What changed in this filing

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Item 1. Financial Statements

2024-05-08 compared with 2023-11-08 · 217 added, 293 removed, 280 unchanged (65% of the section changed)

2 unchanged sentences

Condensed Consolidated Statements of Operations

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

Three Months Ended March 31,

(Dollars in millions, shares in thousands, except per share amounts) 2024 2023

5 unchanged sentences

Restructuring costs and other 16 21

Operating income 90 72 231 168

Litigation expense 63 —

Operating income (loss) ( 39 ) 42

Other income, net 6 —

Interest expense, net ( 13 ) ( 13 )

Income before income taxes 83 83 198 205

Income tax expense ( 15 ) ( 19 ) ( 38 ) ( 51 )

Net income 68 64 160 154

Net income attributable to noncontrolling interests ( 2 ) ( 1 ) ( 4 ) ( 3 )

Net income attributable to GXO $ 66 $ 63 $ 156 $ 151

Earnings per share

Income (loss) before income taxes ( 46 ) 29

Income tax (expense) benefit 10 ( 3 )

Net income (loss) ( 36 ) 26

Net income attributable to Noncontrolling Interests (“NCI”) ( 1 ) ( 1 )

Net income (loss) attributable to GXO $ ( 37 ) $ 25

Earnings (loss) per share

Basic $ ( 0.31 ) $ 0.21

5 unchanged sentences

GXO Logistics, Inc.

Condensed Consolidated Statements of Comprehensive Income

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

Condensed Consolidated Statements of Comprehensive Income (Loss)

Three Months Ended March 31,

(In millions) 2024 2023

Net income $ 68 $ 64 $ 160 $ 154

Net income (loss) $ ( 36 ) $ 26

Other comprehensive income (loss), net of tax

Foreign currency translation loss, net of tax expense of $( 9 ), $( 22 ), $ 0 and $( 32 )

( 69 ) ( 43 ) ( 39 ) ( 163 )

Net unrealized gain on cash flow hedges, net of tax expense of $( 1 ), $( 2 ), $( 1 ) and $( 2 )

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

Other comprehensive loss, net of tax ( 68 ) ( 34 ) ( 36 ) ( 154 )

Comprehensive income — 30 124 —

Comprehensive income (loss) attributable to noncontrolling interest — ( 1 ) 3 ( 1 )

Comprehensive income attributable to GXO $ — $ 31 $ 121 $ 1

Foreign currency translation adjustments ( 14 ) 13

Cash flow hedges 1 ( 3 )

Pension plans 2 —

Other comprehensive income (loss), net of tax ( 11 ) 10

Comprehensive income (loss), net of tax ( 47 ) 36

Comprehensive income attributable to NCI — 1

Comprehensive income (loss) attributable to GXO $ ( 47 ) $ 35

See accompanying Notes to Condensed Consolidated Financial Statements.

1 unchanged sentence

Condensed Consolidated Balance Sheets

September 30, December 31,

March 31, December 31,

(Dollars in millions, shares in thousands, except per share amounts) 2024 2023

31 unchanged sentences

10,000 shares authorized, none issued and outstanding

Additional paid-in capital 2,593 2,575

Additional Paid-In Capital (“APIC”) 2,602 2,598

Retained earnings 515 552

Accumulated Other Comprehensive Income (Loss) (“AOCIL”) ( 249 ) ( 239 )

Total stockholders’ equity before noncontrolling interests 2,784 2,645

Noncontrolling interests 33 33

Total stockholders’ equity before NCI 2,869 2,912

Total equity 2,903 2,946

3 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Nine Months Ended September 30,

Three Months Ended March 31,

(In millions) 2024 2023

Cash flows from operating activities:

Net income $ 160 $ 154

Adjustments to reconcile net income to net cash provided by operating activities

Net income (loss) $ ( 36 ) $ 26

Adjustments to reconcile net income (loss) to net cash provided by operating activities

Depreciation and amortization expense 92 83

Stock-based compensation expense 8 9

Deferred tax expense (benefit)

Other 16 ( 4 )

Deferred tax benefit

Changes in operating assets and liabilities

6 unchanged sentences

Capital expenditures ( 73 ) ( 91 )

Proceeds from sales of property and equipment 13 22

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

Net proceeds from cross-currency swap agreements — 26

Proceeds from sale of property and equipment 6 9

Purchase of Wincanton plc shares ( 15 ) —

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

Cash flows from financing activities:

Proceeds from issuance of debt, net — 898

Repayments of debt, net — ( 21 )

Repayments of finance lease obligations ( 8 ) ( 8 )

Taxes paid related to stock-based compensation awards ( 7 ) ( 12 )

Net cash provided by (used in) financing activities ( 170 ) 863

Effect of exchange rates on cash, restricted cash and cash equivalents ( 2 ) ( 22 )

Net (decrease) increase in cash, restricted cash and cash equivalents ( 21 ) 101

Taxes paid related to net share settlement of equity awards ( 4 ) ( 4 )

Net cash used in financing activities ( 8 ) ( 29 )

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

Net decrease in cash, restricted cash and cash equivalents ( 45 ) ( 69 )

Cash, restricted cash and cash equivalents, beginning of period 470 495

Cash, restricted cash and cash equivalents, end of period

Reconciliation of cash, restricted cash and cash equivalents

Cash and cash equivalents $ 423 $ 426

1 unchanged sentence

Total cash, restricted cash and cash equivalents $ 425 $ 426

Non-cash investing 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 Additional

Capital Retained

Common Stock APIC Retained

Earnings AOCIL Equity Before

Noncontrolling

Interests Noncontrolling

Interests Total

NCI NCI Total

(Shares in thousands,

dollars in millions) Shares Amount

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

Net income — — — 66 — 66 2 68

Other comprehensive loss — — — — ( 66 ) ( 66 ) ( 2 ) ( 68 )

Stock-based compensation — — 7 — — 7 — 7

Vesting of stock-based compensation awards 30 — — — — — — —

Tax withholding on vesting of stock-based compensation awards ( 11 ) — ( 1 ) — — ( 1 ) — ( 1 )

Balance as of September 30, 2023 118,951 $ 1 $ 2,593 $ 479 $ ( 289 ) $ 2,784 $ 33 $ 2,817

(Shares in thousands,

dollars in millions) Common Stock Additional

Capital Retained

Earnings AOCIL Equity Before

Noncontrolling

Interests Noncontrolling

Interests Total

Shares Amount

Balance As of December 31, 2023 119,057 $ 1 $ 2,598 $ 552 $ ( 239 ) $ 2,912 $ 34 $ 2,946

Net income — — — 156 — 156 4 160

Other comprehensive loss — — — — ( 35 ) ( 35 ) ( 1 ) ( 36 )

Stock-based compensation — — 25 — — 25 — 25

Vesting of stock-based compensation awards 366 — — — — — — —

Tax withholding on vesting of stock-based compensation awards ( 143 ) — ( 7 ) — — ( 7 ) — ( 7 )

Dividends — — — — — — ( 3 ) ( 3 )

Balance as of September 30, 2023 118,951 $ 1 $ 2,593 $ 479 $ ( 289 ) $ 2,784 $ 33 $ 2,817

See accompanying Notes to Condensed Consolidated Financial Statements.

GXO Logistics, Inc.

Condensed Consolidated Statements of Changes in Equity

Common Stock Additional

Capital Retained

Earnings AOCIL Equity Before

Noncontrolling

Interests Noncontrolling

Interests Total

(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

Net income (loss) — — — ( 37 ) — ( 37 ) 1 ( 36 )

Other comprehensive loss — — — — ( 10 ) ( 10 ) ( 1 ) ( 11 )

2 unchanged sentences

Tax withholding on vesting of stock compensation awards ( 83 ) — ( 4 ) — — ( 4 ) — ( 4 )

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

Common Stock Additional

Capital Retained

Balance as of March 31, 2024 119,368 $ 1 $ 2,602 $ 515 $ ( 249 ) $ 2,869 $ 34 $ 2,903

Common Stock APIC Retained

Earnings AOCIL Equity Before

Noncontrolling

Interests Noncontrolling

Interests Total

NCI NCI Total

(Shares in thousands,

2 unchanged sentences

Net income — — — 25 — 25 1 26

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

Other comprehensive income — — — — 10 10 — 10

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

1 unchanged sentence

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

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

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

See accompanying Notes to Condensed Consolidated Financial Statements.

11 unchanged sentences

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 accompanying 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, 2023.

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.

Recently Adopted Accounting Pronouncements

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.

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.

Accounting Pronouncements Issued But Not Yet Adopted

In March 2024, the SEC adopted final rules designed to enhance public company disclosures related to the risks and impacts of climate-related matters.

The new rules include disclosures relating to climate-related risks and risk management, as well as the board and management’s governance of such risks.

In addition, the rules include requirements to disclose the financial effects of severe weather events and other natural conditions in the audited financial statements.

Larger registrants will also be required to disclose information about greenhouse gas emissions, which will be subject to a phased-in assurance requirement.

The disclosures are required for annual periods ending December 31, 2025.

In April 2024, the SEC issued an order staying the implementation of the new climate-related disclosure rules pending completion of judicial review of consolidated changes to the rules by the Court of Appeals for the Eighth Circuit.

The Company continues to monitor developments and evaluate the potential impact of these rules on its Consolidated Financial Statements.

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which provides for expanded disclosures primarily related to income taxes paid and the rate reconciliation.

The amendments are effective for annual periods beginning after December 15, 2024 and early adoption is permitted.

The guidance can be applied prospectively or retrospectively.

The Company is currently evaluating the impact of this ASU on its Consolidated Financial Statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis.

This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements.

Early adoption is permitted.

The Company is currently evaluating the impact of this ASU on its Consolidated Financial Statements.

Revenue Recognition

Revenue disaggregated by geographical area was as follows:

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

Three Months Ended March 31,

(In millions) 2024 2023

1 unchanged sentence

United States 747 714

France 207 171 626 530

Netherlands 218 196

France 200 202

Spain 129 127

Italy 97 81 279 243

Other 156 152

Total $ 2,456 $ 2,323

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

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 September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(In millions) 2024 2023

2 unchanged sentences

Food and beverage 316 307

Industrial and manufacturing 263 275 803 807

Consumer packaged goods 295 226

Industrial and manufacturing 266 270

Other 175 190

1 unchanged sentence

Contract Assets and Liabilities

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

Contract assets are 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:

September 30, December 31,

March 31, December 31,

(In millions) 2024 2023

7 unchanged sentences

Total contract liabilities $ 322 $ 325

Revenue included the following:

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

Revenue recognized included the following:

Three Months Ended March 31,

(In millions) 2024 2023

Amounts included in the beginning of year contract liability balance

$ 11 $ 12 $ 109 $ 83

Remaining Performance Obligations

As of September 30, 2023, the fixed consideration component of the Company’s remaining performance obligation was approximately $ 3.4 billion, and the Company expects to recognize approximately 72 % of that amount over the next three years and the remainder thereafter.

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.

As of March 31, 2024, the fixed consideration component of the Company’s remaining performance obligation was approximately $ 3.7 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.

1 unchanged sentence

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

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

September 30, December 31,

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

March 31, December 31,

(In millions) 2024 2023

10 unchanged sentences

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

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

Three Months Ended March 31,

(In millions) 2024 2023

4 unchanged sentences

Total operating lease cost (1)

$ 277 $ 242 $ 824 $ 669

Finance leases:

Amortization of leases $ 10 $ 5 $ 23 $ 23

Amortization of leased assets $ 7 $ 7

Interest expense on lease liabilities 1 1

3 unchanged sentences

Supplemental cash flow information was as follows:

Nine Months Ended September 30,

Three Months Ended March 31,

(In millions) 2024 2023

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

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

Leased assets obtained in exchange for new lease obligations:

Operating leases $ 167 $ 73

Finance leases — 3

Wincanton Acquisition

On February 29, 2024, the Company and the board of directors of Wincanton plc, a logistics company based in Chippenham, United Kingdom (“Wincanton”), reached an agreement on the terms of a cash offer by the Company for the acquisition of the entire issued ordinary share capital of Wincanton (the “Wincanton Acquisition”).

Wincanton is a British logistics provider specializing in both warehousing and transportation solutions.

Wincanton services industries in grocery, retail and manufacturing, consumer goods, ecommerce, healthcare, defense, industrial, and energy.

Under the terms of the agreement, Wincanton shareholders will be entitled to receive 605 pence ($ 7.64 as of March 31, 2024) in cash for each Wincanton share held.

In connection with the Wincanton Acquisition, (i) the Company entered into a bridge term loan credit agreement, (ii) the Company entered into a three-year term loan credit agreement (“Three-Year Term Loan due 2027”), and (iii) in April 2024, the Company issued $ 1.1 billion aggregate principal amount of its senior notes (the “Unsecured Notes”).

For additional information regarding the financing agreements entered in connection with the Wincanton Acquisition, see Note 5.

Debt and Financing Arrangements and Note 13.

Subsequent Events.

During March 2024, the Company purchased approximately 2.0 million Wincanton shares for approximately £ 12 million ($ 15 million).

PFSweb Acquisition

On September 13, 2023, the Company entered into an Agreement and Plan of Merger to acquire PFSweb, Inc., a Delaware corporation headquartered in Irving, Texas (“PFS”), and on October 23, 2023, the Company completed its acquisition of PFS (the “PFS Acquisition”).

The Company acquired the shares of PFS at a price per share of $ 7.50 in cash, totaling approximately $ 149 million, net of cash acquired.

PFS is a global provider of omnichannel commerce

solutions, including a broad range of technology, infrastructure and professional services, in the United States, Canada and Europe.

PFS’s service offerings include order fulfillment, fulfillment-as-a-service, order management and customer care.

The Company recorded the preliminary fair value of assets acquired and liabilities assumed on the date of acquisition, including intangible assets comprising customer relationships, trademarks, trade names and developed technology of $ 55 million with a weighted-average amortization period of 13 years.

Goodwill acquired in connection with the acquisition was $ 82 million, recorded in the Americas and Asia-Pacific reporting unit, and was attributed to anticipated synergies.

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

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

Debt and Financing Arrangements

The following table summarizes the carrying value of debt:

September 30, December 31,

The following table summarizes the carrying value of the Company’s debt:

March 31, December 31,

(In millions) Rate (1)

3 unchanged sentences

2.65 % 397 397

Two-Year Term Loan due 2024 (4)

Three-Year Term Loan due 2025

2 unchanged sentences

6.68 % 499 499

Finance leases and other Various 118 164

Finance leases and other debt Various 108 118

Total debt 1,637 1,647

1 unchanged sentence

Total Long-term debt $ 1,511 $ 1,620

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

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

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

(1) Interest rate as of March 31, 2024.

(2) Net of unamortized debt issuance costs of $ 2 million as of March 31, 2024 and December 31, 2023.

(3) Net of unamortized debt issuance costs of $ 3 million as of March 31, 2024 and December 31, 2023.

(4) Net of unamortized debt issuance costs of $ 1 million as of March 31, 2024 and December 31, 2023.

Bridge Term Loan

On February 29, 2024, the Company entered into a bridge term loan credit agreement that provided a £ 763 million ($ 963 million as of March 31, 2024) unsecured term loan facility (the “Bridge Term Loan”) to fund the Wincanton Acquisition.

The Bridge Term Loan matures 364 days after an advance.

Loans under the Bridge Term Loan bear interest at the daily simple Sterling Overnight Index Average Rate (“SONIA”) plus an applicable margin calculated based on the Company’s credit ratings.

No amounts were outstanding under the Bridge Term Loan as of March 31, 2024.

Concurrently with the closing of the Three-Year Term Loan due 2027, the Company reduced the commitments under the Bridge Term Loan by the aggregate amount of commitments under the Three-Year Term Loan due 2027.

Concurrently with the closing of the Unsecured Notes, the Company terminated the remaining commitments under the Bridge Term Loan.

Three-Year Term Loan due 2027

On March 29, 2024, the Company entered into a term loan credit agreement with the lenders and other parties from time to time party thereto and Bank of America N.A., as administrative agent.

The Three-Year Term Loan due 2027 provided for a three-year multicurrency £ 250 million ($ 316 million as March 31, 2024) unsecured term facility, that may be borrowed by the Company to fund the Wincanton Acquisition.

Loans under the Three-Year Term Loan due 2027 will bear interest at a fluctuating rate per annum equal to, (a) with respect to borrowings in U.S.

Dollars, at the Company’s option, the alternate base rate or term Secured Overnight Financing Rate (“SOFR”) and (b) with respect to borrowings in Pounds Sterling, daily simple SONIA, in each case, plus an applicable margin calculated based on the Company’s credit ratings.

No amounts were outstanding under the Three-Year Term Loan due 2027 as of March 31, 2024.

Concurrently with the closing of the Unsecured Notes, the Company terminated the commitments under the Three-Year Term Loan due 2027.

For additional information regarding subsequent financing agreements entered in connection with the Wincanton Acquisition, see Note 13.

Subsequent Events.

Revolving Credit Agreement

On March 29, 2024, the Company terminated its previous revolving credit agreement expiring in 2026 and entered into a new revolving credit agreement with Bank of America N.A., as administrative agent and an issuing lender (the “Revolving Credit Agreement”).

The Revolving Credit Agreement is a five-year unsecured, multicurrency revolving facility expiring in 2029.

The aggregate commitment of all lenders under the Revolving Credit Agreement will be equal to $ 800 million, of which $ 100 million is available for the issuance of letters of credit.

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

Dollars, at the Company’s option the alternate base rate or term SOFR, (b) with respect to borrowings in Canadian Dollars, term Canadian Overnight Repo Rate Average (“CORRA”), (c) with respect to borrowings in Pounds Sterling, daily simple SONIA and (d) with respect to borrowings in Euros, Euro Interbank Offered Rate (“EURIBOR”), in each case, plus an applicable margin calculated based on the Company’s credit ratings.

No amounts were outstanding under the new or previous revolving credit agreements as of March 31, 2024 or December 31, 2023.

Factoring Programs

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 September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(In millions) 2024 2023

2 unchanged sentences

Net cash provided by operating cash flows

(1) The nine months ended September 30, 2022, includes $ 134 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

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.

The covenants for the Company’s debt securities, 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, 2023, the Company was in compliance with the covenants contained in its debt and financing arrangements.

As of March 31, 2024, the Company complied 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 September 30, 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 March 31, 2024, and December 31, 2023, due to their short-term nature.

The fair value of debt was as follows:

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

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

Unsecured notes due 2026 2 $ 366 $ 398 $ 362 $ 398

2 $ 353 $ 398 $ 342 $ 397

Unsecured notes due 2031 2 326 397 326 397

2 303 397 294 397

Two-Year Term Loan due 2024

2 — — 115 115

Three-Year Term Loan due 2025

5 unchanged sentences

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.

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

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

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

September 30, 2023

(In millions) Notional Derivative

Liabilities (2)

Designated as hedges:

Cross-currency swap agreements $ 1,337 $ 26 $ 14

Interest rate swaps (3)

Not designated as hedges:

Foreign currency option contracts $ 424 $ 16 $ —

Foreign currency forward contracts 58 — —

(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, with a notional amount of $ 125 million, scheduled to mature in 2027 to 2024.

December 31, 2022

(In millions) Notional 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 September 30, 2023 and December 31, 2022, the derivatives were classified as Level 2 within the fair value hierarchy.

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

Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023

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

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

The notional amount and fair value of derivative instruments were as follows:

March 31, 2024 December 31, 2023 Balance Sheet Location

(In millions) Notional Amount

Notional Amount

Derivatives designated as net investment hedges:

Cross-currency swap agreements $ 36 $ ( 3 ) $ 1 $ 2 $ ( 3 ) $ 2

Derivatives designated as cash flow hedges:

Cross-currency swap agreements $ 487 $ 11 $ 487 $ 3 Other long-term assets

Cross-currency swap agreements 165 3 165 7 Other current liabilities

Cross-currency swap agreements 883 29 883 49 Other long-term liabilities

Derivatives designated as cash flow hedge:

Interest rate swaps $ 125 $ 1 $ 125 $ 2 Other current assets

Interest rate swaps (1)

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

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

250 6 125 3 Other long-term assets

Derivatives not designated as hedges:

Foreign currency option contracts $ 314 $ 8 $ 397 $ 8 Other current assets

Foreign currency forward contracts 3 — 1 — Other current assets

(1) In January 2024, the Company entered into an interest rate swap schedule to mature in 2025, with a notional amount of $ 125 million.

As of March 31, 2024 and December 31, 2023, 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 hedges on AOCIL and in the Condensed Consolidated Statements of Operations was as follows:

Three Months Ended March 31, 2024 Three Months Ended March 31, 2023

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

6 unchanged sentences

Interest rate swaps $ 2 $ — $ — $ ( 3 ) $ — $ —

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

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

Derivatives Not Designated as Hedges

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 September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(In millions) 2024 2023

Realized foreign currency contracts gain (loss) $ ( 3 ) $ 10 $ ( 9 ) $ 19

Unrealized foreign currency contracts gain (loss) 8 ( 1 ) 12 14

Total foreign currency gain recognized in net income

Realized loss $ ( 1 ) $ ( 2 )

Unrealized gain 3 1

Foreign currency gain (loss) $ 2 $ ( 1 )

Earnings per Share

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

Three Months Ended March 31,

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

Net income (loss) attributable to common shares $ ( 37 ) $ 25

Basic weighted-average common shares 119,273 118,781

Diluted weighted-average common shares (1)

119,273 119,231

Basic earnings (loss) per share $ ( 0.31 ) $ 0.21

Diluted earnings (loss) per share

$ ( 0.31 ) $ 0.21

Antidilutive shares excluded from diluted weighted-average common shares (1)

(1) For the three months ended March 31, 2024, weighted average shares for basic earnings per share is used for calculating diluted earnings per share because there was a net loss for the period and, as such, all dilutive potential common shares are anti-dilutive and are therefore excluded from the calculation.

Stockholders’ Equity

The following tables summarize the changes in AOCIL by component:

Foreign Currency Adjustment

(In millions) Foreign

Adjustments Cash

Adjustments Net Investment Hedges Cash

Hedges Defined

attributable to

noncontrolling

interest AOCIL

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

Foreign currency translation loss ( 98 ) — — 2 ( 96 )

Unrealized gain on hedges, net of tax 27 — — — 27

Amounts reclassified from AOCIL to net income 2 — 1 — 3

As of December 31, 2023 $ ( 83 ) $ ( 47 ) $ 5 $ ( 113 ) $ ( 1 ) $ ( 239 )

Other comprehensive income (loss) before reclassifications ( 41 ) 33 1 1 1 ( 5 )

Amounts reclassified to net income (loss) — 1 — 1 — 2

Tax amounts — ( 7 ) — — — ( 7 )

Other comprehensive income (loss), net of tax ( 41 ) 27 1 2 1 ( 10 )

As of September 30, 2023 $ ( 188 ) $ 8 $ ( 110 ) $ 1 $ ( 289 )

As of March 31, 2024 $ ( 124 ) $ ( 20 ) $ 6 $ ( 111 ) $ — $ ( 249 )

Foreign Currency Adjustment

(In millions) Foreign

Adjustments Cash

Adjustments Net Investment Hedges Cash

Hedges Defined

attributable to

noncontrolling

interest AOCIL

As of December 31, 2022 $ ( 156 ) $ 7 $ 7 $ ( 112 ) $ — $ ( 254 )

Foreign currency translation loss ( 41 ) — — 1 ( 40 )

Unrealized gain on hedges, net of tax 1 1 — — 2

Amounts reclassified from AOCIL to net income 1 — 2 — 3

Other comprehensive income (loss), net of tax ( 39 ) 1 2 1 ( 35 )

As of September 30, 2023 $ ( 188 ) $ 8 $ ( 110 ) $ 1 $ ( 289 )

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

AOCIL attributable to noncontrolling interest AOCIL attributable to GXO

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 AOCIL to net income ( 1 ) — — — ( 1 )

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

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

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

AOCIL attributable to noncontrolling interest AOCIL attributable to GXO

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 AOCIL to net income ( 5 ) — — — ( 5 )

Other comprehensive income (loss) before reclassifications 24 ( 16 ) ( 4 ) — — 4

Amounts reclassified to net income — 2 — — — 2

Tax amounts — 3 1 — — 4

Other comprehensive income (loss), net of tax 24 ( 11 ) ( 3 ) — — 10

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

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

As of March 31, 2023 $ ( 132 ) $ ( 4 ) $ 4 $ ( 112 ) $ — $ ( 244 )

Employee Benefit Plans

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Retirement Plan were as follows:

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

Three Months Ended March 31,

(In millions) 2024 2023

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Net periodic pension income (1)

$ 2 $ 7 $ 6 $ 25

(1) Net periodic pension income is recorded in 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.

Other than the U.K Retirement Plan, the Company deems other retirement plans to be immaterial to its Consolidated Financial Statements and are excluded from this disclosure.

Defined Contribution Plans

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employees and employees of certain foreign subsidiaries.

The Company’s contributions for the three months ended September 30, 2023 and 2022, were $ 15 million and $ 12 million, respectively, and for the nine months ended September 30, 2023 and 2022 were $ 47 million and $ 40 million, respectively.

The Company’s contributions were $ 17 million for each of the three months ended March 31, 2024 and 2023.

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

Restructuring Costs and Other

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 September 30, 2023, Restructuring costs and other totaled $ 7 million including $ 6 million related to severance charges, primarily from the exit of non-core businesses in Asia.

For the nine months ended September 30, 2023, Restructuring costs and other totaled $ 31 million, including $ 24 million related to severance charges and $ 7 million related to non-cash impairment charges.

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

Restructuring costs primarily related to severance, including projects to optimize the Company’s finance, human resources and information technology functions, and closing certain corporate and administrative offices, which were not associated with customer attrition.

The following table summarizes changes in the restructuring liability, which is included in other current liabilities in the Condensed Consolidated Balance Sheets:

(In millions)

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Payments ( 6 )

Balance as of September 30, 2023 $ 11

The remaining restructuring liability at September 30, 2023 primarily relates to severance payments and is expected to be substantially paid within the next 12 months.

The effective tax rate was 17.9 % for the three months ended September 30, 2023, compared with 22.5 % for the same period in 2022.

The effective tax rate was 19.1 % for the nine months ended September 30, 2023, compared with 24.7 % for the same period in 2022.

The decrease in our effective tax rate for the three months was primarily driven by a tax benefit related to return-to-provision true-up adjustments.

The decrease in our effective tax rate for the nine months was primarily driven by a tax benefit related to valuation allowance release.

As of September 30, 2023 and December 31, 2022, the Company had valuation allowances of $ 36 million and $ 44 million on its deferred income tax asset, respectively.

The following table presents the changes in Goodwill for the nine months ended September 30, 2023:

(In millions)

Balance as of December 31, 2022 $ 2,728

Acquisition (1)

Impact of foreign exchange translation (2)

Balance as of September 30, 2023 $ 2,734

(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.

As of September 30, 2023, and December 31, 2022, there were no accumulated goodwill impairment losses.

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 with 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 final fair values 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 29

Total long-term assets 720

Total assets $ 956

Current liabilities

Accounts payable $ 81

Accrued expenses 96

Current debt 55

Current operating lease liabilities 43

Other current liabilities 56

Total current liabilities

Long-term liabilities

Long-term debt 10

Long-term operating lease liabilities 176

Other long-term liabilities 173

Total long-term liabilities 359

Total liabilities $ 690

Net assets purchased $ 266

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 in connection with the Clipper Acquisition to be deductible for income tax purposes.

Balance as of March 31, 2024

The restructuring liability as of March 31, 2024 is expected to be substantially paid within the next 12 months.

Income taxes for the three months ended March 31, 2024 was a $ 10 million tax benefit compared with a $ 3 million tax expense for the same period in 2023.

The Company’s effective tax rate for the three months ended March 31, 2024 was a benefit on pre-tax loss of 21.1 %, compared to an expense on pre-tax income of 11.0 % for the same period in 2023.

In 2023, the effective tax rate was reduced by discrete tax benefits from the release of valuation allowances.

The Organization for Economic Co-operation and Development (“OECD”) issued administrative guidance for the Pillar Two Global Anti-Base Erosion rules (“Pillar Two”), which imposes a 15% global minimum tax on multinational companies.

Many Pillar Two rules are effective for fiscal years beginning on January 1, 2024, with other aspects to be effective from 2025.

The Company does not expect the Pillar Two rules to materially impact its tax liability in 2024.

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.

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

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

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.

The Company reviews and adjusts accruals for loss

contingencies quarterly and as additional information becomes available.

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 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.

7 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.

During the first quarter of 2024, a trial was held in the United States District Court for the Western District of Missouri in connection with a dispute between the Company and one of its customers related to the start-up of the customer’s warehouse that occurred in 2018 (Lindt et al v.

GXO Warehouse Company, Inc., docket no.

4:22-cv-00384-BP).

In March 2024, the jury returned verdicts in favor of the customer.

The Company recognized a $ 63 million expense in the three months ended March 31, 2024 for the jury verdicts, potential post-trial awards of interest, associated legal fees, costs and other related expenses.

The Company believes that this case was incorrectly decided and intends to pursue post-verdict remedies as necessary, including an appeal, and will pursue reimbursement under its existing insurance policies.

Subsequent Events

Financial Instruments - Net Investment Hedges

In October 2023, the Company terminated a hedge with a notional amount of $ 115 million.

Also, the Company amended a $ 235 million hedge to extend its maturity from 2024 to 2025.

Additionally, the Company entered into various hedges for an aggregate notional amount of $ 313 million that will mature from 2025 to 2028.

PFS provides e-commerce order fulfillment services.

The Company acquired the shares of PFSweb at a price per share of $ 7.50 in cash, totaling approximately $ 181 million.

Wincanton Acquisition

On April 10, 2024, the Wincanton shareholders approved the Wincanton Acquisition and on April 29, 2024, the Company completed the Wincanton Acquisition for total consideration of approximately £ 762 million ($ 953 million), including shares purchased prior to the acquisition.

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

is currently reviewing the Wincanton Acquisition.

The Company estimates that the CMA’s review of the acquisition will be completed during the second half of 2024.

Debt and Financing Transactions

On April 25, 2024, the Company entered into an underwriting agreement to issue and sell $ 1.1 billion of Unsecured Notes, consisting of $ 600 million in aggregate principal amount of its 6.25 % senior notes due 2029 (the “2029 Notes”) and $ 500 million in aggregate principal amount of its 6.50 % senior notes due 2034 (the “2034 Notes”) in a registered public offering to fund the Wincanton Acquisition.

The closing of the sale of the Unsecured Notes occurred on May 6, 2024.

The 2029 Notes bear interest at a rate of 6.25 % per annum payable semiannually on May 6 and November 6 of each year, beginning on November 6, 2024, and maturing on May 6, 2029.

The 2034 Notes bear interest at a rate of 6.50 % per annum payable semiannually on May 6 and November 6 of each year, beginning on November 6, 2024, and maturing on May 6, 2034.

Concurrently with the closing of the Unsecured Notes, the Company terminated the commitments under the Bridge Term Loan and the commitments under the Three-Year Term Loan due 2027.

Also, on May 6, 2024, the Company repaid $ 100 million of the Five-Year Term Loan due 2027 from proceeds received from the Unsecured Notes.

Financial Instruments

In April 2024, the Company amended four cross-currency swaps with an aggregate notional value of $ 315 million that will mature in 2027 and 2028, and entered into three cross-currency swaps with an aggregate notional value of $ 300 million that will mature in 2029.

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