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Economic recessions and other factors that reduce economic activity could have a material adverse impact on our business.
−Removed: The transportation industry in North America historically has experienced cyclical fluctuations in financial results due to economic recessions, downturns in the business cycles of our customers, increases in the prices charged by third-party carriers, interest rate fluctuations, prolonged periods of inflation, political instability, geopolitical conflict and war, changes in international trade policies and other U.S.
+Added: The transportation industry in North America historically has experienced cyclical fluctuations in financial results due to economic recessions, downturns in the business cycles of our customers, increases in the prices charged by third-party carriers, interest rate fluctuations, prolonged periods of inflation, political instability, pandemics, geopolitical conflict and war, changes in international trade policies and other U.S.
and global economic factors beyond our control.
During economic downturns, a reduction in overall demand for transportation services will likely reduce demand for our services and exert downward pressures on our rates and margins.
+Added: The pricing environment also generally becomes more competitive during economic downturns, which may, as it has in the past, affect our ability to obtain price increases from customers both during and following such periods, especially during periods of increased economic inflation.
In addition, in periods of strong economic growth, overall demand may exceed the available supply of transportation resources, resulting in increased network congestion and operating inefficiencies.
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In addition, we have other expenses that are primarily variable but are fixed for a period of time, as well as certain significant fixed expenses;
−Removed: • A prolonged, escalated or expanded war in Ukraine or sanctions imposed in response to the war and future conflicts may adversely impact global supply chain activities and the economy at large;
+Added: • A prolonged, escalated or expanded war in Ukraine or sanctions imposed in response to the war, the Israel-Hamas war and future conflicts may adversely impact global supply chain activities and the economy at large;
government has made significant changes in U.S.
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Any of these factors could have an adverse effect on our business, results of operations or financial condition, as well as on the price of our common stock.
−Removed: If we continue to face unfavorable market conditions arising from the COVID-19 pandemic, our business, prospects, financial condition and operating results may be negatively impacted.
−Removed: The COVID-19 pandemic that emerged in 2020 affected, and may continue to affect, economic activity broadly and customer sectors served by our industry.
−Removed: We continue to closely monitor the COVID-19 pandemic and its impact on all aspects of our business and geographies, including how it has impacted, and may continue to impact, our employees, customers and business partners.
−Removed: The COVID-19 pandemic has created significant volatility, uncertainty and economic disruption, which may adversely affect our business operations and may materially and adversely affect our results of operations, cash flows and financial position.
−Removed: Our operations and those of our customers have been subject to supply chain disruptions due to pandemic-related plant and port shutdowns, transportation delays, government actions and other factors beyond our control.
−Removed: The global shortage of certain components such as semiconductor chips, strains on production or extraction of raw materials, cost inflation, and labor and equipment shortages, could escalate in future quarters.
−Removed: Labor shortages, particularly of truck drivers, mechanics and others employed by our third-party carriers, have led and may continue to lead to increased costs of procuring transportation services, and along with equipment shortages, can result in lower levels of service, including timeliness, productivity and quality of service.
−Removed: If these providers continue to face unfavorable market conditions, our business, prospects, financial condition and operating results may be negatively impacted.
−Removed: In response to the COVID-19 pandemic, we incurred additional costs to meet the needs of our customers and employees and implemented operational changes.
−Removed: Further operational changes, including extended periods of remote work arrangements, could strain our business continuity plans, introduce operational risk, including but not limited to cybersecurity risks, impair our ability to manage our business, and cause us to incur additional costs, which may be significant.
−Removed: The impacts of the COVID-19 pandemic and new strains of the virus that cause COVID-19 may remain prevalent for a significant period of time and may continue to adversely affect our business, results of operations and financial condition even after the COVID-19 outbreak has subsided.
Volatility in fuel prices impacts our fuel surcharge revenue and may impact our profitability.
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Significant changes in the price or availability of fuel in future periods, or significant changes in our ability to mitigate fuel price increases through the use of fuel surcharges, could have a material adverse impact on our operations, fleet capacity and ability to generate both revenues and profits.
−Removed: Higher carrier prices may result in decreased income from operations and increases in working capital.
+Added: Higher carrier prices may result in decreased income from operations and increases in working capital usage.
Motor carriers can be expected to charge higher prices if market conditions warrant or to cover higher operating expenses.
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In some instances where we have entered into contract freight rates with customers, in the event market conditions change and those contracted rates are below market rates, we may be required to provide transportation services at a loss.
+Added: This may be more acute when we have a high percentage of contracted freight with customers and when there are significant changes in prices charged by motor carriers in a short period, as most of our transportation services are procured transactionally.
To date, such losses have not been material, but there can be no assurances that such losses will not be material in the future.
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Our ability to secure sufficient equipment or other transportation services to meet our commitments to customers or provide our services on competitive terms is subject to inherent risks, many of which are beyond our control, including equipment and labor shortages in the transportation industry, interruptions or stoppages in transportation services, “Acts of God” or acts of terrorism, changes in regulations impacting transportation, increases in operating expenses for carriers that result in a reduction in available carriers, and changes in transportation rates;
−Removed: and if we are unable to meet our commitments to our customers or provide our services on competitive terms, our operating results could be materially and adversely affected, and our customers could shift their business to our competitors temporarily or permanently.
+Added: and if we are unable to meet our commitments to our customers or provide our services on competitive terms, our operating results could be
+Added: materially and adversely affected, and our customers could shift their business to our competitors temporarily or permanently.
Our business relies on third-party carriers to conduct its operations, and the status of these parties as independent contractors, rather than employees, is being challenged.
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If our customers experience plant slowdowns or closures because they are unable to negotiate labor contracts, our revenue and profitability could be negatively impacted.
−Removed: Although our work force in the United States is not unionized, labor unions may attempt to organize our employees.
+Added: Labor unions sometimes attempt to organize our employees.
Successful unionization by 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, financial position and outlook.
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Our ability to issue debt or enter into other financing arrangements on acceptable terms could be adversely affected if there is a material decline in the demand for our services or in the financial health of our customers or suppliers or if there are other significantly unfavorable changes in economic conditions.
−Removed: We have incurred debt obligations that could adversely affect our business and profitability and our ability to meet other obligations.
−Removed: In connection with the Separation, RXO entered into (i) a revolving credit agreement providing for a five-year unsecured, multi-currency revolving credit facility and (ii) a term loan credit agreement providing for a five-year $100 million unsecured term loan facility.
−Removed: Additionally, RXO issued $355 million of unsecured notes.
−Removed: RXO transferred the net proceeds from the issuance of the notes and the incurrence of the term loan, together with cash on RXO’s balance sheet, to XPO in October 2022.
−Removed: As a result of these transactions, RXO had approximately $455 million of outstanding debt as of December 31, 2022, excluding finance leases.
+Added: We incurred debt obligations that could adversely affect our business and profitability and our ability to meet other obligations.
+Added: As of December 31, 2023, we had $360 million of outstanding debt (excluding finance leases), constituting $355 million of our unsecured notes and $5 million outstanding under our unsecured, multi-currency revolving credit facility that matures in 2027 (the “Revolver”), in addition to $595 million of undrawn commitments under the Revolver.
We may also incur additional indebtedness in the future.
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A material increase in the frequency or severity of accidents, liability claims or workers’ compensation claims, or unfavorable resolutions of claims could materially and adversely affect our operating results.
−Removed: In addition, significant increases in insurance costs or the inability to purchase insurance as a result of these claims could reduce
−Removed: our profitability.
+Added: In addition, significant increases in insurance costs or the inability to purchase insurance as a result of these claims could reduce our profitability.
Our involvement in the transportation of certain goods, including but not limited to, hazardous materials, could also increase our exposure in the event one of our third-party carriers is involved in an accident resulting in injuries or contamination.
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Impairment may result from significant changes in the manner or use of the acquired assets, in connection with the sale, spin off or other divestiture of a business unit, negative industry or economic trends and/or significant underperformance relative to historic or projected operating results.
−Removed: For a discussion of our goodwill impairment testing, see “Critical Accounting Policies—Evaluation of Goodwill” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
+Added: For a discussion of our goodwill impairment testing, see “Critical Accounting Policies and Estimates—Evaluation of Goodwill” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
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.
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Risks Related to the Separation
−Removed: We have a very limited operating history as a standalone, publicly traded company, and our historical financial information is not necessarily representative of the results we would have achieved as a standalone, publicly traded company and may not be a reliable indicator of our future results.
+Added: We have a limited operating history as a standalone, publicly traded company, and our historical financial information, prior to the Separation, is not necessarily representative of the results we would have achieved as a standalone, publicly traded company and may not be a reliable indicator of our future results.
The financial information in this Annual Report refers to RXO as a public company that began regular-way trading on November 1, 2022.
Prior to the Separation, we derived our combined financial statements from XPO’s accounting records and presented these on a standalone basis as if RXO had been operated independently from XPO.
−Removed: Our historical financial information does not necessarily reflect the financial condition, results of operations or cash flows that we will achieve as a standalone publicly traded company.
+Added: Our historical financial information, prior to the Separation, does not necessarily reflect the financial condition, results of operations or cash flows that we will achieve as a standalone publicly traded company.
Prior to the Separation, we were able to benefit from XPO’s shared economies of scope and scale in costs, employees, vendor relationships and customer relationships.
Additionally, XPO performed various corporate functions for us, such as legal, treasury, accounting, human resources, investor relations, and finance.
−Removed: Our historical financial results reflect allocations of corporate expenses from XPO for such functions, which may be less than the expenses we will incur as a separate, publicly traded company.
+Added: Our historical financial results, prior to the Separation, reflect allocations of corporate expenses from XPO for such functions, which may be less than the expenses we will incur as a separate, publicly traded company.
In addition, our working capital requirements and capital for our general corporate purposes, including capital expenditures and acquisitions, historically were part of the corporate-wide cash management policies of XPO.
1 unchanged sentence
For these reasons, as well as the additional risks related to the Separation noted below, we may not achieve the expected benefits of the Separation.
−Removed: Following the Separation, our financial profile has changed, and we are a smaller, less diversified company than XPO prior to the Separation.
−Removed: The Separation resulted in RXO becoming a smaller, less diversified company with a business concentrated in its industry.
−Removed: As a result, our company may be more vulnerable to changing market conditions, which could have a material adverse effect on our business, financial condition and results of operations.
−Removed: In addition, the diversification of our revenues, costs, and cash flows will diminish as a standalone company, such that our results of operations, cash flows, working capital and financing requirements may be subject to increased volatility and, as we will no longer be able to use cash flow from XPO to fund our investments and operations, our ability to fund capital expenditures and investments, pay dividends and service debt may be diminished.
−Removed: In connection with the Separation, RXO and XPO indemnified each other for certain liabilities.
−Removed: If we are required to pay under these indemnities to XPO, our financial results could be negatively impacted.
−Removed: The XPO indemnities may not be sufficient to hold us harmless from the full amount of liabilities for which XPO will be allocated responsibility, and XPO may not be able to satisfy its indemnification obligations in the future.
−Removed: Pursuant to the Separation and Distribution Agreement and certain other agreements between RXO and XPO, each party agreed to indemnify the other for certain liabilities, in each case for uncapped amounts.
−Removed: Indemnities that we may be required to provide XPO may be significant and could negatively impact our business.
−Removed: Third parties could also seek to hold us responsible for any of the liabilities that XPO has agreed to retain.
−Removed: Any amounts we are required to pay pursuant to these indemnification obligations and other liabilities could require us to divert cash that would otherwise have been used in furtherance of our operating business.
−Removed: Further, the indemnities from XPO for our benefit may not be sufficient to protect us against the full amount of such liabilities, and XPO may not be able to fully satisfy its indemnification obligations.
−Removed: Moreover, even if we ultimately succeed in recovering from XPO any amounts for which we are held liable, we may be temporarily required to bear these costs ourselves.
−Removed: Each of these risks could negatively affect our business, results of operations and financial condition.
−Removed: XPO may fail to perform under the various transition services agreements that were executed as part of the Separation, or we may fail to have necessary systems and services in place when certain of the transaction agreements expire.
−Removed: In connection with the separation and prior to the distribution, RXO and XPO entered into the Separation and Distribution Agreement and various other agreements, including the TSA, the TMA, the EMA and the IPLA.
−Removed: The Separation and Distribution Agreement, the TMA, the EMA and the IPLA, together with the documents and agreements by which the internal reorganization was effected, determined the allocation of assets and liabilities between the companies following the separation for those respective areas and include any necessary indemnifications related to liabilities and obligations.
−Removed: The TSA provides for the performance of certain services by each company for the benefit of the other for a period of time after the Separation.
−Removed: RXO will rely on XPO to satisfy its performance and payment obligations under these agreements.
−Removed: If XPO is unable or unwilling to satisfy its obligations under these agreements, including its indemnification obligations, we could incur operational difficulties and/or losses.
If the Separation, together with certain related transactions, does not qualify as a transaction that is generally tax-free for U.S.
21 unchanged sentences
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.
−Removed: Such opinions are based and relied on, among other things, various facts and assumptions, as well as certain representations, statements and undertakings of XPO, RXO
−Removed: or their respective subsidiaries.
+Added: Such opinions are based and relied on, among other things, various facts and assumptions, as well as certain representations, statements and undertakings of XPO, RXO or their respective subsidiaries.
If any of these representations or statements is, or becomes, inaccurate or incomplete, or if XPO, RXO or their respective subsidiaries do not fulfill or otherwise comply with any such undertakings or covenants, such opinions may be invalid or the conclusions reached therein could be jeopardized.
22 unchanged sentences
These restrictions may limit our ability to pursue certain equity issuances, strategic transactions, repurchases or other transactions that we may otherwise believe to be in the best interests of our stockholders or that might increase the value of our business.
−Removed: Also, we may be responsible for liabilities arising from the failure of the Separation, together with certain related transactions, to qualify for tax-free treatment and our indemnity obligations for such liabilities under the TMA, may discourage, delay or prevent certain third parties from acquiring RXO.
+Added: Also, we may be responsible for liabilities arising from the failure of the
+Added: Separation, together with certain related transactions, to qualify for tax-free treatment and our indemnity obligations for such liabilities under the TMA, may discourage, delay or prevent certain third parties from acquiring RXO.
Certain of our directors and employees may have actual or potential conflicts of interest because of their positions with or financial interests in XPO.
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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.
−Removed: UNRESOLVED STAFF COMMENTS
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.