UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~June 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from____________to____________

Commission File Number: 001-32172

XPO, Inc.

(Exact name of registrant as specified in its charter)


Delaware		03-0450326
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
Five American Lane
Greenwich,	CT	06831
(Address of principal executive offices)		(Zip Code)

(855) 976-6951

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.001 per share

XPO

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~April 28,~~August 1, 2023, there were ~~115,857,013~~115,967,170 shares of the registrant’s common stock, par value $0.001 per share, outstanding.

XPO, Inc.

Quarterly Report on Form 10-Q

For the Quarterly Period Ended ~~March 31,~~June 30, 2023

Table of Contents


			Page No.
Part I—Financial Information
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets			1
Condensed Consolidated Statements of Income			2
Condensed Consolidated Statements of Comprehensive Income			3
Condensed Consolidated Statements of Cash Flows			4
Condensed Consolidated Statements of Changes in Equity			5
Notes to Condensed Consolidated Financial Statements			67
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			1519
Item 3. Quantitative and Qualitative Disclosures About Market Risk			2128
Item 4. Controls and Procedures			2228
Part II—Other Information
Item 1. Legal Proceedings			2228
Item 1A. Risk Factors			2228
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			2228
Item 3. Defaults Upon Senior Securities			2229
Item 4. Mine Safety Disclosures			2229
Item 5. Other Information			2229
Item 6. Exhibits			2329
Signatures			2431

Table of Contents

Part I—Financial Information

Item 1. Financial Statements.

XPO, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)


		March 31,		December 31,			June 30,		December 31,
(In millions, except per share data)	(In millions, except per share data)	2023		2022		(In millions, except per share data)	2023		2022
ASSETS	ASSETS					ASSETS
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	309	$	460	Cash and cash equivalents	$	290	$	460
Accounts receivable, net of allowances of $48 and $43, respectively		1,019		954
Accounts receivable, net of allowances of $46 and $43, respectively						Accounts receivable, net of allowances of $46 and $43, respectively	1,008		954
Other current assets	Other current assets	221		199		Other current assets	224		199
Current assets of discontinued operations	Current assets of discontinued operations	16		17		Current assets of discontinued operations	—		17
Total current assets	Total current assets	1,565		1,630		Total current assets	1,522		1,630
Long-term assets	Long-term assets					Long-term assets
Property and equipment, net of $1,743 and $1,679 in accumulated depreciation, respectively		1,978		1,832
Property and equipment, net of $1,795 and $1,679 in accumulated depreciation, respectively						Property and equipment, net of $1,795 and $1,679 in accumulated depreciation, respectively	2,037		1,832
Operating lease assets	Operating lease assets	717		719		Operating lease assets	704		719
Goodwill	Goodwill	1,483		1,472		Goodwill	1,493		1,472
Identifiable intangible assets, net of $407 and $392 in accumulated amortization, respectively		396		407
Identifiable intangible assets, net of $423 and $392 in accumulated amortization, respectively						Identifiable intangible assets, net of $423 and $392 in accumulated amortization, respectively	383		407
Other long-term assets	Other long-term assets	209		209		Other long-term assets	213		209

Total long-term assets	Total long-term assets	4,783		4,639		Total long-term assets	4,830		4,639
Total assets	Total assets	$	6,348	$	6,269	Total assets	$	6,352	$	6,269
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities	Current liabilities					Current liabilities
Accounts payable	Accounts payable	$	505	$	521	Accounts payable	$	464	$	521
Accrued expenses	Accrued expenses	792		774		Accrued expenses	800		774
Short-term borrowings and current maturities of long-term debt	Short-term borrowings and current maturities of long-term debt	66		59		Short-term borrowings and current maturities of long-term debt	66		59
Short-term operating lease liabilities	Short-term operating lease liabilities	110		107		Short-term operating lease liabilities	110		107
Other current liabilities	Other current liabilities	58		30		Other current liabilities	93		30
Current liabilities of discontinued operations	Current liabilities of discontinued operations	15		16		Current liabilities of discontinued operations	—		16
Total current liabilities	Total current liabilities	1,546		1,507		Total current liabilities	1,533		1,507
Long-term liabilities	Long-term liabilities					Long-term liabilities
Long-term debt	Long-term debt	2,478		2,473		Long-term debt	2,452		2,473
Deferred tax liability	Deferred tax liability	307		319		Deferred tax liability	301		319
Employee benefit obligations	Employee benefit obligations	92		93		Employee benefit obligations	91		93
Long-term operating lease liabilities	Long-term operating lease liabilities	606		606		Long-term operating lease liabilities	592		606
Other long-term liabilities	Other long-term liabilities	264		259		Other long-term liabilities	264		259

Total long-term liabilities	Total long-term liabilities	3,747		3,750		Total long-term liabilities	3,700		3,750
Stockholders’ equity	Stockholders’ equity					Stockholders’ equity

Common stock, $0.001 par value; 300 shares authorized; 116 and 115 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively		—		—
Common stock, $0.001 par value; 300 shares authorized; 116 and 115 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively						Common stock, $0.001 par value; 300 shares authorized; 116 and 115 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively	—		—
Additional paid-in capital	Additional paid-in capital	1,252		1,238		Additional paid-in capital	1,268		1,238
Retained earnings (accumulated deficit)	Retained earnings (accumulated deficit)	10		(4)		Retained earnings (accumulated deficit)	43		(4)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(207)		(222)		Accumulated other comprehensive loss	(192)		(222)

Total equity	Total equity	1,055		1,012		Total equity	1,119		1,012
Total liabilities and equity	Total liabilities and equity	$	6,348	$	6,269	Total liabilities and equity	$	6,352	$	6,269

See accompanying notes to condensed consolidated financial statements.

Table of Contents

XPO, Inc.

Condensed Consolidated Statements of Income

(Unaudited)


		Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
(In millions, except per share data)	(In millions, except per share data)		2023		2022			(In millions, except per share data)	2023		2022		2023		2022
Revenue	Revenue		$	1,907	$	1,894		Revenue	$	1,917	$	2,047	$	3,824	$	3,941
Salaries, wages and employee benefits	Salaries, wages and employee benefits		762		725			Salaries, wages and employee benefits	783		752		1,545		1,477
Purchased transportation	Purchased transportation		457		510			Purchased transportation	444		525		901		1,035
Fuel, operating expenses and supplies	Fuel, operating expenses and supplies		427		418			Fuel, operating expenses and supplies	390		434		817		852
Operating taxes and licenses	Operating taxes and licenses		15		16			Operating taxes and licenses	15		13		30		29
Insurance and claims	Insurance and claims		44		56			Insurance and claims	46		48		90		104
Gains on sales of property and equipment	Gains on sales of property and equipment		(3)		(1)			Gains on sales of property and equipment	(2)		(1)		(5)		(2)
Depreciation and amortization expense	Depreciation and amortization expense		101		94			Depreciation and amortization expense	107		96		208		190

Transaction and integration costs	Transaction and integration costs		22		7			Transaction and integration costs	17		7		39		14
Restructuring costs	Restructuring costs		24		6			Restructuring costs	10		2		34		8
Operating income	Operating income		58		63			Operating income	107		171		165		234
Other income	Other income		(5)		(14)			Other income	(3)		(13)		(8)		(27)

Debt extinguishment loss								Debt extinguishment loss	23		26		23		26
Interest expense	Interest expense		42		37			Interest expense	43		31		85		68
Income from continuing operations before income tax provision	Income from continuing operations before income tax provision		21		40			Income from continuing operations before income tax provision	44		127		65		167
Income tax provision	Income tax provision		4		8			Income tax provision	13		31		17		39
Income from continuing operations	Income from continuing operations		17		32			Income from continuing operations	31		96		48		128
Income (loss) from discontinued operations, net of taxes	Income (loss) from discontinued operations, net of taxes		(3)		456			Income (loss) from discontinued operations, net of taxes	2		45		(1)		501

Net income attributable to XPO	Net income attributable to XPO		$	14	$	488		Net income attributable to XPO	$	33	$	141	$	47	$	629

Net income (loss) attributable to common shareholders	Net income (loss) attributable to common shareholders							Net income (loss) attributable to common shareholders
Continuing operations	Continuing operations		$	17	$	32		Continuing operations	$	31	$	96	$	48	$	128
Discontinued operations	Discontinued operations		(3)		456			Discontinued operations	2		45		(1)		501
Net income attributable to common shareholders	Net income attributable to common shareholders		$	14	$	488		Net income attributable to common shareholders	$	33	$	141	$	47	$	629

Earnings (loss) per share data	Earnings (loss) per share data							Earnings (loss) per share data
Basic earnings per share from continuing operations	Basic earnings per share from continuing operations		$	0.15	$	0.28		Basic earnings per share from continuing operations	$	0.27	$	0.83	$	0.42	$	1.12
Basic earnings (loss) per share from discontinued operations	Basic earnings (loss) per share from discontinued operations		(0.02)		3.97			Basic earnings (loss) per share from discontinued operations	0.01		0.40		(0.01)		4.36
Basic earnings per share attributable to common shareholders	Basic earnings per share attributable to common shareholders		$	0.13	$	4.25		Basic earnings per share attributable to common shareholders	$	0.28	$	1.23	$	0.41	$	5.48
Diluted earnings per share from continuing operations	Diluted earnings per share from continuing operations		$	0.15	$	0.28		Diluted earnings per share from continuing operations	$	0.27	$	0.83	$	0.41	$	1.11
Diluted earnings (loss) per share from discontinued operations	Diluted earnings (loss) per share from discontinued operations		(0.02)		3.94			Diluted earnings (loss) per share from discontinued operations	0.01		0.39		(0.01)		4.33
Diluted earnings per share attributable to common shareholders	Diluted earnings per share attributable to common shareholders		$	0.13	$	4.22		Diluted earnings per share attributable to common shareholders	$	0.28	$	1.22	$	0.40	$	5.44

Weighted-average common shares outstanding	Weighted-average common shares outstanding							Weighted-average common shares outstanding
Basic weighted-average common shares outstanding	Basic weighted-average common shares outstanding		116		115			Basic weighted-average common shares outstanding	116		115		116		115
Diluted weighted-average common shares outstanding	Diluted weighted-average common shares outstanding		116		116			Diluted weighted-average common shares outstanding	118		116		117		116

See accompanying notes to condensed consolidated financial statements.

Table of Contents

XPO, Inc.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)


		Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
(In millions)	(In millions)		2023		2022			(In millions)	2023		2022		2023		2022
Net income	Net income		$	14	$	488		Net income	$	33	$	141	$	47	$	629

Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax							Other comprehensive income (loss), net of tax
Foreign currency translation gain (loss), net of tax effect of $8 and $(2)			$	13	$	(26)
Unrealized gain on financial assets/liabilities designated as hedging instruments, net of tax effect of $1 and $—			2		1
Foreign currency translation gain (loss), net of tax effect of $2, $(9), $10 and $(11)								Foreign currency translation gain (loss), net of tax effect of $2, $(9), $10 and $(11)	$	14	$	(46)	$	27	$	(72)
Unrealized gain on financial assets/liabilities designated as hedging instruments, net of tax effect of $—, $(1), $1 and $(1)								Unrealized gain on financial assets/liabilities designated as hedging instruments, net of tax effect of $—, $(1), $1 and $(1)	1		3		3		4

Other comprehensive income (loss)	Other comprehensive income (loss)		15		(25)			Other comprehensive income (loss)	15		(43)		30		(68)

Comprehensive income attributable to XPO	Comprehensive income attributable to XPO		$	29	$	463		Comprehensive income attributable to XPO	$	48	$	98	$	77	$	561

See accompanying notes to condensed consolidated financial statements.

Table of Contents

XPO, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)
Three Months Ended March 31,
(In millions) 2023 2022
Cash flows from operating activities of continuing operations
Net income $ 14 $ 488
Income (loss) from discontinued operations, net of taxes (3) 456
Income from continuing operations 17 32
Adjustments to reconcile income from continuing operations to net cash from
operating activities
Depreciation, amortization and net lease activity 101 94
Stock compensation expense 22 6
Accretion of debt 3 4
Deferred tax expense (benefit) (2) 5
Gains on sales of property and equipment (3) (1)
Other 17 6
Changes in assets and liabilities
Accounts receivable (69) (154)
Other assets (24) (37)
Accounts payable (8) 117
Accrued expenses and other liabilities 22 116
Net cash provided by operating activities from continuing operations 76 188
Cash flows from investing activities of continuing operations
Payment for purchases of property and equipment (224) (123)
Proceeds from sale of property and equipment 8 3
Net cash used in investing activities from continuing operations (216) (120)
Cash flows from financing activities of continuing operations
Repayment of debt and finance leases (16) (16)
Change in bank overdrafts 19 3
Payment for tax withholdings for restricted shares (12) (12)
Other (1) 1
Net cash used in financing activities from continuing operations (10) (24)
Cash flows from discontinued operations
Operating activities of discontinued operations (8) 13
Investing activities of discontinued operations 1 691
Net cash provided by (used in) discontinued operations (7) 704
Effect of exchange rates on cash, cash equivalents and restricted cash 2 (3)
Net increase (decrease) in cash, cash equivalents and restricted cash (155) 745
Cash, cash equivalents and restricted cash, beginning of period 470 273
Cash, cash equivalents and restricted cash, end of period 315 1,018
Less: Cash, cash equivalents and restricted cash of discontinued operations, end of
period
— 50
Cash, cash equivalents and restricted cash of continued operations, end of period $ 315 $ 968
Supplemental disclosure of cash flow information
Leased assets obtained in exchange for new operating lease liabilities $ 28 $ 22
Leased assets obtained in exchange for new finance lease liabilities 19 4
Cash paid for interest 39 13
Cash paid for income taxes 3 3


	Six Months Ended June 30,
(In millions)	2023		2022
Cash flows from operating activities of continuing operations
Net income	$	47	$	629
Income (loss) from discontinued operations, net of taxes	(1)		501
Income from continuing operations	48		128
Adjustments to reconcile income from continuing operations to net cash from operating activities
Depreciation, amortization and net lease activity	208		190
Stock compensation expense	41		14
Accretion of debt	7		8
Deferred tax expense (benefit)	(6)		22


Gains on sales of property and equipment	(5)		(2)
Other	39		37
Changes in assets and liabilities
Accounts receivable	(64)		(241)
Other assets	(31)		(38)
Accounts payable	(57)		72
Accrued expenses and other liabilities	27		167
Net cash provided by operating activities from continuing operations	207		357
Cash flows from investing activities of continuing operations

Payment for purchases of property and equipment	(355)		(242)
Proceeds from sale of property and equipment	13		7
Proceeds from settlement of cross currency swaps	—		19

Net cash used in investing activities from continuing operations	(342)		(216)
Cash flows from financing activities of continuing operations
Proceeds from issuance of debt	1,977		—

Repurchase of debt	(2,003)		(651)
Proceeds from borrowings on ABL facility	—		275
Repayment of borrowings on ABL facility	—		(275)
Repayment of debt and finance leases	(35)		(32)
Payment for debt issuance costs	(15)		—


Change in bank overdrafts	51		25
Payment for tax withholdings for restricted shares	(12)		(13)

Other	1		(2)
Net cash used in financing activities from continuing operations	(36)		(673)

Cash flows from discontinued operations
Operating activities of discontinued operations	(8)		39
Investing activities of discontinued operations	1		680

Net cash provided by (used in) discontinued operations	(7)		719
Effect of exchange rates on cash, cash equivalents and restricted cash	5		(14)
Net increase (decrease) in cash, cash equivalents and restricted cash	(173)		173
Cash, cash equivalents and restricted cash, beginning of period	470		273
Cash, cash equivalents and restricted cash, end of period	297		446
Less: Cash, cash equivalents and restricted cash of discontinued operations, end of period	—		212
Cash, cash equivalents and restricted cash of continued operations, end of period	$	297	$	234
Supplemental disclosure of cash flow information

Leased assets obtained in exchange for new operating lease liabilities	$	46	$	72
Leased assets obtained in exchange for new finance lease liabilities	36		10
Cash paid for interest	90		73
Cash paid for income taxes	18		71

See accompanying notes to condensed consolidated financial statements.

Table of Contents

XPO, Inc.

Condensed Consolidated Statements of Changes in Equity

(Unaudited)

Common Stock
(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, 2022 115,435 $ — $ 1,238 $ (4) $ (222) $ 1,012
Net income — — — 14 — 14
Other comprehensive income — — — — 15 15
Exercise and vesting of stock compensation awards 315 — — — — —
Tax withholdings related to vesting of stock compensation awards — — (8) — — (8)
Stock compensation expense — — 22 — — 22
Balance as of March 31, 2023 115,750 $ — $ 1,252 $ 10 $ (207) $ 1,055

Common Stock
(Shares in thousands, dollars in millions) Shares Amount Additional Paid-In Capital Retained Earnings Accumulated Other
Comprehensive Loss Total Equity
Balance as of December 31, 2021 114,737 $ — $ 1,179 $ 43 $ (84) $ 1,138
Net income — — — 488 — 488
Other comprehensive loss — — — — (25) (25)
Exercise and vesting of stock compensation awards 245 — — — — —
Tax withholdings related to vesting of stock compensation awards — — (12) — — (12)
Stock compensation expense — — 8 — — 8
Other — — 1 — — 1
Balance as of March 31, 2022 114,982 $ — $ 1,176 $ 531 $ (109) $ 1,598


	Common Stock
(Shares in thousands, dollars in millions)		Shares	Amount		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Equity
Balance as of March 31, 2023		115,750	$	—	$	1,252	$	10	$	(207)	$	1,055
Net income		—	—		—		33		—		33
Other comprehensive income		—	—		—		—		15		15

Exercise and vesting of stock compensation awards		189	—		—		—		—		—
Tax withholdings related to vesting of stock compensation awards		—	—		(4)		—		—		(4)



Stock compensation expense		—	—		19		—		—		19
Other		—	—		1		—		—		1
Balance as of June 30, 2023		115,939	$	—	$	1,268	$	43	$	(192)	$	1,119



	Common Stock
(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, 2022		115,435	$	—	$	1,238	$	(4)	$	(222)	$	1,012
Net income		—	—		—		47		—		47
Other comprehensive income		—	—		—		—		30		30

Exercise and vesting of stock compensation awards		504	—		—		—		—		—
Tax withholdings related to vesting of stock compensation awards		—	—		(12)		—		—		(12)





Stock compensation expense		—	—		41		—		—		41
Other		—	—		1		—		—		1
Balance as of June 30, 2023		115,939	$	—	$	1,268	$	43	$	(192)	$	1,119

Table of Contents

XPO, Inc.

Condensed Consolidated Statements of Changes in Equity (continued)

(Unaudited)


	Common Stock
(Shares in thousands, dollars in millions)		Shares	Amount		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Equity
Balance as of March 31, 2022		114,982	$	—	$	1,176	$	531	$	(109)	$	1,598
Net income		—	—		—		141		—		141
Other comprehensive loss		—	—		—		—		(43)		(43)

Exercise and vesting of stock compensation awards		51	—		—		—		—		—
Tax withholdings related to vesting of stock compensation awards		—	—		(1)		—		—		(1)



Stock compensation expense		—	—		10		—		—		10
Other		—	—		2		—		—		2
Balance as of June 30, 2022		115,033	$	—	$	1,187	$	672	$	(152)	$	1,707


	Common Stock
(Shares in thousands, dollars in millions)		Shares	Amount		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Equity
Balance as of December 31, 2021		114,737	$	—	$	1,179	$	43	$	(84)	$	1,138
Net income		—	—		—		629		—		629
Other comprehensive loss		—	—		—		—		(68)		(68)

Exercise and vesting of stock compensation awards		296	—		—		—		—		—
Tax withholdings related to vesting of stock compensation awards		—	—		(13)		—		—		(13)





Stock compensation expense		—	—		18		—		—		18
Other		—	—		3		—		—		3
Balance as of June 30, 2022		115,033	$	—	$	1,187	$	672	$	(152)	$	1,707

See accompanying notes to condensed consolidated financial statements.

Table of Contents

XPO, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization, Description of Business and Basis of Presentation

XPO, Inc., together with its subsidiaries (“~~XPO”~~XPO,” “we” or ~~“we”~~the “Company”), is a leading provider of freight transportation services. We use our proprietary technology to move goods efficiently through our customers’ supply chains in North America and Europe. See Note 3—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.

Basis of Presentation

We prepared our Condensed Consolidated Financial Statements in accordance with U.S. generally accepted accounting principles (“GAAP”) and on the same basis as the accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”). The interim reporting requirements of Form 10-Q allow certain information and note disclosures normally included in annual consolidated financial statements to be condensed or omitted. These Condensed Consolidated Financial Statements should be read in conjunction with the 2022 Form 10-K.

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

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

Restricted Cash

As of ~~March 31,~~June 30, 2023 and December 31, 2022, our restricted cash included in Other long-term assets on our Condensed Consolidated Balance Sheets was $6$7 million and $10 million, respectively.

Trade Receivables Securitization and Factoring Programs

We sell certain of our trade accounts receivable on a non-recourse basis to third-party financial institutions under factoring agreements. We also sell trade accounts receivable under a securitization program for our European transportation business. We use trade receivables securitization and factoring programs to help manage our cash flows and offset the impact of extended payment terms for some of our customers.

The maximum amount of net cash proceeds available at any one time under our securitization program, inclusive of any unsecured borrowings, is €200 million (approximately ~~$217~~$218 million as of ~~March 31,~~June 30, 2023). As of ~~March 31,~~June 30, 2023, ~~the maximum amount~~€5 million (approximately $5 million) was available under the ~~program was utilized.~~program. The weighted average interest rate was ~~3.41%~~4.41% as of ~~March 31,~~June 30, 2023. ~~In May 2023, we entered into an agreement to extend the securitization~~The program ~~which was scheduled to expire~~expires in July ~~2024, through July~~ 2026. ~~The terms and conditions of the extended securitization program are materially consistent with the prior program.~~

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Information related to the trade receivables sold was as follows:


		Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
(In millions)	(In millions)		2023		2022			(In millions)	2023		2022		2023		2022
Securitization programs	Securitization programs							Securitization programs
Receivables sold in period	Receivables sold in period		$	440	$	447		Receivables sold in period	$	470	$	458	$	910	$	905
Cash consideration	Cash consideration		440		447			Cash consideration	470		458		910		905

Factoring programs	Factoring programs							Factoring programs
Receivables sold in period	Receivables sold in period		24		21			Receivables sold in period	34		23		58		44
Cash consideration	Cash consideration		24		21			Cash consideration	34		23		58		44

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The levels of inputs used to measure fair value are:

•Level 1—Quoted prices for identical instruments in active markets;

•Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets; and

•Level 3—Valuations based on inputs that are unobservable, generally utilizing pricing models or other valuation techniques that reflect management’s judgment and estimates.

We base our fair value estimates on market assumptions and available information. The carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and current maturities of long-term debt approximated their fair values as of ~~March 31,~~June 30, 2023 and December 31, 2022 due to their short-term nature and/or being receivable or payable on demand. The Level 1 cash equivalents include money market funds valued using quoted prices in active markets and a cash deposit for the securitization program. 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.

The fair value hierarchy of cash equivalents was as follows:


(In millions)	(In millions)	Carrying Value		Fair Value		Level 1		(In millions)	Carrying Value		Fair Value		Level 1
March 31, 2023		$	238	$	238	$	238
June 30, 2023								June 30, 2023	$	231	$	231	$	231
December 31, 2022	December 31, 2022	402		402		402		December 31, 2022	402		402		402

Adoption of New Accounting ~~Standard~~

~~In September 2022, the Financial Accounting~~ Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-04, “Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations.” The ASU increases the transparency surrounding supplier finance programs by requiring the buyer to disclose information on an annual basis about the key terms of the program, the outstanding obligation amounts as of the end of the period, a rollforward of such amounts, and the balance sheet presentation of the related amounts. Additionally, the obligation amount outstanding at the end of the period must be disclosed in interim periods. We adopted this standard on January 1, 2023, on a prospective basis. The adoption, which is limited to financial statement disclosures, did not have a material impact on our financial statements.

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

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are effective upon issuance. In December 2022, the FASB issued ASU 2022-06, “Reference rate reform (Topic 848): Deferral of the sunset date of Topic 848” which defers the expiration date for Topic 848 from December 31, 2022 until December 31, 2024. At December 31, 2022, our revolving loan credit agreement (the “ABL Facility”) and ~~the~~ senior secured term loan credit agreement, as amended (the ~~“Term~~“Existing Term Loan Facility”), ~~provide~~provided for an interest rate based on LIBOR. In ~~February~~ 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, and we expect to similarly modify the interest rate basis in the Term Loan Facility in 2023.~~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.

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2. Discontinued Operations

As discussed above, the results of RXO and intermodal are presented as discontinued operations. ~~In addition, discontinued operations include GXO Logistics, Inc. (“GXO”), our former logistics segment that we spun off in August 2021.~~

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

~~Three Months Ended March 31,~~

~~(In millions)~~

~~2022~~

~~Revenue~~

~~1,645~~

~~Salaries, wages and employee benefits~~

~~164~~

~~Purchased transportation~~

~~1,221~~

~~Fuel, operating expenses and supplies~~

~~115~~

~~Operating taxes and licenses~~

~~Insurance and claims~~

~~Depreciation and amortization expense~~

~~Gain on sale of business~~

~~(450)~~

~~Transaction and other operating costs~~

~~Operating income~~

~~561~~

~~Income tax provision~~

~~105~~

~~Net income from discontinued operations attributable to discontinued operations~~

~~456~~


	Three Months Ended June 30,		Six Months Ended June 30,
(In millions)	2022		2022
Revenue	$	1,227	$	2,872
Salaries, wages and employee benefits	151		315
Purchased transportation	879		2,100
Fuel, operating expenses and supplies	76		191
Operating taxes and licenses	1		2
Insurance and claims	4		13
Depreciation and amortization expense	19		41
(Gain) loss on sale of business	16		(434)
Transaction and other operating costs	21		23
Operating income	60		621



Income tax provision	15		120


Net income from discontinued operations attributable to discontinued operations	$	45	$	501

For the three and six months ended ~~March 31,~~June 30, 2023, we incurred approximately ~~$24~~$16 million and $40 million, respectively, of costs related to the RXO spin-off, of which $0 million and $4 million, respectively, are reflected within income (loss) from discontinued operations in our Condensed Consolidated Statements of Income. For the three and six months ended ~~March 31,~~June 30, 2022, we incurred approximately $4$18 million and $21 million, respectively, of costs related to the ~~GXO~~RXO spin-off, ~~all~~ of which $17 million and $20 million, respectively, are reflected within income (loss) from ~~continuing~~discontinued operations in our Condensed Consolidated Statements of ~~income.~~

In accordance with a separation and distribution agreement, GXO has agreed to indemnify XPO for payments XPO makes with respect to certain self-insurance matters that were incurred by the logistics segment prior to the spin-off and remain obligations of XPO. The receivable and reserve for these matters was approximately $16 million and $15 million, respectively, as of March 31, 2023 and approximately $17 million and $16 million, respectively, as of December 31, 2022.Income.

3. Segment Reporting

We are organized into two reportable segments: North American ~~LTL,~~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.

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In our European Transportation segment, we serve a large base of customers with 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 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. We include items directly attributable to a segment, and those that can be allocated on a reasonable basis, in segment results reported to the CODM. 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.

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Selected financial data for our segments is as follows:


		Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	(in millions)		2023		2022			(in millions)	2023		2022		2023		2022
Revenue	Revenue							Revenue
North American LTL	North American LTL		$	1,120	$	1,107		North American LTL	$	1,136	$	1,240	$	2,256	$	2,347
European Transportation	European Transportation		787		787			European Transportation	781		807		1,568		1,594
Total	Total		$	1,907	$	1,894		Total	$	1,917	$	2,047	$	3,824	$	3,941

Adjusted EBITDA	Adjusted EBITDA							Adjusted EBITDA
North American LTL	North American LTL		$	182	$	186		North American LTL	$	208	$	274	$	390	$	460
European Transportation	European Transportation		37		38			European Transportation	46		49		83		87
Corporate	Corporate		(9)		(40)			Corporate	(10)		(34)		(19)		(74)
Total Adjusted EBITDA	Total Adjusted EBITDA		210		184			Total Adjusted EBITDA	244		289		454		473
Less:	Less:							Less:

Debt extinguishment loss								Debt extinguishment loss	23		26		23		26
Interest expense	Interest expense		42		37			Interest expense	43		31		85		68
Income tax provision	Income tax provision		4		8			Income tax provision	13		31		17		39
Depreciation and amortization expense	Depreciation and amortization expense		101		94			Depreciation and amortization expense	107		96		208		190

Transaction and integration costs (1)	Transaction and integration costs (1)		22		7			Transaction and integration costs (1)	17		7		39		14
Restructuring costs (2)	Restructuring costs (2)		24		6			Restructuring costs (2)	10		2		34		8
Income from continuing operations	Income from continuing operations		$	17	$	32		Income from continuing operations	$	31	$	96	$	48	$	128

Depreciation and amortization expense	Depreciation and amortization expense							Depreciation and amortization expense
North American LTL	North American LTL		$	68	$	56		North American LTL	$	71	59		$	139	$	115
European Transportation	European Transportation		32		33			European Transportation	33		32		65		65
Corporate	Corporate		1		5			Corporate	3		5		4		10
Total	Total		$	101	$	94		Total	$	107	$	96	$	208	$	190

(1) Transaction and integration costs for the ~~first quarter of~~periods ended June 30, 2023 are primarily comprised of stock-based compensation and retention awards for certain employees related to strategic initiatives. Transaction and integration costs for the ~~first quarter of~~periods ended June 30, 2022 are primarily comprised of third-party professional fees related to strategic initiatives as well as retention awards paid to certain employees. Transaction and integration costs for the three months ended ~~March 31,~~June 30, 2023 and 2022 include $1$0 million and $2 million, respectively, related to our North American LTL segment, $0 million and $1 million, respectively, related to our European Transportation segment, and ~~$21~~$17 million and $5$4 million, respectively, related to Corporate. Transaction and integration costs for the six months ended June 30, 2023 and 2022 include $0 million and $2 million, respectively, related to our North American LTL segment, $1 million and $3 million, respectively, related to our European Transportation segment, and $38 million and $9 million, respectively, related to Corporate.

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

910

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4. Revenue Recognition

Disaggregation of Revenues

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


	Three Months Ended June 30, 2023
(In millions)	North American LTL		European Transportation		Total
Revenue
United States	$	1,112	$	—	$	1,112
North America (excluding United States)	24		—		24
France	—		331		331
United Kingdom	—		226		226
Europe (excluding France and United Kingdom)	—		224		224

Total	$	1,136	$	781	$	1,917


	Three Months Ended June 30, 2022
(In millions)	North American LTL		European Transportation		Total
Revenue
United States	$	1,213	$	—	$	1,213
North America (excluding United States)	27		—		27
France	—		352		352
United Kingdom	—		224		224
Europe (excluding France and United Kingdom)	—		231		231

Total	$	1,240	$	807	$	2,047


		Three Months Ended March 31, 2023						Six Months Ended June 30, 2023
(In millions)	(In millions)	North American LTL		European Transportation		Total			(In millions)	North American LTL		European Transportation		Total
Revenue	Revenue								Revenue
United States	United States	$	1,097	$	—	$	1,097		United States	$	2,209	$	—	$	2,209
North America (excluding United States)	North America (excluding United States)	23		—		23			North America (excluding United States)	47		—		47
France	France	—		340		340			France	—		671		671
United Kingdom	United Kingdom	—		224		224			United Kingdom	—		450		450
Europe (excluding France and United Kingdom)	Europe (excluding France and United Kingdom)	—		223		223			Europe (excluding France and United Kingdom)	—		447		447

Total	Total	$	1,120	$	787	$	1,907		Total	$	2,256	$	1,568	$	3,824


	Six Months Ended June 30, 2022
(In millions)	North American LTL		European Transportation		Total
Revenue
United States	$	2,297	$	—	$	2,297
North America (excluding United States)	50		—		50
France	—		704		704
United Kingdom	—		449		449
Europe (excluding France and United Kingdom)	—		441		441

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

Three Months Ended March 31, 2022
(In millions) North American LTL European Transportation Total
Revenue
United States $ 1,084 $ — $ 1,084
North America (excluding United States) 23 — 23
France — 352 352
United Kingdom — 225 225
Europe (excluding France and United Kingdom) — 210 210
Total $ 1,107 $ 787 $ 1,894

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5. 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. 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:


				Three Months Ended March 31, 2023									Six Months Ended June 30, 2023
(In millions)	(In millions)	Reserve Balance as of December 31, 2022		Charges Incurred		Payments		Foreign Exchange and Other		Reserve Balance as of March 31, 2023		(In millions)	Reserve Balance as of December 31, 2022		Charges Incurred		Payments		Foreign Exchange and Other		Reserve Balance as of June 30, 2023
Severance	Severance											Severance
North American LTL	North American LTL	$	2	$	—	$	(1)	$	—	$	1	North American LTL	$	2	$	4	$	(2)	$	—	$	4
European Transportation	European Transportation	1		7		(2)		—		6		European Transportation	1		8		(6)		—		3
Corporate	Corporate	19		11		(6)		(1)		23		Corporate	19		16		(19)		(1)		15

Total	Total	$	22	$	18	$	(9)	$	(1)	$	30	Total	$	22	$	28	$	(27)	$	(1)	$	22

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.

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

6. Derivative Instruments

In the normal course of business, we are exposed to risks arising from business operations and economic factors, including fluctuations in interest rates and foreign currencies. We use derivative instruments to manage the volatility related to these exposures. The objective of these derivative instruments is to reduce fluctuations in our earnings and cash flows associated with changes in foreign currency exchange rates and interest rates. These financial instruments are not used for trading or other speculative purposes. Historically, we have not incurred, and do not expect to incur in the future, any losses as a result of counterparty default.

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


		March 31, 2023									June 30, 2023
				Derivative Assets			Derivative Liabilities						Derivative Assets			Derivative Liabilities
(In millions)	(In millions)	Notional Amount		Balance Sheet Caption	Fair Value		Balance Sheet Caption	Fair Value		(In millions)	Notional Amount		Balance Sheet Caption	Fair Value		Balance Sheet Caption	Fair Value
Derivatives designated as hedges	Derivatives designated as hedges									Derivatives designated as hedges
Cross-currency swap agreements	Cross-currency swap agreements	$	617	Other current assets	$	—	Other current liabilities	$	(21)	Cross-currency swap agreements	$	663	Other current assets	$	1	Other current liabilities	$	(24)
Cross-currency swap agreements		57		Other long-term assets	2		Other long-term liabilities	—

Interest rate swaps	Interest rate swaps	1,882		Other current assets	—		Other current liabilities	—		Interest rate swaps	700		Other current assets	2		Other current liabilities	—

Total	Total				$	2		$	(21)	Total				$	3		$	(24)

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	December 31, 2022
			Derivative Assets			Derivative Liabilities
(In millions)	Notional Amount		Balance Sheet Caption	Fair Value		Balance Sheet Caption	Fair Value
Derivatives designated as hedges
Cross-currency swap agreements	$	332	Other current assets	$	—	Other current liabilities	$	(11)
Cross-currency swap agreements	68		Other long-term assets	3		Other long-term liabilities	—
Interest rate swaps	1,882		Other current assets	—		Other current liabilities	(1)


Total				$	3		$	(12)

The derivatives are classified as Level 2 within the fair value hierarchy. The derivatives are valued using inputs other than quoted prices, such as foreign exchange rates and yield curves.

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 June 30,
(In millions)	2023		2022		2023		2022		2023		2022
Derivatives designated as cash flow hedges

Interest rate swaps	1		4		1		—		—		—
Derivatives designated as net investment hedges
Cross-currency swap agreements	(3)		28		—		—		2		2
Total	$	(2)	$	32	$	1	$	—	$	2	$	2


		Amount of Gain (Loss) Recognized in Other Comprehensive Loss on Derivatives				Amount of Gain Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing)						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 March 31,							Six Months Ended June 30,
(In millions)	(In millions)	2023		2022			2023			2022			(In millions)	2023		2022		2023		2022		2023		2022
Derivatives designated as cash flow hedges	Derivatives designated as cash flow hedges												Derivatives designated as cash flow hedges

Interest rate swaps	Interest rate swaps	1		1			—			—			Interest rate swaps	2		5		1		—		—		—
Derivatives designated as net investment hedges	Derivatives designated as net investment hedges												Derivatives designated as net investment hedges
Cross-currency swap agreements	Cross-currency swap agreements	(10)		9			2			1			Cross-currency swap agreements	(13)		37		—		—		4		4
Total	Total	$	(9)	$	10		$	2		$	1		Total	$	(11)	$	42	$	1	$	—	$	4	$	4

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Cross-Currency Swap Agreements

We enter into cross-currency swap agreements to manage the foreign currency exchange risk related to our international operations by effectively converting our fixed-rate USD-denominated debt, including the associated interest payments, to fixed-rate, euro (“EUR”)-denominated debt. The risk management objective of these transactions is to manage foreign currency risk relating to net investments in subsidiaries denominated in foreign currencies and reduce the variability in the functional currency equivalent cash flows of this debt.

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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. At maturity, we will repay the original principal amount in EUR and receive the principal amount in USD. These agreements expire at various dates through 2024.

We designated these cross-currency swaps as qualifying hedging instruments and account for them as net investment hedges. We apply the simplified method of assessing the effectiveness of our net investment hedging relationships. Under this method, for each reporting period, the change in the fair value of the cross-currency swaps is initially recognized in Accumulated other comprehensive income (“AOCI”). The change in the fair value due to foreign exchange remains in AOCI and the initial component excluded from effectiveness testing will initially remain in AOCI and then will be reclassified from AOCI to Interest expense each period in a systematic manner. Cash flows related to the periodic exchange of interest payments for these net investment hedges are included in Cash flows from operating activities of continuing operations on our Condensed Consolidated Statements of Cash Flows.

In the second quarter of 2022, we received approximately $19 million related to the settlement of certain cross currency swaps that matured during the quarter. The proceeds were included in Cash flows from investing activities of continuing operations on our Condensed Consolidated Statements of Cash Flows.

Interest Rate Hedging

We execute short-term interest rate swaps to mitigate variability in forecasted interest payments on our Senior Secured 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 ~~swaps mature on various dates through~~swap matures in November 2023.

We record gains and losses resulting from fair value adjustments to the designated portion of interest rate swaps in AOCI and reclassify them to Interest expense on the dates that interest payments accrue. Cash flows related to the interest rate swaps are included in Cash flows from operating activities of continuing operations on our Condensed Consolidated Statements of Cash Flows.

7. Debt


		March 31, 2023				December 31, 2022					June 30, 2023				December 31, 2022
(In millions)	(In millions)	Principal Balance		Carrying Value		Principal Balance		Carrying Value		(In millions)	Principal Balance		Carrying Value		Principal Balance		Carrying Value

Term loan facility	Term loan facility	$	2,003	$	1,983	$	2,003	$	1,981	Term loan facility	$	700	$	692	$	2,003	$	1,981

6.25% senior notes due 2025	6.25% senior notes due 2025	112		112		112		111		6.25% senior notes due 2025	112		112		112		111
6.25% senior secured notes due 2028										6.25% senior secured notes due 2028	830		820		—		—
7.125% senior notes due 2031										7.125% senior notes due 2031	450		445		—		—
6.70% senior debentures due 2034	6.70% senior debentures due 2034	300		218		300		217		6.70% senior debentures due 2034	300		219		300		217

Finance leases, asset financing and other	Finance leases, asset financing and other	231		231		223		223		Finance leases, asset financing and other	230		230		223		223
Total debt	Total debt	2,646		2,544		2,638		2,532		Total debt	2,622		2,518		2,638		2,532
Short-term borrowings and current maturities of long-term debt	Short-term borrowings and current maturities of long-term debt	66		66		59		59		Short-term borrowings and current maturities of long-term debt	66		66		59		59
Long-term debt	Long-term debt	$	2,580	$	2,478	$	2,579	$	2,473	Long-term debt	$	2,556	$	2,452	$	2,579	$	2,473

The fair value of our debt and classification in the fair value hierarchy was as follows:


(In millions)	(In millions)	Fair Value		Level 1		Level 2		(In millions)	Fair Value		Level 1		Level 2
March 31, 2023		$	2,616	$	395	$	2,221
June 30, 2023								June 30, 2023	$	2,616	$	1,691	$	925
December 31, 2022	December 31, 2022	2,601		392		2,209		December 31, 2022	2,601		392		2,209

We valued Level 1 debt using quoted prices in active markets. We valued Level 2 debt using bid evaluation pricing models or quoted prices of securities with similar characteristics.

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ABL Facility

As of ~~March 31,~~June 30, 2023, our borrowing base was $513 million and our availability under our revolving loan credit agreement (the “ABL Facility”) was ~~$502 million. Outstanding~~$512 million after considering outstanding letters of credit ~~were~~of less than $1 ~~million as of March 31, 2023.~~million. As of ~~March 31,~~June 30, 2023, we were in compliance with the ABL Facility’s financial covenants.

In February 2023, we amended our ABL Facility to, among other things: (i) extend the maturity date to April 30, 2026 (subject, in certain circumstances, to a springing maturity if more than $250 million of our existing term loan debt or certain refinancings thereof remain outstanding 91 days prior to their respective maturity dates); (ii) replace LIBOR-based benchmark rates applicable to loans outstanding with Secured Overnight Financing Rate-based rates; (iii) reduce the sublimit for issuance of letters of credit to $200 million; (iv) reduce the sublimit for borrowings in Canadian Dollars to $50 million; (v) exclude real property from the collateral securing the obligations and (vi) make certain other changes to the covenants and other provisions therein. The aggregate commitment of all lenders under the amended ABL Facility remains $600 million.

Letters of Credit Facility

As of ~~March 31,~~June 30, 2023, we had issued ~~$154~~$141 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 ~~on our term loan facility~~ was ~~6.45%~~7.09% as of ~~March 31,~~June 30, 2023.

In the second quarter of 2023, we used net proceeds from the New Term Loan Facility and new Senior Notes, as described below, together with cash on hand, to repay $2.0 billion of outstanding principal under the Existing Term Loan Facility and to pay related fees, expenses and accrued interest. We recorded a debt extinguishment loss of $23 million in the second quarter of 2023.

Senior Notes Due 2028 and 2031

In May 2023, we completed private placements of $830 million aggregate principal amount of senior secured notes due 2028 (the “Senior Secured Notes due 2028”) and $450 million aggregate principal amount of senior notes due 2031 (the “Senior Notes due 2031” and together with the Senior Secured Notes due 2028, the “Senior Notes”). The Senior Secured Notes due 2028 mature on June 1, 2028 and bear interest at a rate of 6.25% per annum. The Senior Notes due 2031 mature on June 1, 2031 and bear interest at a rate of 7.125% per annum. Interest on the Senior Notes is payable semi-annually in cash in arrears, commencing December 1, 2023. The Senior Notes were issued at par and were used to repay our Existing Term Loan Facility as described above.

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

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The Senior Secured Notes due 2028 and the guarantees thereof are secured by substantially all of our assets and our guarantors equally and ratably with the indebtedness under the Term Loan Credit Agreement (subject to permitted liens and certain other exceptions). The Senior Notes due 2031 and the guarantees thereof are unsecured, unsubordinated indebtedness for us and our guarantors.

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

Senior Notes Due 2025

In the second quarter of 2022, we redeemed $630 million of the then $1.15 billion outstanding principal amount of our 6.25% senior notes due 2025 (“Senior Notes due 2025”). The redemption price for the notes was 100% of the principal amount plus a premium, as defined in the indenture, of approximately $21 million and accrued and unpaid interest. We paid for the redemption using available liquidity. We recorded a debt extinguishment loss of $26 million in the second quarter of 2022 due to this redemption.

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

8. Earnings (Loss) per Share

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


			Three Months Ended March 31,						Three Months Ended June 30,			Six Months Ended June 30,
(In millions, except per share data)	(In millions, except per share data)			2023		2022		(In millions, except per share data)		2023		2022		2023		2022

Net income from continuing operations attributable to common shares	Net income from continuing operations attributable to common shares			$	17	$	32	Net income from continuing operations attributable to common shares		$	31	$	96	$	48	$	128

Net income (loss) from discontinued operations, net of amounts attributable to noncontrolling interest	Net income (loss) from discontinued operations, net of amounts attributable to noncontrolling interest			(3)		456		Net income (loss) from discontinued operations, net of amounts attributable to noncontrolling interest		2		45		(1)		501

Net income attributable to common shares, basic	Net income attributable to common shares, basic			$	14	$	488	Net income attributable to common shares, basic		$	33	$	141	$	47	$	629

Basic weighted-average common shares	Basic weighted-average common shares			116		115		Basic weighted-average common shares		116		115		116		115
		Dilutive effect of stock-based awards		—		1			Dilutive effect of stock-based awards	2		1		1		1
Diluted weighted-average common shares	Diluted weighted-average common shares			116		116		Diluted weighted-average common shares		118		116		117		116

Basic earnings from continuing operations per share	Basic earnings from continuing operations per share			$	0.15	$	0.28	Basic earnings from continuing operations per share		$	0.27	$	0.83	$	0.42	$	1.12
Basic earnings (loss) from discontinued operations per share	Basic earnings (loss) from discontinued operations per share			(0.02)		3.97		Basic earnings (loss) from discontinued operations per share		0.01		0.40		(0.01)		4.36
Basic earnings per share	Basic earnings per share			$	0.13	$	4.25	Basic earnings per share		$	0.28	$	1.23	$	0.41	$	5.48

Diluted earnings from continuing operations per share	Diluted earnings from continuing operations per share			$	0.15	$	0.28	Diluted earnings from continuing operations per share		$	0.27	$	0.83	$	0.41	$	1.11
Diluted earnings (loss) from discontinued operations per share	Diluted earnings (loss) from discontinued operations per share			(0.02)		3.94		Diluted earnings (loss) from discontinued operations per share		0.01		0.39		(0.01)		4.33
Diluted earnings per share	Diluted earnings per share			$	0.13	$	4.22	Diluted earnings per share		$	0.28	$	1.22	$	0.40	$	5.44

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9. Commitments and Contingencies

We are involved, and expect to continue to be involved, in numerous proceedings arising out of the conduct of our business. These proceedings may include claims for property damage or personal injury incurred in connection with the transportation of freight, environmental liability, commercial disputes, insurance coverage disputes and employment-related claims, including claims involving asserted breaches of employee restrictive covenants.

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. 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. If there is a reasonable possibility that a loss, or additional loss, may have been incurred, we disclose the estimate of the possible loss or range of loss if it is material and an estimate can be made, or disclose that such an estimate cannot be made. The determination as to whether a loss can reasonably be considered to be possible or probable is based on our assessment, together with legal counsel, regarding the ultimate outcome of the matter.

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We believe that we have adequately accrued for the potential impact of loss contingencies that are probable and reasonably estimable. We do not believe that the ultimate resolution of any matters to which we are presently a party will have a material adverse effect on our results of operations, financial condition or cash flows. However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more of these matters could have a material adverse effect on our financial condition, results of operations or cash flows. Legal costs incurred related to these matters are expensed as incurred.

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

Insurance Contribution Litigation

In April 2012, Allianz Global Risks US Insurance Company sued eighteen insurance companies in a case captioned Allianz Global Risks US Ins. Co. v. ACE Property & Casualty Ins. Co., et al., Multnomah County Circuit Court (Case No. 1204-04552). Allianz Global Risks US Ins. Co. (“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”). Defendants had insured Freightliner’s assets, which DTNA acquired in 1981. Con-way, Freightliner’s former parent company, intervened. We acquired Con-way in 2015. Con-way and Freightliner had self-insured under fronting agreements with defendant insurers ACE, Westport, and General. Under those agreements, Con-way agreed to indemnify the fronting carriers for damages assessed under the fronting policies. 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. In June 2015, Allianz appealed to the Oregon Court of Appeals. In May 2019, the Oregon Court of Appeals upheld the jury verdict. In September 2019, Allianz appealed to the Oregon Supreme Court. 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 trial court recently decided the ~~next stages of the proceeding. The parties have filed~~parties’ cross-motions for summary judgment, ~~concerning~~leaving open the ~~interpretation of certain of the fronting policies, which are yet to be decided. Following summary judgment, we anticipate a jury~~pollution exclusion and allocation issues. The trial on the pollution exclusion ~~then a bench~~issue is scheduled to take place in the spring of 2024, and the trial on allocation of defense costs among the ~~subject~~applicable insurance ~~policies.~~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.

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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 and April 6, 2023, the~~The Company has met with the County ~~Attorneys~~attorneys and the Los Angeles City ~~Attorney.~~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.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q and other written reports and oral statements we make from time to time contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. In some cases, forward-looking statements can be identified by the use of forward-looking terms such as “anticipate,” “estimate,” “believe,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “will,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target,” “trajectory” or the negative of these terms or other comparable terms. However, the absence of these words does not mean that the statements are not forward-looking. These forward-looking statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions that may cause actual future results, levels of activity, performance or achievements to be materially different from ~~any~~our expected future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause or contribute to a material difference include those discussed below and the risks discussed in the Company’s other filings with the Securities and Exchange Commission (the “SEC”). All forward-looking statements set forth in this Quarterly Report are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations. The following discussion should be read in conjunction with the Company’s unaudited Condensed Consolidated Financial Statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q, and with the audited consolidated financial statements and related notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form ~~10-K.~~10-K”). Forward-looking statements set forth in this Quarterly Report on Form 10-Q speak only as of the date hereof, and we do not undertake any obligation to update forward-looking statements to reflect subsequent events or circumstances, changes in expectations or the occurrence of unanticipated events, except to the extent required by law.

Executive Summary

XPO, Inc., together with its subsidiaries (“XPO,” “we” or ~~“we”~~the “Company”), is a leading provider of freight transportation services with company-specific avenues for value creation. We use our proprietary technology to move goods efficiently through our customers’ supply chains in North America and Europe. As of ~~March 31,~~June 30, 2023, we had approximately ~~38,000~~37,000 employees and ~~558~~562 locations in 17 countries serving approximately ~~48,000~~49,000 customers.

Our company has two reportable segments: North American Less-Than-Truckload (“LTL”), the largest component of our business, and European Transportation. Our North American LTL segment includes the results of our trailer manufacturing operations.

North American Less-Than-Truckload Segment

LTL in North America is a bedrock industry providing a critical service to the economy, with favorable pricing dynamics and a stable competitive landscape. We have one of the largest LTL networks in North America, with approximately 8% share of the $59 billion U.S. market as of December 31, 2022.

One of our LTL competitors recently ceased operations. The impact of this development on our operations and financial performance is uncertain and difficult to predict. We believe it could have both positive and challenging effects on our business, operations, and future financial performance. It is uncertain how the freight volume and

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customers that had been handled and served by this competitor will be absorbed by the remaining market participants.

Our LTL sales and service professionals and network of drivers, tractors, trailers and terminals serve approximately ~~27,000~~29,000 customers in North America. We provide shippers with critical geographic density and day-definite domestic and cross-border services to approximately 99% of U.S. zip codes, as well as Mexico, Canada and the Caribbean.

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Together, our capacity and reach give us the ability to manage large freight volumes efficiently and balance our network to leverage fixed costs. For the trailing 12 months ended ~~March 31,~~June 30, 2023, we delivered approximately 18 billion pounds of freight.

Importantly, our LTL business historically has generated a high return on invested capital and robust free cash flow. This supports our ongoing investments in the expansion of our network capacity and the enhancement of our proprietary technology. We are managing the business to specific objectives, such as high customer service scores for on-time delivery and damage-free freight, the optimal sourcing of linehaul transportation, and the addition of 900 net new doors to our terminal footprint by the first quarter of 2024 from an October 2021 baseline. Since implementing our LTL 2.0 growth plan in the fourth quarter of 2021, we added six terminals to our network, representing ~~369~~473 net new doors.

Additionally, we are continuing to execute a host of initiatives that are specific to XPO and largely independent of the macroeconomic environment. We produced 4,705 trailers at our in-house trailer manufacturing facility in 2022, nearly doubling the 2021 output. Our goal is to produce more than 6,000 trailers in 2023. We are also investing in expanding the number of drivers trained at our 130 commercial driver schools. Our in-house trailer manufacturing and driver schools are examples of idiosyncratic, self-reliant capabilities that are advantageous to XPO, particularly when industry constraints on equipment or drivers exist.

Specific to our technology, we believe we have a large opportunity to drive further growth and profitability in our LTL network through innovation. For further information, see the “Technology and Sustainability” section below.

European Transportation Segment

XPO has a unique pan-European transportation platform with leading positions in key geographies: we are the #1 full truckload broker and the #1 pallet network (LTL) provider in France; the #1 full truckload broker and the #1 LTL provider in Iberia (Spain and Portugal); and a top-tier dedicated truckload provider in the U.K., where we also have the largest single-owner LTL network. We serve a large base of customers within the consumer, trade and industrial markets, including many sector leaders that have long-tenured relationships with us.

Our range of services in Europe encompasses dedicated truckload, LTL, truck brokerage, managed transportation, last mile, freight forwarding and, increasingly, multimodal solutions, such as road-rail and road-short sea combinations that we tailor to customer needs. Our operators use our proprietary XPO Connect® technology to manage these services within our digital ecosystem in Europe.

Technology and Sustainability

One of the ways in which we deliver superior service to our customers is by empowering our employees with technology. Our industry is evolving, and customers want to de-risk their supply chains by forming relationships with reliable service providers that have invested in innovation.

We have built a highly scalable ecosystem on the cloud that deploys our software consistently across our operating footprint. In our North American LTL business, the caliber of our technology is mission-critical to our success; it optimizes linehaul, pickup-and-delivery and pricing — the main components of the service we provide. An LTL network of our scale has hundreds of thousands of activities underway at any given time, all managed on our technology. For the trailing 12 months ended ~~March 31,~~June 30, 2023, we moved 18 billion pounds of freight ~~773~~778 million miles, including moving linehaul freight an average of 2.5 million miles a day.

With intelligent route-building, we can reduce empty miles in our linehaul network, improve load factor and mitigate cargo damage. Our proprietary bypass models make recommendations to enhance trailer utilization, assimilating massive amounts of data and taking volume, density, and freight dimensions into account. We use our visualization tools to reduce costs with pickups and deliveries, and we developed piece-level tracking to identify

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individual pallets to enhance shipment loading and visibility. We also developed a robust pricing platform for contractual account management and automated, dynamic pricing for local accounts.

Importantly, our technology also helps our company meet its environmental, social and governance (“ESG”) goals, such as a reduction in our carbon footprint, and can help our customers meet their own goals. For a detailed discussion of our philosophy relating to innovation and ESG matters, see the Company Overview included in our 2022 Form 10-K, as well as our current Sustainability Report at sustainability.xpo.com.

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~~Impacts of Notable External Conditions~~

As a leading provider of freight transportation services, our business can be impacted to varying degrees by factors beyond our control. The COVID-19 virus that emerged in 2020 affected economic activity broadly and customer sectors served by our industry. Labor shortages, particularly a shortage of truck drivers and dockworkers, and equipment shortages continue to present challenges to many transportation-related industries. Disruptions in supply chains for industrial materials and supplies, such as semiconductor chips, have impacted some of the end-market activities that create demand for our services. We cannot predict how long these dynamics will last, or whether future challenges, if any, will adversely affect our results of operations.

Additionally, economic inflation can have a negative impact on our operating costs, such as the rising costs of fleet maintenance, fuel and purchased transportation we experienced in 2022. We mitigate these costs by mechanisms in our customer contracts, including fuel surcharge clauses and general rate increases. In addition, the rise in interest rates increased our cost of capital in 2022. An economic recession could depress customer demand for transportation services.

Regarding the war between Russia and Ukraine, we have no direct exposure to those geographies. We cannot predict how global supply chain activities or the economy at large may be impacted by a prolonged war in Ukraine or sanctions imposed in response to the war, or whether future conflicts, if any, may adversely affect our results of operations.

Consolidated Summary Financial Table


		Three Months Ended March 31,	Percent of Revenue				Change			Three Months Ended June 30,				Percent of Revenue				Change		Six Months Ended June 30,				Percent of Revenue				Change
(Dollars in millions)	(Dollars in millions)		2023		2022		2023		2022		2023 vs. 2022		(Dollars in millions)	2023		2022		2023		2022		2023 vs. 2022		2023		2022		2023		2022		2023 vs. 2022
Revenue	Revenue		$	1,907	$	1,894	100.0	%	100.0	%	0.7	%	Revenue	$	1,917	$	2,047	100.0	%	100.0	%	(6.4)	%	$	3,824	$	3,941	100.0	%	100.0	%	(3.0)	%
Salaries, wages and employee benefits	Salaries, wages and employee benefits		762		725		40.0	%	38.3	%	5.1	%	Salaries, wages and employee benefits	783		752		40.8	%	36.7	%	4.1	%	1,545		1,477		40.4	%	37.5	%	4.6	%
Purchased transportation	Purchased transportation		457		510		24.0	%	26.9	%	(10.4)	%	Purchased transportation	444		525		23.2	%	25.6	%	(15.4)	%	901		1,035		23.6	%	26.3	%	(12.9)	%
Fuel, operating expenses and supplies	Fuel, operating expenses and supplies		427		418		22.4	%	22.1	%	2.2	%	Fuel, operating expenses and supplies	390		434		20.3	%	21.2	%	(10.1)	%	817		852		21.4	%	21.6	%	(4.1)	%
Operating taxes and licenses	Operating taxes and licenses		15		16		0.8	%	0.8	%	(6.3)	%	Operating taxes and licenses	15		13		0.8	%	0.6	%	15.4	%	30		29		0.8	%	0.7	%	3.4	%
Insurance and claims	Insurance and claims		44		56		2.3	%	3.0	%	(21.4)	%	Insurance and claims	46		48		2.4	%	2.3	%	(4.2)	%	90		104		2.4	%	2.6	%	(13.5)	%
Gains on sales of property and equipment	Gains on sales of property and equipment		(3)		(1)		(0.2)	%	(0.1)	%	200.0	%	Gains on sales of property and equipment	(2)		(1)		(0.1)	%	—	%	100.0	%	(5)		(2)		(0.1)	%	(0.1)	%	150.0	%
Depreciation and amortization expense	Depreciation and amortization expense		101		94		5.3	%	5.0	%	7.4	%	Depreciation and amortization expense	107		96		5.6	%	4.7	%	11.5	%	208		190		5.4	%	4.8	%	9.5	%

Transaction and integration costs	Transaction and integration costs		22		7		1.2	%	0.4	%	214.3	%	Transaction and integration costs	17		7		0.9	%	0.3	%	142.9	%	39		14		1.0	%	0.4	%	178.6	%
Restructuring costs	Restructuring costs		24		6		1.3	%	0.3	%	300.0	%	Restructuring costs	10		2		0.5	%	0.1	%	400.0	%	34		8		0.9	%	0.2	%	325.0	%
Operating income	Operating income		58		63		3.0	%	3.3	%	(7.9)	%	Operating income	107		171		5.6	%	8.4	%	(37.4)	%	165		234		4.3	%	5.9	%	(29.5)	%
Other income	Other income		(5)		(14)		(0.3)	%	(0.7)	%	(64.3)	%	Other income	(3)		(13)		(0.2)	%	(0.6)	%	(76.9)	%	(8)		(27)		(0.2)	%	(0.7)	%	(70.4)	%

Debt extinguishment loss													Debt extinguishment loss	23		26		1.2	%	1.3	%	(11.5)	%	23		26		0.6	%	0.7	%	(11.5)	%
Interest expense	Interest expense		42		37		2.2	%	2.0	%	13.5	%	Interest expense	43		31		2.2	%	1.5	%	38.7	%	85		68		2.2	%	1.7	%	25.0	%
Income from continuing operations before income tax provision	Income from continuing operations before income tax provision		21		40		1.1	%	2.1	%	(47.5)	%	Income from continuing operations before income tax provision	44		127		2.3	%	6.2	%	(65.4)	%	65		167		1.7	%	4.2	%	(61.1)	%
Income tax provision	Income tax provision		4		8		0.2	%	0.4	%	(50.0)	%	Income tax provision	13		31		0.7	%	1.5	%	(58.1)	%	17		39		0.4	%	1.0	%	(56.4)	%
Income from continuing operations	Income from continuing operations		17		32		0.9	%	1.7	%	(46.9)	%	Income from continuing operations	31		96		1.6	%	4.7	%	(67.7)	%	48		128		1.3	%	3.2	%	(62.5)	%
Income (loss) from discontinued operations, net of taxes	Income (loss) from discontinued operations, net of taxes		(3)		456		(0.2)	%	24.1	%	(100.7)	%	Income (loss) from discontinued operations, net of taxes	2		45		0.1	%	2.2	%	(95.6)	%	(1)		501		—	%	12.7	%	(100.2)	%
Net income	Net income		$	14	$	488	0.7	%	25.8	%	(97.1)	%	Net income	$	33	$	141	1.7	%	6.9	%	(76.6)	%	$	47	$	629	1.2	%	16.0	%	(92.5)	%

Three and Six Months Ended ~~March 31,~~June 30, 2023 Compared with Three and Six Months Ended ~~March 31,~~June 30, 2022

Our consolidated revenue for the ~~first~~second quarter of 2023 ~~increased 0.7%~~decreased 6.4% to $1.9 billion, compared with the same quarter in 2022. Our consolidated revenue for the first six months of 2023 decreased 3.0% to $3.8 billion, compared with the same period in 2022. The ~~increase~~decrease in both periods reflects ~~growth~~a decline in fuel surcharge revenue, ~~in our LTL segment,~~ due primarily to ~~higher~~lower diesel prices. Foreign currency movement increased revenue by approximately 0.6 percentage points in the second quarter of 2023 and decreased revenue by approximately ~~2.5~~0.9 percentage points in the first ~~quarter~~six months of 2023.

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Salaries, wages and employee benefits includes compensation-related costs for our employees, including salaries, wages, healthcare-related costs and payroll taxes, and covers drivers and dockworkers, operations and facility workers and employees in support roles and other positions. Salaries, wages and employee benefits for the ~~first~~second quarter of 2023 was ~~$762~~$783 million, or ~~40.0%~~40.8% of revenue, compared with ~~$725~~$752 million, or ~~38.3%~~36.7% of revenue, for the same quarter in 2022. Salaries, wages and employee benefits for the first six months of 2023 was $1.55 billion, or 40.4% of revenue, compared with $1.48 billion, or 37.5% of revenue, for the same period in 2022. The year-over-year increase as a percentage of revenue in both periods primarily reflects the impact of inflation on our cost base and the insourcing of a greater proportion of linehaul from third-party transportation providers, partially offset by lower ~~headcount.~~headcount during the second quarter of 2023.

Purchased transportation includes costs of procuring third-party freight transportation. Purchased transportation for the ~~first~~second quarter of 2023 was ~~$457~~$444 million, or ~~24.0%~~23.2% of revenue, compared with ~~$510~~$525 million, or ~~26.9%~~25.6% of revenue, for the same quarter in 2022. Purchased transportation for the first six months of 2023 was $901 million, or 23.6% of revenue, compared with $1.0 billion, or 26.3% of revenue, for the same period in 2022. The year-over-year decrease as a percentage of revenue in both periods primarily reflects lower rates paid to third-party providers for purchased transportation miles and the insourcing of a greater proportion of linehaul from third-party transportation providers.

Fuel, operating expenses and supplies includes the cost of fuel purchased for use in our vehicles as well as related taxes, maintenance and lease costs for our equipment, including tractors and trailers, costs related to operating our owned and leased facilities, bad debt expense, third-party professional fees, information technology expenses and supplies expense. Fuel, operating expenses and supplies for the ~~first~~second quarter of 2023 was ~~$427~~$390 million, or ~~22.4%~~20.3% of revenue, compared with ~~$418~~$434 million, or ~~22.1%~~21.2% of revenue, for the same quarter in 2022. Fuel, operating expenses and supplies for the first six months of 2023 was $817 million, or 21.4% of revenue, compared with $852 million, or 21.6% of revenue, for the same period in 2022. The year-over-year ~~increase~~decrease in both periods primarily reflects lower fuel costs, partially offset by higher lease costs and bad debt ~~expense, partially offset by lower third-party information technology expenses.~~expense.

Operating taxes and licenses includes tax expenses related to our vehicles and our owned and leased facilities as well as license expenses to operate our vehicles. Operating taxes and licenses for the second quarter of 2023 was $15 million, compared with $13 million for the same quarter in 2022. Operating taxes and licenses for the first six months of 2023 was $30 million, compared with $29 million for the same period in 2022.

Insurance and claims includes costs related to vehicular and cargo claims for both purchased insurance and self-insurance programs. Insurance and claims for the ~~first~~second quarter of 2023 was ~~$44~~$46 million, compared with ~~$56~~$48 million for the same quarter in 2022. Insurance and claims for the first six months of 2023 was $90 million, compared with $104 million for the same period in 2022. The year-over-year decrease in both periods reflects lower cargo insurance expense due to improved operating performance related to damaged shipments.

Depreciation and amortization expense for the ~~first~~second quarter of 2023 was ~~$101~~$107 million, compared with ~~$94~~$96 million for the same quarter in 2022. Depreciation and amortization expense for the first six months of 2023 was $208 million, compared with $190 million for the same period in 2022. The year-over-year increase in both periods reflects the impact of capital investments, in particular tractors and trailers.

Transaction and integration costs for the ~~first~~second quarter of 2023 were ~~$22~~$17 million, compared with $7 million for the same quarter in 2022. Transaction and integration costs for the first six months of 2023 were $39 million, compared with $14 million for the same period in 2022. Transaction and integration costs for the second quarter and first six months of 2023 are primarily comprised of stock-based compensation and retention awards for certain employees related to strategic initiatives. Transaction and integration costs for the second quarter and first ~~quarter~~six months of 2022 are primarily comprised of third-party professional fees related to strategic initiatives as well as retention awards paid to certain employees. We expect to incur additional transaction and integration costs related to ~~rebranding and~~ stock-based compensation in 2023 and 2024.

Restructuring costs for the ~~first~~second quarter of 2023 were ~~$24~~$10 million, compared with $6$2 million for the same quarter in 2022. Restructuring costs for the first six months of 2023 were $34 million, compared with $8 million for the same period in 2022. 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. For more information, see Note 5—Restructuring Charges to our Condensed Consolidated Financial Statements.

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Other income primarily consists of pension income. Other income for the ~~first~~second quarter of 2023 was $5$3 million, compared with ~~$14~~$13 million for the same quarter in 2022. Other income for the first six months of 2023 was $8 million, compared with $27 million for the same period in 2022. The year-over-year decrease in both periods reflects ~~$11 million of~~ lower net periodic pension income in ~~the first quarter of~~ 2023 primarily due to a rise in interest rates and a lower expected return on plan assets.

Debt extinguishment loss was $23 million for the second quarter and first six months of 2023 and $26 million for the second quarter and first six months of 2022. In the second quarter of 2023, we refinanced our Existing Term Loan Facility (as defined below) and wrote-off $12 million of debt issuance costs related to debt extinguished. Additionally, we expensed $11 million of new debt issuance costs related to the portion of the New Term Loan Facility and Senior Notes (both as defined below) accounted for as a modification. In the second quarter of 2022, we redeemed a portion of our outstanding 6.25% senior notes due 2025 (“Senior Notes due 2025”) and wrote-off related debt issuance costs.

Interest expense increased to ~~$42~~$43 million for the second quarter of 2023 from $31 million for the second quarter of 2022. Interest expense increased to $85 million for the first ~~three~~six months of 2023 from ~~$37~~$68 million for the first ~~three~~six months of 2022. The increase in ~~interest expense~~both periods is primarily due to a higher floating interest ~~rate on our Term Loan Facilities,~~rates, partially offset by the impact of the redemption of $1.1 billion of our ~~6.25% senior notes~~Senior Notes due 2025 in 2022.

Our effective income tax rates were ~~18.3%~~28.8% and ~~19.6%~~24.5% for the second quarter of 2023 and 2022, respectively, and 25.4% and 23.3% for the first ~~three~~six months of 2023 and 2022, respectively. The effective tax rates for the ~~first~~second quarter and six-month periods of 2023 and 2022 were based on forecasted full-year effective tax rates, adjusted for discrete items that occurred within the periods presented. The ~~decrease~~increase in our effective income tax rate for the ~~first three months~~second quarter of 2023 compared to the same quarter of 2022 was primarily driven by ~~an increased impact~~

~~Table~~forecasted non-deductible executive compensation expense, partially offset by a tax benefit of ~~Contents~~

$1 million from ~~discrete items due~~return to ~~lower pre-tax book income.~~provision adjustments. The primary ~~items~~item impacting the effective tax rate for the ~~first~~second quarter of 2022 was a tax benefit of $1 million from stock-based compensation.

The increase in our effective income tax rate for the first six months of 2023 ~~are~~compared to the same period in 2022 was primarily driven by forecasted non-deductible executive compensation expense, partially offset by $2 million of discrete tax benefits from revaluing deferred state ~~taxes partially offset by forecasted non-deductible executive compensation expense.~~taxes. The primary item impacting the effective tax rate for the first ~~quarter~~six months of 2022 was a ~~discrete~~ tax benefit of $2$3 million from stock-based compensation.

Segment Financial Results

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. 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. See Note 3—Segment Reporting to our Condensed Consolidated Financial Statements for further information and a reconciliation of Adjusted EBITDA to Income from continuing operations.

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North American Less-Than-Truckload Segment


		Three Months Ended March 31,	Percent of Revenue				Change			Three Months Ended June 30,				Percent of Revenue				Change		Six Months Ended June 30,				Percent of Revenue				Change
(Dollars in millions)	(Dollars in millions)		2023		2022		2023		2022		2023 vs. 2022		(Dollars in millions)	2023		2022		2023		2022		2023 vs. 2022		2023		2022		2023		2022		2023 vs. 2022
Revenue	Revenue		$	1,120	$	1,107	100.0	%	100.0	%	1.2	%	Revenue	$	1,136	$	1,240	100.0	%	100.0	%	(8.4)	%	$	2,256	$	2,347	100.0	%	100.0	%	(3.9)	%
Adjusted EBITDA	Adjusted EBITDA		182		186		16.3	%	16.8	%	(2.2)	%	Adjusted EBITDA	208		274		18.3	%	22.1	%	(24.1)	%	390		460		17.3	%	19.6	%	(15.2)	%
Depreciation and amortization	Depreciation and amortization		68		56		6.1	%	5.1	%	21.4	%	Depreciation and amortization	71		59		6.3	%	4.8	%	20.3	%	139		115		6.2	%	4.9	%	20.9	%

Revenue in our North American LTL segment ~~increased 1.2%~~decreased 8.4% to ~~$1.12~~$1.14 billion for the ~~first~~second quarter of 2023, compared with ~~$1.11~~$1.24 billion for the same quarter in 2022. Revenue decreased 3.9% to $2.26 billion for the first six months of 2023, compared with $2.35 billion for the same period in 2022. The decrease in revenue for both periods reflects a decline in fuel surcharge revenue, primarily driven by lower diesel prices. Revenue included fuel surcharge revenue of ~~$217~~$196 million and ~~$207~~$291 million, respectively, for the second quarters of 2023 and 2022, and $413 million and $498 million, respectively, for the first ~~three~~six months of 2023 and 2022. ~~The increase in fuel surcharge revenue primarily reflects higher diesel prices.~~

We evaluate the revenue performance of our LTL business using several commonly used metrics, including volume (weight per day in pounds) and yield, which is a commonly used measure of LTL pricing trends. We measure yield using gross revenue per hundredweight, excluding fuel surcharges. Impacts on yield can include weight per shipment and length of haul, among other ~~factors.~~factors, while impacts on volume can include shipments per day and weight per shipment. The following table summarizes our key revenue metrics:


		Three Months Ended March 31,					Three Months Ended June 30,						Six Months Ended June 30,
			2023		2022			Change %			2023		2022		Change %		2023		2022		Change %
Pounds per day (thousands)	Pounds per day (thousands)		68,889		70,176			(1.8)	%	Pounds per day (thousands)	70,290		72,333		(2.8)	%	69,587		71,250		(2.3)	%

Shipments per day										Shipments per day	51,220		50,274		1.9	%	50,159		49,316		1.7	%

Average weight per shipment (in pounds)										Average weight per shipment (in pounds)	1,372		1,439		(4.7)	%	1,387		1,445		(4.0)	%

Gross revenue per hundredweight, excluding fuel surcharges	Gross revenue per hundredweight, excluding fuel surcharges		$	21.06	$	20.76		1.4	%	Gross revenue per hundredweight, excluding fuel surcharges	$	21.63	$	21.34	1.4	%	$	21.34	$	21.05	1.4	%

The year-over-year ~~increase~~decrease in revenue, excluding fuel surcharge revenue, for both the second quarter and first ~~quarter~~six months of 2023 reflects lower volume, primarily due to a soft industry environment for freight transportation, largely offset by an increase in gross revenue per ~~hundredweight, almost entirely offset by lower volume.~~hundredweight. The decrease in ~~weight~~volume per day for both the second quarter and first ~~quarter~~six months of 2023 reflects lower average weight per shipment, partially offset by higher shipments per day. In the month of ~~April~~July 2023, as compared to ~~April~~July 2022, weight per day ~~decreased 2.0% while~~and shipments per day increased ~~3.1%.~~4.2% and 8.8%, respectively, reflecting, in part, the impact of recent industry disruption.

Adjusted EBITDA was ~~$182~~$208 million, or ~~16.3%~~18.3% of revenue, for the ~~first three months~~second quarter of 2023, compared with ~~$186 million,~~$274, or ~~16.8%~~22.1% of revenue, for the same quarter in 2022. Adjusted EBITDA was $390 million, or 17.3% of revenue, for the first six months of 2023, compared with $460 million, or 19.6% of revenue, for the same period in 2022. The decrease in Adjusted EBITDA in both the second quarter and first ~~quarter~~six months of 2023 reflected lower revenue, driven by the dynamics explained above, higher salaries, wages and employee benefits, primarily due to cost inflation, and to a lesser extent, ~~higher headcount, $11 million of~~ lower pension ~~income and higher fuel costs and bad debt expense.~~income. These items were ~~almost entirely~~partially offset by lower purchased transportation, primarily due to lower rates paid to third-party providers for purchased transportation miles and the insourcing of a greater proportion of linehaul from third-party transportation ~~providers.~~

~~Table~~providers, and lower fuel costs, in addition to lower headcount during the second quarter of ~~Contents~~

2023.

Depreciation and amortization expense increased to ~~$68~~$71 million in the ~~first~~second quarter of 2023 compared with ~~$56~~$59 million for the same quarter in ~~2022~~2022. Depreciation and amortization expense increased to $139 million in the first six months of 2023 compared with $115 million for the same period in 2022. The increase in both the second quarter and first six months of 2023 was due to the impact of capital investments, in particular tractors and trailers.

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European Transportation Segment


		Three Months Ended March 31,	Percent of Revenue				Change			Three Months Ended June 30,				Percent of Revenue				Change		Six Months Ended June 30,				Percent of Revenue				Change
(Dollars in millions)	(Dollars in millions)		2023		2022		2023		2022		2023 vs. 2022		(Dollars in millions)	2023		2022		2023		2022		2023 vs. 2022		2023		2022		2023		2022		2023 vs. 2022
Revenue	Revenue		$	787	$	787	100.0	%	100.0	%	—	%	Revenue	$	781	$	807	100.0	%	100.0	%	(3.2)	%	$	1,568	$	1,594	100.0	%	100.0	%	(1.6)	%
Adjusted EBITDA	Adjusted EBITDA		37		38		4.7	%	4.9	%	(2.6)	%	Adjusted EBITDA	46		49		6.0	%	6.0	%	(6.1)	%	83		87		5.3	%	5.4	%	(4.6)	%
Depreciation and amortization	Depreciation and amortization		32		33		4.1	%	4.2	%	(3.0)	%	Depreciation and amortization	33		32		4.2	%	4.0	%	3.1	%	65		65		4.1	%	4.1	%	—	%

Revenue in our European Transportation segment ~~was $787~~decreased 3.2% to $781 million for the second quarter of 2023, compared with $807 million for the same quarter in ~~each of~~2022. Revenue decreased 1.6% to $1.57 billion for the first ~~quarters~~six months of 2023, ~~and~~compared with $1.59 billion for the same period in 2022. Foreign currency movement increased revenue by approximately 1.5 percentage points in the second quarter of 2023 and decreased revenue by approximately ~~6.1~~2.2 percentage points in the first ~~quarter~~six months of 2023. The ~~increase~~decrease in revenue for the second quarter of 2023 compared to ~~the first quarter of~~ 2022, after taking into effect the impact of foreign currency movement, primarily reflects a decline in fuel surcharge revenue due to lower diesel prices. Revenue for the first six months of 2023 increased compared to 2022 after taking into effect the impact of foreign currency movement, primarily reflecting price increases to cover cost inflation as well as higher volume.

Adjusted EBITDA was ~~$37~~$46 million, or ~~4.7%~~6.0% of revenue, for the ~~first three months~~second quarter of 2023, compared with ~~$38~~$49 million, or ~~4.9%~~6.0% of revenue, for the same quarter in 2022. Adjusted EBITDA was $83 million, or 5.3% of revenue, for the first six months of 2023, compared with $87 million, or 5.4% of revenue, for the same period in 2022. The decrease in Adjusted EBITDA in both periods was primarily driven by lower fuel revenue, higher salaries, wages and employee benefits due to the impact of cost inflation, and ~~bonuses paid to certain French employees in connection with a government program (PPV: Prime de Partage de la Valeur),~~higher lease costs. These items were almost entirely offset by lower purchased transportation, fuel and ~~higher gains on sales of property and equipment.~~temporary labor costs.

Liquidity and Capital Resources

Our cash and cash equivalents balance was ~~$309~~$290 million as of ~~March 31,~~June 30, 2023, compared to $460 million as of December 31, 2022. Our principal existing sources of cash are: (i) cash generated from operations; (ii) borrowings available under our Second Amended and Restated Revolving Loan Credit Agreement, as amended (the “ABL Facility”); (iii) proceeds from the issuance of other debt; and (iv) proceeds from divestiture activities. As of ~~March 31,~~June 30, 2023, we have ~~$502~~$512 million available to draw under our ABL Facility, based on a borrowing base of ~~$502~~$513 million and outstanding letters of credit of less than $1 million. Additionally, we have a $200 million uncommitted secured evergreen letter of credit facility, under which we had issued ~~$154~~$141 million in aggregate face amount of letters of credit as of ~~March 31,~~June 30, 2023.

In February 2023, we amended our existing ABL Facility. See Note 7—Debt to our Condensed Consolidated Financial Statements for further information.

As of ~~March 31,~~June 30, 2023, we had approximately ~~$811~~$802 million of total liquidity. We continually evaluate our liquidity requirements in light of our operating needs, growth initiatives and capital resources. We believe that our existing liquidity and sources of capital are sufficient to support our operations over the next 12 months.

Trade Receivables Securitization and Factoring Programs

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Term Loan Facility

In May 2023, we ~~entered into an agreement~~amended the Term Loan Credit Agreement to ~~extend~~obtain $700 million of new term loans (the “New Term Loan Facility”) having substantially similar terms as the ~~securitization program, which~~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 ~~scheduled to expire in July 2024, through July 2026. The terms and conditions~~issued at 99.5% of the ~~extended securitization program are materially consistent~~face amount and will mature on May 24, 2028.

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 ~~prior program.~~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.

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 Senior Notes due 2025. The redemption price for the notes was 100% of the principal amount plus a premium, as defined in the indenture, of approximately $21 million and accrued and unpaid interest. We paid for the redemption using available liquidity. We recorded a debt extinguishment loss of $26 million in the second quarter of 2022 due to this redemption.

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

Loan Covenants and Compliance

As of ~~March 31,~~June 30, 2023, we were in compliance with the covenants and other provisions of our debt agreements. Any failure to comply with any material provision or covenant of these agreements could have a material adverse effect on our liquidity and operations.

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Sources and Uses of Cash


		Three Months Ended March 31,					Six Months Ended June 30,
(In millions)	(In millions)	2023		2022		(In millions)	2023		2022
Net cash provided by operating activities from continuing operations	Net cash provided by operating activities from continuing operations	$	76	$	188	Net cash provided by operating activities from continuing operations	$	207	$	357
Net cash used in investing activities from continuing operations	Net cash used in investing activities from continuing operations	(216)		(120)		Net cash used in investing activities from continuing operations	(342)		(216)
Net cash used in financing activities from continuing operations	Net cash used in financing activities from continuing operations	(10)		(24)		Net cash used in financing activities from continuing operations	(36)		(673)

During the ~~three~~six months ended ~~March 31,~~June 30, 2023, we: (i) generated cash from operating activities from continuing operations of $207 million; and (ii) received net proceeds of $2.0 billion from the issuance of debt. We used cash during this period primarily to: (i) purchase property and equipment of $355 million; and (ii) repurchase our Existing Term Loan Facility for $2.0 billion.

During the six months ended June 30, 2022, we generated cash from operating activities from continuing operations of ~~$76~~$357 million. We used cash during this period primarily to: (i) purchase property and equipment of ~~$224 million; (ii) make payments on debt and finance leases of $16~~$242 million; and ~~(iii) make payments~~(ii) redeem a portion of ~~$12 million related to tax withholding obligations in connection with the vesting of restricted shares.~~

~~During the three months ended March 31, 2022, we generated cash from operating activities from continuing operations of $188~~our Senior Notes due 2025 for $651 million. We used cash during this period primarily to: (i) purchase property and equipment of $123 million; (ii) make payments on debt and finance leases of $16 million; and (iii) make payments of $12 million related to tax withholding obligations in connection with the vesting of restricted shares.

Cash flows from operating activities from continuing operations for the ~~three~~six months ended ~~March 31,~~June 30, 2023 decreased by ~~$112~~$150 million, compared with the same period in 2022. The decrease reflects the impact of operating assets and liabilities utilizing ~~$79~~$125 million of cash in the ~~three~~first six months ~~ended March 31,~~of 2023, compared with ~~generating $42~~utilizing $40 million during the same period in 2022, and $80 million of ~~cash during~~lower income from continuing operations for the six months ended June 30, 2023, compared with the same period in 2022. Within operating assets and liabilities, for the ~~three~~six months ended ~~March 31,~~June 30, 2023, compared with the same period in 2022: (i) ~~accounts payable utilized $125 million more cash primarily due to the timing of payments; and (ii)~~ accrued expenses and other liabilities generated ~~$94~~$140 million less cash primarily due to the accrual of a tax obligation related to the sale of our intermodal operation in the first quarter of ~~2022.~~2022; and (ii) accounts payable utilized $129 million more cash primarily due to the timing of payments. Partially offsetting these items, accounts receivable utilized ~~$85~~$177 million less cash in the first ~~quarter~~six months of 2023 as compared to the ~~first quarter of~~same period in 2022 primarily as a result of a lower sequential increase in revenues.

Investing activities from continuing operations used $342 million of cash in the six months ended June 30, 2023 and $216 million of cash in the ~~three~~six months ended ~~March 31, 2023 and $120 million of cash in the three months ended March 31,~~June 30, 2022. During the ~~three~~six months ended ~~March 31,~~June 30, 2023, we used ~~$224~~$355 million to purchase property and equipment, as compared to a ~~$123~~$242 million usage of cash in the same period in 2022. The increase reflects our continued investment, primarily in tractors and trailers, to support our long-term growth targets.

Financing activities from continuing operations used ~~$10~~$36 million of cash in the ~~three~~six months ended ~~March 31,~~June 30, 2023 and ~~$24~~$673 million of cash in the ~~three~~six months ended ~~March 31,~~June 30, 2022. The primary uses of cash from financing activities in each of the first ~~three~~six months of 2023 and 2022 were ~~$16~~$2.0 billion and $651 million, respectively, used to repay ~~borrowings~~our Existing Term Loan Facility and ~~$12 million to make payments for tax withholdings on restricted shares.~~redeem a portion of our Senior Notes due 2025. The primary source of cash from financing activities during the first ~~three~~six months of 2023 was ~~$19~~$2.0 billion of net proceeds from the issuance of debt.

As a result of the debt transactions that occurred during the second quarter, as of June 30, 2023, we had $2.4 billion total outstanding principal amount of debt, excluding finance leases. We have $112 million of ~~proceeds from bank overdrafts,~~debt maturing in 2025 and no other significant debt maturities until 2028. Interest on our ABL and term loan facility are variable, while interest on our senior notes are at fixed rates. As of June 30, 2023, future interest payments associated with our debt aggregate approximately $1.0 billion and are estimated based on the principal amount of debt and applicable interest rates as ~~compared~~of that date. For further information on our debt facilities and maturities, see Note 7—Debt to ~~$3 million in the same period of 2022.~~our Condensed Consolidated Financial Statements.

There were no other material changes to our December 31, 2022 contractual obligations during the ~~three~~six months ended ~~March 31,~~June 30, 2023. We anticipate full year gross capital expenditures to be between $500 million and $600 million in 2023, funded by cash on hand and available liquidity.

New Accounting Standards

Information related to new accounting standards is included in Note 1—Organization, Description of Business and Basis of Presentation to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk.

We are exposed to market risk related to changes in interest rates, foreign currency exchange rates and commodity prices. As a result of the debt transactions that occurred during the second quarter, exposure to changes in interest rates on our term loan facility and fixed rate debt are as follows:

Term Loan Facility. As of June 30, 2023, we had an aggregate principal amount outstanding of $700 million on our term loan facility. The interest rate fluctuates based on SOFR or a Base Rate, as defined in the agreement, plus an applicable margin. Assuming an average annual aggregate principal amount outstanding of $700 million, a hypothetical 1% increase in the interest rate would have increased our annual interest expense by $7 million. Additionally, we utilize short-term interest rate swaps to mitigate variability in forecasted interest payments on our term loan facility. The interest rate swaps convert floating-rate interest payments into fixed rate interest payments.

Fixed Rate Debt. As of June 30, 2023, we had $1.7 billion of fair value of indebtedness (excluding finance leases and asset financings) that bears interest at fixed rates. A 1% decrease in market interest rates as of June 30, 2023 would increase the fair value of our fixed-rate indebtedness by approximately 5%. For additional information concerning our debt, see Note 7—Debt to our Condensed Consolidated Financial Statements.

There have been no other material changes to our quantitative and qualitative disclosures about market risk related to our continuing operations during the ~~three~~six months ended ~~March 31,~~June 30, 2023, as compared with the quantitative and qualitative disclosures about market risk described in our 2022 Form 10-K.

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Item 4. Controls and Procedures.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of ~~March 31,~~June 30, 2023. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of ~~March 31,~~June 30, 2023, such that the information required to be included in our Securities and Exchange Commission (“SEC”) reports is: (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to the Company, including our consolidated subsidiaries; and (ii) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There have not been any changes in our internal control over financial reporting during the quarter ended ~~March 31,~~June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II—Other Information

Item 1. Legal Proceedings.

For information related to our legal proceedings, refer to “Legal Proceedings” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 and Note 9—Commitments and Contingencies of Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors.

There are no material changes to the risk factors previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

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Item 3. Defaults upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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Item 6. Exhibits.


Exhibit Number						Description

~~10.1*+~~4.1						~~Offer Letter,~~Indenture, dated ~~February 14,~~May 24, 2023, ~~between~~by and among XPO, Inc., the ~~registrant~~guarantors party thereto from time to time and ~~Wendy Cassity.~~

~~10.2*+~~						~~Change in Control~~U.S. Bank Trust Company, National Association, as trustee and ~~Severance Agreement, dated February 14, 2023, between~~notes collateral agent (incorporated herein by reference to Exhibit 4.1 to the ~~registrant and Wendy Cassity.~~

~~10.3*+~~						registrant’s Current Report on Form ~~of Time-Based Restricted Stock Unit Award Agreement for executive chairman and CEO (2016 Omnibus Incentive Compensation Plan)~~8-K filed with the SEC on May 25, 2023).

~~10.4*+~~4.2						Indenture, dated May 24, 2023, by and among XPO, Inc., the guarantors party thereto from time to time and U.S. Bank Trust Company, National Association, as trustee (incorporated herein by reference to Exhibit 4.2 to the registrant’s Current Report on Form ~~of Performance-Based Restricted Stock Unit Award Agreement for executive chairman and CEO (2016 Omnibus Incentive Compensation Plan)~~8-K filed with the SEC on May 25, 2023).

~~10.5*+~~						~~Form of Performance-Based Restricted Stock Unit Award Agreement (2016 Omnibus Incentive Compensation Plan).~~

~~10.6*+~~10.1+						Offer Letter, dated April 17, 2023, between the registrant and David ~~Bates.~~Bates (incorporated herein by reference to Exhibit 10.6 to the registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 4, 2023).

~~10.7*+~~10.2+						Change in Control and Severance Agreement, dated April 17, 2023, between the registrant and David ~~Bates.~~Bates (incorporated herein by reference to Exhibit 10.7 to the registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 4, 2023).

~~31.1~~ 10.3						Refinancing Amendment (Amendment No. 8 to Senior Secured Term Loan Credit Agreement ), dated May 24, 2023, by and among XPO, Inc., the subsidiaries signatory thereto, as guarantors, the lenders party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent (incorporated herein by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on May 25, 2023).

10.4+*						Offer Letter, dated July 19, 2023, between the registrant and Kyle Wismans.

10.5+*						Change in Control and Severance Agreement, dated July 19, 2023, between the registrant and Kyle Wismans.

31.1*						Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended ~~March 31,~~June 3 0 , 2023.

31.2 31.2						Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended ~~March~~June 3 10 , ~~202~~3 .2023.

32.1 32.1						Certification of the Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended ~~March 31~~June 3 0 , ~~202~~3 .2023.

32.2 32.2						Certification of the Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended ~~March~~June 3 10 , ~~202~~3 .2023.

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Exhibit Number						Description

101.INS *						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH *						XBRL Taxonomy Extension Schema.

101.CAL *						XBRL Taxonomy Extension Calculation Linkbase.

101.DEF *						XBRL Taxonomy Extension Definition Linkbase.

101.LAB *						XBRL Taxonomy Extension Label Linkbase.

101.PRE *						XBRL Taxonomy Extension Presentation Linkbase.

104 *						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).


*						Filed herewith.
**						Furnished herewith.
+						This exhibit is a management contract or compensatory plan or arrangement.

2330

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			XPO, INC.

By:			/s/ Mario Harik
			Mario Harik
			Chief Executive Officer
			(Principal Executive Officer)

By:			/s/ Carl D. Anderson II
			Carl D. Anderson II
			Chief Financial Officer
			(Principal Financial Officer)

Date: ~~May~~August 4, 2023

2431


	Three Months Ended March 31, 2022
(In millions)	North American LTL		European Transportation		Total
Revenue
United States	$	1,084	$	—	$	1,084
North America (excluding United States)	23		—		23
France	—		352		352
United Kingdom	—		225		225
Europe (excluding France and United Kingdom)	—		210		210

Total	$	1,107	$	787	$	1,894