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Item 8. Financial Statements and Supplementary Data

2024-02-13 compared with 2023-02-24 · 185 added, 175 removed, 647 unchanged (36% of the section changed)

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To the Stockholders and Board of Directors

Opinion on the Consolidated Financial Statements

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of RXO, Inc.

and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with U.S.

We also have audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with U.S.

generally accepted accounting principles.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

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We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

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(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Sufficiency of audit evidence over duplication of XPO’s IT systems and financial data

As discussed in Notes 1 and 3 to the consolidated financial statements, the Company completed its separation from XPO, Inc.

(“XPO”) on November 1, 2022.

Prior to the separation, the Company’s historical assets and liabilities presented were wholly owned by XPO and were reflected on a historical cost basis.

On the separation date, the assets and liabilities were transferred to the Company on a carry-over basis.

To affect the separation, the Company established its own Information Technology (IT) systems to be used for financial reporting (new IT systems).

This included duplication of existing XPO programs and historical financial data as well as executing program development and access controls over the configurations and interfaces of key IT applications.

We identified the evaluation of the sufficiency of audit evidence over duplication of XPO’s Information Technology (IT) systems and historical financial data into the new IT systems to be used by the Company for financial reporting as a critical audit matter.

Evaluating the sufficiency of audit evidence obtained required a high degree of complex auditor judgment and the involvement of IT professionals with specialized skills and knowledge.

Specifically, the number of duplicated XPO programs and volume of historical financial data transferred, as well as the configurations and interfaces of key IT applications and access rights to key IT applications during and after the separation required complex auditor judgment and the involvement of IT professionals with specialized skills and knowledge.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Liabilities for self-insured claims

As discussed in Note 2 to the consolidated financial statements, the Company participates in a combination of self-insurance programs and purchased insurance that are managed to provide for the costs of liability, vehicular, and workers’ compensation (self-insured claims).

The Company records estimates of the undiscounted liabilities associated with claims incurred as of the balance sheet date, including estimates of claims incurred but not reported, by considering historical cost experience, demographic, and severity factors, and judgments about current and expected levels of cost per claim and retention levels.

Insurance liabilities, including those related to claims managed through self-insurance and purchased insurance, amounted to $62 million as of December 31, 2023 and are recorded within Accrued expenses and Other long-term liabilities.

We identified the assessment of the estimated liabilities for self-insured claims as a critical audit matter.

The evaluation of the uncertainty in the amounts that will ultimately be paid to settle these claims required subjective auditor judgment.

Assumptions that may affect the estimated liability of self-insured claims include the consideration of historical cost experience, demographic and severity factors, and judgments about current and expected levels of cost per claim that have uncertainty related to future occurrences or events and conditions.

Additionally, the Company’s liabilities for self-insured claims included estimates for expenses of claims that have been incurred but have not been reported, and specialized skills were needed to evaluate the actuarial methods and assumptions used to make these estimates.

The following are the primary procedures we performed to address this critical audit matter.

We involved IT professionals with specialized skills and knowledge who assisted in determining the nature and extent of procedures to be performed and the testing of the Company’s IT program development and access controls through inquiry about and observation of these controls as well as inspection of supporting evidence to:

– obtain an understanding of the relevant IT systems and processes and testing IT general and application controls related to the duplication of XPO’s programs

– evaluate the configurations and interfaces of certain IT applications and access rights

– assess the duplication and transfer of historical financial data existing at the date of separation

In addition, we reconciled the historical net assets and liabilities recorded by the Company to the net assets and liabilities transferred from XPO at the date of the separation.

We evaluated the sufficiency of audit evidence obtained by assessing the results of procedures performed, including the appropriateness of the nature and extent of the audit effort.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s self-insurance process.

This included controls over the assumptions used in estimating the liabilities for self-insured claims.

In addition, for a sample of claims we compared the Company’s estimates of liabilities to current available information, which included incident and case reports, current and historical cost experience, or other evidence.

We involved actuarial professionals with specialized skills and knowledge, who assisted in:

• comparing the Company’s actuarial reserving methodologies with accepted actuarial methods and procedures

• evaluating assumptions used in determining the liability, including expected level of cost per claim, in relation to recent historical loss payment trends, and demographic and severity factors

• developing an independent expected range of liabilities, including liabilities for claims that have been incurred but have not been reported, based on actuarial methodologies

• comparing the Company’s recorded liability to the independently developed liability range.

We have served as the Company’s auditor since 2022.

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Cash and cash equivalents $ 5 $ 98

Accounts receivable, net of allowances of $ 13 and $ 9 , respectively

Accounts receivable, net of $ 12 and $ 13 in allowances, respectively

Other current assets 48 31

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10,000 shares authorized;

0 shares issued and outstanding as of December 31, 2022

0 shares issued and outstanding as of December 31, 2023 and 2022

Common stock, $ 0.01 par value;

300,000 shares authorized;

116,400 shares issued and outstanding as of December 31, 2022

117,026 and 116,400 shares issued and outstanding as of December 31, 2023 and 2022, respectively

Additional paid-in capital 590 588

Retained earnings 6 2

XPO investment — 1,072

Accumulated other comprehensive loss ( 3 ) ( 4 )

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Stock compensation expense 19 32 8

Deferred tax expense ( 20 ) 3 ( 9 )

Deferred tax (benefit) ( 8 ) ( 20 ) 3

Changes in assets and liabilities

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Proceeds from sale of property and equipment — 1 1

Other ( 2 ) — —

Net cash used in investing activities ( 66 ) ( 56 ) ( 38 )

Financing activities

Proceeds from borrowings on revolving credit facility 76 — —

Repayment of borrowings on revolving credit facility ( 71 ) — —

Proceeds from issuance of debt — 451 —

Repayment of debt and finance leases ( 104 ) — —

Payment for debt issuance costs — ( 9 ) —

Payment for tax withholdings related to vesting of stock compensation awards ( 14 ) ( 3 ) —

Net transfers (to) from XPO ( 621 ) ( 159 ) 32

Repurchase of common stock ( 2 ) — —

Net transfers to XPO — ( 621 ) ( 159 )

Other ( 2 ) ( 1 ) 1

Net cash (used in) provided by financing activities ( 183 ) ( 158 ) 32

Net cash used in financing activities ( 117 ) ( 183 ) ( 158 )

Effect of exchange rates on cash, cash equivalents and restricted cash 1 ( 2 ) —

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Supplemental disclosure of cash flow information:

Cash paid for income taxes 3 5 2

Cash paid for income taxes, net 27 3 5

Cash paid for interest, net 32 — —

See accompanying notes to consolidated financial statements.

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Net income — — — — — 150 150

Other comprehensive income — — — — 1 — 1

Stock compensation expense — — — — — 8 8

Net transfers from XPO — — — — 37 37

Balance as of December 31, 2020 — $ — $ — $ — $ ( 2 ) $ 1,070 $ 1,068

Net income — — — — — 150 150

Stock compensation expense — — — — — 8 8

Net transfers to XPO — — — — ( 156 ) ( 156 )

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

Net income — — — 4 — — 4

Other comprehensive income — — — — 1 — 1

Stock compensation expense — — 19 — — — 19

Vesting of stock compensation awards 726 — — — — — —

Tax withholdings related to vesting of stock compensation awards — — ( 15 ) — — — ( 15 )

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

Balance as of December 31, 2023 117,026 $ 1 $ 590 $ 6 $ ( 3 ) $ — $ 594

See accompanying notes to consolidated financial statements.

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Years Ended December 31, 2023, 2022 and 2021

RXO, Inc., (“RXO”, the “Company” or “we”), is a brokered transportation platform defined by cutting-edge technology and an asset-light business model, with the largest component being our core truck brokerage business.

Our operations also include three asset-light, brokered transportation services, all of which are complementary to our truck brokerage business:

(“RXO”, the “Company” or “we”) is a brokered transportation platform defined by cutting-edge technology and an asset-light business model.

The largest component is our core truck brokerage business.

Our operations also include three asset-light, brokered transportation services, all of which complement our truck brokerage business:

managed transportation, last mile and freight forwarding.

We present our operations in the consolidated financial statements as one reportable segment.

On November 1, 2022, the Company completed the separation from XPO, Inc.

(formerly known as XPO Logistics, Inc.) (“XPO”) (the “Separation”) in a transaction intended to be tax-free for U.S.

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

(formerly known as XPO Logistics, Inc.) (“XPO”) in a transaction intended to be tax-free for U.S.

federal income tax purposes.

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XPO stockholders received one share of RXO common stock for every share of XPO common stock held at the close of business on the record date.

RXO is now a standalone publicly traded company, and, on November 1, 2022, regular-way trading of RXO’s common stock commenced on the New York Stock Exchange (the “NYSE”) under the ticker symbol “RXO.”

The Separation was completed under a Separation and Distribution Agreement and various other agreements that govern aspects of the Company’s relationship with XPO.

See Note 3 — The Separation for additional information of the agreements executed in connection with the Separation.

On November 1, 2022, RXO became a standalone publicly-traded company.

Basis of Presentation and Significant Accounting Policies

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The Company believes the assumptions regarding allocations of XPO corporate expenses are reasonable.

Nevertheless, the consolidated financial statements may not reflect the results of operations, financial position and cash flows had the Company been a standalone entity during the periods presented.

Nevertheless, the consolidated financial statements may not reflect the results of operations, cash flows and financial position had the Company been a standalone entity during the periods presented.

The majority of these allocated costs are recorded within Sales, general and administrative expense;

Depreciation and amortization expense;

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

Transaction and integration costs;

and Restructuring costs in the Consolidated Statements of Operations.

All charges and allocations for facilities, functions and services performed by XPO organizations have been deemed settled in cash by RXO to XPO in the year in which the cost was recorded in the Consolidated Statements of Operations.

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Certain transactions between RXO and XPO, including XPO’s non-RXO subsidiaries, have been included in these consolidated financial statements, and are considered to be effectively settled at the time the transaction is recorded.

The total net effect of the cash settlement of these transactions is reflected in the Consolidated Statements of Cash Flows as a financing activity and in the Consolidated Balance Sheets as XPO investment.

The components of the net transfers to and from XPO include certain costs allocated from XPO Corporate functions, income tax expense, certain cash receipts and payments made on behalf of RXO and general financing activities.

The total net effect of the cash settlement of these transactions is reflected in the Consolidated Statements of Cash Flows as a financing activity and in the Consolidated Statements of Changes in Equity as XPO investment.

The components of the net transfers to and from XPO include certain costs allocated from XPO's corporate functions, income tax expense, certain cash receipts and payments made on behalf of RXO and general financing activities.

For the periods ended before the Separation, the Company was a member of the XPO consolidated group, and its U.S.

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For the periods ended after the Separation, the Company will file a consolidated U.S.

federal income tax return as well as state and local income tax returns.

federal income tax return as well as certain state and local income tax returns.

The Company’s foreign income tax returns are filed on a full-year basis.

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Actual results may vary from those estimates.

The COVID-19 pandemic has created and may continue to create significant uncertainty in macroeconomic conditions, which may cause further business slowdowns or shutdowns, depress demand for the transportation services industry, and adversely impact the Company’s estimates, particularly those that require consideration of forecasted financial information.

The business and economic uncertainty resulting from the COVID-19 pandemic has made calculating estimates and assumptions more difficult.

Significant Accounting Policies

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Performance obligations are generally short-term, with transit times usually less than one week.

Generally, customers are billed on shipment of the freight or on a weekly or monthly basis and make payment according to approved payment terms.

Generally, customers are billed upon shipment of the freight or on a weekly or monthly basis and make payment according to approved payment terms.

When we do not control the specific services, we recognize revenue as the difference between the amount the customer pays us for the service less the amount we are charged by third parties who provide the service.

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Bank overdraft positions occur when the sum of payments honored by the Company's bank exceed the amount of cash available in the Company's account.

The Company had $ 1 million in bank overdrafts as of December 31, 2022 recorded within Other current liabilities in the Consolidated Balance Sheets.

There were no bank overdrafts as of December 31, 2021.

Accounts Receivable and Allowance for Credit Losses

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Ending balance $ 12 $ 13 $ 9

The Company may sell certain accounts receivable from time to time on a non-recourse basis pursuant to factoring arrangements to better match and neutralize the cash flow impact of transportation cost outflows.

During the quarter ended December 31, 2023, we received cash for accounts receivable balances sold of $ 36 million under these arrangements.

Property and Equipment

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Our chief operating decision maker regularly reviews financial information at the operating segment level to allocate resources and assess performance.

We have determined that all our operating segments share the following similar economic and qualitative characteristics and therefore meet the criteria established in Accounting Standards Codification (“ASC”) 280–Segment Reporting for operating segments to be aggregated into one reportable segment:

We have determined that all our operating segments share the following similar economic and qualitative characteristics and therefore meet the criteria for operating segments to be aggregated into one reportable segment:

• The operating segments have similar economic characteristics (e.g., comparable adjusted earnings before interest, taxes, depreciation and amortization margins, our measure of segment profitability), and similar long-term financial models;

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The review of goodwill impairment consists of either using a qualitative approach to determine whether it is more likely than not that the fair value of the assets is less than their respective carrying values or a one-step quantitative impairment test.

In performing the qualitative assessment, the Company considers many factors in evaluating whether the carrying value of goodwill may not be recoverable, including declines in the Company’s stock price and market capitalization of the Company and macroeconomic conditions.

In performing the qualitative assessment, the entity considers many factors in evaluating whether the carrying value of goodwill may not be recoverable, including declines in the entity's stock price and market capitalization of the entity and macroeconomic conditions.

If, based on the results of the qualitative assessment, it is concluded that it is not more likely than not that the fair value of a reporting unit exceeds its carrying value, additional quantitative impairment testing is performed.

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If the carrying value of a reporting unit is greater than its fair value, a goodwill impairment charge will be recorded for the difference (up to the carrying value of goodwill).

The Company uses the income approach and/or a market-based approach to determine the reporting units’ fair values.

The Company uses a combination of the income approach and a market-based approach to determine the reporting units’ fair values.

Under the income approach, the determination of discounted cash flows of the reporting units and assets and liabilities within the reporting units requires significant estimates and assumptions.

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The market approach of determining fair value is based on comparable market multiples for companies engaged in similar businesses, as well as recent transactions within our industry.

For our 2022 goodwill assessment, we performed a quantitative analysis for our reporting units using a combination of income and market approaches.

For our 2023 goodwill assessment, we performed a quantitative analysis for our reporting units using a combination of the income and market approaches.

As of November 30, 2023 we completed our annual impairment tests for goodwill with all of our reporting units having fair values in excess of their carrying values, resulting in no impairment of goodwill.

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The components of accrued expenses are as follows:

As of December 31,

(In millions) 2023 2022

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At December 31, 2023 and 2022, our insurance liabilities amounted to $ 62 million and $ 60 million, respectively, and were included in Accrued expenses and Other long-term liabilities on our Consolidated Balance Sheets.

Up until the date of the Separation, the operations of the Company were included in the consolidated U.S.

federal and certain state and local and foreign income tax returns filed by XPO, where applicable.

Income tax expense and other income tax related information contained in the consolidated financial statements up until the date of the Separation were presented on a separate return basis as if the Company had filed its own tax returns.

As a result, actual tax transactions included in the consolidated financial statements of XPO may not be included in the consolidated financial statements.

Similarly, the tax treatment of certain items reflected in the consolidated financial statements may not be reflected in the consolidated financial statements and tax returns of XPO.

Therefore, portions of items such as net operating losses (“NOLs”), credit carryforwards, other deferred taxes, and valuation allowances may exist in the consolidated financial statements that may or may not exist in XPO’s consolidated financial statements and vice versa.

In addition, although deferred tax assets up until the date of the Separation were recognized for NOLs and tax credits in accordance with the separate return method, certain NOLs and credits did not carry over with the Company in connection with the Separation.

The income taxes of the Company as presented in the consolidated financial statements may not be indicative of the income taxes that the Company will incur in the future.

In jurisdictions where the Company has been included in tax returns filed by XPO, any income tax receivables or payables resulting from the related income tax provisions have been reflected in the Consolidated Balance Sheets within XPO investment.

For the periods ended after the Separation, the Company will file a consolidated U.S.

federal income tax return as well as state and local income tax returns.

The Company’s foreign income tax returns are filed on a full-year basis.

We account for income taxes using the asset and liability method on a legal entity and jurisdictional basis, under which we recognize the amount of taxes payable or refundable for the current year and deferred tax assets and liabilities for the future tax consequences of events that have been recognized in our financial statements or tax returns.

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Valuation allowances are established when, in our judgment, it is more likely than not that our deferred tax assets will not be realized based on all available evidence.

We record global intangible low-taxed income tax as a period cost.

We recognize tax benefits from uncertain tax positions only if (based on the technical merits of the position) it is more likely than not that the tax positions will be sustained on examination by the tax authority.

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We report tax-related interest and penalties as a component of income tax expense.

Up until the date of the Separation, the operations of the Company were included in the consolidated U.S.

federal, certain state, local and foreign income tax returns filed by XPO, where applicable.

As a result, actual tax transactions included in the consolidated financial statements of XPO may not be included in our consolidated financial statements.

Similarly, the tax treatment of certain items reflected in our consolidated financial statements may not be reflected in the consolidated financial statements and tax returns of XPO.

Up until the date of the Separation, the income taxes of the Company as presented in the consolidated financial statements may not have been indicative of the income taxes that the Company will incur post-Separation.

Foreign Currency Translation and Transactions

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Gains and losses arising from foreign currency transactions and the effects of remeasuring monetary assets and liabilities are recorded in Other expense in our Consolidated Statements of Operations and were not material for any of the periods presented.

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The levels of inputs used to measure fair value are:

• Level 1—Quoted prices for identical instruments in active markets;

• Level 2—Quoted prices for similar instruments in active markets;

quoted prices for identical or similar instruments in markets that are not active;

and model-derived valuations in which all significant inputs are observable in active markets;

• Level 3—Valuations based on inputs that are unobservable, generally utilizing pricing models or other valuation techniques that reflect management’s judgment and estimates.

We base our fair value estimates on market assumptions and available information.

The carrying values of cash, accounts receivable, accounts payable and accrued expenses approximated their fair values as of December 31, 2022 and 2021 due to their short-term nature and/or being receivable or payable on demand.

Stock-Based Compensation

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For grants of restricted stock units (“RSUs”) subject to service-based or performance-based vesting conditions only, the Company establishes the fair value based on the market price on the date of the grant.

For stock options, the Company determines the fair value based on its stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends.

The Company recognizes the grant date fair value of equity awards as compensation cost over the requisite service period.

The Company accounts for forfeitures as they occur.

Related-Party Transactions

Transactions between the Company and XPO, and other non-RXO subsidiaries of XPO, are deemed related-party transactions through the November 1, 2022 Separation date.

Related-party transactions are comprised of the following:

(i) those that have been effectively settled for cash, and (ii) those which have historically not been settled and have been forgiven by either party.

For those that have been cash settled, we have recorded related-party receivables (assets) or payables (liabilities) in the Consolidated Balance Sheets as of December 31, 2021.

For those that have been forgiven as of the date of the Separation, the amounts have been recorded as an adjustment of XPO Investment in the Consolidated Balance Sheets.

Reclassifications

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Adoption of New Accounting Standard

In November 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-10, “Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance.” The ASU increases the transparency surrounding government assistance by requiring annual disclosure of (i) the types of assistance received, (ii) an entity’s accounting for the assistance and (iii) the effect of the assistance on the entity’s financial statements.

In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-04, “Liabilities - Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations.” The ASU increases the transparency surrounding supplier finance programs by requiring the buyer to disclose information on an annual basis about the key terms of the program, the outstanding obligation amounts as of the end of the period, a roll-forward of such amounts, and the balance sheet presentation of the related amounts.

Additionally, the obligation amount outstanding at the end of the period must be disclosed in interim periods.

The amendments are effective for fiscal years beginning after December 15, 2022 except for the requirement to disclose the roll-forward information, which is effective for fiscal years beginning after December 15, 2023.

We adopted this standard on January 1, 2023, on a prospective basis.

The adoption did not have a material impact on our financial statement disclosures.

The adoption did not have an impact on our financial statement disclosures.

Accounting Pronouncements Issued but Not Yet Effective

In September 2022, the FASB issued ASU 2022-04, “Liabilities - Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations.” The ASU increases the transparency surrounding supplier finance programs by requiring the buyer to disclose information on an annual basis about the key terms of the program, the outstanding obligation amounts as of the end of the period, a rollforward of such amounts, and the balance sheet presentation of the related amounts.

Additionally, the obligation amount outstanding at the end of the period must be disclosed in interim periods.

The amendments are effective for fiscal years beginning after December 15, 2022 except for the requirement to disclose the rollforward information, which is effective for fiscal years beginning after December 15, 2023.

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.

The amendments are effective for fiscal years beginning after December 15, 2023.

Early adoption is permitted.

We are currently evaluating the impact of the new guidance, which is limited to financial statement disclosures.

The Separation

The Separation was completed under a Separation and Distribution Agreement and various other agreements that govern aspects of the Company’s relationship with XPO, including, but not limited to, a Transition Services Agreement (“TSA”), a Tax Matters Agreement (“TMA”), an Employee Matters Agreement (“EMA”) and an Intellectual Property License Agreement (“IPLA”).

The Separation and Distribution Agreement contains provisions that, among other things, relate to (i) assets, liabilities and contracts transferred, assumed and assigned to each of RXO and XPO as part of the Separation, (ii) cross-indemnities principally designed to place financial responsibility for the obligations and liabilities of RXO’s business with RXO and financial responsibility for the obligations and liabilities of XPO’s remaining business with XPO, (iii) the allocation among RXO and XPO of rights and obligations under existing insurance policies for occurrences before completion of the Separation, and (iv) procedures governing the resolution of disputes, controversies or claims that may arise between RXO and XPO related to the Separation.

Under the TSA, (i) XPO provides RXO and certain of its affiliates, on an interim, transitional basis, various services, and (ii) RXO provides XPO and certain of its affiliates, on an interim, transitional basis, various services.

The services provided include, among others, employee benefits administration, information technology services, regulatory services, accounting support, general administrative services and other support services.

The services generally commenced on the date of the Separation and will terminate no later than eight months following the Separation.

XPO and RXO also entered into a TMA that governs the parties’ respective rights, responsibilities and obligations for tax matters;

including responsibility for taxes, entitlement to refunds, allocation of tax attributes, preparation of tax returns, control of tax contests and other tax matters.

RXO is generally responsible for federal, state and foreign (i) income taxes imposed on a separate return basis on RXO or any of its subsidiaries and (ii) non-income taxes imposed on a separate return basis on RXO or any of its subsidiaries, or with respect to which RXO or any of its subsidiaries is obligated to file the applicable return, in all cases, for taxable periods, or portions thereof, that ended on or prior to the Separation.

The TMA provides special rules that allocate responsibility for tax liabilities arising from a failure of the Separation transactions to qualify for tax-free treatment based on the reasons for such failure.

The TMA also imposes restrictions on RXO during the two years following the Separation that are intended to prevent the Separation and certain related transactions from failing to qualify as transactions that are generally tax-free.

The EMA allocated assets, liabilities, and responsibilities relating to employee compensation and benefit plans and programs and other employee-related matters in connection with the Separation.

The IPLA between an RXO subsidiary and XPO provides such RXO subsidiary licenses to certain XPO software and other intellectual property rights retained by XPO, and provides XPO licenses to certain software, patents and other intellectual property owned by RXO subsidiaries.

In October 2022, the Company completed an offering of $ 355 million aggregate principal amount of unsecured notes (the “Notes”) and entered into a five-year unsecured term loan facility of $ 100 million (the “Term Loan”).

Net proceeds from the issuance of the Notes and the incurrence of the Term Loan, together with cash on RXO's balance sheet, were used to fund a net cash distribution of $ 604 million from RXO to XPO, in the fourth quarter of 2022.

See Note 9 — Debt for additional information.

We are currently evaluating the impact of the new guidance.

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures.” The amendments in this update improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses.

The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items and interim disclosures of a reportable segment’s profit or loss and assets.

All disclosure requirements of the ASU are required for entities with a single reportable segment.

The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods for our fiscal years beginning after December 15, 2024, and should be applied on a retrospective basis to all periods presented.

Early adoption is permitted.

We are currently evaluating the impact of the new guidance.

In December 2023, the FASB issued 2023-09, “Income Taxes (Topic 740) - Improvements to Income Tax Disclosure.” The ASU seeks to enhance income tax information primarily through changes in the rate reconciliation and income taxes paid information.

The amendments are effective for annual periods beginning after December 15, 2024 on a prospective basis.

Early adoption is permitted.

We are currently evaluating the impact of the new guidance.

Revenue Recognition

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

(primarily in North America, excluding the U.S., and Asia) for the years ended December 31, 2022, 2021 and 2020, respectively.

(primarily in Canada, Mexico and Asia) for the years ended December 31, 2023, 2022 and 2021, respectively.

Our revenue disaggregated by service offering is as follows:

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Retail/e-commerce $ 1,533 $ 1,799 $ 1,771

Food and beverage 530 585 394

Industrial/manufacturing 743 817 778

Logistics and transportation 338 331 240

Food and beverage 438 530 585

Automotive 411 390 308

Logistics and transportation 197 338 331

Other 605 922 916

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As of December 31, 2023, the fixed consideration component of our remaining performance obligation was approximately $ 71 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.

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

Restructuring Charges

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These actions generally include severance and facility-related costs, including impairment of operating lease assets, and are intended to improve our efficiency and profitability going forward.

The following is a rollforward of the Company’s restructuring liability, which is included in Other current liabilities in the Consolidated Balance Sheets:

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

Year Ended December 31, 2023

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Facilities 1 4 ( 3 ) — 2

Contract termination — 1 ( 1 ) — —

Total $ 3 $ 16 $ ( 13 ) $ — $ 6

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Facilities 2 2 ( 3 ) — 1

Contract termination — 1 ( 1 ) — —

Total $ 2 $ 13 $ ( 6 ) $ ( 6 ) $ 3

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Operating leases 4.2 4.1

Finance leases 4.3 N/A

Finance leases 3.2 4.3

Weighted-average discount rate

Operating leases 5.2 % 4.7 %

Finance leases 6.1 % N/A

Finance leases 5.7 % 6.1 %

The components of our lease expense are as follows:

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Amortization of leased assets $ 2 $ 1 $ —

Interest on lease liabilities 1 — —

Total finance lease cost $ 3 $ 1 $ —

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As of December 31, 2023, we had additional operating leases that have not yet commenced with future undiscounted lease payments of $ 12 million.

These operating leases will commence in 2023 with initial lease terms of 5 years .

These operating leases will commence in 2024, with initial lease terms ranging from 3 years to 7 years .

Goodwill and Intangible Assets

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We did not recognize any impairment of our identified intangible assets in 2023 or 2022.

During 2022 we retired fully amortized intangible assets of $ 132 million, consisting of $ 130 million in customer relationships and $ 2 million in non-compete agreements.

During 2023 we retired $ 1 million of fully amortized customer relationship intangible assets.

Estimated future amortization expense for amortizable intangible assets for the next five years and thereafter is as follows:

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

December 31, 2022

(In millions) Principal Balance Carrying Value

December 31, 2023 December 31, 2022

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

Revolver $ 5 $ 5 $ — $ —

Term Loan — — 100 100

7.50 % Notes due 2027 (1)

355 347 355 346

Finance leases, asset financing and other 7 7 9 9

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Total long-term debt and obligations under finance leases $ 364 $ 356 $ 460 $ 451

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

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

(In millions) Level 2022 2021

Term Loan 2 $ 95 $ —

7.50 % Notes due 2027

We valued Level 1 debt using quoted prices in active markets.

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

(1) Th e 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 December 31, 2023 and December 31, 2022, respectively.

Our principal payment obligations on debt (excluding finance leases) for the next five years and thereafter is as follows:

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

At December 31, 2022, the Company is in compliance with the covenants of the Revolver.

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

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

As of December 31, 2023, we had $ 5 million outstanding under the Revolver, with interest payable quarterly.

Borrowings under the Revolver are payable, at our option, at any time prior to or at maturity on October 18, 2027.

The effective interest rate on the Revolver was 6.82 % as of December 31, 2023.

On November 2, 2023, the Company exercised a feature to increase the total commitments under its Revolver from $ 500 million to $ 600 million.

Term Loan Credit Agreement

On October 18, 2022, we entered into the $ 100 million Term Loan.

The Term Loan bears interest at a fluctuating rate per annum plus an applicable margin calculated based on RXO’s credit ratings, payable quarterly.

Beginning with the fiscal quarter ending March 31, 2025, the Term Loan will amortize on a quarterly basis in an amount equal to (i) 5 % per annum for the first eight fiscal quarters ending on or after such date and (ii) 10 % per annum for each fiscal quarter ending thereafter.

The Term Loan matures on November 1, 2027.

The effective interest rate on the Term Loan was 5.93 % as of December 31, 2022.

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 December 31, 2022, the Company was in compliance with the covenants of the credit agreement governing the Term Loan.

On October 25, 2022, we completed the private placement of $ 355 million in aggregate principal amount of the Notes.

On October 18, 2022, we entered into a five-year $ 100 million unsecured term loan facility (the “Term Loan”).

The original maturity date of the Term Loan was November 1, 2027.

In connection with the Revolver commitment increase, on November 2, 2023, the Company repaid all of the outstanding obligations in respect of the $ 100 million principal amount, interest and fees under the Term Loan and terminated the Term Loan.

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

The Notes bear interest at a rate of 7.50 % per annum payable semiannually in cash in arrears on May 15 and November 15 of each year, beginning May 15, 2023, and mature on November 15, 2027, unless earlier repurchased or redeemed, if applicable.

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The effective interest rate on the Notes was 8.13 % as of December 31, 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 % 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).

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

At December 31, 2022, the Company was in compliance with the covenants of the N otes.

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

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The levels of inputs used to measure fair value are:

• Level 1—Quoted prices for identical instruments in active markets;

• Level 2—Quoted prices for similar instruments in active markets;

quoted prices for identical or similar instruments in markets that are not active;

and model-derived valuations in which all significant inputs are observable in active markets;

• Level 3—Valuations based on inputs that are unobservable, generally utilizing pricing models or other valuation techniques that reflect management’s judgment and estimates.

Assets and Liabilities

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 December 31, 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 December 31, 2023 December 31, 2022

Revolver 3 $ 5 $ —

Term Loan 2 — 95

7.50% Notes due 2027 1 366 358

We valued Level 1 debt using quoted prices in active markets.

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

We valued Level 3 debt using unobservable inputs which reflect the Company’s best estimate of what hypothetical market participants would use to determine a transaction price for the asset or liability at the reporting date.

Employee Benefit Plan

2 unchanged sentences

The Company’s costs for the defined contribution plan were $ 9 million, $ 8 million and $ 7 million for the years ended December 31, 2023, 2022 and 2021, respectively, and were primarily included in Sales, general and administrative expense in the Consolidated Statements of Operations.

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”).

During the twelve months ended 2023, the Company repurchased 100,000 shares of its common stock for $ 2 million at an average price of $ 20.53 per share, funded by available cash.

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

As of December 31, 2023, $ 123 million remained approved 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.

Stock-Based Compensation

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All awards granted under these plans were related to XPO common shares.

In connection with the Separation, and in accordance with the EMA and the RXO, Inc.

In connection with the Separation, and in accordance with the Employee Matters Agreement (“EMA”) and the RXO, Inc.

2022 Omnibus Incentive Plan (the “2022 Incentive Plan” or the “Plan”) adopted in 2022, the Company’s employees with outstanding former XPO stock-based awards received replacement stock-based awards under the Plan at Separation.

1 unchanged sentence

In connection with the Separation, certain holders of outstanding XPO share-based compensation awards received an adjusted award consisting of both shares of XPO common stock and shares of RXO common stock.

Non-vested shares outstanding at December 31, 2022, as shown in the table below, exclude 2.8 million shares held by non-RXO employees, consisting of certain XPO employees, former employees of XPO as of the distribution date, and XPO non-employee directors who remained on the XPO Board of Directors on the distribution date, that will be settled in RXO common stock once vested under the EMA.

Non-vested shares outstanding, as shown in the table below, exclude 1.7 million and 2.8 million shares held by non-RXO employees at December 31, 2023 and December 31, 2022, respectively, consisting of certain XPO employees, former employees of XPO as of the distribution date, and XPO non-employee directors who remained on the XPO Board of Directors on the distribution date, that will be settled in RXO common stock once vested under the EMA.

Additionally, one employee of RXO was granted RSUs and PRSUs in XPO stock in connection with the Separation.

Non-vested shares outstanding at December 31, 2022, as shown in the table below, exclude these 43 thousand shares, as they will be settled in XPO common stock in accordance with the EMA.

Non-vested shares outstanding, as shown in the table below, exclude these 12 thousand and 43 thousand shares at December 31, 2023 and December 31, 2022, respectively, as they will be settled in XPO common stock in accordance with the EMA.

The Company recognizes stock-based compensation expense related only to those awards held by RXO employees.

21 unchanged sentences

Outstanding as of December 31, 2022

Converted from XPO 1,035,371 21.80 1,888,987 20.57

1,005,171 $ 21.68 896,631 $ 19.68

Granted 1,200,161 20.62 62,605 19.08

11 unchanged sentences

For the periods ended after the Separation, the Company will file a consolidated U.S.

federal income tax return as well as state and local income tax returns.

federal income tax return as well as certain state and local income tax returns.

The Company’s foreign income tax returns are filed on a full-year basis.

23 unchanged sentences

federal benefit 42.4 3.0 2.6

Non-deductible expenses 81.6 1.5 —

Foreign rate differential 17.1 1.5 0.6

9 unchanged sentences

The tax effects of temporary differences that give rise to significant portions of the deferred tax asset and deferred tax liability are as follows:

Years Ended December 31,

(In millions) 2023 2022

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Foreign net operating losses available to offset future taxable income Various times starting in 2028 (1)

State tax credit carryforwards Various times starting in 2026 1 —

(1) Some losses have unlimited carryforward periods.

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Total unrecognized tax benefits that, if recognized, would impact the effective income tax rate as of the end of the year $ — $ — $ 1

We do not expect a reduction to unrecognized tax benefits over the next 12 months due to the statute of limitations lapsing on positions or because tax positions are sustained on audit.

We are subject to taxation in the United States and various states and foreign jurisdictions.

As of December 31, 2022, we have no tax years under examination by the IRS or in any foreign, state or local jurisdictions.

State and local returns after 2015 and non-U.S.

As of December 31, 2023, we have no tax years under examination by the IRS or in any foreign jurisdictions.

We are under examination in various states.

federal tax return after the separation date of November 1, 2022, certain state and local returns after 2016 and non-U.S.

returns after 2010 are open under relevant statutes of limitations and are subject to audit.

6 unchanged sentences

As of the Separation date, 3.3 million total shares, including 2.4 million RSUs and 0.9 million PRSUs, were converted in this manner.

Approximately 0.5 million of these awards vested or were forfeited in 2022, resulting in 2.8 million shares remaining outstanding at December 31, 2022.

Approximately 1.1 million and 0.5 million of these awards vested or were forfeited in 2023 and 2022, respectively, resulting in 1.7 million and 2.8 million shares remaining outstanding at December 31, 2023 and December 31, 2022, respectively.

The adjusted RSU awards are subject to the same terms and vesting conditions that applied to the original XPO award immediately before the distribution.

The adjusted PRSU awards are subject to the same terms and vesting conditions that applied to the original XPO award immediately before the distribution, provided that the XPO Compensation Committee may modify the applicable performance-based vesting conditions prior to the effective time (including by deeming the applicable performance-based vesting conditions to be achieved at a designated performance level).

As these awards will ultimately be settled in RXO shares upon vesting, they have been included in our calculation of diluted weighted-average common shares outstanding as of December 31, 2022.

As these awards will ultimately be settled in RXO shares upon vesting, they have been included in our calculation of diluted weighted-average common shares outstanding as of December 31, 2023 and December 31, 2022.

On November 1, 2022, the date of the Separation, 115,162,555 shares of common stock of RXO were distributed to XPO stockholders of record as of the record date.

1 unchanged sentence

For all periods prior to the Separation, it is assumed that there are no dilutive equity instruments as there were no equity awards of RXO outstanding prior to the Separation.

For the year ended December 31, 2022, diluted earnings per share is computed by giving effect to all potentially dilutive stock awards that are outstanding.

Diluted earnings per share is computed by giving effect to all potentially dilutive stock awards that are outstanding.

The computation of diluted earnings per share excludes the effect of the potential exercise of stock-based awards when the effect of the potential exercise would be anti-dilutive.

Approximately 1.1 million shares are excluded from the calculation of diluted earnings per share for the year ended December 31, 2022, because their inclusion would have been anti-dilutive.

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

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

Years Ended December 31,

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Diluted earnings per share $ 0.03 $ 0.79 $ 1.30

Antidilutive shares excluded from diluted weighted-average common shares

Commitments and Contingencies

7 unchanged sentences

We believe that we have adequately accrued for the potential impact of loss contingencies that are probable and reasonably estimable.

We do not believe that the ultimate resolution of any matters to which we are presently a party will have a material adverse effect on our results of operations, financial condition or cash flows.

However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more of these matters could have a material adverse effect on our financial condition, results of operations or cash flows.

We do not believe that the ultimate resolution of any matters to which we are presently a party will have a material adverse effect on our results of operations, cash flows and financial position.

However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more of these matters could have a material adverse effect on our results of operations, cash flows and financial position.

Legal costs incurred related to these matters are expensed as incurred.

1 unchanged sentence

The liability and excess umbrella insurance policies generally do not cover the misclassification claims described in this note.

In the event we are required to satisfy a legal claim outside the scope of the coverage provided by insurance, our financial condition, results of operations or cash flows could be negatively impacted.

The Company’s last mile subsidiary is involved in several class action and collective action cases involving misclassification claims.

The misclassification claims related solely to the Company’s last mile services, which operated as a wholly owned subsidiary of XPO until the spin-off of RXO was completed.

In the event we are required to satisfy a legal claim outside the scope of the coverage provided by insurance, our results of operations, cash flows or financial position could be negatively impacted.

Our last mile subsidiary is involved in several class action and collective action cases involving misclassification claims.

The misclassification claims related solely to our last mile business, which operated as a wholly owned subsidiary of XPO until the spin-off of RXO was completed.

As of November 1, 2022, pursuant to the Separation and Distribution Agreement between XPO and RXO, the liabilities of XPO’s last mile subsidiary, including legal liabilities, if any, related to the misclassification claims, were spun-off as part of RXO.

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 described above.

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

therefore, no related amounts were reflected on the Company’s financial statements for the year ended December 31, 2023.

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

16 unchanged sentences

Costs $ 52 $ 79

Balances with XPO and its non-RXO Subsidiaries

Assets and liabilities on the Consolidated Balance Sheets include the following related-party amounts that were cash settled:

(In millions) 2022 2021

Amounts due from XPO and its affiliates

Trade receivables (1)

Amounts due to XPO and its affiliates

Trade payables (2)

(1) Represents trade receivables generated from revenue with XPO prior to the Separation.

(2) Represents trade payables generated from costs with XPO prior to the Separation.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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-K

Item 8. Financial Statements and Supplementary Data