What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-06 compared with 2025-05-08 · 136 added, 70 removed, 101 unchanged (67% of the section changed)

23 unchanged sentences

Cost-plus contracts provide for the payment of allowable costs incurred during the performance of the contract plus a specified margin.

On April 29, 2024, we completed the acquisition of Wincanton plc (“Wincanton”), a U.K.

On April 29, 2024, we completed the acquisition of Wincanton plc (now Wincanton Limited), a U.K.

logistics provider specializing in both warehousing and transportation solutions (“the Wincanton Acquisition”).

The Wincanton Acquisition is subject to a review by the Competition and Markets Authority in the U.K., which is expected to be completed by June 25, 2025.

The Wincanton Acquisition was subject to review by the Competition and Markets Authority (the “CMA”) in the U.K.

On June 19, 2025, the CMA approved the Wincanton Acquisition, subject to the divestment of certain grocery contracts in the U.K.

Due to the acquisition of Wincanton in 2024, comparisons in our results of operations between 2025 and 2024 are less meaningful.

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Results of Operations

Three Months Ended March 31, 2025 compared with the Three Months Ended March 31, 2024

Three Months Ended March 31,

Three Months Ended June 30, 2025 compared with the Three Months Ended June 30, 2024

Three Months Ended June 30,

(In millions, except percentages) 2025 2024 $ Change % Change

6 unchanged sentences

Regulatory matter and litigation expense (1) (3) 2 (67) %

Operating loss (56) (39) (17) 44 %

Operating income 89 75 14 19 %

Other income (expense), net (10) 1 (11) n/m

Interest expense, net (32) (13) (19) n/m

Loss before income taxes (93) (46) (47) n/m

Income tax (expense) benefit (2) 10 (12) n/m

Net loss $ (95) $ (36) $ (59) n/m

Interest expense, net (36) (23) (13) 57 %

Income before income taxes 43 53 (10) (19) %

Income tax expense (15) (14) (1) 7 %

Net income $ 28 $ 39 $ (11) (28) %

n/m - not meaningful

Revenue for the three months ended March 31, 2025 increased by 21%, or $521 million, to $3.0 billion compared with $2.5 billion for the same period in 2024.

The increase primarily reflects $487 million from the Wincanton Acquisition.

Also, revenue increased due to growth in our business.

Foreign currency movement decreased our revenue by $33 million for the three months ended March 31, 2025.

Revenue for the three months ended June 30, 2025 increased by 16%, or $453 million, to $3.3 billion compared with $2.8 billion for the same period in 2024.

The increase reflects $168 million from the Wincanton Acquisition and growth in our business.

Foreign currency favorable movements increased our revenue by $127 million for the three months ended June 30, 2025.

Direct operating expense is comprised of both fixed and variable expenses and consists of operating costs related to our warehouses, including personnel costs, rent expenses, utility costs, equipment maintenance and repair costs, transportation costs, costs of materials and supplies, and information technology expenses.

Direct operating expense for the three months ended March 31, 2025 increased by 24%, or $502 million, to $2.6 billion compared with $2.1 billion for the same period in 2024.

The increase primarily reflects $447 million from the Wincanton Acquisition.

Also, Direct operating expense increased due to growth in our business.

As a percentage of revenue, Direct operating expense for the three months ended March 31, 2025, was 85.9% compared with 83.7% for the same period in 2024.

Direct operating expense for the three months ended June 30, 2025 increased by 18%, or $424 million, to $2.8 billion compared with $2.4 billion for the same period in 2024.

The increase reflects $148 million from the Wincanton Acquisition, growth in our business and foreign currency movements.

As a percentage of revenue, Direct operating expense for the three months ended June 30, 2025, was 85.3% compared with 83.9% for the same period in 2024.

The increase in Direct operating expense as a percentage of revenue was primarily related to the Wincanton Acquisition.

Selling, general and administrative expense (“SG&A”) primarily consists of salary and benefits costs for executive and administrative functions, professional fees, bad debt expense and legal costs.

SG&A for the three months ended March 31, 2025 increased by $12 million, to $261 million compared with $249 million for the same period in 2024.

SG&A for the three months ended June 30, 2025 increased by $2 million, to $272 million compared with $270 million for the same period in 2024.

Depreciation and amortization expense for the three months ended June 30, 2025 increased by $11 million, to $110 million compared with $99 million for the same period in 2024.

Amortization expense was $30 million and $22 million for the three months ended June 30, 2025 and 2024, respectively.

Depreciation and amortization expense increased primarily due to the Wincanton Acquisition.

Transaction and integration costs for the three months ended June 30, 2025 and 2024 were $14 million and $15 million, respectively, and primarily related to the Wincanton Acquisition.

Other income (expense), net decreased to an expense, primarily due to increased unrealized foreign currency loss on foreign currency contracts.

Other income (expense), net was as follows:

Three Months Ended June 30,

(In millions, except percentages) 2025 2024 $ Change % Change

Net periodic pension income

$ 4 $ 5 $ (1) (20) %

Foreign currency gain (loss):

Realized foreign currency option and forward contracts loss

(4) (1) (3) n/m

Unrealized foreign currency option and forward contracts gain (loss)

(8) 1 (9) n/m

Foreign currency transaction and remeasurement loss

(2) (4) 2 (50) %

Total foreign currency loss (14) (4) (10) n/m

Other income (expense), net $ (10) $ 1 $ (11) n/m

n/m - not meaningful

Interest expense, net, primarily increased due to debt incurred for the Wincanton Acquisition.

Interest expense, net was as follows:

Three Months Ended June 30,

(In millions, except percentages) 2025 2024 $ Change % Change

Debt and capital leases

$ 45 $ 34 $ 11 32 %

Cross-currency swaps

(8) (11) 3 (27) %

Interest income

(1) — (1) n/m

Interest expense, net $ 36 $ 23 $ 13 57 %

n/m - not meaningful

Income before income taxes for the three months ended June 30, 2025 was $43 million compared with $53 million for the same period in 2024.

The decrease in income before income taxes was due to higher operating income, offset by higher other expense, net, and higher interest expense, net.

Income tax expense for the three months ended June 30, 2025 was $15 million compared with $14 million for the same period in 2024.

Our effective tax rate for the three months ended June 30, 2025 was 34.6% compared with 25.4% for the same period in 2024.

The increase in our effective tax rate was primarily driven by a decrease in pre-tax income.

While the United States has not adopted the Pillar Two Global Anti-Base Erosion rules issued by the Organization for Economic Co-operation and Development (“Pillar Two”), we have incorporated the estimated annual effect of Pillar Two into our income tax provision for the three months ended June 30, 2025.

For the three months ended June 30, 2024, Pillar Two did not have a material impact on our income tax expense.

Six Months Ended June 30, 2025 compared with the Six Months Ended June 30, 2024

Six Months Ended June 30,

(In millions, except percentages) 2025 2024 $ Change % Change

Revenue $ 6,276 $ 5,302 $ 974 18 %

Direct operating expense 5,371 4,445 926 21 %

Selling, general and administrative expense 533 519 14 3 %

Depreciation and amortization expense 219 191 28 15 %

Transaction and integration costs 36 34 2 6 %

Restructuring costs and other 19 17 2 12 %

Regulatory matter and litigation expense 65 60 5 8 %

Operating income 33 36 (3) (8) %

Other income (expense), net (15) 7 (22) n/m

Interest expense, net (68) (36) (32) 89 %

Income (loss) before income taxes (50) 7 (57) n/m

Income tax expense (17) (4) (13) n/m

Net income (loss) $ (67) $ 3 $ (70) n/m

n/m - not meaningful

Revenue for the six months ended June 30, 2025 increased by 18%, or $974 million, to $6.3 billion compared with $5.3 billion for the same period in 2024.

The increase reflects $655 million from the Wincanton Acquisition and growth in our business.

Foreign currency favorable movements increased our revenue by $94 million for the six months ended June 30, 2025.

Direct operating expense for the six months ended June 30, 2025 increased by 21%, or $926 million, to $5.4 billion compared with $4.4 billion for the same period in 2024.

The increase reflects $595 million from the Wincanton Acquisition, growth in our business and foreign currency movements.

As a percentage of revenue, Direct operating expense for the six months ended June 30, 2025, was 85.6% compared with 83.8% for the same period in 2024.

The increase in Direct operating expense as a percentage of revenue was primarily related to the Wincanton Acquisition.

SG&A for the six months ended June 30, 2025 increased by $14 million, to $533 million compared with $519 million for the same period in 2024.

SG&A increased primarily due to the Wincanton Acquisition.

Depreciation and amortization expense for the three months ended March 31, 2025 increased by $17 million, to $109 million compared with $92 million for the same period in 2024.

Amortization expense was $29 million and

$19 million for the three months ended March 31, 2025 and 2024, respectively.

Depreciation and amortization expense for the six months ended June 30, 2025 increased by $28 million, to $219 million compared with $191 million for the same period in 2024.

Amortization expense was $59 million and $41 million for the six months ended June 30, 2025 and 2024, respectively.

Depreciation and amortization expense increased primarily due to the Wincanton Acquisition.

Transaction and integration costs for the three months ended March 31, 2025 and 2024 were $22 million and $19 million, respectively and primarily related to the Wincanton Acquisition.

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.

Restructuring costs and other for the three months ended March 31, 2025 were $17 million compared with $16 million for the same period in 2024.

For the three months ended March 31, 2025, we recorded $66 million of a regulatory matter related to a contingency for the deductibility of value-added tax payments made by us to certain third-party service providers challenged by the Italian authorities.

For the three months ended March 31, 2024, we recorded $63 million of litigation expense related to a dispute between us and one of our customers which was settled in the second quarter of 2024.

Transaction and integration costs for the six months ended June 30, 2025 and 2024 were $36 million and $34 million, respectively and primarily related to the Wincanton Acquisition.

Restructuring costs and other were primarily related to severance in connection with actions taken to optimize certain administrative functions.

Restructuring costs and other for the six months ended June 30, 2025 were $19 million, compared with $17 million for the same period in 2024.

Regulatory matter and litigation expense for the six months ended June 30, 2025 and 2024, were $65 million and $60 million, respectively.

For the six months ended June 30, 2025, we recorded $65 million of expense related to a regulatory matter for the deductibility of value-added tax payments made by us to certain third-party service providers challenged by the Italian authorities.

For the six months ended June 30, 2024, we recorded $60 million of litigation expense related to a dispute between us and one of our customers, which was settled in the second quarter

For additional information regarding our regulatory and legal matters, see Note 14.

“Commitments and Contingencies” in Part I, Item 1 of this Quarterly Report on Form 10-Q .

Other income (expense), net decreased primarily due to unrealized loss on foreign currency contracts.

Other income (expense), net decreased to an expense, primarily due to increased unrealized foreign currency loss on foreign currency contracts.

Other income (expense), net was as follows:

Three Months Ended March 31,

Six Months Ended June 30,

(In millions, except percentages) 2025 2024 $ Change % Change

6 unchanged sentences

(18) 4 (22) n/m

Foreign currency transaction and remeasurement gain

Foreign currency transaction and remeasurement loss

(2) (3) 1 (33) %

Total foreign currency gain (loss) (10) 3 (13) n/m

Total foreign currency loss (24) (1) (23) n/m

Other income (expense), net $ (15) $ 7 $ (22) n/m

n/m - not meaningful

Interest expense increased primarily due to debt incurred for the Wincanton Acquisition in April 2024.

Interest expense, net, primarily increased due to debt incurred for the Wincanton Acquisition.

Interest expense, net was as follows:

Three Months Ended March 31,

Six Months Ended June 30,

(In millions, except percentages) 2025 2024 $ Change % Change

5 unchanged sentences

(3) (3) — — %

Interest expense, net $ 32 $ 13 $ 19 n/m

n/m - not meaningful

Loss before income taxes for the three months ended March 31, 2025, was $93 million compared with $46 million for the same period in 2024.

The increase in loss before income taxes was primarily due to higher SG&A expense, higher depreciation, amortization and interest expense, and lower other income, net.

Income tax for the three months ended March 31, 2025, was a $2 million income tax expense compared with a $10 million income tax benefit for the same period in 2024.

Our effective tax rate for the three months ended March 31, 2025, was an expense on a pre-tax loss of (2.7)%, compared to a benefit on a pre-tax loss of 21.1% for the

same period in 2024.

The change to our effective tax rate was primarily driven by non-deductible transaction costs and a non-deductible regulatory matter.

For the three months ended March 31, 2025 and 2024, the Pillar Two Global Anti-Base Erosion rules issued by the Organization for Economic Co-operation and Development (“Pillar Two”) did not have a material impact on our income tax expense/benefit.

Pillar Two did not have a significant impact on our fiscal 2024 and we currently do not expect it to have a significant impact on our fiscal 2025 income tax expense.

Interest expense, net $ 68 $ 36 $ 32 89 %

Income (loss) before income taxes for the six months ended June 30, 2025 was a $50 million loss compared with $7 million income for the same period in 2024.

The decrease in income before income taxes to a loss was due to lower operating income, higher other expense, net, and higher interest expense, net.

Income tax expense for the six months ended June 30, 2025 was $17 million compared with $4 million for the same period in 2024.

Our effective tax rate for the six months ended June 30, 2025 was an expense on a pre-tax loss of (35.3)%, compared to an expense on pre-tax income of 52.3% for the same period in 2024.

The change in our effective tax rate was primarily driven by a decrease in pre-tax income, offset by non-deductible regulatory matter and transaction costs.

While the United States has not adopted Pillar Two, we have incorporated the estimated annual effect of Pillar Two into our income tax provision for the six months ended June 30, 2025, and we expect to incur additional income tax related to Pillar Two during fiscal 2025.

For the six months ended June 30, 2024, Pillar Two did not have a material impact on our income tax expense.

Pillar Two did not have a material impact on our fiscal 2024 income tax expense.

We continue to monitor Pillar Two developments, including the impact of the statement issued by the G7 on June 28, 2025 regarding the interplay between the U.S.

international tax system and Pillar Two as it relates to U.S.-headquartered companies.

Liquidity and Capital Resources

Our ability to fund our operations and anticipated capital needs is reliant upon the generation of cash from operations, supplemented as necessary by periodic utilization of our revolving credit facility and factoring programs.

Our principal uses of cash in the future will be primarily to fund our operations, working capital needs, capital expenditures, repayment of borrowings and strategic business development transactions.

Our principal uses of cash in the future will be primarily to fund our operations, working capital needs, capital expenditures, repayment of borrowings, repurchases of our common stock and strategic business development transactions.

The timing and magnitude of our new contract start-ups can vary and may positively or negatively impact our cash flows.

We continually evaluate our liquidity requirements and capital structure in light of our operating needs, growth initiatives and capital resources.

As of March 31, 2025, we held cash and cash equivalents of $288 million and restricted cash of $94 million, and we had $949 million of borrowing capacity, net of letters of credit under our revolving credit facilities .

As of March 31, 2025, we deposited €84 million ($91 million as of March 31, 2025) of restricted cash in relation to a contingency.

In April 2025, we made a partial payment of €15 million ($17 million) against this contingency funded from the designated bank account reducing the restricted cash balance.

For additional information regarding our regulatory and legal matters see Note 14.

“Commitments and Contingencies” in Part I, Item 1 of this Quarterly Report on Form 10-Q .

As of June 30, 2025, we held cash and cash equivalents of $205 million and restricted cash of $2 million, and we had $1,003 million of borrowing capacity, net of letters of credit under our revolving credit facilities .

On February 18, 2025, our board of directors authorized and announced the repurchase of up to $500 million (the “Repurchase Plan”) of our common stock.

3 unchanged sentences

The Repurchase Plan does not obligate the Company to repurchase any specific number of shares of common stock and may be suspended or discontinued at any time.

As of March 31, 2025, the remaining authorization under the Repurchase Plan was approximately $390 million.

As of June 30, 2025, the remaining authorization under the Repurchase Plan was $300 million.

We believe that our cas h and cash equivalents on hand, cash flows from operations, the revolving credit facilities, and the use of our factoring programs will provide sufficient liquidity to operate our business and fund our current and assumed obligations for at least the next 12 months.

5 unchanged sentences

The following table summarizes our asset and liability balances:

March 31, December 31,

June 30, December 31,

(In millions, except percentages) 2025 2024 $ Change % Change

Total current assets $ 2,629 $ 2,641 $ (12) — %

Total long-term assets 8,693 8,625 68 1 %

Total current liabilities 3,370 3,189 181 6 %

Total long-term liabilities 5,048 5,042 6 — %

There were no material changes in our total current assets, total long-term assets, and other long-term liabilities as of March 31, 2025, compared to December 31, 2024.

As of March 31, 2025, accrued expenses within total current liabilities included $66 million related to the accrual of a regulatory matter described in Note 14.

“Commitments and Contingencies” in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Current assets

$ 2,589 $ 2,641 $ (52) (2) %

Long-term assets

9,337 8,625 712 8 %

Current liabilities

3,410 3,189 221 7 %

Long-term liabilities

5,541 5,042 499 10 %

Current assets primarily decreased due to cash used for the repurchase of our common stock and repayment of debt, partially offset by an increase in accounts receivable resulting from foreign currency translation.

Long-term assets primarily increased due to the addition of operating lease assets and the impact of foreign currency translation.

Current liabilities primarily increased due to bank overdraft and the increase in the fair value of our derivatives.

Long-term liabilities primarily increased due to the addition of capital and operating lease liabilities and the increase in the fair value of our derivatives.

Also, our assets and liabilities increased due to foreign currency translation from our non-USD operations, primarily the British pound sterling and the Euro.

Cash Flow Activity

Our cash flows from operating, investing and financing activities, as reflected on our Condensed Consolidated Statements of Cash Flows, are summarized as follows:

Three Months Ended March 31,

Six Months Ended June 30,

(In millions, except percentages)

2 unchanged sentences

Net cash used in investing activities (123) (1,014) 891 (88) %

Net cash used in financing activities (66) (8) (58) n/m

Net cash provided by (used in) financing activities (227) 857 (1,084) n/m

Effect of exchange rates on cash and cash equivalents 40 (7) 47 n/m

Net decrease in cash, restricted cash and cash equivalents $ (103) $ (45) $ (58) n/m

Net increase (decrease) in cash, restricted cash and cash equivalents $ (278) $ 1 $ (279) n/m

n/m - not meaningful

Operating Activities

Cash flows provided by operating activities for the three months ended March 31, 2025 decreased by $21 million compared with the same period in 2024.

The decrease was primarily due to less cash generated from income partially offset by lower working capital consumption for the three months ended March 31, 2025.

Cash flows provided by operating activities for the six months ended June 30, 2025 decreased by $133 million compared with the same period in 2024.

The decrease was primarily due to lower income and increased working capital consumption driven by accounts payable for the six months ended June 30, 2025, compared with the same period in 2024.

Investing Activities

Investing activities used $77 million of cash for the three months ended March 31, 2025 and $82 million for the same period in 2024.

During the three months ended March 31, 2025, we used $78 million of cash to purchase property and equipment and received $1 million of cash from sales of property and equipment.

During the three months ended March 31, 2024, we used $73 million of cash to purchase property and equipment, $15 million to purchase Wincanton shares and received $6 million of cash from sales of property and equipment.

Investing activities used $123 million of cash for the six months ended June 30, 2025 and $1.0 billion for the same period in 2024.

During the six months ended June 30, 2025 we used $125 million of cash to purchase property and equipment and received $2 million of cash from sales of property and equipment.

During the six months ended June 30, 2024 we used $863 million, net of cash received, to fund the Wincanton Acquisition, used $161 million of cash to purchase property and equipment and received $10 million of cash from sales of property and equipment.

Financing Activities

Financing activities used $66 million and $8 million of cash for the three months ended March 31, 2025 and March 31, 2024, respectively.

The primary use of cash from financing activities during the three months ended March 31, 2025 was $106 million used to repurchase shares of our common stock pursuant to the Repurchase Plan, $11 million to repay finance lease obligations and $6 million in payments for employee taxes on net settlement of equity awards, partially offset by $56 million of net borrowings under revolving credit facilities.

The primary uses of cash from financing activities during the three months ended March 31, 2024 were $8 million to repay finance lease obligations and $4 million in payments for employee taxes on net settlement of equity awards.

Financing activities used $227 million and generated $857 million of cash for the six months ended June 30, 2025 and June 30, 2024, respectively.

The primary use of cash from financing activities during the six months ended June 30, 2025 was $200 million to repurchase shares of our common stock under the Repurchase Plan, $55 million to repay debt, $24 million to repay finance lease obligations and $7 million in payments for employee taxes on net settlement of equity awards, partially offset by $64 million increase in bank overdraft and $8 million of net borrowings under our revolving credit facilities.

The primary source of cash from financing activities during the six months ended June 30, 2024 was $1.1 billion of proceeds from issuance of long-term debt and $3 million increase in bank overdraft, partially offset by $196 million of cash used to repay debt, $19 million of cash used to repay finance lease obligations and $7 million in payments for employee taxes on net settlement of equity awards.

Off-Balance Sheet Arrangements

1 unchanged sentence

Contractual Obligations

As of March 31, 2025, the Company’s contractual obligations had not materially changed compared with December 31, 2024.

As of June 30, 2025, the Company’s contractual obligations had not materially changed compared with December 31, 2024.

Critical Accounting Policies and Estimates

4 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis