What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-08 compared with 2023-02-13 · 275 added, 383 removed, 1111 unchanged (37% of the section changed)

33 unchanged sentences

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;

(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.

1 unchanged sentence

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 Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate 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 critical audit matters 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Evaluation of the tax-free determination of the spin-off of the Company’s tech-enabled brokered transportation platform as a publicly traded company, RXO, Inc.

As discussed in Note 1 to the consolidated financial statements, on November 1, 2022, the Company completed the previously announced spin-off of RXO into an independent public company.

The spin-off was accomplished by the distribution of 100% of the outstanding common stock of RXO, Inc.

to the Company’s stockholders and was intended to qualify as tax-free to the Company and its stockholders for U.S.

federal income tax purposes.

We identified the evaluation of the spin-off of RXO as a tax-free transaction for U.S.

federal income tax purposes to be a critical audit matter.

The evaluation of the Company’s interpretation and application of the Internal Revenue Code (Code) required complex auditor judgment and the need to involve tax professionals with specialized skills and knowledge to evaluate the U.S.

federal taxability of the spin-off of RXO.

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

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s income tax process, including a control related to Company’s evaluation of the spin-off of RXO as tax-free for U.S.

federal income tax purposes.

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

• inspecting the tax opinions from the Company’s external tax advisors that management utilized in forming their conclusions on U.S.

federal income taxability of the spin-off of RXO, including certain interpretations of the Code

• assessing the key facts, assumptions and representations provided by management and used by the Company’s external tax advisors when evaluating the U.S.

federal income taxability of the spin-off of RXO.

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 they relate.

Liabilities for self-insured claims

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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 claims include the consideration of historical cost experience, severity factors, and judgments about current and expected levels of cost per claims and retention levels 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 assess these estimates.

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 claims include the consideration of historical cost experience, severity factors, and judgments about current and expected levels of cost per claims that have uncertainty related to future occurrences or events and conditions.

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

1 unchanged sentence

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

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

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

We involved an actuarial professional 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 and retention levels, in relation to recent historical loss payment trends and severity factors

• 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 recorded, based on actuarial methodologies

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Other long-term assets 196 209

Long-term assets of discontinued operations — 1,363

Total long-term assets 5,899 4,639

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Other long-term liabilities 285 259

Long-term liabilities of discontinued operations — 281

Total long-term liabilities 4,636 3,750

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300 shares authorized;

115 shares issued and

outstanding as of December 31, 2022 and 2021

116 and 115 shares issued and

outstanding as of December 31, 2023 and 2022, respectively

Additional paid-in capital 1,298 1,238

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Revenue $ 7,744 $ 7,718 $ 7,202

Cost of transportation and services (exclusive of depreciation and

amortization)

4,945 4,604 3,879

Direct operating expense (exclusive of depreciation and amortization) 1,154 1,090 979

Sales, general and administrative expense 678 756 746

Salaries, wages and employee benefits 3,159 2,945 2,866

Purchased transportation 1,760 1,964 1,934

Fuel, operating expenses and supplies 1,623 1,687 1,492

Operating taxes and licenses 60 58 56

Insurance and claims 167 183 174

Gains on sales of property and equipment ( 5 ) ( 60 ) ( 72 )

Depreciation and amortization expense 432 392 385

Goodwill impairment — 64 —

Litigation matter 8 — —

Transaction and integration costs 58 58 36

4 unchanged sentences

Interest expense 168 135 211

Income (loss) from continuing operations before income tax provision

258 107 ( 164 )

Income tax provision (benefit) 74 11 ( 54 )

Income (loss) from continuing operations 184 96 ( 110 )

Income from discontinued operations, net of taxes 482 245 227

Income from continuing operations before income tax provision 260 258 107

Income tax provision 68 74 11

Income from continuing operations 192 184 96

Income (loss) from discontinued operations, net of taxes ( 3 ) 482 245

Net income 189 666 341

Net loss from continuing operations attributable to noncontrolling

Net income from discontinued operations attributable to

noncontrolling interests

— ( 5 ) ( 10 )

Net income attributable to XPO $ 189 $ 666 $ 336

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Earnings (loss) per share data

Basic earnings (loss) per share from continuing operations $ 1.60 $ 0.85 $ ( 1.50 )

Basic earnings per share from discontinued operations 4.19 2.14 2.37

Basic earnings per share from continuing operations $ 1.66 $ 1.60 $ 0.85

Basic earnings (loss) per share from discontinued operations ( 0.02 ) 4.19 2.14

Basic earnings per share attributable to common shareholders $ 1.64 $ 5.79 $ 2.99

Diluted earnings (loss) per share from continuing operations $ 1.59 $ 0.83 $ ( 1.50 )

Diluted earnings per share from discontinued operations 4.17 2.10 2.37

Diluted earnings per share from continuing operations $ 1.62 $ 1.59 $ 0.83

Diluted earnings (loss) per share from discontinued operations ( 0.02 ) 4.17 2.10

Diluted earnings per share attributable to common shareholders $ 1.60 $ 5.76 $ 2.93

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Net income $ 189 $ 666 $ 341

Other comprehensive loss, net of tax

Other comprehensive income (loss), net of tax

Foreign currency translation gain (loss), net of tax effect of $ 12 , $( 15 ) and $ —

4 unchanged sentences

( 23 ) ( 69 ) 34

Other comprehensive loss ( 140 ) ( 54 ) ( 7 )

Other comprehensive income (loss) 5 ( 140 ) ( 54 )

Comprehensive income $ 194 $ 526 $ 287

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Net income $ 189 $ 666 $ 341

Income from discontinued operations, net of taxes 482 245 227

Income (loss) from continuing operations 184 96 ( 110 )

Income (loss) from discontinued operations, net of taxes ( 3 ) 482 245

Income from continuing operations 192 184 96

Adjustments to reconcile income (loss) from continuing operations to net

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Accretion of debt 11 16 18

Deferred tax expense (benefit) 80 7 ( 64 )

Debt extinguishment loss 39 54 —

Deferred tax expense 31 80 7

Gains on sales of property and equipment ( 5 ) ( 60 ) ( 72 )

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Proceeds from issuance of debt 2,962 — —

Proceeds from (repayment of) borrowings related to securitization program — ( 24 ) 23

Repayment of borrowings related to securitization program — — ( 24 )

Repurchase of debt ( 2,117 ) ( 1,068 ) ( 2,769 )

3 unchanged sentences

Payment of debt issuance costs ( 27 ) — ( 5 )

Cash paid in connection with preferred stock conversion — — ( 22 )

Issuance (repurchase) of common stock — 384 ( 114 )

Issuance of common stock — — 384

Change in bank overdrafts 34 ( 20 ) —

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Series A Preferred Stock Common Stock

(Shares in thousands, dollars in millions) Shares Amount Shares Amount Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total XPO Stockholders’

(Shares in thousands, dollars in millions) Shares Amount Shares Amount Additional Paid-In Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Loss Total XPO Stockholders’

Equity Non-controlling Interests Total Equity

1 unchanged sentence

Net income — — — — — 336 — 336 5 341

Other comprehensive income (loss) — — — — — — ( 13 ) ( 13 ) 6 ( 7 )

Other comprehensive loss — — — — — — ( 52 ) ( 52 ) ( 2 ) ( 54 )

Spin-off of GXO — — — — ( 1,199 ) ( 1,161 ) 126 ( 2,234 ) ( 40 ) ( 2,274 )

Exercise and vesting of stock compensation awards — — 392 — 2 — — 2 — 2

Tax withholdings related to vesting of stock compensation awards — — — — ( 28 ) — — ( 28 ) — ( 28 )

Purchase of noncontrolling interest — — — — ( 1 ) — — ( 1 ) ( 20 ) ( 21 )

Issuance of common stock — — 2,875 — 384 — — 384 — 384

Conversion of preferred stock to common stock ( 1 ) ( 1 ) 145 — 1 — — — — —

Preferred stock conversion — — — — — ( 22 ) — ( 22 ) — ( 22 )

Retirement of common stock — — ( 1,715 ) — ( 114 ) — — ( 114 ) — ( 114 )

Purchase of noncontrolling interests — — — — ( 34 ) — — ( 34 ) ( 100 ) ( 134 )

Dividend declared — — — — — — — — ( 3 ) ( 3 )

Exercise of warrants — — 9,215 — — — — — — —

Stock compensation expense — — — — 52 — — 52 — 52

Adoption of new accounting standard and other — — — — 7 ( 4 ) — 3 — 3

Other — — 58 — 3 — — 3 — 3

Balance as of December 31, 2021 — $ — 114,737 $ — $ 1,179 $ 43 $ ( 84 ) $ 1,138 $ — $ 1,138

1 unchanged sentence

Other comprehensive loss — — — — — — ( 140 ) ( 140 ) — ( 140 )

Spin-off of GXO — — — — ( 1,199 ) ( 1,161 ) 126 ( 2,234 ) ( 40 ) ( 2,274 )

Spin-off of RXO — — — — — ( 713 ) 2 ( 711 ) — ( 711 )

Exercise and vesting of stock compensation awards — — 698 — — — — — — —

Tax withholdings related to vesting of stock compensation awards — — — — ( 23 ) — — ( 23 ) — ( 23 )

Issuance of common stock — — 2,875 — 384 — — 384 — 384

Conversion of preferred stock to common stock ( 1 ) ( 1 ) 145 — 1 — — — — —

Purchase of noncontrolling interests — — — — ( 34 ) — — ( 34 ) ( 100 ) ( 134 )

Dividend declared — — — — — — — — ( 3 ) ( 3 )

Exercise of warrants — — 9,215 — — — — — — —

Stock compensation expense — — — — 77 — — 77 — 77

8 unchanged sentences

Net income — — — — — 189 — 189 — 189

Other comprehensive loss — — — — — — ( 140 ) ( 140 ) — ( 140 )

Spin-off of RXO — — — — — ( 713 ) 2 ( 711 ) — ( 711 )

Other comprehensive income — — — — — — 5 5 — 5

Exercise and vesting of stock compensation awards — — 638 — — — — — — —

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See Note 4—Segment Reporting and Geographic Information for additional information on our operations.

Strategic Actions

In March 2022, our Board of Directors approved a strategic plan for the spin-off of our tech-enabled brokered transportation platform as a new public company, separating it from our LTL business in North America;

which was completed in 2022.

Additionally, the plan included the sale of our intermodal operation, which was also completed in 2022;

and the intended divestiture of our European business.

Strategic Developments

2023 was the first full year that XPO operated solely as an asset-based LTL service provider in North America, following the completion of three key parts of our strategic plan, as previously announced:

the spin-offs of RXO, Inc.

(“RXO”) and GXO Logistics, Inc.

(“GXO”) in November 2022 and August 2021, respectively;

and the sale of our North American intermodal operation in March 2022.

On December 20, 2023, we acquired 28 LTL service centers in the U.S.

previously operated by Yellow Corporation (the “Yellow Asset Acquisition”).

Under the transaction, we purchased 26 of the service centers and assumed existing leases for the other two locations.

This is a strategic acquisition of assets that aligns with our commitment to invest in expanding our LTL network capacity.

Our Board of Directors has previously authorized the divestiture of our European business.

There can be no assurance that the divestiture will occur, or of the terms or timing of a transaction.

On November 1, 2022, we completed the spin-off of our tech-enabled brokered transportation platform as a publicly traded company, RXO, Inc.

The transaction is intended to be tax-free to XPO and our shareholders for U.S.

federal income tax purposes.

The spin-off was accomplished by the distribution of 100 % of the outstanding common stock of RXO to XPO shareholders.

RXO is an independent public company trading under the symbol “RXO” on the New York Stock Exchange.

In addition to the transactions related to our March 2022 strategic plan, we completed the spin-off of our logistics segment as GXO Logistics, Inc.

(“GXO”) on August 2, 2021.

The historical results of operations and the financial positions of GXO, RXO and our intermodal operation are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for all periods presented.

The intermodal operation qualified to be accounted for as a discontinued operation after the spin-off of RXO because the sale of the intermodal operation and RXO were part of one strategic plan of disposal.

The historical results of operations and financial positions of RXO, GXO and our intermodal operation are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for all periods presented.

For information on our discontinued operations, see Note 3—Discontinued Operations.

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We prepared these estimates based on the most current and best available information, but actual results could differ materially from these estimates and assumptions.

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

Specifically, we changed the expense captions within Operating income in the Condensed Consolidated Statements of Income to more clearly reflect the nature of the expenses.

The change to natural expense classification had no impact on consolidated Revenues or Operating income.

At the time of the change, we recast prior period amounts to conform to the current presentation.

Consolidation

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We have eliminated intercompany accounts and transactions.

To determine if we are a primary beneficiary of a VIE, we evaluate whether we are able to direct the activities that significantly impact the VIE’s economic performance, including whether we control the operations of each VIE and whether we can operate the VIE under our brand or policies.

whether we can operate the VIE under our brand or policies.

Investors in the VIE only have recourse to the assets owned by the VIE and not to our general credit.

We do not have implicit support arrangements with the VIE.

consolidate the VIE, which is comprised of the special purpose entity related to the European trade securitization program discussed below.

We consolidate the VIE, which is comprised of the special purpose entity related to the European trade securitization program discussed below.

We have a controlling financial interest in entities generally when we own a majority of the voting interest.

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We expense the incremental costs of obtaining contracts when incurred if the amortization period of the assets is one year or less.

These costs are included in Direct operating expense (exclusive of depreciation and amortization).

These costs are included in Salaries, wages and employee benefits on our Consolidated Statements of Income.

Cash, Cash Equivalents and Restricted Cash

We consider all highly liquid investments with an original maturity of three months or less on the date of purchase to be cash equivalents.

As of December 31, 2022, 2021 and 2020, our restricted cash included in Other long-term assets on our Consolidated Balance Sheets was $ 10 million.

As of December 31, 2023, 2022 and 2021, our restricted cash included in Other long-term assets on our Consolidated Balance Sheets was $ 7 million, $ 10 million and $ 10 million, respectively.

Accounts Receivable and Allowance for Credit Losses

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Write-offs, less recoveries, and other adjustments ( 31 ) ( 20 ) ( 17 )

Adoption of new accounting standard — — 4

Ending balance $ 45 $ 43 $ 36

9 unchanged sentences

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 $ 221 million as of December 31, 2023).

As of December 31, 2022, € 1 million (approximately $ 2 million) was available under the program, subject to having sufficient receivables available to sell and with consideration to amounts previously sold.

As of December 31, 2023, € 1 million (approximately $ 1 million) was available under the program.

The weighted average interest rate was 5.35 % as of December 31, 2023.

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Property and Equipment

We generally record property and equipment at cost, or in the case of acquired property and equipment, at fair value at the date of acquisition.

We generally record property and equipment at cost, or in the case of property and equipment acquired in a business combination, at fair value at the date of acquisition.

In connection with the Yellow Asset Acquisition, on December 20, 2023, we acquired 28 LTL service centers for a purchase price of $ 918 million, including a cash payment of $ 870 million, the assumption of certain liabilities and direct transaction costs.

Under the transaction, we purchased 26 of the service centers, primarily consisting of land and buildings, and assumed existing leases for the other two locations.

The transaction was accounted for as an asset acquisition, with the assets recorded at cost.

The Consolidated Statements of Cash Flows for the year ended December 31, 2023 reflects an $ 878 million investing cash outflow for this transaction.

Maintenance and repair expenditures are charged to expense as incurred.

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For each subsequent period, the liability is increased for accretion expense and the capitalized cost is depreciated over the useful life of the related asset.

In connection with the Yellow Asset Acquisition, in December 2023, we recognized $ 6 million of Asset Retirement Obligations.

We measure goodwill as the excess of consideration transferred over the fair value of net assets acquired in business combinations.

We allocate goodwill to our reporting units for the purpose of impairment testing.

We evaluate goodwill for impairment annually, or more frequently if an event or circumstance indicates an impairment loss may have been incurred.

We evaluate goodwill for impairment annually as of August 31, or more frequently if an event or circumstance indicates an impairment loss may have been incurred.

We measure goodwill impairment, if any, at the amount a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill.

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The qualitative assessment includes a review of macroeconomic conditions, industry and market considerations, internal cost factors, and overall financial performance, among other factors.

For our 2022 and 2021 annual goodwill assessments, which were performed as of August 31, we performed a step-zero qualitative analysis for each of the three reporting units that existed at the time of the assessments.

For our 2023 annual goodwill assessment, we performed a step-zero qualitative analysis for our five reporting units.

Based on the qualitative assessments performed, we concluded that it was not more-likely-than-not that the fair value of each of our reporting units was less than their carrying amounts and, therefore, further quantitative analysis was not performed, and we did not recognize any goodwill impairment.

In the fourth quarter of 2022 and in connection with the RXO spin-off, we performed additional impairment tests because the number of our reporting units increased from three to five to reflect our new internal organization.

Specifically, whereas our European Transportation business was previously considered a single reporting unit, after the spin-off of RXO, it was determined that the European Transportation business was comprised of four reporting units.

As a result, in the fourth quarter, we tested each of the four new reporting units for potential impairment.

Similarly, for our 2022 annual goodwill assessment performed as of August 31, we performed a step-zero qualitative analysis for each of the three reporting units that existed at that time and reached the same conclusion.

However, in the fourth quarter of 2022 and in connection with the RXO spin-off, we performed additional impairment tests because the number of our reporting units increased from three to five to reflect our new internal organization.

Specifically, while our European Transportation business was previously considered a single reporting unit, after the spin-off of RXO, it was determined that the European Transportation business was comprised of four reporting units.

As a result, in the fourth quarter of 2022, we tested each of the four new reporting units for potential impairment.

A quantitative test was performed for each of these four new reporting units using a combination of income and market approaches and we recorded an aggregate impairment charge of $ 64 million related to two of these new reporting units.

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Intangible Assets

Our intangible assets subject to amortization consist primarily of customer relationships.

We review long-lived assets to be held-and-used for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

An asset is considered to be impaired if the sum of the undiscounted expected future cash flows over the remaining useful life of a long-lived asset group is less than its carrying amount.

Our intangible assets subject to amortization consist primarily of customer relationships and favorable leases.

In connection with the Yellow Asset Acquisition, the assumed leases contained favorable terms compared to market terms for similar leases and, as result, we recognized a $ 65 million favorable lease intangible asset in December 2023.

We review long-lived assets to be held-and-used, including tangible assets and intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

An asset is considered to be impaired if the sum of the undiscounted expected future

cash flows over the remaining useful life of a long-lived asset group is less than its carrying amount.

An impairment loss is measured as the amount by which the carrying amount of the asset group exceeds the fair value of the asset.

We estimate fair value using the expected future cash flows discounted at a rate comparable with the risks associated with the recovery of the asset.

We estimate fair value using the expected future cash flows discounted at a rate commensurate with the risks associated with the recovery of the asset.

We amortize intangible assets on a straight-line basis or on a basis consistent with the pattern in which the economic benefits are realized.

The estimated useful life for unamortized customer relationships at December 31, 2022 is 14 to 16 years.

The estimated useful life for intangible assets at December 31, 2023 is 14 to 25 years.

Accrued Expenses

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The components of and changes in accumulated other comprehensive income (loss) (“AOCI”), net of tax, for the years ended December 31, 2023 and 2022, are as follows:

(In millions) Foreign Currency Translation Adjustments Derivative Hedges Defined Benefit Plans Liability Less:

AOCI Attributable to Noncontrolling Interests AOCI Attributable to XPO

(In millions) Foreign Currency Translation Adjustments Derivative Hedges Defined Benefit Plans Liability AOCI Attributable to XPO

As of December 31, 2021 $ ( 52 ) $ — $ ( 32 ) $ ( 84 )

1 unchanged sentence

Amounts reclassified from AOCI ( 7 ) — — ( 7 )

Net current period other

comprehensive income (loss)

( 85 ) ( 3 ) 34 2 ( 52 )

Spin-off of GXO 41 — 82 3 126

Net current period other comprehensive income (loss) ( 69 ) ( 2 ) ( 69 ) ( 140 )

Spin-off of RXO 2 — — 2

As of December 31, 2022 ( 119 ) ( 2 ) ( 101 ) ( 222 )

1 unchanged sentence

Amounts reclassified from AOCI ( 9 ) ( 3 ) — ( 12 )

Net current period other

comprehensive income (loss)

( 69 ) ( 2 ) ( 69 ) — ( 140 )

Spin-off of RXO 2 — — — 2

Net current period other comprehensive income (loss) 28 — ( 23 ) 5

As of December 31, 2023 $ ( 91 ) $ ( 2 ) $ ( 124 ) $ ( 217 )

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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.

We adopted this standard on January 1, 2022, on a prospective basis.

The adoption did not have a material 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.

Early adoption is permitted.

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

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

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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, 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.

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

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 12—Debt for further information.

The modifications of these facilities to transition from LIBOR to other base rates did not have a material impact on our consolidated financial statements.

Accounting Pronouncements Issued but Not Yet Effective

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.” The ASU modifies income tax disclosures by requiring (i) consistent categories and greater disaggregation of information in the rate reconciliations and (ii) the disclosure of income taxes paid disaggregated by jurisdiction, among other requirements.

This ASU is effective for fiscal years beginning after December 31, 2024 and should be applied on a prospective basis, with the option to apply the standard retrospectively.

Early adoption is permitted.

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

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.” The amendments in the ASU improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.

In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit and loss, and provide new segment disclosure requirements for entities with a single reportable segment, among other disclosure requirements.

This ASU is effective for fiscal years beginning after December 15, 2023 and should

be applied retrospectively to all prior periods presented in the financial statements.

Early adoption is permitted.

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

Discontinued Operations

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

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

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

2 unchanged sentences

Revenue $ 4,403 $ 10,200

Cost of transportation and services (exclusive of depreciation and

amortization)

3,334 5,281 4,065

Direct operating expense (exclusive of depreciation and

amortization)

211 3,222 4,581

Sales, general and administrative expense 492 901 979

Salaries, wages and employee benefits 503 2,418

Purchased transportation 3,216 4,747

Fuel, operating expenses and supplies 296 2,139

Operating taxes and licenses 3 44

Insurance and claims 19 56

Depreciation and amortization expense 67 276

7 unchanged sentences

Net income from discontinued operations, net of taxes 482 245

Net income from discontinued operations attributable to

noncontrolling interests

— ( 5 ) ( 10 )

Net income from discontinued operations attributable to

discontinued entities

$ 482 $ 240 $ 217

During the years ended December 31, 2022 and 2021, we incurred approximately $ 152 million and $ 125 million, respectively, of costs related to the spin-offs, of which $ 120 million and $ 101 million, respectively, are reflected within income from discontinued operations in our Consolidated Statements of Income.

The following table summarizes the assets and liabilities from discontinued operations:

(In millions) 2021

Cash and cash equivalents $ 34

Accounts receivable, net 1,230

Other current assets 68

Total current assets of discontinued operations 1,332

Property and equipment, net 133

Operating lease assets 210

Identifiable intangible assets, net 110

Other long-term assets 25

Total long-term assets of discontinued operations 1,363

Accounts payable 600

Accrued expenses 307

Short-term operating lease liabilities 63

Other current liabilities 14

Total current liabilities of discontinued operations 984

Deferred tax liability 69

Long-term operating lease liabilities 156

Other long-term liabilities 56

Total long-term liabilities of discontinued operations $ 281

In 2022, RXO completed debt offerings and used the net proceeds to fund a cash payment from RXO to XPO of $ 446 million, which we used to repay a portion of our outstanding borrowings and fund any related fees and expenses.

Additionally, in 2021, GXO completed a debt offering and used the net proceeds to fund a cash payment from GXO to XPO of $ 794 million, which we used to repay a portion of our outstanding borrowings.

Net income from discontinued operations attributable to noncontrolling interests — ( 5 )

Net income from discontinued operations $ 482 $ 240

During the years ended December 31, 2023, 2022 and 2021, we incurred approximately $ 57 million, $ 152 million and $ 125 million, respectively, of costs related to the spin-offs, of which $ 6 million, $ 120 million and $ 101 million, respectively, are reflected within income from discontinued operations in our Consolidated Statements of Income.

In 2022, we completed the sale of our intermodal operation for cash proceeds of approximately $ 705 million, net of cash disposed.

The pre-tax gain on the sale was $ 430 million, net of transaction costs and working capital adjustment.

Additionally, in 2022, RXO completed debt offerings and used the net proceeds of $ 446 million to fund a cash payment from RXO to XPO, which we used to repay a portion of our outstanding borrowings and fund any related fees and expenses.

Similarly, in 2021, GXO completed a debt offering and used the net proceeds to fund a cash payment from GXO to XPO of $ 794 million, which we used to repay a portion of our outstanding borrowings.

For further information, see Note 12—Debt.

Prior to the spin-off of GXO, the pension plan for some employees in the United Kingdom was sold to a GXO entity and approximately $ 82 million of AOCI, net of tax, was transferred to GXO.

In connection with both spin-offs, we entered into separation and distribution agreements as well as various other agreements that provide a framework for the relationships between the parties going forward, including, among others, an employee matters agreement (“EMA”), a tax matters agreement, an intellectual property license agreement and a transition services agreement, through which XPO agreed to provide certain services for a period of time specified in the applicable agreement following the spin-offs.

In connection with both spin-offs, we entered into separation and distribution agreements as well as various other agreements that provided a framework for the relationships between the parties going forward, including, among others, an employee matters agreement (“EMA”), a tax matters agreement, an intellectual property license agreement and a transition services agreement, through which XPO agreed to provide certain services for a period of time specified in the applicable agreement following the spin-offs.

The impact of these services on the consolidated financial statements was immaterial.

Additionally, in accordance with these agreements, GXO has agreed to indemnify XPO for certain payments XPO makes with respect to certain self-insurance matters that were incurred by GXO prior to the spin-off and remain obligations of XPO.

The receivable and reserve for these matters was approximately $ 17 million and $ 16 million, respectively, as of December 31, 2022 and $ 23 million and $ 21 million, respectively, as of December 31, 2021.

Segment Reporting and Geographic Information

We are organized into two reportable segments:

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

In the fourth quarter of 2022 and in connection with the RXO spin-off, we revised our reportable segments to reflect our new internal organization.

Prior to the RXO spin-off, we had two reportable segments:

North American LTL and Brokerage and Other Services.

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.

Our North American LTL segment also includes the results of our trailer manufacturing operations.

Prior to the RXO spin-off, the trailer manufacturing operations were included in our Brokerage and Other Services segment.

In our European Transportation segment, we serve a large base of customers with consumer, trade and industrial markets.

In our European Transportation segment, we serve an extensive base of customers within the consumer, trade and industrial markets.

We offer dedicated truckload, LTL, truck brokerage, managed transportation, last mile, freight forwarding and multimodal solutions, such as road-rail and road-short sea combinations.

Corporate includes corporate headquarters costs for executive officers and certain legal and financial functions, and other costs and credits not attributed to our reporting segments.

Corporate includes corporate headquarters costs for executive officers and certain legal and financial functions, and other costs and credits not attributed to our reportable segments.

Our chief operating decision maker (“CODM”) regularly reviews financial information at the operating segment level to allocate resources to the segments and to assess their performance.

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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 (loss) from continuing operations before debt extinguishment loss, interest expense, income tax, depreciation and amortization expense, goodwill impairment charges, 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, goodwill impairment charges, litigation matters, transaction and integration costs, restructuring costs and other adjustments.

Segment Adjusted EBITDA reflects an allocation of corporate costs.

Selected financial data for our segments is as follows:

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North American LTL (1)

$ 864 $ 932 $ 826

European Transportation 163 169 165

Corporate (1)

( 31 ) ( 104 ) ( 179 )

Total Adjusted EBITDA 996 997 812

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Interest expense 168 135 211

Income tax provision (benefit) 74 11 ( 54 )

Income tax provision 68 74 11

Depreciation and amortization expense 432 392 385

Goodwill impairment (2)

Litigation matter (3)

Transaction and integration costs (4)

Restructuring costs (5)

Other 1 — ( 2 )

Income (loss) from continuing operations $ 184 $ 96 $ ( 110 )

Income from continuing operations $ 192 $ 184 $ 96

Depreciation and amortization expense

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Total $ 432 $ 392 $ 385

(1) In the first quarter of 2023, we began allocating incremental corporate costs from Corporate to North American LTL.

Prior periods have been recast to reflect these incremental allocations.

(2) See Note 9— Goodwill for further information on the impairment charge.

(2) Transaction and integration costs for 2022 are primarily comprised of stock-based compensation and third-party professional fees related to strategic initiatives.

Transaction and integration costs for 2021 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 2020 included professional fees related to our previously announced exploration of strategic alternatives that was terminated in March 2020.

(3) See Note 18— Commitments and Contingencies for further information on the litigation matter.

(4) Transaction and integration costs for 2023 are primarily comprised of stock-based compensation and retention awards for certain employees related to strategic initiatives.

Transaction and integration costs for 2022 and 2021 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 2023, 2022 and 2021 include $ 0 million , $ 3 million and $ 1 million, respectively, related to our North American LTL segment;

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Restructuring Charges

We engage in restructuring actions as part of our ongoing efforts to best use our resources and infrastructure, including actions in connection with the spin-offs and other divestment activities.

We engage in restructuring actions as part of our ongoing efforts to best use our resources and infrastructure, including actions in connection with spin-offs and other divestment activities.

These actions generally include severance and facility-related costs, including impairment of lease assets, as well as contract termination costs, and are intended to improve our efficiency and profitability.

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Corporate 19 20 ( 30 ) ( 1 ) 8

7 39 ( 9 ) ( 18 ) 19

Total severance 13 47 ( 22 ) ( 16 ) 22

Contract termination

North American LTL — 3 ( 3 ) — —

Total contract termination — 3 ( 3 ) — —

Total $ 22 $ 38 $ ( 47 ) $ ( 2 ) $ 11

(1) For the year ended December 31, 2022, charges incurred and foreign exchange and other included the recognition of share-based compensation costs and the corresponding settlement of equity awards upon vesting in conjunction with the spin-off of RXO.

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 the majority of the cash outlays related to the charges incurred in 2023 will be complete within twelve months.

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December 31, 2022

North American LTL $ — $ 2 $ ( 3 ) $ 3 $ 2

European Transportation 6 6 ( 10 ) ( 1 ) 1

Corporate (1)

7 39 ( 9 ) ( 18 ) 19

Total severance 13 47 ( 22 ) ( 16 ) 22

Contract termination

North American LTL — 3 ( 3 ) — —

Total contract termination — 3 ( 3 ) — —

Total $ 13 $ 50 $ ( 25 ) $ ( 16 ) $ 22

Property and Equipment

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Property and equipment

Land $ 258 $ 276

Buildings and leasehold improvements 733 406

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Net book value of capitalized internally-developed software included in property and equipment, net $ 120 $ 129

(1) The increase in Land as of December 31, 2023 compared to December 31, 2022 reflects land acquired in December 2023 as part of the Yellow Asset Acquisition.

Depreciation of property and equipment and amortization of computer software was $ 376 million, $ 336 million and $ 327 million for the years ended December 31, 2023, 2022 and 2021, respectively.

In connection with the Yellow Asset Acquisition, in December 2023, we recognized approximately $ 850 million of Land and Buildings and leasehold improvements, including amounts related to assumed finance leases.

Most of our leases are real estate leases.

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$ — $ 40 $ 69

(1) For the year ended December 31, 2023 we did not complete any sale-leaseback transactions.

For the years ended December 31, 2022 and 2021, we completed multiple sale-leaseback transactions primarily for land and buildings.

We received aggregate cash proceeds of $ 49 million, $ 96 million and $ 143 million in 2022, 2021 and 2020, respectively.

Gains on sale-leaseback transactions are included in Direct operating expense (exclusive of depreciation and amortization) in our Consolidated Statements of Income.

We received aggregate cash proceeds of $ 49 million and $ 96 million in 2022 and 2021, respectively.

Gains on sale-leaseback transactions are included in Gains on sales of property and equipment in our Consolidated Statements of Income.

Supplemental balance sheet information related to leases was as follows:

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3.24 % 2.12 %

In connection with the Yellow Asset Acquisition, in December 2023, we recognized $ 23 million of Property and equipment, net and Long-term debt for finance leases assumed and $ 3 million of Operating lease assets and Operating lease liabilities for operating leases assumed.

Supplemental cash flow information related to leases was as follows:

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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 $ 72 million.

These operating leases will commence in 2023 with initial lease terms of 9 years to 15 years.

These operating leases will commence at various times beginning in 2024 through 2025 with initial lease terms of 4.5 years to 15 years.

(In millions) North American LTL European Transportation Total

Goodwill as of December 31, 2021 $ 726 $ 868 $ 1,594

Impact of foreign exchange translation and other — ( 57 ) ( 57 )

Goodwill as of December 31, 2021 726 868 1,594

Goodwill impairment — ( 64 ) ( 64 )

Impact of foreign exchange translation and other — ( 58 ) ( 58 )

Impact of foreign exchange translation — ( 58 ) ( 58 )

Goodwill as of December 31, 2022 726 746 1,472

As described in Note 2— Basis of Presentation and Significant Accounting Policies, we recorded an aggregate impairment charge of $ 64 million for the year ended December 31, 2022 related to reporting units within our European Transportation reportable segment.

There were no cumulative goodwill impairments as of December 31, 2021.

Impact of foreign exchange translation — 26 26

Goodwill as of December 31, 2023 $ 726 $ 772 $ 1,498

As described in Note 2— Basis of Presentation and Significant Accounting Policies, we recorded no impairment losses in 2023, while we recorded an aggregate impairment charge of $ 64 million in 2022 related to reporting units within our European Transportation reportable segment.

Prior to the 2022 impairment, there were no accumulated impairment losses.

Intangible Assets

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Customer relationships $ 809 $ 452 $ 799 $ 392

Favorable leases 65 — — —

Total $ 874 $ 452 $ 799 $ 392

In connection with the Yellow Asset Acquisition, in December 2023, we recognized $ 65 million of Favorable leases.

For further information, see Note 2—Basis of Presentation and Significant Accounting Policies.

We did no t recognize any impairment of our identified intangible assets in 2023, 2022 and 2021.

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Interest rate swaps 350 Other current assets — Other current liabilities ( 2 )

Interest rate swaps 200 Other long-term assets — Other long-term liabilities —

Total $ — $ ( 36 )

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

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

Amount of Gain (Loss) Recognized in Other Comprehensive 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)

Years Ended December 31,

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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.

In 2021, in preparation for the GXO spin-off, we novated (or transferred) cross-currency swaps that were recorded as a liability with a fair value of approximately $ 28 million to GXO, as well as the associated amounts in AOCI.

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 Consolidated Statements of Cash Flows.

During 2022, we received approximately $ 29 million related to the settlement of certain cross currency swaps that matured during the period.

During 2023 and 2022, we received approximately $ 2 million and $ 29 million, respectively, related to cross-currency swaps that were settled during the period.

The fair value adjustments related to these swaps remain in AOCI and partially offset foreign currency translation adjustment losses on our net investments in foreign subsidiaries.

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

In 2021, prior to the spin-off of GXO, we entered into cross-currency swap agreements to manage the related foreign currency exposure from intercompany loans.

We designated these cross-currency swaps as qualifying hedging instruments and accounted for them as cash flow hedges.

Gains and losses resulting from the change in the fair value of the cross-currency swaps was initially recognized in AOCI and reclassified to Other income on our Consolidated

Statements of Income to offset the foreign exchange impact in earnings created by settling intercompany loans.

Cash flows related to these cash flow hedges was included in Cash flows from operating activities of continuing operations on our Consolidated Statements of Cash Flows.

These swaps were re-designated as net investment hedges in the third quarter of 2021.

Interest Rate Hedging

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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 in 2023.

The outstanding interest rate swaps mature in 2024 and 2025.

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.

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

Term loan facilities $ 2,003 $ 1,981 $ 2,003 $ 1,977

Term loan facility $ 1,100 $ 1,087 $ 2,003 $ 1,981

6.25 % senior notes due 2025

112 111 1,150 1,141

6.25 % senior secured notes due 2028

7.125 % senior notes due 2031

7.125 % senior notes due 2032

6.70 % senior debentures due 2034

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Principal payments on debt $ — $ — $ — $ 1 $ 1,530 $ 1,736

In 2015, we entered into the ABL Facility that provided commitments of up to $ 1.0 billion with a maturity date of October 30, 2020.

In April 2019, we amended the ABL Facility including:

(i) increasing the commitments to $ 1.1 billion, (ii) extending the maturity date to April 30, 2024, subject to springing maturity if some of our senior notes

reach specified levels set in the credit agreement and (iii) reducing the interest rate margin.

In July 2021, we amended the ABL Facility to reduce the commitments from $ 1.1 billion to $ 1.0 billion.

In connection with the spin-off of RXO, effective November 4, 2022, the commitments under the ABL Facility were reduced from $ 1.0 billion to $ 600 million with no further action by any of the parties thereto.

In 2015, we entered into the ABL Facility which provided commitments of up to $ 1.0 billion with a maturity date of October 30, 2020.

This facility was subsequently amended to adjust the amount of the commitment and to extend the maturity date to April 30, 2024.

In connection with the spin-off of RXO, effective November 4, 2022, the commitments under the facility were reduced from $ 1.0 billion to $ 600 million.

There were no other significant changes made to the terms of the facility at that time.

We can issue up to $ 350 million of letters of credit under the ABL Facility.

In February 2023, we amended the 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 (“SOFR”)-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 equal to $ 600 million.

Our availability under the ABL Facility is equal to the borrowing base less advances and outstanding letters of credit.

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A maximum of 30 % of our borrowing base can be equipment and rolling stock in the aggregate.

As of December 31, 2022, our borrowing base under the ABL facility was $ 472 million and our availability was $ 470 million after considering outstanding letters of credit of $ 2 million.

As of December 31, 2023, our borrowing base under the ABL facility was $ 508 million and our availability was $ 508 million after considering outstanding letters of credit of less than $ 1 million.

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

Our loans under the ABL Facility bear interest at a rate equal to:

LIBOR or base rate plus (i) an applicable margin of 1.25 % to 1.50 % for LIBOR loans or (ii) 0.25 % to 0.50 %, for base rate loans.

SOFR or base rate plus (i) an applicable margin of 1.25 % to 1.50 % for SOFR loans or (ii) 0.25 % to 0.50 %, for base rate loans.

The ABL Facility is secured on a first lien basis by the assets of the credit parties as priority collateral and on a second lien basis by certain other assets.

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As of December 31, 2023, we were compliant with this financial covenant.

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

(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 equal to $ 600 million.

Letters of Credit Facility

In 2020, we entered into a $ 200 million uncommitted secured evergreen letter of credit facility.

The letter of credit facility had an initial one-year term, which automatically renewed for an additional year, and may automatically renew with one-year terms until the letter of credit facility terminates.

As of December 31, 2022, we have issued $ 172 million in aggregate face amount of letters of credit under the facility.

Term Loan Facilities

In 2015, we entered into a Term Loan Credit Agreement that provided for a single borrowing of $ 1.6 billion.

We have subsequently amended the Term Loan Credit Agreement to increase the principal balance to $ 2.0 billion, reduce the interest rates and to extend the maturity date to February 2025.

The interest rate spread is 0.75 % in the case of base rate loans and 1.75 % in the case of LIBOR loans.

We recorded a debt extinguishment loss of $ 3 million in 2021 due to an amendment.

The interest rate on our term loan facility was 5.93 % as of December 31, 2022.

commitments under the credit agreement or any other revolving credit facilities in the case of each of the immediately preceding clauses (i) and (ii), if such prepayments are funded with internally generated cash flow, as defined in the agreement.

The letter of credit facility had an initial one-year term, which automatically renews with one-year terms until the letter of credit facility terminates.

As of December 31, 2023, we have $ 139 million in aggregate face amount of letters of credit outstanding under the facility.

Bridge Facility

On December 4, 2023, in connection with the Yellow Asset Acquisition, we entered into a senior secured bridge term loan credit agreement (the “Bridge Credit Agreement”).

Under this agreement, we were able to borrow up to an aggregate amount of $ 870 million (the “Bridge Facility”).

Concurrently with the issuance of the Incremental Term Loans and the Senior Notes due 2032, described below, on December 13, 2023, we terminated the commitments under this agreement.

The Bridge Facility remained unfunded at the termination date.

Term Loan Facility

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.

In the same period, we used net proceeds from the New Term Loan Facility, the Senior Secured Notes due 2028 and the Senior Notes due 2031, as described below, together with cash on hand, to repay $ 2.0 billion of outstanding principal under the Existing Term Loan Facility, which was scheduled to mature in 2025, and to pay related fees, expenses and accrued interest.

We recorded a debt extinguishment loss of $ 23 million in 2023 due to this repayment.

In December 2023, we entered into an incremental amendment to the Term Loan Credit Agreement to obtain $ 400 million of incremental term loans (the “Incremental Term Loans”).

The Incremental Term Loans are a new tranche of loans under the Term Loan Credit Agreement, having substantially similar terms as the New Term Loan Facility, except with respect to maturity date, issue price, prepayment premiums in connection with certain voluntary prepayments and certain other provisions.

The Incremental Term Loans were issued at par and will mature on February 1, 2031.

Both the New Term Loan Facility and Incremental Term Loans bear interest at a rate per annum equal to, at our option, either (a) a Term 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 for both tranches was 7.36 % as of December 31, 2023.

We must prepay an aggregate principal amount of the term loan facility equal to (a) 50 % of any Excess Cash Flow, as defined in the agreement, for the most recent fiscal year ended, minus (b) the sum of (i) all voluntary prepayments of loans during the fiscal year and (ii) all voluntary prepayments of loans under the ABL Facility or any other revolving credit facilities during the fiscal year if accompanied by a corresponding permanent reduction in the commitments under the credit agreement or any other revolving credit facilities in the case of each of the immediately preceding clauses (i) and (ii), if such prepayments are funded with internally generated cash flow, as defined in the agreement.

If our Consolidated Secured Net Leverage Ratio, as defined in the agreement, for the fiscal year was less than or equal to 3.00 :1.00 and greater than 2.50 :1.00, the Excess Cash Flow percentage will be 25 %.

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As of December 31, 2023, our Consolidated Secured Net Leverage Ratio was less than 2.50 :1.00, and no excess cash payment was required.

In November 2022, we repurchased $ 408 million of the then $ 520 million outstanding 6.25 % senior notes due 2025 (“Senior Notes due 2025”) in a cash tender offer.

In December 2023, we completed the private placement of $ 585 million aggregate principal amount of senior notes due 2032 (the “Senior Notes due 2032”), which mature on February 1, 2032 and bear interest at a rate of 7.125 % per annum.

Interest is payable semi-annually in cash in arrears, commencing August 1, 2024.

These notes were issued at par.

In the same period, we used net proceeds from the Incremental Term Loans and the Senior Notes due 2032, together with cash on hand, to finance the Yellow Asset Acquisition, to repay in full the $ 112 million aggregate principal amount outstanding of our 6.25 % Senior Notes due 2025 (the “Senior Notes due 2025”), and to pay related fees, expenses and accrued interest.

The redemption price for the Senior Notes due 2025 was 101.563 % of the principal amount plus accrued and unpaid interest.

We recorded a debt extinguishment loss of $ 2 million due to this redemption.

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”).

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 is payable semi-annually in cash in arrears and commenced December 1, 2023.

These notes were issued at par and were used to repay our Existing Term Loan Facility as described above.

In November 2022, we repurchased $ 408 million of the then $ 520 million outstanding Senior Notes due 2025 in a cash tender offer.

Holders of the Senior Notes due 2025 received total consideration of $1,022.50 per $1,000.00 principal amount of notes tendered and accepted for purchase, plus accrued and unpaid interest.

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In 2021, we redeemed our outstanding 6.125 % senior notes due 2023 (“Senior Notes due 2023”), 6.75 % senior notes due 2024 (“Senior Notes due 2024”) and 6.50 % senior notes due 2022 (“Senior Notes due 2022”).

The redemption price for the Senior Notes due 2023 and Senior Notes due 2022 was 100.0 % of the principal amount, plus accrued and unpaid interest and the redemption price for the Senior Notes due 2024 was 103.375 % of the principle amount, plus accrued and unpaid interest.

We paid for the redemptions using available cash, net proceeds from a debt issuance and equity offering and cash received from GXO of approximately $ 794 million.

We recorded debt extinguishment losses of $ 51 million related to these redemptions.

In 2020, we completed private placements of $ 1.15 billion aggregate principal amount of Senior Notes due 2025.

The Senior Notes due 2025 mature on May 1, 2025 and bear interest at a rate of 6.25 % per annum.

Interest on the notes is paid semi-annually.

A total of $ 850 million of the notes were issued at par, and $ 300 million of the notes were issued subsequently at 101.75 % of face value.

Net proceeds from the notes were initially invested in cash and cash equivalents and were subsequently used in 2021 to redeem our outstanding Senior Notes due 2022 as described above.

The senior notes are guaranteed by each of our direct and indirect wholly-owned restricted subsidiaries (other than some excluded subsidiaries) that are obligors under, or guarantee obligations under, our ABL Facility or existing Term Loan facility or guarantee certain of our capital markets indebtedness or any guarantor of the senior notes.

The senior notes and its guarantees are unsecured, unsubordinated indebtedness for us and our guarantors.

The senior notes contain covenants customary for notes of this nature.

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).

All other senior notes 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 Debentures

In conjunction with an acquisition, we assumed 6.70 % Senior Debentures due 2034 (the “Senior Debentures”) with an aggregate principal amount of $ 300 million.

In conjunction with a 2015 acquisition, we assumed 6.70 % Senior Debentures due 2034 (the “Senior Debentures”) with an aggregate principal amount of $ 300 million.

The Senior Debentures bear interest payable semiannually, in cash in arrears, and mature on May 1, 2034.

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Interest cost 74 45

Actuarial gain ( 453 ) ( 82 )

Actuarial (gain) loss 65 ( 453 )

Benefits paid ( 97 ) ( 93 )

Projected benefit obligation at end of year $ 1,466 $ 1,424

The actuarial gain in both 2022 and 2021 was a result of assumption changes, including an increase in the discount rate, updated mortality projection scales and other assumptions for plan participants.

The actuarial loss in 2023 was a result of assumption changes, including a decrease in the discount rate and other changes to assumptions for plan participants.

The reconciliation of the changes in the fair value of plan assets as of December 31 was as follows:

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The funded status of our qualified plans and non-qualified plans was $ 95 million and $( 54 ) million, respectively, as of December 31, 2023.

The actuarial loss included in AOCI that has not yet been recognized in net periodic benefit expense was $ 142 million and $ 43 million, respectively, as of December 31, 2022 and 2021.

The net periodic benefit cost and amounts recognized in Other comprehensive loss for the years ended December 31 was as follows:

The actuarial loss included in AOCI that has not yet been recognized in net periodic benefit expense was $ 174 million and $ 142 million as of December 31, 2023 and 2022, respectively.

The net periodic benefit cost and amounts recognized in Other comprehensive income (loss) for the years ended December 31 was as follows:

(In millions) 2023 2022 2021

Net periodic benefit (income) expense:

Net periodic benefit income:

Interest cost $ 74 $ 45 $ 39

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Net periodic benefit income $ ( 18 ) $ ( 60 ) $ ( 61 )

Amounts recognized in Other comprehensive loss:

Amounts recognized in Other comprehensive income (loss):

Actuarial (gain) loss $ 32 $ 99 $ ( 7 )

Reclassification of recognized AOCI gain due to settlements — — —

(Gain) loss recognized in Other comprehensive loss $ 99 $ ( 7 ) $ 45

(Gain) loss recognized in Other comprehensive income (loss) $ 32 $ 99 $ ( 7 )

The weighted-average assumptions used to determine the net periodic benefit costs and benefit obligations for the year ended December 31 were as follows:

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Generally, our investment strategy does not include an allocation to cash and cash equivalents, but a cash allocation may arise periodically in response to timing considerations regarding contributions, investments, and the payment of benefits and eligible plan expenses.

We periodically evaluate our defined benefit plans’ asset portfolios for significant concentrations of risk.

We periodically evaluate our

defined benefit plans’ asset portfolios for significant concentrations of risk.

Types of investment concentration risks that are evaluated include concentrations in a single issuer, specific security, asset class, credit rating, duration, industry/sector, currency, foreign country or individual fund manager.

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Fixed income securities 296 966 48 1,310 88.9 %

Derivatives — ( 8 ) — ( 8 ) ( 0.5 ) %

Total plan assets $ 318 $ 958 $ 199 $ 1,475 100.0 %

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The amount included in AOCI that has not yet been recognized in net periodic benefit income (expense) was $ 6 million and the net periodic benefit expense was less than $ 1 million for the Postretirement Plan for the year ended December 31, 2023.

The amount included in AOCI that have not yet been recognized in net periodic benefit income (expense) and the net periodic benefit income (expense) for the Postretirement Plan were no t material for the year ended December 31, 2021.

The amount included in AOCI that has not yet been recognized in net periodic benefit income (expense) was $ 9 million and the net periodic benefit expense was less than $ 1 million for the Postretirement Plan for the year ended December 31, 2022.

The discount rates assumptions used to calculate the interest cost were 5.32 % - 5.41 %, 2.14 % - 2.79 % and 1.56 % - 2.34 % for the years ended December 31, 2023, 2022 and 2021, respectively.

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Series A Convertible Perpetual Preferred Stock (“Preferred Stock”) and Warrants

Commencing the fourth quarter of 2020, holders of our Preferred Stock and warrants exchanged their holdings for our common stock or a combination of our common stock and cash.

These exchanges were intended to simplify our equity capital structure, including in contemplation of the GXO spin-off.

With respect to the Preferred Stock, through December 31, 2020, 69,445 shares were exchanged, and we issued 9.9 million shares of common stock and paid $ 22 million of cash.

The $ 22 million was reflected as a Preferred Stock conversion charge in 2020 in the accompanying consolidated financial statements.

With respect to the warrants, through December 31, 2020, 0.3 million warrants were exchanged, and we issued 0.3 million shares of common stock.

In 2021, the remaining 1,015 preferred shares were exchanged, and we issued 0.1 million shares of common stock.

With respect to the warrants, in 2021, 9.8 million warrants were exchanged, and we issued 9.2 million shares of common stock.

In order to simplify our equity capital structure, in 2021, the remaining 1,015 preferred shares outstanding were exchanged for 0.1 million shares of common stock and the remaining 9.8 million warrants outstanding were exchanged for 9.2 million shares of common stock.

The warrants exchanged included holdings of JPE.

Subsequent to the exchange in 2021, there are no shares of Preferred Stock or warrants outstanding.

Subsequent to the exchange, there are no shares of Preferred Stock or warrants outstanding.

Share Repurchases

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Our remaining share repurchase authorization as of December 31, 2023 is $ 503 million.

In 2020, two million shares were repurchased and retired at an aggregate value of $ 114 million, or $ 66.58 average per share.

The share purchases in 2020 were funded by our available cash and proceeds from our 2019 debt offerings.

Stock-Based Compensation

We grant various types of stock-based compensation awards to directors, officers and key employees under our 2016 incentive plan.

These awards include stock options, restricted stock, restricted stock units, performance-based units, cash incentive awards and other equity-related awards (collectively, “Awards”).

These awards have included stock options, restricted stock, restricted stock units, performance-based units, cash incentive awards and other equity-related awards (collectively, “Awards”).

As a result of the RXO spin-off and in accordance with plan rules, the shares remaining for future issuance under the 2016 incentive plan were equitably adjusted.

3 unchanged sentences

As of December 31, 2023, 3.6 million shares of our common stock were available for the grant of Awards under the 2016 incentive plan.

In connection with the RXO spin-off, outstanding stock-based compensation awards that were previously granted under XPO’s incentive plan were adjusted with the intention of preserving the intrinsic value of the awards immediately before the spin-off.

XPO employees and directors holding awards in XPO stock received a number of similar awards either in XPO stock or a combination of XPO and RXO stock based on conversion ratios outlined in the EMA.

Generally, awards that were previously granted to RXO’s employees and directors under XPO’s incentive plan were converted to awards issued under RXO’s incentive plan.

For employees remaining with XPO whose awards will settle in only XPO stock, the conversion ratio was based on the closing price per share of XPO common stock on October 31, 2022 compared to the closing price per share of XPO common stock on November 1, 2022.

For employees remaining with XPO receiving a combination of XPO and RXO stock, the conversion ratio reflected a distribution ratio of one share of RXO common stock for every share of XPO common stock.

The modification of these awards in connection with the spin-off did not result in incremental compensation cost.

The impact of these adjustments on the number of XPO awards outstanding is included in the effect of spin-off activity in the tables below.

Additionally, we will not incur any future compensation cost related to equity awards held by RXO employees and directors, but we will incur future compensation cost related to RXO equity awards held by XPO employees.

Our employee stock purchase plan offers eligible employees, excluding our executive officers and directors, the right to purchase our common stock using up to 10 % of each employee’s compensation.

Shares are purchased at 5 % below fair market value on the last trading day of each six-month offering period.

The plan authorizes the purchase of up to two million shares of our common stock.

The plan will terminate in October 2027, unless terminated earlier by our Board of Directors.

We do not recognize stock-based compensation expense as the plan is non-compensatory.

At December 31, 2022, two million shares of our common stock were available for purchase under the plan.

During the first quarter of 2023, the Compensation Committee of the Board of Directors approved the suspension of our employee stock purchase plan, effective after the March 2023 offering period is completed.

Our stock-based compensation expense is recorded in SG&A on our Consolidated Statements of Income:

For the March 2023 and prior offering periods, our employee stock purchase plan offered eligible employees, excluding our executive officers and directors, the right to purchase our common stock using up to 10 % of each employee’s compensation.

Shares were purchased at 5 % below fair market value on the last trading day of each six-month offering period.

The plan authorized the purchase of up to two million shares of our common stock.

We did not recognize stock-based compensation expense as the plan was non-compensatory.

Our stock-based compensation expense is recorded in Salaries, wages and employee benefits or Transaction and integration costs on our Consolidated Statements of Income:

Years ended December 31,

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Performance-based restricted stock units 26 35 8

Cash-settled performance-based restricted stock units — — 7

Total stock-based compensation expense $ 78 $ 77 $ 31

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The stock options had a 10 -year contractual term and the exercise price equaled our stock price on the grant date.

A summary of stock option award activity for the year ended December 31, 2022 is presented below:

Stock Options

Number of Stock Options Weighted-Average Exercise Price Weighted-Average Remaining Term

Outstanding as of December 31, 2021 6,608 $ 9.80 0.93

Exercised ( 10,519 ) 6.16

Effect of spin-off (1)

Outstanding as of December 31, 2022 — $ — 0.00

Options exercisable as of December 31, 2022 — $ — 0.00

NM - Not meaningful

(1) Represents the net impact of adjustments made to preserve the value of awards immediately before and after the spin-off.

The total intrinsic value of options exercised during 2022, 2021 and 2020 was less than $ 1 million, $ 4 million and $ 56 million, respectively.

The total cash received from options exercised during 2022, 2021 and 2020 was less than $ 1 million, $ 2 million and less than $ 1 million, respectively.

No stock option awards were outstanding as of December 31, 2023.

The total intrinsic value of options exercised during 2023, 2022 and 2021 was $ 0 million , less than $ 1 million and $ 4 million, respectively.

The total cash received from options exercised during 2023, 2022 and 2021 was $ 0 million , less than $ 1 million and less than $ 2 million, respectively.

Restricted Stock Units and Performance-Based Restricted Stock Units

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RSUs generally vest based on the passage of time (service conditions) and PRSUs generally vest based on the achievement of our financial targets (performance conditions).

PRSUs may also be subject to stock price (market conditions), employment conditions and other non-financial conditions.

PRSUs may also be subject to stock price (market conditions), employment and other non-financial conditions.

The holders of the RSUs and PRSUs do not have the rights of a stockholder and do not have voting rights until the shares are issued and delivered in settlement of the awards.

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Outstanding as of December 31, 2022 2,407,585 $ 35.15 1,039,123 $ 39.89

1,461,610 $ 54.81 2,006,235 $ 46.19

Granted 900,060 38.65 957,131 44.07

1 unchanged sentence

Forfeited and canceled ( 220,775 ) 40.63 ( 227,075 ) 38.88

Effect of spin-off (2)

( 280,652 ) NM ( 578,225 ) NM

Outstanding as of December 31, 2023 2,609,449 $ 35.15 1,218,528 $ 42.75

NM - Not meaningful

(1) Outstanding awards at December 31, 2021 includes awards that were subsequently converted to awards issued under RXO’s incentive plan.

(2) Represents the net impact of (i) adjustments made to preserve the value of awards immediately before and after the spin-off, and (ii) the conversion of certain awards to awards issued under RXO’s incentive plan.

The total fair value of RSUs that vested during 2023, 2022 and 2021 was $ 23 million, $ 46 million and $ 69 million, respectively.

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Foreign ( 26 ) ( 45 ) ( 1 )

Income (loss) from continuing operations before income tax

provision (benefit)

$ 258 $ 107 $ ( 164 )

The income tax provision (benefit) is comprised of the following:

Income from continuing operations before income tax provision $ 260 $ 258 $ 107

The income tax provision is comprised of the following:

Years Ended December 31,

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Foreign ( 10 ) ( 5 ) 24

Total deferred income tax provision (benefit) 80 7 ( 63 )

Total income tax provision (benefit) $ 74 $ 11 $ ( 54 )

Total deferred income tax provision 31 80 7

Total income tax provision $ 68 $ 74 $ 11

The effective tax rate reconciliations were as follows:

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Federal rate and permanent items related to foreign operations.

(2) In the year ended December 31, 2021, the impact of “Other” on the effective tax rate was disproportionately high compared to 2020 and 2022 due to the low income (loss) from continuing operations before income tax provision (benefit) in 2021.

(2) In the year ended December 31, 2021, the impact of “Other” on the effective tax rate was disproportionately high compared to 2022 and 2023 due to the low income from continuing operations before income tax provision in 2021.

For 2021, “Other” is primarily composed of ( 3.6 )% of U.S.

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(In millions) Expiration Date 2023 2022

Federal long-term capital loss carryforwards — 126

Tax effect (before federal benefit) of state net operating

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We could reflect a reduction to unrecognized tax benefits of up to $ 1 million 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.

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

As of December 31, 2023, we have no tax years under examination by the IRS.

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Earnings (Loss) Per Share

We compute basic and diluted earnings per share using the two-class method, which allocates earnings to participating securities.

The participating securities in 2020 consisted of our Preferred Stock.

The undistributed earnings are allocated between common shares and participating securities as if all earnings had been distributed during the period.

Losses are not allocated to the preferred shares.

As discussed in Note 14—Stockholders’ Equity, we recorded a Preferred Stock conversion charge in December 2020 in connection with the conversion of our Preferred Stock.

Basic earnings per share (“EPS”) is computed by dividing net income by the weighted-average number of common shares outstanding for the period.

Diluted EPS is computed on the basis of the weighted-average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method.

Dilutive potential common shares include unvested stock-based compensation awards.

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

1 unchanged sentence

(In millions, except per share data) 2023 2022 2021

Basic earnings (loss) per common share

Income (loss) from continuing operations $ 184 $ 96 $ ( 110 )

Net loss from continuing operations attributable to noncontrolling

Net income (loss) from continuing operations attributable to XPO 184 96 ( 107 )

Preferred Stock conversion charge — — ( 22 )

Preferred Stock dividends — — ( 3 )

Non-cash allocation of undistributed earnings — — ( 6 )

Net income (loss) from continuing operations attributable to common

$ 184 $ 96 $ ( 138 )

Income from discontinued operations, net of taxes $ 482 $ 245 $ 227

Net income from discontinued operations attributable to noncontrolling

— ( 5 ) ( 10 )

Net income from discontinued operations attributable to common shares $ 482 $ 240 $ 217

Net income (loss) from continuing operations attributable to common

shares, basic

Net income from continuing operations attributable to common shares $ 192 $ 184 $ 96

Net income (loss) from discontinued operations attributable to common

( 3 ) 482 240

Net income from discontinued operations attributable to common shares,

Net income attributable to common shares, basic $ 189 $ 666 $ 336

Basic weighted-average common shares 116 115 112

Basic earnings (loss) from continuing operations per share $ 1.60 $ 0.85 $ ( 1.50 )

Basic earnings from discontinued operations per share 4.19 2.14 2.37

Basic earnings per share $ 5.79 $ 2.99 $ 0.87

Diluted earnings (loss) per common share

Net income (loss) from continuing operations attributable to common

shares, diluted

$ 184 $ 96 $ ( 138 )

Net income from discontinued operations attributable to common shares,

Net income attributable to common shares, diluted $ 666 $ 336 $ 79

Basic weighted-average common shares 115 112 92

Dilutive effect of stock-based awards and warrants 1 2 —

Dilutive effect of stock-based awards 2 1 2

Diluted weighted-average common shares 118 116 114

Diluted earnings (loss) from continuing operations per share $ 1.59 $ 0.83 $ ( 1.50 )

Diluted earnings from discontinued operations per share 4.17 2.10 2.37

Basic earnings from continuing operations per share $ 1.66 $ 1.60 $ 0.85

Basic earnings (loss) from discontinued operations per share ( 0.02 ) 4.19 2.14

Basic earnings per share $ 1.64 $ 5.79 $ 2.99

Diluted earnings from continuing operations per share $ 1.62 $ 1.59 $ 0.83

Diluted earnings (loss) from discontinued operations per share ( 0.02 ) 4.17 2.10

Diluted earnings per share $ 1.60 $ 5.76 $ 2.93

Potential common shares excluded — — 20

Certain shares were not included in the computation of diluted earnings (loss) per share because the effect was anti-dilutive.

Commitments and Contingencies

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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.

Shareholder Litigation

On December 14, 2018, a putative class action captioned Labul v.

XPO Logistics, Inc.

was filed in the U.S.

District Court for the District of Connecticut against us and some of our current and former executives, alleging violations of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder, and Section 20(a) of the Exchange Act.

On March 19, 2021, the Court dismissed the complaint with prejudice, and on June 30, 2022, the U.S.

Court of Appeals for the Second Circuit affirmed the dismissal.

The case is now concluded.

Also, on May 13, 2019, Adriana Jez filed a purported shareholder derivative action captioned Jez v.

Jacobs, et al.

, (the “Jez complaint”) in the U.S.

District Court for the District of Delaware, alleging breaches of fiduciary duty, unjust enrichment, waste of corporate assets, and violations of the Exchange Act against some of our current and former directors and officers, with the Company as a nominal defendant.

The Jez complaint was later consolidated with similar derivative complaints.

On July 26, 2022, the Court issued an order dismissing the consolidated derivative complaints with prejudice.

The case is now concluded.

Insurance Contribution Litigation

2 unchanged sentences

Co., et al., Multnomah County Circuit Court (Case No.

Allianz Global Risks US Ins.

(“Allianz”) sought contribution on environmental and product liability claims that Allianz agreed to defend and indemnify on behalf of its insured, Daimler Trucks North America (“DTNA”).

5 unchanged sentences

Con-way’s captive insurer, Centron, was also a named defendant.

After a seven-week jury trial in 2014, the jury found that Con-way and the fronting insurers never

intended that the insurers defend or indemnify any claims against Freightliner.

After a seven-week jury trial in 2014, the jury found that Con-way and the fronting insurers never intended that the insurers defend or indemnify any claims against Freightliner.

In June 2015, Allianz appealed to the Oregon Court of Appeals.

2 unchanged sentences

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.

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

As any losses that may arise in connection with the fronting policies issued by defendant insurers ACE, Westport, and General are not reasonably estimable at this time, no liability has been accrued in the accompanying consolidated financial statements for those potential exposures.

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

In June 2023, the trial court 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 ultimate allocation to the relevant policies;

however, any losses that may arise in connection with the fronting policies issued by defendant insurers ACE, Westport, and General are not reasonably estimable at this time.

California Environmental Matters

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, the Company met with the County Attorneys and the Los Angeles City Attorney.

We are assessing the allegations and the underlying facts.

No discussion of potential monetary sanctions or settlement amount has occurred to date, nor can we reasonably estimate potential costs at this time.

In August 2022, the Company received a letter from the San Bernardino County District Attorney’s Office (the “County”), 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.

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 and negotiate potential monetary sanctions or settlement amount.

We have accrued an immaterial amount for the potential exposure associated with this matter.

Quarterly Financial Data (Unaudited)

1 unchanged sentence

(In millions, except per share data) First

Second Quarter Third Quarter Fourth Quarter (3)

Quarter Second Quarter Third Quarter Fourth Quarter

Revenue $ 1,907 $ 1,917 $ 1,980 $ 1,940

Operating income 58 107 154 119

Income (loss) from continuing operations 32 96 92 ( 36 )

Income from continuing operations 17 31 86 58

Income (loss) from discontinued operations, net of taxes ( 3 ) 2 ( 2 ) —

Net income (loss) 488 141 131 ( 94 )

Net income 14 33 84 58

Net income (loss) attributable to common shareholders:

13 unchanged sentences

(1) The sum of the quarterly earnings (loss) per share may not equal year-to-date amounts due to differences in the weighted-average number of shares outstanding during the respective periods.

(2) Income from discontinued operations, net of tax during the first quarter of 2022 included the gain on the sale of our intermodal business of approximately $ 372 million.

(3) The fourth quarter of 2022 included a goodwill impairment charge of $ 64 million, transaction and integration costs of $ 42 million and restructuring costs of $ 35 million.

(In millions, except per share data) First

Quarter Second Quarter Third Quarter Fourth Quarter

Second Quarter Third Quarter Fourth Quarter (3)

Revenue $ 1,894 $ 2,047 $ 1,946 $ 1,831

18 unchanged sentences

(1) The sum of the quarterly earnings (loss) per share may not equal year-to-date amounts due to differences in the weighted-average number of shares outstanding during the respective periods.

(2) Income from discontinued operations, net of tax during the first quarter of 2022 included the gain on the sale of our intermodal business of approximately $ 372 million.

(3) The fourth quarter of 2022 included a goodwill impairment charge of $ 64 million, transaction and integration costs of $ 42 million and restructuring costs of $ 35 million.

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