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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 June 30, 2023
or
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: 001-40470
_______________________________________________________
GXO_rgb_DigitalUse (002).jpg
GXO Logistics, Inc.
(Exact name of registrant as specified in its charter)
____________________________________________________________________________________________________________
Delaware86-2098312
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
Two American Lane
Greenwich, Connecticut
06831
(Address of principal executive offices) (Zip Code)
(203) 489-1287
Registrant’s telephone number, including area code
_______________________________________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.01 per shareGXONew 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 filerAccelerated filer
Non-accelerated filerSmaller 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 August 1, 2023, there were 118,935,831 shares of the registrant’s common stock, par value $0.01 per share, outstanding.





GXO Logistics, Inc.
Form 10-Q
For the Quarterly Period Ended June 30, 2023
Table of Contents
Page

1



PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GXO Logistics, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)

Three Months Ended June 30,Six Months Ended June 30,
(Dollars in millions, shares in thousands, except per share amounts)2023202220232022
Revenue$2,394 $2,156 $4,717 $4,239 
Direct operating expense1,957 1,775 3,863 3,523 
Selling, general and administrative expense245 220 503 410 
Depreciation and amortization expense84 77 167 153 
Transaction and integration costs6 24 19 43 
Restructuring costs and other3 1 24 14 
Operating income99 59 141 96 
Other income, net1 23 1 39 
Interest expense, net(14)(9)(27)(13)
Income before income taxes86 73 115 122 
Income tax expense(20)(21)(23)(32)
Net income66 52 92 90 
Net income attributable to noncontrolling interests(1)(1)(2)(2)
Net income attributable to GXO$65 $51 $90 $88 
Earnings per share
Basic$0.55 $0.44 $0.76 $0.76 
Diluted$0.54 $0.44 $0.75 $0.76 
Weighted-average common shares outstanding
Basic118,927 116,131 118,854 115,435 
Diluted119,415 116,646 119,323 116,111 

See accompanying Notes to Condensed Consolidated Financial Statements.
2



GXO Logistics, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)

Three Months Ended June 30,Six Months Ended June 30,
(In millions)2023202220232022
Net income$66 $52 $92 $90 
Other comprehensive income (loss), net of tax
Foreign currency translation gain (loss), net of tax (expense) benefit of $6, $(10), $9 and $(10)
17 (75)30 (120)
Net unrealized gain on cash flow hedges, net of tax (expense) of $(1), $0, $0 and $0
4  1  
Defined benefit plans, amortization of net loss, net of tax of $0, $0, $0 and $0
1  1  
Other comprehensive income (loss), net of tax22 (75)32 (120)
Comprehensive income (loss)88 (23)124 (30)
Less: Comprehensive income attributable to noncontrolling interest2  3  
Comprehensive income (loss) attributable to GXO$86 $(23)$121 $(30)

See accompanying Notes to Condensed Consolidated Financial Statements.
3



GXO Logistics, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)

June 30,December 31,
(Dollars in millions, shares in thousands, except per share amounts)20232022
ASSETS
Current assets
Cash and cash equivalents$305 $495 
Accounts receivable, net of allowance of $12 and $12
1,719 1,647 
Other current assets282 286 
Total current assets2,306 2,428 
Long-term assets
Property and equipment, net of accumulated depreciation of $1,428 and $1,297
965 960 
Operating lease assets2,194 2,227 
Goodwill2,802 2,728 
Intangible assets, net of accumulated amortization of $500 and $456
544 570 
Other long-term assets315 306 
Total long-term assets6,820 6,791 
Total assets$9,126 $9,219 
LIABILITIES AND EQUITY
Current liabilities
Accounts payable$566 $717 
Accrued expenses950 995 
Current debt35 67 
Current operating lease liabilities568 560 
Other current liabilities284 193 
Total current liabilities2,403 2,532 
Long-term liabilities
Long-term debt1,625 1,739 
Long-term operating lease liabilities1,838 1,853 
Other long-term liabilities449 417 
Total long-term liabilities3,912 4,009 
Commitments and contingencies (Note 12)
Stockholders’ Equity
Common Stock, $0.01 par value per share; 300,000 shares authorized, 118,932 and 118,728 issued and outstanding
1 1 
Preferred Stock, $0.01 par value per share; 10,000 shares authorized, none issued and outstanding
  
Additional paid-in capital2,587 2,575 
Retained earnings413 323 
Accumulated other comprehensive loss(223)(254)
Total stockholders’ equity before noncontrolling interests2,778 2,645 
Noncontrolling interests33 33 
Total equity2,811 2,678 
Total liabilities and equity$9,126 $9,219 

See accompanying Notes to Condensed Consolidated Financial Statements.
4



GXO Logistics, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)

Six Months Ended June 30,
(In millions)20232022
Cash flows from operating activities:
Net income$92 $90 
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization expense167 153 
Stock-based compensation expense18 16 
Deferred tax expense (benefit)
(17)3 
Other10 1 
Changes in operating assets and liabilities
Accounts receivable(29)(20)
Other assets18 (30)
Accounts payable(107)(56)
Accrued expenses and other liabilities(52)43 
Net cash provided by operating activities100 200 
Cash flows from investing activities:
Capital expenditures(150)(154)
Proceeds from sales of property and equipment10 6 
Acquisition of businesses, net of cash acquired (874)
Net proceeds from cross-currency swap agreements 10 
Other 9 
Net cash used in investing activities(140)(1,003)
Cash flows from financing activities:
Proceeds from issuance of debt, net 898 
Repayments of debt, net(138) 
Repayments of finance lease obligations(16)(15)
Taxes paid related to stock-based compensation awards(6)(12)
Other5 (2)
Net cash provided by (used in) financing activities(155)869 
Effect of exchange rates on cash and cash equivalents5 (15)
Net (decrease) increase in cash and cash equivalents(190)51 
Cash and cash equivalents, beginning of period495 333 
Cash and cash equivalents, end of period
$305 $384 
Supplemental disclosure of non-cash activities:
Common stock issued for acquisition$ $203 

See accompanying Notes to Condensed Consolidated Financial Statements.
5



GXO Logistics, Inc.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)

Common StockAdditional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Equity Before
Noncontrolling
Interests
Noncontrolling
Interests
Total
Equity
(Shares in thousands,
dollars in millions)
SharesAmount
Balance as of March 31, 2023118,889 $1 $2,580 $348 $(244)$2,685 $34 $2,719 
Net income— — — 65 — 65 1 66 
Other comprehensive income— — — — 21 21 1 22 
Stock-based compensation— — 9 — — 9 — 9 
Vesting of stock-based compensation awards71 — — — — — — — 
Tax withholding on vesting of stock-based compensation awards(28)— (2)— — (2)— (2)
Dividends— — — — — — (3)(3)
Balance as of June 30, 2023118,932 $1 $2,587 $413 $(223)$2,778 $33 $2,811 


(Shares in thousands,
dollars in millions)
Common StockAdditional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Equity Before
Noncontrolling
Interests
Noncontrolling
Interests
Total
Equity
SharesAmount
Balance as of December 31, 2022118,728 $1 $2,575 $323 $(254)$2,645 $33 $2,678 
Net income— — — 90 — 90 2 92 
Other comprehensive income— — — — 31 31 1 32 
Stock-based compensation— — 18 — — 18 — 18 
Vesting of stock-based compensation awards336 — — — — — — — 
Tax withholding on vesting of stock-based compensation awards(132)— (6)— — (6)— (6)
Dividends— — — — — — (3)(3)
Balance as of June 30, 2023118,932 $1 $2,587 $413 $(223)$2,778 $33 $2,811 

See accompanying Notes to Condensed Consolidated Financial Statements.
6



GXO Logistics, Inc.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)

Common StockAdditional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Equity Before
Noncontrolling
Interests
Noncontrolling
Interests
Total
Equity
(Shares in thousands,
dollars in millions)
SharesAmount
Balance as of March 31, 2022114,840 $1 $2,349 $163 $(172)$2,341 $34 $2,375 
Net income— — — 51 — 51 1 52 
Other comprehensive loss— — — (74)(74)(1)(75)
Stock-based compensation— — 10 — — 10 — 10 
Vesting of stock compensation awards23 — — — — — — — 
Tax withholding on vesting of stock compensation awards(2)— (1)— — (1)— (1)
Common stock issued for acquisition3,749 — 203 — — 203 — 203 
Dividends— — — — — — (3)(3)
Balance as of June 30, 2022118,610 $1 $2,561 $214 $(246)$2,530 $31 $2,561 


Common StockAdditional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Equity Before
Noncontrolling
Interests
Noncontrolling
Interests
Total
Equity
(Shares in thousands,
dollars in millions)
SharesAmount
Balance as of December 31, 2021114,659 $1 $2,354 $126 $(130)$2,351 $39 $2,390 
Net income— — — 88 — 88 2 90 
Other comprehensive loss— — — — (118)(118)(2)(120)
Stock-based compensation— — 16 — — 16 — 16 
Vesting of stock compensation awards341 — — — — — — — 
Tax withholding on vesting of stock compensation awards(139)— (12)— — (12)— (12)
Common stock issued for acquisition3,749 — 203 — — 203 — 203 
Deconsolidation of variable interest entity— — — — 2 2 (5)(3)
Dividends— — — — — — (3)(3)
Balance as of June 30, 2022118,610 $1 $2,561 $214 $(246)$2,530 $31 $2,561 

See accompanying Notes to Condensed Consolidated Financial Statements.
7



GXO Logistics, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

1. Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements of GXO Logistics, Inc. (“GXO” or the “Company”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and pursuant to the rules of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included.

Operating results for the interim periods are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. The Company’s Condensed Consolidated Financial Statements include the accounts of GXO and its majority-owned subsidiaries and variable interest entities of which the Company is the primary beneficiary. The Company has eliminated intercompany accounts and transactions.

The accompanying unaudited Condensed Consolidated Financial Statements and Notes thereto should be read in conjunction with the Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”). Certain amounts reported for prior periods have been reclassified to conform to the current period’s presentation.

The Company presents its operations as one reportable segment.

Recently Adopted Accounting Pronouncements

In 2020, the Financial Accounting Standards Board (“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 if certain criteria are met. The ASU applies 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. In 2021, the FASB expanded the scope of the guidance to include derivatives. In 2022, the FASB deferred the expiration date for Topic 848 from December 31, 2022, until December 31, 2024. On March 9, 2023, the Company entered into Amendment No. 1 to its revolving credit facility replacing LIBOR-based benchmark rates with SOFR-based benchmark rates and other conforming changes (the “Revolving Credit Facility”). The Company has transitioned its existing contracts to a replacement index. ASU 2020-04 and its amendments did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

8



2. Revenue Recognition

Revenue disaggregated by geographical area was as follows:
Three Months Ended June 30,Six Months Ended June 30,
(In millions)2023202220232022
United Kingdom$893 $777 $1,737 $1,481 
United States692 685 1,406 1,366 
France217 183 419 359 
Netherlands198 163 394 333 
Spain136 123 263 243 
Italy94 80 182 162 
Other164 145 316 295 
Total $2,394 $2,156 $4,717 $4,239 

The Company’s revenue can also be disaggregated by the customer’s primary industry. Revenue disaggregated by industries was as follows:
Three Months Ended June 30,Six Months Ended June 30,
(In millions)2023202220232022
Omnichannel retail$1,026 $879 $1,990 $1,704 
Technology and consumer electronics355 315 721 620 
Food and beverage335 336 642 674 
Industrial and manufacturing270 269 540 532 
Consumer packaged goods232 223 458 436 
Other176 134 366 273 
Total $2,394 $2,156 $4,717 $4,239 

Contract Assets and Liabilities

Contract assets consist of two components, customer acquisition costs and costs to fulfill a contract. Contract assets are primarily amortized to Direct operating expense in the Condensed Consolidated Statements of Operations over the contract term.

Contract liabilities represent the Company’s obligation to transfer services to a customer for which the Company has received consideration or the amount is due from the customer.

9



The contract asset and contract liability balances from contracts with customers were as follows:
June 30,December 31,
(In millions)20232022
Contract assets included in:
Other current assets$15 $25 
Other long-term assets161 165 
Total contract assets$176 $190 
Contract liabilities included in:
Other current liabilities$196 $154 
Other long-term liabilities119 134 
Total contract liabilities$315 $288 

Revenue included the following:
Three Months Ended June 30,Six Months Ended June 30,
(In millions)2023202220232022
Amounts included in the beginning-of-year contract liability balance
$16 $8 $98 $71 

Remaining Performance Obligations

As of June 30, 2023, the fixed consideration component of the Company’s remaining performance obligation was approximately $3.5 billion, and the Company expects to recognize approximately 74% of that amount over the next three years and the remainder thereafter. The Company estimates 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.

10



3. Leases

The Company has operating leases primarily for real estate, warehouse equipment, trucks, trailers, containers and material handling equipment. In addition, the Company has finance leases for warehouse equipment.

The following amounts related to leases were recorded in the Condensed Consolidated Balance Sheets:
June 30,December 31,
(In millions)20232022
Operating leases:
Operating lease assets$2,194 $2,227 
Current operating lease liabilities$568 $560 
Long-term operating lease liabilities1,838 1,853 
Total operating lease liabilities$2,406 $2,413 
Finance leases:
Property and equipment, net$124 $123 
Current debt$31 $35 
Long-term debt96 97 
Total finance lease liabilities$127 $132 

The components of lease expense recorded in the Condensed Consolidated Statements of Operations were as follows:
Three Months Ended June 30,Six Months Ended June 30,
(In millions)2023202220232022
Operating leases:
Operating lease cost$183 $171 $398 $340 
Short-term lease cost63 2392 45 
Variable lease cost29 2257 42 
Total operating lease cost (1)
$275 $216 $547 $427 
Finance leases:
Amortization of leases$6 $11 $13 $18 
Interest expense on lease liabilities1 2 2 3 
Total finance lease cost$7 $13 $15 $21 
Total operating and finance lease cost$282 $229 $562 $448 
(1) Operating lease cost is primarily included in Direct operating expenses in the Condensed Consolidated Statements of Operations.

Supplemental cash flow information was as follows:
Six Months Ended June 30,
(In millions)20232022
Leased assets obtained in exchange for new operating lease liabilities, including $249 from an acquisition in 2022
$239 $559 
Leased assets obtained in exchange for new finance lease liabilities, including $14 from an acquisition in 2022
8 16 
11



4. Debt and Financing Arrangements

The following table summarizes the carrying value of debt:
June 30,December 31,
(In millions)
Rate (1)
20232022
1.65% Unsecured notes due 2026 (2)
1.65%$398 $397 
2.65% Unsecured notes due 2031 (3)
2.65%397 397 
Two-Year Term Loan due 2024 (4)
% 115 
Three-Year Term Loan due 2025 (5)
6.33%235 234 
Five-Year Term Loan due 2027 (6)
6.45%499 499 
Finance leases and otherVarious131 164 
Total debt1,660 1,806 
Less: Current debt35 67 
Total Long-term debt$1,625 $1,739 
(1) Interest rate as of June 30, 2023.
(2) Net of unamortized debt issuance costs of $2 million as of June 30, 2023 and $3 million as of December 31, 2022.
(3) Net of unamortized debt issuance costs of $3 million as of June 30, 2023 and December 31, 2022.
(4) Repaid in the second quarter of 2023.
(5) Net of unamortized debt issuance costs of $1 million as of December 31, 2022.
(6) Net of unamortized debt issuance costs of $1 million as of June 30, 2023 and December 31, 2022.

Factoring Programs

The Company sells certain of its trade receivables on a non-recourse basis to third-party financial institutions under various factoring agreements. The Company accounts for these transactions as sales of receivables and presents cash proceeds as cash provided by operating activities in the Condensed Consolidated Statements of Cash Flows.

Information related to the trade receivables sold was as follows:
Three Months Ended June 30,Six Months Ended June 30,
(In millions)2023202220232022
Receivables sold in period$269 $228 $532 $457 
Cash consideration268 228 529 456 
Net cash used in operating cash flows (1)
 (8) (2)
(1) The three months ended June 30, 2022, includes $8 million of cash used by factoring programs. The six months ended June 30, 2022, includes $116 million of cash provided by factoring program, reduced by $118 million of cash used in the securitization program that was terminated in the first quarter of 2022.

Covenants and Compliance

The covenants in the unsecured notes, term loans and revolving credit facilities, which are customary for financings of this type, limit the Company’s ability to incur indebtedness and grant liens, among other restrictions. In addition, the facilities require the Company to maintain a consolidated leverage ratio below a specified maximum.

As of June 30, 2023, the Company was in compliance with the covenants contained in its debt and financing arrangements.

12



5. Fair Value Measurements and Financial Instruments

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.

Assets and liabilities

The Company bases its fair value estimates on market assumptions and available information. The carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and current maturities of long-term debt approximated their fair values as of June 30, 2023, and December 31, 2022, due to their short-term nature.

Debt

The fair value of debt was    as follows:
June 30, 2023December 31, 2022
(In millions)LevelFair ValueCarrying ValueFair ValueCarrying Value
1.65% Unsecured notes due 2026
2$347 $398 $342 $397 
2.65% Unsecured notes due 2031
2312 397 294 397 
Two-Year Term Loan due 2024
2  115 115 
Three-Year Term Loan due 2025
2231 235 234 234 
Five-Year Term Loan due 2027
2493 499 499 499 

Financial Instruments
The Company directly manages its exposure to risks arising from business operations and economic factors, including fluctuations in interest rates and foreign currencies. The Company uses derivative instruments to manage the volatility related to these exposures. The objective of these derivative instruments is to reduce fluctuations in earnings and cash flows associated with changes in foreign currency exchange rates and interest rates. These financial instruments are not used for trading or other speculative purposes. The Company does not expect to incur any losses as a result of counterparty default.

The fair value of the Company’s derivative instruments and the related notional amounts was as follows:
June 30, 2023
(In millions)Notional
Derivative Assets (1)
Derivative Liabilities (2)
Designated as hedges
Cross-currency swap agreements$1,337 $14 $37 
Interest rate swaps (3)
250 9  
Not designated as hedges
Foreign currency option contracts$315 $4 $ 
(1) Derivative assets are included in Other current assets and Other long-term assets in the Condensed Consolidated Balance Sheets.
(2) Derivative liabilities are included in Other current liabilities and Other long-term liabilities in the Condensed Consolidated Balance Sheets.
(3) In June 2023, the Company amended one interest rate swap scheduled to mature in 2027 to 2024, with a notional amount of $125 million. In connection with this amendment, the Company received $2 million of cash representing the fair value of the reduced term.

13



December 31, 2022
(In millions)Notional
Derivative Assets (1)
Derivative Liabilities (2)
Designated as hedges
Cross-currency swap agreements$1,337 $22 $13 
Interest rate swaps250 9  
Not designated as hedges
Foreign currency option contracts$354 $ $5 
Foreign currency forward contracts3   
(1) Derivative assets are included in Other current assets and Other long-term assets in the Condensed Consolidated Balance Sheets.
(2) Derivative liabilities are included in Other current liabilities and Other long-term liabilities in the Condensed Consolidated Balance Sheets.

As of June 30, 2023 and December 31, 2022, the derivatives were classified as Level 2 within the fair value hierarchy.

The effect of hedges on accumulated other comprehensive loss (“AOCL”) and in the Condensed Consolidated Statements of Operations was as follows:

Three Months Ended June 30, 2023Six Months Ended June 30, 2023
(In millions)Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative
Gain (Loss) Reclassified from AOCL into Net Income (1)
Gain (Loss) Recognized in Net Income on Derivative (Excluded from effectiveness testing) (1)
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative
Gain (Loss) Reclassified from AOCL into Net Income (1)
Gain (Loss) Recognized in Net Income on Derivative (Excluded from effectiveness testing) (1)
Derivatives designated as net investment hedges
Cross-currency swap agreements$(18)$3 $ $(34)$ $1 
Derivatives designated as cash flow hedges
Interest rate swaps$4 $ $ $1 $ $ 
(1) Amounts reclassified to net income are reported within Interest expense, net in the Condensed Consolidated Statements of Operations.

Three Months Ended June 30, 2022Six Months Ended June 30, 2022
(In millions)Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative
Gain (Loss) Reclassified from AOCL into Net Income (1)
Gain (Loss) Recognized in Net Income on Derivative (Excluded from effectiveness testing) (1)
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative
Gain (Loss) Reclassified from AOCL into Net Income (1)
Gain (Loss) Recognized in Net Income on Derivative (Excluded from effectiveness testing) (1)
Derivatives designated as net investment hedges
Cross-currency swap agreements$43 $2 $ $46 $2 $2 
Derivatives designated as cash flow hedges
Interest rate swaps$(1)$ $ $(1)$ $ 
(1) Amounts reclassified to net income are reported within Interest expense, net in the Condensed Consolidated Statements of Operations.

14



Derivatives not designated as hedges

Gains and losses recognized in Other income, net in the Condensed Consolidated Statements of Operations for foreign currency options and forward contracts were as follows:
Three Months Ended June 30,Six Months Ended
June 30,
(In millions)2023202220232022
Realized foreign currency contracts gain (loss)$(4)$7 $(6)$9 
Unrealized foreign currency contracts gain3 9 4 15 
Total foreign currency gain (loss) recognized in net income
$(1)$16 $(2)$24 

6. Stockholders’ Equity

The following table summarizes the changes in AOCL by component:
(In millions)Foreign
Currency
Translation
Adjustments
Cash
Flow
Hedges
Defined
Benefit
Plan
Less: AOCI
attributable to
noncontrolling
interest
AOCL
attributable
to GXO
As of March 31, 2023$(136)$4 $(112)$ $(244)
Foreign currency translation gain33   (1)32 
Unrealized gain (loss) on hedges, net of tax(13)4   (9)
Amounts reclassified from AOCL to net income(3) 1  (2)
Other comprehensive income, net of tax17 4 1 (1)21 
As of June 30, 2023$(119)$8 $(111)$(1)$(223)

(In millions)Foreign
Currency
Translation
Adjustments
Cash
Flow
Hedges
Defined
Benefit
Plan
Less: AOCI
attributable to
noncontrolling
interest
AOCL
attributable
to GXO
As of December 31, 2022$(149)$7 $(112)$ $(254)
Foreign currency translation gain57   (1)56 
Unrealized gain (loss) on hedges, net of tax(26)1   (25)
Amounts reclassified from AOCL to net income(1) 1   
Other comprehensive income, net of tax30 1 1 (1)31 
As of June 30, 2023$(119)$8 $(111)$(1)$(223)

(In millions)Foreign Currency Translation AdjustmentsCash Flow HedgesDefined Benefit PlanLess: AOCI attributable to noncontrolling interestAOCL attributable to GXO
As of March 31, 2022$(94)$ $(76)$(2)$(172)
Foreign currency translation loss(107)  1 (106)
Unrealized gain on hedges, net of tax34    34 
Amounts reclassified from AOCL to net income(2)   (2)
Other comprehensive loss, net of tax(75)  1 (74)
As of June 30, 2022$(169)$ $(76)$(1)$(246)

15



(In millions)Foreign Currency Translation AdjustmentsCash Flow HedgesDefined Benefit PlanLess: AOCI attributable to noncontrolling interestAOCL attributable to GXO
As of December 31, 2021$(53)$ $(76)$(1)$(130)
Foreign currency translation loss(152)  2 (150)
Unrealized gain on hedges, net of tax36    36 
Amounts reclassified from AOCL to net income(4)   (4)
Other comprehensive loss, net of tax(120)  2 (118)
Deconsolidation of variable interest entity4   (2)2 
As of June 30, 2022$(169)$ $(76)$(1)$(246)

7. Employee Benefit Plans

Defined Benefit Plans

The Company sponsors a retirement plan in the U.K. (the “U.K. Retirement Plan”). Components of the net periodic benefit cost recognized under the U.K. Retirement Plan were as follows:
Three Months Ended June 30,Six Months Ended June 30,
(In millions)2023202220232022
Interest cost$(9)$(5)$(19)$(11)
Expected return on plan assets 12 14 24 29 
Amortization of net loss(1) (1) 
Net periodic pension income (1)
$2 $9 $4 $18 
(1) Net periodic pension income is recorded within Other income, net in the Condensed Consolidated Statements of Operations.

The Company also maintains defined benefit pension plans for some of its foreign subsidiaries that are excluded from the disclosure due to their immateriality.

Defined Contribution Plans

The Company has defined contribution retirement plans for its U.S. employees and employees of certain foreign subsidiaries. The Company’s contributions for both the three months ended June 30, 2023 and 2022 were $5 million. For the six months ended June 30, 2023 and 2022 were $22 million and $19 million, respectively. Defined contribution costs were primarily recorded in Direct operating expenses in the Condensed Consolidated Statements of Operations.

8. Restructuring Costs and Other

Restructuring costs and other are primarily related to severance, including projects to optimize finance, human resources and information technology functions, and are not associated with customer attrition.

For the three months ended June 30, 2023, restructuring costs and other totaled $3 million and related to severance charges. For the six months ended June 30, 2023, restructuring costs and other totaled $24 million and included severance charges of $18 million and impairment charges of $6 million as a result of closing certain corporate and administrative offices.

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The following is a roll forward of the restructuring liability, which is included in Other current liabilities in the Condensed Consolidated Balance Sheets:
(In millions)
Balance as of December 31, 2022$13 
Charges incurred18 
Payments(21)
Balance as of June 30, 2023$10 

The remaining restructuring liability at June 30, 2023 primarily relates to severance payments and is expected to be substantially paid within the next twelve months.

9. Income Taxes

The effective tax rate was 23.0% for the three months ended June 30, 2023, compared with 29.4% for the same period in 2022. The effective tax rate was 19.9% for the six months ended June 30, 2023, compared with 26.4% for the same period in 2022. The decrease in our effective tax rate for the three and six months was primarily driven by a decrease in pre-tax losses in certain jurisdictions for which no benefit was recognized and higher transaction costs for the same period in 2022 related to the Clipper Acquisition which were non deductible. The decrease in our effective tax rate for the six months ended June 30, 2023 also reflects a valuation allowance release.

As of June 30, 2023 and December 31, 2022, the Company had valuation allowances of $39 million and $44 million on its deferred income tax asset, respectively.

10. Goodwill

The following table presents the changes in goodwill for the six months ended June 30, 2023:
(In millions)
Balance as of December 31, 2022$2,728 
Acquisition (1)
44 
Impact of foreign exchange translation (2)
30 
Balance as of June 30, 2023$2,802 
(1) Represents the finalization of the purchase price allocation for the Clipper Acquisition. See Note 11 — Acquisition for additional information.
(2) Changes to goodwill amounts resulting from foreign currency translation after the acquisition date are presented as the impact of foreign exchange translation.

11. Acquisition

On May 24, 2022, the Company completed the acquisition of Clipper Logistics plc (“Clipper”), an omnichannel retail logistics specialist based in Leeds, England (the “Clipper Acquisition”). The Company acquired Clipper for $1,106 million, consisting of $902 million in cash and the issuance of 3,757,657 shares of GXO common stock having a value of $204 million.

The Company accounted for the Clipper Acquisition as a business combination using the acquisition method of accounting. The fair value of assets acquired and liabilities assumed was based on management’s estimate of the fair value using valuation techniques including income, cost and market approaches.

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The following table summarizes the final fair values of identifiable assets acquired and liabilities assumed at the acquisition date:
(In millions)
ASSETS
Current assets
Cash and cash equivalents$26 
Accounts receivable143 
Other current assets67 
Total current assets 236 
Long-term assets
Property and equipment80 
Operating lease assets219 
Intangible assets (1)
392 
Other long-term assets29 
Total long-term assets720 
Total assets$956 
LIABILITIES
Current liabilities
Accounts payable$81 
Accrued expenses96 
Current debt55 
Current operating lease liabilities43 
Other current liabilities56 
Total current liabilities
331 
Long-term liabilities
Long-term debt10 
Long-term operating lease liabilities176 
Other long-term liabilities173 
Total long-term liabilities359 
Total liabilities$690 
Net assets purchased$266 
Cash paid$902 
Common stock issued (2)
204 
Purchase price paid$1,106 
Goodwill recorded (3)
$840 
(1) The Company acquired $392 million of intangible assets, comprised of customer relationships and trade names, with weighted-average useful lives of 15 years.
(2) Represents the fair value of the Company’s common stock issued.
(3) Goodwill represents the excess of the purchase price over the fair value of identifiable assets acquired and liabilities assumed at the acquisition date. Goodwill acquired was recorded in the United Kingdom and Ireland reporting unit and was primarily attributed to anticipated synergies. The Company does not expect the goodwill recognized in connection with the Clipper Acquisition to be deductible for income tax purposes.

12. Commitments and Contingencies

The Company is involved, and will continue to be involved, in numerous legal proceedings arising out of the conduct of its business. These proceedings may include personal injury claims arising from the transportation and handling of goods, contractual disputes and employment-related claims, including alleged violations of wage and hour laws.

The Company establishes 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. The Company reviews and adjusts accruals for loss contingencies quarterly and as additional information becomes available. If a loss is not both probable and
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reasonably estimable, or if an exposure to a loss exists in excess of the amount accrued, the Company assesses whether there is at least a reasonable possibility that a loss, or additional loss, may have been incurred. If there is a reasonable possibility that a loss, or additional loss, may have been incurred, the Company discloses the estimate of the possible loss or range of loss if it is material and an estimate can be made, or discloses 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 management’s assessment, together with legal counsel, r