GXO Logistics Inc

Previous wording

On October 23, 2023, the Company completed the acquisition of PFSweb, Inc. (“PFS”), an e-commerce order fulfillment company based in Irving, Texas (the “PFS 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”). Due to the acquisitions of Clipper and PFS, comparisons in our results of operations between 2023 and 2022 are less meaningful.

Current wording

On April 29, 2024, the Company completed the acquisition of Wincanton plc (“Wincanton”), a U.K. logistics provider specializing in both warehousing and transportation solutions (“the Wincanton Acquisition”). On October 23, 2023, the Company completed the acquisition of PFSweb, Inc. (“PFS”), an e-commerce order fulfillment company based in Irving, Texas (the “PFS Acquisition”). Due to the acquisitions of Wincanton in 2024 and PFS in 2023, comparisons in our results of operations between 2024 and 2023 are less meaningful. For additional information regarding our acquisitions, see Note 4. “Acquisitions” to the Consolidated Financial Statements.

Previous wording

Direct operating expenses comprise both fixed and variable expenses and consist of operating costs related to our warehouse operations, including personnel costs, rent expenses, utility costs, equipment maintenance and repair costs, transportation costs, costs of materials and supplies and information technology expenses. Direct operating expense for 2023 increased by 8%, or $592 million, to $8.0 billion compared with $7.4 billion for 2022. As a percentage of revenue, direct operating expense was 82.2% and 82.8% in 2023 and 2022, respectively. The increase primarily reflects $286 million from the Clipper Acquisition (for the periods that were not comparable), $67 million from the PFS Acquisition, and higher personnel and rent expenses.

Current wording

Direct operating expenses comprise both fixed and variable expenses and consist of operating costs related to our warehouse operations, including personnel costs, rent expenses, utility costs, equipment maintenance and repair costs, transportation costs, costs of materials and supplies and information technology expenses. Direct operating expense for 2024 increased by 23%, or $1.8 billion, to $9.9 billion compared with $8.0 billion for 2023. The increase primarily reflects $1.4 billion from the acquisitions of Wincanton and PFS, and higher personnel and temporary labor expenses in the U.K. and Ireland business from growth in the business. Direct operating expense also increased due to foreign currency movement in our U.K. and Ireland and Continental Europe businesses. As a percentage of revenue, direct operating expense was 84.1% and 82.2% in 2024 and 2023, respectively. The increase in Direct operating expense as a percentage of revenue was primarily related to the Wincanton Acquisition.

Previous wording

Selling, general and administrative expense (“SG&A”) primarily consists of salary and benefit costs for executive and certain administration functions, professional fees, bad debt expense and legal costs. SG&A for 2023 increased by 13%, or $112 million, to $998 million, compared with $886 million in 2022. SG&A primarily increased due to the Clipper Acquisition, higher personnel costs for certain administrative functions and bad debt expense.

Current wording

Selling, general and administrative expense (“SG&A”) primarily consists of salary and benefit costs for executive and certain administration functions, professional fees, bad debt expense and legal costs. SG&A for 2024 increased by 6%, or $63 million, to $1.1 billion, compared with $998 million in 2023. The increase was primarily driven by the acquisitions of Wincanton and PFS.

Previous wording

Depreciation and amortization expense for 2023 increased by $32 million to $361 million compared with $329 million for 2022. Depreciation and amortization expense included amortization of intangible assets of $71 million and $68 million in 2023 and 2022, respectively. Depreciation and amortization expense increased primarily due to the Clipper Acquisition.

Current wording

Depreciation and amortization expense for 2024 increased by $54 million to $415 million compared with $361 million for 2023. Depreciation and amortization expense increased primarily due to the acquisitions of Wincanton and PFS. Depreciation and amortization expense included amortization of intangible assets acquired of $108 million and $71 million in 2024 and 2023, respectively.

Previous wording

Transaction and integration costs were $34 million in 2023, compared with $61 million for 2022. Transaction and integration costs in 2023 included $20 million related to the integration of Clipper and $12 million related to the PFS Acquisition, reflecting costs associated with advisory fees and severance costs. Transaction and integration costs in 2022 primarily related to $46 million related to the Clipper Acquisition, reflecting costs associated with financing arrangements, advisory fees and integration costs, and $15 million from the Separation, primarily reflecting rebranding costs.

Current wording

Transaction and integration costs were $76 million in 2024, compared with $34 million for 2023. Transaction and integration costs in 2024 primarily included $61 million related to the Wincanton Acquisition and $8 million related to the integration of PFS. Transaction and integration costs in 2023 primarily included $20 million related to the integration of Clipper Logistics plc and $12 million related to the PFS Acquisition.

Previous wording

We engage in restructuring actions as part of our ongoing efforts to best use our resources and infrastructure. These costs are primarily related to severance, including projects to optimize human resources, finance and information technology activities, and are not associated with customer attrition. Restructuring costs and other were $32 million for 2023 and 2022. Restructuring costs and other for 2023 included $16 million related to a restructuring plan initiated in the fourth quarter of 2022 designed to centralize certain processes and standardize operating structures. Restructuring costs and other in 2023 also included impairment charges of $11 million, primarily related to closing certain corporate and administrative offices, and $5 million associated with the exit of a non-core businesses in Asia. Restructuring costs and other for 2022 included $24 million related to severance costs, primarily from the exit of non-core businesses and central efficiency projects, and $8 million related to the deconsolidation of a joint venture.

Current wording

We engage in restructuring actions as part of our ongoing efforts to best use our resources and infrastructure. These costs are primarily related to severance, including projects to optimize human resources, finance and information technology activities, and are not associated with customer attrition. Restructuring costs and other were $27 million for 2024, compared with $32 million for 2023. Restructuring costs and other in 2024 related to a restructuring plan designed to centralize certain finance, human resource and IT functions. Restructuring costs and other for 2023 included $16 million related to severance, $11 million for impairment charges, and $5 million associated with the exit of a non-core businesses in Asia.

Previous wording

Other income, net decreased due to lower pension income and foreign currency movements. Other income, net was as follows:

Current wording

Other income, net was as follows:

Previous wording

Interest expense, net increased due to the debt from the Clipper Acquisition being outstanding for the full year in 2023 compared with seven months of the prior year and higher variable interest rates on our debt, partially offset by the accretion on cross-currency swaps and interest income in the current period. Interest expense, net was as follows:

Current wording

Interest expense, net increased due to the debt incurred for the Wincanton Acquisition. Interest expense, net was as follows:

Previous wording

Income before income taxes for 2023 increased by $2 million, to $266 million, compared with $264 million for 2022. The increase was primarily due to growth in our business and lower transaction and integration costs, offset by higher interest expense and lower other income. Income from continuing operations before income taxes for our domestic operations was $97 million for 2023, compared with $105 million in 2022. The decrease was driven by a higher interest expense associated with our debt, partially offset by lower transaction and integration costs. Income from continuing operations before income taxes for our foreign operations was $169 million for 2023 compared with $159 million in 2022. The increase was primarily driven by growth in the business and lower transaction and integration costs, partially offset by lower pension income.

Current wording

Income before income taxes for 2024 decreased by $120 million, to $146 million, compared with $266 million for 2023. The decrease was mainly driven by higher transaction and integration costs, litigation expense, and interest expense, partially offset by higher other income, net. Income before income taxes for our domestic operations was a pre-tax loss of $88 million for 2024, compared with $97 million of pre-tax income in 2023. The decrease from income to a loss in 2024 was primarily driven by higher transaction and integration costs, litigation expense and interest expense for debt incurred for the Wincanton Acquisition. Income before income taxes for our foreign operations was $234 million for 2024 compared with $169 million in 2023. The increase in 2024 was primarily driven by growth in the business and other income, net.

Previous wording

Income tax expense was $33 million in 2023, compared with $64 million in 2022. Our effective tax rate was 12.4% in 2023 and 24.2% in 2022. The decrease in our effective income tax rate in 2023 was driven by tax benefits from intangible assets and the release of valuation allowances.

Current wording

Income tax expense was $8 million in 2024, compared with $33 million in 2023. Our effective tax rate was 5.6% in 2024 and 12.4% in 2023. The decrease in our effective income tax rate was driven by income tax benefits from the release of valuation allowances in 2024.

Previous wording

As of December 31, 2023, we held cash and cash equivalents of $468 million and we had $799 million of borrowing capacity available, net of letters of credit under our revolving credit facility. We believe that our cash and cash equivalents on hand, cash flows from operations, the revolving credit facility and the use of our factoring programs will provide sufficient liquidity to operate our business and fund our current and assumed obligations for at least the next 12 months.

Current wording

We believe that our cash and cash equivalents on hand, our cash flows from operations, the borrowing capacity under our revolving credit facilities, and the use of our factoring programs will provide sufficient liquidity to operate our business and fund our current and assumed obligations for at least the next 12 months.

Previous wording

For additional information regarding our cash requirement from contractual obligations, indebtedness and lease obligations, see Note 17. “Commitments and Contingencies”, Note 9. “Debt and Financing Arrangements” and Note 8. “Leases” in Part II, Item 8 of this Annual Report on Form 10-K.

Current wording

For additional information regarding our cash requirements from contractual obligations, indebtedness and lease obligations, and legal matters, see Note 18. “Commitments and Contingencies,” Note 10. “Debt and Financing Arrangements” and Note 9. “Leases” to the Consolidated Financial Statements.

Previous wording

Investing activities used $410 million of cash in 2023 compared with $1.1 billion in 2022. During 2023, we used $274 million of cash for capital expenditures, $149 million in connection with the PFS Acquisition and $3 million in settlement of cross-currency swap agreements, excluding accrued interest, partially offset by $18 million of proceeds from the sales of property and equipment. During 2022, we used $876 million of cash in connection with the Clipper Acquisition, $342 million for capital expenditures, partially offset by $40 million of proceeds from the sales of property and equipment and $21 million in settlement of cross-currency swap agreements, excluding accrued interest.

Current wording

Investing activities used $1.2 billion of cash in 2024 compared with $410 million in 2023. During 2024, we used $863 million, net of cash received, to fund the Wincanton Acquisition, used $359 million of cash to purchase property and equipment, partially offset by $61 million of proceeds from the sales of property and equipment and $4 million in net proceeds from the settlement of cross-currency swap agreements, excluding accrued interest. During 2023, we used $274 million of cash for capital expenditures, used $149 million in connection with the PFS Acquisition and $3 million in settlement of cross-currency swap agreements, excluding accrued interest, partially offset by $18 million of proceeds from the sales of property and equipment.

Previous wording

Financing activities used $186 million of cash in 2023 and generated $787 million in 2022. The primary use of cash from financing activities in 2023 was $169 million in repayment of debt and finance leases and $12 million in payments for employee taxes on net settlement of equity awards. The primary source of cash from financing activities in 2022 was $917 million in proceeds from long-term debt, net, partially offset by $115 million in repayment of debt and finance leases and $16 million in payments for employee taxes on net settlement of equity awards.

Current wording

Financing activities generated $636 million of cash in 2024 and used $186 million in 2023. The primary source of cash from financing activities in 2024 was the issuance of long-term debt of $1.1 billion, partially offset by cash used to repay $408 million of debt, $45 million to repay finance lease obligations and $8 million in payments for employee taxes on net settlement of equity awards. The primary use of cash from financing activities in 2023 was

Previous wording

We lease certain facilities and equipment under operating and finance lease arrangements. As of December 31, 2023, our outstanding obligations under operating and finance leases were $2.4 billion and $116 million, respectively. See Note 8. “Leases” to the Consolidated Financial Statements for additional information.

Current wording

As of December 31, 2024, our outstanding obligations under operating and finance leases were $2.5 billion and $276 million, respectively. For additional information see Note 9. “Leases” to the Consolidated Financial Statements.

Previous wording

As of December 31, 2023, we had $800 million of unsecured notes outstanding with interest payable in arrears on January 15 and July 15 of each year and $735 million of variable-rate term loans outstanding with interest payable in arrears at our option monthly, quarterly or semiannually. See Note 9. “Debt and Financing Arrangements” to the Consolidated Financial Statements for additional information.

Current wording

As of December 31, 2024, we had a total of $1.9 billion of Unsecured Notes outstanding, consisting of $1.1 billion Unsecured Notes with interest payable semiannually on May 6 and November 6 of each year and $800 million Unsecured Notes with interest payable semiannually on January 15 and July 15 of each year. We also have $450 million of variable-rate term loans outstanding with interest payable in arrears at our option monthly, quarterly, or semiannually. For additional information see Note 10. “Debt and Financing Arrangements” to the Consolidated Financial Statements.

Previous wording

In addition, we have obligations for agreements to purchase goods or services entered into in the ordinary course of business that are enforceable and legally binding and gross unrecognized tax benefits.

Current wording

In addition, we have obligations for agreements to purchase goods or services entered into in the ordinary course of business that are enforceable and legally binding.

Previous wording

Our estimates of fair value are based upon reasonable assumptions but are inherently uncertain and unpredictable, and as a result, actual results may differ from these estimates. During the measurement period, which is up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. See Note 4. “Acquisitions” to the Consolidated Financial Statements for additional information.

Current wording

Our estimates of fair value are based upon reasonable assumptions but are inherently uncertain and unpredictable, and as a result, actual results may differ from these estimates. During the measurement period, which is up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. For additional information see Note 4. “Acquisitions” to the Consolidated Financial Statements.

Previous wording

The qualitative factors could include a significant change in the business climate, legal factors, operating performance indicators, competition or the sale or disposition of a significant portion of a reporting unit. If the qualitative assessment indicates that it is more likely than not that an impairment exists, then a quantitative assessment is performed.

Current wording

For each reporting unit, we first assess qualitative factors that are specific to the reporting unit as well as industry and macroeconomic factors to determine whether it is necessary to perform a quantitative goodwill impairment test. The qualitative factors could include a significant change in the business climate, legal factors, operating performance indicators, competition or the sale or disposition of a significant portion of a reporting unit. If the qualitative assessment indicates that it is more likely than not that an impairment exists, then a quantitative assessment is performed.

Previous wording

We sponsor various retirement plans, the most significant of which is in the U.K. (the “U.K. Retirement Plan”). Assumptions used in the accounting for these employee benefit plans include the discount rate and expected return on plan assets. Assumptions are determined based on company data and appropriate market indicators and are evaluated each year at December 31. A change in any of these assumptions would have an effect on the net periodic pension cost reported in the Consolidated Financial Statements.

Current wording

We sponsor various retirement plans, with the most significant plans held in the U.K. (the “U.K. Retirement Plans”). Assumptions used in the accounting for these employee benefit plans include the discount rate and expected return on plan assets. Assumptions are determined based on company data and appropriate market indicators and are evaluated each year at December 31. A change in any of these assumptions would have an effect on the net periodic pension cost reported in the Consolidated Financial Statements.

Previous wording

The discount rate is determined based on the yield on a portfolio of high-quality bonds, constructed to provide cash flows necessary to meet our pension plans’ expected future benefit payments, as determined for the accumulated benefit obligation. A 50-basis-point decrease in the discount rate of the U.K. Retirement Plan would result in an estimated increase in the accumulated benefit obligation of approximately $44 million. The expected return on plan assets assumption is derived using the current and expected asset allocation of the pension plan assets and considering historical as well as expected returns on various classes of plan assets. An increase or decrease of 50 basis points in the expected long-term rate of return of the U.K. Retirement Plan would have decreased or increased 2023 net periodic pension cost by approximately $4 million. See Note 14. “Employee Benefit Plans” to the Consolidated Financial Statements for additional information.

Current wording

The discount rate is determined based on the yield on a portfolio of high-quality bonds, constructed to provide cash flows necessary to meet our pension plans’ expected future benefit payments, as determined for the accumulated benefit obligation. A 50-basis-point decrease in the discount rate of the U.K. Retirement Plans would result in an estimated increase in the accumulated benefit obligation of approximately $91 million. The expected return on plan assets assumption is derived using the current and expected asset allocation of the pension plan assets and considering historical as well as expected returns on various classes of plan assets. An increase or decrease of 50 basis points in the expected return on plan assets for the U.K. Retirement Plans would have decreased or increased our net periodic pension cost by approximately $9 million in 2025. For additional information see Note 15. “Employee Benefit Plans” to the Consolidated Financial Statements.