UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


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

For the quarterly period ended March 31, ~~2021~~2022


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

For the transition period from____________to____________

Commission File Number: 001-32172

XPO Logistics, Inc.

(Exact name of registrant as specified in its charter)


Delaware		03-0450326
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
Five American Lane
Greenwich,	CT	06831
(Address of principal executive offices)		(Zip Code)

(855) 976-6951

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common stock, par value $0.001 per share

XPO

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~April 27, 2021,~~May 4, 2022, there were ~~111,710,560~~115,018,449 shares of the registrant’s common stock, par value $0.001 per share, outstanding.

XPO Logistics, Inc.

Quarterly Report on Form 10-Q

For the Quarterly Period Ended March 31, ~~2021~~2022

Table of Contents


			Page No.
Part I—Financial Information
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets			1
Condensed Consolidated Statements of Income			2
Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~			3
Condensed Consolidated Statements of Cash Flows			4
Condensed Consolidated Statements of Changes in Equity			56
Notes to Condensed Consolidated Financial Statements			67
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			1819
Item 3. Quantitative and Qualitative Disclosures About Market Risk			27
Item 4. Controls and Procedures			27
Part II—Other Information
Item 1. Legal Proceedings			27
Item 1A. Risk Factors			2827
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			28
Item 3. Defaults Upon Senior Securities			2928
Item 4. Mine Safety Disclosures			2928
Item 5. Other Information			2928
Item 6. Exhibits			3029
Signatures			3130

Table of Contents

Part I—Financial Information

Item 1. Financial Statements.

XPO Logistics, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)


		March 31,		December 31,			March 31,		December 31,
(In millions, except per share data)	(In millions, except per share data)	2021		2020		(In millions, except per share data)	2022		2021
ASSETS	ASSETS					ASSETS
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	629	$	2,054	Cash and cash equivalents	$	1,004	$	260
Accounts receivable, net of allowances of $60 and $65, respectively		3,137		2,886
Accounts receivable, net of allowances of $47 and $47, respectively						Accounts receivable, net of allowances of $47 and $47, respectively	2,248		2,105
Other current assets	Other current assets	505		430		Other current assets	279		286
Current assets of discontinued operations						Current assets of discontinued operations	24		26
Total current assets	Total current assets	4,271		5,370		Total current assets	3,555		2,677
Long-term assets	Long-term assets					Long-term assets
Property and equipment, net of $2,653 and $2,568 in accumulated depreciation, respectively		2,651		2,661
Property and equipment, net of $1,790 and $1,828 in accumulated depreciation, respectively						Property and equipment, net of $1,790 and $1,828 in accumulated depreciation, respectively	1,796		1,808
Operating lease assets	Operating lease assets	2,602		2,278		Operating lease assets	821		908
Goodwill	Goodwill	4,554		4,599		Goodwill	2,332		2,479
Identifiable intangible assets, net of $944 and $909 in accumulated amortization, respectively		955		974
Identifiable intangible assets, net of $578 and $612 in accumulated amortization, respectively						Identifiable intangible assets, net of $578 and $612 in accumulated amortization, respectively	548		580
Other long-term assets	Other long-term assets	336		287		Other long-term assets	268		255

Total long-term assets	Total long-term assets	11,098		10,799		Total long-term assets	5,765		6,030
Total assets	Total assets	$	15,369	$	16,169	Total assets	$	9,320	$	8,707
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities	Current liabilities					Current liabilities
Accounts payable	Accounts payable	$	1,329	$	1,255��	Accounts payable	$	1,330	$	1,110
Accrued expenses	Accrued expenses	1,966		1,814		Accrued expenses	1,084		1,107
Short-term borrowings and current maturities of long-term debt	Short-term borrowings and current maturities of long-term debt	88		1,338		Short-term borrowings and current maturities of long-term debt	682		58
Short-term operating lease liabilities	Short-term operating lease liabilities	533		483		Short-term operating lease liabilities	134		170
Other current liabilities	Other current liabilities	260		263		Other current liabilities	178		69
Current liabilities of discontinued operations						Current liabilities of discontinued operations	24		24
Total current liabilities	Total current liabilities	4,176		5,153		Total current liabilities	3,432		2,538
Long-term liabilities	Long-term liabilities					Long-term liabilities
Long-term debt	Long-term debt	5,162		5,369		Long-term debt	2,877		3,514
Deferred tax liability	Deferred tax liability	378		371		Deferred tax liability	300		316
Employee benefit obligations	Employee benefit obligations	178		192		Employee benefit obligations	120		122
Long-term operating lease liabilities	Long-term operating lease liabilities	2,086		1,795		Long-term operating lease liabilities	682		752
Other long-term liabilities	Other long-term liabilities	475		440		Other long-term liabilities	311		327

Total long-term liabilities	Total long-term liabilities	8,279		8,167		Total long-term liabilities	4,290		5,031
Stockholders’ equity	Stockholders’ equity					Stockholders’ equity
Convertible perpetual preferred stock, $0.001 par value; 10 shares authorized; 0 and 0.001 of Series A shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively		0		1
Common stock, $0.001 par value; 300 shares authorized; 112 and 102 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively		0		0

Common stock, $0.001 par value; 300 shares authorized; 115 shares issued and outstanding as of March 31, 2022 and December 31, 2021						Common stock, $0.001 par value; 300 shares authorized; 115 shares issued and outstanding as of March 31, 2022 and December 31, 2021	—		—
Additional paid-in capital	Additional paid-in capital	1,988		1,998		Additional paid-in capital	1,176		1,179
Retained earnings	Retained earnings	983		868		Retained earnings	531		43
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(195)		(158)		Accumulated other comprehensive loss	(109)		(84)
Total stockholders’ equity before noncontrolling interests		2,776		2,709
Noncontrolling interests		138		140

Total equity	Total equity	2,914		2,849		Total equity	1,598		1,138
Total liabilities and equity	Total liabilities and equity	$	15,369	$	16,169	Total liabilities and equity	$	9,320	$	8,707

See accompanying notes to condensed consolidated financial statements.

Table of Contents

XPO Logistics, Inc.

Condensed Consolidated Statements of Income

(Unaudited)


		Three Months Ended March 31,						Three Months Ended March 31,
(In millions, except per share data)	(In millions, except per share data)		2021		2020		(In millions, except per share data)		2022		2021
Revenue	Revenue		$	4,774	$	3,864	Revenue		$	3,473	$	2,989
Cost of transportation and services			2,328		1,898
Direct operating expense			1,656		1,360
Cost of transportation and services (exclusive of depreciation and amortization)							Cost of transportation and services (exclusive of depreciation and amortization)		2,437		2,053
Direct operating expense (exclusive of depreciation and amortization)							Direct operating expense (exclusive of depreciation and amortization)		385		334
Sales, general and administrative expense	Sales, general and administrative expense		588		525		Sales, general and administrative expense		344		338
Depreciation and amortization expense							Depreciation and amortization expense		116		119
Gain on sale of business							Gain on sale of business		(450)		—
Transaction and integration costs							Transaction and integration costs		10		5
Restructuring costs							Restructuring costs		6		1
Operating income	Operating income		202		81		Operating income		625		139
Other income	Other income		(26)		(18)		Other income		(14)		(16)
Foreign currency gain			(2)		(8)
Debt extinguishment loss	Debt extinguishment loss		8		0		Debt extinguishment loss		—		8
Interest expense	Interest expense		69		72		Interest expense		37		65
Income before income tax provision			153		35
Income from continuing operations before income tax provision							Income from continuing operations before income tax provision		602		82
Income tax provision	Income tax provision		35		10		Income tax provision		113		19
Income from continuing operations							Income from continuing operations		489		63
Income (loss) from discontinued operations, net of taxes							Income (loss) from discontinued operations, net of taxes		(1)		55
Net income	Net income		118		25		Net income		488		118
Net income attributable to noncontrolling interests			(3)		(2)

Net income from discontinued operations attributable to noncontrolling interests							Net income from discontinued operations attributable to noncontrolling interests		—		(3)
Net income attributable to XPO	Net income attributable to XPO		$	115	$	23	Net income attributable to XPO		$	488	$	115

Net income (loss) attributable to common shareholders							Net income (loss) attributable to common shareholders
Continuing operations							Continuing operations		$	489	$	63
Discontinued operations							Discontinued operations		(1)		52
Net income attributable to common shareholders	Net income attributable to common shareholders		$	115	$	21	Net income attributable to common shareholders		$	488	$	115

Earnings per share data
Basic earnings per share			$	1.08	$	0.23
Diluted earnings per share			$	1.02	$	0.20
Earnings (loss) per share data							Earnings (loss) per share data
Basic earnings per share from continuing operations							Basic earnings per share from continuing operations		$	4.26	$	0.59
Basic earnings (loss) per share from discontinued operations							Basic earnings (loss) per share from discontinued operations		(0.01)		0.49
Basic earnings per share attributable to common shareholders							Basic earnings per share attributable to common shareholders		$	4.25	$	1.08
Diluted earnings per share from continuing operations							Diluted earnings per share from continuing operations		$	4.23	$	0.56
Diluted earnings (loss) per share from discontinued operations							Diluted earnings (loss) per share from discontinued operations		(0.01)		0.46
Diluted earnings per share attributable to common shareholders							Diluted earnings per share attributable to common shareholders		$	4.22	$	1.02

Weighted-average common shares outstanding	Weighted-average common shares outstanding						Weighted-average common shares outstanding
Basic weighted-average common shares outstanding	Basic weighted-average common shares outstanding		106		92		Basic weighted-average common shares outstanding		115		106
Diluted weighted-average common shares outstanding	Diluted weighted-average common shares outstanding		112		103		Diluted weighted-average common shares outstanding		116		112

See accompanying notes to condensed consolidated financial statements.

Table of Contents

XPO Logistics, Inc.

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

(Unaudited)

Three Months Ended March 31,
(In millions) 2021 2020
Net income $ 118 $ 25
Other comprehensive income (loss), net of tax
Foreign currency translation loss, net of tax effect of $(6) and $(11) $ (42) $ (65)
Defined benefit plans adjustments, net of tax effect of $0 and $2 0 (5)
Other comprehensive loss (42) (70)
Comprehensive income (loss) $ 76 $ (45)
Less: Comprehensive loss attributable to noncontrolling interests (2) (3)
Comprehensive income (loss) attributable to XPO $ 78 $ (42)


	Three Months Ended March 31,
(In millions)		2022		2021
Net income		$	488	$	118

Other comprehensive loss, net of tax
Foreign currency translation loss, net of tax effect of $(2) and $(6)		$	(26)	$	(42)
Unrealized gain on financial assets/liabilities designated as hedging instruments, net of tax effect of $— and $—		1		—

Other comprehensive loss		(25)		(42)
Comprehensive income		$	463	$	76
Less: Comprehensive loss attributable to noncontrolling interests		—		(2)
Comprehensive income attributable to XPO		$	463	$	78

See accompanying notes to condensed consolidated financial statements.

Table of Contents

XPO Logistics, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended March 31,
(In millions)	2022		2021
Cash flows from operating activities of continuing operations
Net income	$	488	$	118
Income (loss) from discontinued operations, net of taxes	(1)		55
Income from continuing operations	489		63
Adjustments to reconcile income from continuing operations to net cash from operating activities
Depreciation, amortization and net lease activity	116		119
Stock compensation expense	8		6
Accretion of debt	4		5
Deferred tax (benefit) expense	(12)		9
Debt extinguishment loss	—		8
Gain on sale of business	(450)		—
Gains on sales of property and equipment	(1)		(23)
Other	10		2
Changes in assets and liabilities
Accounts receivable	(405)		(198)
Other assets	94		(21)
Accounts payable	366		34
Accrued expenses and other liabilities	(19)		73
Net cash provided by operating activities from continuing operations	200		77
Cash flows from investing activities of continuing operations
Proceeds from sale of business	705		—
Payment for purchases of property and equipment	(137)		(74)
Proceeds from sale of property and equipment	3		36

Net cash provided by (used in) investing activities from continuing operations	571		(38)
Cash flows from financing activities of continuing operations

Repayment of borrowings related to securitization program	—		(24)
Repurchase of debt	—		(1,200)

Repayment of borrowings on ABL facility	—		(200)
Repayment of debt and finance leases	(16)		(24)
Payment for debt issuance costs	—		(5)


Change in bank overdrafts	3		8
Payment for tax withholdings for restricted shares	(12)		(21)

Other	1		2
Net cash used in financing activities from continuing operations	(24)		(1,464)

Three Months Ended March 31,
(In millions) 2021 2020
Operating activities
Net income $ 118 $ 25
Adjustments to reconcile net income to net cash from operating activities
Depreciation, amortization and net lease activity 192 183
Stock compensation expense 10 18
Accretion of debt 5 4
Deferred tax benefit (4) (2)
Debt extinguishment loss 8 0
Unrealized gain on foreign currency option and forward contracts (1) (4)
Gains on sales of property and equipment (24) (27)
Other (2) 5
Changes in assets and liabilities
Accounts receivable (196) 44
Other assets (21) (16)
Accounts payable 12 (69)
Accrued expenses and other liabilities 76 19
Net cash provided by operating activities 173 180
Investing activities
Payment for purchases of property and equipment (140) (139)
Proceeds from sale of property and equipment 36 54
Other 9 6
Net cash used in investing activities (95) (79)
Financing activities
Proceeds from (repayment of) borrowings related to securitization program (49) 182
Repurchase of debt (1,200) 0
Proceeds from borrowings on ABL facility 0 620
Repayment of borrowings on ABL facility (200) (20)
Repayment of debt and finance leases (29) (25)
Payment for debt issuance costs (5) 0
Repurchase of common stock 0 (114)
Change in bank overdrafts 1 42
Payment for tax withholdings for restricted shares (21) (16)
Other 2 (1)
Net cash provided by (used in) financing activities (1,501) 668
Effect of exchange rates on cash, cash equivalents and restricted cash (2) (19)
Net increase (decrease) in cash, cash equivalents and restricted cash (1,425) 750
Cash, cash equivalents and restricted cash, beginning of period 2,065 387
Cash, cash equivalents and restricted cash, end of period $ 640 $ 1,137
Supplemental disclosure of cash flow information
Leased assets obtained in exchange for new operating lease liabilities, including $306 million related an acquisition $ 513 $ 156
Leased assets obtained in exchange for new finance lease liabilities 23 8
Cash paid for interest 76 76
Cash paid for income taxes 7 7

Table of Contents


	Three Months Ended March 31,
(In millions)	2022		2021

Cash flows from discontinued operations
Operating activities of discontinued operations	1		96
Investing activities of discontinued operations	—		(57)
Financing activities of discontinued operations	—		(37)
Net cash provided by discontinued operations	1		2
Effect of exchange rates on cash, cash equivalents and restricted cash	(3)		(2)
Net increase (decrease) in cash, cash equivalents and restricted cash	745		(1,425)
Cash, cash equivalents and restricted cash, beginning of period	273		2,065
Cash, cash equivalents and restricted cash, end of period	1,018		640
Less: Cash, cash equivalents and restricted cash of discontinued operations, end of period	4		407
Cash, cash equivalents and restricted cash of continued operations, end of period	$	1,014	$	233
Supplemental disclosure of cash flow information

Leased assets obtained in exchange for new operating lease liabilities	$	46	$	79
Leased assets obtained in exchange for new finance lease liabilities	4		16
Cash paid for interest	13		74
Cash paid for income taxes	5		1

See accompanying notes to condensed consolidated financial statements.

Table of Contents

XPO Logistics, Inc.

Condensed Consolidated Statements of Changes in Equity

(Unaudited)


		Series A Preferred Stock			Common Stock																Series A Preferred Stock			Common Stock
(Shares in thousands, dollars in millions)	(Shares in thousands, dollars in millions)	Shares	Amount		Shares	Amount		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total XPO Stockholders' Equity		Non-controlling Interests		Total Equity		(Shares in thousands, dollars in millions)	Shares	Amount		Shares	Amount		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total XPO Stockholders' Equity		Non-controlling Interests		Total Equity
Balance as of December 31, 2020		1	$	1	102,052	$	0	$	1,998	$	868	$	(158)	$	2,709	$	140	$	2,849
Balance as of December 31, 2021																				Balance as of December 31, 2021	—	$	—	114,737	$	—	$	1,179	$	43	$	(84)	$	1,138	$	—	$	1,138
Net income	Net income	—	—		—	—		—		115		—		115		3		118		Net income	—	—		—	—		—		488		—		488		—		488
Other comprehensive loss	Other comprehensive loss	—	—		—	—		—		—		(37)		(37)		(5)		(42)		Other comprehensive loss	—	—		—	—		—		—		(25)		(25)		—		(25)

Exercise and vesting of stock compensation awards	Exercise and vesting of stock compensation awards	—	—		270	—		—		—		—		—		—		—		Exercise and vesting of stock compensation awards	—	—		245	—		—		—		—		—		—		—
Tax withholdings related to vesting of stock compensation awards	Tax withholdings related to vesting of stock compensation awards	—	—		—	—		(21)		—		—		(21)		—		(21)		Tax withholdings related to vesting of stock compensation awards	—	—		—	—		(12)		—		—		(12)		—		(12)
Conversion of preferred stock to common stock		(1)	(1)		139	—		1		—		—		—		—		0
Exercise of warrants		—	—		9,215	—		—		—		—		—		—		—

Stock compensation expense	Stock compensation expense	—	—		—	—		10		—		—		10		—		10		Stock compensation expense	—	—		—	—		8		—		—		8		—		8
Balance as of March 31, 2021		0	$	0	111,676	$	0	$	1,988	$	983	$	(195)	$	2,776	$	138	$	2,914
Other																				Other	—	—		—	—		1		—		—		1		—		1
Balance as of March 31, 2022																				Balance as of March 31, 2022	—	$	—	114,982	$	—	$	1,176	$	531	$	(109)	$	1,598	$	—	$	1,598


	Series A Preferred Stock			Common Stock
(Shares in thousands, dollars in millions)	Shares	Amount		Shares	Amount		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total XPO Stockholders' Equity		Non-controlling Interests		Total Equity
Balance as of December 31, 2020	1	$	1	102,052	$	—	$	1,998	$	868	$	(158)	$	2,709	$	140	$	2,849
Net income	—	—		—	—		—		115		—		115		3		118
Other comprehensive loss	—	—		—	—		—		—		(37)		(37)		(5)		(42)
Exercise and vesting of stock compensation awards	—	—		270	—		—		—		—		—		—		—
Tax withholdings related to vesting of stock compensation awards	—	—		—	—		(21)		—		—		(21)		—		(21)
Conversion of preferred stock to common stock	(1)	(1)		139	—		1		—		—		—		—		—
Exercise of warrants	—	—		9,215	—		—		—		—		—		—		—

Stock compensation expense	—	—		—	—		10		—		—		10		—		10

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

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, 2019 72 $ 41 92,342 $ 0 $ 2,061 $ 786 $ (145) $ 2,743 $ 153 $ 2,896
Net income — — — — — 23 — 23 2 25
Other comprehensive loss — — — — — — (65) (65) (5) (70)
Exercise and vesting of stock compensation awards — — 417 — — — — — — —
Tax withholdings related to vesting of stock compensation awards — — — — (16) — — (16) — (16)
Retirement of common stock — — (1,715) — (114) — — (114) — (114)
Dividend declared — — — — — (1) — (1) — (1)
Stock compensation expense — — — — 12 — — 12 — 12
Adoption of new accounting standard and other — — — — — (4) — (4) — (4)
Balance as of March 31, 2020 72 $ 41 91,044 $ 0 $ 1,943 $ 804 $ (210) $ 2,578 $ 150 $ 2,728

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., together with its subsidiaries (“XPO” or “we”), ~~provides cutting-edge supply chain solutions to the most successful companies in the world.~~is a leading provider of freight transportation services. We use our ~~integrated network of people,~~proprietary technology to move goods efficiently through our customers’ supply chains, primarily by providing less-than-truckload (“LTL”) and physical assets to help customers manage their goods most efficiently throughout their supply chains. Our customers are multinational, national, mid-size and small enterprises. We run our business on a global basis, with 2 reportable segments: Transportation and Logistics.truck brokerage services. See Note 3—4—Segment Reporting for additional information on our operations.

~~In December 2020,~~2022 Strategic Plan

On March 8, 2022, we announced that our Board of Directors ~~unanimously~~ approved a plan to pursue athe strategic spin-off of ~~100%~~our tech-enabled brokered transportation platform in North America as a publicly traded company and to pursue 2 divestitures: the sale of our ~~Logistics segment as a separate~~North American intermodal operation and the sale or listing of our European business. We sold our intermodal operation, which provides rail brokerage and drayage services, in March 2022. For further information, see Note 3—Divestiture.

If the spin-off to XPO shareholders is completed, the transaction will result in 2 pure-play, publicly traded ~~company.~~companies with simplified business models and clearly delineated value propositions. The core business of the spin-off will be our truck brokerage service, with complementary brokered services for managed transportation, last mile logistics and global forwarding. The remaining company will be an asset-based provider of LTL service in North America. The planned spin-off transaction, which ~~we intend~~is intended to ~~qualify as a transaction that is generally~~be tax-free to XPO and our shareholders for U.S. federal income tax purposes, ~~to XPO shareholders,~~ would result in XPO shareholders owning stock in both companies. In connection with the transaction, it is anticipated that a portion of XPO’s outstanding debt may be repaid using proceeds from borrowings incurred and debt securities to be issued by the spun-off company.

~~If completed,~~We currently expect to complete the spin-off will result in separate public companies with clearly delineated service offerings. XPO will be a global provider of primarily less-than-truckload (“LTL”) transportation and truck brokerage services, and GXO Logistics, Inc. (“GXO”), the planned spin-off, will be a global provider of contract logistics services. Both companies’ stocks are expected to trade on the New York Stock Exchange, and we plan to consider a dual listing on the London Stock Exchange for GXO in due course.

~~The transaction is currently expected to be completed~~ in the ~~second half~~fourth quarter of ~~2021,~~2022, subject to various conditions, including the ~~approval~~effectiveness of a Form 10 registration statement, receipt of a tax opinion from counsel, the refinancing of XPO’s ~~board~~debt on terms satisfactory to the XPO Board of ~~directors.~~Directors, and final approval by the XPO Board of Directors, among other requirements. There can be no assurance that ~~the spin-off~~any strategic transaction will occur, or if ~~it does~~one or more do occur, of ~~its~~the terms or timing.

2021 Spin-Off of the Logistics Segment

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

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 our annual report on Form 10-K for the year ended December 31, ~~2020~~2021 (the ~~“2020~~“2021 Form 10-K”). The interim reporting requirements of Form 10-Q allow certain information and note disclosures normally included in annual consolidated financial statements to be condensed or omitted. These Condensed Consolidated Financial Statements should be read in conjunction with the ~~2020~~2021 Form 10-K.

The Condensed Consolidated Financial Statements are not audited but reflect all adjustments that are of a normal recurring nature and are necessary for a fair presentation of the financial condition, operating results and cash flows for the interim periods presented. Operating results for the three months ended March 31, ~~2021~~2022 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2021.~~2022.

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

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Restricted Cash

As of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, our restricted cash included in Other long-term assets on our Condensed Consolidated Balance Sheets was ~~$11~~$10 million.

Trade Receivables Securitization and Factoring Programs

We sell certain of our trade accounts receivable on a non-recourse basis to third-party financial institutions under factoring agreements. We ~~account for these transactions as sales of receivables and present cash proceeds as cash provided by operating activities in the Condensed Consolidated Statements of Cash Flows. We~~ also sell trade accounts receivable under aour securitization ~~program described below.~~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.

XPO Logistics Europe SA (“XPO Logistics Europe”), one of our majority-owned subsidiaries, participates in a trade receivables securitization program co-arranged by 3 European banks (the “Purchasers”). Under the program, a wholly-owned bankruptcy-remote special purpose entity of XPO Logistics Europe sells trade receivables that

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originate with wholly-owned subsidiaries of XPO Logistics Europe in the United Kingdom and France to unaffiliated entities managed by the Purchasers. The special purpose entity is a variable interest entity and is consolidated by XPO based on our control of the entity’s activities.

We account for transfers under our securitization and factoring arrangements as sales because we sell full title and ownership in the underlying receivables and control of the receivables is considered transferred. For these transfers, the receivables are removed from our Condensed Consolidated Balance Sheets at the date of transfer. In the securitization and factoring arrangements, our continuing involvement is limited to servicing the receivables. The fair value of any servicing assets and liabilities is immaterial. Our trade receivables securitization program permits us to borrow, on an unsecured basis, cash collected in a servicing capacity on previously sold receivables, which we report within short-term debt on our Condensed Consolidated Balance Sheets. We had 0 such borrowings outstanding as of March 31, 2021 and had borrowings of €41 million ($50 million) as of December 31, 2020. See Note 7—Debt for additional information on these borrowings.

The maximum amount of net cash proceeds available at any one time under ~~the~~our securitization program, inclusive of any unsecured borrowings, is ~~€400~~€200 million (approximately ~~$469~~$221 million as of March 31, ~~2021)~~2022). As of March 31, ~~2021, €82~~2022, €1 million (approximately ~~$96~~$1 million) was available ~~to us,~~under the program, subject to having sufficient receivables available to sell and with consideration to ~~the Purchasers.~~amounts previously purchased. The weighted average interest rate was ~~0.58%~~0.53% as of March 31, ~~2021.~~2022. Charges for commitment fees, which are based on a percentage of available amounts, and charges for administrative fees were not material to our results of operations for the three months ended March 31, ~~2021~~2022 and ~~2020.~~2021.

Information related to the trade receivables sold was as follows:


		Three Months Ended March 31,						Three Months Ended March 31,
(In millions)	(In millions)		2021		2020		(In millions)		2022		2021 (1)
Securitization programs	Securitization programs						Securitization programs
Receivables sold in period	Receivables sold in period		$	775	$	691	Receivables sold in period		$	447	$	347
Cash consideration	Cash consideration		775		691		Cash consideration		447		347

Factoring programs	Factoring programs						Factoring programs
Receivables sold in period	Receivables sold in period		$	116	$	264	Receivables sold in period		27		16
Cash consideration	Cash consideration		116		263		Cash consideration		27		16

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

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 levels of inputs used to measure fair value are:

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

•Level 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—Valuations based on inputs that are unobservable, generally utilizing pricing models or other valuation techniques that reflect management’s judgment and estimates.

We base our fair value estimates on market assumptions and available information. The carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and current maturities of long-term debt approximated their fair values as of March 31, ~~2021~~2022 and December 31, ~~2020~~2021 due to their short-term nature and/or being receivable or payable on demand. The Level 1 cash equivalents include money market funds valued using quoted prices in active ~~markets. For information on~~markets and a cash deposit for the ~~fair value hierarchy of our~~securitization program. Our derivative instruments ~~see Note 6—Derivative Instruments~~are classified as Level 2 and ~~for~~are valued using inputs other than quoted prices, such as foreign exchange rates and yield curves. For information on financial liabilities, see Note 7—Debt.

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The fair value hierarchy of cash equivalents was as follows:

(In millions) Carrying Value Fair Value Level 1
March 31, 2021 $ 249 $ 249 $ 249
December 31, 2020 1,738 1,738 1,738


(In millions)	Carrying Value		Fair Value		Level 1
March 31, 2022	$	931	$	931	$	931
December 31, 2021	181		181		181

~~The decrease in~~Cash equivalents at March 31, 2022 include the cash ~~equivalents~~proceeds from ~~December 31, 2020 was primarily due to~~ the ~~redemption~~sale of our ~~senior notes due 2022 and the repayment of borrowings under our revolving loan credit agreement (the “ABL Facility”).~~intermodal operation in March 2022. For further information, ~~See~~see Note ~~7—Debt for further information.~~

3—Divestiture.

Adoption of New Accounting Standard

In ~~December 2019,~~November 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ~~2019-12, “Income Taxes~~2021-10, “Government Assistance (Topic ~~740)~~832): ~~Simplifying the Accounting for Income Taxes.~~Disclosures by Business Entities about Government Assistance.” The ASU ~~is intended to simplify~~increases the transparency surrounding government assistance by requiring annual disclosure of (i) the types of assistance received, (ii) an entity’s accounting for ~~income taxes by removing certain exceptions to~~ the ~~general principles in Topic 740. The ASU also clarifies~~assistance and ~~amends existing guidance to enhance consistency and comparability among reporting entities.~~(iii) the effect of the assistance on the entity’s financial statements. We adopted this standard on January 1, ~~2021~~2022, on a prospective basis. The adoption did not have a material ~~effect~~impact on our ~~consolidated~~ financial ~~statements.~~statement disclosures.

Accounting Pronouncement Issued but Not Yet Effective

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

2. ~~Acquisition~~Discontinued Operations

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


	Three Months Ended March 31,
(In millions)		2021
Revenue		$	1,818
Direct operating expense (exclusive of depreciation and amortization)		1,514
Sales, general and administrative expense		150
Depreciation and amortization expense		73
Transaction and other operating costs		17
Operating income		64
Other income		(11)
Interest expense		4
Income from discontinued operations before income tax provision		71
Income tax provision		16
Net income from discontinued operations, net of taxes		55
Net income from discontinued operations attributable to noncontrolling interests		(3)
Net income from discontinued operations attributable to GXO		$	52

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

In ~~January 2021,~~accordance with a separation and distribution agreement, GXO has agreed to indemnify XPO for payments XPO makes with respect to certain self-insurance matters that were incurred by GXO prior to the spin-off and remain obligations of XPO. The receivable and reserve for these matters was approximately $20 million each as of March 31, 2022 and approximately $23 million and $21 million, respectively, as of December 31, 2021.

3. Divestiture

In March 2022, we sold our ~~XPO Logistics Europe subsidiary acquired the majority of Kuehne + Nagel’s contract logistics operations in the United Kingdom and Ireland, which generated annual revenues in 2020~~North American intermodal operation for cash proceeds of approximately ~~£450~~$705 million, ~~($585 million).~~net of cash disposed and subject to a customary post-closing purchase price adjustment. We recorded a pre-tax gain on the sale of $450 million, net of transaction costs, for the three months ended March 31, 2022. We agreed to provide certain specified customary transition services for a period not exceeding 12 months from the sale. The ~~operations, which provide a range~~intermodal operation generated revenue of ~~logistics services, including inbound~~$1.2 billion and ~~outbound distribution, reverse logistics management and inventory management, are~~operating income of $53 million for the year ended December 31, 2021. The intermodal operation was included in our ~~Logistics~~Brokerage and Other Services segment ~~from~~through the ~~acquisition date. Pro forma results~~date of ~~operations for this acquisition have not been presented as it is not material to~~ the ~~condensed consolidated results of operations.~~sale.

3.4. Segment Reporting

We are organized into 2 reportable segments: ~~Transportation~~(i) North American LTL and ~~Logistics. We evaluate our performance in large part based on the various financial measures of our 2 reporting segments.~~(ii) Brokerage and Other Services.

In our ~~Transportation~~asset-based North American LTL segment, we provide ~~multiple services to facilitate the movement of raw materials, parts~~our customers with geographic density and ~~finished goods. We accomplish this by using our proprietary technology, third-party independent carriers~~day-definite regional, inter-regional and ~~our transportation assets and service centers.~~transcontinental LTL freight services. Our ~~transportation~~ services include ~~LTL, truck brokerage services~~cross-border U.S. freight movements to and ~~other transportation services.~~from Mexico and Canada, as well as intra-Canada service.

In our ~~Logistics~~asset-light Brokerage and Other Services segment, shippers create demand for our technology-enabled services and we place their freight with qualified independent carriers, pricing the transactions on either a contract or a spot basis. Our truck brokerage business is the largest component of the segment, which also includes three complementary brokered services: managed transportation, last mile logistics for heavy goods and global forwarding. Our European business, which we ~~sometimes refer~~plan to ~~as supply chain, we provide~~divest through either a wide range of services differentiated by our proprietary technology and our ability to customize solutions for individual customers. Our services include value-added warehousing and distribution, e-commerce and omnichannel fulfillment, cold-chain logistics, packaging and labeling, factory support, aftermarket support, inventory management, order personalization and supply chain optimization, such as product flow management. In addition, our Logistics segment provides reverse logistics, whichsale or a listing on a European stock exchange, is also ~~called returns management.~~currently reported within this segment.

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

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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 reporting 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 income from continuing operations before debt extinguishment loss, interest expense, income tax, depreciation and amortization expense, gain on sale of business, transaction and integration costs, restructuring costs and other adjustments.

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Selected financial data for our segments is as follows:

(In millions) Transportation Logistics Corporate Eliminations/Other Total
Three months ended March 31, 2021
Revenue $ 2,989 $ 1,818 $ 0 $ (33) $ 4,774
Operating income (loss) (1)
209 68 (75) 0 202
Depreciation and amortization 115 74 3 0 192
Three months ended March 31, 2020
Revenue $ 2,459 $ 1,437 $ 0 $ (32) $ 3,864
Operating income (loss) (2)
120 38 (77) 0 81
Depreciation and amortization 110 69 4 0 183


	Three Months Ended March 31,
(in millions)		2022		2021
Revenue
North American LTL		$	1,105	$	962
Brokerage and Other Services		2,432		2,071
Eliminations		(64)		(44)
Total		$	3,473	$	2,989

Adjusted EBITDA
North American LTL		$	205	$	214
Brokerage and Other Services		164		125
Corporate		(48)		(60)
Total adjusted EBITDA		321		279
Less:
Debt extinguishment loss		—		8
Interest expense		37		65
Income tax provision		113		19
Depreciation and amortization expense		116		119
Unrealized (gain) loss on foreign currency option and forward contracts		—		(1)
Gain on sale of business		(450)		—

Transaction and integration costs (1)		10		5
Restructuring costs (2)		6		1
Income from continuing operations		$	489	$	63

Depreciation and amortization expense
North American LTL		$	55	$	55
Brokerage and Other Services		60		60
Corporate		1		4
Total		$	116	$	119

(1)~~Consolidated operating income~~ Transaction and integration costs for the three months ended March 31, 2022 and 2021 ~~includes $18 million~~are primarily comprised of ~~transaction~~third-party professional fees related to strategic initiatives, including the spin-offs and other disposal activities, as well as retention awards paid to certain employees. Transaction and integration costs and $4 million of restructuring expense. $1 million of the transaction and integration costs relate to our Transportation segment, $5 million relate to our Logistics segment and $12 million relate to Corporate.

~~(2)Consolidated operating income~~ for the three months ended March 31, ~~2020 includes $44~~2022 and 2021 include $2 million ~~of transaction~~ and ~~integration costs and $3~~$1 million, ~~of restructuring expense. $7 million of the transaction and integration costs relate to our Transportation segment, $7 million relate to our Logistics segment and $30 million relate to Corporate.~~

The transaction and integration costs for the first three months of 2021 are primarily related to the planned spin-off of the Logistics segment and our acquisition of the Kuehne + Nagel business. The transaction and integration costs for the first three months of 2020 are primarilyrespectively, related to our ~~previously announced exploration of strategic alternatives that was terminated in March 2020. For~~Brokerage and Other Services segment and $8 million and $4 million, respectively, related to Corporate.

(2) See Note 6— Restructuring Charges for further information on our restructuring actions, see Note 5—Restructuring Charges. We also incurred in the first three months of 2021 and 2020, net incremental and direct costs as a result of the COVID-19 pandemic, including costs for personal protective equipment, site cleanings and enhanced employee benefits, such as appreciation pay.actions.

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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 March 31, 2022
(In millions)	North American LTL		Brokerage and Other Services		Eliminations		Total
Revenue
United States	$	1,082	$	1,519	$	(64)	$	2,537
North America (excluding United States)	23		101		—		124
France	—		352		—		352
United Kingdom	—		225		—		225
Europe (excluding France and United Kingdom)	—		210		—		210
Other	—		25		—		25
Total	$	1,105	$	2,432	$	(64)	$	3,473


	Three Months Ended March 31, 2021
(In millions)	North American LTL		Brokerage and Other Services		Eliminations		Total
Revenue
United States	$	940	$	1,221	$	(44)	$	2,117
North America (excluding United States)	22		69		—		91
France	—		342		—		342
United Kingdom	—		209		—		209
Europe (excluding France and United Kingdom)	—		213		—		213
Other	—		17		—		17
Total	$	962	$	2,071	$	(44)	$	2,989

912

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Three Months Ended March 31, 2021
(In millions) Transportation Logistics Eliminations Total
Revenue
United States $ 2,118 $ 584 $ (9) $ 2,693
North America (excluding United States) 90 14 0 104
France 342 180 (3) 519
United Kingdom 209 552 (15) 746
Europe (excluding France and United Kingdom) 213 465 (5) 673
Other 17 23 (1) 39
Total $ 2,989 $ 1,818 $ (33) $ 4,774

Three Months Ended March 31, 2020
(In millions) Transportation Logistics Eliminations Total
Revenue
United States $ 1,702 $ 536 $ (9) $ 2,229
North America (excluding United States) 71 14 0 85
France 311 150 (3) 458
United Kingdom 182 329 (16) 495
Europe (excluding France and United Kingdom) 188 386 (3) 571
Other 5 22 (1) 26
Total $ 2,459 $ 1,437 $ (32) $ 3,864

Our revenue disaggregated by service offering was as follows:

Three Months Ended March 31,
(In millions) 2021 2020
Transportation segment:
LTL $ 1,221 $ 1,135
Freight brokerage and truckload 1,384 1,023
Last mile (1)
246 201
Managed transportation 97 83
Global forwarding 100 61
Transportation eliminations (59) (44)
Total Transportation segment revenue 2,989 2,459
Total Logistics segment revenue 1,818 1,437
Intersegment eliminations (33) (32)
Total revenue $ 4,774 $ 3,864


	Three Months Ended March 31,
(In millions)		2022		2021
North America
LTL (1)		$	1,133	$	976
Truck brokerage		824		596
Last mile		246		246
Other brokerage (2)		551		453
Total North America		2,754		2,271
Europe		787		763
Eliminations		(68)		(45)
Total		$	3,473	$	2,989

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

(2) Other brokerage includes intermodal, expedite, freight forwarding and managed transportation services. Freight forwarding includes operations conducted outside of North America but managed by our North American ~~last mile operations.~~entities. In March 2022, we sold our intermodal operation. For further information, see Note 3—Divestiture.

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 March 31, ~~2021,~~2022, the fixed consideration component of our remaining performance obligation was approximately ~~$2.1 billion,~~$120 million, and we expect ~~to recognize~~ approximately ~~66%~~89% of that amount to be recognized over the next three years and the

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remainder thereafter. The remaining performance obligation at March 31, 2021 includes contracts related to the Kuehne + Nagel acquisition. The majority of the remaining performance obligation relates to our Logistics reportable segment. We estimate remaining performance obligations at a point in time and actual amounts may differ from these estimates due to changes in foreign currency exchange rates and contract revisions or terminations.

5.6. Restructuring Charges

We engage in restructuring actions as part of our ongoing efforts to best use our resources and ~~infrastructure.~~infrastructure, including actions in connection with spin-offs and other disposal activities. These actions generally include severance and facility-related costs, including impairment of ~~right-of-use~~operating lease assets, as well as contract termination costs and are intended to improve our efficiency and profitability.

~~We recorded restructuring charges~~

Table of ~~$4 million and $3 million in Sales, general and administrative expense on our Condensed Consolidated Statements of Income for the first three months of 2021 and 2020, respectively.~~Contents

Our restructuring-related activity was as follows:


				Three Months Ended March 31, 2021											Three Months Ended March 31, 2022
(In millions)	(In millions)	Reserve Balance as of December 31, 2020		Charges Incurred		Payments		Foreign Exchange and Other		Reserve Balance as of March 31, 2021		(In millions)	Reserve Balance as of December 31, 2021		Charges Incurred		Payments		Reserve Balance as of March 31, 2022
Severance	Severance											Severance
Transportation		$	7	$	1	$	(4)	$	0	$	4
Logistics		19		0		(4)		(1)		14

Brokerage and Other Services												Brokerage and Other Services	$	6	$	2	$	(3)	$	5
Corporate	Corporate	2		3		(1)		0		4		Corporate	7		1		(2)		6
Total severance	Total severance	28		4		(9)		(1)		22		Total severance	13		3		(5)		11
Facilities	Facilities											Facilities
Transportation		5		0		0		0		5

Brokerage and Other Services												Brokerage and Other Services	2		—		—		2
Total facilities	Total facilities	5		0		0		0		5		Total facilities	2		—		—		2
Contract termination												Contract termination
North American LTL												North American LTL	—		3		(3)		—
Total contract termination												Total contract termination	—		3		(3)		—
Total	Total	$	33	$	4	$	(9)	$	(1)	$	27	Total	$	15	$	6	$	(8)	$	13

We expect the majority of the cash outlays related to the charges incurred in the first quarter of ~~2021~~2022 will be complete within ~~twelve~~12 months.

~~6. Derivative Instruments~~

In the normal course of business, we are exposed to risks arising from business operations and economic factors, including fluctuations in interest rates and foreign currencies. We use derivative instruments to manage the volatility related to these exposures. The objective of these derivative instruments is to reduce fluctuations in our earnings and cash flows associated with changes in foreign currency exchange rates and interest rates. These financial instruments are not used for trading or other speculative purposes. Historically, we have not incurred, and do not expect to incur in the future, any losses as a result of counterparty default.

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

March 31, 2021
Derivative Assets Derivative Liabilities
(In millions) Notional Amount Balance Sheet Caption Fair Value Balance Sheet Caption Fair Value
Derivatives designated as hedges
Cross-currency swap agreements $ 450 Other current assets $ 0 Other current liabilities $ (25)
Cross-currency swap agreements 730 Other long-term assets 0 Other long-term liabilities (29)
Interest rate swaps 2,003 Other current assets 0 Other current liabilities 0
Derivatives not designated as hedges
Foreign currency option contracts 178 Other current assets 3 Other current liabilities 0
Total $ 3 $ (54)

December 31, 2020
Derivative Assets Derivative Liabilities
(In millions) Notional Amount Balance Sheet Caption Fair Value Balance Sheet Caption Fair Value
Derivatives designated as hedges
Cross-currency swap agreements $ 450 Other current assets $ 0 Other current liabilities $ (44)
Cross-currency swap agreements 740 Other long-term assets 0 Other long-term liabilities (65)
Interest rate swaps 2,003 Other current assets 0 Other current liabilities (4)
Total $ 0 $ (113)

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

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

Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss) on Derivatives Amount of Gain Reclassified from AOCI into Net Income Amount of Gain Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing)
Three Months Ended March 31,
(In millions) 2021 2020 2021 2020 2021 2020
Derivatives designated as cash flow hedges
Cross-currency swap agreements $ 6 $ 8 $ 6 $ 3 $ 0 $ 0
Interest rate swaps 0 (5) 0 0 0 0
Derivatives designated as net investment hedges
Cross-currency swap agreements 48 38 0 0 3 4
Total $ 54 $ 41 $ 6 $ 3 $ 3 $ 4

The pre-tax gain recognized in earnings for foreign currency option and forward contracts not designated as hedging instruments were gains of $1 million and $4 million for the three months ended March 31, 2021 and 2020, respectively. These amounts are recorded in Foreign currency gain on our Condensed Consolidated Statements of Income.

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~~Cross-Currency Swap Agreements~~

We enter into cross-currency swap agreements to manage the foreign currency exchange risk related to our international operations by effectively converting our fixed-rate USD-denominated debt, including the associated interest payments, to fixed-rate, euro (“EUR”)-denominated debt. The risk management objective of these transactions is to manage foreign currency risk relating to net investments in subsidiaries denominated in foreign currencies and reduce the variability in the functional currency equivalent cash flows of this debt.

During the term of the swap contracts, we will receive interest, either on a quarterly or semi-annual basis, from the counterparties based on USD fixed interest rates, and we will pay interest, also on a quarterly or semi-annual basis, to the counterparties based on EUR fixed interest rates. At maturity, we will repay the original principal amount in EUR and receive the principal amount in USD. These agreements expire at various dates through 2024.

We designated these cross-currency swaps as qualifying hedging instruments and account for them as net investment hedges. We apply the simplified method of assessing the effectiveness of our net investment hedging relationships. Under this method, for each reporting period, the change in the fair value of the cross-currency swaps is initially recognized in Accumulated other comprehensive income (“AOCI”). The change in the fair value due to foreign exchange remains in AOCI and the initial component excluded from effectiveness testing will initially remain in AOCI and then will be reclassified from AOCI to Interest expense each period in a systematic manner. For net investment hedges that were de-designated prior to their maturity, the amounts in AOCI will remain in AOCI until the subsidiary is sold or substantially liquidated. Cash flows related to the periodic exchange of interest payments for these net investment hedges are included in Operating activities on our Condensed Consolidated Statements of Cash Flows.

We also enter into cross-currency swap agreements to manage the related foreign currency exposure from intercompany loans. We designated these cross-currency swaps as qualifying hedging instruments and account for them as cash flow hedges. Gains and losses resulting from the change in the fair value of the cross-currency swaps are initially recognized in AOCI and reclassified to Foreign currency gain to offset the foreign exchange impact in earnings created by the intercompany loans. Cash flows related to these cash flow hedges are included in Operating activities on our Condensed Consolidated Statements of Cash Flows.

~~Interest Rate Hedging~~

We execute short-term interest rate swaps to mitigate variability in forecasted interest payments on our Senior Secured Term Loan Credit Agreement (the “Term Loan Credit Agreement”). The interest rate swaps convert floating-rate interest payments into fixed rate interest payments. We designated the interest rate swaps as qualifying hedging instruments and account for these derivatives as cash flow hedges. The interest rate swaps mature on various dates through 2021.

We record gains and losses resulting from fair value adjustments to the designated portion of interest rate swaps in AOCI and reclassify them to Interest expense on the dates that interest payments accrue. Cash flows related to the interest rate swaps are included in Operating activities on our Condensed Consolidated Statements of Cash Flows.

~~Foreign Currency Option and Forward Contracts~~

We use foreign currency option contracts to mitigate the risk of a reduction in the value of earnings from our operations that use the EUR or the British pound sterling as their functional currency. Additionally, we use foreign currency forward contracts to mitigate exposure from intercompany loans that are not designated as permanent and can create volatility in earnings. The foreign currency contracts (both option and forward contracts) were not designated as qualifying hedging instruments as of March 31, 2021. The contracts are used to manage our exposure to foreign currency exchange rate fluctuations and are not speculative. The contracts generally expire in 12 months or less. Gains or losses on the contracts are recorded in Foreign currency gain on our Condensed Consolidated Statements of Income. Cash flows related to the foreign currency contracts are included in Investing activities on our Condensed Consolidated Statements of Cash Flows, consistent with the nature and purpose for which these derivatives were acquired.

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7. Debt


		March 31, 2021				December 31, 2020					March 31, 2022				December 31, 2021
(In millions)	(In millions)	Principal Balance		Carrying Value		Principal Balance		Carrying Value		(In millions)	Principal Balance		Carrying Value		Principal Balance		Carrying Value
ABL facility		$	0	$	0	$	200	$	200

Term loan facilities	Term loan facilities	2,003		1,971		2,003		1,974		Term loan facilities	$	2,003	$	1,979	$	2,003	$	1,977
6.50% Senior notes due 2022		0		0		1,200		1,195
6.125% Senior notes due 2023		535		532		535		531
6.75% Senior notes due 2024		1,000		990		1,000		989

6.25% Senior notes due 2025	6.25% Senior notes due 2025	1,150		1,139		1,150		1,138		6.25% Senior notes due 2025	1,150		1,141		1,150		1,141
6.70% Senior debentures due 2034	6.70% Senior debentures due 2034	300		211		300		210		6.70% Senior debentures due 2034	300		215		300		214
Borrowings related to securitization program		0		0		50		50

Finance leases, asset financing and other	Finance leases, asset financing and other	407		407		420		420		Finance leases, asset financing and other	224		224		240		240
Total debt	Total debt	5,395		5,250		6,858		6,707		Total debt	3,677		3,559		3,693		3,572
Short-term borrowings and current maturities of long-term debt	Short-term borrowings and current maturities of long-term debt	88		88		1,343		1,338		Short-term borrowings and current maturities of long-term debt	682		682		58		58
Long-term debt	Long-term debt	$	5,307	$	5,162	$	5,515	$	5,369	Long-term debt	$	2,995	$	2,877	$	3,635	$	3,514

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

(In millions) Fair Value Level 1 Level 2
March 31, 2021 $ 5,590 $ 3,190 $ 2,400
December 31, 2020 7,094 4,431 2,663


(In millions)	Fair Value		Level 1		Level 2
March 31, 2022	$	3,717	$	1,500	$	2,217
December 31, 2021	3,811		1,571		2,240

We valued Level 1 debt using quoted prices in active markets. We valued Level 2 debt using bid evaluation pricing models or quoted prices of securities with similar characteristics. The fair value of the asset financing arrangements approximates carrying value as the debt is primarily issued at a floating rate, the debt may be prepaid at any time at par without penalty, and the remaining life of the debt is short-term in nature.

ABL Facility

As of March 31, ~~2021,~~2022, our borrowing base was ~~$1.1~~$1.0 billion and our availability under our ~~ABL Facility~~revolving loan credit agreement (the “ABL Facility”) was ~~$1.084 billion~~$996 million after considering outstanding letters of credit ~~on the ABL Facility~~ of ~~$16~~$4 million. As of March 31, ~~2021,~~2022, we were in compliance with the ABL Facility’s financial covenants.

~~Secured Debt~~

Under our Senior Secured Term Loan Credit Agreement, we have a $200 million uncommitted secured evergreen letter of credit facility, under which we have issued $198 million in aggregate face amount of letters of credit as of March 31, 2021. As of March 31, 2021, we were in compliance with the financial covenants in the Senior Secured Term Loan Agreement.

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Letters of Credit Facility

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

Term Loan Facilities

In the first quarter of 2021, we amended ~~the~~our Senior Secured Term Loan Credit Agreement ~~to consolidate our tranches and lower the interest rate. The applicable terms of the Term~~(the “Term Loan Credit ~~Agreement are as follows:~~

December 31, 2020
(In millions) March 31, 2021 First Tranche Second Tranche
Principal balance $ 2,003 $ 1,503 $ 500
Interest spread:
Base rate loans 0.75 % 1.00 % 1.50 %
LIBOR loans 1.75 % 2.00 % 2.50 %
Maturity date February 2025 February 2025 February 2025

WeAgreement”) and recorded a debt extinguishment loss of $3 ~~million in the first quarter of 2021 due to this amendment.~~

million. The interest rate on our term loan facility was ~~1.86%~~1.99% as of March 31, ~~2021.~~2022.

Senior Notes Due 2025

In March 2022, we provided notice to redeem $630 million of the $1.15 billion principal amount of our outstanding 6.25% senior notes due 2025. See Note 11—Subsequent Events for more information.

Senior Notes Due 2022

In January 2021, we redeemed our outstanding 6.50% senior notes due 2022. The redemption price for the notes was ~~100.0%~~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 ~~our~~the first quarter ~~2021 results~~ of ~~operations~~2021 due to this redemption.

8. Stockholders’ Equity

Series A Convertible Perpetual Preferred Stock and Warrants

~~In 2011, we issued 75,000 shares~~Commencing in the fourth quarter of the Series A Preferred Stock with an initial liquidation preference of $1,000 per share which are convertible into shares of our common stock at a conversion price of $7.00 per common share (subject to customary anti-dilution adjustments). We also issued warrants exercisable for shares of our common stock at an initial exercise price of $7.00 per common share (subject to customary anti-dilution adjustments). Our preferred stock pays quarterly cash dividends equal to the greater of: (i) the “as-converted” dividends on our underlying common stock for the relevant quarter and (ii) 4% of the then-applicable liquidation preference per annum.

~~In December~~ 2020, ~~some~~ holders of our convertible preferred stock and warrants exchanged their holdings for our common stock or a combination of our common stock ~~based on the stated conversion price,~~ and ~~a lump-sum payment that represents an approximation~~cash. These exchanges were intended to simplify our equity capital structure, including in contemplation of the ~~net present value of the future dividends payable on the preferred stock. Additionally, some holders~~spin-off of our warrants exchanged (or committed to exchange subject to the satisfaction of certain customary closing conditions) their holdings, including Jacobs Private Equity, LLC, an entity controlled by the Company’s chairman and chief executive officer, for a number of shares of our common stock equal to the number of shares of common stock that such holder would be entitled to receive upon an exercise of the warrants less the number of shares of common stock that have an approximate value equal to the exercise price of the warrants. With respect to the preferred stock, through December 31, 2020, 69,445 shares were exchanged, and we issued 9.9 million shares of common stock and paid $22 million of cash. With respect to the warrants, through December 31, 2020, 0.3 million warrants were exchanged, and we issued 0.3 million shares of common stock.Logistics segment. In the first quarter of 2021, 975 preferred shares were exchanged, and we issued 0.1 million shares of common ~~stock. With respect to the warrants, in the first quarter of 2021,~~stock and 9.8 million warrants were exchanged, and we issued 9.2 million shares of common stock. ~~These exchanges are intended to simplify our equity capital structure, including in contemplation~~The warrants exchanged included holdings of our previously announced plan to pursue a spin-off of our Logistics segment. As of March 31, 2021, 40 shares of preferred stock remain outstanding, which are convertible into 5,714 shares of our common stock,Jacobs Private Equity, LLC, an entity controlled by the Company’s chairman and ~~0 warrants are outstanding.~~

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chief executive officer.

Share Repurchases

In February 2019, our Board of Directors authorized ~~additional~~ 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.

InThere have been no share repurchases since the first quarter of 2020, we purchased and retired 2 million shares at an aggregate value of $114 million. The share purchases were funded by our available cash and proceeds from our 2019 debt offerings. There were 0 share purchases in the first quarter of 2021.2020. Our remaining share repurchase authorization was $503 million as of March 31, ~~2021.~~2022.

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9. Earnings per Share

We compute basic and diluted earnings per share using the two-class method, which allocates earnings to participating securities. The participating securities in 2020 consisted of our Series A Convertible Perpetual Preferred Stock. The undistributed earnings are allocated between common shares and participating securities as if all earnings had been distributed during the period. Losses are not allocated to the preferred shares. As discussed in Note 8—Stockholders’ Equity, we recorded a preferred stock conversion charge in December 2020 in connection with the conversion of our Series A preferred stock.

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


		Three Months Ended March 31,							Three Months Ended March 31,
(In millions, except per share data)	(In millions, except per share data)		2021		2020		(In millions, except per share data)			2022		2021
Basic earnings per common share
Net income attributable to XPO			$	115	$	23
Series A preferred stock dividends			0		(1)
Non-cash allocation of undistributed earnings			0		(1)
Basic earnings (loss) per common share							Basic earnings (loss) per common share

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

								Income (loss) from discontinued operations, net of taxes		$	(1)	$	55
								Net income from discontinued operations attributable to noncontrolling interests		—		(3)
								Net income (loss) from discontinued operations attributable to common shares		$	(1)	$	52

								Net income from continuing operations attributable to common shares, basic		$	489	$	63
								Net income (loss) from discontinued operations attributable to common shares, basic		(1)		52
Net income attributable to common shares, basic	Net income attributable to common shares, basic		$	115	$	21	Net income attributable to common shares, basic			$	488	$	115

Basic weighted-average common shares	Basic weighted-average common shares		106		92		Basic weighted-average common shares			115		106

Basic earnings from continuing operations per share							Basic earnings from continuing operations per share			$	4.26	$	0.59
Basic earnings (loss) from discontinued operations per share							Basic earnings (loss) from discontinued operations per share			(0.01)		0.49
Basic earnings per share	Basic earnings per share		$	1.08	$	0.23	Basic earnings per share			$	4.25	$	1.08

Diluted earnings per common share
Diluted earnings (loss) per common share							Diluted earnings (loss) per common share
								Net income from continuing operations attributable to common shares, diluted		$	489	$	63
								Net income (loss) from discontinued operations attributable to common shares, diluted		(1)		52
Net income attributable to common shares, diluted	Net income attributable to common shares, diluted		$	115	$	21	Net income attributable to common shares, diluted			$	488	$	115

Basic weighted-average common shares	Basic weighted-average common shares		106		92		Basic weighted-average common shares			115		106
Dilutive effect of stock-based awards and warrants			6		11

								Dilutive effect of stock-based awards and warrants		1		6
Diluted weighted-average common shares	Diluted weighted-average common shares		112		103		Diluted weighted-average common shares			116		112

Diluted earnings from continuing operations per share							Diluted earnings from continuing operations per share			$	4.23	$	0.56
Diluted earnings (loss) from discontinued operations per share							Diluted earnings (loss) from discontinued operations per share			(0.01)		0.46
Diluted earnings per share	Diluted earnings per share		$	1.02	$	0.20	Diluted earnings per share			$	4.22	$	1.02

Potential common shares excluded			0		10

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

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10. ~~Legal~~Commitments and ~~Regulatory Matters~~Contingencies

We are involved, and will continue to be involved, in numerous proceedings arising out of the conduct of our business. These proceedings ~~may~~ include claims for property damage or personal injury incurred in connection with the transportation of freight, ~~claims regarding anti-competitive practices,~~commercial disputes, insurance coverage disputes, and employment-related claims, including claims involving asserted breaches of employee restrictive covenants. These matters also include ~~numerous putative~~several collective and class action ~~multi-plaintiff and individual lawsuits, and administrative proceedings~~cases involving claims that our owner-operators or contract carriers should be treated as employees, rather than independent contractors (“misclassification claims”)~~. These lawsuits~~ and ~~proceedings~~ may seek substantial monetary damages (including claims for unpaid wages, overtime, failure to provide meal and rest breaks, unreimbursed business expenses, penalties and other items), injunctive relief, or both.

We establish accruals for specific legal proceedings when it is considered probable that a loss has been incurred and the amount of the loss can be reasonably estimated. We review and adjust accruals for loss contingencies quarterly and as additional information becomes available. If a loss is not both probable and reasonably estimable, or if an exposure to loss exists in excess of the amount accrued, we assess whether there is at least a reasonable possibility

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that a loss, or additional loss, may have been incurred. If there is a reasonable possibility that a loss, or additional loss, may have been incurred, we disclose the estimate of the possible loss or range of loss if it is material and an estimate can be made, or disclose that such an estimate cannot be made. The determination as to whether a loss can reasonably be considered to be possible or probable is based on our assessment, together with legal counsel, regarding the ultimate outcome of the matter.

We believe that we have adequately accrued for the potential impact of loss contingencies that are probable and reasonably estimable. We do not believe that the ultimate resolution of any matters to which we are presently a party will have a material adverse effect on 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 our financial condition, results of operations or cash flows. Legal costs incurred related to these matters are expensed as incurred.

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

Shareholder Litigation

On December 14, 2018, a putative class action captioned Labul v. XPO Logistics, Inc. et al., was filed in the U.S. District Court for the District of Connecticut against us and some of our current and former executives, alleging violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Section 20(a) of the Exchange Act, based on alleged material misstatements and omissions in our public filings with the U.S. Securities and Exchange Commission. On June 3, 2019, lead plaintiffs Local 817 IBT Pension Fund, Local 272 Labor-Management Pension Fund, and Local 282 Pension Trust Fund and Local 282 Welfare Trust Fund (together, the “Pension Funds”) filed a consolidated class action complaint. Defendants moved to dismiss the consolidated class action complaint on August 2, 2019. On November 4, 2019, the Court dismissed the consolidated class action complaint without prejudice to the filing of an amended complaint. The Pension Funds, on January 3, 2020, filed a first amended consolidated class action complaint against us and a current executive. Defendants moved to dismiss the first amended consolidated class action complaint on March 3, 2020. On March 19, 2021, the Court dismissed the first amended consolidated class action complaint with prejudice and closed the case. On April 29, 2021, the Pension Funds filed a notice of appeal, and the appellate process is ongoing.

Also, on May 13, 2019, Adriana Jez filed a purported shareholder derivative action captioned Jez v. Jacobs, et al., (the “Jez complaint”) in the U.S. District Court for the District of Delaware, alleging breaches of fiduciary duty, unjust enrichment, waste of corporate assets, and violations of the Exchange Act against some of our current and former directors and officers, with the company as a nominal defendant. The Jez complaint was later consolidated with similar derivative complaints filed by purported shareholders Erin Candler and Kevin Rose under the caption In re XPO Logistics, Inc. Derivative Litigation. On December 12, 2019, the Court ordered plaintiffs to designate an operative complaint or file an amended complaint within 45 days. On January 27, 2020, plaintiffs designated the Jez complaint as the operative complaint in the consolidated cases. Defendants moved to dismiss the operative complaint on February 26, 2020. Rather than file a brief in opposition, on March 27, 2020, plaintiffs moved for leave to file a further amended complaint and to stay briefing on defendants’ motions to dismiss. The Court granted plaintiffs’ motion on July 6, 2020. On April 14, 2021, the Court issued an order staying proceedings pending resolution of an appeal in the Labul action. Plaintiffs stipulated that they will dismiss the shareholder derivative action with prejudice if the Labul dismissal is affirmed on appeal.

We believe these suits are without merit and we intend to defend the company vigorously. We are unable at this time to determine the amount of the possible loss or range of loss, if any, that we may incur as a result of these matters.

Insurance Contribution Litigation

In April 2012, Allianz Global Risks US Insurance Company sued 18 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 that Allianz

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agreed to defend and indemnify on behalf of its insured, Daimler Trucks North America (“DTNA”). Defendants had insured Freightliner’s assets, which DTNA acquired in 1981. 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 of Appeals. In May 2019, the 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 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 exposure associated with Centron in the bench trial regarding allocation. As any losses that may arise in connection with the fronting policies issued by defendant insurers ACE, Westport, and General are not reasonably estimable at this time, no liability has been accrued in the accompanying interim consolidated financial statements for those potential exposures.

11. Subsequent ~~Event~~Events

~~On April 6, 2021,~~In March 2022, we provided notice to redeem $630 million (“Redeemed Notes”) of the ~~Company announced a buy-out offer to be followed by a squeeze-out~~$1.15 billion principal amount of our outstanding 6.25% senior notes due 2025. The redemption price for the ~~remaining 3%~~Redeemed Notes was 100% of ~~XPO Logistics Europe that it does not already own, at~~the principal amount plus a ~~price~~premium as defined in the indenture and accrued and unpaid interest. In April 2022, we completed the redemption of ~~€315 per share for 341,887 shares. It is expected that~~ the ~~total cash consideration to be paid in connection with this offer~~Redeemed Notes using available liquidity. The loss on debt extinguishment of approximately $26 million will be approximately €108 million (approximately $128 million). The offer will be subject to review by the Supervisory Board of XPO Logistics Europe, as well as regulatory bodies, and is expected to closereflected in the second quarter of ~~2021.~~2022 results of operations.

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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”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “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” 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 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 other filings with the Securities and Exchange Commission (the “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 will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations. The following discussion should be read in conjunction with the Company’s unaudited Condensed Consolidated Financial Statements and related notes thereto included elsewhere in this Quarterly Report, and with the audited consolidated financial statements and related notes thereto included in the ~~2020~~2021 Annual Report on 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 to the extent required by law.

Executive Summary

XPO Logistics, Inc., ~~a Delaware corporation,~~ together with its subsidiaries (“XPO,” or “we”), ~~provides cutting-edge~~is a leading provider of freight transportation services. We use our proprietary technology to move goods efficiently through our customers’ supply ~~chain solutions to~~chains, primarily by providing less-than-truckload (“LTL”) and truck brokerage services. These two core lines of business generated the ~~most successful companies in the world.~~

~~We have two reporting segments: Transportation and Logistics, each with robust service offerings, leadership positions and growth prospects. In 2020, approximately 62%~~majority of our 2021 revenue ~~came from Transportation,~~ and ~~the remaining 38% came from Logistics. Within~~operating income.

Our company has two reportable segments — (i) North American LTL and (ii) Brokerage and Other Services — and within each segment, we are ~~positioned~~a leading provider in vast, fragmented transportation sectors with growing penetration. As of March 31, 2022, we had approximately 42,000 employees and 731 locations in 20 countries serving approximately 50,000 multinational, national, regional and local customers. We believe that our substantial exposure to ~~capitalize on fast-growing areas of demand.~~secular industry growth trends, our first-mover advantage as an innovator and our blue-chip customer relationships are compelling competitive advantages.

~~In December 2020,~~2022 Strategic Plan

On March 8, 2022, we announced that our Board of Directors ~~unanimously~~ approved a plan to pursue athe strategic spin-off of ~~100%~~our tech-enabled brokered transportation platform in North America as a publicly traded company and to pursue two divestitures: the sale of our ~~Logistics segment as a separate~~North American intermodal operation and the sale or listing of our European business.

If the spin-off to XPO shareholders is completed, the transaction will result in two pure-play, publicly traded ~~company. We intend to structure~~companies with simplified business models and clearly delineated value propositions. The core business of the spin-off ~~as a distribution that~~will be our truck brokerage service, with complementary brokered services for managed transportation, last mile logistics and global forwarding. The remaining company will be an asset-based provider of LTL service in North America. The planned spin-off transaction, which is ~~generally~~intended to be tax-free to XPO and our shareholders for U.S. federal income tax purposes, ~~to XPO shareholders (except with respect to any cash received in lieu of fractional shares) and~~ would result in XPO shareholders owning stock in both companies.

~~If completed, the spin-off will result in separate public companies~~ In connection with clearly delineated service offerings. XPO will be a global provider of primarily less-than-truckload (“LTL”) transportation and truck brokerage services, and GXO Logistics, Inc. (“GXO”), the planned spin-off, will be the second largest contract logistics provider in the world. Both companies’ stocks are expected to trade on the New York Stock Exchange, and we plan to consider a dual listing on the London Stock Exchange for GXO in due course.

The transaction is currently expected to be completed in the second half of 2021, subject to various conditions, including the approval of XPO’s board of directors. There can be no assurance that the spin-off will occur or, if it does occur, of its terms or timing.

Separately, we acquired the majority of Kuehne + Nagel’s contract logistics operations in the United Kingdom and Ireland in January 2021. The operations, which include roughly 5,700 employees and provide a range of logistics

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~~services, including inbound and outbound distribution, reverse logistics management and inventory management, are included in our Logistics segment.~~

As of March 31, 2021, we had approximately 140,000 team members (comprised of approximately 108,000 full-time and part-time employees and 32,000 third-party, temporary workers), and 1,621 locations in 30 countries. Substantially all of our services operate under the single brand of XPO Logistics. We use our highly integrated network to help more than 50,000 customers operate their supply chains most efficiently.

Maintaining strong liquidity has been and will continue to be a top priority for XPO, and is consistent with our pursuit of investment-grade ratings for both XPO and GXO. As discussed in greater detail below, as of March 31, 2021, we had $1.7 billion of available liquidity, including $629 million of cash and cash equivalents.

~~Transportation Segment~~

Our Transportation segment facilitates the movement of raw materials, parts and finished goods. Our largest service offering within the Transportation segment is LTL, which contributed 43% of 2020 segment revenue. We are a top three provider of LTL services in North America, and we have one of the largest LTL networks in Western Europe.

Our other primary service offering within the Transportation segment is truck brokerage. We are the second largest brokerage provider globally and the third largest brokerage provider in North America. As of March 31, 2021, we had truck brokerage relationships with approximately 81,000 independent carriers representing over 1,000,000 trucks. The results of our truck brokerage operations are included as part of our freight brokerage services, which include additional, asset-light services for expedite, intermodal and drayage.

The owned capacity of our transportation model includes approximately 13,000 tractors and 35,000 trailers operated by professional drivers employed by XPO. This equipment is related primarily to our LTL operations in North America. Our fleet also supports our brokerage operations as needed.

~~Logistics Segment~~

Our Logistics segment, which we sometimes refer to as supply chain, provides order fulfillment and other distribution services differentiated by our ability to deliver technology-enabled, customized solutions. XPO is the second largest provider of contract logistics globally, with one of the largest outsourced e-fulfillment platforms.

Our logistics services include high-value-add warehousing and distribution, order fulfillment and personalization, cold-chain logistics, packaging and labeling, aftermarket support, inventory management and supply chain optimization. In addition, many of our e-commerce facilities manage merchandise returns, also known as reverse logistics. Depending on the merchandise being returned, this fast-growing area of logistics can include inspection, testing, repackaging, refurbishment, resale or product disposal, as well as refunding and warranty management. Reverse logistics services are mission-critical for companies with consumer end-markets, as shoppers increasingly “test-drive” the merchandise they buy online.

As of March 31, 2021, we operated 210 million square feet (20 million square meters) of logistics warehouse space worldwide. Approximately 99 million square feet (9 million square meters) was located in North America; 104 million square feet (10 million square meters) was located in Europe; and 7 million square feet (1 million square meters) was located in Asia.

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

~~Operating Philosophy~~

We believe that our rapid pace of innovation differentiates our services, enables us to better utilize our assets and makes the most of the talent within our organization. Our proprietary technology strengthens our relationships with customers by addressing their immediate supply chain needs in ways that accommodate their strategic plans, such as entry into new markets. Technology allows us to be a true partner to our customers by helping them meet their objectives for efficiency, safety, customer service and growth.

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

We currently expect to complete the spin-off in the fourth quarter of 2022, subject to various conditions, including the effectiveness of a Form 10 registration statement, receipt of a tax opinion from counsel, the refinancing of XPO’s debt on terms satisfactory to the XPO Board of Directors, and final approval by the XPO Board of Directors, among other requirements. There can be no assurance that any strategic transaction will occur, or if one or more do occur, of the terms or timing.

In March 2022, we sold our North American intermodal operation for cash proceeds of approximately $705 million, net of cash disposed and subject to a customary post-closing purchase price adjustment. We recorded a pre-tax gain on the sale of $450 million, net of transaction costs, for the three months ended March 31, 2022. We agreed to provide certain specified customary transition services for a period not exceeding 12 months from the sale. The intermodal operation was included in our Brokerage and Other Services segment through the date of the sale.

2021 Spin-Off of the Logistics Segment

During the three months ended March 31, 2022 and 2021, we incurred approximately $4 million and $13 million, respectively, of costs related to the GXO spin-off. For the three months ended March 31, 2021, $12 million of these costs are reflected within income from discontinued operations in our Condensed Consolidated Statements of Income.

North American Less-Than-Truckload Segment

XPO is the fourth largest provider of asset-based LTL services in North America — we have one of the industry’s largest networks of tractors, trailers and terminals, and approximately 8% share of the $51 billion LTL market as of December 31, 2021. We provide our customers with geographic density and day-definite regional, inter-regional and transcontinental LTL freight services. Our services include cross-border U.S. freight movements to and from Mexico and Canada, as well as intra-Canada service.

Our LTL business is one of the few truly national LTL providers in North America, with a historically high return on capital (“ROIC”) and robust free cash flow generation. Our LTL customer base is levered to the industrial economy, which we expect to be a growing opportunity for us as supply chain disruptions resolve and manufacturing scales up in North America. In addition to our competitive positioning, we benefit from favorable industry fundamentals of rational pricing and limited commoditization. We have relationships with approximately 25,000 LTL customers in North America, the majority of which are local accounts. For the trailing 12 months ended March 31, 2022, we delivered approximately 18 billion pounds of freight.

After the planned spin-off of our North American brokered transportation platform, our company will be the third largest pure-play LTL provider in North America. We expect our business to move forward with continued strong momentum from the numerous company-specific initiatives we have underway for network growth and efficiency. We are using a combination of operational tactics and investments in our capacity of tractors, trailers, doors and truck drivers, including our goal of adding 900 net new doors to our network by year-end 2023. Importantly, the plan levers XPO-specific competitive advantages, including our continued deployment of proprietary LTL technology, the expansion of our national driver training network, and increased production at our Company-owned trailer manufacturing facility in Arkansas.

We are making good progress in these areas, including the opening of three new LTL terminals from October 31, 2021 through March 31, 2022, one new terminal in April 2022 and one expected to open in May 2022. In January 2022, we added a second production line at our trailer manufacturing facility to double our output run-rate. We expect to graduate approximately 1,800 driver school trainees this year, which is twice the number of 2021 graduates, to counteract the industry-wide driver shortage.

Specific to our technology, we ~~concentrate~~believe that we have a significant opportunity to further improve the profitability of our ~~efforts~~LTL network through innovation, beyond the large gain in ~~four areas~~operating margin we have achieved to date. We use

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intelligent route-building to move LTL freight across North America, and proprietary visualization tools to help reduce the cost of pickups and deliveries. Our XPO Smart™ productivity tools are deployed in our LTL cross-dock operations. 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.

Brokerage and Other Services Segment

XPO is one of the largest truck brokers in North America. As of December 31, 2021, we had approximately 3% share of the $88 billion truck brokerage industry — which is a subset of the $400 billion total addressable opportunity of for-hire trucking in North America. Shippers create truckload demand and we place their freight with qualified independent carriers, pricing the transactions on either a contract or a spot basis. Our truck brokerage business has an agile model with a variable labor structure that ~~can create value~~generates a high ROIC and free cash flow conversion.

The key factors driving growth and margin expansion in our truck brokerage business are massive capacity, our cutting-edge XPO Connect® technology platform and favorable industry tailwinds. The demand for our shareholders and our customers, primarily by creating “smart” supply chains: our digital freight marketplace, automation and intelligent machines, dynamic data science, and visibility, particularly as it affects customer servicetruckload capacity in the e-commerce ~~supply chain.~~and omnichannel retail sectors continues to be robust. At the same time, more and more shippers are outsourcing to brokers, while increasingly preferring brokers like XPO that offer digital capabilities.

~~Environmental sustainability~~As of March 31, 2022, we had approximately 106,000 independent truckload carriers in our global brokerage network; approximately 88,000 of these carriers are in North America, representing more than one and a half million trucks. Our XPO Connect® brokerage platform is a ~~significant priority~~major differentiator for ~~us. In~~our business and, together with our pricing technology, we believe it can unlock incremental profitable growth well beyond our current levels. As of March 31, 2022, cumulative truck driver downloads of the ~~U.S.,~~mobile app for XPO ~~has been named a Top 75 Green Supply Chain Partner by~~ Connect~~Inbound Logistics~~® ~~for five consecutive years. In France, we have renewed our commitment to the CO2 Charter for another~~surpassed 700,000.

Our Brokerage and Other Services segment also includes three ~~years. In Spain,~~asset-light, brokered transportation services, all of which are complementary to our ~~sites meet Leadership in Energy~~truck brokerage business: managed transportation, last mile logistics for heavy goods and ~~Environmental Design (“LEED”) energy certification standards for 100% consumption of renewable energy. In the U.K., the Digital Distribution Warehouse~~global forwarding. Our European business, which we plan to divest through either a sale or a listing, is also currently reported within this segment.

Post-spin-off, we expect all of the ~~Future we created with Nestlé operates with environmentally friendly ammonia refrigeration systems, energy-saving lighting, air-source heat pumps for administration areas and rainwater harvesting.~~brokered transportation services to continue to lever the first-mover technology advantage the new company will inherit from XPO.

~~More broadly in~~From 2013 through 2021, our Logistics segment, a number of our facilities are ISO 14001-certified, which ensures environmental and other regulatory compliances. We monitor fuel emissions from forklifts, with protocols in place to take immediate corrective action if needed. Our packaging engineers ensure that the optimal carton size is used for each product slated for distribution, and when feasible, we purchase recycled packaging. As a byproduct of managing returned merchandise, we recycle millions of electronic components and batteries each year.

In our Transportation segment, we have made substantial investments in fuel-efficient tractors that use Environmental Protection Agency 2013-compliant and Greenhouse Gas 2014- compliant Selective Catalytic Reduction technology for our LTLtruck brokerage business in North ~~America.~~America generated a compound annual growth rate (“CAGR”) of 27.4% — three times the truck brokerage industry growth rate of 9.6%.

Technology and Corporate Sustainability

Proprietary technology is a major competitive advantage for us across our service lines. Our ~~LTL drivers operate from terminals that have energy-saving policies~~company has been investing in ~~place~~transportation automation and ~~are implementing a phased upgrade to LED lighting.~~

In Europe, our modern road fleet is 98% compliant with Euro V, EEV and Euro VI standards. We also own a large alternative-fuel road fleet that operates in France, the U.K., Spain and Portugal, includingdigitization for more than ~~250 natural gas vehicles. In Spain,~~a decade to innovate how goods move through supply chains. We believe that we ~~own government-approved mega-trucks~~are well-positioned to ~~transport freight~~satisfy customer demands for faster, more efficient supply chains with ~~fewer trips,~~greater visibility, while enhancing revenue and profitability.

Importantly, our ~~last mile operations~~technology also helps our Company and customers meet our respective environmental, social and governance (“ESG”) goals, such as a reduction in ~~Europe use electric vehicles for deliveries~~the carbon footprint of certain supply chains operations. For a detailed discussion of our philosophy relating to innovation and ESG matters, see the Executive Overview included in ~~certain urban areas, reducing those emissions to zero.~~our 2021 Annual Report on Form 10-K, as well as our current Sustainability Report at sustainability.xpo.com.

Impacts of COVID-19 and Other Notable External Conditions

As a ~~global~~leading provider of ~~supply chain solutions,~~freight transportation services, our business can be impacted to varying degrees by factors beyond our control. The ~~rapid escalation of~~ COVID-19 ~~into a~~ pandemic that emerged in 2020 affected, and ~~will~~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 ~~believe~~cannot predict how long these dynamics will last in the ~~COVID-19 pandemic and associated impacts on~~ economic ~~activity had an adverse effect on~~recovery, or whether future challenges, if any, will adversely affect our results of ~~operations and financial condition for~~operations. To date, the ~~three months ended March 31, 2021 and 2020, as discussed below.~~

Due to the evolving nature of the pandemic, it remains difficult to predict the extent of the impact on our industry generally and our business in particular. Furthermore, the extent and pace of a recovery remains uncertain and may differ significantly among the countries in which we operate. We expect that our results of operations will continue to be impacted by the pandemic throughout 2021.

We have incurred net incremental and direct costs related to COVID-19 to ensure that we meet the needs of our employees and customers; these include costs for personal protective equipment (“PPE”), site cleanings and enhanced employee benefits. The majority of our cost base is variable, and while we expect to continue to incur additional costs related to the pandemic, we also have the ability to continue to adjust our expenses to address significant changes in demand for our services, if necessary, as we did in 2020. These actions include reduced use of contractors, reduced employee hours, furloughs, layoffs and required use of paid time off, consistent with applicable regulations.

~~The~~ totality of the actions we have taken during the pandemic, and continue to take ~~combined with~~

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in the ~~variable components of our cost structure,~~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 ~~key~~ 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 months ended March 31, 2022, the transportation industry’s truck driver shortage, together with rising fuel prices, resulted in higher transportation procurement costs to meet growing demand, which costs were largely offset by mechanisms in our customer contracts, including fuel surcharge clauses and general rate increases.

Regarding the war between Russia and Ukraine, we have no direct exposure to those geographies. We cannot predict how global supply chain 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.

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Consolidated Summary Financial Table


		Three Months Ended March 31,	Percent of Revenue				Change							Three Months Ended March 31,	Percent of Revenue	Change
(Dollars in millions)	(Dollars in millions)		2021 (1)		2020 (2)		2021		2020		2021 vs. 2020		(Dollars in millions)			2022		2021		2022		2021		2022 vs. 2021
Revenue	Revenue		$	4,774	$	3,864	100.0	%	100.0	%	23.6	%	Revenue			$	3,473	$	2,989	100.0	%	100.0	%	16.2	%
Cost of transportation and services			2,328		1,898		48.8	%	49.1	%	22.7	%
Direct operating expense			1,656		1,360		34.7	%	35.2	%	21.8	%
Cost of transportation and services (exclusive of depreciation and amortization)													Cost of transportation and services (exclusive of depreciation and amortization)			2,437		2,053		70.2	%	68.7	%	18.7	%
Direct operating expense (exclusive of depreciation and amortization)													Direct operating expense (exclusive of depreciation and amortization)			385		334		11.1	%	11.2	%	15.3	%
Sales, general and administrative expense	Sales, general and administrative expense		588		525		12.3	%	13.6	%	12.0	%	Sales, general and administrative expense			344		338		9.9	%	11.3	%	1.8	%
Depreciation and amortization expense													Depreciation and amortization expense			116		119		3.3	%	4.0	%	(2.5)	%
Gain on sale of business													Gain on sale of business			(450)		—		(13.0)	%	—	%	NM
Transaction and integration costs													Transaction and integration costs			10		5		0.3	%	0.2	%	100.0	%
Restructuring costs													Restructuring costs			6		1		0.2	%	—	%	500.0	%
Operating income	Operating income		202		81		4.2	%	2.1	%	149.4	%	Operating income			625		139		18.0	%	4.7	%	349.6	%
Other income	Other income		(26)		(18)		(0.5)	%	(0.5)	%	44.4	%	Other income			(14)		(16)		(0.4)	%	(0.5)	%	(12.5)	%
Foreign currency gain			(2)		(8)		—	%	(0.2)	%	(75.0)	%
Debt extinguishment loss	Debt extinguishment loss		8		—		0.2	%	—	%	NM		Debt extinguishment loss			—		8		—	%	0.3	%	(100.0)	%
Interest expense	Interest expense		69		72		1.4	%	1.9	%	(4.2)	%	Interest expense			37		65		1.1	%	2.2	%	(43.1)	%
Income before income tax provision			153		35		3.2	%	0.9	%	337.1	%
Income from continuing operations before income tax provision													Income from continuing operations before income tax provision			602		82		17.3	%	2.7	%	634.1	%
Income tax provision	Income tax provision		35		10		0.7	%	0.3	%	250.0	%	Income tax provision			113		19		3.3	%	0.6	%	494.7	%
Income from continuing operations													Income from continuing operations			489		63		14.1	%	2.1	%	676.2	%
Income from discontinued operations, net of taxes													Income from discontinued operations, net of taxes			(1)		55		—	%	1.8	%	NM
Net income	Net income		$	118	$	25	2.5	%	0.6	%	372.0	%	Net income			$	488	$	118	14.1	%	3.9	%	313.6	%

NM - Not meaningful

~~(1)~~Consolidated operating income for the three months ended March 31, 2021 includes $18 million of transaction and integration costs and $4 million of restructuring expense. $1 million of the transaction and integration costs relate to our Transportation segment, $5 million relate to our Logistics segment and $12 million relate to Corporate.

~~(2)~~Consolidated operating income for the three months ended March 31, 2020 includes $44 million of transaction and integration costs and $3 million of restructuring expense. $7 million of the transaction and integration costs relate to our Transportation segment, $7 million relate to our Logistics segment and $30 million relate to Corporate.

The transaction and integration costs for the first three months of 2021 are primarily related to the planned spin-off of the Logistics segment and our acquisition of the Kuehne + Nagel business. The transaction and integration costs for the first three months of 2020 are primarily related to our previously announced exploration of strategic alternatives that was terminated in March 2020. For further information on our restructuring actions, see Note 5—Restructuring Charges to the Condensed Consolidated Financial Statements. We also incurred in the first three months of 2021 and 2020, net incremental and direct costs as a result of the COVID-19 pandemic.

Three Months Ended March 31, ~~2021~~2022 Compared with Three Months Ended March 31, ~~2020~~2021

Revenue for the first quarter of ~~2021~~2022 increased ~~23.6%~~16.2% to ~~$4.8~~$3.5 billion, compared with the same ~~period~~quarter in ~~2020.~~2021. The increase in revenue ~~in the first three months of 2021 compared to the same period in 2020~~ reflects ~~strong~~ growth in both our ~~transportation~~Brokerage and ~~logistics businesses, including~~Other Services and LTL segments and includes the impact of ~~the acquired Kuehne + Nagel business in January 2021, which contributed approximately 3.1 percentage points to~~increased revenue ~~growth. Additionally, foreign~~from fuel surcharges. Foreign currency movement ~~increased~~reduced revenue by approximately ~~3.2~~1.2 percentage points in the first quarter of ~~2021.~~2022.

Cost of transportation and services (exclusive of depreciation and amortization) includes the cost of providing or procuring freight transportation for XPO customers and salaries paid to employee drivers in our LTL and ~~truckload~~truck brokerage businesses.

Cost of transportation and services (exclusive of depreciation and amortization) for the first quarter of ~~2021~~2022 was ~~$2.3~~$2.4 billion, or ~~48.8%~~70.2% of revenue, compared with ~~$1.9~~$2.1 billion or ~~49.1%~~68.7% of revenue, for the same ~~period~~quarter in ~~2020.~~2021. The year-over-year ~~decrease~~increase as a percentage of revenue ~~for the first three months of 2021 was~~is primarily ~~driven by a~~due to higher ~~mix of logistics revenue,~~third-party transportation costs, which were partially offset by ~~increased third-party transportation costs in our transportation segment.~~pricing actions.

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Direct operating expenses (exclusive of depreciation and amortization) are comprised of both fixed and variable expenses and ~~consist of~~include operating costs related to our ~~warehousing facilities and~~ LTL service centers. Direct operating expenses (exclusive of depreciation and 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, ~~depreciation expense,~~ and gains and losses on sales of property and equipment.

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Direct operating expense (exclusive of depreciation and amortization) for the first ~~three months~~quarter of ~~2021~~2022 was ~~$1.7 billion,~~$385 million, or ~~34.7%~~11.1% of revenue, compared with ~~$1.4 billion,~~$334 million, or ~~35.2%~~11.2% of revenue, for the same ~~period~~quarter in ~~2020.~~2021. The year-over-year decrease as a percentage of revenue was primarily driven by ~~lower personnel and facilities costs as a percentage~~the leveraging of ~~revenue as we leveraged our fixed~~compensation costs across ~~increased revenues this quarter, partially~~a larger revenue base. This decrease was almost entirely offset by a ~~higher mix of logistics revenue. Additionally, the first quarters of 2021 and 2020 included $24~~$23 million ~~and $27 million, respectively, from~~ gains on sales of property and ~~equipment.~~equipment in the first quarter of 2021. There were no gains on sales of property and equipment in the first quarter of 2022.

Sales, general and administrative expense (“SG&A”) primarily consists of salaries and commissions for the sales function, salary and benefit costs for executive and certain administration functions, ~~depreciation and amortization expense,~~ professional fees, facility costs, bad debt expense and legal costs.

SG&A for the first quarter of ~~2021~~2022 was ~~$588~~$344 million, or ~~12.3%~~9.9% of revenue, compared with ~~$525~~$338 million, or ~~13.6%~~11.3% of revenue, for the same ~~period~~quarter in ~~2020. SG&A~~2021. The year-over-year decrease as a percentage of revenue was primarily driven by lower compensation expense and third-party professional and consulting fees.

Depreciation and amortization expense for the first quarter of 2022 was $116 million, compared with $119 million for the same quarter in 2021.

Gain on sale of business was $450 million, net of transaction costs, for the first quarter of 2022 as we sold our North American intermodal operation. For more information, see Note 3—Divestiture to our Condensed Consolidated Financial Statements.

Transaction and integration costs for the first quarter of 2022 were $10 million, compared with $5 million for the same quarter in 2021. Transaction and integration costs for the first three months of 2022 and 2021 ~~included approximately $13 million~~are primarily comprised of ~~expenses~~third-party professional fees related to strategic initiatives, including the spin-offs and other disposal activities, as well as retention awards paid to certain employees.

Restructuring costs for the first quarter of 2022 were $6 million, compared with $1 million for the same quarter in 2021. We engage in restructuring actions as part of our ongoing efforts to best use our resources and infrastructure, including actions in connection with spin-offs and other disposal activities. 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 planned spin-off of our ~~Logistics segment, including professional service fees. In comparison, SG&A~~North American brokered transportation operation or for ~~the first three months of 2020 included approximately $40 million of expenses related~~other reasons; however, we are currently unable to ~~our exploration of strategic alternatives that was terminated in March 2020, including professional service fees and employee retention~~reasonably estimate these costs.

Other income primarily consists of pension income. Other income for the first quarter of ~~2021~~2022 was ~~$26~~$14 million, ~~of income,~~ compared with ~~$18~~$16 million ~~of income~~ for the same ~~period~~quarter in ~~2020. The year-over-year increase primarily reflects higher net periodic pension income in the first quarter of 2021, compared with the same period in 2020.~~

Foreign currency gain was a $2 million gain for the first quarter of 2021, compared with an $8 million gain for the same period in 2020. Foreign currency gain in the first quarter of 2021 primarily reflected foreign currency transaction and measurement gains. Foreign currency gain in the first quarter of 2020 primarily reflected realized and unrealized gains on foreign currency option and forward contracts and other derivative contracts, including a gain on a terminated net investment hedge. For additional information on our foreign currency option and forward contracts, see Note 6—Derivative Instruments to our Condensed Consolidated Financial Statements.2021.

Debt extinguishment loss was $8 million for the first ~~three months~~quarter of 2021 and related to the write-off of debt issuance costs for the redemption of our outstanding senior notes due 2022, as well as costs incurred related to the amendment of our term loan credit agreement. There ~~were~~was no debt extinguishment ~~losses~~loss in the first quarter of ~~2020.~~2022.

Interest expense decreased to ~~$69~~$37 million for the first ~~quarter~~three months of ~~2021~~2022 from ~~$72~~$65 million for the first ~~quarter~~three months of ~~2020. Interest~~2021. The decrease in interest expense reflected ~~the issuance of the senior notes due 2025 in the second quarter of 2020, partially offset by the redemption of the senior notes due 2022~~lower average total indebtedness in the first quarter of ~~2021.~~2022.

Our effective income tax rates were ~~22.8%~~18.8% and ~~30.2%~~23.0% for the first three months of ~~2021~~2022 and ~~2020,~~2021, respectively. The effective tax rates for the first quarter of ~~2021~~2022 and ~~2020~~2021 were based on forecasted full-year effective tax rates, adjusted for discrete items that occurred within the periods presented. The ~~change in our~~primary items impacting the effective tax rate for the first ~~quarter~~three months of ~~2021~~2022 compared to the same quarter in ~~2020 was primarily driven by higher pre-tax~~2021 included a tax expense of $78 million from the sale of our North American intermodal operation, which resulted in a reduction to our effective tax rate due to the book ~~income which diluted~~gain exceeding the ~~impact~~tax gain, as well as a tax benefit of ~~contribution- and margin-based taxes.~~$2 million from stock-based compensation. The primary ~~discrete~~ item impacting the effective tax rate for the first quarter of 2021 was a tax benefit of $4$3 million from stock-based compensation. ~~There were no material discrete items impacting the effective tax rate for the first quarter of 2020.~~

~~Restructuring Charges~~

We engage in restructuring actions as part of our ongoing efforts to best use our resources and infrastructure. We recorded restructuring charges of $4 million and $3 million in Sales, general and administrative expense on our Condensed Consolidated Statements of Income for the first three months of 2021 and 2020, respectively.

For more information, see Note 5—Restructuring Charges to the Condensed Consolidated Financial Statements. We may incur incremental restructuring costs in 2021 in connection with the planned spin-off of our Logistics segment or for other reasons; however, we are currently unable to reasonably estimate these costs.

2223

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~~Transportation~~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 income from continuing operations before debt extinguishment loss, interest expense, income tax, depreciation and amortization expense, gain on sale of business, transaction and integration costs, restructuring costs and other adjustments. See Note 4—Segment Reporting for further information and a reconciliation of adjusted EBITDA to Income from continuing operations.

North American Less-Than-Truckload Segment


		Three Months Ended March 31,	Percent of Revenue				Change							Three Months Ended March 31,	Percent of Revenue	Change
(Dollars in millions)	(Dollars in millions)		2021		2020		2021		2020		2021 vs. 2020		(Dollars in millions)			2022		2021		2022		2021		2022 vs. 2021
Revenue	Revenue		$	2,989	$	2,459	100.0	%	100.0	%	21.6	%	Revenue			$	1,105	$	962	100.0	%	100.0	%	14.9	%
Operating income			209		120		7.0	%	4.9	%	74.2	%
Depreciation and amortization			115		110						4.5	%
Adjusted EBITDA													Adjusted EBITDA			205		214		18.5	%	22.2	%	(4.2)	%
Depreciation and amortization expense													Depreciation and amortization expense			55		55		5.0	%	5.7	%	—	%

Revenue in our ~~Transportation~~North American LTL segment increased ~~21.6%~~14.9% to ~~$3.0~~$1.1 billion for the first quarter of ~~2021,~~2022, compared with ~~$2.5 billion~~$962 million for the same ~~period~~quarter in ~~2020.~~2021. Revenue included fuel surcharge revenue of $207 million and $135 million, respectively, for the first three 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 March 31,
		2022		2021		Change %
Pounds per day (thousands)		70,176		70,730		(0.8)	%









Gross revenue per hundredweight, excluding fuel surcharges		$	20.76	$	19.11	8.7	%

The year-over-year increase in revenue for the first quarter of 2022 reflects an increase in gross revenue per hundredweight. The decrease in weight per day for the first quarter reflects lower shipments per day, partially offset by higher weight per shipment.

Adjusted EBITDA was $205 million, or 18.5% of revenue, for the first three months of 2022, compared with $214 million, or 22.2% of revenue, for the same quarter in 2021. Adjusted EBITDA for the first quarter of 2021 included $17 million of gains from real estate transactions. There were no gains from real estate transactions in the first quarter of ~~2021~~2022. Additionally, adjusted EBITDA in the first quarter of 2022 reflected ~~strong growth~~higher revenue, partially offset by increased compensation costs, purchased transportation expense and fuel costs incurred to meet growing demand.

Brokerage and Other Services Segment


	Three Months Ended March 31,	Percent of Revenue				Change
(Dollars in millions)		2022		2021		2022		2021		2022 vs. 2021
Revenue		$	2,432	$	2,071	100.0	%	100.0	%	17.4	%
Adjusted EBITDA		164		125		6.7	%	6.1	%	31.2	%
Depreciation and amortization expense		60		60		2.5	%	2.9	%	—	%

Revenue in ~~freight~~our Brokerage and Other Services segment increased 17.4% to $2.4 billion for the first quarter of 2022, compared with $2.1 billion for the same quarter in 2021. The year-over-year revenue increase for the first three

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months of 2022 primarily reflected an increase in North American truck brokerage ~~and LTL revenues. Additionally, foreign~~loads, facilitated by our digital platform, as well as strength in other services. Foreign currency movement ~~increased~~reduced revenue by approximately ~~2.5~~1.7 percentage points in the first quarter of ~~2021.~~2022.

~~Operating income in our Transportation segment~~Adjusted EBITDA was ~~$209~~$164 million, or ~~7.0%~~6.7% of revenue, for the first ~~quarter~~three months of ~~2021,~~2022, compared with ~~$120~~$125 million, or ~~4.9%~~6.1% of revenue, for the same ~~period~~quarter in 2020. The increase in operating income in the first three months of 2021 was primarily driven by higher revenue, partially offset by higher third-party transportation and personnel costs. Additionally, the first quarter of 2020 included approximately $7 million of expenses related to our exploration of strategic alternatives.

~~Logistics Segment~~

Three Months Ended March 31, Percent of Revenue Change
(Dollars in millions) 2021 2020 2021 2020 2021 vs. 2020
Revenue $ 1,818 $ 1,437 100.0 % 100.0 % 26.5 %
Operating income 68 38 3.7 % 2.6 % 78.9 %
Depreciation and amortization 74 69 7.2 %

Revenue in our Logistics segment increased 26.5% to $1.8 billion for the first quarter of 2021, compared with $1.4 billion for the same period in 2020. The increase in revenue in the first quarter of 2021 compared to the same period in 2020 reflects strong growth in our European business, including the impact of the acquired Kuehne + Nagel business in January 2021, which contributed approximately 8.2 percentage points to segment revenue growth. Additionally, foreign currency movement increased revenue by approximately 5.5 percentage points in the first quarter of 2021.

Operating income in our Logistics segment was $68 million, or 3.7% of revenue, for the first quarter of 2021, compared with operating income of $38 million, or 2.6% of revenue, for the same period in 2020. The increase was primarily driven by higher revenue due to load growth in North American truck brokerage and strong pricing in other brokerage services, partially offset by higher ~~personnel~~third-party transportation and ~~facilities~~compensation costs.

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Liquidity and Capital Resources

~~As of March 31, 2021, we had~~Our cash and cash equivalents balance was $1.0 billion as of ~~$629 million.~~March 31, 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”); ~~and~~ (iii) proceeds from the issuance of other ~~debt.~~debt; and (iv) proceeds from divestiture activities. As of March 31, ~~2021,~~2022, we have ~~$1.084 billion~~$996 million available to draw under our ABL Facility, based on a borrowing base of ~~$1.1~~$1.0 billion and outstanding letters of credit of ~~$16~~$4 million. Additionally, ~~under our Senior Secured Term Loan Credit Agreement,~~ we have a $200 million uncommitted secured evergreen letter of credit facility, under which we have issued ~~$198~~$185 million in aggregate face amount of letters of credit as of March 31, ~~2021.~~2022.

As of March 31, 2022, we had approximately $2.0 billion of total liquidity. We continually evaluate our liquidity requirements in light of our operating needs, growth initiatives and capital resources. We believe that our existing liquidity and sources of capital are sufficient to support our operations over the next 12 months.

Trade Receivables Securitization and Factoring Programs

~~XPO Logistics Europe SA (“XPO Logistics Europe”), one~~ For more information, see Note 1—Organization, Description of our majority-owned subsidiaries, participates in a trade receivables securitization program co-arranged by three European banks (the “Purchasers”). Under the program, a wholly-owned bankruptcy-remote special purpose entityBusiness and Basis of ~~XPO Logistics Europe sells trade receivables that originate with wholly-owned subsidiaries of XPO Logistics Europe in the United Kingdom and France~~Presentation to ~~unaffiliated entities managed by the Purchasers. The special purpose entity is a variable interest entity and is consolidated by XPO based on our control of the entity’s activities.~~

We account for transfers under our securitization and factoring arrangements as sales because we sell full title and ownership in the underlying receivables and control of the receivables is considered transferred. For these transfers, the receivables are removed from our Condensed Consolidated Balance Sheets at the date of transfer. In the securitization and factoring arrangements, our continuing involvement is limited to servicing the receivables. The fair value of any servicing assets and liabilities is immaterial. Our trade receivables securitization program permits us to borrow, on an unsecured basis, cash collected in a servicing capacity on previously sold receivables, which we report within short-term debt on our Condensed Consolidated Balance Sheets. We had no such borrowings outstanding as of March 31, 2021 and €41 million ($50 million) as of December 31, 2020.Financial Statements.

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 in the table below and the amount we collected as a servicer on behalf of the Purchasers. In the first ~~quarter~~three months of ~~2021~~2022 and ~~2020,~~2021, we collected cash as servicer of ~~$770~~$464 million and ~~$690~~$341 million, respectively.

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~~Information related to the trade receivables sold was as follows:~~

Three Months Ended March 31,
(In millions) 2021 2020
Securitization programs
Receivables sold in period $ 775 $ 691
Cash consideration 775 691
Factoring programs
Receivables sold in period $ 116 $ 264
Cash consideration 116 263

Term Loan Facilities

WeAgreement”) and recorded a debt extinguishment loss of $3 ~~million in the first quarter of 2021 due to this amendment.~~million.

Senior Notes Due 2025

In March 2022, we provided notice to redeem $630 million (“Redeemed Notes”) of the $1.15 billion principal amount of our outstanding 6.25% senior notes due 2025. The redemption price for the Redeemed Notes was 100% of the principal amount plus a premium as defined in the indenture and accrued and unpaid interest. In April 2022, we completed the redemption of the Redeemed Notes using available liquidity. The loss on debt extinguishment of approximately $26 million will be reflected in the second quarter of 2022 results of operations.

Senior Notes Due 2022

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Preferred Stock and Warrant Exchanges

~~In December~~Commencing in the fourth quarter of 2020, ~~some~~ holders of our convertible preferred stock and warrants exchanged their holdings for our common stock or a combination of our common stock ~~based on the stated conversion price,~~ and ~~a lump-sum payment that represents an approximation~~cash. These exchanges were intended to simplify our equity capital structure, including in contemplation of the ~~net present value of the future dividends payable on the preferred stock. Additionally, some holders~~spin-off of our warrants exchanged (or committed to exchange subject to the satisfaction of certain customary closing conditions) their holdings, including Jacobs Private Equity, LLC, an entity controlled by the Company’s chairman and chief executive officer, for a number of shares of our common stock equal to the number of shares of common stock that such holder would be entitled to receive upon an exercise of the warrants less the number of shares of common stock that have an approximate value equal to the exercise price of the warrants. With respect to the preferred stock, through December 31, 2020, 69,445 shares were exchanged, and we issued 9.9 million shares of common stock and paid $22 million of cash. With respect to the warrants, through December 31, 2020, 0.3 million warrants were exchanged, and we issued 0.3 million shares of common stock.Logistics segment. In the first quarter of 2021, 975 preferred shares were exchanged, and we issued 0.1 million shares of common ~~stock. With respect to the warrants, in the first quarter of 2021,~~stock and 9.8 million warrants were exchanged, and we issued 9.2 million shares of common stock. ~~These exchanges are intended to simplify our equity capital structure, including in contemplation of our previously announced plan to pursue a spin-off of our Logistics segment.~~

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Share Repurchases

InThere have been no share repurchases since the first quarter of 2020, we purchased and retired 2 million shares at an aggregate value of $114 million. The share purchases were funded by our available cash and proceeds from our 2019 debt offerings. There were no share purchases in the first quarter of 2021.2020. Our remaining share repurchase authorization was $503 million as of March 31, ~~2021.~~2022.

Loan Covenants and Compliance

As of March 31, ~~2021,~~2022, we were in compliance with the covenants and other provisions of our debt agreements. Any failure to comply with any material provision or covenant of these agreements could have a material adverse effect on our liquidity and operations.

Sources and Uses of Cash

Three Months Ended March 31,
(In millions) 2021 2020
Net cash provided by operating activities $ 173 $ 180
Net cash used in investing activities (95) (79)
Net cash provided by (used in) financing activities (1,501) 668
Effect of exchange rates on cash, cash equivalents and restricted cash (2) (19)
Net increase (decrease) in cash, cash equivalents and restricted cash $ (1,425) $ 750


	Three Months Ended March 31,
(In millions)	2022		2021
Net cash provided by operating activities from continuing operations	$	200	$	77
Net cash provided by (used in) investing activities from continuing operations	571		(38)
Net cash used in financing activities from continuing operations	(24)		(1,464)

During the three months ended March 31, 2022, we: (i) generated cash from operating activities from continuing operations of $200 million and (ii) generated net proceeds from sale of a business of $705 million. We used cash during this period primarily to purchase property and equipment of $137 million.

During the three months ended March 31, 2021, we: (i) generated cash from operating activities from continuing operations of ~~$173~~$77 million and (ii) generated proceeds from sales of property and equipment of $36 million. We used cash during this period primarily to: (i) purchase property and equipment of ~~$140~~$74 million; (ii) redeem our senior notes due 2022 for $1.2 billion; and (iii) repay our ABL Facility borrowings of $200 ~~million; and (iv) repay borrowings related to our securitization program of $49 million.~~

During the three months ended March 31, 2020, we: (i) generated cash from operating activities of $180 million; (ii) received net proceeds of $782 million from our issuances of debt and short-term borrowings and (iii) generated proceeds from sales of property and equipment (primarily real estate) of $54 million. We used cash during this period primarily to: (i) purchase property and equipment of $139 million and (ii) repurchase common stock of $114 million.

Cash flows from operating activities from continuing operations for the three months ended March 31, ~~2021 decreased~~2022 increased by $7$123 million, compared with the same period in ~~2020. Accounts receivable were a use~~2021. The increase reflects higher income from continuing operations of cash for the three months ended March 31, 2021, as compared to a source of cash in the prior period, reflecting higher revenues in the current period and a year-over-year decrease in proceeds from factoring. Partially offsetting the impact of accounts receivable was higher net income of $93$426 million for the three months ended March 31, ~~2021,~~2022, compared with the same period in ~~2020.~~2021, and the impact of operating assets and liabilities providing $36 million of cash in the first three months of 2022, compared to utilizing $112 million during the same period in 2021. Partially offsetting these impacts was a $450 million gain on sale of business recognized during the three months ended March 31, 2022. Within operating assets and liabilities, accounts payable generated $332 million more cash while accounts receivable utilized $207 million more cash in the first quarter of 2022 compared to the same period in 2021 as a result of higher revenues and timing of payments.

Investing activities ~~used $95 million and $79~~from continuing operations generated $571 million of cash in the three months ended March 31, ~~2021~~2022 and ~~2020, respectively.~~used $38 million of cash in the three months ended March 31, 2021. During the three months ended March 31, 2022, we received $705 million of cash from the sale of our intermodal operation, net of cash disposed, and used $137 million to purchase property and equipment. During the three months ended March 31, 2021, we used ~~$140~~

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$74 million of cash to purchase property and equipment and received $36 million from sales of property and equipment. ~~During~~

Financing activities from continuing operations used $24 million of cash in the three months ended March 31, ~~2020, we used $139 million of cash to purchase property~~2022 and ~~equipment and received $54 million from sales of property and equipment.~~

~~Financing activities used~~ $1.5 billion of cash in the three months ended March 31, ~~2021 and provided $668 million of cash in the three months ended March 31, 2020.~~2021. The primary uses of cash from financing activities during the first three months of ~~2021~~2022 were ~~$1.2 billion used to redeem the senior notes due 2022, $200~~$16 million used to repay ~~borrowings under our ABL Facility and $49 million used to repay our borrowings related to our securitization~~

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~~program.~~borrowings. The primary ~~sources and~~ uses of cash from financing activities during the three months ended March 31, ~~2020~~2021 were ~~$600 million of proceeds from borrowings on our ABL Facility, net of payments~~$1.2 billion used to redeem the senior notes due 2022 and ~~$182 million of net proceeds from borrowings related to our securitization program, partially offset by $114~~$200 million used to ~~purchase XPO common stock.~~repay borrowings under our ABL Facility.

~~Contractual Obligations~~

~~During~~Except for the ~~three months ended March 31, 2021,~~notice of our intent to redeem a portion of our senior notes due 2025 as described above, there were no material changes to our December 31, ~~2020~~2021 contractual ~~obligations.~~obligations during the three months ended March 31, 2022. We anticipate full year net capital expenditures to be between ~~$500~~$425 million and ~~$550~~$475 million in ~~2021~~2022 (without giving effect to the planned spin-off ~~of our Logistics segment), which reflects an increase of approximately $25 million from the estimate provided in our 2020 Form 10-K.~~and other dispositions).

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.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

We are exposed to market risk related to changes in interest rates, foreign currency exchange rates and commodity risk. There have been no material changes to our quantitative and qualitative disclosures about market risk related to our continuing operations during the three months ended March 31, ~~2021,~~2022, as compared with the quantitative and qualitative disclosures about market risk described in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~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 Chief Executive Officer (“CEO”) and 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 Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of March 31, ~~2021.~~2022. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures as of March 31, ~~2021~~2022 were effective as of such time such that the information required to be included in our 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; and (ii) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There have not been any changes in our internal control over financial reporting during the quarter ended March 31, ~~2021~~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.

~~Intermodal Drayage Classification Claims~~

~~Certain of~~For information related to our intermodal drayage subsidiaries are defendants in class action litigations brought by independent contract carriers in California who contracted with these subsidiaries. In these cases, the contract carriers assert that they should be classified as employees, rather than independent contractors. In two related cases pending in Federal District Court in Los Angeles, ~~Alvarez v. XPO Logistics Cartage, LLC~~ ~~and~~ ~~Arrellano v. XPO Port Services, Inc.~~, the Court has certified classes beginning in April 2016 and March 2013, respectively. Plaintiffs allege that defendants exercised an impermissible degree of control over plaintiffs’ operations through the terms of the parties’ contracts and defendants’ policies, including enforcement of requirements imposed on motor carriers by state and federal law. The particular claims asserted vary from caselegal proceedings, refer to ~~case but generally include claims that, should the contract carriers be determined to be employees, they would be entitled to reimbursement for unpaid wages, unpaid overtime, unpaid~~

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wages for missed meal and rest periods, reimbursement of certain of the contract carriers’ business expenses (including fuel and insurance related costs), Labor Code penalties under California’s Private Attorneys General Act, and attorneys’ fees and costs associated with bringing the action. Discovery is ongoing in these matters, and defendants continue to mount a vigorous defense on the merits of plaintiffs’ claims, including as to the threshold issue of employment classification. Both cases are scheduled for trial in September 2021; however, this date may be impacted or significantly delayed by the effect of the COVID-19 pandemic on Court operations, including the scheduling of jury trials. We anticipate further legal rulings from the Court at or before trial that may substantially affect the scope of the claims asserted. As a result, we are unable at this time to estimate the amount of the possible loss or range of loss, if any, that we may incur as a result of these claims.

~~Shareholder Litigation~~

~~On December 14, 2018, a putative class action captioned~~ ~~Labul v. XPO Logistics, Inc. et al., was filed~~“Legal Proceedings” in the ~~U.S. District Court~~Company’s Annual Report on Form 10-K for the ~~District~~year ended December 31, 2021 and Note 10—Commitments and Contingencies of ~~Connecticut against us and some~~Item 1, “Financial Statements” of ~~our current and former executives, alleging violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Section 20(a) of the Exchange Act, based~~this Quarterly Report on alleged material misstatements and omissions in our public filings with the U.S. Securities and Exchange Commission. On June 3, 2019, lead plaintiffs Local 817 IBT Pension Fund, Local 272 Labor-Management Pension Fund, and Local 282 Pension Trust Fund and Local 282 Welfare Trust Fund (together, the “Pension Funds”) filed a consolidated class action complaint. Defendants moved to dismiss the consolidated class action complaint on August 2, 2019. On November 4, 2019, the Court dismissed the consolidated class action complaint without prejudice to the filing of an amended complaint. The Pension Funds, on January 3, 2020, filed a first amended consolidated class action complaint against us and a current executive. Defendants moved to dismiss the first amended consolidated class action complaint on March 3, 2020. On March 19, 2021, the Court dismissed the first amended consolidated class action complaint with prejudice and closed the case. The Pension Funds filed a notice of appeal, and the appellate process is ongoing.

~~Also, on May 13, 2019, Adriana Jez filed a purported shareholder derivative action captioned~~ ~~Jez v. Jacobs, et al.~~, (“Jez complaint”) in the U.S. District Court for the District of Delaware, alleging breaches of fiduciary duty, unjust enrichment, waste of corporate assets, and violations of the Exchange Act against some of our current and former directors and officers, with the company as a nominal defendant. The Jez complaint was later consolidated with similar derivative complaints filed by purported shareholders Erin Candler and Kevin Rose under the caption ~~In re XPO Logistics, Inc. Derivative Litigation~~. On December 12, 2019, the Court ordered plaintiffs to designate an operative complaint or file an amended complaint within 45 days. On January 27, 2020, plaintiffs designated the Jez complaint as the operative complaint in the consolidated cases. Defendants moved to dismiss the operative complaint on February 26, 2020. Rather than file a brief in opposition, on March 27, 2020, plaintiffs moved for leave to file a further amended complaint and to stay briefing on defendants’ motions to dismiss. The Court granted plaintiffs’ motion on July 6, 2020. On April 14, 2021, the Court issued an order staying proceedings pending resolution of an appeal in the Labul action. Plaintiffs stipulated that they will dismiss the shareholder derivative action with prejudice if the Labul dismissal is affirmed on appeal.

Item 1A. Risk Factors.

There are no material changes to the risk factors previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021, except as set forth below.

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The announced spin-off and sale or listing of our European business are contingent upon the satisfaction of a number of conditions, may not be completed on the currently contemplated timeline, or at all, and may not achieve the intended benefits.

On March 8, 2022, we announced that our Board of Directors had approved a plan to pursue the strategic spin-off of our tech-enabled brokered transportation platform in North America as a publicly traded company and pursue two divestitures, including the sale or listing of our European business. Completion of the announced spin-off, as well as the timing of completion, is subject to a number of conditions, including the effectiveness of a Form 10 registration statement, receipt of a tax opinion from counsel, the refinancing of our debt on terms satisfactory to our Board of Directors, and final approval by our Board of Directors. These transactions are complex in nature and may be affected by unanticipated developments or changes in market conditions. There is the potential for business disruption and significant separation costs. These or other unanticipated developments or costs could delay or prevent the announced transactions, or cause the announced transactions to occur on terms or conditions that are less favorable than anticipated. Furthermore, if the transactions are completed, there is no guarantee that they will be successful in meeting their objectives or achieving their intended benefits. Any of these factors could have a material adverse effect on our business and results of operations.

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

During the quarters ended December 31, 2020 and March 31, 2021, following approvals by a disinterested special committee of our Board of Directors and the Audit Committee to the extent required by our policy on related party transactions, we entered into separate exchange agreements with certain holders of our preferred stock and warrants, including some of our directors and officers, pursuant to which (i) holders of our preferred stock exchanged their preferred shares for a combination of (x) our common stock, based on the number of shares of common stock into which our preferred stock was then convertible; and (y) a lump-sum cash payment that represented an approximation of the net present value of the future dividends required by the terms of our preferred stock to be paid by us; and (ii)

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holders of our warrants exchanged their warrants for the number of shares of our common stock that was equal to the number of shares of common stock that such holder would be entitled to receive upon an exercise of the warrants less the number of shares of our common stock that had an approximate value equal to the exercise price of the warrants, based on the formula set forth in the exchange agreements. With respect to the preferred stock, through December 31, 2020, 69,445 shares were exchanged, and we issued 9,920,709 shares of common stock and paid $22 million of cash. With respect to the warrants, through December 31, 2020, 283,394 warrants were exchanged, and we issued 266,590 shares of common stock. In the first quarter of 2021, 975 preferred shares were exchanged, and we issued 139,284 shares of common stock. With respect to the warrants, in the first quarter of 2021, 9,795,715 warrants were exchanged, and we issued 9,215,094 shares of common stock. The exchange transactions were made to simplify our equity capital structure, including in contemplation of our previously announced plan to pursue a spin-off of our Logistics segment.

The issuance of the shares of the Company’s common stock described above was made in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, only to holders who are “accredited investors” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act. The Company relied on this exemption from registration based in part on representations made by the holders of preferred stock and warrants that participated in the exchange transactions.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

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

~~10.1~~10.2+*						~~Refinancing Amendment (Amendment No. 6 to Credit Agreement), dated as~~Form of March 3, 2021, by and among XPO Logistics, Inc., the subsidiaries signatory thereto, as guarantors, the lenders party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent (incorporated herein by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on March 3, 2021).Performance-Based Restricted Stock Unit Award Agreement (2016 Omnibus Incentive Compensation Plan)

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 Quarterly Report on Form 10-Q for the fiscal quarter ended March 3 1 ~~, 202~~1 . 31, 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 Quarterly Report on Form 10-Q for the fiscal quarter ended March 3 1 ~~, 202~~1 . 31, 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 Quarterly Report on Form 10-Q for the fiscal quarter ended March 3 1 ~~, 202~~1 . 31, 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 Quarterly Report on Form 10-Q for the fiscal quarter ended March 3 1 ~~, 202~~1 . 31, 2022.

101.INS *						XBRL Instance 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:			/s/ Brad Jacobs
			Brad Jacobs
			Chief Executive Officer
			(Principal Executive Officer)

By:			/s/ ~~David Wyshner~~Ravi Tulsyan
			~~David Wyshner~~Ravi Tulsyan
			Chief Financial Officer
			(Principal Financial Officer)

Date: May ~~4, 2021~~10, 2022

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	Three Months Ended March 31, 2020
(In millions)	Transportation		Logistics		Eliminations		Total
Revenue
United States	$	1,702	$	536	$	(9)	$	2,229
North America (excluding United States)	71		14		0		85
France	311		150		(3)		458
United Kingdom	182		329		(16)		495
Europe (excluding France and United Kingdom)	188		386		(3)		571
Other	5		22		(1)		26
Total	$	2,459	$	1,437	$	(32)	$	3,864


	March 31, 2021
			Derivative Assets			Derivative Liabilities
(In millions)	Notional Amount		Balance Sheet Caption	Fair Value		Balance Sheet Caption	Fair Value
Derivatives designated as hedges
Cross-currency swap agreements	$	450	Other current assets	$	0	Other current liabilities	$	(25)
Cross-currency swap agreements	730		Other long-term assets	0		Other long-term liabilities	(29)
Interest rate swaps	2,003		Other current assets	0		Other current liabilities	0
Derivatives not designated as hedges
Foreign currency option contracts	178		Other current assets	3		Other current liabilities	0
Total				$	3		$	(54)


	Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss) on Derivatives				Amount of Gain Reclassified from AOCI into Net Income				Amount of Gain Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing)
	Three Months Ended March 31,
(In millions)	2021		2020		2021		2020		2021		2020
Derivatives designated as cash flow hedges
Cross-currency swap agreements	$	6	$	8	$	6	$	3	$	0	$	0
Interest rate swaps	0		(5)		0		0		0		0
Derivatives designated as net investment hedges
Cross-currency swap agreements	48		38		0		0		3		4
Total	$	54	$	41	$	6	$	3	$	3	$	4