What changed in this filing

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Item 1. Financial Statements

2023-11-07 compared with 2023-08-02 · 83 added, 66 removed, 305 unchanged (33% of the section changed)

1 unchanged sentence

Condensed Consolidated Balance Sheets

June 30, December 31,

September 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 June 30, 2023 and December 31, 2022

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

Common stock, $ 0.01 par value;

300,000 shares authorized;

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

117,002 and 116,400 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

Additional paid-in capital 589 588

5 unchanged sentences

Condensed Consolidated Statements of Operations

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

Three Months Ended September 30, Nine Months Ended September 30,

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

7 unchanged sentences

Operating income $ 6 $ 15 $ 25 $ 124

Other income — ( 1 ) — ( 1 )

Interest expense, net 8 — 16 —

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

Income tax provision 3 15 — 27

Net income $ 3 $ 44 $ 3 $ 83

Earnings per share data

Basic earnings per share $ 0.03 $ 0.38 $ 0.03 $ 0.72

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

Other expense 1 1 1 —

Interest expense (income), net 8 ( 1 ) 24 ( 1 )

Income (loss) before income taxes $ ( 3 ) $ 15 $ — $ 125

Income tax provision (benefit) ( 2 ) 2 ( 2 ) 29

Net income (loss) $ ( 1 ) $ 13 $ 2 $ 96

Earnings (loss) per share data

Basic earnings (loss) per share $ ( 0.01 ) $ 0.11 $ 0.02 $ 0.83

Diluted earnings (loss) per share $ ( 0.01 ) $ 0.11 $ 0.02 $ 0.83

Weighted-average common shares outstanding

2 unchanged sentences

See accompanying notes to condensed consolidated financial statements.

Condensed Consolidated Statements of Comprehensive Income

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

Condensed Consolidated Statements of Comprehensive Income (Loss)

Three Months Ended September 30, Nine Months Ended September 30,

(In millions) 2023 2022 2023 2022

Net income $ 3 $ 44 $ 3 $ 83

Net income (loss) $ ( 1 ) $ 13 $ 2 $ 96

Other comprehensive loss, net of tax

2 unchanged sentences

Other comprehensive loss — ( 2 ) — ( 2 )

Comprehensive income $ 3 $ 42 $ 3 $ 83

Comprehensive income (loss) $ ( 1 ) $ 11 $ 2 $ 94

See accompanying notes to condensed consolidated financial statements.

Condensed Consolidated Statements of Cash Flows

Six Months Ended June 30,

Nine Months Ended September 30,

(In millions) 2023 2022

4 unchanged sentences

Stock compensation expense 16 9

Deferred tax expense (benefit) 2 ( 1 )

Deferred tax benefit ( 1 ) ( 8 )

Changes in assets and liabilities

6 unchanged sentences

Payment for purchases of property and equipment ( 46 ) ( 39 )

Proceeds from sale of property and equipment — 1

Other ( 1 ) —

Net cash used in investing activities ( 47 ) ( 38 )

2 unchanged sentences

Repurchase of common stock ( 2 ) —

Net transfers from XPO — 30

Net transfers to XPO — ( 39 )

Repayment of debt and finance leases ( 3 ) —

Other ( 1 ) —

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

Net cash used in financing activities ( 17 ) ( 38 )

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

4 unchanged sentences

Leased assets obtained in exchange for new operating lease liabilities $ 60 $ 46

Leased assets obtained in exchange for new finance lease liabilities 1 8

Cash paid for income taxes, net 25 3

3 unchanged sentences

(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

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

Net loss — — — ( 1 ) — ( 1 )

Stock compensation expense — — 5 — — 5

2 unchanged sentences

Repurchase of common stock — — — — — —

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

Balance as of September 30, 2023 117,002 $ 1 $ 589 $ 4 $ ( 4 ) $ 590

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

5 unchanged sentences

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

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

Balance as of September 30, 2023 117,002 $ 1 $ 589 $ 4 $ ( 4 ) $ 590

(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

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

Net income — — — — — 13 13

1 unchanged sentence

Stock compensation expense — — — — — 3 3

Net transfers from XPO — — — — — 110 110

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

Net transfers to XPO — — — — — ( 69 ) ( 69 )

Balance as of September 30, 2022 — $ — $ — $ — $ ( 4 ) $ 1,148 $ 1,144

(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 — — — — — 96 96

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

Stock compensation expense — — — — — 9 9

Net transfers from XPO — — — — — 40 40

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

Net transfers to XPO — — — — — ( 29 ) ( 29 )

Balance as of September 30, 2022 — $ — $ — $ — $ ( 4 ) $ 1,148 $ 1,144

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”).

4 unchanged sentences

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.

Operating results for the three and nine months ended September 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.

14 unchanged sentences

Depreciation and amortization expense;

Restructuring costs;

and Transaction and integration costs in the Condensed Consolidated Statements of Operations.

12 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 June 30, 2023.

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

Adoption of New Accounting Standards

6 unchanged sentences

Accounting Pronouncements Issued but Not Yet Effective

In March 2023, the FASB issued ASU 2023-01, “Leases (Topic 842) - Common Control Arrangements”.

The amendments in this update improve current GAAP by clarifying the accounting treatment for leasehold improvements associated with common control leases in order to create uniformity in practice.

In March 2023, the FASB issued ASU 2023-01, “Leases (Topic 842) - Common Control Arrangements.” The amendments in this update improve current GAAP by clarifying the accounting treatment for leasehold improvements associated with common control leases in order to create uniformity in practice.

The ASU seeks to provide guidance to more accurately match the amortization expense of leasehold improvements under common control arrangements with the useful life of the improvements to the consolidated entity as a whole.

7 unchanged sentences

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 three months ended June 30, 2023 and 2022, respectively.

(primarily in North America, excluding the U.S., and Asia) for the three months ended September 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.

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

Our revenue disaggregated by service offering is as follows:

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

Three Months Ended September 30, Nine Months Ended September 30,

(In millions) 2023 2022 2023 2022

6 unchanged sentences

Our revenue disaggregated by industry sector is as follows:

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

Three Months Ended September 30, Nine Months Ended September 30,

(In millions) 2023 2022 2023 2022

10 unchanged sentences

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

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.

As of September 30, 2023, the fixed consideration component of our remaining performance obligation was approximately $ 120 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:

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

(In millions) Reserve Balance

December 31, 2022 Charges Incurred Payments Reserve Balance

June 30, 2023

September 30, 2023

Severance $ 2 $ 11 $ ( 8 ) $ 5

1 unchanged sentence

Total $ 3 $ 12 $ ( 9 ) $ 6

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

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

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

June 30, 2023 December 31, 2022

September 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 $ 8 million and $ 9 million as of June 30, 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 September 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 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.

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

There were no amounts outstanding under the Revolver as of September 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 6.58 % as of June 30, 2023.

The effective interest rate on the Term Loan was 6.79 % as of September 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 June 30, 2023, the Company was in compliance with the covenants of the credit agreement governing the Term Loan.

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

On November 2, 2023, the Company exercised a feature to increase the total commitments under its Revolver, among the Company, the guarantors from time to time party thereto, the lenders and other parties from time to time party thereto and Citibank, N.A., as administrative agent, from $ 500 million to $ 600 million.

In connection with the Revolver commitment increase, the Company repaid all of the outstanding obligations in respect of the $ 100 million principal amount, interest and fees under its Term Loan, among the Company, the guarantors from time to time party thereto, the lenders and other parties from time to time party thereto and Citibank, N.A., as administrative agent, and terminated 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 June 30, 2023.

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

We may redeem the Notes, in whole or in part, at any time on or after November 15, 2024 at a redemption price equal to (i) 103.750 % of the principal amount to be redeemed if the redemption occurs during the 12-month period beginning on November 15, 2024, (ii) 101.875 % of the principal amount to be redeemed if the redemption occurs during the 12-month period beginning on November 15, 2025 and (iii) 100.0 % of the principal amount to be redeemed if the redemption occurs on or after November 15, 2026, in each case plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

At any time prior to November 15, 2024, we may also redeem up to 40 % of the Notes with the net cash proceeds of certain equity offerings at a redemption price equal to 107.500 % of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

In addition, at any time prior to November 15, 2024, we may redeem the Notes, in whole or in part, at a redemption price equal to 100 % of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date plus an applicable “make-whole” premium.

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

At September 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 June 30, 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 September 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 June 30, 2023 December 31, 2022

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

Term Loan 2 $ 95 $ 95

4 unchanged sentences

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.

During the first nine months of 2023, the Company repurchased 100,000 shares of its common stock for $ 2 million at an average price of $ 20.53 per share.

There were no share repurchases in the third quarter of 2023.

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.

As of September 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.

2 unchanged sentences

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 and six months ended June 30, 2022.

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

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

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

Three Months Ended September 30, Nine Months Ended September 30,

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

Net income $ 3 $ 44 $ 3 $ 83

Net income (loss) $ ( 1 ) $ 13 $ 2 $ 96

Basic weighted-average common shares 116,970 115,163 116,823 115,163

1 unchanged sentence

Diluted weighted-average common shares (1)

Basic earnings per share $ 0.03 $ 0.38 $ 0.03 $ 0.72

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

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.

116,970 115,163 119,415 115,163

Basic earnings (loss) per share $ ( 0.01 ) $ 0.11 $ 0.02 $ 0.83

Diluted earnings (loss) per share $ ( 0.01 ) $ 0.11 $ 0.02 $ 0.83

(1) Amounts may not be additive due to rounding.

For the three and nine months ended September 30, 2023, approximately 2.8 million and 0.5 million shares are excluded from the calculation of diluted earnings per share, respectively, because their inclusion would have been anti-dilutive.

Commitments and Contingencies

17 unchanged sentences

Pursuant to the Separation and Distribution Agreement, RXO has agreed to indemnify XPO for certain matters relating to RXO, including indemnifying XPO from and against any liabilities, damages, costs, or expenses incurred by XPO arising out of or resulting from the misclassification claims.

We believe these suits are without merit and we intend to defend the Company vigorously.

In one of the misclassification claims, Muniz v.

RXO Last Mile, Inc.

, the court has granted plaintiffs partial summary judgment and determined our last mile subsidiary misclassified the plaintiff owner/operators as independent contractors when they should have been deemed employees.

We are vigorously defending ourselves in this matter and believe we have a number of meritorious defenses, and there are unresolved questions of law and fact that could be important to the ultimate resolution of this matter.

We believe the misclassification claims, including Muniz v.

RXO Last Mile, Inc.

, are without merit and we intend to defend the Company vigorously.

We are unable at this time to determine the amount of the possible loss or range of loss, if any, that we may incur as a result of these matters.

5 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 and six months ended June 30, 2023.

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

therefore, no related amounts were reflected on the Company’s financial statements for the three and nine months ended September 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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In millions) 2022 2022

2 unchanged sentences

Transaction and integration costs 20 41

Restructuring costs 5 5

Total $ 39 $ 101

1 unchanged sentence

Revenue and costs generated from related parties are as follows:

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

Three Months Ended September 30, Nine Months Ended September 30,

(In millions) 2022 2022

1 unchanged sentence

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