What changed in this filing

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Item 1A. Risk Factors

2021-02-12 compared with 2020-02-10 · 235 added, 226 removed, 173 unchanged (73% of the section changed)

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You should carefully consider the following factors in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and our Consolidated Financial Statements and related Notes in Item 8.

Risks related to our business model and the COVID-19 pandemic

Economic recessions and other factors that reduce freight volumes, both in North America and Europe, could have a material adverse impact on our business.

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In addition, in periods of strong economic growth, overall demand may exceed the available supply of transportation resources, resulting in increased network congestion and operating inefficiencies.

Additional changes in international trade policies and relations could significantly reduce the volume of goods transported globally and adversely affect our business and results of operations.

Additional changes in international trade policies could significantly reduce the volume of goods transported globally and adversely affect our business and results of operations.

These factors subject our business to various risks that may have a material impact on our operating results and future prospects.

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• A reduction in overall freight volume reduces our opportunities for growth.

In addition, if a downturn in our customers’ business cycles causes a reduction in the volume of freight shipped by those customers, our operating results could be adversely affected;

In addition, if a downturn in our customers’ business causes a reduction in the volume of freight shipped by those customers, our operating results could be adversely affected;

• Some of our customers may experience financial distress, file for bankruptcy protection, go out of business, or suffer disruptions in their business and may be unable to pay us.

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trade, including imposing tariffs on certain goods imported into the U.S.

To date, several governments, including the EU , have imposed tariffs on certain goods imported from the U.S.

These actions contributed to weakness in the global economy that could adversely affect our results of operations, and such weakness could continue in 2020.

To date, several governments, including the European Union (“EU”) have imposed tariffs on certain goods imported from the U.S.

These actions may contribute to weakness in the global economy that could adversely affect our results of operations.

Any further changes in U.S.

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In order to maintain high variability in our business model, it is necessary to adjust staffing levels when market demand changes.

In periods of rapid change, it is more difficult to match our staffing levels to our business

In periods of rapid change, it is more difficult to match our staffing levels to our business needs.

In addition, we have other expenses that are primarily variable but are fixed for a period of time, as well as certain significant fixed expenses;

we may be unable to adequately adjust these expenses to match a rapid change in demand.

We operate in a highly competitive industry and, if we are unable to adequately address factors that may adversely affect our revenue and costs, our business could suffer.

Competition in the transportation services industry is intense.

Increased competition may lead to a reduction in revenues, reduced profit margins, or a loss of market share, any one of which could harm our business.

There are many factors that could impair our profitability, including the following:

Competition from other transportation services companies, some of which offer different services or have a broader coverage network, more fully developed information technology systems and greater capital resources than we do;

A reduction in the rates charged by our competitors to gain business, especially during times of declining economic growth, which may limit our ability to maintain or increase our rates, maintain our operating margins or achieve significant growth in our business;

Shippers soliciting bids from multiple transportation providers for their shipping needs, which may result in the depression of freight rates or loss of business to competitors;

The establishment by our competitors of cooperative relationships to increase their ability to address shipper needs;

Decisions by our current or prospective customers to develop or expand internal capabilities for some of the services we provide;

The development of new technologies or business models that could result in our disintermediation in certain services we provide.

The COVID-19 pandemic could have a material adverse effect on our business operations, results of operations, cash flows and financial position

We are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business and geographies, including how it will impact our employees, customers and business partners.

The COVID-19 pandemic has created significant volatility, uncertainty and economic disruption, which will adversely affect our business operations and may materially and adversely affect our results of operations, cash flows and financial position.

We experienced declines in demand for our services that began in the first quarter of 2020, had a substantial impact in the second quarter of 2020, and abated throughout the second half of 2020.

These declines in demand meaningfully affected our results in both North America and Europe.

We also incurred additional costs to meet the needs of our customers and employees.

We expect to continue to incur additional costs, which may be significant, as we implement operational changes in response to the pandemic.

An extended period of remote work arrangements could strain our business continuity plans, introduce operational risk, including but not limited to cybersecurity risks, and impair our ability to manage our business.

The impacts of the COVID-19 pandemic may remain prevalent for a significant period of time and may continue to adversely affect our business, results of operations and financial condition even after the COVID-19 outbreak has subsided.

The extent to which the COVID-19 pandemic impacts us will depend on numerous evolving factors and future developments that we are not able to predict.

Due to the largely unprecedented and evolving nature of the COVID-19 pandemic, it remains very difficult to predict the extent of the impact on our industry generally and our business in particular.

Furthermore, the extent and pace of a recovery remains uncertain and may differ significantly among the countries in which we operate.

As a result, the pandemic could have a material impact on our results of operations and heighten many of our other known risks described in this Annual Report on Form 10-K.

Risks related to Our Strategy, Operations, Legal and Compliance and Finance

Our profitability may be materially adversely impacted if our investments in equipment, service centers and warehouses do not match customer demand for these resources or if there is a decline in the availability of funding sources for these investments.

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If our anticipated requirements for service centers or fleet differ materially from actual usage, our capital-intensive operations, specifically LTL and full truckload, may have more or less capacity than is optimal.

Our contract logistics operations can require a significant commitment of capital in the form of shelving, racking and other warehousing systems that may be required to implement warehouse-management services for our customers.

Our logistics operations can require a significant commitment of capital in the form of shelving, racking and other warehousing systems that may be required to deliver warehouse-management services to our customers.

To the extent that a customer defaults on its obligations under its agreement with us, we could be forced to take a significant loss on the unrecovered portion of this capital cost.

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A decline in the availability of these funding sources could adversely affect our financial condition and results of operations.

Our exploration of strategic alternatives is subject to various risks and uncertainties, may not result in any completed transactions and will involve significant time and expense, which could disrupt or adversely affect our business.

On January 15, 2020, we announced that our board of directors had authorized a review of strategic alternatives, including the possible sale or spin-off of one or more of our business units.

Whether or not any such transaction or transactions are completed, our business may face significant risks, including, without limitation:

The diversion of management’s attention from operating our ongoing businesses and the overall impact on our businesses because of management’s attention to the review of strategic alternatives;

Potential difficulty in maintaining employee morale and retaining key management and other employees;

Potential difficulty in separating assets related to such businesses from the businesses we retain;

The need to obtain regulatory approvals and other third-party consents, which could potentially disrupt customer and supplier relationships;

Foreseen and unforeseen dis-synergy costs, costs of restructuring transactions (including taxes) and other significant costs and expenses;

Potential negative reactions from the financial markets if we do not complete one or more transactions.

Any of these factors could have a material adverse effect on our business, financial condition, results of operations, cash flows and/or the price of our common stock.

If one or more business units is sold or spun off, we will be a smaller, less diversified company than we are today.

A sale or spin-off of one or more of our business units will result in us being a smaller, less diversified company with a more concentrated area of focus.

Following a potential sale or spin-off, we will be reliant on our remaining business units.

As a result, we may become more vulnerable to changing market conditions, which could have a material adverse effect on our business, financial condition and results of operations.

The diversification of our revenues, costs and cash flows will diminish as a result of a sale or spin-off, such that our results of operations, cash flows, working capital, effective tax rate and financing requirements may be subject to increased volatility and our ability to fund capital expenditures, investments and service our debt may be diminished.

We may also incur ongoing costs and retain certain liabilities that were previously allocated to entities that were sold or spun off.

Those costs may exceed our estimates or could diminish the benefits we expect to realize.

Failure to successfully implement our cost and revenue initiatives could cause our future financial results to suffer.

We are implementing various cost and revenue initiatives to further increase our profitability, including advanced pricing analytics and revenue management tools, our digital freight platform, our shared distribution network, cross-selling to strategic accounts, LTL process improvements, logistics automation, workforce productivity, European margin expansion, global procurement and further back-office optimization.

If we are not able to successfully implement these cost and revenue initiatives, our future financial results may suffer.

Our past acquisitions, as well as any acquisitions that we may complete in the future, may be unsuccessful or result in other risks or developments that adversely affect our financial condition and results.

While we intend for our acquisitions to improve our competitiveness and profitability, we cannot be certain that our past or future acquisitions will be accretive to earnings or otherwise meet our operational or strategic expectations.

While we intend for our acquisitions to enhance our competitiveness and profitability, we cannot be certain that our past or future acquisitions will be accretive to earnings or otherwise meet our operational or strategic expectations.

Special risks, including accounting, regulatory, compliance, information technology or human resources issues, may arise in connection with, or as a result of, the acquisition of an existing company, including the assumption of unanticipated liabilities and contingencies, difficulties in integrating acquired businesses, possible management distractions, or the inability of the acquired business to achieve the levels of revenue, profit, productivity or synergies we anticipate or otherwise perform as we expect on the timeline contemplated.

We are unable to predict all of the risks that could arise as a result of our acquisitions.

If the performance of our reporting segments or an acquired business varies from our projections or assumptions, or if estimates about the future profitability of our reporting segments or an acquired business change, our revenues, earnings or other aspects of our financial condition could be adversely affected.

We may also experience difficulties in connection with integrating any acquired companies into our existing businesses and operations, including our existing infrastructure and information technology systems.

The infrastructure and information technology systems of acquired companies could present issues that we were unable to identify prior to the acquisition and that could adversely affect our financial condition and results;

we have experienced challenges of this nature relating to the infrastructure and systems of certain past companies that we acquired.

Also, we may not realize all of the synergies we anticipate from past and potential future acquisitions.

Among the synergies that we currently expect to realize are cross-selling opportunities to our existing customers, network synergies and other operational synergies.

Any of these events could adversely affect our financial condition and results of operations.

In addition, if the performance of our reporting segments or an acquired business varies from our projections or assumptions, or if estimates about the future profitability of our reporting segments or an acquired business change, our revenues, earnings or other aspects of our financial condition could be adversely affected.

We may not successfully manage our growth.

We may experience difficulties and higher-than-expected expenses in executing this strategy as a result of unfamiliarity with new markets, changes in revenue and business models, entry into new geographic areas and increased pressure on our existing infrastructure and information technology systems.

Our growth will place a significant strain on our management, operational, financial and information technology resources.

We will need to continually improve existing procedures and controls, as well as implement new transaction processing, operational and financial systems, and procedures and controls to expand, train and manage our employee base.

Our working capital needs will continue to increase as our operations grow.

We have grown rapidly and substantially over prior years, including by expanding our internal resources, making acquisitions and entering into new markets, and we intend to continue to focus on growth in our transportation and logistics businesses, including organic growth through new customer wins and increased business with existing customers, as well as additional acquisitions.

Our growth may place a significant strain on our management, operational, financial and information technology resources.

We seek to continually improve existing procedures and controls, as well as implement new transaction processing, operational and financial systems, and procedures and controls to expand, train and manage our employee base.

Our working capital needs may continue to increase as our operations grow.

Failure to manage our growth effectively, or obtain necessary working capital, could have a material adverse effect on our business, results of operations, cash flows and financial condition.

We may sell or spin-off one or more of our business units, which may have an adverse effect on our remaining businesses and the market price of our common stock, including because we may become a smaller, less diversified company than we are today.

We may sell or spin-off one or more of our business units and any such transaction or transactions may have an adverse effect on our remaining businesses and the market price of our common stock.

For example, a sale or spin-off of one or more of our business units will result in us being a smaller, less diversified company with a more concentrated area of focus.

Following a potential sale or spin-off, we will be reliant on our remaining business units.

As a result, we may become more vulnerable to changing market conditions, which could have a material adverse effect on our business, financial condition and results of operations.

We may also incur ongoing costs and retain certain liabilities that were previously allocated to entities that were sold or spun off.

Those costs may exceed our estimates or could diminish the benefits we expect to realize.

Issues related to the intellectual property rights on which our business depends, whether related to our failure to enforce our own rights or infringement claims brought by others, could have a material adverse effect on our business, financial condition and results of operations.

We use both internally developed and purchased technologies in conducting our business.

Whether internally developed or purchased, it is possible that users of these technologies could be claimed to infringe upon or violate the intellectual property rights of third parties.

In the event that a claim is made against us by a third party for the

infringement of intellectual property rights, a settlement or adverse judgment against us could result in increased costs to license the technology or a legal prohibition against our using the technology.

Thus, our failure to obtain, maintain or enforce our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations.

We rely on a combination of intellectual property rights, including patents, copyrights, trademarks, domain names, trade secrets, intellectual property licenses and other contractual rights, to protect our intellectual property and technology.

Any of our owned or licensed intellectual property rights could be challenged, invalidated, circumvented, infringed or misappropriated;

our trade secrets and other confidential information could be disclosed in an unauthorized manner to third parties;

or we may fail to secure the rights to intellectual property developed by our employees, contractors and others.

Efforts to enforce our intellectual property rights may be time-consuming and costly, distract management’s attention and our resources, and ultimately be unsuccessful.

Moreover, should we fail to develop and properly manage future intellectual property, this could adversely affect our market positions and business opportunities.

Our overseas operations are subject to various operational and financial risks that could adversely affect our business.

The services we provide outside the U.S.

are subject to risks resulting from changes in tariffs, trade restrictions, trade agreements, tax policies, difficulties in managing or overseeing foreign operations and agents, different liability standards, issues related to compliance with anti-corruption laws, such as the Foreign Corrupt Practices Act and the U.K.

Bribery Act, data protection, trade compliance, and intellectual property laws of countries that do not protect our rights relating to our intellectual property, including our proprietary information systems, to the same extent as do U.S.

The occurrence or consequences of any of these factors may restrict our ability to operate in the affected region or decrease the profitability of our operations in that region.

In addition, as we expand our business in foreign countries, we will be exposed to increased risk of loss from foreign currency fluctuations and exchange controls.

We are exposed to currency exchange rate fluctuations because a significant proportion of our assets, liabilities and earnings are denominated in foreign currencies.

We present our financial statements in U.S.

dollars, but we have a significant proportion of our net assets and income in non-U.S.

dollar currencies, primarily the euro and British pound sterling.

Consequently, a depreciation of non-U.S.

dollar currencies relative to the U.S.

dollar could have an adverse impact on our financial results as further discussed in Item 7A, “Quantitative and Qualitative Disclosures about Market Risk.”

We do not own, and may not acquire, all of the outstanding shares of XPO Logistics Europe SA, the majority-owned subsidiary through which we conduct our European operations.

As of December 31, 2020, we owned approximately 97% of the outstanding shares of XPO Logistics Europe SA, the majority-owned subsidiary through which we conduct our European operations.

We may or may not acquire the remaining shares of XPO Logistics Europe, or we may choose to enact a “squeeze out” merger, which is permitted under French law when a holder owns more than 95% of outstanding shares.

As long as we do not wholly own XPO Logistics Europe, we do not have access to all of its cash flow to service our debt, as we will receive a prorated portion of any dividend based on our ownership percentage.

In addition, we will be subject to limitations on our ability to enter into transactions with XPO Logistics Europe that are not on arms-length terms, which could limit synergies that we could otherwise achieve between our North American and European operations.

Moreover, so long as XPO Logistics Europe continues to be a listed public company in France, we will incur certain recurring costs associated with that public listing.

Volatility in fuel prices impacts our fuel surcharge revenue and may impact our profitability.

We are subject to risks associated with the availability and price of fuel, all of which are subject to political, economic and market factors that are outside of our control.

Fuel expense constitutes one of the greatest costs to our LTL and full truckload carrier operations, as well as to the independent contractor drivers and third-party transportation providers who transport freight arranged by our other operations.

Accordingly, we may be adversely affected by the timing and degree of fuel price fluctuations.

As is customary in our industry, most of our customer contracts include fuel surcharge programs or other cost-recovery mechanisms to mitigate the effect of any fuel price increases over base amounts established in the contract.

However, these mechanisms may not fully capture an increase in fuel price.

Furthermore, market pressures may limit our ability to assess fuel surcharges in the future.

The extent to which we are able to recover increases in fuel costs may be impacted by the amount of empty or out-of-route truck miles or engine idling time.

Decreases in fuel prices reduce the cost of transportation services and accordingly, will reduce our revenues and may reduce margins for certain lines of business.

Significant changes in the price or availability of fuel in future periods, or significant changes in our ability to mitigate fuel price increases through the use of fuel surcharges, could have a material adverse impact on our operations, fleet capacity and ability to generate both revenues and profits.

Extreme or unusual weather conditions whether due to climate change or otherwise, can disrupt our operations, impact freight volumes, and increase our costs, all of which could have a material adverse effect on our business results.

Our business depends, in part, on predictable temperate weather patterns.

Certain seasonal weather conditions and isolated weather events can disrupt our operations.

We frequently incur costs related to snow and ice removal, towing and other maintenance activities during winter months.

At least some of our operations are constantly at risk of extreme adverse weather conditions.

Any unusual or prolonged adverse weather patterns in our areas of operations or markets, whether due to climate change or otherwise, can temporarily impact freight volumes and increase our costs.

Risks related to the Proposed Spin-Off of Our Logistics Segment

The proposed spin-off of our logistics segment into a stand-alone, publicly-traded company is subject to the final approval of our Board of Directors, contingent upon the satisfaction of a number of conditions, may not be completed on the currently contemplated timeline, or at all, and may not achieve the intended benefits.

In December 2020, we announced our intention to separate our logistics segment into a stand-alone, publicly-traded company (“SpinCo”).

The proposed separation is currently expected to be effected through a pro-rata distribution to our shareholders of all of the issued and outstanding shares of common stock of SpinCo.

Completion of the proposed spin-off is subject to the final approval of our Board of Directors and the satisfaction of various customary conditions, including, among others, the receipt and the continuing validity of an opinion from outside counsel regarding the qualification of the spin-off (together with certain related transactions) as a “reorganization” within the meaning of Sections 355 and 368(a)(1)(D) of the Internal Revenue Code, the effectiveness of a Form 10 registration statement that we intend to file with the SEC, the receipt by us of certain proceeds from financing arrangements that SpinCo intends to enter into in connection with the spin-off, the refinancing, if necessary, of our debt on terms satisfactory to our Board of Directors, the New York Stock Exchange having approved for listing (subject to official notice of distribution) the shares of common stock of SpinCo that we intend to distribute to our shareholders, and no other event or development existing or having occurred that, in the judgment of our Board of Directors, in its sole and absolute discretion, makes it inadvisable to effect the spin-off or related transactions.

The proposed spin-off is complex in nature, and unanticipated developments or changes, including changes in the law, the macroeconomic environment, competitive conditions of our markets, regulatory approvals or clearances, the uncertainty of the financial markets, and challenges in executing the separation, could delay or prevent the completion of the proposed spin-off, or cause the spin-off to occur on terms or conditions that are different or less favorable than expected, including, without limitation, the failure of the spin-off to qualify as a transaction that is generally tax-free for U.S.

federal income tax purposes to our shareholders.

Whether or not we complete the spin-off, our ongoing businesses may face material challenges in connection with the proposed spin-off, including, without limitation:

• the diversion of our management’s attention from operating and growing our business as a result of the significant amount of our management’s time and effort required to execute the proposed spin-off;

• foreseen and unforeseen costs and expenses that will be incurred in connection with the proposed spin-off, including accounting, tax, legal and other professional services costs as well as recruiting costs associated with hiring key senior management and personnel new to SpinCo;

• retaining existing business and operational relationships, including with customers, suppliers and employees, as well as cultivating new business relationships;

• potential negative reactions from the financial markets if we fail to complete the spin-off as currently expected, within the anticipated time frame or at all.

Additionally, volatility in the world financial markets could increase borrowing costs or affect our ability to access the capital markets.

Our ability to issue debt or enter into other financing arrangements on acceptable terms could be adversely affected if there is a material decline in the demand for our products or in the solvency of our customers or suppliers or if there are other significantly unfavorable changes in economic conditions.

These conditions may adversely affect our anticipated timeline to complete the spin-off and the expected benefits of the spin-off, including by increasing the time and expense involved in the spin-off.

Other challenges associated with effectively executing the spin-off include attracting, retaining and motivating key management and employees during the pendency of the spin-off and following its completion;

addressing any disruptions to our supply chain, manufacturing, sales and distribution, and other operations resulting from separating XPO into two independent companies;

and separating XPO’s information systems.

Any of these factors could have a material adverse effect on our business, financial condition, results of operations, cash flows and/or the price of our common stock.

Furthermore, if the spin-off is completed, we cannot provide assurance that the spin-off will achieve the full strategic and financial benefits expected to result from the separation, nor can we provide assurance that each stand-alone company will be successful in meeting its objectives.

If the spin-off occurs, our financial and operational profile will change, and we will be a smaller, less diversified company than we are today.

A spin-off of our Logistics segment will result in us being a smaller, less diversified company with a more concentrated area of focus.

Following the proposed spin-off, we will be reliant on our remaining business units.

As a result, we may become more vulnerable to changing market conditions and competitive pressures, which could have a material adverse effect on our business, financial condition and results of operations.

The diversification of our revenues, costs and cash flows will diminish as a result of a spin-off, such that our results of operations, cash flows, working capital, effective tax rate and financing requirements may be subject to increased volatility and our ability to fund capital expenditures, investments and service our debt may be diminished.

We may also incur ongoing costs and retain certain liabilities that were previously allocated to entities that were spun off.

Those costs may exceed our estimates or could diminish the benefits we expect to realize.

There can be no assurance that the combined value of the common stock of the two publicly traded companies following the completion of the proposed spin-off will be equal to or greater than what the value of our common stock would have been had the spin-off not occurred.

If the spin-off, together with certain related transactions, does not qualify as a transaction that is generally tax-free for U.S.

federal income tax purposes, XPO and XPO stockholders could be subject to significant tax liabilities.

In addition, if certain internal restructuring transactions were to fail to qualify as transactions that are generally tax-free for U.S.

federal or non-U.S.

income tax purposes, we could be subject to significant tax liabilities.

It is a condition to the spin-off that we receive an opinion of outside counsel regarding the qualification of the spin-off, together with certain related transactions, as a “reorganization” within the meaning of Sections 355 and 368(a)(1)(D) of the Internal Revenue Code.

The opinion of counsel will be based upon and rely on, among other things, various facts and assumptions, as well as certain representations, statements and undertakings of XPO and SpinCo, including those relating to the past and future conduct of XPO and SpinCo.

If any of these facts, assumptions, representations, statements or undertakings is, or becomes, inaccurate or incomplete, or if XPO or SpinCo breaches any of its representations or covenants contained in the separation agreement and certain other agreements and documents or in any documents relating to the opinion of counsel, the opinion of counsel may be invalid, and the conclusions reached therein could be jeopardized.

Notwithstanding receipt of the opinion of counsel, the U.S.

Internal Revenue Service (the “IRS”) could determine that the spin-off and/or certain related transactions should be treated as taxable transactions for U.S.

federal income tax purposes if it determines that any of the representations, assumptions or undertakings upon which the opinion of counsel was based are false or have been violated.

In addition, the opinion of counsel will represent the judgment of such counsel and will not be binding on the IRS or any court, and the IRS or a court may disagree with the conclusions in the opinion of counsel.

Accordingly, notwithstanding receipt of the opinion of counsel, there can be no assurance that the IRS will not assert that the spin-off and/or certain related transactions do not qualify for tax-free treatment for U.S.

federal income tax purposes or that a court would not sustain such a challenge.

In the event the IRS were to prevail with such challenge, XPO and XPO stockholders could be subject to significant U.S.

federal income tax liability.

If the spin-off, together with certain related transactions, were to fail to qualify as a transaction that is generally tax-free for U.S.

federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code, in general, for U.S.

federal income tax purposes, XPO would recognize taxable gain as if it had sold the SpinCo common stock in a taxable sale for its fair market value (unless XPO and SpinCo jointly make an election under Section 336(e) of the Code with respect to the spin-off, in which case, in general, (a) XPO would recognize taxable gain as if SpinCo had sold all of its assets in a taxable sale in exchange for an amount equal to the fair market value of SpinCo common stock and the assumption of all its liabilities and (b) SpinCo would obtain a related step-up in the basis of its assets), and XPO stockholders who receive such SpinCo shares in the spin-off would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares.

Risks related to Our Use of Technology

Our business will be seriously harmed if we fail to develop, implement, maintain, upgrade, enhance, protect and integrate our information technology systems, including those systems of any businesses that we acquire.

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We rely on our information technology systems to effectively manage our sales and marketing, financial, legal and compliance functions, engineering and product development tasks, research and development data, communications, logistics order entry and fulfillment and other business processes.

We also rely on third parties and virtualized infrastructure to operate our information technology systems.

Despite significant testing for risk management, external and internal risks, such as malware, insecure coding, “Acts of God,” data leakage and human error, pose a direct threat to the stability or effectiveness of our information technology systems and operations.

We also rely on third parties and virtualized infrastructure to operate

our information technology systems.

Despite significant testing, external and internal risks, such as malware, insecure coding, “Acts of God,” data leakage and human error, pose a direct threat to the stability or effectiveness of our information technology systems and operations.

The failure of our information technology systems to perform as we anticipate has in the past, and could in the future, adversely affect our business through transaction errors, billing and invoicing errors, internal recordkeeping and reporting errors, processing inefficiencies and loss of sales, receivables collection or customers.

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and abroad, particularly in the EU, and failure to comply with applicable U.S.

or foreign data protection regulations or other data protection

standards may expose us to litigation, fines, sanctions or other penalties, which could harm our business, its reputation, results of operations and financial condition.

or foreign data protection regulations or other data protection standards may expose us to litigation, fines, sanctions or other penalties, which could harm our business, reputation, results of operations and financial condition.

Risks related to Our Credit and Liquidity

Our substantial indebtedness could adversely affect our financial condition.

We have substantial outstanding indebtedness, which could:

Negatively affect our ability to pay principal and interest on our debt or dividends on our Series A Preferred Stock;

negatively affect our ability to pay principal and interest on our debt;

increase our vulnerability to general adverse economic and industry conditions;

Limit our ability to fund future capital expenditures and working capital, to engage in future acquisitions or development activities, or to otherwise realize the value of our assets and opportunities fully because of the need to dedicate a substantial portion of our cash flow from operations to payments of interest and principal or to comply with any restrictive terms of our debt;

limit our ability to fund future capital expenditures and working capital, to engage in future acquisitions or development activities, or to otherwise realize the value of our assets and opportunities fully because of the need to dedicate a substantial portion of our cash flow to payments of interest and principal or to comply with any restrictive terms of our debt;

limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

impair our ability to obtain additional financing or to refinance our indebtedness in the future;

Place us at a competitive disadvantage compared to our competitors that may have proportionately less debt.

and place us at a competitive disadvantage compared to our competitors that may have proportionately less debt.

Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, could materially and adversely affect our financial position and results of operations.

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We may in the future be required to raise capital through public or private financing or other arrangements in order to pursue our growth strategy or operate our businesses.

Such financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could harm our business or our ability to execute our strategy.

Such financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could harm our business and/or our ability to execute our strategy.

Further debt financing may involve restrictive covenants and could reduce our profitability.

If we cannot raise funds on acceptable terms, we may not be able to grow our business or respond to competitive pressures.

Failure to successfully implement our cost and revenue initiatives could cause our future financial results to suffer.

We are implementing various cost and revenue initiatives to further improve our profitability.

We estimate that 40% of the potential opportunity is related to revenue initiatives:

advanced pricing analytics and revenue management tools, our digital freight platform, our shared distribution network and cross-selling to strategic accounts in Europe.

The other 60% is related to cost initiatives:

LTL process improvements, contract logistics automation, workforce productivity, European margin expansion, global procurement and further back-office optimization.

If we are not able to successfully implement these cost and revenue initiatives, our future financial results may suffer.

We may be adversely affected by interest rate changes because of our floating rate credit facilities.

The Second Amended and Restated Revolving Loan Credit Agreement, as amended (the “ABL Facility”) and the senior secured term loan credit agreement, as amended (the “Term Loan Facility”), provide for an interest rate based

on London Interbank Offered Rate (“LIBOR”) or a Base Rate, as defined in the agreements, plus an applicable margin.

Our European trade receivables securitization program (the “Receivables Securitization Program”) provides for an interest rate at lenders’ cost of funds plus an applicable margin.

Our financial position may be affected by fluctuations in interest rates since the ABL Facility, Term Loan Facility and Receivables Securitization Program are subject to floating interest rates.

Refer to Item 7A, “Quantitative and Qualitative Disclosures about Market Risk” for the impact on interest expense of a hypothetical 100 basis point increase in the interest rate.

Interest rates are highly sensitive to many factors, including governmental monetary policies, domestic and international economic and political conditions and other factors beyond our control.

A significant increase in interest rates could have an adverse effect on our financial position and results of operations.

Additionally, the interest rates on some of our debt is tied to LIBOR.

In July 2017, the head of the U.K.’s Financial Conduct Authority announced its intention to phase out the use of LIBOR by the end of 2021.

The uncertainty regarding the future of LIBOR, as well as the transition from LIBOR to another benchmark rate or rates, could have adverse impacts on our outstanding debt that currently uses LIBOR as a benchmark rate, and ultimately, adversely affect our financial condition and results of operations.

Risks related to Third-Party Relationships

We depend on third parties in the operation of our business.

In our global forwarding, last mile and freight brokerage operations, we do not own or control the transportation assets that deliver our customers’ freight, and we do not employ the people directly involved in delivering this freight.

In addition, in our freight brokerage businesses (particularly our over-the-road expedite operations and intermodal drayage operations) and in our last mile business, we engage independent contractors who own and

operate their own equipment.

In our freight brokerage, last mile and global forwarding operations, we do not own or control the transportation assets that deliver our customers’ freight, and we do not employ the people directly involved in delivering this freight.

In addition, in our freight brokerage businesses and in our last mile business, we engage independent contractors who own and operate their own equipment.

Accordingly, we are dependent on third parties to provide truck, rail, ocean, air and other transportation services and to report certain events to us, including delivery information and cargo claims.

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equipment shortages in the transportation industry, particularly among contracted truckload carriers and railroads;

driver shortages in the transportation industry and/or resulting increases in the cost of procuring transportation services;

interruptions or stoppages in transportation services as a result of labor disputes, seaport strikes, network congestion, weather-related issues, “Acts of God” or acts of terrorism;

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increases in operating expenses for carriers, such as fuel costs, insurance premiums and licensing expenses, that result in a reduction in available carriers;

Changes in transportation rates.

and changes in transportation rates.

In addition, our European business heavily relies on subcontracting and we use a large number of temporary employees in these operations.

As a result, we are exposed to various risks related to managing our subcontractors, such as the risk that they do not fulfill their assignments in a satisfactory manner or within the specified deadlines.

Moreover, we cannot guarantee that temporary employees are as well-trained as our other employees.

Specifically, we may be exposed to the risk that temporary employees may not perform their assignments in a satisfactory manner or may not comply with our safety rules in an appropriate manner, whether as a result of their lack of experience or otherwise.

Such failures could compromise our ability to fulfill our commitments to our customers, comply with applicable regulations or otherwise meet our customers’ expectations.

Such failures could also harm our reputation and ability to win new business and could lead to our being liable for contractual damages.

Furthermore, in the event of a failure by our subcontractors or temporary employees to fulfill their assignments in a satisfactory manner, we could be required to perform unplanned work or additional services in line with the contracted service, without receiving any additional compensation.

As a result, any failure to properly manage our subcontractors or temporary employees in Europe or elsewhere could have a material adverse impact on our revenues, earnings, financial position and outlook.

Increases in driver compensation and difficulties with attracting and retaining drivers could adversely affect our revenues and profitability.

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The availability of qualified drivers may be affected from time to time by changing workforce demographics, competition from other transportation companies and industries for employees, the availability and affordability of driver training schools, changing industry regulations, and the demand for drivers in the labor market.

If the current industry-wide shortage of qualified drivers continues, our global LTL operations and our European truckload operation will likely experience difficulty in attracting and retaining enough qualified drivers to fully satisfy customer demand.

If the current industry-wide shortage of qualified drivers continues, our global LTL operations and our European truckload operation could experience difficulty in attracting and retaining enough qualified drivers to fully satisfy customer demand.

During periods of increased competition in the labor market for drivers, our LTL and full truckload operations may be required to increase driver compensation and benefits in the future or face difficulty meeting customer demand, all of which could adversely affect our profitability.

Additionally, a shortage of drivers could result in the underutilization of our truck fleet, lost revenue, increased costs for purchased transportation or increased costs for driver recruitment.

Increases in independent contractor driver rates or other necessities in attracting and retaining qualified independent contractor drivers could adversely affect our profitability and ability to replenish or grow our independent contractor driver networks.

Our freight brokerage and intermodal operations rely on fleets of vehicles that are owned and operated by independent contractors.

Our last mile service is also performed by independent contract carriers who supply their own vehicles, drivers and helpers.

These independent contractors are responsible for maintaining and operating their own equipment and paying their own fuel, insurance, licenses and other operating costs.

Turnover and bankruptcy among independent contractor drivers often limit the pool of qualified independent contractor drivers and increase competition for their services.

In addition, regulations such as the FMCSA Compliance Safety Accountability program may further reduce the pool of qualified independent contractor drivers.

Thus, our continued reliance on independent contractor drivers could limit our ability to grow our ground transportation networks.

We are currently experiencing difficulty in attracting and retaining sufficient numbers of qualified independent contractor drivers, and we expect to continue to experience this difficulty from time to time in the future.

Additionally, our agreements with independent contractor drivers are terminable by either party without penalty and upon short notice.

Consequently, we need to regularly recruit new, qualified independent contractor drivers to

replace those who have left our networks.

If we are unable to retain our existing independent contractor drivers or recruit new independent contractor drivers, our business and results of operations could be adversely affected.

The rates we offer our independent contractor drivers are subject to market conditions and we may find it necessary to continue to increase independent contractor drivers’ rates in future periods.

If we are unable to continue to attract and retain a sufficient number of independent contractor drivers, we could be required to increase our mileage rates and accessorial pay or operate with fewer trucks and face difficulty meeting shipper demands, all of which would adversely affect our profitability and scale, or our ability to pursue our growth strategy.

Our business may be materially adversely affected by labor disputes.

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If any of our customers are affected by labor disputes and consequently cease or significantly modify their operations at a plant served by our Logistics segment, we may experience significant revenue loss and shutdown costs, including costs related to early termination of leases, causing our business to suffer.

XPO Logistics Europe’s business activities require a large amount of labor, which represents one of its most significant costs.

Our European business activities require a large amount of labor, which represents one of our most significant costs.

It is essential that we maintain good relations with employees, trade unions and other staff representative institutions.

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Efforts by labor organizations to organize employees at certain locations in North America, if successful, may result in increased costs and decreased efficiencies at those locations.

Since 2014, in the U.S.

, the International Brotherhood of Teamsters (“ Teamsters ”) has attempted to organize employees at several of our LTL and logistics locations, and the International Association of Machinists (“ Machinists ”) has attempted to organize a small number of mechanics at three LTL maintenance shops.

Since 2014, in the U.S., the International Brotherhood of Teamsters (“Teamsters”) has attempted to organize employees at several of our LTL and logistics locations, and the International Association of Machinists (“Machinists”) has attempted to organize a small number of mechanics at three LTL maintenance shops.

In 2018, the United Automobile, Aerospace and Agricultural Implement Workers of America (“UAW”) attempted to organize warehouse workers at one logistics location.

The majority of our employees involved in these organizing efforts rejected union representation.

As of January 1, 2020, our employees had voted in favor of union representation in 10 of the 25 union elections held since 2014, with approximately 545 employees voting in favor and 602 employees voting against representation.

As of January 1, 2021, our employees had voted in favor of union representation in 10 of the 29 union elections held since 2014, with 684 employees voting in favor and 782 employees voting against representation.

In October 2017, a majority of employees at our North Haven, Connecticut logistics location, which had previously voted for Teamsters representation, petitioned us to withdraw recognition of the Teamsters as the employees’ representative, and we withdrew this recognition.

Similarly, in 2019, a majority of employees at our LTL locations in Laredo, Texas and Aurora, Illinois, voted to decertify the Teamsters as the employees’ representative.

In addition, we continue to challenge the results of one election held in 2014 for an LTL location in Los Angeles, California pursuant to a petition that had been filed by the Teamsters , while seven locations where employees had voted in favor of union representation are in negotiations for an initial collective bargaining agreement.

Since 2014, the Teamsters have withdrawn six petitions seeking elections on behalf of approximately 230 LTL employees prior to the election being held, and the Machinists withdrew one petition for an LTL election on behalf of six individuals.

Similarly, in 2019, a majority of

employees at our LTL locations in Laredo, Texas and Aurora, Illinois, voted to decertify the Teamsters as the employees’ representative.

In December 2020, employees at our LTL location in Cinnaminson, New Jersey filed a petition with the National Labor Relations Board to decertify the Teamsters as the employees’ bargaining representative;

the election date is pending.

As of December 31, 2020, XPO is engaged in good faith bargaining with the Teamsters at six locations where employees voted in favor of union representation.

In May 2020, LTL technicians at our Gary Hammond, Indiana shop ratified a contract negotiated between XPO and the Machinists.

Since 2014, the Teamsters have withdrawn seven petitions seeking elections on behalf of approximately 396 LTL employees prior to the election being held, and the Machinists withdrew one petition for an LTL election on behalf of six individuals.

We cannot predict with certainty whether further organizing efforts may result in the unionization of any additional locations in the U.S.

If successful, these efforts may result in increased costs and

decreased efficiencies at the specific locations where representation is elected.

If successful, these efforts may result in increased costs and decreased efficiencies at the specific locations where representation is elected.

We do not expect the impact, if any, to extend to our larger organization or the services provided to our customer base.

Risks related to Litigation and Regulations

Certain of our businesses rely on owner-operators and contract carriers to conduct their operations, and the status of these parties as independent contractors, rather than employees, is being challenged.

We are involved in numerous lawsuits, including putative class action lawsuits, multi-plaintiff and individual lawsuits, and state tax and other administrative proceedings that claim that our contract carriers or owner-operators or their drivers should be treated as our employees, rather than independent contractors, or that certain of our drivers were not paid for all compensable time or were not provided with required meal or rest breaks.

We are involved in numerous lawsuits, including class action lawsuits, multi-plaintiff and individual lawsuits, and state tax and other administrative proceedings that claim that our contract carriers or owner-operators or their drivers should be treated as our employees, rather than independent contractors, or that certain of our drivers were not paid for all compensable time or were not provided with required meal or rest breaks.

These lawsuits and proceedings may seek substantial monetary damages (including claims for unpaid wages, overtime, failure to provide meal and rest periods, unreimbursed business expenses and other items), injunctive relief, or both.

In addition, we incur certain costs, including legal fees, in defending the status of these parties as independent contractors.

While we believe that our contract carriers and owner-operators and their drivers are properly classified as independent contractors rather than as employees, adverse decisions have been rendered recently in certain cases pending against us, including with respect to determinations that certain of our contract carriers and owner-operators are improperly classified.

Such adverse final outcomes in these matters could, among other things, entitle certain of our contract carriers and owner-operators and their drivers to reimbursement with respect to certain expenses and to the benefit of wage-and-hour laws and result in employment and withholding tax and benefit liability for us, and could result in changes to the independent contractor status of our contract carriers and owner-operators.

Changes to state laws governing the definition of independent contractors could also impact the status of our contract carriers and owner-operators.

Adverse final outcomes in these matters or changes to state laws could cause us to change our business model, which could have a material adverse effect on our business strategies, financial condition, results of operations or cash flows.

While we believe that our contract carriers and owner-operators and their drivers are properly classified as independent contractors rather than as employees, adverse final outcomes in these matters could, among other things, entitle certain of our contract carriers and owner-operators and their drivers to reimbursement with respect to certain expenses and to the benefit of wage-and-hour laws and result in employment and withholding tax and benefit liability for us, and could result in changes to the independent contractor status of our contract carriers and owner-operators.

Changes to state or federal laws governing the definition of independent contractors could also impact the status of our contract carriers and owner-operators.

Adverse final outcomes in these matters or changes to state or federal laws could cause us to change our business model, which could have a material adverse effect on our business strategies, financial condition, results of operations or cash flows.

These claims involve potentially significant classes that could involve thousands of claimants and, accordingly, significant potential damages and litigation costs, and could lead others to bring similar claims.

The results of these matters cannot be predicted with certainty and an unfavorable resolution of one or more of these matters could have a material adverse effect on our financial condition, results of operations or cash flows.

Our overseas operations are subject to various operational and financial risks that could adversely affect our business.

The services we provide outside the U.S.

The occurrence or consequences of any of these factors may restrict our ability to operate in the affected region or decrease the profitability of our operations in that region.

In addition, as we expand our business in foreign countries, we will be exposed to increased risk of loss from foreign currency fluctuations and exchange controls.

Our European business heavily relies on subcontracting and we use a large number of temporary employees in these operations.

Any failure to properly manage our subcontractors or temporary employees in Europe could have a material adverse impact on our revenues, earnings, financial position and outlook.

Subcontracting plays a key role in our European business, which we operate through our majority-owned subsidiary, XPO Logistics Europe SA.

As of December 31, 2019 , we subcontracted approximately 53% of our Transportation segment operations in the region.

Such failures could compromise our ability to fulfill our commitments to our customers, comply with applicable regulations or otherwise meet our customers’ expectations.

In some situations, the poor execution of services by our subcontractors could result in a customer terminating a contract.

Such failures by our subcontractors could harm our reputation and ability to win new business and could lead to our being liable for contractual

Furthermore, in the event of a failure by our subcontractors to fulfill their assignments in a satisfactory manner, we could be required to perform unplanned work or additional services in line with the contracted service, without receiving any additional compensation.

Lastly, some of our subcontractors in Europe may not be insured or may not have sufficient resources available to handle any claims from customers resulting from potential damage and losses relating to their performance of services on our behalf.

As a result, any non-compliance by our subcontractors with their contractual or legal obligations may have a material adverse effect on our business and financial condition.

XPO Logistics Europe also makes significant use of temporary staff.

We cannot guarantee that temporary employees are as well-trained as our other employees.

If such risks materialize, they could have a material adverse effect on our business and financial condition.

We are involved in multiple lawsuits and are subject to various claims that could result in significant expenditures and impact our operations.

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Material increases in the frequency or severity of vehicular accidents, liability claims or workers’ compensation claims, or the unfavorable resolution of claims, or our failure to recover, in full or in part, under indemnity provisions with transportation providers, could materially and adversely affect our operating results.

Our involvement in the transportation of certain goods, including but not limited to hazardous materials, could also increase our exposure in the event that we or one of our contracted carriers is involved in an accident resulting in injury or contamination.

Our involvement in the transportation of certain goods, including but not limited to

hazardous materials, could also increase our exposure in the event that we or one of our contracted carriers is involved in an accident resulting in injury or contamination.

In addition, significant increases in insurance costs or the inability to purchase insurance as a result of these claims could reduce our profitability.

An increase in the number or severity of self-insured claims or an increase in insurance premiums could have an adverse effect on us.

We use a combination of self-insurance programs and large-deductible purchased insurance to provide for the costs of employee medical, vehicular collision and accident, cargo and workers’ compensation claims.

We use a combination of self-insurance programs and purchased insurance to provide for the costs of employee medical, vehicular collision and accident, cargo and workers’ compensation claims.

Our estimated liability for self-retained insurance claims reflects certain actuarial assumptions and judgments, which are subject to a degree of variability.

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Our defined benefit pension plans include funded and unfunded plans in the U.S.

A decline in interest rates or lower returns on funded plan assets may cause increases in the expense and funding requirements for these defined benefit pension plans and for our postretirement medical plan.

A decline in interest rates and/or lower returns on funded plan assets may cause increases in the expense and funding requirements for these defined benefit pension plans and for our postretirement medical plan.

Despite past amendments that froze our defined benefit pension plans to new participants and curtailed benefits, these pension plans remain subject to volatility associated with interest rates, inflation, returns on plan assets, other actuarial assumptions and statutory funding requirements.

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As a result, we are unable to predict the effect on our financial statements associated with our defined benefit pension plans and our postretirement medical plan.

We may be adversely affected by interest rate changes because of our floating rate credit facilities.

The Second Amended and Restated Revolving Loan Credit Agreement, as amended (the “ ABL Facility ”), the senior secured term loan credit agreement, as amended (the “ Term Loan Facility ”), provide for an interest rate based on London Interbank Offered Rate (“ LIBOR ”) or a Base Rate, as defined in the agreements, plus an applicable margin.

Our European trade receivables securitization program (the “Receivables Securitization Program”) provides for an interest rate at lenders’ cost of funds plus an applicable margin.

Our financial position may be affected by fluctuations in interest rates since the ABL Facility , Term Loan Facility and Receivables Securitization Program are subject to floating interest rates.

Refer to Item 7A, “Quantitative and Qualitative Disclosures about Market Risk ” for the impact on interest expense of a hypothetical 100 basis point increase in the interest rate.

Interest rates are highly sensitive to many factors, including governmental monetary policies, domestic and international economic and political conditions and other factors beyond our control.

A significant increase in interest rates could have an adverse effect on our financial position and results of operations.

Additionally, the interest rates on some of our debt is tied to LIBOR .

In July 2017, the head of the U.K.

’s Financial Conduct Authority announced its intention to phase out the use of LIBOR by the end of 2021.

The uncertainty regarding the future of LIBOR , as well as the transition from LIBOR to another benchmark rate or rates could have adverse impacts on our outstanding debt that currently uses LIBOR as a benchmark rate, and ultimately, adversely affect our financial condition and results of operations.

We are exposed to currency exchange rate fluctuations because a significant proportion of our assets, liabilities and earnings are denominated in foreign currencies.

We present our financial statements in U.S.

dollars, but we have a significant proportion of our net assets and income in non- U.S.

dollar currencies, primarily the euro and British pound sterling.

Consequently, a depreciation of non- U.S.

dollar currencies relative to the U.S.

dollar could have an adverse impact on our financial results as further discussed in Item 7A, “Quantitative and Qualitative Disclosures about Market Risk .”

The economic uncertainties relating to eurozone monetary policies may cause the value of the euro to fluctuate against other currencies.

Currency volatility contributes to variations in our sales of products and services in impacted jurisdictions.

For example, in the event that one or more European countries were to replace the euro with another currency, our sales into such countries, or in Europe generally, would likely be adversely affected until stable exchange rates are established.

Accordingly, fluctuations in currency exchange rates could adversely affect our business and financial condition in Europe and the business of the combined company.

The decision of the United Kingdom to withdraw from the European Union may have a negative effect on global economic conditions, financial markets and our operations.

In June 2016, a majority of voters in the U.K.

voted in favor of the U.K.

’s withdrawal from the EU (“ Brexit ”) in a national referendum.

On January 31, 2020, the U.K.

withdrew from the EU and entered into a transition period to, among other things, negotiate an agreement with the EU governing the future relationship between the EU and the U.K.

The referendum and subsequent withdrawal of the U.K.

from the EU has created significant uncertainty about the future relationship between the U.K.

and the EU and will have uncertain impacts on our transportation and logistics operations in Europe.

In 2019 , we derived approximately 12% of our revenue from the U.K.

and an aggregate 26% from the rest of the European countries where we operate.

In addition, the implementation of Brexit has caused, and may continue to cause, uncertainty in the global markets.

The effects of Brexit on our transportation and logistics operations in Europe will depend on any agreements the U.K.

ultimately reaches to retain access to EU markets either during the transitional period or more permanently.

The laws and regulations that will apply to the U.K.

domestic economy will depend, in large part, on the content of any agreements the U.K.

is able to negotiate with the EU and current laws and regulations may either be replaced or replicated after withdrawal, including those governing manufacturing, labor, environmental, data protection/privacy, competition and other matters either applicable to the transportation and logistics industry directly or with potential impact on the demand for our services in the U.K.

or in Europe more generally.

cannot reach an agreement with the EU , it will likely have an adverse impact on access to labor in the U.K.

and trade between the U.K.

and EU and may create further short-term currency volatility.

In the absence of a future trade deal, the U.K.

’s trade with the EU and the rest of the world would be subject to tariffs and duties set by the World Trade Organization, which could result in uncertain demand for our services in the U.K.

and its trading partners.

In addition, the movement of goods between the U.K.

and the remaining member states of the EU will be subject to additional inspections and documentation checks, leading to possible delays at ports of entry and departure, which may have unexpected impacts on our ability to efficiently provide our transportation and logistics services.

Moreover, currency volatility could drive a weaker U.K.

pound which could result in a decrease in our reported consolidated financial results for the U.K.

, which are reported in US dollars.

Any adverse consequences of Brexit , such as a deterioration in the U.K.

’s or the EU ’s economic condition, currency exchange rates, bilateral trade agreements or regulatory trade environment, including the potential imposition of tariffs, could reduce demand for our services in the U.K.

or the EU , negatively impact the value of our defined benefit pension plans in the U.K.

, or otherwise have a negative impact on our operations, financial condition and results of operations.

Sales or issuances of a substantial number of shares of our common stock may adversely affect the market price of our common stock.

We may fund any future acquisitions or our capital requirements from time to time, in whole or part, through sales or issuances of our common stock or equity-based securities, subject to prevailing market conditions and our financing needs.

Future equity financing will dilute the interests of our then-existing stockholders, and future sales or issuances of a substantial number of shares of our common stock or other equity-related securities may adversely affect the market price of our common stock.

We do not own, and may not acquire, all of the outstanding shares of XPO Logistics Europe SA, the majority-owned subsidiary through which we conduct our European operations.

As of December 31, 2019 , we owned 95.4% of the outstanding shares of XPO Logistics Europe SA, the majority-owned subsidiary through which we conduct our European operations.

We may or may not acquire the remaining shares of XPO Logistics Europe, or we may choose to enact a “squeeze out” merger, which is permitted under

French law when a holder owns more than 95% of outstanding shares.

Moreover, XPO Logistics Europe would be forced to continue as a listed public company in France, thereby incurring certain recurring costs.

Volatility in fuel prices impacts our fuel surcharge revenue and may impact our profitability.

We are subject to risks associated with the availability and price of fuel, all of which are subject to political, economic and market factors that are outside of our control.

Accordingly, we may be adversely affected by the timing and degree of fuel price fluctuations.

However, these mechanisms may not fully capture an increase in fuel price, as there is a lag between payment for fuel and collection of the surcharge revenue.