What changed in this filing

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Item 1. Financial Statements

2023-08-03 compared with 2023-05-10 · 181 added, 86 removed, 394 unchanged (40% of the section changed)

2 unchanged sentences

Condensed Consolidated Statements of Operations

Three Months Ended March 31,

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

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

13 unchanged sentences

Net income attributable to GXO $ 65 $ 51 $ 90 $ 88

Earnings per share data

Earnings per share

Basic $ 0.55 $ 0.44 $ 0.76 $ 0.76

6 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income (Loss)

Three Months Ended March 31,

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

(In millions) 2023 2022 2023 2022

1 unchanged sentence

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

Foreign currency translation gain (loss), net of tax (expense) benefit of $ 6 , $( 10 ), $ 9 and $( 10 )

17 ( 75 ) 30 ( 120 )

Net unrealized gain on cash flow hedges, net of tax (expense) of $( 1 ), $ 0 , $ 0 and $ 0

Defined benefit plans, amortization of net loss, net of tax of $ 0 , $ 0 , $ 0 and $ 0

Other comprehensive income (loss), net of tax 22 ( 75 ) 32 ( 120 )

5 unchanged sentences

Condensed Consolidated Balance Sheets

March 31, December 31,

June 30, December 31,

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

41 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31,

Six Months Ended June 30,

(In millions) 2023 2022

14 unchanged sentences

Proceeds from sales of property and equipment 10 6

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

Net proceeds from cross-currency swap agreements — 10

Net cash used in investing activities ( 140 ) ( 1,003 )

Cash flows from financing activities:

Proceeds from issuance of debt, net — 898

Repayments of debt, net ( 138 ) —

1 unchanged sentence

Taxes paid related to stock-based compensation awards ( 6 ) ( 12 )

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

Other 5 ( 2 )

Net cash provided by (used in) financing activities ( 155 ) 869

Effect of exchange rates on cash and cash equivalents 5 ( 15 )

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

Net (decrease) increase in cash and cash equivalents ( 190 ) 51

Cash and cash equivalents, beginning of period 495 333

Cash and cash equivalents, end of period

Supplemental disclosure of non-cash activities:

Common stock issued for acquisition $ — $ 203

See accompanying Notes to Condensed Consolidated Financial Statements.

11 unchanged sentences

dollars in millions) Shares Amount

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

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

Net income — — — 65 — 65 1 66

3 unchanged sentences

Tax withholding on vesting of stock-based compensation awards ( 28 ) — ( 2 ) — — ( 2 ) — ( 2 )

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

Dividends — — — — — — ( 3 ) ( 3 )

Balance as of June 30, 2023 118,932 $ 1 $ 2,587 $ 413 $ ( 223 ) $ 2,778 $ 33 $ 2,811

(Shares in thousands,

10 unchanged sentences

Net income — — — 90 — 90 2 92

Other comprehensive loss — — — — ( 44 ) ( 44 ) ( 1 ) ( 45 )

Other comprehensive income — — — — 31 31 1 32

Stock-based compensation — — 18 — — 18 — 18

1 unchanged sentence

Tax withholding on vesting of stock-based compensation awards ( 132 ) — ( 6 ) — — ( 6 ) — ( 6 )

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

Dividends — — — — — — ( 3 ) ( 3 )

Balance as of June 30, 2023 118,932 $ 1 $ 2,587 $ 413 $ ( 223 ) $ 2,778 $ 33 $ 2,811

See accompanying Notes to Condensed Consolidated Financial Statements.

GXO Logistics, Inc.

Condensed Consolidated Statements of Changes in Equity

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

Net income — — — 51 — 51 1 52

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

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

Vesting of stock compensation awards 23 — — — — — — —

Tax withholding on vesting of stock compensation awards ( 2 ) — ( 1 ) — — ( 1 ) — ( 1 )

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

Dividends — — — — — — ( 3 ) ( 3 )

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

Common Stock 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, 2021 114,659 $ 1 $ 2,354 $ 126 $ ( 130 ) $ 2,351 $ 39 $ 2,390

Net income — — — 88 — 88 2 90

Other comprehensive loss — — — — ( 118 ) ( 118 ) ( 2 ) ( 120 )

Stock-based compensation — — 16 — — 16 — 16

Vesting of stock compensation awards 341 — — — — — — —

Tax withholding on vesting of stock compensation awards ( 139 ) — ( 12 ) — — ( 12 ) — ( 12 )

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

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

Dividends — — — — — — ( 3 ) ( 3 )

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

See accompanying Notes to Condensed Consolidated Financial Statements.

7 unchanged sentences

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

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

Operating results for the interim periods 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.

1 unchanged sentence

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”).

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

The Company presents its operations as one reportable segment.

11 unchanged sentences

Revenue disaggregated by geographical area was as follows:

Three Months Ended March 31,

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

(In millions) 2023 2022 2023 2022

4 unchanged sentences

Spain 136 123 263 243

Italy 94 80 182 162

Other 164 145 316 295

Total $ 2,394 $ 2,156 $ 4,717 $ 4,239

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,

The Company’s revenue can also be disaggregated by the customer’s primary industry.

Revenue disaggregated by industries was as follows:

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

(In millions) 2023 2022 2023 2022

11 unchanged sentences

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

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

June 30, December 31,

(In millions) 2023 2022

Contract assets included in:

7 unchanged sentences

Revenue included the following:

Three Months Ended March 31,

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

(In millions) 2023 2022 2023 2022

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

$ 16 $ 8 $ 98 $ 71

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.

As of June 30, 2023, the fixed consideration component of the Company’s remaining performance obligation was approximately $ 3.5 billion, and the Company expects to recognize approximately 74 % 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.

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.

In addition, the Company has finance leases for warehouse equipment.

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

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

June 30, December 31,

(In millions) 2023 2022

Operating leases:

9 unchanged sentences

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

Three Months Ended March 31,

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

(In millions) 2023 2022 2023 2022

4 unchanged sentences

Total operating lease cost (1)

$ 275 $ 216 $ 547 $ 427

Finance leases:

5 unchanged sentences

Supplemental cash flow information was as follows:

Three Months Ended March 31,

Six Months Ended June 30,

(In millions) 2023 2022

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

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

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

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

Debt and Financing Arrangements

The following table summarizes the carrying value of debt:

June 30, December 31,

(In millions) Rate (1)

March 31, 2023 December 31, 2022

1.65 % Unsecured notes due 2026 (2)

3 unchanged sentences

Two-Year Term Loan due 2024 (4)

6.02 % 115 115

Three-Year Term Loan due 2025 (5)

6 unchanged sentences

Total Long-term debt $ 1,625 $ 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.

(1) Interest rate as of June 30, 2023.

(2) Net of unamortized debt issuance costs of $ 2 million as of June 30, 2023 and $ 3 million as of December 31, 2022.

(3) Net of unamortized debt issuance costs of $ 3 million as of June 30, 2023 and December 31, 2022.

(4) Repaid in the second quarter of 2023.

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

(6) Net of unamortized debt issuance costs of $ 1 million as of June 30, 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 sells certain of its trade receivables on a non-recourse basis to third-party financial institutions under various factoring agreements.

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.

Information related to the trade receivables sold was as follows:

Three Months Ended March 31,

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

(In millions) 2023 2022 2023 2022

1 unchanged sentence

Cash consideration 268 228 529 456

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.

Net cash used in operating cash flows (1)

— ( 8 ) — ( 2 )

(1) The three months ended June 30, 2022, includes $ 8 million of cash used by factoring programs.

The six months ended June 30, 2022, includes $ 116 million of cash provided by factoring program, reduced by $ 118 million of cash used in the securitization program that was terminated in the first quarter of 2022.

Covenants and Compliance

1 unchanged sentence

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

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

As of June 30, 2023, the Company was in compliance with the covenants contained in its debt and financing arrangements.

Fair Value Measurements and Financial Instruments

8 unchanged sentences

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

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

The carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and current maturities of long-term debt approximated their fair values as of June 30, 2023, and December 31, 2022, due to their short-term nature.

The fair value of debt was as follows:

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

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

11 unchanged sentences

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.

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

March 31, 2023

Notional Derivative Assets (1)

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

June 30, 2023

(In millions) Notional Derivative Assets (1)

Derivative Liabilities (2)

4 unchanged sentences

Foreign currency option contracts $ 315 $ 4 $ —

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.

(3) In June 2023, the Company amended one interest rate swap scheduled to mature in 2027 to 2024, with a notional amount of $ 125 million.

In connection with this amendment, the Company received $ 2 million of cash representing the fair value of the reduced term.

December 31, 2022

Notional Derivative Assets (1)

(In millions) Notional Derivative Assets (1)

Derivative Liabilities (2)

7 unchanged sentences

(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)

As of June 30, 2023 and December 31, 2022, the derivatives were classified as Level 2 within the fair value hierarchy.

The effect of hedges on accumulated other comprehensive loss (“AOCL”) and in the Condensed Consolidated Statements of Operations was as follows:

Three Months Ended June 30, 2023 Six Months Ended June 30, 2023

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

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

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

Gain (Loss) Recognized in Net Income on Derivative (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 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)

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

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

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

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

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

Derivatives designated as net investment hedges

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

Derivatives designated as cash flow hedges

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

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

1 unchanged sentence

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 March 31,

Three Months Ended June 30, Six Months Ended

(In millions) 2023 2022 2023 2022

Realized gain (loss) $ ( 2 ) $ 2

Unrealized gain 1 6

Total gain (loss) $ ( 1 ) $ 8

Realized foreign currency contracts gain (loss) $ ( 4 ) $ 7 $ ( 6 ) $ 9

Unrealized foreign currency contracts gain 3 9 4 15

Total foreign currency gain (loss) recognized in net income

$ ( 1 ) $ 16 $ ( 2 ) $ 24

Stockholders’ Equity

6 unchanged sentences

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 )

Foreign currency translation gain 33 — — ( 1 ) 32

Unrealized gain (loss) on hedges, net of tax ( 13 ) 4 — — ( 9 )

Amounts reclassified from AOCL to net income ( 3 ) — 1 — ( 2 )

Other comprehensive income, net of tax 17 4 1 ( 1 ) 21

As of June 30, 2023 $ ( 119 ) $ 8 $ ( 111 ) $ ( 1 ) $ ( 223 )

(In millions) Foreign

5 unchanged sentences

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

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

Foreign currency translation gain 57 — — ( 1 ) 56

Unrealized gain (loss) on hedges, net of tax ( 26 ) 1 — — ( 25 )

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

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

Deconsolidation of variable interest entity 4 — ( 2 ) 2

Other comprehensive income, net of tax 30 1 1 ( 1 ) 31

As of June 30, 2023 $ ( 119 ) $ 8 $ ( 111 ) $ ( 1 ) $ ( 223 )

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

AOCI attributable to noncontrolling interest AOCL attributable to GXO

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

Foreign currency translation loss ( 107 ) — — 1 ( 106 )

Unrealized gain on hedges, net of tax 34 — — — 34

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

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

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

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

AOCI attributable to noncontrolling interest AOCL attributable to GXO

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

Foreign currency translation loss ( 152 ) — — 2 ( 150 )

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

Amounts reclassified from AOCL to net income ( 4 ) — — — ( 4 )

Other comprehensive loss, net of tax ( 120 ) — — 2 ( 118 )

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

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

Employee Benefit Plans

4 unchanged sentences

Retirement Plan were as follows:

Three Months Ended March 31,

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

(In millions) 2023 2022 2023 2022

1 unchanged sentence

Expected return on plan assets 12 14 24 29

Amortization of net loss ( 1 ) — ( 1 ) —

Net periodic pension income (1)

$ 2 $ 9 $ 4 $ 18

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

3 unchanged sentences

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.

The Company’s contributions for both the three months ended June 30, 2023 and 2022 were $ 5 million.

For the six months ended June 30, 2023 and 2022 were $ 22 million and $ 19 million, respectively.

Defined contribution costs were primarily recorded 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.

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

For the three months ended June 30, 2023, restructuring costs and other totaled $ 3 million and related to severance charges.

For the six months ended June 30, 2023, restructuring costs and other totaled $ 24 million and included severance charges of $ 18 million and impairment charges of $ 6 million as a result of closing certain corporate and administrative offices.

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

3 unchanged sentences

Payments ( 21 )

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.

Balance as of June 30, 2023 $ 10

The remaining restructuring liability at June 30, 2023 primarily relates to severance payments and is expected to be substantially paid within the next twelve months.

The effective tax rate was 23.0 % for the three months ended June 30, 2023, compared with 29.4 % for the same period in 2022.

The effective tax rate was 19.9 % for the six months ended June 30, 2023, compared with 26.4 % for the same period in 2022.

The decrease in our effective tax rate for the three and six months was primarily driven by a decrease in pre-tax losses in certain jurisdictions for which no benefit was recognized and higher transaction costs for the same period in 2022 related to the Clipper Acquisition which were non deductible.

The decrease in our effective tax rate for the six months ended June 30, 2023 also reflects a valuation allowance release.

As of June 30, 2023 and December 31, 2022, the Company had valuation allowances of $ 39 million and $ 44 million on its deferred income tax asset, respectively.

The following table presents the changes in goodwill for the six months ended June 30, 2023:

(In millions)

Balance as of December 31, 2022 $ 2,728

Acquisition (1)

Impact of foreign exchange translation (2)

Balance as of June 30, 2023 $ 2,802

(1) Represents the finalization of the purchase price allocation for the Clipper Acquisition.

See Note 11 — Acquisition for additional information.

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

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”).

2 unchanged sentences

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:

The following table summarizes the final fair values of identifiable assets acquired and liabilities assumed at the acquisition date:

(In millions)

33 unchanged sentences

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.

The Company does not expect the goodwill recognized in connection with the Clipper Acquisition to be deductible for income tax purposes.

Commitments and Contingencies

3 unchanged sentences

The Company reviews and adjusts accruals for loss contingencies quarterly and as additional information becomes available.

If a loss is not both probable and reasonably estimable, or if an exposure to loss exists in excess of the amount accrued, the Company assesses whether there is at least a reasonable possibility that a loss, or additional loss, may have been incurred.

If a loss is not both probable and

reasonably estimable, or if an exposure to a loss exists in excess of the amount accrued, the Company assesses whether there is at least a reasonable possibility that a loss, or additional loss, may have been incurred.

If there is a reasonable possibility that a loss, or additional loss, may have been incurred, the Company discloses the estimate of the possible loss or range of loss if it is material and an estimate can be made, or discloses that such an estimate cannot be made.

3 unchanged sentences

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’s financial condition, results of operations or cash flows.

Legal costs incurred related to these matters are expensed as incurred.

Legal costs related to these matters are expensed as they are incurred.

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

1 unchanged sentence

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