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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
September 9, 2024
RXO, INC.
(Exact name of registrant as specified in its charter)
| Delaware |
|
001-41514 |
|
88-2183384 |
| (State or other jurisdiction of incorporation) |
|
(Commission File Number) |
|
(IRS Employer Identification No.) |
| 11215 North Community House Road, Charlotte, NC |
|
28277 |
| (Address of principal executive offices) |
|
(Zip Code) |
| (980) 308-6058 |
| (Registrant’s telephone number, including area code) |
| |
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| |
|
| ¨ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| |
|
| ¨ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| |
|
| ¨ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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 $0.01 per share |
|
RXO |
|
New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange
Act of 1934 (§240.12b-2 of this chapter).
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. ¨
As previously reported, on June 21, 2024, RXO,
Inc., a Delaware corporation (“RXO”), United Parcel Service of America, Inc., a Delaware corporation (“UPS”),
UPS Corporate Finance S.À R.L., a limited liability company (société à responsabilité limitée)
organized under the laws of the Grand Duchy of Luxembourg (“UPS Lux”), and UPS SCS (UK) LTD., a limited company formed under
the laws of England and Wales (“UPS SCS”, and together with UPS and UPS Lux, the “Sellers”), entered into a Purchase
Agreement, pursuant to which, following the satisfaction or waiver of certain conditions, RXO will purchase the Sellers’ technology-driven,
asset light based truckload freight brokerage services business, as well as certain assets used to conduct haulage, dedicated transport
and warehousing services in the United Kingdom (collectively, the “Business”) (the “Transaction”) for $1.025 billion
in cash, subject to certain customary adjustments. The consummation of the Transaction is subject to the satisfaction of certain customary
closing conditions, including expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, which expired on August 1, 2024, and the absence of certain legal restraints on completion of the Transaction.
This Current Report on Form 8-K is being filed
in connection with the Transaction to provide (i) the audited combined financial statements of the Business, (ii) the unaudited combined
interim financial information of the Business, (iii) the unaudited pro forma condensed combined financial information for RXO and the Business,
in each case as described below and (iv) the consent of Deloitte & Touche LLP, the Sellers’ independent registered public accounting
firm. This Current Report on Form 8-K does not modify or update the consolidated financial statements of RXO included in RXO’s Annual
Report on Form 10-K for the year ended December 31, 2023 or in RXO’s Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 2024, nor does it reflect any subsequent information or events.
The historical audited combined balance sheets
of the Business and the related statements of combined income (loss), statements of combined comprehensive income (loss) and statements
of combined cash flows as of and for each of the years ended December 31, 2023 and 2022, together with the notes thereto and the independent
auditor’s report thereon, are filed as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by reference.
The historical unaudited combined balance sheets
of the Business and the related unaudited statements of combined income (loss), unaudited statements of combined comprehensive income
(loss), unaudited statements of combined cash flows as of and for the six month periods ended June 30, 2024 and 2023, together with the
notes thereto, are filed as Exhibit 99.2 to this Current Report on Form 8-K and incorporated herein by reference.
The unaudited pro forma condensed combined balance
sheet for RXO and the Business as of June 30, 2024 and the unaudited pro forma condensed combined statements of operations for RXO and
the Business for the six months ended June 30, 2024 and 2023 and the year ended December 31, 2023, together with the notes thereto, are
filed as Exhibit 99.3 to this Current Report on Form 8-K and incorporated herein by reference.
The consent of Deloitte & Touche LLP is filed
as Exhibit 23.1 to this Current Report on Form 8-K and incorporated herein by reference.
Forward-looking Statements
This report includes forward-looking statements,
including statements relating to the potential transaction, such as the expected funding and time period to consummate the potential transaction.
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,” “predict,” “should,”
“will,” “expect,” “project,” “forecast,” “goal,” “outlook,” “target,”
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 us in light of our experience
and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are
appropriate in the circumstances.
These forward-looking statements are subject to
known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance, or achievements
to be materially different from any 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 the risks discussed in our filings with the Securities
and Exchange Commission (“SEC”) and the following: potential delays in consummating the potential transaction; RXO’s
ability to integrate the operations of the Business in a successful manner and in the expected time period; the possibility that any
of the anticipated benefits and projected synergies of the potential transaction will not be realized or will not be realized on the anticipated
terms and within the expected time period; the occurrence of any event, change or other circumstance that could give rise to the termination
of the purchase agreement; risks that the anticipated tax treatment of the potential transaction is not obtained; unforeseen or unknown
liabilities; customer, regulatory and other stakeholder approvals and support; unexpected future capital expenditures; potential litigation
relating to the potential transaction that could be instituted against RXO or its directors; the possibility that the potential transaction
may be more expensive to complete than anticipated, including as a result of unexpected factors or events; the effect of the announcement,
pendency or completion of the potential transaction on the parties’ business relationships and business generally; risks that the
potential transaction disrupts current plans and operations of RXO and potential difficulties in employee retention and hiring as a result
of the potential transaction, as well as the risk of disruption of RXO’s or the Business' management, including the diversion
of management’s time and attention to completion of the proposed transaction and integration matters, and business disruption during
the pendency of, or following, the potential transaction; certain restrictions during the pendency of the proposed transaction that may
impact RXO’s and the Business' ability to pursue certain business opportunities or strategic transactions; negative effects
of this announcement, and the pendency or completion of the potential transaction on the market price of RXO’s common stock and/or
operating results; rating agency actions and RXO’s ability to access short- and long-term debt and equity markets on a timely and
affordable basis; the risk that actual results of the acquired business may differ materially from preliminary results; and the risks
described in Part I, Item 1A “Risk Factors” of RXO’s Annual Report on Form 10-K for the year ended December 31, 2023
and in subsequent filings with the SEC. All forward-looking statements set forth in this report are qualified by these cautionary statements
and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized,
that they will have the expected consequences to or effects on us or our business or operations. Forward-looking statements set forth
in this report 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.
| Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits.
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, hereunto duly authorized.
| |
RXO, Inc. |
| |
|
| |
|
| Date: September 9, 2024 |
By: |
/s/ Jeffrey D. Firestone |
| |
|
Jeffrey D. Firestone |
| |
|
Chief Legal Officer and Corporate Secretary |
Exhibit 23.1
CONSENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation
by reference in Registration Statement No. 333- 268006 on Form S-8 of RXO, Inc. of our report dated August 23, 2024,
(which report expresses an unqualified opinion and includes an explanatory paragraph related to the derivation of the combined financial
statements from the accounting records of United Parcel Service, Inc. (“UPS”), the existence of significant transactions
with related parties, and the allocation of certain expenses by UPS) relating to the combined financial statements of Coyote Logistics
appearing in the Current Report on Form 8-K of RXO, Inc. dated September 9, 2024.
/s/ Deloitte & Touche LLP
Atlanta, Georgia
September 9, 2024
Exhibit 99.1
Coyote Logistics
Combined Financial Statements
As of and for the years ended December 31, 2023
and 2022
and Independent Auditor’s Report.
TABLE OF CONTENTS
| Independent Auditor’s Report |
|
| Financial Statements |
|
| Combined Balance Sheets |
1 |
| Statements of Combined Income (Loss) |
2 |
| Statements of Combined Comprehensive Income (Loss) |
2 |
| Statements of Combined Cash Flows |
3 |
| Notes to Combined Financial Statements |
4 |
| Note 1—Business and Summary of Accounting Policies |
4 |
| Note 2—Related Party Transactions with UPS |
9 |
| Note 3—Revenue Recognition |
9 |
| Note 4—Property, Plant and Equipment |
11 |
| Note 5—Goodwill and Intangible Assets |
12 |
| Note 6—Leases |
13 |
| Note 7—Equity |
15 |
| Note 8—Stock Based Compensation |
15 |
| Note 9—Income Taxes |
16 |
| Note 10—Legal Proceedings and Contingencies |
18 |
| Note 11—Subsequent Events |
19 |
 | | Deloitte
& Touche LLP
1230 Peachtree Rd NW #3100
Atlanta, GA 30309
USA
www.deloitte.com |
INDEPENDENT AUDITOR’S REPORT
To Coyote Logistics
Atlanta, Georgia
Opinion
We have audited the accompanying combined balance sheets
of Coyote Logistics Midco, Inc., Coyote Logistics UK Limited, Coyote Logistics Netherland B.V., and Haulfast (collectively, “Coyote
Logistics” or the “Company”) as of December 31, 2023 and 2022, which are wholly owned subsidiaries of United Parcel Service,
Inc. (“UPS”), and the related statements of combined income, comprehensive income (loss), and cash flows for the years then
ended, and the related notes to the combined financial statements (collectively referred to as the “financial statements”).
In our opinion, the accompanying financial statements present
fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations
and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s
Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and
to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that
the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Emphasis of Matter
As discussed in Note 1 to the financial statements, the accompanying
financial statements were prepared on a standalone basis and derived from the consolidated financial statements and accounting records
of UPS. Further, the accompanying financial statements include significant transactions with related parties and reflect allocations of
certain expenses from UPS. The historical results of operations, financial position and cash flows of Coyote Logistics presented in these
financial statements may not be indicative of actual results had Coyote Logistics been an independent standalone business, and they are
not necessarily indicative of Coyote Logistics’ future results of operations, financial position and cash flows. Our opinion is not modified
with respect to this matter.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation
and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of
America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required
to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the companies’ ability
to continue as a going concern for one year after the date that the financial statements are issued.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee
that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood
that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS, we:
| · | Exercise professional judgment and maintain professional skepticism throughout
the audit. |
| · | Identify and assess the risks of material misstatement
of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures
include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. |
| · | Obtain an understanding of internal control
relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the companies’ internal control. Accordingly, no such opinion is expressed. |
| · | Evaluate the appropriateness of accounting
policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation
of the financial statements. |
| · | Conclude whether, in our judgment, there are
conditions or events, considered in the aggregate, that raise substantial doubt about the companies’ ability to continue as a going concern
for a reasonable period of time. |
We are required to communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters
that we identified during the audit.
/s/ Deloitte & Touche LLP
August 23, 2024
COYOTE LOGISTICS
COMBINED BALANCE SHEETS
(In millions)
| |
|
December 31, |
|
| |
|
2023 |
|
|
2022 |
|
| ASSETS |
|
|
|
|
|
|
| Current Assets: |
|
|
|
|
|
|
| Cash and cash equivalents |
|
$ |
— |
|
|
$ |
— |
|
| Accounts receivable |
|
|
375 |
|
|
|
564 |
|
| Less: Allowances for credit losses |
|
|
(3 |
) |
|
|
(7 |
) |
| Accounts receivable, net |
|
|
372 |
|
|
|
557 |
|
| Contract assets |
|
|
8 |
|
|
|
11 |
|
| Other current assets |
|
|
16 |
|
|
|
12 |
|
| Total Current Assets |
|
|
396 |
|
|
|
580 |
|
| Property, Plant and Equipment, Net |
|
|
17 |
|
|
|
23 |
|
| Operating Lease Right-Of-Use Assets |
|
|
93 |
|
|
|
91 |
|
| Goodwill |
|
|
494 |
|
|
|
492 |
|
| Intangible Assets, Net |
|
|
212 |
|
|
|
360 |
|
| Deferred Income Tax Assets |
|
|
1 |
|
|
|
1 |
|
| Other Non-Current Assets |
|
|
2 |
|
|
|
2 |
|
| Total Assets |
|
$ |
1,215 |
|
|
$ |
1,549 |
|
| LIABILITIES AND SHAREOWNERS’ EQUITY |
|
|
|
|
|
|
| Current Liabilities: |
|
|
|
|
|
|
| Current maturities of operating leases |
|
$ |
18 |
|
|
$ |
16 |
|
| Accounts payable |
|
|
307 |
|
|
|
466 |
|
| Accrued wages and withholdings |
|
|
28 |
|
|
|
46 |
|
| Other current liabilities |
|
|
8 |
|
|
|
5 |
|
| Total Current Liabilities |
|
|
361 |
|
|
|
533 |
|
| Non-Current Operating Leases |
|
|
89 |
|
|
|
89 |
|
| Deferred Income Tax Liabilities |
|
|
37 |
|
|
|
77 |
|
| Other Non-Current Liabilities |
|
|
24 |
|
|
|
23 |
|
| Equity: |
|
|
|
|
|
|
|
|
| Net parent investment |
|
|
701 |
|
|
|
831 |
|
| Accumulated other comprehensive income (loss) |
|
|
3 |
|
|
|
(4 |
) |
| Total Equity |
|
|
704 |
|
|
|
827 |
|
| Total Liabilities and Equity |
|
$ |
1,215 |
|
|
$ |
1,549 |
|
See notes to combined financial statements.
COYOTE LOGISTICS
STATEMENTS OF COMBINED INCOME (LOSS)
(In millions)
| | |
Years Ended December 31, | |
| | |
2023 | | |
2022 | |
| Revenue | |
$ | 3,154 | | |
$ | 4,774 | |
| Operating Expenses: | |
| | | |
| | |
| Purchased transportation | |
| 2,674 | | |
| 4,052 | |
| Compensation and benefits | |
| 298 | | |
| 368 | |
| Depreciation and amortization | |
| 62 | | |
| 61 | |
| Intangible asset impairment charge | |
| 111 | | |
| — | |
| Other expenses | |
| 99 | | |
| 96 | |
| Total Operating Expenses | |
| 3,244 | | |
| 4,577 | |
| Operating Profit (Loss) | |
| (90 | ) | |
| 197 | |
| Other Income and (Expense): | |
| | | |
| | |
| Investment (expense) and other | |
| (3 | ) | |
| (3 | ) |
| Income Before Income Taxes | |
| (93 | ) | |
| 194 | |
| Income Tax Expense (Benefit) | |
| (23 | ) | |
| 51 | |
| Net Income (Loss) | |
$ | (70 | ) | |
$ | 143 | |
STATEMENTS OF COMBINED COMPREHENSIVE INCOME
(LOSS)
(In millions)
| | |
Years Ended December 31, | |
| | |
| 2023 | | |
| 2022 | |
| Net Income (Loss) | |
$ | (70 | ) | |
$ | 143 | |
| Change in foreign currency translation adjustment | |
| 7 | | |
| (8 | ) |
| Comprehensive Income (Loss) | |
$ | (63 | ) | |
$ | 135 | |
See notes to combined financial statements.
COYOTE LOGISTICS
STATEMENTS OF COMBINED CASH FLOWS
(In millions)
| | |
Years Ended December 31, | |
| | |
2023 | | |
2022 | |
| Cash Flows From Operating
Activities: | |
| | | |
| | |
| Net Income (loss) | |
$ | (70 | ) | |
$ | 143 | |
| Adjustments to reconcile net
income to net cash from operating activities: | |
| | | |
| | |
| Depreciation and amortization | |
| 62 | | |
| 61 | |
| Self-insurance reserves | |
| 3 | | |
| 1 | |
| Deferred tax (benefit) | |
| (41 | ) | |
| (11 | ) |
| Stock compensation expense | |
| 2 | | |
| 1 | |
| Asset impairment charge | |
| 111 | | |
| — | |
| Other losses | |
| 3 | | |
| 9 | |
| Changes in assets and liabilities: | |
| | | |
| | |
| Accounts receivable | |
| 185 | | |
| 148 | |
| Other assets | |
| (2 | ) | |
| 1 | |
| Accounts payable | |
| (159 | ) | |
| (95 | ) |
| Accrued wages and withholdings | |
| (19 | ) | |
| 6 | |
| Other liabilities | |
| 2 | | |
| (1 | ) |
| Net cash
from operating activities | |
| 77 | | |
| 263 | |
| Cash Flows (Used In) Investing
Activities: | |
| | | |
| | |
| Capital
expenditures | |
| (20 | ) | |
| (26 | ) |
| Net cash
(used in) investing activities | |
| (20 | ) | |
| (26 | ) |
| Cash Flows (Used In) Financing
Activities: | |
| | | |
| | |
| Transfers
(to) Parent | |
| (57 | ) | |
| (237 | ) |
| Net cash
(used in) financing activities | |
| (57 | ) | |
| (237 | ) |
| Effect
Of Exchange Rate Changes on Cash and Cash Equivalents | |
| — | | |
| — | |
| Net Increase (Decrease)
In Cash and Cash Equivalents | |
| — | | |
| — | |
| Cash and Cash Equivalents: | |
| | | |
| | |
| Beginning of period | |
| — | | |
| — | |
| End of period | |
$ | — | | |
$ | — | |
| Supplemental
Disclosures of Cash Flow Information: | |
| | | |
| | |
| Current
income taxes settled through net parent investment (non-cash) | |
$ | 16 | | |
$ | 61 | |
See notes to combined financial statements.
COYOTE LOGISTICS
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1. BUSINESS AND SUMMARY OF ACCOUNTING POLICIES
United Parcel Service, Inc (“UPS”
or “Parent”) is a global package delivery company and provider of global supply chain management solutions. UPS has two reportable
segments in its SEC periodic filings: U.S. Domestic Package and International Package. The Parent’s remaining businesses are reported
as Supply Chain Solutions (“SCS”), which is a global provider of transportation, logistics and related services.
Coyote Logistics Midco, Inc., Coyote
Logistics UK Ltd., Coyote Logistics Netherland BV, and each of their respective subsidiaries and the net assets of Haulfast in the UK
(collectively, “Coyote” or “Coyote Logistics”) is operated under SCS. Substantially all revenue, assets, and operations
are located in the US. These combined financial statements are being prepared to reflect Coyote on a standalone basis as further described
below. Coyote is a full-scale, asset-light based truckload, less-than-truckload, and intermodal freight brokerage service provider. It
provides multi-modal third-party logistics and data intelligence solutions, including warehousing, domestic transport, and last mile,
with primary operations in the U.S., Mexico, United Kingdom, and Europe.
Basis of Presentation
Throughout the periods included in these combined
financial statements, Coyote operated as part of UPS and consisted of several dedicated legal entities and businesses. Separate financial
statements have not historically been prepared for Coyote. The combined financial statements were prepared on a standalone basis and are
derived from the consolidated financial statements and accounting records of the parent. These combined financial statements reflect the
historical results of operations, financial position and cash flows of Coyote in accordance with accounting principles generally accepted
in the United States (“GAAP”). The historical results of operations, financial position and cash flows of Coyote presented in
these combined financial statements may not be indicative of actual results had Coyote been an independent standalone business, and they
are not necessarily indicative of Coyote’s future results of operations, financial position and cash flows. The combined financial statements
include all revenues and costs directly attributable to Coyote and an allocation of expenses related to certain corporate functions, including,
but not limited to, general corporate expenses such as treasury, tax, and other administrative services. These expenses have been allocated
to Coyote based on direct usage or benefit where specifically identifiable, with the remaining expenses allocated primarily on a pro rata
basis using an applicable measure of revenues, cost of revenues, headcount, number of transactions, or other relevant measures. Management
of Coyote considers these allocations to be a reasonable reflection of the utilization of services or the benefit received. However, the
allocations may not be indicative of the actual expense that would have been incurred had Coyote operated as an independent, standalone
business, nor are they indicative of Coyote’s future expenses. Actual costs that may have been incurred if Coyote had been a standalone
company would depend on a number of factors, including the chosen organization structure and functions outsourced or performed by employees.
UPS uses a centralized approach to cash
management and financing of its operations. Coyote’s cash is transferred to UPS daily and UPS funds Coyote’s operating and investing activities
as needed. These arrangements are not reflective of the manner in which Coyote would have financed its operations had it been a standalone
business separate from UPS during the periods presented. Cash pooling, related interest and intercompany arrangements are excluded from
the asset and liability balances in the combined balance sheets. These amounts have instead been reported as net parent investment as
a component of equity, and are presented as financing activities within the statement of cash flows.
The combined financial statements include
assets and liabilities specifically attributable to Coyote, including assets and liabilities where Coyote is the legal beneficiary or
obligor. UPS’s debt and related interest expense have not been attributed to Coyote for the periods presented since Coyote is not the
legal obligor on the debt, and UPS’s borrowings were not directly attributable to Coyote. All intercompany transactions and balances within
Coyote have been eliminated. Certain transactions between Coyote and UPS have been included in the combined financial statements. See note
2 to the combined financial statements for further information regarding Coyote’s related party transactions.
Use of Estimates
The preparation of our combined financial
statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts
of revenues and expenses and the disclosure of contingencies. Estimates have been prepared on the basis of the most current and best information,
and actual results could differ materially from those estimates.
Although our estimates contemplate current
and expected future conditions, as applicable, it is reasonably possible actual conditions could differ from our expectations, which could
materially affect our results of operations and financial position. Such changes could result in future impairments of intangible assets,
long-lived assets, decreases in the carrying amount of our tax assets, or increases in our self-insurance liabilities at the time of a
measurement event.
Revenue Recognition
Revenue is recognized over time as we
perform the services in the contract. Refer to note 3 for further discussion of our revenue recognition policies.
Cash and Cash Equivalents
Coyote’s cash balances are swept daily
as part of the Parent’s treasury cash-pool, and thus total cash and cash equivalent balances held by Coyote were not material as of December
31, 2023 and 2022.
Third Party Claims
Claims and insurance accruals reflect
the estimated cost of claims for cargo loss and damage incurred primarily in our brokerage operations. In establishing accruals for claims
and expenses, we evaluate and monitor aggregate claim data, and we use factors such as historical claim payouts and current claim metrics
to determine the appropriate reserves for potential liability. Coyote had $22 and $21 million accrued for such matters as of December
31, 2023 and 2022, respectively.
Property, Plant and Equipment
Property, plant and equipment are carried
at cost. We evaluate the useful lives of our property, plant and equipment based on our usage, maintenance and replacement policies, and
taking into account physical and economic factors that may affect the useful lives of the assets.
Depreciation and amortization are provided by the
straight-line method over the estimated useful lives of the assets, which are as follows:
| |
· |
Leasehold Improvements: lesser of asset useful life or lease term |
| |
|
|
| |
· |
Furniture and Office Equipment: 3 to 20 years |
| |
|
|
| |
· |
Technology Equipment: 3 to 10 years |
| |
|
|
| |
· |
Vehicles: 5 to 15 years |
We review long-lived assets for impairment
when circumstances indicate the carrying amount of an asset may not be recoverable based on its undiscounted future cash flows. If the
carrying amount of the asset is determined not to be recoverable, a write-down to fair value is recorded. Fair values are determined based
on quoted market values, discounted cash flows or external appraisals, as appropriate. We review long-lived assets for impairment at the
individual asset or the asset group level for which the lowest level of independent cash flows can be identified.
Leased Assets
We recognize a right-of-use (“ROU”)
asset and lease obligation for all leases greater than twelve months, including reasonably certain renewal or purchase options. Some of
our leases contain both lease and non-lease components, which we have elected to treat as a single lease component. Lease costs for short-term
leases are recognized on a straight-line basis over the lease term.
Certain of our leases contain future
payments that are dependent on an index or rate, such as the consumer price index. We initially measure the lease obligation and ROU asset
using the index or rate at the commencement date. In subsequent periods, lease payments dependent on an index or rate are not remeasured.
Rather, changes to payments due to a change in an index or rate are recognized in our statements of combined income (loss) in the period
of the change.
When available, we use the rate implicit
in the lease to discount lease payments; however, the rate implicit in the lease is not readily determinable for substantially all of
our leases. For these leases, we use an estimate of our incremental borrowing rate to discount lease payments based on information available
at lease commencement. The incremental borrowing rate is derived using multiple inputs including our credit rating, the impact of full
collateralization, lease term and denominated currency.
Contractual Commitments
We issue surety bonds for self-insurance
and other routine business requirements, and as of December 31, 2023 and 2022, we had $1 million of surety bonds written.
Goodwill and Intangible Assets
UPS’s acquisition of Coyote allocated goodwill
to the business, which represented costs in excess of net identifiable assets acquired (goodwill) and indefinite-lived intangible assets.
For other businesses in these carve-out financials, a relative fair value approach was taken. Goodwill is not amortized, but is tested
for impairment at least annually, unless changes in circumstances indicate an impairment may have occurred between annual tests. We complete
our annual goodwill impairment evaluation as of July 1 on a reporting unit basis.
In assessing goodwill for impairment, we initially
evaluate qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying
amount. We consider several factors, including macroeconomic conditions, industry and market conditions, overall financial performance
of the reporting unit, changes in management, strategy or customers and relevant reporting unit-specific events such as a change in the
carrying amount of net assets, a more likely than not expectation of selling or disposing of all, or a portion of, a reporting unit, and
the testing for recoverability of a significant asset group within a reporting unit. If this qualitative assessment results in a conclusion
that it is more likely than not that the fair value of a reporting unit exceeds the carrying value, then no further testing is performed
for that reporting unit.
If the qualitative assessment is not
conclusive, or if we elect to bypass the qualitative test, we quantitatively assess the fair value of a reporting unit to test goodwill
for impairment. We assess the fair value of a reporting unit using a combination of discounted cash flow modeling and observable valuation
multiples for comparable companies. Our estimates are developed using assumptions that we believe are consistent with how a market participant
would value our reporting units. If the carrying amount of a reporting unit exceeds the reporting unit’s fair value, we record the excess
amount as goodwill impairment, not to exceed the total amount of goodwill allocated to the reporting unit.
When performing impairment tests of
indefinite-lived intangible assets, we use a combination of income- and market-based approaches to estimate fair value. If the carrying
value of the indefinite-lived asset exceeds its estimated fair value, an impairment charge is recognized for the amount by which the carrying
amount of the asset exceeds its fair value.
Finite-lived intangible assets, including
customer lists, are amortized on a straight-line basis over the estimated useful lives of the assets, which is generally 10 years. Capitalized
software is generally amortized over 7 years for developed software and 5 years for purchased software.
Self-Insurance Accruals
UPS is self-insured for costs associated
with workers’ compensation claims, automobile liability, health and welfare and general business liabilities, up to certain limits. Self-insurance
reserves are established for estimates of the loss that UPS will ultimately incur on reported claims, as well as estimates of claims that
have been incurred but not yet reported. A portion of the reserve is attributed to Coyote each period, up to a certain limit, representing
Coyote’s obligation.
Workers’
compensation, automobile liability and general liability insurance claims may take several years to completely settle. Consequently,
actuarial estimates are required to project the ultimate cost that will be incurred to fully resolve a claim. A number of factors
can affect the actual cost of a claim, including the length of time the claim remains open, trends in healthcare costs, the results
of any related litigation and with respect to workers’ compensation claims, changes in legislation. Furthermore, claims may emerge
in a future year for events that occurred in a prior year at a rate that differs from actuarial projections. All of these factors
can result in revisions to actuarial projections and produce a material difference between estimated and actual operating
results.
Additionally,
UPS and its affiliates provide services and pay certain expenses on behalf of Coyote, including commissions, general and
administrative expenses. The costs of the aforementioned self-insurance expenses and intercompany arrangement are allocated to
Coyote by UPS, and any cost estimates are adjusted to actual amounts based on the actuarial reports at each annual period end.
During 2023 and 2022, the cost (benefit) allocated to Coyote by UPS was approximately $2 and $(0.9) million, respectively.
Pension and Postretirement Benefits
Certain of our employees participate
in defined benefit pension and postretirement medical plans sponsored by UPS which include participants of other UPS businesses. These
plans were accounted for as single-employer plans under UPS, however for Coyote, we have accounted for our participation in the plans
as a multiemployer benefit plan. Accordingly, we do not record an asset or liability to recognize the funded status of the plans. We allocate
annual service cost of these plans to Coyote for all active Coyote participants. This pension expense is reported within Compensation
and benefits in the statements of combined income (loss).
Additionally, certain of our employees
participate in a defined contribution retirement plan sponsored by UPS which includes participants of other UPS businesses. The UPS 401(k)
Savings Plan is sponsored by UPS and includes eligible Coyote employees. All contributions are subject to maximum compensation and contribution
limits for a tax-qualified defined contribution plan as prescribed by the IRS.
For eligible employees the Parent matches,
in shares of UPS common stock or cash, a portion of the participating employees’ contributions. Matching contributions charged to expense
were $5 and $7 million for 2023 and 2022, respectively.
Income Taxes
Coyote is included within UPS’s federal
consolidated or combined income tax return in the United States and certain foreign jurisdictions, within UPS’s consolidated or combined
U.S. state tax returns, and filing separately in various U.S. state and foreign jurisdictions. Coyote does not directly pay U.S. federal
or state income taxes. In all periods presented, the income tax provision has been computed for the entities comprising Coyote on a standalone,
separate return basis as if Coyote were a separate taxpayer. As a result, the tax treatment of certain items reflected in these combined
financial statements may not be reflected in the consolidated financial statements and tax returns of UPS.
The provision for income taxes is determined using
the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the future tax consequences
expected to occur when the reported amounts of assets and liabilities are recovered or paid. In estimating future tax consequences, we
generally consider all expected future events other than proposed changes in the tax law or rates. Valuation allowances are provided if
it is more likely than not that a deferred tax asset will not be realized. Income taxes as presented attribute deferred income taxes of
UPS to Coyote standalone combined financial statements in a manner that is systematic, rational and consistent with the asset and liability
method. As a result, actual tax transactions included in the consolidated financial statements of UPS may not be included in the separate
combined financial statements of Coyote. Similarly, the tax treatment of certain items reflected in the combined financial statements of
Coyote may not be reflected in the consolidated financial statements and tax returns of UPS.
We recognize liabilities for uncertain tax positions
based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available
evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals
or litigation processes, if any. Once it is determined that the position meets the recognition threshold, the second step requires us
to estimate and measure the largest amount of tax benefit that is more likely than not to be realized upon ultimate settlement. The difference
between the amount of recognizable tax benefit and the total amount of tax benefit from positions filed or to be filed with the tax authorities
is recorded as a liability for uncertain tax benefits. It is inherently difficult and subjective to estimate such amounts, as we have
to determine the probability of various possible outcomes. We reevaluate uncertain tax positions on a quarterly basis. This evaluation
is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under
audit and new audit activity. Such a change in recognition or measurement could result in the recognition of a tax benefit or an additional
charge to the tax provision.
Foreign Currency Translation and Remeasurement
We translate the results of operations of our foreign
subsidiaries using average exchange rates during each period, whereas balance sheet accounts are translated using exchange rates at the
end of each period. Balance sheet currency translation adjustments are recorded in accumulated other comprehensive income (loss). Pre-tax
foreign currency transaction gains (losses) from remeasurement included in investment income (expense) and other were $0.1 and $(0.8)
million in 2023 and 2022, respectively.
Advertising Costs
Coyote expenses advertising costs as
incurred. The total expense recognized within Other Expenses in our statements of combined income (loss) was $1 and $2 million
during 2023 and 2022, respectively.
Stock-Based Compensation
Parent has stock-based employee compensation plans
in which certain Coyote senior employees are participants, which are more fully described in note 8. All share-based awards to employees
are measured based on their fair values and expensed over the period during which an employee is required to provide service in exchange
for the award (the vesting period), less estimated forfeitures. Parent has issued employee share-based awards under various incentive
compensation plans that contain vesting conditions, including service conditions, where the awards cliff vest or vest ratably over a one,
three, or five year period (the “nominal vesting period”) or at the date the employee retires (as defined by the plan), if earlier.
Compensation cost is generally recognized immediately for awards granted to retirement-eligible employees, or over the period from the
grant date to the date retirement eligibility is achieved, if that is expected to occur during the nominal vesting period. We estimate
forfeiture rates based on historical rates of forfeitures for awards with similar characteristics, historical and projected rates of employee
turnover and the nature and terms of the vesting conditions of the awards. We reevaluate our forfeiture rates on an annual basis.
The Parent maintains an employee stock
purchase plan for all eligible employees. Under this plan, shares of UPS class A common stock may be purchased at quarterly intervals
at 95% of the NYSE closing price of UPS class B common stock on the last day of each quarterly period. Total purchased shares by Coyote
employees were immaterial during 2023 and 2022. This plan is not considered to be compensatory, and therefore no compensation cost is
measured for the employees’ purchase rights.
Adoption of New Accounting Standards
Accounting pronouncements adopted during
the periods covered by the audited, combined financial statements did not have a material impact on our consolidated financial position,
results of operations, cash flows or internal controls.
Accounting Standards Issued But Not Yet Effective
In December 2023, the FASB issued an ASU to enhance
tax-related disclosures. This update will require more standardized categories for tax rate reconciliation and additional detail for significant
tax items. It will also require a breakdown of income taxes paid by jurisdiction exceeding 5% of total taxes and remove certain disclosure
requirements for unremitted foreign earnings and uncertain tax positions. The standard becomes effective in the first quarter of 2025.
Should our financial statements continue to be required, we are evaluating its impact on our disclosures and internal controls but do not
expect this ASU will have a significant impact on our consolidated financial position, results of operations, cash flows or internal controls.
Other accounting pronouncements issued
before, but not effective until after, December 31, 2023, are not expected to have a material impact on our consolidated financial position,
results of operations, cash flows or internal controls.
COYOTE LOGISTICS
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 2. RELATED PARTY TRANSACTIONS WITH UPS
Coyote provides services to other UPS
businesses. The nature of services provided is similar to the services that Coyote provides to its third party customers and governed
by a shipper/brokerage transportation agreement. The terms and conditions of these transactions may differ from those that would have
been negotiated between unrelated parties at that time.
All significant intercompany transactions
between Coyote and UPS have been included in these combined financial statements and are considered to have been effectively settled through
equity contributions or distributions at the time the transactions were recorded. Sales to UPS, which was primarily transportation by
Coyote for UPS, during 2023 and 2022 were $570 and $864 million, respectively. Operating expenses, which was primarily purchased transportation
by Coyote from UPS, attributable to Coyote from UPS during 2023 and 2022, were $6 and $33 million, respectively. The total net effect
of the settlement of these intercompany transactions is reflected in the statements of combined cash flows as a financing activity and
in the combined balance sheets as net parent investment.
NOTE 3.
REVENUE RECOGNITION
Revenue Recognition
Coyote provides multi-modal third-party
logistics brokerage services and data intelligence solutions for domestic and international transport via full truckload, less-than-truckload,
intermodal, and last mile transport, with primary operations in the U.S., Mexico, U.K., and Europe. Substantially all of our revenues
are from contracts associated with arranging the pick-up, transportation and delivery of shipments and freight (“transportation services”),
which generally occurs over a short period of time.
We account for a contract when both
parties have approved the contract and are committed to perform their obligations, the rights of the parties are identified, payment terms
are identified, the contract has commercial substance and collectability of consideration is probable.
Performance Obligations
A performance obligation is a promise in a contract
to transfer a distinct good or service to the customer, and is the basis of revenue recognition. To determine the proper revenue recognition
method for contracts, we evaluate whether two or more contracts should be combined and accounted for as a single contract, and whether
the combined or single contract should be accounted for as more than one performance obligation. This evaluation requires judgment, and
the decision to combine a group of contracts or to separate the combined or single contract into multiple performance obligations could
change the amount of revenue and profit recorded in a given period. Within most of our contracts, the customer contracts with us to provide
distinct services, such as transportation brokerage services. The vast majority of our contracts with customers for transportation services
include only one performance obligation; the transportation services themselves. However, if a contract is separated into more than one
performance obligation, we allocate the total transaction price to each performance obligation based on the estimated relative standalone
selling prices of the promised goods or services underlying each performance obligation. We frequently sell standard transportation services
with observable standalone sales prices. In these instances, the observable standalone sales are used to determine the standalone selling
price.
Satisfaction of Performance Obligations
We generally recognize revenue over time
as we perform the services in the contract because our customers receive the benefit of our services as the goods are transported from
one location to another. Further, if we were unable to complete delivery to the final location, those services would not need to be re-performed.
As control transfers over time, revenue is recognized
based on the extent of progress towards completion of the performance obligation. The selection of the method to measure progress towards
completion requires judgment and is based on the nature of the products or services to be provided. We use an output method of progress
based on time-in-transit for our Coyote contracts because it best depicts the transfer of control to the customer which occurs as ratably
as time passes. Under the output measure of progress based on time-in-transit, the extent of progress towards completion is measured based
on the ratio of time elapsed to date to the total estimated time in transit. Revenues, including ancillary or accessorial fees and reductions
for estimated customer incentives, are recorded proportionally as time elapses.
COYOTE LOGISTICS
NOTES TO COMBINED FINANCIAL STATEMENTS
Variable Consideration
We
estimate variable consideration at the most likely amount to which we expect to be entitled. We include estimated amounts of
revenue, which may be reduced by incentives or other contract provisions, in the transaction price to the extent it is probable that a
significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is
resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are
based on an assessment of anticipated customer spending and all information (historical, current and forecasted) that is reasonably available
to us.
Contract Modifications
Contracts are often modified to account for changes
in the rates we charge our customers or to add additional distinct services. We consider contract modifications to exist when the modification
either creates new, or changes the existing, enforceable rights and obligations. Contract modifications that add additional distinct goods
or services are treated as separate contracts. Contract modifications that do not add distinct goods or services typically change the
price of existing services. These contract modifications are accounted for prospectively as the remaining performance obligations are
distinct.
Payment Terms
Under the typical payment terms of our
customer contracts, the customer pays at periodic intervals (i.e., every 14 days, 30 days, 45 days, etc.) for shipments included on invoices
received. Invoices are generated daily, depending on the specific agreement with the customer. It is not customary business practice to
extend payment terms past 90 days, and as such, we do not have a practice of including a significant financing component within our contracts
with customers.
Principal vs. Agent Considerations
In our transportation businesses, we
utilize independent contractors and third-party carriers in the performance of some transportation services. GAAP requires us to evaluate,
using a control model, whether our businesses themselves promise to transfer services to the customer (as the principal) or to arrange
for services to be provided by another party (as the agent). Based on our evaluation of the control model, we determined we act as the
principal rather than the agent within revenue arrangements. Revenue and the associated purchased transportation costs are both reported
on a gross basis within our statements of combined income (loss).
Accounts Receivable, Net
Accounts receivable, net, include amounts
billed and currently due from customers. The amounts due are stated at their net estimated realizable value. Losses on accounts receivable
are recognized when they are incurred, which requires us to make our best estimate of the probable losses inherent in our customer receivables
at each balance sheet date. These estimates require consideration of historical loss experience, adjusted for current conditions, trends
in customer payment frequency, and judgments about the probable effects of relevant observable data, including present economic conditions
and the financial health of specific customers and market sectors. Losses on accounts receivable are recognized when reasonable and supportable
forecasts affect the expected losses inherent in our accounts receivable at each balance sheet date. These estimates require consideration
of historical loss experience, adjusted for current conditions, forward-looking indicators, trends in customer payment frequency, and
judgements about the probable effects of relevant observable data, including present and future economic conditions and the financial
health of specific customers and market sectors. Our risk management process includes standards and policies for reviewing major account
exposures and concentrations of risk.
Our allowance for expected credit losses
as of December 31, 2023 and 2022 was $3 and $7 million, respectively. Amounts for credit losses charged to expense before recoveries during
2023 and 2022 were $2 and $8 million, respectively.
Contract Assets
Contract Assets include billed and unbilled
amounts resulting from in-transit shipments, as Coyote has an unconditional right to payment only when services have been completed (i.e.,
shipments have been delivered). Amounts do not exceed their net realizable value. Contract assets are generally converted each month based
on the short-term nature of the transactions. Contract assets as of January 1, 2022 were $11 million.
COYOTE LOGISTICS
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, net as of December
31, 2023 and 2022 consisted of the following (in millions):
| | |
2023 | | |
2022 | |
| Leasehold improvements | |
$ | 27 | | |
$ | 29 | |
| Furniture and office equipment | |
| 5 | | |
| 5 | |
| Technology equipment | |
| 37 | | |
| 37 | |
| Other | |
| 3 | | |
| 2 | |
| | |
| 72 | | |
| 73 | |
| Less: Accumulated depreciation and amortization | |
| (55 | ) | |
| (50 | ) |
| Property, Plant & Equipment, Net | |
$ | 17 | | |
$ | 23 | |
We monitor our property, plant and equipment
for any indicators that the carrying value of the assets may not be recoverable. We recognized impairment charges of $1 million in 2022,
due to the exit of certain office space. No impairment charges on property, plant and equipment were recorded in 2023.
COYOTE LOGISTICS
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 5. GOODWILL AND INTANGIBLE ASSETS
The activity in the balance of Coyote’s goodwill is as follows (in millions):
| Balance on January 1, 2022 | |
$ | 496 | |
| Foreign currency translation adjustment | |
| (4 | ) |
| Balance on December 31, 2022 | |
$ | 492 | |
| Foreign currency translation adjustment | |
| 2 | |
| Balance on December 31, 2023 | |
$ | 494 | |
Goodwill Impairment
As Coyote historically represented a reporting
unit for UPS, the goodwill impairment evaluation was completed as part of the UPS annual goodwill impairment evaluation, as of July 1,
2023 and 2022. In addition, UPS conducted interim impairment tests when changes in circumstances indicate an impairment may have occurred
between annual tests.
We
utilized a quantitative process to test goodwill for impairment. We determined it was more likely than not the reporting unit fair
value exceeded the carrying value for Coyote. We did not record any goodwill impairment charges in 2023 or 2022.
Intangible Assets
The following is a summary of intangible assets as of December
31, 2023 and 2022 (in millions):
| | |
| | |
| | |
| | |
Weighted | |
| | |
| | |
| | |
| | |
Average | |
| | |
| | |
| | |
| | |
Amortization | |
| | |
Gross | | |
Accumulated | | |
Net Carrying | | |
Period | |
| | |
Carrying Amount | | |
Amortization | | |
Value | | |
(in years) | |
| December 31, 2023 | |
| | | |
| | | |
| | | |
| | |
| Capitalized software | |
$ | 114 | | |
$ | (62 | ) | |
$ | 52 | | |
| 6.7 | |
| Customer list/relationships | |
| 427 | | |
| (356 | ) | |
| 71 | | |
| 10.0 | |
| Trade name | |
| 89 | | |
| — | | |
| 89 | | |
| N/A | |
| Total Intangible Assets | |
$ | 630 | | |
$ | (418 | ) | |
$ | 212 | | |
| 9.3 | |
| December 31, 2022 | |
| | | |
| | | |
| | | |
| | |
| Capitalized software | |
$ | 97 | | |
$ | (50 | ) | |
$ | 47 | | |
| | |
| Customer list/relationships | |
| 427 | | |
| (314 | ) | |
| 113 | | |
| | |
| Trade name | |
| 200 | | |
| — | | |
| 200 | | |
| | |
| Total Intangible Assets | |
$ | 724 | | |
$ | (364 | ) | |
$ | 360 | | |
| | |
A trade name with
a carrying value of $89 and $200 million as of December 31, 2023 and 2022, respectively, is deemed to be an indefinite-lived intangible
asset, and therefore is not amortized. Impairment tests for indefinite-lived intangible assets are performed on an annual basis or more
frequently if required. Our annual test as of July 1, 2023 indicated that the fair value of the Coyote trade name was in excess of its
carrying value, although the excess was less than 10 percent.
Since the July 1, 2023 testing date,
the business continued to be negatively impacted by market conditions, which resulted in revenue declines. In response, during the fourth
quarter of 2023, UPS began to evaluate strategic alternatives and tested the Coyote trade name for impairment as of December 31, 2023,
using forecasts that reflected updated market conditions and an evaluation of strategic alternatives related to this business. We concluded
that the carrying value of the trade name exceeded its estimated fair value and recorded an asset impairment charge of $111 million. The
revised carrying value of this trade name as of December 31, 2023 was $89 million. The trade name continues to be indefinite-lived.
COYOTE LOGISTICS
NOTES TO COMBINED FINANCIAL STATEMENTS
All of Coyote’s other recorded intangible
assets are deemed to be finite-lived intangibles, and are thus amortized over their estimated useful lives. Impairment tests for these
intangible assets are only performed when a triggering event occurs that may indicate that the carrying value of the intangible may not
be recoverable. There were no impairments of finite-lived intangible assets in 2023 and 2022.
Amortization of intangible assets was
$56 and $54 million in each of 2023 and 2022, respectively. Expected amortization of finite-lived intangible assets recorded as of December
31, 2023 for the next five years is as follows (in millions): 2024—$59; 2025—$42; 2026—$13; 2027—$6; 2028—$0.4. Amortization expense in
future periods may be affected by business acquisitions or dispositions, software development, and other factors.
NOTE 6. LEASES
We recognize a right-of-use (“ROU”)
asset and lease liability for all leases greater than 12 months. Some of our leases contain both lease and non-lease components, which
we have elected to treat as a single lease component. We have also elected not to recognize leases that have an original lease term, including
reasonably certain renewal or purchase options, of twelve months or less in our combined balance sheets. Lease costs for short-term leases
are recognized on a straight-line basis over the lease term. We elected the package of transition practical expedients for existing contracts,
which allowed us to carry forward our historical assessments of whether contracts are, or contain, leases, lease classification and determination
of initial direct costs.
We primarily have operating leases for
warehouses, vehicles, corporate office space and various other equipment used in operating our business. Certain leases for real estate
contain options to purchase, extend or terminate the lease. Determining the lease term and amount of lease payments to include in the
calculation of the ROU asset and lease liability for leases containing options requires the use of judgment to determine whether the exercise
of an option is reasonably certain, and if the optional period and payments should be included in the calculation of the associated ROU
asset and liability. In making this determination, we consider all relevant economic factors that would compel us to exercise or not exercise
an option.
Many of our real estate leases contain
charges for common area maintenance or other miscellaneous expenses that are updated based on landlord estimates. Due to this variability,
the cash flows associated with these charges are not included in the minimum lease payments used in determining the ROU asset and associated
lease liability.
Some of our real estate leases contain options
to renew or extend the lease or terminate the lease before the expiration date. These options are factored into the determination of the
lease term and lease payments when their exercise is considered to be reasonably certain.
The components of lease expense for the years ended December
31, 2023 and 2022 are as follows (in millions).
| | |
2023 | | |
2022 | |
| Operating lease costs | |
$ | 20 | | |
$ | 18 | |
| Short-term and variable lease costs | |
| 7 | | |
| 5 | |
| Total lease costs | |
$ | 27 | | |
$ | 23 | |
In addition to the lease costs disclosed
in the table above, we monitor all lease categories for any indicators that the carrying value of the assets may not be recoverable. There
were no material impairments recognized for 2023 and 2022.
COYOTE LOGISTICS
NOTES TO COMBINED FINANCIAL STATEMENTS
Supplemental information related to leases
and location within our combined balance sheets (in millions, except lease term and discount rate) as of December 31, 2023 and 2022 were
as follows:
| | |
2023 | | |
2022 | |
| Operating Leases: | |
| | | |
| | |
| Operating lease right-of-use assets | |
$ | 93 | | |
$ | 91 | |
| | |
| | | |
| | |
| Current maturities of operating leases | |
$ | 18 | | |
$ | 16 | |
| Non-current operating leases | |
| 89 | | |
| 89 | |
| Total operating lease obligations | |
$ | 107 | | |
$ | 105 | |
| | |
| | | |
| | |
| Weighted average remaining lease term (in years): | |
| | | |
| | |
| Operating leases | |
| 7.6 | | |
| 8.2 | |
| | |
| | | |
| | |
| Weighted average discount rate: | |
| | | |
| | |
| Operating leases | |
| 3.0 | % | |
| 3.0 | % |
Supplemental cash flow information related to leases
as of December 31, 2023 and 2022 is as follows (in millions):
| | |
2023 | | |
2022 | |
| Cash paid for amounts included in measurement of liabilities: | |
| | | |
| | |
| Operating cash flows from operating leases | |
$ | 20 | | |
$ | 19 | |
| | |
| | | |
| | |
| Right-of-use assets obtained in exchange for lease obligations: | |
| | | |
| | |
| Operating leases | |
$ | 21 | | |
$ | 2 | |
Future payments for lease obligations as of December 31, 2023 are as follows (in millions):
| | | |
Operating Leases | |
| 2024 | | |
$ | 21 | |
| 2025 | | |
| 18 | |
| 2026 | | |
| 15 | |
| 2027 | | |
| 13 | |
| 2028 | | |
| 11 | |
| Thereafter | | |
| 44 | |
| Total lease payments | | |
| 122 | |
| Less: Imputed interest | | |
| (15 | ) |
| Total lease obligations | | |
| 107 | |
| Less: Current obligations | | |
| (18 | ) |
| Long-term lease obligations | | |
$ | 89 | |
As of December 31, 2023, all leases have commenced.
COYOTE LOGISTICS
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 7. EQUITY
Net parent investment in the combined
balance sheets represents UPS’s historical investment in Coyote and includes accumulated net earnings attributable to Coyote and the net
effect of transactions with, and cost allocations from the Parent.
The following is
a rollforward of our net parent investment and accumulated other comprehensive income (loss) accounts for the years ended December 31,
2023 and 2022 (in millions):
| | |
Net Parent
Investment | | |
Accumulated
Other
Comprehensive
Income (Loss) | |
| Balance as of December 31, 2021 | |
$ | 921 | | |
$ | 4 | |
| Net Income | |
| 143 | | |
| — | |
| Other comprehensive (loss) | |
| — | | |
| (8 | ) |
| Net transfers (to) Parent | |
| (233 | ) | |
| — | |
| Balance as of December 31, 2022 | |
| 831 | | |
| (4 | ) |
| Net (loss) | |
| (70 | ) | |
| — | |
| Other comprehensive income | |
| — | | |
| 7 | |
| Net transfers (to) Parent | |
| (60 | ) | |
| — | |
| Balance as of December 31, 2023 | |
$ | 701 | | |
$ | 3 | |
All significant intercompany transactions
between Coyote and UPS have been included in these combined financial statements and are considered to have been effectively settled through
equity contributions or distributions at the time the transactions were recorded.
NOTE 8. STOCK-BASED COMPENSATION
UPS’s incentive compensation plans permit
the grant of non-qualified and incentive stock options, stock appreciation rights, restricted stock and stock units, and restricted performance
shares and units to eligible employees. In 2021, UPS shareholders approved the 2021 Omnibus Incentive Compensation Plan (the “Plan”)
under which UPS is authorized to issue non-qualified and incentive stock options, stock appreciation rights, restricted stock and stock
units (“RSUs”), and restricted performance shares and performance units (“RPUs”, collectively with RSUs, “Restricted
Units”) underlying 25 million shares. Each award issued in the form of Restricted Units, stock options and other permitted awards
reduces the share reserve by one share. The Parent had 10 and 14 million shares available to be issued under this plan as of December
31, 2023 and 2022, respectively.
The primary compensation programs offered
under the UPS incentive compensation plan include the UPS Management Incentive Award program (inclusive of programs for U.S. and international-based
employees), the UPS Long-Term Incentive Performance Award program, and the UPS Stock Option Program. Coyote employee participation in
these programs were immaterial for all periods presented.
The total expense recognized in our statements
of combined income (loss) was $2 and $1 million during 2023 and 2022, respectively. The associated income tax benefit recognized in our
statements of combined income (loss) was $0.5 and $0.3 million during 2023 and 2022, respectively. There was no cash income tax benefit
received from the lapsing of Restricted Units during 2023 and 2022.
COYOTE LOGISTICS
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 9. INCOME TAXES
Income tax expense for 2023 and 2022 consists of the following (in millions):
| |
2023 | | |
2022 | |
| Current: | |
| | | |
| | |
| U.S. Federal | |
$ | 12 | | |
$ | 50 | |
| U.S. State and Local | |
| 4 | | |
| 10 | |
| Non-U.S. | |
| 2 | | |
| 2 | |
| Total Current | |
$ | 18 | | |
$ | 62 | |
| Deferred: | |
| | | |
| | |
| U.S. Federal | |
$ | (34 | ) | |
$ | (11 | ) |
| U.S. State and Local | |
| (7 | ) | |
| — | |
| Non-U.S. | |
| — | | |
| — | |
| Total Deferred | |
| (41 | ) | |
| (11 | ) |
| Total Income Tax Expense (Benefit) | |
$ | (23 | ) | |
$ | 51 | |
Income before income taxes includes the following components (in millions):
| | |
2023 | | |
2022 | |
| United States | |
$ | (97 | ) | |
$ | 203 | |
| Non-U.S. | |
| 4 | | |
| (9 | ) |
| Total Income (Loss) Before Income Taxes: | |
$ | (93 | ) | |
$ | 194 | |
A reconciliation
of the statutory federal income tax rate to the effective income tax rate for 2023 and 2022 consists of the following:
| | |
2023 | | |
2022 | |
| Statutory U.S. federal income tax rate | |
| 21.0 | % | |
| 21.0 | % |
| U.S. state and local income taxes (net of federal benefit) | |
| 3.1 | | |
| 4.3 | |
| Non-U.S. tax rate differential | |
| (0.2 | ) | |
| (0.6 | ) |
| U.S. federal tax credits | |
| 1.1 | | |
| (0.7 | ) |
| Change in valuation allowance | |
| (0.5 | ) | |
| 1.5 | |
| Other | |
| 0.2 | | |
| 0.8 | |
| Effective income tax rate | |
| 24.7 | % | |
| 26.3 | % |
COYOTE LOGISTICS
NOTES TO COMBINED FINANCIAL STATEMENTS
Deferred income tax assets and liabilities are comprised
of the following as of December 31, 2023 and 2022 (in millions):
| | |
2023 | | |
2022 | |
| Fixed assets and capitalized software | |
$ | (4 | ) | |
$ | (9 | ) |
| Operating lease right-of-use assets | |
| (22 | ) | |
| (21 | ) |
| Goodwill and intangible assets | |
| (44 | ) | |
| (78 | ) |
| Other | |
| (1 | ) | |
| (2 | ) |
| Deferred tax liabilities | |
| (71 | ) | |
| (110 | ) |
| | |
| | | |
| | |
| Loss and credit carryforwards | |
| 4 | | |
| 3 | |
| Operating lease liabilities | |
| 26 | | |
| 25 | |
| Contingency accruals | |
| 4 | | |
| 4 | |
| Other | |
| 5 | | |
| 5 | |
| Deferred tax assets | |
| 39 | | |
| 37 | |
| Deferred tax assets valuation allowance | |
| (4 | ) | |
| (3 | ) |
| Deferred tax asset (net of valuation allowance) | |
| 35 | | |
| 34 | |
| | |
| | | |
| | |
| Net deferred tax (liability) | |
$ | (36 | ) | |
$ | (76 | ) |
Further, we have Non-U.S. operating loss carryforwards as follows (in millions):
| | |
2023 | | |
2022 | |
| Non-U.S. operating loss | |
$ | 47 | | |
$ | 43 | |
The non-U.S. loss carryforwards of $47
million as of December 31, 2023 can be carried forwards for periods ranging from 10 years to indefinitely. As indicated in the table above,
we have established a valuation allowance for certain non-U.S. carryforwards due to the uncertainty resulting from a lack of previous
taxable income within the applicable tax jurisdiction.
For the separate company financial statements,
the opening tax attribute balances reported as of January 1, 2022 are the balances available per the historical tax return filings. There
may be some instances where taxable income from other combined UPS entities have been used to monetize the historical tax attributes of
Coyote. In these cases, it is not practical to adjust the historical carrying value of the attribute on a separate return basis to reflect
the standalone results from the beginning of the carryforward period. During the carve out period, all attributes have been utilized or
generated based on the separate return basis.
The undistributed earnings and profits
(“E&P”) of our foreign subsidiaries amounted to a $86 million deficit as of December 31, 2023. Currently, all of the undistributed
E&P of our foreign subsidiaries is considered to be indefinitely reinvested and, accordingly, no deferred income taxes have been provided
thereon. Upon distribution of those earnings in the form of dividends or otherwise, we would be subject to U.S. state and local taxes
and withholding taxes payable in various jurisdictions. Determination of the amount of unrecognized deferred income tax liability is not
practicable because of the complexities associated with its hypothetical calculation.
The Organization for Economic Co-operation and
Development (“OECD”) has introduced a framework to implement a global minimum corporate tax of 15%, referred to as Pillar Two
or the minimum tax directive. Many aspects of the minimum tax directive will be effective beginning in 2024, with certain remaining impacts
to be effective beginning in 2025. While it is uncertain whether the U.S. will enact legislation to adopt the minimum tax directive, certain
countries in which we operate have adopted legislation, and other countries are in the process of introducing legislation, to implement
the minimum tax directive. While we do not currently expect the minimum tax directive to have a material impact on our effective tax rate,
our analysis is ongoing as the OECD continues to release additional guidance and countries implement legislation. To the extent additional
changes take place in the countries in which we operate, it is possible that these legislative changes and efforts may increase uncertainty
and have an adverse impact on our effective tax rates or operations.
COYOTE LOGISTICS
NOTES TO COMBINED FINANCIAL STATEMENTS
The following table summarizes the activity related to our
uncertain tax positions (in millions):
| | |
Tax | | |
Interest | | |
Penalties | |
| Balance as of December 31, 2021 | |
$ | 12 | | |
$ | — | | |
$ | — | |
| Additions for tax positions of the current year | |
| 3 | | |
| — | | |
| — | |
| Balance as of December 31, 2022 | |
| 15 | | |
| — | | |
| — | |
| Additions for tax positions of the current year | |
| 1 | | |
| — | | |
| — | |
| Additions for tax positions of prior years | |
| — | | |
| 1 | | |
| — | |
| Foreign currency exchange rate changes | |
| 1 | | |
| — | | |
| — | |
| Balance as of December 31, 2023 | |
$ | 17 | | |
$ | 1 | | |
$ | | |
The total amount of gross
uncertain tax positions as of December 31, 2023 and 2022 that, if recognized, would affect the effective tax rate was $7 and $6 million,
respectively. Our continuing policy is to recognize interest and penalties associated with income tax matters as a component of income
tax expense.
We are included within UPS’s federal consolidated
or combined income tax return in the U.S. and certain foreign jurisdictions, included within UPS’s consolidated or combined U.S. state
tax returns and filing separate in various U.S. state and foreign jurisdictions. We have substantially resolved all U.S. federal income
tax matters for tax years prior to 2016. In addition, certain state returns which Coyote is included in are under audit for various years.
A number of years may elapse
before an uncertain tax position is audited and ultimately settled. It is difficult to predict the ultimate outcome or the timing of resolution
for uncertain tax positions. It is reasonably possible that the liability for uncertain tax positions could significantly increase or
decrease within the next twelve months. Items that may cause changes to uncertain tax positions include the allocation of income and expense
between tax jurisdictions. These changes could result from the settlement of litigation, the completion of ongoing examinations, the expiration
of the statute of limitations, or other unforeseen circumstances. At this time, an estimate of the range of the reasonably possible change
cannot be made.
NOTE 10. LEGAL PROCEEDINGS AND CONTINGENCIES
We are involved
in a number of judicial proceedings and other matters arising from the conduct of our business. These proceedings may include claims for
property damage or personal injury incurred in connection with transportation of freight, commercial disputes, and employment-related
claims. These matters also may seek substantial monetary damages.
We believe we have adequately accrued
for the potential impact of loss contingencies that are probable and reasonably estimable. Although there can be no assurance as to the
ultimate outcome, we have generally denied, or believe we have a meritorious defense and will deny, liability in all pending matters,
and we intend to vigorously defend each matter. We accrue amounts associated with legal proceedings when and to the extent a loss becomes
probable and can be reasonably estimated. Costs included in Other Expenses for legal proceedings and other matters was $8 million
and $0.8 million for 2023 and 2022, respectively.
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 a loss,
or additional loss, may have been incurred. 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. The actual costs of resolving legal
proceedings may be substantially higher or lower than the amounts accrued on those claims. Legal costs incurred related to these matters
are expensed as incurred.
For matters as to which we
are not able to estimate a possible loss or range of losses, we are not able to determine whether any such loss will have a material adverse
effect on our business, financial condition, results of operations or liquidity.
COYOTE LOGISTICS
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 11. SUBSEQUENT EVENTS
On June 23, 2024, UPS announced it
has entered into an agreement to sell its Coyote Logistics business unit to RXO, Inc. for $1.025 billion. The sale is subject to regulatory
approvals and closing conditions and is expected to close by the end of 2024. UPS and Coyote would continue to operate under the terms
of an existing shipper / brokerage transportation agreement after the sale closes.
Coyote evaluated subsequent events through
August 23, 2024 the date on which the combined financial statements were available to be issued.
Exhibit 99.2
Coyote Logistics
Unaudited Combined Financial Statements
For the six months ended June 30, 2024 and 2023
and as of June 30, 2024 and December 31, 2023
TABLE OF CONTENTS
| Financial Statements |
|
| Combined Balance Sheets |
1 |
| Statements of Combined Income (Loss) |
2 |
| Statements of Combined Comprehensive Income (Loss) |
2 |
| Statements of Combined Cash Flows |
3 |
| Notes to Unaudited Combined Financial Statements |
4 |
| Note 1—Business and Summary of Accounting Policies |
4 |
| Note 2—Related Party Transactions with UPS |
9 |
| Note 3—Revenue Recognition |
9 |
| Note 4—Property, Plant and Equipment |
11 |
| Note 5—Goodwill and Intangible Assets |
12 |
| Note 6—Leases |
12 |
| Note 7—Equity |
14 |
| Note 8—Stock-Based Compensation |
15 |
| Note 9—Income Taxes |
15 |
| Note 10—Legal Proceedings and Contingencies |
15 |
| Note 11—Subsequent Events |
15 |
COYOTE LOGISTICS
COMBINED BALANCE SHEETS
(In millions)
| | |
June 30,
2024
(unaudited) | | |
December 31,
2023 | |
| ASSETS | |
| | | |
| | |
| Current Assets: | |
| | | |
| | |
| Cash and cash equivalents | |
$ | — | | |
$ | — | |
| Accounts receivable | |
| 345 | | |
| 375 | |
| Less: Allowances for credit losses | |
| (3 | ) | |
| (3 | ) |
| Accounts receivable, net | |
| 342 | | |
| 372 | |
| Contract assets | |
| 13 | | |
| 8 | |
| Other current assets | |
| 16 | | |
| 16 | |
| Total Current Assets | |
| 371 | | |
| 396 | |
| Property, Plant and Equipment, Net | |
| 16 | | |
| 17 | |
| Operating Lease Right-Of-Use Assets | |
| 84 | | |
| 93 | |
| Goodwill | |
| 494 | | |
| 494 | |
| Intangible Assets, Net | |
| 188 | | |
| 212 | |
| Deferred Income Tax Assets | |
| 1 | | |
| 1 | |
| Other Non-Current Assets | |
| 1 | | |
| 2 | |
| Total Assets | |
$ | 1,155 | | |
$ | 1,215 | |
| LIABILITIES AND SHAREOWNERS’ EQUITY | |
| | | |
| | |
| Current Liabilities: | |
| | | |
| | |
| Current maturities of operating leases | |
$ | 16 | | |
$ | 18 | |
| Accounts payable | |
| 227 | | |
| 307 | |
| Accrued wages and withholdings | |
| 21 | | |
| 28 | |
| Other current liabilities | |
| 5 | | |
| 8 | |
| Total Current Liabilities | |
| 269 | | |
| 361 | |
| Non-Current Operating Leases | |
| 81 | | |
| 89 | |
| Deferred Income Tax Liabilities | |
| 29 | | |
| 37 | |
| Other Non-Current Liabilities | |
| 23 | | |
| 24 | |
| Equity: | |
| | | |
| | |
| Net parent investment | |
| 753 | | |
| 701 | |
| Accumulated other comprehensive income | |
| — | | |
| 3 | |
| Total Equity | |
| 753 | | |
| 704 | |
| Total Liabilities and Equity | |
$ | 1,155 | | |
$ | 1,215 | |
See notes to unaudited, combined financial statements.
COYOTE LOGISTICS
STATEMENTS OF COMBINED INCOME (LOSS)
(In millions)
(unaudited)
| | |
Six Months Ended June 30 | |
| | |
2024 | | |
2023 | |
| Revenue | |
$ | 1,307 | | |
$ | 1,625 | |
| Operating Expenses: | |
| | | |
| | |
| Purchased transportation | |
| 1,124 | | |
| 1,365 | |
| Compensation and benefits | |
| 122 | | |
| 163 | |
| Depreciation and amortization | |
| 31 | | |
| 31 | |
| Other expenses | |
| 41 | | |
| 54 | |
| Total Operating Expenses | |
| 1,318 | | |
| 1,613 | |
| Operating Profit (Loss) | |
| (11 | ) | |
| 12 | |
| Other Income and (Expense): | |
| | | |
| | |
| Investment (expense) and other | |
| (1 | ) | |
| — | |
| Income (Loss) Before Income Taxes | |
| (12 | ) | |
| 12 | |
| Income Tax Expense (Benefit) | |
| (2 | ) | |
| 3 | |
| Net Income (Loss) | |
$ | (10 | ) | |
$ | 9 | |
STATEMENTS OF COMBINED COMPREHENSIVE INCOME
(LOSS)
(In millions)
(unaudited)
| | |
Six Months Ended June 30 | |
| | |
2024 | | |
2023 | |
| Net Income (Loss) | |
$ | (10 | ) | |
$ | 9 | |
| Change in foreign currency translation adjustment | |
| (3 | ) | |
| 6 | |
| Comprehensive Income (Loss) | |
$ | (13 | ) | |
$ | 15 | |
See notes to unaudited, combined financial statements.
COYOTE LOGISTICS
STATEMENTS OF COMBINED CASH FLOWS
(In millions)
(unaudited)
| | |
Six
Months Ended June 30 | |
| | |
2024 | | |
2023 | |
| Cash Flows (Used In) Operating Activities: | |
| | | |
| | |
| Net Income (loss) | |
$ | (10 | ) | |
$ | 9 | |
| Adjustments to reconcile net income (loss) to net cash (used in) operating activities: | |
| | | |
| | |
| Depreciation and amortization | |
| 31 | | |
| 31 | |
| Self-insurance reserves | |
| (1 | ) | |
| — | |
| Deferred tax (benefit) | |
| (8 | ) | |
| (6 | ) |
| Stock compensation expense | |
| — | | |
| 1 | |
| Other losses | |
| 1 | | |
| 2 | |
| Changes in assets and liabilities: | |
| | | |
| | |
| Accounts receivable | |
| 27 | | |
| 143 | |
| Other assets | |
| (4 | ) | |
| 8 | |
| Accounts payable | |
| (80 | ) | |
| (198 | ) |
| Accrued wages and withholdings | |
| (7 | ) | |
| (18 | ) |
| Other liabilities | |
| (3 | ) | |
| (2 | ) |
| Other operating activities | |
| 1 | | |
| — | |
| Net cash (used in) operating activities | |
| (53 | ) | |
| (30 | ) |
| Cash Flows (Used In) Investing Activities: | |
| | | |
| | |
| Capital expenditures | |
| (6 | ) | |
| (13 | ) |
| Net cash (used in) investing activities | |
| (6 | ) | |
| (13 | ) |
| Cash Flows From Financing Activities: | |
| | | |
| | |
| Transfers from Parent | |
| 59 | | |
| 43 | |
| Net cash from financing activities | |
| 59 | | |
| 43 | |
| Effect Of Exchange Rate Changes on Cash and Cash Equivalents | |
| — | | |
| — | |
| Net Increase (Decrease) In Cash and Cash Equivalents | |
| — | | |
| — | |
| Cash and Cash Equivalents: | |
| | | |
| | |
| Beginning of period | |
| — | | |
| — | |
| End of period | |
$ | — | | |
$ | — | |
See notes to unaudited, combined financial statements.
COYOTE LOGISTICS
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS
NOTE 1. BUSINESS AND SUMMARY OF ACCOUNTING POLICIES
United Parcel Service Inc. (“UPS” or
“Parent”) is a global package delivery company and provider of global supply chain management solutions. UPS has two reportable
segments in its SEC periodic filings: U.S. Domestic Package and International Package. The Parent’s remaining businesses are reported
as Supply Chain Solutions (“SCS”), which is a global provider of transportation, logistics and related services.
Coyote Logistics Midco, Inc., Coyote
Logistics UK Ltd., Coyote Logistics Netherland BV, and each of their respective subsidiaries and the net assets of Haulfast in the UK
(“Coyote” or “Coyote Logistics”) is operated under SCS. These combined financial statements are being prepared to
reflect Coyote on a standalone basis as further described below. Coyote is a full-scale, asset-light based truckload, less-than-truckload,
and intermodal freight brokerage service provider. It provides multi-modal third-party logistics and data intelligence solutions, including
warehousing, domestic transport, and last mile, with primary operations in the U.S., Mexico, United Kingdom, and Europe.
On June 23, 2024, UPS announced it has
entered into an agreement to sell its Coyote Logistics business unit to RXO, Inc. for $1.025 billion. The sale is subject to regulatory
approvals and closing conditions and is expected to close by the end of 2024. UPS and Coyote would continue to operate under the terms
of an existing shipper / brokerage transportation agreement after the sale closes.
Basis of Presentation
Throughout the periods included in these combined
financial statements, Coyote operated as part of UPS and consisted of several dedicated legal entities and businesses. Separate financial
statements have not historically been prepared for Coyote. The combined financial statements were prepared on a standalone basis and are
derived from the consolidated financial statements and accounting records of the Parent. These combined financial statements reflect the
historical results of operations, financial position and cash flows of Coyote in accordance with accounting principles generally accepted
in the United States (“GAAP”). The historical results of operations, financial position and cash flows of Coyote presented in
these combined financial statements may not be indicative of actual results had Coyote been an independent standalone business, and they
are not necessarily indicative of Coyote’s future results of operations, financial position and cash flows. The combined financial statements
include all revenues and costs directly attributable to Coyote and an allocation of expenses related to certain corporate functions, including,
but not limited to, general corporate expenses such as treasury, tax, and other administrative services. These expenses have been allocated
to Coyote based on direct usage or benefit where specifically identifiable, with the remaining expenses allocated primarily on a pro rata
basis using an applicable measure of revenues, cost of revenues, headcount, number of transactions, or other relevant measures. Allocations
for management costs and corporate support services provided to Coyote totaled $2 and $2 million for the six months ended June 30, 2024
and 2023, respectively. Management of Coyote considers these allocations to be a reasonable reflection of the utilization of services
or the benefit received. However, the allocations may not be indicative of the actual expense that would have been incurred had Coyote
operated as an independent, standalone business, nor are they indicative of Coyote’s future expenses. Actual costs that may have been
incurred if Coyote had been a standalone company would depend on a number of factors, including the chosen organization structure and
functions outsourced or performed by employees.
UPS uses a centralized approach to cash management
and financing of its operations. Coyote’s cash is transferred to UPS daily and UPS funds Coyote’s operating and investing activities as
needed. These arrangements are not reflective of the manner in which Coyote would have financed its operations had it been a standalone
business separate from UPS during the periods presented. Cash pooling, related interest and intercompany arrangements are excluded from
the asset and liability balances in the combined balance sheets. These amounts have instead been reported as net parent investment as
a component of equity, and are presented as financing activities within the statement of cash flows.
The combined financial statements include
assets and liabilities specifically attributable to Coyote, including assets and liabilities where Coyote is the legal beneficiary or
obligor. UPS’s debt and related interest expense have not been attributed to Coyote for the periods presented since Coyote is not the
legal obligor on the debt, and UPS’s borrowings were not directly attributable to Coyote. All intercompany transactions and balances within
Coyote have been eliminated. Certain transactions between Coyote and UPS have been included in the combined financial statements. See note
2 to the combined financial statements for further information regarding Coyote’s related party transactions.
Use of Estimates
The preparation of our combined financial
statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts
of revenues and expenses and the disclosure of contingencies. Estimates have been prepared on the basis of the most current and best information,
and actual results could differ materially from those estimates.
Although our estimates contemplate current
and expected future conditions, as applicable, it is reasonably possible actual conditions could differ from our expectations, which could
materially affect our results of operations and financial position. Such changes could result in future impairments of intangible assets,
long-lived assets, decreases in the carrying amount of our tax assets, or increases in our self-insurance liabilities at the time of a
measurement event.
Revenue Recognition
Revenue is recognized over time as we
perform the services in the contract. Refer to note 3 for further discussion of our revenue recognition policies.
Cash and Cash Equivalents
Coyote’s cash balances are swept daily
as part of the Parent’s treasury cash-pool, and thus total cash and cash equivalent balances held by Coyote were not material as of June
30, 2024 and December 31, 2023.
Third Party Claims
Claims and insurance accruals reflect
the estimated cost of claims for cargo loss and damage incurred primarily in our brokerage operations. In establishing accruals for claims
and expenses, we evaluate and monitor aggregate claim data, and we use factors such as historical claim payouts and current claim metrics
to determine the appropriate reserves for potential liability. Coyote had $21 and $22 million accrued for such matters as of June 30,
2024 and December 31, 2023, respectively.
Property, Plant and Equipment
Property, plant and equipment are carried
at cost. We evaluate the useful lives of our property, plant and equipment based on our usage, maintenance and replacement policies, and
taking into account physical and economic factors that may affect the useful lives of the assets.
Depreciation and amortization are provided by the
straight-line method over the estimated useful lives of the assets, which are as follows:
·
Leasehold Improvements: lesser of asset useful life or lease term
·
Furniture and Office Equipment: 3 to 20 years
·
Technology Equipment: 3 to 10 years
·
Vehicles: 5 to 15 years
We review long-lived assets for impairment when
circumstances indicate the carrying amount of an asset may not be recoverable based on its undiscounted future cash flows. If the carrying
amount of the asset is determined not to be recoverable, a write-down to fair value is recorded. Fair values are determined based on quoted
market values, discounted cash flows or external appraisals, as appropriate. We review long-lived assets for impairment at the individual
asset or the asset group level for which the lowest level of independent cash flows can be identified.
Leased Assets
We recognize a right-of-use (“ROU”)
asset and lease obligation for all leases greater than twelve months, including reasonably certain renewal or purchase options. Some of
our leases contain both lease and non-lease components, which we have elected to treat as a single lease component. Lease costs for short-term
leases are recognized on a straight-line basis over the lease term.
Certain of our leases contain future
payments that are dependent on an index or rate, such as the consumer price index. We initially measure the lease obligation and ROU asset
using the index or rate at the commencement date. In subsequent periods, lease payments dependent on an index or rate are not remeasured.
Rather, changes to payments due to a change in an index or rate are recognized in our statements of combined income in the period of the
change.
When available, we use the rate implicit
in the lease to discount lease payments; however, the rate implicit in the lease is not readily determinable for substantially all of
our leases. For these leases, we use an estimate of our incremental borrowing rate to discount lease payments based on information available
at lease commencement. The incremental borrowing rate is derived using multiple inputs including our credit rating, the impact of full
collateralization, lease term and denominated currency.
Contractual Commitments
We issue surety bonds for self-insurance
and other routine business requirements, and as of June 30, 2024 and December 31, 2023, we had $1 million of surety bonds written.
Goodwill and Intangible Assets
UPS’s acquisition of Coyote allocated goodwill
to the business, which represented costs in excess of net identifiable assets acquired (goodwill) and indefinite-lived intangible assets.
These assets are tested for impairment at least annually, unless changes in circumstances indicate an impairment may have occurred between
annual tests. We complete our annual goodwill impairment evaluation as of July 1 on a reporting unit basis.
In assessing goodwill for impairment, we initially
evaluate qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying
amount. We consider several factors, including macroeconomic conditions, industry and market conditions, overall financial performance
of the reporting unit, changes in management, strategy or customers and relevant reporting unit-specific events such as a change in the
carrying amount of net assets, a more likely than not expectation of selling or disposing of all, or a portion of, a reporting unit, and
the testing for recoverability of a significant asset group within a reporting unit. If this qualitative assessment results in a conclusion
that it is more likely than not that the fair value of a reporting unit exceeds the carrying value, then no further testing is performed
for that reporting unit.
If the qualitative assessment is not conclusive,
or if we elect to bypass the qualitative test, we quantitatively assess the fair value of a reporting unit to test goodwill for impairment.
We assess the fair value of a reporting unit using a combination of discounted cash flow modeling and observable valuation multiples for
comparable companies. Our estimates are developed using assumptions that we believe are consistent with how a market participant would
value our reporting units. If the carrying amount of a reporting unit exceeds the reporting unit’s fair value, we record the excess amount
as goodwill impairment, not to exceed the total amount of goodwill allocated to the reporting unit.
When performing impairment tests of indefinite-lived
intangible assets, we use a combination of income- and market-based approaches to estimate fair value. If the carrying value of the indefinite-lived
asset exceeds its estimated fair value, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds
its fair value.
Finite-lived intangible assets, including customer
lists are amortized on a straight-line basis over the estimated useful lives of the assets, which is generally 10 years. Capitalized software
is generally amortized over 7 years for developed software and 5 years for purchased software.
Self-Insurance Accruals
UPS is self-insured for costs associated with workers’
compensation claims, automobile liability, health and welfare and general business liabilities, up to certain limits. Self-insurance reserves
are established for estimates of the loss that UPS will ultimately incur on reported claims, as well as estimates of claims that have
been incurred but not yet reported. A portion of the reserve is attributed to Coyote each period, up to a certain limit, representing
Coyote’s obligation.
Workers’ compensation, automobile liability and
general liability insurance claims may take several years to completely settle. Consequently, actuarial estimates are required to project
the ultimate cost that will be incurred to fully resolve a claim. A number of factors can affect the actual cost of a claim, including
the length of time the claim remains open, trends in healthcare costs, the results of any related litigation and with respect to workers’
compensation claims, changes in legislation. Furthermore, claims may emerge in a future year for events that occurred in a prior year
at a rate that differs from actuarial projections. All of these factors can result in revisions to actuarial projections and produce a
material difference between estimated and actual operating results.
Additionally, UPS and its affiliates
provide services and pay certain expenses on behalf of Coyote, including commissions, general and administrative expenses. The costs of
the aforementioned self-insurance expenses and intercompany arrangement are allocated to Coyote by UPS, and any cost estimates are adjusted
to actual amounts based on the actuarial reports at each annual period end. During the six months ended June 30, 2024 and 2023, the cost
(benefit) allocated to Coyote by UPS was approximately $(0.4) and $2 million respectively.
Pension and Postretirement Benefits
Certain of our employees participate
in defined benefit pension and postretirement medical plans sponsored by UPS which include participants of other UPS businesses. These
plans were accounted for as single-employer plans under UPS, however for Coyote, we have accounted for our participation in the plans
as a multiemployer benefit plan. Accordingly, we do not record an asset or liability to recognize the funded status of the plans. We allocate
annual service cost of these plans to Coyote for all active Coyote participants. This related pension expense is reported within Compensation
and benefits as applicable in the statements of combined income (loss).
Additionally, certain of our employees
participate in a defined contribution retirement plan sponsored by UPS which includes participants of other UPS businesses. The UPS 401(k)
Savings Plan is sponsored by UPS and includes eligible Coyote employees. All contributions are subject to maximum compensation and contribution
limits for a tax-qualified defined contribution plan as prescribed by the IRS.
For eligible employees the Parent matches,
in shares of UPS common stock or cash, a portion of the participating employees’ contributions. Matching contributions charged to expenses
were $2 and $3 million for the six months ended June 30, 2024 and 2023, respectively.
Income Taxes
Coyote is included within UPS’s federal
consolidated or combined income tax return in the United States and certain foreign jurisdictions, within UPS’s consolidated or combined
U.S. state tax returns, and filing separately in various U.S. state and foreign jurisdictions. Coyote does not directly pay U.S. federal
or state income taxes. In all periods presented, the income tax provision has been computed for the entities comprising Coyote on a standalone,
separate return basis as if Coyote were a separate taxpayer. As a result, the tax treatment of certain items reflected in these combined
financial statements may not be reflected in the consolidated financial statements and tax returns of UPS.
The provision for income taxes is determined using
the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the future tax consequences
expected to occur when the reported amounts of assets and liabilities are recovered or paid. In estimating future tax consequences, we
generally consider all expected future events other than proposed changes in the tax law or rates. Valuation allowances are provided if
it is more likely than not that a deferred tax asset will not be realized. Income taxes as presented attribute deferred income taxes of
UPS to Coyote standalone combined financial statements in a manner that is systematic, rational and consistent with the asset and liability
method. As a result, actual tax transactions included in the consolidated financial statements of UPS may not be included in the separate
combined financial statements of Coyote. Similarly, the tax treatment of certain items reflected in the combined financial statements of
Coyote may not be reflected in the consolidated financial statements and tax returns of UPS.
We recognize liabilities for uncertain tax positions
based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available
evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals
or litigation processes, if any. Once it is determined that the position meets the recognition threshold, the second step requires us
to estimate and measure the largest amount of tax benefit that is more likely than not to be realized upon ultimate settlement. The difference
between the amount of recognizable tax benefit and the total amount of tax benefit from positions filed or to be filed with the tax authorities
is recorded as a liability for uncertain tax benefits. It is inherently difficult and subjective to estimate such amounts, as we have
to determine the probability of various possible outcomes. We reevaluate uncertain tax positions on a quarterly basis. This evaluation
is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under
audit and new audit activity. Such a change in recognition or measurement could result in the recognition of a tax benefit or an additional
charge to the tax provision.
Foreign Currency Translation and Remeasurement
We translate the results of operations of our foreign
subsidiaries using average exchange rates during each period, whereas balance sheet accounts are translated using exchange rates at the
end of each period. Balance sheet currency translation adjustments are recorded in accumulated other comprehensive income (loss). Pre-tax
foreign currency transaction gains (losses) from remeasurement included in investment income (expense) and other were $(0.1) and $0.3
million for the six months ended June 30, 2024 and 2023, respectively.
Advertising Costs
Coyote expenses advertising costs as
incurred. The total expense recognized within Other Expenses in our statements of combined income (loss) was $0.6 and $0.7 million
during the six months ended June 30, 2024 and 2023, respectively.
Stock-Based Compensation
Parent has stock-based employee compensation plans
in which certain Coyote employees are participants, which are more fully described in note 8. All share-based awards to employees are
measured based on their fair values and expensed over the period during which an employee is required to provide service in exchange for
the award (the vesting period), less estimated forfeitures. Parent has issued employee share-based awards under various incentive compensation
plans that contain vesting conditions, including service conditions, where the awards cliff vest or vest ratably over a one, three, or
five year period (the “nominal vesting period”) or at the date the employee retires (as defined by the plan), if earlier. Compensation
cost is generally recognized immediately for awards granted to retirement-eligible employees, or over the period from the grant date to
the date retirement eligibility is achieved, if that is expected to occur during the nominal vesting period. We estimate forfeiture rates
based on historical rates of forfeitures for awards with similar characteristics, historical and projected rates of employee turnover
and the nature and terms of the vesting conditions of the awards. We reevaluate our forfeiture rates on an annual basis.
The Parent maintains an employee stock
purchase plan for all eligible employees. Under this plan, shares of UPS class A common stock may be purchased at quarterly intervals
at 95% of the NYSE closing price of UPS class B common stock on the last day of each quarterly period. Total purchased shares by Coyote
employees were immaterial during the six months ended June 30, 2024 and 2023. This plan is not considered to be compensatory, and therefore
no compensation cost is measured for the employees’ purchase rights.
Adoption of New Accounting Standards
Accounting pronouncements adopted during
the periods covered by the audited, combined financial statements did not have a material impact on our consolidated financial position,
results of operations, cash flows or internal controls.
Accounting Standards Issued But Not Yet Effective
In December 2023, the FASB issued an ASU to enhance
tax-related disclosures. This update will require more standardized categories for tax rate reconciliation and additional detail for significant
tax items. It will also require a breakdown of income taxes paid by jurisdiction exceeding 5% of total taxes and remove certain disclosure
requirements for unremitted foreign earnings and uncertain tax positions. The standard becomes effective for us in the first quarter of
2025. We are evaluating its impact on our financial statements, disclosures and internal controls but do not expect this ASU will have
a significant impact on our consolidated financial position, results of operations, cash flows or internal controls.
Other accounting pronouncements issued
before, but not effective until after, June 30, 2024, are not expected to have a material impact on our consolidated financial position,
results of operations, cash flows or internal controls.
COYOTE LOGISTICS
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS
NOTE 2. RELATED PARTY TRANSACTIONS WITH UPS
Coyote often provides services to other
UPS businesses. The nature of services provided is similar to the services that Coyote provides to its third party customers.
All significant intercompany transactions
between Coyote and UPS have been included in these combined financial statements and are considered to have been effectively settled through
equity contributions or distributions at the time the transactions were recorded. Sales to UPS, which was primarily transportation by
Coyote for UPS, during the six months ended June 30, 2024 and 2023, were $204 and $261 million, respectively. Operating expenses, which
was primarily purchased transportation by Coyote from UPS, attributable to Coyote from UPS during the six months ended June 30, 2024 and
2023, were $2 and $3 million, respectively. The total net effect of the settlement of these intercompany transactions is reflected in
the statements of combined cash flows as a financing activity and in the combined balance sheets as net parent investment.
NOTE 3.
REVENUE RECOGNITION
Revenue Recognition
Coyote provides multi-modal third-party
logistics brokerage services and data intelligence solutions for domestic and international transport via full truckload, less-than-truckload,
intermodal, and last mile transport, with primary operations in the U.S., Mexico, U.K., and Europe. Substantially all of our revenues
are from contracts associated with arranging the pick-up, transportation and delivery of shipments and freight (“transportation services”),
which generally occurs over a short period of time.
We account for a contract when both parties
have approved the contract and are committed to perform their obligations, the rights of the parties are identified, payment terms are
identified, the contract has commercial substance and collectability of consideration is probable.
Performance Obligations
A performance obligation is a promise in a contract
to transfer a distinct good or service to the customer, and is the basis of revenue recognition. To determine the proper revenue recognition
method for contracts, we evaluate whether two or more contracts should be combined and accounted for as a single contract, and whether
the combined or single contract should be accounted for as more than one performance obligation. This evaluation requires judgment, and
the decision to combine a group of contracts or to separate the combined or single contract into multiple performance obligations could
change the amount of revenue and profit recorded in a given period. Within most of our contracts, the customer contracts with us to provide
distinct services, such as transportation brokerage services. The vast majority of our contracts with customers for transportation services
include only one performance obligation; the transportation services themselves. However, if a contract is separated into more than one
performance obligation, we allocate the total transaction price to each performance obligation based on the estimated relative standalone
selling prices of the promised goods or services underlying each performance obligation. We frequently sell standard transportation services
with observable standalone sales prices. In these instances, the observable standalone sales are used to determine the standalone selling
price.
Satisfaction of Performance Obligations
We generally recognize revenue over time
as we perform the services in the contract because our customers receive the benefit of our services as the goods are transported from
one location to another. Further, if we were unable to complete delivery to the final location, those services would not need to be re-performed.
As control transfers over time, revenue is recognized
based on the extent of progress towards completion of the performance obligation. The selection of the method to measure progress towards
completion requires judgment and is based on the nature of the products or services to be provided. We use an output method of progress
based on time-in-transit for our Coyote contracts because it best depicts the transfer of control to the customer which occurs as ratably
as time passes. Under the output measure of progress based on time-in-transit, the extent of progress towards completion is measured based
on the ratio of time elapsed to date to the total estimated time in transit. Revenues, including ancillary or accessorial fees and reductions
for estimated customer incentives, are recorded proportionally as time elapses.
COYOTE LOGISTICS
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS
Variable Consideration
We
estimate variable consideration at the most likely amount to which we expect to be entitled. We include estimated amounts of
revenue, which may be reduced by incentives or other contract provisions, in the transaction price to the extent it is probable that a
significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is
resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are
based on an assessment of anticipated customer spending and all information (historical, current and forecasted) that is reasonably available
to us.
Contract Modifications
Contracts are often modified to account for changes
in the rates we charge our customers or to add additional distinct services. We consider contract modifications to exist when the modification
either creates new, or changes the existing, enforceable rights and obligations. Contract modifications that add additional distinct goods
or services are treated as separate contracts. Contract modifications that do not add distinct goods or services typically change the
price of existing services. These contract modifications are accounted for prospectively as the remaining performance obligations are
distinct.
Payment Terms
Under the typical payment terms of our
customer contracts, the customer pays at periodic intervals (i.e., every 14 days, 30 days, 45 days, etc.) for shipments included on invoices
received. Invoices are generated daily, depending on the specific agreement with the customer. It is not customary business practice to
extend payment terms past 90 days, and as such, we do not have a practice of including a significant financing component within our contracts
with customers.
Principal vs. Agent Considerations
In our transportation businesses, we
utilize independent contractors and third-party carriers in the performance of some transportation services. GAAP requires us to evaluate,
using a control model, whether our businesses themselves promise to transfer services to the customer (as the principal) or to arrange
for services to be provided by another party (as the agent). Based on our evaluation of the control model, we determined that all of our
major businesses act as the principal rather than the agent within their revenue arrangements. Revenue and the associated purchased transportation
costs are both reported on a gross basis within our statements of combined income.
Accounts Receivable, Net
Accounts receivable, net, include amounts
billed and currently due from customers. The amounts due are stated at their net estimated realizable value. Losses on accounts receivable
are recognized when they are incurred, which requires us to make our best estimate of the probable losses inherent in our customer receivables
at each balance sheet date. These estimates require consideration of historical loss experience, adjusted for current conditions, trends
in customer payment frequency, and judgments about the probable effects of relevant observable data, including present economic conditions
and the financial health of specific customers and market sectors. Losses on accounts receivable are recognized when reasonable and supportable
forecasts affect the expected losses inherent in our accounts receivable at each balance sheet date. These estimates require consideration
of historical loss experience, adjusted for current conditions, forward-looking indicators, trends in customer payment frequency, and
judgements about the probable effects of relevant observable data, including present and future economic conditions and the financial
health of specific customers and market sectors. Our risk management process includes standards and policies for reviewing major account
exposures and concentrations of risk.
Our allowance for expected credit losses
as of June 30, 2024 and December 31, 2023 were both $3 million. Amounts for credit losses charged to expense before recoveries during
the six months ended June 30, 2024 and 2023 were $1 and $0.7 million, respectively.
Contract Assets
Contract Assets include billed and unbilled
amounts resulting from in-transit shipments, as Coyote has an unconditional right to payment only when services have been completed (i.e.,
shipments have been delivered). Amounts do not exceed their net realizable value. Contract assets are generally converted each month based
on the short-term nature of the transactions.
COYOTE LOGISTICS
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS
NOTE 4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, net as of June 30,
2024 and December 31, 2023 consisted of the following (in millions):
| | |
June 30,
2024 | | |
December 31,
2023 | |
| Leasehold improvements | |
$ | 27 | | |
$ | 27 | |
| Furniture and office equipment | |
| 5 | | |
| 5 | |
| Technology equipment | |
| 41 | | |
| 37 | |
| Other | |
| — | | |
| 3 | |
| | |
| 73 | | |
| 72 | |
| Less: Accumulated depreciation and amortization | |
| (57 | ) | |
| (55 | ) |
| Property, Plant & Equipment, Net | |
$ | 16 | | |
$ | 17 | |
We monitor our property, plant and equipment
for any indicators that the carrying value of the assets may not be recoverable. No impairment charges on property, plant and
equipment were recorded in the six months ended June 30, 2024 or 2023.
COYOTE LOGISTICS
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS
NOTE 5. GOODWILL AND INTANGIBLE ASSETS
The activity in the balance of Coyote’s goodwill is as follows
(in millions):
| Balance on December 31, 2023 | |
$ | 494 | |
| Foreign currency translation adjustment | |
| — | |
| Balance on June 30, 2024 | |
$ | 494 | |
Goodwill Impairment
As Coyote historically represented a
reporting unit for UPS, the goodwill impairment evaluation was completed as part of the UPS annual goodwill impairment evaluation, as
of July 1st, 2023 and 2022. In addition, UPS conducted interim impairment tests when changes in circumstances indicate an impairment may
have occurred between annual tests. As of June 30, 2024, Coyote had no indications an impairment was more likely than not.
Intangible Assets
The following is a summary of intangible assets as of June
30, 2024 and December 31, 2023 (in millions):
| | |
Gross
Carrying Amount | | |
Accumulated
Amortization | | |
Net Carrying
Value
| |
| June 30, 2024 | |
| | | |
| | | |
| | |
| Capitalized software | |
$ | 119 | | |
$ | (70 | ) | |
$ | 49 | |
| Customer list/relationships | |
| 427 | | |
| (377 | ) | |
| 50 | |
| Trade name | |
| 89 | | |
| — | | |
| 89 | |
| Total Intangible Assets | |
$ | 635 | | |
$ | (447 | ) | |
$ | 188 | |
| December 31, 2023 | |
| | | |
| | | |
| | |
| Capitalized software | |
$ | 114 | | |
$ | (62 | ) | |
$ | 52 | |
| Customer list/relationships | |
| 427 | | |
| (356 | ) | |
| 71 | |
| Trade name | |
| 89 | | |
| — | | |
| 89 | |
| Total Intangible Assets | |
$ | 630 | | |
$ | (418 | ) | |
$ | 212 | |
A trade name with a carrying value of
$89 million as of both June 30, 2024 and December 31, 2023 is deemed to be an indefinite-lived intangible asset, and therefore is not amortized.
Impairment tests for indefinite-lived intangible assets are performed on an annual basis or more frequently if required. Our annual test
as of July 1, 2023 indicated that the fair value of the Coyote trade name was in excess of its carrying value, although the excess was
less than 10 percent.
All of Coyote’s other recorded intangible
assets are deemed to be finite-lived intangibles, and are thus amortized over their estimated useful lives. Impairment tests for these
intangible assets are only performed when a triggering event occurs that may indicate that the carrying value of the intangible may not
be recoverable. There were no impairments of finite-lived intangible assets during the six months ended June 30, 2024 and 2023.
NOTE 6. LEASES
We recognize a right-of-use (“ROU”)
asset and lease liability for all leases greater than 12 months. Some of our leases contain both lease and non-lease components, which
we have elected to treat as a single lease component. We have also elected not to recognize leases that have an original lease term, including
reasonably certain renewal or purchase options, of twelve months or less in our combined balance sheets. Lease costs for short-term leases
are recognized on a straight-line basis over the lease term. We elected the package of transition practical expedients for existing contracts,
which allowed us to carry forward our historical assessments of whether contracts are, or contain, leases, lease classification and determination
of initial direct costs.
COYOTE LOGISTICS
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS
We primarily have operating leases for
warehouses, vehicles, corporate office space and various other equipment used in operating our business. Certain leases for real estate
contain options to purchase, extend or terminate the lease. Determining the lease term and amount of lease payments to include in the
calculation of the ROU asset and lease liability for leases containing options requires the use of judgment to determine whether the exercise
of an option is reasonably certain, and if the optional period and payments should be included in the calculation of the associated ROU
asset and liability. In making this determination, we consider all relevant economic factors that would compel us to exercise or not exercise
an option.
Many of our real estate leases contain
charges for common area maintenance or other miscellaneous expenses that are updated based on landlord estimates. Due to this variability,
the cash flows associated with these charges are not included in the minimum lease payments used in determining the ROU asset and associated
lease liability.
Some of our real estate leases contain
options to renew or extend the lease or terminate the lease before the expiration date. These options are factored into the determination
of the lease term and lease payments when their exercise is considered to be reasonably certain.
The components of lease expense for the six months ended
June 30, 2024 and 2023 are as follows (in millions).
| | |
2024 | | |
2023 | |
| Operating lease costs | |
$ | 11 | | |
$ | 9 | |
| Short-term and variable lease costs | |
| 3 | | |
| 3 | |
| Total lease costs | |
$ | 14 | | |
$ | 12 | |
In addition to the lease costs disclosed
in the table above, we monitor all lease categories for any indicators that the carrying value of the assets may not be recoverable. There
were no material impairments recognized for the six months ended June 30, 2024 and 2023.
Supplemental information related to leases
and location within our combined balance sheets (in millions, except lease term and discount rate) as of June 30, 2024 and December 31,
2023 were as follows:
| | |
2024 | | |
2023 | |
| Operating Leases: | |
| | | |
| | |
| Operating lease right-of-use assets | |
$ | 84 | | |
$ | 93 | |
| | |
| | | |
| | |
| Current maturities of operating leases | |
| 16 | | |
| 18 | |
| Non-current operating leases | |
| 81 | | |
| 89 | |
| Total operating lease obligations | |
$ | 97 | | |
$ | 107 | |
| | |
| | | |
| | |
| Weighted average remaining lease term (in years): | |
| | | |
| | |
| Operating leases | |
| 7.4 | | |
| 7.6 | |
| | |
| | | |
| | |
| Weighted average discount rate: | |
| | | |
| | |
| Operating leases | |
| 3.2 | % | |
| 3.0 | % |
Supplemental cash flow information related to leases as of six months
ended June 30, 2024 and 2023 is as follows (in millions):
| | |
2024 | | |
2023 | |
| Cash paid for amounts included in measurement of liabilities: | |
| | | |
| | |
| Operating cash flows from operating leases | |
$ | 11 | | |
$ | 9 | |
| | |
| | | |
| | |
| Right-of-use assets obtained in exchange for lease obligations: | |
| | | |
| | |
| Operating leases | |
$ | 1 | | |
$ | 5 | |
COYOTE LOGISTICS
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS
Future payments for lease obligations as of June 30, 2024 are as follows (in millions):
| |
Operating Leases | |
| 2024 | |
$ | 10 | |
| 2025 | |
| 19 | |
| 2026 | |
| 16 | |
| 2027 | |
| 12 | |
| 2028 | |
| 11 | |
| Thereafter | |
| 43 | |
| Total lease payments | |
| 111 | |
| Less: Imputed interest | |
| (14 | ) |
| Total lease obligations | |
| 97 | |
| Less: Current obligations | |
| (16 | ) |
| Long-term lease obligations | |
$ | 81 | |
As of June 30, 2024, all leases have commenced.
NOTE 7. EQUITY
Net parent investment in the combined
balance sheets represents UPS’s historical investment in Coyote and includes accumulated net earnings attributable to Coyote and the net
effect of transactions with, and cost allocations from the Parent.
The following is
a rollforward of our net parent investment and accumulated other comprehensive income accounts for the six months ended June 30, 2024
and December 31, 2023 (in millions):
| | |
Net Parent
Investment | | |
Accumulated
Other
Comprehensive
Income | |
| Balance as of December 31, 2023 | |
$ | 701 | | |
$ | 3 | |
| Net (loss) | |
| (10 | ) | |
| — | |
| Other comprehensive (loss) | |
| — | | |
| (3 | ) |
| Net transfers from Parent | |
| 62 | | |
| — | |
| Balance as of June 30, 2024 | |
$ | 753 | | |
$ | — | |
All significant
intercompany transactions between Coyote and UPS have been included in these combined financial statements and are considered to have
been effectively settled through equity contributions or distributions at the time the transactions were recorded.
COYOTE LOGISTICS
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS
NOTE 8. STOCK-BASED COMPENSATION
UPS’s incentive compensation plans permit
the grant of non-qualified and incentive stock options, stock appreciation rights, restricted stock and stock units, and restricted performance
shares and units to eligible employees. In 2021, our shareholders approved our 2021 Omnibus Incentive Compensation Plan (the “Plan”)
under which UPS is authorized to issue non-qualified and incentive stock options, stock appreciation rights, restricted stock and stock
units (“RSUs”), and restricted performance shares and performance units (“RPUs”, collectively with RSUs, “Restricted
Units”) underlying 25 million shares. Each award issued in the form of Restricted Units, stock options and other permitted awards
reduces the share reserve by one share. The Parent had 10 million shares available to be issued under this plan as of December 31, 2023.
The primary compensation programs offered
under the UPS incentive compensation plan include the UPS Management Incentive Award program (inclusive of programs for U.S. and international-based
employees), the UPS Long-Term Incentive Performance Award program, and the UPS Stock Option Program. Coyote employee participation in
these programs were immaterial for all periods presented.
The total expense recognized in our statements
of combined income (loss) was not material and $1 million during the six months ended June 30, 2024 and 2023, respectively.
NOTE 9. INCOME TAXES
Our effective tax rate for the six months
ended June 30, 2024 and 2023 was approximately 16.7% and 25%, respectively. The year-over-year decrease in our effective tax rate was
driven by changes in the jurisdictional mix of earnings.
We have recognized liabilities for uncertain
tax positions and we reevaluate these uncertain tax positions on a quarterly basis. A number of years may elapse before an uncertain tax
position is audited and ultimately settled. It is difficult to predict the ultimate outcome or the timing of resolution for uncertain
tax positions. It is reasonably possible that the liability for uncertain tax positions could significantly increase or decrease within
the next twelve months. Items that may cause changes to uncertain tax positions include the allocation of income and expense between tax
jurisdictions. These changes could result from the settlement of litigation, the completion of ongoing examinations, the expiration of
the statute of limitations, or other unforeseen circumstances. At this time, an estimate of the range of the reasonably possible change
cannot be made.
NOTE 10. LEGAL PROCEEDINGS AND CONTINGENCIES
We are involved in a number of judicial
proceedings and other matters arising from the conduct of our business. These proceedings may include claims for property damage or personal
injury incurred in connection with transportation of freight, commercial disputes, and employment-related claims. These matters also may
seek substantial monetary damages.
We believe we have adequately accrued
for the potential impact of loss contingencies that are probable and reasonably estimable. Although there can be no assurance as to the
ultimate outcome, we have generally denied, or believe we have a meritorious defense and will deny, liability in all pending matters,
and we intend to vigorously defend each matter. We accrue amounts associated with legal proceedings when and to the extent a loss becomes
probable and can be reasonably estimated. Costs included in Other Expenses for legal proceedings and other matters was immaterial
and $7 million for the six months ended June 30, 2024 and 2023, respectively.
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
a loss, or additional loss, may have been incurred. 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. The actual costs of
resolving legal proceedings may be substantially higher or lower than the amounts accrued on those claims. Legal costs incurred related
to these matters are expensed as incurred.
For matters as to which we are not able
to estimate a possible loss or range of losses, we are not able to determine whether any such loss will have a material adverse effect
on our business, financial condition, results of operations or liquidity.
NOTE 11. SUBSEQUENT EVENTS
Coyote evaluated subsequent events through
August 23, 2024 the date on which the combined financial statements were available to be issued.
Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION
On June 21, 2024, RXO, Inc. (“RXO”
or the “Company”) entered into a Purchase Agreement (the “Agreement”) with United Parcel Service of America, Inc.
(“UPS”), UPS Corporate Finance S.À R.L. (“UPS Lux”) and UPS SCS (UK) LTD. (“UPS SCS” and, together
with UPS and UPS Lux, the “Sellers”), pursuant to which RXO agreed to purchase (the “Acquisition”) the Sellers’
technology-driven, asset light based truckload freight brokerage services business, as well as certain assets used to conduct haulage,
dedicated transport and warehousing services in the United Kingdom (collectively, “Coyote”).
The fair value of the total consideration to be
paid under the Agreement is $1.025 billion, to be paid in cash at the time of closing, including an estimate of the working capital adjustment,
and is subject to certain customary post-closing adjustments.
The following unaudited pro forma condensed combined
financial statements give effect to the following (collectively, the “Transactions”):
| • | the Acquisition, which is expected to close on or before September 20, 2024, the actual date of closing
to be determined and subject to the satisfaction or waiver of certain closing conditions; |
| • | the incurrence of debt under the Company’s delayed draw term loan facility in the principal amount
of $200 million (the “Delayed Draw Term Facility”) to fund a portion of the cash consideration of the Acquisition and pay
related fees and expenses; |
| • | the issuance of 20,954,780 shares of the Company’s common stock, par value $0.01 per share (the
“Common Stock”), at a purchase price of $20.21 per share and pre-funded warrants (the “Warrants”) to purchase
6,259,471 shares of Common Stock (the “Warrant Shares”), at a purchase price of $20.20 per warrant (the “Private Placement”);
and |
| • | the issuance of shares of our Common Stock in a contemplated public offering for gross proceeds of $350
million. |
The unaudited pro forma condensed combined financial
statements are prepared using the acquisition method of accounting in accordance with the business combination accounting guidance as
provided in Accounting Standards Codification 805, Business Combinations, with RXO treated as the accounting acquirer for the Transaction.
The unaudited pro forma condensed combined balance
sheet gives effect to the Transactions as if they occurred on June 30, 2024 and the unaudited pro forma condensed combined statements
of operations give effect to the Transactions as if they occurred as of January 1, 2023 and, in each case, the assumptions and adjustments
described in the accompanying notes to the unaudited pro forma condensed combined financial statements. The unaudited pro forma condensed
combined financial statements are provided for informational purposes only and are not necessarily indicative of the operating results
that would have occurred if the Transactions had been completed as of the dates set forth above, nor is it indicative of the future results
of RXO following the Transactions.
In determining the preliminary estimate of fair
values of assets acquired and liabilities assumed of Coyote, RXO used publicly available benchmarking information as well as a variety
of other assumptions, including market participant assumptions. The purchase price allocation relating to the Transactions is preliminary
and subject to change, as additional information becomes available and as additional analyses are performed. There can be no assurances
that the final valuations will not result in material changes to this preliminary purchase price allocation. The unaudited pro forma condensed
combined financial statements do not give effect to the potential impact of any anticipated synergies, operating efficiencies or cost
savings that may result from the Transactions or of any integration costs. The unaudited pro forma condensed combined financial statements
do not purport to project the future operating results or financial position of RXO following the Transactions.
The unaudited pro forma condensed combined financial
information should be read together with the Coyote audited combined financial statements for the year ended December 31, 2023 and
the Coyote unaudited combined interim financial statements as of and for the six months ended June 30, 2024 and 2023, all of which
are included elsewhere in this Form 8-K, as well as RXO’s consolidated financial statements and related notes thereto contained
in its Annual Report on Form 10-K for the year ended December 31, 2023 and RXO’s Quarterly Report on Form 10-Q for
the six months ended June 30, 2024.
RXO, Inc.
Unaudited Pro Forma Condensed Combined Balance
Sheet
As of June 30, 2024
| (In millions) | |
RXO
Historic | | |
Coyote
Historic | | |
Transaction Accounting Adjustments | | |
Note 3 | |
Financing Adjustments | | |
Note 5 | |
Pro Forma
Combined | |
| ASSETS | |
| | | |
| | | |
| | | |
| |
| | | |
| |
| | |
| Current assets | |
| | | |
| | | |
| | | |
| |
| | | |
| |
| | |
| Cash and cash equivalents | |
$ | 7 | | |
$ | — | | |
$ | (1,025 | ) | |
(a) | |
$ | 1,077 | | |
(a)(b) | |
$ | 59 | |
| Accounts receivable, net of allowances | |
| 725 | | |
| 342 | | |
| — | | |
| |
| — | | |
| |
| 1,067 | |
| Other current assets | |
| 44 | | |
| 29 | | |
| (1 | ) | |
(h) | |
| — | | |
| |
| 72 | |
| Total current assets | |
| 776 | | |
| 371 | | |
| (1,026 | ) | |
| |
| 1,077 | | |
| |
| 1,198 | |
| Long-term assets | |
| | | |
| | | |
| | | |
| |
| | | |
| |
| | |
| Property and equipment, net of accumulated depreciation | |
| 118 | | |
| 65 | | |
| — | | |
| |
| — | | |
| |
| 183 | |
| Operating lease assets | |
| 210 | | |
| 84 | | |
| 7 | | |
(d) | |
| — | | |
| |
| 301 | |
| Goodwill | |
| 630 | | |
| 494 | | |
| (24 | ) | |
(b) | |
| — | | |
| |
| 1,100 | |
| Identifiable intangible assets, net of accumulated amortization | |
| 62 | | |
| 139 | | |
| 369 | | |
(c) | |
| — | | |
| |
| 570 | |
| Other long-term assets | |
| 17 | | |
| 2 | | |
| 16 | | |
(i) | |
| — | | |
| |
| 35 | |
| Total long-term assets | |
| 1,037 | | |
| 784 | | |
| 368 | | |
| |
| — | | |
| |
| 2,189 | |
| Total assets | |
$ | 1,813 | | |
$ | 1,155 | | |
$ | (658 | ) | |
| |
$ | 1,077 | | |
| |
$ | 3,387 | |
| LIABILITIES AND EQUITY | |
| | | |
| | | |
| | | |
| |
| | | |
| |
| | |
| Current liabilities | |
| | | |
| | | |
| | | |
| |
| | | |
| |
| | |
| Accounts payable | |
$ | 382 | | |
$ | 227 | | |
$ | — | | |
| |
$ | — | | |
| |
$ | 609 | |
| Accrued expenses | |
| 197 | | |
| 21 | | |
| 19 | | |
(f) | |
| — | | |
| |
| 237 | |
| Short-term debt and current maturities of long-term debt | |
| 16 | | |
| — | | |
| — | | |
| |
| — | | |
| |
| 16 | |
| Short-term operating lease liabilities | |
| 54 | | |
| 16 | | |
| (1 | ) | |
(d) | |
| — | | |
| |
| 69 | |
| Other current liabilities | |
| 13 | | |
| 5 | | |
| (4 | ) | |
(f)(h) | |
| — | | |
| |
| 14 | |
| Total current liabilities | |
| 662 | | |
| 269 | | |
| 14 | | |
| |
| — | | |
| |
| 945 | |
| Long-term liabilities | |
| | | |
| | | |
| | | |
| |
| | | |
| |
| | |
| Long-term debt and obligations under finance leases | |
| 370 | | |
| — | | |
| — | | |
| |
| 199 | | |
(b) | |
| 569 | |
| Deferred tax liabilities | |
| — | | |
| 29 | | |
| 96 | | |
(j) | |
| — | | |
| |
| 125 | |
| Long-term operating lease liabilities | |
| 160 | | |
| 81 | | |
| (5 | ) | |
(d) | |
| — | | |
| |
| 236 | |
| Other long-term liabilities | |
| 42 | | |
| 23 | | |
| 7 | | |
(e) | |
| — | | |
| |
| 72 | |
| Total long-term liabilities | |
| 572 | | |
| 133 | | |
| 98 | | |
| |
| 199 | | |
| |
| 1,002 | |
| Commitments and Contingencies Equity | |
| | | |
| | | |
| | | |
| |
| | | |
| |
| | |
| Preferred stock | |
| — | | |
| — | | |
| — | | |
| |
| — | | |
| |
| — | |
| Common stock | |
| 1 | | |
| — | | |
| — | | |
| |
| — | | |
| |
| 1 | |
| Additional paid-in capital | |
| 599 | | |
| — | | |
| — | | |
| |
| 1,094 | | |
(a)(f) | |
| 1,693 | |
| Net parent investment | |
| — | | |
| 753 | | |
| (753 | ) | |
(g) | |
| — | | |
| |
| — | |
| Retained earnings (Accumulated deficit) | |
| (16 | ) | |
| — | | |
| (17 | ) | |
(f) | |
| (216 | ) | |
(f) | |
| (249 | ) |
| Accumulated other comprehensive loss | |
| (5 | ) | |
| — | | |
| — | | |
| |
| — | | |
| |
| (5 | ) |
| Total equity | |
| 579 | | |
| 753 | | |
| (770 | ) | |
| |
| 878 | | |
| |
| 1,440 | |
| Total liabilities and equity | |
$ | 1,813 | | |
$ | 1,155 | | |
$ | (658 | ) | |
| |
$ | 1,077 | | |
| |
$ | 3,387 | |
See accompanying notes to the unaudited pro forma
condensed combined financial statements.
RXO, Inc.
Unaudited Pro Forma Condensed Combined Statement
of Operations
For the Six Months Ended June 30, 2024
| (Dollars in millions, shares in thousands, except per share amounts) | |
RXO
Historic | | |
Coyote
Historic | | |
Transaction Accounting Adjustments | | |
Note 4 | |
Financing Adjustments | | |
Note 5 | |
Pro Forma
Combined | |
| Revenue | |
$ | 1,843 | | |
$ | 1,307 | | |
$ | (1 | ) | |
(e) | |
$ | — | | |
| |
$ | 3,149 | |
| Cost of transportation and services (exclusive of depreciation and amortization) | |
| 1,399 | | |
| 1,134 | | |
| (1 | ) | |
(e) | |
| — | | |
| |
| 2,532 | |
| Direct operating expense (exclusive of depreciation and amortization) | |
| 103 | | |
| 3 | | |
| — | | |
| |
| — | | |
| |
| 106 | |
| Sales, general and administrative expense | |
| 299 | | |
| 143 | | |
| — | | |
| |
| — | | |
| |
| 442 | |
| Depreciation and amortization expense | |
| 33 | | |
| 31 | | |
| (4 | ) | |
(a) | |
| — | | |
| |
| 60 | |
| Transaction and integration costs | |
| 8 | | |
| 3 | | |
| — | | |
| |
| — | | |
| |
| 11 | |
| Restructuring costs | |
| 13 | | |
| 4 | | |
| — | | |
| |
| — | | |
| |
| 17 | |
| Operating income (loss) | |
| (12 | ) | |
| (11 | ) | |
| 4 | | |
| |
| — | | |
| |
| (19 | ) |
| Other expense | |
| 1 | | |
| — | | |
| — | | |
| |
| — | | |
| |
| 1 | |
| Interest expense, net | |
| 16 | | |
| 1 | | |
| (1 | ) | |
(b) | |
| 7 | | |
(c) | |
| 23 | |
| Income (loss) before income taxes | |
| (29 | ) | |
| (12 | ) | |
| 5 | | |
| |
| (7 | ) | |
| |
| (43 | ) |
| Income tax provision (benefit) | |
| (7 | ) | |
| (2 | ) | |
| 1 | | |
(c) | |
| (2 | ) | |
(d) | |
| (10 | ) |
| Net income (loss) | |
$ | (22 | ) | |
$ | (10 | ) | |
$ | 4 | | |
| |
$ | (5 | ) | |
| |
$ | (33 | ) |
| | |
| | | |
| | | |
| | | |
| |
| | | |
| |
| | |
| Earnings (loss) per share data | |
| | | |
| | | |
| | | |
| |
| | | |
| |
| | |
| Basic | |
$ | (0.19 | ) | |
| | | |
| | | |
| |
| | | |
| |
$ | (0.21 | ) |
| Diluted | |
$ | (0.19 | ) | |
| | | |
| | | |
| |
| | | |
| |
$ | (0.21 | ) |
| | |
| | | |
| | | |
| | | |
| |
| | | |
| |
| | |
| Weighted-average common shares outstanding | |
| | | |
| | | |
| | | |
| |
| | | |
| |
| | |
| Basic | |
| 117,398 | | |
| | | |
| | | |
| |
| 36,353 | | |
(e) | |
| 153,751 | |
| Diluted | |
| 117,398 | | |
| | | |
| | | |
| |
| 36,353 | | |
(e) | |
| 153,751 | |
See accompanying notes to the unaudited pro forma
condensed combined financial statements.
RXO, Inc.
Unaudited Pro Forma Condensed Combined Statement
of Operations
For the Six Months Ended June 30, 2023
| (Dollars in millions, shares in thousands, except per share amounts) | |
RXO
Historic | | |
Coyote
Historic | | |
Transaction Accounting Adjustments | | |
Note 4 | |
Financing Adjustments | | |
Note 5 | |
Pro Forma
Combined | |
| Revenue | |
$ | 1,973 | | |
$ | 1,625 | | |
$ | (1 | ) | |
(e) | |
| — | | |
| |
| 3,597 | |
| Cost of transportation and services (exclusive of depreciation and amortization) | |
| 1,482 | | |
| 1,375 | | |
| (1 | ) | |
(e) | |
| — | | |
| |
| 2,856 | |
| Direct operating expense (exclusive of depreciation and amortization) | |
| 120 | | |
| 3 | | |
| — | | |
| |
| — | | |
| |
| 123 | |
| Sales, general and administrative expense | |
| 297 | | |
| 198 | | |
| — | | |
| |
| — | | |
| |
| 495 | |
| Depreciation and amortization expense | |
| 36 | | |
| 31 | | |
| 7 | | |
(a) | |
| — | | |
| |
| 74 | |
| Transaction and integration costs | |
| 10 | | |
| — | | |
| 19 | | |
(d) | |
| — | | |
| |
| 29 | |
| Restructuring costs | |
| 9 | | |
| 6 | | |
| — | | |
| |
| — | | |
| |
| 15 | |
| Operating income (loss) | |
| 19 | | |
| 12 | | |
| (26 | ) | |
| |
| — | | |
| |
| 5 | |
| Other expense (income) | |
| — | | |
| (1 | ) | |
| — | | |
| |
| 216 | | |
(f) | |
| 215 | |
| Interest expense, net | |
| 16 | | |
| 1 | | |
| (1 | ) | |
(b) | |
| 7 | | |
(c) | |
| 23 | |
| Income (loss) before income taxes | |
| 3 | | |
| 12 | | |
| (25 | ) | |
| |
| (223 | ) | |
| |
| (233 | ) |
| Income tax provision (benefit) | |
| — | | |
| 3 | | |
| (4 | ) | |
(c) | |
| (2 | ) | |
(d) | |
| (3 | ) |
| Net income (loss) | |
$ | 3 | | |
$ | 9 | | |
$ | (21 | ) | |
| |
| (221 | ) | |
| |
| (230 | ) |
| | |
| | | |
| | | |
| | | |
| |
| | | |
| |
| | |
| Earnings (loss) per share data | |
| | | |
| | | |
| | | |
| |
| | | |
| |
| | |
| Basic | |
$ | 0.03 | | |
| | | |
| | | |
| |
| | | |
| |
$ | (1.50 | ) |
| Diluted | |
$ | 0.03 | | |
| | | |
| | | |
| |
| | | |
| |
$ | (1.50 | ) |
| | |
| | | |
| | | |
| | | |
| |
| | | |
| |
| | |
| Weighted-average common shares outstanding | |
| | | |
| | | |
| | | |
| |
| | | |
| |
| | |
| Basic | |
| 116,748 | | |
| | | |
| | | |
| |
| 36,353 | | |
(e) | |
| 153,101 | |
| Diluted | |
| 119,414 | | |
| | | |
| | | |
| |
| 36,353 | | |
(e) | |
| 153,101 | |
See accompanying notes to the unaudited pro forma
condensed combined financial statements.
RXO, Inc.
Unaudited Pro Forma Condensed Combined Statement
of Operations
For the Year Ended December 31, 2023
| (Dollars in millions, shares in thousands, except per share amounts) | |
RXO
Historic | | |
Coyote
Historic | | |
Transaction Accounting Adjustments | | |
Note 4 | |
Financing Adjustments | | |
Note 5 | |
Pro Forma
Combined | |
| Revenue | |
$ | 3,927 | | |
$ | 3,154 | | |
$ | (2 | ) | |
(e) | |
$ | — | | |
| |
$ | 7,079 | |
| Cost of transportation and services (exclusive of depreciation and amortization) | |
| 2,967 | | |
| 2,692 | | |
| (2 | ) | |
(e) | |
| — | | |
| |
| 5,657 | |
| Direct operating expense (exclusive of depreciation and amortization) | |
| 235 | | |
| 6 | | |
| — | | |
| |
| — | | |
| |
| 241 | |
| Sales, general and administrative expense | |
| 591 | | |
| 358 | | |
| — | | |
| |
| — | | |
| |
| 949 | |
| Depreciation and amortization expense | |
| 67 | | |
| 62 | | |
| 2 | | |
(a) | |
| — | | |
| |
| 131 | |
| Intangible asset impairment charge | |
| — | | |
| 111 | | |
| — | | |
| |
| — | | |
| |
| 111 | |
| Transaction and integration costs | |
| 12 | | |
| — | | |
| 19 | | |
(d) | |
| — | | |
| |
| 31 | |
| Restructuring costs | |
| 16 | | |
| 15 | | |
| — | | |
| |
| — | | |
| |
| 31 | |
| Operating income (loss) | |
| 39 | | |
| (90 | ) | |
| (21 | ) | |
| |
| — | | |
| |
| (72 | ) |
| Other expense | |
| 3 | | |
| — | | |
| — | | |
| |
| 216 | | |
(f) | |
| 219 | |
| Interest expense, net | |
| 32 | | |
| 3 | | |
| (3 | ) | |
(b) | |
| 14 | | |
(c) | |
| 46 | |
| Income (loss) before income taxes | |
| 4 | | |
| (93 | ) | |
| (18 | ) | |
| |
| (230 | ) | |
| |
| (337 | ) |
| Income tax provision (benefit) | |
| — | | |
| (23 | ) | |
| (2 | ) | |
(c) | |
| (4 | ) | |
(d) | |
| (29 | ) |
| Net income (loss) | |
$ | 4 | | |
$ | (70 | ) | |
$ | (16 | ) | |
| |
$ | (226 | ) | |
| |
$ | (308 | ) |
| | |
| | | |
| | | |
| | | |
| |
| | | |
| |
| | |
| Earnings (loss) per share data | |
| | | |
| | | |
| | | |
| |
| | | |
| |
| | |
| Basic | |
$ | 0.03 | | |
| | | |
| | | |
| |
| | | |
| |
$ | (2.01 | ) |
| Diluted | |
$ | 0.03 | | |
| | | |
| | | |
| |
| | | |
| |
$ | (2.01 | ) |
| | |
| | | |
| | | |
| | | |
| |
| | | |
| |
| | |
| Weighted-average common shares outstanding | |
| | | |
| | | |
| | | |
| |
| | | |
| |
| | |
| Basic | |
| 116,871 | | |
| | | |
| | | |
| |
| 36,353 | | |
(e) | |
| 153,224 | |
| Diluted | |
| 119,456 | | |
| | | |
| | | |
| |
| 36,353 | | |
(e) | |
| 153,224 | |
See accompanying notes to the unaudited pro forma
condensed combined financial statements.
Notes to Unaudited Pro Forma Condensed Combined
Financial Statements
(Dollars in millions, shares in thousands, except
per share amounts)
The unaudited pro forma condensed combined
financial statements are prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786
“Amendments to Financial Disclosures about Acquired and Disposed Businesses”. The historical information of RXO and Coyote
is presented in accordance with accounting principles generally accepted in the United States of America.
The Transaction will be treated as a
business combination for accounting purposes, with RXO determined to be the accounting acquirer. The purchase price was allocated to the
assets acquired and liabilities assumed based on their preliminary estimated fair values as of June 30, 2024.
| 2. | Calculation of Consideration Transferred and Preliminary Purchase Price Allocation |
Consideration Transferred
The estimated purchase price and the
allocation of the estimated purchase price discussed below are preliminary and subject to certain customary post-closing adjustments.
A final determination of required adjustments will be made based upon the final evaluation of the fair value of tangible and identifiable
intangible assets acquired and liabilities assumed, which may impact consideration transferred. For pro forma purposes, the fair value
of total consideration consists of $1.025 billion in cash to be paid at the time of closing for the purchase of Coyote’s assets
and liabilities.
Preliminary Purchase Price Allocation
Under the acquisition method of accounting,
Coyote’s identifiable assets acquired and liabilities assumed by the Company have been recorded at the acquisition date fair values
and added to those of the Company. The pro forma adjustments are preliminary and based on estimates of the fair value and useful lives
of the assets acquired and liabilities assumed and are prepared to illustrate the estimated effect of the Transactions. The final amounts
allocated to assets acquired and liabilities assumed could differ significantly from the amounts presented in the unaudited pro forma
condensed combined financial statements. Accordingly, the pro forma purchase price allocation is subject to further adjustment as additional
information becomes available and as additional analyses and final valuations are completed. There can be no assurances that these additional
analyses and final valuations will not result in material changes to the estimates of fair value set forth below.
The following table summarizes the preliminary
allocation of the consideration to Coyote’s identifiable tangible and intangible assets acquired and liabilities assumed by the
Company, as if the Transactions had been completed on June 30, 2024, based on the unaudited combined balance sheet of Coyote as of
June 30, 2024, with the excess recorded as goodwill:
| Accounts receivable, net | |
$ | 342 | |
| Other current assets | |
| 28 | |
| Property and equipment, net | |
| 65 | |
| Intangible assets, net | |
| 508 | |
| Operating lease assets | |
| 91 | |
| Other long-term assets | |
| 18 | |
| Total assets | |
$ | 1,052 | |
| | |
| | |
| Accounts payable | |
$ | (227 | ) |
| Accrued expenses | |
| (21 | ) |
| Short-term operating lease liabilities | |
| (15 | ) |
| Other current liabilities | |
| (3 | ) |
| Deferred tax liabilities | |
| (125 | ) |
| Long-term operating lease liabilities | |
| (76 | ) |
| Other long-term liabilities | |
| (30 | ) |
| Total liabilities | |
$ | (497 | ) |
| | |
| | |
| Net assets acquired (a) | |
| 555 | |
| Estimated purchase consideration (b) | |
| 1,025 | |
| Estimated goodwill (b) - (a) | |
$ | 470 | |
Goodwill represents the excess of consideration
transferred over the estimated fair value of the underlying net assets acquired. Goodwill will not be amortized but instead will be reviewed
for impairment at least annually, absent any indicators of impairment. Goodwill is attributable to synergies expected to be achieved from
the combined operations of the Company and Coyote. Goodwill recognized in the Transactions is not expected to be deductible for tax purposes.
| 3. | Description of Transaction Accounting Adjustments, as presented in the Unaudited Pro Forma Condensed
Combined Balance Sheet as of June 30, 2024 |
| a. | Represents an adjustment for the consideration transferred, consisting of $1.025 billion of cash to be
paid at the time of closing for the purchase of Coyote. See Note 5 for information on equity and debt issuances used to fund the Acquisition. |
| b. | Eliminates goodwill recorded in the historical financial statements of Coyote of $494 million and
records the preliminary goodwill resulting from the pro forma purchase price allocation as if the Acquisition had occurred using a preliminary
goodwill estimate of $470 million. The adjustment represents the net impact to goodwill of $24 million. |
| c. | Represents the net adjustment to the estimated fair value of intangible assets acquired in the Acquisition.
Preliminary identifiable intangible assets in the pro forma financial statements are provided in the table below. The amortization related
to these identifiable intangible assets is reflected as a pro forma adjustment in the unaudited pro forma condensed combined statement
of operations, as further described in Note 4(a). |
| ($ in millions) | |
Estimated Fair
Value | | |
Estimated Useful
Life (Years) |
| Customer relationships | |
$ | 493 | | |
13 - 16 |
| Trademarks | |
| 15 | | |
0.5 - 15 |
| Total | |
| 508 | | |
|
| Eliminate Coyote historical intangible assets carrying value | |
$ | (139 | ) | |
|
| Adjustment | |
$ | 369 | | |
|
| d. | Represents the adjustment to the right-of-use (“ROU”) assets and lease liabilities of Coyote’s
operating leases. Coyote’s acquired ROU assets and lease liabilities are measured and recognized based on remaining future lease
payments as of June 30, 2024 using RXO’s incremental borrowing rates. |
| e. | Represents adjustment to accrue for estimated asset retirement obligation associated with real estate
leases. |
| f. | Represents adjustment to accrue for estimated transaction costs of $19 million to be incurred by
RXO related to the Transactions, net of $2 million tax effect included in other current liabilities. |
| g. | Represents adjustment to eliminate Coyote’s historical equity of $753 million. |
| h. | Represents adjustment to remove tax related assets and liabilities retained by the Sellers. The adjustment
includes reductions of $1 million in other current assets and $2 million in other current liabilities. |
| i. | Represents adjustment to recognize an indemnification asset provided for in the Agreement. |
| j. | Represents the increase to long-term deferred tax liabilities of $96 million related to the incremental
differences in the book and tax basis created from the preliminary purchase price allocation. Deferred taxes are established based on
a blended statutory tax rate based on jurisdictions where income is generated. The effective tax rate of RXO following the Transactions
could be materially different depending on post-acquisition activities. |
| 4. | Description of Transaction Accounting Adjustments, as presented in the Unaudited Pro Forma Condensed
Combined Statements of Operations for the six months ended June 30, 2024 and 2023, and the year ended December 31, 2023 |
| a. | Represents the adjustment to record elimination of historical amortization expense and recognition of
new amortization expense related to identifiable intangible assets based on the estimated fair value as of the Acquisition Date. Amortization
expense was calculated based on the estimated fair value of each of the identifiable intangible assets and the periods in which the associated
economic benefits are expected to be derived using the associated estimated useful lives, as further described in Note 3(c) above.
The adjustment for amortization expense is as follows: |
| (In millions) | |
Six Months Ended
June 30, 2024 | | |
Six Months Ended
June 30, 2023 | | |
Year Ended
December 31, 2023 | |
| Reversal of Coyote’s historical amortization expense | |
$ | (21 | ) | |
$ | (21 | ) | |
$ | (43 | ) |
| Amortization of acquired identifiable intangible assets | |
| 17 | | |
| 28 | | |
| 45 | |
| Total intangible asset amortization adjustment | |
$ | (4 | ) | |
$ | 7 | | |
$ | 2 | |
| b. | Represents the reversal of Coyote’s historical interest expense related to intercompany activity
with the Sellers. |
| c. | Represents the income tax effect of the pro forma adjustments calculated using an estimated weighted-average
statutory tax rate of 25% for Coyote. |
| d. | Reflects estimated transaction costs to be incurred by RXO that have not yet been recognized in the statement
of operations for the periods presented. Transaction costs are expensed as incurred and reflected as if incurred on January 1, 2023,
the date the Transaction is assumed to have been completed for the purposes of the unaudited pro forma condensed combined statement of
operations. This is a non-recurring item. |
| e. | Represents the adjustment to eliminate historical intercompany revenue and cost of transportation and
services (exclusive of depreciation and amortization) transactions between RXO and Coyote. |
| a. | Reflects proceeds from RXO’s assumed issuance of approximately $900 million of common stock,
net of $22 million in equity issuance costs. Approximately $550 million was funded through the Private Placement completed on
August 13, 2024. The Private Placement consisted of 20,954,780 shares of Common Stock issued at a purchase price of $20.21 per share
and Warrants to purchase 6,259,471 shares of Common Stock at a purchase price of $20.20 per Warrant. The Warrants will be exercisable
at any time, subject to certain conditions, at an exercise price of $0.01 per share. |
The remaining $350 million is based
on the contemplated public offering of Common Stock in September 2024, using an assumed share price of $27.26 per share, the closing
price of Common Stock on September 5, 2024. The number of shares of Common Stock to be issued in the contemplated public offering
is dependent upon the RXO share price at that time. The following table provides a sensitivity analysis of pro forma basic loss per share
based on changes in the number of shares of Common Stock issued resulting from a 10% increase or decrease in the assumed stock price:
| | |
Price of RXO | | |
| | |
Pro Forma Basic Loss Per Share | |
| | |
Common
Stock | | |
Common
Stock Issued | | |
Six Months Ended
June 30, 2024 | | |
Six Months Ended
June 30, 2023 | | |
Year Ended
December 31, 2023 | |
| Assumed stock price | |
$ | 27.26 | | |
| 12,839,325 | | |
$ | (0.21 | ) | |
$ | (1.50 | ) | |
$ | (2.01 | ) |
| Decrease of 10% | |
$ | 24.53 | | |
| 14,265,916 | | |
$ | (0.21 | ) | |
$ | (1.49 | ) | |
$ | (1.99 | ) |
| Increase of 10% | |
$ | 29.99 | | |
| 11,672,113 | | |
$ | (0.22 | ) | |
$ | (1.51 | ) | |
$ | (2.03 | ) |
| b. | Reflects the contemplated borrowing of $200 million under the Delayed Draw Term Facility in connection
with the Transactions, net of capitalized debt issuance costs of $1 million. |
| c. | To record interest expense and amortization of debt issuance costs related to the contemplated borrowing
under the Delayed Draw Term Facility described above in Note 5(b). Borrowings under the Term Loan A bear interest at a fluctuating rate
per annum. The pro forma interest expense adjustment assumes an interest rate of 6.94%. A 1/8% change in the interest rate would not have
a material impact on pro forma interest expense. |
| d. | Represents the income tax effect of the pro forma financing adjustments calculated using an estimated
weighted-average statutory tax rate of 25% for the combined entity. |
| e. | Represents the pro forma weighted-average basic common shares outstanding calculated using the historical
basic weighted average shares of Common Stock outstanding, adjusted for additional shares issued and contemplated to be issued to consummate
the Transactions, as described in Note 5(a) above. Warrants to purchase 3,700,718 shares of Common Stock are excluded from the calculation
of pro forma weighted-average basic common shares outstanding, as the issuance of these shares is subject to the approval by stockholders
of the Company (the “Stockholder Approval Condition”). Pro forma diluted earnings per share attributable to Common Stock is
equal to pro forma basic earnings per share due to a pro forma net loss in the six months ended June 30, 2024 and 2023 and the year
ended December 31, 2023. |
| (In thousands) | |
Six Months Ended
June 30, 2024 | | |
Six Months Ended
June 30, 2023 | | |
Year Ended
December 31, 2023 | |
| Weighted-average basic common shares outstanding | |
| | | |
| | | |
| | |
| Historical basic shares of Common Stock | |
| 117,398 | | |
| 116,748 | | |
| 116,871 | |
| | |
| | | |
| | | |
| | |
| Shares of Common Stock issued through Private Placement | |
| 20,955 | | |
| 20,955 | | |
| 20,955 | |
| Warrants not subject to Stockholder Approval Condition | |
| 2,559 | | |
| 2,559 | | |
| 2,559 | |
| Shares of Common Stock to be issued through contemplated public offering | |
| 12,839 | | |
| 12,839 | | |
| 12,839 | |
| Total shares of Common Stock issued in connection with the Transactions | |
| 36,353 | | |
| 36,353 | | |
| 36,353 | |
| | |
| | | |
| | | |
| | |
| Pro forma basic shares of Common Stock | |
| 153,751 | | |
| 153,101 | | |
| 153,224 | |
| f. | Represents adjustment to recognize deemed non-pro rata distribution of $216 million associated with the
Private Placement completed on August 13, 2024 based on the difference between the issuance price and the closing market price of
Common Stock on the effective date. |
| 6. | Reclassification Adjustments |
Certain reclassifications have been
made to the Coyote historical financial information to conform to the RXO financial statement presentation.
Reclassifications in the unaudited pro forma condensed combined
balance sheet as of June 30, 2024:
| | |
Before Reclassification | | |
Reclassification | | |
Note | |
After Reclassification | |
| Contract assets | |
$ | 13 | | |
$ | (13 | ) | |
(a) | |
$ | — | |
| Other current assets | |
| 16 | | |
| 13 | | |
(a) | |
| 29 | |
| Property and equipment, net of accumulated depreciation | |
| 16 | | |
| 49 | | |
(b) | |
| 65 | |
| Identifiable intangible assets, net of accumulated amortization | |
| 188 | | |
| (49 | ) | |
(b) | |
| 139 | |
| Deferred income tax assets | |
| 1 | | |
| (1 | ) | |
(c) | |
| — | |
| Other long-term assets | |
| 1 | | |
| 1 | | |
(c) | |
| 2 | |
| Accrued wages and withholdings | |
| 21 | | |
| (21 | ) | |
(d) | |
| — | |
| Accrued expenses | |
| — | | |
| 21 | | |
(d) | |
| 21 | |
Reclassifications in the unaudited pro forma condensed combined
statement of operations for the six months ended June 30, 2024:
| | |
Before Reclassification | | |
Reclassification | | |
Note | |
After Reclassification | |
| Purchased transportation | |
$ | 1,124 | | |
$ | (1,124 | ) | |
(e) | |
$ | — | |
| Cost of transportation and services (exclusive of depreciation and amortization) | |
| — | | |
| 1,134 | | |
(e)(f)(j) | |
| 1,134 | |
| Direct operating expense (exclusive of depreciation and amortization) | |
| — | | |
| 3 | | |
(g) | |
| 3 | |
| Compensation and benefits | |
| 122 | | |
| (122 | ) | |
(f)(g)(h) | |
| — | |
| Other expenses | |
| 41 | | |
| (41 | ) | |
(j) | |
| — | |
| Sales, general and administrative expense | |
| — | | |
| 143 | | |
(h)(j) | |
| 143 | |
| Transaction and integration costs | |
| — | | |
| 3 | | |
(h) | |
| 3 | |
| Restructuring costs | |
| — | | |
| 4 | | |
(h) | |
| 4 | |
| Investment (expense) and other | |
| (1 | ) | |
| 1 | | |
(l) | |
| — | |
| Interest expense, net | |
| — | | |
| 1 | | |
(l) | |
| 1 | |
Reclassifications in the unaudited pro forma condensed combined
statement of operations for the six months ended June 30, 2023:
| | |
Before Reclassification | | |
Reclassification | | |
Note | |
After Reclassification | |
| Purchased transportation | |
$ | 1,365 | | |
$ | (1,365 | ) | |
(e) | |
$ | — | |
| Cost of transportation and services (exclusive of depreciation and amortization) | |
| — | | |
| 1,375 | | |
(e)(f)(k) | |
| 1,375 | |
| Direct operating expense (exclusive of depreciation and amortization) | |
| — | | |
| 3 | | |
(g) | |
| 3 | |
| Compensation and benefits | |
| 163 | | |
| (163 | ) | |
(f)(g)(i) | |
| — | |
| Other expenses | |
| 54 | | |
| (54 | ) | |
(k) | |
| — | |
| Sales, general and administrative expense | |
| — | | |
| 198 | | |
(i)(k) | |
| 198 | |
| Restructuring costs | |
| — | | |
| 6 | | |
(i)(k) | |
| 6 | |
| Investment (expense) and other | |
| — | | |
| — | | |
(m) | |
| — | |
| Other expense (income) | |
| — | | |
| (1 | ) | |
(m) | |
| (1 | ) |
| Interest expense, net | |
| — | | |
| 1 | | |
(m) | |
| 1 | |
Reclassifications in the unaudited pro forma condensed combined
statement of operations for the year ended December 31, 2023:
| | |
Before Reclassification | | |
Reclassification | | |
Note | |
After Reclassification | |
| Purchased transportation | |
$ | 2,674 | | |
$ | (2,674 | ) | |
(e) | |
$ | — | |
| Cost of transportation and services (exclusive of depreciation and amortization) | |
| — | | |
| 2,692 | | |
(e)(f)(k) | |
| 2,692 | |
| Direct operating expense (exclusive of depreciation and amortization) | |
| — | | |
| 6 | | |
(g) | |
| 6 | |
| Compensation and benefits | |
| 298 | | |
| (298 | ) | |
(f)(g)(i) | |
| — | |
| Other expenses | |
| 99 | | |
| (99 | ) | |
(k) | |
| — | |
| Sales, general and administrative expense | |
| — | | |
| 358 | | |
(i)(k) | |
| 358 | |
| Restructuring costs | |
| — | | |
| 15 | | |
(i)(k) | |
| 15 | |
| Investment (expense) and other | |
| (3 | ) | |
| 3 | | |
(l) | |
| — | |
| Interest expense, net | |
| — | | |
| 3 | | |
(l) | |
| 3 | |
| a. | Represents the reclassification of Contract assets as reflected in Coyote’s historical combined
balance sheet as of June 30, 2024 to Other current assets to conform to RXO’s historical balance sheet presentation. |
| b. | Represents the reclassification of capitalized software from Intangible assets, net, as reflected in Coyote’s
historical combined balance sheet as of June 30, 2024 to Property and equipment, net of accumulated depreciation to conform to RXO’s
historical balance sheet presentation. |
| c. | Represents the reclassification of Deferred income tax assets as reflected in Coyote’s historical
combined balance sheet as of June 30, 2024 to Other long-term assets to conform to RXO’s historical balance sheet presentation. |
| d. | Represents the reclassification of Accrued wages and withholdings as reflected in Coyote’s historical
combined balance sheet as of June 30, 2024 to Accrued expenses to conform to RXO’s historical balance sheet presentation. |
| e. | Represents the reclassification of Purchased transportation as reflected in Coyote’s historical
statements of combined income (loss) for the six months ended June 30, 2024 and 2023 and the year ended December 31, 2023 to
Cost of transportation and services (exclusive of depreciation and amortization) to conform to RXO’s historical statement of operations
presentation. |
| f. | Represents the reclassification of a portion of Compensation and benefits as reflected in Coyote’s
historical statement of combined income (loss) for the six months ended June 30, 2024 and 2023 and the year ended December 31,
2023 to Cost of transportation and services (exclusive of depreciation and amortization) to conform to RXO’s historical statement
of operations presentation. |
| g. | Represents the reclassification of a portion of Compensation and benefits as reflected in Coyote’s
historical statement of combined income (loss) for the six months ended June 30, 2024 and 2023 and the year ended December 31,
2023 to Direct operating expense (exclusive of depreciation and amortization) to conform to RXO’s historical statement of operations
presentation. |
| h. | Represents the reclassification of a portion of Compensation and benefits as reflected in Coyote’s
historical statement of combined income (loss) for the six months ended June 30, 2024 to Sales, general and administrative expense,
Transaction and integration costs, and Restructuring costs to conform to RXO’s historical statement of operations presentation. |
| i. | Represents the reclassification of a portion of Compensation and benefits as reflected in Coyote’s
historical statement of combined income (loss) for the six months ended June 30, 2023 and the year ended December 31, 2023 to
Sales, general and administrative expense and Restructuring costs to conform to RXO’s historical statement of operations presentation. |
| j. | Represents the reclassification of a portion of Other expenses as reflected in Coyote’s historical
statement of combined income (loss) for the six months ended June 30, 2024 to Cost of transportation and services (exclusive of depreciation
and amortization) and Sales, general and administrative expense to conform to RXO’s historical statement of operations presentation. |
| k. | Represents the reclassification of a portion of Other expenses as reflected in Coyote’s historical
statement of combined income (loss) for the six months ended June 30, 2023 and the year ended December 31, 2023 to Cost of transportation
and services (exclusive of depreciation and amortization), Sales, general and administrative expense, and Restructuring costs to conform
to RXO’s historical statement of operations presentation. |
| l. | Represents the reclassification of Investment (expense) and other as reflected in Coyote’s historical
statement of combined income (loss) for the six months ended June 30, 2024 and the year ended December 31, 2023 to Interest
expense, net to conform to RXO’s historical statement of operations presentation. |
| m. | Represents the reclassification of Investment (expense) and other as reflected in Coyote’s historical
statement of combined income (loss) for the six months ended June 30, 2023 to Interest expense, net and Other expense (income) to
conform to RXO’s historical statement of operations presentation. |
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-Number 240
-Section 14d
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-Publisher SEC
-Name Exchange Act
-Number 240
-Section 12
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-Publisher SEC
-Name Exchange Act
-Number 240
-Section 12
-Subsection d1-1
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-Publisher SEC
-Name Exchange Act
-Section 14a
-Number 240
-Subsection 12
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-Publisher SEC
-Name Securities Act
-Number 230
-Section 425
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RXO (NYSE:RXO)
過去 株価チャート
から 10 2024 まで 11 2024
RXO (NYSE:RXO)
過去 株価チャート
から 11 2023 まで 11 2024
