What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-03 compared with 2021-08-04 · 359 added, 247 removed, 436 unchanged (58% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

June 30, December 31,

September 30, December 31,

(In millions, except per share data) 2021 2020

3 unchanged sentences

Other current assets 284 303

Current assets of discontinued operations 25 1,664

Total current assets 2,550 5,378

5 unchanged sentences

Other long-term assets 237 187

Long-term assets of discontinued operations — 4,666

Total long-term assets 5,983 10,799

7 unchanged sentences

Other current liabilities 132 102

Current liabilities of discontinued operations 24 1,728

Total current liabilities 2,527 5,161

5 unchanged sentences

Other long-term liabilities 366 384

Long-term liabilities of discontinued operations — 1,430

Total long-term liabilities 4,990 8,167

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10 shares authorized;

— and 0.001 of Series A shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

— and 0.001 of Series A shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

Common stock, $ 0.001 par value;

300 shares authorized;

112 and 102 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

115 and 102 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

Additional paid-in capital 1,174 1,998

Retained earnings 1,139 868

Retained earnings (accumulated deficit) ( 79 ) 868

Accumulated other comprehensive loss ( 79 ) ( 158 )

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Condensed Consolidated Statements of Income (Loss)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In millions, except per share data) 2021 2020 2021 2020

3 unchanged sentences

Sales, general and administrative expense 339 294 1,001 915

Operating income (loss) 246 ( 141 ) 448 ( 60 )

Depreciation and amortization expense 118 119 357 351

Transaction and integration costs 15 — 26 66

Restructuring costs 14 — 16 31

Operating income 112 138 442 75

Other income ( 15 ) ( 12 ) ( 43 ) ( 31 )

2 unchanged sentences

Interest expense 53 81 176 226

Income (loss) before income tax provision (benefit) 204 ( 205 ) 357 ( 170 )

Income (loss) from continuing operations before income tax provision (benefit) 32 68 257 ( 115 )

Income tax provision (benefit) 11 31 60 ( 36 )

Income (loss) from continuing operations 21 37 197 ( 79 )

Income (loss) from discontinued operations, net of taxes ( 78 ) 61 22 68

Net income (loss) ( 57 ) 98 219 ( 11 )

Net (income) loss attributable to noncontrolling interests ( 2 ) 3 ( 5 ) 1

Net loss from continuing operations attributable to noncontrolling interests — — — 3

Net income from discontinued operations attributable to noncontrolling interests — ( 5 ) ( 5 ) ( 7 )

Net income (loss) attributable to XPO $ ( 57 ) $ 93 $ 214 $ ( 15 )

Net income (loss) attributable to common shareholders

Earnings per share data

Basic earnings (loss) per share $ 1.39 $ ( 1.45 ) $ 2.48 $ ( 1.20 )

Diluted earnings (loss) per share $ 1.38 $ ( 1.45 ) $ 2.40 $ ( 1.20 )

Continuing operations $ 21 $ 28 $ 197 $ ( 78 )

Discontinued operations ( 78 ) 56 17 61

Net income (loss) attributable to common shareholders $ ( 57 ) $ 84 $ 214 $ ( 17 )

Earnings (loss) per share data

Basic earnings (loss) per share from continuing operations $ 0.19 $ 0.30 $ 1.78 $ ( 0.86 )

Basic earnings (loss) per share from discontinued operations ( 0.69 ) 0.63 0.15 0.68

Basic earnings (loss) per share attributable to common shareholders $ ( 0.50 ) $ 0.93 $ 1.93 $ ( 0.18 )

Diluted earnings (loss) per share from continuing operations $ 0.19 $ 0.27 $ 1.73 $ ( 0.86 )

Diluted earnings (loss) per share from discontinued operations ( 0.68 ) 0.56 0.14 0.68

Diluted earnings (loss) per share attributable to common shareholders $ ( 0.49 ) $ 0.83 $ 1.87 $ ( 0.18 )

Weighted-average common shares outstanding

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Condensed Consolidated Statements of Comprehensive Income (Loss)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In millions) 2021 2020 2021 2020

3 unchanged sentences

$ ( 47 ) $ 71 $ ( 74 ) $ 27

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

( 3 ) ( 1 ) ( 3 ) ( 1 )

Defined benefit plans adjustments, net of tax effect of $( 9 ), $( 1 ), $( 9 ) and $ 1

28 ( 2 ) 28 ( 7 )

Other comprehensive income (loss) ( 22 ) 68 ( 49 ) 19

Comprehensive income (loss) $ ( 79 ) $ 166 $ 170 $ 8

Comprehensive income (loss) attributable to noncontrolling interests 5 — 3 ( 3 )

Comprehensive income attributable to noncontrolling interests — 10 3 7

Comprehensive income (loss) attributable to XPO $ ( 79 ) $ 156 $ 167 $ 1

2 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Six Months Ended June 30,

Nine Months Ended September 30,

(In millions) 2021 2020

Operating activities

Cash flows from operating activities of continuing operations

Net income (loss) $ 219 $ ( 11 )

Adjustments to reconcile net income (loss) to net cash from operating activities

Income from discontinued operations, net of taxes 22 68

Income (loss) from continuing operations 197 ( 79 )

Adjustments to reconcile net income (loss) from continuing operations to net cash from operating activities

Depreciation, amortization and net lease activity 357 351

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Accrued expenses and other liabilities 171 229

Net cash provided by operating activities 539 394

Investing activities

Net cash provided by operating activities from continuing operations 558 292

Cash flows from investing activities of continuing operations

Payment for purchases of property and equipment ( 212 ) ( 220 )

Proceeds from sale of property and equipment 72 137

Net cash used in investing activities ( 154 ) ( 172 )

Financing activities

Other ( 3 ) 5

Net cash used in investing activities from continuing operations ( 143 ) ( 78 )

Cash flows from financing activities of continuing operations

Proceeds from issuance of debt — 1,155

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Purchase of noncontrolling interests — —

Repurchase of common stock — ( 114 )

Issuance (repurchase) of common stock 384 ( 114 )

Change in bank overdrafts 33 19

Payment for tax withholdings for restricted shares ( 25 ) ( 21 )

Net cash provided by (used in) financing activities ( 1,639 ) 1,701

Distribution from GXO 794 —

Other ( 5 ) 2

Net cash provided by (used in) financing activities from continuing operations ( 1,880 ) 1,195

Nine Months Ended September 30,

(In millions) 2021 2020

Cash flows from discontinued operations

Operating activities of discontinued operations 68 398

Investing activities of discontinued operations ( 95 ) ( 145 )

Financing activities of discontinued operations ( 302 ) ( 12 )

Net cash provided by (used in) discontinued operations ( 329 ) 241

Effect of exchange rates on cash, cash equivalents and restricted cash ( 7 ) ( 2 )

2 unchanged sentences

Cash, cash equivalents and restricted cash, end of period 264 2,035

Cash, cash equivalents and restricted cash of discontinued operations, end of period — 404

Cash, cash equivalents and restricted cash of discontinued operations, end of period $ 264 $ 1,631

Supplemental disclosure of cash flow information

Leased assets obtained in exchange for new operating lease liabilities, including $ 281 related to an acquisition in 2021

Leased assets obtained in exchange for new operating lease liabilities $ 140 $ 188

Leased assets obtained in exchange for new finance lease liabilities 54 9

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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 March 31, 2021 — $ — 111,676 $ — $ 1,988 $ 983 $ ( 195 ) $ 2,776 $ 138 $ 2,914

Net income — — — — — 156 — 156 2 158

Other comprehensive income

— — — — — — 12 12 3 15

(Shares in thousands, dollars in millions) Shares Amount Shares Amount Additional Paid-In Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Loss Total XPO Stockholders' Equity Non-controlling Interests Total Equity

Balance as of June 30, 2021 — $ — 111,726 $ — $ 1,971 $ 1,139 $ ( 183 ) $ 2,927 $ 40 $ 2,967

Net loss — — — — — ( 57 ) — ( 57 ) — ( 57 )

Other comprehensive loss — — — — — — ( 22 ) ( 22 ) — ( 22 )

Spin-off of GXO — — — — ( 1,199 ) ( 1,161 ) 126 ( 2,234 ) ( 40 ) ( 2,274 )

Exercise and vesting of stock compensation awards

2 unchanged sentences

— — — — ( 3 ) — — ( 3 ) — ( 3 )

Conversion of preferred stock to common stock — — 6 — — — — — — —

Purchase of noncontrolling interests — — — — ( 34 ) — — ( 34 ) ( 100 ) ( 134 )

Dividend declared

— — — — — — — — ( 3 ) ( 3 )

Issuance of common stock — — 2,875 — 384 — — 384 — 384

Stock compensation expense

— — — — 19 — — 19 — 19

— — — — 3 — — 3 — 3

Balance as of June 30, 2021 — $ — 111,726 $ — $ 1,971 $ 1,139 $ ( 183 ) $ 2,927 $ 40 $ 2,967

Balance as of September 30, 2021 — $ — 114,673 $ — $ 1,174 $ ( 79 ) $ ( 79 ) $ 1,016 $ — $ 1,016

Series A Preferred Stock Common Stock

Balance as of December 31, 2020 1 $ 1 102,052 $ — $ 1,998 $ 868 $ ( 158 ) $ 2,709 $ 140 $ 2,849

1 unchanged sentence

Other comprehensive loss — — — — — — ( 47 ) ( 47 ) ( 2 ) ( 49 )

Spin-off of GXO — — — — ( 1,199 ) ( 1,161 ) 126 ( 2,234 ) ( 40 ) ( 2,274 )

Exercise and vesting of stock compensation awards

2 unchanged sentences

— — — — ( 25 ) — — ( 25 ) — ( 25 )

Issuance of common stock — — 2,875 — 384 — — 384 — 384

Conversion of preferred stock to common stock ( 1 ) ( 1 ) 145 — 1 — — — — —

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— — — — 3 — — 3 — 3

Balance as of June 30, 2021 — $ — 111,726 $ — $ 1,971 $ 1,139 $ ( 183 ) $ 2,927 $ 40 $ 2,967

Balance as of September 30, 2021 — $ — 114,673 $ — $ 1,174 $ ( 79 ) $ ( 79 ) $ 1,016 $ — $ 1,016

XPO Logistics, Inc.

2 unchanged sentences

Balance as of March 31, 2020 72 $ 41 91,044 $ — $ 1,943 $ 804 $ ( 210 ) $ 2,578 $ 150 $ 2,728

Net loss — — — — — ( 131 ) — ( 131 ) ( 3 ) ( 134 )

Balance as of June 30, 2020 72 $ 41 91,322 $ — $ 1,963 $ 672 $ ( 192 ) $ 2,484 $ 150 $ 2,634

Net income — — — — — 93 — 93 5 98

Other comprehensive income — — — — — — 63 63 5 68

3 unchanged sentences

— — — — ( 3 ) — — ( 3 ) — ( 3 )

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

Dividend declared

3 unchanged sentences

— — — — 2 1 — 3 — 3

Balance as of June 30, 2020 72 $ 41 91,322 $ — $ 1,963 $ 672 $ ( 192 ) $ 2,484 $ 150 $ 2,634

Balance as of September 30, 2020 72 $ 41 91,361 $ — $ 1,971 $ 766 $ ( 129 ) $ 2,649 $ 136 $ 2,785

Series A Preferred Stock Common Stock

1 unchanged sentence

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

Net loss — — — — — ( 108 ) — ( 108 ) ( 1 ) ( 109 )

Other comprehensive loss

— — — — — — ( 47 ) ( 47 ) ( 2 ) ( 49 )

Net income (loss) — — — — — ( 15 ) — ( 15 ) 4 ( 11 )

Other comprehensive income — — — — — — 16 16 3 19

Exercise and vesting of stock compensation awards

2 unchanged sentences

— — — — ( 21 ) — — ( 21 ) — ( 21 )

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

Retirement of common stock

6 unchanged sentences

— — 62 — 4 ( 3 ) — 1 — 1

Balance as of June 30, 2020 72 $ 41 91,322 $ — $ 1,963 $ 672 $ ( 192 ) $ 2,484 $ 150 $ 2,634

Balance as of September 30, 2020 72 $ 41 91,361 $ — $ 1,971 $ 766 $ ( 129 ) $ 2,649 $ 136 $ 2,785

See accompanying notes to condensed consolidated financial statements.

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Organization, Description of Business and Basis of Presentation

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

We use our extensive 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.

We run our business on a global basis, with two reportable segments:

Transportation and Logistics.

XPO Logistics, Inc., together with its subsidiaries (“XPO” or “we”), is a leading provider of freight transportation services, primarily less-than-truckload (“LTL”) and truck brokerage services.

We use our proprietary technology to move goods efficiently through our customers’ supply chains.

See Note 3—Segment Reporting for additional information on our operations.

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XPO does not beneficially own any shares of GXO’s common stock following the spin-off.

GXO, a global provider of contract logistics services, is an independent public company trading under the symbol “GXO” on the New York Stock Exchange.

The historical results of operations and the financial position of GXO are included in these condensed consolidated financial statements.

After the spin-off, we will no longer consolidate GXO, and all periods prior to the spin-off will reflect our Logistics segment as a discontinued operation.

In connection with the spin-off, we have entered into a separation and distribution agreement as well as various other agreements with GXO that provide a framework for the relationships between the parties going forward, including, among others, an employee matters agreement, a tax matters agreement, an intellectual property license agreement and a transition services agreement, through which XPO will continue to provide certain services to GXO following the spin-off.

With the completion of the spin-off, XPO is a leading provider of transportation services, primarily less-than-truckload (“LTL”) transportation and truck brokerage services.

GXO is an independent public company trading under the symbol “GXO” on the New York Stock Exchange.

The historical results of operations and the financial position of our Logistics segment for periods prior to the spin-off are presented as discontinued operations in these Condensed Consolidated Financial Statements.

For information on our discontinued operations, see Note 2—Discontinued Operations.

We prepared our Condensed Consolidated Financial Statements in accordance with U.S.

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These Condensed Consolidated Financial Statements should be read in conjunction with the 2020 Form 10-K.

Our historical results reflect a noncontrolling interest in XPO Logistics Europe SA (“XPO Logistics Europe”), a business we acquired majority ownership of in 2015.

In April 2021, we announced a buy-out offer to be followed by a squeeze-out for the remaining 3 % of XPO Logistics Europe that we did not already own.

The buy-out offer and squeeze-out were completed in the second quarter of 2021 at a cost of $ 128 million plus expenses.

Following the squeeze-out, we own all of the outstanding shares of XPO Logistics Europe.

The Condensed Consolidated Financial Statements are not audited but reflect all adjustments that are of a normal recurring nature and are necessary for a fair presentation of the financial condition, operating results and cash flows for the interim periods presented.

Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

Operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

Reclassifications

Following the spin-off, we adopted a new format for our Condensed Consolidated Statements of Income (Loss) to separately present depreciation and amortization expense, transaction and integration costs and restructuring costs from other operating expenses.

We have recast prior period amounts to conform to the current period’s presentation.

Restricted Cash

As of June 30, 2021 and December 31, 2020, our restricted cash included in Other long-term assets on our Condensed Consolidated Balance Sheets was $ 11 million.

As of September 30, 2021 and December 31, 2020, our restricted cash included in Other long-term assets on our Condensed Consolidated Balance Sheets was $ 10 million and $ 11 million, respectively.

Trade Receivables Securitization and Factoring Programs

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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.

XPO Logistics Europe 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.

Our European business participates in a trade receivables securitization program co-arranged by two European banks (the “Purchasers”).

Under the program, a wholly-owned bankruptcy-remote special purpose entity of XPO sells trade receivables that originate with wholly-owned subsidiaries 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.

The program expires in July 2024.

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 Condensed Consolidated Balance Sheets at the date of transfer.

In the securitization and factoring arrangements, our continuing involvement is limited to servicing the receivables and, in the case of the securitization arrangements, providing recourse in certain defined circumstances.

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

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 Condensed Consolidated Balance Sheets.

We had no such borrowings outstanding as of June 30, 2021 and had borrowings of € 41 million ($ 50 million) as of December 31, 2020.

We had no such borrowings outstanding as of September 30, 2021 and had borrowings of € 20 million ($ 24 million) as of December 31, 2020.

See Note 7—Debt for additional information on these borrowings.

The maximum amount of net cash proceeds available at any one time under the securitization program, inclusive of any unsecured borrowings, is € 400 million (approximately $ 474 million as of June 30, 2021).

As of June 30, 2021, € 59 million (approximately $ 70 million) was available to us, subject to having sufficient receivables available to sell to the Purchasers.

The weighted average interest rate was 0.60 % as of June 30, 2021.

Charges for commitment fees, which are based on a percentage of available amounts, and charges for administrative fees were not material to our results of operations for the three and six months ended June 30, 2021 and 2020.

The maximum amount of net cash proceeds available at any one time under the securitization program, inclusive of any unsecured borrowings, is € 200 million (approximately $ 232 million as of September 30, 2021).

Prior to July 2021, when the securitization program was amended in connection with the spin-off, the maximum amount available was € 400 million.

As of September 30, 2021, € 19 million (approximately $ 22 million) was available under the program, subject to having sufficient receivables available to sell and with consideration to amounts previously purchased.

The weighted average interest rate was 0.59 % as of September 30, 2021.

Information related to the trade receivables sold was as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In millions) 2021 2020 2021 2020

6 unchanged sentences

Receivables sold in period

113 199 229 463

Cash consideration

112 199 228 462

The trade receivables securitization program was amended in July 2021.

See Note 11—Subsequent Events for more information.

Fair Value Measurements

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quoted prices for identical or similar instruments in markets that are not active;

and model-derived valuations in which all significant inputs are

observable in active markets;

and model-derived valuations in which all significant inputs are observable in active markets;

• Level 3—Valuations based on inputs that are unobservable, generally utilizing pricing models or other valuation techniques that reflect management’s judgment and estimates.

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

The carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and current maturities of long-term debt approximated their fair values as of June 30, 2021 and December 31, 2020 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 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 September 30, 2021 and December 31, 2020 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 and a cash deposit for securitization program.

For information on the fair value hierarchy of our derivative instruments, see Note 6—Derivative Instruments and for information on financial liabilities, see Note 7—Debt.

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(In millions) Carrying Value Fair Value Level 1

June 30, 2021 $ 535 $ 535 $ 535

September 30, 2021 $ 159 $ 159 $ 159

December 31, 2020 1,685 1,685 1,685

The decrease in cash equivalents from December 31, 2020 was primarily due to the redemption of our senior notes due 2022 in January 2021 and the repayment of borrowings under our revolving loan credit agreement (the “ABL Facility”).

For further information, see Note 7—Debt for further information.

The decrease in cash equivalents from December 31, 2020 was primarily due to the redemption of our senior notes due 2023 and 2024 in the third quarter of 2021, the redemption of our senior notes due 2022 in January 2021, and the repayment of borrowings under our revolving loan credit agreement (the “ABL Facility”).

For further information, see Note 7—Debt.

Adoption of New Accounting Standard

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We are currently evaluating the impact of the new guidance.

In January 2021, our XPO Logistics Europe subsidiary acquired the majority of Kuehne + Nagel’s contract logistics operations in the United Kingdom and Ireland, 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, are included in our Logistics segment from the acquisition date.

Pro forma results of operations for this acquisition have not been presented as it is not material to the condensed consolidated results of operations.

Discontinued Operations

As discussed above, on August 2, 2021, we completed the spin-off of our Logistics segment.

In July 2021, GXO completed a debt offering and used the net proceeds to fund a cash payment from GXO to XPO of $ 794 million, which we used to repay a portion of our outstanding borrowings.

For further information, see Note 7—Debt.

During the three and nine months ended September 30, 2021, we incurred approximately $ 68 million and $ 111 million, respectively, of costs related to the spin-off, of which $ 57 million and $ 96 million, respectively, are reflected within income (loss) from discontinued operations in our Condensed Consolidated Statements of Income (Loss).

The following table summarizes the assets and liabilities from discontinued operations of GXO:

(In millions) 2020

Cash and cash equivalents $ 323

Accounts receivable, net 1,212

Other current assets 129

Total current assets of discontinued operations 1,664

Property and equipment, net 770

Operating lease assets 1,434

Goodwill 2,063

Identifiable intangible assets, net 299

Other long-term assets 100

Total long-term assets of discontinued operations 4,666

Accounts payable 408

Accrued expenses 770

Short-term borrowings and current finance lease liabilities 57

Short-term operating lease liabilities 332

Other current liabilities 161

Total current liabilities of discontinued operations 1,728

Long-term debt and finance lease liabilities 129

Deferred tax liability 85

Long-term operating lease liabilities 1,099

Other long-term liabilities 117

Total long-term liabilities of discontinued operations $ 1,430

Prior to the spin-off of GXO, the U.K.

pension plan was sold to a GXO entity and GXO paid approximately £ 26 million (approximately $ 34 million) to XPO, which represented the value of the net assets at the date of the sale.

In connection with this transaction, approximately $ 82 million of accumulated other comprehensive income, net of tax, was transferred to GXO.

The following table summarizes the financial results from discontinued operations of GXO:

Three Months Ended September 30, Nine Months Ended September 30,

(In millions) 2021 2020 2021 2020

Revenue $ 651 $ 1,580 $ 4,350 $ 4,421

Direct operating expense 544 1,295 3,614 3,679

Sales, general and administrative expense 53 124 363 383

Depreciation and amortization expense 26 75 185 222

Transaction and other operating costs 59 2 101 49

Operating income (loss) ( 31 ) 84 87 88

Other income ( 4 ) ( 10 ) ( 27 ) ( 28 )

Interest expense 3 4 12 13

Income (loss) from discontinued operations before income tax provision ( 30 ) 90 102 103

Income tax provision 48 29 80 35

Net income (loss) from discontinued operations, net of taxes ( 78 ) 61 22 68

Net income from discontinued operations attributable to noncontrolling interests — ( 5 ) ( 5 ) ( 7 )

Net income (loss) from discontinued operations attributable to GXO $ ( 78 ) $ 56 $ 17 $ 61

In connection with the spin-off, we entered into a separation and distribution agreement as well as various other agreements with GXO that provide a framework for the relationships between the parties going forward, including, among others, an employee matters agreement, a tax matters agreement, an intellectual property license agreement and a transition services agreement, through which XPO will continue to provide certain services for a period of time specified in the applicable agreement to GXO following the spin-off.

The impact of these services on the condensed consolidated financial statements was immaterial.

Additionally, in accordance with these agreements, GXO has agreed to indemnify XPO for certain payments XPO makes with respect to certain self-insurance matters that were incurred by GXO prior to the spin-off and remain obligations of XPO.

The receivable and reserve for these matters was approximately $ 25 million and $ 24 million, respectively, as of September 30, 2021.

Segment Reporting

We are organized into two reportable segments:

In connection with the spin-off of the logistics business, we revised our reportable segments to reflect how our chief operating decision maker (“CODM”) makes decisions related to resource allocation and segment performance.

Prior to the spin-off, we had two reportable segments:

Transportation and Logistics.

We evaluate our performance in large part based on the various financial measures of our two reporting segments.

In our Transportation segment, we provide multiple services to facilitate the movement of raw materials, parts and finished goods.

We accomplish this by using our proprietary technology, third-party independent carriers and our

transportation assets and service centers.

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

In our Logistics segment, 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.

Following the spin-off, we have two reportable segments:

(i) North American LTL and (ii) Brokerage and Other Services.

In our North American LTL segment we provide our customers with geographic density and day-definite regional, inter-regional and transcontinental LTL freight services.

Our services include cross-border U.S.

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

In our Brokerage and Other Services segment, shippers create the truckload demand and we place their freight with qualified carriers, pricing our service on either a spot or contract basis.

Our Brokerage and Other Services segment also includes last mile logistics for heavy goods sold through e-commerce, omnichannel retail and direct-to-consumer channels.

Several other non-core brokered freight transportation modes are included in our Brokerage and Other Services segment, as well as our European transportation offerings.

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

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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.

Our 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.

During the third quarter of 2021, our CODM began evaluating segment profit (loss) based on adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”), which we define as income (loss) from continuing operations before interest expense, income tax, depreciation and amortization expense, transaction and integration costs, restructuring costs and other adjustments.

Prior to the change in our reporting segments in the third quarter of 2021, our CODM used operating income as the measure of segment profit (loss).

Prior period segment disclosures have been recast to conform to the current period presentation.

Selected financial data for our segments is as follows:

(In millions) Transportation Logistics Corporate Eliminations/Other Total

Three months ended June 30, 2021

Revenue $ 3,186 $ 1,881 $ — $ ( 31 ) $ 5,036

Operating income (loss) (1)

255 71 ( 80 ) — 246

Depreciation and amortization 117 85 3 — 205

Three months ended June 30, 2020

Revenue $ 2,127 $ 1,404 $ — $ ( 29 ) $ 3,502

Operating income (loss) (2)

( 15 ) ( 43 ) ( 83 ) — ( 141 )

Depreciation and amortization 113 80 3 — 196

Six months ended June 30, 2021

Revenue $ 6,175 $ 3,699 $ — $ ( 64 ) $ 9,810

Operating income (loss) (3)

464 139 ( 155 ) — 448

Depreciation and amortization 232 159 6 — 397

Six months ended June 30, 2020

Revenue $ 4,586 $ 2,841 $ — $ ( 61 ) $ 7,366

Operating income (loss) (4)

105 ( 5 ) ( 160 ) — ( 60 )

Depreciation and amortization 223 149 7 — 379

(1) Consolidated operating income for the three months ended June 30, 2021 includes $ 35 million of transaction and integration costs and $ 2 million of restructuring income.

$ 2 million of the transaction and integration costs relate to our Transportation segment, $ 7 million relate to our Logistics segment and $ 26 million relate to Corporate.

(2) Consolidated operating loss for the three months ended June 30, 2020 includes $ 46 million of transaction and integration costs and $ 50 million of restructuring expense.

$ 13 million of the transaction and integration costs relate to our Transportation segment, $ 18 million relate to our Logistics segment and $ 15 million relate to Corporate.

(3) Consolidated operating income for the six months ended June 30, 2021 includes $ 53 million of transaction and integration costs and $ 2 million of restructuring expense.

$ 3 million of the transaction and integration costs relate to our Transportation segment, $ 12 million relate to our Logistics segment and $ 38 million relate to Corporate.

(4) Consolidated operating loss for the six months ended June 30, 2020 includes $ 90 million of transaction and integration costs and $ 53 million of restructuring expense.

$ 20 million of the transaction and integration costs relate to our Transportation segment, $ 25 million relate to our Logistics segment and $ 45 million relate to Corporate.

The transaction and integration costs for the first six months of 2021 are primarily related to the spin-off of the Logistics segment and our acquisition of the Kuehne + Nagel business in January 2021.

The transaction and integration costs for the first six months of 2020 are primarily related to our previously announced exploration of strategic alternatives that was terminated in March 2020.

For further information on our restructuring actions, see Note 5—Restructuring Charges.

We also incurred net incremental and direct costs as a result of the COVID-19 pandemic in the second quarter and first six months of 2021 and 2020, including costs for personal protective equipment, site cleanings and enhanced employee benefits, such as appreciation pay.

Three Months Ended September 30, Nine Months Ended September 30,

(in millions) 2021 2020 2021 2020

North American LTL $ 1,071 $ 933 $ 3,114 $ 2,623

Brokerage and Other Services 2,261 1,778 6,493 4,738

Eliminations ( 62 ) ( 36 ) ( 162 ) ( 100 )

Total $ 3,270 $ 2,675 $ 9,445 $ 7,261

Adjusted EBITDA

North American LTL $ 222 $ 238 $ 694 $ 562

Brokerage and Other Services 131 90 386 159

Corporate ( 46 ) ( 60 ) ( 164 ) ( 163 )

Total adjusted EBITDA 307 268 916 558

Debt extinguishment loss 46 — 54 —

Interest expense 53 81 176 226

Income tax provision (benefit) 11 31 60 ( 36 )

Depreciation and amortization expense 118 119 357 351

Unrealized (gain) loss on foreign currency option and forward contracts — — 1 ( 1 )

Litigation settlements 29 — 29 —

Transaction and integration costs 15 — 26 66

Restructuring costs 14 — 16 31

Income (loss) from continuing operations $ 21 $ 37 $ 197 $ ( 79 )

Depreciation and amortization expense

North American LTL $ 57 $ 55 $ 169 $ 169

Brokerage and Other Services 60 59 180 168

Corporate 1 5 8 14

Total $ 118 $ 119 $ 357 $ 351

Revenue Recognition

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Our revenue disaggregated by geographical area, based on sales office location, was as follows:

Three Months Ended June 30, 2021

(In millions) Transportation Logistics Eliminations Total

Three Months Ended September 30, 2021

(In millions) North American LTL Brokerage

Services Eliminations Total

United States $ 1,049 $ 1,384 $ ( 62 ) $ 2,371

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Total $ 1,071 $ 2,261 $ ( 62 ) $ 3,270

Three Months Ended June 30, 2020

(In millions) Transportation Logistics Eliminations Total

Three Months Ended September 30, 2020

(In millions) North American LTL Brokerage

Services Eliminations Total

United States $ 913 $ 1,026 $ ( 36 ) $ 1,903

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Total $ 933 $ 1,778 $ ( 36 ) $ 2,675

Six Months Ended June 30, 2021

(In millions) Transportation Logistics Eliminations Total

Nine Months Ended September 30, 2021

(In millions) North American LTL Brokerage

Services Eliminations Total

United States $ 3,046 $ 3,881 $ ( 162 ) $ 6,765

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Total $ 3,114 $ 6,493 $ ( 162 ) $ 9,445

Six Months Ended June 30, 2020

(In millions) Transportation Logistics Eliminations Total

Nine Months Ended September 30, 2020

(In millions) North American LTL Brokerage and Other Services Eliminations Total

United States $ 2,565 $ 2,645 $ ( 100 ) $ 5,110

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Our revenue disaggregated by service offering was as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In millions) 2021 2020 2021 2020

Transportation segment:

LTL $ 1,363 $ 979 $ 2,584 $ 2,114

Freight brokerage and truckload 1,414 818 2,798 1,841

North America

$ 1,091 $ 941 $ 3,165 $ 2,652

Truck Brokerage 700 432 1,903 1,062

Last Mile 250 243 765 662

Other Brokerage (2)

547 413 1,486 1,108

Managed transportation 106 74 203 157

Global forwarding 114 76 214 137

Transportation eliminations ( 80 ) ( 38 ) ( 139 ) ( 82 )

Total Transportation segment revenue 3,186 2,127 6,175 4,586

Total Logistics segment revenue 1,881 1,404 3,699 2,841

Intersegment eliminations ( 31 ) ( 29 ) ( 64 ) ( 61 )

Total North America 2,588 2,029 7,319 5,484

Europe 757 687 2,311 1,894

Eliminations ( 75 ) ( 41 ) ( 185 ) ( 117 )

Total Revenue $ 3,270 $ 2,675 $ 9,445 $ 7,261

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

(1) LTL revenue is before intercompany eliminations and includes revenue from our trailer manufacturing business.

(2) Other brokerage includes intermodal and drayage, expedite, freight forwarding and managed transportation services.

Performance Obligations

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

On June 30, 2021, the fixed consideration component of our remaining performance obligation was approximately

$ 2.2 billion, and we expect approximately 67 % of that amount to be recognized over the next three years and the remainder thereafter.

The remaining performance obligation at June 30, 2021 includes contracts related to the Kuehne + Nagel acquisition.

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

On September 30, 2021, the fixed consideration component of our remaining performance obligation was approximately $ 135 million, and we expect approximately 84 % of that amount to be recognized over the next three years and the remainder thereafter.

We estimate remaining performance obligations at a point in time and actual amounts may differ from these estimates due to changes in foreign currency exchange rates and contract revisions or terminations.

Restructuring Charges

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.

We engage in restructuring actions as part of our ongoing efforts to best use our resources and infrastructure, including actions in connection with our spin-off and 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 (credits) were recorded on our Condensed Consolidated Statements of Income (Loss) as follows:

Three Months Ended June 30, Six Months Ended June 30,

(In millions) 2021 2020 2021 2020

Cost of transportation and services $ — $ 1 $ — $ 1

Direct operating expense — 6 — 6

Sales, general and administrative expense ( 2 ) 43 2 46

Total $ ( 2 ) $ 50 $ 2 $ 53

Our restructuring-related activity was as follows:

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

(In millions) Reserve

Balance as of December 31, 2020 Charges Incurred Payments Reversals Foreign Exchange and Other Reserve Balance as of June 30, 2021

Transportation $ 7 $ 1 $ ( 7 ) $ — $ 1 $ 2

Logistics 19 6 ( 7 ) ( 9 ) ( 4 ) 5

Balance as of December 31, 2020 Charges Incurred Payments Reversals Foreign Exchange and Other Reserve Balance as of September 30, 2021

North American LTL $ — $ — $ — $ — $ — $ —

Brokerage and Other Services 7 9 ( 9 ) — 1 8

Corporate 1 7 ( 1 ) — ( 2 ) 5

Total severance 8 16 ( 10 ) — ( 1 ) 13

Transportation 5 — — — — 5

Brokerage and Other Services 5 — ( 2 ) — 1 4

Total facilities 5 — ( 2 ) — 1 4

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The fair value of our derivative instruments and the related notional amounts were as follows:

June 30, 2021

September 30, 2021

Derivative Assets Derivative Liabilities

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Cross-currency swap agreements 120 Other long-term assets — Other long-term liabilities ( 2 )

Derivatives not designated as hedges

Foreign currency option contracts 178 Other current assets 1 Other current liabilities —

Interest rate swaps 2,003 Other current assets — Other current liabilities —

Total $ — $ ( 12 )

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

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

Three Months Ended June 30,

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

Three Months Ended September 30,

(In millions) 2021 2020 2021 2020 2021 2020

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Total $ 41 $ ( 57 ) $ 3 $ ( 8 ) $ 1 $ 4

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

Six Months Ended June 30,

Nine Months Ended September 30,

(In millions) 2021 2020 2021 2020 2021 2020

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Total $ 80 $ ( 38 ) $ 7 $ ( 8 ) $ 6 $ 8

The pre-tax gain (loss) recognized in earnings for foreign currency option and forward contracts not designated as hedging instruments were losses of $ 2 million and $ 1 million for the three and six months ended June 30, 2021, respectively, and a loss of $ 2 million and a gain of $ 2 million for the three and six months ended June 30, 2020, respectively.

The pre-tax gain (loss) recognized in earnings for foreign currency option and forward contracts not designated as hedging instruments was a loss of $ 1 million for the nine months ended September 30, 2021 and a loss of $ 1 million and a gain of $ 1 million for the three and nine months ended September 30, 2020, respectively.

There were no gains or losses related to these contracts for the three months ended September 30, 2021.

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

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We enter into cross-currency swap agreements to manage the foreign currency exchange risk related to our international operations by effectively converting our fixed-rate USD-denominated debt, including the associated interest payments, to fixed-rate, euro (“EUR”)-denominated debt.

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.

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.

In the third quarter of 2021, in preparation for the spin, we novated (or transferred) cross-currency swaps with a fair value of approximately $ 28 million to GXO, as well as the associated amounts in Accumulated other comprehensive income (“AOCI”).

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.

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We apply the simplified method of assessing the effectiveness of our net investment hedging relationships.

Under this method, for each reporting period, the change in the fair value of the cross-currency swaps is initially recognized in Accumulated other comprehensive income (“AOCI”).

Under this method, for each reporting period, the change in the fair value of the cross-currency swaps is initially recognized in AOCI.

The change in the fair value due to foreign exchange remains in AOCI and the initial component excluded from effectiveness testing will initially remain in AOCI and then will be reclassified from AOCI to Interest expense each period in a systematic manner.

For net investment hedges that were de-designated prior to their maturity, the amounts in AOCI will remain in AOCI until the subsidiary is sold or substantially liquidated.

Cash flows related to the periodic exchange of interest payments for these net investment hedges are included in Operating activities on our Condensed Consolidated Statements of Cash Flows.

We also enter into cross-currency swap agreements to manage the related foreign currency exposure from intercompany loans.

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 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 Condensed Consolidated Statements of Cash Flows.

Cash flows related to the periodic exchange of interest payments for these net investment hedges are included in Cash flows from operating activities of continuing operations on our Condensed Consolidated Statements of Cash Flows.

Prior to the spin, we entered into cross-currency swap agreements to manage the related foreign currency exposure from intercompany loans.

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

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

Cash flows related to these cash flow hedges was included in Cash flows from operating activities of continuing operations on our Condensed Consolidated Statements of Cash Flows.

Interest Rate Hedging

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We designated the interest rate swaps as qualifying hedging instruments and account for these derivatives as cash flow hedges.

There were no interest rate swaps

outstanding as of June 30, 2021.

The interest rate swaps mature in the fourth quarter of 2021.

We record gains and losses resulting from fair value adjustments to the designated portion of interest rate swaps in AOCI and reclassify them to Interest expense on the dates that interest payments accrue.

Cash flows related to the interest rate swaps are included in Operating activities on our Condensed Consolidated Statements of Cash Flows.

Cash flows related to the interest rate swaps are included in Cash flows from operating activities of continuing operations on our Condensed Consolidated Statements of Cash Flows.

Foreign Currency Option and Forward Contracts

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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 June 30, 2021.

Generally, the foreign currency contracts (both option and forward contracts) are not designated as qualifying hedging instruments.

The 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.

We had no outstanding contracts as of September 30, 2021 and December 31, 2020.

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

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

June 30, 2021 December 31, 2020

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

September 30, 2021 December 31, 2020

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

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6.125 % Senior notes due 2023

535 532 535 531

6.75 % Senior notes due 2024

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Long-term debt $ 3,640 $ 3,515 $ 5,386 $ 5,240

In July and August 2021, we issued notices to redeem our outstanding senior notes due 2024 and senior notes due 2023, respectively.

See Note 11—Subsequent Events for more information.

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

(In millions) Fair Value Level 1 Level 2

June 30, 2021 $ 5,592 $ 3,168 $ 2,424

September 30, 2021 $ 3,825 $ 1,582 $ 2,243

December 31, 2020 6,908 4,429 2,479

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The fair value of the asset financing arrangements approximates carrying value as the debt is primarily issued at a floating rate, the debt may be prepaid at any time at par without penalty, and the remaining life of the debt is short-term in nature.

As of June 30, 2021, our borrowing base was $ 1.1 billion and our availability under our ABL Facility was $ 1.084 billion after considering outstanding letters of credit on the ABL Facility of $ 16 million.

As of June 30, 2021, we were in compliance with the ABL Facility’s financial covenants.

The ABL facility was amended in July 2021.

See Note 11—Subsequent Events for more information.

Under our Senior Secured Term Loan Credit Agreement, we have a $ 200 million uncommitted secured evergreen letter of credit facility, under which we have issued $ 198 million in aggregate face amount of letters of credit as of June 30, 2021.

As of June 30, 2021, we were in compliance with the financial covenants in the Senior Secured Term Loan Agreement.

In July 2021, we amended our existing ABL facility which matures in April 2024 to reduce the commitments from $ 1.1 billion to $ 1.0 billion.

There were no other significant changes made to the terms of the facility, including the maturity date, the interest rate margin, and financial covenants.

As of September 30, 2021, our borrowing base was $ 1.0 billion and our availability under our ABL Facility was $ 993 million after considering outstanding letters of credit on the ABL Facility of $ 7 million.

As of September 30, 2021, we were in compliance with the ABL Facility’s financial covenants.

Letters of Credit Facility

As of September 30, 2021, we were in compliance with the financial covenants in the Senior Secured Term Loan Agreement.

Term Loan Facilities

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December 31, 2020

(In millions) June 30, 2021 First Tranche Second Tranche

(In millions) September 30, 2021 First Tranche Second Tranche

Principal balance $ 2,003 $ 1,503 $ 500

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Maturity date February 2025 February 2025 February 2025

We recorded a debt extinguishment loss of $ 3 million in the first six months of 2021 due to this amendment.

The interest rate on our term loan facility was 1.87 % as of June 30, 2021.

We recorded a debt extinguishment loss of $ 3 million in the first nine months of 2021 due to this amendment.

The interest rate on our term loan facility was 1.83 % as of September 30, 2021.

Senior Notes Due 2023 and 2024

In the third quarter of 2021, we redeemed our outstanding 6.125 % senior notes due 2023 (“Senior Notes due 2023”) and our outstanding 6.75 % senior notes due 2024 (“Senior Notes due 2024”).

The redemption price for the Senior Notes due 2023 was 100.0 % of the principal amount, plus accrued and unpaid interest and the redemption price for the Senior Notes due 2024 was 103.375 % of the principle amount, plus accrued and unpaid interest.

We paid for the redemption using cash received from GXO of approximately $ 794 million, proceeds from an equity offering described in Note 8—Stockholders’ Equity and available cash.

We recorded debt extinguishment losses in the third quarter of 2021 of $ 3 million and $ 43 million related to the redemption of the Senior Notes due 2023 and Senior Notes due 2024, respectively.

Senior Notes Due 2022

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We paid for the redemption with available cash.

We recorded a debt extinguishment loss of $ 5 million in the first six months of 2021 due to this redemption.

We recorded a debt extinguishment loss of $ 5 million in the first nine months of 2021 due to this redemption.

Senior Notes Due 2025

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Net proceeds from the notes were initially invested in cash and cash equivalents and were subsequently used to redeem our outstanding senior notes due 2022 in January 2021.

GXO Revolving Credit Facility

In June 2021, in preparation for the spin-off, GXO, which was our wholly-owned subsidiary at the time, entered into a five-year , unsecured, multi-currency revolving credit facility (the “GXO Facility”).

Initially, the GXO Facility provides commitments up to $ 800 million, of which $ 60 million will be available for the issuance of letters of credit.

Loans under the GXO Facility will bear interest at a fluctuating rate equal to:

(i) with respect to borrowings in dollars, at GXO’s option, the alternate base rate or the reserve-adjusted LIBOR, (ii) with respect to borrowings in Canadian dollars, the reserve-adjusted Canadian Dollar Offered Rate and (iii) with respect to borrowings in Euros, the reserve-adjusted Euro Interbank Offered Rate, in each case, plus an applicable margin calculated based on GXO’s credit ratings.

The availability of the GXO Facility was subject to the spin-off occurring.

The covenants in the GXO Facility, which are customary for financings of this type, can limit the ability to incur indebtedness and grant liens, among other restrictions.

In addition, the GXO Facility requires GXO to maintain a consolidated leverage ratio below a stated maximum consolidated leverage ratio.

There was no amount outstanding under the GXO Facility at June 30, 2021.

Following the spin-off, the GXO Facility is not available to us.

Stockholders’ Equity

Share Issuance

In July 2021, we completed a registered underwritten offering of 5.0 million shares of our common stock at a public offering price of $ 138.00 per share, plus an additional 750,000 shares of our common stock through an option granted to underwriters.

Of the 5.0 million shares, we offered 2.5 million shares directly and 2.5 million shares were offered by Jacobs Private Equity, LLC (“JPE”).

The additional 750,000 purchased shares were also split equally between us and JPE.

We received approximately $ 384 million of proceeds, net of fees and expenses, from the sale of the shares and used them to repay a portion of our outstanding borrowings and for general corporate purposes.

XPO did not receive any proceeds from the sale of shares by JPE.

Series A Convertible Perpetual Preferred Stock and Warrants

In 2011, we issued 75,000 shares of the Series A Preferred Stock with an initial liquidation preference of $ 1,000 per share which were 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).

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 paid quarterly cash dividends equal to the greater of:

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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 (“JPE”), 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.

Additionally, some holders of our warrants exchanged (or committed to exchange subject to the satisfaction of certain customary closing conditions) their holdings, including JPE, 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, through December 31, 2020, 69,445 shares were exchanged, and we issued 9.9 million shares of common stock and paid $ 22 million of cash.

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These exchanges were intended to simplify our equity capital structure, including in contemplation of the spin-off of our Logistics segment.

As of June 30, 2021, there were no shares of preferred stock or warrants outstanding.

As of September 30, 2021, there were no shares of preferred stock or warrants outstanding.

Share Repurchases

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

There were no share purchases in the first six months of 2021 or in the second quarter of 2020.

Our remaining share repurchase authorization was $ 503 million as of June 30, 2021.

Earnings per Share

There have been no share repurchases since the first quarter of 2020.

Our remaining share repurchase authorization was $ 503 million as of September 30, 2021.

Earnings (Loss) per Share

We compute basic and diluted earnings per share using the two-class method, which allocates earnings to participating securities.

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The computations of basic and diluted earnings (loss) per share were as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In millions, except per share data) 2021 2020 2021 2020

Basic earnings (loss) per common share

Net income (loss) attributable to XPO $ 156 $ ( 131 ) $ 271 $ ( 108 )

Income (loss) from continuing operations $ 21 $ 37 $ 197 $ ( 79 )

Net loss from continuing operations attributable to noncontrolling interests — — — 3

Net income (loss) from continuing operations attributable to XPO 21 37 197 ( 76 )

Series A preferred stock dividends — — — ( 2 )

Non-cash allocation of undistributed earnings — ( 9 ) — —

Net income (loss) from continuing operations attributable to common shares $ 21 $ 28 $ 197 $ ( 78 )

Income (loss) from discontinued operations, net of taxes $ ( 78 ) $ 61 $ 22 $ 68

Net income from discontinued operations attributable to noncontrolling interests — ( 5 ) ( 5 ) ( 7 )

Net income (loss) from discontinued operations attributable to common shares $ ( 78 ) $ 56 $ 17 $ 61

Net income (loss) from continuing operations attributable to common shares, basic $ 21 $ 28 $ 197 $ ( 78 )

Net income (loss) from discontinued operations attributable to common shares, basic ( 78 ) 56 17 61

Net income (loss) attributable to common shares, basic $ ( 57 ) $ 84 $ 214 $ ( 17 )

Basic weighted-average common shares 115 91 111 91

Basic earnings (loss) from continuing operations per share $ 0.19 $ 0.30 $ 1.78 $ ( 0.86 )

Basic earnings (loss) from discontinued operations per share ( 0.69 ) 0.63 0.15 0.68

Basic earnings (loss) per share $ ( 0.50 ) $ 0.93 $ 1.93 $ ( 0.18 )

Diluted earnings (loss) per common share

Net income (loss) from continuing operations attributable to common shares, diluted $ 21 $ 28 $ 197 $ ( 78 )

Net income (loss) from discontinued operations attributable to common shares, diluted ( 78 ) 56 17 61

Net income (loss) attributable to common shares, diluted $ ( 57 ) $ 84 $ 214 $ ( 17 )

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Diluted weighted-average common shares 116 102 114 91

Diluted earnings (loss) from continuing operations per share $ 0.19 $ 0.27 $ 1.73 $ ( 0.86 )

Diluted earnings (loss) from discontinued operations per share ( 0.68 ) 0.56 0.14 0.68

Diluted earnings (loss) per share $ ( 0.49 ) $ 0.83 $ 1.87 $ ( 0.18 )

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We believe that we have adequately accrued for the potential impact of loss contingencies that are probable and reasonably estimable.

We do not believe that the ultimate resolution of any matters to which we are presently a party

will have a material adverse effect on our results of operations, financial condition or cash flows.

We do not believe that the ultimate resolution of any matters to which we are presently a party will have a material adverse effect on our results of operations, financial condition or cash flows.

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

Legal costs incurred related to these matters are expensed as incurred.

We carry liability and excess umbrella insurance policies that we deem sufficient to cover potential legal claims arising in the normal course of conducting our operations as a transportation and logistics company.

The liability and excess umbrella insurance policies generally do not cover the misclassification claims described in this note.

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.

Subsequent Events

As described in Note 1—Organization, Description of Business and Basis of Presentation, on August 2, 2021, we completed the spin-off of our Logistics segment into an independent public company, GXO, in a transaction intended to qualify as tax-free to our stockholders for U.S.

federal income tax purposes .

In preparation for the spin-off, in July 2021, GXO completed an offering of $ 800 million aggregate principal amount of notes, consisting of $ 400 million of notes due 2026 (the “GXO 2026 Notes”) and $ 400 million of notes due 2031 (the “GXO 2031 Notes”, and together with the GXO 2026 Notes, the “GXO Notes”).

The GXO 2026 Notes will bear interest at a rate of 1.65 % per annum payable semiannually in cash in arrears on January 15 and July 15 of each year, beginning January 15, 2022, and will mature on July 15, 2026.

The GXO 2031 Notes will bear interest at a rate of 2.65 % per annum payable semiannually in cash in arrears on January 15 and July 15 of each year, beginning January 15, 2022, and will mature on July 15, 2031.

The net proceeds from the sale of the GXO Notes were used to fund a cash payment from GXO to XPO of $ 794 million, which we intend to use to repay a portion of our outstanding borrowings as noted below.

Following the completion of the spin-off, the GXO Notes are no longer an obligation of XPO.

Equity Offering

Of the 5.0 million shares, we offered 2.5 million shares directly and 2.5 million shares were offered by JPE.

The additional 750,000 purchased shares were also split equally between us and JPE.

We received approximately $ 385 million of proceeds, net of fees and expenses, from the sale of the shares and intend to use them to repay a portion of our outstanding borrowings as noted below and for general corporate purposes.

XPO did no t receive any proceeds from the sale of shares by JPE.

Debt Redemption

In July 2021, we issued notice to redeem our outstanding 6.75 % senior notes due 2024 that had a principal balance of $ 1.0 billion as of June 30, 2021.

Also, in August 2021, we issued notice to redeem our outstanding 6.125 % senior notes due 2023 that had a principal balance of $ 535 million as of June 30, 2021.

The redemption price for our senior notes due 2024 was 103.375 %, plus accrued and unpaid interest.

The redemption price for our senior notes due 2023 was 100.0 % of the principal amount, plus accrued and unpaid interest.

We expect to pay for these redemptions using the cash payment of $ 794 million received from GXO, the proceeds from the July 2021 equity offering and available cash.

ABL Amendment

In July 2021, we amended our existing ABL facility which matures in April 2024 to reduce the commitments from $ 1.1 billion to $ 1.0 billion.

There were no other significant changes made to the terms of the facility, including the maturity date, the interest rate margin, and financial covenants.

Trade Securitization Program

In July 2021, in connection with the spin-off, the existing trade receivables securitization program was amended;

the existing € 400 million program is now comprised of two separate € 200 million programs, one of which will continue to be available to us and one of which will be part of GXO following the spin-off.

The new program expires in July 2024.

Changes to Legal Entity Structure

In July 2021, in connection with the spin-off of our Logistics segment, we amended our legal entity structure.

These changes will result in one-time cash and non-cash tax expenses in the second half of 2021.

Intermodal Drayage Classification Claims

Certain of our intermodal drayage subsidiaries are defendants in class action litigations brought by independent contract carriers in California who contracted with these subsidiaries.

In these cases, the contract carriers assert that they should be classified as employees, rather than independent contractors.

In two related cases pending in Federal District Court in Los Angeles , Alvarez v.

XPO Logistics Cartage, LLC and Arrellano v.

XPO Port Services, Inc.

, the Court has certified classes beginning in April 2016 and March 2013, respectively.

Plaintiffs allege that defendants exercised an impermissible degree of control over plaintiffs’ operations through the terms of the parties’ contracts and defendants’ policies, including enforcement of requirements imposed on motor carriers by state and federal law.

The particular claims asserted vary from case to case but generally include claims that, should the contract carriers be determined to be employees, they would be entitled to reimbursement for unpaid wages and/or minimum wage, unpaid wages for missed meal and rest periods, reimbursement of certain of the contract carriers’ business expenses (including fuel and insurance related costs), Labor Code penalties under California’s Private Attorneys General Act, and attorneys’ fees and costs associated with bringing the action.

Defendants mounted a vigorous defense on the merits of plaintiffs’ claims, including as to whether the plaintiffs met the applicable test for the threshold issue of employment classification.

Trial in both cases was scheduled to begin September 7, 2021.

In August 2021, the parties held a mediation at which a tentative settlement was reached in both actions.

Subject to the Court’s approval, we have agreed to pay the plaintiff class in the Alvarez case a total of $ 20 million, which includes all attorneys’ fees and other costs.

We have agreed to pay the plaintiff class in the Arrellano case a total of $ 9.5 million, which includes all attorneys’ fees and other costs.

We accrued the full amount of both settlements in the third quarter of 2021.

Under the terms of both settlement agreements, we do not have to reclassify our

contractors as employees and the plaintiff classes have agreed to release us from all liability from the inception of each respective class period through December 31, 2021.

All parties involved have agreed to dismiss all claims and counterclaims with prejudice, and the settlement agreements do not contain any admission of liability, wrongdoing or responsibility by any of the parties.

The Court granted preliminary approval of the settlements on October 8, 2021, and a final approval hearing is scheduled for January 10, 2022.

Shareholder Litigation

On December 14, 2018, a putative class action captioned Labul v.

XPO Logistics, Inc.

, was filed in the U.S.

District Court for the District of Connecticut 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 June 3, 2019, lead plaintiffs 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”) filed a consolidated class action complaint.

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.

Defendants moved to dismiss the first amended consolidated class action complaint on March 3, 2020.

On March 19, 2021, the Court dismissed the first amended consolidated class action complaint with prejudice and closed the case.

On April 29, 2021, the Pension Funds filed a notice of appeal, and the appellate process is ongoing.

Also, on May 13, 2019, Adriana Jez filed a purported shareholder derivative action captioned Jez v.

Jacobs, et al.

, (the “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.

The Jez complaint was later consolidated with similar derivative complaints filed by purported shareholders Erin Candler and Kevin Rose under the caption In re XPO Logistics, Inc.

Derivative Litigation.

On December 12, 2019, the Court ordered plaintiffs to designate an operative complaint or file an amended complaint within 45 days.

On January 27, 2020, plaintiffs designated the Jez complaint as the operative complaint in the consolidated cases.

Defendants moved to dismiss the operative complaint on February 26, 2020.

Rather than file a brief in opposition, on March 27, 2020, plaintiffs moved for leave to file a further amended complaint and to stay briefing on defendants’ motions to dismiss.

The Court granted plaintiffs’ motion on July 6, 2020.

On April 14, 2021, the Court issued an order staying proceedings pending resolution of an appeal in the Labul action.

Plaintiffs stipulated that they will dismiss the shareholder derivative action with prejudice if the Labul dismissal is affirmed on appeal.

We believe these suits are without merit and we intend to defend the company vigorously.

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.

Insurance Contribution Litigation

In April 2012, Allianz Global Risks US Insurance Company sued eighteen insurance companies in a case captioned Allianz Global Risks US Ins.

ACE Property & Casualty Ins.

Co., et al., Multnomah County Circuit Court (Case No.

Allianz sought contribution on environmental and product liability claims that Allianz agreed to defend and indemnify on behalf of its insured, Daimler Trucks North America (“DTNA”).

Defendants had insured Freightliner’s assets, which DTNA acquired in 1981.

Con-way, Freightliner’s former parent company, intervened.

We acquired Con-way in 2015.

Con-way and Freightliner had self-insured under fronting agreements with defendant insurers ACE, Westport, and General.

Under those agreements, Con-way agreed to indemnify the fronting carriers for damages assessed under the fronting policies.

After a seven-week jury trial in 2014, the jury found that Con-way and the fronting insurers never intended that the insurers defend or indemnify any claims against Freightliner.

In June 2015, Allianz appealed to the Oregon Court of Appeals.

In May 2019, the Oregon Court of Appeals upheld the jury verdict.

In September 2019, Allianz appealed to the Oregon Supreme Court.

In March 2021, the Oregon Supreme Court reversed the jury verdict, holding that it was an error to allow the jury to decide how the parties intended the fronting policies to operate, and also holding that the trial court improperly instructed the jury concerning one of the pollution exclusions at issue.

In July of 2021, the matter was remanded to the trial court for further proceedings consistent with the Oregon Supreme Court’s decision.

There is no date yet set for the

next stages of the proceeding, which are anticipated to involve cross-motions for summary judgment concerning the interpretation of certain of the fronting policies, followed by a jury trial on the pollution exclusion, then a bench trial on allocation of defense costs among the subject insurance policies.

As any losses that may arise from this matter are not reasonably estimable at this time, no liability has been accrued in the accompanying interim consolidated financial statements.

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

What changed 10-Q

Item 1. Financial Statements