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What changed in GXO Logistics, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of GXO Logistics, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+197 added−248 removedSource: 10-K (2024-02-15) vs 10-K (2023-02-16)

Top changes in GXO Logistics, Inc.'s 2023 10-K

197 paragraphs added · 248 removed · 155 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeCustomers and Markets We provide our customers with high-value-add warehousing and distribution, order fulfillment, e-commerce, reverse logistics and other supply chain services. We provide services to customers globally, including Fortune 100 and Fortune Global 500 companies in the U.S., European multinational market leaders and other renowned global brands.
Biggest changeWe provide services to customers globally, including Fortune 100 companies in the U.S., Fortune Global 500 companies in the world, European multinational market leaders and other renowned global brands. The customers we serve are primarily in North America and Europe and operate in every major industry. The diversification of our customer base reduces concentration risk.
Our customer base includes many blue-chip leaders in sectors that demonstrate high growth and/or durable demand, with significant growth potential through customer outsourcing of logistics services. GXO became a standalone publicly traded company on August 2, 2021, when GXO Logistics, Inc. completed its separation (the “Separation”) from XPO, Inc.
Our customer base includes many blue-chip leaders in sectors that demonstrate high growth and/or durable demand, with significant growth potential through customer outsourcing of logistics services. GXO became a standalone publicly traded company on August 2, 2021, when GXO completed its separation (the “Separation”) from XPO, Inc.
Our warehouse management system creates a synchronized environment across automation platforms to control these technologies holistically, providing an integrated solution. We have found that autonomous goods-to-person systems and that cobots, which assist workers with the inventory picking process, can improve labor productivity. Stationary robot arms can repeat demanding tasks with greater precision than is possible manually.
Our warehouse management system creates a synchronized environment across automation platforms to control these technologies holistically, providing an integrated solution. We have found that autonomous goods-to-person systems and cobots, which assist workers with the inventory picking process, can improve labor productivity. Stationary robot arms can repeat demanding tasks with greater precision than is possible manually.
We ask our employees for feedback through engagement surveys, roundtables and town halls, and we use periodic engagement surveys to gauge our progress and assess satisfaction. In this way, our employees help drive the continuous improvement of our business.
We ask our employees for feedback through engagement surveys, roundtables and town halls. We use periodic engagement surveys to gauge our progress and assess satisfaction. In this way, our employees help drive the continuous improvement of our business.
Our talent development infrastructure provides resources to employees who aspire to grow throughout their careers, such as tailored skills development, training and mentoring. In addition, we maintain a robust pipeline of future operations leaders by using structured sponsorships and additional learning techniques to develop internal candidates who demonstrate high potential to advance from supervisory roles into site leader positions.
Our talent development infrastructure provides resources to employees who aspire to grow 4 throughout their careers, such as tailored skills development, training and mentoring. In addition, we maintain a robust pipeline of future operations leaders by using structured sponsorships and additional learning techniques to develop internal candidates who demonstrate high potential to advance from supervisory roles into site leader positions.
We aim to maintain an Occupational Safety and Health Administration recordable incident rate that is less than half the published rate for the General Warehousing and Storage sector, based on the “Industry Injury and Illness Data” of the U.S. Bureau of Labor Statistics. 5 Talent Development and Engagement Our employees are critically important to our ability to provide best-in-class service.
We aim to maintain an Occupational Safety and Health Administration recordable incident rate that is less than half the published rate for the General Warehousing and Storage sector, based on the “Industry Injury and Illness Data” of the U.S. Bureau of Labor Statistics. Talent Development and Engagement Our employees are critically important to our ability to provide best-in-class service.
We integrate best practices to drive productivity, with a focus on automation and other levers of profitable growth. 2 To aid in executing our strategy, we have instilled a culture that focuses on delivering mutually beneficial results for our customers and our company with the highest legal and ethical standards and clear policies and practices to support compliance throughout our organization.
We integrate best practices to drive productivity, with a focus on automation and other levers of profitable growth. To aid in executing our strategy, we have instilled a culture that focuses on delivering mutually beneficial results for our customers and our company with the highest legal and ethical standards and clear policies and practices to support compliance throughout our organization.
Our connection management software module facilitates integration with SAP, Oracle and other external systems, enabling our customers to get the maximum benefit from our technology. 3 Predictive Analytics Our predictive analytics add significant value for customers, particularly in e-commerce and omnichannel retail, where seasonality drives high volumes through outbound and inbound logistics processes.
Our connection management software module facilitates integration with SAP, Oracle and other external systems, enabling our customers to get the maximum benefit from our technology. Predictive Analytics Our predictive analytics add significant value for customers, particularly in e-commerce and omnichannel retail, where seasonality drives high volumes through outbound and inbound logistics processes.
Due to the competitive nature of our marketplace, we strive daily to strengthen and expand existing business relationships and forge new relationships. Environmental and Other Government Regulations Our operations are regulated and licensed by various governmental agencies in the U.S. at the local, state and federal levels and in other countries where we conduct business.
Due to the competitive nature of our marketplace, we strive daily to strengthen and expand existing business relationships and forge new relationships. Government Regulations Our operations are regulated and licensed by various governmental agencies in the U.S. at the local, state, and federal levels and in other countries where we conduct business.
We seek to identify top talent in all aspects of the recruitment process, and we emphasize training and development supported by our own GXO University. We tailor our recruitment efforts by geography and job function using an array of channels to ensure a diverse candidate pool.
We seek to identify top talent in all aspects of the recruitment process and we emphasize training and development supported by our own online GXO University. We tailor our recruitment efforts by geography and job function, using an array of channels to ensure a diverse candidate pool.
Our services are both highly responsive to customer goals, such as increasing visibility in the supply chain, decreasing fulfillment times and mitigating environmental impacts and being proactive in identifying potential improvements. GXO creates short- and long-term value for customers and shareholders through our unique combination of technology, scale and expertise.
Our services are highly responsive to customer goals, such as increasing visibility in the supply chain, decreasing fulfillment times and mitigating environmental impacts, while being proactive in identifying potential improvements. GXO creates short- and long-term value for customers and shareholders through our unique combination of technology, scale and expertise.
Technology and Intellectual Property Contract logistics is growing more and more complex, as changing consumer expectations and preferences continue to drive a need for faster delivery times, higher levels of returned inventory, and better visibility throughout the supply chain. Traditional warehousing solutions are no longer sufficient to fill these needs.
Technology and Intellectual Property Contract logistics is becoming more and more complex, as changing consumer expectations and preferences continue to drive a need for faster delivery times, higher levels of returned inventory and better visibility throughout the supply chain. Traditional warehousing solutions are no longer sufficient to fill these needs.
Our strategy addresses growth and optimization by focusing on core verticals that demonstrate enduring demand over time and where we already have a deep presence. We expect to attract new customers and expand the services we provide to existing customers through new projects, thus earning more of their external and internal logistics spend.
Our strategy addresses growth and optimization by focusing on core verticals that demonstrate enduring demand over time and where we already have a deep presence. We expect to attract new customers and expand the services we provide to existing customers through new projects, thus earning more of their logistics spend.
We compete based on our ability to deliver quality service, reliability, scope and scale of operations, technological capabilities, expertise and pricing. Our competitors include local, regional, national and international companies that offer services similar to those we provide. Our competitors include DHL, DSV, Kuehne + Nagel International, GEODIS and ID Logistics.
We compete based on our ability to deliver quality service, reliability, scope and scale of operations, technological capabilities, expertise and pricing. Our competitors include local, regional, national and international companies that offer services similar to those we provide. Our competitors include CEVA, DHL, DSV, GEODIS, ID Logistics, Kuehne + Nagel and Ryder.
We provide our customers with high-value-add warehousing and distribution, order fulfillment, e-commerce, reverse logistics and other supply chain services differentiated by our ability to deliver technology-enabled, customized solutions at scale.
We provide our customers with high-value-added warehousing and distribution, order fulfillment, e-commerce, reverse logistics and other supply chain services differentiated by our ability to deliver technology-enabled, customized solutions at scale.
Technology enables us to add value to our customers’ end-to-end operations in terms of cost, efficiency, accuracy, and environmental impact. Investments in cutting-edge technology are a major growth driver for our business. Our highly scalable platform is built on the cloud to speed the deployment of new ways to increase efficiency and leverage our footprint.
Technology enables us to add value to our customers’ end-to-end 1 operations in terms of cost, efficiency, accuracy and environmental impact. Investments in cutting-edge technology are a major growth driver for our business. Our highly scalable warehouse management platform is built on the cloud to speed the deployment of new ways to increase efficiency and leverage our footprint.
Intelligent Warehouse Automation Our intelligent warehouse automation includes deployments of autonomous robots and cobots, automated sortation systems, automated guided vehicles, goods-to-person systems and wearable devices — these are all effective ways to deliver critical improvements in speed, accuracy and productivity. Importantly, automation also enhances safety and the overall quality of employment.
Intelligent Warehouse Automation Our intelligent warehouse automation includes deployments of autonomous robots and collaborative robots (“cobots”), automated sortation systems, automated guided vehicles, goods-to-person systems and wearable devices — these are all effective ways to deliver critical improvements in speed, accuracy and productivity. Importantly, automation also enhances safety and the overall quality of employment.
In Europe, the benefits offered vary by country and are tailored to the needs of the local markets. Examples include comprehensive healthcare and risk insurance, employee assistance programs covering mental, physical and financial wellbeing, pension plans, profit sharing, and local and global bonuses structured to offer competitive pay in each country.
In Europe, the benefits offered vary by country and are tailored to the needs of the local markets. Examples include comprehensive healthcare and risk insurance, employee assistance programs covering mental, physical and financial well-being, pension plans, profit sharing and local and global bonuses structured to offer competitive pay in each country.
Our strategy is to help our customers manage their warehouses for optimal efficiency, using our network of people, technology and other physical assets. We deliver value to customers in the form of technological innovations, process efficiencies, cost efficiencies and reliable outcomes.
Our strategy is to help our customers manage their warehouse needs for optimal efficiency, using our network of people, technology and other physical assets. We deliver value to customers in the form of technological innovations, process efficiencies, cost efficiencies and reliable outcomes.
Our customers rely on us to move their goods with high efficiency through their supply chains — from the moment inbound goods arrive at our logistics sites, through fulfillment and distribution, and the management of returned products.
Our customers rely on us to move their goods, with high efficiency, through their supply chains — from the moment goods arrive at our warehouses through fulfillment and distribution, and the management of returned products.
The industry needs scaled technology players, like GXO, to deliver these complex solutions. Technology is a core competitive advantage for GXO and fundamental to how we win and retain business. GXO was an early adopter of technology and operates more than 30% of technology-enabled warehouses compared to the industry average of roughly 8%.
The industry needs scaled technology players, like GXO, to deliver these complex solutions. Technology is a core competitive advantage for GXO and fundamental to how we win and retain business. GXO was an early adopter of technology, and more than 30% of our warehouses are technology-enabled compared to the industry average of approximately 10%.
As of December 31, 2022, our approximately 135,000 team members operated in 979 facilities worldwide totaling 197 million square feet of space, primarily on behalf of large corporations, that have outsourced their warehousing, distribution and other related activities to us. Our revenue is diversified among over one thousand customers, including many multinational corporations, across numerous verticals.
As of December 31, 2023, our 131,000 team members operated in 974 facilities worldwide totaling 199 million square feet of space, primarily on behalf of large corporations that have outsourced their warehousing, distribution and other related activities to us. Our revenue is diversified among over one thousand customers, including many multinational corporations, across numerous verticals.
This requires an unwavering commitment to workplace inclusion and safety as well as competitive total compensation that meets the needs of our employees and their families. Employee Profile As of December 31, 2022, we operated in 28 countries with approximately 135,000 team members (comprised of 89,000 full-time and part-time employees and 46,000 temporary workers engaged through third-party agencies).
This requires an unwavering commitment to workplace inclusion and safety as well as competitive total compensation that meets the needs of our employees and their families. Employee Profile As of December 31, 2023, we operated in 27 countries with approximately 131,000 team members (comprising approximately 87,000 full-time and part-time employees and 44,000 temporary workers engaged through third-party agencies).
In 2022, 41% of our revenue was from Omnichannel retail, 15% from Technology and consumer electronics, 15% from Food and beverage, 12% from Industrial and manufacturing, 10% from Consumer packaged goods and 7% from other industries, with the vast majority of our revenue generated in United Kingdom, United States, France, Netherlands and Spain.
In 2023, 42% of our revenue was from Omnichannel retail, 15% from Technology and consumer electronics, 14% from Food and beverage, 11% from Industrial and manufacturing, 11% from Consumer packaged goods, and 7% from other industries, with the vast majority of our revenue generated in the United Kingdom, the United States, the Netherlands, France, Spain and Italy.
As an industry leader that invests substantially in technology, we have access to an immense amount of data, as well as the analytical processing capabilities to capitalize on that data by incorporating our learnings into customer solutions. We believe our ability to process and act upon data is a key competitive advantage and differentiator.
As an industry leader that invests substantially in technology, we have access to an immense amount of data, as well as the analytical processing capabilities to capitalize on that data by incorporating our learnings into customer solutions.
Materials are available online as soon as reasonably practicable after we electronically submit them to the SEC. Further materials regarding our corporate governance policies and practices, including our Corporate Governance Guidelines, Code of Business Ethics and the charters relating to the committees of our Board of Directors are also available on the investors section of our website. 7
Further materials regarding our corporate governance policies and practices, including our Corporate Governance Guidelines, Code of Business Ethics and the charters relating to the committees of our Board of Directors, are also available on the investors section of our website.
Information about our Executive Officers The following information relates to our executive officers: Name Age Position Malcolm Wilson 64 Chief Executive Officer Baris Oran 49 Chief Financial Officer Karlis Kirsis 43 Chief Legal Officer Maryclaire Hammond 57 Chief Human Resources Officer Elizabeth Fogarty 53 Chief Communications Officer Malcolm Wilson has served as Chief Executive Officer since the Separation in August 2021, after serving as Chief Executive Officer of XPO Logistics Europe since September 2017.
Information About Our Executive Officers The following information relates to our current executive officers: Name Age Position Malcolm Wilson 65 Chief Executive Officer Baris Oran 50 Chief Financial Officer Karlis Kirsis 44 Chief Legal Officer Elizabeth Fogarty 54 Chief Communications Officer Richard Cawston 50 Chief Revenue Officer Malcolm Wilson has served as Chief Executive Officer since the Separation in August 2021, after serving as Chief Executive Officer of XPO Logistics Europe since September 2017.
Fogarty was employed by Citi as the Managing Director and Head of Global Consumer Banking Public Affairs from October 2013 to September 2021, and before that as the Director of Corporate Communications and Vice President of Global Public Affairs. Available Information We are required to file annual, quarterly and current reports, proxy statements and other information with the U.S.
Fogarty was employed by Citi as the Managing Director and Head of Global Consumer Banking Public Affairs from October 2013 to September 2021 and before that as the Director of Corporate Communications and Vice President of Global Public Affairs.
We have made significant investments in the safety, well-being and satisfaction of our employees in numerous areas, including diversity, inclusion and belonging; health and safety; talent development and engagement; and expansive total rewards. Diversity, Inclusion and Belonging We take pride in having an inclusive workplace that encourages a diversity of backgrounds and perspectives and mandates fair treatment for all individuals.
We have made and continue to make significant investments in the safety, well-being and satisfaction of our employees in numerous areas, including diversity, inclusion and belonging; health and safety; talent development and engagement; and expansive total rewards.
In addition, we are subject to a variety of other U.S. and foreign laws and regulations, including, but not limited to, the Foreign Corrupt Practices Act and other anti-bribery and anti-corruption statutes. 4 Moreover, we are subject to various environmental laws and regulations in the jurisdictions where we operate.
These regulations impact us directly and indirectly when they regulate third parties with which we arrange or contract services. In addition, we are subject to a variety of other U.S. and foreign laws and regulations, including, but not limited to, the Foreign Corrupt Practices Act and other anti-bribery and anti-corruption statutes.
Health and Safety Our employees’ safety is always our foremost priority, and we have numerous protocols in place to ensure a safe workplace environment.
We welcome employees of every gender identity, sexual orientation, race, ethnicity, national origin, religion, life experience, veteran status and disability. Health and Safety Our employees’ safety is always our foremost priority, and we have numerous protocols in place to ensure a safe workplace environment.
Seasonality Our revenue and profitability are typically lower in the first quarter of the calendar year relative to other quarters. This is due in part to seasonality, namely the post-holiday reduction in demand experienced by many of our customers, which leads to less use of the logistics services we provide.
This is due in part to seasonality, namely the post-holiday reduction in demand experienced by many of our customers, which leads to less use of the logistics services we provide. Competition We operate in a highly competitive global industry with a highly fragmented marketplace where thousands of companies compete domestically and internationally.
(“XPO”) and began regular-way trading on the New York Stock Exchange under the ticker symbol “GXO.” GXO was incorporated as a Delaware corporation in February 2021. 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”).
(“XPO”) and began regular-way trading on the New York Stock Exchange under the ticker symbol “GXO.” GXO was incorporated as a Delaware corporation in February 2021. Our Strategy We design and operate the most advanced warehouse solutions in the world.
The majority of our employees in Europe and United Kingdom were covered by collective bargaining agreements, while none of our employees in North America were covered by collective bargaining agreements. As of December 31, 2022, approximately 34% of our global workforce was comprised of women, and 66% of our workforce in the U.S. were ethnic minorities.
As of December 31, 2023, approximately 36% of our global workforce were women, and 66% of our workforce in the U.S. were ethnic minorities.
Kirsis previously served in various roles at XPO, including Senior Vice President, Corporate Counsel from July 2017 to February 2020 and Vice President, Corporate and Securities Counsel from September 2016 to July 2017. 6 Maryclaire Hammond has served as Chief Human Resources Officer since the Separation in August 2021, after serving as Senior Vice President, Human Resources – Americas and Asia Pacific for XPO’s North American logistics business, a role she had held since September 2019.
Kirsis previously served in various roles at XPO, including Senior Vice President, Corporate Counsel from July 2017 to February 2020 and Vice President, Corporate and Securities Counsel from September 2016 to July 2017. Elizabeth Fogarty has served as Chief Communications Officer since September 2021. Prior to her time with GXO, Ms.
Our workforce is located as follows: 42% in the United Kingdom, 30% in Europe (excluding the United Kingdom), 26% in North America and 2% were based in Latin America and Asia combined.
Our workforce is located: 47% in the United Kingdom, 25% in Europe (excluding the United Kingdom), 25% in North America and 3% in Latin America and Asia combined. The majority of our employees in Europe and the United Kingdom were covered by collective bargaining agreements, while none of our employees in North America were covered by collective bargaining agreements.
Our revenue is highly diversified due to our expertise across a range of key verticals, reflecting our customers’ principal industry sectors.
In 2023, our top five customers combined accounted for approximately 17% of our total revenue, and no customer represented more than 4%. Our revenue is highly diversified due to our expertise across multiple verticals, reflecting our customers’ principal industry sectors.
Our business benefits from strong positioning in the e-commerce sector, where demand is characterized by seasonal surges in activity, with the fourth quarter holiday peak typically being the most dramatic. Competition We operate in a highly competitive global industry with a highly fragmented marketplace where thousands of companies compete domestically and internationally.
Seasonality During the fourth quarter, our business benefits from strong positioning in the e-commerce sector, where demand is characterized by surges in activity associated with the holiday season. Our revenue and profitability are typically lower in the first quarter of the calendar year relative to other quarters.
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See Item 8 of Part II, “Financial Statements and Supplementary Data — Note — 4 Acquisitions” to the Consolidated Financial Statements for additional information. Drivers of Value Creation GXO Operates in a Massive Market that is Growing Rapidly Due to Strong, Secular Tailwinds. GXO is the largest pure-play contract logistics provider in the world.
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We believe our ability to process and act upon data is a key competitive advantage and differentiator. 2 Customers and Markets We provide our customers with high-value-added warehousing and distribution, order fulfillment, e-commerce, reverse logistics and other supply chain services.
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Our significant scale makes us well-positioned to benefit from the logistics industry’s predominant tailwinds — the secular shift in logistics toward outsourcing, the growth in consumer demand for e-commerce and omnichannel retail, and the focus on ensuring supply chain resilience that is driving higher inventory levels and nearshoring and re-shoring. 1.
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Environmental Sustainability Environmental sustainability is a key pillar of our Environmental, Social, and Governance (“ESG”) strategy. We are partnering with customers around the globe to help them achieve their environmental goals while we innovate to reduce our impact.
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Outsourcing: Over the last five years, the outsourced portion of the market has outgrown the broader market. We expect this outperformance to continue as the benefits of economies of scale and rising technological complexity make the outsourced offering even more compelling. 2. E-commerce: E-commerce is increasing as a share of overall commerce and will continue to do so.
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For many of our customers, the logistics component of their supply chain accounts for a sizeable portion of their greenhouse gas (“GHG”) emissions and waste footprint. We collaborate with customers to create action plans that reduce emissions related to their supply chains through technology-enabled solutions.
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E-commerce creates demand for a far greater degree of sophistication throughout the fulfillment process, and a compelling revenue-multiplier effect for GXO. Additionally, more E-commerce also means more returns: roughly one in three items are being returned in the E-commerce environment based on third party research. The increased touchpoints mean higher revenue capture for the warehouse provider. 3.
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Our environmental sustainability strategy is designed to be applicable globally while also compliant with local environmental regulations. Throughout our business, GXO has identified GHG emissions and waste associated with operations as our greatest opportunities to reduce our environmental impact.
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Supply Chain Resilience: The need to make supply chains more resilient has driven a trend towards holding more inventory – the concept of just-in-case, rather than just–in–time. Additionally, we expect many industries to follow the trend of pursuing resiliency in their supply chains through near-shoring.
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In 2021, we established environmental 3 targets to track and prioritize our reduction of Scopes 1 and 2 GHG emissions and increase waste diversion rates globally. Part of our environmental strategy focuses on improving the energy efficiency of our buildings.
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GXO has Strong Competitive Advantages that have Enabled it to Grow Faster than the Broader Market. 1. Robust Technological Differentiation: Increasingly, customers want technology-enabled, highly customized solutions that incorporate intelligent automation and data science.
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We have a global initiative to replace our warehouse lighting with LED and are developing our strategy to increase the amount of renewable electricity used in our buildings. In 2023, we began an exercise to quantify our full carbon footprint, including our Scope 3 emissions. We anticipate the results of this exercise in the first half of 2024.
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Order fulfillment times are compressing, and 1 new channels are emerging as companies seek to improve the efficiency, speed and visibility of their supply chain activities, notably in the e-commerce and omnichannel retail channels. GXO leads the industry in automation levels.
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Diversity, Inclusion and Belonging We take pride in having an inclusive workplace that encourages a diversity of backgrounds and perspectives and mandates fair treatment for all individuals. These attributes of our culture make us a stronger organization and a better partner to all GXO stakeholders.
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Our focus as an innovator is helping our customers meet the expectations of their customers, with reliable outcomes, more visibility and greater efficiency. Furthermore, we keep close tabs on innovation and are constantly testing numerous large and small technology opportunities, and our team has a unique and deep understanding of how to deploy this sophisticated technology.
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Richard Cawston has served as Chief Revenue Officer and President of Europe since December 2023, after serving as President of Europe for GXO since August 2021 and President of XPO Logistics Europe – Supply Chain since September 2017.
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Across core verticals, we see a strong correlation between automation and market share growth, as our technological advantages enable us to offer continuous improvement opportunities to customers over the life of a contract, which is a powerful driver of retention and growth. 2. Global Scale: GXO’s ability to serve multinationals around the world is another key driver of our growth.
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He joined XPO in 2015 through XPO’s acquisition of Norbert Dentressangle, where he was Managing Director of the logistics division in the United Kingdom and Ireland. 5 Available Information We are required to file annual, quarterly and current reports, proxy statements and other information with the SEC.
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We have established leading market positions across North America, Western Europe, and the UK, and we have built scale positions across the following, highly attractive verticals – omnichannel retail and consumer packaged goods; food and beverage; industrial and manufacturing; as well as tech and consumer electronics.
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Reports filed with the SEC can be viewed at http://www.sec.gov and on our corporate website at www.gxo.com. Materials are available online as soon as reasonably practicable after we electronically submit them to the SEC.
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Our customer portfolio includes long-term relationships with blue-chip market leaders and world-class brands, including Fortune 100 and Fortune Global 500 companies. Importantly, scale enables us to continuously learn and improve shared knowledge across our verticals and our large, diversified customer base to create more value. 3.
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Trusted expertise: Our executives have decades of experience in their respective fields and work together to create sustainable value through operational excellence and a purposeful culture. Our executives foster a company culture that is safe, respectful, entrepreneurial, innovative and inclusive, with a focus on diversity, inclusion and belonging that continues to shape our recruitment efforts and work environments.
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We have extensive experience in our core verticals, and we understand the specific requirements for quality control, real-time visibility, special handling, security, complex stock-keeping, time-assured deliveries and agility during surges in demand. The average relationship tenure for our top 20 customers in 2022, based on revenue, was over 15 years, and our revenue retention rate is above 90% each year.
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GXO has a Resilient Business Model with Multiple Drivers of Profitable Growth 1. High Quality Growth: First, our long-term relationships, have an average contract and lease term of five years. Second, our pricing framework is managed through contractual terms and includes escalations for inflation.
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Third, our stable revenue base is diversified by customer, vertical and geography, making GXO resilient through different parts of the cycle. Additionally, no customer represented more than 4% of our total revenue in 2022. Fourth, our customers are high-quality companies, and the vast majority of our top-100 credit rated customers are Investment Grade. 2.
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Continuous Improvement and Productivity: GXO expects to generate meaningful margin expansion from an increase in large scale automation, further implementation of adaptive technologies, completion of central efficiency projects, and the realization of synergies from the 2022 acquisition of Clipper. Our Strategy We design and operate the most advanced warehouse solutions in the world.
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The customers we serve are primarily in North America and Europe and operate in every major industry. The diversification of our customer base reduces concentration risk. In 2022, our top five customers combined accounted for approximately 16% of our total revenue, and no customer represented more than 4%.
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These regulations impact us directly and indirectly when they regulate third parties with which we arrange or contract services.
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Historically, we have successfully resolved potential environmental exposure without a material effect on our business or operations.
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We believe that our operations are in compliance with current laws and regulations and we do not know of any existing environmental law, regulation nor condition that reasonably would be expected to have a material adverse effect on our business, capital expenditures, or operating results.
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However, future changes to environmental laws or regulations may impact our operations and could result in increased costs. A number of our sites are ISO 14001-certified to high standards for environmental management, and we have implemented numerous programs to manage environmental risks and maintain compliance in our business.
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U.S. federal and state governments, as well as governments in certain foreign jurisdictions where we operate, have also proposed environmental legislation that could, among other things, limit carbon, exhaust and greenhouse gas emissions. If enacted, such legislation could result in reduced productivity and efficiency and increased operating expenses, all of which could adversely affect our results of operations.
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These attributes of our culture make us a stronger organization and a better partner to all GXO stakeholders. We welcome employees of every gender identity, sexual orientation, race, ethnicity, national origin, religion, life experience, veteran status and disability.
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In November 2021, we appointed a Vice President of Diversity, Inclusion and Belonging and we have launched a Sustainability Steering Committee and Diversity and Inclusion Steering Committee in Europe and the Americas whose strategies include support and contributions for our Environmental, Social and Governance (“ESG”) commitments and ongoing community engagement events.
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Prior to her time with XPO, Ms. Hammond was employed by Marathon Petroleum Company (formerly Andeavor) as a Senior Human Resources Director from August 2017 to September 2019, and before that as Human Resources Director for BP North America. Elizabeth Fogarty has served as Chief Communications Officer since September 2021. Prior to her time with GXO, Ms.
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Securities and Exchange Commission (SEC). The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.
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Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available, free of charge, on our corporate website at www.gxo.com.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny changes to employment-related laws and regulations, including increased minimum wages or the expansion of union organization rights could result in increased labor costs that could adversely affect our business, results of operations, cash flows and financial condition.
Biggest changeAny changes to employment-related laws and regulations, including increased minimum wages or the expansion of union organization rights, could result in increased labor costs that could adversely affect our business, results of operations, cash flows and financial condition. 6 Labor represents a significant portion of our operating expenses, thus, compliance with these evolving laws and regulations could substantially increase our cost of doing business, while failure to do so could subject us to significant fines and lawsuits and could adversely affect our business, results of operations, cash flows and financial condition.
Our ability to achieve our ESG goals, including our goal to achieve 30% reduction in Greenhouse Gas (“GHG”) emissions by 2030, and to accurately and transparently report our progress presents numerous operational, financial, legal and other risks, and may be dependent on the actions of suppliers and other third parties, all of which are outside of our control.
Our ability to achieve our ESG goals, including our goal to achieve 30% reduction in Greenhouse Gas (“GHG”) emissions by 2030, and to accurately and transparently report our progress presents numerous operational, financial, legal and other risks and may be dependent on the actions of suppliers and other third parties, all of which are outside our control.
Certain provisions in GXO’s amended and restated certificate of incorporation and bylaws, and of Delaware law, may prevent or delay an acquisition of GXO, which could decrease the trading price of GXO’s common stock.
Certain provisions in GXO’s amended and restated certificate of incorporation and amended and restated bylaws, and of Delaware law, may prevent or delay an acquisition of GXO, which could decrease the trading price of GXO’s common stock.
Our amended and restated certificate of incorporation provides that unless the board of directors otherwise determines, the state courts within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware) will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of GXO, any action asserting a claim for or based on a breach of a fiduciary duty owed by any current or former director or officer of GXO to GXO or to GXO stockholders, including a claim alleging the aiding and abetting of such a breach of fiduciary duty, any action asserting a claim against GXO or any current or former director or officer of GXO arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or amended and restated bylaws, any action asserting a claim relating to or involving GXO governed by the internal affairs doctrine, or any action asserting an “internal corporate claim” as that term is defined in Section 115 of the DGCL.
Our amended and restated certificate of incorporation provides that unless the board of directors otherwise determines, the state courts within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware) will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of GXO, any action asserting a claim for or based on a breach of a 15 fiduciary duty owed by any current or former director or officer of GXO to GXO or to GXO stockholders, including a claim alleging the aiding and abetting of such a breach of fiduciary duty, any action asserting a claim against GXO or any current or former director or officer of GXO arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or amended and restated bylaws, any action asserting a claim relating to or involving GXO governed by the internal affairs doctrine or any action asserting an “internal corporate claim” as that term is defined in Section 115 of the DGCL.
If the Separation, together with certain related transactions, were to fail to qualify as a transaction that is generally tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code, in general, for U.S. federal income tax purposes, XPO would recognize taxable gain as if it had sold the GXO common stock in a taxable sale for its fair market value, and XPO stockholders who receive such GXO shares in the distribution would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares.
If the Separation, together with certain related transactions, were to fail to qualify as a transaction that is generally tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code, XPO would recognize taxable gain as if it had sold the GXO common stock in a taxable sale for its fair market value, and XPO stockholders who receive such GXO shares in the distribution would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares.
We may experience difficulties and higher than expected expenses in executing this strategy as a result of unfamiliarity with new markets, changes in revenue and business models, entry into new geographic areas or increased pressure on our existing infrastructure and information technology systems. Our growth will place a significant strain on our management, operational, financial and information technology resources.
We may experience difficulties and higher than expected expenses in executing this strategy as a result of unfamiliarity with new markets, changes in revenue and business models, entry into new geographic areas or increased pressure on our existing infrastructure and information technology systems. 7 Our growth will place a significant strain on our management, operational, financial and information technology resources.
The services we provide outside of the U.S. are subject to risks resulting from changes in tariffs, trade restrictions, trade agreements, tax rules and policies, difficulties in managing or overseeing foreign operations and agents, different liability standards, issues related to compliance with anti-corruption laws, such as the Foreign Corrupt Practices Act and the U.K.
The services we provide outside the U.S. are subject to risks resulting from changes in tariffs, trade restrictions, trade agreements, tax rules and policies, difficulties in managing or overseeing foreign operations and agents, different liability standards, issues related to compliance with anti-corruption laws, such as the Foreign Corrupt Practices Act and the U.K.
Generally, any deterioration in industrial relations in our European 13 operations, such as general strike activities or other material labor disputes, could have an adverse effect on our revenues, earnings and financial position. Although our workforce in the U.S. is not unionized, labor unions have, from time to time, attempted to organize our employees.
Generally, any deterioration in industrial relations in our European operations, such as general strike activities or other material labor disputes, could have an adverse effect on our revenues, earnings and financial position. Although our workforce in the U.S. is not unionized, labor unions have, from time to time, attempted to organize our employees.
In addition, we may fail to accurately determine the needs of our customers or trends in the logistics industry, or we may fail to respond appropriately by implementing functionality for our technology platform in a 11 timely or cost-effective manner. Any such failures could result in decreased demand for our services and a corresponding decrease in our revenues.
In addition, we may fail to accurately determine the needs of our customers or trends in the logistics industry, or we may fail to respond appropriately by implementing functionality for our technology platform in a timely or cost-effective manner. Any such failures could result in decreased demand for our services and a corresponding decrease in our revenues.
Although we typically partner with our new customers to ensure that onboarding is smooth, our inability to integrate new customers or operational sites into our technology systems, or recruit additional employees to manage new customer relationships, or incurrence of higher than anticipated costs to onboard new customers may negatively affect our financial condition or operations.
Although we typically partner with our new customers to ensure that onboarding is smooth, our inability to integrate new customers or operational sites into our technology systems or recruit additional employees to manage new customer relationships or the incurrence of higher than anticipated costs to onboard new customers may negatively affect our financial condition or operations.
In connection with the Separation, XPO received an opinion of outside counsel regarding the qualification of certain elements of the Separation under Section 355 of the Internal Revenue Code (the “Code”). The opinion of counsel was based upon and relies on, among other things, various facts and assumptions, as well as certain representations, statements, and undertakings of XPO.
In connection with the Separation, XPO received an opinion from outside counsel regarding the qualification of certain elements of the Separation under Section 355 of the Internal Revenue Code (the “Code”). The opinion of counsel was based upon and relies on, among other things, various facts and assumptions, as well as certain representations, statements and undertakings of XPO.
We are currently subject to employment-related claims in connection with our operations. These claims, lawsuits and proceedings are in various stages of adjudication or investigation and involve a wide variety of claims and potential outcomes. 8 We depend on our ability to attract and retain qualified employees and temporary workers.
We are currently subject to employment-related claims in connection with our operations. These claims, lawsuits and proceedings are in various stages of adjudication or investigation and involve a wide variety of claims and potential outcomes. We depend on our ability to attract and retain qualified employees and temporary workers.
Failure to manage our growth effectively or obtain necessary working capital could have a material adverse effect on our business, results of operations, cash flows and financial condition. 9 Our overseas operations are subject to various operational and financial risks that could adversely affect our business.
Failure to manage our growth effectively or obtain necessary working capital could have a material adverse effect on our business, results of operations, cash flows and financial condition. Our overseas operations are subject to various operational and financial risks that could adversely affect our business.
If our information technology systems are unable to manage high volumes with reliability, accuracy and speed as we grow, or if such systems are not suited to manage the various services we offer, our service levels and operating efficiency could decline.
If our information technology systems are unable to manage high volumes with reliability, accuracy and speed as we grow, or if such systems are not suited to manage the various services we offer, our service levels and operating 9 efficiency could decline.
This exclusive forum provision may limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with GXO or our directors or officers, which may discourage such lawsuits against GXO and our directors and officers.
This exclusive forum provision may limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with GXO or our directors or officers, which may discourage such lawsuits against GXO or our directors or officers.
Several of our long-term customer contracts are fixed-price arrangements that limit our ability to pass on to our customers increases in labor costs due to low unemployment, increases in government unemployment benefits, competitive pressures, union activity or changes in federal or state minimum wage or overtime laws, and any such increases in labor costs could adversely affect our business, results of operations, cash flows and financial condition.
Many of our long-term customer contracts are fixed-price arrangements that limit our ability to pass on to our customers increases in labor costs due to low unemployment, increases in government unemployment benefits, competitive pressures, union activity or changes in federal or state minimum wage or overtime laws and any such increases in labor costs could adversely affect our business, results of operations, cash flows and financial condition.
Alternatively, if a court were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, we may incur additional costs associated with resolving such matters in other jurisdictions, which could negatively affect our business, results of operations and financial condition.
Alternatively, if a court were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, we may incur additional costs associated with resolving such matters in other jurisdictions, which could negatively affect our business, results of operations and financial condition. Item 1B.
Any of our owned or licensed intellectual property rights could be challenged, invalidated, circumvented, infringed or misappropriated; our trade secrets and other confidential information could be disclosed 12 in an unauthorized manner to third parties; or we may fail to secure the rights to intellectual property developed by our employees, contractors and others.
Any of our owned or licensed intellectual property rights could be challenged, invalidated, circumvented, infringed or misappropriated; our trade secrets and other confidential information could be disclosed in an unauthorized manner to third parties; or we may fail to secure the rights to intellectual property developed by 10 our employees, contractors and others.
Risks Related to Our Use of Technology Our business will be seriously harmed if we fail to develop, implement, maintain, upgrade, enhance, protect and integrate our information technology systems, including those systems of any businesses that we acquire.
Risks Related to Our Use of Technology Our business will be seriously harmed if we fail to develop, implement, maintain, upgrade, enhance, protect and integrate our information technology systems, including the systems of any businesses that we acquire.
In addition, potentially significant expenditures could be required to comply with environmental laws and regulations, including requirements that may be adopted or imposed in the future. 15 Our ability to achieve our ESG goals are subject to risks, many of which are outside of our control, and our reputation could be harmed if we fail to meet such goals.
In addition, potentially significant expenditures could be required to 13 comply with environmental laws and regulations, including requirements that may be adopted or imposed in the future. Our ability to achieve our ESG goals is subject to risks, many of which are outside our control, and our reputation could be harmed if we fail to meet such goals.
Any such failure could result in harm to our reputation and have an ongoing adverse impact on our business, results of operations and financial condition, including after the underlying failures have been remedied. We may also be subject to cybersecurity attacks and other intentional hacking.
Any such failure could result in harm to our reputation and have an ongoing adverse impact on our business, results of operations and financial condition, including after the underlying failures have been remedied. We may also be subject to cyberattacks and other intentional hacking.
Any failure to identify and address such defects or errors or prevent a cyber-attack could result in service interruptions, operational difficulties, loss of revenues or market share, liabilities to our customers or others, the diversion of corporate resources, injury to our reputation or increased service and maintenance costs.
Any failure to identify and address such defects or errors or prevent a cyberattack could result in service interruptions, operational difficulties, loss of revenues or market share, liabilities to our customers or others, the diversion of corporate resources, injury to our reputation or increased service and maintenance costs.
Efforts to enforce our intellectual property rights may be time-consuming and costly, distract management’s attention, divert our resources and ultimately be unsuccessful. Moreover, should we fail to develop and properly manage future intellectual property, this could adversely affect our market positions and business opportunities.
Efforts to enforce our intellectual property rights may be time-consuming and costly, distract management’s attention, divert our resources in other ways and ultimately be unsuccessful. Moreover, should we fail to develop and properly manage future intellectual property, this could adversely affect our market positions and business opportunities.
In addition, as part of and prior to the Separation, XPO and its subsidiaries completed an internal reorganization, and XPO, GXO and their respective subsidiaries incurred certain tax costs in connection with the internal reorganization, including non-U.S. tax costs resulting from transactions in non-U.S. jurisdictions, which may be material.
In addition, as part of and before the Separation, XPO and its subsidiaries completed an internal reorganization, and XPO, GXO and their respective subsidiaries incurred certain tax costs in connection with the internal reorganization, including non-U.S. tax costs resulting from transactions in non-U.S. jurisdictions, which may be material.
In addition, recently, regulatory and enforcement focus on data protection has heightened in the U.S. and abroad, particularly in the EU, and failure to comply with applicable U.S. or foreign data protection regulations or other data protection standards may expose us to litigation, fines, sanctions or other penalties, which could harm our business, its reputation, results of operations and financial condition.
In addition, recently, regulatory and enforcement focus on data protection has heightened in the U.S. and abroad, particularly in the European Union (“EU”), and failure to comply with applicable U.S. or foreign data protection regulations or other data protection standards may expose us to litigation, fines, sanctions or other penalties, which could harm our business, its reputation, results of operations and financial condition.
We have experienced challenges of this nature relating to the infrastructure and systems of certain companies that we have acquired. Also, we may not realize all of the synergies we anticipate from past and potential future acquisitions. Among the synergies that we currently expect to realize are cross-selling opportunities to our existing customers, network synergies and other operational synergies.
We have experienced challenges of this nature relating to the infrastructure and systems of certain companies that we have acquired. Also, we may not realize all of the synergies we anticipate from past and potential future acquisitions. Among the synergies that we currently expect to realize are cross-selling opportunities to our existing customers, as well as network and operational efficiencies.
We are subject to claims and litigation related to labor and employment, personal injury, vehicular accidents, cargo and other property damage, business practices, environmental liability and other matters, including claims asserted under various other theories of agency or employer liability.
We are subject to claims and litigation related to our customer contracts and relationships, labor and employment, personal injury, vehicular accidents, cargo and other property damage, business practices, environmental liability and other matters, including claims asserted under various other theories of agency or employer liability.
Although we manage our business to exceed prescribed performance levels, our inability to meet these service levels, whether due to labor shortages, volume peaks, our inability to procure temporary labor, technological malfunctions or other events that may or may not be within our control, may expose us to penalties or incremental costs or lead to the termination of customer contracts, any of which could negatively affect our business and financial condition. 10 Our operations are subject to seasonal fluctuations, and our inability to manage these fluctuations could negatively affect our business and our results of operations.
Although we manage our business to exceed prescribed performance levels, our inability to meet these service levels, whether due to labor shortages, volume peaks, our inability to procure temporary labor, 8 technological malfunctions or other events that may or may not be within our control, may expose us to penalties or incremental costs or lead to the termination of customer contracts, any of which could negatively affect our business and financial condition.
Currency volatility contributes to variations in our sales of services in impacted jurisdictions. Accordingly, fluctuations in currency exchange rates could adversely affect our business and financial condition. Our inability to successfully manage the costs and operational difficulties of adding new customers and business may negatively affect our financial condition and operations.
Currency volatility contributes to variations in our revenue and expenses in foreign currency jurisdictions. Accordingly, fluctuations in currency exchange rates could adversely affect our business and financial condition. Our inability to successfully manage the costs and operational difficulties of adding new customers and business may negatively affect our financial condition and operations.
Economic recessions and other factors that reduce consumer spending, both in North America and Europe, could have a material adverse impact on our business. Our performance is affected by recessionary economic cycles, downturns in customers’ business cycles and changes in customers’ business practices.
Economic recessions and other factors, such as heightened geopolitical tensions or conflict, that reduce consumer spending, both in North America and Europe, could have a material adverse impact on our business. Our performance is affected by recessionary economic cycles, downturns in customers’ business cycles and changes in customers’ business practices.
A failure of our information technology infrastructure or a breach of our information systems, networks or processes may materially adversely affect our business. The efficient operation of our business depends on our information technology systems, including internet and cloud-based services, for many activities important to our business.
A failure of our information technology infrastructure or a breach of our information systems, networks or processes may have a material adverse effect on our business. The efficient operation of our business depends on our information technology systems, including internet and cloud-based services, for many activities important to our business.
We are unable to predict the impact that recently enacted and future regulations may have on our business. If higher costs are incurred by us as a result of future changes in regulations, this could adversely affect our results of operations to the extent we are unable to obtain a corresponding increase in price from our customers.
If higher costs are incurred by us as a result of future changes in regulations, this could adversely affect our results of operations to the extent we are unable to obtain a corresponding increase in price from our customers.
Successful unionization of our employees or organizing efforts could lead to business interruptions, work stoppages and the reduction of service levels due to work rules that could have an adverse effect on our customer relationships and our revenues, earnings and financial position.
Successful unionization of our employees or organizing efforts could lead to business interruptions, work stoppages and the reduction of service levels due to work rules and could have an adverse effect on our customer relationships and our revenues, earnings and financial position. 11 Any failure to properly manage our temporary workers could have a material adverse impact on our revenues, earnings and financial position.
Our failure to meet our customers’ expectations during these seasonal peaks may negatively affect our customer relationships, could expose us to penalties under our contractual arrangements with customers and ultimately could negatively affect our business and our results of operations. We are subject to risks arising from the COVID-19 global pandemic (the “Pandemic”).
Our failure to meet our customers’ expectations during these seasonal peaks may negatively affect our customer relationships, could expose us to penalties under our contractual arrangements with customers and ultimately could negatively affect our business and our results of operations.
If we fail to comply with any of the covenants under our debt obligations and are unable to obtain a waiver or amendment, such failure may result in an event of default under our indebtedness. We may not have sufficient liquidity to repay or refinance our indebtedness if such indebtedness were accelerated upon an event of default.
Further, failure to comply with the covenants under our indebtedness may have a material adverse impact on our operations. If we fail to comply with any of the covenants under our debt obligations and are unable to obtain a waiver or amendment, such failure may result in an event of default under our indebtedness.
Therefore, our inability to recruit a qualified temporary workforce may result in our inability to meet our customers’ performance targets. Our past acquisitions, as well as any acquisitions that we may complete in the future, may be unsuccessful or result in other risks or developments that adversely affect our financial condition and results.
Our past acquisitions, as well as any acquisitions that we may complete in the future, may be unsuccessful or result in other risks or developments that adversely affect our financial condition and results.
The potential for a wider conflict could further increase financial market volatility and could negatively affect our ability to raise additional capital when required. While we currently conduct limited business in Russia, the conflict and its effects could adversely affect our business, results of operations, cash flows and financial condition.
Any period of heightened geopolitical tensions or conflict can increase financial market volatility and could negatively affect our ability to raise additional capital when required. While we do not conduct business in Russia, the conflict and its effects could adversely affect our business, results of operations, cash flows and financial condition.
Section 203 provides that, subject to limited exceptions, persons that acquire, or are affiliated with persons that acquire, more than 15% of the outstanding voting stock of a Delaware corporation may not engage in a business combination with that corporation, including by merger, consolidation or acquisitions of additional shares, for a three-year period following the date on which that person or any of its affiliates becomes the holder of more than 15% of the corporation’s outstanding voting stock. 17 We believe these provisions will protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our board of directors and by providing our board of directors with more time to assess any acquisition proposal.
Section 203 provides that, subject to limited exceptions, persons that acquire, or are affiliated with persons that acquire, more than 15% of the outstanding voting stock of a Delaware corporation may not engage in a business combination with that corporation, including by merger, consolidation or acquisitions of additional shares, for a three-year period following the date on which that person or any of its affiliates become the holder of more than 15% of the corporation’s outstanding voting stock.
In particular, we derive a substantial portion of our revenue from the operation and management of facilities that are often located close to a customer’s manufacturing plant and are integrated into the customer’s production line process.
If our customers experience plant slowdowns or closures because they are unable to negotiate labor contracts, our revenue and profitability could be negatively impacted. In particular, we derive a substantial portion of our revenue from the operation and management of facilities that are often located close to a customer’s manufacturing plant and are integrated into the customer’s production line process.
In the event the relevant taxing authorities prevail with any challenge in respect of any relevant transaction, XPO, GXO and their subsidiaries could be subject to significant tax liabilities.
In the event the relevant taxing authorities prevail with any challenge in respect of any relevant transaction, XPO, GXO and their subsidiaries could be subject to significant tax liabilities. 14 Risks Related to Our Common Stock Any stockholder’s percentage of ownership in GXO may be diluted in the future at any given time.
If the performance of an acquired business, including our 2022 acquisition of Clipper, varies from our projections or assumptions or if estimates about the future profitability of an acquired business change, our revenues, earnings or other aspects of our financial condition could be adversely affected.
We are unable to predict all the risks that could arise as a result of our acquisitions. If the performance of an acquired business varies from our projections or assumptions or if estimates about the future profitability of an acquired business change, our revenues, earnings or other aspects of our financial condition could be adversely affected.
We could incur significant costs, including clean-up costs, fines and sanctions and claims by third parties for property damage and personal injury, as a result of violations of or liabilities under these laws and regulations.
For example, certain jurisdictions including the State of California enacted legislation requiring certain companies to disclose GHG emissions and climate-related financial risk information. We could incur significant costs, including clean-up costs, fines and sanctions and claims by third parties for property damage and personal injury, as a result of violations of or liabilities under these laws and regulations.
To the extent that a customer defaults on its obligations under its agreement with us, we could be forced to take a significant loss on the unrecovered portion of the upfront capital costs. The contractual terms between us and our customers could expose us to penalties and costs in the event we do not meet the contractually prescribed performance levels.
To the extent that a customer defaults on its obligations under its agreement with us, we could be forced to take a significant loss on the unrecovered portion of the upfront capital costs.
Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, could materially and adversely affect our financial position and results of operations. Further, failure to comply with the covenants under our indebtedness may have a material adverse impact on our operations.
We have incurred debt obligations that could adversely affect our business and profitability and our ability to meet other obligations. Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, could materially and adversely affect our financial position and results of operations.
If, as a result of their assessment of our ESG practices, certain investors are unsatisfied with our actions or progress, they may reconsider their investment in our Company.
If we are unable to meet our ESG goals or evolving stakeholder expectations and industry standards, our reputation could be negatively impacted. If, as a result of their assessment of our ESG practices, certain investors are unsatisfied with our actions or progress, they may reconsider their investment in our Company.
Many of our customers typically realize a significant portion of their sales during the holiday season in the fourth quarter of each calendar year.
Our operations are subject to seasonal fluctuations, and our inability to manage these fluctuations could negatively affect our business and our results of operations. Many of our customers typically realize a significant portion of their sales during the holiday season in the fourth quarter of each calendar year.
Any failure to properly manage our temporary workers could have a material adverse impact on our revenues, earnings, financial position. Our business uses a large number of temporary workers in our operations. We cannot guarantee that temporary workers are as well-trained as our other employees.
Our business uses a large number of temporary workers in our operations. We cannot guarantee that temporary workers are as well-trained as our other employees.
The regulatory landscape in which we operate is constantly evolving and subject to significant change, including as a result of evolving political and social pressures. Future laws, regulations and regulatory reforms, may be more stringent and may require changes to our operating practices that influence the demand for our services or require us to incur significant additional costs.
Future laws, regulations and regulatory reforms may be more stringent and may require changes to our operating practices that influence the demand for our services or require us to incur significant additional costs. We are unable to predict the impact that recently enacted and future regulations may have on our business.
A deteriorating economic environment may result in tensions in industrial relations, which may lead to industrial action within our European operations; this could have a direct impact on our business operations.
In Europe, our business activities rely on a large amount of labor, including a number of workers who are affiliated with trade unions and other staff representative institutions. A deteriorating economic environment may result in tensions in industrial relations, which may lead to industrial action within our European operations which could have a direct impact on our business operations.
We maintain long-term contracts with the majority of our customers, many of which include performance-based minimum levels of service.
The contractual terms between us and our customers could expose us to penalties and other costs in the event we do not meet the contractually prescribed performance levels. We maintain long-term contracts with the majority of our customers, many of which include performance-based minimum levels of service.
With respect to certain transactions undertaken as part of the internal reorganization, XPO obtained opinions of external tax advisors regarding the tax treatment of such transactions. Such opinions are based and relied on, among other 16 things, various facts and assumptions, as well as certain representations, statements and undertakings of XPO, GXO or their respective subsidiaries.
With respect to certain transactions undertaken as part of the internal reorganization, XPO obtained opinions of external tax advisors regarding the tax treatment of such transactions.
As the nature, scope and complexity of ESG reporting, diligence and disclosure requirements expand, including the SEC’s recently proposed disclosure requirements regarding, among other matters, GHG emissions, we may have to undertake additional costs to control, assess and report on ESG metrics.
If the nature, scope and complexity of ESG reporting, diligence and disclosure requirements expand, we may have to undertake additional costs to control, assess and report on ESG metrics. Any failure or perceived failure to satisfy various ESG reporting standards within the timelines we announce, or at all, could increase the risk of litigation.
Our operations are regulated and licensed by various governmental agencies at the local, state and federal levels in the U.S. and in the foreign countries where we operate. These regulatory agencies have authority and oversight of domestic and international activities. Our subsidiaries must also comply with applicable regulations and requirements of various agencies.
These regulatory agencies have authority and oversight of domestic and international activities. Our subsidiaries must also comply with applicable regulations and requirements of various agencies. 12 The regulatory landscape in which we operate is constantly evolving and subject to significant change, including as a result of evolving political and social pressures.
The ramifications of the hostilities and sanctions may not be limited to Russia, Ukraine and Russian and Ukrainian companies; ramifications may spill over to and negatively impact other regional and global economic markets, may cause supply chain disruptions and may increase costs for transportation and energy.
The ramifications of any period of heightened geopolitical tensions or conflicts, including increased international trade sanctions, may negatively impact regional and global economic markets, including where we operate, may cause supply chain disruptions and may increase costs for labor, transportation and energy.
Risks Related to Third-Party Relationships Our business may be materially adversely affected by labor disputes or organizing efforts. Labor disputes involving our customers could affect our operations. If our customers experience plant slowdowns or closures because they are unable to negotiate labor contracts, our revenue and profitability could be negatively impacted.
We may not have sufficient liquidity to repay or refinance our indebtedness if such indebtedness were accelerated upon an event of default. We may also incur additional indebtedness in the future. Risks Related to Third-Party Relationships Our business may be materially adversely affected by labor disputes or organizing efforts. Labor disputes involving our customers could affect our operations.
Removed
Labor represents a significant portion of our operating expenses; thus, compliance with these evolving laws and regulations could substantially increase our cost of doing business, while failure to do so could subject us to significant fines and lawsuits and could have a material adverse effect on our business, financial condition and results of operations.
Added
In addition, the COVID-19 pandemic and resulting actions, as well as other macro-economic headwinds such as inflation and supply change disruptions increased the potential for labor shortages and heightened levels of employee turnover. Therefore, our inability to recruit a qualified temporary workforce may result in our inability to meet our customers’ performance targets.
Removed
We are unable to predict all of the risks that could arise as a result of our acquisitions.
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Damage to our reputation through unfavorable publicity or the actions of our employees or temporary workers could adversely affect our financial condition. Our success depends on our ability to consistently deliver operational excellence and strong customer service.
Removed
Our results of operations may continue to reflect the adverse impact from the Pandemic, including its impact on our supply chain and inflationary pressures.
Added
Our inability to deliver our services and solutions as promised on a consistent basis, or our customers having a negative experience or otherwise becoming dissatisfied, can negatively impact our relationships with new or existing customers and adversely affect our brand and reputation, which could, in turn, adversely affect revenue and earnings growth.
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A pandemic or other public health epidemic poses the risk that we or our employees, customers, suppliers, manufacturers and other commercial partners may be prevented from conducting business activities for an indefinite period of time, including due to the spread of the disease or shutdowns requested or mandated by governmental authorities.
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Adverse publicity (whether or not justified) relating to activities by our employees, contractors, agents or others with whom we do business, such as customer service issues, could tarnish our reputation and reduce the value of our brand.
Removed
The extent to which the Pandemic may have a material adverse effect on our future business, financial condition and results of operations will depend on many factors that are not within GXO’s control, including but not limited to the Pandemic's path and effect, new variants and vaccination rates, potential supply chain disruptions and inflation, which can impact our key markets, business or financial condition.
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With the increase in the use of social media outlets such as LinkedIn, X (formerly Twitter), Facebook, Instagram and YouTube, adverse publicity can be disseminated quickly and broadly, making it increasingly difficult for us to effectively respond. This unfavorable publicity could also require us to allocate significant resources to rebuild our reputation.
Removed
Risks Related to Russia’s Invasion of Ukraine. In February 2022, Russia launched a large-scale military invasion of Ukraine. The United States and other countries and certain international organizations have imposed broad-ranging economic sanctions on Russia and certain Russian individuals, banking entities and corporations as a response, and additional sanctions may be imposed.
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We face risks associated with the handling of customer inventory. Under some of our agreements, we maintain the inventory of our customers, some of which may be significant in value. Our failure to properly handle and safeguard such inventory exposes us to potential claims and expenses as well as harm to our business and reputation.
Removed
The extent and duration of the military action or future escalation of such hostilities, resulting sanctions and market disruptions and volatility are impossible to predict, but could be significant and could have a severe adverse effect on the regional and global economies.
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Technology and new market entrants may also disrupt the way we and our competitors operate.
Removed
We have incurred debt obligations that could adversely affect our business and profitability and our ability to meet other obligations. In 2021, in connection with the Separation, GXO entered into a Revolving Credit Agreement providing an $800 million unsecured five-year revolving credit facility and issued $800 million of unsecured notes in two series.
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If we fail to successfully implement critical technology, if our technology does not provide the anticipated benefits or it does not meet market demands, we may be placed at a competitive disadvantage and could lose customers, materially adversely impacting our financial condition and results of operations.
Removed
GXO transferred a portion of the net proceeds of the notes and other cash and cash equivalents to XPO.
Added
During 2023, the OECD issued administrative guidance for the Pillar Two Global Anti-Base Erosion rules (“Pillar Two”), which generally imposes a 15% global minimum tax on multinational companies. Many Pillar Two rules are effective for fiscal years beginning on January 1, 2024, with other aspects to be effective from 2025.
Removed
In March 2022, GXO entered into a two- and three-year term loan facility that provided $165 million and $235 million, respectively, and in May 2022, GXO entered into a five-year unsecured term loan facility that provided a $500 million unsecured term loan. The term loans were used to fund the Clipper Acquisition.
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The Company regularly monitors developments in its jurisdictions and considers the impact of the tax-related proposals as they arise. We are subject to regulations, which could negatively impact our business. Our operations are regulated and licensed by various governmental agencies at the local, state and federal levels in the U.S. and in the foreign countries where we operate.
Removed
As a result of these transactions, GXO had approximately $1.6 billion of outstanding debt as of December 31, 2022, excluding finance leases and other debt. We may also incur additional indebtedness in the future.
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We believe these provisions will protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our board of directors and by providing our board of directors with more time to assess any acquisition proposal.
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In Europe, our business activities rely on a large amount of labor, including a number of workers who are affiliated with trade unions and other staff representative institutions. It is essential that we maintain good relations with employees, trade unions and other staff representative institutions.
Removed
The OECD has recommended changes to numerous long-standing international tax principles through its base erosion and profit shifting project.
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These and other tax laws and related regulations changes, to the extent adopted, may increase tax uncertainty, result in higher compliance costs and adversely affect our provision for income taxes, results of operations and/or cash flow. 14 We are subject to regulation, which could negatively impact our business.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties. As of December 31, 2022, we operated in 979 facilities, including five corporate offices, located in the United States, United Kingdom, and Europe, of which 372 facilities are owned or leased by our customers. In the aggregate, we occupied 197 million square feet in our locations.
Biggest changeItem 2. Properties. As of December 31, 2023, we operated in 974 facilities, including corporate offices, of which 359 facilities are owned or leased by our customers. We lease our global headquarters in Greenwich, Connecticut and our executive office in London, England. We believe that our facilities are sufficient for our current needs.
(2) Excludes the United Kingdom. (3) Locations are primarily in Asia and Latin America. We lease our global headquarters in Greenwich, Connecticut, our executive office in London, England, and various other offices in the United States, United Kingdom, France and India to support our global executive and shared services functions.
(2) Excludes the United Kingdom. (3) Locations are primarily in Asia and Latin America.
Facilities Square Footage Locations Leased Facilities Owned Facilities Customer Facilities (1) Total Leased Facilities Owned Facilities Customer Facilities (1) Total (in millions) United States 193 — 101 294 47 — 31 78 United Kingdom 161 2 153 316 19 1 20 40 Europe (2) 188 — 99 287 41 — 31 72 Other (3) 58 — 19 77 5 — 2 7 Corporate 5 — — 5 — — — — Total 605 2 372 979 112 1 84 197 (1) Locations owned or leased by our customers.
Facilities Square Footage Locations Leased Facilities Owned Facilities Customer Facilities (1) Total Leased Facilities Owned Facilities Customer Facilities (1) Total (in millions) United States 199 — 112 311 48 — 30 78 United Kingdom 172 2 129 303 18 1 23 42 Europe (2) 192 — 100 292 42 — 31 73 Other (3) 50 — 18 68 5 — 1 6 Total 613 2 359 974 113 1 85 199 (1) Locations owned or leased by our customers.
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We believe that our facilities are sufficient for our current needs.
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In the aggregate, we occupied 199 million square feet in our locations.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe stock performance assumes $100 was invested on August 2, 2021 in our common stock, the S&P 400 MidCap Index, the S&P 500 Technology Index and the S&P 500 Transportation Index, including reinvestment of dividends through December 31, 2022. 8/2/2021 9/30/2021 12/31/2021 3/31/2022 6/30/2022 9/30/2022 12/31/2022 GXO $ 100.00 $ 124.37 $ 144.01 $ 113.11 $ 68.61 $ 55.59 $ 67.69 S&P 400 MidCap Index 100.00 98.09 105.57 100.06 84.28 81.85 90.28 S&P 500 Technology Index 100.00 97.77 113.85 104.12 82.83 77.50 80.94 S&P 500 Transportation Index 100.00 94.03 110.27 109.70 89.94 79.95 88.61 20 Recent Sales of Unregistered Securities On May 24, 2022, the Company completed the Clipper Acquisition.
Biggest changeThe stock performance assumes $100 was invested on August 2, 2021, in our common stock, the S&P 400 MidCap Index, the S&P 500 Technology Index and the S&P 500 Transportation Index, including reinvestment of dividends through December 31, 2023. 8/2/21 12/31/21 6/30/22 12/31/22 6/30/23 12/31/23 GXO $ 100.00 $ 144.01 $ 68.61 $ 67.69 $ 99.60 $ 96.97 S&P 400 MidCap Index 100.00 105.57 84.28 90.28 97.41 103.33 S&P 500 Technology Index 100.00 113.85 82.83 80.94 114.99 126.59 S&P 500 Transportation Index 100.00 110.27 89.94 88.61 97.43 97.57 19 Item 6. [Reserved]
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information and Dividends Our common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “GXO.” On February 13, 2023, there were approximately 88 record holders of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information and Dividends Our common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “GXO.” On February 12, 2024, there were approximately 83 record holders of our common stock.
Stock Performance Graph On August 2, 2021, our common stock began regular-way trading. The following graph sets forth the cumulative total stockholder return to GXO’s stockholders for the period beginning August 2, 2021, through December 31, 2022, as well as the corresponding returns on the S&P 400 MidCap Index, the S&P 500 Technology Index and the S&P 500 Transportation Index.
The following graph sets forth the cumulative total stockholder return to GXO’s stockholders for the period beginning August 2, 2021, through December 31, 2023, as well as the corresponding returns on the S&P 400 MidCap Index, the S&P 500 Technology Index and the S&P 500 Transportation Index.
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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.
Added
Stock Performance Graph GXO became a standalone publicly traded company on August 2, 2021, and our common stock began regular-way trading.
Removed
Pursuant to the terms of the Clipper Acquisition, 7,551 shares of GXO common stock were issued during the quarter ended December 31, 2022 in connection with the exercise of options under a court-sanctioned scheme of arrangement.
Removed
These shares were issued in reliance on the exemption from registration provided by Section 3(a)(10) of the Securities Act, which exempts from the registration requirements under the Securities Act any securities that are issued in exchange for one or more bona fide outstanding securities where the terms and conditions of such issuance and exchange are approved, after a hearing upon the fairness of such terms and conditions at which all persons to whom it is proposed to issue securities in such exchange shall have the right to appear, by any court or other governmental authority expressly authorized by law, to grant such approval.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOther income, net was as follows: Year Ended December 31, (In millions) 2022 2021 $ Change % Change Net periodic pension income $ 33 $ 19 $ 14 74 % Foreign currency gain (loss): Realized foreign currency option and forward contracts gain 29 1 28 n/m Unrealized foreign currency option and forward contracts gain (loss) (11) 1 (12) n/m Foreign currency transaction and remeasurement gain (loss) (4) 2 (6) n/m Total foreign currency gain 14 4 10 n/m Other 4 — 4 n/m Total $ 51 $ 23 $ 28 n/m n/m - not meaningful Interest expense primarily consists of interest related to indebtedness for money borrowed, capital lease obligations and cross currency swaps used in net investment hedges.
Biggest changeOther income, net was as follows: Year Ended December 31, (In millions) 2023 2022 $ Change % Change Net periodic pension income $ 8 $ 33 $ (25) (76) % Foreign currency gain (loss): Realized foreign currency option and forward contracts gain (loss) (13) 29 (42) n/m Unrealized foreign currency option and forward contracts gain (loss) 4 (11) 15 n/m Foreign currency transaction and remeasurement loss — (3) 3 (100) % Total foreign currency gain (loss) (9) 15 (24) n/m Other 2 3 (1) (33) % Other income, net $ 1 $ 51 $ (50) (98) % n/m - not meaningful 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.
We have identified the following accounting policies to be the most critical as they are important to our financial condition and results of operations, and require significant judgment and estimates on the part of management in their application. 28 Business Combinations We record tangible and intangible assets acquired and liabilities assumed in business combinations under the purchase method of accounting.
We have identified the following accounting policies to be the most critical as they are important to our financial condition and results of operations and require significant judgment and estimates on the part of management in their application. Business Combinations We record tangible and intangible assets acquired and liabilities assumed in business combinations under the purchase method of accounting.
A change in any of these assumptions would have an effect on net periodic pension costs reported in the consolidated financial statements. 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 change in any of these assumptions would have an effect on the net periodic pension cost reported in the Consolidated Financial Statements. 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.
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.
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.
Our principal uses of cash in the future will be primarily to fund our operations, working capital needs, capital expenditures, repayment of borrowings and strategic business development transactions. The timing and magnitude of our start-ups can vary and may positively or negatively impact our cash flows.
Our principal uses of cash in the future will be primarily to fund our operations, working capital needs, capital expenditures, repayment of borrowings and strategic business development transactions. The timing and magnitude of our new contract start-ups can vary and may positively or negatively impact our cash flows.
During 2022, we used $876 million in connection with the Clipper Acquisition, $342 million of cash for capital expenditures, partially offset by $40 million received from the sales of property and equipment and $21 million in net proceeds from the settlement of cross-currency swap agreements, excluding accrued interest.
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.
We provide our customers with high-value-add warehousing and distribution, order fulfillment, e-commerce, reverse logistics and other supply chain services differentiated by our ability to deliver technology-enabled, customized solutions at scale.
We provide our customers with high-value-added warehousing and distribution, order fulfillment, e-commerce, reverse logistics and other supply chain services differentiated by our ability to deliver technology-enabled, customized solutions at scale.
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 are not included in this Annual Report and can be found in Part II, Item 7, “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” in our Annual Report on Form 10-K for the year ended December 31, 2021.
Discussions of 2021 financial condition and year-to-year comparisons between 2022 and 2021 are not included in this Annual Report and can be found in Part II, Item 7, “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” in our Annual Report on Form 10-K for the year ended December 31, 2022.
We use technology to manage advanced automation, labor productivity, safety and the complex flow of goods within sophisticated logistics environments. Our business model is asset-light and historically resilient in cycles, with high returns, strong free cash flow and visibility into revenue and earnings.
We use technology to manage advanced automation, labor productivity, sustainability, safety and the complex flow of goods within sophisticated warehouse environments. Our business model is asset-light and historically resilient in cycles, with high returns, strong free cash flow and visibility into revenue and earnings.
Our customer base includes many blue-chip leaders in sectors that demonstrate high growth and/or durable demand, with significant growth potential through customer outsourcing of logistics services. We strive to provide all of our customers with consistently high levels of service and cutting-edge automation.
Our customer base includes many blue-chip leaders in sectors that demonstrate high growth and/or durable demand, with significant growth potential through customer outsourcing of logistics services. We strive to provide all customers with consistent quality service and cutting-edge automation.
Significant assumptions utilized in the allocation of the purchase price related to intangible assets include future expected cash flows from acquired customer relationships and trade names and discount rates. 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.
Significant assumptions utilized in the allocation of the purchase price related to intangible assets include future expected cash flows from acquired intangibles and discount rates. 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.
The most dramatic growth in secular demand in recent years has been in e-commerce and related sectors, including omnichannel retail and other direct-to-consumer channels. We expect to attract new customers and expand the services we provide to existing customers through new projects, thus earning more of their external and internal logistics spend.
The most dramatic growth in demand in recent years has been in e-commerce and related sectors, including omnichannel retail and other direct-to-consumer channels. We expect to attract new customers and expand the services we provide to existing customers through new projects, thus earning more of their logistics spending.
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 for 2022 were $32 million compared with $4 million for 2021.
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.
Liquidity and Capital Resources Overview Our ability to fund our operations and anticipated capital needs are reliant upon the generation of cash from operations, supplemented as necessary by periodic utilization of our revolving credit facility.
Liquidity and Capital Resources Overview Our ability to fund our operations and anticipated capital needs is reliant upon the generation of cash from operations, supplemented as necessary by periodic utilization of our revolving credit facility and factoring programs.
Business Overview GXO Logistics, Inc., together with its subsidiaries (“GXO,” the “Company” or “we”), is the largest pure-play contract logistics provider in the world and a foremost innovator in an industry.
Business Overview GXO Logistics, Inc., together with its subsidiaries (“GXO,” the “Company,” “our” or “we”), is the largest pure-play contract logistics provider in the world and a foremost innovator in the industry.
Our customers rely on us to move their goods with high efficiency through their supply chains — from the moment inbound goods arrive at our logistics sites, through fulfillment and distribution and the management of returned products.
Our customers rely on us to move their goods with high efficiency through their supply chains — from the moment goods arrive at our warehouses through fulfillment and distribution, and the management of returned products.
We also collaborate with our largest customers on planning and forecasting and provide assistance with network optimization, working with these customers to design or redesign their supply chains to meet specific goals, such as sustainability metrics. Our multidisciplinary, consultative approach has led to many of our key customer relationships extending for years and expanding in scope.
We also collaborate with our largest customers on planning and forecasting and assist with network optimization, working with these customers to design or redesign their supply chains to meet specific goals, such as environmental, social and governance. Our multidisciplinary, consultative approach has led to many of our key customer relationships extending for years and expanding in scope.
Also, the following discussion and analysis of our financial conditions and results of operations generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
Also, the following discussion and analysis of our financial condition and results of operations generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
The primary sources of cash from financing activities in 2022 were $917 million in proceeds from long-term debt and the revolving credit facility, 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.
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.
Capital Expenditures Our 2023 capital expenditures include fulfillment costs and investments in technology and automation to improve the speed and accuracy of order fulfillment and the resiliency of supply chains.
Capital Expenditures Our future capital spending includes fulfillment costs and investments in technology and automation to improve the speed and accuracy of order fulfillment and the resiliency of our supply chains.
As of December 31, 2022, we have $800 million of unsecured notes outstanding with interest payable in arrears on January 15 and July 15 of each year, and $850 million of variable-rate term loans outstanding with interest payable in arrears at our option monthly, quarterly, or semiannually.
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.
Off-Balance Sheet Arrangements We do not engage in any off-balance sheet financial arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Off-Balance Sheet Arrangements We do not engage in any off-balance sheet financial arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. 24 Contractual Obligations We lease certain facilities and equipment under operating and finance lease arrangements.
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.
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. Other income, net decreased due to lower pension income and foreign currency movements.
Direct operating expenses comprise both fixed and variable expenses and consist of operating costs related to our logistics facilities, including personnel costs, facility and equipment expenses, such as rent, utilities, equipment maintenance and repair, transportation costs, costs of materials and supplies and information technology expenses.
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 2022 increased by 12%, or $806 million, to $7.4 billion compared with $6.6 billion for 23 2021. As a percentage of revenue, direct operating expense was 82.8% and 83.6% in 2022 and 2021, respectively.
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.
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.
Employee Benefit Plans 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.
Contractual Obligations We lease certain facilities and equipment under operating and finance lease arrangements. As of December 31, 2022, our outstanding obligations under operating and finance leases were $2.4 billion and $132 million, respectively. See Note — 8 Leases to the Consolidated Financial Statements for additional information.
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.
See Note — 9 Debt and Financing Arrangements to the Consolidated Financial Statements for additional information. 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.
“Debt and Financing Arrangements” to the Consolidated Financial Statements for additional information. 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. Critical Accounting Policies We prepare our Consolidated Financial Statements in accordance with GAAP.
Cash Flow Activity Our cash flows from operating, investing and financing activities, as reflected on our Consolidated Statements of Cash Flows, were summarized as follows: Year Ended December 31, (In millions) 2022 2021 $ Change % Change Net cash provided by operating activities $ 542 $ 455 $ 87 19 % Net cash used in investing activities (1,149) (207) (942) n/m Net cash provided by (used in) financing activities 787 (241) 1,028 n/m Effect of exchange rates on cash and cash equivalents (18) (2) (16) n/m Net increase in cash and cash equivalents $ 162 $ 5 $ 157 n/m n/m - not meaningful 27 Operating Activities Cash flows provided by operating activities for 2022 increased by $87 million compared with 2021.
Cash Flow Activity Our cash flows from operating, investing and financing activities, as reflected on our Consolidated Statements of Cash Flows, were summarized as follows: Year Ended December 31, (In millions) 2023 2022 $ Change % Change Net cash provided by operating activities $ 558 $ 542 $ 16 3 % Net cash used in investing activities (410) (1,149) 739 (64) % Net cash (used in) provided by financing activities (186) 787 (973) n/m Effect of exchange rates 13 (18) 31 n/m Net (decrease) increase in cash, restricted cash and cash equivalents $ (25) $ 162 $ (187) n/m n/m - not meaningful Operating Activities Cash flows provided by operating activities for 2023 increased by $16 million compared with 2022.
Critical Accounting Policies We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”). We make assumptions, estimates and judgments that affect our reported amounts of assets, liabilities, revenues, expenses, gains and losses. Material changes in these assumptions, estimates and/or judgments have the potential to materially alter our results of operations.
We make assumptions, estimates and judgments that affect our reported amounts of assets, liabilities, revenues, expenses, gains and losses. Material changes in these assumptions, estimates and/or judgments have the potential to materially alter our results of operations.
The combined consolidated financial statements for all periods presented prior to the Separation are now referred to as “Consolidated Financial Statements” and have been prepared under U.S generally accounting principles (“GAAP”). 22 Prior to the Separation, GXO historical assets and liabilities presented were wholly owned by XPO and were reflected on a historical cost basis.
Before the Separation, GXO’s historical financial statements were prepared on a standalone combined basis and were derived from the Consolidated Financial Statements and accounting records of XPO. The combined Consolidated Financial Statements for all periods presented before the Separation are now referred to as “Consolidated Financial Statements” and have been prepared under the U.S. generally accepted accounting principles (“GAAP”).
The increase was primarily due to growth in our business, lower transaction and integration costs, and other income from a pension plan and foreign currency contracts, partially offset by higher restructuring costs. Income from continuing operations before income taxes for our domestic operations was $105 million for 2022, compared with a loss of $25 million in 2021.
The increase was primarily due to growth in our business and lower transaction and integration costs, offset by 22 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.
Transaction and integration costs in 2022 include $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.
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. We engage in restructuring actions as part of our ongoing efforts to best use our resources and infrastructure.
A quantitative goodwill impairment test, when performed, includes estimating the fair value of a reporting unit using the income and/or market approach.
If the qualitative assessment indicates that it is more likely than not that an impairment exists, then a quantitative assessment is performed. A quantitative goodwill impairment test, when performed, includes estimating the fair value of a reporting unit using the income and/or market approach.
A 25-basis-point decrease in the discount rate would result in an estimated increase in the accumulated benefit obligation of approximately $24 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.
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.
Many of the factors used in assessing fair value are outside the control of management, and these assumptions and estimates may change in future periods.
Many of the factors used in assessing fair value are outside the control of management, and these assumptions and estimates may change in future periods. Changes in assumptions or estimates could materially affect the estimate of the fair value of a reporting unit and therefore could affect the likelihood and amount of any potential impairment.
Results of Operations Year Ended December 31, (In millions) 2022 2021 $ Change % Change Revenue $ 8,993 $ 7,940 $ 1,053 13 % Direct operating expense 7,443 6,637 806 12 % Selling, general and administrative expense 886 714 172 24 % Depreciation and amortization expense 329 335 (6) (2) % Transaction and integration costs 61 99 (38) (38) % Restructuring costs and other 32 4 28 n/m Operating income 242 151 91 60 % Other income, net 51 23 28 n/m Interest expense (29) (21) (8) 38 % Income before income taxes 264 153 111 73 % Income tax (expense) benefit (64) 8 (72) n/m Net income $ 200 $ 161 $ 39 24 % n/m - not meaningful Revenue for 2022 increased by 13%, or $1.1 billion, to $9.0 billion compared with $7.9 billion for 2021.
Results of Operations Year Ended December 31, (In millions) 2023 2022 $ Change % Change Revenue $ 9,778 $ 8,993 $ 785 9 % Direct operating expense 8,035 7,443 592 8 % Selling, general and administrative expense 998 886 112 13 % Depreciation and amortization expense 361 329 32 10 % Transaction and integration costs 34 61 (27) (44) % Restructuring costs and other 32 32 — — % Operating income 318 242 76 31 % Other income, net 1 51 (50) (98) % Interest expense, net (53) (29) (24) 83 % Income before income taxes 266 264 2 1 % Income tax expense (33) (64) 31 48 % Net income $ 233 $ 200 $ 33 17 % Revenue for 2023 increased by 9%, or $785 million, to $9.8 billion compared with $9.0 billion for 2022.
Depreciation and amortization expense for 2022 decreased to $329 million compared with $335 million for 2021. Depreciation and amortization expense included amortization of intangible assets of $68 million and $61 million in 2022 and 2021, respectively.
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. Transaction and integration costs were $34 million in 2023, compared with $61 million for 2022.
On August 2, 2021, the Company became a standalone publicly traded company, and its financial statements post-Separation are now prepared on a consolidated basis.
Cost-plus contracts provide for the payment of allowable costs incurred during the performance of the contract plus a specified margin. 20 Basis of Presentation On August 2, 2021, the Company became a standalone publicly traded company and its financial statements post the separation from XPO, Inc. (the “Separation”) are now prepared on a consolidated basis.
The increase was primarily due to $39 million higher income in 2022, and $47 million in non-cash adjustments driven by a decrease in deferred tax benefit for 2021. Investing Activities Investing activities used $1,149 million of cash in 2022 compared with $207 million used in 2021.
The increase was due to $33 million higher net income and $40 million non-cash adjustments, offset by $57 million of working capital used in 2023. Investing Activities Investing activities used $410 million of cash in 2023 compared with $1.1 billion in 2022.
We have three reporting units: i) Americas and Asia-Pacific; ii) United Kingdom and Ireland and iii) Continental Europe. 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.
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. 25 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.
Financial Condition The following table summarizes our asset and liability balances as of December 31, 2022 and 2021: December 31, (In millions) 2022 2021 $ Change % Change Total current assets $ 2,428 $ 2,099 $ 329 16 % Total long-term assets 6,791 5,172 1,619 31 % Total current liabilities 2,532 2,329 203 9 % Total long-term liabilities 4,009 2,552 1,457 57 % The increase in our assets and liabilities from December 31, 2021 to December 31, 2022 primarily reflects the assets acquired and liabilities assumed, as well as various debt instruments entered into in connection with the Clipper Acquisition.
Financial Condition The following table summarizes our asset and liability balances as of December 31, 2023 and 2022: December 31, (In millions) 2023 2022 $ Change % Change Total current assets $ 2,568 $ 2,428 $ 140 6 % Total long-term assets 6,939 6,791 148 2 % Total current liabilities 2,626 2,532 94 4 % Total long-term liabilities 3,935 4,009 (74) (2) % 23 Total assets increased by $288 million from December 31, 2022 to December 31, 2023, primarily reflecting increases from the PFS Acquisition.
Income from continuing operations before income taxes for our foreign operations was $159 million for 2022, compared with income of $178 million in 2021.
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.
New Accounting Standards Information related to new accounting standards is included in Note — 2 Basis of Presentation and Significant Accounting Policies to the Consolidated Financial Statements.
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. New Accounting Standards Information related to new accounting standards is included in Note 2. “Basis of Presentation and Significant Accounting Policies” to the Consolidated Financial Statements. 26
The vast majority of our contracts with customers are multi-year agreements, and our facility lease arrangements generally align with contract length. Most of our customer contracts contain both fixed and variable components. The fixed component is typically designed to cover facility, technology and equipment costs, while the variable component is determined based on expected volumes and associated labor costs.
The fixed component is typically designed to cover warehouse, technology and equipment costs, while the variable component is determined based on expected volumes and associated labor costs. Under fixed-price contracts, the Company agrees to perform the specified work for a pre-determined price.
SG&A primarily consists of salary and benefit costs for executive and certain administration functions, professional fees, facility costs other than those related to our logistics facilities, bad debt expense and legal costs. SG&A for 2022 increased by 24%, or $172 million, to $886 million, compared with $714 million in 2021. SG&A increased primarily due to higher personnel expenses.
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. 21 Depreciation and amortization expense for 2023 increased by $32 million to $361 million compared with $329 million for 2022.
During 2021, we used $250 million of cash for capital expenditures, received $32 million in connection with the K + N Acquisition and received $11 million from sales of property and equipment. Financing Activities Financing activities generated $787 million of cash in 2022 and used $241 million of cash in 2021.
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.
The majority of these allocated costs are recorded within Selling, general and administrative expense (“SG&A”), Depreciation and amortization expense and Transaction and integration costs in the Consolidated Statements of Operations. 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”).
GXO has one reportable segment. 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”).
Removed
Basis of Presentation Prior to the separation (the “Separation”) from XPO, Inc. (“XPO”), GXO historical financial statements were prepared on a standalone combined basis and were derived from the consolidated financial statements and accounting records of XPO.
Added
The vast majority of our contracts with customers are long-term in nature, and our warehouse lease arrangements generally align with contract length. The Company has both fixed-price contracts (closed book or hybrid contracts) and cost-plus contracts (open book contracts) . Most of our customer contracts contain both fixed and variable components.
Removed
In connection with the Separation, GXO assets and liabilities were transferred to the Company on a carry-over basis.
Added
To the extent the Company’s actual costs vary from the estimates upon which the price was negotiated, the Company will generate more or less profit.
Removed
Prior to the Separation, GXO historical results of operations included allocations of XPO costs and expenses, including XPO’s corporate function which incurred a variety of expenses including, but not limited to, information technology, human resources, accounting, sales and sales operations, procurement, executive services, legal, corporate finance and communications.
Added
Due to the acquisitions of Clipper and PFS, comparisons in our results of operations between 2023 and 2022 are less meaningful.
Removed
An allocation of these expenses is included to burden all business units comprising XPO’s historical results of operations, including GXO. The charges reflected have been either specifically identified or allocated using drivers including proportional adjusted earnings before interest, taxes, depreciation and amortization, which include adjustments for transaction and integration costs, as well as restructuring costs and other adjustments, or headcount.
Added
The increase primarily reflects $378 million from the Clipper Acquisition (for the periods that were not comparable), $82 million from the PFS Acquisition, and growth in Continental Europe. Foreign currency movements increased revenue by $140 million in 2023.
Removed
For the year ended December 31, 2022, the Company recorded $569 million and $4 million of revenue and income before income taxes, respectively. GXO has one reportable segment.
Added
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. 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.
Removed
The increase in 2022 compared to the prior year reflects an increase of $569 million due to the Clipper Acquisition, $391 million in our Americas and Asia-Pacific operations and $172 million from our United Kingdom and Ireland operations.
Added
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.
Removed
This increase was partially offset by a decrease of $79 million in our Continental Europe operations, primarily due to the deconsolidation of a 50% owned joint venture and foreign currency movement. Foreign currency movement decreased revenue by $653 million in 2022.
Added
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.
Removed
Direct operating expense increased primarily due to higher personnel and temporary labor expenses of $528 million, as well as higher third-party transportation costs and facilities expense of $224 million.
Added
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.
Removed
The decrease in depreciation and amortization expense was primarily a result of $15 million allocated corporate charges from XPO before the Separation in the prior year, offset by higher amortization as a result of the Clipper Acquisition. Transaction and integration costs were $61 million in 2022, compared with $99 million for 2021.
Added
Interest expense, net was as follows: Year Ended December 31, (In millions) 2023 2022 $ Change % Change Debt and capital leases $ 96 $ 59 $ 37 63 % Cross-currency swaps (33) (25) (8) 32 % Interest income (10) (5) (5) 100 % Interest expense, net $ 53 $ 29 $ 24 83 % Income before income taxes for 2023 increased by $2 million, to $266 million, compared with $264 million for 2022.
Removed
Transaction and integration costs in 2021 primarily relate to the Separation and the acquisition of the majority of Kuehne + Nagel’s contract logistics operations in the U.K. (the “K + N Acquisition”). We engage in restructuring actions as part of our ongoing efforts to best use our resources and infrastructure.
Added
The increase was primarily driven by growth in the business and lower transaction and integration costs, partially offset by lower pension income. 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.
Removed
Interest expense for 2022 increased by 38%, or $8 million, to $29 million, compared to $21 million for 2021 as a result of higher outstanding debt. Income before income taxes for 2022, increased by $111 million, to $264 million, compared with $153 million for 2021.
Added
The decrease in our effective income tax rate in 2023 was driven by tax benefits from intangible assets and the release of valuation allowances.
Removed
The increase in income in our domestic operations for 2022 was driven by a 16% increase in revenue resulting primarily from the reduced impact of COVID-19 on our business in 2022 and lower depreciation and amortization expense of $20 million.
Added
We continually evaluate our liquidity requirements and capital structure in light of our operating needs, growth initiatives and capital resources. 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.
Removed
The decrease in 24 income was primarily driven by the impact of foreign currency movement, offset by an increase of $4 million in additional income resulting from the Clipper Acquisition, as well as an increase in pension income of $14 million. Income tax for 2022 was a $64 million expense compared to an $8 million benefit for 2021.
Added
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.
Removed
Our effective tax rate was 24.2% in 2022 and not meaningful in 2021. The increase in our effective income tax rate was driven by contribution and margin-based taxes and offset by the benefit from changes to the valuation allowance and stock-based compensation.
Added
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.
Removed
We continually evaluate our liquidity requirements and capital structure 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.
Added
Total liabilities increased by $20 million from December 31, 2022 to December 31, 2023, reflecting the early repayment of debt, partially offset by increases from the PFS Acquisition.
Removed
Debt and Financing Arrangements Five-Year Term Loan On May 25, 2022, the Company entered into a five-year unsecured Term Loan (the “Five-Year Term Loan”) that provided a $500 million unsecured term loan facility to fund the Clipper Acquisition. On May 26, 2022, the Company borrowed $500 million that will mature on May 26, 2027.
Added
Financing Activities 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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeFor our fixed-rate notes, a 1% increase or decrease in interest rates would have decreased or increased the fair value of our notes by approximately 4%. Foreign Currency Exchange Risk A significant proportion of our net assets and income is in non-USD currencies, primarily the Euro (“EUR”) and British pound sterling (“GBP”).
Biggest changeForeign Currency Exchange Rate Risk A significant proportion of our net assets and income is in non-USD currencies, primarily the Euro (“EUR”) and British pound sterling (“GBP”). We are exposed to currency risk from potential changes in functional currency values of our foreign currency denominated assets, liabilities and cash flows.
Fluctuations in exchange rates also affect the volume of sales or the foreign currency sales price as competitors’ services become more or less attractive. The sensitivity analysis of the impact of changes in foreign currency exchange rates does not factor in a potential change in sales levels or local currency prices.
Fluctuations in exchange rates also affect the volume of sales or the foreign currency sales price as competitors’ services become more or less attractive. The sensitivity analysis of the impact of changes in foreign currency exchange rates does not factor in a potential change in sales levels or local currency prices. See Note 10.
Interest Rate Risk Our long-term debt portfolio, excluding finance leases and other debt, consists of $800 million fixed-rate notes and $850 million variable-rate loans, complemented by a variable-rate revolving credit facility. We use cross-currency swap agreements to convert $600 million of variable-rate debt from Secured Overnight Financing Rate (“SOFR”) to Euro Interbank Offered Rate (“Euribor”).
Interest Rate Risk Our long-term debt portfolio, excluding finance leases and other debt, consists of $800 million fixed-rate notes and $735 million variable-rate loans, complemented by a variable-rate revolving credit facility. We use cross-currency swap agreements to convert $250 million of variable-rate debt from Secured Overnight Financing Rate (“SOFR”) to Euro Interbank Offered Rate (“Euribor”).
We also entered into interest rate swap agreements to convert $250 million of variable-rate U.S. dollar (“USD”)-denominated debt into USD-denominated fixed-rate debt. As of December 31, 2022, a hypothetical 1% increase in Euribor would have increased our interest expense by approximately $6 million.
We also entered into interest rate swap agreements to convert $250 million of variable-rate U.S. dollar (“USD”)-denominated debt into USD-denominated fixed-rate debt. As of December 31, 2023, a hypothetical 1% increase in Euribor would have increased our interest expense by approximately $3 million.
As of December 31, 2022, a uniform 10% strengthening in 30 the value of the USD relative to the GBP would have decreased our net assets by approximately $30 million. These theoretical calculations assume that an instantaneous, parallel shift in exchange rates occurs, which is not consistent with the history of foreign currency markets.
As of December 31, 2023, a uniform 10% strengthening in the value of the USD relative to the GBP would have decreased our net assets by approximately $143 million, net of hedging. These theoretical calculations assume that an instantaneous, parallel shift in exchange rates occurs, which is not consistent with the history of foreign currency markets.
We use foreign currency option contracts to mitigate the risk of a reduction in the value of earnings from our operations that use the EUR or GBP as their functional currency. As of December 31, 2022, a uniform 10% strengthening in the value of the USD relative to the EUR would have increased our net assets by approximately $35 million.
We use foreign currency option contracts to mitigate the risk of a reduction in the value of earnings from our operations that use the EUR or GBP as their functional currency.
See Note — 10 Fair Value Measurements and Financial Instruments to the Consolidated Financial Statements for additional information. 31
“Fair Value Measurements and Financial Instruments” to the Consolidated Financial Statements for additional information. 27
We are exposed to currency risk from potential changes in functional currency values of our foreign currency denominated assets, liabilities, and cash flows. Consequently, depreciation of the EUR or the GBP relative to the USD could have an adverse impact on our financial results.
Consequently, depreciation of the EUR or the GBP relative to the USD could have an adverse impact on our financial results.
Added
As of December 31, 2023, a uniform 10% strengthening in the value of the USD relative to the EUR would have increased our net assets by approximately $67 million, net of hedging.

Other GXO 10-K year-over-year comparisons