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, ~~2022~~2023


☐			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)~~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 ~~May 4, 2022,~~April 28, 2023, there were ~~115,018,449~~115,857,013 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, ~~2022~~2023

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			3
Condensed Consolidated Statements of Cash Flows			4
Condensed Consolidated Statements of Changes in Equity			65
Notes to Condensed Consolidated Financial Statements			76
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			1915
Item 3. Quantitative and Qualitative Disclosures About Market Risk			2721
Item 4. Controls and Procedures			2722
Part II—Other Information
Item 1. Legal Proceedings			2722
Item 1A. Risk Factors			2722
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			2822
Item 3. Defaults Upon Senior Securities			2822
Item 4. Mine Safety Disclosures			2822
Item 5. Other Information			2822
Item 6. Exhibits			2923
Signatures			3024

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)	2022		2021		(In millions, except per share data)	2023		2022
ASSETS	ASSETS					ASSETS
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	1,004	$	260	Cash and cash equivalents	$	309	$	460
Accounts receivable, net of allowances of $47 and $47, respectively		2,248		2,105
Accounts receivable, net of allowances of $48 and $43, respectively						Accounts receivable, net of allowances of $48 and $43, respectively	1,019		954
Other current assets	Other current assets	279		286		Other current assets	221		199
Current assets of discontinued operations	Current assets of discontinued operations	24		26		Current assets of discontinued operations	16		17
Total current assets	Total current assets	3,555		2,677		Total current assets	1,565		1,630
Long-term assets	Long-term assets					Long-term assets
Property and equipment, net of $1,790 and $1,828 in accumulated depreciation, respectively		1,796		1,808
Property and equipment, net of $1,743 and $1,679 in accumulated depreciation, respectively						Property and equipment, net of $1,743 and $1,679 in accumulated depreciation, respectively	1,978		1,832
Operating lease assets	Operating lease assets	821		908		Operating lease assets	717		719
Goodwill	Goodwill	2,332		2,479		Goodwill	1,483		1,472
Identifiable intangible assets, net of $578 and $612 in accumulated amortization, respectively		548		580
Identifiable intangible assets, net of $407 and $392 in accumulated amortization, respectively						Identifiable intangible assets, net of $407 and $392 in accumulated amortization, respectively	396		407
Other long-term assets	Other long-term assets	268		255		Other long-term assets	209		209

Total long-term assets	Total long-term assets	5,765		6,030		Total long-term assets	4,783		4,639
Total assets	Total assets	$	9,320	$	8,707	Total assets	$	6,348	$	6,269
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities	Current liabilities					Current liabilities
Accounts payable	Accounts payable	$	1,330	$	1,110	Accounts payable	$	505	$	521
Accrued expenses	Accrued expenses	1,084		1,107		Accrued expenses	792		774
Short-term borrowings and current maturities of long-term debt	Short-term borrowings and current maturities of long-term debt	682		58		Short-term borrowings and current maturities of long-term debt	66		59
Short-term operating lease liabilities	Short-term operating lease liabilities	134		170		Short-term operating lease liabilities	110		107
Other current liabilities	Other current liabilities	178		69		Other current liabilities	58		30
Current liabilities of discontinued operations	Current liabilities of discontinued operations	24		24		Current liabilities of discontinued operations	15		16
Total current liabilities	Total current liabilities	3,432		2,538		Total current liabilities	1,546		1,507
Long-term liabilities	Long-term liabilities					Long-term liabilities
Long-term debt	Long-term debt	2,877		3,514		Long-term debt	2,478		2,473
Deferred tax liability	Deferred tax liability	300		316		Deferred tax liability	307		319
Employee benefit obligations	Employee benefit obligations	120		122		Employee benefit obligations	92		93
Long-term operating lease liabilities	Long-term operating lease liabilities	682		752		Long-term operating lease liabilities	606		606
Other long-term liabilities	Other long-term liabilities	311		327		Other long-term liabilities	264		259

Total long-term liabilities	Total long-term liabilities	4,290		5,031		Total long-term liabilities	3,747		3,750
Stockholders’ equity	Stockholders’ equity					Stockholders’ equity

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; 116 and 115 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively						Common stock, $0.001 par value; 300 shares authorized; 116 and 115 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively	—		—
Additional paid-in capital	Additional paid-in capital	1,176		1,179		Additional paid-in capital	1,252		1,238
Retained earnings		531		43
Retained earnings (accumulated deficit)						Retained earnings (accumulated deficit)	10		(4)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(109)		(84)		Accumulated other comprehensive loss	(207)		(222)

Total equity	Total equity	1,598		1,138		Total equity	1,055		1,012
Total liabilities and equity	Total liabilities and equity	$	9,320	$	8,707	Total liabilities and equity	$	6,348	$	6,269

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)		2022		2021		(In millions, except per share data)		2023		2022
Revenue	Revenue		$	3,473	$	2,989	Revenue		$	1,907	$	1,894
Cost of transportation and services (exclusive of depreciation and amortization)			2,437		2,053
Direct operating expense (exclusive of depreciation and amortization)			385		334
Sales, general and administrative expense			344		338
Salaries, wages and employee benefits							Salaries, wages and employee benefits		762		725
Purchased transportation							Purchased transportation		457		510
Fuel, operating expenses and supplies							Fuel, operating expenses and supplies		427		418
Operating taxes and licenses							Operating taxes and licenses		15		16
Insurance and claims							Insurance and claims		44		56
Gains on sales of property and equipment							Gains on sales of property and equipment		(3)		(1)
Depreciation and amortization expense	Depreciation and amortization expense		116		119		Depreciation and amortization expense		101		94
Gain on sale of business			(450)		—

Transaction and integration costs	Transaction and integration costs		10		5		Transaction and integration costs		22		7
Restructuring costs	Restructuring costs		6		1		Restructuring costs		24		6
Operating income	Operating income		625		139		Operating income		58		63
Other income	Other income		(14)		(16)		Other income		(5)		(14)
Debt extinguishment loss			—		8

Interest expense	Interest expense		37		65		Interest expense		42		37
Income from continuing operations before income tax provision	Income from continuing operations before income tax provision		602		82		Income from continuing operations before income tax provision		21		40
Income tax provision	Income tax provision		113		19		Income tax provision		4		8
Income from continuing operations	Income from continuing operations		489		63		Income from continuing operations		17		32
Income (loss) from discontinued operations, net of taxes	Income (loss) from discontinued operations, net of taxes		(1)		55		Income (loss) from discontinued operations, net of taxes		(3)		456
Net income			488		118

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

Net income attributable to XPO	Net income attributable to XPO		$	488	$	115	Net income attributable to XPO		$	14	$	488

Net income (loss) attributable to common shareholders	Net income (loss) attributable to common shareholders						Net income (loss) attributable to common shareholders
Continuing operations	Continuing operations		$	489	$	63	Continuing operations		$	17	$	32
Discontinued operations	Discontinued operations		(1)		52		Discontinued operations		(3)		456
Net income attributable to common shareholders	Net income attributable to common shareholders		$	488	$	115	Net income attributable to common shareholders		$	14	$	488

Earnings (loss) per share data	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 per share from continuing operations		$	0.15	$	0.28
Basic earnings (loss) per share from discontinued operations	Basic earnings (loss) per share from discontinued operations		(0.01)		0.49		Basic earnings (loss) per share from discontinued operations		(0.02)		3.97
Basic earnings per share attributable to common shareholders	Basic earnings per share attributable to common shareholders		$	4.25	$	1.08	Basic earnings per share attributable to common shareholders		$	0.13	$	4.25
Diluted earnings per share from continuing operations	Diluted earnings per share from continuing operations		$	4.23	$	0.56	Diluted earnings per share from continuing operations		$	0.15	$	0.28
Diluted earnings (loss) per share from discontinued operations	Diluted earnings (loss) per share from discontinued operations		(0.01)		0.46		Diluted earnings (loss) per share from discontinued operations		(0.02)		3.94
Diluted earnings per share attributable to common shareholders	Diluted earnings per share attributable to common shareholders		$	4.22	$	1.02	Diluted earnings per share attributable to common shareholders		$	0.13	$	4.22

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

See accompanying notes to condensed consolidated financial statements.

Table of Contents

XPO, ~~Logistics,~~ Inc.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

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


	Three Months Ended March 31,
(In millions)		2023		2022
Net income		$	14	$	488

Other comprehensive income (loss), net of tax
Foreign currency translation gain (loss), net of tax effect of $8 and $(2)		$	13	$	(26)
Unrealized gain on financial assets/liabilities designated as hedging instruments, net of tax effect of $1 and $—		2		1

Other comprehensive income (loss)		15		(25)


Comprehensive income attributable to XPO		$	29	$	463

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)

~~Table of Contents~~


		Three Months Ended March 31,					Three Months Ended March 31,
(In millions)	(In millions)	2022		2021		(In millions)	2023		2022
Cash flows from operating activities of continuing operations						Cash flows from operating activities of continuing operations
Net income						Net income	$	14	$	488
Income (loss) from discontinued operations, net of taxes						Income (loss) from discontinued operations, net of taxes	(3)		456
Income from continuing operations						Income from continuing operations	17		32
Adjustments to reconcile income from continuing operations to net cash from operating activities						Adjustments to reconcile income from continuing operations to net cash from operating activities
Depreciation, amortization and net lease activity						Depreciation, amortization and net lease activity	101		94
Stock compensation expense						Stock compensation expense	22		6
Accretion of debt						Accretion of debt	3		4
Deferred tax expense (benefit)						Deferred tax expense (benefit)	(2)		5

Gains on sales of property and equipment						Gains on sales of property and equipment	(3)		(1)
Other						Other	17		6
Changes in assets and liabilities						Changes in assets and liabilities
Accounts receivable						Accounts receivable	(69)		(154)
Other assets						Other assets	(24)		(37)
Accounts payable						Accounts payable	(8)		117
Accrued expenses and other liabilities						Accrued expenses and other liabilities	22		116
Net cash provided by operating activities from continuing operations						Net cash provided by operating activities from continuing operations	76		188
Cash flows from investing activities of continuing operations						Cash flows from investing activities of continuing operations

Payment for purchases of property and equipment						Payment for purchases of property and equipment	(224)		(123)
Proceeds from sale of property and equipment						Proceeds from sale of property and equipment	8		3

Net cash used in investing activities from continuing operations						Net cash used in investing activities from continuing operations	(216)		(120)
Cash flows from financing activities of continuing operations						Cash flows from financing activities of continuing operations

Repayment of debt and finance leases						Repayment of debt and finance leases	(16)		(16)

Change in bank overdrafts						Change in bank overdrafts	19		3
Payment for tax withholdings for restricted shares						Payment for tax withholdings for restricted shares	(12)		(12)

Other						Other	(1)		1
Net cash used in financing activities from continuing operations						Net cash used in financing activities from continuing operations	(10)		(24)

Cash flows from discontinued operations	Cash flows from discontinued operations					Cash flows from discontinued operations
Operating activities of discontinued operations	Operating activities of discontinued operations	1		96		Operating activities of discontinued operations	(8)		13
Investing activities of discontinued operations	Investing activities of discontinued operations	—		(57)		Investing activities of discontinued operations	1		691
Financing activities of discontinued operations		—		(37)
Net cash provided by discontinued operations		1		2

Net cash provided by (used in) discontinued operations						Net cash provided by (used in) discontinued operations	(7)		704
Effect of exchange rates on cash, cash equivalents and restricted cash	Effect of exchange rates on cash, cash equivalents and restricted cash	(3)		(2)		Effect of exchange rates on cash, cash equivalents and restricted cash	2		(3)
Net increase (decrease) in cash, cash equivalents and restricted cash	Net increase (decrease) in cash, cash equivalents and restricted cash	745		(1,425)		Net increase (decrease) in cash, cash equivalents and restricted cash	(155)		745
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	273		2,065		Cash, cash equivalents and restricted cash, beginning of period	470		273
Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	1,018		640		Cash, cash equivalents and restricted cash, end of period	315		1,018
Less: Cash, cash equivalents and restricted cash of discontinued operations, end of period	Less: Cash, cash equivalents and restricted cash of discontinued operations, end of period	4		407		Less: Cash, cash equivalents and restricted cash of discontinued operations, end of period	—		50
Cash, cash equivalents and restricted cash of continued operations, end of period	Cash, cash equivalents and restricted cash of continued operations, end of period	$	1,014	$	233	Cash, cash equivalents and restricted cash of continued operations, end of period	$	315	$	968
Supplemental disclosure of cash flow information	Supplemental disclosure of cash flow information					Supplemental disclosure of cash flow information

Leased assets obtained in exchange for new operating lease liabilities	Leased assets obtained in exchange for new operating lease liabilities	$	46	$	79	Leased assets obtained in exchange for new operating lease liabilities	$	28	$	22
Leased assets obtained in exchange for new finance lease liabilities	Leased assets obtained in exchange for new finance lease liabilities	4		16		Leased assets obtained in exchange for new finance lease liabilities	19		4
Cash paid for interest	Cash paid for interest	13		74		Cash paid for interest	39		13
Cash paid for income taxes	Cash paid for income taxes	5		1		Cash paid for income taxes	3		3

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																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		Additional Paid-In Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Loss		Total Equity
Balance as of December 31, 2021		—	$	—	114,737	$	—	$	1,179	$	43	$	(84)	$	1,138	$	—	$	1,138
Balance as of December 31, 2022																				Balance as of December 31, 2022		115,435	$	—	$	1,238	$	(4)	$	(222)	$	1,012
Net income	Net income	—	—		—	—		—		488		—		488		—		488		Net income		—	—		—		14		—		14
Other comprehensive loss		—	—		—	—		—		—		(25)		(25)		—		(25)
Other comprehensive income																				Other comprehensive income		—	—		—		—		15		15

Exercise and vesting of stock compensation awards	Exercise and vesting of stock compensation awards	—	—		245	—		—		—		—		—		—		—		Exercise and vesting of stock compensation awards		315	—		—		—		—		—
Tax withholdings related to vesting of stock compensation awards	Tax withholdings related to vesting of stock compensation awards	—	—		—	—		(12)		—		—		(12)		—		(12)		Tax withholdings related to vesting of stock compensation awards		—	—		(8)		—		—		(8)

Stock compensation expense	Stock compensation expense	—	—		—	—		8		—		—		8		—		8		Stock compensation expense		—	—		22		—		—		22
Other		—	—		—	—		1		—		—		1		—		1
Balance as of March 31, 2022		—	$	—	114,982	$	—	$	1,176	$	531	$	(109)	$	1,598	$	—	$	1,598

Balance as of March 31, 2023																				Balance as of March 31, 2023		115,750	$	—	$	1,252	$	10	$	(207)	$	1,055


		Series A Preferred Stock			Common 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		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Equity
Balance as of December 31, 2020		1	$	1	102,052	$	—	$	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
Net income	Net income	—	—		—	—		—		115		—		115		3		118		Net income		—	—		—		488		—		488
Other comprehensive loss	Other comprehensive loss	—	—		—	—		—		—		(37)		(37)		(5)		(42)		Other comprehensive loss		—	—		—		—		(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)
Conversion of preferred stock to common stock		(1)	(1)		139	—		1		—		—		—		—		—
Exercise of warrants		—	—		9,215	—		—		—		—		—		—		—

Stock compensation expense	Stock compensation expense	—	—		—	—		10		—		—		10		—		10		Stock compensation expense		—	—		8		—		—		8

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

See accompanying notes to condensed consolidated financial statements.

Table of Contents

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”), is a leading provider of freight transportation services. We use our proprietary technology to move goods efficiently through our customers’ supply chains ~~primarily by providing less-than-truckload (“LTL”)~~in North America and ~~truck brokerage services.~~Europe. See Note 4—3—Segment Reporting for additional information on our operations.

2022 ~~Strategic Plan~~RXO Spin-Off and Intermodal Sale

On ~~March 8,~~November 1, 2022, we ~~announced that our Board~~completed the spin-off of ~~Directors approved a plan to pursue the strategic spin-off of~~RXO, Inc. (“RXO”), our tech-enabled brokered transportation platform ~~in North America~~ as a publicly traded company and to pursue 2 divestitures: the sale of our North American intermodal operation and the sale or listing of our European business. We sold our intermodal operation, which provides rail brokerage and drayage services, in March 2022. For further information, see Note 3—Divestiture.

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

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

~~2021 Spin-Off of the Logistics Segment~~

~~On August 2, 2021, we completed the spin-off of our Logistics segment as GXO Logistics, Inc. (“GXO”~~(the “RXO spin-off”). The historical results of operations and the financial positions of RXO and our ~~Logistics segment~~intermodal operation, which was sold in March 2022, 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~~Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 (the ~~“2021~~“2022 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 ~~2021~~2022 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, ~~2022~~2023 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2022.~~2023.

In the first quarter of 2023, we made certain changes to our financial reporting to increase transparency and improve comparability. Specifically, we changed the expense captions within Operating income in the Condensed Consolidated Statements of Income to reflect the nature of the expense. The change to natural expense classification had no impact on consolidated Revenues or Operating income. We have recast prior period amounts to conform to the current ~~period’s~~year’s presentation.

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Restricted Cash

As of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, our restricted cash included in Other long-term assets on our Condensed Consolidated Balance Sheets was $6 million and $10 ~~million.~~million, respectively.

Trade Receivables Securitization and Factoring Programs

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

The maximum amount of net cash proceeds available at any one time under our securitization program, inclusive of any unsecured borrowings, is €200 million (approximately ~~$221~~$217 million as of March 31, ~~2022)~~2023). As of March 31, ~~2022, €1 million (approximately $1 million) was~~2023, the maximum amount available under the program ~~subject to having sufficient receivables available to sell and with consideration to amounts previously purchased.~~was utilized. The weighted average interest rate was ~~0.53%~~3.41% as of March 31, ~~2022. Charges for commitment fees,~~2023. In May 2023, we entered into an agreement to extend the securitization program, which was scheduled to expire in July 2024, through July 2026. The terms and conditions of the extended securitization program are ~~based on a percentage~~materially consistent with the prior program.

Table of ~~available amounts, and charges for administrative fees were not material to our results of operations for the three months ended March 31, 2022 and 2021.~~Contents

Information related to the trade receivables sold was as follows:

Three Months Ended March 31,
(In millions) 2022
2021 (1)
Securitization programs
Receivables sold in period $ 447 $ 347
Cash consideration 447 347
Factoring programs
Receivables sold in period 27 16
Cash consideration 27 16

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


	Three Months Ended March 31,
(In millions)		2023		2022
Securitization programs
Receivables sold in period		$	440	$	447
Cash consideration		440		447

Factoring programs
Receivables sold in period		24		21
Cash consideration		24		21

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, ~~2022~~2023 and December 31, ~~2021~~2022 due to their short-term nature and/or being receivable or payable on demand. The Level 1 cash equivalents include money market funds valued using quoted prices in active markets and a cash deposit for the securitization program. ~~Our~~For information on the fair value hierarchy of our derivative instruments, ~~are classified as Level 2~~see Note 6—Derivative Instruments; and ~~are valued using inputs other than quoted prices, such as foreign exchange rates and yield curves. For~~for further 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, 2022 $ 931 $ 931 $ 931
December 31, 2021 181 181 181

~~Cash equivalents at March 31, 2022 include the cash proceeds from the sale of our intermodal operation in March 2022. For further information, see Note 3—Divestiture.~~


(In millions)	Carrying Value		Fair Value		Level 1
March 31, 2023	$	238	$	238	$	238
December 31, 2022	402		402		402

Adoption of New Accounting Standard

In ~~November 2021,~~September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ~~2021-10, “Government Assistance (Topic 832)~~2022-04, “Liabilities - Supplier Finance Programs (Subtopic 405-50): ~~Disclosures by Business Entities about Government Assistance.~~Disclosure of Supplier Finance Program Obligations.” The ASU increases the transparency surrounding ~~government assistance~~supplier finance programs by requiring the buyer to disclose information on an annual ~~disclosure of (i)~~basis about the ~~types of assistance received, (ii) an entity’s accounting for the assistance and (iii) the effect~~key terms of the ~~assistance on~~program, the ~~entity’s financial statements.~~outstanding obligation amounts as of the end of the period, a rollforward of such amounts, and the balance sheet presentation of the related amounts. Additionally, the obligation amount outstanding at the end of the period must be disclosed in interim periods. We adopted this standard on January 1, ~~2022,~~2023, on a prospective basis. The adoption, which is limited to financial statement disclosures, did not have a material impact on our financial ~~statement disclosures.~~

~~Accounting Pronouncement Issued but Not Yet Effective~~statements.

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

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are effective upon ~~issuance through~~issuance. In December 2022, the FASB issued ASU 2022-06, “Reference rate reform (Topic 848): Deferral of the sunset date of Topic 848” which defers the expiration date for Topic 848 from December 31, ~~2022.~~2022 until December 31, 2024. At December 31, 2022, our revolving loan credit agreement (the “ABL Facility”) and the senior secured term loan credit agreement, as amended (the “Term Loan Facility”), provide for an interest rate based on LIBOR. In February 2023, we amended the terms of our ABL Facility, including transitioning the interest rate from LIBOR to other base rates, and we expect to similarly modify the interest rate basis in the Term Loan Facility in 2023. We ~~intend to apply this guidance if~~do not expect the modifications of ~~contracts that include LIBOR occur, which is not expected~~these facilities to have a material impact on our consolidated financial statements.

2. Discontinued Operations

As discussed above, the results of RXO and intermodal are presented as discontinued operations. In addition, discontinued operations include GXO Logistics, Inc. (“GXO”), our former logistics segment that we spun off in August 2021.

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

Three Months Ended March 31,

(In millions)

~~2021~~2022

Revenue

~~1,818~~1,645

~~Direct operating expense (exclusive of depreciation~~Salaries, wages and ~~amortization)~~employee benefits

~~1,514~~164

~~Sales, general and administrative expense~~Purchased transportation

~~150~~1,221

Fuel, operating expenses and supplies

115

Operating taxes and licenses

Insurance and claims

Depreciation and amortization expense

73 22

Gain on sale of business

(450)

Transaction and other operating costs

172

Operating income

64561

~~Other income~~

~~(11)~~

~~Interest expense~~

~~Income from discontinued operations before income tax provision~~

Income tax provision

16105

~~Net income from discontinued operations, net of taxes~~

~~Net income from discontinued operations attributable to noncontrolling~~

~~interests~~

~~(3)~~

Net income from discontinued operations attributable to ~~GXO~~discontinued operations

52456

~~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~~2023, we incurred approximately $24 million of ~~these~~

~~Table~~costs related to the RXO spin-off, of ~~Contents~~

~~costs~~which $4 million are reflected within income (loss) from discontinued operations in our Condensed Consolidated Statements of Income. For the three months ended March 31, 2022, we incurred approximately $4 million of costs related to the GXO spin-off all of which are reflected within income from continuing operations in our Condensed Consolidated Statements of income.

In accordance with a separation and distribution agreement, GXO has agreed to indemnify XPO for payments XPO makes with respect to certain self-insurance matters that were incurred by ~~GXO~~the logistics segment prior to the spin-off and remain obligations of XPO. The receivable and reserve for these matters was approximately ~~$20~~$16 million ~~each~~and $15 million, respectively, as of March 31, ~~2022~~2023 and approximately ~~$23~~$17 million and ~~$21~~$16 million, respectively, as of December 31, ~~2021.~~2022.

3. ~~Divestiture~~

In March 2022, we sold our North American intermodal operation for cash proceeds of approximately $705 million, net of cash disposed and subject to a customary post-closing purchase price adjustment. We recorded a pre-tax gain on the sale of $450 million, net of transaction costs, for the three months ended March 31, 2022. We agreed to provide certain specified customary transition services for a period not exceeding 12 months from the sale. The intermodal operation generated revenue of $1.2 billion and operating income of $53 million for the year ended December 31, 2021. The intermodal operation was included in our Brokerage and Other Services segment through the date of the sale.

4. Segment Reporting

We are organized into 2two reportable segments: ~~(i)~~ North American LTL, the largest component of our business, and ~~(ii) Brokerage and Other Services.~~European Transportation.

In our asset-based North American LTL segment, we provide ~~our customers~~shippers with geographic density and day-definite ~~regional, inter-regional~~domestic and ~~transcontinental LTL freight services. Our~~cross-border services ~~include cross-border~~to the U.S. ~~freight movements to and from Mexico and Canada,~~, as well as ~~intra-Canada service.~~Mexico, Canada and the Caribbean. Our North American LTL segment also includes the results of our trailer manufacturing operations.

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In our ~~asset-light Brokerage~~European Transportation segment, we serve a large base of customers with consumer, trade 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. Ourindustrial markets. We offer dedicated truckload, LTL, 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~~freight forwarding and ~~global forwarding. Our European business, which we plan to divest through either a sale or a listing on a European stock exchange, is also currently reported within this segment.~~

~~Some of our operating units provide services to our other operating units outside of their reportable segment. Billings for~~multimodal solutions, such ~~services are based on negotiated rates~~as road-rail and ~~are reflected as revenues of the billing segment. We adjust these rates from time to time based on market conditions. We eliminate intersegment revenues and expenses in our consolidated results.~~road-short sea combinations.

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

~~Table~~ Segment Adjusted EBITDA has historically reflected an allocation of ~~Contents~~

corporate costs. In the first quarter of 2023, we began allocating incremental corporate costs from Corporate to North American LTL. Prior periods have been recast to reflect these incremental allocations, which approximate $80 million annually.

Selected financial data for our segments is as follows:


		Three Months Ended March 31,						Three Months Ended March 31,
(in millions)	(in millions)		2022		2021		(in millions)		2023		2022
Revenue	Revenue						Revenue
North American LTL	North American LTL		$	1,105	$	962	North American LTL		$	1,120	$	1,107
Brokerage and Other Services			2,432		2,071
Eliminations			(64)		(44)
European Transportation							European Transportation		787		787
Total	Total		$	3,473	$	2,989	Total		$	1,907	$	1,894

Adjusted EBITDA	Adjusted EBITDA						Adjusted EBITDA
North American LTL	North American LTL		$	205	$	214	North American LTL		$	182	$	186
Brokerage and Other Services			164		125
European Transportation							European Transportation		37		38
Corporate	Corporate		(48)		(60)		Corporate		(9)		(40)
Total adjusted EBITDA			321		279
Total Adjusted EBITDA							Total Adjusted EBITDA		210		184
Less:	Less:						Less:
Debt extinguishment loss			—		8

Interest expense	Interest expense		37		65		Interest expense		42		37
Income tax provision	Income tax provision		113		19		Income tax provision		4		8
Depreciation and amortization expense	Depreciation and amortization expense		116		119		Depreciation and amortization expense		101		94
Unrealized (gain) loss on foreign currency option and forward contracts			—		(1)
Gain on sale of business			(450)		—

Transaction and integration costs (1)	Transaction and integration costs (1)		10		5		Transaction and integration costs (1)		22		7
Restructuring costs (2)	Restructuring costs (2)		6		1		Restructuring costs (2)		24		6
Income from continuing operations	Income from continuing operations		$	489	$	63	Income from continuing operations		$	17	$	32

Depreciation and amortization expense	Depreciation and amortization expense						Depreciation and amortization expense
North American LTL	North American LTL		$	55	$	55	North American LTL		$	68	$	56
Brokerage and Other Services			60		60
European Transportation							European Transportation		32		33
Corporate	Corporate		1		4		Corporate		1		5
Total	Total		$	116	$	119	Total		$	101	$	94

(1) Transaction and integration costs for the ~~three months ended March 31,~~first quarter of 2023 are primarily comprised of stock-based compensation for certain employees related to strategic initiatives. Transaction and integration costs for the first quarter of 2022 ~~and 2021~~ are primarily comprised of third-party professional fees related to strategic initiatives ~~including the spin-offs and other disposal activities,~~ as well as retention awards paid to certain employees. Transaction and integration costs for the three months ended March 31, 2023 and 2022 ~~and 2021~~ include $2$1 million and $1$2 million, respectively, related to our ~~Brokerage and Other Services~~European Transportation segment and $8$21 million and $4$5 million, respectively, related to Corporate.

(2) See Note 6—5— Restructuring Charges for further information on our restructuring actions.

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5.4. Revenue Recognition

Disaggregation of Revenues

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


		Three Months Ended March 31, 2022									Three Months Ended March 31, 2023
(In millions)	(In millions)	North American LTL		Brokerage and Other Services		Eliminations		Total		(In millions)	North American LTL		European Transportation		Total
Revenue	Revenue									Revenue
United States	United States	$	1,082	$	1,519	$	(64)	$	2,537	United States	$	1,097	$	—	$	1,097
North America (excluding United States)	North America (excluding United States)	23		101		—		124		North America (excluding United States)	23		—		23
France	France	—		352		—		352		France	—		340		340
United Kingdom	United Kingdom	—		225		—		225		United Kingdom	—		224		224
Europe (excluding France and United Kingdom)	Europe (excluding France and United Kingdom)	—		210		—		210		Europe (excluding France and United Kingdom)	—		223		223
Other		—		25		—		25

Total	Total	$	1,105	$	2,432	$	(64)	$	3,473	Total	$	1,120	$	787	$	1,907

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

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~~Our revenue disaggregated by service offering was as follows:~~


	Three Months Ended March 31, 2022
(In millions)	North American LTL		European Transportation		Total
Revenue
United States	$	1,084	$	—	$	1,084
North America (excluding United States)	23		—		23
France	—		352		352
United Kingdom	—		225		225
Europe (excluding France and United Kingdom)	—		210		210

Total	$	1,107	$	787	$	1,894

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

(2) Other brokerage includes intermodal, expedite, freight forwarding and managed transportation services. Freight forwarding includes operations conducted outside of North America but managed by our North American entities. In March 2022, we sold our intermodal operation. 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, 2022, the fixed consideration component of our remaining performance obligation was approximately $120 million, and we expect approximately 89% of that amount to be recognized over the next three years and the remainder thereafter. We estimate remaining performance obligations at a point in time and actual amounts may differ from these estimates due to changes in foreign currency exchange rates and contract revisions or terminations.

6.5. Restructuring Charges

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

Our restructuring-related activity was as follows:


			Three Months Ended March 31, 2023
(In millions)	Reserve Balance as of December 31, 2022		Charges Incurred		Payments		Foreign Exchange and Other		Reserve Balance as of March 31, 2023
Severance
North American LTL	$	2	$	—	$	(1)	$	—	$	1
European Transportation	1		7		(2)		—		6
Corporate	19		11		(6)		(1)		23









Total	$	22	$	18	$	(9)	$	(1)	$	30

In addition to the severance charges noted in the table above, we recorded a non-cash lease impairment charge of $6 million in our North American LTL segment in the first quarter of 2023.

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~~Our restructuring-related activity was as follows:~~

Three Months Ended March 31, 2022
(In millions) Reserve Balance
as of
December 31, 2021 Charges Incurred Payments Reserve Balance
as of
March 31, 2022
Severance
Brokerage and Other Services $ 6 $ 2 $ (3) $ 5
Corporate 7 1 (2) 6
Total severance 13 3 (5) 11
Facilities
Brokerage and Other Services 2 — — 2
Total facilities 2 — — 2
Contract termination
North American LTL — 3 (3) —
Total contract termination — 3 (3) —
Total $ 15 $ 6 $ (8) $ 13

We expect that the majority of the cash outlays related to the severance charges incurred in the first ~~quarter~~three months of ~~2022~~2023 will be ~~complete~~completed within 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.

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


	March 31, 2023
			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	$	617	Other current assets	$	—	Other current liabilities	$	(21)
Cross-currency swap agreements	57		Other long-term assets	2		Other long-term liabilities	—
Interest rate swaps	1,882		Other current assets	—		Other current liabilities	—


Total				$	2		$	(21)


	December 31, 2022
			Derivative Assets			Derivative Liabilities
(In millions)	Notional Amount		Balance Sheet Caption	Fair Value		Balance Sheet Caption	Fair Value
Derivatives designated as hedges
Cross-currency swap agreements	$	332	Other current assets	$	—	Other current liabilities	$	(11)
Cross-currency swap agreements	68		Other long-term assets	3		Other long-term liabilities	—
Interest rate swaps	1,882		Other current assets	—		Other current liabilities	(1)


Total				$	3		$	(12)

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 Loss on Derivatives				Amount of Gain Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing)
	Three Months Ended March 31,
(In millions)	2023		2022			2023		2022
Derivatives designated as cash flow hedges

Interest rate swaps	1		1			—		—
Derivatives designated as net investment hedges
Cross-currency swap agreements	(10)		9			2		1
Total	$	(9)	$	10		$	2	$	1

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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. Cash flows related to the periodic exchange of interest payments for these net investment hedges are included in Cash flows from operating activities of continuing operations on our Condensed Consolidated Statements of Cash Flows.

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 interest rate swaps convert floating-rate interest payments into fixed rate interest payments. We designated the interest rate swaps as qualifying hedging instruments and account for these derivatives as cash flow hedges. The outstanding interest rate swaps mature on various dates through 2023.

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

7. Debt

March 31, 2022 December 31, 2021
(In millions) Principal Balance Carrying Value Principal Balance Carrying Value
Term loan facilities $ 2,003 $ 1,979 $ 2,003 $ 1,977
6.25% Senior notes due 2025 1,150 1,141 1,150 1,141
6.70% Senior debentures due 2034 300 215 300 214
Finance leases, asset financing and other 224 224 240 240
Total debt 3,677 3,559 3,693 3,572
Short-term borrowings and current maturities of long-term debt 682 682 58 58
Long-term debt $ 2,995 $ 2,877 $ 3,635 $ 3,514


	March 31, 2023				December 31, 2022
(In millions)	Principal Balance		Carrying Value		Principal Balance		Carrying Value

Term loan facility	$	2,003	$	1,983	$	2,003	$	1,981



6.25% senior notes due 2025	112		112		112		111
6.70% senior debentures due 2034	300		218		300		217

Finance leases, asset financing and other	231		231		223		223
Total debt	2,646		2,544		2,638		2,532
Short-term borrowings and current maturities of long-term debt	66		66		59		59
Long-term debt	$	2,580	$	2,478	$	2,579	$	2,473

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, 2022 $ 3,717 $ 1,500 $ 2,217
December 31, 2021 3,811 1,571 2,240


(In millions)	Fair Value		Level 1		Level 2
March 31, 2023	$	2,616	$	395	$	2,221
December 31, 2022	2,601		392		2,209

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~~

Table 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.Contents

ABL Facility

As of March 31, ~~2022,~~2023, our borrowing base ~~was $1.0 billion~~ and ~~our~~ availability under our revolving loan credit agreement (the “ABL Facility”) was ~~$996 million after considering outstanding~~$502 million. Outstanding letters of credit were less than $1 million as of ~~$4 million.~~March 31, 2023. As of March 31, ~~2022,~~2023, we were in compliance with the ABL Facility’s financial covenants.

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Letters of Credit Facility

As of March 31, ~~2022,~~2023, we ~~have~~had issued ~~$185~~$154 million in aggregate face amount of letters of credit under our $200 million uncommitted secured evergreen letter of credit facility.

Term Loan ~~Facilities~~Facility

~~In the first quarter of 2021, we amended our Senior Secured Term Loan Credit Agreement (the “Term Loan Credit Agreement”) and recorded a debt extinguishment loss of $3 million.~~ The interest rate on our term loan facility was ~~1.99%~~6.45% as of March 31, ~~2022.~~

~~Senior Notes Due 2025~~

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

~~Senior Notes Due 2022~~

In January 2021, we redeemed our outstanding 6.50% senior notes due 2022. The redemption price for the notes was 100% of the principal amount, plus accrued and unpaid interest. We paid for the redemption with available cash. We recorded a debt extinguishment loss of $5 million in the first quarter of 2021 due to this redemption.2023.

8. ~~Stockholders’ Equity~~

~~Series A Convertible Perpetual Preferred Stock and Warrants~~

Commencing in the fourth quarter of 2020, holders of our convertible preferred stock and warrants exchanged their holdings for our common stock or a combination of our common stock and cash. These exchanges were intended to simplify our equity capital structure, including in contemplation of the spin-off of our Logistics segment. In the first quarter of 2021, 975 preferred shares were exchanged, and we issued 0.1 million shares of common stock and 9.8 million warrants were exchanged, and we issued 9.2 million shares of common stock. The warrants exchanged included holdings of Jacobs Private Equity, LLC, an entity controlled by the Company’s chairman and chief executive officer.

~~Share Repurchases~~

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

~~There have been no share repurchases since the first quarter of 2020. Our remaining share repurchase authorization was $503 million as of March 31, 2022.~~

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9. Earnings (Loss) per Share

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)			2022		2021		(In millions, except per share data)			2023		2022
Basic earnings (loss) per common share

Net income from continuing operations attributable to common shares								Net income from continuing operations attributable to common shares			$	17	$	32

Net income (loss) from discontinued operations, net of amounts attributable to noncontrolling interest								Net income (loss) from discontinued operations, net of amounts attributable to noncontrolling interest			(3)		456

Net income attributable to common shares, basic								Net income attributable to common shares, basic			$	14	$	488

Basic weighted-average common shares								Basic weighted-average common shares			116		115
									Dilutive effect of stock-based awards		—		1
Diluted weighted-average common shares								Diluted weighted-average common shares			116		116

Basic earnings from continuing operations per share								Basic earnings from continuing operations per share			$	0.15	$	0.28
Basic earnings (loss) from discontinued operations per share								Basic earnings (loss) from discontinued operations per share			(0.02)		3.97
Basic earnings per share								Basic earnings per share			$	0.13	$	4.25

		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				$	488	$	115

Basic weighted-average common shares				115		106

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

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

Basic weighted-average common shares				115		106

		Dilutive effect of stock-based awards and warrants		1		6
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 from continuing operations per share			$	0.15	$	0.28
Diluted earnings (loss) from discontinued operations per share	Diluted earnings (loss) from discontinued operations per share			(0.01)		0.46		Diluted earnings (loss) from discontinued operations per share			(0.02)		3.94
Diluted earnings per share	Diluted earnings per share			$	4.22	$	1.02	Diluted earnings per share			$	0.13	$	4.22

~~10.~~9. Commitments and Contingencies

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

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

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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.

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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 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 18eighteen 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 Global Risks US Ins. Co. (“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 Events~~California Environmental Matters

In ~~March~~August 2022, the Company received a letter from the San Bernardino County District Attorney’s Office, written in cooperation with certain other California District Attorneys and the Los Angeles City Attorney, notifying the Company of an investigation into alleged violations with respect to underground storage tanks, hazardous materials, and hazardous waste in California, and offering a meeting. On October 20, 2022 and April 6, 2023, the Company met with the County Attorneys and the Los Angeles City Attorney. We are assessing the allegations and the underlying facts, and continue to engage with the County and Los Angeles City Attorneys to address the alleged violations. No discussion of potential monetary sanctions or settlement amount has occurred to date, nor can 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.reasonably estimate potential costs at this time.

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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 ~~2021 Annual Report on~~2022 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., together with its subsidiaries (“XPO,” or “we”), is a leading provider of freight transportation ~~services.~~services with company-specific avenues for value creation. We use our proprietary technology to move goods efficiently through our customers’ supply chains ~~primarily by providing less-than-truckload (“LTL”)~~in North America and ~~truck brokerage services. These two core lines~~Europe. As of ~~business generated the majority of our 2021 revenue~~March 31, 2023, we had approximately 38,000 employees and ~~operating income.~~558 locations in 17 countries serving approximately 48,000 customers.

Our company has two reportable ~~segments — (i)~~segments: North American Less-Than-Truckload (“LTL”), the largest component of our business, and European Transportation. Our North American LTL ~~and (ii) Brokerage and Other Services — and within each~~ segment we are 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 secular industry growth trends, our first-mover advantage as an innovator and our blue-chip customer relationships are compelling competitive advantages.

~~2022 Strategic Plan~~

~~On March 8, 2022, we announced that our Board of Directors approved a plan to pursue~~includes the ~~strategic spin-off~~results of our ~~tech-enabled brokered transportation platform~~trailer manufacturing operations.

North American Less-Than-Truckload Segment

LTL in North America asis a ~~publicly traded company~~bedrock industry providing a critical service to the economy, with favorable pricing dynamics and ~~to pursue two divestitures: the sale of our 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 companies with simplified business models and clearly delineated value propositions. The core businessa stable competitive landscape. We have one of the ~~spin-off will be our truck brokerage~~largest LTL networks in North America, with approximately 8% share of the $59 billion U.S. market as of December 31, 2022.

Our LTL sales and service ~~with complementary brokered services for managed transportation, last mile logistics~~professionals and ~~global forwarding. The remaining company will be an asset-based provider~~network of ~~LTL service~~drivers, tractors, trailers and terminals serve approximately 27,000 customers in North America. ~~The planned spin-off transaction, which is intended~~We provide shippers with critical geographic density and day-definite domestic and cross-border services to ~~be tax-free to XPO~~approximately 99% of U.S. zip codes, as well as Mexico, Canada and ~~our shareholders for U.S. federal income tax purposes, would result in XPO shareholders owning stock in both companies. In connection with~~the Caribbean.

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Together, our capacity and reach give us the ~~transaction, it is anticipated that a portion of XPO’s outstanding debt may be repaid using proceeds from borrowings incurred~~ability to manage large freight volumes efficiently and ~~debt securities~~balance our network to ~~be issued by the spun-off company.~~

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~~

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.

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.leverage fixed costs. For the trailing 12 months ended March 31, ~~2022,~~2023, we delivered approximately 18 billion pounds of freight.

~~After~~Importantly, our LTL business historically has generated a high return on invested capital and robust free cash flow. This supports our ongoing investments in the ~~planned spin-off~~expansion of our ~~North American brokered transportation platform,~~network capacity and the enhancement of our ~~company will be~~proprietary technology. We are managing the ~~third largest pure-play LTL provider in North America. We expect our~~ business to ~~move forward with continued strong momentum from~~specific objectives, such as high customer service scores for on-time delivery and damage-free freight, the ~~numerous company-specific initiatives we have underway for network growth~~optimal sourcing of linehaul transportation, and ~~efficiency. We are using a combination~~the addition 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 terminal footprint by the first quarter of 2024 from an October 2021 baseline. Since implementing our LTL 2.0 growth plan in the fourth quarter of 2021, we added six terminals to our network, ~~by year-end 2023. Importantly,~~representing 369 net new doors.

Additionally, we are continuing to execute a host of initiatives that are specific to XPO and largely independent of 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~~macroeconomic environment. We produced 4,705 trailers at our ~~Company-owned~~in-house trailer manufacturing facility in ~~Arkansas.~~

2022, nearly doubling the 2021 output. Our goal is to produce more than 6,000 trailers in 2023. We are ~~making good progress~~also investing 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 twiceexpanding the number of ~~2021 graduates,~~drivers trained at our 130 commercial driver schools. Our in-house trailer manufacturing and driver schools are examples of idiosyncratic, self-reliant capabilities that are advantageous to ~~counteract the industry-wide driver shortage.~~XPO, particularly when industry constraints on equipment or drivers exist.

Specific to our technology, we believe ~~that~~ we have a ~~significant~~large opportunity to drive further ~~improve the~~growth and profitability ofin our LTL network through ~~innovation, beyond~~innovation. For further information, see the “Technology and Sustainability” section below.

European Transportation Segment

XPO has a unique pan-European transportation platform with leading positions in key geographies: we are the #1 full truckload broker and the #1 pallet network (LTL) provider in France; the #1 full truckload broker and the #1 LTL provider in Iberia (Spain and Portugal); and a top-tier dedicated truckload provider in the U.K., where we also have the largest single-owner LTL network. We serve a large ~~gain~~base of customers within the consumer, trade and industrial markets, including many sector leaders that have long-tenured relationships with us.

Our range of services in ~~operating margin~~Europe encompasses dedicated truckload, LTL, truck brokerage, managed transportation, last mile, freight forwarding and, increasingly, multimodal solutions, such as road-rail and road-short sea combinations that we ~~have achieved~~tailor to ~~date. We~~customer needs. Our operators use

our proprietary XPO Connect
® technology to manage these services within our digital ecosystem in Europe.

20Technology and Sustainability

~~Table~~One of ~~Contents~~

the ways in which we deliver superior service to our customers is by empowering our employees with technology. Our industry is evolving, and customers want to de-risk their supply chains by forming relationships with reliable service providers that have invested in innovation.

We have built a highly scalable ecosystem on the cloud that deploys our software consistently across our operating footprint. In our North American LTL business, the caliber of our technology is mission-critical to our success; it optimizes linehaul, pickup-and-delivery and pricing — the main components of the service we provide. An LTL network of our scale has hundreds of thousands of activities underway at any given time, all managed on our technology. For the trailing 12 months ended March 31, 2023, we moved 18 billion pounds of freight 773 million miles, including moving linehaul freight an average of 2.5 million miles a day.

With intelligent route-building, we can reduce empty miles in our linehaul network, improve load factor and mitigate cargo damage. Our proprietary bypass models make recommendations to ~~move LTL~~enhance trailer utilization, assimilating massive amounts of data and taking volume, density, and freight ~~across North America, and proprietary~~dimensions into account. We use our visualization tools to ~~help~~ reduce ~~the cost of~~costs with pickups and ~~deliveries. Our XPO Smart™ productivity tools are deployed in our LTL cross-dock operations. Our largest opportunity is related~~deliveries, and we developed piece-level tracking to ~~our proprietary~~identify individual pallets to enhance shipment loading and visibility. We also developed a robust pricing ~~technology, which includes~~platform for contractual account management and 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 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 truckload capacity in the e-commerce 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.

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 major differentiator for 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 mobile app for XPO Connect® ~~surpassed 700,000.~~

Our Brokerage and Other Services segment also includes three asset-light, brokered transportation services, all of which are complementary to our truck brokerage business: managed transportation, last mile logistics for heavy goods and global forwarding. Our European business, which we plan to divest through either a sale or a listing, is also currently reported within this segment.

~~Post-spin-off, we expect all of the brokered transportation services to continue to lever the first-mover technology advantage the new company will inherit from XPO.~~

~~From 2013 through 2021, our truck brokerage business in North 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 company has been investing in transportation automation and digitization for more than a decade to innovate how goods move through supply chains. We believe that we are well-positioned to satisfy customer demands for faster, more efficient supply chains with greater visibility, while enhancing revenue and profitability.

Importantly, our technology also helps our ~~Company and customers~~company meet ~~our respective~~its environmental, social and governance (“ESG”) goals, such as a reduction in ~~the~~our carbon footprint, ~~of certain supply chains operations.~~and can help our customers meet their own goals. For a detailed discussion of our philosophy relating to innovation and ESG matters, see the ~~Executive~~Company Overview included in our ~~2021 Annual Report on~~2022 Form 10-K, as well as our current Sustainability Report at sustainability.xpo.com.

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Impacts of ~~COVID-19 and Other~~ Notable External Conditions

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

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in the recovery, have mitigated the impact on our profitability relative to the impact on our revenue and volumes, while our strong liquidity and disciplined capital management enable us to continue to invest in growth initiatives.

Additionally, economic inflation can have a negative impact on our operating ~~costs. A prolonged period~~costs, such as the rising costs of ~~inflation could cause interest rates,~~fleet maintenance, fuel ~~wages~~ and ~~other~~purchased transportation we experienced in 2022. We mitigate these 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. In addition, the rise in interest rates increased our cost of capital in 2022. An economic recession could depress customer demand for transportation services.

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.

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)		2022		2021		2022		2021		2022 vs. 2021		(Dollars in millions)			2023		2022		2023		2022		2023 vs. 2022
Revenue	Revenue		$	3,473	$	2,989	100.0	%	100.0	%	16.2	%	Revenue			$	1,907	$	1,894	100.0	%	100.0	%	0.7	%
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)			385		334		11.1	%	11.2	%	15.3	%
Sales, general and administrative expense			344		338		9.9	%	11.3	%	1.8	%
Salaries, wages and employee benefits													Salaries, wages and employee benefits			762		725		40.0	%	38.3	%	5.1	%
Purchased transportation													Purchased transportation			457		510		24.0	%	26.9	%	(10.4)	%
Fuel, operating expenses and supplies													Fuel, operating expenses and supplies			427		418		22.4	%	22.1	%	2.2	%
Operating taxes and licenses													Operating taxes and licenses			15		16		0.8	%	0.8	%	(6.3)	%
Insurance and claims													Insurance and claims			44		56		2.3	%	3.0	%	(21.4)	%
Gains on sales of property and equipment													Gains on sales of property and equipment			(3)		(1)		(0.2)	%	(0.1)	%	200.0	%
Depreciation and amortization expense	Depreciation and amortization expense		116		119		3.3	%	4.0	%	(2.5)	%	Depreciation and amortization expense			101		94		5.3	%	5.0	%	7.4	%
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	%	Transaction and integration costs			22		7		1.2	%	0.4	%	214.3	%
Restructuring costs	Restructuring costs		6		1		0.2	%	—	%	500.0	%	Restructuring costs			24		6		1.3	%	0.3	%	300.0	%
Operating income	Operating income		625		139		18.0	%	4.7	%	349.6	%	Operating income			58		63		3.0	%	3.3	%	(7.9)	%
Other income	Other income		(14)		(16)		(0.4)	%	(0.5)	%	(12.5)	%	Other income			(5)		(14)		(0.3)	%	(0.7)	%	(64.3)	%
Debt extinguishment loss			—		8		—	%	0.3	%	(100.0)	%

Interest expense	Interest expense		37		65		1.1	%	2.2	%	(43.1)	%	Interest expense			42		37		2.2	%	2.0	%	13.5	%
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 from continuing operations before income tax provision			21		40		1.1	%	2.1	%	(47.5)	%
Income tax provision	Income tax provision		113		19		3.3	%	0.6	%	494.7	%	Income tax provision			4		8		0.2	%	0.4	%	(50.0)	%
Income from continuing operations	Income from continuing operations		489		63		14.1	%	2.1	%	676.2	%	Income from continuing operations			17		32		0.9	%	1.7	%	(46.9)	%
Income from discontinued operations, net of taxes			(1)		55		—	%	1.8	%	NM
Income (loss) from discontinued operations, net of taxes													Income (loss) from discontinued operations, net of taxes			(3)		456		(0.2)	%	24.1	%	(100.7)	%
Net income	Net income		$	488	$	118	14.1	%	3.9	%	313.6	%	Net income			$	14	$	488	0.7	%	25.8	%	(97.1)	%

~~NM - Not meaningful~~

Three Months Ended March 31, ~~2022~~2023 Compared with Three Months Ended March 31, ~~2021~~2022

~~Revenue~~Our consolidated revenue for the first quarter of ~~2022~~2023 increased ~~16.2%~~0.7% to ~~$3.5~~$1.9 billion, compared with the same quarter in ~~2021.~~2022. The increase ~~in revenue~~ reflects growth in ~~both~~fuel surcharge revenue in our ~~Brokerage and Other Services and~~ LTL ~~segments and includes the impact of increased revenue from fuel surcharges.~~segment, due primarily to higher diesel prices. Foreign currency movement ~~reduced~~decreased revenue by approximately ~~1.2~~2.5 percentage points in the first quarter of ~~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 truck brokerage businesses.

Cost of transportation and services (exclusive of depreciation and amortization) for the first quarter of 2022 was $2.4 billion, or 70.2% of revenue, compared with $2.1 billion or 68.7% of revenue, for the same quarter in 2021. The year-over-year increase as a percentage of revenue is primarily due to higher third-party transportation costs, which were partially offset by pricing actions.2023.

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~~Direct operating expenses (exclusive of depreciation~~Salaries, wages and ~~amortization) are comprised of both fixed~~employee benefits includes compensation-related costs for our employees, including salaries, wages, healthcare-related costs and ~~variable expenses~~payroll taxes, and ~~include operating costs related to our LTL service centers. Direct operating expenses (exclusive of depreciation~~covers drivers and ~~amortization) consist mainly of personnel costs,~~dockworkers, operations and facility workers and ~~equipment expenses, such as rent, utilities, equipment maintenance~~employees in support roles and ~~repair, costs of materials~~other positions. Salaries, wages and ~~supplies, information technology expenses, and gains and losses on sales of property and equipment.~~

~~Direct operating expense (exclusive of depreciation and amortization)~~employee benefits for the first quarter of ~~2022~~2023 was ~~$385~~$762 million, or ~~11.1%~~40.0% of revenue, compared with ~~$334~~$725 million, or ~~11.2%~~38.3% of revenue, for the same quarter in ~~2021.~~2022. The year-over-year increase as a percentage of revenue primarily reflects the impact of inflation on our cost base, partially offset by lower headcount.

Purchased transportation includes costs of procuring third-party freight transportation. Purchased transportation for the first quarter of 2023 was $457 million, or 24.0% of revenue, compared with $510 million, or 26.9% of revenue, for the same quarter in 2022. The year-over-year decrease as a percentage of revenue ~~was~~ primarily ~~driven by~~reflects lower rates paid to third-party providers for purchased transportation miles and the ~~leveraging~~insourcing of ~~compensation costs across~~ a ~~larger revenue base. This decrease was almost entirely offset by a $23 million gains on sales~~greater proportion of ~~property~~linehaul from third-party transportation providers.

Fuel, operating expenses and ~~equipment~~supplies includes the cost of fuel purchased for use in ~~the first quarter of 2021. There were no gains on sales of property~~our vehicles as well as related taxes, maintenance 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~~lease costs for ~~executive~~our equipment, including tractors and ~~certain administration functions, professional fees, facility~~trailers, costs related to operating our owned and leased facilities, bad debt expense, third-party professional fees, information technology expenses and ~~legal costs.~~

~~SG&A~~supplies expense. Fuel, operating expenses and supplies for the first quarter of ~~2022~~2023 was ~~$344~~$427 million, or ~~9.9%~~22.4% of revenue, compared with ~~$338~~$418 million, or ~~11.3%~~22.1% of revenue, for the same quarter in ~~2021.~~2022. The year-over-year increase primarily reflects higher lease costs and bad debt expense, partially offset by lower third-party information technology expenses.

Operating taxes and licenses includes tax expenses related to our vehicles and our owned and leased facilities as well as license expenses to operate our vehicles.

Insurance and claims includes costs related to vehicular and cargo claims for both purchased insurance and self-insurance programs. Insurance and claims for the first quarter of 2023 was $44 million, compared with $56 million for the same quarter in 2022. The year-over-year decrease ~~as a percentage of revenue was primarily driven by~~reflects lower ~~compensation~~cargo insurance expense ~~and third-party professional and consulting fees.~~due to improved operating performance related to damaged shipments.

Depreciation and amortization expense for the first quarter of ~~2022~~2023 was ~~$116~~$101 million, compared with ~~$119~~$94 million for the same quarter in ~~2021.~~

~~Gain on sale~~2022. The year-over-year increase reflects the impact 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.capital investments, in particular tractors and trailers.

Transaction and integration costs for the first quarter of ~~2022~~2023 were ~~$10~~$22 million, compared with $5$7 million for the same quarter in ~~2021.~~2022. Transaction and integration costs for the first ~~three months~~quarter of ~~2022~~2023 are primarily comprised of stock-based compensation for certain employees related to strategic initiatives. Transaction and ~~2021~~integration costs for the first quarter of 2022 are primarily comprised of third-party professional fees related to strategic initiatives ~~including the spin-offs and other disposal activities,~~ as well as retention awards paid to certain employees. We expect to incur additional transaction and integration costs related to rebranding and stock-based compensation in 2023 and 2024.

Restructuring costs for the first quarter of ~~2022~~2023 were $6$24 million, compared with $1$6 million for the same quarter in ~~2021.~~2022. 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~~divestment activities. For more information, see Note 6—5—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 North American brokered transportation operation or for other reasons; however, we are currently unable to reasonably estimate these costs.

Other income primarily consists of pension income. Other income for the first quarter of ~~2022~~2023 was ~~$14~~$5 million, compared with ~~$16~~$14 million for the same quarter in ~~2021.~~

~~Debt extinguishment loss was $8~~2022. The year-over-year decrease reflects $11 million ~~for the first 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 was no debt extinguishment losslower net periodic pension income in the first quarter of ~~2022.~~2023 primarily due to a rise in interest rates and a lower expected return on plan assets.

Interest expense ~~decreased~~increased to $42 million for the first three months of 2023 from $37 million for the first three months of ~~2022 from $65 million for the first three months of 2021.~~2022. The ~~decrease~~increase in interest expense ~~reflected lower average total indebtedness~~is primarily due to a higher floating interest rate on our Term Loan Facilities, partially offset by the impact of the redemption of $1.1 billion of our 6.25% senior notes due 2025 in ~~the first quarter of~~ 2022.

Our effective income tax rates were ~~18.8%~~18.3% and ~~23.0%~~19.6% for the first three months of ~~2022~~2023 and ~~2021,~~2022, respectively. The effective tax rates for the first quarter of ~~2022~~2023 and ~~2021~~2022 were based on forecasted full-year effective tax rates, adjusted for discrete items that occurred within the periods presented. The decrease in our effective income tax rate for the first three months of 2023 compared to the same quarter of 2022 was primarily driven by an increased impact

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from discrete items due to lower pre-tax book income. The primary items impacting the effective tax rate for the first ~~three months~~quarter of 2022 compared to the same quarter in 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 gain exceeding the tax gain, as well as a tax benefit of2023 are $2 million of discrete tax benefits from ~~stock-based compensation.~~revaluing deferred state taxes partially offset by forecasted non-deductible executive compensation expense. The primary item impacting the effective tax rate for the first quarter of ~~2021~~2022 was a discrete tax benefit of $3$2 million from stock-based compensation.

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Segment Financial Results

Our chief operating decision maker (“CODM”) regularly reviews financial information at the operating segment level to allocate resources to the segments and to assess their performance. Our CODM evaluates segment profit (loss) based on adjusted earnings before interest, taxes, depreciation and amortization (“~~adjusted~~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. Segment Adjusted EBITDA has historically reflected an allocation of corporate costs. In the first quarter of 2023, we began allocating incremental corporate costs from Corporate to North American LTL. Prior periods have been recast to reflect these incremental allocations, which approximate $80 million annually. See Note 4—3—Segment Reporting to our Condensed Consolidated Financial Statements for further information and a reconciliation of ~~adjusted~~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)		2022		2021		2022		2021		2022 vs. 2021		(Dollars in millions)			2023		2022		2023		2022		2023 vs. 2022
Revenue	Revenue		$	1,105	$	962	100.0	%	100.0	%	14.9	%	Revenue			$	1,120	$	1,107	100.0	%	100.0	%	1.2	%
Adjusted EBITDA	Adjusted EBITDA		205		214		18.5	%	22.2	%	(4.2)	%	Adjusted EBITDA			182		186		16.3	%	16.8	%	(2.2)	%
Depreciation and amortization expense			55		55		5.0	%	5.7	%	—	%
Depreciation and amortization													Depreciation and amortization			68		56		6.1	%	5.1	%	21.4	%

Revenue in our North American LTL segment increased ~~14.9%~~1.2% to ~~$1.1~~$1.12 billion for the first quarter of ~~2022,~~2023, compared with ~~$962 million~~$1.11 billion for the same quarter in ~~2021.~~2022. Revenue included fuel surcharge revenue of ~~$207~~$217 million and ~~$135~~$207 million, respectively, for the first three months of ~~2022~~2023 and ~~2021.~~2022. The increase in fuel surcharge revenue primarily reflects higher diesel prices.

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,						Three Months Ended March 31,
			2022		2021		Change %			2023		2022		Change %
Pounds per day (thousands)	Pounds per day (thousands)		70,176		70,730		(0.8)	%	Pounds per day (thousands)	68,889		70,176		(1.8)	%

Gross revenue per hundredweight, excluding fuel surcharges	Gross revenue per hundredweight, excluding fuel surcharges		$	20.76	$	19.11	8.7	%	Gross revenue per hundredweight, excluding fuel surcharges	$	21.06	$	20.76	1.4	%

The year-over-year increase in revenue, excluding fuel surcharge revenue, for the first quarter of ~~2022~~2023 reflects an increase in gross revenue per ~~hundredweight.~~hundredweight, almost entirely offset by lower volume. The decrease in weight per day for the first quarter reflects lower ~~shipments~~average weight per ~~day,~~shipment, partially offset by higher shipments per day. In the month of April 2023, as compared to April 2022, weight per ~~shipment.~~day decreased 2.0% while shipments per day increased 3.1%.

Adjusted EBITDA was ~~$205~~$182 million, or ~~18.5%~~16.3% of revenue, for the first three months of ~~2022,~~2023, compared with ~~$214~~$186 million, or ~~22.2%~~16.8% of revenue, for the same quarter in ~~2021.~~2022. The decrease in 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 2022. Additionally, adjusted~~ EBITDA in the first quarter of ~~2022~~2023 reflected higher ~~revenue, partially~~salaries, wages and employee benefits, primarily due to cost inflation and, to a lesser extent, higher headcount, $11 million of lower pension income and higher fuel costs and bad debt expense. These items were almost entirely offset by ~~increased compensation costs,~~lower purchased transportation, ~~expense~~primarily due to lower rates paid to third-party providers for purchased transportation miles 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 our Brokerage and Other Services segment increased 17.4% to $2.4 billion for~~ the ~~first quarter~~insourcing of ~~2022, compared with $2.1 billion for the same quarter in 2021. The year-over-year revenue increase for the first three~~a greater proportion of linehaul from third-party transportation providers.

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~~months~~Depreciation and amortization expense increased to $68 million in the first quarter of 2023 compared with $56 million for the same quarter in 2022 ~~primarily reflected an increase~~due to the impact of capital investments, in ~~North American truck brokerage loads, facilitated by~~particular tractors and trailers.

European Transportation Segment


	Three Months Ended March 31,	Percent of Revenue				Change
(Dollars in millions)		2023		2022		2023		2022		2023 vs. 2022
Revenue		$	787	$	787	100.0	%	100.0	%	—	%
Adjusted EBITDA		37		38		4.7	%	4.9	%	(2.6)	%
Depreciation and amortization		32		33		4.1	%	4.2	%	(3.0)	%

Revenue in our ~~digital platform, as well as strength~~European Transportation segment was $787 million in ~~other services.~~each of the first quarters of 2023 and 2022. Foreign currency movement ~~reduced~~decreased revenue by approximately ~~1.7~~6.1 percentage points in the first quarter of ~~2022.~~2023. The increase in revenue compared to the first quarter of 2022, after taking into effect the impact of foreign currency movement, primarily reflects price increases to cover cost inflation as well as higher volume.

Adjusted EBITDA was ~~$164~~$37 million, or ~~6.7%~~4.7% of revenue, for the first three months of ~~2022,~~2023, compared with ~~$125~~$38 million, or ~~6.1%~~4.9% of revenue, for the same quarter in ~~2021.~~2022. The ~~increase~~decrease in Adjusted EBITDA was primarily driven by higher ~~revenue~~salaries, wages and employee benefits due to ~~load growth~~the impact of cost inflation and bonuses paid to certain French employees in ~~North American truck brokerage and strong pricing in other brokerage services, partially~~connection with a government program (PPV: Prime de Partage de la Valeur), almost entirely offset by ~~higher third-party~~lower purchased transportation and ~~compensation costs.~~higher gains on sales of property and equipment.

Liquidity and Capital Resources

Our cash and cash equivalents balance was ~~$1.0 billion~~$309 million as of March 31, ~~2022,~~2023, compared to ~~$260~~$460 million as of December 31, ~~2021.~~2022. Our principal existing sources of cash ~~are~~are: (i) cash generated from operations; (ii) borrowings available under our Second Amended and Restated Revolving Loan Credit Agreement, as amended (the “ABL Facility”); (iii) proceeds from the issuance of other debt; and (iv) proceeds from divestiture activities. As of March 31, ~~2022,~~2023, we have ~~$996~~$502 million available to draw under our ABL Facility, based on a borrowing base of ~~$1.0 billion~~$502 million and outstanding letters of credit of $4less than $1 million. Additionally, we have a $200 million uncommitted secured evergreen letter of credit facility, under which we ~~have~~had issued ~~$185~~$154 million in aggregate face amount of letters of credit as of March 31, ~~2022.~~2023.

As of March 31, ~~2022,~~2023, we had approximately ~~$2.0 billion~~$811 million 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

was utilized. Under the securitization program, we service the receivables we sell on behalf of the ~~Purchasers,~~purchasers. In May 2023, we entered into an agreement to extend the securitization program, which ~~gives us visibility into the timing of customer payments.~~was scheduled to expire in July 2024, through July 2026. The ~~benefit to our cash flow includes the difference between the cash consideration in the table below~~terms and ~~the amount we collected as a servicer on behalf~~conditions of the ~~Purchasers. In the first three months of 2022 and 2021, we collected cash as servicer of $464 million and $341 million, respectively.~~

~~Term Loan Facilities~~

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

~~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~~

~~Share Repurchases~~

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

~~There have been no share repurchases since the first quarter of 2020. Our remaining share repurchase authorization was $503 million as of March 31, 2022.~~prior program.

Loan Covenants and Compliance

As of March 31, ~~2022,~~2023, 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.

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Sources and Uses of Cash


		Three Months Ended March 31,					Three Months Ended March 31,
(In millions)	(In millions)	2022		2021		(In millions)	2023		2022
Net cash provided by operating activities from continuing operations	Net cash provided by operating activities from continuing operations	$	200	$	77	Net cash provided by operating activities from continuing operations	$	76	$	188
Net cash provided by (used in) investing activities from continuing operations		571		(38)
Net cash used in investing activities from continuing operations						Net cash used in investing activities from continuing operations	(216)		(120)
Net cash used in financing activities from continuing operations	Net cash used in financing activities from continuing operations	(24)		(1,464)		Net cash used in financing activities from continuing operations	(10)		(24)

During the three months ended March 31, ~~2022, we: (i)~~2023, we 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 $77 million and (ii) generated proceeds from sales of property and equipment of $36$76 million. We used cash during this period primarily to: (i) purchase property and equipment of ~~$74~~$224 million; (ii) ~~redeem our senior notes due 2022 for $1.2 billion;~~make payments on debt and finance leases of $16 million; and (iii) ~~repay our ABL Facility borrowings~~make payments of ~~$200~~$12 million related to tax withholding obligations in connection with the vesting of restricted shares.

During the three months ended March 31, 2022, we generated cash from operating activities from continuing operations of $188 million. We used cash during this period primarily to: (i) purchase property and equipment of $123 million; (ii) make payments on debt and finance leases of $16 million; and (iii) make payments of $12 million related to tax withholding obligations in connection with the vesting of restricted shares.

Cash flows from operating activities from continuing operations for the three months ended March 31, ~~2022 increased~~2023 decreased by ~~$123~~$112 million, compared with the same period in ~~2021.~~2022. The ~~increase~~decrease reflects ~~higher income from continuing operations of $426 million for the three months ended March 31, 2022, compared with the same period in 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 from continuing operations generated $571~~$79 million of cash in the three months ended March 31, 2023, compared with generating $42 million of cash during the same period in 2022. Within operating assets and liabilities, for the three months ended March 31, 2023, compared with the same period in 2022: (i) accounts payable utilized $125 million more cash primarily due to the timing of payments; and (ii) accrued expenses and other liabilities generated $94 million less cash primarily due to the accrual of a tax obligation related to the sale of our intermodal operation in the first quarter of 2022. Partially offsetting these items, accounts receivable utilized $85 million less cash in the first quarter of 2023 as compared to the first quarter of 2022 ~~and~~primarily as a result of a lower sequential increase in revenues.

Investing activities from continuing operations used ~~$38~~$216 million of cash in the three months ended March 31, ~~2021.~~2023 and $120 million of cash in the three months ended March 31, 2022. During the three months ended March 31, ~~2022,~~2023, we ~~received $705 million of cash from the sale of our intermodal operation, net of cash disposed, and~~ used ~~$137~~$224 million to purchase property and ~~equipment. During~~equipment, as compared to a $123 million usage of cash in the same period in 2022. The increase reflects our continued investment, primarily in tractors and trailers, to support our long-term growth targets.

Financing activities from continuing operations used $10 million of cash in the three months ended March 31, ~~2021, we used~~

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~~$74 million of cash to purchase property~~2023 and ~~equipment and received $36 million from sales of property and equipment.~~

~~Financing activities from continuing operations used~~ $24 million of cash in the three months ended March 31, ~~2022 and $1.5 billion~~2022. The primary uses of cash from financing activities in each of the first three months ~~ended March 31, 2021.~~of 2023 and 2022 were $16 million used to repay borrowings and $12 million to make payments for tax withholdings on restricted shares. The primary ~~uses~~source of cash from financing activities during the first three months of ~~2022 were $16~~2023 was $19 million ~~used~~of proceeds from bank overdrafts, as compared to ~~repay borrowings. The primary uses~~$3 million in the same period of cash from financing activities during the three months ended March 31, 2021 were $1.2 billion used to redeem the senior notes due 2022 and $200 million used to repay borrowings under our ABL Facility.2022.

~~Except for the notice of our intent to redeem a portion of our senior notes due 2025 as described above, there~~There were no material changes to our December 31, ~~2021~~2022 contractual obligations during the three months ended March 31, ~~2022.~~2023. We anticipate full year ~~net~~gross capital expenditures to be between ~~$425~~$500 million and ~~$475~~$600 million in ~~2022 (without giving effect to the planned spin-off~~2023, funded by cash on hand and ~~other dispositions).~~available liquidity.

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.~~prices. 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, ~~2022,~~2023, as compared with the quantitative and qualitative disclosures about market risk described in our ~~Annual Report on~~2022 Form ~~10-K for the year ended December 31, 2021.~~10-K.

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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, ~~2022.~~2023. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of March 31, ~~2022 were effective as of such time~~2023, 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, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II—Other Information

Item 1. Legal Proceedings.

For information related to our legal proceedings, refer to “Legal Proceedings” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 and Note ~~10—~~9—Commitments and Contingencies of Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q.

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, ~~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.2022.

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

None.

Item 3. Defaults upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

2822

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Item 6. Exhibits.


Exhibit Number						Description

10.1+10.1+						Offer Letter, dated February 14, 2023, between the registrant and Wendy Cassity.

10.2*+						Change in Control and Severance Agreement, dated February 14, 2023, between the registrant and Wendy Cassity.

10.3*+						Form of Time-Based Restricted Stock Unit Award Agreement for executive chairman and CEO (2016 Omnibus Incentive Compensation Plan).

10.4*+						Form of Performance-Based Restricted Stock Unit Award Agreement for executive chairman and CEO (2016 Omnibus Incentive Compensation Plan).

10.2+10.5+						Form of Performance-Based Restricted Stock Unit Award Agreement (2016 Omnibus Incentive Compensation Plan).

10.6*+						Offer Letter, dated April 17, 2023, between the registrant and David Bates.

10.7*+						Change in Control and Severance Agreement, dated April 17, 2023, between the registrant and David Bates.

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 31, ~~2022.~~2023.

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 ~~31, 2022.~~ 3 1 , 202 3 .

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 31 ~~2022.~~, 202 3 .

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 ~~31, 2022.~~ 3 1 , 202 3 .

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~~Mario Harik
			~~Brad Jacobs~~Mario Harik
			Chief Executive Officer
			(Principal Executive Officer)

By:			/s/ ~~Ravi Tulsyan~~Carl D. Anderson II
			~~Ravi Tulsyan~~Carl D. Anderson II
			Chief Financial Officer
			(Principal Financial Officer)

Date: May ~~10, 2022~~4, 2023

3024


	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


			Three Months Ended March 31, 2022
(In millions)	Reserve Balance as of December 31, 2021		Charges Incurred		Payments		Reserve Balance as of March 31, 2022
Severance

Brokerage and Other Services	$	6	$	2	$	(3)	$	5
Corporate	7		1		(2)		6
Total severance	13		3		(5)		11
Facilities

Brokerage and Other Services	2		—		—		2
Total facilities	2		—		—		2
Contract termination
North American LTL	—		3		(3)		—
Total contract termination	—		3		(3)		—
Total	$	15	$	6	$	(8)	$	13


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

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



6.25% Senior notes due 2025	1,150		1,141		1,150		1,141
6.70% Senior debentures due 2034	300		215		300		214

Finance leases, asset financing and other	224		224		240		240
Total debt	3,677		3,559		3,693		3,572
Short-term borrowings and current maturities of long-term debt	682		682		58		58
Long-term debt	$	2,995	$	2,877	$	3,635	$	3,514