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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 September 30, 2023
or
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 2022 Q3 10-Q (Cover - NEW v2)DM.jpg
XPO, Inc.
(Exact name of registrant as specified in its charter)
_______________________________________________________
Delaware03-0450326
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
Five American Lane
Greenwich,CT06831
(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 classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.001 per shareXPONew 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 filerAccelerated filer
Non-accelerated filerSmaller 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 October 23, 2023, there were 115,973,170 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 September 30, 2023
Table of Contents
 
Page No.


Part I—Financial Information
Item 1. Financial Statements.
XPO, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
September 30,December 31,
(In millions, except per share data)20232022
ASSETS
Current assets
Cash and cash equivalents$355 $460 
Accounts receivable, net of allowances of $45 and $43, respectively
1,059 954 
Other current assets199 199 
Current assets of discontinued operations 17 
Total current assets1,613 1,630 
Long-term assets
Property and equipment, net of $1,767 and $1,679 in accumulated depreciation, respectively
2,072 1,832 
Operating lease assets695 719 
Goodwill1,465 1,472 
Identifiable intangible assets, net of $431 and $392 in accumulated amortization, respectively
366 407 
Other long-term assets217 209 
Total long-term assets4,815 4,639 
Total assets$6,428 $6,269 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable$473 $521 
Accrued expenses827 774 
Short-term borrowings and current maturities of long-term debt66 59 
Short-term operating lease liabilities111 107 
Other current liabilities45 30 
Current liabilities of discontinued operations 16 
Total current liabilities1,522 1,507 
Long-term liabilities
Long-term debt2,447 2,473 
Deferred tax liability326 319 
Employee benefit obligations90 93 
Long-term operating lease liabilities584 606 
Other long-term liabilities262 259 
Total long-term liabilities3,709 3,750 
Stockholders’ equity
Common stock, $0.001 par value; 300 shares authorized; 116 and 115 shares issued and
outstanding as of September 30, 2023 and December 31, 2022, respectively
  
Additional paid-in capital1,284 1,238 
Retained earnings (accumulated deficit)127 (4)
Accumulated other comprehensive loss(214)(222)
Total equity1,197 1,012 
Total liabilities and equity$6,428 $6,269 
See accompanying notes to condensed consolidated financial statements.

1

XPO, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
(In millions, except per share data)2023202220232022
Revenue$1,980 $1,946 $5,804 $5,887 
Salaries, wages and employee benefits809 739 2,354 2,216 
Purchased transportation437 480 1,338 1,515 
Fuel, operating expenses and supplies406 425 1,223 1,277 
Operating taxes and licenses15 15 45 44 
Insurance and claims39 41 129 145 
(Gains) losses on sales of property and equipment1 (1)(4)(3)
Depreciation and amortization expense110 99 318 289 
Transaction and integration costs8 2 47 16 
Restructuring costs1 7 35 15 
Operating income154 139 319 373 
Other income(4)(15)(12)(42)
Debt extinguishment loss  23 26 
Interest expense41 35 126 103 
Income from continuing operations before income tax provision117 119 182 286 
Income tax provision31 27 48 66 
Income from continuing operations86 92 134 220 
Income (loss) from discontinued operations, net of taxes(2)39 (3)540 
Net income attributable to XPO$84 $131 $131 $760 
Net income (loss) attributable to common shareholders
Continuing operations$86 $92 $134 $220 
Discontinued operations(2)39 (3)540 
Net income attributable to common shareholders $84 $131 $131 $760 
Earnings (loss) per share data
Basic earnings per share from continuing operations$0.74 $0.80 $1.16 $1.92 
Basic earnings (loss) per share from discontinued operations(0.01)0.34 (0.02)4.69 
Basic earnings per share attributable to common shareholders$0.73 $1.14 $1.14 $6.61 
Diluted earnings per share from continuing operations$0.72 $0.79 $1.14 $1.91 
Diluted earnings (loss) per share from discontinued operations(0.01)0.34 (0.02)4.66 
Diluted earnings per share attributable to common shareholders$0.71 $1.13 $1.12 $6.57 
Weighted-average common shares outstanding
Basic weighted-average common shares outstanding116 115 116 115 
Diluted weighted-average common shares outstanding119 116 118 116 
See accompanying notes to condensed consolidated financial statements.

2

XPO, Inc.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
(In millions)2023202220232022
Net income$84 $131 $131 $760 
Other comprehensive income (loss), net of tax
Foreign currency translation gain (loss), net of tax effect of $(5), $(7),
$5 and $(18)
$(21)$(60)$6 $(132)
Unrealized gain (loss) on financial assets/liabilities designated as hedging
instruments, net of tax effect of $, $, $1 and $(1)
(1) 2 4 
Other comprehensive income (loss)(22)(60)8 (128)
Comprehensive income attributable to XPO$62 $71 $139 $632 
See accompanying notes to condensed consolidated financial statements.

3

XPO, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended September 30,
(In millions)20232022
Cash flows from operating activities of continuing operations
Net income$131 $760 
Income (loss) from discontinued operations, net of taxes(3)540 
Income from continuing operations 134 220 
Adjustments to reconcile income from continuing operations to net cash from operating
activities
Depreciation, amortization and net lease activity318 289 
Stock compensation expense58 21 
Accretion of debt8 12 
Deferred tax expense16 30 
Gains on sales of property and equipment(4)(3)
Other46 46 
Changes in assets and liabilities
Accounts receivable(141)(199)
Other assets(24)72 
Accounts payable(38)13 
Accrued expenses and other liabilities70 127 
Net cash provided by operating activities from continuing operations443 628 
Cash flows from investing activities of continuing operations
Payment for purchases of property and equipment(494)(354)
Proceeds from sale of property and equipment19 10 
Proceeds from settlement of cross-currency swaps2 29 
Net cash used in investing activities from continuing operations(473)(315)
Cash flows from financing activities of continuing operations
Proceeds from issuance of debt1,977  
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(50)(46)
Payment for debt issuance costs(15) 
Change in bank overdrafts30 5 
Payment for tax withholdings for restricted shares(12)(13)
Other1 (1)
Net cash used in financing activities from continuing operations(72)(706)
Cash flows from discontinued operations
Operating activities of discontinued operations(11)31 
Investing activities of discontinued operations2 668 
Net cash provided by (used in) discontinued operations (9)699 
Effect of exchange rates on cash, cash equivalents and restricted cash2 (25)
Net increase (decrease) in cash, cash equivalents and restricted cash(109)281 
Cash, cash equivalents and restricted cash, beginning of period470 273 
Cash, cash equivalents and restricted cash, end of period361 554 
Less: Cash, cash equivalents and restricted cash of discontinued operations, end of period 187 
Cash, cash equivalents and restricted cash of continued operations, end of period$361 $367 
Supplemental disclosure of cash flow information
Leased assets obtained in exchange for new operating lease liabilities$80 $114 
Leased assets obtained in exchange for new finance lease liabilities52 15 
Cash paid for interest109 94 
Cash paid for income taxes36 64 
See accompanying notes to condensed consolidated financial statements.

4

XPO, Inc.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
Common Stock 
(Shares in thousands, dollars in millions)SharesAmountAdditional Paid-In CapitalRetained EarningsAccumulated Other
Comprehensive Loss
Total Equity
Balance as of June 30, 2023115,939 $ $1,268 $43 $(192)$1,119 
Net income— — — 84 — 84 
Other comprehensive loss— — — — (22)(22)
Exercise and vesting of stock compensation awards
33 — — — —  
Tax withholdings related to vesting of stock compensation awards
— — (2)— — (2)
Stock compensation expense
— — 17 — — 17 
Other
— — 1 — — 1 
Balance as of September 30, 2023115,972 $ $1,284 $127 $(214)$1,197 
Common Stock 
(Shares in thousands, dollars in millions)SharesAmountAdditional Paid-In CapitalRetained Earnings
(Accumulated Deficit)
Accumulated Other
Comprehensive Loss
Total Equity
Balance as of December 31, 2022115,435 $ $1,238 $(4)$(222)$1,012 
Net income— — — 131 — 131 
Other comprehensive income— — — — 8 8 
Exercise and vesting of stock compensation awards
537 — — — —  
Tax withholdings related to vesting of stock compensation awards
— — (14)— — (14)
Stock compensation expense
— — 58 — — 58 
Other
— — 2 — — 2 
Balance as of September 30, 2023115,972 $ $1,284 $127 $(214)$1,197 







5


XPO, Inc.
Condensed Consolidated Statements of Changes in Equity (continued)
(Unaudited)
Common Stock
(Shares in thousands, dollars in millions)SharesAmountAdditional Paid-In CapitalRetained EarningsAccumulated Other
Comprehensive Loss
Total Equity
Balance as of June 30, 2022115,033 $ $1,187 $672 $(152)$1,707 
Net income— — — 131 — 131 
Other comprehensive loss— — — — (60)(60)
Exercise and vesting of stock compensation awards
19 — — — —  
Stock compensation expense
— — 8 — — 8 
Balance as of September 30, 2022115,052 $ $1,195 $803 $(212)$1,786 
Common Stock
(Shares in thousands, dollars in millions)SharesAmountAdditional Paid-In CapitalRetained EarningsAccumulated Other
Comprehensive Loss
Total Equity
Balance as of December 31, 2021114,737 $ $1,179 $43 $(84)$1,138 
Net income— — — 760 — 760 
Other comprehensive loss— — — — (128)(128)
Exercise and vesting of stock compensation awards
315 — — — —  
Tax withholdings related to vesting of stock compensation awards
— — (13)— — (13)
Stock compensation expense
— — 26 — — 26 
Other— — 3 — — 3 
Balance as of September 30, 2022115,052 $ $1,195 $803 $(212)$1,786 

See accompanying notes to condensed consolidated financial statements.

6

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,” “we” or the “Company”), is a leading provider of freight transportation services. We use our proprietary technology to move goods efficiently through our customers’ supply chains in North America and Europe. 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 nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.
In the first quarter of 2023, we made certain changes to our financial reporting to increase transparency and improve comparability. Specifically, we changed the expense captions within Operating income in the Condensed Consolidated Statements of Income to reflect the nature of the expense. The change to natural expense classification had no impact on consolidated Revenues or Operating income. We have recast prior period amounts to conform to the current year’s presentation.
Restricted Cash
As of September 30, 2023 and December 31, 2022, our restricted cash included in Other long-term assets on our Condensed Consolidated Balance Sheets was $6 million and $10 million, respectively.
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 $211 million as of September 30, 2023). As of September 30, 2023, €15 million (approximately $16 million) was available under the program. The weighted average interest rate was 5.07% as of September 30, 2023. The program expires in July 2026.

7

Information related to the trade receivables sold was as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(In millions)2023202220232022
Securitization programs
Receivables sold in period
$452 $418 $1,362 $1,323 
Cash consideration
452 418 1,362 1,323 
Factoring programs
Receivables sold in period
23 31 81 75 
Cash consideration
23 31 81 75 
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 September 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)Carrying ValueFair ValueLevel 1
September 30, 2023$305 $305 $305 
December 31, 2022402 402 402 
Adoption of New Accounting Standards
In March 2020, the FASB issued ASU 2020-04, “Reference rate reform (Topic 848): Facilitation of the effects of reference rate reform on financial reporting.” The ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform. The amendments apply only to contracts and hedging relationships that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. The amendments are elective and are effective upon issuance. In December 2022, the FASB issued ASU 2022-06, “Reference rate reform (Topic 848): Deferral of the sunset date of Topic 848” which defers the expiration date for Topic 848 from December 31, 2022 until December 31, 2024. At December 31, 2022, our revolving loan credit agreement (the “ABL Facility”) and senior secured term loan credit agreement, as amended (the “Existing Term Loan Facility”), provided for an interest rate based on LIBOR. In 2023, we amended the terms of our ABL Facility and Existing Term Loan Facility, including transitioning the interest rate from LIBOR to other base rates. See Note 7—Debt for further information. We do not expect the modifications of these facilities to have a material impact on our consolidated financial statements.

8

2. Discontinued Operations
As discussed above, the results of RXO and our intermodal operation are presented as discontinued operations.
The following table summarizes the results of operations from discontinued operations:
Three Months Ended September 30,Nine Months Ended September 30,
(In millions)20222022
Revenue$1,137 $4,009 
Salaries, wages and employee benefits140 455 
Purchased transportation826 2,926 
Fuel, operating expenses and supplies76 267 
Operating taxes and licenses1 3 
Insurance and claims5 18 
Depreciation and amortization expense19 60 
(Gain) loss on sale of business (434)
Transaction and other operating costs24 47 
Operating income46 667 
Income tax provision7 127 
Net income from discontinued operations$39 $540 
For the three and nine months ended September 30, 2023, we incurred approximately $9 million and $49 million, respectively, of costs related to the RXO spin-off, of which $1 million and $5 million, respectively, are reflected within income (loss) from discontinued operations in our Condensed Consolidated Statements of Income. For the three and nine months ended September 30, 2022, we incurred approximately $22 million and $43 million, respectively, of costs related to the RXO spin-off, of which $20 million and $40 million, respectively, are reflected within income (loss) from discontinued operations in our Condensed Consolidated Statements of Income.
The supplemental disclosure of cash paid for income taxes on our Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 excludes $67 million of cash taxes paid primarily related to the gain on the sale of our intermodal operation.
3. Segment Reporting
We are organized into two reportable segments: North American Less-Than-Truckload (“LTL”), the largest component of our business, and European Transportation.
In our asset-based North American LTL segment, we provide shippers with geographic density and day-definite domestic and cross-border services to the U.S., as well as Mexico, Canada and the Caribbean. Our North American LTL segment also includes the results of our trailer manufacturing operations.
In our European Transportation segment, we serve a large base of customers within the consumer, trade and industrial markets. We offer dedicated truckload, LTL, truck brokerage, managed transportation, last mile, freight forwarding and multimodal solutions, such as road-rail and road-short sea combinations.
Corporate includes corporate headquarters costs for executive officers and certain legal and financial functions, and other costs and credits not attributed to our reportable segments.

9

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.
Selected financial data for our segments is as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(in millions)2023202220232022
Revenue
North American LTL$1,228 $1,205 $3,484 $3,552 
European Transportation752 741 2,320 2,335 
Total$1,980 $1,946 $5,804 $5,887 
Adjusted EBITDA
North American LTL$241 $240 $631 $700 
European Transportation44 43 127 130 
Corporate(7)(21)(26)(95)
Total Adjusted EBITDA278 262 732 735 
Less:
Debt extinguishment loss  23 26 
Interest expense 41 35 126 103 
Income tax provision31 27 48 66 
Depreciation and amortization expense110 99 318 289 
Transaction and integration costs (1)
8 2 47 16 
Restructuring costs (2)
1 7 35 15 
Other1  1  
Income from continuing operations$86 $92 $134 $220 
Depreciation and amortization expense
North American LTL$75 60 $214 $175 
European Transportation35 31 100 96 
Corporate 8 4 18 
Total$110 $99 $318 $289 
(1)    Transaction and integration costs for the periods ended September 30, 2023 are primarily comprised of stock-based compensation and retention awards for certain employees related to strategic initiatives. Transaction and integration costs for the periods ended September 30, 2022 are primarily comprised of third-party professional fees related to strategic initiatives as well as retention awards paid to certain employees. Transaction and integration costs for the three months ended September 30, 2023 and 2022 include $1 million and $2 million, respectively, related to our European Transportation segment, and $7 million and $0 million, respectively, related to Corporate. Transaction and integration costs for the nine months ended September 30, 2023 and 2022 include $0 million and $2 million, respectively, related to our North American LTL segment, $2 million and $5 million, respectively, related to our European Transportation segment, and $45 million and $9 million, respectively, related to Corporate.
(2)    See Note 5— Restructuring Charges for further information on our restructuring actions.

10

4. Revenue Recognition
Disaggregation of Revenues
Our revenue disaggregated by geographic area based on sales office location was as follows:
Three Months Ended September 30, 2023
(In millions)North American LTLEuropean TransportationTotal
Revenue
United States$1,202 $ $1,202 
North America (excluding United States)26  26 
France 309 309 
United Kingdom 232 232 
Europe (excluding France and United Kingdom) 211 211 
Total$1,228 $752 $1,980 
Three Months Ended September 30, 2022
(In millions)North American LTLEuropean TransportationTotal
Revenue
United States$1,179 $ $1,179 
North America (excluding United States)26  26 
France 313 313 
United Kingdom 217 217 
Europe (excluding France and United Kingdom) 211 211 
Total$1,205 $741 $1,946 
Nine Months Ended September 30, 2023
(In millions)North American LTLEuropean TransportationTotal
Revenue
United States$3,411 $ $3,411 
North America (excluding United States)73  73 
France 980 980 
United Kingdom 682 682 
Europe (excluding France and United Kingdom) 658 658 
Total$3,484 $2,320 $5,804 
Nine Months Ended September 30, 2022
(In millions)North American LTLEuropean TransportationTotal
Revenue
United States$3,476 $ $3,476 
North America (excluding United States)76  76 
France 1,017 1,017 
United Kingdom 666 666 
Europe (excluding France and United Kingdom) 652 652 
Total$3,552 $2,335 $5,887 

11

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:
Nine Months Ended September 30, 2023
(In millions)Reserve Balance
as of
December 31, 2022
Charges IncurredPaymentsForeign Exchange and OtherReserve Balance
as of
September 30, 2023
Severance
North American LTL$2 $4 $(4)$ $2 
European Transportation1 9 (8) 2 
Corporate19 16 (24)(1)10 
Total$22 $29 $(36)$(1)$14 
In addition to the severance charges noted in the table above, we recorded a non-cash lease impairment charge of $6 million in our North American LTL segment in the first quarter of 2023.
We expect that the majority of the cash outlays related to the severance charges incurred in the first nine months of 2023 will be completed within 12 months.
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:
September 30, 2023
Derivative AssetsDerivative Liabilities
(In millions)Notional AmountBalance Sheet CaptionFair ValueBalance Sheet CaptionFair Value
Derivatives designated as hedges
Cross-currency swap agreements$652 Other current assets$3 Other current liabilities$(9)
Interest rate swaps700 Other current assets1 Other current liabilities 
Total$4 $(9)

12

December 31, 2022
Derivative AssetsDerivative Liabilities
(In millions)Notional AmountBalance Sheet CaptionFair ValueBalance Sheet CaptionFair Value
Derivatives designated as hedges
Cross-currency swap agreements$332 Other current assets$ Other current liabilities$(11)
Cross-currency swap agreements68 Other long-term assets3 Other long-term liabilities 
Interest rate swaps1,882 Other current assets Other current liabilities(1)
Total$3 $(12)
The derivatives are classified as Level 2 within the fair value hierarchy. The derivatives are valued using inputs other than quoted prices, such as foreign exchange rates and yield curves.
The effect of derivative and nonderivative instruments designated as hedges on our Condensed Consolidated Statements of Income was as follows:
Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss) on DerivativesAmount of Gain Reclassified from AOCI into Net IncomeAmount of Gain Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing)
Three Months Ended September 30,
(In millions)202320222023202220232022
Derivatives designated as cash flow hedges
Interest rate swaps$(1)$ $1 $ $ $ 
Derivatives designated as net investment hedges
Cross-currency swap agreements20 25   2 1 
Total$19 $25 $1 $ $2 $1 
Amount of Gain Recognized in Other Comprehensive Income (Loss) on DerivativesAmount of Gain Reclassified from AOCI into Net IncomeAmount of Gain Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing)
Nine Months Ended September 30,
(In millions)202320222023202220232022
Derivatives designated as cash flow hedges
Interest rate swaps$1 $5 $2 $ $ $ 
Derivatives designated as net investment hedges
Cross-currency swap agreements7 62   6 5 
Total$8 $67 $2 $ $6 $5 
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.

13

During the term of the swap contracts, we will receive interest on a quarterly basis from the counterparties based on USD fixed interest rates, and we will pay interest, also on a quarterly basis, to the counterparties based on EUR fixed interest rates. At maturity, we will repay the original principal amount in EUR and receive the principal amount in USD. 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.
During the first nine months of 2023 and 2022, we received approximately $2 million and $29 million, respectively, related to cross-currency swaps that were settled during the period. The proceeds were included in Cash flows from investing activities of continuing operations on our Condensed Consolidated Statements of Cash Flows.
Interest Rate Hedging
We execute short-term interest rate swaps to mitigate variability in forecasted interest payments on our Senior Secured Term Loan Credit Agreement. The interest rate swaps convert floating-rate interest payments into fixed rate interest payments. We designated the interest rate swaps as qualifying hedging instruments and account for these derivatives as cash flow hedges. The outstanding interest rate swap matures in the fourth quarter of 2023.
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
September 30, 2023December 31, 2022
(In millions)Principal BalanceCarrying ValuePrincipal BalanceCarrying Value
Term loan facility$700 $692 $2,003 $1,981 
6.25% senior notes due 2025
112 112 112 111 
6.25% senior secured notes due 2028
830 821   
7.125% senior notes due 2031
450 445   
6.70% senior debentures due 2034
300 220 300 217 
Finance leases, asset financing and other223 223 223 223 
Total debt2,615 2,513 2,638 2,532 
Short-term borrowings and current maturities of long-term debt66 66 59 59 
Long-term debt$2,549 $2,447 $2,579 $2,473 
The fair value of our debt and classification in the fair value hierarchy was as follows:
(In millions)Fair ValueLevel 1Level 2
September 30, 2023$2,574 $1,655 $919 
December 31, 20222,601 392 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 September 30, 2023, our borrowing base was $590 million and our availability under our revolving loan credit agreement (the “ABL Facility”) was $589 million after considering outstanding letters of credit of less than $1 million. As of September 30, 2023, we were in compliance with the ABL Facility’s financial covenants.
In February 2023, we amended our ABL Facility to, among other things: (i) extend the maturity date to April 30, 2026 (subject, in certain circumstances, to a springing maturity if more than $250 million of our existing term loan debt or certain refinancings thereof remain outstanding 91 days prior to their respective maturity dates); (ii) replace LIBOR-based benchmark rates applicable to loans outstanding with Secured Overnight Financing Rate-based rates; (iii) reduce the sublimit for issuance of letters of credit to $200 million; (iv) reduce the sublimit for borrowings in Canadian Dollars to $50 million; (v) exclude real property from the collateral securing the obligations and (vi) make certain other changes to the covenants and other provisions therein. The aggregate commitment of all lenders under the amended ABL Facility remains $600 million.
Letters of Credit Facility
As of September 30, 2023, we had issued $139 million in aggregate face amount of letters of credit under our $200 million uncommitted secured evergreen letter of credit facility.
Term Loan Facility
In 2015, we entered into a Term Loan Credit Agreement that provided for a single borrowing of $1.6 billion, which was subsequently amended to increase the principal balance to $2.0 billion and to extend the maturity date to February 2025 (the “Existing Term Loan Facility”).
In May 2023, we amended the Term Loan Credit Agreement to obtain $700 million of new term loans (the “New Term Loan Facility”) having substantially similar terms as the Existing Term Loan Facility, except with respect to maturity date, issue price, interest rate, prepayment premiums in connection with certain voluntary prepayments and certain other provisions. The New Term Loan Facility was issued at 99.5% of the face amount and will mature on May 24, 2028.
The New Term Loan Facility will bear interest at a rate per annum equal to, at our option, either (a) a Term Secured Overnight Financing (“SOFR”) rate (subject to a 0.00% floor) or (b) a base rate (subject to a 0.00% floor), in each case, plus an applicable margin of 2.00% for Term SOFR loans or 1.00% for base rate loans. The interest rate was 7.32% as of September 30, 2023.
In the second quarter of 2023, we used net proceeds from the New Term Loan Facility and new Senior Notes, as described below, together with cash on hand, to repay $2.0 billion of outstanding principal under the Existing Term Loan Facility and to pay related fees, expenses and accrued interest. We recorded a debt extinguishment loss of $23 million in the first nine months of 2023 due to this redemption.
Senior Notes Due 2028 and 2031
In May 2023, we completed private placements of $830 million aggregate principal amount of senior secured notes due 2028 (the “Senior Secured Notes due 2028”) and $450 million aggregate principal amount of senior notes due 2031 (the “Senior Notes due 2031” and together with the Senior Secured Notes due 2028, the “Senior Notes”). The Senior Secured Notes due 2028 mature on June 1, 2028 and bear interest at a rate of 6.25% per annum. The Senior Notes due 2031 mature on June 1, 2031 and bear interest at a rate of 7.125% per annum. Interest on the Senior Notes is payable semi-annually in cash in arrears, commencing December 1, 2023. The Senior Notes were issued at par and were used to repay our Existing Term Loan Facility as described above.
The Senior Notes are guaranteed by each of our direct and indirect wholly-owned restricted subsidiaries (other than certain excluded subsidiaries) that are obligors under, or guarantee obligations under, our existing secured ABL Facility or the Term Loan Credit Agreement (or certain replacements thereof) or guarantee certain of our other indebtedness.
The Senior Secured Notes due 2028 and the guarantees thereof are secured by substantially all of our assets and our guarantors equally and ratably with the indebtedness under the Term Loan Credit Agreement (subject to permitted

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liens and certain other exceptions). The Senior Notes due 2031 and the guarantees thereof are unsecured, unsubordinated indebtedness for us and our guarantors.
The Senior Notes contain covenants and events of default customary for notes of this nature. If the Senior Secured Notes due 2028 and the Company are each assigned investment grade ratings from at least two of the major rating agencies and no default has occurred, then certain covenant requirements will permanently cease to be in effect, and the collateral, security interests, and guarantees securing the Senior Secured Notes due 2028 will automatically be released.
Senior Notes Due 2025
In the second quarter of 2022, we redeemed $630 million of the then $1.15 billion outstanding principal amount of our 6.25% senior notes due 2025 (“Senior Notes due 2025”). The redemption price for the notes was 100% of the principal amount plus a premium, as defined in the indenture, of approximately $21 million and accrued and unpaid interest. We paid for the redemption using available liquidity. We recorded a debt extinguishment loss of $26 million in the first nine months of 2022 due to this redemption.
In the fourth quarter of 2022, we repurchased an additional $408 million of the outstanding principal amount of our Senior Notes due 2025 in a cash tender offer.
8. Earnings (Loss) per Share
The computations of basic and diluted earnings per share were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(In millions, except per share data)2023202220232022
Net income from continuing operations attributable to
common shares
$86 $92 $134 $220 
Net income (loss) from discontinued operations, net of
amounts attributable to noncontrolling interest
(2)39 (3)540 
Net income attributable to common shares, basic$84 $131 $131 $760 
Basic weighted-average common shares116 115 116 115 
Dilutive effect of stock-based awards3 1 2 1 
Diluted weighted-average common shares119 116 118 116