What changed in this filing

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Item 1. Business

2022-02-16 compared with 2021-02-12 · 285 added, 281 removed, 111 unchanged (84% of the section changed)

Company Overview

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

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

XPO was incorporated as a Delaware corporation in May 2000.

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

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

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

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

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

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

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

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

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

Planned Spin-off of the Logistics Segment

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

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

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

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

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

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

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

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

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

Transportation Segment Overview

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

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

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

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

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

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

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

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

Logistics Segment Overview

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Operating Philosophy

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

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

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

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

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

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

Environmental sustainability is a significant priority for us.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Transportation Services

Less-Than-Truckload (LTL)

Our LTL operations in North America are asset-based.

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

This includes cross-border U.S.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Truck Brokerage

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Logistics Services

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

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

These are all verticals where we

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

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

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

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

Logistics processes are ripe for transformation through technology.

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

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

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

this integration substantially increased throughput in 2020.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

This responds directly to increasing demand for shorter fulfillment times.

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

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

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

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

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

Our services are both highly responsive to

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

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

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

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

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

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

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

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

XPO Logistics, Inc., together with its subsidiaries, is a leading provider of freight transportation services.

We use our proprietary technology to move goods efficiently through our customers’ supply chains, primarily by providing less-than-truckload (“LTL”) and truck brokerage services.

These two core lines of business generated the majority of our 2021 revenue and operating income.

Our company has two reportable segments — (i) North American LTL and (ii) Brokerage and Other Services — and within each segment, we are a leading provider in vast, fragmented transportation sectors with growing penetration.

As of December 31, 2021, we had approximately 42,000 employees and 771 locations in 20 countries serving over 50,000 multinational, national, regional and local customers.

In addition to our scale, we believe that our substantial exposure to secular industry growth trends, our first-mover advantage as an innovator and our blue-chip customer relationships are compelling competitive advantages.

We continue to closely monitor the impact of the COVID-19 pandemic and supply chain challenges on all aspects of our business, including how they affect our employees, customers and business partners.

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

Spin-off of the Logistics Segment

On August 2, 2021, we completed the previously announced spin-off of our Logistics segment in a transaction intended to qualify as tax-free to XPO and our stockholders for U.S.

federal income tax purposes, which was accomplished by the distribution of 100% of the outstanding common stock of GXO Logistics, Inc.

(“GXO”) to XPO stockholders.

XPO stockholders received one share of GXO common stock for every share of XPO common stock held at the close of business on July 23, 2021, the record date for the distribution.

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

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

The historical results of GXO are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for all periods presented.

Unless otherwise indicated, all amounts in this Annual Report refer to continuing operations, including comparisons to the prior year.

North American Less-Than-Truckload Segment

XPO is a top three provider of LTL services in North America — we have one of the industry’s largest asset-based networks of tractors, trailers, drivers and terminals, and approximately 8% share of the $42 billion LTL market as of December 31, 2020.

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.

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

We have relationships with approximately 25,000 LTL customers in North America, the majority of which are local accounts.

For the year ended December 31, 2021, we delivered approximately 13 million LTL shipments.

In addition to reliable national capacity, the other key factors driving our LTL growth and margin expansion are our proprietary technology and the industry’s favorable fundamentals:

limited commoditization, rational pricing dynamics, rising industrial demand and the continued growth of e-commerce, which is driving frequent shipments of freight that doesn’t require an entire truck.

Specific to XPO, we believe that we have a significant opportunity to leverage our technology to improve LTL profitability beyond the sizable margin gains we have already achieved.

We use intelligent route-building to move LTL freight across North America, and proprietary visualization tools to help reduce the cost of pickups and deliveries.

Our XPO Smart™ productivity tools are deployed in our LTL yards and cross-dock operations, and we have developed a pricing platform that enables our pricing experts to be much more productive and will enhance our ability to price in a dynamic marketplace.

We are taking action in the five areas of our previously announced action plan to drive growth and enhance network efficiencies in our LTL business.

We began executing the plan in October 2021.

The five areas of our plan are:

• Improve network flow.

Our targeted fourth quarter 2021 initiatives have significantly improved network fluidity, while generating stronger service metrics in areas such as on-time transit and freight handling as the quarter progressed;

• Drive pricing.

We pulled our typical January 2022 general rate increase forward to November 2021 and instituted accessorial charges for detained trailers, oversized freight and special handling, contributing to record 11% growth in yield, excluding fuel, in the fourth quarter;

• Expand the driver base.

We graduated approximately 900 professional drivers from our driver training schools in 2021, exceeding our goal, and intend to double the number of 2021 graduates in 2022;

• Increase trailer production.

In January 2022, we added a second production line at our Searcy, Arkansas trailer manufacturing facility.

We expect to double the number of units produced in 2022 year-over-year;

• Expand footprint by 900 net new doors (approximately 6%) by year-end 2023.

We added a total 149 net doors to the network from October 2021 through January 2022 with the opening of three new terminals:

Chicago Heights, Illinois;

Sheboygan, Wisconsin;

and Texarkana, Arkansas.

Additionally, we plan to open new fleet maintenance shops in Ohio, Florida, New York and Nevada in the first quarter of 2022.

Brokerage and Other Services Segment

XPO is the second largest truck broker worldwide, and one of the largest in North America, with approximately 3% share of the $80 billion North American market as of December 31, 2021.

Shippers create truckload demand and we place their freight with qualified carriers, pricing our service on either a spot or contract basis.

Our truck brokerage business has an agile, non-asset model with a variable labor structure that generates a high return on invested capital and free cash flow conversion.

The key factors driving growth and margin expansion in our truck brokerage business are massive capacity, cutting-edge technology and favorable industry tailwinds.

The demand for truckload capacity in the e-commerce and omnichannel retail sectors is growing rapidly.

At the same time, more and more shippers are outsourcing to brokers and increasingly preferring brokers like XPO that offer digital capabilities.

As of December 31, 2021, we had approximately 98,000 independent truckload carriers in our global brokerage network, representing more than a million trucks.

We provide our customers with digital access to truckload capacity through our XPO Connect® brokerage technology.

This proprietary platform is a major differentiator for our business and, together with our pricing technology, we believe it can unlock incremental profitable growth well beyond our current levels.

Our Brokerage and Other Services segment also includes exposure to a fast-growing brokerage subsector — last mile logistics for heavy goods sold through e-commerce, omnichannel retail and direct-to-consumer channels.

XPO is the largest last mile provider for heavy goods in North America.

Several other non-core brokered freight transportation modes are included in this segment, as well as our European service offering.

XPO holds leading positions in key geographies in Europe:

we are the No.

1 truck broker and the No.

1 LTL provider in France and Iberia (Spain / Portugal), and the No.

3 truck broker in the U.K., where we also have the largest single-owner LTL network.

Innovation and Sustainability

Our first-mover advantage as an industry innovator is rooted in the more than $3 billion we have spent on technology on all operations since 2011.

We concentrate our efforts on creating “smart” supply chains that create meaningful value for our shareholders and our customers.

Technology is a major competitive differentiator for us.

We use it to serve our customers better and make the most of the talent and assets within our organization.

Our cloud-based ecosystem speeds the deployment of new ways to deliver transportation services to customer sectors that are increasingly interested in digitization and automation.

Environmental sustainability is another significant priority for us, and one that is increasingly connected to our technology.

Our entire business model is based on transporting freight as efficiently as possible.

This fosters our ability to improve our carbon footprint over time by reducing empty miles, maintaining a modern fleet and executing company-specific initiatives, such as training our drivers in eco-friendly techniques.

We’re committed to reducing the impact of our operations on the environment, especially with respect to climate change and biodiversity, while helping our customers do the same.

In 2020, we developed a scorecard to provide a progressive means of evaluating the management of our Environmental, Social and Governance (“ESG”) initiatives and incentivizing long-term, successive achievements.

Our ESG scorecard tracks measurable progress with our environmental initiatives over four years, taking into account lead time requirements, category weighting and target variances.

The environmental initiatives within the scorecard encompass strategic objectives of reducing fossil fuel dependency, carbon emissions and carbon footprint, nitrogen oxide emissions and waste.

These objectives are

underpinned by specific goals — for example, we’re working to achieve greater fuel efficiency in our managed transportation business, with an annual goal of averaging at least seven miles per gallon every year for four years.

We also set a goal to reduce carbon emissions in our LTL business by increasing the load factor rate by at least 2% over the performance period.

Together with five other categories of ESG-related targets, the environmental initiatives in our ESG scorecard provide a roadmap for XPO.

As we execute our sustainability strategy, we’re focusing on three critical areas:

our transportation fleet, technology and facilities.

Transportation Fleet

Our business relies heavily on the availability and pricing of diesel fuel to provide our transportation services.

In 2021, we switched to 100% premium diesel for our fleet.

Because premium diesel is higher in cetane — analogous to octane in gasoline — it burns cleaner, lubricates better and runs more smoothly.

On the road, this translates to fuel savings in the range of 1.8% to 2.5%, with commensurate reductions in carbon emissions.

Our ongoing fleet initiatives include modernizing our tractors and trailers;

deploying cleaner fuels where practical, such as natural gas, biogas and electricity;

expanding our use of data and software analytics to improve the efficiency of routing, loading and handling freight;

and exploring the use of lighter vehicles with a smaller environmental footprint.

Our scale gives us the ability to explore options locally and replicate improvements across our company.

In North American LTL, we’re investing in replacing many of our older tractors and trailers, including more than $100 million allocated to buy approximately 1,000 new tractors in 2022.

The supply chain challenges related to the COVID-19 pandemic delayed the retirement of older tractors and limited our ability to secure new models in 2021.

As newer vehicles become available, we will continue to introduce trucks with 15-liter engines and automatic transmissions that improve reliability and fuel economy, while lowering emissions and extending engine life.

In Europe, over 90% of our diesel road fleet is compliant with Euro VI standards, and we have a natural gas-powered fleet of more than 250 total trucks in France, the U.K., Spain and Portugal.

We also use government-approved mega-trucks in Spain to transport more freight with fewer trips.

We’re currently testing the use of longer, duo-trailer vehicles that have the potential to reduce CO2 emissions by an estimated 25% to 30% per trip, compared with the same freight moved on traditional trucks.

In 2021, we piloted the first fully electric commercial trucks in our fleets in Spain and France, and our last mile business uses electric vehicles for certain deliveries, reducing those emissions to zero.

Electric vehicles show promise in commercial transport applications, particularly as a zero-emission alternative to diesel for urban service.

Our fleet experts are working with manufacturers to test the commercial viability of larger electric vehicles, and we put our first electric truck into service in 2021.

This initiative is serving as a valuable pilot to advance our understanding of how and where to best use electric vehicles.

For many of our customers, the transportation components of their supply chain account for a significant portion of their CO2 footprint.

We use machine learning and other technologies, leveraged by our scale, to coordinate the movement of goods in ways that are greener, safer, more efficient and more cost-effective.

Our four key priorities are:

• Improved utilization of truck capacity.

In our LTL business, our routing algorithms are designed to keep our trucks fuller over more miles, thus reducing “empty miles.” In our truck brokerage business, our XPO Connect® digital platform matches shippers with carriers for the optimal movements of freight, reducing inefficiencies and sourcing backhauls for carriers with empty trucks following deliveries.

• Enhanced driver performance.

XPO drivers receive eco-training to reinforce techniques for fuel efficiency, and we digitally track drivers’ habits on the road.

This helps us improve their individual driving efficiency and safety.

• Data-driven visibility.

Our technology follows a shipment from pickup to delivery, with real-time visibility into where goods are and when they will be delivered.

Digital tracking mitigates inefficiencies and allows us to assimilate data into future planning models to improve accuracy and performance.

• Emissions reduction.

We use big data to predict freight volumes and plan capacity, which helps us determine the optimal vehicle or mode of transportation.

In some cases, we can shift non-urgent loads to reliable, lower-carbon options, such as rail.

In 2021, XPO moved 217,000 rail shipments in the U.S., which reduced greenhouse gas emissions by over 540,000 metric tons, compared with moving the same freight by truck.

Our expertise in the circular economy continues to enhance the eco-profile of our facilities and operating practices.

We have ongoing initiatives underway to install LED lighting in our buildings, reuse pallets, right-size packaging and incorporate other environmentally friendly processes into our operations.

We cut waste by reusing materials where feasible and recycling a growing share of waste.

Additional Information

For more information on how XPO is working to improve sustainability through operational excellence, innovation and a progressive employment environment, see sustainability.xpo.com .

Our strategy is to help customers move their goods most efficiently through their supply chains.

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

Our services are both highly responsive to customer goals, such as mitigating environmental impacts over time, and proactive in identifying potential improvements.

Most important, we have instilled a culture that defines success as mutually beneficial results for our company and our customers.

Management’s growth and optimization strategy is to:

• Market our solutions and vertical expertise to new and existing customers of all sizes, using a partnership approach that creates enduring relationships;

• Leverage our positioning to increasingly capitalize on secular trends in demand, such as the rapid growth of e-commerce and the heightened customer interest in outsourcing freight transportation;

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

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

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

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

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

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

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

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

Technology and Intellectual Property

• Attract and retain high-caliber independent contracted carriers and independent brokered carriers for our non-asset services;

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

Additionally, each of our core businesses executes a strategy of competitive differentiation:

• In North American LTL — recruit and retain quality drivers for our fleet, and best utilize our capacities of drivers, equipment, terminals and technology for a superior customer experience;

• In truck brokerage — leverage the advantages of our proprietary XPO Connect® digital marketplace to grow our share of the brokerage sector and penetrate the for-hire trucking industry.

Proprietary Technology and Intellectual Property

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

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

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

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

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

We have built a highly scalable platform on the cloud that enables us to deploy innovations across multiple geographies in a relatively short time, and also take an innovation developed for one of our services and apply it to other services.

This differentiates the value we offer and gives our larger accounts an added incentive to use us.

We believe that our investment in technology is among the highest in our industry at an annual average of approximately $300 million.

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

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

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

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

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

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

Intelligent warehouse automation is a priority for our Logistics segment.

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

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

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

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

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

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

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

XPO Connect® is our proprietary digital freight marketplace;

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

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

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

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

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

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

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

XPO Connect® gives shippers access to our transportation network and market data, while freight carriers transact to secure loads through the app.

As of December 31, 2021, we had approximately 98,000 carriers registered for XPO Connect® globally and over 600,000 cumulative truck driver downloads of the app.

In the fourth quarter of 2021, 70% of our brokerage orders in North America were created or covered digitally.

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

linehaul, pickup-and-delivery and pricing.

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

Our North American LTL linehaul network moved freight approximately 2.5 million miles a day on average in 2021.

In total, we moved 18 billion pounds of LTL freight 758 million miles in 2021.

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

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

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

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

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

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

With pickup-and-delivery, we are focused on optimizing routing, pricing management, trailer utilization, exception management and dock productivity through our technology.

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

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

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

Customers and Markets

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

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

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

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

and 11% in France.

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

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

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

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

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

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

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

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

We market our services to customers with domestic and international supply chains, and primarily perform these services in North America and Europe.

In 2021, approximately 72% of our total revenue was generated in the U.S., 11% in France, 7% in the U.K.

and 6% in Europe (excluding France and the U.K.).

XPO operates in highly fragmented marketplaces along with thousands of companies competing domestically and internationally.

We compete on quality of service, reliability, scope and scale of operations, technological capabilities, expertise and price.

Our competitors include local, regional, national and international companies that offer the same services we provide, including C.H.

Robinson, FedEx, Old Dominion Freight Line and Saia.

Some of our competitors have significantly more customers, resources and experience than we have, and some of our customers have sufficient internal resources to perform the services we offer.

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

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

The health of the freight transportation industry overall will continue to be a function of domestic and global economic growth.

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

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Other federal agencies, such as the U.S.

EPA, the U.S.

Environmental Protection Agency (“EPA”), the U.S.

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

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

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

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

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

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

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

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

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

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

Department of State, the U.S.

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Some states have launched initiatives to increase tax revenues from items such as unemployment, workers’ compensation and income taxes, and the reclassification of independent contractors as employees could help states increase these revenues.

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

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

In addition to these possible legislative changes, the National Labor Relations Board (“NLRB”) and NLRB's general counsel have signaled the desire to reverse several pro-employer precedents, to make it more difficult for a worker to be classified as an independent contractor by changing the factors used in determining worker classification.

The NLRB has also entered into a Memorandum Of Understanding with the U.S.

Department of Labor regarding the exchange of information and cooperation in enforcement activities regarding the misclassification of employees as independent contractors.

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

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

Environmental Regulations.

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

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

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

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

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

affected our business or operations.

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

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

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

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

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

If enacted, such legislation could result in higher costs for new tractors and trailers, reduced productivity and efficiency, and increased operating expenses, all of which could adversely affect our results of operations.

Risk Management and Insurance

We maintain insurance for commercial automobile liability, truckers’ commercial automobile liability, commercial general liability, cargo/warehouse legal liability, workers’ compensation and employers’ liability, and umbrella and excess umbrella liability, with coverage limits, deductibles and self-insured retention levels that we believe are reasonable given the varying historical frequency, severity and timing of claims.

We maintain insurance for commercial automobile and trucker’s liability, commercial general liability, cargo legal liability, workers’ compensation and employers’ liability, umbrella and excess liability, cyber risk, and property coverage with coverage limits, deductibles and self-insured retention levels that we believe are reasonable given the varying historical frequency, severity and timing of claims.

Certain actuarial assumptions and managerial judgments are made for insurance reserves and are subject to a degree of variability.

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

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

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

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

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

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

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

Human Capital Management

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

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

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

Employee Profile

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

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

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

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

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

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

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

Diversity and Inclusion

At XPO, every action we take is based on our values – we are safe, entrepreneurial, respectful, innovative and inclusive.

Our values shape our approach to human capital management and ensure we provide an excellent work environment for our employees.

Our success relies heavily on our strong governance structure, Code of Business Ethics, good corporate citizenship and commitment to employee engagement.

As a customer-centric company with a strong service culture, we continually strive to be an employer of choice.

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

Employee Base Profile

We had approximately 42,000 employees in locations spanning 20 countries as of December 31, 2021, with approximately 21,000 employees in North American LTL and approximately 21,000 employees in Brokerage and Other Services, including corporate.

Our workforce is supplemented with approximately 5,400 temporary workers.

By geography, approximately 66% of our employees are based in North America, approximately 33% are in Europe and approximately 1% are in Latin America and Asia combined.

By job description, approximately 57% of our employees work as drivers and dockworkers, approximately 25% work as operations and warehouse workers and approximately 9% work in field supervisory and management positions with the remainder in support and other positions.

In North America, approximately 78% of our employees occupy hourly roles and approximately 22% are in salaried positions.

By gender, approximately 18% of our global employees are female and approximately 23% of global managerial positions (manager or supervisor and above) are occupied by women.

Women also comprise approximately 45% of our global salaried field and non-field professionals, and approximately 22% of all U.S.

employees at vice president level and above, an increase of more than three percentage points from 2020.

By ethnicity, almost 40% of our U.S.

employees are ethnically or racially diverse, with representation of Black and African American colleagues surpassing the U.S.

census by seven percentage points.

Approximately 30% of colleagues in U.S.

managerial positions (manager or supervisor and above) identify as ethnically or racially diverse.

As of December 31, 2021, approximately 88% of our employees in Europe were represented by unions or other employee representative bodies.

In the U.S., less than 1% of our employees are represented by a union.

Throughout 2021, we made significant investments in the safety, well-being and satisfaction of our employees in the following areas, among others:

Diversity, Equity and Inclusion (“DE&I”)

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

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

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

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

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

Led by our chief diversity officer, we celebrate diversity through our heritage month celebrations, including Black history, women’s history, LGBTQ+ pride, Hispanic heritage, Native American heritage, Asian American heritage and military veterans.

We offer inclusivity courses through our XPO University e-learning portal.

We also engage in academic partnerships that advance diversity in higher education, including our collaboration with Historically Black Colleges and Universities (“HBCUs”) and the Hispanic Association of Colleges and Universities.

We sponsor inclusion programs and employee resource groups that support employee heritage, women, veterans, the LGBTQ+ community, people with disabilities and other multicultural groups.

Commitments added in 2021 include a partnership with Hiring our Heroes, a DE&I global employee portal and “Table Talk” conversations on DE&I topics with XPO leaders.

ESG Initiatives in Long-Term Incentives.

Our commitment to long-term and successive ESG achievements is demonstrated through our ESG scorecard, which we introduced in 2020 with more than 40 defined ESG targets and initiatives that span a four-year period through 2023.

Our ESG scorecard deliverables are organized into six categories that are tied to performance on:

(1) employee safety;

(2) sustainability;

(3) information security;

(4) diversity and human capital management, among other areas of ESG.

Goals include targets for turnover rates, gender and ethnic diversity growth in managerial positions and DOT recordable preventable accident frequency in both managed transportation and LTL.

These ESG performance targets and initiatives, including deliverables for diversity and inclusion, are linked to 25% of our top executives’ long-term incentive compensation.

Health and Safety

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

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

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

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

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

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

The physical and emotional safety of our employees is our top priority, and we have numerous protocols in place to ensure a safe work environment.

In the U.S., we aim to maintain an Occupational Safety and Health Administration total recordable incident rate (“TRIR”) that is less than half the published rate for the Truck Transportation industry based on the “Industry Injury and Illness Data” from the U.S.

Bureau of Labor Statistics (“BLS”).

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

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

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

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

In 2021, our North American Transport business unit exceeded our target expectation with a TRIR 2.63 points lower than the BLS national benchmark.

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

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

In addition to physical well-being, we also consider emotional well-being to be an important part of workplace safety.

Our Code of Business Ethics mandates zero tolerance of discrimination, harassment, retaliation, bullying and other unacceptable behaviors to ensure all employees feel welcome at work.

Our open-door policy provides multiple channels for employees to report any incidents, including our anonymous Ethics Point hotline and website, along with any supervisor, manager or member of the HR team.

Throughout the COVID-19 pandemic, we’ve continued to prioritize employee physical and mental health and have aimed to balance protecting employee health while creating a comfortable work environment.

We remain diligent in upholding XPO’s COVID-19 safety protocols, including daily health attestations, a contactless delivery policy for our drivers and customers and access to mental health counseling services for employees and their dependents.

We continue to offer pandemic paid sick leave to provide U.S.

and Canadian employees up to an additional two weeks of fully-paid sick leave.

Talent Development and Engagement

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

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

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

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

Employee Engagement.

At XPO, we regularly solicit feedback from employees to gauge our progress, assess satisfaction and encourage constructive suggestions.

Each quarter, we solicit feedback from our global “wired” employees through an online satisfaction survey.

In the U.S., we also conduct an annual satisfaction survey among our “non-wired” frontline employee audience in addition to regular roundtables and town halls.

Based on employee

feedback, we identify improvement areas and develop action plans at the business unit and facility level to implement improvements.

We also foster career development at all levels and seek to recruit and retain the best talent available.

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

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

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

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

We tailor our recruitment efforts by geography and job function using an array of channels.

We proactively recruit through advertisements tailored for individual roles, and we use a range of different sources to search for potential candidates.

For example, through our recruiting partnerships, we advertise open positions on recruitment websites targeted toward women, LGBTQ+ individuals, Blacks and African-Americans, Hispanics, veterans and those who are disabled.

Our goal is to identify candidates who have the skills our customers need – or the desire to learn those skills.

Specifically, we partner with Hiring our Heroes to attract military veterans and WorkFit, the Down’s Syndrome Association’s employment program.

Our integrated approach to talent development begins with the recruitment platform we launched this year.

It includes job previews, on-demand interviewing and scheduling and pre-employment assessments to improve and personalize the candidate experience, allowing candidates to choose opportunities with XPO that best match their skills and interests.

These features also reduce time demands of the candidate and improve employee retention by allowing candidates to learn about XPO and the role for which they’re applying prior to joining XPO.

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

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

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

Driver School.

XPO’s driver training schools are instrumental in our driver recruitment efforts, enabling us to teach new drivers.

We have 130 driver training schools in our network and graduated approximately 900 students in 2021.

Our driver training program is also a critical component of our driver retention strategy, as our retention rate on average over the past two years for internal driver school graduates is more than 30 percentage points higher than that of external driver hires.

Our recent enhancements to student compensation and training options are industry-leading and include free tuition, guaranteed wages for instruction hours, on-the-job training and other benefits.

In contrast to the BLS-reported national average age of 46 years old for employees in the Truck Transportation industry, approximately 80% of our 2021 student driver hired population is below 40 years of age with nearly half of students between the ages of 25-34 years old.

We plan to expand our graduate count in 2022 to double our graduates in 2021.

XPO Graduate Program (LTL).

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

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

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

The programs also help retain top talent by defining personalized development paths, and they attract new talent by differentiating XPO from its competitors.

Our executive training program for high-potential managers launched in the U.S.

in 2021 and will launch in Europe in 2022.

This program emphasizes our commitment to promote from within and increase gender diversity in executive management roles by providing cross-functional leadership experience via special projects, collaboration with peers and mentoring from XPO executives.

XPO University.

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

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

In 2021, more than one million training hours were completed by our employees worldwide.

Expansive Total Rewards

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

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

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

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

Competitive Wages.

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

In 2021, total compensation expense for employees (i.e., excluding contingent workers) rose by 13%, or $389 million, reflecting both concentrated and broad-based investments in wage increases for more than 22,000 hourly workers throughout the year, and annual merit-based and promotional increases for our salaried employees.

In addition, we hired nearly 15,000 employees globally at competitive rates as we continued to invest in the company’s growth, innovation and commitment to deliver relentlessly for our customers.

Comprehensive Benefits.

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

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

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

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

We offer a comprehensive suite of health and welfare benefit programs to support employees and their families.

Many of these benefits are offered because of employee feedback.

In the U.S., examples include:

• Pregnancy Care Policy:

guarantees up to 80 hours of paid prenatal leave and certain automatic accommodations, plus consideration of more significant accommodations.

• Family Bonding Policy:

provides 100% paid time off for six weeks for the primary caregiver of a newborn or newly adopted child, and 100% paid time off for two weeks for a secondary caregiver.

• Tuition Reimbursement:

provides up to $5,250 annually for continuing education, tuition-free commercial driver training and education discounts for more than 80 fields of online study.

• Additional Benefits:

including access to a Total Rewards Statement, assistance with diabetes management, supplemental insurance and short-term loans.

In Europe, XPO’s benefit programs vary by country and are tailored to the needs of local markets.

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

Community Involvement

In 2021, there were hundreds of examples of our company and employees giving back, including our support of the Susan G.

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

Komen Foundation, Truckers Against Trafficking, Soles4Souls, Girls With Impact, Toys for Tots, Elves & More and the Make-A-Wish Foundation, among others.

Information about our Executive Officers

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Brad Jacobs 65 Chairman of the Board and Chief Executive Officer

Troy Cooper 51 President

Mario Harik 41 Chief Information Officer;

David Wyshner 53 Chief Financial Officer

Acting President, Less-Than-Truckload

Ravi Tulsyan 53 Chief Financial Officer

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

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

Jacobs also has served as the non-executive chairman of the Board of Directors of GXO Logistics, Inc.

since August 2, 2021.

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

Jacobs led two other public companies prior to XPO:

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

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

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

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

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

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

and OSI Specialties, Inc.

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

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

and holds a degree in accounting from Marietta College.

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

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

Mario Harik has served as XPO’s chief information officer since November 2011 and acting president, Less-Than-Truckload since October 2021.

Harik has led numerous technological developments for transportation and logistics industries, built comprehensive technology organizations, overseen the implementation of extensive proprietary platforms, and consulted to Fortune 100 companies.

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

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co-founder of G3 Analyst, where he served as chief architect of web and voice applications;

and architect and consultant with Adea Solutions.

and solutions architect and consultant with Adea Solutions.

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

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

Ravi Tulsyan has served as XPO’s chief financial officer since September 2021, after formerly serving as the company’s deputy chief financial officer since February 2021 and treasurer since 2016.

Prior to XPO, Mr.

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

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

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

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

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

degree from the Wharton School of the University of Pennsylvania.

Tulsyan served as treasurer and senior vice president, M&A with ADT Corporation following ADT’s 2012 spin off from Tyco International.

Tulsyan previously served as Tyco’s vice president of global capital markets and head of financial planning and analysis at the time of the separation, and led all treasury activities related to the transaction.

Tulsyan held executive positions as senior treasury manager with PepsiCo, and manager of derivatives strategy and trading with Xerox Corporation.

He holds a master’s degree in finance from the University of Rochester, a master’s degree in mechanical engineering from the Ohio State University, and a bachelor’s degree from the Indian Institute of Technology Madras.

Available Information

2 unchanged sentences

Materials are available online as soon as reasonably practicable after we electronically submit them to the SEC.

You can also access materials regarding our corporate governance policies and practices, including our Corporate Governance Guidelines, Code of Business Ethics and the charters relating to the committees of our Board of Directors.

You also may request a printed copy of these materials without charge by writing to:

You can also access materials on our website regarding our corporate governance policies and practices, including our Corporate Governance Guidelines, Code of Business Ethics and the charters relating to the committees of our Board of Directors.

You may request a printed copy of these materials without charge by writing to:

Investor Relations, XPO Logistics, Inc., Five American Lane, Greenwich, Connecticut 06831.

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

What changed 10-K

Item 1. Business