XPO Logistics, Inc.

Quarterly Report on Form 10-Q

~~Index~~For the Quarterly Period Ended September 30, 2022

Table of Contents



	Page No.
Part I—Financial Information
Item 1. Financial ~~Statements:~~Statements (Unaudited):
Condensed Consolidated Balance Sheets		1
Condensed Consolidated Statements of ~~Operations~~Income (Loss)		2
Condensed Consolidated Statements of Comprehensive Income (Loss)		3
Condensed Consolidated Statements of Cash Flows		4
Condensed Consolidated Statements of Changes in Equity		6
Notes to Condensed Consolidated Financial Statements		58
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		1824
Item 3. Quantitative and Qualitative Disclosures About Market Risk		2636
Item 4. Controls and Procedures		2636
Part II—Other Information
Item 1. Legal Proceedings		2736
Item 1A. Risk Factors		2736
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		2736
Item 3. Defaults Upon Senior Securities		2736
Item 4. Mine Safety Disclosures		2736
Item 5. Other Information		2736
Item 6. Exhibits		2837
Signatures		38

Table of Contents

Part I—Financial Information

Item 1.Financial Statements.

XPO Logistics, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)


	September 30,		December 31,
(In millions, except per share data)	2022		2021
ASSETS
Current assets
Cash and cash equivalents	$	544	$	260
Accounts receivable, net of allowances of $51 and $47, respectively	2,013		2,105
Other current assets	257		286
Current assets of discontinued operations	17		26
Total current assets	2,831		2,677
Long-term assets
Property and equipment, net of $1,848 and $1,828 in accumulated depreciation, respectively	1,828		1,808
Operating lease assets	816		908
Goodwill	2,229		2,479
Identifiable intangible assets, net of $598 and $612 in accumulated amortization, respectively	496		580
Other long-term assets	303		255

Total long-term assets	5,672		6,030
Total assets	$	8,503	$	8,707
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	1,022	$	1,110
Accrued expenses	1,087		1,107
Short-term borrowings and current maturities of long-term debt	60		58
Short-term operating lease liabilities	145		170
Other current liabilities	111		69
Current liabilities of discontinued operations	17		24
Total current liabilities	2,442		2,538
Long-term liabilities
Long-term debt	2,848		3,514
Deferred tax liability	334		316
Employee benefit obligations	116		122
Long-term operating lease liabilities	671		752
Other long-term liabilities	306		327

Total long-term liabilities	4,275		5,031
Stockholders’ equity

Common stock, $0.001 par value; 300 shares authorized; 115 shares issued and outstanding as of September 30, 2022 and December 31, 2021	—		—
Additional paid-in capital	1,195		1,179
Retained earnings	803		43
Accumulated other comprehensive loss	(212)		(84)


Total equity	1,786		1,138
Total liabilities and equity	$	8,503	$	8,707

September 30, December 31,
(In millions, except per share data) 2017 2016
ASSETS
Current assets:
Cash and cash equivalents $ 473.1
$ 373.4
Accounts receivable, net of allowances of $39.2 and $26.3, respectively 2,601.0
2,313.3
Other current assets 507.6
386.9
Total current assets 3,581.7
3,073.6
Property and equipment, net of $980.6 and $589.9 in accumulated depreciation, respectively 2,602.1
2,537.4
Goodwill 4,534.3
4,325.8
Identifiable intangible assets, net of $515.9 and $377.1 in accumulated amortization, respectively 1,468.0
1,534.7
Other long-term assets 172.1
226.9
Total long-term assets 8,776.5
8,624.8
Total assets $ 12,358.2
$ 11,698.4
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 1,158.0
$ 1,056.3
Accrued expenses 1,517.4
1,382.1
Current maturities of long-term debt 90.0
136.5
Other current liabilities 142.3
156.7
Total current liabilities 2,907.7
2,731.6
Long-term debt 4,541.0
4,731.5
Deferred tax liability 535.0
572.4
Employee benefit obligations 211.5
251.4
Other long-term liabilities 464.6
373.9
Total long-term liabilities 5,752.1
5,929.2
Stockholders’ equity:
Convertible perpetual preferred stock, $.001 par value; 10.0 shares authorized; .07 of Series A shares issued and outstanding at September 30, 2017 and December 31, 2016 41.2
41.6
Common stock, $.001 par value; 300.0 shares authorized; 119.6 and 111.1 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively 0.1
0.1
Additional paid-in capital 3,581.6
3,244.9
Accumulated deficit (259.5 ) (392.9 )
Accumulated other comprehensive loss (54.6 ) (193.7 )
Total stockholders' equity before noncontrolling interests 3,308.8
2,700.0
Noncontrolling interests 389.6
337.6
Total equity 3,698.4
3,037.6
Total liabilities and equity $ 12,358.2
$ 11,698.4

See accompanying notes to condensed consolidated financial statements.

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XPO Logistics, Inc.

Condensed Consolidated Statements of ~~Operations~~Income (Loss)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions, except per share data)	2022		2021		2022		2021
Revenue	$	3,042	$	3,270	$	9,747	$	9,445
Cost of transportation and services (exclusive of depreciation and amortization)	2,044		2,306		6,634		6,545
Direct operating expense (exclusive of depreciation and amortization)	363		366		1,113		1,058
Sales, general and administrative expense	298		339		966		1,001
Depreciation and amortization expense	118		118		349		357
Gain on sale of business	—		—		(434)		—
Transaction and integration costs	25		15		60		26
Restructuring costs	9		14		19		16
Operating income	185		112		1,040		442
Other income	(15)		(19)		(44)		(45)
Debt extinguishment loss	—		46		26		54
Interest expense	35		53		103		176
Income from continuing operations before income tax provision	165		32		955		257
Income tax provision	34		11		194		60
Income from continuing operations	131		21		761		197
Income (loss) from discontinued operations, net of taxes	—		(78)		(1)		22
Net income (loss)	131		(57)		760		219

Net income from discontinued operations attributable to noncontrolling interests	—		—		—		(5)
Net income (loss) attributable to XPO	$	131	$	(57)	$	760	$	214

Net income (loss) attributable to common shareholders
Continuing operations	$	131	$	21	$	761	$	197
Discontinued operations	—		(78)		(1)		17
Net income (loss) attributable to common shareholders	$	131	$	(57)	$	760	$	214

Earnings (loss) per share data
Basic earnings per share from continuing operations	$	1.14	$	0.19	$	6.62	$	1.78
Basic earnings (loss) per share from discontinued operations	—		(0.69)		(0.01)		0.15
Basic earnings (loss) per share attributable to common shareholders	$	1.14	$	(0.50)	$	6.61	$	1.93
Diluted earnings per share from continuing operations	$	1.13	$	0.19	$	6.58	$	1.73
Diluted earnings (loss) per share from discontinued operations	—		(0.68)		(0.01)		0.14
Diluted earnings (loss) per share attributable to common shareholders	$	1.13	$	(0.49)	$	6.57	$	1.87

Weighted-average common shares outstanding
Basic weighted-average common shares outstanding	115		115		115		111
Diluted weighted-average common shares outstanding	116		116		116		114

Three Months Ended September 30, Nine Months Ended September 30,
(In millions, except per share data) 2017 2016 2017 2016
Revenue $ 3,887.1
$ 3,713.8
$ 11,186.9
$ 10,942.8
Operating expenses
Cost of transportation and services 2,042.7
2,008.4
5,899.6
5,926.8
Direct operating expense 1,258.7
1,153.4
3,590.6
3,389.8
Sales, general and administrative expense 398.9
383.2
1,211.3
1,224.7
Total operating expenses 3,700.3
3,545.0
10,701.5
10,541.3
Operating income 186.8
168.8
485.4
401.5
Other income (6.7 ) (1.1 ) (6.0 ) (6.7 )
Foreign currency loss (income) 15.0
(0.3 ) 53.9
1.8
Debt extinguishment loss 4.6
53.2
13.6
53.2
Interest expense 72.5
93.0
222.4
280.8
Income before income tax provision 101.4
24.0
201.5
72.4
Income tax provision 30.4
2.7
48.4
20.0
Net income 71.0
21.3
153.1
52.4
Net income attributable to noncontrolling interests (8.5 ) (6.2 ) (17.4 ) (13.2 )
Net income attributable to XPO $ 62.5
$ 15.1
$ 135.7
$ 39.2

Earnings per share data:
Net income attributable to common shareholders $ 57.5
$ 13.8
$ 124.5
$ 35.8

Basic earnings per share $ 0.49
$ 0.13
$ 1.10
$ 0.33
Diluted earnings per share $ 0.44
$ 0.11
$ 0.99
$ 0.30

Weighted-average common shares outstanding
Basic weighted-average common shares outstanding 117.5
110.3
113.5
110.0
Diluted weighted-average common shares outstanding 129.8
122.9
126.2
119.2

See accompanying notes to condensed consolidated financial statements.

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XPO Logistics, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2022		2021		2022		2021
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 (loss) on financial assets/liabilities designated as hedging instruments, net of tax effect of $—, $1, $(1) and $1	—		(3)		4		(3)
Defined benefit plans adjustments, net of tax effect of $—, $(9), $— and $(9)	—		28		—		28
Other comprehensive loss	(60)		(22)		(128)		(49)
Comprehensive income (loss)	$	71	$	(79)	$	632	$	170
Less: Comprehensive income attributable to noncontrolling interests	—		—		—		3
Comprehensive income (loss) attributable to XPO	$	71	$	(79)	$	632	$	167

Three Months Ended September 30, Nine Months Ended September 30,
(In millions) 2017 2016 2017 2016
Net income $ 71.0
$ 21.3
$ 153.1
$ 52.4

Other comprehensive income (loss), net of tax
Foreign currency translation gain (loss) ⁽¹⁾
$ 82.0
$ (8.0 ) $ 247.6
$ (27.2 )
Unrealized loss on financial assets/liabilities designated as hedging instruments, net of tax effect of $23.3, $9.2, $42.1 and $16.7 (28.4 ) (12.4 ) (68.9 ) (23.3 )
Defined benefit plans adjustments, net of tax effect of $1.9, $1.1, $1.9 and $1.1 (1.0 ) (5.3 ) (1.0 ) (5.3 )
Other comprehensive income (loss) 52.6
(25.7 ) 177.7
(55.8 )
Comprehensive income (loss) $ 123.6
$ (4.4 ) $ 330.8
$ (3.4 )
Less: Comprehensive income attributable to noncontrolling interests (21.1 ) (5.1 ) (56.0 ) (10.2 )
Comprehensive income (loss) attributable to XPO $ 102.5
$ (9.5 ) $ 274.8
$ (13.6 )

⁽¹⁾ ~~There is no tax impact related to the foreign currency translation adjustments as the earnings are considered permanently reinvested.~~

See accompanying notes to condensed consolidated financial statements.

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XPO Logistics, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended September 30,
(In millions)	2022		2021
Cash flows from operating activities of continuing operations
Net income	$	760	$	219
Income (loss) from discontinued operations, net of taxes	(1)		22
Income from continuing operations	761		197
Adjustments to reconcile income from continuing operations to net cash from operating activities
Depreciation, amortization and net lease activity	349		357
Stock compensation expense	26		29
Accretion of debt	12		15
Deferred tax expense	10		5
Debt extinguishment loss	26		54
Gain on sale of business	(434)		—
Gains on sales of property and equipment	(4)		(36)
Other	29		5
Changes in assets and liabilities
Accounts receivable	(245)		(371)
Other assets	30		(1)
Accounts payable	76		133
Accrued expenses and other liabilities	28		171
Net cash provided by operating activities from continuing operations	664		558
Cash flows from investing activities of continuing operations
Proceeds from sale of business	705		—
Payment for purchases of property and equipment	(394)		(212)
Proceeds from sale of property and equipment	11		72
Proceeds from settlement of cross currency swaps	29		—
Other	—		(3)
Net cash provided by (used in) investing activities from continuing operations	351		(143)
Cash flows from financing activities of continuing operations

Repayment of borrowings related to securitization program	—		(24)
Repurchase of debt	(651)		(2,769)
Proceeds from borrowings on ABL facility	275		—
Repayment of borrowings on ABL facility	(275)		(200)
Repayment of debt and finance leases	(47)		(63)
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)

Nine Months Ended September 30,
(In millions) 2017 2016
Operating activities
Net income $ 153.1
$ 52.4
Adjustments to reconcile net income to net cash from operating activities
Depreciation and amortization 489.1
485.4
Stock compensation expense 50.1
34.2
Accretion of debt 14.5
12.3
Deferred tax benefit (3.1 ) (2.3 )
Loss on extinguishment of debt 13.6
53.2
Unrealized loss (gain) on foreign currency option and forward contracts 49.9
(2.8 )
Other 20.1
8.7
Changes in assets and liabilities:
Accounts receivable (199.8 ) (79.0 )
Other assets (40.2 ) (72.5 )
Accounts payable 48.6
(150.7 )
Accrued expenses and other liabilities (71.2 ) 65.7
Cash flows provided by operating activities 524.7
404.6
Investing activities
Payment for purchases of property and equipment (389.9 ) (318.5 )
Proceeds from sale of assets 59.6
57.9
Other —
8.6
Cash flows used by investing activities (330.3 ) (252.0 )
Financing activities
Proceeds from issuance of long-term debt 523.5
1,377.8
Repurchase of debt (782.9 ) (1,334.2 )
Proceeds from borrowings on ABL facility 495.0
260.0
Repayment of borrowings on ABL facility (525.0 ) (260.0 )
Repayment of long-term debt and capital leases (80.9 ) (126.4 )
Payment for debt issuance costs (12.8 ) (24.9 )
Proceeds from common stock offering 287.6
—
Change in bank overdrafts 11.5
24.9
Payment for tax withholdings for restricted shares (15.2 ) (9.3 )
Dividends paid (3.3 ) (2.5 )
Other (1.0 ) 11.3
Cash flows used by financing activities (103.5 ) (83.3 )
Effect of exchange rates on cash 8.8
1.2
Net increase in cash 99.7
70.5
Cash and cash equivalents, beginning of period 373.4
289.8
Cash and cash equivalents, end of period $ 473.1
$ 360.3
Supplemental disclosure of cash flow information:
Cash paid for interest $ 176.5
$ 259.1
Cash paid for income taxes $ 59.9
$ 41.7

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	Nine Months Ended September 30,
(In millions)	2022		2021
Cash flows from discontinued operations
Operating activities of discontinued operations	(5)		68
Investing activities of discontinued operations	2		(95)
Financing activities of discontinued operations	—		(302)
Net cash used in discontinued operations	(3)		(329)
Effect of exchange rates on cash, cash equivalents and restricted cash	(25)		(7)
Net increase (decrease) in cash, cash equivalents and restricted cash	281		(1,801)
Cash, cash equivalents and restricted cash, beginning of period	273		2,065
Cash, cash equivalents and restricted cash, end of period	554		264
Less: Cash, cash equivalents and restricted cash of discontinued operations, end of period	—		—
Cash, cash equivalents and restricted cash of continued operations, end of period	$	554	$	264
Supplemental disclosure of cash flow information

Leased assets obtained in exchange for new operating lease liabilities	$	165	$	140
Leased assets obtained in exchange for new finance lease liabilities	19		54
Cash paid for interest	94		195
Cash paid for income taxes	131		74

See accompanying notes to condensed consolidated financial statements.

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XPO Logistics, Inc.

Condensed Consolidated Statements of Changes in Equity

(Unaudited)


	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 June 30, 2022	—	$	—	115,033	$	—	$	1,187	$	672	$	(152)	$	1,707	$	—	$	1,707
Net income	—	—		—	—		—		131		—		131		—		131
Other comprehensive loss	—	—		—	—		—		—		(60)		(60)		—		(60)

Exercise and vesting of stock compensation awards	—	—		19	—		—		—		—		—		—		—




Stock compensation expense	—	—		—	—		8		—		—		8		—		8

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


	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
Net income	—	—		—	—		—		760		—		760		—		760
Other comprehensive loss	—	—		—	—		—		—		(128)		(128)		—		(128)

Exercise and vesting of stock compensation awards	—	—		315	—		—		—		—		—		—		—
Tax withholdings related to vesting of stock compensation awards	—	—		—	—		(13)		—		—		(13)		—		(13)





Stock compensation expense	—	—		—	—		26		—		—		26		—		26
Other	—	—		—	—		3		—		—		3		—		3
Balance as of September 30, 2022	—	$	—	115,052	$	—	$	1,195	$	803	$	(212)	$	1,786	$	—	$	1,786

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XPO Logistics, Inc.

Condensed Consolidated Statements of Changes in Equity (continued)

(Unaudited)


	Series A Preferred Stock			Common Stock
(Shares in thousands, dollars in millions)	Shares	Amount		Shares	Amount		Additional Paid-In Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Loss		Total XPO Stockholders' Equity		Non-controlling Interests		Total Equity
Balance as of June 30, 2021	—	$	—	111,726	$	—	$	1,971	$	1,139	$	(183)	$	2,927	$	40	$	2,967
Net loss	—	—		—	—		—		(57)		—		(57)		—		(57)
Other comprehensive loss	—	—		—	—		—		—		(22)		(22)		—		(22)
Spin-off of GXO	—	—		—	—		(1,199)		(1,161)		126		(2,234)		(40)		(2,274)
Exercise and vesting of stock compensation awards	—	—		72	—		2		—		—		2		—		2
Tax withholdings related to vesting of stock compensation awards	—	—		—	—		(3)		—		—		(3)		—		(3)
Issuance of common stock	—	—		2,875	—		384		—		—		384		—		384


Stock compensation expense	—	—		—	—		19		—		—		19		—		19

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


	Series A Preferred Stock			Common Stock
(Shares in thousands, dollars in millions)	Shares	Amount		Shares	Amount		Additional Paid-In Capital		Retained Earnings (Accumulated Deficit)		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
Net income	—	—		—	—		—		214		—		214		5		219
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	—	—		386	—		2		—		—		2		—		2
Tax withholdings related to vesting of stock compensation awards	—	—		—	—		(25)		—		—		(25)		—		(25)
Issuance of common stock	—	—		2,875	—		384		—		—		384		—		384
Conversion of preferred stock to common stock	(1)	(1)		145	—		1		—		—		—		—		—
Purchase of noncontrolling interests	—	—		—	—		(34)		—		—		(34)		(100)		(134)
Dividend declared	—	—		—	—		—		—		—		—		(3)		(3)
Exercise of warrants	—	—		9,215	—		—		—		—		—		—		—
Stock compensation expense	—	—		—	—		44		—		—		44		—		44
Other	—	—		—	—		3		—		—		3		—		3
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.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization, Description of Business and Basis of Presentation

XPO Logistics, Inc. ~~and~~, together with its subsidiaries ~~("XPO"~~(“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; 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 Strategic Plan

On March 8, 2022, we announced that our Board of Directors approved a strategic plan to pursue the ~~"Company") use an integrated network~~spin-off of ~~people, technology~~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 ~~physical assets~~our European business, which we intend to ~~help customers manage their goods more efficiently throughout their supply chains. The Company’s customers are multinational, national, mid-size and small enterprises, and include many~~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 ~~most prominent companies in~~terms or timing of a transaction.

RXO Spin-Off

We completed the ~~world. XPO runs its business~~spin-off of our tech-enabled brokered transportation platform on November 1, 2022, which created a ~~global basis, with two reportable segments: Transportation and Logistics.~~

In the Transportation segment, the Company provides multiple services to facilitate the movement of raw materials, parts and finished goods. The Company accomplishes this by using its proprietary transportation technology, third-party carriers and Company-owned trucks and service centers. XPO’s transportation services include: freight brokerage, last mile, less-than-truckload ("LTL"new public company, RXO, Inc. (“RXO”), ~~full truckload, and global forwarding services. Freight~~comprised of our former services for truck brokerage, managed transportation, last mile and ~~global forwarding~~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 ~~all non-asset or asset-light businesses. LTL and full truckload are asset-based.~~

Inincluded in the Logistics segment, referred to as supply chain, the Company provides a range of contract logistics services, including highly engineered and customized solutions, value-added warehousing and distribution, cold chain solutions and other inventory management solutions. Additionally, the Company performs e-commerce fulfillment, order personalization, warehousing, reverse logistics, storage, factory support, aftermarket support, manufacturing, distribution, packaging and labeling, as well as supply chain optimization services such as production flow management.

~~For additional information relating to these segments, refer to~~ ~~Note 2—Segment Reporting~~.

~~The Company has prepared the accompanying unaudited~~ 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

We prepared our Condensed Consolidated Financial Statements in accordance with U.S. generally accepted accounting principles (“GAAP”) and on the same basis as the accounting policies described in ~~its annual report~~our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2021 (the ~~"2016~~“2021 Form ~~10-K"~~10-K”) ~~and the~~. The interim reporting requirements of Form ~~10-Q. Accordingly,~~10-Q allow certain information and note disclosures normally included in annual consolidated financial statements ~~prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been~~to be condensed or omitted. These ~~unaudited condensed consolidated financial statements~~Condensed Consolidated Financial Statements should be read in conjunction with the ~~2016~~2021 Form 10-K.

~~In the opinion of management,~~The Condensed Consolidated Financial Statements are not audited but reflect all adjustments ~~consisting only~~that are of a normal recurring ~~adjustments, which~~nature and are necessary for a fair presentation of the financial condition, operating results and cash flows for the interim periods ~~presented have been made. Interim~~presented. Operating results ~~of operations~~for the three and nine months ended September 30, 2022 are not necessarily indicative of the results ~~of the full year.~~

~~Adoption of New Accounting Standards~~

In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-09, Compensation - Stock Compensation (Topic 718): "Improvements to Employee Share-based Payment Accounting." This ASU involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Under the new standard, income tax benefits and deficiencies are tothat may be recognized as income tax expense or benefit in the income statement and the tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. An entity should also recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period. Excess tax benefits should be classified along with other income tax cash flows as an operating activity. The Company adopted this standard in the fourth quarter of 2016, effective January 1, 2016. Accordingly, the provision for income taxes in the first nine months of 2017 included excess tax benefits of $9.8 million that affected the income tax provision. For the nine months ended September 30, 2016, there was no material effect on the Company's condensed consolidated financial statements from the adoption of this ASU. In regard to forfeitures, the Company elected to account for forfeitures when they occur.

~~Accounting Pronouncements Issued But Not Yet Effective~~

In May 2014, the FASB issued ASU No. 2014-09, Revenue (Topic 606): "Revenue from Contracts with Customers." This new standard includes the required steps to achieve the core principle that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard will be effective for the Company's annual and interim periods beginning January 1, 2018, and permits the use of either the retrospective or cumulative effect transition method. The Company has determined it will use the modified retrospective transition method. The Company is currently evaluating the effects of this standard and has completed a "gap assessment," whereby it has compared its current revenue recognition

practices to those required by the new standard. The main areas under consideration include the recognition of revenue using proportionate delivery within the Transportation segment and gross versus net revenue presentation. The Company does not currently expect that the adoption of the standard will have a material effect on its statement of operations, balance sheet or statement of cash flows. The Company expects to provide expanded revenue recognition disclosures based on the new qualitative and quantitative disclosure requirements of the standard upon adoption.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases, including operating leases. Under the new requirements, a lessee will recognize in the balance sheet a liability to make lease payments (the lease liability) and the right-of-use asset representing the right to the underlying asset for the lease term. For leases with a term of 12 months or less, the lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. The standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the effects ASU 2016-02 will have on its consolidated financial statements and related disclosures. As of December 31, 2016, the Company reported $2,144.3 million in operating lease obligations and will evaluate those contracts as well as other existing arrangements to determine if they qualify for lease accounting under the new standard. The Company does not plan to adopt the standard early.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): “Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force).” This ASU addresses eight specific cash flow classification issues with the objective of reducing the existing diversity in practice. Under the new standard, cash payments for debt prepayments or debt extinguishment costs should be classified as outflows for financing activities. Additional cash flow issues covered under the standard include: settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows and application of the predominance principle. This ASU is effective for public entities for fiscal years beginning after December 15, 2017, including interim periods within that reporting period; however, early adoption is permitted. The Company does not expect the adoption of this standard to have a material effect on its consolidated statement of cash flows.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): “Restricted Cash.” This ASU requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and restricted cash. The standard is effective for the Company's annual and interim periods beginning January 1, 2018 and requires retrospective adoption. The Company does not expect the adoption of this standard to have a material effect on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): "Simplifying the Accounting for Goodwill Impairment." Under the current guidance for assessing goodwill for impairment, an entity can first assess qualitative factors to determine whether a two-step goodwill impairment test is necessary (often referred to as "Step 0"). When an entity bypasses or fails Step 0, the two-step goodwill impairment test is performed. Step 1 compares a reporting unit’s fair value to its carrying amount to determine if there is a potential impairment. If the carrying amount exceeds fair value, Step 2 must be completed. Step 2 involves determining the implied fair value of goodwill and comparing it to the carrying amount of that goodwill to measure the impairment loss, if any. The revised guidance eliminates Step 2 of the current goodwill impairment test, which requires a hypothetical purchase price allocation to measure goodwill impairment. Under the new standard, a goodwill impairment loss will instead be measured at the amount by which a reporting unit's carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance requires prospective adoption and will be effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption of this guidance is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company adopted this guidance in connection with its annual impairment test as of August 31, 2017. The adoption did not impact the consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-07, Compensation - Retirement Benefits (Topic 715): "Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost." The ASU will change how employers that sponsor defined benefit pension and/or other postretirement benefit plans present the cost of the benefits in the statements of operations. This cost, commonly referred to as the "net periodic benefit cost," is comprised of several components that reflect different aspects of the arrangement with the employee, including the effect of the related funding. Currently, the Company aggregates the various components of the net periodic benefit cost (including interest cost and the expected return on plan assets) for presentation purposes and includes these costs within operating income (loss) in the condensed consolidated statements of operations. Under the new guidance, these costs will be presented below operating income (loss). This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period; however,

~~early adoption is permitted. The Company will be adopting the standard~~ for the year ending December 31, ~~2018.~~ 2022.

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Restricted Cash

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

We sell certain of our trade accounts receivable on a non-recourse basis to third-party financial institutions under factoring agreements. We also sell trade accounts receivable under our securitization program. We use trade receivables securitization and factoring programs to help manage our cash flows and offset the impact of extended payment terms for some of our customers.

The ~~adoption of the standard will have no impact on net income. In connection with the adoption of this new standard, prior periods will be recast to reflect the new presentation. The~~maximum amount of net ~~periodic benefit cost that will be reclassified below operating income~~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. Charges for ~~fiscal year 2016 will be approximately $25 millionof income.~~

~~In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): "Scope of Modification Accounting." This ASU provides guidance about~~commitment fees, which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. Under the new standard, modification accounting applies unless all the following conditions are met: (i) the fair value of the modified award is the same as the fair value of the original award immediately before the modification, (ii) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the modification, and (iii) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification the original award immediately before the original award is modified. Generally speaking, modification accounting requires an entity to calculate and recognize the incremental fair value of the modified award as compensation cost on the date of modification (for a vested award) or over the remaining service period (for an unvested award). This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period; however, early adoption is permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and does not plan to adopt the standard early.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): “Targeted Improvements to Accounting for Hedging Activities.” This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within that reporting period; however, early adoption is permitted. The purpose of the amendments in this ASU is to better align an entity’s risk management activities and financial reporting for hedging relationships, simplify hedge accounting requirements, and improve the disclosures of hedging arrangements. The Company adopted the standard effective October 1, 2017; the adoption of the standard will impact how the Company currently accounts for its cross currency swaps. While the adoption is expected to have a favorable impact on non-operating income, the impact is not expected to be material.

2.~~Segment Reporting~~

The Company is organized into two reportable segments: Transportation and Logistics. Corporate and Eliminations constitute the remaining portions of the Company’s operating results required to be presented in order to reconcile the Company’s segment results to the condensed consolidated financial statements.

The Company's chief executive officer, who is the chief operating decision maker ("CODM"), regularly reviews financial information at the reporting segment level in order to make decisions about resources to be allocated to the segments and to assess their performance. Segment results that are reported to the CODM include items directly attributable to a segment as well as those that can be allocatedbased on a ~~reasonable basis. Asset information by segment is~~percentage of available amounts, and charges for administrative fees were not ~~provided~~material to ~~the Company's CODM as the majority~~our results of ~~the Company's assets are managed at the corporate level.~~

~~The Company evaluates performance based on the various financial measures of the respective business segments. The following table identifies selected financial data~~operations for the ~~three-~~three and ~~nine- months ended September 30, 2017 and 2016:~~

(In millions) Transportation Logistics Corporate Eliminations Total
Three Months Ended September 30, 2017
Revenue $ 2,469.8
$ 1,458.8
$ —
$ (41.5 ) $ 3,887.1
Operating income (loss) 145.2
77.4
(35.8 ) —
186.8
Depreciation and amortization 111.7
54.9
0.7
—
167.3

Three Months Ended September 30, 2016
Revenue $ 2,409.1
1,347.0
$ —
$ (42.3 ) $ 3,713.8
Operating income (loss) 125.4
75.3
(31.9 ) —
168.8
Depreciation and amortization 114.8
46.5
0.5
—
161.8

Nine Months Ended September 30, 2017
Revenue $ 7,152.2
$ 4,154.1
$ —
$ (119.4 ) $ 11,186.9
Operating income (loss) 406.0
188.9
(109.5 ) —
485.4
Depreciation and amortization 329.3
155.1
4.7
—
489.1

Nine Months Ended September 30, 2016
Revenue $ 7,125.4
$ 3,939.7
$ —
$ (122.3 ) $ 10,942.8
Operating income (loss) 354.0
158.3
(110.8 ) —
401.5
Depreciation and amortization 341.9
142.2
1.3
—
485.4

~~3. Restructuring Charges~~

In conjunction with various acquisitions, the Company has initiated a facility rationalization and severance program to close facilities and reduce employment. These initiatives are intended to improve the Company's efficiency and profitability.

~~The restructuring charges incurred during the~~ nine months ended September 30, ~~2017,~~2022 and ~~included in~~2021.

Information related to the ~~Company's condensed consolidated statement of operations~~trade receivables sold was as ~~sales, general and administrative expense, direct operating expense, and cost of transportation and services, are summarized below.~~

follows:

Nine Months Ended September 30, 2017
(In millions) Reserve Balance at December 31, 2016 Charges Incurred Payments Foreign Exchange and Other Reserve Balance at September 30, 2017
Transportation
Facilities $ 1.4
$ 0.2
$ (1.3 ) $ —
$ 0.3
Severance 5.8
1.6
(4.7 ) 0.5
3.2
Total 7.2
1.8
(6.0 ) 0.5
3.5
Logistics
Contract termination 0.7
0.3
(0.3 ) —
0.7
Facilities 0.5
—
(0.5 ) —
—
Severance 16.1
4.0
(14.1 ) 1.1
7.1
Total 17.3
4.3
(14.9 ) 1.1
7.8
Corporate
Contract termination 0.3
—
(0.3 ) —
—
Severance 0.4
1.2
(1.5 )

0.1
Total 0.7
1.2
(1.8 ) —
0.1
Total $ 25.2
$ 7.3
$ (22.7 ) $ 1.6
$ 11.4


	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2022		2021		2022		2021
Securitization programs
Receivables sold in period	$	418	$	504	$	1,323	$	1,259
Cash consideration	418		504		1,323		1,259

Factoring programs
Receivables sold in period	42		17		102		46
Cash consideration	42		17		102		46

4. Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The ~~Company accounts for certain assets and liabilities at~~levels of inputs used to measure fair value ~~and categorizes each of its fair value measurements in one of the following three levels based on the lowest level input that is significant to the fair value measurement in its entirety:~~are:

•Level ~~1 -~~ 1—Quoted prices for identical instruments in active markets;

•Level ~~2 -~~ 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments

in markets that are not active; and model-derived valuations in which all significant inputs are observable in active

markets; and

•Level ~~3 -~~ 3—Valuations based on inputs that are unobservable, generally utilizing pricing models or other valuation

techniques that reflect management’s judgment and estimates.

~~Assets and Liabilities Measured at Fair Value~~

~~As of September 30, 2017 and December 31, 2016, the Company's assets and liabilities measured at~~We base our fair value ~~include its derivative instruments~~estimates on market assumptions and ~~the liability related to its cash settled performance-based restricted stock units.~~

~~Fair Value of Financial Instruments~~

available information. The carrying values of ~~the following financial instruments~~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, ~~2017~~2022 and December 31, ~~2016: cash, cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses. Fair values approximate carrying values for these financial instruments since they are~~2021 due to their short-term in nature and/or ~~are~~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. For information ~~regarding~~on the ~~estimated~~ fair value hierarchy of our derivative instruments, see Note 7—Derivative Instruments; and for further information on financial liabilities, see Note 8—Debt.

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The fair value hierarchy of cash equivalents was as follows:


(In millions)	Carrying Value		Fair Value		Level 1
September 30, 2022	$	502	$	502	$	502
December 31, 2021	181		181		181

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 ~~Company's derivative instruments~~assistance on the entity’s financial statements. We adopted this standard on January 1, 2022, on a prospective basis. The adoption did not have a material impact on our financial statement disclosures.

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. The amendments apply only to contracts and hedging relationships that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. 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. Adoption of the standard is not expected to have a material impact on our consolidated financial statements.

2. Discontinued Operations

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

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


	Three Months Ended September 30,		Nine Months Ended September 30,
(In millions)	2021		2021
Revenue	$	651	$	4,350
Direct operating expense (exclusive of depreciation and amortization)	544		3,614
Sales, general and administrative expense	53		363
Depreciation and amortization expense	26		185
Transaction and other operating costs	59		101
Operating income (loss)	(31)		87
Other income	(4)		(27)
Interest expense	3		12
Income (loss) from discontinued operations before income tax provision	(30)		102
Income tax provision	48		80
Net income (loss) from discontinued operations, net of taxes	(78)		22
Net income from discontinued operations attributable to noncontrolling interests	—		(5)
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 $17 million each as of September 30, 2022 and approximately $23 million and $21 million, respectively, as of December 31, 2021.

3. Divestiture

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. 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. 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.

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4. Segment Reporting

Effective through September 30, 2022, 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, 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 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. Billings for such services are based on negotiated rates and are reflected as revenues of the billing segment. We adjust these rates from time to time based on market conditions. 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 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. We include items directly attributable to a segment, and those that can be allocated on a reasonable basis, in segment results reported to the CODM. We do not provide asset information by segment to the CODM. 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 ~~refer~~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.

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Selected financial data for our segments is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2022		2021		2022		2021
Revenue
North American LTL	$	1,204	$	1,071	$	3,548	$	3,114
Brokerage and Other Services	1,921		2,261		6,420		6,493
Eliminations	(83)		(62)		(221)		(162)
Total	$	3,042	$	3,270	$	9,747	$	9,445

Adjusted EBITDA
North American LTL	$	258	$	222	$	757	$	694
Brokerage and Other Services	123		131		439		386
Corporate	(29)		(46)		(118)		(164)
Total adjusted EBITDA	352		307		1,078		916
Less:
Debt extinguishment loss	—		46		26		54
Interest expense	35		53		103		176
Income tax provision	34		11		194		60
Depreciation and amortization expense	118		118		349		357
Unrealized loss on foreign currency option and forward contracts	—		—		—		1
Gain on sale of business	—		—		(434)		—
Litigation settlements	—		29		—		29
Transaction and integration costs (1)	25		15		60		26
Restructuring costs (2)	9		14		19		16
Net income from continuing operations attributable to common shareholders	$	131	$	21	$	761	$	197

Depreciation and amortization expense
North American LTL	$	60	$	57	$	175	$	169
Brokerage and Other Services	54		60		168		180
Corporate	4		1		6		8
Total	$	118	$	118	$	349	$	357

(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 5—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.

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5. Revenue Recognition

Disaggregation of Revenues

We disaggregate our revenue by geographic area and service offering. Our revenue disaggregated by geographical area, based on sales office location, was as follows:


	Three Months Ended September 30, 2022
(In millions)	North American LTL		Brokerage and Other Services		Eliminations		Total
Revenue
United States	$	1,178	$	1,079	$	(83)	$	2,174
North America (excluding United States)	26		90		—		116
France	—		313		—		313
United Kingdom	—		217		—		217
Europe (excluding France and United Kingdom)	—		212		—		212
Other	—		10		—		10
Total	$	1,204	$	1,921	$	(83)	$	3,042


	Three Months Ended September 30, 2021
(In millions)	North American LTL		Brokerage and Other Services		Eliminations		Total
Revenue
United States	$	1,049	$	1,384	$	(62)	$	2,371
North America (excluding United States)	22		73		—		95
France	—		330		—		330
United Kingdom	—		224		—		224
Europe (excluding France and United Kingdom)	—		199		—		199
Other	—		51		—		51
Total	$	1,071	$	2,261	$	(62)	$	3,270


	Nine Months Ended September 30, 2022
(In millions)	North American LTL		Brokerage and Other Services		Eliminations		Total
Revenue
United States	$	3,472	$	3,739	$	(221)	$	6,990
North America (excluding United States)	76		293		—		369
France	—		1,017		—		1,017
United Kingdom	—		666		—		666
Europe (excluding France and United Kingdom)	—		653		—		653
Other	—		52		—		52
Total	$	3,548	$	6,420	$	(221)	$	9,747

Table of Contents


	Nine Months Ended September 30, 2021
(In millions)	North American LTL		Brokerage and Other Services		Eliminations		Total
Revenue
United States	$	3,046	$	3,881	$	(162)	$	6,765
North America (excluding United States)	68		212		—		280
France	—		1,024		—		1,024
United Kingdom	—		655		—		655
Europe (excluding France and United Kingdom)	—		627		—		627
Other	—		94		—		94
Total	$	3,114	$	6,493	$	(162)	$	9,445

Our revenue disaggregated by service offering was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2022		2021		2022		2021
North America
LTL (1)	$	1,250	$	1,091	$	3,658	$	3,165
Truck brokerage	686		700		2,265		1,903
Last mile	264		250		784		765
Other brokerage (2)	186		547		936		1,486
Total North America	2,386		2,588		7,643		7,319
Europe	741		757		2,335		2,311
Eliminations	(85)		(75)		(231)		(185)
Total	$	3,042	$	3,270	$	9,747	$	9,445

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

(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

Remaining performance obligations represent firm contracts for which services have not been performed and future revenue recognition is expected. 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 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; actual amounts may differ from these estimates due to changes in foreign currency exchange rates and contract revisions or terminations.

6. 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 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.

Table of Contents

Our restructuring-related activity was as follows:


			Nine Months Ended September 30, 2022
(In millions)	Reserve Balance as of December 31, 2021		Charges Incurred		Payments		Foreign Exchange and Other		Reserve Balance as of September 30, 2022
Severance
North American LTL	$	—	$	2	$	—	$	—	$	2
Brokerage and Other Services	6		6		(9)		(1)		2
Corporate	7		6		(6)		—		7
Total severance	13		14		(15)		(1)		11
Facilities

Brokerage and Other Services	2		1		(1)		—		2
Total facilities	2		1		(1)		—		2
Contract termination
North American LTL	—		3		(3)		—		—
Brokerage and Other Services	—		1		—		—		1
Total contract termination	—		4		(3)		—		1
Total	$	15	$	19	$	(19)	$	(1)	$	14

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.

7. Derivative Instruments ~~and~~ ~~Note 6—Debt, respectively.~~

5.~~Derivative Instruments~~

In the normal course of business, ~~the Company is~~we are exposed to ~~certain~~ risks arising from business operations and economic factors, including fluctuations in interest rates and foreign currencies. ToWe use derivative instruments to manage the volatility related to these ~~exposures, the Company uses derivative instruments.~~exposures. The objective of these derivative instruments is to reduce fluctuations in ~~the Company’s~~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. ~~The Company has~~Historically, we have not ~~historically~~ incurred, and ~~does~~do not expect to incur in the future, any losses as a result of counterparty default.

The ~~Company's~~fair value of our derivative ~~portfolio is comprised~~instruments and the related notional amounts were as follows:


	September 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	$	332	Other current assets	$	18	Other current liabilities	$	—
Cross-currency swap agreements	79		Other long-term assets	10		Other long-term liabilities	—
Interest rate swaps	2,003		Other current assets	6		Other current liabilities	—


Total				$	34		$	—

Table of ~~the following instruments as of September 30, 2017 and December 31, 2016.~~

Contents


												December 31, 2021
September 30, 2017
				Derivative Assets			Derivative Liabilities							Derivative Assets			Derivative Liabilities
(In millions)	Fair Value Hierarchy Level	Notional Amount		Balance Sheet Caption	Fair Value		Balance Sheet Caption	Fair Value			(In millions)	Notional Amount		Balance Sheet Caption	Fair Value		Balance Sheet Caption	Fair Value
Derivatives designated as hedges:
Derivatives designated as hedges											Derivatives designated as hedges
Cross-currency swap agreements	Level 2	$	1,265.9	Other long-term assets	$	—	Other long-term liabilities	$	(114.4	)	Cross-currency swap agreements	$	362	Other current assets	$	—	Other current liabilities	$	(4)
Cross-currency swap agreements	Level 2	0.7		Other current assets	0.1		Other current liabilities	—			Cross-currency swap agreements	110		Other long-term assets	—		Other long-term liabilities	—
Interest rate swaps	Level 2	118.1		Other current assets	—		Other current liabilities	(0.6		)	Interest rate swaps	2,003		Other current assets	—		Other current liabilities	—
Derivatives not designated as hedges:
Foreign currency option and forward contracts	Level 2	876.2		Other current assets	1.8		Other current liabilities	(13.0		)
Foreign currency option and forward contracts	Level 2	223.2		Other long-term assets	1.3		Other long-term liabilities	(4.1		)

Total					$	3.2		$	(132.1	)	Total				$	—		$	(4)

December 31, 2016
Derivative Assets Derivative Liabilities
(In millions) Fair Value Hierarchy Level Notional Amount Balance Sheet Caption Fair Value Balance Sheet Caption Fair Value
Derivatives designated as hedges:
Cross-currency swap agreements Level 2 $ 730.9
Other long-term assets $ 11.9
Other long-term liabilities $ (6.9 )
Cross-currency swap agreements Level 2 3.3
Other current assets 0.1
Other current liabilities —
Interest rate swaps Level 2 105.4
Other current assets —
Other current liabilities (2.3 )
Derivatives not designated as hedges:
Foreign currency option and forward contracts Level 2 552.2
Other current assets 18.8
Other current liabilities (1.0 )
Foreign currency option and forward contracts Level 2 742.6
Other long-term assets 26.7
Other long-term liabilities (5.8 )
Total $ 57.5
$ (16.0 )

The ~~following table indicates~~derivatives are classified as Level 2 within the ~~amount~~fair value hierarchy. The derivatives are valued using inputs other than quoted prices, such as foreign exchange rates and yield curves.

The effect of pre-tax gains/(losses) that have been recognized in accumulated other comprehensive loss in the condensed consolidated balance sheets and gains/(losses) recognized in income before income tax provision in the condensed consolidated statements of operations for derivative and nonderivative ~~instruments:~~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
Derivatives designated as cash flow hedges
Cross-currency swap agreements	$	—	$	—	$	—	$	3	$	—	$	—

Derivatives designated as net investment hedges
Cross-currency swap agreements	25		41		—		—		1		1
Total	$	25	$	41	$	—	$	3	$	1	$	1


	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
Derivatives designated as cash flow hedges
Cross-currency swap agreements	$	—	$	4	$	—	$	7	$	—	$	—
Interest rate swaps	5		—		—		—		—		—
Derivatives designated as net investment hedges
Cross-currency swap agreements	62		76		—		—		5		6
Total	$	67	$	80	$	—	$	7	$	5	$	6

Recognized in Accumulated Other Comprehensive Loss Recognized in Income Before Income Tax Provision
(In millions) Three Months Ended September 30, 2017 Three Months Ended September 30, 2016 Three Months Ended September 30, 2017 Three Months Ended September 30, 2016
Derivatives designated as hedges:
Cross-currency swap agreements $ (50.4 ) $ (17.9 ) $ —
$ —
Interest rate swaps 0.7
0.3
—
—
Derivatives not designated as hedges:
Interest rate swaps —
—

0.3
Foreign currency option and forward contracts —
—
(14.2 ) (0.5 )
Nonderivatives designated as hedges:
Foreign currency denominated notes 1.3
(4.0 ) —
$ —
Total $ (48.4 ) $ (21.6 ) $ (14.2 ) $ (0.2 )

Recognized in Accumulated Other Comprehensive Loss Recognized in Income Before Income Tax Provision
(In millions) Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016
Derivatives designated as hedges:
Cross-currency swap agreements $ (112.7 ) $ (23.9 ) $ —
$ —
Interest rate swaps 1.8
2.8
—
—
Derivatives not designated as hedges:
Interest rate swaps —
—

0.9
Foreign currency option and forward contracts —
—
(52.7 ) 2.3
Nonderivatives designated as hedges:
Foreign currency denominated notes 6.9
(18.9 ) —
$ —
Total $ (104.0 ) $ (40.0 ) $ (52.7 ) $ 3.2

Cross-Currency Swap Agreements

~~In May 2017, the Company entered~~We enter into ~~certain~~ cross-currency swap agreements to manage the ~~related~~ foreign currency exchange risk related to our international operations by effectively converting ~~the~~our fixed-rate ~~U.S. Dollar ("USD")-denominated senior notes due 2023 (see~~ ~~Note 6—Debt~~),USD-denominated debt, including the ~~semi-annual~~associated interest payments, to fixed-rate, ~~EUR-denominated~~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 ~~the senior notes due 2023.~~this debt.

Table of Contents

During the term of the swap contracts, ~~the Company~~we will receive interest, either on a quarterly ~~interest payments in March, June, September and December of each year~~or semi-annual basis, from the counterparties based on USD fixed interest rates, and ~~the Company~~we will ~~make~~pay interest, also on a quarterly ~~interest payments in March, June, September and December of each year~~or semi-annual basis, to the counterparties based on EUR fixed interest rates. At maturity, ~~the Company~~we will repay the original principal amount in EUR and receive the principal amount in USD. ~~The Company has~~These agreements expire at various dates through 2024.

We designated ~~the~~these cross-currency ~~swap agreements~~swaps as qualifying hedging instruments and ~~is accounting~~account for ~~these~~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.

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.

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 (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. 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 ~~cross-currency swap agreements are recorded~~designated portion of interest rate swaps in ~~accumulated other comprehensive income~~AOCI and reclassify them to ~~the extent that the cross-currency swaps are effective in hedging the designated risk.~~

~~Foreign Currency Option and Forward Contracts~~

In order to mitigate the currency translation risk which results from converting the financial statements of the Company’s international operations, which primarily use the Euro ("EUR") and British Pound Sterling ("GBP") as their functional currency, the Company uses foreign currency option and forward contracts. Additionally, the Company may use foreign currency forward contracts to mitigate the foreign currency exposure from intercompany loans. The foreign currency contracts were not designated as qualifying hedging instruments as of September 30, 2017. The contracts are not speculative; rather, they are used to manage the Company’s exposure to foreign currency exchange rate fluctuations. The contracts expire in 24 months or less. Gains or lossesInterest expense on the ~~contracts are recorded in foreign currency (gain) loss in the condensed consolidated statements of operations.~~dates that interest payments accrue. Cash flows related to the ~~foreign currency contracts~~interest rate swaps are included in Cash flows from operating activities of continuing operations on ~~the condensed consolidated statements~~our Condensed Consolidated Statements of ~~cash flows, except for the cash flows resulting from forwards designated as hedges~~Cash Flows.

8. Debt


	September 30, 2022				December 31, 2021
(In millions)	Principal Balance		Carrying Value		Principal Balance		Carrying Value

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



6.25% senior notes due 2025	520		517		1,150		1,141
6.70% senior debentures due 2034	300		216		300		214

Finance leases, asset financing and other	197		197		240		240
Total debt	3,020		2,908		3,693		3,572
Short-term borrowings and current maturities of long-term debt	60		60		58		58
Long-term debt	$	2,960	$	2,848	$	3,635	$	3,514

Table of ~~intercompany loans which are included in financing activities.~~

Contents

6.~~Debt~~

~~The Company's debt is comprised of the following:~~

September 30, 2017
Fair Value
(In millions) Principal Balance Carrying Value Level 1 Level 2
ABL facility $ —
$ —
$ —
$ —
Senior notes due 2023 535.0
527.7
560.4
—
Senior notes due 2022 1,600.0
1,582.2
1,686.6
—
Senior notes due 2021 590.3
584.4
619.8
—
Term loan facility 1,494.0
1,453.3
—
1,501.4
Senior debentures due 2034 300.0
202.3
299.9
—
Convertible senior notes 4.7
4.7
19.4
—
Euro private placement notes due 2020 14.2
15.2
—
14.8
Asset financing 95.8
95.8
92.6
—
Capital leases for equipment 165.4
165.4
—
165.4
Total debt $ 4,799.4
$ 4,631.0
$ 3,278.7
$ 1,681.6
Current maturities of long-term debt $ 90.0
$ 90.0

Long-term debt $ 4,709.4
$ 4,541.0

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


(In millions)	Fair Value		Level 1		Level 2
September 30, 2022	$	2,944	$	808	$	2,136
December 31, 2021	3,811		1,571		2,240

December 31, 2016
Fair Value
(In millions) Principal Balance Carrying Value Level 1 Level 2
ABL facility $ 30.0
$ 30.0
$ —
$ 30.0
Senior notes due 2023 535.0
527.1
560.4
—
Senior notes due 2022 1,600.0
1,579.9
1,689.4
—
Senior notes due 2021 527.1
520.7
546.0
—
Senior notes due 2018 265.8
267.1
274.0
—
Term loan facility 1,481.9
1,439.2
—
1,507.1
Senior debentures due 2034 300.0
200.8
241.6
—
Convertible senior notes 49.4
47.1
129.8
—
Euro private placement notes due 2020 12.6
13.7
—
14.0
Asset financing 145.0
145.0
145.0
—
Capital leases for equipment 97.4
97.4
—
97.4
Total debt $ 5,044.2
$ 4,868.0
$ 3,586.2
$ 1,648.5
Current maturities of long-term debt $ 138.9
$ 136.5

Long-term debt $ 4,905.3
$ 4,731.5

~~The~~We valued Level 1 debt ~~was valued~~ using quoted prices in active markets. ~~The~~We valued Level 2 debt ~~was valued~~ using bid evaluation pricing models or quoted prices of securities with similar characteristics. The fair value of the asset financing arrangements approximates carrying value ~~since~~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.

~~Refinancing~~ABL Facility

As of ~~Existing~~ 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 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

~~On March 10, 2017,~~In the Company entered into a Refinancing Amendment (Amendment No. 2 to Credit Agreement) (the "Amendment"), by and among XPO, its subsidiaries signatory thereto, as guarantors, the lenders party thereto and Morgan Stanley Senior Funding, Inc., in its capacity as administrative agent (the "Administrative Agent"), amending that certain Senior Securedfirst quarter of 2021, we amended our Term Loan Credit Agreement ~~dated as~~and recorded a debt extinguishment loss of October 30, 2015 (as amended, amended and restated, supplemented or otherwise modified, including by that certain Incremental and Refinancing Amendment (Amendment No. 1 to Credit Agreement), dated as of August 25, 2016, the "Term Loan Credit Agreement").

~~Pursuant to the Amendment, the outstanding $1,481.9 million principal amount of term loans under the Term Loan Credit Agreement (the "Existing Term Loans") were replaced with $1,494.0~~$3 million in ~~aggregate principal amount~~the first nine months of new term loans (the "New Term Loans") having substantially similar terms as the Existing Term Loans, other than with respect to the applicable interest rate and prepayment premiums in respect of certain voluntary prepayments. Proceeds from the New Term Loans were used primarily to refinance the Existing Term Loans and to pay interest, fees and expenses in connection therewith, and up to $1.5 million may be used for general corporate purposes.

The interest rate margin applicable to the New Term Loans was reduced from 2.25% to 1.25%, in the case of base rate loans, and from 3.25% to 2.25%, in the case of LIBOR loans and the LIBOR floor was reduced from 1.0% to 0%.2021. The interest rate on ~~the New Term Loans~~our term loan facility was ~~3.55% at~~4.38% as of September 30, ~~2017. The New Term Loans maturity date remains October 30, 2021. The refinancing resulted in a debt extinguishment charge~~2022.

Senior Notes Due 2025

In April 2022, we redeemed $630 million of ~~$8.3 million during~~ the ~~nine months ended September 30, 2017.~~

~~Redemption~~then $1.15 billion outstanding principal amount of our 6.25% senior notes due 2025 (“Senior Notes due ~~2018~~

~~In August 2017, the Company redeemed all of its outstanding 7.25% senior notes due January 2018 (the “Notes”~~2025”). The redemption price for the ~~Notes~~notes was ~~102.168%~~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 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 ~~Notes,~~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 ~~but excluding,~~ the ~~date~~redemption of ~~redemption.~~the Senior Notes due 2023 and Senior Notes due 2024, respectively.

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 ~~funded using cash on hand at the date~~100% of the ~~redemption. The loss on~~principal amount, plus accrued and unpaid interest. We paid for the redemption with available cash. We recorded a debt extinguishment ~~was approximately~~loss of $5 ~~million.~~

~~Convertible Senior Notes~~

~~During~~million in the first nine months ~~ended September 30, 2017, the Company issued an aggregate~~ of ~~approximately 2.7 million shares~~2021 due to this redemption.

Table of the Company’s common stock to certain holders of the Convertible Senior Notes in connection with the conversion of $44.7 million aggregate principal amount of the Convertible Senior Notes. The conversions were allocated to long-term debt and equity in the amounts of $44.4 million and $44.8 million, respectively. A loss on conversion of $0.5 million was recorded as part of these transactions. Certain of these transactions represented induced conversions pursuant to which the Company paid the holder a market-based premium in cash. The negotiated market-based premiums, in addition to the difference between the current fair value and the book value of the Convertible Senior Notes, were reflected in interest expense.Contents

9. Stockholders’ Equity

~~7. Stockholders' Equity~~Share Issuance

In July ~~2017, the Company~~2021, we completed a registered underwritten offering of 115.0 million shares of ~~its~~our common stock at a public offering price of ~~$60.50~~$138.00 per share, plus ~~up to~~ an additional ~~1.65 million~~750,000 shares of ~~its~~our common stock ~~pursuant to~~through an option granted to ~~the underwriters to purchase additional shares of the Company’s common stock directly from the Company (the “Offering”).~~underwriters. Of the 115.0 million shares, ~~of common stock, 5~~we offered 2.5 million shares directly and 2.5 million shares were offered ~~directly~~by Jacobs Private Equity, LLC (“JPE”), an entity controlled by the ~~Company~~Company’s former chief executive officer and ~~6 million~~current executive chairman. The additional 750,000 purchased shares were ~~offered in connection with forward sale agreements (the "Forward Sale Agreements") described below. The option granted to the underwriters expired unexercised. The Offering closed on July 25, 2017.~~

~~In connection with the Offering, the Company entered into separate Forward Sale Agreements with Morgan Stanley & Co. LLC~~also split equally between us and ~~JPMorgan Chase Bank, National Association, London Branch (the "Forward Counterparties") pursuant to which the Company has agreed to sell, and each Forward Counterparty agreed to purchase, 3~~JPE. We received approximately $384 million ~~shares~~ of the Company’s common stock (or 6 million shares of the Company common stock in the aggregate) subject to the terms and conditions of the Forward Sale Agreements, including the Company’s right to elect cash settlement or net share settlement. The initial forward price under each of the Forward Sale Agreements is $58.08 per share (which is the public offering price of our common stock, less the underwriting discount) and is subject to certain adjustments pursuant to the terms of the Forward Sale Agreements. Settlement of each of the Forward Sale Agreements must occur no later than one year after the closing of the Offering but may occur earlier at the option of the Company or, in certain circumstances described in the Forward Sale Agreements, at the option of the relevant Forward Counterparty. A Forward Counterparty’s decision to exercise its right to accelerate the Forward Sale Agreements entered into with it and to require the Company to settle the Forward Sale Agreements will be made irrespective of the Company’s interests, including the Company’s need for capital. The Company could be required to issue and deliver the Company’s common stock under the terms of the physical settlement provisions of the Forward Sale Agreements irrespective of the Company’s capital needs, which would result in dilution to the Company’s earnings per share and return on equity. The Forward Sales Agreements will be accounted for as equity instruments with subsequent changes in fair value not recognized as long as the contracts continue to be equity classified.

~~The Company received~~ proceeds, ~~of $290.4 million ($287.6 million~~ net of fees and ~~expenses)~~expenses, from the sale of ~~5 million~~the shares and used them to repay a portion of ~~common stock in the Offering. The Company has~~our outstanding borrowings and for general corporate purposes. XPO did not ~~received~~receive any proceeds from the sale of shares by JPE.

Series A Convertible Perpetual Preferred Stock and Warrants

Commencing in the fourth quarter of ~~its~~2020, holders of our convertible preferred stock and warrants exchanged their holdings for our common stock byor a combination of our common stock and cash. These exchanges were intended to simplify our equity capital structure, including in contemplation of the ~~Forward Counterparties pursuant~~spin-off of our logistics segment. 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 ~~Forward Sale Agreements. The Company used the net proceeds of the shares issued and sold by the Company~~warrants, in the ~~Offering~~first quarter of 2021, 9.8 million warrants were exchanged, and ~~expects~~we issued 9.2 million shares of common stock. The warrants exchanged included holdings of JPE. Subsequent to ~~use~~the exchange in the second quarter of 2021, there are no shares of preferred stock or warrants outstanding.

Share Repurchases

In February 2019, our Board of Directors authorized repurchases of up to $1.5 billion of our common stock. Our share repurchase authorization permits us to purchase shares in both the open market and in private transactions, with the timing and number of shares dependent on a variety of factors, including price, general business conditions, market conditions, alternative investment opportunities and funding considerations. We are not obligated to repurchase any ~~net proceeds received upon~~specific number of shares and may suspend or discontinue the ~~settlement~~program at any time.

There have been no share repurchases since the first quarter of ~~the Forward Sale Agreements for general corporate purposes, which may include strategic acquisitions and the repayment or refinancing~~2020. Our remaining share repurchase authorization was $503 million as of ~~outstanding indebtedness.~~

September 30, 2022.

~~8. Legal and Regulatory Matters~~

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10. Earnings (Loss) per Share

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


		Three Months Ended September 30,				Nine Months Ended September 30,
(In millions, except per share data)		2022		2021		2022		2021






Net income from continuing operations attributable to common shares		$	131	$	21	$	761	$	197



Net income (loss) from discontinued operations, net of amounts attributable to noncontrolling interest		—		(78)		(1)		17



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

Basic weighted-average common shares		115		115		115		111
	Dilutive effect of stock-based awards and warrants	1		1		1		3
Diluted weighted-average common shares		116		116		116		114

Basic earnings from continuing operations per share		$	1.14	$	0.19	$	6.62	$	1.78
Basic earnings (loss) from discontinued operations per share		—		(0.69)		(0.01)		0.15
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
Diluted earnings (loss) from discontinued operations per share		—		(0.68)		(0.01)		0.14
Diluted earnings (loss) per share		$	1.13	$	(0.49)	$	6.57	$	1.87

11. Commitments and Contingencies

We are involved, and ~~will~~expect to continue to be involved, in numerous proceedings arising out of the conduct of ~~its~~our business. These proceedings may include ~~among other matters,~~ claims for property damage or personal injury incurred in connection with the transportation of freight, ~~claims regarding anti-competitive practices,~~environmental liability, commercial disputes, insurance coverage disputes and employment-related claims, including claims involving asserted breaches of employee restrictive covenants and tortious interference with contract. These proceedings also include numerous purported class action lawsuits, multi-plaintiff and individual lawsuits and state tax and other administrative proceedings that claim either that the Company’s owner operators or contract carriers should be treated as employees, rather than independent contractors, or that certain of the Company's drivers were not paid for all compensable time or were not provided with required meal or rest breaks. These lawsuits and proceedings may seek substantial monetary damages (including claims for unpaid wages, overtime, failure to provide meal and rest periods, unreimbursed business expenses and other items), injunctive relief, or both.covenants.

~~The Company establishes~~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. ~~Accruals~~We review and adjust accruals for loss contingencies ~~are reviewed~~ quarterly and ~~adjusted~~ as additional information becomes available. In connection with certain acquisitions of privately-held businesses, the Company has retained purchase price holdbacks or escrows to provide security for a negotiated duration with respect to damages incurred in connection with pre-acquisition claims and litigation matters. If a loss is not both probable and reasonably estimable, or if an exposure to loss exists in excess of the amount accrued, ~~therefor or the applicable purchase price holdback or escrow, the Company assesses~~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, ~~the Company discloses~~we disclose the estimate of the possible loss or range of loss if it is material and an estimate can be made, or ~~states~~disclose that such an estimate cannot be made. The ~~evaluation~~determination as to whether a loss iscan reasonably be considered to be possible or probable is based on ~~the Company’s~~our assessment, ~~in conjunction~~together with legal counsel, regarding the ultimate outcome of the matter.

~~The Company believes~~We believe that ~~it has~~we have adequately accrued for ~~or has adequate purchase price holdbacks or escrows with respect to,~~ the potential impact of loss contingencies that are probable and reasonably estimable. ~~The Company does~~We do not believe that the ultimate resolution of any matters to which ~~the Company is~~we are presently a party will have a material adverse effect on ~~its~~our results of operations, financial condition or cash flows. However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more of these matters could have a material adverse effect on ~~the Company’s~~our financial condition, results of operations or cash flows. Legal costs incurred related to these matters are expensed as incurred.

~~The Company carries~~We carry liability and excess umbrella insurance policies that ~~it deems~~we deem sufficient to cover potential legal claims arising in the normal course of conducting ~~its~~our operations as a transportation ~~and logistics~~ company. ~~The liability and excess umbrella insurance policies generally do not cover the misclassification claims described in this Note.~~ In the event ~~the Company is~~we are required to satisfy a legal claim outside the scope of the coverage provided by insurance, ~~the Company’s~~our financial condition, results of operations or cash flows could be negatively impacted.

~~Intermodal Drayage Classification Claims~~

~~Certain~~21

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As of October 31, 2022, the ~~Company’s intermodal drayage subsidiaries received notices from~~company’s last mile subsidiary was involved in several class action and collective action cases involving claims that the ~~California Labor Commissioner, Division~~contract carriers with which it contracted for performance of ~~Labor Standards Enforcement (the "DLSE"), that a total of approximately 150 owner operators contracted with these subsidiaries filed claims in 2012 with the DLSE in which they assert that they~~delivery services, or their delivery workers, should be ~~classified~~treated as employees, rather than independent ~~contractors. These~~contractors (“misclassification claims”). The misclassification claims seek reimbursement for the owner operators’ business expenses, including fuel, tractor maintenance and tractor lease payments. After a decision was rendered by a DLSE hearing officer in seven of these claims, in 2014, the Company appealed the decision to California Superior Court, San Diego, where a de novo trial was held on the merits of those claims. On July 17, 2015, the court issued a final statement of decision finding that the seven claimants were employees rather than independent contractors, and awarding an aggregate of $2.9 million plus post-judgment interest and attorneys’ feespertained solely to the ~~claimants. The Company appealed this judgment, but cannot provide assurance that such appeal will be successful. Separate decisions~~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 ~~rendered in June 2015~~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

On December 14, 2018, a DLSE hearing officer in claims involving five additional plaintiffs, resulting in an award for the plaintiffs in an aggregate amount of approximately $0.9 million, following which the Company appealed the decisionsputative class action captioned Labul v. XPO Logistics, Inc. et al. was filed in the U.S. District Court for the ~~Central~~ District of ~~California.~~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 ~~May 16, 2017,~~March 19, 2021, the Court ~~issued judgment finding that~~dismissed the ~~five claimants were employees rather than independent contractors,~~complaint with prejudice, and ~~awarding an aggregate~~on June 30, 2022, the U.S. Court of approximately $1.0 million plus post-judgment interest and attorneys’ fees to the claimants. The Company has appealed this judgment, but cannot provide assurance that such appeal will be successful. In addition, separate decisions were rendered in April 2017 by a DLSE hearing officer in claims involving four additional plaintiffs, resulting in an awardAppeals for the ~~plaintiffs~~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. Jacobs, et al., (the “Jez complaint”) in ~~an aggregate amount of approximately $0.9 million, following which the Company appealed the decisions to~~ the U.S. District Court for the ~~Central~~ District of ~~California.~~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 ~~remaining DLSE~~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

In April 2012, Allianz Global Risks US Insurance Company sued eighteen insurance companies in a case captioned Allianz Global Risks US Ins. Co. v. ACE Property & Casualty Ins. Co., et al., Multnomah County Circuit Court (Case No. 1204-04552). Allianz sought contribution on environmental and product liability claims ~~(the "Pending DLSE Claims") have been transferred~~that Allianz agreed to ~~California Superior~~defend and indemnify on behalf of its insured, Daimler Trucks North America (“DTNA”). Defendants had insured Freightliner’s assets, which DTNA acquired in 1981. Con-way, Freightliner’s former parent company, intervened. We acquired Con-way in 2015. Con-way and Freightliner had self-insured under fronting agreements with defendant insurers ACE, Westport, and General. Under those agreements, Con-way agreed to indemnify the fronting carriers for damages assessed under the fronting policies. Con-way’s captive insurer, Centron, was also a named defendant. After a seven-week jury trial in 2014, the jury found that Con-way and the fronting insurers never intended that the insurers defend or indemnify any claims against Freightliner. In June 2015, Allianz appealed to the Oregon Court ~~in three separate actions involving approximately 200 claimants, including~~of Appeals. In May 2019, the ~~approximately 150 claimants mentioned above. The Company believes~~Oregon Court of Appeals upheld the jury verdict. In September 2019, Allianz appealed to the Oregon Supreme Court. In March 2021, the Oregon Supreme Court reversed the jury verdict, holding that it ~~has adequately~~was an error to allow the jury to decide how the parties intended the fronting policies to operate, and also holding that the trial court improperly instructed the jury concerning one of the pollution exclusions at issue. In July of 2021, the matter was remanded to the trial court for further proceedings consistent with the Oregon Supreme Court’s decision. There is no date yet set for the next stages of the proceeding. The parties have filed cross-motions for summary judgment concerning the interpretation of certain of the fronting policies, which are yet to be decided. Following summary judgment, we anticipate a jury trial on the pollution exclusion, then a bench trial on allocation of defense costs among the subject insurance policies. We have accrued an immaterial amount for the potential ~~impact of loss contingencies~~

exposure associated with Centron in the bench trial regarding allocation. As any losses that may arise in connection with the fronting policies issued by defendant insurers ACE, Westport, and General are ~~probable and~~not reasonably estimable ~~relating to the claims referenced above. The Company is unable~~ at this time, ~~to estimate~~no liability has been accrued in the ~~amount~~accompanying interim consolidated financial statements for those potential exposures.

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California Environmental Matters

In August 2022, the ~~possible loss or range of loss, if any,~~company received a letter from the San Bernardino County District Attorney’s Office, written in ~~excess of its accrued liability that it may incur as a result of these claims given, among~~cooperation with certain other ~~reasons, that the number and identities of plaintiffs in these lawsuits are uncertain~~California District Attorneys and the ~~range~~Los Angeles City Attorney, notifying the company of ~~potential loss could be impacted substantially by future rulings by the courts involved, including on the merits of the claims.~~

~~Last Mile Logistics Classification Claims~~

Certain of the Company’s last mile logistics subsidiaries are party to several putative class action litigations brought by independent contract carriers who contracted with these subsidiaries in which the contract carriers assert that they should be classified as employees, rather than independent contractors. The particular claims asserted vary from case to case, but the claims generally allege unpaid wages, unpaid overtime, or failure to provide meal and rest periods, and seek reimbursement of the contract carriers’ business expenses. Putative class actions against the Company’s subsidiaries are pending in California (Fernando Ruiz v. Affinity Logistics Corp., filed in May 2005 in the Federal District Court, Southern District of California - the Company has reached an agreement to settle this litigation, which is subject to final Court approval; Ron Carter, Juan Estrada, Jerry Green, Burl Malmgren, Bill McDonald and Joel Morales v. XPO Logistics, Inc., filed in March 2016 in the Federal District Court, Northern District of California; Ramon Garcia v. Macy’s and XPO Logistics Inc., filed in July 2016 in Superior Court of the State of California, Alameda County; and Kevin Kramer v. XPO Logistics Inc., filed in September 2016 in Superior Court of the State of California, Alameda County); New Jersey (Leonardo Alegre v. Atlantic Central Logistics, Simply Logistics, Inc., filed in March 2015 in the Federal District Court, New Jersey - the Company has reached an agreement to settle this litigation, and the Court has approved the settlement); and Connecticut (Carlos Taveras v. XPO Last Mile, Inc., filed in November 2015 in the Federal District Court, Connecticut, - the Company reached an agreement to settle this litigation and the settlement has been paid). The Company believes that it has adequately accrued for the potential impact of loss contingencies relating to the foregoing claims that are probable and reasonably estimable. The Company is unable at this time to estimate the amount of the possible loss or range of loss, if any, in excess of its accrued liability that it may incur as a result of these claims given, among other reasons, that the number and identities of plaintiffs in these lawsuits are uncertain and the range of potential loss could be impacted substantially by future rulings by the courts involved, including on the merits of the claims.

~~Last Mile TCPA Claims~~

~~The Company is a party to a putative class action litigation (Leung v. XPO Logistics, Inc., filed in May 2015 in the U.S. District Court, Illinois) alleging~~investigation into alleged violations of the Telephone Consumer Protection Act ("TCPA") related to an automated customer call system used by a last mile logistics business that the Company acquired. This matter is in the initial pleading stage and the court has not yet determined whether to certify the matter as a class action. The Company has reached an agreement to settle this matter, which is subject to final Court approval. The Company has accrued the full amount of the proposed settlement.

~~Less-Than-Truckload Meal Break Claims~~

~~The Company’s LTL subsidiary is a party to several class action litigations alleging violations of the state of California's wage and hour laws~~ with respect to ~~its driver employees. Plaintiffs allege failure~~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 ~~provide drivers~~date, nor can we reasonably estimate potential costs at this time.

12. 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.

RXO Debt

In preparation for the spin-off, in October 2022, a wholly-owned subsidiary of XPO that merged with ~~required meal breaks~~ and ~~rest breaks. Plaintiffs seek to recover unspecified monetary damages, penalties, interest and attorneys’ fees. The primary case is~~ ~~Jose Alberto Fonseca Pina, et al. v. Con-way Freight Inc., et al.~~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 "~~Pina~~ ~~case"~~“RXO Notes”). The ~~Pina~~ ~~case was initially filed~~ RXO Notes bear interest at a rate of 7.50% per annum payable semiannually in cash in arrears on May 15 and November ~~2009 in Monterey County Superior Court~~15 of each year, beginning May 15, 2023, and ~~was removed~~mature on November 15, 2027. They were issued at an issue price of 98.962% of par.

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

The ~~Company has reached an agreement~~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 ~~settle~~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 ~~Pina~~ ~~case and~~ 12-month anniversary of the ~~settlement~~distribution. As the spin-off has been ~~approved by~~consummated, the ~~Court. The Company has accrued~~RXO Notes, the ~~full amount~~RXO Term Loan and RXO’s revolving credit facility are direct obligations of ~~the proposed settlement.~~

RXO.

~~9. Earnings Per Share~~

Basic and diluted earnings per share are computed using the two-class method, which is an earnings allocation method that determines earnings per share for common shares and participating securities. The participating securities consist of the Company's Series A Convertible Perpetual Preferred Stock. The undistributed earnings are allocated between common shares and participating securities as if all earnings had been distributed during the period. In periods of loss, no allocation is made to the preferred shares.

Three Months Ended September 30, Nine Months Ended September 30,
(In millions, except per share data) 2017 2016 2017 2016
Basic earnings per common share
Net income attributable to XPO $ 62.5
$ 15.1
$ 135.7
$ 39.2
Cumulative preferred dividends (0.7 ) (0.7 ) (2.2 ) (2.2 )
Non-cash allocation of undistributed earnings (4.3 ) (0.6 ) (9.0 ) (1.2 )
Net income allocable to common shares, basic $ 57.5
$ 13.8
$ 124.5
$ 35.8

Basic weighted-average common shares 117.5
110.3
113.5
110.0
Basic earnings per share $ 0.49
$ 0.13
$ 1.10
$ 0.33

Diluted earnings per common share
Net income allocable to common shares, basic $ 57.5
$ 13.8
$ 124.5
$ 35.8
Interest from Convertible Senior Notes 0.2
0.3
0.9
—
Net income allocable to common shares, diluted $ 57.7
$ 14.1
$ 125.4
$ 35.8

Basic weighted-average common shares 117.5
110.3
113.5
110.0
Dilutive effect of Convertible Senior Notes 1.9
3.0
2.6
—
Dilutive effect of non-participating stock-based awards 10.4
9.6
10.1
9.2
Diluted weighted-average common shares 129.8
122.9
126.2
119.2

Diluted earnings per share $ 0.44
$ 0.11
$ 0.99
$ 0.30

Potential common shares excluded 10.2
11.5
10.2
14.9

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

~~10. Subsequent Events~~Debt Tender Offer

In October ~~2017, XPO Logistics Europe SA (“XPO Logistics Europe”), in~~2022, we commenced a tender offer to purchase for cash any and all of our outstanding Senior Notes due 2025, which ~~the Company holds an 86.25% controlling interest, entered into~~had a ~~European trade receivables securitization program for an aggregate maximum amount~~principal balance outstanding of ~~€270~~$520 million ~~(approximately $315 million) for a term~~as of ~~three years co-arranged~~September 30, 2022. The tender offer will expire on November 17, 2022, unless extended or earlier terminated by ~~Crédit Agricole and HSBC. Under the terms~~XPO.

Table of the program, XPO Logistics Europe, or one of its wholly-owned subsidiaries in the United Kingdom or France, will sell trade receivables to XPO Collections Designated Activity Company Limited (“XCDAL”), a wholly-owned bankruptcy remote special purpose entity of XPO Logistics Europe. The receivables will be funded by senior variable funding notes denominated in the same currency as the corresponding receivables. XCDAL is considered a variable interest entity and will be consolidated by XPO Logistics Europe based on its control of the entity’s activities. The receivable balances under this program will be reported as accounts receivable on the Company’s consolidated balance sheet and the obligation to return the cash it receives will be included in the Company’s long-term debt.Contents

The receivables securitization program provides additional liquidity to fund XPO Logistics Europe's operations. Borrowings under the program will bear interest at lenders’ cost of funds plus a margin of 1.05%. The receivables securitization program contains representations and warranties, affirmative and negative covenants, termination events, events of default, indemnities and other obligations on the part of XPO Logistics Europe, certain of its subsidiaries, and XCDAL which are customary for transactions of this nature.

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q and other written reports and oral statements we make from time to time contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the ~~"Securities Act"~~“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the ~~"Exchange Act"~~“Exchange Act”). All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. In some cases, forward-looking statements can be identified by the use of forward-looking terms such as "anticipate," "estimate," "believe," "continue," "could," "intend," "may," "plan," "potential," "predict," "should," "will," "expect," "objective," "projection," "forecast," "goal," "guidance," "outlook," "effort," "target," "trajectory"“anticipate,” “estimate,” “believe,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “will,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target,” “trajectory” or the negative of these terms or other comparable terms. However, the absence of these words does not mean that the statements are not forward-looking. These forward-looking statements are based on certain assumptions and analyses made by the ~~Company~~company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause or contribute to a material difference include those discussed below and the risks discussed in the ~~Company’s~~company’s other filings with the Securities and Exchange Commission (the ~~"SEC"~~“SEC”). All forward-looking statements set forth in this Quarterly Report are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by the ~~Company~~company will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the ~~Company~~company or its business or operations. The following discussion should be read in conjunction with the ~~Company’s~~company’s unaudited Condensed Consolidated Financial Statements and related ~~Notes~~notes thereto included elsewhere in this Quarterly ~~Report.~~Report, and with the audited consolidated financial statements and related notes thereto included in the 2021 Form 10-K. Forward-looking statements set forth in this Quarterly Report speak only as of the date hereof, and we do not undertake any obligation to update forward-looking statements to reflect subsequent events or circumstances, changes in expectations or the occurrence of unanticipated events, except asto the extent required by law.

Reference should be made to the audited consolidated financial statements and notes thereto and related "Management’s Discussion and Analysis of Financial Condition and Results of Operations" included in the Company's 2016 Annual Report on Form 10-K.

Executive Summary

XPO Logistics, Inc., ~~a Delaware corporation~~ together with its subsidiaries ("(“XPO,~~" the "Company," "we"~~” or ~~"our"~~“we”), is a ~~top ten global~~leading provider of ~~cutting-edge supply chain solutions to the most successful companies in the world. The Company operates as a highly integrated network of people, technology and physical assets.~~freight transportation services. We use our ~~network~~proprietary technology to ~~help~~move goods efficiently through our ~~customers manage their goods more efficiently throughout their~~customers’ supply ~~chains.~~chains; in North America, we achieved this primarily by providing less-than-truckload (“LTL”) and truck brokerage services until November 1, 2022, when we completed the spin-off of our brokered transportation platform. The spin-off resulted in LTL being XPO’s sole business in North America, and created a new public company, RXO, Inc. (“RXO”), comprised of our former services for truck brokerage, managed transportation, last mile and freight forwarding.

In the first nine months of 2022, our company had two reportable segments — (i) North American LTL and (ii) Brokerage and Other Services — and within each segment, we were a leading provider operating in vast, fragmented transportation sectors with growing penetration, and with company-specific avenues for value creation. As of September 30, ~~2017,~~2022, we ~~served more than 50,000 customers and operated with over 91,000~~had approximately 44,000 employees and ~~1,444~~748 locations in ~~32 countries.~~20 countries serving approximately 50,000 multinational, national, regional and local customers.

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

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RXO Spin-Off

We ~~run~~completed the spin-off of RXO on November 1, 2022 in a transaction intended to be tax-free to XPO and our ~~business~~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 ~~a global basis,~~the New York Stock Exchange. 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. Additionally, effective in the fourth quarter of 2022, we will revise our reportable segments to reflect our new internal organization.

In connection with ~~two segments: Transportation and Logistics. Within each segment,~~the spin-off, we have ~~built robust service offerings that are positioned to capitalize on fast-growing areas of customer demand. Substantially all of our businesses operate under the single brand of XPO Logistics.~~

We are not reliant on the economy of any one country, region or industry. Based on where orders originated, approximately 60% of our 2016 revenue was generated in the United States, 13% in France, 12% in the United Kingdom,entered into a separation and ~~15% in other countries. Our customers are also highly diversified across every major industry, with retail and e-commerce historically accounting for approximately a quarter of our revenue.~~

In our Transportation segment, we are the second largest freight brokerage provider globally, and we hold industry-leading positions in North America and Europe. In North America, we are the largest provider of last mile logistics for heavy goods; the largest manager of expedite shipments; the second largest provider of less-than-truckload ("LTL") transportation; and the third largest provider of intermodal services;distribution agreement, as well as various other agreements with RXO that provide a ~~global freight forwarder with~~framework for the relationships between the parties going forward, including, among others, an employee matters agreement, a ~~large network~~tax matters agreement, an intellectual property license agreement and a transition services agreement, through which XPO will provide certain services to RXO.

Divestiture of ~~ocean, air, ground and border services.~~Intermodal

In ~~Europe,~~March 2022, we ~~have~~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 ~~largest owned road transportation fleet.~~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 ~~offer full truckload transportation~~agreed to provide certain specified customary transition services for a period not exceeding 12 months from the sale. Intermodal was included in ~~Europe~~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 ~~dedicated, non-dedicated~~a discontinued operation because the sale was part of one strategic plan of disposal, and ~~brokered services; last mile~~all periods prior to the date of the spin-off will be reflected as a discontinued operation. For further information on the sale of intermodal, see Note 3—Divestiture.

2021 Spin-Off of the Logistics Segment

On August 2, 2021, we completed the spin-off of our logistics ~~services;~~segment as GXO Logistics, Inc. (“GXO”). 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.

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 ~~LTL transportation through~~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).

North American Less-Than-Truckload Segment

XPO has one of the largest networks of tractors, trailers and terminals in the North American LTL ~~networks~~industry, with approximately 8% share of a $51 billion U.S. market. LTL in ~~Western Europe.~~North America is a growing industry providing a critical service to the economy, with favorable pricing dynamics and a stable competitive landscape.

~~Our blended model~~We serve approximately 25,000 customers with geographic density and day-definite regional, national and cross-border services that reach approximately 99% of ~~owned, contracted~~U.S. zip codes, as well as cross-border service to Mexico, Canada and ~~brokered~~the Caribbean. Our capacity gives us the ~~flexibility~~ability to ~~offer solutions that best serve~~manage large freight volumes efficiently and balance our network to leverage fixed costs. XPO delivered approximately 18 billion pounds of freight for the ~~interests~~trailing 12 months through September 30, 2022.

Importantly, our LTL business historically has generated a high return on invested capital and robust free cash flow. This allows us to invest in ongoing development of our ~~customers~~proprietary technology and numerous other growth and optimization initiatives. We are managing the business to specific objectives, such as high customer service scores for on-time delivery and damage-free freight, the insourcing of more linehaul miles from third-party transportation

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providers as we add more capacity, and the ~~Company.~~addition of 900 net new doors to our network by year-end 2023, from an October 2021 baseline. As of September 30, ~~2017, globally,~~2022, we had added five terminals to our network, representing 369 net new doors.

Additionally, we are continuing to execute on a host of idiosyncratic initiatives that are specific to XPO and independent of the macroeconomic environment. The ongoing deployment of our proprietary LTL technology encompasses multiple levers for value creation, such as pricing optimization, cost modeling by customer and lane, and piece-level tracking.

As other examples, we added a second production line at our in-house trailer manufacturing facility in January and expect to double our output run-rate. We are also investing in training more drivers at our 130 in-house commercial driver schools, and expect to train approximately ~~11,000~~1,700 drivers this year. Our trailer manufacturing and our expansive footprint of driver schools are unique, self-reliant capabilities that address equipment constraints and the driver shortage, and are largely independent of macroeconomic conditions.

Specific to our technology, we believe we have a large opportunity to further improve the profitability of our LTL network through innovation, beyond the large gain in operating margin achieved to date. We use intelligent route-building to move LTL freight across North America, and proprietary visualization tools to help reduce the cost of pickups and deliveries. Our XPO Smart® productivity tools are installed in our cross-dock operations, and our new piece-level tracking tool increases visibility of a shipment at the per-pallet level, with positive impacts to trailer loading, dock planning and shortage claims. Our largest opportunity is related to our proprietary pricing technology, which includes automated, dynamic pricing for local accounts and a new pricing platform utilized by our pricing experts for larger accounts.

~~owner operators under~~Brokerage and Other Services Segment

Prior to the completion of the RXO spin-off, XPO was the fourth largest truckload transportation broker in the U.S. Our asset-light truck brokerage business places shippers’ freight with qualified independent carriers using our XPO Connect® technology platform. We price this service on either a contract or a spot basis, and we operate with a variable cost structure that adjusts quickly to ~~provide drayage, expedite,~~market changes. We derive our revenue from diversified industry verticals, and we have many long-standing, blue-chip customer relationships — on average, our top 10 customers have a 16-year tenure with us.

Our truck brokerage business has a long track record of generating top-line growth and margin expansion, a high return on invested capital and strong free cash flow. In 2022, notable factors driving our performance included our access to massive truckload capacity for shippers through our carrier relationships, strong management expertise, company-specific avenues for value creation led by our cutting-edge technology, and favorable industry tailwinds.

Broker penetration of for-hire truckload transportation has doubled in the last 15 years, and is still less than 25%. We have approximately 4% share of the $88 billion U.S. brokered truckload industry, giving us a long runway for revenue growth — the total addressable for-hire truckload opportunity in 2021 was estimated to be approximately $400 billion. Demand for truckload capacity in the e-commerce and omnichannel retail sectors continues to be robust, and more and more shippers are outsourcing to brokers, while increasingly preferring brokers like XPO that offer digital capabilities.

As of September 30, 2022, we had relationships with approximately 108,000 independent truckload carriers in North America, representing more than one and a half million trucks. These relationships enable us to serve high demand without taking on high fixed costs. Even though we don’t own the trucks or employ the drivers that transport our customers’ freight, shippers view us as a highly reliable core carrier due to our operational excellence and capacity resources.

Our XPO Connect® brokerage platform is another major differentiator for our business, together with our pricing technology, which we believe can unlock incremental profitable growth well beyond our current levels. We bring together seasoned transportation experts and master technologists to transform truck brokerage through digitization, making the process more productive for shippers, carriers and our company. As of September 30, 2022, cumulative truck driver downloads of the mobile app for XPO Connect® approximated 850,000.

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The impact of XPO Connect® is pervasive throughout our brokerage operations. As of September 30, 2022, approximately 80% of our truck brokerage orders in North America were created or covered digitally. From 2013 through 2021, the compound annual growth rate (“CAGR”) of our truck brokerage revenue was 27.4% — approximately three times the U.S. brokered truckload industry CAGR of 9.6% — in part because larger customers communicate digitally with XPO Connect® through APIs and other integrations, and our automation makes our brokerage team more efficient at tendering loads.

Our Brokerage and Other Services segment also includes asset-light, complementary brokered services for managed transportation, including expedited ground and air charter capabilities, last mile for heavy goods and ~~LTL~~freight forwarding, all of which use our technology. Our European business is also reported within this segment.

Technology and Sustainability

Our proprietary technology is a major competitive advantage for us across our service lines. Our company has been investing in transportation automation, data science and digitization for more than a decade, well ahead of the industry curve, to innovate how goods move through supply chains. We believe that we are well-positioned to satisfy customer demands for faster, more efficient supply chains with greater visibility, while enhancing revenue and profitability.

Importantly, our technology also helps our company meet its environmental, social and governance (“ESG”) goals, such as a reduction in the carbon footprint of certain supply chain operations, and can help our customers meet their own goals. For a detailed discussion of our philosophy relating to innovation and ESG matters, see the Company Overview included in our 2021 Form 10-K, as well as our current Sustainability Report at sustainability.xpo.com.

Impacts of Notable External Conditions

As a leading provider of freight transportation services, our business can be impacted to varying degrees by factors beyond our control. The COVID-19 virus that emerged in 2020 affected, and may continue to affect, economic activity broadly and customer sectors served by our industry. Labor shortages, particularly a shortage of truck drivers and dockworkers, and equipment shortages continue to present challenges to many transportation-related industries. Additionally, disruptions in supply chains for industrial materials and supplies, such as semiconductor chips, have impacted some of the end-market activities that create demand for our services. We cannot predict how long these dynamics will last, or whether future challenges, if any, will adversely affect our results of operations. To date, the totality of the actions we have taken during the pandemic, and continue to take in the recovery, have mitigated the impact on our profitability relative to the impact on our revenue and volumes, while our strong liquidity and disciplined capital management enable us to continue to invest in growth initiatives.

Additionally, economic inflation can have a negative impact on our operating costs. A prolonged period of inflation could cause interest rates, fuel, wages and other costs to continue to increase, which would adversely affect our results of operations unless our pricing to our customers correspondingly increases. For the three and ~~more than 50,000 independent brokered carriers representing approximately 1,000,000 trucks on~~nine months ended September 30, 2022, a combination of growing demand for freight transportation services, the ~~road.~~ongoing truck driver shortage and rising fuel prices resulted in higher transportation procurement costs; these costs were offset by mechanisms in our customer contracts, including fuel surcharge clauses and general rate increases. An economic recession could depress customer demand for transportation services and adversely affect our results of operations.

Regarding the war between Russia and Ukraine, we have no direct exposure to those geographies. We employ professional drivers who transport goods for customers using our fleet of owned and leased trucks and trailers. Globally, our fleet encompasses approximately 16,000 tractors and 39,000 trailers primarily related to our LTL and full truckload operations. These assets also provide capacity for our freight brokerage operations. Our company overall is asset-light, with assets accounting for just under a third of our revenue.

In our Logistics segment, which we sometimes refer to as "supply chain" or "contract logistics," we provide a range of services, including highly engineered and customized solutions, value-added warehousing and distribution, cold chain solutions and other inventory management solutions. We perform e-commerce fulfillment, order personalization, reverse logistics, recycling, storage, factory support, aftermarket support, manufacturing, distribution, packaging and labeling, as well ascannot predict how global supply chain ~~optimization services such as production flow management and transportation management.~~activities or the economy at large may be impacted by a prolonged war in Ukraine or sanctions imposed in response to the war, or whether future conflicts, if any, may adversely affect our results of operations.

~~XPO is the second largest contract logistics provider worldwide, with a broad footprint~~

Table of shared and dedicated facilities that makes us attractive to multinational customers. Our logistics customers include the preeminent names in aerospace, retail, technology, manufacturing, food and beverage, wireless, chemical, agribusiness, life sciences and healthcare.Contents

We also benefit from a strong presence in the high-growth e-commerce sector. E-commerce is predicted to continue to grow globally at a double-digit rate through at least 2020 and, increasingly, order fulfillment is being outsourced. We are the largest outsourced e-fulfillment provider in Europe, and we have a major platform for e-fulfillment in North America, where we provide highly customized solutions that include reverse logistics and omni-channel services.

We believe that our ability to provide customers with integrated, end-to-end supply chain solutions gives us a competitive advantage. Many customers, particularly large companies, are increasingly turning to multi-modal providers to handle their supply chain requirements. We have built XPO to capitalize on this trend, as well as the trend toward outsourcing in both transportation and logistics, the boom in e-commerce, and the adoption of just-in-time inventory practices. All of our service lines are run by highly experienced operators who know how to deliver results.

Two hallmarks of our operations worldwide are technology and sustainability. We place massive importance on innovation because we believe that great technology in the hands of well-trained employees is the ultimate competitive advantage. Our annual investment in technology is among the highest in our industry.

Our focus is on using innovation to differentiate our services and deliver tangible value to our customers and investors. We have built a highly scalable and integrated system on a cloud-based platform that speeds up innovation. Our global team of more than 1,600 IT professionals can deploy proprietary software very rapidly. We concentrate our efforts in the following areas of innovation: automation; visibility and customer service business-specific analytics; and far-reaching new capabilities.

~~We also have a strong, global commitment to sustainability. XPO owns the largest natural gas truck fleet in Europe and launched government-approved mega-trucks in Spain, both of which reduce CO~~₂ ~~emissions. We have been awarded the label "Objectif CO~~₂~~" for outstanding environmental performance of transport operations in Europe by the French Ministry of the Environment and the French Environment and Energy Agency.~~

Many of our logistics facilities in North America are ISO14001-certified, which ensures environmental and other regulatory compliances. We monitor fuel emissions from forklifts, with systems in place to take immediate corrective action if needed. Company packaging engineers ensure that the optimal carton size is used for each product slated for distribution and, as a byproduct of reverse logistics, we recycle millions of electronic components and batteries each year. These are just a few of the many initiatives that reflect our commitment to operating in a progressive and environmentally sound manner, with the greatest efficiency and least waste possible.

~~XPO Logistics, Inc.~~

Consolidated Summary Financial Table


	Three Months Ended September 30,				Percent of Revenue				Change		Nine Months Ended September 30,				Percent of Revenue				Change
(Dollars in millions)	2022		2021		2022		2021		2022 vs. 2021		2022		2021		2022		2021		2022 vs. 2021
Revenue	$	3,042	$	3,270	100.0	%	100.0	%	(7.0)	%	$	9,747	$	9,445	100.0	%	100.0	%	3.2	%
Cost of transportation and services (exclusive of depreciation and amortization)	2,044		2,306		67.2	%	70.5	%	(11.4)	%	6,634		6,545		68.1	%	69.3	%	1.4	%
Direct operating expense (exclusive of depreciation and amortization)	363		366		11.9	%	11.2	%	(0.8)	%	1,113		1,058		11.4	%	11.2	%	5.2	%
Sales, general and administrative expense	298		339		9.8	%	10.4	%	(12.1)	%	966		1,001		9.9	%	10.6	%	(3.5)	%
Depreciation and amortization expense	118		118		3.9	%	3.6	%	—	%	349		357		3.6	%	3.8	%	(2.2)	%
Gain on sale of business	—		—		—	%	—	%	—	%	(434)		—		(4.5)	%	—	%	NM
Transaction and integration costs	25		15		0.8	%	0.5	%	66.7	%	60		26		0.6	%	0.3	%	130.8	%
Restructuring costs	9		14		0.3	%	0.4	%	(35.7)	%	19		16		0.2	%	0.2	%	18.8	%
Operating income	185		112		6.1	%	3.4	%	65.2	%	1,040		442		10.7	%	4.7	%	135.3	%
Other income	(15)		(19)		(0.5)	%	(0.6)	%	(21.1)	%	(44)		(45)		(0.5)	%	(0.5)	%	(2.2)	%
Debt extinguishment loss	—		46		—	%	1.4	%	NM		26		54		0.3	%	0.6	%	(51.9)	%
Interest expense	35		53		1.2	%	1.6	%	(34.0)	%	103		176		1.1	%	1.9	%	(41.5)	%
Income from continuing operations before income tax provision	165		32		5.4	%	1.0	%	415.6	%	955		257		9.8	%	2.7	%	271.6	%
Income tax provision	34		11		1.1	%	0.3	%	209.1	%	194		60		2.0	%	0.6	%	223.3	%
Income from continuing operations	131		21		4.3	%	0.6	%	523.8	%	761		197		7.8	%	2.1	%	286.3	%
Income (loss) from discontinued operations, net of taxes	—		(78)		—	%	(2.4)	%	NM		(1)		22		—	%	0.2	%	NM
Net income (loss)	$	131	$	(57)	4.3	%	(1.7)	%	NM		$	760	$	219	7.8	%	2.3	%	247.0	%

NM - Not meaningful

Three Months Ended September 30, Percent of Revenue Change Nine Months Ended September 30, Percent of Revenue Change
(In millions) 2017 2016 2017 2016 2017 vs. 2016 2017 2016 2017 2016 2017 vs. 2016
Revenue $ 3,887.1
$ 3,713.8
100.0 % 100.0 % 4.7 % $ 11,186.9
$ 10,942.8
100.0 % 100.0 % 2.2 %
Cost of transportation and services 2,042.7
2,008.4
52.6 % 54.1 % 1.7 % 5,899.6
5,926.8
52.7 % 54.2 % (0.5 )%
Direct operating expense 1,258.7
1,153.4
32.4 % 31.1 % 9.1 % 3,590.6
3,389.8
32.1 % 31.0 % 5.9 %
SG&A expense 398.9
383.2
10.3 % 10.3 % 4.1 % 1,211.3
1,224.7
10.8 % 11.2 % (1.1 )%
Operating income 186.8
168.8
4.8 % 4.5 % 10.7 % 485.4
401.5
4.3 % 3.7 % 20.9 %
Other income (6.7 ) (1.1 ) (0.2 )% — % 509.1 % (6.0 ) (6.7 ) (0.1 )% (0.1 )% (10.4 )%
Foreign currency loss (income) 15.0
(0.3 ) 0.4 % — % (5,100.0 )% 53.9
1.8
0.5 % — % 2,894.4 %
Debt extinguishment loss 4.6
53.2
0.1 % 1.4 % (91.4 )% 13.6
53.2
0.1 % 0.5 % (74.4 )%
Interest expense 72.5
93.0
1.9 % 2.5 % (22.0 )% 222.4
280.8
2.0 % 2.6 % (20.8 )%
Income before income tax provision 101.4
24.0
2.6 % 0.6 % 322.5 % 201.5
72.4
1.8 % 0.7 % 178.3 %
Income tax provision 30.4
2.7
0.8 % 0.1 % 1,025.9 % 48.4
20.0
0.4 % 0.2 % 142.0 %
Net income $ 71.0
$ 21.3
1.8 % 0.6 % 233.3 % $ 153.1
$ 52.4
1.4 % 0.5 % 192.2 %

~~Consolidated Results~~

Three and Nine Months Ended September 30, ~~2017~~2022, Compared towith Three and Nine Months Ended September 30, ~~2016~~2021

Revenue for the third quarter of ~~2017~~2022 decreased 7.0% to $3.0 billion, compared with the same quarter in 2021. Revenue for the first nine months of 2022 increased ~~4.7%~~3.2% to ~~$3,887.1 million as~~$9.7 billion, compared with the same period in 2021. The decrease in revenue in the third quarter of 2022 compared to the same period in ~~2016. The increase was primarily driven~~2021 reflects the sale of intermodal in March 2022, partially offset by growth in our ~~European contract logistics business, mid-single digit improvement~~LTL segment, which includes the impact of increased revenue from fuel surcharges. Revenue in ~~LTL weight per day, accelerating~~the first nine months of 2022 compared to the same period in 2021 reflects growth in our LTL segment and our North American truck brokerage ~~operations, and mid-teens growth in Last Mile revenue. These items were~~operation, partially offset by the ~~October 2016 divestiture~~sale of ~~our North American truckload operation, which had~~intermodal. The sale of intermodal reduced revenue ~~of $131.8 million~~growth by approximately 9.5 percentage points in the third quarter of ~~2016.~~2022 and 5.1 percentage points in the first nine months of 2022. Additionally, foreign currency movement reduced revenue by approximately 2.6 percentage points in the third quarter of 2022 and 2.0 percentage points in the first nine months of 2022.

Cost of transportation and services ~~represents~~ (exclusive of depreciation and amortization) includes the cost of providing or procuring freight transportation ~~services~~ for ~~our~~XPO customers and ~~includes~~ salaries paid to employee drivers in our ~~full truckload~~LTL and ~~LTL businesses, as well as commissions paid to independent station owners in our global forwarding business.~~truck brokerage businesses.

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Cost of transportation and services (exclusive of depreciation and amortization) for the third quarter of ~~2017~~2022 was ~~$2,042.7 million,~~$2.0 billion, or ~~52.6%~~67.2% of revenue, compared ~~to $2,008.4 million,~~with $2.3 billion, or ~~54.1%~~70.5% of revenue, for the same quarter in 2021. Cost of transportation and services (exclusive of depreciation and amortization) for the ~~third quarter~~first nine months of ~~2016.~~2022 was $6.6 billion, or 68.1% of revenue, compared with $6.5 billion, or 69.3% of revenue, for the same period in 2021. The ~~reduction~~year-over-year decrease as a percentage of revenue ~~was primarily driven by~~in both periods reflects the ~~divestiture~~sale of ~~our North American truckload operation and~~intermodal. Additionally impacting the decrease as a percentage of revenue in both periods were lower ~~mix of managed~~third-party transportation ~~in North American Supply Chain,~~costs, which were partially offset by higher ~~third-party transportation costs in freight brokerage~~fuel and ~~intermodal operations.~~compensation costs.

Direct operating ~~expense~~ ~~includes:~~expenses (exclusive of depreciation and amortization) are comprised of both fixed and variable expenses and include operating costs related to our contract logistics facilities; intermodal equipment lease expense; depreciation expense; maintenance and repair costs; property taxes; operating costs of our local drayage and last mile warehousing facilities; costs related to our LTL service ~~centers~~centers. Direct operating expenses (exclusive of depreciation and ~~European pallet network, such as direct labor, facilities and forklift trucks; and fixed terminal and cargo handling expenses. Operating costs of our contract logistics facilities~~amortization) consist mainly of personnel costs, facility and equipment expenses, such as rent, utilities, equipment maintenance and repair, costs of materials and supplies, information technology expenses, and gains and losses on sales of property and equipment.

Direct operating expense (exclusive of depreciation and amortization) for the third quarter of 2022 was $363 million, or 11.9% of revenue, compared with $366 million, or 11.2% of revenue, for the same quarter in 2021. Direct operating expense (exclusive of depreciation and amortization) for the first nine months of 2022 was $1.11 billion, or 11.4% of revenue, compared with $1.06 billion, or 11.2% of revenue, for the same period in 2021. The decrease in direct operating expense in the third quarter of 2022 reflects the sale of intermodal and lower gains on sales of property and equipment, partially offset by higher compensation and facility costs. The increase in direct operating expense in the first nine months of 2022 reflects higher compensation and facility costs, partially offset by the sale of intermodal and ~~depreciation expense. Operating costs~~lower gains on sales of ~~our local drayage~~property and last mile warehousing facilities consist mainly of personnel costs, rent, maintenance, utilities and other facility-related costs. Operating costs of our LTL facilities consist mainly of personnel costs, rent and depreciation of service center equipment. ~~Fixed terminal and cargo handling costs primarily relate to the fixed rent and storage expense charged by terminal operators.~~

Direct operating expense for the third ~~quarter~~quarters of ~~2017 was $1,258.7~~2022 and 2021 included $2 million ~~or 32.4%~~and $6 million, respectively, and the first nine months of 2022 and 2021 included $4 million and $36 million, respectively, of gains on sales of property and equipment. As a percentage of revenue, ~~compared to $1,153.4 million, or 31.1% of revenue, in~~direct operating expense for the third quarter and nine-month periods reflects the lower gains on sales of ~~2016. The~~property and equipment. Additionally, the leveraging of compensation costs across a larger revenue base partially offset the year-over-year increase as a percentage of revenue ~~was primarily driven by higher benefits and temporary labor expense to support growth~~ in ~~our contract logistics business.~~the nine-month period.

Sales, general and administrative expense (" (“SG~~&A"~~&A”) primarily consists of ~~costs relating to customer acquisition, carrier procurement, billing, customer service,~~ salaries and ~~related expenses of our~~commissions for the sales function, salary and benefit costs for executive and ~~administrative staff, integration-related costs, office expenses, technology services,~~certain administration functions, professional fees, ~~and other purchased services relating to the aforementioned functions, travel and entertainment~~facility costs, bad debt expense and ~~depreciation and amortization expense.~~

legal costs.

SG&A for the third quarter of ~~2017~~2022 was ~~$398.9~~$298 million, or ~~10.3%~~9.8% of revenue, compared ~~to $383.2~~with $339 million, or ~~10.3%~~10.4% of revenue, for the same quarter in 2021. SG&A for the first nine months of 2022 was $966 million, or 9.9% of revenue, compared with $1.0 billion, or 10.6% of revenue, for the same period in 2021. SG&A for the third quarter and first nine months of 2021 included $29 million of legal costs related to settlements in connection with classification of independent contractors at intermodal. Additionally, the third quarter of 2022 reflects lower compensation-related costs, partially offset by higher commission expense due to the performance of our North American transportation business, while the first nine months of 2022 reflects the impact of the intermodal sale, partially offset by higher commission expense. As a percentage of revenue, the year-over-year decrease in both periods was primarily driven by the legal costs recorded in the third quarter of ~~2016. SG&A expense~~2021 and the sale of intermodal. Additionally, the year-over-year decrease as a percentage of revenue ~~was flat, which primarily~~in the nine-month period reflects the ~~benefit~~leveraging of ~~cost-saving actions initiated in 2016~~compensation costs across a larger revenue base.

Depreciation and ~~lower professional fees and consulting costs, which were offset by higher purchased services.~~

~~Foreign currency loss (income)~~ amortization expense for the third quarter of ~~2017~~2022 and 2021 was ~~$15.0~~$118 million. Depreciation and amortization expense for the first nine months of 2022 was $349 million, compared with $357 million for the same period in 2021. The third quarter of 2022 primarily reflects higher depreciation expense at our LTL segment, offset by the sale of intermodal. The decrease in the nine-month period reflected the sale of intermodal.

Gain on sale of business was $434 million, net of transaction costs, for the first nine months of 2022 and related to the sale of intermodal during the first quarter of 2022. For more information, see Note 3—Divestiture to our Condensed Consolidated Financial Statements.

Transaction and integration costs for the third quarter of 2022 were $25 million, compared with $15 million for the same quarter in 2021. Transaction and integration costs for the first nine months of 2022 were $60 million, compared with $26 million for the same period in 2021. Transaction and integration costs for the third quarter and first nine months of 2022 and 2021 are primarily comprised of third-party professional fees related to strategic

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initiatives, including the spin-offs and other divestment activities, as well as retention awards paid to certain employees.

Restructuring costs for the third quarter of 2022 were $9 million, compared with $14 million for the same quarter in 2021. Restructuring costs for the first nine months of 2022 were $19 million, compared with $16 million for the same period in 2021. We engage in restructuring actions as part of our ongoing efforts to ~~$(0.3)~~best use our resources and infrastructure, including actions in connection with spin-offs and other divestment activities. For more information, see Note 6—Restructuring Charges to our Condensed Consolidated Financial Statements. We may incur incremental restructuring costs in 2022 in connection with the spin-off of our brokered transportation platform or for other reasons; however, we are currently unable to reasonably estimate these costs.

Other income primarily consists of pension income. Other income for the third quarter of 2022 was $15 million, compared with $19 million for the same quarter in 2021. Other income for the first nine months of 2022 was $44 million, compared with $45 million for the same period in 2021. The third quarter and first nine months of 2021 reflected a realized gain in connection with the de-designation of a cross-currency swap.

Debt extinguishment loss was $26 million for the first nine months of 2022. There was no debt extinguishment loss in the third quarter of ~~2016. The~~2022. Debt extinguishment loss was $46 million for the third quarter of ~~2017 primarily relates to unrealized losses on~~2021 and $54 million for the ~~Company's foreign currency option~~first nine months of 2021. In the second quarter of 2022, we redeemed a portion of our outstanding senior notes due 2025 and ~~forward contracts and was primarily due to~~wrote-off related debt issuance costs. In the ~~strengthening of the Euro and the British Pound relative to the U.S. dollar. For additional information on the Company's foreign currency option and forward contracts, see~~ ~~Note 5—Derivative Instruments~~ ~~of the condensed consolidated financial statements.~~

~~Debt extinguishment loss~~ ~~for~~ third quarter of ~~2017~~2021, we redeemed our outstanding senior notes due 2023 and 2024 and wrote-off related debt issuance costs, as well as incurred a pre-payment penalty. Additionally, in the first quarter of ~~$4.6 million~~2021, we redeemed our outstanding senior notes due 2022 and wrote-off related debt issuance costs, as well as incurred costs related to the ~~redemption~~amendment of ~~the~~our Senior ~~Notes due 2018. See Liquidity and Capital Resources below for further information. The debt extinguishment loss~~Secured Term Loan Credit Agreement (the “Term Loan Credit Agreement”).

Interest expense decreased to $35 million for the third quarter of ~~2016 of $53.2~~2022 from $53 million ~~related to the redemption of the Senior Notes due 2019 in September 2016.~~

~~Interest expense~~ ~~decreased to $72.5 million in~~for the third quarter of ~~2017,~~2021. Interest expense decreased to $103 million for the first nine months of 2022 from ~~$93.0~~$176 million infor the ~~third quarter~~first nine months of ~~2016.~~2021. The decrease in interest expense ~~is consistent with the year-over-year reduction in~~reflects lower average total indebtedness in the third quarter and first nine months of approximately 10% and also reflects the lower rates attributable to our recent refinancings. The reduction in average total indebtedness reflects the benefit of utilizing the proceeds from the sale of our North American Truckload operation in October 2016 to repurchase $555.0 million of outstanding indebtedness.2022.

Our effective income tax rates were 20.6% and 33.5% for the third quarter of ~~2017~~2022 and ~~2016 were 30.0%~~2021, respectively, and ~~11.3%,~~20.3% and 23.1% for the first nine months of 2022 and 2021, respectively. The effective tax ~~rate~~rates for the third quarter and nine-month periods of ~~2017 was~~2022 and 2021 were based on forecasted ~~full year~~full-year effective tax rates, adjusted for discrete items that occurred within the ~~period~~periods presented. ~~There was no material net~~The primary item impacting the effective tax rate ~~impact related to discrete items. The~~for the third quarter of ~~2016~~2022 is a reduction in tax expense of $3 million from the sale of intermodal and the primary items impacting the effective tax rate ~~was impacted by $10 million of discrete tax benefits primarily associated with change in reserve for uncertain tax positions and deferred tax asset revaluations.~~

~~Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016~~

~~Revenue~~ for the first nine months of ~~2017~~2022 is a tax expense of $71 million from the sale of intermodal, which resulted in a reduction to our effective tax rate due to the book gain exceeding the tax gain, as well as a tax benefit of $3 million from stock-based compensation.

The primary items impacting the effective tax rate for the third quarter of 2021 were tax benefits of $45 million related to a tax planning initiative that resulted in the recognition of a long-term capital loss and $3 million from uncertain tax positions that were partially offset by discrete tax expenses of $41 million related to valuation allowances, of which $34 million were transferred to GXO. The primary items impacting the effective tax rate for the first nine months of 2021 were tax benefits of $45 million related to a tax planning initiative that resulted in the recognition of a long-term capital loss, $8 million from uncertain tax positions and $4 million from stock-based compensation that were partially offset by tax expenses of $41 million related to valuation allowances, of which $34 million were transferred to GXO, and $5 million from return to provision adjustments.

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Segment Financial Results

Our chief operating decision maker (“CODM”) regularly reviews financial information at the operating segment level to allocate resources to the segments and to assess their performance. Our CODM evaluates segment profit 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. See Note 4—Segment Reporting to our Condensed Consolidated Financial Statements for further information and a reconciliation of adjusted EBITDA to Net income from continuing operations attributable to common shareholders.

North American Less-Than-Truckload Segment


	Three Months Ended September 30,				Percent of Revenue				Change		Nine Months Ended September 30,				Percent of Revenue				Change
(Dollars in millions)	2022		2021		2022		2021		2022 vs. 2021		2022		2021		2022		2021		2022 vs. 2021
Revenue	$	1,204	$	1,071	100.0	%	100.0	%	12.4	%	$	3,548	$	3,114	100.0	%	100.0	%	13.9	%
Adjusted EBITDA	258		222		21.5	%	20.8	%	16.2	%	757		694		21.3	%	22.3	%	9.1	%
Depreciation and amortization expense	60		57		5.0	%	5.3	%	5.3	%	175		169		4.9	%	5.4	%	3.6	%

Revenue in our North American LTL segment increased ~~2.2%~~12.4% to ~~$11,186.9~~$1.2 billion for the third quarter of 2022, compared with $1.1 billion for the same quarter in 2021. Revenue increased 13.9% to $3.5 billion for the first nine months of 2022, compared with $3.1 billion for the same period in 2021. Revenue included fuel surcharge revenue of $273 million and $167 million, respectively, for the third quarters of 2022 and 2021, and $771 million and $466 million, respectively, for the first nine months of 2022 and 2021.

We evaluate the revenue performance of our LTL business using several commonly used metrics, including volume (weight per day in pounds) and yield, which is a commonly used measure of LTL pricing trends. We measure yield using gross revenue per hundredweight, excluding fuel surcharges. Impacts on yield can include weight per shipment and length of haul, among other factors. The following table summarizes our key revenue metrics:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022		2021		Change %		2022		2021		Change %
Pounds per day (thousands)	70,063		72,152		(2.9)	%	70,854		73,138		(3.1)	%









Gross revenue per hundredweight, excluding fuel surcharges	$	21.43	$	20.02	7.0	%	$	21.18	$	19.47	8.8	%

The year-over-year increases in revenue for both the third quarter and first nine months of 2022 reflect an increase in gross revenue per hundredweight. The decrease in weight per day for the third quarter and first nine months reflects lower shipments per day.

Adjusted EBITDA was $258 million, or 21.5% of revenue, for the third quarter of 2022, compared with $222 million, or 20.8% of revenue, for the same quarter in 2021. Adjusted EBITDA was $757 million, or 21.3% of revenue, for the first nine months of 2022, compared with $694 million, or 22.3% of revenue, for the same period in 2021. Adjusted EBITDA for the third quarter and first nine months of 2021 included $5 million and $27 million of gains from real estate transactions, respectively. There were no gains from real estate transactions in the third quarter and first nine months of 2022. Additionally, adjusted EBITDA in both periods of 2022 reflects higher revenue, partially offset by increased compensation and fuel costs, as well as higher purchased transportation costs in the year-to-date period from higher highway subservice costs per mile.

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Brokerage and Other Services Segment


	Three Months Ended September 30,				Percent of Revenue				Change		Nine Months Ended September 30,				Percent of Revenue				Change
(Dollars in millions)	2022		2021		2022		2021		2022 vs. 2021		2022		2021		2022		2021		2022 vs. 2021
Revenue	$	1,921	$	2,261	100.0	%	100.0	%	(15.0)	%	$	6,420	$	6,493	100.0	%	100.0	%	(1.1)	%
Adjusted EBITDA	123		131		6.4	%	5.8	%	(6.1)	%	439		386		6.8	%	5.9	%	13.7	%
Depreciation and amortization expense	54		60		2.8	%	2.7	%	(10.0)	%	168		180		2.6	%	2.8	%	(6.7)	%

Revenue in our Brokerage and Other Services segment decreased 15.0% to $1.9 billion for the third quarter of 2022, compared with $2.3 billion for the same quarter in 2021. The decrease in revenue was due to the sale of intermodal in March 2022, which impacted revenue by approximately 13.7 percentage points, and lower revenue generated from services in our managed transportation operation and lower ocean volume in our freight forwarding business. Additionally, lower revenue generated from our truck brokerage business in the third quarter of 2022 was primarily driven by lower truckload pricing in the spot market, partially offset by a year-over-year increase in volume, facilitated by the company’s digital brokerage platform. Foreign currency movement reduced revenue by approximately 3.8 percentage points in the third quarter of 2022.

Revenue decreased 1.1% to $6.4 billion for the first nine months of 2022, compared with $6.5 billion for the same period in 2021. The decrease in revenue was due to the sale of intermodal in March 2022, which impacted revenue by approximately 7.4 percentage points in the first nine months of 2022. Revenue in the first nine months of 2022 compared to the same period in ~~2016. The~~2021 benefited from an increase ~~was primarily driven by growth in our European contract logistics business, improvement in LTL weight per day, and mid-teens growth~~ in North American truck brokerage ~~and Last Mile operations. These items were partially offset~~loads, as well as strong pricing across the segment. Foreign currency movement reduced revenue by ~~the October 2016 divestiture of our North American truckload operation, which had revenue of $394.0 million~~approximately 3.0 percentage points in the first nine months ~~ended September 30, 2016.~~of 2022.

~~Cost~~Adjusted EBITDA was $123 million, or 6.4% of ~~transportation and services~~revenue, for the third quarter of 2022, compared with $131 million, or 5.8% of revenue, for the same quarter in 2021. Adjusted EBITDA was $439 million, or 6.8% of revenue, for the first nine months of ~~2017 was $5,899.6~~2022, compared with $386 million, or ~~52.7%~~5.9% of revenue, for the same period in 2021. The decrease in the third quarter of 2022 compared to ~~$5,926.8 million, or 54.2%~~the same period in 2021 was primarily driven by the sale of ~~revenue,~~intermodal, partially offset by lower third-party transportation costs in North American truck brokerage. The increase in the first nine months of ~~2016. The reduction as a percentage of revenue~~2022 compared to the same period in 2021 was primarily driven by ~~a lower mix of managed transportation~~higher revenue in North American ~~Supply Chain,~~truck brokerage, partially offset by higher third-party transportation ~~costs~~and compensation-related costs.

Liquidity and Capital Resources

Our cash and cash equivalents balance was $544 million as of September 30, 2022, compared to $260 million as of December 31, 2021. Our principal existing sources of cash are: (i) cash generated from operations; (ii) borrowings available under our Second Amended and Restated Revolving Loan Credit Agreement, as amended (the “ABL Facility”); (iii) proceeds from the issuance of other debt; and (iv) proceeds from divestiture activities. As of September 30, 2022, we have $996 million available to draw under our ABL Facility, based on a borrowing base of $1 billion and outstanding letters of credit of $4 million. Additionally, we have a $200 million uncommitted secured evergreen letter of credit facility, under which we had issued $185 million in ~~freight brokerage~~aggregate face amount of letters of credit as of September 30, 2022.

As of September 30, 2022, we had approximately $1.5 billion of total liquidity. We continually evaluate our liquidity requirements in light of our operating needs, growth initiatives and ~~intermodal operations.~~capital resources. We believe that our existing liquidity and sources of capital are sufficient to support our operations over the next 12 months.

~~Direct operating expense~~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.

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Trade Receivables Securitization and Factoring Programs

We sell certain of our trade accounts receivable on a non-recourse basis to third-party financial institutions under factoring agreements. We also sell trade accounts receivable under our securitization program co-arranged by two banks (the “Purchasers”). 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. For more information, see Note 1—Organization, Description of Business and Basis of Presentation to our Condensed Consolidated Financial Statements.

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.

Under the program, we service the receivables we sell on behalf of the Purchasers, which gives us visibility into the timing of customer payments. The benefit to our cash flow includes the difference between the cash consideration and the amount we collected as a servicer on behalf of the Purchasers. In the first nine months of ~~2017 was $3,590.6 million, or 32.1%~~2022 and 2021, we collected cash as servicer of ~~revenue, compared to $3,389.8 million, or 31.0% of revenue, in~~$1.3 billion and $1.2 billion, respectively.

Term Loan Facility

In the first ~~nine months~~quarter of ~~2016. The increase as~~2021, we amended our Term Loan Credit Agreement and recorded a ~~percentage~~debt extinguishment loss of ~~revenue was primarily driven by higher benefits and temporary labor expense to support growth in our contract logistics business.~~

~~SG&A~~ for the first nine months of 2017 was $1,211.3 million, or 10.8% of revenue, compared to $1,224.7 million, or 11.2% of revenue, in the first nine months of 2016. The improvement in SG&A expense as a percentage of revenue for the nine-months ended September 30, 2017 primarily reflects the benefit of cost-saving actions initiated in 2016 and lower professional fees and consulting costs.

~~Foreign currency loss~~ ~~for the first nine months of 2017 was $53.9 million as compared to $1.8~~$3 million in the first nine months of ~~2016.~~2021.

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 ~~for~~of $26 million in the first nine months of ~~2017 primarily relates to unrealized losses on the Company's foreign currency option and forward contracts and was primarily~~2022 due to ~~the strengthening~~this redemption. In October 2022, we commenced a tender offer to purchase for cash any and all of ~~the Euro and the British Pound relative to the U.S. dollar.~~

~~Debt extinguishment loss~~ ~~for the first nine months of 2017 relates to the refinancing of the Company's Term Loan facility and~~our outstanding Senior Notes due ~~2018. As discussed further~~2025. See below ~~(see Liquidity~~for more information.

Senior Notes Due 2023 and ~~Capital Resources),~~2024

In the ~~Company incurred a $13.6~~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 ~~charge~~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 ~~aggregate related to these refinancings. The debt extinguishment loss for the first nine months~~third quarter of ~~2016~~2021 of ~~$53.2~~$3 million and $43 million related to the redemption of the Senior Notes due ~~2019 in September 2016.~~2023 and Senior Notes due 2024, respectively.

~~Interest expense~~ ~~decreased to $222.4~~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 nine months of ~~2017, from $280.8~~2021 due to this redemption.

RXO Debt

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.

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In addition to the RXO Notes, RXO entered into a term loan facility that provides $100 million in ~~the first nine months~~aggregate principal amount of ~~2016.~~ term loans (the “RXO Term Loan”) and a revolving credit facility that provides $500 million in aggregate commitments.

The ~~decrease in~~net proceeds (including any interest expense is consistent with the year-over-year reduction in average total indebtedness of approximately 10% and also reflects the lower rates attributable to our recent refinancings. The reduction in average total indebtedness reflects the benefit of utilizing the proceedsthereon) from the ~~sale of our North American Truckload operation in October 2016 to repurchase $555.0 million of outstanding indebtedness.~~

~~Our effective income tax rates~~ for the first nine months of 2017 and 2016 were 24.0% and 27.6%, respectively. The effective tax rate for the first nine months of 2017 was impacted primarily by $9.8 million of tax benefits associated with share-based payment

arrangements, $3.1 million of tax benefits associated with deferred tax asset revaluations, $3.3 million of tax benefits associated with the release of valuation allowance on state tax matters, and $2.5 million of tax benefits associated with research and development tax credits. The effective tax rate for the first nine months of 2016 was impacted by $12.4 million of discrete tax benefits primarily associated with change in reserve for uncertain tax positions and deferred tax asset revaluations.

~~Transportation~~

~~Summary Financial Table~~

Three Months Ended September 30, Percent of Revenue Change Nine Months Ended September 30, Percent of Revenue Change
(In millions) 2017 2016 2017 2016 2017 vs. 2016 2017 2016 2017 2016 2017 vs. 2016
Revenue $ 2,469.8
$ 2,409.1
100.0 % 100.0 % 2.5 % $ 7,152.2
$ 7,125.4
100.0 % 100.0 % 0.4 %
Cost of transportation and services 1,776.8
1,733.0
71.9 % 71.9 % 2.5 % 5,119.7
5,096.0
71.6 % 71.5 % 0.5 %
Direct operating expense 300.4
294.4
12.2 % 12.2 % 2.0 % 884.5
904.6
12.4 % 12.7 % (2.2 )%
SG&A expense
Salaries & benefits 132.3
138.3
5.4 % 5.7 % (4.3 )% 393.8
428.3
5.5 % 6.0 % (8.1 )%
Other SG&A expense 38.1
43.3
1.5 % 1.8 % (12.0 )% 126.2
110.9
1.8 % 1.6 % 13.8 %
Purchased services 36.5
34.5
1.5 % 1.4 % 5.8 % 99.3
111.5
1.4 % 1.6 % (10.9 )%
Depreciation & amortization 40.5
40.2
1.6 % 1.7 % 0.7 % 122.7
120.1
1.7 % 1.7 % 2.2 %
Total SG&A expense 247.4
256.3
10.0 % 10.6 % (3.5 )% 742.0
770.8
10.4 % 10.8 % (3.7 )%
Operating income $ 145.2
$ 125.4
5.9 % 5.2 % 15.8 % $ 406.0
$ 354.0
5.7 % 5.0 % 14.7 %

Note: Total depreciation and amortization for the Transportation segment included in cost of transportation and services, direct operating expense and SG&A was $111.7 million and $114.8 million for the three months ended September 30, 2017 and 2016, respectively, and $329.3 million and $341.9 million for the nine months ended September 30, 2017 and 2016, respectively.

~~Transportation~~

~~Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016~~

Revenue in our Transportation segment increased 2.5% to $2,469.8 million in the third quarter of 2017 compared to $2,409.1 million in the third quarter of 2016. The increase was primarily driven by mid-teens revenue growth in our U.S. last mile service offering; growth in U.S. freight brokerage; and a 5.6% year-on-year increase in weight per day within our U.S. LTL business, partially offset by the divestiture of our North American truckload operations, which had revenue of $131.8 million in the third quarter of 2016 and lower revenue in global forwarding.

Cost of transportation and services for the third quarter of 2017 was $1,776.8 million, or 71.9% of revenue, compared to $1,733.0 million, or 71.9% of revenue, in the third quarter of 2016. The cost as a percentage of revenue was flat compared to the third quarter of 2016 as the divestiture of our North American truckload operations was offset by the increased cost of third party transportation in brokerage and intermodal operations.

Direct operating expense for the third quarter of 2017 was $300.4 million, or 12.2% of revenue, compared to $294.4 million, or 12.2% of revenue, in the third quarter of 2016. Cost savings initiatives and improved dock efficiency largely offset increased payroll and benefits expense in the U.S. LTL business.

SG&A decreased to $247.4 million in the third quarter of 2017 from $256.3 million in the third quarter of 2016. As a percentage of revenue, SG&A decreased from 10.6% in the third quarter of 2016 to 10.0% in the third quarter of 2017, reflecting improved technology-enabled labor efficiencies in North American brokerage and intermodal operations, as well as cost-discipline within European Transport operations.

~~Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016~~

Revenue in our Transportation segment increased 0.4% to $7,152.2 million in the first nine months of 2017 compared to $7,125.4 million in the first nine months of 2016. The increase was primarily driven by mid-teens revenue growth in our U.S. last mile service offering; growth in U.S. freight brokerage; and a 5.8% increase in weight per day within our U.S. LTL business. The impact of these items was partially offset by the divestiture of our North American truckload operations, which had revenue of $394.0 million in the nine months ended September 30, 2016, and lower revenue in global forwarding.

Cost of transportation and services for the first nine months of 2017 was $5,119.7 million, or 71.6% of revenue, compared to $5,096.0 million, or 71.5% of revenue, in the first nine months of 2016. Increased cost of third party transportation in brokerage and intermodal operations and higher fuel expenses were partially offset by line-haul savings in LTL.

Direct operating expense for the first nine months of 2017 was $884.5 million, or 12.4% of revenue, compared to $904.6 million, or 12.7% of revenue, in the first nine months of 2016. The improvement as a percentage of revenue was driven primarily by cost savings initiatives and improved dock efficiency in the U.S. LTL business.

SG&A decreased to $742.0 million in the first nine months of 2017 from $770.8 million in the first nine months of 2016. As a percentage of revenue, SG&A decreased from 10.8% in the first nine months of 2016 to 10.4% in the first nine months of 2017 reflecting technology-enabled labor efficiencies in our North American brokerage and intermodal operations.

~~Logistics~~

~~Summary Financial Table~~

Three Months Ended September 30, Percent of Revenue Change Nine Months Ended September 30, Percent of Revenue Change
(In millions) 2017 2016 2017 2016 2017 vs. 2016 2017 2016 2017 2016 2017 vs. 2016
Revenue $ 1,458.8
$ 1,347.0
100.0 % 100.0 % 8.3 % $ 4,154.1
$ 3,939.7
100.0 % 100.0 % 5.4 %
Cost of transportation and services 305.2
316.7
20.9 % 23.5 % (3.6 )% 894.7
950.1
21.5 % 24.1 % (5.8 )%
Direct operating expense 959.3
859.2
65.8 % 63.8 % 11.7 % 2,706.3
2,485.8
65.1 % 63.1 % 8.9 %
SG&A expense
Salaries & benefits 64.9
50.8
4.4 % 3.8 % 27.8 % 188.8
174.6
4.5 % 4.4 % 8.1 %
Other SG&A expense 10.0
6.4
0.7 % 0.5 % 56.3 % 47.3
43.1
1.1 % 1.1 % 9.7 %
Purchased services 21.7
17.8
1.5 % 1.3 % 21.9 % 66.4
63.0
1.6 % 1.6 % 5.4 %
Depreciation & amortization 20.3
20.8
1.4 % 1.5 % (2.4 )% 61.7
64.8
1.5 % 1.6 % (4.8 )%
Total SG&A expense 116.9
95.8
8.0 % 7.1 % 22.0 % 364.2
345.5
8.8 % 8.8 % 5.4 %
Operating income $ 77.4
$ 75.3
5.3 % 5.6 % 2.8 % $ 188.9
$ 158.3
4.5 % 4.0 % 19.3 %

Note: Total depreciation and amortization for the Logistics segment included in cost of transportation and services, direct operating expense and SG&A was $54.9 million and $46.5 million for the three months ended September 30, 2017 and 2016, respectively, and $155.1 million and $142.2 million for the nine months ended September 30, 2017 and 2016, respectively.

~~Logistics~~

~~Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016~~

Revenue in our Logistics segment increased by 8.3% to $1,458.8 million in the third quarter of 2017 compared to $1,347.0 million in the third quarter of 2016. The increase in revenue was primarily driven by strong demand for contract logistics both in Europe and North America, partially offset by a decline in managed transportation revenue in North America. European logistics revenue growth reflected a significant benefit from new contract starts, notably with e-commerce and cold chain customers in the United Kingdom, Spain and the Netherlands. In North America, the largest gains came from the e-commerce and industrial sectors.

Cost of transportation and services for the third quarter of 2017 was $305.2 million, or 20.9% of revenue, compared to $316.7 million, or 23.5% of revenue, in the third quarter of 2016. The 3.6% reduction relative to the third quarter of 2016 was primarily driven by the lower cost of third party transportation in the managed transportation operations of North American supply chain, consistent with lower volumes of business.

Direct operating expense in the third quarter of 2017 was $959.3 million, or 65.8% as a percentage of revenue, compared to $859.2 million, or 63.8% as a percentage of revenue, in the third quarter of 2016. The 11.7% increase relative to the third quarter of 2016 was primarily driven by higher payroll and temporary labor costs related to new contract startups.

SG&A increased to $116.9 million in the third quarter of 2017 from $95.8 million in the third quarter of 2016. As a percentage of revenue, SG&A increased to 8.0% in the third quarter of 2017 from 7.1% in the third quarter of 2016 due to higher benefits costs and higher purchased services related to more IT spending to support growth in Europe.

~~Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016~~

Revenue in our Logistics segment increased by 5.4% to $4,154.1 million in the first nine months of 2017 compared to $3,939.7 million in the first nine months of 2016. The increase in revenue was primarily driven by strong demand for contract logistics

in both Europe and North America, partially offset by a decline in managed transportation revenue. European logistics revenue growth reflected a significant benefit from new contract starts, notably with e-commerce and cold chain customers in the United Kingdom, Italy and the Netherlands.

Cost of transportation and services for the first nine months of 2017 was $894.7 million, or 21.5% of revenue, compared to $950.1 million, or 24.1% of revenue, in the first nine months of 2016. The 5.8% reduction relative to the first nine months of 2016 was primarily driven by the lower cost of third party transportation in the managed transportation operations of North American supply chain, consistent with lower volumes of business.

Direct operating expense in the first nine months of 2017 was $2,706.3 million, or 65.1% as a percentage of revenue, compared to $2,485.8 million, or 63.1% as a percentage of revenue, in the first nine months of 2016. The 8.9% increase relative to the first nine months of 2016 was primarily driven by higher temporary labor costs related to new contract startups.

SG&A increased to $364.2 million in the first nine months of 2017 from $345.5 million in the first nine months of 2016. As a percentage of revenue, SG&A was flat at 8.8%. The 5.4% increase relative to the first nine months of 2016 was primarily driven by higher payroll and benefits to support new contract starts.

~~Liquidity and Capital Resources~~

~~We manage our liquidity using internal cash management practices, which are subject to: (i) the policies and cooperation~~issuance of the ~~financial institutions we utilize to maintain~~RXO Notes and ~~provide cash management services, (ii) the terms and other requirements~~incurrence of the ~~agreements to which we are a party, and (iii) the statutes, regulations and practices of each of the local jurisdictions in which we operate.~~

~~Our principal existing sources of cash are cash generated from operations and borrowings available under the Second Amended and Restated Revolving~~RXO Term Loan, ~~Credit Agreement (the "ABL Facility"). As of September 30, 2017, we had~~together with RXO’s cash and cash equivalents on hand, were used to fund a cash distribution of ~~$473.1~~approximately $488 million to XPO in October 2022, which we intend to use to repay existing indebtedness and ~~availability under~~fund any related fees and expenses prior to the ~~ABL Facility~~12-month anniversary of ~~$608.5 million. Availability under~~ the ~~ABL Facility is based on~~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 ~~borrowing base~~tender offer to purchase for cash any and all of ~~$857.0~~our outstanding Senior Notes due 2025, which had a principal balance outstanding of $520 million as ~~well as outstanding letters~~ of ~~credit of $248.5 million, respectively.~~September 30, 2022. The tender offer will expire on November 17, 2022, unless extended or earlier terminated by XPO.

We continually evaluate our liquidity requirements, capital needs and the availability of capital resources based on our operating needs and our planned growth initiatives. We believe that our existing sources of cash will be sufficient to support our existing operations over the next 12 months.

~~Equity Offering~~Share Issuance

Preferred Stock and Warrant Exchanges

Commencing in the fourth quarter of ~~its~~2020, holders of our convertible preferred stock and warrants exchanged their holdings for our common stock ~~by the Forward Counterparties pursuant~~or a combination of our common stock and cash. These exchanges were intended to ~~the Forward Sale Agreements. The Company used the net proceeds~~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 approximately 139 thousand shares of common stock. In the second quarter of 2021, the remaining 40 preferred shares were exchanged, and ~~sold by the Company in the Offering and expects to use any net proceeds received upon the settlement~~we issued 5,714 shares of ~~the Forward Sale Agreements for general corporate purposes, which may include strategic acquisitions and the repayment or refinancing of outstanding indebtedness.~~

~~Refinancing of Existing Term Loan~~

On March 10, 2017, we entered into a Refinancing Amendment (Amendment No. 2 to Credit Agreement) (the "Amendment"), by and among XPO, its subsidiaries signatory thereto, as guarantors, the lenders party thereto and Morgan Stanley Senior Funding, Inc., in its capacity as administrative agent (the "Administrative Agent"), amending that certain Senior Secured Term Loan Credit Agreement, dated as of October 30, 2015 (as amended, amended and restated, supplemented or otherwise modified, including by that certain Incremental and Refinancing Amendment (Amendment No. 1 to Credit Agreement), dated as of August 25, 2016, the "Term Loan Credit Agreement").

Pursuant to the Amendment, the outstanding $1,481.9 million principal amount of term loans under the Term Loan Credit Agreement (the "Existing Term Loans") were replaced with $1,494.0 million in aggregate principal amount of new term loans (the "New Term Loans") having substantially similar terms as the Existing Term Loans, other than withcommon stock. With respect to the ~~applicable interest rate~~warrants, in the first quarter of 2021, 9.8 million warrants were exchanged, and ~~prepayment premiums~~we issued 9.2 million shares of common stock. The warrants exchanged included holdings of JPE. Subsequent to the exchange in ~~respect~~the second quarter of ~~certain voluntary prepayments. Proceeds from the New Term Loans were used primarily to refinance the Existing Term Loans and to pay interest, fees and expenses in connection therewith, and~~2021, there are no shares of preferred stock or warrants outstanding.

Share Repurchases

In February 2019, our Board of Directors authorized repurchases of up to $1.5 billion of our common stock. Our share repurchase authorization permits us to purchase shares in both the open market and in private transactions, with the timing and number of shares dependent on a variety of factors, including price, general business conditions, market conditions, alternative investment opportunities and funding considerations. We are not obligated to repurchase any specific number of shares and may suspend or discontinue the program at any time.

There have been no share repurchases since the first quarter of 2020. Our remaining share repurchase authorization was $503 million ~~may be used for general corporate purposes.~~

~~The interest rate margin applicable to the New Term Loans was reduced from 2.25% to 1.25%, in the case~~as of ~~base rate loans, and from 3.25% to 2.25%, in the case of LIBOR loans and the LIBOR floor was reduced from 1.0% to 0%. The interest rate on the New Term Loans was 3.55% at~~ September 30, 2017. The New Term Loans maturity will remain October 30, 2021. The refinancing resulted in an extinguishment charge of $8.3 million in the nine months ended September 30, 2017. The Company expects annual cash interest savings of approximately $15 million per year related to the refinancing.

~~Redemption of Senior Notes due 2018~~

In August 2017, the Company redeemed all of its outstanding 7.25% senior notes due January 2018 (the “Notes”). The redemption price for the Notes was 102.168% of the principal amount of the Notes, plus accrued and unpaid interest to, but excluding, the date of redemption. The redemption was funded using cash on hand at the date of the redemption. The loss on debt extinguishment was approximately $5 million.2022.

Loan Covenants and Compliance

As of September 30, ~~2017,~~2022, we were in compliance with the covenants and other provisions of ~~the ABL Facility, the New Term Loans, the senior notes due 2021, 2022 and 2023 (collectively the "Senior Notes"), and the other applicable indentures.~~our debt agreements. Any failure to ~~be in compliance~~comply with any material provision or covenant of these agreements could have a material adverse effect on our liquidity and operations.

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Sources and Uses of Cash


	Nine Months Ended September 30,
(In millions)	2022		2021
Net cash provided by operating activities from continuing operations	$	664	$	558
Net cash provided by (used in) investing activities from continuing operations	351		(143)
Net cash used in financing activities from continuing operations	(706)		(1,880)

During the nine months ended September 30, ~~2017,~~2022, we: (i) generated cash from operating activities from continuing operations of ~~$524.7 million,~~$664 million; and (ii) generated net proceeds from ~~sales~~the sale of ~~assets~~intermodal of ~~$59.6 million and (iii) received proceeds of $287.6 million from our common stock offering.~~$705 million. We used cash during this period ~~principally to~~primarily to: (i) purchase property and equipment of ~~$389.9 million,~~$394 million; and (ii) redeem our Senior Notes due 2018 for $271.5 million, (iii) make payments on long-term debt and capital leases of $80.9 million, (iv) make repayments, net of advances, on our ABL Facility of $30.0 million, (v) make payments for tax withholdings on restricted shares of $15.2 million and (vi) make payments for debt issuance costs of $12.8 million in connection with the refinancinga portion of our ~~Term Loan facility.~~senior notes due 2025 for $651 million.

During the nine months ended September 30, ~~2016,~~2021, we: (i) generated cash from operating activities from continuing operations of ~~$404.6 million,~~$558 million; (ii) generated proceeds from sales of ~~assets~~property and equipment of ~~$57.9 million, and~~$72 million; (iii) received a distribution from GXO of $794 million; and (iv) generated proceeds ~~net~~ of ~~repurchases,~~$384 million from the issuance of ~~$43.6 million on our debt.~~common stock. We used cash during this period ~~principally to~~primarily to: (i) purchase property and equipment of ~~$318.5 million~~$212 million; (ii) ~~make payments on long-term debt~~redeem our senior notes due 2022, 2023 and ~~capital leases of $126.4 million~~2024 for $2.8 billion; and (iii) ~~make~~repay our ABL Facility borrowings of $200 million.

Cash flows from operating activities from continuing operations for the nine months ended September 30, 2022 increased by $106 million, compared with the same period in 2021. The increase reflects higher income from continuing operations of $564 million for the nine months ended September 30, 2022, compared with the same period in 2021, partially offset by the impact of operating assets and liabilities utilizing $111 million of cash in the first nine months of 2022, compared with utilizing $68 million during the same period in 2021 and a $434 million gain on sale of business recognized during the nine months ended September 30, 2022. Within operating assets and liabilities, accrued expenses and other liabilities generated $143 million less cash while accounts receivable utilized $126 million less cash in the first nine months of 2022, compared with the same period in 2021, primarily as a result of timing of payments ~~for debt issuance costs~~in the 2022 period.

Investing activities from continuing operations generated $351 million of ~~$24.9 million.~~cash in the nine months ended September 30, 2022 and used $143 million of cash in the nine months ended September 30, 2021. During the nine months ended September 30, 2022, we received $705 million of cash from the sale of intermodal, net of cash disposed, received $29 million from the settlement of cross currency swaps and used $394 million to purchase property and equipment. During the nine months ended September 30, 2021, we used $212 million of cash to purchase property and equipment and received $72 million from sales of property and equipment.

~~Off-Balance Sheet Arrangements~~

Financing activities from continuing operations used $706 million of cash in the nine months ended September 30, 2022 and $1.9 billion of cash in the nine months ended September 30, 2021. The ~~Company guarantees~~primary uses of cash from financing activities during the ~~lease payments~~first nine months of ~~certain tractor and trailer equipment utilized by subcontract carriers. These guarantees continue through the end~~2022 were $651 million used to redeem a portion of the senior notes due 2025 and $47 million used to repay borrowings. The primary uses of cash from financing activities during the nine months ended September 30, 2021 were $2.8 billion used to redeem the senior notes due 2022, 2023 and 2024 and $200 million used to repay borrowings under our ABL Facility. The primary sources of cash from financing activities during the first nine months of 2021 were $794 million of proceeds from a distribution from GXO and $384 million of net proceeds from our common stock offering.

Except for the redemption of a portion of our senior notes due 2025 as described above, there were no material changes to our December 31, 2021 contractual obligations during the nine months ended September 30, 2022. RXO’s operating lease obligations of ~~the equipment, which is typically four years. The maximum amount of the guarantee is limited to the amount of unpaid principal and interest. As~~approximately $140 million as of September 30, ~~2017,~~2022 will not be part of our contractual obligations following the ~~maximum amount of these guarantees was approximately $18.0 million.~~spin-off. We anticipate full year net capital expenditures to be between $375 million and $425 million in 2022 (excluding any net capital expenditures associated with the RXO spin-off).

New Accounting Standards

Information related to new accounting standards is included in Note 1—Organization, Description of Business and Basis of Presentation to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

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Item 3.Quantitative and Qualitative Disclosures about Market Risk.

~~We have a significant proportion of our net assets and income in non-U.S. dollar currencies, primarily the EUR and GBP.~~ We are exposed to ~~currency~~market risk ~~from the potential~~related to changes in ~~functional currency values of our~~interest rates, foreign currency ~~denominated assets, liabilities~~exchange rates and cash flows. Consequently, a depreciation of the EUR and GBP relative to the U.S. dollar could have an adverse impact on our financial results. In order to mitigate against the risk of a reduction in the value of foreign currency from the Company’s international operations, the Company uses foreign currency option and forward contracts and gains or losses on these contracts are recorded in foreign currency gain/loss in the condensed consolidated statements of operations. See ~~Note 5—Derivative Instruments~~ ~~for further information.~~

commodity prices. There have been no material changes to our quantitative and qualitative disclosures about market risk related to our continuing operations during the nine months ended September 30, ~~2017~~2022, as compared towith the quantitative and qualitative disclosures about market risk described in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2021.

Item 4.Controls and Procedures.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our ~~principal executive officer~~Chief Executive Officer (“CEO”) and ~~principal financial officer,~~Chief Financial Officer (“CFO”), we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in ~~Rules~~Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of ~~the end of the period covered by this report.~~September 30, 2022. Based on ~~their~~that evaluation, our ~~principal executive officer~~CEO and ~~principal financial officer~~CFO concluded that our disclosure controls and procedures were effective as of ~~such time~~September 30, 2022, such that the information required to be included in our ~~SEC~~Securities and Exchange Commission (“SEC”) reports is: (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to the Company, including our consolidated ~~subsidiaries,~~subsidiaries; and (ii) accumulated and communicated to our management, including our ~~principal executive officer~~CEO and ~~principal financial officer,~~CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There ~~were no~~have not been any changes in our internal control over financial reporting during the quarter ended September 30, ~~2017~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II—Other Information

Item 1.Legal Proceedings.

For information related to our legal proceedings, ~~please~~ refer to ~~"Legal Proceedings"~~“Legal Proceedings” in the ~~Company's~~Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016~~2021 and Note ~~8—Legal~~11—Commitments and ~~Regulatory Matters~~Contingencies of Item 1, ~~"Financial Statements"~~“Financial Statements” of this Quarterly Report on Form 10-Q.

Item 1A.Risk Factors.

~~In addition~~There are no material changes to ~~the other information set forth in this report, you should carefully consider~~ the risk factors ~~discussed~~previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2021, except as ~~updated~~disclosed in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2017, which could materially affect our business, financial condition, or future results.~~March 31, 2022.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.

During the quarter ended September 30, 2017, the Company issued an aggregate of 2.0 million shares of the Company's common stock, par value $0.001 per share, to certain holders of the Company's Convertible Senior Notes in connection with the conversion of $33.7 million aggregate principal amount of the Convertible Senior Notes. The number of shares of our common stock issued in the foregoing transactions equals the number of shares of our common stock presently issuable to holders of the Convertible Senior Notes upon conversion under the original terms of the Convertible Senior Notes. During the quarter ended September 30, 2017, pursuant to the Investment Agreement dated as of June 13, 2011 (the “Investment Agreement”) by and among Jacobs Private Equity, LLC (“JPE”) and the other investors party thereto (collectively with JPE, the “Investors”) the Company issued 17,799 unregistered shares of its common stock as a result of the cashless exercise of warrants by certain shareholders and 11,429 unregistered shares of its common stock as a result of the exercise of warrants by certain shareholders for cash resulting in the receipt of $80,003 of total proceeds by the Company. The proceeds received by the Company will be used for general corporate purposes. The issuance of these shares was exempt from the registration requirements of the Securities Act of 1933, as amended, in accordance with Section 4(a)(2) thereof, as a transaction by an issuer not involving any public offering. For additional information on the Company's Convertible Senior Notes, refer to ~~Note 9—Debt, of Item 8, "Financial Statements and Supplementary Data" in our 2016 Annual Report on Form 10-K and~~ ~~Note 6—Debt~~ ~~of Item 1, "Financial Statements" of this Quarterly Report on Form 10-Q.~~None.

Item 3.Defaults upon Senior Securities.

None.

Item 4.Mine Safety Disclosures.

Not applicable.

Item 5.Other Information.

None.

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Item 6.Exhibits.


Exhibit Number		Description


~~Exhibit~~ ~~Number~~		~~Description~~
10.1*+
~~10.1~~	~~Forward Sale~~Employment Agreement, dated ~~July 19, 2017, by and~~August 5, 2022, between the ~~Company~~registrant and ~~Morgan Stanley & Co. LLC (incorporated by reference to Exhibit 1.2 to the Company’s Current Report on Form 8-K filed with the SEC on July 25, 2017).~~Mario A. Harik.

~~10.2~~10.2*+		~~Forward Sale~~Form of Performance-Based Restricted Stock Unit Award Agreement dated July 19, 2017, by and between the Company and JPMorgan Chase Bank, National Association, London Branch (incorporated by reference to Exhibit 1.3 to the Company’s Current Report on Form 8-K filed with the SEC on July 25, 2017)(2016 Omnibus Incentive Compensation Plan).

~~10.3~~10.3*+		Letter of Amendment ~~No. 1~~ to ~~Second Amended and Restated Revolving Loan Credit~~Separation Agreement, dated ~~as of July 19, 2017, by~~September 1, 2022, between the registrant and among the Company and certain subsidiaries signatory thereto, Morgan Stanley Senior Funding, Inc., as agent, and the Lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 25, 2017).Troy A. Cooper.

~~31.1~~10.4*+		Employment Agreement, dated September 13, 2022, between the registrant and Bradley S. Jacobs.

10.5*+		Offer Letter, dated October 6, 2022, between the registrant and Carl Anderson.

10.6*+		Change in Control and Severance Agreement, dated October 9, 2022, between the registrant and Carl Anderson.

10.7*+		Form of Restricted Stock Unit Award Agreement (2016 Omnibus Incentive Compensation Plan).

10.8*+		Form of Performance-Based Restricted Stock Unit Award Agreement (2016 Omnibus Incentive Compensation Plan).

10.9*+		Transition Agreement, dated October 10, 2022, between the registrant and Ravi Tulsyan.

31.1 *		Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the ~~registrant's~~registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, ~~2017.~~2022.

31.2 *		Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the ~~registrant's~~registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, ~~2017.~~2022.

32.1 ***		Certification of the Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, with respect to the ~~registrant's~~registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, ~~2017.~~2022.

32.2 ***		Certification of the Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, with respect to the ~~registrant's~~registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, ~~2017.~~2022.

101.INS *		XBRL Instance ~~Document.~~Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH *		XBRL Taxonomy Extension Schema.

101.CAL *		XBRL Taxonomy Extension Calculation Linkbase.

101.DEF *		XBRL Taxonomy Extension Definition Linkbase.

101.LAB *		XBRL Taxonomy Extension Label Linkbase.

101.PRE *		XBRL Taxonomy Extension Presentation Linkbase.



104 *						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).


*						Filed herewith.
**						Furnished herewith.
+						This exhibit is a management contract or compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		XPO LOGISTICS, INC.

By:		~~XPO Logistics, Inc.~~/s/ Mario Harik
		Mario Harik
~~By:~~		~~/s/ Bradley S. Jacobs~~
	~~Bradley S. Jacobs~~
	Chief Executive Officer
		(Principal Executive Officer)

By:		/s/ ~~John J. Hardig~~Ravi Tulsyan
		~~John J. Hardig~~Ravi Tulsyan
		Chief Financial Officer
		(Principal Financial Officer)

Date: November ~~6, 2017~~

2, 2022



Delaware									03-0450326
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)


Five American Lane
~~Five American Lane~~ Greenwich, CT	CT	06831
(Address of principal executive offices)		(Zip ~~code)~~Code)



ý☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



¨☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	Nine Months Ended September 30,
(In millions)	2017			2016
Operating activities
Net income	$	153.1		$	52.4
Adjustments to reconcile net income to net cash from operating activities
Depreciation and amortization	489.1			485.4
Stock compensation expense	50.1			34.2
Accretion of debt	14.5			12.3
Deferred tax benefit	(3.1		)	(2.3		)
Loss on extinguishment of debt	13.6			53.2
Unrealized loss (gain) on foreign currency option and forward contracts	49.9			(2.8		)
Other	20.1			8.7
Changes in assets and liabilities:
Accounts receivable	(199.8		)	(79.0		)
Other assets	(40.2		)	(72.5		)
Accounts payable	48.6			(150.7		)
Accrued expenses and other liabilities	(71.2		)	65.7
Cash flows provided by operating activities	524.7			404.6
Investing activities
Payment for purchases of property and equipment	(389.9		)	(318.5		)
Proceeds from sale of assets	59.6			57.9
Other	—			8.6
Cash flows used by investing activities	(330.3		)	(252.0		)
Financing activities
Proceeds from issuance of long-term debt	523.5			1,377.8
Repurchase of debt	(782.9		)	(1,334.2		)
Proceeds from borrowings on ABL facility	495.0			260.0
Repayment of borrowings on ABL facility	(525.0		)	(260.0		)
Repayment of long-term debt and capital leases	(80.9		)	(126.4		)
Payment for debt issuance costs	(12.8		)	(24.9		)
Proceeds from common stock offering	287.6			—
Change in bank overdrafts	11.5			24.9
Payment for tax withholdings for restricted shares	(15.2		)	(9.3		)
Dividends paid	(3.3		)	(2.5		)
Other	(1.0		)	11.3
Cash flows used by financing activities	(103.5		)	(83.3		)
Effect of exchange rates on cash	8.8			1.2
Net increase in cash	99.7			70.5
Cash and cash equivalents, beginning of period	373.4			289.8
Cash and cash equivalents, end of period	$	473.1		$	360.3
Supplemental disclosure of cash flow information:
Cash paid for interest	$	176.5		$	259.1
Cash paid for income taxes	$	59.9		$	41.7



(In millions)	Transportation		Logistics		Corporate			Eliminations			Total
Three Months Ended September 30, 2017
Revenue	$	2,469.8	$	1,458.8	$	—		$	(41.5	)	$	3,887.1
Operating income (loss)	145.2		77.4		(35.8		)	—			186.8
Depreciation and amortization	111.7		54.9		0.7			—			167.3

Three Months Ended September 30, 2016
Revenue	$	2,409.1	1,347.0		$	—		$	(42.3	)	$	3,713.8
Operating income (loss)	125.4		75.3		(31.9		)	—			168.8
Depreciation and amortization	114.8		46.5		0.5			—			161.8

Nine Months Ended September 30, 2017
Revenue	$	7,152.2	$	4,154.1	$	—		$	(119.4	)	$	11,186.9
Operating income (loss)	406.0		188.9		(109.5		)	—			485.4
Depreciation and amortization	329.3		155.1		4.7			—			489.1

Nine Months Ended September 30, 2016
Revenue	$	7,125.4	$	3,939.7	$	—		$	(122.3	)	$	10,942.8
Operating income (loss)	354.0		158.3		(110.8		)	—			401.5
Depreciation and amortization	341.9		142.2		1.3			—			485.4



			Nine Months Ended September 30, 2017
(In millions)	Reserve Balance at December 31, 2016		Charges Incurred		Payments			Foreign Exchange and Other		Reserve Balance at September 30, 2017
Transportation
Facilities	$	1.4	$	0.2	$	(1.3	)	$	—	$	0.3
Severance	5.8		1.6		(4.7		)	0.5		3.2
Total	7.2		1.8		(6.0		)	0.5		3.5
Logistics
Contract termination	0.7		0.3		(0.3		)	—		0.7
Facilities	0.5		—		(0.5		)	—		—
Severance	16.1		4.0		(14.1		)	1.1		7.1
Total	17.3		4.3		(14.9		)	1.1		7.8
Corporate
Contract termination	0.3		—		(0.3		)	—		—
Severance	0.4		1.2		(1.5		)			0.1
Total	0.7		1.2		(1.8		)	—		0.1
Total	$	25.2	$	7.3	$	(22.7	)	$	1.6	$	11.4



December 31, 2016
				Derivative Assets			Derivative Liabilities
(In millions)	Fair Value Hierarchy Level	Notional Amount		Balance Sheet Caption	Fair Value		Balance Sheet Caption	Fair Value
Derivatives designated as hedges:
Cross-currency swap agreements	Level 2	$	730.9	Other long-term assets	$	11.9	Other long-term liabilities	$	(6.9	)
Cross-currency swap agreements	Level 2	3.3		Other current assets	0.1		Other current liabilities	—
Interest rate swaps	Level 2	105.4		Other current assets	—		Other current liabilities	(2.3		)
Derivatives not designated as hedges:
Foreign currency option and forward contracts	Level 2	552.2		Other current assets	18.8		Other current liabilities	(1.0		)
Foreign currency option and forward contracts	Level 2	742.6		Other long-term assets	26.7		Other long-term liabilities	(5.8		)
Total					$	57.5		$	(16.0	)



	Recognized in Accumulated Other Comprehensive Loss						Recognized in Income Before Income Tax Provision
(In millions)	Three Months Ended September 30, 2017			Three Months Ended September 30, 2016			Three Months Ended September 30, 2017			Three Months Ended September 30, 2016
Derivatives designated as hedges:
Cross-currency swap agreements	$	(50.4	)	$	(17.9	)	$	—		$	—
Interest rate swaps	0.7			0.3			—			—
Derivatives not designated as hedges:
Interest rate swaps	—			—						0.3
Foreign currency option and forward contracts	—			—			(14.2		)	(0.5		)
Nonderivatives designated as hedges:
Foreign currency denominated notes	1.3			(4.0		)	—			$	—
Total	$	(48.4	)	$	(21.6	)	$	(14.2	)	$	(0.2	)