What changed in this filing

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Item 1A. Risk Factors

2025-02-27 compared with 2024-02-13 · 39 added, 33 removed, 309 unchanged (19% of the section changed)

95 unchanged sentences

If our customers experience plant slowdowns or closures because they are unable to negotiate labor contracts, our revenue and profitability could be negatively impacted.

Labor unions sometimes attempt to organize our employees.

Successful unionization by our employees or organizing efforts could lead to business interruptions, work stoppages and the reduction of service levels due to work rules that could have an adverse effect on our customer relationships and our revenues, earnings, financial position and outlook.

We are subject to one collective bargaining agreement that covers fewer than 20 of our employees.

We have not experienced any work stoppages due to strikes by unionized workers, but we cannot make assurances that there will not be any work stoppages due to strikes or other job actions in the future.

Labor unions may continue to attempt to organize our employees.

Further successful unionization by our employees or organizing efforts could lead to business interruptions, work stoppages and the reduction of service levels due to work rules that could have an adverse effect on our customer relationships and our revenues, earnings, financial position and outlook.

Risks Related to Our Use of Technology

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The failure of our information technology systems to perform as we anticipate could adversely affect our business through transaction errors, billing and invoicing errors, internal recordkeeping and reporting errors, processing inefficiencies and loss of sales, receivables collection or customers.

Any such failure could result in harm to our reputation and have an ongoing adverse impact on our business, results of operations and financial condition, including after the underlying failures have been remedied.

Any such failure could result in harm to our reputation and have an ongoing adverse impact

on our business, results of operations and financial condition, including after the underlying failures have been remedied.

Further, the delay or failure to implement information system upgrades and new systems effectively could disrupt our business, distract management’s focus and attention from our business operations, and increase our implementation and operating costs, any of which could negatively impact our operations and operating results.

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We incurred debt obligations that could adversely affect our business and profitability and our ability to meet other obligations.

As of December 31, 2023, we had $360 million of outstanding debt (excluding finance leases), constituting $355 million of our unsecured notes and $5 million outstanding under our unsecured, multi-currency revolving credit facility that matures in 2027 (the “Revolver”), in addition to $595 million of undrawn commitments under the Revolver.

As of December 31, 2024, we had $374 million of outstanding debt and finance leases, consisting primarily of $355 million of our unsecured notes, in addition to $600 million of undrawn commitments under the unsecured, multi-currency revolving credit facility that matures in 2029 (the “Revolver”).

We may also incur additional indebtedness in the future.

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We typically do not assume cargo liability to our customers above minimum industry standards in our international freight forwarding, ocean transportation, or air freight businesses on international or domestic air shipments.

Although we are not legally liable for loss or damage to our customers’ cargo, from time to time, claims may be asserted against us for cargo losses.

Although we are not legally liable for loss or damage to our customers’ cargo while operating as a property freight broker, from time to time, claims may be asserted against us for cargo losses.

From time to time, we are involved in lawsuits and are subject to various claims that could result in significant expenditures and impact our operations.

50 unchanged sentences

If we determine that our goodwill has become impaired, we may incur impairment charges, which would negatively impact our operating results.

As of December 31, 2023, we had $630 million of goodwill on our Consolidated Balance Sheet.

As of December 31, 2024, we had $1.1 billion of goodwill on our Consolidated Balance Sheet.

Goodwill represents the excess of cost over the fair value of net assets acquired in business combinations.

12 unchanged sentences

Any charges that we are required to record or the failure to achieve the intended financial results associated with divestitures of businesses or assets could have a material adverse effect on our business, financial condition or results of operations.

Risks Related to the Acquisition of Coyote

We may be unable to integrate Coyote successfully and realize the anticipated benefits of the Coyote acquisition.

On September 16, 2024, we completed the acquisition of Coyote for $1.038 billion in cash, subject to certain additional customary adjustments.

The successful integration of Coyote and operations into those of our own and our ability to realize the expected synergies and benefits of the transaction are subject to a number of risks and uncertainties, many of which are outside of our control.

We will also be required to devote significant management attention and resources to integrating business practices, cultures and operations of each business.

The risks and uncertainties relating to integrating the two businesses include, among other things:

• the challenge of integrating complex organizations, systems, operating procedures, compliance programs, technology, networks and other assets of Coyote;

• the difficulties harmonizing differences in the business cultures of our company and Coyote;

• the difficulties of integrating Coyote's European business and operating it in a complex commercial and regulatory environment;

• the inability to successfully integrate our respective businesses in a manner that permits us to achieve the cost savings, synergies and other anticipated benefits from the Coyote acquisition;

• the inability to minimize the diversion of management attention from ongoing business concerns during the process of integrating Coyote into our businesses;

• the inability to resolve potential conflicts that may arise relating to customer, supplier and other important relationships of our business and Coyote;

• difficulties in retaining key management and other key employees;

• the challenge of managing the expanded operations of a significantly larger and more complex company and coordinating geographically separate organizations.

We incurred substantial expenses to consummate the Coyote acquisition but may not realize the anticipated cost synergies and other benefits.

In addition, even if we are able to integrate Coyote successfully, the anticipated benefits of the Coyote acquisition may not be realized fully, or at all, or may take longer to realize than expected.

Given the size and significance of the Coyote acquisition, we may encounter difficulties in the integration of the operations of Coyote and may fail to realize the full benefits and synergies of the Coyote acquisition, which could adversely impact our business, results of operation and financial condition.

Coyote may have liabilities that are not known to us.

Coyote may have liabilities that we failed, or were unable, to discover in the course of performing our due diligence investigations.

We cannot assure you that the indemnification available to us under the purchase agreement in respect of the Coyote acquisition in connection with such agreement will be sufficient in amount, scope or duration to fully offset the possible liabilities associated with the business of Coyote or property that we assumed upon consummation of the Coyote acquisition.

We may learn additional information about Coyote that materially adversely affects us, such as unknown or contingent liabilities and liabilities related to compliance with applicable laws.

Any such liabilities, individually or in the aggregate, could have a material adverse effect on our business, financial condition and results of operations.

Acquisition accounting adjustments could adversely affect our financial results.

We account for the Coyote acquisition using the acquisition method of accounting.

We allocate the total estimated purchase price to net tangible assets and amortizable intangible assets, and based on their fair values as of the acquisition date record the excess, if any, of the purchase price over those fair values as goodwill.

Differences between preliminary estimates and the final acquisition accounting may occur, and these differences could have a material impact on the consolidated financial statements and the combined company’s future results of operations and financial position.

Risks Related to the Separation

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Any such indemnity obligations could be material.

We may not be able to engage in desirable capital-raising or strategic transactions following the Separation.

Under current U.S.

federal income tax law, a spin-off that otherwise qualifies for tax-free treatment can be rendered taxable to the parent corporation and its stockholders as a result of certain post-spin-off transactions, including certain acquisitions of shares or assets of the spun-off corporation.

For example, a spin-off may result in taxable gain to the parent corporation under Section 355(e) of the Code if it were later deemed to be part of a plan (or series of related transactions) pursuant to which one or more persons acquire, directly or indirectly, shares representing a 50 percent or greater interest (by vote or value) in the spun-off corporation.

To preserve the U.S.

federal income tax treatment of the Separation, and in addition to our indemnity obligation described above, the TMA restricts us, for the two-year period following the Separation, except in specific circumstances, from, among other things:

(i) ceasing to actively conduct certain of our businesses;

(ii) entering into certain transactions or series of transactions pursuant to which all or a portion of the shares of RXO stock would be acquired, whether by merger or otherwise;

(iii) liquidating or merging or consolidating with any other person;

(iv) issuing equity securities beyond certain thresholds;

(v) repurchasing shares of RXO stock other than in certain open-market transactions;

or (vi) taking or failing to take any other action that would jeopardize the expected U.S.

federal income tax treatment of the Separation and certain related transactions.

Further, the TMA imposes similar restrictions on us and our subsidiaries during the two-year period following the Separation that are intended to prevent certain transactions undertaken as part of the internal reorganization from failing to qualify as transactions that are generally tax-free for U.S.

federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code or for applicable non-U.S.

income tax purposes.

These restrictions may limit our ability to pursue certain equity issuances, strategic transactions, repurchases or other transactions that we may otherwise believe to be in the best interests of our stockholders or that might increase the value of our business.

Also, we may be responsible for liabilities arising from the failure of the

Separation, together with certain related transactions, to qualify for tax-free treatment and our indemnity obligations for such liabilities under the TMA, may discourage, delay or prevent certain third parties from acquiring RXO.

Certain of our directors and employees may have actual or potential conflicts of interest because of their positions with or financial interests in XPO.

5 unchanged sentences

Risks Related to Our Common Stock

Sales of shares of our common stock in connection with the Registration Rights Agreement, or the prospect of any such sales, could affect the market price of our common stock and could impair our ability to raise capital through future sales of equity securities.

We have entered into a registration rights agreement (the “Registration Rights Agreement”) with Jacobs Private Equity, LLC (“JPE”), an affiliate of Brad Jacobs, our chairman.

As of December 31, 2023, JPE beneficially owned 1.3 million shares of our common stock, which represents approximately 1.1% of our outstanding shares of common stock.

Any sales in connection with the Registration Rights Agreement, or the prospect of any such sales, could adversely impact the market price of our common stock.

In addition, in connection with a registration request under the Registration Rights Agreement for an underwritten offering, we may be required to agree to be restricted from selling or disposing any of our common stock or securities convertible into or exchangeable or exercisable for common stock for a period of 90 days (subject to certain exceptions and our ability to defer a registration request or suspend use of a registration statement under certain circumstances).

As a result, we may be restricted in our ability to raise capital through future sales of equity securities.

Sales of shares of our common stock in connection with registration rights granted to certain stockholders, or the prospect of any such sales, could affect the market price of our common stock and could impair our ability to raise capital through future sales of equity securities.

We have entered into a registration rights agreement (the “Registration Rights Agreement”) with Jacobs Private Equity, LLC (“JPE”), an affiliate of Brad Jacobs, our chairman, as well as purchase agreements with certain significant stockholders that have granted such stockholders certain registration rights.

As of December 31, 2024, JPE and the significant stockholders beneficially owned 21.6 million shares of our common stock with registration rights, which represents approximately 13.3% of our outstanding shares of common stock.

Any sales in connection with the Registration Rights Agreement and such purchase agreements, or the prospect of any such sales, could adversely impact the market price of our common stock.

Any stockholder’s percentage of ownership in RXO may be diluted in the future at any given time.

17 unchanged sentences

These provisions may also prevent or discourage attempts to remove and replace incumbent directors.

In addition, an acquisition or further issuance of our common stock may trigger the application of Section 355(e) of the Code, causing the Separation to be taxable to XPO.

Under the TMA, we are required to indemnify XPO for the resulting tax, and this indemnity obligation might discourage, delay or prevent a change of control that our stockholders may consider favorable.

RXO’s amended and restated certificate of incorporation contains an exclusive forum provision that may discourage lawsuits against RXO and our directors and officers.

9 unchanged sentences

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 1A. Risk Factors