What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-05-03 compared with 2023-10-30 · 109 added, 226 removed, 332 unchanged (50% of the section changed)

1 unchanged sentence

Condensed Consolidated Balance Sheets

September 30, December 31,

March 31, December 31,

(In millions, except per share data) 2024 2023

3 unchanged sentences

Other current assets 222 208

Current assets of discontinued operations — 17

Total current assets 1,528 1,593

14 unchanged sentences

Other current liabilities 79 93

Current liabilities of discontinued operations — 16

Total current liabilities 1,622 1,590

9 unchanged sentences

300 shares authorized;

116 and 115 shares issued and

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

116 shares issued and

outstanding as of March 31, 2024 and December 31, 2023

Additional paid-in capital 1,302 1,298

Retained earnings (accumulated deficit) 127 ( 4 )

Retained earnings 252 185

Accumulated other comprehensive loss ( 222 ) ( 217 )

1 unchanged sentence

Total liabilities and equity $ 7,603 $ 7,492

Amounts may not add due to rounding.

See accompanying notes to condensed consolidated financial statements.

Condensed Consolidated Statements of Income

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

Three Months Ended March 31,

(In millions, except per share data) 2024 2023

5 unchanged sentences

Insurance and claims 38 44

(Gains) losses on sales of property and equipment 1 ( 1 ) ( 4 ) ( 3 )

Gains on sales of property and equipment ( 2 ) ( 3 )

Depreciation and amortization expense 117 101

3 unchanged sentences

Other income ( 10 ) ( 5 )

Debt extinguishment loss — — 23 26

Interest expense 58 42

2 unchanged sentences

Income from continuing operations 67 17

Income (loss) from discontinued operations, net of taxes ( 2 ) 39 ( 3 ) 540

Net income attributable to XPO $ 84 $ 131 $ 131 $ 760

Net income (loss) attributable to common shareholders

Loss from discontinued operations, net of taxes — ( 3 )

Net income $ 67 $ 14

Net income (loss)

Continuing operations $ 67 $ 17

Discontinued operations — ( 3 )

Net income attributable to common shareholders $ 84 $ 131 $ 131 $ 760

Net income $ 67 $ 14

Earnings (loss) per share data

1 unchanged sentence

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

Basic earnings per share attributable to common shareholders $ 0.73 $ 1.14 $ 1.14 $ 6.61

Basic earnings per share $ 0.58 $ 0.13

Diluted earnings per share from continuing operations $ 0.56 $ 0.15

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

Diluted earnings per share attributable to common shareholders $ 0.71 $ 1.13 $ 1.12 $ 6.57

Diluted earnings per share $ 0.56 $ 0.13

Weighted-average common shares outstanding

1 unchanged sentence

Diluted weighted-average common shares outstanding 120 116

Amounts may not add due to rounding.

See accompanying notes to condensed consolidated financial statements.

Condensed Consolidated Statements of Comprehensive Income

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

Three Months Ended March 31,

(In millions) 2024 2023

1 unchanged sentence

Other comprehensive income (loss), net of tax

Foreign currency translation gain (loss), net of tax effect of $( 5 ), $( 7 ),

$ 5 and $( 18 )

$ ( 21 ) $ ( 60 ) $ 6 $ ( 132 )

Unrealized gain (loss) on financial assets/liabilities designated as hedging

instruments, net of tax effect of $ — , $ — , $ 1 and $( 1 )

Foreign currency translation gain (loss), net of tax effect of $( 3 ) and $ 8

Unrealized gain on financial assets/liabilities designated as hedging instruments, net of tax

effect of $ — and $ 1

Other comprehensive income (loss) ( 5 ) 15

Comprehensive income attributable to XPO $ 62 $ 71 $ 139 $ 632

Comprehensive income $ 62 $ 29

Amounts may not add due to rounding.

See accompanying notes to condensed consolidated financial statements.

Condensed Consolidated Statements of Cash Flows

Nine Months Ended September 30,

Three Months Ended March 31,

(In millions) 2024 2023

1 unchanged sentence

Net income $ 67 $ 14

Income (loss) from discontinued operations, net of taxes ( 3 ) 540

Loss from discontinued operations, net of taxes — ( 3 )

Income from continuing operations 67 17

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

Depreciation, amortization and net lease activity 318 289

Depreciation and amortization 117 101

Stock compensation expense 19 22

Accretion of debt 3 3

Deferred tax expense 16 30

Deferred tax expense (benefit) 8 ( 2 )

Gains on sales of property and equipment ( 2 ) ( 3 )

8 unchanged sentences

Proceeds from sale of property and equipment 7 8

Proceeds from settlement of cross-currency swaps 2 29

Net cash used in investing activities from continuing operations ( 299 ) ( 216 )

Cash flows from financing activities of continuing operations

Proceeds from issuance of debt 1,977 —

Repurchase of debt ( 2,003 ) ( 651 )

Proceeds from borrowings on ABL facility — 275

Repayment of borrowings on ABL facility — ( 275 )

Repayment of debt and finance leases ( 21 ) ( 16 )

7 unchanged sentences

Investing activities of discontinued operations — 1

Net cash provided by (used in) discontinued operations ( 9 ) 699

Net cash used in discontinued operations — ( 7 )

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

Net increase (decrease) in cash, cash equivalents and restricted cash ( 109 ) 281

Net decrease in cash, cash equivalents and restricted cash ( 183 ) ( 155 )

Cash, cash equivalents and restricted cash, beginning of period 419 470

Cash, cash equivalents and restricted cash, end of period $ 235 $ 315

Cash, cash equivalents and restricted cash of discontinued operations, end of period — 187

Cash, cash equivalents and restricted cash of continued operations, end of period $ 361 $ 367

Supplemental disclosure of cash flow information

3 unchanged sentences

Cash paid for income taxes 3 3

Amounts may not add due to rounding.

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

Comprehensive Loss Total Equity

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

Net income — — — 84 — 84

Other comprehensive loss — — — — ( 22 ) ( 22 )

Exercise and vesting of stock compensation awards

Tax withholdings related to vesting of stock compensation awards

— — ( 2 ) — — ( 2 )

Stock compensation expense

— — 17 — — 17

Balance as of September 30, 2023 115,972 $ — $ 1,284 $ 127 $ ( 214 ) $ 1,197

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

(Accumulated Deficit) Accumulated Other

Comprehensive Loss Total Equity

Balance as of December 31, 2023 116,073 $ — $ 1,298 $ 185 $ ( 217 ) $ 1,266

Net income — — — 67 — 67

Other comprehensive income — — — — 8 8

Other comprehensive loss — — — — ( 5 ) ( 5 )

Exercise and vesting of stock compensation awards

4 unchanged sentences

— — 19 — — 19

Balance as of September 30, 2023 115,972 $ — $ 1,284 $ 127 $ ( 214 ) $ 1,197

Condensed Consolidated Statements of Changes in Equity (continued)

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

Comprehensive Loss Total Equity

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

Net income — — — 131 — 131

Other comprehensive loss — — — — ( 60 ) ( 60 )

Exercise and vesting of stock compensation awards

Stock compensation expense

Balance as of September 30, 2022 115,052 $ — $ 1,195 $ 803 $ ( 212 ) $ 1,786

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

Balance as of March 31, 2024 116,312 $ — $ 1,302 $ 252 $ ( 222 ) $ 1,332

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

Comprehensive Loss Total Equity

1 unchanged sentence

Net income — — — 14 — 14

Other comprehensive loss — — — — ( 128 ) ( 128 )

Other comprehensive income — — — — 15 15

Exercise and vesting of stock compensation awards

4 unchanged sentences

— — 22 — — 22

Other — — 3 — — 3

Balance as of September 30, 2022 115,052 $ — $ 1,195 $ 803 $ ( 212 ) $ 1,786

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

Amounts may not add due to rounding.

See accompanying notes to condensed consolidated financial statements.

4 unchanged sentences

See Note 2—Segment Reporting for additional information on our operations.

2022 RXO Spin-Off and Intermodal Sale

On November 1, 2022, we completed the spin-off of RXO, Inc.

(“RXO”), our tech-enabled brokered transportation platform as a publicly traded company (the “RXO spin-off”).

The historical results of operations and the financial positions of RXO and our intermodal operation, which was sold in March 2022, are presented as discontinued operations in our Condensed Consolidated Financial Statements.

For information on our discontinued operations, see Note 2—Discontinued Operations.

Strategic Developments

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

previously operated by Yellow Corporation.

In connection with this transaction, we purchased 26 of the service centers and assumed existing leases for the other two locations.

This strategic acquisition of assets 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.

Basis of Presentation

4 unchanged sentences

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

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

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 reflect the nature of the expense.

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

We have recast prior period amounts to conform to the current year’s presentation.

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

The historical results of operations and financial positions of RXO, Inc., GXO Logistics, Inc.

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.

Within the Condensed Consolidated Financial Statements and associated notes, certain amounts may not add due to the use of rounded numbers.

Percentages presented are calculated from the underlying numbers in millions.

Restricted Cash

As of September 30, 2023 and December 31, 2022, our restricted cash included in Other long-term assets on our Condensed Consolidated Balance Sheets was $ 6 million and $ 10 million, respectively.

As of March 31, 2024 and December 31, 2023, our restricted cash included in Other long-term assets on our Condensed Consolidated Balance Sheets was $ 7 million.

Trade Receivables Securitization and Factoring Programs

2 unchanged sentences

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

The maximum amount of net cash proceeds available at any one time under our securitization program, inclusive of any unsecured borrowings, is € 200 million (approximately $ 211 million as of September 30, 2023).

As of September 30, 2023, € 15 million (approximately $ 16 million) was available under the program.

The weighted average interest rate was 5.07 % as of September 30, 2023.

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 $ 216 million as of March 31, 2024).

As of March 31, 2024, the maximum amount available under the program was utilized.

The weighted average interest rate was 5.41 % as of March 31, 2024.

The program expires in July 2026.

Information related to the trade receivables sold was as follows:

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

Three Months Ended March 31,

(In millions) 2024 2023

1 unchanged sentence

Receivables sold in period

$ 452 $ 418 $ 1,362 $ 1,323

Cash consideration

452 418 1,362 1,323

Factoring programs

10 unchanged sentences

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

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

The carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and current maturities of long-term debt approximated their fair values as of March 31, 2024 and December 31, 2023 due to their short-term nature and/or being receivable or payable on demand.

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

For information on the fair value hierarchy of our derivative instruments, see Note 6—Derivative Instruments;

and for further information on financial liabilities, see Note 7—Debt.

For information on the fair value hierarchy of our derivative instruments, see Note 5—Derivative Instruments and for information on financial liabilities, see Note 6—Debt.

The fair value hierarchy of cash equivalents was as follows:

(In millions) Carrying Value Fair Value Level 1

September 30, 2023 $ 305 $ 305 $ 305

March 31, 2024 $ 186 $ 186 $ 186

December 31, 2023 369 369 369

Adoption of New Accounting Standards

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

Facilitation of the effects of reference rate reform on financial reporting.” The ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform.

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

The amendments are elective and are effective upon issuance.

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

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

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

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

See Note 7—Debt for further information.

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

Discontinued Operations

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

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

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

(In millions) 2022 2022

Revenue $ 1,137 $ 4,009

Salaries, wages and employee benefits 140 455

Purchased transportation 826 2,926

Fuel, operating expenses and supplies 76 267

Operating taxes and licenses 1 3

Insurance and claims 5 18

Depreciation and amortization expense 19 60

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

Transaction and other operating costs 24 47

Operating income 46 667

Income tax provision 7 127

Net income from discontinued operations $ 39 $ 540

For the three and nine months ended September 30, 2023, we incurred approximately $ 9 million and $ 49 million, respectively, of costs related to the RXO spin-off, of which $ 1 million and $ 5 million, respectively, are reflected within income (loss) from discontinued operations in our Condensed Consolidated Statements of Income.

For the three and nine months ended September 30, 2022, we incurred approximately $ 22 million and $ 43 million, respectively, of costs related to the RXO spin-off, of which $ 20 million and $ 40 million, respectively, are reflected within income (loss) from discontinued operations in our Condensed Consolidated Statements of Income.

The supplemental disclosure of cash paid for income taxes on our Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 excludes $ 67 million of cash taxes paid primarily related to the gain on the sale of our intermodal operation.

Accounting Pronouncements Issued but Not Yet Effective

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 annual periods beginning in 2025, and should be applied on a prospective basis, with the option to apply 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 increase 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 on a retrospective basis for annual periods beginning in 2024, and for interim periods beginning January 1, 2025.

Early adoption is permitted.

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

Segment Reporting

1 unchanged sentence

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.

In our 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.

In our European Transportation segment, we serve a large base of customers within the 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.

3 unchanged sentences

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

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

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

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, which approximate $ 80 million annually.

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

Segment Adjusted EBITDA includes an allocation of corporate costs.

Selected financial data for our segments is as follows:

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

Three Months Ended March 31,

(in millions) 2024 2023

7 unchanged sentences

Total Adjusted EBITDA 288 210

Debt extinguishment loss — — 23 26

Interest expense 58 42

3 unchanged sentences

Restructuring costs (2)

Other 1 — 1 —

Income from continuing operations $ 67 $ 17

4 unchanged sentences

Total $ 117 $ 101

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

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

Transaction and integration costs for the three months ended September 30, 2023 and 2022 include $ 1 million and $ 2 million, respectively, related to our European Transportation segment, and $ 7 million and $ 0 million , respectively, related to Corporate.

Transaction and integration costs for the nine months ended September 30, 2023 and 2022 include $ 0 million and $ 2 million, respectively, related to our North American LTL segment, $ 2 million and $ 5 million, respectively, related to our European Transportation segment, and $ 45 million and $ 9 million, respectively, related to Corporate.

(1) Transaction and integration costs for the first quarter of 2024 and 2023 are primarily comprised of stock-based compensation for certain employees related to strategic initiatives.

Transaction and integration costs for the three months ended March 31, 2024 and 2023 include $ 1 million and $ 1 million, respectively, related to our European Transportation segment, and $ 13 million and $ 21 million, respectively, related to Corporate.

(2) Restructuring costs for the three months ended March 31, 2024 and 2023 include $ 0 million and $ 6 million, respectively, related to our North American LTL segment, $ 8 million and $ 7 million, respectively, related to our European Transportation segment, and $ 0 million and $ 11 million, respectively, related to Corporate.

See Note 4— Restructuring Charges for further information on our restructuring actions.

2 unchanged sentences

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

Three Months Ended September 30, 2023

(In millions) North American LTL European Transportation Total

United States $ 1,202 $ — $ 1,202

North America (excluding United States) 26 — 26

France — 309 309

United Kingdom — 232 232

Europe (excluding France and United Kingdom) — 211 211

Total $ 1,228 $ 752 $ 1,980

Three Months Ended September 30, 2022

(In millions) North American LTL European Transportation Total

United States $ 1,179 $ — $ 1,179

North America (excluding United States) 26 — 26

France — 313 313

United Kingdom — 217 217

Europe (excluding France and United Kingdom) — 211 211

Total $ 1,205 $ 741 $ 1,946

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

(In millions) North American LTL European Transportation Total

5 unchanged sentences

Total $ 1,221 $ 797 $ 2,018

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

(In millions) North American LTL European Transportation Total

6 unchanged sentences

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 spin-offs and other divestment activities.

We engage in restructuring actions as part of our ongoing efforts to best use our resources and infrastructure.

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.

Our restructuring-related activity was as follows:

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

(In millions) Reserve Balance

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

September 30, 2023

December 31, 2023 Charges Incurred Payments Reserve Balance

March 31, 2024

North American LTL $ 2 $ — $ ( 1 ) $ 1

2 unchanged sentences

Total $ 11 $ 8 $ ( 8 ) $ 11

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

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

We expect that the majority of the cash outlays related to the severance charges incurred in the first three months of 2024 will be completed within 12 months.

Derivative Instruments

5 unchanged sentences

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

September 30, 2023

March 31, 2024

Derivative Assets Derivative Liabilities

2 unchanged sentences

Cross-currency swap agreements $ 249 Other current assets $ — Other current liabilities $ ( 9 )

Cross-currency swap agreements 403 Other long-term assets — Other long-term liabilities ( 11 )

Interest rate swaps 550 Other current assets 1 Other current liabilities —

5 unchanged sentences

Cross-currency swap agreements $ 652 Other current assets $ — Other current liabilities $ ( 34 )

Cross-currency swap agreements 68 Other long-term assets 3 Other long-term liabilities —

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 )

2 unchanged sentences

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

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

Three Months Ended September 30,

(In millions) 2023 2022 2023 2022 2023 2022

Derivatives designated as cash flow hedges

Interest rate swaps $ ( 1 ) $ — $ 1 $ — $ — $ —

Derivatives designated as net investment hedges

Cross-currency swap agreements 20 25 — — 2 1

Total $ 19 $ 25 $ 1 $ — $ 2 $ 1

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

Nine Months Ended September 30,

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

Three Months Ended March 31,

(In millions) 2024 2023 2024 2023

15 unchanged sentences

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

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

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

Interest Rate Hedging

We execute short-term interest rate swaps to mitigate variability in forecasted interest payments on our Senior Secured Term Loan Credit Agreement.

We execute short-term interest rate swaps to mitigate variability in forecasted interest payments on our Senior Secured Term Loan Credit Agreement (the “Term Loan Credit Agreement”).

The interest rate swaps convert floating-rate interest payments into fixed rate interest payments.

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

The outstanding interest rate swap matures in the fourth quarter of 2023.

The outstanding interest rate swaps mature on various dates 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.

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

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

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

Term loan facility $ 1,100 $ 1,088 $ 1,100 $ 1,087

6.25 % senior secured notes due 2028

830 822 830 822

7.125 % senior notes due 2031

450 445 450 445

6.25 % senior secured notes due 2028

7.125 % senior notes due 2032

585 575 585 575

6.70 % senior debentures due 2034

6 unchanged sentences

(In millions) Fair Value Level 1 Level 2

September 30, 2023 $ 2,574 $ 1,655 $ 919

March 31, 2024 $ 3,553 $ 2,226 $ 1,327

December 31, 2023 3,583 2,235 1,348

1 unchanged sentence

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

As of September 30, 2023, our borrowing base was $ 590 million and our availability under our revolving loan credit agreement (the “ABL Facility”) was $ 589 million after considering outstanding letters of credit of less than $ 1 million.

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

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

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

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

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

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

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

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

As of March 31, 2024, our borrowing base was $ 565 million and our availability under our Second Amended and Restated Revolving Credit Agreement, as amended (the “ABL Facility”) was $ 564 million after considering outstanding letters of credit of less than $ 1 million.

As of March 31, 2024, we were in compliance with the ABL Facility’s financial covenants.

Letters of Credit Facility

As of September 30, 2023, we had issued $ 139 million in aggregate face amount of letters of credit under our $ 200 million uncommitted secured evergreen letter of credit facility.

As of March 31, 2024, we had issued $ 138 million in aggregate face amount of letters of credit under our $ 200 million uncommitted secured evergreen letter of credit facility.

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.

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

The interest rate was 7.32 % as of September 30, 2023.

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

We recorded a debt extinguishment loss of $ 23 million in the first nine months of 2023 due to this redemption.

Senior Notes Due 2028 and 2031

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

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

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

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

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

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

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

liens and certain other exceptions).

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

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

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

Senior Notes Due 2025

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

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

We paid for the redemption using available liquidity.

We recorded a debt extinguishment loss of $ 26 million in the first nine months of 2022 due to this redemption.

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

The applicable interest rate for the two tranches of the term loan facility approximated 7.32 % as of March 31, 2024.

Earnings (Loss) per Share

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

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

Three Months Ended March 31,

(In millions, except per share data) 2024 2023

Net income from continuing operations attributable to

common shares

$ 86 $ 92 $ 134 $ 220

Net income (loss) from discontinued operations, net of

amounts attributable to noncontrolling interest

( 2 ) 39 ( 3 ) 540

Net income attributable to common shares, basic $ 84 $ 131 $ 131 $ 760

Net income from continuing operations $ 67 $ 17

Net loss from discontinued operations — ( 3 )

Net income $ 67 $ 14

Basic weighted-average common shares 116 116

2 unchanged sentences

Basic earnings from continuing operations per share $ 0.58 $ 0.15

Basic earnings (loss) from discontinued operations per

( 0.01 ) 0.34 ( 0.02 ) 4.69

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

Basic earnings per share $ 0.58 $ 0.13

Diluted earnings from continuing operations per share $ 0.56 $ 0.15

Diluted earnings (loss) from discontinued operations per

( 0.01 ) 0.34 ( 0.02 ) 4.66

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

Diluted earnings per share $ 0.56 $ 0.13

3 unchanged sentences

We establish accruals for specific legal proceedings when it is considered probable that a loss has been incurred and the amount of the loss can be reasonably estimated.

We review and adjust accruals for loss contingencies quarterly

and as additional information becomes available.

We review and adjust accruals for loss contingencies quarterly and as additional information becomes available.

If a loss is not both probable and reasonably estimable, or if an exposure to loss exists in excess of the amount accrued, we assess whether there is at least a reasonable possibility that a loss, or additional loss, may have been incurred.

26 unchanged sentences

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 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 interim consolidated financial statements for those potential exposures.

The trial on the pollution exclusion issue is scheduled to take place in the fall of 2024, and the trial on allocation of defense costs among the applicable insurance policies is to take place in early 2025.

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.

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.

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.

Following meetings between the Company and County attorneys and the Los Angeles City Attorney and an assessment of the allegations and the underlying facts, the Company engaged in negotiations with the County and Los Angeles City Attorneys to address settlement of the alleged violations.

The Company previously accrued for this matter, and it was resolved for $ 7.9 million in April 2024.

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

What changed 10-Q

Item 1. Financial Statements