What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2021-02-12 compared with 2020-02-10 · 310 added, 330 removed, 82 unchanged (89% of the section changed)

Company Overview

XPO Logistics, Inc., together with its subsidiaries (“XPO,” “XPO Logistics,” “the Company,” “we” or “our”), is a top ten global provider of cutting-edge supply chain solutions to the most successful companies in the world.

XPO was incorporated as a Delaware corporation on May 8, 2000.

The Company has two reporting segments:

Transportation and Logistics.

Within each segment, we have robust service offerings that are positioned to capitalize on fast-growing areas of customer demand.

Substantially all of our services operate under the single brand of XPO Logistics.

As of December 31, 2019 , we had approximately 100,000 employees and 1,504 locations in 30 countries, and over 50,000 customers.

Our operations help our customers move their goods most efficiently throughout their supply chains.

Transportation Segment

Our Transportation segment includes our services for truck brokerage and truckload;

less-than-truckload (“ LTL ”);

intermodal and drayage;

managed transportation;

and global forwarding.

We offer these services in both North America and Europe with the exception of intermodal/drayage, which is strictly North America, and truckload, which is in Europe.

Within each region, the complementary transportation services we provide represent an opportunity to provide multiple solutions to our larger customers.

For the full year 2019 , our largest service offerings within the Transportation segment were LTL and freight brokerage/truckload, which contributed 44% and 40% , respectively, to segment revenue.

The segment overall contributed approximately 64% to our consolidated revenue in 2019 , compared with 65% and 66% in 2018 and 2017 , respectively.

Globally, we are the second largest freight brokerage provider, and a top five provider of managed transportation.

Many of our other transportation services hold market-leading positions in North America and Europe.

In North America, we are the largest provider of last mile logistics for heavy goods, the largest manager of expedited shipments, a top three provider of LTL transportation and a top three provider of intermodal services, with a national drayage network.

We are also a freight forwarder with a global network of ocean, air, ground and cross-border services.

In Europe, we provide full truckload transportation as a brokered service using independent carriers, and as dedicated and non-dedicated capacity using our fleet — one of the largest owned road fleets in Europe.

Our other transportation offerings in Europe are LTL transportation, which we provide with one of the largest LTL networks in Western Europe, and last mile logistics.

Our total lane density in Europe covers the regions that produce approximately 90% of the gross domestic product of the European Union (the “ EU ”).

We use a blended model of owned, contracted and brokered capacity for over-the-road transportation.

This gives us extensive flexibility in providing optimal solutions.

The non-asset portion of our model is predominately variable cost and includes our brokerage operations, as well as contracted capacity with independent providers.

As of December 31, 2019 , globally, we had approximately 10,000 independent carriers and owner-operators under contract to provide drayage, expedite, last mile and LTL services to our customers, and more than 50,000 independent brokered carriers representing over 1,000,000 trucks on the road.

The asset portion of our transportation model encompasses approximately 15,500 tractors and 40,000 trailers;

these are primarily related to our LTL operations in North America and our full truckload operations in Europe.

We employ professional drivers in both regions to transport goods for our customers, using our assets.

Our owned fleet also provides supplemental capacity for our freight brokerage operations as needed.

Logistics Segment

XPO is the second largest global provider of contract logistics based on facility space, with the largest outsourced e-fulfillment platform in Europe.

We have deep expertise in key verticals and strong positions in fast-growing sectors.

Our Logistics segment, which we also refer to as supply chain or contract logistics, contributed approximately 36% to our consolidated revenue in 2019 , compared with 35% and 34% in 2018 and 2017 , respectively.

We provide a range of logistics services that help our customers meet their objectives while controlling costs and improving efficiency.

Our services include highly engineered, customized solutions, as well as value-added warehousing and distribution, e-commerce and omnichannel fulfillment, cold-chain solutions, reverse logistics, packaging and labeling, factory support, aftermarket support, inventory management, order personalization and supply chain optimization.

In addition, we provide highly engineered solutions and optimization services, such as production flow management.

Once we secure a logistics contract, the average customer tenure is approximately five years and the relationship can expand to include a wider range of services, such as inbound and outbound logistics.

Our competitive positioning in logistics is as a technology leader.

We are innovative and agile, with the ability to handle complex implementations, and we are a proponent of advanced automation.

Reverse logistics, also called returns management, is a fast-growing area of contract logistics and one in which we have a reputation as a quality provider.

In 2019 , we managed about 170 million returns.

It is a multifaceted service that includes inspections, repackaging, refurbishment, resale or disposal, refunds and warranty management.

These are high-value services for any company with consumer end-markets, as consumers are increasingly test-driving the products they buy online.

As of December 31, 2019 , we operated 200 million square feet ( 19 million square meters) of contract logistics facility space worldwide.

Approximately 104 million square feet ( 10 million square meters) was located in North America and Asia, where we are a market leader in logistics capacity, and 96 million square feet ( 9 million square meters) was located in Europe, where we are a top five industrial tenant.

Customers served by our Logistics segment include many of the preeminent names in retail and e-commerce, food and beverage, technology, aerospace, wireless, industrial and manufacturing, chemical, agribusiness, life sciences and healthcare.

Our logistics network benefits from strong positioning in the high-growth e-commerce sector.

We are the largest outsourced e-fulfillment provider in Europe, and we have a major platform for e-fulfillment in North America, where we provide solutions for high-volume omnichannel distribution and reverse logistics.

E-commerce is

predicted to continue to grow globally at a double-digit rate through at least 2022, making it difficult for many companies to handle fulfillment in-house while providing high levels of service.

Our experience with fast-growing e-commerce categories makes us a valuable partner to customers who want to outsource order fulfillment and personalization, product returns, testing, refurbishment, warranty management, refunding and other service-intensive parts of the supply chain.

Together with XPO Direct™, our shared space distribution offering, our Logistics segment provides e-commerce companies with superior control, flexible warehousing and staffing, advanced automation and predictive analytics that help manage peaks in demand.

XPO Logistics, Inc., together with its subsidiaries (“XPO” or “we”), provides cutting-edge supply chain solutions to the most successful companies in the world.

The company is the second largest contract logistics provider and the second largest freight broker globally, and a top three less-than-truckload provider in North America.

XPO was incorporated as a Delaware corporation in May 2000.

As of December 31, 2020, we had approximately 102,000 employees and 1,523 locations in 30 countries, with substantially all of our services operating under the single brand of XPO Logistics.

In January 2021, we acquired the majority of the logistics operations of Kuehne + Nagel in the U.K.

and Ireland, which increased our location count to 1,629 and our number of employees to approximately 108,000.

We use our highly integrated network to help more than 50,000 customers operate their supply chains most efficiently.

We have two reporting segments, Transportation and Logistics, each with robust service offerings, leadership positions and growth prospects.

In 2020, approximately 62% of our revenue came from Transportation, and the remaining 38% came from Logistics.

Within each segment, we are positioned to capitalize on fast-growing areas of demand.

We continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business, including how it affects our employees, customers and business partners.

See “Impacts of COVID-19” in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Planned Spin-off of the Logistics Segment

In December 2020, we announced that our Board of Directors unanimously approved a plan to pursue a spin-off of 100% of our Logistics segment as a separate publicly traded company.

The spin-off, which we intend to qualify as a transaction that is generally tax-free for U.S.

federal income tax purposes to XPO shareholders, would result in XPO shareholders owning stock in both companies.

If completed, the spin-off will result in separate public companies with clearly delineated service offerings.

XPO will be a global provider of primarily less-than-truckload (“LTL”) transportation and truck brokerage services, and the spun-off company will be the second largest contract logistics provider in the world.

Both companies’ stocks are expected to trade on the New York Stock Exchange, and we plan to consider a dual listing on the London Stock Exchange for the spun-off company in due course.

The transaction is currently expected to be completed in the second half of 2021, subject to various conditions.

There can be no assurance that the spin-off will occur or, if it does occur, of its terms or timing.

See “Risk Factors” in Item 1A below for further information.

Transportation Segment Overview

Our Transportation segment primarily provides LTL and truck brokerage services in North America and Europe.

Our largest service offering within the Transportation segment is LTL, which contributed 43% of 2020 segment revenue.

We are a top three provider of LTL services in North America, and we have one of the largest LTL networks in Western Europe.

Our other primary service offering within the Transportation segment is truck brokerage.

We are the second largest brokerage provider globally and the third largest brokerage provider in North America.

As of December 31, 2020, we had truck brokerage relationships with approximately 75,000 independent carriers representing over 1,000,000 trucks.

The results of our truck brokerage operations are included as part of our freight brokerage services, which include additional, asset-light services for expedite, intermodal and drayage.

For more information about our Transportation segment offerings, refer to the “Transportation Services” section below.

Logistics Segment Overview

Our Logistics segment, which we sometimes refer to as supply chain, provides order fulfillment and other distribution services differentiated by our ability to deliver technology-enabled, customized solutions.

Our logistics customers include many preeminent companies that benefit from our scale, digital capabilities, expertise and range of solutions.

Many of these customers have long-tenured relationships with us, and frequently expand the scope and scale of the services we provide to them.

XPO is the second largest provider of contract logistics globally, with the largest outsourced e-commerce fulfillment platform in Europe, and a major platform for e-fulfillment in North America.

As of December 31, 2020, we operated 205 million square feet (19 million square meters) of logistics warehouse space worldwide.

Approximately 101 million square feet (9 million square meters) was located in North America;

96 million square feet (9 million square meters) was located in Europe;

and 8 million square feet (1 million square meters) was located in Asia.

Our January 2021 acquisition of Kuehne + Nagel logistics sites in the U.K.

and Ireland increased our global facility space to 212 million square feet (20 million square meters).

Our Logistics segment benefits from deep roots in the e-commerce sector, which continues to show strong, secular growth.

Many of our e-commerce facilities also manage merchandise returns, also known as reverse logistics.

Before COVID-19, e-commerce was already growing globally at a double-digit rate, and that growth has accelerated as more consumers opt to purchase goods online.

This level of growth makes it difficult for many companies to handle fulfillment and returns in-house while providing high levels of service.

We provide solutions for pure-play e-commerce companies, omnichannel retailers and manufacturers with aftermarket distribution channels, including the merchandise returns that have become a significant byproduct of order fulfillment.

For more information about our Logistics segment offering, refer to the “Logistics Services” section below.

Operating Philosophy

We believe that our rapid pace of innovation differentiates XPO’s services and makes the most of the talent and assets within our organization.

Our technology is a way for us to strengthen our relationships with customers and serve them as completely as possible.

Our industry is evolving, and customers value our ability to solve complex problems with sophisticated, customized solutions underpinned by our digitalization and data science.

We concentrate our technology efforts in four areas:

We believe that our rapid pace of innovation differentiates our services, enables us to better utilize our assets and makes the most of the talent within our organization.

Our proprietary technology strengthens our relationships with customers by addressing their immediate supply chain needs and anticipating future needs.

Technology allows us to be a true partner to our customers by helping them meet their objectives for efficiency, safety, customer service and growth.

When developing our technology, we concentrate our efforts in four areas that can create value for our shareholders by serving our customers most efficiently:

our digital freight marketplace, automation and intelligent machines, dynamic data science, and visibility and customer service, specifically in the e-commerce supply chain.

Our 2019 investment in technology was among the highest in our industry at approximately $550 million .

Our global team of approximately 1,800 technology professionals works closely with our operations in North America and Europe, and can deploy proprietary software very rapidly on our cloud-based platform.

We prioritize innovations that can benefit our customers and create value for our shareholders.

For example, our XPO Connect™ digital marketplace gives our transportation customers a birds-eye view of real-time market conditions and available capacity.

It matches shippers and carriers with digital efficiency, benefitting both parties and contributing to financial performance.

See the “Transportation Services” and “Technology and Intellectual Property” sections below for more information.

In addition to our focus on technology, we have a strong commitment to sustainability.

This is an area where we have already set an example in the industry.

In the United States (“ U.S.

”), XPO has been named a Top 75 Green Supply Chain Partner by Inbound Logistics for four consecutive years, and in 2016 we were awarded the label “Objectif CO2” for outstanding environmental performance of transport operations in Europe by the French Ministry of the Environment and the French Environment and Energy Agency.

See the “Transportation Services,” “Logistics Services” and “Technology and Intellectual Property” sections below for more information about our technology.

Environmental sustainability is a significant priority for us.

In the U.S., XPO has been named a Top 75 Green Supply Chain Partner by Inbound Logistics for five consecutive years.

In France, we have renewed our commitment to the CO2 Charter for another three years.

In Spain, all of our sites meet Leadership in Energy and Environmental Design (“LEED”) energy certification standards for 100% consumption of renewable energy.

In the United Kingdom (“ U.K.

”), the warehouse of the future we created with Nestlé is scheduled to open in mid-year 2020.

It utilizes environmentally friendly ammonia refrigeration systems, energy-saving light-emitting diode (“LED”) lighting, air-source heat pumps for administration areas and rainwater harvesting.

A number of our logistics facilities are ISO14001-certified, which ensures environmental and other regulatory compliances.

We monitor fuel emissions from forklifts in our warehouses, and we have protocols in place to take immediate corrective action if needed.

In the U.K., the Digital Distribution Warehouse of the Future we created with Nestlé became a reality in 2020, operating with environmentally friendly ammonia refrigeration systems, energy-saving lighting, air-source heat pumps for administration areas and rainwater harvesting.

In our Logistics segment, a number of our warehouse facilities are ISO 14001-certified, which ensures environmental and other regulatory compliances.

We monitor fuel emissions from forklifts, with protocols in place to take immediate corrective action if needed.

Our packaging engineers ensure that the optimal carton size is used for each product slated for distribution, and when feasible, we purchase recycled packaging.

As a byproduct of our reverse logistics operations, we recycle millions of electronic components and batteries each year.

In transportation, we have made substantial investments in fuel-efficient Freightliner Cascadia tractors in North America;

As a byproduct of managing returned merchandise, we recycle millions of electronic components and batteries each year.

In our Transportation segment, we have made substantial investments in fuel-efficient Freightliner Cascadia tractors in North America;

these use Environmental Protection Agency (“EPA”) 2013-compliant and Greenhouse Gas 2014-compliant Selective Catalytic Reduction technology.

Our North American LTL locations have energy-saving policies in place and are implementing a phased upgrade to LED lighting.

In Europe, we own one of the industry’s most modern road fleets:

98% compliant with Euro V, EEV and Euro VI standards.

We also own a large fleet of natural gas trucks operating in France, the U.K.

, Spain and Portugal and, in 2019, we invested in 100 new Stralis Natural Power Euro VI tractors for our LTL network in France.

These tractors use a combination of liquified and compressed natural gas (“LNG/CNG”) to generate lower NOx emissions than the Euro VI standard and reduce noise in densely populated areas.

In Spain, we use government-approved mega-trucks that can significantly reduce CO 2 emissions due to their larger carrying capacity.

Our last mile operations in Europe are piloting electric vehicles for deliveries in urban areas, reducing those emissions to zero.

Our modern road fleet in Europe is 98% compliant with Euro V, EEV and Euro VI standards.

We also own a large fleet of natural gas trucks operating in France, the U.K., Spain and Portugal, and in 2020 we invested in 80 new tractors that use liquified natural gas (“LNG”).

This increased our alternative-fuel road fleet in France to more than 250 LNG vehicles.

In Spain, we own government-approved mega-trucks to transport freight with fewer trips, and our last mile operations in Europe use electric vehicles for deliveries in certain urban areas, reducing those emissions to zero.

Transportation Services

Our Transportation segment includes freight brokerage (which encompasses truck brokerage, intermodal, drayage and expedite), last mile, LTL , full truckload, global forwarding and managed transportation services.

Our XPO Connect™ digital freight platform is continually improving our transportation services through visibility and automation, making us more productive and differentiating our services.

We are able to customize the user experience based on business-to-business (“B2B”) shipper and carrier requirements load by load, and business-to-consumer (“B2C”) consumer expectations for last mile service.

The platform’s multimodal architecture is the foundation for ongoing innovations across our transportation ecosystem.

See the “Technology and Intellectual Property” section below for more information.

Freight Brokerage, including Truck Brokerage, Intermodal, Drayage and Expedite

Less-Than-Truckload (LTL)

Our LTL operations in North America are asset-based.

We provide customers with geographic density and day-definite regional, inter-regional and transcontinental LTL freight services with one of the industry’s largest national networks of tractors, trailers, professional drivers and terminals.

This includes cross-border U.S.

service to and from Mexico and Canada, as well as intra-Canada service.

In 2020, our LTL operations in North America offered more than 75,000 next-day and two-day lanes and had over 20,000 customers.

Our customers value our scale and capacity and our network of 290 LTL terminals in the U.S.

We also have one of the largest, most modern and most safety-equipped LTL fleets in our industry.

Our North American fleet contains approximately 7,800 tractors and 25,000 trailers, operated by approximately 12,000 employee drivers.

In Europe, our LTL offering utilizes a blend of operations that includes asset-based (XPO fleet) and asset-light (contracted carriers), supported by a network of terminals.

We provide LTL services domestically in France, the U.K., Spain and Portugal, and we offer multinational LTL distribution throughout Europe.

Our linehaul network is how we move LTL freight across the country.

We use intelligent route-building to increase fleet utilization, optimize load factor and limit cargo damage.

To improve pickup-and-delivery performance, we developed routing and visualization tools that help our dispatchers leverage route density and reduce cost per stop.

To optimize pricing, we use elasticity models to adjust for current lane conditions.

In addition, we use our XPO Smart™ labor management technology in our yard and dock operations to enhance productivity.

For more information, see the “Technology and Intellectual Property” section below.

While each application of our technology delivers its own benefits, we also expect a strong synergistic effect on our LTL business as a whole.

For example, when we optimize truck routes, this benefits asset utilization, driver utilization, customer service and yield, and should reduce our carbon footprint.

Truck Brokerage

Our truck brokerage operations are non-asset-based — we place shippers’ freight with qualified carriers, primarily trucking companies.

Customers offer loads to us via electronic data interchange, email, telephone and the internet on a daily basis.

Truck brokerage services are priced on either a spot market or contract basis for shippers.

We collect payments from our customers and pay carriers for transporting customer loads.

Our proprietary, cloud-based brokerage platform, Freight Optimizer, gives us real-time visibility into truckload supply and demand.

Freight Optimizer is also the core technology engine behind XPO Connect™.

Our intermodal operations are asset-light;

we provide customers with container capacity, brokered rail transportation, drayage transportation via independent contractors, and on-site operational services.

We utilize containers and chassis we lease or own, together with access to supplemental capacity, to meet our customers’ intermodal requirements.

We offer our door-to-door intermodal services to a wide range of customers in North America, including large industrial and retail shippers, transportation intermediaries, such as intermodal marketing companies, and steamship lines.

To facilitate these services, we work with the railroads in providing the long-haul portion of freight shipments, and we contract with independent drayage trucking companies for local pickup and delivery of the containers.

We also provide customized electronic tracking and analysis of market prices and negotiated rates through our proprietary Rail Optimizer technology, which we use to determine the optimal configurations of truck and rail.

Our expedite operations are predominantly non-asset-based — we use a network of contracted owner-operators for expedited ground transportation, and an electronic bid platform for air charter loads.

Another large component of our expedite offering is our proprietary transportation management system (“ TMS ”), which awards loads electronically based on online bids by carriers.

These transactions primarily happen on a machine-to-machine basis.

Our purpose-built TMS initiates a new auction on the internet, and we take a fee for facilitating the process.

Our expedite services can be characterized as time-critical, time-sensitive or high priority freight shipments, many of which require special handling.

Urgent needs for expedited transportation typically arise due to tight tolerances in a customer’s supply chain, or some kind of disruption to the supply chain.

Expedite customers most often request our services on a per-load transactional basis through our offices or via our proprietary online portals.

Only a small percentage of loads are scheduled for future delivery dates.

We operate an ISO 9001:2008-certified call center that gives our customers on-demand status updates related to their expedited shipments.

Last Mile Logistics

Our last mile operations in North America and Europe primarily specialize in heavy goods, including appliances, furniture, large electronics and other items that are larger-than-parcel.

We have an industry-leading network of 85 last mile hubs in North America positioned within 125 miles of approximately 90% of the U.S.

population and we are expanding our last mile delivery service in Europe.

Last mile comprises the final stage of the delivery from a local distribution center or retail store to the end-customer’s home or business.

It is a fast-growing industry sector that serves blue chip retailers and e-commerce companies, as well as smaller retailers with limited in-house capabilities for deliveries and installations.

Incremental services are often required, such as positioning the product in the room of choice, unpacking, assembly, utility

connection, installation, testing, and removal of an old product.

We use independent contractors to perform these services, making our last mile operations asset-light.

Important aspects of last mile service are responsiveness to seasonal demand, economies of scale, advanced technology and an ability to provide a consistently high-quality experience.

We use our proprietary technology to collect customer feedback, monitor carrier performance, manage capacity and communicate digitally with consumers to protect the brands of the retailers, e-tailers and manufacturers we serve.

Less-Than-Truckload ( LTL )

In North America, our LTL operations are asset-based.

We own one of the industry’s largest fleets of tractors and trailers for linehaul, pickup and delivery, employ professional drivers and have a national network of terminals.

We provide our customers with critical density and day-definite regional, inter-regional and transcontinental LTL freight services.

As of December 31, 2019 , our LTL operations in North America offered more than 75,000 next-day and two-day lanes, encompassing approximately 99% of all U.S.

We also provide cross-border service to and from Mexico and Canada, as well as intra-Canada service.

In Europe, our LTL operations utilize a blend of asset-based and asset-light capacity — XPO fleet and contracted carriers — supported by a network of terminals.

We provide LTL services domestically in France, the U.K.

and Spain, and offer multinational LTL distribution throughout Europe.

Full Truckload

Our asset-based full truckload service operates almost entirely in Europe, where we are a leading provider.

For many customers, we function as a dedicated contract carrier, providing truckload capacity by utilizing our tractors, trailers and drivers.

In 2019 , dedicated truckload was a significant contributor to our Transportation revenue in Europe.

We also provide capacity on a transactional basis for the transportation of packaged goods, high cube products and bulk goods.

We provide full truckload services domestically in France, the U.K.

, Spain, Poland, Romania, Italy, Portugal and Slovakia, and internationally throughout Europe.

Global Forwarding

Our global forwarding operations are asset-light;

we provide logistics services for domestic, cross-border and international shipments through our relationships with ground, air and ocean carriers and a network of XPO and agent-owned offices.

Our freight forwarding capabilities are not restricted by size, weight, mode or location, and therefore are potentially attractive to a wide market base.

As part of our global forwarding network, we operate subsidiaries as non-vessel-operating common carriers (“ NVOCC ”) to transport our customers’ freight by contracting with vessel operators.

We are also a customs broker licensed by the U.S.

Customs and Border Protection Service.

This enables us to provide customs brokerage services to direct domestic importers, other freight forwarders and NVOCC s, and vessel-operating common carriers.

Managed Transportation

XPO is a top five global provider of managed transportation.

We provide this non-asset service to shippers who want to outsource some or all of their transportation modes and related activities.

These activities can include freight handling, such as consolidation and deconsolidation, labor planning, inbound and outbound shipment facilitation, documentation and customs management, claims processing and third-party logistics (“ 3PL ”) supplier management.

The three arms of our managed transportation offering are control tower solutions, managed expedite through our proprietary, web-based platform, and dedicated capacity.

Our control tower experts design the optimal routes for a given supply chain, source the most efficient carriers and ensure a high level of performance.

Our dedicated service is a turnkey solution we tailor for each customer, complete with drivers, tractors, trailers, maintenance, management, fuel and Key Performance Indicator (“KPI”) reporting.

Customers offer loads to us via electronic data interchange (“EDI”), email, telephone and our XPO Connect™ platform on a daily basis;

we collect payments from our customers and pay carriers for transporting the loads.

Our truck brokerage capabilities are differentiated by scale, expertise and the critical advantages of our propriety technology.

As of December 31, 2020, we had approximately 75,000 independent carriers in our global brokerage network, giving us access to more than a million trucks.

Our operating model enables us to reduce our costs when demand is soft and flex our resources to find trucks as demand returns.

In the U.S., truck brokers have steadily penetrated the broader for-hire trucking industry over time, in part because of the reliable access to capacity brokers can provide and, more recently, digital access to truck capacity.

Our platform has become one of the most rapidly adopted technologies in the brokerage industry.

The marketplace dynamics, together with the vast potential of future applications, establish XPO Connect™ as a significant differentiator of our brokerage offering.

For more information, see the “Technology and Intellectual Property” section below.

In addition to truck brokerage, our freight brokerage services include intermodal and drayage operations that provide customers with container capacity, long-haul transportation brokered with railroads, road transportation of containers performed by independent contractors, and on-site operational services.

We utilize containers and chassis we lease or own, together with access to supplemental equipment capacity, to meet our customers’ intermodal requirements.

Our Transportation segment also includes an asset-light last mile logistics service for the home delivery of heavy goods — a sector that benefits from the rapid growth of e-commerce and omnichannel retail.

XPO is the largest provider of last mile logistics for heavy goods in North America, with a growing last mile presence in Europe.

Additionally, we may assist customers with ancillary services, such as urgent shipping, or freight forwarding, or customers may outsource the management of their freight transportation to us.

As of December 31, 2020, we had approximately 10,000 independent contractors under contract to provide ancillary services to our customers.

Logistics Services

Our Logistics segment provides a wide range of services differentiated by our technology and our ability to customize solutions for customers.

These services include value-added warehousing, distribution and inventory management, omnichannel and e-commerce fulfillment, order personalization, reverse logistics, cold chain

solutions, packaging and labeling, factory support and aftermarket support.

In addition, the segment provides highly engineered, customized solutions and supply chain optimization services, including advanced automation and predictive volume flow management.

Our logistics customers operate primarily in industries with high-growth outsourcing opportunities, such as retail and e-commerce, food and beverage, technology, aerospace, wireless, manufacturing and other industrial, chemical, agribusiness, life sciences and healthcare.

We have extensive experience in these verticals, and we understand the demanding requirements for quality standards, real-time visibility, special handling, security, complex stock-keeping, time-assured deliveries and agility during seasonal surges in certain sectors.

Contract logistics processes are ripe for transformation through technology.

Our Logistics segment provides a wide range of services differentiated by our technology, including high-value-add warehousing and distribution, order fulfillment and personalization, cold-chain logistics, packaging and labeling, aftermarket support, inventory management and supply chain optimization.

Our logistics customers primarily operate in industries with high-growth outsourcing opportunities, including e-commerce and retail, food and beverage, consumer packaged goods, technology, aerospace, telecommunications, industrial and manufacturing, chemicals, agribusiness, life sciences and healthcare.

These are all verticals where we

have significant expertise and we understand the specific requirements, such as special handling, complex stock-keeping, time-assured deliveries and surge management.

One of the most highly valued services across multiple customer verticals is reverse logistics.

Depending on the merchandise being returned, this fast-growing area of logistics can include inspection, testing, repackaging, refurbishment, resale or product disposal, as well as refunding and warranty management.

Reverse logistics services are mission-critical for companies with consumer end-markets, as shoppers are increasingly “test-driving” the merchandise they buy online.

Logistics processes are ripe for transformation through technology.

Order fulfillment times are compressing, most notably in the direct-to-consumer space.

The most cost-effective way to meet customer expectations is through advanced automation and intelligent machines — robots and cobots (collaborative robots), automated sortation systems, automated guided vehicles (“AGVs”) and goods-to-person systems.

In 2019 , we integrated collaborative robotics and goods-to-person systems in a number of our sites to support our warehouse employees.

We have also developed analytics that predict future surges in demand based on data histories and forecasted customer spend.

About 10% to 35% of all e-commerce orders result in returned goods, which creates reverse peaks at certain times of year.

We have been able to shave several days off the reverse process through automation, accelerating our customers’ ability to get product back on the shelf for resale.

In addition to our investments in automation and analytics, we have differentiated XPO from other logistics providers through our ability to create a synchronized environment across automation platforms.

Our proprietary warehouse management platform (“ WMx ”), integrates robotics and other advanced automation into our operations with a high degree of control, even when complex, third-party software is involved.

Our warehouse platform is a key competitive advantage, particularly in multichannel environments.

Other technologies that differentiate our logistics offering are our proprietary tools for order management tool (“ OMx ”), which gives customers deep visibility into fulfillment flows, and our business analytics dashboard (“ BMx ”), which gives customers XPO tools to manage their supply chains.

Our connection management software (“ CMx ”) facilitates the seamless integration of SAP, Oracle and other customer systems, enabling us to engage in sophisticated demand planning.

XPO Direct™ is our shared-space distribution network in North America;

we designed it to capitalize on the strengths of our Logistics and Transportation segments in combination.

Our technology links strategically located logistics sites and last mile hubs, giving customers the flexibility to reposition inventory close to demand as geographic patterns change.

Our facilities serve as stockholding sites and cross-docks that can be utilized by multiple customers at the same time.

The most cost-effective way to meet the majority of customer expectations is through advanced automation and intelligent machines — robots and cobots (collaborative robots), automated sortation systems, automated guided vehicles (“AGVs”) and goods-to-person systems.

In 2019, we integrated collaborative robotics and goods-to-person systems in a number of our warehouses to support our employees and improve efficiency;

this integration substantially increased throughput in 2020.

Additionally, we have developed analytics that predict future surges in demand based on data histories and forecasted customer spend.

About 15% to 35% of consumer goods bought online are returned, based on the product category, and this creates reverse peaks at certain times of year.

We have been able to shave several days off the reverse process through automation, which accelerates a customer’s ability to return goods to retail for sale.

In addition to our investments in automation and analytics, we have differentiated XPO from other logistics providers through our ability to create a synchronized warehouse environment across automation solutions.

Our proprietary warehouse management platform integrates robotics and other advanced automation into our operations with rigorous control, even when complex, third-party software is involved.

Our XPO Smart™ labor management tools help us offset the higher cost of labor in our facilities by making the optimal use of workforce hours.

As logistics volumes pick up, our site managers are able make rapid adjustments to labor levels in real time.

XPO Smart™ self-adjusts site by site to drive productivity across our logistics network.

For more information, see the “Technology and Intellectual Property” section below.

Other technologies that differentiate our logistics offering are our proprietary warehouse module for order management, which gives customers deep visibility into fulfillment flows, and our analytics dashboard, which gives customers valuable business intelligence to manage their supply chains.

Our connection management software module facilitates integration with SAP, Oracle and other external systems, enabling our customers to get the most benefit from our technology in areas such as visibility, demand planning and continuous improvement.

XPO Direct™ is our shared-space distribution network for B2C and B2B customers in North America.

This unique solution gives retailers and manufacturers a way to manage fulfillment using our scale, capacity and innovation without the need to add high-fixed-cost distribution centers.

XPO Direct™ gives customers the flexibility to reposition inventory within one-day and two-day ground delivery range of approximately 99% of the U.S.

population as demand patterns change, and in close proximity to retail stores for inventory replenishment.

This responds directly to increasing demand for shorter fulfillment times.

XPO Direct™ capitalizes on the strengths of our Transportation and Logistics segments in combination.

Our technology links our facilities, which serve as strategically located stockholding sites and cross-docks that can be utilized by multiple customers at the same time.

Transportation needs are supported by our brokered, contracted and owned capacity.

XPO Direct™ gives companies a way to manage B2C and B2B fulfillment using our scale and capacity, without the capital investment of adding high-fixed-cost distribution centers.

We can position goods within one-day and two-day ground transportation range of approximately 90% of the U.S.

population and in close proximity to retail stores for rapid inventory replenishment.

Our strategy is to help customers manage their goods most efficiently throughout their supply chains, using our network of people, technology and physical assets.

We deliver value to customers in the form of process efficiencies, cost efficiencies, reliable outcomes, technological innovations and service that is both highly responsive and proactive.

As part of our strategy, we continuously seek to become more efficient in our own operations.

We do this by looking for ways to leverage our strengths and solve as many supply chain challenges as possible for our customers.

For example, a transportation customer in North America may utilize our truck brokerage, intermodal and expedite solutions.

Additionally, we have positioned XPO to capitalize on the ongoing growth in e-commerce and on secular trends in demand, such as outsourcing and just-in-time inventory practices.

In addition, we have a comprehensive framework of processes for recruiting, training and mentoring our employees, and for marketing to the hundreds of thousands of prospective customers in our existing markets.

Most important to our growth, we have instilled a culture that focuses our efforts on delivering results for our customers and our Company.

We deliver value to customers in the form of technological innovations, process efficiencies, cost efficiencies and reliable outcomes.

Our services are both highly responsive to

customer goals, such as mitigating environmental impacts over time, and proactive in identifying potential improvements.

Most important, we have instilled a culture that focuses our efforts on delivering mutually beneficial results for our customers and our company.

As part of our strategy, we have positioned XPO to capitalize on secular trends in demand, such as the rapid growth of e-commerce and the heightened customer interest in outsourcing.

Management’s growth and optimization strategy for the Transportation segment is to:

Market our diversified, multimodal solutions and expertise to customers of all sizes, both new and existing accounts;

Market the advantages of our proprietary XPO Connect™ digital marketplace, which synthesizes data science, digital automation and real-time visibility for a superior shipper-carrier-consumer experience;

Recruit and retain quality drivers, and best utilize our driver and equipment capacities;

Attract and retain quality independent owner-operators and independent brokered carriers for our carrier network;

Recruit and retain talented sales and customer service representatives, and continuously improve employee productivity with state-of-the-art training and technology;

Integrate industry-best practices, with a focus on automation and analytics that drive productivity and share gains.

• Market our solutions and vertical expertise to new and existing customers of all sizes;

• Leverage the advantages of our proprietary XPO Connect™ digital marketplace, which synthesizes the shipper, carrier and consumer experiences using automation and real-time visibility;

• Recruit and retain quality drivers for our fleets, and best utilize our driver and equipment capacities;

• Attract and retain quality independent contracted carriers and independent brokered carriers for our transportation network;

• Recruit and retain talented sales and customer service representatives and continuously improve their productivity with state-of-the-art training and technology;

• Integrate industry best practices into our operations, with a focus on automation and analytics that drive productivity and share gains.

Management’s growth and optimization strategy for the Logistics segment is to:

Develop additional business in verticals where we already have deep logistics expertise and a strong track record of successful relationships;

• Develop additional business in verticals where we already have deep expertise, enduring customer relationships and a strong track record of successful performance;

• Capture more share of wallet with existing customers who could use our logistics solutions for more of their supply chain needs;

Market the advantages of our proprietary WMx technology suite, which we use to manage advanced automation, robotics, labor productivity, safety and changes in demand in complex warehouse environments;

• Market the advantages of our proprietary technology for warehouse operations, which we use to manage advanced automation, robotics, labor productivity, safety and changes in demand in complex logistics environments;

• Partner with our customers in meeting their goals for supply chain performance, growth management and stakeholder satisfaction, and help them overcome challenges specific to their business;

Integrate industry-best practices, with a focus on automation and analytics that drive productivity and share gains.

Potential Strategic Alternatives

In January 2020, we announced that XPO has commenced a review of strategic alternatives, including the possible sale or spin-off of one or more of our business units, in order to maximize shareholder value.

A timetable has not been set for the completion of the review process and we have not determined which, if any, business units would be sold or spun off.

However, we do not intend to sell or spin off our North American less-than-truckload unit.

• Integrate industry best practices into our operations, with a focus on automation and analytics that drive productivity and share gains.

Technology and Intellectual Property

One of the ways in which we empower our employees to deliver superior service is through our proprietary technology.

We believe that the continual enhancement of our technology is critical to our success.

It represents one of our largest categories of investment.

We have built a highly scalable platform on the cloud to speed the deployment of new ways to increase efficiency, control costs and leverage our footprint.

We can develop an innovation for one of our service lines and distribute it across different geographies and services to derive widespread benefits.

This same platform also provides a way to address opportunities in real time, with constant feedback loops that engage our operators and customers.

In 2019 , we made considerable technological progress, including these highlights:

One of the ways in which we strengthen our relationships with customers is by empowering our employees to deliver superior service through our technology.

Our industry is evolving, and customers want to de-risk their supply chains through robust visibility and digitization.

We are already well-positioned to provide this value to customers, because we prioritized visibility, control and automation early in the development of our proprietary technology.

We have built a highly scalable platform on the cloud that speeds the deployment of new ways to increase efficiency, control costs and leverage our footprint.

We can deploy innovations across multiple geographies in a relatively short time, and also take an innovation developed for one of our services and apply it to other services to differentiate the value we offer.

This agility gives our larger accounts an added incentive to use us for multiple solutions.

We believe that our investment in technology is among the highest in our industry at an annual average of approximately $500 million.

The most significant impacts of our technology to date are in these areas:

XPO Smart ™ is our proprietary suite of intelligent tools and analytics that self-adjusts site by site to drive productivity across our operations.

It incorporates dynamic data science, predictive analytics and machine learning

to aid our managers in decision-making.

It incorporates dynamic data science, predictive analytics and machine learning to aid our managers in decision-making.

We use XPO Smart™ to improve our labor and inventory management in a safe, disciplined and cost-effective manner.

As of December 31, 2019 , we had implemented XPO Smart™ in all our LTL dock operations and over 100 of our logistics sites in North America, with a roll-out underway in our logistics network in Europe.

Intelligent automation is a priority for us in logistics.

This includes autonomous robots and collaborative robots, automated sortation systems, automated guided vehicles, goods-to-person systems and virtual reality assistance.

We integrate and control these technologies in-house using WMx , our proprietary warehouse management platform.

Advanced automation and robotics deliver critical improvements in speed, control, accuracy and productivity and, importantly, also enhance worker safety and the overall quality of employment.

For Nestlé, the world’s largest food and beverage company, we have co-developed a fully automated warehouse of the future in the U.K.

, scheduled to open in mid-2020.

It is expected to have the highest throughput of any facility in Nestlé’s global fulfilment network.

Our European innovation lab is being relocated to this site, where it will function as both a think tank and a technology launch pad.

XPO Connect ™, our proprietary digital freight marketplace, incorporates our core Freight Optimizer platform, shipper interface, pricing engine, carrier interface and our carrier mobile app, called Drive XPO™.

The architecture provides visibility across multiple transportation modes, establishing the groundwork to continually improve our service, capture share and reduce costs.

Our truck brokerage, last mile, managed transportation and global forwarding operations are now using the XPO Connect™ platform.

This fully automated, self-learning digital platform connects shippers with carriers, both virtually and through our operations.

We give shippers access to our carrier transportation network and predictive data, while carriers connect through the app.

As of December 31, 2019 , we had more than 40,000 U.S.

truck carriers registered for XPO Connect™.

The current capabilities of the marketplace, and the tremendous potential of future applications, establish this technology as a significant differentiator across our transportation services.

In LTL , our technology roadmap focuses on the main components of the service lifecycle.

XPO Smart™ was implemented in 85% of our warehouses in North America and 50% of our warehouses in Europe as of December 31, 2020.

Additional roll-outs are underway and we expect to see a significant increase in productivity as we fully utilize the tools in our operations going forward.

Intelligent warehouse automation is a priority for our Logistics segment.

This includes autonomous robots and collaborative robots, automated sortation systems, automated guided vehicles, goods-to-person systems and wearable smart devices.

We integrate these technologies into our operations and control them in-house with our proprietary warehouse management system.

Advanced automation, robotics and autonomous goods-to-person systems are particularly effective in delivering critical improvements in speed, accuracy and productivity.

Importantly, automation also enhances worker safety and the overall quality of employment.

For Nestlé, the world’s largest food and beverage company, we co-developed a fully automated Digital Distribution Warehouse of the Future in the U.K., which we opened in mid-2020.

This distribution center has the capacity to process more than a million pallets per year — the highest throughput of any facility in Nestlé’s global network.

Our European innovation lab is based on the premises, where it functions as both a think tank and a launch pad with the ability to test new technologies under real-life operating conditions.

XPO Connect ™ is our proprietary digital freight marketplace;

it encompasses our core Freight Optimizer system, shipper interface, pricing engine, carrier interface and our carrier mobile app, called Drive XPO™.

This fully automated, self-learning digital platform gives us a scalable framework to continually improve our service, capture share and reduce costs.

XPO Connect™ connects shippers with freight carriers, both virtually and through our transportation operations.

We give shippers access to our transportation network and market data, while carriers transact to secure loads through the mobile app.

As of December 31, 2020, globally, we had more than 70,000 truck carriers registered for XPO Connect™ and over 300,000 truck driver downloads of the app.

In LTL , our technology focuses on optimizing the main components of the service we provide:

linehaul, pickup-and-delivery and pricing.

Our North American LTL linehaul network moved freight approximately 2.3 million miles a day on average in 2020, with approximately 15% of that volume traveling direct.

With intelligent route-building, such as bypass optimization, we can reduce empty miles, improve load factor and mitigate cargo damage.

Our proprietary linehaul bypass models work with massive amounts of data to arrive at recommendations based on volume and density, taking freight dimensions into account to identify gaps in trailer utilization.

With intelligent route-building, we can reduce empty miles in our linehaul network, improve load factor and mitigate cargo damage.

Our proprietary bypass models assimilate massive amounts of data to arrive at recommendations based on volume and density, taking freight dimensions into account to identify gaps in trailer utilization.

Other areas of LTL that are ripe for optimization through our technology include pickup-and-delivery routing, pricing management, trailer utilization, exception management and dock productivity.

While each component delivers its own benefits, we also expect a strong synergistic effect on our LTL operations as a whole.

For example, as we optimize truck routes, this benefits asset utilization, driver utilization and customer service, and should reduce our carbon footprint by decreasing empty miles.

In last mile , we recently launched XPO Connect™ in our last mile service for heavy goods and we’ve moved our first large customer onto the platform.

We expect to have the technology pushed out to all last mile customers in early 2020, providing real-time ETAs for home deliveries, and enabling custom notifications and e-rescheduling.

We have other proprietary last mile technology that we use to engage consumers in the delivery process, gather real-time feedback post-delivery and maintain superior satisfaction levels, which helps our retail and e-tail customers build brand loyalty.

Consumers can track their online orders of heavy goods using our web portal, text messaging and voice-activated smart speakers, and use our augmented reality tool to visualize an item inside their home.

We are the only last mile provider for heavy goods to invest in digital consumerization to this degree.

In October 2019, we became the first global logistics company to partner with the Massachusetts Institute of Technology (“MIT”) in its Industrial Liaison Program to advance business innovation.

This is a unique opportunity for us to collaborate with MIT’s world-class research capabilities and realize new levels of productivity for our customers.

At the same time, we will be providing input into the future of robotics, machine learning and systems engineering.

In September 2020, we extended our partnership with the Massachusetts Institute of Technology (“MIT”) Industrial Liaison Program.

We are the first global logistics company to collaborate with MIT’s world-class research capabilities to advance supply chain innovation.

This is an opportunity to realize new levels of productivity for our customers, and at the same time, we have the opportunity to provide input into future applications of robotics, machine learning and systems engineering.

Customers and Markets

We provide services to a variety of customers, ranging in size from small, entrepreneurial organizations to Fortune 500 companies and global leaders.

We have a diversified base of more than 50,000 customers that minimizes our concentration risk.

In 2019 , our top five customers accounted for approximately 8% of our revenue.

In addition, our markets are highly diversified.

We provide services to more than 50,000 customers, ranging in size from small, entrepreneurial organizations to Fortune 500 companies and global leaders.

The diversification of our customer base minimizes concentration risk:

in 2020, our top five customers combined accounted for approximately 8% of our revenue, with our largest customer accounting for approximately 2% of revenue.

Our markets are also highly diversified.

The customers we serve span every major industry and touch every part of the economy.

Our revenue derives from a mix of key verticals, such as retail and e-commerce, food and beverage, consumer packaged goods and industrial.

Our transportation services are marketed primarily in North America and Europe, whereas our logistics and global forwarding networks serve global markets with concentrations in North America, Europe and Asia.

For the full year 2019 , approximately 59% of our revenue was generated in the U.S.

, 14% in Europe (excluding France and the U.K.

), 12% in France and 12% in the U.K.

Transportation and logistics are highly competitive and fragmented marketplaces, with thousands of companies competing domestically and internationally.

XPO competes on quality of service, reliability, scope and scale of operations, technological capabilities and price.

Our revenue derives from a mix of key verticals, such as retail and e-commerce, food and beverage, consumer packaged goods, technology and industrial.

Our Transportation and Logistics segments market to domestic and international customers and primarily perform their services in North America and Europe.

For the full year 2020, approximately 58% of our total revenue was generated in the U.S., 15% in Europe (excluding France and the U.K.), 13% in the U.K.

and 11% in France.

Transportation and logistics are highly fragmented marketplaces with thousands of companies competing domestically and internationally.

XPO competes on quality of service, reliability, scope and scale of operations, technological capabilities, expertise and price.

Our competitors include local, regional, national and international companies that offer the same services we provide;

some have larger customer bases, significantly more resources and more experience than we have.

Additionally, some of our customers have sufficient internal resources to perform services we offer.

Due in part to the fragmented nature of the industry, we must strive daily to retain existing business relationships and forge new relationships.

In logistics, some of our competitors include Clipper Logistics, Kuehne + Nagel and DSV.

In transportation, some of our competitors include Old Dominion Freight Line, Saia, FedEx and C.H.

Additionally, some of our customers have sufficient internal resources to perform the services we offer.

Due to the competitive nature of our marketplaces, we strive daily to strengthen existing business relationships and forge new relationships.

The health of the transportation and logistics industries will continue to be a function of domestic and global economic growth.

However, we believe that we have positioned XPO in fast-growing sectors to benefit from secular trends in demand, such as e-commerce and outsourcing.

However, we believe that we have positioned XPO in fast-growing sectors to benefit from secular trends, such as the demand for e-commerce, omnichannel retail and supply chain outsourcing.

Our operations are regulated and licensed by various governmental agencies in the U.S.

and in other countries where we conduct business.

These regulations impact us directly and indirectly by regulating third-party transportation providers we arrange and/or contract with to transport freight for our customers.

Regulation Affecting Motor Carriers, Owner-Operators and Transportation Brokers.

, our subsidiaries that operate as motor carriers and freight transportation brokers are licensed by the Federal Motor Carrier Safety Administration (“ FMCSA ”) of the U.S.

These regulations impact us directly and also indirectly when they regulate third-party providers we arrange and/or contract with to transport freight for our customers.

Regulations Affecting Motor Carriers, Owner-Operators and Transportation Brokers.

In the U.S., our subsidiaries that operate as motor carriers, freight forwarders, and freight transportation brokers are licensed by the Federal Motor Carrier Safety Administration (“FMCSA”) of the U.S.

Department of Transportation (“DOT”).

Our motor carrier subsidiaries and the third-party motor carriers we contract with in the U.S.

must comply with the safety and fitness regulations of the DOT , including those related to controlled substances and alcohol, hours-of-service compliance, vehicle maintenance, hazardous materials compliance, driver fitness, unsafe driving, and minimum insurance requirements.

Weight and equipment dimensions also are subject to government regulations.

We also may become subject to new or more restrictive regulations relating to emissions, drivers’ hours-of-service, independent contractor eligibility requirements, onboard reporting of operations, air cargo security and other matters affecting safety or operating methods.

Other agencies, such as the U.S.

must comply with the safety and fitness regulations of the DOT, including those related to, without limitation, controlled substances and alcohol, hours-of-service compliance, vehicle maintenance, hazardous materials compliance, driver fitness, unsafe driving, and minimum insurance requirements, as well as the Compliance Safety Accountability (“CSA”) program, which uses a Safety Measurement System (“SMS”) to rank motor carriers on seven categories of safety-related data, known as Behavioral Analysis and Safety Improvement Categories (“BASICs”).

Other federal agencies, such as the U.S.

EPA, the U.S.

Food and Drug Administration (“FDA”), the California Air Resources Board (“CARB”) and the U.S.

Department of Homeland Security (“ DHS ”), also regulate our equipment, operations and independent contractor drivers.

Like the third-party carriers with which we contract, we are subject to a variety of vehicle registration and licensing requirements in certain states and local jurisdictions where we operate.

Department of Homeland Security (“DHS”), also regulate our equipment, operations, cargo and independent contractor drivers.

We are also subject to a variety of vehicle registration and licensing requirements in certain states and local jurisdictions where we operate, as are the third-party carriers with which we contract.

In foreign jurisdictions where we operate, our operations are regulated by the appropriate governmental authorities.

In 2010, the FMCSA introduced the Compliance Safety Accountability program (“ CSA ”), which uses a Safety Management System (“ SMS ”) to rank motor carriers on seven categories of safety-related data, known as Behavioral Analysis and Safety Improvement Categories, or “ BASIC s.”

Although the CSA ranks are not currently publicly available, this development is likely to be temporary.

As a result, our fleet could be ranked worse or better than our competitors, and the safety ratings of our motor carrier operations could be impacted.

Our network of third-party transportation providers may experience a similar result.

A reduction in safety and fitness ratings may result in difficulty attracting and retaining qualified independent contractors and

could cause our customers to direct their business away from XPO and to carriers with more favorable CSA scores, which would adversely affect our results of operations.

In addition, nearly all carriers and drivers that are required to maintain records of duty status, including certain of XPO’s motor carrier subsidiaries and drivers, have been required to install electronic logging devices (“ ELD s”).

ELD use may increase costs for independent contractors and other third-party carriers who provide services to XPO and may impact driver recruitment.

We may become subject to new or more restrictive regulations relating to emissions, drivers’ hours-of-service, independent contractor eligibility requirements, onboard reporting of operations, air cargo security and other matters affecting safety or operating methods.

Regulations Affecting our Subsidiaries Providing Ocean and Air Transportation.

XPO Customs Clearance Solutions, LLC (“ XCCS ”) and XPO GF America, Inc.

(“ XGFA ”), two of our subsidiaries, are licensed as U.S.

Customs brokers by the U.S.

One of our subsidiaries, XPO Customs Clearance Solutions, LLC (“XCCS”), is licensed as a U.S.

Customs broker by the U.S.

Customs and Border Protection (the “CBP”) of the DHS in each U.S.

district where they perform services.

Customs brokers are requir ed to maintain prescribed records and are subject to periodic audits by the CBP .

district where it performs services.

Customs brokers are required to maintain prescribed records and are subject to periodic audits by the CBP.

jurisdictions where we perform customs brokerage services, our operations are licensed, where necessary, by the appropriate governmental authorities.

Our subsidiaries offering expedited air charter transportation are subject to regulation by the Transportation Security Administration (“ TSA ”) of the DHS governing air cargo security for all loads, regardless of origin and destination.

XPO Global Forwarding, Inc.

(“ XGF ”), XGFA and XPO Air Charter, LLC are regulated as “indirect air carriers” by the TSA .

These agencies provide requirements, guidance and, in some cases, administer licensing requirements and processes applicable to the freight forwarding industry.

Regarding our international operations, XGF and XGFA are members of the International Air Transportation Association (“ IATA ”), a voluntary association of airlines and freight forwarders that outlines operating procedures for forwarders acting as agents or third-party intermediaries for IATA members.

A substantial portion of XPO’s international air freight business is transacted with other IATA members.

Additionally, XGF , XGFA and XCCS are each licensed as an Ocean Transportation Intermediary (“ OTI ”) and are each Ocean Freight Forwarders (“ OFF ”) licensed by the U.S.

Federal Maritime Commission (“ FMC ”), which establishes the qualifications, regulations and bonding requirements for arranging transportation to or from the U.S.

as an OTI ( OTI s include both NVOCC s and OFF s).

XGF and XGFA are also licensed as NVOCC s.

Our OTI operations are subject to regulations of the U.S.

Our subsidiaries that offer expedited air charter transportation are subject to regulation by the Transportation Security Administration (“TSA”) of the DHS governing air cargo security for all loads, regardless of origin or destination.

Some of our subsidiaries are regulated as “indirect air carriers” by the TSA.

The CBP, TSA and relevant non-U.S.

governmental agencies provide requirements and guidance and, in some cases, administer licensing requirements and processes applicable to the freight forwarding industry.

Regarding our international operations, XPO is a member of the International Air Transportation Association (“IATA”), a voluntary association of airlines and freight forwarders that outlines operating procedures for forwarders acting as agents or third-party intermediaries for IATA members.

A substantial portion of our international air freight business is transacted with other IATA members.

Additionally, some of our subsidiaries are licensed as an Ocean Transportation Intermediary (“OTI”), since they operate as a non-vessel-operating common carrier, or NVOCC, and/or as an Ocean Freight Forwarder (“OFF”) licensed by the U.S.

Federal Maritime Commission (“FMC”), which establishes the qualifications, regulations, licensing and bonding requirements for arranging international transportation to or from the U.S.

Our OTI operations, which include operating as both an NVOCC and an OFF, are subject to regulations of the U.S.

Department of State, the U.S.

Department of Commerce and the U.S.

Department of Treasury, and to various laws and regulations of the other countries where we operate.

These laws and regulations govern what commodities may be shipped to what destinations and to what end-users, unfair international trade practices, limitations on entities with which we may conduct business and related matters.

Department of Commerce, the U.S.

Department of Treasury, the U.S.

Department of Justice, and the Securities and Exchange Commission and to various laws and regulations of the other countries where we operate.

These laws and regulations govern what commodities may be shipped to certain destinations and end-users, unfair international trade practices, limitations on entities with which we may conduct business and related matters.

Other Regulations.

We are subject to a variety of other U.S.

and foreign laws and regulations, including, but not limited to, the Foreign Corrupt Practices Act and other anti-bribery and anti-corruption statutes.

and foreign laws and regulations, including, but not limited to, the Foreign Corrupt Practices Act and other anti-bribery and anti-corruption statutes, and export sanction laws.

We are also subject to state and U.S.

federal laws and regulations addressing some types of cargo transported and/or stored by our subsidiaries, or transported pursuant to a government contract or subcontract.

federal laws and regulations addressing some types of cargo transported or stored by our subsidiaries, or transported pursuant to a government contract or subcontract.

Classification of Independent Contractors.

tax and other federal and state regulatory authorities, as well as private litigants, continue to assert that independent contractor drivers in the trucking industry are employees rather than independent contractors, while applying a variety of standards in their determinations of independent contractor status.

Federal legislators have introduced legislation in the past to make it easier for tax and other authorities to reclassify independent contractors as employees, including legislation to increase the recordkeeping requirements and heighten the penalties for companies who misclassify workers and are found to have violated overtime or wage requirements.

Federal legislators have introduced legislation in the past to make it easier for tax and other authorities to reclassify independent contractors as employees, including legislation to increase the recordkeeping requirements and heighten the penalties for companies that misclassify workers and are found to have violated overtime or wage requirements.

Additionally, federal legislators have sought to abolish the current safe harbor, which allows taxpayers that meet certain criteria to treat individuals as independent contractors if they are following a longstanding, recognized practice.

4 unchanged sentences

If the independent contractor drivers that provide services to XPO are determined to be our employees, we would incur additional exposure under some or all of the following:

state tax, workers’ compensation, unemployment benefits, and labor, employment and tort laws, including for prior periods, as well as potential liability for employee benefits and tax withholdings.

federal and state tax, workers’ compensation, unemployment benefits, and labor, employment and tort laws, including for prior periods, as well as potential liability for employee benefits and tax withholdings.

Environmental Regulations.

Our transportation and logistics facilities and operations and our independent contractors are subject to various environmental laws and regulations dealing with the hauling, handling and disposal of hazardous materials, emissions from vehicles, engine-idling, fuel tanks and related fuel spillage and seepage, discharge and retention of storm water, and other environmental matters that involve inherent environmental risks.

Similar laws and regulations may apply in many of the foreign jurisdictions in which we operate.

Our transportation and logistics operations and our independent contractors are subject to various environmental laws and regulations in the jurisdictions where we operate.

In the U.S., these laws and regulations deal with the hauling, handling and disposal of hazardous materials, emissions from vehicles, engine-idling, fuel tanks and related fuel spillage and seepage, discharge and retention of storm water, and other environmental matters that involve inherent environmental risks.

We may be responsible for the cleanup of any spill or other incident involving hazardous materials caused by our business.

In the past, we have been responsible for the cost to clean up diesel fuel spills caused by traffic accidents or other events, and none of these incidents materially affected our business or operations.

In the past, we have been responsible for the cost to clean up diesel fuel spills caused by traffic accidents or other events, and none of these incidents materially

affected our business or operations.

We generally transport only hazardous materials rated as low-to-medium-risk, and only a small percentage of our total loads contain hazardous materials.

We believe that our operations are in substantial compliance with current laws and regulations and we do not know of any existing environmental condition that reasonably would be expected to have a material adverse effect on our business or operating results.

A number of our logistics sites are ISO14001-certified to high standards for environmental management, and we have implemented numerous programs to manage environmental risks and maintain compliances.

Future changes in environmental regulations or liabilities from newly discovered environmental conditions or violations (and any associated fines and penalties) could have a material adverse effect on our business, competitive position, results of operations, financial condition or cash flows.

A number of our logistics sites are ISO 14001-certified to high standards for environmental management, and we have implemented numerous programs to manage environmental risks and maintain compliance.

federal and state governments, as well as governments in certain foreign jurisdictions where we operate, have also proposed environmental legislation that could, among other things, potentially limit carbon, exhaust and greenhouse gas emissions.

4 unchanged sentences

Our revenue and profitability are typically lower for the first quarter of the calendar year relative to other quarters.

We believe this is due in part to the post-holiday reduction in demand experienced by many of our customers, which leads to more available capacity and less demand for expedited and premium shipping services.

In addition, the productivity of our tractors and trailers, independent contractors and transportation providers generally decreases during the winter season because inclement weather impedes operations.

In contrast, our logistics network benefits from strong positioning in the e-commerce sector, where demand is characterized by strong seasonal surges in activity;

the fourth quarter peak is typically the most dramatic, when holiday orders are placed online.

We believe this is due in part to the post-holiday reduction in demand experienced by many of our customers, which leads to less use of transportation and logistics services.

In our Logistics segment, which benefits from strong positioning in the e-commerce sector, demand is characterized by strong seasonal surges in activity, with the fourth quarter holiday peak typically being the most dramatic.

In our Transportation segment, the productivity of our tractors and trailers, independent contractors and other transportation providers generally decreases during the winter season because inclement weather impedes operations.

It is not possible to reliably predict whether our historical revenue and profitability trends will continue to occur in future periods.

As of December 31, 2019 , we have approximately 100,000 full-time and part-time employees.

Our employee base is one of our most critical resources, and we view the recruitment, training and retention of qualified employees as being essential to our ongoing success.

We believe that we have good relations with our employees, with strong programs in place for communication and professional development.

Human Capital Management

Our success relies in large part on our strong governance structure and Code of Business Ethics, our good corporate citizenship and, importantly, engaged employees who embrace our values.

As a customer-centric company with a strong service culture, we constantly work to maintain our position as an employer of choice.

This requires an unwavering commitment to workplace inclusion and safety, as well as competitive total compensation that meets the needs of our employees and their families.

Employee Profile

We had approximately 102,000 employees worldwide as of December 31, 2020, with over 39,000 employees in Transportation and more than 61,000 employees in Logistics.

In North America, 79% of our employees occupy hourly roles and 21% are in salaried positions.

With locations spanning 30 countries, 45% of our employees are based in North America, 53% in Europe and 2% in Latin America and Asia, combined.

Across our operations, 27% of our employees work as drivers and dockworkers, 46% as warehouse workers and 24% in field supervisory and management positions.

In addition, our workforce is supplemented with approximately 18,000 temporary workers at our logistics sites in North America and an average of 17,500 temporary workers in our logistics network in Europe.

As of December 31, 2020, 75.8% of our employees in Europe were represented by unions or other employee representative bodies, while almost all of our employees in the United States have chosen to remain union-free.

Throughout 2020, we made significant investments in the safety, well-being and satisfaction of our employees in these and other areas:

Diversity and Inclusion

We take pride in having an inclusive workplace that encourages a diversity of talents and perspectives.

We welcome employees of every gender identity, sexual orientation, race, ethnicity, national origin, religion, life experience and disability.

In 2020, we created the position of chief diversity officer and linked ESG performance targets and initiatives, including deliverables and targets for diversity and inclusion, to 25% of our top executives’ long-term incentive compensation, to further strengthen this aspect of our culture.

In addition, we celebrated the values of Black history, women’s history, LBGTQ+ pride, Hispanic heritage and military veterans, and launched inclusivity courses through our XPO University e-learning portal.

We also formed academic partnerships that advance diversity in higher education, and we supported eight inclusion programs that highlight women, veterans, the LGBTQ+ community, people with disabilities and other groups.

Health and Safety

Our frontline employees provide essential services to keep goods flowing to the people who need them.

Their protection is always our foremost priority, and with the onset of COVID-19 in 2020, we began using a combination of protective measures, technology and virtual communications to maintain a safe workplace environment.

There are many preventative measures and risk-mitigating actions we have taken to protect employees, including offering 100% paid pandemic sick leave for eligible employees, providing frontline employee appreciation pay to approximately 40,000 workers in the U.S.

and Canada, procuring ample supplies of personal protective equipment for employees in all of our workplaces, instituting a contactless delivery policy for our customers, and providing expanded access to mental health counseling services for employees and their dependents.

In addition to our COVID-19 response, we have numerous protocols in place to ensure a safe workplace environment.

We aim to maintain an Occupational Safety and Health Administration (“OSHA”) total recordable incident rate (“TRIR”) that is less than half the published rate for the Warehousing and Storage sector, based on the “Industry Injury and Illness Data” of the U.S.

Bureau of Labor Statistics (“BLS”).

In 2020, we exceeded our target expectation with a TRIR that was 74.5% lower than the BLS national benchmark.

Another way we work to decrease occupational injuries and illnesses is with our global Road to Zero program.

Road to Zero instills safety and compliance awareness through education, mentoring, communication and on-the-job reinforcement.

In addition to physical well-being, we also consider emotional well-being to be an important part of workplace safety — our Code of Business Ethics mandates zero tolerance of discrimination, harassment, retaliation, bullying and other unacceptable behaviors.

Talent Development and Engagement

Across our universe of customers, our employees are foundational to providing a best-in-class level of service.

We ask our employees for feedback through engagement surveys, roundtables and town halls, and we use periodic engagement surveys to gauge our progress, assess satisfaction and ask for constructive suggestions.

In this way, our employees help drive the continuous improvement of our business.

We emphasize career development and the identification of top industry talent in all aspects of the recruitment, training and talent development process.

Our talent development infrastructure includes these activities and programs, among others:

We tailor our recruitment efforts by geography and job function using an array of channels to ensure a diverse candidate pool.

We seek to identify untapped opportunities in the recruitment of military veterans, and we have partnered with WorkFit, the Down’s Syndrome Association’s employment program.

This supportive program offers tailored skills development, training and mentoring for employees who aspire to grow into higher-paying positions with more responsibility.

Grow at XPO is intended primarily to create opportunities for employees from minority populations or underrepresented communities.

XPO Graduate Program (LTL) and Site Operations Manager Academy (Logistics).

We maintain a robust “ready now” pipeline of future operations leaders by using structured sponsorships and incidental learning techniques.

These programs are designed to develop internal candidates who demonstrate high potential in supervisory roles, preparing them to become site leaders.

The programs also serve to retain top talent by defining personalized development paths, and they attract new talent by differentiating XPO as an employer.

XPO University.

Our learning and development platform encompasses online and in-person programs, including JumpStart onboarding, management training and skills development.

In 2020, approximately 2.8 million training hours were completed by our employees worldwide.

Expansive Total Rewards

We appreciate that our employees choose to work for XPO from among the many different options available to them inside and outside our industry.

We offer a total compensation package that is both competitive and progressive to help attract and retain outstanding talent.

Competitive Wages :

In 2020, we continued to provide regular wage increases to almost 22,000 hourly field-based employees in North America across our LTL and logistics businesses, maintaining our strong competitive positioning in the market.

Comprehensive Benefits :

We offer a comprehensive suite of benefits to all our employees, many of which reflect employee feedback.

In the U.S., examples include our pregnancy care policy, family bonding policy, tuition reimbursement program for continuing education, tuition-free commercial driver training and additional benefits such as diabetes management, supplemental insurance and short-term loans.

In Europe, the benefits offered vary by country, tailored to the needs of the local markets.

Examples include comprehensive healthcare and risk insurances, employee assistance programs covering mental, physical and financial wellbeing, commercial driver training, vocational coaching and training and a full flexible benefits program in the U.K.

Community Involvement

In 2020, there were hundreds of examples of our company and employees giving back, including our support of the Susan G.

Komen Foundation, Soles4Souls, Girls With Impact, the Make-A-Wish Foundation, United in Giving (UK), and the FESBAL (Spain) and FareShare (UK) food charities.

Information about our Executive Officers

The following information relates to each of our executive officers:

Chairman of the Board and Chief Executive Officer

Acting Chief Financial Officer

Chief Information Officer

Chief Legal Officer

Jacobs has served as XPO’s chairman of the board of directors and chief executive officer since September 2011.

He is also the managing director of Jacobs Private Equity, LLC, which is XPO’s second largest stockholder.

Jacobs has led two other public companies prior to XPO:

Name Age Position

Brad Jacobs 64 Chairman of the Board and Chief Executive Officer

Troy Cooper 51 President

Mario Harik 40 Chief Information Officer

David Wyshner 53 Chief Financial Officer

Brad Jacobs has served as XPO’s chairman of the Board of Directors and chief executive officer since September 2011.

He is also the managing member of Jacobs Private Equity, LLC, which is XPO’s largest stockholder.

Jacobs led two other public companies prior to XPO:

United Rentals, Inc., which he founded in 1997, and United Waste Systems, Inc., which he founded in 1989.

1 unchanged sentence

He served as chairman and chief executive officer of United Waste Systems from 1989 to 1997.

Cooper has served as XPO’s president since April 2018, after formerly serving as XPO’s chief operating officer from 2014 to 2018, and as Transportation segment leader.

Fro m September 2015 to September 2017, he also served as chief executive officer and chairman of XPO Logistics Europe.

Troy Cooper has served as XPO’s president since April 2018, after formerly serving as XPO’s chief operating officer from 2014 to 2018.

From September 2015 to September 2017, he also served as chief executive officer and chairman of XPO Logistics Europe.

Cooper joined XPO in September 2011 as vice president of finance.

Prior to XPO, Mr.

Cooper served as vice president and group controller with United Rentals, Inc., where he was responsible for field finance functions and helped to integrate over 200 acquisitions in the U.S.

, Canada and Mexico.

Prior to XPO, he served as vice president and group controller with United Rentals, Inc., where he was responsible for field finance functions and helped to integrate over 200 acquisitions in the U.S., Canada and Mexico.

Earlier, he held controller positions with United Waste Systems, Inc.

1 unchanged sentence

(formerly a division of Union Carbide, Inc.).

He began his career in public accounting with Arthur Andersen and Co.

and has a degree in accounting from Marietta College.

Glickman has served as XPO’s acting chief financial officer since August 2018, after joining XPO in June 2018 as senior vice president, corporate finance.

Prior to XPO, Ms.

Glickman served as chief financial officer of business services for Novartis from January 2017 to May 2018, and held executive roles with Honeywell International from March 2006 to November 2016 and, prior to Honeywell, Bristol-Myers Squibb.

During her 11 years with Honeywell, she served as chief financial officer of the fluorine products business, and as head of internal audit and director of finance operations.

With Bristol-Myers Squibb, she had senior responsibility for corporate controllership and accounting, financial controls and compliance.

Glickman began her career at PricewaterhouseCoopers.

She is a certified public accountant and a Chartered Accountant with a degree in economics from the University of York (UK).

Harik has served as XPO’s chief information officer since November 2011.

Harik has built comprehensive IT organizations, overseen the implementation of extensive proprietary platforms, and consulted to Fortune 100 companies.

Cooper began his career in public accounting with Arthur Andersen and Co.

and holds a degree in accounting from Marietta College.

Mario Harik has served as XPO’s chief information officer since November 2011.

Harik has built comprehensive technology organizations, overseen the implementation of extensive proprietary platforms, and consulted to Fortune 100 companies.

His prior positions include chief information officer and senior vice president of research and development with Oakleaf Waste Management;

3 unchanged sentences

Harik holds a master’s degree in engineering, information technology from Massachusetts Institute of Technology, and a degree in engineering - computer and communications from the American University of Beirut, Lebanon.

Rogers has served as XPO’s chief legal officer since February 2020.

Rogers joined XPO from Stericycle, Inc., a global leader in medical waste management, where he served as executive vice president and general counsel from 2017 to 2020.

He was previously chief legal officer of cloud communications leader Vonage Holdings Corp.

for seven years.

At Stericycle and Vonage, he led the negotiation and execution of numerous strategic initiatives.

Earlier, he was a partner at Bingham McCutchen LLP and at Latham & Watkins LLP, specializing in intellectual property and litigation.

He received his juris doctorate degree from Cornell Law School and his bachelor’s degree from Cornell University.

David Wyshner has served as XPO’s chief financial officer since March 2020.

Prior to XPO, Mr.

Wyshner served as chief financial officer of Wyndham Hotels & Resorts, Inc.

from May 2018 to December 2019, and as its senior advisor from December 2019 to March 2020.

He served as executive vice president and chief financial officer of Wyndham Worldwide Corporation, from which Wyndham Hotels was spun-off, from August 2017 to May 2018.

Wyshner served as chief financial officer of Avis Budget Group from August 2006 to June 2017 and as Avis Budget Group’s president from January 2016 to June 2017.

Wyshner received his bachelor’s degree from Yale University and his M.B.A.

degree from the Wharton School of the University of Pennsylvania.

Available Information

6 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-K

Item 1. Business