What changed in this filing

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Item 1. Financial Statements

2022-08-08 compared with 2022-05-10 · 290 added, 135 removed, 412 unchanged (51% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

March 31, December 31,

June 30, December 31,

(In millions, except per share data) 2022 2021

33 unchanged sentences

115 shares issued and outstanding as of

March 31, 2022 and December 31, 2021

June 30, 2022 and December 31, 2021

Additional paid-in capital 1,187 1,179

6 unchanged sentences

Condensed Consolidated Statements of Income

Three Months Ended March 31,

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

(In millions, except per share data) 2022 2021 2022 2021

Revenue $ 3,232 $ 3,186 $ 6,705 $ 6,175

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

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

Cost of transportation and services (exclusive of

depreciation and amortization)

2,153 2,186 4,590 4,239

Direct operating expense (exclusive of depreciation

and amortization)

365 358 750 692

Sales, general and administrative expense 324 324 668 662

Depreciation and amortization expense 115 120 231 239

Gain on sale of business ( 450 ) —

(Gain) loss on sale of business 16 — ( 434 ) —

Transaction and integration costs 25 6 35 11

4 unchanged sentences

Interest expense 31 58 68 123

Income from continuing operations before income tax provision 602 82

Income from continuing operations before income tax

188 143 790 225

Income tax provision 47 30 160 49

2 unchanged sentences

Net income 141 158 629 276

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

Net income from discontinued operations attributable

to noncontrolling interests

— ( 2 ) — ( 5 )

Net income attributable to XPO $ 141 $ 156 $ 629 $ 271

5 unchanged sentences

Basic earnings per share from continuing operations $ 1.23 $ 1.01 $ 5.49 $ 1.61

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

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

Basic earnings (loss) per share from discontinued

— 0.38 ( 0.01 ) 0.87

Basic earnings per share attributable to common

$ 1.23 $ 1.39 $ 5.48 $ 2.48

Diluted earnings per share from continuing operations $ 1.22 $ 1.00 $ 5.45 $ 1.56

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

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

Diluted earnings (loss) per share from discontinued

— 0.38 ( 0.01 ) 0.84

Diluted earnings per share attributable to common

$ 1.22 $ 1.38 $ 5.44 $ 2.40

Weighted-average common shares outstanding

4 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income

Three Months Ended March 31,

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

(In millions) 2022 2021 2022 2021

Net income $ 141 $ 158 $ 629 $ 276

Other comprehensive loss, net of tax

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

Other comprehensive income (loss), net of tax

Foreign currency translation gain (loss), net of tax effect of $( 9 ), $ 3 , $( 11 ) and $( 3 )

$ ( 46 ) $ 15 $ ( 72 ) $ ( 27 )

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

effect of $ — and $ —

Other comprehensive loss ( 25 ) ( 42 )

Unrealized gain on financial assets/liabilities designated as hedging

instruments, net of tax effect of $( 1 ), $ — , $( 1 ) and $ —

Other comprehensive income (loss) ( 43 ) 15 ( 68 ) ( 27 )

Comprehensive income $ 98 $ 173 $ 561 $ 249

Comprehensive loss attributable to noncontrolling interests — ( 2 )

Comprehensive income attributable to noncontrolling interests — 5 — 3

Comprehensive income attributable to XPO $ 98 $ 168 $ 561 $ 246

2 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31,

Six Months Ended June 30,

(In millions) 2022 2021

8 unchanged sentences

Accretion of debt 8 10

Deferred tax (benefit) expense ( 12 ) 9

Deferred tax expense 6 10

Debt extinguishment loss 26 8

11 unchanged sentences

Proceeds from sale of property and equipment 7 60

Proceeds from settlement of cross currency swaps 19 —

Net cash provided by (used in) investing activities from continuing operations 464 ( 75 )

2 unchanged sentences

Repurchase of debt ( 651 ) ( 1,200 )

Proceeds from borrowings on ABL facility 275 —

Repayment of borrowings on ABL facility ( 275 ) ( 200 )

3 unchanged sentences

Payment for tax withholdings for restricted shares ( 13 ) ( 22 )

Other ( 2 ) 5

Net cash used in financing activities from continuing operations ( 673 ) ( 1,489 )

Three Months Ended March 31,

Six Months Ended June 30,

(In millions) 2022 2021

3 unchanged sentences

Financing activities of discontinued operations — ( 159 )

Net cash provided by discontinued operations 1 2

Net cash provided by (used in) discontinued operations ( 3 ) 2

Effect of exchange rates on cash, cash equivalents and restricted cash ( 14 ) 1

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Series A Preferred Stock Common Stock

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

(Shares in thousands, dollars in millions) Shares Amount Shares Amount Additional Paid-In Capital Retained Earnings Accumulated Other

Comprehensive Loss Total XPO Stockholders' Equity Non-controlling Interests Total Equity

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

Net income — — — — — 141 — 141 — 141

Other comprehensive loss — — — — — — ( 43 ) ( 43 ) — ( 43 )

Exercise and vesting of stock compensation awards

— — 51 — — — — — — —

Tax withholdings related to vesting of stock compensation awards

— — — — ( 1 ) — — ( 1 ) — ( 1 )

Stock compensation expense

— — — — 10 — — 10 — 10

— — — — 2 — — 2 — 2

Balance as of June 30, 2022 — $ — 115,033 $ — $ 1,187 $ 672 $ ( 152 ) $ 1,707 $ — $ 1,707

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

8 unchanged sentences

— — — — 3 — — 3 — 3

Balance as of June 30, 2022 — $ — 115,033 $ — $ 1,187 $ 672 $ ( 152 ) $ 1,707 $ — $ 1,707

XPO Logistics, Inc.

Condensed Consolidated Statements of Changes in Equity (continued)

Series A Preferred Stock Common Stock

(Shares in thousands, dollars in millions) Shares Amount Shares Amount Additional Paid-In Capital Retained Earnings Accumulated Other

Comprehensive Loss Total XPO Stockholders' Equity Non-controlling Interests Total Equity

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

Net income — — — — — 156 — 156 2 158

Other comprehensive income — — — — — — 12 12 3 15

Exercise and vesting of stock compensation awards

— — 44 — — — — — — —

Tax withholdings related to vesting of stock compensation awards

— — — — ( 1 ) — — ( 1 ) — ( 1 )

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

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

Dividend declared

— — — — — — — — ( 3 ) ( 3 )

Stock compensation expense

— — — — 15 — — 15 — 15

— — — — 3 — — 3 — 3

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

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, 2020 1 $ 1 102,052 $ — $ 1,998 $ 868 $ ( 158 ) $ 2,709 $ 140 $ 2,849

6 unchanged sentences

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 — — — — — — —

1 unchanged sentence

— — — — 25 — — 25 — 25

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

Other — — — — 3 — — 3 — 3

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

See accompanying notes to condensed consolidated financial statements.

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

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.

2022 Planned RXO Spin-Off

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

In addition, the Board of Directors authorized two divestitures:

our North American intermodal operation, which we sold in March 2022, and the divestiture of our European business.

For further information on the sale of our intermodal operation, see Note 3—Divestiture.

The spin-off to XPO shareholders, if completed as planned, will result in two independent, publicly traded companies.

The spin-off company will be RXO, Inc.

(“RXO”) and will be comprised of our asset-light core truck brokerage business and complementary brokered services for managed transportation, last mile logistics and global forwarding.

The remaining company, XPO, will be a pure-play provider of asset-based 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.

federal income tax purposes, will result in XPO shareholders owning stock in both XPO and RXO.

In connection with the transaction, it is anticipated that a portion of XPO’s outstanding debt will be repaid using proceeds from debt incurred by RXO.

We currently expect to complete the RXO spin-off transaction 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 our Board of Directors, and final approval by the 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.

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

Operating results for the three and six months ended June 30, 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 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.

As of June 30, 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

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

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.

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 months ended March 31, 2022 and 2021.

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 $ 210 million as of June 30, 2022).

As of June 30, 2022, less than € 1 million (less than $ 1 million) was available under the program, subject to having sufficient receivables available to sell and with consideration to amounts previously sold.

The weighted average interest rate was 0.78 % as of June 30, 2022.

Information related to the trade receivables sold was as follows:

Three Months Ended March 31,

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

(In millions) 2022 2021 (1)

2022 2021 (1)

Securitization programs

Receivables sold in period

$ 458 $ 408 $ 905 $ 755

Cash consideration

458 408 905 755

Factoring programs

1 unchanged sentence

Cash consideration

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

(1) Information for the three and six months ended June 30, 2021 exclude 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 March 31, 2022 and December 31, 2021 due to their short-term nature and/or being receivable or payable on demand.

The carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and current maturities of long-term debt approximated their fair values as of June 30, 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.

For information on the fair value hierarchy of our derivative instruments, see Note 7—Derivative Instruments;

and for further information on financial liabilities, see Note 8—Debt.

The fair value hierarchy of cash equivalents was as follows:

(In millions) Carrying Value Fair Value Level 1

March 31, 2022 $ 931 $ 931 $ 931

June 30, 2022 $ 377 $ 377 $ 377

December 31, 2021 181 181 181

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 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.

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.

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

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.

We intend to apply this guidance if modifications of contracts that include LIBOR occur.

Adoption of the standard is not expected to have a material impact on our consolidated financial statements.

Discontinued Operations

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

Three Months Ended March 31,

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

(In millions) 2021 2021

12 unchanged sentences

Net income from discontinued operations attributable to GXO $ 43 $ 95

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.

No costs related to the GXO spin-off were incurred for the three months ended June 30, 2022.

For the six months ended June 30, 2022, we incurred costs of approximately $ 4 million related to the GXO spin-off.

For the three and six months ended June 30, 2021, we incurred costs of approximately $ 30 million and $ 43 million, respectively, related to the GXO spin-off, of which $ 27 million and $ 39 million, respectively, 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 the logistics segment prior to the spin-off and remain obligations of XPO.

The receivable and accrued expense for these matters was approximately $ 19 million each as of June 30, 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 customary post-closing working capital adjustments that remain ongoing.

We recorded a $ 450 million pre-tax gain on the sale, net of transaction costs, during the first quarter of 2022.

During the second quarter of 2022, we recognized a working capital adjustment of $ 16 million, which reduced the gain initially recognized in the first quarter of 2022.

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

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We are organized into two reportable segments:

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

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.

(i) North American LTL;

and (ii) Brokerage and Other Services.

In our asset-based North American LTL segment, we provide our customers with geographic density and day-definite regional, national and cross-border LTL freight services.

In our asset-light Brokerage and Other Services segment, our core truck brokerage business places shippers’ freight with qualified independent carriers using our XPO Connect ® technology platform.

Truck brokerage is the largest component of the segment, which also includes complementary brokered transportation services for managed transportation, last mile logistics and global forwarding.

In addition, our European business is reported in this segment, and our North American intermodal operation was included in the segment through its date of sale in March 2022.

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

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

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.

Our CODM evaluates segment profit (loss) based on adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”), which we define as net income from continuing operations attributable to common shareholders before debt extinguishment loss, interest expense, income tax, depreciation and amortization expense, (gain) loss 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 March 31,

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

(in millions) 2022 2021 2022 2021

12 unchanged sentences

Depreciation and amortization expense 115 120 231 239

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

Gain on sale of business ( 450 ) —

Unrealized loss on foreign currency

option and forward contracts

(Gain) loss on sale of business 16 — ( 434 ) —

Transaction and integration costs (1)

Restructuring costs (2)

Income from continuing operations $ 489 $ 63

Net income from continuing operations

attributable to common shareholders

$ 141 $ 113 $ 630 $ 176

Depreciation and amortization expense

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Total $ 115 $ 120 $ 231 $ 239

(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.

(1) Transaction and integration costs for the periods ended June 30, 2022 and 2021 are primarily comprised of third-party professional fees related to strategic initiatives, including the spin-offs and other divestment activities, as well as retention awards paid to certain employees.

Transaction and integration costs for the three months ended June 30, 2022 and 2021 include $ 2 million and $ — million , respectively, related to our North American LTL segment, $ 1 million and $ 2 million, respectively, related to our Brokerage and Other Services segment and $ 22 million and $ 4 million, respectively, related to Corporate.

Transaction and integration costs for the six months ended June 30, 2022 and 2021 include $ 2 million and $ — million , respectively, related to our North American LTL segment, $ 3 million and $ 3 million, respectively, related to our Brokerage and Other Services segment and $ 30 million and $ 8 million, respectively, related to Corporate.

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

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

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

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

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Total $ 1,239 $ 2,067 $ ( 74 ) $ 3,232

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

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

6 unchanged sentences

Total $ 1,081 $ 2,161 $ ( 56 ) $ 3,186

Six Months Ended June 30, 2022

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

United States $ 2,294 $ 2,660 $ ( 138 ) $ 4,816

North America (excluding United States) 50 203 — 253

France — 704 — 704

United Kingdom — 449 — 449

Europe (excluding France and United Kingdom) — 441 — 441

Other — 42 — 42

Total $ 2,344 $ 4,499 $ ( 138 ) $ 6,705

Six Months Ended June 30, 2021

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

United States $ 1,997 $ 2,497 $ ( 100 ) $ 4,394

North America (excluding United States) 46 139 — 185

France — 694 — 694

United Kingdom — 431 — 431

Europe (excluding France and United Kingdom) — 428 — 428

Other — 43 — 43

Total $ 2,043 $ 4,232 $ ( 100 ) $ 6,175

Our revenue disaggregated by service offering was as follows:

Three Months Ended March 31,

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

(In millions) 2022 2021 2022 2021

4 unchanged sentences

Other brokerage (2)

199 486 750 939

Total North America 2,503 2,460 5,257 4,731

3 unchanged sentences

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

(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.

(2) Other brokerage includes expedite, freight forwarding and managed transportation services, and intermodal through its date of sale in March 2022.

For further information, see Note 3—Divestiture.

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

Performance Obligations

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

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

On 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.

(i) have original expected durations of one year or less;

or (ii) contain variable consideration.

On June 30, 2022, the fixed consideration component of our remaining performance obligation was approximately $ 139 million, and we expect approximately 91 % 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;

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 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.

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 divestment 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 going forward.

Our restructuring-related activity was as follows:

Three Months Ended March 31, 2022

Six Months Ended June 30, 2022

(In millions) Reserve Balance

December 31, 2021 Charges Incurred Payments Reserve Balance

March 31, 2022

June 30, 2022

Brokerage and Other Services $ 6 $ 4 $ ( 6 ) $ 4

5 unchanged sentences

North American LTL — 3 ( 3 ) —

Brokerage and Other Services — 1 — 1

Total contract termination — 4 ( 3 ) 1

Total $ 15 $ 10 $ ( 14 ) $ 11

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

We expect that the majority of the cash outlays related to the charges incurred in the first six months of 2022 will be completed within 12 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:

June 30, 2022

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 $ 343 Other current assets $ 8 Other current liabilities $ —

Cross-currency swap agreements 89 Other long-term assets 6 Other long-term liabilities —

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

Total $ 18 $ —

December 31, 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 $ ( 4 )

Cross-currency swap agreements 110 Other long-term assets — Other long-term liabilities —

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

Total $ — $ ( 4 )

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 was as follows:

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

Three Months Ended June 30,

(In millions) 2022 2021 2022 2021 2022 2021

Derivatives designated as cash flow hedges

Cross-currency swap agreements $ — $ ( 2 ) $ — $ ( 2 ) $ — $ —

Interest rate swaps 4 — — — — —

Derivatives designated as net investment hedges

Cross-currency swap agreements 28 ( 13 ) — — 2 2

Total $ 32 $ ( 15 ) $ — $ ( 2 ) $ 2 $ 2

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

Six Months Ended June 30,

(In millions) 2022 2021 2022 2021 2022 2021

Derivatives designated as cash flow hedges

Cross-currency swap agreements $ — $ 4 $ — $ 4 $ — $ —

Interest rate swaps 5 — — — — —

Derivatives designated as net investment hedges

Cross-currency swap agreements 37 35 — — 4 5

Total $ 42 $ 39 $ — $ 4 $ 4 $ 5

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.

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 Accumulated other comprehensive income (“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.

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.

In the second quarter of 2022, we received approximately $ 19 million related to the settlement of certain cross currency swaps that matured during the quarter.

The proceeds were included in Cash flows from investing activities of continuing operations on our Condensed Consolidated Statements of Cash Flows.

Prior to the spin-off of GXO in 2021, we held 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 Other income on our Condensed Consolidated Statements of Income 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.

These swaps were re-designated as net investment hedges in the third quarter of 2021.

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 outstanding interest rate swaps mature in the fourth quarter of 2022.

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.

June 30, 2022 December 31, 2021

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

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(In millions) Fair Value Level 1 Level 2

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

June 30, 2022 $ 2,927 $ 799 $ 2,128

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.

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.

As of June 30, 2022, our borrowing base was $ 1 billion and our availability under our revolving loan credit agreement (the “ABL Facility”) was $ 995 million after considering outstanding letters of credit of $ 5 million.

As of June 30, 2022, we were in compliance with the ABL Facility’s financial covenants.

Letters of Credit Facility

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.

As of June 30, 2022, we had 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 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.

In the first quarter of 2021, we amended our Term Loan Credit Agreement and recorded a debt extinguishment loss of $ 3 million in the first six months of 2021.

The interest rate on our term loan facility was 2.87 % as of June 30, 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.

In April 2022, we redeemed $ 630 million of the then $ 1.15 billion outstanding principal amount of our 6.25 % senior notes due 2025.

The redemption price for the notes was 100 % of the principal amount plus a premium, as defined in the indenture, of approximately $ 21 million and accrued and unpaid interest.

We paid for the redemption using available liquidity.

We recorded a debt extinguishment loss of $ 26 million in the second quarter of 2022 due to this redemption.

Senior Notes Due 2022

2 unchanged sentences

We paid for the redemption with available cash.

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

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

Stockholders’ Equity

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

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.

In the first quarter of 2021, 975 preferred shares were exchanged, and we issued approximately 139 thousand 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.

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

Subsequent to the exchange in the second quarter of 2021, there are no shares of preferred stock or warrants outstanding.

Share Repurchases

3 unchanged sentences

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

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

Our remaining share repurchase authorization was $ 503 million as of June 30, 2022.

Earnings per Share

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

Three Months Ended March 31,

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

(In millions, except per share data) 2022 2021 2022 2021

Basic earnings (loss) per common share

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

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

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

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

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

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

Net income from continuing operations attributable to

common shares

$ 141 $ 113 $ 630 $ 176

Net income (loss) from discontinued operations, net of

amounts attributable to noncontrolling interest

— 43 ( 1 ) 95

Net income attributable to common shares, basic $ 141 $ 156 $ 629 $ 271

Basic weighted-average common shares 115 112 115 109

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 per share $ 4.25 $ 1.08

Diluted earnings (loss) per common share

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

Dilutive effect of stock-based awards and warrants 1 1 1 4

Diluted weighted-average common shares 116 113 116 113

Basic earnings from continuing operations per share $ 1.23 $ 1.01 $ 5.49 $ 1.61

Basic earnings (loss) from discontinued operations per

— 0.38 ( 0.01 ) 0.87

Basic earnings per share $ 1.23 $ 1.39 $ 5.48 $ 2.48

Diluted earnings from continuing operations per share $ 1.22 $ 1.00 $ 5.45 $ 1.56

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

Diluted earnings (loss) from discontinued operations per

— 0.38 ( 0.01 ) 0.84

Diluted earnings per share $ 1.22 $ 1.38 $ 5.44 $ 2.40

1 unchanged sentence

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

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.

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

These matters also include several class action and collective action cases involving claims that the contract carriers with which we contract for performance of delivery services, or their delivery workers, should be treated as employees, rather than independent contractors (“misclassification claims”) and may seek substantial monetary damages (including claims for unpaid wages, overtime, unreimbursed business expenses, deductions from wages, 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.

The determination as to whether a loss can reasonably be considered to be possible or probable is based on our assessment, together with legal counsel, regarding the ultimate outcome of the matter.

The determination as to whether a loss can

reasonably be considered to be possible or probable is based on our assessment, together with legal counsel, regarding the ultimate outcome of the matter.

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

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, was filed in the U.S.

District Court for the District of Connecticut against us and some of our current and former executives, alleging violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Section 20(a) of the Exchange Act, based on alleged material misstatements and omissions in our public filings with the U.S.

District Court for the District of Connecticut against us and some of our current and former executives, alleging violations of Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 thereunder, and Section 20(a) of the Exchange Act, based on alleged material misstatements and omissions in our public filings with the U.S.

Securities and Exchange Commission.

5 unchanged sentences

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

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

On April 29, 2021, the Pension Funds filed a notice of appeal.

On June 30, 2022, the U.S.

Court of Appeals for the Second Circuit affirmed the district court’s dismissal with prejudice of the first amended consolidated compliant.

The Pension Funds did not petition for rehearing of the appellate decision by the July 14, 2022 deadline.

The Pension Funds’ deadline to petition the U.S.

Supreme Court for review is September 28, 2022.

If the Pension Funds do not file such petition by that date, the case will be concluded.

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

10 unchanged sentences

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

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

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

We are unable at this time to determine the amount of the possible loss or range of loss, if any, that we may incur as a result of these matters.

Plaintiffs stipulated that they would dismiss the shareholder derivative action with prejudice if the Labul dismissal was affirmed on appeal, including any petitions for rehearing.

The Labul dismissal was affirmed on appeal on June 30, 2022, and the deadline for a rehearing petition passed on July 14, 2022.

On July 26, 2022, the Court issued an order dismissing the Jez case with prejudice.

Insurance Contribution Litigation

2 unchanged sentences

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.

15 unchanged sentences

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