What changed in this filing

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Item 1. Financial Statements

2022-05-10 compared with 2021-11-03 · 191 added, 439 removed, 356 unchanged (64% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

September 30, December 31,

March 31, December 31,

(In millions, except per share data) 2022 2021

11 unchanged sentences

Other long-term assets 268 255

Long-term assets of discontinued operations — 4,666

Total long-term assets 5,765 6,030

15 unchanged sentences

Other long-term liabilities 311 327

Long-term liabilities of discontinued operations — 1,430

Total long-term liabilities 4,290 5,031

Stockholders’ equity

Convertible perpetual preferred stock, $ 0.001 par value;

10 shares authorized;

— 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;

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

115 shares issued and outstanding as of

March 31, 2022 and December 31, 2021

Additional paid-in capital 1,176 1,179

Retained earnings (accumulated deficit) ( 79 ) 868

Retained earnings 531 43

Accumulated other comprehensive loss ( 109 ) ( 84 )

Total stockholders’ equity before noncontrolling interests 1,016 2,709

Noncontrolling interests — 140

Total equity 1,598 1,138

2 unchanged sentences

XPO Logistics, Inc.

Condensed Consolidated Statements of Income (Loss)

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

Condensed Consolidated Statements of Income

Three Months Ended March 31,

(In millions, except per share data) 2022 2021

Revenue $ 3,473 $ 2,989

Cost of transportation and services 2,306 1,814 6,545 4,919

Direct operating expense 366 310 1,058 904

Cost of transportation and services (exclusive of depreciation and amortization) 2,437 2,053

Direct operating expense (exclusive of depreciation and amortization) 385 334

Sales, general and administrative expense 344 338

Depreciation and amortization expense 116 119

Gain on sale of business ( 450 ) —

Transaction and integration costs 10 5

2 unchanged sentences

Other income ( 14 ) ( 16 )

Foreign currency (gain) loss ( 4 ) 1 ( 2 ) ( 5 )

Debt extinguishment loss — 8

Interest expense 37 65

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 from continuing operations before income tax provision 602 82

Income tax provision 113 19

Income from continuing operations 489 63

Income (loss) from discontinued operations, net of taxes ( 1 ) 55

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

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

Net income 488 118

Net income from discontinued operations attributable to noncontrolling interests — ( 3 )

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

Net income attributable to XPO $ 488 $ 115

Net income (loss) attributable to common shareholders

1 unchanged sentence

Discontinued operations ( 1 ) 52

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

Net income attributable to common shareholders $ 488 $ 115

Earnings (loss) per share data

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

Basic earnings per share from continuing operations $ 4.26 $ 0.59

Basic earnings (loss) per share from discontinued operations ( 0.01 ) 0.49

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 )

Basic earnings per share attributable to common shareholders $ 4.25 $ 1.08

Diluted earnings per share from continuing operations $ 4.23 $ 0.56

Diluted earnings (loss) per share from discontinued operations ( 0.01 ) 0.46

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

Diluted earnings per share attributable to common shareholders $ 4.22 $ 1.02

Weighted-average common shares outstanding

3 unchanged sentences

XPO Logistics, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

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

Condensed Consolidated Statements of Comprehensive Income

Three Months Ended March 31,

(In millions) 2022 2021

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

Other comprehensive income (loss), net of tax

Foreign currency translation gain (loss), net of tax effect of $ 7 , $ 13 , $ 4 and $ 6

$ ( 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

Net income $ 488 $ 118

Other comprehensive loss, net of tax

Foreign currency translation loss, net of tax effect of $( 2 ) and $( 6 )

$ ( 26 ) $ ( 42 )

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

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

Comprehensive income attributable to noncontrolling interests — 10 3 7

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

Unrealized gain on financial assets/liabilities designated as hedging instruments, net of tax

effect of $ — and $ —

Other comprehensive loss ( 25 ) ( 42 )

Comprehensive income $ 463 $ 76

Comprehensive loss attributable to noncontrolling interests — ( 2 )

Comprehensive income attributable to XPO $ 463 $ 78

See accompanying notes to condensed consolidated financial statements.

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Nine Months Ended September 30,

Three Months Ended March 31,

(In millions) 2022 2021

Cash flows from operating activities of continuing operations

Net income (loss) $ 219 $ ( 11 )

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

Net income $ 488 $ 118

Income (loss) from discontinued operations, net of taxes ( 1 ) 55

Income from continuing operations 489 63

Adjustments to reconcile income from continuing operations to net cash from

operating activities

Depreciation, amortization and net lease activity 116 119

3 unchanged sentences

Debt extinguishment loss — 8

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

Gain on sale of business ( 450 ) —

Gains on sales of property and equipment ( 1 ) ( 23 )

6 unchanged sentences

Cash flows from investing activities of continuing operations

Proceeds from sale of business 705 —

Payment for purchases of property and equipment ( 137 ) ( 74 )

Proceeds from sale of property and equipment 3 36

Other ( 3 ) 5

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

Net cash provided by (used in) investing activities from continuing operations 571 ( 38 )

Cash flows from financing activities of continuing operations

Proceeds from issuance of debt — 1,155

Proceeds from (repayment of) borrowings related to securitization program ( 24 ) 25

Repayment of borrowings related to securitization program — ( 24 )

Repurchase of debt — ( 1,200 )

Proceeds from borrowings on ABL facility — 820

Repayment of borrowings on ABL facility — ( 200 )

1 unchanged sentence

Payment for debt issuance costs — ( 5 )

Purchase of noncontrolling interests — —

Issuance (repurchase) of common stock 384 ( 114 )

Change in bank overdrafts 3 8

Payment for tax withholdings for restricted shares ( 12 ) ( 21 )

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,

Net cash used in financing activities from continuing operations ( 24 ) ( 1,464 )

Three Months Ended March 31,

(In millions) 2022 2021

3 unchanged sentences

Financing activities of discontinued operations — ( 37 )

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

Net cash provided by discontinued operations 1 2

Effect of exchange rates on cash, cash equivalents and restricted cash ( 3 ) ( 2 )

2 unchanged sentences

Cash, cash equivalents and restricted cash, end of period 1,018 640

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

Cash, cash equivalents and restricted cash of discontinued operations, end of

Cash, cash equivalents and restricted cash of continued operations, end of period $ 1,014 $ 233

Supplemental disclosure of cash flow information

7 unchanged sentences

Series A Preferred Stock Common Stock

(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

— — 72 — 2 — — 2 — 2

Tax withholdings related to vesting of stock compensation awards

— — — — ( 3 ) — — ( 3 ) — ( 3 )

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

Stock compensation expense

— — — — 19 — — 19 — 19

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

Series A Preferred Stock Common Stock

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

Balance as of December 31, 2021 — $ — 114,737 $ — $ 1,179 $ 43 $ ( 84 ) $ 1,138 $ — $ 1,138

1 unchanged sentence

Other comprehensive loss — — — — — — ( 25 ) ( 25 ) — ( 25 )

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

Exercise and vesting of stock compensation awards

2 unchanged sentences

— — — — ( 12 ) — — ( 12 ) — ( 12 )

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

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

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

Dividend declared

— — — — — — — — ( 3 ) ( 3 )

Exercise of warrants — — 9,215 — — — — — — —

Stock compensation expense

1 unchanged sentence

— — — — 1 — — 1 — 1

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

XPO Logistics, Inc.

Condensed Consolidated Statements of Changes in Equity (continued)

Series A Preferred Stock Common Stock

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

Exercise and vesting of stock compensation awards

— — 39 — — — — — — —

Tax withholdings related to vesting of stock compensation awards

— — — — ( 3 ) — — ( 3 ) — ( 3 )

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

Dividend declared

— — — — — — — — ( 4 ) ( 4 )

Stock compensation expense

— — — — 10 — — 10 — 10

— — — — 2 1 — 3 — 3

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

Balance as of March 31, 2022 — $ — 114,982 $ — $ 1,176 $ 531 $ ( 109 ) $ 1,598 $ — $ 1,598

Series A Preferred Stock Common Stock

1 unchanged sentence

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

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

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

Net income — — — — — 115 — 115 3 118

Other comprehensive loss — — — — — — ( 37 ) ( 37 ) ( 5 ) ( 42 )

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

— — ( 1,715 ) — ( 114 ) — — ( 114 ) — ( 114 )

Dividend declared

— — — — — ( 2 ) — ( 2 ) ( 4 ) ( 6 )

Conversion of preferred stock to common stock ( 1 ) ( 1 ) 139 — 1 — — — — —

Exercise of warrants — — 9,215 — — — — — — —

Stock compensation expense

— — — — 10 — — 10 — 10

Adoption of new accounting standard and other

— — 62 — 4 ( 3 ) — 1 — 1

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

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

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

Organization, Description of Business and Basis of Presentation

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.

XPO Logistics, Inc., together with its subsidiaries (“XPO” or “we”), 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.

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

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 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 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.

2022 Strategic Plan

On March 8, 2022, we announced that our Board of Directors approved a plan to pursue the strategic spin-off of our tech-enabled brokered transportation platform in North America as a publicly traded company and to pursue two divestitures:

the sale of our North American intermodal operation and the sale or listing of our European business.

We sold our intermodal operation, which provides rail brokerage and drayage services, in March 2022.

For further information, see Note 3—Divestiture.

If the spin-off to XPO shareholders is completed, the transaction will result in two pure-play, publicly traded companies with simplified business models and clearly delineated value propositions.

The core business of the spin-off will be our truck brokerage service, with complementary brokered services for managed transportation, last mile logistics and global forwarding.

The remaining company will be an asset-based provider of LTL service in North America.

The planned spin-off transaction, which is intended to be tax-free to XPO and our shareholders for U.S.

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

In connection with the transaction, it is anticipated that a portion of XPO’s outstanding debt may be repaid using proceeds from borrowings incurred and debt securities to be issued by the spun-off company.

We currently expect to complete the spin-off in the fourth quarter of 2022, subject to various conditions, including the effectiveness of a Form 10 registration statement, receipt of a tax opinion from counsel, the refinancing of XPO’s debt on terms satisfactory to the XPO Board of Directors, and final approval by the XPO Board of Directors, among other requirements.

There can be no assurance that any strategic transaction will occur, or if one or more do occur, of the terms or timing.

2021 Spin-Off of the Logistics Segment

On August 2, 2021, we completed the spin-off of our Logistics segment as GXO Logistics, Inc.

The historical results of our Logistics segment are presented as discontinued operations in our Condensed Consolidated Financial Statements.

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

Basis of Presentation

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

3 unchanged sentences

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 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.

Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

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

Restricted Cash

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.

As of March 31, 2022 and December 31, 2021, our restricted cash included in Other long-term assets on our Condensed Consolidated Balance Sheets was $ 10 million.

Trade Receivables Securitization and Factoring Programs

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

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

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

We also sell trade accounts receivable under our securitization program.

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.

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.

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 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 € 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.

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 nine months ended September 30, 2021 and 2020.

The maximum amount of net cash proceeds available at any one time under our securitization program, inclusive of any unsecured borrowings, is € 200 million (approximately $ 221 million as of March 31, 2022).

As of March 31, 2022, € 1 million (approximately $ 1 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 0.53 % as of March 31, 2022.

Information related to the trade receivables sold was as follows:

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

Three Months Ended March 31,

(In millions) 2022 2021 (1)

1 unchanged sentence

Receivables sold in period

$ 504 $ 355 $ 1,259 $ 1,008

Cash consideration

504 355 1,259 1,008

Factoring programs

1 unchanged sentence

Cash consideration

(1) Information for the three months ended March 31, 2021 excludes the Logistics segment.

Fair Value Measurements

7 unchanged sentences

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 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.

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 March 31, 2022 and December 31, 2021 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 the securitization program.

Our derivative instruments are classified as Level 2 and are valued using inputs other than quoted prices, such as foreign exchange rates and yield curves.

For information on financial liabilities, see Note 7—Debt.

The fair value hierarchy of cash equivalents was as follows:

(In millions) Carrying Value Fair Value Level 1

September 30, 2021 $ 159 $ 159 $ 159

March 31, 2022 $ 931 $ 931 $ 931

December 31, 2021 181 181 181

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.

Cash equivalents at March 31, 2022 include the cash proceeds from the sale of our intermodal operation in March 2022.

For further information, see Note 3—Divestiture.

Adoption of New Accounting Standard

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, “Income Taxes (Topic 740):

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

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

In November 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-10, “Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance.” The ASU increases the transparency surrounding government assistance by requiring annual disclosure of (i) the types of assistance received, (ii) an entity’s accounting for the assistance and (iii) the effect of the assistance on the entity’s financial statements.

We adopted this standard on January 1, 2022, on a prospective basis.

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

The adoption did not have a material impact on our financial statement disclosures.

Accounting Pronouncement Issued but Not Yet Effective

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

We are currently evaluating the impact of the new guidance.

We intend to apply this guidance if modifications of contracts that include LIBOR occur, which is not expected to have a material impact on our consolidated financial statements.

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,

Three Months Ended March 31,

(In millions) 2021

Revenue $ 1,818

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

Direct operating expense (exclusive of depreciation and amortization) 1,514

Sales, general and administrative expense 150

1 unchanged sentence

Transaction and other operating costs 17

Operating income (loss) ( 31 ) 84 87 88

Operating income 64

Other income ( 11 )

Interest expense 4

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

Income from discontinued operations before income tax provision 71

Income tax provision 16

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.

Net income from discontinued operations, net of taxes 55

Net income from discontinued operations attributable to noncontrolling

Net income from discontinued operations attributable to GXO $ 52

During the three months ended March 31, 2022 and 2021, we incurred approximately $ 4 million and $ 13 million, respectively, of costs related to the GXO spin-off.

For the three months ended March 31, 2021, $ 12 million of these

costs are reflected within income from discontinued operations in our Condensed Consolidated Statements of Income.

In accordance with a separation and distribution agreement, GXO has agreed to indemnify XPO for 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 $ 20 million each as of March 31, 2022 and approximately $ 23 million and $ 21 million, respectively, as of December 31, 2021.

In March 2022, we sold our North American intermodal operation for cash proceeds of approximately $ 705 million, net of cash disposed and subject to a customary post-closing purchase price adjustment.

We recorded a pre-tax gain on the sale of $ 450 million, net of transaction costs, for the three months ended March 31, 2022.

We agreed to provide certain specified customary transition services for a period not exceeding 12 months from the sale.

The intermodal operation generated revenue of $ 1.2 billion and operating income of $ 53 million for the year ended December 31, 2021.

The intermodal operation was included in our Brokerage and Other Services segment through the date of the sale.

Segment Reporting

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.

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

We are organized into 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.

In our asset-based 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.

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

In our asset-light Brokerage and Other Services segment, shippers create demand for our technology-enabled services and we place their freight with qualified independent carriers, pricing the transactions on either a contract or a spot basis.

Our truck brokerage business is the largest component of the segment, which also includes three complementary brokered services:

managed transportation, last mile logistics for heavy goods and global forwarding.

Our European business, which we plan to divest through either a sale or a listing on a European stock exchange, is also currently reported within this segment.

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 CODM regularly reviews financial information at the operating segment level to allocate resources to the segments and to assess their performance.

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

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

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

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.

Our CODM evaluates segment profit (loss) based on adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”), which we define as income from continuing operations before debt extinguishment loss, interest expense, income tax, depreciation and amortization expense, gain on sale of business, transaction and integration costs, restructuring costs and other adjustments.

Selected financial data for our segments is as follows:

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

Three Months Ended March 31,

(in millions) 2022 2021

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Interest expense 37 65

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

Income tax provision 113 19

Depreciation and amortization expense 116 119

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

Litigation settlements 29 — 29 —

Gain on sale of business ( 450 ) —

Transaction and integration costs (1)

Restructuring costs (2)

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

Income from continuing operations $ 489 $ 63

Depreciation and amortization expense

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Total $ 116 $ 119

(1) Transaction and integration costs for the three months ended March 31, 2022 and 2021 are primarily comprised of third-party professional fees related to strategic initiatives, including the spin-offs and other disposal activities, as well as retention awards paid to certain employees.

Transaction and integration costs for the three months ended March 31, 2022 and 2021 include $ 2 million and $ 1 million, respectively, related to our Brokerage and Other Services segment and $ 8 million and $ 4 million, respectively, related to Corporate.

(2) See Note 6— Restructuring Charges for further information on our restructuring actions.

Revenue Recognition

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

Three Months Ended September 30, 2021

(In millions) North American LTL Brokerage

Services Eliminations Total

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

North America (excluding United States) 22 73 — 95

France — 330 — 330

United Kingdom — 224 — 224

Europe (excluding France and United Kingdom) — 199 — 199

Other — 51 — 51

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

Three Months Ended September 30, 2020

(In millions) North American LTL Brokerage

Services Eliminations Total

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

North America (excluding United States) 20 57 — 77

France — 317 — 317

United Kingdom — 176 — 176

Europe (excluding France and United Kingdom) — 194 — 194

Other — 8 — 8

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

Nine Months Ended September 30, 2021

(In millions) North American LTL Brokerage

Services Eliminations Total

Three Months Ended March 31, 2022

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

United States $ 1,082 $ 1,519 $ ( 64 ) $ 2,537

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Total $ 1,105 $ 2,432 $ ( 64 ) $ 3,473

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

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

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Our revenue disaggregated by service offering was as follows:

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

Three Months Ended March 31,

(In millions) 2022 2021

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Other brokerage (2)

547 413 1,486 1,108

Total North America 2,754 2,271

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Eliminations ( 68 ) ( 45 )

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

Total $ 3,473 $ 2,989

(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.

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

Freight forwarding includes operations conducted outside of North America but managed by our North American entities.

In March 2022, we sold our intermodal operation.

For further information, see Note 3—Divestiture.

Performance Obligations

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

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.

On March 31, 2022, the fixed consideration component of our remaining performance obligation was approximately $ 120 million, and we expect approximately 89 % 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 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.

We engage in restructuring actions as part of our ongoing efforts to best use our resources and infrastructure, including actions in connection with spin-offs and other disposal activities.

These actions generally include severance and facility-related costs, including impairment of operating lease assets, as well as contract termination costs and are intended to improve our efficiency and profitability.

Our restructuring-related activity was as follows:

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 September 30, 2021

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

Three Months Ended March 31, 2022

(In millions) Reserve Balance

December 31, 2021 Charges Incurred Payments Reserve Balance

March 31, 2022

Brokerage and Other Services $ 6 $ 2 $ ( 3 ) $ 5

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Total facilities 2 — — 2

Total $ 13 $ 16 $ ( 12 ) $ — $ — $ 17

We expect the majority of the cash outlays related to the charges incurred in 2021 will be complete within twelve months.

Derivative Instruments

In the normal course of business, we are exposed to risks arising from business operations and economic factors, including fluctuations in interest rates and foreign currencies.

We use derivative instruments to manage the volatility related to these exposures.

The objective of these derivative instruments is to reduce fluctuations in our earnings and cash flows associated with changes in foreign currency exchange rates and interest rates.

These financial instruments are not used for trading or other speculative purposes.

Historically, we have not incurred, and do not expect to incur in the future, any losses as a result of counterparty default.

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

September 30, 2021

Derivative Assets Derivative Liabilities

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

Derivatives designated as hedges

Cross-currency swap agreements $ 362 Other current assets $ — Other current liabilities $ ( 10 )

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

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

Total $ — $ ( 12 )

December 31, 2020

Derivative Assets Derivative Liabilities

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

Derivatives designated as hedges

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

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

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

Total $ — $ ( 113 )

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

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

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

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

Derivatives designated as cash flow hedges

Cross-currency swap agreements $ — $ ( 9 ) $ 3 $ ( 8 ) $ — $ —

Derivatives designated as net investment hedges

Cross-currency swap agreements 41 ( 48 ) — — 1 4

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

Nine Months Ended September 30,

(In millions) 2021 2020 2021 2020 2021 2020

Derivatives designated as cash flow hedges

Cross-currency swap agreements $ 4 $ ( 4 ) $ 7 $ ( 8 ) $ — $ —

Interest rate swaps — ( 5 ) — — — —

Derivatives designated as net investment hedges

Cross-currency swap agreements 76 ( 29 ) — — 6 8

Contract termination

North American LTL — 3 ( 3 ) —

Total contract termination — 3 ( 3 ) —

Total $ 15 $ 6 $ ( 8 ) $ 13

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).

Cross-Currency Swap Agreements

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.

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.

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

These agreements expire at various dates through 2024.

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

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 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 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

We execute short-term interest rate swaps to mitigate variability in forecasted interest payments on our Senior Secured Term Loan Credit Agreement (the “Term Loan Credit Agreement”).

The interest rate swaps convert floating-rate interest payments into fixed rate interest payments.

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

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 Cash flows from operating activities of continuing operations on our Condensed Consolidated Statements of Cash Flows.

Foreign Currency Option and Forward Contracts

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

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

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 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

We expect the majority of the cash outlays related to the charges incurred in the first quarter of 2022 will be complete within 12 months.

March 31, 2022 December 31, 2021

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

ABL facility $ — $ — $ 200 $ 200

Term loan facilities $ 2,003 $ 1,979 $ 2,003 $ 1,977

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1,150 1,141 1,150 1,141

6.125 % Senior notes due 2023

6.75 % Senior notes due 2024

— — 1,000 989

6.25 % Senior notes due 2025

1,150 1,140 1,150 1,138

6.70 % Senior debentures due 2034

300 215 300 214

Borrowings related to securitization program — — 24 24

Finance leases, asset financing and other 224 224 240 240

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(In millions) Fair Value Level 1 Level 2

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

March 31, 2022 $ 3,717 $ 1,500 $ 2,217

December 31, 2021 3,811 1,571 2,240

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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.

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.

As of March 31, 2022, our borrowing base was $ 1.0 billion and our availability under our revolving loan credit agreement (the “ABL Facility”) was $ 996 million after considering outstanding letters of credit of $ 4 million.

As of March 31, 2022, we were in compliance with the ABL Facility’s financial covenants.

Letters of Credit Facility

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 September 30, 2021.

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

As of March 31, 2022, we have issued $ 185 million in aggregate face amount of letters of credit under our $ 200 million uncommitted secured evergreen letter of credit facility.

Term Loan Facilities

In the first quarter of 2021, we amended the Term Loan Credit Agreement to consolidate our tranches and lower the interest rate.

The applicable terms of the Term Loan Credit Agreement are as follows:

December 31, 2020

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

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

Interest spread:

Base rate loans 0.75 % 1.00 % 1.50 %

LIBOR loans 1.75 % 2.00 % 2.50 %

Maturity date February 2025 February 2025 February 2025

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.

In the first quarter of 2021, we amended our Senior Secured Term Loan Credit Agreement (the “Term Loan Credit Agreement”) and recorded a debt extinguishment loss of $ 3 million.

The interest rate on our term loan facility was 1.99 % as of March 31, 2022.

Senior Notes Due 2025

In March 2022, we provided notice to redeem $ 630 million of the $ 1.15 billion principal amount of our outstanding 6.25 % senior notes due 2025.

See Note 11—Subsequent Events for more information.

Senior Notes Due 2022

In January 2021, we redeemed our outstanding 6.50 % 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 nine months of 2021 due to this redemption.

Senior Notes Due 2025

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

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.

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

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).

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

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

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 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.

With respect to the warrants, through December 31, 2020, 0.3 million warrants were exchanged, and we issued 0.3 million shares of common stock.

In the first quarter of 2021, 975 preferred shares were exchanged, and we issued 0.1 million shares of common stock.

In the second quarter of 2021, the remaining 40 preferred shares were exchanged, and we issued 5,714 shares of common stock.

With respect to the warrants, in the first quarter of 2021, 9.8 million warrants were exchanged, and we issued 9.2 million shares of common stock.

Commencing in the fourth quarter of 2020, holders of our convertible preferred stock and warrants exchanged their holdings for our common stock or a combination of our common stock and cash.

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

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

In the first quarter of 2021, 975 preferred shares were exchanged, and we issued 0.1 million shares of common stock and 9.8 million warrants were exchanged, and we issued 9.2 million shares of common stock.

The warrants exchanged included holdings of Jacobs Private Equity, LLC, an entity controlled by the Company’s chairman and chief executive officer.

Share Repurchases

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

In the first quarter of 2020, we purchased and retired 2 million shares at an aggregate value of $ 114 million.

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

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.

The participating securities in 2020 consisted of our Series A Convertible Perpetual Preferred Stock.

The undistributed earnings are allocated between common shares and participating securities as if all earnings had been distributed during the period.

Losses are not allocated to the preferred shares.

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

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

Our remaining share repurchase authorization was $ 503 million as of March 31, 2022.

Earnings per Share

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

Three Months Ended March 31,

(In millions, except per share data) 2022 2021

Basic earnings (loss) per common share

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 )

Net income from continuing operations attributable to common shares $ 489 $ 63

Income (loss) from discontinued operations, net of taxes $ ( 1 ) $ 55

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Net income (loss) from discontinued operations attributable to common shares $ ( 1 ) $ 52

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 )

Net income from continuing operations attributable to common shares, basic $ 489 $ 63

Net income (loss) from discontinued operations attributable to common shares,

Net income attributable to common shares, basic $ 488 $ 115

Basic weighted-average common shares 115 106

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

Basic earnings from continuing operations per share $ 4.26 $ 0.59

Basic earnings (loss) from discontinued operations per share ( 0.01 ) 0.49

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

Basic earnings per share $ 4.25 $ 1.08

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 )

Net income from continuing operations attributable to common shares, diluted $ 489 $ 63

Net income (loss) from discontinued operations attributable to common shares,

Net income attributable to common shares, diluted $ 488 $ 115

Basic weighted-average common shares 115 106

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Diluted weighted-average common shares 116 112

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

Diluted earnings from continuing operations per share $ 4.23 $ 0.56

Diluted earnings (loss) from discontinued operations per share ( 0.01 ) 0.46

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

Potential common shares excluded — 10 — 21

Certain shares were not included in the computation of diluted earnings (loss) per share because the effect was anti-dilutive.

Legal and Regulatory Matters

Diluted earnings per share $ 4.22 $ 1.02

Commitments and Contingencies

We are involved, and will continue to be involved, in numerous proceedings arising out of the conduct of our business.

These proceedings may include claims for property damage or personal injury incurred in connection with the transportation of freight, claims regarding anti-competitive practices, and employment-related claims, including claims involving asserted breaches of employee restrictive covenants.

These matters also include numerous putative class action, multi-plaintiff and individual lawsuits, and administrative proceedings involving claims that our owner-operators or contract carriers should be treated as employees, rather than independent contractors (“misclassification claims”).

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

These proceedings include claims for property damage or personal injury incurred in connection with the transportation of freight, commercial disputes, insurance coverage disputes, and employment-related claims, including claims involving asserted breaches of employee restrictive covenants.

These matters also include several collective and class action cases involving claims that our owner-operators or contract carriers should be treated as employees, rather than independent contractors (“misclassification claims”) and may seek substantial monetary damages (including claims for unpaid wages, overtime, failure to provide meal and rest breaks, unreimbursed business expenses, penalties and other items), injunctive relief, or both.

We establish accruals for specific legal proceedings when it is considered probable that a loss has been incurred and the amount of the loss can be reasonably estimated.

We review and adjust accruals for loss contingencies quarterly and as additional information becomes available.

If a loss is not both probable and reasonably estimable, or if an exposure to loss exists in excess of the amount accrued, we assess whether there is at least a reasonable possibility that a loss, or additional loss, may have been incurred.

If a loss is not both probable and reasonably estimable, or if an exposure to loss exists in excess of the amount accrued, we assess whether there is at least a reasonable possibility

that a loss, or additional loss, may have been incurred.

If there is a reasonable possibility that a loss, or additional loss, may have been incurred, we disclose the estimate of the possible loss or range of loss if it is material and an estimate can be made, or disclose that such an estimate cannot be made.

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In the event we are required to satisfy a legal claim outside the scope of the coverage provided by insurance, our financial condition, results of operations or cash flows could be negatively impacted.

Intermodal Drayage Classification Claims

Certain of our intermodal drayage subsidiaries 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

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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”).

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.

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

Con-way’s captive insurer, Centron, was also a named defendant.

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.

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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.

There is no date yet set for the next stages of the proceeding.

The parties have filed cross-motions for summary judgment concerning the interpretation of certain of the fronting policies, which are yet to be decided.

Following summary judgment, we anticipate a jury trial on the pollution exclusion, then a bench trial on allocation of defense costs among the subject insurance policies.

We have accrued an immaterial amount for the potential exposure associated with Centron in the bench trial regarding allocation.

As any losses that may arise in connection with the fronting policies issued by defendant insurers ACE, Westport, and General are not reasonably estimable at this time, no liability has been accrued in the accompanying interim consolidated financial statements for those potential exposures.

Subsequent Events

In March 2022, we provided notice to redeem $ 630 million (“Redeemed Notes”) of the $ 1.15 billion principal amount of our outstanding 6.25 % senior notes due 2025.

The redemption price for the Redeemed Notes was 100 % of the principal amount plus a premium as defined in the indenture and accrued and unpaid interest.

In April 2022, we completed the redemption of the Redeemed Notes using available liquidity.

The loss on debt extinguishment of approximately $ 26 million will be reflected in the second quarter of 2022 results of operations.

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