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Item 1. Financial Statements

2023-08-04 compared with 2023-05-04 · 162 added, 76 removed, 395 unchanged (38% of the section changed)

1 unchanged sentence

Condensed Consolidated Balance Sheets

March 31, December 31,

June 30, December 31,

(In millions, except per share data) 2023 2022

32 unchanged sentences

300 shares authorized;

116 and 115 shares issued and outstanding

as of March 31, 2023 and December 31, 2022, respectively

116 and 115 shares issued and

outstanding as of June 30, 2023 and December 31, 2022, respectively

Additional paid-in capital 1,268 1,238

5 unchanged sentences

Condensed Consolidated Statements of Income

Three Months Ended March 31,

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

(In millions, except per share data) 2023 2022 2023 2022

11 unchanged sentences

Other income ( 3 ) ( 13 ) ( 8 ) ( 27 )

Debt extinguishment loss 23 26 23 26

Interest expense 43 31 85 68

20 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income

Three Months Ended March 31,

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

(In millions) 2023 2022 2023 2022

1 unchanged sentence

Other comprehensive income (loss), net of tax

Foreign currency translation gain (loss), net of tax effect of $ 8 and $( 2 )

Foreign currency translation gain (loss), net of tax effect of $ 2 , $( 9 ),

$ 10 and $( 11 )

$ 14 $ ( 46 ) $ 27 $ ( 72 )

5 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31,

Six Months Ended June 30,

(In millions) 2023 2022

3 unchanged sentences

Income from continuing operations 48 128

Adjustments to reconcile income from continuing operations to net cash from

operating activities

Adjustments to reconcile income from continuing operations to net cash from operating

Depreciation, amortization and net lease activity 208 190

12 unchanged sentences

Proceeds from sale of property and equipment 13 7

Proceeds from settlement of cross currency swaps — 19

Net cash used in investing activities from continuing operations ( 342 ) ( 216 )

Cash flows from financing activities of continuing operations

Proceeds from issuance of debt 1,977 —

Repurchase of debt ( 2,003 ) ( 651 )

Proceeds from borrowings on ABL facility — 275

Repayment of borrowings on ABL facility — ( 275 )

Repayment of debt and finance leases ( 35 ) ( 32 )

Payment for debt issuance costs ( 15 ) —

Change in bank overdrafts 51 25

10 unchanged sentences

Cash, cash equivalents and restricted cash, end of period 297 446

Cash, cash equivalents and restricted cash of discontinued operations, end of

Cash, cash equivalents and restricted cash of discontinued operations, end of period — 212

Cash, cash equivalents and restricted cash of continued operations, end of period $ 297 $ 234

6 unchanged sentences

Condensed Consolidated Statements of Changes in Equity

(Shares in thousands, dollars in millions) Shares Amount Additional Paid-In Capital Retained Earnings Accumulated Other

Comprehensive Loss Total Equity

Balance as of March 31, 2023 115,750 $ — $ 1,252 $ 10 $ ( 207 ) $ 1,055

Net income — — — 33 — 33

Other comprehensive income — — — — 15 15

Exercise and vesting of stock compensation awards

189 — — — — —

Tax withholdings related to vesting of stock compensation awards

— — ( 4 ) — — ( 4 )

Stock compensation expense

— — 19 — — 19

Balance as of June 30, 2023 115,939 $ — $ 1,268 $ 43 $ ( 192 ) $ 1,119

(Shares in thousands, dollars in millions) Shares Amount Additional Paid-In Capital Retained Earnings (Accumulated Deficit) Accumulated Other

9 unchanged sentences

— — 41 — — 41

Balance as of June 30, 2023 115,939 $ — $ 1,268 $ 43 $ ( 192 ) $ 1,119

Condensed Consolidated Statements of Changes in Equity (continued)

(Shares in thousands, dollars in millions) Shares Amount Additional Paid-In Capital Retained Earnings Accumulated Other

Comprehensive Loss Total Equity

Balance as of March 31, 2022 114,982 $ — $ 1,176 $ 531 $ ( 109 ) $ 1,598

Net income — — — 141 — 141

Other comprehensive loss — — — — ( 43 ) ( 43 )

Exercise and vesting of stock compensation awards

Tax withholdings related to vesting of stock compensation awards

— — ( 1 ) — — ( 1 )

Stock compensation expense

— — 10 — — 10

Balance as of June 30, 2022 115,033 $ — $ 1,187 $ 672 $ ( 152 ) $ 1,707

(Shares in thousands, dollars in millions) Shares Amount Additional Paid-In Capital Retained Earnings Accumulated Other

8 unchanged sentences

Stock compensation expense

— — 18 — — 18

Other — — 3 — — 3

Balance as of March 31, 2022 114,982 $ — $ 1,176 $ 531 $ ( 109 ) $ 1,598

Balance as of June 30, 2022 115,033 $ — $ 1,187 $ 672 $ ( 152 ) $ 1,707

See accompanying notes to condensed consolidated financial statements.

1 unchanged sentence

Organization, Description of Business and Basis of Presentation

XPO, Inc., together with its subsidiaries (“XPO” or “we”), is a leading provider of freight transportation services.

XPO, Inc., together with its subsidiaries (“XPO,” “we” or the “Company”), is a leading provider of freight transportation services.

We use our proprietary technology to move goods efficiently through our customers’ supply chains in North America and Europe.

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The Condensed Consolidated Financial Statements are not audited but reflect all adjustments that are of a normal recurring nature and are necessary for a fair presentation of the financial condition, operating results and cash flows for the interim periods presented.

Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

Operating results for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

In the first quarter of 2023, we made certain changes to our financial reporting to increase transparency and improve comparability.

3 unchanged sentences

Restricted Cash

As of March 31, 2023 and December 31, 2022, our restricted cash included in Other long-term assets on our Condensed Consolidated Balance Sheets was $ 6 million and $ 10 million, respectively.

As of June 30, 2023 and December 31, 2022, our restricted cash included in Other long-term assets on our Condensed Consolidated Balance Sheets was $ 7 million and $ 10 million, respectively.

Trade Receivables Securitization and Factoring Programs

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We use trade receivables securitization and factoring programs to help manage our cash flows and offset the impact of extended payment terms for some of our customers.

The maximum amount of net cash proceeds available at any one time under our securitization program, inclusive of any unsecured borrowings, is € 200 million (approximately $ 217 million as of March 31, 2023).

As of March 31, 2023, the maximum amount available under the program was utilized.

The weighted average interest rate was 3.41 % as of March 31, 2023.

In May 2023, we entered into an agreement to extend the securitization program, which was scheduled to expire in July 2024, through July 2026.

The terms and conditions of the extended securitization program are materially consistent with the prior program.

The maximum amount of net cash proceeds available at any one time under our securitization program, inclusive of any unsecured borrowings, is € 200 million (approximately $ 218 million as of June 30, 2023).

As of June 30, 2023, € 5 million (approximately $ 5 million) was available under the program.

The weighted average interest rate was 4.41 % as of June 30, 2023.

The program expires in July 2026.

Information related to the trade receivables sold was as follows:

Three Months Ended March 31,

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

(In millions) 2023 2022 2023 2022

1 unchanged sentence

Receivables sold in period

$ 470 $ 458 $ 910 $ 905

Cash consideration

470 458 910 905

Factoring programs

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We base our 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 March 31, 2023 and December 31, 2022 due to their short-term nature and/or being receivable or payable on demand.

The carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and current maturities of long-term debt approximated their fair values as of June 30, 2023 and December 31, 2022 due to their short-term nature and/or being receivable or payable on demand.

The Level 1 cash equivalents include money market funds valued using quoted prices in active markets and a cash deposit for the securitization program.

3 unchanged sentences

(In millions) Carrying Value Fair Value Level 1

March 31, 2023 $ 238 $ 238 $ 238

June 30, 2023 $ 231 $ 231 $ 231

December 31, 2022 402 402 402

Adoption of New Accounting Standard

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 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.

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

The adoption, which is limited to financial statement disclosures, did not have a material impact on our financial statements.

Adoption of New Accounting Standards

In March 2020, the FASB issued ASU 2020-04, “Reference rate reform (Topic 848):

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The amendments apply only to contracts and hedging relationships that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform.

The amendments are elective and

are effective upon issuance.

The amendments are elective and are effective upon issuance.

In December 2022, the FASB issued ASU 2022-06, “Reference rate reform (Topic 848):

Deferral of the sunset date of Topic 848” which defers the expiration date for Topic 848 from December 31, 2022 until December 31, 2024.

At December 31, 2022, our revolving loan credit agreement (the “ABL Facility”) and the senior secured term loan credit agreement, as amended (the “Term Loan Facility”), provide for an interest rate based on LIBOR.

In February 2023, we amended the terms of our ABL Facility, including transitioning the interest rate from LIBOR to other base rates, and we expect to similarly modify the interest rate basis in the Term Loan Facility in 2023.

At December 31, 2022, our revolving loan credit agreement (the “ABL Facility”) and senior secured term loan credit agreement, as amended (the “Existing Term Loan Facility”), provided for an interest rate based on LIBOR.

In 2023, we amended the terms of our ABL Facility and Existing Term Loan Facility, including transitioning the interest rate from LIBOR to other base rates.

See Note 7—Debt for further information.

We do not expect the modifications of these facilities to have a material impact on our consolidated financial statements.

1 unchanged sentence

As discussed above, the results of RXO and intermodal are presented as discontinued operations.

In addition, discontinued operations include GXO Logistics, Inc.

(“GXO”), our former logistics segment that we spun off in August 2021.

The following table summarizes the results of operations from discontinued operations:

Three Months Ended March 31,

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

(In millions) 2022 2022

6 unchanged sentences

Depreciation and amortization expense 19 41

Gain on sale of business ( 450 )

(Gain) loss on sale of business 16 ( 434 )

Transaction and other operating costs 21 23

1 unchanged sentence

Income tax provision 15 120

Net income from discontinued operations attributable to discontinued operations $ 456

For the three months ended March 31, 2023, we incurred approximately $ 24 million of costs related to the RXO spin-off, of which $ 4 million are reflected within income (loss) from discontinued operations in our Condensed Consolidated Statements of Income.

For the three months ended March 31, 2022, we incurred approximately $ 4 million of costs related to the GXO spin-off all of which are reflected within income from continuing operations in our Condensed Consolidated Statements of income.

In accordance with a separation and distribution agreement, GXO has agreed to indemnify XPO for payments XPO makes with respect to certain self-insurance matters that were incurred by the logistics segment prior to the spin-off and remain obligations of XPO.

The receivable and reserve for these matters was approximately $ 16 million and $ 15 million, respectively, as of March 31, 2023 and approximately $ 17 million and $ 16 million, respectively, as of December 31, 2022.

Net income from discontinued operations attributable to discontinued

For the three and six months ended June 30, 2023, we incurred approximately $ 16 million and $ 40 million, respectively, of costs related to the RXO spin-off, of which $ 0 million and $ 4 million, respectively, are reflected within income (loss) from discontinued operations in our Condensed Consolidated Statements of Income.

For the three and six months ended June 30, 2022, we incurred approximately $ 18 million and $ 21 million, respectively, of costs related to the RXO spin-off, of which $ 17 million and $ 20 million, respectively, are reflected within income (loss) from discontinued operations in our Condensed Consolidated Statements of Income.

Segment Reporting

We are organized into two reportable segments:

North American LTL, the largest component of our business, and European Transportation.

North American Less-Than-Truckload (“LTL”), the largest component of our business, and European Transportation.

In our asset-based North American LTL segment, we provide shippers with geographic density and day-definite domestic and cross-border services to the U.S., as well as Mexico, Canada and the Caribbean.

6 unchanged sentences

We do not provide asset information by segment to the CODM.

Our CODM evaluates segment profit (loss) based on adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”), which we define as income from continuing operations before interest expense, income tax, depreciation and amortization expense, transaction and integration costs, restructuring costs and other adjustments.

Our CODM evaluates segment profit (loss) based on adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”), which we define as income from continuing operations before debt extinguishment loss, interest expense, income tax, depreciation and amortization expense, transaction and integration costs, restructuring costs and other adjustments.

Segment Adjusted EBITDA has historically reflected an allocation of corporate costs.

2 unchanged sentences

Selected financial data for our segments is as follows:

Three Months Ended March 31,

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

(in millions) 2023 2022 2023 2022

7 unchanged sentences

Total Adjusted EBITDA 244 289 454 473

Debt extinguishment loss 23 26 23 26

Interest expense 43 31 85 68

9 unchanged sentences

Total $ 107 $ 96 $ 208 $ 190

(1) Transaction and integration costs for the first quarter of 2023 are primarily comprised of stock-based compensation for certain employees related to strategic initiatives.

Transaction and integration costs for the first quarter of 2022 are primarily comprised of third-party professional fees related to strategic initiatives as well as retention awards paid to certain employees.

Transaction and integration costs for the three months ended March 31, 2023 and 2022 include $ 1 million and $ 2 million, respectively, related to our European Transportation segment and $ 21 million and $ 5 million, respectively, related to Corporate.

(1) Transaction and integration costs for the periods ended June 30, 2023 are primarily comprised of stock-based compensation and retention awards for certain employees related to strategic initiatives.

Transaction and integration costs for the periods ended June 30, 2022 are primarily comprised of third-party professional fees related to strategic initiatives as well as retention awards paid to certain employees.

Transaction and integration costs for the three months ended June 30, 2023 and 2022 include $ 0 million and $ 2 million, respectively, related to our North American LTL segment, $ 0 million and $ 1 million, respectively, related to our European Transportation segment, and $ 17 million and $ 4 million, respectively, related to Corporate.

Transaction and integration costs for the six months ended June 30, 2023 and 2022 include $ 0 million and $ 2 million, respectively, related to our North American LTL segment, $ 1 million and $ 3 million, respectively, related to our European Transportation segment, and $ 38 million and $ 9 million, respectively, related to Corporate.

(2) See Note 5— Restructuring Charges for further information on our restructuring actions.

2 unchanged sentences

Our revenue disaggregated by geographic area based on sales office location was as follows:

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

(In millions) North American LTL European Transportation Total

5 unchanged sentences

Total $ 1,136 $ 781 $ 1,917

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

(In millions) North American LTL European Transportation Total

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Total $ 1,240 $ 807 $ 2,047

Six Months Ended June 30, 2023

(In millions) North American LTL European Transportation Total

United States $ 2,209 $ — $ 2,209

North America (excluding United States) 47 — 47

France — 671 671

United Kingdom — 450 450

Europe (excluding France and United Kingdom) — 447 447

Total $ 2,256 $ 1,568 $ 3,824

Six Months Ended June 30, 2022

(In millions) North American LTL European Transportation Total

United States $ 2,297 $ — $ 2,297

North America (excluding United States) 50 — 50

France — 704 704

United Kingdom — 449 449

Europe (excluding France and United Kingdom) — 441 441

Total $ 2,347 $ 1,594 $ 3,941

Restructuring Charges

2 unchanged sentences

Our restructuring-related activity was as follows:

Three Months Ended March 31, 2023

Six Months Ended June 30, 2023

(In millions) Reserve Balance

December 31, 2022 Charges Incurred Payments Foreign Exchange and Other Reserve Balance

March 31, 2023

June 30, 2023

North American LTL $ 2 $ 4 $ ( 2 ) $ — $ 4

3 unchanged sentences

In addition to the severance charges noted in the table above, we recorded a non-cash lease impairment charge of $ 6 million in our North American LTL segment in the first quarter of 2023.

We expect that the majority of the cash outlays related to the severance charges incurred in the first three months of 2023 will be completed within 12 months.

We expect that the majority of the cash outlays related to the severance charges incurred in the first six months of 2023 will be completed within 12 months.

Derivative Instruments

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The fair value of our derivative instruments and the related notional amounts were as follows:

March 31, 2023

June 30, 2023

Derivative Assets Derivative Liabilities

2 unchanged sentences

Cross-currency swap agreements $ 663 Other current assets $ 1 Other current liabilities $ ( 24 )

Cross-currency swap agreements 57 Other long-term assets 2 Other long-term liabilities —

Interest rate swaps 700 Other current assets 2 Other current liabilities —

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The effect of derivative and nonderivative instruments designated as hedges on our Condensed Consolidated Statements of Income was as follows:

Amount of Gain (Loss) Recognized in Other Comprehensive Loss on Derivatives Amount of Gain Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing)

Three Months Ended March 31,

Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss) on Derivatives Amount of Gain Reclassified from AOCI into Net Income Amount of Gain Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing)

Three Months Ended June 30,

(In millions) 2023 2022 2023 2022 2023 2022

4 unchanged sentences

Total $ ( 2 ) $ 32 $ 1 $ — $ 2 $ 2

Six Months Ended June 30,

(In millions) 2023 2022 2023 2022 2023 2022

Derivatives designated as cash flow hedges

Interest rate swaps 2 5 1 — — —

Derivatives designated as net investment hedges

Cross-currency swap agreements ( 13 ) 37 — — 4 4

Total $ ( 11 ) $ 42 $ 1 $ — $ 4 $ 4

Cross-Currency Swap Agreements

We enter into cross-currency swap agreements to manage the foreign currency exchange risk related to our international operations by effectively converting our fixed-rate USD-denominated debt, including the associated interest payments, to fixed-rate, euro (“EUR”)-denominated debt.

The risk management objective of these transactions is to manage foreign currency risk relating to net investments in subsidiaries denominated in foreign currencies and reduce the variability in the functional currency equivalent cash flows of this debt.

During the term of the swap contracts, we will receive interest, either on a quarterly or semi-annual basis, from the counterparties based on USD fixed interest rates, and we will pay interest, also on a quarterly or semi-annual basis, to the counterparties based on EUR fixed interest rates.

During the term of the swap contracts, we will receive interest on a quarterly basis from the counterparties based on USD fixed interest rates, and we will pay interest, also on a quarterly basis, to the counterparties based on EUR fixed interest rates.

At maturity, we will repay the original principal amount in EUR and receive the principal amount in USD.

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Cash flows related to the periodic exchange of interest payments for these net investment hedges are included in Cash flows from operating activities of continuing operations on our Condensed Consolidated Statements of Cash Flows.

In the second quarter of 2022, we received approximately $ 19 million related to the settlement of certain cross currency swaps that matured during the quarter.

The proceeds were included in Cash flows from investing activities of continuing operations on our Condensed Consolidated Statements of Cash Flows.

Interest Rate Hedging

2 unchanged sentences

We designated the interest rate swaps as qualifying hedging instruments and account for these derivatives as cash flow hedges.

The outstanding interest rate swaps mature on various dates through 2023.

The outstanding interest rate swap matures in November 2023.

We record gains and losses resulting from fair value adjustments to the designated portion of interest rate swaps in AOCI and reclassify them to Interest expense on the dates that interest payments accrue.

Cash flows related to the interest rate swaps are included in Cash flows from operating activities of continuing operations on our Condensed Consolidated Statements of Cash Flows.

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

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

2 unchanged sentences

112 112 112 111

6.25 % senior secured notes due 2028

7.125 % senior notes due 2031

6.70 % senior debentures due 2034

6 unchanged sentences

(In millions) Fair Value Level 1 Level 2

March 31, 2023 $ 2,616 $ 395 $ 2,221

June 30, 2023 $ 2,616 $ 1,691 $ 925

December 31, 2022 2,601 392 2,209

1 unchanged sentence

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

As of March 31, 2023, our borrowing base and availability under our revolving loan credit agreement (the “ABL Facility”) was $ 502 million.

Outstanding letters of credit were less than $ 1 million as of March 31, 2023.

As of March 31, 2023, we were in compliance with the ABL Facility’s financial covenants.

As of June 30, 2023, our borrowing base was $ 513 million and our availability under our revolving loan credit agreement (the “ABL Facility”) was $ 512 million after considering outstanding letters of credit of less than $ 1 million.

As of June 30, 2023, we were in compliance with the ABL Facility’s financial covenants.

In February 2023, we amended our ABL Facility to, among other things:

(i) extend the maturity date to April 30, 2026 (subject, in certain circumstances, to a springing maturity if more than $ 250 million of our existing term loan debt or certain refinancings thereof remain outstanding 91 days prior to their respective maturity dates);

(ii) replace LIBOR-based benchmark rates applicable to loans outstanding with Secured Overnight Financing Rate-based rates;

(iii) reduce the sublimit for issuance of letters of credit to $ 200 million;

(iv) reduce the sublimit for borrowings in Canadian Dollars to $ 50 million;

(v) exclude real property from the collateral securing the obligations and (vi) make certain other changes to the covenants and other provisions therein.

The aggregate commitment of all lenders under the amended ABL Facility remains $ 600 million.

Letters of Credit Facility

As of March 31, 2023, we had issued $ 154 million in aggregate face amount of letters of credit under our $ 200 million uncommitted secured evergreen letter of credit facility.

As of June 30, 2023, we had issued $ 141 million in aggregate face amount of letters of credit under our $ 200 million uncommitted secured evergreen letter of credit facility.

Term Loan Facility

The interest rate on our term loan facility was 6.45 % as of March 31, 2023.

In 2015, we entered into a Term Loan Credit Agreement that provided for a single borrowing of $ 1.6 billion, which was subsequently amended to increase the principal balance to $ 2.0 billion and to extend the maturity date to February 2025 (the “Existing Term Loan Facility”).

In May 2023, we amended the Term Loan Credit Agreement to obtain $ 700 million of new term loans (the “New Term Loan Facility”) having substantially similar terms as the Existing Term Loan Facility, except with respect to maturity date, issue price, interest rate, prepayment premiums in connection with certain voluntary prepayments and certain other provisions.

The New Term Loan Facility was issued at 99.5 % of the face amount and will mature on May 24, 2028.

The New Term Loan Facility will bear interest at a rate per annum equal to, at our option, either (a) a Term Secured Overnight Financing (“SOFR”) rate (subject to a 0.00 % floor) or (b) a base rate (subject to a 0.00 % floor), in each case, plus an applicable margin of 2.00 % for Term SOFR loans or 1.00 % for base rate loans.

The interest rate was 7.09 % as of June 30, 2023.

In the second quarter of 2023, we used net proceeds from the New Term Loan Facility and new Senior Notes, as described below, together with cash on hand, to repay $ 2.0 billion of outstanding principal under the Existing Term Loan Facility and to pay related fees, expenses and accrued interest.

We recorded a debt extinguishment loss of $ 23 million in the second quarter of 2023.

Senior Notes Due 2028 and 2031

In May 2023, we completed private placements of $ 830 million aggregate principal amount of senior secured notes due 2028 (the “Senior Secured Notes due 2028”) and $ 450 million aggregate principal amount of senior notes due 2031 (the “Senior Notes due 2031” and together with the Senior Secured Notes due 2028, the “Senior Notes”).

The Senior Secured Notes due 2028 mature on June 1, 2028 and bear interest at a rate of 6.25 % per annum.

The Senior Notes due 2031 mature on June 1, 2031 and bear interest at a rate of 7.125 % per annum.

Interest on the Senior Notes is payable semi-annually in cash in arrears, commencing December 1, 2023.

The Senior Notes were issued at par and were used to repay our Existing Term Loan Facility as described above.

The Senior Notes are guaranteed by each of our direct and indirect wholly-owned restricted subsidiaries (other than certain excluded subsidiaries) that are obligors under, or guarantee obligations under, our existing secured ABL Facility or the Term Loan Credit Agreement (or certain replacements thereof) or guarantee certain of our other indebtedness.

The Senior Secured Notes due 2028 and the guarantees thereof are secured by substantially all of our assets and our guarantors equally and ratably with the indebtedness under the Term Loan Credit Agreement (subject to permitted liens and certain other exceptions).

The Senior Notes due 2031 and the guarantees thereof are unsecured, unsubordinated indebtedness for us and our guarantors.

The Senior Notes contain covenants and events of default customary for notes of this nature.

If the Senior Secured Notes due 2028 and the Company are each assigned investment grade ratings from at least two of the major rating agencies and no default has occurred, then certain covenant requirements will permanently cease to be in effect, and the collateral, security interests, and guarantees securing the Senior Secured Notes due 2028 will automatically be released.

Senior Notes Due 2025

In the second quarter of 2022, we redeemed $ 630 million of the then $ 1.15 billion outstanding principal amount of our 6.25 % senior notes due 2025 (“Senior Notes due 2025”).

The redemption price for the notes was 100 % of the principal amount plus a premium, as defined in the indenture, of approximately $ 21 million and accrued and unpaid interest.

We paid for the redemption using available liquidity.

We recorded a debt extinguishment loss of $ 26 million in the second quarter of 2022 due to this redemption.

In the fourth quarter of 2022, we repurchased an additional $ 408 million of the outstanding principal amount of our Senior Notes due 2025 in a cash tender offer.

Earnings (Loss) per Share

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

Three Months Ended March 31,

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

(In millions, except per share data) 2023 2022 2023 2022

Net income from continuing operations attributable to common shares $ 17 $ 32

Net income (loss) from discontinued operations, net of amounts attributable

to noncontrolling interest

Net income from continuing operations attributable to

common shares

$ 31 $ 96 $ 48 $ 128

Net income (loss) from discontinued operations, net of

amounts attributable to noncontrolling interest

2 45 ( 1 ) 501

Net income attributable to common shares, basic $ 33 $ 141 $ 47 $ 629

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Basic earnings from continuing operations per share $ 0.27 $ 0.83 $ 0.42 $ 1.12

Basic earnings (loss) from discontinued operations per share ( 0.02 ) 3.97

Basic earnings (loss) from discontinued operations per

0.01 0.40 ( 0.01 ) 4.36

Basic earnings per share $ 0.28 $ 1.23 $ 0.41 $ 5.48

Diluted earnings from continuing operations per share $ 0.27 $ 0.83 $ 0.41 $ 1.11

Diluted earnings (loss) from discontinued operations per share ( 0.02 ) 3.94

Diluted earnings (loss) from discontinued operations per

0.01 0.39 ( 0.01 ) 4.33

Diluted earnings per share $ 0.28 $ 1.22 $ 0.40 $ 5.44

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In March 2021, the Oregon Supreme Court reversed the jury verdict, holding that it was an error to allow the jury to decide how the parties intended the fronting policies to operate, and also holding that the trial court improperly instructed the jury concerning one of the pollution exclusions at issue.

In July of 2021, the matter was remanded to the trial court for further proceedings consistent with the Oregon Supreme Court’s decision.

There is no date yet set for the next stages of the proceeding.

The parties have filed cross-motions for summary judgment concerning the interpretation of certain of the fronting policies, which are yet to be decided.

Following summary judgment, we anticipate a jury trial on the pollution exclusion, then a bench trial on allocation of defense costs among the subject insurance policies.

In July 2021, the matter was remanded to the trial court for further proceedings consistent with the Oregon Supreme Court’s decision.

The trial court recently decided the parties’ cross-motions for summary judgment, leaving open the pollution exclusion and allocation issues.

The trial on the pollution exclusion issue is scheduled to take place in the spring of 2024, and the trial on allocation of defense costs among the applicable insurance policies is set for the fall of 2024.

We have accrued an immaterial amount for the potential exposure associated with Centron in the bench trial regarding allocation.

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In August 2022, the Company received a letter from the San Bernardino County District Attorney’s Office, written in cooperation with certain other California District Attorneys and the Los Angeles City Attorney, notifying the Company of an investigation into alleged violations with respect to underground storage tanks, hazardous materials, and hazardous waste in California, and offering a meeting.

On October 20, 2022 and April 6, 2023, the Company met with the County Attorneys and the Los Angeles City Attorney.

The Company has met with the County attorneys and the Los Angeles City Attorney on multiple occasions.

We are assessing the allegations and the underlying facts, and continue to engage with the County and Los Angeles City Attorneys to address the alleged violations.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements