Item 1. Financial Statements
ITEM 1. FINANCIAL STATEMENTS
GXO Logistics, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
(Dollars in millions, shares in thousands, except per share amounts) 2024 2023 2024 2023
Revenue $ 2,846 $ 2,394 $ 5,302 $ 4,717
Direct operating expense 2,389 1,957 4,445 3,863
Selling, general and administrative expense 270 245 519 503
Depreciation and amortization expense 99 84 191 167
Transaction and integration costs 15 6 34 19
Restructuring costs and other 1 3 17 24
Litigation expense ( 3 ) — 60 —
Operating income 75 99 36 141
Other income, net 1 1 7 1
Interest expense, net ( 23 ) ( 14 ) ( 36 ) ( 27 )
Income before income taxes 53 86 7 115
Income tax expense ( 14 ) ( 20 ) ( 4 ) ( 23 )
Net income 39 66 3 92
Net income attributable to Noncontrolling Interests (“NCI”) ( 1 ) ( 1 ) ( 2 ) ( 2 )
Net income attributable to GXO $ 38 $ 65 $ 1 $ 90
Earnings per share
Basic $ 0.32 $ 0.55 $ 0.01 $ 0.76
Diluted $ 0.32 $ 0.54 $ 0.01 $ 0.75
Weighted-average common shares outstanding
Basic 119,427 118,927 119,350 118,854
Diluted 119,683 119,415 119,680 119,323
See accompanying Notes to Condensed Consolidated Financial Statements.
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GXO Logistics, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
(In millions) 2024 2023 2024 2023
Net income $ 39 $ 66 $ 3 $ 92
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments ( 14 ) 17 ( 28 ) 30
Cash flow hedges — 4 1 1
Pension plans — 1 2 1
Other comprehensive income (loss), net of tax ( 14 ) 22 ( 25 ) 32
Comprehensive income (loss), net of tax 25 88 ( 22 ) 124
Less: Comprehensive income attributable to NCI 1 2 1 3
Comprehensive income (loss) attributable to GXO $ 24 $ 86 $ ( 23 ) $ 121
See accompanying Notes to Condensed Consolidated Financial Statements.
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GXO Logistics, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
June 30, December 31,
(Dollars in millions, shares in thousands, except per share amounts) 2024 2023
ASSETS
Current assets
Cash and cash equivalents $ 469 $ 468
Accounts receivable, net of allowance of $ 15 and $ 11
1,909 1,753
Other current assets 419 347
Total current assets 2,797 2,568
Long-term assets
Property and equipment, net of accumulated depreciation of $ 1,637 and $ 1,545
1,093 953
Operating lease assets 2,344 2,201
Goodwill 3,664 2,891
Intangible assets, net of accumulated amortization of $ 563 and $ 528
942 567
Other long-term assets 520 327
Total long-term assets 8,563 6,939
Total assets $ 11,360 $ 9,507
LIABILITIES AND EQUITY
Current liabilities
Accounts payable $ 690 $ 709
Accrued expenses 1,286 966
Current debt 219 27
Current operating lease liabilities 672 597
Other current liabilities 402 327
Total current liabilities 3,269 2,626
Long-term liabilities
Long-term debt 2,551 1,620
Long-term operating lease liabilities 1,981 1,842
Other long-term liabilities 626 473
Total long-term liabilities 5,158 3,935
Commitments and Contingencies (Note 13)
Stockholders’ Equity
Common Stock, $ 0.01 par value per share; 300,000 shares authorized, 119,437 and 119,057 issued and outstanding
1 1
Preferred Stock, $ 0.01 par value per share; 10,000 shares authorized, none issued and outstanding
— —
Additional Paid-In Capital (“APIC”) 2,610 2,598
Retained earnings 553 552
Accumulated Other Comprehensive Income (Loss) (“AOCIL”) ( 263 ) ( 239 )
Total stockholders’ equity before NCI 2,901 2,912
NCI 32 34
Total equity 2,933 2,946
Total liabilities and equity $ 11,360 $ 9,507
See accompanying Notes to Condensed Consolidated Financial Statements.
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GXO Logistics, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended June 30,
(In millions) 2024 2023
Cash flows from operating activities:
Net income $ 3 $ 92
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization expense 191 167
Stock-based compensation expense 19 18
Deferred tax benefit
( 16 ) ( 17 )
Other 10 10
Changes in operating assets and liabilities
Accounts receivable 56 ( 29 )
Other assets ( 8 ) 18
Accounts payable ( 82 ) ( 107 )
Accrued expenses and other liabilities ( 8 ) ( 52 )
Net cash provided by operating activities 165 100
Cash flows from investing activities:
Capital expenditures ( 161 ) ( 150 )
Proceeds from sale of property and equipment 10 10
Acquisition of businesses, net of cash acquired ( 863 ) —
Net cash used in investing activities ( 1,014 ) ( 140 )
Cash flows from financing activities:
Proceeds from debt, net 1,085 —
Repayments of debt, net ( 196 ) ( 138 )
Repayments of finance lease obligations ( 19 ) ( 16 )
Taxes paid related to net share settlement of equity awards ( 7 ) ( 6 )
Other ( 6 ) 5
Net cash provided by (used in) financing activities 857 ( 155 )
Effect of exchange rates on cash and cash equivalents ( 7 ) 5
Net increase (decrease) in cash, restricted cash and cash equivalents 1 ( 190 )
Cash, restricted cash and cash equivalents, beginning of period 470 495
Cash, restricted cash and cash equivalents, end of period
$ 471 $ 305
Reconciliation of cash, restricted cash and cash equivalents
Cash and cash equivalents $ 469 $ 305
Restricted Cash (included in Other long-term assets) 2 —
Total cash, restricted cash and cash equivalents $ 471 $ 305
See accompanying Notes to Condensed Consolidated Financial Statements.
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GXO Logistics, Inc.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
Common Stock APIC Retained
Earnings AOCIL Equity Before
NCI NCI Total
Equity
(Shares in thousands,
dollars in millions) Shares Amount
Balance as of March 31, 2024 119,368 $ 1 $ 2,602 $ 515 $ ( 249 ) $ 2,869 $ 34 $ 2,903
Net income — — — 38 — 38 1 39
Other comprehensive loss — — — — ( 14 ) ( 14 ) — ( 14 )
Stock-based compensation — — 11 — — 11 — 11
Vesting of stock compensation awards 115 — — — — — — —
Tax withholding on vesting of stock-based compensation awards ( 46 ) — ( 3 ) — — ( 3 ) — ( 3 )
Other — — — — — — ( 3 ) ( 3 )
Balance as of June 30, 2024 119,437 $ 1 $ 2,610 $ 553 $ ( 263 ) $ 2,901 $ 32 $ 2,933
Common Stock APIC Retained
Earnings AOCIL Equity Before
NCI NCI Total
Equity
(Shares in thousands,
dollars in millions) Shares Amount
Balance as of December 31, 2023 119,057 $ 1 $ 2,598 $ 552 $ ( 239 ) $ 2,912 $ 34 $ 2,946
Net income — — — 1 — 1 2 3
Other comprehensive loss — — — — ( 24 ) ( 24 ) ( 1 ) ( 25 )
Stock-based compensation — — 19 — — 19 — 19
Vesting of stock compensation awards 509 — — — — — — —
Tax withholding on vesting of stock-based compensation awards ( 129 ) — ( 7 ) — — ( 7 ) — ( 7 )
Other — — — — — — ( 3 ) ( 3 )
Balance as of June 30, 2024 119,437 $ 1 $ 2,610 $ 553 $ ( 263 ) $ 2,901 $ 32 $ 2,933
See accompanying Notes to Condensed Consolidated Financial Statements.
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GXO Logistics, Inc.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
Common Stock APIC Retained
Earnings AOCIL Equity Before
NCI NCI Total
Equity
(Shares in thousands,
dollars in millions) Shares Amount
Balance as of March 31, 2023 118,889 $ 1 $ 2,580 $ 348 $ ( 244 ) $ 2,685 $ 34 $ 2,719
Net income — — — 65 — 65 1 66
Other comprehensive income — — — 21 21 1 22
Stock-based compensation — — 9 — — 9 — 9
Vesting of stock compensation awards 71 — — — — — — —
Tax withholding on vesting of stock compensation awards ( 28 ) — ( 2 ) — — ( 2 ) — ( 2 )
Other — — — — — — ( 3 ) ( 3 )
Balance as of June 30, 2023 118,932 $ 1 $ 2,587 $ 413 $ ( 223 ) $ 2,778 $ 33 $ 2,811
Common Stock APIC Retained
Earnings AOCIL Equity Before
NCI NCI Total
Equity
(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 — — — 90 — 90 2 92
Other comprehensive income — — — — 31 31 1 32
Stock-based compensation — — 18 — — 18 — 18
Vesting of stock compensation awards 336 — — — — — — —
Tax withholding on vesting of stock compensation awards ( 132 ) — ( 6 ) — — ( 6 ) — ( 6 )
Other — — — — — — ( 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.
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GXO Logistics, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements of GXO Logistics, Inc. (“GXO” or the “Company”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and pursuant to the rules of the U.S. Securities and Exchange Commission (the “SEC”). 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 interim periods are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. 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 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.
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 U.S. 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.
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2. Revenue Recognition
Revenue disaggregated by geographical area was as follows:
Three Months Ended June 30, Six Months Ended June 30,
(In millions) 2024 2023 2024 2023
United Kingdom $ 1,289 $ 893 $ 2,202 $ 1,737
United States 731 692 1,478 1,406
Netherlands 220 198 438 394
France 201 217 401 419
Spain 145 136 274 263
Italy 97 94 190 182
Other 163 164 319 316
Total $ 2,846 $ 2,394 $ 5,302 $ 4,717
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 June 30, Six Months Ended June 30,
(In millions) 2024 2023 2024 2023
Omnichannel retail $ 1,316 $ 1,026 $ 2,338 $ 1,990
Technology and consumer electronics 363 355 745 721
Food and beverage 326 335 642 642
Industrial and manufacturing 331 270 597 540
Consumer packaged goods 290 232 585 458
Other 220 176 395 366
Total $ 2,846 $ 2,394 $ 5,302 $ 4,717
Contract Assets and Liabilities
The contract asset and contract liability balances from contracts with customers were as follows:
June 30, December 31,
(In millions) 2024 2023
Contract assets included in:
Other current assets $ 21 $ 21
Other long-term assets 186 160
Total contract assets $ 207 $ 181
Contract liabilities included in:
Other current liabilities $ 308 $ 210
Other long-term liabilities 112 115
Total contract liabilities $ 420 $ 325
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Revenue recognized included the following:
Three Months Ended June 30, Six Months Ended June 30,
(In millions) 2024 2023 2024 2023
Amounts included in the beginning of year contract liability balance
$ 48 $ 16 $ 153 $ 98
Remaining Performance Obligations
The remaining performance obligations relate to firm customer contracts for which services have not been performed and future revenue recognition is expected. As permitted in determining the remaining performance obligation, the Company omits obligations that have original expected durations of one year or less or contain variable consideration.
As of June 30, 2024, the fixed consideration component of the Company’s remaining performance obligation was approximately $ 4.1 billion, and the Company expects to recognize approximately 76 % 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.
3. Leases
The Company has operating leases for real estate, warehouse equipment, trucks, trailers, containers and material handling equipment. In addition, the Company has finance leases for warehouse equipment.
The following amounts were recorded in the Condensed Consolidated Balance Sheets related to leases:
June 30, December 31,
(In millions) 2024 2023
Operating leases:
Operating lease assets $ 2,344 $ 2,201
Current operating lease liabilities $ 672 $ 597
Long-term operating lease liabilities 1,981 1,842
Total operating lease liabilities $ 2,653 $ 2,439
Finance leases:
Property and equipment, net $ 207 $ 107
Current debt $ 34 $ 26
Long-term debt 181 90
Total finance lease liabilities $ 215 $ 116
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The components of lease expense recorded in the Condensed Consolidated Statements of Operations were as follows:
Three Months Ended June 30, Six Months Ended June 30,
(In millions) 2024 2023 2024 2023
Operating leases:
Operating lease cost $ 193 $ 183 $ 377 $ 398
Short-term lease cost 51 63 100 92
Variable lease cost 46 29 86 57
Total operating lease cost (1)
$ 290 $ 275 $ 563 $ 547
Finance leases:
Amortization of leased assets $ 7 $ 6 $ 14 $ 13
Interest expense on lease liabilities 1 1 2 2
Total finance lease cost $ 8 $ 7 $ 16 $ 15
Total operating and finance lease cost $ 298 $ 282 $ 579 $ 562
(1) Operating lease cost is primarily included in Direct operating expense in the Condensed Consolidated Statements of Operations.
Supplemental cash flow information was as follows:
Six Months Ended June 30,
(In millions) 2024 2023
Leased assets obtained in exchange for new lease obligations:
Operating leases, including $ 244 from an acquisition in 2024
$ 560 $ 239
Finance leases, including $ 36 from an acquisition in 2024
120 8
4. Acquisitions
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”). Under the terms of the agreement, Wincanton shareholders received 605 pence ($ 7.64 as of the acquisition date) in cash for each Wincanton share held.
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 ($ 958 million). 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.
Wincanton is a logistics provider specializing in both warehousing and transportation solutions in the U.K. and Ireland. Wincanton services industries in grocery, retail and manufacturing, consumer goods, ecommerce, healthcare, defense, industrial, and energy.
The Company incurred transaction and financing costs related to the Wincanton Acquisition of $ 11 million and $ 26 million for the three and six months ended June 30, 2024, respectively, which are included in Transaction and integration costs in the Condensed Consolidated Statements of Operations.
In connection with the Wincanton Acquisition, (i) the Company entered into a bridge term loan credit agreement (the “Bridge Term Loan”), (ii) the Company entered into a three-year term loan credit agreement (“Three-Year Term
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Loan due 2027”), and (iii) in April 2024, the Company issued $ 1.1 billion aggregate principal amount of senior notes (the “Unsecured Notes”). For additional information regarding the financing agreements entered in connection with the Wincanton Acquisition, see Note 6. Debt and Financing Arrangements.
Wincanton’s results of operations are included in the Condensed Consolidated Statements of Operations from the date of acquisition. The Company recorded $ 333 million and $ 3 million of revenue and income before income taxes for both the three and six months ended June 30, 2024, respectively.
The following table summarizes the fair values of assets acquired and liabilities assumed at the acquisition date:
(In millions)
ASSETS
Current assets
Cash and cash equivalents $ 91
Accounts receivable 259
Other current assets 76
Total current assets 426
Long-term assets
Property and equipment 75
Operating lease assets 175
Intangible assets 437
Other long-term assets 149
Total long-term assets 836
Total assets $ 1,262
LIABILITIES
Current liabilities
Accounts payable $ 68
Accrued expenses 322
Current debt 7
Current operating lease liabilities 80
Other current liabilities 98
Total current liabilities
575
Long-term liabilities
Long-term debt 167
Long-term operating lease liabilities 166
Other long-term liabilities 194
Total long-term liabilities
527
Total liabilities $ 1,102
Net assets purchased $ 160
Purchase price (1)
$ 958
Goodwill recorded (2)
$ 798
(1) The Company recorded a realized foreign currency gain of $ 5 million which represents the change in foreign currency rates from the acquisition date through the settlement date. The gain is included as a component of “Transaction and Integration expense” on the Condensed Consolidated Statements of Operations.
(2) Goodwill represents the excess of the purchase price over the fair value of identifiable assets acquired and liabilities assumed at the acquisition date. Goodwill acquired was recorded in the U.K. and Ireland reporting unit and was primarily attributed to anticipated synergies. The Company does not expect the goodwill recognized in connection with the Wincanton Acquisition to be deductible for income tax purposes.
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.
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The following unaudited pro forma information presents the Company’s results of operations as if the acquisition of Wincanton occurred on January 1, 2023. The pro forma results reflect the impact of incremental interest expense to finance the acquisition and amortization expense on acquired intangible assets. Adjustments have also been made to remove transaction related costs. The unaudited pro forma information is not necessarily indicative of what the results of operations of the combined company would have been had the acquisition been completed as of January 1, 2023.
Three Months Ended Six Months Ended
June 30, June 30,
(In millions) 2024 2023 2024 2023
Revenue $ 2,983 $ 2,825 $ 5,876 $ 5,568
Income (loss) before income taxes (1)
38 74 ( 81 ) 78
(1) Included in the Income (loss) before income taxes on a pro forma basis for the six months ended June 30, 2024 were long-lived asset impairment charges of $ 90 million recorded by Wincanton.
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 $ 84 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 U.S. 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.
5. Goodwill
The following table presents the changes in Goodwill for the six months ended June 30, 2024:
(In millions)
Balance as of December 31, 2023
$ 2,891
Acquisition (1)
806
Impact of foreign exchange translation (2)
( 33 )
Balance as of June 30, 2024
$ 3,664
(1) Includes $ 798 million and $ 8 million for the preliminary purchase price allocation for the Wincanton Acquisition and adjustments to the purchase price allocation for the PFS Acquisition, respectively.
(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 June 30, 2024 and December 31, 2023, there were no accumulated goodwill impairment losses.
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6. Debt and Financing Arrangements
The following table summarizes the carrying value of the Company’s debt:
June 30, December 31,
(In millions) Rate (1)
2024 2023
Unsecured notes due 2026 (2)
1.65 % $ 398 $ 398
Unsecured notes due 2029 (3)
6.25 % 592 —
Unsecured notes due 2031 (4)
2.65 % 397 397
Unsecured notes due 2034 (5)
6.50 % 490 —
Three-Year Term Loan due 2025 (6)
6.57 % 185 235
Five-Year Term Loan due 2027 (7)(8)
6.69 % 399 499
Finance leases and other debt Various 309 118
Total debt 2,770 1,647
Less: Current debt 219 27
Total Long-term debt $ 2,551 $ 1,620
(1) Interest rate as of June 30, 2024.
(2) Net of unamortized debt issuance costs of $ 2 million as of June 30, 2024 and December 31, 2023.
(3) Net of unamortized debt issuance costs of $ 8 million as of June 30, 2024.
(4) Net of unamortized debt issuance costs of $ 3 million as of June 30, 2024 and December 31, 2023.
(5) Net of unamortized debt issuance costs of $ 10 million as of June 30, 2024.
(6) On June 27, 2024, the Company repaid $ 50 million of the Three-Year Term Loan due 2025.
(7) Net of unamortized debt issuance costs of $ 1 million as of June 30, 2024 and December 31, 2023.
(8) On May 6, 2024, the Company repaid $ 100 million of the Five-Year Term Loan due 2027.
Unsecured Notes
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.
Three-Year Term Loan due 2027
On March 29, 2024, the Company entered into a three-year term loan credit agreement with the lenders and other parties from time to time party thereto and Bank of America N.A., as an administrative agent, that provided a three-year multicurrency £ 250 million unsecured term facility to fund the Wincanton Acquisition. Concurrently with the closing of the Unsecured Notes, the Company terminated the commitments under the Three-Year Term Loan due 2027. No amounts were drawn under the Three-Year Term Loan due 2027.
Bridge Term Loan
On February 29, 2024, the Company entered into a 364-day bridge term loan credit agreement that provided a £ 763 million unsecured Bridge Term Loan facility to fund the Wincanton Acquisition.
Concurrently with the closing of the Unsecured Notes, the Company terminated the commitments under the Bridge Term Loan. No amounts were drawn under the Bridge Term Loan.
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Revolving Credit Facilities
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 Secured Overnight Financing Rate (“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 Sterling Overnight Index Average Rate (“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 previous or new revolving credit agreements as of June 30, 2024 or December 31, 2023.
In connection with the Wincanton Acquisition, the Company assumed a revolving credit facility agreement (the “Wincanton Revolving Credit Agreement”) under which it may borrow up to approximately £ 175 million ($ 221 million as of June 30, 2024) in aggregate at any time, expiring in March 2027. Loans under the Wincanton Revolving Credit Agreement will bear interest at daily simple SONIA plus a fixed margin. As of June 30, 2024, the Company had £ 74 million ($ 94 million) of borrowings outstanding under this agreement.
Amounts drawn and repaid in 90 days or less under the revolving credit facilities are presented net in the Condensed Consolidated Statements of Cash Flows.
Factoring Programs
The Company sells certain of its trade receivables on a non-recourse basis to third-party financial institutions under various factoring agreements.
Information related to the trade receivables sold was as follows:
Three Months Ended June 30, Six Months Ended June 30,
(In millions) 2024 2023 2024 2023
Receivables sold in period $ 364 $ 269 $ 655 $ 532
Cash consideration 360 268 649 529
Net cash provided by operating cash flows
15 — 18 —
Covenants and Compliance
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 June 30, 2024, the Company complied with the covenants contained in its debt and financing arrangements.
7. Fair Value Measurements and Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The levels of inputs used to measure fair value are:
• Level 1—Quoted prices for identical instruments in active markets;
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• Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets; and
• Level 3—Valuations based on inputs that are unobservable, generally utilizing pricing models or other valuation techniques that reflect management’s judgment and estimates.
Assets and Liabilities
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 June 30, 2024 and December 31, 2023, due to their short-term nature.
Debt
The fair value of debt was as follows:
June 30, 2024 December 31, 2023
(In millions) Level Fair
Value Carrying Value Fair
Value Carrying Value
Unsecured notes due 2026 2 $ 369 $ 398 $ 362 $ 398
Unsecured notes due 2029 2 611 592 — —
Unsecured notes due 2031 2 323 397 326 397
Unsecured notes due 2034 2 507 490 — —
Three-Year Term Loan due 2025
2 183 185 231 235
Five-Year Term Loan due 2027
2 396 399 493 499
Financial Instruments
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.
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The notional amount and fair value of derivative instruments were as follows:
June 30, 2024 December 31, 2023 Balance Sheet Location
(In millions) Notional Amount
Fair
Value Notional Amount
Fair
Value
Derivatives designated as net investment hedges:
Cross-currency swap agreements (1)
$ 1,037 $ 18 $ 487 $ 3 Other long-term assets
Cross-currency swap agreements 165 2 165 7 Other current liabilities
Cross-currency swap agreements (1)
633 22 883 49 Other long-term liabilities
Derivatives designated as cash flow hedge:
Interest rate swaps $ — $ — $ 125 $ 2 Other current assets
Interest rate swaps (2)
250 6 125 3 Other long-term assets
Derivatives not designated as hedges:
Foreign currency option contracts $ 337 $ 8 $ 397 $ 8 Other current assets
Foreign currency option contracts 106 3 — — Other current liabilities
Foreign currency forward contracts 107 1 1 — Other current assets
(1) 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.
(2) 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 June 30, 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 June 30, 2024 Six Months Ended June 30, 2024
(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)
Derivatives designated as net investment hedges
Cross-currency swap agreements $ 15 $ 4 $ — $ 47 $ 2 $ 1
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.
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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 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)
Derivatives designated as net investment hedges
Cross-currency swap agreements $ ( 18 ) $ 3 $ — $ ( 34 ) $ — $ 1
Derivatives designated as cash flow hedges
Interest rate swaps $ 4 $ — $ — $ 1 $ — $ —
(1) Amounts reclassified to Net income 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 June 30, Six Months Ended June 30,
(In millions) 2024 2023 2024 2023
Realized loss $ ( 1 ) $ ( 4 ) $ ( 2 ) $ ( 6 )
Unrealized gain 1 3 4 4
Foreign currency gain (loss) $ — $ ( 1 ) $ 2 $ ( 2 )
8. Earnings per Share
The computations of basic and diluted earnings per share were as follows:
Three Months Ended June 30, Six Months Ended June 30,
(Dollars in millions, shares in thousands, except per share amounts)
2024 2023 2024 2023
Net income attributable to common shares
$ 38 $ 65 $ 1 $ 90
Basic weighted-average common shares 119,427 118,927 119,350 118,854
Diluted weighted-average common shares (1)
119,683 119,415 119,680 119,323
Basic earnings per share
$ 0.32 $ 0.55 $ 0.01 $ 0.76
Diluted earnings per share
$ 0.32 $ 0.54 $ 0.01 $ 0.75
Antidilutive shares excluded from diluted weighted-average common shares
1,087 1,604 1,074 1,711
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9. Stockholders’ Equity
The following tables summarize the changes in AOCIL by component:
Foreign Currency Adjustment
(In millions) Foreign
Currency
Translation
Adjustments Net Investment Hedges Cash
Flow
Hedges Defined
Benefit
Plans Less: AOCIL
attributable to
NCI AOCIL
attributable
to GXO
As of March 31, 2024 $ ( 124 ) $ ( 20 ) $ 6 $ ( 111 ) $ — $ ( 249 )
Other comprehensive income (loss) before reclassifications ( 22 ) 14 — ( 1 ) — ( 9 )
Amounts reclassified to net income (loss) — ( 4 ) — 1 — ( 3 )
Tax amounts 1 ( 3 ) — — — ( 2 )
Other comprehensive income (loss), net of tax ( 21 ) 7 — — — ( 14 )
As of June 30, 2024 $ ( 145 ) $ ( 13 ) $ 6 $ ( 111 ) $ — $ ( 263 )
Foreign Currency Adjustment
(In millions) Foreign
Currency
Translation
Adjustments Net Investment Hedges Cash
Flow
Hedges Defined
Benefit
Plans Less: AOCIL
attributable to
NCI AOCIL
attributable
to GXO
As of December 31, 2023 $ ( 83 ) $ ( 47 ) $ 5 $ ( 113 ) $ ( 1 ) $ ( 239 )
Other comprehensive income (loss) before reclassifications ( 63 ) 47 1 — 1 ( 14 )
Amounts reclassified to net income (loss) — ( 3 ) — 2 — ( 1 )
Tax amounts 1 ( 10 ) — — — ( 9 )
Other comprehensive income (loss), net of tax ( 62 ) 34 1 2 1 ( 24 )
As of June 30, 2024 $ ( 145 ) $ ( 13 ) $ 6 $ ( 111 ) $ — $ ( 263 )
Foreign Currency Adjustment
(In millions) Foreign
Currency
Translation
Adjustments Net Investment Hedges Cash
Flow
Hedges Defined
Benefit
Plans Less: AOCIL
attributable to
NCI AOCIL
attributable
to GXO
As of March 31, 2023 $ ( 132 ) $ ( 4 ) $ 4 $ ( 112 ) $ — $ ( 244 )
Other comprehensive income (loss) before reclassifications 32 ( 18 ) 5 — ( 1 ) 18
Amounts reclassified to net income (loss) — ( 3 ) — 1 — ( 2 )
Tax amounts 1 5 ( 1 ) — — 5
Other comprehensive income (loss), net of tax 33 ( 16 ) 4 1 ( 1 ) 21
As of June 30, 2023 $ ( 99 ) $ ( 20 ) $ 8 $ ( 111 ) $ ( 1 ) $ ( 223 )
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Foreign Currency Adjustment
(In millions) Foreign
Currency
Translation
Adjustments Net Investment Hedges Cash
Flow
Hedges Defined
Benefit
Plans Less: AOCIL
attributable to
NCI AOCIL
attributable
to GXO
As of December 31, 2022 $ ( 156 ) $ 7 $ 7 $ ( 112 ) $ — $ ( 254 )
Other comprehensive income (loss) before reclassifications 56 ( 34 ) 1 — ( 1 ) 22
Amounts reclassified to net income (loss) — ( 1 ) — 1 — —
Tax amounts 1 8 — — — 9
Other comprehensive income (loss), net of tax 57 ( 27 ) 1 1 ( 1 ) 31
As of June 30, 2023 $ ( 99 ) $ ( 20 ) $ 8 $ ( 111 ) $ ( 1 ) $ ( 223 )
10. Employee Benefit Plans
Defined Benefit Plans
The Company sponsors a defined benefit pension scheme in the U.K. (the “GXO U.K. Retirement Plan”). In connection with the Wincanton Acquisition, the Company assumed multiple pension schemes covering certain employees in the U.K. and Ireland (the “Wincanton Retirement Plan”). The Company recognized £ 109 million ($ 137 million) of assets on the acquisition date, reflecting the funded status of the Wincanton Retirement Plan which is recorded in Other long-term assets.
The GXO U.K. Retirement Plan and the Wincanton Retirement Plan (collectively the “U.K. Retirement Plans”) do not allow for new plan participants or additional benefit accruals.
The Company deems other international retirement plans to be immaterial to its Condensed Consolidated Financial Statements and are excluded from this disclosure.
Components of the net periodic benefit income recognized under the U.K. Retirement Plans were as follows:
Three Months Ended June 30, Six Months Ended June 30,
(In millions) 2024 2023 2024 2023
Interest cost $ ( 17 ) $ ( 9 ) $ ( 26 ) $ ( 19 )
Expected return on plan assets 23 12 36 24
Amortization of net loss ( 1 ) ( 1 ) ( 2 ) ( 1 )
Net periodic pension income (1)
$ 5 $ 2 $ 8 $ 4
(1) Net periodic pension income is recorded in Other income, net in the Condensed Consolidated Statements of Operations.
Defined Contribution Plans
The Company has defined contribution retirement plans for its U.S. employees and employees of certain foreign subsidiaries. Defined contribution costs were as follows:
Three Months Ended June 30, Six Months Ended June 30,
(In millions) 2024 2023 2024 2023
Defined contribution costs (1)
$ 21 $ 15 $ 38 $ 32
(1) Defined contribution costs were primarily recorded in Direct operating expense in the Condensed Consolidated Statements of Operations.
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11. Restructuring Costs and Other
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)
Balance as of December 31, 2023 $ 7
Charges incurred 17
Payments ( 12 )
Balance as of June 30, 2024
$ 12
The restructuring liability as of June 30, 2024 is expected to be substantially paid within the next 12 months.
12. Income Taxes
Income tax expense for the three months ended June 30, 2024 and 2023, was $ 14 million and $ 20 million, respectively, and the Company’s effective tax rate for the three months ended June 30, 2024 and 2023, was 25.4 % and 23.0 %, respectively. The increase in the Company’s effective tax rate for the three months ended June 30, 2024 compared with 2023 was driven by non-deductible items partially offset by a return-to-provision benefit in 2024.
Income tax expense for the six months ended June 30, 2024 and 2023, was $ 4 million and $ 23 million, respectively, and the Company’s effective tax rate for the six months ended June 30, 2024 and 2023, was 52.3 % and 19.9 %, respectively. The increase in the Company’s effective tax rate for the six months ended June 30, 2024, was primarily driven by a decrease in pre-tax income partially offset by non-deductible items.
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.
13. Commitments and Contingencies
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. 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. The determination as to whether a loss can reasonably be considered to be possible or probable is based on management’s assessment, together with legal counsel, regarding the ultimate outcome of the matter.
Management of the Company believes that it has adequately accrued for the potential impact of loss contingencies that are probable and reasonably estimable. Management of the Company does not believe that the ultimate resolution of any matters to which the Company is presently a party will have a material adverse effect on its results
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of operations, financial condition or cash flows. However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more of these matters could have a material adverse effect on the Company’s financial condition, results of operations or cash flows. 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. 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.
On June 14, 2024, the Company’s subsidiary GXO Warehouse Company, Inc. entered into a Confidential Settlement Agreement (the “Settlement Agreement”) to settle all claims 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 (the “Dispute”). A payment under the Settlement Agreement was made by the Company on July 5, 2024. As of July 10, 2024, the Dispute, which was litigated under the caption Lindt et al. v. GXO Warehouse Company, Inc., docket no. 4:22-cv-00384-BP, in Federal District Court for the Western District of Missouri, was dismissed with prejudice, each side to bear their own costs and fees, and the Court retains jurisdiction to enforce the terms of the Confidential Settlement Agreement. Among other things in the Settlement Agreement, the parties each denied the allegations and counterclaims asserted in the Dispute, and agreed to a mutual release of claims arising from, under or otherwise in connection with their prior business relationship and the Dispute, in exchange for a payment by the Company of $ 45 million. The Company intends to pursue reimbursement in connection with this Dispute under its existing insurance policies. The Company recognized $ 60 million expense for the six months ended June 30, 2024, for the settlement, associated legal fees, costs and other related expenses.
On July 2, 2024, the Italian authorities launched an investigation into the deductibility of value-added tax payments by GXO to certain third-party cooperative labor providers for their services provided from 2017 through 2023 . The alleged amount is € 84 million ($ 90 million as of June 30, 2024). It is reasonably po ssible that a loss may be incurred; however, the possible range of losses is not reasonably estimable given the status of the on-going investigation. We are cooperating in this matter and believe that we have a number of credible defenses.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.