What changed in this filing

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Item 1. Financial Statements

2023-08-02 compared with 2023-05-03 · 79 added, 50 removed, 292 unchanged (31% of the section changed)

1 unchanged sentence

Condensed Consolidated Balance Sheets

March 31, December 31,

June 30, December 31,

(Dollars in millions, shares in thousands, except per share amounts) 2023 2022

30 unchanged sentences

0 shares issued and

outstanding as of March 31, 2023 and December 31, 2022

outstanding as of June 30, 2023 and December 31, 2022

Common stock, $ 0.01 par value;

300,000 shares authorized;

116,853 and 116,400 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively

116,954 and 116,400 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively

Additional paid-in capital 587 588

5 unchanged sentences

Condensed Consolidated Statements of Operations

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(Dollars in millions, shares in thousands, except per share amounts) 2023 2022 2023 2022

7 unchanged sentences

Operating income $ 14 $ 58 $ 19 $ 109

Other income — ( 1 ) — ( 1 )

Interest expense, net 8 — 16 —

Income (loss) before income taxes $ ( 3 ) $ 51

Income tax provision (benefit) ( 3 ) 12

Income before income taxes $ 6 $ 59 $ 3 $ 110

Income tax provision 3 15 — 27

Net income $ 3 $ 44 $ 3 $ 83

7 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In millions) 2023 2022 2023 2022

Net income $ 3 $ 44 $ 3 $ 83

Other comprehensive income, net of tax

Foreign currency translation gain, net of tax effect of $ — and $ —

Other comprehensive income — 2

Other comprehensive loss, net of tax

Foreign currency translation loss, net of tax effect of $ — , $ — , $ — and $ —

$ — $ ( 2 ) $ — $ —

Other comprehensive loss — ( 2 ) — —

Comprehensive income $ 3 $ 42 $ 3 $ 83

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31,

Six Months Ended June 30,

(In millions) 2023 2022

4 unchanged sentences

Stock compensation expense 11 6

Deferred tax expense (benefit) 2 ( 1 )

Changes in assets and liabilities

9 unchanged sentences

Payment for tax withholdings related to vesting of stock compensation awards ( 9 ) —

Net transfers to XPO — ( 74 )

Repurchase of common stock ( 2 ) —

Net transfers from XPO — 30

Repayment of debt and finance leases ( 1 ) —

Other ( 1 ) —

Net cash used in financing activities ( 8 ) ( 74 )

Net cash (used in) provided by financing activities ( 13 ) 30

Effect of exchange rates on cash, cash equivalents and restricted cash 1 —

5 unchanged sentences

Cash paid for income taxes, net 21 3

Cash paid for interest, net 17 —

See accompanying notes to condensed consolidated financial statements.

1 unchanged sentence

(Dollars in millions, shares in thousands) Shares Amount Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Equity

Balance as of March 31, 2023 116,853 $ 1 $ 586 $ 2 $ ( 4 ) $ 585

Net income — — — 3 — 3

Stock compensation expense — — 6 — — 6

Vesting of stock compensation awards 201 — — — — —

Tax withholdings related to vesting of stock compensation awards — — ( 3 ) — — ( 3 )

Repurchase of common stock ( 100 ) — ( 2 ) — — ( 2 )

Balance as of June 30, 2023 116,954 $ 1 $ 587 $ 5 $ ( 4 ) $ 589

(Dollars in millions, shares in thousands) Shares Amount Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Equity

Balance as of December 31, 2022 116,400 $ 1 $ 588 $ 2 $ ( 4 ) $ 587

Net income — — — 3 — 3

Other comprehensive income — — — — — —

Stock compensation expense — — 11 — — 11

1 unchanged sentence

Tax withholdings related to vesting of stock compensation awards — — ( 10 ) — — ( 10 )

Repurchase of common stock ( 100 ) — ( 2 ) — — ( 2 )

Balance as of June 30, 2023 116,954 $ 1 $ 587 $ 5 $ ( 4 ) $ 589

(Dollars in millions, shares in thousands) Shares Amount Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss XPO Investment Total Equity

Balance as of March 31, 2022 — $ — $ — $ — $ — $ 1,043 $ 1,043

Net income — — — — — 44 44

Other comprehensive loss — — — — ( 2 ) — ( 2 )

Stock compensation expense — — — — — 4 4

Net transfers from XPO — — — — — 110 110

Balance as of June 30, 2022 — $ — $ — $ — $ ( 2 ) $ 1,201 $ 1,199

(Dollars in millions, shares in thousands) Shares Amount Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss XPO Investment Total Equity

1 unchanged sentence

Net income — — — — — 83 83

Other comprehensive income — — — — 2 — 2

Stock compensation expense — — — — — 6 6

Net transfers to XPO — — — — — ( 70 ) ( 70 )

Balance as of March 31, 2022 — $ — $ — $ — $ — $ 1,043 $ 1,043

Net transfers from XPO — — — — — 40 40

Balance as of June 30, 2022 — $ — $ — $ — $ ( 2 ) $ 1,201 $ 1,199

See accompanying notes to condensed consolidated financial statements.

10 unchanged sentences

Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

The year-end condensed consolidated balance sheet data was derived from our audited financial statements, but does not include all disclosures required by GAAP.

These financial statements have been prepared on a basis that is substantially consistent with the accounting principles applied in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”).

3 unchanged sentences

All intercompany accounts and transactions have been eliminated.

The condensed consolidated financial statements reflect all adjustments that are of a normal recurring nature and are necessary for a fair presentation of financial condition, operating results and cash flows for the interim periods presented.

Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

In management’s opinion, the condensed consolidated financial statements reflect all adjustments that are of a normal recurring nature and are necessary for a fair presentation of financial condition, operating results and cash flows for the interim periods presented.

Operating results for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

On November 1, 2022, the Company completed the separation (the “Separation”) from XPO, Inc.

4 unchanged sentences

On November 1, 2022, the Company became a standalone publicly traded company, and its financial statements post-Separation are prepared on a consolidated basis.

Prior to the Separation, the Company’s financial statements were prepared on a standalone combined basis and were derived from the consolidated financial statements and accounting records of XPO (the “historical financial statements”).

Prior to the Separation, the Company’s financial statements were prepared on a standalone combined basis and were derived from the consolidated financial statements and accounting records of XPO.

The combined financial statements for all periods presented prior to the Separation are now also referred to as “condensed consolidated financial statements,” and have been prepared in accordance with GAAP.

21 unchanged sentences

Our significant accounting policies are disclosed in Note 2 to the 2022 Form 10-K.

There have been no material changes to the Company’s significant accounting policies as of March 31, 2023.

There have been no material changes to the Company’s significant accounting policies as of June 30, 2023.

Adoption of New Accounting Standards

17 unchanged sentences

Approximately 7 % and 10 % of our revenues were generated outside the U.S.

(primarily in North America, excluding the U.S., and Asia) for the three months ended March 31, 2023 and 2022, respectively.

(primarily in North America, excluding the U.S., and Asia) for the three months ended June 30, 2023 and 2022, respectively.

Approximately 7 % and 9 % of our revenues were generated outside the U.S.

(primarily in North America, excluding the U.S., and Asia) for the six months ended June 30, 2023 and 2022, respectively.

Our revenue disaggregated by service offering is as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In millions) 2023 2022 2023 2022

6 unchanged sentences

Our revenue disaggregated by industry sector is as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In millions) 2023 2022 2023 2022

Retail/e-commerce $ 373 $ 451 $ 759 $ 932

Food and beverage 105 150

Industrial/manufacturing 193 213 374 442

Logistics and transportation 52 87

Food and beverage 107 155 212 305

Automotive 105 100 207 189

Logistics and transportation 42 67 94 154

Other 143 240 327 516

4 unchanged sentences

(i) have original expected durations of one year or less or (ii) contain variable consideration.

As of March 31, 2023, the fixed consideration component of our remaining performance obligation was approximately $ 153 million, and we expect approximately 97 % of that amount to be recognized over the next 3 years and the remainder thereafter.

As of June 30, 2023, the fixed consideration component of our remaining performance obligation was approximately $ 136 million, and we expect approximately 99 % of that amount to be recognized over the next 3 years and the remainder thereafter.

We estimate remaining performance obligations at a point in time and actual amounts may differ from these estimates due to changes in foreign currency exchange rates and contract revisions or terminations.

3 unchanged sentences

The following is a roll-forward of the Company’s restructuring liability, which is included in Accrued expenses in the Condensed Consolidated Balance Sheets:

Three Months Ended March 31, 2023

Six Months Ended June 30, 2023

(In millions) Reserve Balance

December 31, 2022 Charges Incurred Payments Reserve Balance

March 31, 2023

June 30, 2023

Severance $ 2 $ 9 $ ( 6 ) $ 5

1 unchanged sentence

Total $ 3 $ 9 $ ( 7 ) $ 5

We expect the majority of the cash outlays related to the remaining restructuring liability at March 31, 2023 to be complete within twelve months.

We expect the majority of the cash outlays related to the remaining restructuring liability at June 30, 2023 to be complete within twelve months.

The following table summarizes the principal balance and carrying value of our debt:

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

(In millions) Principal Balance Carrying Value Principal Balance Carrying Value

6 unchanged sentences

Total long-term debt and obligations under finance leases $ 459 $ 451 $ 460 $ 451

(1) The carrying value of the 7.50 % Notes due 2027 is presented net of unamortized debt issuance cost and discount of $ 9 million and $ 9 million as of March 31, 2023 and December 31, 2022, respectively.

(1) The carrying value of the 7.50 % Notes due 2027 is presented net of unamortized debt issuance cost and discount of $ 8 million and $ 9 million as of June 30, 2023 and December 31, 2022, respectively.

Revolving Credit Agreement

5 unchanged sentences

The Revolver requires the Company to maintain a maximum consolidated leverage ratio and minimum interest coverage ratio.

At March 31, 2023, the Company was in compliance with the covenants of the Revolver.

There were no amounts outstanding under the Revolver as of March 31, 2023 or December 31, 2022.

At June 30, 2023, the Company was in compliance with the covenants of the Revolver.

There were no amounts outstanding under the Revolver as of June 30, 2023 or December 31, 2022.

Term Loan Credit Agreement

3 unchanged sentences

The Term Loan matures on November 1, 2027.

The effective interest rate on the Term Loan was 5.93 % as of March 31, 2023.

The effective interest rate on the Term Loan was 6.58 % as of June 30, 2023.

The covenants in the Term Loan are customary for financings of this type.

In addition, the Term Loan requires the Company to maintain a maximum consolidated leverage ratio and minimum interest coverage ratio.

At March 31, 2023, the Company was in compliance with the covenants of the credit agreement governing the Term Loan.

At June 30, 2023, the Company was in compliance with the covenants of the credit agreement governing the Term Loan.

On October 25, 2022, we completed an offering of $ 355 million in unsecured notes (the “Notes” or the “ 7.50 % Notes due 2027”).

1 unchanged sentence

The Notes were issued at an issue price of 98.962 % of par.

The effective interest rate on the Notes was 8.14 % as of March 31, 2023.

The effective interest rate on the Notes was 8.14 % as of June 30, 2023.

The Notes are guaranteed by each of our direct and indirect wholly owned domestic subsidiaries (other than certain excluded subsidiaries).

1 unchanged sentence

The Notes contain covenants customary for debt securities of this nature.

At March 31, 2023, the Company was in compliance with the covenants of the Notes.

At June 30, 2023, the Company was in compliance with the covenants of the Notes.

Fair Value Measurements

8 unchanged sentences

The Company bases its fair value estimates on market assumptions and available information.

The carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and current maturities of long-term debt approximated their fair values as of March 31, 2023 and December 31, 2022, due to their short-term nature and/or being receivable or payable on demand.

The carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and current maturities of long-term debt approximated their fair values as of June 30, 2023 and December 31, 2022, due to their short-term nature and/or being receivable or payable on demand.

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

(In millions) Level March 31, 2023 December 31, 2022

(In millions) Level June 30, 2023 December 31, 2022

Term Loan 2 $ 95 $ 95

2 unchanged sentences

We valued Level 2 debt using bid evaluation pricing models or quoted prices of securities with similar characteristics.

Stockholders’ Equity

On May 2, 2023, the Company’s Board of Directors authorized the repurchase of up to $ 125 million of the Company’s common stock (the “2023 Share Repurchase Program”).

In the second quarter of 2023, the Company repurchased 100,000 shares of its common stock for $ 2 million at an average price of $ 20.53 per share.

The share purchases were funded by available cash.

As of June 30, 2023, $ 123 million remained available to be used for share repurchases under the 2023 Share Repurchase Program.

The 2023 Share Repurchase Program does not have an expiration date and may be suspended or discontinued at any time at the discretion of the Company’s Board of Directors.

We are not obligated to repurchase any specific number of shares.

Earnings per Share

On November 1, 2022, the date of the Separation, 115,162,555 shares of common stock of the Company were distributed to XPO stockholders of record as of the record date and began regular-way trading.

This share amount is utilized for the calculation of basic and diluted earnings per share for the three months ended March 31, 2022.

This share amount is utilized for the calculation of basic and diluted earnings per share for the three and six months ended June 30, 2022.

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(Dollars in millions, shares in thousands, except per share data) 2023 2022 2023 2022

5 unchanged sentences

Diluted earnings per share $ 0.03 $ 0.38 $ 0.03 $ 0.72

For the three months ended March 31, 2023, approximately 0.9 million shares are excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.

For the three and six months ended June 30, 2023, approximately 0.3 million and 0.6 million shares are excluded from the calculation of diluted earnings per share, respectively, because their inclusion would have been anti-dilutive.

Commitments and Contingencies

25 unchanged sentences

Allocation of General Corporate Expenses

Post-Separation, general shared costs from XPO were no longer allocated to the company, therefore no related amounts were reflected on the Company’s financial statements for the three months ended March 31, 2023.

Post-Separation, general shared costs from XPO were no longer allocated to the Company;

therefore no related amounts were reflected on the Company’s financial statements for the three and six months ended June 30, 2023.

Prior to the Separation, certain shared costs were allocated to the Company from XPO’s corporate overhead.

3 unchanged sentences

Costs included in our Condensed Consolidated Statements of Operations for our allocated share of XPO’s corporate overhead are as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In millions) 2022 2022

2 unchanged sentences

Transaction and integration costs 18 21

Total $ 39 $ 62

Transactions with XPO and its non-RXO Subsidiaries

Revenue and costs generated from related parties are as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In millions) 2022 2022

Subsequent Events

On May 2, 2023, the RXO Board of Directors authorized us to repurchase an indeterminate number of shares of our common stock at an aggregate purchase price of up to $ 125 million (the “2023 Share Repurchase Program”).

The 2023 Share Repurchase Program does not have an expiration date and may be suspended or discontinued at any time.

We are not obligated to repurchase any specific number of shares.

Revenue $ 26 $ 75

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements