What changed in this filing

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Item 1. Financial Statements

2024-05-07 compared with 2023-11-07 · 99 added, 172 removed, 216 unchanged (56% of the section changed)

1 unchanged sentence

Condensed Consolidated Balance Sheets

September 30, December 31,

March 31, December 31,

(Dollars in millions, shares in thousands, except per share amounts) 2024 2023

1 unchanged sentence

Cash and cash equivalents $ 7 $ 5

Accounts receivable, net of allowances of $ 10 and $ 13 , respectively

Accounts receivable, net of $ 10 and $ 12 in allowances, respectively

Other current assets 47 48

12 unchanged sentences

Accrued expenses 220 199

Current maturities of long-term debt 3 4

Short-term debt and current maturities of long-term debt 16 3

Short-term operating lease liabilities 54 53

10 unchanged sentences

10,000 shares authorized;

0 shares issued and

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

0 shares issued and outstanding as of March 31, 2024 and December 31, 2023

Common stock, $ 0.01 par value;

300,000 shares authorized;

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

117,544 and 117,026 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

Additional paid-in capital 593 590

Retained earnings 4 2

Retained earnings (Accumulated deficit) ( 9 ) 6

Accumulated other comprehensive loss ( 3 ) ( 3 )

3 unchanged sentences

Condensed Consolidated Statements of Operations

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

Three Months Ended March 31,

(Dollars in millions, shares in thousands, except per share amounts) 2024 2023

6 unchanged sentences

Restructuring costs 11 8

Operating income $ 6 $ 15 $ 25 $ 124

Operating income (loss) $ ( 12 ) $ 5

Other expense 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

Interest expense, net 8 8

Loss before income taxes $ ( 21 ) $ ( 3 )

Income tax benefit ( 6 ) ( 3 )

Net income (loss) $ ( 15 ) $ —

7 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income (Loss)

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

Three Months Ended March 31,

(In millions) 2024 2023

Net income (loss) $ ( 15 ) $ —

Other comprehensive loss, net of tax

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

$ — $ ( 2 ) $ — $ ( 2 )

Other comprehensive loss — ( 2 ) — ( 2 )

Other comprehensive income (loss), net of tax

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

Other comprehensive income (loss) — —

Comprehensive income (loss) $ ( 15 ) $ —

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Nine Months Ended September 30,

Three Months Ended March 31,

(In millions) 2024 2023

Operating activities

Net income $ 2 $ 96

Adjustments to reconcile net income to net cash from operating activities

Net income (loss) $ ( 15 ) $ —

Adjustments to reconcile net income (loss) to net cash from operating activities

Depreciation and amortization expense 16 18

9 unchanged sentences

Payment for purchases of property and equipment ( 11 ) ( 12 )

Proceeds from sale of property and equipment — 1

Other ( 1 ) —

Net cash used in investing activities ( 11 ) ( 12 )

Financing activities

Proceeds from borrowings on revolving credit facilities 39 —

Repayment of borrowings on revolving credit facilities ( 31 ) —

Payment for tax withholdings related to vesting of stock compensation awards ( 2 ) ( 7 )

Repurchase of common stock ( 2 ) —

Net transfers to XPO — ( 39 )

Repayment of debt and finance leases ( 3 ) —

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

Other — ( 1 )

Net cash provided by (used in) financing activities 6 ( 8 )

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

4 unchanged sentences

Leased assets obtained in exchange for new operating lease liabilities $ 23 $ 10

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

Cash paid for income taxes, net 1 6

2 unchanged sentences

Condensed Consolidated Statements of Changes in Equity

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

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

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

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

Net loss — — — ( 15 ) — ( 15 )

Other comprehensive income — — — — — —

Stock compensation expense — — 5 — — 5

1 unchanged sentence

Tax withholdings related to vesting of stock compensation awards — — ( 2 ) — — ( 2 )

Repurchase of common stock — — — — — —

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

Balance as of March 31, 2024 117,544 $ 1 $ 593 $ ( 9 ) $ ( 3 ) $ 582

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

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

Net income — — — — — —

Other comprehensive income — — — — — —

Stock compensation expense — — 5 — — 5

1 unchanged sentence

Tax withholdings related to vesting of stock compensation awards — — ( 7 ) — — ( 7 )

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

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

Net income — — — — — 13 13

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

Stock compensation expense — — — — — 3 3

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

Balance as of December 31, 2021 — $ — $ — $ — $ ( 2 ) $ 1,072 $ 1,070

Net income — — — — — 96 96

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

Stock compensation expense — — — — — 9 9

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

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

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

See accompanying notes to condensed consolidated financial statements.

15 unchanged sentences

All intercompany accounts and transactions have been eliminated.

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 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.

(formerly known as XPO Logistics, Inc.) (“XPO”).

The Separation was accomplished by the distribution of 100 percent of the outstanding common stock of RXO to XPO stockholders as of the close of business on October 20, 2022, the record date for the distribution.

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.

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

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

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

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

In connection with the Separation, the Company’s assets and liabilities were transferred to the Company on a carry-over basis.

Prior to the Separation, the historical results of operations included allocations of XPO costs and expenses, including XPO’s corporate function which incurred a variety of expenses including, but not limited to, information technology, human resources, accounting, sales and sales operations, procurement, executive services, legal, corporate finance and communications.

An allocation of these expenses is included to burden all business units comprising XPO’s historical results of operations, including RXO.

The charges reflected have either been specifically identified or allocated using drivers including proportionally adjusted earnings before interest, taxes, depreciation and amortization, which includes adjustments for transaction and integration costs, as well as restructuring costs and other adjustments, or headcount.

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

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

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

Depreciation and amortization expense;

Restructuring costs;

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

For the periods ended before the Separation, XPO investment represents XPO’s historical investment in RXO and includes the net effects of transactions with and allocations from XPO as well as RXO’s accumulated earnings.

Certain transactions between RXO and XPO, including XPO’s non-RXO subsidiaries, have been included in these condensed 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 Condensed Consolidated Statements of Cash Flows as a financing activity and in the Condensed 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.

taxable income was included in XPO’s consolidated U.S.

federal income tax return as well as in the tax returns filed by XPO with certain state and local taxing jurisdictions.

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.

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, results of operations and cash flows for the interim periods presented.

Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

Significant Accounting Policies

Our significant accounting policies are disclosed in Note 2 to the 2023 Form 10-K.

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

Adoption of New Accounting Standards

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 an impact on our financial statement disclosures.

There have been no material changes to the Company’s significant accounting policies as of March 31, 2024.

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.

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.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 ASU 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.

In March 2024, the SEC issued the final rules under SEC Release No.

33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors.

In April 2024, the SEC voluntarily stayed implementation of the final rules as a result of pending judicial review.

These rules, if adopted, will require registrants to disclose certain climate-related information, including Scope 1 and Scope 2 greenhouse gas emissions and other climate-related topics, in registration statements and annual reports, when material.

Disclosure requirements, absent the results of pending judicial review, will begin phasing in with the Company’s annual reporting for the year ending December 31, 2025.

We are currently evaluating the impact the rules will have on our disclosures.

Revenue Recognition

2 unchanged sentences

The majority of our revenue, based on sales office location, is generated in the U.S.

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 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 nine months ended September 30, 2023 and 2022, respectively.

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

(primarily in Canada, Mexico and Asia) for the three months ended March 31, 2024 and 2023.

Our revenue disaggregated by service offering is as follows:

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

Three Months Ended March 31,

(In millions) 2024 2023

6 unchanged sentences

Our revenue disaggregated by industry sector is as follows:

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

Three Months Ended March 31,

(In millions) 2024 2023

10 unchanged sentences

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

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.

As of March 31, 2024, the fixed consideration component of our remaining performance obligation was approximately $ 61 million, and we expect approximately 100 % of that amount to be recognized over the next 3 years.

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

1 unchanged sentence

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

Nine Months Ended September 30, 2023

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

Three Months Ended March 31, 2024

(In millions) Reserve Balance

December 31, 2023 Charges Incurred Payments Reserve Balance

September 30, 2023

March 31, 2024

Severance $ 4 $ 8 $ ( 4 ) $ 8

Facilities 2 2 ( 1 ) 3

Contract termination — 1 — 1

Total $ 6 $ 11 $ ( 5 ) $ 12

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

We expect the majority of the cash outlays related to the remaining restructuring liability at March 31, 2024 to be complete within twelve months.

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

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

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

Term Loan $ 100 $ 100 $ 100 $ 100

Revolver $ — $ — $ 5 $ 5

7.50 % Notes due 2027 (1)

355 347 355 347

Finance leases, asset financing and other 7 7 9 9

Finance leases, asset financing and short-term debt 20 20 7 7

Total debt and obligations under finance leases 375 367 367 359

Current maturities of long-term debt 3 3 4 4

Short-term debt and current maturities of long-term debt 16 16 3 3

Total long-term debt and obligations under finance leases $ 359 $ 351 $ 364 $ 356

(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

On October 18, 2022, we entered into a five-year , unsecured multi-currency revolving credit facility (the “Revolver”).

The Revolver borrowing capacity is up to $ 500 million, of which $ 50 million is available for the issuance of letters of credit.

Loans under the Revolver bear interest at a fluctuating rate plus an applicable margin based on the Company’s credit ratings.

(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 $ 8 million as of March 31, 2024 and December 31, 2023, respectively.

Revolving Credit Facilities

On October 18, 2022, we entered into a five-year , $ 500 million unsecured multi-currency revolving credit facility (the “Revolver”), with $ 50 million available for the issuance of letters of credit.

Loans under the Revolver bear interest at a fluctuating rate plus an applicable margin based on the Company’s credit ratings, with interest payable quarterly.

The Company is required to pay a commitment fee on any unused commitment, based on pricing levels set forth in the agreement.

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

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

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

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

The Term Loan bears interest at a fluctuating rate plus an applicable margin calculated based on the Company’s credit ratings, payable at least 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 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 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”).

The Revolver requires the Company to maintain a maximum consolidated leverage ratio not greater than 3.50 :1.00 and minimum interest coverage ratio of not less than 3.00 :1.00.

At March 31, 2024, the Company was in compliance with the covenants of the Revolver.

There were no letters of credit outstanding on the Revolver at March 31, 2024.

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

On April 11, 2024, the Company and lenders entered into an amendment to increase the consolidated leverage ratio financial covenant level applicable under the Revolver from the fiscal quarter ending June 30, 2024 through the fiscal quarter ending March 31, 2025 (the “Covenant Relief Period”), as follows:

(i) to 4.25 :1.00 for the fiscal

quarters ending June 30, 2024 and September 30, 2024;

(ii) to 4.00 :1.00 for the fiscal quarter ending December 31, 2024;

(iii) to 3.75 :1.00 for the fiscal quarter ending March 31, 2025;

and (iv) returns to 3.50 :1.00 beginning with the fiscal quarter ending June 30, 2025.

In addition, during the Covenant Relief Period, the Company and its subsidiaries are subject to restrictions with respect to paying dividends or other distributions on equity interests, share repurchases, and other restricted payments, as well as certain material acquisitions, in each case subject to certain exceptions.

The Company can elect to terminate the Covenant Relief Period and the restrictions thereunder if the consolidated leverage ratio financial covenant as of any fiscal quarter end is not greater than 3.50 :1.00.

We also have a non-U.S.

revolving credit facility with a maximum commitment of approximately $ 18 million.

This facility has a one-year term and we had $ 13 million outstanding as of March 31, 2024 classified as short-term debt.

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.

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 September 30, 2023.

The effective interest rate on the Notes was 8.13 % as of March 31, 2024.

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.

4 unchanged sentences

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

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

At March 31, 2024, 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 September 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 short-term debt and current maturities of long-term debt approximated their fair values as of March 31, 2024 and December 31, 2023, 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 September 30, 2023 December 31, 2022

Term Loan 2 $ 95 $ 95

(In millions) Level March 31, 2024 December 31, 2023

Revolver 3 $ — $ 5

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.

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.

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

During 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 under the 2023 Share Repurchase Program in the first quarter of 2024.

As of March 31, 2024, $ 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.

We are not obligated to repurchase any specific number of shares or use a specific dollar amount of the approved and remaining $ 123 million.

Earnings per Share

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

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

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

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

Three Months Ended March 31,

(Dollars in millions, shares in thousands, except per share data) 2024 2023

6 unchanged sentences

Diluted earnings (loss) per share $ ( 0.13 ) $ —

Antidilutive shares excluded from diluted weighted-average common shares 2,514 925

(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

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 or financial condition.

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 or financial condition.

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

We carry liability and excess umbrella insurance policies that are deemed sufficient to cover potential legal claims arising in the normal course of conducting our operations as a transportation company.

We carry liability and excess umbrella insurance policies that we deem sufficient to cover potential legal claims arising in the normal course of conducting our operations as a transportation company.

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.

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 condition 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 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 as of November 1, 2022.

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.

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, 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 are vigorously defending the Company 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.

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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.

Related Party

Prior to the Separation, the Company did not operate as a standalone business and the condensed consolidated financial statements were derived from the consolidated financial statements and accounting records of XPO.

Transactions between the Company and XPO, and other non-RXO subsidiaries of XPO, that occurred prior to the Separation have been classified as related-party transactions.

Transactions that originated with XPO prior to the Separation were cash settled or forgiven as of November 1, 2022.

For amounts that were forgiven, the amounts have been recorded as an adjustment to XPO Investment.

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 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.

The Condensed Consolidated Statements of Operations include expenses for certain centralized functions and other programs provided and/or administered by XPO that were charged directly to the Company.

In addition, for purposes of preparing these condensed consolidated financial statements, a portion of XPO’s total corporate expenses have been allocated to the Company.

See Note 2 - Basis of Presentation and Significant Accounting Policies for a discussion of the methodology used to allocate such costs for purposes of preparing these condensed consolidated financial statements.

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

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

(In millions) 2022 2022

Sales, general and administrative expense $ 11 $ 47

Depreciation and amortization expense 3 8

Transaction and integration costs 20 41

Restructuring costs 5 5

Total $ 39 $ 101

Transactions with XPO and its non-RXO Subsidiaries

Revenue and costs generated from related parties are as follows:

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

(In millions) 2022 2022

Revenue $ 26 $ 101

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