What changed in this filing

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Item 1. Financial Statements

2022-11-02 compared with 2022-08-08 · 190 added, 166 removed, 536 unchanged (40% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

June 30, December 31,

September 30, December 31,

(In millions, except per share data) 2022 2021

33 unchanged sentences

115 shares issued and outstanding as of

June 30, 2022 and December 31, 2021

September 30, 2022 and December 31, 2021

Additional paid-in capital 1,195 1,179

5 unchanged sentences

XPO Logistics, Inc.

Condensed Consolidated Statements of Income

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

Condensed Consolidated Statements of Income (Loss)

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

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

8 unchanged sentences

Depreciation and amortization expense 118 118 349 357

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

Gain on sale of business — — ( 434 ) —

Transaction and integration costs 25 15 60 26

9 unchanged sentences

Income (loss) from discontinued operations, net of taxes — ( 78 ) ( 1 ) 22

Net income 141 158 629 276

Net income (loss) 131 ( 57 ) 760 219

Net income from discontinued operations attributable

to noncontrolling interests

— ( 2 ) — ( 5 )

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

Net income (loss) attributable to XPO $ 131 $ ( 57 ) $ 760 $ 214

Net income (loss) attributable to common shareholders

1 unchanged sentence

Discontinued operations — ( 78 ) ( 1 ) 17

Net income attributable to common shareholders $ 141 $ 156 $ 629 $ 271

Net income (loss) attributable to common

$ 131 $ ( 57 ) $ 760 $ 214

Earnings (loss) per share data

2 unchanged sentences

— ( 0.69 ) ( 0.01 ) 0.15

Basic earnings per share attributable to common

Basic earnings (loss) per share attributable to common

$ 1.14 $ ( 0.50 ) $ 6.61 $ 1.93

2 unchanged sentences

— ( 0.68 ) ( 0.01 ) 0.14

Diluted earnings per share attributable to common

Diluted earnings (loss) per share attributable to

common shareholders

$ 1.13 $ ( 0.49 ) $ 6.57 $ 1.87

4 unchanged sentences

XPO Logistics, Inc.

Condensed Consolidated Statements of Comprehensive Income

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

Condensed Consolidated Statements of Comprehensive Income (Loss)

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

(In millions) 2022 2021 2022 2021

Net income $ 141 $ 158 $ 629 $ 276

Other comprehensive income (loss), net of tax

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

Net income (loss) $ 131 $ ( 57 ) $ 760 $ 219

Other comprehensive loss, net of tax

Foreign currency translation loss, net of tax effect of $( 7 ), $ 7 , $( 18 ) and $ 4

$ ( 60 ) $ ( 47 ) $ ( 132 ) $ ( 74 )

Unrealized gain on financial assets/liabilities designated as hedging

Unrealized gain (loss) on financial assets/liabilities designated as hedging

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

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

Comprehensive income $ 98 $ 173 $ 561 $ 249

— ( 3 ) 4 ( 3 )

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

Other comprehensive loss ( 60 ) ( 22 ) ( 128 ) ( 49 )

Comprehensive income (loss) $ 71 $ ( 79 ) $ 632 $ 170

Comprehensive income attributable to noncontrolling interests — — — 3

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

Comprehensive income (loss) attributable to XPO $ 71 $ ( 79 ) $ 632 $ 167

See accompanying notes to condensed consolidated financial statements.

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Six Months Ended June 30,

Nine Months Ended September 30,

(In millions) 2022 2021

23 unchanged sentences

Proceeds from settlement of cross currency swaps 29 —

Other — ( 3 )

Net cash provided by (used in) investing activities from continuing operations 351 ( 143 )

6 unchanged sentences

Payment for debt issuance costs — ( 5 )

Issuance of common stock — 384

Change in bank overdrafts 6 33

Payment for tax withholdings for restricted shares ( 13 ) ( 25 )

Distribution from GXO — 794

Other ( 1 ) ( 5 )

Net cash used in financing activities from continuing operations ( 706 ) ( 1,880 )

Six Months Ended June 30,

Nine Months Ended September 30,

(In millions) 2022 2021

3 unchanged sentences

Financing activities of discontinued operations — ( 302 )

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

Net cash used in discontinued operations ( 3 ) ( 329 )

Effect of exchange rates on cash, cash equivalents and restricted cash ( 25 ) ( 7 )

15 unchanged sentences

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

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

Net income — — — — — 131 — 131 — 131

2 unchanged sentences

— — 19 — — — — — — —

Tax withholdings related to vesting of stock compensation awards

— — — — ( 1 ) — — ( 1 ) — ( 1 )

Stock compensation expense

— — — — 8 — — 8 — 8

— — — — 2 — — 2 — 2

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

Balance as of September 30, 2022 — $ — 115,052 $ — $ 1,195 $ 803 $ ( 212 ) $ 1,786 $ — $ 1,786

Series A Preferred Stock Common Stock

11 unchanged sentences

— — — — 3 — — 3 — 3

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

Balance as of September 30, 2022 — $ — 115,052 $ — $ 1,195 $ 803 $ ( 212 ) $ 1,786 $ — $ 1,786

XPO Logistics, Inc.

1 unchanged sentence

Series A Preferred Stock Common Stock

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

(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 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

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

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

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

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

Exercise and vesting of stock compensation awards

2 unchanged sentences

— — — — ( 3 ) — — ( 3 ) — ( 3 )

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

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

Dividend declared

— — — — — — — — ( 3 ) ( 3 )

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

Stock compensation expense

— — — — 19 — — 19 — 19

— — — — 3 — — 3 — 3

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

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

Series A Preferred Stock Common Stock

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

(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

2 unchanged sentences

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

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

Exercise and vesting of stock compensation awards

2 unchanged sentences

— — — — ( 25 ) — — ( 25 ) — ( 25 )

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

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

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Other — — — — 3 — — 3 — 3

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

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

See accompanying notes to condensed consolidated financial statements.

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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.

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

in North America, we achieved this primarily by providing less-than-truckload (“LTL”) and truck brokerage services.

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

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, 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.

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.

2022 Strategic Plan

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 as a publicly traded company, which we completed in November 2022.

In addition, our Board of Directors authorized the planned divestitures of our North American intermodal operation, which we sold in March 2022, and our European business, which we intend to divest.

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

There can be no assurance that the divestiture of our European business will occur, or of the terms or timing of a transaction.

We completed the spin-off of our tech-enabled brokered transportation platform on November 1, 2022, which created a new public company, RXO, Inc.

(“RXO”), comprised of our former services for truck brokerage, managed transportation, last mile and freight forwarding.

The transaction is intended to be tax-free to XPO and our shareholders for U.S.

federal income tax purposes.

The spin-off was accomplished by the distribution of 100 % of the outstanding common stock of RXO to XPO shareholders, creating a new, independent public company that began trading under the symbol “RXO” on the New York Stock Exchange.

XPO shareholders received one share of RXO common stock for every share of XPO common stock held at the close of business on October 20, 2022, the record date for the distribution.

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

The historical results of operations and the financial position of RXO are included in the condensed consolidated financial statements in this Form 10-Q.

The RXO businesses will not be consolidated in our reporting from November 1, 2022 forward, and such businesses will be reflected as discontinued operations in all periods prior to the spin-off.

In connection with the spin-off, we have entered into a separation and distribution agreement as well as various other agreements with RXO 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 provide certain services to RXO.

Basis of Presentation

4 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 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.

Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

Restricted Cash

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.

As of September 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 $ 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.

Charges for commitment fees, which are based on a percentage of available amounts, and charges for administrative fees were not material to our results of operations for the three and six months ended June 30, 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 $ 196 million as of September 30, 2022).

As of September 30, 2022, € 6 million (approximately $ 6 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 1.16 % as of September 30, 2022.

Information related to the trade receivables sold was as follows:

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

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

(In millions) 2022 2021 2022 2021

2022 2021 (1)

Securitization programs

6 unchanged sentences

Cash consideration

(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 June 30, 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 September 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 the fair value hierarchy of our derivative instruments, see Note 7—Derivative Instruments;

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(In millions) Carrying Value Fair Value Level 1

June 30, 2022 $ 377 $ 377 $ 377

September 30, 2022 $ 502 $ 502 $ 502

December 31, 2021 181 181 181

8 unchanged sentences

Accounting Pronouncement Issued but Not Yet Effective

In September 2022, the FASB issued ASU 2022-04, “Liabilities - Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations.” The ASU increases the transparency surrounding supplier finance programs by requiring the buyer to disclose information on an annual basis about the key terms of the program, the outstanding obligation amounts as of the end of the period, a rollforward of such amounts, and the balance sheet presentation of the related amounts.

Additionally, the obligation amount outstanding at the end of the period must be disclosed in interim periods.

The amendments are effective for fiscal years beginning after December 15, 2022 except for the requirement to disclose the rollforward information, which is effective for fiscal years beginning after December 15, 2023.

Early adoption is permitted.

We are currently evaluating the impact of the new guidance, which is limited to financial statement disclosures.

In March 2020, the FASB issued ASU 2020-04, “Reference rate reform (Topic 848)—Facilitation of the effects of reference rate reform on financial reporting.” The ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform.

4 unchanged sentences

Discontinued Operations

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

In connection with the spin-off, we received a cash distribution of $ 794 million, which we used to repay a portion of our outstanding borrowings.

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

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

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

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

(In millions) 2021 2021

4 unchanged sentences

Transaction and other operating costs 59 101

Operating income 54 118

Operating income (loss) ( 31 ) 87

Other income ( 4 ) ( 27 )

Interest expense 3 12

Income from discontinued operations before income tax provision 61 132

Income (loss) from discontinued operations before income tax

Income tax provision 48 80

Net income from discontinued operations, net of taxes 45 100

Net income from discontinued operations attributable to noncontrolling

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

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.

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

Net income from discontinued operations attributable to

noncontrolling interests

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

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

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

For the three and nine months ended September 30, 2021, we incurred costs of approximately $ 68 million and $ 111 million, respectively, related to the GXO 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).

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.

The receivable and accrued expense for these matters was approximately $ 17 million each as of September 30, 2022 and approximately $ 23 million and $ 21 million, respectively, as of December 31, 2021.

In March 2022, we sold intermodal 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.

1 unchanged sentence

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.

Intermodal generated revenue of $ 1.2 billion ($ 1.1 billion excluding intercompany transactions) and operating income of approximately $ 53 million for the year ended December 31, 2021.

Intermodal was included in our Brokerage and Other Services segment through the date of the sale.

In conjunction with the RXO spin-off, and effective in the fourth quarter of 2022, the results of intermodal qualify to be accounted for as a discontinued operation because the sale was part of one strategic plan of disposal, and all periods prior to the date of the spin-off will be reflected as a discontinued operation.

Segment Reporting

We are organized into two reportable segments:

Effective through September 30, 2022, we are organized into two reportable segments:

(i) North American LTL;

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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.

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

In addition, our European business is reported in this segment, and intermodal 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 eliminate intersegment revenues and expenses in our consolidated results.

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

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

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

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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 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.

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 on sale of business, litigation settlements for significant matters, transaction and integration costs, restructuring costs and other adjustments.

Selected financial data for our segments is as follows:

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

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

(in millions) 2022 2021 2022 2021

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option and forward contracts

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

Gain on sale of business — — ( 434 ) —

Litigation settlements — 29 — 29

Transaction and integration costs (1)

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Total $ 118 $ 118 $ 349 $ 357

(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.

(1) Transaction and integration costs for the periods ended September 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 September 30, 2022 and 2021 include $ — million and $ 1 million, respectively, related to our North American LTL segment, $ 3 million and $ 5 million, respectively, related to our Brokerage and Other Services segment and $ 22 million and $ 9 million, respectively, related to Corporate.

Transaction and integration costs for the nine months ended September 30, 2022 and 2021 include $ 2 million and $ 1 million, respectively, related to our North American LTL segment, $ 6 million and $ 8 million, respectively, related to our Brokerage and Other Services segment and $ 52 million and $ 17 million, respectively, related to Corporate.

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

In connection with the RXO spin-off, and effective in the fourth quarter of 2022, we will revise our reportable segments to reflect our new internal organization.

Revenue Recognition

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

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

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

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Total $ 1,204 $ 1,921 $ ( 83 ) $ 3,042

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

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

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

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

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

6 unchanged sentences

Total $ 3,548 $ 6,420 $ ( 221 ) $ 9,747

Six Months Ended June 30, 2021

Nine Months Ended September 30, 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 June 30, Six Months Ended June 30,

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

(In millions) 2022 2021 2022 2021

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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.

On September 30, 2022, the fixed consideration component of our remaining performance obligation was approximately $ 151 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;

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Our restructuring-related activity was as follows:

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

(In millions) Reserve Balance

December 31, 2021 Charges Incurred Payments Reserve Balance

June 30, 2022

December 31, 2021 Charges Incurred Payments Foreign Exchange and Other Reserve Balance

September 30, 2022

North American LTL $ — $ 2 $ — $ — $ 2

Brokerage and Other Services 6 6 ( 9 ) ( 1 ) 2

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Total $ 15 $ 19 $ ( 19 ) $ ( 1 ) $ 14

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.

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

Derivative Instruments

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

June 30, 2022

September 30, 2022

Derivative Assets Derivative Liabilities

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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,

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

Amount of Gain Recognized in Other Comprehensive Loss on Derivatives Amount of Gain 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) 2022 2021 2022 2021 2022 2021

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Cross-currency swap agreements $ — $ — $ — $ 3 $ — $ —

Interest rate swaps 4 — — — — —

Derivatives designated as net investment hedges

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Total $ 25 $ 41 $ — $ 3 $ 1 $ 1

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,

Amount of Gain Recognized in Other Comprehensive 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)

Nine Months Ended September 30,

(In millions) 2022 2021 2022 2021 2022 2021

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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.

During the first nine months of 2022, we received approximately $ 29 million related to the settlement of certain cross currency swaps that matured during the period.

The fair value adjustments related to these swaps remain in AOCI and partially offset foreign currency translation adjustment losses on our net investments in foreign subsidiaries.

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

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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.

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 (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.

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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

September 30, 2022 December 31, 2021

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

Term loan facilities $ 2,003 $ 1,976 $ 2,003 $ 1,977

Term loan facility $ 2,003 $ 1,978 $ 2,003 $ 1,977

6.25 % senior notes due 2025

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(In millions) Fair Value Level 1 Level 2

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

September 30, 2022 $ 2,944 $ 808 $ 2,136

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 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.

As of September 30, 2022, our borrowing base was $ 1 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 September 30, 2022, we were in compliance with the ABL Facility’s financial covenants.

In connection with the spin-off, effective November 4, 2022, the commitments under the ABL Facility will automatically be reduced from $ 1 billion to $ 600 million with no further action by any of the parties thereto.

Adjusting for this reduction of commitments and the borrowing base, our total liquidity of $ 1.5 billion as of September 30, 2022 would have been $ 1.0 billion.

Letters 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 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.

As of September 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 Facility

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 nine months of 2021.

The interest rate on our term loan facility was 4.38 % as of September 30, 2022.

Senior Notes Due 2025

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

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

We recorded a debt extinguishment loss of $ 26 million in the first nine months of 2022 due to this redemption.

In October 2022, we commenced a tender offer to purchase for cash any and all of our outstanding Senior Notes due 2025.

See Note 12—Subsequent Events for more information.

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 approximately $ 794 million of cash received from GXO, proceeds from an equity offering described in Note 9—Stockholders’ Equity and available cash.

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

Senior Notes Due 2022

In January 2021, we redeemed our outstanding 6.50 % senior notes due 2022.

In the first quarter of 2021, we redeemed our outstanding 6.50 % senior notes due 2022.

The redemption price for the notes was 100 % of the principal amount, plus accrued and unpaid interest.

We paid for the redemption with available cash.

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

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

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”), an entity controlled by the Company’s former chief executive officer and current executive chairman.

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

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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.

The warrants exchanged included holdings of JPE.

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

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

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

Earnings per Share

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

Earnings (Loss) per Share

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

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

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

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

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— ( 78 ) ( 1 ) 17

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

Net income (loss) attributable to common shares, basic $ 131 $ ( 57 ) $ 760 $ 214

Basic weighted-average common shares 115 115 115 111

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— ( 0.69 ) ( 0.01 ) 0.15

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

Basic earnings (loss) per share $ 1.14 $ ( 0.50 ) $ 6.61 $ 1.93

Diluted earnings from continuing operations per share $ 1.13 $ 0.19 $ 6.58 $ 1.73

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— ( 0.68 ) ( 0.01 ) 0.14

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

Diluted earnings (loss) per share $ 1.13 $ ( 0.49 ) $ 6.57 $ 1.87

Commitments and Contingencies

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

We are involved, and expect to 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, 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.

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

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

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

As of October 31, 2022, the company’s last mile subsidiary was involved in several class action and collective action cases involving claims that the contract carriers with which it contracted for performance of delivery services, or their delivery workers, should be treated as employees, rather than independent contractors (“misclassification claims”).

The misclassification claims pertained solely to the company’s last mile services, which operated as a wholly owned subsidiary of the company until the spin-off of RXO was completed.

As of November 1, 2022, pursuant to the Separation and Distribution Agreement between the company and RXO, the liabilities of the company’s last mile subsidiary, including legal liabilities, if any, related to the misclassification claims, were spun-off as part of RXO.

Pursuant to the Separation and Distribution Agreement, RXO has agreed to indemnify the company for certain matters relating to RXO, including indemnifying the company from and against any liabilities, damages, costs, or expenses incurred by the company arising out of or resulting from the misclassification claims described above.

Shareholder Litigation

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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 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.

On June 3, 2019, lead plaintiffs Local 817 IBT Pension Fund, Local 272 Labor-Management Pension Fund, and Local 282 Pension Trust Fund and Local 282 Welfare Trust Fund (together, the “Pension Funds”) filed a consolidated class action complaint.

Defendants moved to dismiss the consolidated class action complaint on August 2, 2019.

On November 4, 2019, the Court dismissed the consolidated class action complaint without prejudice to the filing of an amended complaint.

The Pension Funds, on January 3, 2020, filed a first amended consolidated class action complaint against us and a current executive.

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

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

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

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.

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 (the “Exchange Act”) and Rule 10b-5 thereunder, and Section 20(a) of the Exchange Act.

On March 19, 2021, the Court dismissed the complaint with prejudice, and on June 30, 2022, the U.S.

Court of Appeals for the Second Circuit affirmed the dismissal.

The case is now concluded.

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

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District Court for the District of Delaware, alleging breaches of fiduciary duty, unjust enrichment, waste of corporate assets, and violations of the Exchange Act against some of our current and former directors and officers, with the company as a nominal defendant.

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

Derivative Litigation.

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

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

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

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

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

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

Plaintiffs stipulated that they 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.

The Jez complaint was later consolidated with similar derivative complaints.

On July 26, 2022, the Court issued an order dismissing the consolidated derivative complaints with prejudice.

The case is now concluded.

Insurance Contribution Litigation

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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.

California Environmental Matters

In August 2022, the company received a letter from the San Bernardino County District Attorney’s Office, written in cooperation with certain other California District Attorneys and the Los Angeles City Attorney, notifying the company of an investigation into alleged violations with respect to underground storage tanks, hazardous materials, and hazardous waste in California, and offering a meeting.

On October 20, 2022, the company met with the County Attorneys and the Los Angeles City Attorney.

We are assessing the allegations and the underlying facts.

No discussion of potential monetary sanctions or settlement amount has occurred to date, nor can we reasonably estimate potential costs at this time.

Subsequent Events

As described in Note 1—Organization, Description of Business and Basis of Presentation, on November 1, 2022, we completed the spin-off of our tech-enabled brokered transportation platform into an independent public company, RXO, in a transaction intended to be tax-free to XPO and our shareholders for U.S.

federal income tax purposes.

In preparation for the spin-off, in October 2022, a wholly-owned subsidiary of XPO that merged with and into RXO substantially concurrent with the consummation of the spin-off, completed an offering of $ 355 million aggregate principal amount of notes due 2027 (the “RXO Notes”).

The RXO Notes bear interest at a rate of 7.50 % per annum payable semiannually in cash in arrears on May 15 and November 15 of each year, beginning May 15, 2023, and mature on November 15, 2027.

They were issued at an issue price of 98.962 % of par.

In addition to the RXO Notes, RXO entered into a term loan facility that provides $ 100 million in aggregate principal amount of term loans (the “RXO Term Loan”) and a revolving credit facility that provides $ 500 million in aggregate commitments.

The net proceeds (including any interest thereon) from the issuance of the RXO Notes and incurrence of the RXO Term Loan, together with RXO’s cash and cash equivalents on hand, were used to fund a cash distribution of approximately $ 488 million to XPO in October 2022, which we intend to use to repay existing indebtedness and fund any related fees and expenses prior to the 12-month anniversary of the distribution.

As the spin-off has been consummated, the RXO Notes, the RXO Term Loan and RXO’s revolving credit facility are direct obligations of RXO.

Debt Tender Offer

In October 2022, we commenced a tender offer to purchase for cash any and all of our outstanding Senior Notes due 2025, which had a principal balance outstanding of $ 520 million as of September 30, 2022.

The tender offer will expire on November 17, 2022, unless extended or earlier terminated by XPO.

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