What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-02-12 compared with 2020-02-10 · 515 added, 615 removed, 969 unchanged (54% of the section changed)

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We have audited the accompanying consolidated balance sheets of XPO Logistics, Inc.

and subsidiaries (the Company) as of December 31, 2019 and 2018, the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2019, and the related notes (collectively, the consolidated financial statements).

and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, cash flows, and changes in equity for each of the years in the three-year period ended December 31, 2020, and the related notes (collectively, the consolidated financial statements).

We also have audited the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

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Change in Accounting Principle

As discussed in Notes 2 and 8 to the consolidated financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of Accounting Standard Update (ASU) No.

As discussed in Note 8 to the consolidated financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of Accounting Standard Update (ASU) No.

2016-02, Leases and its related amendments (Topic 842).

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Assessment of the estimated liabilities for self-insured claims

As discussed in Note 2 to the consolidated financial statements, the Company uses a combination of self-insurance programs and large-deductible purchased insurance to provide for the costs of liability, vehicular, and workers’ compensation claims (“self-insured claims”).

The Company records estimates of the undiscounted liability associated with claims incurred as of the balance sheet date, including estimates of claims incurred but not reported.

Liabilities for self-insured claims

As discussed in Note 2 to the consolidated financial statements, the Company uses a combination of self-insurance programs and purchased insurance to provide for the costs of liability, vehicular, and workers’ compensation claims (self-insured claims).

The Company records estimates of the undiscounted liability associated with claims incurred as of the balance sheet date, including estimates of claims incurred but not reported, by considering historical cost experience, demographic and severity factors, and judgments about current and expected levels of cost per claim and retention levels.

These liabilities are recorded within accrued liabilities and other long-term liabilities as of December 31, 2020.

We identified the assessment of the estimated liabilities for self-insured claims as a critical audit matter.

The evaluation of the uncertainty in the amounts that will ultimately be paid to settle these claims required significant auditor judgment.

Factors that may affect the estimated liability of claims include the consideration of historical cost experience, severity factors, and judgments about current and expected levels of cost per claims and retention levels.

Additionally, the Company’s liabilities included estimates for expenses of claims that have been incurred but have not been reported, and specialized skills were needed to evaluate the actuarial methods and models used to assess these estimates.

The primary procedures we performed to address this critical audit matter included the following.

We tested certain internal controls over the Company’s self-insurance process including controls over the assumptions used in estimating the liability.

In addition, we compared the Company’s estimates of liabilities for self-insured claims to current available information which include legal claims, incident and case reports, current and historical cost experience, or other evidence.

The evaluation of the uncertainty in the amounts that will ultimately be paid to settle these claims required subjective auditor judgment.

Assumptions that may affect the estimated liability of claims include the consideration of historical cost experience, severity factors, and judgments about current and expected levels of cost per claims and retention levels that have uncertainty related to future occurrences or events and conditions.

Additionally, the Company’s liabilities for self-insured claims included estimates for expenses of claims that have been incurred but have not been reported, and specialized skills were needed to evaluate the actuarial methods and assumptions used to assess these estimates.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s self-insurance process.

This included controls over the assumptions used in estimating the liabilities for self-insured claims.

In addition, we compared the Company’s estimates of liabilities for individual self-insured claims to current available information, which included legal claims, incident and case reports, current and historical cost experience, or other evidence.

We involved an actuarial professional with specialized skills and knowledge, who assisted in:

Comparing the Company’s actuarial reserving methodologies with generally accepted actuarial standards;

Evaluating assumptions used in determining the liability, including expected level of cost per claim and retention levels, in relation to recent historical loss payment trends;

Developing an independent expected range of reserves, including reserves for claims that have

been incurred but have not been recorded, based on actuarial methodologies in order to evaluate the Company’s estimated liabilities;

Comparing the Company’s recorded liability to an independently developed liability range.

• comparing the Company’s actuarial reserving methodologies with accepted actuarial methods and procedures

• evaluating assumptions used in determining the liability, including expected level of cost per claim and retention levels, in relation to recent historical loss payment trends and severity factors

• developing an independent expected range of liabilities, including liabilities for claims that have been incurred but have not been recorded, based on actuarial methodologies

• comparing the Company’s recorded liability to the independently developed liability range.

Assessment of the carrying value of goodwill

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The Company performs goodwill impairment testing annually, or more frequently if events or circumstances indicate the carrying value of a reporting unit that includes goodwill might exceed the fair value of that reporting unit.

The Company uses a combination of an income approach and a market based approach in assessing the carrying value of its goodwill.

In assessing the carrying value of goodwill, the Company uses a third-party appraiser, who uses a combination of an income approach and a market approach to estimate fair value.

The income approach is based on the present value of estimated future cash flows, discounted at a risk-adjusted rate to estimate the fair value of the reporting units.

The market approach is based on comparable market multiples for public companies engaged in similar business, as well as recent transactions within the industry and related data.

The market approach is based on comparable market multiples for companies engaged in similar business, as well as recent transactions within the industry.

We identified the assessment of the carrying value of goodwill for each of the Company’s reporting units as a critical audit matter.

Assessment of certain assumptions utilized to estimate fair value under the income approach, including long-term future growth rates and the risk adjusted discount rate, required significant auditor judgment.

Assessment of certain assumptions used to estimate fair value under the income approach, including the fair value model, long-term future growth rates, and the risk-adjusted discount rate, had estimation uncertainty, which resulted in subjective auditor judgment and required specialized skills and knowledge.

Additionally, assessment of the guideline public companies and transactions within the industry used to estimate fair value under the market approach required significant auditor judgment.

Changes to these assumptions can have a significant effect on the Company’s assessment of the carrying value of the goodwill.

The primary procedures performed to address this critical audit matter included the following.

We tested certain internal controls over the Company’s goodwill impairment assessment process, including controls related to the determination of the fair value of the reporting unit, the estimate of long-term future growth rates, the assumptions used to develop the risk-adjusted discount rate, and the determination of the guideline public companies and transactions within the industry.

Performed sensitivity analyses over the fair value model and long-term future growth rates to assess their impact on the Company’s determination of the fair value of each reporting unit.

Compared the Company’s historical growth rate forecast to actual results to assess the Company’s ability to accurately forecast.

Involved a valuation professional with specialized skill and knowledge who assisted in:

Changes to these assumptions may have a significant effect on the Company’s assessment of the carrying value of the goodwill.

The following are the primary procedures performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s goodwill impairment assessment process.

This included controls related to the determination of the fair value of the reporting units, the estimate of long-term future growth rates, the assumptions used to develop the risk-adjusted discount rates, and the determination of the guideline public companies and transactions within the industry.

We performed sensitivity analyses over the fair value model for long-term future growth rates to assess their impact on the Company’s determination of the fair value of each reporting unit.

We compared the Company’s historical growth rate forecast to actual results to assess the Company’s ability to accurately forecast.

We involved valuation professionals with specialized skill and knowledge, who assisted in:

• comparing the valuation methodologies used by the Company to valuation standards

Comparing the Company’s risk adjusted discount rate to a risk adjusted discount rate range that was independently developed using publicly available third-party market data for comparable entities;

Comparing the long-term growth rate to industry data, economic growth data, and long-term growth rates utilized in prior years’ valuation analyses by the Company;

Evaluating the guideline public companies and transactions utilized by the Company by reading the Capital IQ business descriptions, examining financial metrics of the comparable public companies and transactions within the industry, and considering market participant guidance and perspective.

• comparing the Company’s risk-adjusted discount rates to risk-adjusted discount rate ranges that were independently developed using publicly available third-party market data for comparable entities

• comparing the long-term growth rates to industry data, economic growth data, and long-term growth rates used by the Company in prior years’ valuation analyses

• evaluating the guideline public companies and transactions used by the Company by reading the business descriptions, examining financial metrics of the comparable public companies and transactions within the industry, and considering market participant guidance and perspective.

We have served as the Company’s auditor since 2011.

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Total current assets 5,370 3,342

Long-term assets

Property and equipment, net of $ 2,568 and $ 2,054 in accumulated depreciation, respectively

Operating lease assets 2,278 2,245

Goodwill 4,599 4,450

Identifiable intangible assets, net of $ 909 and $ 784 in accumulated amortization, respectively

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Total long-term assets 10,799 10,786

Total assets $ 16,169 $ 14,128

LIABILITIES AND STOCKHOLDERS’ EQUITY

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Total current liabilities 5,153 3,258

Long-term liabilities

Long-term debt 5,369 5,182

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10 shares authorized;

0.07 of Series A shares issued and outstanding as of December 31, 2019 and 2018, respectively

0.001 and 0.07 of

Series A shares issued and outstanding as of December 31, 2020 and 2019, respectively

Common stock, $ 0.001 par value;

300 shares authorized;

92 and 116 shares issued and outstanding as of December 31, 2019 and 2018, respectively

102 and 92 shares issued and

outstanding as of December 31, 2020 and 2019, respectively

Additional paid-in capital 1,998 2,061

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Noncontrolling interests 140 153

Total equity 2,849 2,896

Total liabilities and equity $ 16,169 $ 14,128

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(In millions, except per share data) 2020 2019 2018

Operating expenses

Revenue $ 16,252 $ 16,648 $ 17,279

Cost of transportation and services 7,852 8,303 9,013

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Sales, general and administrative expense 2,172 1,845 1,837

Total operating expenses

Operating income 391 821 704

Other expense (income)

Foreign currency loss

Other income ( 79 ) ( 54 ) ( 109 )

Foreign currency (gain) loss ( 3 ) 9 3

Debt extinguishment loss — 5 27

Interest expense 325 292 217

Income before income tax provision (benefit)

Income tax provision (benefit)

Income before income tax provision 148 569 566

Income tax provision 31 129 122

Net income 117 440 444

Net income attributable to noncontrolling interests ( 7 ) ( 21 ) ( 22 )

Net income attributable to XPO $ 110 $ 419 $ 422

Earnings per share data (Note 17):

Net income attributable to common shareholders $ 79 $ 379 $ 390

Earnings per share data

Basic earnings per share $ 0.87 $ 3.95 $ 3.17

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(In millions) 2020 2019 2018

Net income $ 117 $ 440 $ 444

Other comprehensive income (loss), net of tax

Foreign currency translation gain (loss), net of tax effect of $ 17 , $( 7 ) and $( 6 )

Unrealized gain (loss) on financial assets/liabilities designated as hedging instruments, net of tax effect of $(1) in all periods

$ 112 $ 23 $ ( 100 )

Unrealized gain (loss) on financial assets/liabilities designated as hedging instruments, net of tax effect of $ — , $( 1 ) and $( 1 )

( 2 ) 4 ( 6 )

Defined benefit plans adjustment, net of tax effect of $ 30 , $ 1 and $ 23

( 117 ) ( 19 ) ( 91 )

Other comprehensive income (loss) ( 7 ) 8 ( 197 )

Comprehensive income $ 110 $ 448 $ 247

Comprehensive income (loss) attributable to noncontrolling interests

Comprehensive income (loss) attributable to noncontrolling

interests 13 20 ( 5 )

Comprehensive income attributable to XPO $ 97 $ 428 $ 252

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Operating activities

Net income $ 117 $ 440 $ 444

Adjustments to reconcile net income to net cash from operating activities

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Accretion of debt 21 21 15

Deferred tax expense (benefit)

Deferred tax (benefit) expense ( 81 ) 46 45

Debt extinguishment loss — 5 27

Unrealized loss (gain) on foreign currency option and forward contracts

Unrealized (gain) loss on foreign currency option and forward contracts ( 2 ) 9 ( 20 )

Gain on sale of equity investment — — ( 24 )

Gains on sales of property and equipment ( 92 ) ( 110 ) ( 8 )

Other 45 21 8

Changes in assets and liabilities

Accounts receivable ( 382 ) ( 67 ) ( 13 )

Other assets 28 ( 47 ) ( 49 )

Accounts payable 69 ( 120 ) 35

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Cash collected on deferred purchase price receivable — 186 —

Other ( 26 ) 2 8

Net cash used in investing activities ( 357 ) ( 161 ) ( 400 )

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Proceeds from issuance of debt 1,155 1,754 1,074

Proceeds from borrowings related to securitization program 47 — —

Repurchase of debt — — ( 1,225 )

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Proceeds from forward sale settlement — — 349

Proceeds from common stock offerings

Purchase of noncontrolling interests ( 21 ) ( 258 ) —

Cash paid in connection with preferred stock conversion ( 22 ) — —

Repurchase of common stock ( 114 ) ( 1,347 ) ( 536 )

Payment for tax withholdings for restricted shares ( 26 ) ( 14 ) ( 53 )

Dividends paid

Net cash used in financing activities

Net cash provided by (used in) financing activities 1,136 ( 759 ) ( 620 )

Effect of exchange rates on cash, cash equivalents and restricted cash 14 2 ( 17 )

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

Net increase (decrease) in cash, cash equivalents and restricted cash 1,678 ( 127 ) 65

Cash, cash equivalents and restricted cash, beginning of year 387 514 449

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For the Three Years Ended December 31, 2020, 2019 and 2018

Series A Preferred Stock

(Shares in thousands, dollars in millions)

Additional Paid-In Capital

(Accumulated Deficit) Retained Earnings

Accumulated Other Comprehensive (Loss) Income

Total Stockholders’

Non-controlling Interests

Series A Preferred Stock Common Stock

(Shares in thousands, dollars in millions) Shares Amount Shares Amount Additional Paid-In Capital (Accumulated Deficit) Retained Earnings Accumulated Other Comprehensive Income (Loss) Total XPO Stockholders’

Equity Non-controlling Interests Total Equity

Balance as of December 31, 2017 72 $ 41 119,920 $ — $ 3,590 $ ( 43 ) $ 16 $ 3,604 $ 406 $ 4,010

Other comprehensive income

Net income — — — — — 422 — 422 22 444

Other comprehensive loss — — — — — — ( 170 ) ( 170 ) ( 27 ) ( 197 )

Exercise and vesting of stock compensation awards — — 995 — 1 — — 1 — 1

Tax withholdings related to vesting of stock compensation awards — — — — ( 53 ) — — ( 53 ) — ( 53 )

Issuance of common stock from offering

Conversion of Series A preferred stock to common stock

Issuance of common stock upon conversion of convertible senior notes, net of tax

Dividend paid

Impact of tax reform act

Issuance of common stock from forward sale settlement — — 6,000 — 349 — — 349 — 349

Retirement of common stock — — ( 11,314 ) — ( 608 ) — — ( 608 ) — ( 608 )

Dividend declared — — — — — ( 3 ) — ( 3 ) ( 6 ) ( 9 )

Stock compensation expense — — — — 30 — — 30 — 30

Other — — 82 — 2 1 — 3 — 3

Balance as of December 31, 2018 72 $ 41 115,683 $ — $ 3,311 $ 377 $ ( 154 ) $ 3,575 $ 395 $ 3,970

Other comprehensive loss

Net income — — — — — 419 — 419 21 440

Other comprehensive income (loss) — — — — — — 9 9 ( 1 ) 8

Exercise and vesting of stock compensation awards — — 489 — 1 — — 1 — 1

Tax withholdings related to vesting of stock compensation awards — — — — ( 14 ) — — ( 14 ) — ( 14 )

Issuance of common stock from forward sale settlement

Purchase of noncontrolling interests — — — — ( 3 ) — — ( 3 ) ( 255 ) ( 258 )

Retirement of common stock — — ( 23,932 ) — ( 1,275 ) — — ( 1,275 ) — ( 1,275 )

Dividend paid

Dividend declared — — — — — ( 3 ) — ( 3 ) ( 5 ) ( 8 )

Stock compensation expense — — — — 36 — — 36 — 36

Adoption of new accounting standard and other — — 102 — 5 ( 7 ) — ( 2 ) ( 2 ) ( 4 )

Balance as of December 31, 2019 72 $ 41 92,342 $ — $ 2,061 $ 786 $ ( 145 ) $ 2,743 $ 153 $ 2,896

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For the Three Years Ended December 31, 2020, 2019 and 2018

Series A Preferred Stock

(Shares in thousands, dollars in millions)

Additional Paid-In Capital

Retained Earnings

Accumulated Other Comprehensive Loss

Total Stockholders’

Non-controlling Interests

Series A Preferred Stock Common Stock

(Shares in thousands, dollars in millions) Shares Amount Shares Amount Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total XPO Stockholders’

Equity Non-controlling Interests Total Equity

Balance as of December 31, 2019 72 $ 41 92,342 $ — $ 2,061 $ 786 $ ( 145 ) $ 2,743 $ 153 $ 2,896

Net income — — — — — 110 — 110 7 117

Other comprehensive income (loss) — — — — — — ( 13 ) ( 13 ) 6 ( 7 )

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Purchase of noncontrolling interests — — — — ( 1 ) — — ( 1 ) ( 20 ) ( 21 )

Conversion of preferred stock to common stock ( 71 ) ( 40 ) 10,014 — 40 — — — — —

Preferred stock conversion — — — — — ( 22 ) — ( 22 ) — ( 22 )

Retirement of common stock — — ( 1,715 ) — ( 114 ) — — ( 114 ) — ( 114 )

Dividend paid

Dividend declared — — — — — ( 2 ) — ( 2 ) ( 6 ) ( 8 )

Stock compensation expense — — — — 52 — — 52 — 52

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Nature of Operations

We use an integrated network of people, technology and physical assets to help companies manage their goods most efficiently throughout their supply chains.

We use our integrated network of people, technology and physical assets to help customers manage their goods most efficiently throughout their supply chains.

Our customers are multinational, national, mid-size and small enterprises.

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Transportation and Logistics.

See Note 4 —Segment Reporting and Geographic Information for additional information on our segments.

See Note 4—Segment Reporting and Geographic Information for additional information on our operations.

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.

Basis of Presentation and Significant Accounting Policies

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We prepare our consolidated financial statements in accordance with U.S.

generally accepted accounting principles, which requires us to make estimates and assumptions that impact the amounts reported and disclosed in our consolidated financial statements and the accompanying notes.

We prepared these estimates based on the most current and best available information, but actual results could differ materially from these estimates and assumptions.

generally accepted accounting principles (“GAAP”), which requires us to make estimates and assumptions that impact the amounts reported and disclosed in our consolidated financial statements and the accompanying notes.

We prepared these estimates based on the most current and best available information, but actual results could differ materially from these estimates and assumptions, particularly in light of the outbreak of a strain of coronavirus, COVID-19.

COVID-19 has had, and we expect will continue to have, significant effects on economic activity, on demand for our services, and on our results of operations in 2021.

Certain reclassifications have been made to prior year amounts to conform to the current year’s presentation.

Consolidation

Our consolidated financial statements include the accounts of XPO Logistics, Inc.

(“XPO” or “we”) and our majority-owned subsidiaries and variable interest entities (“ VIE s”) where we are the primary beneficiary.

(“XPO” or “we”) and our majority-owned subsidiaries and variable interest entities (“VIEs”) where we are the primary beneficiary.

We have eliminated intercompany accounts and transactions.

To determine if we are a primary beneficiary of a VIE , we evaluate whether we are able to direct the activities that significantly impact the VIE ’s economic performance, including whether we control the operations of each VIE and whether we can operate the VIE s under our brand or policies.

Investors in these VIE s only have recourse to the assets owned by the VIE and not to our general credit.

To determine if we are a primary beneficiary of a VIE, we evaluate whether we are able to direct the activities that significantly impact the VIE’s economic performance, including whether we control the operations of each VIE and whether we can operate the VIEs under our brand or policies.

Investors in these VIEs only have recourse to the assets owned by the VIE and not to our general credit.

We do not have implicit support arrangements with any VIE.

Other than the special purpose entity, which we consolidate related to the European Trade Securitization Program discussed below in this Note and in Note 12 —Debt , assets and liabilities of VIE s where we are the primary beneficiary are not significant to our consolidated financial statements.

We have a controlling financial interest in other entities generally when we own a majority of the voting interest.

The noncontrolling interests reflected in our consolidated financial statements primarily relate to a minority interest in XPO Logistics Europe SA (“ XPO Logistics Europe ”), formally known as Norbert Dentressangle SA (“ ND ”), a business we acquired in 2015.

As described in Note 3 —Purchase of Noncontrolling Interest , we purchased a portion of the noncontrolling interests in 2019.

Following this acquisition, our noncontrolling interest was reduced to approximately 5 % of XPO Logistics Europe .

Other than the special purpose entity related to the European Trade Securitization Program discussed below in this Note and in Note 12—Debt, which we consolidate, assets and liabilities of VIEs where we are the primary beneficiary are not significant to our consolidated financial statements.

We have a controlling financial interest in entities generally when we own a majority of the voting interest.

The noncontrolling interests reflected in our consolidated financial statements primarily relate to a minority interest in XPO Logistics Europe SA (“XPO Logistics Europe”), formerly known as Norbert Dentressangle SA, a business we

acquired in 2015.

As described in Note 3—Purchases of Noncontrolling Interest, we purchased portions of the noncontrolling interests in both 2020 and 2019.

Following these acquisitions, the noncontrolling interest was reduced to approximately 3 % of XPO Logistics Europe.

Significant Accounting Policies

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Transportation

Our transportation segment generates revenue by providing freight brokerage and other transportation services for our customers.

Our transportation segment generates revenue by providing less-than-truckload, freight brokerage and other transportation services for our customers.

Additional services may be provided to our customers under their transportation contracts, including unloading and other incidental services.

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For these contracts, we recognize revenue on a straight-line basis over the term of the contract because the pattern of benefit to the customer, and our efforts to fulfill the contract, are generally distributed evenly throughout the period.

Performance obligations are short-term, with transit days less than one week.

Performance obligations are generally short-term, with transit times usually less than one week.

Generally, customers are billed on shipment of the freight or on a monthly basis and make payment according to approved payment terms.

When we do not control the specific services, we recognize revenue as the difference between the amount the customer pays us for the service less the amount we are charged to perform the service.

Our logistics segment generates revenue by providing supply chain services for our customers, including warehousing, distribution, order fulfillment, packaging, reverse logistics and inventory management contracts ranging from a few months to a few years.

When we do not control the specific services, we recognize revenue as the difference between the amount the customer pays us for the service less the amount we are charged by third parties who provide the service.

Our Logistics segment generates revenue by providing supply chain services for our customers, including warehousing and distribution, order fulfillment, reverse logistics, packaging and labeling, factory and aftermarket support and inventory management contracts ranging from a few months to a few years.

Our performance obligations are satisfied over time as customers receive and consume the benefits of our services.

The contracts contain a single performance obligation as the distinct services provided remain substantially the same over time and possess the same pattern of transfer.

The contracts generally contain a single performance obligation as the distinct services provided remain substantially the same over time and possess the same pattern of transfer.

The transaction price is based on the consideration specified in the contract with the customer and contains fixed and variable consideration.

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Revenue relating to these pricing adjustments is estimated and included in the consideration if it is probable that a significant revenue reversal will not occur in the future.

The estimate of variable consideration is determined by the expected value or most likely amount method and factors in current, past and forecasted experience with the customer.

The estimate of variable consideration is determined by the expected value or most likely amount method and

factors in current, past and forecasted experience with the customer.

Customers are billed based on terms specified in the revenue contract and they pay us according to approved payment terms.

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As of December 31, 2020, 2019 and 2018, our restricted cash included in Other long-term assets on our Consolidated Balance Sheets was $ 11 million, $ 10 million and $ 12 million, respectively.

Restricted cash as of December 31, 2017 was primarily tax-deferred proceeds from a property sale in 2017, which was reclassified in 2018 .

Accounts Receivable and Allowance for Doubtful Accounts

We record accounts receivable at the contractual amount and we record an allowance for doubtful accounts for the amount we estimate we may not collect.

In determining the allowance for doubtful accounts, we consider historical

collection experience, the age of the accounts receivable balances, the credit quality of our customers, any specific customer collection issues, current economic conditions, and other factors that may impact our customers’ ability to pay.

In determining the allowance for doubtful accounts, we consider historical collection experience, the age of the accounts receivable balances, the credit quality and risk of our customers, any specific customer collection issues, current economic conditions, and other factors that may impact our customers’ ability to pay.

Commencing in 2020 and in accordance with Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments” discussed further below, we also consider reasonable and supportable forecasts of future economic conditions and their expected impact on customer collections in determining our allowance for doubtful accounts.

We write off accounts receivable balances once the receivables are no longer deemed collectible.

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Beginning balance $ 58 $ 52 $ 42

Cumulative effect adjustment for adoption of ASU 2016-13 4 — —

Provision charged to expense 53 34 36

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Trade Receivables Securitization and Factoring Programs

We sell certain of our trade accounts receivable on a non-recourse basis to third-party financial institutions under factoring agreements.

We account for these transactions as sales of receivables and present cash proceeds as cash provided by operating activities in the Consolidated Statements of Cash Flows.

We also sell trade accounts receivable under a securitization program described below.

We use trade receivables securitization and factoring programs to help manage our cash flows and offset the impact of extended payment terms for some of our customers.

In July 2019, XPO Logistics Europe , one of our majority-owned subsidiaries, entered into a new, three -year trade receivables securitization program co-arranged by Crédit Agricole, BNP Paribas and HSBC (the “ Purchasers ”) and terminated its prior program.

Under the new program, a wholly-owned bankruptcy remote special purpose entity of XPO Logistics Europe sells trade receivables that originate with wholly-owned subsidiaries of XPO Logistics Europe in the United Kingdom and France.

The special purpose entity is a variable interest entity and is consolidated by XPO Logistics Europe based on its control of the entity’s activities.

Our subsidiary sells these trade receivables to unaffiliated entities managed by the Purchasers .

Under the terminated prior program, the receivables were originally funded by senior variable funding notes in the same currency as the corresponding receivables.

See Note 12 —Debt f or additional information related to our receivables securitization secured borrowing program.

We account for transfers under our factoring arrangements as sales because we sell full title and ownership in the underlying receivables and control of the receivables is considered transferred.

We account for transfers under our securitization programs as either sales or secured borrowings based on an evaluation of whether control has transferred.

In instances where we do not meet the criteria for surrender of control, the transaction was accounted for as a secured borrowing.

For these transactions, the receivables remained on our Consolidated Balance Sheets and the notes were reflected within debt.

For transfers in the securitization programs where we have surrendered control of the receivables, the transactions are accounted for as sales and the receivables are derecognized from our Consolidated Balance Sheets at the date of transfer.

In the securitization and factoring arrangements, any of our continuing involvement is limited to servicing the receivables.

XPO Logistics Europe, one of our majority-owned subsidiaries, participates in a trade receivables securitization program co-arranged by three European banks (the “Purchasers”).

Under the program, a wholly-owned bankruptcy-remote special purpose entity of XPO Logistics Europe sells trade receivables that originate with wholly-owned subsidiaries of XPO Logistics Europe in the United Kingdom and France to unaffiliated entities managed by the Purchasers.

The special purpose entity is a variable interest entity and is consolidated by XPO based on our control of the entity’s activities.

We account for transfers under our securitization and factoring arrangements as sales because we sell full title and ownership in the underlying receivables and control of the receivables is considered transferred.

For these transfers, the receivables are removed from our Consolidated Balance Sheets at the date of transfer.

In the securitization and

factoring arrangements, any of our continuing involvement is limited to servicing the receivables.

The fair value of any servicing assets and liabilities is immaterial.

Under the terminated securitization program, if transfers were accounted for as sales, the consideration received included a simultaneous cash payment and a deferred purchase price receivable.

Our trade receivables securitization program permits us to borrow, on an unsecured basis, cash collected in a servicing capacity on previously sold receivables, which we report within short-term debt on our Consolidated Balance Sheets.

These borrowings amounted to € 41 million ($ 50 million) as of December 31, 2020.

See Note 12—Debt for additional information related to our receivables securitization secured borrowing program and these borrowings.

Under a securitization program that was terminated in July 2019, we accounted for transfers as either sales or secured borrowings based on an evaluation of whether control has transferred.

For the transfers that did not meet the criteria for surrender of control, the transaction was accounted for as a secured borrowing.

These secured borrowings were repaid when the program was terminated.

For transfers that were accounted for as sales, the consideration received included a simultaneous cash payment and a deferred purchase price receivable.

The deferred purchase price receivable was not a trade receivable and was recorded based on its fair value and reported within Other current assets on our Consolidated Balance Sheets.

The cash payment which we received on the date of the transfer was reflected within Net cash provided by operating activities .

The cash payment which we received on the date of the transfer was reflected within Net cash provided by operating activities on our Consolidated Statement of Cash Flows.

As we received cash payments on the deferred purchase price receivable, it was reflected as an investing activity.

As of December 31, 2018, the balance of deferred purchase price receivable reflected within Other current assets was $ 52 million .

The new program does not include a deferred purchase price mechanism and all transfers of eligible receivables under the new program are accounted for as sales.

The maximum amount of net cash proceeds available at any one time under the new program is € 400 million (approximately $ 448 million as of December 31, 2019 ).

As of December 31, 2019 , € 65 million (approximately $ 73 million ) was available to us based on the level of receivables sold and outstanding as of that date.

The new program does not include a deferred purchase price mechanism.

The maximum amount of net cash proceeds available at any one time under the new program, inclusive of any unsecured borrowings, is € 400 million (approximately $ 489 million as of December 31, 2020).

As of December 31, 2020, € 75 million (approximately $ 92 million) was available to us, subject to having sufficient receivables available to sell to the Purchasers.

The weighted average interest rate was 0.62 % as of December 31, 2020.

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Receivables sold in period

$ 2,868 $ 2,231 $ 231

Cash consideration

2,868 2,095 179

Deferred purchase price

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Capitalized software also includes the fair value of acquired internally-developed technology.

We compute d epreciation expense on a straight-line basis over the estimated useful lives of the assets as follows:

Classification

Estimated Useful Life

We compute depreciation expense on a straight-line basis over the estimated useful lives of the assets as follows:

Classification Estimated Useful Life

Buildings and leasehold improvements

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We recognize operating lease right-of-use assets and liabilities at the lease commencement date based on the estimated present value of the lease payments over the lease term.

As most of our leases do not provide an implicit rate, we use incremental borrowing rates based on our outstanding debt to determine the present value of future lease payments.

As most of our leases do not provide an implicit rate, we use incremental borrowing rates based on the information available at commencement date to determine the present value of future lease payments.

This rate is determined from a hypothetical yield curve that takes into consideration market yield levels of our relevant debt outstanding as well as the index that matches our credit rating, and then adjusts as if the borrowings were collateralized.

We include options to extend or terminate a lease in the lease term when we are reasonably certain to exercise such options.

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Our reporting units are our operating segments or one level below our operating segments for which discrete financial information is prepared and regularly reviewed by segment management.

For our 2019 goodwill assessment, we performed a quantitative analysis for all five of our reporting units using a combination of income and market approaches, with the assistance of a third-party valuation appraiser.

As of August 31, 2019, we completed our annual impairment tests for goodwill with all of our reporting units having fair values in excess of their carrying values.

Accounting guidance allows entities to perform a qualitative assessment (a “step-zero” test) before performing a quantitative analysis.

If an entity determines that it is not more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the entity does not need to perform a quantitative analysis for that reporting unit.

The qualitative assessment includes review of macroeconomic conditions, industry and market considerations, internal cost factors, and overall financial performance, among other factors.

For our 2018 goodwill assessment, we performed a step-zero qualitative analysis for all of our reporting units.

Based on the qualitative assessments performed, we concluded that it is not more-likely-than-not that the fair value of our reporting units was less than their carrying amounts, and therefore, further quantitative analysis was not performed.

For the years ended December 31, 2019 and 2018 , we did not recognize any goodwill impairment.

For our 2020 and 2019 goodwill assessments, we performed a quantitative analysis for all five of our reporting units using a combination of income and market approaches, with the assistance of a third-party valuation appraiser.

As of August 31, 2020 and 2019, we completed our annual impairment tests for goodwill with all of our reporting units having fair values in excess of their carrying values, resulting in no impairment of goodwill.

The income approach of determining fair value is based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate.

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The range of estimated useful lives by type are as follows:

Classification

Estimated Useful Life

Classification Estimated Useful Life

Customer relationships

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Accrued Expenses

The components of accrued expenses as of December 31, 2020 and 2019 are as follows:

As of December 31,

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Self-Insurance

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

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

We periodically evaluate our level of insurance coverage and adjust our insurance levels based on risk tolerance and premium expense.

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The components of and changes in accumulated other comprehensive income (loss) (“AOCI”), net of tax, for the years ended December 31, 2020 and 2019, are as follows:

(In millions)

Foreign Currency Translation Adjustments

Derivative Hedges

Defined Benefit Plans Liability

AOCI Attributable to Noncontrolling Interests

AOCI Attributable to XPO

(In millions) Foreign Currency Translation Adjustments Derivative Hedges Defined Benefit Plans Liability Less:

AOCI Attributable to Noncontrolling Interests AOCI Attributable to XPO

As of December 31, 2018 $ ( 143 ) $ 1 $ ( 12 ) $ — $ ( 154 )

Other comprehensive (loss) income

Other comprehensive income (loss) 33 10 ( 18 ) 1 26

Amounts reclassified from AOCI ( 10 ) ( 6 ) ( 1 ) — ( 17 )

Net current period other comprehensive loss

Net current period other comprehensive income (loss) 23 4 ( 19 ) 1 9

As of December 31, 2019 ( 120 ) 5 ( 31 ) 1 ( 145 )

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As of December 31, 2020 $ ( 8 ) $ 3 $ ( 148 ) $ ( 5 ) $ ( 158 )

liabilities for the future tax consequences of events that have been recognized in our financial statements or tax returns.

We account for income taxes using the asset and liability method on a legal entity and jurisdictional basis, under which we recognize the amount of taxes payable or refundable for the current year and deferred tax assets and liabilities for the future tax consequences of events that have been recognized in our financial statements or tax returns.

Our calculation relies on several factors, including pre-tax earnings, differences between tax laws and accounting rules, statutory tax rates, tax credits, uncertain tax positions, and valuation allowances.

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We convert foreign currency transactions recognized on our Consolidated Statements of Income to USD by applying the exchange rate prevailing on the date of the transaction.

Gains and losses arising from foreign currency transactions and the effects of remeasuring monetary assets and liabilities are recorded in Foreign currency loss on our Consolidated Statements of Income .

Foreign currency loss included on our Consolidated Statements of Income consisted of the following:

Gains and losses arising from foreign currency transactions and the effects of remeasuring monetary assets and liabilities are recorded in Foreign currency (gain) loss on our Consolidated Statements of Income.

Foreign currency (gain) loss included on our Consolidated Statements of Income consisted of the following:

Years Ended December 31,

(In millions) 2020 2019 2018

Unrealized foreign currency option and forward contracts losses (gains)

Realized foreign currency option and forward contracts losses

Foreign currency transaction and remeasurement losses (gains)

Total foreign currency loss

Unrealized foreign currency option and forward contracts (gains) losses $ ( 2 ) $ 9 $ ( 20 )

Realized foreign currency option, forward and other derivative contracts (gains) losses ( 4 ) — 16

Foreign currency transaction and remeasurement losses 3 — 7

Total foreign currency (gain) loss $ ( 3 ) $ 9 $ 3

Fair Value Measurements

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We base our fair value estimates on market assumptions and available information.

The carrying values of cash and cash equivalents, accounts receivable, deferred purchase price related to accounts receivable sold, accounts payable, accrued expenses and current maturities of long-term debt approximated their fair values as of December 31, 2019 and 2018 due to their short-term nature and/or are receivable or payable on demand.

The carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and current maturities of long-term debt approximated their fair values as of December 31, 2020 and 2019 due to their short-term nature and/or being receivable or payable on demand.

The Level 1 cash equivalents include money market funds valued using quoted prices in active markets.

The Level 2 cash equivalents include short-term investments valued using published interest rates for instruments with similar terms and maturities.

information on the fair value hierarchy of our derivative instruments, see Note 11 —Derivative Instruments and for information on financial liabilities, see Note 12 —Debt .

For information on the fair value hierarchy of our derivative instruments, see Note 11—Derivative Instruments and for information on financial liabilities, see Note 12—Debt.

The fair value hierarchy of cash equivalents was as follows:

As of December 31, 2019

(In millions)

Carrying Value

Cash equivalents

As of December 31, 2018

(In millions)

Carrying Value

Cash equivalents

(In millions) Carrying Value Fair Value Level 1 Level 2

December 31, 2020 $ 1,738 $ 1,738 $ 1,738 $ —

December 31, 2019 144 144 127 17

Derivative Instruments

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The gain or loss resulting from fair value adjustments on cash flow hedges are recorded in AOCI on our Consolidated Balance Sheets until the hedged item is recognized in earnings and is presented in the same income statement line item as the earnings effect of the hedged item.

The gains and losses on the net investment hedges are recorded as cumulative translation adjustments in AOCI to the extent that the instruments are effective in hedging the designated risk.

The gains and losses on the net investment hedges are recorded as cumulative translation adjustments in AOCI to the extent that the instruments are effective in hedging

the designated risk.

Gains and losses on cash flow hedges and net investment hedges representing hedge components excluded from the assessment of effectiveness will be amortized into Interest expense on our Consolidated Statements of Income in a systematic manner.

Derivatives that are not designated as hedging instruments are adjusted to fair value through earnings and are recorded in Foreign currency loss on our Consolidated Statements of Income .

Derivatives that are not designated as hedging instruments are adjusted to fair value through earnings and are recorded in Foreign currency (gain) loss on our Consolidated Statements of Income.

Defined Benefit Pension Plans

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We account for stock-based compensation based on the equity instrument’s grant date fair value.

For grants of restricted stock units (“ RSU s”) subject to service-based or performance-based vesting conditions only, we establish the fair value based on the market price on the date of the grant.

For grants of RSU s subject to market-based vesting conditions, we establish the fair value using the Monte Carlo simulation lattice model.

We determined the fair value

of our stock-based awards based on our stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends.

For grants of restricted stock units (“RSUs”) subject to service-based or performance-based vesting conditions only, we establish the fair value based on the market price on the date of the grant.

For grants of RSUs subject to market-based vesting conditions, we establish the fair value using the Monte Carlo simulation lattice model.

We determined the fair value of our stock-based awards based on our stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends.

We account for forfeitures as they occur.

We recognize the grant date fair value of equity awards as compensation cost over the requisite service period.

We recognize expense for our performance-based restricted stock units (“ PRSU s”) over the awards’ requisite service period based on the number of awards expected to vest with consideration to the actual and expected financial results.

We recognize expense for our performance-based restricted stock units (“PRSUs”) over the awards’ requisite service period based on the number of awards expected to vest with consideration to the actual and expected financial results.

We do not recognize expense until achievement of the performance targets for a PRSU award is considered probable.

Adoption of New Accounting Standard

In February 2016, the Financial Accounting Standards Board (“ FASB ”) issued Accounting Standards Update (“ ASU ”) 2016-02, Leases.

The core principle of ASU 2016-02 is that a lessee should recognize on its Consolidated Balance Sheets the assets and liabilities that arise from leases, including operating leases.

Under the new requirements, a lessee recognizes on the balance sheet the right-of-use asset representing the right to use the underlying asset and the lease liability representing the present value of future lease payments.

We utilized a comprehensive approach to assess the impact of ASU 2016-02 on our financial statements and related disclosures.

In particular, we completed a robust review of our lease portfolio and enhanced our internal controls, including those related to the identification , monitoring of, measurement and disclosure of our lease portfolio.

We also implemented a new software solution to facilitate compliance with the new guidance.

As discussed further in Note 8 —Leases , we adopted ASU 2016-02 and its related amendments (Topic 842) on January 1, 2019.

Accounting Pronouncements Issued but Not Yet Effective

In June 2016, the FASB issued ASU 2016-13 “Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments,” as modified by subsequently issued ASU s.

The ASU amends the current incurred losses impairment method with a method that reflects expected credit losses on certain types of financial instruments, including trade receivables.

On adoption, we will record an immaterial adjustment to total equity as of January 1, 2020 for the cumulative impact of adoption.

Adoption of New Accounting Standards

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13 “Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.” The ASU, as subsequently modified, amends the incurred losses impairment method with a method that reflects expected credit losses on certain types of financial instruments, including trade receivables.

We adopted this standard on January 1, 2020 and recorded an immaterial adjustment to total equity for the cumulative impact of adoption.

In August 2018, the FASB issued ASU 2018-15, “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40):

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Under the guidance, any capitalized implementation costs would be included in prepaid expenses, amortized over the term of the hosting arrangement on a straight-line basis and presented in the same line items in the Consolidated Statement of Income as the expense for fees of the associated hosting arrangements.

We adopted this standard on January 1, 2020 on a prospective basis and do not expect it to have a material effect on our consolidated financial statements.

We adopted this standard on January 1, 2020 on a prospective basis.

The adoption did not have a material effect on our consolidated financial statements.

Accounting Pronouncements Issued but Not Yet Effective

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740):

“Simplifying the Accounting for Income Taxes.” The ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

The ASU also clarifies and amends existing guidance to improve consistent application among reporting entities.

This ASU is effective for fiscal years beginning after December 15, 2020, including interim periods within that reporting period;

however, early adoption is permitted.

We are currently evaluating the impact of this standard on our consolidated financial statements.

Purchase of Noncontrolling Interest

In November 2019, we purchased a shareholder’s noncontrolling interest in XPO Logistics Europe for € 234 million (approximately $ 258 million ).

Our purchase reduced Noncontrolling interests and Additional paid-in capital by $ 255 million and $ 3 million , respectively.

Simplifying the Accounting for Income Taxes.” The ASU is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

The ASU also clarifies and amends existing guidance to enhance consistency and comparability among reporting entities.

We adopted this standard on January 1, 2021 on a prospective basis.

The adoption did not have a material effect on our consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, “Reference rate reform (Topic 848):

Facilitation of the effects of reference rate reform on financial reporting.” The ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform.

The amendments apply only to contracts and hedging relationships that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform.

The amendments are elective and are effective upon issuance through December 31, 2022.

We are currently evaluating the impact of the new guidance.

Purchases of Noncontrolling Interest

In the third quarter of 2020 and fourth quarter of 2019, we purchased shareholders’ noncontrolling interests in XPO Logistics Europe for € 17 million (approximately $ 21 million) and € 234 million (approximately $ 258 million), respectively.

Segment Reporting and Geographic Information

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We accomplish this by using our proprietary technology, third-party independent carriers and our transportation assets and service centers.

Our transportation services include truck brokerage, expedite, intermodal, drayage, last mile, less-than-truckload (“LTL”), full truckload, global forwarding and managed transportation.

Freight brokerage, last mile, global forwarding and managed transportation are non-asset or asset-light businesses while LTL and full truckload are primarily asset-based operations.

In our Logistics segment, which we also refer to as supply chain or contract logistics, we provide a wide range of services differentiated by our proprietary technology and our ability to customize solutions for individual customers.

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

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

Our transportation services include LTL, truck brokerage services and other transportation services.

In our Logistics segment, which we sometimes refer to as supply chain, we provide a wide range of services differentiated by our proprietary technology and our ability to customize solutions for individual customers.

Our services include value-added warehousing and distribution, e-commerce and omnichannel fulfillment, cold-chain logistics, packaging and labeling, factory support, aftermarket support, inventory management, order personalization and supply chain optimization, such as product flow management.

In addition, our Logistics segment provides reverse logistics, which is also called returns management.

Some of our operating units provide services to our other operating units outside of their reportable segment.

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We eliminate intersegment revenues and expenses in our consolidated results.

Corporate includes corporate headquarters costs for executive officers and certain legal and financial functions, and other costs and credits not attributed to our core business.

Our chief operating decision maker (“ CODM ”) regularly reviews financial information at the reporting segment level to allocate resources to the segments and to assess their performance.

Corporate includes corporate headquarters costs for executive officers and certain legal and financial functions, and other costs and credits not attributed to our reporting segments.

Our chief operating decision maker (“CODM”) regularly reviews financial information at the operating segment level to allocate resources to the segments and to assess their performance.

We include items directly attributable to a segment, and those that can be allocated on a reasonable basis, in segment results reported to the CODM.

We do not provide asset information by segment to the CODM , as the majority of our assets are managed at the corporate level.

We do not provide asset information by segment to the CODM.

Selected financial data for our segments is as follows:

(In millions)

Transportation

(In millions) Transportation Logistics Corporate Eliminations/Other Total

Year Ended December 31, 2020

Revenue $ 10,199 $ 6,182 $ — $ ( 129 ) $ 16,252

Operating income (loss) (1)

507 140 ( 256 ) — 391

Depreciation and amortization 453 301 12 — 766

Year Ended December 31, 2019

Revenue $ 10,687 $ 6,093 $ — $ ( 132 ) $ 16,648

Operating income (loss) (2)

752 241 ( 172 ) — 821

Depreciation and amortization 447 277 15 — 739

Year Ended December 31, 2018

Revenue $ 11,343 $ 6,065 $ — $ ( 129 ) $ 17,279

Operating income (loss) (3)

646 216 ( 158 ) — 704

Depreciation and amortization 461 244 11 — 716

(1) Consolidated operating income for 2020 includes $ 100 million of transaction and integration costs, of which $ 21 million relates to our Transportation segment and $ 28 million relates to our Logistics segment, and $ 56 million of restructuring expense.

(2) Consolidated operating income for 2019 includes $ 5 million of transaction and integration costs and $ 49 million of restructuring expense.

(3) Consolidated operating income for 2018 includes $ 33 million of transaction, integration and rebranding costs, $ 21 million of restructuring expense, $ 26 million of litigation costs and $ 24 million from gain on sale of equity investment.

The transaction and integration costs for 2020 are primarily related to our previously announced exploration of strategic alternatives that was terminated in March 2020 and costs related to our planned acquisition of the Kuehne + Nagel business, as described in Note 19—Subsequent Events.

For further information on our restructuring actions, see Note 6—Restructuring Charges to the Consolidated Financial Statements.

We also incurred net incremental and direct costs as a result of the COVID-19 pandemic in 2020, including costs for personal protective equipment, site cleanings and enhanced employee benefits, such as appreciation pay.

As of December 31, 2020 and 2019, we held long-lived tangible assets outside of the U.S.

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Revenue Recognition

Adoption of Topic 606, “Revenue from Contracts with Customers”

We adopted ASU 2014-09, Revenue (Topic 606):

“Revenue from Contracts with Customers.” on January 1, 2018.

Our reported results for 2019 and 2018 are presented under Topic 606, while our prior periods were not adjusted and are reported under Topic 605 “Revenue Recognition.” Under Topic 605, for our Transportation segment, with the

exception of the LTL business, revenue was recognized at the point in time when delivery was complete and the shipping terms of the contract were satisfied.

Disaggregation of Revenues

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Year Ended December 31, 2020

(In millions)

Transportation

(In millions) Transportation Logistics Eliminations Total

United States $ 7,220 $ 2,220 $ ( 43 ) $ 9,397

North America (excluding United States) 311 50 — 361

France 1,205 643 ( 13 ) 1,835

United Kingdom 677 1,526 ( 53 ) 2,150

Europe (excluding France and United Kingdom) 739 1,654 ( 17 ) 2,376

Other 47 89 ( 3 ) 133

Total $ 10,199 $ 6,182 $ ( 129 ) $ 16,252

Year Ended December 31, 2019

(In millions)

Transportation

(In millions) Transportation Logistics Eliminations Total

United States $ 7,454 $ 2,338 $ ( 33 ) $ 9,759

North America (excluding United States) 286 37 — 323

France 1,358 659 ( 12 ) 2,005

United Kingdom 760 1,384 ( 68 ) 2,076

Europe (excluding France and United Kingdom) 810 1,582 ( 16 ) 2,376

Other 19 93 ( 3 ) 109

Total $ 10,687 $ 6,093 $ ( 132 ) $ 16,648

Year Ended December 31, 2018

(In millions)

(In millions) Transportation Logistics Eliminations Total

United States $ 8,055 $ 2,196 $ ( 19 ) $ 10,232

North America (excluding United States) 274 67 — 341

France 1,496 687 ( 18 ) 2,165

United Kingdom 704 1,436 ( 70 ) 2,070

Europe (excluding France and United Kingdom) 793 1,584 ( 18 ) 2,359

Other 21 95 ( 4 ) 112

Total $ 11,343 $ 6,065 $ ( 129 ) $ 17,279

Our revenue disaggregated by service offering was as follows:

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Transportation segment:

LTL $ 4,450 $ 4,815 $ 4,839

Freight brokerage and truckload 4,373 4,383 4,784

Last mile (1)

908 873 1,065

Managed transportation 344 496 462

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(1) Comprised of our North American last mile operations.

Transaction Price Allocated to Remaining Performance Obligation

Our remaining performance obligation represents the aggregate amount of transaction price yet to be recognized as of the end of the reporting period.

Performance Obligations

Remaining performance obligations represent firm contracts for which services have not been performed and future revenue recognition is expected.

As permitted in determining the remaining performance obligation, we omit obligations that:

(i) have original expected durations of one year or less or (ii) contain variable consideration.

On December 31, 2019 , the fixed consideration component of our remaining performance obligation was approximately $ 1.5 billion , and we expect to recognize approximately 75 % over the next three years and the remainder thereafter.

On December 31, 2020, the fixed consideration component of our remaining performance obligation was approximately

$ 1.6 billion, and we expect to recognize approximately 75 % of that amount over the next three years and the remainder thereafter.

The majority of the remaining performance obligation relates to our Logistics reportable segment.

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Restructuring Charges

We engage in restructuring actions as part of our ongoing efforts to best use our resources and infrastructure.

These actions may include severance and facility-related costs and are intended to improve our efficiency and profitability.

Additionally, a portion of the restructuring charge recorded in 2019 is related to our largest customer downsizing its business with us.

We engage in restructuring actions as part of our ongoing efforts to best use our resources and infrastructure, including actions in response to COVID-19.

These actions generally include severance and facility-related costs, including impairment of right-of-use assets, and are intended to improve our efficiency and profitability.

Restructuring charges were recorded on our Consolidated Statements of Income as follows:

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Direct operating expense 7 1 1

We recognized $ 21 million and $ 19 million of restructuring charges in the fourth quarter of 2019 and 2018 , respectively.

Restructuring charges for the year ended December 31, 2017 were $ 34 million , the majority of which was included in Sales, general and administrative expense (“ SG&A ”).

Sales, general and administrative expense 48 46 20

Total $ 56 $ 49 $ 21

We recognized $ 3 million, $ 21 million and $ 19 million of restructuring charges in the fourth quarter of 2020, 2019 and 2018, respectively.

Our restructuring-related activity was as follows:

Year Ended December 31, 2020

(In millions)

Reserve Balance as of December 31, 2 018

Charges Incurred

Foreign Exchange and Other

Reserve Balance as of December 31, 2 019

(In millions) Reserve Balance as of December 31, 2019 Charges Incurred Payments Foreign Exchange and Other Reserve Balance as of December 31, 2020

Transportation $ 12 $ 17 $ ( 22 ) $ — $ 7

Logistics 11 21 ( 14 ) 1 19

Corporate 2 11 ( 10 ) ( 1 ) 2

Total severance 25 49 ( 46 ) — 28

Transportation — 6 — ( 1 ) 5

We expect the majority of the cash outlays under the 2019 approved plans will be substantially complete by the end of 2020 .

Logistics — 1 ( 1 ) — —

Total facilities — 7 ( 1 ) ( 1 ) 5

Total $ 25 $ 56 $ ( 47 ) $ ( 1 ) $ 33

We expect the majority of the cash outlays related to the charges incurred in 2020 will be complete within twelve months.

Year Ended December 31, 2019

(In millions)

Charges Incurred

Reserve Balance as of December 31, 2018

(In millions) Reserve Balance as of December 31, 2018 Charges Incurred Payments Foreign Exchange and Other Reserve Balance as of December 31, 2019

Transportation $ 9 $ 30 $ ( 26 ) $ ( 1 ) $ 12

The majority of the cash outlays under the 2018 approved plan were substantially complete by the end of 2019 .

Logistics 5 14 ( 8 ) — 11

Corporate 2 3 ( 3 ) — 2

Total severance 16 47 ( 37 ) ( 1 ) 25

Transportation — 2 ( 2 ) — —

Total facilities — 2 ( 2 ) — —

Total $ 16 $ 49 $ ( 39 ) $ ( 1 ) $ 25

The majority of the cash outlays related to the charges incurred in 2019 were substantially complete by the end of 2020.

Property and Equipment

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Property and equipment

Land $ 303 $ 334

Buildings and leasehold improvements 648 648

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Adoption of Topic 842, “Leases”

On January 1, 2019, we adopted Topic 842 prospectively through a cumulative-effect adjustment with no restatement of prior period financial statements.

On adoption, we elected the package of practical expedients to retain the lease identification, classification and initial direct costs for existing leases.

We recognized $ 2.1 billion of Operating lease assets and liabilities on the Consolidated Balance Sheet as of January 1, 2019 in connection with the adoption of this new standard.

Additionally, beginning in 2019, net operating lease activity, including the reduction of the operating lease asset and the accretion of the operating lease liability, are reflected in Depreciation, amortization and net lease activity on our Consolidated Statements of Cash Flows .

On January 1, 2019, we adopted ASU 2016-02, “Leases”, and its related amendments (Topic 842) prospectively through a cumulative-effect adjustment with no restatement of prior period financial statements.

Beginning in 2019, net operating lease activity, including the reduction of the operating lease asset and the accretion of the operating lease liability, are reflected in Depreciation, amortization and net lease activity on our Consolidated Statements of Cash Flows.

The adoption of Topic 842 did not have a material impact on our Consolidated Statements of Income and our Consolidated Statements of Cash Flows.

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The components of our lease expense and gain realized on sale-leaseback transactions were as follows:

Year Ended December 31,

Years Ended December 31,

(In millions) 2020 2019

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Gain recognized on sale-leaseback transactions (1)

For the year ended December 31, 2019 , we completed multiple sale-leaseback transactions for land and buildings, including a sale and partial leaseback of our shared-services center in Portland, Oregon and received aggregate cash proceeds of $ 203 million .

(1) For the years ended December 31, 2020 and 2019, we completed multiple sale-leaseback transactions for land and buildings, including a sale and partial leaseback of our shared-services center in Portland, Oregon in 2019.

We received aggregate cash proceeds of $ 143 million and $ 203 million in 2020 and 2019, respectively.

Gains on sale-leaseback transactions are included in Direct operating expense in our Consolidated Statements of Income.

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(In millions) 2020 2019

December 31, 2019

Operating leases:

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Total operating lease liabilities

$ 2,278 $ 2,244

Finance leases:

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Operating leases

6 years 7 years

Finance leases

8 years 7 years

Weighted-average discount rate

Operating leases

4.82 % 5.16 %

Finance leases

Assets represented by capital leases, net of accumulated depreciation, were $ 296 million as of December 31, 2018.

3.10 % 2.69 %

Supplemental cash flow information related to leases was as follows:

Year Ended December 31,

Years Ended December 31,

(In millions) 2020 2019

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Finance leases

Property and equipment acquired through capital leases was $ 111 million and $ 145 million for the years ended December 31, 2018 and 2017, re spectively.

Additionally, non-cash investing activities for the year ended December 31, 2019 include $ 39 million of property and equipment additions for build-to-suit leases.

Property and equipment acquired through capital leases was $ 111 million for the year ended December 31, 2018.

Additionally, non-cash investing activities for the years ended December 31, 2020 and 2019 included $ 30 million and $ 39 million of property and equipment additions for build-to-suit leases.

Maturities of lease liabilities as of December 31, 2020 were as follows:

(In millions)

Finance Leases

Operating Leases

(In millions) Finance Leases Operating Leases

2021 $ 97 $ 579

Thereafter 106 635

Total lease payments

$ 479 $ 2,718

interest ( 70 ) ( 440 )

Present value of lease liabilities

$ 409 $ 2,278

As of December 31, 2020, we had additional operating leases that have not yet commenced with future undiscounted lease payments of $ 202 million.

These operating leases will commence in fiscal year 2020 through fiscal year 2035 with initial lease terms of 4 years to 15 years .

Disclosures Related to Topic 840

The following information is required disclosure for companies adopting the lease standard prospectively without revising comparative prior period information.

Future minimum lease payments with initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2018 were as follows:

(In millions)

Capital Leases

Operating Leases

Year ending December 31:

Total minimum lease payments

Amount representing interest

Present value of minimum lease payments

Rent expense was $ 820 million and $ 716 million for the years ended December 31, 2018 and 2017, respectively.

(In millions)

Transportation

These operating leases will commence in 2021 through 2022 with initial lease terms of 2 years to 15 years.

Rent expense was $ 820 million for the year ended December 31, 2018.

(In millions) Transportation Logistics Total

Goodwill as of December 31, 2018 $ 2,520 $ 1,947 $ 4,467

Impact of foreign exchange translation

Impact of foreign exchange translation and other ( 46 ) 29 ( 17 )

Goodwill as of December 31, 2019 2,474 1,976 4,450

3 unchanged sentences

Intangible Assets

December 31, 2019

December 31, 2018

(In millions)

Gross Carrying Amount

Accumulated Amortization

Gross Carrying Amount

Accumulated Amortization

December 31, 2020 December 31, 2019

(In millions) Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization

Definite-lived intangibles

Customer relationships $ 1,883 $ 909 $ 1,875 $ 784

Non-compete agreements

We did not recognize any impairment of our identified intangible assets in 2020 and 2018.

We recorded a non-cash, pre-tax charge of $ 6 million in 2019 related to the impairment of customer relationships intangibles associated with exiting our direct postal injection business.

For 2018 and 2017 , we did no t recognize any impairment of our identified intangible assets.

Estimated future amortization expense for amortizable intangible assets for the next five years is as follows:

(In millions)

(In millions) 2021 2022 2023 2024 2025 Thereafter

Estimated amortization expense $ 138 $ 128 $ 112 $ 108 $ 103 $ 385

Actual amounts of amortization expense may differ from estimated amounts due to changes in foreign currency exchange rates, additional intangible asset acquisitions, future impairment of intangible assets, accelerated amortization of intangible assets and other events.

Intangible asset amortization expense recorded in SG&A was $ 156 million , $ 159 million and $ 164 million for the years ended December 31, 2019 , 2018 and 2017 , respectively.

Intangible asset amortization expense recorded in Sales, general and administrative expense (“SG&A”) was $ 144 million, $ 156 million and $ 159 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Derivative Instruments

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December 31, 2020

Derivative Assets

Derivative Liabilities

(In millions)

Notional Amount

Balance Sheet Caption

Derivative Assets Derivative Liabilities

(In millions) Notional Amount Balance Sheet Caption Fair Value Balance Sheet Caption Fair Value

Derivatives designated as hedges

Cross-currency swap agreements

Other long-term assets

Other long-term liabilities

Interest rate swap

Other current assets

Other current liabilities

Derivatives not designated as hedges:

Foreign currency option contracts

Other current assets

Other current liabilities

Cross-currency swap agreements $ 450 Other current assets $ — Other current liabilities $ ( 44 )

Cross-currency swap agreements 740 Other long-term assets — Other long-term liabilities ( 65 )

Interest rate swaps 2,003 Other current assets — Other current liabilities ( 4 )

Total $ — $ ( 113 )

December 31, 2019

Derivative Assets

Derivative Liabilities

(In millions)

Notional Amount

Balance Sheet Caption

Derivative Assets Derivative Liabilities

(In millions) Notional Amount Balance Sheet Caption Fair Value Balance Sheet Caption Fair Value

Derivatives designated as hedges

Cross-currency swap agreements

Other long-term assets

Other long-term liabilities

Cross-currency swap agreements $ 1,233 Other long-term assets $ — Other long-term liabilities $ ( 18 )

Interest rate swap 2,003 Other current assets — Other current liabilities ( 7 )

Derivatives not designated as hedges

Foreign currency option contracts

Other current assets

Other current liabilities

Foreign currency option contracts 365 Other current assets 1 Other current liabilities —

Total $ 1 $ ( 25 )

The derivatives are classified as Level 2 within the fair value hierarchy.

The derivatives are valued using inputs other than quoted prices such as foreign exchange rates and yield curves.

The effect of derivative and nonderivative instruments designated as hedges on our Consolidated Statements of Income were as follows:

Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative

Amount of Gain (Loss) Reclassified from AOCI into Net Income

Amount of Gain Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing)

The effect of derivative and nonderivative instruments designated as hedges on our Consolidated Statements of Income was as follows:

Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives Amount of Gain (Loss) Reclassified from AOCI into Net Income Amount of Gain Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing)

Years Ended December 31,

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Interest rate swaps ( 5 ) 5 — — — — — — —

Derivatives designated as net investment hedges:

Derivatives designated as net investment

Cross-currency swap agreements ( 81 ) 55 52 — — — 9 10 4

Nonderivatives designated as hedges:

Foreign currency denominated notes

The pre-tax gain (loss) recognized in earnings for foreign currency option and forward contracts not designated as hedging instruments was a loss of $ 9 million and a gain of $ 4 million and a loss of $ 64 million for the years ended December 31, 2019 , 2018 and 2017 , respectively.

These amounts are recorded in Foreign currency loss on our Consolidated Statements of Income .

Total $ ( 98 ) $ 67 $ 65 $ ( 15 ) $ 5 $ 17 $ 9 $ 11 $ 5

The pre-tax gain (loss) recognized in earnings for foreign currency option and forward contracts not designated as hedging instruments was a gain of $ 1 million, a loss of $ 9 million and a gain of $ 4 million for the years ended December 31, 2020, 2019 and 2018, respectively.

These amounts are recorded in Foreign currency (gain) loss on our Consolidated Statements of Income.

Cross-Currency Swap Agreements

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The risk management objective of these transactions is to manage foreign currency risk relating to net investments in subsidiaries denominated in foreign currencies and reduce the variability in the functional currency equivalent cash flows of this debt.

During the term of the swap contracts, we will receive interest, either on a quarterly or semi-annually basis, from the counterparties based on USD fixed interest rates, and we will pay interest, also on a quarterly or semi-annual basis, to the counterparties based on EUR fixed interest rates.

During the term of the swap contracts, we will receive interest, either on a quarterly or semi-annual basis, from the counterparties based on USD fixed interest rates, and we will pay interest, also on a quarterly or semi-annual basis, to the counterparties based on EUR fixed interest rates.

At maturity, we will repay the original principal amount in EUR and receive the principal amount in USD.

9 unchanged sentences

We designated these cross-currency swaps as qualifying hedging instruments and account for them as cash flow hedges.

Gains and losses resulting from the change in the fair value of the cross-currency swaps is initially recognized in AOCI and reclassified to Foreign currency loss to offset the foreign exchange impact in earnings created by the intercompany loans.

Gains and losses resulting from the change in the fair value of the cross-currency swaps are initially recognized in AOCI and reclassified to Foreign currency (gain) loss to offset the foreign exchange impact in earnings created by the intercompany loans.

Cash flows related to these cash flow hedges are included in Operating activities on our Consolidated Statements of Cash Flows.

7 unchanged sentences

Foreign Currency Option and Forward Contracts

We use foreign currency option contracts to mitigate the risk of a reduction in the value of earnings from our operations that use the EUR or the British pound sterling (“ GBP ”) as their functional currency.

We use foreign currency option contracts to mitigate the risk of a reduction in the value of earnings from our operations that use the EUR or the British pound sterling as their functional currency.

Additionally, we use foreign currency forward contracts to mitigate exposure from intercompany loans that are not designated as permanent and can create volatility in earnings.

The foreign currency contracts (both option and forward contracts) were not designated as qualifying hedging instruments as of December 31, 2019 or 2018 .

The contracts are used to manage our exposure to foreign currency exchange rate fluctuations and are not speculative.

The foreign currency contracts (both option and forward contracts) are used to manage our exposure to foreign currency exchange rate fluctuations and are not speculative.

The contracts generally expire in 12 months or less.

Gains or losses on the contracts are recorded in Foreign currency loss on our Consolidated Statements of Income .

Commencing in 2018, cash flows related to the foreign currency contracts are included in Investing activities on our Consolidated Statements of Cash Flows , consistent with the nature and purpose for which these derivatives were acquired.

Prior to 2018, these cash flows were reflected within Operating activities .

December 31, 2019

December 31, 2018

(In millions)

Principal Balance

Carrying Value

Principal Balance

Carrying Value

Term loan facility

We had no outstanding contracts as of December 31, 2020.

As of December 31, 2019, the contracts were not designated as qualifying hedging instruments.

Gains or losses on the contracts are recorded in Foreign currency (gain) loss on our Consolidated Statements of Income.

Cash flows related to the foreign currency contracts are included in Investing activities on our Consolidated Statements of Cash Flows, consistent with the nature and purpose for which these derivatives were acquired.

December 31, 2020 December 31, 2019

(In millions) Principal Balance Carrying Value Principal Balance Carrying Value

ABL facility $ 200 $ 200 $ — $ —

Term loan facilities 2,003 1,974 2,003 1,969

6.50 % Senior notes due 2022

1,200 1,195 1,200 1,192

6.125 % Senior notes due 2023

6.70% Senior Debentures due 2034

535 531 535 530

6.75 % Senior notes due 2024

Trade securitization program

Unsecured credit facility

1,000 989 1,000 987

6.25 % Senior notes due 2025

1,150 1,138 — —

6.70 % Senior debentures due 2034

300 210 300 208

Borrowings related to securitization program 50 50 — —

Finance leases, asset financing and other 420 420 380 380

Total debt 6,858 6,707 5,418 5,266

Short-term borrowings and current maturities of long-term debt 1,343 1,338 84 84

1 unchanged sentence

The fair value of our debt and classification in the fair value hierarchy was as follows:

(In millions)

(In millions) Fair Value Level 1 Level 2

December 31, 2020 $ 7,094 $ 4,431 $ 2,663

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(In millions) 2021 (1)

2022 2023 2024 2025 Thereafter

Principal payments on debt $ 1,254 $ 1 $ 535 $ 1,001 $ 3,353 $ 300

(1) In January 2021, we redeemed the outstanding balance of our senior notes due June 2022 (the “Senior Notes due 2022”).

In 2015, we entered into a revolving loan credit agreement (the “ABL Facility”) that provided commitments of up to $ 1.0 billion with a maturity date of October 30, 2020.

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(i) increasing the commitments to $ 1.1 billion, (ii) extending the maturity date to April 30, 2024, subject to springing maturity if some of our senior notes reach specified levels set in the credit agreement and (iii) reducing the interest rate margin.

We can issue up to $ 350 million of letters of credit and up to $ 50 million for swing line loans under the ABL Facility .

We can issue up to $ 350 million of letters of credit under the ABL Facility.

Our availability under the ABL Facility is equal to the borrowing base less advances and outstanding letters of credit.

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A maximum of 20 % of our borrowing base can be equipment and rolling stock in the aggregate.

As of December 31, 2019 , our borrowing base was $ 927 million and our availability was $ 713 million , after considering outstanding letters of credit of $ 214 million .

As of December 31, 2020, our borrowing base was $ 1.1 billion and our availability was $ 883 million, after considering outstanding borrowings of $ 200 million and outstanding letters of credit of $ 17 million.

As of December 31, 2020, we were in compliance with the ABL Facility’s financial covenants.

Our loans under the ABL Facility bear interest at a rate equal to:

(i) London Interbank Offered Rate (“ LIBOR ”) or base rate plus an applicable margin of 1.25 % to 1.50 % , for LIBOR loans, and (ii) 0.25 % to 0.50 % , for base rate loans.

As of December 31, 2018, the interest rate margins were 1.50 % to 2.00 % for LIBOR loans and 0.50 % to 1.00 % for base rate loans.

LIBOR or base rate plus (i) an applicable margin of 1.25 % to 1.50 % for LIBOR loans or (ii) 0.25 % to 0.50 %, for base rate loans.

The average interest rate on outstanding borrowings as of December 31, 2020 was 1.40 %.

The ABL Facility is secured on a first lien basis by the assets of the credit parties as priority collateral and on a second lien basis by certain other assets.

3 unchanged sentences

The ABL Facility contains representations and warranties, affirmative and negative covenants and events of default customary for agreements of this nature.

The covenants in the ABL Facility can limit our ability to:

incur indebtedness;

The covenants in the ABL Facility can limit our ability to incur indebtedness;

engage in certain mergers, consolidations, acquisitions and dispositions;

3 unchanged sentences

As of December 31, 2020, we were compliant with this financial covenant.

Term Loan Facility

In April 2020, we entered into a Senior Secured Term Loan Credit Agreement, comprised of a $ 150 million committed secured term loan facility and a $ 200 million uncommitted secured evergreen letter of credit facility.

We did not draw on the term loan facility through its term, which ended in January 2021.

Letters of credit under the letter of credit facility shall expire within one year of issuance and may contain automatic one-year renewals until the letter of credit facility terminates.

As of December 31, 2020, we have issued $ 200 million in aggregate face amount of letters of credit under the facility.

The credit agreement governing the term loan and letter of credit facilities contains representations and warranties and affirmative and negative covenants customary for financings of this type as well as customary events of default.

Term Loan Facilities

In 2015, we entered into a Term Loan Credit Agreement that provided for a single borrowing of $ 1.6 billion.

The Term Loan Credit Agreement was issued at an original issue discount of $ 32 million.

We have amended the Term Loan Credit Agreement to include the execution of a new tranche of loans in 2019, to reduce the interest rates and to extend the maturity dates.

As of December 31, the applicable terms of the Term Loan Credit Agreement , as amended, were as follows:

(In millions)

Incremental loans

Interest rate:

Base rate loans

Incremental loans

Base rate loans

Maturity date

February 23, 2025

Proceeds from the new tranche of loans were used for general corporate purposes, including funding purchases of our common stock as described in Note 14 —Stockholders’ Equity .

The interest rates on the term loans and incremental term loans were 3.80 % and 4.24 % , respectively, as of December 31, 2019 .

In February 2018, we refinanced our term loans by replacing the outstanding $ 1,494 million principal amount of term loans (the “ Current Term Loans ”) with $ 1,503 million in aggregate principal amount of new term loans (the “ Present Term Loans ”).

Our Present Term Loans have substantially similar terms as our Current Term Loans , except for the interest rate and maturity date, prepayment premiums and some other amendments to the restrictive covenants.

We used the proceeds from the Present Term Loans to refinance the Current Term Loans and to pay interest, fees and expenses in connection with this refinancing.

We recorded a debt extinguishment loss of $ 10 million in 2018 due to this refinancing.

In March 2017, we refinanced our term loans by replacing the outstanding $ 1,482 million principal amount of term loans (the “ Existing Term Loans ”) with $ 1,494 million in aggregate principal amount of Current Term Loans .

Our Current Term Loans have substantially similar terms as our Existing Term Loans , other than the interest rate and prepayment premiums.

We used the proceeds from the Current Term Loans primarily to refinance the Existing Term

Loans and to pay interest, fees and expenses in connection with this refinancing.

In 2018, we refinanced our term loans by replacing the outstanding $ 1.5 billion principal amount of term loans (the “Initial Term Loans”) with $ 1.5 billion in aggregate principal amount of new term loans (the “Present Term Loans”).

Our Present Term Loans have substantially similar terms as our Initial Term Loans, except for the interest rate and maturity date, prepayment premiums and some other amendments to the restrictive covenants.

We used the proceeds from the Present Term Loans to refinance the Initial Term Loans and to pay interest, fees and expenses in connection with this refinancing.

We recorded a debt extinguishment loss of $ 10 million in 2018 due to this refinancing.

We amended the Term Loan Credit Agreement in 2019 to include a new tranche of term loans (the “Incremental Term Loan Facility”), to reduce the interest rates and to extend the maturity dates.

Net proceeds from borrowings under the Incremental Term Loan Facility were used for general corporate purposes, including to fund purchases of our common stock described in Note 14—Stockholders’ Equity.

The loans under the Incremental Term Loan Facility were issued at a price of 99.50 % of par.

The interest rates on the Present Term Loans and the Incremental Term Loans were 2.15 % and 2.66 %, respectively, as of December 31, 2020.

As of December 31, 2020 and 2019, the applicable terms of the Term Loan Credit Agreement, as amended, were as follows:

(In millions) Present Term Loans Incremental Term Loans

Amounts outstanding at December 31, 2020 and 2019:

Facility $ 1,503 $ 500

Interest spread:

Base rate loans 1.00 % 1.50 %

LIBOR loans 2.00 % 2.50 %

Maturity date February 2025 February 2025

We must prepay an aggregate principal amount of the term loan facility equal to (a) 50 % of any Excess Cash Flow, as defined in the agreement, for the most recent fiscal year ended, minus (b) the sum of (i) all voluntary prepayments of loans during the fiscal year and (ii) all voluntary prepayments of loans under the ABL Facility or any other revolving credit facilities during the fiscal year if accompanied by a corresponding permanent reduction in the commitments under the credit agreement or any other revolving credit facilities in the case of each of the immediately preceding clauses (i) and (ii), if such prepayments are funded with internally generated cash flow, as defined in the agreement.

If our Consolidated Secured Net Leverage Ratio, as defined in the agreement, for the fiscal year was less than or equal to 3.00 :

1.00 and greater than 2.50 :

1.00 , the Excess Cash Flow percentage will be 25 % .

If our Consolidated Secured Net Leverage Ratio for the fiscal year was less than or equal to 2.50 :

1.00 , the Excess Cash Flow percentage will be 0 % .

If our Consolidated Secured Net Leverage Ratio, as defined in the agreement, for the fiscal year was less than or equal to 3.00 :1.00 and greater than 2.50 :1.00, the Excess Cash Flow percentage will be 25 %.

If our Consolidated Secured Net Leverage Ratio for the fiscal year was less than or equal to 2.50 :1.00, the Excess Cash Flow percentage will be 0 %.

The remaining principal is due at maturity.

As of December 31, 2019 , our Consolidated Secured Net Leverage Ratio was less than 2.50 :

and no excess cash payment was required.

In February 2019, we completed our private placement of $ 1.0 billion aggregate principal amount of senior notes (“ Senior Notes due 2024 ”).

As of December 31, 2020, our Consolidated Secured Net Leverage Ratio was less than 2.50 :1.00, and no excess cash payment was required.

In the second quarter of 2020, we completed private placements of $ 1.15 billion aggregate principal amount of Senior Notes due 2025.

The Senior Notes due 2025 mature on May 1, 2025 and bear interest at a rate of 6.25 % per annum.

Interest on the notes is paid semi-annually.

$ 850 million of the notes were issued at par, and $ 300 million of the notes were issued subsequently at 101.75 % of face value.

Net proceeds from the notes were invested in cash and cash equivalents.

In February 2019, we completed a private placement of $ 1.0 billion aggregate principal amount of senior notes (“Senior Notes due 2024”).

We used the proceeds from the Senior Notes due 2024 to repay our outstanding obligation under the Unsecured Credit Facility described below and to finance a portion of our share repurchases described in Note 14—Stockholders’ Equity.

In July 2018, we redeemed $ 400 million of the then $ 1.6 billion outstanding senior notes due June 2022 (the “ Senior Notes due 2022 ”) that were originally issued in 2015.

In July 2018, we redeemed $ 400 million of the then $ 1.6 billion outstanding Senior Notes due 2022 that were originally issued in 2015.

The redemption price for the Senior Notes due 2022 was 103.25 % of the principal amount, plus accrued and unpaid interest.

1 unchanged sentence

We recorded a debt extinguishment loss of $ 17 million in 2018 due to this redemption.

In December 2017, we redeemed our outstanding senior notes due June 2021 (the “ Senior Notes due 2021 ”) that were originally issued in 2015.

The redemption price for the Senior Notes due 2021 was 102.875 % of the principal amount, plus accrued and unpaid interest.

We paid for the redemption with cash on hand.

We recorded a debt extinguishment loss of $ 23 million in 2017 due to this redemption.

In August 2017, we redeemed our outstanding 7.25 % senior notes due 2018 (“ Senior Notes due 2018 ”) , that had been assumed in connection with our 2015 acquisition of Con-way Inc.

The redemption price for the Senior Notes due 2018 was 102.168 % of the principal amount, plus accrued and unpaid interest.

We paid for the redemption with cash on hand.

We recorded a debt extinguishment loss of $ 5 million in 2017 due to this redemption.

In January 2021, we redeemed the remaining balance of the Senior Notes due 2022.

For additional information, see Note 19—Subsequent Events.

The senior notes bear interest payable semiannually, in cash in arrears.

The Senior Notes due 2024 mature on August 15, 2024, the senior notes due September 2023 mature on September 1, 2023 and the Senior Notes due 2022 mature on June 15, 2022.

The senior notes are guaranteed by each of our direct and indirect wholly-owned restricted subsidiaries (other than some excluded subsidiaries) that are obligors under, or guarantee obligations under, our ABL Facility (or certain of its replacements) or guarantee certain of our capital markets indebtedness or any guarantor of the senior notes.

The Senior Notes due 2025 mature on May 1, 2025, the Senior Notes due 2024 mature on August 15, 2024, the Senior Notes due September 2023 mature on September 1, 2023 and the Senior Notes due 2022 mature on June 15, 2022.

The senior notes are guaranteed by each of our direct and indirect wholly-owned restricted subsidiaries (other than some excluded subsidiaries) that are obligors under, or guarantee obligations under, our ABL Facility or existing term loan facilities or guarantee certain of our capital markets indebtedness or any guarantor of the senior notes.

The senior notes and its guarantees are unsecured, unsubordinated indebtedness for us and our guarantors.

4 unchanged sentences

Including amortization of the fair value adjustment recorded on the acquisition date, interest expense on the Senior Debentures is recognized at an annual effective interest rate of 10.96 %.

Convertible Senior Notes

We issued approximately three million shares of our common stock to some holders of our convertible senior notes as part of their conversion in 2017.

The conversions were allocated to long-term debt and equity in the amounts of $ 49 million and $ 50 million , respectively.

Some of these transactions represented induced conversions and we paid the holder a market-based premium in cash.

Interest expense reflected the negotiated market-based premiums in addition to the difference between the current fair value and the book value of the convertible senior notes.

Trade Securitization Program

In 2017, XPO Logistics Europe entered into a European trade receivables securitization program for a term of three years .

Under the terms of this program, XPO Logistics Europe , or one of its wholly-owned subsidiaries in the United Kingdom or France, sold trade receivables to XPO Collections Designated Activity Company Limited (“ XCDAL ”), a wholly-owned bankruptcy remote special purpose entity of XPO Logistics Europe .

The receivables were funded by senior variable funding notes in the same currency as the corresponding receivables.

XCDAL was considered a variable interest entity and was consolidated by XPO Logistics Europe based on its control of the entity’s activities.

The receivables balance under this program were reported as Accounts receivable on our Consolidated Balance Sheets and the related notes were included in our Long-term debt .

In July 2019, XPO Logistics Europe terminated this trade receivables securitization program and entered into a new trade receivables securitization program for a term of three years .

In connection with the termination of the prior program, XPO Logistics Europe paid off all of the notes which had been included in our debt balances.

Under the new program, all receivable transfers have been accounted for as sales.

For additional information, see Note 2 —Basis of Presentation and Significant Accounting Policies .

As discussed in Note 2—Basis of Presentation and Significant Accounting Policies, XPO Logistics Europe participates in a trade receivables securitization program.

The special purpose entity is a variable interest entity and is consolidated by XPO based on our control of the entity’s

The program will expire in July 2022 and contains financial covenants customary for this type of arrangement, including maintaining a defined average days sales outstanding ratio.

In 2019, XPO Logistics Europe terminated a prior trade receivables securitization program and paid off the notes associated with the program, which had been included in our debt balances.

Our trade receivables securitization program permits us to borrow, on an unsecured basis, cash collected in a servicing capacity on previously sold receivables.

These borrowings are owed to the program’s Purchasers and are included in short-term debt until they are repaid in the following month’s settlement.

Unsecured Credit Facility

In December 2018, we entered into a $ 500 million unsecured credit facility (“Unsecured Credit Facility”).

As of December 31, 2018, we had borrowed $ 250 million .

As of December 31, 2018, we had borrowed $ 250 million under the facility.

We borrowed an additional $ 250 million in January 2019.

5 unchanged sentences

These financing arrangements are denominated in EUR, generally with floating interest rates.

As of December 31, 2019 , interest rates on asset financing range from 0.85 % to 1.22 % , with a weighted average interest rate of 1.06 % , and initial terms range from five years to 10 years .

As of December 31, 2020, interest rates on asset financing range from 0.85 % to 1.06 %, with a weighted average interest rate of 0.99 %, and initial terms range from 6 years to 10 years.

Employee Benefit Plans

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We determine the net periodic benefit costs using assumptions regarding the projected benefit obligation and the fair value of plan assets as of the beginning of the year.

Net periodic benefit costs are recorded in

Other expense (income) on our Consolidated Statements of Income .

Net periodic benefit costs are recorded in Other income on our Consolidated Statements of Income.

We calculate the funded status of the defined benefit pension plans, which represents the difference between the projected benefit obligation and the fair value of plan assets, on a plan-by-plan basis.

4 unchanged sentences

Interest cost 54 66 23 29

Plan amendment

Actuarial loss (gain)

Actuarial loss 216 214 159 136

Benefits paid ( 80 ) ( 77 ) ( 55 ) ( 56 )

Foreign currency exchange rate changes

Foreign currency exchange rate changes and other — — 50 50

Projected benefit obligation at end of year (1)

As of December 31, 2019 , the accumulated benefit obligations for the U.K.

$ 2,052 $ 1,862 $ 1,500 $ 1,323

(1) As of December 31, 2020 and 2019, the accumulated benefit obligations for the U.K.

plan was equal to the projected benefit obligations.

As of December 31, 2018 , the accumulated benefit obligations for the U.S.

plans were equal to the projected benefit obligations.

Actuarial losses were a result of assumption changes, including a decrease in the discount rate, updated mortality projection scales for plan participants and a decrease in assumed inflation for the U.K.

Actuarial losses were a result of assumption changes, including a decrease in the discount rate, updated mortality projection scales and other assumptions for plan participants, and an increase in assumed inflation for the U.K.

The reconciliation of the changes in the fair value of plan assets as of December 31 was as follows:

13 unchanged sentences

Long-term liabilities ( 73 ) ( 69 ) ( 24 ) —

Net amount recognized

Plans with projected and accumulated benefit obligation in excess of plan assets:

Net pension asset (liability) recognized $ 10 $ 1 $ ( 24 ) $ 39

Plans with projected and accumulated benefit obligation in excess

of plan assets:

Projected and accumulated benefit obligation $ 78 $ 75 $ 1,500 $ —

4 unchanged sentences

(In millions) 2020 2019 2020 2019

Actuarial (loss) gain

Actuarial loss $ ( 50 ) $ ( 5 ) $ ( 158 ) $ ( 54 )

Prior-service credit — — 17 18

$ ( 50 ) $ ( 5 ) $ ( 141 ) $ ( 36 )

The net periodic benefit cost and amounts recognized in Other comprehensive income (loss) for the years ended December 31 was as follows:

4 unchanged sentences

Amortization of prior-service credit — — — ( 1 ) ( 1 ) ( 2 )

Recognized AOCI loss due to settlements

Net periodic benefit income $ ( 48 ) $ ( 24 ) $ ( 33 ) $ ( 35 ) $ ( 30 ) $ ( 41 )

2 unchanged sentences

Prior-service cost — — — 1 — 19

Reclassification of recognized AOCI gain due to settlements

Reclassification of prior-service credit to net periodic benefit income

Reclassification of prior-service credit to net periodic benefit

income — — — 1 1 2

(Gain) loss recognized in Other comprehensive income (loss) $ 45 $ ( 49 ) $ 58 $ 92 $ 58 $ 61

The weighted-average assumptions used to determine the net periodic benefit costs and benefit obligations for the year ended December 31 were as follows:

Qualified Plans

Non-Qualified Plans

Discount rate - net periodic benefit costs

3.14% - 3.38%

Qualified Plans U.S.

Non-Qualified Plans U.K.

2020 2019 2018 2020 2019 2018 2020 2019 2018

Discount rate - net

periodic benefit costs 2.96 % 4.08 % 3.14 % - 3.38 %

2.40 % - 2.78 %

3.65 % - 3.95 %

Discount rate - benefit obligations

2.84 % - 3.21 %

1.84 % 2.56 % 2.21 %

Discount rate - benefit

obligations 2.48 % 3.35 % 4.18 % - 4.39 %

1.62 % - 2.30 %

1 unchanged sentence

3.93 % - 4.28 %

Expected long-term rate of return on plan assets

1.37 % 2.04 % 2.85 %

Expected long-term rate

of return on plan assets 5.60 % 5.80 % 3.00 % - 5.40 %

4.40 % 4.85 % 4.95 %

No rate of compensation increase was assumed as the plans are frozen to additional participant benefit accruals.

Beginning in 2018, we started using a full yield curve approach to estimate the interest cost component of net periodic benefit cost by applying specific spot rates along the yield curve used to determine the benefit obligation to each of the underlying projected cash flows based on time until payment.

Before 2018, we estimated the interest cost component by using a single weighted-average discount rate derived from the yield curve used to measure the benefit obligation.

Our new approach provides a more precise measurement of interest costs by improving the

correlation between projected benefit cash flows and their corresponding spot rates.

The change did not impact the measurement of our U.S.

pension benefit obligation and has been accounted for as a change in accounting estimate and applied prospectively.

We use a full yield curve approach to estimate the interest cost component of net periodic benefit cost by applying specific spot rates along the yield curve used to determine the benefit obligation to each of the underlying projected cash flows based on time until payment.

Expected benefit payments for the defined benefit pension plans are summarized below.

1 unchanged sentence

Actual benefit payments may vary from these estimates.

(In millions)

(In millions) U.S.

Year ending December 31:

2021 $ 92 $ 50

2026-2030 529 297

We manage the assets in the U.S.

plans using a long-term liability-driven investment strategy that seeks to mitigate the funded status volatility by increasing exposure to fixed income investments over time.

plans using a long-term liability-driven investment strategy that seeks to mitigate the funded status volatility by increasing participation in fixed income investments as the plan’s funded status increases.

We developed this strategy by analyzing a variety of diversified asset-class combinations with the projected liabilities.

Our investment strategy is to achieve an investment mix of approximately 80 % in fixed income securities and 20 % of investments in equity securities.

Our current investment strategy is to achieve an investment mix of approximately 85 % in fixed income securities and 15 % of investments in equity securities.

The fixed income allocation consists primarily of domestic fixed income securities and targets to hedge more than 92 % of domestic projected liabilities.

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We periodically evaluate our defined benefit plans’ asset portfolios for significant concentrations of risk.

Types of investment concentration risks that are evaluated include concentrations in a single entity, industry, foreign country or individual fund manager.

Types of investment concentration risks that are evaluated include concentrations in a single issuer, specific security, asset class, credit rating, duration, industry/sector, currency, foreign country or individual fund manager.

As of December 31, 2020, our defined benefit plan assets had no significant concentrations of risk.

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Plan are in line with the target asset allocations.

The implied target asset allocation of the U.K.

Plan consists of approximately 60 % matching assets (U.K.

gilts and cash) and approximately 40 % growth and income assets (consisting of a range of pooled funds investing in structured equities, high yield

bonds and asset-backed securities).

The trustees have approved a transition in 2021 to a new target strategic asset allocation for the U.K.

Plan that consists of approximately 40 % matching assets (U.K.

gilts and cash) and approximately 60 % growth and income assets (consisting of a range of

pooled funds investing in structured equities, investment grade and high yield bonds and asset-backed securities).

The target asset allocations of the U.K.

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The fair values of investments held in the pension plans by major asset category as of December 31, 2020 and 2019, and the percentage that each asset category comprises of total plan assets were as follows:

(Dollars in millions)

December 31, 2020

(Dollars in millions) Level 1 Level 2 Not Subject

to Leveling (1)

Total Percentage of Plan Assets

Asset category (U.S.

Qualified Plans)

Not Subject to Leveling (1)

Percentage of Plan Assets

Cash and cash equivalents:

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Fixed income securities 425 1,274 1 1,700 82.5 %

Global long-term debt instruments

Derivatives — 1 — 1 — %

Plan assets $ 478 $ 1,275 $ 309 $ 2,062 100.0 %

Asset category (U.K.

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Fixed income securities — 883 495 1,378 93.3 %

Derivatives — 4 77 81 5.5 %

Plan assets $ 17 $ 887 $ 572 $ 1,476 100.0 %

(1) Investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient are not classified in the fair value hierarchy.

The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented for the total defined benefit pension plan assets.

(Dollars in millions)

December 31, 2019

(Dollars in millions) Level 1 Level 2 Not Subject

to Leveling (1)

Total Percentage of Plan Assets

Asset category (U.S.

Qualified Plans)

Not Subject to Leveling (1)

Percentage of Plan Assets

Cash and cash equivalents:

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Fixed income securities 405 1,108 5 1,518 81.5 %

Global long-term debt instruments

Derivatives — 4 — 4 0.2 %

Plan assets $ 507 $ 1,112 $ 244 $ 1,863 100.0 %

Asset category (U.K.

1 unchanged sentence

Fixed income securities — 773 474 1,247 91.6 %

Hedge funds (2)

Diversified multi-asset funds:

Dynamic asset allocation

Derivatives — ( 8 ) 89 81 5.9 %

Plan assets $ 34 $ 765 $ 563 $ 1,362 100.0 %

(1) Investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient are not classified in the fair value hierarchy.

The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented for the total defined benefit pension plan assets.

The fair value of the fund is based on the fair value of the underlying assets, substantially all of which is invested in the York Credit Opportunities Master Fund, L.P., an exempted limited partnership formed under the laws of the Cayman Islands.

The fund offers very limited liquidity with redemption only allowed on the anniversary of investment with 60 days ’ prior notice.

For the periods ended December 31, 2020 and 2019, we had no investments held in the pension plans within Level 3 of the fair value hierarchy.

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Discount rate assumption as of December 31 2.20 % 3.09 %

The amounts included in AOCI that have not yet been recognized in net periodic benefit expense as of December 31 were as follows:

(In millions)

Actuarial gain (loss)

Net Periodic Benefit Expense for Postretirement Medical Plan

Years Ended December 31,

(In millions, except discount rate)

Service cost - benefits earned during the year

Interest cost on projected benefit obligation

Amortization of actuarial gain

Net periodic benefit (gain) expense

Discount rate assumption used to calculate interest cost

3.87% - 4.36%

3.11% - 3.67%

The amounts included in AOCI that have not yet been recognized in net periodic benefit income (expense) and the net periodic benefit income (expense) for the postretirement plan were not material in any of the periods presented.

The discount rates assumptions used to calculate the interest cost were 2.66 % - 3.22 %, 3.87 % - 4.36 % and 3.11 % - 3.67 % for the years ended December 31, 2020, 2019 and 2018, respectively.

Expected benefit payments, which reflect expected future service, as appropriate, are summarized below.

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Actual benefit payments may vary from these estimates.

(In millions)

Benefit Payments

(In millions) Benefit Payments

Year ending December 31:

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Series A Convertible Perpetual Preferred Stock and Warrants

We issued to some investors 75,000 shares of the Series A Preferred Stock with an initial liquidation preference of $ 1,000 per share, which are convertible into shares of our common stock at a conversion price of $ 7.00 per common share (subject to customary anti-dilution adjustments).

We also issued to some investors warrants exercisable for shares of our common stock at an initial exercise price of $ 7.00 per common share (subject to customary anti-dilution adjustments).

As of December 31, 2019 , our outstanding preferred stock is convertible into 10 million shares of our common stock and our outstanding warrants are exercisable for an aggregate of 10 million shares of our common stock.

We issued 75,000 shares of the Series A Preferred Stock with an initial liquidation preference of $ 1,000 per share which are convertible into shares of our common stock at a conversion price of $ 7.00 per common share (subject to customary anti-dilution adjustments).

We also issued warrants exercisable for shares of our common stock at an initial exercise price of $ 7.00 per common share (subject to customary anti-dilution adjustments).

Our preferred stock ranks senior to our common stock with respect to dividend and liquidation rights.

Our preferred stock pays quarterly cash dividends equal to the greater of:

Our preferred stock pays

quarterly cash dividends equal to the greater of:

(i) the “as-converted” dividends on our underlying common stock for the relevant quarter and (ii) 4 % of the then-applicable liquidation preference per annum.

Our preferred stock is not redeemable.

Equity Offering and Forward Sale Agreements

In July 2017, we completed a registered underwritten offering of 11 million shares of our common stock at a public offering price of $ 60.50 per share (the “Offering”).

Of the 11 million shares of common stock, we offered five million shares directly and six million shares were offered in connection with forward sale agreements (the “Forward Sale Agreements”).

The Offering closed in July 2017 and we received $ 290 million of proceeds ( $ 288 million net of fees and expenses) from the sale of the five million shares.

We used the net proceeds for general corporate purposes.

In July 2018, we settled the forward sales in full by delivering six million shares of our common stock to the counterparties in the agreements and received $ 349 million of net cash proceeds.

We used these net cash proceeds to repay our Senior Notes due 2022 as described above.

In December 2020, some holders of our convertible preferred stock exchanged their holdings for a combination of our common stock, based on the stated conversion price, and a lump-sum payment that represents an approximation of the net present value of the future dividends payable on the preferred stock.

Additionally, some holders of our warrants exchanged (or committed to exchange subject to the satisfaction of certain customary closing conditions) their holdings, including Jacobs Private Equity, LLC, an entity controlled by the Company’s chairman and chief executive officer, for a number of shares of our common stock equal to the number of shares of common stock that such holder would be entitled to receive upon an exercise of the warrants less the number of shares of common stock that have an approximate value equal to the exercise price of the warrants.

With respect to the preferred stock, 69,445 shares were exchanged, and we issued 9.9 million shares of common stock and paid $ 22 million of cash.

The $ 22 million has been reflected as a preferred stock conversion charge in the accompanying consolidated financial statements.

With respect to the warrants, 0.3 million warrants were exchanged, and we issued 0.3 million shares of common stock.

Additional commitments were made with respect to 9.6 million warrants, which are expected to be converted into 9.1 million shares of common stock in the first quarter of 2021.

As of December 31, 2020, our remaining outstanding preferred stock is convertible into 0.1 million shares of our common stock, and our outstanding warrants are exercisable for an aggregate of 9.8 million shares of our common stock.

Forward Sales

In 2018, we settled forward sales in full that were included in a 2017 registered underwritten offering by delivering six million shares of our common stock to the counterparties in the agreements and received $ 349 million of net cash proceeds.

We used these net cash proceeds to repay our Senior Notes due 2022.

Share Repurchases

In December 2018, our Board of Directors authorized the repurchase of up to $ 1 billion of our common stock (the “2018 Program”), which was completed in the first quarter of 2019.

The share repurchases were funded by our Unsecured Credit Facility and our available cash.

In February 2019, our Board of Directors authorized additional repurchases of up to $ 1.5 billion of our common stock (the “2019 Program”).

In December 2018, our Board of Directors authorized the repurchase of up to $ 1 billion of our common stock, which was completed in the first quarter of 2019.

The share repurchases were funded by our Unsecured Credit Facility and available cash.

In February 2019, our Board of Directors authorized additional repurchases of up to $ 1.5 billion of our common stock.

The 2019 authorization permits us to purchase shares in both the open market and in private transactions, with the timing and number of shares dependent on a variety of factors, including price, general business conditions, market conditions, alternative investment opportunities and funding considerations.

We are not obligated to repurchase any specific number of shares and may suspend or discontinue the program at any time.

The share purchases under the 2019 Program were funded by our available cash and proceeds from our new debt offerings.

The share purchases under this program have been funded by our available cash and proceeds from our 2019 debt offerings.

Information regarding our shares repurchased, based on settlement date, were as follows:

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We grant various types of stock-based compensation awards to directors, officers and key employees under our 2016 incentive plan.

These awards include stock options, restricted stock units, performance-based units, cash incentive awards and other equity-related awards (collectively, “ Awards ”).

These awards include stock options, restricted stock, restricted stock units, performance-based units, cash incentive awards and other equity-related awards (collectively, “Awards”).

The 2016 plan authorizes the issuance of up to 6.6 million shares of our common stock as Awards.

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As of December 31, 2020, 1.8 million shares of our common stock were available for the grant of Awards under the 2016 plan.

Our employee stock purchase plan offers eligible U.S.

and some non-U.S.

employees, excluding our executive officers and directors, the right to purchase our common stock through payroll deductions up to 10 % of each employee’s compensation.

Our employee stock purchase plan offers eligible employees, excluding our executive officers and directors, the right to purchase our common stock up to 10 % of each employee’s compensation.

Shares are purchased at 5 % below fair market value on the last trading day of each six-month offering period.

Employees must hold the stock for a minimum of three months from the date of purchase.

The plan authorizes the purchase of up to two million shares of our common stock.

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(In millions) 2020 2019 2018

Restricted stock units

Restricted stock and restricted stock units $ 49 $ 30 $ 21

Performance-based restricted stock units 2 6 9

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The stock options have a 10 -year contractual term and the exercise price equals our stock price on the grant date.

We have not granted stock options since 2016.

We have no t granted stock options since 2016.

A summary of stock option award activity for the year ended December 31, 2020 is presented below:

Stock Options

Number of Stock Options

Weighted-Average Exercise Price

Weighted-Average Remaining Term

Number of Stock Options Weighted-Average Exercise Price Weighted-Average Remaining Term

Outstanding as of December 31, 2019 575,755 $ 12.29 2.47

Exercised ( 533,000 ) 11.60

Forfeited — —

Outstanding as of December 31, 2020 42,755 $ 21.01 3.36

Options exercisable as of December 31, 2020 42,755 $ 21.01 3.36

The intrinsic value of options outstanding and exercisable as of December 31, 2019 was $ 39 million , respectively.

The intrinsic value of options outstanding and exercisable as of December 31, 2020 was $ 4 million.

The total intrinsic value of options exercised during 2020, 2019 and 2018 was $ 56 million, $ 6 million and $ 11 million, respectively.

The total cash received from options exercised during 2019 , 2018 and 2017 was $ 1 million , respectively.

Restricted Stock Units and Performance-Based Restricted Stock Units

The total cash received from options exercised during 2020, 2019 and 2018 was less than $ 1 million, $ 1 million and $ 1 million, respectively.

Restricted Stock, Restricted Stock Units and Performance-Based Restricted Stock Units

We grant RSUs and PRSUs to our key employees, officers and directors with various vesting requirements.

RSUs generally vest based on the passage of time (service conditions) and PRSUs generally vest based on the achievement of our financial targets (performance conditions).

PRSUs may also be subject to stock price (market conditions) and employment conditions.

PRSUs may also be subject to stock price (market conditions), employment conditions and other non-financial conditions.

The holders of the RSUs and PRSUs do not have the rights of a stockholder and do not have voting rights until the shares are issued and delivered in settlement of the awards.

In 2020, we granted approximately 0.2 million shares of fully vested restricted stock to some of our employees that have sale and transfer restrictions for two years from grant date.

The restricted stock had a weighted-average grant date fair value of $ 48.05 and was determined based on the fair market value of the shares at the grant date less a discount associated with transferability restrictions.

The assumptions used to fair value the restricted stock included a risk-free interest rate of 0.20 % and volatility of 61.0 %.

The number of RSUs and PRSUs vested includes shares of our common stock that we withheld on behalf of our employees to satisfy the minimum tax withholdings.

We estimate the fair value of PRSUs subject to market-based vesting conditions using a Monte Carlo simulation lattice model.

Non-cash financing activities for the year ended December 31, 2020 included $ 21 million related to tax withholdings for restricted shares that were paid in 2021.

We estimate the fair value of PRSUs subject to market-based vesting conditions using a Monte Carlo simulation lattice model, with the following weighted-average assumptions:

Risk-free interest rate 0.6 %

Volatility 50.3 %

Dividend yield —

Expected term (in years) 4.6

A summary of RSU and PRSU award activity for the year ended December 31, 2020 is presented below:

Number of RSUs

Weighted-Average Grant Date Fair Value

Number of PRSUs

Weighted-Average Grant Date Fair Value

RSUs Weighted-Average Grant Date Fair Value Number of PRSUs Weighted-Average Grant Date Fair Value

Outstanding as of December 31, 2019 1,729,415 $ 56.17 1,584,265 $ 29.35

Granted 1,053,211 77.49 504,951 96.91

Vested ( 920,590 ) 57.70 ( 103,734 ) 35.68

Forfeited and canceled ( 246,224 ) 65.52 ( 128,921 ) 57.79

Outstanding as of December 31, 2020 1,615,812 $ 67.43 1,856,561 $ 45.39

The total fair value of RSUs that vested during 2019 , 2018 and 2017 was $ 13 million , $ 30 million and $ 23 million , respectively, measured at the weighted-average grant date fair value.

The total fair value of RSUs that vested during 2020, 2019 and 2018 was $ 64 million, $ 13 million and $ 30 million, respectively.

All of the outstanding RSUs as of December 31, 2020 vest subject to service conditions.

The total fair value of PRSUs that vested during 2019 , 2018 and 2017 was $ 23 million , $ 96 million and $ 8 million , respectively, measured at the weighted-average grant date fair value.

Of the outstanding PRSUs as of December 31, 2019 , 418,342 vest subject to service and a combination of market and performance conditions and 1,165,923 vest subject to service and performance conditions.

The total fair value of PRSUs that vested during 2020, 2019 and 2018 was $ 8 million, $ 23 million and $ 96 million, respectively.

Of the outstanding PRSUs as of December 31, 2020, 1,447,359 vest subject to service and a combination of market and performance conditions, 395,891 vest subject to service and performance conditions and 13,311 vest subject to service and market conditions.

As of December 31, 2020, unrecognized compensation cost related to non-vested RSUs and PRSUs of $ 78 million is anticipated to be recognized over a weighted-average period of approximately 2.34 years.

Cash-Settled Performance-Based Restricted Stock Units

We grant cash-settled PRSUs to some key employees and executive officers.

The PRSUs vest based on the passage

of time and are settled in cash either ratably over a two to four year period or cliff vest at the end of three to four years.

The awards may also be subject to the achievement of performance targets and employment conditions.

The awards are classified as liabilities and the fair value is based on the closing price of our common stock at grant date and is re-measured each reporting date until settlement.

We recognize compensation expense for cash-settled PRSUs over the performance periods based on the probability of achieving the performance conditions and the closing price of our common stock.

As of December 31, 2019 and 2018 , we had recognized accrued liabilities of $ 30 million and $ 18 million , respectively, using a fair value per PRSU of $ 79.70 and $ 57.04 , respectively.

We previously granted cash-settled PRSUs to some key employees and executive officers.

The PRSUs vested based on the passage of time and are settled in cash either ratably over a two to four year period or cliff vest at the end of three to four years .

The awards were also subject to the achievement of performance targets and employment

The awards were classified as liabilities and the fair value was based on the closing price of our common stock at grant date and was re-measured each reporting date until settlement.

We recognized compensation expense for cash-settled PRSUs over the performance periods based on the probability of achieving the performance conditions and the closing price of our common stock.

As of December 31, 2019, we had recognized accrued liabilities of $ 30 million using a fair value per PRSU of $ 79.70 .

A summary of cash-settled PRSU award activity for the year ended December 31, 2020 is presented below:

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Outstanding as of December 31, 2019 435,327

Vested ( 419,942 )

Forfeited and canceled —

Outstanding as of December 31, 2020 15,385

As of December 31, 2019 , we had $ 4 million of unrecognized compensation cost related to non-vested cash-settled PRSU compensation that is anticipated to be recognized in 2020;

this will vary based on changes in our common stock price and the probability of achieving performance targets in future periods.

Income (loss) before taxes related to our U.S.

Income before taxes related to our U.S.

and foreign operations was as follows:

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(In millions) 2020 2019 2018

Income before income tax provision (benefit)

$ 49 $ 379 $ 319

Foreign 99 190 247

Income before income tax provision $ 148 $ 569 $ 566

The income tax provision (benefit) is comprised of the following:

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(In millions) 2020 2019 2018

Federal $ 36 $ 18 $ 2

Foreign 68 62 69

Total current income tax provision $ 112 $ 83 $ 77

Federal $ ( 47 ) $ 52 $ 57

State ( 5 ) — 2

Foreign ( 29 ) ( 6 ) ( 14 )

Total deferred income tax provision (benefit) ( 81 ) 46 45

Total income tax provision (benefit)

On December 22, 2017, the Tax Cuts and Jobs Act (the “ Tax Act ”) was signed into law.

The Tax Act includes numerous changes to existing U.S.

tax law, including a permanent reduction in the federal corporate income tax rate from 35% to 21% .

The rate reduction

became effective January 1, 2018.

As a result, we recorded a tax benefit of $ 173 million in the fourth quarter of 2017 related to the revaluation of our net deferred tax liabilities.

We did not record any changes during the measurement period.

On December 29, 2019, a law was published in France modifying the phases of previously enacted rate reductions.

Consequently, we recorded a tax expense of $ 3 million in the fourth quarter of 2019 related to the revaluation of our net deferred tax liabilities due to the expected recognition of these liabilities.

On December 31, 2017, a law was published in France enacting a rate reduction from 34.4% to 25.8% to be phased in over five years starting in 2018.

On December 29, 2017, a law was published in Belgium enacting a tax rate reduction from 34% to 25% to be phased in over three years starting in 2018.

Consequently, we recorded a tax benefit of $ 10 million in the fourth quarter of 2017 related to the revaluation of our net deferred tax liabilities.

Total income tax provision $ 31 $ 129 $ 122

The effective tax rate reconciliations were as follows:

Years Ended December 31,

2020 2019 2018

federal statutory tax rate 21.0 % 21.0 % 21.0 %

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Foreign operations (1)

Valuation allowance

Contribution- and margin-based taxes 9.2 2.4 2.5

Valuation allowances ( 0.6 ) 0.1 ( 3.7 )

Changes in uncertain tax positions 2.8 ( 0.9 ) —

Effect of law changes (2) (3)

Stock-based compensation ( 8.1 ) ( 0.3 ) ( 3.8 )

Other ( 5.6 ) ( 1.2 ) ( 0.2 )

Effective tax rate 21.1 % 22.6 % 21.6 %

Foreign operations include the net impact of the changes to foreign valuation allowances, the cost of foreign inclusion net of foreign tax credits, and permanent items related to foreign operations.

In 2019, there were tax rate changes in France.

In 2017, there were tax rate changes in the U.S., France and Belgium.

(1) Foreign operations include the net impact of changes to valuation allowances, the cost of inclusion of foreign income in the U.S.

net of foreign taxes, and permanent items related to foreign operations.

Components of the Net Deferred Tax Asset or Liability

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Property and equipment ( 299 ) ( 324 )

Other ( 49 ) ( 46 )

Total deferred tax liability ( 631 ) ( 667 )

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Investments in Foreign Subsidiaries

As a result of the Tax Act, we decided to apply a partial indefinite reversal assertion to pre-2018 earnings and profits that have been invested back into the foreign businesses.

We also decided not to apply an indefinite reversal assertion on all 2018 and future years’ earnings and profits.

We apply a partial indefinite reversal assertion to pre-2018 earnings and profits that have been invested back into the foreign businesses.

We do not apply an indefinite reversal assertion on all 2018 and future years’ earnings and profits.

Operating Loss and Tax Credit Carryforwards

(In millions)

Expiration Date

Our operating loss and tax credit carryforwards were as follows:

(In millions) Expiration Date 2020 2019

Federal net operating losses for all U.S.

operations (including those of minority owned subsidiaries)

2032 - 2037 (1)

Tax effect (before federal benefit) of state net operating losses

Various times starting in 2020 (1)

Federal tax credit carryforwards

Various times starting in 2032 (1)

State tax credit carryforward

Various times starting in 2020 (1)

Foreign net operating losses available to offset future taxable income

Various times starting in 2020 (1)

(including those of minority owned subsidiaries) 2033 - 2037 (1)

Tax effect (before federal benefit) of state net operating

losses Various times starting in 2021 (1)

Federal tax credit carryforwards Various times starting in 2033 (1)

State tax credit carryforward Various times starting in 2021 (1)

Foreign net operating losses available to offset future

taxable income Various times starting in 2021 (1)

(1) Some credits and losses have unlimited carryforward periods .

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The balances and activity related to our valuation allowance were as follows:

(In millions)

Beginning Balance

Ending Balance

(In millions) Beginning Balance Additions Reductions Ending Balance

Year Ended December 31, 2020 $ 59 $ 10 $ — $ 69

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Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits (“ UTB ”) is as follows:

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

Years Ended December 31,

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Gross unrecognized tax benefits $ 27 $ 24 $ 29

Total UTB that, if recognized, would impact the effective income tax rate as of the end of the year

We could reflect a reduction to unrecognized tax benefits of $ 3 million over the next 12 months due to the statute of limitations lapsing on positions or because tax positions are sustained on audit.

Total unrecognized tax benefits that, if recognized, would impact

the effective income tax rate as of the end of the year $ 20 $ 16 $ 22

We could reflect a reduction to unrecognized tax benefits of up to $ 15 million over the next 12 months due to the statute of limitations lapsing on positions or because tax positions are sustained on audit.

We are subject to taxation in the United States and various states and foreign jurisdictions.

As of December 31, 2019 , we have no tax years under examination by the Internal Revenue Service (“IRS”).

As of December 31, 2020, we have no tax years under examination by the IRS.

We have various U.S.

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Losses are not allocated to the preferred shares.

As discussed in Note 14—Stockholders’ Equity, we recorded a preferred stock conversion charge in December 2020 in connection with the conversion of our Series A preferred stock.

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

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Net income attributable to XPO $ 110 $ 419 $ 422

Preferred stock conversion charge ( 22 ) — —

Series A preferred stock dividends ( 3 ) ( 3 ) ( 3 )

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Diluted earnings per common share

Net income attributable to common shares, basic

Interest from Convertible Senior Notes

Net income attributable to common shares, diluted $ 79 $ 379 $ 390

Basic weighted-average common shares 92 96 123

Dilutive effect of Convertible Senior Notes

Dilutive effect of non-participating stock-based awards and equity forward

Dilutive effect of warrants and stock-based awards 10 10 12

Diluted weighted-average common shares 102 106 135

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We are involved, and will continue to be involved, in numerous proceedings arising out of the conduct of our business.

These proceedings may include claims for property damage or personal injury incurred in connection with

the transportation of freight, claims regarding anti-competitive practices, and employment-related claims, including claims involving asserted breaches of employee restrictive covenants and tortious interference with contracts.

These matters also include numerous purported class action, multi-plaintiff and individual lawsuits, and administrative proceedings that claim either that our owner-operators or contract carriers should be treated as employees, rather than independent contractors, or that some 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.

These proceedings may include claims for property damage or personal injury incurred in connection with the transportation of freight, claims regarding anti-competitive practices, and employment-related claims, including claims involving asserted breaches of employee restrictive covenants.

These matters also include numerous putative class action, multi-plaintiff and individual lawsuits, and administrative proceedings involving claims that our owner-operators or contract carriers should be treated as employees, rather than independent contractors (“misclassification claims”).

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

We establish accruals for specific legal proceedings when it is considered probable that a loss has been incurred and the amount of the loss can be reasonably estimated.

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In the event we are required to satisfy a legal claim outside the scope of the coverage provided by insurance, our financial condition, results of operations or cash flows could be negatively impacted.

Intermodal Drayage Classification Claims

Certain of our intermodal drayage subsidiaries received notices from the California Labor Commissioner, Division of Labor Standards Enforcement (the “ DLSE ”), that a total of approximately 150 owner-operators contracted with these subsidiaries filed claims in 2012 with the DLSE .

These owner-operators asserted that they should be classified as employees, rather than independent contractors.

These claims seek reimbursement for the owner-operators’ business expenses, including fuel, tractor maintenance and tractor lease payments.

Decisions were rendered in June 2015 by a DLSE hearing officer with respect to claims of five plaintiffs, resulting in awards in an aggregate amount of approximately $ 1 million , following which we appealed the decisions in the U.S.

District Court for the Central District of California (“Central District Court”).

On May 16, 2017, the Central District Court issued judgment finding that the five claimants were employees rather than independent contractors and awarded an aggregate of approximately $ 1 million plus post-judgment interest and attorneys’ fees to the claimants.

We appealed this judgment, but on February 20, 2019, the United States Court of Appeals for the Ninth Circuit declined to consider the appeal on technical grounds.

In addition, separate decisions were rendered in April 2017 by a DLSE hearing officer in claims involving four additional plaintiffs, resulting in an award for the plaintiffs in an aggregate amount of approximately $ 1 million .

We appealed this decision to the California Superior Court, Long Beach, and the court ultimately entered judgment in favor of the four plaintiffs for approximately $ 812 thousand on September 27, 2019.

The remaining DLSE claims (the “ Pending DLSE Claims ”) were transferred to California Superior Court, Los Angeles in three separate actions involving approximately 170 claimants, including the claimants mentioned above who originally filed claims in 2012.

We have reached an agreement to settle the majority of the Pending DLSE Claims , the settlement payment has been made, and the settled claims have been dismissed.

In addition, some of our intermodal drayage subsidiaries are party to putative class action litigations, individual and multi-plaintiff lawsuits, and administrative claims in California brought by independent contract carriers who contracted with these subsidiaries.

In these matters, the contract carriers assert that they should be classified as employees, rather than

independent contractors.

We believe that we have adequately accrued for the potential impact of loss contingencies that are probable and reasonably estimable relating to the claims referenced above.

We are unable at this time to estimate the amount of the possible loss or range of loss, if any, in excess of our accrued liability that we may incur as a result of these claims given, among other reasons, that the range of potential loss could be impacted substantially by future rulings by the courts involved, including on the merits of the claims.

Last Mile Logistics Classification Claims

Some of our last mile logistics subsidiaries are party to several putative class action litigations brought by independent contract carriers who contracted with these subsidiaries.

In these litigations, the contract carriers, and in some cases the contract carriers’ employees, assert that they should be classified as employees, rather than independent contractors.

The particular claims asserted vary from case to case, but the claims generally allege unpaid wages, unpaid overtime, or failure to provide meal and rest periods, and seek reimbursement of the contract carriers’ business expenses.

The cases include four related matters pending in the Federal District Court, Northern District of California:

Ron Carter, Juan Estrada, Jerry Green, Burl Malmgren, Bill McDonald and Joel Morales v.

XPO Logistics, Inc.

(“Carter”) , filed in March 2016;

Ramon Garcia v.

Macy’s and XPO Logistics Inc.

(“Garcia”) , filed in July 2016;

Kevin Kramer v.

XPO Logistics Inc.

(“Kramer”) , filed in September 2016;

and Hector Ibanez v.

XPO Last Mile, Inc.

(“Ibanez”) , filed in May 2017.

We reached agreements to settle the Carter, Garcia, Kramer and Ibanez matters and have accrued the full amount of the settlements.

The Carter settlement received final court approval on October 18, 2019, and the settlement has been paid.

The parties await final approval of the settlements in the other matters.

As for the other pending lawsuits, we believe that we have adequately accrued for the potential impact of loss contingencies that are probable and reasonably estimable.

We are unable at this time to estimate the amount of the possible loss or range of loss, if any, in excess of our accrued liability that we may incur as a result of these claims given, among other reasons, that the number and identities of plaintiffs in these lawsuits are uncertain and the range of potential loss could be impacted substantially by future rulings by the courts involved, including on the merits of the claims.

Shareholder Litigation

On December 14, 2018, two putative class actions were filed in the U.S.

District Court for the District of Connecticut and the U.S.

District Court for the Southern District of New York against us and some of our current and former executives, alleging violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Section 20(a) of the Exchange Act, based on alleged material misstatements and omissions in our public filings with the U.S.

Securities and Exchange Commission.

On January 7, 2019, the plaintiff in one of the class actions, Leeman v.

XPO Logistics, Inc.

1:18-cv-11741 (S.D.N.Y.), voluntarily dismissed the action without prejudice.

In the other putative class action, Labul v.

XPO Logistics, Inc.

3:18-cv-02062 (D.

Conn.), which is pending in the U.S.

District Court for the District of Connecticut, on April 2, 2019, the court appointed Local 817 IBT Pension Fund, Local 272 Labor-Management Pension Fund, and Local 282 Pension Trust Fund and Local 282 Welfare Trust Fund (together, the “Pension Funds”) as lead plaintiffs.

On June 3, 2019, the Pension Funds, with additional plaintiff Norfolk County Retirement System, filed a consolidated class action complaint against us and some of our current and former executives, alleging violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, Section 20(a) of the Exchange Act, and Sections 11 and 15 of the Securities Act, based on alleged material misstatements and omissions in our public filings with the U.S.

Securities and Exchange Commission.

Defendants moved to dismiss the consolidated class action complaint on August 2, 2019.

On November 4, 2019, the court dismissed the consolidated class action complaint without prejudice to the filing of an amended complaint.

The Pension Funds, on January 3, 2020, filed a first amended consolidated class action complaint against us and a current executive, alleging violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Section 20(a) of the Exchange Act.

Defendants’ deadline to respond to or move against the amended complaint is March 3, 2020.

Also, on May 13, 2019, Adriana Jez filed a purported shareholder derivative action captioned Jez v.

Jacobs, et al.

19-cv-889-RGA (D.

Del.) (“ Jez complaint”) in the U.S.

District Court for the District of Delaware, alleging breaches of fiduciary duty, unjust enrichment, waste of corporate assets, and violations of the Exchange Act against some of our current and former directors and officers, with the company as a nominal defendant.

On May 24, 2019, Erin Candler filed a purported shareholder derivative action with substantially similar claims and allegations against the same parties, captioned Candler v.

Jacobs, et al.

19-cv-959-CFC (D.

Del.), also in the U.S.

District Court

for the District of Delaware.

On June 14, 2019, the two actions were consolidated for all purposes (“consolidated action”).

On September 27, 2019, plaintiffs in the consolidated action filed a consolidated shareholder derivative complaint.

On the same date, Kevin Rose filed a purported shareholder derivative action with substantially similar claims and allegations against the same parties, captioned Rose v.

Jacobs, et al.

19-cv-1815-RGA (D.

Del.), also in the U.S.

District Court for the District of Delaware.

On December 12, 2019, the court ordered that the Rose action be consolidated into the consolidated action.

On January 27, 2020, plaintiffs designated the Jez complaint as the operative complaint in the consolidated cases.

Defendants’ deadline to respond to or move against the operative complaint is February 26, 2020.

We believe these suits are without merit and we intend to defend the company vigorously against the allegations.

We are unable at this time to determine the amount of the possible loss or range of loss, if any, that we may incur as a result of these matters.

Subsequent Events

In January 2021, our XPO Logistics Europe subsidiary acquired the majority of Kuehne + Nagel’s contract logistics operations in the United Kingdom, which generated annual revenues in 2020 of approximately £ 450 million ($ 585 million).

The operations, which provide a range of logistics services, including inbound and outbound distribution, reverse logistics management and inventory management, will be included in our Logistics segment.

Debt Redemption

Also in January 2021, we redeemed our outstanding Senior Notes due 2022.

The redemption price for the Senior Notes due 2022 was 100.0 % of the principal amount, plus accrued and unpaid interest.

We paid for the redemption with available cash.

We expect to record a debt extinguishment loss of approximately $ 5 million in our first quarter of 2021 results of operations due to this redemption.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 8. Financial Statements and Supplementary Data