.

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 Accumulated Other Comprehensive Income (“AOCI”) and are reclassified into Interest expense, net over the life of the underlying debt, as interest on the Company’s floating rate debt is accrued.

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

Foreign Currency Exchange Rate Risk

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

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

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

The foreign currency forward contracts generally expire within 12 months.

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

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

September 30, 2022 December 31, 2021

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

Derivatives designated as hedges

Cross-currency swap agreements $ 1,387 $ 103 $ — $ — Other long-term assets

Interest rate swaps 250 11 — — Other long-term assets

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

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

Derivatives not designated as hedges

Foreign currency option contracts $ 105 $ 18 $ 368 $ 11 Other current assets

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

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

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

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

Derivatives designated as hedges

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

Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022

(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 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)

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

March 31, 2023

Notional Derivative Assets (1)

Derivative Liabilities (2)

Designated as hedges

Cross-currency swap agreements $ 1,337 $ 22 $ 27

Interest rate swaps 250 6 —

Not designated as hedges

Foreign currency option contracts $ 241 $ 1 $ 5

Foreign currency forward contracts 44 — —

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

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

December 31, 2022

Notional Derivative Assets (1)

Derivative Liabilities (2)

Designated as hedges

Cross-currency swap agreements $ 1,337 $ 22 $ 13

Interest rate swaps 250 9 —

Not designated as hedges

Foreign currency option contracts $ 354 $ — $ 5

Foreign currency forward contracts 3 — —

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

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

As of March 31, 2023 and December 31, 2022, the derivatives are classified as Level 2 within the fair value hierarchy.

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

Three Months Ended March 31, 2023

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

Gain (Loss) Recognized in Net Income on Derivatives

(Excluded from effectiveness testing) (1)

Derivatives designated as net investment hedges

3 unchanged sentences

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

Three Months Ended September 30, 2021 Nine Months Ended September 30, 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 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)

Three Months Ended March 31, 2022

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

Gain (Loss) Recognized in Net Income on Derivatives

(Excluded from effectiveness testing) (1)

Derivatives designated as net investment hedges

3 unchanged sentences

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

Three Months Ended Nine Months Ended

September 30, September 30,

Three Months Ended March 31,

(In millions) 2023 2022

Realized gain $ 10 $ — $ 19 $ —

Unrealized gain (loss) ( 1 ) 1 14 1

Total gain recognized in net income $ 9 $ 1 $ 33 $ 1

Realized gain (loss) $ ( 2 ) $ 2

Unrealized gain 1 6

Total gain (loss) $ ( 1 ) $ 8

Stockholders’ Equity

The following table summarizes the changes in AOCL by component:

(In millions) Foreign

Adjustments Cash

Hedges Defined

attributable to

noncontrolling

interest AOCL

As of December 31, 2022 $ ( 149 ) $ 7 $ ( 112 ) $ — $ ( 254 )

Unrealized gain (loss), net of tax 11 ( 3 ) — — 8

Amounts reclassified from AOCL to net income 2 — — — 2

Other comprehensive income (loss), net of tax 13 ( 3 ) — — 10

As of March 31, 2023 $ ( 136 ) $ 4 $ ( 112 ) $ — $ ( 244 )

(In millions) Foreign

Adjustments Cash

Hedges Defined

attributable to

noncontrolling

interest AOCL

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

Unrealized gain (loss), net of tax ( 43 ) — — 1 ( 42 )

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

Other comprehensive income (loss), net of tax ( 45 ) — — 1 ( 44 )

Deconsolidation of variable interest entity 4 — ( 2 ) 2

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

Employee Benefit Plans

Defined Benefit Plans

In July 2021, the Company became the plan sponsor for a retirement plan in the U.K.

The Company sponsors a retirement plan in the U.K.

Retirement Plan”).

Components of the net periodic benefit cost under the U.K.

Components of the net periodic benefit cost recognized under the U.K.

Retirement Plan were as follows:

Three Months Ended Nine Months Ended

September 30, September 30,

Three Months Ended March 31,

(In millions) 2023 2022

1 unchanged sentence

Expected return on plan assets 12 15

Net periodic benefit income (1)

$ 7 $ 10 $ 25 $ 10

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

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

Net periodic pension income (1)

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

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

Defined Contribution Plans

The Company’s costs for qualified defined contribution plans were $ 4 million for both the three months ended September 30, 2022 and 2021, and $ 12 million for both the nine months ended September 30, 2022 and 2021.

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

Earnings Per Share

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

Three Months Ended Nine Months Ended

September 30, September 30,

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

2022 2021 (1)

Net income attributable to common shares $ 63 $ 72 $ 151 $ 97

Basic weighted-average common shares 118,621 114,629 116,508 114,627

Dilutive effect of stock-based awards 444 900 599 900

Diluted weighted-average common shares 119,065 115,529 117,107 115,527

Basic earnings per share $ 0.53 $ 0.63 $ 1.30 $ 0.84

Diluted earnings per share $ 0.53 $ 0.62 $ 1.29 $ 0.84

Antidilutive shares excluded from diluted weighted-average common shares 2,013 — 1,735 —

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

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

Stockholders’ Equity

The following table summarizes the changes in AOCI by component:

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

AOCI attributable to noncontrolling interest AOCI attributable to GXO

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

Foreign currency translation loss ( 111 ) — — 2 ( 109 )

Unrealized gain on hedges, net of tax 69 9 — — 78

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

Other comprehensive income (loss), net of tax ( 43 ) 9 — 2 ( 32 )

Balance as of September 30, 2022 $ ( 212 ) $ 9 $ ( 76 ) $ 1 $ ( 278 )

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

AOCI attributable to noncontrolling interest AOCI attributable to GXO

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

Foreign currency translation loss ( 260 ) — — 4 ( 256 )

Unrealized gain on hedges, net of tax 102 9 — — 111

Amounts reclassified from AOCI to net income ( 5 ) — — — ( 5 )

Other comprehensive income (loss), net of tax ( 163 ) 9 — 4 ( 150 )

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

Balance as of September 30, 2022 $ ( 212 ) $ 9 $ ( 76 ) $ 1 $ ( 278 )

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

AOCI attributable to noncontrolling interest AOCI attributable to GXO

Balance as of June 30, 2021 $ 42 $ ( 1 ) $ ( 1 ) $ ( 1 ) $ 39

Unrealized loss, net of tax ( 10 ) — — — ( 10 )

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

Other comprehensive loss, net of tax ( 12 ) — — — ( 12 )

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

Balance as of September 30, 2021 $ ( 38 ) $ ( 1 ) $ ( 83 ) $ ( 1 ) $ ( 123 )

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

AOCI attributable to noncontrolling interest AOCI attributable to GXO

The Company has defined contribution retirement plans for its U.S.

employees and employees of certain foreign subsidiaries.

The Company’s contributions for the three months ended March 31, 2023 and 2022, were $ 17 million and $ 14 million, respectively, and were primarily included in Direct operating expenses in the Condensed Consolidated Statements of Operations.

Restructuring Costs and Other

Restructuring costs are primarily related to severance, including projects to optimize finance, human resource and information technology functions, and are not associated with customer attrition.

For the three months ended March 31, 2023, restructuring costs and other totaled $ 21 million and included severance charges of $ 15 million and impairment charges of $ 6 million as a result of closing certain corporate and administrative offices.

For the three months ended March 31, 2022, restructuring costs and other totaled $ 13 million and included severance charges of $ 5 million and $ 8 million related to the deconsolidation of a joint venture.

The following is a roll forward of the restructuring liability, which is included in Other current liabilities in the Condensed Consolidated Balance Sheets:

(In millions)

Balance as of December 31, 2022 $ 13

Unrealized loss, net of tax ( 28 ) ( 1 ) — — ( 29 )

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

Other comprehensive loss, net of tax ( 30 ) ( 1 ) — — ( 31 )

Transfers to (from) XPO, net of tax ( 69 ) — ( 82 ) 1 $ ( 150 )

Balance as of September 30, 2021 $ ( 38 ) $ ( 1 ) $ ( 83 ) $ ( 1 ) $ ( 123 )

Charges incurred 15

Payments ( 8 )

Balance as of March 31, 2023 $ 20

The remaining restructuring liability at March 31, 2023 primarily relates to severance payments and is expected to be substantially paid within the next twelve months.

The effective tax rate for the first quarter of 2023 was 11.0 percent, a decrease from 22.1 percent in the prior year.

The change in our effective tax rate was primarily driven by discrete tax benefits from the release of valuation allowances as it is more likely than not that the deferred income tax assets will be realized.

As of March 31, 2023 and December 31, 2022, the Company had valuation allowances of $ 39 million and $ 44 million on its deferred income tax asset, respectively.

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 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 value 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)

Current assets

Cash and cash equivalents $ 26

Accounts receivable 143

Other current assets 67

Total current assets 236

Long-term assets

Property and equipment 80

Operating lease assets 219

Intangible assets (1)

Other long-term assets 30

Total long-term assets 721

Total assets $ 957

Current liabilities

Accounts payable $ 81

Accrued expenses 97

Current debt 56

Current operating lease liabilities 43

Other current liabilities 50

Total current liabilities

Long-term liabilities

Long-term debt 10

Long-term operating lease liabilities 175

Other long-term liabilities 161

Total long-term liabilities 346

Total liabilities $ 673

Net assets purchased $ 284

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 Company does not expect the goodwill recognized as a part of the acquisition of Clipper to be deductible for income tax purposes.

The fair value 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 finalization of income taxes and goodwill.

Commitments and Contingencies

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

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

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

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

10 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements